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BHARAT PUMP AND COMPRESSORS LIMITED
(A GOVT. OF INDIA UNDERTAKING ENTERPRISRE)
NAINI- ALLAHABAD
A PROJECT REPORT OF SUMMER TRAINING ON
WORKING CAPITAL MANAGEMENT
MASTER OF BUSINESS ADMINISTRATON
(2011-2012)
TRAINING DURATION (12/06/2012 To 26/07/2012)
SUPERVISED BY:- SUBMITTED BY:-
Mr. Dr. Vishnu P. Mishra VIPIN KUMAR MISHR
MBA 3RD SEM
l.D. No-11110115
Roll No. 1101170115
UNITED INSTITUTESOF MANAGEMENT
NAINI, ALLAHABAD
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CERTIFICATE
This is certified that Mr.VIPIN KUMAR MISHRA MBA student,UIM naini,
Allahabad session 2011-2012 has successfully completed the project work entitled-
WORKING CAPITAL MANAGEMENT .
Under my guidance and supervision. Their work is genuine and original an has not
submitted so far any other MBA student.
Date:- Mr. N.A. Khan
Finance Manager
BPCL Naini Allahabad
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DECLARATION
I, solemnly declare that project work entitled:- Working Capital Management in
BPCL is bona fide project work carried out by me, under guidance of Mr. N. A.
Khan ( finance manager) BPCL
I further declare that the best of my knowledge that the work presented in this
project report is original and genuine.
Date:- Vipin kumar mishra
MBA 3RD SEM
Roll No. 1101170115
ACKNOWLEDGEMENT
I am glad to express my extreme thank and feeling of deep gratitude,
indebtedness and reverence to my esteemed supervisor Mr. R.H.M.John , who has
always show exemplary keenness and interest in the process of project work. His
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valuable guidance, timely suggestion and constant fatherly information made it possible
for me to complete present shape and at due date.
I express my sincere thank to Dr. Vishnu P. Mishra for providing me valuable
help in accomplishment of this project work.
Also I pay my heartiest thank to Mr. O. P. Shukla, U.C. Sharma and V.S. Singh
(training incharge) for valuable suggestion to me at time to time.
At last but not least I am thank full to all employee of BPCL, Naini- Alld, who
provided their full support and co-ordination during my training by giving me sufficient
knowledge related to my topic and organizational environment.
The completion of this project is the result of valuable guidance, constructive
suggestion,
keen interest and eminent supervision of all the training officer and every experienced
employee of BPCL
Vipin kumar mishra
MBA 3RD SEM
Roll No.-1101170115
EXECUTIVE SUMMARY
The objective of my project is the Working Capital Management in BPCL.
Objective of the report is to analyze and understand the Impact of leverage on
profitability of the firm. This report investigate the relationship between
leverage( operating, financial and combined) and earning per share. it aims to describe
how the earning capacity of the firm is influenced by the fixed operating costs and the
fixed financial charges.
Other tools like skew ness and kurtosis are applied to examine Lack of
symmetry used to understand the distribution of data and Flatness or peaked ness.
The results suggest that the leverage and profitability and growth are related and the
leverage is having impact on
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the profitability of the firm.
Financial ratio analysis is the selection, evaluation and interpretation of
financial data, along with the other pertinent information, to assist in investment and
financial decision-making. Financial ratio analysis may be used internally to evaluate
employees performance, the efficiency of operation and credit policies, and externally
to evaluate potential investment, credit worthiness of borrower among other things.
TABLE OF CONTENT
ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
CERTIFICATE
CHAPTER PAGE NO.
1. HISTORY OF COMPANY
2. VISSION,MISSION AND OBJECTIVE
3. THE GROUP
4. ISO CERTIFICATION
5. ISO CERTIFICATE6. PROFILE
7. CAPABILITIES
8. MANAGEMENT STRUCTURE
9. TYPE OF POST
10. ORGANIZATON CHART
11. PRODUCT & SERVICES
12. OFFICES AND CONTACT ADDRESSES
13. IMPORTANT CLIENT
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14. WORKING CAPITAL
15. WORKING CAPITAL MANAGEMENT
16. INVENTORY MANAGEMENT
17. CORPORATE FINANCE
18. CAPITAL INVESTMENT DECISION
19. FINANCIAL RISK AND MANAGEMENT
20. PERSONAL AND PUBLIC FINANCE
21. COMPETENCY
22. CUSTOMER STISFACTON
23. MANUFACTURING UNIT
24. MANAGEMENT INFORMATION SYETEM
25. BALABNCE SHEET
26. PROFIT AND LOSS ACCOUNT
27. GRAPHICAL PRESENTATION OF TURNOVER,VALUE ADDED PER
EMPLOYEE,NET PROFIT BEFORE TAX,NET WORTH
28. TEN YEAR DIGEST
29. STATEMENT COST OF GOODS SOLD
30. DATA ANALYSIS
31. CONCLUSION
32. BIBLIOGRAPHY
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HISTORY OF THE COMPANY
HISTORY OF COMPANY
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Bharat pumps and compressors limited incorporated in 1-jan-1970 in Naini at trans of yamuna area of
Allahabad and commercial activities started in 1973 with the objective to design, manufacture and
supply of capital goods in the fluid handling field including provision of services connected there with.
BPC which caters to the need of core sectors of economy such as oil exploitation and exploration,
refineries, petro-chemicals and fertilizers process industries, nuclear and thermal power plants, had in
its earlier phases entered in to technical collaboration with world renowned manufactures to
indigenously design and manufacture heavy duty centrifugal and reciprocating pump, reciprocating
compressors and high pressure gas cylinders and other hi-tech oil field equipment such as cementing
units, sucker rod pumps etc.
In a very short span, the company absorbed the technology and established itself as a world renowned
manufacturer of wide range of hi-tech products. BPC has supplied its products to the total satisfaction
of customers in almost all national projects of companies like ONGC, OIL, BPCL, IOCL, HOC, RCF,
Nuclear power corporation, Dept. Atomic Energy, IPCLETC.
THE GROUP
8
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THE GROUP
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Like many others impart substitution oriented public sector undertakings BPCL also
have to face various constrains because of long gestation period of profitability. By the
time company could start showing result ,the growing international competition
effectively.
Group of six premier sector engineering undertaking namely are :
Bharat pumps and compressors limited, Allahabad
Bharat heavy plates & Vessels Ltd, Vizag
Richardson and Cruddas Ltd, Kolkata
Bridge and Roof Co. (INDIA) Ltd, Kolkata
Triveni structureal Ltd, Allahabad
Tungbhadra Steel Product Ltd, Hospet (Karnatka)
Was formed in year 1987 under the holding company Bharat Yantra Nigam Ltd.
Having its head office at Allahabad , the collective and integrated strength of the
group augur well for its future roll as a strong and viable engineering group.
ISO CERTIFICATION
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ISO CERTIFICATION
Bharat pumps and compressors limited, naini- Allahabad is a certified integrated
management systems company having ISO 9001/2000,ISO 14001/2004, OHSAS
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18001/1999 includes environment, occupational health and safety management
systems, with the objective to design , manufacture and supply capital goods in the fluid
handling field including provision of services connected there with, BPC catters to the
need of core sector of the economy such as oil exploration and exploitation,
refineries,petro chemicals, chemicals and fertilizer process industries and power plant
and indigenously designs and manufacture heavy duty centrifugal pumps, reciprocating
pumps, reciprocating compressors and high pressure seamless gas cylinders and other
high tech oil field equipment such as cementing units, sucker rod pumps etc
ISO CERTIFICATE
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BPCL-NAINI (An Overview)
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LOCATION- NAINI
Naini is a satellite township of the city of allahabad, located on the banks of river
yamuna and developed into an industrial centre. Some other manufacturing
organizations located in Naini are ITI, TSL, AREVA, SAIL, etc.
