Description
The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."
CHAPTER-I INTRODUCTION AND DESIGN OF THE STUDY INTRODUCTION FINANCIAL STATEMENT ANALYSIS
Financial statement is an organized collection of data according to logical and consisted accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business form. It may reveal a series of activities over a given period of time, as in the case of an income statement.
The focus of the financial analysis is on key figures in the financial statements and the significant relationships the exists between them. The analysis of financial statements is a process of evaluating relationships between component parts of financial statements to obtain a better understanding of the firm’s position and performance.
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.
USERS OF FINANCIAL ANALYSIS: • 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 firm’s 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 firm’s 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.
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.
Financial statements are indicators of the two significant factors: 1. Profitability 2. Financial Soundness
Analysis and interpretation of financial statements therefore refers to such a treatment of the information contained in the income statement and the balance sheet so as to afford full diagnosis of the profitability and financial soundness of the business.
The term “analysis” means methodical classification of the data given in the financial statements. The term “interpretation” means “ explaining the meaning and significance of the data so simplified.
Types of financial Analysis Financial analysis can be classified in to different categories depending upon. (a) The material used (b) The modus operand of analysis
On the basis of materials used. According to this basis financial analysis can be of two types.
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 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 year’s 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. Ratio analysis is a process of identifying the financial strengths and weakness of the firm. This may be accomplished either through a trend analysis of the firm’s ratios over a period of time or through a comparison of the firm’s ratios with its nearest competitors and with the industry averages. The four most important financial dimensions which a firm would like to analyze are: liquidity, Leverage, Activity and Profitability. Nature of Ratio Analysis:
A Financial ratio is a relationship between tow accounting numbers. ratios help to make a qualitative judgment about the firm’s financial performance. Financial Ratio: Financial Ratio is a relationship between two financial variables. It helps to ascertain the financial condition of a firm.
Types of financial Ratios: ? Liquidity ratios ? Leverages ratios ? Activity ratios ? Profitability ratios
Liquidity Ratio: Liquidity Ratio measure the firm’s 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 outsider’s capital in financing the firm’s assets, and is calculated by establishing relationships between borrowed capital and equity capital.
Activity Ratio: Activity ratio reflects the firms efficiency in utilizing its assets in generating sales and is calculated by establishing relationships between sales and assets. Profitability Ratio: Profitability ratios measure the overall performance of the firm by deterring the effectiveness of the firm ingenerating profit, and are calculated by establishing relationships between profit figures on the one hard, and sales and assets on the other.
Utility of Ratio Analysis Assessment of the firm’s financial conditions and capabilities. ? Diagnosis of the fir’s problems, weakness and strengths. ? Credit analysis ? Comparative analysis
? Time series analysis
Cautions in using ratio analysis ? Standards of comparisons ? Company differences ? Prices level ? Different definition ? Changing situations ? Past data Standard of Comparison: ? Time series analysis ? Inter-firm analysis ? Industry analysis ? Preformed financial statement analysis Advantages of Ratio Analysis: 1. It helps in analysis of the situation i.e. analysis on the financial situation and performance.
2. Inter-firm and Inra-firm comparison is both possible on the basis of accounting ratio 3. Accounting Ratio not only indicates the present position but they also indicate the cause leading up to the position of a large extent 4. It helps in obtaining best result when ratios for a number of years are put in tabular form so that the figure for one year can be easily compoared with those of other year 5. It indicates the trend of the change, which helps in preparation of estimates for the future. 6. They provide simplicity to the complex accounting information presented by the financial statements 7. They are very helpful to outsiders as well as for internal management 8. It is very helpful to internal managements, discharge of the basic managerial functions. 9. It also helps in planning, policy making & controlling the activities. 10. They are helpful in establishing the standard casting system.
Limitations of ratio analysis
1. Ratio provides only guidelines to the management they are only the means. However They scratch surfaces and raise question. The limitation of the ratio may force the management to have detailed investigation of the situation under question. 2. single accounting ratio is not useful at all unless it is studied with other accounting ratios 3. They are based only on the quantitative information. Hence, qualitative information puts limit on the ratios 4. Ratios are subject to arithmetical accuracy of the financial statements. Moreover financial statement also include estimated date like provision for 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.
2. METHODS OF LEAST SQUARES (TREND VALUES)
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 values of Y and the trend value (Yc) is 0 and sum of 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. 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
Here a and b are constants or unknowns.
In the equation for the first – degree parabola Yc = a + bx, the values of the unknown or constants can be calculated by the following two normal equations. ?Y = Na +b?x a?x +b?X2 the numbers or months for which data are given
?xY = N =
When x = 0, the equation will take the form of ?Y b?x = = Na 0 b?x2 0
?xY = b?x2 =
by these equation we can know the values of a and b i.e a b a b = = = = ?Y/N and ?xY / ?x2 the mean value of Y values rate of change
3. COMPARATIVE STATEMENT ANALYSIS : Comparative statement is those statements, which have designed in a way, so as to provide time perspective to the consideration of the various
elements of financial position embodied in such statements. In such statements figures for two or more periods are placed side by side to facilitate comparison.
The two statements are proposed for comparison. They are comparative income statement and comparative Balance Sheet. STATEMENT OF THE PROBLEM Nowadays due to the policy of the changing government and also due to the competition in the globalize era, the financial performance of the BHEL is not appreciable. Though the company developed well, it could not earn much profit as like the other private sectors company invilved in similar business. There is no proper instruction from the authorities and from the ministry. Further there is considerable delay in implementing the new system because of more formalities to change the existing system. The financial performance of the BHEL should be analyzed well increase the profit and make the company to compete with others doing similar business. SIGNIFICANCE OF THE STUDY: • Every company must consider their liquidity position, profitability and solvency position and also the main attention should be on smooth working capital position. • For this analysis the ratios, working capital requirements for the next five years period to enables meaningful planning for the future. • Researcher worked and applied various tables in relevant ratio from the data collection in Bharat Heavy Electricals Limited Researcher giving more suitable idea to the management and developed the company in
various way. Researcher analysis some table in statistical approaches of trend line. OBJECTIVES OF THE STUDY: The study has the following objectives. ? To provide a strong theoretical framework for analyzing financial statements. ? To study the growth profile of the company during the study period. ? To study the financial position of the company and operation of Bharat Heavy Electricals Limited ? To appraise financial soundness of the company. ? To offer suggestions for improvement in the company.
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 development of the company and IT employees to bring overall growth. The present study attempt to develop a trend analysis model for Sales and Working Capital and Profit and Loss Accounts. There can be forecasting to evaluate the overall performance of the Bharat Heavy Electricals Limited in future.
LIMITATION OF STUDY 1. The Secondary data like annual reports of BHARAT HEAVY ELECTRICAL LIMITED is collected from BHEL Trichy, hints the accuracy of the result of the study will depends upon the accuracy of data provided by the company. 2. The study covers only the period of 5 (2006 to 2011) 3. Various techniques, ratio statistical tools used in this study will have its own limitation.
