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A

Project Report

On

Financial Analysis

Of

Presented to

Mr. Nikunj Patel

Assistant Professor,
S.V.Institute of Management,Kadi
Hemchandracharya North Gujarat University

On

December 7, 2007

In Partial fulfillment of the requirement for the


Managerial Accounting-I course in the
Master of Business Administration Programme

By

Ashwin Chaudhary
PREFACE

We are the student of Master of Business Administration and as per the


university curriculum, we are required to prepare a project report on financial
analysis of any particular company. For this purpose we selected the Steel
Authority of India Limited, as it is a new task for us, which provide great
knowledge to us.

We got a chance to keep in the real business world for the financial analysis
which helpful for us to know new things about the finance department of the
company that from where the cash in come in the company and where it is go.
Also the report helps us to know how companies prepare their financial
statement. What are their accounting policies and to know about other financial
aspect of the company.

This report highlights the financial position of the company. This report include
analysis of balance sheet, profit &loss account and cash flow statement for the
last five years. It also focuses on firms working capital requirement, sources and
instrument of working capital finance. And also ratios have been calculated to
present a clear picture of the financial profitability and liquidity position of the
company.

This project really enhance our knowledge about industry and I have really
gained a lot of knowledge from this project. I hope this will also help in future.

S.V.Institute of Management, Kadi By


Ashwin
ACKNOWLEDGEMENT

Through this acknowledgement we would like to express our sincere gratitude


towards all those people who helped us in the preparation of this project report,
which has been a learning experience for us.

Firstly, we would like to thank Mr. S.M. Shah, Director of the S.V. Institute of
Management, Kadi, who gave us this valuable opportunity to prepare this report.

Secondly, we would like to thank to my In charge Mr.Nikunj Patel who guided us


and also always willing to help us with proper guidance in making the project
report.

Finally, we were thankful to our friends who guide us directly and indirectly in
collecting data and preparing the report as well as imparting their knowledge with
us.

S.V.Institute of Management, Kadi By


Ashwin
Executive Summary
Our this documents contain the comparative performance of the Steel Authority
Of India Ltd. Of the latest five years i.e. 2002-03 to 2006-07. this include the
analysis of the five years data of the company.

Our this report include the introduction of the company, brief history of the
company, its business and vision of the company. Our this report also include the
analysis of the balance sheet and the profit & loss Account for the same five
years. The cash flow statements are also analyzed. the report contain the ratio
analysi of the company to measure the performance of the company with
interpretation required. The all aspects of the ratios are considered and the
efficiency of the company is also judge by us. Thus the recommendation and
suggestion is also provided for the company to be consider for the better
working. After analyzing all the available financial data of the Steel Authority
Of India Ltd. ,we are able to understand the financial position of the company by
computing various ratios and by making graphical presentations :

If we look at company’s assets side we can see that there is a over all increase in
the assets of the company from 2002 to 2007. In the last two years i.e. in 2006 &
2007 there is a increase of 15%. This shows that company is also purchasing
new assets in this five years. Company is also making a proper provision during
this years. Company is investing in many areas like quoted investments and
mutual fund. Company is also making a proper redord of inventories and
receivables. There is an increasing trend in current ratio, so it is showing a good
working capital of the company. At the end company is also making a proper
system of written off of assets.

From the above data and analysis we can say that company is earning a good
profit in these five years. And the effect of this we can see on the net worth of the
company. Company is also consistent in declaring dividend to the shareholders.
As company’s profit increasing from one year to another there is a proper record
of reserve and surplus. Company is increasing its reserve and surplus its shows
that company is aware about the future and also aware of the contingency. So
we can say that company’s future is good as far as growth is concerned.

Now we can see that company’s borrowing is decreasing year by year. Company
repaid the bank loan and debentures. So the burden of the company is
decreasing. And it is good for company’s reputation.

At the end we can say that in these five years company’s performance is
tremendous as far as growth is concerned. There is a continuous increase in the
profit of the company at a higher rate.
CONTENT
Chapter Particular Page
No.

1 About The Company 1


1.1 Introduction to SAIL 2
1.2 History & Development 3
1.3 Contact information 5
1.4 Board of Directors 6
1.5 Bankers & Auditors 7
1.6 Basic information of SAIL 8
1.7 Vision & Mission 9
1.8 Awards & Accolades 10
1.9 Product Profile 11
1.10 Shareholding Pattern 12
2 Finance And Financial Analysis 13
2.1 Introduction to Finance 14
2.2 Financial Analysis & Techniques 15
3 Balance sheet Analysis 18
3.1 Introduction to Balance Sheet 19
3.2 Balance Sheet 20
3.3 Comparative Analysis of balance sheet 22
3.4 Common Size Statement of Balance 23
Sheet
3.5 Trend Analysis of Balance Sheet 31
4 Profit & Loss Account Analysis 36
4.1 Introduction to P&L Account 36
4.2 Profit & Loss Account 37
4.3 Comparative Analysis Of P&L Account 40
4.4 Common Size Statement Of P&L Account 41
4.5 Trend Analysis Of Profit & Loss Account 43
5 Cash Flow Statement analysis 45
5.1 Introduction to Cash Flow Statement 46
5.2 Cash Flow Statement 47
5.3 Analysis of Cash Flow Statement 49
6 Meaning Of Ratio Analysis 50
7 Utility Of Ratio Analysis 51
8 Classification Of Ratio Analysis 53
A Liquidity Ratios 54
A.1 Current Ratio 55
A.2 Acid Test/Quick Ratio 56
A.3 Defensive Interval Ratio 56
A.4 Cash Ratio 57
B Leverage/Capital Structure Ratios 59
B.1 Long Term Funds To Fixed Assets Ratio 59
B.2 Total Debt – Equity ratio 60
B.3 Capital Employed Ratio 61
B.4 Interest Coverage Ratio 62
C Profitability Ratios 63
C.1 Gross Profit Ratio 64
C.2 Operating Profit Ratio 65
C.3 Net Profit Ratio 65
C.4 Cost Of Goods Sold Ratio 66
C.5 Operating Expense Ratio 67
C.6 Return On Total Assets Ratio 68
C.7 Selling Expense Ratio 69
C.8 Earning Per Share 70
C.9 Return On Total Shareholder’s Equity 71
D Activity Ratios 72
D.1 Inventory Turnover Ratio 72
D.2 Debtors Turnover Ratio 72
D.3 Total Assets Turnover Ratio 73
D.4 Fixed Assets Turnover Ratio 74
D.5 Debt Collection Period 74
9 DU POINT CHART 76
9.1 INTRODUCTION TO DU POINT CHART 76
9.2 DU POINT CHART OF SAIL 77
9.3 Interpretation of Due Point Chart 78
10 Recommendations & Suggestions 79
11 Contemporary Issue in SAIL 80
12 Annexure 81
13 Bibliography 90
CHAPTER - 1 ABOUT THE COMPANY
1.1 Introduction to SAIL
1.2 History & Development
1.3 Contact Information
1.4 Board of Directors
1.5 Bankers and Auditors
1.6 Basic information of SAIL
1.7 Vision and Mission
1.8 Awards and Accolades
1.9 Product Profile
1.10 Shareholding Pattern
1.1 Introduction to SAIL

SAIL
is the leading steel-making company in India. It is a
fully integrated iron and steel maker, producing both
basic and special steels for domestic construction,
engineering, power, railway, automotive and defence industries and for sale in
export markets.

Ranked amongst the top ten public sector companies in India in terms of
turnover, SAIL manufactures and sells a broad range of steel products, including
hot and cold rolled sheets and coils, galvanised sheets, electrical sheets,
structurals, railway products, plates, bars and rods, stainless steel and other alloy
steels. SAIL produces iron and steel at five integrated plants and three special
steel plants, located principally in the eastern and central regions of India and
situated close to domestic sources of raw materials, including the Company's iron
ore, limestone and dolomite mines. The company has the distinction of being
India’s largest producer of iron ore and of having the country’s second largest
mines network. This gives SAIL a competitive edge in terms of captive availability
of iron ore, limestone, and dolomite which are input for steel making.

SAIL's wide range of long and flat steel products are much in demand in the
domestic as well as the international market. This vital responsibility is carried out
by SAIL's own Central Marketing Organisation (CMO) and the International Trade
Division. CMO encompasses a wide network of 34 branch offices and 54
stockyards located in major cities and towns throughout India.

Today, the accent in SAIL is to continously adapt to the competitive business


environment and excel as a business organisation, both within and outside India.
SAIL has consolidated its position and is endeavouring towards shaping a
sustainable future, turning india’s dream into an inspiring reality. SAIL is well
poised to play a vital role in the current unprecedented growth phase in the
country.
1.2 HISTORY AND DEVELOPMENT

THE PRECURSOR

SAIL traces its origin to the formative years of an emerging nation - India. After
independence the builders of modern India worked with a vision - to lay the
infrastructure for rapid industrialisaton of the country. The steel sector was to
propel the economic growth. Hindustan Steel Private Limited was set up on
January 19, 1954. The President of India held the shares of the company on
behalf of the people of India

EXPANDING HORIZON (1959-1973)

Hindustan Steel (HSL) was initially designed to manage only one plant that was
coming up at Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary
work was done by the Iron and Steel Ministry. From April 1957, the supervision
and control of these two steel plants were also transferred to Hindustan Steel.
The registered office was originally in New Delhi. It moved to Calcutta in July
1956 and ultimately to Ranchi in December 1959.

A new steel company, Bokaro Steel Limited, was incorporated in January 1964 to
construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai and
Rourkela Steel Plants were completed by the end of December 1961. The 1 MT
phase of Durgapur Steel Plant was completed in January 1962 after
commissioning of the Wheel and Axle plant. The crude steel production of HSL
went up from .158 MT (1959-60) to 1.6 MT. The second phase of Bhilai Steel
Plant was completed in September 1967 after commissioning of the Wire Rod
Mill. The last unit of the 1.8 MT phase of Rourkela - the Tandem Mill - was
commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel Plant
was completed in August 1969 after commissioning of the Furnace in SMS.
Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and
1.6 MT at Durgapur, the total crude steel production capacity of HSL was raised
to 3.7 MT in 1968-69 and subsequently to 4MT in 1972-73.

HOLDING COMPANY

The Ministry of Steel and Mines drafted a policy statement to evolve a new model
for managing industry. The policy statement was presented to the Parliament on
December 2, 1972. On this basis the concept of creating a holding company to
manage inputs and outputs under one umbrella was mooted. This led to the
formation of Steel Authority of India Ltd. The company, incorporated on January
24, 1973 with an authorized capital of Rs. 2000 crore, was made responsible for
managing five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and
Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was
restructured as an operating company.

Since its inception, SAIL has been instrumental in laying a sound infrastructure
for the industrial development of the country. Besides, it has immensely
contributed to the development of technical and managerial expertise. It has
triggered the secondary and tertiary waves of economic growth by continuously
providing the inputs for the consuming industry.

SAIL TODAY

SAIL today is one of the largest industrial entities in India. Its strength has been
the diversified range of quality steel products catering to the domestic, as well as
the export markets and a large pool of technical and professional expertise.

Today, the accent in SAIL is to continuously adapt to the competitive business


environment and excel as a business organization, both within and outside India.
1.3 CONTACT INFORMATION

Steel Authority of India Ltd.

Registered Office :-

Address

Street :- Ispat bhavan, Lodhi Road, P.B. No. 3049

City :- New Delhi Pincode :- 110003

State :- Delhi

E-Mail Address :- secy.sail@sailex.com / sailco@vsnl.com

Website :-www.sail.co.in

Telephone and Fax Number

Country Code :- 91 Area Code :- 11

Telephone Number :- 24367481

Fax Number :- 24367015

Head Office :-

Address

Stereet :- Bokaro Steel Plant, Bokaro Steel City, Jharkhand

State :- Jharkhand

Pincode :- 827001
1.4 BOARD OF DIRECTORS

Mr. S.K. Roongta {Chirman}

Mr. K.K. Khanna {Technical Director}

Mr. G.Ojha {Personnel Director}

Mr. Soiles Bhattacharya {Finance director}

Mr. Shoeb S.Ahmed {Commercial Director}

Mr. Nilotpal Roy {Managing Director - IIsco Plant}

Mr. V. Shyamsundar {Managing Director – Durgapur steel Plant}

Mr. B.N. Singh {Managing Director - Rourkela Steel Plant}

Dr. S.C. Jain {Independent Director}

Prof. R.P. Sengupta { Independent Director}

Dr. Velu Annamalai { Independent Director}

Prof. Deepak Nayyar { Independent Director}

Shri Siddharth Kak { Independent Director}

Shri Shyamal Ghosh { Independent Director}

Shri P.K. Sengupta { Independent Director}

Shri Devinder Kumar {Secretary}


1.5 BANKER AND AUDITORS

Bankers:-

 State Bank of India


 Punjab National Bank
 Canara Bank
 Bank Of Baroda
 United Bank Of India
 Bank Of India
 Union Bank Of India
 Allahabad Bank
 UCO Bank
 Central Bank Of India
 Indian Overseas Bank
 Syndicate Bank
 Jammu & Kashmir Bank
 State Bank Of Hyderabad
 State Bank Of Saurashtra
 IDBI Bank
 HDFC Bank Ltd.

Auditors:-

 M/s. S.K. Mittal & Co.


 M/s. Ray & Ray
 M/s. Dass Maulik Mahendra K.Agrawala & Co.
1.6 BASIC INFORMATION OF SAIL
ROC Registration Number :- 55 – 6454

Incorporation year :- 1954

Ownership :- Central Govt. - Commercial Enterprises

Main Activity :- Finished steel (incl. saleable steel)

Subsidiary/ies :- Maharashtra Elektrosmelt Ltd.

Other Integrated Plants :- Bhilai steel plants (BSP)


Durgapur steel plants (DSP)
Rourkela steel plants (RSP)
Bokaro steel plants (BSL)
IISCO steel plant (ISP)
1.7 VISION AND MISSION OF SAIL

VISION :-

Our vision to be a respected world class corporation and the leader in Indian
steel business in quality, productivity, profitability and customer satisfaction.

