project “ratio analysis of tata power company limited”

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A PROJECT REPORT ON

“RATIO ANALYSIS OF Tata Power Company Limited ”

SUBMITTED BY

MR/MISS ZINE SAGAR VIJAY SANGITA,

ROLL NO: 6279

M.Com. SEM- I

(ADVANCE ACCOUNTANCY)

ACADEMIC YEAR: 2014-15

Under the guidance of PROJECT GUIDE

PROF. S.V.RANE

PROF.ANURADHA GANESH

SUBMITTED TO UNIVERSITY OF MUMBAI

MULUND COLLEGE OF COMMERCE

S N ROAD, MULUND (WEST)

MUMBAI - 400080

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DECLARATION FROM THE STUDENT

I, ZINE SAGAR VIJAY SANGITA ROLL No. 6279 Student of

Mulund College Of Commerce, S. N. Road, Mulund (West)

400080, studying in M.Com Part- I hereby declare that I have

completed the project on “RATIO ANALYSIS OF INDIAN OIL

CORPORATION LTD” under the guidance of project guide Prof.

during the academic year 2014-15. The information submitted is

true to the best of my knowledge.

Date: 23RD SEPTEMBER 2014 Signature

Place : Mulund

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CERTIFICATE

I, Prof., hereby certify that Mr/Miss ZINE SAGAR VIJAY SANGITA Roll

No. 6279 of Mulund College of Commerce, S. N. Road, Mulund (West),

Mumbai -400080 of M.com Part I (Advanced Accountancy) has completed

her project on “RATIO ANALYSIS OF INDIAN OIL CORPORATION

LTD” during the academic year 2014-15. The information submitted is true

and original to the best of my knowledge.

Project Guide External guide

Co-coordinator Principal

Date: 23RD SEPTEMBER 2014

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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to Principal of

Mulund College of Commerce DR. (Mrs.) ParvathiVenkatesh,

Course - Coordinator Prof. Rane and our project guide Prof.,

for providing me an opportunity to do my project work on

“RATIO ANALYSIS OF INDIAN OIL CORPORATION LTD”. I

also wish to express my sincere gratitude to the non -

teaching staff of our college. I sincerely thank to all of them

in helping me to carrying out this project work. Last but not

the least, I wish to avail myself of this opportunity, to

express a sense of gratitude and love to my friends and my

beloved parents for their mutual support, strength, help and

for everything.

DATE: 23RD SEPTEMBER 2014 SIGNATURE

PLACE:MULUND

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Contents

INTRODUCTION 6

VISION,MISSION AND VALUES 7

History :- ̀ 9

Achievements/ recognition : 11

BALANCE SHEET 14

STATEMENT OF PROFIT AND LOSS A/c: 16

RATIO ANALYSIS 18

CALCULATION RATIO ANALYSIS 20

Conclusion 43

Bibliography/webliography 45

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INTRODUCTIONTata Power is India’s largest integrated power company with a

growing internationalpresence. The Company together with its subsidiaries

and jointly controlled entities has aninstalled gross generation capacity of

8584 MW in India and a presence in all the segments of the power sector viz.

Fuel Security and Logistics, Generation (thermal, hydro, solar and wind),

Transmission, Distribution and Trading.

It has drawn up an ambitious roadmap to expand its presence across

the power valuechain to empower and positively impact the lives of each and

every stakeholder. Witha customer base of 1.9 million, the Company plans to

have 18,000 MW generation

capacity, 4000 MW of distribution, 25 million tonnes per annum of energy

resources and

10-X growth in value added businesses by 2022. The Company is also

constantly innovating to ensure that stakeholder expectations are exceeded.

Some of these are :

Successful public-private partnerships in Generation, Transmission and

Distribution in India

Developed country’s first 4000 MW Ultra Mega Power Project at Mundra

(Gujarat) based on supercritical technology

Focus on clean energy and one of the largest renewable energy players in

India

Strategic presence in Transmission through Powerlinks Transmission Limited

in the Eastern and North Eastern region of India and Transmission operations

in the Mumbai License Area

International presence through strategic investments in Indonesian coal

mines; in Singapore through Trust Energy Resources to securitise coal supply

and the shipping of coal for its thermal power generation operations; in

South Africa through a joint venture called ‘Cennergi’ to develop projects in

South Africa, Botswana and Namibia; in Australia through investments in

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enhanced geothermal and clean coal technologies and in Bhutan through a

hydro project in partnership with The Royal Government of Bhutan.