RESEARCH METHODOLGY Methods of data collection;Secondary data The secondary data is derived from the annual reports, Business line and finance newspapers websites and PERIOD OF THE STUDY: The study covers the time period of 5 years from the financial year 200607 and 2010-11. TOOLS AND TECHNIQUES USED: To analyze and interpret the financial statements of the study unit the following tools are used in the study. 1. Ratio Analysis. 2. Trend Analysis. (Least square Method) the internal auditing books of BHEL
3. Comparative statement Analysis The interpretations are also printed graphically using trend line graphs and sub-dividing bar diagram.
CHAPTER-II 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).
Tootsie Roll Industries, Inc., through its subsidiaries, engages in the manufacture and sale of confectionery products. The company sells its products 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.
Review Of Financial Statements It is said that companies will come and go, and those that survive and left standing will teach other companies, how their survived. We will take two
companies; UPS and Ebay, Inc break them down and show you how they got their 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 of any 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 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. Author Name Tootsie Roll And Hershey
CHAPTER-III COMPANY PROFILE BHEL is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector. BHEL was established more than four
decades age ushering in the indigenous Heavy Electrical Equipment ushering in the indigenous Heavy Electrical Equipment industry in India. BHEL has built over the years, a robust domestic market position by becoming the largest supplier of power plant equipment in India, and by developing strong market presence in select segments of industrial sector and the Railways. Currently, 80% of the Nuclear power generated in the country is through BHEL sets.
BHEL caters to core sectors of the Indian Economy viz., Power Generation and Transmission. Industry, Transportation, Renewable Energy, Defence, etc. The wide network of BHEL’s 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 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. BHEL’s 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 BHEL’s
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, BHEL’s performance was recognized by the prestigious publication ‘Forbes Asia’, which featured BHEL in its fourth annual ‘Forbes 50’ list of the best of Asia-Pacific’s publicly-traded companies with revenues or market capitalization of at least US$ 5 billion, having highest long-term 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 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 EEPC‘s 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. BHEL-make 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 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.
The Company has proven expertise in Plant Performance improvement through Renovation, Modernization and Uprating of variety of power plant equipment, besides specialized know-how of residual life assessment, health diagnostics and life extension of plants. It has retained 100% share of R&M market of Thermal sets in the country in 2008-09. BHEL built thermal sets consistently exceed the national average efficiency parameters, and have achieved the highest-ever Plant Load Factor (PLF) of 80.5% (overall) during 2008-09, which is 3.5% higher than the national average. Overall Operating Availability (OA) was also the higher-ever at 88.4%. BHEL is the one of the few companies worldwide, involved in the development of Integrated Gasification Combined Cycle (IGCC) technology which would user in clean technology.
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 BHEL is a leading manufacturer of a variety of electrical, electronic and mechanical equipment, to meet the demands of a number of industries, like metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals, etc. other than power utilities. BHEL has supplied systems and individual products
including a large number of co-generation Captive power plants, Centrifugal compressors, Drive Turbines, Industrial boilers and auxiliaries, Waste heat recovery boilers, Gas turbines, Pumps, Heat exchangers, Electrical machines, Valves, Heavy castings and forgings, Electrostatic precipitators, ID/FD fans, Seamless pipes, etc. to a number of industries other than power utilities. BHEL has also emerged as a major supplier of controls and instrumentation systems, especially distributed digital control systems for various power plants and industries. BHEL is the leading company in the world having mastered the art of burning Naptha in Gas turbines. Industry sector is fully geared to execute EPC contracts for captive power plants from concept of commissioning. TRANSPORTATION Today, over 70% of Indian Railways, one of the largest railway networks in the world is equipped with traction equipment built by BHEL. BHEL’s
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 BHEL’s traction propulsion system and controls. The range includes traction motors, traction generators/alternators, transformers, substation equipment, vacuum circuit breakers, locomotive bogies, smoothing reactors, exciters, converters, inverters, choppers and associated control equipment, viz., master controllers, chopper controllers, brake and door equipment, electronic controls including software based controls extending to rolling stock and other transport applications.
BHEL has manufactured and supplied a large number of 3000 HP electric locomotives and 4700 HP AC/DC locomotives to Indian Railways and dieselelectric locomotives ranging from 350 HP to 2600 HP to cement, steel and fertilizer plants, thermal power stations, coal fields, ports and other medium and large industries and urban transportation projects. Diesel Multiple Units, underground Metro-rail system at Kolkata, Electric Multiple Unit (EMU) service at Mumbai, Kolkata, Chennai and Delhi are all operating on drives and controls supplied by BHEL. BHEL has also established itself as a leading supplier of state-of-the-art propulsion equipment to Indian Railways for 3-phase drive 6000 HP electric locos, 4000 HP diesel-electric locos, electrical multiple units, etc. BHEL has also diversified into the area of track maintenance machines and coach building for Indian railways and undertakes retrofitting and overhauling of rolling stock. Development of 3-phase IGBT based propulsion system for AC-EMU and AC-DEMU is also underway in association with technology partner. RENEWALBLE ENERGY BHEL has made rapid strides in this strategically important area of nonconventional energy, which holds the key to the problem of burgeoning energy needs, on the one hand and rapidly depleting fossil-based energy sources, on the other. Range of Renewable Energy product and systems manufactured and
supplied includes a number of solar water heating systems, solar photo-voltaic (SPV) systems for both Domestic and Industrial application and wind electric
generators all over India. BHEL also has the capability to set up Grid-connected and Hybrid SPV Power Plants. In addition, BHEL fabricates space-grade solar panels and space-quality batteries for satellites launched by ISRO. BHEL is also supplying small hydro power plants (up to 25 MW station capacity) for distributed power generation.
OIL AND GAS BHEL possesses expertise to design, manufacture and service various types of onshore rigs to suit the Indian service conditions. The range of equipment covers onshore deep drilling rigs, super- deep drilling rigs, heli-rigs, work-over rigs, mobile rigs and desert rigs with matching draw works and hoisting equipment. The diesel-electric oil rigs for onshore drilling made by BHEL are suitable for depths up to 9,000 metres.
BHEL is supplying onshore drilling rig equipment viz. Draw works, Rotary-table, Travelling block, Swivel, Mast and sub structure, Mud systems and Rig electrics, Well & X-Mas tree valves upto 10,000 psi rating for onshore as well as offshore application to ONGC, Oil India Ltd. and Private drilling Companies. BHEL has also supplied casing Support System, Mudline
Suspension System and Block Valves to ONGC for refurbishment and upgradation 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 in _+800KV HVDC application. BHEL has indigenously
developed and commercialized state-of-the-art controlled shunt reactor for reactive power management of long transmission lines.
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 Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears, Castings and Forgings etc.
The company has taken significant steps towards globalisation with successful forays in new markets and new product areas, apart from firmly establishing the company’s presence in existing export markets and areas.
