A Project Report on

FINANCIAL STATEMENT ANALYSIS

AT
ROURKELA STEEL PLANT

SUBMITTED IN PARTIAL FUIFILMENT OF THE

REQUIREMENT FOR THE DEGREE OF
“MASTER OF COMMERCE (M.COM)”
SUDMITTED BY
A SIRISHA
M.COM FINAL YEAR COMMERCE
EXAM ROLL NO: - 11804CM004
CLASS ROLL NO: - PG18CM40
UNDER THE GUIDANCE OF
SRI PRAVAT SAHOO
(ASSISTANT PROFESSOR IN COMMERCE)

PG DEPARTMENT OF COMMERCE
KHALLIKOTE AUTONOMOUS COLLEGE
BERHAMPUR, ODISHA
2018-2020
SRI PRAVAT SAHOO P.G. Dept. of Commerce
(ASSISTANT PROFESSOR IN COMMERCE) Khallikote Auto. College
Berhampur -1

CERTIFICATE

This is to certify that the work embodied in this project entitled

“FINANCIAL STATEMENT ANALYSIS AT ROURKELA STEEL
PLANT” represents the independent project work carried out by
my student A SIRISHA under my supervision and guidance for
the award of M.Com Degree and the same has not been
submitted earlier to any other institution for a degree/diploma.

Place: Berhampur (SRI PRAVAT SAHOO)

Date:
 DECLARATION

I hereby declare that this Project Report entitled “FINANCIAL STATEMENT

ANALYSIS AT ROURKELA STEEL PLANT” submitted in the partial fulfillment of
the requirement of Master of Commerce (M. Com). It is based on only
secondary data found by me in various institutes, books, magazines and
websites & collected by me under guidance of PRAVAT SAHOO SIR.

A SIRISHA
DATE: -

PLACE: - Berhampur
 ACKNOWLEDGEMENT

I express our profound thanks to PRAVAT SAHOO project guide, for his
consistent encouragement and invaluable suggestion in completing this
project, without his effort the completion of this project would be practically
impossible.

It gives me great pleasure to acknowledge my indebtedness to my family

members for their substantial moral support and encouragement in my
studies.

A SIRISHA
DATE: -

PLACE: - Berhampur
 PREFACE

I have made this report file on the topic “FINANCIAL STATEMENT ANALYSIS AT
ROURKELA STEEL PLANT” I have tried my best to elucidate all the relevant detail
to the topic to be included in the report. While in the beginning I have tried to
give a general view about this topic.

My efforts and wholehearted co corporation of each and every one has ended
on a successful note. I express my sincere gratitude to PRAVAT SAHOO who
assisting me throughout the preparation of this topic. I thank him for providing
me the reinforcement, confidence and most importantly the track for the topic
whenever I needed it.
 CONTENTS
Sr. no. PARTICULARS PAGE. NO.
1. CHAPTER-1 1-5
1.1 INTRODUCTION
1.2 SIGNIFICANCE OF THE STUDY
1.3 OBJECTIVES OF THE STUDY
1.4 SCOPE OF STUDY
1.5 RESEARCH METHODOLGY
1.6 TOOLS AND TECHNIQUES USED
1.7 LIMITATION OF STUDY
2. CHAPTER-2 6-18
2.1 COMPANY PROFILE
2.2 INDUSTRY ANALYSIS
2.3 DIFFERENT UNITS OF SAIL
2.4 ROURKELA STEEL PLANT
2.5 CORPORATE OBJECTIVES
2.6 STRUCTURE OF THE OFFICE
3. CHAPTER-3 19-29
3.1 FINANCIAL STATEMENT ANALYSIS
3.2 WORKING CAPITAL MANAGEMENT
3.3 RATIO ANALYSIS
3.4 ANNUAL ACCOUNTS OF SAIL (RSP)
4. CHAPTER-4 30-45
4.1 DATA ANALYSIS & INTERPRETATION
4.2 SWOT ANALYSIS OF RSP
5. CHAPTER-5 46-47
5.1 SUGGESTIONS
5.2 CONCLUSION
6. BIBLIOGRAPHY 48
 CHAPTER1

1.1 INTRODUCTION
FINANCIAL STATEMENT
Financial statements (or financial reports) are formal records of the financial activities and
position of a business person, or other entity. Relevant financial information is presented in a
structured manner and in a form, which is easy to understand. They typically include four
basic financial statements accompanied by a management discussion and analysis:
A balance sheet or statement of financial position, reports on a company's assets, liabilities,
and owners’ equity at a given point in time.
An income statement or profit and loss report (P&L report), or statement of comprehensive
income, or statement of revenue & expense reports on a company's income, expenses, and
profits over a stated period of time. A profit and loss statement provide information on the
operation of the enterprise. These include sales and the various expenses incurred during the
stated period.
A statement of changes in equity or equity statement, or statement of retained earnings,
reports on the changes in equity of the company over a stated period of timeA cash flow
statement reports on a company's cash flow activities, particularly its operating, investing and
financing activities over a stated period of time.
(Notably, a balance sheet represents a single point in time, where the income statement, the
statement of changes in equity, and the cash flow statement each represent activities over a
stated period of time.)
There are four main financial statements:
 A balance sheets
 An income statements
 Cash flow statement and
 Statement of shareholders’ equity

BALANCESHEET
balance sheet or statement of financial position or statement of financial condition is a
summary of the financial balances of an individual or organization, whether it be a sole
proprietorship, a business partnership, a corporation,private limited company or other
organization such as Government or not-for-profit entity. Assets, liabilities and ownership
equity are listed as of a specific date, such as the end of its financial year. A balance sheet is

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often described as a "snapshot of a company's financial condition". Of the four basic financial
statements, the balancesheet is the only statement which applies to a single point in time of a
business' calendar year.
A standard company balance sheet has two sides: assets, on the left and financing, which
itself has two parts,liabilities and ownership equity, on the right. The main categories of
assets are usually listed first, and typically in order of liquidity. Assets are followed by the
liabilities. The difference between the assets and the liabilities is known as equity or the net
assets or the net worth or capital of the company and according to the accounting equation,
net worth must equal assets minus liabilities.Another way to look at the balance sheet
equation is that total assets equals liabilities plus owner's equity. Looking at the equation in
this way shows how assets were financed: either by borrowing money (liability) or by using
the owner's money (owner's or shareholders' equity). Balance sheets are usually presented
with assets in one section and liabilities and net worth in the other section with the two
sections "balancing". A business operating entirely in cash can measure its profits by
withdrawing the entire bank balance at the end of the period, plus any cash in hand. However,
many businesses are not paid immediately; they build up inventories of goods and they
acquire buildings and equipment. In other words: businesses have assets and so they cannot,
even if they want to, immediately turn these into cash at the end of each period. Often, these
businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw
all their original capital and profits at the end of each period. In other words, businesses also
have liabilities.
INCOME STATEMENT
An income statement or profit and loss account (also referred to as a profit and loss statement
(P&L), statement of profit or loss, revenue statement, statement of financial performance,
earnings statement, statement of earnings, operating statement, or statement of operations) is
one of the financial statements of a company and shows the company’s revenues and
expenses during a particular period. It indicates how the revenues (also known as the “top
line”) are transformed into the net income or net profit (the result after all revenues and
expenses have been accounted for). The purpose of the income statement is to show
managers and investors whether the company made money (profit) or lost money (loss)
during the period being reported.
An income statement represents a period of time (as does the cash flow statement). This
contrasts with the balance sheet, which represents a single moment in time.

