Professional Documents
Culture Documents
On
Balance Sheet analysis of NTPC Ltd
1
Student’s undertaking
This is to certify that Mr. Vijay Thapa, Enrollment No. – 00514101709 student of
Bachelors Of Business Administration at Jagannath International
Management School, affiliated to Guru Gobind Singh Indraprastha
University has successfully completed the project titled Balnce Sheet Analysis
Of Ntpc Ltd.
I certify that the project has been completed under my guidance ad it is an
authentic work and have never been submitted elsewhere or has not been
sourced through other means.
2
TO WHOMSOEVER IT MAY CONCERN
This is to certify that VIJAY THAPA student of BBA (2009-12) has completed
his project on “BALANCE SHEET ANALYSIS OF NTPC Ltd” under my
guidance.
His work is up to my satisfaction and worth appreciation.
I wish him all the best for future endeavors.
3
Acknowledgement
I express my gratitude and convey my thanks to all the teachers for their guidance
and motivation to complete this project. I also want to thank Indraprastha
University to give us opportunity to prepare independent projects in our interested
areas i.e. students can choose from ‘Finance, Marketing, Production, Sales and
Human Resource etc
I am also thanks to Mrs. Tanvi Gupta, Internal Project Guide. Her constant
motivation and evaluation enabled me to make this project more analytical and
conclusive.
Vijay Thapa
Enrolment No. – 00514101709
Bachelors of Business Administration
3rd Semester
Jagannath International Management School, Kalkaji
4
CONTENTS
Table Of Content Page No.
Executive Summary 6
Objectives 10
Company’s Profile 12
1) About The Company 13
2) Board Of Directors 15
Research Methodology 21
Secondary Data 23
1) Balance Sheet 24
2) Profit & Loss Account 26
Ratio Analysis 29
i) Liquidity Ratio 31
ii) Solvency Ratio 36
iii) Activity Ratio 42
iv) Profitability Ratio 50
Analysis 60
Cash Flow Statement 63
Analysis Of Cash Flow Statement 65
Income Statement 66
Analysis Of Income Statement 68
Conclusion 70
Bibliography 72
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6
NTPC Limited (NTPC) is an India-based company engaged in the generation of
thermal power. The Company's principal business is generation and sale of bulk
power. Other business includes providing consultancy, project management and
supervision, oil and gas exploration and, coal mining. During the fiscal year
ended March 31, 2009 (fiscal 2009), 66% of total power generation was from
coal stations. During fiscal 2009, the power stations of the Company generated
206.939 billion units of electricity. It has an installed coal-based capacity of
23,895 megawatts comprising 79 units with average fleet age of 18 years. The
Company has acquired 44.6% stake in Transformers and Electricals Kerala Ltd.
(TELK) from Government of Kerala on June 19, 2009.
The Company
NTPC was incorporated in 1975. In the last 31 years, it has grown into the largest
power utility of India. NTPC is the sixth largest thermal power generator in the
World and the Second most efficient utility in terms of capacity utilisation based
on data of 1998.
Consultancy
NTPC provides consultancy in all its aspects of power plant construction and
management right from concept of commissioning and beyond. Combining the
technical, managerial and financial skills, it provides the holistic solutions to
power businesses all over the world.
7
INTRODUCTION
NTPC
Limited or National Thermal Power Corporation Ltd is the largest
thermal power generating company of India. NTPC is the sixth largest thermal
power generator in the world and the second most efficient utility in terms of
capacity utilisation based on data of1998.
SUBSIDIARIES
8
NTPC Vidyut Vyapar Nigam Ltd. (NVVN): It was formed to cater to and deal
with the vast potential of power trading in the country and optimum capacity
utilisation.
NTPC Hydro Limited (NHL): It was set up in December, 2002 to develop small
and medium sized Hydro Electric Power Projects of up to 250 MW capacity.
9
10
OBJECTIVE
The basic objective of the project is to know the financial position of NTPC Ltd.
By analysing the balance sheet of the company.
The objective was to determine the financial health of the company by finding out
various ratios and analysing the various financial statements of the company like
profit and loss account, balance sheet etc……
11
12
ABOUT THE COMPANY
NTPC Limited (Formerly National Thermal Power Corporation) is the largest
state-owned power generating company in India. Forbes Global 2000 for 2009
ranked it 317th in the world. It is an Indian public sector company listed on
the Bombay Stock Exchange although at present the Government of India holds
84.5%(after divestment the stake by Indian government on 19october2009) of its
equity. With a current generating capacity of 31134 MW, NTPC has embarked on
plans to become a 75,000 MW company by 2017. It was founded on November
7, 1975.
