financial statement analysis

A Project Report onFINANCIAL STATEMENT ANALYSISNational Aluminium Company Ltd.Corporate Office, Bhubaneswar

ByMRUTYUNJAY DASH(ROLL NO: -PGDM/14-16/25)(Submitted for the partial fulfillment of the degree of Master in Finance and Control)For the Session: 2014-2016ASIAN SCHOOL OF BUSINESS MANAGEMENT

ACKNOWLEDGEMENTI express my deep gratitude to the individuals who have guided me and helped a lot in completing my summer internship project. I am really thankful to my project guide, Mr. M.R Rath (AGM of Finance) NALCO to permit me to avail this project and for his valuable advice and guidance in each and every step towards completion of the project. I would like to thanks the staffs of finance department (corporate) NALCO for their kind co-operation. I take this opportunity to express deep sense of gratitude and reverence to my professor Mr. Padmanav Mohapatra, ASIAN SCHOOL OF BUSINESS MANAGEMENT,BHUBANESWAR for his suggestions, constant inspirations and guidance to carry out & complete this project.

DECLARATIONI do here by declare that I have worked on the topic FINANCIAL STATEMENT ANALYSISfrom 20th APRIL,2015 to 13th JUNE 2015. All Financial Year has neither been purchased nor acquired by any other unfair means. The data and information exists in this report are accurate and updated to the current data, to the best of my knowledge. However, for this purpose of the project, information already compiled in my sources has been utilized. All the information in this report is true representation of what I have experienced during the project.

CONTENTSExecutive Summary Objective of the Study: Methodology Chapter-1: Overview of Aluminium Industry Global status Status of Indian Industry Chapter-2: Company profile Introduction Background Project segments Previous five years performance-Physical & Financial Achievements Chapter-3: Introduction of the Project undertaken Overview of Financial statement analysis Types of Financial statements Objectives Characteristics Limitations Techniques Chapter-4: Financial Statement Analysis of NALCO Comparative Statements Common Size Statements Ratio Analysis Cash flow statement Financial Performance of NALCO Holistic Report Finding & Inferences Conclusion Bibliography.

Executive Summary India's share of global aluminium production is hovering around 4-5 per cent. The Indian Aluminium industry is highly concentrated with only five primary plants in the country from three business houses. The Adyta Birla Group: Hindustan Aluminium Company Limited (HINDALCO), Vedanta Resources: Bharat Aluminium Company Limited (BALCO), Madras Aluminium Company Limited (MALCO), Public Sector Undertaking: National Aluminium Company Limited (NALCO). NALCO Aluminium Company Ltd. truly a national venture to take the country forward in the world of Aluminium market was incorporated on Jan 7, 1981. NALCO has contributed to India's need for self-sufficiency in Aluminium. NALCO heralded a new era of Aluminium making in the country as well as in the world acquiring the 5th position. I had been fortunate to be a part ofNALCO Corporate Office, Bhubaneswar as a summer intern in the field of finance on the topic "Financial statement Analysis ".The project was carried out with the aim of evaluating the financial statements of the company as it provide valuable insight into a firm performance. The analysis was done by analyzing the various liquidity ratios, Solvency ratios, activity turnover ratios, profitability ratios in order to determine the operational efficiency & operations of the company. Holistic report has been made. Thereafter interpretations are derived from the analysis. The objective of the project was to understand the financial condition & performance ofNALCO & its financial strength & weakness of the firm by properly establishing relationship between the items of the balance sheet" the profit & loss account and cash flow statement which has been carried out by' applying the methodology of ratio analysis. . Study was done taking the period of 3 years ofNALCO from 2010-11 to 2012-13 & data has been collected from annual reports, internet. To prepare a holistic report is based upon the: a) The LME price effect on average aluminium price, net profit, net sales of the companies. b) On the basis of CSR activities undertaken by the companies. Further based on these financial statement analysis conclusion has been drawn that NALCO's GP margin has been declining due to economic recession all over the' world. The liquidity analysis depicts that NALCO has the ability to meet its current obligations. The solvency ratios of NALCO show that NALCO has a good long solvency position. Keeping in view of the present scenario ofNALCO, it can work on cost control &increase in profitability. It can invest in surplus cash to generate returns & try to manage the debtor turnover ratio to higher profitability. It should aim at increasing the turnover through diversification &innovation which can increase its sales volume. As the company does not has long term debt so it should aim to have proper debt-equity ratio which would increase its EPS & gain advantage on its low cost debt.

Objective of the Study: To analysis the financial performance progress of NALCO by establishing relationship between the items of balance sheet and profit and loss Account. To identify company strength and weakness of NALCO by in comparison to its competitors. To assess the operational efficiency of the management of the company. To evaluate the financial condition and performance as well as to study the relationship among various financial factors and also measures the profitability of the business by the various profitability ratios. To have a comparative analysis of the company based upon the holistic report.

CHAPTER-01(Over view of Aluminium Industry)

GLOBAL STATUS Today, the global aluminium industry has only a bare resemblance to what it was in the early 1970s. the most important structural changes are the geographical relocation of bauxite, Alumina and aluminium production centres; shifts in the degree of concentration and Integration; the emergence of new consuming regions, the development of new end-use Markets and the threat of substitutes, including recycled metal; the historical decline in real Prices of the metal and the recent upward shift in the industry cost curve; the market adjustment Mechanisms and, more recently, the rising popularity of commodities as an asset class. The main objective of this paper is to highlight and analyze these changes over the last four decades. Commencing with an identification of the main characteristics of the aluminium industry in the early 1970s, the paper then examines the main forces or drivers that have deeply modified the structure of the global aluminium industry, factors such as energy crises, arrival of new players, variations in exchange rates, shifting trends in aluminium cost curves, and the role of emerging economies. The main characteristics of current global aluminium Industry is then presented, with a view on future demand and production. The Global Aluminium Industry in the Early 1970s The year 1972 saw bauxite production dominated by four countries - Australia, Jamaica, Suriname and USSR - which together held a 60% global market share. Today, only Australia is on a list of the top six producers. Even greater changes have occurred in the location of Alumina-producing countries. In 1972, more than 45% of global alumina production was concentrated in five industrialized countries, poorly- endowed with bauxite reserves: United States, Japan, Canada, France and Germany. The other major producers were then Australia (13%), USSR (12%), Jamaica (9%) and Surinam (6%). Today, among the countries Mentioned above, only Australia is still a significant producer, with alumina production having generally shifted from industrialized or aluminium producing countries to bauxite producing regions. Major shifts have also occurred in the geographic location of aluminium production centres. The Combined share of United States, USSR and Japan reached almost 60% of global primary Production in 1972. Today, their corresponding share barely exceeds 10%. Norway, Germany and France has also been replaced on the list of top aluminium producers.

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STATUS OF INDIAN INDUSTRY: Indian Aluminium Industry was first established in the year 1808 and it took almost 46 years to make its production commercially viable. The research work of the country took several years and resulted in extracting the Aluminium from the ore. On earth Aluminium is the third most available element constituting almost 7.3% by mass. Currently Aluminium is also the second most used metal in the world after steel. Due to the fact that consistent growth of Indian economy at a rate of 8%, the demand for metals, used for various sectors, is also on the higher side. As a result, the Indian Aluminium Industry is also growing consistently as in the year 2009 the aluminium industry in India saw a growth of about 9%. In the year 1938 the production of Aluminium started in India when the Aluminium Corporation of India's plant was commissioned. The plant was set up with a financial and technical collaboration with Alcan, Canada which had a capacity of producing: 2,500 tonnes per annum. In the year 1959 the Hindustan Aluminium Corporation (Hindalco) was set up; which had a capacity of producing 20,000 tonnes per annum. A public sector enterprise Malco which had a capacity of 10,000 tonnes per annum was commissioned in 1965. Then later in the year 1987, National Aluminium Company (NALCO) was commissioned to produce Aluminium with a capacity of producing 0.218 million tonnes. Indian Aluminium Industry Government started regulating and controlling during the 1970's. Restrictions in entry and price distribution controls were common in the Aluminium Industry. Aluminium Control Order has been implemented where the aluminium producers had to sell 50% of their products for electrical usages in the country. Later in 1989, the order was removed as the govemment decontrolling was revoked. In the year 1991 with de-licensing of industry, the liberal import of technologies and capital goods was started. The liberalization resulted in a growth rate of 12% of the industry, comparing to the growth rate of 6% during the 1980. The Indian per capita Aluminium consumption is less than 1 kg compared to about 3kgs in China and 30 kgs in the US. The fact that almost 44% of the domestic aluminium is consumed by the electrical sector and there are only about 300 applications for the metal in India leaves a lot of room for the domestic sector to grow. Just to put things in perspective, aluminium usage on the global front is tilted towards transportation and packaging sectors and there are an estimated 3,000 applications for the metal.

