I would like to express my hert!ul th"ks to m"y people# $his disserttio" is " e!!ort to %o"tri&ute towrds %hie'i"( the desire desired d o&)e%t o&)e%ti'e i'es# s# I" doi"( doi"( so* I h'e h'e optimi optimi+ed +ed ll 'il 'il&le &le resour%es "d mde use o! some exter"l resour%es* the i"terply o! whi%h* o'er period o! time* led to the tti"me"t o! the set (ols# I tke here (ret opportu"ity to express my si"%ere "d deep se"se o! (rtitude to my esteemed !%ulty mem&ers o! , PT Ja)aharlal Nehr# In*tit#te Of B#*ine** Mana+e!ent , -i$ra! Uni.er*it/, Uain !or (i'i"( me " opportu"ity to work o" this
pro)e%t# $he support - (uid"%e !rom sir* ws o! (ret help - it ws extremely 'lu&le# I lso express my si"%ere th"ks to ll the people who* dire%tly or i"dire%tly* %o"tri&uted i" time* e"er(y "d k"owled(e to this e!!ort.
Na!an "#$!ani
.
DEC'%R%TION I Nm" ukm"i here&y de%lre tht this pro)e%t is the re%ord o! uthe"ti% work %rried out &y me duri"( the %demi% yer yer 201 01 20 201 1 "d "d hs "ot &ee" ee" su su&m &mit itte ted d to "y "y othe other r U"i'ersity or I"stitute towrds the wrd o! "y de(ree#
I !urther de%lre tht i" the e'e"t o! "y i"!ri"(eme"t whether k"owi"(ly or u"k"owi"(ly the U"i'ersity shll "ot &e li&le !or the sme i" "y m""er wht so e'er #
D%TE
/
Si+nat#re of the *t#ent
/
3
Chapt er–1
NTRODUCTI ON I
Intro#ction 3inancial Mana+e!ent is the spe%i!i% re o! !i""%e deli"(
with the !i""%il de%isio" %orportio"s mke* "d the tools "d "lysis used to mke the de%isio"s# $he dis%ipli"e s whole my &e di'ided &etwee" lo"(4term "d short4term de%isio"s "d te%h"i5ues# 6oth shre the sme (ol o! e"h"%i"( !irm 'lue &y e"suri"( tht retur" o" %pitl ex%eeds %ost o! %pitl* without tki"( ex%essi'e !i""%il risks# Ca3*!a& *n')!/'n! d'5*)*+n) %omprise the lo"(4term %hoi%es
&out whi%h pro)e%ts re%ei'e i"'estme"t* whether to !i""%e tht i"'estme"t with e5uity or de&t* "d whe" or whether to py di'ide"ds to shreholders# hort4term %orporte !i""%e de%isio"s re %lled
m"(i"( %sh* i"'e"tories* "d short4term &orrowi"(s "d le"di"( 8e#(#* the %redit terms exte"ded to %ustomers9# :orporte !i""%e is %losely relted to m"(eril !i""%e* whi%h is sli(htly &roder i" s%ope* des%ri&i"( the !i""%il te%h"i5ues 'il&le to ll !orms o! &usi"ess e"terprise* %orporte or "ot#
Role of 3inancial Mana+er* ;
$he role o! !i""%il m"(er %" &e dis%ussed u"der the !ollowi"( heds; 1# Nture o! work 2# et us dis%uss e%h o! these i" detiled m""er#
7
NEED O3 T"E STUD4
1#
$he study hs (ret si("i!i%"%e "d pro'ides &e"e!its to 'rious prties whom dire%tly or i"dire%tly i"ter%t with the %omp"y#
2#
It is &e &e"e!i%il to m m"(eme"t o! th the %om %omp"y &y &y pr pro'idi"( %rys %ryst tll %le %lerr pi%t pi%tur uree re( re(rd rdi" i"( ( impo import rt" "tt spe spe%t %tss like like li5u li5uid idit ity y* le'er(e* %ti'ity "d pro!it&ility#
.#
$he st study is is l lso &e &e"e!i%il to to em employees " "d o! o!!ers mo moti'tio" &y showi"( showi"( how %ti'ely %ti'ely they re re %o"tri&uti"( %o"tri&uti"( !or %omp"y?s %omp"y?s (rowth# (rowth#
3#
$he i" i"'est estors wh who r re i" i"terested i" i" i" i"'esti"( i" i" th the %o %omp"y?s shres will lso (et &e"e!ited &y (oi"( throu(h the study "d %" esil esily y tke tke de%i de%isi sio" o" whet whethe herr to i"'e i"'est st or "o "ott to i"'e i"'est st i" the the %omp"y?s shres#
@
OBJECTI-ES
$he m)or o&)e%ti'es o! the rese"t study re to k"ow &out !i""%il stre"(ths "d wek"ess o! >AN:O throu(h 3IN%NCI%' R%TIO %N%'4SIS # The !ain o5ecti.e* of re*ent *t#/ ai!e a* ;
$o e'lute the per!orm"%e o! the %omp"y &y usi"( rtios s yrdsti%k to mesure the e!!i%ie"%y o! the %omp"y# $o u"derst"d the li5uidity* pro!it&ility "d e!!i%ie"%y positio"s o! the %omp"y duri"( the stud study y peri period od## $o e'l e'lu ute te "d "d "l "ly+ y+ee 'ri 'riou ouss !%t !%tss o! the the !i" !i""% "%i ill per!orm"%e o! the %omp"y# %omp"y# $o mke %ompriso"s %ompriso"s &etwee" the rtios duri"( di!!ere"t periods# OBJECTI-ES
1#
$o study the prese"t !i""%il system t e"ti"( >"%o#
2#
$o determi"e the Bro!it&ility* >i5uidity Rtios#
.#
$o "ly+e the %pitl stru%ture o! the %omp"y with the help o!
