Professional Documents
Culture Documents
Financial Analysis:
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by property establishing relationships between the item of
the balance sheet and the profit and loss account. Financial analysis can be
undertaken by management of the firm, or by parts outside the firm.
Management
Trade creditors
Investors
Government
Others
Management:
Management of the firm would be interested in every aspect of the financial
analysis. It is their overall responsibility to see that the resources of the firm are
used most effectively and efficiently and that the firms condition is sound.
Trade Creditors:
The trade creditors are to be paid in a short term solvency of the concern. The
current ratio and acid test ratio will enable the creditors to assets the short term
solvency position of the concern.
Investors:
The Investors are interested their money in the firms shares, are not
concerned about the firms earnings. They restore more confidence in those firms
that show steady growth in earnings. As such, they concentrate on the analysis of
the firms present and future profitability. They are also interested in the firms
financial structure to the extent it influences the firms earning ability and risk.
Government:
The financial statements are used to asses tax liability of business
enterprise. These statements enable the government to find out whether the
business is following various regulations or not.
Others:
Trade associations, stock exchange and public at may also analyze the
financial statements to judge the financial position of different concerns.
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Definition
According to Myres Financial statement analysis is largely is a study of
the Relationship among the various financial factors in a business as disclose by a
single set of statement and a study of the trend of these factors as show in a series
of statements.
a) External Analysis
Those who are outsider for the business do this analysis. The outsiders
include investors, credit agencies. government agencies and other creditors who
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have no access to the internal records of the company. These persons mainly
depends upon, the published financial statements. Their analysis serves only a
limited purpose. The position of this analysis has improved in recent times on
account of increased governmental control over companies and governmental
regulations regulations requiring more detailed disclosures of information by the
companies in their financial statements.
b) Internal analysis:
This analysis is done by persons who have access to the books of account
and other information to the books of accounts related to the business., Executives
and employees of the organization or by officers appointed for this purpose by the
government or the court under powers vested in them can therefore do such an
analysis. The analysis in done depending upon the objective to be active
depending upon the objective to be achieved through this analysis.
On the basis of modus operandi according to this, financial analysis can
also be two types.
a) Horizontal Analysis
In case of this type of analysis financial statements for a number of years
are reviewed and analyzed. The current years figures are compared with the
standard or base year. The analysis statement usually contains figures for too or
more years and the changes are shown regarding each item from the base year
usually in the form of percentages. such as analysis given the management
considerable insight into levels and areas of strength and weakness. Since this
type of analysis is based on the date from year to year rather than on one date, it is
also termed as Dynamic Analysis?
b) Vertical Analysis:
In case of this type of analysis a study is made of the quantitative
relationship of the various items in the financial statements on a particular type,
such an analysis is useful in comparing the performance of servral companies in
the same group, or divisions or departments in the same company. Since this
analysis depends on the data for one period, is nor very conductive financial
position. It is also called Static Analysis as it frequently used to ratios developed
on one date or for one accounting period. Tools or Techniques used for Analysis:
1. Ratio Analysis
2. Method of least Squares (Trend Values)
3. Comparative statement Analysis.
These are explained in bring as follows.
1. Ratio Analysis:
Ratio Analysis is widely used tool of financial analysis. It is defined as the
systematic use of ratio to interpret the financial statements so that the strength and
weakness of a firm as well as its historical performance and current financial
condition can be determined. The term ratio refers to the numerical or quantitative
relationship between two items/ Variable. This relation can be expressed as.
a. Percentages
b. Fractions
c. Proportion of numbers.
Accounting ratios showed the relationship in mathematical terms between
two interrelated accounting figures. This is the most important tool available to
financial analysis for their work.
5
Financial Ratio:
Financial Ratio is a relationship between two financial variables. It helps to
ascertain the financial condition of a firm.
Liquidity ratios
Leverages ratios
Activity ratios
Profitability ratios
Liquidity Ratio:
Liquidity Ratio measure the firms ability to meet current obligations, and
are calculated by establishing relationships between current assets and current
liabilities.
Leverage ratio:
Leverage ratios measures the proportion of outsiders capital in financing
the firms assets, and is calculated by establishing relationships between borrowed
capital and equity capital.
Activity Ratio:
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Past data
Standard of Comparison:
Time series analysis
Inter-firm analysis
Industry analysis
depreciation, bad and doubtful debts etc. hence, result revealed by ratios are
subject to such estimates.
