ANALYSIS OF FINANCIAL STATEMENTS OF

TATA STEEL
BACHELOR OF BUSINESS ADMINISTRATION

By

SARWADAMAN SINGH (17BBA010)

VAIBHAV KUMAR RANA (17BBA012)
AMIT KUMAR (17BBA038)

USHA MARTIN UNIVERSITY, JHARKHAND

(Established by Jharkhand Government under Sec.2(f) of UGC Act 1956)

FACULTY OF COMMERECE & BUSINESS MANAGEMENT

2020
 PROJECT SYNOPSIS
1. TITLE OF THE PROJECT
Analysis of financial statements of Tata steel
2. INTRODUCTION -
Financial statement: - Financial Statement Analysis is a method of reviewing and analyzing a company’s
accounting reports (financial statements) in order to gauge its past, present or projected future performance.
This process of reviewing the financial statements allows for better economic decision making.
Globally, publicly listed companies are required by law to file their financial statements with the relevant
authorities. Firms are also obligated to provide their financial statements in the annual report that they share
with their stakeholders. As financial statements are prepared in order to meet requirements, the second step
in the process is to analyze them effectively so that future profitability and cash flows can be forecasted.
Users of financial statement analysis: -
• Management: -The managers of the company use their financial statement analysis to make
intelligent decisions about their performance.
• Owners: - Small business owners need financial information from their operations to
determine whether the business is profitable.
• Investors: -People who have purchased stock or shares in a company need financial
information to analyze the way the company is performing.
• Creditors: -Creditors are interested in knowing if a company will be able to honor its
payments as they become due.
• Government: -Governing and regulating bodies of the state look at financial statement
analysis to determine how the economy is performing in general so they can plan their
financial and industrial policies

Methods of financial statement analysis: -

Horizontal Analysis: - Horizontal analysis is used in financial statement analysis to compare historical
data, such as ratios, or line items, over a number of accounting periods. Horizontal analysis can either use
absolute comparisons or percentage comparisons, where the numbers in each succeeding period are
expressed as a percentage of the amount in the baseline year, with the baseline amount being listed as
100%. This is also known as base-year analysis.
Vertical Analysis: - Vertical analysis is a method of financial statement analysis in which each line item is
listed as a percentage of a base figure within the statement. Thus, line items on an income statement can be
stated as a percentage of gross sale, while line items on a balance sheet can be stated as a percentage of
total assets or liabilities, and vertical analysis of a cash flow statement shows each cash inflow or outflow
as a percentage of the total cash inflows.
 3. RATIONALE OF THE STUDY
Nowadays the GDP of India is 2.72 lakh crore USD (According to 2018) which is gradually increasing
year per year, that's why we are very eager to do the research i.e. Analysis of financial statement of Tata
steel to find the financial statement of Tata steel and how Tata steel is contributing to the economic growth
of the developing India. Also, we want to know that whether Tata steel is growing and flourishing among
their rivals or not.
4. REVIEW OF LITERATURE

In a comparative study of financial performance analysis, Singla (2013) analyzed financial performance of
two leading steel companies in Indian steel industry, SAIL and TATA steel, for a period of five years from
2007-08 to 2011-12. Various financial ratios like current ratio, quick ratio, inventory turnover ratio,
operating ratio, gross profit ratio, net profit ratio, dividend payout ratio etc, under category of liquidity,
profitability and working capital, were used for the analysis. Result of the study revealed that profitability
and inventory management of TATA steel was better than that of SAIL.

Altman Z score model was used by Ramaratnam and Jayaraman (2010) to examine the financial
soundness of selected steel companies of Indian steel industry. The study covered a period of five years
from 2006 to 2010. Various financial ratios used in Altman Z-score were calculated and statistical
techniques such as ANOVA test etc were applied to the ratios to test consistency, stability and overall
trends in different ratios. Finally, it was concluded that all selected units were financially sound during the
study period while operating efficiency of JSW steel and TATA steel was good.

Another study was conducted by Takeh & Navaprabha (2015) to analyze the impact of capital structure
on financial performance of selected Indian steel companies for a period from 2007 to 2012. Multiple
regression model, correlation matrix, ANOVA and descriptive statistics were used for data analysis. OPM,
ROA, ROE and ROCE were used as indicators of financial performance (dependent variables) while
TDER, TADR, ICR and FDR were used as indicators of capital structure (independent variables). The
result indicated that capital structure had significantly impacted financial performance of Indian steel
Industry. Correlation results confirmed negative relationship between capital structure and financial
performance measures.

