Analysis of Financial Statement - (WWW - Students3k.com)

More MBA Projects available at : STUDENTS3K.
COM
CHAPTER-I
INTRODUCTION AND DESIGN OF THE STUDY
INTRODUCTION
FINANCIAL STATEMENT ANALYSIS
Financial statement is an organized collection of data according to logical

and consisted accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business form. It may reveal a series of activities over
a given period of time, as in the case of an income statement.
The focus of the financial analysis is on key figures in the financial

statements and the significant relationships the exists between them. The analysis
of financial statements is a process of evaluating relationships between component
parts of financial statements to obtain a better understanding of the firms position
and performance.
Financial Analysis:
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by property establishing relationships between the item of
the balance sheet and the profit and loss account. Financial analysis can be
undertaken by management of the firm, or by parts outside the firm.
WWW.STUDENTS3K.COM
More MBA Projects available at : STUDENTS3K.COM
USERS OF FINANCIAL ANALYSIS:
Management
Trade creditors
Investors
Government
Others
Management:
Management of the firm would be interested in every aspect of the financial
analysis. It is their overall responsibility to see that the resources of the firm are
used most effectively and efficiently and that the firms condition is sound.
Trade Creditors:
The trade creditors are to be paid in a short term solvency of the concern. The
current ratio and acid test ratio will enable the creditors to assets the short term
solvency position of the concern.
Investors:
The Investors are interested their money in the firms shares, are not
concerned about the firms earnings. They restore more confidence in those firms
that show steady growth in earnings. As such, they concentrate on the analysis of
the firms present and future profitability. They are also interested in the firms
financial structure to the extent it influences the firms earning ability and risk.
Government:
The financial statements are used to asses tax liability of business
enterprise. These statements enable the government to find out whether the
business is following various regulations or not.
2
WWW.STUDENTS3K.COM
Others:
Trade associations, stock exchange and public at may also analyze the
financial statements to judge the financial position of different concerns.
Definition
According to Myres Financial statement analysis is largely is a study of
the Relationship among the various financial factors in a business as disclose by a
single set of statement and a study of the trend of these factors as show in a series
of statements.
Financial statements are indicators of the two significant factors:
1. Profitability
2. Financial Soundness
Analysis and interpretation of financial statements therefore refers to such a
treatment of the information contained in the income statement and the balance
sheet so as to afford full diagnosis of the profitability and financial soundness of
the business.
The term analysis means methodical classification of the data given in the
financial statements. The term interpretation means explaining the meaning
and significance of the data so simplified.
Types of financial Analysis
Financial analysis can be classified in to different categories depending
upon.
(a) The material used
(b) The modus operand of analysis
On the basis of materials used. According to this basis financial analysis can be of
two types.
3
WWW.STUDENTS3K.COM
a) External Analysis
Those who are outsider for the business do this analysis. The outsiders
include investors, credit agencies. government agencies and other creditors who
have no access to the internal records of the company. These persons mainly
depends upon, the published financial statements. Their analysis serves only a
limited purpose. The position of this analysis has improved in recent times on
account of increased governmental control over companies and governmental
regulations regulations requiring more detailed disclosures of information by the
companies in their financial statements.
b) Internal analysis:
This analysis is done by persons who have access to the books of account
and other information to the books of accounts related to the business., Executives
and employees of the organization or by officers appointed for this purpose by the
government or the court under powers vested in them can therefore do such an
analysis. The analysis in done depending upon the objective to be active
depending upon the objective to be achieved through this analysis.
On the basis of modus operandi according to this, financial analysis can
also be two types.
a) Horizontal Analysis
In case of this type of analysis financial statements for a number of years
are reviewed and analyzed. The current years figures are compared with the
standard or base year. The analysis statement usually contains figures for too or
more years and the changes are shown regarding each item from the base year
usually in the form of percentages. such as analysis given the management
4
WWW.STUDENTS3K.COM
considerable insight into levels and areas of strength and weakness. Since this
type of analysis is based on the date from year to year rather than on one date, it is
also termed as Dynamic Analysis?
b) Vertical Analysis:
In case of this type of analysis a study is made of the quantitative
relationship of the various items in the financial statements on a particular type,
such an analysis is useful in comparing the performance of servral companies in
the same group, or divisions or departments in the same company. Since this
analysis depends on the data for one period, is nor very conductive financial
position. It is also called Static Analysis as it frequently used to ratios developed
on one date or for one accounting period. Tools or Techniques used for Analysis:
1. Ratio Analysis
2. Method of least Squares (Trend Values)
3. Comparative statement Analysis.
These are explained in bring as follows.
1. Ratio Analysis:
Ratio Analysis is widely used tool of financial analysis. It is defined as the
systematic use of ratio to interpret the financial statements so that the strength and
weakness of a firm as well as its historical performance and current financial
condition can be determined. The term ratio refers to the numerical or quantitative
relationship between two items/ Variable. This relation can be expressed as.
a. Percentages
b. Fractions
c. Proportion of numbers.
Accounting ratios showed the relationship in mathematical terms between
two interrelated accounting figures. This is the most important tool available to
financial analysis for their work.
5
WWW.STUDENTS3K.COM
Ratio analysis is a process of identifying the financial strengths and

weakness of the firm. This may be accomplished either through a trend analysis of
the firms ratios over a period of time or through a comparison of the firms ratios
with its nearest competitors and with the industry averages. The four most
important financial dimensions which a firm would like to analyze are: liquidity,
Leverage, Activity and Profitability.
Nature of Ratio Analysis:
A Financial ratio is a relationship between tow accounting numbers. ratios
help to make a qualitative judgment about the firms financial performance.
Financial Ratio:
Financial Ratio is a relationship between two financial variables. It helps to
ascertain the financial condition of a firm.
Types of financial Ratios:
Liquidity ratios
Leverages ratios
Activity ratios
Profitability ratios
Liquidity Ratio:
Liquidity Ratio measure the firms ability to meet current obligations, and
are calculated by establishing relationships between current assets and current
liabilities.
Leverage ratio:
Leverage ratios measures the proportion of outsiders capital in financing
the firms assets, and is calculated by establishing relationships between borrowed
capital and equity capital.
Activity Ratio:
WWW.STUDENTS3K.COM
Activity ratio reflects the firms efficiency in utilizing its assets in

generating sales and is calculated by establishing relationships between sales and
assets.
Profitability Ratio:
Profitability ratios measure the overall performance of the firm by deterring
the effectiveness of the firm ingenerating profit, and are calculated by establishing
relationships between profit figures on the one hard, and sales and assets on the
other.
Utility of Ratio Analysis
Assessment of the firms financial conditions and capabilities.
Diagnosis of the firs problems, weakness and strengths.
Credit analysis
Comparative analysis
Time series analysis
Cautions in using ratio analysis
Standards of comparisons
Company differences
Prices level
Different definition
Changing situations
Past data
Standard of Comparison:
Time series analysis
Inter-firm analysis
Industry analysis
Preformed financial statement analysis

Advantages of Ratio Analysis:
1. It helps in analysis of the situation i.e. analysis on the financial situation and
performance.
2. Inter-firm and Inra-firm comparison is both possible on the basis of accounting
ratio
3. Accounting Ratio not only indicates the present position but they also indicate
the cause leading up to the position of a large extent
7
WWW.STUDENTS3K.COM
4. It helps in obtaining best result when ratios for a number of years are put in
tabular form so that the figure for one year can be easily compoared with those
of other year
5. It indicates the trend of the change, which helps in preparation of estimates for
the future.
6. They provide simplicity to the complex accounting information presented by
the financial statements
7. They are very helpful to outsiders as well as for internal management
8. It is very helpful to internal managements, discharge of the basic managerial
functions.
9. It also helps in planning, policy making & controlling the activities.
10. They are helpful in establishing the standard casting system.
Limitations of ratio analysis
1. Ratio provides only guidelines to the management they are only the means.
However They scratch surfaces and raise question. The limitation of the ratio
may force the management to have detailed investigation of the situation under
question.
2. single accounting ratio is not useful at all unless it is studied with other
accounting ratios
3. They are based only on the quantitative information. Hence, qualitative
information puts limit on the ratios
4. Ratios are subject to arithmetical accuracy of the financial statements.
Moreover financial statement also include estimated date like provision for
depreciation, bad and doubtful debts etc. hence, result revealed by ratios are
subject to such estimates.
5. Ratios are computed on the basis of financial statements which are historical in
nature.
WWW.STUDENTS3K.COM
6.
Knowledge of ratios only is meaningless unless it is also found how it is made
up.
7. Lack of homogeneity of data, personal judgment lack of consistency etc. is the
factors which limit the conclusion to be derived on the basis of accounting
ratios.
2. METHODS OF LEAST SQUARES (TREND VALUES)
By the method of lease square, a straight line trend can be fitted to the
given time series of data. It is a mathematical, as well as, analytical method. With
its help, economic and business time series data can be fitted and this helps in
forecasting and predicting. The trend line is called the line of best fit. The sum of
deviations of the actual
values of Y and the trend value (Yc) is 0 and sum of
square of deviations of the actual value and the trend value is the least.
(Y-Yc) = 0 and (Y- Yc) = least. So this method is called the least squares method
or the line of best fit.
The method of least squares cab be used to explain the linear and non
linear trend i.e. a straight line trend or parabolic trend.
The straight line trend or the first degree parabola is represented by the
mathematical equation.
Yc = a + bx
Yc = require trend value
9
WWW.STUDENTS3K.COM
X = unit of time
Here a and b are constants or unknowns.