About:
Bharat pump & compressor ltd.,, Naini , allahabad is a certified integrated management
systems company having ISO 9001:2000, ISO 14001:2004, OHSAS 118001:1999
Includes Environment, occupational health & safety Management systems, with the
objective to design, manufacture and supply capital goods in the fluid handling field
including provision of services connected therewith. BPC caters to the need of core
sector of the economy such as oil exploration and exploitation, refineries, petro-
chemical, chemicals and fertilizers, process industries and power plants and
indigenously designs and manufactures heavy duty centrifugal pumps, reciprocating
pumps, reciprocating compressors and high pressure seamless gas cylinders and other
hi-tech oil field equipments such as cementing units, sucker rod pumps etc.
BPC : VISION
To become an Indian MNC in the field of fluid handling, gas compression, gas
storage equipment, services and project management.
BPC : MISSION
To provide quality products and services to core sector industries with special
thrust on oil and natural gas, petro chemicals, refineries, nuclear and thermal
power plants, fertilisers and public transport services complying to health and
safety requirements.
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BPC : OBJECTIVES
To increase market share of their products and services.
To maximise customers satisfaction by providing quality product and services
within stipulated delivery.
To increase the business of spares and rendering prompt after sales service
including refurbishment.
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PORFILE
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PROFILE
Bharat pumps and compressors ltd, the public sector corporate enterprise, was
incorporated in 1970 with manufacturing facility at naini , Allahabad, India
Mission and objective of the company is to research, design and develop,
manufacture and supply capital goods in the fluid handling field including provision of
services connected there-with, to cater the need of Oil exploration and exploitation,
refineries, petro-chemicals, chemicals and fertilizer, power sectors and process and
down stream industries.
The corporate philosophy also involves approach for total quality
management (TQM) and total productive maintenance (TPM) in order to achieve and
sustain a reputation for quality at a competitive cost, in national and international
markets for our products and services through collective involvement of all.
BPC is the only company in Asia to manufacture a wide range of hi-tech
products, heavy duty pumps and compressors and high pressure seamless and welded
gas cylinders, under one roof.
Such high valued hi-tech products are functioning to the total satisfaction
of the customers with least maintenance cost and optimum energy conservation.
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CAPABILITIES
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CAPABILITIES
BPC, the ISO 9001:2000,ISO 14001:2004, OHAS 18001:1999
Company, manufacture highly technically sophisticated and environmentally
friendly products, equaling international standards of quality and performance with the
help of most modern and sophisticated machining cater having latest CMC machines,
assembly, testing,heat treatment and fabrication workshops.
TEST FACILITIES
The factory is equipped for full load testing of various parameter for complete
product rang up to 2000 KVA.
QUALITY ASSURANCE
Quality assurance department ensure that the products ( pumps and compressors)
meet the specification of international codes such as API and are fully guaranteed for
performance on the basis of proven and the most updated designs. Gas cylinder are
manufactured as per specification of international standard such as DOT, BS, BIS, ISO
etc. and usage approval from recognized national/international agencies.
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BOARD OF DIRECTORS
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TYPE OF POST
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MD
CGM GM
DGM
SR.MANAGER
MANAGER
SR. ENGINEER/OFFICER
OFFICER/ ENGINEER
SUPERVISIORS
ASSISTANT ENGINEER 15
FOREMAN/OFFICE SUPRINTEDENT 01
CHARGEMAN 18
NON-EXECUTIVES (WORKERS)
CHIEF FOREMAN 151
SR. FOREMAN 284
FOREMAN (W.) 143
SR. TECHNICIAN 51
HIGH SKILLED WORKER 31
SKILLED WORKER (GRADE 3) 26
SKILLED WORKER (GRADE 2) 10
SKILLED WORKER (GRADE 1) 10
SEMI SKILLED WORKER 21
UNSKILLED WORKER 05
TOTAL
01
02
03
13
14
45
60
13
48
965
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ORGANIZATINAL CHART
PRODUCT
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PRODUCT
Gas cylinder
1 High pressure seamless industrial gas
cylinders.
2 Welded cylinders.
3 Cylinders in Cascade for storage of
compressed natural gas (CNG)
Pump and
compressors
1 Centrifugal Pumps
2 Pumps for application in power plants.
3 Reciprocating piston and plunger pumps4 Cementing units.
5 Sucker rod pumping unit.
6 Reciprocating compressors.
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Rang of products
Maximum
power
2500 KW
Maximum
pressure
140 kg/cm2
Maximum
capacity
12,000 M3/Hr
Fluids
handled
Dematerialized water, sea water,
hydrocarbon, neptha, LPG, carbonate
solution, boiler feed water, benefield
solution, alkaline and acidic solution,
ammonia liquor and slurry
Maximum
power
1700 KW
Maximum
pressure
675 kg/cm2
Maximum
capacity
315 M3/Hr
Fluids
handled
Drilling mud, cementing slurry, crude
oil steam, condensate, heavy water,
fatty acids, ammonia carbonate, liquid
ammonia, water injection
Centrifugal pumps
Reciprocating pumps
Maximum
power
25,000 KW
Maximum
pressure
450 kg/cm2
Maximum
capacity
70,000 nm3/Hr
Air, nitrogen, oxygen, carbon di-oxide,
hydrocarbon, ammonia, synthesis gas,
hydrogen sulphate, coal gas etc.
Reciprocating compressors
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Gas cylinder
Maximumpressure
400 kg/cm2
Maximum
capacity
110 liters.
Gas handled Oxygen, nitrogen, hydrogen, argon, air,
helium, carbon di-oxide, nitrous oxide,
acetylene, ammonia, chlorine, Freon,
LPG, compressed natural gas (CNG)
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OFFICES AND CONTACT ADDRESSES
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IMPORTANT CLIENT
COMPETENCY
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COMPETENCY:
Quality Assurance Programmes conform to International specifications and
requirements.
Research and Development efforts are supported by test facilities for model
testing in the centrifugal pumps, reciprocating pumps and compressors area and
also carry out live testing of expendables etc.
Fully groomed Installation, Commissioning and Spare Parts Division renders
Product Support, Technical Assistance and advice besides providing quick and
effective after sales service
A strong Design Department has been established which houses Computer
aided Design Centre. Highly qualified, trained, experienced and competent
engineers are involved in application engineering, thermodynamic calculations,
hydraulic calculations and systems design in the area of piping, instrumentation,
electrical, operational control etc.
The company undertakes long term maintenance contract of the equipments
installed and commissioned at customers' plants, with the objective to maximise
their profits and minimise their risks.
WORKING CAPITAL
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Working capital also known as "WC", is a financial metric which represent
soperating liquidity available to a business. Along with fixedassets such as plant and
equipment, working capital is considered a part of operating capital. It is calculated
ascurrent assetsminuscurrentliabilities. If current assets are less than current liabilities,
an entity has a working capital deficiency , also called a working capital deficit .
Networking capital is working capital minus cash (which is a current asset)and minus
interest bearing liabilities (i.e. short term debt). It is aderivation of working capital, that
is commonly used in valuationtechniques such as DCFs (Discounted cash flows).