3#
>e'er(e rtio# $o o!!er p pproprite su su((estio"s !o !or th the &e &etter
Most o! o! th the % %l%ultio"s r re m mde o" o" th the !i !i""%il st stteme eme"ts o! o! the %omp"y pro'ided stteme"ts#
2#
Re!erri"( st st"drd te texts "d "d re re!erred &o &ooks %ol %olle%ted som some o! the i"!ormtio" re(rdi"( theoreti%l spe%ts#
.#
Method4 to to s ssess th the pe per!orm"%e o! o! he he %o %omp"y me method o! o! o&ser'tio" o! the work i" !i""%e deprtme"t i" !ollowed#
10
'IMIT%TIONS
1#
$hee study pro' $h ro'ides " i"si(h i(ht i"t i"to the !i""%i "%il l** pers erso""el* el* mrketi"( "d other spe%ts o! >AN:O# E'ery study will &e &ou"d with %erti" limittio"s# limittio"s#
2#
$he &e &elow me" me"ttio"ed r re th the %o %o"stri"ts u" u"der wh whi%h th the st study is %rried out#
.#
O"e O"e o! the the !%to %torrs o! the study ws l%k %k o! 'i 'ill&il &ilit ity y o! mp mple i"!ormtio"# Most o! the i"!ormtio" hs &ee" kept %o"!ide"til "d s su%h s "ot ssed s rt o! poli%y o! %omp"y# $ime is " imp import" t"t lim limitt ittiio"# $he whole ole stud tudy ws
%o"du%ted i" period o! 0 dys* whi%h is "ot su!!i%ie"t to %rry out proper i"terprettio" "d "lysis#
11
C$a3!'% 6 2
POWER INDUSTR4
12
INDUSTR4 PRO3I'E
E>E:$RI:I$Y is o"e o! the 'itl re5uireme"ts i" the o'er ll de'elopme"t o! the e%o"omy "d is there!ore* ppropritely %lled the 6Wheel of De.elop!ent7# I" !%t* the power se%tor hs plyed domi""t
role i" the so%io4e%o"omi% de'elopme"t o! the %ou"ty# As %o"'e"ie"t 'erstile "d relti'ely %hep !orm o! e"er(y it plys %ru%il role i" (ri%ulture* tr"sport* i"dustry "d domesti% se%tor# e"%e power hs ll lo"( remi"ed i" the priority list o! I"di" pl""ers "d pl" outlys h'e re!le%ted this spe%t# $he outlys !or power se%tor h'e &ee" rou"d 1CD o! the totl outlys !or the pu&li% se%tor i" 'rious pl" periods# $here hs &ee" spe%t%ulr i"%rese i" the i"stlled (e"erti"( %p%ity o! ele%tri%ity i" the %ou"try# trti"( with %p%ity o! &out 1.0M< t the time o! i"depe"de"%e* espite treme"dous i"%rese i" the 'il&ility o! power si"%e i"depe"de"%e there is %ute power short(e (p &etwee" dem"d "d supply# $he per %pit %o"sumptio" o! power i" the %ou"try is 'ery low s %ompred to the positio" i" the de'eloped %ou"tries# Bower is key i"put !or e%o"omi% (rowth hs s dire%t reltio"ship with the "tio"l produ%ti'ity s lso the o'erll e%o"omy o! the %ou"try# $here hs &ee" di'ersi!i%tio" o! the sour%es o! (e"ertio" i" terms o! hydel* therml "d "u%ler sour%es# $he shre o! hydel i" the totl (e"erti"( %p%ity hd drsti%lly %ome dow" "d tht o! therml hd show" "oti%e&le i"%rese# A"other si("i!i%"t %h"(e is the i"%resi"( shre o! :e"trl se%tors i" re%e"t yers#
1.
$he shre o! the therml eleme"t i" the i"stlled (e"erti"( %p%ity* whi%h is lso predomi""tly %ol4&sed* shows stedy i"%rese# $hus* the relti'ely %heper "d more desir&le %h"(e i" terms o! hi(her shre o! hydel sour%e* whi%h is re"ew&le* h'e "ot mterili+ed# POWER SCEN%RIO
$he power se%tor is t %ross rods tody# $here is %hro"i% power short(e i" the %ou"try mi"ly ttri&ut&le to dem"d o! power %o"ti"uously outstrippi"( the supply# "4DE' POWER
I" the prese"t (lo&l e"er(y %o"text* there re %erti" spe%ts* whi%h h'e %5uired "ew si("i!i%"%e# $he de'elopme"t o! hydropower hs to &e (i'e" m)or thrust i" the %urre"t de%de#
13
MINI "4DE' P'%NTS
$here re "um&er o! sttes i" the :ou"try where mi"i hydel pro)e%ts %" &e set up t %omprti'ely lower i"'estme"ts to suppleme"t other sour%es o! e"er(y# A%%ordi"( to reli&le estimtes the totl pote"til o! mi"i4hydel pl"ts ll o'er the %ou"try is rou"d 000M<# $his i"%ludes 2*000M< i" hilly res t ,hi(h heds "d low dis%hr(eF poi"ts "d .00M< t ,low heds "d low is%hr(eF poi"ts# Brti%ulr drops "d irri(tio" systems# T"ERM%' POWER
$herml u"its h'e emer(ed s the lr(est sour%e o! power i" I"di# 6ut u"!ortu"tely* the pro(ress o! power (e"ertio" i" this se%tor hs "ot &ee" mrked &y "y "ew &rekthrou(h# At prese"t stress %o"ti"ues to &e lid o" therml power sttio" &e%use o! shorter %o"stru%tio" time# Usi"( &etter pro)e%t m"(eme"t te%h"i5ues is shorte"i"( the %o"stru%tio" period !or these pl"ts# It hs &ee" possi&le to impro'e o'erll e!!i%ie"%y o! therml pl"t &y usi"( (s tur&i"es i" %o")u"%tio" with %o"'e"tio"l stem tur&i"es# $he u"io" (o'er"me"t hs* i" order to step up %e"trl (e"ertio" i" the %ou"try* est&lished super therml power ttio" i" di!!ere"t re(io"s# $he Ntio"l $herml power :orportio" 8N$B:9 ws est&lished i" 1C7 with the o&)e%t o! pl""i"(* promoti"( "d or("i+i"( i"te(rted de'elopme"t o! therml power i" the %ou"try#