Mission :-

We build lasting relationship with customers based on trust and mutual benefit;
uphold highest ethical standards in conduct of our business. We create and
nurture a culture that supports flexibility, learning and is proactive to change. We
chart a challenging career for employees with opportunities for advancement and
rewards and also we value the opportunity and responsibility to make a
meaningful difference in people’s lives.
1.8 AWARDS & ACCOLADES
The excellent performance of the company has been widely recognized. It has
won number of awards and accolades in various fields. These include :

 The prestigious SCOPE Gold Trophy to SAIL for excellence and


Outstanding Contribution to the Public Sector Management – institutional
category for 2004-05.
 SCOPE Meritorious Award to SAIL for Environmental Excellence &
Sustainable Development for 2004-05.
 Prime Minister’s Shram Awards to 10 SAIL employees for 2004.
 Businessworld – FICCI – SEDF Corporate Social Responsibility Award
– 2006 to SAIL for its innovative corporate social responsibility initiatives in
the fields of education, access to drinking water, medical and healthcare,
sanitation, women’s empowerment, tribal welfare, sports, child healthcare,
heritage preservation, cultural and recreational activities.
 National Safety Awards for the year 2002 & 2003to Raw Material Devision.
 B.M.L. Munjal Award to SAIL for excellence in learning and development
for 2006 by Hero Honda Mindmine Institute.
 Dun & Bradstreet’s American Express Award – 2006 SAIL as the top
Indian company in Iron & Steel sector.
 Regional Trophy for Top Exporter to SAIL in the category of Manufacturing
Unit (Non – SSI category) for 2003-04 by the Engineering Export Promotion
Council, Northern Region.
 First Prize to SAIL pavilion at Udyog Mela in Ranchi by Jarkhand
Government.
 SAIL bagged the Construction World – NICMAR Award – 2006 and was
adjudged number one company in turnover and profitability amongst steel
manufacturing industries.
 First Pinnacle Award to SAIL for best steel company for supply of steel for
construction industry by ZEE Business.
1.9 PRODUCT PROFILE

Own Products

Main Steel Plant Pig Iron


Steel Ingots/Liquid
Saleable Steel-Finished
Saleable Steel-Semi
Finished

Alloy Steel Plant Pig Iron


Steel Ingots/Liquid
Saleable Steel-Finished
Saleable Steel-Semi
Finished

Other Product

Product Wise

Semis Blooms, Billets and Slabs


Long Products Structurals ,
Crane Rails,
Bars, Rods & Rebars
Wire Rods
Flat Products HR Coils, Sheets & Skelp,
Plates,
CR Coils & sheets
Tinplates
Electrical Steel
Tabular Products Pipes

Railway Products Rails,


Wheel, Axles, Wheel Sets
1.10 Shareholding Pattern
As on 31st March 2007
Category Number of Number of Amount % of
Equity shares holders (Rs. In Equity
held Crore)
Government of India 3544690285 1 3544.69 85.82
Financial Institutions & 164232264 55 164.23 3.98
Banks
Mutual Funds and UTI 58188578 81 58.19 1.41
Foreign Institutional 254199047 119 254.20 6.15
Investors (FII’s)
Global Depository 1546835 2 1.55 0.04
Receipts (GDRs)
Companies( including 23359147 3090 23.36 0.56
Trusts & Clearing
Members)
Individuals (including 84184389 209382 84.18 2.04
Employees& NRIs)
Total 4130400545 212730 4130.40 100.00

Government of India
Shareholding Pattern (% of equity)
2.04
Financial Institutions
0.56
& Banks
0.04
6.15 Mutual Funds and UTI

1.41
3.98 Foreign Institutional
Investors (FII’s)

Global Depository
Receipts (GDRs)
85.82
Companies( including
Trusts & Clearing
Members)
Individuals (including
Employees& NRIs)
CHAPTER – 2 FINANCE AND FINANCIAL ANALYSIS

2.1 Introduction to Finance


2.2 Financial Analysis and Techniques
2.1 INTRODUCTION TO FINANCE
AND FINANCE ANALYSIS

Introduction to Finance

• Preface
The position of finance in business can be matched with the position of
blood in the human body. Finance is the lifeblood of the business.
Finance, today is not only limited up to function that circulates business
but also extended its boundaries. Today success or failure concern
heavily depends upon how effective financial management a firm has. It is
the portfolio that give maximum return at minimum cost. Further different
parties, both inside and outside of firm are interested in financial position
of firm and at fixed interval they often evaluate financial position by
assessing financial statement of firm.
2.2 Financial Analysis & Technique

Financial statement analysis is the collective name for the tools and
techniques that are intended to provide relevant information to decision
makers. The purpose of financial statement analysis is to assess a
company’s financial health and performance. Financial statement analysis
consists of comparison for the same company over period of time and
comparison of different companies either in the same industry or in
different industries.

There are mainly seven techniques of analyzing financial statements are


follows :-

• Comparative Statement
• Trend Percentages
• Common Size Statement
• Statement showing change in net working capital
• Fund flow statement
• Cash flow statement
• Ratio Analysis

By using these techniques management or any person who knows these


techniques can analyze the financial position with adequate data and interpret it
and also deriving conclusion from it.

(A)Comparative Statement.

Under this, The logic is if we put financial statement of different year


together we can easily know the changes in the business that occurs time by
time and slowly gradually. This method is very useful for the owners of business;
by this they can better know their performance in business in last few years.
Here, this method needs financial statement of firm of more than two years.
Because if we compare current years position with previous years position then it
may give wrong information i.e. it may happen that previous year is affected by
inflation or vice a versa than in this situation we can’t get correct conclusion.
Thus by putting last three or five years statement together we can know the
increase or decrease in assets, liabilities, income and expense of the business.
With this method we can interpret profit and loss account as well as balance
sheet.
(B)Trend Percentage.

Trend analysis involves calculation of percentage changes in financial


statement items for a number of successive years. It is an extension of
comparative statement to several years. Trend analysis is carried out by first
assigning a value of 100 to the financial statement items in a past financial year
used as the base year and then expressing financial statement items in the
following year as a percentage of the base year value. Suppose, we have
information about cash and bank balance of business as follow for one particular
company.

Year 2003-04 2004-05 2005-06


Cash & Bank 10000 12000 14000

So, in trend analysis we put 100 for 2003-04 and get 120 for 2004-05 and
also get 140 for the year 2005-06. So by comparing data in percentage we can
easily get conclusion about financial position. But some limitation are that if base
year is not normal year than we can not get correct conclusion, further sometime
in current year it may be possible that price of some goods is increased or
decreased or due to some new Govt. policies, business have to be change
accordingly so in this type of condition business in trend analysis cannot give
correct conclusion.

(C) Common Size Statement.

Common size statement is the proportional expression of each item on a


financial statement to the statement total. In this statement all the elements within
each statement are expressed in percentage of some common number and
always add up to 100 percent. The items in the profit and loss account are
usually expressed as percentage of sales, while the balance sheet items are
given as percentage of total shareholder’s funds and liabilities or of total assets.
This type of statement is also called as 100% statement.

(D)Statement Showing Increasing or Decreasing in Net working Capital

Net working capital means increase of current assets over current


liabilities. Working capital is necessary for day-to-day functioning of business
therefore, for knowing the year by year change in it; Statement of changing in
working capital is to be prepared. There are many different methods for preparing
this statement but popular among it is to compare current assets with current
liabilities and not increase or decrease in it

(E) Fund Flow Statement.


This statement is prepared in intention to know that during the year how much
inflow come and how many outflows goes from business. Further from where this
inflow occurred and to where these outflow goes. It also indicates investment of
funds. If we have issued shares during the year than it is considered as inflow
and if we have purchase machinery than it is considered as outflow of funds.

(F) Cash Flow Statement.


Fund flow statement and working capital statement shows change in working
capital as well as flows for the period of one year. While cash flow statement can
represent flows of working capital for short period of time. It is prepared quaterly,
half yearly or yearly. This statement also compares previous year’s flow with
current years flow so that we can best predict position of business. Cash flow
information is widely used by incestors, analysts, managers, creditors and others.
It is a part of full set of financial statement.

(G) Ratio Analysis


Financial statement cannot useful for proper guidance independently but it more
useful for knowledge of interrelation between two information. In simple words,
after comparison of different financial statement if we want to put this can
compare ratio of particular firm with other firm for knowing the performance of
particular company. Ratio is a figure showing the logical relationship between
any two items taken from financial statement. Ratio analysis method is classified
as :-

(A) Traditional method include


i) Profit & loss Account Ratio
ii) Balance sheet Ratio
iii) Mix Ratio

(B) Classification According to Nature of ratio include


i) Liquidity Ratio
ii) Profitability Ratio
iii) Leverage Ratio
iv) Activity Ratio
CHAPTER – 3 BALANCE SHEET ANALYSIS
3.1 Introduction to Balance Sheet
3.2 Balance Sheet
3.3 Comparative Analysis of Balance Sheet
3.4 Common size statement of Balance Sheet
3.5 Trend Analysis of Balance Sheet
3.1 INTRODUCTION TO BALANCE SHEET

A balance sheet is a list of assets and liabilities and claims of a business


at some specific point of time and is prepared from an adjusted Trial Balance. It
shows the financial position of a business by detailing the source of funds and
utilization of these funds. A Balance Sheet shows the assets and liabilities
grouped, properly classified and arranged in a specific manner.

USES OF BALANCE SHEET


• It enables us to ascertain the proprietary interest of a person or business
organization.
• It enables us to calculate the actual capital employed in the business.
• The lender can ascertain the financial position of the business.
• It may serve as the basis for determining purchase consideration of the
business.
• Different ratio can be calculated from the Balance Sheet and these ratios
can be utilized for better management of the business.

LIMITATION OF BALANCE SHEET


• Fixed assets are shown in the Balance Sheet as historical cost less
depreciation up-to-date. A conventional Balance Sheet can not reflect the
true value of these assets. Again intangible assets are shown in the
Balance Sheet at book values which may bear no relationship to the
market values.
• Sometimes, balance sheet contains some assets which command no
market value such as expense, debenture discount etc. the inclusion of
these assets unduly inflate the total value of assets.
• The balance sheet can not reflect the value of certain factors such as skill
and loyalty of staff.
• A conventional balance sheet may mislead untrained readers in
inflationary situations.
• The value of major number of current assets depends upon some
estimates, so it cannot reflect the true financial position of business.
3.2 BALANCE SHEET
Balance Sheet of Steel Authority of India Limited
As On 31st March

SOURCES OF FUNDS Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07


Rs.Crore 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Net Worth 2829.75 2525.24 5037.67 10306.65 12601.41 17313.15


Authorised Capital 5000 5000 5000 5000 5000 5000
Issued Equity Capital 4130.4 4130.4 4130.4 4130.4 4130.4 4130.4
Paid-up Equity Capital 4130.4 4130.4 4130.4 4130.4 4130.4 4130.4
Preference Capital 0 0 0 0 0 0
Bonus Equity capital 0 0 0 0 0 0
Buy back amount 0 0 0 0 0 0
Buy back shares(nos.) 0 0 0 0 0 0
Reserve & Surplus -1300.65 -1605.16 907.27 6176.25 8471.01 13182.75
Borrowing 13562 12387.67 8012.99 4959.11 3388.45 3291.52
Deferred Tax Liabilities 0 0 0 3032.05 2889.53 2707.79
Current
Liabilities&Provision 7326.59 7944.14 9783.5 11163.73 11765.05 12011.86
Total Liabilities 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32

APPLICATION OF
FUNDS
Rs.Crore
Gross Fixed Assets 27767.21 27901.85 28057.06 28335.05 29913.51 30927.22
Land & Building 1985.94 1874.52 1888.29 2269.25 2604.88 2608.23
Plant & Machinery 23286.87 23608.46 23713.23 24085.01 25021.73 25489.78
Other Fixed Assets 1938.46 2057.62 2073.34 1614.31 1528.96 1593.17
Capital WIP 555.94 361.25 382.2 366.48 757.94 1236.04
Less:Cumulative
depreciation 12393.76 13490.26 14547.46 15542.3 17134.62 18232.91
Net Fixed Assets 15373.45 14411.59 13509.6 12792.75 12778.89 12694.31
Revalued Assets 0 0 0 0 0 0
Investment 568.03 543.17 543.17 606.71 292 513.79
Deferred Tax Assets 0 0 0 1187.74 1405.07 1295.13
Inventories 4020.32 3722.52 3057.05 4220.69 6210.06 6651.47
Receivable 2760.37 3123.18 3277.84 4167.8 3428.77 4291.2
Cash & Bank Balance 416.37 512.91 2017.16 6132.12 6172.64 9609.93
Cash in hand 263.71 217.97 192.99 355.61 280.47 420.22
Bank balance 152.66 294.94 1824.17 5776.51 5892.17 9189.61
Intangible/DRE not
written off 579.8 543.68 429.34 353.73 357.01 268.59
Total Assets 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
Interpretation :-

The balance sheet is the statement showing the increase or decrease in the
assets and liabilities. This indicates the change in capital structure as well as
increase or decrease in assets.
In the last four year net worth is increases very rapidly. It is increases by 4711.14
in 2006-07 as compared to previous year. The reserves & surplus is also get
increase in last four years very rapidly. It is increases by 4711.74 in 2006-07 as
compared to previous year.
Now, here the strongest point of the company that company’s debt is decrease
year by year and proportion of the debt in capital structure is decrease that is in
2005-06 borrowing debt is 3388.45 and in 2006-07 debt is 3291.52. So it is
decrease by 96.43.
The balance sheet also shows the balance of assets and other investment made
by the company. The gross fixed assets are increased in 2006-07 by 1013.71 as
compared to previous year. The investment is also increase in 2006-07 by
221.79 as compared to previous year. The overall inventory turnover ratio shows
the good position of the company is good.
We also conclude that the liquid position of the company is good because cash
balance is increases year by year.
3.3 COMPARATIVE ANALYSIS OF
BALANCE SHEET
Steel Authority Of India
Ltd. Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Rs.Crore 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

