A Project Report On

“FINANCIAL HEALTH OF RELIANCE INDUSTRIES LIMITED”

INDIAN INSTITUTE OF FINANCIAL PLANNING

September-2013
SUBMITTED TO MR SANDEEP KAPOOR
Address:

2E/8, JhandewalanExt, near Jhandewalan metro station Delhi.
BY

SACHIN NIMBARK SHAHBAZ AKHTAR SIMHADRI ASHOK SUBHASH KUMAR

21312 21313 21314 21315

TABLE OF CONTENT
Sl.No Particulars Page no.
3 1. ACKNOWLEDMENT

2.

INTRODUCTION

4-9 10-13

3.
4.

COMPANY PROFILE

AWARDS AND RECOGNITONS

14

5.

DATA ANALYSIS & INTERPRETATION

15-47

6.

FINDINGS

48-49

7.

SUGGESTION & RECOMMENDATION

50

8.

CONCLUSION

51

9.

BIBLOGRAPHY

52

ACKNOWLEDMENT

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 SANDEEP SIR for giving me an opportunity to work on the project and giving me full support in completing this project. Last but not least, I would like to thank my parents & my friends for their full cooperation & continuous support during the course of this assignment.

INTRODUCTION
Meaning of Financial Statement
Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. 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, liabilities and owners equity, 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. 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 second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial

Features of Financial Analysis
 To present a complex data contained in the financial statement in simple and understandable form.  To classify the items contained in the financial statement inconvenient and rational groups.  To make comparison between various groups to draw various conclusions.

Purpose of Analysis of financial statements
        To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of mgt. To provide useful information to mgt

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.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 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.Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. determined and presented. . Ratio analysis can be used both in trend and static 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 .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.

       Fund Flow Analysis Fund may be interpreted in various ways as (a) Cash.  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. (b) Total current assets. To point out the financial strengths and weaknesses of the business.  In short.   To inform as to how the loans to the business have been used. when a transaction results in a change i. increase or decrease in the amount of fund. 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. .. (c) Net working capital. (d) Net current assets. it is a technical device designed to highlight the changes in the financial condition of a business enterprise between two balance sheets.e. For the purpose of fund flow statement the term means net working capital. The flow of fund will occur in a business.

To show the actors contributing to the reduction of cash balance inspire of increasing of profit or decreasing profit. Cash flow statement reveals that inflow and outflow of cash during a particular period. To show the causes of changes in cash balance between the balance sheet dates. It is an important tool of cash planning and control. sale of assets investments etc. It helps the management in planning the repayment of loans. 4. It explaining the reasons for low cash balance. It shows the major sources and uses of cash. Uses of CFS 1. rent dividend. . Objectives of CFS 1. 5. 2.Cash Flow Analysis Cash is a life blood of business. Likewise. credit arrangements etc. From the past year statements projections can be made for the future. 2. A firm receives cash from various sources like sales. It is prepared on the basis of historical data showing the inflow and outflow of cash. interest etc. 3. debtors. It helps in short term financial decisions relating to liquidity. the firm needs cash to make payment to salaries.

The other segment of the company includes textile. RIL has also set up plants for Polyester Staple Fiber (PSF) in 1986 and for Linear Alkyl Benzene (LAB) & Purified Terephthalic Acid (PTA) in 1988. The company operates worldclass manufacturing facilities across the country at Allahabad. Gujarat in technical collaboration with DuPont and BF Goodich respectively. Hoshiarpur. Nagpur. They are the first private sector company from India to feature in the Fortune Global 500 list of 'World's Largest Corporations' and ranks 117th amongst the world's Top 200 companies in terms of profits. Barabanki. The company is India's largest private sector company on all major financial parameters. . and oil and gas. it was started as a small textile manufacturer unit. Nagothane.Company Profile Reliance Industries Ltd is an India-based company. The petrochemicals segment includes production and marketing operations of petrochemical products.Ambani. the company entered the telecom industry through a joint venture with NYNEX. retail business and special economic zone (SEZ) development. Naroda. The refining segment includes production and marketing operations of the petroleum products. The Hazira petrochemical plant was commissioned in 1991-92. In May 8. refining. In the year 1995-96. The company operates in three business segments: petrochemicals. RIL has setup a petrochemical facility to produce HDPE and PVC at Hazira. USA and promoted Reliance Telecom Private Limited in India. 1973 RIL was incorporated and conformed their name as RIL in the year 1985. The company has set up a texturising / twisting facilities in 1979. the company has transformed their business from manufacturing of textiles products into a petrochemical major. The oil and gas segment includes exploration. Patalganga. Over the years. Dahej. Jamnagar. development and production of crude oil and natural gas. In the year 1966 the RIL was founded by Shri Dhirubhai H. Hazira. Silvassa and Vadodara.