Some of the major successes achieved by BHEL have been in Gas-based power projects in Oman, Libya, Malaysia, UAE, Saudi Arabia, Iraq, Bangladesh, Sri Lanks, China, Kazakhstan; Thermal power projects in Cyprus, Malta, Libya, Egypt, Indonesia, Thailand, Malaysia, Sudan, Syria, Ethiopia, Senegal, New Calendonia ; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan, Nepal, Taiwan, Tajikistan, Thailand, Afghanistan, Vietnam, Rwanda;
Compressors in Oman, Iraq, France and Substation projects & equipment in Philippines, Ghana, Tanzania, Laos, Malaysia, Libya, Zambia, Saudi Arabia, Iraq, Ethiopia, Nepal, Bangladesh, and Afghanistan, Execution of these overseas projects has also provided BHEL the experience of working with world renowned consulting organizations and inspection agencies.
The company has been successful in meeting the demanding requirements of international markets in terms of complexity of work as well as technology, quality and other requirements viz. HSE requirements, financing packages and associated O&M services, to name a few. BHEL has proved its capability to undertake projects on fast- track basis. The company has also established its versatility to successfully meet the varying needs of different sectors, be it captive power, utility power generation or the oil sector. Besides undertaking turnkey projects on its own, BHEL also possesses the requisite flexibility to interface and 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.
The corporate R&D Division at Hyderabad leads BHEL’S research efforts in a number of areas of importance to BHEL’S product range. Research and product development centers at each of the manufacturing divisions play a complementary role. Centres of excellence have been set up for Simulators, computational Fluid Dynamics, Permanent Magnet Machines and Surface Engineering. As the fifth in the series, BHEL has established a centre of
Excellence for Intelligent Machines and Robotics (COEIMAR ). Centre of excellence is being established for Compressors & Pumps.
In addition to the Corporate R&D Division, BHEL has four specialized institutes, viz., Welding Research Institute at Trichy, ceramic Technological Institute at Bangalore, Centre for Electric Traction and Hydro lab at Bhopal and Pollution Control Research Institute at Haridwar. BHEL has introduced, several state –of –the- art products viz. 60MW Bubbling Fluidised Bed Combustion Boiler for power generation, 260 MW
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, high-efficiency 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 cylinder reheat Steam turbine in 120-150MW range, Deaerator for 1000 MW power plants, combined HP-IP module in the output range of 500-650 MW with
subcritical parameters, IGBT based 3-phase drive system for 700HP diesel electric locomotives, technology for manufacture of 400KV long- rod composite insulators with improved properties by adding nano materials, performance Analysis, 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.
Reinforcing its position as a total solution provider, BHEL has developed and successfully commissioned a Maintenance Controller (an Integrated Asset Management and Decision Support System) at the Western Mountain Power Project, Libya. Based on Power Pac-G, software jointly developed by BHEL and TCS, this is a system for complete power plant maintenance for Combined Cycle Power Plant application and takes care of all the maintenance needs of a power station. The company is also engaged on research on futuristic areas like fuel cells for distributed environment-friendly power generation, clean coal technology applications, standardization of electrode making process, development of process for addition of Nano/Micro particles for improving material characteristics, super conductivity applications in transformers, generators/motors etc. With an array of new technologies at its command, BHEL is confident of meeting the challenges
ahead and fulfilling its responsibilities as the premier engineering and manufacturing enterprise of India. Human Resource Development Institute The Human Resource Development Institute (HRDI) situated in Noida, is the corner stone of BHEL’S learning Infrastructure, along woth the Advanced Technical Education Centre (ATEC) at Hyderabad and the Human Resource Development Centres (HRDCs) at different units. Through various
organizational developmental efforts, these centres ensure that the prime resource of the organization –the Human Capital – is always in a state of readiness to meet the dynamic challenges posed by the fast changing environment. it is their constant Endeavour to take the HRD activities to the strategic level of becoming an active partner in achieving the organizational goals. Guided by the HRD Mission statement “To promote and inculcate a valuebased culture utilizing the fullest potential of Human Resources for achieving the BHEL Mission”, the HRDI through a step by step strategic long term training process and several short term need based programmes based on comprehensive organizational research, enables the human resources to unearth and polish their potential. HRDI is spearheading the HRD initiatives in the company and focusing on competency, commitment and culture building. Some of the Core programmes, Strategic need based programmes; Competency based programmes and Functional Programmes like Advanced Management Programmes, General Management Programmes, Strategic
Management
Programmes,
Senior
Management
Programmes,
Missle
Management Programmes, and Young Managers Programmes. In addition, the HRDI provides professional support to Corporate HR and HRDCs at Units/Divisions. HRDI is also accepting consulting assignments from other organizations in a selective manner.
Health, Safety and Environment Management BHEL is an environment friendly company in all its activities, products and services, providing safe and healthy working environment to all stakeholders, In fact this aspect has become an integral part of the company’s business performances. Environment improvement Administrative ministry. Some of the major EIPs at BHEL plants & townships included tree plantation drives, installation of rain water harvesting plants, Energy and Conservation Projects utilizing efficient technologies, reduction in noise level, improvement in
chemical storage & handling systems, improvement in fumes extraction systems, Resource conservation Plants (Lubricants/ Metals/Coolants), utilization of Nonconventional energy resources etc. Significantly, BHEL has also taken initiatives on Clean Development Mechanism (CDM) projects to reduce greenhouse gas emissions in amore focused way and vigorous efforts are being made to achieve milestones in this area. A broad reference list of CDM activity projects both of in –house implementation
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 BHEL’s 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.
Corporate Social Responsibility BHEL has developed a CSR scheme and its mission Statement of CSR is“Be a Committed Corporate Citizen, alive towards its Corporate Social Responsibility”. Thrust is being given in eight areas-Self employment generation, Environment protection, Community development, Education, Health
management & medical aids, Orphanages & Old-age Homes, Infrastructural development and Disaster/ Calamity Management. Quarterly and
Disaster/Calamity Management. Quarterly and annual CSR reports are prepared containing the activities carried out, benefits accrued to neighboring communities, the number of people benefited and the amount spent etc.
BHEL adopted 56 villages having nearly 80,000 inhabitants. In addition , BHEL provides financial assistance to various NGOs/ Trusts/Social Welfare Societies that are engaged in social activities throughout the country.
Participation in the UN’s Global Compact Programme The company reiterate its commitment to United Nation’s Global compact programme and the set of core values enshrined in its ten principles and the intent to advance Global Compact principles within the company’s sphere of influence on human rights, labour standards, environment and anti corruption. As the world’s largest global compact is the first and the citizenship initiative, the Global Compact is the first and the foremost concern which is exhibiting and building the social legitimacy of business and markets. BHEL has made these a part of the
strategy, culture and day-to-day operations. As part of this programme, BHEL continues to play a lead role in the activities of the Global Compact Society in India, which acts as an apex level nodal agency representing Indian corporate bodies and institutions / organizations that are committed to UN’s Global Compact Programmes. Company publicly advocates with its employees and other stakeholders and regularly incorporates its commitments towards Global compact programme through its Annual report, press conferences and other public documents.