Working Capital = Current Assets Current Liabilities
A company can be endowed with assets and profitabilitybut short of liquidity
if its assets cannot readily be converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable
and payable and cash
WORKING CAPITAL MANAGEMENT
Decisions relating to working capital and short term financing are referred to as
working capital management. These involve managing the relationship between
afirm'sshort-term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming operational
expenses.
By definition, working capital management entails short term decisions
- generally, relating to the next one year period - which are "reversible". These
decisions are therefore not taken on the same basis as Capital Investment Decisions
(NPV or related, as above) rather they will be based on cash flows and / or profitability
One measure of cash flow is provided by the cash conversion cycle- the net number of
days from the outlay of cash forraw material to receiving payment from the customer.
As a management tool, this metric makes explicit the inter-relatedness of decisions
relating to inventories, accounts receivable and payable, and cash. Because this number
effectively corresponds to the time that the firm' scash is tied up in operations and
http://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Profit_(accounting)http://en.wikipedia.org/wiki/Current_liabilityhttp://en.wikipedia.org/wiki/Operations_managementhttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Current_assetshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Current_liabilitieshttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Profit_(accounting)http://en.wikipedia.org/wiki/Current_liabilityhttp://en.wikipedia.org/wiki/Operations_managementhttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Materialhttp://en.wikipedia.org/wiki/Accounting_liquidity7/31/2019 Uim Vipin - Copy
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unavailable for other activities, management generally aims at a low net count In this
context, the most useful measure of profitability isReturn on capital (ROC). The result
is shown as a percentage, determined by dividing relevantincome for the 12 months
bycapital employed;Return on equity(ROE) shows this result for the firm's
shareholders. Firm value is enhanced when,and if, the return on capital, which results
from working capitalmanagement, exceeds thecost of capital, which results from
capitalinvestment decisions as above. ROC measures are therefore useful as
amanagement tool, in that they link short-term policy with long-term decisionmaking.
SeeEconomic value added(EVA).Guided by the above criteria, management will use a
combination of policies andtechniques for the management of working capital. These
policies aim at managingthe current assets (generallycashandcash
equivalents,inventoriesanddebtors) and the short term financing, such that cash flows
and returns are acceptable.
Cash management. Identify the cash balance which allows for the business to meet day
to day expenses, but reduces cash holding costs.
Inventory management
. Identify the level of inventory which allows for uninterrupted production but reduces
the investment in raw materials and Short term financing. Identify the appropriate source
of financing, giventhe cash conversion cycle: the inventory is ideally financed by credit
granted by the supplier; however, it may be necessary to utilize a
bankloan(or overdraft), or to "convert debtors to cash" through "factoring".
CSH CONVERSION CYCLE
management accounting, the WORKING CAPITAL
Cash Conversion Cycle(CCC) measures how long a firm will be deprived of cash if it
increases itsinvestment in resources in order to expand customer sales. It is thus
ameasure of theliquidity riskentailed by growth. However, shorteningthe CCC creates
its own risks: while a firm could even achieve anegative CCC by collecting from
customers before paying suppliers, a policy of strict collections and lax payments is not
always sustainable
http://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Capital_employedhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)http://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Capital_employedhttp://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Economic_value_addedhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Cash_and_cash_equivalentshttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Cash_managementhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Factoring_(finance)http://en.wikipedia.org/wiki/Management_accountinghttp://en.wikipedia.org/wiki/Liquidity_risk7/31/2019 Uim Vipin - Copy
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Definition CCC days between disbursing cash and collecting cash in connection
withundertaking a discrete unit of operations.
Inventory conversionperiod+ Receivables conversionperiod Payables conversionperiod
Avg. Inventory COGS / 365+Avg.
Accounts Receivable Revenue / 365 Avg.
Accounts Payable COGS / 365
CORPORATE FINANCE
Corporate financeis an area of financedealing with financial decisions business
enterprisesmake and the tools and analysis used to make these decisions. The primary
goal of corporate finance is to maximize corporate value . whilemanaging the firm's
financialrisks. Although it is in principle different frommanagerial financewhich studies
the financial decisions of all firms, rather thancorporations alone, the main concepts in
the study of corporate finance areapplicable to the financial problems of all kinds of
firms.The discipline can be divided into long-term and short-term decisions
andtechniques.Capital investmentdecisions are long-term choices about which projects
receive investment, whether to finance that investment withequityordebt, and when or
whether to paydividendstoshareholders. On the other hand, the short term decisions can
be grouped under the heading "Working capital management".This subject deals with
the short-term balance ofcurrent assets and current liabilities; the focus here is on
managing cash,inventories, and short-term borrowing and lending (such as the terms
on credit extended to customers).The terms corporate finance and corporate financier
are also associated withinvestment banking . The typical role of aninvestment bankis to
evaluate the company's financial needs and raise the appropriate type of capital that best
fitsthose needs.
liabilities; the focus here is on managing cash, inventories, and short-term borrowing
and lending (such as the terms on credit extended to customers).The terms corporate
finance and corporate financier are also associated with investment banking. The
http://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Receivableshttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Maximizationhttp://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/Riskshttp://en.wikipedia.org/wiki/Managerial_financehttp://en.wikipedia.org/wiki/Capital_investmenthttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Dividendshttp://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Working_capital_managementhttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Receivableshttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Accounts_Payablehttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Maximizationhttp://en.wikipedia.org/wiki/Valuation_(finance)http://en.wikipedia.org/wiki/Riskshttp://en.wikipedia.org/wiki/Managerial_financehttp://en.wikipedia.org/wiki/Capital_investmenthttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Dividendshttp://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Working_capital_managementhttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Investment_banking7/31/2019 Uim Vipin - Copy
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typical role of aninvestment bankis to evaluate the company's financial needs and raise
the appropriate type of capital that best fitsthose needs
CAPITAL INVESTMENT DECISION
Capital investment decisions are long-term corporate finance decisions
relatingtofixed assetsandcapital structure . Decisions are based on several inter-related
criteria. (1) Corporate management seeks to maximize the value of the firm byinvesting
in projectswhich yield a positivenet present valuewhenvaluedusing an
appropriatediscount rate. (2) These projects must also befinancedappropriately. (3) If no
such opportunities exist, maximizing shareholder value dictates thatmanagement must
return excess cash to shareholders (i.e., distribution viadividends). Capital investment
decisions thus comprise an investment decision, afinancing decision, and a dividend
decision. The investment decision Management must allocate limited resources
between competing opportunities(projects) in a process known ascapital budgeting
Making this capital allocationdecision requires estimating the value of each opportunity
or project, which is afunction of the size, timing and predictability of future Project
valuation each project's value will be estimated using a discounted cash
flow(DCF)valuation, and the opportunity with the highest value, as measured by the
resultantnet present value(NPV) will be selected (applied to Corporate Finance
byJoel Deanin 1951; see alsoFisher separation theorem,John Burr Williams: theory).