the present and the future. 1932 .July 6." Shri Dhirubhai H.Current composition of the Board and Category of Directors are as Follows: "Between my past. Ambani Chairman Reliance Group December 28. there is one common Factor: Relationship and Trust. This is the foundation of our growth. 2002 Board of Directors of Reliance Industries Limited .

S. Ravimohan Executive Director Shri Ramniklal H. Shri Yogendra P. Meswani Executive Director Shri Hital R. Meswani Executive Director Shri . Kapur Bhakta . Ambani Shri Mansingh L.Shri Mukesh D Ambani Chairman & Managing Director Shri Nikhil R. Trivedi Dr. D. V.Kohli Executive Director Shri PMS Prasad Executive Director Shri R.

P.Shri M. Unity of Purpose. Agility and Innovation”. . and stakeholder’s value”. Respect for People. 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. Outside-in Focus. society. Ashok Misra Prof. VALUES & QUALITY POLICY YOUR VALUES “Integrity. Modi Prof.

. USA. Ambani was conferred the Asia Society Leadership Award by the. Ambani is Business Leader of the Year.  Mukesh D. Washington. May 2004.Fortune magazine August 2004.Awards & Recognition  International Refiner of the Year in 2005 at the 23rd Annual In World Refining and Fuel Conference Awards for managers  Mukesh D. Ambani received the United States of America-India Business Council (USIBC) leadership award for "Global Vision" 2007 in Washington in July 2007. Ambani ranked 13th in Asia's Power 25 list of The Most Powerful People in Business published by.  Mukesh D.  Mukesh D.

945.75 126.393.453.86 1.441.97 63.48 200.393.573.68 117.669.928.697.44 11.00 43.17 1.90 4.393.53 1.804.664.61 27.879.760.453.00 112.14 0.17 0.448.97 10.87 Mar '07 12 months Mar '08 12 months Mar '09 12 months 1.792.650.00 77.651.479.60 6.393.00 59.569.26 7.25 0.Data analysis and Interpretation Reliance Industries Balance Sheets from 2006 to 2009 in Rs.56 73.573.53 69.967.600.61 71.28 1.904. Mar '06 12 months Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities 1.21 1.26 81.39 1.865.206.39 1.682.21 60.51 36.372.55 871.92 63.73 91. Cr.13 9.81 2.277.19 49.90 14.12 18.861.200.256.17 29.00 0.784.40 0.45 .825.71 21.

90 30.79 5.63 23.81 3.35 16.79 20.06 69.13 19.83 20.266.87 0.00 29.10 42.345.221.846.19 1.957.163.54 2. Loans & 24.890.58 217.285.00 42.660.712.38 500.014.522.043.18 10.119.13 16.656.136.Application Of Funds Gross Block Less: Accum.71 .51 3.145.28 12.72 4.628.62 239.253.13 29.177.692.15 Advances Differed Credit Current Liabilities Provisions Total Current Liabilities & 21.547.98 0.00 24.732.91 18.664.675.23 13.298.00 17.84 20.227.09 84.31 63.247.42 308.71 1.70 49.251.31 14.06 32.34 12.908.343.86 56.75 8.609.992.00 104.02 3.62 0.64 100.527.77 35.005.268.210.836.506.906.696.75 6. 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.528.532.00 Provisions 25.55 1.20 5.228.516.010.858.743.15 23.883.716.375.82 4.71 0.75 149.229.18 14.441.16 45.571.970.46 7.99 44.38 55.85 99.47 61.54 6.872.11 14.