SOURCE OF FUNDS
Net Worth 2829.75 2525.24 5037.67 10306.65 12601.41 17313.15
Change -304.51 2512.43 5268.98 2294.76 4711.74
Reserve & surplus -1300.65 -1605.16 907.27 6176.25 8471.01 13182.75
Change -304.51 2512.43 5268.98 2294.76 4711.74
Borrowings 13562 12387.67 8012.99 4959.11 3388.45 3291.52
Change -1174.33 -4374.68 -3053.88 -1570.66 -96.93
Deferred Tax Liabilities 0 0 0 3032.05 2889.53 2707.79
Change 0 0 3032.05 -142.52 -181.74
Current Liabilities &
Provision 7326.59 7944.14 9783.5 11163.73 11765.05 12011.86
Change 617.55 1839.36 1380.23 601.32 246.81
Total Liabilities 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32

APPLICATION OF
FUNDS
Rs.Crore
Gross Fixed Assets 27767.21 27901.85 28057.06 28335.05 29913.51 30927.22
Change 134.64 155.21 277.99 1578.46 1013.71
Investment 568.03 543.17 543.17 606.71 292 513.79
change -24.86 0 63.54 -314.71 221.79
Deferred Tax Assets 0 0 0 1187.74 1405.07 1295.13
Change 0 0 1187.74 217.33 -109.94
Inventories 4020.32 3722.52 3057.05 4220.69 6210.06 6651.47
Change -297.8 -665.47 1163.64 1989.37 441.41
Receivable 2760.37 3123.18 3277.84 4167.8 3428.77 4291.2
Change 362.81 154.66 889.96 -739.03 862.43
Cash &Bank Balance 416.37 512.91 2017.16 6132.12 6172.64 9609.83
Change 96.54 1504.25 4114.96 40.52 3437.19
Intangible/ DRE not
written off 579.8 543.68 429.34 353.73 357.01 268.59
Change -36.12 -114.34 -75.61 3.28 -88.42
Total Assets 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
3.4 COMMON SIZE STATEMENT OF
BALANCE SHEET

SOURCE OF FUNDS March- March- March- March- March- March-


02 03 04 05 06 07
Rs.Crore 12mths 12mths 12mths 12mths 12mths 12mths
Net Worth 11.93% 11.05% 22.06% 34.98% 41.12% 49.01%
Authorised Capital 21.08% 21.88% 21.90% 16.97% 16.32% 14.15%
Issued Equity Capital 17.41% 18.07% 18.09% 14.02% 13.48% 11.69%
Paid up Equity Capital 17.41% 18.07% 18.09% 14.02% 13.48% 11.69%
Reserve & Surplus -5.48% -7.02% 3.97% 20.96% 27.64% 37.32%
Borrowings 57.18% 54.20% 35.09% 16.84% 11.06% 9.32%
Deferred tax liabilities 0.00% 0.00% 0.00% 10.29% 9.43% 7.67%
Current liabilities&provisions 30.89% 34.76% 42.85% 37.89% 38.39% 34.00%
Total liabilities 100% 100% 100% 100% 100% 100%
APPLICATION OF
FUNDS(Rs.Crore)
Gross fixed assets 117.07% 122.07% 122.87% 96.17% 97.61% 87.55%
Land & building 8.37% 8.20% 8.27% 7.70% 8.50% 7.38%
Plant & machinery 98.18% 103.29% 103.85% 81.75% 81.65% 72.16%
Other fixed assets 8.17% 9.00% 9.08% 5.48% 4.99% 4.51%
Capital WIP 2.34% 1.58% 1.67% 1.24% 2.47% 3.50%
Less: depreciation -52.25% -59.02% -63.71% -52.75% -55.91% -51.62%
Net fixed assets 64.82% 63.05% 59.16% 43.42% 41.70% 35.94%
Revalued assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Investment 2.39% 2.38% 2.38% 2.06% 0.95% 1.45%
Deferred tax assets 0.00% 0.00% 0.00% 4.03% 4.59% 3.67%
Inventories 16.95% 16.29% 13.39% 14.33% 20.26% 18.83%
Receivables 11.64% 13.66% 14.35% 14.15% 11.19% 12.15%
Cash & Bank balance 1.76% 2.24% 8.83% 20.81% 20.14% 27.20%
Cash in hand 1.11% 0.95% 0.85% 1.21% 0.92% 1.19%
Bank balance 0.65% 1.29% 7.98% 19.60% 19.22% 26.01%
Intangible/ DRE written off 2.44% 2.38% 1.8%9 1.20% 1.17% 0.76%
Total assets 100% 100% 100% 100% 100% 100%
INTERPRETATION OF COMMON SIZE STATEMENT OF
BALANCE SHEET
 Source of Funds :-

• For the source of Funds we have taken the total


liabilities as 100.
• As we see in the table that in first two year borrowing
constitutes a largest part of the source of funds and after that current
liabilities and provision constitutes largest part of the source of funds.
• The deferred tax liabilities decrease year by year. In
the 2006-2007 it reported as 7.67% which is lower than the last two
years.

 Application of Funds :-

• For the analysis of application of funds we have taken the total assets
as 100.
• From the table we can interpret that the investment in the company
decrease in last three year. So it is not good for company.
• The sundry debtor of the company in last three year is increasing.
• As we see in the table cash balance increase very rapidly in last two
year
• We see in the table that net fixed assets increase in last three year. In
2006-07 fixed assets is 38.94% which is lower than previous year by
5.76%.

FOR THE YEAR 2001-02


APPLICATION OF FUNDS
Net fixed assets

2.44% Investment
1.76%
Deferred tax assets
11.64%
16.95% Inventories

0.00% 64.82% Receivables


2.39%
Cash & Bank balance

Intangible/ DRE written


off
FOR THE YEAR 2002-03
APPLICATION OF FUNDS
Net fixed assets

2.38% Investment
2.24%
Deferred tax assets
13.66%
Inventories

16.29%
63.05% Receivables
0.00%
2.38% Cash & Bank balance

Intangible/ DRE written


off

FOR THE YEAR 2003-04


APPLICATION OF FUNDS
Net fixed assets

Investment

Deferred tax assets


8.83% 0
14.35%
Inventories

13.39% 59.16% Receivables


0.00%
Cash & Bank balance
2.38%

Intangible/ DRE written


off
FOR THE YEAR 2004-05
APPLICATION OF FUNDS
Net fixed assets

Investment

Deferred tax assets


20.81% 1.20%
43.42% Inventories

14.15%
Receivables
2.06%
14.33%
4.03% Cash & Bank balance

Intangible/ DRE written


off

FOR THE YEAR 2005-06


APPLICATION OF FUNDS
Net fixed assets

Investment

Deferred tax assets


20.14% 1.17%
41.70% Inventories

11.19%
0.95% Receivables
20.26%
4.59% Cash & Bank balance

Intangible/ DRE written


off
FOR THE YEAR 2006-07
APPLICATION OF FUNDS
Net fixed assets

Investment

Deferred tax assets


0.76%
27.20% 35.94%
Inventories

12.15% 1.45% Receivables


18.83%
3.67%
Cash & Bank balance

Intangible/ DRE written


off

FOR THE YEAR 2001-02


Source of funds

Paid up Equity
Capital

Reserve & Surplus


17.41%
30.89%
-5.48% Borrowings
0.00%
57.18%
Deferred tax
liabilities

Current
liabilities&provision
FOR THE YEAR 2002-03
Source of funds

Paid up Equity
Capital

Reserve & Surplus


18.07%
34.76%
-7.02% Borrowings
0.00%
54.20%
Deferred tax
liabilities

Current
liabilities&provision

FOR THE YEAR 2003-04


Source of funds

Paid up Equity
Capital

Reserve & Surplus


18.09%
42.85% 3.97% Borrowings

0.00% 35.09%
Deferred tax
liabilities

Current
liabilities&provision
FOR THE YEAR 2004-05
Source of funds

Paid up Equity
Capital

Reserve & Surplus


14.02%
37.89%
20.96% Borrowings

10.29% 16.84%
Deferred tax
liabilities

Current
liabilities&provision

FOR THE YEAR 2005-06


Source of funds

Paid up Equity
Capital

Reserve & Surplus

13.48%
38.39%
Borrowings
27.64%
9.43% 11.06%
Deferred tax
liabilities

Current
liabilities&provision
FOR THE YEAR 2006-07
Source of funds

Paid up Equity
Capital

Reserve & Surplus

11.69%
34.00%
Borrowings
7.67% 37.32%

9.32% Deferred tax


liabilities

Current
liabilities&provision
3.5 TREND ANALYSIS OF BALANCE SHEET
SOURCE OF FUNDS March-02 March-03 March-04 March-05 March-06 March-07
Rs.Crore 12mths 12mths 12mths 12mths 12mths 12mths

Net Worth 100.00 89.24 178.03 364.22 445.32 611.83


Authorized capital 100.00 100.00 100.00 100.00 100.00 100.00
Issued Equity capital 100.00 100.00 100.00 100.00 100.00 100.00
Paid-up equity capital 100.00 100.00 100.00 100.00 100.00 100.00
Bonus equity capital 100.00 100.00 100.00 100.00 100.00 100.00
Reserves & surplus 100.00 123.41 -69.76 -474.85 -651.29 -1013.55
Borrowings 100.00 91.34 59.08 36.57 24.98 24.27
Current liabilities & 100.00 108.43 133.53 152.37 160.58 163.95
provision
Total liabilities 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
Total liabilities 100.00 96.37 96.27 124.21 129.20 148.93

APPLICATION OF FUNDS
Rs.Crore
Gross Fixed Assets 100.00 100.48 101.04 102.05 107.73 111.38
Land & building 100.00 94.39 95.08 114.27 131.17 131.33
Plant & machinery 100.00 101.38 101.83 103.43 107.45 109.46
Other fixed assets 100.00 106.15 106.98 83.28 78.87 82.19
Capital WIP 100.00 64.98 68.75 65.92 136.33 222.33
Less:cumulative depreciation 100.00 108.85 117.38 125.40 138.25 147.11
Net fixed assets 100.00 93.74 87.88 83.21 83.12 82.57
Revalued assets 100.00 100.00 100.00 100.00 100.00 100.00
Investments 100.00 95.62 95.62 106.81 51.41 90.45
Inventories 100.00 92.59 76.04 104.98 154.47 165.45
Receivables 100.00 113.14 118.75 150.99 124.21 155.46
Cash & bank balance 100.00 123.19 484.47 1472.76 1482.49 2308.00
Intangible / DRE not written 100.00 93.77 74.05 61.00 61.57 46.32
off

Total Assets 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32


Total Assets 100.00 96.37 96.27 124.21 129.20 148.93
APPLICATION OF FUNDS :-

TREND ANALYSIS OF NET FIXED ASSETS

Net fixed assets

150
Amount(%)

100
100 93.74 87.88 83.21 83.12 82.57
50
0
2002 2003 2004 2005 2006 2007
Years

 The above graph of net fixed assets shows little decreased as compared to
base year 2001-02
 In the year 2001-02 it was 100% it decreased 82.57 in the year 2006-07. It
means it has been decreased to 17.43% in this period.
 In real it was 15373.45 in the year 2001-02 and decreased to 12694.31 in the
year 2006-07.
 Actually, gross fixed assets have been increased continuously but it shows
downward trend only due to depreciation.

TREND ANALYSIS OF INVESTMENTS

Investments

150
Amount(%)

106.81
100 90.45
100 95.62 95.62
50
51.41
0
2002 2003 2004 2005 2006 2007
Years

 The above graph of trend of investments shows fluctuation but investments


have been decreased compared to the base year 2001-002
 In the year 2001-02 it was 100% but in the year 2003-04 it has been reduced to
95.62% but then it has been increased to 106.81% in the year 2004-05. After that
in the year 2005-06 it has decreased to 51.41 but after that in the last year it is
increased to 90.45.
 In real it was 568.03 in 2001-02 and decreased to 513.79 in the year 2006-07.
 It has reduced in the year 2005-06 because of sale of investments in this year.
TREND ANALYSIS OF INVENTORIES

Inventories

200
Amount(%)

150 165.45
154.47
100
100 104.98
50 92.59 76.04
0
2002 2003 2004 2005 2006 2007
Years

 The above graph of trend of inventories shows continuously decrease till 2003-
04 but after that it is icreasing continuously. So there is a fluctuation the
inventories.
 In the year 2002-03 it was 100%. In the 2006-07 year it is 165.45. so it is
increase by 65.45%
 In real it was 4020.32 Rs.Crore in the year 2001-02 and increased to 6651.47
Rs. Crore in the year 2006-07.
 Because there is a continuously increasing in store and spares and finished
goods.

SOURCE OF FUNDS :-

TREND NALYSIS OF NET WORTH

Net W orth

800
Amount(%)

600 611.83
364.22
400 178.03
100 89.24 445.32
200
0
2002 2003 2004 2005 2006 2007
Ye ars
 Here the net worth of the company is increasing till 2006-07.
 It was 100% in the base year 2001-02 and in 2006-07 it is 611.83% in the year
2006-07. so it is increase by 511.83%
 The reason behind that reserve and surplus increase very rapidly, but share
capital remain same.

TREND ANALYSIS OF BORROWINGS

Borrowings

150
Amount(%)

100
100 91.34 36.57 24.98
50
59.08 24.27
0
2002 2003 2004 2005 2006 2007
Years

 Borrowings of the company is continuously decreasing.


 In the year 2001-02 it is 100% but in the year 2006-07 it is 24.27% so it is
decrease by 75.73%.
 The reason behind that company repaid the short term borrowings and
debentures.

