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HEEP - DIVISION
BHARAT HEAVY ELECTRICALS LIMITED HARIDWAR
A SUMMER TRAINING REPORT IN PARTIAL FULFILLMENT OF REQUIMENT FOR THE DEGREE OF MASTER OF BUSINESS FINANCE
SUPERVISION BY: Dr. Bindu Arora
SUBMITTED BY : Neetu Malik
DEPARTMENT OF MANAGEMENT STUDIES KANYA GURUKUL MAHAVIDYALAYA (DEHRADUN) nd 2 CAMPUS OF GURUKULA KANGRI VISHAVIDYALAYA HARIDWAR – 249403 (UTTRAKHAND) [2006-2008]
I express my sincere thanks to the Management of HEEP(Heavy Electrical Equipment Plant) of BHEL, Ranipur, Haridwar Unit for giving me an opportunity to gain exposure on matter related to Project under the esteem guidance of Mr. ANIL MALIK(Sr.Manager product cost section) I hereby take this opportunity to put on records my sincere thanks to Shri ANIL MALIK under the light of whose able guidance I could complete this project in an effective and successful manner. I am also indebted to MR.VIVEK GOYAL(Sr.Accounts officer Books&budget), Mr.INDER KUMAR(Sr.A/O),Mr.SUJIT KUMAR(Sr.A/O) ,Smt Usha Verma (Accounts officer) for their valuable information's and inputs, which added dimensions and meaning to my project. I am also thankful to the rest of the staff of the SALES section for their valuable suggestion and cooperation to achieve the task. With sincere thanks NEETU MALIK K.G.M. DEHRADUN
I hereby declare that the study entitled “RATIO ANALYSIS” in the context of H.E.E.P. BHEL being submitted by me in the partial fulfillment of the requirement for the award of MASTER OF BUSINESS FINANCE by K.G.M.DEHRADUN is a record of my own work. The study was conducted at FINANCE DEPARTMENT , H.E.E.P. BHEL. The matter embodied in this project report has not been submitted to any other university or institution for the award of degree.
As a part of my MBF programme, I was asked to undergo 8 weeks summer training in any organization, to give the exposure to practical management and to get familiar with the various activities taking place in the organization. I got an opportunity to undergo my summer training in the reputed organization “BHEL” Haridwar where I was allowed to work on the project titled “A Critical Study of Ratio Analysis at H.E.E.P. Haridwar BHEL”. In this project, an attempt has been made to study the Ratio Analysis of BHEL Haridwar. The salient feature of this report is the comprehensive coverage and latest information about the topic of the study. Financial data of last 6 years have been taken and the working capital position is evaluated and interpreted.
VISION & VALUES *COMPANY’S BUSINESS OBJECTIVES *BUSINESS SECTOR *RESEARCH AND DEVELOPMENT *TECHNICAL COLLABORATIONS *DIVISION OF BHEL *COMPETITOR OF BHEL *AWARD WON *SWOT ANAYSIS OF BHEL *QUALITY 2}BHEL-HARIDWAR PROFILE *INFORMATION ABOUT BHEL HARIDWAR UNIT *PRODUCT PROFILE OF HARIDWAR UNIT 3}FINANCIAL OVERVIEW *SIGNIFICANT ACCOUNTING POLICIES *FINANCE FUNCTION 4}RESEARCH MEHTODOLOGY 5}PROJECT * FINANCIAL ANALYSIS * OBJECTIVE OF THE STUDY * USES OF FINANCIAL STATEMENT TO DIFFERENT PARTIES * PROBLEMS OF FINANCIAL STATEMENT OF DIFFERENT PARTIES * RATIO ANALYSIS (i) (ii) (iii) RATIOS AND ITS MEANING GRAPHICAL PRESENTATION OF RATIOS INTERPRETATION OF RATIOS * CONCLUSIONS AND SUGGESTIONS * LIMITATION OF STUDY * BIBLIOGRAPHY .INDEX 1}BHEL PROFILE *BHEL –AN OVERVIEW *BHEL –IN INDIA *COMPANY PROFILE *COMPANY’S MISSION.
L. * QUALITY .H.L .H. AN OVERVIEW * B. VISION & OBJECTIVES *COMPANY’S BUSINESS OBJECTIVES * BUSINESS SECTORS * RESEARCH AND DEVELOPMENT * TECHNICAL COLLABORATIONS * DIVISIONS OF B.H.E.H.L.E.E.L. * COMPETITORS OF B.PROFILE ********************** * B.E.L. IN INDIA * COMPANY PROFILE * COMPANY’S MISSION .E.CHAPTER#1 B.H. * AWARDS WON * SWOT ANALYSIS OF B.L.E.H.
has described BHEL as " one of the most efficient enterprises in the industrial sector. performance and profitability. industrial transportation.B. successfully meeting diverse needs through turn key capability. BHEL's range of services extent from project feasibility studies to after sales services. It has also embarked into other areas including defence and civil aviation. BHEL has acquired ISO 9000 certificate for most of its operations and has taken up Total Quality Management (TQM). oil and gas. AN OVERVIEW Established in the late 50's BHARAT HEAVY ELECTRICALS LIMITED (BHEL) is a name which is recognised across the industrial world. BHEL has had a consistent track record of growth.H.E. . BHEL is India's industrial ambassador to the world with export presence in more than 50 countries. fourteen manufacturing units.L. A dynamic 63000 strong team embodies the BHEL philosophy excellence through continuous striving for state of the art technology. BHEL offers a wide spectrum of products and services for core sectors like power transmission. telecommunication etc. a wide spread regional services network and projects sites all over India and even abroad. at par with international standards of efficiency". Besides supply of non conventional energy systems. The world bank in its report on the Indian Public Sectors. With corporate headquarters in NEW DELHI . It is one of the largest engineering and manufacturing enterprises in INDIA and is one of the leading international companies in the power field.
4. JAIPUR 10. BANGLORE 2. SECUNDRABAD # MANUFACTURING UNITS *********************** 1. JABALPUR 9. 2. NAGPUR (WESTERN REGION) 4. BANGALORE 2. TIRUCHIRAPALLY # SERVICE CENTRES ****************** 1. LUCKNOW 11. CHANDIGARH 7. RUDRAPUR 9. BARODA 3. IN INDIA # REGIONAL OFFICES (POWER SECTORS) *********************************** 1. JAGDISHPUR 7. 5. 3. CALCUTTA 6. GUWAHATI 8.B. CHENNAI 12. RANCHI 15.L.H. 9. 7. HYDERABAD 6. RANIPET 10. NEW DELHI 13. 8. BHOPAL 3. 6. BANGLORE BARODA CALCUTTA CHANDIGARH SECUNDRABAD NEW DELHI NAGPUR PATNA VARANASI . NEW DELHI (NORTHERN REGION) 2. CALCUTTA (EASTERN REGION) 3. BHUBANESHWAR 4. GOINDWAL 4. HARDWAR 5. MUMBAI 5. JHANSI 8. PATNA 14. CHENNAI (SOUTHERN REGION) # BUSSINESS OFFICES ******************* 1.E.
Hyderabad and Tiruchirapalli.L.A.COMPANY PROFILE BHEL is India's largest engineering company and one of its kind in this part of the hemisphere.E. which signalled the dawn of the heavy electrical industry in India. transmission. telecommunication and oil business.H.has consistently upgraded its design and manufacturing facilities to international standards by acquiring and assimilating. In the early 60's three more major plants were set up in Hardwar. which is largely due to emphasises placed all along on contemporary some of the best technologies of the world from the leading companies in U.EUROPE. The company now has 14 manufacturing divisions. transmission. The first plant of BHEL was set up in Bhopal in 1956. utilisations and conservation of energy in core sectors of economy that fulfill vital infrastructure needs of the country. 9 services centres and power sectors regional centres besides project sites spread all over India and also abroad to provide prompt and effective service to customers. It manufactures a wide range of state of the art power generation equipment and systems besides equipment for industry. defence. ..S. BHEL's business broadly covers conversions. Its product have established an enviable reputation of high quality and reliability. and JAPAN together with techonologies from its own R&D centres technologies B.