Strategic Elements tatapowerfor the year 2014-15

Vision :To be the most admired and responsible integrated power

company with international footprint, delivering sustainable

value to all stokeholder.

MissionWe will become the most admired and responsible power

company delivering sustainable value by :

Operating our assets at benchmark levels Execting projects

safely, with predictable benchmark quality, cost and time

growing the tata power businesses be it across the value

chain or across geographies, and also in allied or new

businesses

Driving organizational transformation and creating a culture

that will help us to deliver on our strategic intent.

Achieving our sustainability intent of ‘Leadership with care’,

by having leading and best practices obn care for the

Environment, care for the community, care for the customers

and shareholders and carec for the people.

Being the lead adopter of technology, wherever appropriate,

with a bold spirit of pioneering and calculated risk taking,

and building capabilities that would help us internalise the

use of these technologies

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.

Values :

Our Values are SACRED to us

Safety – Safety is a core value over which no business

objective can have a higher priority.

Agility :-Speed, Responsiveness and being Proacting

through collaboration and Empowering Employees

Care : care for stakeholders our Environments, customers

and potential, our community and our people (our employee

and partners)

Ethics : Achieve the most admired standards ethics, through

integrity and mutual trust.

Diligence : Do everything (set direction, deploy actions,

analyse, review, plan and mitigate risks etc.) with a

thoroughness that delivers quality and

Excellence : in all areas, and especially in operation,

Exaction and growth.

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History :-

Tata Power, erstwhile known as Tata Electric, pioneered the generation of electricity in India nine decades ago. The company started as Tata Hydroelectric Power Supply Company in 1911, it got its new status with the amalgamation of two entities viz, Tata Hydroelectric Power Supply Company and Andhra Valley Power Supply Company in 1916. Today, it is the country's largest private power utility, established as a licensee in Mumbai and with ambitious expansion plans from being essentially Mumbai–centric to a major national player, not only in the fields of Power but also in Energy and Broadband Communication.

Tata Power commissioned India’s first power plant– the hydro–electric station– in Khopoli (72 MW) in 1915, the second hydro station one in Bhivpuri (75 MW) in 1919 and the 3rd one in Bhira (300 MW) in 1922. With these three hydro stations and the 1,350 MW thermal power station in Trombay, Mumbai; a 475 MW power station near Jamshedpur in Jharkhand and an 87 MW thermal power plant in Belgaum, Tata Power is the largest integrated private power company in India and is the most trustworthy power supplier to Mumbai.

The Tata Power Company Limited is India's largest private sector power utility with an installed generation capacity of over 2785 MW. The company has emerged as a pioneer in the Indian power sector, with a track record of performance, customer care and sustained growth. Tata Power has a presence in all the segments of the power sector viz generation (thermal, hydro, solar, wind and liquid fuel), transmission and distribution Recognized as India’s largest private sector power utility, with a reputation for trustworthiness, built up over nearly nine decades, Tata Power surges ahead into yet another year with plans of sustained growth, greater value to consumer and reliable power supply.

Led by a powerful vision, Tata Power pioneered the generation of electricity in India. It has now successfully served the Mumbai consumers for over ninety years and has spread its footprints across the nation. Today, it is the country’s largest private player in the sector. Apart from Mumbai and Delhi, the company has generation capacities in Jojobas, Jharkhand and Karnataka.

Tata Power has an installed power generation capacity of above 2300 Mega Watts, with the Mumbai power business, which has a unique mix of Thermal and Hydro Power, generated at the Thermal Power Station, Trombay, and the Hydro Electric Power Stations at Bhira, Bhivpuri and Khopoli, accounting for 1797 MW. Its diverse generation capability facilitates the company in producing low cost energy, thereby giving its consumers a greater value for money.

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Among its many achievements that Tata Power can proudly boast of are the installation and commissioning of India’s first 500 MW unit (at its Thermal Power Generating Station, Trombay) the 150 MW Pumped Storage Unit at its Hydro Generating Station, Bhira, and environmental control systems like the Flue Gas Desulphurisation plant.Tata Power has a first of its kind joint venture with Power Grid Corporation of India for the 1200 km Tala Transmission Project.