TREND ALYSIS OF CURRENT LIABILITIES AND PROVISION


Current liabilities & provision

200
Amount(%)

150 163.95
100 133.53 152.37 160.58
50 100 108.43
0
2002 2003 2004 2005 2006 2007
Years

 The above graph of trend of current liabilities & provisions shows continuously
increase in the current liabilities & provisions compared to the base year 2001-02
 In the year 2001-02 it was 100% it has been continuously increase to 163.95%
in the year 2006-07. It means it has been increased 63.95% in this period.
 Current liabilities & provisions constitutes of liabilities & provisions.
 The reason behind that sundry creditors and other current liabilities are
increasing.
CHAPTER – 4 PROFIT AND LOSS ACCOUNT ANALYSIS

4.1 Introduction to P&L Account


4.2 Profit & Loss Account
4.3 Comparative Analysis of P&L Account
4.4 Common Size Statement of P&L Account
4.5 Trend Analysis of Profit & Loss Account
4.1 INTRODUCTION TO PROFIT AND LOSS ACCOUNT
The Profit & Loss account is also known as the income statement. It can
be defined as a report that summaries the revenues and expenses of an
accounting period to reflect the changes in various critical areas of firm’s
operation. It is of greatest interest and import and importance to end-users of
accounting statements because it enables them to ascertain whether the
business operations have been profitable or not during that particular period. The
important destination between the balance sheet and income statement is for a
period of one year. The two broad categories of item shown in the income
statement are revenue and expenses. Revenues derived from a companies
operation say manufacturing and selling products. During transaction business
has also incurred revenues other than main business operation. Expenses are
occurred in day-to-day transactions. Here expenses regarding manufacturing
activities do not considered but office and administrative expenses are
considered. By deducting total expenses from total revenue we get profit and by
deducting total revenue from total expenses we get total loss. Income tax amount
is also decided by profit that incurred in business with help of this statement.
4.2 PROFIT & LOSS ACCOUNT
Profit & loss of Steel Authority Of India Limited
As On 31st March
Mar Mar Mar Mar Mar Mar
Steel Authority Of India Ltd. 2002 2003 2004 2005 2006 2007
12
Rs. Crore (Non-Annualised) 12 mths 12 mths mths 12 mths 12 mths 12 mths
-
Income
Sales 16624.2 20500.09 25584 33219.84 34288.05 41288.89
Other income 226.39 201.36 297.34 558.93 764.46 1134.64
Change in stocks -422.38 -433 -485.84 247.61 1131.31 289.15
Non-recurring income 753.27 215.55 124.02 291.4 388.7 303.46
-
Expenditure
Raw materials, stores, etc. 7312.01 7355.21 8184.11 11647.61 14129.12 15259.95
Wages & salaries 3255.33 3087.23 4155.02 3823.2 4182.86 5131.38
Energy (power & fuel) 1709.59 2036.56 2158.86 2196.86 2495.47 2584.6
Indirect taxes (excise, etc.) 2009.09 2400.27 2899.01 3358.53 4625.1 5419.5
Advertising & marketing
expenses 88.74 142.82 149.14 69.19 61.27 82.8
Distribution expenses 675.54 615.76 625.5 828.01 982.12 872.87
Others 1090.68 2616.6 2607.74 1110.13 2485.45 2609.13
Less: expenses capitalized 21.3 20.66 26.47 36.85 47.66 67.43
Non-recurring expenses 24.53 26.07 59.9 132.83 31.03 51.84
-
Profits / losses
PBDIT 1037.27 2224.14 4706.71 11188.27 7627.76 11071.5
Financial charges (incl.
lease rent) 1588.27 1381.79 953.57 651.98 467.76 332.13
PBDT -551 842.35 3753.14 10536.29 7160 10739.37
Depreciation 1155.89 1146.66 1122.59 1126.95 1207.3 1211.48
PBT -1706.89 -304.31 2630.55 9409.34 5952.7 9527.89
Tax provision 0 0 118.47 2592.37 1939.73 3325.6
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
-
Appropriation of profits
Dividends 0 0 0 1548.27 941.94 1478.4
Retained earnings -1706.89 -304.31 2512.08 5268.7 3071.03 4723.89
PAT

8000
6816.97
7000 6202.29
6000
5000
4012.97
4000
Amount(%)

3000 2512.08
2000
1000
0
-1000 2002 -304.31
2003 2004 2005 2006 2007
-2000
-1706.89
-3000
Years

INTERPRETATION :-

The profit and loss account of the company shows the overall income and
expenditure, made by the company in a particular time period. The difference
between the debit and credit side of the P&L account, shows the net profit or net
loss.

Here the profit and loss account of the company shows the satisfactory level but
as compared to previous year the expenses of the company is increases. Here
the sales turnover is increase year by year. The sales in 2005-06 is 34288.05
and now it is increase by 7000.84 Crore Rs. In 2006-07. So, by this way the
income of the company is increase by 6444.12 in 2006-07 as compared to
previous year.

While on the other side the expenditure shows the expenses meet by the
company in a particular period. The expenditure met by the company is highest
in 2006-07, while in other year the expenditure of the company are increases.
The overall analysis of the expenditure side of the company shows the average
increase in expenses of the company.

After analyzing the income and expenditure side of the company, there is
difference between both sides which is known as the net profit / loss. The net
profit of the company shows an overall increase year by year. In 2001-02 it is
1037.27 and now it is increasing and in 2006-07 it is 11071.5 Crore Rs.

Therefore, On the basis profit and loss account the overall performance is
growing very well. But on the basis of the calculating various ratio, the ratios are
clearly indicates the good and bad position of the company. The profitability
ratios are increasing year by year, which shows the good performance of the
company.
4.3 COMPARATIVE ANALYSIS OF PROFIT & LOSS
ACCOUNT

Steel Authority Of India


Ltd. Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Rs.Crore 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Income 17181.48 20484 25519.52 34317.78 36572.52 43016.14


Change 3302.52 5035.52 8798.26 2254.74 6443.62
Expenditure 16186.81 18301.18 20865.75 23203.21 29040.08 32079.5
change 2114.37 2564.57 2337.46 5836.87 3039.42
PBDIT 1037.27 2224.14 4706.71 11188.27 7627.76 11071.5
Change 1186.87 2482.57 6481.56 -3560.51 3443.74
PBDT -551 842.35 3753.14 10536.29 7160 10739.37
Change 1393.35 2910.79 6783.15 -3376.29 3579.37
PBT -1706.89 -304.31 2630.55 9409.34 5952.7 9527.89
Change 1402.58 2934.86 6778.79 -3456.64 3575.19
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
Change 1402.58 2816.39 4304.89 -2804 2189.32
4.4 COMMON SIZE STATEMENT OF PROFIT AND LOSS
ACCOUNT

Steel Authority Of India Ltd. March- 02 March-03 March-04 March-05 March-06 March-07
Rs.Crore 12mths 12mths 12mths 12mths 12mths 12mths

Income
Sales 98.65% 99.03% 98.85% 98.35% 97.82% 97.33%
Other Income 1.35% 0.97% 1.15% 1.65% 2.18% 2.67%
Total Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Change in stocks -2.51% -2.09% -1.88% 0.73% 3.23% 0.68%
Non-recurring income 4.47% 1.04% 0.48% 0.86% 1.11% 0.72%

Expenditure
Raw materials, stores, etc. 43.39% 35.53% 31.62% 34.48% 40.31% 35.97%
Wages & salaries 19.32% 14.91% 16.05% 11.32% 11.93% 12.10%
Energy( power & fuel) 10.15% 9.84% 8.34% 6.50% 7.12% 6.09%
Indirect taxes (excise etc.) 11.92% 11.59% 11.20% 9.94% 13.19% 12.77%
Advertising & marketing expenses 0.53% 0.69% 0.58% 0.20% 0.17% 0.20%
Distribution expenses 4.01% 2.97% 2.42% 2.45% 2.80% 2.06%
Others 6.47% 12.64% 10.08% 3.29% 7.10% 6.15%
Less: expense capitalized -0.13% -0.10% -0.10% -0.11% -0.14% -0.16%
Non-recurring expenses 0.15% 0.13% 0.23% 0.39% 0.09% 0.12%
Profits / losses
PBDIT 6.16% 10.74% 18.19% 33.13% 21.77% 26.10%
- Financial charges (incl. lease rent) 9.43% 6.67% 3.68% 1.93% 1.33% 0.78%
PBDT -3.27% 4.07% 14.51% 31.19% 20.44% 25.32%
Depreciation 6.86% 5.54% 4.35% 3.34% 3.44% 2.86%
PBT -10.13% -1.47% 10.16% 27.85% 17.00% 22.46%
Tax Provision 0.00% 0.00% 0.46% 7.67% 5.54% 7.84%
PAT -10.13% -1.47% 9.70% 20.18% 11.46% 14.62%
-
Appropriation of profit
Dividends 0.00% 0.00% 0.00% 4.58% 2.69% 3.48%
Retained Earnings -10.13% -1.47% -9.70% 15.60% 8.77% 11.14%
INTERPRETATION OF COMMON SIZE STATEMENT
OFPROFIT AND LOSS ACCOUNT
• For the analysis of Profit & Loss account we have taken the sales and
other income as base.
• From the analysis of common size statement, we can interpret that the
income of the company increase year by year.
• The expenditure also increases year by year. It recorded in % . In current
year expenditure is higher than previous year.
• As we see in the table Raw Material consumed increases very large
proportion. It shows that production of the company increases year by
year.
• The PBDIT of the company is also increase in current year. In previous
year it is 21.77% and in current year it is 26.10%.
4.5 TREND ANALYSIS OF PROFIT AND LOSS ACCOUNT
Steel Authority Of India Ltd. March- 02 March-03 March-04 March-05 March-06 March-07
Rs. Crore 12mths 12mths 12mths 12mths 12mths 12mths
Income
Sales 100.00 123.31 153.90 199.83 206.25 248.37
Other income 100.00 88.94 131.34 246.89 337.67 501.19
Change in stocks 100.00 102.51 115.02 -58.62 -267.84 -68.46
Non-recurring income 100.00 28.62 16.46 38.68 51.60 40.29
Expenditure
Raw materials, stores, etc. 100.00 100.59 111.93 159.29 193.23 208.70
Wages & salaries 100.00 94.84 127.64 117.44 128.49 157.63
Energy(power & fuel) 100.00 119.13 126.28 128.50 145.97 151.18
Indirect taxes (excise, etc.) 100.00 119.47 144.29 167.17 230.21 269.75
Advertising & marketing 100.00 160.94 168.06 77.97 69.04 93.31
expenses
Distribution expenses 100.00 91.15 92.59 122.57 145.38 129.21
Others 100.00 239.91 239.09 101.78 227.89 239.22
Less: expenses capitalized 100.00 97.00 124.27 173.00 223.76 316.57
Non recurring expenses 100.00 106.28 244.19 541.50 126.50 211.33
Profit / losses
PBDIT 100.00 214.42 453.76 1078.63 735.37 1067.37
Financial charges (Incl. lease 100.00 87.00 60.04 41.05 29.45 20.91
rent)
PBDT 100.00 -152.88 -681.15 -1912.21 -1299.46 -1949.07
Depreciation 100.00 99.20 97.12 97.50 104.45 104.81
PBT 100.00 17.83 -154.11 -551.26 -348.75 -558.20
Tax provision 100.00 100.00 100.00 1.18 25.92 33.25
PAT 100.00 17.83 -147.17 -399.38 -235.10 -363.37
Appropriation of profit
Dividends 100.00 100.00 100.00 15.48 9.00 15.00
Retained earnings 100.00 17.83 -147.17 -308.67 -179.92 -276.75
TREND ANALYSIS OF SALES

Sales
Amount(%)

300
248.37
200
153.9 199.83 206.25
100 123.31
100
0
2002 2003 2004 2005 2006 2007
Years

 The above graph of sales shows continuously increase in the sales compared
to the base year 2001-02
 In the year 2001-02 it was 100% it has been continuously increase to 248.37%
in the year 2006-07. It means it has been increased 148.37% in this period.
 In real it was 16624.2 in the year 2001-02 and increased to 41288.89 Rs.Crore
 So it is favorable for the company & increases the reputation of the company.

TREND ANALYSIS OF PBDIT

PBDIT

1500
Amount(%)

1000 1078.63 1067.37


735.37
500 453.76
100 214.42
0
2002 2003 2004 2005 2006 2007
Years

 The above graph shows the continuously increasing in the PBDIT compared to
the base year 2001-02.
 In the year 2001-02 it was 100%. And now in 2006-07 it is 1067.37. so it is
increase by 967.37%. It is favourable for the company.
 It has increased due to increase in sales over the years.
CHAPTER – 5 CASH FLOW STATEMENT ANALYSIS
5.1 Introduction to Cash Flow Statement
5.2 Cash Flow Statement
5.1 INTRODUCTION TO CASH FLOW STATEMENT

Cash is the nerve center around which business activity flow. The profit figure
shown in the profit & loss statement in the book profit. It does not represent cash
profit. For knowing the cash profit we prepare cash flow statement in the
business. This statement provides information about the cash flows of an
enterprise. This statement is also useful in taking economic decision that are
taken by users require an evaluation of the ability of an enterprise to generate
cash and cash equivalents. The cash flow statement deals with the provision of
information about the historical changes in cash. Cash flow statement which
classifies cash flows during the period among (i) Operating (ii) investing (iii)
financing activities.
5.2 CASH FLOW STATEMENT

Steel Authority Of India Ltd. Mar 2002 Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007
RsCrore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

