Research Methodology and Data Collection

Research Methodology
A. Problem Statement
A study on Financial Analysis of Reliance Industries LTD.
B. Objective Of Study
To understand the information contained in financial statements with a view to know the
strength or weaknesses of the firm and to make forecast about the future prospects of the
firm and thereby enabling the financial analyst to take different decisions regarding the
operations of the firm.
C. Research design
I have used Descriptive research design for this Research.

Research Design pertains to the great research approach or strategy adopted for a
particular project. A research project has to be the conducted scientifically making sure
that the data is collected adequately and economically.

The study used a descriptive research design for the purpose of getting an insight over
the issue. It is to provide an accurate picture of some aspects of market environment.
Descriptive research is used when the objective is to provide a systematic description that
is as factual and accurate as possible.
D. Sample design
Sampling unit: - financial statements.

Sampling size: - last three year financial statement.
E. Data collection method

Secondary Data: Through the internet and published data
F. Data collection period

15st June, 2016 to 18st July, 2016.
Financial Analysis of Reliance Industries LTD.
Financial Statement Analysis

Common Size Statement Analysis
Trend Analysis
Ratio Analysis
FINANCIAL STATEMENT ANALYSIS:

BALANCE SHEET
2014
2015
Liabilities:Equity Share Capital

Revaluation Reserves
Reserves and Surplus
Equity Share Application Money
Long Term Borrowings
Deferred Tax Liabilities [Net]
Long Term Provisions
Short Term Borrowings
Trade Payables
Other Current Liabilities
Short Term Provisions
Total Liabilities
3,232.00
0
1,93,842.00
17
62,711.00
12,215.00
0
22,770.00
57,862.00
10,767.00
4,167.00
3,67,583.00
3,236.00
0
2,12,923.00
17
76,227.00
12,677.00
1,404.00
12,914.00
54,470.00
19,063.00
4,854.00
3,97,785.00
Assets:Tangible Assets
Intangible Assets
Capital Work-In-Progress
80,368.00
29,038.00
32,673.00
79,778.00
34,785.00
65,178.00
Intangible Assets Under Development
9,043.00
10,575.00
Non-Current Investments
Long Term Loans And Advances
Current Investments
Inventories
Trade Receivables
Cash And Cash Equivalents
Short Term Loans And Advances
Other Current Assets
Total Assets
52,692.00
52,692.00
33,370.00
42,932.00
10,664.00
36,624.00
11,277.00
466
3,67,583.00
62,058.00
62,058.00
50,515.00
36,551.00
4,661.00
11,571.00
12,307.00
547
3,97,785.00
INCOME STATEMENT
Particulars
Amount
Amount
2014
2015
Gross sales
4,01,302
3,40,814
(-) returns
11,185.00
11,738.00
Net sales
3,90,117
3,29,076
COGS
303489
246274
Gross Profit
86,628.00
82,802
1)Depreciation
8,789
8,488
2)Employee salaries
3370
3,686
Operating profit
74469
70,628
(-)Indirect operating expenses
(-) Non-operating expenses:1)Financial costs
3,206
2,367
Net profit before tax
71,263
68,261
(-) Tax
5834
6749
Net profit after tax
65,429
61,512
(-) Equity share dividend
2793
2944
Surplus/Retained Earnings
62,636
58,568
TREND ANALYSIS:
In financial analysis the direction of changes over a period of years is of crucial importance.
Time series or trend analysis of ratio indicates the direction of change. This kind of analysis is
particularly applicable to the items of profit and loss account and balance sheet.
Trend Analysis of INCOME STATEMENT:

Trend Analysis
PARTICULARS
2013
2014
2015
2013
2014
2015
Gross sales
3,71,119.00 4,01,302
3,40,814
100
108.133
91.834
(-) returns
10,822.00
11,185.00
11,738.00
100
103.354
108.464
Net sales
3,60,297
3,90,117
3,29,076
100
108.277
91.335
COGS
342,011
371,235
308,329
100
Gross Profit
3,50,832
86,628.00
82,802
100
1)Depreciation
9,465
8,789
8,488
100
92.858
89.678
2)Employee salaries
3,354
3370
3,686
100
100.477
109.899
74469
70,628
100
241.885
229.409
(-)Indirectoperating expenses
Operating profit
30787
(-) Non-operating expenses:1)Financial costs
3036
3,206
2,367
100
105.600
77.964
26,284
27,818
29,468
100
105.836
112.114
(-) Tax
5,281
5834
6749
100
110.472
127.798
21,003
21,984
22,719
100
104.671
108.170
2628
2793
2944
100
106.279
112.024
18,375
19,191
19,775
100
104.441
107.619
Trend Analysis of Balance sheet:

Trend analysis
Particulars
2013

Equity
Share
3229.00
0
1,75,711.0
0
Application 25
Money
Trade Payables
Total Liabilities
43,012.00
12,193.00
0
11,511.00
45,787.00
21,640.00
4,348.00
318,511.0
2013
2014
2015
100
100
100
100.093
0
110.319
100.217
0
121.178
17
0
17
100
68
68
62,711.00
12,215.00
0
22,770.00
57,862.00
10,767.00
4,167.00
3,67,583.00
76,227.00
12,677.00
1,404.00
12,914.00
54,470.00
19,063.00
4,854.00
3,97,785.0
100
100
100
100
100
100
100
100
145.799
100.180
0
197.811
126.372
49.755
95.873
115.407
177.223
103.970
0
112.189
118.964
88.091
111.638
124.889
2014
3,232.00
3,236.00
0
0
1,93,842.00 2,12,923.0
0
Assets:Tangible Assets
Intangible Assets
Intangible
Assets
Under
2015
82,962.00
26,786.00
13,525.00
5,591.00
80,368.00
29,038.00
32,673.00
9,043.00
79,778.00
34,785.00
65,178.00
10,575.00
100
100
100
100
96.873
108.407
241.575
161.742
96.162
129.863
481.908
189.143
Development
24,143.00
Long Term Loans And 21,528.00
52,692.00
52,692.00
62,058.00
62,058.00
100
100
218.250
132.088
257.043
135.911
Advances
Current Investments
Inventories
Trade Receivables
Short Term Loans And
28,366.00
42,729.00
11,880.00
49,547.00
10,974.00
33,370.00
42,932.00
10,664.00
36,624.00
11,277.00
50,515.00
36,551.00
4,661.00
11,571.00
12,307.00
100
100
100
100
100
117.641
100.475
89.764
73.918
102.761
178.083
85.541
39.234
23.354
112.147
Advances
480
466
547
100
97.083
113.958
Total Assets
318,511.0
3,67,583.00 3,97,785.0
COMMON SIZE STATEMENT:
Common Size Statement of Income Statement
100
115.407
124.889
Particulars
2014
2015
3,40,814
100
100
11,185.00
11,738.00
2.78718
3.44411
Net sales
3,90,117
3,29,076
97.2128
96.5559
COGS
303489
246274
75.6261
72.2605
Gross Profit
86,628.00
82,802
21.5867
24.2954
1)Depreciation
8,789
8,488
2.19012
2.49051
2)Employee salaries
3370
3,686
0.83977
1.08153
Operating profit
74469
70,628
18.5568
20.7233
1)Financial costs
3,206
2,367
0.7989
0.69451
71,263
68,261
17.7579
20.0288
(-) Tax
5834
6749
1.45377
1.98026
65,429
61,512
16.3042
18.0486
2793
2944
0.69598
0.86381
62,636
58,568
15.6082
17.1847
2014
2015
Gross sales
4,01,302
(-) returns
(-)Indirect operating expenses
(-) Non-operating expenses:-
Common Size Statement of Balance sheet
Common
PARTICULARS
2014
2015
sixe
statement
2014
2015
3,232.00
3,236.00
0.87926
0.8135
1,93,842.00
2,12,923.00
52.7342
53.5272
Equity Share Application Money
17
17
0.00462
0.00427
62,711.00
76,227.00
17.0604
19.1629
12,215.00
12,677.00
3.32306
3.1869
1,404.00
0.35295
22,770.00
12,914.00
6.19452
3.24648
Trade Payables
57,862.00
54,470.00
15.7412
13.6933
10,767.00
19,063.00
2.92913
4.79229
4,167.00
4,854.00
1.13362
1.22026
Total Liabilities
3,67,583.00
3,97,785.00
100
100
Tangible Assets
80,368.00
79,778.00
21.8639
20.0556
Intangible Assets
29,038.00
34,785.00
7.89971
8.74467
32,673.00
65,178.00
8.8886
16.3852
Intangible Assets Under Development
9,043.00
10,575.00
2.46012
2.65847
52,692.00
62,058.00
14.3347
15.6009
Long Term Loans And Advances
52,692.00
62,058.00
14.3347
15.6009
Current Investments
33,370.00
50,515.00
9.07822
12.6991
Inventories
42,932.00
36,551.00
11.6795
9.18863
Assets:-
Trade Receivables
10,664.00
4,661.00
2.90111
1.17174
36,624.00
11,571.00
9.96346
2.90886
Short Term Loans And Advances
11,277.00
12,307.00
3.06788
3.09388
466
547
0.12677
0.13751
Total Assets
3,67,583.00
3,97,785.00
100
100
RATIO ANALYSIS:
Accounting Ratios are very useful as they briefly summarize the result of detailed and
complicated computations. Ratio analysis is one of the techniques of financial analysis to
evaluate the financial condition and performance of a company. Ratio analysis of financial
statements is a study of relationship among various financial factors in a business as disclosed by
a single set of statements and a study of trend of these factors as shown in a series of statements.
1) CURRENT RATIO :
Current ratio = Current assets / Current liabilities
Year
Current Assets
Current Liabilities
Current ratio: -
2014
1,35,333
95,566
1.41:1
2015
1,16,152
91,301
1.27:1
INTERPRETATION:
The ideal ratio is 2:1. The current assets and liabilities of reliance industries are almost
equal. Therefore, company must increase its assets.
2) QUICK RATIO:
Quick ratio = Quick Asset / Quick liabilities
Quick Asset = Current Asset Inventory
Quick liabilities = Quick liability Bank O.D
Year
Quick assets
Quick liabilities
Quick ratio
2014
92401
95,566
0.967 :1
2015
79601
91,301
0.872 :1
INTERPRETATION:
Ideal quick ratio is 1:1. The ratio here in both the years is less than that of the ideal ratio.
Therefore, company must improve.
3) NET PROFIT RATIO :
Net profit = Net Profit / Sales *100
YEAR
NET PROFIT
SALES
NET PROFIT RATIO
2014
21,984.00
3,90,117.00
5.635%
2015
22,719.00
3,29,076.00
6.904%
INTERPRETATION:
The ideal net profit ratio is 20%. The industries ratio is much less than that. Hence, we
can say that industry is average in terms of net profit ratio.
4) OPERATING RATIO :
Operating ratio = cost of goods sold + operating expenses / total sales
COST OF GOOD SOLD

