Analysis of Financial Statement
Analysis of Financial Statement
Analysis of Financial Statement
INTRODUCTION
some financial aspects of a business form. It may reveal a series of activities over
statements and the significant relationships the exists between them. The analysis
and performance.
Financial Analysis:
the balance sheet and the profit and loss account. Financial analysis can be
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USERS OF FINANCIAL ANALYSIS:
Management
Trade creditors
Investors
Government
Others
Management:
analysis. It is their overall responsibility to see that the resources of the firm are
used most effectively and efficiently and that the firm’s condition is sound.
Trade Creditors:
The trade creditors are to be paid in a short term solvency of the concern. The
current ratio and acid test ratio will enable the creditors to assets the short term
Investors:
The Investors are interested their money in the firms shares, are not
concerned about the firms earnings. They restore more confidence in those firms
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that show steady growth in earnings. As such, they concentrate on the analysis of
the firms present and future profitability. They are also interested in the firm’s
financial structure to the extent it influences the firms earning ability and risk.
Government:
enterprise. These statements enable the government to find out whether the
Others:
Trade associations, stock exchange and public at may also analyze the
Definition
single set of statement and a study of the trend of these factors as show in a series
of statements.
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Financial statements are indicators of the two significant factors:
1. Profitability
2. Financial Soundness
treatment of the information contained in the income statement and the balance
the business.
The term “analysis” means methodical classification of the data given in the
upon.
On the basis of materials used. According to this basis financial analysis can be of
two types.
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a) External Analysis
Those who are outsider for the business do this analysis. The outsiders
include investors, credit agencies. government agencies and other creditors who
have no access to the internal records of the company. These persons mainly
depends upon, the published financial statements. Their analysis serves only a
limited purpose. The position of this analysis has improved in recent times on
b) Internal analysis:
This analysis is done by persons who have access to the books of account
and other information to the books of accounts related to the business., Executives
and employees of the organization or by officers appointed for this purpose by the
government or the court under powers vested in them can therefore do such an
a) Horizontal Analysis
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In case of this type of analysis financial statements for a number of years
are reviewed and analyzed. The current year’s figures are compared with the
standard or base year. The analysis statement usually contains figures for too or
more years and the changes are shown regarding each item from the base year
considerable insight into levels and areas of strength and weakness. Since this
type of analysis is based on the date from year to year rather than on one date, it is
b) Vertical Analysis:
the same group, or divisions or departments in the same company. Since this
analysis depends on the data for one period, is nor very conductive financial
on one date or for one accounting period. Tools or Techniques used for Analysis:
1. Ratio Analysis
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1. Ratio Analysis:
systematic use of ratio to interpret the financial statements so that the strength and
condition can be determined. The term ratio refers to the numerical or quantitative
relationship between two items/ Variable. This relation can be expressed as.
a. Percentages
b. Fractions
c. Proportion of numbers.
two interrelated accounting figures. This is the most important tool available to
weakness of the firm. This may be accomplished either through a trend analysis of
the firm’s ratios over a period of time or through a comparison of the firm’s ratios
with its nearest competitors and with the industry averages. The four most
important financial dimensions which a firm would like to analyze are: liquidity,
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Financial Ratio:
Liquidity ratios
Leverages ratios
Activity ratios
Profitability ratios
Liquidity Ratio:
Liquidity Ratio measure the firm’s ability to meet current obligations, and
liabilities.
Leverage ratio:
Activity Ratio:
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Activity ratio reflects the firms efficiency in utilizing its assets in
assets.
Profitability Ratio:
the effectiveness of the firm ingenerating profit, and are calculated by establishing
relationships between profit figures on the one hard, and sales and assets on the
other.
Credit analysis
Comparative analysis
Standards of comparisons
Company differences
Prices level
Different definition
Changing situations
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Past data
Standard of Comparison:
Inter-firm analysis
Industry analysis
1. It helps in analysis of the situation i.e. analysis on the financial situation and
performance.
ratio
3. Accounting Ratio not only indicates the present position but they also indicate
4. It helps in obtaining best result when ratios for a number of years are put in
tabular form so that the figure for one year can be easily compoared with those
of other year
5. It indicates the trend of the change, which helps in preparation of estimates for
the future.
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8. It is very helpful to internal managements, discharge of the basic managerial
functions.
1. Ratio provides only guidelines to the management they are only the means.
However They scratch surfaces and raise question. The limitation of the ratio
may force the management to have detailed investigation of the situation under
question.
