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Comparative Financial Statement of Reliance Life Insurance For Year 2013-14 & 2014-15.
Comparative Financial Statement of Reliance Life Insurance For Year 2013-14 & 2014-15.
INTRODUCTION
The financial statement provides the basic data for financial performance analysis. The
financial statements provide a summarized view of the financial position and operations of a
firm. Financial analysis (also referred to as financial statement analysis or accounting analysis)
refers to an assessment of the viability, stability and profitability of a business. The analyst first
identifies the information relevant to the decision under consideration from the total
information contained in the financial statements. Therefore, much can be learnt about a firm
from a careful examination of its financial statements as invaluable documents and
performance reports. The analysis of financial statements is an important aid to financial
analysis. They provide information on how the firm has performed in the past and what is its
current financial position. Financial analysis is the process of identifying the financial strengths
and weakness of the firm from the available accounting data and financial statements. The
analysis is done by establishing relationship between the different items of financial statements.
The focus of financial analysis is on key figures in the financial statements and the significant
relationship that exists between them. The first task of financial analyst is to select the
information relevant to the decision under consideration from the total information contained
in the financial statement. The second step involved in financial analysis is to arrange the
information in a way to highlight significant relationships. The final step is interpretation and
drawing of inferences and conclusions. In brief, financial analysis is the process of selection,
relation, and evaluation.
a) To compare and analyze the financial statements for the past two financial years (2013-14
and 2014-15)
b) To know the profitability, liquidity and solvency position of Reliance Life Insurance
c) To compare and interpret financial statements of the Reliance Life Insurance with
comparative analysis.
d) To provide suggestions for improving the overall finance performance of the company.
Research Methodology
The methodology followed for conducting the study includes the specifications of research
design and data collection used for analyzing the collected data.
a. Research Design:
The research design which will be used for this study is descriptive type.
Financial analysis is mainly done to compare the growth, profitability and financial soundness
of the respective insurance companies by diagnosing the information contained in the financial
statements.
Financial analysis is done to identify the financial strengths and weaknesses of the insurance
company by properly establishing relationship between the items of Balance Sheet and Profit
& Loss Account. It helps in better understanding of companies financial position, growth and
performance by analyzing the financial statements with various tools and evaluating the
relationship between various elements of financial statements.
CHAPTER 2
THEORETICAL BACKGROUND
Few men in history have made as dramatic a contribution to their country's economic progress
as did the founder of Reliance, Shri. Dhirubhai H. Ambani. Fewer still have left behind a legacy
that is more enduring and timeless.As with all great pioneers, there is more than one unique
way of describing the true genius of Dhirubhai: the corporate visionary, the unmatched
strategist, the proud patriot, the leader of men, the architect of India's capital markets, and the
champion of shareholder interest. But the role Dhirubhai cherished most was perhaps that of
India's greatest wealth creator. In one lifetime, he built from scratch, India's largest private
sector enterprise.When Dhirubhai embarked on his first business venture, he had a seed capital
of only about US$ 300 (around Rs. 14,000). Over the next three and a half decades, he
converted this fledgling enterprise into a 60,000 crore colossusan achievement which earned
Reliance a place on the global Fortune 500 list, the first ever Indian private company to do
so.Dhirubhai is widely regarded as the father of India's capital markets. In 1977, when Reliance
Textile Industries Limited first went public, the Indian stock market was a place patronised by
a small club of elite investors which dabbled in a handful of stocks. Undaunted, Dhirubhai
managed to convince a large number of first-time retail investors to participate in the unfolding
the Reliance story and put their hard-earned money into the Reliance Textile IPO, promising
them in exchange for their trust, substantial return on their investments. It was to be the start
of one of the greatest stories of mutual respect and reciprocal gain in the Indian market.Under
Dhirubhai's extraordinary vision and leadership, Reliance scripted one of the greatest growth
stories in corporate history anywhere in the world, and went on to become India's largest private
sector enterprise.
CHAPTER 3 :
DATA PRESENTATION AND ANALYSIS
TOOLS USED FOR ANALYSIS
(1) Ratio Analysis
Profitability ratio
Return on equity
Activity ratio
Solvency ratio
Current ratio
RATIO ANALYSIS:
A ratio is the process of determining and presenting the relationship of items and groups of
items in the financial statements. The ratios can be classified into the following types:
PROFITABILITY RATIO :
Profitability Ratio measured as i ability to make maximum profit from optimum
YEARS
GROSS
RATIO (IN %)
(RS)
2013-2014
21971.03
108277.62
20.29
2014-2015
32347.63
118189.37
27.37
INFERENCES:
The Gross Profit for the financial year 2013-2014 was recorded as per the ratio is
20.29%, where as the years between 2014-2015 went through a change in the ratio of 27.37%
Thus, it is showing the steady growth in the company profile.
