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A STUDY ON

FINANCIAL PREFORMANCE ANALYSIS OF


LARSEN AND TOUBRO LIMITED

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ACKNOWLEDGEMENT

I would like to express my gratitude and appreciation to all those who gave me the
possibility to complete this report. A special thanks to Mr.Senthil (Cluster
Accounts Manager) and Mr.V.Nagarajan (Deputy Manager Accounts-Water,
smart world and Communication IC) in Larsen & Toubro whose help,
stimulating suggestions and encouragement, helped me to coordinate my project
especially in writing this report.

I would also like to acknowledge with much appreciation the crucial role of the
staff of Larsen & Toubro Limited who helped me in collecting all required
information to complete the project report.

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TABLE OF CONTENTS

SL.NO CONTENT PAGE


NO.
1 Introduction to the Company 3-15

2 Literature Analysis 16-20

3 Theoretical Framework 21-34

4 Data Analysis And Interpretation 35-75

5 Findings, Suggestions And Conclusion 76-85

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CHAPTER-1

INTRODUCTION TO THE
COMPANY

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1.1 INDUSTRY PROFILE

The Conglomerate industry consists of large organizations engaged in multiple


business lines within the industrial sector, where at least two business lines
comprise a substantial portion of the company's total operation. Companies in the
industry typically conduct business on a global scale. The Conglomerate industry
excludes financial holding companies across multiple sectors, classified in
Financial Services - Diversified and organizations operating numerous business
lines within the industrial sector, where only one business line dominates the entire
operation.

Larsen & Toubro is a USD 14 billion technology, engineering, construction,


manufacturing and financial services conglomerate, with global operations. One of
the largest and most respected companies in India's private sector, L&T's products
and systems are marketed in over 30 countries worldwide. A strong, customer-
focused approach and the constant quest for top-class quality have enabled L&T to
attain and sustain leadership in its major lines of business over seven decades.

L&T Construction is the construction arm of Larsen & Toubro. Ranked 28th
among the top 225 global contractors by Engineering News Record in 2013, L&T
Construction offers EPC solutions with single-source responsibility for executing
large industrial and infrastructure projects from concept to commissioning.
With a track record of over 70 years, L&T Construction has proven its capability
for executing all types of mega projects on a turnkey basis involving innovative
designs, comprehensive construction services that include procurement, supply,
installation, testing and commissioning.

The company has an ever-spreading global footprint with worksites across 20


countries worldwide including South Asia, South East Asia, the Middle East,
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Russia and Africa. L&T Construction was one of the earliest companies to operate
in the Gulf and, over the years, has gained significant market presence in UAE,
Oman, Qatar, Saudi Arabia, Kuwait and Bahrain for executing projects on EPC
basis. L&T has always believed that progress can only be achieved in harmony
with the environment and therefore a commitment to community welfare and
environmental protection is integral to its corporate vision.

L&T Construction has over the past seven decades been transforming cityscapes
and landscapes with structures of immense size and grandeur. India's largest
construction organization and ranked among the world's top 30 contractors, the
company's capabilities span the entire gamut of construction - civil, mechanical,
electrical and instrumentation engineering and its services extend to all core sector
industries and infrastructure projects.

Several of the country's prized landmarks - edifices, structures, airports, industrial


projects, flyovers, viaducts, pipelines - are a result of the considerable skills of
L&T Construction. Today, more and more structures beyond India's boundaries are
standing tall thanks to L&T Construction.

L&T Construction straddles six related businesses:

 Buildings & Factories

 Transportation Infrastructure

 Heavy Civil Infrastructure

 Power Transmission & Distribution

 Water, Communication, Smart World

 Geo Structure

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L&T Construction offers a broad spectrum of Engineering, Design, Research and
Consultancy services, ranging from concept to commissioning for all types of
projects at its AR Centre located at Chennai.

The AR Centre is ISO certified and provides comprehensive engineering services:

 Feasibility Studies

 Project Reports and Due Diligence Reports

 Architectural, Structural and Civil Design

 Geo-technical Engineering

 Building Services

 Mechanical System Engineering

 Electrical and Instrumentation System Engineering

 Hydraulic Engineering

 Engineering Project Management

 Inspection and Quality Assurance Support

Over the last seven decades, the AR Centre has designed critical structures for
many of India's most challenging projects and has gained a reputation for
innovation and quality through application of modern construction methods and
techniques, which are constantly updated. A team of dedicated engineers are
ceaselessly engaged in developing and acquiring new concepts and structural
systems for unique project developmental works in line with the latest
developments in the field. With the aid of state-of-the-art technology and

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customized software developed in house, this team works towards reducing
construction time and adding value to the clients.

1.2 COMPANY PROFILE


Larsen & Toubro is a US$14.3 billion technology, engineering, construction and
manufacturing and financial services conglomerate. It addresses critical needs in
key sectors including infrastructure, construction, hydrocarbon, power, defense and
aerospace. Its footprint extends across seven countries in addition to India.

A strong, customer-focused approach, conformance to global HSE standards and


the constant quest for top-class quality have enabled the Company to sustain
leadership in its major lines of business for over 75 years.

L&T was rated 58th Most Innovative Company by Forbes International, and 4th in
the global list of „green companies‟ in the industrial sector by Newsweek. It was
voted among the most admired companies in the country by Fortune India, and
rated 8th Most Powerful Brand in India by Brand Finance. It won The Economic
Times Corporate Citizen of the Year Award - 2013, instituted by one of the
world‟s most widely sold business newspapers - The Economic Times. A survey
by a leading HR consultancy affirmed its reputation as a people-focused company,
leading to the award for the „Most Attractive Employer‟ in the industrial sector.

1.2.1 HISTORY

The evolution of L&T into a major engineering and construction organization is


among the more remarkable success stories in Indian industry. It was founded in
Mumbai (then Bombay) in 1938 by two Danish engineers, Henning Holck-Larsen
and Soren Kristian Toubro. Beginning with the import of machinery from Europe,
L&T took on engineering and construction assignments of increasing

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sophistication. Today, the company sets engineering benchmarks in terms of scale
and complexity.

1.2.2 CORPORATE SUSTAINABILITY

L&T was the first company in India in the engineering & construction space to
publicly disclose its sustainability performance. The Company‟s annual
Sustainability Reports highlight achievements and objectives across the traditional
three „Ps‟ of Planet, People and Profits. All our Reports are rated A+ by Global
Reporting Initiatives, indicating the highest level of disclosure. The recognition
that the Company has secured from forums around the world affirm public
perception of L&T as an organization that contributes significantly to the
wellbeing of people.

1.2.3 L&T HYDROCARBON ENGINEERING

L&T Hydrocarbon Engineering delivers 'design to build' engineering and


construction solutions on a turnkey basis in the oil & gas, petroleum refining,
chemicals & petrochemicals and fertilizer sectors. In-house expertise, experience,
and strategic partnerships enable it to deliver a single point solution for all projects
– from front-end design through engineering, fabrication, project management,
construction and installation and commissioning. Modular fabrication facilities at
Hazira (India, west coast), Kattupalli (India, east coast) and Zohar (Oman) give
L&T all-weather delivery capability.

The Company‟s operations are characterized by an overriding emphasis on safety,


on time delivery, cost competitiveness, high quality standards with focus on best in
class IT security practices. Integrated strengths coupled with an experienced and

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highly skilled work force, are key enablers in delivering critical and complex
projects.

1.2.4 TRANSPORTATION INFRASTRUCTURE

L&T is engaged in the turnkey construction of major infrastructure projects -


expressways, bridges, runways and railway projects. The Company has been a
leading player in rail infrastructure development for more than three decades, and
has brought in new technologies and mechanized construction. L&T is the only
private organization in India qualified to undertake integrated rail construction
projects of the Indian Railways.

1.2.5 HEAVY CIVIL INFRASTRUCTURE

The Company undertakes heavy civil construction - underground metro rail


corridors docks, container terminals, wharves and berths, jetties, breakwater and
shore protection, and caissons. It has the expertise to design special launching and
erection techniques, including special systems formwork for concrete deck on top
of steel and concrete structures.

Comprehensive engineering, procurement and construction services are offered for


hydropower projects. L&T has also played a critical role in the development of
technology for India‟s nuclear power sector.

1.2.6 BUILDING & FACTORIES

L&T occupies leadership position in the construction of major airports, IT parks,


turnkey hospitals and residential buildings. Building & Factories Business
undertakes projects on a „concept to commissioning‟ basis. Its technological

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capabilities encompass tall towers and eco-friendly „green‟ buildings. Its track
record includes landmark structures such as the Baha‟i temple in New Delhi.

1.2.7 POWER TRANSMISSION & DISTRIBUTION

The focus is on sub-stations, industrial electrification, transmission line projects


and railway construction on the domestic front, and power transmission and
distribution projects. L&T has an extensive track record in the Middle East, and is
recognized as a major player in the region.

1.2.8 WATER PROJECTS & SOLAR ENERGY

L&T‟s Water & Solar business caters to the entire value chain of water and solar
EPC. The water and effluent treatment business covers water intake, transmission,
treatment and distribution including industrial waste water treatment & disposal
and ordinary waste water treatment & reuse segments. The water technology
business uses advanced water treatment technologies for complex treatment
projects – largely in the Middle East. L&T‟s Solar EPC business comprises solar
photovoltaic (PV), concentrated solar power (CSP).

1.2.9 METALLURGICAL & MATERIAL HANDLING

This Company undertakes turnkey construction contracts for projects in minerals


& metals sector, and bulk material handling projects. It is a leader in all its areas of
operations. It has a structural steel fabrication unit at Kanchipuram to meet the
customized needs of its wide client base.

1.2.10 POWER

L&T offers turnkey solutions for the power sector with a wide capability spectrum
covering supercritical coal and gas based projects. The supercritical technology
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that L&T propagates is „greener‟ than conventional techniques and represents a
major advantage for industry. L&T‟s integrated capabilities and in-house expertise
encompass virtually every aspect of design, engineering, manufacture, construction
and project management. The Company‟s integrated manufacturing facility at
Hazira near Surat is among the most advanced in the world for manufacturing
state-of-the-art equipment for power plants - boilers, steam turbines, pulverizes,
pressure piping, coaxial fans, air-pre-heaters and electrostatic precipitators. The
complex also includes a modern casting and foundry shop.

