financial statements performance

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CHAPTER-1

1.1 INTRODUCTION

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Steel comprises one of the most important inputs in all sectors of the economy.

Economy of any country depends on the strong base of the iron and steel industry. Steel is a

versatile material with multitude of useful properties making it indispensable for furtheringand achieving continuing growth of the economy-be it construction, manufacturing,

infrastructure or consumable. The level of steel consumption has long been regarded as an

index of industrialization and economic maturity attained by country.

eeping in view the importance of steel, the integrated steel plants with foreign

collaborations were set up in the public sector in the post independence era. The growth of

any organization depends on the overall performance such as production, marketing, human

resource and financial performance of the organization. The financial performance of anyorganization reflects the strengths, weakness, opportunities and threats of the organization

with respect to profits Earned, investments, sales realization, turnover, return on investment,

and net worth of capital.

!inance plays an important role in any organization. The dictionary meaning of

finance is money affairs or the art of managing or administrating the public money. "ence the

name financial management could be referred to as money management. The function of

finance is not arranging funds for the business organization but also it includes planning,

forecasting of cash flow, both receipts and payments, raising the funds, allocation of funds

and financial control.

Efficient management of financial resources and deliberate analysis financial results

are prere#uisites for success of an enterprise. !inancial statements are the basis for decision

making by the management and as well as all other outsiders who are interested in the affairs

of the firm.

!inancial management involves the management of finance function. $t is concerned

with the planning, organizing, directing and controlling the financial activities of an

enterprise. $t deals mainly with raising funds in the most economic and suitable manner%

using these funds as profitably as possible% planning future operations and controlling current

performance and future developments through financial accounting, cost accounting,

budgeting, statistics and other means. $t is continuously with achieving an ade#uate rate of

return on investment, as this is necessary for survival and the attracting of new capital.

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The financial manager must see that the funds are procured in a manne

The financial manager must see that the funds are procured in a manner that the risk, cost

and control considerations are properly balanced in a given situation and there is optimum

utilization of funds. The financial manager estimates the total re#uirements of funds, both

in short period and long period. The financial manager assesses the financial position of

the company through the working out of the return on capital, debt-e#uity ratio, cost of

capital from each source etc.., and comparison of the capital structure with that of similar

companies.

Introduction to Financial Analysis:

The terms &financial analysis' also known as analysis and interpretation 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 data.

!inancial analysis is the process of identifying the financial strength and weakness of

the firm by properly establishing between the items of the balance sheet and profit and loss

account. There are various methods or techni#ues used in analysis financial statements such

as comparative statements, trend analysis, common size statements, schedule of changes in

working capital, funds flow and cash flow analysis ( )ost *olume +rofit nalysis and atio

nalysis.

1.2 NEED FOR THE TUD!

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There is a special role of every industry barring up on the need essentiality where

everything has to be done in accordance with standards that are regulated by the government.

The main aim of any firm is to maximize the wealth of the profits. hich in turn depend on

successful sales activity/ To generate sales, investment of sufficient funds in current assets is

re#uired. The need of current assets should be emphasized, as the sales don't convert into

cash immediately but involved a cycle of operations, namely operating cycle.

ashtriya$spat 0igam limited is a multi-product steel-manufacturing unit with varying

cycle time for each product. The capital re#uired by each department in a largeorganization

like $01 depends on the product target for that year. To understand this, conceptual idea is

not only sufficient but also it needs a wide knowledge and understanding of the factors that

are affecting them. Especially "IA#HAPATNA$ TEE% P%ANT has emerged from

loss to profit making company.

0ow, the study is all about analyzing, how this has been possible for a company

whose figures were budgeted to negative show finally ended with high positively.

"ere in this pro2ect an attempt is made by financial statements for knowing the

financial performance of the company.

1.& O'(ECTI"E OF THE TUD!

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To know about ashtriya$spat 0igam 1td

To know the current position of various assets, liabilities and results of operation

activities

To find out !inancial Strengths and weaknesses of the firm

To know the 1i#uidity +osition of a firm

To know the causes of changes in the )ash +osition

To find out important tools of Short-term, 1ong-term !inancial +lanning

To know the ability of the firm to meet its current obligations

To know the overall operation efficiency and performance of the firm

To find out foremost important !inancial 3ecisions

To know the detailed information about comparative and common size balance

sheets

To examine profitability position of $01, during the year 4556-4557 to 4558-

4559.

To know about steel scenario in $ndia and world

1.)REEARCH $ETHODO%O*!

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:ethodology is a systematic procedure of collecting information in order to analyze

and verify a phenomenon. The data can be collected through two principle sources.

DEFINITION OF REEARCH

;The manipulation of things, concepts or symbols for the purpose of generalizing to

extend, correct or verity knowledge, whether that knowledge aids in construction of theory or

in the practice of an art. weeks as not enough to go in the detailed aspects of the

study.

The study is carried basing on the information and documents provided by the

organization and based on the $nteraction with various employees of respective

departments.

espondents may not provide accurate information due to various reasons.

:ost of the matters related to budgets were confidential so it is not possible to gather

information.

Time is a ma2or constraint.