Sinku & Kumar (2014) attempted to review the financial performance of Steel Authority of India Limited
(SAIL). The study was purely based on secondary data conducted for a period of five years from 2005-06
to 2009-10. The data were tabulated, analyzed and interpreted with the help of various financial ratios and
Multivariate Discriminate Analysis (MDA) developed by Prof. Edward I. Altman (1968). It was observed
from the analysis of various ratios that the profit earning capacity, liquidity position and long-term
solvency position of SAIL was quite good during the study period and the level of bankruptcy position was
also very low.

In another study, Kavitha and Palanivelu (2014) investigated factors affecting steel industry based on
profitability model. Analysis was done for a period of ten years starting from 2002-2003 to 2011-2012.
Twenty-one firms were taken for the study out of 227 iron and steel firms working in India out of which
168 were listed in stock exchanges in India. ANOVA was used to find whether there was any significant
difference between liquidity, leverages and efficiency positions of the firms under study during the selected
period of time. It was found that quick ratio, debt equity ratio, proprietary ratio, fixed asset to net-worth
ratio and inventory turnover ratio had impacted profitability positions of the steel firms. It was suggested
that Companies could reduce the interest burden by giving quality products and should build brand image
to increase the profit. It was also suggested that the firms should utilize maximum production capacity and
should try to increase production and sales for maximization of profit and to strengthen financial position.

5. RESEARCH OBJECTIVES

•To analyses the profitability of the business

•To analyses the asset management of the firm.
•To analyses the short term and long-term financial position of the firm.
•To make recommendation based on the analysis of financial statements.

6. RESEARCH HYPOTHESIS
Tata steel is a major player in the steel producing market in Indian economy.

7. RESEARCH METHODOLOGY
6.1 Research Design
Quantative research design: - If your objectives involve measuring variables, finding frequencies or
correlations, and testing hypotheses, you will need to do quantitative research. Quantitative research
designs tend to be more fixed, with variables and methods determined in advance of data collection.
The performance evaluation of an enterprise may be conducted by making a comparative study of its own
records and an attractive approach would here to analyses the firm's objectives and performance against
absolute standard of efficiency. The study was conducted on the basis of financial data from published
records and other books with both primary and secondary data. (i.e. published financial statements of last 6
years, and other relevant books and accounts of the firm.)

6.2 Data Collection Method/Tools

Secondary Data: -annual reports of Tata steel (including balance sheet’s)

6.3 Data Analysis Tools & Techniques

The study makes use of techniques like
 • Comparative balance sheet and income statements
• Common size balance sheet and income statements
• Profitability ratio
• Liquidity ratio
• Activity ratio
Simple mathematical tools like
• Averages
• Percentage
Accounting tools like
• Ratios
• Trend analysis & statistical tools were also used for this analysis

8. LIMITATIONS: -
• The Sample Size is very small. Only few data were analyzed. So, there is a possibility of occurrence
of some sampling errors. If the sample were large and representative, the observation would have
become more credible.
• It considers only monetary factors; non-monetary factors are not considered.
• The time allowed for the study is less.
• It has been conducted by using secondary data

REFERENCES: -
http://www.dissertationideas.co.uk/Finance/Analysis-of-Financial-Statements-of-XYZ-Company.php

SINGLA (2013) A COMPARATIVE STUDY OF FINANCIAL PERFORMANCE OF SAIL AND TATA

STEEL LTD. INTERNATIONAL MANUSCRIPT ID: ISSN23194618-V2I1M11-012013, Retrieved
from: - https://docplayer.net/20316915-A-comparative-study-of-financial-performance-of-sail-and-Tata-
steel-ltd.html

.S.Ramaratnam, R.Jayaraman (2010) A study on measuring the financial soundness of select firms with
special reference to Indian steel industry. ASIAN JOURNAL OF MANAGEMENT RESEARCH , ISSN
2229 – 3795Retrieved from: - http://www.ipublishing.co.in/ajmrvol1no1/EIJMRS1056.pdf
Takeh & Navaprabha (2015) CAPITAL STRUCTURE AND ITS IMPACT ON FINANCIAL
PERFORMANCE OF INDIAN STEEL INDUSTRY Volume 6, Issue 6, June (2015), working paper: - pp.
29-38, Article ID: 10120150606004, International Journal of Management (IJM) IAEME:
http://www.iaeme.com/IJM.asp,
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Sinku & Kumar (2014) Analysis of Financial Health of Steel Authority of India Limited www.iiste.org
ISSN 2224-6096 (Paper) ISSN 2225-0581 (online) Vol.4, No.12, 2014.
Reverted from file: - http://citeseerx.ist.psu.edu/viewdoc/download?
doi=10.1.1.849.5720&rep=rep1&type=pdf (2020)

Kavitha and Palanivelu (2014) A Study on Financial Performance of Iron and Steel Industries India
Volume: 3 | Issue: 7 | July 2014 • ISSN No 2277 – 8179,
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(IJSR)/fileview.php?val=July_2014_1404300285__27.pdf