CHAPTER 1

INTRODUCTION
The financial statement provides the basic data for financial performance analysis. The
financial statements provide a summarized view of the financial position and operations of a
firm. Financial analysis (also referred to as financial statement analysis or accounting analysis)
refers to an assessment of the viability, stability and profitability of a business. The analyst first
identifies the information relevant to the decision under consideration from the total
information contained in the financial statements. Therefore, much can be learnt about a firm
from a careful examination of its financial statements as invaluable documents and
performance reports. The analysis of financial statements is an important aid to financial
analysis. They provide information on how the firm has performed in the past and what is its
current financial position. Financial analysis is the process of identifying the financial strengths
and weakness of the firm from the available accounting data and financial statements. The
analysis is done by establishing relationship between the different items of financial statements.
The focus of financial analysis is on key figures in the financial statements and the significant
relationship that exists between them. The first task of financial analyst is to select the
information relevant to the decision under consideration from the total information contained
in the financial statement. The second step involved in financial analysis is to arrange the
information in a way to highlight significant relationships. The final step is interpretation and
drawing of inferences and conclusions. In brief, financial analysis is the process of selection,
relation, and evaluation.

OBJECTIVES OF THE STUDY

a) To study the financial performance analysis of Reliance Life Insurance

a) To compare and analyze the financial statements for the past two financial years (2013-14
and 2014-15)

b) To know the profitability, liquidity and solvency position of Reliance Life Insurance

c) To compare and interpret financial statements of the Reliance Life Insurance with
comparative analysis.

d) To provide suggestions for improving the overall finance performance of the company.

Research Methodology
The methodology followed for conducting the study includes the specifications of research
design and data collection used for analyzing the collected data.
a. Research Design:
The research design which will be used for this study is descriptive type.

b. Sources of data collection:

The study is based on secondary data that has been collected from annual reports , magazines,
journals, documents and other published information. The study covers the period of 2 years
i.e. from year 2013-14 to year 2014-15. Ratio. Analysis was applied to analyze and compare
the trends in insurance business and financial performance.

c. Tabulation, Analysis and Interpretations:

On the basis of classification, tables will be prepared. These tables are to be set for
interpretation based on Qualitative analysis using industry expertise.

LIMITATION OF THE STUDY

Due to constraints of time and resources, the study is likely to suffer from certain limitations.
Some of these are mentioned here under so that the findings of the study may be understood in
a proper perspective.
The limitations of the study are:
The study is based on the secondary data and the limitation of using secondary data may
affect the results.
The secondary data was taken from the annual reports of the Reliance Life Insurance. It may
be possible that the data shown in the annual reports may be window dressed which
does not show the actual position of the banks.

Financial analysis is mainly done to compare the growth, profitability and financial soundness
of the respective insurance companies by diagnosing the information contained in the financial
statements.
Financial analysis is done to identify the financial strengths and weaknesses of the insurance
company by properly establishing relationship between the items of Balance Sheet and Profit
& Loss Account. It helps in better understanding of companies financial position, growth and
performance by analyzing the financial statements with various tools and evaluating the
relationship between various elements of financial statements.

SCOPE OF THE STUDY

The study is based on the accounting information of the Reliance Life Insurance. The study
covers the period of 2013-14 and 214-15 for analyzing the financial statement such as income
statements and balance sheet.
The scope of the study involves the various factors that affect the financial efficiency of the
company. To increase the profit and sales growth of the company. This study finds out the
operational efficiency of the organization and allocation of resources to improve the efficiency
of the organization.
The data of the past two years are taken into account for the study. The performance is
compared within those periods. This study finds out the areas where Reliance Life Insurance can
improve to increase the efficiency of its assets and funds employed.

CHAPTER 2
THEORETICAL BACKGROUND
Few men in history have made as dramatic a contribution to their country's economic progress
as did the founder of Reliance, Shri. Dhirubhai H. Ambani. Fewer still have left behind a legacy
that is more enduring and timeless.As with all great pioneers, there is more than one unique
way of describing the true genius of Dhirubhai: the corporate visionary, the unmatched
strategist, the proud patriot, the leader of men, the architect of India's capital markets, and the
champion of shareholder interest. But the role Dhirubhai cherished most was perhaps that of
India's greatest wealth creator. In one lifetime, he built from scratch, India's largest private
sector enterprise.When Dhirubhai embarked on his first business venture, he had a seed capital
of only about US$ 300 (around Rs. 14,000). Over the next three and a half decades, he
converted this fledgling enterprise into a 60,000 crore colossusan achievement which earned
Reliance a place on the global Fortune 500 list, the first ever Indian private company to do
so.Dhirubhai is widely regarded as the father of India's capital markets. In 1977, when Reliance
Textile Industries Limited first went public, the Indian stock market was a place patronised by
a small club of elite investors which dabbled in a handful of stocks. Undaunted, Dhirubhai
managed to convince a large number of first-time retail investors to participate in the unfolding
the Reliance story and put their hard-earned money into the Reliance Textile IPO, promising
them in exchange for their trust, substantial return on their investments. It was to be the start
of one of the greatest stories of mutual respect and reciprocal gain in the Indian market.Under
Dhirubhai's extraordinary vision and leadership, Reliance scripted one of the greatest growth
stories in corporate history anywhere in the world, and went on to become India's largest private
sector enterprise.

