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INTRODUCTION AND RESEARCH

METHODOLOGY
1.1 INTRODUCTION TO THE TOPIC
1.2 DEFINITION AND MEANING OF THE
TOPIC
1.3 RELEVANCE OF THE STUDY
1.4 SCOPE OF THE STUDY
1.5 OBJECTIVE OF THE STUDY
1.6 RESEARCH METHODOLOGY
1.7 PRIMARY AND SECONDARY DATA
1.8 LIMITITATIONS OF THE STUDY

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1.1 INTRODUCTION
The term “analysis of financial performance” also known as
“analysis of preparation of financial statements”, refers to the
process of determining financial strength and weaknesses of the
firm by establishing strategic relationship between the items of
the balance sheet, profit and loss account and other operative
area.
Accounting is the process of identifying, measuring and
communicating economic information to permit informed
judgment and decision by the users of the information. It involves
recording, classifying and summarizing various business
transactions. The end products of business transaction are the
financial statement comprising primarily the position statement
or the balance sheet and the income statement or the profit and
loss account. These statements are the outcome of summarizing
process of accounting and are therefore the sources of
information the basis of which conclusions are drawn about the
profitability and the financial position of a concern.
Financial statements are the basis for decision making by the
management as well as all other outsiders who are interested in
the affairs o the firm such as investors, creditors, customers,
suppliers, financial institutions, employees, potential investors,
government and the general public, the analysis and the
Interpretation of financial statement depends upon the nature
and type of information of financial statement depends upon the
nature and type of information available in those statements.

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 An analysis of financial statement is an important aid to the
management of any organization for decision making focus of
financial analysis is on the key finger in the financial statement
and the significant relationship exists
Between key fingers. The analysis of financial statement is a
process evaluating relationship between component parts of
firm’s financial analysis which involves three approaches.

 The first approaches views finance as to providing of funds

needed by a business on most suitable terms. This approach
confines to the raising of funds and to the study of financial
institutions and instruments from where funds can be procured.
 The second approach relates finance to cash.
 The third approach views finance as being concerned with rising
of funds and their effective utilization.

1.2 Definition and Meaning of Financial Statement:

The process of reviewing and evaluating a company’s financial
statements, thereby gaining and understanding of the financial
health of the company and enabling more effective decision
making.
A financial statement is an organized collection of data according
to logical and consistent accounting procedures. Its purpose is to
convey and understanding of some financial aspects of business
firm. It may show position at a moment of time as in the case of a
balance sheet or may reveal a service of activities over a given
period of time as in the case of profit and loss account.
Thus the term financial generally refers to two basis statement:
 The profit and loss account or income statement and

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 The balance sheet or the position statement.
Of course, a business may also prepare
1. Statement of retained earnings and
2. Statement of changes in financial position in addition to the above
statements.
These statements are the basic and formal means through which
the corporate management communities financial information to
various users. They are primarily directed towards the needs of
owners and incidentally to the needs
external parties, which include investors, tax authorities,
government, employees etc.

1.3 Relevance of The Study

According to maigs and meigs (2003, financial statement are a
structured representation of the financial position and financial
performance of an entity. The objective of financial statement is to
provide information about the financial position, financial
performance and cashflows of an entity that Is useful to a wide
range of users in making economic decisions.
Financial statem,ent also show the result of the management’s
stewardship of the resources entrusted to it. To meet these
objectives, financial statements provide information about an
entity’s.
i) Assets
ii) Liabilities
iii) Equity
iv) Income and expenses including gains and losses

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 v) Contribution by and distribution to owners in their
capacity as owners, and
vi) Cash flows
A complete set of financial statement comprises:
1) A statement of financial position as the end of the period:
2) A statement of comprehensive income for the period:
3) A statement of changes in equity for the period
4) A statement of cash flow for the period.
5) Notes of account comprising a summary of significant
accounting policies and other explanatory information; and
6) A statement of financial position as at the beginning of the
earliest comparative period when an entity applies an
accounting policy retrospectively or makes a retrospective
restatement of items in its financial statement or whe it
reclassifies items in its financial statements.

1.4 Scope of the study

The study covers almost the entire area of financial operations
covered by “BHARAT SANCHAR NIGAM LIMITED” the study is
been conducted with the help of data obtained from audited
financial records. The audited financial records are the company
annual reports pertaining to past 5 years from 2011-12 to 2016-
17 and the audited financial records are obtained from the
company’s annual report. The researchers tries to measures the
performance of the organization and its working capital
management in terms of financial wealth.

1.5 Objectives of the study

 To study the financial performance analysis of “BHARAT
SANCHAR NIGAM LIMITED”.
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 To analyze the financial statement of the company by using
financial tools
 To analyze the financial changes over a period of five years
 To evaluate the financial position of the company in terms of
solvency, profitability, activity and earnings ratios.
 To suggest effective measures in the existing system of the
company.

1.6 Research Methodology

Research is defined as the process used to collect information and
data for the purpose of making business decisions. The
methodology may include publication research, interviews,
surveys and other research techniques, and could include both
present and historical information.
Research means ‘know about new things;. Sometimes, it may refer
to scientific search pertinent information on specific topic. In fact
research is an art of scientific investigation.
In this study of sample company named BSNL has been taken for
analysis of financial position in general and liquidity in specific.
Present study is based on secondary data i.e. published annual
reports of the company. These financial data is classified,
tabulated and edited as per the requirement of the profitability
analysis of the company. This study has covered 9 years' data
from 2002-03 to 2010-11 for analysis of financial position of
BSNL. The financial and liquidity position of BSNL have been
analyzed by the financial techniques of ratio Analysis. The
collected data have been analyzed with the help of the all the
major relevant financial ratios such as:
I. Current Ratio;

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 II. Liquidity Ratio;
III. NP Ratio;
IV. Operating Profit Ratio;
V. EPS;
VI. P/E Ratio;
VII. Debt-Equity Ratio;
VIII. Fixed Assets to Net worth Ratio;
IX. Current Assets to Net worth Ratio;
X. FA turnover Ratio;
XI. WC turnover Ratio;
XII. Debtors turnover Ratio; and
Creditors turnover Ratio analysis from stake holder's point of
view. The ability of an organization to analyze its financial
position is essential for improving its competitive position in the
marketplace. Through a careful analysis of its financial
performance, the organization can identify opportunities to
improve performance of the department, unit or organizational
level. In this context researcher has undertaken to assess the
financial performance of BSNL as a case study to understand how
management of finance plays a crucial role in the growth and
development of the public sector company.