2. single accounting ratio is not useful at all unless it is studied with other
accounting ratios
Moreover financial statement also include estimated date like provision for
depreciation, bad and doubtful debts etc. hence, result revealed by ratios are
5. Ratios are computed on the basis of financial statements which are historical in
nature.
up.
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7. Lack of homogeneity of data, personal judgment lack of consistency etc. is the
ratios.
By the method of lease square, a straight line trend can be fitted to the
given time series of data. It is a mathematical, as well as, analytical method. With
its help, economic and business time series data can be fitted and this helps in
forecasting and predicting. The trend line is called the line of best fit. The sum of
deviations of the actual values of Y and the trend value (Yc) is 0 and sum of
square of deviations of the actual value and the trend value is the least.
(Y-Yc) = 0 and (Y- Yc) = least. So this method is called the least squares method
The method of least squares cab be used to explain the linear and non
The straight line trend or the first degree parabola is represented by the
mathematical equation.
Yc = a + bx
X = unit of time
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Here a and b are constants or unknowns.
In the equation for the first – degree parabola Yc = a + bx, the values of the
Y = Na +bx
Y = Na
bx = 0
xY = bx2
bx2 = 0
a = Y/N and
b = xY / x2
b = rate of change
two or more periods are placed side by side to facilitate comparison. The two
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statements are proposed for comparison. They are comparative income statement
Nowadays due to the policy of the changing government and also due to the
competition in the globalize era, the financial performance of the BHEL is not
appreciable. Though the company developed well, it could not earn much profit as
like the other private sectors company involved in similar business. There is no
proper instruction from the authorities and from the ministry. Further there is
change the existing system. The financial performance of the BHEL should be
analyzed well increase the profit and make the company to compete with others
solvency position and also the main attention should be on smooth working
capital position.
For this analysis the ratios, working capital requirements for the next five
Researcher worked and applied various tables in relevant ratio from the
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various way. Researcher analysis some table in statistical approaches of
trend line.
statements.
To study the growth profile of the company during the study period.
SCOPE OF STUDY:
company selected for the study. The financial authorities can use this for
statements and help to apply the resources of the company properly for the
present study attempt to develop a trend analysis model for Sales and Working
Capital and Profit and Loss Accounts. There can be forecasting to evaluate the
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LIMITATION OF STUDY
accuracy of the result of the study will depends upon the accuracy of
3. Various techniques, ratio statistical tools used in this study will have its
own limitation.
RESEARCH METHODOLGY
Secondary data
The secondary data is derived from the annual reports, Business line and
The study covers the time period of 5 years from the financial year 2006-07
and 2010-11.
To analyze and interpret the financial statements of the study unit the
1. Ratio Analysis.
The interpretations are also printed graphically using trend line graphs and
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CHAPTER-II
REVIEW OF LITERATURE
and sale of various types of chocolate and confectionery, refreshment and snack
products, and food and beverage enhancers in the United States and
stores, and natural food stores. The company was founded in 1894 and is based in
Hershey, Pennsylvania. The Hershey Company went public on the New York
Tootsie Roll Industries, Inc., through its subsidiaries, engages in the manufacture
and sale of confectionery products. The company sells its products under the
stores, dollar stores, chain grocers, drug chains, discount chains, cooperative
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Tootsie Roll Industries operates in the United States, Canada, and Mexico.
The company was founded in 1896 and is based in Chicago, Illinois. The Tootsie
Roll Industries, Inc. went public on the NYSE in 1927 (http:// finance. yahoo.
com/q/pr?s=TR).
The Hershey Company and the Tootsie Roll Company both are companies in
I compared both companies for the years 2002, 2003, and 2004 against each other
and against the industry averages in order to make a decision about which
company investors would choose to invest in. The comparisons I used to make this
It is said that companies will come and go, and those that survive and left
standing will teach other companies, how their survived. We will take two
companies; UPS and Ebay, Inc break them down and show you how they got their
start. In our paper, it will also be discussed and show a review of their financial
statements from each one. The point is to get a better picture of where a company
started, the competition it endured, and the money that was possibility projected
for the start. This paper will also show how auditors are essential to the running
of any company.
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Review of Financial Statements Brief overview UPS, a delivery service, has been
James E. Casey started the company on $100 borrowed from a friend of his.
