A STUDY ON

RATIO ANALYSIS
With reference to HINDUSTAN PETROLEUM CORPORATION LIMITED VISAKHAPATNAM
A project report submitted to Andhra University. In partial fulfillment for the award of the degree of

BACHELOR OF BUSINESS MANAGEMENT

Submitted by N.NEELIMA (Regd. No.2011-1209025) UNDER THE GUIDANCE OF Mr. GOWRI SHANKAR

DEPARTMENT OF MANAGEMENT STUDIES G.V.P DEGREE COLLEGE (AUTONOMOUS)

(APPROVED BY A.I.C.T.E., Accredited by NAAC B++ and NBA AFFLIATED TO ANDHRA UNIVERSITY) GAYATRI VALLEY, RUSHI KONDA VISAKHAPATNAM 2011-2014

DECLARATION

I, N. Neelima student of

Gayatri Vidya Parishad, Visakhapatnam

pursuing Bachelor of Business Management, hereby declare that the project report titled RATIO ANALYSIS is an original work carried out by me availing the guidance of my project guide Gowri shankar. This project report or a part of this project report has not been submitted for the award of any other degree of either this university or any other university.

Place: Visakhapatnam Date: N.NEELIMA

ACKNOWLEDGEMENT
I express my sincere gratitude to Prof. RAHMAN , Principal, Gayatri Vidya Parishad College for Degree and PG Courses, for giving me an opportunity to work on this project. I express my sincere gratitude to Prof .S. Rajani, Director, School of Management Studies, Gayatri Vidya Parishad College for Degree and PG Courses, for giving me an opportunity to work on this project.

I am grateful to G. Syamala Rao, Head of Department, School of Management Studies, Gayatri Vidya Parishad College for Degree and PG Courses, for giving me an opportunity to work on this project. I wish to take greatest pleasure in recording my profound gratitude and sincere thanks to Gowri shankar School of Management Studies, Gayatri Vidya Parishad College for Degree and PG Courses, for her inspiring guidance, keen interest and critical evaluation of the work for the successful completion of the project. I express my sincere thanks to Mr. P. Bala Krishnan , Human Resourses Manger for allowing me to complete the project entitled RATIO ANALYSIS with his full cooperation.

My special thanks to all the members of the staff in the department of BBM, who have helped me in completing this project. (N.NEELIMA)

CONTENTS CHAPTER I
Introduction to the study Need for the study Methodology Objectives of the study Limitations

PAGE NO.

CHAPTER II
Industry Analysis

CHAPTER III
Company Analysis

CHAPTER IV
Theoretical framework

CHAPTER -V
Data Analysis and Interpretation

CHAPTER VI
Summary Findings Suggestions

ANNEXURE BIBLIOGRAPHY

TABLE OF RATIO ANALYSIS

SL. NO. PARTICULARS PAGE NO.

1.

Table of Current Ratio

2.

Table of Quick Ratio

3.

Table of Absolute Quick Ratio Table of Debt Equtiy Ratio Table of Equtiy Ratio

4.

5.

6.

Table of Solvency Ratio

7.

Table of Inventory Turnover Ratio Table of Debtors Turnover Ratio Table of Working Capital Turnover Ratio Table of Fixed Assets Turnover Ratio

8.

9.

10.

11.

Table of Gross Profit Ratio Table of Net Profit Ratio

12.

13.

Table of Return On Investment For Capital Ratio

GRAPHS OF RATIO ANALYSIS

SL. NO. PARTICULARS PAGE NO.

1.

Graphical Representation of Current Ratio Graphical Representation of Quick Ratio Graphical Representation of Absolute Quick Ratio Graphical Representation of Debt Equtiy Ratio Graphical Representation of Equtiy Ratio Graphical Representation of Solvency Ratio Graphical Representation of Inventory Turnover Ratio Graphical Representation of Debtors Turnover Ratio Graphical Representation of Working Capital Turnover Ratio Graphical Representation of Fixed Assets Turnover Ratio

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

Graphical Representation of Gross Profit Ratio Graphical Representation of Net Profit Ratio Graphical Representation of Return On Investment For Capital Ratio

12.

13.

CHAPTER-I

INTRODUCTION

Finance is to be business what blood is to the human body. Fortunately for human body there is mostly an automatic of the quantity and quality of blood required. No such automation is available in case of business. The companys most acceptable objective is maximization of wealth means the maximum of total value of equity shares of the company. Therefore achievement of the objective assumes great importance.

The study of financial statements is done for the purpose of presenting a periodical review or report. They reflect the financial position and operating strengths and weaknesses of the concern by properly establishing relationship between the items of balance sheet and remove statements.

There are various methods and techniques used in analyzing financial statements, such as comparative statements, trend analysis, and common size statements, schedule of changes in working capital, funds flow and cash flow analysis, cost-volume-profit analysis and ratio analysis. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (quantitative relationship between figures and groups of figures). It is with the help of ratios that the financial statements can be analyzed more clearly and decisions made from such analysis. The financial position of the company can be seen in the financial statement of the business or the company. The financial statement includes the profit and loss account, Balance sheet, the statement of retained earnings as sources and applications of funds. The analysis of financial statements is process of selection, relation and equalization.

NEED FOR THE STUDY

An absolute figure does not give any meaning unless it is related with the other relevant figure. Amount of current liabilities of a company does not tell anything about solvency position the company. When it is related with current assets amount of the same company, an opinion about the solvency position of the company can be had. Ratios are important both in vertically and horizontal analysis. In vertical analysis, ratios help the analysts to form a judgment whether the performance of the corporation at a point of time is good, average or poor.

Ratios can be useful to judge financial condition and profitability performance of the corporation when they are compared. An analysis of ratio gives two types of comparison. First, a comparison is made between present ratios with past-expected future ratios of the same firm.

When financial ratio for several past years are computed, the analyst can determine the pattern of change and determine whether there has been an improvement or decrease in the financial position of the corporation over the period of time.

Financial statement result in the presentation of information that will be helpful in decision making by business managers in investors and creditors who are interested in the financial status and operating of a business.

The importance and universally used technique of ratio analysis is not limited merely to the computation of ratios but to compare the calculated ratios with standard interim and with other industries i.e., it is a process of determining and interpreting numerically relationship based on financial statements. It is relevant in accessing the performance of a firm. It is useful for taking the decision by the finance manager. It is helps to access the long-term financial stability of organization. Ratio analysis is also useful for knowing the liquidity of the company, operating efficiency of the firm and overall profitability of the firm. The sickness or weakness of the firm can be detected through ratio analysis. It is useful for understanding corrective steps for reducing the weakness.

METHODOLOGY OF THE STUDY

Methodology is a systematic procedure of collecting information in order to analyze and verify a phenomenon.

The collection of information has been done through two principle sources. 1. Primary Data. 2. Secondary Data.

PRIMARY DATA:
Primary data are those which are collected afresh and for the first time, and thus happen to be original in character. Only one fourth of the information has obtained from primary data and the rest from secondary data. The major techniques that are used for the purpose of the primary data are personal interview method and observation method. It is the information collected directly from accounts, accounting officers and finance departments.

SECONDARY DATA:
Secondary data are those which have already been collected by someone else and which have already been passed through the statistical process. Data is collected from documents, records and files of the company. Data is gathered from the annual reports of the company. Data is gathered from the administrative reports of the company.

OBJECTIVES OF THE STUDY

The present study has been undertaken with the following objectives:

1. To study the growth and development of Hindustan Petroleum Corporation Limited.

2. To study trends in finance and analyze various elements in financial analysis.

3. To evaluate the financial position of Hindustan Petroleum Corporation Limited..

4. To calculate and estimate the important financial ratios as a part of financial analysis in Hindustan Petroleum Corporation Limited..

5. To have an overview about the financial position of the company and offer appropriate suggestions.

6. To indicate strengths and weaknesses identified from the computed ratios. 7. 8. To make comparisons between the ratios during different periods. To understand the liquidity and profitability of the company during the study periods

LIMITATIONS OF THE STUDY

The major limitation is the short time span available for the study. During the study of ratio analysis, the companys current financial information is not available. Reliability on usage of secondary data is another limitation. The complexity and confidentiality of various operations was also a limitation to this study. Financial statements are not purely objective statement of facts. They present information, which is a combination of recorded facts, accounting conversions and personal judgments. The study is based only on the information let out by the public documents such as annual reports of the company. The financial data based used in this report is restricted only to HPCL Visakha Refinery it does not cover subsidiaries or joint ventures of the firm.

CHAPTER-II INDUSTRY PROFILE

PROFILE OF OIL INDUSTRY: Where is Oil and Natural Gas found? Most crude oil and natural gas originate from plant and animal life that thrived millions of years ago in swamps and oceans. The organic materials were deposited with mud and silt from streams and rivers the sediments eventually hardened to form sedimentary rock. Heat and pressure transformed the fort part of the plant and animals into solid, liquid or gaseous hydrocarbons known as fossil fuels (crude oil and natural gas).

Crude Oil: Crude oil is a naturally occurring liquid found in formations in the Earth consisting of a complex mixture of hydrocarbons of various lengths like hydrogen, carbon and non-metallic elements such as Sulphur, Oxygen, Nitrogen and other gases. Any shorter hydrocarbons are considered Natural Gas, while longer hydrocarbon chains are more solid, and the chains are coal. It is usually black or dark brown (although it may be yellowish or even greenish) but varies greatly in appearance, depending on its composition.

