Financial Statement Analysis of NTPC

A
Project Report on
ANALYSIS OF FINANCIAL STATEMENTS

OF
NATIONAL THERMAL POWER CORPORATION
PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF

POST GRADUATE DIPLOMA IN MANAGEMENT
2009-2011
I – Business Institute
Greater Noida (U.P)
Under the supervision of Submitted by

Mrs. Neeru Nitin Garg
PGDM-Finance
I-BUSINESS INSTITUTE 1
CERITIFICATE
This is to certify that MR. NITIN GARG, is a bonafide regular student of the
I-BUSINESS INSTITUTE for the session 2009-2011 . He has completed the project
report titled “ANALYSIS OF FININCIAL STATEMENT OF NATIONAL
THERMAL POWER CORPORATION under my supervision as a part a partial
fulfillment for the award of PGDM degree of AICTE. To the best of my knowledge the
report is Good and not copied from anywhere.
Head of the Department Project supervisior
DECLARATION
I Mr. NITIN GARG hereby declare that this project is the record of authentic work
carried out by me during the academic year 2010-2011 and has not been submitted to any
other University or Institute towards the award of any degree. All the details and analysis
provided in the report hold true to the best of my knowledge.
Signature of the student
(NITIN GARG)
ACKNOWLEDGEMENT
These eight weeks at National Thermal Power Corporation (NTPC) have been a great
learning experience. It has been one of the most enriching experience for me to work
along with the employees of one of the best managed organizations, a company rightly
considered as one of the Navratna’s in the public sector of the country.
I am very thankful to Sh. R.A GOYAL , Sr. Manager (Finance & Accounts) who has
given me full opportunity to learn the tendering operations executed here.
I am very thankful to Miss.Neeru , Faculty, I-BUSINESS INSTITUTE, Greater Noida for
the guidance and interest evinced throughout the preparation of this project.
I take this opportunity, also to express my love and sincere thanks to my family members
and friends for their support and advice during various stage of work.
I-BUSINESS INSTITUTE -4-

EXECUTIVE SUMMARY
India is the emerging giants of the world economy and international energy markets.
Energy development in India are transforming the global energy system by dint of their
ize and there growing weight in international fossil-fuel trade. India is increasingly
exposed to changes in world energy markets. The staggering pace of Indian economic
growth in the past few years, out ripping that of all other major countries, has pushed up
sharply their energy needs, a growing share of which has to be imported. The momentum
of economic development look set to keep their energy demand growing strongly. As
they become richer, the citizen of India are using more energy to run their offices and
factories, and buying more electrical appliances and cars. These developments are
contributing to a big improvement in their quality of life, a legitimate aspiration that
needs to be accommodated and supported by the rest of the world. The consequences for
India the OECD and the rest of the world of unfettered growth in global energy demand
are, however, alarming. If government around the world stick with current policies-the
underlying premise of our reference scenario-the world’s energy need would be well over
50% higher in 2030 than today, china and India together account for 45% of the increase
in demand in this scenario. Globally, fossil fules continue to dominate the fuel mix.
These trend lead to continued growth in energy-related emissions of carbon-dioxide (co2)
and to increased reliance of consuming countries to imports of oil and gas-much of them
from the middle east and Russia. Both development would heighten concerns about
climate change and energy security. The challenges for all countries is to put in motion a
transition to a more secure, lower-carbon energy system, without undermining economic

and social development. Now where will this challenges be tougher, or of greater
importance to the rest of the world, than in china and India, vigorous, immediate and
collective policy action by all government is essential to move the world onto a more
sustainable energy path. There has so far been more talk than action in most countries.
Were all the policies that governments around the world are considering today to be
implemented, as we assume in an alternative policy scenario, the world’s energy demand
and related emissions would be reduced substantially. Measure to improve energy
efficiency stand out as the cheapest the fastest way to curb demand and emissions growth
in the near term. But even in this scenario, c02 emissions are still one-quarter 4 world
energy outlook 2007 above current levels in 2030. To achieve a much bigger reduction
in emissions alternative policy scenario projections are based on what some might
consider conservative assumptions about economic grow on average 1.5 percentage
points per years faster than in the reference scenario (thought more slowly than of late),
energy demand is 21% higher in 2030 in china and combined. The global increase in
energy demand amounts to 6%, making it all the more urgent for governments around the
world to implement policies, such as those taken into account in the alternative policy
scenario, to curb the growth in fossil-energy demand and related emissions.

CONTENT
C
Chh..N
Noo PPaarrttiiccuullaarr PPaaggee N
Noo
1 Introduction……………………………...
§ Objective……………………………………………. 9
2 INDUSTRY Profile……………………….
§ Board of Director’s …………………………. 15
§ Vision & Mission Statement…………………. 17
§ Background of NTPC………………………… 18
§ Market Share…………………………………. 20
§ Achievements………………………………… 21
§ Organization structure of NTPC……………… 23
§ Location of NTPC Plants………………. 24
§ Joint ventures…………………………………. 25
3 RESEARCH METHODOLOGY... 47
4 DATA ANALYSIS……………………….
§ Ratio Meaning & Technique…………………. 50
§ Limitations of Ratio Analysis……………… ... 53
§ Classification Of Ratios & interpretation….. ... 54
5 FINDING…………………………………… 103
6 CONCLUSION…………………………….. 105
7 SUGGESTION & RECOMMENDATIONS 109
8 LIMIATION OF STUDY………………….. 111
……………...BIBLOGRAPHY………………………………. 112
………….............. ANNEXURE………………………………………. 113

CHAPTER 1
INTRODUNCTION
• Objective

INTRODUCTION
Scenario of Power in India
Growth of economy calls for watching the rate of growth in infrastructure facilities.
Power sector is one of the major aspects of this infrastructure building. Some prominent
people like the Ex Chairman of GE Jack Welch have gone to the extent of saying, “you
don’t have a chance to stand in the 21st century without lots of power………Without
this you miss the next revolution.”
Moreover, the growth rate of demand for power in developing countries is generally
higher than that of GDP. In India, the elasticity ratio was 3.06 in 1st plan, & peaked at
5.11 during 3rd plan and came down to 1.65 in 80’s. For 90’s a ratio of around 1.5 was
projected. Hence, in order to support a growth of GDP of around 7%, the rate of growth
of power supply of 10% is required.
If we look at current scenario, electricity consumption in India has more than doubled in
the last decade, outpacing the economic growth. If we analyze the various statistics of
Indian power sector, we will find that the generating capacity has gone up tremendously
from a meager 1712MW in 1950 to a whooping 147000MW today.
The critical role played by the power industry in the economic progress of a country has
to be emphasized. A self sufficient power industry is vital for a nation to achieve
economic stability
Indian Power Industry
Before Independence

The British controlled the Indian power industry firmly before Independence. Then legal
and policy framework was contributing to private ownership, with not much regulation
with regard to operational safety.
Post Independence
Immediately after Independence, the country was faced with capacity restraint. India
adopted a socialist structure for economic growth and all the major industries were
controlled by public sector enterprises. By 1970's, India had nationalized most of its
energy assets, due to its commitment to social goals. By the late 1980's, the Indian
economy felt the strain of the socialist agenda followed since independence. Faced with a
serious deterioration in public finance and balance of payment crisis, the Union
government as part of its policy of economic liberalization allowed greater investment by
private sector in the power industry.
The electricity sector in India is predominantly controlled by Government of India's
public sector undertakings (PSUs). Major PSUs involved in the generation of electricity
include National Thermal Power Corporation (NTPC), National Hydroelectric Power
Corporation (NHPC) and Nuclear Power Corporation of India (NPCI). Besides PSUs,
several state-level corporations, such as Maharashtra State Electricity Board (MSEB), are
also involved in the generation and intra-state distribution of electricity. The Power Grid
Corporation of India is responsible for the inter-state transmission of electricity and the
development of national grid.
India is world's 6th largest energy consumer, accounting for 3.4% of global energy
consumption. Due to India's economic rise, the demand for energy has grown at an
I-BUSINESS INSTITUTE - 10 -
average of 3.6% per annum over the past 30 years. In March 2009, the installed power
generation capacity of India stood at 147,000 MW while the per capita power
consumption stood at 612 kWh. The country's annual power production increased from
about 190 billion kWH in 1986 to more than 680 billion kWH in 2006. The Indian
government has set an ambitious target to add approximately 78,000 MW of installed
generation capacity by 2012. The total demand for electricity in India is expected to cross
950,000 MW by 2030.
Electricity losses in India during transmission and distribution are extremely high and
vary between 30 to 45%. In 2004-05, electricity demand outstripped supply by 7-11%.
Due to shortage of electricity, power cuts are common throughout India and this has
adversely effected the country's economic growth.
Generation
Grand Total Installed Capacity is 147,402.81 MW
Thermal Power
₪ Current installed capacity of Thermal Power (as of 12/2008) is 93,392.64
MW which is 63.3% of total installed capacity.
₪ Current installed base of Coal Based Thermal Power is 77,458.88 MW
which comes to 53.3% of total installed base.
₪ Current installed base of Gas Based Thermal Power is 14,734.01 MW
which is 10.5% of total installed base.
₪ Current installed base of Oil Based Thermal Power is 1,199.75 MW
which is 0.9% of total installed base.The state of Maharashtra is the largest
producer of thermal power in the country.
Hydro Power
India was one of the pioneering states in establishing hydro-electric power plants, The
power plant at Darjeeling and Shimsa (Shivanasamudra) was established in 1898 and
1902 respectively and is one of the first in Asia. The installed capacity as of 2008 was
approximately 36647.76. The public sector has a predominant share of 97% in this sector.
Nuclear Power
Currently, 17 nuclear power reactors produce 4,120.00 MW (2.9% of total installed
base).
Renewable Power
Current installed base of Renewable energy is 13,242.41 MW which is 7.7% of total
installed base with the southern state of Tamil Nadu contributing nearly a third of it
(4379.64 MW) largely through wind power.
Power for ALL by 2012
The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This
mission would require that our installed generation capacity should be at least 200,000
MW by 2012 from the present level of 144,564.97 MW. Power requirement will double
by 2020 to 400,000MW.
Today’s environment is a tough environment to survive, with the new industries and the
new sectors coming up so strongly and financially sound. But to gain an extra edge over
others they ought to have an extra or special added advantage.
“Our people are our most important asset.” Nearly every organization report contains
a phrase like this & for good reason. Today, the last great source of competitive
advantage is human capital.
OBJECTIVE OF THE STUDY
The above study aimed at:
₪ To gain the overall idea about the organization.
₪ To gain a firsthand knowledge about the structure and the functioning of the finance
department and the return on investment policy.
₪ To gain and enhance different managerial skills.
₪ To see the applicability and usability of theory which have been taught
to us during the first year of the course?
₪ To find out the financial performance of the organization
\₪ To find out the importance of finance in business.
₪ To find out the future requirement of finance in business.
₪ To study the investment decisions based on the return.
Depending on the studies as started above suggest some new innovative ideas which may
beneficial to the organization.
CHAPTER 2
INDUSTRY PROFILE
• Director’s Profile
• Vision & Mission Statement
• Background Of NTPC
• Market Share
• Achievements
• Organization structure of NTPC
• Joint Ventures
• Location of NTPC Plant
INDUSTRY PROFILE
BOARD OF DIRECTORS
The Management of the Company is vested with the Board of Directors. In terms of the
Articles of Association of the Company the Board of Directors can have minimum four
Directors and maximum twenty Directors.
The Composition of the Board of Directors is given below
S. Name Designation Date of
No. Appointment
Functional Directors
1 Shri R.S.Sharma Chairman & Managing 01.04.2008