?udgeting process is very dynamic.

There was no scope of gathering current information as the auditing has not been done at

the time of pro2ect work.

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CHAPTER-2

-

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2.1 OR*ANIATION PROFI%E

Steel industry is the back bone of all industrial commercial activities. ealizing these

countries planners have been formulating and updating annual plans for production of iron

and steel. $n this context a number of steel plants were setup. The steel industry plays a vital

role in the growth of nation@s economy. Steel is such a versatile commodity that every ob2ect

we see in our day to day life has used steel either directly or indirectly in its product To

mention a few it is used for such small items as nails, pins, needles etc., agriculture

implements boilers, ship fabrication, railway materials, automobile parts, etc. to have

machine structure.

The great investment that has gone into the fundamental research in iron and steel

technology has helped both directly and indirectly in many modem fields of today@s science

and technology. $t would have been very painful to imagine the fate of today@s civilization if

steel has not been there. Steel is versatile and indispensable item. The versatility steel has not

been there. Steel is versatile and indispensable item. The versatility steel can be traced mainly

of three reasons.

$t is only metallic item, which can be continently and economically produced, in large

#uantities.

$t has got very good strength coupled with density and malleability.

$ts properties can be changed over a wide range. $t alloys easily with many of the

common element.

The level of steel consumption has been regarded as an index of industrialization and

economic maturity attained by country. eeping in view the importance of steel, the

integrated steel plants with foreign collaborations were setup in the public sector in the post-

independence era.

The growth of any organization depends on the over all performance such as

production, marketing, human resource and financial performance of the organization. The

financial performance of any organization reflects the strengths, weaknesses, opportunities

and threats of the organization with respect to profits earned, investments, sales realization,

turnover, returns on investment, net worth of capital

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Indias t++l c+nario:

$ndian steel industry has always remained isolated and protected by government,

where the steel industry was never expected to generate profit from business, but was

expected to provide employment to the unemployed. +resently $ndia is operating with open-

hearth furnaces. The existing e#uipment, energy and labor in $ndian steel industry are much

low than developed countries.

$ndian steel industry generates a significant amount of waste materials, which can

cause environmental problems. The four aspects of Aaste :anagement< namely- residue

reprocess, recycle and recovery do not hold much ground in the $ndian steel industry. The

$ndian companies cannot spend more for pollution control. The energy consumption per tone

is 75-B55C higher than that of the international norms.

The $ndian steel industries have developed a bit in the recent years. The production is

growing on properly. :any techni#ues are being implemented in the steel industries. The

country@s aim is to sell #uality steel. The government is also helping the steel industries in this

basis. The apparent consumption of steel is shown below.

The development of steel industry in $ndia should be viewed in con2unction with the

type and system of government that had been ruling the country. The production of steel in

significant #uality started after B995. The growth of steel industry can be started by dividing

the period into pre and post independent era. $n the period of pre independence steel

production was B.7 million tones per year, which was raised to 9.5 million tones of target by

the seventies. This is the present of the bold steps taken by the government to develop this

sector.

orlds d+/and 3or t++l:

The total demand for steel in world is expected to grow at an annual rate of B.DC

between B97 and 4555 .3. as per the study concerned by china economists.

ccording to their estimation total demand in advanced industrial countries on a

whole is expected to grow at 5.>C annual rate following a

rate between B9D6 to B986. steel demand is less developed countries on a whole is

expected to grow at a 7.7C annual rate up to 4555 following a .B annual growth rate

between B986-B996. ithin the controlling plant economy the Eastern Europe erstwhile

FSS region may have 5.C annual steel demand growth. Steel demand in china. 0orth

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orea region would grow at 6.5 annual rates up to the end of this century at a D.7C per

annual growth during B9D6-B985.

Hi,li,ts o3 r+s+nt t++l c+nario:

The world steel shows a low growth demand.

There is a threat to steel industry from competitive products like plastics, aluminum,

etc.

3eveloped countries slowly reduced the production of steel.

3eveloping countries like )hina are planning to produce steel as much large #uantity

then of present output of 85 :t. per annum. $ndia consciously and strategically decides to invest into steel production.

+reference is given to superior #uality products and high value item production.

)ustomer oriented approach in view of product oriented approach.

Emergence of new technology like scraps preheatil

*ro4t o3 t++l Industry:

The growth in a chronological order is depicted below=

.No !EAR *ROTH

B B85 Gsier :arshall heath$er constructed the first manufacturing plant at

port-motor in :adras presidency.

4 B8D6 Hames erskin founded the ?engal frame works.

B899 Hamshedi2i TT initiated the scheme for an integrated steel plant.

6 B95> !ormation of T$S)G

7 B9BB T$S)G started +roduction.

> B9B8 T$S)G was founded

D B965 !ormation of :ysore iron and steel initiated at ?hadravathi in

arnataka.

8 B97B (

B97>

!irst five-year plan - The "industan steel limited I"S1J was born in

the year B976 with decision of setting up three plants each with B

million tones in got steel per year at ourkela, ?hilai, 3urgapur.

T$S)G started its expansion program.