This requires estimating the size and timing of all of the incremental cash
flowsresulting from the project. Such future cash flows are thendiscountedto
determinetheir present value (seeTime value of money). These present values are
thensummed, and this sum net of the initial investment outlay is the NPV. SeeFinancial
modeling.The NPV is greatly affected by thediscount rate. Thus, identifying the proper
discount rate - often termed, the project "hurdle rate" is critical to making anappropriate
decision. The hurdle rate is the minimum acceptablereturnon aninvestmenti.e.
the project appropriate discount rate. The hurdle rate shouldreflect the riskiness of the
investment, typically measured byvolatilityof cashflows, and must take into account the
financing mix. Managers use models such astheCAPMor theAPTto estimate a discount
rate appropriate for a particular project, and use theweighted average cost of
capital( WACC ) to reflect thefinancing mix selected. (A common error in choosing a
discount rate for a projectis to apply a WACC that applies to the entire firm. Such an
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approach may not beappropriate where the risk of a particular project differs markedly
from that of thefirm's existing portfolio of assets.)In conjunction with NPV, there are
several other measures used as (secondary)selection criteriain corporate finance. These
are visible from the DCF and includediscounted payback period,IRR,Modified
IRR,equivalent annuity, capital efficiency, andROI. Alternatives (complements).
FINANCIAL RISK MANAGEMENT
Financial Risk Management the process of measuring riskand then developing
and implementing strategies tomanage that risk.Financial risk management focuses on
risks that can be managed("hedged") using tradedfinancial instruments (typically
changes in commodity prices,interest rates,foreign exchange ratesandstock prices).
Financial risk management will also play an important role incashmanagement. This
area isrelated to corporate finance in two ways. Firstly, firm exposure to business risk is
adirect result of previous Investment and Financing decisions. Secondly,
bothdisciplines share the goal of enhancing, or preserving, firmvalue.
All citation needed large corporations have risk management teams, and small
firms practice informal,if not formal, risk management. There is a fundamental debate
on the value of "Risk Management" and shareholder value that questions a
shareholder's desire tooptimize risk versus taking exposure to pure risk. The debate
links value of risk management in a market to the cost of bankruptcy in that
market.Derivativesare the instruments most citation needed commonly used in financial
risk management. Because unique derivativecontractstend to be costly to create
andmonitor, the most cost-effective financial risk management methods usuallyinvolve
derivatives that trade on well-establishedfinancial marketsorexchanges. These standard
derivative instruments includeoptions,futures contracts,forward contracts, andswaps.More customized and second generation derivatives known asexoticstradeover the
counterakaOTC.
Relationship with other areas in finance Investment bankingUse of the term
corporate finance varies considerably across the world. In theUnited Statesit is used,
as above, to describe activities, decisions and techniquesthat deal with many aspects of
a companys finances and capital. In the United Kingdom and Commonwealth
countries, the terms corporate finance and corporate financier tend to be associated
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with investment banking- i.e. withtransactions in which capital is raised for the
corporation.
PERSONAL AND PUBLIC FINANCE
Corporate finance utilizes tools from almost all areas of finance. Some of the
toolsdeveloped by and for corporations have broad application to entities other
thancorporations, for example, to partnerships, sole proprietorships, not-for-
profitorganizations, governments, mutual funds, and personal wealth management.
WORKING CAPITAL WORKS
What Is Working Capital?
WORKING CAPITAL refers to the cash a business requires for day-to-day
operations, or, morespecifically, for financing the conversion of raw materials into
finished goods, which thecompany sells for payment. Among the most important items
of working capital arelevels of inventory, accounts receivable, and accounts payable.
Analysts look at theseitems for signs of a company's efficiency and financial
strength.Take a simplistic case: a spaghetti sauce company uses $100 to build up its
inventoryof tomatoes, onions, garlic, spices, etc. A week later, the company assembles
theingredients into sauce and ships it out. A week after that, the checks arrive
fromcustomers. That $100, which has been tied up for two weeks, is the company'sworkingcapital. The quicker the company sells the spaghetti sauce, the sooner the
companycan go out and buy new ingredients, which will be made into more sauce sold
at a profit.If the ingredients sit in inventory for a month, company cash is tied-up and
can't be usedto grow the spaghetti business. Even worse, the company can be left
strapped for cashwhen it needs to pay its bills and make investments. Working capital
also gets trappedwhen customers do not pay their invoices on time or suppliers get paid
too quickly or not fast enough.The better a company manages its working capital, the
less the company needs toborrow. Even companies with cash surpluses need to manage
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working capital to ensurethat those surpluses are invested in ways that will generate
suitable returns for investors.
Not All Companies Are the Same Some companies are inherently better placed than
others. Insurance companies, for instance, receive premium payments up front before
having to make any payments;however, insurance companies do have unpredictable
cash outflow as claims come in.Normally, a big retailer like Wal-Mart (NYSE:WMT)
has little to worry about when itcomes to accounts receivable: customers pay for goods
on the spot. Inventoriesrepresent the biggest problem for retailers; as such, they must
perform rigorousinventory forecasting or they risk being out of business in a short
time.Timing and lumpiness of payments can pose serious troubles.
Manufacturingcompanies, for example, incur substantial upfront costs for materials and
labor beforereceiving payment. Much of the time they eat more cash than they generate.
EVALUATING COMPANIES
Investors should favor companies that place emphasis on supply-chain management
toensure that trade terms are optimized. Days-sales outstanding or DSO for short, is a
goodindication of working capital management practices. DSO provides a rough guide
to thenumber of days that a company takes to collect payment after making a sale
longer to collect its payments. It suggests that the company is not going tohave enough
cash to fund short-term obligations because the cash cycle islengthening. A spike in DSO is even more
worrisome, especially for companies that are already low on cash.The inventory turnover
ratio offers another good instrument for assessingthe effectiveness of WCM. The inventory
ratio shows how fast/oftencompanies are able to get their goods completely off the shelves.
Theinventory ratio looks like this:
COST OF GOODS SOLD (COGS)/INVENTORY
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Broadly speaking, a high inventory turnover ratio is good for business.Products
that sit on the shelf are not making money. Granted, an increasein the ratio can be a
positive sign, indicating that management, expectingsales to increase, is building up
inventory ahead of time.For investors, a company's inventory turnover ratio is best seen
in light of its competitors. In a given sector where, say, it is normal for a company
tocompletely sell out and restock six times a year, a company that achieves aturnover
ratio of four is an underperformer.Computer giant and stock market champion, Dell
(Nasdaq:DELL),recognized early that a good way to bolster shareholder value was to
notchup working capital management. The company's world-class supply-
chainmanagement system ensures that DSO stays low. Improvements ininventory
turnover increase cash flow, all but eliminating liquidity risk,leaving Dell with more
cash on the balance sheet to distribute toshareholders or fund growth plans.Dell's
exceptional WCM certainly exceeds those of the top executives whodo not worry
enough about the nitty-gritty of working capital management.Some CEOs frequently
see borrowing and raising equity as the only way toboost cash flow. Other times, when
faced with a cash crunch, instead of setting straight inventory turnover levels and
reducing DSO longer to collect its payments. It suggests that the company is not going
tohave enough cash to fund short-term obligations because the cash cycle islengthening.