1.2.11 HEAVY ENGINEERING

L&T is acknowledged as one of the top five manufacturing companies in the world
in the heavy engineering space. Operating at the higher end of the technological
spectrum, L&T‟s offerings straddle the segments of process plants and the strategic
sectors of defense, nuclear and aerospace. New processes, products and materials
have been introduced in manufacturing. The Company also has the logistics
capabilities of fabricating and supplying over-dimensional equipment to tight
delivery schedules. Globally-benchmarked workshops are located at Poway in
Mumbai, Hazira and Baroda in Gujarat, Talegaon in Maharashtra, and Zohar in
Oman.

1.2.12 SHIPBUILDING

Two modern shipyards - one on the west coast of India at Hazira, and the other on
the east coast at Kattupalli near Chennai establish L&T as a major shipbuilder. A
state-of the-art Marine Design Centre is located at Chennai. L&T Shipbuilding
focuses on four major business segments: Building warships, submarines and
auxiliary vessels; Building specialized commercial ships; Repairs and re-fits of
submarines as well as naval and commercial ships; Ship conversions. The Hazira
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Shipyard has the capability to build sophisticated mid-sized ships up to 20,000 t
deadweight capacity, of 10 meters in length. The mega shipyard at Kattupalli also
includes a container port and an offshore modular fabrication yard. It has a
waterfront of 2.2 km, depth of 10m at berths and channel depths of 16 m.

1.2.13 ELECTRICAL & AUTOMATION

L&T is a major international manufacturer of a wide range of electrical and


electronic products and systems. In the electrical segment, the Company holds
leadership position in low tension switchgear in India, and is rapidly establishing
itself in international markets.

The product range also includes custom-engineered LV and MV switchboards for


industrial sectors like power, refineries, petrochemical, cement. In the electronic
segment are a wide range of meters and complete control and automation systems
for industries.

1.2.14 INFORMATION TECHNOLOGY

Larsen & Toubro InfoTech, a 100% subsidiary of L&T, offers comprehensive,


end-to-end software solutions and services with a focus on Manufacturing, BFSI
and Communications & Embedded Systems. It provides a cost cutting partnership
in the realm of offshore outsourcing, application integration and package
implementation. Leveraging the heritage and domain expertise of the parent
company, its services encompass a broad technology spectrum, catering to leading
international companies across the globe.

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1.2.15 TECHNOLOGY SERVICES

L&T Technology Services provides leading-edge engineering solutions to multiple


industry sectors like automotive, aerospace, consumer electronics, consumer
packaged goods, marine, medical devices, off-highway equipment, railways,
pharmaceuticals, oil & gas, utilities, infrastructure and industrial products. With its
global headquarters at Vadodara, the Company operates through dedicated
engineering centers in tandem with onsite teams worldwide. Its client base includes
several Fortune 500 companies.

1.2.16 MACHINERY & INDUSTRIAL PRODUCTS

The Company manufactures, markets and provides service support for industrial
products, industrial machinery as well as construction and mining machinery. This
includes a wide range of industrial valves for critical applications, rubber
processing machinery, surface miners, hydraulic excavators, aggregate crushers
and application engineered welding alloys and cutting tools.

1.2.17 INFRASTRUCTURE DEVELOPMENT

L&T Infrastructure Development Projects Limited, a subsidiary, leverages domain


expertise in construction and financial services, and is a major player in Public-
Private Projects in India. L&T IDPL develops projects in various models - Build
Own Transfer, Build Own Operate Transfer, Build Own Operate Share Transfer,
and other variants including the annuity model. Major projects being executed by
the Company include Hyderabad Metro Rail - the largest public-private rail project
in the world, and ports at Dhamra and Kattupalli. Multiple highway projects
around the country have established L&T IDPL as the leader in the space.

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1.2.18 FINANCIAL SERVICES

L&T Financial Services - a publicly listed subsidiary - is a key player in India‟s


financial services sector. Its subsidiaries include L&T Finance Limited, L&T
Infrastructure Finance Company Limited and L&T Asset Management Company
Limited. The Company also provides Insurance related services through L&T
General Insurance Company Limited.

1.3 VISION OF THE COMPANY


L&T shall be a professionally managed Indian multinational, committed to total
customer satisfaction and enhancing shareholder value. L&T- ites shall be an
innovative, entrepreneurial and empowered team constantly creating value and
attaining global benchmarks. L&T shall foster a culture of caring trust and
continuous learning while meeting expectations of employees, stakeholders and
society.

1.4 AWARDS AND RECOGNITION

2015:

 L&T Wins Award for Excellence in Power Project Execution.

2014:

 F&S India Manufacturing Excellence Award for MFF- Hazira.


 L&T Wins Golden Peacock Award for Excellence in Corporate Governance.
 L&T Technology Services Wins Frost & Sullivan Excellence Award.
 L&T Wins Most Attractive Employer In Infrastructure Industry from Randstad.
 L&T Electrical & Automation's AU-Series Wins Best Product Award at
ELECRAMA 2014.
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2013:

 L&T Wins D&B Top Infrastructure Company Award.


 L&T bags NDTV Profit Business Leadership Award.
 L&T Power Wins „Golden Peacock National Quality Award‟.

2012:

 L&T Voted „Champion of Champions‟ at the ABCI 52nd Annual Awards.


 L&T 9th in Global Ranking of World‟s Most Innovative Companies.
 L&T Top Engineering Company in Business Today Listing of „Best
Companies to Work For‟.
 FICCI Awards for Excellence in Quality Systems.
 L&T Ranks Among Top 10 in S&P ESG India Index.
 L&T wins NDTV Profit Business Leadership Award.
 L&T Heavy Engineering Wins Safety Innovation Award.
 L&T - Chiyoda wins ICAI National Award for Excellence in Cost
Management – 2011.
 L&T Hydrocarbon Bags CNBC TV18 „Infrastructure Excellence Award‟
 L&T Heavy Engineering Wins National Award for Export Excellence

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CHAPTER 2

LITERATURE ANALYSIS

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Noel Capon, John U. Farley, Scott Hoenig, Determinants of Financial
Performance: A Meta-Analysis

A meta-analysis of results from 320 published studies relates environmental,


strategic and organizational factors to financial performance. Some factors (e.g.,
concentration and growth) have been studied widely and have a relatively
consistent positive impact on performance. Other widely-studied factors (e.g., size)
have few consistent effects. Many factors (particularly organizational variables)
are understudied.

William L. Megginson, Robert C. Nash And Matthias Van Randenborgh.The


Financial and Operating Performance of Newly Privatized Firms: An International
Empirical Analysis

This study compares the pre- and post-privatization financial and operating
performance of 61 companies from 18 countries and 32 industries that experience
full or partial privatization through public share offerings during the period 1961
to 1990
Amalendu Bhunia, Sri Somnath Mukhuti and Sri Gautam Roy, Financial
Performance analysis – A case study

The Pressent study aims to identify the financial strength of the public sector
pharmaceutical enterprises by properly establishing relationships between the
items of the balance sheet and the profit and loss account. The study two public
sector drug and pharmaceutical enterprises listed on BSE. The study has been
undertaken for a period of twelve years from 1997-98 to 2010-09 and the necessary
data have been obtained from CMIE database.

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Brian K. Boyd, Strategic planning and financial performance: A meta-analysis
Review

After two decades of research, the effect of strategic planning on a firms


performance is still unclear. While some studies have found significant benefits
from planning others have found no relationship, or even small negative effects.
Interpretation of these is confounded by the act that many of these studies base
their findings on a small number of firms.

Juliet D’Souza and William L. Megginson, The financial operating performance


of privatized firms during the 1990‟s

This study compares the pre and the post-privatization financial and operating
performance of 85 companies from 28 industrialized countries that are privatized
through public share offerings between 1990 and 1996. We document significant
increases in profitability, output, operating efficiency and dividend payments and
there is a significant decrease in leverage ratios for our full sample of firms after
privatization and for most subsamples examined.

According to Rajiv and Mishra, Balance Sheet, P&L a/c and cash flow statement
contain a lot of numbers that can be used to draw some meaningful inferences,
these inferences can further be used as the inputs for planning, decision making.
The numbers contained in the financial statements carry a host of information that
can be put to use in making judgments‟ regarding financial strength and weakness
of the firm, efficiency and past policies and remedial measures or corrective action
to be taken. Financial management, Rajiv Srivastava, Anil Mishra, Oxford
university press, Pg No: 25Accounting for Management T.Vijaya Kumar McGraw
Hill Publications Pg No: 23.1

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According to Slhler, A comprehensive analysis, presenting data in meaningful
terms is a significant aid to understanding the profitability and financial strength of
a company. When properly prepared, financial evaluations can be used in
performance appraisal and to highlight

similarities and differences among unit of the same organization.

According to Van Horne, Wachowicz, Financial analysis involves the use of


various financial statements. The Balance Sheet summarizes the assets, Liabilities
and owner‟s equity of a business at the moment in time, usually the end of the year
or the quarter. Financial statement analysis is the art of transforming data from
financial statements into information that is useful for informed decision making.
Financial management: Theory and Practice, Slhler Crawford Davis, Jaico
Publication, Pg No: 47. Fundamentals of financial management, James C. Van
Horne, John M.Wachowicz, PHI publications 13th edition, Pg: 128.

According to Prasanna Chandra, Analysis of Financial Statement s is of internet


to lenders, investors, security analyst, managers, corporate boards, regulators and
others. Financial statement analysis may be done for a variety of purposes, which
may be range from simple analysis of the short term liquidity position of a firm to
a comprehensive assessment of the strength and weakness of the firm in various
areas. It is helpful in accessing corporate excellence, judging creditworthiness,
forecasting bond ratings; predict bankruptcy, and accessing market risk.

Amir (1993) was the first to use the term “value relevance” in the context of
information content of accounting figures. An accounting figure/ratio value
relevant is it has the significantly strong predicted association with the stock prices
and stock market indicators such, price-earnings (P/E) or price to book (P/B)
ratios. Misund et al. in their study on the value of relevance of accounting figures

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in the international oil and gas industry concluded that all accounting figures are
value relevant, be it cash or accrual based.