Director
2 Shri Chandan Director (Operations) 01.01.2009

Roy
3 Shri I J Kapoor Director (Commercial) 08.10.2008
4 Shri R.K. Jain Director (Technical) 05.05.2008
5 Shri A.K. Singhal Director (Finance) 01.08.2007
Part-Time Official Directors
1 Shri M. Sahoo Joint Secretary and Financial 11.07.2007

Advisor Ministry of Power,
Government of India
2 Shri Harish Jointm Secretary (Thermal) 11.07.2008

Chandra Ministry of Power,
Government of India
Vision & Mission Statement
Vision
“A world class integrated power major, powering India’s growth, with
increasing global presence."
Mission
“Develop and provide reliable power, related products and services at
competitive prices, integrating multiple energy sources with innovative and
eco-friendly technologies and contribute to society.”
Core Values – BCOMIT
B – Business Ethics
C – Customer Focus (External & Internal)
O – Organizational & Professional Pride
M – Mutual Respect & Trust
I – Innovation & Speed
T – Total Quality for Excellence
Background of NTPC
NTPC – a global giant in power sector
NTPC Limited is the largest power generating company of India. A public sector
company, it was incorporated in the year 1975 to accelerate power development in the
country as a wholly owned company of the Government of India. At present,
Government of India holds 89.5% of the total equity shares of the company & the balance
10.5% is held by FIIs, Domestic Banks, Public and others. Today, it has emerged as an
‘Integrated Power Major’, with a significant presence in the entire value chain of power
generation business.
Based on 1998 data, carried out by Data monitor UK, an ISO 9001:2000 certified
company, NTPC is the 6th largest in terms of thermal power generation & the
second most efficient in terms of capacity utilization amongst the thermal utilities in
the world.
Within a span of 33 years, NTPC has emerged as a truly national power company, with
power generating facilities in all the major regions of the country. Driven by its vision to
lead, it has charted out an ambitious growth plan of becoming a 75000 MW plus
company by 2017.
GROWTH RATE
Growth in electricity generation has decelerated to 6.6 per cent from 7.5 per cent in the
corresponding period in 2008-09, the Economic Survey tabled in the Parliament by
finance minister P. Chidambaram said.
The government is expecting 9.5 per cent growth per annum in the power sector in the
11th Five Year Plan.
MARKET SHARE
While the majority of capital invested in these countries is domestic, the sovereign risk
characteristics of these countries can differ significantly, which can influence the types of
international lenders that are willing to invest in these markets. This aspect of investment
risk, combined with the technological capacity of a country to deploy technologies, as
well as the local policies and measures that govern them, can influence technology
investment flows to Brazil, Russia, India, and China.
Achievements
Recognizing its excellent performance and vast potential, Government of the India has
identified NTPC as one of the jewels of Public Sector 'Navratnas'- a potential global
giant.
A) NTPC ranked 317th in the ‘2009, Forbes Global 2000’ ranking of the World’s
biggest companies.
B) NTPC has been rated as one of the top most “Best Employer” of the country for the
year 2003, 2004 & 2005 in a row.
C) It has also been rated as one of the “Best Companies to Work for in India” by
Mercer HR Consulting- Business Today Survey 2004, it has developed into a multi-
location and multi-fuel company over the past three decades.
D) NTPC has been awarded No.1, Best Workplace in India among large organizations
for the year 2008, by the Great Places to Work Institute, India Chapter in collaboration
with The Economic Times.
E) Leadership Award for CMD, NTPC in the 4th Global Leadership Summit by Amity
University for Sectoral Excellence in Power industry for his outstanding contribution to
the growth of Indian business & bringing glory to the country through his pioneering
leadership.
F) Ranked #1 independent power producer in Asia in the THIRD ANNUAL PLATTS
TOP 250 GLOBAL ENERGY COMPANY AWARDS 2008 for outstanding Global
financial & Industrial performance at the award ceremony in Singapore. The corporation
has been simultaneously ranked #15, overall in Asia amongst the energy companies.
G) NTPC’s excellence in executing power projects & its initiative in Decentralized
Distributed Power Generation has been recognized and awarded at IEEMA Power
Awards 2008. NTPC Vindhyachal Stage-III (2x 500MW) has been conferred the IPMA
SILVER MEDAL for Project Excellence by International Project Management
Association, at the IPMA Congress, held in Rome, Italy, for implementation of project in
record time & achieving excellent environmental, economic performance and giving
outstanding support to the local community.
Some major awards given to the Company in the areas of environment management &
Corporate Social Responsibility include:
Organization Structure of NTPC
Source: www.ntpc.co.in Figure 2.3: Organization structure of NTPC
Location of NTPC Plants
Anta
JOINT VENTURES
NTPC has identified Joint Ventures, strategic alliances as well as acquisitions &
diversifications as viable and desired options for its business development.
NTPC looks for opportunity to create such joint ventures & strategic alliances, in the
entire value chain of the power business. NTPC as a partner endows the Joint Venture
Alliances with a winning edge. Acquisitions & Diversifications in the areas related to the
core business not only ensure growth but also add to the robustness of the company.
Diversification is carried out either directly or through subsidiaries/JV
Promoter’s Equity
Name of the Joint Date of
S.No Holding as on Area(s) of Operation
Venture Company Incorporation
31.3.2008
Trading of power,
NTPC 5.28% import/export of
NHPC 5.28% power and purchase
PTC India of power from
1. 16.04.99 PFC 5.28%
Limited identified private
Power Grid
5.28% power projects and
Corp selling it to identified
SEBs/others.
To take up
assignments of
NTPC 50% construction,
Utility Powertech Reliance erection and
2. 23.11.95
Limited (UPL) Infrastructure 50% supervision in power
Ltd. sector and other
sectors in India and
abroad.
To own and operate
a capacity of 564
MW as captive
power plants for
SAIL’s steel
NTPC-SAIL NTPC 50% manufacturing
3. Power Company 08.02.99 facilities located at
Pvt. Ltd. SAIL 50% Durgapur, Rourkela
and Bhilai. Another
unit of 250 MW is
expected to be
commissioned
shortly.
NTPC 50% To take up
Renovation &
NTPC-Alstom Alstom Modernization
4. Power Services 20.09.99 Power
Private Limited 50% assignments of power
Generation plants both in India
AG and abroad.
To set up a coal-
NTPC Tamil NTPC 50%
based power station
5. Nadu Energy 23.05.03 Tamil Nadu
Company Ltd. 50% of 1000MW capacity,
Electricity at Vallur , using
Board Ennore port
infrastructure
facilities. The
construction work at
site is under
progress.
To take over and
operate gas based
Dabhol Power
Ratnagiri Gas and
Project alongwith
6. power Pvt. 08.07.05 NTPC 28.33%
LNG terminal.
Limited
NTPC’s
shareholding is to be
revised to 32.88%.
To set up coal based
NTPC 50% power Project of
Indraprastha 1500 MW (3x500
Power MW),in Jhajjar
25%
Aravali Power Generation District of Haryana.
7. Company Private 21.12.06 Co. Ltd. NTPC would also
Ltd. Haryana operate and maintain
Power the station on
25% Management
Generation
Corp. Ltd. Contract basis for at
least 25 years.
To jointly undertake
the development and
NTPC 50% operation &
NTPC-SCCL Singareni maintenance of coal
8. Global Venture 31.07.07 Collieries Blocks and
Pvt. Ltd. 50% integrated coal based
Company
Ltd. power projects in
India and abroad.
NTPC 50% To set-up a power

Uttar plant of 1320 MW
Pradesh (2X660 MW) at Meja
Meja Urja Nigam
9. 02.04.08 Rajya Vidyut Tehsil or any other
Private Limited 50%
Utpadan suitable site in
Nigam Allahabad district in
Limited the state of UP.
To carry out
NTPC BHEL NTPC 50%
Engineering
10. Power Projects 28.04.08 Bharat
50% Procurement and
Pvt Ltd. Heavy Construction (EPC)
Electrical Ltd activities in the
power sector and to
engage in
manufacturing and
supply of equipment
for power plants and
other infrastructure
projects in India and
Abroad.
To establish a facility
to take up
manufacturing of
castings, forgings,
NTPC 49% fittings and high
BF-NTPC Energy pressure piping
11. 19.06.08 Bharat Forge
Systems Limited 51% required for power
Limited projects and other
industries, Balance of
Plant (BOP)
equipment for the
power sector
To set-up a coal
based power project
NTPC 50% having capacity of
Nabinagar Power 1980 MW (3X660
Generating NTPC Bihar MW) and operation
12. 09.09.08 State
Company Private 50% & maintenance
Limited Electricity thereof at Nabinagar
Board in district
Aurangabad of State
of Bihar.
NTPC 16.67%
National Power NHPC 16.67% To operate a Power
13. 11.12.08 Exchange at National
Exchange Limited PFC 16.66% level.
TCS 50%
Fig-4: List of Joint Ventures
FUTURE CAPACITY ADDITIONS
NTPC has formulated a long term Corporate Plan upto 2017. In line with the Corporate
Plan, the capacity addition under implementation stage is presented below:
S.No PROJECT STATE FUEL MW

1. Kahalgaon-II (3X500) Bihar Coal 500
2. Sipat I (3 x 660) Chhattisgarh Coal 1980
3. Barh I (3 x 660) Bihar Coal 1980
4. Korba III ( 1 x 500) Chhattisgarh Coal 500
5. Farakka III ( 1 x 500) West Bengal Coal 500
6. NCTPP II ( 2 x 490) Uttar Pradesh Coal 980
7. Simhadri II ( 2 x 500) Andhra Pradesh Coal 1000
Indira Gandhi STPP- JV with IPGCL &
8. Haryana Coal 1500
HPGCL ( 3 x 500)
9. Vallur I -JV with TNEB ( 2 x 500) Tamilnadu Coal 1000
Nabinagar TPP-JV with Railways (4 x
10. Bihar Coal 1000
250)
11. Bongaigaon(3 x 250) Assam Coal 750
Himachal
12. Koldam HEPP ( 4 x 200) 800
Pradesh
13. Loharinag Pala HEPP ( 4x 150) Uttarakhand 600
14. Tapovan Vishnugad HEPP (4 x 130) Uttarakhand 520
15. Mauda ( 2 x 500) Maharashta Coal 1000
16. Barh II (2 X 660) Bihar Coal 1320
17. Vindhyachal-IV (2X500) Madhya Pradesh Coal 1000
18. Rihand III(2X500) Uttar Pradesh Coal 1000
Total 17930
Subsidiaries
Subsidiaries of NTPC
Competitors
RELIANCE ENERGY LTD. TATA POWER LTD.
NATIONAL HYDROELECTRIC POWER POWER GRID

CORPORATION LTD. (NHPCL) OF INDIA LTD. (PGCIL)
Acquisition
Business development through Acquisition serves both NTPC's own commercial interest
as well as the interest of the Indian economy.
Taking over being a part of the acquisition process, is also an opportunity for NTPC to
add to its power generation capacity through minimal investment & very low gestation
period. NTPC has, over the years, acquired the following three power stations belonging
to other utilities/SEBs and has turned around each of them using its corporate abilities.
POWER STATIONS TAKEN OVER YEAR ORIGINAL OWNER
2x210 MW FEROZE GANDHI UNCHAHAR THERMAL UP RajyaVidyut Utpadan Nigam

