steel authority of india limited term paper

8/7/2019 Steel Authority of India Limited Term Paper

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ACCOUNTING FOR

MANAGERS

Term paper

Based on financial statement

analysis and interpretation.

Submitted to:- Submitted by:-

Mrs.Manu kalia Subodh kumar singh

Regd.no- 11008039

Roll.no-A19

M.B.A- S1003



Steel Authority of India Limited (SAIL) is the leading steel-making company in

India. It is a fully integrated iron and steel maker, producing both basic and special

steels for domestic construction, engineering, power, railway, automotive and

defense industries and for sale in export markets.

Ranked amongst the top ten public sector companies in India in terms of turnover,

SAIL manufactures and sells a broad range of steel products, including hot and cold

rolled sheets and coils, galvanized sheets, electrical sheets, structural’s, railway

products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces

iron and steel at five integrated plants and three special steel plants, located

principally in the eastern and central regions of India and situated close to domesticsources of raw materials, including the Company's iron ore, limestone and dolomite

mines. The company has the distinction of being India’s second largest producer of

iron ore and of having the country’s second largest mines network. This gives SAIL

a competitive edge in terms of captive availability of iron ore, limestone, and

dolomite which are inputs for steel making.

SAIL's wide range of long and flat steel products is much in demand in the

domestic as well as the international market. This vital responsibility is carried out

by SAIL's own Central Marketing Organization (CMO) that transacts business

through its network of 37 Branch Sales Offices spread across the four regions, 25Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact

Offices. CMO’s domestic marketing effort is supplemented by its ever widening

network of rural dealers who meet the demands of the smallest customers in the

remotest corners of the country. With the total number of dealers over 2000 ,

SAIL's wide marketing spread ensures availability of quality steel in virtually all

the districts of the country.

http://www.sail.co.in/aboutus.php?tag=company-aboutus






SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000

accredited unit of CMO, undertakes exports of Mild Steel products and Pig Iron

from SAIL’s five integrated steel plants.

With technical and managerial expertise and know-how in steel making gained

over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offersservices and consultancy to clients world-wide.

SAIL has a well-equipped Research and Development Centre for Iron and Steel

(RDCIS) at Ranchi which helps to produce quality steel and develop new

technologies for the steel industry. Besides, SAIL has its own in-house Centre for

Engineering and Technology (CET).

Major Units

Integrated Steel Plants

• Bhilai Steel Plant (BSP) in Chhattisgarh

• Durgapur Steel Plant (DSP) in West Bengal

• Rourkela Steel Plant (RSP) in Orissa

• Bokaro Steel Plant (BSL) in Jharkhand

• IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants

• Alloy Steels Plants (ASP) in West Bengal

• Salem Steel Plant (SSP) in Tamil Nadu

• Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

Subsidiary

• Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

VISIon

http://sail.co.in/pnu.php?tag=bhilai

http://sail.co.in/pnu.php?tag=durgapur


http://sail.co.in/pnu.php?tag=rourkela

http://sail.co.in/pnu.php?tag=bokaro

http://sail.co.in/pnu.php?tag=iisco


http://www.sail.co.in/pnu.php?tag=special


http://www.sail.co.in/pnu.php?tag=special_salem

http://www.sail.co.in/pnu.php?tag=special_visvesvaraya

http://sail.co.in/pnu.php?tag=bhilai


http://sail.co.in/pnu.php?tag=rourkela

http://sail.co.in/pnu.php?tag=bokaro



http://www.sail.co.in/pnu.php?tag=special_salem

http://www.sail.co.in/pnu.php?tag=special_visvesvaraya



• To be a respected world class corporation and the leader in

Indian steel business in quality, productivity, profitability and

customer satisfaction

Mission

To be a respected world class corporation and the leader in Indian

steel business in quality, productivity, profitability and customer

satisfaction.

CREDO

• We build lasting relationships with customers based on trust

and mutual benefits.

• We uphold highest ethical standards in conduct of ourbusiness.

• We create and nurture a culture that supports flexibility,

learning and is proactive to change.

• We chart a challenging career for employees with opportunities

for advancement and rewards.

• We value the opportunity and responsibility to make ameaningful difference in people's lives.



Company profile :

Type State-owned enterprise

Public (BSE: 500113)

Industry Steel

Founded 1954

Headquarter

s

Ispat Bhawan, New Delhi, India[1]

Key people C.S Verma (Chairman)

Revenue ▲ 41,356.50 crore (US$9.31 billion)[2]

Net income ▲ 6,791.09 crore (US$1.53 billion)[2]

Total assets ▲ US$10.54 billion (2008)

Employees 131,910 (2006)