Exploration- the search for the Petroleum Exploration is the act of searching or traveling for the purpose of discovery, e.g., of unknown regions, for oil, gas, coal, etc., Petroleum is found in porous rock formation in the upper strata of some areas of the Earth's crust. Earth scientists in the Petroleum industry including Geologists, Geophysicists, Geochemists, Paleontologists study the rocks which got buried thousands of meters below the surface, how these rocks have been affected and transformed stretching back millions of years to identify 'traps' with recoverable oil reserves. A trap is an oil reservoir, petroleum systems or petroleum reservoir is often thought of as being an underground 'lake' of oil, but it is actually composed of hydrocarbons contained in porous rock formations. Known reserves of petroleum are typically estimated at around 1.2 trillion barrels.

Consumption is currently around 84 million barrels per day, or 31 billion barrels per year. At current consumption levels, current known reserves would be gone in about 32 years, around 2039. However, this ignores any new discoveries, changes in demand, better technology, population ingrowth, industrialization of third world countries and other factors. While oil is expected to remain a major source of energy in coming years, alternative energy development such as solar power, wind power, butanol, ethanol, photovoltaic, nuclear power, hydrogen, or oil from oil shale, and oil sands may increase in significance. Coal may also increase in use because of its countries, such as China and India. existence in vast quantities in rapidly developing

The Birth of the Industry: The petroleum industry operates on the petroleum market. Petroleum is vital to nearly all other industries, if not industrialized civilization itself, and thus is of critical concern to many nations. Oil accounts for a large percentage of the world's energy consumption, ranging from a low of 32% for Europe and Asia up to a high of 53% for the Middle East. Other geographic regions consumption patterns are as follows: South and Central America (44%), Africa (41%), and North America (40%). The world at large consumes 30 billion barrels (4.8km3) of oil per year, and the top oil consumers largely consists of developed nations in fact, 24% of the oil consumed in 2004 went to the United States alone. The production, distribution, refining and retailing of petroleum, taken as a whole represent one single largest industry in terms of dollar value on earth. Since the earliest record history, there have been accounts of crude oil and natural gas seeping to the earth's surface. The oil was used to caulk boats and buildings, grease wheels and dress the wounds of people and animals until the refining process was done in the 1850's. Oil was not commonly used as fuel of its foul smelling fume. Today the upstream of oil industry has grown to a great extent which includes more than 1000 explorations and production companies as well as hundreds of associated business such as seismic and drilling contractor service and supply companies.

The midstream sector includes oil and gas pipelines that connect production and consuming areas, other facilities extract sulphur and natural gas liquids, store oil and gas products and transport by truck, rail or tanker. The downstream sector consists of refineries gas distribution utilities oil product wholesalers, service stations and petrochemical companies. The exploration of the oil and natural gases are being done in countries like India, USA, Canada, UAE, Saudi and Russia, parts of Europe, Africa, Australia, and South America. High technology is being used in exploring the reserves, which include:
High-tech exploration enhanced recovery production method. Cold climate and offshore operations. Development of oil and sour gas recoveries. Gas processing, sulphur extraction and heavy oil upgrading. Construction and operation pipelines. Specialized controls and computer applications. Environmental protection technology and safety training. Innovative products and service that customer needs.

History of Oil and Natural Gas

Petroleum, in some form or other, is not a substance new in the world's history. More than 400 years ago, according to Herodotus and confirmed by DiodorusSiculus, asphalt was employed in the construction of the walls and towers of Babylon; there were oil pits near Ardericca (near Babylon), and a pitch spring on zacynthus. 10 great quantities of it were found on the banks of the River Issus, one of the tributaries of the Euphrates. The first oil wells were drilled in China in the 4th century or earlier. They had depths of up to 243 meters and were drilled using bits attached to bamboo poles. The oil was burned to evaporate brine and produce salt. Petroleum was known as 'Burning Water' in Japan in the 7th century.

In the 8th century, the streets of the newly constructed Baghdad were paved with tar, derived from easily accessible petroleum from natural fields in the region. In the 9 th century, oil fields were exploited in the area around modern Baku, and Azerbaijan to produce naphtha. The Geographer Masudi described these fields in the 10 th century and by macro polo in 13th century, who described the output of those wells as hundreds of shiploads. The earliest mention of American petroleum occurs in Sir Walter Raleigh's account of the Trinidad Pitch Lake in 1595. The modern history of petroleum began in 1846 with the discovery of the process of refining kerosene from coal by Atlantic Canada's Abraham Pineo Gesner. Russian Engineer F.N.Semyonov drilled the first modern oil well in 1848, on the Apsheron Peninsula northeast of Baku. Meerzoeff built the first Russian refinery in the mature oil's fields at Baku in 1861. At that time, Baku produced about 90% of the World's Oil. The American petroleum industry began with Edwin Drakes drilling of 69-footdeep oil well in 1859. The industry grew slowly in the 1800s driven by the demand for kerosene and oil lamps. It became a major national concern in the early part of the 20th century. By 1910, significant oil fields had been discovered in Canada, specifically in the province of Alberta. Petroleum production is a major industry in Canada. In 2005, almost 25,000 new oil wells were spud (drilled) in Canada. Daily, over 100 new wells are spud in the province of Alberta alone. Origin of Oil and Natural Gas: Most geologists view crude oil and natural gas as a product of compression and heating of ancient organic materials over geological time. According to this theory, oil is formed from the preserved remains of pre-historic zooplankton and algae, which have been settled to the sea bottom in large quantities under anoxic conditions. Terrestrial plants, on the other hand, tend to form coal. Over geological time, this organic matter mixed with mud and is buried under heavy layers of sediment.

The resulting high levels of heat and pressure cause the remains to metamorphose, first into a waxy material known as kerosene which is found in var ious oil shales around the world, and then with more heat into liquid and gaseous hydrocarbons are lighter than rock or water, these sometimes migrate upward through adjacent rock layers until they become trapped beneath impermeable rocks, within porous rocks called reservoirs. Concentration of hydrocarbons in a trap forms an oil field, from which drilling and pumping can extract the liquid. Three conditions must be present for oil reservoirs to form:
First, a source rock rich inorganic material buried deep enough for Subterranean heat to cook it into oils. Second, a porous and permeable reservoir rock for it toaccumulatein and Last, a cap rock (seal) that it forms escaping to the surface.

Birth of Oil Industry: Since the earliest times, there have been instances of crude oil and natural gas seeping to earths surface. The oil was used to caulk boats and buildings, grease vehicles and dress the wounds of people and animals until refining process emerged in 1850s. The worlds first oil refinery opened at Ploiesti, Romania in 1856. Several other refineries were built at that location with investment from United States companies. The Guinness Book of World Records now (October 2006) records the BP Amoco Refinery in Texas city, USA as a refinery with the largest capacity (43,300 barrels per day which is approx. 15,100,000 imperial Gallon). Major sectors of Oil Industry: The oil industry is often divided into three major sectors:
Upstream Sector: This includes the searching for potential underground or underwater oil and gas fields, drilling of exploratory wells, which brings crude oil and raw natural gas to the surface.

Midstream Sector: This sector process stores, markets and transports commodity such as crude oil and natural gas liquids such as ethane, propane and butane.

Use of Oil and Natural Gas:

Humans have utilized petroleum in an unrefined state for over 5000 years. Ancient Persian tablets indicate the medicinal and lighting uses of petroleum in the upper echelons of their society. Ancient Chinese were also known to burn skimmed oil for light.The early 19th century ushered in petroleum's usefulness as a medicine and lubricant; other successful uses including lighting and heating. A petroleum industry emerged in North America in Canada and the United States, fueling the Industrial Revolution. Petroleum products are useful materials derived from crude oil (petroleum) as it is produced in oil refineries. According to crude oil composition and demand, refineries can produce different shares of petroleum products. Largest share of oil products is used as energy carriers, various grades of fuel oil and gasoline. Refineries also produced other chemicals, some of which are used in chemical process to produce plastic and other useful materials. Since petroleum often contains a couple of percent sapphire, large quantities of sulphur are also often produced as a petroleum product. Hydrogen and carbon in the form of petroleum coke may also be produced as petroleum products. The hydrogen produced is often used as an intermediate product for other oil refinery processes such as hydrogen catalytic cracking (hydro cracking) and

hydrodesulphurization. Major Products of Oil Refineries Asphalt Diesel fuel Fuel oils Gasoline Kerosene Liquid petroleum gas Lubricating oil

Origin of Oil Industry in India India's first Prime Minister Jawaharlal Nehru, prior from 1947 to 1964, saw industrialization as the key to alleviating poverty.Industrialization not only promised selfsufficiency for our nation that had just regained political sovereignty, but also offered external economies accruing from technical progress. The result of appointing and spending millions of rupees for industrialization in our five-year plan right from 2nd to 8th is the high level expertise we will be in direct competition with America and European Union for oil and natural gas from all over the world specially Middle East. The bottom line is that whoever gets to use the oil, will grow faster and eventually dominated the world. The DigboiRefinery was set up as Digboi in 1901 by Assam oil Company Limited, which was taken over by Indian Oil Corporation Ltd., with effect from 1981. Over a decade following Independence, various Multinational Companies have set up the following three Refineries in India:
Standard Vacuum Oil (international) in Mumbai. Caltex Oil Refinery Ltd., at Visakhapatnam. Burma Shell at Mumbai.