In the equation for the first degree parabola Yc = a + bx, the values of the
unknown or constants can be calculated by the following two normal equations.
Y
Na +bx
xY =
ax +bX2
the numbers or months for which data are given
When x = 0, the equation will take the form of

Y
Na
bx
xY =
bx2
bx2 =
by these equation we can know the values of a and b i.e

a
Y/N and
xY / x2
the mean value of Y values
rate of change
3. COMPARATIVE STATEMENT ANALYSIS :

Comparative statement is those statements, which have designed in a way,
so as to provide time perspective to the consideration of the various elements of
10
WWW.STUDENTS3K.COM
financial position embodied in such statements. In such statements figures for

two or more periods are placed side by side to facilitate comparison. The two
statements are proposed for comparison. They are comparative income statement
and comparative Balance Sheet.
STATEMENT OF THE PROBLEM
Nowadays due to the policy of the changing government and also due to the
competition in the globalize era, the financial performance of the BHEL is not
appreciable. Though the company developed well, it could not earn much profit as
like the other private sectors company invilved in similar business. There is no
proper instruction from the authorities and from the ministry. Further there is
considerable delay in implementing the new system because of more formalities to
change the existing system. The financial performance of the BHEL should be
analyzed well increase the profit and make the company to compete with others
doing similar business.
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 position.
For this analysis the ratios, working capital requirements for the next five
years period to enables meaningful planning for the future.
Researcher worked and applied various tables in relevant ratio from the
data collection in Bharat Heavy Electricals Limited Researcher giving
11
WWW.STUDENTS3K.COM
more suitable idea to the management and developed the company in

various way. Researcher analysis some table in statistical approaches of
trend line.
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.
To study the financial position of the company and operation of Bharat
Heavy Electricals Limited
To appraise financial soundness of the company.
To offer suggestions for improvement in the company.
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. The
present study attempt to develop a trend analysis model for Sales and Working
Capital and Profit and Loss Accounts. There can be forecasting to evaluate the
overall performance of the Bharat Heavy Electricals Limited in future.
12
WWW.STUDENTS3K.COM
LIMITATION OF STUDY
1. The Secondary data like annual reports of BHARAT HEAVY
ELECTRICAL LIMITED is collected
from BHEL Trichy, hints the
accuracy of the result of the study will depends upon the accuracy of
data provided by the company.
2. The study covers only the period of 5 (2006 to 2011)
3. Various techniques, ratio statistical tools used in this study will have its
own limitation.
RESEARCH METHODOLGY
Methods of data collection;Secondary data
The secondary data is derived from the annual reports, Business line and
finance newspapers websites and
the internal auditing books of BHEL
PERIOD OF THE STUDY:

The study covers the time period of 5 years from the financial year 2006-07
and 2010-11.
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.
13
WWW.STUDENTS3K.COM
2. Trend Analysis. (Least square Method)

3. Comparative statement Analysis
The interpretations are also printed graphically using trend line graphs and
sub-dividing bar diagram.
14
WWW.STUDENTS3K.COM
CHAPTER-II
REVIEW OF LITERATURE
Financial Statement Analysis
The Hershey Company engages in the manufacture, marketing, distribution,
and sale of various types of chocolate and confectionery, refreshment and snack
products, and food and beverage enhancers in the United States and
internationally. The Hershey Company sells its products through sales
representatives and food brokers, primarily to wholesale distributors, chain
grocery stores, mass merchandisers, chain drug stores, vending companies,
wholesale clubs, convenience stores, dollar stores, concessionaires, department
stores, and natural food stores. The company was founded in 1894 and is based in
Hershey, Pennsylvania. The Hershey Company went public on the New York
Stock Exchange (NYSE) in 1922 (http://finance.yahoo.com/q/pr?s=HSY).
Tootsie Roll Industries, Inc., through its subsidiaries, engages in the

manufacture and sale of confectionery products. The company sells its products
under the registered trademarks. It distributes its products through candy and
grocery brokers to wholesale distributors of candy and groceries, supermarkets,
variety stores, dollar stores, chain grocers, drug chains, discount chains,
cooperative grocery associations, warehouse and membership club stores, vending
machine operators, the U.S. military, and fund-raising charitable organizations.
15
WWW.STUDENTS3K.COM
Tootsie Roll Industries operates in the United States, Canada, and Mexico.
The company was founded in 1896 and is based in Chicago, Illinois. The Tootsie
Roll Industries, Inc. went public on the NYSE in 1927 (http:// finance. yahoo.
com/q/pr?s=TR).
The Hershey Company and the Tootsie Roll Company both are
companies in confection industry; they specialize in a wide variety of chocolate
candy products. I compared both companies for the years 2002, 2003, and 2004
against each other and against the industry averages in order to make a decision
about which company investors would choose to invest in. The comparisons I used
to make this decision were ratios for liquidity, solvency, and profitability.
Review Of Financial Statements

It is said that companies will come and go, and those that survive and left
standing will teach other companies, how their survived.
We will take two
companies; UPS and Ebay, Inc break them down and show you how they got their
start. In our paper, it will also be discussed and show a review of their financial
statements from each one. The point is to get a better picture of where a company
started, the competition it endured, and the money that was possibility projected
for the start. This paper will also show how auditors are essential to the running
of
any
company.
16
WWW.STUDENTS3K.COM
Review of Financial Statements Brief overview UPS, a delivery service, has been
around for about 100 years.
James E. Casey started the company on $100 borrowed from a friend of his.
Casey, who was 19 years old when he started UPS, had worked for delivery
services before and wanted to start a better delivery system of his own.
The American Messenger company, what UPS was previously called,
started in Seattle, Washington and had many competitors in the beginning. His
business not only survived among them, but thrived (UPS, n.d.). Today the
company serves over 200 countries delivering goods, funds, and information
(UPS, n.d., 1). UPS has several stores located in these countries, including the
United States, where people can not only have their packages sent, but they can
also buy delivery products from them as well.
On September 5, 1995, Piere Omidyar founded eBay sitting in his living room.
eBay got it first start with a lie stating that it was founded to help Omidyars
finacee trade Pez candy dispensers and that lie was back by a public relations
manager in 1997. (eBay, n.d., 2) In 1997 Jeffery Skoll became the first president of
eBay. eBay original name was Auction Web Omidyar did not like that name so he
changed it to Echo Bay.com but that name was taken so he change it to Ebay.com
and on September 21,1989 Omidrar and Skoll went public and became
billionaires.
Author Name Tootsie Roll And Hershey
17
WWW.STUDENTS3K.COM
CHAPTER-III
COMPANY PROFILE
BHEL is the largest engineering and manufacturing enterprise in India in
the energy related/infrastructure sector.
BHEL was established more than four
decades age ushering in the indigenous Heavy Electrical Equipment ushering in