Website www.sail.co.in

http://en.wikipedia.org/wiki/Types_of_business_entity

http://en.wikipedia.org/wiki/Government-owned_corporation

http://en.wikipedia.org/wiki/Public_company

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

http://www.bseindia.com/stockreach/stockreach.htm?scripcd=500113%E2%80%8E

http://en.wikipedia.org/wiki/Industry

http://en.wikipedia.org/wiki/Steel

http://en.wikipedia.org/wiki/New_Delhi

http://en.wikipedia.org/wiki/India



http://en.wikipedia.org/w/index.php?title=C.S_Verma&action=edit&redlink=1

http://en.wikipedia.org/wiki/Chairman

http://en.wikipedia.org/wiki/Revenue

http://en.wikipedia.org/wiki/United_States_dollar

http://en.wikipedia.org/wiki/Steel_Authority_of_India_Limited

http://en.wikipedia.org/wiki/Net_income



http://en.wikipedia.org/wiki/Asset


http://en.wikipedia.org/wiki/Website

http://www.sail.co.in/

http://en.wikipedia.org/wiki/Types_of_business_entity

http://en.wikipedia.org/wiki/Government-owned_corporation

http://en.wikipedia.org/wiki/Public_company

http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

http://www.bseindia.com/stockreach/stockreach.htm?scripcd=500113%E2%80%8E

http://en.wikipedia.org/wiki/Industry

http://en.wikipedia.org/wiki/Steel

http://en.wikipedia.org/wiki/New_Delhi


http://en.wikipedia.org/w/index.php?title=C.S_Verma&action=edit&redlink=1

http://en.wikipedia.org/wiki/Chairman

http://en.wikipedia.org/wiki/Revenue



http://en.wikipedia.org/wiki/Net_income



http://en.wikipedia.org/wiki/Asset


http://en.wikipedia.org/wiki/Website

http://www.sail.co.in/



FINANCIAL STATEMENTS

Financial statement generally shows the picture of the company in financial terms.

Each financial statement relate to a specific data or a course of a particular period

of time.

It will help the business owners and other interested parties to analyze the data in

financial statements to provide them with better information about such key factors

for decision making and ultimate business survival.

TOOLS OF FINANCIAL STATEMENTS ANALYSIS

• Comparative Statement

• Common Size Analysis

• Trend Analysis

• Ratio Analysis• Cash Flow Statement

• Fund Flow statement

Comparative Analysis :-

It is a horizontal technique in which financial data of two or more periods are presented in comparative forms. Such data depict absolute data of two or more

years , increase or decrease in terms of percentage .

Common Size Analysis :-



It facilitates both type of analysis , i.e, horizontal as well as vertical. This statement

indicate the relationship of various items in terms of with some common or basic

items . In Income statement the common item ids Net Sales and in Position

statement the common item is total of assets and liabilities.

Individual items / net sales * 100

Trend analysis :-

This analysis is an important tool of horizontal financial analysis . Under this

method trend ratio are calculated from selected items of financial year taking the

figure of the base year as 100 .

Trend Ratio = Current Year Amount / Base Year Amount *100

Ratio Analysis :

It is Used to establish meaning full mathematical relationship between two items

or two group of items shown in financial statement. This relationship is simply

Expressed in ratio like 1:1or percentage or in times.

Cash Flow statement :-

This technique is very useful in the management of cash and analysis of short term

liquidity . Under this method a statement is prepared to show the inflow or outflow

of cash related to various activities in the concern during a specific period. There is

a perfect format that was followed to make this analysis

Fund Flow Statement ;-

It is prepared to reveals the sources from which funds are obtained and the uses to

which they are being put. Here the term “funds” stand for “working capital” . It

always accompanied by schedule of working capital changes.. There is a perfect

format that was followed to make this analysis



Objective:

• To analyze the financial position of SAIL.

• To attain the liquidity and the solvency position of thecompany in respect to the past two years.

• To compare the performance of sail in the past two years.

• To identify the financial weaknesses of the firm and to

suggest remedial measures

• To determine the long term as well as short term solvency,

which decide the credit worthiness of the firm also.

• To determine and examine the earning capacity of the firm

and to estimates the future prospects.

• It helps in identifying the financial strength and weakness of

the firm by properly establish the relation between the items

of balance sheet and profit & loss account.

IMPORTANCE OF FINANCIAL STATEMENT ANALYSIS

Financial Statement contains a bundle of useful and valuable

information which is not used by only owners but by various

parties have interest in the business concern. The main users

of financial statements are as ;-

• Investors

• Lenders

• Trade creditors



• Employees

• Government and its agencies

• Management

• Stock Exchange

Methodology:

• We had collected all the relevant information from the

secondary source i.e. from the annual report of the

company. . The income statement, Position statement,

fund flow statement and cash flow statement ,these all

are extracted from the annual report of sail.

Balance Sheet :

Steel Authority of India

Balance Sheet

Mar '09 Mar '10

12 mths 12 mths

Sources Of Funds



Total Share Capital 4,130.40 4,130.40

Equity Share Capital 4,130.40 4,130.40

Share Application Money 0 0

Preference Share Capital 0 0

Reserves 23,853.70 29,186.30

Revaluation Reserves 0 0

Networth 27,984.1

0

33,316.7

0

Secured Loans 1,473.60 7,755.90

Unsecured Loans 6,065.19 8,755.35

Total Debt 7,538.79 16,511.2

5

Total Liabilities 35,522.8

9

49,827.9

5

Mar '09 Mar '10

12 mths 12 mths

Application Of Funds

Gross Block 32,728.69 35,396.19

Less: Accum. Depreciation 20,459.86 21,780.91

Net Block 12,268.8

3

13,615.2

8

Capital Work in Progress 6,544.24 15,026.13Investments 652.7 668.83

Inventories 10,121.45 9,027.46

Sundry Debtors 3,024.36 3,493.90

Cash and Bank Balance 347.94 22,436.37

Total Current Assets 13,493.75 34,957.73

Loans and Advances 4,292.50 4,123.43

Fixed Deposits 17,880.59 0

Total CA, Loans & Advances 35,666.84 39,081.16

Deffered Credit 0 0

Current Liabilities 10,201.51 12,351.78

Provisions 9,408.21 6,211.67

Total CL & Provisions 19,609.72 18,563.45

Net Current Assets 16,057.1

2

20,517.7

1



Miscellaneous Expenses 0 0

Total Assets 35,522.8

9

49,827.9

5

Contingent Liabilities 32,193.13 28,382.46

Book Value (Rs) 67.75 80.66

Profit and loss :