2
Charitable organizations that are required to publish financial statements do not produce an
income statement.
Instead, they produce a similar statement that reflects funding sources compared against
program expenses, administrative costs, and other operating commitments. This statement is
commonly referred to as the statement of activities. Revenues and expenses are further
categorized in the statement of activities by the donor restrictions on the funds received and
expended. The income statement can be prepared in one of two methods, The Single Step
income statement totals revenues and subtracts expenses to find the bottom line. The Multi-
Step income statement takes several steps to find the bottom line: starting with the gross
profit, then calculating operating expenses. Then when deducted from the gross profit, yields
income from operations. Adding to income from operations is the difference of other
revenues and other expenses. When combined with income from operations, this yields
income before taxes. The final step is to deduct taxes, which finally produces the net income
for the period measured.
STATEMENT OF CHANGES IN EQUITY
Statement of changes in equity and similarly the statement of changes in owner's equity for a
sole trader, statement of changes in partners' equity for a partnership, statement of changes in
Shareholders' equity for a Company or statement of changes in Taxpayers' equity for
Government financial statements is one of the four basic financialstatements.The statement
explains the changes in a company's Share Capital, accumulated reserves and retained
earnings over the reporting period. It breaks down changes in the owners' interest in the
organization, and in the application of retained profit or surplus from one accounting period
to the next. Line items typically include profits or losses from operations, dividends paid,
issue or redemption of shares, revaluation reserve and any other items charged or credited to
accumulated other comprehensive income. It also includes the Non-Controlling Interest
attributable to other individuals and organizations. The statement is expected under the
generally accepted accounting principles and explains the owners' equity shown on the
balance sheet, where: owners' equity = assets − liabilities
CASH FLOW STATEMENT
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. As an
analytical tool, the statement of cash flows is useful in determining the short-term viability of
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a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7),
is the International Accounting Standard that deals with cash flow statements.
People and groups interested in cash flow statements include:
Accounting personnel, who need to know whether the organization will be able to cover
payroll and other immediate expenses Potential lenders or creditors, who want a clear picture
of a company's ability to repay Potential investors, who need to judge whether the company
is financially sound Potential employees or contractors, who need to know whether the
company will be able to afford compensation Company Directors, who are responsible for
governance of the company, and are responsible for ensuring that the company doesn't trade
while insolvent Shareholders of the business
COMMON SIZE STATEMENT
Common size statement is a statement in which all items are expressed as a percentage of a
base figure, useful for purposes of analyzing trends and changing relationship among
financial statement items. These percentage figures bring out clearly the relative significance
of each group of items in the aggregative position of the company.
Common size ratios are used to compare financial statements of different size companies or
of the same company over different periods. By expressing the items in proportion to some
size related measure, standardized financial statements can be created, revealing trends and
providing insight into how the different companies compare. A common size analysis scales
the financials into a percentage of sales for the income statement and a percentage of total
assets on the balance sheet. The scaling effect highlights the most important expense areas
and can reveal problem areas that may not have been noticed before.
It also provides a way to compare year-to-year variations in financials.
1.2 SIGNIFICANCE OF THE STUDY:
 Every company must consider their liquidity position, profitability and solvency
position and also the main attention should be on smooth working capital positio
 Researcher worked and applied various tables in relevant ratio from the data
collection in ROURKELA STEEL PLANT Researcher giving more suitable idea to
the management and developed the company in various way. Researcher analysis
some table in statistical approaches of trend line.
1.3 OBJECTIVES OF THE STUDY:
The study has the following objectives.
 To provide a strong theoretical framework for analyzing financial statements.
 To study the growth profile of the company during the study period.
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  To study the financial position of the company and operation of ROURKELA STEEL
PLANT.
 To appraise financial soundness of the company.
 To offer suggestions for improvement in the company.
1.4 SCOPE OF STUDY:
The study mainly attempts to analyze the financial performance of the company
selected for the study. The financial authorities can use this for evaluating their performance
in future, which will help to analyze financial statements and help to apply the resources of
the company properly for the development of the company and IT employees to bring overall
growth. There can be forecasting to evaluate the overall performance of the ROURKELA
STEEL PLANT in future.
1.5 RESEARCH METHODOLOGY:
DATA SOURCES
Methods of Data Collection
1. Primary Data: Raw data or primary data is a term for data collected at source. This type
of information is obtained directly from the first hand sources by means of surveys,
observations and experimentation and not to subjected to any processing or manipulation and
also called primary data.
2. Secondary Data: It refers to the data collected by someone other than the user i.e. is the
data is already available and analyzed by someone else. Common source of secondary data
includes various published or unpublished data, books, magazines, newspaper, trade journals
etc.
1.6 TOOLS AND TECHNIQUES USED:
To analyze and interpret the financial statements of the study unit the following tools are
used in the study.
1. Ratio Analysis.
2. Comparative statement Analysis
The interpretations are also printed graphically using trend line graphs and sub-dividing
bar diagram.
1.7 LIMITATION OF STUDY
1. The Secondary data like annual reports of ROURKELA STEEL PLANT is
collected from ROURKELA STEEL PLANT head office, hints the accuracy of
the result of the study will depends upon the accuracy of data provided by the
company.
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 2. The study covers only the period of 5 (2017 to 2018)
3. Various techniques, ratio statistical tools used in this study will have its own
limitation.
CHAPTER - 2
2.1 COMPANY PROFILE
STEEL AUTHORITY OF INDIA LIMITED
 Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is
a fully integrated iron and steel maker, producing both basic and special steels for domestic
construction, engineering, power, railway, automotive and defence industries and for sale in
export markets. SAIL is also among the Seven Maharatnas of the country's Central Public
Sector Enterprises.
 SAIL manufactures and sells a broad range of steel products, including hot and cold rolled
sheets and coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars
and rods, stainless steel and other alloy steels.
 SAIL produces iron and steel at five integrated plants and three special steel plants, located
principally in the eastern and central regions of India and situated close to domestic sources
of raw materials, including the Company's iron ore, limestone and dolomite mines. The
company has the distinction of being India’s second largest producer of iron ore and of
having the country’s second largest mines network.
 The company's sales turnover recorded an improvement of around 18.50% in FY18 and stood
at Rs 58,297 crore compared to Rs 49,180 crore over FY17. With a annual turnover of Rs.
43,294 crores in 2015-16, the company is among the top five highest profits earning
corporate of the country.
 It is a Public Sector Undertaking which trades publicly in the market is wholly owned by
Government of India and acts like an operating company. Incorporated on January 24, 1973,
SAIL has more than 72,339 employees. The company's current chairman is A.K. Choudhury,
SAIL is the 20th largest steel producer in the world.
 Ranked amongst, the top ten public sector companies in India in terms of turnover. This vital
responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) that
transacts business through its network of 37 Branch Sales Offices spread across the four
regions, 25 Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact
Offices. Company takes care of rural as well domestic demand where it can’t reach with the
help of its dealers. With the total number of dealers over 2000 . SAIL's International Trade

6
 Division (ITD), in New Delhi- an ISO 9001:2000 accredited unit of CMO, undertakes
exports of Mild Steel products and Pig Iron from SAIL’s five integrated steel plants. It also
offers services and consultancy to its clients world-wide with SAIL’s Consultancy Division
(SAILCON) at New Delhi.
 SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at
Ranchi which helps to produce quality steel and develop new technologies for the steel
industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET),
Management Training Institute (MTI) and Safety Organization at Ranchi. Our captive mines
are under the control of the Raw Materials Division in Kolkata. The Environment
Management Division and Growth Division of SAIL operate from their headquarters in
Kolkata. Almost all our plants and major units are ISO Certified.

2.2 INDUSTRY ANALYSIS

 Steel is an alloy of iron and other elements, including carbon. When carbon is the
primary alloying element, its content in the steel is between 0.002% and 2.1% by weight.
The following elements are always present in steel:Carbon, Manganese, Phosphorus, Sulfur,
Silicon, and traces of oxygen, nitrogen and aluminum. Alloying elements intentionally added
to modify the characteristics of steel include:
 Alloys with a higher than 2.1% carbon (depending on other element content and possibly
on processing) are known as cast iron. Because they are not malleable even when hot, they
can be worked only by casting, and they have lower melting point and good cast ability. Steel
is also distinguishable from wrought iron, which can contain a small amount of carbon, but it
is included in the form of slag inclusions.

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 Today, steel is one of the most common materials in the world, with more than 1.3 billion
tons produced annually. It is a major component in buildings, infrastructure, tools,
ships, automobiles, machines, appliances, and weapons. Modern steel is generally identified
by various grades defined by assorted standards organizations.

2.3 DIFFERENT UNITS OF SAIL

 Bhilai Steel Plant (BSP)
An agreement was signed in New Delhi on Feb.2, 1955 between the Govt. of India & Soviet
union to set up an integrated steel plant at Bhilai with a capacity of 1 MT of ingot steel. The
plant began its operation on January 31, 1959 when a Coke Battery No. 1 was commissioned.
Production of Pig Iron at Bhilai began on Feb.4, 1959 when Blast Furnace No.1 was
commissioned. Situated in Chhattisgarh, this was one of the three 1 MT capacity crude steel
plants set up in the Public Sector in the late fifties.
 Rourkela Steel Plant (RSP)
RSP was the first of the three steel plants taken up in the Public Sector. On December 31,
1953, an agreement was made between the Govt. of India & a Consortium considering of
Thyssen&Demag, Aktiengeselischaft, Duisburg to set up a steel plant of initial capacity of
0.5 MT subsequently a supplementary agreement was signed in July 1955 to set up a 1 MT
plant. .RSP presently has the capacity to produce 4.5 million tonnes of hot metal, 4.2 million
tonnes of crude steel and 3.9 million tonnes of saleable. RSP is geared up producing
defense& space quality plates through a Special Plate Plant.
 Durgapur Steel Plant (DSP)
Set up with an initial annual capacity of 1 million tonnes of ingot steel, DSP was later
expanded to 1.6 million tones & further expanded to 1.876 MT. it is a major producer of
railway products like forged wheels & axles, sleepers & fish plates. With the completion of
the massive modernization programme, DSP is a possession of state-of-the-art technology for
quality steel making.
 Bokaro Steel Plant (BSL)

Bokaro Steel Plant brings out before one’s eyes the vision of a massive giant in the
making’. As the fourth steel plant in the Public Sector, conceived in 1959, it actually started
taking shape in 1965 with the signing of an agreement with the Govt. of USSR on 25th
January 1965.BSL was originally incorporated as a Limited Company on 29th January 1964.
After the formation of SAIL in 1973, it became a wholly owned subsidiary of SAIL & on 1 st
May 1978, it was eventually merged with SAIL in terms of Public Sector Iron & Steel
8
Companies (restructuring) & Miscellaneous Provisions Act 1978. The plant was conceived as
the country’s 1st ‘Swadeshi’ steel plant, to be built with maximum indigenization going into
the equipment’s, materials & know-how.
 IISCO Burnpur West Bengal
The erstwhile Indian Iron & Steel Company (IISCO), one of the oldest steel plants of the
country has been amalgamated with India’s largest steel maker, SAIL with effect from 16th
Feb.2006. Following merger, IISCO has now been renamed as IISCO Steel plant (ISP). ISP,
one of the oldest integrated steel plants, started production of iron away back in 1870 in its
Kulti works of Bengal Iron Works Company. ISP’s Burnpur Works was incorporated on 11th
March 1918, started iron making in 1922 & steel making in 1939. In the late 1950’s it
expanded further to become a million tonnes steel plant.
1.3 Present Status of Industry:
India was the world’s second-largest steel producer in 2018.The growth in the Indian steel
sector has been driven by domestic availability of raw materials such as iron ore and cost-
effective labor. Consequently, the steel sector has been a major contributor to India’s
manufacturing output.
During the Corresponding period last year i.e., 2017-18 the company has earned Operating
profit of 2037.38 Crores but during the year of 2018-19 the company earned Operating
profit 6882.21 of Crores. It shows that SAIL has overcome the losses and started to earn
more profit as compare to previous years. This is due to increase in production as its
modernized units started its production to its expectation and also materials are sold in the
market due to increase in demand of its product at a higher NSR(net sales realization).

