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It is difficult to acknowledge precious a debt as that of learning as it is the only debt that is difficult to repay except through gratitude. First and foremost I wish to express my profound gratitude to the almighty, the merciful & compassionate with those grace & blessings. I have been able to complete this work. It is my profound privilege to express my sincere thanks to ________, for giving me an opportunity to work on the project and giving me full support in completing this project. I am very thankful to my guide _________ for his full support in completing this project work. Last but not least, I would like to thank my parents & my friends for their full continuous support during the course of this assignment. cooperation &
TABLE OF CONTENT
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EXECUTIVE SUMMARY INTRODUCTION OBJECTIVE OF STUDY RESEARCH METHODOLOGY COMPANY PROFILE FINANCIAL POSITION OF RELIANCE INDUSTRIES LTD.ssssss DATA ANALYSIS & INTERPRETATION FINDINGS SUGGESTION & RECOMMENDATION CONCLUSION
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studied and interpreted in light of company’s performance. Critical decisions of distributing dividends. or rather. Later. I study ratio analysis. Dhirubhai Ambani. BIBLOGRAPHY EXECUTIVE SUMMARY The project assigned to me was to study the financial health of any organization in the country. Through a thorough financial analysis. my aim to understand the financial factors is influencing the company and its decision making. Issue of bonus Debentures and other current news are analyzed and their impact on the bottom line of the company is assessed. fund flow analysis and cash flow analysis of the company to analyzing the financial position of the company in last four years. I decided to choose one of India’s largest companies in a sector that has rapidly grown over the last few years and a company where leaders like Mr. a company that has been made Mr. Finally.11. I try and analyze the financial environment in which Reliance Industry Limited is operating. Through this report. I try and evaluate the various ratios to appreciate their impact on company’s performance over the last four years The financial statements of last four years are identified. Dhirubhai Ambani. .
They report profitability and the financial position of the business at the end of accounting period. liabilities and owners equity. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection. and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. relation and evaluation.INTODUCTION Meaning of Financial Statement Financial statements refer to such statements which contains financial information about an enterprise. . The two statements are: The Balance Sheet Profit And Loss Account They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets. Thus the financial statement provides a summarized view of financial position and operations of a firm Meaning of Financial Analysis The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The second step is to arrange the information in a way to highlight significant relationship.
To know the solvency.Features of Financial Analysis To present a complex data contained in the financial statement in simple and understandable form. Purpose of Analysis of financial statements To know the earning capacity or profitability. . To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To provide useful information to mgt Procedure of Financial Statement Analysis The following procedure is adopted for the analysis and interpretation of financial statements:The analyst should acquaint himself with principles and postulated of accounting. He should know the plans and policies of the managements that he may be able to find out whether these plans are properly executed or not. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various conclusions. To know the efficiency of mgt. To know the trend of business.
fund flow etc. common size. Comparison can be made on a number of different bases. The information is interpreted in a simple and understandable way. On the other hand. It will involve the grouping similar data under same heads. The liquidity of the borrower is extremely important in evaluating the safety of a loan. Analyzing financial statements involves evaluating three characteristics of a company: its liquidity. They want to assess the likelihood of dividends and the growth potential of the stock. its profitability. Similarly. Following are the three illustrations: Intra-company basis. is primarily interested in the ability of the borrower to pay obligations when they come due. Earning capacity of the enterprise then analysis of income statement will be undertaken. looks to profitability and solvency measures that indicate the company’s ability to survive over a long period of time. The conclusions drawn from interpretation are presented to the management in the form of reports. A relationship is established among financial statements with the help of tools & techniques of analysis such as ratios. Breaking down of individual components of statement according to nature. If the aim is find out. if financial position is to be studied then balance sheet analysis will be necessary. and its insolvency. trends. such as a bondholder. stockholders are interested in the profitability and solvency of the company. The significance and utility of financial data is explained for help indecision making. Long-term creditors consider such measures as the amount of debt in the company’s capital structure and its ability to meet interest payments. The financial data be given in statement should be recognized and rearranged.The extent of analysis should be determined so that the sphere of work may be decided. however. such as a bank. This basis compares an item or financial relationship within a company in the current year with . A long-term creditor. The data is reduced to a standard form. A short-term creditor.
the same item or relationship in one or more prior years. For example, Sears, Roebuck and Co. can compare its cash balance at the end of the current year with last year’s balance to find the amount of the increase or decrease. Likewise, Sears can compare the percentage of cash to current assets at the end of the current year with the percentage in one or more prior years. Intracompany comparisons are useful in detecting changes in financial relationships and significant trends. 2. Industry averages. This basis compares an item or financial relationship of a company with industry averages (or norms) published by financial ratings organizations such as Dun & Bradstreet, Moody’s and Standard & Poor’s. For example, Sears’s net income can be compared with the average net income of all companies in the retail chain-store industry. Comparisons with industry averages provide information as to a company’s relative performance within the industry.
3. Inter company basis. This basis compares an item or financial relationship of one company with the same item or relationship in one or more competing companies. The comparisons are made on the basis of the published financial statements of the individual companies. For example, Sears’s total sales for the year can be compared with the total sales of its major competitors such as Kmart and WalMart. Intercompany comparisons are useful in determining a company’s competitive position.
Tools of Financial Statement Analysis Various tools are used to evaluate the significance of financial statement data. Three commonly used tools are these: Ratio Analysis Funds Flow Analysis Cash Flow Analysis
Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future.
Meaning of Ratio: A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “so many times”. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. Meaning of Ratio Analysis: Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus
on a technique, which is easy to use. It can provide you with a valuable investment analysis tool. This technique is called cross-sectional analysis. Cross-sectional analysis compares financial ratios of several companies from the same industry. Ratio analysis can provide valuable information about a company's financial health. A financial ratio measures a company's performance in a specific area. For example, you could use a ratio of a company's debt to its equity to measure a company's leverage. By comparing the leverage ratios of two companies, you can determine which company uses greater debt in the conduct of its business. A company whose leverage ratio is higher than a competitor's has more debt per equity. You can use this information to make a judgment as to which company is a better investment risk. However, you must be careful not to place too much importance on one ratio. You obtain a better indication of the direction in which a company is moving when several ratios are taken as a group.
Objective of Ratios: Ratios are worked out to analyze the following aspects of business organizationSolvencyLong term Short term Immediate Stability Profitability Operational efficiency Credit standing Structural analysis Effective utilization of resources Leverage or external financing
00. then the gross profit may be described as 20% of sales [ 10.00.5 times are the credit sales that of cash sales. 5. B] As a rate of times: In the above case the equity share capital may also be described as 4 times that of preference share capital. net sales of the firm are Rs.000/50. such relationship can be expressed in different ways as follows – A] As a pure ratio: For example the equity share capital of a company is Rs. the cash sales of a firm are Rs.5 [30.00.00. the ratio of equity share capital to preference share capital is 20.00.00.Forms of Ratio: Since a ratio is a mathematical relationship between two or more variables / accounting figures. C] As a percentage: In such a case.00. one item may be expressed as a percentage of some other items.00.000 & the amount of the gross profit is Rs.000. 10.000: 5.000. Similarly.000/12. For example.000 = 4:1. 20.000] Steps in Ratio Analysis The ratio analysis requires two steps as follows: . So the ratio of credit sales to cash sales can be described as 2.000] = 2.50.000.00.00.00. 30.000 & credit sales are Rs. 12.00.000 & the preference share capital is Rs.
the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared with some predetermined standard. Types of comparisons The ratio can be compared in three different ways – 1] Cross section analysis: One of the way of comparing the ratio or ratios of the firm is to compare them with the ratio or ratios of some other selected firm in the same industry at the same point of time. The importance of a correct standard is oblivious as the conclusion is going to be based on the standard itself. In interpreting the ratio of a particular firm. The firm’s performance may be compared with the performance of the leader in the industry in order to uncover the major operational inefficiencies. Time series analysis helps to the firm to assess . The standard ratio may be the past ratio of the same firm or industry’s average ratio or a projected ratio or the ratio of the most successful firm in the industry. By comparing the present performance of a firm with the performance of the same firm over the last few years. The cross section analysis helps the analyst to find out as to how a particular firm has performed in relation to its competitors. The cross section analysis is easy to be undertaken as most of the data required for this may be available in financial statement of the firm. an assessment can be made about the trend in progress of the firm.1] Calculation of ratio 2] Comparing the ratio with some predetermined standards. So it involves the comparison of two or more firm’s financial ratio at the same point of time. about the direction of progress of the firm. 2] Time series analysis: The analysis is called Time series analysis when the performance of a firm is evaluated over a period of time.
which clearly shows that the ratio of the firm is above the industry average. the ratio of operating expenses to net sales for firm may be higher than the industry average however. For example.whether the firm is approaching the long-term goals or not. If possible. The Time series analysis looks for (1) Important trends in financial performance (2) Shift in trend over the years (3) Significant deviation if any from the other set of data\ 3] Combined analysis: If the cross section & time analysis. whereas the industry average has not shown any significant changes. The combined analysis as depicted in the above diagram. The dates of different financial statements from where data is taken must be same. It may be noted that these prerequisites are not conditions for calculations for meaningful conclusions. there are certain prerequisites. but it is decreasing over the years & is approaching the industry average. Pre-Requisites to Ratio Analysis: In order to use the ratio analysis as device to make purposeful conclusions. only audited financial statements should be considered. A trend of ratio of a firm compared with the trend of the ratio of the standard firm can give good results. both are combined together to study the behavior & pattern of ratio. over the years it has been declining for the firm. Accounting policies followed by different firms must be same in case of cross section analysis . otherwise there must be sufficient evidence that the data is correct. then meaningful & comprehensive evaluation of the performance of the firm can definitely be made. which must be taken care of. The accounting figures are inactive in them & can be used for any ratio but meaningful & correct interpretation & conclusion can be arrived at only if the following points are well considered.
