INTRODUCTION

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
some cases it may be economical to buy certain assets in a lot size. Another important

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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.

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 NTPC Ramagundam has achieved first place in Raja-Bhasha Award in the year 2003.
 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.

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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
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.

Transport
Ramagundam 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

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Honable Prime Minister of INDIA Late. 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,
monitoring environment impacts using NRSA satellite imaging services, Ash pond treatment,
Ash brick plants, awareness of environment to the local communityNTPC has gained
accolades for its highest quality of disaster management policies. RSTPS has less than 10
disturbances in 2005-2006 and non last more than a day.

DISTRIBUTION OF POWER OF NTPC RAMAGUNDAM

S.No States Distributed Capacity in MW Percentage

01 Andhra Pradesh 580 27.619

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S.No States Distributed Capacity in MW Percentage

02 Tamil nadu 470 22.381

03 Karnataka 345 16.429
04 Kerala 245 11.667
05 Goa 100 4.762
06 Pondicharry 50 2.381
07 Unallocated 310 14.762

RSTPS ACHEVEMENT AND AWARDS:

• NTPC has been awarded the prestigious SCOPE AWARD 2004, for its exemplary
contribution in management of Public Sector Enterprise.
•
• BEST HR HEAD AWARD by Amity School of Business for its contribution to
Corporate Human Resource Management in August 2004.
•
• Greentech Safety Award 2004-05: NTPC won 9 Gold, 4 Silver, 1 Bronze award for
outstanding achievement in the field of safety and environment management.
•
• International Market Assessment India (IMA) has adjudged NTPC Chief Finance officer
of the year for excellence in Finance of Public Sector Undertaking for the year 2004.
RSTPS has bagged the Golden trophy, in Performance Excellence Award for the year
2003-04 instituted by Indian Institute of Industrial Engineering, in recognition of its
performance in financial achievement, Customer Satisfaction, Internal processes,
Innovation and learning, Strategy for development

RSTPS – AT A GLANCE:

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Address: P.O. Jyothinagar, Dist. KarimNagar-505215, Andhra Pradesh
Approved Capacity 2600 MW
Stage I: 3X200 MW
Installed Capacity Stage II: 3X500 MW
Stage III: 1X500 MW
(i) South Godavari Coal Fields of Singrani Collieries for Stage I & II
Coal Source
(ii) Korba Coal Fields of SECL for Stage III
Sri Ram Sagar Dam on Godavari River, D-83 Canal from pochampad
Water Source
Reservoir
Pondicherry, Goa, Kerala, Karnataka, Tamil Nadu, AP, PGCIL (for
Beneficiary States
HVDC)
Stage - I: 3x 200 MW
Unit Sizes
Stage -II: 3x 500 MW
Unit -I 200 MW November 1983
Unit -II 200 MW May 1984
Unit -III 200 MW December 1984
Units Commissioned
Unit -IV 500 MW June 1988
Unit -V 500 MW March 1989
Unit -VI 500 MW October 1989
Units Commissioning
Unit -VII 500 MW August 2004
Schedule
International IDA, IBRD loan, OPEC, KFW, EXIM Bank, Japan.

FINANCIAL PERFORMANCE OF NATIONAL THERMAL POWER

STATION FOR THE YEAR 2008-09

DISTRIBUTION OF REVENUE

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 Depreciaction

Interwest & Finance

Charges
Tax

Dividend

Retained Earning

Fuel

Employee Remuneratio
&Benefits
Other operational
expenses

MAJOR PROJECT INPUTS:-

Construction manpower -15,000

Structural steel -40,000 Tones
Reinforcement Steel -70,000 Tones
Cement -3, 40,000 Tones
Equipment -1, 00,000 Tones
Cabling -3,000 Km.

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POWER SECTOR

Energy is an important parameter in the overall economic development activity of

any country. It has become synonymous with the progress in all fields of activities. It’s
standard of living in the words of DAGLI is as follows “it is said that the difference
between a starving Indian peasant and a prosperous American former is that behind his
elbow the Indian farmer has almost nothing while his American counterpart has
thousands of horse power.

Thus, it is energy, which is the dividing line between any subsistence economy and
a highly developed economy. India is poor and America is rich because America
consumes nearly 50 times as much energy as is consumed by India. Energy is at the heart
of the modern industrial society. It could also be an effective weapon in the battle against
object poverty”.