Mar '06 12 months Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments 89.277.18 439.463.93 0.00 200.622.157.131.353.78 6.19 Mar '07 12 months Mar '08 12 months Mar '09 12 months 118.522.60 139.149.867.03 236.897.68 133.46 8.70 0.45 36.38 0.67 80.66 324.805.15 0.03 4.71 6.89 654.00 1.00 117.654.124.369.03 427.86 46.00 91.61 542.56 .669.66 Reliance Industries Profit & Loss Accounts from 2006 to 2009 in Rs.28 37.57 12.74 10.928.792.595.66 -1.07 4.767.69 727.87 24.432.264.00 71.699. Cr.16 146.959.07 141.877.46 5.269.246.328.96 2.68 111.Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 3.79 546.352.

Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Exp.74 80.066.10 118.31 5.00 14.872.66 109.29 5.29 1.736.50 1.65 2.24 -111.14 0.137.72 109.832. 83.14 Capitalised Total Expenses 68.26 978.947.534.590.10 321.112.815.529.21 -175.17 5.35 11.98 4.446.094.46 -3.00 10.59 59.549.24 3.45 668.66 0.712. Miscellaneous Expenses Preoperative Exp.34 4.18 0.33 300.34 15.88 10.60 562.355.943.506.65 91.650.75 0.17 Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax 3.23 98.40 4.711.72 9.400.00 18.478.42 -155.739.66 3.19 5.585.446.14 2.559.94 112.234.309.14 48.28 143.32 .397.40 412.10 23.119.91 0.195.85 19.146.265.98 2.84 2.847.00 23.069.29 0.555.162.33 715.51 14.642.15 0.550.052.791.06 1.26 2.284.34 3.52 138.69 2.00 18.458.528. Selling and Admin Exp.261.018.09 1.

00 1.00 8.536.66 .98 97.673.44 4.83 0.00 727.10 10.00 1.14 23.86 130.51 11.393.51 195.935.08 85.49 133.446.95 0.08 100.66 0.847.737.91 10.71 110.75 0.935.07 0.018.74 15.711.18 0.14 48.815.40 13.24 277.Extra-ordinary items Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakh) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 3.810.897.05 322.631.00 324.28 130.08 65.02 4.528.29 18.00 542.57 14.00 1.156.00 439.03 13.400.44 202.440.23 5.15 14.195.949.00 1.96 0.88 8.

Calculation and Interpretation of Ratios 1] Current Ratio: Current ratio = Current assets/Current liablities YEAR 2005-2006 24.696.00 1.858.16 1.23 Current assets Current liabilities Current ratio .09 45.99 25.298.16 2007-2008 44.221.15 21.86 32.06 1.547.38 2008 -2009 56.14 2006-2007 30.743.210.71 1.675.

5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 current ratio Comments: In Reliance Industries Ltd. the current assets are 1.23:1 in 2008-2009.23 rupee is available to the them. the current ratio throws light on the company’s ability to pay its current liabilities out of its current assets. which makes company sounder. The Reliance Industries Ltd.23 times the current liabilities. has a goody current ratio. It means that for one rupee of current liabilities. . In other words the current assets are 1.5 2 1. the current ratio is 1. Almost 4 years current ratio is same but current ratio in 2007-2008 is bit higher. Thus.current ratio 3 2. 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.

674.858.91 45.75 2008 -2009 36029.48 25.00 0.06 0.547.33 21.69 2007-2008 24.675.16 0.221.71 0.227.67 2006-2007 18.2] Liquid Ratio: Liquid ratio = Quick assets/ Quick liabilities YEAR Quick assets 2005-2006 14.576.75 32.78 Quick liabilities Liquid ratio .