CHAPTER 3 :
DATA PRESENTATION AND ANALYSIS
TOOLS USED FOR ANALYSIS
(1) Ratio Analysis
Profitability ratio

Gross profit ratio

Net profit ratio

Return on equity

Activity ratio

Working capital turnover ratio

Capital turnover ratio

Fixed assest turnover ratio

Solvency ratio

Current ratio

Debt equity ratio

(2) Comparative Statement Analysis

RATIO ANALYSIS:
A ratio is the process of determining and presenting the relationship of items and groups of
items in the financial statements. The ratios can be classified into the following types:

PROFITABILITY RATIO :
Profitability Ratio measured as i ability to make maximum profit from optimum

utilization by a business concern is termed as profitability.

o GROSS PROFIT RATIO
This ratio is also known as Gross Margin or Trading Margin Ratio. Gross Profit Ratio includes
the difference between sales and direct costs.

Gross Profit Ratio = ( Gross Profit / Net Sales ) * 100

YEARS

GROSS

PROFIT NET SALES (RS)

RATIO (IN %)

(RS)
2013-2014

21971.03

108277.62

20.29

2014-2015

32347.63

118189.37

27.37

INFERENCES:
The Gross Profit for the financial year 2013-2014 was recorded as per the ratio is
20.29%, where as the years between 2014-2015 went through a change in the ratio of 27.37%
Thus, it is showing the steady growth in the company profile.

o NET PROFIT RATIO

It measures of management efficiency in operating the business successfully from the owners
point of view. Higher the ratio better is the operational efficiency of business concern.

Net Profit Ratio = ( Net Profit After Tax / Net Sales ) *100

YEARS

NET PROFIT (RS)

NET SALES (RS)

RATIO (IN %)

2013-2014

15073.14

108277.62

13.92

2014-2015

22674.86

118189.37

19.18

INFERENCES:
The Net Profit Ratio depicts that the company had a good profit in 2013-2014 i.e 13.92% where
it had a good yield profit. Comparing to the year 2014-2015 is 19.18%. This indicates that
there is an improvement in the operational efficient of the business and it leads to the increase
in the profitability of the firm.

o RETURN ON EQUITY OR RETURN ON NET WORTH

This ratio signifies the return on equity shareholders funds. The profit considered for
computing the ratio is taken after payment of preference dividend.

Return on Equity = ( Net Profit After Interest And Tax / Shareholders funds ) * 100

YEARS

NET

PROFIT SHAREHOLDER

AFTER

RATIO(IN %)

FUNDS(RS)

INTEREST AND
TAX (RS)
2013-2014

15073.14

268538.97

5.61

2014-2015

22674.86

333318.07

6.80

INFERENCES:
Return on shareholder fund determines the profitability from the shareholders point of view.
From the above, it shows that in the year 2013-2014, the company shows 5.61% of ratio and it
has risen to 6.80%. This is a clear indication of overall operation is efficient.

ACTIVITY RATIO OR TURNOVER RATIO:

Activity ratios highlight the operational efficiency of the business concern. The term

operational efficiency refers to effective, profitable and rational use of resources available to
the concern.

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o WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working capital. It also measures
the smooth running of business. The ratio establishes relationship between cost of sales and
working capital.

Working Capital Turnover Ratio = ( Sales / Net Working Capital )

YEAR

SALES (IN RS)

NET

WORKING RATIO (IN TIMES)

CAPITAL (IN RS)

2013-2014

108277.62

666319.18

0.16

2014-2015

118189.37

898497.54

0.13

INFERENCES:
A higher ratio is the indication of lower investment of working capital and more profit.
In 2013-2014, the sales of the company are high at 0.16 times but in the year 2014-2015, it
gone downward of sales to 0.13 times.

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o CAPITAL TURNOVER RATIO

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 = (Sales / Capital Employed)

YEARS

NET SALES (RS)

CAPITAL

RATIO (IN TIMES)

EMPLOYED (RS)
2013-2014

108277.62

533288.26

0.20

2014-2015

118189.37

720052.92

0.17

INFERENCES:
In the year 2013-2014, the sales comparing to 2014-2015 it is decreased to 0.17 times and it
shows that efficient methods are adopted to use the capital employed.