Net Profit Ratio = ( Net Profit After Tax / Net Sales ) *100
YEARS
RATIO (IN %)
2013-2014
15073.14
108277.62
13.92
2014-2015
22674.86
118189.37
19.18
INFERENCES:
The Net Profit Ratio depicts that the company had a good profit in 2013-2014 i.e 13.92% where
it had a good yield profit. Comparing to the year 2014-2015 is 19.18%. This indicates that
there is an improvement in the operational efficient of the business and it leads to the increase
in the profitability of the firm.
Return on Equity = ( Net Profit After Interest And Tax / Shareholders funds ) * 100
YEARS
NET
PROFIT SHAREHOLDER
AFTER
RATIO(IN %)
FUNDS(RS)
INTEREST AND
TAX (RS)
2013-2014
15073.14
268538.97
5.61
2014-2015
22674.86
333318.07
6.80
INFERENCES:
Return on shareholder fund determines the profitability from the shareholders point of view.
From the above, it shows that in the year 2013-2014, the company shows 5.61% of ratio and it
has risen to 6.80%. This is a clear indication of overall operation is efficient.
operational efficiency refers to effective, profitable and rational use of resources available to
the concern.
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Working capital ratio measures the effective utilization of working capital. It also measures
the smooth running of business. The ratio establishes relationship between cost of sales and
working capital.
YEAR
NET
108277.62
666319.18
0.16
2014-2015
118189.37
898497.54
0.13
INFERENCES:
A higher ratio is the indication of lower investment of working capital and more profit.
In 2013-2014, the sales of the company are high at 0.16 times but in the year 2014-2015, it
gone downward of sales to 0.13 times.
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YEARS
CAPITAL
EMPLOYED (RS)
2013-2014
108277.62
533288.26
0.20
2014-2015
118189.37
720052.92
0.17
INFERENCES:
In the year 2013-2014, the sales comparing to 2014-2015 it is decreased to 0.17 times and it
shows that efficient methods are adopted to use the capital employed.
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YEAR
SALES (RS)
2013-2014
108277.62
20241.05
5.35
2014-2015
118189.37
23237.80
5.09
INFERENCES:
Higher the ratio is more than the efficiency in utilization of Fixed Assets. Lower ratio
indicates the under utilization of fixed assets. From the above table it indicates that the sales
has been gradually declining over the next year 2014-2015 for 5.09 times.
Solvency or Financial Ratios include all ratios which express financial position of the concern.
The term financial position generally refers to short-tem and long-term solvency of the business
concern, including safety of different interested parties.
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o CURRENT RATIO
YEAR
(RS)
LIABILITY(RS)
2013-2014
68876.04
50360.94
1.36
2013-2014
166489.36
55084
3.02
INFERENCES:
A high current ratio is an assurance that the firm will have adequate funds to pays
current liabilities and other payment. During the year 2013-2014, the current ratio is 3.02 times
and it is more when compared with previous year 2014-2015 is 1.36 times.
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YEAR
LONG
TERM SHAREHOLDER
DEBT (RS)
FUNDS (RS)
2013-2014
418021.26
115267
3.62
2014-2015
588417.27
131635.65
4.47
INFERENCES:
From the above table, during the year 2013-2014 the debt equity ratio is 3.62 times and then it
shows the uptrend from the year 2014-2015 as 4.47 times. Suggest that the debt from the
company has increased over the years with increase in shareholder funds as well.
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It is on two or more different dates can be used for comparing assets and liabilities and findings
out any increase or decrease in the items.
PARTICULARS
Income
2014
from 108277.62
2015
Amount
Percentage
Increase /
Increase
Decrease
Decrease
during (Rs.)
(In %)
118189.37
+9911.75
+9.15
63379.55
(1164.54)
(1.80)
54809.82
+11076.29
+25.33
2538.90
Operation
Less:
Financial 64544.09
Expense
Gross Profit (A)
43733.53
Other Income:
Profit on Sale of Shares
Other Income
3199.28
4142.57
+943.29
+29.48
Total (B)
3199.28
6681.47
+3482.19
+108.84
Total Income
46932.81
61491.29
14558.48
+134.17
7160.91
6042.27
(1118.64)
(15.62)
9407.97
10011.23
+603.26
+6.41
(A+B) = C
Expense:
Operating Expense:
Administration
Expense
Establishment
Expense
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Provision
4616.80
8608.59
+3991.79
+86.46
Depreciation
3776.10
4481.57
+705.47
+18.68
Total Operating
24961.78
29143.66
+4181.88
+16.75
32347.63
+10376.6
+47.23
6897.89
9672.77
+2774.88
+40.23
Non- 6897.89
9672.77
+2774.88
+40.23
22674.86
+7601.72
+50.43
Expense (D)
(C-D)
Non-Operating Expense:
Taxation
Total
Operating
Expense (F)
Net Profit (E-F)
15073.14
INFERENCES:
The comparative income statement shows income from operation amount increase during the
year 2014-2015 was Rs.9911.75 and increase in percentage of 9.15.