VISION & VALUES .COMPANY’S MISSION .
productivity and generate adequate internal resources to finance the company's growth. primarily through improvements in operational efficiency. CUSTOMER FOCUS:To build a high degree of customer confidence by providing increased value for his money through international standards of product quality. . customers and the country at large have from BHEL.COMPANY’ BUSINESS OBJECTIVES GROWTH :To ensure a steady growth by enhancing the compititive edge of BHEL defence. IMAGE:To fulfill the expectations which stakeholders like government as owner. PROFITABILITY:To provide a reasonable and adequate return on capital employed. percieve his role and responsibilities and participate and contribute positively to the growth and success of the company. performance and superior services. new areas and international operations so as to fulfill national expectations from BHEL. employees. PEOPLE.ORIENTATION:To enable each employee to achieve his potential. improve his capabilities. TECHNOLOGY:Achieve technological excellence in operations by development of indigenous technologies and efficient absorption and adaptations of imported technologies to suit business need and priorities and provide the competitive advantage to the company. capacity utilisation . telecommunication and electronics in existing business. To invest in human resources continuously and be alive to their needs.
piping and station C & I upto 500 MW rating with technology and capcbility to go upto 1000 MW range. Nuclear steams generators. sets . BHEL began to manufacture gas turbines and now possesses two streams of gas turbine technology. gravimetric feeders. valves etc. It has the capability to manufacture gas turbines upto 200 MW rating and custom built combined cycle power plants. The fluidised bed boiler that uses low graded high-ash abrasive indian coal is an outcome of such an effort. electrostatic precipitators. POWER SECTORS:Power is the core sector of BHEL and comprises of thermal. fans. mainly power. The auxillary products high value capital equipment like bowl and tube mills. This enables BHEL to have a strong customer’s orientation. to be sensitive to his needs and respond quickly to the changes in the market. pumps and heaters.BUSINESS SECTORS BHEL's operations are organised around three business sectors. BHEL has contracted so far around 240 thermal sets of various ratings which includes 14 power plants set up on turn key basis. BHEL manufactures boilers auxillaries. BHEL has adopted the technology to the needs of the country and local conditions. nuclear gas. industry and international operations. turbine generators. With large scale availability of natural gas and the sudden increase in demand. TG sets and associate controls. Today BHEL supplied sets. Nearly 85 % of world bank tenders for thermal sets floated in India have been won by the company against international competition. accounts for nearly 66 % of the total installed capacity in the country as against nil till 1969-70. This has led to the development of several technologies in house. diesel and hydro business.
drives. switch gears and heavy castings and forgings. The four power sectors regional centres at New Delhi. waste heat recovery boilers. Chennai. defence industrial process plants and other applications. BHEL has developed expertised in renovation and maintenance of power plant equipment besides specialised know how of residual life assessment. industrial boilers and auxillaries. These include: • • • • Dry Type Transformers SF6 Switch Gears 400 KW Transmission Equipment High Voltage Direct Current System . Kolkata and Nagpur will play a major role in giving a thrust to this business and focus BHEL's efforts in this area. gas turbines.and related equipment of 235 MW rating have been supplied to most of the nuclear power plants in India. TRANSMISSION:A wide range of transmission products and systems are produced by BHEL to meet the needs of power transmission and distribution sector. electric motors. high speed industrial drive turbines. and control equipments. Company in India with the capability to make simulators for power plants. Production of 500 MW nuclear sets. INDUSTRY SECTORS :BHEL is a major producer of large size thyristor devices. high voltage transformers. for which orders have been received. The products include centrifugal compressors. health diagnostic and life extensions of plants. An entry has been made in aviation industry for which BHEL has set up facilities and is now producing two seater aircraft.
• Series and Shunt Compensation Systems In anticipation of the need for improved substations. a 33 KV gas insulated sub station with micro processors base control and protection system has been done. These include : • • • • Broad Gauge 3900 HP AC / DC locomotives Diesel Shunting Locomotives upto 2600 HP 5000 HP AC Loco with thyristor control Battery Powered Road Vehicles and Locomotives . TRANSPORTATION:65 % of trains in Indian Railways are equiped with BHEL's traction and traction control equipment.
The dedicated effort of BHEL's R & D engineers have produced several new products like automated storage retrieval system automated guide vehicles for material transportation etc.2 MW industrial steam turbines. "BHEL is spending Rs. R. • • • Development of 4700 HP AC / DC loco for Indian Railways. Development and application low cost ROBOTS for job loading/unloading. Major R & D achievement include : • Design manufacture and supply of countries first 17. Development of largest capacitor voltage transformers of 8800 PF 400 KV rating. 60 Crores on Research and Development. 760 Crores. Earning from product which has been commercialised has gone up 26 % to Rs." .K. Establishment of Asia's largest fuel evaluation test facility at Tiruchy was high light of the year.D. Shah . This facility will enable evaluation of combustion. heat transfer and pollution parameters in boilers.CMD Mr.RESEARCH AND DEVELOPMENT BHEL has a corporate R & D center supported by R & D groups at each of the manufacturing divisions. According to ex.
Generators and Axial Condensers # Cam Shaft Controllers and Tractions Current Control Units # HDVC # Programmable Controls # Gas Turbines # Tube Mills # Dry Type Transformers COLLABORATIONS Prommashexport RUSSIA Sulzer Brother Ltd. # Bypass & Pressure Reducing Systems # Electronic Automation System for Steam Turbine & Generators # Francis Type Hydro Turbines # Moisture Separator Reheaters # Christmas Trees & Conventional Well Head Assemblies # Steam Turbines . USA Stien Industries FRANCE May & Christe GERMANY . GERMANY Siemens AG. Hydro Sets. GERMANY General Electric CANADA Baloke Duerr GERMANY National Oil Well USA Siemens AG. Motors & Control Gears. SWITZERLAND Siemens AG. GERMANY ABB SWEDEN ABB SWITZERLAND General Electric Co.TECHNICAL COLLABORATIONS PRODUCT # Thermal Sets.
they are as follows : 1. BHEL. Jhansi 7. IOD. Hyderabad 3. Bangalore 9. HERP. COTT. ISG. SSTP & MHD. Regional Operations Division ARP. New Delhi 14. Ranipet 12. BAP.DIVISIONS OF BHEL There are 20 Divisions of BHEL. IS. Bhopal 20. Bangalore 10. Tiruchy 5. Power Group (Four Regions and PEM) . New Delhi 19. TPG. IP. Hardwar 6. CFFP. Varanasi 18. EPD. Rudrapur 17. Tiruchy 4. BHEL. Bhopal 8. Bangalore 11. HPBP. Hyderabad 15. HEEP. HPEP. Hardwar 2. CFP. ED. Jagdishpur 13. New Delhi 16.
CNMI & EC 6.K. Seimens 23. Electro Consult 10. Electrim 8. USA Japan Russia Japan Japan U. Asea Brown Boueri 3. Costain 7. Fuji 12. Mitsui 18. Ansaldo 2. Beehtel 4. Rolls Royce 21. Franco Tosi 11. Sanghai Electric Co.MAJOR COMPETITORS OF BHEL 1. 22. LMZ 16. NEI 19. Hitachi 15. Energostio 9. USA Germany China Germany Czechoslovakia . Block & Neatch 5. Raytheon 20. Skoda Italy Switzerland USA USA China U.K. GEC Alsthom 13. Mitsubishi 17.K. General Electric 14. Poland Russia Italy France Japan U.
Certificate of Merit by National Productivity Council for outstanding performance for 2nd consecutive year. USA . BHEL one of the 9 PSE’s declared “Navratna” by Govt.MAJOR MILE STONE 1975 1978 1982 1993 1995 1997 1997 1998 1998 1999 1999 1999 1999 1999 1999 2000 2001 2001 2001 2002 2002 2002 2004 2005 Job Redesign concept launched for FIRST time in India. Concept Accreditation of ISO 9001 quality System. Accreditation of U stamp.Q score 550-600 consecutive Turbine . Turnover Index and Manufacturing Index Accreditation of ISO 9000-2k JBE Workshop of Apex TQM Group at Tehri to evolve Business policy and CSF. Well documented Suggestion Scheme launched. AD-Merkblatt HPO Recertification by RWTUV for Gas Combustion Chambers INSAAN Award for Excellence in Suggestion for 9th consecutive year Launching of 5s concept PCRI recognized as Environmental Lab by Haryana State Board for Prevention and Control of Pollution Accreditation of ISO 14001-Enviornment management system CII Site Visit for CII-EXIM Business Excellence Award-2000 Top Management TQM Workshop at Rishikesh and HRDC INSAAN Award for excellence in Suggestion for 11 th year Launching of QTM & RCA at HEEP Hardwar by CMD Launching of delivery Index . Launched Productivity Movement & Quality Circle. National Productivity Award for HEEP by the President of India . Accreditation of R Stamp from National Board of Boiler and Pressure Vessel Inspector. of India . Adopted EFQM model of TQM for achieving Business Excellence. New blade shop establishe Commendation of significant achievement in CII-EXIM award with T.