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o FIXED ASSET TURNOVER RATIO

This ratio determines efficiency of utilization of fixed assets and profitability of a business

Fixed Asset Turnover Ratio = (Sales / Net Fixed asset)

YEAR

SALES (RS)

FIXED ASSET (RS) RATIO (IN TIMES)

2013-2014

108277.62

20241.05

5.35

2014-2015

118189.37

23237.80

5.09

INFERENCES:
Higher the ratio is more than the efficiency in utilization of Fixed Assets. Lower ratio
indicates the under utilization of fixed assets. From the above table it indicates that the sales
has been gradually declining over the next year 2014-2015 for 5.09 times.

SOLVENCY OR FINANCIAL RATIOS

Solvency or Financial Ratios include all ratios which express financial position of the concern.
The term financial position generally refers to short-tem and long-term solvency of the business
concern, including safety of different interested parties.

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o CURRENT RATIO

In order to measure the short-term liquidity or solvency of a concern, comparison of current

assets and current liabilities is inevitable. Current ratio indicates the ability of a concern
to meet its current obligations as and when they are due for payment.

Current Ratio = ( Current asset / Current liabilities )

YEAR

CURRENT ASSET CURRENT

RATIO (IN TIMES)

(RS)

LIABILITY(RS)

2013-2014

68876.04

50360.94

1.36

2013-2014

166489.36

55084

3.02

INFERENCES:
A high current ratio is an assurance that the firm will have adequate funds to pays
current liabilities and other payment. During the year 2013-2014, the current ratio is 3.02 times
and it is more when compared with previous year 2014-2015 is 1.36 times.

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o DEBT EQUITY RATIO

The debt equity ratio is determined to ascertain the soundness of the long term financial
policies of the company and also to measures the relatives proposition of outsiders
funds and shareholders funds investments in the company.

Debt Equity Ratio = ( Total Long term Debt / Shareholders Funds )

YEAR

LONG

TERM SHAREHOLDER

RATIO (IN TIMES)

DEBT (RS)

FUNDS (RS)

2013-2014

418021.26

115267

3.62

2014-2015

588417.27

131635.65

4.47

INFERENCES:
From the above table, during the year 2013-2014 the debt equity ratio is 3.62 times and then it
shows the uptrend from the year 2014-2015 as 4.47 times. Suggest that the debt from the
company has increased over the years with increase in shareholder funds as well.

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It is on two or more different dates can be used for comparing assets and liabilities and findings
out any increase or decrease in the items.
PARTICULARS

Income

2014

from 108277.62

2015

Amount

Percentage

Increase /

Increase

Decrease

Decrease

during (Rs.)

(In %)

118189.37

+9911.75

+9.15

63379.55

(1164.54)

(1.80)

54809.82

+11076.29

+25.33

2538.90

Operation
Less:

Financial 64544.09

Expense
Gross Profit (A)

43733.53

Other Income:
Profit on Sale of Shares
Other Income

3199.28

4142.57

+943.29

+29.48

Total (B)

3199.28

6681.47

+3482.19

+108.84

Total Income

46932.81

61491.29

14558.48

+134.17

7160.91

6042.27

(1118.64)

(15.62)

9407.97

10011.23

+603.26

+6.41

(A+B) = C
Expense:
Operating Expense:
Administration
Expense
Establishment
Expense

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Provision

4616.80

8608.59

+3991.79

+86.46

Depreciation

3776.10

4481.57

+705.47

+18.68

Total Operating

24961.78

29143.66

+4181.88

+16.75

Operating Profit 21971.03

32347.63

+10376.6

+47.23

6897.89

9672.77

+2774.88

+40.23

Non- 6897.89

9672.77

+2774.88

+40.23

22674.86

+7601.72

+50.43

Expense (D)

(C-D)
Non-Operating Expense:
Taxation
Total
Operating
Expense (F)
Net Profit (E-F)

15073.14

INFERENCES:
The comparative income statement shows income from operation amount increase during the
year 2014-2015 was Rs.9911.75 and increase in percentage of 9.15.
For the year 2014-2015, the total income indicates Rs.14558.48 and percentage increase during
the year 2014-2015 was 134.17.
The operating profit has been increased is Rs.32347.63 in the year 2015 which is
comparing to the previous year was Rs.21971.03 and the percentage shows increase by 47.23.
The Net profit amount increases during 2014-2015 is Rs. 7601.72 and shows percentage
increase by 50.43.

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Particulars

2014

2015

Amount

Percentage

(Rs.)

(Rs.)