According to Ohlson(1995) depicted in his work that the value of a firm can be
expressed as a linear function of book value, earnings and other value relevant
information. Financial management theory and practice Prasanna Chandra 7th
edition 2010 TATA McGraw Hill Pg No: 69

Amir, E.Harris, T.S & Venuti, E.K (1993) “A comparison of the value
relevance of U.S.P-632 Ohlson (1995) depicted in his work that the value of the
firm can be expressed. Pg No-454

Mingyi Hung (2000) in his paper on “accounting standards and the value
relevance of financial statements: An international Analysis” concluded that the
use of accrual accounting (versus the cash accounting) negatively affects the value
relevance of financial statements in countries with weak shareholder protection.

According to Liu, Nissim and Thomas (2004), we found that multiples based on
reported earnings outperform multiples based on a variety of reported operating
cash flow measures. EPS forecasts represented substantially better summary
measures of value than did operating cash forecasts in all five countries examined,
and this relative superiority was absorbed in most of the industries. Hardly any
studies have been done in the area of investing value relevance of financial
statements based on Indian Accounting Standards. This may be probably because
it‟s just ten years that due to a number of reforms, Indian economy has divulged
into a market-oriented economy. Further, most of the accounting standards have
been developed during last six years by the ICAI. Prior to this, due concerns were
not involved in improving the quality and integrity of financial reporting

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CHAPTER: 3

THEORETICAL FRAMEWORK

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2.1 FINANCIAL PERFORMANCE ANALYSIS

2.1.1 MEANING AND DEFINITION

The word „Performance is derived from the word „parfourmen‟, which means „to
do‟, „to carry out‟ or „to render‟. It refers the act of performing; execution,
accomplishment, fulfillment, etc. In border sense, performance refers to the
accomplishment of a given task measured against preset standards of accuracy,
completeness, cost, and speed. In other words, it refers to the degree to which an
achievement is being or has been accomplished. In the words of Frich Kohlar “The
performance is a general term applied to a part or to all the conducts of activities of
an organization over a period of time often with reference to past or projected cost
efficiency, management responsibility or accountability or the like. Thus, not just
the presentation, but the quality of results achieved refers to the performance.
Performance is used to indicate firm‟s success, conditions, and compliance.

Financial performance refers to the act of performing financial activity. In broader


sense, financial performance refers to the degree to which financial objectives
being or has been accomplished. It is the process of measuring the results of a
firm's policies and operations in monetary terms. It is used to measure firm's
overall financial health over a given period of time and can also be used to
compare similar firms across the same industry or to compare industries or sectors
in aggregation.

Financial performance analysis is the process of identifying the financial strengths


and weaknesses of the firm by properly establishing the relationship between the
items of the balance sheet and profit & loss account. It also helps in short term and
long term forecasting. Growth of the company can also be identified with the help
of financial performance analysis. The dictionary meaning of analysis is to resolve
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or separate a thing into its element or components part for tracing their relation to
the things as whole and to each other. The analysis of financial statement is a
process of evaluating the relationship between the component parts of financial
statement to obtain a better understanding of the firm‟s position and performance.
This analysis can be undertaken by management of the firm or by parties outside.

In short, the firm itself as well as various interested groups such as managers,
shareholders, creditors, tax authorities, and others seeks answers to the following
important questions:

1. What is the financial position of the firm at a given point of time?

2. How is the Financial Performance of the firm over a given period of time?

These questions can be answered with the help of financial analysis of a firm.

Financial analysis involves the use of financial statements. A financial statement is


an organized collection of data according to logical and Conceptual Framework 50
consistent accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business firm. It may show a position at a moment of
time as in the case of a Balance Sheet, or may reveal a series of activities over a
given period of time, as in the case of an Income Statement. Thus, the term
„financial statements‟ generally refers to two basic statements: the Balance Sheet
and the Income Statement. The Balance Sheet shows the financial position of the
firm at a given point of time. It provides a snapshot and may be regarded as a static
picture.

“Balance sheet is a summary of a firm‟s financial position on a given date that


shows Total assets = Total liabilities + Owner‟s equity.” The income statement
(referred to in India as the profit and loss statement) reflects the performance of the
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firm over a period of time. “Income statement is a summary of a firm‟s revenues
and expenses over a specified period, ending with net income or loss for the
period.” However, financial statements do not reveal all the information related to
the financial operations of a firm, but they furnish some extremely useful
information, which highlights two important factors profitability and financial
soundness. Thus analysis of financial statements is an important aid to financial
performance analysis.

Financial performance analysis includes analysis and interpretation of financial


statements in such a way that it undertakes full diagnosis of the profitability and
financial soundness of the business. The analysis of financial statements is a
process of evaluating the relationship between component parts of financial
statements to obtain a better understanding of the firm‟s position and performance.

The financial performance analysis identifies the financial strengths and


weaknesses of the firm by properly establishing relationships between the items of
the balance sheet and profit and loss account. The first task is to select the
information relevant to the decision under consideration from the total information
contained in the financial statements. The second is to arrange the information in a
way to highlight significant relationships. The final is interpretation and drawing of
inferences and conclusions. In short, “financial performance analysis is the process
of selection, relation, and evaluation.”

2.1.2 SIGNIFICANCE OF FINANCIAL PERFORMANCE ANALYSIS

Interest of various related groups is affected by the financial performance of a firm.


Therefore, these groups analyze the financial performance of the firm. The type of
analysis varies according to the specific interest of the party involved. The
following are some of the parties interested in financial performance analysis.
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 Trade creditors: Trade creditors interested in the liquidity of the firm
(appraisal of firm‟s liquidity)
 Bond holders: Bond holders interested in the cash-flow ability of the firm.
 Investors: Investors interested in present and expected future earnings as
well as stability of these earnings
 Management: Management interested in internal control, better financial
condition and better performance (appraisal of firm‟s present financial
condition, evaluation of opportunities in relation to this current position,
return on investment provided by various assets of the company, etc.)
2.1.3 TYPES OF FINANCIAL PERFORMANCE ANALYSIS:
Financial performance analysis can be classified into different categories on the
basis of material used and modes operandi as under:

1. Material used

On the basis of material used financial performance can be analyzed in following


two ways:

a. External analysis: This analysis is undertaken by the outsiders of the business


namely investors, credit agencies, government agencies, and other creditors
who have no access to the internal records of the company. They mainly use
published financial statements for the analysis and as it serves limited purposes.
b. Internal analysis: This analysis is undertaken by the persons namely executives
and employees of the organization or by the officers appointed by government
or court who have access to the books of account and other information related
to the business.

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2. Modus operandi

On the basis of modus operandi financial performance can be analyze in the


following two ways:

a. Horizontal Analysis: In this type of analysis financial statements for a number of


years are reviewed and analyzed. The current year‟s figures are compared with the
standard or base year and changes are shown usually in the form of percentage.
This analysis helps the management to have an insight into levels and areas of
strength and weaknesses. This analysis is also called Dynamic Analysis as it based
on data from various years.

b. Vertical Analysis: In this type of Analysis study is made of quantitative


relationship of the various items of financial statements on a particular date. This
analysis is useful in comparing the performance of several companies in the same
group, or divisions or departments in the same company. This analysis is not much
helpful in proper analysis of firm‟s financial position because it depends on the
data for one period. This analysis is also called Static Analysis as it based on data
from one date or for one accounting period.

2.1.4 TECHNIQUES OR TOOLS OF FINANCIAL PERFORMANCE


ANALYSIS

An analysis of financial performance can be possible through the use of one or


more tools / techniques of financial analysis:

2.1.4.1 Ratio Analysis


Ratio analysis is an important and age-old technique. It is a powerful tool of
financial Analysis. It is defined as “The indicated quotient of two mathematical
expressions” and as “the relationship between two or more things” .Systematic use
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of ratio is 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. A ratio is only comparison of the numerator with the denominator
.The term ratio refers to the numerical or quantitative relationship between two
figures. Thus, ratio is the relationship between two figures and obtained by
dividing a former by the latter. Ratios are designed show how one number is
related to another. The data given in the financial statements are in absolute form
and are dumb and are unable to communicate anything. Ratios are relative form of
financial data and are very useful technique to check upon the efficiency of a firm.
Some ratios indicate the trend or progress or downfall of the firm. In the view of
the requirements of the various users of ratio, it is divided in to the following
important categories.

 Liquidity ratios
 Activity ratios
 Profitability ratios
 Earnings ratios
2.1.4.2 Comparative balance sheet:

The comparative balance sheet is helpful in analyzing and evaluating the financial
position of the firm over a period of years. The comparative balance sheet analysis
is the study of the trend of the same items, group of items, and computed items in
two or more balance sheet of the same business enterprise on different dates.

The changes in periodic balance sheet items reflect the conduct of a business. The
changes can be observed by comparison of the balance sheet at the beginning and
at the end of the period and these changes can help in forming an opinion about the
progress of an enterprise

27
2.1.4.4 Common size balance sheet:

Financial statements when read in absolute figure are not easily understandable.
They are even misleading. Each items of asset is converted in to percentage to total
asset and each item of capital and liabilities is expressed to total liability and
capital fund. Thus the whole balance sheet is converted in to percentage form i.e.,
every individual item stated as a percentage of total 100.such converted balance
sheet is known as common size balance sheet. The percentage so calculated can be
easily compared with the corresponding percentages in some other period.

2.1.4.5 Trend analysis:

The „trend‟ signifies a tendency and as such the review and appraisal of tendency
in accounting variables are nothing but the trend analysis. Trend analysis is carried
out by calculating trend ratio. Trend analysis is significant for forecasting and
budgeting. Trend analysis discloses the change in financial and the operating data
between specific periods.

2.1.5 CASHFLOW STATEMENT

In financial accounting, a cash flow statement, also known as statement of cash


flows, is a financial statement that shows how changes in balance sheet accounts
and income affect cash and cash equivalents, and breaks the analysis down to
operating, investing and financing activities. Essentially, the cash flow statement is
concerned with the flow of cash in and out of the business. The statement captures
both the current operating results and the accompanying changes in the balance
sheet. As an analytical tool, the statement of cash flows is useful in determining the
short-term viability of a company, particularly its ability to pay bills. International

28
Accounting Standard 7 (IAS 7), is the International Accounting Standard that deals
with cash flow statements.

The cash flow statement is partitioned into three segments, namely:

1. cash flow resulting from operating activities;


2. cash flow resulting from investing activities;
3. cash flow resulting from financing activities.