1
(EO POWER S4STEM
eo Bower ystem is "turl ir4%o"ditio"i"( system !or reside"til "d %ommer%il premises* usi"( (eotherml e"er(y 'il&le &e"eth the (rou"d sur!%e t depth o! meters# It is i"telli(e"tly desi("ed to 'e"tilte the i"teriors to ll %or"ers "d to e!!e%ti'ely e"h"%e the i"ter"l %o"ditio"s &y remo'l o! !ormldehyde whi%h is hrm!ul to o"es helth# $his system pro'ides "turl e"'iro"me"t4like %o"ditio"s to o"esel!* i"%reses house li!e "d prote%ts the e"'iro"me"t# NUC'E%R ENER(4
$he pl""ers* ri(ht !rom the &e(i""i"( u"derstood the import"%e o! "u%ler e"er(y i" meeti"( the %ou"try?s lo"(4term e"er(y "eeds# Re%o("i+i"( tht "u%ler te%h"olo(y would &e su&)e%t to pro(ressi'ely restri%ti'e te%h"olo(y %e"trl re(ime "d lso tht the lo"( term strte(ies !or exploittio" o! the %ou"try?s 'st thorium resour%es re &ou"d to &e some wht di!!ere"t !rom those o! most other %ou"tries e"((ed i" "u%ler power de'elopme"t* treme"dous emphsis ws pl%ed o" %hie'i"( sel! reli"%e i" te%h"olo(y de'elopme"t# $his poli%y hs yielded ri%h di'ide"ds "d tody o"e %" proudly use the reli+tio" o! i"di(e"ous %p&ility i" ll spe%ts o! the "u%ler !uel %y%le# OCE%N ENER(4
$he lo"( st"di"( proposl to tp "o"4%o"'e"tio"l sour%e o! o%e" e"er(y !or power (e"ertio" is expe%ted to (et !illip with )oi"t tem o! the $mil"du ele%tri%ity 6ord "d the O%e" E"er(y :ell o! I"di" I"stitute o! $e%h"olo(y* Mdrs %omme"di"( the o!!er o! the U## &sed
1
!irm se solr power 8B9 to set up O%e" $herml E"er(y :o"'ersio" 8O$E:9 pl"ts o! 100 M< %p%ities e%h lo"( the $mil"du :ost !or serious %o"sidertio" "d re%omme"di"( the setti"( up o! o"e pl"t to &e(i" with t Gulsekrpt"m re#
WIND ENER(4
SO'%R ENER(4
It is &elie'ed tht with )ust 0#1 per %e"t o! the 7*000 trillio" k+ o! solr e"er(y tht re%hes the erth* pl"et?s e"er(y re5uireme"t %" &e stis!ied# Ele%tri%ity %" &e (e"erted with the help o! solr e"er(y throu(h the solr therml route* s well s dire%tly !rom su"li(ht with the help o! olr BhotoHolti% 8BH9 te%h"olo(y# BH ystems re &ei"( used !or li(hti"(* wter pumpi"(* "d tele%ommu"i%tio"s "d lso !or 'ill(e
17
si+e power pl"ts i" rurl res# BH systems re &ei"( used to pro'ide li(hti"( u"der the Ntio"l >iter%y missio"* re!ri(ertio" !or '%%i"e stor(e "d tr"sport u"der the Ntio"l immu"i+tio" pro(rmme* dri"ki"( wter "d power !or tele%ommu"i%tio"s# I"di" rilwys h'e &ee" usi"( this te%h"olo(y !or si("li"(# PROB'EMS
$he power se%tor i" I"di is &eset with "um&er o! pro&lems# $hey relte to delys i" the !ormultio" "d impleme"ttio" o! 'rious pro)e%ts* poor utili+tio" o! %p%ity* &ottle"e%ks i" the supply o! %ol to therml sttio"* "d its poor 5ulity* !ulty distri&utio" "d tr"smissio" rr"(eme"ts "d &d pl""i"( ledi"( to " i")udi%ious hydel therml mix# E%olo(i%l pro&lems re lso 'exi"( this se%tor# urdles i" e"'iro"me"tl %ler"%es te"d to slow dow" %ompletio" o! power pro)e%ts# :ompe"story !!oresttio" "d l"d %5uisitio" h'e pro'ed to &e m)or &ottle"e%ks i" the %ler"%e o! power pro)e%ts# $he mi" pro&lem !%ed i" the %se o! e"'iro"me"tl %ler"%es is the short(e o! l"d !or %ompe"story !!oresttio"#
1@
C$a3!'% 6 7
O8ER8IEW O9
'%NCO (ROUP
1C
PRO3I'E O3 (ENTIN( '%NCO POWER 8INDI%9 PRI-%TE 'IMITED 8OPER%TIONS : M%INTEN%NCE COMP%N4 3OR '%NCO & OND%P%''I POWER PRI-%TE 'IMITED9 e"ti"( >"%o Bower 8I"di9 Bri'te >imited is su&sidiry o! e"ti"( (roup o! %omp"ies &sed t Gul >umpur* Mlysi# e"ti"( (roup hs its prese"%e i" di'ersi!ied !ields like Bower* Bl"ttio"s* Bper B%k(i"(* E"terti"me"t* Resorts - otels* Broperty de'elopme"t* :ruise li"ers* e :ommer%e* Oil "d s# e"ti"( (roup is Mlysi?s ledi"( multi"tio"l %orportio" "d o"e o! Asi?s &est4m"(ed %omp"ies with o'er .*000 employees (lo&lly# $he (roup is re"ow"ed !or its stro"( m"(eme"t ledership* !i""%il prude"%e "d sou"d i"'estme"t dis%ipli"e# $he %om&i"ed mrket %pitli+tio" o! the (roup is &out U C &illio"# $he operti"( re'e"ue !or the (roup !or the yer 2007 is U 1#. &illio"# e"ti"( >"%o Bower 8I"di9 Bri'te >imited hs e"tered i" to 1 yers Opertio"s "d Mi"te""%e A(reeme"t with >"%o Go"dplli Bower Bri'te >imited* who re the ow"ers o! the .@ M< (s !ired %om&i"ed %y%le power pl"t t ko"dplli# e"ti"( >"%o Bower 8I"di9 Bri'te >imited hs its re(istered o!!i%e t >"%o Go"dplli Bower Bl"t* Go"dplli IA* "d Grish" istri%t#
20