This indicates that the dependence on the long-term liabilities & creditors are more & the company is following an aggressive working capital policy. has increased from 0. Almost in all 4 years the liquid ratio is same.72 0. which is better for the company to meet the urgency.78 0.62 0.8 0.78 in 2008-2009 which shows that company follow low liquidity position to achieve high profitability.liquid ratio 0.66 0.76 0.7 0. The liquid ratio of the Reliance Industries Ltd.64 0.68 0. The liquid ratio shows the company’s ability to meet its immediate obligations promptly.67 to 0.74 0. Liquid ratio of Company is not favorable because the quick assets of the company are less than the quick liabilities.6 2005-06 2006-07 2007-08 2008-09 liquid ratio Comments: The liquid or quick ratio indicates the liquid financial position of an enterprise. .

58 0.72 0.448.13 87.405.66 Proprietary fund Total fund Proprietary ratio .804.93 0.72 2006-2007 63.655.520.73 2007-2008 81.967.77 2008 -2009 126.372.60 105.97 189.3] Proprietary Ratio: Proprietary ratio = Shareholders fund/ Fixed assets + current liabilities YEAR 2005-2006 49.26 68.07 0.439.

proprietary ratio 0.78 0.62 0. This shows that the contribution by owners to total assets is more than the contribution by outside creditors.72 0.7 0. . The Company’s long-term solvency position is very sound.74 0.6 2005-06 2006-07 2007-08 2008-09 proprietary ratio Comments: The Proprietary ratio of the company is 0.76 0.66 0.64 0. 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.68 0.66 in the year 2008-2009. As the Proprietary ratio is very favorable of the company.

4] Stock Working Capital Ratio: Stock working capital ratio = Stock/ Working Capital YEAR 2005-2006 10.78 2007-2008 14.93 2.82 3149.54 12.38 1.39 Stock Working Capital Stock capital ratio working .13 2008 -2009 14.51 4352.70 1.522.836.136.119.622.15 3.21 2006-2007 12.247.72 10.

stock working capital ratio 3. In the year 20072008 the sale is increased which affects decrease in stock that effected in increase in working capital in 2007-2008. The amount of stock is decreasing from the year 2005-2006 to 2008-2009.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 stock working capital ratio Comments: This ratio shows that extend of funds blocked in stock.It shows that the solvency position of the company is sound.5 3 2.5 2 1. . However in the year 2008-2009 it has increased a little to.

600. reserve & surplus YEAR 2005-2006 7.967.697.5] Capital Gearing Capital gearing ratio = Preference capital+ secured loan/Equity capital.2% 8.448.804.26 2006-2007 9.12 63.90 49.5% .92 126.664.17 81.372.97 Secured loan Equity capital & reserves & surplus Capital gearing ratio 16% 15% 8.13 2007-2008 6.60 2008 -2009 10.569.

Capital gearing ratio is a leverage ratio. It means that during the year 2005-2006 company has borrowed more secured loans for the company’s expansion.5% of the fund covering the secured loan position.For the last 2 years [i.capital gearing ratio 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2005-06 2006-07 2007-08 2008-09 capital gearing ratio Comments: Gearing means the process of increasing the equity shareholders return through the use of debt. . But in the year 2005-2006 the Capital-gearing ratio is 16%. which indicates the proportion of debt & equity in the financing of assets of a company. near about 8.e.2007-2008 TO 2008-2009] Capital gearing ratio is all most same which indicates.

26 Debt Equity Ratio 0.904.61 2006-2007 27.59 .44 0.825.48 126.865.60 2008 -2009 73.372.479.73 63.45 0.448.6] Debt Equity Ratio: Debt equity ratio = Total long term debt/ Total shareholders fund YEAR 2005-2006 21.967.804.68 81.97 Long term debt Shareholders fund 49.44 0.13 2007-2008 36.

This shows that with the increase in debt. the shareholders fund also increased. The lower ratio viewed as favorable from long term creditor’s point of view.4 0. This shows long-term capital structure of the company is sound. It expresses the relation between the external equities & internal equities.1 0 2005-06 2006-07 2007-08 2008-09 debt equity ratio Comments: The debt equity ratio is important tool of financial analysis to appraise the financial structure of the company.debt equity ratio 0.59 during the year 2005-2006 to 2008-2009.2 0. .7 0.5 0. The rate of debt equity ratio is increased from 0. This ratio is very important from the point of view of creditors & owners.44 to 0.3 0.6 0.