Casey, who was 19 years old when he started UPS, had worked for delivery
services before and wanted to start a better delivery system of his own.
started in Seattle, Washington and had many competitors in the beginning. His
business not only survived among them, but thrived (UPS, n.d.). Today the
company serves over 200 countries delivering “goods, funds, and information”
(UPS, n.d., 1). UPS has several stores located in these countries, including the
United States, where people can not only have their packages sent, but they can
On September 5, 1995, Piere Omidyar founded eBay sitting in his living room.
eBay got it first start with a lie stating “that it was founded to help Omidyars
finacee trade Pez candy dispensers and that lie was back by a public relations
manager in 1997. (eBay, n.d., 2) In 1997 Jeffery Skoll became the first president
of eBay. eBay original name was Auction Web Omidyar did not like that name so
Ebay.com and on September 21,1989 Omidrar and Skoll went public and became
billionaires.
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CHAPTER-III
COMPANY PROFILE
Equipment industry in India. Heavy Electricals (India) Limited was merged with
BHEL in 1974. In 1991, BHEL was converted into a public limited company.
the indigenous Heavy Electrical Equipment industry in India. BHEL has built
over the years, a robust domestic market position by becoming the largest supplier
select segments of industrial sector and the Railways. Currently, 80% of the
BHEL caters to core sectors of the Indian Economy viz., Power Generation
units, 7 Joint Ventures and a large number of Project Sites spread all over India
and large number of Project Sites spread all over India and abroad enables the
Company to promptly serve its customers and provide them with suitable
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BHEL, where Quality Systems as per ISO-9000 have taken deep roots, has
CII/EFQM model for Business Excellence. BHEL became the first Public Sector
Company in the country to win the coveted “PRIZE” through Haridwar unit under
the CII Exim Award Scheme. BHEL’s Bhopal & Jhansi Units and Power Sector
Northern and Eastern Regions have also won the Commendations for Significant
Occupational Health and Safety. Major Units of BHEL have been accredited to
For the third consecutive year, BHEL’s performance was recognized by the
prestigious publication ‘Forbes Asia’, which featured BHEL in its fourth annual
term profitability and sales & earnings growth. Significantly, BHEL is the only
India PSU to figure on the elite list, since the list was conceived. BHEL is the
only Indian PSU to figure on the elite list, since the list was conceived. BHEL and
its 4 units were awarded “ICWAI Awards for Excellence in Cost Management”
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for 2008 – the highest among both public and private sector companies. BHEL
won EEPC‘s top Export Award for the eighteenth year in succession.
BHEL has retained its market leadership position during 2015-16 with 74%
59% increase over 2014-15. With the all-time high commissioning of 15000 MW
in a single year FY2015-16, BHEL has exceeded 170 GW installed base of power
generating equipments
It also has been exporting its power and industry segment products and services
for over 40 years. BHEL's global references are spread across over 76 countries
across all the six continents of the world. The cumulative overseas installed
countries including Malaysia, Oman, Iraq, UAE, Bhutan, Egypt and New Zealand.
Their physical exports range from turnkey projects to after sales services
POWER GENERATION
nuclear, gas and hydro-based utility power plants to meet customer requirements
for power generation. BHEL has proven turnkey capabilities for executing power
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account for nearly two-third of the overall Installed capacity and around three-
fourth of the power generated in India. BHEL supplies steam turbines, generators,
boilers and matching auxiliaries upto 800 MW ratings including supercritical sets
efficient use of high ash content coal available in India. BHEL also supplies
circulating fluidized bed combustion (CFBC) boilers for thermal plants. BHEL
Francis, Pelton and Kaplan type, pump turbines, bulb turbines and mini-micro
diagnostics and life extension of plants. It has retained 74% share of R&M market
BHEL built thermal sets consistently exceed the national average efficiency
parameters, and have achieved the highest-ever Plant Load Factor (PLF) of 80.5%
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(overall) during 2008-09, which is 3.5% higher than the national average. Overall
BHEL offers a large variety of control equipment and solutions, for power
Company has expertise of supplying complete Systems for entire power stations
INDUSTRIES
other than power utilities. BHEL has supplied systems and individual products
Seamless pipes, etc. to a number of industries other than power utilities. BHEL has
especially distributed digital control systems for various power plants and
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industries. BHEL is the leading company in the world having mastered the art of
burning Naptha in Gas turbines. Industry sector is fully geared to execute EPC
TRANSPORTATION
Today, over 70% of Indian Railways, one of the largest railway networks in
involvement in the transportation sector has been marked with rapid growth. Most
of the trains in Indian Railways, whether electric or diesel powered, are equipped
with BHEL’s traction propulsion system and controls. The range includes traction
including software based controls extending to rolling stock and other transport
applications.