The total installed capacity of the company is 31134 MW (including JVs) with 15
coal based and 7 gas based stations, located across the country. In addition
under JVs, 3 stations are coal based & another station uses naphtha/LNG as
fuel. By 2017, the power generation portfolio is expected to have a diversified
fuel mix with coal based capacity of around 53000 MW, 10000 MW through gas,
9000 MW through Hydro generation, about 2000 MW from nuclear sources and
around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a
multi-pronged growth strategy which includes capacity addition through green
field projects, expansion of existing stations, joint ventures, subsidiaries and
takeover of stations.
13
NTPC has been operating its plants at high efficiency levels. Although the
company has 18.79% of the total national capacity it contributes 28.60% of total
power generation due to its focus on high efficiency. NTPC’s share at 31 Mar
2001 of the total installed capacity of the country was 24.51% and it generated
29.68% of the power of the country in 2008-09. Every fourth home in India is lit
by NTPC. 170.88BU of electricity was produced by its stations in the financial
year 2005-2006. The Net Profit after Tax on March 31, 2006 was INR 58,202
million. Net Profit after Tax for the quarter ended June 30, 2006 was INR 15528
million, which is 18.65% more than for the same quarter in the previous financial
year. 2005).
14
BOARD OF DIRECTORS
Shri Arup Roy Choudhury, Chairman & Managing Director since September
2010, has an illustrious career spanning over 32 years of outstanding
contribution in the fields of engineering, general management, strategic
management and business leadership. He is a Graduate in Civil Engineering
from Birla Institute of Technology, Mesra and a Post-Graduate in Management
and Systems from IIT-Delhi. A keen learner of the latest professional
developments, he is currently pursuing a doctorate in ‘Select Study of Project
Performance Metrics in Indian Construction Industry’ from IIT-Delhi.
15
NTPC, responsible for management of ~ 3900 MW generating capacity,
administering more than ¼th of NTPC’s turn over along with project
implementation activities for 2x490 MW at Dadri Stage-II.
Shri D.K. Jain, has taken over the charge as Director (Technical) as on 13th
May 2010. Shri D.K. Jain (58 years) is a graduate in Mechanical Engineering
from IIT, Kharagpur. He joined NTPC Limited in 1978. He has rich and varied
experience of over 35 years in design and execution of large power plants. He
has worked in various capacities in the areas of renovation & modernisation,
engineering and project execution. He was actively involved in design and
engineering of first pit-head super thermal power station of NTPC at Singrauli.
Before his elevation as Director (Technical), he was Executive Director
(Engineering), responsible for identification of sites, taking up feasibilities studies,
design and detailed engineering of coal, gas and hydro power projects. He also
oversees the Mine Planning and Design of NTPC’s Captive Coal Blocks.
Shri P.K. Sengupta is B. Com and FICWA. He has held the position of Director
(Finance) in Eastern Coalfields Limited, Director (Finance) in Coal India Limited
prior to becoming Chairman & Managing Director of Coal India Limited in
January 1995. He has held directorship in Steel Authority of India and Naively
Lignite Corporation as non-official part-time Director. He has expertise in the area
of Financial Management and General Administration. He has been on the Board
16
of the Company with effect from August 26, 2008 as a non-official part - time
director.
Shri M.N. Buch is M.A. (History) from Delhi University, M. Phil (Public
Administration) from Indian Institute of Public Administration, Punjab University,
PG Diploma holder in Port Management and Administration from University
College, London and an Indian Administrative Officer of Gujarat Cadre, 1964
batch. He has held various posts in Gujarat Government. He had held the
position of Joint Secretary to the Government of India in Department of Banking,
Ministry of Finance, Additional Secretary to the Ministry of Labour, GOI, Director-
General, Sports Authority of India prior to becoming Member of Public
Enterprises Selection Board, GOI. He has been also on the Board of various
public sector banks. He has wide experience in both Development and
Regulatory Administration at the Central, State and District levels. He has been
on the Board of the Company with effect from August 26, 2008 as a non-official
part - time director.
Shri Shanti Narain is B.Sc (Hons. in Physics) and M.Sc. (Mathematics) from
Delhi University and has pursued Management Development Programme at
British Transport Staff College, UK. He has held various posts in Railways prior
to becoming Member (Traffic), Railway Board. He has key expertise in strategic
management of transport systems with special focus on Railways, involving
planning, marketing, customer relations, monitoring and control of operational
and commercial activities and development of transport infrastructure. He has
been on the Board of the Company with effect from August 26, 2008 as a non-
official part - time director.