1.7 Data Collection:

The data collection is classified into two types they are as follows.
1. Primary data
1. Secondary data

Primary data collection:

The information collected directly without any reference is
primary data. In this study it is mainly though conversation with
concerned officers and staff numbers individually.

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 Secondary data collection:
The secondary data collections are collected from information
which is used by information. This information is already
collected and analyzed by other and that information is used by
others. The secondary data are collected from following ways.
1. Company’s annual reports
2. Company’s website
3. Manual

1.8 Limitations of the study

 The study is restricted for a period of five years.
 Assumed that years are a responsible period to get fault accurate
picture, policies and practices of management of the company.
 Due to the inadequate time it is not possible to analyze all respect
relevant to the study.
 The analysis is based on annual report of the company.
 Authorities were reluctant about the working of the company.

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 CHAPTER-2

HISTORY AND PROFILE OF

BHARAT SANCHAR NIGAM
LIMITED (BSNL)
2.1 COMPANY PROFILE
2.2 VISSION
2.3 MISSION
2.4 OBJECTIVES OF BSNL
2.5 CHAIRMAN AND MANIING DIRECTOR
2.6 OUTLOOK AND FUTURE STRATEGY
2.7 CORPORATE SOCIAL
RESPONSIBILITY
2.8 AWARDS AND ACCOLADES

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2.1 COMPANY PROFILE AND HISTORY

Bharat Sanchar Nigam Limited (known as BSNL, India

Communications Corporation Limited) is a public sector
telecommunication company in India.
Bharat Sanchar Nigam Ltd. was incorporated on 15th September
2000. It took over the business of providing of telecom services
and network management from the erstwhile Central
Government Departments of Telecom Services (DTS) and
Telecom Operations (DTO), with effect from 1st October‘2000 on
going concern basis. It is one of the largest & leading public sector
units providing comprehensive range of telecom services in
India.
BSNL has installed Quality Telecom Network in the country &
now focusing on improving it, expanding the network,
introducing new telecom services with ICT applications in villages
& winning customer's confidence. Today, it has about 36.42
million line basic telephone capacity, 7.13 million WLL capacity,
95.96 million GSM capacity, 34,727 fixed exchanges, 1,17,090

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GSM BTSs, 9,594 CDMA Towers, 102 Satellite Stations, 7,73,976
Rkm . of OFC, 4751 RKm. of
microwave network connecting 646 districts, 4519cities/towns &
6.25 lakhs villages .

BSNL is the only service provider, making focused efforts &

planned initiatives to bridge the rural-urban digital divide in ICT
sector. In fact there is no telecom operator in the country to beat
its reach with its wide network giving services in every nook &
corner of the country & operates across India except New Delhi &
Mumbai. Whether it is inaccessible areas of Sachem glacier or
North-Eastern regions of the country, BSNL serves its customers
with a wide bouquet of telecom services namely Wire line, CDMA
mobile, GSM mobile, Internet, Broadband, Carrier service, MPLS-
VPN, VSAT, VoIP, IN Services, FTTH, etc.
BSNL is one of major service provider in its license area. The
company offers wide ranging & most transparent tariff schemes
designed to suit every customer. BSNL has 94.36 million cellular
& 1.02 million WLL customers as on 31.10.2016. 3G Facility has
been given to all 2G connections of BSNL. In basic services, BSNL
is miles ahead of its rivals, with 13.88 million wire line
phone subscribers i.e. 56.96% share of the wire line subscriber
base.
BSNL has set up a world class multi-gigabit, multi-protocol
convergent IP infrastructure that provides convergent services
like voice, data & video through
the same Backbone & Broadband Access Network. At present
there are 21.86 million broadband customers including both
wire line & wireless broadband.

The company has vast experience in planning, installation,

network integration & maintenance of switching & transmission
networks & also has a world class ISO 9000 certified Telecom
Training Institute.
During the 2015-16, turnover of BSNL is around Rs. 32,919
Crores.

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 2.2 VISION:
 Be the leading telecom service provider in India with global
presence.
 Create a customer focused organization with excellence in
customer care, sales and marketing.
 Leverage technology to provide affordable and innovative
telecom. Services/products across customer segments.

2.3 MISSION:
Be the leading telecom service provider in India with global
presence.
 Becoming the most trusted, preferred and admired telecom
brand
 Providing reliable telecom services that are value for money
 Generating value for all stakeholders – employees, shareholders,
vendors & business associates
 Excellence in customer service -friendly, reliable, time bound,
convenient and courteous service
 Offering differentiated products/services tailored to different
service segments
 Developing a marketing and sales culture that is responsive to
customer needs
 To explore International markets for Global presence
 Maximizing return on existing assets with sustained focus on
profitability
 Changing policies and processes to enable transparent, quick and
efficient decision making.