'%NCO (ROUP PRO3I'E >AN:O roup* hed5urtered i" yder&d* I"di is o"e o! the ledi"( &usi"ess houses i" outh I"di# It hs " sset &se o! U 30 millio" "d tur"o'er o! more th" U .00 millio"# AN:O is hedi"( !or %p%ity o! 200 M< "d " sset &se o! U 2# &illio" &y the yer 2010# >"%o is well4di'ersi!ied (roup with %ti'ities like power (e"ertio"* e"(i"eeri"( "d %o"stru%tio"* m"u!%turi"(* I"!ormtio" te%h"olo(y 8I$9* "d property de'elopme"t# >"%o (roup is stri'i"( to Empower* E"&le "d E"ri%h prt"er* &usi"ess sso%ites "d to &e the %hose" 'ehi%le !or (rowth !or stkeholders "d sour%e o! i"spirtio" to the so%iety# $he (roup is re%o("i+ed s ledi"( plyer i" the I"di" e%o"omi% s%e"rio with opertio" i" UA "d UG# >AN:O lso hs prese"%e i" :i'il :o"stru%tio"* Broperty e'elopme"t* M"u!%turi"( o! Bi( Iro" - u%tile Iro" pu" Bipes "d I"!ormtio" $e%h"olo(y# >AN:O?s o'erll (rowth is ttri&uted to its te%h"i%l* :ommer%il "d m"(eril skills* whi%h is ppre%ited &y its I"ter"tio"l prt"ers :ommo"welth e'elopme"t :orportio" 8A:$I/lo&ules9 o! the U"ited Gi"(dom* e"ti"( roup o! Mlysi "d oos" o! Gore#
21
OBJECTI-ES
1# $o pro'ide &si% me"ities !or the rurl poor# 2# $o s'e rts o! histori%l rele'"%e whi%h re o" the 'er(e o! exti"%tio"# .# $o de'elop i"te(rted pro(rmmes !or the di!!ere"tly &led# 3# $o e"%our(e !resh tle"t i" the re o! sports# # $o tke up other hum"itri" %ti'ities# # the su&st"til prt o! the power re5uireme"t# ;U%'IT4 PO'IC4
22
COMP%N4 "I(" 'I("TS
1# .@#133 M< %om&i"ed %y%le power pl"t u"der &uild operte ow" rr"(eme"t with the stte (o'er"me"t# 2# $he si"(le lr(est i"'estme"t i" A"dhr Brdesh* &y "y A"dhr Brdesh &sed (roup# .# Bower pur%hse (reeme"t !irmed with AB $RAN:O !or 1 yers# 3# E%o !rie"dly* dheri"( to hi(hest st"drds o! s!ety "d %o"'ersio" o! "turl resour%es# # $he !irst pro)e%t %lered &y :e"trl Ele%tri%ity Authority 8:EA9 u"der the i"ter"tio"l %ompetiti'e 6iddi"( 8I:69 route !or power pro)e%ts i" I"di# # $he !irst o! the I:6 power pro)e%ts i" I"di to %hie'e !i""%il %losure "d %omplete %o"stru%tio" i" shortest possi&le time# 7# O"e o! the lowest e'%utio"s %osts to AB $RAN:O# @# $he !irst pri'te se%tor power pro)e%t to re%ei'e dis&urseme"t o! !i""%e !rom Bower Ki""%e :orportio" limited* I"di# C# $he shortest %o"stru%tio" time i" the pri'te se%tor 10#>o%tio" d'"t(es i"%lude; 9 Broximity to Ntio"l "d stte i(hwy &9 =ust 1# km !rom !uel stor(e !%ility o! i"dust" Betroleum :orportio" limited# %9 :lose to the ri'er Grish" "d up strem o! the Brksm 6rr(e e"suri"( pere""il wter supply# d9 Ad)%e"t to 220 k
2.
C$a3!'% 6 4
R ATIO A NALSIS
23
R%TIO %N%'4SIS 3IN%NCI%' %N%'4SIS
Ki""%il "lysis is the pro%ess o! ide"ti!yi"( the !i""%il stre"(ths "d wek"esses o! the !irm "d est&lishi"( reltio"ship &etwee" the items o! the &l"%e sheet "d pro!it - loss %%ou"t# Ki""%il rtio "lysis is the %l%ultio" "d %ompriso" o! rtios* whi%h re deri'ed !rom the i"!ormtio" i" %omp"y?s !i""%il stteme"ts# $he le'el "d histori%l tre"ds o! these rtios %" &e used to mke i"!ere"%es &out %omp"y?s !i""%il %o"ditio"* its opertio"s "d ttr%ti'e"ess s " i"'estme"t# $he i"!ormtio" i" the stteme"ts is used &y •
$rde %reditors* to ide"ti!y the !irm?s &ility to meet their %lims i#e# li5uidity positio" o! the %omp"y#
•
I"'estors* to k"ow &out the prese"t "d !uture pro!it&ility o! the %omp"y "d its !i""%il stru%ture#
•
M"(eme"t* i" e'ery spe%t o! the !i""%il "lysis# It is the respo"si&ility o! the m"(eme"t to mi"ti" sou"d !i""%il %o"ditio" i" the %omp"y#
2
R%TIO %N%'4SIS
$he term ,RtioF re!ers to the "umeri%l "d 5u"titti'e reltio"ship &etwee" two items or 'ri&les# $his reltio"ship %" &e exposed s •
Ber%e"t(es
•
Kr%tio"s
•
Broportio" o! "um&ers Rtio "lysis is de!i"ed s the systemti% use o! the rtio to
i"terpret the !i""%il stteme"ts# o tht the stre"(ths "d wek"esses o! !irm* s well s its histori%l per!orm"%e "d %urre"t !i""%il %o"ditio" %" &e determi"ed# Rtio re!le%ts 5u"titti'e reltio"ship helps to !orm 5u"titti'e )ud(me"t#
STEPS IN R%TIO %N%'4SIS •
$he !irst tsk o! the !i""%il "lysis is to sele%t the i"!ormtio" rele'"t to the de%isio" u"der %o"sidertio" !rom the stteme"ts "d %l%ultes pproprite rtios#
•
$o %ompre the %l%ulted rtios with the rtios o! the sme !irm relti"( to the pst or with the i"dustry rtios# It !%ilittes i" ssessi"( su%%ess or !ilure o! the !irm#
2
•
$hird step is to i"terprettio"* drwi"( o! i"!ere"%es "d report writi"( %o"%lusio"s re drw" !ter %ompriso" i" the shpe o! report or re%omme"ded %ourses o! %tio"#