the indigenous Heavy Electrical Equipment industry in India. BHEL has built
over the years, a robust domestic market position by becoming the largest supplier
of power plant equipment in India, and by developing strong market presence in
select segments of industrial sector and the Railways. Currently, 80% of the
Nuclear power generated in the country is through BHEL sets.
BHEL caters to core sectors of the Indian Economy viz., Power Generation
and Transmission. Industry, Transportation, Renewable Energy, Defence, etc. The
wide network of BHELs 14 manufacturing divisions, 4 power sector regional
centres, 8 service centres, 15 regional offices, one subsidiary co., Joint Ventures
and a large number of Project Sites spread all over India and large number of
Project Sites spread all over India and abroad enables the Company to promptly
serve its customers and provide them with suitable products, systems and services
efficiently and at competitive prices.
BHEL, where Quality Systems as per ISO-9000 have taken deep roots, has
now made significant achievements in Total Quality Management by adopting the
18
WWW.STUDENTS3K.COM
CII/EFQM model for Business Excellence. BHEL became the first Public Sector
Company in the country to win the coveted PRIZE through Haridwar unit under
the CII Exim Award Scheme. BHELs Bhopal & Jhansi Units and Power Sector
Northern and Eastern Regions have also won the Commendations for Significant
achievement/Strong commitment to TOM during 2008-09. Also BHELs insulator
plant at Jagdishur won the commendation by R K Bajaj Quality award. BHEL
shares the growing global concern on issues related to Environment and
Occupational Health and Safety. Major Units of BHEL have been accredited to
ISO-14001 Environmental Management Systems and to OHSAS-18001 for
Occupational Health and Safety Systems.
For the third consecutive year, BHELs performance was recognized by the
prestigious publication Forbes Asia, which featured BHEL in its fourth annual
Forbes 50 list of the best of Asia-Pacifics publicly-traded companies with
revenues or market capitalization of at least US$ 5 billion, having highest longterm profitability and sales & earnings growth. Significantly, BHEL is the only
India PSU to figure on the elite list, since the list was conceived. BHEL is the
only Indian PSU to figure on the elite list, since the list was conceived. BHEL and
its 4 units were awarded ICWAI Awards for Excellence in Cost Management for
2008 the highest among both public and private sector companies. BHEL won
EEPCs top Export Award for the eighteenth year in succession.
19
WWW.STUDENTS3K.COM
POWER GENERATION
BHEL manufactures a wide range of products and systems for thermal,
nuclear, gas and hydro-based utility power plants to meet customer requirements
for power generation. BHEL has proven turnkey capabilities for executing power
projects from Concept to Commissioning. BHEL-built power generating sets
account for nearly two-third of the overall Installed capacity and around threefourth of the power generated in India. BHEL supplies steam turbines, generators,
boilers and matching auxiliaries upto 800 MW ratings including supercritical sets
of 600/800 MW. BHEL has facilities to go up to 1000 MW unit size. BHELmake steam turbines are designed to achieve higher efficiencies. To make efficient
use of high ash content coal available in India. BHEL also supplies circulating
fluidized bed combustion (CFBC) boilers for thermal plants. BHEL manufactures
220/235/500/540 MWe Nuclear turbine-generator sets. BHEL is the only India
company capable of manufacturing large-size gas-based power plant equipment,
comprising advanced-class gas turbines up to 289 MW (ISO) RATING for open
and combined-cycle operations. BHEL engineers and manufactures custom-built
hydro power equipment. Its range covers turbines of Francis, Pelton and Kaplan
type, pump turbines, bulb turbines and mini-micro hydro plants, with matching
generators, for different head-discharge combinations.
The Company has proven expertise in Plant Performance improvement

through Renovation, Modernization and Uprating of variety of power plant
20
WWW.STUDENTS3K.COM
equipment, besides specialized know-how of residual life assessment, health

diagnostics and life extension of plants. It has retained 100% share of R&M
market of Thermal sets in the country in 2008-09.
BHEL built thermal sets consistently exceed the national average efficiency
parameters, and have achieved the highest-ever Plant Load Factor (PLF) of 80.5%
(overall) during 2008-09, which is 3.5% higher than the national average. Overall
Operating Availability (OA) was also the higher-ever at 88.4%.
BHEL is the one of the few companies worldwide, involved in the
development of Integrated Gasification Combined Cycle (IGCC) technology
which would user in clean technology.
BHEL offers a large variety of control equipment and solutions, for power
stations ranging from simple control systems to single push-button automation.
Company has expertise of supplying complete Systems for entire power stations
comprising Boiler, Turbine and Balance of Plant (BoP).
INDUSTRIES
BHEL is a leading manufacturer of a variety of electrical, electronic and
mechanical equipment, to meet the demands of a number of industries, like
metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals, etc.
other than power utilities.
BHEL has supplied systems and individual products
including a large number of co-generation Captive power plants, Centrifugal

compressors, Drive Turbines, Industrial boilers and auxiliaries, Waste heat
21
WWW.STUDENTS3K.COM
recovery boilers, Gas turbines, Pumps, Heat exchangers, Electrical machines,

Valves, Heavy castings and forgings, Electrostatic precipitators, ID/FD fans,
Seamless pipes, etc. to a number of industries other than power utilities. BHEL has
also emerged as a major supplier of controls and instrumentation systems,
especially distributed digital control systems for various power plants and
industries. BHEL is the leading company in the world having mastered the art of
burning Naptha in Gas turbines. Industry sector is fully geared to execute EPC
contracts for captive power plants from concept of commissioning.
TRANSPORTATION
Today, over 70% of Indian Railways, one of the largest railway networks in
the world is equipped with traction equipment built by BHEL.
BHELs
involvement in the transportation sector has been marked with rapid growth. Most
of the trains in Indian Railways, whether electric or diesel powered, are equipped
with BHELs traction propulsion system and controls. The range includes traction
motors, traction generators/alternators, transformers, substation equipment,
vacuum circuit breakers, locomotive bogies, smoothing reactors, exciters,
converters, inverters, choppers and associated control equipment, viz., master
controllers, chopper controllers, brake and door equipment, electronic controls
including software based controls extending to rolling stock and other transport
applications.
BHEL has manufactured and supplied a large number of 3000 HP electric
locomotives and 4700 HP AC/DC locomotives to Indian Railways and diesel22
WWW.STUDENTS3K.COM
electric locomotives ranging from 350 HP to 2600 HP to cement, steel and

fertilizer plants, thermal power stations, coal fields, ports and other medium and
large industries and urban transportation projects. Diesel Multiple Units,
underground Metro-rail system at Kolkata, Electric Multiple Unit (EMU) service
at Mumbai, Kolkata, Chennai and Delhi are all operating on drives and controls
supplied by BHEL. BHEL has also established itself as a leading supplier of stateof-the-art propulsion equipment to Indian Railways for 3-phase drive 6000 HP
electric locos, 4000 HP diesel-electric locos, electrical multiple units, etc.
BHEL has also diversified into the area of track maintenance machines and
coach building for Indian railways and undertakes retrofitting and overhauling of
rolling stock.
Development of 3-phase IGBT based propulsion system for AC-EMU and
AC-DEMU is also underway in association with technology partner.
RENEWALBLE ENERGY
BHEL has made rapid strides in this strategically important area of nonconventional energy, which holds the key to the problem of burgeoning energy
needs, on the one hand and rapidly depleting fossil-based energy sources, on the
other.
Range of Renewable Energy product and systems manufactured and
supplied includes a number of solar water heating systems, solar photo-voltaic

(SPV) systems for both Domestic and Industrial application and wind electric
generators all over India. BHEL also has the capability to set up Grid-connected
and Hybrid SPV Power Plants. In addition, BHEL fabricates space-grade solar
23
WWW.STUDENTS3K.COM
panels and space-quality batteries for satellites launched by ISRO. BHEL is also
supplying small hydro power plants (up to 25 MW station capacity) for distributed
power generation.
OIL AND GAS

BHEL possesses expertise to design, manufacture and service various types
of onshore rigs to suit the Indian service conditions. The range of equipment
covers onshore deep drilling rigs, super- deep drilling rigs, heli-rigs, work-over
rigs, mobile rigs and desert rigs with matching draw works and hoisting
equipment. The diesel-electric oil rigs for onshore drilling made by BHEL are
suitable for depths up to 9,000 metres.
BHEL is supplying onshore drilling rig equipment viz. Draw works,

