Set up in 1954, Bharat Electronics Limited (BEL) is India’s foremost defense electronics company, a Navratna PSU under the Ministry of Defence. PQR is a multi­-products, multi-­technology, multi­-Unit conglomerate boasting of over 350 products in the areas of military communication, radars, naval systems, telecom & broadcast, electronic warfare, tank electronics, electro optics, professional electronic components and solar photovoltaic systems. The range includes small components costing a few rupees to huge systems costing up to ₹60 crore. BEL’s customers include the army, navy, air force, paramilitary, coast guard, police, doordarshan, all India radio, department of telecommunications and consumers of professional electronic components.

The company’s turnover has been on a steady rise. During 2010–11, BEL achieved a record turnover of ₹55,297 million. The order book of the company on 1st April 2011 was ₹236,000 million. BEL has been making profits continuously for more than four decades and rewarding its shareholders with cash dividends. The company has declared a dividend of 216 per cent for the year 2010–11 with a payout ratio of around 23%. The summarized balance sheet of the company for the last three years is given below:

Balance Sheet as on 31st March

 

The information regarding income and profit of the company for the last three years is given below: 

Required:

1. Critically evaluate the working capital management of Bharat Electronics Limited.

2. Compute the return on equity for the company for the last three years. Using DuPont analysis identify the reasons for the decline in the ROE.

3. How does increase in current assets impact the ROE of the company?

4. Suggest ways to BEL for improving its ROE.

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Particulars Assets Non-current assets Current assets Inventories Trade receivables Cash & bank Loans & advances Total Equity and liabilities Shareholders' funds Share capital Other equity Government grants Loan funds Current liabilities and provisions Total 2009 6,728 24,179 22,782 26,419 4,977 78,357 85,085 800 37,037 37,837 234 12 47,002 85,085 (in Million) 2010 6,901 24,487 21,684 35,784 4,333 86,288 93,189 800 42,453 43,253 204 7 49,725 93,189 2011 7,353 24,608 29,032 65,194 5,553 124,387 131,740 800 49,057 49,857 169 4 81,710 131,740