PBIT -1706.89 -315.87 2685.06 9365.35 5705.74 9422.62


Add: depreciation 1164.12 1146.5 1174.38 1192.2 1217.47 1236.75
Interest payable 1562.03 1334.01 899.43 605.05 467.76 215.25
Gain or loss on forex transactions 79.66 94.13 44.95 24.86 -20.54 -5.61
Write offs / amortisation 232.54 339.45 321.33 194.18 188.2 131.93
Profit on sale of investments 0 0 0 0 0 0
Profit on sale of assets -662.47 -144.19 -52.42 6.52 -58.24 -13.97
Interest income -105.3 -88.96 -74.76 -262.76 -461.49 -752.6
Dividend income -5.74 -2.67 -8.22 -13.38 -13.66 -17.34
Other income / provision
adjustments 490.88 740.38 1648.37 -691.64 428.92 -180.48
-
Cash flow before working cap.
changes 1048.83 3102.78 6638.12 10420.38 7454.16 10036.55
Trade receivables 426.98 -413.9 78.42 -149.96 -1149.52 -832.15
Inventories 477.16 297.46 662.93 -1163.63 -1766.94 -441.41
Trade payables -17.28 -36.41 84.21 645.29 79.55 337.9
Others 0 0 0 0 0 0
-
Cash flow from operations 1935.69 2949.93 7463.68 9752.08 4617.25 9100.89
Direct taxes paid 0 0 -118.47 -777.93 -746.45 -3427.31
Dividend tax paid 0 0 0 -80.97 -176.68 -136.13
-
Cash flow before extra ord. items 1935.69 2949.93 7345.21 8893.18 3694.12 5537.45
Extraordinary items -785.02 -282.19 -160.01 -74.68 -46.87 76.21
-
Cash flow from operating activities 1150.67 4085.95 8242.61 9735.73 4268.81 6122.82
-
Net cash used in investing activities 676.26 13.3 -339.76 -240.56 -338.01 -587.53
Purchase of fixed assets -322.03 -299.35 -363.32 -527.59 -896.65 -1137.66
Sale of fixed assets 703.17 177.69 89.48 60.91 87.65 46.82
Acquisition / merger of cos. 0 0 0 0 0 0
Purchase of investments -103.34 -4.51 0 -40 -60.17 -225
Sale of investments 0 0 0 0 0 0
Project expenses 0 0 0 0 0 0
Loan to group / subsidiary cos. 15.93 44.91 -153.31 45.98 -0.83 25.45
Loan to other cos. 0 0 0 0 0 0
Interest received 186.47 91.89 79.17 206.76 518.33 685.52
Dividend received 5.74 2.67 8.22 13.38 13.66 17.34
Other income 190.32 0 0 0 0 0
-
Net cash used in financing activities -2077.99 -2584.5 -5341.19 -4481.64 -3396.75 -1588.94
Proceeds from share issues 0 0 0 0 0 0
Total proceeds from borrowings 0 0 0 0 0 0
Proceeds from long term
borrowings 0 0 0 0 0 0
Proceeds from short term 0 0 0 0 0 0
borrowings
Total Repayment of borrowings -318.71 -1166.09 -4284.13 -2945.13 -1515.63 -111.49
Repayment of long term
borrowings -318.71 0 0 0 0 0
Repayment of short term
borrowings 0 0 0 0 0 0
Share issue expenses 0 0 0 0 0 0
Interest paid -1759.04 -1418.21 -1057.41 -917.23 -621.56 -509.16
Dividend paid 0 0 0 -619.56 -1259.77 -970.64
Other cash from financing activities -0.24 -0.2 0.35 0.28 0.21 2.35
-
Net cash flow -251.06 96.54 1504.25 4096.3 -87.51 3437.19
-
Opening cash balance 667.43 416.37 512.91 2035.82 6260.15 6172.64
-
Closing cash balance 416.37 512.91 2017.16 6132.12 6172.64 9609.83
ANALYSIS OF CASH FLOW STATEMENT

 Cash Flow From Operating Activities :

• From the table of cash flow statement of the company we can


interpret that in 2006-07 cash from operating activities is
increase as compared to previous year because in 2006-07
PAT is increase more compared to previous years. But in 2005-
06 it is decrease because in this year PAT is decrease.
• The other reason is that current assets of the company is
increasing every year but current liabilities are increasing with
minor changes in last five years.

 Cash Flow From Investing Activities :

• From the cash flow statement we can interpret that cash from
investing activities is performed very good in last two years.
• The reason behind it is that the purchase of the fixed assets by
the company is increase very rapidly. So we can say that the
company expand its business.
• The other side the sale of fixed assets is increasing in last five
year. In 2006-07 the sale of fixed assets is too high.

 Cash Flow From Financing Activities :

• From the cash flow statement we can say that the cash from
financing activities is decreasing year by year.
• The reason behind it is that company repaid the borrowing and
loan. And also paid to the dividend in last three years to the
shareholders.
CHAPTER – 6 MEANING OF RATIO ANALYSIS

Ratio analysis is a widely used tool for financial analysis. It is defined as


the systematic use of ratio to interpret the financial statement, so that the
strength and weakness of a firm as well as its historical performance and current
financial condition can be determined. The term ration refers to the numerical
and quantitative relationship between two items/variables. The relationship can
be expressed as :-

1. Percentage
2. Fraction
3. Proportion of numbers

The rational of ratio analysis lies in the fact that it makes related
information comparable. A single figure by itself has no meaning but when
expressed in terms of a related figure, it yields significant inferences.

Ratio analysis thus, a quantitative tool, enables analysis to draw


quantitative answers such as:-

 Is the net profit adequate?


 Are the assets being used efficiently?
 Is the firm solvent?
 Can the firm met its current obligations and so on?
CHAPTER – 7 UTILITY OF RATIO ANALYSIS

The use of ratio was started by banks for ascertaining the liquidity and
profitability of the company’s business for the purpose of advancing loan to them.
It gradually become popular and other creditors began to use them profitably.
Now even the investor calculates ratio from the published account of the
company before investing their savings. The ratio analysis provides useful
information to management, which would help them in taking important policy
decision. Diverse group of people make use of ratios, to determine the particular
aspect of the financial position of the company, in which they are interested.

1) Profitability
Useful information about the trend of profitability is available from the
profitability ratios. The gross profit ratio, net profit ratio and ratio of return on
investment give a good idea of profitability of business.

2) Liquidity
In fact, the use of this ratio to ascertain the liquidity of the business. The
current ratio and liquid ratio will tell whether the business will be able to meet its
current liabilities as and when they mature.

3) Efficiency
The turnover ratio are excellent guides to measures the efficiency of
managers. For e.g. the stock turnover will indicate how efficiency the sales are
being made, the debtors turnover shows the efficiency of collection department
and assets are used in business.

4) Inter- firm comparison


The absolute ratio of the firm are not of much use, unless they are
compared with similar ratio of other firm belongs to the same industries.

5) Indicate Trend
The ratio of the last three to five years will indicate the trend in the
respective fields.
6) Useful for budgetory Control
Regular budgetary reports are prepared in business where the system of
budgetary control in use. If various ratios are prepared in this reports, it will give a
fairly good idea about various aspect of financial position.

7) Useful for decision making


Ratios guide the management in making some of the important decision.
CHAPTER – 8 CLASSIFICATION OF RATIO

{A} Liquidity Ratios


{B} Leverage / Capital Structure Ratios
{C} Profitability Ratios
{D} Activity Ratios
CLASSIFICATION OF RATIOS
Ratios can be classified into four broad group :-
1. Liquidity Ratio
2. Leverage / Capital structure Ratio
3. Profitability Ratio
4. Activity / Efficiency Ratio

{A}LIQUIDITY RATIOS
Liquidity is the most important factor in successful financial management.
A firm should have enough money to meets its short term liabilities, as and when
they become due for payment. If affirm fails to meet its short term liabilities
frequently, its prestige and creditworthiness would be adversely affected. A very
high degree of liquidity is also bad; idle assets earn nothing. Therefore it is
necessary to strike a proper balance between high liquidity and lack of liquidity.

{A.1}-Current Ratio
This most widely used ratio shows the proportion of current assets to
current liabilities. It is also known as ‘ Working Capital Ratio’. It is a measure of
short term financial strength of business and shows whether the business will
able to meet its current liabilities. Generally, it is believed that ratio of 2:1 is good
and shows a comfortable working capital position. But this ratio is differ company
by company. The formula for calculating this ratio is as under :-

Current Ratio = Current Assets


Current Liabilities
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07

Current Assets 7137.7 7350.32 8181.01 14374.42 15795.11 20536.14


Current 11353.24 9462.98 9938.01 11237.02 12080.29 12278.1
liabilities &
Provision
Current 0.63 0.77 0.82 1.28 1.31 1.67
Ratio(times)
Current Ratio

2 1.67
1.5 1.28 1.31

Ratio
0.77 0.82
1 0.63
0.5
0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This calculation implies that the fluctuation in the current ratio. As compared to
previous year the current years ratio shows the better liquidity position. In the
previous year this ratio is 1.31:1 and in the current year it is 1.67:1 which shows
increase in liquidity. The reason behind that cash balance and receivable is
increasing. But as compared to standard ratio it is not good but as per chore
committee it is good because as per chore committee 1.33 ratio is good. The
current liabilities also increase year by year. But finally company had tried to
maintain and improve this ratio.

{A.2} Acid Test / Quick Ratio


The Acid test ratio is the ratio between quick current assets and current
liabilities and is calculated by dividing the quick assets by the liquid liabilities.
Most people believe that liquid ratio is acid test ratio, but sometimes
business is able to repay its liquid quick assets. The reason behind that is
emergency requirement cash and business cannot get it from debtors, so quick
assets include cash balance + investment certificate that can be immediately
transferable into cash. The satisfactory ratio is 1:1 but lower limit is 0.5:1. Here
quick assets does not include stock.

= Quick Assets (Current assets-Inventories)


Current Liabilities
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Quick 3153.38 3627.80 5123.96 10153.73 9585.05 13884.67
Assets
Current 11353.24 9462.98 9938.01 11237.02 12080.29 12278.1
liabilities
Quick 0.28 0.38 0.52 0.90 0.79 1.13
Ratio(times)
Quick Ratio(times)

1.5
1.13
0.9 0.79
1

Ratio
0.52
0.5 0.28 0.38

0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
So as per the current year ratio of the company is up to some extent satisfactory.
This ratio shows the repay ability of the company which is satisfactory as per
lower level all over the year. As compared to previous year in current year it is
good. In 2002 it is 0.28 and in current year it is 1.13:1.

{A.3}Defensive Interval Ratio


The defensive interval ratio provides such a measure of liquidity. It is a
ratio between the quick assets and the projected daily cash requirement. Apart
from paying current liabilities, the liquidity position of a firm should be examined
in relation to it liability to meet projected daily expenditure from operations.

= Liquid Assets
Projected Daily Cash Requirement
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Liquid 3153.38 3627.80 5123.96 10153.73 9585.05 13884.67
Assets
Daily cash 82.18 92.18 104.62 116.14 143.37 157.67
requirement
Defensive 38 39 49 87 67 88
Interval
Ratio(days)
Defensive Interval Ratio(days)

100 87 88
80 67
60 49
39

Ratio
38
40
20
0
2002 2003 2004 2005 2006 2007
Ye a rs

Interpretation :-
This ratio shows the recovery of invested liquid assets. Therefore higher the ratio
shows the longer the period of recovery of liquid assets. Here the defensive
interval ratio of the company is increasing till 2005 but it has decreased for one
year and than again it has increase. So it is fluctuating. That means requirement
of more investment of liquid assets.

{A.4}Cash Ratio
Cash ratio is the most liquid asset; Financial analyst may examined the
cash ratio and its equivalent to current liabilities. Trade investment or marketable
securities are equivalent of cash, they may be include in the computation of cash
ratio.

= Cash + Marketable Securities X 100


Current Liabilities
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Cash 416.38 512.92 2017.17 6132.13 6172.70 9609.89
balance
Current 11353.24 9462.98 9938.01 11237.02 12080.29 12278.1
liabilities
Cash 3.67 5.42 20.30 54.57 51.10 78.27
Ratio (%)
Cash Ratio (%)

100 78.27
80
54.57 51.1

Ratio
60
40 20.3
20 3.67 5.42
0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This ratio shows the available percentage of cash as compare to current
liabilities. The total cash available to the company is average increased year by
year and also average ratio i.e. 3.67, 5.42, 20.30, 54.57, 51.10, 78.27 increased
which shows the good performance of the company. But in the 2005-06 it is
decreased from 54.57% to 51.10%. Because cash does not increase as
compared to increase current liabilities.
{B}CAPITAL STRUCTURE/LEVERAGE RATIO
The second category of financial ratios is leverage or capital structure
ratios. The long term creditors would judge the soundness of a firm on the basis
of the long term financial strength measured in terms of its ability to pay the
interest regularly as well as repay the installment of the principal of due dates or
in one lump sum at the time of maturity. Leverage means proportion of owner’s
capital to debt capital. It shows the proportion of outside funds used in business
as compared to funds provided by the owners in terms of share capital, reserves
etc.

{B.1} Long Term Funds to Fixed Assets Ratio


This ratio is obtained by dividing the long term funds with fixed assets.
Here long term fund include owner’s fund plus long term debt. This ratio must be
1:1 or more. If fixed capital is less than fixed assets, it would mean that short
term funds have been used in purchasing fixed assets the business would be put
to trouble.

= Owner’s fund + Long term debt


Fixed assets
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Long term 12365.1 13394.07 12896.45 15192.47 15674.62 20338.43
funds
Fixed 15373.45 14411.59 13509.6 12792.75 12778.89 12694.31
assets
Long term 0.80 0.93 0.95 1.19 1.23 1.60
fund to
fixed
assets
ratio
(times)
Long term fund to fixed assets ratio(times)

2 1.6
1.5 1.19 1.23
0.93 0.95

Ratio
1 0.8

0.5
0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This ratio is increasing year by year. In 2004-05 ,2005-06 2006-07 the fixed
capital was more than adequate to cover the fixed assets. In the year 2003-04 it
is 0.95 and now it is 1.60 in 2006-07. It is increase by 0.65.

{B.2} Total Debt Equity Ratio


This ratio can be called as a proprietary ratio and it is another form of it. It
establishes relationship between the outside long term & short term liabilities and
owner’s funds. This ratio is obtained by dividing the total debt by net worth.
= Total Debt
Net Worth
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Debt 13562 12387.67 8012.99 4959.11 3388.45 3291.52
Net Worth 2252.1 1988.93 4659.17 10011.72 12385.59 17184
Debt Equity 6.02 6.22 1.72 0.50 0.27 0.19
Ratio (times)
Debt Equity Ratio (times)

8 6.22
6.02
6
Ratio

4
1.72
2 0.5 0.27 0.19
0
2002 2003 2004 2005 2006 2007
Years
Interpretation :-
This ratio shows the 0.19 paisa of liabilities against the 1Rs. Of owner’s capital.
This ratio is very high in 2001-02, 2002-03 but in last 4 year it is decreasing year
by year. It is good for company as the interest burden is low. In the 2001-02,
2002-03 the company have more bank borrowing and debenture but later on
company had repaid its debentures and loans.