fertilizer plants, thermal power stations, coal fields, ports and other medium and
at Mumbai, Kolkata, Chennai and Delhi are all operating on drives and controls
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supplied by BHEL. BHEL has also established itself as a leading supplier of state-
BHEL has also diversified into the area of track maintenance machines and
coach building for Indian railways and undertakes retrofitting and overhauling of
rolling stock.
RENEWALBLE ENERGY
BHEL has made rapid strides in this strategically important area of non-
conventional energy, which holds the key to the problem of burgeoning energy
needs, on the one hand and rapidly depleting fossil-based energy sources, on the
(SPV) systems for both Domestic and Industrial application and wind electric
generators all over India. BHEL also has the capability to set up Grid-connected
and Hybrid SPV Power Plants. In addition, BHEL fabricates space-grade solar
panels and space-quality batteries for satellites launched by ISRO. BHEL is also
supplying small hydro power plants (up to 25 MW station capacity) for distributed
power generation.
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BHEL possesses expertise to design, manufacture and service various types
of onshore rigs to suit the Indian service conditions. The range of equipment
covers onshore deep drilling rigs, super- deep drilling rigs, heli-rigs, work-over
rigs, mobile rigs and desert rigs with matching draw works and hoisting
equipment. The diesel-electric oil rigs for onshore drilling made by BHEL are
Rotary-table, Travelling block, Swivel, Mast and sub structure, Mud systems and
Rig electrics, Well & X-Mas tree valves upto 10,000 psi rating for onshore as well
as offshore application to ONGC, Oil India Ltd. and Private drilling Companies.
BHEL has also supplied casing Support System, Mudline Suspension System and
Block Valves to ONGC for refurbishment and up-gradation of onshore Oil Rigs.
TRANSMISSION
Instrument transformers, Dry type transformers, Shunt reactors, vacuum and SF6
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switchgear, Gas insulated switchgears, Ceramic insulators, Gas insulated
banks, circuit breakers, control and protection equipment and thyristor valves are
BHEL has developed and commissioned indigenous 36KV and 145KV Gas
the company undertakes turnkey execution of substations up to 400KV and has the
systems have been supplied for economic transmission of bulk power over long
distances have been developed and supplied for the first time in the country for use
With string engineering the Company accepts full project responsibility for
with extensive on – the job exposure for design and applications relating to Power
INTERNATIONAL BUSINESS
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BHEL has, over the years, established its references in 70 countries across
the world. These references encompass almost the entire range of BHEL products
and services, covering Thermal, Hydro and gas – based turnkey power projects,
The company has taken significant steps towards globalisation with successful
forays in new markets and new product areas, apart from firmly establishing the
power projects in Oman, Libya, Malaysia, UAE, Saudi Arabia, Iraq, Bangladesh,
Sri Lanks, China, Kazakhstan; Thermal power projects in Cyprus, Malta, Libya,
Philippines, Ghana, Tanzania, Laos, Malaysia, Libya, Zambia, Saudi Arabia, Iraq,
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projects has also provided BHEL the experience of working with world renowned
quality and other requirements viz. HSE requirements, financing packages and
associated O&M services, to name a few. BHEL has proved its capability to
undertake projects on fast- track basis. The company has also established its
power, utility power generation or the oil sector. Besides undertaking turnkey
projects on its own, BHEL also possesses the requisite flexibility to interface and
complement other international companies for large projects, and has also
exhibited products.