5. Ratios are computed on the basis of financial statements which are historical in
nature.
6. Knowledge of ratios only is meaningless unless it is also found how it is made
up.
7. Lack of homogeneity of data, personal judgment lack of consistency etc. is the
factors which limit the conclusion to be derived on the basis of accounting
ratios.
By the method of lease square, a straight line trend can be fitted to the
given time series of data. It is a mathematical, as well as, analytical method. With
its help, economic and business time series data can be fitted and this helps in
forecasting and predicting. The trend line is called the line of best fit. The sum of
deviations of the actual
square of deviations of the actual value and the trend value is the least.
(Y-Yc) = 0 and (Y- Yc) = least. So this method is called the least squares method
or the line of best fit.
The method of least squares cab be used to explain the linear and non
linear trend i.e. a straight line trend or parabolic trend.
9
The straight line trend or the first degree parabola is represented by the
mathematical equation.
Yc = a + bx
Yc = require trend value
X = unit of time
Na +bx
xY =
ax +bX2
Na
bx
xY =
bx2
bx2 =
Y/N and
xY / x2
rate of change
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analyzed well increase the profit and make the company to compete with others
doing similar business.
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SCOPE OF STUDY:
The study mainly attempts to analyze the financial performance of the
company selected for the study. The financial authorities can use this for
evaluating their performance in future, which will help to analyze financial
statements and help to apply the resources of the company properly for the
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RESEARCH METHODOLGY
Methods of data collection;Secondary data
The secondary data is derived from the annual reports, Business line and
finance newspapers websites and
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REVIEW OF LITERATURE
Financial Statement Analysis
The Hershey Company engages in the manufacture, marketing, distribution,
and sale of various types of chocolate and confectionery, refreshment and snack
products, and food and beverage enhancers in the United States and
internationally. The Hershey Company sells its products through sales
representatives and food brokers, primarily to wholesale distributors, chain
grocery stores, mass merchandisers, chain drug stores, vending companies,
wholesale clubs, convenience stores, dollar stores, concessionaires, department
stores, and natural food stores. The company was founded in 1894 and is based in
Hershey, Pennsylvania. The Hershey Company went public on the New York
Stock Exchange (NYSE) in 1922 (http://finance.yahoo.com/q/pr?s=HSY).
under the registered trademarks. It distributes its products through candy and
grocery brokers to wholesale distributors of candy and groceries, supermarkets,
variety stores, dollar stores, chain grocers, drug chains, discount chains,
cooperative grocery associations, warehouse and membership club stores, vending
machine operators, the U.S. military, and fund-raising charitable organizations.
Tootsie Roll Industries operates in the United States, Canada, and Mexico.
The company was founded in 1896 and is based in Chicago, Illinois. The Tootsie
Roll Industries, Inc. went public on the NYSE in 1927 (http:// finance. yahoo.
com/q/pr?s=TR).
The Hershey Company and the Tootsie Roll Company both are
companies in confection industry; they specialize in a wide variety of chocolate
candy products. I compared both companies for the years 2002, 2003, and 2004
against each other and against the industry averages in order to make a decision
about which company investors would choose to invest in. The comparisons I used
to make this decision were ratios for liquidity, solvency, and profitability.
companies; UPS and Ebay, Inc break them down and show you how they got their
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start. In our paper, it will also be discussed and show a review of their financial
statements from each one. The point is to get a better picture of where a company
started, the competition it endured, and the money that was possibility projected
for the start. This paper will also show how auditors are essential to the running
company.
Review of Financial Statements Brief overview UPS, a delivery service, has been
around for about 100 years.
James E. Casey started the company on $100 borrowed from a friend of his.
Casey, who was 19 years old when he started UPS, had worked for delivery
services before and wanted to start a better delivery system of his own.
The American Messenger company, what UPS was previously called,
started in Seattle, Washington and had many competitors in the beginning. His
business not only survived among them, but thrived (UPS, n.d.). Today the
company serves over 200 countries delivering goods, funds, and information
(UPS, n.d., 1). UPS has several stores located in these countries, including the
United States, where people can not only have their packages sent, but they can
also buy delivery products from them as well.