Shri Shanti Narain is B.Sc (Hons. in Physics) and M.Sc. (Mathematics) from
Delhi University and has pursued Management Development Programme at
British Transport Staff College, UK. He has held various posts in Railways prior
to becoming Member (Traffic), Railway Board. He has key expertise in strategic
17
management of transport systems with special focus on Railways, involving
planning, marketing, customer relations, monitoring and control of operational
and commercial activities and development of transport infrastructure. He has
been on the Board of the Company with effect from August 26, 2008 as a non-
official part - time director. Company with effect from August 26, 2008 as a non-
official part - time director.
Dr. M. Govinda Rao is Director, National Institute of Public Finance and Policy,
New Delhi. He is also a Member, Economic Advisory Council to the Prime
Minister. His past positions include Director, Institute for Social and Economic
Change, Bangalore and Fellow, Research School of Pacific and Asian Studies,
Australian National University, Canberra, Australia. He has played a number of
advisory roles in various Expert Committees. He has published 12 books and
monographs on various aspects of Public Finance besides technical articles in a
number of journals. He has been on the Board of the Company with effect from
August 26, 2008 as a non-official part - time director.
18
Shri Santosh Nautiyal is a Post Graduate in Political Science and Public
Administration. He belonged to Indian Administrative Services (Orissa 1968) and
retired in July 2006 as Chairman (in the rank of Secretary to the Govt. of India,)
National Highway Authority of India. He has held various positions like Additional
Secretary, Govt of India in Department of Consumer Affairs, Principal Secretary
of Government of Orissa, Joint Secretary in Ministry of Steel and Managing
Director in Industrial Promotion and Investment Corporation of Orissa Ltd. He
also served as Chairman of Food Corporation of India and after retirement was
appointed as Chairman of the National Shipping Board constituted by the Central
Government. He has been on the Board of the Company with effect from January
30, 2009 as a non-official part - time director.
Shri Arun Kumar Sanwalka is M.Sc (Engg) from UK, I. Mech. (E), UK. and
AMIE (India) – Mech. & Prod. He has held various positions in Indian Railways
and retired from the position of General Manager, Northeast Frontier Railway
after 38 years of service. He has wide expertise in the areas of General
Management & Administration, Transport planning, Project management and
coordination. He has also handled several projects for establishing large
production, maintenance and repair facilities of Indian Railways. He also held the
position of Executive Director (Motive Power), RDSO for several years. He has
19
been on the Board of the Company with effect from January 30, 2009 as a non-
official part - time director.
20
21
RESEARCH METHODOLOGY
SECONDARY DATA : The methodology used for conducting the research is the
collection and analysis of secondary data; which is the data available in the published
form and is not primary in nature. The following forms of secondary data tools were
used for the research purpose:
1. INTERNET SITES
2. CONCERNED BOOKS
3. PEOPLE
4. MAGAZINES
22
23
BALANCE SHEET
Balance Sheet
31-Mar-09 %BT 31-Mar-08 %BT 31-Mar-07 %BT
Equity Capital 0.00 0.00 0.00 0.00 82455.00 10.21
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Share Capital 82455.00 7.84 82455.00 9.22 82455.00 10.21
Reserves and Surplus 491246.00 46.69 443931.00 49.66 403513.00 49.96
Loan Funds 345678.00 32.85 271906.00 30.42 244844.00 30.32
Current Liabilities 74391.00 7.07 55483.00 6.21 53235.00 6.59
Provisions 32495.00 3.09 23816.00 2.66 17028.00 2.11