28 133.43 111.086.03 22.14 .699.758.877.78 22.7 2007-2008 30.805.959 18.4 2008 -2009 25.7 2006-2007 25.439.2 141.48 80.79 22.7] Gross Profit Ratio: Gross profit ratio = (Gross profit/Net sale) *100 YEAR Gross profit Net sales Gross profit Ratio 2005-2006 18345.

It has decreased to 18.14% in the year 2008-2009 due to increase in sales with corresponding more increase in cost of goods sold.7%. It is continuously declined from 2005-2006 t0 2008-2009 due to high cost of purchases & overheads. In the year 2005-2006 the gross profit ratio is 22. .gross profit ratio 25 20 15 gross profit ratio 10 5 0 2005-06 2006-07 2007-08 2008-09 Comments: The gross profit is the profit made on sale of goods. The net sales and gross profit is continuously increasing from the year 2005-20063 to 2008-2009. It is the profit on turnover. Although the gross profit ratio is declined during the years 2005-2006 to 2008-2009.

75% 111.17 COGS + Operating 68.10 2008 -2009 118.8] Operating Ratio: Operating ratio = (COGS+ operating expenses/ Net sales) *100 YEAR 2005-2006 2006-2007 91.959 83.947.234.699.72 2007-2008 109.03 82.78 81.550.805.24 expenses Net sales Operating ratio 80.79 84.877.80% 141.506.31% 133.28% .

00% 84.00% 2005-06 2006-07 2007-08 2008-09 operating ratio Comments: The operating ratio shows the relationship between costs of activities & net sales. it is reducing continuously over the next two years. which in 2005-2006 was 84. in 2006-2007 was 82. in 2007-2008 was 81.00% 80.operating ratio 85. Though the cost has increased in 20062007 as compared to 2005-2006.50% 83.75%.00% 81. indicate downward trend in cost but upward / positive trend in operational performance.28%.50% 84.00% 82.50% 80. This is due to increase in the cost of goods sold.31%.00% 83.80% & in 2008-2009 it is 83. .50% 81.50% 82.The operating ratio of the company has decreased in 3 year and increase a little in last year. Operating ratio over a period of 4 years when compared that indicate the change in the operational efficiency of the company.

03 10.805.32 141.877.943.78 14.458.10) Net Profit Ratio: Net profit ratio = ( NPAT/Net sales)* 100 YEAR 2005-2006 9.69% 2007-2008 19.34 80.959.00 10.29 133.40 111.069.79 11.699.78% NPAT Net sales Net profit ratio .54% 2008 -2009 15.309.21% 2006-2007 11.

00% 8. .00% 4.net profit ratio 16.00% 10.00% 6. At the same time company has been successful in controlling the expenses i.00% 0. managerial efficiency & sales promotion. Company’s sales have increased in 3 years and decreased in the last year.00% 14.00% 2005-06 2006-07 2007-08 2008-09 net profit ratio 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.e.It is a clear index of cost control.00% 12. manufacturing & other expenses.00% 2.Profitability ratio of company shows considerable increase in 3 years and decreased in the last year.

96.49.30 3.11] Stock Turnover Ratio: Stock Turnover Ratio = COGS/ Average stock YEAR COGS Average stock Stock Ratio 2005-2006 18.73.89.97.90.02 6.72.32 5.90 2006-2007 21.26 6.73 Turnover 3.58 3.11 4.20 2008 -2009 25.98 5.4 .6 2007-2008 28.33.

5 2 1.The stock turnover ratio is 2001-2002 was 3. it means the stock turnover ratio is 3.4 times which indicate that the stock is being turned into sales 3. The inventory cycle makes 3.4 times then the stock holding period is 3. It helps to work out the stock holding period.5 4 3. . Inurn the year 2001-2002 to 2004-2005 the stock turnover ratio has improved from 3.4 to 3. it means with lower inventory the company has achieved greater sales.stock turnover ratio 4.5months].5 months [12/3. Thus. the stock of the company is moving fast in the market.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 stock turnover ratio Comments: Stock turnover ratio shows the relationship between the sales & stock it means how stock is being turned over into sales.73 times.5 months for stock to be sold out after it is produced.4 rounds during the year.5 3 2.4 times during the year. For the last 4 years stock turnover ratio is lower than the standard but it is in increasing order. This indicates that it takes 3.4=3.

