I N T R O D U C T I O N GENERAL INTRODUCTION : Finance may be defined as the provision of money at the time where, it is required. Finance refers to the management of flews of money through an organization it concerns with the application of skills in the manipulation, use and control of money. Different authorities have interpreted the term ‘finance differently. However there are three main approaches to finance. 1. The first approach views finance as to providing of funds needed by a business on most suitable terms this approach confines finance to the raising of funds and to the study of financial institutions & instruments from where funds can be procured. 2. The second approach relates finance to cash. 3. The third approach views finance is being concerned with rising of funds& their effective utilization. DEFINITION OF FINANCIAL MANAGEMENT: 1
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I N T R O D U C T I O N
GENERAL INTRODUCTION :
Finance may be defined as the provision of money at the time where, it is required.
Finance refers to the management of flews of money through an organization it concerns
with the application of skills in the manipulation, use and control of money. Different
authorities have interpreted the term ‘finance differently. However there are three main
approaches to finance.
1. The first approach views finance as to providing of funds needed by a business on
most suitable terms this approach confines finance to the raising of funds and to the study
of financial institutions & instruments from where funds can be procured.
2. The second approach relates finance to cash.
3. The third approach views finance is being concerned with rising of funds& their
effective utilization.
DEFINITION OF FINANCIAL MANAGEMENT:
Financial management as practice by corporate firms can be called corporation
finance or business finance, financial management refers to that part of the management
activity which is concerned with the planning & controlling of firms financial resources.
It deals with finding out various sources for raising funds for the firm. The sources must
be suitable & economical for the needs of the business the most appropriate use of such
funds also forms a part of financial management.
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OBJECTIVES OF FINANCIAL MANAGEMENT: -
Financial management is concerned with procurement and use of funds. Its
main aim is to use business funds in such a way that the firm’s valve/earnings are
maximized there are various alternatives available for using business funds. The pros &
cons of various decisions have to look into before making a final selection. Financial
management provides a frame work for selecting a proper cause of action and deciding a
viable commercial strategy. The main objective of a business is to maximize the owner
economic welfare. These objectives can be achieved by
1. Profit maximization
2. Wealth maximization
MANAGEMENT OF FIXED ASSETS
The selection of various Fixed Assets required creating the desired
production facilities and the decision as regards determination of the level of fixed assets
is primarily the task at their production/technical people. The decision relating to fixed
assets involve huge funds for a long period of time and are generally of irreversible
nature affecting the long term profitability of a concern an unsound invest decision may
prove to be total to the very existence of the organization Thus, management of fixed
asset is of vital importance to any organization.
The process of fixed asset management involves:
1. Selection of most worthy projects or alternatives of fixed assets
2. Arranging the requisite funds/capital for the same
The first important consideration to be acquire only that much amount of fixed assets
which will be just sufficient to ensure smooth and efficient running of the business. In
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some cases it may be economical to buy certain assets in a lot size. Another important
consideration to be kept in mind is possible increase in demand of the firm’s product
necessarily expansion of its activities. Hence a firm should have that much amount of
fixed assets, which could adjust to increase demand.
The third aspect of fixed assets management is that a firm must ensure buffer stocks of
certain essential equipments/services to ensure uninterrupted production in these events
of emergencies. Sometime there may be a breakdown in some equipment or services
affecting the entire production it is always better to have some alternative arrangements
to deal with such situations.
But at the same time the cost of carrying such buffer stock should also be evaluated.
Efforts should also be made to minimize the level of buffer stock of fixed assets be
encouraging their maximum utilization during learn period, transferring a part of peak
period and living additional capacity.
FIXED ASSETS:
Fixed assets are those assets which are required and held permanently for a pretty
longtime in the business and are used for the purpose for earning profits The successful
continuance of the business depends upon the maintenance of such assets, They are not
meant for resale in the ordinary course of business and the utility of these assets remains
so long as they are in work order, so they are also known as capital assets. Land and
buildings, plant and machinery, motor vans, furniture and fixtures are some examples of
these assets.