1991
POWER STATION of Uttar Pradesh
4x60 MW + 2x110 MW TALCHER THERMAL POWER

1995 Orissa State Electricity Board
STATION
4x110 MW TANDA THERMAL POWER STATION 2000 UP State Electricity Board
705MW BADARPUR THERMAL POWER STATION 2006 Central Electricity Authority
Diversified Growth
NTPC’s quest for diversification started about a decade back with its foray into Hydro
Power. It has, since then, been moving towards becoming a highly diversified company
through backward, forward and lateral integration. The company is well on its way to
becoming ‘an Integrated Power Major’, having entered Hydro Power, Coal Mining,
Power Trading,
Equipment Manufacturing and Power Distribution. NTPC has made long strides in
developing its Ash Utilization business. In its pursuit of diversification, NTPC has also
developed strategic alliances and joint ventures with leading national and international
companies.
₪ Hydro Power: In order to give impetus to hydro power growth in the
country and to have a balanced portfolio of power generation, NTPC
entered hydro power business with the 800 MW Koldam hydro
projects in Himachal Pradesh. Two more projects have also been taken
up in Uttarakhand. A wholly owned subsidiary, NTPC Hydro Ltd., is
setting up hydro projects of capacities up to 250 MW.
₪ Coal Mining: In a major backward integration move to create fuel security,
NTPC has ventured into coal mining business with an aim to meet about
20% of its coal requirement from its captive mines by 2017. The Government
of India has so far allotted 7 coal blocks to NTPC, including 2 blocks to
be developed through joint venture route. Coal Production is likely to
start in 2009-10.
₪ Power Trading: 'NTPC Vidyut Vyapar Nigam Ltd.' (NVVN), a wholly owned
subsidiary was created for trading power leading to optimal utilization of NTPC’s
assets. It is the second largest power trading company. In order to facilitate power
trading in the country, ‘National Power Exchange Ltd.’, a JV between NTPC,
NHPC, PFC and TCS has been formed for operating a Power Exchange.
₪ Ash Business: NTPC has focused on the utilization of ash generated by its
power stations to convert the challenge of ash disposal into an opportunity. Ash is
being used as a raw material input for cement companies\ and brick
manufacturers. NVVN is engaged in the business of Fly Ash export and sale to
domestic customers. Joint ventures with cement companies are being planned to
set up cement grinding units in the vicinity of NTPC stations.
₪ Power Distribution: ‘NTPC Electric Supply Company Ltd.’ (NESCL), a
wholly owned subsidiary of NTPC, was set up for distribution of power. NESCL
is actively engaged in ‘Rajiv Gandhi Gramin Vidyutikaran Yojana’programme for
rural electrification and also working as 'Advisor cum Consultant' for Ministry of
Power for implementation of Accelerated Power Development and Reforms
Programmed (APDRP) launched by Government of India.
₪ Equipment Manufacturing: Enormous growth in power sector
necessitates augmentation of power equipment manufacturing capacity. NTPC
has formed JVs with BHEL and Bharat Forge Ltd. for power plant equipment
manufacturing. NTPC has also acquired stake in Transformers and Electricals
Kerela Ltd. (TELK) for manufacturing and repair of transformers
Power Generation
Presently, NTPC generates power from Coal and Gas. With an installed capacity of
30,144 MW, NTPC is the largest power generating major in the country . It has also
diversified into hydro power, coal mining, power equipment manufacturing, oil & gas
exploration, power trading & distribution. With an increasing presence in the power value
chain, NTPC is well on its way to becoming an “Integrated Power Major.”
Installed Capacity
Be it the generating capacity or plant performance or operational efficiency, NTPC’s
Installed Capacity and performance depicts the company’s outstanding performance
across a number of parameters.
NTPC Owned
Coal 15 2,383
Gas/Liquid Fuel 7 3,955
Total 22 27,850
Owned By JVs
Coal & Gas 4 2,294
Total 26 30,144
Regional Spread of Generatin Facilities
REGION COAL GAS TOTAL
Nortern 7,035 2,312 9,347
Western 6,360 1,293 7,653
Southern 3600 350 3,950
Eastern 6,900 - 6,900
JVs 814 1,480 2,294
Total 24,709 5,435 30,144
Coal Based Power Stations
With 15 coal based power stations, NTPC is the largest thermal power generating
company in the country. The company has a coal based installed capacity of 23,895 MW.
S.no COAL BASED (owned STATE COMMISSIONED
CAPACITY(MW)
by N.T.P.C)
1 Singru li Uttar Pradesh 2,000
2 Korba Chhattisgarh 2,100
3 Ramag Andhra Pradesh 2,600
4 Farakka West Bengal 1,600
5 Vi\ndhyacha Madhya Pradesh 3,260
6 Rih and Uttar Pradesh 2,000
7 Kahalga Bihar 1,840
8 Dadri Uttar Pradesh 840
9 Talcher Kaniha Orissa 3,000
10 Unchahar Uttar Pradesh 1,050
11 Talcher Thermal Orissa 460
12 Simh ad ri Andhra Pradesh 1 1,000
13 Tand Uttar Pradesh 440
14 Badarpur Delhi 705
15 Sipat- II Chhattisgarh 1,000
Total 23,895
Coal Based Power Stations: Based Joint Ventures:
S.NO COAL BASED (owned STATE COMMISSIONED

CAPACITY
by N.T.P.C)
1 Durgapur West Bengal 120
Rourkela Orissa 120

2
Bhilai Chhattisgarh 574
3
Total 814
Gas/Liquid Fuel Based Power Stations
With a combined gas based commissioned capacity of 3955 MW, NTPC caters to the
peeking demand for power.
COAL BASED (owned STATE COMMISSIONED

CAPACITY(MW)
by N.T.P.C)
1. Anta Rajasthan 413
2. Auraiya Uttar Pradesh 652
3. Kawas Gujarat 645
4. Dadri Uttar Pradesh
817
5. Jhanor-Gan dhar Gujarat
350
6. Rajiv Gandhi CC PP Kerala
Kayamkulam
7. Faridabad Haryana 430
Total 3,955
Hydro Based Power Projects (Under Implementation)
NTPC has increased thrust on hydro development for a balanced portfolio for long term
sustainability. The first step in this direction was taken by initiating investment in
Koldam Hydro Electric Power Project located on Satluj river in Bilaspur district of
Himachal Pradesh. Two other hydro projects under construction are Tapovan Vishnu gad
and Loharinag Pala.
On all these projects construction activities are in full swing
HYDRO BASED STATE APPROVED
S.NO CAPACITY(MV)
1 Kold am (HE PP) 800 Himachal Pradesh 800
2 oharina g Pala (HEP P) Uttarakhand 600
3 Tapo van Vishnu gad (HE PP) Uttarakhand 520
Total 1,920
NTPC ANTA
National Thermal Power Corporation Limited (NTPC) is the largest thermal power
generating company of India.
A public sector company wholly owned by Govt. of India, it was incorporated in the year
1975 to accelerate power development in the country. NTPC Anta project is located
about 23 Km. from Baran district headquarter and close to Anta town of the district. Anta
project is the first in the series of combined cycle power projects set up by NTPC in
different parts of the country. The installed capacity of first stage is 413 MW comprising
3 gas turbines of 88 MW each and a steam turbine of 149 MW. All the units were
synchronized ahead of schedule. The project has strength of 240 employees.
The District Industries Centre (DIC) programme was introduced for the first time in the
state in July 1978 for providing the necessary support services under one roof for
industrial development in the district. Kota which is the major industrial town of the state
is just 72 km. from Baran where industrialization has taken roots in the early sixties.
After the creation of Baran district, office of the district industry centre office was
established at Baran in September 1992.
Main industries in Baran district are agro based industries included soyabean and mustard
oil, pulse/rice mills, coriander &wheat grinding agriculture instruments, mineral based
units like stone crashers etc.
National Thermal Power Corporation (NTPC), a government of India enterprise, is also
situated in Anta which produces electricity based on the Gas.
The district has a tremendous scope for the rapid industrialization, especially among agro
based industries. The main forest produce of district is “Tendu leave”. So Bidi, Dona
pattal units are beneficial in the district. The minerals produced in the district are
Limestone, Sandstone, building stone etc. So the units based on the above stones are also
beneficial.
Rajasthan Financial Corporation (RFC) is a leading financial institution of the state which
caters to the industrial and financial requirements of the medium, small scale and tiny
industrial units.
For setting up the industrial units in the district, RIICO provide land and infrastructure
facilities, technical consultancy and financial inputs. There are three industrial areas in
the district.
Location & Origin
With the findings of natural gas in Western Offshore fields of Bombay High, Central
Government decided to take this gas upto North India and accordingly laid the HBJ
Pipeline starting from Hazira. GOI directed to set up gas based CCPPs along with HBJ
pipeline. Initially 3 such projects were conceived at Anta , Kawas, & Auraiya in States of
Rajasthan, Gujarat & UP respectively. Anta project was set up to mitigate the power
shortage in the Northen region which was estimated between 13-16% of the peak demand
during the VIIth plan period. Further, looking at the benefit of the low gestation, high
efficiency, quick (Black) start and quick loading capability with mix-fuel flexibility and
low pollution impact, Anta project was considered the most viable option to eminently
fulfill the supply demand gap in Nothern Region. A brief profile of Project is exhibited in
o-3.
A Brief project profile of Anta
§ Station : Combined cycle Gas based Power Station