Profit & Loss account of SteelAuthority of IndiaIn rs crore

Particulars

Mar '09 Mar '10

12 mths 12 mths

Income Sales Turnover 49,331.47 43,934.70

Excise Duty 5,532.89 3,386.88

Net Sales 43,798.58 40,547.82

Other Income 2,002.77 2,768.23

Stock Adjustments 1,872.87 -1,157.45

Total Income 47,674.22 42,158.60

Expenditure

Raw Materials 23,915.45 20,506.40

Power & Fuel Cost 3,119.42 3,369.35

Employee Cost 8,401.73 5,416.81

Other Manufacturing

Expenses

643.35 287.66



Selling and Admin

Expenses

1,587.61 0

Miscellaneous Expenses 992.85 719.99

Preoperative Exp

Capitalised

-1,930.40 0

Total Expenses 36,730.01 30,300.21

Mar '09 Mar '10

12 mths 12 mths

Operating Profit 8,941.44 9,090.16

PBDIT 10,944.21 11,858.39Interest 253.24 402.01

PBDT 10,690.97 11,456.38

Depreciation 1,285.12 1,337.24

Other Written Off 128.02 10.33

Profit Before Tax 9,277.83 10,108.81

Extra-ordinary items 181.26 98.45

PBT (Post Extra-ord Items) 9,459.09 10,207.26

Tax 3,284.28 3,452.89

Reported Net Profit 6,174.81 6,754.37

Total Value Addition 12,814.56 9,793.81

Preference Dividend 0 0

Equity Dividend 1,073.90 1,363.03

Corporate Dividend Tax 181.26 227.52

Per share data (annualised)

Shares in issue (lakhs) 41,304.01 41,304.01Earning Per Share (Rs) 14.95 16.35

Equity Dividend (%) 26 33



Cash Flow Statement

Steel Authority of India

Cash Flow statement

Particulars

Mar '08 Mar '09

12 mths 12 mths

Net Profit Before

Tax

11468.73 9403.45

Net Cash From

Operating

Activities

8378.18 6124.26

Net Cash (used

in)/from

-1139.89 -4406.47

Investing Activities

Net Cash (used

in)/from FinancingActivities

-3088.68 2751.3

Net

(decrease)/incre

ase In Cash and

Cash Equivalents

4149.61 4469.09



Opening Cash &

Cash Equivalents

9609.83 13759.44

Closing Cash &

Cash Equivalents

13759.44 18228.53

INTERPRETATION:-

1. Net cash inflow from operating activities has decreased from

8378.18Cr. to 6124.26Cr. due to decrease of current assets,

reserves and increase in current liabilities.

2. Net cash inflow from investing activities have been on the negative ,inboth the year which indicates that sail has been purchasing large amount

of fixed and other asset.

3. Net cash inflow from financing activities has been on the negative, in the

year 2008 which means this year, sail has been investing in other

activities. And in the next year it is around 2751.3 cr which means,sail has

issued their shares and other bonds.

Fund Flow Statement

Particulars 2009 2010

WorkingCapital

Increase

Decrease

Current assets

Inventories 266.15 331.8 65.65

Sundry Debtors 1383.4 1742.42 359.02

Cash and Bank Balance1182.41 1380.21 197.8



Loans and Advances2012.31 867.29

1145.01

Total (A)

4844.27 4321.72

Current Liabilities

Current Liabilities1715.91 1632.47

(B)

1715.

91 1632.47 83.44

Working Capital (A-B)3128.

36 2689.25439.11

Net decrease in Workingcapital Changes 439.11

1369.2

8

STATEMENT OF SOURCES AND APPLICATION OF FUNDS

FOR THE YEAR 2010

SOURCES Rs. APPLICATION Rs.

Funds from operations 579.56purchase of fixedassets

5697.61



Provisions 281.82Capital work inprogress

Raising of secured loans 336.42 Investment 225.31

share capital 5333.3Loans andAdvances 169.07

Net workingcapital 439.11

6531.1 6531.1

Interpretation

1.Fund flow statement shows how the profits of the company have been used.

It reveals the facts and reasons about the changes in currents assets with

current liabilities between two consecutive years.

2.Here, sources of funds are Retained earnings, provisions, raising of secured

loan. And these funds have been utilized for purchase of fixed assets,

investment etc.

3.This statement reveals that the financial position of the company is

satisfactory.

Cost sheet:

COST SHEET OF SAIL India LTD for 2009 and 2010



Particulars 2010 2009

Raw Materials 20,506.40 23,915.45

PRIME COST 20,506.40 23,915.45

Add:- FactoryOverheads

Power & Fuel Cost 3,369.35 3,119.42

other ManufacturingExpenses

287.66 643.35

Depreciation 0 0

FACTORY COST 24,163.41 27,678.22

Add:-Office and Adm.Overheads

Employee Cost 5,416.81 8,401.73

MiscellaneousExpenses

719.99 992.85

Other ManufacturingExpenses

287.66 643.35

COST OF

PRODUCTION

30,587.87 37,716.15

Selling and AdmnsExpenses

0 1,587.61

COST OF GOODSSOLD

30,587.87 39,303.76

operating profit 9,959.95 4,494.82

SALES 40,547.82 43,798.58

Interpretation :

ANALYSIS:-



1. The Prime cost of the concern has decreased as compared

to previous year. It is due to decrease in the consumption of

the raw material in 2010.

2. Cost of goods sold decreases from 39303.76 to 30587.87. in2010.

3. Operating Profit has increases from 4494.82 cr to 9959.95

Cr.