-T-H-R-E-A-T-S♣ Technology suppliers are becoming competitors with the opening up of the Indian economy. ♣ High Growth forecast in India's index of industrial production would increase demand for industrial equipment such as motors & compressors. ♣ Fall in Global power equipment prices can affect profitability. -O-P-P-O-R-T-U-N-I-T-I-E-S♣ High expected growth in power sector (7000 MW per annum needs to be added ). -W-E-A-K-N-E-S-S-E-S♣ High woking capital requirement due to its exposure to cash starved SEBs. ♣ Comprehensive turn key experience from product design to commissioning. . ♣ Inablity to provide project financing. ♣ Flexible manufacturing set up . ♣ Big entry barrier due to high replacement cost of its manufacturing facilities.SWOT ANALYSIS OF BHEL -S-T-R-E-N-G-T-H-S♣ Low cost Producer of quality equipment due to cheap labour and fully depriciated plants.
Gamma rays. It is a watch work whether in coming material. . assembly or testing. The products. BHEL (HEEP) Hardwar has also received global recognition with the award of ISO9001 certificate by Bureau Varities Quality International for all its products and services. include steam turbine and turbo generators. gas turbines. machining. A large number of sophisticated testing and measuring instruments including CNC 3D co-ordinate measuring machine. hydro generators. AC/DC motors and associated control panels. condensers heat exchangers. hydro turbines. which had received ISO-9001 recognition. non destructive testing facilities like X-ray. magnetic particle inspection are being extensively used.QUALITY Quality is infact a way of life in BHEL Hardwar. As a part of its continuous journey in attaining excellence in quality management. Ultrasonic. in process.Quality assurance system quality plant and field quality assurance are aids to tool quality concept.
.L.CHAPTER # 2 B.HARDWAR PROFILE ********************************** INFORMATION ABOUT B.L. HARDWAR UNIT PRODUCT PROFILE OF HARDWAR UNIT .E.H.E.H.
advance procurement and manufacturing action on long lead items. are all aimed at providing customers with product. Located immediately to the south of HEEP is the Central Foundry Forge Plant (CFFP). set up with French collaboration for the production of alloy steel casting and forgings required to complete the production profile of BHEL. TQM etc. noise and solid wastes reorienting itself to be more responsive to customer need. cost control. system and services that match their requirements. Various in-house initiative aimed at reducing cycle times. The plant went into production in 1967 and is engaged in the manufacturing of power generation and utilisation equipment.L.B. . business process reengineering. There are two power equipments manufacturing plants situated in BHEL.H.E. pre-contract engineering work. On the northern side is Heavy Electrical Equipment Plant (HEEP) set up originally with Soviet collaboration. A Pollution Control Research Institute has also been setup within the BHEL campus at Ranipur to provide services to government and private agencies to control industrial pollution with respect to air.improving productivity in operations. water. HARDWAR UNIT BHEL is situated at Ranipur near Hardwar.
600 manufacturing upto 115 MW * Gas Turbines * Light Aircraft * AC / DC Machines * Apparatus and Control Gears * Steam Turbines for combined cycle power plant * Heat Exchangers / condensers * Medical Equipment * Super Rapid Gun Mount 60.000 KW To match with the power equipment Various combinations Manufacturing upto 800 MW ratings Linac (for cancer treatment) Naval Gun .20.PRODUCT PROFILE PRODUCT CAPACITY RATINGS * Thermal Sets * Hydro Sets Upto 1.200 MW 150 ratings Two Seater 5.000 MW Maximum hydro runner turbine diameter 6.
CHAPTER # 3 FINANCE OVERVIEW ************************** * SIGNIFICANT ACCOUNTING POLICIES * FINANCE FUNCTIONS SIGNIFICANT ACCOUNTING POLICIES .
1. Cost include: # Internal transfers for capital works.Unquoted investments intended to be held till maturity are valued at cost.5 % of the realisable value or in its absence. Effect of extraordinary events such as devaluation / revaluation in respect of long term liabilities / loans utilised for acquisition of fixed assets are added to / reduced from cost. # Interest cost incurred on funds borrowed specifically for projects and identified there with are capitalised up the time of commissioning of the relevant projects. Accounts have drawn on historical cost convention based on accrual method of accounting. Sales include goods despatched to the customer by partial shipment which are billed / unbilled pending formal billing. (ii) Recognition of sales revenue in respect of long production cycle items is made on technical estimates. whichever is lower. (ii) Investments: Quoted investments are carried at lower of cost or market price. When the aggregate value of shipment represents 30 % or more of the realisable value. Accounting for Fixed Assets and Investments: (i) Fixed assets: Fixed assets (other than land acquired free from states government) are carried at cost of acquisition or construction or book value less accumulated depreciation. taken at actual/ estimated factory cost or market price. at the quoted price. 2. Revenue Recognition (i) Sales are recorded based on significant risks and rewards of ownership being transferred in favour of the customer. they are considered at 97. 3. .
(v) Income from supply / errection of non BHEL equipment / system and civil works is recognised based on despatches to customer / work done at project site. duty drawback. refund of custom duty and insurance are taken into account on accrual.5 % of contract value. (i) Claims for export subsidy. . recognised as (iv) Income from erection and project management services is recognised on work done and billed based on the percentage of completion or the intrinsic value. Research and development expenditure is charged to profit and loss account. which ever is lower. The balance 2. (ii) Amounts due in respect of price escalation claims and / or variation in contract is recognised as revenue only when they are conditions in the contract for such claims or variations and / or evidence of the acceptablility of the same from customers. Gratuity is determined in accordance with the actuarial valuation based on data relatable to eligible employees in the service at the beginning of each calender year.(iii) Otherwise. 4. 6. reckoned at 97. 5. 7. The balance 2.5 % is recognised as income when the contract is completed.5 % of realisable value. Accounting for foreign currency transaction : (i) In case of current assets and current liabilities the effect of conversion at year and exchange rate is taken to the P & L a/c. Claims by / against the company claims for liquidated damages by / against the company are recognised in the account of acceptance. they are considered at actual / estimated factory cost or 97.5 % is revenue on completion of supplies under the contract. Fixed assets acquired for purpose of research and development are capitalised.
or at nominal value if received free. are recognised as revenue over the period to which relate on the principle of matching cost to revenue. Grants in the form of non monetary assets are accounted for at the acquisition cost.(ii) In case of long term liabilities. Grants related to revenue. Translation of financial statement of foreign branches. (i) Items of income and expenditure are translated at average rate except depreciation. 2.5 % value of the contract. Warranty claims / expenses on rectification work are accounted for against natural heads in the year of actual incurrence. 10. unless receives as compensation for expenses / losses. . Government grants these are accounted when there is reasonable certainty of their realisation grants related to fixed depreciable assets are adjusted against the gross cost of the relevant assets while those related to non depreciable assets are credited to capital reserve.5 % of the value of each completed product is provided. which is converted at the rates adopted for corresponding fixed assets. 9. 8. Provisions for contractual obligations in respect of completed contracts under warranty at the year end is considered at 2. (ii) Current assets and current liabilities are translated at closing rate while fixed assets are translated at rates in force when the transaction takes place (iii) All transaction variances at the end of the year are taken to the P & L a/c. variations arising from normal exchange fluctuations are recognised and taken to profit and loss a/c if it results in loss and ignored if there is net gains. In case of the contract of suppliers of more than a single product.
Work related to capital expenditures of the company. SALES SECTION Sales accounts section will deal mainly with the following items :(i) Scrutiny and vetting of estimates / quotation for sale of products / services. Interaction with management of top management link for achieving cost control and cost reduction and thereby improving bottom line of the company.FINANCE FUNCTIONS COST SECTION Cost. (vii) Preparation of cost sheet of different product and their analysis for future planning. (iv) Maintenance of subsidiary records like sales journals / sales day book. Developing variance Management Information report for different parts of management for purpose of cost control and reduction. . advances from customer ledger etc.section of the company is divided into following two sections viz. Determination of pricing policy of the company. sundry debtors ledgers. wherever financial concurrence is required. (v) (vi) Valuation of work in progress and finished goods. PRODUCT COST & CENTRAL COST and these deals with the following functions :(i) (ii) (iii) (iv) Determination of periodic profits including inventory valuation. (ii) (iii) Scrutiny and vetting of agreements for sales of products and services Invoicing for sale / advance or progressive payment / erection income and other.