TOP COMPANIES:

Hindustan AluminiumCmpany (HINDALCO) National Aluminium Company (NALCO) Bharat Aluminium Company (BALCO) MALCO INDALCompany (Location)Capacity (in tonnes)Production (in tonnes)

FY 09Q1 FY10

Hindalco445000523400

Nalco(Angul)345000360000

Balco (Corba)345000357000125000

Malco (Mettur)4000023000

VAL (Jharsuguda)25000082000

Total1345400

Indian aluminium industry on fast growth Figures and forecasts of a market with great potential The three major producers of aluminium in India are Hinda1co, Vedanta Group and the state owned Na1co, who mine/procure bauxite and convert it into aluminium ingots. These three together account for the majority of share of total domestic aluminium production. Indian scenario Bauxite: India is endowed with large deposits of high quality bauxite ore, amounting to almost 5% of the world's reserves, totaling to about 3 billion tonnes. At 5.3 milliontonnes of aluminium production, (expected capacities by 2015) these reserves are likely to last for 100 years. At 10 million tonnes per annum production, which India should reach between 2020 & 2025 our bauxite reserves will last for 45-50 years. Power (Coal): All Indian primary metal producers have captive power plants. Greenfield smelters are also being planned, based on captive power generation, using coal. India's 250 bntonnes non-coking coal reserves (proven and indicated), are the fourth largest in the world. Technical Manpower: India has a formidable pool of manpower - both skilled and unskilled; to support the manufacture of aluminium, which is a labour-intensive process. Per Capita Consumption: With the Indian economy projected to be amongst the top five in the world by 2025, the overall consumption of aluminium is projected to be about 5 million tonnes by 2015, and 10 million tonnes by 2020. India's consumption has grown at a CAGR of 15% in the last five years, almost double the word average of 8.1 %. End-use sectors of aluminium. The per capita aluminium consumption in India is just l.3 kgs, compared to about 12 kgs in China, 28 kgs in the US and 39 kgsin Germany. The world average is 7.4 kgs. Growing Market & Economical Production: Apart from its potentially large, growing market India has ready availability of the three important inputs to manufacture aluminium: bauxite, power (coal) and manpower. Indian aluminium companies are amongst the lowest cost producers of the metal in the world, which is a significant advantage, especially during times of cyclical downturns. Abundant bauxite reserves and access to economical manpower give the domestic aluminium manufacturers a competitive advantage. GDP and consumption growth Primary aluminium consumption in India has grown from 450 kt in 1991, to 1,140 ktin 2008 and currently accounts for 3.1 % of global consumption. Total aluminium consumption (primary + recycled) has grown significantly, at a CAGR of around 15% during 2002-09 and reached 1.5 million tonnes. As per Mckinsey& Co., "Indian Aluminium use will grow 9 to 11 % to 2.10 to 2.75 million tonnes, by 20 15". The aluminium consumption follows the GDP growth curve, hence these would also be growth drivers for the consumption of aluminium. The major sectors contributing to Indian aluminium consumption growth are Electrical (Power), Building and Construction, Packaging and Transportation. These sectors are expected to grow in double digits in the next decade, to reach a per capita consumption of approx 10 kg. To be in line with China's per capita consumption in 2020, consumption in India has to reach 10 million tonnes. Planned growthin Indian aluminium productionThe Indian aluminium industry's enthusiasm to grow smelting capacity on an ambitious scale here and abroad - the wanderlust is that of Nalco - was not dimmed in any way by the adverse performance of the metal during the recession. According to sources, Nalco is working to give shape to three mega projects simultaneously, including a $4-billion 500,000 tonnes smelter along with a captive 1,250 power complex at East Kalimantan in Indonesia. Nalco is also pursuing a project of similar configuration at Jharsuguda in Orissa. The promised access to 80 million tonnes of bauxite deposits at Gudem and KR Konda in Andhra Pradesh will also lead Nalco to build a 1.4-million tonne alumina refinery in the state. Hindalco has also got big things on its plate. If all its projects get commissioned on revised schedule, then Hindalco will see its smelting capacity rising to 1.7 million tonnes from 500,000 tonnes and alumina refining capacity to 6.5 million tonnes from 1.7 million tonnes by 2013. Meanwhile, Novelisacquisition has given Hindalco global leadership in that value added segment where path breaking technologies are in application. Vedanta has arrived on the Indian aluminium scene much later than Hindalco and Nalco. While it has made up for the lost time by gaining control of Balco and Madras Aluminium, Vedanta is aggressively building new capacity through greenfield .and brownfield routes. India to face major aluminium surplus by 2013 Aluminium industry in India is moving towards overcapacity, since supply is likely to grow in excess of demand going forward. Considering that all aluminium projects would begin commercial production with expanded capacity as planned, there could be at least 2 million tonnes of additional capacity for exports by 2013. Fitch Ratings report recently said that India's aluminium productions will more than treble to 4.4 Million tonnes by mid 2012 with new capacities coming on stream, along with requisite captive Power generation capacities.

CHAPTER-02(COMPANY PROFILE)

COMPANY PROFILE: NATIONAL ALUMINUM COMPANY LIMITED (NALCO) The East Coast bauxite discovery led to the setting up of India's largest Alumina-Aluminium complex, National Aluminium Company Ltd (NALCO) in 1981 following technical collaboration agreement with Aluminium Pechiney of France. The project cost of Rs.2,408 crore was part financed by 980 million euro dollar loan extended by a consortium of International banks. The Company has long back prepaid the loan, besides contributing more than Rs.16,000 crore to Central and State exchequer as tax and duties etc, besides having huge cash reserve for future growth activities. Presently, Govt. of India holds 87.15% share in NALCO. It is an integrated and diversified mining, metal and power group "A CPSE with annual sales of' 6,370 cores in FYI 0-11. The Company has bulk shipment facilities at Vizag port, besides utilizing the facilities at Kolkata and Paradeep ports.With the emergence of NALCO on the aluminium scene, there has been a quantum jump in alumina and aluminium production in the country. NALCO is the 1 st Public Sector Company in the country to venture into International market in a big way with LME registration since May 1989. Export sales account for almost 30-35% of its turnover with business in more than 30 countries in recent past. Its alumina and metal enjoy premium in world market on account of quality and international standard. The production units at NALCO are operating consistently near or more than 100% capacity. Due to its consistent track record in managing operations and improving costs and output, the Company has been accorded prestigious Navratna status by' Govt. of India in 2008. NALCO is one of the lowest cost producers of alumina and aluminium in the world. In addition to existing operations, NALCO has extensive plans for brown field and green field expansion projects worth ' 40,000 crore in the country and abroad. Further, the Company has taken up steps for commissioning of allotted coal block (Utkal-E in Odisha) at a cost of' 338 crore. At the same time, to offset the vagaries of international market related to aluminium, NALCO is looking beyond its core strength and venturing into other metals and energy sectors. NALCO has signed agreement with Nuclear Power Corporation of India Limited (NPCIL) to form a joint venture Company for establishment of2X 700 MW nuclear power plants at Kakrapara in Gujarat, where the construction work has already started. To harness the non-conventional energy source, the Company is setting up a wind power project of 50.4 MW capacity in Andhra Pradesh for which order has been placed in June, 2011. The Company has also been shortlisted by Govt. of Gujarat for alumina refinery 10.8 NALCO has plans to set up thermal power plants as independent power project (IPP) and even Ultra Mega Power Projects (UMPP) and exploring for solar plants also. Further, the Company is developing bauxite mines (Gudem and KR Konda in Andhra Pradesh and likely to start Pottangi in Odisha); besides setting up forward and backward integration projects. Leveraging the technical collaboration with Aluminium Pechiney (now Rio Tinto Alcan) since 1982, NALCO has continued to add value and is poised to grow further.