Services offered by the company:

Design & Development– Strategic Electronics Division (SED)– SED (Mumbai) was established in 1967 and is today a leading development organization, having pioneered indigenous design and development of many hi–tech systems for Defence and Industry. The manufacturing facility was established in 1982 and is situated in Bangalore.Direct Marketing – Power Supply to Mumbai Consumers– The Company also supplies power directly to such bulk consumers as Central and Western Railways, Mumbai Port, refineries, textile mills, fertilizer factories, BARC, Municipal Corporation water pumping plants and other major continuous processes industries requiring uninterrupted power supply.Power Projects & Related Services– Tata Power also extends its expertise for:Setting up Independent Power Plants (IPP) Setting up Captive Power Plants (CPP)Power Transmission and Distribution Projects Operation and Maintenance Services (O&M Services)Transmission & Distribution

Transmission Business – Tata Power owns and operates 1200 circuit Kms of high voltage (220 kV and 110 kV) Transmission Network.

Distribution Business – Tata Power has a 935 km HT and LT cable distribution network connecting 17 major receiving stations and over 85 sub–stations in its Mumbai License area.Subsidiary Companies associated with Tata Power:

Af–Taab Investment Co. Ltd. Chemical Terminal Trombay Ltd. Powerlinks Transmission Ltd. Tata Power Trading Co. Ltd. Maithon Power Ltd. NELCO Ltd. Tatanet Services Ltd. Industrial Energy Ltd. Industrial Power Utility Ltd. Industrial Power Infrastructure Ltd. Coastal Gujarat Power Limited

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Veltina Holdings Ltd. Tata Power (Mauritius) Ltd. Tata Power (Cyprus) Ltd. Tata Power International Holdings Ltd. North Delhi Power Ltd. Energy Eastern Pte. Ltd. Trust Energy Resources Pte. Ltd.

Achievements/ recognition:

2013Tata Agrico Best Garden Awards 2013MACCIA Awards 2013Partner Recognition for Illustrious Delivery & Excellence

2012Infrastructure Excellence Awards 2012Powerline Award in the category 'Best Performing Renewable IPP'Certificate of Merit awarded to Transmission Linesolden Peacock Environment Management Award – 2012 Greentech Safety Award 2012 – Silver in the Power Sector categoryInnovative Energy Service Award'The Most Innovative Energy Service Award'

Maithon Power Limited (a Joint–Venture of Tata Power and Damodar Valley Corporation), in continuation with the “Green Maithon, Great Maithon” campaign launched on World Environment Day, has undertaken Green Belt Development on over 400 acres of project area and social forestry in 10 Kms radius. –Sept 2011.

Tata Power, won several accolades at the prestigious CMO Asia Awards 2011 for excellence in Brand and Marketing organized at Singapore.

“Greentech Safety Gold Award 2008” in Thermal Power sector for “Outstanding achievement in Safety Management” awarded to Trombay Thermal Power Station for the 5th consecutive year. – April 2008.

“SurakshaPuraskar” by the National Safety Council of India for Jojobera, in January 2008 for developing and implementing very effective Safety Management Systems and Procedures during the assessment period of three years – 2003–05. – January 2008.

Silver Shield awarded for Bhira and Bhira Pump Storage Scheme (6X25 + 1 X 150 MW), adjudged the second best performing station in the country by the Central Electricity Authority, India. – March 2008.

Awarded the Quality Circles AWARD 2007 at the “National Convention on Quality Circles” under the aegis of Quality Circle Forum of India.

Dahanukar Award by the Indian Association of Occupational Health for HIV/AIDS intervention at the workplace.

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NASSCOM Best IT User Award 2006 in the Energy and Utility sector for providing value added services to consumers through Customer Portal System via Internet website.

Amity HR Excellence Award for the year 2007 for effective people management practices and HR systems.

Tata Power has won the prestigious Dahanukar Award for HIV / AIDS intervention at the work place in 2007.

Association of Business Communicators India Award 2007 – Bronze medal for Social Responsibility Communication.

Tata Power Bhira Hydro Plant has received the ‘Silver Shield’ Award from the Central Electricity Authority Mumbai.

‘Tata Power, Jamshedpur' has been declared as the winner of 'Golden Peacock Environment Management Award' for the year 2006.

Greentech Safety Award 2006 under Platinum Category has been awarded to The Tata Power Co. Ltd., Jojobera, Jamshedpur.

Rajiv Gandhi National Quality Award 2005 for Jojobera. Tata Power is awarded Certificate for Strong Commitment to Excel for the

year 2005 by the jury of CII–EXIM Bank Award for Business Excellence–2005 – 12 November 2005.

Tata Power among the top 13 Best Managed Companies in India by Business Today–AT Kearney.

Tata Power receives CII National Award for ‘Excellence in Energy Management’ (Nov 04, 2004).

The 2nd Wartsila–MantoshSondhi Award 2004 for its outstanding contribution to the Indian Power sector.