§ Gas Turbines: 3x88.71 MW
§ Steam Turbine : 1x153.2 MW.
§ Total Capcity: 419.33 MW
§ Commercial operation started w.e.f 01.08.1990.
§ Fig.0-3
Sole product of NTPC-Anta is electrical power generated by using gas or naphtha as
main fuel. The generated power is transmitted through six 220 KV lines. Thus NTPC's
role is limited upto the Switchyard, beyond which PGCIL network feeds to respective
DISCOMs
.
ANTA PROJECT PROFILE
The Anta project profile is given in Table 1
Table 1
Approved Capacity 419 MW
Installed Capacity 419 MW
Location Anta, District Baran, Rajasthan
Gas Source HBJ Pipeline – South Basin Gas field
Water Source Kota Right Main Canal
Unit Size 3*8GT + 1*149 ST
Unit Commissioned Capacity Year
Unit I 89 MW GT January 1989
Unit II 89 MW GT March 1989
Unit III 89 MW GT May 1989
Unit IV 152 MW ST March 1990
Beneficiary States U.P., J&K, Himachal Pradesh , Delhi,
Chandigarh, Rajasthan, Punjab, Haryana
International Assistance IBRD & Japan
ANTA has many unique features and achievements
Unique Features and achievements of ANTA
§ First Gas Power station of NTPC
§ First station in India where 13D2 ABB machine was installed.
§ Anta is the first power station on HBJ gas pipe line.
§ Having world benchmark for ABB Gas Turbine overhaul period 15.25 days.
ANTA’s journey towards excellence had started since inception. Today ANTA is one of
the best gas power plants in the country. For the financial year 2008-09, ANTA has been
ranked first among all gas stations of NTPC under ABT regime. It has achieved unique
distinction of being the first power station of the country having zero forced outage.
ANTA is certified under ISO 9001: 2000; ISO 14001: 2004; OHSAS 18001: 2007; SA
8000: 2001 and Five-S.
Product and Market:
The product of ANTA is Electricity at 220KV, which is supplied to its customers in
northern grid. Allocation of Anta power to various states is shown in figure: 0-5.
1%
Rajasthan
3%
U.p
4% 6% 20% Unallocated
7% Punjab
Delhi
J&k
10%
22% Uttaranchal
12% Haryana
15%
H.p
Chandigarth
§ Only Power station in country to achieve zero forced outage in a financial year (2005-06). Customers :
Customers :
Its customer consists of state distribution companies in member states of northern grid
viz. Rajasthan, UP, Delhi, Punjab, Haryana, Himachal Pradesh, Uttaranchal, J&K and
Chandigarh. The coordination for generation scheduling is done by ANTA with the
NRLDC (Northern Region Load Dispatch Centre) of Power Grid located at New Delhi.
SWOT Analysis
Strengths: -
1. Good corporate Image.
2. Complete range of product for transmission & distribution.
3. Established brand name with executive oriented program.
4. Strong & wide networks of manpower across India.
5. Considered to be having technology & design ability.
Weakness: -
1. The procurement process in the companies is cumbersome and subject to auditing.
2. Low exposure to the needs & dynamics of distribution business.
3. Role clarity on the requirement of being an equipment supplier or a solution provider.
As there are very few supplier
of equipment manufacturing plant.
Opportunities: -
1. Huge Investment leading to greater demand of goods and services.
2. Demand leading to Industry operating at full & over capacity.
3. Better Price realization.
4. Early birds to learn faster and thus achieve repeat orders. Policy to bid from ultra mega
power plant.
5. Vertical integration for supply chain management of coal by acquiring coal blogs.
Threats: -
1. Purchases preference may be extended to distribution sector.
2. Increase in no. of small contractors leading to price war.
3. Emergence of competitors in the market like Schneider, Reliance, Tata etc.
4. Change in government policies for open trade or stock trading or energy trading.
5. Reduce the time lag.
CHAPTER 3
RESEARCH
METHODOLOGY
METHODOLOGY
The information was collected from various source which are listed below:-
₪ For the official document.
₪ From records and manuals of different departments of the organizations .
₪ From a close observation of the functioning of various departments of the
organizations.
₪ Last but not least, knowledge, both negative and positive precipitated through informal
discussions with the employees of different departments.
RESEARCH METHODOLOGY
Plan of study:-
A proper and systematic approach is essential in any project work. Proper planning
should be conducting the data collection, completion and presentation of the project.
Each and every step must be so planned that it leads to the next step automatically. This
systematic approach is a blend a planning and organization and major emphasis is given
to independences of various steps.
The plan of this study is as follows.
Research purpose
The purpose of the research was to criteria on which investment of the company is raised
every year and a favorable rate of return is arrived at, increasing the net result of the
company as per their budget.
Research objective
The main objective the research is:-
₪ To know the investment decisions.
₪ To analyze the investment depending on internal rate of return.
Research design
₪ Research design helps in proper collection and analysis of the data. It helps in further
course of action.
Research approaches
₪ The most appropriate research is descriptive. This is because the goal of the study is
clear research will help to understand to concept better.
Classification of data
Primary data
₪ This includes the information collected mainly from the office. This has served as
primary source of data for this study
Secondary data
₪ This includes the information gathered from various website.
Sample Size
₪ The sample size selected is of four years.
Sampling technique
₪ The sampling procedure employed for this is judgmental sampling a convenience
sampling technique in which elements are based on the judgment of researcher
Software tools used for the data analysis
The software tools used for data analysis in MS WORD & MS EXCEL
CHAPTER 6
DATA ANALYSIS
• Ratio Meaning & Technique
• Advantages
• Uses of Ratio Analysis
• Limitations of Ratio Analysis
• Classification Of Ratios & interpretation
RATIO ANALYSIS
INTRODUCTION
Financial analysis is the process of identifying the financial strengths and weaknesses of
the firm and establishing relationship between the items of the balance sheet and profit &
loss account.
Financial ratio analysis is a fascinating topic to study because it can teach us so much
about accounts and businesses. When we use ratio analysis we can work out how
profitable a business is, we can tell if it has enough money to pay its bills and we can
even tell whether its shareholders should be happy!
Ratio analysis can also help us to check whether a business is doing better this year than
it was last year; and it can tell us if our business is doing better or worse than other
businesses doing and selling the same things. In addition to ratio analysis being part of an
accounting and business studies syllabus, it is a very useful thing to know anyway!
The overall layout of this section is as follows: We will begin by asking the question,
what do we want ratio analysis to tell us? Then, what will we try to do with it? This is the
most important question, funnily enough! The answer to that question then means we
need to make a list of all of the ratios we might use: we will list them and give the
formula for each of them.
Once we have discovered all of the ratios that we can use we need to know how to use
them, who might use them and what for and how will it help them to answer the question
we asked at the beginning?
At this stage we will have an overall picture of what ratio analysis is, who uses it and the
ratios they need to be able to use it. All that's left to do then is to use the ratios; and we
will do that step- by-step, one by one.
Ratio analysis
Ratio analysis is one of the techniques of financial analysis to evaluate the financial
condition and performance of a business concern. Simply, ratio means the comparison of
one figure to other relevant figure or figures. According to Myers , “Ratio analysis of
financial statements is a study of relationship among various financial factors in a
business as disclosed by a single set of statements and a study of trend of these factors as
shown in a series of statements."
Advantages and Uses of Ratio Analysis
There are various groups of people who are interested in analysis of financial position of
a company. They use the ratio analysis to work out a particular financial characteristic of
the company in which they are interested. Ratio analysis helps the various groups in the
following manner:
₪ To workout the profitability: Accounting ratio help to measure the profitability of
the business by calculating the various profitability ratios. It helps the
management to know about the earning capacity of the business concern. In this
way profitability ratios show the actual performance of the business.
₪ To workout the solvency: With the help of solvency ratios, solvency of the
company can be measured. These ratios show the relationship between the
liabilities and assets. In case external liabilities are more than that of the assets of
the company, it shows the unsound position of the business. In this case the
business has to make it possible to repay its loans.
₪ Helpful in analysis of financial statement: Ratio analysis help the outsiders just
like creditors, shareholders, debenture-holders, bankers to know about the
profitability and ability of the company to pay them interest and dividend etc.
₪ Helpful in comparative analysis of the performance: With the help of ratio
analysis a company may have comparative study of its performance to the
previous years. In this way company comes to know about its weak point and be
able to improve them.
₪ To simplify the ac counting information: Accounting ratios are very useful as they
briefly summarize the result of detailed and complicated computations.
Limitations of Ratio Analysis
In spite of many advantages, there are certain limitations of the ratio analysis techniques
and they should be kept in mind while using them in interpreting financial statements.
The following are the main limitations of accounting ratios:
₪ Limited Comparability: Different firms apply different accounting policies.
Therefore the ratio of one firm cannot always be compared with the ratio of other firm.
Some firms may value the closing stock on LIFO basis while some other firms may
value on FIFO basis. Similarly there may be difference in providing depreciation of
fixed assets or certain of provision for doubtful debts etc.
₪ False Results: Accounting ratios are based on data drawn from accounting records.
In case that data is correct, then only the ratios will be correct. For example, valuation
of stock is based on very high price, the profits of the concern will be inflated and it
will indicate a wrong financial position. The data therefore must be absolutely correct.
₪Effect of Price Level Changes: Price level changes often make the comparison
of figures difficult over a period of time. Changes in price affect the cost of production,
sales and also the value of assets. Therefore, it is necessary to make proper adjustment
for price-level changes before any comparison.
₪Qualitative factors are ignored: Ratio analysis is a technique of quantitative
analysis and thus, ignores qualitative factors, which may be important in decision
making. For example, average collection period may be equal to standard credit period,
but some debtors may be in the list of doubtful debts, which is not disclosed by ratio
analysis.
₪Effect of window-dressing : In order to cover up their bad financial position some
companies resort to window dressing. They may record the accounting data according
to the convenience to show the financial position of the company in a better way.
Procedure (Stages) For Ratio-analysis
Classification Of Ratios
Ratios may be classified in a number of ways to suit any particular purpose. Different
kinds of ratios are selected for different types of situations. Mostly, the purpose for which
the ratios are used and the kind of data available determine the nature of analysis. The
various accounting ratios can be classified as follows:
A. Profitability ratios :
1 Gross profit ratio
2 Net profit ratio
3 Operating ratio
4 Return on shareholders’ investment or net worth
5 Return on equity capital
6 Earnings Per Share Ratio
7 Price earnings ratio
B. Liquidity ratios :
1 Current ratio
2 Liquid /Acid test / Quick ratio
C. Activity ratios :
1 Inventory/Stock turnover ratio
2 Debtors/Receivables turnover ratio
3 Working capital turnover ratio
4 Fixed assets turnover ratio
D. Leverage ratios or long term solvency ratios :
1 Debt equity ratio
2 Proprietary or Equity ratio
3 Ratio of fixed assets to shareholders funds
4 Current Assets to Proprietor's Fund Ratio
5 Interest coverage or debt service ratio
A .Profitability ratios :
1. Gross profit ratio (GP ratio ):-
Gross profit ratio is the ratio of gross profit to net sales expressed as a percentage. It
expresses the relationship between gross profit and sales.
Gross Profit
Gross profit ratio = *100
Net Sales
Significance:
Gross profit ratio may be indicated to what extent the selling prices of goods per unit may
be reduced without incurring losses on operations. It reflects efficiency with which a firm
produces its products. As the gross profit is found by deducting cost of goods sold from
net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation.
It may vary from business to business. However, the gross profit earned should be
sufficient to recover all operating expenses and to build up reserves after paying all fixed
interest charges and dividends.
Hence, an analysis of gross profit margin should be carried out in the light of the
information relating to purchasing, mark-ups and markdowns, credit and collections as
well as merchandising policies.
(in crore)
GROSS PROFIT RATIO
YEAR GROSS PROFIT NET SALES RATIO
2004 7,912.00 18,871.20 41%
2005 8,036.60 22,565.00 36%
2006 8,070.10 26,142.90 31%
2007 10,982. 80 32,631.70 34%
2008 12,393.40 37,050.10 33%
GRAPHICAL REPRESENTATION
50
45 41
40 36 Ratio
34 33
35 31
30
25
20
15
10
5
0
2004 2005 2006 2007 2008
Interpretation:
The Gross profit of NTPC was 41% in 2003 – 2004 it had fallen up by 36%. in 2004-
2005. in 2005 – 2006 it had again fallen to 30.86% %. But in 2006-2007 had gone to
34% which shows company earned profit . in year 2007-08 it had fallen up to 33%.
2. Net profit ratio : -
Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as
percentage.
Components of net profit ratio:
The two basic components of the net profit ratio are the net profit and sales. The net
profits are obtained after deducting income-tax and, generally, non-operating expenses
and incomes are excluded from the net profits for calculating this ratio. Thus, incomes
such as interest on investments outside the business, profit on sales of fixed assets and
losses on sales of fixed assets, etc are excluded.
Formula:
Net Profit
Net profit ratio = *100
Net Sales
Significance:
NP ratio is used to measure the overall profitability and hence it is very useful
proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not
be able to achieve a satisfactory return on its investment. This ratio also indicates the
firm's capacity to face adverse economic conditions such as price competition, low
demand, etc. Obviously, higher the ratio the better is the profitability. But while
interpreting the ratio it should be kept in minds that the performance of profits also be
seen in relation to investments or capital of the firm and not only in relation to sales.
(in crore)
NET PROFIT RATIO
YEAR NET PROFIT NET SALES RATIO
2004 5286.00 18,871.20 28%
2005 5807.00 22,565.00 26%
2006 5820.00 26,142.90 22%
2007 6865.00 32,631.70 21%
2008 7415.00 37,050.10 20%
50
45
40
35 Ratio
28 26
30
25 22 21 22
20
15
10
5
0
2004 2005 2006 2007 2008
Interpretation:
The net profit ratio of NTPC was 28% in 2003 – 2004 it had fallen up by 26%. in 2004-
2005. again in 2005 – 2006 it had fallen down to 22%. Further it had fallen to 21% in
2006-2007 and again in year 2007-08 it had fallen down up to 20% which shows the
loss.
3. Operating ratio : -
Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is
generally expressed in percentage. It measures the cost of operations per dollar of sales.
This is closely related to the ratio of operating profit to net sales.
Components:
The two basic components for the calculation of operating ratio are operating cost (cost
of goods sold plus operating expenses) and net sales. Operating expenses normally
include (a) administrative and office expenses and (b) selling and distribution expenses.
Financial charges such as interest, provision for taxation etc. are generally excluded from
operating expenses.
Formula of operating ratio:
Cost of good sold+ Operating expenses