YEAR
OPERATIONG
OPERATING
TOTAL SALES
RATIO
(%)
EXPENSES
2014
346009
3,90,117.00
88.69%
2015
280882
3,29,076.00
85.35%
INTERPRETATION:
The ratio should be 80 or less than that. The companys ratio shows that most of the income
goes in operating expenses. Therefore, company must try to reduce it in order to make
payments for fixed assets, interest, etc.
5) PROPRIETARY RATIO:
Proprietary ratio = Owners fund / (Total assets Intangible assets)
OWNER'S
TOTAL
FUND
INTANGIBLE ASSETS
2014
3,232.00
106295
0.030405946
2015
3,236.00
81367
0.039770423
YEAR
ASSETS-
PROPRIETARY RATIO
INTERPRETATION:
AN ideal proprietary ratio is the one which is neither too high nor too low. The companys
ratio is quite low which shows less security to the creditors.
6) WORKING CAPITAL TURNOVER RATIO:
Working Capital Turnover Ratio = Sales / Net W.C
Net working capital = current assets current liabilities
year
sales
net working capital
working capital turnover ratio
2014
3,90,117.00
39767
9.81006865
2015
3,29,076.00
24851
13.24196209
INTERPRETATION:
As compared to previous year, the ratio of the company has increased by 35% which is
beneficial for the industry.
7) DEBTORS TURNOVER RATIO:
Debtors turnover ratio indicates the number of times debtors turnover each year.
Debtors turnover ratio = sales / Average Account receivable
DEBTORS
YEAR
SALES
DEBTORS
2014
3,90,117.00
10,664.00
36.58 days
2015
3,29,076.00
4,661.00
70.60 days
TURNOVER
RATIO
INTERPRETATION:
The ratio of the company has increased as compared to previous year which shows that either
the company has decreased its debtors payment period or it means that debtors of the company
have increased.
8) TOTAL ASSETS TURNOVER RATIO:

This ratio shows the firms ability in generating sales from all financial resources committed to
total asset.
Total Assets Turnover Ratio = Sales / Total Assets.
TOTAL
YEAR
SALES
TOTAL ASSETS
2014
3,90,117.00
1,35,333
3:1
2015
3,29,076.00
1,16,152
3:1
ASSESTS
TURNOVER RATIO
INTERPRETATION:
The ratio of this year is equal as compared to previous year which means the company makes use
of its assets optimally in order to increase its sales.
9) DEBT EQUITY RATIO:Debt equity ratio = Total long term debts / Owners fund
YEAR
DEBTS
OWNER'S FUND
DEBT EQUITY RATIO
2014
62,711.00
3,232.00
19:1
2015
76,227.00
3,236.00
23:1
INTERPRETATION:
The ideal ratio is 0.4 or less than that but, the companys ratio is much higher than that which
results into difficulty in borrowing money from lenders because they have certain credit limits.
10) GROSS PROFIT:

GROSS PROFIT RATIO = GROSS PROFIT / SALES
YEAR
GROSS
PROFIT
SALES
GROSS PROFIT RATIO
2014
60692
3,90,117.00
15.55%
2015
67887
3,29,076.00
20.62%
INTERPRETATION:
The ideal ratio is 55%.As compared to this, the companys ratio is much low which
means the company has less money to pay operating expenses like salaries, utilities, and
rent. Therefore, this ratio should as high as possible.
11) STOCK TURNOVER RATIO:
Stock turnover ratio = cost of goods sold / average stock
YEAR
COGS
AVERAGE STOCK
stock turnover ratio
2014
329425
26969.5
12.21472404
2015
261189
329519
0.792637147
INTERPRETATION:
Turnover ratio has decreased by 93.5% as compared to previous year which is a quite
huge decrease. Both the situations are risky because low ratio implies a faulty purchasing
system whereas, high ratio implies that purchasing system is tightly managed. Hence, the
company must have medium ratio which is neither too high nor too low.
12) CREDITORS TURNOVER RATIO:
CREDITORS TURNOVER RATIO = (CREDITORS + BILL PAYABLE) / AVERAGE CREDIT
PURCHASE*365
YEAR
(CREDITORS
BILL PAYABLE)
AVERAGE
PURCHASE
CREDIT
CREDITORS TURNOVER
RATIO
2014
57,862.00
329519
64 days
2015
54,470.00
256969.5
77.36 days
INTERPRETATION:
It is favorable to have higher creditors turnover ratio because it shows that the company
pays its bills frequently and regularly. The companys creditors ratio has increased as
compared to previous year which is a good sign for the company.
13) RETURN ON CAPITAL EMPLOYED:
RETURN ON CAPITAL EMPLOYED = NET PROFIT / (SHARE CAPITAL + RESERVES +
LONG TERM LOANS) * 100
(SHARE
YEAR
NET PROFIT
CAPITAL
RESERVES
TERM LOANS)
LONG
RETURN ON CAPITAL
EMPLOYED
2014
21,984.00
3,11,497.00
7.057531854
2015
22,719.00
3,44,162.00
6.601251736
INTERPRETATION:
A higher ratio would be more favorable because it means that more profits are generated
by each amount of capital employed. The companys ratio is decreasing and so it must try
to increase it efficiently to generate more profits.
14) RETURN ON EQUITY SHARE CAITAL:
RETURN ON EQUITY SHARE CAITAL = (NET PROFIT - PREFRENCE DIVIDEND)

/EQUITY SHARE CAPITAL * 100
(NET
YEAR
PROFIT
PREFRENCE
DIVIDEND)
EQUITY
SHARE
RETURN
ON
CAPITAL
SHARE CAITAL
2014
21,984.00
54,944.00
40.01164822
2015
22,719.00
55,012.00
41.2982622
EQUITY
INTERPRETATION:
Here, higher values are generally favourable which means that the company is efficient in
generating income on new investment. The companys ratio for both the years is high which
means the company is effectively generating income on new investments.

Research Methodology and Data Collection

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Research Methodology and Data Collection

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Research Methodology

I have used Descriptive research design for this Research.

that the data is collected adequately and economically.

Sampling unit: - financial statements.

E. Data collection method

F. Data collection period

Financial Analysis of Reliance Industries LTD.

Financial Statement Analysis

FINANCIAL STATEMENT ANALYSIS:

Liabilities:Equity Share Capital

Intangible Assets Under Development

(-)Indirect operating expenses

(-) Non-operating expenses:1)Financial costs

Net profit before tax

Net profit after tax

(-) Equity share dividend

Trend Analysis of INCOME STATEMENT:

(-) Non-operating expenses:1)Financial costs

Net profit before tax

Net profit after tax

(-) Equity share dividend

Trend Analysis of Balance sheet:

Liabilities:Equity Share Capital

COMMON SIZE STATEMENT:

Common Size Statement of Income Statement

Net profit before tax

Net profit after tax

(-) Equity share dividend

(-)Indirect operating expenses

(-) Non-operating expenses:-

Common Size Statement of Balance sheet

Liabilities:Equity Share Capital

Reserves and Surplus

Equity Share Application Money

Long Term Borrowings

Deferred Tax Liabilities [Net]

Long Term Provisions

Short Term Borrowings

Other Current Liabilities

Short Term Provisions

Intangible Assets Under Development

Long Term Loans And Advances

Cash And Cash Equivalents

Short Term Loans And Advances

Other Current Assets

NET PROFIT RATIO

Operating ratio = cost of goods sold + operating expenses / total sales

COST OF GOOD SOLD

net working capital

working capital turnover ratio

7) DEBTORS TURNOVER RATIO:

8) TOTAL ASSETS TURNOVER RATIO:

DEBT EQUITY RATIO

10) GROSS PROFIT:

GROSS PROFIT RATIO

stock turnover ratio

14) RETURN ON EQUITY SHARE CAITAL:

RETURN ON EQUITY SHARE CAITAL = (NET PROFIT - PREFRENCE DIVIDEND)

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