2.4 OBJECTIVES:

 To increasing sales revenue with focus on subscriber retention &

acquisition by way of strengthening sales & marketing, quality of
service and customer delivery

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 Accelerate the pace of expansion of mobile & data services with
up-gradation of technology
 Increasing BSNL visibility in urban, sub-urban and rural areas
 Developing sales and marketing team with attitude towards
customer care
 To improve customer care by reducing fault rate, upgrading
Customer service Centres (CSCs) and introducing convergent
billing
 Providing a conducive work environment with strong focus on
performance to enhance customer delight towards BSNL services
 Leverage data services to increase BSNL’s customer’s base &
revenues by providing higher bandwidths capabilities for wire
line and wireless broadband customers
 To strengthen company’s finances by gainful utilization of its
assets through sharing / monetization of existing infrastructure
like land, building and sharing of passive infrastructure like
towers etc.
 Creating Wi-Fi Hot Spots and replacing Legacy wire line
exchanges by Next Generation Network.
 Expanding the reach of fiber network near to the customer
premises particularly in apartment complexes through FTTH in
order to meet the ever increasing bandwidth requirement for
both data & video applications
 To leverage the existing infrastructure of BSNL thereby
contributing towards nation building by facilitating the execution
of government programmers and initiatives viz. National Optical
Fiber Network (NOFN), Network for Spectrum (NFS), and
dwelling on Smart City concept
 To improve productivity by training and skill development and
redeployment of legacy manpower
 Developing knowledge pool exposed to latest technological
advancements
 To explore opportunities in international telecom in developing
markets
 To become preferred service provider to the Government for
reliable and secure service Network and to serve National
security interests
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 Anupam Shrivastava is a 1981 batch of Indian Telecom Service
(ITS) Officer who has more than three decades of experience in
the field of telecommunications. He is BE (Electronics &
Communications) and is also MBA (Mktg.). He has taken
telecommunication trainings in India & Japan.

The foundation of telecom network in India was laid by British

sometime in 19th century. The history of BSNL linked with the
beginning of telecom in India. In 19th century and for almost
entire 29th century, the telecom of India was operated as a
government of India wing. Earlier it was part of erstwhile post
and Telegraph department (P&T). In 1975 the Department of
Telecom(DoT) was separated from P&T. DoT was responsible
for running of telecom service in entire country until 1985 when
Mahanagar Telephone Nigam Limited(MTNL) was carved out
of DoT to run out the telecom services in Delhi and Mumbai . It
is a well known fact that BSNL was carved out of Department of
Telecom to provide level playing field to private telecoms.
Subsequently in 1990 the telecom sector was opened up by the
government for the private investment; therefore it became
necessary to separate the government's policy wings from
operations wings. The government of India corporatized the
operation wing of DoT on October 01, 2000 and named it as
Bharat Sanchar Nigam Limited (BSNL) and then onward BSNL
operates as a public sector.

2.5 Chairman & Managing Director- Shri Anupam

Shrivastava
Anupam Shrivastava took over as CMD, BSNL on 15th of January,
2015. Prior to that he worked as Director (CM) in BSNL Corporate

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Office since May, 2013 where he was responsible for the growth
of mobile business of GSM in BSNL, including all activities related
to Sales & Marketing, VAS, Tariff finalization & revenue. As Zonal
Director for North Zone he was also responsible for monitoring
growth and maintenance of Telecom Network in 8 North Zone
Circles. During his tenure Phase-VII roll-out in all Zones showed
remarkable progress. Approximately 8 million new GSM line with
state-of-the-art technology were added in BSNL GSM Network
which improved quality of service / data speed. Union Govt. gave
GSM mobile tower installation work in more than1800 locations
in LWE areas to be funded through USOF with a total cost of more
than 3500 crores. The PO has been awarded in November, 2014
and is important for both GoI and BSNL. In all approximately Rs.
8,000 crores worth of developmental activities were initiated in
his tenure. During his tenure revenue growth for mobile segment
remained positive. Anupam Shrivastava is also holding the
additional charge of Director (Finance) as the post is lying vacant
since December 2013.

2.6 OUTLOOK AND FUTURE STRATEGY

Indian Telecom Broadband market poised for healthy growth.

NTP 2012 emphasizes for affordable and reliable broadband on
demand by 2015, achievement of 175 Mn connections by 2017
and 600 Mns connections by 2020. Ever increasing demand for
wireless connections across the urban and rural areas, together
with increasing market for VAS and multimedia contents will
build up a strong business case.

The Company is keenly watching the new developments taking

place in the telecom sector inter-alia the entry of new large pan-
India private service provider.

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Your Directors have drawn strategic plans to meet the challenges
thrown by the new entrants. Being an incumbent player with an
array of wide ranging spectrum in all bands across the country
and highly skilled manpower, Your Company is strongly poised to
take on the challenges. Your Company’s philosophy towards the
competition is two pronged, viz. Collaborate and Compete. As
such, wherever it is required to improve its presence or, QoS, your
Company has chosen to enter into ICR arrangements or, Infra
Sharing etc., simultaneously offering highly competitive tariffs.
The Landline 49 and 249 Plan are the examples. In addition to
this, to give further impetus to Customer Care, Your Company,
while acknowledging its USP that it’s the most transparent and
affordable service provider, has started an unique campaign
across the country with a pledge taken by all classes of employees
to give Service With A Smile (SWAS).

2.7 CORPORATE SOCIAL RESPONSIBILITY

The Company, being wholly owned Government Company has
been taking up various CSR initiatives even prior to coming into
force of the provisions of the Act of 2013. The Company had its
own CSR Policy which is now being aligned with the CSR Policy
requirements under the Companies Act 2013. Owing to losses
being incurred by the company since the year 2009-10, no
specific amount could be earmarked for CSR activities. However,
the Company, being a wholly owned Government Company
continued its engagement with social obligations to bridge the
digital divide, apart from employee and their family welfare
programmes. The Company has constituted the Corporate Social
Responsibility Committee of the Board.

2.8 AWARDS AND ACCOLADES

Apart from being the recipient of several awards from the Central
and State Government in the Energy Conservation segment, Your
Company was also conferred with the “Dalal Street Investment

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Journal Best PSU Award 2015, for ‘Highest Turnover PSU in Mini
Ratna – Non manufacturing Category”.

Chapter-3

Data Analysis and Interpretation

3.1RATIO ANALYSIS
a. ANALYSIS AND INTERPRETATION OF
CURRENT RATIO
b. ANALYSIS AND INTERPRETATION OF
QUICK RATIO
c. NET PROFIT RATIO ANALYSIS AND
INTERPRETATION
d. OPERATING PROFIT RATIO ANALYSIS

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 e. ANALYSIS OF RETURN ON
INVESTMENT
f. DEBT EQUITY RATIO
g. FIXED ASSETS TURNOVER RATIO
h. CURRENT ASSETS TURNOVER RATIO
i. WORKING CAPITAL TURNOVER RATIO
3.2 COMPARITIVE BALANCE SHEET AND
PROFIT AND LOSS ACCOUNT OF BSNL
FROM 2011 TO 2016

3.1.A Current ratio”

The ratio 2:1 is considered an idle for current ratio and it is a
conventional rule. It represents a margin of safety of creditors.
The higher the current ratio, the greater the margin of safety: the
larger the amount of current assets in relation current liabilities
the most the firm’s ability to meet its current obligations.
However, current ratio should not be followed blind because a
company with less than 2:1 ratio may be doing well and the one of
high ratio struggles to meet its obligations because current ratio
only measures the quality and not the quality.