Operating ratio = *100
Net Sales
Operating ratio shows the operational efficiency of the business. Lower operating ratio
shows higher operating profit and vice versa. An operating ratio ranging between 75%
and 80% is generally considered as standard for manufacturing concerns
(in crore)
OPERATING RATIO
YEAR COST OF GOOD SOLD NET SALES RATIO
2004 13,667.00 18,871.20 72%
2005 15,276.10 22,565.00 68%
2006 18,718.30 26,142.90 71%
2007 22,472.10 32,631.70 69%
2008 25,519.70 37,050.10 69%
50
45
40
35 Ratio
30
25
20
15
10
5
0
2004 2005 2006 2007 2008
Interpretation:
In The graph Operating ratio of NTPC was 72% in 2003 – 2004 it had fallen up by 68%.
in 2004-2005. in 2005 – 2006 it had gone to 71%. Further it had fallen to 69% in 2006-
2007 and again in year 2007-08 it had fallen down up to 69% which shows company
earned maximum profit
4. Return on share holder’s investment:-
It is the ratio of net profit to share holder's investment. It is the relationship between net
profit (after interest and tax) and share holder's/proprietor's fund. This ratio establishes
the profitability from the share holders' point of view. The ratio is generally calculated in
percentage.
Components:
The two basic components of this ratio are net profits and shareholder's funds.
Shareholder's funds include equity share capital, (preference share capital) and all
reserves and surplus belonging to shareholders. Net profit means net income after
payment of interest and income tax because those will be the only profits available for
share holders.
Formula of return on shareholder's investment or net worth Ratio:
Net profit after tax - Preference dividend)

Return on Shareholder’s investment = *100
Share holder’s fund
Significance:
This ratio is one of the most important ratios used for measuring the overall efficiency of
a firm. As the primary objective of business is to maximize its earnings, this ratio
indicates the extent to which this primary objective of businesses being achieved. This
ratio is of great importance to the present and prospective shareholders as well as the
management of the company.
(in crore)
RETURN ON SHAREHOLDER’S INVESTEMENT
NET PROFIT AFTER

YEAR TAX SHAREHOLDER’S FUND RATIO
2004 5286.00 35,992.00 .15
2005 5807.00 41,776.00 .14
2006 5820.00 44,959.00 .13
2007 6865.00 48,597.00 .14
2008 7415.00 52,639.00 .14
50
40
30 Ratio
20
13
10
0.15 0.14 0.14 0.14
0
2004 2005 2006 2007 2008
Interpretation:
The Return on Shareholder’s investment of NTPC was 15% in 2003 – 2004 it had fallen
up by 14%. in 2004-2005. again in 2005 – 2006 it had fallen down to 13%. But in 2006-
2007 this ratio had fallen to 14% and again in year 2007-08 it had fallen down up to 14%
we can see by analysis of table sometimes ratio increase some time constant and some
time decrease which shows company shareholder’s investment up and down.
5. Return on Equity Capital (ROEC) Ratio
In real sense, ordinary shareholders are the real owners of the company. They assume the
highest risk in the company. (Preference share holders have a preference over ordinary
shareholders in the payment of dividend as well as capital. Preference share holders get a
fixed rate of dividend irrespective of the quantum of profits of the company). The rate of
dividends varies with the availability of profits in case of ordinary shares only. Thus
ordinary shareholders are more interested in the profitability of a company and the
performance of a company should be judged on the basis of return on equity capital of the
company. Return on equity capital which is the relationship between profits of a company
and its equity, can be calculated as follows:
Formula of return on equity capital or common stock:
Formula of return on equity capital ratio is:
Net profit after tax - Preference dividend)

Return on Equity Capital = *100
Equity share capital
Components:
Equity share capital should be the total called-up value of equity shares. As the profit
used for the calculations are the final profits available to equity shareholders as dividend,
therefore the preference dividend and taxes are deducted in order to arrive at such profits.
Significance:
This ratio is more meaningful to the equity shareholders who are interested to know
profits earned by the company and those profits which can be made available to pay
dividends to them. Interpretation of the ratio is similar to the interpretation of return on
shareholder's investments and higher the ratio better is.
(in crore)
RETURN ON EQUITY CAPITAL
NET PROFIT AFTER

YEAR TAX EQUITY SHARE CAPITAL RATIO
2004 5286.00 7,812.50 .68
2005 5807.00 8,245.50 .70
2006 5820.00 8,245.50 .71
2007 6865.00 8,245.50 .83
2008 7415.00 8,245.50 .90
50
45
40
35
30
25
Ratio
20
15
10
5 0.68 0.7 0.71 0.83 0.9
0
2004 2005 2006 2007 2008
Interpretation:
The Return on Equity capital of NTPC was .68 in 2003 – 2004 it had gone up by .70. in
2004-2005. again in 2005 – 2006 it had gone to .71. But in 2006-2007 this ratio had
again gone to .83 and again in year 2007-08 it had gone up to .90 we can see by analysis
of graph return on equity capital ratio was continuous increase which shows company in
better position.
6. Earnings per Share (EPS) Ratio :- Definition:
Earnings per share ratio (EPS Ratio) are a small variation of return on equity capital ratio
and are calculated by dividing the net profit after taxes and preference dividend by the
total number of equity shares.
Formula of Earnings per Share Ratio:
The formula of earnings per share is:
Net profit after tax - Preference dividend
Earinings per Share =
No. of Equity share
Significance:
The earnings per share is a good measure of profitability and when compared with EPS
of similar companies, it gives a view of the comparative earnings or earnings power of
the firm. EPS ratio calculated for a number of years indicates whether or not the earning
power of the company has increased.
(in crore)
RETURN ON EQUITY CAPITAL
NET PROFIT AFTER

YEAR TAX NO OF EQUITY SHARE RATIO
2004 5286.00 781.00 6.77
2005 5807.00 825.00 7.04
2006 5820.00 825.00 7.05
2007 6865.00 825.00 8.32
2008 7415.00 825.00 8.99
50
45
40
35
30
25
Ratio
20
15
6.77 7.04 7.05 8.32 8.39
10
5
0
2004 2005 2006 2007 2008
Interpretation:
NTPC EPS was Rs. 6.77 in 2003-04 which has raises to Rs.7.04 in 2004 – 2005
further in the year 2005 – 2006 it has increased to Rs 7.05.. In 2006-2007 the ratio gone
to 8.32 and in 200-2008 gone upto 8.99 which shows A higher value of EPS in these
years shows that the company is trying to maintain its net profit available to equity share
holder of NTPC, which also assure efficient utilization of equity capital
7. Price Earnings Ratio (PE Ratio): Definition:
Price earnings ratio (P/ E ratio) is the ratio between market price per equity share and
earning per share. The ratio is calculated to make an estimate of appreciation in the value
of a share of a company and is widely used by investors to decide whether or not to buy
shares in a particular company.
Formula of Price Earnings Ratio:
Following formula is used to calculate price earnings ratio:
Market price per equity share
Price Earnings Ratio =
Earning per share
Significance of Price Earnings Ratio:
Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares
of a particular company at a particular market price.
Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the
management should look into the causes that have resulted into the fall of this ratio.
(in crore)
PRICE EARNINGS RATIO
MARKET PRICE PER

YEAR EQUITY SHARE EARNINGS PER SHARES RATIO
2004 19.20 676.54 .03
2005 3,524.90 704.26 5.01
2006 951.60 705.86 1.35
2007 316.40 832.54 0.38
2008 304.30 899.25 0.34
50
45
40
35 Ratio
30
25
20
15
10 5.01
5 0.03 1.35 0.38 0.34
0
2004 2005 2006 2007 2008
Interpretation:
The Price earning Ratio of NTPC was .03 in 2003 – 2004 .it had increased by 5.01
which’s shows company in better position .in 2004-2005. again in 2005 – 2006 it had
fallen down to 1.35. and in 2006-2007 this ratio had fallen to .38 and again in year 2007-
08 it had fallen down up to .34 .
B. Liquidity ratios :
1. Current Ratio: Definition:
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio is also known as "working capita l ratio ". It is a measure of general
liquidity and is most widely used to make the analysis for short term financial position or
liquidity of a firm. It is calculated by dividing the total of the current assets by total of the
current liabilities.
Formula:
Following formula is used to calculate current ratio:
Current Assets
Current Ratio =
Current Liability
Components:
The two basic components of this ratio are current assets and current liabilities. Current
assets include cash and those assets which can be easily converted into cash within a
short period of time, generally, one year, such as marketable securities or readily
realizable investments, bills receivables, sundry debtors, (excluding bad debts or
provisions), inventories, work in progress, etc. Prepaid expenses should also be included
in current assets because they represent payments made in advance which will not have to
be paid in near future. Current liabilities are those obligations which are payable within a
short period of tie generally one year and include outstanding expenses, bills payable,
sundry creditors, bank overdraft, accrued expenses, short term advances, income tax
payable, dividend payable, etc. However, sometimes a controversy arises that whether
overdraft should be regarded as current liability or not. Often an arrangement with a bank
may be regarded as permanent and therefore, it may be treated as long term liability. At
the same time the fact remains that the overdraft facility may be cancelled at any time.
Accordingly, because of this reason and the need for conversion in interpreting a
situation, it seems advisable to include overdrafts in current liabilities.
Significance :
This ratio is a general and quick measure of liquidity of a firm. It represents the margin of
safety or cushion available to the creditors. It is an index of the firm’s financial stability.
It is also an index of technical solvency and an index of the strength of working capital.
A relatively high current ratio is an indication that the firm is liquid and has the ability to
pay its current obligations in time and when they become due. On the other hand, a
relatively low current ratio represents that the liquidity position of the firm is not good
and the firm shall not be able to pay its current liabilities in time without facing
difficulties. An increase in the current ratio represents improvement in the liquidity
position of the firm while a decrease in the current ratio represents that there has been
deterioration in the liquidity position of the firm. A ratio equal to or near 2:1 is
considered as a standard or normal or satisfactory. The idea of having doubled the current
assets as compared to current liabilities is to provide for the delays and losses in the
realization of current assets. However, the rule of 2:1 should not be blindly used while
making interpretation of the ratio. Firms having less than 2 : 1 ratio may be having a
better liquidity than even firms having more than 2 : 1 ratio. This is because of the reason
that current ratio measures the quantity of the current assets and not the quality of the
current assets. If a firm's current assets include debtors which are not recoverable or
stocks which are slow-moving or obsolete, the current ratio may be high but it does not
represent a good liquidity position.
Limitations of Current Ratio :
This ratio is measure of liquidity and should be used very carefully because it suffers
from many limitations. It is, therefore, suggested that it should not be used as the sole
index of short term solvency.
1. It is crude ratio because it measures only the quantity and not the quality of the current
assets.
2. Even if the ratio is favorable, the firm may be in financial trouble, because of more
stock and work in process which is not easily convertible into cash, and, therefore firm
may have less cash to pay off current liabilities.
(in crore)
CURRENT RATIO
YEAR CURRENT ASSETS CURRENT LIABILITY RATIO
2004 14,642.40 9,189.80 1.32