BHEL - AN OVERVIEW
BHEL is the largest engineering and manufacturing enterprise in India in the energy, related/ infrastructure & sector today. BHEL has built over the years, robust domestic market position by becoming the largest supplier of power plant equipment in India, and by developing a strong market. Presence in select
segments of the industries sector, and the Railway.
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 with a well recognized track record of performance. Defying the scourge of worldwide recession, in 2008-09, BHEL save a spectacular top line growth of 31% with a turnover of Rs.28,033 crore and net profit rising by 9,8% toRs.3,138 crore over the privies year. Order inflow diving 2008-09 was at record high of Rs.59, 618 crore with total orders in hand in the 2 nd quarter of 2009 at Rs.1,25,800 crore. The cumulative capacity of BHEL’s projects installed worldwide stands at around 1,05,000 mw BHEL’s manufacturing 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.
Global Liknks :The achievements have earned an international reputation of BHEL,
Trichy. The plant has so far supplied boilers for around 1350 MW of power generation capacity to Malaysis, Libya, Iran, Eqypt etc. BHEL’s valves have
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 Malaysia. been exported to
CHAPTER-IV ANALYSIS AND INTERPRETATION OF DATA In this chapter an attempt has been made to analysis how efficiently the analysis of Financial statement is managed in Bharat Heavy Electricals
limited. Financial tools such as schedule of changes in ratio analysis, least squares, comparative statements have been used for the purpose of analysis.
The financial statement involves recording classifying and summarizing of various business transactions. It is prepared for the purpose of presenting a periodical review or report of the progress made by the concern and deals with the state of the investment, in the business and ‘result achieved’ during the accounting period. Financial statement, income statement and position statement are the outcome of accounting process.
Ratio analysis is a technique of analysis and interpretation of financial statements. It is used as a device to analysis and interpret the financial health of
a firm. Analysis
of a financial statement with the aid of ratio helps to
arrangements in decision making control.
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
TABLE – 4.1 Current Ratio (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Current Assets 13343 16331 21063 27705 36901 Current liabilities 8446 10321 14420 19821 28333 Current Ratio 1.57 1.58 1.46 1.39 1.30
Source : secondary Data Interpretation
Current ratio during the year 06-07 is the 1.57. In the next year 2007-08 it was maximum 1.58 and in the year 2008- 09 it was 1.46. In the year 2009-10 the current ratio is 1.39 and in the last year 2010--11 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. CHART NO.1
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 all current assets except stock and prepaid expenses. It is determined by dividing quick assets by quick liabilities. Liquid Assets
Liquid Ratio = Liquid Liabilities
TABLE – 4.2 Liquid Ratio (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Current Assets 10427 12587 21021 27648 36823 Current liabilities 8446 10321 14420 19821 28333 Current Ratio 1.23 1.21 1.45 1.39 1.29
Source : Secondary Data Interpretation Liquid ratio during the year 2008-2009 it attains the maximum value of 5.20. in the above year it was slightly reduced to 2006 – 07 to 1.23. In the next year, 2007-08 it further decreased to 1.21 and in the next year 2009-10 1.39. in the last year decreased 2010—2011 to 1.29.
During the period of study, the value of liquid ratio is higher than the ideal value which indicates the efficiency of the company to meet is immediate requirements. The overall trend of liquid ratio shows up and down ward trend.
CHART NO.2
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 proprietor’s funds by the total tangible assets. Proprietor’s Funds Proprietary Ratio = ------------------------------Total Tangible Assets TABLE – 4.3 Proprietory Ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Proprietary Fund 6027 7301 8788 10774 12939
Total Assets 14483 17498 22354 29344 39528
Proprietary Ratio 0.41 0.41 0.39 0.36 0.32
Source : Secondary Data Interpretation
Proprietory ratio during the year 2006-07 and 2007-08 it attains the maximum value of 0.41. In the year2006-07 the proprietory ratio was slightly reduced to 0.39. In the next year, 2009-10 It further reduced to 0.36. During the year 2010-11 it further decreased to 0.32.
CHART NO.3
4) Fixed Assets to Net Worth Ratio: This ratio shows the relationship between fixed assets and proprietor’s funds. The purpose of this ratio is to fend out the percentage of the owners fund invested in fixed assets. Fixed Assets Fixed Assets to Net worth Ratio = -------------------------------
Proprietor’s funds TABLE - 4.4 fixed assets to Net worth Ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Fixed asset 1140 1167 1291 1639 2627
Proprietory Fund 6027 7301 8788 10774 12939
Fixed asset to Net worth ratio 0.18 0.15 0.14 0.15 0.20
Sources : Secondary Data Interpretation
Fixed asset to Net worth Ratio during the year 2006-07 was 0.18. it was slightly reduced to 0.14 in the 2006-07 year. In the next year 2007-08 and 200910 the net worth ratio 0.15. The same is increased to a maximum of 0.20 in the year 2010-2011
CHART NO.4
5) Net Profit Ratio Net Profit Ratio establishes a relationship between net profit (after taxes) and sales. It is determined by dividing the net income after tax to the net sales for the period and measures the profit per rupees of sales. Net Profit
Net Profit Ratio
=
------------------------------- x 100 Sales
TABLE- 4.5 Net Profit Ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Net Profit 953 1679 2415 2859 3138
Sales 10336 14,525 18739 21401 28033
Net Profit Ratio 9.2% 11.6% 12.9% 13.4% 11.20%
Source : Secondary Data
Interpretation
From the table, it is found that the net profit has been fluctuating during the study period. In the year 2006-07 the net profit ratio was 9.2%. In the year 200708 it was increased to 11.6%. In the next year 2008-09 it was further increased 12.9%. During the year 2009-10 there was a slight increases to 13.4%. During the year 2010-11 the net profit ratio was 11.20%.