From 1961 onwards various other refineries were set up at Barauni, Koyali, Chennai and Cochin. Corresponding to a steep hike in Oil prices influenced by Gulf Oil producing countries in 1973, Government of India took a policy decision to nationalize the Oil Sector keeping in view the economic interest of the country. This has resulted in formation of Hindustan Petroleum Corporation Limited (HPCL) by amalgamating the assets of ESSO Oil Company and its market activities.

Industry Structure: The Ministry of Petroleum & Natural Gas (MOP&NG) is entrusted with the responsibility of exploration and production of oil and natural gas, their refining, distribution and marketing, import, export and conservation of petroleum products and liquefied natural gas. Director General of Hydrocarbon (DHG), Oil Industry Development Board and Petroleum Planning and Analysis Cell support the Ministry. The following are the activities of MOP&NG in Oil Industry Sector:
Exploration and exploitation of petroleum resources, including natural gas. Production, supply, distribution, marketing and pricing of petroleum Including natural gas and petroleum products. Oil refineries, including lube plants. Additive for petroleum and petroleum products. Lube blending and greases. Planning, development and control of and assistance to all industries Planning, development and regulation of oil field services.

A lion's share of 84% of Exploration and Production of Crude Oil and Natural Gas is from two major viz., Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) while the Refining Sector is dominated by PUS's like Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Limited (HPCL) Bharat Petroleum Corporation Limited (BPCL) Chennai Petroleum Corporation Limited (CPCL) Kochi Refineries Limited (KRL) in refining and marketing various Petroleum Fuels. Marketing of Petroleum Products has undergone a sea change with abolition of administered pricing mechanism since April 1st 2002 except for Kerosene and Liquid Petroleum Gas. In addition, the Oil Companies are given free hand to fix their own prices to get benefit from the competitive edge.

India annually consumes about 3% of the world's total energy. The country is the world's 6th largest energy consumer and is in fact a new energy importer. There has been a gap between supply and availability of petroleum and petroleum products in India.Over the last 15 years or so, the demand for petroleum products as risen at an average rate of about 60%. The current requirement of crude oil in the country stands at around 112 MMT and this is likely to increase to about 190 MMT by 2011-12. Fuel oils presently up the majority of India's refinery output. Total refined product output from India's refineries has risen about 60% in the past decade. Using Oil and Natural Gas: During the refining of the petrochemicals, wide range of petroleum molecules comes in a wide variety of size and shapes strings and rings of carbon and hydrogen atoms. The methane in natural gas is the simplest and smallest. By comparison the molecules in paraffin wax and asphalt are complex and enormous. The hydrocarbon molecules are sorted, split apart, reassembled and blended in refineries and petrochemical plants. There, they become magnitude of products from gasoline to synthetic rubber. Aeristic Energy Source: The petrochemicals industry exists because the people have become accustomed to the benefits of oil product and natural gas provides benefits like convenient, affordable transportation, warm houses and thousands of synthetic materials. India annually consumes about 3% of the world's total energy. The country is the world's 6th largest energy consumer and is in fact a new energy importer. There has been a gap between supply and availability of petroleum and petroleum products in India.

Over the last 15 years or so, the demand for petroleum products as risen at an average rate of about 60%. The current requirement of crude oil in the country stands at around 112 MMT and this is likely to increase to about 190 MMT by 2011-12. Fuel oils presently up the majority of India's refinery output. Total refined product output from India's refineries has risen about 60% in the past decade.

Major Players in Indian Oil Industry: 1) Indian Oil Corporation Limited. 2) Hindustan Petroleum Corporation Limited. 3) Bharat Petroleum Corporation Limited. 4) Madras Refinery. 5) Bongaigaon Refinery and Petrochemical Limited. 6) Cochin Refinery. 7) Numaligarh Refinery Limited. 8) Mangalore Refinery Limited. 9) Reliance Petrochemicals Limited.

PROFILE OF HPCL

HPCL VISION: "To be a World Class Company known for caring and delighting the customers with high quality products and innovative services across domestic and international markets with aggressive growth and delivering superior financial performance. The company will be a model of excellence in meeting social commitment, environment, health and safety norms and in employee welfare and relations". HPCL MISSION: "HPCL, along with its joint ventures, will be a fully integrated company in hydrocarbons sector of exploration and production, refining and marketing focusing on enhancement of productivity, quality and profitability, caring for customers and employees, caring for environment protection and cultural heritage. It will be also attaining scale dimensions by diversifying into other energy related fields and by taking up transnational operations". In order to achieve Vision objectives and to play effective roles in the emerging operating environment, the following corporate values have been made, which would be an integral part of decision making process. History: Hindustan Petroleum Corporation Limited (HPCL) has been formed through amalgamation of four established companies. Gradually, it has grown today as a second largest integrated Oil Refinery and Marketing Company in India. Merge of ESSO, Lube India Limited, Caltex Oil Refining India Limited and Kosan Gas Company Limited incorporated HPCL

Incorporation: The company was first incorporated as Standard Vacuum Refining Company of India in July 1952 and later named as ESSO India Limited from March 1962. On July 12 th, 1974 when ESSO and Lube India were nationalized, the company was renamed as HPCL with effect from July 15 th, 1974. Subsequently, Caltex was nationalized by Government of India and merged with HPCL in 1978. In the following year, the undertakings of Kosan Gas Company Limited, the concessionaries of HPCL in the domestic LPG market, were merged with HPCL. Hence, HPCL which is as amalgamation of various undertakings has been growing by leaps and bounds. Growth: HPCL is a Fortune 500 company, with an annual turnover of Rs. 1,08,599 Crores and sales/income from operations of Rs 1,14,889 Crores (US$ 25,306 Millions) during FY 200910, having about 20% Marketing share in India and a strong market infrastructure. HPCL operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tons Per Annum (MMTPA) capacity and the other in Vishakhapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery &Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is constructing a refinery at Bhatinda, in the state of Punjab, as a Joint venture with Mittal Energy Investments Pvt Ltd. HPCL also owns and operates the largest Lube Refinery in the country producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production. HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply & Distribution infrastructure comprising

Terminals, Pipeline networks, Aviation Service Stations, LPG Bottling Plants, Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL, over the years, has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPA presently. On the financial front, the turnover grew from Rs. 2687 Crores in 1984-85 to an impressive Rs 1, 16,428 Crores in FY 2008-09. HPCL had started its journey in a humble way in 1974 with one Refinery in Mumbai with a refining capacity of 3.5 million metric tons per annum (MMTPA) and a Lube Refinery at Mumbai around 1.65lakh metric tons per annum and a slender sales turnover of Rs. 36.7crores and a net profit of Rs. 5.8crores. But, with a dedicated and efficient team of employees and a flawless and growth-oriented strategy of Top Management, HPCL could succeed in achieving Navaratna Status in Industry apart from spreading its wings both within and outside the country by meeting class standards in Refining and Marketing.

Profile: Hindustan Petroleum Corporation Limited (HPCL) came into being in 1974 after the takeover and merger of the Erstwhile ESSO and Lube India undertakings. Caltex was merged with HPCL in the domestic LPG market was taken over and merged with HPCL in 1979. HPCL is a listed Public Sector, India's second largest oil refining and accounts for more than 20% of the country's total refining capacity. It is one of the 'Navaratnas' identified by the Government of India as having potential to grow into a global giant. Its shares are one of the 30 shares forming BSE sensex. It has 85 Regional Offices, 37 Terminals/Tap of points, 92 Depots, 41 LPG Bottling plants and 7,313 Retail Outlets, 1,648 Kerosene Dealers, 2,202 LPG Distributors.

The corporation made a successful IPO in two stages during 1995 & 1997 and its share holding pattern is as follows:
GOI- 51.01% Financial Institution - 21.49% Fll's-11.05% Banks-1.73% MF's - 3.92% NRI's - 0.37% Employees - 0.35% Public-10.08%

The HPCL Group presently consists of HPCL, its 100% subsidiary, Guru Gobind Singh Refineries Limited and interests in seven joint ventures, Mangalore Refineries and Petrochemicals Limited (19.95%), Prize Petroleum Corporation Limited (50%), South Asia LPG Company Private Limited (50%), Hindustan Coals Limited (50%), Petronet India Limited (16%), Peronet MHB Limited (26%), Bhagyanagar Gas Limited (25%). During the year ending 31st March, 2006 the turnover was Rs.76,90crores registering an increase of 18% over 20042005 after Tax was Rs.406 crores.

Refineries: HPCL has two refineries. On the west coast is the Mumbai Refinery with a capacity of 5.5 million metric tons per annum, while the other at Visakhapatnam on the east coast has a capacity of 7.5 millionmetric tons per annum. Both the refineries produce a number of value added products like petrol, high speed diesel oil, superior kerosene oil liquefied petroleum gas, naphtha, aviation turbine fuel and others over 300 grades of Lubes, specialties and greases. Marketing: The marketing operations of HPCL are divided into three Strategic Business Units, Retail comprising of Petrol, Diesel and Automotive Lube sales, Direct Sales comprising of Lubes and Industrial & Government sales and LPG.

Storage and Distribution: HPCL has a extensive nationwide network comprising of pipe lines, terminals and depots for the storage and distribution of petroleum products across the country. Corporate Values or Objectives:
Consistently provide top quality products with prompt and efficient services to ensure satisfaction. Be cost effective and emphasize on high productivity and profitability. Expedite redressal of employees, customers and shareholders grievances. Motivate employees for professional and social advancement at all levels in a participative environment. Develop capabilities and enhance effectiveness of employees through training and career planning. Reward shareholders with consistent good returns.