(iii) Maintenace of accounts of advances to suppliers. c) Foreign payment. excise duty.(v) (vi) Payments.rejections and rectifications of materials and sundry creditors. b) Stores review. STORES SECTION For the convenience of performance of various function it is divided in to further three sections which are as follows :a) Stores bills. recovery and accounting of sales tax. (vii) Scrutiny . . (ii) Pricing of stores receipt vouchers including fixed assets vouchers and fixed assets receipt vouchers.claims recoverable . Review and reconciliation as well as follow up of recovery of outstanding dues from the customers in coordination with the commercial department. (viii) (ix) Calculation and scrutiny of data for payments of royalties to the collaborators.claims for short suppliers . They deal mainly with the following items of works: (i) Payment of suppliers bills including bills for advances -indigenous and foreign. payments and accounting of bills of carriers and insurers and other miscellaneous claims relating to the outwards consignments. Accounting of claims on carriers/ insurance companies for missing items / damages on outward consignments. (iv) Opening of letter of credit and arranging payments to foreign suppliers under foreign credit / deffered payment agreements.
port trust dues . BOOKS AND BUDGET SECTION This section deals mainly with the following:(i) (ii) Preparation of operating budget for the company as a whole. (iii) (iv) (v) (vi) Preparation of annual accounts of the company . (vii) Keeping account of earnest money and security deposits received from tender and suppliers. (vi) Maintenance of accounts of material issued on loan and materials issued to subcontractors.custom duty. and accounting of such payments are made at regional offices. Maintenance and accounting of fixed assets accounts. PAYROLL SECTION This section deals mainly with the following functions : (i) (ii) Preparation of monthly wage bills. (viii) Adjustment of stores in transit to be made at the close of the year. Coordination with company auditors with regard to company accounts.bills of contractors for transport /handling etc. All account work related to personal payments and disclose profit and loss account of the company.transit insurance bills .local agents commission and clearing agents bills. Preparation of long term profit plans based on broad objectives of the company. .(v) Payment of bills for ocean freight . Co-ordination with various functions of organisation with regard to generation and submission of important MIR's to corporate office.
telephone and miscellaneous payments. Commissioner. ESI (employee state insurance). WORKS SECTION Works section of the company is dealing with the following functions: (i) (ii) Payments of contractors bills including bills for advance. building and roads. Maintenance of accounts of contractors with regard to security deposits.(iii) Dealing with income tax authority with regard to personal taxation of employee. (vi) Payments and accounting of all miscellaneous expenditures incurred on post and telegraph.F. (iii) (iv) 215 maintenance of accounts of materials issued on loans to contractors. The broad functions are : . (v) To ensure correct payment of salary and wages and other benefits to employees in line with policies. CASH SECTION The cash section shall be responsible for banking of all money or money's worth received by the company and the disbursement of all authorised payments on behalf of the company and also for the safe custody of all cash and other valuables as may be entrusted to that section. (v) (vi) All other miscellaneous work relating to hiring of various facilities. progressive payments. Payments and accounting of all expenditure related to revenue particularly with regard to expenditure incurred on repair and maintenance of plant and machinery. (iv) Dealing with other statutory authority such as P. earnest money. All accounting work related to capital expenditure in progress on erection of plant & machinery and building.
on behalf of the company. and other paper securities. wages and other personal payments of employees. maintenance of registers and other record incidental to and for the efficient despatch of the responsibilities of the section.(i) Receipt of money in the form of cash. share certificates. banks consortium to ensure the smooth functioning of the centralised cash credit system. cash forecasts etc. cheque. NOTE : The function of arrangements of cash credit facility specified at item (iv) above is now discharged centrally by the cash management section of the corporate office. bank draft. (iv) (v) Arrangement / operation of cash credit facility with banks. Preparation of cash flow statements. However the division concerned will also keep proper liasions with all the local members. (iii) Accounting of all receipt and payments on behalf of the company in cash / bank books. . (ii) Handling and custody of cash . till disbursement or deposit in bank and custody of other valuables like govt. bank guarantees etc. cheque etc. postal orders etc. Payment of money to the suppliers. on behalf of the company and disbursement of salaries . contractors etc.
profit & loss a/c of the respective year & the other internal documents .the step for research should be finalized .CHATER#4 RESEARCH METHODOLOGY The term research methodology indicates an exhaustic investigation into some accepted principles and conclusion so as to bring into some new and novel facts. As highlights above secondary data is taken as a sour . All the figures are taken from their balance sheet. I choose the project of ‘RATIO ANALYSIS’. He approved the project . Anil Malik. Once the problem to be studied is decided. The first step towards any research is to identify the problem and to look at it objectively . I discussed the project with my instructor & coordinator Mr. Entire information & data were gathered from the respected annual reports of BHEL . after that a simple course of action has been followed for working on this project. Haridwar.
CHAPTER # 5. PROJECT ************* FINANCIAL ANALYSIS OBJECTIVE OF THE STUDY RATIO ANALYSIS RATIOS AND ITS MEANING GRAPHICAL PRESENTATION OF RATIOS INTERPRETATION OF RATIOS USES OF FINANCIAL STATEMENT TO DIFFERENT PARTIES PROBLEMS OF FINANCIAL STATEMENTS CONCLUSIONS AND SUGGESTIONS .
It makes use of existing financial statements and involves a limited access to confidential information on a firm. These departments have available more details and current information than is available to outsiders. Internal Analysis :This is performed by the corporate finance and accounting departments and is more detailed than external analysis. as reflected in the financial records and reports. . There are two views points in receiving and evaluating financial data : 1. They are able to prepare Performa. or investments analysis. The goal of such analysis is to determine efficiency and performance of the firm management. stock holders. We will develop ratio analysis as the primary tool for examining the firm's financial position and performance. External Analysis :This is performed by outsiders to the firm such as creditors. Its main aim is to measure the firm's liquidity. profitability and other indications that business is conducted in a rational and orderly way. 2. or future statements and are able to produce a more accurate and timely analysis of the firm's strength and weaknesses.FINANCIAL ANALYSIS Financial analysis is the process of determining the operating and financial characteristics of a firm from accounting data and financial statement.
Ratios can highlight the factors associated with successful and unsuccessful firms. These persons are interested in liquidity. Over a period of years. Short term creditors. 2. the ratio may provide clues and trends of future problems. Every industry has its own unique set of operating and financial characteristics. Long term creditors.FINANCIAL RATIOS AND UTILITY A ratio may be defined as a fixed relationship in degree or number between two numbers. overvalued undervalued firms. 3. The firm must be sufficiently liquid in the short term and have adequate profits for the long terms. a firm or a industry develop certain norms That may indicate future success or failure. These can be identified with the help of ratios. In the short run. To compare different companies in same industry. Some uses of ratios are following: 1. ratios are used to point out relationships that are not obvious from the raw data. To compare different industries. These persons examine liquidity and profitability. In finance. These persons hold obligation that will soon mature. If relationship change in firm's data over different time periods. . the amount of liquid assets determines the ability to pay off current liabilities. USERS OF RATIOS 1. These persons hold bonds or mortgages against the firm and are interested in current payment of interest and eventual payment of principal. To compare performance in different time periods. and are concerned with firm's ability to pay its bills promptly. 2. They can reveal strong firms and weak firms.
In the addition to liquidity and profitability the owners of the firm are concerned about the policies of the firm that affect the market price of firm's stock. Without liquidity. the firms will not be able to declare the dividends. Without profits. Stock holders. With poor policies the common stock would trade at low prices in the market.3. . the firm could not pay cash dividend.
♦ ♦ Ratios help in inter firm and intra firm comparison. To decide about the future prospects of the firm. solvency and profitability of the firm. ♦ ♦ Overall operating efficiency and performance of the firm. Efficiency with which firm is utilising its various assets in generating sales revenue. To determine the debt capacity of the firm.OBJECTIVE OF STUDY The project "ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS" is undertaken to fulfil the following objectives : To estimate the earning capacity. To gauge the financial position and financial performance of the firm. They help in determining the financial strength by highlighting the liquidity. ♦ With the help of ratios we can determine the ability of the firm to meet its current obligations. UTILITY OF FINANCIAL ANALYSIS: Following are the advantages of financial analysis. To determine the long term liquidity of the funds as well as solvency. RATIO ANALYSIS . They are also useful in forecasting purpose. ♦ They are useful in comparison of performance.
ACTIVITY RATIOS : . if properly analysed and interpreted. They measures how efficiently the assets are employed by the firm. Financial statement analysis may be done for a variety of purpose.They are also called Turnover ratios or Asset management ratios. Financial ratio analysis is a study of ratios between various items or groups of items. The principle tool for financial statement analysis is Financial Ratio Analysis. usually one year. it is also a riskier source of finance. . While debt capital is a cheaper source of finance. which may range from simple analysis of the short term liquidity position of the firm to comprehensive assessment of the strengths and weaknesses of the firm in various areas. can provide valuable insights in to firms performance and position.Financial leverage refers to the use of debt finance.Liquidity refers to the ability of the firm to meet its obligations in the short run. Liquidity ratios are generally based on the relationship between current assets and current liabilities (the sources for meeting short-term obligations).Financial statement contain a wealth of information which. Leverage ratios helps in assessing the risk arising from the use of debt capital. LEVERAGE RATIOS: . These ratios are based on the relationship between the level of activity and the level of various assets. Financial ratio have been classified as follows: TYPES OF FINANCIAL RATIOS • • • • • LIQUIDITY RATIOS ACTIVITY RATIOS LEVERAGE RATIOS PROFITABILITY RATIOS OTHER RATIOS LIQUIDITY RATIOS : . A ratio is an arithmetical relationship between two figures.
