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net ISSN (ONLINE): 2250-0758, ISSN (PRINT): 2394-6962

Volume-5, Issue-2, April-2015

International Journal of Engineering and Management Research
Page Number: 665-669

A Study on Financial Performance of Reliance Industries Limited

R. Ramanan
MBA, School of Management, SASTRA University, Thanjavur-613401, Tamil Nadu, INDIA

ABSTRACT II. OBJECTIVE

The concept of financial performance analysis is
the process of identifying financial strength of the company
with the help of its Profit and loss account, and Balance
sheet. Reliance Industries Limited (RIL), is India’s largest
private sector company with business across the energy and
materials value chain and a strong presence in the rapidly
expanding retail and telecommunication sectors.
The financial performance analysis of the
company is done for the period of five years, starting from
the financial year 2009-2010 to 2013-2014. The objective of
this study to evaluate the financial position of the company,
analyze financial changes and identify future result by
using ratio and trend analysis. To know whether the
business is making profit or not, is maintaining liquidity
position, and know the dividend growth of the company.
The ratios used in this project are in terms of
solvency, turnover, and profitability ratios. The trend
analysis has done for the indicators such as Sales and
Expenses. The company performance was good during the
period 2010 and 2011, but in 2012 and 2013 the company
performance was not good, due to recession in European
countries and affected the exports of the company. Then
slowly the global economic condition was improved a little
bit in 2014, and the customer demand for the retail
products and oil exports increased in the year 2014.
Keywords---- Balance Sheet, Profit and Loss Account,
Ratios, Trend analysis.
I. INTRODUCTION
Financial performance analysis is the process of
identifying the financial strengths and weaknesses of the
firm by properly establishing the relationship between
the items of balance sheet and profit and loss account.
There are many tools to find financial performance of
the company, one of the most useful tools is ratio and
trend analysis. The financial analysis is done to find the
firm’s current position with that of market situation. This
analysis is used by creditors, shareholders, board.
• To evaluate the financial position of Reliance
Industries Ltd in terms of solvency,
profitability, turnover ratios for the years from
2009-2010 to 2013-2014.
• To identify any consistent results or trends by
using trend analysis
• To analyze the financial changes over a period
of five years.
• To suggest effective measures in the existing
system of the company.
III. RESEARCH METHODOLOGY
• The secondary data were collected from
company’s annual reports and their websites.
• The data collected on different aspects were
analyzed.
• The period of study for the project is 5 years
(2009-2010 to 2013-2014).
IV. SCOPE OF THE STUDY
The study covers almost the entire area of
financial operations covered by “Reliance Industries
Limited” the study has been conducted with the help of
data obtained from audited financial records. The audited
financial records are the company annual reports
pertaining to past 5 years from 2009-2010 to 2013-2014
and the audited financial records are obtained from the
company’s annual report. The researcher tries to measure
the performance of the organization.
V. TOOLS APPLIED FOR ANALYSIS
The tools applied are ratio and trend analysis
VI. LIMITATIONS OF THE STUDY
• The study is restricted for a period of five years

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• The analysis is based on annual reports of the From the above table, it is clearly showing that
company. the company is increasing its debt component in the
capital structure. It shows that company has the scope to
VII. REVIEW OF LITERATURE increase fund through debt because of low debt
component. This shows good sign but in case the
Yunus, N.M., Malik, S.A. (2012) states that company wants to develop more, it has good scope
the use of financial model is to predict the performance raising fund through debt, is possible one.
of a company. The theoretical analysis in the
development of model is done using the matrix solution
of the Matlab software. The model is then validated with
the actual company's business performance to determine
the predicting accuracy.
Hooks, Jill. (2007) found that this research
examines the financial performance of three entities over
a fifteen year period. The aim is to determine the
influence of corporatization, commercialization and
ownership form on the reported financial performance of
three entities.
Wei, Sun. (2010) found that this paper
discusses some theories of the system of performance
evaluation, analyses merit and disadvantage of these
theories. this paper brings forward the system of From the above chart, it is clearly showing that
performance evaluation with method of fuzzy the company is maintaining minimum cash coverage
mathematics. This paper validates the correctness of the ratio due to increasing in the current liabilities
system of performance evaluation with the example. component. Though the cash level is increased in all the
Hajek, P., & Olej, V. (2014) found that this years yet it shows downward trend due to constant
paper develops a methodology to extract concepts increasing in current liabilities. Hence it is not a good
containing qualitative information from corporate annual sign for the company.
reports. The methodology makes it possible to easily
compare the concepts with future financial performance.
The results suggest that annual reports differ in terms of
the concepts emphasized reflecting future financial
performance.
Rungi, M., Stulova, V. (2013) states that the
current study investigates the impact of absorptive
capacity on financial performance in the context of
corporate acquisitions. A quantitative research was
carried out based on European ICT companies that were
subject to acquisition in 2008. The results demonstrate
that absorptive capacity entails a direct effect on
financial performance.
From the above table, it is clearly showing that the
VIII. ANALYSIS AND company has keeping more or less ideal ratio but in the
INTERPRETATIONS year 2014 it is decreasing because the current liabilities
is increasing more than the current asset, as a result it
keeps down in the final year, if this situation keeps on
moving then the company cannot meet its current
liability. Hence this position is good but it is
recommended that the company has to increase current
asset more than current liabilities