This will be conductive to counter checks. CLASSIFICATION OF RATIO BASED ON FINANCIAL STATEMENT BASED ON FUNCTION BASED ON USER 1] BALANCE SHEET RATIO 2] REVENUE STATEMENT RATIO 1] LIQUIDITY RATIO 2] LEVERAGE RATIO 3] ACTIVITY RATIO 4] PROFITABILITY RATIO 1] RATIOS FOR SHORT TERM CREDITORS 2] RATIO FOR SHAREHOLDER 3] COMPOSITE 5] COVERAGE 3] RATIOS FOR RATIO RATIO MANAGEMENT 4] RATIO FOR LONG TERM CREDITORS . a group of ratios must be preferred. Last but not least. One ratio may not throw light on any performance of the firm. the analyst must find out that the two figures being used to calculate a ratio must be related to each other. Therefore.otherwise the results of the ratio analysis would be distorted. otherwise there is no purpose of calculating a ratio.
Revenue ratios are Gross profit ratio. There are two types of composite ratiosSome composite ratios study the relationship between the profits & the investments of the concern. and Proprietary ratio. These ratios study the relationship between the assets & the liabilities. Operating ratio. of the concern.g. Balance sheet ratios are Current ratio. 3] Composite ratio: These ratios indicate the relationship between two items. or both.g. of which one is found in the balance sheet & other in revenue statement. Capital gearing ratio. Other composite ratios e. return on proprietors fund. While calculating these ratios. These ratios help to judge the liquidity. Liquid ratio. debtors turnover ratios. there is no need to refer to the Revenue statement. dividend payout . Net profit ratio. E.g. One-way of classification of ratios is based upon the sources from which are taken. return on equity capital etc. P& P A/C. return on capital employed.Based on Financial Statement Accounting ratios express the relationship between figures taken from financial statements. Ratio of current assets to current liabilities or Debt to equity ratio. solvency & capital structure of the concern. These ratios study the relationship between the profitability & the sales of the concern. E. Net operating profit ratio. Debt equity ratio. Figures may be taken from Balance Sheet. Stock turnover ratio. and Stock working capital ratio. they are called Balance Sheet Ratios. 2] Revenue ratio: Ratio based on the figures from the revenue statement is called revenue statement ratios. 1] Balance sheet ratio: If the ratios are based on the figures of balance sheet. creditors turnover ratios. Expense ratio.
1] Liquidity ratios: It shows the relationship between the current assets & current liabilities of the concern e. It is also known as Turnover ratios & productivity ratios e.ratios. expenses ratios It shows the relationship between profit & investment e. operating net profit ratios. return on investment. 2] Leverage ratios: It shows the relationship between proprietors funds & debts used in financing the assets of the concern e. debt equity ratios. operating ratios. leverage ratios. & Proprietary ratios. 5] Coverage ratios: It shows the relationship between the profit on the one hand & the claims of the outsiders to be . 3] Activity ratios: It shows relationship between the sales & the assets. stock turnover ratios.g.g. liquid ratios & current ratios.g. gross profit ratios. profitability ratios & turnover ratios. 4] Profitability ratios: It shows the relationship between profits & sales e. capital gearing ratios. & debt service ratios Based on Function: Accounting ratios can also be classified according to their functions in to liquidity ratios. activity ratios. debtors’ turnover ratios. return on equity capital.g.g.
g. dividend payout ratios & debt service ratios. proprietor ratios. liquid ratios. Based on User: 1] Ratios for short-term creditors: Current ratios. . return on capital employed.paid out of such profit e. expenses ratios 4] Ratios for long-term creditors: Debt equity ratios. operating ratios. return on equity capital 3] Ratios for management: Return on capital employed. turnover ratios. stock working capital ratios 2] Ratios for the shareholders: Return on proprietors fund.
in the ordinary course of business. Quick/Acid-Test ratio. converted into cash within a short period time. 2:1 Formula: Current assets Current ratio = Current liabilities The current assets of a firm represents those assets which can be. and Cash ratio.Liquidity Ratio: Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. These ratios are discussed below Current Ratio Meaning: This ratio compares the current assets with the current liabilities. E.g. are Current ratio. normally not exceeding one year. which indicate the liquidity of a company. The current liabilities defined as liabilities which are short term maturing obligations to be met. as . The ratios. It is expressed in the form of pure ratio. It is also known as ‘working capital ratio’ or ‘solvency ratio’.
that is the entity is under utilizing its current assets. CR measures the ability of the company to meet its CL. i. marketable securities. Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Formula: . CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL.g. Any ratio below indicates that the entity may face liquidity problem but also Ratio over 2: 1 as above indicates over trading. inventory of raw materials.. the greater the short-term solvency. bills payable. bank credit. which will become liquid within approximately twelve months with liabilities. which can be converted into. debtors (net of provision for bad and doubtful debts). The higher the current ratio. cash immediately or at a short notice without diminution of value. bills receivable. which will be due for payment in the same period and is intended to indicate whether there are sufficient short-term assets to meet the short. and provision for taxation. semi-finished and finished goods. Liquid ratio compares the quick assets with the quick liabilities.originally contemplated. Liquid Ratio: Meaning: Liquid ratio is also known as acid test ratio or quick ratio. The term quick assets refer to current assets. Current assets include cash and bank balances. 1:1. E. Current liabilities consist of trade creditors. It is expressed in the form of pure ratio.e. with in a year. This compares assets. This ratio measures the liquidity of the current assets and the ability of a company to meet its short-term debt obligation.term liabilities. dividends payable and outstanding expenses. Recommended current ratio is 2: 1. and prepaid expenses.
This is a fairly stringent measure of liquidity because it is based on those current assets. QA refers to those current assets that can be converted into cash immediately without any value strength. Formula: Cash + Bank + Marketable securities Cash ratio = Total current liabilities Since cash and bank balances and short term marketable securities are the most liquid assets of a firm. short-term marketable securities. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required. which are highly liquid. QR indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. One drawback of the quick ratio is that it ignores the timing of receipts and payments.Quick assets Liquid ratio = Quick liabilities Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. financial analysts look at the cash ratio. QA includes cash and bank balances. This ratio considers only the absolute liquidity available with the firm. and sundry debtors. a quick ratio of 1:1 is considered good. Cash Ratio: Meaning: This is also called as super quick ratio. If the super liquid assets are too much in relation to . Inventories are excluded from the numerator of this ratio because they are deemed the least liquid component of current assets. Generally.
. Earnings per Share represent earning of the company whether or not dividends are declared.the current liabilities then it may affect the profitability of the firm. the earning per share are determined by dividing net profit by the number of equity shares. Investment/ Shareholder Earning per Share Meaning: Earnings per Share are calculated to find out overall profitability of the organization. If there is only one class of shares.
But remember not all profit earned is going to be distributed as dividends the company also retains some profits for the business Dividend Per Share:Meaning: DPS shows how much is paid as dividend to the shareholders on each share held.EPS measures the profits available to the equity shareholders on each share held. Formula: Dividend Paid to Ordinary Shareholders Dividend per Share = Number of Ordinary Shares Dividend Payout Ratio:Meaning: . Formula: Net Profit after Tax Earnings per share = Number of equity share The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time.
Formula: Dividend per share Dividend Payout ratio = Earning per share D/P ratio shows the percentage share of net profits after taxes and after preference dividend has been paid to the preference equity holders.Dividend Pay-out Ratio shows the relationship between the dividends paid to equity shareholders out of the profit available to the equity shareholders. *100 Gearing CAPITAL GEARING RATIO:- .
which generates a substantial amount of profits per rupee of sales. It is expressed as a pure ratio. can comfortably meet its operating expenses and provide more returns to its shareholders. The Capital-gearing ratio shows the relationship between two types of capital viz: . The relationship between profit and sales is measured by profitability ratios.equity capital & preference capital & long term borrowings. There are two types of profitability ratios: Gross Profit Margin and Net Profit Margin. Equity shareholders earn more when the rate of the return on total capital is more than the rate of interest on debts. Profitability These ratios help measure the profitability of a firm. Formula: Preference capital+ secured loan Capital gearing ratio = Equity capital & reserve & surplus Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a concern.Meaning: Gearing means the process of increasing the equity shareholders return through the use of debt. A firm. . This is also known as leverage or trading on equity.
Formula: . This ratio shows the profit that remains after the manufacturing costs have been met. It measures the efficiency of production as well as pricing. how productive the concern . how good its control is over the direct cost.GROSS PROFIT RATIO:Meaning: This ratio measures the relationship between gross profit and sales. This ratio helps to judge how efficient the concern is I managing its production. purchase. It is defined as the excess of the net sales over cost of goods sold or excess of revenue over cost. selling & inventory. how much amount is left to meet other expenses & earn net profit. Gross profit Gross profit ratio = Net sales * 100 Net Profit Ratio:Meaning: Net Profit ratio indicates the relationship between the net profit & the sales it is usually expressed in the form of a percentage.
ROCE indicates the efficiency with which the long-term funds of a firm are utilized. Alternatively it can also be defined as fixed assets plus net working capital.NPAT Net profit ratio = Net sales This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as a percentage of net sales. It is the sum of long-term liabilities and owner's equity. administration. It means that the capital employed comprises of shareholder funds plus long-term debts. It measures the overall efficiency of production. Capital employed refers to the long-term funds invested by the creditors and the owners of a firm. selling. the gross and net profit margin ratios provide an understanding of the cost and profit structure of a firm * 100 Return on Capital Employed:Meaning:The profitability of the firm can also be analyzed from the point of view of the total funds employed in the firm. pricing and tax management. The term fund employed or the capital employed refers to the total long-term source of funds. They are . financing. Formula: NPAT Return on capital employed = Capital employed *100 Financial These ratios determine how quickly certain current assets can be converted into cash. Jointly considered.