Current ratio = current assets/current liabilities

CALCULATION OF CURRENT RATIO OF BSNL:

YEAR CURRENT CURRENT RATIOS

ASSETS LIABILITIES
2010-2011 2555149 2839272 0.89
2011-2012 2267653 1929361 1.17
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 2012-2013 1655204 1944007 0.85
2013-2014 2122331 1994332 1.06
2014-2015 1705246 2260356 0.75

CURRENT RATIO GRAPH

Ratio

1.4

1.2

0.8 Column2
Column1
0.6
Ratio

0.4

0.2

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

GRAPH NO. 3.1

 As a conventional rule a current ratio 2:1 more is considered
satisfactory. BSNl has a current ratio in the financial year 2012-13
gone up to 1.17 times than it is gradually decreasing in the year
2015-2016. Hence BSNL is maintaining slight standard current
ratio which is not good sing of property.
 Also it is not always necessary that a good current ratio indicates
a comfortable liquidity position. If current assets comprise a
greater proposition of less marketable assets or investment,
current ratio has not significance.

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 Larger the amount of current assets in relation to current
liabilities greater the firm’s ability to meet its current obligations.

3.1.B Quick Ratio

This is also known as acid test ratio. It establishes a relationship

with quick or liquid assets and current liabilities. It indicates the
ability of the company to meet its short term liabilities from its
current assets without having to sell stock. It is vital index of the
firm’s liquidity. The ratio of 1:1 is considered to represent a
satisfactory current financial condition. But 1:1 in essence does
not imply sound liquidity position because a high value of quick
ratio in a company may have problem of funds shortage, if it has a
slow paying doubtful and longer period outstanding debtors. At
the same time, if the firms are able to meet its current obligations
in time by turning over their inventories efficiently they can
prosper. Although quick ratio is a more penetrating test of
liquidity than the current ratio, yet it should be used cautiously.
Quick ratio may therefore be calculated as follow:

Quick ratio + quick assets/current liabilities

Calculation of quick ratio of BSNL

Year Quick ratio Current liabilities Ratios

2011-2012 2160325 2200029 0.76
2012-2013 1907975 1929361 0.98
2013-2014 1277995 1944007 0.65
2014-2015 1767603 1994332 0.88
2015-2016 1335558 2260356 0.59

Quick ratio graph:

Quick ratio percentage

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 1.2

0.8

Series 3
0.6
Series 2
Quick ratio percentage
0.4

0.2

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

GRAPH NO. 3.2

Interpretation:

The quick ratio of BSNL is below acceptable norms 2:1.

Comparing to 2012 and 2016 quick ratio has fallen further. It
shows that the absolute liquid assets of BSNL are not sufficient to
meet the current liabilities and is a question against liquidity. The
trend shows that quick ratio is falling down and is necessary to
take preventive measures. They should give more emphasis for
debt collection and generating more cash through operating
activities.
3.1.C Net profit ratio:

The ratio indicates the firm’s ability withstand adverse economic

conditions. It establishes a relationship between net profit and
sales and also indicates management’s efficiency in
manufacturing, administering and selling of products. Net profit
margin ratio is the overall measure of the firm’s ability to turn
each Naira sales into Net profit; it is measured by dividing profit
after tax by sales:

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 Net profit ratio = Net profit/sales * 100
Calculation of Net profit ratio of BSNL

Year Net profit/PAT Sales/Total Percentage

Revenue
2011-2012 (638426) 2968762 (21.50)
2012-2013 (885070) 2793350 (31.68)
2013-2014 (788444) 2712789 (29.06)
2014-2015 (701976) 2799635 (25.07)
2015-2016 (834409) 2864520 (28.75)

NET PROFIT RATIO GRAPH

INTERPRETATION:

BSNL had net loss 21.50 in the year 2011-2012. Then after it was
increasing, now it is 28.75% in 2015-2016
Overall financial position in not good, it will meet future requirement also.

3.1.D Operating Profit Ratio

Average ration can be calculated from the balance sheet items to

determine the proportion of debt in total financing. And can be
equally be calculated from the profit and loss account to
determine the extent to which operating profit are sufficient to
cover the fixed charges (Pendey 2005)
Calculated as:

Operating profit ratio = Profit before Tax/ Turnover

CALCULATION OF OPERATING PROFIT RATIO OF BSNL:
Ratio*100
YEARS PBT TR PERCENTAGE
2011-2012 657979 2968762 (22.16)
2012-2013 882093 2793350 (31.60)
2013-2014 795536 2712789 (29.32)
2014-2015 712419 2799635 (25.44)

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2015-2016 884342 2864520 (30.87)

Sources: computed on the basis of the information given in the annual

reports of BSNL

Operating Profit Ratio Graph:

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
-5

-10

-15 Series 3
Series 2
-20 Operating profit ratio

-25

-30

-35

GRAPH NO.3.3

Interpretation:

The operating profit ratio indicates that in 2011-2012 BSNL have-

22.16%. After 4 years it has been increased to -30.87 i.e 2015-
2016. Because operating expenses are more. Higher operating
profit ratio enables the firm to meet interest, income tax
dividends and retain profits for expansion.
3.1.E Return on Investment Ratio:

The ratio is a useful measure of the profitability of all the financial

resources invested in the firm’s assets. Return on Investment
(ROI),measures the gain or loss generated on an investment

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relative to the amount of money invested. ROI is usually
expressed as a percentage and is typically used for personal
financial decisions, to compare a company’s profitability or to
compare the efficiency of different.