There is a close correlation between energy consumption and level of economic

development. Energy means “capacity of doing work”. There are various sources of
energy but in India the important sources are coal, hydroelectricity, oil and natural gas,
nuclear fuels, firewood and animal wastes. Despite the development of various sources
in the energy sector, the fact still remains that low cost energy sources like fire wood,
cattle dung and vegetable wastes account for as much as 45 percent of energy
consumption in the country.

DEVELOPMENT IN INDIA

Power development in India began in 1897 when a 200KW hydro station was first
commissioned at DARJEELING. In 1899, a first steam station was set-up in Calcutta with a
total capacity of 100KW. There after, a series of hydro and steam power station were
commissioned. But the power development was not in a systematic and planned manner in

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the country. Therefore to achieve the objective of promoting the co-ordination development
and rationalization of generation, transmission and distribution of electricity on a regional
basis throughout the country in the most efficient and economic way, the state electricity
board (SEBs) was constituted in the various states of the country under the provisions of the
electricity (supply) act 1948.

These SEBs, were to enjoy the monopoly in respect of generation, transmission and
distribution of electricity in the country. The efficiency of working of power plant and their
maintenance have been unsatisfactory as a result of which the power generating capacity
already created could not have been fully utilized. Power is the single factor, which changed
the way of living. The National Thermal Power Corporation Limited, established on
November 7th 1975, has become the most important infrastructure input for improving the
standard of living to meet the growing demand and to fulfill the needs of the country. Just in
29 years this company has grown to be the largest producer of power in the country.

Keeping the significance of power supply in sight, NTPC has been chosen for the
purpose of the study as it has many units under its control. Ramagundam Super Thermal
Power Station (RSTPS) has been selected for the study.

PRESENT SCENARIO

Several measures have been taken in line with the Electricity Act, 2003. The National
Electricity Policy has been notified. Main targets of National Electricity Policy (NEP) are:
• Availability of electricity to all households in five years.
• Demand to be fully met by 2012.
• Minimum lifeline consumption of 1unit per household per day.

RECENT DEVELOPMENT:

24
• In 2004-05, the economy has maintained the growth momentum despite a deficient
southwest monsoon, hardening international prices of steel and extensive devastation caused
by Tsunami.
• He macro economic stability observed in recent years needs to be sustained and
strengthened. Further improvements in investment climate and augmenting infrastructure,
especially electricity infrastructure are being given high priority.

Power generation in India:

Source Central State Private Total % Share

Coal 21417.51 36302.00 4414.38 62130.89 59.22
Gas 4419.00 2661.70 4082.40 11163.10 1.64
Diesel 0 582.89 551.94 1134.80 1.08
Total 25836.51 39546.59 9045.72 74428.82 7.94
Thermal
Hydro 3049.00 22636.00 576.20 26261.22 25.03
Nuclear 2720.00 0 0 2720.00 2.59
Wind 0 62.86 1444.60 1507.46 1.44
Total 31605.51 62245.47 11066.52 104917.5 100

DATA ANALYSIS & INTERPRETATION

25
 The analysis returns on fixed assets of National Thermal Power Corporation
limited (NTPC) is studied with the help of following techniques.

1. Componential analysis
2. Trend analysis
3. Ratio analysis

Componential analysis:-

The componential analysis of the fixed assets of national thermal power corporation
limited (NTPC) includes Net Block , Capital (work in process) and construction stores
and advances.

The data relating to different components of fixed assets of the national thermal power
corporation limited (NTPC) for ten Years commencing from 2003-04 are set out in the
following table analysis.
-
TABLE: – I

YEAR NET BLOCK CAPITAL (W/P) CONSTRUCTION TOTAL

(FIXED ASSETS)
& STORES

1997-98 1245981.78(61.24) 737188.53(36.23) 51481.73(2.53) 2034652.04(100)