Rotary-table, Travelling block, Swivel, Mast and sub structure, Mud systems and
Rig electrics, Well & X-Mas tree valves upto 10,000 psi rating for onshore as well
as offshore application to ONGC, Oil India Ltd. and Private drilling Companies.
BHEL has also supplied casing Support System, Mudline Suspension System and
Block Valves to ONGC for refurbishment and up-gradation of onshore Oil Rigs.
BHEL has supplied GT driven centrifugal compressor packages to GAIL
India Ltd for their gas compressor stations.
24
WWW.STUDENTS3K.COM
TRANSMISSION
BHEL is present in the field of power transmission in India with a wide
range of transmission systems and products. The products manufactured by BHEL
include Power transformers, Instrument transformers, Dry type transformers,
Instrument transformers, Dry type transformers, Shunt reactors, vacuum and SF6
switchgear, Gas insulated switchgears, Ceramic insulators, Gas insulated
switchgears, Ceramic insulators, etc. Major critical hardware such as capacitor
banks, circuit breakers, control and protection equipment and thyristor valves are
in its manufacturing range.
BHEL has developed and commissioned indigenous 36KV and 145KV Gas
insulated Substation (GIS). HVDC Disc insulators of rating 320kN/420kN base,
the company undertakes turnkey execution of substations up to 400KV and has the
capability to execute 765 KV substations. High voltage Direct Current (HVDC)
systems have been supplied for economic transmission of bulk power over long
distances have been developed and supplied for the first time in the country for use
in _+800KV HVDC application. BHEL has indigenously developed and
commercialized state-of-the-art controlled shunt reactor for reactive power
management of long transmission lines.
With string engineering the Company accepts full project responsibility for
feasibility / system studies, execution and commissioning of fixed Series
25
WWW.STUDENTS3K.COM
Compensation / controlled shunt Reactor schemes. BHEL has a team of experts

with extensive on the job exposure for design and applications relating to Power
System Studies, Feasibility Studies, Insulation Coordination etc.
INTERNATIONAL BUSINESS
BHEL has, over the years, established its references in 70 countries across
the world. These references encompass almost the entire range of BHEL products
and services, covering Thermal, Hydro and gas based turnkey power projects,
Substation projects, Rehabilitation projects, besides a wide variety of products like
Transformers,
Compressors,
Valves,
Oil
field
equipment,
Electrostatic
Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears,

Castings and Forgings etc.
The company has taken significant steps towards globalisation with successful
forays in new markets and new product areas, apart from firmly establishing the
companys presence in existing export markets and areas.
Some of the major successes achieved by BHEL have been in Gas-based

power projects in Oman, Libya, Malaysia, UAE, Saudi Arabia, Iraq, Bangladesh,
Sri Lanks, China, Kazakhstan; Thermal power projects in Cyprus, Malta, Libya,
Egypt, Indonesia, Thailand, Malaysia, Sudan, Syria, Ethiopia, Senegal, New
Calendonia ; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan,
26
WWW.STUDENTS3K.COM
Nepal, Taiwan, Tajikistan, Thailand, Afghanistan, Vietnam, Rwanda; Compressors

in Oman, Iraq, France and Substation projects & equipment in Philippines,
Ghana, Tanzania, Laos, Malaysia, Libya, Zambia, Saudi Arabia, Iraq, Ethiopia,
Nepal, Bangladesh, and Afghanistan, Execution of these overseas projects has also
provided BHEL the experience of working with world renowned consulting
organizations and inspection agencies.
The company has been successful in meeting the demanding requirements

of international markets in terms of complexity of work as well as technology,
quality and other requirements viz. HSE requirements, financing packages and
associated O&M services, to name a few. BHEL has proved its capability to
undertake projects on fast- track basis. The company has also established its
versatility to successfully meet the varying needs of different sectors, be it captive
power, utility power generation or the oil sector. Besides undertaking turnkey
projects on its own, BHEL also possesses the requisite flexibility to interface and
complement other international companies for large projects, and has also
exhibited products.
The company is taking a number of strategic business initiatives to fuel
further growth in overseas business. Strategic alliances has been established in
Rwanda-AIL, Ethiopia-OIA. Senegal Nykomb, Indonesia MFI, for taking up
EPC on partnership basis. Reference for large Unit size rating has been created by
securing an order for Steam Turbine based Tishreen Thermal Power Plant on EPC
27
WWW.STUDENTS3K.COM
basis from Syria for 2x200MW Units. International visibility is also exhibited by
participating in International exhibitions in Egypt, Vietnam, Syria & South Africa
and wining best exhibitor award.
Technology Up-gradation, Research & Development
To meet the Customers expectation of contemporary technologies and
faster deliveries company lays great emphases on the continuous up- gradation of
products & related technologies, and development of new products. The Company
has upgraded its products to contemporary levels through continuous in house
efforts as well as through acquisition of new technologies from leading
engineering organizations of the world.
The corporate R&D Division at Hyderabad leads BHELS research efforts

in a number of areas of importance to BHELS product range. Research and
product development centers at each of the manufacturing divisions play a
complementary role. Centres of excellence have been set up for Simulators,
computational Fluid Dynamics, Permanent Magnet Machines and Surface
Engineering. As the fifth in the series, BHEL has established a centre of
Excellence for Intelligent Machines and Robotics (COEIMAR ). Centre of
excellence is being established for Compressors & Pumps.
In addition to the Corporate R&D Division, BHEL has four specialized

institutes, viz., Welding Research Institute at Trichy, ceramic Technological
28
WWW.STUDENTS3K.COM
Institute at Bangalore, Centre for Electric Traction and Hydro lab at Bhopal and
Pollution Control Research Institute at Haridwar.
BHEL has introduced, several state of the- art products viz. 60MW
Bubbling Fluidised
Bed Combustion Boiler for power generation, 260 MW
steam turbine designed to suit combined cycle power plants, Bypass Over Fire Air
(BOFA) system for reduction of NOx from coal based thermal power plants, highefficiency Frances and Pelton hydro turbines, new LP turbine variant which can be
retrofitted in old Russian (LMW) 210MW thermal sets, Automatic Storage &
Retrieval system (ASRS) for storage and inventory management system of the
Indian Army, Solar Panels with 5500 watts output consisting of high-efficiency
multi-junction solar cells, satellite batteries for NSAT 4A, Controlled Shunt
Reactor (CSR) for 400KV Transmission lines, Flexible AC Transmission Systems
(FACTS), STATCOM, Phase Shifting Transformer (PST), 145KV Gas Insulated
Switchgear (GIS), Micro controller based flame scanner, a more energy efficient
single cylinder non reheat Steam turbine in 100-140 MW application, single
cylinder reheat Steam turbine in 120-150MW range, Deaerator for 1000 MW
power plants, combined HP-IP module in the output range of 500-650 MW with
subcritical parameters, IGBT based 3-phase drive system for 700HP diesel electric
locomotives, technology for manufacture of
400KV long- rod composite
insulators with improved properties by adding nano materials, performance

Analysis,
320kN/420kN
Porcelain
insulators,
800KV
hollow
insulator,
Diagnostics and Optimization (PADO) package for power plants, 91 ton BHEL
29
WWW.STUDENTS3K.COM
280 Bowl Mill, etc. Design has been developed for new module THRI brushless
exciter for adoption of advance feature for 800 MW exciter.
Reinforcing its position as a total solution provider, BHEL has developed

and successfully commissioned a Maintenance Controller (an Integrated Asset
Management and Decision Support System) at the Western Mountain Power
Project, Libya. Based on Power Pac-G, software jointly developed by BHEL and
TCS, this is a system for complete power plant maintenance for Combined Cycle
Power Plant application and takes care of all the maintenance needs of a power
station.
The company is also engaged on research on futuristic areas like fuel cells
for distributed environment-friendly power generation, clean coal technology
applications, standardization of electrode making process, development of process
for addition of Nano/Micro particles for improving material characteristics, super
conductivity applications in transformers, generators/motors etc. With an array of
new technologies at its command, BHEL is confident of meeting the challenges
ahead and fulfilling its responsibilities as the premier engineering and
manufacturing enterprise of India.
Human Resource Development Institute
The Human Resource Development Institute (HRDI) situated in Noida, is
the corner stone of BHELS learning Infrastructure, along woth the Advanced
Technical Education Centre (ATEC) at Hyderabad and the Human Resource
30
WWW.STUDENTS3K.COM
Development Centres (HRDCs) at different units. Through various organizational

developmental efforts, these centres
ensure that the prime resource of the
organization the Human Capital is always in a state of readiness to meet the

dynamic challenges posed by the fast changing environment. it is their constant
Endeavour to take the HRD activities to the strategic level of becoming an active
partner in achieving the organizational goals.
Guided by the HRD Mission statement To promote and inculcate a valuebased culture utilizing the fullest potential of Human Resources for achieving the
BHEL Mission, the HRDI through a step by step strategic long term training
process and several short term need based programmes based on comprehensive
organizational research, enables the human resources to unearth and polish their
potential. HRDI is spearheading the HRD initiatives in the company and focusing
on competency, commitment and culture building.
Some of the Core programmes, Strategic need based programmes;
Competency based programmes and Functional Programmes like Advanced
Management Programmes,
General Management Programmes,
Strategic
Management Programmes, Senior Management Programmes, Missle Management