CHART NO.5
6) Stock Turnover Ratio: This ratio Indicates whether investment in inventory is efficiently used or not. It explains whether investment in inventories in within proper limits or not. It also measures the effectiveness of the firm’s sales calculated as follows. Cost of goods sold Stock Turnover = ------------------------------Average Stock Cost of goods sold = Sales- Gross Profit efforts. The ratio is
Average stock
=
Opening stock + Closing stock -------------------------------------2
TABLE – 4.6 STOCK TURNOVER RATIO (in crores) Year Cost of goods sold 8673 11902 14960 16936 23153 Average Stock 2919 3653 4971 7097 9350 Stock Turnover Ratio 2.97 3.25 3.00 2.38 2.47
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data Interpretation
From the table, it is found that the stock Turnover ratio has been fluctuating during the study period. In the year 2006-07 it was 2.97, It increases during the year 2007-08 was slightly to 3.25. In the year 2008-09 it was 3.00 and decreases to 2.38 in the year 2009-10 and during the year 2010-2011 it was increased to 2.47. CHART NO.6
7) Debtors turnover ratio The purpose of this ratio is to discuss the credit collector power and policy of the firm. This ratio is established between account receivable and net credit sales of the period. The debtors turnover ratio is calculated as follows. Credit Sales Debtors Turnover Ratio = -------------------------------
Average Account receivables Average account receivables = Total Debtors and B/R
TABLE No.4.7 Debtor Turn over (Rs in crores) Year Sales Sundry debtors Debtors turn over ratio Rs 5972 7168 9695 11975 15976 1.73 2.02 1.93 1.78 1.75
Rs 2006-2007 1033 6 2007-2008 1452 5 2008-2009 1873 9 2009-2010 2140 1 2010-2011 2803 3
Sources : Secondary Data 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
8) Average debt collection period The average number of days that lapsed between the receipt of the invoice by customers and the actual payment of the invoice . When measured against the
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 = ------------------------------Net Credit sales ABLE - 4.8 Debt Collection Period (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data Debtors 5972 7169 9695 11975 15976 Credit Sales 10336 14525 18739 21401 28033 Debt Collection Period 210 days 180 days 188 days 204 days 208 days
Interpretation Debt Collection period ratio in the year 06-07 was 210 days. In next year 07-08 it further reduced to 180 days. In the next year 08-09 it was 188 days. In the next year 2009-10 it was 204 days. During the years 2010-11 it was 208 days.
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
9) Creditors turnover ratio: It indicates the number of times on the average that the creditors turnover each year. Creditors turnover ratio indicates the number of items the accounts
payable rotate in a year. It signifies credit period enjoyed by the firm in paying its creditors. Account payable include traded creditors and bills payable. . Creditors Turnover Ratio = Credit Purchases ------------------------------Average account payable TABLE – 4.9 Creditor Turnover Ratio (in crores) Year Credit Purchase 4892 6866 10182 11821 17620 Average Account payable 2100 284 3538 4424 5852 Creditor Turnover ratio 2.32 24.17 2.87 2.67 3.0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data
The creditor Turnover ratio during the year 06-07 was 2.32. In the year 07-08 it was increased to 24.17. In the year 08-09 creditors turnover ratio slightly reduced to 2.87. In the year 07-08 it was reduced to 2.67. During the year 20102011 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
10) Average Payment period : The radio gives the average credit period enjoyed by the firm from its creditors. It can be computed as follows. Creditors + B/P Average Payment period days) = ------------------------------- X 365 (in
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) Credit Purchase year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Sources : Secondary Data 4892 6866 10182 11821 17620 Average Creditors 2100 284 3538 4424 5852 Average Payment period 156 days 15 days 126 days 136 days 121 days
The average payment period during the year 2006-07 was 156 days. From the year 2007-08 it was heavily decreased 15 days. In the year 2008-09 average payment period was 126 days. In the year 2009-10 it was 136 days. This last year 2010-2011 it was 121 days.
CHART NO.10
11) Fixed assets turnover Ratio: The ratio indicates that extent to which the investments in Fixed assets contributes towards sales. If compared with a previous year, it indicates whether the investment in Fixed assets has been judicious or not. The ratio is calculate as follows. Sales Fixed assets turnover ratio = ------------------------------Fixed assets
TABLE – 4.11 Fixed asset Turnover ratio (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data Sales 10336 14525 18739 21401 28033 Fixed asset 1140 1167 1291 1639 2627 Fixed asset Turnover 9.06 12.44 14.51 13.05 10.67
Interpretation
The fixed asset turnover ratio during the year 2006-07 was 9.06. It is found that the fixed asset turnover ration has been fluctuating during the study period. In the year 07-08 it was 12.44. In the year 08-09 it was 14.51. During the year 200708 the fixed asset turn over ratio was 13.05. This, last year 2010-2011 it was decreased to 10.67. CHART NO.11
12) Capital Turnover Radio: Managerial efficiency is also calculated by establishing the relationship between cost of sales or sales with the amount of capital invested in the business. Capital turnover Ratio is calculated with the help of the following formula. Sales Capital turnover ratio = --------------------------------------
Net worth (Or) Proprietor’s fund
TABLE – 4.12 Capital Turnover ratio crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Net worth (or) Proprietor’s fund 6027 7302 8789 10775 12939 Sales 10336 14525 18739 21401 28033
(in
Capital Turnover ratio 1.71 1.98 2.13 1.98 2.16
Sources : Secondary Data Interpretation It is inferred from the above table the capital turnover ratio for the year 0607 was 1.71. In the year 07-08 it was 1.98. where as In the year was 2008-09 it was increased to 2.13. In the year 2009-10 it was slightly decreased to 1.98. But during the year 08-09 it was increased further to 2.16. CHART NO.12
13) Return on total assets:
Profitability can be measured in terms of relationship between net profit and total assets. It measures the profitability profitability can be known by applying this ratio. of investment. The overall
Net Profit Return on total Assets = -------------------------- X100 Table assets TABLE – 4.13 Return on Total assets
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Net Profit 1582 2564 3736 4430 4849
Total asset 14482 17497 22354 29344 39528
Return on Total assets 10.92 14.65 16.71 15.09 12.26
Source : Secondary Data Interpretation From, the above table, it was found that the return on total asset has been fluctuating during the study period. In the year 2006-07 it was 10.92. In the year 2007-08 it was increased to 14.65. In the year 2008-09 was increased further increased to 16.71 and in the year 09-10 it was reduced to 15.09. During the year 2010-11 it was slightly decreased to 12.26.