1998-99 1563326.28(77.20) 411710.83(20.33) 49981.44(2.47) 2025018.55(100)
1999-2000 1716061.32(87.08) 192766.70(9.78) 617993.44(3.14) 1970621.46(100)
2000-01 1686635.85(85.02) 217244.62(10.95) 70006.57(4.03) 1983787.00(100)
2001-02 1591203.54(77.43) 396188.29(19.28) 67463.53(3.28) 2054855.40(100)
2002-03 1703351.36(77.11) 415493.07(18.81) 90034.08(4.76) 2208878.51(100)
2003-04 1846573.54(82.87) 278964.63(12.51) 102649.68(4.62) 2228187.85(100)
2004-05 1767804.49(73.27) 509149.83(21.10) 135461.22(5.61) 2423642.10(100)
2005-06 1986502.51(75.67) 515430.25(19.64) 123207.82(4.69) 2625140.56(100)
2006-07 2125450.00(73.93) 564130.00(19.62) 185400.00(6.45) 2875980.00(100)
2007-08 2231486.71(69.20) 67063211(20.79) 322225.45(9.98) 3224344.27(100)
2008-09 2551784.23(71.94) 727497.22(20.79) 267497.22(7.54) 3546778.67(100)

26
Interpretation:
By observing the above table reveals that the following.
The investment in the net block is in fluctuating trend and it is varying in between 61.24
over the total fixed assets during the year 1997-98 and it is increasing to 71.94 during the
year 2008-09.
The average net block registered 1741231.51 during the above period s.
The investment in use in capital w/p is also in fluctuating trend and it is varying in
between 36.23 % over the total fixed assets during the year 1997-98 it decreased to 20.51
% during 2008-09.
The average capital W/P was registered at RS. 469699.67.

The investment in use in construction stores and advances in fluctuating trend and it
varying in between 2.53 % on the total fixed a assets during the year 1997-98 and it is
increased to 7.54% during 2008-09.

TREND ANALYSIS: -
In Financial analysis the direction of changes over a period of Years is of initial
importance. Time series or trend analysis of ratio indicators the direction of change.
This kind of analysis is particularly applicable to the times of profit and loss account it is
advisable that trends of sales and net income may be studied in the light of two factors.
The rate of fixed expansion or secular trend in the growth of the business and the general

27
price level. It might be found in practice that a number of firms would be shown a
persistent growth over period of Years But to get a true trend of growth; the sales figure
should be adjusted by a suitable index of general prices.

In other words, sales figures should be deflated for rising price level. Another
method of securing trend of growth and one which can be used instead of the adjusted
sales figure or as check on them is to tabulate and plot the output or physical volume of
the sales expressed in suitable units of measure. If the general price level is not
considered while analyzing trend of growth, it can be mislead management they may
become unduly optimistic in period of prosperity and pessimistic in duel periods.

For trend analysis, the use of index numbers. In generally advocated the procedure
followed is to assign the numbers. 100 to items of the base year and at calculate
percentage change in each item of other Years in relation to the base year this procedure
may be called as “fixed percentage method”.

This margin determines the direction of upward or downward and involves the
implementation of the percentage relationship of the each statement item means to the
same in the base year. Generally the first year is taken as the base year. The figure of the
base year is taken as 100 and trend ratio for the other year is calculated on the basis of
one year. Here an attempt is made to known the growth total investment and fixed assets
of NTPC for 12 Years that is 1997-98 to 2008-2009.

TOTAL INVESTMENT: -
TABLE: – II

28
 YEAR INVESTMENT TREND PERCENTAGE
(IN LAKHS)
1997-98 2945073.37 100
1998-99 3030293.17 103
1999-2000 3192444.28 108
2000-01 3061183.11 104
2001-02 3545210.87 120
2002-03 9015874 306
2003-04 3991459.4 136
2004-05 4028114.2 137
2005-06 3667441.15 125
2006-07 17338000 589
2007-08 2079775 71
2008-09 3119662.5 105

INTERPRETATION :
From the analysis of the above table it can be observed that:

29
 The growth rate of total investment of NTPC is in upward trend, which shows table of
the NTPC investment in total investment is increasing from time to time during the
year 1997-98 it was recorded 100%.