HR VISION: Excellence in harnessing the full potential of the employees for becoming a Global Energy Company.

HR MISSION: "Your needs are our Business."

HR SPIRITS: Satisfaction of Customers Pride Integrity Role Model Involvement and Commitment Transparency Spirit of Team Work

HPCL recruits its Management Staff by way of Officer Trainees through advertisement in national newspapers on all India basis. The recruitment process consists of written test, interview and group discussion. The candidates preferred for selection for Operations are from Engineering field (Chemical, Mechanical, Civil, Electrical and Instrumentation), for finance, charted accountants and campus selection for Operations and HR officers from NT's and IIM's respectively. The recruitment for Non-Management staff in both technical and administrative fields is done based on the eligible candidates recommended by the local employment offices.

HUMAN RESOURCES IN HPCL HPCL recognizes its Human Resources as the key to achieve organizational excellence and a glaring identity in the competitive global arena. HPCL, with its Refineries in Mumbai and Visakhapatnam, zonal offices in Delhi, Mumbai, Kolkata, and Chennai, Terminals, Depots and regional offices in four corners of the country successfully runs its business in refining, marketing and distribution of petroleum products to both industrial sector as well as domestic sector. It has a wide network of retail dealership and LPG distributorships through which it supplies various light distillates like petrol, diesels, and LPG along with auto lubes to serve the day-to-day needs of its valued customers. These activities are carried out by its 11,300 employees (approx.) who serve the corporation at managerial, clerical and worker level, in order to enrich the skills of several employees in fields IT, Technical, Safety, Management, Behaviors and office administration. HPCL conducts regular training programs as its own management training institutes at NIGDI, Pune apart from engaging external agencies for the purpose. HP team is headed by chairman & managing director at the helm of affairs with the four reporting directors Viz., human resources, marketing, refineries and finance.

HUMAN RESOURCE PLANNING IN HPCL Manpower: The total manpower in HPCL - VR as of 1 st April 2010 is 1154. Manpower is classified into two categories: (a) (b) Management Non-management - 492 - 662

Number of management employees Number of non-management employees

Management employees A Grade

Are represented by grades A to I. Officers, Engineers, Superintendents

B Grade

Senior Officers, Senior Engineers, Senior Superintendents Deputy Manager Managers Senior Managers Chief Manager Deputy General Manager General Manager Executive Director

C Grade D Grade E Grade F Grade G Grade H Grade I Grade

HPCL VISAKH REFINERY HPCL Visakh Refinery was commissioned in 1957 as Caltex Oil Refining Limited (CORIL). It was first oil refinery on the East Coast and the first major industry in the city of Visakhapatnam, Andhra Pradesh. The installed capacity of the refinery was 0.65 Million Metric Tons Per Annum (MMTPA) IN 1957. CORIL was taken over by Government of India and merged with expanded in phased in phased manner over the years. Visakh Refinery is Fuel Based refinery generating major products of mass consumption like petrol, Diesel and Kerosene. Hence, crude meeting General Purpose Characteristics can be processed with the existing refinery configuration. Visakh refinery has flexibility to process wide range of crude procured across the globe and ranging from very high sulfur to low sulfur and non bituminous category to Bituminous and non-bituminous category to Bituminous and Lubes bases crudes.

Visakh Refinery consists of three crude / vacuum distillation Units, one with a capacity of 1.5 MMTPA and other two having a capacity of 3.0 MMTPA each. Fluid catalytic cracking unit has been provided as a secondary processing unit. There are two FCC units with a capacity of 0.4 MMTPA and 0.95MMTPA (after Revamp) respectively. This is the only one of two refineries in India with two FCCUs. Besides these, the refinery has Propylene Recovery Unit (0.023MMTPA Capacity). Bitumen Blowing Unit (0.225MMTPA Capacity) and various product-treating units.

The product quality standards with respect to sulfur content have been made more stringent of late. To meet these new standards a Diesel Hydra-De- sulphurisation Unit (DHDS) has been set up in the refinery at an approximate cost of Rs.794 crores. T he commissioning of DHDS facilities is in progress.The various process units of Visakh Refinery have been provided by leading process licensors / technology suppliers. Visakh Refinery was among the first in India to have digitals controls for refinery operations and advanced controls were added later on to the existing units to facilitate accuracy in tank gauging along with optimization / improvement in product blending. The project, is first of its kind in India has recently been implemented in Mumbai refinery of HPCL. The performance of Visakh Refinery has been excellent in the past in all relevant areas like distillate production, R&D, specific energy consumption etc. the fire incident in September 1997, gave a temporary setback to the refinery operations, which has been overcome in a short period by the concerted efforts of all the employees. The refinery has been reconstructed and the output levels in the years 1999-2000 was 4.55 Million tons. Visakh Refinery attaches utmost importance to conservation of energy by regular monitoring and analysis of fuel and utilities consumption, optimizing plant operations and proper maintenance up keep of plant and machinery. The refinery has own national energy conservation awards. Various energy conservation projects like efficiency furnaces. Captive power plant, CDU / CTU integration, co Boiler, OM&S Automation, improved Preheat Recovery etc. with a total investment of Rs. 214 crores have been implemented.

The fuel and loss for Visakh Refinery for the year 1999-2000 was 5.4 wt % on crude as against the target of 6.8 wt %. The specific energy consumption was 140.2 MBTU / BBL / NRGF, which is the lowest ever. Concern for environment has always been a way of life at Visakh Refinery ever since it went on stream in 1957. Over the years the refinery has invested large amounts in various projects to meet the stringent emissions and discharges norms applicable to the refinery. There are two Effluent Treatment Plants for treating wastewater to MINA's standards before discharge to the sea. Sulphur Recovery Unit based on state-of the-art locate-n technology was commissioned in 1994 to reduce sulphurdioxide emissions from the refinery. These measures ensure that the impact of refinery operations on the surrounding environment is minimal. Visakh Refinery has always kept in mind its responsibility towards the society at large, especially the weaker sections. Two tribal villages near Visakhapatnam-manyapalem and Itchapuram have been adopted with the aim of uplifting them and making them self-reliant. Various activities medical camps, adult/children education has been undertaken. Manyapalem has already achieved 100% literacy. A school building has been constructed at Itchapuram for primary education. The refinery has also distributed high yielding varieties of coconut and fruit saplings. To supply drinking water, bore wells have been dug and water storage in Manyapalem. Safety of both man and machine has to be given the utmost attention in any industrial context. Visakh Refinery has received a number of awards given by various national and international agencies for the excellent safety track record of the refinery. The refinery is equipped with a firewater network, which is kept pressurized around the clock to handle emergencies arising during operations. There is a separate Fire &safety department manned by qualified with the relevant equipment.

Rect Sales /Di Lubes: HPCL's Lube Blending plant at Silvassa (phase-1, with a capacity of 600KL/ month) was commissioned in December 1999 within a record completion period of 4 months. HPCL has made a foray into international marketing by appointing Distributors at NEPAL, Sri Lanka, Bangladesh and Malaysia. HPCL achieved an export of Rs.1.5 crores to Nepal. Keeping in view the changing customer preferences, HPCL has strengthened its presence in the bazaar trade with commissioning of 51 new Distributorships. Environment friendly 2-stroke engine oil-'Racer-2' has already become the second largest selling brand in its category while, Lai Godha', an optimized diesel engine oil has Become the largest selling lubricant in its category. 7 new automotive products and 14 new industrial lubricants were introduced to meet specific applications. The household insecticide brand 'Finite' was re- launched and notched a growth of 67%. HPCL is the only Oil Company with a presence in this business line. LPG: During the year 3 new LPG Bottling plants with a total capacity of 112 TMTPA were commissioned at Madhurai, Pampore and User (phase2) and also augmentation of an existing plant by 18TMTPA were completed. The newplant at USAR is the first HPCL unit to have safer Mounded to range for LPG.A portable filling plant wascommissioned at Banaskantha in Gujaratfor meeting rural market requirements. The overall capacity utilization of LPG plants during the year was over100%. Pipeline: Mumbai-Pune pipeline achieved a output of 3.58 MMT (against MOU 'Excellent' target of 3.50 MMT) and Visakha-Vijayawada pipeline achieved an output of 2.60 MMT (against an MOU 'Excellent' target of 1.50 MMT). The Visakha-Vijayawada PIPELINE EXTENSION UP TO Secunderabad at a cost of Rs.377.55 crores was approved during the year and the same is under implementation.

Depots / Terminals: During the year 6 new POL depots /terminals with a tank age of 63700 KL at Balasore, Panewadi (Manmad), Bekutchi, Tirunelveli, Kappalur (Madhurai) and

mavallur(Hudli). Additional tanker of 352550 KL at locations was completed. As part of our pursuit of quality assurance they have obtained ISO9002 accreditation for select Bottling Plants, product Pipelines, retail Outlets and Lube plants. RECENT TRENDS: Visakh Refinery is in the process of establishing Environmental Management System (EMS) for its operating complex and to get it certified by the ISO 14001 standards. Organizational Environmental Policy has been issued; objectives, targets and Environmental management programs are finalized. The system has been documented and the implementation of the system is in progress. Visakh Refinery has plans to upgrade the configuration of its facilities in order to achieve product value addition & produce environmental friendly fuels conforming to the Euro III & Euro IV norms with mega project of CFP (Clean Fuels Project) with a cost of rupees 2000 corers. Efforts are being made to appoint a suitable consultant for carrying out a study for this purpose. Visakh Refinery plans to bring about rapid improvement in its environmental &safety performance. Over the next 5 years the Refinery aims to become a zero effluent installation. Initiative has been taken to completely develop the safety function, which was made exclusively under the PS&E Division of the TSD. Also efforts are on to establish a certified Safety Management System in the Refinery.