Current Liabilities and Provisions 106886.00 10.16 79299.00 8.87 70263.00 8.70
Total Liabilities and Stockholders Equity (BT) 1052248.00 100.00 893880.00 100.00 807643.00 100.00
Tangible Assets Net 328974.00 31.26 260614.00 29.16 256402.00 31.75
Intangible Assets Net 383.00 0.04 303.00 0.03 63.00 0.01
Net Block 329357.00 31.30 260917.00 29.19 256465.00 31.75
Capital Work In Progress Net 264049.00 25.09 224783.00 25.15 168392.00 20.85
Fixed Assets 593426.00 56.40 485720.00 54.34 424873.00 52.61
Investments 139835.00 13.29 152672.00 17.08 160943.00 19.93
Inventories 32434.00 3.08 26757.00 2.99 25102.00 3.11
Accounts Receivable 35842.00 3.41 29827.00 3.34 12523.00 1.55
Cash and Cash Equivalents 162716.00 15.46 149332.00 16.71 133146.00 16.49
Other Current Assets 12961.00 1.23 10475.00 1.17 12154.00 1.50
Current Assets 243953.00 23.18 216391.00 24.21 182925.00 22.65
Loans & Advances 65300.00 6.21 39097.00 4.37 38902.00 4.82
24
Miscellaneous Expenditure Other Assets 0.00 0.00 0.00 0.00 0.00 0.00
Total Assets (BT) 1052248.00 100.00 893880.00 100.00 807643.00 100.00
25
26
P&L Account
27
Mar '06 Mar '07 Mar '08 Mar '09
Particulars
Income
37,302.4
Sales Turnover 26,318.60 32,817.30 42,196.80
0
Excise Duty 175.70 185.60 211.40 221.60
37,091.0
Net Sales 26,142.90 32,631.70 41,975.20
0
Other Income 2,897.90 2,875.60 3,119.70 3,012.80
Stock Adjustments 0.00 0.00 0.00 0.00
40,210.7
Total Income 29,040.80 35,507.30 44,988.00
0
Expenditure
Raw Materials 25.00 23.70 26.80 31.00
22,160.7
Power & Fuel Cost 16,497.10 19,947.60 27,292.30
0
Employee Cost 1,137.50 1,362.60 2,229.30 2,897.60
Other Manufacturing
705.10 842.90 920.00 940.00
Expenses
Selling and Admin
353.20 410.80 389.80 473.20
Expenses
Miscellaneous
247.20 292.40 368.20 394.90
Expenses
Preoperative Exp
-256.40 -418.40 -544.70 -637.40
Capitalised
25,550.1
Total Expenses 18,708.70 22,461.60 31,391.60
0
Mar'09
Mar '06 Mar '07 Mar '08
11,540.9
Operating Profit 7,434.20 10,170.10 10,583.60
0
14,660.6
PBDIT 10,332.10 13,045.70 13,596.40
28
0
Interest 2,004.60 2,055.70 1,982.20 1,737.00
12,678.4
PBDT 8,327.50 10,990.00 11,859.40
0
29
As on 31-Mar-09 31-Mar-08 31-Mar-07
Return Related
Return on Total Assets (%) 8.70 11.50 10.90
Return on Networth (%) 14.50 14.60 14.10
Return on Capital Employed (%) 20.00 24.90 19.20
Profitability
Gross Margin (%) 26.90 32.70 32.50
Operating Margin (%) 19.50 25.40 24.50
Net Profit Margin (%) 19.50 20.00 21.00
Adjusted Net Profit Margin (%) 19.80 20.70 21.00
Asset Turnover(x) 0.50 0.50 0.50
Leverage
Debt/Equity ratio (x) 2.19 1.63 0.50
Total Debt/Total Assets (x) 3.04 3.28 0.30
Long term Debt/Networth (x) 0.60 0.50 0.50
Interest Coverage (x) 5.20 6.40 5.10
Liquidity
Current Ratio (x) 2.28 2.72 2.70
Quick Ratio (x) 1.97 2.39 3.00
Cash Ratio (x) 2.20 2.70 2.50
Working Capital
Working Capital to Sales (x) 0.40 0.40 0.40
Working Capital Days (days gross sales) 146.70 157.40 145.10
Receivables (days gross sales) 31.00 29.20 14.00
Creditors (days cost of sales) 61.90 47.50 46.80
FG Inventory (days cost of sales) -- -- --
RM Inventory (days consumption) -- -- --
30
Per Share
Book Value Per Share (Rs) 59.50 53.80 58.90
Earnings Per Share (Rs) 9.90 9.00 8.30
Dividend Per Share (Rs) 3.60 3.50 3.20
Growth(%)
Total Operating Income 13.16 13.67 22.08
EBITDA -8.52 14.47 25.29
EBIT -12.86 17.44 33.46
Net Profit 10.61 8.01 17.95
Total Assets 16.05 10.47 12.41
Ratio Year
Years 2008 2009
Current Ratio 216391/79299 243953/106886
Current Ratio 2.72:1 2.28:1
31
2.8
2.7
2.6
2.5
2.4
Ratios
2.3
2.2
2.1
2
2008 2009
Comments
As we can see in the above ratio table as well as in the graph the current
ratio for the year 2009-10 have decreased as compared to current ratio for
the year 2008-09 but yet it is slightly greater then 2:1. As ideal ratio is always
2:1.