A spike in DSO is even more worrisome, especially for companies that are already low
on cash.Theinventory turnover ratiooffers another good instrument for assessingthe
effectiveness of WCM. The inventory ratio shows how fast/oftencompanies are able to
get their goods completely off the shelves. Theinventory ratio looks like this:
SECTIONS OF FINANCE DEPARTMENT
STORE BILL SECTION & FOREIGN PAYMENT MR.C.N MISHRA
SALES- MR. G.P SINGH
PROVIDEND FUND MS. GAURI
SALARY MR. M.N TRIPATHI
MISCELLANEOUS MR. B.V SINGH
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INCOME TAX- MR. RANJEET SINGH
COSTING-MR. WAHIDI JI
BOOK SECTION- MR. S.B GUPTA
BANK SECTION-MR SANJAY GUPTA
MEDICAL SECTION -MR. R.C PANDEY
STORE BILL SECTION
Base of placing the Purchase Order (PO)- Design Department raised indent
forprocurement of material for various products the main product of BPCL
are:1.Reciprocating Compressor2.Reciprocating Pumps3.Centrifugal Pumps4.Gas
Cylinder (excluding LPG)After receipt of indent Purchase Department offer quotation
from different suppliersthrough tenders. There are 4 types of tenders-
1. Single tender (for only one reputed supplier).
2. Limited tender (Some regular suppliers are said to be providing quotation after
receipt of quotation comparative statement is prepared in which price quality,
past performances of the supplier are maintained. The comparative statement
send to finance department for concurrence and final decision are given by
finance department.
3. Global tender (These are given in newspaper and international supplier submits
their quotations through this tender).
4. Open-tender (quotation calls for international).Purchase order (PO)- This is an
arrangement between buyers and suppliers & suppliersand suppliers is bound to
deliver the materials as mentioned in PO-
Items name
Quantity
Unit rate
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Packing & forwarding [0.5% to 5% of material value (mv)]
excise dutyUp to 29-02-2008-16.48%Up to march 2008-14.42%Up to o7-12-
2008-10.03%Up to 24-02-2009-8.24%Up to 27-02-2010-10.03%
VAT [MV+P&F+Excise duty] 5 %(19-02-2010) or [13.5% applicable in 5%
cases].
Service tax (10.3%is applicable on machinery work or labour job).
Central Sales Tax (CST)- Presently 2% on [MV+P&F+ED].
Government taxes like VAT, CST, Service Tax %age is not given in PO
.Payment to the supplier When supplier supplies the material, he provide
bills invoice/bill, taxable invoice [for moderate credit- credit taken which
excise duty are paid byBPC to suppliers. BPC takes excise credit on the basis
of taxable invoice.]
According to PO supplier invoice/ bill the same or past as per PO rate terms&
conditions.Late delivery inventory - 0.5% per week subject to maximum of 5% of
delayed supply isdeducted from the bill. If supply is delayed beyond delivery period (asper PO deliveryperiod is 4 weeks from the date of PO), all payments are released
through cheques /RTGS.Note-; ED, VAT, ST or refunded/credited by sales tax
department & excise department.Contractor transport payment- Annual contract is
awarded for transportation of materials from BPCL to any place within India & all over
India to BPCL. Presentlythere are 3 transporters. e.g.- ETO (Economic Transport
Organisation), ARC(Associated Road Organisation), Indo Aryan Organisation.For
different jobs, construction of roads, building, foundation of machinerytanks the
contract is awarded on the basis of tender Income tax - @ 2.06% of labour job amount.
Machinery is deducted from the suppliersbill. Finally store department provide Store
Receipt Voucher (SRV) to finance forvaluation.Purchase of imported materials- On the
basis of PO, materials are imported by 2 ways-;(1) through letter of credit (LC) -
90%(2) On collection basis-10%Establishment of LC-
1.Banker- SBI Naini
2.Consignee- overseas supplier, foreign vendors (supplier) beneficiaries.
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3.Consignee- SBI Naini a/c, BPCL Naini (receiver)Foreign payment -:After placement
of the PO purchase department sent request letter to financedepartment.Foreign
payment section along with 2 copies of PO and suppliers consent letter
forestablishing LC. Finance department on the basis of PO prepare the
followingdocuments:
1.Letter addressed to SBI Naini (chief manager) in which PO no., date, value inforeign
currency, freight forwarders, name and address are mentioned.
2.Shipping documents. In this document the following points are indicated:
i.Airway bill / Bill of lading
ii.Invoice/Bill
iii.Packing list
iv.Country or origin
v.Test Inspection Certificatevi.Certificate of utilities
vii.Specification of Goals
viii.Certificate of completion of supply
ix.Warranty/ GuaranteeTotal LC value in FC suppliers name, name of freight
forwarders, latedelivery penalty if applicable, PBC (Performance Bank Guarantee)
if applicable, requirement of advance set of documents for shipping of materials.3.
Guarantee LC form ( 2) suppliers name, FC value, price term [free on boat]
All charges from suppliers workshops to sea/ airport like handling charges,
documentation charges, warehousing charges, paid by suppliers and finally charges in
his invoice.4. Foreign exchange control .
Name of supplier
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Material cost The LC is established by the buyer through his banker (SBI, Naini) with
a primebank located in the country of supplier. Confirmation of LC is confirmed by
thebuyers banker only.Terms of dispatch/ shipment (fob)- in this case supplier is
responsible fortransportation of material upto port, documentation charge, warehouse
chargewill be paid by the supplier and finally charged in this bill.Ex-works: The
supplier is only responsible on his work place. The freightforwarder of buyer is
responsible for material handling upto port and allexpenses at port.Cost insurance and
freight of air/ship- will be born by the supplier.Port of Loading- The supplier shipped
the material with the consultant of freightforwarder in his country.Port of Discharge-
Material discharge of Mumbai port and the clearing agent of buyershall provide all
expense of the port along with freight bill.Releasing of material from port- after
payment freight port trust expenses custom duty andreceipt of original documents like
bill/invoice, packing list, country of origin and AWB/ BL.Invoice/bill and AWB/ BL
must be signed by chief manager SBI Naini. In some casesoriginal documents are not
received in SBI Naini and material reached and Mumbai portthen in case of air release
order duly addressed to freight forwarder and signed by chief manager SBI Naini. In
case of sea indemnity bond is issued and also signed by SBI is sentto freight forwarder
for increasing the material from the port. After releasing the materialsthrough our
transporters, materials are send ton BPCL Naini
MICSCELLANEOUS PAYMENT SECTION
.Function of miscellaneous payment section
1.Payment of transport bills
2.Payment of mobiles and telephones
3.Miscellaneous advance and adjustment
4.AMC (annual maintenance contracts)
5.Publication and advertisemen
t6.Payment of leased houses
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7.Security/earnest money deposits and payment
8.Reduction of income tax &payment
9.Training and seminar
10.Power payment11.Miscellaneous payments
DEDUCTION AND PENALTY IN CASE OF PENALTY
Deduction on late arrival (for all types of vehicles)=Contract amount +diesel hike /
252*1%Extra mileage rate rs.5.60 per km Penaltycase
Contract amount +diesel hikeDays in a month or 25 days/25 hrs *hrs indicated in the
bill 4 or 3
LANDLINES36 landlines connection DGM (60000/-)90 Mobiles are issued to the
officer diff.department
IMPEREST
Imperest is an advance being paid to each and every department to meet out
theexpenses of emergent and petty nature.
MISCELLANEOUS ADVANCE AND ADJUSTMENT
it includes material handling ,localcash purchase ,repair handling ,welfare /press and
publication expenses etc.AMC-annual maintenance contractsAMC for computersAMC
for crane servicesAMC for weighing machinesAMC for electronic punching
machinesAMC for electronic data processing(EDP)
PUBLICATION AND ADVERTISEMENT
Advertisement for tender notice Advertisement for recruitmentAdvertisement for
goodwill and sales promotion
SECURITY/EARNEST MONEY DEPOSITS AND PAYMENT
Earnest money it is being deposited at the time of issuing tender form .it isrefundable
just after the party is failure to obtain contract.Security money-it is being deposited
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after finalization of contract and securitydeposits is refundable after termination of
contracts.