2.1.6 W0RKING CAPITAL MANAGEMENT


DEFINITION:

A managerial accounting strategy focusing on maintaining efficient levels of both


components of working capital, current assets and current liabilities, in respect to
each other. Working capital management ensures a company has sufficient cash
flow in order to meet its short-term debt obligations and operating expenses.

Working capital = current asset – current liabilities

There are three main components associated with working capital management:
accounts receivable, accounts payable and inventory.

The efficient management of working capital is essential for the profitability and
overall financial health of any company. Working capital is the cash that
companies use to operate and conduct their businesses. The components, or
aspects, of working capital that investors and analysts assess to evaluate a company
are the key elements for a company's cash flow – money coming in, money going
out and management of inventory.

29
ACCOUNTS RECEIVABLE

Accounts receivable are revenues due – what is owed to a company by its


customers for sales made. Timely, efficient collection of accounts receivable is
essential to a company's smooth financial operation. Accounts receivable are listed
as assets on a company's balance sheet, but they are not actually assets until they
are collected. A common metric analysts use to assess a company's handling of
accounts receivable is days sales outstanding, which reveals the average number of
days a company takes to collect sales revenues.

ACCOUNTS PAYABLE:

Accounts payable, the money that a company is obligated to pay out over
the short term, is also a key component of working capital management.
Companies seek to strike a balance between maintaining maximum cash flow by
delaying payments as long as is reasonably possible and the need to maintain
positive credit ratings and good relationships with suppliers and creditors. Ideally,
a company's average time to collect receivables is significantly shorter than its
average time to settle payables.

INVENTORY

Inventory is a company's primary asset that it converts into sales revenues.


The rate at which a company sells and replenishes its inventory is an important
measure of its success. Investors consider the inventory turnover rate to be an
indication of the strength of sales and as a measure of how efficient the company is
in its purchasing and manufacturing process. Inventory that is too low puts the
company in danger of losing out on sales, but excessively high inventory

30
How does working capital management affect corporate earnings?
 A company that does not manage working capital effectively is less
profitable and could potentially face financial insolvency. Working capital is
the money used by a business to fund its daily operations. It can be looked at
as essentially the financing for the transformation of basic materials into
finishedgoods.

 Three key components of working capital are inventory, accounts payable


and accounts receivable. Each of these elements is examined by analysts for
indications of a company's financial soundness and operational efficiency.
The longer it takes a company to turn raw materials into sales revenues, the
longer the company‟s working capital is tied up and cannot be utilized for
growing its business and increasing profits. If a company‟s working capital
is tied up for an extended period of time, it may have to take on additional
financing to bridge the gap in cash flow. Efficient working capital
management thus helps keep a company's total debt level down.

 Companies do not all face the same situations in terms of operational cash
flow. For example, hospitals receive co-pays from patients at the time of
delivery of services and then receive the remainder some time later from
insurance companies. Timely collection of accounts receivables is of
paramount importance. Large retail companies do not face such accounts
receivable issues since customers pay for goods immediately. The issue for
these kinds of businesses is more in the area of inventory management.

 Evaluating the working capital management of a company is important for


investors as it is indicative of how efficiently a company is handling cash,

31
how likely it is to be profitable and how much potential it has for growth.
Adequately managing working capital is critical for the basic financial
survival of a company.

Objectives of the Study

Primary Objectives

To study the profitability at L&T Constructions

Secondary Objectives

To study all the financial statements for the past five years to identify the changes
in various items present in them.

To examine the impact of the changes in the financial statement on the financial
position and the profitability of the organisation

Preparation of the common size statements to understand the composition of


various assets and liabilities in the balance sheet

32
To find future trend of selected items for next 5 years

Calculation of liquidity ratios, profitability ratios and operational ratios in order to


ascertain the financial significance of the figure contained in the financial
statements by establishing relationships between them

To examine the relationship that exists between sales and inventories by using Karl
Pearson‟s Correlation co-efficient.

Scope of the Study

The study, which is done at the L&T construction, aims at forecasting profitability.
Profitability analysis is a process of understanding the financial strength and
weakness between the various items of balance sheet and profit and loss account,
profitability analysis is therefore very important and crucial aspect of every
company has to undertake as it is starting for making plans and has to be done
using any sophisticated forecasting and procedures. The above study will help the
organization to identify the adverse condition and would help in taking necessary
steps.

Need For the Study

Forecasting profitability is one of the tools for controlling costs and maximizing
profits. It is useful management tool for comparing the performance with pre
planned performance with a view to attain equilibrium between ends and meanings
outputs and efforts. It corrects the deviation from pre-planned path through the
media observation, research planning, control and decision making and thus helps
in performance of future activities in an orderly way. It uncovers uneconomic in
operations, weaknesses in organization structure and minimizes wasteful spending.

33
Prediction helps the firm to control expenses and attains its objective in a profitable
manner

METHODOLOGY

The research method used is analytical research. In this type of research the
researcher uses the facts and information already available and analyses them to
make a critical of the material.

Research Design

The research is designed in such a way to mainly concentrate on data collected


through secondary mode.

Sources and Collection of Data

For the purpose of this study only secondary data have been used to a large extent.

Source of Data

The main source of data of the study was the annual reports of L&T constructions,
internet sources, books and articles.

Tools

1. Schedule changes in working capital


2. Common size balance Sheet
3. Ratio analysis
4. Trend Analysis
5. Comparative balance sheet analysis

34
CHAPTER: 4

DATA ANALYSIS AND

INTERPRETATION

35
COMPARTIVE STATEMENT ANALYSIS OF L& T FOR THE YR 2011-12

PARTICULAR CY 2012 ( rs in crore ) BY 2011( rs in crore) INC / DEC ( RS ) INC/ DEC ( %)


NON CURRENT ASSETS
FIXED ASSET
tangible assets 14113.7 10899.6 3214.2 29.5
intangible assets 5287.0 4724.6 562.4 11.9
captial wip 7878.8 7392.9 485.9 6.6
goodwill on consolidation 0.0 0.0
intangible assets under development 7033.9 4969.5 2064.5 41.5
NON CURRENT INVESTMENTS 1564.9 1503.3 61.5 4.1
LONG TERM LOANS AND ADVANCES 1900.8 2188.4 -287.6 -13.1
CASH AND BANK BALANCES 143.6 0.8 142.8 17845.0
OTHER NON CURRENT ASSETS 201.7 95.1 106.6 112.1
DEFERRED TAX ASSET ( NET) 129.0 20.7 108.4 523.7
LONG TERM LOANS AND ADVANCES TOWARDS FA 16605.9 10358.6 6247.3 60.3
CURRENT ASSETS
CURRENT INVESTMENT 7224.6 7712.4 -487.8 -6.3
INVENTORIES 4229.9 3040.3 1189.6 39.1
TRADE RECEIVABLES 20405.4 14119.5 6285.9 44.5
CASH AND BANK BALANCES 3378.6 3644.6 -266.1 -7.3
SHORT TERM LOANS AND ADV 5591.5 4184.3 1407.2 33.6
SHORT TERM LOANS AND ADV TOWARDS FA 8167.3 7352.1 815.2 11.1
OTHER CURRENT ASSETS 15137.9 12527.6 2610.3 20.8
TOTAL 118994.3 94734.1 24260.2 25.6
EQUITY AND LIABILITES
NON - CURRENT LIABILITES
LONG TERM BORROWINGS 36155.6 24841.1 11314.6 45.5
DEFERRED TAX LIABLITES( NET) 210.9 331.6 -120.7 -36.4
OTHER LONG TREM LIAB 1059.6 252.1 807.4 320.2
DEFFERED PAYMENT LIAB FOR ACQUISTION OF F.A 3953.6 4417.8 -464.2 -10.5
LONG TERM PROVISIONS 312.2 274.3 37.9 13.8
CURRENT LIABILITES
SHORT TERM BORROWINGS 5778.1 4036.8 1741.2 43.1
CURRENT MATURITIES OF LTB 5216.4 3920.4 1296.0 33.1
TRADE PAYABLES 16716.5 14687.7 2028.8 13.8
SHORT TERM PROVISONS 2343.1 2246.8 96.3 4.3
CURRENT MATURITIES OF DEFERRED PAY LIAB FOR ACQ OF F.A 464.1 93.9 370.2 394.2
OTHER CURRENT LIABILITES 15644.2 13555.2 2089.0 15.4
SHARE HOLDERS FUNDS
SHARE CAPTIAL 122.5 121.8 0.7 0.6
RESERVE AND CAPITAL 29264.3 24928.8 4335.5 17.4
MINORITY INTEREST 1753.5 1026.0 727.5 70.9
TOTAL EQUITY AND LIABILITES 118994.3 94734.1 24260.2 25.6

BY-Base Year , CY- Current Year

36
COMPARTIVE B/S STATEMENT OF L&T FOR YR 2012-13
CY 2013 BY2012 ( INC./ INC./ DEC
PARTICULAR
(in crore ) in crore) DEC. ( RS ( %)
NON CURRENT ASSETS
FIXED ASSET
tangible assets 20816.2 14113.7 6702.4 47.5
intangible assets 7453.3 5287.0 2166.3 41.0
captial wip 4061.1 7878.8 -3817.7 -48.5
goodwill on consolidation 2119.8 0.0 2119.8 0.0
intangible assets under development 7289.4 7033.9 255.5 3.6
NON CURRENT INVESTMENTS 1224.2 1564.9 -340.7 -21.8
LONG TERM LOANS AND ADVANCES 2258.6 1900.8 357.9 18.8
CASH AND BANK BALANCES 65.1 143.6 -78.5 -54.7
OTHER NON CURRENT ASSETS 148.2 201.7 -53.5 -26.5
DEFERRED TAX ASSET ( NET) 194.2 129.0 65.2 50.5
LONG TERM LOANS AND ADVANCES TOWARDS FA 21840.7 16605.9 5234.8 31.5
CURRENT ASSETS
CURRENT INVESTMENT 7543.3 7224.6 318.7 4.4
INVENTORIES 5169.5 4229.9 939.6 22.2
TRADE RECEIVABLES 23011.3 20405.4 2606.0 12.8
CASH AND BANK BALANCES 3566.1 3378.6 187.6 5.6
SHORT TERM LOANS AND ADV 6171.5 5591.5 580.1 10.4
SHORT TERM LOANS AND ADV TOWARDS FA 10160.1 8167.3 1992.8 24.4
OTHER CURRENT ASSETS 20029.7 15137.9 4891.8 32.3
TOTAL 143122.2 118994.3 24127.9 20.3
EQUITY AND LIABILITES
NON - CURRENT LIABILITES
LONG TERM BORROWINGS 47392.1 36155.6 11236.5 31.1
DEFERRED TAX LIABLITES( NET) 377.9 210.9 167.0 79.2
OTHER LONG TREM LIAB 1160.9 1059.6 101.3 9.6
DEFFERED PAYMENT LIAB FOR ACQUISTION OF F.A 3481.5 3953.6 -472.1 -11.9
LONG TERM PROVISIONS 346.7 312.2 34.5 11.0
CURRENT LIABILITES
SHORT TERM BORROWINGS 7965.8 5778.1 2187.7 37.9
CURRENT MATURITIES OF LTB 7313.7 5216.4 2097.4 40.2
TRADE PAYABLES 18053.7 16716.5 1337.1 8.0
SHORT TERM PROVISONS 2539.4 2343.1 196.4 8.4
CURRENT MATURITIES OF DEFERRED PAY LIAB FOR ACQUIS OF F.A 472.5 464.1 8.4 1.8
OTHER CURRENT LIABILITES 17505.6 15644.2 1861.5 11.9
SHARE HOLDERS FUNDS
SHARE CAPTIAL 123.1 122.5 0.6 0.5
RESERVE AND CAPITAL 33736.6 29264.3 4472.3 15.3
MINORITY INTEREST 2652.9 1753.5 899.4 51.3
TOTAL EQUITY AND LIABILITES 143122.2 118994.3 24127.9 20.3