Such as EPS. A profit margin ratio shows the relationships between profit and sales. There are two types of profitability ratio. PER. Overtime per employee etc.Profitability reflects the final result of business operations. 'A ratio is known as a symptom like blood pressure. HELPS IN DECISION-MAKING: Financial statements are prepared primarily for decision making. Ratio Analysis helps in making decisions from the information provided in these financial statements.PROFITABILITY RATIOS: . But the information provided in financial statements is not an end in itself and no meaningful conclusions can be drawn from these statements alone.' It is with help of ratios that the financial statements can be analysed and decision made from such analysis. Planning is looking ahead and the ratios calculated for a number of year's work as a guide for the future. a financial analyst analyses the financial statement with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. OTHER RATIOS: . It is use as a device to analysis and interpret the financial health of enterprise. ADVANTAGES OF RATIOS: The ratio analysis is one of the most powerful tools of financial analysis. HELPS IN FINANCIAL FORECASTING AND PLANNING: Ratio analysis is of much help in financial forecasting and planning.In this project we have analysed some other ratios of BHEL. blood pressure etc. Rate of return reflects the relationship between profit and investment. Profit margin ratios and rate of return ratios. Turnover per employee. 2. Just like a doctor examines his patient by recording his body temperature. Personal payment per employee. . 1. Before making his conclusion regarding the illness and before giving his treatment. the pulse rate or the temperature of the individual.
3. come to the knowledge of the management which helps in effective control of the business. HELPS IN COMMUNICATING: The financial strength and weaknesses of a firm are communicated in a more easy and understandable manner by the use of ratios the information contained in a financial statement is conveyed in a meaningful manner to the one for whom it is meant. which is utmost importance in effective business management. USES OF FINANCIAL STATEMENTS TO DIFFERENT PARTIES The analysis and interpretation of financial statements is an important accounting activity. ratios help in communication and enhance the value of financial statements. ratio analysis helps in forecasting and planning. Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise. 5. if any. HELPS IN CONTROL: Ratio analysis even helps in making effective control of the business. Thus. The weaknesses or otherwise. can be found by comparing the actual with the standards so as to take corrective action at the right time. 4. Standard ratios can be based upon Performa financial statements and variance or deviations. The end users of business statements are interested in these statements primarily as an aid to determine the financial position and the results of the operations. The following are the use of statement analysis to different parties : . if any. There are different parties interested in the financial analysis of their statements and their aims and their objectives also differ significantly. Thus.Meaningful conclusions can be drawn for future from these ratios. HELPS IN CO-ORDINATION: Ratios even helps in coordination.
primarily in terms of the flexibility available to such enterprises to acquire other business and new assets on an advantage basis for this purpose. Investors have been increasingly concerned with the cash generation capability of an enterprise. Queries concerning the relationships of earnings to investment. .Investors presents as well as prospects are also interested in the measurement of earning capacity of the securities.The analysis of these statements is very essential to the creditors. TO THE TOP MANAGEMENT : . effectiveness of working capital management etc.The first party interested in the financial statement analysis is the finance department of the business concern itself to the financial managers such analysis provides a deep insight into the financial condition of the enterprises and the view of the past performance which helps in future decision making. Also some aspects of enterprise operations are of interest to creditors in regard to liquidity of funds. profitability of the operations.TO THE FINANCIAL EXECUTIVES : . The financial statements give vital information concerning the position of the enterprise as well the result of the operations. TO THE INVESTORS AND OTHERS :.The top management of the concern is also increased in the analysis of these statements because it helps them reaching conclusions regarding: Performance appraisal of overall business activities. Enquiry about current financial position and long term strategic planning. soundness of financial structure. TO THE CREDITORS:. Queries concerning the relationships of earnings to trends in sales etc.
preliminary and preoperative expenses.given the diversity of BHEL product lines. If information is available only about industry average or some other standard and not about the entire dispersion of ratios for various firms in the industry. installment sales. foreign exchange transactions. As a result. the financial analyst should look at the average data available as per resource. it is difficult to find suitable benchmarks for evaluating its financial performance and conditions. . comparative financial statement analysis may be vitiated. • PRICE LEVEL CHANGES:.In India financial accounting takes into consideration price level changes.Business firms have some latitudes in accounting treatment like depreciation. provision of reserve and revaluation of assets. valuation of stocks research and development expenses. Due to diversity of accounting practices found in practice. Hence financial statement analysis can be vitiated. circumspection and judgement in such exercise. balance sheet figures are distorted and profits are misreported. • WINDOW DRESSING:. it may not be possible to draw meaningful inferences. the financial analyst may run into difficulty.firm may resort to window dressing to project a favorable financial picture. • DEVELOPMENT OF BENCHMARKS:. Hence even for such firm. • VARIATIONS IN ACCOUNTING POLICIES :.PROBLEMS OF FINANCIAL STATEMENTS There are certain problems and issues encountered in financial analysis which call for care. When window dressing is suspected.
13 2005.04 100608 82133 1. of current liabilities there is Rs.06 139668 110923 1.6 1.07 139029 12332 1.22 2004. Cu rren t Rati o = Cu rren t As s ets / Cu rren t L i ab i li ti es Year C urrent as s et s C urrent li abi l i ti es R at i o 2001.05 112836 99390 1.3 1.CURRENT RATIO (CR) This ratio indicates the extent of the soundness of the current financial position of an undertaking and the degree of safety provided to the creditors.13 RATIO 1.2 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR I NF E RE NCE : From the above ratios it is clear that Current Ratio of last six years is greater than one and on an average it is 1..13 1.6 0. The higher the current ratio.2 1 0.03 80044 61375 1.22 1.13 1.41 2002.25 2006.4 0.25 1.02 100962 71641 1.4 1.41 1.24:1 that means for every one Re. So this indicates that the short-term liquidity position of the company is very good and short-term condition are safe as far as payment is .30 2003. the more the firms ability to meet current obligations and the greater safety of funds of short term creditors.8 0. the larger amount of rupee available per rupee of current liability. 1.24 of current assets to meet the short term obligation.
63 0.69 0.8 0.69 RATIO 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : Quick Ratio is not even approaching one.2 0.8 0.4 0.1 0 0.3 0.78 0.Q UI CK RAT I O (Q R) Quick ratio is a more refined tool to measure the liquidity of an organization.6 0.7 0.63 2006. This ratio shows the extent of cushion of protection provided from the Quick assets to the current creditors. here paymentof creditors are not made in time due to lack of cash/liquid fund .78 2003.80 2002. Quick Ratio = Quick Assets / Current Liabilities Year Qui ck as s et s C urrent li abi l i ti es R at i o 2001-02 57501 71641 0.04 61394 82133 0. which cannot be converted into cash easily.07 84781 123322 0. because it excludes very slow moving inventories and the items of current assets.5 0.75 2004-05 53860 99390 0. It is a better test of financial strength than the current ratio.79 0.54 2005-06 110923 0.03 47674 61375 0. A Quick ratio of 1:1 is usually considered satisfactory. hence there is liquidity problem in payment in time.54 0.
The higher the stock turnover rate or the lower the stock turnover period the better. It gives the position of the inventory management of the company. .40 2002-03 101336 37915 2. The average of STR comes out to be 2.55 2006.87 2005-06 164059 64387 2.07 210494 62023 3. work-in-progress and finished goods.5 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE: Stock turnover ratio indicates that how quick inventories are converted into sales.5 1 0. So average inventory is satisfactory. It is important to ensure that the level of stock is kept as low as possible.72 2004.05 140697 49095 2. consistent with the need to fulfill customer order in time.5 3 3. Inventory Year C OGS Avg. i nvent ory R at i o 2001-02 108811 45414 2.87 2.67 2.77 which shows that for every Re 1 of average inventory these are Rs 2. Stock turnover Ratio = Cost of Goods Sold / Avg.STOCK TURNOVER RATIO (STR) A considerable amount of a company’s capital may be tied up in the raw material.04 97432 35792 2.67 2003.39 2. although the ratio will vary between companies.but in current .55 RATIO 2.4 2.77 of net sales this indicates that short term liquidity position of the company is satisfactory and the inventory management of the company was improving year to year .39 3.5 2 1.72 2.
the better the position. Debtors Year C redi t s al es Avg.DEBTORS TURNOVER RATIO (DTR) Debtor T/O.5 2. T. which measures whether the amount of resources tied up in debtors is reasonable and whether the company has been efficient in converting debtors into cash.04 97432 48642 2.00 2004. debt ors R at i o 2001-02 108811 52490 2.85 3 2. . Here from the graph and the ratio of the last six years it is clear that the debtors are collected quickly as the Dr.07 times in year 2001-02 to 2.90 2006.85 times in year 2006-07.07 210494 73981 2.R. Debtors Turnover Ratio (as a %) = Credit Sales/Avg. is increasing year by year from 2. Showing that average collection period is short and so there are less or say no bad debts for the company.5 1 0.5 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : This ratio indicates that how quick dr are collected and greater the ratio shows better the position of the company.20 2003.07 2002-03 101336 46161 2. The higher the ratio. So it is clear from the above that the short-term liquidity position of the company is good.05 140697 52209 2.9 2.2 2 2.69 2005-06 164059 56630 2.85 RATIO 2 1.69 2.07 2.