REDUCTION OF INCOME TAX &PAYMENT
TDS is being deducted from the parties payment under two section1st
-sec 194(c)2nd
-sec 194 (j)Sec194(c)-ths sec. covers the payments of parties who are rendering their
serviceswith their own means and cost .e.g. transporters bill.(A) rate of TDS-2.06%(B)
Rate of TDS-1.03% is being deducted from the bill of the parties who do the work of
mediator or broker.\e.g satya advertising agencies sec 194(j)
TDS at the rate of-10.30%This rate is applicable on the payment of professional,
retainers and serviceconsultants. Tax will be deposited on before the 7thof the coming
month.SALARY SECTIONAs per the government rules and regulations the salary
section calculates the salaryof employees by involving-:DA (IDA)-industrial dearness
allowanceDA is changed according to the survey made by consumer forum in several
citiesto know the prices of various products.Presently DA is 127.5% of
basicHRA( house rent allowance )Classification of cities HRAA-1(population>50 lac)
30% of basic payA,B-1,B-2(population between 20-50 lac) 15% of basic payC
(population between 10-20 lac) 7.5% of basic payUnclassified (below 10 lac) 5% of
basic payCCA(city compensatory allowance)Washing allowance Rs 60/- per
monthCanteen allowance Rs 400/-per monthChildren education allowanceAttendance
award Rs55 for 100% attendance
PROVIDEND FUND SECTION
UP/4882/2612 code given by PF Commissioner to BPCL.P.F no up/4882/261212%
is cut down from individual salary same amount is added to a/c which is provided by
company.Contribution involved in the separate a/c of employee:(1)Employee
contribution(2)Employer contribution(3)Voluntary provident fundVPF is a/c to the will
of employee which is provided by companyRandomly .maximum limit that can be cut
down 6000/- or 72000 per year.
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In last two month Feb. &mar individual can exceed the amount 6000/- tomaintain
72000/- in that year
8.33% or Rs 541/- whichever is lower one is cut from the 12% of the salarythen we get
the amount.Types of loan Non refundableCondition 1- 90% of the amount is
providedCondition2-(basic+DA)*36RefundableCondition 1- 90% of the amount is
provided after 10 year of service if taken75%provided only refundableCondition 2-
(basic + DA)*6DeductionProvident fund -12% of basic +DA8.5% interest on
PFVoluntary provident fundMax 6000/- can be deducted as VPF
Income tax deduction
Bus charge
GLIC/LIC Deduction
MEDICAL SECTION
Medical section of finance department provides financial help for medical facilitiesto
the employee and their dependents.In the month of April 95% of the basic payment is
provided to the employee for normal disease.For each month=95%of thebasic12Following are the hospital in which financial help is provided
:(1)Srijan vatsalya hospital pvt.ltd
(2) Akshay vat and trama hospital.
(3) saraswati heart care
(4)Nazareth hospital.
(5) government hospitals
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CUSTOMER SATISFACTION
CSTOMER STISFACTION
In Time Delivery,
Installation
Commissioning of
Products
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Common Objective
To Maximise Profits
And Minimise Cost
Of The Customer
Just In Time
Spare Parts
Management-
Low Downtime
Long Term Preventive
Maintenance Contract -
Low Cost,
Low Downtime
Continuous
And Rapid
Technological
Upgradation
On The Job Training
Programme For Customer
Operational & Maintenance
Personnel
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MANUFACTURING UNIT
ACHIVEMENT 2010-2011
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MANAGEMENT INFORMATION SYSTEM
BALANCE SHEET
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PROFIT AND LOSS ACCOUNT
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GRAPHICAL PRESENTATION OF
TURNOVER, VALUE ADDED PER EMPLOYEE, NET PROFIT BEFORE
TAX, NET WORTH
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Turnover (in cr.) -:
0
50
100
150
200
250
300
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Value added per employee (in lacks)-:
0
2
4
6
8
10
12
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
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Net profit before tax
0
5
10
15
20
25
30
35
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Net worth (in cr.)-:
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0
20
40
60
80
100
120
140
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
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TEN YEAR DIGEST
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particular
2010-
2011
2009-
2010
2008-
2009
2007-
2008
2006-
2007
2005-
2006
2004-
2005
2003-
2004
2002-
2003
20
20
value of
production 20908.6 28193.8 23998.9 19177.3 14983.1 10317.9 7000 4749.8 6441 66sales 21021.3 27111.8 23636.4 19459.5 14371.6 9442.1 7008 5139.9 6422.1 72gross profit/
(loss) pbdit 2867 4993.7 5968.6 4327.9 3167.4 2188.9 875.8 -290.9 -203.9 -4Depreciation/dre 439 266.1 214 304.5 365.3 387.1 388 390.9 270.2 1interest 525.9 674 868.5 462.2 271.4 1585 1469.2 1009.6 736.3 6(a) p/l before tax
on cu. Ope. 1902.1 4053.5 4886.1 3561.3 2530.8 216.8 -981.4
-
1691.3
-
1210.3 12
(b)1- provisions 0 2.6 1021.4 364.3 791.1 0 67.4 390.4 3.12- net profit
period adj. -1.1 71.2 130.3 -146.6 174.6 -32.3 -36.8 -412.4 -78.43- extra ordinary
item 475.5 1012.7 2031.4 0 0 0 0 0 0
p/l before tax 1425.5 3109.4 1963.6 3050.5 1914.3 184.5 1085.5
-
2494.1
-
1291.8 12provision for tax 472.6 544.4 107.1 3.9 2.8 2.4 0 0 0net profit after
tax 952.9 2565 1856.5 3046.6 1911.4 182.1 1085.5
-
2494.1
-
1291.8 12
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RATIO ANALYSIS
RATIO ANALYSIS
Ratio analysis is power tool of financial analysis. A ratio is defined as the indicated
quotient of mathematical expression and as a relationship between
two or more things. Ratio quantitative relationship helps to form a qualitative
judgement
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STANDARD OF COMPARISION
The ratio involve comparison for a useful interpretation of the financial statement.
Standard of comparison may consist of :
Past ratio
Competitors ratio
Industry ratio Projected ratio
TYPES OF RATOS
Ratios are classified into four categories;
Liquidity ratio measure the firms ability to meet its current obligation.
1- (current ratio = current assets/currents liability)
2-
Leverage ratio show the proportion of debt and equity in financing the firms
assets
Activity ratio reflect the firms efficiency in utilizing its assets
Profitability ratio measure overall performance and effectiveness of the firm
DATA ANALYSIS
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DEFINITION
Theprocess of evaluating datausing analytical and logical reasoning to examine
each component of the data provided. This form of analysis is just one of the many
steps that must be completed when conducting a research experiment. Data from
various sources is gathered, reviewed, and then analyzed to form some sort of finding
or conclusion. There are a variety of specific data analysis method, some of which
include data mining, text analytics, business intelligence, and data visualizations.
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OVERVIEW
Once you have developed your study idea, developed your study plan, and
executed your study successfully, the fun part begins! Now is the time to discover the
truth behind your study questions. Is treatment A better than treatment B? Does it
depend on what group of patients received the treatment (eg, young versus old)? Are
patients really better off receiving this new plate or surgical technique? Is it possible
that the old way is the best way? Is it possible that it doesnt matter what technique you
use? Finding out these answers is the motivating force behind performing a clinical
study. If you paid attention to detail in your study planning and worked hard in ensuring
the quality and validity of your data collection methods, there is no reason these
questions cannot be answered, at least in your study population.