SUPPORTING FACILITIES OF THE PROCESS UNIT:

Crude Receiving Facilities: An Off Shore Tanker Terminal (OSTT), located at the outer harbor is used to unload crude oil tankers and transport it to the refinery by a dedicated 36" crude oil line of approx. 8.5 KM. The entire unloading berth has an effective firefighting system with remote operated monitors and sprinklers. Other Activities: HPCL - Visakh Refinery has made rapid progress in the area of Hazardous Solid Waste Management, which is an issue of serious environmental concern. It has already made successful pioneering efforts in the area of oily sludge processing. To develop a sustainable and environmental sound strategy for long-term management of hazardous solid wastes, the Refinery has entered into an agreement with EPTRI, Hyderabad and VAProject, Sweden for preparing an "Integrated Hazardous Solid Waste Management Plan". This is the first initiative of its kind by an Indian Refinery. The plan is aimed at creating a technically viable and environmentally sound system for the management of every hazardous solid waste generated in the Refinery. Joint Ventures: Mangalore Refinery: The corporation's first joint venture, the Mangalore refinery and petrochemicals Ltd. Formed in association with the Aditya Birla Group has achieved a milestone by expanding the Refinery's capacity from 3 MMTPA to 9MMTPA during September 1999, three months ahead of schedule in spite of carious difficulties and constraints like undulating terrain of the site and heavy monsoon.

Punjab Refinery: Preliminary activities for HPCL's proposal to set up a 9MMTPA Refinery at Bathinda, in the state of Punjab, are in progress Environmental clearance for the project including for the linked project Crude oil terminal at Mundra in Gujarat have been received. In a bid to select a joint venture partner for the project, a confidentiality Agreement has been signed with M/s Total Fina ELF for the same. HPCL Board has approved commencing the project as its own project and subsequently include joint Venture partner, have so required. Power Project: Selection of technical partner for HPCL's joint venture project with APGENCO for setting up a Refinery -residue based 500 MW Power Plant at Visakh, at an estimated cost of Rs.2208 crores, is at an advanced stage. The detailed feasibility report is also expected be finalized shortly. Bitumen Emulsion: Hindustan Colas, HPCL's Bitumen Emulsion Company under joint venture with M/s. colas S.A. of France, is operating with plants at Vashi, New Mumbai and Bahadurgar, near Delhi. Its third plant near Chennai was commissioned during the year.

CHAPTER-IV THEORETICAL FRAME WORK OF THE STUDY

RATIOANALYSIS A THEORITICAL APPROACH

THEORITICAL FRAME WORK OF THE STUDY:

The focus of financial analysis is one key figures contained in the financial statements and highlights and significant relationship that exists between them analyzing financial statements is a process of evaluating relationship between parts of financial statements to obtain a better understanding of a firm position and performance. The purpose of evaluation of financial statement differs among various groups interested in the results and relationships, reported in the financial statements. For example, short term creditors are primarily interested in judging the firms ability to pay its currently maturity obligations. The relevant information for this is the composition of short term (current) assets and short term (current) liabilities. The debenture holders or financial institutions granting long term loans would be concerned with examining the capital structure past and projected earnings and changes in the financial position.

The share holders as well as potential investors would naturally be interested in the earnings per share and dividend payout ratio which are likely to have a significant bearing on market price of the shares. The outside elements are thus largely interested in the information that is relevant from their point of view. The management of the firm, in contrast, looks to the financial statements from angles. These statements are required for management own evaluation and decision-making. Moreover it is responsible for the overall performances of the firm maintain its solvency so as to be able to meet short term and long term obligations to the creditors and at the same time ensuring an adequate rate return.

MEANING OF RATIO ANALYSIS:

Its a widely used tool for financial analysis. The term ratio refers to the numerical or quantitative relationship between two items/variables. Each of their measures of expressing related variable described the relationship between net profits and sales of the firm. It should be noted that computing the ratio does not add any information not already inherent in the figures of profit and income generation.

What the ratio does is that it reveals the relationship in a more meaning full was so as to draw concussion from them. The rationale of ration analysis has in the fact that it makes related information comparable a single figure by itself has no meaning but when express in terms of a related figures it yield significant inferences. The ratio analysis covers figures into meaning full comparable forms and removes the difficulty of drawing inference on the basis of absolute figures as quantitative answers to questions such as:

a) Are the net profit adequate b) Are the assets being used efficiently c) If the firm solvent d) Can the firm meet its current obligation and so on?

SIGNIFICANCE OF RATIO ANALYSIS:

Financial tools are of immense use to the financial manager in as much they help him in carrying out his planning and controlling functions while preparing financial plan for the company the financial manager must know the impact of financial analysis serves as hand made to the management in determining the impact of his decision. These tools are equally useful in the sphere of financial manager to undertake constant review of the actual financial operations of the company against the preformed balance sheet and profit and loss account statement and to analysis the cause of major deviations so as to take financial manager can rationalize his decision and reach the business goal easily.

The utility of financial tools is not limited to the financial manager. They are investors helpful to top management, creditors, investors and labors, by analyzing and interpreting the financial a single ratio in itself does not indicate favorable or unfavorable condition it should be compared with some standard. Standards of comparison may consist. 1. Ratios calculated from the past financial statement of the same firm. 2. Ratios developed using the projected or perform as financial statements of the same firm, at the same point in time. 3. Ratios of the industry to which the firm belongs.

The easiest way to evaluate the performance of a firm is to compared its present ratios with the past ratios when financial ratio over a period of times financial ratios over a period of times are compared it gives an indication of the direction of change and reflects whether the firms financial position and performance has improved, deteriorated constant overtime. This kind of comparison is valid only when the firms accounting policies and procedures have not charged overtimes.

Sometimes future ratios are used as the standard of comparison. Future ratio can be developed from the projected or perform in financial statements. The comparison of the past ratios with shows the firms relative strengths and weakness in the past and the future. If the future ratios indicate weak financial position, corrective active should be initiated.

Another way of comparison is to compute the ratios of one form with some selected firm in the same industry at same point of time in most of cases it is more useful to compare the firms ratio with the ratio of a few carefully.

Selected competitors who have similar operations this kind of comparison Indicates the relative financial position and performance of a firm. A firm can easily resort to such a comparison, as it is not difficult to get the published financial statement of the same of the similar firms.

To determine the financial condition and performance of a firm its ratio may be compared with average ratios of the industry of which the firm is member industry ratios are important standards in view of the fact that each industry has its characteristics, which influences the financial and operating relationship but there is some practical difficulties in the industry ratio.

Thirdly, the average will be meaning and the comparison futile if the firms with in the same industry widely differ in their accounting data for the companies in the industries and eliminate extremely strong and extremely week firms the industry ratio will prove to be very useful in evaluating the financial conditions and performance of firm.

LIMITATIONS OF RATIO ANALYSIS:

The ratio analysis is widely used technique to evaluate the financial position and performance of business but its some limitations. The limitations are as follows.

1) It is difficult to decide on the proper basis for comparison. 2) The comparison is rendered difficult because of difference in situation of two companies or of one company over years. 3) The price level changes make the interpretation of ratio invalid. 4) The difference in the definitions of items in the balance sheet and the income statements make the interpretations of ratio difficult. 5) The ratios calculated at a point of time are less informative and defective as they suffer from short-term changes. 6) The ratios are generally, calculated from past financial statements and thus are no indicates of future.

CLASSIFICATION OF RATIOS:
1. According to Sources Financial ratios can be classified on the following basis according to source. Revenue Ratios

When two ratios are taken from revenue statements the ratio so computed is Ratio.

known as Revenue

Balance Sheet Ratios

When two variables are taken from the balance sheet the ratio so computed is known as Balance Sheet ratio.

Mixed Ratios

When one variable is taken from the Revenue Statement and other is taken from the balance sheet the ratio so computed are known as mixed ratios.

2. According to usage

The following seven categories of financial ratios have been advocated by George Foster of Stanford University and this seems to cover exhaustively different aspects of a business organization, these categories are:

Cash Position Liquidity Working Capital/ Cash flow Capital Structure Profitability

Debt Service Coverage Turnover

Broadly speaking, the operations and financial position of a firm can be described by studying its short term and long term liquidity position, profitability and its operational activities. Therefore the ratios can be classified into following five broad categories:

Liquidity Ratios Capital Structure / Leverage Ratios Activity Ratios Profitability Ratios Expenses Ratios Market test Ratio

LIQUIDITY RATIOS:
Liquidity refers to the ability of a concern to meet its current obligations as and when these become due. The current assets should either be liquid or near liquidity. If current assets can pay off current liabilities then liquidity position will be satisfactory. On the other hand, if current liabilities may not be easily met out of current assets then liquidity position will be bad. To measure the liquidity of the firm the following ratios are calculated: 1. Current Ratio 2. Quick Ratio 3. Cash Ratio.

1) Current Ratio Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short term financial position or liquidity of a firm. It is calculated by dividing the total of current assets by total of the current liabilities.

Current Ratio

Current Assets Current Liabilities

Current assets include cash and those assets which can be easily converted into cash within a short period of time generally, one year, such as inventories, Sundry debtors, bank balances, loans and advances etc.