But it is increasing in the year 2008-09 which shows that there is a net increase by 105 %.
The average investment in total assets was found to be RS.4917877.58 during
the review period.
During the period of 1997-98 it is Rs.2945073.37 and it was increased in the year
2008-09 Rs. 3119662.50
GROWTH RATE IN FIXED ASSETS
TABLE: - III
YEAR FIXED ASSETS (IN TREND PERCENTAGE
LAKHS)
1997-98 1245981.7 111.13
1998-99 1563326.2 139.43
1999-2000 1716061.3 153.05
2000-01 1686635.8 150.43
2001-02 1591203.5 141.92
2002-03 1703351.3 151.92
2003-04 1846573.5 164.69
2004-05 1767804.4 157.67
2005-06 1986502.5 177.17
2006-07 2125450 189.56
2007-08 2231486.1 170
2008-09 2551784.23 205

Chart-III
GROWTH RATE IN FIXED ASSETS
INTERPRETATION:

Growth rate in fixed assets, the examination of the above table reveals analysis
and interpretation.
a) During the year 1997-98 the fixed assets investment was recorded at 1245981.7
Lakhs and it is increased to Rs. 2551784.23 in 2008-09 and it is quite satisfactory.
b) The trend percentage in the year 1997-98 is taken as the base year as 100 % and it
was increased to 205 % in the year 2008-09.

30
C) The average growth rate in fixed assets Rs.1834679.96.

31
 RATIO ANALYSIS :
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the
indicated quotient of two mathematical expressions” and as “the relationship between for
evaluating the financial position and performance of a firm. The absolute accounting figure
reported in financial statement do not provide a meaningful understanding of the of the
performance and financial position of a firm. An accounting figure conveys meaning when it
is related to some other relevant information.
Ratios help to summarize large quantities of financial data and to make qualitative
judgment about the firm’s financial performance.
FIXED ASSETS TO NET WORTH RATIO:

This ratio establishes the relationship between Fixed Assets and Net worth
Net worth = Share Capital + Reserves & Surplus + Retained Earnings.

Fixed Assets
Fixed Assets to Net worth Ratio = ---------------- X 100
Net worth
This ratio of ‘Fixed Assets’ to ‘Net worth’ indicates the extent to which shareholder
funds are sunk into the fixed assets. Generally, the purchase of fixed assets should be
financed by shareholders, equity including reserves & surpluses and retained earnings. If
the ratio is less than 100% it implies that owners funds are more than total Fixed Assets
and a part of the working capital is provided by the share holders.

When the ratio is more than 100% it implies that owner’s funds are not sufficient to
finance the fixed assets and the finance has to depend upon outsiders to finance the fixed
assets. There is no “rule of thumb” to interpret this ratio but 60% to 65% is considered to
be satisfactory ratio in case of industrial undertaking.

32
Fixed assets Ratio :
This ratio explains whether the firm has raised adequate long term funds to
meet its fixed assets requirements and is calculated as under.
Fixed Assets (after depreciation)
----------------------------------------------
Capital Employed
This ratio gives and idea as to what part of the capital employed has been used in
purchasing the Fixed Assets for the concern. If the ratio is less than one it is good for the
concern.

FIXED ASSETS AS A % TO CURRENT LIABILITIES

The ratio measures the relationship between fixed assets and the funded debt and is a
very useful so the long term erection. The ratio can be calculated as below
Fixed Assets
Fixed Assets as a % to Current Liabilities = ------------------------
Current Liabilities

TOTAL INVESTMENT TURNOVER RATIO :

This ratio is calculated by dividing the net sales by the value of total assets that is (Net
sales/Total investment) or (sales/Total investment). A high ratio is an indicator of over
trading of total assets while a low ratio reveals idle capacity. The traditional standard for
the ratio in two times.

33
FIXED ASSETS TURNOVER RATIO :

This ratio expresses the number of times fixed assets arte being turned-over is a stated
period. It is calculated as under.
Sales
--------------------------------------------------
Net fixed assets (after depreciation)
This ratio shows how well the fixed assets are being uses in the business. The
ratio is important in case of manufacturing concern because sales are produced not only
by use of Current assets but also by amount invested in fixed Assets the higher ratio, the
better is the performance. On the other hand a low ratio indicates that fixed assets are not
being efficiently utilized.

GROSS CAPITAL EMPLOYED

The term ‘Gross capital employed’ usually comprises the total assets, fixed, as
well as current assets used in a business
Gross Capital employed = Fixed Assets + Current Assets.

RETURN ON FIXED ASSETS

Profit after tax
RETURN ON FIXED ASSETS =--------------------------- X 100
Fixed assets
This ratio is calculated to measure the profit after tax against the amount invested in
total assets to ascertain whether assets are being utilized properly or not. The higher
the ratio the better it is for the concern.

