ACCOUNTING FOR MANAGERS

Term paper
Based on financial statement analysis and
interpretation.

Submitted to:- Submitted by:-

[Link] kalia Subodh kumar singh
[Link]- 11008039
[Link]-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
domestic sources 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, 25
Departmental 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.
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 offers
services 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
  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 our business.

 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 a meaningful difference in
people's lives.

Company profile :
Type State-owned enterprise
Public (BSE: 500113)

Industry Steel

Founded 1954

Headquarters 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 [Link]

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 the company 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 27,984.10 33,316.70
Secured Loans 1,473.60 7,755.90
Unsecured Loans 6,065.19 8,755.35
Total Debt 7,538.79 16,511.25
Total Liabilities 35,522.89 49,827.95
  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 12,268.83 13,615.28
Capital Work in Progress 6,544.24 15,026.13
Investments 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 16,057.12 20,517.71
Miscellaneous Expenses 0 0
Total Assets 35,522.89 49,827.95
Contingent Liabilities 32,193.13 28,382.46
Book Value (Rs) 67.75 80.66
     

Profit and loss :

Profit & Loss account of Steel Authority of India

In 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 643.35 287.66
Expenses
Selling and Admin 1,587.61 0
Expenses
Miscellaneous Expenses 992.85 719.99
Preoperative Exp -1,930.40 0
Capitalised
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 11,858.39
Interest 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 41,304.01
Earning Per Share (Rs) 14.95 16.35
Equity Dividend (%) 26 33

Cash Flow Statement

Steel Authority of India

Cash Flow statement

   Mar '08 Mar '09
 
12 mths 12 mths
Particulars
     
Net Profit Before 11468.73 9403.45
Tax
Net Cash From 8378.18 6124.26
Operating
Activities

Net Cash (used -1139.89 -4406.47

in)/from
Investing Activities

Net Cash (used -3088.68 2751.3

in)/from Financing
Activities

Net 4149.61 4469.09

(decrease)/increase
In Cash and Cash
Equivalents

Opening Cash & 9609.83 13759.44

Cash Equivalents
Closing Cash & 13759.44 18228.53
Cash Equivalents

Fund Flow Statement

Sources of funds
   YEAR 09 YEAR 10

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 27,984.10 33,316.70
Secured Loans 1,473.60 7,755.90
Unsecured Loans 6,065.19 8,755.35
Total Debt 7,538.79 16,511.25
Total Liabilities 35,522.89 49,827.95

Application of funds
Gross Block 32,728.69 35,396.19

Less: Accum. Depreciation 20,459.86 21,780.91

Net Block 12,268.83 13,615.28

Capital Work in Progress 6,544.24 15,026.13

Investments 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 16,057.12 20,517.71

Miscellaneous Expenses 0 0

Total Assets 35,522.89 49,827.95

     
Contingent Liabilities 32,193.13 28,382.46
Book Value (Rs) 67.75 80.66

ANALYSIS OF STATEMENTS

RATIO ANALYSIS
 It is the important tool of Financial Statement Analysis. It is a process
through which various ratios are calculated and on that basis
conclusions are drawn which become the base of managerial decision.

Objective Of Ratio Analysis

Ratio Analysis is an important technique of financial analysis. 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

Classification Of Ratios

1. Liquidity Ratio
 2. Profitability Ratio
3. Turnover/Activity/efficiency Ratio
4. Solvency Ratio

1. LIQUIDITY RATIO :-
1. Current Ratio :- Current Assets
Current Liabilities

Rule of Thumb :- 2:1

2. Quick Ratio / Acid Test Ratio :- Quick Assets

Current Liabilities

Where ,Quick Assets = Current assets – Inventory (stock) – Prepaid

expenses

Rule of Thumb : 1:1

3 Absolute Liquid Ratio / Cash Ratio :- Absolute Quick Assets

Current Liabilities

It is also known as a “Super Quick Ratio “ because it is very - very liquid.