On September 5, 1995, Piere Omidyar founded eBay sitting in his living room.
eBay got it first start with a lie stating that it was founded to help Omidyars
finacee trade Pez candy dispensers and that lie was back by a public relations
manager in 1997. (eBay, n.d., 2) In 1997 Jeffery Skoll became the first president of
eBay. eBay original name was Auction Web Omidyar did not like that name so he
17
changed it to Echo Bay.com but that name was taken so he change it to Ebay.com
and on September 21,1989 Omidrar and Skoll went public and became
billionaires.
COMPANY PROFILE
BHEL is the largest engineering and manufacturing enterprise in India in
the energy related/infrastructure sector.
BHEL caters to core sectors of the Indian Economy viz., Power Generation
and Transmission. Industry, Transportation, Renewable Energy, Defence, etc. The
wide network of BHELs 14 manufacturing divisions, 4 power sector regional
centres, 8 service centres, 15 regional offices, one subsidiary co., Joint Ventures
and a large number of Project Sites spread all over India and large number of
Project Sites spread all over India and abroad enables the Company to promptly
18
serve its customers and provide them with suitable products, systems and services
efficiently and at competitive prices.
BHEL, where Quality Systems as per ISO-9000 have taken deep roots, has
now made significant achievements in Total Quality Management by adopting the
CII/EFQM model for Business Excellence. BHEL became the first Public Sector
Company in the country to win the coveted PRIZE through Haridwar unit under
the CII Exim Award Scheme. BHELs Bhopal & Jhansi Units and Power Sector
Northern and Eastern Regions have also won the Commendations for Significant
achievement/Strong commitment to TOM during 2008-09. Also BHELs insulator
plant at Jagdishur won the commendation by R K Bajaj Quality award. BHEL
shares the growing global concern on issues related to Environment and
Occupational Health and Safety. Major Units of BHEL have been accredited to
ISO-14001 Environmental Management Systems and to OHSAS-18001 for
Occupational Health and Safety Systems.
For the third consecutive year, BHELs performance was recognized by the
prestigious publication Forbes Asia, which featured BHEL in its fourth annual
Forbes 50 list of the best of Asia-Pacifics publicly-traded companies with
revenues or market capitalization of at least US$ 5 billion, having highest longterm profitability and sales & earnings growth. Significantly, BHEL is the only
India PSU to figure on the elite list, since the list was conceived. BHEL is the
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only Indian PSU to figure on the elite list, since the list was conceived. BHEL and
its 4 units were awarded ICWAI Awards for Excellence in Cost Management for
2008 the highest among both public and private sector companies. BHEL won
EEPCs top Export Award for the eighteenth year in succession.
POWER GENERATION
BHEL manufactures a wide range of products and systems for thermal,
nuclear, gas and hydro-based utility power plants to meet customer requirements
for power generation. BHEL has proven turnkey capabilities for executing power
projects from Concept to Commissioning. BHEL-built power generating sets
account for nearly two-third of the overall Installed capacity and around threefourth of the power generated in India. BHEL supplies steam turbines, generators,
boilers and matching auxiliaries upto 800 MW ratings including supercritical sets
of 600/800 MW. BHEL has facilities to go up to 1000 MW unit size. BHELmake steam turbines are designed to achieve higher efficiencies. To make efficient
use of high ash content coal available in India. BHEL also supplies circulating
fluidized bed combustion (CFBC) boilers for thermal plants. BHEL manufactures
220/235/500/540 MWe Nuclear turbine-generator sets. BHEL is the only India
company capable of manufacturing large-size gas-based power plant equipment,
comprising advanced-class gas turbines up to 289 MW (ISO) RATING for open
and combined-cycle operations. BHEL engineers and manufactures custom-built
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hydro power equipment. Its range covers turbines of Francis, Pelton and Kaplan
type, pump turbines, bulb turbines and mini-micro hydro plants, with matching
generators, for different head-discharge combinations.
BHEL offers a large variety of control equipment and solutions, for power
stations ranging from simple control systems to single push-button automation.
Company has expertise of supplying complete Systems for entire power stations
comprising Boiler, Turbine and Balance of Plant (BoP).