Company vision To be reputed global Company in the Metals and Energy Sectors Company Mission To continuously develop human resources, create safe working conditions, improve productivity and quality and reduce cost and waste. To be a good corporate citizen, protecting and enhancing the environment as well as discharging social responsibility in order to ensure sustainable growth. To intensify R&D for technology development. ORGANISATIONAL STRUCTURE NALCO is a govt. of INDIA Enterprise under the administration control of the ministry of mines. The company is managed by Board of Directors appointed by the president of INDIA. The Board consists of 10 Directors including the Chairman cum Managing Director of the company. There are 4 functional full-time directors heading production, finance, project and technical personal and administrative disciplines. There are four senior Govt. officials nominated to the Board as Directors on ex- officio basis. Besides there are three non-official directors in the appointed to represent the interests of financial institutions, allied Industries and R&D objectives of the company. Thus the Board of company is a full of highly experienced and outstanding potentials drawn from various fields of specialization. The company enjoys maximum possible operational autonomy consistent with the overall corporate objectives, basic policies and programmes with a view to achieve optimum utilization of its resources subject to the provision of Indian: companies act. The memorandum of understanding signed with the govt. and also subject to policies formulated by the Board of Directors from time to time the Chairman cum MD has full power to sanction expenditures or to deal with other matters for effective functioning of the company. The management Control System is based on delegation of authority and individual accountability for results. The responsibility and authority to take decisions on various matters are delegated by the Chairman-cum MD to different levels in the management.

SWOT ANALYSIS OF NALCO:

1. STRENGTH: Skilled and committed manpower. Good quality bauxite reserves. Efficient technology. Various well planned and ideally located infrastructure facilities. Efficient operations. Manufacture of good quality alumina&aluminium product at competitive cost. Excellent customer service. Prudential financial management & commitment to good co-operate governance practices in all facets of operations.

2. WEAKNESS: Shortage of coal. Limited product range. Escalating production cost including that of labour. Fluctuation in the LME prices as well as in exchange rates.

3.0PPURTUNITIES: Growth of the potential domestic market. Wide spread uses of alumina for various purpose.

4. THREATS: Competition in scrap imports. Constraints in fuel supply & rise in material cost. Energy crisis. Dumping of metal at low cost by European countries.

ACHIVEMENTS: First Mines Safety Award-1988 by DGMS. Best Eco-friendly Factory Award 1994-95 to the Mines and Refinery Complex by Odisha State Factory inspectorate. State Award-1995 to Captive Power Plant from state Factory inspectorate for Environment Management. India Priyadarshini Vrikshamitra Award-1994 from MOEF, Govt. of India, for a forestation and wasteland development. FICCI Environment A ward for Environment Conservation and Pollution Control- 1996-97. WEC-IIEE-IAEWP Environment award -1997 for contributing towards environment protection. Gem Granite Environment Award for -1997-98 by FIMI, New Delhi for Mines. Shri Sita Ram Rungta Memorial Social Awareness Award-I 997-98 by FIM.I, New Delhi. Pollution Control Excellence Award - 1998 by Odisha State Pollution Control Board for Mines. Special Commendation under Golden Peacock Environment Management Award 1998 Scheme by World Environment Foundation. State Award for Best Occupational Health Centre to S&P Complex' -1998. Best Safety Performance Award to CPP by CII (ER)- 1999-2000. The prestigious Dun & Bradstreet's Best PSU Award - 2012 in Non-Ferrous Metal Category. Products: Aluminium metals Ingots Alloy Ingots T-Ingots Sows Billets Wire Rods Cast Strips Alumina and Hydrate Calcined Alumina Alumina Hydrate Special Product Speciality Hydrate Rolled Product Alumina Rolled Product Product process Bauxite Mines On Panchpatmali hills of Koraput district in Orissa, a fully mechanized opencast mine of 4.8 million tpa capacity is in operation -since November, 1985, serving- feedstock to Alumina Refinery at Damanjodi located on the foothills. Presently, the- capacity is being expanded to 6.3 million tpa. The salient features: Area of deposit - 16 sq. km. Resource - 310 million tonnes Ore quality - Alumina 45%, Silica 2% Mineralogy - Over 90% gibbsitic Over burden - 3 meters (average) Ore thickness - 14 meters (average) Transport - 14.6 km long single flight multicurve cable belt conveyor of 1800 tph.Alumina Refinery The 15, 75, 000 tpa Alumina Refinery, having three parallel streams of equal capacity, is located in the picturesque valley of Damanjodi in Koraput district. In, operation since September, 1986, the Refinery is designed to Provide Alumina to the Company's Smelter at Angul Export the balance Alumina to overseas markets through Visakhapatnam Port.Presently, the capacity is being expanded to 21,00,000tpa. The salient features: Atmospheric pressure digestion process Pre-desilication and inter-stage cooling for higher productivity Energy efficient fluidised bed calciners Co-generation of 3x18.5 MW power by use of back pressure turbine in steam generation plant.Aluminium Smelter The 3,45,000tpa capacity Aluminium Smelter is located at Angul in Orissa. Based on energy efficient state-of-the-art technology of smelting and pollution control, the Smelter Plant is in operation since early 1987. Presently, the capacity is being expanded to 4,60,000tpa. The salient features: Advanced 180 KA cell technology Micro-processor based pot regulation system Fume treatment plant with dry-scrubbing systemfor pollution control and fluoride salt recovery. Integrated facility for manufacturing carbon anodes, bus bars, anode stems etc. 4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 tph and 2 x 20 tph ingot casting machines 4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills 2 x 45 tonne furnaces and 60142 per drop billet casting machine 2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine 26,000 tpa strip casting machines With the acquisition and subsequent merger of International Aluminium Products' Limited (IAPL) with Nalco, the 50,000 tpa export-oriented Rolled Products Unit is all set to produce foil stock, fin stock, can stock, circles, coil stock, cable wraps, standard sheets and coils.Captive Power Plant Close to the Aluminium Smelter at Angul, a Captive Power Plant of 960 MW capacity, comprising 8 x 120 MW clusters, has been established for firm supply of power to the Smelter. Presently, the capacity is being expanded to 1200 MW. The salient features: Micro-processor based burner management system for optimum thermal efficiency. Computer controlled data acquisition system for on-line monitoring Automatic turbine run-up system Specially designed barrel type high pressure turbine. Electrostatic precipitators with advanced intelligent controllers Wet disposal of ash The water for the Plant is drawn from River Brahmani through a 7 km long double circuit pipeline. The coal demand is met from a mine of 3.5 million tpa capacity opened up for Nalco at Bharatpur in Ta1cher by Mahanadi Coalfields Limited. The Power Plant is inter-connected with the State Grid. 5 Years Performance at glance-Physical

Sl. No.Particulars2013-142012-132011-122010-112009-10

A. INCOME STATEMENT

1Export3,7193,4102,5692,0652,209

2Domestic Sales3,3053,8374,3584,3053,101

3Gross Sales (1+2)7,0247,2476,9276,3705,310

4Less Excise duty375438427411256

5Net Sale (3-4)6,6496,8096,5005,9595,054

6OTHER INCOME:

7Operating13210711298119

8Non-operating558511542353374

9Operating Expenses5,8476,0105,4674,4644,071

10Operating Profit (5+7+9)9349061,1451,5931,102

11Exceptional Exenditure49

12EBIT (10+8+11)1,4431,4171,6651,9461,476

13Interest and Financing charges071-2

14EBIT (12-13)1,4431,4101,6641,9461,474

15Depriciation and Amortization525505467422319

16PBT9189051,1981,5241,155

17Provision for Tax276312348455341

18Net Profit (PAT)(14-15)6425938501,069814

19B. BALANCE SHEET:

20Equity Capital1,2891,2891,2891,289644

21Reserves & Surplus10,83410,64410,4269,8769,751

22Net Worth (19+20)12,12211,93311,71511,16510,395

23Loans00159

24Working Capital3,9493,4114,1933,3042,998

25Capital Employed (23+24)10,74110,04010,8058,7987,834

26C. RATIO:

27Operating Profit Margin (OPM)(%)(10/5*100)14.0513.3117.6226.7321.80

28Net Profit Margin (%)(18/5*100)9.668.7113.0717.9416.11

29Return on Capital employed (%)(18/25*100)5.985.917.8612.1510.39

30Return on Net worth (RONN)(%)(18/21*100)5.34.977.259.577.83

31D. OTHERS:

32Book Value per share of 5 each47.0446.345.4643.3240.34

33Earnings per Share2.492.33.304.153.16

34Dividend1.51.251.002.502.50

5 Year Performance At a Glance- Physical

Sl. No.PARTICULARSUNIT 2013-14 2012-132011-122010-112009-10

1PRODUCTION

BauxiteMT32,92,377 54,19,39150,02,62648,23,62618,78,888

Alumina HydrateMT19,25,000 1,80,2001,68,70015,56,00015,91,500

AluminiumMT3,16,492 4,03,3844,13,0894,43,5974,31,488

Power (Net)MU4,989 6,0766,2006,6086,293

Wind PowerMU 144 14---

2EXPORT SALES

Alumina HydrateMT13,09,473 9,44,1177,92,5526,39,8557,02,554

AluminiumMT1,01,243 1,44,16198,39998,2001,43,947

3DOMESTIC SALES

Alumina, Hydrate and other ChemicalsMT 33,288 40,60550,25345,91644,420

AluminiumMT2,18,420 28,9413,17,5173,40,7522,89,032

Power (Net)MU27 26165615

Wind PowerMU144 14---

PERFORMANCE HILIGHTS:Production Achieved:ProductionUnit2013-142012-13

BauxiteMT 62,92,677 54,19,391

Aluminium HydrateMT 19,25,000 18,02,000

Aluminium HydrateMT 3,16,492 4,03,384

Electricity (Net)MU 4,989 6,076

The Company has achieved its best performance in production of Bauxite and Aluminium Hydrate as compared to its previous year. Transportation of Bauxite is 62.93 lakh MT (against 54.19 lakh MY in 2012-13). Aluminium Hydrate production of 19.25 lakh MT against 18.02 lakh unit last year. But the production of Aluminium decrease from 4.03 lakh MT in 2012-13 to 3.16 lakh MT in 2013-14.Financial YearAluminium Hydrate (in 000MT)Aluminium (in 000MT)

2009-101592431

2010-111556444

2011-121687413

2012-131802403

2013-141925316

Sales PerformanceFinancial YearNet Sale (Rs. In Crore)LME Aluminium Price

2009-1050541866

2010-1159592257

2011-1265002318

2012-1368091976

2013-1466491773

The Company has achieved the ever export sales at Rs. 3719 Cr. During the year against earlier highest ever sale of Rs. 3410 Cr.During previous year. The Aluminium price US$ decrease to 1773 in 2013-14 from US$ 1976 in 2013-13. However, domestic sales decrease to Rs. 3305 Cr. In 2013-14 to Rs. 3837 Cr.In previous year 2012-13.

CHAPTER-03(INTRODUCTION OF THE PROJECT UNDER TAKEN)

FINANCIAL STATEMENT ANALYSIS-AN OVER VIEW Financial statements are prepared primarily for a true and fair view of the statement of affairs of the company. They play a dominant role in setting the framework of managerial 'decision. But the information provided in the financial statements is not an end in itself as no meaningful conclusion can be drawn from these statements alone. However, the information provide in the financial statement is, of immense use in making decision through analysis and interpretation. Financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance sheet and profit & loss account. The terms 'financial statement analysis' also known as analysis and interpretation of financial statements' refers to process of determining financial strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet ,profit & loss account and other operative data. "Analyzing financial statements," according to Metcalf and Titard, Financial statement is a process of evaluating the relationship between component part of a financial statement to obtain better understanding of a firm's position and performance." The purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial sounded of the firms: The two basic financial statements prepared for the purpose of external reporting to owner investors and creditors are:- (1) Balance sheet or statement of financial position (2) Profit &loss or income statement BALANCE SHEET:- Balance sheet is a statement of financial condition or the state of affairs of a business on a particular date. It provides information about assets, liabilities and owners equity of a business firm t the close of the firm as on the specific date. It provides a snapshot of the financial position of the firm at the close of the close of the firm's accounting period. FUNTION OF BALANCE SHEET:- 1. It gives a concise summery of the firm's resources and obligations. 2. It is a measure of the firm's liquidity. 3. It is a measure of the firm's solvency.

PROFIT &LOSS ACCOUNT: The profit and loss account is a "score board" of the firm's performance during a , year. It is the summer of revenues, expenses & net income resulting from business operation in a year.

FUNCTION OF PROFIT & LOSS ACCOUNT: 1. It gives a concise summery of the firm's revenues and expense during a periods of time. 2. It measures the firm's profitability. 3. It accumulates economic data. 4. It measures net profit by matching revenues and according to the basic accounting principle. OBJECTIVES OF FINANCIAL STATEMENTS: 1. To provide reliable financial information about economic resources and obligation of a business firms. 2. To provide other needed information about changes in such economic resources and" obligation. ,', 3. To provide reliable information about changes in net resources arising out of business activities. 4. To provide information that assist in estimating the earning potentials of business. 5. To disclose to the extent possible, other information related to the financial statements relevant to the need of users of these statements. CHARACTERISTICS OF FINANCIAL STATEMENT: 1. Depicts true financial position:- The information contained in financial statement should be such that the true and correct idea is taken about the financial position of the concern & no material information should be withheld. 2. Effective presentation:-it should be presented in a simple &lucid way so as to make them easily understandable. 3. Relevance:-it should be relevant to the objectives of the enterprise. 4. Attractive: - important information's should be highlighted. 5. Comparability: - The result of the financial analysis should be in such a way that it can be compared with the previous year's statements. 6. Analytical Representation:- The information should be analyzed in such a way that similar data is, presented at the same place and a relationship can be established in similar type of information.7. Brief: - If possible, it should be presented in brief. 8. Promptness: - it should be prepared and presented at the earliest possible.

LIMITATIONS OF FINANCIAL STATEMENT: 1. Though financial statements are relevant and useful for the concern, still it suffers from the following limitation. 2. Financial statement ignore non-monetary events in a company, which may be either favorably affect the company's performance and profitability. 3. Financial statements are historical or give report on past events. They fail to give current picture of future. 4. These are interim reports. 5. Comparison between financial statements of one firm with other may not be possible if different according policies are followed.

FINANCIAL STATEMENT ANALYSIS: It is the process through which the financial statement are evaluated and interpreted ' by various tools like Ratios. Comparative balance sheet etc. to judge the financial strength of the company.AIM: 1. To judge and find-out the financial position of the company. 2. To know the solvency of the firm. 3. To help the investors in deciding whether to invest in the company or not. 4. To help the management in taking proper and timely decisions. 5. To have inter-firms comparison possible. STEPS: Financial statement analysis follows a series of steps that leads a user to a meaningful interpretation of financial data. These steps are:- 1. Specify the purpose of analysis. 2. Identify the measurement base. 3. Collect and process the data. 4. Compare the process data with a standard.ANALYSIS METHODS OF FINANCIAL STATEMENT: 1. Comparative statements 2. common-size statements 3. Ratio analysis 4. Cash flow statement

CHAPTER-04(FINANCIAL STATEME ANALYSIS OF NALCO)

COMPARATIVE BALANCE SHEET - 31.03.2014Particulars31.03.201431.03.2013Inc/DecInc/Dec (%)

Non-Current Assets

Fixed Assets

Tangible Assets6,688.806,523.801652.48

Intangible Assets103.14105.09-1.95-1.86

Capital Work-in-Progress768.741,001.92-233.18-30.33

Non-Current Investment1.04161.04-160-15,384.62

Long term Loans and Advances1,517.271,474.0443.232.85

Other non-current Assets43.3236.496.8315.76

TOTAL9,122.319,302.38-180.07-1.97

Current Assets

Current Investment1,244.001,329.02-85.02-6.83

Inventories1,173.661,380.64-206.98-17.64

Trade Receivable243.57148.6594.9238.97

Cash & Bank Balance4,048.293,504.38543.9113.44

Short term Loans and Advances481.38473.767.621.58

Other Current Assets235.30193.7841.5217.65

TOTAL7,426.207,030.23395.975.33

GRAND TOTAL16,548.5116,332.61215.901.30

Equity and liabilities and shareholders fund

Particulars2013-142012-13Inc/DecInc/Dec(%)

Share Capital1,288.621,288.62

Reserve and Surplus10,833.8310,643.831901.75

TOTAL12,122.4511,932.451901.58

Non-Current Liabilities

Deferred Tax Liabilities (Net)910.13903.1370.77

Other Long term Liabilities54.9670.82-15.86-28.85

Long term Provisions218.22208.629.64.40

TOTAL1,183.311,182.570.740.062

Current Liabilities

Trade Payables531.12509.1721.954.13

Other Current Liabilities2,564.382,545.7518.630.72

Short term Provisions147.25162.67-15.42-10.47

TOTAL3,242.753,217.5925.160.78

GRAND TOTAL16,548.5116,332.61215.901.30

.