EPC on partnership basis. Reference for large Unit size rating has been created by
securing an order for Steam Turbine based Tishreen Thermal Power Plant on EPC
basis from Syria for 2x200MW Units. International visibility is also exhibited by
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To meet the Customers’ expectation of contemporary technologies and
faster deliveries company lays great emphases on the continuous up- gradation of
products & related technologies, and development of new products. The Company
Institute at Bangalore, Centre for Electric Traction and Hydro lab at Bhopal and
BHEL has introduced, several state –of –the- art products viz. 60MW
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steam turbine designed to suit combined cycle power plants, Bypass Over Fire Air
(BOFA) system for reduction of NOx from coal based thermal power plants, high-
efficiency Frances and Pelton hydro turbines, new LP turbine variant which can be
retrofitted in old Russian (LMW) 210MW thermal sets, Automatic Storage &
Retrieval system (ASRS) for storage and inventory management system of the
Indian Army, Solar Panels with 5500 watts output consisting of high-efficiency
multi-junction solar cells, satellite batteries for NSAT 4A, Controlled Shunt
Switchgear (GIS), Micro controller based flame scanner, a more energy efficient
power plants, combined HP-IP module in the output range of 500-650 MW with
subcritical parameters, IGBT based 3-phase drive system for 700HP diesel electric
Diagnostics and Optimization (PADO) package for power plants, 91 ton BHEL
280 Bowl Mill, etc. Design has been developed for new module THRI brushless
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Reinforcing its position as a total solution provider, BHEL has developed
Project, Libya. Based on Power Pac-G, software jointly developed by BHEL and
TCS, this is a system for complete power plant maintenance for Combined Cycle
Power Plant application and takes care of all the maintenance needs of a power
station.
The company is also engaged on research on futuristic areas like fuel cells
the corner stone of BHEL’S learning Infrastructure, along woth the Advanced
organizational developmental efforts, these centres ensure that the prime resource
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the dynamic challenges posed by the fast changing environment. it is their
constant Endeavour to take the HRD activities to the strategic level of becoming
Guided by the HRD Mission statement “To promote and inculcate a value-
based culture utilizing the fullest potential of Human Resources for achieving the
BHEL Mission”, the HRDI through a step by step strategic long term training
process and several short term need based programmes based on comprehensive
organizational research, enables the human resources to unearth and polish their
potential. HRDI is spearheading the HRD initiatives in the company and focusing
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fact this aspect has become an integral part of the company’s business
major EIPs at BHEL plants & townships included tree plantation drives,
way and vigorous efforts are being made to achieve milestones in this area. A
and joint claim projects with customers has been generated. CDM is a planned
activity for each unit and carbon credit forms part of budgeted activity.
energy efficient single cylinder non- reheat steam turbine for 100-140MW
application has been developed, suitable for plants where large amount of waste
heat is available and reheat option is not feasible This is the largest single cylinder
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Corporate Social Responsibility
BHEL has developed a CSR scheme and its mission Statement of CSR is-
Responsibility”.
programme and the set of core values enshrined in its ten principles and the intent
world’s largest global compact is the first and the citizenship initiative, the Global
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Compact is the first and the foremost concern which is exhibiting and building the
social legitimacy of business and markets. BHEL has made these a part of the
continues to play a lead role in the activities of the Global Compact Society in
India, which acts as an apex level nodal agency representing Indian corporate
bodies and institutions / organizations that are committed to UN’s Global Compact
programme through its Annual report, press conferences and other public
documents.
BHEL - AN OVERVIEW
the energy, related/ infrastructure & sector today. BHEL has built over the years,
robust domestic market position by becoming the largest supplier of power plant
BHEL was established more than 55 years ago whering in the indigenous Heavy
Electrical Equipment industry in India, a dream which has been more that
realized with a well recognized track record of performance. The company has
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established the capability to deliver 20,000 MW p.a. of power equipment to
BHEL has retained its market leadership position during 2015-16 with 74%
59% increase over 2014-15. With the all-time high commissioning of 15000 MW
in a single year FY2015-16, BHEL has exceeded 170 GW installed base of power
generating equipments.
It also has been exporting its power and industry segment products and services
for over 40 years. BHEL's global references are spread across over 76 countries
across all the six continents of the world. The cumulative overseas installed
countries including Malaysia, Oman, Iraq, UAE, Bhutan, Egypt and New Zealand.
Their physical exports range from turnkey projects to after sales services
During the year 2012-13, the company invested about Rs. 1,252 Crore on R&D
products. The IPR (Intellectual Property Rights) capital of BHEL grew by 21.5%
Global Liknks :-
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The achievements have earned an international reputation of BHEL,
Trichy. The plant has so far supplied boilers for around 1350 MW of power
generation capacity to Malaysis, Libya, Iran, Eqypt etc. BHEL’s valves have
been exported to Malts, Cyprus, Malaysia , and Indonesia while pressure part
equipment and spares have been exported to the USA, boiler components have
been supplied to China and secemles steal Tubas have been exported to
Malaysia.