CHART NO.13
14) Operating Ratio Operating ratio is an indicative of the proportion that the cost of sales bears to sales. ‘Cost of sales’ includes direct cost of goods sold as well as other operating expenses. It is an important ratio that is used to discuss the general
profitability of the concern. It is calculated by dividing the total operating cost by net sales. Cost of goods sold + Net operating expenses Operating ratio = ----------------------------------------------------- X100 Sales Cost of goods sold = sales = gross profit. TABLE – 4.14 TABLE – 4.14 Operating ratio (in crores) Year Cost of goods sold + operating 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 expenses 8673 11902 14960 16936 23153 10336 14525 18739 21401 28033 83.9 81.9 79.8 79.1 82.5 Sales Operating ratio
Source : Secondary Data Interpretation The above table clearly reveals that the Operating ratio for the year 06-07 was 83.9. But in the year 07-08 it was slightly reduced to 81.9 and in the year 0809 it was further reduced to 79.8. In the year 09-10 It was 79.1. During the year last year 2010-2011 it was increased to 82.5. CHART NO.14
15) Assets Turnover Ratio This ratio is also called as Investments Turnover Ratio”. It expresses the relationship between cost of goods sold / net sales and assets/ investments of a firm. The figure of net sales can be used where information regarding cost of goods sold is not available. There are many variants of this ratio accordingly as there are differences in the concept of assets employed. Total Assets
Assets Turnover Ratio
= ------------------------------Sales
TABLE – 4.15 Asset turnover ratio (in crores)
Year
Fixed assets
Current assets 13343 16331 21063 27705 36901
Total assets 14481 17496 22353 29343 39528
Sales
Assets Turnover
2006-2007 1139 2007-2008 1166 2008-2009 1291 2009-2010 1639 2010-2011 2627 Source : Secondary Data Interpretation
10336 14525 18739 21401 28033
ratio 1.4 1.2 1.1 1.3 1.4
From the table, it is understood that the Asset turnover ratio for the 200607 was 1.4. In the year 2007-08 it was reduced to 1.2. In the year 2008-09 it was further reduced to 1.1. In the year 2009-2010 there is slight increase to 1.3.while in the year 2010-2011 it was slightly increaed to 1.4
CHART NO.15
16) Gross Profit Ratio: Gross Profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. This ratio plays an important role in two management areas. In the area of financial management, the ratio serves as a valuable indicator of the firm’s ability to utilize effectively outside sources of
fund. Secondly, this ratio also serves as important tool in shipping the pricing policy of the firm. This ratio is calculated by dividing gross profit by net sales. Gross Profit Gross Profit Ratio = -------------------------- X 100 Net Sales Table – 4.16 Gross Profit ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Gross profit 1663 2623 3779 4465 4880
Sales 10336 14525 18739 21401 28033
Gross Profit Ratio 16.0% 18.0% 20.1 % 20.8 % 17.4 %
Source : Secondary Data
The above table shaows that the Gross profit Ratio during the year 2006-07 was 16.0%. In the year 2007-08 it was increased to 18.0%. In the following year 2008-09 increased to 20.1 %. In the year 2009-10 there was slight increases to 20.8 %. In this last year was 2010-11 the gross profit ratio was 17.4 %
CHART NO.16
TABLE – 4.17 Comparative Statement for the year 2006-07 to 2007-08 (in crores) Particulars Assets: 2006-07 2007-08 Absolute change % of change
Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total
1140 13343 14483 7120 1325 8445
1167 16331 17498 8808 1512 10320
27 2988 3015 1688 187 1875
2.36 22.39 20.81 23.70 14.11 22.20
Sources : Secondary Data Interpretation From this table, it is found that the comparative statement for the year has been fluctuating during the study period. In the year 2006-07 to 2007-08 having fixed assets was 2.36 & current asset was increased to 22.39. and in the year 2006-07 to 2007-08 current liabilities increased 23.70 and other liabilities it was 14.11. CHART NO.17
TABLE – 4.18 Comparative Statement for the year 2007-08 to 2008-09
(in crores) Particulars Assets: Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total 1512 10320 2522 14420 1010 4100 66.79 39.72 2007-08 1167 1633 17498 8808 2008-09 1291 21063 22354 11898 Absolute change 124 4732 4856 3090 % of change 10.62 28.97 27.75 35.08
Sources : Secondary Data Interpretation From this, table was comparative statement for the year has been fluctuating during the study period. In the year 2007-08 Fixed assets was
increased by 10.62 . Current assets was 28.97. and the current liabilities was 35.08. CHART NO.18
TABLE – 4.19 Comparative Statement for the year
2008-09 to 2009-10 (in crores)
Particulars Assets: Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total
2008-09 1291 21063 22354 11898 2522 14420
2009-10 1639 27705 29344 16576 3244 19820
Absolute change 348 6642 6990 4678 722 5400
% of change 26.95 31.53 31.26 39.31 28.62 37.44
Sources : Secondary Data Interpretation In the year comparative statement from the 2008-09 to 2009-10. The fixed assets was increased by 26.95 while the Current assets was increased by 31.53 and current liabilities by 39.31.
CHART NO.20
TABLE – 4.20
Comparative Statement for the year 2009-2010 to 2010-2011
Particulars Assets: Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total
2009-10 1639 27705 29344 16576
2010-11 2627 36901 39528 23357
Absolute change 988 9196 10184 6781
% of change 60.28 33.19 34.70 40.90
3244 19820
4976 28333
1732 8513
53.39 42.95
In the year comparative statement from the 2009-2010 to 20102011. The above table clearly reveals that the was tremendous increase in the fixed asset to 60.28. In the same year current asset was increased by 33.19 and the current liabilities was by 40.90.
CHART NO.20
Method of Least square: TABLE – 4.21
Fitting the straight Line Trend To sales (Rs. In Crores)
Year 2006-07 2007-08 2008-09 2009-10 2010-11 N=S Interpretation
Y (Sales) 4136 5034 5541 6471 7750 £y=28932
X (year codes) -2 -1 0 1 2 £x=0
X2 4 1 0 1 4 2 £x =10
Xy
Trent
values Yc -8272 953.4 -5034 3369.9 0 5786.4 6471 8202.9 31000 10619.4 £zy= 24165 £yc=28932
The equation of straight Line Trend is yc since £ x = 0 a= £Y/N £y = 28932 le = £x7/£x2 £xy=24165 N=5 £x2=10 = a+ lex
Substituting the values, we get A D = = 28932/5 24165/10 = = 5786.4 2416.5
The Linear trend for sales by the method of least squares is For 2009-10 x would be 3 Hence y 2010 = = = For 2010 – 11 5786.4 + (2416.5 (3) 5786.4 + 7249.5 13035.9 (in Crores)
x would be 4
Hence y 2011
= = =
5786.4 + (2416.5 (4) ) 5786.4 + 9666 15452.4 (in crores)
Forecasted value Year Sales (In Crores) 2012 13035.9 2013 15452.4
CHAPTER-V FINDINGS, SUGGESTIONS AND CONCLUSION FINDINGS
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 firm’s 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 2009-2010 to 12.26 in the 2010-2011. 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 2009-2010 to 17% in 2010-11. 8. Sales shows the increasing trend at the rate in every year. SUGGESTIONS
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 taking steps to reduce the cost of sales , which have done by
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 of the concern. The concern is required to
develop an effective inventory management system. Sales are to be increased to keep with increased in fixed Assets in order improve its fixed Assets turnover ratio.
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 is developing corporate social responsibility such as self
Employment generation, Environment protection, Education Health management and medical aids and so an. It’s focus attention is on 56 adopted villages having nearly 80000in habitations in addition to financial assistance. Finally, I pray God requesting to develop the unit more and in day by day. BHEL should run in successful manner in future also.
doc_413142554.doc
The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."
CHAPTER-I INTRODUCTION AND DESIGN OF THE STUDY INTRODUCTION FINANCIAL STATEMENT ANALYSIS
Financial statement is an organized collection of data according to logical and consisted accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business form. It may reveal a series of activities over a given period of time, as in the case of an income statement.
The focus of the financial analysis is on key figures in the financial statements and the significant relationships the exists between them. The analysis of financial statements is a process of evaluating relationships between component parts of financial statements to obtain a better understanding of the firm’s position and performance.
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.
USERS OF FINANCIAL ANALYSIS: • 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 firm’s 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 firm’s 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.
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.