B%SIS OR ST%ND%RDS O3 COMP%RISON
Rtios re relti'e !i(ures re!le%ti"( the reltio" &etwee" 'ri&les# $hey e"&le "lyst to drw %o"%lusio"s re(rdi"( !i""%il opertio"s# $hey use o! rtios s tool o! !i""%il "lysis i"'ol'es the %ompriso" with relted !%ts# $his is the &sis o! rtio "lysis# $he &sis o! rtio "lysis is o! !our types# •
Bst rtios* %l%ulted !rom pst !i""%il stteme"ts o! the !irm#
•
:ompetitor?s rtio* o! the some most pro(ressi'e "d su%%ess!ul %ompetitor !irm t the sme poi"t o! time#
•
I"dustry rtio* the i"dustry rtios to whi%h the !irm &elo"(s to
•
Bro)e%ted rtios* rtios o! the !uture de'eloped !rom the pro)e%ted or pro !orm !i""%il stteme"ts
27
N%TURE O3 R%TIO %N%'4SIS
Rtio "lysis is te%h"i5ue o! "lysis "d i"terprettio" o! !i""%il stteme"ts# It is the pro%ess o! est&lishi"( "d i"terpreti"( 'rious rtios !or helpi"( i" mki"( %erti" de%isio"s# It is o"ly me"s o! u"derst"di"( o! !i""%il stre"(ths "d wek"esses o! !irm# $here re "um&er o! rtios whi%h %" &e %l%ulted !rom the i"!ormtio" (i'e" i" the !i""%il stteme"ts* &ut the "lyst hs to sele%t the pproprite dt "d %l%ulte o"ly !ew pproprite rtios# $he !ollowi"( re the !our steps i"'ol'ed i" the rtio "lysis# •
ele%tio" o! rele'"t dt !rom the !i""%il stteme"ts depe"di"( upo" the o&)e%ti'e o! the "lysis#
•
:l%ultio" o! pproprite rtios !rom the &o'e dt#
•
:ompriso" o! the %l%ulted rtios with the rtios o! the sme !irm i" the pst* or the rtios de'eloped !rom pro)e%ted !i""%il stteme"ts or the rtios o! some other !irms or the %ompriso" with rtios o! the i"dustry to whi%h the !irm &elo"(s#
to i"terpret rtios# $he i"terprettio" o! rtios %" &e mde i" the !ollowi"( wys# •
i"(le &solute rtio
•
roup o! rtios
•
istori%l %ompriso"
•
Bro)e%ted rtios
•
I"ter4!irm %ompriso"
(UIDE'INES OR PREC%UTIONS 3OR USE O3 R%TIOS
$he %l%ultio" o! rtios my "ot &e di!!i%ult tsk &ut their use is "ot esy# Kollowi"( (uideli"es or !%tors my &e kept i" mi"d while i"terpreti"( 'rious rtios re •
A%%ur%y o! !i""%il stteme"ts
•
O&)e%ti'e or purpose o! "lysis
•
ele%tio" o! rtios
•
Use o! st"drds
•
:li&er o! the "lysis
2C
IMPORT%NCE O3 R%TIO %N%'4SIS •
Aid to mesure (e"erl e!!i%ie"%y
•
Aid to mesure !i""%il sol'e"%y
•
Aid i" !ore%sti"( "d pl""i"(
•
K%ilitte de%isio" mki"(
•
Aid i" %orre%ti'e %tio"
•
Aid i" i"tr4!irm %ompriso"
•
A%t s (ood %ommu"i%tio"
•
E'lutio" o! e!!i%ie"%y
•
E!!e%ti'e tool
'IMIT%TIONS O3 R%TIO %N%'4SIS •
i!!ere"%es i" de!i"itio"s
•
>imittio"s o! %%ou"ti"( re%ords
•
>%k o! proper st"drds
•
No llow"%es !or pri%e le'el %h"(es
.0
•
:h"(es i" %%ou"ti"( pro%edures
•
Ju"titti'e !%tors re i("ored
•
>imited use o! si"(le rtio
•
6%k(rou"d is o'er looked
•
>imited use
•
Berso"l &is
C'%SSI3IC%TIONS O3 R%TIOS
$he use o! rtio "lysis is "ot %o"!i"ed to !i""%il m"(er o"ly# $here re di!!ere"t prties i"terested i" the rtio "lysis !or k"owi"( the !i""%il positio" o! !irm !or di!!ere"t purposes# Hrious %%ou"ti"( rtios %" &e %lssi!ied s !ollows; 1# $rditio"l :lssi!i%tio" 2# Ku"%tio"l :lssi!i%tio" .# i("i!i%"%e rtios
1< Traitional Cla**ification
It i"%ludes the !ollowi"(# •
6l"%e sheet 8or9 positio" stteme"t rtio; $hey del with the reltio"ship &etwee" two &l"%e sheet items* e#(# the rtio o! %urre"t
.1
ssets to %urre"t li&ilities et%#* &oth the items must* howe'er* perti" to the sme &l"%e sheet# •
Bro!it - loss %%ou"t 8or9 re'e"ue stteme"t rtios; $hese rtios del with the reltio"ship &etwee" two pro!it - loss %%ou"t items* e#(# the rtio o! (ross pro!it to sles et%#*
•
:omposite 8or9 i"ter stteme"t rtios; $hese rtios exhi&it the reltio" &etwee" pro!it - loss %%ou"t or i"%ome stteme"t item "d &l"%e sheet items* e#(# sto%k tur"o'er rtio* or the rtio o! totl ssets to sles#
ome rtios re import"t th" others "d the !irm my %lssi!y them s primry "d se%o"dry rtios# $he primry rtio is o"e* whi%h is o! the prime import"%e to %o"%er"# $he other rtios tht support the primry rtio re %lled se%o"dry rtios#
IN T"E -IEW O3 3UNCTION%' C'%SSI3IC%TION T"E R%TIOS %RE
As rule* the %urre"t rtio with 2;1 8or9 more is %o"sidered s stis!%tory positio" o! the !irm# "%o roup o! %omp"y !or %o"sult"%y dditio"l ser'i%es# $he su"dry de&tors h'e i"%resed due to the i"%rese to %orporte txes# I" the yer 200* the %sh "d &"k &l"%e is redu%ed &e%use tht is used !or pyme"t o! di'ide"ds# I" the yer 2007* the lo"s "d d'"%es i"%lude m)orly the d'"%es to employees "d deposits to
.