CHAPTER-IV
In this chapter an attempt has been made to analysis how efficiently the
periodical review or report of the progress made by the concern and deals with
the state of the investment, in the business and ‘result achieved’ during the
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Ratio analysis is a technique of analysis and interpretation of financial
firm. Analysis of a financial statement with the aid of ratio helps to arrangements
1) Current Ratio
Current ratio may be defined as the relationships between current assets and
those, the amount of which can be realized within a period of one year. Current
liabilities are those amounts which are payable within a period of one year. A
Current Assets
Current Ratio =
Current liabilities
(in crores)
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2015-2016 60218 32855 1.83
Interpretation
Current ratio during the year 13-14 is the 1.81. In the year 2016-17 it was
maximum 1.97 and second highest in the year 2014- 15 it was 1.96. Last year
The ideal value of current ratio 2:1, but during the period of study, the
current ratio is lesser than the standard. This shows the current ratio to shows a
do down ward which indicates the inefficiency of the company to meet its current
obligations.
CHART NO.1
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2) Liquid Ratio:-
The teem ‘Liquidity’ refers to the ability of a firm to pay its short – term
obligations as and when they become due. The term quick assets or liquid assets
refers current assets, which can be converted into cash immediately. It comprises
all current assets except stock and prepaid expenses. It is determined by dividing
Liquid Assets
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Liquid Ratio =
Liquid Liabilities
(in crores)
Interpretation
Liquid ratio during the year 2008-2009 it attains the maximum value of
5.20. in the above year it was slightly reduced to 2006 – 07 to 1.23. In the next
year, 2007-08 it further decreased to 1.21 and in the next year 2009-10 1.39. in the
During the period of study, the value of liquid ratio is higher than the ideal
requirements. The overall trend of liquid ratio shows up and down ward trend.
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CHART NO.2
3) Proprietory Ratio :
the owners’ contribution to the total value of assets. This ratio shows the long –
Proprietor’s Funds
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TABLE – 4.3 Proprietory Ratio
(in crores)
Assets Ratio
Interpretation
Proprietory ratio during the year 2006-07 and 2007-08 it attains the
reduced to 0.39. In the next year, 2009-10 It further reduced to 0.36. During the
CHART NO.3
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4) Fixed Assets to Net Worth Ratio:
This ratio shows the relationship between fixed assets and proprietor’s
funds. The purpose of this ratio is to fend out the percentage of the owners fund
Fixed Assets
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Proprietor’s funds
(in crores)
Interpretation
Fixed asset to Net worth Ratio during the year 2006-07was 0.18. it was
slightly reduced to 0.14 in the 2006-07 year. In the next year 2007-08 and 2009-10
the net worth ratio0.15. The same is increased to a maximumof 0.20 in the year
2010-2011
CHART NO.4
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5) Net Profit Ratio
Net Profit Ratio establishes a relationship between net profit (after taxes)
and sales. It is determined by dividing the net income after tax to the net sales for
Net Profit
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Net Profit Ratio = ------------------------------- x 100
Sales
(in crores)
Ratio
Interpretation
From the table, it is found that the net profit has been fluctuating during the
study period. In the year 2006-07 the net profit ratio was 9.2%. In the year 2007-
08it was increased to11.6%. In the next year 2008-09it was further
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increased12.9%. During the year 2009-10 there was a slightincreasesto 13.4%.
CHART NO.5
also measures the effectiveness of the firm’s sales efforts. The ratio is calculated
as follows.
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Cost of goods sold
Average Stock
--------------------------------------
(in crores)
Interpretation
From the table, it is found that the stock Turnover ratio has been fluctuating
during the study period. In the year 2006-07 it was 2.97, It increases during the
year 2007-08 was slightly to 3.25. In the year 2008-09 it was 3.00 and
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decreasesto 2.38in the year 2009-10 and during the year 2010-2011 it was
increased to2.47.