For the year 2014-2015, the total income indicates Rs.14558.48 and percentage increase during
the year 2014-2015 was 134.17.
The operating profit has been increased is Rs.32347.63 in the year 2015 which is
comparing to the previous year was Rs.21971.03 and the percentage shows increase by 47.23.
The Net profit amount increases during 2014-2015 is Rs. 7601.72 and shows percentage
increase by 50.43.
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Particulars
2014
2015
Amount
Percentage
(Rs.)
(Rs.)
Increase /
Increase /
Decrease
Decrease
Assets:
Current Assets
68876.04
166489.36
+97613.32
+141.72
653955.77
799363.96
+145408.19
+21.98
5691.36
6124.40
+433.04
+7.61
Investment
51188.87
53744.80
+2555.93
+4.99
Fixed Asset
20241.05
23237.80
+2996.75
+14.80
Total Asset
799953.09
1048960.32
+249007.23
+31.13
58478.77
67946.53
+9467.76
+16.19
Unsecured Loan
208479.20
260960.87
+52481.67
+25.17
Secured Loan
417728.12
588417.27
+170689.15
+40.86
684686.09
917324.67
+232638.58
+33.98
5555.19
5555.19
Options
109711.81
126080.46
+16368.65
+14.92
Total
115267.0
131635.65
16368.65
+14.20
799953.09
1048960.32
249007.23
+31.13
Shareholders
Funds (B)
Total Liabilities
and Capital (A+B)
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INFERENCES:
In the year 2014-2015, the investment it shows the uptrend for the year 2015 as
Rs.53744.80 and it has increased by 4.99%.
Fixed assets has been increased was Rs.23237.80 in the year 2015 which is comparing to the
previous year and the percentage shows increase by 14.80.
During the year 2014, the shareholders fund amount to Rs.115267.00 it has been increased to
the amount of Rs. 131635.65 and percentage increased was 14.20.
Secured loans shows uptrend by Rs.588417.27 over the previous year of Rs.417728.12 and
increase in percentage of 33.98.
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CHAPTER 4
FINDINGS AND INFERENCE
The Gross Profit Ratio shows that increasing in sales has maintained the companys
profit level. In the year 2013-2014, the percentage shows 20.29 it has been increased
during the year 2014-2015 to 27.37.
The net profit ratio has been increased to 19.18 during the financial year 2014 2015
to 13.92 during 2013 2014 which indicates that there is an improvement in the
operational efficient of the business and it leads to the increase in the profitability of
the firm.
It has found that the return on equity during the year 2013-2014, the company shows
5.61% of ratio and it has risen to 6.80%. This is a clear indication of overall operation
is efficient.
The Working capital in the year 2013-2014, the sales of the company is low at
Rs.666319.18 and it is increased to Rs.898497.54 in 2014-2015. It measures the
effective utilization of working capital.
The capital turnover of capital employed in the financial year 2013-2014 it shows
Rs.533288.26 and during the year 2014-2015 it is increased to Rs.720052.92. It has
effective utilization of capital employed under the current year.
Fixed asset turnover shows increase in sales of Rs.118189.37 comparing to the previous
year of Rs. 108277.62 and the firm should maintain this increasing trend in future also.
During the year 2014-2015, the current ratio is 3.02% and it is more when compared
with previous year 2013-2014 is 1.36 %. So the short term liquidity of a concern,
comparison of current assets and current liabilities is inevitable.
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The debt equity ratio has shows 3.62% in 2013-2014 and it has been raised to 4.47%
during 2014-2015 which indicates that the company has increased over the years with
increase in shareholder funds as well.
It is found that the shareholders funds had increased by Rs.16368.65 over the
percentage of 14.20 in comparative income statement analysis. It determines the
profitability from the shareholders point of view.
The financial year 2014-2015 depicts the Net Cash from financing activities amount of
Rs.217819.49 shows upward profit in the company.
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CONCLUSION
In the study of Financial Performance of Reliance Life Insurance it is clear that the firms
financial performance is satisfactory. The firm has stable growth and it shows a greater
efficiency in all the areas it works.
If the company utilizes its working capital then the company can go heights which it wanted to
achieve. The comparative income statement shows increase in the current year of net profit and
it depict the companies current profit position. To improve the efficiency the firm will strive
for better performance and increase the market share the company.
The suggestions provided through the study will help the firm to improve the operational
performance efficiently. The suggestions provided through the study will help the firm to
improve the operational performance efficiently.
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BIBLIOGRAPHY
BOOKS:Mcom part 1-advanced financial accountancy-Mumbai university
WEBSITE:http://www.google.com
http://www.scribd.com
http://www.reliancelife.com
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