Greentech Environment Excellence Platinum Award' in Thermal Power sector for the year 2003–2004 for Jojobera Division.

'Greentech Safety Gold Award' for the Year 2003–2004 for the Trombay power plant.

Tata Power receives the Greentech Gold Award for safety (August 18, 2003).

Tata Power bags BCCI 'good corporate citizen award 2001–2002' (September 21, 2002).

Premier credit rating agencies like CRISIL & ICRA have given Tata Power the Coveted 'AAA ' and 'LAAA' ratings respectively.

Tata Power has won the N M GIDWANI Rolling Trophy consistently from 1991 to 1999, for the maintenance of the Suman Nagar Gardens, a competition conducted by the Friends of Trees.

Safety Awards for Lowest Frequency Rate of Accident and Maximum Accident Free days have been won by Trombay Thermal Power Station in 1992. Bombay Chamber Good Corporate Citizen Award 1994 – 95.

Awards from FCCI, ASSOCHAM and the Department of Science and Technology, Government of India for the achievements in the field of R & D.

Confederation of Indian Industries (CII) award for the development of 500 MW Thermal Power Plant training simulator.

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The Review 200 Plaque ranked Tata Power among the top ten organisations in Asia for overall corporate excellence by the Far Eastern Economic Review in 1995.

The 1995 Power Plant Award presented by Electric Power International for the Trombay Thermal Power Station.

Bronze Award from the American Concrete Institute for the 'Outstanding Structures of the Year' for the 900 feet tall reinforced concrete chimney for the 500 MW power plant at Trombay Thermal Power Station 1988–89.

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BALANCE SHEET FOR FINANCIAL YEARS 2014 AND 2013

Note Particulars March-14 March-13

EQUITY AND LIABILITIES

(1) Shareholders' Funds

2 (a) Share Capital 237.33 237.33

3 (b) Reserves and Surplus11648.74 10,803.46

11,886.0711,040.79

UNSECURED PERPETUAL SECURITIES1,500.00 1,500.00

STATUTORY CONSUMER RESRVIES 613.23 604.23

SPRVICE APPROPRIATION TOWARDS PROJECT COST533.61 533.61

(2) Non-current liabilities

4 (a) Long-term borrowings7,175.998,452.57

5 (b) Deferred tax liabilities (Net) 881.14805.49

6 (c) Other Long-term liabilities86.1099.81

7 (d) Long-term provisions 164.23413.19

8,307.469,771.06

(3) Current liabilities

8 (a) Short-term borrowings 1,579.531,172.15

9(b) Trade payables 1,057.68923.55

6 (c) Other current liabilities4,305.992,027.64

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7 (d) Short-term provisions661.01437.61

7,604.21 4,560.95

TOTAL30,539.03 28,092.86

ASSETS

(4) Non-current assets

(a) Fixed Assets

10 (i) Tangible assets8,532.81 7,744.41

11 (ii) Intangible assets65.8230.11

12(iii) Capital work-in-progress 684.49641.46

9,373.72 8,489.32

14 (b) Non-current investments 12,361.09 10,859.68

15(c) Long-term loans and advances 2,898.79 2,140.56

16(d) Other non-current assets 2,369.49 2,808.17

27,003.54 24,297.73

(5) Current assets

14 (a) Current investments 1.36 256.56

17 (b) Inventories 710.67761.09

18 (c) Trade receivables1,320.101,300.06

19 (d) Cash and Bank Balances67.86413,17

15 (e) Short-term loans and advances 873.08920.90

16 (f) Other current assets 562.42141.35

3,535.49 3,795.13

TOTAL30,539.03 28,092.86

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STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2014

Note Particulars March-14 March-13

(1) Revenue:

20 (a) Revenue from operations 8,645.259,583.64

Less: Excise Duty18.2116.36

Revenue from operations (Net) 8,627.049,567.28

21 (b) Other Income655.76721.67

Total Revenue9,282.8010,288.95

(2) Expenses:

Cost of Power Purchases 793.33 624.26

Less : Cash Discount 3.360.84

789.97 627.39

Cost Of Fuel 3,350.915,244.00

Transmission Charges467.96 233.43

22 Cost of Components consumed 178.99 150.75

23 Employee Benefits Expense 544.95 547.60

24Finance cost 868.21 684.41

Depreciation and Amortisation 587.14 364.10

26 Other Expenses 1,003.51737.49

Total Expenses 7,791.648,585.57

PROFIT BEFORE TAX 1,491.16 1,703.38

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TAX EXPENSE

(8) Tax Expense:

Current Tax Expanses 354.50 337.43

MAT Credit reversed in respect of prior year 105.00 Nil

Excess Provision For Tax Relating to Prior Years (25.65) Nil

Net Current Tax Expenses 433.85 337.43

Deferred Tax 103.23341.26

Net Tax Expenses 537.08678.69

(9) Profit for the year 954.08 1,024.69

33 Earning per Equity Share

(a) Basic (Rs.) 3.50 3.44

(b) Diluted (Rs.) 3.50 3.44

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RATIO ANALYSIS

Ratio Analysis is the method or process by which the relationship of items or group of items in the financial statements are computed, determined and presented.

Ratio analysis is an attempt to derive quantitative measures or guides concerning the financial health and profitability of a business enterprise. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but the group of ratios he would prefer depends on the purpose and the objective of the analysis.

Ratio :Means ratio is one figure expressed in term of another figure. It is a mathematical yardstick that measures the relationship between two figures., which are related to each other and mutually interdependent. Ratio is expressed by dividing one figure by the other related figure. Thus the a ratio is an expression relating one number to another.

An accounting ratio is an expression relating two figures or two accounts or two sets of account heads or groups contained in the financial statements.

OBJECTIVE OF RATIOS

a) Solvency : 1)Long Term 2) Short Term 3) Immediateb) Stabilityc) Profitabilityd) Operational efficiencye) Credit standingf) Structural analysisg) Effective utilization of resourcesh) Leverage or external financing.

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1)Liquidity Ratios :1)Current Ratio :

The Current Ratio is one of the best known measures of financial strength. It is the most common measure of short-term liquidity. It is also referred as the working capital ratio because net working capital is the difference between current assets and current liabilities. Current Assets = Inventories + Sundry Debtors + Cash and Bank Balances + Receivables/ Accruals + Loans and Advances + Disposable Investments Current Liabilities = Creditors for goods and services + Short-term Loans + Bank Overdraft + Cash Credit + outstanding Expenses + Provision for Taxation + Proposed Dividend + Unclaimed Dividend

The main question this ratio addresses is: "Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets?"

A generally acceptable current ratio is 2 to 1.

a) Current Ratio = Total Current Assets Total Current Liabilities

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CALCULATION OF CURRENT RATIO

FOR THE YEAR 2013-14

a) Current Ratio = Total Current Assets Total Current Liabilities


Current Rations = Total Current Assets Total Current Liabilities

= 3795.13 4560.95

` = 0.83

Comments :-The ratio is not somewhere near to standard ratio of 2:1.

The ratio is 0.46 and 0.83 respectively the year 2013-14 and 2013.

current ratio=3535.49 7604.21

= 0.46

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b) Quick Ratios/ Quick Asset Ratio/ Acid test RatioThe Quick Ratio is sometimes called the "acid-test" ratio and is one of

the best measures of liquidity.

Quick Assets

= Current Assets – (Inventories + prepaid expenses)

Current Liabilities

= As mentioned under Current Ratio.

The Quick Ratio is a much more conservative measure of

short-term liquidity than the Current Ratio. It helps answer the

question: "If all sales revenues should disappear, could my business

meet its current obligations with the readily convertible quick funds on

hand?"

Quick ration of 1:1 is considered satisfactory.

b ) Quick Ratio = Total Quick Assets Total Current LiabilitiesFOR THE YEAR 2013-14

a) Quick Ratio = Total Quick Assets Total Current Liabilities

= 2824.827604.21

= 0.371FOR THE YEAR 2012-13

a) Quick Ratio = Total Quick Assets Total Current Liabilities

= 3034.044560.95

= 0.665Comments :-The immediate solvency position as reveled by liquidity ratio is seems to be satisfactory. This proves that company is in a better condition to pay back all its quick liabilities.However the position in 2014 is better than that of 2013.

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b) Absolute Liquidity Ration :

Absolute Liquid Assets = Cash + Bank Balance + Marketable Securities

Current Liabilities = Trade Creditors+ Bills payable+ Banks credit+ Provision for Taxation+ Dividend Payable+ Outstanding Expenses

Rationale:1) The ideal Absolute Liquid ratio is 1:2 or 0.5.2) This ratio indicates most rigorous liquidity test.

c) Absolute Liquidity Ration = cash + Marketable securitiesTotal Current Liabilities


a) Absolute Liquidity Ration = cash + Marketable securities Total Current Liabilities

= 69.227604.21

= 0.009


Absolute Liquidity Ration =Total Current Assets Total Current Liabilities

= 671.734560.95

= 0.147

Comments :

The ideal Absolute Liquid ratio is 1:2 or 0.5 .how ever the Absolute liquidity ration is 0.009 and 0.147 receptively the year 2014 and 13.