Financial transactions are recorded in the books keeping in view the going concern
aspect of the business unit. It is assumed the business unit has a reasonable expectation of
continuing business at a profit for an indefinite period of time. It will continue to operate
in the future. This assumption provides much of the justification for recording fixed
assets at original; cost and depreciating them in a systematic manner without reference to
their current realizable value.
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It is useless to show fixed assets in the balance sheet at their estimated realizable
values if there is no immediate expectation of selling them. Fixed resale; so they are
shown at their book values (i.e. cost less depreciation provided) and not at their current
realizable values.
The market value of a fixed asset may change with the passage of time, but for
accounting purpose it continues to be shown in the books at its bulk value, i.e., the cost at
which it was purchased minus depreciation provided up to date.
The cost concept of accounting depreciation calculated on the basis of historical
costs of old assets is usually lower than that of those calculated at current value or
replacement value. This result in more profits on paper, which if distributed in full, will
lead to reduction of capital.
NEED FOR VALUATION OF FIXED ASSETS:
Valuation of fixed assets is important in order to have fair measure of profit or
loss and financial position of the concern.
Fixed assets are meant for use for many years the value of these assets decreases
with their use or with time or for other reasons. A portion of fixed assets reduced by use
is converted into cash though charging depreciation for correct measurement of income
proper measurement of depreciation is essential, as depreciation constitutes a part of the
total cost of production.
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RESEARCH METHODOLOGY
NEED FOR STUDY: - Fixed Assets plays very important role in relating company’s objectives the firms to
which capital investment vested on fixed assets. This fixed asset is not convertible or not
liquid able over a period of time the total owner funds and long-term liabilities are
invested in fixed assets. Since fixed assets playing dominant role in total business the
firms has realized the effective utilization of fixed assets. So ratio contributes very much
in analyzing and evaluating the performance of fixed assets. If firms fixed assets are idle
and not utilized properly it effects long-term sustainability of the firms, which may affect
liquidity and solvency and profitability positions of the company. The idle of fixed assets
lead a tremendous in financial cost and intangible cost associate to it. So there is need for
the companies to evaluate fixed assets performance. Comparison with similar company
and comparison with industry standards. So chose a study to conduct on the fixed assets
analysis of NTPC corporate at RSTPS using ratio in comparison with previous year
performance. The title of the project is analysis on fixed assets management.
IMPORTANCE: - Fixed Assets are the assets, which cannot be liquidates into cash within one year.
The large amount of funds of the company is invested in these assets. Every year the
company investments an additional fund in these assets directly or indirectly the survival
and other objectives of the company purely depends on operating performance of
management in effective utilization of there assets.
Firm has evaluate the performance of fixed assets with proportion of capital employed
on net assets turnover and other parameters which is helpful for evaluating the
performance of fixed assets.
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SCOPE:
The project is covered of fixed assets of NTPC drawn from annual reports of the
company. The fixed assets considered in the project are which cannot be converted into
cash with one year. Ration analysis is used for evaluating fixed assets performance of
NTPC.
The subject matter is limited to fixed assets it analysis and its performance but not
any other areas of accounting corporate, marketing and financial matters.
METHODOLOGY:
The data used for analysis and interpretation form annual reports of the company
that is secondary forms of data. Ratio analysis is used for calculation on purpose.
The project is presented by using table’s graphs and with their interpretations. No
survey is undertaken or observation study is conducted in evaluating ‘Fixed assets’
performance of NTPC.
OBJECTIVES OF THE STUDY:
1. The study is conducted to evaluate fixed assets performance of NTPC.
2. The study is conducted to evaluate the fixed assets turnover of NTPC.
3. The study is made to known the amount of capital expenditure made by the
company during study period.