2. PROFITABILITY RATIO

Gross Profit Ratio :- Gross Profit * 100

Net Sales

Where , Gross Profit = Sales – Cost of goods sold (COGS)

COGS = opening stock + purchases + direct expenses – closing stock

Net Sales = Sales – Sales Return (Return Inward)

1. Net Profit Ratio :- Net profit * 100

Net Sales

Where , Net Sales = Gross Profit – indirect expenses

2. Operating Ratio :- Operating cost * 100

Net Sales

Where , operating cost = cost of good sold + operating expenses

(selling & distribution expenses , administration expenses )

3. Return On Investment : Net profit * 100

Share holder funds

This ratio is determine the earning capacity related to owner’s capital

and investment

4. Return on Equity :- Net Profit – Preference Dividend

Share holder funds

It is very important from the view point of equity shareholders because

dividend on equity shares depends upon the profit available for equity
shareholders.

5. Earning Per Share :- Net profit – Preference dividend

Number of shares equity
 3. Turnover Ratio/ Activity Ratio / Efficiency Ratio

1. Inventory Turnover Ratio :- Cost of Goods sold

Average Stock

Where , Average stock = opening stock + closing stock

2. Debtor Turnover Ratio :- Net Annual Credit Sales

Average Debtors

Where, Debtors includes Bills Receivables , Accounts Receivables.

3. Creditors Turnover Ratio :- Net Annual Credit Purchase

Average Creditors
4. Solvency Ratio

It means ability of firm to pay its liabilities on due date.

1. Debt Equity Ratio :- Debt

Equity

It reflect the long term financial position of the firm.

2. Interest Coverage Ratio ; Earnings Before Interest & Tax

Interest Charges
This ratio indicates the ability of concern to pay the interest due.
Whenever any concern procures loans, the creditors wants to satisfied
that interest will be received regularly and easily.

FOR 2009:-
Preference share dividend=0
Share holder fund= 1135.19
Return on equity =Net profit-Preference dividend/Shareholder fund*100
= 228.16 -0 / 1135.19 *100

= 20 %*LIQUIDITY RATIO

1. Current ratio (rupees in crores)

Current assets = 533.22

Current liability= 367.32

Current ratio = current assets/current liability

= 533.22/367.32

= 1.45

Interpretation

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 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

Current assets = 533.22

Current liability = 367.32

Quick ratio =current assets – (investment +prepaid expense)/current liability

=533.22-207.53/367.32

= 325.69/367.32

=0.89

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 Havells India limited is [Link] 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 =157.37

Current liability=367.32

Absolute liquid ratio =absolute liquid assets/current liability

=157.37/533.22

=0.29

INTERPRETATION

Absolute liquidity is represented by cash and near cash item .the absolute liquid
ratio are cash, bank and marketable securities .A standard of 0.5:1 absolute
liquidty is considered. The ratio of absolute liquid ratio is 0.29 which show that
company has too much liquidty assets which is good for the company .it show a
good financial position in the market.

*profitability ratio

1. Gross profit ratio

Gross profit =185.06
Net sales = 2195.15

Gross profit ratio =gross profit/net sales*100

=185.06/2195.15*100
=8.43%

INTERPRETATION
Gross profit ratio indicates what extent the selling price of goods per unit
may be reduced without incurring losses on operation. It reflects the
efficiency with which a firm produced its product. The ratio of company is
8.43 which show that company production is good according to their ratio.

2. Net profit ratio

Net profit= 145.23
Net sales =2195.15

Net profit ratio=net profit/net sales*100

=145.23/2195.15*100
=6.6%

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 6.6% which show that company is not earns a huge net profit.