INTERPRETATION:-The current liabilities of the Company increased by 0.78% only against 5.33% in Current Asset. This shows better management of the Company. The increase in Tangible Asset by 2.48% and decrease in Capital work in progress was mainly due to capitalization of wind power plant and upgradation of 4th stream at Alumina Refinery. The cash and Bank balance of the Company increases by 13.44% from previous year i.e. 543.91 Crore.The Companys Balance Sheet reveals there is overall increase in Asset but decrease in Non-Current Asset by (180.07) i.e. 1.97% and increase in Current Asset to 215.90 i.e. 1.3%. The Reserve and Surplus increased to 190 Cr. i.e. by 1.75% as the whole Company is in healthy financial position

COMPARATIVE INCOME STATEMENT FOR THE YEAR ENDED 31.03.2014. (Rs. In Crores)Sl. No.Particulars31.03.201431.03.2013Inc/Dec (Amount)Inc/Dec (%)

A. Income Statement

1Exports3,7193,4103098.31

2Domestic Sales3,3053,837-532-16.09

3Gross Sales(1+2)7,0247,247-223-3.17

4Less Excise Duty375438-63-18.8

5Net Sales(3-4)6,6496,809-160-2.40

6Other Income----

7Operating Income1321072523.36

8Non-Operating Income558511478.42

Total Revenue7,3397,427881.20

9Operating Expenses5,8476,010-163-2.78

10Operating Profit (5+7-9)934906283.00

11Exceptional Expenditure49-49100

12Earnings before Interest, Dep. & Taxes (EBIDT)(10+8-11)1,4431,417261.80

13Interest & Finance Charges07-7-100

14Earning before Dep. & Taxes (EBDT)(12-13)1,4431,410332.29

15Depreciation& Amortization525505203.81

16Profit before Tax (PBT)(14-15)918

905131.42

17Provision for Tax2763123613.04

18Net Profit(PAT)(16-17)642593497.63

INTERPRETATION:-The Comparative Statement reveals that there is increase in total income of 88i.e. 1.20, which is increase in both Operating and Non-Operating income. Whereas there is decrease in Operating expenses of 163 i.e. 2.78. This shows the Companys overall Operational and Financial Management is very good.

COMMON SIZE BALANCE SHEET AS ON 31.03.2014.Sl. No.Particulars31.03.2014(%)31.03.2013(%)

1Assets

2Non-Current Assets

3Fixed Assets

4Tangible Assets6,688.8040.426,523.8039.94

5Intangible Assets103.140.62105.090.64

6Capital Work in Progress768.744.651,001.926.13

7Non-Current Investments1.040.01161.040.99

8Long term Loans & Advances1,517.279.171,474.049.03

9Other Non-Current Assets43.320.2636.490.22

TOTAL9,122.3155.129,302.3856.96

10Current Assets

11Current Investments1,2447.511,329.028014

12Inventories1,173.667.091,380.648.45

13Trade Receivables243.571.47148.650.91

14Cash & Bank Balances4,048.2924.463,504.3821.45

15Short term Loan and & Advances481.382.91473.762.90

16Other Current Assets235.301.42193.781.19

TOTAL7,426.2044.887,030.2343.04

GRAND TOTAL16,548.5110016,332.61100

17Equity & Liabilities

18Shareholder's fund

19Share Capital1,288.627.791,288.627.89

20Reserve & Surplus10,833.8365.4710,643.8365.17

TOTAL12,122.4573.2511,932.4573.06

21Non-Current Liabilities

22Deferred Tax Liabilities910.135.50903.135.53

23Other Long term Liabilities54.960.3370.820.43

24Long term Provision218.221.32208.621.28

TOTAL1,183.317.151,182.577.24

25Current Liabilities

26Trade Payables531.123.21509.173.12

27Other Current Liabilities2,564.3815.502,545.7515.59

28Short term Provision147.250.89162.670.10

TOTAL3,242.7519.603,217.5919.70

GRAND TOTAL16,548.5110016,332.61100

INTERPRETATION:-Out of the total Liabilities 73.25% of the funds are Shareholder fund. Out of which Share Capital is 7.79% only. This shows that the Company relies more on its own fund.The Working Capital management of Company is very good during financial year 2013-14 as Current Asset increase from previous year and decrease in Current Liabilities from previous year i.e. 2012-13.The Non-Current Asset stood at 55.12% against 56.96% during 2012-13. This indicates decrease in Non-Current Asset and increase in Cash & Bank Balances.

COMMON SIZE INCOME STATEMENTSl. No.Particulars31.03.2014 (Amount)(%)31.03.2013 (Amount)(%)

1Exports3,71955.933,41050.08

2Domestic Sales3,30549.713,83756.35

3Gross Sales (1+2)7,024105.637,247106.43

4Less-Excise Duty3755.644386.43

5Net Sales (3-4)6,6491006,809100

6Other Income

7Operating1321.991071.57

8Non-Operating5588.395117.50

9Operating Expenses5,84787.936,01088.26

10Operating Profit (5+7-9)93414.0490613.30

11Exceptional Expenditure490.74-0

12EBIDT(10+8-11)1,44321.701,41720.81

13Interest & Financing Charges0070.10

14EBDT (12-13)1,44321.701,41020.70

15Depreciation & Amortization5257.905057.42

16PBT (14-15)91813.8190513.29

17Provision for Tax2764.153124.58

18Net Profit6429.665938.71

INTERPRETATION:-On Export Sales Companys performance increased and in domestic sales it decreases. Overall Operating Expenses decrease in % term and it is a sign of good cost management. Operating Profit has been increased marginally to 934 during 2013-14 from 906 during 2012-13. Overall it is a good performance by Company.

RATIO ANALYSIS

1. LIQUIDITY RATIO Working capital Acid test or quick ratio Current ratio 2. PROFITABILITY RATIO Gross Profit Net profit Return on capital employed Return on net worth 3. ACTIVITY RATIO Stock turnover ratio Working capital turnover ratio Debtor turnover ratio CONCEPT OF RATIO ANALYSIS DEFINATION:- Ratio analysis is a tool used by individuals to conduct a quantitative analysis of information in a company financial statement. Ratios are calculated from current year numbers & then compared previous year, other companies & industries or even, the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. Objectives of Ratio Analysis Financial ratios are true test of the profitability, efficiency and financial soundness of the firm. These ratios have following objectives: (1) Measuring the profitability: Profitability is the profit earning capacity of the business. This can be measured by Gross Profit, Net Profit, Expenses and Other Ratios. If these ratios fall we can take corrective measures.(2) Determining operational efficiency: Operational efficiency of the business can be determined by calculating operating / activity ratios. (3) Measuring financial position: Short-term and long-term financial position of the business can be measured by calculating liquidity and solvency ratios. In case of unhealthy short or long-term position, corrective measures can be taken.(4) Facilitating comparative analysis: Present performance can be compared with past performance to discover the plus and minus points. Comparison with the performance of other competitive firms can also be made.(5) Indicating overall efficiency: Profit and Loss Account shows the amount of net profit and Balance Sheet shows the amount of various assets, liabilities and capital. But the profitability can be known by calculating the financial ratios.(6) Budgeting and forecasting: Ratio "analysis is of much help in financial forecasting and planning. Ratios calculated for a number of years work as a guide for the future. Meaningful conclusions can be drawn for future from these ratios.Advantages 1. It simplifies the financial statements. 2. It helps in comparing companies of different size with each other. 3. It helps in trend analysis which involves comparing a single company over a period.4. It highlights important information in simple form quickly. A user can judge a company by just looking at few numbers instead of reading the whole financial statements. Limitations Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of financial ratio analysis are: 1. Different companies operate in different industries each having different environmental conditions such as regulation, market structure, etc. Such factors are so significant that a comparison of two companies from different industries might be misleading.2. Financial accounting information is affected by estimates and assumptions. Accounting standards allow different accounting policies, which impairs comparability and hence ratio analysis is less useful in such situations. 3. Ratio analysis explains relationships between past information while users are more concerned about current and future information. Ratios and Formulas in Customer Financial Analysis Financial statement analysis is a judgmental process. One of the primary objectives is identification of major changes in trends, and relationships and the investigation of the reasons underlying those changes. The judgment process can be improved by experience and the use of analytical tools. Probably the most widely used financial analysis technique is ratio analysis, the analysis of relationships between two or more line items on the financial statement. Financial ratios are usually expressed - in percentage or times. Generally, financial ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the following categories: Liquidity ratios measure a firm's ability to meet its current obligations. Profitability ratios measure management's ability to control expenses and to earn a return on the resources committed to the business. Leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time. Efficiency, activity or turnover ratios provide information about management's ability to control expenses and to earn a return on the resources committed to the business.A ratio can be computed from any pair of numbers. Given the large quantity of variables included in financial statements, a very long list of meaningful ratios can be derived. A standard list of ratios or standard computation of them does not exist. The following ratio presentation includes ratios that are most often used when evaluating the credit worthiness of a customer. Ratio analysis becomes a very personal or company driven procedure. Analysts are drawn to and use the ones they are comfortable with and understand.

