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8/7/2019 Steel Authority of India Limited Term Paper
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ACCOUNTING FOR
MANAGERS
Term paper
Based on financial statement
analysis and interpretation.
Submitted to:- Submitted by:-
Mrs.Manu kalia Subodh kumar singh
Regd.no- 11008039
Roll.no-A19
M.B.A- S1003
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Steel Authority of India Limited (SAIL) is the leading steel-making company in
India. It is a fully integrated iron and steel maker, producing both basic and special
steels for domestic construction, engineering, power, railway, automotive and
defense industries and for sale in export markets.
Ranked amongst the top ten public sector companies in India in terms of turnover,
SAIL manufactures and sells a broad range of steel products, including hot and cold
rolled sheets and coils, galvanized sheets, electrical sheets, structural’s, railway
products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces
iron and steel at five integrated plants and three special steel plants, located
principally in the eastern and central regions of India and situated close to domesticsources of raw materials, including the Company's iron ore, limestone and dolomite
mines. The company has the distinction of being India’s second largest producer of
iron ore and of having the country’s second largest mines network. This gives SAIL
a competitive edge in terms of captive availability of iron ore, limestone, and
dolomite which are inputs for steel making.
SAIL's wide range of long and flat steel products is much in demand in the
domestic as well as the international market. This vital responsibility is carried out
by SAIL's own Central Marketing Organization (CMO) that transacts business
through its network of 37 Branch Sales Offices spread across the four regions, 25Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact
Offices. CMO’s domestic marketing effort is supplemented by its ever widening
network of rural dealers who meet the demands of the smallest customers in the
remotest corners of the country. With the total number of dealers over 2000 ,
SAIL's wide marketing spread ensures availability of quality steel in virtually all
the districts of the country.
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SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000
accredited unit of CMO, undertakes exports of Mild Steel products and Pig Iron
from SAIL’s five integrated steel plants.
With technical and managerial expertise and know-how in steel making gained
over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offersservices and consultancy to clients world-wide.
SAIL has a well-equipped Research and Development Centre for Iron and Steel
(RDCIS) at Ranchi which helps to produce quality steel and develop new
technologies for the steel industry. Besides, SAIL has its own in-house Centre for
Engineering and Technology (CET).
Major Units
Integrated Steel Plants
• Bhilai Steel Plant (BSP) in Chhattisgarh
• Durgapur Steel Plant (DSP) in West Bengal
• Rourkela Steel Plant (RSP) in Orissa
• Bokaro Steel Plant (BSL) in Jharkhand
• IISCO Steel Plant (ISP) in West Bengal
Special Steel Plants
• Alloy Steels Plants (ASP) in West Bengal
• Salem Steel Plant (SSP) in Tamil Nadu
• Visvesvaraya Iron and Steel Plant (VISL) in Karnataka
Subsidiary
• Maharashtra Elektrosmelt Limited (MEL) in Maharashtra
VISIon
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• To be a respected world class corporation and the leader in
Indian steel business in quality, productivity, profitability and
customer satisfaction
Mission
To be a respected world class corporation and the leader in Indian
steel business in quality, productivity, profitability and customer
satisfaction.
CREDO
• We build lasting relationships with customers based on trust
and mutual benefits.
• We uphold highest ethical standards in conduct of ourbusiness.
• We create and nurture a culture that supports flexibility,
learning and is proactive to change.
• We chart a challenging career for employees with opportunities
for advancement and rewards.
• We value the opportunity and responsibility to make ameaningful difference in people's lives.
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Company profile :
Type State-owned enterprise
Public (BSE: 500113)
Industry Steel
Founded 1954
Headquarter
s
Ispat Bhawan, New Delhi, India[1]
Key people C.S Verma (Chairman)
Revenue ▲ 41,356.50 crore (US$9.31 billion)[2]
Net income ▲ 6,791.09 crore (US$1.53 billion)[2]
Total assets ▲ US$10.54 billion (2008)
Employees 131,910 (2006)
Website www.sail.co.in
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FINANCIAL STATEMENTS
Financial statement generally shows the picture of the company in financial terms.
Each financial statement relate to a specific data or a course of a particular period
of time.
It will help the business owners and other interested parties to analyze the data in
financial statements to provide them with better information about such key factors
for decision making and ultimate business survival.
TOOLS OF FINANCIAL STATEMENTS ANALYSIS
• Comparative Statement
• Common Size Analysis
• Trend Analysis
• Ratio Analysis• Cash Flow Statement
• Fund Flow statement
Comparative Analysis :-
It is a horizontal technique in which financial data of two or more periods are presented in comparative forms. Such data depict absolute data of two or more
years , increase or decrease in terms of percentage .
Common Size Analysis :-
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It facilitates both type of analysis , i.e, horizontal as well as vertical. This statement
indicate the relationship of various items in terms of with some common or basic
items . In Income statement the common item ids Net Sales and in Position
statement the common item is total of assets and liabilities.
Individual items / net sales * 100
Trend analysis :-
This analysis is an important tool of horizontal financial analysis . Under this
method trend ratio are calculated from selected items of financial year taking the
figure of the base year as 100 .
Trend Ratio = Current Year Amount / Base Year Amount *100
Ratio Analysis :
It is Used to establish meaning full mathematical relationship between two items
or two group of items shown in financial statement. This relationship is simply
Expressed in ratio like 1:1or percentage or in times.