3. Operating ratio
Operating cost =COGS + operating expenses
=2010.09+361.74+14.56=2386.39
Net sales = 2195.15
Operating ratio=operating cost /net sales*100
=2386.39/2195.15*100
=108.7%
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 108.7%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 =145.23
Shareholder fund=934.33

Return on investment=net profit/shareholder fund*100

=145.23/934.33*100
=15.54%
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 15.54% 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=145.23
Preference share dividend=0
Share holder fund=934.33
Return on equity =Net profit-Preference dividend/Shareholder fund*100
=145.23-0/934.33*100
=15.54%
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 is15.54% 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

 =2195.15-185.06

=2010.09

Average stock= 207.53

Inventory turnover ratio=COGS/average stock

= 2010.09/ 207.53 =10

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 10 which show that company has good
turnover implies good sales.

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

Net credit sales= 2195.15
Average debtor= 86.74

Debtor turnover ratio=2195.15/86.74

=25.31

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 we could not find.
*solvency ratio
1. Debt to equity ratio

Debt=70.28

Equity= 30.08

Debt to equity ratio= total debt/equity

=70.28/30.08

=2.3

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=167.20
Interest charges= 25.03
Interest coverage ratio=earnings before interest tax/interest charges
 =167.20/25.03
=6.7

INTERPRETATION

Interest coverage ratio determines that how easily a company can pay interest on
outstanding debt. The lower the ratio, the company is burden by debt expense.
But the Havells India limited has interest coverage ratio is 6.7. Which show that
company has not much debt or if company has any debt it can easily met by the
company.

CALCULATION FOR 2010

*LIQUIDITY RATIO
1. Current ratio (rupees in crores)

Current assets = 561.25

Current liability= 416.17

Current ratio = current assets/current liability

= 561.25 / 416.17

= 1.35

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
low .it is 1.35 which indicates that the enterprise has not more finance than it
need .the ratio show that company has not much finance.

Thus, a high current ratio means the enterprise has more finance so they can
use efficiently. But company has low current ratio.

2 .Acid test ratio/Quick ratio

Current assets = 561.25

Current liability = 416.17

Quick ratio =current assets – (investment +prepaid expense)/current liability

=561.25-330.65/416.17

= 231/416.17

= 0.56

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 havells India limited is [Link] acid test ratio of company is not too much.
It means company has not too much finance available.

2. Absolute liquid ratio

Cash and bank = 68.31

Current liability= 416.17

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

=68.31
Absolute liquid ratio =absolute liquid assets/current liability

= 68.31 / 416.17

= 0.16

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 0.16. Which show that
company has not good liquid assets.

*profitability ratio

3. Gross profit ratio

Gross profit = 313.53
Net sales = 2468.77

Gross profit ratio =gross profit/net sales*100

= 313.53 / 2468.77 * 100
= 12.7%
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
12.7%. Which show that company production is good according to their
ratio.

4. Net profit ratio

 Net profit= 228.16
Net sales =2468.77

Net profit ratio=net profit/net sales*100

= 228.16 / 2468.77 * 100
= 9.24%
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 9.24% which
show that company earn a normal net profit .it is good for the company.

3. Operating ratio

Operating cost =COGS+ operating expenses

=2155.24+424.52+16.56
= 2596.32
Net sales = 2468.77
Operating ratio=operating cost /net sales*100
= 2596.32 / 2468.77 *100
= 105%
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 to evaluating its own efficiency.
The ratio of havells India limited is 105%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 =228.16
Shareholder fund= 1135.19
 Return on investment=net profit/shareholder fund*100

= 228.16 / 1135.19 *100

= 20 %
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 a function of accounting and
operating policies of an enterprise.

5. Return on equity
Net profit=228.16

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

= 2468.77 – 313.53

= 2155.24

Average stock= 330.65

Inventory turnover ratio=COGS / average stock

= 2155.24 / 330.65 = 6.5

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 6.5 which show that company has high
turnover implies good sales.