INTERPRETATION:-

1. The Cost of goods sold has deceased because of decrease in

both of the variable as well as fixed assets, which adds to

the cost of the goods.

2. Despite of decrease in the COGS, operating profit has

increased, which shows the performance of sail is relevantly

good.

ANALYSIS OF STATEMENTS

RATIO ANALYSIS



It is the important tool of Financial Statement Analysis. Itis a process through which various ratios are calculated

and on that basis conclusions are drawn which becomethe base of managerial decision.

Objective Of Ratio Analysis

Ratio Analysis is an important technique of financialanalysis. It also provide useful indications related to

financial health and operational efficiency of the concern.

The following are the objective or advantages of ratio

analysis:-

1. It is useful in Financial Position Analysis

2. It is helpful in Financial Forecasting and Planning.

3. It is useful in assessing the Operational efficiency.

4. It help in Comparative study

5. It is Useful in Control

6. It help in locating the weak spots of the Business

FOR 2009:-



LIQUIDITY RATIO

1. Current ratio (rupees in crores)

Current assets = 13493.75

Current liability= 10201.51

Current ratio = current assets/current liability

= 13493.75/10201.51

= 1.32

Interpretation

As a rule of thumb a ratio of2:1 is considered sound enough however it is not

universally applicable. In SAIL. The current ratio is very high .it is 1.45 which

indicates that the enterprise has not enough finance to meet their current obligation.

2 .Acid test ratio/Quick ratio



Quick ratio =current assets – (investment +prepaid

expense)/current liability

=13943.75-1021.45/10201.51

= 0.33

INTERPRETATION

Current ratio and test ratio indicate the ability of the enterprise to

meet its current liability however the acid test ratio is better

indicator of liquidity. Acid test ratio of sail India limited is 0.33.the

acid test ratio of company is not too much .it means company has



not too much financial resources .so Company cannot easily meet

their current liability.

3. Absolute liquid ratio

Absolute liquid assets =cash in hand + cash in bank +marketable

securities

Cash and bank =347.94

Marketable securities =652.7

Current liability=10201.51

Absolute liquid ratio =absolute liquid assets/current liability

=347.94+652.7/10201.51

=0.09

INTERPRETATION

Absolute liquidity is represented by cash and near cash item .the

absolute liquid ratio are cash, bank and marketable securities .Astandard of 0.5:1 absolute liquidity is considered. The ratio of

absolute liquid ratio is 0.09, which show that company has good

amount of liquidity assets which is good for the company .it show

a good financial position in the market.

*profitability ratio

1. Gross profit ratio

Gross profit =8941.44



Net sales = 43798.58

Gross profit ratio =gross profit/net sales*100

=8914.44/43798.58*100

=20.41%

INTERPRETATION

Gross profit ratio indicates what extent the selling price of

goods per unit may be reduced without incurring losses onoperation. It reflects the efficiency with which a firm

produced its product. The ratio of company is 20.41% which

show that company production is real good according to

their ratio.

2. Net profit ratio

Net profit= 6174.81


Net profit ratio=net profit/net sales*100

=6174.81/43798.58*100

=14%

INTERPRETATION



Actually the business totally depends on the profit of the

company. Business is only run success if it earns profit. So

net profit ratio of this company is 14% which show thatcompany is not earns a huge net profit.

3. Operating ratio

Operating cost =COGS + operating expenses

=8941.44+643.35+1587.61


Operating ratio=operating cost /net sales*100

=11172.4/4378.58*100

=255.16%

INTERPRETATION

Operating ratio indicate the relationship between operating

expenses and sales. The ratio indicates operating efficiency

of the organisation and it is important to the management to

evaluating its own efficiency.

The ratio of reliance power is 255.16% which indicate the

efficiency of the organization is good but not bettermanagement should take more steps towards their utilization

of their resources.



4. Return on investment

Net profit =6174.81

Shareholder fund=27984.10

Return on investment=net profit/shareholder fund*100

=6174.81/27984.10*100

=22.06%

INTERPRETATION

Through this ratio company can measure the percentage

return to the company on the fund .it is also a good

indication of the profitability of the organization.

The company has ratio of RETURN OF INVESTMENT is 22.06%

this percentage sufficient for the company because profit is a

function of accounting and operating policies of an

enterprise.

5. Return on equity

Net profit=6174.81

Preference share dividend=0

Share holder fund=27984.10

Return on equity =Net profit-Preference

dividend/Shareholder fund*100

=6174.81-0/27984.10



=22.06

INTERPRETATION

Return on equity measure a corporation ,s profitability by

revealing how much profit a company generate with the money

shareholder have invested. The ratio of ROE is 22.06% indicating

good performance in generating profit from that amount which is

invested by the shareholder.

6. Earnings per share =Net profit-preference

dividend/No. Of equity share

outstanding

*Activity /turnover ratio

1. Inventory turnover ratio

COGS=net sales-gross profit

=43798.58-8914.44

=34884.14

Average stock= 10121.45

Inventory turnover ratio=COGS/average stock

= 34884.14/10121.41=3.47

INTERPRETATION

Inventory turnover ratio indicate that how many times a company,

s inventory is sold and replaced over a period. A high ratio implies

either strong sales or effective buying. But company ITR is 3



which show that company has considerable turnover implies

good sales.

2. Debtor’s turnover ratio=net credit annual

sales/average debtors

Net credit sales= 43798.58

Average debtor= 10121.45

Debtor turnover ratio=43798.58/10121.45

=4.32

.