This signifies that the company has better capacity to meet its liabilities or we
can say that the company has enough resources to discharge its obligations.
As very high current ratio shows the idleness of the source or funds available
at its disposal.
32
2. Quick Ratio
It establishes a relationship between quick assets and current liabilities.
Its objective is to measure the ability of the firm to meet its short term obligations.
Ratio Year
Years 2008 2009
Quick Ratio 189634/79299 211519/106886
Quick Ratio 2.39:1 1.97:1
33
2.5
1.5
Ratio
1
0.5
0
2008 2009
Comments:-
As we can see in the above ratio as well as in the graph the quick ratio for
the year, 2009 have decreased as compared to the quick ratio for the
previous year i.e. 2009 but it is slightly greater than 1:1 i.e. 1.97:1. As we
know that the ideal ratio is 1:1
Even if the ratio has decreased but it still represents the good short term
position of the company.
34
WORKING NOTES
35
II) Solvency Ratio:-
Ratio Year
Years 2008 2009
Debt Equity Ratio 134782/82454 181277/82454
Debt Equity Ratio 1.63:1 2.19:1
36
2.5
1.5
Ratios
1
0.5
0
2008 2009
Comments:-
As we can see in the above ratio as well as in the graph the debt-equity
ratio for the year, 2009 have decreased as compared to the debt equity
ratio for the previous year i.e. 2008
As we know that the ideal ratio is 2:1
Therefore this increase in the debt equity ratio to 2.19 slightly impacts both
the creditors and the firm. Now the firm will enjoy benefits of trading on
equity but there will be a greater risk to the creditors.
37
2. Total Assets to Debt Ratio:-
Its establishes a relationship between total assets and long term debts.
Its objectives are to measure the safety margin available to the suppliers
of long term debts. It measures the extent to which the assets can cover
the debt.
Ratio Year
Years 2008 2009
Total Asset Debt Ratio 893880/271906 1052248/345678
Total Asset Debt Ratio 3.28 3.04
38
3.3
3.25
3.2
3.15
3.1
Ratio
3.05
3
2.95
2.9
2008 2009
Comments:-
As we can see in the above ratio as well as in the graph the total assets to debt
ratio for the year 2009 have slightly decreased as compared to total assets to
debt ratio for the previous year i.e. 2008. As we know, that ideal ratio is 2:1.
Therefore, this decrease in the total assets to debt equity ratio to 3.04:1 implies
that the company is using less equity then debt, which means less safety
margins for creditors.
39
3. Proprietary Ratio:-
It measures a relationship between proprietors fund and total assets.
Its objectives are to measure how the proprietors have financed the
assets.
Ratio Year
Years 2008 2009
Proprietor’s Ratio 443931*100/893880 491246*100/1052248
Proprietor’s Ratio 49.66 46.68
40
50
49.5
49
48.5
48
47.5
Ratio
47
46.5
46
45.5
45
2008 2009
Comments:-
As we can see in the above ratio as well as in the graph the total Proprietor’s
Ratio for the year 2009 have slightly decreased as compared to Proprietor’s
Ratio for the previous year i.e. 2008.
Therefore, this decrease in the Proprietor’s Ratio to 46.68% implies that the
Proprietor’s Funds are not using properly i.e. there is some problem while using
funds so the company has to take some decision unless their company will
suffer..
41
III) Activity Ratio:-
Ideal Ratio: Higher the ratio, the more efficient the management and
utilization of capital employed.
Ratio Year
Years 2008 2009
Capital Turnover Ratio 20 24.9
42
25
20
15
Ratio
10
0
2008 2009
Comments:-
We can see in the above ratio as well as in the graph the capital turnover ratio
for the year, 2009 have increased as compared to the capital turnover ratio for
the previous year i.e.2008
Therefore, the increase in the capital turnover ratio to 24.9 times imply that the
management is trying to work efficiently and capital employed has increased in
the same proportion as the net sales increases. That is why the ratio increases
for the year 2009.
43
2. Fixed Assets Turnover Ratio:-
a. I establish a relation between Net sales and fixed assets.
b. Its objective is to determine the efficiency with which the fixed
assets are utilised.
Ideal Ratio:- Higher the Ratio, the more efficient the management and
utilization of fixed assets and vice versa.
Ratio Year
Years 2008 2009
Fixed Assets Turnover .50 .50
Ratio
44
0.5
0.4
0.3
FixedAssets
0.2 Turnover Ratio
0.1
0
2008 2009
Comments:-
We can see in the above ratio as well as in the graph the fixed asset turnover
ratio for the year 2008 has been the same to the fixed asset turnover ration for
the year 2009.