Cash Flow statement :-
This technique is very useful in the management of cash and analysis of short term
liquidity . Under this method a statement is prepared to show the inflow or outflow
of cash related to various activities in the concern during a specific period. There is
a perfect format that was followed to make this analysis
Fund Flow Statement ;-
It is prepared to reveals the sources from which funds are obtained and the uses to
which they are being put. Here the term “funds” stand for “working capital” . It
always accompanied by schedule of working capital changes.. There is a perfect
format that was followed to make this analysis
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Objective:
• To analyze the financial position of SAIL.
• To attain the liquidity and the solvency position of thecompany in respect to the past two years.
• To compare the performance of sail in the past two years.
• To identify the financial weaknesses of the firm and to
suggest remedial measures
• To determine the long term as well as short term solvency,
which decide the credit worthiness of the firm also.
• To determine and examine the earning capacity of the firm
and to estimates the future prospects.
• It helps in identifying the financial strength and weakness of
the firm by properly establish the relation between the items
of balance sheet and profit & loss account.
IMPORTANCE OF FINANCIAL STATEMENT ANALYSIS
Financial Statement contains a bundle of useful and valuable
information which is not used by only owners but by various
parties have interest in the business concern. The main users
of financial statements are as ;-
• Investors
• Lenders
• Trade creditors
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• Employees
• Government and its agencies
• Management
• Stock Exchange
Methodology:
• We had collected all the relevant information from the
secondary source i.e. from the annual report of the
company. . The income statement, Position statement,
fund flow statement and cash flow statement ,these all
are extracted from the annual report of sail.
Balance Sheet :
Steel Authority of India
Balance Sheet
Mar '09 Mar '10
12 mths 12 mths
Sources Of Funds
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Total Share Capital 4,130.40 4,130.40
Equity Share Capital 4,130.40 4,130.40
Share Application Money 0 0
Preference Share Capital 0 0
Reserves 23,853.70 29,186.30
Revaluation Reserves 0 0
Networth 27,984.1
0
33,316.7
0
Secured Loans 1,473.60 7,755.90
Unsecured Loans 6,065.19 8,755.35
Total Debt 7,538.79 16,511.2
5
Total Liabilities 35,522.8
9
49,827.9
5
Mar '09 Mar '10
12 mths 12 mths
Application Of Funds
Gross Block 32,728.69 35,396.19
Less: Accum. Depreciation 20,459.86 21,780.91
Net Block 12,268.8
3
13,615.2
8
Capital Work in Progress 6,544.24 15,026.13Investments 652.7 668.83
Inventories 10,121.45 9,027.46
Sundry Debtors 3,024.36 3,493.90
Cash and Bank Balance 347.94 22,436.37
Total Current Assets 13,493.75 34,957.73
Loans and Advances 4,292.50 4,123.43
Fixed Deposits 17,880.59 0
Total CA, Loans & Advances 35,666.84 39,081.16
Deffered Credit 0 0
Current Liabilities 10,201.51 12,351.78
Provisions 9,408.21 6,211.67
Total CL & Provisions 19,609.72 18,563.45
Net Current Assets 16,057.1
2
20,517.7
1
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Miscellaneous Expenses 0 0
Total Assets 35,522.8
9
49,827.9
5
Contingent Liabilities 32,193.13 28,382.46
Book Value (Rs) 67.75 80.66
Profit and loss :
Profit & Loss account of SteelAuthority of IndiaIn rs crore
Particulars
Mar '09 Mar '10
12 mths 12 mths
Income Sales Turnover 49,331.47 43,934.70
Excise Duty 5,532.89 3,386.88
Net Sales 43,798.58 40,547.82
Other Income 2,002.77 2,768.23
Stock Adjustments 1,872.87 -1,157.45
Total Income 47,674.22 42,158.60
Expenditure
Raw Materials 23,915.45 20,506.40
Power & Fuel Cost 3,119.42 3,369.35
Employee Cost 8,401.73 5,416.81
Other Manufacturing
Expenses
643.35 287.66
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Selling and Admin
Expenses
1,587.61 0
Miscellaneous Expenses 992.85 719.99
Preoperative Exp
Capitalised
-1,930.40 0
Total Expenses 36,730.01 30,300.21
Mar '09 Mar '10
12 mths 12 mths
Operating Profit 8,941.44 9,090.16
PBDIT 10,944.21 11,858.39Interest 253.24 402.01
PBDT 10,690.97 11,456.38
Depreciation 1,285.12 1,337.24
Other Written Off 128.02 10.33
Profit Before Tax 9,277.83 10,108.81
Extra-ordinary items 181.26 98.45
PBT (Post Extra-ord Items) 9,459.09 10,207.26
Tax 3,284.28 3,452.89
Reported Net Profit 6,174.81 6,754.37
Total Value Addition 12,814.56 9,793.81
Preference Dividend 0 0
Equity Dividend 1,073.90 1,363.03
Corporate Dividend Tax 181.26 227.52
Per share data (annualised)
Shares in issue (lakhs) 41,304.01 41,304.01Earning Per Share (Rs) 14.95 16.35
Equity Dividend (%) 26 33
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Cash Flow Statement
Steel Authority of India
Cash Flow statement
Particulars
Mar '08 Mar '09
12 mths 12 mths
Net Profit Before
Tax
11468.73 9403.45
Net Cash From
Operating
Activities
8378.18 6124.26
Net Cash (used
in)/from
-1139.89 -4406.47
Investing Activities
Net Cash (used
in)/from FinancingActivities
-3088.68 2751.3
Net
(decrease)/incre
ase In Cash and
Cash Equivalents
4149.61 4469.09
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Opening Cash &
Cash Equivalents
9609.83 13759.44
Closing Cash &
Cash Equivalents
13759.44 18228.53
INTERPRETATION:-
1. Net cash inflow from operating activities has decreased from
8378.18Cr. to 6124.26Cr. due to decrease of current assets,
reserves and increase in current liabilities.