There for the in 2013 is better than the year 2014.

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Defensive Interval Ratio :

D) Defensive Interval Ratio = Quick AssetsProjected Daily Cash Requirement


Defensive Interval Ratio = Quick AssetsProjected Daily Cash Requirement

= 2824.8241.095

= 68.728


Defensive Interval Ratio = Quick AssetsProjected Daily Cash Requirement

= 3034.0446.06

= 67.33

Projected Daily Cash Requirement = Cost Of goods sold + Cash Expenses 365


= 7207.88 + 7791.64365

= 41.094


= 7863.9 + 8585.57365

= 45.06Comments :-The Defensive Interval Ratio is 68.72 and 67.33 receptively the year 2014 and 13

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2) Activity Ratios :

a) Inventory Turnover Ratio = Cost of goods soldAverage Inventory


= 7207.88355.335

= 20.284


= 7863.9380.545

= 20.66Comments :-The purpose of this ratio is to measure the operating efficiency of the

company and of inventory management.

Higher the ratio, greater is the efficiency.

The stock turnover is almost same in the year 2014 and 13.

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Debtors Turnover

Debtors Turnover = Credit SalesAverage Debtors


= 8627.04660.05

= 13.070


= 9567.28650.03

= 14.71Comments :-The Debtors Turnover was 13.70 and 14.71receptively the year 2014 and 13

Working Capital Turnover :

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a) Working Capital Turnover = Net SalesAverage Working Capital


= 8627.04(2034.06)

= - 4.240


= 9567.28(382.91)

= - 24.98

Comments :-The purpose of this ratio is to measure the operating efficiency of the

company and of inventory management.Higher the ratio, greater is the

efficiency.

Fixed Assets Turnover :It measures the efficiency with which the firm uses its fixed

assets.

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A high fixed assets turnover ratio indicates efficient utilisation of fixed

assets in generating sales.

A firm whose plant and machinery are old may show a higher fixed

assets turnover ratio than the firm which has purchased them recently.

a) Fixed Assets Turnover = SalesFixed Assets


= 8627.049373.72

= 0.920


= 9567.288489.32

= 1.126

Comments :-The ratio of fixed turnover has declined in the year 2014 from 1.126 in the year 2013 to 0.126 in the year 2014.This is due to decrease in fixed assets due to new machinery purchase

Total Assets Turnover :

This ratio measures the efficiency with which the firm uses

its total assets.

This ratio is computed as: __Sales_

Total Assets

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b) Total Assets Turnover = SalesTotal Assets


= 8627.0430539.03

= 0.2824


= 9567.2828092.86

= 0.34

Comments :-There is decrease in the total asset ratio in the year 2014, the reason

is purchase of new assets.

Capital Employed Turnover :It is a relationship between sales and capital employed

This ratio indicates the firm’s ability of generating sales per rupee of

long term investment.

The higher the ratio, the more efficient is the utilization of owner’s and

long-term creditors’ funds.

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c) Capital Employed Turnover = SalesAverage Capital Employed


= 8627.042652.5

= 3.252


= 9567.284053.20

= 2.36

Comments :-

There is a increase in the capital employed ratio from the year 2013 to 2014 from 2.36 to 3.25. The sales have increased but capital employed has increased more than increase in sales

3) Leverage Ratios :

1) Debt Equity Ratio

This ratio indicates the proportion of debt fund in relation to

equity. This ratio is very often referred in capital structure decision as

well as in the legislation dealing with the capital structure decisions

(i.e. issue of shares and debentures). Lenders are also very keen to

know this ratio since it shows relative weights of debt and equity.

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Debt equity ratio is the indicator of firm’s financial leverage.

According to the traditional school, cost of capital firstly decreases due

to the higher dose of leverage, reaches minimum and thereafter

increases, so infinite increase in leverage (i.e. debt-equity ratio) is not

possible.

a) Debt Equity Ratios = Long Term DebtsShareholder’s Funds


= 7175.9911886.07

= 0.603


= 8452.5711040.79

= 0.76Comments :-A high ratio here means less protection for creditors. A low ratio, on the

other hand, indicates a wider safety cushion. Here large sum is contributed

by shareholders so debt is minimal. Still a decline in debt equity can be

observed due to increase in shareholders funds

b) Total Debt Ratio = Total DebtTotal Assets


= 8755.5230539.09

= 0.286

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= 9630.7228092.86

= 0.34

Comments :-As there is an increase in the assets of the company due to purchase of fixed

assets, the total debt equity ratio is showing the decline from 0.34 in the year

2013 to 0.28 in the year 2014

c) Interest Coverage Ratios = EBITInterest


= 2823.63795.39

= 3.54


= 3048.33 666.26

= 4.57

Comments :-The company has negligible interest burden. The interest coverage ratios are

totally in favourable condition.