9 B97> (

B9>B

Second five-year plan - bold decision was taken up to increase the

ingot steel output in $ndia to > million tones per year and its

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production at ourkela, ?hilai and 3urgapur steel plant started

B5 B9>B (

B9>>

Third five-year plan - 3uring the plan the three steel plants under

"S1, T$S)G K T$S)G were expandedL

BB B9>6 ?okaro steel plant came into existence.

B4 B9>> ( B9>9

ecession period - Till the expansion programmes were activelyexisted during this period.

B B9>9 (

B9D6

!ourth five-year plan - Salem steel plant started. 1icenses were given

for setting up of many mini steel plants and re-rolling mills

government of $ndia. +lants in south are each in *isakhapatnam and

arnataka. S$1 was formed during this period on 46th Hanuary B9D

B6 B9D6-

B9D9

!ifth five-year plan - The idea of setting first integrated steel

+lant, the first sea-based plant at *isakhapatnam took definite shape. t the

end of the fifth five year plan the totaled installed capacity from six

integrated plants was up to B5.> million tons.

B7

.

B9D9 -

B985

nnual plan. The Erstwhile soviet union agreed to help in setting up the

*isakhapatnam steel plant

B> B985 (

B987

Sixth five-year plan - ork on *isakhapatnam steel plant started with a big

bang and top priority was accorded to start the plant. Schemes for

modernization of ?hilai steel plant, ourkela steel plant, 3urgapur steelplant and T$S)G were initiated. )apacity at the end of sixth five-year plan

from six integrated plants stood BB.75 million tones.

BD B987 (

B99B

Seventh five-year plan - Expansion works at ?hilai and ?okaro steel plant

completed. +rogress of *isakhapatnam steel plant picked up and the

nationalized concept has been introduced to commission the plant with 5

:T li#uid steel capacities by B995

B8 B994 (

B99D

Eight five-year plan - The *isakhapatnam steel plant was commissioned in

B994. The cost of plant has become around 8D77 crores. *isakhapatnam steel

plant started the production and modernization of other steel plants is also

duly engaged.

B9 B99D (

4554

0inth five-year plan - estructuring of *isakhapatnam steel plant and other

pubic sector undertakings.

T+ $a5or t++l and R+lat+d Co/ani+s in India:

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?hart efectories 1td.

"industan Steel works )onstruction 1td

Hindal Steel and +ower 1td

:anganese oreI$ndiaJ 1td

:etallurgical and engineering consultants $ndia 1td

0ational :ineral 3evelopment )orporation

ashtriya$spat 0igam 1td

Sponge $ron $ndia 1td

Steel uthority of $ndia 1td

TT $ron steel )ompany

t++l Plants 4it For+i,n Colla6orations:

.No Plant Colla6oration Caacity o3

Finis+d t++l Products

B ourkela Steel +lant est Mermany

4 ?hilai Steel +lant Erstwhile FSS

3urgapur Steel +lant ?ritan

6 ?okaro Steel +lant Erstwhile FSS

2.2 Pro3il+ o3 "isa7aatna/ t++l Plant

*isakhapatnam steel plant the first coast based steel plant of $ndia is located B> km

south west of city of destiny i.e., *isakhapatnam ?estowed with modern technologies, *S+

has an installed capacity of million tones per annum of li#uid steel and 4.7> million tones of

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saleable steel. t *S+ there is emphasis on total automation, seamless integration and

efficient up gradations which results in wide range of long and structural products to meet

stringent demands of discerning customers with in $ndia and abroad. *S+ products meet

exacting international #uality standards such as H$S, 3$003 ?$S, and ?S etc.

*S+ has become the first integrated steel plant in the country to be certified to all the

three international standards for #uality I$SG-955BJ for environment management I$SG-

B655BJ, for Gccupational "ealth K Safety IG"SS-B855BJ. The certificate covers #uality

system of all operational, maintenance and service units besides purchase system, training

and marketing functions spreading over 6 regional marketing offices, 46 branch offices and

stock yard located all over the country.

*S+ successfully installing and operating efficiently s6>5 crores worth of pollution

control and environment control e#uipments and converting the barren land scope by planting

more than million plants has made the steel plant, steel township and surrounding areas into

a heaven of lush greenery.

'AC#*ROUND:"isa7aatna/ st++l lant

To meet the growing domestic needs of steel, government of $ndia decided to set up

an integrated steel plant at *isakhapatnam. n agreement was signed with erstwhile FSS in

B9D9 for co-operation in setting up .6 :t integrated steel plant at *isakhapatnam. The

foundation stone for the plant was laid by the then prime minister on 45th Han @DB.

The pro2ect was estimated to cost s. 89D.48 )rs based on prices as on 6th #uarter of

B98B. "owever, on completion of construction and commissioning of the whole plant in

B994, the cost escalated to around 8755 )r. Fnlike other integrated steel plants in $ndia,

*isakhapatnam Steel +lant is one of the most modem steel plants in the country. The plant

was dedicated to the nation on B st august@ B994 by the +rime :inister, Sri.

+.*.0arasimhaao.