2. Net cash inflow from investing activities have been on the negative ,inboth the year which indicates that sail has been purchasing large amount
of fixed and other asset.
3. Net cash inflow from financing activities has been on the negative, in the
year 2008 which means this year, sail has been investing in other
activities. And in the next year it is around 2751.3 cr which means,sail has
issued their shares and other bonds.
Fund Flow Statement
Particulars 2009 2010
WorkingCapital
Increase
Decrease
Current assets
Inventories 266.15 331.8 65.65
Sundry Debtors 1383.4 1742.42 359.02
Cash and Bank Balance1182.41 1380.21 197.8
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Loans and Advances2012.31 867.29
1145.01
Total (A)
4844.27 4321.72
Current Liabilities
Current Liabilities1715.91 1632.47
(B)
1715.
91 1632.47 83.44
Working Capital (A-B)3128.
36 2689.25439.11
Net decrease in Workingcapital Changes 439.11
1369.2
8
STATEMENT OF SOURCES AND APPLICATION OF FUNDS
FOR THE YEAR 2010
SOURCES Rs. APPLICATION Rs.
Funds from operations 579.56purchase of fixedassets
5697.61
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Provisions 281.82Capital work inprogress
Raising of secured loans 336.42 Investment 225.31
share capital 5333.3Loans andAdvances 169.07
Net workingcapital 439.11
6531.1 6531.1
Interpretation
1.Fund flow statement shows how the profits of the company have been used.
It reveals the facts and reasons about the changes in currents assets with
current liabilities between two consecutive years.
2.Here, sources of funds are Retained earnings, provisions, raising of secured
loan. And these funds have been utilized for purchase of fixed assets,
investment etc.
3.This statement reveals that the financial position of the company is
satisfactory.
Cost sheet:
COST SHEET OF SAIL India LTD for 2009 and 2010
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Particulars 2010 2009
Raw Materials 20,506.40 23,915.45
PRIME COST 20,506.40 23,915.45
Add:- FactoryOverheads
Power & Fuel Cost 3,369.35 3,119.42
other ManufacturingExpenses
287.66 643.35
Depreciation 0 0
FACTORY COST 24,163.41 27,678.22
Add:-Office and Adm.Overheads
Employee Cost 5,416.81 8,401.73
MiscellaneousExpenses
719.99 992.85
Other ManufacturingExpenses
287.66 643.35
COST OF
PRODUCTION
30,587.87 37,716.15
Selling and AdmnsExpenses
0 1,587.61
COST OF GOODSSOLD
30,587.87 39,303.76
operating profit 9,959.95 4,494.82
SALES 40,547.82 43,798.58
Interpretation :
ANALYSIS:-
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1. The Prime cost of the concern has decreased as compared
to previous year. It is due to decrease in the consumption of
the raw material in 2010.
2. Cost of goods sold decreases from 39303.76 to 30587.87. in2010.
3. Operating Profit has increases from 4494.82 cr to 9959.95
Cr.
INTERPRETATION:-
1. The Cost of goods sold has deceased because of decrease in
both of the variable as well as fixed assets, which adds to
the cost of the goods.
2. Despite of decrease in the COGS, operating profit has
increased, which shows the performance of sail is relevantly
good.
ANALYSIS OF STATEMENTS
RATIO ANALYSIS
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It is the important tool of Financial Statement Analysis. Itis a process through which various ratios are calculated
and on that basis conclusions are drawn which becomethe base of managerial decision.
Objective Of Ratio Analysis
Ratio Analysis is an important technique of financialanalysis. It also provide useful indications related to
financial health and operational efficiency of the concern.
The following are the objective or advantages of ratio
analysis:-
1. It is useful in Financial Position Analysis
2. It is helpful in Financial Forecasting and Planning.
3. It is useful in assessing the Operational efficiency.
4. It help in Comparative study
5. It is Useful in Control
6. It help in locating the weak spots of the Business
FOR 2009:-
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LIQUIDITY RATIO
1. Current ratio (rupees in crores)
Current assets = 13493.75
Current liability= 10201.51
Current ratio = current assets/current liability
= 13493.75/10201.51
= 1.32
Interpretation
As a rule of thumb a ratio of2:1 is considered sound enough however it is not
universally applicable. In SAIL. The current ratio is very high .it is 1.45 which
indicates that the enterprise has not enough finance to meet their current obligation.
2 .Acid test ratio/Quick ratio
Current assets = 13493.75
Current liability= 10201.51
Quick ratio =current assets – (investment +prepaid
expense)/current liability
=13943.75-1021.45/10201.51
= 0.33
INTERPRETATION
Current ratio and test ratio indicate the ability of the enterprise to
meet its current liability however the acid test ratio is better
indicator of liquidity. Acid test ratio of sail India limited is 0.33.the
acid test ratio of company is not too much .it means company has
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not too much financial resources .so Company cannot easily meet
their current liability.