Liquidity Ratio:-1. Working CapitalWorking Capital compares Current Assets Current Liabilities, and serves as the liquid reserve available to satisfy contingencies and uncertainties. A high Working Capital balance is mandated if the entity is unable to borrow on short notice. The ratio indicates the short-term solvency of a business and in determining if a firm can pay its current liabilities when due. FormulaCurrent Assets - Current Liabilities

Financial YearCurrent AssetCurrent LiabilitiesWorking Capital

2010-116045.172740.953304.22

2011-126269.092676.893592.2

2012-137075.813211.933863.98

2013-147426.203242.754183.45

2. Acid Test or Quick RatioA measurement of the liquidity position of the business. The quick ration compares the cash plus cash equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation. Consequently, a businesss quick ratio will be lower than its current ratio. It is a stringent test of liquidity. FormulaCash+Marketable Securities+Accounts Receivable Current Liabilities

Financial YearTotal Quick AssetTotal Current LiabilitiesQuick Ratio

2010-114986.702740.951.82

2011-125056.392676.891.88

2012-135695.173211.931.78

2013-146299.143242.751.94

INTERPRETATION (Quick Ratio):-The quick ratio of Company is more than satisfactory. The ideal quick ratio is 1:1. But last four year shows quick ratio of 1.82, 1.88, 1.78 and 1.94 respectively. It shows the liquid cash position is much more. It is better to invest liquid cash more profitable manner. 3. Current RatioIt provides an indication of the liquidity of the business by comparing the amount of current assets to current liabilities. A business's current assets generally consist of cash, marketable securities, accounts receivable, and inventories. Current liabilities include accounts payable, current maturities of long-term debt, accrued income taxes, and other accrued expenses that are due within one year. In general, businesses prefer to have at least one dollar of current assets for every dollar of current liabilities. However, the normal current ratio fluctuates from industry to industry. A current ratio significantly higher than the industry average could indicate the existence of redundant assets. Conversely, a current ratio significantly lowers than the industry average could indicate a lack of liquidity. FormulaCurrent Assets Current LiabilitiesFinancial YearCurrent AssetCurrent LiabilitiesCurrent Ratio (%)

2010-116045.172740.952.21

2011-126269.092676.892.34

2012-137075.813211.932.20

2013-147426.203242.752.29

INTERPRETATION:-Conventionally 2:1 current ratio is very satisfactory. The Companys current ratio of last four years is 2.21, 2.34, 2.20 and 2.29. This implies that Company can pay its Current Liabilities immediately. Its management practice is very good.

Profitability Ratios:-4. Gross Profit MarginIt indicates the relationship between net sales revenue and the cost of goods sold. This ratio should be compared with industry data as it may indicate insufficient volume and excessive purchasing or labor costs. FormulaGross Profit Net SalesFinancial YearGross ProfitNet SalesProfitability Ratio

2010-111524595925.57

2011-121198650018.43

2012-13905680913.29

2013-14967.186648.814.55

INTERPRATATION:-The Gross Profit ratio for the year has decreased from 2010-11 to 2012-13, but it increases in 2013-14. PBT has shown a decline due to decrease in sales. The Gross Profit ratio decline indicates cost rise to manpower, inefficiency in proper management of input materials and other element of cost. Further, this may be due to global slowdown in Aluminium and inability to increase sales price.

6.Net Profit Margin (Return on Sales)A measure of net income dollars generated by each dollar of sales. FormulaNet ProfitNet SalesRefinements to the net income figure can make it more accurate than this ratio computation. They could include removal of equity earnings from investments, other income and other expense items as well as minority share of earnings and nonrecurring items.

Financial YearNet ProfitNet SalesNet Profit Ratio (in %)

2010-111069595917.94

2011-12850650013.07

2012-1359368098.71

2013-146426648.809.66

INTERPRETATION:-The ratio has decrease from the year 2010-11 to 2012-13 due to PAT decrease from 2010-11 to 2012-13. But there is improvement in PAT during 2013-14 in percentage term. Although Net Sales decrease the Net profit increased. The increase in profitability shows good operational and financial management of the Company.

5.Return on Capital EmployeeThe ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and capital employed to earn it.ROCE=Net Profit after Tax Capital Employed Financial YearPATCapital EmployedROCE (%)

2010-11106987989.57

2011-12850108057.25

2012-13593100404.97

2013-14642133064.82

INTERPRETATION:-The ratio decrease from 2010-11 to 2013-14 due to decrease in PAT and increase in Capital Employed. Capital Employed increased due to increase in Fixed Asset and Current Asset. This indicates the firm has not able to use its available resources properly to generate income. Further, during 2013-14 the PAT increases the Capital Employed increased is much more.

5. Return on Net WorthIt is the ratio of Net Profit After Tax to Net Worth. It measures the rate of return of shareholder i.e. it measure the amount of earnings for each rupee that the shareholders have invested in the Company.

100Return on Net Worth = PATNet WorthNet Worth = Share Capital+Reserve& SurplusFinancial YearPATNet WorthReturn on Net Worth

2010-111069111659.58

2011-12850117157.25

2012-13593119334.97

2013-14642121225.30

INTERPRETATION:-The RONW decrease from the year 2010-11 to 2012-13 due to increase in Net Worth and decrease in PAT. Net Worth increases due to increase in Reserve & Surplus. PAT decrease due to decrease in sales and increase in expenses. But during year 2013-14 there is improvement in RONW. The PAT increases and Net Worth also increase. Despite of that RONW on higher side this indicates Companys better management towards cost reduction.

Long-Term Solvency and Leverage Ratios:-6. Debt-equity RatioThe Ratio measure the contribution of lender relative to its contribution to owners. This ratio also measure the debt exposure i.e. the to which the firm is financed by debt.Debt-equity Ratio = Long term DebtsShareholders fundsLong term Debt = Debenture+Mortgageloan+Bankloan+Loan from Financial InstitutionShareholders fund = Equity share Capital+Preference Share Capital+Reserves&Surplus+Security PremiumFinancial yearTotal Long term fundTotal Shareholder fundDebt equity Ratio

2010-11011164.610

2011-12011715.080

2012-13011932.450

2013-14012122.450

INTERPRETATION:-Debt-equity ratio is zero all the four years from 2010=11 to 2013-14. Since the Company finance does not depend upon long term finance. Shareholders fund increases sharply due to increase in Reserve and Surplus.

7. Proprietary RatioThis ratio shows the proportion of total asset of a business finance by the Shareholders fund. It is used to ascertain the solvency & financial stability of the firm in the long run.Proprietary Ratio =Shareholders fund Total AssetShareholders fund = Equity Share Capital+ Preference Share Capital+Reserves&Surplus+Security PremiumTotal Asset = Fixed Asset+Investment+Current AssetFinancial YearShareholders fundTotal AssetProprietary Ratio (%)

2010-1111164.6114948.9074.69

2011-1211715.0815520.7875.48

2012-1311932.4516332.6173.05

2013-1412122.4516548.5173.25

INTERPRETATION:-The proprietary Ratio is increase in 2011-12 as compared to 2010-11 and it was highest in 2011-12 due to increase in Shareholders fund from 11164.61 to 11715.08 and increase in total 14948.90 to 15520.78 and then suddenly the Proprietary Ratio is decline in 2012-13 and 2013-14.

Activity Ratios:-These ratios measure how well the resources at disposal of the concern are being utilized. These ratios measure the efficiency & rapidity of the resources of the Company.

8. Stock Turnover Ratio:-It is ratio of cost of goods sold or sales to average stock in trade. The Stock Turnover Ratio how quickly inventories are sold i.e. the number of times a business stock turnover during a year.Stock Turnover Ratio = Cost of goods sold = number of times Average stock Cost of goods sold = Net sales-Gross profitAverage stock = Opening stock+Closing stock2Financial YearCost of goods soldInventoryStock turnover ratio (in times)

2010-114891.781001.704.42

2011-125934.081108.595.35

2012-136522.531288.225.06

2013-1463721277.154.99

INTERPRETATION:-Stock turnover ratio is in the range of 4.42 to 4.99 during last four years i.e. 2010-11 to 2013-14. The high stock turnover ratio indicates good inventory management by the Company.

9. Working Capital Turnover RatioThis is the ratio between turnover (sales) & working capital. This shows the extent to which a business is using its working capital to generate sales.Working Capital Turnover Ratio = Net Sales= Number of timeWorking CapitalFinancial YearNet SalesWorking CapitalWorking Capital Turnover Ratio

2010-1159593304.221.8

2011-1265003592.21.81

2012-1368093863.881.75

2013-146648.84183.451.76

INTERPRETATION:-The ratio decrease from 2011-12 to 2012-13 due to increase in Working Capital, which indicates under utilization of Working Capital i.e. cash balance.