INDUSTRIES
21
BHELs
involvement in the transportation sector has been marked with rapid growth. Most
of the trains in Indian Railways, whether electric or diesel powered, are equipped
with BHELs traction propulsion system and controls. The range includes traction
motors, traction generators/alternators, transformers, substation equipment,
vacuum circuit breakers, locomotive bogies, smoothing reactors, exciters,
22
needs, on the one hand and rapidly depleting fossil-based energy sources, on the
other.
BHEL has also supplied casing Support System, Mudline Suspension System and
Block Valves to ONGC for refurbishment and up-gradation of onshore Oil Rigs.
BHEL has supplied GT driven centrifugal compressor packages to GAIL
India Ltd for their gas compressor stations.
TRANSMISSION
BHEL is present in the field of power transmission in India with a wide
range of transmission systems and products. The products manufactured by BHEL
include Power transformers, Instrument transformers, Dry type transformers,
Instrument transformers, Dry type transformers, Shunt reactors, vacuum and SF6
switchgear, Gas insulated switchgears, Ceramic insulators, Gas insulated
switchgears, Ceramic insulators, etc. Major critical hardware such as capacitor
banks, circuit breakers, control and protection equipment and thyristor valves are
in its manufacturing range.
BHEL has developed and commissioned indigenous 36KV and 145KV Gas
insulated Substation (GIS). HVDC Disc insulators of rating 320kN/420kN base,
the company undertakes turnkey execution of substations up to 400KV and has the
capability to execute 765 KV substations. High voltage Direct Current (HVDC)
systems have been supplied for economic transmission of bulk power over long
distances have been developed and supplied for the first time in the country for use
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With string engineering the Company accepts full project responsibility for
feasibility / system studies, execution and commissioning of fixed Series
Compensation / controlled shunt Reactor schemes. BHEL has a team of experts
with extensive on the job exposure for design and applications relating to Power
System Studies, Feasibility Studies, Insulation Coordination etc.
INTERNATIONAL BUSINESS
BHEL has, over the years, established its references in 70 countries across
the world. These references encompass almost the entire range of BHEL products
and services, covering Thermal, Hydro and gas based turnkey power projects,
Substation projects, Rehabilitation projects, besides a wide variety of products like
Transformers,
Compressors,
Valves,
Oil
field
equipment,
Electrostatic
The company has taken significant steps towards globalisation with successful
forays in new markets and new product areas, apart from firmly establishing the
companys presence in existing export markets and areas.
26
27
complement other international companies for large projects, and has also
exhibited products.
The company is taking a number of strategic business initiatives to fuel
further growth in overseas business. Strategic alliances has been established in
Rwanda-AIL, Ethiopia-OIA. Senegal Nykomb, Indonesia MFI, for taking up
EPC on partnership basis. Reference for large Unit size rating has been created by
securing an order for Steam Turbine based Tishreen Thermal Power Plant on EPC
basis from Syria for 2x200MW Units. International visibility is also exhibited by
participating in International exhibitions in Egypt, Vietnam, Syria & South Africa
and wining best exhibitor award.
Technology Up-gradation, Research & Development
To meet the Customers expectation of contemporary technologies and
faster deliveries company lays great emphases on the continuous up- gradation of
products & related technologies, and development of new products. The Company
has upgraded its products to contemporary levels through continuous in house
efforts as well as through acquisition of new technologies from leading
engineering organizations of the world.
steam turbine designed to suit combined cycle power plants, Bypass Over Fire Air
(BOFA) system for reduction of NOx from coal based thermal power plants, highefficiency Frances and Pelton hydro turbines, new LP turbine variant which can be
retrofitted in old Russian (LMW) 210MW thermal sets, Automatic Storage &
Retrieval system (ASRS) for storage and inventory management system of the
Indian Army, Solar Panels with 5500 watts output consisting of high-efficiency
multi-junction solar cells, satellite batteries for NSAT 4A, Controlled Shunt
Reactor (CSR) for 400KV Transmission lines, Flexible AC Transmission Systems
(FACTS), STATCOM, Phase Shifting Transformer (PST), 145KV Gas Insulated
Switchgear (GIS), Micro controller based flame scanner, a more energy efficient
single cylinder non reheat Steam turbine in 100-140 MW application, single
29
320kN/420kN
Porcelain
insulators,
800KV
hollow
insulator,
Diagnostics and Optimization (PADO) package for power plants, 91 ton BHEL
280 Bowl Mill, etc. Design has been developed for new module THRI brushless
exciter for adoption of advance feature for 800 MW exciter.
