The document analyzes the financial performance of Indian Oil Corporation Ltd. using various metrics like DuPont analysis, net profit margin, asset turnover ratio, return on assets, return on equity, internal growth rate, and sustainable growth rate for the years 2018-2019, 2019-2020, and 2020-2021. The key findings are that Indian Oil's return on equity increased from 15.53% in 2018-2019 to 19.72% in 2020-2021, and its sustainable growth rate also increased over the years, reaching 12.403% in 2020-2021, indicating strong future growth potential.
The document analyzes the financial performance of Indian Oil Corporation Ltd. using various metrics like DuPont analysis, net profit margin, asset turnover ratio, return on assets, return on equity, internal growth rate, and sustainable growth rate for the years 2018-2019, 2019-2020, and 2020-2021. The key findings are that Indian Oil's return on equity increased from 15.53% in 2018-2019 to 19.72% in 2020-2021, and its sustainable growth rate also increased over the years, reaching 12.403% in 2020-2021, indicating strong future growth potential.
The document analyzes the financial performance of Indian Oil Corporation Ltd. using various metrics like DuPont analysis, net profit margin, asset turnover ratio, return on assets, return on equity, internal growth rate, and sustainable growth rate for the years 2018-2019, 2019-2020, and 2020-2021. The key findings are that Indian Oil's return on equity increased from 15.53% in 2018-2019 to 19.72% in 2020-2021, and its sustainable growth rate also increased over the years, reaching 12.403% in 2020-2021, indicating strong future growth potential.
The document analyzes the financial performance of Indian Oil Corporation Ltd. using various metrics like DuPont analysis, net profit margin, asset turnover ratio, return on assets, return on equity, internal growth rate, and sustainable growth rate for the years 2018-2019, 2019-2020, and 2020-2021. The key findings are that Indian Oil's return on equity increased from 15.53% in 2018-2019 to 19.72% in 2020-2021, and its sustainable growth rate also increased over the years, reaching 12.403% in 2020-2021, indicating strong future growth potential.
INSTITUTION OF PROFESSIONAL EDUCATION AND RESEARCH
2021-2023 MBA SEM-2 SECTION - 3
FINANCIAL MANAGEMENT Indian Oil Corporation Ltd.
Submitted to :-
Prof. Yashveer Singh
Submitted by :-
Ishika Gupta
Tanish Jain
Vrashti Jain INDIAN OIL CORPORATION IndianOil, a diversified, integrated energy major with presence in almost all the streams of oil, gas, petrochemicals and alternative energy sources; a world of high-caliber people, state-of-the-art technologies and cutting-edge R&D; a world of best practices, quality-consciousness and transparency; and a world where energy in all its forms is tapped most responsibly and delivered to the consumers most affordably.
DUPONT ANALYSIS The DuPont analysis (also known as the DuPont identity or DuPont model) is a framework for analyzing fundamental performance popularized by the DuPont Corporation. DuPont analysis is a useful technique used to decompose the different drivers of return on equity (ROE). The decomposition of ROE allows investors to focus on the key metrics of financial performance individually to identify strengths and weaknesses.
DuPont Analysis=Net Profit Margin×AT×EM
where: Net Profit Margin=Revenue Net Income
AT=Asset turnoverAsset Turnover=Average Total AssetsSales
1). Net profit margin:-
The net profit margin is the ratio of bottom line profits compared to total revenue or total sales. This is one of the most basic measures of profitability.
The asset turnover ratio measures how efficiently a company uses its assets to generate revenue.
Asset Turnover Ratio= Sales/ Total Assets
Year Sales Total Assets Assets Turnover Ratio 2018 -2019 527701 315707 167.14 2019 -2020 485660 311090 156.11 2020-2021 378057 334054 113.17
3). Equity multiplier/ Financial Leverage:-
Financial leverage, or the equity multiplier, is an indirect analysis of a company's use of debt to finance its assets.
Year Total Assets Equity Financial
Leverage 2018 -2019 315707 108657 2.9055 2019 -2020 311090 93768 3.3176 2020-2021 334054 110500 3.0231 4).Return on Assets The term return on assets (ROA) refers to a financial ratio that indicates how profitable a company is in relation to its total assets. Corporate management, analysts, and investors can use ROA to determine how efficiently a company uses its assets to generate a profit.
Return on assets =Net Profit/Total Assets
Year Net Profit Total Assets ROA
2018-2019 3.20 315707 5.35 2019-2020 0.27 311090 0.42 2020-2021 5.77 334054 6.53 5).Return on Equity Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal to a company's assets minus its debt, ROE is considered the return on net assets.
Return on equity= Net Profit * Asset Turnover Ratio* Equity Multiplier
Year Net Profit Assets Equity ROE Margin Turnover Multiplier Ratio 2018-2019 3.20 167.14 2.9055 15.53
2019-2020 0.27 156.11 3.3176 1.398
2020-2021 5.77 113.17 3.0231 19.72
6).Internal growth rate
An internal growth rate (IGR) is the highest level of growth achievable for a business without obtaining outside financing, and a firm's maximum internal growth rate is the level of business operations that can continue to fund and grow the company.
Internal growth rate=ROA*b/ 1-(ROA-b)
Where;
ROA= Return on Assets
b= Retention Ratio
Year Return on Retention Ratio Internal growth
Assets rate
2018-2019 5.35 42.75 2.34
2019-2020 0.42 -267.05 1.134
2020-2021 6.53 55.85 3.78
7).Sustainable Growth Rate
The sustainable growth rate (SGR) is the maximum rate of growth that a company or social enterprise can sustain without having to finance growth with additional equity or debt. The SGR involves maximizing sales and revenue growth without increasing financial leverage. Achieving the SGR can help a company prevent being over-leveraged and avoid financial distress. Year Retention Ratio Return on Sustainable Equity Growth Rate 2018-2019 42.75 15.53 7.11 2019-2020 -267.05 1.398 3.842 2020-2021 55.85 19.72 12.403
CONCLUSION ● The higher the rate of SGR the better it is for the company; the ratio signifies for a company how much the company can grow sustainably in the future with the number of earnings it generates with the help of the normal course of business. The ratio for Indian Oil of 20 -21 signifies that Indian Oil is able to grow by 12.403% on a sustainable basis in the future. ● High IGR implies that a company can achieve a maximum growth rate without any reliance on external financing.