Therefore, the no change in the fixed asset ratio implies that the company has
not utilised nor over utilised its assets in efficient way.
45
3. Working Capital Turnover Ratio:-
a. This establish a relation between Net sales and working capital.
b. Its objective is to determine the efficiency with which the working
capital is utilised.
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilization of fixed assets and vice versa.
Ratio Year
Years 2008 2009
Working Capital Turnover .40 .40
Ratio
46
0.4
0.35
0.3
0.25
0.2
Ratio
0.15
0.1
0.05
0
2008 2009
Comments:-
We can see in the above ratio as well as in the graph, the working capital
turnover ratio in the year 2009 has not increased or decreased as compared to
previous year i.e. 2008 working capital turnover ratios.
This signifies that the company is not utilizing the working capital efficiency in the
year 2009.
47
4. Stock Turnover Ratio:-
a. It establishes a relation between Cost of Goods Sold and Average
Inventory.
b. Its objective is to determine the efficiency with which the Inventory
is utilised.
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilization of fixed assets and vice versa.
Ratio Year
Years 2008 2009
Stock Turnover Ratio 14.60 14.50
48
14.6
14.58
14.56
14.54
14.52
Ratio
14.5
14.48
14.46
14.44
2008 2009
Comments:-
We can see in the above ratio as well as in the graph, the stock turnover ratio in
the year 2009has decreased as compared to the previous year i.e. 2008 stock
turnover ratios.
This decrease in stock turnover ratio to 14.50 times in the year 2009 might be
due to inventory levels, obsolete inventory and due to this; the firm may incur hgh
carrying costs.
49
(IV)Profitability Ratio
A. In relation To Sales
1. Gross Profit Ratio:-
a. It measures a relation between Net sales and Gross Profit.
b. Its objective is to determine the efficiency with which the production
operation is carried out.
Ideal Ratio: - Higher the Ratio, the more efficient the management
Ratio Year
2008 2009
Gross Profit Ratio 32.70 26.90
50
35
30
25
20
15 Ratio
10
0
2008 2009
Comments:-
We can see in the above ratio as well as in the gross profit ratio in the year 2009
has decreased as a compared to previous year i.e. 2008 gross profit ratios.
This decrease in the gross profit ratio in the year 2009 might be due to lower
sales price with constant cost of goods sold.
51
2. Net Profit Ratio:-
a. It measures a relation between Net sales and Net Profit.
b. Its objective is to determine the overall profitability due to various
factors.
Formula => Net Profit Ratio: - Net Profit before Tax * 100
Net Sales
Ideal Ratio: - Higher the Ratio, the more efficient the capacity of the firm
and the demand for the product is falling.
Ratio Year
2008 2009
Net Profit Ratio 20.00 19.50
52
20
19.9
19.8
19.7
19.6
Ratio
19.5
19.4
19.3
19.2
2008 2009
Comments:-
We can see in the above ratio as well as in the graph, the net profit ratio in the
year 2009 have fall down drastically as compared to previous year i.e. 2008.
This decline in the net profit ratio indicates the cost of production is increasing
and also expenses are increasing as a result there is a decline in the net profit so
the company should try to reduce its expenses otherwise the company might
have pay huge amount of money or might be shut down its operations for a while.
Working Notes
Here we are considering Net profit be equal to net profit before interest and
tax.
B. In Relation to Investment
53
3. Return On Total Assets:-
a. It measures a relation between Net Profit before interest and tax
and total Assets.
b. Its objective is to find out how efficiently the total assets have been
used by the management.
(Formula)
Return On Total Assets: - Net Profit Before Interest and Tax *100
Total Assets
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilisation of total assets.
Ratio Year
2008 2009
Net Profit Ratio 11.50 8.70
54
12
10
6
Ratio
4
0
2008 2009
Comments:-
We can see in the above ratio as well as in the graph, the return on total assets
in the year 2009 have decreased as compared to previous year i.e. 2008 return
on total assets.
This decrease in the return on total assets to 1.87% in the current year implies
that the management is not efficient enough and the assets are not utilized
properly.
55
4. Return On Capital Employed/ Return On Investment(ROI):-
a. It measures a relation between Capital Employed and Net Profit
before Interest and Tax.
b. Its objective is to find out how efficiently the long term funds
supplied by the creditors and shareholders have been used.