{B.3} Capital Employed Ratio


This ratio is expressing the basic relationship between debt equity. One
may want to know, how much funds are being contributed together by lenders
and owners for each rupee of the owner contributions. This can be found out by
calculating the ratio of capital employed to net assets to net worth.

= Capital Employed
Net Worth
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Capital 11787.45 12857.76 12517.65 14897.54 15458.80 20209.28
Employed
Net Worth 2252.1 1988.93 4659.17 10011.72 12385.59 17184
Capital 5.23 6.46 2.69 1.49 1.25 1.18
Employed
Ratio (times)

Capital Employed Ratio (times)

8 6.46
6 5.23
Ratio

4 2.69
1.49 1.25
2
0
2002 2003 2004 2005 2006
Years

Interpretation :-
This ratio shows the capital employed in business against 1 Rs. of net worth.
The overall result of this ratio over past year is good. That is in 2001-02, 2002-
03, 2003-04, 2004-05, 2005-06, 2006-07 it is as 5.23, 6.46, 2.69, 1.49, 1.25,
1.18. In 2001-02, 2002-03 there is better utilization of employed capital of the net
worth.

{B.4} Interest Coverage Ratio


The interest coverage ratio is also known as ‘ Time interest earned ratio’.
This ratio measures the debt servicing capacity of a firm in so far as fixed interest
on long term loan is concerned. It is determined by dividing the total profit or
earning before interest and taxes by the fixed interest charges on loans.
= EBIT
Interest
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
EBIT -1706.89 -315.87 2685.06 9365.35 5705.74 9422.62
Interest 1588.27 1381.79 953.57 651.98 467.76 332.13
Interest -1.07 0.23 2.82 14.36 12.20 28.37
Coverage
Ratio (times)

Interest coverage ratio(times)


28.37
30
20 14.36 12.2
Ratio

10 2.82
-1.07 0.23
0
-10
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This ratio shows whether the company has sufficient income to cover its interest
requirement by a wide margin. This ratio is as increasing rate. This is very good
for company. It implies that adequate safety for payment of interest even if there
were to be a drop in the company’s earning. The companies interest cover
continuous to be exceptionally high. This ratio shows that EBIT has power 28.37
times covering interest in 2006-07.
{C}PROFITABILITY RATIO

Profit is the main objective of any business enterprise. Besides,


profitability is the measure of efficiency. The owners invest their funds in
expectation of receiving reasonable return. Hence profitability ratios are very
important from the view point of various shareholders. Profitability ratio indicating
profitability in relation to sales and investment.

{C.1}Gross Profit Ratio


Gross profit margin ratio reflect the efficiency with which management
produces each unit of product. It expressing the relationship between Gross
Profit earned to Net Sales. This ratio usually expressed as percentage.

= Gross Profit X 100


Sales
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Gross 760.93 2713.41 5309.77 10601.09 6277.49 10266.25
Profit
Net Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Gross 5.21 15.00 23.41 35.50 21.16 28.62
Profit
Ratio(%)

Gross Profit Ratio(%)

40 35.5
28.62
30 23.41 21.16
Ratio

20 15
10 5.21
0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
Gross profit ratio shows the relation between gross profit and sales. That means
how much proportion of gross profit in sales. This ratio is increase still 2004-05
but in 2005-06 it is decreasing by 19.34% that is 21.16%. It indicate that cost of
sale is high or that the purchasing is inefficient.
{C.2} Operating Profit Ratio
It is a ratio showing relationship between Operating Profit and Net Sales.
It shows the efficiency of management.

= EBIT X 100
Net Sales
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
EBIT -1706.89 -315.87 2685.06 9365.35 5705.74 9422.62
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Operating -11.68 -1.75 11.84 31.36 19.24 26.27
Profit
Ratio (%)

Operating Profit Ratio (%)

40 31.36
26.27
30 19.24
20 11.84
Ratio

10 -1.75
0 -11.68
-10
-20
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
Operating profit ratio shows the proportion of profit before interest and tax in
sales revenue. This ratio is in 2002, it is -11.68%, in 2003 it is -1.75%, in 2004 it
is 11.84%, in 2005 it is 31.36%, in 206 it is 19.24% and in 2007 it is 26.27%
which means operating profit is increasing. So operating expenses is decreasing.

{C.3} Net Profit ratio


Net Profit is obtained when operating expense, interest and taxes are
subtracted from the gross profit. The net profit ratios measured by dividing PAT
(Profit After tax) by sales. This ratio indicates the firm’s capacity to withstand
adverse economic conditions.

= PAT X 100
Sales
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Net Profit -11.68 -1.68 11.07 22.83 13.53 17.29
Ratio (%)

Net Profit Ratio (%)

30 22.83
20 11.07 13.53 17.29
Ratio

10 -1.68
0 -11.68
-10
-20
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
Net profit ratio shows the relationship of PAT with the sales. This ratio does not
show the good position of the company. In past year that is 2001-02, 2002-03,
2003-04, 2004-05, 2005-06, 2006-07 the ratio is -11.68, -1.68, 11.07, 22.83,
13.53, 17.29 and it is decrease due to increase in cost and expenses of the
company. Soothe current year ratio is decrease to 13.53% in 2006 but in 2007 it
is increase to 17.29%.

{C.4} Cost Of Goods Sold Ratio


This ratio indicate percentage share of sales in consumed cost of goods
sold and conversely what proportion is available for meeting expenses such as
selling and general distribution expense as well as financial expenses consisting
of taxes, interest and dividend.

= COGS X 100
Sales
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Cost of 13854.18 15386.41 17375.22 19260.22 23385.46 25603.14
goods sold
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
COGS 94.79 85.00 76.59 64.50 78.84 71.38
ratio(%)
COGS ratio(%)

94.79
100 85 78.84 71.38
76.59
80 64.5

Ratio
60
40
20
0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This ratio indicates proportion of cost of good sold in the sales revenue. The cost
of good sold ratio is decrease year by year from 2002 to 2005 but in 2006 due to
some unknown reason the cost is increase from 64.50% to 78.84%.

{C.5} Operating Expense Ratio


The operating expense ratio explains the changes in the profit margin
(EBIT to sales) ratio. This ratio computed by dividing operating expenses viz.
cost of good sold plus selling expenses and general and selling
expenses(excluding interest) by sales.

= Operating Expense X 100


Sales
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Operating 16144.21 18259.86 20812.81 23129.51 28944.76 31944.64
Expenses
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Operating 110.46 100.88 91.75 77.46 97.58 89.06
profit
ratio (%)
Operating P rofit Ratio(% )

150
110.46 100.88
91.75 97.58 89.06
100 77.46

Ratio
50

0
2002 2003 2004 2005 2006 2007
Ye a rs

Interpretation :-
The operating expenses are very high as compared to sales. In the 2002 and
2003 it is very high but in 2005 it is controlled by company. But in 2006 and 2007
it is increasing because indirect taxes and other expenses is increasing very
rapidly. Here company try to control this expenses.

{C.6} Return On Total Investment :-


Profitability ratio can also be computed by relating the profit of a
company to its total assets. The ROA may also be called profit – to –asset ratio.
This ratio can be computed by dividing the PAT by total assets.

= PAT X 100
Total Assets
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
Total Assets 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
Return On -7.20 -1.33 11.00 23.14 13.10 17.56
Investment
(%)
Return On Investment (%)

30 23.14
17.56
20 11 13.1
Ratio

10
-1.33
0 -7.2
-10
2002 2003 2004 2005 2006 2007
Years
Interpretation :-
This ratio shows company’s profit earned on the total investment made in the
company. This ratio is increasing every year. In 2002 it is -7.20% and now it is
17.56 %in 2007. so it is increasing by 24.76%. It is very good for the company.

{C.7} Selling Expense Ratio


This ratio shows the relationship between the selling expenses and sales
obtained by the company. This ratio is obtains dividing the selling expenses by
the sales as follows:-

= Selling Expenses X 100


Sales
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Selling expenses 764.28 758.28 774.64 897.2 1043.39 955.67
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Selling 5.23 4.19 3.41 3.00 3.52 2.66
expenses
ratio(%)
Selling expenses ratio(%)

6 5.23
4.19
3.41 3.52
4 3 2.66
Ratio

0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
The average of all year’s ratio shows the reduction in selling expenses of the
company. The ratios are 5.23, 4.19, 3.41, 3.00, 3.52, 2.66. because the
advertising and marketing expenses decreases year by year and sales are
increases year by year. But in 2006-07 the advertising expenses suddenly
increases.

{C.8} Earning Per Share


Financial analyst regard the earning per share as an important measure
of profitability. EPS measures the profit available to the equity shareholders on a
per share basis, that is the amount that they can get on every share held. It is
computed by dividing the PAT to the No. of equity share.
= Profit After Tax
No. of equity share
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
No.Of equity 4130.4 4130.4 4130.4 4130.4 4130.4 4130.4
share
EPS Ratio -4.13 -0.74 6.08 16.50 9.72 15.02

EPS Ratio

20 16.5 15.02
15 9.72
10 6.08
EPS

5 -0.74
0 -4.13
-5
-10
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
The earning per share is increases very rapidly. But in 2005-06 EPS is
decreases because PAT is decrease. EPS is as -4.13, -0.74, 6.08, 16.50, 9.72,
15.02. It is very good for shareholders. They get good return.

{C.9} Return On Total shareholder’s Equity :-


In this ratio profitability is measured by dividing the net profit after tax by
the total shareholders equity. The term shareholders equity include paid up
capital and reserve & surplus less accumulated loss. This ratio reveals how
profitably the owner’s fund have been utilized by t he firm.

= Net Profit After Tax X 100


Total shareholder’s equity
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
Total 2829.75 2525.24 5037.67 10306.65 12601.41 17313.15
shareholder’s
equity
Return on -60.32 -12.05 49.87 66.14 31.85 35.82
total
shareholder’s
equity ratio

Return on toal shareholder’s equity ratio

100 66.14
49.87
50 31.85 35.82
Ratio

-12.05
0
-60.32
-50

-100 2002 2003 2004 2005 2006 2007


Years

Interpretation :-
The ratio is in minus in first two years because PAT is in minus. but in 2004 &
2005 year it is increases very rapidly. In this period company use owner’s fund
very profitably. But in 2006 it is decreasing because shareholder’s funds are
increasing and PAT is decreasing. But, though the company is earning good
profit.
{D} ACTIVITY RATIO
The activity ratio measures the efficiency with which assets are being
used in business. They are also known as Turnover Ratio. The efficiency with
which the assets are used would be reflected in the speed and rapidly with which
assets are converted into sales. The greater the rate of turnover or conversation,
the more efficient is the utilization / management, other things being equal.

{D.1} Stock / Inventory Turnover Ratio


This ratio indicate how fast inventory is sold. High ratio is good from the
view point of liquidity and vice-versa. A low ratio would signify that inventory does
not sale fast stays on the self or in the warehouse for long time.

= COGS
Inventory
Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
COGS 13854.18 15386.41 17375.22 19260.22 23385.46 25603.14
Inventory 4020.32 3722.52 3057.05 4220.69 6210.06 6651.47
Inventory 3.45 4.13 5.68 4.56 3.77 3.85
turnover
Ratio
(times)

Inventory turnover Ratiio (times)

5.68
6 4.56
4.13 3.77 3.85
4 3.45
Ratio

0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
Here, we have taken total inventory as base. The overall result of this ratio shows
bad result of inventory turnover. The result of 2002 to 2004 it is increasing rate
but after 2004 it is decreasing. Stock does not sale fast. Here company try to
increase this ratio.

{D.2} Debtors Turnover Ratio


This ratio suggests that the number of times the amount of credit sales is
collected during the year. A high ratio indicate that shorter time period between
credit sales and collection. A low ratio shows that debt is not being collected
rapidly.

=
Sales
Debtors+ Bills Receivable Rs.Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Debtor’s 2474.15 2917.74 2914.11 3046.80 3183.91 4003.42
+Receivable
s
Debtor’s 5.91 6.20 7.78 9.80 9.32 8.96
turnover
Ratio (Times)

Debtor’s turnover Ratio (Times)

15
9.8 9.32 8.96
10 7.78
Ratio

5.91 6.2
5

0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
Here we have taken debtor plus bills receivable as base. Till 2005 it is increasing
trend but after 2005 it is decreasing trend. The conversation of debtors into cash
shows a good collection policy of the company. It is increasing in earlier years
because debtors are increasing and sales are also increasing.

{D.3} Total Assets Turnover Ratio


The amounts invested in business are invested in all assets jointly and
sales are affected through them to earn profits. So in order to find out relation
between total assets to sales. Total assets include net fixed assets and current
assets.
= Net Sales
Total Assets Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Total Assets 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
Total Assets 0.62 0.79 0.99 1.01 0.97 1.02
Turnover
Ratio (times)

Total Assets Turnover Ratio (times)

1.5
0.99 1.01 0.97 1.02
1 0.79
0.62

Ratio
0.5

0
2002 2003 2004 2005 2006 2007
Ye a rs

Interpretation :-
Here we have taken as total assets as base. The total assets are increasing year
by year. The investment in assets in 2001-02 it is 23718.34 and in 2006-07 it is
35324.32 which was approximately 1.5 times more. The company is using the
assets efficiently that’s why the ratio is increasing trend. The ratios are increasing
that is 0.62, 0.79, 0.99, 1.01, 0.97, 1.02.

{D.4} Fixed Assets Turnover Ratio


Here we have also taken fixed assets as base. To ascertain the efficiency
and profitability of business of business, the total fixed assets are compared to
sales. This ratio can be finding out by dividing sales with the total fixed assets.
The more the sales in relation to amount invested in fixed assets, the more
efficient is the use of fixed assets.