3. Absolute liquid ratio
Absolute liquid assets =cash in hand + cash in bank +marketable
securities
Cash and bank =347.94
Marketable securities =652.7
Current liability=10201.51
Absolute liquid ratio =absolute liquid assets/current liability
=347.94+652.7/10201.51
=0.09
INTERPRETATION
Absolute liquidity is represented by cash and near cash item .the
absolute liquid ratio are cash, bank and marketable securities .Astandard of 0.5:1 absolute liquidity is considered. The ratio of
absolute liquid ratio is 0.09, which show that company has good
amount of liquidity assets which is good for the company .it show
a good financial position in the market.
*profitability ratio
1. Gross profit ratio
Gross profit =8941.44
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Net sales = 43798.58
Gross profit ratio =gross profit/net sales*100
=8914.44/43798.58*100
=20.41%
INTERPRETATION
Gross profit ratio indicates what extent the selling price of
goods per unit may be reduced without incurring losses onoperation. It reflects the efficiency with which a firm
produced its product. The ratio of company is 20.41% which
show that company production is real good according to
their ratio.
2. Net profit ratio
Net profit= 6174.81
Net sales = 43798.58
Net profit ratio=net profit/net sales*100
=6174.81/43798.58*100
=14%
INTERPRETATION
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Actually the business totally depends on the profit of the
company. Business is only run success if it earns profit. So
net profit ratio of this company is 14% which show thatcompany is not earns a huge net profit.
3. Operating ratio
Operating cost =COGS + operating expenses
=8941.44+643.35+1587.61
Net sales = 43798.58
Operating ratio=operating cost /net sales*100
=11172.4/4378.58*100
=255.16%
INTERPRETATION
Operating ratio indicate the relationship between operating
expenses and sales. The ratio indicates operating efficiency
of the organisation and it is important to the management to
evaluating its own efficiency.
The ratio of reliance power is 255.16% which indicate the
efficiency of the organization is good but not bettermanagement should take more steps towards their utilization
of their resources.
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4. Return on investment
Net profit =6174.81
Shareholder fund=27984.10
Return on investment=net profit/shareholder fund*100
=6174.81/27984.10*100
=22.06%
INTERPRETATION
Through this ratio company can measure the percentage
return to the company on the fund .it is also a good
indication of the profitability of the organization.
The company has ratio of RETURN OF INVESTMENT is 22.06%
this percentage sufficient for the company because profit is a
function of accounting and operating policies of an
enterprise.
5. Return on equity
Net profit=6174.81
Preference share dividend=0
Share holder fund=27984.10
Return on equity =Net profit-Preference
dividend/Shareholder fund*100
=6174.81-0/27984.10
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=22.06
INTERPRETATION
Return on equity measure a corporation ,s profitability by
revealing how much profit a company generate with the money
shareholder have invested. The ratio of ROE is 22.06% indicating
good performance in generating profit from that amount which is
invested by the shareholder.
6. Earnings per share =Net profit-preference
dividend/No. Of equity share
outstanding
*Activity /turnover ratio
1. Inventory turnover ratio
COGS=net sales-gross profit
=43798.58-8914.44
=34884.14
Average stock= 10121.45
Inventory turnover ratio=COGS/average stock
= 34884.14/10121.41=3.47
INTERPRETATION
Inventory turnover ratio indicate that how many times a company,
s inventory is sold and replaced over a period. A high ratio implies
either strong sales or effective buying. But company ITR is 3
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which show that company has considerable turnover implies
good sales.
2. Debtor’s turnover ratio=net credit annual
sales/average debtors
Net credit sales= 43798.58
Average debtor= 10121.45
Debtor turnover ratio=43798.58/10121.45
=4.32
.
*solvency ratio
1. Debt to equity ratio
Debt=7538.79
Equity= 27984.10
Debt to equity ratio= total debt/equity
7538.79/27984.10
=0.26
INTERPRETATION
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Through this ratio company find out financial power of
the company. A high debt to equity ratio generally means that a
company has been aggressive in financial its growth with debt. If
company debt may increase more than it may lead to bankruptcy.
Company debt to equity ratio is not much which indicates
that company took debt according to their need.
*coverage ratio
1. Interest coverage ratio
EBIT=10944.21
Interest charges= 253.24
Interest coverage ratio=earnings before interesttax/interest charges
=10944.21/253.24
=43.2
INTERPRETATION
Interest coverage ratio determines that how easily a company can
pay interest on outstanding debt. The lower the ratio, thecompany is burden by debt expense. But the Havells India limited
has interest coverage ratio is 43.2. Which show that company has
large debt and it has to pay large debt.
CALCULATION FOR 2010
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*LIQUIDITY RATIO1. Current ratio (rupees in crores)
Current assets = 34957.73
Current liability= 12351.78
Current ratio = current assets/current liability
= 34957.73/12351.78= 2.83
Interpretation
Generally as a rule of thumb a ratio of2:1 is considered
sound enough however it is not universally applicable. In
Havells India limited. The current ratio is very good as it is
2.83 which indicates that the enterprise has good amount
of finance that it needs.the ratio show that company hasgood finance.