(o'er"me"t# $he lo"s "d d'"%es redu%ed &e%use the employees set o!! their %lims# $he other %urre"t ssets i"%lude the i"terest tti"ed !rom the deposits# $he deposits redu%ed due to the de%lrtio" o! di'ide"ds# o the other %urre"t ssets de%resed# $he hu(e i"%rese i" su"dry de&tors resulted " i"%rese i" the rtio* whi%h is &o'e the &e"%hmrk le'el o! 2;1 whi%h shows the %om!ort&le positio" o! the !irm#
(R%P"IC%' REPRESENT%TION
.
2<
;UIC& R%TIO 8%!o#nt in R*<9 ;#ic$ Ratio 'a%
<(*5= A))'!)
C(%%'n! L*a;*&*!*')
Ra!*+
200=
@*73*11
7*C0.*C2
7#31
200>
2*370*..
.1*@@3*1
1#
200?
C*@@.*2@
1*0*20
3#.
200@
@C*3..*C
37*117*1CC
1#C
200A
11*3.1*@@
.0*2*1
.#@1
Interpretation
.7
Jui%k ssets re those ssets whi%h %" &e %o"'erted i"to %sh with i" short period o! time* sy to six mo"ths# o* here the su"dry de&tors whi%h re with the lo"( period does "ot i"%lude i" the 5ui%k ssets# :ompre with 200* the Jui%k rtio is i"%resed &e%use the su"dry de&tors re i"%resed due to the i"%rese i" the %orporte tx "d !or tht the pro'isio" %reted is lso i"%resed# o* the rtio is lso i"%resed with the 200#
(R%P"IC%' REPRESENT%TION
.@
=<
%BOSU'TE 'I;UIDIT4 R%TIO 8%!o#nt in R*<9 %5*ol#te Ca*h Ratio 'a%
A;)+&(!' L*>(*d A))'!)
C(%%'n! L*a;*&*!*')
Ra!*+
200=
.1*003*027
7*C0.*C2
.#C2
200>
10*@C*77@
.1*@@3*1
0#.3
200?
.C*3*32
1*0*20
2#3
200@
.*@0*@2
37*117*1CC
1#13
200A
.*3C*070
.0*2*1
1#1@
Interpretation
.C
$he %urre"t ssets whi%h re redy i" the !orm o! %sh re %o"sidered s &solute li5uid ssets# ere* the %sh "d &"k &l"%e "d the i"terest o" !ixed ssts re &solute li5uid ssets# I" the yer 200* the %sh "d &"k &l"%e is de%resed due to de%rese i" the deposits "d the %urre"t li&ilities re lso redu%ed &e%use o! the pyme"t o! di'ide"d# $ht %uses sli(ht i"%rese i" the %urre"t yer?s rtio#
30
(R%P"IC%' REPRESENT%TION
31
'E-ER
%(E R%TIOS >< PROPRIETOR4 R%TIO 8%!o#nt in R*<9 Proprietor/ Ratio 'a%
S$a%' H+&d'%) 9(nd)
T+!a& A))'!)
Ra!*+
200=
7*7C*21C
7@*72*171
0#@
200>
.*.01*@.3
@@*3.@*107
0#
200?
70*2.1*01
@C*1@*.C1
0#7C
200@
*37.*2
10*.@*201
0#.
200A
C7*00*01.
12C*@0*102
0#7
32
Interpretation
$he proprietry rtio est&lishes the reltio"ship &etwee" shreholders !u"ds to totl ssets# It determi"es the lo"(4term sol'e"%y o! the !irm# $his rtio i"di%tes the exte"t to whi%h the ssets o! the %omp"y %" &e lost without !!e%ti"( the i"terest o! the %omp"y# $here is "o i"%rese i" the %pitl !rom the yer2003# $he shre holder?s !u"ds i"%lude %pitl "d reser'es "d surplus# $he reser'es "d surplus is i"%resed due to the i"%rese i" &l"%e i" pro!it "d loss %%ou"t* whi%h is %used &y the i"%rese o! i"%ome !rom ser'i%es# $otl ssets* i"%ludes !ixed "d %urre"t ssets# $he !ixed ssets re redu%ed &e%use o! the depre%itio" "d there re "o m)or i"%reme"ts i" the !ixed ssets# $he %urre"t ssets re i"%resed %ompred with the yer 200# $otl ssets re lso i"%resed th" pre%ious yer* whi%h resulted " i"%rese i" the rtio th" older#
(R%P"IC%' REPRESENT%TION
3.
%CTI-
IT4 R%TIOS ?< WOR&IN( C%PIT%' TURNO-ER R%TIO 8%!o#nt in R*<9 Wor$in+ Capital T#rno.er Ratio 'a% 200= 200> 200? 200@ 200A
I"%ome !rom ser'i%es is (retly i"%resed due to the extr i"'oi%e !or Opertio"s - Mi"te""%e !ee "d the worki"( %pitl is lso i"%resed (reter due to the i"%rese i" !rom ser'i%es &e%use the hu(e i"%rese i" %urre"t ssets# $he i"%ome !rom ser'i%es is rised "d the %urre"t ssets re lso rised to(ether resulted i" the de%rese o! the rtio o! 2007 %ompred with 200#
3
(R%P"IC%' REPRESENT%TION
3
@<
3IED %SSETS TURNO-ER R%TIO 8%!o#nt in R*<9 3ie %**et* T#rno.er Ratio 'a%
In5+/' 9%+/ S'%*5')
N'! 9*?'d A))'!)
Ra!*+
200=
.*.0C*@.3
2@*@.3*.17
1#2
200>
.*@CC*0@3
2C*@*27C
1#@2
200?
72*72@*7C
17*1.7*.10
3#23
200@
*0*3C
1*0*CC.