Management Programmes,
Strategic
and joint claim projects with customers has been generated. CDM is a planned
activity for each unit and carbon credit forms part of budgeted activity.
In conformity with BHELs concern for society and environment, a mote
energy efficient single cylinder non- reheat steam turbine for 100-140MW
application has been developed, suitable for plants where large amount of waste
heat is available and reheat option is not feasible This is the largest single cylinder
steam turbine engineered so far by BHEL.
All manufacturing Units/Regions of the company are accredited to international
standards viz. ISO-14001 certification for environmental management and
OHSAS-18001 certification for occupational health safety management systems.
protection,
Community
development,
Education,
Health
and
Disaster/
Calamity
Management.
Quarterly
and
BHEL - AN OVERVIEW
34
BHEL was established more than 40 years ago whering in the indigenous
Heavy Electrical Equipment industry in India, a dream which has been more that
realized
the
projects installed
capacity
expansion from 10000 MW.pa.to 15000 MW pa. is proceeding apace and plans
are afoot to hike this further to 20006 MW pa by 2011-12.
of BHEL,
Trichy. The plant has so far supplied boilers for around 1350 MW of power
generation capacity to Malaysis, Libya, Iran, Eqypt etc. BHELs valves have
35
been exported to Malts, Cyprus, Malaysia , and Indonesia while pressure part
equipment and spares have been exported to the USA, boiler components have
been supplied to China and secemles steal Tubas have been exported to Malaysia.
36
1) Current Ratio
Current ratio may be defined as the relationships between current assets and
current liabilities. It is the most common ratio for measuring liquidity. It is
calculated by dividing current assets by current liabilities. Current assets are
those, the amount of which can be realized within a period of one year. Current
liabilities are those amounts which are payable within a period of one year. A
current ratio of 2:1 is considerable ideal.
Current Assets
Current Ratio =
Current liabilities
Year
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Current Assets
13343
16331
21063
27705
36901
Current liabilities
8446
10321
14420
19821
28333
37
Current Ratio
1.57
1.58
1.46
1.39
1.30
Interpretation
Current ratio during the year 10-11 is the 1.57. In the next year 2011-12 it
was maximum 1.58 and in the year 2012-13 it was 1.46. In the year 2013-14 the
current ratio is 1.39 and in the last year 2014-15 the current ratio decreased to
1.30.
The ideal value of current ratio 2:1, but during the period of study, the
current ratio is lesser than the standard. This shows the current ratio to shows a
do down ward which indicates the inefficiency of the company to meet its current
obligations
2) Liquid Ratio:The teem Liquidity refers to the ability of a firm to pay its short term
obligations as and when they become due. The term quick assets or liquid assets
refers current assets, which can be converted into cash immediately. It comprises
38
all current assets except stock and prepaid expenses. It is determined by dividing
quick assets by quick liabilities.
Liquid Assets
Liquid Ratio =
Liquid Liabilities
Current Assets
10427
12587
21021
27648
36823
Current liabilities
8446
10321
14420
19821
28333
39
Current Ratio
1.23
1.21
1.45
1.39
1.29
Interpretation
Liquid ratio during the year 2010-2011 it attains the maximum value of
5.20. in the above year it was slightly reduced to 2011 12 to 1.23. In the next
year, 2012-13 it further decreased to 1.21 and in the next year 2014-15 1.39.
During the period of study, the value of liquid ratio is higher than the ideal
value
which indicates
requirements. The overall trend of liquid ratio shows up and down ward trend
3) Proprietory Ratio :
Proprietory ratio relates to the proprietors funds to total assets. It revels
the owners contribution to the total value of assets. This ratio shows the long
time solvency of the business. It is calculated by dividing proprietors funds by
the total tangible assets.
Proprietors Funds
Proprietary Ratio
Year
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Proprietary Fund
Total
Proprietary
6027
7301
8788
10774
12939
Assets
14483
17498
22354
29344
39528
Ratio
0.41
0.41
0.39
0.36
0.32
Interpretation
Proprietory ratio during the year 2010-11 and 2011-12 it attains the
maximum value of 0.41. In the year2012-13 the proprietory ratio was slightly
reduced to 0.39. In the next year, 2013-14 It further reduced to 0.36. During the
year 2014-15 it further decreased to 0.32.