2.4 ROURKELA STEEL PLANT

Type of company: Rourkela Steel Plant is a Manufacturing Company.
Nature of business: Rourkela Steel Plant is a Manufacturing and Steel Producing Company.
Rourkela Steel Plant (RSP), the first integrated steel plant in the Public Sector of India. The
Govt. of India under the ablest leadership of the Prime Minister Pt. Jawaharlal Nehru decided
to set up large Steel Plants by the Govt. itself after the general election of 1952. Rourkela and
its adjacent areas are rich in iron ores, manganese, dolomite and lime stones, which are the
basic materials for production of iron and steel. Considering Rourkela to be best place for a
steel plant, the survey work was completed in the year 1954. The infrastructure work of the
plant was accomplished in between 1955 and 1960. Almost thirty-two villages were alienated
and the people of the villages were resettled. It was set up with German collaboration with an

9
installed capacity of 1 million tons. Subsequently, the capacity was enhanced to 1.9 million
tons and so on.
RSP was the first plant in India to incorporate LD technology of steel making. It is also the
first steel plant in SAIL and the only one presently where 100% of the slabs rolled are
produced through the cost effective and quality centered continuous casting route. RSP is the
only plant in SAIL to produce silicon steels for the power sector, high quality pipes for the oil
and gas sector and tin plates for the packaging industry. Almost all major units of the plant
are covered under ISO: 9002 certification, while its Silicon Steel Mill and Sintering Plant II
have been awarded ISO: 14001, certification for Environment Management.
The plant has recently undergone modernization up gradation in two phase involving around
Rs.12, 000 Crores. The modernization process of RSP completed in 2013. Rourkela Steel
Plant unveiled the country's largest blast furnace named "DURGA" having a useful volume
of 4060 cubic meters with a production capacity of 8000 tons hot metal per day, thus
increasing its production capacity from 2.2 MT to 4.5 MT.RSP presently has the capacity to
produce 4.5 million tonnes of hot metal, 4.2 million tonnes of crude steel and 3.9 million
tonnes of saleable. RSP is geared up producing defense & space quality plates through a
Special Plate Plant. A New Plate mill also was commissioned during 2014-15 with a capacity
of 10 lakhs tonnes per annum. Also a New Hot Strip Mill will be commissioned before 2019.
Most of the old units were also revamped for effecting substantial improvement in the
quality of products, reducing cost and ensuring cleaner environment.
It is SAIL’s only plant that produce silicon steels for the power sector, high quality pipes for
the oil & gas sector and tin plates for the packaging industry. Its wide and sophisticated
product range includes various flat, tubular and coated products. Almost all major units of the
plant, including its Finance & Accounts Department, Personnel Department and Steel
Township, are certified to ISO: 9001 standards. RSP’s Silicon Steel Mill, Sintering Plant II,
Environment Engineering Department, Plate Mill, Hot Strip Mill, ERW and SW Pipe Plants,
Special Plate Plant as well as Steel Township have been awarded ISO 14001 certification for
Environment Management.
Special Features of Rourkela Steel Plant:-
 It is the first Plant in Asia to adopt LD process of steel making.
 It is the only Plant producing large diameter ERW/SW Pipes conforming to most rigid
standards of API.
 It is the first steel Plant in India to adopt external desulphurization of hot metal by calcium
carbide injection process.
10
 It is the only Plant in SAIL producing Cold Rolled Non Oriented (CRNO) Steel sheets for use
in the electrical industries with installed capacity of 73,500 Ton/year.
 Rourkela is the first in vacuum degassing metallurgy. This system has been adopted primarily
for production of silicon steel for the cold rolled non-oriented sheets. The system consists of
vacuum arc refining and vacuum oxygen refining units and a degassing facility.
 It is the first integrated Steel Plant of SAIL which adopted the cost effective and quality
centered continuous casting route to process 100% of steel produced.
 All the major production departments and some service departments certified to ISO
9001:2008 QMS.
 Silicon Steel Mill, Environmental Engineering Department and Sinter Plant – II, HSM, PM,
SPP, ERWPP, SWPP & Township certified to ISO 14001:2004 EMI.
 Financials
Market Share of The Company
According to Joint Plant Committee Survey, the market share of SAIL is around 14.90% in
the month of April 2017- December 2017. SAIL is aiming to increase its market share, by
volume, from 14% to 16% by 2018-19. SAIL’s present capacity of 17 million tonnes of
saleable steel production will increase to 21.4 million tonnes on completion of its more than
Rs. 60,000 Crore modernization programme by this fiscal.
RSP to other unit
RSP is earning operating profit among all the units and is in second rank after BSL as
compare to other units of SAIL. In case of Profit before tax, BSL only earns more profit than
RSP during the financial year 2018-19 as compared to other unit of SAIL. This is due to high
finance cost for huge investment in setting up of new units in view of increasing its
production capacity.
Improvements
In the year 2017-18, the company was incurring Net loss (Profit after TAX) of Rs.
481.71crors but by 2018-19 the company has incurred Net profit of 2178.82 crores. This
shows that there is much more improvement in the financial position of the company for its
improvement in production and also market support.
Possibilities
There is a possibility that the company will earn huge profit in the coming years because:
1. New units set up during modernization started production up to their optimum level.
2. Consistent market demand of its products and

11
3. Its huge loyal customer base supports for its genuineness in business dealing compared to
Private steel giants.
Conclusion
Overall in Steel industry there is ups and down in its cycle of business. Till 2017-18 Financial
Year 2017-18 the company was suffering losses due to poor market demand and dumping of
steel from China and other European countries. Due to intervention of government and taking
measure like anti-dumping duty and import restrictions, local steel industry are improving
their bottom line whereas before these measures it was a question of their survival. In coming
year SAIL will be dominating the market and also will earn handsome profit due to increase
in its production after modernization and lowering its cost of production.

2.5 CORPORATE OBJECTIVES

1. Common objective
 To get true and fair view of financial help of the reporting entity.
 To get accurate picture of strength and stability of reporting entity.
 To ensure the firm’s capacity to pay its short term payment.
 To have an idea of operational efficiency and profitability of reporting entity.
 To have an idea of relative performance of reporting entity keeping in view industry
as a whole of which reporting entity is a part.
 To have a look upon future prospects of reporting entity.
2. Individual objectives
For owner and investors
 To know financial condition of the organization in a better way.
 To have a look upon performance of various segment of reporting entity.
 To find out the rank of reporting entity in the industry to which it belongs.
For bankers and money lenders
 To have look upon paying capacity of reporting entity and cash flow.
 To have look upon solvency position and component of capital structure.
 To have a look upon and borrowing capacity of the firm.
For management
 To make help of financial statement analysis in taking important decision.
 To assess profitability position.

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Business Vision
To be a respected world-class corporation and to be the leader in Indian steel business in
quality, productivity, profitability and customer satisfaction”. At RSP, the efforts have always
been to put the employees first and by involving them they create road maps for growth and
development. The Mission of the organization was evolved by feeling their collective pulse.

Business Mission
“The future of our steel plant lies in our own hands. It is our individual and collective
responsibility to rebuild our plant into a profitable, harmonious and vibrant organization. We
will do whatever things are necessary which are good for our plant. We shall never do
anything that hurts our plant.”
The mission was synergized by distinctive value termed as Samskar, which seeks to motivate
and inspire the workforce with the objective of building a harmonious and vibrant
organization.
Business Samskar
“We have to create and sustain a peaceful work environment where every employee can
contribute to the plant in assigned area of work, with full freedom and dignity and without
fear.”
Business Sankalpa
“We the employees of Rourkela Steel Plant have full faith in our unlimited potential and we
resolve to sustain our Samskar and commit ourselves to achieving Total Safety, Perfect
Quality, Optimum cost and Maximum Productivity. It is our Sankalpa to spread Samridhi in
our Steel Plant, Steel Township and in the region.”
Quality Policy
“We the employees of RSP will provide defect-free products and services to our internal and
external customers on time, every time through continual improvement of our processes and
system.”
Important Departments of RSP
 Finance and Accounting

 Central accounts
 Costing and budget (Operation)
 Finance (Operation)
 Cash

13
 GST(Goods and service Tax)
 Pay section
 Stores Accounting
 Claims and Freights
 Raw Materials Bill Accounting
 Stock Verification
 Project Modernization and Expansion.
 Purchase (General Purpose, Spares, Refractories, Import, and Ispat General Hospital).
 Marketing (Central marketing organization for main product, marketing department for
selling of defectives , by-products and disposal of old assets).
 Personnel (Motivating employees, rationalization man power).
 Human Resources (For induction training, competence enhancement, foreign & external
training).
 Law (Conduct for protecting the policies of the company).
 Town engineering (Looks after the maintenance of 18 sectors in the industrial township).
 Sports (Conduct various sports activities in the state and district level).
 TQM department (To establish companywide total quality movement).
 Public relation department (RSTV, ISPAT press, Documentation centre).
 CISF (For safeguarding the total 33.89 sq. km covered by 23 km long perimeter long
wall).
 Project department (Working as project purchase, project finance, project execute).
 About The Section
Finance & Accounts department of Rourkela Steel Plant is accredited with ISO 9001 and
only plant is having ISO certified Finance Department. The Finance department is divided
into various sections i.e. Costing Section, Main Accounts, Operation Finance, Project
Finance, OB&A Section, Taxation Section, Stock Verification Section, Sales section, Store
Section, RMBA Section, Cash section, Pay and Final settlement section.
 OB&A SECTION
The quality objectives as per ISO certificate of OB&A section are:
 To avail rebate on account of prompt payment of power bills of WESCO.
 Release of Suppliers’/ Contractors’ payments on receipt of all required documents within
the stipulated time. To take necessary action for the BGs before expiry date.
 Processing of all Supplier/ Contractor bill within 30 days from bill diary date.

14
 This section mainly deals with releasing payments of Bills and payments to the
Suppliers’/Contractors’. They also release funds for CSR activities which are being
carried out by the organization at corporate level. The following activities are being
carried out in this section:
 Receipts of Bills & Payment thereof.
 Maintenance of Signature Cards.
 Deduction of Statutory Dues, Remittance thereof and filing returns.
 Demand Recovery. Monitoring Bank Guarantees.
 Booking of Receipts.
 Accounting of OB&A.
 TAXATION SECTION
The Taxation section mainly deals with Indirect Taxes. After implementation of GST( Goods
and Service Tax) in the country w.e.f 01.07.2017, this section has taken proactive action for
smooth implementation of GST in all the activities which are affected. Taxation section also
looks after GST accounting, payment and filling of various returns and ensuring abiding of
all GST provisions without any failure. Also deals with old cases unsettled related to Sales
Tax , Excise Duty Service Tax and Customs as per government's guidelines.
There are 3 taxes applicable under this system: CGST, SGST & IGST.
 CGST: Collected by the Central Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
 IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to
Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
Transaction New Regime Old Regime
Revenue will be
shared equally
CGST + SGST VAT + Central
Sale within the State between the
Excise/Service tax
Centre and the
State
There will only be
one type of tax
(central) in case of
inter-state sales.
IGST Central Sales Tax + The Centre will
Sale to another State
Excise/Service Tax then share the
IGST revenue
based on the
destination of
goods.
15
 STOCK VERIFICATION
The stock verification section mainly deals with the operation related to verification of stock.
It involves actual counting, measuring, and weighing of all items in stock. Stock verification
is necessary because:
(a) It minimizes pilferage and fraudulent practices,
(b) It ensures accuracy and usefulness of documents,
(c) It brings about a reconciliation of the stock records and documents.
(d) It identifies areas for more disciplined document control and
(e) It backs up the balance sheet stock figures Stock verification is the task of the materials
audit department. Verification may be continuous or periodical.
 STORES BILLS & ACCOUNTING
The Accounting department is a dedicated team of specialist who manage the finances of an
organization. The Stores Section of F&A Department deals with accounting of material
received through Inter Plant Transfer against A/T issued by MM-Department. Stores Section
of F&A Department deals with accounting of stores& spares received at different stores
location against A/T issued by MM-Department. The other accounting works of Stores
Section are:-
 Provision of Long Service Award.
 Provision of Advance/ Claims receivable etc.
 Apportionment of Overheads.
 Accounting of freight liability.
 Clearance of Suspense and Intersection adjustment Account.
 Accounting of SME liability.
 Schedules preparation and audit.
 RMB&A
The quality Objective as per ISO certificate of RMB&A Section are:
 Release of Suppliers’/ Contractors’ payments within stipulated time.
 Processing of all Bank Guarantee before expiry.
 Not to release payments without corresponding Budgetary provision (excepting
Salary payments, Statutory Payments and Railways freight payments)
 SALES