.#C
200A
C*3*C02
13*1.*0.3
#@2
Interpretation
37
Kixed ssets re used i" the &usi"ess !or produ%i"( the (oods to &e sold# $his rtio shows the !irm?s &ility i" (e"erti"( sles !rom ll !i""%il resour%es %ommitted to totl ssets# $he rtio i"di%tes the %%ou"t o! o"e rupee i"'estme"t i" !ixed ssets# $he i"%ome !rom ser'i%es is (reterly i"%resed i" the %urre"t yer due to the i"%rese i" the Opertio"s - Mi"te""%e !ee due to the i"%rese i" extr i"'oi%e "d the "et !ixed ssets re redu%ed &e%use o! the i"%resed %hr(e o! depre%itio"# Ki"lly* tht e!!e%ted hu(e i"%rese i" the rtio %ompred with the pre'ious yer?s rtio#
3@
(R%P"IC%' REPRSENT%TION
3C
A<
C%PIT%' TURNO-ER R%TIO 8%!o#nt in R*<9 Capital T#rno.er Ratio 'a%
$his is "other rtio to )ud(e the e!!i%ie"%y "d e!!e%ti'e"ess o! the %omp"y like pro!it&ility rtio# $he i"%ome !rom ser'i%es is (reterly i"%resed %ompred with the pre'ious yer "d the totl %pitl employed i"%ludes %pitl "d reser'es - surplus# ue to hu(e i"%rese i" the "et pro!it the %pitl employed is lso i"%resed lo"( with i"%ome !rom ser'i%es# 6oth re e!!e%ted i" the i"%reme"t o! the rtio o! %urre"t yer#
1
(R%P"IC%' REPRESENT%TION
2
<
CURRENT %SSETS TO 3IED %SSETS R%TIO 8%!o#nt in R*<9 C#rrent %**et* To 3ie %**et* Ratio 'a% 200= 200> 200? 200@ 200A
:urre"t ssets re i"%resed due to the i"%rese i" the su"dry de&tors "d the "et !ixed ssets o! the !irm re de%resed due to the %hr(e o! depre%itio" "d there is "o m)or i"%reme"t i" the !ixed ssets# $he i"%reme"t i" %urre"t ssets "d the de%rese i" !ixed ssets resulted " i"%rese i" the rtio %ompred with the pre'ious yer
3
(R%P"IC%' REPRESENT%TION
PRO3I
T%BI'IT4 R%TIOS (ENER%' PRO3IT%BI'IT4 R%TIOS < NET PRO3IT R%TIO 8%!o#nt in R*<9 Net Profit Ratio 'a%
N'! P%+,*! A,!'% Ta?
In5+/' ,%+/ S'%*5')
Ra!*+
200=
21*12.*373
.*0.C*@.3
0#C
200>
1*12*C32
.*@CC*0@3
0#.0
200?
1*C2C*227
72*72@*7C
0#2.
200@
1@*2C*@0
*0*3C
0#..
200A
30*@*.C
C*3*C02
0#32
Interpretation
$he "et pro!it rtio is the o'erll mesure o! the !irm?s &ility to tur" e%h rupee o! i"%ome !rom ser'i%es i" "et pro!it# I! the "et mr(i" is i"de5ute the !irm will !il to %hie'e retur" o" shreholder?s !u"ds# i(h "et pro!it rtio will help the !irm ser'i%e i" the !ll o! i"%ome !rom ser'i%es* rise i" %ost o! produ%tio" or de%li"i"( dem"d# $he "et pro!it is i"%resed &e%use the i"%ome !rom ser'i%es is i"%resed# $he i"%reme"t resulted sli(ht i"%rese i" 2007 rtio %ompred with the yer 200#
7
(R%P"IC%' REPRESENT%TION
@
10< OPER%TIN( PRO3IT 8%!o#nt in R*<9 Operatin+ Profit 'a%
$he operti"( pro!it rtio is used to mesure the reltio"ship &etwee" "et pro!its "d sles o! !irm# epe"di"( o" the %o"%ept* it will de%ide# $he operti"( pro!it rtio is i"%resed %ompred with the lst yer# $he er"i"(s re i"%resed due to the i"%rese i" the i"%ome !rom ser'i%es &e%use o! Opertio"s - Mi"te""%e !ee# o* the rtio is i"%resed sli(htly %ompred with the pre'ious yer#
C
(R%P"IC%' REPRESENT%TION
0
11< RETURN ON TOT%' %SSETS R%TIO 8%!o#nt in R*<9 Ret#rn on Total %**et* Ratio 'a%
N'! P%+,*! A,!'% Ta?
T+!a& A))'!)
Ra!*+
200=
21*12.*373
7@*72*171
0#27
200>
1*12*C32
@@*3.@*107
0#1@
200?
1*C2C*227
@C*1@*.C1
0#1C
200@
1@*2C*@0
10*.@*201
0#17
200A
30*@*.C
12C*@0*102
0#.1
Interpretation
$his is the rtio &etwee" "et pro!it "d totl ssets# $he rtio i"di%tes the retur" o" totl ssets i" the !orm o! pro!its# $he "et pro!it is i"%resed i" the %urre"t yer &e%use o! the i"%reme"t i" the i"%ome !rom ser'i%es due to the i"%rese i" Opertio"s Mi"te""%e !ee# $he !ixed ssets re redu%ed due to the %hr(e o! depre%itio" "d "o m)or i"%reme"ts i" !ixed ssets &ut the %urre"t ssets re i"%resed &e%use o! su"dry de&tors "d tht e!!e%ts " i"%rese i" the rtio %ompred with the lst yer i#e# 200#
1
(R%P"IC%' REPRESENT%TION
2
12<
RESER-ES : SURP'US TO C%PIT%' R%TIO 8%!o#nt in R*<9 Re*er.e* : S#rpl#* To Capital Ratio 4ear 200= 200> 200? 200@ 200A
$he rtio is used to re'el the poli%y pursued &y the %omp"y 'ery hi(h rtio i"di%tes %o"ser'ti'e di'ide"d poli%y "d 'i%e4'ers# i(her the rtio &etter will &e the positio"# $he reser'es - surplus is de%resed i" the yer 200* due to the pyme"t o! di'ide"ds "d i" the yer 2007 the pro!it is i"%resed# 6ut the %pitl is remi"i"( %o"st"t !rom the yer 2003# o the i"%rese i" the reser'es - surplus %used (reter i"%rese i" the %urre"t yer?s rtio %ompred with the older#
3
(R%P"IC%' REPRESENT%TION
O-ER
%'' PRO3IT%BI'IT4 R%TIOS