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4. The study is conducted to evaluate depreciation and method of depreciation
adopted by NTPC
5. The study is conducted to known the amount of finance made by long-term
liabilities and owner funds towards fixed assets.
6. Study is conducted to evaluate that if fixed assets are liquidated. What is the
proportion of fixed assets amount will contribute for payment of owner fund and
long term liabilities.
7. The study is evaluate is giving adequate returns to the company.
SOURCES OF DATA:
The data gathering method is adopted purely from secondary sources.
The theoretical contents are gathered from eminent texts books and references and library
at NTPC.
The financial data and information is gathered from annual reports of the company
internal records
Interpretation conclusions and suggestions are purely base on my opinion and
suggestions provided by the project guide.
Limitations:
1 The study period of 45 days as prescribed by university
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2 The study is limited unto the date and information provided by NTPC and its
annual reports
3 The report will not provide exact fixed assets status and position in NTPC; it may
vary from time to time and situation to situation.
4 This report is not helpful in investing in NTPC either through disinvestments or
capital market.
5 The accounting procedure and other accounting principles are limited by the
company changes in them may vary the fixed assets performance.
ACCOUNTING POLICIES OF FIXED ASSETS:
1. Fixed assets are shown at historical cost.
2. Intangible assets are recorded at their cost of acquisition.
3. Capital expenditure on assets not owned by the company is reflected as a distinct
item in capital work-in-progress till the period of completion and thereafter in the
Fixed Assets.
4. In the case of commissioned assets where final settlement of bills with
contractors in yet to be effected, capitalization is done on provisional bases
subject to necessary adjustment in the year of final settlement.
5. Assets and systems common to more than one generating unit are capitalized on
the basis of engineering estimates assessments.
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PROFILE OF NTPC:
National Thermal Power
Corporation popularly known as NTPC was
formed on 7th November 1975 as a central
electric generating company. NTPC the
Navaratna power giant today generates 1/4th of the
total power in the country and is ranked 9th
largest thermal power generating company in the
world. It has a total generating capacity of 19,435MW.
NTPC a front-runner in the Indian Power Sector is one of the largest & the best power
utilities of the world, there by contributing to India’s emergence as one of the world’s leading
economies. The world rank, in its performance audit report on NTPC’s projects observed that
“NTPC record in plant construction, cost containment & operating efficiency has
been exceptional, while as an institution it has broken new ground in Organization &
Management, successfully navigated the transition from constructions to operating company
& generally coped quite well with the problems of rapid expansion.
Two corporations The National Hydro Electric Power Corporation (NHPC) &
National Thermal Power Corporation (NTPC) were set in 1975-76 in the center sector as a
step to achieve the objectives. The company started functioning in March 1976 with the
appointment of a Chairman & Managing Director.
With ambitious growth plans to become a 56,000MW power company by 2017, NTPC
the largest power utility of India has already diversified into hydro sector further
initiatives for greater organization transformation have been approved under “PROJECT
DISHA”.
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NTPC was among the first Public Sector Enterprises to enter into a Memorandum of
Understanding (MOU) with the Government in 1987-88. NTPC has been placed under the
'Excellent category' (the best category) every year since the MOU system became operative.
Recognizing its excellent performance and vast potential, Government of the India
has identified NTPC as one of the jewels of Public Sector ‘Navratnas’- a potential global
giant. Inspired by its glorious past and vibrant present, NTPC is well on its way to realize its
vision of being “A world class integrated power major, powering India’s growth, with
increasing global presence”.
NTPC is committed to the environment, generating power at minimal environmental
cost and preserving the ecology in the vicinity of the plants. NTPC has undertaken massive a
forestation in the vicinity of its plants. Plantations have increased forest area and reduced
barren land.
NTPC has also taken proactive steps for ash utilization. In 1991, it set up Ash
Utilization Division to manage efficient use of the ash produced at its coal stations. This
quality of ash produced is ideal for use in cement, concrete, cellular concrete, building
material.