Programmes, and Young Managers Programmes.
In addition, the HRDI provides professional support to Corporate HR and HRDCs
at Units/Divisions. HRDI is also accepting consulting assignments from other
organizations in a selective manner.
31
WWW.STUDENTS3K.COM
Health, Safety and Environment Management

BHEL is an environment friendly company in all its activities, products and
services, providing safe and healthy working environment to all stakeholders, In
fact this aspect has become an integral part of the companys business
performances. Environment improvement Administrative ministry. Some of the
major EIPs at BHEL plants & townships included tree plantation drives,
installation of rain water harvesting plants, Energy and Conservation Projects
utilizing efficient technologies, reduction in noise level, improvement in chemical
storage & handling systems, improvement in fumes extraction systems, Resource
conservation Plants (Lubricants/ Metals/Coolants), utilization of Non-conventional
energy resources etc.
Significantly, BHEL has also taken initiatives on Clean Development
Mechanism (CDM) projects to reduce greenhouse gas emissions in amore focused
way and vigorous efforts are being made to achieve milestones in this area. A
broad reference list of CDM activity projects both of in house implementation
and joint claim projects with customers has been generated. CDM is a planned
activity for each unit and carbon credit forms part of budgeted activity.
In conformity with BHELs concern for society and environment, a mote
energy efficient single cylinder non- reheat steam turbine for 100-140MW
application has been developed, suitable for plants where large amount of waste
heat is available and reheat option is not feasible This is the largest single cylinder
steam turbine engineered so far by BHEL.
32
WWW.STUDENTS3K.COM
All manufacturing Units/Regions of the company are accredited to international

standards viz. ISO-14001 certification for environmental management and
OHSAS-18001 certification for occupational health safety management systems.
Corporate Social Responsibility

BHEL has developed a CSR scheme and its mission Statement of CSR isBe a Committed Corporate Citizen, alive towards its Corporate Social
Responsibility.
Thrust is being given in eight areas-Self employment generation,
Environment
protection,
Community
development,
Education,
Health
management & medical aids, Orphanages & Old-age Homes, Infrastructural

development
and
Disaster/
Calamity
Management.
Quarterly
and
Disaster/Calamity Management. Quarterly and annual CSR reports are prepared

containing the activities carried out, benefits accrued to neighboring communities,
the number of people benefited and the amount spent etc.
BHEL adopted 56 villages having nearly 80,000 inhabitants. In addition ,
BHEL provides financial assistance to various NGOs/ Trusts/Social Welfare
Societies that are engaged in social activities throughout the country.
Participation in the UNs Global Compact Programme

The company reiterate its commitment to United Nations Global compact
programme and the set of core values enshrined in its ten principles and the intent
33
WWW.STUDENTS3K.COM
to advance Global Compact principles within the companys sphere of influence

on human rights, labour standards, environment and anti corruption. As the
worlds largest global compact is the first and the citizenship initiative, the Global
Compact is the first and the foremost concern which is exhibiting and building the
social legitimacy of
business and markets. BHEL has made these a part of the
strategy, culture and day-to-day operations. As part of this programme, BHEL

continues to play a lead role in the activities of the Global Compact Society in
India, which acts as an apex level nodal agency representing Indian corporate
bodies and institutions / organizations that are committed to UNs Global Compact
Programmes. Company publicly advocates with its employees and other
stakeholders and regularly incorporates its commitments towards Global compact
programme through its Annual report, press conferences and other public
documents.
BHEL - AN OVERVIEW
BHEL is the largest engineering and manufacturing enterprise in India in
the energy, related/ infrastructure & sector today. BHEL has built over the years,
robust domestic market position by becoming the largest supplier of power plant
equipment in India, and by developing
a strong market. Presence in select
segments of the industries sector, and the Railway.
34
WWW.STUDENTS3K.COM
BHEL was established more than 40 years ago whering in the indigenous
Heavy Electrical Equipment industry in India, a dream which has been more that
realized
with a well recognized
track record of performance. Defying
the
scourge of worldwide recession, in 2008-09, BHEL save a spectacular top line

growth of 31% with a turnover of Rs.28,033 crore and net profit rising by 9,8%
toRs.3,138 crore over the privies year. Order inflow diving 2008-09 was at record
high of Rs.59, 618 crore with total orders in hand in the 2 nd quarter of 2009 at
Rs.1,25,800 crore. The
worldwide
cumulative capacity of BHELs
projects installed
stands at around 1,05,000 mw BHELs manufacturing
capacity
expansion from 10000 MW.pa.to 15000 MW pa. is proceeding apace and plans
are afoot to hike this further to 20006 MW pa by 2011-12.
Global Liknks :The achievements have earned an international reputation
of BHEL,
Trichy. The plant has so far supplied boilers for around 1350 MW of power
generation capacity to Malaysis, Libya, Iran, Eqypt etc. BHELs valves have
been exported to Malts, Cyprus, Malaysia , and Indonesia while pressure part
equipment and spares have been exported to the USA, boiler components have
been supplied to China and secemles steal Tubas have been exported to Malaysia.
CHAPTER-IV
35
WWW.STUDENTS3K.COM
ANALYSIS AND INTERPRETATION OF DATA

In this chapter an attempt has been made to analysis how efficiently the
analysis of Financial statement is managed in Bharat Heavy Electricals limited.
Financial tools such as schedule of changes in ratio analysis, least squares,
comparative statements have been used for the purpose of analysis.
The financial statement involves recording classifying and summarizing of

various business transactions. It is prepared for the purpose of presenting a
periodical review or report of the progress made by the concern and deals with
the state of the investment, in the business and result achieved during the
accounting period. Financial statement, income statement and position statement
are the outcome of accounting process.
Ratio analysis is a technique of analysis and interpretation of financial

statements. It is used as a device to analysis and interpret the financial health of a
firm. Analysis of a financial statement with the aid of ratio helps to arrangements
in decision making control.
1) Current Ratio
Current ratio may be defined as the relationships between current assets and
current liabilities. It is the most common ratio for measuring liquidity. It is
calculated by dividing current assets by current liabilities. Current assets are
36
WWW.STUDENTS3K.COM
those, the amount of which can be realized within a period of one year. Current
liabilities are those amounts which are payable within a period of one year. A
current ratio of 2:1 is considerable ideal.
Current Assets
Current Ratio =
Current liabilities
TABLE 4.1 Current Ratio

(in crores)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Current Assets
13343
16331
21063
27705
36901
Current liabilities
8446
10321
14420
19821
28333
Current Ratio
1.57
1.58
1.46
1.39
1.30
Source : secondary Data

Interpretation
Current ratio during the year 06-07 is the 1.57. In the next year 2007-08 it
was maximum 1.58 and in the year 2008- 09 it was 1.46. In the year 2009-10 the
current ratio is 1.39 and in the last year 2010--11 the current ratio decreased to
1.30.
The ideal value of current ratio 2:1, but during the period of study, the
current ratio is lesser than the standard. This shows the current ratio to shows a
37
WWW.STUDENTS3K.COM
do down ward which indicates the inefficiency of the company to meet its current
obligations.
CHART NO.1
2) Liquid Ratio:The teem Liquidity refers to the ability of a firm to pay its short term
obligations as and when they become due. The term quick assets or liquid assets
refers current assets, which can be converted into cash immediately. It comprises
38
WWW.STUDENTS3K.COM
all current assets except stock and prepaid expenses. It is determined by dividing
quick assets by quick liabilities.
Liquid Assets
Liquid Ratio =
Liquid Liabilities
TABLE 4.2 Liquid Ratio

(in crores)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Current Assets
10427
12587
21021
27648
36823
Current liabilities
8446
10321
14420
19821
28333
Current Ratio
1.23
1.21
1.45
1.39
1.29
Source : Secondary Data

Interpretation
Liquid ratio during the year 2008-2009 it attains the maximum value of
5.20. in the above year it was slightly reduced to 2006 07 to 1.23. In the next
year, 2007-08 it further decreased to 1.21 and in the next year 2009-10 1.39. in the
last year decreased 20102011 to 1.29.
During the period of study, the value of liquid ratio is higher than the ideal
value
which indicates
the efficiency of the company to meet is immediate
requirements. The overall trend of liquid ratio shows up and down ward trend.
39
WWW.STUDENTS3K.COM
CHART NO.2
3) Proprietory Ratio :
Proprietory ratio relates to the proprietors funds to total assets. It revels
the owners contribution to the total value of assets. This ratio shows the long
time solvency of the business. It is calculated by dividing proprietors funds by
the total tangible assets.
Proprietors Funds
Proprietary Ratio
------------------------------Total Tangible Assets