(Formula)
Return on Investment: - Net Profit before Interest and Tax * 100
Capital Employed
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilisation of capital employed.
Ratio Year
2008 2009
Net Profit Ratio 14.60 14.50
56
14.6
14.58
14.56
14.54
14.52
Ratio
14.5
14.48
14.46
14.44
2008 2009
Comments:-
We can see in the above ratio as well as in the graph, the return on investment in
the year 2009 have decreased as compared to previous year i.e. 2008 return on
investment of 14.60%
This decrease in the return on investment implies that the management is not
working efficiently and capital employed is not utilized at its fullest.
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5. Return On Shareholders Fund:-
a. It measures a relation between Shareholder’s Fund and Net Profit
after Interest and Tax.
b. Its objective is to find out how efficient the management and
utilization of shareholder’s have been used.
Formula => Return on Net Worth: - Net Profit after Interest and Tax * 100
Shareholder’s Fund
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilization of shareholders funds.
Ratio Year
2008 2009
Return On Shareholder’s Fund 14.60 14.50
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Comments:-
As we can see in the above ratio as well as in the graph, the return on
shareholder’s Funds in the year 2009 have changed slightly as compared to
previous year i.e. 2008 Return On shareholder’s Fund of 14.60
This change in the Return on shareholder’s Funds is a danger for the company as
there is no proper utilization of shareholder’s funds.
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Analysis
1. Company’s Current ratio has declined from 2.39 to 1.97 in the year 2009.
But yet it is above ideal ratio of 2:1. As in previous year the current ratio is
too high which shows that the company has idle funds available at its
pocket. But now in this year i.e.2008 this high ratio slows down. As a
result we can say that now there is good margin for short term creditors.
2. Now again we see in the case of Quick Ratio that this year 2009 this ratio
has declined to 1.97:1 as compared to previous year having quick ratio to
be equal to 2.39:1 which is too high than the ideal ratio of 1:1. As we can
see in the profit and loss account the amount of debtors is the chief
reason for the decline in this ratio. So this makes the ratio as a satisfactory
ratio.
3. Company’s debt equity ratio has slightly increased from the previous year
having ratio of 1.63:1 which makes ratio a safety margin for the creditors
since the owner’s equity is treated as a margin of safety by creditors.
4. Company’s Total Assets to debt ratio has decreased from 3.28:1 to 3.04:1
which means less safety for short term as well as long term creditors as
owner’s equity is treated as margin of safety by creditors.
6. Company’s Capital Turnover Ratio has increased from 20.00 to 24.9 times
in the year 2009. This shows that company is on the path of using capital
employed efficiently and the management is also becoming efficient. Now
this is positive sign for the company.
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7. In year 2008 company’s fixed turnover ratio did not changed at all. It was .
50 times in 2008 and still .50 times in 2009. There is no direct relationship
between sales and fixed assets.
8. In the year 2009 company’s working capital ratio didn’t increase at all. It
means management didn’t become more efficient and firm has no ability
to generate sales per rupee of working capital.
10. In the year 2009 the company’s net profit ratio has declined as compared
to net profit ratio in the year 2008 which is 20.00%. Due to this decline in
the net profit ratio there is a danger for the company with regard to future
adverse economic conditions.
11. Due to decline in net profit ratio last year i.e. 2009 return on total assets
also decreases which is shows that the management is not utilizing the
total assets efficiently.
12. Due to decline in the net profit before interest and tax in the year 2009
return on investment also declines to 8.70%. this shows that the capital
employed is not utilized properly.
13. Decline in company’s return on net worth in the year 2009 is very low
compared to 2008 which is 14.60% declined. But in this year this goes
down to 14.50% it shows that the management is not taking this issue as
serious issue as a result inefficient utilisation of shareholder’s funds. This
decline is also due to increase in house tax which reduces the net profit.
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Cash Flow of NTPC ------------------ in Rs. Cr. -------------------
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
Net Cash From Operating Activities 6206.40 8065.30 10171.10 9688.10 10594.20
Opening Cash & Cash Equivalents 6078.30 8471.40 13314.60 14933.20 16271.60
Closing Cash & Cash Equivalents 8471.40 13314.60 14933.20 16271.60 14459.50
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The cash flow statement shows how much cash comes in and goes out of the
company over the quarter or the year.