*solvency ratio

1. Debt to equity ratio

Debt=7538.79

Equity= 27984.10

Debt to equity ratio= total debt/equity

7538.79/27984.10

=0.26

INTERPRETATION



Through this ratio company find out financial power of

the company. A high debt to equity ratio generally means that a

company has been aggressive in financial its growth with debt. If

company debt may increase more than it may lead to bankruptcy.

Company debt to equity ratio is not much which indicates

that company took debt according to their need.

*coverage ratio

1. Interest coverage ratio

EBIT=10944.21

Interest charges= 253.24

Interest coverage ratio=earnings before interesttax/interest charges

=10944.21/253.24

=43.2

INTERPRETATION

Interest coverage ratio determines that how easily a company can

pay interest on outstanding debt. The lower the ratio, thecompany is burden by debt expense. But the Havells India limited

has interest coverage ratio is 43.2. Which show that company has

large debt and it has to pay large debt.

CALCULATION FOR 2010



*LIQUIDITY RATIO1. Current ratio (rupees in crores)



Current ratio = current assets/current liability

= 34957.73/12351.78= 2.83

Interpretation

Generally as a rule of thumb a ratio of2:1 is considered

sound enough however it is not universally applicable. In

Havells India limited. The current ratio is very good as it is

2.83 which indicates that the enterprise has good amount

of finance that it needs.the ratio show that company hasgood finance.

Thus, a high current ratio means the enterprise has more

finance so they can use efficiently.

2 .Acid test ratio/Quick ratio


Current liability = 12351.78

Quick ratio =current assets – (investment +prepaid

expense)/current liability



= 34957.73-9027.46/12351.78

=2.09

INTERPRETATION

Current ratio and test ratio indicate the ability of the enterprise to

meet its current liability however the acid test ratio is better

indicator of liquidity. Acid test ratio of sail India limited is2.09.the

acid test ratio of company is good. It means company has too

much finance available.

2. Absolute liquid ratio

Cash and bank = 668.83


Absolute liquid assets =cash in hand + cash in bank +marketable

securities

=668.83+22436.37

Absolute liquid ratio =absolute liquid assets/current liability

= 1.87

INTERPRETATION

Absolute liquidity is presented by cash and near cash item .the

absolute liquid ratio are cash, bank and marketable securities .A

standard of 0.5:1 absolute liquidity is considered. The ratio of

absolute liquid ratio is 1.87Which show that company has good

liquid assets.



*profitability ratio

3. Gross profit ratio

Gross profit = 9090.16


Gross profit ratio =gross profit/net sales*100

= 22.4%

INTERPRETATION

Gross profit ratio indicate what extent the selling price of

goods per unit may be reduced without incurring losses on

operation .it reflect the efficiency with which a firm produced

its product. The ratio of company is 22.4%. Which show that

company production is good according to their ratio.

4. Net profit ratio

Net profit= 6754.37

Net sales =40547.84

Net profit ratio=net profit/net sales*100

= 1.66

INTERPRETATION



Actually the business totally depend on the profit of the

company .Business is only run success if it earn profit. So net

profit ratio of this company is 1.66% which show that company

earn a low net profit .it is good for the company.

3. Operating ratio

Operating cost =COGS+ operating expenses

=40547.82+8941.54+643.35+1587.4

= 51720.11


Operating ratio=operating cost /net sales*100

= 127.55

INTERPRETATION

Operating ratio indicate the relationship between operating

expenses and sales. The ratios indicate operating efficiency

of the organisation and it is important to the management toevaluating its own efficiency.

The ratio of havells India limited is 127.55%

which indicate the efficiency of the organisation is good but

not better management should take more steps towards

their utilisation of their resources.

4. Return on investment

Net profit =6754.37

Shareholder fund= 33316.7



Return on investment=net profit/shareholder fund*100

= 20.27

INTERPRETATION

Through this ratio company can measure the percentage

return to the company on the fund .it is also a good

indication of the profitability of the organisation.

The company has ratio of RETURN OF INVESTMENT is 20%

this percentage sufficient for the company because profit is afunction of accounting and operating policies of an

enterprise.

5. Return on equity

Net profit=6754.37

ROE=6754.37-0/33316.7

=20.27%

INTERPRETATION

Return on equity measure a corporation ,s profitability by

prevailing how much profit a company generate with the

money shareholder have invested. The ratio of ROE is



indicating good performance in generating profit from that

amount which is invested by the shareholder.

6. Earnings per share =Net profit-preference

dividend/No. Of equity share

outstanding

*Activity /turnover ratio

1. Inventory turnover ratio

COGS=net sales-gross profit

= 40547.82-9090.16

= 31456.84

Average stock= 33316.7

Inventory turnover ratio=COGS / average stock

= 0.94

INTERPRETATION

Inventory turnover ratio indicate that how many times a company,

s inventory is sold and replaced over a period. A high ratio implies

either strong sales or effective buying. But company ITR is 0.94

which show that company has low turnover implies good sales.

3. Debtor’s turnover ratio=net credit annual sales/average

debtors

Net credit sales= 40547.82



Average debtor= 9027.46

Debtor turnover ratio= 4.49

3. Creditors turnover ratio =net credit

purchase/average creditor

Average payment period=365/CTR

NOTE – there is no any credit purchase by the company so wecould not find.

*solvency ratio

1. Debt to equity ratio

Debt= 16511.25

Equity= 33316.7

Debt to equity ratio= total debt/equity

= 0.49

INTERPRETATION

Through this ratio company find out financial power of the

company. A high debt to equity ratio generally means that a

company has been aggressive in financial its growth with debt. If

company debt may increase more than it may lead to bankruptcy.



