Presentation on Summer Training Report

AT SOUTH EASTERN COALFIELDS LIMITED A Mini Ratna Company

ON COMPARATIVE ANALYSIS OF FINANCIAL RATIOS OF SUBSIDIARIES OF C.I.L. BY :- WILSON XALXO

9/27/2012

According to Robert N. Anthony A ratio is simply one number expressed in term of another. Ratio Analysis, therefore, means the process of computing, determining and presenting the relationship of related items and group of items of the financial statement. The relationship between two accounting figures, expressed mathematically, is known as financial ratio. Ratio analysis is the process of identifying the financial strengths and weakness of an enterprise by properly establishing relationships between the items of the balance sheet and profit and loss account

Importance 1. Useful in financial position analysis 2. Useful in simplifying accounting figure 3. Useful in assessing the operational efficiency 4. Useful in forecasting purpose 5. Useful in locating the weak spots of the business 6. Useful in comparison

Limitations 1. False results 2. Variation in accounting policies 3. Price level changes affect ratios 4. Ignoring qualitative factors 5. . Misleading results in the absence of absolute data

Interpretation: - Current Ratio of 2:1 is considered ideal for any concern i.e. current assets should be twice the amount of current liabilities. If the current assets are two times the current liabilities, there will be no adverse effect on business operations when current liabilities are paid off. If the ratio is less than 2 difficulties may be experienced in the payment of current liabilities and day-to-day operations of the business may suffer. if the ratio higher than 2 it is very comfortable for the creditor but, for the concern. it indicate accumulation of idle fund and lack of the enthusiasm for work.

Interpretation: -The quick ratio of 1:1 ratio is considered ideal ratio for a concern because it is wise to keep the liquid assets at least equal to the liquid liabilities at all time. Liquid assets are those assets, which can be readily converted into cash and will include cash balance, bills receivable, sundry debtors, and short-term investments.

Interpretation: -Working capital is the excess of current assets over current liabilities. Increase in volume of sales requires increase in size of inventory, but from a sound financial point of view, inventory should not exceed amount of working capital. The desirable ratio is 1:1.

Interpretation: - This ratio is very useful for analysis for long-term financial condition. This ratio signifies the excess of proprietors funds over outsiders funds and thereby indicates the soundness of the financial / capital structure of the business enterprise.

Interpretation: - This ratio is very important for the creditors, because they know the share of Proprietors Funds in the total assets and satisfy how far their loan is secured. The higher the ratio, the more safety will be to the creditor.

Interpretation: -This shows that as on 31st March 2011 for every rupee of owners contribution. Re 1.04 is contributed together by Lenders and Owners. This reflects that the company is not dependent on borrowed capital.

Interpretation: - This ratio shows how well the fixed assets are being used in the business. The ratio is important in case of manufacturing concern because sales are produced not only use of current assets but also by amount invested in fixed assets. The higher in the ratio, the better is the performance. On the other hand, a low ratio indicates that fixed assets are not being efficiently utilized

Interpretation: - The higher is the ratio, the lower is the investment in working capital and the greater are the profits. IT is better for the SECL.

Interpretation: - It was observed that Inventory turnover ratio indicates maximum sales achieved with the minimum investment in the inventory. As such, the general rule high inventory turnover is desirable but high inventory turnover ratio may not necessary indicates the profitable situation. An organization, in order to achieve a large sales volume may sometime sacrifice on profit, inventory ratio may not result into high amount of profit.

Interpretation: - Higher the ratio the better it is, a lower ratio indicates unfavorable trends in the form of reduction in selling prices not accompanied by proportionate decrease in cost of goods or increase in cost of production.

 Interpretation:

- Higher the ratio, the better it is because it gives idea improved efficiency of the concern.

Interpretation: - A higher operating expenses ratio is not favorable, as it will leave a very small amount of operating income to meet interest and dividend etc.

Interpretation: - This ratio considered being the most important ratio because it reflects the overall efficiency with which capital is used. This ratio is a helpful tool for making capital budgeting decisions; a project yielding higher return is favored.

Time has been a limiting factor and it has been difficult to analyze the various aspects of finance with the prescribed time. Financial statements are only in terms of reports. They are not final because the exact financial position can be known only when the business is closed.

Financial statements are prepared on the basis of certain accounting concepts and conventions. Any changes in the method or procedure of accounting limits the utility of financial statements. The authenticity of the financial statements has not been checked with the book of accounts of the company.

S.E.C.L should concentrate to pay off its short term debt by more flexible payment policies. Large Amount of Funds are stuck in the form of Cash and Bank Balances it should be invested some place more profitable. S.E.C.L. has been concentrated in payment of Secured Loans but left out loans form the Holding company it should be paid of as well.