Return on Investment = Profit after Tax/Total

capital+reserve+surplus*100

CALCULATION OF RETURN ON INVESTMENT OF BSNL:

Years Profit after Total capital+reserve+surplus Percentage

tax
2011- (638426) 1250000=6756875 (7.97)
2012
2012- (885070) 1250000=5867102 (12.43)
2013
2013- (788444) 1250000=5076420=37633 (12.38)
2014
2014- (701976) 1250000=4470295 (12.20)
2015
2015- (823409) 1250000=3506443=28497 (17.21)
2016

Sources: computed on the basis of the information given in the annual

reports of BSNL.

Return on Investment

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 0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
-2

-4

-6

-8 Column2
-10 Column1

-12 Return on Investment

-14

-16

-18

-20

GRAPH NO.3.4

Interpretation:

o Return on Investment ratio decreased continuously from all the

years.
o It is decreasing in an increasing rate from -7.97 to -17.21 from
2011-2012 to 2015-2016.
3.1.F Debt-Equity Ratio

This ratio expresses the direct proportion of debt to owner’s

equity. It is indirectly computed by dividing total debt by net
worth i.e.

Debt-Equity Ratio = Total Debt/Equity

CALCULATION OF DEBT-EQUITY RATIO OF BSNL:

(Rs. In lakhs)

Years Equity Debt Ratio

2011-2012 8006875 550923 0.069
2012-2013 7117102 596575 0.084

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 2013-2014 6363873 574043 0.090
2014-2015 5753332 402074 0.069
2015-2016 4784940 350096 0.073

Sources: computed on the basis of the information given in the annual

reports of BSNL.

Debt-Equity Ratio

0.1

0.09

0.08

0.07

0.06
Series 3
0.05
Series 2
0.04 Debt-Equity Ratio
0.03

0.02

0.01

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

GRAPH NO.3.5

Interpretation

 The lower the Debt-equity Ratio, the higher the degree of

protection enjoyed by the creditors.
 The Debt-equity ratio, is increasing year after for 3 years from
2011 to 2014, after 2014 suddenly it fell down with increasing
rate.
 It can have a financial leverage on company but as BSNL is not
making profits from 2011 It is not advisable to admit more debt
capital as it may cause the company to bear more financial burden
in terms of interest payments. Instead they can make effective
utilization of its reserves.
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3.1G Fixed Assets Turnover Ratio

It measures the willingness of the firm to efficiently utilize its

fixed assets and current assets separately.
It is computed by the following:

Fixed Assets Turnover Ratio=Net sales/Net fixed

assets
CALCULATION OF FIXED ASSETS TURNOVER RATIO OF BSNL:

Years Fixed assets Revenue FATR

2011-2012 7753915 2968762 0.38
2012-2013 7051480 2793350 0.40
2013-2014 6455700 2712789 0.42
2014-2015 5449945 2799635 0.51
2015-2016 4713414 2864520 0.61

Sources: computed on the basis of the information given in the annual

report of BSNL.

Fixed Assets Turnover Ratio:

0.7

0.6

0.5

0.4 Column2
Column1
0.3
Fixed Assets turnover Ratio

0.2

0.1

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

GRAPH NO.3.6
27
Interpretation:

It indicates the firm’s ability to generate sales per rupee of

investment in fixed assets. In general, higher the ratio, the more
efficient the management and utilization of fixed assets, and vice
versa, may be noted that there is no direct relationship between sales
are influenced by other factor. The main reason is the drop in operating
profits.

3.1.H Current Assets Turnover ratio:

It measures the willingness of the firm to efficiently utilize its fixed assets
and current assets separately.

It is computed by the following:

Current Assets to Net worth= Current Assets/Total

Capital = reserve and surplus

CALCULATION OF CURRENT ASSETS TURNOVER RATIO OF BSNL:

Years Current assets Revenue CATR

2011-2012 2555149 2968762 0.86
2012-2013 2267653 2793350 0.81
2013-2014 1655204 2712789 0.61
2014-2015 2122331 2799635 0.75
2015-2016 1705246 2864520 0.60

Sources: computed on the basis of the information given in the annual

report of BSNL.

Current assets Turnover Ratio

28
 1

0.9

0.8

0.7

0.6
Column1
0.5
Column2
0.4 Series 1
0.3

0.2

0.1

0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

GRAPH NO. 3.7

Interpretation:

The current assets turnover ratio is increasing every year, but it is

not real because if we look at figures of current assets every year
it is lower than the previous year. From 2011 current assets
investment fell down more in 2014 compared with 2011. So this
Ratio is misleading. But it is good that even at decreasing trend of
revenue BSNL is able to cover its current assets investment from
the revenue generated
3.1.I Working Capital Turnover Ratio

This indicates the extent in which current assets (or working

capital gap) relate to sales calculated by:

Working Capital Turnover= sales/working capital

CALCULATION OF WORKING CAPITAL TURNOVER RATIO OF BSNL:

(Rs in Lakhs)

29
 YEAR Net working Sales WCTR
capital
2011-2012 (284123) 2968762 (10.44)
2012-2013 338292 2793350 8.25
2013-2014 (288803) 2712789 (9.39)
2014-2015 127999 2799635 21.8
2015-2016 555110 2864520 (5.16)

Sources: computed on the basis of the information given in the

annual report of BSNL
WORKING CAPITAL TURNOVER RATIO

25

20

15

10
Column3
5 Column2
Working Capital Turnover Ratio
0
2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
-5

-10

-15

GRAPH NO.3.8

Interpretation:

 Working capital is fluctuating from every year, it is not constant in

its progress.
 Working capital measures how well a company is utilizing its
capital support a given level of sales.