To operate the plant at international levels and attain such labor productivity, the

organizational man power has been rationalized. The plant has a capacity of producing .5 :t

of li#uid steel and 4.>7> :t of saleable steel.

"P T+cnolo,y:tat+-o3-t+-Art

Dm tall coke oven batteries with coke dry #uenching.

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?iggest ?last !urnaces in the country

?ell less top charging system in blast !urnace.

B55C slag granulation at the ?! cast house.

Suppressed combustion - 13 gas recovery system.

B55C continuous casting of li#uid steel.

ATemporeA and AStelmorA cooling process in 1::: K :.

Extensive waste heat recovery systems.

)omprehensive pollution control measures.

$a5or ourc+s o3 Ra4 /at+rial:

$ron Gre 1umps K !ines ?ailadilla, : +

? ! 1ime Stone Haggayyapeta, +

S:S 1ime Stone FE

? ! 3olomite :adharam, +

S:S 3olomite :adharam, +

:anganese Gre )hipurupalli, +

$a5or Units at "P:

3E+T:E0TS 00F1 F0$TS I.5 :T STMEJ

)ap. I@GGGTJ

)oke Gvens 4,4>B 6 ?atteries each of >D ovens K D :ts

"eight

Sinter +lant 7,47> 4 Sinter machines of B4 S#m grate areaEach

?last !urnace ,655 4 !urnaces of 455 cu m volume each

Steel :elt Shop ,555 13 )onverters each of B )um.

*olume and six 6 strand bloom casters

1::: DB5 6 Strand !inishing :ill

: 875 4 x B5 Strand !inishing :ill

::S: 875 > Strand !inishing :ill

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$ain Products o3 "P:

t++l Products 'y Products

ngles 0ut )oke

?illets )oke dust

)hannels )oal Tar

?eams nthracene Gil

S#uares "+ 0aphthalene

!lats ?enzene

ounds Toluene

e ?ars Nylene

ire rods ash Gil

"IION:

To be a continuously growing world-class company.

+ sall:

"arness our growth potential and sustain profitable growth.

3eliver high #uality and cost competitive products and be the first choice ofcustomers.

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To create an inspiring work environment to unleash the creative energy of people.

chieve excellence in enterprise management.

?e a respected corporate citizen, ensure clean and green environment and develop

vibrant communities around.

$IION:

To attain B> million tones li#uid steel capacity through technological up gradation,

operational efficiency and expansion, to produce steel at international standards of cost of

#uality, and to meet the aspirations of the stakeholders.

O'(ECTI"E OF "P:

Expand plant capacity to >. :t by 45B5-BB with the mission to expand further in

subse#uent phases as per the corporate plan.

Towards growth-expand the plant capacity to D:t by 45BB-B4 and B5 :t ?y 45B9-

45.

?e amongst top five lowest cost steel producers in the world by 4559-45B5.

chieve higher levels of customer satisfaction than competitors.

Towards employees-make $01 the employer of choice. Fpgrade the skills and

efficiency of employees through training and development and maintain high levels of

motivation and satisfaction.

?e recognized as an excellent business organization by 4559-B5.

$nstill right attitude amongst employees and facilitate them to excel in their

professional, personal and social life.

Or,ani8ational tructur+ o3 "isa7aatna/ t++l Plant:

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*$S"+T0: STEE1 +10T has a well designed organizational structure. $t

has centralized management structure. There is )hairman cum :anaging 3irector I):3J as

head% the main decisions are taken by him, in accordance with steel industry IS$1J. These

are 9 levels in organization from E-G to E-9.

%E"E% NA$E

E-9 Meneral :anager

E-8 Hoint Meneral :anager

E-D 3y. dditional )hief :anager

E-> dditional )hief :anager

E-7 3y. )hief :anager

E-6 :anager

E- 3eputy :anager

E-4 ssistant :anager

E-l Hunior :anager

E-5 ssistant Executive

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Introduction to Financial tat+/+nts:

ccounting process involved recording, classifying and summarizing various business

transactions. The aim of maintaining various records is to determine profitability of the

enterprise from operation of the business and also to find out is financial position. !inancialstatements are in term reports, presented annually and reflect a division of the life of an

enterprise in to more or less arbitrary accounting period more fre#uently a year. The

financial statement is an organized collection of data according to logical and consistent

accounting procedures its purpose is to convey of a business firm.

D+3initions:

ccording to (on N.$y+r;The financial statements provide a summary of the

accounts of a business enterprise, the balance sheet reflecting the assets, liabilities, and

capital as on a certain date and the income statement showing the results of operations during

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The term &ecorded facts% refers to the data taken out from the accounting records.

The records are maintained on the basis of actual cost data. The figures of various accounts

such as cash in hand, cash at bank, bills receivables, Sundry debtors, fixed assets are taken as

per the figure recorded in the accounting books. s the recorded facts are not based on

replacement costs the financial statements do not show current financial condition of the

concern.

2. Accountin, Con+rsions:

)ertain accounting converters are followed while preparing financial statements. The

conversion of valuating inventory at cost or market price, whichever is lower, is followed.

The valuing of assets at cost less depreciation principle for balance sheet purposes statements

comparable, simple and realistic.