37
COMPARTIVE B/S ANALYSIS OF L & T FOR THE YEAR 2013 - 2014
CY 2014 ( rs BY 2013 (
INC/DEC (RS) INC/DEC (%)
PARTICULAR in crore ) rs in crore)
NON CURRENT ASSETS
FIXED ASSET
intangible assets 9391.4 7453.3 1938.1 26.0
captial wip 4262.6 4061.1 201.5 5.0
goodwill on consolidation 2136.2 2119.8 16.4 0.8
intangible assets under development 10018.4 7289.4 2729.0 37.4
NON CURRENT INVESTMENTS 1432.8 1224.2 208.6 17.0
LONG TERM LOANS AND ADVANCES 2793.8 2258.6 535.2 23.7
CASH AND BANK BALANCES 38.7 65.1 -26.4 -40.5
OTHER NON CURRENT ASSETS 184.9 148.2 36.8 24.8
DEFERRED TAX ASSET ( NET) 280.4 194.2 86.2 44.4
LONG TERM LOANS AND ADVANCES TOWARDS FA 32598.9 21840.7 10758.1 49.3
CURRENT ASSETS
CURRENT INVESTMENT 6676.2 7543.3 -867.1 -11.5
INVENTORIES 5527.5 5169.5 358.0 6.9
CASH AND BANK BALANCES 4096.6 3566.1 530.4 14.9
SHORT TERM LOANS AND ADV 7327.2 6171.5 1155.7 18.7
SHORT TERM LOANS AND ADV TOWARDS FA 10835.6 10160.1 675.5 6.6
OTHER CURRENT ASSETS 25269.7 20029.7 5240.0 26.2
TOTAL 170022.7 143122.2 26900.5 18.8
EQUITY AND LIABILITES
NON - CURRENT LIABILITES
LONG TERM BORROWINGS 55447.3 47392.1 8055.1 17.0

DEFERRED TAX LIABLITES( NET) 617.9 377.9 240.0 63.5


OTHER LONG TREM LIAB 980.0 1160.9 -180.9 -15.6
DEFFERED PAYMENT LIAB FOR ACQUISTION OF F.A 2966.8 3481.5 -514.7 -14.8
LONG TERM PROVISIONS 366.1 346.7 19.5 5.6
CURRENT LIABILITES
SHORT TERM BORROWINGS 13678.7 7965.8 5712.9 71.7
CURRENT MATURITIES OF LTB 11027.0 7313.7 3713.2 50.8
TRADE PAYABLES 20870.6 18053.7 2816.9 15.6
SHORT TERM PROVISONS 2930.8 2539.4 391.4 15.4
CURRENT MATURITIES OF DEFERRED PAY LIAB FOR ACQOF F.A 515.1 472.5 42.6 9.0
OTHER CURRENT LIABILITES 19731.8 17505.6 2226.2 12.7
SHARE HOLDERS FUNDS
SHARE CAPTIAL 185.4 123.1 62.3 50.6
RESERVE AND CAPITAL 37526.2 33736.6 3789.6 11.2
MINORITY INTEREST 3179.2 2652.9 526.3 19.8
TOTAL EQUITY AND LIABILITES 170022.7 143122.2 26900.5 18.8

38
Analysis of changes in comparative balance sheet of Larsen &Toubro from
2011-12 to 2013-14 (in %)

Figure 1

Analysis of changes in comparitive balance sheet of Larsen &Toubro from


45
2011-12 to 2013-14 (in %)
2011-12 (%)
40 38.43

35
30.14
30 27.67
26.54
Percetage

24.35
25 22.98 21.97
19.77
20 17.3 17.95
16.65
15.22 14.44
15 13.83
11.37
10

0
Total share holder's Total non current Total current Total non current Total current assets
fund liabilities liabilities assets

INTERPRETATION :

By analyzing the comparative balance sheet from the FY 2011-12 to 2013-14, we can see the
following results: The shareholders fund is increasing in at a decreasing rate of 5.93% which is
due to the issue of bonus shares. The total non-current liabilities have been increasing at a
decreasing rate of 23.99%.The current liabilities increased by 7.9%. The non-current assets
increased at a decreasing rate of 5.78%. The total current asset increased at a decreasing rate of
8.14%. This shows there is a considerable increase in the current assets with respect to current
liabilities. In this situation the organization can easily manage the requirement for working
capital to meet its day to day expenses.

39
COMMON SIZE BALANCE SHEET OF LARSEN AND TOUBRO
Common Sized Balance Sheet Of L & T (2012-13 To 2013-14)

Table 1

COMMON SIZED BALANCE SHEET OF L & T (2012-13 to 2013-14)

2013-14 2012-13 2013-14 2012-13 (in


Particulars (in crores) (in crores) (in %) %)
Equity and liability
Total shareholder‟s fund 37711.61 33859.69 22.18 23.66
Minority interest 3179.18 2652.87 1.87 1.85
Total non-current liabilities 60377.97 52758.98 35.51 36.86
Total current liabilities 68753.97 53850.69 40.44 37.63

Total liabilities 170022.73 143122.23 100 100


Assets
Total non-current assets 83905.49 67470.74 49.35 47.14
Total current assets 86117.24 75651.49 50.65 52.86

Total 170022.73 143122.23 100 100

Interpretation

The above table reveals the common size balance sheet of Larsen and Toubro Constructions for
the year 2013-2014. The company net current assets decreased from 52.86% to 50.65% followed
by 2013-2014. The Company‟s Fixed Asset shows a slight amount of deviation. The company
capital, surplus and reserves also didn‟t show much of deviation. Finally it can be concluded that
the company‟s financial position is satisfied.

40
COMMON SIZED BALANCE SHEET OF L & T (2011-12 to 2012-13)

Table 2

COMMON SIZED BALANCE SHEET OF L & T (2011-12 to 2012-13)

2012-13 2011-12 2012-13 2011-12


PARTICULARS
(in crores) (in crores) (in %) (in %)

Equity and liability


Total shareholder‟s fund 33859.69 29386.78 23.66 24.7
Minority interest 2652.87 1753.46 1.85 1.47
Total non-current liabilities 52758.98 41691.81 36.86 35.04
Total current liabilities 53850.69 46162.28 37.63 38.79
Total liabilities 143122.2 118994.33 100 100
Assets
Total non-current assets 67470.74 54859.3 47.14 46.1
Total current assets 75651.49 64135.03 52.86 53.90
Total 143122.2 118994.33 100.00 100.00

Interpretation

The above table reveals the common size balance sheet of Larsen and Toubro Constructions for
the year 2012-2013. The company net current assets decreased from 53.90% to 52.86% followed
by 2012-2013. The Company‟s Fixed Asset did not show much of deviation. The company
capital, surplus and reserves also didn‟t show much of deviation. Finally it can be concluded that
the company‟s financial position is satisfied.

41
COMMON SIZED BALANCE SHEET OF L & T (2010-11 to 2011-12)

Table 3

COMMON SIZED BALANCE SHEET OF L & T (2010-11 to 2012-13)


2011-12 2010-11 2011-12 2010-11
PARTICULARS (in crores) (in crores) (in %) (in %)
Equity and liability
Total shareholder's fund 29386.78 25050.55 24.7 26.44
Minority interest 1753.46 1023 1.47 1.08
Total non-current liabilities 41691.81 30116.8 35.04 31.79
Total current liabilities 46162.28 38540.77 38.79 40.68
Total liabilities 118994.33 94731.12 100 100.00
Assets
Total non-current assets 54859.3 42153.39 46.1 44.50
Total current assets 64135.03 52580.73 53.90 55.50
Total 118994.33 94734.12 100 100.00

Interpretation

The above table reveals the common size balance sheet of Larsen and Toubro Constructions for
the year 2011-2012. The company net current assets decreased from 55.50% to 53.90% followed
by 2011-2012. The Company‟s Fixed Asset shows a slight amount of deviation. The company
capital, surplus and reserves also didn‟t show much of deviation. Finally it can be concluded that
the company‟s financial position is satisfied.