30
 3.2 Comparative Balance sheet Of BSNL for the years
ended 31st march 2012 (session 2011-2012)

Notes as at 31st march as at 31st march

2012 2011
I. EQUITY AND
LIABILITIES
Shareholder’s Funds 3 1,250,000 1,250,000
Share capital 4 5,867,10 6,756,875
Reserves and surplus
7,117,102 8,006,875
Non-current liabilities
Long term borrowings 5 98,318 98,318
Other long term 6 426,257
liabilities 7 627,981 452,605
Long term provisions 583,098
1,152,556 1134,021
Current liabilities
Short term borrowings 8 204,047 72,000
Trade payables 9 984,668
Other current 10 612,631 1,139,305
liabilities 11 128,015 622,374
Short term provisionS
121,231
TOTAL 1,929,361 1954,910
10,199,019 11,095,806
Assets
II. Non-current assets
Fixed assets 12 5,083,121
- Tangible assets 1,620,053 5,516,005
-Intangible assets 428,048 1,713,231
- Capital work-in- 523,412
progress 2,043
- Intangible assets 1267
under development

31
 Non-current 13 601,352 550,141
investments 14 6,238 9,215
Deferred tax assets 15 66,896
(net) 74,637
Long-term loans and
advances
7,807,751
8,387,908
Current assets
Inventories 16 359,678 394,824
Trade receivables 17 396,218
Cash and Bank balances 18 188,509 443,181
Short-term loans and 19 114,142
advances 20 250,008
Other current assets 1,209,106
124,391

1,342,745

2,267,653 2555149
Intra/Inter circle 32 123,615 152,749
remittances
Total 10,199,019
11,095,806

STATEMENT OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED

31ST MARCH 2012 (SESSION 2011-2012)

Notes For the years For the years

ended 31st march ended 31st march
2012 2011
Revenue from
Operations 22 2,599,850
Other income 22 193500 2,704,471
264,291
Total Revenue 2,793,350
2,968,762
Employees’
remuneration and
benefits 23 1,340,604

32
Financial expenses 24 18,412 1,379,095
Depreciation and 39,439
amortization 12 917,432
Other expenses
- 972,543
Administrative,
operating and 26 1,029,391
other expenses
- License and 29 352,772 1,012,013
Spectrum fee 197,172
Total Expenses 3,658,611
3,600,262
Profit/(Loss)
before prior period (865261) (631,500)
items
Prior-period items 27 ((16,832) ((26,479)
(net)
Profit/(Loss) ((882,093)
before tax (657,979)
Tax expense :
Tax for earlier (2,977) (2046)
years (2,1599)
- Deferred tax

Profit/(Loss) for the year ((885,070)

(638,426)
Earnings per share 34 ((17.70) (12.77)
(in Rs.)

COMPARITIVE BALANCE SHEET OF BHARAT SANCHAR NIGAM

LIMITED FOR THE YEAR ENDED 31ST MARCH 2013 (SESSION 2012-
2013)

(All amounts in Rs. lakhs, unless stated otherwise)

Notes as at 31st march as at 31st march

2013 2012

33
III. EQUITY AND
LIABILITIES
Shareholder’s Funds 3 1,250,000 1,250,000
Share capital 4 5,076,240 5,867,102
Reserves and surplus 5 37,633
Deferred government
grant
6363873 7,117,102
Non-current liabilities
Long term borrowings 6 170,318 170,318
Other long term 7 403,725 426,257
liabilities 8 687,008 627,981
Long term provisions
1,261,051 1,224,556
Current liabilities
Short term borrowings 9 950,092 132,047
Trade payables 10 256,114 984,668
Other current 11 684,617 678,929
liabilities 12 53,184 46,231
Short term provisions

TOTAL 1,944,007 1,841,875

9,568,931 10,183,533
Assets
IV. Non-current assets
Fixed assets 13
- Tangible assets
-Intangible assets 4,555,753 5,006,679
- Capital work-in- 1,528,885 1,620,053
progress 369,600 422,705
- Intangible assets
under development 1,462 2,043
6,455,700 7,051,480
Non-current 14 657,511 601,352
investments 15 13,330 6,238
Deferred tax assets 16 684,728 650,476
(net)
Long-term loans and
advances
7,811,269 8,309,546
34
Current assets
Inventories 17 377,209 359,678
Trade receivables 18 295,339 396,218
Cash and Bank balances 19 116,125 188,509
Short-term loans and 20 92,617 114,142
advances 21 773,914 691,825
Other current assets
1,655,204 1,750,372
Intra/Inter circle 33 102,458 123,615
remittances
Total 9,568,931 10,183,533

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH
2013 (SESSION 2012-2013)

Notes For the years For the years

ended 31st march ended 31st march
2013 2012
Revenue from
Operations 22 2,565,481 2,598,213
Other income 23 147,308 195,137

Total Revenue 2,712,789 2,793,350

Employees’
remuneration and
benefits 24 1,375,782 1,340,604
Financial expenses 25 35,147 18,412
Depreciation and
amortization 13 833,643 917,432
Other expenses
-
Administrative,
operating and 26 1,040,235 1,029,391
other expenses
- License and 29 205,236 352,772
Spectrum fee
Total Expenses 3,490,043 3,658,611
Profit/(Loss)
before prior period (777,254) (865,261)
items
Prior-period items 27 (18,282) (16,832)

35
(net)
Profit/(Loss) (795,536) (882,093)
before tax
Tax expense : 7,092 (2,977)
- Deferred tax

Profit/(Loss) for the year (788,444) (885,070)

Earnings per share 34 (15.77) (17.70)

(in Rs.)