40
WWW.STUDENTS3K.COM
TABLE 4.3 Proprietory Ratio

(in crores)
Year
Proprietary Fund
Total
Proprietary
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
6027
7301
8788
10774
12939
Assets
14483
17498
22354
29344
39528
Ratio
0.41
0.41
0.39
0.36
0.32

Interpretation
Proprietory ratio during the year 2006-07 and 2007-08 it attains the
maximum value of 0.41. In the year2006-07 the proprietory ratio was slightly
reduced to 0.39. In the next year, 2009-10 It further reduced to 0.36. During the
year 2010-11 it further decreased to 0.32.
CHART NO.3
41
WWW.STUDENTS3K.COM
4) Fixed Assets to Net Worth Ratio:

This ratio shows the relationship between fixed assets and proprietors
funds. The purpose of this ratio is to fend out the percentage of the owners fund
invested in fixed assets.
Fixed Assets
Fixed Assets to Net worth Ratio
=
42
------------------------------WWW.STUDENTS3K.COM
Proprietors funds
TABLE - 4.4 fixed assets to Net worth Ratio
(in crores)
Year
Fixed asset
Proprietory
Fixed asset to Net
1140
1167
1291
1639
2627
Fund
6027
7301
8788
10774
12939
worth ratio
0.18
0.15
0.14
0.15
0.20
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Sources : Secondary Data
Interpretation
Fixed asset to Net worth Ratio during the year 2006-07 was 0.18. it was
slightly reduced to 0.14 in the 2006-07 year. In the next year 2007-08 and 2009-10
the net worth ratio 0.15. The same is increased to a maximum of 0.20 in the year
2010-2011
CHART NO.4
43
WWW.STUDENTS3K.COM
5) Net Profit Ratio

Net Profit Ratio establishes a relationship between net profit (after taxes)
and sales. It is determined by dividing the net income after tax to the net sales for
the period and measures the profit per rupees of sales.
Net Profit
44
WWW.STUDENTS3K.COM
Net Profit Ratio
------------------------------- x 100
Sales
TABLE- 4.5 Net Profit Ratio

(in crores)
Year
Net Profit
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
953
1679
2415
2859
3138
Sales
Net Profit
10336
14,525
18739
21401
28033
Ratio
9.2%
11.6%
12.9%
13.4%
11.20%
Interpretation
From the table, it is found that the net profit has been fluctuating during the
study period. In the year 2006-07 the net profit ratio was 9.2%. In the year 200708 it was increased to 11.6%. In the next year 2008-09 it was further increased
12.9%. During the year 2009-10 there was a slight increases to 13.4%. During the
year 2010-11 the net profit ratio was 11.20%.
CHART NO.5
45
WWW.STUDENTS3K.COM
6) Stock Turnover Ratio:

This ratio Indicates whether investment in inventory is efficiently used or
not. It explains whether investment in inventories in within proper limits or not. It
also measures the effectiveness of the firms sales efforts. The ratio is calculated
as follows.
Cost of goods sold
Stock Turnover
------------------------------Average Stock
Cost of goods sold =
Sales- Gross Profit

46
WWW.STUDENTS3K.COM
Average stock
Opening stock + Closing stock

-------------------------------------2
TABLE 4.6 STOCK TURNOVER RATIO

(in crores)
Year
Cost of goods
Average
Stock
sold
8673
11902
14960
16936
23153
Stock
2919
3653
4971
7097
9350
Turnover Ratio
2.97
3.25
3.00
2.38
2.47
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Interpretation
From the table, it is found that the stock Turnover ratio has been fluctuating
during the study period. In the year 2006-07 it was 2.97, It increases during the
year 2007-08 was slightly to 3.25. In the year 2008-09 it was 3.00 and decreases
to 2.38 in the year 2009-10 and during the year 2010-2011 it was increased to
2.47.
CHART NO.6
47
WWW.STUDENTS3K.COM
7) Debtors turnover ratio

The purpose of this ratio is to discuss the credit collector power and policy
of the firm. This ratio is established between account receivable and net credit
sales of the period. The debtors turnover ratio is calculated as follows.
Credit Sales
Debtors Turnover Ratio
-------------------------------
Average Account receivables

Average account receivables
=
48
Total Debtors and B/R

WWW.STUDENTS3K.COM
TABLE No.4.7 Debtor Turn over (Rs in crores)

Year
Sales
Sundry debtors Debtors turn over ratio
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Rs
10336
14525
18739
21401
28033
Rs
5972
7168
9695
11975
15976
1.73
2.02
1.93
1.78
1.75

Interpretation
From the table, it is found that the Debtor Turnover ratio has been
fluctuating during the study period. In the year 2006-07 it was 1.73, It increases
during the year 2007-08 was slightly to 2.02. In the year 2008-09 it was
decreased to 1.93 and decreases to 1.78 in the year 2009-10 and during the year
2010-2011 it was further decreased to 1.75
CHART NO.7
49
WWW.STUDENTS3K.COM
8) Average debt collection period

The average number of days that lapsed between the receipt of the invoice
by customers and the actual payment of the invoice . When measured against the
50
WWW.STUDENTS3K.COM
credit terms obtained from suppliers, average the account period shows the
length of time during which the firm is financing the account receivable either
with its own funds or borrowed funds. The radio may be calculated as follows:
Debtors B/R
Average debt collection period
------------------------------Net Credit sales
ABLE - 4.8 Debt Collection Period

(in crores)
Year
Debtors
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
5972
7169
9695
11975
15976
Credit Sales
Debt Collection
10336
14525
18739
21401
28033
Period
210 days
180 days
188 days
204 days
208 days
Interpretation
Debt Collection period ratio in the year 06-07 was 210 days. In next year
07-08 it further reduced to 180 days. In the next year 08-09 it was 188 days. In
the next year 2009-10 it was 204 days. During the years 2010-11 it was 208 days.
51
WWW.STUDENTS3K.COM
From the above it is inferred that the debt collection period shows a fluting
trend, which indicates quick recovery of money from debtors and also indirectly
shows that the management in highly efficient in collecting debts promptly.
CHART NO.8
9) Creditors turnover ratio:

It indicates the number of times on the average that the creditors turnover
each year. Creditors turnover ratio indicates the number of items the accounts
52
WWW.STUDENTS3K.COM
payable rotate in a year. It signifies credit period enjoyed by the firm in paying its
creditors. Account payable include traded creditors and bills payable.
.
Credit Purchases
Creditors Turnover Ratio
------------------------------Average account payable
TABLE 4.9 Creditor Turnover Ratio

(in crores)
Year
Credit Purchase
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Average Account
Creditor
payable
2100
284
3538
4424
5852
Turnover ratio
2.32
24.17
2.87
2.67
3.0
4892
6866
10182
11821
17620
The creditor Turnover ratio during the year 06-07 was 2.32. In the year 0708 it was increased to 24.17. In the year 08-09 creditors turnover ratio slightly
reduced to 2.87. In the year 07-08 it was reduced to 2.67. During the year 20102011 it was increased to 3.0
From the above it in inferred that the creditors turnover ratio shows an
upward trend which indicates that the company is highly efficient in making.
Speedy settlements of debts to its creditors.
CHART NO.9
53
WWW.STUDENTS3K.COM
10) Average Payment period :

The radio gives the average credit period enjoyed by the firm from its
creditors. It can be computed as follows.
Creditors + B/P
Average Payment period
------------------------------- X 365 (in
days)
54
WWW.STUDENTS3K.COM
Credit Purchase
A Lower Ratio shows that the creditors being paid promptly. The amount
payable depends upon the purchase policy, the quantum of purchase and suppliers
credit policy.
TABLE 4.10 Average Payment Period
(in crores)
year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Credit
Average
Average Payment
Purchase
Creditors
period
4892
6866
10182
11821
17620
2100
284
3538
4424
5852
156 days
15 days
126 days
136 days
121 days
The average payment period during the year 2006-07 was 156 days. From
the year 2007-08 it was heavily decreased 15 days. In the year 2008-09 average
payment period was 126 days. In the year 2009-10 it was 136 days. This last year
2010-2011 it was 121 days.
CHART NO.10
55
WWW.STUDENTS3K.COM
11) Fixed assets turnover Ratio:

The ratio indicates that extent to which the investments in Fixed assets
contributes towards sales. If compared with a previous year, it indicates whether
the investment in Fixed assets has been judicious or not. The ratio is calculate as
follows.
Sales
Fixed assets turnover ratio =
------------------------------Fixed assets
56
WWW.STUDENTS3K.COM
TABLE 4.11 Fixed asset Turnover ratio

(in crores)
Year
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Sales
10336
14525
18739
21401
28033
Fixed asset
Fixed asset
1140
1167
1291
1639
2627
Turnover
9.06
12.44
14.51
13.05
10.67
Interpretation
The fixed asset turnover ratio during the year 2006-07 was 9.06. It is found
that the fixed asset turnover ration has been fluctuating during the study period. In
the year 07-08 it was 12.44. In the year 08-09 it was 14.51. During the year 200708 the fixed asset turn over ratio was 13.05. This, last year 2010-2011 it was
decreased to 10.67.
CHART NO.11
57
WWW.STUDENTS3K.COM
12) Capital Turnover Radio:

Managerial efficiency is also calculated by establishing the relationship
between cost of sales or sales with the amount of capital invested in the business.
Capital turnover Ratio is calculated with the help of the following formula.
Sales
Capital turnover ratio
--------------------------------------
Net worth (Or) Proprietors fund

TABLE 4.12 Capital Turnover ratio (in crores)
58
WWW.STUDENTS3K.COM
Year
Net worth (or)
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Proprietors fund
6027
7302
8789
10775
12939
Sales
Capital Turnover
10336
14525
18739
21401
28033
ratio
1.71
1.98
2.13
1.98
2.16

Interpretation
It is inferred from the above table the capital turnover ratio for the year 0607 was 1.71. In the year 07-08 it was 1.98. where as In the year was 2008-09 it
was increased to 2.13. In the year 2009-10 it was slightly decreased to 1.98. But
during the year 08-09 it was increased further to 2.16.
CHART NO.12
59
WWW.STUDENTS3K.COM
13) Return on total assets:
60
WWW.STUDENTS3K.COM
Profitability can be measured in terms of relationship between net profit

and total assets. It measures the profitability
of investment. The overall
profitability can be known by applying this ratio.
Net Profit
Return on total Assets
-------------------------- X100
Table assets
TABLE 4.13 Return on Total assets
Year
Net Profit
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
1582
2564
3736
4430
4849
Total asset
Return on Total
14482
17497
22354
29344
39528
assets
10.92
14.65
16.71
15.09
12.26

Interpretation
From, the above table, it was found that the return on total asset has been
fluctuating during the study period. In the year 2006-07 it was 10.92. In the year
2007-08 it was increased to 14.65. In the year 2008-09 was increased further
increased to 16.71 and in the year 09-10 it was reduced to 15.09. During the year
2010-11 it was slightly decreased to 12.26.
61
WWW.STUDENTS3K.COM
CHART NO.13
14) Operating Ratio

Operating ratio is an indicative of the proportion that the cost of sales bears
to sales. Cost of sales includes
direct cost of goods sold as well as other
operating expenses. It is an important ratio that is used to discuss the general

62
WWW.STUDENTS3K.COM
profitability of the concern. It is calculated by dividing the total operating cost by

net sales.
Cost of goods sold + Net operating expenses
Operating ratio
----------------------------------------------------- X100
Sales
Cost of goods sold = sales = gross profit.

TABLE 4.14
TABLE 4.14 Operating ratio
(in crores)
Year
Cost of goods
Sales
Operating ratio
10336
14525
18739
21401
28033
83.9
81.9
79.8
79.1
82.5
sold + operating
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
expenses
8673
11902
14960
16936
23153

Interpretation
The above table clearly reveals that the Operating ratio for the year 06-07
was 83.9. But in the year 07-08 it was slightly reduced to 81.9 and in the year 0809 it was further reduced to 79.8. In the year 09-10 It was 79.1. During the year
last year 2010-2011 it was increased to 82.5.
CHART NO.14
63
WWW.STUDENTS3K.COM
15) Assets Turnover Ratio

This ratio is also called as Investments Turnover Ratio. It expresses the
relationship between cost of goods sold / net sales and assets/ investments of a
firm. The figure of net sales can be used where information regarding cost of
goods sold is not available. There are many variants of this ratio accordingly as
there are differences in the concept of assets employed.
Total Assets
64
WWW.STUDENTS3K.COM
Assets Turnover Ratio = ------------------------------Sales

TABLE 4.15 Asset turnover ratio
(in crores)
Year
Fixed
Current
Total
assets
assets
assets
Turnover
14481
17496
22353
29343
39528
ratio
1.4
1.2
1.1
1.3
1.4
2006-2007
1139
2007-2008
1166
2008-2009
1291
2009-2010
1639
2010-2011
2627
13343
16331
21063
27705
36901
Sales
10336
14525
18739
21401
28033
Assets
Interpretation
From the table, it is understood that the Asset turnover ratio for the 200607 was 1.4. In the year 2007-08 it was reduced to 1.2. In the year 2008-09 it was
further reduced to 1.1. In the year 2009-2010 there is slight increase to 1.3.while
in the year 2010-2011 it was slightly increaed to 1.4
CHART NO.15
65
WWW.STUDENTS3K.COM
16) Gross Profit Ratio:

Gross Profit ratio measures the relationship of gross profit to net sales and
is usually represented as a percentage. This ratio plays an important role in two
management areas. In the area of financial management, the ratio serves as a
valuable indicator of the firms ability to utilize effectively outside sources of
66
WWW.STUDENTS3K.COM
fund. Secondly, this ratio also serves as important tool in shipping the pricing
policy of the firm. This ratio is calculated by dividing gross profit by net sales.
Gross Profit
Gross Profit Ratio
-------------------------- X 100
Net Sales
Table 4.16 Gross Profit ratio

(in crores)
Year
Gross profit
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
1663
2623
3779
4465
4880
Sales
Gross Profit
10336
14525
18739
21401
28033
Ratio
16.0%
18.0%
20.1 %
20.8 %
17.4 %
The above table shaows that the Gross profit Ratio during the year 2006-07
was 16.0%. In the year 2007-08 it was increased to 18.0%. In the following year
2008-09 increased to 20.1 %. In the year 2009-10 there was slight increases to
20.8 %. In this last year was 2010-11 the gross profit ratio was 17.4 %
CHART NO.16
67
WWW.STUDENTS3K.COM
TABLE 4.17
Comparative Statement for the year
2006-07 to 2007-08
(in crores)
Particulars
2006-07
2007-08
Absolute
% of change
change
Assets:
68
WWW.STUDENTS3K.COM
Fixed Asset
Current asset
Total
Liabilities :
1140
13343
14483
1167
16331
17498
27
2988
3015
2.36
22.39
20.81
Current
7120
8808
1688
23.70
Liabilities
Others
Total
1325
8445
1512
10320
187
1875
14.11
22.20

Interpretation
From this table, it is found that the comparative statement for the year has
been fluctuating during the study period. In the year 2006-07 to 2007-08 having
fixed assets was 2.36 & current asset was increased to 22.39. and in the year
2006-07 to 2007-08 current liabilities increased 23.70 and other liabilities it was
14.11.
CHART NO.17
69
WWW.STUDENTS3K.COM
TABLE 4.18
2007-08 to 2008-09
70
WWW.STUDENTS3K.COM
(in crores)
Particulars
2007-08
2008-09
Absolute
% of change
10.62
Assets:
1167
1291
change
124
Fixed Asset
Current asset
Total
Liabilities :
1633
17498
8808
21063
22354
11898
4732
4856
3090
28.97
27.75
35.08
1512
10320
2522
14420
1010
4100
66.79
39.72
Current
Liabilities
Others
Total

Interpretation
From this, table was comparative statement for the year has been
fluctuating during the study period. In the year 2007-08
Fixed assets was
increased by 10.62 . Current assets was 28.97. and the current liabilities was
35.08.
CHART NO.18
71
WWW.STUDENTS3K.COM
TABLE 4.19
72
WWW.STUDENTS3K.COM
2008-09 to 2009-10
(in crores)
Particulars
2008-09
2009-10
Absolute
% of
Assets:
1291
1639
change
348
change
26.95
Fixed Asset
Current asset
Total
Liabilities :
21063
22354
11898
27705
29344
16576
6642
6990
4678
31.53
31.26
39.31
Current Liabilities
Others
Total
2522
14420
3244
19820
722
5400
28.62
37.44

Interpretation
In the year comparative statement from the 2008-09 to 2009-10. The fixed
assets was increased by 26.95 while the Current assets was increased by 31.53
and current liabilities by 39.31.
CHART NO.20
73
WWW.STUDENTS3K.COM
TABLE 4.20
74
WWW.STUDENTS3K.COM

2009-2010 to 2010-2011
Particulars
2009-10
2010-11
Absolute
% of change
Assets:
1639
2627
change
988
60.28
Fixed Asset
Current asset
Total
Liabilities :
27705
29344
16576
36901
39528
23357
9196
10184
6781
33.19
34.70
40.90
3244
19820
4976
28333
1732
8513
53.39
42.95
Current
Liabilities
Others
Total
In the year comparative statement from the 2009-2010 to 2010-2011.