CHART NO.3
41
------------------------------Proprietors funds
Year
2010-2011
2011-2012
2012-2013
2013-2014
Fixed asset
Proprietory
1140
1167
1291
1639
Fund
6027
7301
8788
10774
worth ratio
0.18
0.15
0.14
0.15
42
2014-2015
2627
12939
0.20
Interpretation
Fixed asset to Net worth Ratio during the year 2010-11 was 0.18. it was
slightly reduced to 0.14 in the 2011-12 year. In the next year 2012-13 and 2013-14
the net worth ratio 0.15. The same is increased to a maximum of 0.20 in the year
2014-2015
CHART NO.4
43
------------------------------- x 100
44
Sales
TABLE- 4.5 Net Profit Ratio
(in crores)
Year
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Net Profit
953
1679
2415
2859
3138
Sales
Net Profit
10336
14,525
18739
21401
28033
Ratio
9.2%
11.6%
12.9%
13.4%
11.20%
Interpretation
From the table, it is found that the net profit has been fluctuating during the
study period. In the year 2010-11 the net profit ratio was 9.2%. In the year 201112 it was increased to 11.6%. In the next year 2012-13 it was further increased
12.9%. During the year 2013-14 there was a slight increases to 13.4%. During the
year 2014-15 the net profit ratio was 11.20%.
CHART NO.5
45
------------------------------Average Stock
46
Average stock
Cost of goods
Average
Stock
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
sold
8673
11902
14960
16936
23153
Stock
2919
3653
4971
7097
9350
Turnover Ratio
2.97
3.25
3.00
2.38
2.47
Interpretation
From the table, it is found that the stock Turnover ratio has been fluctuating
during the study period. In the year 2010-11 it was 2.97, It increases during the
year 2011-12 was slightly to 3.25. In the year 2012-13 it was 3.00 and decreases
to 2.38 in the year 2013-14 and during the year 2014-2015 it was increased to
2.47.
CHART NO.6
47
-------------------------------
Sales
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Rs
10336
14525
18739
21401
28033
Rs
5972
7168
9695
11975
15976
1.73
2.02
1.93
1.78
1.75
Interpretation
From the table, it is found that the Debtor Turnover ratio has been
fluctuating during the study period. In the year 2006-07 it was 1.73, It increases
during the year 2007-08 was slightly to 2.02. In the year 2008-09 it was
decreased to 1.93 and decreases to 1.78 in the year 2009-10 and during the year
2010-2011 it was further decreased to 1.75
CHART NO.7
49
credit terms obtained from suppliers, average the account period shows the
length of time during which the firm is financing the account receivable either
with its own funds or borrowed funds. The radio may be calculated as follows:
Debtors B/R
Average debt collection period
Debtors
5972
7169
9695
11975
15976
Credit Sales
Debt Collection
10336
14525
18739
21401
28033
Period
210 days
180 days
188 days
204 days
208 days
Interpretation
Debt Collection period ratio in the year 2010-11 was 210 days. In next year
11-12 it further reduced to 180 days. In the next year 2012-13 it was 188 days.
In the next year 2013-14 it was 204 days. During the years 2014-15 it was 208
days.
51
From the above it is inferred that the debt collection period shows a fluting
trend, which indicates quick recovery of money from debtors and also indirectly
shows that the management in highly efficient in collecting debts promptly.
CHART NO.8
52
Credit Purchases
Creditors Turnover Ratio
Credit Purchase
Average Account
Creditor
4892
6866
10182
11821
17620
payable
2100
284
3538
4424
5852
Turnover ratio
2.32
24.17
2.87
2.67
3.0
The creditor Turnover ratio during the year 2010-11 was 2.32. In the year
2011-12 it was increased to 24.17. In the year 2012-13 creditors turnover ratio
53
slightly reduced to 2.87. In the year 2013-14it was reduced to 2.67. During the
year 2014-15 it was increased to 3.0
From the above it in inferred that the creditors turnover ratio shows an
upward trend which indicates that the company is highly efficient in making.
Speedy settlements of debts to its creditors.
CHART NO.9
54
days)
Credit Purchase
A Lower Ratio shows that the creditors being paid promptly. The amount
payable depends upon the purchase policy, the quantum of purchase and suppliers
credit policy.