&. Postulat+s:

The accountants make certain assumption while making accounting records. Gne of

these assumptions is that the enterprise is treated as a going concern. The other alternative to

this postulate is that the concern is to be li#uidated the concern. So the assets are shows on a

going concern basis. n other important assumption is to presume that the value of money

will remain in the same in different periods.

). P+rsonal (ud,/+nts:

Even though certain standard accounting conversions are followed in preparing

financial statement but still personal 2udgment of the accountant plays on important part.

Caract+ristics o3 3inancial stat+/+nts:

The financial statements are prepared with a view to depict financial position of a

concern. The financial statements should be prepared in such a way that they are able to give

a clear and orderly picture of the concern. The ideal financial statement has the following

characteristics.

1. D+ict tru+ 3inancial osition:

The information contained in the financial statements should be such that a true and

correct idea is taken about the financial position of the concern.

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2. Attracti+:

The financial statements should be prepared in such a way that important information

is underlined so that it attracts the eye of the reader.

&. Co/ara6ility:

The results of financial analysis should be comparable. The financial statements

should be presented in such a way that they can be compared to the previous year's

statements. +revious year's figures in the balance sheet.

). 'ri+3:

$f possible, the financial statements must be prepared in brief. The reader will be able

to form as idea about the figures.

I/ortanc+ o3 3inancial stat+/+nts:

!inancial statements contain a lot of useful and valuable information regarding

profitability financial position and future prospective of business concern. The utility of

financial statement to different parties may be summarized as follows=

1. $ana,+/+nt:

The financial statements are useful for assessing the efficiency of different cost

centers. The management is able to decide the course of action to be adopted in future.

2. Cr+ditors:

The trade creditors are to be paid in a short period. The )S will be interested in

current solvency of the concerns. The calculations of current ratio and li#uid ratio will enable

the creditors to assess the current financial position of the concerns in relation to their debts.

&. In+stors:

The investors include both short-term and long term investors. They are interested in

the security of the principal amounts of loan and regular payments by the concern. The

investors will not only analyse the parent financial position but will also study the future

prospectus and expansion plans of the concern.

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). *o+rn/+nt:

The financial statements are used assess tax liability of business enterprises. The

Movernment studies economic situation of the country from these statements. These

statements enable the government to find out whether business is following various rules and

regulations or not.

0. Trad+ Associations:

These associations provide service and protection to the members. They may analyse

the financial statements for the purpose of providing facilities to these members. They may

develop standard ratios and design uniform system of accounts.

;. toc7 E9can,+:

The stock exchange deal in purchase and sale of securities of different companies.

The financial statements enable the stock broker to 2udge the financial position of different

concerns. The fixation of prices for securities etc. is also based on the statements.

%i/itations o3 Financial tat+/+nts:

!inancial statements are relevant and useful for the concern, still they do not present a

final picture of the concern, and otherwise misleading conclusions may be drawn. The

financial statements suffer from following limitation=

1. I,norin, o3 non-/on+tary as+cts:

These statements are prepared with the help of accounting information which mainly

consider monetary aspects only. The value of business depends both on #ualitative and

#uantitative factors.

2. Historical cost:

The statements are prepared on the basis of historical cost. The value of fixed assets

is at there original cost less depreciation. The balance sheet value are not shown the value of

assets may be sold more over they do not reflect the market value which is as important

factor in determining the solvency of an enterprise.

&. P+rsonal (ud,/+nt:

$n preparing financial statements certain items are left to the personal Hudgment of the

accountant. $f any accountant is not following accounting principles correctly his 2udgment

will give wrong picture.

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). Con+rsion o3 Cons+ration:

3ue to conversion of conservation the income statement may not disclose true

income of the business. This is due to ignorance of probable incomes and accounting

probable losses.

Financial Analysis:

!inancial analysis is the process of identifying the financial strength and weakness of

the firm by properly establishing between the items of the balance sheet and profit and loss

account. There are various methods or techni#ues used in analysis financial statements such

as comparative statements, trend analysis, common size statements, schedule of changes in

working capital, funds flow and cash flow analysis ( )ost *olume +rofit nalysis and atio

nalysis.

$+anin, and conc+t o3 3inancial analysis:

The terms &financial analysis' also known as analysis and interpretation 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 data

T+cni


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Co/arati+ Financial tat+/+nts:

The statements which have been designed in a way so as to provide time perspective

to the consideration of various elements of financial position embodied in such statements

figures for two or more period side by side to facilitate comparison.

?oth the income statement and balance sheet can be prepared 0i the form of

comparative financial statements.

The comparative financial statements contain the following items.

i bsolute figures Iamount in s. O-J as given in the final accounts.

27

Cash Flow

Analysis

Common Size

Financial

Statements

Financial

Analysis

Techniques

Funds flow

Analysis

Ratio

Analysis

Trend

Percentages

Comparatie

Financial

Statements

Ratio C!"!P

Analysis


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ii bsolute figures expressed in terms of percentages.

iii $ncrease of decrease in absolute figures in terms of money value.

iv $ncrease or decrease in terms of percentages.

v )omparison expressed in ratios.

vi +ercentages of totals.