21% 2007-2008 19.45 7.943.34 71.73 8.21 117.458.87 12.64% NPAT Capital employed Return on capital employed .40 145.12] Return on Capital Employed: Return on capital employed = (NPAT/ Capital employed)*100 YEAR 2005-2006 9.50% 2008 -2009 15.308.65% 2006-2007 11.277.928.069.669.415.28 16.32 200.

. then increase in 2007-2008 and finally decrease in 2008-2209.00% 2005-06 2006-07 2007-08 2008-09 return on capital employed Comments: The return on capital employed shows the relationship between profit & investment. tax.00% 4. i. The return on capital employed is show-mixed trend.In 2007-2008 It is highest that is 16.00% 8.50%.00% 6.return on capital employed 18. This indicates a very high profitability on each rupee of investment & has a great scope to attract large amount of fresh fund.7.64 is earned on a capital employed of Rs. it decrease in 2006-2007 . The return on capital employed of Rs.64 is available to take care of interest.00% 0. 7.00% 12.00% 10.00% 2.& appropriation.00% 14.100.e. 7.00% 16.64 indicate that net return of Rs. Its purpose is to measure the overall profitability from the total funds made available by the owner & lenders. this amount of Rs.

86 2008 -2009 15.00 15.08 85.458.08 2006-2007 11.29.13] Earning Per Share: Earning per share = NPAT/ Number of equity share YEAR 2005-2006 9.309.08 65.935.40.935.06934 13.71 2007-2008 19.00 13.28 NPAT No.737.943.00 14.32.of equity share Earning per share .49 133.536.98 97.

It is beneficial to the shareholders and prospective investor to invest the money in this company. 97. Therefore the shareholders earning per share is increased continuously from 2005-2006 to 2007-2008 by 65. This shows it is continuous capital appreciation per unit share for consecutive three years and capital depreciation per unit share in the last year. The net profit after tax of the company is increasing in all years accepts 2008-2009.08-133.The Earning per share is 97.earning per share 160 140 120 100 80 60 40 20 0 2005-06 2006-07 2007-08 2008-09 earning per share Comments: Earning per share is calculated to find out overall profitability of the company. for each share of Rs.28 means shareholder gets Rs.86% and decrease in 2008-2009 to 97. In other words the shareholder earned Rs. 10/-. Earning per share represents the earning of the company whether or not dividends are declared. .28%.28 per share.The above analysis shows the Earning per share and Dividend per share is increasing rapidly.

85 59.825.53 Long term borrowings 21.516.440.52 Application of funds 49.72 2.631.393.39 1.54 14.85 60.29 17.846.35 3.119.365.52 24.18 Inventories 10.573.74 40.91 2.21 1.836.05 Payment of tax 1.82 12.413.72 Payment dividends 1393.4 Investment 5.17 1.18 16.44 1.904.137.64 39.11 20.51 14.74 20.Calculations and Interpretation of Fund Flow Statement Fund flow statement (in Rs.405.559.432.624.48 Operating profit 14.34 20.865.642.000.458.59 99.717.585.34 19.453.29 Net increase in working capital 18.39 37.954.139.630.491.251.21 20.247.23 32.268.) Mar ' 09 Source of funds Mar ' 08 Mar ' 07 Mar ' 06 Issue of shares 1.136.61 27.24 1. Cr.897.211.410.11 .73 36.393.51 1.479.68 73.152.85 3.717.

 The application of funds also increases continuously from the tear 2006 to 2009.Comments  The fund flow analysis shows that the funds increase continuously from the year 2006-2009 due to the maximum long term borrowings and more operating profit .The funds are maximum in the year 2009 because in this year the company borrowed maximum long term loan. 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. .