TABLE 4.10 Average Payment Period
(in crores)
year
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Credit
Average
Average Payment
Purchase
Creditors
period
4892
6866
10182
11821
17620
2100
284
3538
4424
5852
156 days
15 days
126 days
136 days
121 days
55
The average payment period during the year 2010-11 was 156 days. From
the year 2011-12 it was heavily decreased 15 days. In the year 2012-13 average
payment period was 126 days. In the year 2013-14 it was 136 days. This last year
2014-2015 it was 121 days.
CHART NO.10
56
------------------------------Fixed assets
Sales
10336
14525
18739
21401
28033
Fixed asset
Fixed asset
1140
1167
1291
1639
2627
Turnover
9.06
12.44
14.51
13.05
10.67
Interpretation
The fixed asset turnover ratio during the year 2010-11 was 9.06. It is found
that the fixed asset turnover ration has been fluctuating during the study period. In
57
the year 2011-12 it was 12.44. In the year 2012-13 it was 14.51. During the year
2013-14 the fixed asset turn over ratio was 13.05. This, last year 2014-2015 it
was decreased to 10.67.
CHART NO.11
58
--------------------------------------
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Proprietors fund
6027
7302
8789
10775
12939
Sales
Capital Turnover
10336
14525
18739
21401
28033
ratio
1.71
1.98
2.13
1.98
2.16
Interpretation
It is inferred from the above table the capital turnover ratio for the year
2010-11 was 1.71. In the year 2011-12 it was 1.98. where as In the year was
2012-13 it was increased to 2.13. In the year 2013-14 it was slightly decreased to
1.98. But during the year 2014-15 it was increased further to 2.16.
CHART NO.12
59
Current ratio shows a document trend indicating the company not able to
fulfill current obligations furthers this also indicate that liquidity position of the
company is less satisfactory.
In all the five years the current ratio is less than the ideals of 2. Creditors
term over ratio shows an upward trend and indicates better credit management.
In all the five years the liquid ratio is higher than the ideal ratio of 1
Common size financial statements clearly shoes the firm allocates half of the total
current assets to debtor.
The firms debt collection period have more than 180days it increased the
debt collection period year by year. It shows firms liberal debt collection policy.
2. Fixed assets turnover was 11% in the year 2010-11.
3. Capital turnover ratio was 2.16 in the year 2010-11.
4. Return on total assets that decreased from 15.09 in the year 2010-2011 to 12.26
in the 2011-2012.
5. Operating ration has increased from 79.1 in the year 07-08 to 82.5 in the year
2010-11
6. Asset turnover ratio was 1.4 in the year 2010-11.
7. Gross profit ratio has come down from 21% in year 2012-2013 to 17% in
2013-14.
8. Sales shows the increasing trend at the rate in every year
.
SUGGESTIONS
61
The current ratio of the company is below the standard ratio in all the 5
years under study , Hence it should be improved at least to the standard.
The debt collection period is more than 180 days which is to be reduced or
the debt collection policy of the company is to be changed.
Suitable training may be imparted to all the executives including labourers
as and when they are recruited.
The gross profit of BHEL has to be increased , this can be done by taking
steps to reduce the cost of sales , which have its own affect over the gross profit.
As the consumption of raw materials holds a wider part in the cost of sales.
Researcher who is in the hands of the company to adopt consistent pricing policy
regarding raw materials which ultimately reduce the cost of sales & which in
tern improves the gross profit in the subsequent years.
The company may take one of the measures for improving more profits,
sale should be enhanced from into end through innovative marketing techniques.
In a competitive business world, unless & other wise aggressive it is very
difficult to achieve its required sales.
The concern must take measures to avoid dead stock which has an
adverse.
Effect over the liquidity
CONCLUSION
Bharat Heavy Electricals units bying in India come under the purview of
NAVARATNA units. There are 14 more Bharat Heavy Electricals units /
divisions. Of this Bharat Heavy Electricals limited Tiruchirappalli is one the unit
and it earns more profit for every year continuously.
The company has been successful in meeting the demanding requirements
of not only in India but also international markets in terms of complicity of work
as well as Technology etc. BHEL has over the year established its reference in
to700 countries across the world. This unit gives more
employment ie to
thousands and thousands of workers. It gives more protection and safety to the
staff working in it besides more concentration to the welfare of the workers.
BHEL
63