COMPARITIVE BALANCE SHEET OF BHARAT SANCHAR NIGAM

LIMITED FOR THE YEAR ENDED 31ST MARCH 2014 (SESSION 2013-
2014)

Notes as at 31st march as at 31st march

2014 2013
I. EQUITY AND
LIABILITIES
Shareholder’s Funds
Share capital 3 1,250,000 1,250,000
Reserves and surplus 4 4,470,295 5,076,240
Deferred government 5 33,037 37,633
grant
5,753,332
6,363,873
Non-current liabilities
Long term borrowings 6 72,000 170,318
Other long term 7 330,074 353,884
liabilities 8 783,606
Long term provisions 687,008
1,185,680
1,211,210
Current liabilities
Short term borrowings 9 373,853 256,114
Trade payables 10 870,657
Other current 11 682,363 950,092
liabilities 12 67,459 721,054

36
 Short term provisions 53,184

TOTAL 1 ,994,332 1980444

8,933,344 9,555,527
Assets
II. Non-current assets
Fixed assets 13
- Tangible assets 4,555,753
-Intangible assets 4,144,428 1,528,885
- Capital work-in- 917,677
progress 369,600
- Intangible assets 386917
under development 1462
923

5,449,945 5
Non-current 14 718,074 6,455,700
investments 657,511
Deferred tax assets 15 23,773
(net) 13,330
Long-term loans and 16
advances 532,684
683,370

6,724,476
7,809,911
Current assets
Inventories 17 354,728 377,209
Trade receivables 18 276,258 295,339
Cash and Bank balances 19 93,195 116,125
Short-term loans and 20 76,344 93,975
advances 21 1,321,806 760,510
Other current assets
2,122,331
1,643,158
Intra/Inter circle 33 86,537 102,458
remittances
Total 8,933,344
9,555,527

37
 Statement of Profit and Loss 31ST MARCH 2014 (SESSION
2014-2015)

Notes For the years For the years

ended 31st march ended 31st march
2015 2014
Revenue from
Operations 22 2,615,326 2,565,481
Other income 23 184,309 147,308

Total Revenue 2,799,635

2,712,789
Employees’
remuneration and
benefits 24 1,543,584 1,375,782
Financial expenses 25 21,964 35,147
Depreciation and
amortization 13 602,317 833,643
Other expenses
-
Administrative,
operating and 26 1,100,765 1,040,235
other expenses
- License and 29 224,330 205,236
Spectrum fee
Total Expenses 3,492,960 3,490,043
Profit/(Loss)
before prior period (693,325) (777,254)
items
Prior-period items 27 (19,094) (18,282))
(net)
Profit/(Loss) (712,419)
before tax (795,536)
Tax expense : 15 10443
- Deferred tax 7092

38
 Profit/(Loss) for the year ((823,409) (701,976)

Earnings per share 34 (14.04) (15.77)

(in Rs.)

COMPARITIVE BALANCE SHEET OF BHARAT SANCHAR NIGAM

LIMITED FOR THE YEAR ENDED 31ST MARCH 2015 (SESSION 2014-
2015)

Notes as at 31st march as at 31st march

2015 2014
I. EQUITY AND
LIABILITIES
Shareholder’s Funds 3 1,250,000 1,250,000
Share capital 4 3,506,443 4,470,295
Reserves and surplus 5 28,497 33,037
Deferred government
grant
4,784,940 5,753,332
Non-current liabilities
Long term borrowings 6 5,619 72,000
Other long term 7 344,477 330,074
liabilities 8 28,438 85,532
Long term provisions
378,534 487,606
Current liabilities
Short term borrowings 9 632,871 373,853
Trade payables 10 828,914 870,657
Other current 11 734,591 682,363
liabilities 12 63,980 67,459
Short term provisions
TOTAL 2,260,356 1,994,332
7,423,830 8,235,270

39
 Assets
II. Non-current assets
Fixed assets 13
- Tangible assets 3,522,316
-Intangible assets 863,184 4,144,428
- Capital work-in- 327,914 917,677
progress 386,917
- Intangible assets - 923
under development

4,713,414 5,449,945
Non-current 14 20,000 20,000
investments 15 84,706 23,773
Deferred tax assets 16 843,152 532,684
(net)
Long-term loans and
advances
5,661,272 6,026,402
Current assets
Inventories 17 369,688 354,728
Trade receivables 18 232,660 276,258
Cash and Bank balances 19 122,477 93,195
Short-term loans and 20 69,135 76,344
advances 21 911,286 1,321,806
Other current assets
1,705,246 2,122,331
Intra/Inter circle 33 57,312 86,537
remittances
Total 7,423,830 8,235,270

STATEMENT OF PROFIT AND LOSS ACCOUBT FOR THE YEAR ENDED

31ST MARCH 2015 (2014-2015)

Notes For the years For the years

ended 31st march ended 31st march
2015 2014
Revenue from
Operations 22 2,724,223 2,615,326

40
Other income 23 140,297 184,309

Total Revenue 2,864,520 2,799,635

Employees’
remuneration and
benefits 24 1,496,350 1,543,584
Financial expenses 25 50,189 21,799
Depreciation and
amortization 13 &43 881,680 602,317
Other expenses
-
Administrative,
operating and 26 1,083,959 1,100,930
other expenses
- License and 29 217,032 224,330
Spectrum fee

Total Expenses 3,729,210 3,492,960

Profit/(Loss)
before prior period (864,690) ((693,325)
items
Prior-period items 27 ((19,652) ((19,094)
(net)
Profit/(Loss) (884,342) ((712,419)
before tax
Tax expense : 15 60,933 (10,443)
- Deferred tax

Profit/(Loss) for the year ((823,409) (701,976)

Earnings per share 34 (16.47) (14.04)

(in Rs.)

COMPARITIVE BALANCE SHEET OF BHARAT SANCHAR NIGAM

LIMITED FOR THE YEAR ENDED 31ST MARCH 2016 (2015-2016)

Notes as at 31st march as at 31st march

2016 2015

41
 I. EQUITY AND
LIABILITIES
Shareholder’s Funds 3 1,250,000 1,250,000
Share capital 4 3,116,774 3,506,443
Reserves and surplus 5 24,533 28,497
Deferred government
grant
4,391,307 4,784,940
Non-current liabilities
Long term borrowings 6 498,974 5,619
Other long term 7 332,087 344,477
liabilities 8 - 28,438
Long term provisions
831,061 378,534
Current liabilities
Short term borrowings 9 283,672 632,871
Trade payables - -
-total outstanding dues
of micro and small 268 41
enterprises
-total outstanding dues 10 682,102 828,873
of micro and small 11 858,270 734,591
enterprises 12 27,995 63,980
Other current
liabilities
Short term provisions
TOTAL 1,852,307 2,260,356
7,074,675 7,423,830
Assets
II. Non-current assets
Fixed assets 13
- Tangible assets 3,137,194
-Intangible assets 806,679 3,522,316
- Capital work-in- 306,828 863,184
progress 327,914