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

Net credit sales= 2468.77
Average debtor= 79.47

Debtor turnover ratio=2468.77 / 79.47

= 31

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 we could not find.
*solvency ratio
1. Debt to equity ratio

Debt= 115.81

Equity= 31.19

Debt to equity ratio= total debt/equity

= 115.81 / 31.19

= 3.7

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= 290.26
Interest charges= 11.74
Interest coverage ratio=earnings before interest tax/interest charges
=290.26 / 11.74
 = 24.7

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 24.7 which show
that company has no any debt or if company has any debt it can easily meet by
the company.
 TREND ANALYSIS

BALANCE SHEET :

Trend Analysis=
Current year*100 /
Base year(2009)
Particulars Mar '09 Mar '10
Total Share Capital 4,130.40 4,130.40 100
Equity Share Capital 4,130.40 4,130.40 100
Share Application
Money 0 0 0
Preference Share
Capital 0 0 0
Reserves 23,853.70 29,186.30 122.3554417
Revaluation Reserves 0 0 0
Networth 27,984.10 33,316.70 119.055821
Secured Loans 1,473.60 7,755.90 526.3232899
Unsecured Loans 6,065.19 8,755.35 144.3540928
Total Debt 7,538.79 16,511.25 219.0172428
Total Liabilities 35,522.89 49,827.95 140.269978
       
Assets      
Gross Block 32,728.69 35,396.19 108.1503415
Less: Accum.
Depreciation 20,459.86 21,780.91 106.456789
Net Block 12,268.83 13,615.28 110.9745591
Capital Work in
Progress 6,544.24 15,026.13 229.6084801
Investments 652.7 668.83 102.4712732
Inventories 10,121.45 9,027.46 89.1913708
Sundry Debtors 3,024.36 3,493.90 115.5252682
Cash and Bank Balance 347.94 22,436.37 6448.344542
Total Current Assets 13,493.75 34,957.73 259.0660862
Loans and Advances 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 0
Current Liabilities 10,201.51 12,351.78 121.0779581
Provisions 9,408.21 6,211.67 66.02393016
Total CL & Provisions 19,609.72 18,563.45 94.66453371
Net Current Assets 16,057.12 20,517.71 127.7795146
Miscellaneous Expenses 0 0 0

Total Assets 35,522.89 49,827.95 140.269978

       
Contingent Liabilities 32,193.13 28,382.46 88.16309567
Book Value (Rs) 67.75 80.66 119.0553506
Profit and Loss:

Particulars    

Trend Analysis=
Current
year*100 / Base
year(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 3,386.88 61.21358
Net Sales 43,798.58 40,547.82 92.57793
Other Income 2,002.77 2,768.23 138.2201
Stock Adjustments 1,872.87 -1,157.45 -61.8009
Total Income 47,674.22 42,158.60 88.4306
Expenditure  
Raw Materials 23,915.45 20,506.40 85.74541
Power & Fuel Cost 3,119.42 3,369.35 108.0121
Employee Cost 8,401.73 5,416.81 64.47256
Other Manufacturing Expenses 643.35 287.66
287.66
Selling and Admin Expenses 1,587.61 0
0
Miscellaneous Expenses 992.85 719.99 72.5175
Preoperative Exp Capitalised -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 9,090.16 101.6633
PBDIT 10,944.21 11,858.39 108.3531
Interest 253.24 402.01 158.7466
PBDT 10,690.97 11,456.38 107.1594
Depreciation 1,285.12 1,337.24 104.0557
Other Written Off 128.02 10.33 8.069052
Profit Before Tax 9,277.83 10,108.81 108.9566
Extra-ordinary items 181.26 98.45 54.31424
PBT (Post Extra-ord Items) 9,459.09 10,207.26 107.9095
Tax 3,284.28 3,452.89 105.1338
Reported Net Profit 6,174.81 6,754.37 109.3859
Total Value Addition 12,814.56 9,793.81 76.4272
Preference Dividend 0 0 0
Equity Dividend 1,073.90 1,363.03 126.9234
Corporate Dividend Tax 181.26 227.52 1255.214
Per share data (annualised)    
Shares in issue (lakhs) 41,304.01 41,304.01 100
Earning Per Share (Rs) 14.95 16.35 109.3645
Equity Dividend (%) 26 33 126.9231
 Common size Statement