Co/arati+ Inco/+ tat+/+nts:

The income statement Iprofit K loss OcJ gives the results of the operations during a

definite period. $t reveals the profit carried or loss incurred by the cancers. The comparative

study if income statement for more than B year may enable us to know the program of the

concern. !irst two columns gibe figures of various items for two years. The third and fourth

column used to show increase or decrease in figures in absolute adopted in preparing

comparative balance sheet.

$n first step, find out the changes in absolute figures i.e., increase or decrease

should be calculated.

$n second step percentage of change should be calculated with the help of

following formula.

)hange in amount

+ercentage of change P x B55

?ase year amount

Co/arati+ 6alanc+ s++t:

The balance sheet prepared on a particular date reveals the financial position of the

concern on the date to study the trends of business over a period of time comparative balance

sheet reveals the cause for changes in the financial position on amount of various

transactions. The comparative studies throw light on financial policies adopted by

management.

The comparative balance sheet consists of two columns for the original data. third

column used to show increase or decrease in various items. south column containing the

parentage of increase or decrease may be added.

Co//on i8+ tat+/+nts:

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The common size statements, balance sheet and income statement are shown in

analytical percentages. The figures are shown as percentages of total assets, total liabilities

and sales. The total assets are taken as B55 and different assets are expressed as percentage

of the total. Similarly various liabilities are taken as a part of total liabilities. These

statements are also known as component parentage or B55C statements because every

individual item is stated as a percentage of the total B55 the short statements because every

individual item is stated as a percentage of the total B55 the short-comings in comparative

statements and trend percentages where changes in item could not be compared with the total

have been covered up.

The common size statements may be prepared in the following way.

The totals of assets or liabilities are taken as B55.

The individual assets are expressed as a percentage of total assets i.e., B55

and different liabilities are calculated in relation to that liability

Co//on i8+ Inco/+ tat+/+nt:

The items in income statement can be shown as percentages of sales to show the

relation of each item to sales. significant relationship can be established between items of

income statement and volume of sales. The increase in sales will certainly increases selling

expression and volume of sales. The increase in sales will certainly increases selling

expresses and not administrative or financial expenses. $n case the volume of sale increases

to a considerable extent, administrative and financial expenses may go up. $n case the sales

are declining, the selling expenses should be reduced at once.

So, a relationship is established between sales and other in income statement and this

relationship is helpful in evaluating operational activities of the enterprises.

Co//on i8+ 'alanc+ ++t:

Statement in which balance sheet items are expressed as the ratio of each asset to total

assets and the ratio of each liability is expressed as a ratio of total liabilities is called common

size balance sheet. The common size balance sheet is a horizontal analysis. The comparison

of figures in different periods is not useful becomes total figure may be affected by a number

of factors. $t is not possible to establish standard norms for various assets. The trends of year

to year may not be studied and even they may not give proper results.

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Analysis andt+ Int+rr+tation o3 Financial tat+/+nts:

!inancial Statements are indicators of the two significant factors=

B +rofitability

4 !inancial soundness

nalysis and interpretation of !inancial Statements therefore refer to such a

treatment of the information contained in the income statement and balance sheet so as to

afford full diagnosis of the profitability and financial soundness of the business.

Cost-"olu/+-Pro3it Analysis:

)ost ( *olume ( +rofit analysis is an important tool of profit planning. $t studies the

relationship between cost, volume of production, sales and profit. $t is not strictly a techni#ue

used for analysis of financial statements. "owever, it is an important tool for the

management for decision making. Since the data is provided both cost and financial records.

$t tells the volume of account of variation in output, selling price and cost, and finally, the

#uantity to be produced and sold to reach the target profit level.

Ratio Analysis:

!inancial analysis depends to very large extents of the use of ratios through there are

other e#uality important tools of such analysis. Thus, a direct examination of the magnitude

of two released items is some what enlightening but the comparison is greatly facilitated by

expressing the relationship as a ratio.

atio analysis of business enterprises enters on efforts to derive #uantitative measures

or guides concerning the expected capacity of the firm to meet its future financial obligation

or expectations present and past data are used for the purpose and what ever extrapolations

appear necessary. They are made to provide no indication of feature performance. lexander

alt, who criticized the bankers for its lap sided development owing to their decisions

regarding the grant of credit on

Ratio:

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atio is an expression of the #uantitative relationship that exists between the two

numbers. The ratio is defined as ;the indicated #uotient of two mathematical

expressions< the ratio should be determined between related accounting variables to

be meaningful and effective.

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CHAPTER-4

).1 DATA ANA%!I = INTERPRETATION

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Grganizations are purposive creations. They are created in order to achieve particular

task, which individuals cannot accomplish on their own. hen organizations are created the

huge task of the organization is also sub divided into smaller tasks, which can be handled,

effectively be an individual or a group of individuals. This in other words is called as activity

analysis. Fsually this leads to departmentalization of organization. To carry out these

activities, people are re#uired to take timely decisions in light of present ob2ectives.