16
This section mainly deals with the sale of various materials of RSP to the customers. Primary
product sales are dealt by Central Marketing Organization which head office located in
Kolkata. The Secondary product sales of RSP products are done through online auction made
by Metal Junction a 50-50 Joint Venture of TATA and SAIL. There are two types of auction
i.e., forward auction and backward auction. Forward auction means buyers can continuously
bid for the items they are interested in. Eventually the highest bidder wins the item. This
auction is usually done while selling the products to the customers. Backward auction means
the buyers can bid for the items they are interested. The lower bidder wins the item. This
auction is usually conducted in case of Purchase of Materials or doing the project in a lower
price and in case of transporting the products to the customers place.
 PROJECTS FINANCE
At the time of modernization and expansion of the Plant for increasing its production capacity
or setting of new plants, huge funds are required to be invested, which either are to be from
own source of income or to be borrowed from external agencies. From projecting fund
requirement till completion and commencement of project, it is the department which needs
to take lot of tough financial decisions. The objective is that the Cost of capital should be
minimized and there should be optimum utilization of fund. These projects can provide or
generate revenue to the organization in future or in coming years. The project manager is
responsible for managing the production of the required deliverables and planning and
monitoring the project, managing project risk.
 PAY & FINAL SETTLEMENT
The functions of the Section are:
 Payment of Gratuity, Leave Salary, etc.
 Payment of wage revision arrear & Performance Related Pay (PRP).
 Deposit of Income Tax.

The quality objective of section is to ensure last day settlement of Gratuity & other dues on
the last working day of the employee, wherever the employee opts for the same

17
2.6 STRUCTURE OF THE OFFICE (FINANCE & ACCOUNTS
DEPARTMENT)

CEO

General
manager
(F&A)

DGM
(Finance & DGM DGM DGM DGM
Accounts)

AGM AGM AGM AGM AGM

(OB& A)

Senior Senior
Manager Manager

Deputy Senior Assistant

Senior Executive
Executive Manager Manager Manager
Assistant
Assistant
Senior Senior Senior
Executive Executive Executive
Assistant Assistant Assistant

18
 CHAPTER -3
CONCEPT AND THEORIES OF STUDY
3.1 FINANCIAL STATEMENT ANALYSIS
Financial statement is prepared primarily for decision-making. They play a dominant role in
setting the framework of managerial decision. Financial analysis is ‘the process of identifying
the financial strength and weaknesses of the firm by properly establishing relationship
between the item of the balance sheet and the profit and loss account’.
Types Of Financial Analysis:
External Analysis:
This analysis is done by outsiders who do not have access to the detailed internal accounting
records of the business firm. These outsiders include investors, potential investors, creditors,
potential creditors, government agencies, and the general public. For financial analysis, these
external parties to the firm depend almost entirely on the published financial statement.
External analysis, thus serves only limited period.
Internal Analysis:
The analysis conducted by persons who have access to the internal accounting records of a
business firm is known as internal analysis. Such an analysis can, therefore, be performed by
executives and employees of the organization as well as government agencies which have
statutory powers vested in them.
Horizontal Analysis: Horizontal analysis refers to the comparison of financial data of a
company for several years. The figure of this type of analysis is presented horizontally over a
number of columns. Such a column represents a year of a company. This type of analysis is
also called ‘dynamic analysis’ as it is based on the data from year to year, rather than on the
data of any year.
Vertical Analysis: Vertical analysis refers to the study of relationship of various items in the
financial statement of one accounting period. Vertical analysis is also called ‘Static Analysis’.
This is not very conductive to a proper analysis of the firm’s financial position and provided
by a study data in respective. This can only be affected. Therefore, vertical analysis is not
very useful.

19
METHODS OR DEVICES OF FINANCIAL ANALYSIS:
 COMPARATIVE STATEMENT
 RATIO ANALYSIS
COMPARATIVE STATEMENT
The comparative financial statement is statement of the financial position of different period
of time. The elements of financial position are shown in a comparative form so as to give an
idea of financial position of two or more period. The comparative statement may show
 Absolute figure.
 Change in absolute figure i.e., increase or decrease in absolute figures.
 Absolute data in terms of percentage.
 Increase or decrease in terms of percentage.
The two comparative statements are:
1. Comparative Balance Sheet
The comparative balance sheet analysis is the study of the trend of the same item,
group of item and computed item in two or more balance sheet of the same business
enterprise on different dates.
2. Comparative Income Statement
The income statement gives the result of the operation of the business. The
comparative income statement gives an idea of the progress of a business over a period of
time. The changes in absolute data in money values and percentage can be determined to
analyses the profitability of the business. Like comparative balance sheet, income statement
also has four columns. First two columns give figure of various items for two years. Third
and four columns are used to show the increase or decrease in figure in absolute amount and
percentage respectively.

3.2 WORKING CAPITAL MANAGEMENT

Working capital means the funds which are required to meet the daily transactions of the
business. In other, words it refers to that part of the firm’s capital which is required for
financing current assets such as cash, marketable securities, debtors & inventories. Some of
the decisions taken in working capital management are:
 An adequate supply of raw materials.
 Cash to meet the operation payments.
 The ability to grant credit to customers.
 The capacity to wait for market for its finished products.

20
 Investment in various current assets.
 Appropriate sources of fund to finance current assets.
Thus working capital is very significant fact of financial management. Every business
concern should have adequate working capital to run operations smoothly. It should have
neither excess working capital nor inadequate working capital both of these have adverse
effects on firm’s profitability & liquidity positions.
CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital:
 Balance sheet concept or traditional concept
 Operating cycle concept
BALANCE SHEET CONCEPT OR TRADITIONAL CONCEPT
It shows the position of the firm at a certain point of time. It is calculated on the basis of
balance sheet prepared at a specific date. In this method there are two types of working
capital. These are
1. Gross working capital
2. Net working capital
1. GROSS WORKING CAPITAL
It refers to a firm’s investment in current assets. Some examples of current assets are:
o Cash in hand and Bank
o Bill Receivables
o Sundry Debtors
o Short Term Loan & Advances
o Inventory of Stock
o Prepaid expenses
Gross Working Capital = Total Current Assets

2. NET WORKING CAPITAL

It refers to the differences between current assets and current liabilities.

Net Working Capital = Current Assets – Current Liabilities

NET WORKING CAPITAL MAY BE NEGATIVE OR POSITIVE

When the current assets exceed the current liabilities, the working capital is positive and the
negative working capital results when the current liabilities are more than the current assets.
OBJECTIVE OF WORKING CAPITAL MANAGEMENT

21
1. To minimize the amount of capital employed in financing the current assets. This will also
lead to an improvement in Return on Capital Employed.
2. To manage the current in such a way that the marginal return on investment in these assets
is not less than the cost of capital acquired to finance them. This will ensure then
maximization of the value of business unit.
3. To maintain a proper balance between the amount of current assets & the current liabilities
in such a way that a firm is always able to meet its financial obligations whenever due.
4. Thus, the objective is to ensure the maintenance of satisfactory level of working capital in
such a way that it is neither inadequate nor excessive. A good working capital should also
ensure a reasonable margin of safety also.
NEED FOR WORKING CAPITAL
The need for working capital arises on account of two reasons:
 To finance operations during the time gap between sale of goods on credit and realization
of money from customers of the firm.
 To incur day-to-day expenses and overhead such as fuel, power and office expenses etc.
 To provide credit facilities to the customer.
 To maintain the inventories of raw materials, work-in-progress, stores and spares and
finished products.
 To finance investments in current assets for achieving the growth target in sales.
STRUCTURE OF WORKING CAPITAL
The structure of working capital includes a study of the components of current assets &
current liabilities. These are:
Current assets
The list of current assets comprises inventories (including raw materials, work-in-progress,
finished goods & spares), sundry debtors including receivables, readily realizable securities
& tax reserve certificates, short term investments, accrued incomes prepaid expenses (not in
the nature of deferred charge), cash at bank & cash in hand. In Rourkela Steel Plant, current
assets are:
 Inventories (stores & spares, raw materials, semi-finished goods)
 Sundry debtors
 Cash & bank balances
 Interest receivables/accrued
 Loans & advances
Current Liabilities
22
The list of liabilities includes trade creditors, accounts receivables, outstanding or accrued
expenses, bank overdraft, outstanding liabilities, short-term loans & borrowings & certain
obligations including different provisions i.e. provision for taxation, proposed dividend etc.
In Rourkela Steel Plant, current liabilities are:
 Sundry creditors.
 Advances from customers.
 Security deposits.
 Other liabilities etc
FACTORS TO BE CONSIDERED WHILE ESTIMATING WORKING CAPITAL
REQUIREMENT
 Total costs incurred on materials, wages & overheads.
 The length of time for which raw materials remain in stores before they are issued to
production.
 The length of the production cycle or work-in-progress, i.e., the time taken for conversion
of raw materials into finished goods.
 The length of the sales cycle during which finished goods are to be kept waiting for sales.
 The average period of credit allowed to customers.
 The amount of cash required to pay day-to-day expenses of the business.
 The amount of cash required for advance payments if any.
 The average period of credit to be allowed by suppliers.
 Time-lag in the payment of wages & other overheads.
3.3 RATIO ANALYSIS:
The term “Ratio” refers to the numerical and quantitative relationship between two items or
variables. This relationship can be exposed as
 Percentages
 Fractions
 Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the financial
statements. So that the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined. Ratio reflects a quantitative
relationship helps to form a quantitative judgment.
STEPS IN RATIO ANALYSIS
 The first task of the financial analysis is to select the information relevant to the decision
under consideration from the statements and calculates appropriate ratios.
 To compare the calculated ratios with the ratios of the same firm relating to the past or
with the industry ratios. It facilitates in assessing success or failure of the firm.