Debtor Turnover RatioFinancial YearNet Credit SalesAverage Trade DebtorDebtor Turnover Ratio

2010-111787.96147.0912

2011-121950.08124.8916

2012-132042.7140.5614

2013-141994.64196.1110.17

INTERPRETATION:-Debtor Turnover Ratio indicates how quickly debtors are converted in to cash. Debtor Turnover Ratio is better during 2011-12 and 2012-13 than 2013-14.

CASH FLOW STATEMENT Cash flow statements and projections express a business's results or plans in terms of cash in and out of the business, without adjusting for accrued revenues and expenses. The cash flow statement doesn't show whether the business will be profitable, but if does show the cash position of the business at any given point in time by measuring revenue against outlays. The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement: Cash refers to cash on hand in the business. Cash sales are income from sales paid for by cash. Receivables are income from the collection of money owed to the business resulting from sales. Other income is income from investments, interest on loans that have been extended, and the liquidation of any assets. Total income is the sum of total cash, cash sales, receivables and other income. Material/merchandise is the raw material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service. Direct labour is the labour required to manufacture a product (for manufacturing operations only) or to perform a service. Overhead is all fixed and variable expenses required for the operations of the business. Marketing/sales is all salaries, commissions and other direct costs associated with the marketing and sales departments. R&D is labour expenses required to support the research and development' operations of the business. G&A is labour expenses required to support the general and administrative functions of the business. Taxes are all taxes, except payroll, paid to the appropriate government institutions. Capital represents the capital requirements to obtain any equipment needed to generate income. Loan payments are the total of all payments made to reduce any long-term debts. Total expenses are the sum of material, direct labour, overhead expenses, marketing, sales, R&D, G&A, taxes, capital and loan payments. Cash flow is the difference between total income and total expenses. This amount is carried over to the next period as beginning cash. Cumulative cash now is the difference between current cash flow and cash flow from the previous period.

Objective.Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis to assess the ability of the enterprise togenerate cash and cash equivalents and the needs of the enterprise toutilizethose cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation.The Standard deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of cash flow statement which classifies cash flows during the period from operating, investing and financing activities. Scope1) An enterprise should prepare a cash flow statement and should present it for each period for which financial statements are presented.2) Users of an enterprise's financial statements are interested in how the enterprise generates and uses cash and cash equivalents. This is the case regardless of the nature' of the enterprise's activities and irrespective of whether cash can be viewed as the product of the enterprise, as may be the case with a financial enterprise. Enterprises need cash for essentially the same reasons, however different their principal revenue- producing activities might be. They need cash to conduct their operations, to' pay their obligations, and to provide returns to their investors.Benefits of Cash Flow Information3) A cash flow statement, when used in conjunction with the other financial statements, provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure (including its liquidity and solvency} and its ability to affect the amounts and timing of cash flows in order to adapt 1'0 changing circumstances and opportunities. Cash flow information is useful in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different enterprises. It also enhances the comparability of the reporting of operating performance by different enterprises because it eliminates the effects of using different accounting treatments for the same transactions and events.4) Historical cash flow information is often used as an indicator of the amount, timing and certainty of future cash flows. It is also useful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices.

Presentation of a Cash Flow Statement (1) The cash flow statement should report cash flows during the period Classified by operating, investing and financing activities.(2) An enterprise presents its cash flows from operating, investing and financing activities in a manner which is most appropriate to its business. Classification by activity provides information that allows users to assess the impact of those activities on the financial position of the enterprise and the amount of its cash and cash equivalents. This information may also be used to evaluate the relationships among those activities.(3) A single transaction may include cash flows that are classified differently. For example, when the instalment paid in respect of a fixed asset acquired on deferred payment basis includes both interest and loan, the interest element is classified under financing activities and the loan element is classified under investing activities. Operating Activities (1) The amount of cash flows arising from operating activities is a key indicator of the extent to which the operations of the enterprise have generated sufficient cash flows to maintain the operating capability of the enterprise, pay dividends, repay loans and make new investments without recourse to external sources of financing. Information about the specific components of historical operating cash flows is useful, in conjunction with other information, in forecasting future operating cash flows.(2) Cash flows from operating activities are primarily derived from the principal revenue-producing activities of the enterprise. Therefore, they generally result from the transactions and other events that enter into the determination of net profit or loss. Examples of cash flows from operating activities are: a) Cash receipts from the sale of goods and the rendering of services; b) Cash receipts from royalties, fees, commissions and other revenue; c) Cash payments to suppliers for goods and services;d) Cash payments to and on behalf of employees;e) Cash receipts and cash payments of an insurance enterprise for Premiums and claims, annuities and other policy benefits;f) Cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities; andg) Cash receipts and payments relating to futures contracts, forward contracts, option contracts and swap contracts when the contracts are held for dealing or trading purposes. (3) Some transactions, such as the sale of an item of plant, may give rise to a gain or loss which is included in the determination of net profit or loss. However, the cash flows relating to such transactions are cash flows from investing activities.(4) An enterprise may hold securities and loans for dealing or trading purposes, in which case they are similar to inventory acquired specifically for resale. Therefore, cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities. Similarly, cash advances and loans made by financial enterprises are usually classified as operating activities since they relate to the main revenue-producing activity of that enterprise.

Investing Activities The separate disclosure of cash flows arising from investing activities is important because the cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Examples of cash flows arising from investing activities are: a) Cash payments to acquire fixed assets (including intangibles). These payments include those relating to capitalized research and development costs and self-constructed fixed assets; b) Cash receipts from disposal of fixed assets (including intangibles); c) Cash payments to acquire shares, warrants or debt instruments of other enterprises and interests in joint ventures (other than payments for those instruments considered to be cash equivalents and those held for dealing or trading purposes);d) Cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interests in joint ventures (other than receipts from those instruments considered to be cashequivalents and those held for dealing or trading purposes);e) Cash advances and loans made to third parties (other than advances and loans made by a financial enterprise); f) Cash receipts from the repayment of advances and loans made to third parties (other than advances and loans of a financial enterprise); g) Cash payments for futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the payments are classified as financing activities; andh) Cash receipts from futures contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes, or the receipts are classified as financing activities. Financing Activities 1. The separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise. Examples of cash flows arising from financing activities are: a) Cash proceeds from issuing shares or other similar instruments;b) Cash proceeds from issuing debentures, loans, 'notes, bonds, and other short or long-term borrowings; and c) Cash repayments of amounts borrowed.

CASH FLOW STATEMENT FOR THE YEAR ENDED 2011-2012

ParticularsYear ended March 31, 2012Year ended March 31, 2011

A. Cash flow from operating activities

Net Profit Before Tax and extraordinary 1197.751524.7

Income adjustment for:-365.91

Depreciation 466.55427.72

Interest and financing charges and dividend 0.870.05

Provisions (net) 1.290.34

Claims and recoverable written off 2.810.01

Dividend8.54

Stores and spares written off 16.364.74

Dividend Income(98.47)0.04

Loss/profit on sale of assets (net) 0.21

1587.311890.61

Adjustments for

Inventories(162.91)

Trade and other receivables (163.39)(112.96)

Trade payable 70.26(396.56)13.40

Tax generated from operations And direct taxes paid 1190.75396.79288.03

Cash flow before extraordinary item (304.05)2178.64

886.7(548.11)

Extraordinary item -1630.53

Net cash flow 886.70-

B. CASH FLOW BEFORE INVESTING ACTIVITIES1630.53

Purchase of fixed assets (758.16)

Dividend incomes from mutual funds 577.41833.22

Net cash flow used in investing activities 98.4764.74

(88.28)768.48

C. CASH FLOW FROM FINANCING ACTIVITIES

Interest and financing charges 0.870.05

Exchange variation gains(14.88)-

Proceeds from short term borrowings(415.55)6.27

Dividend including dividend tax paid (301.53)(225.39)

(431.5)(219.17)

D. NET CHARGES IN CASH AND CASH EQUIVALENT431.5 642 .88

E. CASH AND CASH EQUIVALENT OPENING BALANCE 373.123152.35

F.CASH AND CASH EQUIVALENT CLOSING BALANCE3795.233795.23

4168.351524.7



A. Cash flow from operating Period

Net Profit Before Tax and extraordinary Item 905.041197.75


Interest and financing charges 7.450.87

Provisions 24.991.29


Dividend

Stores and spares written off 11.8816.3

Dividend income (73.10)(98.47)