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d) Financial Leverage Ratio = EBITEBT


= 2823.631491.16

= 1.89


= 3048.331703.38

= 1.78

Comments :-The Financial Leverage Ratio in the 2013 was 1.78 and in the year 2014 was 1.89.so the financial leverage ratio is same.

4) Profitability Ratios :

Gross Profit Ratio:It brings out relationship between Gross Profit and Net Sales. It

is also known as

‘Turnover Ratio.’ It is expressed as a percentage of net sales.

Gross profit= Net sales - Cost of goods sold

Net sales = Gross Profit sales - returns

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This ratio is important in the analysis of the profitability of a business

concern.

a) Gross Profit Ratios = Gross Profit * 100 Net Sales


= 1491.16*1008627.04

= 17.28


= 1703.38*100 9567.28

= 17.80

Comments :The rate of gross profit is 17.28 % in 2014 and 17.80 % in 2013.

This shows that there is a reduction in the gross profit ratio.

The reason for reduction in gross profit ratio is increase in cost of

goods sold without corresponding increase in sales.

But the on the whole the rate near to 65 % is satisfactory

Operating Profit Ratio:-Operating ratio is the relationship between cost of activities and

net sales. This ratio brings out the relationship between total cost of

goods sold and net sales

The operating ratio shows at what percentage the operating expenses

are comprised in net sales. It is expressed as a percentage

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Operating cost = cogs + operating expenses

b) Operating Profit Ratios = EBIT * 100 Net Sales


= 2823.63*1008627.04

= 32.729


= 3048.33*100 9567.28

= 31.86

Comments :-There is aincrease in the operating profit ratio.

The operating cost has increased may be due to inflation but

considerable the net sales have not increased.

Net Profit Ratio: Net profit ratio indicates the relationship between net profit and

net sales. Net profit can be either operating net profit or net profit after

tax or net profit before tax. This ratio is also known as ‘Margin on

Sales Ratio’

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This ration in important as it is measure of over-all profitability and is

very useful to the proprietors and investors in judging the prospects of

return on their investments.

Net Profit Ratios = Profit After Tax * 100Net Sales


= 954.08*1008627.04

= 11.059


= 1024.69*100 9567.28

= 10.71

Comments :-The net profit is 11.05% and 10.71 % for 2014 and 2013

respectivelyincrease .The net profit ratio is satisfactory for both the

years.

c) Cost of Goods Sold Ratio = Cost of Goods Sold * 100Net Sales


= 835.4*1008627.04

= 9.68

36


= 981.719567.28

= 10.26

Comments :-There is a fall in the cost of goods sold ratio due to in increment in the

cost maybe due to inflation. And the net sales did not increase in

correspondence to increase in cost

d) Administrative Exp. Ratio = Administrative Exp * 100Net Sales


= 129.16*100 8627.04

= 1.49


= 135.38*100 9567.28

= 1.41

Comments There a fall in the admin expenses ratio in the year 2014.

e) Selling Expenses Ratio = Selling Exp *100Net Sales


= 6.68*1008627.04

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= 0.07FOR THE YEAR 2012-13

= 7.74*100 9567.28

= 0.081

Comments :-There is a fall in the Selling Expenses Ratio in the 2014. Which proves

improvement in the efficiency of the firm

a) Operating Expenses Ratio = Adm.Exp + Selling Exp+ Dep recition*100

Net SalesFOR THE YEAR 2013-14

= 724.85*1008627.04

= 8.40FOR THE YEAR 2012-13

= 634.81*1009567.28

= 6.63

Comments :-The Operating Expenses Ratio is in the year 2013 was

6.30 and in the year 2014 was 8.40.

38

b) Financing Expenses Ratio = Financing Expenses * 100Net Sales


= 868.21*1008627.04

= 10.06


= 684.41*1009567.28

= 7.15

Comments :-The Financing Expenses Ratio was in the year 2014 was

increase from 7.15 to 10.06.

c) Operating Ratio = COGS + AD. Ex. + Selling Ex.+ Deprecation*100 Net sales


= -258.73*1008627.04

= - 2.99


= 3034.044560.95

= 0.665

39

Comments :-There is improvement in efficiency in the year 2014 as compared to

2013.There is decline in various expenses, leading to better

profitability of the company.