Thus, a high current ratio means the enterprise has more
finance so they can use efficiently.
2 .Acid test ratio/Quick ratio
Current assets = 34957.73
Current liability = 12351.78
Quick ratio =current assets – (investment +prepaid
expense)/current liability
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= 34957.73-9027.46/12351.78
=2.09
INTERPRETATION
Current ratio and test ratio indicate the ability of the enterprise to
meet its current liability however the acid test ratio is better
indicator of liquidity. Acid test ratio of sail India limited is2.09.the
acid test ratio of company is good. It means company has too
much finance available.
2. Absolute liquid ratio
Cash and bank = 668.83
Current liability= 12351.78
Absolute liquid assets =cash in hand + cash in bank +marketable
securities
=668.83+22436.37
Absolute liquid ratio =absolute liquid assets/current liability
= 1.87
INTERPRETATION
Absolute liquidity is presented by cash and near cash item .the
absolute liquid ratio are cash, bank and marketable securities .A
standard of 0.5:1 absolute liquidity is considered. The ratio of
absolute liquid ratio is 1.87Which show that company has good
liquid assets.
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*profitability ratio
3. Gross profit ratio
Gross profit = 9090.16
Net sales = 40547.84
Gross profit ratio =gross profit/net sales*100
= 22.4%
INTERPRETATION
Gross profit ratio indicate what extent the selling price of
goods per unit may be reduced without incurring losses on
operation .it reflect the efficiency with which a firm produced
its product. The ratio of company is 22.4%. Which show that
company production is good according to their ratio.
4. Net profit ratio
Net profit= 6754.37
Net sales =40547.84
Net profit ratio=net profit/net sales*100
= 1.66
INTERPRETATION
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Actually the business totally depend on the profit of the
company .Business is only run success if it earn profit. So net
profit ratio of this company is 1.66% which show that company
earn a low net profit .it is good for the company.
3. Operating ratio
Operating cost =COGS+ operating expenses
=40547.82+8941.54+643.35+1587.4
= 51720.11
Net sales = 40547.84
Operating ratio=operating cost /net sales*100
= 127.55
INTERPRETATION
Operating ratio indicate the relationship between operating
expenses and sales. The ratios indicate operating efficiency
of the organisation and it is important to the management toevaluating its own efficiency.
The ratio of havells India limited is 127.55%
which indicate the efficiency of the organisation is good but
not better management should take more steps towards
their utilisation of their resources.
4. Return on investment
Net profit =6754.37
Shareholder fund= 33316.7
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Return on investment=net profit/shareholder fund*100
= 20.27
INTERPRETATION
Through this ratio company can measure the percentage
return to the company on the fund .it is also a good
indication of the profitability of the organisation.
The company has ratio of RETURN OF INVESTMENT is 20%
this percentage sufficient for the company because profit is afunction of accounting and operating policies of an
enterprise.
5. Return on equity
Net profit=6754.37
ROE=6754.37-0/33316.7
=20.27%
INTERPRETATION
Return on equity measure a corporation ,s profitability by
prevailing how much profit a company generate with the
money shareholder have invested. The ratio of ROE is
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indicating good performance in generating profit from that
amount which is invested by the shareholder.
6. Earnings per share =Net profit-preference
dividend/No. Of equity share
outstanding
*Activity /turnover ratio
1. Inventory turnover ratio
COGS=net sales-gross profit
= 40547.82-9090.16
= 31456.84
Average stock= 33316.7
Inventory turnover ratio=COGS / average stock
= 0.94
INTERPRETATION
Inventory turnover ratio indicate that how many times a company,
s inventory is sold and replaced over a period. A high ratio implies
either strong sales or effective buying. But company ITR is 0.94
which show that company has low turnover implies good sales.
3. Debtor’s turnover ratio=net credit annual sales/average
debtors
Net credit sales= 40547.82
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Average debtor= 9027.46
Debtor turnover ratio= 4.49
3. Creditors turnover ratio =net credit
purchase/average creditor
Average payment period=365/CTR
NOTE – there is no any credit purchase by the company so wecould not find.
*solvency ratio
1. Debt to equity ratio
Debt= 16511.25
Equity= 33316.7
Debt to equity ratio= total debt/equity
= 0.49
INTERPRETATION
Through this ratio company find out financial power of the
company. A high debt to equity ratio generally means that a
company has been aggressive in financial its growth with debt. If
company debt may increase more than it may lead to bankruptcy.
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Company debt to equity ratio is not much which indicates
that company took debt according to their need.
*coverage ratio
3. Inertest coverage ratio
EBIT= 11858.39
Interest charges= 402.01
Interest coverage ratio=earnings before interesttax/interest charges
=29.49
INTERPRETATION
Interest coverage ratio determine that how easily a company can
pay interest on outstanding debt .the lower the ratio ,the company
is burden by debt expense. But the reliance power company has
interest coverage ratio is 2.49which show that company has no
any debt or if company has any debt it can easily meet by the
company.