The important turnover ratios are debtors turnover ratio. average collection period. Net credit sales are the gross credit sales minus returns. and total assets turnover ratio.also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in managing assets. from customers. The higher the DTO. These are described below: DEBTORS TURNOVER RATIO (DTO) Meaning: DTO is calculated by dividing the net credit sales by average debtors outstanding during the year. These ratios are based on the relationship between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. if any. fixed assets turnover ratio. . inventory/stock turnover ratio. the better Formula: it is for the organization. This ratio shows how rapidly debts are collected. Average debtors are the average of debtors at the beginning and at the end of the year. It measures the liquidity of a firm's debts.
cost of goods sold) is related to a stock figure (inventories). For calculating ITR. However. In general. Fixed AssetsTurnover (FAT) The FAT ratio measures the net sales per rupee of investment in fixed assets. averages may be used when a flow figure (in this case. Formula: Net sales Fixed assets turnover = Net fixed assets . Formula: Cost of Goods Sold Stock Turnover Ratio = Average stock ITR reflects the efficiency of inventory management. the more efficient is the management of inventories. which may lead to frequent stock outs and loss of sales and customer goodwill. and vice versa. The higher the ratio. the average of inventories at the beginning and the end of the year is taken.Credit sales Debtors turnover ratio = Average debtors Inventory or Stock Turnover Ratio (ITR) Meaning: ITR refers to the number of times the inventory is sold and replaced during the accounting period. a high inventory turnover may also result from a low level of inventory.
It relates shareholders fund to total assets. In other words. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. Proprietors Ratio: Meaning: Proprietary ratio is a test of financial & credit strength of the business. the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low). It is usually expressed in the form of percentage.This ratio measures the efficiency with which fixed assets are employed. Proprietary ratio determines as to what extent the owner’s interest & expectations are fulfilled from the total investment made in the business operation. this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated. Proprietary ratio compares the proprietor fund with total liabilities. Formula: Proprietary fund Proprietary ratio = Total fund OR Shareholders fund Proprietary ratio = Fixed assets + current liabilities . However. This ratio determines the long term or ultimate solvency of the company. Total assets also know it as net worth.
Stock Working Capital Ratio: Meaning: This ratio shows the relationship between the closing stock & the working capital. The ratio highlights the predominance of stocks in the current financial position of the company. It helps to judge the quantum of inventories in relation to the working capital of the business. It is usually expressed as a pure ratio.g. Formula: Stock Stock working capital ratio = Working Capital Stock working capital ratio is a liquidity ratio. It shows the extent of funds blocked in stock. this ratio indicates the relative proportion of debt & equity in financing the assets of the firm. E. This ratio also helps to study the solvency of a concern. This relationship is shown by debt equity ratio. The relationship between borrowed funds & owners capital is a popular measure of the long term financial solvency of a firm. The purpose of this ratio is to show the extent to which working capital is blocked in inventories. Debt Equity Ratio: Mening: This ratio compares the long-term debts with shareholders fund. It indicates the composition & quality of the working capital. 2:1 Formula: Total long-term debt . It is expressed as a percentage. Alternatively. It is a qualitative test of solvency. If investment in stock is higher it means that the amount of liquid assets is lower.
Debt equity ratio = Total shareholders fund Debt equity ratio is also called as leverage ratio. Its purpose is to measure the rate of return on the total fund made available by the owners. Debt equity ratio shows the margin of safety for long-term creditors & the balance between debt & equity. Formula: NPAT Return on proprietors fund = Proprietor’s fund * 100 Creditors Turnover Ratio: It is same as debtors turnover ratio. Return on proprietors fund is a profitability ratio. It shows the speed at which payments are made to the supplier for purchase made from them. Return on Proprietor Fund: Meaning: Return on proprietors fund is also known as ‘return on proprietor’s equity’ or ‘return on shareholders’ investment’ or ‘investment ratio’. This ratio is of practical importance to prospective investors & shareholders. This ratio indicates the relationship between net profits earned & total proprietor’s funds. Leverage is also known as ‘gearing’ or ‘trading on equity’. which the relationship between profit & investment by the proprietors in the concern. Leverage means the process of the increasing the equity shareholders return through the use of debt. This ratio helps to judge how efficient the concern is in managing the owner’s fund at disposal. It is a relation between net credit purchase and average .
It enhances credit worthiness of the company. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: 1] Liquidity position 2] Long-term solvency 3] Operating efficiency 4] Overall profitability 5] Inter firm comparison 6] Trend analysis.creditors Net credit purchase Credit turnover ratio = Average creditors Months in a year Average age of accounts payable = Credit turnover ratio Both the ratios indicate promptness in payment of creditor purchases. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of interference regarding the performance of a firm. . ratios are of crucial significance. Higher creditors turnover ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. A very low ratio indicates that the company is not taking full benefit of the credit period allowed by the creditors. Importance of Ratio Analysis: As a tool of financial management.
Similarly the various profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. for instance. The leverage ratios. 3] Operating efficiency: Yet another dimension of the useful of the ratio analysis. security analyst & the present & potential owners of a business. A firm can be said to have the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the principal. The long-term solvency is measured by the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power & operating efficiency.total as well as its components.1] Liquidity position: With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a firm. The liquidity ratio is particularly useful in credit analysis by bank & other suppliers of short term loans. 2] Long-term solvency: Ratio analysis is equally useful for assessing the long-term financial viability of a firm. In fact. is that it throws light on the degree of efficiency in management & utilization of its assets. will indicate whether a firm has a reasonable proportion of various sources of finance or if it is heavily loaded with debt in which case its solvency is exposed to serious strain. . relevant from the viewpoint of management. the solvency of a firm is. Ratio analysis reveals the strength & weaknesses of a firm in this respect. The various activity ratios measure this kind of operational efficiency. This respect of the financial position of a borrower is of concern to the long-term creditors. dependent upon the sales revenues generated by the use of its assets. in the ultimate analysis. This ability is reflected in the liquidity ratio of a firm.
whether the movement is favorable or unfavorable. This is made possible by the use of trend analysis. For example. This is made possible due to inter firm comparison & comparison with the industry averages. Advantages of Ratio Analysis . One of the popular techniques is to compare the ratios of a firm with the industry average. An inter firm comparison would demonstrate the firms position vice-versa its competitors. On the other hand. 5] Inter firm comparison: Ratio analysis not only throws light on the financial position of firm but also serves as a stepping-stone to remedial measures. they are concerned about the ability of the firm to meets its short term as well as long term obligations to its creditors. that is. which are interested in one aspect of the financial position of a firm. the management is constantly concerned about overall profitability of the enterprise. the ratio may be low as compared to the norm but the trend may be upward. take remedial measures. 6] Trend analysis: Finally. though the present level may be satisfactory but the trend may be a declining one. That is.4] Overall profitability: Unlike the outsides parties. ratio analysis enables a firm to take the time dimension into account. to ensure a reasonable return to its owners & secure optimum utilization of the assets of the firm. whether the financial position of a firm is improving or deteriorating over the years. In other words. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. the firm can seek to identify the probable reasons & in light. If the results are at variance either with the industry average or with those of the competitors. This is possible if an integrated view is taken & all the ratios are considered together. A single figure of a particular ratio is meaningless unless it is related to some standard or norm. The significance of the trend analysis of ratio lies in the fact that the analysts can know the direction of movement.
These limitations are described below: 1] Information problems Ratios require quantitative information for analysis but it is not decisive about analytical output. there is need to consider the changes in price. When comparing performance over time. there is need to consider the changes in technology. 2] Comparison of performance over time When comparing performance over time. The figures in a set of accounts are likely to be at least several months out of date. and so might not give a proper indication of the company’s current financial position. 3] Inter-firm comparison Companies may have different capital structures and to make comparison of performance . asset valuations in the balance sheet could be misleading. The advantages of ratio analysis can be summarized as follows: Ratios facilitate conducting trend analysis. Limitations of Ratio Analysis Ratio analysis has its limitations. Where historical cost convention is used. which give the decision-maker insights into the financial performance of a company. profitability and solvency of a firm. Changes in accounting policy may affect the comparison of results between different accounting years as misleading.Financial ratios are essentially concerned with the identification of significant accounting data relationships. which is important for decision making and forecasting. Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons. operating efficiency. Ratios based on this information will not be very useful for decision-making. Ratio analysis helps in the assessment of the liquidity. The movement in performance should be in line with the changes in price. The comparison of actual ratios with base year ratios or standard ratios helps the management analyze the financial performance of the firm. The movement in performance should be in line with the changes in technology.