23
 Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.
BASIS OR STANDARDS OF COMPARISON
Ratios are relative figures reflecting the relation between variables. They enable analyst to
draw conclusions regarding financial operations. They use of ratios as a tool of financial
analysis involves the comparison with related facts. This is the basis of ratio analysis The
basis of ratio analysis is of four types
 Past ratios, calculated from past financial statements of the firm.
 Competitor’s ratio, of the few most progressive and successful Competitor’s firms at the
same point of time.
 Industry ratio, the industry ratios to which the firm belongs to.
 Projected ratios, ratios of the future developed from the projected financial statements.
INTERPRETATION OF THE RATIOS
The interpretation of ratios is an important factor. The inherent limitations of ratio
analysis should be kept in mind while interpreting them.
The impact of factors such as price level changes, change in accounting policies, window
dressing etc., should also be kept in mind when attempting to interpret ratios.
The interpretation of ratios can be made in the following ways.
 Single absolute ratio
 Group of ratios
 Historical comparison
 Projected ratios
 Inter-firm comparison
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS
The calculation of ratios may not be a difficult task but their uses not easy. Following
guidelines or factors may be kept in mind while interpreting various ratios is:
 Accuracy of financial statements
 Objective or purpose of analysis
 Selection of ratios
 Use of standards
 Ratios provide only a base
USES OF RATIO ANALYSIS
 Helps in decision- making
 Helps in financial forecasting and planning
 Helps in communicating
 Helps in co-ordination
24
 Helps in control
For analyzing the financial statements of RSP I have used the following statements. I have
done the analysis by using ratio and working capital of the organization, which are as
follows:-

3.4 ANNUAL ACCOUNTS OF SAIL (RSP):

A. Balance Sheet As On 31st March 2018(Rs. in Crores)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18
EQUITIES AND
LIABILITIES
Shareholder's Funds - - - - -
Reserves and Surplus 4662.46 4833.51 2309.58 912.67 728.74
Total Reserves and Surplus 4662.46 4833.51 2309.58 912.67 728.74
Total Shareholders’ Funds 4662.46 4833.51 2309.58 728.74
912.67
Non-Current Liabilities
Other Long Term Liabilities 87.93 99.36 105.74 316.97
277.59
Long Term Provisions 559.25 537.41 549.8 527.75 605.62
Total Non-Current 647.18 636.77 655.54 805.34 922.59
Liabilities
Current Liabilities
Short Term Borrowings 14.83 25.33 10.1 2.06 2.07
Trade Payables 227.85 354.88 425.23 442.51 553.25
Other Current Liabilities 1882.86 2330.51 2053.03 2315.91 2333.08
Short Term Provisions 239.01 289.97 338.01 393.91 356.86
Total Current Liabilities 2364.55 3000.69 2826.37 3154.39 3245.26
Inter Unit Current Account 17090.52 18525.08 19923.13 26728.79
23013.69
Total Capital And 24764.71 26996.05 25714.62 31625.38
Liabilities 27886.09
ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 7205.11 11462.99 11624.95 13634.94 13383.10
Intangible Assets 5.66 3.27 1.93 0.67 0.95
Capital Work-In-Progress 6319.09 3001.19 3408.6 2114.77 3166.58
Long Term Loans And 309.82 339.94 386.59 61.69 46.12
Advances
Other non-current Assets 0.04 0.03 0.02 327.36 248.07
Total Non-Current Assets 13839.72 14807.42 15422.09 16844.82
16139.43

Current Assets
Inventories 2294.45 3264.44 2947.01 2477.74 2334.75
25
Trade Receivables 5.64 3.62 6.22 2.91 2.07
Cash And Cash Equivalents 4.15 23.92 25.79 27.76 30.35
Short Term Loans And 47.76 48.83 34.23 5.09 4.68
Advances
Other Current Assets 195.76 396.63 160.78 253.19 267.94
Total Current Assets 2547.76 3737.44 3174.03 2766.67 2639.79
Inter Unit Current Account 8377.23 8451.19 7118.5 8979.97 12140.77
Total Assets 24764.71 26996.05 25714.62 27886.09 31625.38

COMPRATIVE BALANCE SHEET

A. Comparative Balance Sheet of SAIL (RSP) As On 31st March2016-17 and 2017-18
(Rs. in (Crores)

Particulars 2016-17 2017-18 Increase/ Percentage

decrease (% )change
EQUITIES AND LIABILITIES
Shareholder's Funds - - - -
Reserves and Surplus 912.67 728.74 (183.83) (20.14)
Total Reserves and Surplus 912.67 728.74 (183.83) (20.14)
Total Shareholders’ Funds 912.67 728.74 (183.83) (20.14)
Non-Current Liabilities
Other Long Term Liabilities 277.59 316.97 39.38 14.18
Long Term Provisions 527.75 605.62 77.87 14.75
Total Non-Current Liabilities 805.34 922.59 117.25 14.55
Current Liabilities
Short Term Borrowings 2.06 2.07 0.01 0.48
Trade Payables 442.51 553.25 110.74 25.02
Other Current Liabilities 2315.91 2333.08 17.17 0.74
Short Term Provisions 393.91 356.86 (37.05) (9.40)
Total Current Liabilities 3154.39 3245.26 90.87 2.88
Inter Unit Current Account 23013.69 26728.79 3715.10 16.14
Total Capital And Liabilities 27886.09 31625.38 3748.39 13.44
ASSETS
Non-Current Assets
Tangible Assets 13634.94 13383.10 (251.84) (1.84)
Intangible Assets 0.67 0.95 0.28 41.79
Capital Work-In-Progress 2114.77 3166.58 1051.81 49.73
Long Term Loans And Advances 61.69 46.12 (15.57) (25.23)
Other non-current Assets 327.36 248.07 (79.29) (24.22)
Total Non-Current Assets 16139.43 16844.82 705.39 4.37
Current Assets
Inventories 2477.74 2334.75 (142.99) (5.77)
Trade Receivables 2.91 2.07 (0.84) (28.86)
Cash And Cash Equivalents 27.76 30.35 2.59 9.32
Short Term Loans And Advances 5.09 4.68 (0.41) (8.05)

26
Other Current Assets 253.19 267.94 14.75 5.82
Total Current Assets 2766.67 2639.79 (126.9) (4.58)
Inter Unit Current Account 8979.97 12140.77 3160.8 35.19
Total Assets 27886.09 31625.38 3739.29 13.40

INCOME STATEMENT
Income Statement of Profit& Loss for the year ended 31st March 2018 (Rs. in Crore)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18
INCOME
Revenue From Operations [Gross] 9168.91 9377.37 7823.01 9787.14 12312.99
Less: Excise/Service Tax/Other 970.83 974.22 879.62 1060.68 286.54
Levies
Revenue From Operations [Net] 8198.08 8403.15 6943.39 8726.46 12026.45
Total Operating Revenues 8198.08 8403.15 6943.9 8726.46 12026.45
Other Income 50.46 51.94 42.17 60.56 62.61
Stock Transfer to Other units 294.79 299.45 100.86 273.76 217.67
Total Revenue 8543.33 8754.54 7086.42 9060.78 12306.73
EXPENSES
Cost Of Materials Consumed 4654.16 4410.05 4068.11 4858.31 6382.98
Changes In Inventories Of (360.85) (690.43) 187.27 203.24 292.04
FG,WIP And Stock-In Trade
Employee Benefit Expenses 1568 1590.36 1689.14 1545.33 1493.56
Finance Costs 210.09 386.59 558.67 624.16 641.59
Depreciation And Amortisation 370.31 440.34 566.37 667.72 721.75
Expenses
Share of Expenditure over Income 124.43 148.91 149.27 177.99 171.53
Other Expenses 1769 2158.94 2375.78 2311.41 2769.63
Total Expenses 8335.14 8444.76 9594.61 10388.16 12473.08

Profit/Loss for the year 208.19 309.78 (2508.19 (1327.38 (166.35)

) )
Add: Adjustments pertaining to 4.01 (77.74) (15.33) 30.42 34.47
earlier years
Profit before Exceptional Items 212.2 232.04 (2523.52 (1357.80 (180.24)
) )
Less: Exceptional items Foreign - - - - -
Exchange
Profit/Loss carried to Balance 212.2 232.04 (2523.52 (1357.80 (180.24)
Sheet ) )

27
COMPARATIVE INCOME STATEMENT
Comparative Income Statement for the year ended 31st March 2016-17 and 2017-18
(Rs. in Crore)

Particulars 2016-17 2017-18 Increase/ percentage

Decrease (%)
Change
INCOME
Revenue From Operations [Gross] 9787.14 12312.99 2525.85 25.80
Less: Excise/Service Tax/Other Levies 1060.68 286.54 (774.14) (72.98)
Revenue From Operations [Net] 8726.46 12026.45 3299.99 37.81
Total Operating Revenues 8726.46 12026.45 3299.99 37.81
Other Income 60.56 62.61 2.05 3.38
Stock Transfer to Other units 273.76 217.67 (56.09) (20.48)
Total Revenue 9060.78 12306.73 3245.98 35.82
EXPENSES
Cost Of Materials Consumed 4858.31 6382.98 1524.67 31.38
Changes In Inventories Of FG,WIP And 203.24 292.04 88.8 43.69
Stock-In Trade
Employee Benefit Expenses 1545.33 1493.56 (51.77) (3.35)
Finance Costs 624.16 641.59 17.43 2.79
Depreciation And Amortisation 667.72 721.75 54.03 8.09
Expenses
Share of Expenditure over Income 177.99 171.53 (6.46) (3.62)
Other Expenses 2311.41 2769.63 458.22 19.82
Total Expenses 10388.16 12473.08 2084.92 20.07