TREND ANALYSIS
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BALANCE SHEET :
Particulars Mar '09 Mar '10
Trend Analysis=Currentyear*100 / Baseyear(2009)
Total ShareCapital 4,130.40 4,130.40 100Equity Share
Capital 4,130.40 4,130.40 100ShareApplicationMoney 0 0 0Preference ShareCapital 0 0 0
Reserves 23,853.7029,186.3
0 122.3554417Revaluation
Reserves 0 0 0
Networth 27,984.1033,316.7
0 119.055821
Secured Loans 1,473.60 7,755.90 526.3232899
Unsecured Loans 6,065.19 8,755.35 144.3540928
Total Debt 7,538.7916,511.2
5 219.0172428
Total Liabilities 35,522.8949,827.9
5 140.269978
Assets
Gross Block 32,728.6935,396.1
9 108.1503415
Less: Accum.Depreciation 20,459.86
21,780.91 106.456789
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Net Block 12,268.8313,615.2
8 110.9745591Capital Work inProgress 6,544.24
15,026.13 229.6084801
Investments 652.7 668.83 102.4712732Inventories 10,121.45 9,027.46 89.1913708
Sundry Debtors 3,024.36 3,493.90 115.5252682Cash and Bank Balance 347.94
22,436.37 6448.344542
Total CurrentAssets 13,493.75
34,957.73 259.0660862
Loans andAdvances 4,292.50 4,123.43 96.06126966
Fixed Deposits 17,880.59 0 0
Total CA, Loans& Advances 35,666.84
39,081.16 109.5728133
Deffered Credit 0 0 0CurrentLiabilities 10,201.51
12,351.78 121.0779581
Provisions 9,408.21 6,211.67 66.02393016Total CL &Provisions 19,609.72
18,563.45 94.66453371
Net CurrentAssets 16,057.12
20,517.71 127.7795146
MiscellaneousExpenses 0 0 0
Total Assets 35,522.8949,827.9
5 140.269978
ContingentLiabilities 32,193.13
28,382.46 88.16309567
Book Value (Rs) 67.75 80.66 119.0553506
Interpretation:
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• Net worth had increased from 2009 to 2010 and loans are
decreased , it is good for company, it doesn’t involve huge
risk ,thus there is proper balance.
•
Current assets and current liabilities both has increased whileincrease in liability is not good for the company but increase
in assets are good sign for the company.
• Debtors are increased which means company’s mostly sales
are on credit basis.
• Cash and bank balance are increased which means
company’s liquid assets are more to meet the short term
solvency.
Profit and Loss:
Particulars
TrendAnalysis=Currentyear*100 /Baseyear(2009)
Mar '09 Mar '10
12 mths 12 mths
Income
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Sales Turnover 49,331.47
43,934.70 89.06019
Excise Duty 5,532.89 3,386.8861.21358
Net Sales 43,798.58
40,547.82 92.57793
Other Income 2,002.77 2,768.23138.2201
Stock Adjustments 1,872.87 -1,157.45 -61.8009
Total Income 47,674.22
42,158.60 88.4306
Expenditure
Raw Materials 23,915.4
5
20,506.4
0 85.74541Power & Fuel Cost 3,119.42 3,369.35
108.0121
Employee Cost 8,401.73 5,416.8164.47256
Other ManufacturingExpenses
643.35 287.66
287.66
Selling and AdminExpenses
1,587.61 0
0
MiscellaneousExpenses
992.85 719.9972.5175
Preoperative ExpCapitalised
-1,930.40
0
0
Total Expenses 36,730.01
30,300.21 82.49442
Mar '09 Mar '10
12 mths 12 mths
Operating Profit 8,941.44 9,090.16101.6633
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PBDIT 10,944.21
11,858.39 108.3531
Interest 253.24 402.01158.7466
PBDT 10,690.97
11,456.38 107.1594
Depreciation 1,285.12 1,337.24104.0557
Other Written Off 128.02 10.338.069052
Profit Before Tax 9,277.83 10,108.81 108.9566
Extra-ordinary items 181.26 98.4554.31424
PBT (Post Extra-ord
Items)
9,459.09 10,207.2
6 107.9095Tax 3,284.28 3,452.89
105.1338
Reported Net Profit 6,174.81 6,754.37109.3859
Total Value Addition 12,814.56
9,793.8176.4272
Preference Dividend 0 00
Equity Dividend 1,073.90 1,363.03126.9234
Corporate DividendTax
181.26 227.521255.214
Per share data(annualised)
Shares in issue (lakhs) 41,304.01
41,304.01 100
Earning Per Share (Rs) 14.95 16.35109.3645
Equity Dividend (%) 26 33126.9231
Interpretation :
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• Net sales are decreased which means indirectly income of
the company is decreases.
• Taxes are increased which lead to burden on the company.
• Operating profit has also increased which is a good sign for
the company.
• Actually selling expenses has decreased to 0 which means
no amount is spend on selling and advertisement.
