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CHAPTER-1

INTRODUCTION TO THE TOPIC

FINANCIAL MANAGEMENT

Financial Management can be defined as:- The management of the finances of a

business/organization in order to achieve financial objectives.

Taking a business as the most common structure, the key objectives of financial

management would be to:

y Create wealth for the business

y Generate cash, and

y Provide a return on investment keeping in mind the risks that the business is taking

and the resources invested

There are three primary elements to the process of financial management:

FINANCIAL PLANNING

Management need to ensure that sufficient funding is available to meet the needs of the

business. In the short term, funding may be needed to invest in equipment and stocks, pay

employees and fund sales made on credit.

In the medium and long term, funding may be needed for significant additions to the

productive capacity of the business or to facilitate acquisitions.

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FINANCIAL CONTROL

Financial control is a critically important activity to help the business ensure that said

business is meeting its goals. Financial control addresses questions such as:

y Are assets being used efficiently?

y Are the businesses assets secure?

y Does management act in the best interest of the shareholders and in accordance

with business rules?

FINANCIAL DECISION MAKING

The primary aspects of financial decision making relate to investment, financing and

dividends:

y Investments must be financed in some way; however there are always financing

alternatives that can be considered. For example it is possible to raise funds from

selling new shares, borrowing from banks or taking credit from suppliers.

y A key financing decision is whether profits earned by the business should be

retained rather than distributed to shareholders via dividends. If dividends are too

high, the business may be starved of funding to reinvest in growing revenues and

profits.

COST MANAGEMENT (CONTROL AND REDUCTION)

COST CONCEPT

The term "cost" is synonymously used for the term "expense", which refers to sacrifice.

According to Committee of cost concepts-"Cost is foregoing, measured in monetary terms,

incurred or potentially to be incurred to achieve a specific objective."

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Controlling Cost via Responsibility Accounting-

To control cost these fundamentals should be observed-

y

Fixing responsibility to control.

y Limiting the individuals control efforts to his controllable costs

y Reporting the performance of individual.

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CHAPTER-2

OBJECTIVES OF STUDY

y To ensure availability of Total Quality People to meet the Organizational Goals

and Objectives.

y To have a continuous improvement in Knowledge, Skill and Competence

(Managerial, Behavioral and Technical)

y To promote a Culture of Achievement and Excellence with emphasis on

Integrity, Credibility and Quality

y To maintain a motivated workforce through empowerment of Individual and

team building.

y To enhance Organizational Learning

y To play a pivotal role directly and significantly to enhance Productivity,

y Profitability and improve the Quality of WorkLife

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CHAPTER 3

LITERATURE REVIEW

Topic: - Analysis of Financial Management System of HAL, Lucknow.

Objective:-

1. COST REDUCTION AND CONTROL:

To have full coverage of finance control by following various budgets i.e. capital budget,

revenue budget (manpower budget, purchase budget, welfare budget, maintenance

budget, ways and means etc) and making all efforts to reduce the cost from each element

of cost by curtailing the expenditure estimated in the budget to a reasonable cost, so as to

reduce the cost and increase the profitability of the organization.

2. FINDING VARIOUS METHODS FOR IMPLEMENTATION:

To find out various methods like EOQ (Economic Order Quantity), ABC analysis etc

which are implemented by the organization to control cost under various heads.

Research Methodology

Types of Research: -Descriptive research design for the final survey.

Source of Data: -Departmental Analysis, Journals

Sample Design: - Simple Random Sampling.

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Findings:-

y In finance section, L1 i.e. lowest price is considered so that total cost of

production would be reduced and controlled.

y Method study is implemented during production process and the method which is

less time consuming and having less cost is accepted.

y Minimum inventory is kept in stores, so that there would be no wastage and cost

can be reduced.

y

It is also implementing methods of 5S to control and maintain cost effectiveness.

y It has also implemented lean management and various tools like KAIZEN for

wastage removal so as to reduce the extra cost incurred.

Conclusion:-

HAL is one of the largest PSU under the department of defense production, GOI and is a

NAVRATNA company ranked 34th in the list of worlds top 100 defense companies. HAL

with its wide spectrum of expertise in design, development and manufacture of aircrafts,

helicopters, engines, accessories and avionics has emerged as major aeronautical complex in

Asia.

As herein, the projects and items need huge investments than any other organization and

confidential factor is also there too much extent but as much information is extracted shows

that cost control is being performed quite good thats why it is in so much profit.

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HINDUSTAN AERONAUTICS

LIMITED

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CHAPTER 4

COMPANY PROFILE

Hindustan Aeronautics Limited (HAL) based in Bangalore, India, is one of Asias largest

aerospace companies. Under the management of the Indian Ministry of Defence, this public

sector company is mainly involved in aerospace industry, which includes manufacturing and

assembling aircraft, navigation and related communication equipment, as well as operating

airports. HAL built the first military aircraft in South Asia and is currently involved in the

design, fabrication and assembly of aircraft, jet engines, helicopters and their components and

spares. It has several facilities throughout India including Nasik, Korwa, Kanpur, Koraput,

and Lucknow. The German engineer Kurt Tank designed the HF-24 Marut fighter-bomber,

the first fighter aircraft made in India.

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HISTORY OF THE COMPANY

Hindustan Aeronautics Limited (HAL) has a long history of collaboration with several

other international and domestic aerospace agencies such as the Airbus Industries, Boeing,

Sukhoi Aviation Corporation, Israel Aircraft Industries, RSK MiG, BAESystems, Rolls-

Royce plc, Dassault Aviation, Dornier Flugzeugwerke, Aeronautical Development Agency

and Indian Space Research Organization.

HAL was established as Hindustan Aircraft in Bangalore in 1940 by Walchand Hirachand

to produce military aircraft for the Royal Indian Air Force. The initiative was actively

encouraged by the Kingdom of Mysore, especially by the Diwan, Sir Mirza Ismail. The

British Government bought a one-third stake in the company by April 1941 as it believed this

to be a strategic imperative. Later in A pril 1942, it bought out the stakes of Walchand

Hirachand himself and other promoters so that it can act freely. The decision by United

Kingdom was primarily motivated to boost British military hardware supplies in Asia to

counter the increasing threat posed by Imperial Japan during Second World War. However,

the Mysore Kingdom refused to sell its stake in the company but yielded the management

control over to the British Government. Thus, within 2 years of establishment, it was

nationalized.

Hindustan Aeronautics Limited (HAL) came into existence on 1st October

1964.HAL

was set up as an amalgamation of HindustanA

ircraftL

imited along withAeronautics India Limited and Aircraft Manufacturing Depot located in Kanpur, India.

Hindustan Aeronautics Limited has it headquarter located at Bangalore, India. HAL is one of

the largest aerospace companies which are run by the Ministry of Defense. The principal

activities of HAL involve manufacturing aircraft, aerospace, navigation, and instruments for

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communication purposes. A part from these, few other activities performed by HAL are

Designing, manufacturing, and collecting aircraft, jet engines, helicopters, along with their

elements and spares. Hindustan Aircraft Limited which located at Bangalore was

incorporated by the industrialist the late Seth Walchand Hirachand December 1940. The

Government of India became a stakeholder of the company in 1941 and seized the

management department in 1942. HAL has 19Production Units and 9 Research and Design

Centers in 7 locations in India. The Company has an impressive product track record - 12

types of aircraft manufactured with in-house R & D and 14 types produced under license.

HAL has m