There are various tools to analyze the performance of an organization of which

some important aspects are considered in this pro2ect. They are=

)omparative Statement nalysis

)ommon Size Statement nalysis

Co/arati+ stat+/+nts:

)omparative statements show the financial condition of business at a given point

of time. The elements of financial position are shown in comparative form so as to give an

idea of financial of two or more periods is known as comparative statements. )omparative

statements not only shows the absolute figures and exhibits changes in absolute figures of a

company but also gives absolute data in terms of percentages and change in percentages. $t

includes=

)omparative $ncome Statement

)omparative ?alance Sheet

Co/arati+ Inco/+ tat+/+nt:

This statement is prepared to study the changes in various incomes and expenses

between two periods on a specific date. $t helps the management to know the profitability

position and reasons behind fluctuations in incomes and expenses.

!or the above purpose, we have taken into consideration of the five year accounts

viz., 4556-57 to 4558-59.

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Co/arati+ Inco/+ tat+/+nt o3 "P %td.

For T+ !+ars 2>>?-2>>@ Rs. In CrsB

PARTICULARS 2008 2009I!"#$%&$'D$"#$%&$(

)"*%!+$

I!"-$

#ross Sales $%&''!%( $%&$%!)' -**!&& -%!**

+ess: ,cise duty recoeredon sales

$'&&!( $*.*!*/ -)*!&/ -&!)&

0et Sales 1%..!'( 1$*.!'. &%!%$ %!&&

2nternal Consumption ..!&) $$&!$ */!)& *.!1.2nterest ,arned (*&!)& (.(!*$ )*!/( .!)'

3ther reenue 1$!*( (/!%* -$)!*/ -$(!.%

T%/ 9992. 1010.1 111.9 1.12

E3$!456#$

Raw 4aterial Consumed &*.%!** /.1)!*/ $)$)!%' '(!()

5epletion 6 7Accretion8 toStoc9 of Semi-finished6Finished goods

-'&'!$( -1$)!)/ -/('!&. $)(!$$

,mployees remuneration ;ustments- raw materialmining cost

'1!$/ '.!%) -$!%1 -*!(.

N$ E3$!456#$ 99. 8082.1 108.9 1.0

Profit for the year *11&!1( *%**!%% -1(*!1( -'*!&1

Prior period ad>ustments-0etcredit

%!'1 &!/1 &!* $%()!1*

P#5 B$#$ T% 299.7 202.9 ;98. ;72.7P#


35/48

Current Ta -$$..!$' -(&)!'. &&$!(/ -'(!$.

Fringe ?enefit Ta -&!&' -&!)) -%!*' /!$1

,arlier year ad>ustments $$!(( *$!'1 1!)* .$!('

5eferred Ta $*.!$( '.!)' -.1!/& -)1!.)

P#5 A$# T% 192. 177. ;0.1 ;71.2

?alance of Profit 5D.BD)rs, i.e. -B.47Cas compared to the previous year. The overall profitability is

satisfactory!

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Co/arati+ 'alanc+ ++t:

The comparative studies throw a lot on financial policies followed by management. The

)omparative ?alance Sheet consists of two columns for the original data. The third column is

used to show increase or decrease in various items. The fourth column shows percentage

increase or decrease

C-3%#%5


37/48

progress

T%/ =5$4 A&&$& 71.92 8.11 202.2 ?9.19

TOTAL ASSETS

C.A ? =.A 12.1 177.7 ?2.9 ?1.08

LIABILITIES:C6##$! L5%>5/55$&:

C.L(

Sundry Creditors /%$!'$ $$&1!&& @)&.!$' @$*1!*.

Adances from

Customers$')!1( $'(!&) @%!&1 @%!'/

3ther Adances $!/( $!&' -%!$& -.!1$

,arnest 4oneyB Security

; 3ther 5eposits11!'* $'(!.( '.!// '.!.$

2nterest Accured 5/55$&110.1 20.9 90. 9.0

L!+ T$#- L5%>5/55$&

@ P#


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B. 3uring the financial year 4559, the long-term liabilities were increased by s 7>D.6>

i.e.% 47.9>C comparison to the previous year 4558.

4. $n comparison to the previous year i.e.% 4558 the current liabilities were increased by

s.975.>6 i.e.% by 79.56C.

. The fixed assets have been increased by s.4654.46 in comparison to the previous year

i.e.% by >9.B9C.

6. )urrent assets have been increased by s.76.D in comparison to previous year i.e.%

5.6>C shows which that the working capital of the company is strengthened.

7. The li#uidity position of the company during the year 4558-4559 is satisfactory.

Co//on i8+ Inco/+ tat+/+nt:

The items in the income statements can be shown as percentages of sales to show the relation

of each item to sales. significant relationship can be established between items of income

statement and volume of sales. The increase in sales will certainly increase selling expenses

and volume of sales. The increase in sales lead to an increase in selling expenses but not

financial or administrative expenses. $n case the volume of sales increases to a considerable

extent, administrative and financial expenses may go up

C--! S5$ I!"-$ S%$-$! VSP L4.

=# T*$ Y$%#& 2008;2009 R&. I! C#&(

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PARTICULARS 2008 2009)C*%!+$

5! 2008) "*%!+$

5! 2009

I!"-$

#ross Sales$%&'

'!%(

$%&$

%!)'