34
FIXED ASSETS TO NET WORTH :
The ratio indicates the extent to where shareholders funds are struck in the fixed
assets. The formula to compute fixed assets to net worth is calculated as follows. Fixed
assets (after depreciation) / Net worth.

NET WORTH = Share capital + Reserves & surplus + Retained

Earnings.
If the ratio is less than 100% it implies that owner funds are more than the fixed
assets and the shareholders and vice-versa provide a part of working capital.

Fixed assets
Fixed Assets to Net worth Ratio = ---------------------------- X 100
Net worth
TABLE: - IV
YEAR NET WORTH GROSS FIXED RATION IN %
(crores) ASSETS
(crores)
1997-98 14327.05 15376.6 107.32
1998-99 14830.43 19722.24 132.98
1999-2000 16144.68 22726.9 140.77
2000-01 17884.49 24179.65 135.19
2001-02 20145.87 25210.79 125.14
2002-03 22910.4 28473.82 124.28
2003-04 25820.79 32307.35 125.12
2004-05 28652.5 32891.16 114.79
2005-06 31512.7 36610.6 116.18
2006-07 35550.1 40028.1 112.6
2007-08 41776.3 43106.2 103.18
2008-09 45118.4 47416.82 105.09

35
 Chart:-IV

INTERPRETATION:

The Gross fixed assets to net worth ratio are fluctuating from year to year.
In the year1997-98 the gross fixed assets to net worth ratio is 107.32 in the year 2008-09
the fixed assets to net worth ratio is 105.09 decreased which shows that the net worth
utilization to acquire the fixed assets is decrease in the year 2007-08 when compare to
1997-98. The highest ratio recorded in 1999-00 at 140.77 the lowest ratio is recorded at
107.32 years 1997-98.

36
FIXED ASSETS AS A PERCENTAGE TO LONG TERM
LIABILITIES:

Fixed assets ratio a various ratio of fixed assets to net worth is a ratio of fixed assets to
long term funds which is calculated as = Fixed Assets (after depreciation)
---------------------------------------------
Capital Employed

TABLE 5 :

YEAR FIXED LONG TERM PERCENTAGE

ASSETS ( FUNDS
LAKHS)
1997-98 1245981.7 2490097.67 50
1998-99 1563326.2 2527802.66 62
1999-2000 1716061.3 2581717.9 66
2000-01 1686635.8 2680821.07 63
2001-02 1591203.5 2978834.74 53
2002-03 1703351.3 2976040 57
2003-04 1846573.5 3304520 56
2004-05 1767804.4 3565260 50
2005-06 1986502.5 3863430 51
2006-07 2125450 4582670 46
2007-08 2231486.1 5920162.25 37
2008-09 2454634.71 6393775.23 39

Chart: -V

37
INTERPRETATION:

The fixed assets as a % of long-term liabilities the ratio is fluctuating from

Year to year The fixed assets as a percentage of long term liabilities is recorded at 50% in
the year 1997-98 and it is recorded at 39% in year 2008-09.
The highest ratio is recorded at 66% in the year 1999-00 the lowest ratio is 37 % in 2007-
08.The average of fixed assets of the long term liabilities ratio is recorded at 82% during
review period of time which less than 100% which indicates that a part of the working
capital requirement is met over of the long term funds of the company.

FIXED ASSETS AS A PERCENTAGE CURRENT LIABIULITIES:

Fixed assets as a % to Current Liabilities = Fixed Assets/ Current Liabilities

38
TABLE: - VI

YEAR FIXED ASSETS CURRENT PERCENATAGE

(LAKHS) LIABILITIES
1997-98 1245981.7 259332.23 4.804
1998-99 1563326.2 170935.23 9.145
1999-2000 1716061.3 204280.05 8.4
2000-01 1686635.8 380362.05 4.434
2001-02 1591203.5 566370.13 3.142
2002-03 1703351.3 518929.95 3.282
2003-04 1846573.5 673243.51 2.742
2004-05 1767804.4 314169.94 5.646
2005-06 1986502.5 342002.02 5.808
2006-07 2125450 652440 3.258
2007-08 2231486.1 5230681.14 4.26
2008-09 2454634.71 564913.59 4.34
Chart: -VI

INTERPRETATION:

The ratio was fluctuating trend percentage in review period.Form the above table it is
observed that the ratio was recorded at 4.804 in the 1997-98 and is gradually changing to
4.34 in 2008-09, which indicates that the current funds are used in the fixed assets, which
is quite satisfactory.