Company debt to equity ratio is not much which indicates

that company took debt according to their need.

*coverage ratio

3. Inertest coverage ratio

EBIT= 11858.39

Interest charges= 402.01

Interest coverage ratio=earnings before interesttax/interest charges

=29.49

INTERPRETATION

Interest coverage ratio determine that how easily a company can

pay interest on outstanding debt .the lower the ratio ,the company

is burden by debt expense. But the reliance power company has

interest coverage ratio is 2.49which show that company has no

any debt or if company has any debt it can easily meet by the

company.

TREND ANALYSIS



BALANCE SHEET :

Particulars Mar '09 Mar '10

Trend Analysis=Currentyear*100 / Baseyear(2009)

Total ShareCapital 4,130.40 4,130.40 100Equity Share

Capital 4,130.40 4,130.40 100ShareApplicationMoney 0 0 0Preference ShareCapital 0 0 0

Reserves 23,853.7029,186.3

0 122.3554417Revaluation

Reserves 0 0 0

Networth 27,984.1033,316.7

0 119.055821

Secured Loans 1,473.60 7,755.90 526.3232899

Unsecured Loans 6,065.19 8,755.35 144.3540928

Total Debt 7,538.7916,511.2

5 219.0172428

Total Liabilities 35,522.8949,827.9

5 140.269978

Assets

Gross Block 32,728.6935,396.1

9 108.1503415

Less: Accum.Depreciation 20,459.86

21,780.91 106.456789



Net Block 12,268.8313,615.2

8 110.9745591Capital Work inProgress 6,544.24

15,026.13 229.6084801

Investments 652.7 668.83 102.4712732Inventories 10,121.45 9,027.46 89.1913708

Sundry Debtors 3,024.36 3,493.90 115.5252682Cash and Bank Balance 347.94

22,436.37 6448.344542

Total CurrentAssets 13,493.75

34,957.73 259.0660862

Loans andAdvances 4,292.50 4,123.43 96.06126966

Fixed Deposits 17,880.59 0 0

Total CA, Loans& Advances 35,666.84

39,081.16 109.5728133

Deffered Credit 0 0 0CurrentLiabilities 10,201.51

12,351.78 121.0779581

Provisions 9,408.21 6,211.67 66.02393016Total CL &Provisions 19,609.72

18,563.45 94.66453371

Net CurrentAssets 16,057.12

20,517.71 127.7795146

MiscellaneousExpenses 0 0 0

Total Assets 35,522.8949,827.9

5 140.269978

ContingentLiabilities 32,193.13

28,382.46 88.16309567

Book Value (Rs) 67.75 80.66 119.0553506

Interpretation:



• Net worth had increased from 2009 to 2010 and loans are

decreased , it is good for company, it doesn’t involve huge

risk ,thus there is proper balance.

•

Current assets and current liabilities both has increased whileincrease in liability is not good for the company but increase

in assets are good sign for the company.

• Debtors are increased which means company’s mostly sales

are on credit basis.

• Cash and bank balance are increased which means

company’s liquid assets are more to meet the short term

solvency.

Profit and Loss:

Particulars

TrendAnalysis=Currentyear*100 /Baseyear(2009)

Mar '09 Mar '10

12 mths 12 mths

Income



Sales Turnover 49,331.47

43,934.70 89.06019

Excise Duty 5,532.89 3,386.8861.21358

Net Sales 43,798.58

40,547.82 92.57793

Other Income 2,002.77 2,768.23138.2201

Stock Adjustments 1,872.87 -1,157.45 -61.8009

Total Income 47,674.22

42,158.60 88.4306

Expenditure

Raw Materials 23,915.4

5

20,506.4

0 85.74541Power & Fuel Cost 3,119.42 3,369.35

108.0121

Employee Cost 8,401.73 5,416.8164.47256

Other ManufacturingExpenses

643.35 287.66

287.66

Selling and AdminExpenses

1,587.61 0

0


992.85 719.9972.5175

Preoperative ExpCapitalised

-1,930.40

0

0

Total Expenses 36,730.01

30,300.21 82.49442

Mar '09 Mar '10

12 mths 12 mths

Operating Profit 8,941.44 9,090.16101.6633



PBDIT 10,944.21

11,858.39 108.3531

Interest 253.24 402.01158.7466

PBDT 10,690.97

11,456.38 107.1594

Depreciation 1,285.12 1,337.24104.0557

Other Written Off 128.02 10.338.069052

Profit Before Tax 9,277.83 10,108.81 108.9566

Extra-ordinary items 181.26 98.4554.31424

PBT (Post Extra-ord

Items)

9,459.09 10,207.2

6 107.9095Tax 3,284.28 3,452.89

105.1338

Reported Net Profit 6,174.81 6,754.37109.3859

Total Value Addition 12,814.56

9,793.8176.4272

Preference Dividend 0 00

Equity Dividend 1,073.90 1,363.03126.9234

Corporate DividendTax

181.26 227.521255.214

Per share data(annualised)

Shares in issue (lakhs) 41,304.01

41,304.01 100

Earning Per Share (Rs) 14.95 16.35109.3645

Equity Dividend (%) 26 33126.9231

Interpretation :



• Net sales are decreased which means indirectly income of

the company is decreases.

• Taxes are increased which lead to burden on the company.

• Operating profit has also increased which is a good sign for

the company.

• Actually selling expenses has decreased to 0 which means

no amount is spend on selling and advertisement.