Financial statements are indicators of the two significant factors: 1. Profitability 2. Financial Soundness
Analysis and interpretation of financial statements therefore refers to such a treatment of the information contained in the income statement and the balance sheet so as to afford full diagnosis of the profitability and financial soundness of the business.
The term “analysis” means methodical classification of the data given in the financial statements. The term “interpretation” means “ explaining the meaning and significance of the data so simplified.
Types of financial Analysis Financial analysis can be classified in to different categories depending upon. (a) The material used (b) The modus operand of analysis
On the basis of materials used. According to this basis financial analysis can be of two types.
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 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 year’s 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. Ratio analysis is a process of identifying the financial strengths and weakness of the firm. This may be accomplished either through a trend analysis of the firm’s ratios over a period of time or through a comparison of the firm’s ratios with its nearest competitors and with the industry averages. The four most important financial dimensions which a firm would like to analyze are: liquidity, Leverage, Activity and Profitability. Nature of Ratio Analysis:
A Financial ratio is a relationship between tow accounting numbers. ratios help to make a qualitative judgment about the firm’s financial performance. Financial Ratio: Financial Ratio is a relationship between two financial variables. It helps to ascertain the financial condition of a firm.
Types of financial Ratios: ? Liquidity ratios ? Leverages ratios ? Activity ratios ? Profitability ratios
Liquidity Ratio: Liquidity Ratio measure the firm’s 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 outsider’s capital in financing the firm’s assets, and is calculated by establishing relationships between borrowed capital and equity capital.
Activity Ratio: Activity ratio reflects the firms efficiency in utilizing its assets in generating sales and is calculated by establishing relationships between sales and assets. Profitability Ratio: Profitability ratios measure the overall performance of the firm by deterring the effectiveness of the firm ingenerating profit, and are calculated by establishing relationships between profit figures on the one hard, and sales and assets on the other.
Utility of Ratio Analysis Assessment of the firm’s financial conditions and capabilities. ? Diagnosis of the fir’s problems, weakness and strengths. ? Credit analysis ? Comparative analysis
? Time series analysis
Cautions in using ratio analysis ? Standards of comparisons ? Company differences ? Prices level ? Different definition ? Changing situations ? Past data Standard of Comparison: ? Time series analysis ? Inter-firm analysis ? Industry analysis ? Preformed financial statement analysis Advantages of Ratio Analysis: 1. It helps in analysis of the situation i.e. analysis on the financial situation and performance.
2. Inter-firm and Inra-firm comparison is both possible on the basis of accounting ratio 3. Accounting Ratio not only indicates the present position but they also indicate the cause leading up to the position of a large extent 4. It helps in obtaining best result when ratios for a number of years are put in tabular form so that the figure for one year can be easily compoared with those of other year 5. It indicates the trend of the change, which helps in preparation of estimates for the future. 6. They provide simplicity to the complex accounting information presented by the financial statements 7. They are very helpful to outsiders as well as for internal management 8. It is very helpful to internal managements, discharge of the basic managerial functions. 9. It also helps in planning, policy making & controlling the activities. 10. They are helpful in establishing the standard casting system.
Limitations of ratio analysis
1. Ratio provides only guidelines to the management they are only the means. However They scratch surfaces and raise question. The limitation of the ratio may force the management to have detailed investigation of the situation under question. 2. single accounting ratio is not useful at all unless it is studied with other accounting ratios 3. They are based only on the quantitative information. Hence, qualitative information puts limit on the ratios 4. Ratios are subject to arithmetical accuracy of the financial statements. Moreover financial statement also include estimated date like provision for 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.
2. METHODS OF LEAST SQUARES (TREND VALUES)
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 values of Y and the trend value (Yc) is 0 and sum of 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. 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
Here a and b are constants or unknowns.
In the equation for the first – degree parabola Yc = a + bx, the values of the unknown or constants can be calculated by the following two normal equations. ?Y = Na +b?x a?x +b?X2 the numbers or months for which data are given
?xY = N =
When x = 0, the equation will take the form of ?Y b?x = = Na 0 b?x2 0
?xY = b?x2 =
by these equation we can know the values of a and b i.e a b a b = = = = ?Y/N and ?xY / ?x2 the mean value of Y values rate of change
3. COMPARATIVE STATEMENT ANALYSIS : Comparative statement is those statements, which have designed in a way, so as to provide time perspective to the consideration of the various
elements of financial position embodied in such statements. In such statements figures for two or more periods are placed side by side to facilitate comparison.
The two statements are proposed for comparison. They are comparative income statement and comparative Balance Sheet. STATEMENT OF THE PROBLEM Nowadays due to the policy of the changing government and also due to the competition in the globalize era, the financial performance of the BHEL is not appreciable. Though the company developed well, it could not earn much profit as like the other private sectors company invilved in similar business. There is no proper instruction from the authorities and from the ministry. Further there is considerable delay in implementing the new system because of more formalities to change the existing system. The financial performance of the BHEL should be analyzed well increase the profit and make the company to compete with others doing similar business. SIGNIFICANCE OF THE STUDY: • Every company must consider their liquidity position, profitability and solvency position and also the main attention should be on smooth working capital position. • For this analysis the ratios, working capital requirements for the next five years period to enables meaningful planning for the future. • Researcher worked and applied various tables in relevant ratio from the data collection in Bharat Heavy Electricals Limited Researcher giving more suitable idea to the management and developed the company in
various way. Researcher analysis some table in statistical approaches of trend line. OBJECTIVES OF THE STUDY: The study has the following objectives. ? To provide a strong theoretical framework for analyzing financial statements. ? To study the growth profile of the company during the study period. ? To study the financial position of the company and operation of Bharat Heavy Electricals Limited ? To appraise financial soundness of the company. ? To offer suggestions for improvement in the company.
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 development of the company and IT employees to bring overall growth. The present study attempt to develop a trend analysis model for Sales and Working Capital and Profit and Loss Accounts. There can be forecasting to evaluate the overall performance of the Bharat Heavy Electricals Limited in future.
LIMITATION OF STUDY 1. The Secondary data like annual reports of BHARAT HEAVY ELECTRICAL LIMITED is collected from BHEL Trichy, hints the accuracy of the result of the study will depends upon the accuracy of data provided by the company. 2. The study covers only the period of 5 (2006 to 2011) 3. Various techniques, ratio statistical tools used in this study will have its own limitation.
RESEARCH METHODOLGY Methods of data collection;Secondary data The secondary data is derived from the annual reports, Business line and finance newspapers websites and PERIOD OF THE STUDY: The study covers the time period of 5 years from the financial year 200607 and 2010-11. TOOLS AND TECHNIQUES USED: To analyze and interpret the financial statements of the study unit the following tools are used in the study. 1. Ratio Analysis. 2. Trend Analysis. (Least square Method) the internal auditing books of BHEL
3. Comparative statement Analysis The interpretations are also printed graphically using trend line graphs and sub-dividing bar diagram.
CHAPTER-II 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).