Profit before Tax :

A high NP Margin would ensure adequate return to the owners as well as enable the Company to withstand adverse economic conditions when selling prices are declining, demand for the product is falling and cost of production is increasing

d) Profit Before Tax Ratio = Profit Before Tax * 100Net Sales


= 1419.16*1008627.04

= 17.28


= 1703.38*1009567.28

= 17.80

Comments :-A high NP Margin would ensure adequate return to the

owners as well as enable the Company to withstand adverse

economic conditions when selling prices are declining, demand for the

product is falling and cost of production is increasing.

Decline in Net Profit implies increase in operating Expenses

Net Profit Margin indicates Managementʹs ability to operate the

business with sufficient success not only to cover the costs but also to

40

leave a margin of reasonable compensation to the Owners for

providing their capital at a risk.

Return On Assets Ratio:

The profitability of the firm is measured by establishing

relation of net profit with the total assets. The ratio indicates

the efficiency of utilization ofassets in generating revenue

e) Return on Assets Ratios = Profit After Tax * 100 Total Assets


= 954.08*10030539.03

= 3.124


= 1024.69*10028092.86

= 3.64

Comments :The Return on Assets Ratios was 3.12 and 3.64 was respectively in the year 2014 and 2013.the ratios was almost same.

Return on Proprietors Fund :

Alternatively known as “Return on Proprietors equity” or “Return on

ShareHolders Investments” or “Investors Ratio” these ratio indicates

the relation between profit earned ant total proprietors funds

41

This ratio is of practical importance to prospective investors and

share-holders. If the ratio is higher, they feel confident and

encouraged to invest in the company.

f) Return on Shareholder’s Funds = Profit After Tax * 100Shareholder’s Funds


= 954.0811886.07

= 8.026


= 1024.69*10011040.79

= 9.28

Comments :-There is decreases in the Return on asset ratio in the year 2014 as

compared to 2013.

This means for each rupee of asset the company is earning more of

profit

Earning per Share :

Earning per share is calculated to find out over-all profitability of the

organisation. Earning per share represents earnings of the company

whether or not dividends are declared. If there is only one case of

shares, the earning per share are determined by dividing net profit by

42

the number of shares. If there are both equity and preference shares

then the net profit should be reduced by the amount paid to the

preference share holders.

This ratio is used by the investors for evaluating the investment

opportunities.

g) Earnings Per Share = PAT – Pref. DividendNumber of Equity Shares


= 954.08-022900000

= 4.16


= 1024.69-022900000

= 4.47

Comments :-TheEarnings Per Share ratios in the year 2014 and in the year 2013 was receptively 4.17 and 4.37.

Conclusion

STANDALONE

ON a standalone basis the operating revenue was lower at

Rs.8,627.04crore, as against 9,567.28 crore in FY 13, decreased of

43

10 % however your company earned a higher operating profit

compared to previous years but owing to forex losses and reversal

of mat credit accrued in earlier years, your company reported a

profit after tax (PAT) of Rs.954.08 crore as against Rs.1,024.69

crore for the previous year. Last year pat was higher due to

onetime adjustment owing to change in depreciation rate.

Power Business

Operating revenue for power business was Rs. 8,167.70 crore in

FY 14 as against Rs. 9,157.96 crore in Fy 13 lower fuel cost builit

in the revenue recovery resulted in lower operating revenue on

standalone basis part ly offset by higher transmission charges paid

in the Mumbai regulated business based on the intra state

trqansmission order. However operating profit was higher due to

favourable appellate tribunal order Mumbai license area.

All the ratios compeer the each other I say the tata power ltd was

profitably is the year 2012-14 was in the year 2012-13 more

profitability for the year 2012-13.

The company was more profitability compeer the year 2013 and

the year was 2014 was more than higher profit in the year 2012-

13.

Bibliography

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T.Y.B.COM book of University of Mumbai-Managements accounting

Books of T.Y.B.COMof Financial Accounting –Dr.VarshaAinapur

M.com Part II books Advanced Financial AccountingIII

Webligraphy

http//: www.tatapoer.com

http//:www.tatapoweltd.com

http//:www.tatapowerndtv.com

http://www.tatapoer.com/

project “ratio analysis of tata power company limited”

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