CHART NO.6
The purpose of this ratio is to discuss the credit collector power and policy
of the firm. This ratio is established between account receivable and net credit
Rs Rs
Interpretation
From the table, it is found that the Debtor Turnover ratio has been
fluctuating during the study period. In the year 2006-07 it was 1.73, It increases
during the year 2007-08 was slightly to 2.02. In the year 2008-09 it was
decreased to 1.93 and decreases to 1.78 in the year 2009-10 and during the year
CHART NO.7
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8) Average debt collection period
The average number of days that lapsed between the receipt of the invoice
by customers and the actual payment of the invoice . When measured against the
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credit terms obtained from suppliers, average the account period shows the
length of time during which the firm is financing the account receivable either
with its own funds or borrowed funds. The radio may be calculated as follows:
Debtors B/R
(in crores)
Period
Interpretation
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Debt Collection period ratio in the year 06-07 was 210 days. In next year
07-08 it further reduced to 180 days. In the next year 08-09 it was 188 days. In
the next year 2009-10 it was 204 days. During the years 2010-11 it was 208 days.
From the above it is inferred that the debt collection period shows a fluting
trend, which indicates quick recovery of money from debtors and also indirectly
CHART NO.8
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9) Creditors turnover ratio:
It indicates the number of times on the average that the creditors turnover
each year. Creditors turnover ratio indicates the number of items the accounts
payable rotate in a year. It signifies credit period enjoyed by the firm in paying its
. Credit Purchases
(in crores)
The creditor Turnover ratio during the year 06-07 was 2.32. In the year 07-
08 it was increased to 24.17. In the year 08-09 creditors turnover ratio slightly
reduced to 2.87. In the year 07-08 it was reduced to 2.67. During the year 2010-
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From the above it in inferred that the creditors turnover ratio shows an
upward trend which indicates that the company is highly efficient in making.
CHART NO.9
Creditors + B/P
days)
Credit Purchase
A Lower Ratio shows that the creditors being paid promptly. The amount
payable depends upon the purchase policy, the quantum of purchase and suppliers
credit policy.
(in crores)
year
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The average payment period during the year 2006-07 was 156 days. From
the year 2007-08 it was heavily decreased 15 days. In the year 2008-09 average
payment period was 126 days. In the year 2009-10 it was 136 days. This last year
CHART NO.10
61
The ratio indicates that extent to which the investments in Fixed assets
the investment in Fixed assets has been judicious or not. The ratio is calculate as
follows.
Sales
Fixed assets
(in crores)
Turnover
Interpretation
62
The fixed asset turnover ratio during the year 2006-07 was 9.06. It is found
that the fixed asset turnover ration has been fluctuating during the study period. In
the year 07-08 it was 12.44. In the year 08-09 it was 14.51. During the year 2007-
08 the fixed asset turn over ratio was 13.05. This, last year 2010-2011 it was
decreased to 10.67.
CHART NO.11
63
Managerial efficiency is also calculated by establishing the relationship
between cost of sales or sales with the amount of capital invested in the business.
Capital turnover Ratio is calculated with the help of the following formula.
Sales
crores)
Interpretation
It is inferred from the above table the capital turnover ratio for the year 06-
07 was 1.71. In the year 07-08 it was 1.98. where as In the year was 2008-09 it
was increased to 2.13. In the year 2009-10 it was slightly decreased to 1.98. But
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CHART NO.12
65
Profitability can be measured in terms of relationship between net profit
Net Profit
Table assets
assets
Interpretation
From, the above table, it was found that the return on total asset has been
fluctuating during the study period. In the year 2006-07 it was 10.92. In the year
2007-08 it was increased to 14.65. In the year 2008-09 was increased further
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increased to 16.71 and in the year 09-10 it was reduced to 15.09. During the year
CHART NO.13
67
Operating ratio is an indicative of the proportion that the cost of sales bears
to sales. ‘Cost of sales’ includes direct cost of goods sold as well as other
net sales.
Sales
TABLE – 4.14
(in crores)
sold + operating
expenses
68
Interpretation
The above table clearly reveals that the Operating ratio for the year 06-07
was 83.9. But in the year 07-08 it was slightly reduced to 81.9 and in the year 08-
09 it was further reduced to 79.8. In the year 09-10 It was 79.1. During the year
CHART NO.14
relationship between cost of goods sold / net sales and assets/ investments of a
firm. The figure of net sales can be used where information regarding cost of
goods sold is not available. There are many variants of this ratio accordingly as
Total Assets
Sales
(in crores)
ratio
Interpretation
70
From the table, it is understood that the Asset turnover ratio for the 2006-
07 was 1.4. In the year 2007-08 it was reduced to 1.2. In the year 2008-09 it was
further reduced to 1.1. In the year 2009-2010 there is slight increase to 1.3.while
CHART NO.15
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16) Gross Profit Ratio:
Gross Profit ratio measures the relationship of gross profit to net sales and
fund. Secondly, this ratio also serves as important tool in shipping the pricing
policy of the firm. This ratio is calculated by dividing gross profit by net sales.