Increase /

Increase /

Decrease

Decrease

Assets:
Current Assets

68876.04

166489.36

+97613.32

+141.72

Loans & Advance

653955.77

799363.96

+145408.19

+21.98

Deferred Tax Asset

5691.36

6124.40

+433.04

+7.61

Investment

51188.87

53744.80

+2555.93

+4.99

Fixed Asset

20241.05

23237.80

+2996.75

+14.80

Total Asset

799953.09

1048960.32

+249007.23

+31.13

Liabilities and Capital:

Current Liability

58478.77

67946.53

+9467.76

+16.19

Unsecured Loan

208479.20

260960.87

+52481.67

+25.17

Secured Loan

417728.12

588417.27

+170689.15

+40.86

Total Liabilities (A)

684686.09

917324.67

+232638.58

+33.98

5555.19

5555.19

Options

109711.81

126080.46

+16368.65

+14.92

Total

115267.0

131635.65

16368.65

+14.20

799953.09

1048960.32

249007.23

+31.13

Capital and Reserve:

Share Capital
Reserve & Stock

Shareholders
Funds (B)
Total Liabilities
and Capital (A+B)

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INFERENCES:
In the year 2014-2015, the investment it shows the uptrend for the year 2015 as
Rs.53744.80 and it has increased by 4.99%.
Fixed assets has been increased was Rs.23237.80 in the year 2015 which is comparing to the
previous year and the percentage shows increase by 14.80.
During the year 2014, the shareholders fund amount to Rs.115267.00 it has been increased to
the amount of Rs. 131635.65 and percentage increased was 14.20.
Secured loans shows uptrend by Rs.588417.27 over the previous year of Rs.417728.12 and
increase in percentage of 33.98.

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CHAPTER 4
FINDINGS AND INFERENCE

The Gross Profit Ratio shows that increasing in sales has maintained the companys
profit level. In the year 2013-2014, the percentage shows 20.29 it has been increased
during the year 2014-2015 to 27.37.

The net profit ratio has been increased to 19.18 during the financial year 2014 2015
to 13.92 during 2013 2014 which indicates that there is an improvement in the
operational efficient of the business and it leads to the increase in the profitability of
the firm.

It has found that the return on equity during the year 2013-2014, the company shows
5.61% of ratio and it has risen to 6.80%. This is a clear indication of overall operation
is efficient.

The Working capital in the year 2013-2014, the sales of the company is low at
Rs.666319.18 and it is increased to Rs.898497.54 in 2014-2015. It measures the
effective utilization of working capital.

The capital turnover of capital employed in the financial year 2013-2014 it shows
Rs.533288.26 and during the year 2014-2015 it is increased to Rs.720052.92. It has
effective utilization of capital employed under the current year.

Fixed asset turnover shows increase in sales of Rs.118189.37 comparing to the previous
year of Rs. 108277.62 and the firm should maintain this increasing trend in future also.

During the year 2014-2015, the current ratio is 3.02% and it is more when compared
with previous year 2013-2014 is 1.36 %. So the short term liquidity of a concern,
comparison of current assets and current liabilities is inevitable.

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The debt equity ratio has shows 3.62% in 2013-2014 and it has been raised to 4.47%
during 2014-2015 which indicates that the company has increased over the years with
increase in shareholder funds as well.

It is found that the shareholders funds had increased by Rs.16368.65 over the
percentage of 14.20 in comparative income statement analysis. It determines the
profitability from the shareholders point of view.

The financial year 2014-2015 depicts the Net Cash from financing activities amount of
Rs.217819.49 shows upward profit in the company.

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SUGGESTION AND CONCLUSION

SUGGESTIONS
The current ratio is improving rapidly so the bank wants to keep an eye on the current assets
flow. The firm has been suggested to reduce the expenditure as it increases every year.
Decrease in expenses will increase the profitability. By over viewing the working capital
turnover ratio it is clear that the firm wants to utilize its working capital efficiently that is the
excess current assets should be adjusted according to current scenario. Though the net profit
shows it is increased but we found that the net profit ratio has been decreased. So the firm
should consider increasing the sales in turn to increase the actual profit.
The debt equity ratio of the firm is also increasing. The firm should focus on the debt and long
term funds which are utilized in the company. The excess cash flow should or can be utilized
in any new ventures if the company wishes to do.

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CONCLUSION
In the study of Financial Performance of Reliance Life Insurance it is clear that the firms
financial performance is satisfactory. The firm has stable growth and it shows a greater
efficiency in all the areas it works.
If the company utilizes its working capital then the company can go heights which it wanted to
achieve. The comparative income statement shows increase in the current year of net profit and
it depict the companies current profit position. To improve the efficiency the firm will strive
for better performance and increase the market share the company.
The suggestions provided through the study will help the firm to improve the operational
performance efficiently. The suggestions provided through the study will help the firm to
improve the operational performance efficiently.

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BIBLIOGRAPHY
BOOKS:Mcom part 1-advanced financial accountancy-Mumbai university
WEBSITE:http://www.google.com
http://www.scribd.com
http://www.reliancelife.com

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