= Net Sales
Fixed Assets
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
Fixed Assets 15373.45 14411.59 13509.6 12792.75 12778.89 12694.31
Fixed Assets 0.95 1.26 1.68 2.33 2.32 2.83
Turnover Ratio
Fixed Assets Turnover Ratio (times)

2.83
3 2.33 2.32
2 1.68

Ratio
1.26
0.95
1

0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This ratio shows an efficiently and profitability of the business. This ratio is
continuous increasing. This shows the fixed assets are being used effectively to
earn profits in the business. It is good for the company. In 2001-02 this ratio is
0.95 and in 2006-07 it is 2.83.

{D.5} Debt Collection Period


This ratio shows the number of days taken to collect the dues of credit
sales. It shows the efficiency of the collection policy of the enterprise. It is
calculated by dividing 365 by debtor’s turn over ratio.

= 360 Days
Debtor’s Turnover
Rs. Crore
Year Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
Days 360 360 360 360 360 360
Debtor’s 5.91 6.20 7.78 9.80 9.32 8.96
turnover
Debt 61 58 46 37 39 40
collection
period (days)
Debt collection period (days)

80 61 58
60 46
37 39 40

Ratio
40
20
0
2002 2003 2004 2005 2006 2007
Years

Interpretation :-
This ratio shows the company’s efficiency of collecting the money back from the
debtors. But in the initial years it is very high, here the company is lacking the
proficiency. Generally most of the company ‘s having the policy of giving the time
period of 30-40 days to their debtors. Till 2005 it is decreasing, but after 2005 it is
increasing trend. Here company try to maintain this ratio.
CHAPTER-9 DU POINT CHART

9.1 INTRODUCTION TO DU POINT CHART

Profit margin & assets turnover are the two drivers of return on assets. The Du
Pont System of financial analysis clearly brings out the effects of these two
drivers on return on assets. A system is useful for analysis, which considers
important inter relationship based on information found in financial statements.

Importance Of Du Pont Chart:

Any decision affecting the product price per unit costs, volume or efficiency has
an impact on the profit margin or turnover ratios. Similarly any decision affecting
the amount & ratio of debt or equity used will affect the financial structure & the
overall cost of capital of a company. Therefore, these financial concepts are very
important to evaluate as every business is competing for Limited Capital
Resources. Understanding the inter relationship among the various ratios such
as turnover ratio, average & probability ratios helps companies to put their money
areas where the risk adjusted return is the maximum.

The chart used by “Du Pont Company” of U.S.A is known as Du Pont Chart.

This is the Du Pont Chart applied to Ashok Leyland Ltd. At the left of the Du Pont
Chart is the return on the assets defined as the product of the Net Profit Margin &
the Total Assets Turnover Ratio.

Net Profit Total Assets = Net Profit / Sales X Net Sales / Avg. Total Assets.

Such decomposition helps in understanding how the Net Profit Margin & Total
Assets Turnover Ratio influences the Return on Total Assets.
9.2 DU PONT CHART OF SAIL
ROI (%)
2001-02 : -7.20
2002-03 : -1.33
2003-04 : 11.00
2004-05 : 23.14
2005-06 : 13.10
2006-07 : 17.56

Profit Margin (%) Total Assets


2001-02 : -11.68 Turnover (times)
2002-03 : -1.68 2001-02 : 0.62
2003-04 : 11.07 2002-03 : 0.79
2004-05 : 22.83 2003-04 : 0.99
2005-06 : 13.53 2004-05 : 1.01
2006-07 : 17.29 2005-06 : 0.97
2006-07 : 1.02

PAT ( in Rs.) Total sales ( in Rs.)


2001-02 : -1706.89 2001-02 : 14615.11
2002-03 : -304.31 2002-03 : 18099.82
2003-04 : 2512.08 2003-04 : 22684.99
2004-05 : 6816.97 2004-05 : 29861.31
2005-06 : 4012.97 2005-06 : 29662.95
2006-07 : 6202.29 2006-07 : 35869.39

Total sales(in Rs.) Total Assets (in Rs.)


2001-02 : 14615.11 2001-02 : 23718.34
2002-03 : 18099.82 2002-03 : 22857.05
2003-04 : 22684.99 2003-04 : 22834.16
2004-05 : 29861.31 2004-05 : 29461.54
2005-06 : 29662.95 2005-06 : 30644.44
2006-07 : 35869.39 2006-07 : 35324.32
9.3 INTERPRETATION OF DU POINT CHART

 The Du Point chart indicates the rate of return on investment in


percentage.
 The chart shows the allocation of financial performance of the company. In
the chart profit margin percentage and total assets turnover in times is
given. ROI is the multiplication of the profit margin and total assets
turnover.
 We can say from the chart that profit margin increase year by year. The
total assets turnover ratio also increase simultaneously.
 The reason behind the increment of profit margin is that the PAT of the
company increase year by year. And the denominator, total sales of the
company also increases very rapidly.
 The reason behind that increment in the total assets turnover ratio is that
the increment of net working capital and investment both are increases
simultaneously every year.
CHAPTER – 10 RECOMMENDATION AND SUGGESTION

By analyzing the annual report of the company, we would have to recommend


and suggest that :-

 From the analysis of the liquidity ratio we are able to recommend that the
liquidity position of the company is good, and also it is able to meet it current
obligation.
 The capital structure ratios shows the performance of the company is
increasing, because the company repaid the long term long term borrowing and
debenture
 The balance sheet figures are showing the declining trend since last few years.
It should be the reason for higher inventory level which unnecessary blocked the
money. For higher the profitability ratio of the firm, it is required to increase the
sales along with:
 To increase the work efficiency of the workers as well as of the staff members,
arrangement of different training programmes like meetings, seminars,
conferences, coaching classes etc. is required.
 For the innovation of new market, select capable market representatives who
are more efficient to recover the more market share.
 Try to maintain the quality level as per the market demand which satisfies the
customers more.
 In order to increase the profit the firm should keep proper control over the
expenses retaliating to the purchase of goods, manufacturing and labours for
that, proper supervision and timely comparison of actual with budgeted
overheads should be taken. This will help the management to know the causes
and taking competitive actions to reduce the expenses.
In order to reduce the expenses relating to payment of interest, the firm should
rely more on its share capital rather than borrowing loans and funds. Firm should
also try to maintain proper balance between debt and equity.
 To improve the liquidity position of the firm, proper working capital is necessary
to recover the daily cash requirement. For that, the firm should:
 Try to reduce the debt collection period which should be main sources for
working capital.
 Use more credit facility which is given by the creditors.
 Firm should also use more short term loans to recover the working capital
requirement because the interest rate for short term loans is less and it should be
flexible to use.
 In order to maximize wealth under uncertainty, the firm must pay enough
dividends to satisfy investors. It should help to increase the moral of the investors
and side by side also helps in long term financial strength of the firm. So, by
increasing profits, the firm should pay dividends regularly.
CHAPTER – 11 CONTEMPORARY ISSUES IN SAIL

 Goal ‘in principle’ approval accorded for merger of NINL, MEL & BRL with
SAIL.
 Agreement concluded for setting up of cement plant in joint venture with
M/S JP Associates for utilizing BF slag of Bhilai Steel Plant.
 Process under way for setting up a slag based cement plant using BF slag
at BSL in the frame work of JV.
 JV companies supplying captive power to SAIL to augment their
capacities by setting up 500 MW plant addition each at BSP & BSL.
CHAPTER-12 ANNEXURE
Assets : mfg. cos.

Mar Mar Mar Mar Mar


Steel Authority Of India Ltd. 2002 2003 2004 2005 2006 Mar 2007
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Gross fixed assets 27767.21 27901.85 28057.06 28335.05 29913.51 30927.22
Land & building 1985.94 1874.52 1888.29 2269.25 2604.88 2608.23
Plant & machinery 23286.87 23608.46 23713.23 24085.01 25021.73 25489.78
Other fixed assets 1938.46 2057.62 2073.34 1614.31 1528.96 1593.17
Capital WIP 555.94 361.25 382.2 366.48 757.94 1236.04
Less: cummulative depreciation 12393.76 13490.26 14547.46 15542.3 17134.62 18232.91
Net fixed assets 15373.45 14411.59 13509.6 12792.75 12778.89 12694.31
-
Revalued assets 0 0 0 0 0 0
-
Investments 568.03 543.17 543.17 606.71 292 513.79
In group / associate cos. 561.88 398.78 398.78 606.47 284.48 509.48
In mutual funds 0 0 0 0 0 0
Other investments 6.15 144.39 144.39 0.24 7.52 4.31
-
Marketable investment 0.01 0.01 0.01 0.01 0.06 0.06
In group / associate cos. 0 0 0 0 0 0
Quoted investment 0.01 0.01 0.01 0.01 0.06 0.06
Market value of quoted investment 0.42 0.41 0.79 0.9 3.33 4.31
-
Deferred tax assets 0 0 0 1187.74 1405.07 1295.13
-
Inventories 4020.32 3722.52 3057.05 4220.69 6210.06 6651.47
Raw materials and stores 1520.2 1655.4 1475.77 2271.69 2985.24 3137.5
Raw materials 628.45 774.49 580.64 1369.97 1769.97 1780.83
Stores and spares 891.75 880.91 895.13 901.72 1215.27 1356.67
Finished and semi-finished goods 2500.12 2067.12 1581.28 1949 3224.82 3513.97
Finished goods 2500.12 2067.12 1581.28 1949 3224.82 3513.97
Semi-finished goods 0 0 0 0 0 0
Incomplete construction contracts 0 0 0 0 0 0
Stock real estate 0 0 0 0 0 0
Stock of shares / securities 0 0 0 0 0 0
Other stock 0 0 0 0 0 0
-
Receivables 2760.37 3123.18 3277.84 4167.8 3428.77 4291.2
Sundry debtors 1389.41 1660.09 1549.96 1908.45 1881.73 2314.75
Debtors exceeding six months 206.06 198.08 130.61 118.82 116 72.63
Accrued income 93.52 90.59 86.18 142.18 85.48 152.56
Advances / loans to corporate bodies 23.37 8.3 171.05 146.2 16.42 16.42
Group / associate cos. 23.37 8.3 171.05 146.2 16.42 16.42
Other cos. 0 0 0 0 0 0
Deposits with govt. / agencies 85.06 105.86 106.19 87.94 132.73 108.3
Advance payment of tax 84.27 0.69 0.31 744.68 10.23 10.5
Other receivables 1084.74 1257.65 1364.15 1138.35 1302.18 1688.67
-
Cash & bank balance 416.37 512.91 2017.16 6132.12 6172.64 9609.83
Cash in hand 263.71 217.97 192.99 355.61 280.47 420.22
Bank balance 152.66 294.94 1824.17 5776.51 5892.17 9189.61
-
Intangible / DRE not written off 579.8 543.68 429.34 353.73 357.01 268.59
Intangible assets (goodwill, etc.) 2.15 7.37 50.84 58.8 141.19 139.44
DRE not written off 577.65 536.31 378.5 294.93 215.82 129.15
Share issue expenses not written off 0 0 0 0 0 0
VRS expenses not written off 455.33 496.26 357.19 283.73 212.38 129.15
Other misc. expenses not written off 122.32 40.05 21.31 11.2 3.44 0
-
Total assets 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
Liabilities: mfg. cos.

Mar Mar Mar Mar Mar


Steel Authority Of India Ltd. 2002 2003 2004 2005 2006 Mar 2007
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Net worth 2829.75 2525.24 5037.67 10306.65 12601.41 17313.15
Authorised capital 5000 5000 5000 5000 5000 5000
Issued equity capital 4130.4 4130.4 4130.4 4130.4 4130.4 4130.4
Paid-up equity capital 4130.4 4130.4 4130.4 4130.4 4130.4 4130.4
Preference capital 0 0 0 0 0 0
-
Bonus equity capital 0 0 0 0 0 0
Buy back amount 0 0 0 0 0 0
Buy back shares (nos.) 0 0 0 0 0 0
-
Reserves & surplus -1300.65 -1605.16 907.27 6176.25 8471.01 13182.75
Free reserves 236.15 235.33 257.98 5694.06 8071.64 12819.45
Share premium reserves 236.15 235.33 235.29 235.29 235.29 235.29
Other free reserves 0 0 22.69 5458.77 7836.35 12584.16
Specific reserves 923.82 924.44 649.29 482.19 399.37 363.3
Revaluation reserves 0 0 0 0 0 0
Accumulated losses -2460.62 -2764.93 0 0 0 0
-
Borrowings 13562 12387.67 8012.99 4959.11 3388.45 3291.52
Bank borrowings 4744.98 2535.09 154.51 73.29 315.24 791.24
Short term bank borrowings 4026.65 1518.84 154.51 73.29 315.24 266.24
Long term bank borrowings 718.33 1016.25 0 0 0 525
Financial institutional borrowings 0 0 0 0 0 0
Govt. / sales tax deferral borrowings 204.43 204.43 204.43 204.43 204.43 204.43
Debentures / bonds 4523.55 4942.75 4323.4 2967.35 2232.95 1760.2
Fixed deposits 1272.46 1021.28 581.39 217.1 0 0
Foreign borrowings 2616.58 3452.94 2749.26 1496.94 635.83 535.65
Borrowings from corporate bodies 0 6.18 0 0 0 0
Group / associate cos. 0 0 0 0 0 0
Borrowings from promoters / directors 0 0 0 0 0 0
Commercial paper 0 0 0 0 0 0
Other borrowings 200 225 0 0 0 0
-
Secured borrowings 7051.38 5511.59 3378.48 1603.98 1122.16 1556.39
Unsecured borrowings 6967.98 7416.35 5310.28 4165.81 3175.46 2624.13
Current portion of long term debt 270 2743.44 1484.95 1587.02 1448.23 2047.12
Total foreign currency borrowings 3278.32 0 0 0 0 0
-
Deferred tax liabilities 0 0 0 3032.05 2889.53 2707.79
-
Current liabilities & provisions 7326.59 7944.14 9783.5 11163.73 11765.05 12011.86
Current liabilities 5112.45 5032.98 5081.77 5591.35 6100.87 6287.2
Sundry creditors 1597.32 1484.85 1600.83 1994.03 2111.23 2183.31
Interest accrued / due 1539.46 1538.18 1515.7 1338.43 1284.99 1087.79
Creditors for capital goods 253.95 192.92 179.98 213.47 316.13 361.76
Other current liabilities 1721.72 1817.03 1785.26 2045.42 2388.52 2654.34
Share application money 0 0 0 0 0 0
Advance against WIP 0 0 0 0 0 0
Provisions 2214.14 2911.16 4701.73 5572.38 5664.18 5724.66
Tax provision 0 0 56.85 748.06 186.85 44.32
Dividend provision 0 0 0 743.47 309.78 619.56
Dividend tax provision 0 0 0 104.27 43.45 105.29
Other provisions 2214.14 2911.16 4644.88 3976.58 5124.1 4955.49
-
Total liabilities 23718.34 22857.05 22834.16 29461.54 30644.44 35324.32
-
Contingent liabilities
Bills discounted 30.3 25.11 13.87 18.2 23.89 17.01
Disputed taxes 1041.86 0 0 1134.69 2567.88 2774.33
Letters of credit 0 0 0 0 0 0
Total guarantees 28.85 28.85 28.85 31.4 31.4 31.4
Future lease rent payable 0 0 0 0 0 0
Liabilities on capital account 254.79 545.27 540.52 957.05 1974.77 1970.72

Profit & loss account: profits / mfg. cos.