Current liabilities are those obligations which are payable within a short period of generally one year and include Sundry creditors, outstanding expenses etc.

2. Quick Ratio:

Quick ratio also known as Acid test or Liquid Ratio is a more rigorous test of liquidity than the current ratio. It may be defined as the relationship between quick/ or liquid assets and current or liquid liabilities. An asset is said to be liquid if it can be converted into cash within a short period without loss value. In that sense cash in hand and cash at bank are the most liquid assets the other assets which can be included in the liquid assets are Sundry Debtors, short term or temporary investments etc. The quick ratio can be calculated by dividing the total of the quick assets by total assets by total current liabilities.

Quick Ratio

Quick Assets Current Liabilities

3. Cash Ratio/ Absolute Liquid Ratio:Cash ratio is calculated together with current ratio and acid test ratio so as to exclude from the current assets and find out the absolute liquid assets.

Cash Ratio

Super Quick Assets Current liabilities

Cash ratio includes cash in hand and cash at bank and temporary investments. The acceptable norm for this ratio is 50% or 0.5:1 or 1:2 i.e. Re. 1 worth absolute liquid assets are considered adequate to pay Rs. 2 worth current liabilities in time as all the creditors are not expected to demand cash at the time and then cash may also be realized from the debtors and inventories.

LEVERAGE RATIOS:
Leverage Ratios throw light on the long term solvency of the firm. The term Solvency refers to the ability of a firm includes debenture holders, financial institutions providing medium and long term loans and other selling goods on installment basis. The long term creditors of a firm are primarily interested in knowing the firms ability to pay regularly interest on long term borrowings, repayment of the principal amount at the maturity and the security of their loans. According, long term solvency ratios indicate a firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings. The following ratios serve the purpose of determining the solvency of the concern:

1. Debt Equity Ratio

Debt- Equity Ratio, also known as External Internal Equity Ratio is calculated to measure the relative claims of outsiders and the owners (i.e., shareholders) against the firms assets. This ratio indicates the relationship between the external equities or the outsiders funds and internal equities or the shareholders funds. The two basic components of the ratio are outsiders funds i.e. external equities and share holders funds, i.e. internal equities. The outsiders funds include all debts/ liabilities to outsiders, whether long- term or short- term or whether in form of debentures bonds, mortgages or bills.

The shareholders funds consist of equity share capital, preference share capital, capital reserves, revenue reserves and surpluses. The accumulated losses and deferred expenses, if any, should be deducted from the total to find out shareholders funds it is called net worth and the ratio may be termed as Debt to Net worth ratio.

Debt- Equity Ratio, also known as External Internal Equity Ratio. This ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders funds. It is calculated as below:

Debt- Equity Ratio

Total Debt Shareholders Funds

1. Fixed Assets to Net worth Ratio The ratio establishes the relationship between fixed assets and shareholders funds i.e., share capital plus reserves & surplus. This ratio is calculated as follows:

Fixed Assets to Net Worth Ratio

Fixed Assets Net Worth

2. Proprietors Ratio A variant to the debt- equity is the proprietors ratio which can is also known as Equity Ratio or Shareholders to Total Equities ratio or Net Worth to Total assets Ratio.

This ratio establishes the relationship between shareholders funds to total assets of the firm. The ratio of proprietors funds to total funds (proprietors + outsiders funds or total funds or total assets) is an important ratio for determining long term solvency of a firm. The components of this ratio are Shareholders funds or Proprietors Funds and Total Assets. The shareholders funds are Equity Share Capital, Preference Share Capital and Preference Share Capital, reserves and surplus.

Out of this amount, accumulated losses should be deducted. These total assets on the other hand denote total resources of the concern. This ratio can be calculated as under

Proprietary Ratio

= Shareholders Funds Total Assets

3. Total Liabilities/ External Equities to Total Assets

This is a small variant of equity ratio and can be simply calculated as 100- equity ratio. The ratio indicates the relationship between total liabilities total assets of a firm and can be calculated as follows

External Equities of Total Assets

External Equities Total Assets

4. Total debt to Capital Employed The ratio establishes the relationship between total debt and capital employed. The ratio can be calculated as follows

Total Debt to Capital employed

Total Debt Capital Employed

ACTIVITY RATIOS:
Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed affects the volume of sales. The better the management of assets, the larger is the amount of sales and the profits. Activity ratios measure the efficiency or effectiveness with which a firm manages its resources or assets.

These ratios are also called turnover ratios because they indicate the speed with which assets are converted or turned over into sales e.g., inventory turnover ratio indicates the rate at which the funds invested in inventories are into sales. Depending upon the purpose, a number of turnover ratios can be calculated, as debtors turnover, stock turnover, capital turnover, etc.

1. Inventory Turnover or Stock Turnover Ratio

Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirement of the business. But the level of inventory should neither be too high nor low. It is harmful to hold more inventories for the following reasons paid. There are chances of obsolescence of stocks. Consumers will prefer goods of

It unnecessarily blocks capital which can otherwise be profitability used

somewhere else. Over stock will require more require more go down space, so more rent will be

latest design, etc. Slow disposal of stocks will mean slow recovery of cash also which will

adversely affect liquidity. periods.

There are chances of deterioration in quality if the stocks are held for more

It will therefore be advisable to dispose of f inventory as early as possible. On the other hand, too low inventory may mean loss of business opportunities. Thus, it is very essential to keep sufficient stocks in business. Inventory turnover ratio also known as stock velocity is normally calculated as sales/ average inventory.

It would indicate whether inventory has been efficient used or not. The purpose is to see whether only the required minimum funds have been locked up in inventory. Inventory Turnover Ratio (I.T.R) indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

The figure of inventory at the end of the year should not be taken for calculating stock velocity because normally the stock at the year end is low. Generally, efforts are made to dispose of inventory before the close of turnover ratio.

If possible, stock figures at the beginning and at the end of every month should be taken and added up and thus should be taken. The ratio is calculated by dividing the cost of sold by amount of average inventory at cost:

Inventory or Stock Turnover Ratio

Cost of Goods Average Inventory

2. A. Debtors Turnover Ratio

A concern may sell goods on cash as well as on credit. Credit is one of the important elements of sales promotion. The volume of sales can be increased by following a liberal credit policy. But the effect of a liberal credit policy may result in typing up substantial funds of a firm in the form of trade debtors. Trade debtors are expected to be converted into cash within a short period and are included in current assets.

Hence, the liquidity position of a concern to pay its short term obligations in time depends upon the quality of its trade debtors. Two kinds of ratios can be computed to evaluate the quality of debtors.

Debtors Turnover ratio indicated the velocity of debt collection of firm. In simple words, it indicates the number of times average debtors (receivables) are turned over during a year.

Debtors Turn Over Ratio

Sales Average Debtors

B. Debtors collection Period Ratio The Debtors Collection period represents the average number of days which a firm has to wait before its receivables are converted into cash. The ratio can be calculated as follows:

Debtors Collection Period

Days in a year Debtors Turnover Ratio

3. A. Creditors Turnover Ratio

In the course of business operations firm has to make credit purchases and incur short term liabilities supplier of goods, i.e., creditor is naturally interested in finding out how much time is likely to take in repaying its trade creditors. The analysis for creditors turnover is basically the same as o f debtors turnover ratio except that in place of trade debtors, the trade creditors are taken as one of the components of the ratio and in place of average daily sales, average daily purchases are taken as the other component of the ratio. Same as debtors turnover ratio, creditors turnover ratio is calculated:

Creditors turnover ratio

Net credit annual Purchases Average trade creditors

B. Creditors Collection Period Ratio The Creditors Collection Period ratio represents the average number of days by the firm and higher the ratio, less liquid is the position of the firm. But a higher collection period also implies greater credit period enjoyed by the firm and consequently larger the benefit reaped from the credit suppliers higher ratio may also imply lesser discount facilities availed or higher price paid for the goods purchased on credit. It is calculated as follows

Creditors Collection Period Ratio

Days in a Year Creditors Turnover Ratio

4. Capital Employed Turn Over Ratio The ratio establishes the relationship between cost of goods sold and capital employed. The ratio can be calculated as follows:

Capital Employed Turnover Ratio

Cost of Goods sold Capital Employed

5. Fixed assets turn Over Ratio

The ratio establishes relationship between Fixed Assets and Net Sales of a particular financial year. The ratio can be calculated as follow:

Fixed assets Turn Over ratio

Net sales Fixed asset

PROFITABILITY RATIOS:
The primary objective of a business undertaking is to earn profits. Profit earning is considered essential for the survival of the business. In the words of Lord Keynes, Profit is the engine that drives the business enterprise. A business needs profits not only for its existence but also for expansion and diversification. The investors want an adequate return on their investments, workers want higher wages, creditors want higher security for their interest and loan and so on. A business enterprise can discharge its obligations to the various segments of the society only through earnings of profits. Profits are thus, a useful measure of overall efficiency of a business.

Profits to the management are the test of efficiency and a measurement of control: to owners, a measure of worth of their investment, to the creditors, the margin of safety to employees, a source of fringe benefits, to government, a measure of taxpaying capacity and the basis of legislative action: to customers, a hint to demand for better quality and price cuts, to an enterprise, less cumbersome source of finance for the growth and existence and finally to the country. Profits are an index of economic progress profitability ratios is calculated to measure the overall efficiency of the business. Generally, profitability ratios are calculated either in sales or in relation to investment. The various profitability ratios are discussed below:

1. Gross Profit Ratio Gross Profit Ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. Thus, it is calculated by dividing the gross profit by sales.