42
Analysis of Equities &Liabilities in the Common Size Balance Sheet of L&T during the FY
2011-12 to 2013-14

Figure 1

An al ysi s of E q u i ti es&L i ab i l i ti es i n th e Common S i ze


Bal an ce S h eet of L &T d u ri n g th e FY 2011 -12 to 2013 -14

40.68

40.44
38.79

37.63
36.86

35.51
35.04
31.79
26.44
PERCENTAGE

23.66
24.7

22.18

1.87
1.85
1.47
1.08

Total share holder's minority intrest Total non current Total current
fund liabilities liabilities
Equities & Liabilities

Changes in 2011 (in %) Changes in 2012 (in %)


Changes in 2013 (in %) Changes in 2014 (in %)

43
Figure 2

Analysis of Assets in the Common Size Balance Sheet of L&T


during the FY 2011-12 to 2013-14
60.00 55.50 53.90
52.86
49.35 50.65
50.00 46.1 47.14
44.50
PERCENTAGE

40.00

30.00

20.00

10.00

0.00
Total non current assets Total current assets
ASSETS
Changes in 2011 (in %) Changes in 2012 (in %)
Changes in 2013 (in %) Changes in 2014 (in %)

44
STATEMENT OF WORKING CAPITAL (2013-14)
Particulars 2013-14 2012-13 Increase Decrease
in crores in crores in crores in crores
Current assets
current investments 6676.17 7543.31 867.14
inventories 5527.46 5169.46 358
trade receivables 26384.55 23011.32 3373.23
cash and bank balances 4096.57 3566.14 530.43
short term loans and advances 7327.16 6171.5 1155.66
short term loans and advances 10835.6 10160.06 675.54
towards financing activities
other current assets 25269.73 20029.7 5240.03
Total current assets 86117.24 75651.49
Current liabilities
short term borrowings 13678.67 7965.76 5712.91
current maturities of deferred 515.13 472.53 42.6
payment liabilities for acquisition
of fixed asset
current maturities of long term 11026.97 7313.73 3713.24
borrowings
trade payables 20870.58 18053.65 2816.93
other current liabilities 19731.84 17505.6 2226.24
short term provisions 2930.78 2539.42 391.36
Total current liabilities 68753.97 53850.69
Working Capital ( CA-CL) 17363.27 21800.8
Decrease in WC 4437.53 4437.53
Net WC 21800.8 21800.8 15770.42 15770.42

45
Figure 1

Changes in Working Capital during the FY 2012-13 to 2013-14

100000
86117.24 2012-13 2013-14
90000

80000 75651.49
68753.97
70000
Amounts in crores

60000 53850.69
50000

40000

30000
21800.8
17363.27
20000

10000

0
Total Current Asset Total Current liability Total Working capital

INTERPRETATION:

The current asset and the current liability shows an increasing trend during the FY
2012-13 to 2013-14. The total current asset increased by 13.83%. The total current
liabilities increased by 27.67%. It shows a decrease in the working capital by
20.35% in this FY.

46
Table 1

STATEMENT OF WORKING CAPITAL (2012-13) in crores


Particulars 2012-13 2011-12 Increase Decrease
Current assets
current investments 7543.31 7224.6 318.71
inventories 5169.46 4229.87 939.59
trade receivables 23011.32 20405.36 2605.96
cash and bank balances 3566.14 3378.58 187.56
short term loans and advances 6171.5 5591.45 580.05
short term loans and advances 10160.06 8167.27 1992.79
towards financing activities
other current assets 20029.7 15137.9 4891.8
Total current assets 75651.49 64135.03
Current liabilities
short term borrowings 7965.76 5778.06 2187.7
current maturities of deferred 472.53 464.09 8.44
payment liabilities for acquisition
of fixed asset
current maturities of long term 7313.73 5216.38 2097.35
borrowings
trade payables 18053.65 16716.53 1337.12
other current liabilities 17505.6 15644.15 1861.45
short term provisions 2539.42 2343.07 196.35
Total current liabilities 53850.69 46162.28
Working Capital ( CA-CL) 21800.8 17972.75
Increase in WC 3828.05 3828.05
Net WC 21800.8 21800.8 11516.46 11516.46

47
Figure 2

Changes in Working Capital during the FY 2011-12 to 2012-13


80000 75651.49

70000
64135.03 2011--12 2012-13
60000
53850.69
Amounts in crores

50000 46162.28

40000

30000
21800.8
20000 17972.75

10000

0
Total Current Asset Total Current liability Total Working capital

INTERPRETATION:
The current asset and the current liability shows an increasing trend during the FY 2012-13 to
2013-14. The total current asset increased by 17.95 %. The total current liabilities increased by
16.65 %. It shows an increase in the working capital by 21.29% in this FY.

48
Table 3

STATEMENT OF WORKING CAPITAL (2012-13) in crores


Particulars 2011-12 2010-11 Increase Decrease
Current assets
current investments 7224.6 7712.44 487.84
inventories 4229.87 3040.27 1189.6
trade receivables 20405.36 14119.45 6285.91
cash and bank balances 3378.58 3644.64 266.1
short term loans and advances 5591.45 4184.29 1407.16
short term loans and advances 8167.27 7352.06 815.21
towards financing activities
other current assets 15137.9 12527.58 2610.32
Total current assets 64135.03 52580.73
Current liabilities
short term borrowings 5778.06 4036.83 1741.23
current maturities of deferred 464.09 93.91 370.18
payment liabilities for acquisition of
fixed asset
current maturities of long term 5216.38 3920.41 1295.97
borrowings
trade payables 16716.53 14687.72 2028.81
other current liabilities 15644.15 13555.15 2089
short term provisions 2343.07 2246.75 96.32
Total current liabilities 46162.28 38540.77
Working Capital ( CA-CL) 17972.75 14039.96
Increase in WC 3932.79 3932.79
Net WC 17972.75 17972.75 12308.2 12308.2

49
Figure 3

Changes in Working Capital during the FY 2010-11 to 2011-12

70000 64135.03
2010--11 2011-12
60000
52580.73
46162.28
Amounts in crores

50000
38540.77
40000

30000

20000 17972.75
14039.96
10000

0
Total Current Asset Total Current liability Total Working capital

INTERPRETATION:
The current asset and the current liability shows an increasing trend during the FY 2012-13 to
2013-14. The total current asset increased by 21.97 %. The total current liabilities increased by
19.77 %. It shows an increase in the working capital by 28.01% in this FY.

50
LIQUIDITY RATIO

1. CURRENT RATIO in Crores

Years Current Assets Current Liabilities Current Ratio

2014 86117.24 68753.97 1.252542071

2013 75651.49 53580.69 1.411917054

2012 64135.03 46162.28 1.389338438

2011 52580.73 38540.77 1.364288518

CURRENT RATIO
1.45
1.41
1.4 1.38
1.36
1.35
RATIO

1.3
1.25
1.25
1.2
1.15
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it increased from 1.36 to 1.38. It again
increased to 1.41 in the year 2013. In the year 2014 it decreased to 1.25. The
management should take remedial measures to improve the present position.

51
2. QUICK RATIO in Crores

Years Quick Assets Current Liabilities Quick Ratio

2014 80589.78 68753.97 1.172147296

2013 70482.03 53580.69 1.315437147

2012 59905.16 46162.28 1.297707999

2011 49540.46 38540.77 1.285404002

QUICK RATIO
1.35
1.31
1.28 1.29
1.3

1.25
RATIO

1.2 1.17
1.15

1.1
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it increased from 1.28 to 1.30. It again
increased to 1.31 in the year 2013. In the year 2014 it decreased to 1.17. The
management should take remedial measures to improve the present position

52
3. ABOSULTE LIQUID RATIO in Crores

Absolute Liquid
Year Assets Current Liabilities Absolute Liquid Ratio

2014 10772.74 68753.97 0.156685352

2013 11109.45 53580.69 0.207340555

2012 11357.08 46162.28 0.24602511

2011 10603.18 38540.77 0.275115936

LIQUID RATIO
0.3 0.27
0.24
0.25
0.2
0.2
0.15
RATIO

0.15
0.1
0.05
0
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it increased from 0.15 to 0.24. It again
decreased to 0.21 in the year 2013. In the year 2014 it further decreased to 0.15.
The management should take remedial measures to improve the present position

53
LEVERAGE RATIOS

4. PROPRIETARY RATIO in Crores

Total Tangible
Year Shareholders' Funds Assets Proprietary Ratio

2014 37711.61 64571.28 0.584030702

2013 33859.69 58899.01 0.574877065

2012 29386.78 49301.98 0.596056791

2011 25050.55 38183.38 0.656058997

PROPRIETORY RATIO
0.66 0.65

0.64

0.62

0.6 0.59
RATIO

0.58
0.58 0.57

0.56

0.54

0.52
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it decreased from 0.65 to 0.59. It again
decreased to 0.57 in the year 2013. In the year 2014 it increased to 0.58. The
management should take remedial measures to improve the present position.

54
ACTIVITY RATIOS

5. WORKING CAPITAL TURNOVER RATIO in Crores

Year COGS Working Capital Working Capital Turnover Ratio

2014 48730.46 17363.27 2.806525499

2013 43462.44 22070.8 1.96922812

2012 38785.64 17972.75 2.158024788

2011 31220.89 14039.96 2.223716449

Working Capital Turnover Ratio


3 2.8

2.5 2.22 2.15


1.96
2
RATIO

1.5

0.5

0
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it decreased from 2.22 to 2.15. It again
decreased to 1.96 in the year 2013. In the year 2014 it increased to 2.8.The
management should take remedial measures to improve the present position.

55
6. FIXED ASSETS TURNOVER RATIO in Crores

Year COGS Net Fixed Assets Fixed Asset Turnover Ratio

2014 48730.46 46575.98 1.04625732

2013 43462.44 41739.74 1.041272418

2012 38785.64 34313.51 1.130331464

2011 31220.89 27986.53 1.115568454

Fixed Asset Turnover Ratio


1.14 1.13
1.12 1.11
1.1
1.08
RATIO

1.06 1.05
1.04
1.04
1.02
1
0.98
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it increased from 1.11 to 1.13. It again
decreased to 1.04 in the year 2013. In the year 2014 it increased to 1.05. The
management should take remedial measures to improve the present position.

56
7. CAPITAL TURNOVER RATIO in Crores

Year COGS Capital Employed Capital Turnover Ratio

2014 48730.46 37711.61 1.292187207

2013 43462.44 33859.69 1.283604191

2012 38785.64 29386.78 1.319832932

2011 31220.89 25050.55 1.24631555

Capital Turnover Ratio


1.32 1.31
1.3 1.29
1.28
1.28
RATIO

1.26
1.24
1.24
1.22
1.2
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it increased from 1.25 to 1.32. It again
decreased to 1.28 in the year 2013. In the year 2014 it increased to 1.29. The
management should take remedial measures to improve the present position.