92 2004.2004.200602 03 04 05 06 07 YEAR INFERENCE : The ratio from last 6 years shows that it increases year by year indicating that fixed assets of the company are being utilized effectively that means the profit fixed assets are improving year by year showing the better performance of the company. It also ensures whether investment in the assets have been judicious or not.54 6. . The effective utilization of fixed assets will result in increased production and reduced cost.04 97432 14082 6.80 2006.92 9.2005.8 8.99 16 14.2002.2003. Fixed Assets Turnover Ratio = Cost of Goods Sold / Fixed Assets Year Cost of Goods Sold Fixed Assets R ati o 2001.FIXED ASSETS TURNOVER RATIO Fixed assets are used in the business for producing goods to be sold.07 210494 21062 9.06 164059 13896 11.54 2005.94 2002.99 RATIO 10 8 6 4 2 0 2001.03 101336 14634 6.05 140697 16471 8.92 6.92 2003.02 108811 7281 14.94 14 12 11.
TOTAL ASSETS TURNOVER RATIO :This ratio shows the relationship between sales and total assets of the company and also compare the total sales with total assets. Total assets turn over ratio= net sale/ Total assets According to rule of thumb Total assets turnover ratio indicate that if turnover is less that means there is a lack of proper utilization of invested assets and if it is higher that means company is using it’s investing properties in an impressive manner.
Year Net sale Total assets R ati o 2001- 02 108811 108243 1.01 2002- 03 101336 94678 1.07 2003- 04 97432 114690 0.85 2004- 05 140697 129307 1.09 2005- 06 164059 153564 1.068 2006- 07 210494 160091 1.31
1.4 1.2 1 0.8 0.6 0.4 0.2 0 1.01 1.07 0.85 1.09 1.068
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
INFERENCE The total assets turn over ratio is the relationship between total assets and sales. According to the rule, in the case of BHEL Haridwar we compare the six year data and graph and find out in the year 2001&2002 the total assets turn over increasing, it indicates that company using its investment in assets and properties in an impressive manner but after 2003 it is decreasing but still it is well sufficient for a company. After 2003 the company took its best position and again in year 2004, the company achieves the higher total assets turnover. This is an indication of proper utilization of investing assets in comparison to sales of the company.
DEBT EQUITY RATIO (DER)
The ratio indicates the relationship between loan fund and net worth of the company, which is known as gearing. If the proportion of
Year Long t erm debt Sharehol de rs fund R ati o 2001- 02 238 47581 0.005 2002- 03 308 62410 0.005 2003- 04 447 67756 0.007 2004- 05 364 82644 0.004 2005- 06 499 102423 0.005 2006-07 910 130389 0.006
debt to equity is low a company is said to be low-geared and vice versa. A debt equity ratio of 2:1 is the norm accepted by financial institutions for financing projects. The higher the gearing,the more volatile the return to the shareholders. Debt Equity Ratio = Long Term Debt/Share Holders Funds 0.007 0.006 0.005 0.005 0.004 0.007 0.006 0.005
0.005 0.004 0.003 0.002 0.001 0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
INFERENCE : Debt Equity Ratio shows that how much funds a company has to meet the long-term obligations. Lesser the ratio shows better the position of the company. The Debt Equity Ratio goes on decreasing from year by year and is less than 1 in each year also. The average of Debt Equity Ratio comes out to be 0.005 which is less then 1,which means that long term liquidity position of the company is very good . The Debt Equity Ratio is‘0.006’ in 2006-07 and this is a very good position of the company hence it is clear that long term liquidity position of the company is good.
PROPRIETOR RATIO or (SHARE HOLDER EQUITY RATIO) It is assumed that larger the proportion of the shareholders equity, the stronger is the financial position of the firm. This ratio will supplement the debt-equity ratio. In this ratio a relationship established between the shareholder’s fund and the total assets. A reduction in shareholder’s equity signally the over dependence on outside source for long term financial needs and this carries the risk of higher level of gearing. This ratio indicates the degree to which unsecured creditors are protected against loss in the event of liquidation.
Year S hare Hol der Funds Tot al As s et s R at i o 2001-02 47581 108243 0.44 2002- 03 62410 94678 0.7 2003-04 67756 114690 0.6 2004-05 82644 129307 0.64 2005-06 102423 153564 0.67 2006-07 130389 160091 0.81
Prop Ratio = Share Holder Funds / Total Assets
0.9 0.8 0.7 RATIO 0.6 0.5 0.4 0.3 0.2 0.1 0
0.7 0.6 0.44
0.81 0.64 0.67
2002-03 2003-04 2004-05 2005-06 2006-07
INFERENCE : There is increase in shareholders fund but there is no fresh investment in FA is made and this may affect future profitability of the company.
It indicating a sound financial position of the company. From the last six years data we see that the solvency ratio is increasing slowly and it has increased from 0.8 0.7 0.65 0. This ratio indicates the relationship between total liabilities and total assets of the business.65 2003.65 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : Here from the data and the ratio of last six years it is clear that the company’s financial position is sound and is capable of meeting its liabilities out of its total assets.77 2005.78 RATIO 0.SOLVENCY RATIO Solvency is a state where the company is supposed to be financially sound and capable of meeting its liability out of its assets.6 0.66 in 2001-02 to 0.78 0.72 0. .725 0. Solvency Ratio = Total outside Liabilities /Total real Assets Year Tot al Li abi li t i es Tot al As s et s R at i o 2001-02 71945 108243 0.06 111422 153564 0.725 2006-07 12432 160091 0.66 0.72 2004-05 99754 129307 0.66 2002-03 61683 94678 0.04 82580 114690 0.55 0.77 0.78 in 2006-07.75 0.
16 2004-05 2005-06 2006-07 YEAR INFERENCE : Here this ratio is going on decreasing and the average comes out to be 0.23 0.21 2004.15 2002.21 RATIO 0.05 0 2001-02 2002-03 2003-04 0. .25 0. 0. This also shows that what portion of net worth is invested in the fixed assets.15 0.FIXED ASSETS TO NET WORTH RATIO This ratio shows that how efficiently the fixed assets are utilized by the company. 1 of Proprietor Fund there are Rs.02 7281 47581 0.04 14082 67756 0.2 0.14 0.14 2006-07 21062 130389 0.16 0.06 13896 102423 0.03 14634 62410 0.15 0.05 16471 82644 0.18 which means for every Re.23 2003.20 2005.18 of Fixed Assets indicating that Fixed Assets are utilized properly but there are no fresh investments made in Fixed Assets which may effect the future profitability of the company.1 0.2 0. Fixed Assets to Net Worth Ratio = Fixed Assets / Proprietor Funds Year Fi xed As s et s P ropri et or Funds R ati o 2001.
which may affect the future profitability of the company.28 2003-04 68203 14082 4.41 6.84 5.2003. Fixed assets minus depreciation provided on this till the date of calculation. It also indicates the portion of longterm fund that is invested in the working capital.23 8 7.03 R 7 6 5 4 3 2 1 0 2001.2002.FIXED ASSETS RATIO This ratio indicates the proportion of long funds deployed in fixed assets.41 2006-07 131299 21062 6.200602 03 04 05 06 07 YEAR INFERENCE : This ratio indicates that proportion of long funds deployed in fixed assets here the fixed assets ratio is increasing .42 2002.42 7.23 4. The higher the ratio indicates the safer the funds available in case of liquidation.84 2004.05 83008 16471 5.But from the data we found that there are no fresh investment made in Fixed Assets. . Fixed Assets Ratio = Capital Employed / Net Fixed Assets Year Capital Employed Net Fixed Assets Rati o 2001-02 54002 7281 7.2004.03 62718 14634 4. But there is continuous decrease in long-term funds.2005.28 4.03 2005-06 102922 13896 7.