THE FINANCIAL PERFORMANCE:
The company’s market capitalization crossed Rs. One trillion and also generated
170.88 Bus during 2005-06registering an increase of 7.40% over 2004-05. NTPC contributed
27.68%electricity in the country during 2005-06. Provisional and un audited Net profit after
tax for the year 2005-06 is Rs.57, 061 million as compared to Rs.58, 070 million during the
year 2004-05. Capital Outlay for 2006-07 was set at Rs.113, 250 million. It has an interim
dividend of 20% for the financial year 2005-06 amounting to Rs.16, 491 million.
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NEW TECHNOLOGY INITIATIVES:
NTPC has adopted super critical technology for SIPAT-1 (3*660 MW) and Barh
(3*660 MW) projects. As part of long-term capacity addition programme, NTPC plans to
develop coal-based thermal power projects with higher units sizes, machines along with
integrated captive mining. These power projects will have higher efficiency, assured fuel
availability at lower cost, lower project cost due to economy of scale and lower green house
gas emissions.
The unique features include training facility at remote terminal at NTPC PMI-
NOIDA in addition to the main unit located at Sipat site. NTPC has taken steps to develop a
roadmap for adopting ‘Clean Development Mechanism’.This shall help in earning ‘Citified
Emission Reduction’ and will attract advanced technologies and investment into the country.
Geographical Information System based mapping interface is being developed in
association with IIT-Delhi or integrating the topographical features with the environmental
monitoring data and mapping it around Kahalgaon STPP.
RESEARCH AND DEVELOPMENT:
R&D Center continued to provide scientific services to all the stations of NTPC and
some other utilities to increase their availabilities and reliability by way of carrying out
health assessment of the power plant components, carrying out failure analysis, condition
monitoring of various equipment, post- operational chemical cleaning of boilers,
formulations of chemical treatments etc.
In addition, R&D center worked for attaining self-sufficiency in overhauling and
spares parts development for gas turbines and also for the refurbishment of Gas Turbine
components.
ENERGY TECHNOLOGIES:
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Energy Technologies, a new initiative for the development of new technologies with
focus on fundamental R&D, covering the entire energy spectrum has identified five
important destinations for itself and power sectors. These are: i) Reduction in cost of power,
ii) Resolving energy-carbon conflict, iii) Strengthening the power delivery
infrastructure, iv) Enabling digital society and Sustainable development. To achieve the first
two destinations, a comprehensive programme of various new technologies, has been
formulated.
In its mission to create a world-class institute Energy Technologies is planning to
establish various specialist divisions, research labs and centers of excellence. Centers of
Excellence in Simulation & Modeling, Artificial intelligence, Computational Fluid
Dynamics, Sensors and Material science are being proposed.
CENTRE FOR POWER EFFICIENCY & ENVIRONMENT
PROTECTION (CenPEEP):
CenPEEP has been established in association with USAID to implement Greenhouse
Gas Pollution Prevention Project to reduce emission of Greenhouse gases per unit of energy
generated while increasing energy productivity. CenPEEP in its pursuit for improving
performance of power plants has created ‘Center of Excellence for Efficiency’. This Center
will monitor, evaluate and provide guidance to stations for achieving the goal of increased
efficiency and productivity. CenPEEP is also involved in acquisition, demonstration and
implementation of new techniques for performance improvement of Power Plants.
HUMAN RESOURSE MANAGEMENT:
NTPC takes pride in its highly motivated and trained Human Resource that has
contributed its best to bring NTPC to its present height. The total strength of employees of
the corporation stands at 23385 as on March 31,2005.
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To induct talent and groom them into a dedicated cadre of power professionals
“Executive Trainee” Scheme was introduced in the year 1977 for recruitment in the
disciplines of Mechanical Electrical, Civil, Control & instrumentation and now encompasses
Computer Science, Chemistry, HR and Finance disciplines inputs as well as a on-the-job
training. The new recruits are also attached with senior executives under a systematic and
formal ‘Mentoring System’ of the company to integrate them into the Culture of the
company.