20 -23.433.245.55 10.955.08 -18.79 Cash and equivalent end of year 22.53 4.835.010.47 Mar ' 06 10.23 Mar ' 08 23.870.426.70 -1.176.67 Net inc/dec in cash and equivalent 17.86 17.58 Net cash used in investing activity -24.835. Activity 23.130.88 Net cash used in fin.146.35 2.084.280.973.14 Mar ' 07 14.520.Calculations and Interpretation of Cash Flow Statement Cash flow Statement (in Rs.301.04 306.567.732.05 1.38 -1.608.462.73 3.29 1.704.35 3.24 2.58 8.74 16.01 -12.16 .282.06 Net cash flow-operating activity 18.225.894. Mar ' 09 Profit before tax 18.08 366.63 Cash and equivalent begin of year 4.444.390. Cr).

 The net cash used in financing activities is maximum in the year 2008 and 2009 in comparison to 2006 and 2007. 2007 and 2008 but decreased in the year 2009 due to the excessive liquidity.  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 low liquidity position of the firm in these years. which shows the sound position of the firm.Comments:  The cash flow statement shows that the net profit before tax increased continuously in the year 2006.  The net cash from the operating activities continuously increased from the 2006 to 2009. The Closing cash and cash equivalents maximum in the year 2009 and minimum in the year 2007 shows maximum liquidity position in the year 2009. when company contributed fewer amounts in financing activities.  The cash and cash equivalents of the firm decreased in the year 2006 and 2007. the firm maintain the .  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 increased in the year 2008 and 2009 showing the high liquidity position of the firm.

5.67.82) and increased in 2009 to 0.54% to 10.75.23 during 2006.16. It decreased in the current year compared with the previous year from 23. The capital gearing ratio is decreased form 2006 – 08 (0. 1. The net profit ratio is also decreased in the current year compared with the previous year from 14.1% to 18. . 2007. 0. 6. 4. The quick ratio is also in non fluctuating trend throughout the period 2006 – 09 resulting as 0.78%. 0.39 in the year 2006 – 09. The current ratio has shown non fluctuating trend as 1. 0.38 and 1. 1.44-0.The Company believes in high profitability and low liquidity position.16. 2.59 in the year 2006-09. The proprietary ratio is decreased compared with the last year. 2008 and 2009.69. 3. 0.85.78.97%. The debt-equity ratio increased from 0.14. 8. 7.15 and 0.21 to 1.Findings 1. The stock working capital ratio decreased from 3. The gross profit ratio is in fluctuation manner. The proprietary ratio has shown a non fluctuating trend.

.9. Cost of goods sold shows a non fluctuating pattern in the year 2005-2008 and increased in the year 2008-2009. 12. The return on capital employed is increased in the year 2006 and 2008 while it decreased in the year 2007 and 2009. 13. 10. The operating ratio is increased in the current year compared with the previous year from 81. 11. The earning per share is maximum in the year 2007-2008 and minimum in the year 20052006. Dividend payout ratio is maximum in the year 2005-2006 and minimum in the 2007-2008.28%.8% to 83.

The profit ratio is decreased in current year so the company should pay attention to this because profit making is the prime objective o every business. The cost of goods sold is high in every year so the company should do efforts to control it. . The company should improve its liquidity position. Liquidity refers to the ability of the concern to meet its current obligations as and when these become due. The company should make the balance between liquidity and solvency position of the company. 3. 4.Suggestion & Recommendation 1. 5. 2. 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.

Conclusion The company’s overall position is at a very good position. The profit of the company decreased in the last year due to maintaining the comparatively high liquidity. The company maintains low liquidity to achieve the high profitability. The long term solvency position of the company is very good. . 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. The company distributes dividends every year to its share holders.

com Wikipedia encyclopedia www.moneycontrol.com     2005-2006 2006-2007 2007-2008 2008-2009 .ril.com  ANAUAL REPORTS OF RELIANCE INDUSTRIES LIMITED from www.Bibliography     FINANCIAL MANAGEMENT Scribed .