$%&!&$ $%'!%'

+ess: ,cise duty recoered on sales$'&&!

($*.*!

*/$'!&) $*!)1

0et Sales1%..!

'(1$*.!

'.%!%$ 1%!'&

2nternal Consumption ..!&) $$&!$ %!.1 $!$'

2nterest ,arned(*&!)

&(.(!*

$(!*/ (!(1

3ther reenue 1$!*( (/!%* %!1$ %!(&

T%/9992.

1010

.1100.00 100.00

E3$!456#$

Raw 4aterial Consumed&*.%!

**/.1)!

*/&*!.' /.!'/

5epletion 6 7Accretion8 to Stoc9 ofSemi-finished6Finished goods

-'&'!$

(

-1$)!)

/-'!&' -1!%(

,mployees remuneration ;


40/48

Prior period ad>ustments-0et credit %!'1 &!/1 %!%% %!%/

P#5 B$#$ T%299.

7202.

929.98 20.0

P#ustments $$!(( *$!'1 %!$* %!*$

5efferred Ta$*.!$

('.!)' $!*. %!'.

P#5 A$# T%192.

177.

19. 17.22

?alance of Profit


41/48

) )A-6! A-6!

ASSETS:

C6##$! A&&$&: C.A(

Cash ; ?an9 ?alances ()11!$$ /%!&% ))*&!$( '(!'/

Sundry 5e


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@ P#5/55$&@ P#.8D C while

current liabilities are B6.6C. The working

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CHAPTER-5

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0.1U$$ER!

This study concentrated on the financial state of affairs of the company $01.$t

involved study of ?alance sheet profit and loss account and ratio analysis and also their

comparison over the last five years, it has presented a broader picture of the financial position

of the company. The study analyzed the company's success in being able to effectively

manage its day to day re#uirements pertaining to cash and funds flow and effectively

channelizing the short term and long term funds of the company to meet the re#uirements.

The performance of the )ompany in terms of both +roduction and Sales evenue has

been satisfactory, the )ompany surrounded various adverse situations during the past 47

years and has now been conferred the status of :ini atna by now been conferred the status

of :ini atna by Movernment of $ndia . The )ompany's plan to expand its capacity to >.

mtpa of li#uid steel has been approved by Movernment of $ndia and the pro2ect is under

progress.

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.2 =INDINGS

!ixed assets forms more than 47C to the total assets in the financial year 4558-59.

The debt capital is less than the share capital so, it reveals that the company in the

high li#uidity position.

orking capital position of the company is in satisfactory position.

3ebt capital is less than the e#uity and it shows the economical strength of the

company.

The analysis for the purpose of the investing in shares generally concentrates on the

return on e#uity of vsp, which is increasing% therefore it is a good bet for investment

sub2ected to availability of shares.

Even though profit before tax I+?TJ reduced by 9>9 crores in year 4558-59 compared

to last year, the company is in a good financial position.

!inally total assets of the company increased by B>C as whole the financial position

is satisfied.

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0.& U**ETION

B "igh profit realization by selling the products in higher margins will eventually

result in higher cash accrual and hence higher credit rating.

4 Since the firm performance is largely dependant on availability of raw materials, $n

order to avoid the uncertainties in ac#uiring the raw materials 0ew and innovative

steps will be taken to effectively utilize the surplus funds.

The present level of the cash is s DB5> crores, this can be used in expansion $$ in

order to maintain the current ratio i.e., between current assets and current liabilities

at the optimum level.

6 The other main area where $01 has tremendous scope for improvement is in

manufacturing value added products. This will result in better sales realization and

higher profits.

7 Standardization of general stores material and spares and reduce the number of

items.

> The company should take proper steps to reduce the expenses and thoroughly seek

for maximum gains.

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0.) CONC%UION

The *isakhapatnam Steel +lant has been dedicated to nation in B994 and it is one ofthe ma2or steel plants in the sia and having much more capital investment. e know that the

*isakhapatnam Steel +lant as a large organization might have long gestation period and while

establishing the *isakhapatnam Steel +lant so much of lands were taken from the local

people and provided the 2obs to them in *S+ thought they may not skillful. ?ut the top

management of *S+ conducts so many training and development programs to improve their

performance, not only this but also fre#uent technological changes due to the above factors in

the initial stage.

The *S+ incurred some losses but with the remedial measures taken by the top

management the past scenario was changed and the organization was stepped towards the

profits and recorded 669.>> crores as a profit for the year 4554. "owever the top

management must take care to improve the profitability and must try to reduce O remove the

accumulated losses, which is important for the wealth of the organization.

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BIBILOGRAPHY

=INANCIAL MANAGEMENT I.M.PANDEY

=INANCIALMANAGEMENT PRASANNA CHANDRA

OTHER SOURCES:

nnual eports of ashtriya$spat 0igam 1imited

$nformation from Iwww.vizagsteel.comJ

Meneral rticles nd :agazines Gf ashtriya$spat 0igam 1imited

0ewspapers= 3eccan )hronicle, The "indu.

Documents

financial statements performance