39
The average ratio was recorded at 6.96 during the review period of time. The highest
ratio was recorded at 9.145, which is higher than the average ratio.
The lowest ratio was recorded at 2.742, which is less than the average ratio.

TOTAL INVESTMENT TURNOVER RATIO:

The total investment turnover ratio can be calculat5ed by the formula as given under
Sales
Total investment ratio = ----------------------- X 100
Total Investment
TABLE : –VII
YEAR INVESTMENT SALES IN LAKHS PERCENATAGE
( LAKHS )
1997-98 2945073.37 635984.1 21.59
1998-99 3030293.17 834419.09 27.54
1999-2000 3192444.28 983965.19 30.82
2000-01 3061183.11 1239465.6 40.42
2001-02 3545210.87 1404211.85 39.64
2002-03 9015874 1608132.1 17.84
2003-04 3991459.4 1902068.31 47.65
2004-05 4028114.2 1788252 44.39
2005-06 3667441.15 1902068.1 51.86
2006-07 17338000 1885190 101.73
2007-08 2079775 2254024.15 108.36
2008-09 3119662.5 2930231.39 93.92

40
Chart:-VII

TOTAL INVESTMENT TURNOVER RATIO

INTERPRETATION:

The ratio was in increasing trend but in 2008-09 it is just decreased.

During the year 1997-98 the ratio was recorded at 21.59 % and in the 2008-09 the ratio
was increasing to 93.92The highest ratio was recorded at 108.73 in the year 2006-07
which is more than the average ratio.
The lowest ratio was 17.84%, which is lesser than the average ratio.

41
SALE OF ENERGY:

TABLE –VIII

YEAR SALES IN LAKHS

1997-98 635984.1
1998-99 834419.09
1999-2000 983965.19
2000-01 1239465.6
2001-02 1404211.85
2002-03 1608132.1
2003-04 1902068.31
2004-05 1788252
2005-06 1902068.1
2006-07 1885190
2007-08 2254024.15
2008-09 2930231.39

INTERPRETATION :

42
Interpretation:
By observing the above table that
The rate of energy of NTPC is increasing over the previous period.
In the year 1997-98 the sale of energy is Rs.635984.10 lakhs and it is gradually
increasing year by year. And in the 2008-09 its sale of energy is Rs. 2930231.39.
The average sale of energy is 1614000.99, which the sale of energy is to be
increase to level of average sale of energy in forth coming year. The growth rate of sale
of energy is in a satisfactory condition.
The sale of power is decreased in the current year compared to last year but the overall
revenue increased by providing the consultancy services.

43
FIXED ASSETS TURNOVER RATIO:

The fixed assets turnover ratio is the relationship between the sales or cost of goods and
fixed / capital assets employed in a business.
Sales
Fixed Assets turnover Ratio = -------------------------- X 100
Total Fixed Assets

TABLE:-IX

YEAR SALES IN LAKHS TOTAL PERCENTAGE

EXPENDITURE
1997-98 635984.1 2034652.04 27.59
1998-99 834419.09 2025018.15 41.2
1999-2000 983965.19 1790621.46 49.13
2000-01 1239465.6 1982787.09 62.48
2001-02 1404211.85 2054855.4 68.33
2002-03 1608132.1 2208878.51 72.8
2003-04 1902068.31 2228187.85 85.36
2004-05 1788252 2423642.1 73.31
2005-06 1902068.1 2625140.58 72.45
2006-07 1881780 2005620 93
2007-08 2254024.15 3224336.12 69.9
2008-09 2930231.39 3546769.73 82.61

44
INTERPRETATION:

The fixed assets turnover ratio is fluctuating trend during the review period of time.
During the year 1997-98 the ratio was recorded as 27.59 and in the year 2008-09 the ratio
was increased to 82.61.
Average ratio was observed at 68.80 during the review period of time.
The highest ratio was recorded at 93% in 2006-07 which is more than the average.
The lowest ratio was 27.59 in the year 1997-98 which is less than the average.