Gross Profit

Gross Profit * 100 Sales

1. Net Profit Ratio Net profit ratio establishes a relationship between net profit (after taxes) and sales and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of firms profitability and is calculated as: Net Profit Ratio = Net Profit * 100 Sales

2. Return on Total Assets Ratio:-

The ratio establishes relationship between net profits and total assets. The ratio can be calculated as follows and its generally represented as a percentage.

Return on Total Assets Ratio = Net Profit Total Assets

* 100

3. Return on Capital Employed

Return on capital employed establishes the relationship between profits and the capital employed. It is the primary ratio and is most widely used to measure the overall profitability and efficiency of a business. The term Capital Employed refers to the total of investment made in a business and can be defined in a number of ways.

Return on Capital Employed =

Net Profit

* 100

Capital Employed

Expenses Ratio:
Expenses ratios indicate the relationship of various expenses to net sales. The operating ratio reveals the average total variations in expenses. But some of the expenses may be increasing while some may be falling. Hence, expense ratios are calculated by dividing each item of expenses or groups of expenses with the net sales to analyze the causes of variation of the operating ratio.

The ratio can be calculated for each individual item of expenses or a group of items of a particular type of expense like cost of sales ratio, administrative expenses ratio, selling expenses ratio, material consumed ratio and etc. the lower the ratio, the greater is the profitability.

While interpreting the ratio, it must be remembered that for a fixed expense like rent, the ratio will fall if sales increase and for a variable expense, the ratio in proportion to ales shall remain nearly the same.

1. Administrative Expenses The ratio establishes the relationship between administration expenses and the net sales. The ratio can be calculated as follow:

Administration Expenses = Administration Expenses * 100 Net Sales

2. Operating Expenses

The ratio establishes the relationship between operating expenses and net sales. The ratio can be calculated as follows

Operating expenses = Operating Expenses * 100 Net Sales

3. Net Profit to Proprietors Fund Ratio:The ratio establishes relationship between net profit and proprietors funds. The ratio can be calculated as follow: Net Profit to Proprietors Fund Ratio =

Net Profit * 100 Proprietors Funds

Market Test Ratios:-

Market Test Ratios are defined as the ratios which help in studying the position of different ratios which are linked with position of the market. These ratios helps in knowing the current position of the market and further helping the organization in taking further precautionary steps. These ratios are calculated on the basis of the market position.

The various Market Test ratios are discussed below

1. Earnings Per Share Earnings per share are a small variation of return on equity capital and are calculated by dividing the Net Profit after Taxes and Preference Dividend by the total number of Out Standing shares. Companies often use a weighted average of shares outstanding over the reporting term. EPS can be calculated for the previous year ("trailing EPS"), for the current year ("current EPS"), or for the coming year ("forward EPS"). Note: The last year's EPS would be actual, while current year and forward year EPS would be estimates.

EPS

Net Profit after Tax Preference Dividend Number of O/S Shares

1. Price Earnings Ratio or P/E Ratio

It is the ratio between market price per equity share and earnings per share. It is also defined as; the ratio of the market price of a common stock to its earnings per share. The estimated P/E of a company is often used to compare current earnings to estimated future earnings. If earnings are expected to grow in the future, the estimated P/E will be lower than the current P/E. This measure is also used to compare one company to another with a forward-looking focus. It also helps the investors whether to buy or not shares in a particular company.

Price Earnings Ratio

Earnings per Share * 100 Market Price per Share

2. Dividend Pay Out Ratio It is calculated to find the extent to which the Earnings per Share (EPS) have been retained in the business. The higher the dividend payout ratio, the less profits are invested back into the business to create future growth. In our dividend growth strategy, we look for companies that invest back into the business in order to create more growth that will allow for another increase in the dividend. Dividend pay- out Ratio = Dividend per Equity Share (DPS) Earnings per Share (EPS)

CHAPTER-V DATA ANALYSIS AND INTERPRETATION

CURRENT RATIO:
Current Ratio = Current assets / Current liabilities

YEARS 2007-08 2008-09 2009-10 2010-11 .2011-12

CURRENT ASSETS 19297.37 15992.69 20641.94 26590.97 36759.74

CURRENT LIABILITIES 12433.69 11755.81 16555.11 19606.60 42700.36

CURRENT RATIO 1.55 1.36 1.24 1.35 0.86

GRAPHICAL REPRESENTATION:
CURRENT RATIO
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1 2 3 4 5 Series1

Interpretation:
From the above graph the current ratio in 2007-08 that is 1.55.In the year 2008-09 it is 1.36 and 2009-10 the ratio is 1.24 which increased gradually from previous years and for the year 201011 it is 1.35 and decreased in 2011-12 to 0.86.

QUICK / ACID TEST / LIQUID RATIO:

Quick Ratio = Quick assets/Current liabilities
Where Quick assets = Current assets Inventories

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

QUICK ASSETS 2054.13 3030.37 2804.25 2832.88 7159.42

QUICK LIABILITIES 12433.69 11755.81 16555.11 19606.60 42700.36

QUICK RATIO 0.16 0.25 0.16 0.14 0.16

GRAPHICAL REPRESENTATION:
0.3 0.25 0.2 0.15 Series1 0.1 0.05 0 1 2 3 4 5

Interpretation:
from the above graph the quick ratio in 2007-08 that is 0.16. In the year 2008-09 it is 0.25 and 2009-10 the ratio is 0.16 which gradually decreased from previous years and for the 2010-11 it is 0.14 and increased in 2011-12 to 0.16.

ABSOLUTE QUICK RATIO:

Absolute quick ratio = Quick assets / Quick liabilities
YEARS SUPER QUICK ASSETS 2054.13 3030.37 2804.25 2832.88 7159.42 QUICK LIABILITIES ABSOLUTE QUICK RATIO 0.16 0.25 0.16 0.14 0.08

2007-08 2008-09 2009-10 2010-11 2011-12

12433.69 11755.81 16555.11 19606.60 42700.36

GRAPHICAL REPRESENTATION:
0.3 0.25 0.2 0.15 0.1 0.05 0 1 2 3 4 5

Series1

Interpretation:
From the above graph the absolute quick ratio in 2007-08 that is 0.16. In the year 2008-09 it is 0.25 and 2009-10 the ratio is 0.16 which decreased gradually from previous years and for the year 2010-11 it is 0.14 and decreased in 2011-12 to 0.08 .

DEBT EQUITY RATIO:

Debt Equity Ratio =Debt Capital / Equity Capital

YEARS
2007-08 2008-09 2009-10 2010-11 2011-12

DEBT CAPITAL
16786.70 22755.17 21302.37 25021.19 15284.47

EQUITY CAPITAL
10563.29 10730.63 11557.97 12545.80 13122.52

DEBT EQUITY RATIO

1.58 2.12 1.84 1.99 1.16

GAPHICAL REPRESENTATION:
2.5

1.5 Series1 1

0.5

0 1 2 3 4 5

Interpretation: From the above graph the debt-equity ratio in 2007-08 that is 1.58 . In the year 2008-09 it is 2.12 and 2009-10 the ratio is decreased to 1.84 which increased gradually from previous years and for the year 2010-11 it is 1.99 and further decreased to1.16.

EQUITY RATIO:
Equity Ratio = Equity Capital / Total assets

YEARS
2007-08 2008-09 2009-10 2010-11 2011-12

EQUITY CAPITAL
16786.70 22755.17 21302.37 25021.19 15284.47

TOTAL ASSETS
34542.60 32648.51 39836.20 49034.20 71107.35

EQUITY RATIO
0.30 0.32 0.29 0.25 0.18

GRAPHICAL REPRESENTATION:
0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 1 2 3 4 5 Series1

Interpretation:
From the above graph the absolute quick ratio in 2007-08 that is 0.16. In the year 2008-09 it is 0.25 and 2009-10 the ratio is 0.16 which decreased gradually from previous years and for the year 2010-11 it is 0.14 and decreased in 2011-12 to 0.08.

SOLVENCY RATIO:
Solvency Ratio = Total Liabilities To Outsiders / Total Assets

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

TOTAL LAIBILITIES TO OUTSIDERS 29220.39 34510.98 37857.48 44627.79 57984.83

TOTAL ASSETS 34542.60 32648.51 39836.20 49034.20 71107.35

SOLVENCY RATIO 0.84 1.05 0.95 0.91 0.81

GRAPHICAL REPRESENTATION:
1.2 1 0.8 0.6 0.4 0.2 0 1 2 3 4 5

Series1

Interpretation:
From the above graph the equity ratio in 2007-08 it is 0.30 and 2009-10 the ratio is 0.29 which increased gradually from previous years and for the year 2010-11 it is 0.25 which decreased in 2011-12 the ratio is 0.18.

INVENTORY TURNOVER RATIO:

Inventory Turnover Ratio = Cost Of Goods Sold / Average Stock

YEARS
2007-08 2008-09 2009-10 2010-11 2011-12

COST OF GOODS SOLD

95334.25 108665.37 99222.48 121426.28 176919.99

AVERAGE STOCK
20118.68 20813.52 21372.25 28801.50 36076.81

INVENTORY TURNOVER RATIO

4.73 5.22 4.64 4.21 4.90

GRAPHICAL REPRESENTATION:
6 5 4 3 2 1 0 1 2 3 4 5

Series1

Interpretation:
From the above graph the inventory turnover ratio of the year 2007-08 is 4.73. In the year 2008-09 it is 5.22 and 2009-10 it is 4.64 which decreased gradually from previous years and for the year 2010-11 it is increased to 4.21 and in the year 2011-12 it is 4.90.