4250701 4713414
Non-current 14 20,000 20,000
investments 15 113,645 84,706
Deferred tax assets 16 663,911 843,152
(net)
42
 Long-term loans and
advances
5,048,257 5,661,272
Current assets
Inventories 17 443,371 369,688
Trade receivables 18 261,515 232,660
Cash and Bank balances 19 103,509 122,477
Short-term loans and 20 101,918 69,135
advances 21 1,058,576 911,286
Other current assets
1,968,889 1,705,246
Intra/Inter circle 33 57,529 57,312
remittances
Total 7,074,675 7,423,830

Statement of Profit and Loss FOR THE YEAR ENDED

31ST MARCH 2016 (SESSION 2015-2016)
Notes For the years For the years
ended 31st march ended 31st march
2016 2015
Revenue from
Operations 22 2,844,942 2,724,223
Other income 23 446,928 140,297

Total Revenue 3,291,870 2,864,520

Employees’
remuneration and
benefits 24 1,538,649 1,496,350
Financial expenses 25 54,339 50,189
Depreciation and
amortization 13 713,511 881,680
Other expenses
-
Administrative,
operating and 26 1,139,235 1,083,959

43
other expenses
- License and 29 228,538 217,032
Spectrum fee

Total Expenses 3,674,272 3,729,210

Profit/(Loss)
before prior period (382,402) (864,690)
items
Prior-period items 27 (34,529) (19,652)
(net)
Profit/(Loss) (416,931) (884,342)
before tax
Tax expense : 15 28,939 (60,933)
- Deferred tax

Profit/(Loss) for the year (387,992) (823,409)

Earnings per share 34 (7.76) (16.47)

(in Rs.)

44
 CHAPTER -4

FINDINGS SUGGESTION AND

CONCLUSION
1. FINDING
2. SUGGESTIONS
3. CONCLUSION
4. BIBLIOGRAPHY

45
 4.1 Findings:
Following are the findings that I have made from this study:
 BSNL is making losses continuously for five years from 2011 onwards.
 The root cause for such a situation is the loss in operating revenue and
other incomes.
 Depreciation is a significant charge against revenue.
 Looking into the total revenue of 2012, revenue of that year is 7%
lesser than 2011. This means that additional investment made in 2011
was not fruitful.
 The huge investment in 2011 caused a large burden in terms of current
liability (Rs 2260356 lakhs). It severely affected the working capital
position of that year where net working capital shown a negative
figure. The reason for this is, BSNL has invested in LIC for a policy
called leave encashment policy which results in burden for the
organization.
 The general trend in BSNL’s business profile shows that revenue is
falling down while expenses are increasing every year.
 Keeping the e phase soon the BSNL will result in operating loss.
 From the study, I have learned that 2G scam had affected the ratio of
the companies.
 From this study I came to know that each company is differentiating it
from its other competitors by using new techniques.
 The total revenues of BSNL have been reducing year by year since
2011-2012
 The operating expenditure has reduced in consecutive years from
36002 crores in 2011-2012 to 34900 crores in 2013-2014.
 Long-term liabilities or borrowings have been increased from
11340 crores in 2011-2012 to 12610 crores in 2013-2014.
 The current ratio between current assets and current liabilities
has been fluctuating 0.89 in 2011-2012,0.75 in 2015-2016.

46
 The debt equity ratio has shown a significant growth from 0.090
in 2013-2014 to 0.073 in 2015-2016
 The fixed assets to net worth ratio has been quiet good from 0.38
in 2011-2012 to 0.061 in 2015-2016
 The working capital of the company is not up to the mark.
 BSNL Company had more expenses due to which it is facing losses
continuously for the last five years.
 The total current liabilities are more than current assets.
Financial position of BSNL for the last five years is not good.

4.2 SUGGETIONS:
Following are my suggestions which may help to resolve the crisis
of BSNL.
 It is high time for BSNL to improve their operating efficiency.
They should concentrate on increasing both their operating
revenues as well as other revenues.
 Depreciation is a significant charge against their operating profit.
So that the company should take utmost good care in maintaining
their fixed assets.
 BSNL should develop their customer base of mobile as well as
broadband users as they are two major source of income. They
should try to improve revenue from other operators.
 BSNL should conduct a brand revitalization campaign which can
attract more new users as well as maintain existing customers.
 They should concentrate on quality oriented mobile internet
business as the era is shifting towards mobile computing and
smart devices. They should optimize new investments and utilize
their existing infrastructure maximum.
 BSNL need to be more competitive in terms of their service
offered.
47
 They should make effective utilization of the large reserve
available.
 BSNL can explore other areas to improve revenue generation.
 Debt financing also will help the company to attain financial
leverage as the financial expenses are reducing.
 They can consider for public issue debt securities.
 The root cause for existing financial crisis is the unproductive
investments.

4.3 CONCLUSIONS:
The study “FINANCIAL STATEMENT ANALYSIS” at BSNL is done
by using some widely accepted tools and techniques. Within the
constraint I believe that study served its purpose. It is understood
that financial statements of BSNL is worsening especially
regarding their operating income. It is expected that a huge
number of retirements, around a lakh will happen on coming
years which will certainly help them to reduce the cost of
administration. The reason for such financial distress is not only
the marginal efficiency, but also the huge competition in the
industry. Other changing socio-economic variables are also
affecting the performance of the company. BSNL needs to bring in
large amount of changes especially in marketing as a measure to
increase the market share as well as revenue. It is evident that
BSNL as a prestigious company has well brand image among the
customer and can overcome the present situation easily by
adopting efficient management techniques.

48
4.4 BIBLIOGRAPHY

www.bsnl.co.in

www.google.co.in

www.natfm.bsnl.co.in

TEXT BOOKS:

FINANCIAL MANAGEMENT BY SUDARSHAN REDDY

RATIO ANALYSIS BY F.M.MORLEY
RATIO ANALYSIS FUNDAMENTALS-GOOGLE BOOKS
FINANCIAL ACCOUNTING AND ANALYSIS by Dr. PRASHANTHA ATHMA

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