Loss/profit on sale of assets (net) 0.170.21

1383.831587.31

Adjustments for

Inventories(205.25)(162.91)


Trade payable 208.0272.5570.26(396.56)

Tax generated from operations And direct taxes paid 1311.281190.75

Cash flow before extraordinary item (435.11)(304.05)

876.17886.7

Extraordinary item --

Net cash flow 876.17886.70

B. CASH FLOW BEFORE INVESTING ACTIVITIES

Purchase of fixed assets 648.93(758.16)

Dividend incomes from mutual funds 735.80577.41


1311.63(88.28)


Interest and financing charges 7 .45(0.87)

Exchange variation gains-(14.88)

Proceeds from short term borrowings(221.06)(415.55)

Dividend including dividend tax paid (225.39)(301.53)

(228.51)(431.5)

D. NET CHARGES IN CASH AND CASH EQUIVALENT228.51431.5

E. CASH AND CASH EQUIVALENT OPENING BALANCE (663.91)373.12

F. CASH AND CASH EQUIVALENT CLOSING BALANCE4168.353795.23

3504.384168.35



A. Cash flow from operating Period

Net Profit Before Tax and extraordinary Item 917.81905.04


Interest and financing charges -7.45

Provisions 32.3424.99


Stores and spares written off (122.48)(73.10)

Dividend income (7368.88)(395.03)

Loss/profit on sale of assets (net) 0.060.17

1003.03988.8

Adjustments for

Inventories191.3(205.25)


Trade payable 268.97337.97213.68(112.23)

Tax generated from operations And direct taxes paid 1340.93876.57

Cash flow before extraordinary item (359.59)(435.11)

981.34441.46

Extraordinary item --

Net cashflow876.17886.7

B. CASH FLOW BEFORE INVESTING ACTIVITIES

Purchase of fixed assets (618.68)(648.98)

Dividend incomes from mutual funds 245.62(735.8)

Interest income from deposits, loans and advances112.4873.16


78.05(876.92)


Interest and financing charges -7.45

Exchange variation gains(515.48)(221.06)

(515.81)(228.51)

D. NET CHARGES IN CASH AND CASH EQUIVALENT(515.81)(228.51)

E. CASH AND CASH EQUIVALENT OPENING BALANCE 543.91(663.94)

F. CASH AND CASH EQUIVALENT CLOSING BALANCE3504.384168.35

4048.293504.38

INTERPRETATION:- During the year 2012-2014 the net cash flow of NALCO is increasing. That shows the better cash management by the company, company also gain continuously due to depreciation of Rupees i.e gain from foreign exchange. Working capital loan facilities is mortgaged by hypothecation of raw material, stock in progress, finished goods, consumable, stores and spares, book depths, receivable and other current assets of the company.

FINANCIAL PERFORMANCE OF NALCO Financial YearIncome (Rs. In Crore)Net Profit (Rs. In crore)

2005-0651221562

2006-0763542381

2007-0855761672

2008-0956311272

2009-105547814

2010-1164101069

2011-127154850

2012-137428593

2013-147339642

Thus from 2011-2012 the income has increased from Rs 7154 crore to Rs 7428 crore but Net Profit has decreased from 2011-2012 from Rs 850 crore to Rs 593 crore. The income shown above is fully dependent on the London metal Market & the net profit is calculated in different aspect keeping in mind the cost factor of production. So in 2012-2013 the net profit is decreased due to the maintenance & raw material increase in price.HOLISTIC REPORT1. Result of the LME price The average price of aluminium on LME in 2011-2012 was $2317 per compared to $ 1976 in 2012-2013. Thus the difference is of $341 per ton. This downfall in LME price of aluminium & high inputs cost has affected it net profit which has decrease to Rs. 593 crore in the current yea!' as compared to Rs. 850 crore in last year. 2. Comparison of CSR activities:- Bhubaneswar: Na1co Foundation has bagged a prestigious award in the category of best Corporate Social Responsibility Practices 2013, at the Responsible Business Summit & Awards. On behalf of the Foundation, Aswini Kumar Choudhury, Chief Operating Officer, received the award at a function held on Friday in Mumbai, a company release said here. Right from inception, NALCO has been laying special emphasis on CSR and has been allocating I per cent of its net profit every year for carrying out various developmental activities. In order to strengthen its CSR activities, the company has set up standalone Nalco Foundation in 2010 and increased its fund allocation by another 1 per cent of net profit. The Foundation has taken up some significant projects in health, education, drinking water and other areas of community development. It has established 197 primary school-cum-cyclone shelters after super cyclone in 2009 with contribution of RS 1.31Cr. which was the biggest CSR activities ever it has been involved in transforming a simple & naive civilization to a vibrant industrial society, rehabilitating the displaced person, training the youth & youth & job opportunities. It constructed SisuMandir in which each child get a subsidy of Rs 15000 per annum. It commissioned 2 wind power plants at Ludarva. 54 FINDINGS & INFERENCES a) Findings from the analysis of balance sheet: The equity share capital has increased from 2010-11 and it remains constant atRs 1288.62. The reserve and surplus has increased over the year. The net worth even shows the similar trend. Due to efficient management of NALCO has been zero debt company since 2007-08. The fixed assets showed a substantial increase in the year 2008-09 to 2009-10 and thereafter increase at increasing trend. The current assets have been fluctuating over the years but increases due to remarkable increase in trade receivables & cash & bank balance.b) Findings from the analysis of income statement: The net sales have been increasing from the year 2010-11 to 2012-l3. The expenses have been continuously increasing from 2010-11 due to increase in price of raw material, power & fuel, employees remuneration. The net profit has declined from the year 2010-11 to 2012-13. The net profit is lowest in the year 2012-13 as compared to the year 2010-11 & 2011-12. The net profit declined due to decreased in sales and increase in expenses.

55CONCLUSION: I would like to conclude that NALCO has travelled a long distance in pursuit of excellence in all the areas of its performance, for which it has become a world class company. Organization is based on the traditional approach on financing total funds i.e. Shareholders fund. Organization is base on financing its working capital on conservative approach. The organization is constantly improving its reserve and surplus which a good sign strengthening future financial stabilities. Operating expenses of organization are to be improved the profitability of the, organization. Liquidity Ratio: It shows that NALCO has the ability to meet its current obligations. It doesn't suffer from excess liabilities. It thus has a proper balance between high liquidity & lack of liability. It's a good sign for NALCO as the creditors would definitely extend credit because of the satisfactory liquidity position ofNalco. Solvency Ratios: The solvency ratios ofNALCO show that at present Nalco is debt free company or a zero debt company hence there is no debt holder of NALCO& therefore it doesn't pay the fixed interest. Thus the solvency ratio ofNALCO shows that it has a good long-term solvency position. Activity Ratios: The activity ratios show the speed with which the assets are converted to sales. The efficiencies in turning its inventories ratio has considerable which despite, that NALCO is in the position to sell its stock quickly. The company debtor turnover ratio has increased for some as well as decreases for some year but in' the present year i.e.20 12-13 it has decreased which despite that the company operates on cash basis and collection of account receivables is efficient enough. Profitability Ratios:The primary objective of a business concern is to earn profits which is required not only for existence but also for expansion & diversification. The profitability ratio of NALCO has good one.

RECOMMENDATION From the analysis of Balance sheet & Income statement of NALCO, some of the recommendations to the company are as follows:- The sales volume of NALCO is low. Therefore NALCO should aim to increase its turnover through diversification & innovation. One of the major concerns of NALCO is its declining profit. It should aim at working on it by controlling it operating expenses. Raw material, power & fuel constitute the majority of operating expenses. The company may go for backward integration for critical raw materials like coal, caustic soda & lime. It may acquire more coal mines to keep power cost competitive. It should transform from being only an aluminium producer & energy provider. The EPS of NALCO has been showing a declining trend. The company should aim to maximize value & long-term return it shareholders through a strategy of new investment & cost competitive mines. The company has lots of stagnate cash. It should go for investments. The cash which remain stagnate should be invest to increase profit. The company has no long-term debt in its capital structure. The company should aim to have a proper debt equity ratio in order to improve its EPS & gain advantages of low cost debt. It should develop a powerful scientific & technical base. A part from investments in volume growth, the company shall substantially finance R & D & modernization.

BIBLIOGRAPHYAuthorized Book MANAGEMENT ACCOUNTING (Shashi k. Gupta & R.K. Sharma) Annual report ofNALCO 2010-2011 Annual report ofNALCO 2011-2012 Annual report ofNALCO 2012-2013SEARCH ENGINES: www.google.com www.nalcoindia.co.in www.Investopedia.com

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