The above table clearly reveals that the was tremendous increase in the fixed asset
to 60.28. In the same year current asset was increased by 33.19 and the current
liabilities was by 40.90.
CHART NO.20
75
WWW.STUDENTS3K.COM
Method of Least square:

TABLE 4.21
76
WWW.STUDENTS3K.COM
Fitting the straight Line Trend To sales (Rs. In Crores)
Year
2006-07
2007-08
2008-09
2009-10
2010-11
N=S
Y (Sales)
X (year
4136
5034
5541
6471
7750
y=28932
codes)
-2
-1
0
1
2
x=0
X2
4
1
0
1
4
2
x =10
Xy
Trent
values Yc
-8272
953.4
-5034
3369.9
0
5786.4
6471
8202.9
31000
10619.4
zy= 24165 yc=28932
Interpretation
The equation of straight Line Trend is
yc
= a+ lex
since x = 0
a= Y/N
le = x7/x2
xy=24165 N=5 x2=10
y = 28932
Substituting the values, we get

A
28932/5
5786.4
24165/10
2416.5
The Linear trend for sales by the method of least squares is

For 2009-10 x would be 3
Hence y 2010
For 2010 11
5786.4 + (2416.5 (3)
5786.4 + 7249.5
13035.9 (in Crores)
x would be 4
77
WWW.STUDENTS3K.COM
Hence y 2011=
5786.4 + (2416.5 (4) )

=
5786.4 + 9666
15452.4 (in crores)
Forecasted value
Year
Sales
2012
13035.9
2013
15452.4
(In Crores)
CHAPTER-V
FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
Current ratio shows a document trend indicating the company not able to
fulfill current obligations furthers this also indicate that liquidity position of the
company is less satisfactory.
78
WWW.STUDENTS3K.COM
In all the five years the current ratio is less than the ideals of 2. Creditors
term over ratio shows an upward trend and indicates better credit management.
In all the five years the liquid ratio is higher than the ideal ratio of 1
Common size financial statements clearly shoes the firm allocates half of the total
current assets to debtor.
The firms debt collection period have more than 180days it increased the
debt collection period year by year. It shows firms liberal debt collection policy.
2. Fixed assets turnover was 11% in the year 2010-11.
3. Capital turnover ratio was 2.16 in the year 2010-11.
4. Return on total assets that decreased from 15.09 in the year 2009-2010 to 12.26
in the 2010-2011.
5. Operating ration has increased from 79.1 in the year 07-08 to 82.5 in the year
2010-11
6. Asset turnover ratio was 1.4 in the year 2010-11.
7. Gross profit ratio has come down from 21% in year 2009-2010 to 17% in
2010-11.
8. Sales shows the increasing trend at the rate in every year.
SUGGESTIONS
The current ratio of the company is below the standard ratio in all the 5
years under study , Hence it should be improved at least to the standard.
The debt collection period is more than 180 days which is to be reduced or
the debt collection policy of the company is to be changed.
79
WWW.STUDENTS3K.COM
Suitable training may be imparted to all the executives including labourers

as and when they are recruited.
The gross profit of BHEL has to be increased , this can be done by taking
steps to reduce the cost of sales , which have its own affect over the gross profit.
As the consumption of raw materials holds a wider part in the cost of sales.
Researcher who is in the hands of the company to adopt consistent pricing policy
regarding raw materials which ultimately reduce the cost of sales & which in
tern improves the gross profit in the subsequent years.
The company may take one of the measures for improving more profits,
sale should be enhanced from into end through innovative marketing techniques.
In a competitive business world, unless & other wise aggressive it is very
difficult to achieve its required sales.
The concern must take measures to avoid dead stock which has an
adverse.
Effect over the liquidity
of the concern. The concern is required to
develop an effective inventory management system.

Sales are to be increased to keep with increased in fixed Assets in order
improve its fixed Assets turnover ratio.
CONCLUSION
Bharat Heavy Electricals units bying in India come under the purview of
NAVARATNA units. There are 14 more Bharat Heavy Electricals units /
80
WWW.STUDENTS3K.COM
divisions. Of this Bharat Heavy Electricals limited Tiruchirappalli is one the unit
and it earns more profit for every year continuously.
The company has been successful in meeting the demanding requirements
of not only in India but also international markets in terms of complicity of work
as well as Technology etc. BHEL has over the year established its reference in
to700 countries across the world. This unit gives more
employment ie to
thousands and thousands of workers. It gives more protection and safety to the
staff working in it besides more concentration to the welfare of the workers.
BHEL
is developing corporate social responsibility such as self
Employment generation, Environment protection, Education Health management

and medical aids and so an. Its focus attention is on 56 adopted villages having
nearly 80000in habitations in addition to financial assistance.
Finally, I pray God requesting to develop the unit more and in day by day.
BHEL should run in successful manner in future also.
81
WWW.STUDENTS3K.COM

Analysis of Financial Statement - (WWW - Students3k.com)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Analysis of Financial Statement - (WWW - Students3k.com)

Uploaded by

Copyright:

Available Formats

More MBA Projects available at : STUDENTS3K.

Financial statement is an organized collection of data according to logical

The focus of the financial analysis is on key figures in the financial

More MBA Projects available at : STUDENTS3K.COM

USERS OF FINANCIAL ANALYSIS:

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

Ratio analysis is a process of identifying the financial strengths and

More MBA Projects available at : STUDENTS3K.COM

Activity ratio reflects the firms efficiency in utilizing its assets in

Preformed financial statement analysis

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

Knowledge of ratios only is meaningless unless it is also found how it is made

2. METHODS OF LEAST SQUARES (TREND VALUES)

values of Y and the trend value (Yc) is 0 and sum of

More MBA Projects available at : STUDENTS3K.COM

Here a and b are constants or unknowns.

the numbers or months for which data are given

When x = 0, the equation will take the form of

by these equation we can know the values of a and b i.e

the mean value of Y values

3. COMPARATIVE STATEMENT ANALYSIS :

More MBA Projects available at : STUDENTS3K.COM

financial position embodied in such statements. In such statements figures for

More MBA Projects available at : STUDENTS3K.COM

more suitable idea to the management and developed the company in

More MBA Projects available at : STUDENTS3K.COM

from BHEL Trichy, hints the

the internal auditing books of BHEL

PERIOD OF THE STUDY:

More MBA Projects available at : STUDENTS3K.COM

2. Trend Analysis. (Least square Method)

More MBA Projects available at : STUDENTS3K.COM

Tootsie Roll Industries, Inc., through its subsidiaries, engages in the

More MBA Projects available at : STUDENTS3K.COM

Review Of Financial Statements

We will take two

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

BHEL was established more than four

decades age ushering in the indigenous Heavy Electrical Equipment ushering in

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

The Company has proven expertise in Plant Performance improvement

More MBA Projects available at : STUDENTS3K.COM

equipment, besides specialized know-how of residual life assessment, health

BHEL has supplied systems and individual products

including a large number of co-generation Captive power plants, Centrifugal

More MBA Projects available at : STUDENTS3K.COM

recovery boilers, Gas turbines, Pumps, Heat exchangers, Electrical machines,

More MBA Projects available at : STUDENTS3K.COM

electric locomotives ranging from 350 HP to 2600 HP to cement, steel and

Range of Renewable Energy product and systems manufactured and

supplied includes a number of solar water heating systems, solar photo-voltaic

More MBA Projects available at : STUDENTS3K.COM

OIL AND GAS

BHEL is supplying onshore drilling rig equipment viz. Draw works,

More MBA Projects available at : STUDENTS3K.COM

More MBA Projects available at : STUDENTS3K.COM

Compensation / controlled shunt Reactor schemes. BHEL has a team of experts