Common size Statement
Balance sheet
Sources Of Funds YEAR 09 YEAR 10
%
change in2009
%
changein 2010
Total ShareCapital 4,130.40 4,130.40
11.627432
8.2893236
Equity ShareCapital 4,130.40 4,130.40
11.627432
8.2893236
Share ApplicationMoney 0 0 0 0
Preference ShareCapital 0 0 0 0
Reserves 23,853.70 29,186.30 35,208.4136184.35
4
RevaluationReserves 0 0 0
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Networth 27,984.10 33,316.70 78.7866.86347
7
Secured Loans 1,473.60 7,755.90 4.15 15.56536
Unsecured Loans 6,065.19 8,755.35 17.0717.57116
2
Total Debt 7,538.79 16,511.25 21.2233.13652
3
Total Liabilities 35,522.89 49,827.95 100.00 100
Application Of Funds
Gross Block 32,728.69 35,396.19 92.1371.03681
8
Less: Accum.Depreciation 20,459.86 21,780.91 57.60
43.712234
Net Block 12,268.83 13,615.28 34.5427.32458
4
Capital Work inProgress 6,544.24 15,026.13 18.42 30.156027
Investments 652.7 668.831.837406
81.342278
8
Inventories 10,121.45 9,027.46 28.4918.11726
1
Sundry Debtors 3,024.36 3,493.908.513834
3 7.011928
Cash and Bank Balance 347.94 22,436.37 0.98 45.02768
Total CurrentAssets 13,493.75 34,957.73 37.99 70.15687
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Loans andAdvances 4,292.50 4,123.43
12.083758
8.2753354
Fixed Deposits 17,880.59 0 50.34 0
Total CA, Loans &Advances 35,666.84 39,081.16 100.41
78.432205
Deffered Credit 0 0 0 0
Current Liabilities 10,201.51 12,351.78 28.7224.78885
8
Provisions 9,408.21 6,211.67 26.4812.46623
6
Total CL &Provisions 19,609.72 18,563.45 55.20
37.255095
Net CurrentAssets 16,057.12 20,517.71 45.20 41.17711
MiscellaneousExpenses 0 0 0 0
Total Assets 35,522.89 49,827.95 100.00 100
ContingentLiabilities 32,193.13 28,382.46 90.63
56.960923
Book Value (Rs) 67.75 80.660.190722
1 0.161877
• Net worth is decreases from78% to 66 % and loans has
decreased from 12% to 8%, it is not good for company, it
involve huge risk , we should maintain a balance between
debt and equity.
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• Current assets has increased and current liabilities has
decreased ,while decrease in liability is good for the
company and increase in assest is good.
•
Debtors are decreased from 8% to 7% which meanscompany’s mostly sales are on credit basis.
• Cash and bank balance are increased which means
company’s liquid assets are more to meet the short term
solvency.
Profit and Loss
Particulars Mar '09 Mar '10% changein 2009
%changein 2010
12 mths 12 mths
Income
Sales Turnover 49,331.47 43,934.70
112.632578
108.3528
Excise Duty 5,532.89 3,386.88 12.6325785
8.352804
Net Sales 43,798.58 40,547.8
2 100 100Other Income 2,002.77 2,768.23 4.57268249
6.827075
Stock Adjustments
1,872.87 -1,157.45
4.27609754 2.85453
Total Income 47,674.22 42,158.60 108.84878
103.9725
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Expenditure 0 0
Raw Materials 23,915.45 20,506.40
54.6032543
50.57337
Power & FuelCost
3,119.42 3,369.35 7.12219437
f13/f7*100
Employee Cost 8,401.73 5,416.81 19.1826539
13.35907
OtherManufacturingExpenses
643.35 287.661.4688832
40.7094
34
Selling andAdmin Expenses
1,587.61 0 3.62479788 0
Miscellaneous
Expenses
992.85 719.99 2.2668543
1
1.7756
56Preoperative ExpCapitalised
-1,930.40 0 -4.4074488 0
Total Expenses 36,730.01 30,300.21
83.8611891 74.7271
Mar '09 Mar '10
12 mths 12 mths
Operating Profit 8,941.44 9,090.16 20.4149084
22.41837
PBDIT 10,944.21 11,858.39
24.9875909
29.24544
Interest 253.24 402.01 0.57819226
0.991447
PBDT 10,690.97 11,456.3
8
24.409398
7 28.254Depreciation 1,285.12 1,337.24 2.9341590
53.2979
33
Other Written Off 128.02 10.33 0.29229258
0.025476
Profit Before Tax 9,277.83 10,108.8 21.182947 24.930
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159
Extra-ordinaryitems
181.26 98.45 0.41384903 0.2428
PBT (Post Extra-ord Items)
9,459.09 10,207.26
21.5967961
25.17339
Tax 3,284.28 3,452.89 7.49859927 8.5156
Reported NetProfit
6,174.81 6,754.37 14.0981968
16.65779
Total ValueAddition
12,814.56 9,793.81 29.2579348
24.15373
PreferenceDividend
0 00 0
Equity Dividend 1,073.90 1,363.03 470352.951
3.361537
CorporateDividend Tax
181.26 227.52 0.41384903
0.561115
Per share data(annualised)
Shares in issue(lakhs)
41,304.01 41,304.01
94.3044501
101.8649
Earning Per
Share (Rs)
14.95 16.35 0.0341335
3
0.0403
23Equity Dividend(%)
26 33 0.05936266
0.081385
Interpretation :
• Taxes has decreased from 8% 7% which leads to less burden
on the company.
• Operating profit has increased which is a good sign for the
company.
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• Actually selling expenses are also decreases which means
advertising is less may be the reason for less sales , but it is
not good for company’s future
Comparative Statement
Balance sheet
Sources Of Funds
YEAR09 YEAR 10
Increaseordecrease %change
Total ShareCapital
4,130.40 4,130.40 0 0
Equity Share
Capital
4,130.4
0 4,130.40 0 0ShareApplicationMoney 0 0 0
PreferenceShare Capital 0 0 0 0
Reserves23,853.
7029,186.3
0 5,332.6022.35544
2
RevaluationReserves 0 0 0 0
Networth27,984.