STATION-WISE GENERATION 2006-07
STATIONS CAPACITY (MW) Gen (MU) Gross
Northern Region 4780 33891
Singrauli 2000 15803
Rihand 1500 7989
Unchahar 840 6781
Tanda 440 3318
National Capital Region 3152 22353
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Dadri (Coal) 840 6831
Anta (Gas) 413 2785
Auraiya (Gas) 652 4118
Badri (Gas) 817 5457
Faridabad (Gas) 430 3162
Western Region 5653 41724
Korba 2100 17049
Vindyhachal 2260 17821
Kawas (Gas) 645 2822
Jhanor Gandhr (Gas) 648 4032
Easrern Region 5900 35225
Kahalgaon 840 9701
Talcher – Kaniha 3000 16246
Talcher – Thermal 460 3196
Southern Region 3950 25917
Ramagundam 2600 17172
Simhadri 1000 8123
Rajiv Gandhi CCP (Gas) 350 622
Total 23435 159110
NTPC ORGANISATION AND FUNCTIONS :
The organization design is one of the main factors, which ultimately determines the
effectiveness of an enterprise. The board of directors is the supreme policy making body,
which give the direction to the activities of the organization. The head of this board is the
Chairman and Managing Director who is also the full time Chief Executive of the company.
The members of this board are both full-time directors as well as senior level officers.
The basic divisions, which are accountable to CMD, are:
Technical and Engineering Division,
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Corporate Commercial division,
Operation Services division,
Corporate Finance division,
Corporate Human Resource division,
Corporate Projects division,
Vigilance division.
OBJECTIVES OF NTPC:
To add generating capacity with in prescribed time and cost.
To operate and maintain power stations at high availability ensuring minimum cost of
generation. It has planned massive growth to make itself a 40,000 MW company.
To maintain the financial soundness of the company by managing the financial
operations in accordance with good commercial utility practices.
To function as a responsible corporate citizen and discharge Social Responsibility, in
respect of environment protection and rehabilitation.
To adopt appropriate human resources development policy leading to Creation of
team of motivated and competent power professionals.
To develop R & D for achieving improved plant reliability.
CORPORATE OBJECTIVES:
To add generating capacity with in prescribed time and cost.
To expand the constancy operations and to participate ventures Abroad
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To maintain the financial soundness of the company by managing the financial
operations in accordance with good commercial utility.
To development (R&D) for achieving improved plant reliability.
To develop appropriate commercial policy leading to remunerative tariffs and
minimum receivables.
Implement strategic diversification in the areas of R&M, Hydro, LNG and non-
conventional and eco-friendly fuels and explore new areas like transmission,
information technology etc.
Make prudent acquisitions. Continuously develop competent human resources to
match world standards.
PRESTIGIOUS AWARDS WON BY NTPC:
US Environmental Protection agency’s “2003 Climate Protection Award”.
SCOPE Award for Excellence and Outstanding Contribution to the Public Sector
Management-Institutional Category 2000-01.
CII Award for Excellence in Infrastructure 2002.
Teri’s CORE-BCSD Corporate Social Responsibility Award.
“Business Today-Hewitt Associate Best Employer Survey 2002-03” has ranked NTPC
as the third best place to work among 220 major companies in India.
NTPC – CENPEEP received world climate technology award-2002 in recognition of
institute’s achievements in furthering the goal of Climate Technology Initiative.
Ramagundam project received National Safety Council of India’s Safety Award
“PRASHANSA PATRA” for developing and safety and health management systems.
NTPC Ramagundam has achieved first place in Raja-Bhasha Award in the year 2003.
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NTPC has bagged Safety Innovation Award 2005.
NTPC Limited bagged the IPMA (International Project Mngt
Award).
EXECUTIVE SUMMAR :
Why I have chosen NTPC to do project?