2005 14,721.80 8,561.30 1.72
2006 18,234.80 8,650.60 2.11
2007 25,858.80 10,702.50 2.42
2008 30,527.80 13,164.40 2.32
50
45
40
35 Ratio
30
25
20
15
10
5 1.32 1.72 2.11 2.42 2.32
0
2004 2005 2006 2007 2008
Interpretation:
We can see that there is a clear rise in the current ratio in 2003-04 and 2004-05. As a
conventional rule a current ratio of 2:1 is considered satisfactory. The company has
achieved the current ratio of 2.32, 2.42 & 2.11 during the years 2007-08,2006-07,2005-06
respectively. Company may have adapted aggressive working capital policy. The
company has high liquidity because of high value of current ratio. The company can
easily fulfill the short term liability.
2. Liquid or Liquidity or Acid Test or Quick Ratio: - Definition:
Liqu id ratio is also termed as "Liquidity Ratio ”, “Acid Test Ratio " or "Quick Ratio ". It
is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a
firm to pay its short term obligations as and when they become due.
Components:
The two components of liquid ratio (acid test ratio or quick ratio) are liquid assets and
liquid liabilities. Liquid assets normally include cash, bank, sundry debtors, bills
receivable and marketable securities or temporary investments. In other words they are
current assets minus inventories (stock) and prepaid expenses. Inventories cannot be
termed as liquid assets because it cannot be converted into cash immediately without a
loss of value. In the same manner, prepaid expenses are also excluded from the list of
liquid assets because they are not expected to be converted into cash. Similarly, Liquid
liabilities means current liabilities i.e., sundry creditors, bills payable, outstanding
expenses, short term advances, income tax payable, dividends payable, and bank
overdraft (only if payable on demand). Some time bank overdraft is not included in
current liabilities, on the argument that bank overdraft is generally permanent way of
financing and is not subject to be called on demand. In such cases overdraft will be
excluded from current liabilities.
Formula of Liquidity Ratio
Quick Assets
Liquidity Ratio =
Current Liability
Significance:
The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm.
It measures the firm's capacity to pay off current obligations immediately and is more
rigorous test of liquidity than the current ratio. It is used as a complementary ratio to the
current ratio. Liquid ratio is more rigorous test of liquidity than the current ratio because
it eliminates inventories and prepaid expenses as a part of current assets. Usually a high
liquid ratio an indication that the firm is liquid and has the ability to meet its current or
liquid liabilities in time and on the other hand a low liquidity ratio represents that the f
irm's liquidity position is not good. As a convention, generally, a quick ratio of "one to
one" (1:1) is considered to be satisfactory.
Although liquidity ratio is more rigorous test of liquidity than the current ratio , yet it
should be used cautiously and 1:1 standard should not be used blindly. A liquid ratio of
1:1 does not necessarily mean satisfactory liquidity position of the firm if all the debtors
cannot be realized and cash is needed immediately to meet the current obligations. In the
same manner, a low liquid ratio does not necessarily mean a bad liquidity position as
inventories are not absolutely non-liquid. Hence, a firm having a high liquidity ratio may
not have a satisfactory liquidity position if it has slow-paying debtors. On the other hand,
a firm having a low liquid ratio may have a good liquidity position if it has a fast moving
inventory. Though this ratio is definitely an improvement over current ratio, the
interpretation of this ratio also suffers from the same
limitations as of current ratio.
(in crore)
LIQUIDITY RATIO
YEAR CURRENT ASSETS CURRENT LIABILITY RATIO
2004 12904.40 9,189.80 1.40
2005 12944.10 8,561.30 1.50
2006 15894.30 8,650.60 1.84
2007 23348.60 10,702.50 2.18
2008 27852.00 13,164.40 2.12
50
45
40
35
30
25
20
15
10
5 1.4 1.5 1.84 2.18 2.12
0
2004 2005 2006 2007 2008
Interpretation:
From the above graph we can easily point out that there is a clear rise in the quick ratio in
2003-04 and 2004-05. As a conventional rule a quick ratio of 1:1 is considered
satisfactory. The company has achieved the current ratio satisfactorily. The company has
high liquidity because of high value of current ratio. Thus NTPC has the capacity to pay
off current obligations immediately the short term liability.
C. Activity ratios :
1 .Inventory Turnover Ratio or Stock Turnover Ratio (ITR): Definition:
Stock turnover ratio and inventory turnover ratio are the same. This ratio is a relationship
between the cost of goods sold during a particular period of time and the cost of average
inventory during a particular period. It is expressed in number of times. Stock turnover
ratio / Inventory turnover ratio indicates the number of time the stock has been turned
over during the period and evaluates the efficiency with which a firm is able to manage
its inventory. This ratio indicates whether investment in stock is within proper limit or
not.
Components of the Ratio:
Average inventory and cost of goods sold are the two elements of this ratio. Average
inventory is calculated by adding the stock in the beginning and at the end of the period
and dividing it by two. In case of monthly balances of stock, all the monthly balances are
added and the total is divided by the number of months for which the average is
calculated.
Formula of Stock Turnover/Inventory Turnover Ratio:
Cost Of Good Sold

Inventory Turnover ratio =
Average inventory at cost
Generally, the cost of goods sold may not be known from the published financial
statements. In such circumstances, the inventory turnover ratio may be calculated by
dividing net sales by average inventory at cost. If average inventory at cost is not known
then inventory at selling price may be taken as the denominator and where the opening
inventory is also not known the closing inventory figure may be taken as the average
inventory.
Inventory Turnover Ratio = Net Sales/ Average Inventory at Cost
Inventory Turnover Ratio = Net Sales /Average inventory at Selling Price
Inventory Turnover Ratio = Net Sales/Inventory
Significance of ITR :
Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a
high inventory turnover/stock velocity indicates efficient management of inventory
because more frequently the stocks are sold; the lesser amount of money is required to
finance the inventory. A low inventory turnover ratio indicates an inefficient management
of inventory. A low inventory turnover implies over-investment in inventories, dull
business, poor quality of goods, stock accumulation, accumulation of obsolete and slow
moving goods and low profits as compared to total investment. The inventory turnover
ratio is also an index of profitability, where a high ratio signifies more profit; a low ratio
signifies low profit. Sometimes, a high inventory turnover ratio may not be accompanied
by relatively a high profit. Similarly a high turnover ratio may be due to under-
investment in inventories. It may also be mentioned here that there are no rule of thumb
or standard for interpreting the inventory turnover ratio. The norms may be different for
different firms depending upon the nature of industry and business conditions. However
the study of the comparative or trend analysis of inventory turnover is still useful for
financial analysis
(in crore)
INVENTORY TURNOVER RATIO
AVERAGE INVENTORY AT
YEAR NET CREDIT SALES COST RATIO
2004 18,871.20 1,738.00 11
2005 22,565.00 1,777.00 13
2006 26,142.90 2,340.00 11
2007 32,631.70 2,510.00 13
2008 37,050.10 2,675.00 14
GRAPHICAL REPRESENTATION \
50
45
40
35
30 Ratio
25
20 14
13 13
15 11 11
10
5
0
2004 2005 2006 2007 2008
Interpretation:
We can see in graph in 2003-04 inventory was 11 times and in 2004-05 the ratio had
gone to 13 times which shows more profit earn by company in 2005-06 this ratio
decrease by 11 times in 2006-07 the ratio increased by 13 times. And in 2007-08 the
ratio had gone 14 times which shows full utilizatation of stock
2. Debtors Turnover Ratio or Receivables Turnover Ratio:
A concern may sell goods on cash as well as on credit. Credit is one of the important
elements of sales promotion. The volume of sales can be increased by following a liberal
credit policy. The effect of a liberal credit policy may result in tying up substantial funds
of a firm in the form of trade debtors (or receivables). Trade debtors are expected to be
converted into cash within a short period of time and are included in current assets.
Hence, the liquidity position of concern to pay its short term obligations in time
depends upon the quality of its trade debtors.
Definition:
Debtors turnover ratio indicates the velocity of debt collection of a firm. In simple words
it indicates the number of times average debtors (receivable) are turned over during a
year. Formula of Debtors Turn over Ratio :
Net Credit Sales

Debtors turnover Ratio =
Average Trade Debtor
The two basic components of the ratio are net credit annual sales and average trade
debtors. The trade debtors for the purpose of this ratio include the amount of Trade
Debtors & Bills Receivables. The average receivables are found by adding the opening
receivables and closing balance of receivables and dividing the total by two. It should be
noted that provision for bad and doubtful debts should not be deducted since this may
give an impression that some amount of receivables has been collected. But when the
information about opening and closing balances of trade debtors and credit sales is not
available, then the debtors turnover ratio can be calculated by dividing the total sales by
the balance of debtors (inclusive of bills receivables) given. and formula can be written as
follows.
Net Sales
Debtor Turnover Ratio =
Debtor
Significance of the Ratio:
This ratio indicates the number of times the debtors are turned over a year. The higher the
value of debtor’s turnover the more efficient is the management of debtors or more liquid
the debtors are. Similarly, low debtors turnover ratio implies inefficient management of
debtors or less liquid debtors. It is the reliable measure of the time of cash flow from
credit sales. There is no rule of thumb which may be used as a norm to interpret the ratio
as it may be different from firm to firm.
(in crore)
DEBTOR TURNOVER RATIO
YEAR NET CREDIT SALES AVERAGE DEBTOR AT COST RATIO
2004 18,871.20 469.00 40
2005 22,565.00 1,374.70 16
2006 26,142.90 867.8 30.12
2007 32,631.70 1,252.30 26
2008 37,050.10 2,982.70 12
50
45 40
40
35 30.12
30 26
Ratio
25
20 16
15 12
10
5
0
2004 2005 2006 2007 2008
Interpretation:
The debtor’s turnover ratio in 2003 – 2004 40 times which show efficient management of
credit. But in year 2004 – 2005 it has fallen down to 16 times further in the year 2005 –
2006 it had gone to 30.12 times and it again fallen down in next year i.e. 26 times and
2007-08 it has fallen up to 12 times .
3. Working Capital Turnover Ratio:
Definition:
Working capital turnover ratio indicates the velocity of the utilization of net working
capital. This ratio represents the number of times the working capital is turned over in the
course of year and is calculated as follows:
Formula of Working Capital Turnover Ratio:
Following formula is used to calculate working capital turnover ratio
Cost Of Sales
Working Capital turnover Ratio =
Net Working Capital
The two components of the ratio are cost of sales and the net working capital. If the
information about cost of sales is not available the figure of sales may be taken as the
numerator. Net working capital is found by deduction from the total of the current assets
the total of the current liabilities.
Significance:
The working capital turnover ratio measures the efficiency with which the working
capital is being used by a firm. A high ratio indicates efficient utilization of working
capital and a low ratio indicates otherwise. But a very high working capital turnover ratio
may also mean lack of sufficient working capital which is not a good situation.
(in crore)
WORKING CAPITAL TURNOVER RATIO
YEAR COST OF SALES NET WORKING CAPITAL RATIO
2004 18,871.20 5,452.60 3.46
2005 22,565.00 6,160.50 3.66
2006 26,142.90 9,584.20 2.73
2007 32,631.70 15,156.30 26
2008 37,050.10 17,363.4 12
50
40
Ratio
30 26
20 12
10 3.46 3.66 2.73
0
2004 2005 2006 2007 2008
Interpretation
In case of NTPC the ratio was 3.46 times in 2003-2004 it has been increased to 3.66
times in 2004 – 2005 to 2.73 in 2005 – 2006. Further in 2006 – 2007 it had fallen to
2.15and in the year 2007-08 it has again fallen up to 2.13 times this shows company has
not utilized owners and long-term borrowed funds efficiently.
4. Fixed Assets Turnover Ratio: Definition:
Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures
the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the
intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.
The ratio is calculated by using following formula:
Formula of Fixed Assets Turnover Ratio:
Fixed assets turnover ratio turnover ratio is calculated by the following formula:
Cost Of Sales
Fixed Assets turnover Ratio =
Net Fixed Assets
(in crore)
FIXED ASSETS TURNOVER RATIO
YEAR COST OF SALES NET FIXED ASSETS RATIO
2004 18,871.20 21,160.10 .89
2005 22,565.00 22,204.70 1.02
2006 26,142.90 22,967.50 1.14
2007 32,631.70 25,525.00 1.28
2008 37,050.10 39,933.70 .93
50
40
30
Ratio
20
10
0.89 1.02 1.14 1.28 0.93
0
2004 2005 2006 2007 2008
Interpretation
A high ratio indicates efficient utilization of fixed assets in generating sales. In case of
NTPC the ratio was .89 in the year 2003-2004,which had gone to 1.02 in 2004-2005.in
the year 2005-2006 the ratio had again increased to 1.14 and in 2006-2007 it is 1.28 and
same is in case of 2007-08 the ratio had fallen .93 .its Cleary that in previous year full
utilization of fixed assets but in 2007-08 this ratio decrease .
D. Leverage ratios or long term solvency ratios :
1. Debt –to- Equity Ratio: Definition:
Debt-to-Equity ratio indicates the relationship between the external equities or outsiders
funds and the internal equities or shareholders funds. It is also known as external internal
equity ratio . It is determined to ascertain soundness of the long term financial policies of
the company.
Formula of Debt to Equity Ratio:
Following formula is used to calculate debt to equity ratio
External equities
Debt Equity Ratio =
Internal equities
Outsider funds
Debt Equities Ratio =
Shareholder’s fund
As a long term financial ratio it may be calculated as follows:
Total Long Term Debts
Total Long Term Fund
Total Long Term debt