Common size Statement

Balance sheet

Sources Of Funds YEAR 09 YEAR 10

%

change in2009

%

changein 2010

Total ShareCapital 4,130.40 4,130.40

11.627432

8.2893236

Equity ShareCapital 4,130.40 4,130.40

11.627432

8.2893236

Share ApplicationMoney 0 0 0 0

Preference ShareCapital 0 0 0 0

Reserves 23,853.70 29,186.30 35,208.4136184.35

4

RevaluationReserves 0 0 0



Networth 27,984.10 33,316.70 78.7866.86347

7

Secured Loans 1,473.60 7,755.90 4.15 15.56536

Unsecured Loans 6,065.19 8,755.35 17.0717.57116

2

Total Debt 7,538.79 16,511.25 21.2233.13652

3

Total Liabilities 35,522.89 49,827.95 100.00 100


Gross Block 32,728.69 35,396.19 92.1371.03681

8

Less: Accum.Depreciation 20,459.86 21,780.91 57.60

43.712234

Net Block 12,268.83 13,615.28 34.5427.32458

4

Capital Work inProgress 6,544.24 15,026.13 18.42 30.156027

Investments 652.7 668.831.837406

81.342278

8

Inventories 10,121.45 9,027.46 28.4918.11726

1

Sundry Debtors 3,024.36 3,493.908.513834

3 7.011928

Cash and Bank Balance 347.94 22,436.37 0.98 45.02768

Total CurrentAssets 13,493.75 34,957.73 37.99 70.15687



Loans andAdvances 4,292.50 4,123.43

12.083758

8.2753354

Fixed Deposits 17,880.59 0 50.34 0

Total CA, Loans &Advances 35,666.84 39,081.16 100.41

78.432205

Deffered Credit 0 0 0 0

Current Liabilities 10,201.51 12,351.78 28.7224.78885

8

Provisions 9,408.21 6,211.67 26.4812.46623

6

Total CL &Provisions 19,609.72 18,563.45 55.20

37.255095

Net CurrentAssets 16,057.12 20,517.71 45.20 41.17711

MiscellaneousExpenses 0 0 0 0

Total Assets 35,522.89 49,827.95 100.00 100

ContingentLiabilities 32,193.13 28,382.46 90.63

56.960923

Book Value (Rs) 67.75 80.660.190722

1 0.161877

• Net worth is decreases from78% to 66 % and loans has

decreased from 12% to 8%, it is not good for company, it

involve huge risk , we should maintain a balance between

debt and equity.



• Current assets has increased and current liabilities has

decreased ,while decrease in liability is good for the

company and increase in assest is good.

•

Debtors are decreased from 8% to 7% which meanscompany’s mostly sales are on credit basis.



solvency.

Profit and Loss

Particulars Mar '09 Mar '10% changein 2009

%changein 2010

12 mths 12 mths

Income

Sales Turnover 49,331.47 43,934.70

112.632578

108.3528

Excise Duty 5,532.89 3,386.88 12.6325785

8.352804

Net Sales 43,798.58 40,547.8

2 100 100Other Income 2,002.77 2,768.23 4.57268249

6.827075

Stock Adjustments

1,872.87 -1,157.45

4.27609754 2.85453

Total Income 47,674.22 42,158.60 108.84878

103.9725



Expenditure 0 0

Raw Materials 23,915.45 20,506.40

54.6032543

50.57337

Power & FuelCost

3,119.42 3,369.35 7.12219437

f13/f7*100

Employee Cost 8,401.73 5,416.81 19.1826539

13.35907

OtherManufacturingExpenses

643.35 287.661.4688832

40.7094

34

Selling andAdmin Expenses

1,587.61 0 3.62479788 0

Miscellaneous

Expenses

992.85 719.99 2.2668543

1

1.7756

56Preoperative ExpCapitalised

-1,930.40 0 -4.4074488 0

Total Expenses 36,730.01 30,300.21

83.8611891 74.7271

Mar '09 Mar '10

12 mths 12 mths

Operating Profit 8,941.44 9,090.16 20.4149084

22.41837

PBDIT 10,944.21 11,858.39

24.9875909

29.24544

Interest 253.24 402.01 0.57819226

0.991447

PBDT 10,690.97 11,456.3

8

24.409398

7 28.254Depreciation 1,285.12 1,337.24 2.9341590

53.2979

33

Other Written Off 128.02 10.33 0.29229258

0.025476

Profit Before Tax 9,277.83 10,108.8 21.182947 24.930



159

Extra-ordinaryitems

181.26 98.45 0.41384903 0.2428

PBT (Post Extra-ord Items)

9,459.09 10,207.26

21.5967961

25.17339

Tax 3,284.28 3,452.89 7.49859927 8.5156

Reported NetProfit

6,174.81 6,754.37 14.0981968

16.65779

Total ValueAddition

12,814.56 9,793.81 29.2579348

24.15373

PreferenceDividend

0 00 0

Equity Dividend 1,073.90 1,363.03 470352.951

3.361537

CorporateDividend Tax

181.26 227.52 0.41384903

0.561115

Per share data(annualised)

Shares in issue(lakhs)

41,304.01 41,304.01

94.3044501

101.8649

Earning Per

Share (Rs)

14.95 16.35 0.0341335

3

0.0403

23Equity Dividend(%)

26 33 0.05936266

0.081385

Interpretation :

• Taxes has decreased from 8% 7% which leads to less burden

on the company.

• Operating profit has increased which is a good sign for the

company.