1033,316.7
0 5,332.6019.05582
1
Secured Loans1,473.6
0 7,755.90 6,282.30426.3232
9
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UnsecuredLoans
6,065.19 8,755.35 2,690.16
44.354093
Total Debt7,538.7
916,511.2
5 8,972.46119.0172
4
Total Liabilities35,522.
8949,827.9
514,305.0
640.26997
8
Application Of Funds
Gross Block 32,728.
6935,396.1
9 2,667.508.150341
5
Less: Accum.Depreciation
20,459.86
21,780.91 1,321.05 6.456789
Net Block 12,268.
8313,615.2
8 1,346.4510.97455
9
Capital Work inProgress
6,544.24
15,026.13 8,481.89
129.60848
Investments 652.7 668.83 16.132.471273
2
Inventories10,121.
45 9,027.46-
1,093.99
-10.80862
9
Sundry Debtors3,024.3
6 3,493.90 469.5415.52526
8
Cash and Bank Balance 347.94
22,436.37
22,088.43
6348.3445
Total CurrentAssets
13,493.75
34,957.73
21,463.98
159.06609
Loans andAdvances
4,292.50 4,123.43 -169.07
-3.938730
3
Fixed Deposits 17,880.59
0 -17,880.5
-100
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9
Total CA, Loans& Advances
35,666.84
39,081.16 3,414.32
9.5728133
Deffered Credit 0 0 0 0
CurrentLiabilities
10,201.51
12,351.78 2,150.27
21.077958
Provisions9,408.2
1 6,211.67-
3,196.54-
33.97607
Total CL &Provisions
19,609.72
18,563.45
-1,046.27
-5.335466
3
Net CurrentAssets
16,057.12
20,517.71 4,460.59
27.779515
MiscellaneousExpenses 0 0 0 0
Total Assets35,522.
8949,827.9
514,305.0
640.26997
8
ContingentLiabilities
32,193.13
28,382.46
-3,810.67
-11.83690
4
Book Value (Rs) 67.75 80.66 12.9119.05535
1
Interpretation :
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• Net worth is increased from 2009 to 2010 and loans are
decreased , it is good for company, as it involve less risk ,
we should maintain a balance between debt and equity.
•
Current assets and current liabilities both have increasedwhile increased in assest is good while increase in liabilities
is not good ,as it is increasing burden.
• Debtors are increased which means company’s mostly sales
are on credit basis.
• Cash and bank balance are increased which means
company’s liquid assets are more to meet the short term
solvency.
Profit and Loss
Particulars Mar '09 Mar '10 Increaseor
decrease%
change12 mths 12 mths
Income
Sales Turnover 49,331.47
43,934.70
43,934.70
89.0602
Excise Duty 5,532.89 3,386.88 -45,944.5
9 -830.39
Net Sales 43,798.58
40,547.82
35,014.93
79.9454
Other Income 2,002.77 2,768.23 -41,030.3
5 -2048.7
Stock Adjustments 1,872.87 - -3,160.22 -168.74
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1,157.45
Total Income 47,674.22
42,158.60
40,285.73
84.5021
Expenditure
Raw Materials 23,915.45
20,506.40 -3,409.05 -14.255
Power & Fuel Cost 3,119.42 3,369.35249.93
8.01207
Employee Cost 8,401.73 5,416.81-2,984.92 -35.527
OtherManufacturingExpenses
643.35 287.66
-355.69 -55.287
Selling and AdminExpenses
1,587.61 0
-1,587.61 -100
MiscellaneousExpenses
992.85 719.99-272.86 -27.482
Preoperative ExpCapitalised
-1,930.40
0
1,930.40 -100
Total Expenses 36,730.01
30,300.21 -6,429.80 -17.506
Mar '09 Mar '10
12 mths 12 mths
Operating Profit 8,941.44 9,090.16148.72
1.66327
PBDIT 10,944.2
1
11,858.3
9 914.18
8.3530
9Interest 253.24 402.01
148.7758.746
6
PBDT 10,690.97
11,456.38 765.41
7.15941
Depreciation 1,285.12 1,337.24 52.12 4.0556
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5
Other Written Off 128.02 10.33-117.69 -91.931
Profit Before Tax 9,277.83 10,108.8
1 830.98
8.9566
2Extra-ordinaryitems
181.26 98.45-82.81 -45.686
PBT (Post Extra-ord Items)
9,459.09 10,207.26 748.17
7.90953
Tax 3,284.28 3,452.89168.61
5.13385
Reported NetProfit
6,174.81 6,754.37579.56
9.38588
Total ValueAddition
12,814.56
9,793.81-3,020.75 -23.573
PreferenceDividend
0 00.00 0
Equity Dividend 1,073.90 1,363.03289.13
26.9234
CorporateDividend Tax
181.26 227.5246.26
25.5214
Per share data
(annualised)
Shares in issue(lakhs)
41,304.01
41,304.01 0.00 0
Earning Per Share(Rs)
14.95 16.351.40
9.36455
Equity Dividend(%)
26 337.00
26.9231
Interpretation :• Net sales are increased which means indirectly income of the
company isincreasing.
• Taxes are increased which lead to burden on the company.
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• Operating profit has increased which is a good sign for the
company.
• Actually selling expenses has decreases to 0 ,which means
advertising and selling expenses have not performed in2010.