Being a power giant with huge manpower and being a public sector organization with
number of trade unions where they have major role and it also posses:
Navaratna status,
Core values,
Takes care of society,
It has CSR i.e., corporate social Responsibility,
Highly skilled people,
Welfare Activities,
Provides R & R i.e., Responsibilitation and Resettlement to the surrounding
people.
RAMAGUNDAM – A LEGEND
Ramagundam (including Godavarikhani Town) is a city and municipality in the
Karimnagar district of northern Andhra Pradesh, India. It has a population of 236,623 (2001
census).The town Ramagundam gets its name from combination of two words (Rama +
Gundam). A famous temple of Hindu god Lord Rama is situated in old part of the town and
Gundam means water springs.
Legend has it, in the age bygone, LORD RAMA traversing the banks of Godavari River left
his immortal footprints on a small hillock. Today his blessings lives on-enshrined in a small
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immortal footprints that Ramagundam is considered as Manchester of India in light of the
companies around it. Some of them are FCI (Fertilizer Corporation of India), Kesoram
Cement (Basanth Nagar), NTPC (RSTPS-Ramagundam super thermal power station
sourcing 2600 MW of power 24/7), and APSEB unit (Ramagundam).
Around 24 units of coal mines belt in Godavarikhani stretching 25 km including opencasts
(state of the art proclainers) are used in these open coal mines.There are many factories
around this place that take the raw material from the coalmines and prepare carbon
derivatives.River Godavari flowing through this region gave this a strategic location for all
these companies providing employment to more than 15,000 people.
TransportRamagundam is connected to major parts of the State through a well connected road, Rajiv
Rahadari (Freeway of Late Shri Rajiv Gandhi) in remembrance of Gandhi family and the
Party he hailed from(Congress I). APSRTC is well connected across all communities of this
region.Ramagundam is connected through the South Central Railway which connects to all
the four metropolitan cities of India. Most of the trains passing through this route stop at
Ramagundam. Ramagundam Airport code is RMD. The nearest airport (other than unused
RDM) is around 250 km (Hyderabad-HYD) away and connected through Highway NH-7 via
Karimnagar and Siddipet.
RAMAGUNDAM SUPER THERMAL POWER STATION (RSTPS)
November 14th 1978, sudenly the
sleepy village RAMAGUNDAM became
the scene of hectic activities. Barricades &
Welcome arches were erected all along the
road leading to what is now the site of 2600
MW POWER STATION. It is on this
auspicious day of 14th November 1978 the
Honable Prime Minister of INDIA Late.
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Shri.Morarji Desai laid the foundation stone for a MAMMOTH POWER STATION IN
SOUTHERN INDIA.
NTPC Ramagundam spread over 1000 acres of land, is considered to be one of the
best in the nation (among 24locations). Constructed at a cost of Rs.1762 crores, the station
has been one of the largest recipients of the WORLD BANK loan.its project implementation
and finacial control has pause from the World Bank, Ramagundam can be cosidered as the
school for ‘Construction of Power Prjects’. NTPC is divided into 5 regions: Ramgundam
falls in southern region along with Simhadri and Kayankulam.
NTPC Ramagundam unit with Approved and Installed capacity of 2600MW is the
largest Thermal Power plant powering South India’s growth. Ramagundam unit of NTPC
credited with ISO 14001 certified Super Thermal Power Station in our country.
This provides major chunk of power supply to Dadar Nagar Haveli, Daman & Dui,
PGCIL (Powergrid Corporation of India Limited). PGCIL has a capacity of 9500MW and
expects to grow into 30,000 MW by 2012 with a 16 billion USD investment. Less than 25%
of the power is provided to the State of Andhra Pradesh More than 38000 crores are invested
to build this massive organisation which provides employment to more than 6000. Recently
7th unit was added (August 2004) with additional capacity of 500 MW.
NTPC Ramagundam has exemplary vision for the environment which includes afforestation,