Profit/Loss for the year (1327.38) (166.35) (1161.03) (87.46)

Add: Adjustments pertaining to earlier 30.42 34.47 4.05 13.31
years
Profit before Exceptional Items (1357.80) (180.24) (1177.56) (86.72)
Less: Exceptional Items Foreign - - - -
Exchange
Profit/Loss carried to Balance Sheet (1357.80) (180.24) (1171.56) (86.72)

28
Working capital (operations):

As On As On As On As On As On
Particulars
31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18
A. CURRENT ASSETS:
Cash and Bank Balances. 4.15 23.92 25.79 27.76 30.35
Raw Materials 367.95 388.20 340.44 305.09 541.80
Stores And Spares. 402.10 551.23 518.81 312.68 435.13
Finished/Semi-Finished 1524.40 2325.01 2087.76 1859.97 1357.82
Products.
Sundry Debtors. 5.64 3.62 6.22 2.91 2.07
Loans & Advances 47.76 41.02 34.23 5.09 4.68
Other Current Assets. 195.76 404.44 160.78 253.17 267.94
Total (A) 2547.76 3737.44 3174.03 2766.67 2639.79
B. CURRENT
LIABILITIES

Sundry Creditors. 227.85 354.88 425.23 442.51 553.25

Security & Other deposits. 97.70 113.75 62.16 140.80 171.39

Others. 964.60 1010.56 969.26 887.49 942.06
Prov.(Excl.Gratuity,Leave 356.86
Encashment, 239.01 289.97 338.01 393.91
Post Retmt. Benefits))
Total (B) 1529.16 1769.16 1794.66 1864.71 2023.56
1018.60 1968.28 1379.37 901.96 616.23
Working Capital(A-B)
as per RSP's books
Add: Net Current Assets
relating to RSP in CMO's (278.38) (205.55) (412.04)
books (1038.85) 1355.44

Total Working Capital 740.22 1762.73 967.33 (136.89) 1971.67

Increase/Decrease in (54.77) 1022.51 (795.40) (1104.22) 2108.56
Working Capital Over
Previous Year.

To know the working capital position and operation of Rourkela Steel Plant, the following table
is prepared.
From the above given table we have the following current and liabilities position table.

29
 CHAPTER -4

4.1 DATA ANALYSIS & INTERPRETATION

CURRENT ASSETS
( Rs in Crores)
Year 2013-14 2014-15 2015-16 2016-17 2017-18
Current assets 2547.76 3737.44 3174.03 2766.67 2639.79
Current liabilities 1529.16 1769.16 1794.66 1864.71
2023.56
4000
3500
3000
2500
2000
Current assets
1500
Current liabilities
1000
500
0

Current assets includes with net current assets relating to RSP in CMOs books.
Interpretation: The current assets were always higher than the current liabilities during the
five years. So overall, the current assets were in increasing trend. This is due to large volume
of consumption of raw material which ultimately influencing the working capital of the plant.
But, the plant should ensure that the additional working capital invested should be utilized
properly and efficiently. Otherwise there would be blockage of capital and resources causing
additional finance cost burden to the company.The liabilities were also fluctuating throughout
the last five years. The highest one was in the year 2017-18 due to larger credit purchases.
But every year the plant is able to maintain sound liquidity position as compared to other
Steel companies.
WORKING CAPITAL
(Rs. in Crores)
Year 2013-14 2014-15 2015-16 2016-17 2017-18

Working Capital -136.89 197.167

740.22 1762.73 967.33

30
 Working Capital
2000

1000
Working Capital
0
2013-14 2014-15 2015-16 2016-17 2017-18
-1000
Interpretation: Following interpretations were made:
 The working capital of RSP was fluctuating during the last five years. It happened, due to
changes in current assets and liabilities position of plant which is due to production trend
as per market demand/requirement and disposal of existing inventories.
 It is seen from the above working capital table that due to large amount of inventories
accumulation during 2014-15 & 2015-16 the working capital also increased as compared
to other years.
 The year in which inventories were high has a high working capital and vice versa.

REVENUE

YEAR 2014-15 2015-16 2016-17 2017-18 2018-19

REVENUE 9377.37 7823.01 9787.14 12312.99 14606.03

REVENUE
Datenreihen1 Datenreihen2 Datenreihen3
Datenreihen4 Datenreihen5

14606.03
12312.99
9377.37 9787.14
7823.01

REVENUE

Interpretation: Following interpretations were made:

 In the above graph of revenue, it shows that during 2015-16 the revenue is decreased
compared to 2014-15 and subsequently during 2016-17, 2017-18 & 2018-19 it is in
increasing trend.
 This is due to increase the demand of product, increase in market share, and
also increase in the frequency of transaction per customer.

31
 Increase in market demand due to various new infrastructure projects introduced by the
government.
 Imposition of safeguard duty , anti-dumping duty and minimum import price by the
government on cheaper imports from china , Korea etc . There by allowing domestic
players to clearly focus on industry demand and increase their market share. Also
Government has imposed minimum import price for certain categories of Steel Imports
. (Industry data during April - December 2018-19 ,imports from china stood at USD
53.87 Billion as against USD 76.38 billion in 2017-18)
 Increase in net sales revenue(NSR) due to anti-dumping measures adopted by the
government thereby having a direct impact on Turnover.
 Better quality products from SAIL yielded higher demand and thereby increased NSR
contributed to the higher turnover(example: NEW PLATE MILL PLATES from RSP).
 under this point it says that the unit is produced some specific product which maintain
better quality and also price and demand we can say it monopoly .
 Increase the number of customers: it means the organisation trying to grab more
customers by providing quality product, good service etc.
 Increase the average transaction size: under this it says the RSP try to gives discount on
purchase of bulk amount of products.
 Increasing the frequency of transactions :it means they encourages the customers to
purchase more and more products. it will help you to increase the revenue of the
organisation.

 NET PROFIT/LOSS

YEAR 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

NET PROFIT/LOSS 212.2 232.04 -2523.5 -1357.8 -180.24 1472.21

NET PROFIT/LOSS
Datenreihen1 Datenreihen2 Datenreihen3
Datenreihen4 Datenreihen5 Datenreihen6
1472.21
212.2 232.04

NET PROFIT/LOSS -180.24

-1357.8
-2523.5

32
 Interpretation: In the above graph it show that in 2015-16 to 2017-18 the organization's suffered
a net loss due to sluggish market resulting in realization of lesser NSR, and also cost of raw
materials were increased. Subsequently during 2018-19 the company earns a huge profit and
expecting the same trend in the coming years due to increase in demand of these steel products and
restriction imposed by Govt. on cheaper imported steels.
 Another factor for decrease in net profit is rising costs. This is due to higher Raw material cost,
Employee's cost, increasing Interest on borrowed capital for Mordernisation.
 A company’s net profit decreases if company loses revenue or increase additional expenses.
 EMPLOYEE COST

2018-
YEAR 2014-15 2015-16 2016-17 2017-18 19
EMPLOYE COST 1158.65 1187.46 1204.23 1153.84 1721.54

EMPLOYEE COST
2014-15
2015-16
2016-17
2016-18
2018-19

Interpretation:

 In the above graph it shows that the cost of the employe is increasing trend from 2014-15
to2016-17and during 2017-18 in is decresed marginally and again incresed during 2018-
19.
 Basic reason for increase in empolyee cost is increase in employee turnover or higher pay
to employees due to Pay revision.
 Instalation of new technology which is required skilled employee for smooth operating.
 New technology which improves output per worker enables the firm to cut back on
employing workers, leading to lower costs.

 COST OF
PRODUCTION:-

2014- 2015- 2016- 2017-

YEAR 15 16 17 18 2018-19
7936.48 9155.48 9750.53 11576.9 Not
COST OF PRODUCTION published
33
 COST OF PRODUCTION
Column1 2014-15 2015-16 2016-17 2017-18 2018-19

11576.91
9155.48 9750.53
7936.48

COST OF PRODUCTION

Interpretation:
 The cost of production of RSP is gradually increasing due to increase in cost of raw
material which are market driven. this affects the whole steel Industry.
 When the cost of production goes up, it will have an impact on profit earning. To tackle
the issue, either the company has to increase the sell price of the material or to maintain
the market price it has to reduce the cost of production by taking some stiff productivity
measures.
 If the cost of production increase, price will increase, and then supply increase but
demand may decrease because of price increase. An increase in production cost will
affects the profit taken from revenus for sold goods.

RATIO ANALYSIS FOR THE YEARS 2013-2018 OF ROURKELA STEEL PLANT:

A ratio is simple arithmetical expression of the relationship of one number to another. The
following ratios have been used to judge the liquidity, activity and profitability of RSP which
has extreme implication in working capital management of the plant, which are as follows:-
Current Ratio: Current ratio may be defined as the relation between current assets and
current liabilities. This ratio, also known as working capital ratio is a measure of general
liquidity and is most widely used to make analysis of short term financial position or liquidity
of a firm. An ideal Current Ratio should be 2:1 for sound liquidity. However a ratio of 1: 1.5
is also acceptable if the firm has adequate arrangement with its bankers to meet its short term
requirements of funds.

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

34
 ( Rs in Crores)
Years 2013-14 2014-15 2015-16 2016-17 2017-18
Current Assets 2547.76 3737.44 3174.03 2766.67 2639.79
Current Liabilities (excl. 1529.16 1769.16 1794.66 1864.71 2023.56
prov.)
Current ratio=CA/CL 1.666 2.113 1.757 1.483 1.304

Current ratio=CA/CL
3
2
Current ratio=CA/CL
1
0
2013-14 2014-15 2015-16 2016-17 2017-18

Interpretation: Following analysis was made:

 The current ratio were above the standard norm of 2:1 during the year 2014-2015, which
shows that more unsold inventories are lying in the store. Due to production expansion,
more raw materials were purchased.
 Still the position is sound and can be controlled easily. During 2013-2014, 2015-2016 ,
2016-17 and 2017-18 current ratio are below the standard norm.
 This is due to uprising trend in the industry which helped to liquidate the inventories
which was unsold for long period.
 With the above analysis it is imminent that the liquidity position of the company is not as
per industry’s standard norm. But this cannot be treated as a conclusive decision. The ideal
ratio of Current Ratio is 2:1 which may be applicable for small enterprises but it cannot
applicable for large enterprises like RSP, as they need not to maintain of Assets compared
to Liability.
1. Quick or acid test or liquid ratio: Quick ratio may be defined as the relationship
between quick liquid assets and current liabilities. It ignores inventories and pre-paid
expenses from current assets. As a convention quick ratio 1:1 is considered satisfactory.