They do not indicate future trends and they do not consider economic conditions. Ratios are calculated on the basis of past financial statements. Inter-firm comparison may not be useful unless the firms compared are of the same size and age.when one is all equity financed and another is a geared company it may not be a good analysis. 3] 5 main areas- Liquidity – the ability of the firm to pay its way Investment/shareholders – information to enable decisions to be made on the extent of the risk and the earning potential of a business investment Gearing – information on the relationship between the exposure of the business to loans as opposed to share capital Profitability – how effective the firm is at generating profits given sales and or its capital assets Financial – the rate at which the company sells its stock and the efficiency with which it uses its assets . Selective application of government incentives to various companies may also distort intercompany comparison. Ratios provide only quantitative information. Even within a company. and employ similar production methods and accounting practices. not qualitative information. Comparing the performance of two enterprises may be misleading. comparisons can be distorted by changes in the price level. Purpose of Ratio Analysis: 1] To identify aspects of a business’s performance to aid decision making 2] Quantitative process – may need to be supplemented by qualitative factors to get a complete picture.
either individually or in relation to those of other firms in the same industry. (b) Total current assets. The flow of fund . it is true that what can be achieved by the technique of ratio analysis cannot be achieved by the mere preparation of financial statement. which need the management attention in order to improve the situation. (c) Net working capital. As the future is closely related to the immediate past.e. Ratio analysis also helps to locate & point out the various areas. inter firm comparison or comparison with standard ratios. profitability & overall performance. ratio calculated on the basis of historical financial statements may be of good assistance to predict the future. This comparison may be in the form of intra firm comparison. Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of performance. it enables the interested persons to know the financial & operational characteristics of an organisation & take the suitable decision. As the ratio analysis is concerned with all the aspect of a firms financial analysis i. solvency. Ratio analysis is one of the best possible techniques available to the management to impart the basic functions like planning & control. as the ratio all by them do not mean anything. Thus proper comparison of ratios may reveal where a firm is placed as compared with earlier period or in comparison with the other firms in the same industry. (d) Net current assets. which is already appearing in the financial statement. For the purpose of fund flow statement the term means net working capital.Role of Ratio Analysis: It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the same figure & information. activity. liquidity. At the same time. Fund Flow Analysis Fund may be interpreted in various ways as (a) Cash. The process of this appraisal is not complete until the ratio so computed can be compared with something.
increase or decrease in the amount of fund. Format of Fund Flow Statement Sources Fund from operation Non-trading incomes Issue of shares Applications Fund lost in operations Non-operating expenses Redemption of redeemable preference share Issue of debentures Redemption of debentures . Different names of Fund-Flow Statement A Funds Statement A statement of sources and uses of fund A statement of sources and application of fund Where got and where gone statement Inflow and outflow of fund statement Objectives of Fund Flow Statement The main purposes of FFS are:] To help to understand the changes in assets and asset sources which are not readily evident in the income statement or financial statement. it is a technical device designed to highlight the changes in the financial condition of a business enterprise between two balance sheets. To point out the financial strengths and weaknesses of the business. when a transaction results in a change i..will occur in a business. In short. To inform as to how the loans to the business have been used.e. According to Robert Anthony the funds flow statement describes the sources from which additional funds were derived and the uses to which these funds were put.
Preparation of accounts for non-current items (Ascertain the hidden information). Likewise. It is prepared on the basis of historical data showing the inflow and outflow of cash. Cash flow statement reveals that inflow and outflow of cash during a particular period. Preparation of adjusted profit and loss account (to know fund from or fund lost in operations). Cash Flow Analysis Cash is a life blood of business. the firm needs cash to make payment to salaries. Preparation of the fund flow statement. It is an important tool of cash planning and control. Objectives of CFS To show the causes of changes in cash balance between the balance sheet dates. rent dividend. interest etc. To show the actors contributing to the reduction of cash balance inspire of increasing of profit or decreasing profit. Preparation of schedule changes in working capital (taking current items only). debtors. .Borrowing of loans Acceptance of deposits Sale of fixed assets Sale of investments (Long Term) Decrease in working capital Repayment of loans Repayment of deposits Purchase of fixed assets Purchase of long term investments Increase in working capital Steps in Preparation of Fund Flow Statement. sale of assets investments etc. A firm receives cash from various sources like sales.
Uses of CFS It explaining the reasons for low cash balance. The entity’s ability to generate future cash flows. investors and others can make predictions of the amounts. and others assess the following aspects of the firm’s financial position. Comparison of current items (to find out inflow or outflow of cash). By examining relationships between items in the statement of cash flows. Cash from operation can be prepared by this formula also. timing. It helps in short term financial decisions relating to liquidity. Preparation of Cash Flow Statement. It shows the major sources and uses of cash. From the past year statements projections can be made for the future. The entity’s ability to pay dividends and meet obligations. Steps in Preparing CFS Opening of accounts for non-current items (to find out the hidden information). credit arrangements etc. To preparing Account for all non-current items is easier for preparing Cash Flow Statement. creditors. Preparation of adjusted P&L account (to find out cash from operation or profit. . and cash lot in operation or loss). It helps the management in planning the repayment of loans. and uncertainty of future cash flows better than they can from accrual basis data. Net Profit + Decrease in Current Assets OR Increase in Current Liabilities Usefulness of the Statement of Cash Flows The information in a statement of cash flows should help investors. Increase in Current Assets OR Decrease in Current Liabilities .
If a company does not have adequate cash, employees cannot be paid, debts settled, or dividends paid. Employees, creditors, and stockholders should be particularly interested in this statement, because it alone shows the flows of cash in a business. The cash investing and financing transactions during the period. By examining a company’s investing and financing transactions, a financial statement reader can better understand why assets and liabilities changed during the period. The reasons for the difference between net income and net cash Net income provides information on the success or failure of a business enterprise. However, some are critical of accrual basis net income because it requires many estimates. As a result, the reliability of the number is often challenged. Such is not the case with cash. Many readers of the statement of cash flows want to know the reasons for the difference between net income and net cash provided by operating activities. Then they can assess for themselves the reliability of the income number. In summary, the information in the statement of cash flows is useful in answering the following questions. How did cash increase when there was a net loss for the period? How were the proceeds of the bond issue used? How were the expansions in the plant and equipment financed? Why were dividends not increased? How was the retirement of debt accomplished? How much money was borrowed during the year? Is cash flow greater or less than net income?
Cash Flow Statement Inflow of Cash Amount Outflow of cash Amount
Redemption preference shares Redemption debentures
Cash from operation ***
Sales of assets Issue of debentures
Repayment of loans Payment dividends
Raising of loans Collection debentures Refund of tax
*** from ***
Pay of tax Cash lost
*** in ***
debentures *** Closing cash balance ***
Cash from operation can be calculated in two ways: Cash Sales Method Cash Sales – (Cash Purchase + Cash Operation Expenses) Net Profit Method It can be prepared in statement form or by Adjusted Profit and Loss Account.
Objective of Study
To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.
Research is defined as a systematic, gathering recording and analysis of data about problem relating to any particular field. It determines strength reliability and accuracy of the project. Research Design: Research Design pertains to the great research approach or strategy adopted for a particular project. A research project has to be the conducted scientifically making sure that the data is collected adequately and economically. The study used a descriptive research design for the purpose of getting an insight over
the issue. It is to provide an accurate picture of some aspects of market environment. Descriptive research is used when the objective is to provide a systematic description that is as factual and accurate as possible. 2. Method of Data Collection: Secondary Data: Through the internet and published data Limitation of the study
Significant business decisions are frequently made using one or more of the analytical tools
and inventories) may not be representative of the balances in the accounts during the year. But. Alternative Accounting Methods Companies vary in the generally accepted accounting principles they use. In addition to differences in inventory costing methods. differences also exist in reporting such items as depreciation. the costs of warranties. periodic depreciation. and contingent losses. payables. Firms frequently establish a fiscal year-end that coincides with the low point in operating activity or in inventory levels.illustrated in this term paper. They are not adjusted for price-level changes. To the extent that these estimates are inaccurate. Such variations may hamper comparability. the financial ratios and percentages are inaccurate. Diversification of Firms Diversification in U. it is unlikely that their current ratios are comparable. But. one should be aware of the limitations of these tools and of the financial statements on which they are based. if not impossible in some cases. These differences in accounting methods might be detectable from reading the notes to the financial statements. receivables. adjusting the financial data to compensate for the different methods is difficult. Many firms today are so diversified that they cannot be classified by a single industry – they are true . For example. Estimates are used in determining the allowance for uncollectible receivables. Atypical Data Fiscal year-end data may not be typical of the financial condition during the year.S. one company may use the FIFO method of inventory costing: another company in the same industry may use LIFO. and amortization. Estimates Financial statements contain numerous estimates. certain account balances (cash. depletion. If inventory is a significant asset to both companies. Cost Traditional financial statements are based on cost. Therefore. industry also limits the usefulness of financial analysis. me period. Comparisons of unadjusted financial data from different periods may be rendered invalid by significant inflation or deflation.
Others appear to be comparable but are not. Oil refining and the manufacture of polyfines account for nearly all of Reliance’s sales. HYPERLINK "http://images.com/2008/08/nuclear-power-generation. In 2009 the company merged with its oil and gas refining subsidiary (Reliance Petroleum) in order to boost the operational and financial synergies of Reliance as a major refining company. The flagship company. is India’s largest private sector enterprise.conglomerates.html&usg=__hQQbUZMU7dtXRmO_iziMWcej3jY=&h=438&w=400&sz=37&hl=en&s tart=17&um=1&itbs=1&tbnid=V_8X_X-Pwe3_YM:&tbnh=127&tbnw=116&prev=/images? q=images+of+the+reliance+industries+limited&hl=en&sa=X&um=1"HYPERLINK "http://philip9876. though those businesses are relatively small. founded by Dhirubhai H Ambani (1932-2002).co.breakingupdate.com/files/mukesh-ambaniril. The chairman of the company is Mukesh Ambani.com/news/ril-signs-gas-sale-purchase-deals-12fertiliser-cos41638. is a Fortune Global 500 company and is the largest private sector company in India. COMPANY PROFILE The Reliance group.google. It also makes textiles and explores for oil and gas. with businesses in the energy and material value chain. The company is India’s largest petrochemical firm and among the country’s largest companies (along with the likes of Indian Oil and Tata Group).wordpress. Reliance Industries Limited.jpg" .in/imgres? imgurl=http://breakingupdate.files.jpg&imgrefurl=http://www.