Many investigators reach this point in the study so exhausted that they put the
data aside and forget about it for a while. Its not uncommon to leave such a
tremendous effort behind by not getting to the data analysis. Discipline in sticking to
the effort until the end is paramount for this phase of your study. Unfortunately, we
cannot just push a button and all our results, tables, and figures pop up on our computer
screen. Performing the data analysis takes a combination of expertise, discipline, and
patience in carefully handling the data in accordance with the data analysis plan you set
forth in the study protocol This goes back to assembling a complete research team.
Though resources may limit you, it pays to get an epidemiologist or biostatistician
involved in this phase of your study, if even as a consultant. Ideally, this person was
involved in helping you develop the analysis plan in the protocol. They can help you
with basic elements of the data analysis to be sure you are handling your data in an
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efficient and effective manner. Furthermore, if available to you, they can perform the
whole analysis in a complete and robust manner which will get the best out of your hard
efforts up to this point. On the other hand, some investigators enjoy analyzing their own
data and have the expertise to do it. If so, go for it! If not, you can learn a lot by
working along side a person who does the analysis for or with you.
Like we did in Part 2 of this module where we discussed study design principles
following the outline of a protocol , we will discuss data analysis and reporting
principles following the outline of a study report or manuscript for publication, Table
11.1. Keep in mind that each sponsor (if applicable) and journal may have different
requirements and therefore the outline may change slightly; however, these basic
elements should be included in any study report or manuscript for publication.
11.2 INTRODUCTION
You can borrow from your Background and Significance section of your
protocol when you write this section. It will be important to be relatively brief, likely
far fewer characters than your protocol. The key is to inform the reader as to why your
topic is important. It is not necessary to spend a tremendous amount of effort reiterating
what others have already discussed in previous studies on your topic. Try to make it
novel and to the point. The introduction should end with a clear and concise description
of your study purpose. If you had more than one purpose or a secondary purpose, list
them separately. For example, you can state something like this:
There is a tendency to change your objectives based on findings you have
become aware of since the study. Be careful with this. It is ok to report secondary
findings that you did not anticipate, but it is important that they are reported in their
context and not as primary objectives. Bottom line - list the objectives you set out to
answer. They should be consistent with the specific aims from your protocol
Statistically non-significant findings are still significant!
11.3 METHODS
This is where you tell your reader what study design you chose to use to answer
your primary and secondary objectives. It also gives you the opportunity to describe the
institution(s) in which you recruited your subjects. You get to tell your story of how
you identified and recruited subjects, the characteristics of these subjects, how manyparticipated and how many you lost to follow-up.
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11.3.1 Study design
This section is short and to the point. Here you tell the reader whether your
study was a randomized or quasi-randomized controlled trial, cohort study, case-control
study, case-series and whether you used additional methods such as matching, blockrandomization, stratified randomization, etc. ].
11.3.2 Subjects
It is very important to clearly and thoroughly describe your study populations.
Readers need to know if your results and conclusions may be generalized to their
population. Additionally, it is important to place your study in time. Technological
advances, changes in patient care procedures, and differences in reporting practices at
different times can affect the outcomes and interpretation of your study1. The following
items should be included in this section:
Explanation of inclusion and exclusion criteria.
Institutions in which you identified and recruited your patients.
Time period in which you collected your data.
For retrospective studies, give the dates during which the data were originally
collected as opposed to when you abstracted them from the study.
11.3.3 Data collection
It is important in this section to describe clearly and concisely the process by which
you identified and recruited subjects and whether they finished the study. Full
accountability of every subject should be attempted. When possible, provide a
schematic summary of the study showing the number and disposition of participants at
each stage, Figure 11.1. The schematic summary should include:
The total number of subjects approached.
The total number of subjects found eligible and ineligible.
The number of subjects who agreed to participate and signed informed consent.
The number of subjects who did not complete the study (eg, lost to follow-up,
withdrew, died).
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The number of subjects who completed the study and whose data are included
in the final analysis.
Make every attempt to describe the following subjects:
Those evaluated who did not meet the study criteria.
Those subjects who were approached but declined to participate.
Those subjects who were enrolled but were withdrawn or dropped out.
Those subjects who were enrolled but were lost to follow-up.
Thos subjects who were enrolled and completed the study.
Subjects who agree to participate may differ in important ways than those who
decline to participate. For example, they may be more likely to take risks or more
motivated to get better and comply with the treatment protocol. Patients may be
withdrawn or drop out willingly for various reasons, some of which may bias the
interpretation of the results. Subjects who are lost to follow-up may be those subjects
who are least satisfied with the results of their treatment or may be doing so well they
do not feel they need to be evaluated any longer. Either scenario could bias the results.
Studies with low follow-up rates (ie,
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Finally, describe the baseline prognostic factors and outcome measures that were
collected. If special instruments were used to define these, identify them, provide any
background info as to their validity, reliability, and responsiveness, and if possible
provide a copy of the instrument in the paper. A clear description of the instruments
content, scale, and interpretation with appropriate references should be included
whether you provide an actual copy of the instrument or not.
Figure 11.1. Example of a cohort study schematic summary.
11.3.4 Data analysis
The Uniform Requirements for Manuscripts Submitted to Biomedical Journals
summarizes the overall intent of statistical reporting: Describe statistical methods with
enough detail to enable a knowledgeable reader with access to the original data to
verify the reported results2.
The statistical comparisons you make here are the same as the ones you
specified in your protocol before any data were collected1. Therefore, this section
should restate what that plan was. Assuming you followed that plan, this section can be
a mirror image of the protocols section with some slight edits as needed. It is
understandable that the choice of specific statistical tests may depend on the quality of
the data in the end (eg, whether continuous data were normally distributed or not), so
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the specific test often cannot be stated in advance. In the end, this section should
provide a clear and concise description of how you analyzed your data so that someone
could repeat it. If you performed a randomized controlled trial, you should be clear as to
whether the statistical analysis was on the basis of intent-to-treat] . Furthermore, it is a
good idea to reiterate you power calculations so as to validate whether or not you
achieved the necessary number of patients in your study that you had planned for.
Finally, identify the statistical package or program (with its corresponding reference)
used to analyze the data. Results may very slightly from package to package due to
discrepancies in validation and updating.
11.4 RESULTS
The results section should be quick and to the point. In other words, there
should not be too much explaining or justifying the findings. This is left for the
discussion. The flow of the results section should begin with descriptive statistics of
study groups, findings with respect to measured risk factors or outcomes (analytical
statistics) and accompanying tables and figures as necessary.
11.4.1 Descriptive statistics
The presentation of descriptive data on the study population is important for thefollowing reasons:
It enables you to determine the comparability of study groups at baseline and
evaluate the likelihood of any selection bias [Using didactic] or confounding
The baseline characteristics of the study population can help in determining the
generalizability [Using, External Validity] of the results of study population to
other study populations.