Gross Profit
Net Sales
(in crores)
Ratio
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The above table shaows that the Gross profit Ratio during the year2006-07
was 16.0%. In the year 2007-08 it was increased to 18.0%. In the following year
2008-09 increased to 20.1 %. In the year 2009-10 there was slight increases
to20.8 %. In this last year was 2010-11the gross profit ratio was 17.4 %
CHART NO.16
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TABLE – 4.17
2006-07 to 2007-08
(in crores)
change
Assets:
Liabilities :
Liabilities
Interpretation
From this table, it is found that the comparative statement for the year has
been fluctuating during the study period. In the year 2006-07 to 2007-08 having
fixed assets was 2.36 & current asset was increased to 22.39. and in the year
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2006-07 to 2007-08 current liabilities increased 23.70 and other liabilities it was
14.11.
CHART NO.17
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TABLE – 4.18
2007-08 to 2008-09
(in crores)
change
Fixed Asset
Current
Liabilities
Interpretation
From this, table was comparative statement for the year has been
fluctuating during the study period. In the year 2007-08 Fixed assets was
increased by 10.62 . Current assets was 28.97. and the current liabilities was
35.08.
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CHART NO.18
77
TABLE – 4.19
2008-09 to 2009-10
(in crores)
change change
Fixed Asset
Current Liabilities
Interpretation
assets was increased by 26.95 while the Current assets was increased by 31.53
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CHART NO.20
79
TABLE – 4.20
2009-2010 to 2010-2011
change
Fixed Asset
Current
Liabilities
2011.The above table clearly reveals that the was tremendous increase in the fixed
asset to 60.28. In the same year current asset was increased by 33.19 and the
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CHART NO.20
81
Method of Least square:
TABLE – 4.21
codes) values Yc
Interpretation
yc = a+ lex
since £ x = 0
a= £Y/N le = £x7/£x2
A = 28932/5 = 5786.4
D = 24165/10 = 2416.5
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The Linear trend for sales by the method of least squares is
= 5786.4 + 7249.5
= 5786.4 + 9666
Forecasted value
(In Crores)
83
CHAPTER-V
FINDINGS
Current ratio shows a document trend indicating the company not able to
fulfill current obligations furthers this also indicate that liquidity position of the
In all the five years the current ratio is less than the ideals of 2. Creditors
term over ratio shows an upward trend and indicates better credit management.
In all the five years the liquid ratio is higher than the ideal ratio of 1
Common size financial statements clearly shoes the firm allocates half of the total
The firm’s debt collection period have more than 180days it increased the
debt collection period year by year. It shows firms liberal debt collection policy.
4. Return on total assets that decreased from 15.09 in the year 2009-2010 to 12.26
in the 2010-2011.
5. Operating ration has increased from 79.1 in the year 07-08 to 82.5 in the year
2010-11
7. Gross profit ratio has come down from 21% in year 2009-2010 to 17% in
2010-11.
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8. Sales shows the increasing trend at the rate in every year.
SUGGESTIONS
The current ratio of the company is below the standard ratio in all the 5
The debt collection period is more than 180 days which is to be reduced or
The gross profit of BHEL has to be increased , this can be done by taking
steps to reduce the cost of sales , which have its own affect over the gross profit.
As the consumption of raw materials holds a wider part in the cost of sales.
Researcher who is in the hands of the company to adopt consistent pricing policy
regarding raw materials which ultimately reduce the cost of sales & which in
The company may take one of the measures for improving more profits,
sale should be enhanced from into end through innovative marketing techniques.
The concern must take measures to avoid dead stock – which has an
adverse.
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Sales are to be increased to keep with increased in fixed Assets in order
CONCLUSION
Bharat Heavy Electricals units bying in India come under the purview of
divisions. Of this Bharat Heavy Electricals limited Tiruchirappalli is one the unit
of not only in India but also international markets in terms of complicity of work
as well as Technology etc. BHEL has over the year established its reference in
to700 countries across the world. This unit gives more employment ie to
thousands and thousands of workers. It gives more protection and safety to the
and medical aids and so an. It’s focus attention is on 56 adopted villages having
Finally, I pray God requesting to develop the unit more and in day by day.
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