It shows the margin of cover to lenders of the company.8 -33. the position will be unsafe and it will show that there is nothing left for the shareholder and the position of lender is also unsafe.110.390 .67 -110.2005.2002.4 -17. In case profit is either equal or lesser than the interest.8 -26 RATIO -35.4 2002.07 42957 .15 20 0 -20 -40 -60 -80 -100 -120 11. It is always desirable to have profit more than the interest payable.2004. The net income of the company should be ideally 6 or 7 times of the fixed interest charges.35.17.02 7205 632 11.15 2001.2003.200602 03 04 05 06 07 YEAR INFERENCE : Interest Coverage Ratio had increased in 2001-02 while after that it is decreasing year by year as it shows negative.05 22338 .8 2003-04 12324 -474 -26 2004.03 11083 .8 2005-06 31552 -937 -33. Interest Coverage Ratio = Profit before interest and tax / Interest Year P B IT Interest R at i o 2001.67 2006.622 .INTEREST COVERAGE RATIO This ratio shows how many times the profit covers the interest.623 . It is clear that there is no risk for lenders and share holders. .
The ratio measures the efficiency of the company’s operation and this can also be compared with the previous years results to ascertain the efficiency partners with respect to the previous year.90 25 20 17.50 2006-07 48196 210494 22. company should take in plans relating to cost reduction and cost control.200602 03 04 05 06 07 YEAR INFERENCE : Gross Profit Ratio is increasing year by year. It has 22. since it is based on the assumption that all costs deducted when computing gross profit. Efforts should also be made to take up contracts having greater margins such as renovation / retrofitting etc.9 RATIO 15 10 5 0 2001.60 2004-05 25901 140697 18.6 18.2002.GROSS PROFIT RATIO (GPR) This ratio measures the gross profit margin on the total net sales made by the company. irrespective of the level of production and sales. Gross Profit Ratio = (Gross Profit / Net Sales) × 100 Year Gros s P rofit Net S al es R at i o 2001-02 10487 108811 9.2004. For improving the more profitiability of the company. . A stable gross profit margin is therefore the norm.07 2003-04 17176 97432 17.40 2005-06 35329 164059 21.4 21. When every thing is normal the gross profit margin should remain unchanged.5 22.90 in 2006-07 from 9.60 2002-03 14260 101336 14.2003.2005. which are directly variable with sales.07 9.6 in 2001-02.6 14. In addition to regular contracts which has very less margin.
04 7248 97432 7.1 12.54 RATIO 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : Net profit of last six years is continuously increasing this indicating a good operating efficiency of the company. The average of net profit ratio comes out to be 9.02 4354 108811 4 2002.07% which means that for every Rs.07 and this is a satisfactory position for the company and also .07 26400 210494 12.1 2006.54 14 12 10.03 7078 101336 7 2003. In the same way. Net profit ratio inefficiency shows and the operational excessive selling efficiency and of the managerial distribution expenses. Net Profit Margin = Profit After Tax / Net Sales × 100 Year P AT Net S al es R ati o 2001.3 7 4 7.4 10 8 6 4 2 0 13. The company’s performance is good. 100 of net sales profit margin is of Rs 9. Increase or decrease in the ratio is determined in comparison to pervious year’s performance.3 2005-06 21553 164059 13. increase shows better performance.NET PROFIT MARGIN This ratio established relationship between net profit and net sales. indicates that Managerial skills are efficient. .4 2004-05 14523 140697 10.
Net Profit to Fixed Assets Ratio = Net Profit / Fixed Assets Year Net Profit Fixed Assets R ati o 2001.2 1.45 1.25 0.65 0.6 1.57 2003-04 7248 14082 0. if this ratio higher. But there is no fresh investment made in Fixed Assets during these years and can affect future profitability of the company.45 in year 2005-06.02 4354 7281 0.2 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : Here this ratio is going on increasing however in 200203 to 2006-07.87 RATIO 1 0.87 2002-03 7078 14634 0.87 2005-06 21553 13896 1.25 1.6 0. whether fixed assets are being properly used or not.87 0.57 0.45 2006-07 26400 21062 1.4 0.8 0. But this year ratio decline means fixed assets are not being properly used in this year .4 1. . It will be in the favor of the business.NET PROFIT TO FIXED ASSETS RATIO The ratio shows relationship of net profit to fixed assets and also indicates. The earning capacity of the company from utilization of Fixed Assets is improving year by year. it increased from 0.65 2004-05 14553 16471 0.57 in year 2002-03 to 1. indicating that the fixed assets of the company is being used effectively.
company should not invest in the fixed assets and R & D expenditures. Return on Investment = Profit After Tax/Share Holder Funds × 100 Year Profit After Tax Share Holder Funds R at i o 2001-02 4354 53697 8.3 2003.5 2005.04 7248 67756 10.3 8.25 in year 2006-07. It shows the earning capacity of the net assets of the business.2002.06 21553 102423 21.6 2004-05 14523 82644 17.11 in year 2001-02 and it increased to 20.04 17.04 2006-07 26400 130389 20.11 2002.11 10.2003. .6 RATIO 20 15 10 5 0 20.2004.03 7078 62410 11. It can be used for comparing the performance of even dissimilar business or different department of the same business. The ratio judges the performance of the business.25 25 21.200602 03 04 05 06 07 YEAR INFERENCE : Return on investment is increasing year by year that is 8. how effectively the capital employed in the business is used.2005.5 11.25 2001.RETURN ON INVESTMENT (ROI) Return on investment ratio measures. it is indicating that the capital employed in the business is used effectively and the performance of the company is increasing hence.
16 0.12 141435 0. its numerator measures the return to shareholders where as its denominator represents the contribution of all investors.07 104684 0.2004.04 7248 2004.038 0.038 in 2001-02 but it has increased continuously and extend to 0. this ratio should be high.02 4354 2002.06 21553 2006-07 26400 ATA RATIO 115637 0. This ratio indicates the management efficiency in use of invested funds. the position of the company will be good.07 0. RETURN ON ASSETS = PAT / AVERAGE TOTAL ASSETS Year Profit After Tax 2001.17 0. Hence.17 0.06 0.07 0.12 0.07 113173 0. It was 0.02 0 2001.17 in 2006-07.200602 03 04 05 06 07 INFERENCE: The return on assets ratio is increasing year by year.038 101460 0.1 0. EARNING POWER .08 0.14 0.05 14523 2005.2002.2005.15 156827 0.12 0.03 7078 2003. because as much high this ratio will be .04 0. it indicates that management efficiency regarding invested fund is improving.18 0.RETURN ON ASSETS Return on assets is define as: PAT / ATA.15 0.2003.
27 in 2006-07.02 7205 2002.3 0.11 104684 0. In 2001-02 it was 0. Return on equity is defined as equity earning / avg. although ratio is increasing but not in effective way so company should use there assets affectively. which is not affected by interest charges and tax burden. RETURN ON EQUITY Return on equity is a measure of great interest to equity share holders.04 12324 2004.22 0.12 0.Earning power is a measure of business performance.05 22338 2005. EARNING POWER = PBIT / AVERAGE TOTAL ASSETS Year 2001.22 156827 0.06 31552 20006-07 42957 PBIT ATA RATIO 115637 0.05 0 0.062 101460 0.15 0.1 0.03 11083 2003.2 141435 0.27 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 INFERENCE: from the above graph we can analyse that the earning power of the company is gradually increasing. equity.25 0.062 0.12 113173 0. It abstract away the effect of capital structure and tax factor and focuses on operating performance the numerator represents a measure of pre-tax earnings belonging to all sources of finance and the denominator represents total financing. The .11 0.27 0.06 but gradually it has increased up to 0.2 0.2 0.
so it is indicating good financial position of the company .55 4570 1.18 4570 4.72 4570 5.95 4570 1. it is regarded as a very important measures as it reflects the productivity of the ownership capital employed in the firm.07 26400 PAT AVG.95 1.58 4570 3. RETURN ON EQUITY = PAT / AVERAGE EQUITY Year 2001.02 4354 2002.03 7078 2003.78 6 5 4 3 2 1 0 0.EQUITY RATIO 4570 0.58 3.78 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 INFERENCE: from the above graph we can see.55 1.06 21553 2006.72 5.18 4.numerator of this ratio is equal to PAT and the denominator includes all contribution made by equity share holders (Paid-up + reserve & surplus). As in 2001-02 it was 0.05 14523 2005.95 & in 2006-07it has increased up to 5.04 7248 2004.78. return on equity is increasing by leaps& bounds. Return on equity measures the profitability of equity funds invested in the firm.
.TURNOVER PER EMPLOYEE This ratio is calculated by dividing turnover of the company by the number of employees working in the company. This indicating how efficiently manpower is used to generate turnover.
of Employees Rati o 2001-02 108811 7463 14.86 2005-06 164059 6195 26.3 25 20 15 10 5 0 32 RATIO 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : As this ratio is increasing continuously year by year this indicates that the Human Resources of the company is utilized effectively and are generating high turnover which is good for the company. of Employees Year Turnover No.03 14.Turnover Per Employee = Turnover / No. . the higher the satisfaction level of the employees.48 2006.48 21.86 14. PERSONAL PAYMENT PER EMPLOYEE This ratio is achieved by dividing personal payment by number of employees working in the company.58 14.30 2004-05 140697 6434 21.00 35 30 26. Hence company’s performance is good. The higher the personal payment per employee.07 210494 6577 32.58 2002-03 101336 7222 14.03 2003-04 97432 6811 14.