Balance sheet

% change in % change in
Sources Of Funds YEAR 09 YEAR 10 2009 2010
Total Share Capital 4,130.40 4,130.40 11.627432 8.2893236
Equity Share Capital 4,130.40 4,130.40 11.627432 8.2893236

Share Application Money 0 0 0 0

Preference Share Capital 0 0 0 0

Reserves 23,853.70 29,186.30 35,208.41 36184.354
Revaluation Reserves 0 0 0  
Networth 27,984.10 33,316.70 78.78 66.863477
Secured Loans 1,473.60 7,755.90 4.15 15.56536
Unsecured Loans 6,065.19 8,755.35 17.07 17.571162
Total Debt 7,538.79 16,511.25 21.22 33.136523
Total Liabilities 35,522.89 49,827.95 100.00 100
 

Application Of Funds        
Gross Block 32,728.69 35,396.19 92.13 71.036818
Less: Accum.
Depreciation 20,459.86 21,780.91 57.60 43.712234
Net Block 12,268.83 13,615.28 34.54 27.324584

Capital Work in Progress 6,544.24 15,026.13 18.42 30.156027

Investments 652.7 668.83 1.8374068 1.3422788

Inventories 10,121.45 9,027.46 28.49 18.117261

Sundry Debtors 3,024.36 3,493.90 8.5138343 7.011928

Cash and Bank Balance 347.94 22,436.37 0.98 45.02768

Total Current Assets 13,493.75 34,957.73 37.99 70.15687

Loans and Advances 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 28.72 24.788858
Provisions 9,408.21 6,211.67 26.48 12.466236

Total CL & Provisions 19,609.72 18,563.45 55.20 37.255095

Net Current Assets 16,057.12 20,517.71 45.20 41.17711
Miscellaneous Expenses 0 0 0 0

Total Assets 35,522.89 49,827.95 100.00 100

 

Contingent Liabilities 32,193.13 28,382.46 90.63 56.960923

Book Value (Rs) 67.75 80.66 0.1907221 0.161877

Profit and Loss

Particulars Mar '09 Mar '10

% change in % change
2009 in 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 40,547.82 100 100
Other 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 & Fuel Cost 3,119.42 3,369.35 7.12219437 f13/f7*100
Employee Cost 8,401.73 5,416.81 19.1826539 13.35907
Other Manufacturing 643.35 287.66
Expenses 1.46888324 0.709434
Selling and Admin 1,587.61 0
Expenses 3.62479788 0
Miscellaneous Expenses 992.85 719.99 2.26685431 1.775656
Preoperative Exp -1,930.40 0
Capitalised -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 11,456.38 24.4093987 28.254
Depreciation 1,285.12 1,337.24 2.93415905 3.297933
Other Written Off 128.02 10.33 0.29229258 0.025476
Profit Before Tax 9,277.83 10,108.81 21.182947 24.93059
Extra-ordinary items 181.26 98.45 0.41384903 0.2428
PBT (Post Extra-ord 9,459.09 10,207.26
Items) 21.5967961 25.17339
Tax 3,284.28 3,452.89 7.49859927 8.5156
Reported Net Profit 6,174.81 6,754.37 14.0981968 16.65779
Total Value Addition 12,814.56 9,793.81 29.2579348 24.15373
Preference Dividend 0 0 0 0
Equity Dividend 1,073.90 1,363.03 470352.951 3.361537
Corporate Dividend 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 0.03413353 0.040323
Equity Dividend (%) 26 33 0.05936266 0.081385
 Comparative Statement