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31-Mar- 31-Mar- 31-Mar-
09(12) 08(12) 07(12)
Profit / Loss A/C Rs mn %OI Rs mn %OI Rs mn %OI
Net Sales (OI) 419765.00 100.00 370936.00 100.00 326335.00 100.00
Material Cost 310.00 0.07 268.00 0.07 237.00 0.07
Increase Decrease Inventories 0.00 0.00 0.00 0.00 0.00 0.00
Personnel Expenses 25012.00 5.96 19289.00 5.20 11908.00 3.65
Manufacturing Expenses 281563.00 67.08 229985.00 62.00 208109.00 63.77
Gross Profit 112880.00 26.89 121394.00 32.73 106081.00 32.51
Administration Selling and Distribution
7291.00 1.74 5975.00 1.61 5255.00 1.61
Expenses
EBITDA 105589.00 25.15 115419.00 31.12 100826.00 30.90
Depreciation Depletion and Amortisation 23645.00 5.63 21385.00 5.77 20754.00 6.36
EBIT 81944.00 19.52 94034.00 25.35 80072.00 24.54
Interest Expense 20229.00 4.82 17981.00 4.85 19806.00 6.07
Other Income 32963.00 7.85 29241.00 7.88 28699.00 8.79
Pretax Income 94678.00 22.56 105294.00 28.39 88965.00 27.26
Provision for Tax 11582.00 2.76 28401.00 7.66 20427.00 6.26
Extra Ordinary and Prior Period Items
-1083.00 -0.26 -2745.00 -0.74 109.00 0.03
Net
Net Profit 82013.00 19.54 74148.00 19.99 68647.00 21.04
Adjusted Net Profit 82013.00 19.54 74148.00 19.99 68647.00 21.04
Dividend - Preference 0.00 0.00 0.00 0.00 0.00 0.00
Dividend - Equity 29683.00 7.07 28859.00 7.78 26385.00 8.09
The income statement is basically the first financial statement you will come
across in an annual report or quarterly Securities And Exchange
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Commission (SEC) filing. It also contains the numbers most often discussed
when a company announces its results -numbers such as
revenue, earnings and earnings per share. Basically, the income
statementshows how much money the company generated (revenue), how much
it spent (expenses)andthedifference between the two (profit) over a certain time
period.
NET SALES
Revenue, also commonly known as sales, is generally the most straightforward
part of the income statement. Often, there is just a single number that represents
all the money a company brought in during a specific time period, although big
companies sometimes break down revenue by business segment or geography.
The company have improved profitability by increasing sales revenue for the year
2009.
EXPENSES
There are many kinds of expenses, but the two most common are the cost of
goods sold (COGS) and selling, general and administrative expenses (SG&A).
Cost of goods sold is the expense most directly involved in creating revenue. It
represents the costs of producing or purchasing the goods or services sold by
the company.
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excludes certain expenses and revenues that may not be related to its central
operations. High operating margins can mean the company has effective control
of costs, or that sales are increasing faster than operating costs. Operating profit
also gives investors an opportunity to do profit-margin comparisons between
companies that do not issue a separate disclosure of their cost of goods sold
figures (which are needed to do gross margin analysis). Operating profit
measures how much cash the business throws off, and some consider it a more
reliable measure of profitability since it is harder to manipulate with accounting
tricks than net earnings.
Net income generally represents the company's profit after all expenses,
including financial expenses, have been paid. This number is often called the
"bottom line" and is generally the figure people refer to when they use the word
"profit" or "earnings".
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Conclusion
After analyzing the Ratios, Balance sheet, Income statement, Cash Flows, I
came to the conclusion that NTPC (National Thermal Power Corporation) ltd.
From the past 2 years there is an increase in the profit of the company NTPC
Ltd.
This is due to high efficiency of the management of the company and resources
have been utilized properly in this year 2009-10.
So we can say that company is taking this issue of making the company more
efficient and effective through proper management in the future. And the issue of
making the company more indulge in social services and less focussing on profit
making.
The company more and more achievement has made the company liable to
show better improvement in the nest few years.
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Bibliography
BOOKS
• Maheshwari, S.N.; Principles of Management Accounting, Sultan
Chand & Sons, 2003 Fourteenth Edition
• Bhattacharya, S.K. & Dearden; Accounting for Management – Text and
Cases, Vikas Publishing House, 2003 Third Edition.
• Pandey, I.M.; Management Accounting, Vikas Publishing House, 2003
Third Edition.
SITES
• http://www.bseindia.com
• http://en.wikipedia.org/wiki/National_Thermal_Power_Corporation
• https://www.ntpc.co.in/
• http://www.moneycontrol.com/financials/ntpc/balance-sheet/NTP
• http://money.rediff.com/companies/ntpc-ltd/15130025/balance-sheet
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