45
 FIXED ASSETS AS A PERCENTAGE TO TOTAL ASSETS;
Net Fixed Assets
Fixed Assets as a% to Total Assets =. ------------------------ X 100
Total Assets
TABLE – X: -
YEAR FIXED ASSETS TOTAL ASSETS PERCENTAGE
(LAKHS)
1997-98 1245981.7 2490097.67 50
1998-99 1563326.2 2527802.66 62
1999-2000 1716061.3 2581717.9 66
2000-01 1686635.8 2680821.07 63
2001-02 1591203.5 2978834.74 53
2002-03 1703351.3 3421429.86 51
2003-04 1846573.5 3454129.34 53
2004-05 1767804.4 4201361.89 42
2005-06 1986502.5 4934066.11 40
2006-07 2125450 3480130 61
2007-08 2231486.1 3522210.05 63
2008-09 2454634.71 3839208.95 64

Chart: -VIII

46
INTERPRETATION:

From the above table it is examined that.

Fixed assets to total assets ratio is fluctuating trend during the review period of time.
During the year 1997-98 the ratio was recorded at 50 % and the year 2008-09 the ratio
decreased to 64%.
Average ratio was observed 59.79 during the review period of time.
The highest ratio was observed at 66 in the year 1999-00 which is more than the average.
The lowest ratio was recorded at 40 in 2005-06 which less than that of average.

47
GROSS CAPITAL EMPLOYEED:

Gross Capital Employed = Fixed Assets + Current Assets

TABLE: – XI
YEAR FIXED ASSETS CURRENT ASSETS GROSS CAPITAL
(LAKHS) EMPLOYED
1997-98 1245981.7 1243645.9 2489627.7
1998-99 1563326.2 964183.32 2527509.1
1999-2000 1716061.3 865286.52 2581347.8
2000-01 1686635.8 985327.24 2671963..0
2001-02 1591203.5 1356784.5 2947988
2002-03 1703351.3 1775873.6 3479225
2003-04 1846573.5 1659018.7 3505592.3
2004-05 1767804.4 12433557.4 4201361.8
2005-06 1986502.5 2121460.2 4107962.7
2006-07 2125450 1354680 3480130
2007-08 2231486.1 1290735.11 352221.2
2008-09 2454634.71 1419808.62 3874443.33

PROFIT AFTER TAXES:

48
 TABLE: -XII
YEAR PROFIT AFTER
TAXES (crores)
1997-98 112455.4
1998-99 135261.1
1999-2000 167943.1
2000-01 215349.6
2001-02 81572.8
2002-03 342453.2
2003-04 373380.2
2004-05 353962.3
2005-06 360755.7
2006-07 526080
2007-08 580705.8
2008-09 638776.4

INTERPRETATION

From the above the profits of NTPC are in increasing which is good for the company. In
the year 1997-98 the PAT is 105799.9 crores and then it is increasing. In the year
2002 the PAT is the lowest and in 2007 it observed the highest PAT that is 526080 over
the Years. The NTPC has to concentrate on the profits of the company by taking
necessary steps improving the qualitative production and sale of the energy. Average
PAT is 252273.99.

RETURN ON GROSS CAPITAL EMPLOYED:

The profit for the purpose of calculation on capital employed should be computed
according to the concept of capital employed used. The profits taken must be the profit
earned on the capital employed in the business.
Profit After Tax
Return on Gross Capital Employed = ----------------------------- X 100
Gross Capital Employed

49
TABLE:–XIII
YEAR PROFIT AFTER GROSS CAPITAL PERCENTAGE
TAXES (crores) EMPLOYED
1997-98 112455.42 2489627.74 4.52
1998-99 135261.1 2527509.1 5.34
1999-2000 167943.14 2581347.84 6.51
2000-01 215349.64 2671963.09 8.06
2001-02 81572.81 2947988.08 9.55
2002-03 342453.28 3421431.36 10
2003-04 373380.26 3454130.54 10.81
2004-05 353962.39 3445800.49 10.3
2005-06 360755.71 3927820.5 9.18
2006-07 526080 3480130 15.12
2007-08 580705.8 3522223.9 16.48
2008-09 638776.4 3804001.81 16.79