𝑄𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠
𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Note: - 𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡𝑠 = 𝑇𝑜𝑡𝑎𝑙 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 – 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠

35
 ( Rs in Crores)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18
Quick assets 253.31 473.00 227.02 288.93 305.04
Current Liabilities 1529.16 1769.16 1794.66 1864.71 2023.56
Quick ratio 0.165 0.267 0.126 0.155 0.151

Quick ratio
0.3
0.25
0.2
0.15
Quick ratio
0.1
0.05
0
2013-14 2014-15 2015-16 2016-17 2017-18

Interpretation: The quick ratios of RSP for the preceding five years are below the standard
norm of 1:1. The quick ratio is gradually in decreasing trend up to the year 2013-2014 and
after that slightly increased in 2014-15 and a thereafter a slight decrease in 2015-16 in
comparison to previous year. Again it increased during 2016-17 and thereafter a slight
decrease in 2017-18. Quick ratio provides a check on liquidity position of a firm. With the
above analysis it is imminent that the liquidity position of the company is not as per
industry’s standard norm. But this cannot be treated as a conclusive decision. Both current
and quick ratio should be considered in relation to the industry average to infer whether the
firm’s short-term financial position is satisfactory or not.
2. Absolute Liquid or Cash ratio: It includes cash in hand and at bank and marketable
securities or temporary investments only from the current assets .The accepted norm for this
ratio is 1:2 i.e. Rs 1 Crore worth of absolute liquid assets are considered adequate to pay Rs 2
corer worth of current liabilities in time as all the creditors are not expected to demand cash
as the same time and then cash may also be realized from debtors and inventories.
𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝑙𝑖𝑞𝑢𝑖𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
𝐶𝑎𝑠ℎ 𝑟𝑎𝑡𝑖𝑜 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Absolute Liquid or Cash Ratio=Absolute liquid assets/Current Liabilities

(Rs in crores)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18
Absolute liquid assets 4.15 23.92 25.79 27.76 30.35
Current Liabilities 1529.16 1769.16 1794.66 1864.71 2023.56
Cash ratio 0.0027 0.0135 0.0144 0.0148 0.0149

36
 Cash ratio
0.016
0.014
0.012
0.01
0.008
Cash ratio
0.006
0.004
0.002
0
2013-14 2014-15 2015-16 2016-17 2017-18

Interpretation:
The cash ratios of RSP for the preceding five years are below the standard norm 0.5:1 which
is not satisfactory. However a liquid position does not always mean bad liquidity position as
the RSP is with fast moving inventories is sufficient enough to meet the current obligation.
Following points also become a part of the analysis:
 After demonetization RSP as a public sector adopted 100% e- payment & e-receipt mode.
Even though RSP was insisting all its customers and vendors for using e-payments and e-
receipts mode to carry to transact with RSP.
 As it uses online mode of payment and receipts so the cash ratio is below the standard level.
 RSP as an organization always send its fund requirement and utilization report to Corporate
Office.
 The account has a facility activated named Auto Sweep, in which all the remaining amount
from the fund received by CMO is automatically transferred to SAIL main account, hence
leaving cash balance at a NIL position.
 On the very next day on the basis of report received by RSP C.O. transfer money to the cash
credit account of RSP and again the whole process is repeated.
 Now the other sources of cash for RSP is local collection which includes sale of scrap,
secondary products, by-products, collection from social welfare services(medical, hospital,
water, etc.) provided to public at a subsidized rates. Now, the cash collected from these
sources and payments made from these funds are on the basis of seniority.
3. Interval Measure or Defensive- interval Ratio: The defensive interval ratio (DIR), also
called the defensive interval period (DIP) or basic defense interval (BDI), is a financial
metric that indicates the number of days that a company can operate without needing to
access noncurrent assets, long-term assets whose full value cannot be obtained within the

37
 current accounting year, or additional outside financial resources. The DIR is sometimes
viewed as a financial efficiency ratio, but is most commonly considered a liquidity ratio.
The DIR is a helpful tool in evaluating a company's financial health because it provides
the real world metric of how many days the company can operate in terms of meeting
daily operational expenses without running into any financial difficulty that would likely
require it to access additional funds through either new equity investment, a bank loan or
the sale of long-term assets.
𝑄𝑢𝑖𝑐𝑘 𝑜𝑟 𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
𝐼𝑛𝑡𝑒𝑟𝑣𝑎𝑙 𝑀𝑒𝑎𝑠𝑢𝑟𝑒 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑎𝑖𝑙𝑦 𝐶𝑎𝑠ℎ 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑠𝑒𝑠
Average daily cash opration expenses=operation cost/365
(Rs. in Crores)
Particulars 2013-14 2014-15 2015-16 2016-17 2017-18
Quick or Liquid Assets 253.31 473.00 227.02 288.93 305.04
Operation Cost 1767.83 2158.94 2375.78 2341.83 2783.52
Average Daily Cash Operating Expenses 4.843 5.915 6.509 6.416 7.626
Interval Measure 52.300 79.967 34.878 45.033 40

Interval Measure
90
80
70
60
50
40 Interval Measure
30
20
10
0
2013-14 2014-15 2015-16 2016-17 2017-18

Interpretation: Following assumptions were made:

 As we can clearly see that the company has enough cash for continuing its daily operational
activity but it will exhaust with in stipulated period.
 During the year 2014-15 it went up that is to 80 days (approximately) which again went down
to 34 days (approximately) in the year 2015-16 that is just 34 days ahead from a month and
against it went up to 45 days in 2016-17 which again went down to 40days in the year 2017-
18.which resulted in low inventory conversion period and majorly due to using the funds for
the purpose of expansion and modernization of plant.

38
4. Creditor turnover ratio (CTR): The creditor turnover ratio is a liquidity ratio that shows a
company's ability to pay off its accounts payable by comparing net credit purchases to the
average creditors during a period. In other words, the creditor turnover ratio is how many times
a company can pay off its average creditors balance during the course of a year.
𝑁𝑒𝑡 𝐶𝑟𝑒𝑑𝑖𝑡 𝐴𝑛𝑛𝑢𝑎𝑙 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒
𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠
Note: - Net Credit Annual Purchase = 60% of Cost of production
Average Creditors = Opening Creditor + Closing Creditor / 2
Average payment period= No. of days in a year/ CTR

( Rs in lakhs)
PARTICULARS 2013-14 2014-15 2015-16 2016-17 2017-18
Net Credit Annual Purchase 4656.02 4761.89 5493.29 5850.32 6946.15
Average Creditors 228.52 291.365 390.055 433.87 497.88
Creditor Turnover Ratio 20.37 16.34 14.08 13.48 13.95
Average payment period (days) 17.67 22.03 25.57 26.71 26.16

Creditor Turnover Ratio

25

20

15

Creditor Turnover Ratio

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

Interpretation: Following analysis was made:

 In the above graph it shows company's paying ability to its creditors .We can see that the
credit turnover ratio gradually decreases, which means RSP's paying ability to it's short term
debts is Increasing gradually with number of days.
 The basic reason may be, as per contractual term, or may be due to weak liquidity position of
the company during the year where market demand of the product is sluggish due to
availability of cheaper Steel from competitors and also imported steels from China and Japan.
 Every vendor is a creditor of RSP. Weather it is a vendor of raw material, stores and spares,
stationeries, office and factory equipment’s, etc.

39
 The payments terms are almost same for every vendor, except the size of transaction. If the
size is huge then it will take more days to release the payment as per contractual terms.
 Generally the payment release days are between 30 to 60 days depending upon the agreed
contractual terms.
5. Debtor Turnover Ratio :
Debtor Turnover Ratio examines the velocity or movement of debtors. It takes the net credit
annual sale and the average debtors as determinants for the measurement of debtor turnover
ratio.
𝑁𝑒𝑡 𝐶𝑟𝑒𝑑𝑖𝑡 𝐴𝑛𝑛𝑢𝑎𝑙 𝑆𝑎𝑙𝑒
𝐷𝑒𝑏𝑡𝑜𝑟 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜(𝐷𝑇𝑅)
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠

Note: -Net Credit Annual Sale = 15% of Net Sales

Average Debtors = Opening Debtor + Closing Debtor / 2
Average Debt collection period= No. of Days in a year / DTR
( Rs in Crores)
PARTICULARS 2013-14 2014-15 2015-16 2016-17 2017-18
Net Credit Sale 1365.29 1393.63 1156.39 1454.43 1832.52
Avg. Debtor 410.5 463.00 492.00 456.50 249
Debtor Turnover Ratio 3.32 3.01 2.35 3.18 7.36
Average debt collection 110 121 155 115 49.59
period (days)

Debtor Turnover Ratio

8

4
Debtor Turnover Ratio
2

0
2013-14 2014-15 2015-16 2016-17 2017-18

Interpretation: On analyzing the debtor turnover ratio of RSP, we get to know the
following:
 That all of its credit sales are made through CMO (Central Marketing Organization),
which consists of about 15% of company’s sales.
 The main debtors of the company are defense sector where in company collects its
payments within 15 to 30 days, rest the entire sales are on cash basis. Even if the company
makes sales on credit it collects the payment within a day or two.
 Therefore on averaging the collection period we get such a low debtor collection period.

40
  Debtor turnover ratio for RSP has increased from 7.36 times in 2017-18 but it decreased
to 3.18 times in 2016-17.
 From the table it is clearly visible that the organization has very less amount debtors,
which implies that the company is managing its debtors efficiently.
6. Inventory turnover or stock turnover ratio: Inventory turnover ratio also known as
stock velocity is normally calculated as sales/avg. inventory or cost of goods sold /avg.
inventory. It would indicate whether inventory has been efficiently used or not. The
purpose is to see whether only the required minimum funds have been locked up in
inventory.
a. Raw material turnover ratio
𝑅𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑐𝑜𝑛𝑠𝑢𝑚𝑒𝑑
𝑅𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
( Rs in Crores)

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18

Raw Material Consumed 4654.16 4410.05 4068.11 4858.31 6382.98
Average Raw Material Inventory 391.11 378.08 364.32 322.76 423.45
Raw Material Turnover Ratio 11.899 11.664 11.166 15.052 15.074

Raw Material Turnover Ratio

20

10 Raw Material Turnover Ratio

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:- Inventory turnover is a ratio showing how many times a company has
sold and replaced inventory during a given period. A company can then divide the days in the
period by the inventory turnover formula to calculate the days it takes to sell the inventory on
hand. Calculating inventory turnover can help businesses make better decisions on pricing,
manufacturing, marketing and purchasing new inventory.
 A high ratio implies either strong sales or insufficient inventory. The former is desirable while
the latter could lead to lost business. Sometimes a low inventory turnover rate is a good thing,
such as when prices are expected to rise (inventory pre-positioned to meet fast-rising demand) or
when shortages are anticipated.