Shareholders fund
Components:
The two basic components of debt to equity ratio are outsiders’ funds i.e. external
equities and share holders’ funds, i.e., internal equities. The outsiders’ funds include all
debts / liabilities to outsiders, whether long term or short term or whether in the form of
debentures, bonds, mortgages or bills. The shareholders funds consist of equity share
capital, preference share capital, capital reserves, revenue reserves, and reserves
representing accumulated profits and surpluses like reserves for contingencies, sinking
funds, etc. The accumulated losses and deferred expenses, if any, should be deducted
from the total to find out shareholder's funds Some writers are of the view that current
liabilities do not reflect long term commitments and they should be excluded from
outsider's funds. There are some other writers who suggest that current liabilities should
also be included in the outsider's funds to calculate debt equity ratio for the reason that
like long term borrowings, current liabilities also represents firm's obligations to
outsiders and they are an important determinant of risk. However, we advise that to
calculate debt equity ratio current liabilities should be included in outsider's funds. The
ratio calculated on the basis outsider's funds excluding liabilities may be termed as ratio
of long-term debt to share holders funds. It means that for every four dollars worth of
the creditors investment the shareholders have invested six dollars. That is external debts
are equal to 0.66% of shareholders funds.
Significance of Debt to Equity Ratio:
Debt to equity ratio indicates the proportionate claims of owners and the outsiders against
the firms assets. The purpose is to get an idea of the cushion available to outsiders on the
liquidation of the firm. However, the interpretation of the ratio depends upon the
financial and business policy of the company. The owners want to do the business with
maximum of outsider's funds in order to take lesser risk of their investment and to
increase their earnings (per share) by paying a lower fixed rate of interest to outsiders.
The outsider’s creditors) on the other hand, want that shareholders (owners) should invest
and risk their share of proportionate investments. A ratio of 1:1 is usually considered to
be satisfactory ratio although there cannot be rule of thumb or standard norm for all types
of businesses. Theoretically if the owner’s interests are greater than that of creditors, the
financial position is highly solvent. In analysis of the long-term financial position it
enjoys the same importance as the current ratio in the analysis of the short-term financial
position.
(in crore)
DEBT EQUITIES RATIO
YEAR LONG TERM DEBT SHAREHOLDER”S FUND RATIO
2004 15,612.00 35,992.00 .43

2005 17,425.00 41,776.00 .42
2006 20,638.00 44,959.00 .46
2007 25,141.00 48,597.00 .52
2008 28,564.0 52,639.00 .54
50
45
40
35
Ratio
30
25
20
15
10
5 0.43 0.42 0.46 0.52 0.54
0
2004 2005 2006 2007 2008
Interpretation:
we can easily point out that there is a sharp rise in the debt-equity ratio from 2004-05 to
2007- 08. From the above data we conclude that the company has less debt it can also pay
off the current obligations very easily.
2. Proprietary or Equity Ratio: Definition:
This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net worth to
total assets ratio. This ratio relates the shareholder's funds to total assets. Proprietary /
Equity ratio indicates the long-term or future solvency position of the business.
Formula of Proprietary/ Equity Ratio:
Shareholders funds
Proprietary ratio =
Total assets
Components:
Shareholder's funds include equity share capital plus all reserves and surpluses items.
Total assets include all assets, including Goodwill. Some authors exclude goodwill from
total assets. In that case the total shareholder's funds are to be divided by total tangible
assets. As the total assets are always equal to total liabilities, the total liabilities, may also
be used as the denominator in the above formula.
Significance:
This ratio throws light on the general financial strength of the company. It is also
regarded as a test of the soundness of the capital structure. Higher the ratio or the share of
shareholders in the total capital of the company better is the long-term solvency position
of the company. A low proprietary ratio will include greater risk to the creditors.
(in crore)
PROPRIETARY RATIO
YEAR SHAREHOLDER’S FUND TOTAL ASSETS RATIO
2004 35,992.00 51,540.40 .70

2005 41,776.00 59,201.50 .71
2006 44,959.00 65,596.80 .69
2007 48,597.00 73,737.90 .66
2008 52,639.00 81,202.60 .65
50
45
40
Ratio
35
30
25
20
15
10
5 0.7 0.71 0.69 0.66 0.65
0
2004 2005 2006 2007 2008
Interpretation
We can see by graph in 2003-04 the ratio was .70 and in 2004-05 ratio had increased .71
which shows company soundness and capital structure was good. in 2005-06 the
proportions had fallen up to .69 and continued had fallen up to 2008 which shows
general risk to the creditor included.
3. Fixed Assets to Proprietor's Fund Ratio: Definition:
Fixed assets to proprietor’s fund ratio establish the relationship between fixed assets and
shareholders’ funds. The purpose of this ratio is to indicate the percentage of the owner's
funds invested in fixed assets.
Formula:
Shareholders funds
fixed Assets to Proprietors =
Proprietors Fund
The fixed assets are considered at their book value and the proprietor's funds consist of
the same items as internal equities in the case of debt equity ratio.
Significance:
The ratio of fixed assets to net worth indicates the extent to which shareholder's funds are
sunk into the fixed assets. Generally, the purchase of fixed assets should be financed by
shareholder's equity including reserves, surpluses and retained earnings. If the ratio is less
than 100%, it implies that owners’ funds are more than fixed assets and a part of the
working capital is provided by the shareholders. When the ratio is more than the 100%, it
implies that owners’ funds are not sufficient to finance the fixed assets and the firm has to
depend upon outsiders to finance the fixed assets. There is no rule of thumb to interpret
this ratio by 60 to 65 percent is considered to be a satisfactory ratio in case of industrial
undertakings.
(in crore)
FIXED ASSETS TO PROPRIETORS
Year FIXED ASSETS PROPRIETORS FUND Ratio

Proprietors Fund
2004 21,160.10 35,992.00 .56
2005 22,204.70 41,776.00 .53
2006 22,967.50 44,959.00 .51
2007 25,525.00 48,597.00 .52
2008 39,933.70 52,639.00 .76
50
45
40
35
30
Ratio
25
20
15
10
5 0.56 0.53 0.51 0.52 0.76
0
2004 2005 2006 2007 2008
Interpretation
In the year 2003-2004 the ratio was 0.56. In 2004-2005 the ratio had decreased to .53.
But in 2005-2006 the ratio had again falled to 0.51. Further it had increased to .52 in
2006-2007 but in 2007-08 the ratio is 0.76 which is very close to the ideal ratio. From the
analysis it is found out that since last four years company is investing average more than
70% of its long-term fund in fixed assets. There is more investment in fixed assets so if
that excess fund can be utilized effectively at some other place that should be done.
4. Current Assets to Proprietor's Fund Ratio:
Current Assets to Proprietor’s Fund Ratio establishes the relationship between current
assets and shareholder's funds. The purpose of this ratio is to calculate the percentage of
shareholders funds invested in current assets.
Formula:
Shareholders funds
Current Assets to Proprietors fund =
Proprietors Fund
Significance:
Different industries have different norms and therefore, this ratio should be studied
carefully taking the history of industrial concern into consideration before relying too
much on this ratio.
(in crore)
UCURRENT ASSETS TO PROPRITORS FUND
PROPRIETORS FUND
Year CURRENT ASSETS Proprietors Fund Ratio
2004 14,642.40 35,992.00 .41
2005 14,721.80 41,776.00 .35
2006 18,234.80 44,959.00 .41
2007 25,858.80 48,597.00 .53
2008 30,527.80 52,639.00 .58
50
45
40
35
30 Ratio
25
20
15
10
5 0.41 0.35 0.41 0.53 0.58
0
2004 2005 2006 2007 2008
Interpretation
In the year 2003-2004 the ratio was 0.41. In 2004-2005 the ratio had decreased to .35.
But in 2005-2006 the ratio had again increased to 0.41. Further it had increased to .53 in
2006-2007 but in 2007-08 the ratio is increased.
5. Debt Service Ratio or Interest Coverage Ratio: Definition:
Interest coverage ratio is also known as debt service ratio or debt service coverage ratio .
This ratio relates the fixed interest charges to the income earned by the business. It
indicates whether the business has earned sufficient profits to pay periodically the interest
charges. It is calculated by using the following formula.
Formula:
Net profit before interest and tax

Interest Coverage ratio =
Fixed interest charge
Significance of debt service ratio:
The interest coverage ratio is very important from the lender's point of view. It indicates
the number of times interest is covered by the profits available to pay interest charges.
It is an index of the financial strength of an enterprise. A high debt service ratio or
interest coverage ratio assures the lenders a regular and periodical interest income. But
the weakness of the ratio may create some problems to the financial manager in raising
funds from debt sources.
(in crore)
INTEREST COVERAGE RATIO
NET PROFIT BEFORE t FIXED INTEREST

Year INTEREST AND TAX CHARGES Ratio
2004 10317.00 3,372.70 3
2005 7092.00 1,014.20 7
2006 6981.00 958.50 7.28
2007 10767.00 1,859.40 6
2008 12053.00 1,798.10 7
50
40
30
Ratio
20
10 7 7.28 6 7
3
0
2004 2005 2006 2007 2008
Interpretation
This ratio suggests that whether company manages to earn sufficient income to cover its
expenses. The ratio of the company indicates that company depends much on borrowed

funds. In 2008 company interest coverage ratio was 7 which shows high ratio compare to
previous year The high interest ratio means that company depends more on debt funds.