57
8. CURRENT ASSETS TO FIXED ASSETS RATIO in Crores

Current Assets to Fixed Assets


Year Current Assets Fixed Assets Ratio

2014 86117.24 46575.98 1.848962491

2013 75651.49 41739.74 1.812457145

2012 64135.03 34313.51 1.869089755

2011 52580.73 27986.53 1.878787045

Current Asset to Fixed Asset Ratio


1.88 1.87
1.87 1.86
1.86
1.85 1.84
1.84
RATIO

1.83
1.82 1.81
1.81
1.8
1.79
1.78
2011 2012 2013 2014
YEARS

Interpretation

Current Assets are increased due to a increase in debtors and the next fixed assets
of the company are raised due to a rise in investment. It resulted in the rise in ratio
compared to the previous year.
58
PROFITABILITY RATIOS

GENERAL PROFITABILITY RATIOS

9. NET PROFIT RATIO in Crores

Year Net Profit After Tax Net Sales Net Profit Ratio

2014 4875.4 85128.4 5.72%

2013 5252.38 74498 7.05%

2012 4690.96 64313.11 7.29%

2011 4455.15 52043.78 8.56%

Net Profit RATIO


9 8.56
8 7.29 7.05
7
5.72
6
RATIO

5
4
3
2
1
0
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is decreasing trend during the
study period. In the year 2011-2012 it decreased from 8.36 to 7.29. It again
decreased to 7.05 in the year 2013. In the year 2014 it further decreased to 5.73.
The management should take immediate remedial measures to improve the present
position which is alarming.
59
10. OPERATING PROFIT in Crores

Year Operating Profit Net Sales Operating Profit Ratio

2014 28998.33 85128.4 0.340642253

2013 24145.65 74498 0.324111386

2012 20636.88 64313.11 0.320881388

2011 16967.01 52043.78 0.326014175

Operating Profit Ratio


0.345
0.34
0.34

0.335
0.33
0.33
RATIO

0.325
0.32 0.32
0.32

0.315

0.31
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is constant trend during the
study period. In the year 2011-2012 it decreased from 0.33 to 0.321. It again
increased to 0.324 in the year 2013. In the year 2014 it increased to 0.34. The
management should take remedial measures to improve the present position.

60
11. RETURN ON TOTAL ASSETS RATIO in Crores

Year Net Profit Total Assets Return on Total Assets

2014 4875.4 170022.73 2.867498951

2013 5252.38 143122.23 3.669856178

2012 4690.96 118994.33 3.942171026

2011 4455.15 94734.12 4.70279346

Return On Total Asset Ratio


5 4.7
4.5
3.94
4 3.66
3.5
2.86
3
rRATIO

2.5
2
1.5
1
0.5
0
2011 2012 2013 2014
YEARS

Interpretation

From the above graph it can be observed that there is decreasing trend during the
study period. In the year 2011-2012 it decreased from4.7 to 3.94. It again
decreased to 3.67 in the year 2013. In the year 2014 it increased to 2.87. The
management should take remedial measures to improve the present position.
61
12. RESERVES & SURPLUS TO CAPITAL RATIO in Crores

Reserves And Reserves & Surplus to Capital


Year Surplus Capital Ratio
0.995084
2014 37526.23 185.38

2013 33736.61 123.08 0.996365

2012 29264.3 122.48 0.995832

2011 24928.78 121.77 0.995139

Reserves & Surplus To Capital Ratio


0.9962
0.996
0.996
0.9958
0.9956
RATIO

0.9954
0.9952
0.995 0.995 0.995
0.995
0.9948
0.9946
0.9944
2011 2012 2013 2014
YEAR

Interpretation

From the above graph it can be observed that there is constant trend during the
study period. In the year 2011-2012 it remained constant in 0995. It again
increased to 0.996 in the year 2013. In the year 2014 it was 0.995 The present
position is satisfying.

62
OVERALL PROFITABILITY RATIOS

13. EARNINGS PER SHARE in Crores

Number of Equity
Year Net Profit Shares Earnings Per Share

2014 4875.4 925416187 52.59

2013 5252.38 920889827 57.03

2012 4690.96 611108916 76.76

2011 4455.15 605799369 73.54

EARNINGS PER SHARE


90
76.76
80 73.54
70
57.03
60 52.59
50
40
30
20
10
0
2011 2012 2013 2014
YEAR

Interpretation

From the above graph it can be observed that there is fluctuating trend during the
study period. In the year 2011-2012 it increased from 73.54 to 76.76. It again
decreased to 57.03 in the year 2013. In the year 2014 it further decreased to 52.59.
The management should take remedial measures to improve the present position.

63
14. PRICE EARNINGS (P/E) RATIO in Crores

Yea Market Price Per


r Share Earnings Per Share Price-Earnings Ratio

2014 40.75 52.59 0.774862141

2013 36.77 57.03 0.644748378

2012 48.09 76.76 0.626498176

2011 41.35 73.54 0.562279032

PRICE PER EARNING RATIO


0.9
0.77
0.8
0.7 0.62 0.64
0.6 0.56
RATIO

0.5
0.4
0.3
0.2
0.1
0
2011 2012 2013 2014
YEAR

Interpretation

From the above graph it can be observed that there is increasing trend during the
study period. In the year 2011-2012 it increased from 0.56 to 0.63. It again
increased to 0.64 in the year 2013. In the year 2014 it further increased to 0.77.
This shows a greater amount of satisfaction in the market.

64
15. RETURN ON INVESTMENT in Crores

Yea
r Net Profit Shareholders' Funds Return on Investment

2014 4875.4 37711.61 0.129281142

2013 5252.38 33859.69 0.155121916

2012 4690.96 29386.78 0.159628241

2011 4455.15 25050.55 0.177846395

RETURN ON INVESTMENT
20
17.78
18
15.9 15.51
16
14 12.93
12
Ratio

10
8
6
4
2
0
2011 2012 2013 2014
YEAR

Interpretation

From the above graph it can be observed that there is decreasing trend during the
study period. In the year 2011-2012 it decreased from 17.78 to 15.96. It again
decreased to 15.51 in the year 2013. In the year 2014 it further decreased to12.93.
The management should take remedial measures to improve the present position.
65
TREND ANALYSIS-1

Table Showing Trend Analysis of current assets

Years X Y X2 XY Trend Deviation


Value

2010 -2 42056.44 4 -84112.88 41869.71 186.73


2011 -1 52580.73 1 -52580.73 52988.95 -408.22
2012 0 64135.03 0 0 64108.19 26.84
2013 1 75651.49 1 75651.49 75227.43 424.06
2014 2 86117.24 4 172234.48 86346.67 -229.43
Total 320540.93 10 11119.24

Where Deviation = Y-Trend Value

Yc =A+Bx

Where A=∑y/n

B=∑xy /∑x2

A= ∑y/n

= 320540.93

A = 64108.19

B= ∑xy/∑x2

= 111192.36

10

B= 11119.24

66
Yc = A+Bx

= 64108.19+ 11119.24(-2)

= 41869.706

Yc =A+Bx

= 64108.19+ 11119.24(-1)

= 52988.95

Yc =A+Bx

= 64108.19+0

= 64108.19

Yc =A+Bx

= 64108.19+11119.24 (1)

= 75227.43

Yc =A+Bx

= 64108.19+11119.24 (2)

= 86346.67

67
Trend Analysis of Current Assets from 2010-2014

Trend Analysis of Current Assets


80000

70000

60000
Trend Values

50000

40000
Trend
30000
Deviation
20000

10000

0
2010 2011 2012 2013
Years

Projected Trend Value of current assets for the forthcoming years (2015-2019)

Year Future Trend Value(Trend Value+B)


2014 86346.67 (Base Year)
2015 97465.91
2016 108585.15
2017 119704.39
2018 130823.63
2019 141942.87

Interpretation

The trend analysis for the above years shows a very good amount increase. This is mainly due to the
reason that these data‟s have been arrived in comparison with the last 5 years current assets value. There
was a phenomenal increase in growth in term of assets during 2014 and this is one of the major reasons
that the projections are showing a good increase. In reality if we assume that the same increase in trend
continues compared to 2014, the ratio for the above five years will be still higher.

68
Chart Showing Trend Analysis of Current Assets

In Crores

Future Trend Value


2019 141942.87

2018 130823.63

2017 119704.39
Years

2016 108585.15 Future Trend

2015 97465.91

2014 86346.67

0 20000 40000 60000 80000 100000 120000 140000 160000


Trend Values

69
TREND ANALYSIS-2

Table Showing Trend Analysis of Current Liabilities

Years X Y XY X2 Trend Deviation


Value

2010 -2 24277.33 -48554.66 4 26388.15 -2110.82


2011 -1 38540.77 -38540.77 1 35763.69 2777.08
2012 0 46162.28 0 0 45139.23 1023.05
2013 1 52580.73 52580.73 4 54514.77 -1934.04
2014 2 64135.03 128270.06 1 63889.23 245.78
Total 225696.14 93755.36 10

Where Deviation = Y-Trend Value

Yc =A+Bx

Where A=∑y/n

B=∑xy /∑x2

A= ∑y/n

= 225696.14

A = 45139.23

B= ∑xy/∑x2

= 93755.36

10

B= 9375.54

70
Yc = A+Bx

= 45139.23+9375.54(-2)

= 26388.15

Yc =A+Bx

= 45139.23+ 9375.54(-1)

= 35763.69

Yc =A+Bx

= 45139.23+ 0

= 45139.23

Yc =A+Bx

=45139.23+9375.54 (1)

= 54514.77

Yc =A+Bx

= 45139.23+ 9375.54(2)

= 63889.23

71
Trend Analysis of Current Liabilities from 2010-2014 in Crores

70000 64135.03
63889.23
60000 52580.73
46162.28 54514.77
50000
45139.23
38540.77
40000
Values

35763.69
24277.33 Trend
30000
26388.15 Deviation
20000

10000

0
2010 2011 2012 2013 2014
Years

Projected Trend Value of current Liabilities for the forthcoming years(2015-2019)

Year Future Trend Value(Trend Value+B)


2014 63889.23 ( Base Year)
2015 73264.77
2016 82640.31
2017 92015.85
2018 101391.39
2019 110766.93

Interpretation:

The trend analysis for the above years shows a marginal increase. This is mainly due to the reason that
these data‟s have been arrived in comparison with the last 5 years current liabilities value. There was no
phenomenal increase in growth in term of liabilities during 2014 and this is one of the major reasons that
the projections are showing a marginal increase. In reality if we assume that the same increase in trend
continues compared to 2014, the ratio for the above five years will be still higher.