This is typically the first table in your report or manuscript,
Table 11.2. Baseline data for hip fracture patients treated with a Dynamic Hip Screw (DHS) or Per
Compression Plating (PCCP)
DHS PCCP
No. or mean % or range No. or mean % or r
Age (years) 83 64-98 82 65-96
AO Classification
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A11 stable 5 11 9 23
A12 stable 15 34 6 15
A13 stable 5 11 1 3
A22 unstable 6 14 2 5
A22 unstable 10 23 14 36
A23 unstable 3 7 7 18
From this table, we note that both groups are relatively equal with respect to
age; however, if we combine fracture classifications into stable versus unstable
fractures, we find that 44% of those treated with the DHS were unstable fracturescompared with 59% of those treated with the PCCP. This may put the PCCP group at
an unfair disadvantage if unstable fractures are more likely to give rise to a poorer
outcome. An unequal distribution between treatment groups of an independent factor
that is also associated (negatively or positively) with the outcome constitutes a potential
confounding variable . Potentially confounding variables should be dealt with in the
analytical analysis. [see example below].
11.4.2 Analytical statistics
A thorough description of the purpose of analytical studies and hypothesis
testing is outlined in the Developing the Study Plan part of this moduleThis section will
focus on reporting your results.
Your outcomes will either be categorical or continuous or a combination of
This section will discuss how to present both types of outcomes. Statistics can be as
much of an art as it is a science. Furthermore, there are myriads of ways to display
your data. Going through all these options is beyond the scope of this module; however,
we will present some important evidence-based medicine concepts ways in which
data reporting should have a significant impact on your audience and allow them to
apply your findings clinically. As some say, the p-value is overrated!.
Categorical outcomes
Often surgeons want to know the proportion of patients who experience a
certain outcome, either negative (e.g. non-union) or positive (e.g. those who have an
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excellent clinical outcome). In many studies, the authors simply report these
dichotomous outcomes as proportions for the treatment and control groups and a p-
value to tell us if the results are significant. A common way of reporting these
outcomes is presented in Table 11.3.
Table 11.3 Hypothetical outcomes comparing the LCP to the standard plate
Treatment group
LCP
(N=119)
Standard plate
(N=112)P-value*
Outcome n % n %
Union 107 90 90 80.0 0.04
Nonunion 12 10 22 80.0 0.04
Complications 12 10 11 10 0.92
*Hypothesis testing using the chi-square test.
RR is simply the proportion of patients with the outcome in the treatment group
divided by the proportion of patients with the outcome in the control group. In
this case, 0.10/0.20 = 0.50
The RRR is |1-RR| x 100, or in our case, (1-0.5) x 100 = 50%. A relative risk
reduction of 50% means that the LCP reduced the risk of non-union by 50%
compared with the control (standard plate) treatment. If the treatment increases
the risk of a bad event, we call that relative risk increase (RRI). Furthermore,
when a treatment increases the probability of a good event, the term we use is
relative benefit increase (RBI) (Table 11.4).
The RD is the absolute difference between the proportions, 0.20-0.10 = 0.10 or
10%.
The NNT represents the number of patients one would need to treat in order to
prevent a negative outcome (or allow a positive outcome, depending on which
outcome is being evaluated). The formula is 1/RD. In our example, 1/.10 = 10;
therefore, for every 10 patients treated with the LCP, one non-union can be
prevented compared with a standard plate (Table 11.5).
Table 11.4. The relationship among relative and absolulte risk reduction, risk increase and benefit
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increase
Relative
1-|T/C|
Absolute
|T-C|
Treatment reduces the risk ofbad eventvs.control Relative risk reduction
(RRR)
Absolute risk reduction
(ARR)
Treatment increases the risk ofbad eventvs.controlRelative risk increase
(RRI)
Absolute risk increase
(ARI)
Treatment increases the probability of a good
eventvs. control
Relative benefit
increase
(RBI)
Absolute benefit
increase
(ABI)
Table 11.5. Summary of the ways to report non-unions for fictional data comparing the LCP with a
standard plate.
Treatment (T) (n=30) Control (C) (n=30) RR RRR RD NNT
No. (%) No. (%) T/C 1-(T/C) C-T 1/(C-T)
3(10) 6(20) 0.50 0.50 0.10 10
As discussed in , rates can also be reported and a statistical test like the chi-square test performed which will provide a p-value. While the p-value may be
statistically significant (p
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When evaluating LCP versus a standard plate, one may want to adjust for
smoking status (a potential confounder) in this way (Table 11.6):
Table 11.6. Fracture non-union among smokers and non-smokers for fictitious data.
LCP (N=100) Standard (N=100)
n % n % PR
Smokers 11/15 (73.3) 31/42 (73.8) 0.94
Non-smokers 3/85 (3.4) 2/58 (3.3) 1.02
Total 14/100 (14.0) 33/100 (33.0) 0.42
RR = relative risk (cast/ORIF)
In this example, the proportion of patients treated with an LCP who end up with
a non-union is 14% compared with 33% receiving a standard plate; a relative risk of
0.42, which translates to a 58% reduction in risk. However, there happen to be far less
smokers in the LCP group than the cast group, and smokers have a higher non-union
rate no matter what treatment they receive, whether LCP or a standard plate (73% non-
union). When the data are stratified, one can quickly see that there really is no
difference in non-union between the LCP and standard plate groups in either smokers or
non-smokers (73% nonunion in each group among smokers, and about 3% in each
group among non-smokers). The difference is that more smokers ended up in the
standard plate group. When we adjust for smoking, the relative risk of nonunion among
those receiving an LCP is 0.99 compared with a standard plate.
CONTINUOUS OUTCOMES
Continuous outcomes are very common in orthopedic research. Examples
include operative time, blood loss, range of motion, visual analog pain scales, and
various outcome scores that often fall on a 0 to 100 point . As discussed in Part 2
(section 6.2) these outcomes are typically presented as a mean with a standard
deviation, Table 11.7. Hypothesis testing is performed using Students t-test or the
Pearsons product moment-correlation coefficient.
Table 11.7. Hypothetica Foot and Ankle Outcome Scores*.
Treatment N Mean SD Min Max P-value
LCP 119 88 17.5 41 98 P
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Standard Plate 112 76 10.2 34 91
*Scores normalized to a total possible of 100 points.
Two-sample t-test.
If there are potential confounding variables that need to be controlled for such
as age, fracture severity, smoking status, etc. you can use linear regression or analysis
of variance. These are discussed superficially in but a thorough discussion of
multivariate methods is beyond the scope of this module.
11.5 DISCUSSION
Since the results section is intended to report your finding without
interpretation, the discussion section allows you to put your findings in context.
However, the discussion section has a tendency to take on a life of its own. It is very
common for this section to become long and difficult to read. It is also common for this
section to serve as a platform for one to give their opinions with respect to the treatment
intervention being evaluated. Some go as far as to discuss public policy changes in their
discussion. There are no standard guidelines for this section which is probably why
authors take the liberty to write everything they were not able to write in the previous
three sections of the manuscript. Be careful with this approach. It is very refreshing toread a discussion that is clear and concise. If you present your methods and results in an
effective way, then the discussion allows you to interpret those results in such a way as
to allow the reader to make up his/her own mind in the end. In light of this background,
here are some guidelines to consider when writing the discussion section which will
prevent you from falling into the trap of writing too much with too little substance.
Consider addressing these issues in the order presented below:
1. Discuss the implications of the primary analyses first.
Secondary analyses should be discussed later and described as explanatory.
2. Distinguish between statistical and clinical significance.
Statistical significance relates to how likely the observed effect is due to chance
(ie, sampling variation).
Clinical significance relates to the magnitude of the observed effect.
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Lets look a little closer at these concepts. Statistical significance depends