41
 After analyzing the raw material turnover ratio of RSP, the ratio shows a consistency of the raw
material consumed by the company. Higher the ratio indicates efficient management of the
inventory.
b.Work-In-Progress turnover ratio
𝑊𝑜𝑟𝑘 − 𝐼𝑛 − 𝑃𝑟𝑜𝑔𝑟𝑒𝑠𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜
= 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 / 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑤𝑜𝑟𝑘 − 𝑖𝑛 − 𝑝𝑟𝑜𝑔𝑟𝑒𝑠𝑠 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 = 𝑆𝑎𝑙𝑒𝑠 − 𝑃𝑟𝑜𝑓𝑖𝑡 − 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠.
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠 = 𝐹𝑟𝑒𝑖𝑔ℎ𝑡 𝑂𝑢𝑡𝑤𝑎𝑟𝑑 + 𝐸𝑥𝑐𝑖𝑠𝑒 𝐷𝑢𝑡𝑦 + 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑡𝑜 𝐽. 𝑃. 𝐶 𝑓𝑢𝑛𝑑
(Rs. in Crores)
Years 2013-14 2014-15 2015-16 2016-17 2017-18
Cost Of Production 7760.03 7936.48 9155.48 9750.53 11576.91
Average Work-In-Progress Inventory 187.18 374.18 675.91 602.80 544.42
Work-In-Progress Turnover Ratio 41.457 21.210 13.545 16.175 21.264
times times times times times

Work-In-Progress Turnover Ratio (times)

50

40

30
Work-In-Progress Turnover
20 Ratio (times)

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:-
After analyzing the above ratio of RSP, the ratio interprets that there is a decrement in the year
2014-15 i.e. 21.210 and further to 13.545 during the year 2015-16 compared to year 2013-14
which is 41.457 times during the year 2016-17 compared to 2014-15 and 2015-16.Again the year
2017-18 which is increased 21.264 times. In 2014-15 and 2015-16 the work-in-progress
inventory was gone up for which the ratio declined. This is due to sluggish market for Steel in
India primarily for availability of cheaper steel dumping by China.
b. Finished goods turnover ratio
Finished goods turnover ratio = Cost of goods sold / Average finished goods inventory.

Years 2013-14 2014-15 2015-16 2016-17 2017-18

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Cost Of Goods Sold 8317.26 8444.76 9594.61 10388.16 12773.51
Average Finished Goods 1139.96 1550.53 1621.84 1371.06 1064.48
Inventory
Finished Goods Turnover Ratio 7.296 days 5.446 days 5.916 days 7.577 days 11.999 day

FINISHED GOODS TURNOVER RATION

Datenreihen3
Datenreihen2
Datenreihen1

INTERPRETATION:-
After analyzing the above ratio of RSP, the ratio indicates a quick change i.e. in the year 2013-14
the ratio was 7.296 times and it became 5.446 times in 2014-15. In 2014-15, the market
condition was not good that is why the sales were gone in sluggish in which the finished goods
inventories were gone up for which the ratio declined. Again it increased to 5.916 during 2015-
16 and 7.577 in 2016-17 and 11.999 during the year 2017-18. This shows the market was in
uprising trend for which the ration is also in uprising trend.
7. Working Capital Turnover ratio:
Working capital of a concern is directly related to sales. The current assets like debtors, B/R,
cash, stock etc. change with the increase and decrease of sales. Working capital turnover ratio
indicates the velocity of the utilisation of net working capital. Higher the ratio lower is
investment in working & higher is the profitability & a low working capital ratio indicates
that the working capital is not efficiently utilized. This ratio indicates the number of times of
the working capital is turned over in the course of year.
𝑆𝑎𝑙𝑒𝑠
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝑁𝑒𝑡 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙

( Rs in Crores)
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 PARTICULARS 2013-14 2014-15 2015-16 2016-17 2017-18
Net Sales 9101.94 9290.86 7709.29 9696.23 12216.81
Net Working Capital 740.22 1762.73 967.33 -136.89 1971.67
W.C. Turnover ratio 12.296 5.271 7.970 -70.832 6.196

W.C. Turnover ratio

20
Inter
0 pret
2013-14 2014-15 2015-16 2016-17 2017-18
-20 ation
W.C. Turnover ratio
-40 : The

-60 work
ing
-80
capit
al turned over was not consistent during last five years. In the Year 2013-14 experienced the
highest turnover ratio, it means more working capital was invested during the year. In the
year 2014-15, working capital turnover was lowest, which refers to lower amount of working
capital invested in that year. The Working Capital Turnover ratio is negative during the year
2016-17 and again in uprising trend during the year 2017-18 to 6.196. It indicates, due to
sudden increase of demand for steel materials , the stock of inventory has been liquidated
and need for working capital was less as the realization was quick on sales of materials.

Notes: -
 Retained earnings in the case of PSU are generally zero because there is no secrecy to
be maintained with this company.
 Treasury shares are the shares which are owned by the co. in case of buy back. As a
matter of fact, MAJOR percentage of shares are owned by govt. i.e. 75% and rest is
owned by financial institutions like LIC Mutual Funds / UTI, Financial Institutions /
Banks, Insurance Companies, Qualified Foreign Investor &Individual shareholders
holding nominal share capital in excess of Rs. 1 lakh. Therefore the has very low
public holding which is around 3-4% and co. don’t usually buy back their shares
because of such low holding of common public.

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Notes: -
 Ratios like current ratio, quick ratio, interval measure ratio, cash ratio,
debtor turnover ratio ad creditor turnover ratio forms part of working capital
analysis.
 The same ratio is analyzed under ratio analysis for the purpose of financial

statement analysis also.

4.2 SWOT ANALYSIS OF RSP

In the present era all companies are adopting some similar strategies and methods. Now if a
company wants or aims to out-stand others in the field of action then they need to work on its
internal factors. By establishing a balance between the internal strengths and weaknesses to
that of external opportunities and threats, this is made possible. For this every company now
chooses to go for its SWOT analysis. The SWOT analysis stands for the analysis of its
strengths, weaknesses, opportunities and threats. When the SWOT analysis of RSP was
performed the following facts were found: -
STRENGTH OPPORTUNITIES

1. Availability of iron ore 1.Growing domestic demand

2. Low labor wage rate 2.Unexplored rural market
3. Largest pool of technical man power 3.Steel consumption is required
4.Export opportunity
4. A bounce of quality man power
5. Low production cost

WEAKNESSES THREATS

1.Low labor productivity 1.Dumping by competitors

2.Low R&D investment 2.Slow industry growth
3.High cost of capital 3.Excessive taxation
4.Unexplored rural market 4.Technology change
5.High taxation 5.Threat of substitutes

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 CHAPTER-5

SUGGESTIONS & CONCLUSION

5.1 SUGGESTIONS:
As per the project study it would be appropriate to site some suggestions for the consideration
of the organization. Every organization needs profit to survive, so in loss situation the
company should focus on the primary objective of the company is to convert the loss into
profit. Since the company is a public sector undertaking, it’s main motto is to provide service
to the customer.
Suggestion is very useful for the companies to get better the financial position and for the
better performance.
1. The company should try to increase the production so as to get economies of large scale
production. It will assist in rising the rate of return on capital employed.
2. The management should try to adopt cost reduction techniques in their companies to get
over this critical situation.
3. The management should try to utilize their production capacity fully in order to reduce
factory overheads and to utilize their fixed assets properly.
4. To strengthen the financial efficiency, long-term funds have to be used to finance core
current asset s and a part of temporary current assets. It is better if the companies can
reduce the over sized short-term loans and advances eliminates the risk arranging finance
regularly.
5. For regular supply of raw materials and the final product infrastructure facilities are
required further improvement.
6. Improper planning and delays in implementation of projects lead to rise in their cost. So,
properly planning should be made.

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7. In order to increase the profitability of the companies, it is suggested to control the cost of
goods sold and operating expenses.
8. There has been too much of government interference in policy and day-to-day working
and decisions. This lead to delays in decision-making. This should be abolished.

5.2 CONCLUSION:
Rourkela Steel Plant has not only addressed itself to the country’s need for self-sufficiency in
steel, but has also given the country, the technology edge producing strategic material.
Besides being the leader in the domestic primary steel market excluding the semi-finished
products, the company has also earned a good name in the domestic market in manufacture of
crude steel. With its consistent track record in capacity utilization, technology absorption,
quality assurance export performance, servicing of loans, internal source generation and
posting of profits, the company has chartered a course of confidence among its stake holders.
Rourkela Steel Plant is a well-known public sector unit in the steel sector in India. It shows
how a well-managed company achieves the mission of the company and gives much more
profit. Just as circulation of blood is essential in human body for maintaining life like that
working capital is also an important aspect and can be a main contributor to a company’s
profit if managed efficiently.

Rourkela Steel Plant is a profitable organization and it is making a continuous profit over five
years, which comes under “MAHARATNA COMPANY”. It helps in providing maximum
benefit to the whole organization and also to the society. Since it is public sector unit of the
decision-making process which is quite slow, because of Government interference. However,
every year profit is increasing as well as to the production capacity.

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 BIBLIOGRAPHY
FINANCIAL REPORTS AND JOURNALS
 “Annual Financial Reports, ROURKELA STEEL PLANT” (2011-16)
 Financial Year Books for 2011-12 to 2015-18.
BOOKS
 I.M. Pandey "Financial Management.” Vikash Publication House Pvt.
 R. K. Sharma and Shashi K. Gupta “Financial Management” Kalyani Publishers
 FINANCIAL MANAGEMENT – M.Y. KHAN AND P.K. JAIN OF Tata McGraw-
Hill publication
WEBSITES
 www.rourkelasteelplant.com

 https://economictimes.indiatimes.com

 www.ndtv.com

 https://sail.co.in

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