Balance sheet

Increase or
Sources Of Funds YEAR 09 YEAR 10 decrease %change

Total Share Capital 4,130.40 4,130.40 0 0

Equity Share Capital 4,130.40 4,130.40 0 0

Share Application
Money 0 0   0

Preference Share
Capital 0 0 0 0
Reserves 23,853.70 29,186.30 5,332.60 22.355442
Revaluation Reserves 0 0 0 0
Networth 27,984.10 33,316.70 5,332.60 19.055821
Secured Loans 1,473.60 7,755.90 6,282.30 426.32329
Unsecured Loans 6,065.19 8,755.35 2,690.16 44.354093
Total Debt 7,538.79 16,511.25 8,972.46 119.01724
Total Liabilities 35,522.89 49,827.95 14,305.06 40.269978
     

Application Of Funds
Gross Block 32,728.69 35,396.19 2,667.50 8.1503415
Less: Accum.
Depreciation 20,459.86 21,780.91 1,321.05 6.456789
Net Block 12,268.83 13,615.28 1,346.45 10.974559

Capital Work in
Progress 6,544.24 15,026.13 8,481.89 129.60848
Investments 652.7 668.83 16.13 2.4712732
Inventories 10,121.45 9,027.46 -1,093.99 -10.808629
Sundry Debtors 3,024.36 3,493.90 469.54 15.525268

Cash and Bank

Balance 347.94 22,436.37 22,088.43 6348.3445
Total Current Assets 13,493.75 34,957.73 21,463.98 159.06609
Loans and Advances 4,292.50 4,123.43 -169.07 -3.9387303
Fixed Deposits 17,880.59 0 -17,880.59 -100

Total CA, Loans &

Advances 35,666.84 39,081.16 3,414.32 9.5728133
Deffered Credit 0 0 0 0
Current Liabilities 10,201.51 12,351.78 2,150.27 21.077958
Provisions 9,408.21 6,211.67 -3,196.54 -33.97607
Total CL & Provisions 19,609.72 18,563.45 -1,046.27 -5.3354663
Net Current Assets 16,057.12 20,517.71 4,460.59 27.779515

Miscellaneous
Expenses 0 0 0 0

Total Assets 35,522.89 49,827.95 14,305.06 40.269978

     
 Contingent Liabilities 32,193.13 28,382.46 -3,810.67 -11.836904
Book Value (Rs) 67.75 80.66 12.91 19.055351

Profit and Loss

Particulars Mar '09 Mar '10
Increase or
  12 mths 12 mths decrease % change
           
Income    
Sales Turnover 49,331.47 43,934.70 43,934.70 89.0602
Excise Duty 5,532.89 3,386.88 -45,944.59 -830.39
Net Sales 43,798.58 40,547.82 35,014.93 79.9454
Other Income 2,002.77 2,768.23 -41,030.35 -2048.7
Stock Adjustments 1,872.87 -1,157.45 -3,160.22 -168.74
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 3,369.35 249.93 8.01207
Employee Cost 8,401.73 5,416.81 -2,984.92 -35.527
Other Manufacturing 643.35 287.66
Expenses -355.69 -55.287
Selling and Admin 1,587.61 0
-1,587.61 -100
Expenses
Miscellaneous Expenses 992.85 719.99 -272.86 -27.482
Preoperative Exp -1,930.40 0
Capitalised 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 9,090.16 148.72 1.66327
PBDIT 10,944.21 11,858.39 914.18 8.35309
Interest 253.24 402.01 148.77 58.7466
PBDT 10,690.97 11,456.38 765.41 7.15941
Depreciation 1,285.12 1,337.24 52.12 4.05565
Other Written Off 128.02 10.33 -117.69 -91.931
Profit Before Tax 9,277.83 10,108.81 830.98 8.95662
Extra-ordinary items 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 3,452.89 168.61 5.13385
Reported Net Profit 6,174.81 6,754.37 579.56 9.38588
Total Value Addition 12,814.56 9,793.81 -3,020.75 -23.573
Preference Dividend 0 0 0.00 0
Equity Dividend 1,073.90 1,363.03 289.13 26.9234
Corporate Dividend Tax 181.26 227.52 46.26 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 16.35 1.40 9.36455
Equity Dividend (%) 26 33 7.00 26.9231