• Actually selling expenses are also decreases which means

advertising is less may be the reason for less sales , but it is

not good for company’s future

Comparative Statement

Balance sheet

Sources Of Funds

YEAR09 YEAR 10

Increaseordecrease %change

Total ShareCapital

4,130.40 4,130.40 0 0

Equity Share

Capital

4,130.4

0 4,130.40 0 0ShareApplicationMoney 0 0 0

PreferenceShare Capital 0 0 0 0

Reserves23,853.

7029,186.3

0 5,332.6022.35544

2

RevaluationReserves 0 0 0 0

Networth27,984.

1033,316.7

0 5,332.6019.05582

1

Secured Loans1,473.6

0 7,755.90 6,282.30426.3232

9



UnsecuredLoans

6,065.19 8,755.35 2,690.16

44.354093

Total Debt7,538.7

916,511.2

5 8,972.46119.0172

4

Total Liabilities35,522.

8949,827.9

514,305.0

640.26997

8


Gross Block 32,728.

6935,396.1

9 2,667.508.150341

5

Less: Accum.Depreciation

20,459.86

21,780.91 1,321.05 6.456789

Net Block 12,268.

8313,615.2

8 1,346.4510.97455

9

Capital Work inProgress

6,544.24

15,026.13 8,481.89

129.60848

Investments 652.7 668.83 16.132.471273

2

Inventories10,121.

45 9,027.46-

1,093.99

-10.80862

9

Sundry Debtors3,024.3

6 3,493.90 469.5415.52526

8

Cash and Bank Balance 347.94

22,436.37

22,088.43

6348.3445

Total CurrentAssets

13,493.75

34,957.73

21,463.98

159.06609

Loans andAdvances

4,292.50 4,123.43 -169.07

-3.938730

3

Fixed Deposits 17,880.59

0 -17,880.5

-100



9

Total CA, Loans& Advances

35,666.84

39,081.16 3,414.32

9.5728133

Deffered Credit 0 0 0 0

CurrentLiabilities

10,201.51

12,351.78 2,150.27

21.077958

Provisions9,408.2

1 6,211.67-

3,196.54-

33.97607

Total CL &Provisions

19,609.72

18,563.45

-1,046.27

-5.335466

3

Net CurrentAssets

16,057.12

20,517.71 4,460.59

27.779515

MiscellaneousExpenses 0 0 0 0

Total Assets35,522.

8949,827.9

514,305.0

640.26997

8

ContingentLiabilities

32,193.13

28,382.46

-3,810.67

-11.83690

4

Book Value (Rs) 67.75 80.66 12.9119.05535

1

Interpretation :



• Net worth is increased from 2009 to 2010 and loans are

decreased , it is good for company, as it involve less risk ,

we should maintain a balance between debt and equity.

•

Current assets and current liabilities both have increasedwhile increased in assest is good while increase in liabilities

is not good ,as it is increasing burden.

• Debtors are increased which means company’s mostly sales

are on credit basis.



solvency.

Profit and Loss

Particulars Mar '09 Mar '10 Increaseor

decrease%

change12 mths 12 mths

Income

Sales Turnover 49,331.47

43,934.70

43,934.70

89.0602

Excise Duty 5,532.89 3,386.88 -45,944.5

9 -830.39

Net Sales 43,798.58

40,547.82

35,014.93

79.9454

Other Income 2,002.77 2,768.23 -41,030.3

5 -2048.7

Stock Adjustments 1,872.87 - -3,160.22 -168.74



1,157.45

Total Income 47,674.22

42,158.60

40,285.73

84.5021

Expenditure

Raw Materials 23,915.45

20,506.40 -3,409.05 -14.255

Power & Fuel Cost 3,119.42 3,369.35249.93

8.01207

Employee Cost 8,401.73 5,416.81-2,984.92 -35.527

OtherManufacturingExpenses

643.35 287.66

-355.69 -55.287

Selling and AdminExpenses

1,587.61 0

-1,587.61 -100


992.85 719.99-272.86 -27.482

Preoperative ExpCapitalised

-1,930.40

0

1,930.40 -100

Total Expenses 36,730.01

30,300.21 -6,429.80 -17.506

Mar '09 Mar '10

12 mths 12 mths

Operating Profit 8,941.44 9,090.16148.72

1.66327

PBDIT 10,944.2

1

11,858.3

9 914.18

8.3530

9Interest 253.24 402.01

148.7758.746

6

PBDT 10,690.97

11,456.38 765.41

7.15941

Depreciation 1,285.12 1,337.24 52.12 4.0556



5

Other Written Off 128.02 10.33-117.69 -91.931

Profit Before Tax 9,277.83 10,108.8

1 830.98

8.9566

2Extra-ordinaryitems

181.26 98.45-82.81 -45.686

PBT (Post Extra-ord Items)

9,459.09 10,207.26 748.17

7.90953

Tax 3,284.28 3,452.89168.61

5.13385

Reported NetProfit

6,174.81 6,754.37579.56

9.38588

Total ValueAddition

12,814.56

9,793.81-3,020.75 -23.573

PreferenceDividend

0 00.00 0

Equity Dividend 1,073.90 1,363.03289.13

26.9234

CorporateDividend Tax

181.26 227.5246.26

25.5214

Per share data

(annualised)

Shares in issue(lakhs)

41,304.01

41,304.01 0.00 0

Earning Per Share(Rs)

14.95 16.351.40

9.36455

Equity Dividend(%)

26 337.00

26.9231

Interpretation :• Net sales are increased which means indirectly income of the

company isincreasing.

• Taxes are increased which lead to burden on the company.



• Operating profit has increased which is a good sign for the

company.

• Actually selling expenses has decreases to 0 ,which means

advertising and selling expenses have not performed in2010.

steel authority of india limited term paper

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