wikipedia.wikipedia.wikipedia.wikipedia.org/wiki/US$"US $ 35.wikipedia.85 billion for the fiscal year ending in March 2008 making it one of India's private sector HYPERLINK "http://en.jsp? companyname=RELIANCE&submit1=go&series=EQ&flag=0"RELIANCE) is HYPERLINK "http://en.wikipedia. it has diversified its operations in recent years.wikipedia. the group was divided between them in 2006. It was founded by the Indian industrialist HYPERLINK "http://en.org/wiki/India"India's "http://en.org/wiki/Conglomerate_(company)"conglomerate (by market value) .wikipedia.org/wiki/Mukesh_Ambani"Mukesh Ambani and HYPERLINK "http://en.wikipedia.jpg" Stock .nseindia.in/data/articleimgs/9544-afebruary-2003-photo-of-the-reliance-industries-limited-petrochemical-plantat-jamnagar-in-thisocto.org/wiki/Forbes"Forbes's list of "world's 100 most respected companiesHYPERLINK "http://www.ibtimes. Critics allege that the rise of Reliance Industries to the top slot in terms of market capitalization is largely due to Dhirubhai's ability to manipulate the levers of a controlled economy to his advantage. After severe differences between the founder's two sons. HYPERLINK "http://en.org/wiki/Dhirubhai_Ambani"Dhirubhai Ambani in 1966.co. Though the company's oil-related operations form the core of its business.9 billion and profit of US$ 4.Reliance Industries Limited (HYPERLINK HYPERLINK "http://en.wikipedia.com/marketinfo/equities/quotesearch.org/wiki/Private_sector"private largest sector HYPERLINK HYPERLINK "http://en. Ambani has been a pioneer in introducing financial instruments like fully convertible debentures to the Indian stock markets. being ranked at 206th position (2008).org/wiki/Fortune_Global_500"Fortune Global 500 companies.org/wiki/National_Stock_Exchange_of_India"NSE: "http://www. with an annual turnover of HYPERLINK "http://en. Ambani was one of the first entrepreneurs to draw retail investors to the stock markets. Reliance Industries was the only Indian firm featured in the HYPERLINK "http://en. In September 2008.org/wiki/Anil_Ambani"Anil Ambani.
org/wiki/Reliance_Petroleum"Reliance Petroleum Limited (RPL) was a subsidiary of Reliance Industries Limited (RIL) and was created to exploit .wikipedia.org/wiki/Petrochemicals"petrochemicals. "http://en.org/wiki/NOVA_Chemicals"NOVA Chemicals have signed a letter of intent to make energy-efficient structures. It operates a 33 million tone refinery at Jamnagar in the Indian state of Gujarat.According to the company website "1 out of every 4 investors in India is a Reliance shareholder. Subsidiaries Major Subsidiaries & Associates HYPERLINK "http://en.org/wiki/Garments"garments HYPERLINK (under the products. The company is also involved in oil & gas exploration and production. Reliance has also completed a second refinery of 29 million tons at the same site which started operations in December 2008.wikipedia.wikipedia. Reliance has more than 3 million shareholders. 2009.org/w/index.org/wiki/Krishna_Godavari_basin"Krishna Godavari basin.wikipedia.wikipedia. gas production from the KG D6 ramped up to 60 MMSCMD.org/wiki/Petroleum_products"petroleum "http://en. making it one of the world's most widely held stocks. "http://en.wikipedia. it struck a major find on India's eastern coast in the HYPERLINK "http://en. Gas production from this find was started on April 2. Products Reliance Industries Limited has a wide range of products from HYPERLINK HYPERLINK HYPERLINK name of Vimal).”. Reliance companies have been among the best performing in the Indian stock market. subsequent to its split in January 2006 has continued to grow.wikipedia.wikipedia.org/wiki/Reliance_Fresh"Reliance Fresh and launched a new chain called Delight Reliance Retail and HYPERLINK "http://en. As of the end of 3rd quarter of 2009-2010.php? title=Reliance_Retail&action=edit&redlink=1"Reliance Retail has entered into the fresh foods market as HYPERLINK "http://en. Reliance Industries Ltd. In 2002. to brand "http://en. The primary business of the company is petroleum refining and petrochemicals.
the emerging opportunities.org/wiki/Reliance_Life_Sciences"Reliance Life Sciences is a research-driven.relclin. Clinical Research Services.wikipedia.org/wiki/Reliance_Institute_of_Life_Sciences"Reliance Institute of Life Sciences (Rils) established by Dhirubhai Ambani Foundation.com/"Reliance Clinical Research Services (RCRS).org/wiki/Reliance_Logistics"Reliance Logistics (P) Limited is a single window solutions provider for transportation. Bio-fuels.wikipedia. supported by in house state of art telemetric and telemetry solutions. Molecular Medicine.org/wiki/Reliance_Industrial_Infrastructure_Limited"Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of setting up / operating Industrial Infrastructure that also involves leasing and providing services connected with computer software and data processing.wikipedia.wikipedia. warehousing. creating value in the refining sector worldwide. logistics.org/wiki/Reliance_Solar"Reliance Solar. Currently. Regenerative Medicine. Specifically. biotechnology-led. HYPERLINK "http://en. is an institution of higher education in various fields of life sciences and related technologies.wikipedia. RPL stands amalgamated with RIL. plant and industrial biotechnology opportunities. and supply chain needs. biotechnology and medical device companies. Plant Biotechnology and Industrial Biotechnology. these relate to Biopharmaceuticals. distribution. a contract research organization (CRO) and wholly owned subsidiary of Reliance Life Sciences. has been set up to provide clinical research services to pharmaceutical. Pharmaceuticals. The solar energy initiative of Reliance aims to bring solar energy systems and solutions primarily to . HYPERLINK "http://en. HYPERLINK "http://en. HYPERLINK "http://en. life sciences organization that participates in medical. HYPERLINK "http://en. HYPERLINK "http://www. Novel Therapeutics.
On 2 April 2009.org/wiki/Mukesh_Ambani"Mukesh Ambani controlled Reliance Industries.wikipedia.html"Reliance Retail is the retail business wing of the Reliance business.org/wiki/Krishna_Godavari_basin"Krishna Godavari basin off the coast of lion tonnes) of HYPERLINK "http://en. Reliance Retail HYPERLINK "http://www.org/w/index.org/wiki/Natural_gas"natural gas in the HYPERLINK "http://en. Reliance found HYPERLINK "http://en. Reliance Mart.2 billion barrels (165 mil in 2002. It was the largest discovery of natural gas in world in financial year 2002-2003.org/wiki/Andhra_Pradesh"Andhra Pradesh near HYPERLINK "http://en.ril. Equivalent to 1.php? title=Reliance_Retail&action=edit&redlink=1"Reliance Retail brand. and Reliance Jewel come under the HYPERLINK "http://en. Reliance AutoZone. Reliance iStore.wikipedia. On 2008 Oct 8.wikipedia. Reliance's Oil & Gas find HYPERLINK "http://en.wikipedia. Anil Ambani's Reliance Natural Resources took Reliance Industries to the HYPERLINK "http://en.org/wiki/Vishakapatnam"Vishakhapatnam.34 per million HYPERLINK "http://en.org/wiki/Crude_oil"crude oil.org/wiki/Bombay_High_Court"Bombay High Court to uphold a memorandum of understanding that said RIL will supply the natural gas at $2. Reliance Time Out.wikipedia.wikipedia. Reliance Home Kitchens.wikipedia.remote and rural areas and bring about a transformation in the quality of life.wikipedia.org/wiki/British_thermal_units"British thermal units to Anil Ambani.wikipedia. mutton and other meat products (halal and non-halal) through one of its . Many brands like Reliance Fresh. Reliance Trends.com/html/business/business_retail. but only 5 trillion cubic feet are extractable. Reliance Digital.wikipedia.org/wiki/Relicord"Relicord is the first and one of the most dependable stem-cell banking services of South East Asia offered by HYPERLINK "http://en. HYPERLINK "http://en. Reliance Super. Reliance Footprint. Reliance Industries (RIL) commenced natural gas production from its D-6 block in the Krishna-Godavari (KG) The gas reserve is 7 trillion cubic feet in size. Reliance saw opportunity in retailing chicken. Reliance Wellness.
of India and the Maharashtra Pollution Control Board. Reliance Industries backed a conference on environmental awareness in New Delhi in 2006. They use this process to develop a strong recycling process which won them a reward in the Team Excellence competition.retail arms called "Delight Non Veg." One of the Delight outlets has been shut down due to protest by anti-animal cruelty activists at Gandhi Nagar. Delhi who want Reliance to close its non-veg food marketing. Mukesh D. Awards & Recognition International Refiner of the Year in 2005 at the 23rd Annual HYPERLINK "http://en.wikipedia. Ambani received the United States of America-India Business Council (USIBC) leadership award for "Global Vision" 2007 in Washington in July 2007. They operate the largest polyester recycling center that uses the polyester waste as a filling and stuffing. . Ambani was conferred the Asia Society Leadership Award by the HYPERLINK "http://en. Govt.org/wiki/Asia_Society"Asia Society. The conference was to help bring about new ideas and articles on various aspects of environmental protection in the region.org/w/index.php?title=Hart %27s_World_Refining_and_Fuels_Conference&action=edit&redlink=1"Hart's World Refining and Fuels Conference. Washington. In order to deal with this large amount of waste they had to create a way to recycle the waste. May 2004. USA. Maharashtra Pollution Control Board invited various industries complied with the pollution control norms to take active part in the conference and to support as a sponsor. The conference proved effective as a way to promote environmental concern in the area.wikipedia. The conference was run by the Asia Pacific Jurist Association in partnership with the Ministry of Environment & Forests. Environmental record Reliance Industry is the world’s largest polyester producer and as a result one of the largest producers of polyester waste in the world. Awards for managers Mukesh D.