Steel Authority Of India Ltd. Mar 2002 Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Profits / losses
PBDIT 1037.27 2224.14 4706.71 11188.27 7627.76 11071.5
Financial charges 1588.27 1381.79 953.57 651.98 467.76 332.13
Interest 1547.63 1333.02 918.14 605.49 429.72 315.28
On short term borrowings 629.39 430.34 128.26 79.01 66.3 30.22
On long term borrowings 918.24 902.68 789.88 526.48 363.42 285.06
Other financial charges 40.64 48.77 35.43 46.49 38.04 16.85
Lease rent 0 0 0 0 0 0
Interest capitalised 0 0 0 1.69 4.69 0.88
PBDT -551 842.35 3753.14 10536.29 7160 10739.37
Depreciation 1155.89 1146.66 1122.59 1126.95 1207.3 1211.48
PBT -1706.89 -304.31 2630.55 9409.34 5952.7 9527.89
Tax provision 0 0 118.47 2592.37 1939.73 3325.6
Corporate tax 0 0 118.47 748.06 1915.4 3299.12
Deferred taxes 0 0 0 1844.31 0 0
Other direct taxes 0 0 0 0 24.33 26.48
PAT -1706.89 -304.31 2512.08 6816.97 4012.97 6202.29
-
Appropriation of profits
Dividends 0 0 0 1548.27 941.94 1478.4
Equity dividends 0 0 0 1363.03 826.08 1280.42
Preference dividends 0 0 0 0 0 0
Dividend tax 0 0 0 185.24 115.86 197.98
Retained earnings -1706.89 -304.31 2512.08 5268.7 3071.03 4723.89
-
Profits / Losses (NNRT)
PBDIT (NOI, NNRT) 82.14 1833.3 4345.25 10470.77 6505.63 9685.24
PBDIT (NNRT) 308.53 2034.66 4642.59 11029.7 7270.09 10819.88
PBDT (NNRT) -1279.74 652.87 3689.02 10377.72 6802.33 10487.75
PBT (NNRT) -2435.63 -493.79 2566.43 9250.77 5595.03 9276.27
PAT(NNRT) -2435.63 -493.79 2447.96 6658.4 3655.3 5950.67

Profit & loss account: income / mfg. cos.

Mar Mar Mar Mar


Steel Authority Of India Ltd. 2002 2003 2004 2005 Mar 2006 Mar 2007
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Income
Sales 16624.2 20500.09 25584 33219.84 34288.05 41288.89
Manufacturing 15461.4 19079.05 23929.86 31769.39 32231.33 39128.99
Trading 18.38 6.76 8.88 4.2 67.71 0.96
Fiscal benefits / subsidies 87.49 212.76 334.81 84.24 68.2 172.5
Internal transfers 958.93 1049.42 1098.17 1206.75 1780.05 1833.08
Other operating income 98 152.1 212.28 155.26 140.76 153.36
-
Other income 226.39 201.36 297.34 558.93 764.46 1134.64
Dividend income 5.74 2.67 8.22 13.38 13.66 17.34
Interest income 105.3 88.96 74.76 262.76 461.49 752.6
Rent income 0 0 0 0 0 0
Miscellaneous income 115.35 109.73 214.36 282.79 289.31 364.7
-
Change in stocks -422.38 -433 -485.84 247.61 1131.31 289.15
Finished goods -422.38 -433 -485.84 247.61 1131.31 289.15
Semi-finished goods 0 0 0 0 0 0
-
Non-recurring income 753.27 215.55 124.02 291.4 388.7 303.46
Gain on sale of assets 662.47 144.19 52.42 0 58.24 13.97
Gain on sale of investments 0 0 0 0 0 0
Insurance claim/s 0 0 0 0 0 0
Tax refunds / adj. /defr. tax asset 0 11.56 2.34 43.99 246.96 105.27
Depreciation provision/s written back 0 0.16 0 0 0 0
Other provisions written back 76.81 47.82 44.03 239.5 80.18 58.65
Other non-recurring income 13.99 11.82 25.23 7.91 3.32 125.57

Profit & loss account: expenditure / mfg. cos.

Mar Mar Mar Mar Mar


Steel Authority Of India Ltd. 2002 2003 2004 2005 2006 Mar 2007
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Expenditure
Raw materials, stores, etc. 7312.01 7355.21 8184.11 11647.61 14129.12 15259.95
Raw materials 5707.91 6308.3 6987.95 9740.09 12827.85 13833.21
Stores & spares 1586.01 1038.84 1183.75 1900.06 1235.78 1425.45
Packaging expenses 0 0 0 0 0 0
Purchase of traded goods 18.09 8.07 12.41 7.46 65.49 1.29
Wages & salaries 3255.33 3087.23 4155.02 3823.2 4182.86 5131.38
VRS expenses 170.9 215.22 301.42 148.14 176.32 123.9
Energy (power & fuel) 1709.59 2036.56 2158.86 2196.86 2495.47 2584.6
-
Other operating expenses 92.2 114.15 121.24 129.18 -631.05 -749.1
Royalty / knowhow 35.79 37.9 40.77 38.8 53.61 51.21
Insurance premium 6.96 7.28 7.57 7.87 8.21 8.13
-
Indirect taxes 2009.09 2400.27 2899.01 3358.53 4625.1 5419.5
Excise duties 1982.62 2370.56 2881.66 3335.01 4605.48 5393.82
Sales tax 0 0 0 0 0 0
Other indirect taxes 26.47 29.71 17.35 23.52 19.62 25.68
-
Repairs & maintenance 162.07 1523.35 1543.79 239.98 2162.43 2419.07
Plant & machinery 89.54 1315.62 1323.39 142.24 1813.56 2029.7
Other repairs 72.53 207.73 220.4 97.74 348.87 389.37
-
Advertising & marketing expenses 88.74 142.82 149.14 69.19 61.27 82.8
Advertising 0 0 0 0 0 0
Marketing 88.74 142.82 149.14 69.19 61.27 82.8
-
Distribution expenses 675.54 615.76 625.5 828.01 982.12 872.87
Provision for doubtful / bad debts 72.65 173.33 213.59 43.38 31.1 21.38
Amortisation / write-offs 239.62 330.98 310.01 194.18 188.2 131.93
Miscellaneous expenses 524.14 474.79 419.11 503.41 734.77 785.85
-
Less: expenses capitalised 21.3 20.66 26.47 36.85 47.66 67.43
-
Non-recurring expenses 24.53 26.07 59.9 132.83 31.03 51.84
Loss on sale of assets 0 0 0 17.61 0 0
Loss on sale of investment 0 0 0 0 0 0
Prior period taxes 0 0 0 0 0 0
Depreciation provision/s for earlier years 8.23 0 51.79 65.25 10.17 25.27
Other non-recurring expenses 16.3 26.07 8.11 49.97 20.86 26.57
-
Total R & D expenditure 49.85 54.82 71.9 60.58 63.48 76.85
R & D capital 1.7 0.89 0.95 1.34 3.23 5.55
R & D current 48.15 53.93 70.95 59.24 60.25 71.3
Executive summary: mfg. cos.

Mar Mar Mar Mar Mar


Steel Authority Of India Ltd. 2002 2003 2004 2005 2006 Mar 2007
Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
-
Gross sales 16624.2 20500.09 25584 33219.84 34288.05 41288.89
Net sales 14615.11 18099.82 22684.99 29861.31 29662.95 35869.39
VOP 14192.73 17666.82 22199.15 30108.92 30794.26 36158.54
Other income 226.39 201.36 297.34 558.93 764.46 1134.64
Cost of production 13854.18 15386.41 17375.22 19260.22 23385.46 25603.14
Selling & marketing expenses 88.74 142.82 149.14 69.19 61.27 82.8
Distribution expenses 675.54 615.76 625.5 828.01 982.12 872.87
PBDIT (NNRT) 308.53 2034.66 4642.59 11029.7 7270.09 10819.88
PBDT (NNRT) -1279.74 652.87 3689.02 10377.72 6802.33 10487.75
PBT (NNRT) -2435.63 -493.79 2566.43 9250.77 5595.03 9276.27
PAT (NNRT) -2435.63 -493.79 2447.96 6658.4 3655.3 5950.67
-
Exports 534.98 1076.6 1688.39 1335.43 1091.64 1169.55
Imports 2073.08 2444.73 2555.58 4726.42 6275.91 7437.09
-
Gross fixed assets (excl. reval. & WIP) 27213.42 27608.33 27773.08 28058.19 29325.63 29860.09
Current assets 7173.7 7350.32 8181.01 14374.42 15795.11 20536.14
Net worth (net of reval. & DRE) 2252.1 1988.93 4659.17 10011.72 12385.59 17184
Equity capital 4130.4 4130.4 4130.4 4130.4 4130.4 4130.4
Long term borrowings 9535.35 10868.83 7858.48 4885.82 3073.21 3025.28
Capital employed 11787.45 12857.76 12517.65 14897.54 15458.8 20209.28
Current liabilities & provisions 11353.24 9462.98 9938.01 11237.02 12080.29 12278.1
-
Total assets / liabilities (excl. reval. & DRE) 23056.42 22320.05 22455.35 28421.93 30418.39 35184.67
-
Growth (%)
Gross sales -4.31 24.16 25.89 30.74 1.55 21.37
Cost of production 2.96 11.06 12.93 10.85 21.42 9.48
PBDIT -83.21 559.47 128.18 137.58 -34.09 48.83
PAT Error Error Error 172 -45.1 62.8
GFA 1.12 1.43 0.44 1 4.23 1.84
Total assets -8.92 -3.19 0.61 26.57 7.02 15.67
-
Margins ratios (%)
PBDIT (NNRT) / sales 1.86 9.93 18.15 33.2 21.2 26.21
PBDT (NNRT) / sales -7.7 3.18 14.42 31.24 19.84 25.4
PAT (NNRT) / sales -14.65 -2.41 9.57 20.04 10.66 14.41
PBDIT (NNRT) / net sales 2.11 11.24 20.47 36.94 24.51 30.16
PBDT (NNRT) / net sales -8.76 3.61 16.26 34.75 22.93 29.24
PAT (NNRT) / net sales -16.67 -2.73 10.79 22.3 12.32 16.59
-
Returns ratios (%)
PAT (NNRT) / net worth -75.91 -23.29 73.64 90.77 32.64 40.25
PAT (NNRT) / total assets -10.07 -2.18 10.93 26.17 12.42 18.14
PBIT (NNRT) / capital employed -6.44 7.21 27.74 72.24 39.94 53.88
PAT (NNRT) / capital employed -18.5 -4.01 19.29 48.57 24.08 33.37
-
Liquidity ratios (times)
Long term debt / equity 4.234 5.465 1.687 0.488 0.248 0.176
Total debt / equity 6.022 6.228 1.72 0.495 0.274 0.192
Current ratio 0.632 0.777 0.823 1.279 1.308 1.673
Interest cover -0.53 0.64 3.69 15.19 12.96 28.93
-
Gross working capital cycle (days) 179 155 130 106 128 139
Net working capital cycle (days) 140 122 101 74 95 109
Avg. days of debtors 35 28 23 19 21 19
Avg. days of creditors 39 33 29 32 32 29
-
Asset utilisation ratios (times)
VOP / total assets 0.59 0.78 0.99 1.18 1.05 1.1
VOP / GFA 0.52 0.65 0.8 1.08 1.08 1.23

Last 10 Years High. Low & Closing at BSE


(on 31st March)

Year High Low Closing


1998 10.55 9.9 10
1999 6.05 5.85 5.9
2000 8.10 7.8 7.9
2001 5.85 5.55 5.6
2002 4.95 4.75 4.9
2003 9.25 8.8 8.8
2004 33.35 32.1 32.3
2005 64.15 62.2 62.95
2006 85.4 82.8 83.3
2007 116.15 111.3 114.1

CHAPTER – 13 BIBLIOGRAPHY
For the preparing the report we uses the following :-

1. Annual Report of the company of 2006-07

2. Websites :- WWW.indiainfoline.com
WWW.sail.com
WWW.Kotaksecurities.com

3. Data Software used :- Prowess


4. Books :-

 Management Accounting, 1st Edition, B.S.Shah Publisher,


Author – T.J.Rana, Chapter 2 & 3, Financial Analysis &
Interpretation & Ratio Analysis Pg No.16 to 18 & Pg No. 35 to
50

 Financial Management, 4th Edition, TATA Mcgraw HILL


Publisher, Author – M. Y. Khan & P. K. Jain, Part II, Chapter 7,
Financial Statement Analysis.