INTERPRETATION:
Return on Gross capital employed ratio is fluctuating trend during the review period of
time. During the year 1997-98 the ratio was recorded at 4.52% and in the year 2008-09
the ratio was increased to 16.79.Average ratio was observed at 19.18%. The highest ratio
was recorded at 16.79 in the year 2008-09 which is more than average ratio. The lowest
ratio was recorded at 4.52 in the year 1997-98 which the less than the average ratio.
RETURN ON FIXED ASSETS:
The return on fixed assets can be calculated as under
Profit After tax
Return on Fixed Assets = ------------------------- X 100
Fixed Assets
Table: –XIV

YEAR PROFIT AFTER FIXED ASSETS PERCENTAGE

TAXES (crores) (IN LAKHS)
1997-98 112455.4 1245981.7 9
1998-99 135261.1 1563326.2 8.65
1999-2000 167943.1 1716061.3 10.1

50
2000-01 215349.6 1686635.8 13
2001-02 81572.8 1591203.5 5.13
2002-03 342453.2 1703351.3 20.1
2003-04 373380.2 1846573.5 20.22
2004-05 353962.3 1767804.4 20
2005-06 360755.7 1986502.5 18.2
2006-07 526080 2125450 24.75
2007-08 580705.8 2231486.1 26.02
2008-09 638776.4 2454634.71 27.12

INTERPRETATION:

Returns fixed assets ratio is increasing

During the year 1997-98 the ratio recorded as 9.00 and in the year 2008-09 the ratio
increased to 27.12.
Average ratio is 17.74.
The highest ratio is recorded at 27.12 in the year 2008-09 the lowest ratio was recorded at
5.13 in the year 2001-02.
Findings

1 Regarding the fixed assets to net worth it has observed that it has been decreased
slightly to 105.09
2 Regarding the fixed assets it has been observed that the fixed asset has increased.
3 Regarding the long - term funds to fixed assets it is decreased over the Years.
4 Regarding the fixed assets as a percentage of current liabilities it is observed it is
decreased over the Years except in the year 1996-97 it is increased.
5 Regarding the total investment turnover ratio it is observed that it has been
increasing over the Years considerably i.e., 21.59 to 93.92.
6 Regarding the asset turn over ratio it has been observed that it is satisfactory at it
were increasing from 27.59 to 82.61.
7 Regarding the fixed assets to total assets it has been observed that there was
increase from 50% to 64%.

51
 8 Regarding the profit and gross capital employed ratio it can be observed that it has
been increasing over the year i.e., from 5.41 to 17.11 result of the above it can be
said that the ratio is steadily increasing.
9 Regarding profit and fixed assets ratio it can be observed that it has been
increasing over the Years i.e., from 112455.4 to 638776.4 it can be said that the
profit to fixed assets ratio is quite satisfactory.
10 From the above study it can be said that the NTPC financial position on Fixed
Assets is quite satisfactory.
Suggestions & Recommendations:

1 Suggestions for efficient management of fixed assets of NTPC are

2 The NTPC should follow the NPV method or IRR method both at a time
rather than following only NPV method.

3 The NTPC should analyze and measure a list of projects for evaluation.

4 The ratio of return on fixed assets is poor. The finance department (The
manager of NTPC should take remedial steps to improve the position.

5 The PAT ratio must be improved.

6 The NTPC capital budgeting policies should be achieved in the forth

coming Years.

7 The NTPC has to increase its consultancy services to other power project in
India and abroad.

8 NTPC must concentrate on other diversification and takeover.

52
 9 NTPC must be expanded with profit making units with low cost.

CONCLUSION

After analyzing the financial position of National Thermal power corporation

(NTPC) and evaluating its fixed assets Management or capital budgeting techniques in
respect of components analysis, trend analysis and ratio analysis. The following
conclusions are drawn from the project preparation.
The progress of the NTPC shows that there is an increase in Net Block considerably
over the year that is from 61.24% to71.94% regarding the work-in-progress it has
decreased from 36.23 to 20.51 the financial position of NTPC regarding investment it has
been increasing form 100%

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BIBLIOGRAPHY

Book Name Author name

Financial accounting S P jain

Cost and management accounting ICWA book

Accounting for management Khan and jain

Website:
www.wikipedia.com

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www.ntpc.com
www.yahoofinance,com

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