Ambani is HYPERLINK "http://en.wikipedia. there is one common Factor: Relationship and Trust. 1932 . the present and the future. Mukesh D.org/wiki/The_Economic_Times"Economic Times Business Leader of the Year.wikipedia. This is the foundation of our growth." Shri Dhirubhai H. Current composition of the Board and Category of Directors are as Follows: "Between my past. August 2004.July 6. 2002 Board of Directors of Reliance Industries Limited Shri Mukesh D Ambani Chairman & Managing .org/wiki/Fortune_magazine"Fortune magazine. Ambani ranked 13th in Asia's Power 25 list of The Most Powerful People in Business published by HYPERLINK "http://en.Mukesh D. Ambani Chairman Reliance Group December 28.
. D. V. Meswani Executive Director Shri . Bhakta Shri Yogendra P. P.Director Shri Nikhil R. Dipak C Jain MISSION & VISION “Continuously innovate to remain Partners in human progress by Harnessing science & technology in the petrochemicals domain” OUR MISSION “Be a globally preferred Business associate with responsible Concern for ecology.Kohli Executive Director Shri PMS Prasad Executive Director Shri R. Kapur Shri M. Trivedi Dr. Meswani Executive Director Shri Hital R. Ambani Shri Mansingh L.S. and stakeholder’s value”. Ravimohan Executive Director Shri Ramniklal H. society. Ashok Misra Prof. Modi Prof.
We shall sustain organizational excellence through visionary leadership and innovative efforts” Reliance Industrie s Balance Sheets from 2006 to 2009 in Rs. Mar '06 Mar '07 Mar '08 Mar '09 12 months 12 months .VALUES & QUALITY POLICY YOUR VALUES “Integrity. Unity of Purpose. Outside-in Focus. Respect for People. Cr. Agility and Innovation”. QUALITY POLICY “Bare committed to meet customers’ requirements through continual improvement of our quality management systems.
77 104.448.12 14.200.26 81.28 200.48 117.372.53 Share Application Money 0.664.25 0.90 Unsecured Loans Total Debt 21.600.40 0.17 1.573.904.970.00 Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans 7.73 71.967.479.453.71 1.792.55 871.229.12 months 12 months Sources Of Funds Total Share Capital 1.393.804.393.81 2.97 63.00 77.697.60 10.00 43.569.865.17 18.61 69.206.861.21 1.86 73.277.441.70 27.26 9.628.10 149.19 49.17 1.45 60.669.393.56 0.51 63.682.760.87 36.00 59.928.13 6.393.651.21 1.650.68 91.945.573.44 11.453.90 4.53 Equity Share Capital 1.825.13 99.879.256.14 0.39 1.39 1.784.61 Total Liabilities Application Of Funds Gross Block 84.00 112.97 .75 126.92 29.532.
85 12.043.28 20.906.75 13.82 4.251.79 5.890.014.858.266.609.86 56.177.31 63.522.63 23.13 16.38 55.528.716.71 24.38 500.11 14.664.75 16.47 61.547.119.660.13 14.20 5.38 .247.15 30.345.692.210.84 20.18 14.136.75 6.51 3.010.16 45.87 0.908.19 1.145.35 42.46 7.228.09 0.64 100.836.81 3.221.732.298.441.00 25.79 49.42 308.54 2.06 32.98 0.91 19.15 23.506.23 8.00 42.00 29.15 4.54 6.99 44.992.352.696.005.227.846.62 239.55 1.18 10.712.622.163.62 0.06 69.93 12.149.872.675.656.522.90 21.00 24.883.72 4. Loans & Advances Differed Credit Current Liabilities Provisions Total Current Liabilities & Provisions Net Current Assets 29.71 3.Less: Accum.00 18.957.268.743.02 3.58 217.516. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total Current Assets.253.571.31 35.375.70 10.00 17.83 20.71 1.527.285.34 12.343.
69 439.Miscellaneous Expenses 0.66 Reliance Industries Profit & Loss Accounts from 2006 to 2009 in Rs.66 0.00 71.18 0.57 542.00 91.86 46.767.792.74 727.277.897.03 0.157.28 37.00 Total Assets Contingent Liabilities Book Value (Rs) 324. Cr.928.432.45 36.61 200. Mar '06 Mar '07 Mar '08 Mar '09 .87 24.00 117.669.
328.877.12 months 12 months 12 months 12 months Income Sales Turnover 89.699.07 Excise Duty 8.68 5.2220.127.116.119.67 6.96 .463.79 111.805.03 133.46 146.07 Net Sales 80.353.00 Other Income 546.78 141.369.71 139.654.46 118.68 4.
791.261.284.595.355.534.16 427.03 Stock Adjustments 2.89 6.146.650.98 .34 Power & Fuel Cost 1.19 654.69 2.832.94 112.14 109.26 2.65 98.236.59 Expenditure Raw Materials 59.739.29 80.56 Total Income 83.867.52 138.555.052.60 -1.131.28 143.66 1.590.264.84 3.
10 5.265.14 -111.45 2.31 1.17 715.19 1.09 2.094.46 -3. 668.33 5.33 2.23 412.98 Selling and Admin Exp.112.Employee Cost 978. Capitalised -155.65 .736.60 Miscellaneous Expenses 300.21 -175.478.119.40 4.66 562.50 Other Manufacturing Exp.162.872.397.549.42 Preoperative Exp. 5.74 321.
75 23.018.815.446.91 4.00 0.24 91.550.10 118.528.17 Operating Profit 3.400.51 48.15 4.29 PBDIT 0.14 18.66 PBDT 0.234.711.00 0.10 .506.Total Expenses 68.88 0.00 Interest 10.195.72 109.947.18 14.847.00 0.14 5.
066.195.847.943.559.14 .66 Other Written Off 1.26 23.35 3.06 14.137.309.34 11.528.40 19.00 Depreciation 10.458.446.14 5.711.018.24 18.642.75 23.85 3.34 Profit Before Tax 9.29 15.29 Tax 10.400.069.529.15 4.585.18 14.815.0.91 4.72 2.712.32 Extra-ordinary items 3.
949.897.18.07 10.00 0.96 8.631.44 202.810.95 11.00 Equity Dividend 1.673.440.51 48.44 1.02 277.156.24 1.393.83 Preference Dividend 0.10 0.00 0.00 Total Value Addition 8.23 .00 0.51 1.446.88 0.66 Reported Net Profit 0.05 Corporate Dividend Tax 195.
08 13.00 Book Value (Rs) 324.08 14.00 110.322.00 130.66 Financial Position of Reliance Industries Ltd.08 85.935.00 130.74 727.86 97.49 15.57 542.536.03 439.40 Per share data (annualized) Shares in issue (lakh) 13.737. After going through the various ratios.71 133.98 Earning Per Share (Rs) 65.28 Equity Dividend (%) 100.935. fund flow and cash flow analysis would like to state that: .
DATA ANALYSIS AND INTERPRETATION Calculation and Interpretation of Ratios 1] Current Ratio: Formula: Current assets Current ratio = Current liabilities YEAR Current assets 2005-2006 24.210.298. Dividend paid in all years to its shareholders.99 2007-2008 44.09 . The company is paying promptly to the suppliers. Dividend payout ratio is satisfactory.696. The profitability position of the company is very satisfactory. The return on capital employed is satisfactory. Immediate solvency position of the company is also quite satisfactory.743. Overall profitability position of the company is quite satisfactory. The company can meet its urgent obligations immediately. Credit policies are effective.The long-term solvency of the company is very satisfactory.15 2006-2007 30.86 2008 -2009 56.
The consistency increase in the value of current assets will increase the ability of the company to meets its obligations & therefore from the point of view of creditors the company is less risky. The Reliance Industries Ltd.14 1. which makes company sounder. Thus.576.91 .Current liabilities Current ratio 21.71 1.06 32. has a goody current ratio.75 2008 -2009 36029. Almost 4 years current ratio is same but current ratio in 2007-2008 is bit higher.23 times the current liabilities.38 1. 2] Liquid Ratio: Formula: Quick assets Liquid ratio = Quick liabilities YEAR Quick assets 2005-2006 14.23:1 in 2008-2009.16 45.48 2007-2008 24. the current ratio is 1.858.16 1. the current assets are 1.227.675.00 25. the current ratio throws light on the company’s ability to pay its current liabilities out of its current assets.33 2006-2007 18.221. In other words the current assets are 1.23 Comments: In Reliance Industries Ltd.23 rupee is available to the them.674.547. It means that for one rupee of current liabilities.
675.00 Liquid ratio 0. obligations promptly. Almost in all 4 years the liquid ratio is same. has increased from 0.78 in 2008-2009 which shows that company follow low liquidity position to achieve high profitability.71 0.69 32. The liquid ratio of the Reliance Industries Ltd.78 Comments: The liquid or quick ratio indicates the liquid financial position of an enterprise.858.16 0. Liquid ratio of Company is not favorable because the quick assets of the company are less than the quick liabilities.75 45. which is better for the company to meet the urgency.67 to 0. This indicates that the dependence on the long-term liabilities & creditors are more & the company is following an aggressive working capital policy. The liquid ratio shows the company’s ability to meet its immediate 3] Proprietary Ratio: Formula: Proprietary fund Proprietary ratio = OR Total fund .06 0.Quick liabilities 21.67 25.547.221.
655.72 87. It means that the for every one rupee of total assets contribution of 66 paisa has come from owners fund & remaining balance 34 paisa is contributed by the outside creditors.93 0. As the Proprietary ratio is very favorable of the company.439.26 2006-2007 63.66 Comments: The Proprietary ratio of the company is 0.405.97 68. 4] Stock Working Capital Ratio: Formula: .13 2007-2008 81.520.07 0.72 0.77 189.66 in the year 2008-2009.804.Shareholders fund Proprietary ratio = Fixed assets + current liabilities YEAR Proprietary fund Total fund Proprietary ratio 2005-2006 49.372. This shows that the contribution by owners to total assets is more than the contribution by outside creditors.73 105.967.58 0.60 2008 -2009 126.448. The Company’s long-term solvency position is very sound.