DEBTORS TURNOVER RATIO:

Debtors Turnover Ratio = Net Sales / Average Trade Debtors

YEARS
2007-08 2008-09 2009-10 2010-11 2011-12

NET SALES
96442.2 109377.60 101347.51 123772.42 178139.23

AVERAGE TRADE DEBTORS

1644.22 1975.78 2339.12 2545.85 3321.01

DEBTORS TURNOVER RATIO

58.65 55.35 43.32 48.61 53.63

GRAPHICAL REPRESENTATION:
70 60 50 40 30 20 10 0 1 2 3 4 5 Series1

Interpretation:
From the above graph the debtors turnover ratio in 2007-08 that is 58.65.In the year 2008-09 it is 53.35 and 2009-10 the ratio is 43.32 which increased gradually from previous years and for the year 2010-11 it is 48.61 and in the year 2011-12 the ratio is 53.63.

WORKING CAPITAL TURNOVER RATIO:

Working Capital Turnover Ratio = Cost Of Sales / Average Working Capital

YEARS

NET SALES

AVERAGE WORKING CAPITAL

15381.03 17645.03 18323.13 23616.45 32976.45

WORKING CAPITAL TURNOVER RATIO

6.27 6.19 5.53 5.24 5.40

2007-08 2008-09 2009-10 2010-11 2011-12

96442.2 109377.60 101347.51 123772.42 178139.23

GRAPHICAL REPRESENTATION:
6.4 6.2 6 5.8 5.6 5.4 5.2 5 4.8 4.6 1 2 3 4 5 Series1

Interpretation:
From the above graph the working capital turnover ratio in 2007-08 that is 6.27 .In the year 2008-09 it is 6.19 and 2009-10 the working capital is 5.53 which decreased gradually from previous years and for the year 2010-11 it is 5.22 and in the year 2011-12 it is 5.40.

FIXED ASSETS TURNOVER RATIO:

Fixed Assets Turnover Ratio = Net Sales / Fixed Assets

YEARS
2007-08 2008-09 2009-10 2010-11 2011-12

NET SALES
96442.2 109377.60 101347.51 123772.42 178139.23

FIXED ASSETS
15245.23 16655.82 19194.26 22443.23 32777.55

FIXED ASSETS TURNOVER RATIO

6.32 6.56 5.28 5.51 5.43

GRAPHICAL REPRESENTATION:
7 6 5 4 3 2 1 0 1 2 3 4 5 Series1

Interpretation:
From the above graph the fixed asset turnover ratio in 2007-08 that is 6.32. in the year 2008-09 it is 6.56 and 2009-10 the ratio is 5.28 which increased gradually from previous years and for the year 2010-11 it is 5.51 and in the year 2011-12 it is 5.43.

GROSS PROFIT RATIO:

Gross Profit Ratio = Gross Profit / Net Sales

YEARS

GROSS PROFIT

NET SALES

GROSS PROFIT RATIO

1.14 0.65 2.09 1.89 0.68

2007-08 2008-09 2009-10 2010-11 2011-12

1108.67 712.22 2125.03 2346.14 1219.64

96442.2 109377.60 101347.51 123772.42 178139.23

GRAPHICAL REPRESENTATION:
2.5

1.5 Series1 1

0.5

0 1 2 3 4 5

Interpretation:
from the above graph the gross profit ratio in 2007-08 that is 1.14. In the year 2008-09 it is 0.65 and 2009-10 the ratio increased to 2.09 which decreased gradually from previous years and for the year 2010-11 it is 1.89 and it decreased in 2011-12 to 0.68.

NET PROFIT RATIO:

Net Profit Ratio =[ Net Profit After Taxes / Net Sales]100

YEARS
2007-08 2008-09 2009-10 2010-11 2011-12

NET PROFIT AFTER TAXES

1134.88 574.98 1301.37 1539.01 911.43

NET SALES
96442.2 109377.60 101347.51 123772.42 178139.23

NET PROFIT RATIO

1.17 0.52 1.28 1.24 0.51

GRAPHICAL REPRESENTATION:
1.4 1.2 1 0.8 0.6 0.4 0.2 0 1 2 3 4 5 Series1

Interpretation: From the above graph the net profit ratio in 2007-08 that is 1.17. In the year 2008-09 0.52 and 2009-10 the ratio is 1.28 which decreased gradually from previous years and for the year 2010-11 it is 1.24 and decreased in 2011-12 to 0.51.

RETURN ON INVESTMENT FOR CAPITAL:

Return On Investment For Capital = [Profits Before Interest And Taxes / Total Assets]*100

YEARS

PROFIT BEFORE INTERNET AND TAXES

1108.67 712.22 2125.03 2346.14 1219.64

TOTAL ASSETS

RETURN ON INVESTMENT FOR CAPITAL

2.67 1.52 4.14 3.88 1.71

2007-08 2008-09 2009-10 2010-11 2011-12

41379.65 46844.98 51223.42 60369.22 71107.35

GRAPHICAL REPRESENTATION:
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 1 2 3 4 5 Series1

Interpretation:
From the above graph the net profit ratio in 2007-08 that is 1.17. In the year 2008-09 0.52 and 2009-10 the ratio is 1.28 which decreased gradually from previous years and for the year 2010-11 it is 1.24 and decreased in 2011-12 to 0.51.

CHAPTER-V
Summary Findings Suggestions

SUMMARY
The first chapter of the study concentrates on the introduction, need, methodology, objectives, and limitations of the project which gives a clear insight into the topic of the study.

In the second chapter of the study it gives a detailed report of the introduction of oil industry, evolution of oil industry . The oil industry in India developed after the period of Independence. The oil industry has been so developed that it involves its presence in many of the major industries. Thus at present the oil industry is in a steady position and also has a wide scope for development.

In the third chapter it gives a clear detail about the company, its objectives, its mission and vision which are helping to lead the company in a steady position and also to maintain a confidence in the market. Since the company is concentrating to meet the employee necessities and to provide best service to the customers, the scope for improvement is very large.

The fourth chapter mainly focuses on Ratio Analysis of the financial statements of a company which is helpful to obtain a better understanding of the firms position and performance. The easiest way to evaluate the performance of a firm is to compare its present ratios with the past ratios when financial ratios over a period of times are compared. It gives an indication of the direction of change and reflects whether the firms financial position and performance has improved.

In the last chapter it gives the detailed report by calculating the ratios of the financial statements. It shows that the firms liquid position is satisfactory and it has the capability to clear its current liabilities without keeping any dues. Though the firm is in a stable position it is not maintaining a proper cash and bank balance which is necessary to clear the unpredicted emergencies.

FINDINGS
The current ratio has shown in fluctuating trend as 7.41, 2.19, 4.48, 1.98 and 3.82 during 2003 of which indicates a continuous increase in both current assets and current liabilities. The quick ratio is also in a fluctuating trend throughout the period 2003-2007 resulting as 7.41, 1.65, 4.35, 1.9 and 3.81. The company's present liquidity position is satisfactory.

The absolute liquid ratio has been decreased from 3.92 to 1.18, from 2003-2007.

The proprietary ratio has shown a fluctuating trend. The proprietary ratio is increased compared with the last year . So, the long term solvency of the firm is increased.

The working capital increased from 0.72 to 1.13 in the year 2003-2007.

The fixed assets turnover ratio is in the increasing trend from the year 2003-2007 (1.26, 1.82, 4.24, 3.69 and 6.82). It indicates that the company is efficiently utilizing fixed assets. The capital turnover ratio is increased from 0.72 to 1.13 in the year 2003-2007.

The fixed assets turnover ratio is in increasing trend from the year 2003-2007 (1.26, 1.82, 4.24, 3.69, 6.82). It indicates that the company is efficiently utilizing the fixed assets. The capital turnover ratio is increased from2003-2005(0.98, 1.01 and1.04)and decreased in 2006 to 0.98. It increased in the current year as 1.00. The current assets to fixed assets ratio is increasingly gradually from 2003-2007 as 2.93, 3.74, 4.20, 6.07 and 8.17. It shows that the current assets are increased than fixed assets. The net profit ratio is in fluctuation manner. It increased in the current year compared with the previous year from 0.33 to 0.42.

SUGGESTIONS

From the study of Ratio Analysis of Hindustan Petroleum Corporation Limited, the following are suggested for effective management: The company had a satisfactory current ratio. The standard current ratio is usually 2:1. The high current ratio shows the inefficiency of investments in current assets. So, maintaining the current ratio not below the 2:1 is better for the company. The company is maintaining a low cash and bank balances. For companys better performance it should maintain a proper balance. The companys liquid ratio is more than the standard ratio of 1:1. It shows the companys conservative behavior in maintaining the liquid assets. So, decreasing the liquid assets or obtain finance from short term sources is better for the company. Debtors are maintained same in almost all years except in the year 2006-07 it was very low as compared to the other years, but when there is increase in business, the debtors turned over quickly. So, the company may adopt a more efficient credit policy. The company has to maintain a proper inventory so that the firms production process and sales will be continuous without any obstacle.

ANNEXURE

BIBLIOGRAPHY

Financial Management(Theory and Practice) - Shasi k. Gupta Management Accounting Financial Management - M.Y.KHAN & P.K.JAIN - I.M. Pandey

Annual Report from 2008-2009 to 2011-2012 of Hindustan petroleum corporation limited.