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www.ijemr.net ISSN (ONLINE): 2250-0758, ISSN (PRINT): 2394-6962
From the above chart it is understandable that
the company met ideal ratio only in the year 2012 and
2013. It is decreasing trend because the company is
keeping more stocks in the subsequent years, if it keeps
on holding more stocks then the company cannot convert
it into cash quickly. Hence it is recommended that the
company must reduce stock levels
From the above table, it is clearly showing that
it is decreasing trend till 2013 and it increased in 2014, it
shows that the company can pay its ongoing interest
payment. The low debt service ratio indicates that more
financial risk, because the company is not able to
generate funds for interest payments.
From the above table, it is clearly showing
that the company is utilizing the asset efficiently till the
year 2012 and in the year 2013 and 2014 it is reduced
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due to mismanagement in the fixed asset and causes
slight variation in this ratio. Hence it is good sign that it
is more than one time.
From the above table, it is clearly showing that
the company is maintaining some portion of cash for
maintaining or increasing its sales, when this ratio is in
increasing trend it shows a way that the company can
give more credit facilities and maintain additional
inventory to promote its sales. This shows that the
company has a way to boost up its sales activity, a little
further.
Projected trend analysis for the period of 2015 –
2017, for sales shows a good result, as it keeps on
increasing trend. Due to this increasing volume, the
company can generate a better return and growth of the
company in future. With this rising trend it shows that
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the company product/services, is availed by more
customers
Projected trend analysis for the period of 2015 –
2017, for expenses trend is increasing one and it is not a
good sign. The company might have control over its
expenses, because the profit will reduce if the expenses
increasing. Though the tax payment will differ because
of the expenses increasing, it does affect the company
performance.
IX. FINDINGS
 From the analysis of Debt-Equity ratio, it is
found that the company is using low debt, the
company is focusing on shareholders not
creditors.
 From the analysis of Current ratio, it is found
that the company has good liquidity position it
can able to meet its current liabilities.
 From the analysis of Quick ratio, it is found that
the company has meet ideal ratio in the year
2012 and 2013. It decreased in the year 2014.
 From the analysis of cash coverage ratio, it is
found that the company has low ratio in the
year 2010 then increased till 2013, finally in the
year 2014 it decreased.
 From the analysis of debt service ratio, it is
found that the company interest payment is
decreasing till 2013 from 2010, then in the year
2014 it increased a little bit.
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 From the analysis of Fixed asset turnover ratio,
it is found that the company had utilizing the
asset efficiently in all the years. It has reached
the ideal ratio in all the years.
 From the analysis of sales to working capital
ratio, it is found that the company has utilized
its working capital usefully for sales in the year
2011, but it is reduced in the year 2012 and
2013, and increased in the year 2014.
X. RECOMMENDATIONS
• The company has to go for more debt
component, because the company is using low
debt component and moreover it can develop
further business activities with the help of more
funds.
• The company has to control over expenses,
because the expenses is keep on increasing in
all the years, and it results in decreasing in
profit available for shareholders.
• The company has to maintain adequate cash
level to meet out its immediate requirement,
because the company maintains less cash
availability
• The company inventories is keep on increasing
from the beginning of the year, so it has to take
necessary steps like sales promotion,
advertising to clear the stocks because it affects
the liquidity position.
• The company has to properly utilize the assets
efficiently to generate more profits, because
from the year 2010 till 2014, the company’s
assets efficiency in generating profit is
decreasing, slowly.
XI. CONCLUSIONS
During the financial year 2009-2010, Reliance
industries limited had given dividend of Rs. 7 per share
in the year 2010, against given Rs.13 per share in the
year 2009, because the company need capital for its
growth plans, even though the profit is increased. The
projects like KG D6 and SEZ, refineries at Jamnagar
started for past one year period from 2010, was a
successful one.
During the financial year 2010-2011, Reliance
Industries limited had made a record performance in
profit growth because the projects in Jamnagar namely
KG D6 and SEZ refinery was successful and also the
Indian’s consumer demand was high in manufacturing
The company had given an increase in one rupee of
dividend per share, Rs.8 per share in the year 2011
compared to previous year Rs. 7 per share in 2010.
During the financial year 2011-2012, was a
challenging year because economic uncertainty prevails
in Europe (debt crisis), and slows down of economic
growth across Asia. These result in inverse impact of
customer demand for products and services. Anyhow the
company increased profit a little bit from previous year.
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During the financial year 2012-2013, the

company performance was not so good because the
European was full of uncertainty, recession, and
unemployment. This leads to market slowdown and
impacted demand, and the oil price went up. The
expenses went up because of change in economic factor
and the company is largest contributor by payment of
taxes. So the profit was reduced.
During the financial year 2013-2014, the
company performance was boosted up, economic
recovery in Europe and U.S made a positive impact in
customer demand of oil and gas, and some pressure was
raised like rupee value depreciated against dollars. The
projects like setting up of 4G telecom has improved. So
now the performance of Reliance Industries limited is
reinstating to its original place.

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