39 2005-2006 10.72 10. It shows that the solvency position of the company is sound.247.522. However in the year 2008-2009 it has increased a little to.93 2007-2008 14.136.21 2.15 2006-2007 12.13 1. .Stock Stock working capital ratio = Working Capital YEAR Stock Working Capital Stock working 3.119.78 1.70 2008 -2009 14.82 3149.51 4352. In the year 2007-2008 the sale is increased which affects decrease in stock that effected in increase in working capital in 2007-2008.38 capital ratio Comments: This ratio shows that extend of funds blocked in stock.836.54 12. The amount of stock is decreasing from the year 2005-2006 to 2008-2009.622.
13 6.372.97 7.5% of the fund covering the secured loan position.26 9. which indicates the proportion of debt & equity in the financing of assets of a company.569.664.12 63. For the last 2 years [i.448. near about 8.2007-2008 TO 2008-2009] Capital gearing ratio is all most same which indicates.e.5% Comments: Gearing means the process of increasing the equity shareholders return through the use of debt.600.804.92 126.5] Capital Gearing Ratio: Formula: Preference capital+ secured loan Capital gearing ratio = Equity capital & reserve & surplus YEAR Secured loan Equity capital & reserves & surplus Capital gearing ratio 2005-2006 2006-2007 2007-2008 2008 -2009 10. Capital gearing ratio is a leverage ratio.90 49.60 16% 15% 8.17 81. But in the year 2005- .967.2% 8.697.
61 Shareholders49.26 fund Debt Ratio Equity0.73 63.865.804.448.48 126. It means that during the year 2005-2006 company has borrowed more secured loans for the company’s expansion.45 0.60 2008 -2009 73.372.479.44 0.59 Comments: The debt equity ratio is important tool of financial analysis to appraise the financial .44 0. 6] Debt Equity Ratio: Formula: Total long term debt Debt equity ratio = Total shareholders fund YEAR 2005-2006 2006-2007 27.904.68 81.825.967.97 Long term debt 21.13 2007-2008 36.2006 the Capital-gearing ratio is 16%.
877.59 during the year 2005-2006 to 20082009.structure of the company.43 111. the shareholders fund also increased.48 80. This ratio is very important from the point of view of creditors & owners. This shows long-term capital structure of the company is sound. 7] Gross Profit Ratio: Formula: Gross profit Gross profit ratio = Net sales * 100 YEAR Gross profit Net sales Gross Ratio 2005-2006 18345.44 to 0.7 2007-2008 30.03 22.959 18.79 profit22.14 . This shows that with the increase in debt. The lower ratio viewed as favorable from long term creditor’s point of view.28 133.805.758. The rate of debt equity ratio is increased from 0.7 2006-2007 25.439.086.2 141. It expresses the relation between the external equities & internal equities.78 22.699.4 2008 -2009 25.
It has decreased to 18.7%. In the year 20052006 the gross profit ratio is 22.79 111. The net sales and gross profit is continuously increasing from the year 2005-20063 to 20082009.947.14% in the year 2008-2009 due to increase in sales with corresponding more increase in cost of goods sold.877.699. It is continuously declined from 2005-2006 t0 2008-2009 due to high cost of purchases & overheads.72 2007-2008 109.78 141. 8] Operating Ratio: Formula: COGS+ operating expenses Operating ratio = Net sales *100 YEAR COGS + Operating expenses Net sales 2005-2006 68.959 .805.10 2008 -2009 118.24 2006-2007 91.234.Comments: The gross profit is the profit made on sale of goods.506.03 133.550. It is the profit on turnover. Although the gross profit ratio is declined during the years 2005-2006 to 2008-2009.17 80.
Operating ratio 84.31%.31% 81.28%. 10) Net Profit Ratio: Formula: NPAT Net profit ratio = * 100 Net sales .80% 83.28% Comments: The operating ratio shows the relationship between costs of activities & net sales.75%. The operating ratio of the company has decreased in 3 year and increase a little in last year.75% 82. in 2006-2007 was 82. Though the cost has increased in 2006-2007 as compared to 2005-2006. it is reducing continuously over the next two years. in 2007-2008 was 81. indicate downward trend in cost but upward / positive trend in operational performance.80% & in 2008-2009 it is 83. This is due to increase in the cost of goods sold. Operating ratio over a period of 4 years when compared that indicate the change in the operational efficiency of the company. which in 2005-2006 was 84.
699. managerial efficiency & sales promotion. Profitability ratio of company shows considerable increase in 3 years and decreased in the last year.069.943.00 10.54% 2008 -2009 15.458.32 141.959. At the same time company has been successful in controlling the expenses i.40 111.34 80.805. It is a clear index of cost control.78 14.309.03 10.YEAR NPAT Net sales 2005-2006 9.877.29 133. Company’s sales have increased in 3 years and decreased in the last year.69% 2007-2008 19.79 2006-2007 11. 11] Stock Turnover Ratio: Formula: COGS Stock Turnover Ratio = .e.21% Comments: The net profit ratio of the company is high in all year but the net profit is increasing order from this ratio of 4 year it has been observe that the from 2005-2006 to 2007-2008 the net profit is increased and it decreased in the year 2008-2009. manufacturing & other expenses.78% Net profit ratio 11.
73 Stock Turnover3.5 months for stock to be sold out after it is produced. This indicates that it takes 3.32 5. the stock of the company is moving fast in the market.90 2006-2007 21.97.30 3.4 times then the stock holding period is 3.4 times which indicate that the stock is being turned into sales 3. It helps to work out the stock holding period.58 3. it means with lower inventory the company has achieved greater sales.4=3.4 times during the year.98 5.73 times. 12] Return on Capital Employed: .96. The stock turnover ratio is 2001-2002 was 3.5 months [12/18.104.22.168 Ratio Comments: Stock turnover ratio shows the relationship between the sales & stock it means how stock is being turned over into sales.4 rounds during the year.26 6.73.Average stock YEAR COGS Average stock 2005-2006 18.5months]. The inventory cycle makes 3.90.11 4.4 to 3.6 2007-2008 28. Thus. Inurn the year 2001-2002 to 2004-2005 the stock turnover ratio has improved from 3.49. For the last 4 years stock turnover ratio is lower than the standard but it is in increasing order.02 6. it means the stock turnover ratio is 3.89.20 2008 -2009 25.
The return on capital employed of Rs.87 2006-2007 11.64% Comments: The return on capital employed shows the relationship between profit & investment.40 145.069. Its purpose is to measure the overall profitability from the total funds made available by the owner & lenders.458. 7.7. this amount of Rs.65% 8. it decrease in 2006-2007 . 7.In 2007-2008 It is highest that is 16.50% 7.415.64 is earned on a capital employed of Rs.308. i.73 2007-2008 19.e.21% 16.100.28 2008 -2009 15.64 is available to take care of interest.669.50%.45 12. tax.34 71.943. This indicates a very high profitability on each rupee of investment & has a great scope to attract large . then increase in 2007-2008 and finally decrease in 2008-2209. The return on capital employed is show-mixed trend.& appropriation.21 117.32 200.277.Formula: NPAT Return on capital employed = *100 Capital employed YEAR NPAT Capital employed Return on capital employed 2005-2006 9.928.64 indicate that net return of Rs.
Earning per share represents the earning of the company whether or not dividends are declared.943.06934 equity13.00 14.00 15.08 85.86 97.98 per65.29.amount of fresh fund.935.935.28 Comments: Earning per share is calculated to find out overall profitability of the company.28 means shareholder gets Rs.458.309. 10/-.71 133.00 13.737.49 2008 -2009 15.08 2007-2008 19.32.40. 13] Earning Per Share: Formula: NPAT Earning per share = Number of equity share YEAR NPAT No. for each share of Rs. The Earning per share is 97.of share Earning share 2005-2006 9. In other .536.08 2006-2007 11.
97.28%.00 2006-2007 10. Therefore the shareholders earning per share is increased continuously from 2005-2006 to 2007-2008 by 65.22 2008 -2009 12.36% ratio 12. The above analysis shows the Earning per share and Dividend per share is increasing rapidly.86% and decrease in 2008-2009 to 97.38% per65.33 2007-2008 11. This shows it is continuous capital appreciation per unit share for consecutive three years and capital depreciation per unit share in the last year.38% 12. 14] Dividend Payout Ratio: Formula: Dividend per share Dividend Payout ratio = Earning per share YEAR Dividend share Earning share Dividend payout15.28 2005-2006 per10.86 97.71 133.28 per share.05% 8.05 * 100 .words the shareholder earned Rs. It is beneficial to the shareholders and prospective investor to invest the money in this company. The net profit after tax of the company is increasing in all years accepts 2008-2009.08-133.08 85.
532.36. 15] Cost of Goods Sold Ratio: Formula: COGS Cost of goods sold Ratio = Net sales * 100 YEAR COGS Net sales 2005-2006 62.805. From this one can say that the company is more conservative for expansion.5 133.8 141.85 Cost of goods77. However the company has declared more dividends in the year 2005-2006 as the company has sufficient profit. So its declare dividend in all four years.6 111.05 and 12.00 81.78 77.31 80.773.200.31 sold ratio .03 77.Comments: The company earned profit in all four years.959.38 respectively.51 2008 -2009 116.699. 2006-2007 and 2008-2009 the Dividend payout ratio is 15. In the year 2007-2008 the company has declared the dividend 8. In the year 2005-2006. 12.22 2007-2008 103.259.719.79 2006-2007 86.38 because the company has not earned more profit in the year 2001-2002 hence the company has not declared more dividends in the year 2008-2009.