2002.36 3.94 4.2005.2003.56 5 4. 2005-06 28114 6195 4.08 2002-03 24317 7222 3.36 2006-07 29800 6577 4.200602 03 04 05 06 07 YEAR INFERENCE : Personal payment is increasing in last six years and also the turnover per employee is increasing which shows that there is effective utilization of man power.56 RATIO 4 3 2 1 0 2001.74 = Personal 2004-05 25361 6434 3.54 of 2001-02 22994 7463 3.08 3. .94 Payment/No.Personal Employees Year Personal Payment No.74 3. of Employees R at i o Payment Per Employee 2003-04 25467 6811 3.54 3.2004.
04 917 6811 0.1 0.15 0.02 1026 7463 0.2 0.06 1209 6195 0. .19 2006-07 1337 6577 0.20 0.14 2002. of Employees R at i o 2001. Is not satisfactory and the time management is not good in the company this is a caution for the company. Overtime Per Employee = Overtime/ No. Resource management and Planning Management should be reviewed.OVERTIME PER EMPLOYEE This ratio is achieved by dividing overtime given to the employees by the number of employees working in the company.18 2005.EL.13 2004.19 0.11 2003.H.18 0.11 0.13 0.05 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : As the ratio is increasing at an increasing rate which shows that the Human Resource Management of B. of Employees Year Overtime No.2 RATIO0.03 824 7222 0.05 1148 6434 0.14 0. This ratio should be minimum then we can say that the company’s Human Resource Management is working efficiently.
64 2006-07 1517 210494 0.72 RATIO 1 0. p aymen t Turnover R ati o 2001-02 808 108811 0.72 1. Dependability on collaborator’s payment has decreased.6 0. hence company can’t sustain in long run without its own efforts on R & D.4 0.74 2002-03 1104 101336 1. Collaborator’s Payment of Turnover = Collaborator’s Payment / Turnover × 100 Year C. it shows that company is using its own funds for the R & D expenses. .8 0.2 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : As the ratio varies year by year but decreasing in the last four years.91 2004-05 765 140697 0. R & D per turnover has not increased.54 2005-06 1076 164059 0.2 1.64 0.74 0.08 2003-04 885 97432 0.COLLABORATOR’S PAYMENT AS A PERCENTAGE OF TURNOVER This ratio is calculated as a percentage and is used to medicates weather the company is dependent on the collaborator’s payment for the R & D expenses or it uses its own fund for the same.54 0.91 0.08 0.
The ratio medicates the repair and maintenance expenses made on gross block.2004.03 1.02 452 43644 1.2003.4 0.17 2003.6 0.4 1.200602 03 04 05 06 07 YEAR INFERENCE : It has increased 2001-02 to 2003-04 but after than in 2004-05 it has decreased slightly and again increased in 2005-06 that means that the repair and maintenance expenses are increasing so fresh investment is required.8 1.2002.04 1052 54668 1.12 2001.76 2006-07 1015 72957 1.6 RATIO 1.8 0.92 1.05 654 59170 1. .2005.12 2005.REPAIR/MAINTENANCE AS A PERCENTAGE OF GROSS BLOCK This ratio calculated by dividing repair and maintenance expenses by the gross block of the company. otherwise it may effect the future profitability of the company.76 1.06 1065 60233 1.39 1.03 618 52619 1.92 2004.2 0 1.39 2 1. Repair/Maintenance As a Percentage of Gross Block = Repair / Gross Block × 100 Year Repair Gross Block R at i o 2001.2 1 0.17 1.03 2002.
as we are not carrying out R & D.002 RATIO 0.R & D EXPENSES AS A PERCENTAGE OF TURNOVER This ratio is achieved by dividing R & D Expenses by the turnover of the company. though the product requires high technology.0005 0 0 0 0 0 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : This ratio is decreasing continuously which is a bad sign.002 0. Own technology can be developed. R & D Expenses As a Percentage of Turnover = R & D Expenses / Turnover × 100 Year R & D Expenses Turnover R ati o 2001-02 2 108811 0.001 0. .0015 0. The ratio indicates how much efforts are made on R & D.002 2002-03 0 101336 0 2003-04 0 97432 0 2004-05 0 140697 0 2005-06 0 164059 0 2006-07 0 210494 0 0.
08 RATIO 1 0.29 2005-06 50 164059 0.7 2003-04 1061 97432 1.29 0.8 0.4 0.13 2006-07 75 210494 0.03 0.03 1.7 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : As the ratio is initially increased till 2003-04 but after that it is decreasing at a decreasing trend so it is clear that there are no or less bad debts in the company.07 0.2 0 0.2 1.6 0.13 0. Bad debts As a Percentage of Turnover = Bad debts/Turnover × 100 Year Bad debts Turnover R at i o 2001-02 76 108811 0.07 2002-03 705 101336 0. which indicates better Debtor Management.08 2004-05 412 140697 0. .BAD DEBTS AS A PERCENTAGE OF TURNOVER This ratio indicates how effectively the debts are collected and also indicates that how effectively debtors are managed.
28 2005.26 40 35 30 40 RATIO 25 20 15 10 5 0 25 22.3 21. efforts should be made that goods are dispatched to only customers who are making timely payments. Hence.28 22.89 2006-07 44743 210494 21.COLLECTABLE DEBTS AS A PERCENTAGE OF TURNOVER This ratio indicates how effectively debtors are collected out of turnover.03 21373 101336 22.05 29938 140697 21. Collectable Debts As a Percentage of Turnover = Collectable debts/Turnover × 100 Year Collectable debts Turnover R ati o 2001.89 21.3 2003.02 26745 108811 25 2002.04 39335 97432 40 2004.06 37566 164059 22. .26 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : As above graph shows fluctuating ratio year by year.
02 108811 43644 249.37 2006. Turnover As a Percentage of Gross block =Turnover/Gross block × 100 Year Turnover Gross block Rati o 2001.37 237.7 2005.07 210494 72957 288.7 288.52 300 RATIO 250 200 150 100 50 0 249.05 140697 59170 237.06 164059 60233 272.32 192.31 2002.58 178. .03 101336 52619 192.04 97432 54668 178.TURNOVER AS A PERCENTAGE OF GROSS BLOCK This ratio indicates out of gross block how much turnover can be generated & how effectively can it be generated.52 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 YEAR INFERENCE : Turnover is decreasing initially in 2001-02 to 2003-04 after that it is increasing at a faster rate as compared to fresh investments.22 2004. Fresh investments are required as company’s product is a product involving high technology and in absence of fresh investments growth in turnover can’t be maintained.22 272.58 2003.
2 All the data collected was from the secondary sources and I had to rely on the data collected by them. CONCLUSIONS AND SUGGESTIONS .LIMITATION OF STUDY 1 It took a lot of time in collection of data as the data Available in BHEL Haridwar is so wide and covers great deal of extensive information. 3 The conclusion given regarding BHEL is based on the present economic condition.
fixed assets and current assets turnover of company goes on increasing which is a good indicator as it brings commensurate gain and also the average collection goes on decreasing but management should take more efficient steps to reduce it. Furthermore good judgement depends upon the intelligence and ability of the analyst. • On seeing the profitability of the BHEL its overall performance is very good. The debt collection period is high and inventories are least liquid current assets. A continuous increase in the values of EPS and DPS results.I have obtained some weak and strong points of the company during the analysis of financial statements which are as follows : As just only the analysis financial statement is not only mean to reach at conclusions we cannot substitute it for sound judgement. I conclude that it is not very good as the current assets are in the form of inventories and debtors. It is very necessary so that fund should not be blocked unreasonably. • On seeing the liquidity position of BHEL. • On seeing turnover. Efficient inventory management is required in BHEL. So maintaining the inventories are relatively costly affair for the company and the management must have to investigate properly. investors feel safe to invest money in BHEL. BIBLIOGRAPHY . I conclude that it is very good as the stake of owners in company is continuously increasing and its long term debt continuously decreasing it means that company is paying its debt promptly and creditors will not face any risk in investing in BHEL as also BHEL is giving assured ROI. • On seeing the leverage position of the BHEL.
S.Ravi M.* Annual Report of BHEL ( Share holder’s Copy) *Annul Report of BHEL ( Management Copy) *Auditors Report *Management Accounting.Dr. N.Kishore *Financial ManagementSubir kumar Banerjee .Maheshwari *Financial Management.
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