72
Chart Showing Trend Analysis of Current liabilities(2015-2019)

In Crores

Future Trend Values

2018 101391.39

2017 92015.85
Years

2016 82640.31
Future Trend
2015 73264.77

2014 63889.23

0 20000 40000 60000 80000 100000 120000


Values

73
Consolidated Cash Flow Statement FY 2011-2014
In Crores

Cash Flow Mar'14 Mar'13 Mar'12 Mar'11

Profit Before Tax 6679.41 5677.94 6255.33 5568.56

Net Cash Flow Operating Activity 1047.24 1472.24 1081.58 3833.3

Net Cash Flow Investing Activity -1214.32 656.73 -1922.28 -2416.79

Net Cash Flow Financial Activity 504.5 -3316.23 1015.61 -1124.84

Net Inc/Dec In Cash And Cash Equivalent 336.97 -409.66 174.91 298.48

Cash And Cash Equivalent At The Beginning Of the Year 1457.15 1906.02 1730.35 1431.87

Cash And Cash Equivalent At The End Of the Year 1794.12 1496.36 1905.26 1730.35

74
In Crores

Cash Flow Analysis of L&T During the Fy2010-11 To 2013-14

3833.3
1906.02

1905.26
1794.12

1730.35

1730.35
1496.36
1472.24
1457.15

1431.87
1081.58
1047.24

1015.61
656.73
336.97
504.5

298.48
174.91
Mar'14 Mar'13 Mar'12 Mar'11
-409.66

-1124.84
-1214.32

-1922.28

-2416.79
-3316.23

Net Cash Flow Operating Activity


Net Cash Flow Investing Activity
Net Cash Flow Financial Activity
Net Inc/Dec In Cash And Cash Equivalent
Cash And Cash Equivalent At The Beginning Of the Year
Cash And Cash Equivalent At The End Of the Year

75
CHAPTER 5
FINDINGS, SUGGESTIONS &
CONCLUSION

76
FINDINGS OF THE STUDY

 By analyzing the comparative balance sheet from the FY 2011-12 to 2013-


14, we can see the following results: The shareholders fund is increasing in
at a decreasing rate of 5.93% which is due to the issue of bonus shares. The
total non-current liabilities have been increasing at a decreasing rate of
23.99%.The current liabilities increased by 7.9%. The non-current assets
increased at a decreasing rate of 5.78%. The total current asset increased at a
decreasing rate of 8.14%. This shows there is a considerable increase in the
current assets with respect to current liabilities. In this situation the
organization can easily manage the requirement for working capital to meet
its day to day expenses.

 The above table reveals the common size balance sheet of Larsen and
Toubro Constructions for the year 2013-2014. The company net current
assets decreased from 52.86% to 50.65% followed by 2013-2014. The
Company‟s Fixed Asset shows a slight amount of deviation. The company
capital, surplus and reserves also didn‟t show much of deviation. Finally it
can be concluded that the company‟s financial position is satisfied.

 The above table reveals the common size balance sheet of Larsen and
Toubro Constructions for the year 2012-2013. The company net current
assets decreased from 53.90% to 52.86% followed by 2012-2013. The
Company‟s Fixed Asset did not show much of deviation. The company
capital, surplus and reserves also didn‟t show much of deviation. Finally it
can be concluded that the company‟s financial position is satisfied.

 The above table reveals the common size balance sheet of Larsen and
Toubro Constructions for the year 2011-2012. The company net current

77
assets decreased from 55.50% to 53.90% followed by 2011-2012. The
Company‟s Fixed Asset shows a slight amount of deviation. The company
capital, surplus and reserves also didn‟t show much of deviation. Finally it
can be concluded that the company‟s financial position is satisfied.

 The current asset and the current liability show an increasing trend during
the FY 2012-13 to 2013-14. The total current asset increased by 13.83%.
The total current liabilities increased by 27.67%. It shows a decrease in the
working capital by 20.35% in this FY.

 The current asset and the current liability shows an increasing trend during
the FY 2012-13 to 2013-14. The total current asset increased by 17.95 %.
The total current liabilities increased by 16.65 %. It shows a increase in the
working capital by 21.29% in this FY.

 The current asset and the current liability shows an increasing trend during
the FY 2012-13 to 2013-14. The total current asset increased by 21.97 %.
The total current liabilities increased by 19.77 %. It shows a increase in the
working capital by 28.01% in this FY.

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 1.36 to
1.39. It again increased to 1.41 in the year 2013. In the year 2014 it
decreased to 1.25. The management should take remedial measures to
improve the present position.

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 1.28 to
1.30. It again increased to 1.31 in the year 2013. In the year 2014 it

78
decreased to 1.17. The management should take remedial measures to
improve the present position

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 0.15 to
0.24. It again decreased to 0.21 in the year 2013. In the year 2014 it further
decreased to 0.15. The management should take remedial measures to
improve the present position

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 1.11 to
1.13. It again decreased to 1.04 in the year 2013. In the year 2014 it
increased to 1.05. The management should take remedial measures to
improve the present position.

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it decreased from 2.22 to
2.16. It again decreased to 1.97 in the year 2013. In the year 2014 it
increased to 2.81.The management should take remedial measures to
improve the present position.

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 1.11 to
1.13. It again decreased to 1.04 in the year 2013. In the year 2014 it
increased to 1.05. The management should take remedial measures to
improve the present position.

 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 1.25 to
1.32. It again decreased to 1.28 in the year 2013. In the year 2014 it

79
increased to 1.29. The management should take remedial measures to
improve the present position

 Current Assets are increased due to a increase in debtors and the next fixed
assets of the company are raised due to a rise in investment. It resulted in the
rise in ratio compared to the previous year

 From the above graph it can be observed that there is decreasing trend
during the study period. In the year 2011-2012 it decreased from 8.36 to
7.29 . It again decreased to 7.05 in the year 2013. In the year 2014 it further
decreased to 5.73. The management should take immediate remedial
measures to improve the present position which is alarming.

 From the above graph it can be observed that there is constant trend during
the study period. In the year 2011-2012 it decreased from 0.33 to 0.321. It
again increased to 0.324 in the year 2013. In the year 2014 it increased to
0.34. The management should take remedial measures to improve the
present position.

 From the above graph it can be observed that there is decreasing trend
during the study period. In the year 2011-2012 it decreased from4.7 to 3.94.
It again decreased to 3.67 in the year 2013. In the year 2014 it increased to
2.87. The management should take remedial measures to improve the
present position.

 From the above graph it can be observed that there is constant trend during
the study period. In the year 2011-2012 it remained constant in 0995. It
again increased to 0.996 in the year 2013. In the year 2014 it was 0.995 The
present position is satisfying.

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 From the above graph it can be observed that there is fluctuating trend
during the study period. In the year 2011-2012 it increased from 73.54 to
76.76. It again decreased to 57.03 in the year 2013. In the year 2014 it
further decreased to 52.59. The management should take remedial measures
to improve the present position.

 From the above graph it can be observed that there is increasing trend during
the study period. In the year 2011-2012 it increased from 0.56 to 0.63. It
again increased to 0.64 in the year 2013. In the year 2014 it further increased
to 0.77. This shows a greater amount of satisfaction in the market.

 From the above graph it can be observed that there is decreasing trend
during the study period. In the year 2011-2012 it decreased from 17.78 to
15.96. It again decreased to 15.51 in the year 2013. In the year 2014 it
further decreased to12.93. The management should take remedial measures
to improve the present position.

 The trend analysis for the above years shows a very good amount increase.
This is mainly due to the reason that these data‟s have been arrived in
comparison with the last 5 years current assets value. There was a
phenomenal increase in growth in term of assets during 2014 and this is one
of the major reasons that the projections are showing a good increase. In
reality if we assume that the same increase in trend continues compared to
2014, the ratio for the above five years will be still higher.

 The trend analysis for the above years shows a marginal increase. This is
mainly due to the reason that these data‟s have been arrived in comparison
with the last 5 years current liabilities value. There was no phenomenal
increase in growth in term of liabilities during 2014 and this is one of the

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major reasons that the projections are showing a marginal increase. In reality
if we assume that the same increase in trend continues compared to 2014,
the ratio for the above five years will be still higher.

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Suggestions:

 After the analysis of financial statements, it is clear that the company‟s


status is not good, because the net working capital of the company has
decreased from last year‟s position.

 Company‟s Profits are huge in the current year, it‟s better to declare
dividend to shareholders.

 The Company is utilizing its fixed assets, which majorly help in the growth
of the organization. The Company should maintain that perfectly.

 The company‟s Investments are raised from the inception, it gives the other
income i.e., interest on investments.

 Steps have to be taken to increase the current assets position of the firm so as
to improve the liquidity position of the company.

 Percentage of Debt to equity can be reduced so as to reduce the financial


risk.

 Percentage of debt in capital can be reduced so as to reduce the financial


risk.

 Steps can be taken to reduce the current liability of the firm so as to have a
stable financial position.

 Steps can be taken to increase the net profit so as to increase the overall
financial performance.

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Conclusion:

 The company‟s overall position is at a good position. Particularly the current


year‟s position is well due to a raise in the profit than the previous year.

 It‟s better for the organization to diversify the funds to different sectors in
the present market scenario.

 L&T construction is showing fluctuations in its profitability position in the


past few years, which is concluded with the financial statement analysis.

 The Assets were increased but the working capital is decreased which says
that the firm is not able to meet its current liabilities.

 The calculation of Current and Liquid Ratio will enable the creditors to
access the current financial position of the concern in relation to their debts.

 Preparation of financial statements enables the government to find out


whether the organization is following various rules and regulations or not.
These statements provide a base for regulation of the company.

 It is not only helpful to analyze the present financial position it also enables
to study the future prospects and the expansion plans of the concern.

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Bibliography

 www.larsentoubro.com
 www.lntecc.com
 http://www.larsentoubro.com/media/29758/fact-sheet-sep2014.pdf
 https://ebstudies.wordpress.com/2012/11/06/financial-performance-analysis/
 http://shodhganga.inflibnet.ac.in/bitstream/10603/705/11/12_chapter3.pdf
 https://ebstudies.wordpress.com/2012/11/06/financial-performance-analysis/

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