31 2007-2008 217.79 2008 -2009 500.31 Marketable securities .69%.31% so the gross profit is 22.Comments: This ratio shows the rate of consumption of raw material in the process of production. It indicates that in 2005-2006. In the year 2005-2006 the cost of goods sold ratio is 77. 16] Cash Ratio: Formula: Cash + Bank + Marketable securities Cash ratio = Total current liabilities YEAR 2005-2006 2006-2007 308.31% of raw material is consumed in the process of production. During the 3 years the rate of cost of goods sold ratio is almost same and it increased in last year however the gross profit & sales is increased during the same period.13 Cash + Bank +239. the 77.
71 Cash ratio 0.16 45. This shows that the company has little cash.006 in the year 2007-2008 & increased in the year 2008-2009 t0 0. & marketable securities to meet any contingency.00 25. In the year 2005-2006 the cash ratio is 0. bank balance.675.010.Total liabilities current21.06 32.858.011 & remains same in the year 2006-2007.006 0.010 Comments: This ratio is called as super quick ratio or absolute liquidity ratio. 17] Return on Proprietors Fund Ratio: Formula: NPAT Return on proprietors fund = Proprietor’s fund * 100 YEAR 2005-2006 2006-2007 2007-2008 2008 -2009 .011 0.547.011 0.221. Then it is decreased to 0.
804.34 11.20% to 12. In the year 2005-2006 the return on proprietors fund is 18.11 Proprietors fund49. large transfers to reserve etc. 100 of funds contributed by the owners.97 12.NPAT 9.40 63.069.67 19.448.20% it means the net return of Rs.26 Return on18.60 23.372.20 approximately is earned on the each Rs.89 15. 18. During the last 4 years the rate of return on proprietors fund is in fluctuating order.13 16.967.29 81.20 proprietors fund Comments: Return on proprietors fund shows the relationship between profits & investments by proprietors in the company.11% and it is maximum in the year 2007-2008. The return on proprietors fund during the year 2005-2006 to 2008-2009 is decreased from 18.458.309. & has a great scope to attract large amount of fresh fund from owners.32 126. 18] Operating Profit Ratio: Formula: Operating profit . It shows that the company has very large returns available to take care of high dividends.943.
During the last 4 years the operating profit ratio is remains almost same. The operating profit is equal to gross profit minus all operating expenses or sales less cost of goods sold and operating expenses.79 Return on17.76 2008 -2009 24. In the other words operating profit ratio 17.87 proprietors fund Comments: Operating profit ratio shows the relationship between operating profit & the sales. inventory. 100.04 Proprietors fund80. Calculations and Interpretation of Fund Flow Statement . purchase. 17 is available for meeting non operating expenses.17 is earned on sale of Rs.91 111.03 18. Thus.152.26 2007-2008 22.432.458. It indicates that the company has great efficiency in managing all its operations of production.04% indicates that average operating margin of Rs.805.405.74 2006-2007 20.877. This amount of Rs.Operating profit ratio = Net sales *100 YEAR NPAT 2005-2006 14.78 16.04% of net sales remains as operating profit after meeting all operating expenses.52 133. The operating profit ratio of 17.04means that 17.39 141. selling and distribution and also has control over the direct and indirect costs.959 17. company has a large margin is available to meet non-operating expenses and earn net profit.699.
35 3.21 1.825.85 60.136.34 20.44 1.365.000.440. Cr.05 Payment of tax 1.51 14.432.559.119.631.91 2.72 Payment dividends 1393.247.479.717.34 19.23 32.18 16.61 27.52 Application funds of 49.18 Inventories 10.393.458.516.17 1.68 73.268.642.39 1.4 Investment 5.85 3.64 39.11 20.51 1.904.251.630.846.836.24 1.865.74 40.) Mar ' 09 Source of funds Mar ' 08 Mar ' 07 Mar ' 06 Issue of shares 1.48 Operating profit 14.897.453.393.152.73 36.Fund flow statement (in Rs.74 20.954.82 12.54 14.139.72 2.413.624.29 .137.53 Long borrowings term21.52 24.405.573.585.39 37.59 99.
It was minimum in the year 2006 and maximum in the year 2009. The net working capital available to the company was maximum in the year 2009 shows the high liquidity position of the firm and it was minimum in the year 2007 shows the low liquidity position of the firm. The application of funds also increases continuously from the tear 2006 to 2009.11 Comments The fund flow analysis shows that the funds increase continuously from the year 20062009 due to the maximum long term borrowings and more operating profit .29 working capital 17.410.The funds are maximum in the year 2009 because in this year the company borrowed maximum long term loan.21 20. .491.211.Net increase in18.717.85 59.
433.86 17.010.520.06 Net cash flow-operating activity 18.Calculations and Interpretation of Cash Flow Statement Cash flow Statement (in Rs.14 14. Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Profit before tax 18. Cr).74 16.704.426.245.55 .870.23 23.47 10.
10.955.301.282.01 -12.462.390.29 1.24 2.08 366.894.88 Net cash used in fin.608.835.79 .67 Net inc/dec in cash and equivalent 17.58 Net cash used in investing activity -24.567.58 8.130.35 3.20 -23.73 3.444.70 -1.38 -1.084.973.04 306.63 Cash and equivalent begin of year 4.732. Activity 23.225.08 -18.
Cash and equivalent end of year 22. The Closing cash and cash equivalents maximum in the year 2009 and minimum in the year 2007 shows the firm maintain the maximum liquidity position in the year 2009.176.35 2. when company contributed fewer amounts in financing activities. 2007 and 2008 but decreased in the year 2009 due to the excessive liquidity.05 1.146. which shows the low liquidity position of the firm in these years. The opening cash and cash equivalents are minimum in the year 2008 and maximum in the year 2009. The cash and cash equivalents of the firm decreased in the year 2006 and 2007. The cash and cash equivalents of the firm increased in the year 2008 and 2009 showing the high liquidity position of the firm. The statement shows that net cash from investing activities is negative in all four years that means the firm is not enough contribute in investing activities. which shows the sound position of the firm.16 Comments: The cash flow statement shows that the net profit before tax increased continuously in the year 2006.835. . The net cash used in financing activities is maximum in the year 2008 and 2009 in comparison to 2006 and 2007. The net cash from the operating activities continuously increased from the 2006 to 2009.280.53 4.
15 and 0. 2007.75. 2008 and 2009.21 to 1. 2.14.38 and 1. The current ratio has shown non fluctuating trend as 1.The Company believes in high profitability and low liquidity position. 0.Findings 1. The proprietary ratio has shown a non fluctuating trend. The capital gearing ratio is decreased form 2006 – 08 (0. 1.23 during 2006.16. The quick ratio is also in non fluctuating trend throughout the period 2006 – 09 resulting as 0. 1.69.39 in the year 2006 – 09. 3.78. 0. 5.67. 0. The proprietary ratio is decreased compared with the last year. 4. The stock working capital ratio decreased from 3.82) and increased in .16. 0.
The operating profit ratio shows almost similar pattern in all years but it is maximum in the year 2006-2007 and minimum in the year 2007-2008. It decreased in the current year compared with the previous year from 23. 10. 11.1% to 18. The cash ratio shows a non fluctuating pattern in the year 2006. The operating ratio is increased in the current year compared with the previous year from 81.2009 to 0.59 in the year 2006-09. 15.97%. 12.78%. Dividend payout ratio is maximum in the year 2005-2006 and minimum in the 2007-2008. The net profit ratio is also decreased in the current year compared with the previous year from 14. 14. 2008 and 2009 but decreased in the year 2008. The return on capital employed is increased in the year 2006 and 2008 while it decreased in the year 2007 and 2009. Suggestion & Recommendation 1. 16. The debt-equity ratio increased from 0. The company should improve its liquidity position. 2. The gross profit ratio is in fluctuation manner.8% to 83. 7. 13. 3.54% to 10. 8.85. 6. Cost of goods sold shows a non fluctuating pattern in the year 2005-2008 and increased in the year 2008-2009. The company should make the balance between liquidity and solvency position of the company. Return on proprietorship fund is maximum in the year 2007-2008 and minimum in the year 2008-2009. The earning per share is maximum in the year 2007-2008 and minimum in the year 20052006. The profit ratio is decreased in current year so the company should pay attention to this .44-0. 9. Liquidity refers to the ability of the concern to meet its current obligations as and when these become due.28%.
The cost of goods sold is high in every year so the company should do efforts to control it. The long term financial position of the company is very good but it should pay a little attention to short term solvency of the company. The company distributes dividends every year to its share holders.because profit making is the prime objective o every business. The long term solvency position of the company is very good. 4. The profit of the company decreased in the last year due to maintaining the comparatively high liquidity. 5. The net working capital of the company is maximum in the last year shows the maximum liquidity. The company achieves sufficient profit in past four years. Conclusion The company’s overall position is at a very good position. . The company maintains low liquidity to achieve the high profitability.
L. Concepts & problems R. CHOPDE ANAUAL REPORTS OF RELIANCE INDUSTRIES LIMITED 2005-2006 2006-2007 2007-2008 2008-2009 WEBSIDES www.Bibliography REFERENCE BOOKS – FINANCIAL MANAGEMENT Theory.RUSTAGI FINANCIAL MANAGEMENT Text and problems By.moneycontrol. K.ril.P. CHOUDHARI S. CHOPDE D.com www.N.M. JAIN MANAGEMENT ACCOUNTING AINAPURE FINANCIAL MANAGEMENT L.com . KHAN AND P.Y.N.
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