1=< E%RNIN(S PER S"%RE 8%!o#nt in R*<9 Earnin+* Per Share 'a% 200= 200> 200? 200@ 200A
Er"i"(s per shre rtio re used to !i"d out the retur" tht the shreholder?s er" !rom their shres# A!ter %hr(i"( depre%itio" "d !ter pyme"t o! tx* the remi"i"( mou"t will &e distri&uted &y ll the shreholders# Net pro!it !ter tx is i"%resed due to the hu(e i"%rese i" the i"%ome !rom ser'i%es# $ht is the mou"t whi%h is 'il&le to the shreholders to tke# $here re 1*@71*C2@ shres o! Rs#10/4 e%h# $he shre %pitl is %o"st"t !rom the yer 2003# ue to the hu(e i"%rese i" "et pro!it the er"i"(s per shre is (reterly i"%resed i" 2007#
7
(R%P"IC%' REPRESENT%TION
@
1><
PRICE E%RNIN(S 8PFE9 R%TIO 8%!o#nt in R*<9 Price Earnin+ 8PFE9 Ratio 'a%
Ma%='! P%*5' P'% S$a%'
200= 200> 200? 200@ 200A
Ea%n*n) P'% S$a%'
.2#3 2@#37 .7#2 .0#17 1#@
Interpretation
C
101# @#1 C#03 C#7 21#@
Ra!*+
0#.2 .#.0 3#1 .#0C 2#.C
$he rtio is %l%ulted to mke " estimte o! ppli%tio" i" the 'lue o! shre o! %omp"y# $he mrket pri%e per shre is i"%resed due to the i"%rese i" the reser'es - surplus# $he er"i"(s per shre re lso i"%resed (reterly %ompred with the lst yer &e%use o! i"%rese i" the "et pro!it# o* the rtio is de%resed %ompred with the pre'ious yer#
70
(R%P"IC%' REPRESENT%TION
71
1?< RETURN ON IN-ESTMENT 8%!o#nt in R*<9 Ret#rn on In.e*t!ent 'a%
N'! P%+,*! A,!'% Ta?
S$a%' H+&d'%) 9(nd
Ra!*+
200=
21*12.*373
7*7C*21C
0#.1
200>
1*12*C32
.*.01*@.3
0#.
200?
1*C2C*227
70*2.1*01
0#23
200@
1@*2C*@0
*37.*2
0#.2
200A
30*@*.C
C7*00*01.
0#32
Interpretation
$his is the rtio &etwee" "et pro!its "d shreholders !u"ds# $he rtio is (e"erlly %l%ulted s per%e"t(e multiplyi"( with 100# $he "et pro!it is i"%resed due to the i"%rese i" the i"%ome !rom ser'i%es "t the shreholders !u"ds re i"%resed &e%use o! reser'e surplus# o* the rtio is i"%resed i" the %urre"t yer#
$he proprietory rtio hs show" !lu%tuti"( tre"d# $he proprietory rtio is i"%resed %ompred with the lst yer# o* the lo"( term sol'e"%y o! the !irm is i"%resed#
#
$he worki"( %pitl i"%resed !rom 0#72 to 1#1. i" the yer 200. 07#
#
$he !ixed ssets tur"o'er rtio is i" i"%resi"( tre"d !rom the yer 200. 07 81#2* 1#@2* 3#23* .#C* "d #@29# It i"di%tes tht the %omp"y is e!!i%ie"tly utili+i"( the !ixed ssets#
7#
$he %pitl tur"o'er rtio is i"%resed !orm 200. 0 80#C@* 1#01* "d 1#039 "d de%resed i" 200 to 0#C@# It i"%resed i" the %urre"t yer s 1#00#
7
@#
$he %urre"t ssets to !ixed ssets rtio is i"%resi"( (rdully !rom 200. 07 s 2#C.* .#73* 3#20* #07 "d @#17# It shows tht the %urre"t ssets re i"%resed th" !ixed ssets#
C#
$he "et pro!it rtio is i" !lu%tutio" m""er# It i"%resed i" the %urre"t yer %ompred with the pre'ious yer !orm 0#.. to 0#32#
10#
$he "et pro!it is i"%resed (reterly i" the %urre"t yer# o the retur" o" totl ssets rtio is i"%resed !rom 0#17 to 0#.1#
11#
$he Reser'es "d urplus to :pitl rtio is i"%resed to 3#1C !rom 2#02# $he %pitl is %o"st"t*
&ut the reser'es "d surplus is i"%resed i" the %urre"t yer# 12#
$he er"i"(s per shre ws 'ery hi(h i" the yer 200. i#e#* 101## $ht is de%resed i" the !ollowi"( yers &e%use "um&er o! e5uity shres re i"%resed "d the "et pro!it is de%resed# I" the %urre"t yer the "et pro!it is i"%resed due to the i"%rese i" operti"( "d mi"te""%e !ee# o the er"i"(s
1 A!ter the "lysis o! Ki""%il tteme"ts* the %omp"y sttus is &etter* &e%use the Net worki"( %pitl o! the %omp"y is dou&led !rom the lst yer?s positio"# 2 $he %omp"y pro!its re hu(e i" the %urre"t yerL it is &etter to de%lre the di'ide"d to shreholders# . $he %omp"y is utilisi"( the !ixed ssets* whi%h m)orly help to the (rowth o! the or("istio"# $he %omp"y should mi"ti" tht per!e%tly# 3 $he %omp"y !ixed deposits re rised !rom the i"%eptio"* it (i'es the other i"%ome i#e#* I"terest o" !ixed deposits#
CONC'USION
$he %omp"y?s o'erll positio" is t (ood positio"# Brti%ulrly the %urre"t yer?s positio" is well due to rise i" the pro!it le'el !rom the lst yer positio"# It is &etter !or the or("i+tio" to di'ersi!y the !u"ds to di!!ere"t se%tors i" the prese"t mrket s%e"rio#
7C
BIB'IO(R%P"4
RE33ERED BOO&S •
KINAN:IA> MANAEMEN$ 4 I# M# BANEY
•
MANAEMEN$ A::OUN$AN:Y 4 BI>>AI - 6AAHA$I
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MANAEMEN$ A::OUN$IN ARMA - UB$A
INTERNET SITE www#er%p#or( www#wikipedi#%om
@0
www#"wd#(o'#i" %PPENDI Balance *heet a* on =1 *t March 200A 8%!o#nt in R*<9 Partic#lar*