CHAPTER 7
Findings

FINDINGS
There is a huge crisis over energy in the world especially in the field of electricity. India
is also victim of the same condition. In spite of several efforts taken by the governments
in this regard, there is enormous possibility exists. NTPC is a key organization in India as
far as the supply of power is concerned. After successfully conducting this project work,
it can be said that the financial health of NTPC is sound enough and it appears positive in
accordance with its balance sheet and profit & loss A/c which are available to me.
Some other finding there are
1. We can easily found that company net profit ratio in 2007-2008 was 20 this ratio fallen
compare to previous year means company profit decrease.
2. in Return on equity capital ratio compare to previous year ratio .90 which shows the
company regularly dividend paid
3. company earning per ratio increase year by year
4. company current ratio is very good which shows highly liquidity available
5. company stock turnover ratio 14 which shows full utilization of stock

CHAPTER 6
CONCLUSION

CONCLUSION
The electricity supply has been in the public domain in most of the developing countries.
Under public ownership, the sector has not been able to catch up with the growing demand
for electricity. The operational inefficiency and financial losses often lead to poor quality of
supply and underinvestment. A wave of reforms has swept through a number of developing
countries. These reforms were primarily targeted to improve the performance of the state
owned companies and to provide a conducive atmosphere for private investment in the
sector. The erstwhile vertically integrated SEBs in India has been riddled with inefficiencies
due to a lack of accountability and administrative bottlenecks. Reforms in the Indian power
sector were initiated to restructure the SEBs and to set up independent regulatory institutions.
The Electricity Act 2003 led to deepening of the reform process by enabling competition in
the wholesale electricity market and retail electricity supply, in phases. Thirteen SEBs have

so far unbundled into separate generation, transmission and distribution companies.
Beginning with the establishment of an independent regulatory commission in Orissa in
1996, the SERCs have been set up in all states. Some of the smaller states in the North East
have established a Joint Electricity Regulatory Commission. The process of tariff
determination has become more transparent and limited tariff rationalization has been
undertaken against consumer opposition and political meddling.
The emerging competition in the bulk power market and phased direct access to large
consumers is aimed at reducing the risks associated with sales to financially weak state
utilities. The policy and regulatory developments are promising, but more needs to be done to
improve the performance of distribution utilities. Amongst other factors, the autonomy to
manage these utilities in a commercial manner remains a key issue. In the long-run, the
state’s objectives are best served by nurturing a financially sustainable sector that can
improve access for poor and rural consumers. This research undertook a review of the policy
and regulatory developments in the Indian power sector. A review of the literature and a
comparative policy analysis helped us to unravel some of the lessons to be learned for the
process of reform in developing countries in general. The initial phase of power sector
reform in India allowed commercially-oriented IPPs to sell power to financially weak SEBs,
which do not rely on sound commercial principles. This marriage of convenience is not
sustainable. The initial phase of reforms in developing countries should be aimed to
restructure the sector and to set up an independent regulator. As private participation grows,
it would be suitable to introduce competition in the sector. This would not only help lower
the cost of power purchase, it would also provide greater incentive for performance
improvement. The experience of private sector investment in Latin American countries relied
on the introduction of commercial interest in the bulk power market by inviting IPPs as well

as introducing commercial principles at the end of buyer utilities through their divestiture.
The experience in East Asia and Latin America suggests that macroeconomic stability
remains a key to attracting sustainable and increased investment in the infrastructure sectors.
India continues to demonstrate macroeconomic stability along with prudent currency
management. Future growth prospects in the power sector hold substantial potential for
private investment. However, the financial performance of the state owned distribution
utilities remains a key concern for investors. A positive outcome of existing distribution
privatization programs would guide such future plans, which remain politically sensitive. The
regulatory challenge is to provide incentives for improvement in technical efficiency and
financial performance. The unavailability of sovereign guarantees can be adequately
addressed if state utilities become viable through greater commercialization, if not
privatization. Inability of the domestic capital market to provide long-term debt for the power
sector needs to be adequately addressed by encouraging contractual saving through life
insurance and pension funds, and channel zing these for the power sector. Securitization of
project loans after the construction period and development of secondary bond market would
help garner funds for investment in the sector. The long-term interest of the consumers can
only be served if reasonably priced electricity is available over the long-run. Political
interests would best be served by depoliticizing tariffs, which would be beneficial to
consumers in the long-term through improved quality and reliability of supply. Given the
objective to electrify all villages by 2010 and to double the generating capacity in the country
by 2012, the need to improve the policy environment and strengthen the regulatory
framework cannot be ignored.

CHAPTER 7
SUGGESTION
&
RECOMMENDATIONS

SUGGESTION
₪ Regulatory commission should work properly. They should try to minimize the cost,
so that general customer should meet the cost easily.
₪ Company should try to get ultra mega power plant project.
₪ They should try to improve the operational efficiency and financial performance of
state utilities.
₪ Company has sound data system from where they can start the cost cut methods at
different measures to improve their performance.
₪ The human resource can be optimizing to a certain extent for increasing profitability.

CHAPTER 8
LIMITATION
OF
STUDY

LIMITATION OF THE STUDY
The limitations faced during the summer course are:-
₪ First-it was not possible to study various aspect of the organization in detail.\
₪ Employees were apprehensive of secrecy data therefore hesitated in disclosing all the
data regarding some of the points concerning to this study.
₪ As this is a general study, hypothesis could not be drawn.
₪ Some executives could not afford time because of their busy schedule
₪ The time was a big constraint as the two months was a short span of time. As the
respondents are no high designations, reaching them was hectic task.
₪ The respondents were to be reached through emails and by personals and the time
were not enough get the response about the quarries and doubts raised.

BIBLIOGRAPHY
Reference Books
Financial management : I.M Pandey

Management Accounting : Sharma & Gupta
management accountancy : Pillai & bagavati
Websites:
ü www.ntpc.co.in
ü www. moneycontrol.com
ü www.myiris.com
ü www.indiabudget.nic.in
Search Engine:
ü www.google.com
ü www.wikipedia.com

ANNEXURE
FINANCIAL
PARTICULARS STATISTICS OF NTPC
2008 2007 2006 (IN2005
CRORE)2004
Long Term Loans 19,875.90 17,661.50 14,464.60 12,647.10 10,868.40
Long Term Debt 28,564.00 25,141.00 20,638.00 17,425.00 15,612.00
Ordinary Equity 8,245.50 8,245.50 8,245.50 8,245.50 7,812.50
Shareholder's Equity 8,245.50 8,245.50 8,245.50 8,245.50 7,812.50
General Reserve 44,393.10 40,351.30 36,713.20 33,530.80 28,116.00
Shareholder's Fund 52,639.00 48,597.00 44,959.00 41,776.00 35,992.00
Capital Employed 64,269.00 58,013.00 51,178.00 46,178.00 29,574.00
Fixed Asset 39,933.70 25,525 22,967.50 22,204.70 21,160.10
Current Asset 30,527.80 25,858.80 18,234.80 14,721.80 14,642.40
Total Asset 81,202.60 73,737.90 65,596.80 59,201.50 51,540.40
Cash & Cash Equivalent 473.00 750.10 176.80 367.30 602.50
Inventory 2,675.70 2,510.20 2,340.50 1,777.70 1,738.00
Quick Asset 27852.00 23348.60 15894.30 12944.10 12904.40
Cash Sales
Total Sales 37,050.10 32,631.70 26,142.90 22,565.00 18,871.20

Cost Of Goods Sold 25,519.70 22,472.10 18,718.30 15,276.10 13,667.00
Gross Profit 12,393.40 10,982.80 8,070.10 8,036.60 7,912.90
Operating Cost
Debtors 2,982.70 1,252.30 867.80 1,374.70 469.90
Creditors
Operating Profit 11,585.10 10,170.10 7,434.20 7,313.10 5,226.10
Current Liability 13,164.40 10,702.50 8,650.60 8,561.30 9,189.80
Long Term liability 19876.00 17662.00 14465.00 12647.00 1458.00
Total Liability 33040.00 28364.00 23115.00 21208.00 10648.00
Net working Capital 17363.00 15156.00 9584.00 6161.00 5453.00
PBIT 12053.00 10767.00 6981.00 7092.00 10317.00
Interest 1,798.10 1,859.40 958.50 1,014.20 3,372.70
PBT 10,254.90 8,907.40 6,022.40 6,078.20 6,943.80
Tax Payment 2,840.10 2,042.70 202.20 271.20 1,658.30
PAT 7415.00 6865.00 5820.00 5807.00 5286.00
Total No. Of shares IN million 825.00 825.00 825.00 825.00 781.00
EPS 899.25 832.54 705.86 704.26 676.54
Dividend Paid/share 3.50 3.20 2.80 2.40 1.39
Market Price in Rs 304.30 316.40 951.60 3,524.90 19.20
Book Value 6384.00 5894.00 5453.00 5067.00 4599.00


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A

ANALYSIS OF FINANCIAL STATEMENTS

NATIONAL THERMAL POWER CORPORATION

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF

Under the supervision of Submitted by

report titled “ANALYSIS OF FININCIAL STATEMENT OF NATIONAL

THERMAL POWER CORPORATION under my supervision as a part a partial

report is Good and not copied from anywhere.

Head of the Department Project supervisior

provided in the report hold true to the best of my knowledge.

Signature of the student

considered as one of the Navratna’s in the public sector of the country.

given me full opportunity to learn the tendering operations executed here.

I am very thankful to Miss.Neeru , Faculty, I-BUSINESS INSTITUTE, Greater Noida for

I-BUSINESS INSTITUTE -4-

contributing to a big improvement in their quality of life, a legitimate aspiration that

These trend lead to continued growth in energy-related emissions of carbon-dioxide (co2)

transition to a more secure, lower-carbon energy system, without undermining economic

I-BUSINESS INSTITUTE -5-

implemented, as we assume in an alternative policy scenario, the world’s energy demand

and related emissions would be reduced substantially. Measure to improve energy

consider conservative assumptions about economic grow on average 1.5 percentage

scenario, to curb the growth in fossil-energy demand and related emissions.

I-BUSINESS INSTITUTE -6-

7 SUGGESTION & RECOMMENDATIONS 109

8 LIMIATION OF STUDY………………….. 111

………….............. ANNEXURE………………………………………. 113

I-BUSINESS INSTITUTE -7-

I-BUSINESS INSTITUTE -8-

Scenario of Power in India

this you miss the next revolution.”

of power supply of 10% is required.

from a meager 1712MW in 1950 to a whooping 147000MW today.

to be emphasized. A self sufficient power industry is vital for a nation to achieve

Indian Power Industry

I-BUSINESS INSTITUTE -9-

with regard to operational safety.

government as part of its policy of economic liberalization allowed greater investment by

private sector in the power industry.

The electricity sector in India is predominantly controlled by Government of India's

include National Thermal Power Corporation (NTPC), National Hydroelectric Power

development of national grid.

government has set an ambitious target to add approximately 78,000 MW of installed

vary between 30 to 45%. In 2004-05, electricity demand outstripped supply by 7-11%.

adversely effected the country's economic growth.

Grand Total Installed Capacity is 147,402.81 MW

₪ Current installed capacity of Thermal Power (as of 12/2008) is 93,392.64

MW which is 63.3% of total installed capacity.

₪ Current installed base of Coal Based Thermal Power is 77,458.88 MW

which comes to 53.3% of total installed base.

₪ Current installed base of Gas Based Thermal Power is 14,734.01 MW

which is 10.5% of total installed base.

₪ Current installed base of Oil Based Thermal Power is 1,199.75 MW

which is 0.9% of total installed base.The state of Maharashtra is the largest

Currently, 17 nuclear power reactors produce 4,120.00 MW (2.9% of total installed

Current installed base of Renewable energy is 13,242.41 MW which is 7.7% of total

(4379.64 MW) largely through wind power.

Power for ALL by 2012

others they ought to have an extra or special added advantage.

advantage is human capital.

OBJECTIVE OF THE STUDY

The above study aimed at:

₪ To gain the overall idea about the organization.