Tootsie Roll Industries, Inc., through its subsidiaries, engages in the manufacture and sale of confectionery products. The company sells its products 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.
Review Of Financial Statements It is said that companies will come and go, and those that survive and left standing will teach other companies, how their survived. We will take two
companies; UPS and Ebay, Inc break them down and show you how they got their 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 of any 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 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. Author Name Tootsie Roll And Hershey
CHAPTER-III COMPANY PROFILE BHEL is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector. BHEL was established more than four
decades age ushering in the indigenous Heavy Electrical Equipment ushering in the indigenous Heavy Electrical Equipment industry in India. BHEL has built over the years, a robust domestic market position by becoming the largest supplier of power plant equipment in India, and by developing strong market presence in select segments of industrial sector and the Railways. Currently, 80% of the Nuclear power generated in the country is through BHEL sets.
BHEL caters to core sectors of the Indian Economy viz., Power Generation and Transmission. Industry, Transportation, Renewable Energy, Defence, etc. The wide network of BHEL’s 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 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. BHEL’s 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 BHEL’s
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, BHEL’s performance was recognized by the prestigious publication ‘Forbes Asia’, which featured BHEL in its fourth annual ‘Forbes 50’ list of the best of Asia-Pacific’s publicly-traded companies with revenues or market capitalization of at least US$ 5 billion, having highest long-term 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 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 EEPC‘s 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. BHEL-make 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 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.
The Company has proven expertise in Plant Performance improvement through Renovation, Modernization and Uprating of variety of power plant equipment, besides specialized know-how of residual life assessment, health diagnostics and life extension of plants. It has retained 100% share of R&M market of Thermal sets in the country in 2008-09. BHEL built thermal sets consistently exceed the national average efficiency parameters, and have achieved the highest-ever Plant Load Factor (PLF) of 80.5% (overall) during 2008-09, which is 3.5% higher than the national average. Overall Operating Availability (OA) was also the higher-ever at 88.4%. BHEL is the one of the few companies worldwide, involved in the development of Integrated Gasification Combined Cycle (IGCC) technology which would user in clean technology.
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 BHEL is a leading manufacturer of a variety of electrical, electronic and mechanical equipment, to meet the demands of a number of industries, like metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals, etc. other than power utilities. BHEL has supplied systems and individual products
including a large number of co-generation Captive power plants, Centrifugal compressors, Drive Turbines, Industrial boilers and auxiliaries, Waste heat recovery boilers, Gas turbines, Pumps, Heat exchangers, Electrical machines, Valves, Heavy castings and forgings, Electrostatic precipitators, ID/FD fans, Seamless pipes, etc. to a number of industries other than power utilities. BHEL has also emerged as a major supplier of controls and instrumentation systems, especially distributed digital control systems for various power plants and industries. BHEL is the leading company in the world having mastered the art of burning Naptha in Gas turbines. Industry sector is fully geared to execute EPC contracts for captive power plants from concept of commissioning. TRANSPORTATION Today, over 70% of Indian Railways, one of the largest railway networks in the world is equipped with traction equipment built by BHEL. BHEL’s
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 BHEL’s traction propulsion system and controls. The range includes traction motors, traction generators/alternators, transformers, substation equipment, vacuum circuit breakers, locomotive bogies, smoothing reactors, exciters, converters, inverters, choppers and associated control equipment, viz., master controllers, chopper controllers, brake and door equipment, electronic controls including software based controls extending to rolling stock and other transport applications.
BHEL has manufactured and supplied a large number of 3000 HP electric locomotives and 4700 HP AC/DC locomotives to Indian Railways and dieselelectric locomotives ranging from 350 HP to 2600 HP to cement, steel and fertilizer plants, thermal power stations, coal fields, ports and other medium and large industries and urban transportation projects. Diesel Multiple Units, underground Metro-rail system at Kolkata, Electric Multiple Unit (EMU) service at Mumbai, Kolkata, Chennai and Delhi are all operating on drives and controls supplied by BHEL. BHEL has also established itself as a leading supplier of state-of-the-art propulsion equipment to Indian Railways for 3-phase drive 6000 HP electric locos, 4000 HP diesel-electric locos, electrical multiple units, etc. BHEL has also diversified into the area of track maintenance machines and coach building for Indian railways and undertakes retrofitting and overhauling of rolling stock. Development of 3-phase IGBT based propulsion system for AC-EMU and AC-DEMU is also underway in association with technology partner. RENEWALBLE ENERGY BHEL has made rapid strides in this strategically important area of nonconventional energy, which holds the key to the problem of burgeoning energy needs, on the one hand and rapidly depleting fossil-based energy sources, on the other. Range of Renewable Energy product and systems manufactured and
supplied includes a number of solar water heating systems, solar photo-voltaic (SPV) systems for both Domestic and Industrial application and wind electric
generators all over India. BHEL also has the capability to set up Grid-connected and Hybrid SPV Power Plants. In addition, BHEL fabricates space-grade solar panels and space-quality batteries for satellites launched by ISRO. BHEL is also supplying small hydro power plants (up to 25 MW station capacity) for distributed power generation.
OIL AND GAS BHEL possesses expertise to design, manufacture and service various types of onshore rigs to suit the Indian service conditions. The range of equipment covers onshore deep drilling rigs, super- deep drilling rigs, heli-rigs, work-over rigs, mobile rigs and desert rigs with matching draw works and hoisting equipment. The diesel-electric oil rigs for onshore drilling made by BHEL are suitable for depths up to 9,000 metres.
BHEL is supplying onshore drilling rig equipment viz. Draw works, Rotary-table, Travelling block, Swivel, Mast and sub structure, Mud systems and Rig electrics, Well & X-Mas tree valves upto 10,000 psi rating for onshore as well as offshore application to ONGC, Oil India Ltd. and Private drilling Companies. BHEL has also supplied casing Support System, Mudline
Suspension System and Block Valves to ONGC for refurbishment and upgradation 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 in _+800KV HVDC application. BHEL has indigenously
developed and commercialized state-of-the-art controlled shunt reactor for reactive power management of long transmission lines.
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 Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears, Castings and Forgings etc.
The company has taken significant steps towards globalisation with successful forays in new markets and new product areas, apart from firmly establishing the company’s presence in existing export markets and areas.
Some of the major successes achieved by BHEL have been in Gas-based power projects in Oman, Libya, Malaysia, UAE, Saudi Arabia, Iraq, Bangladesh, Sri Lanks, China, Kazakhstan; Thermal power projects in Cyprus, Malta, Libya, Egypt, Indonesia, Thailand, Malaysia, Sudan, Syria, Ethiopia, Senegal, New Calendonia ; Hydro power plants in New Zealand, Malaysia, Azerbaijan, Bhutan, Nepal, Taiwan, Tajikistan, Thailand, Afghanistan, Vietnam, Rwanda;
Compressors in Oman, Iraq, France and Substation projects & equipment in Philippines, Ghana, Tanzania, Laos, Malaysia, Libya, Zambia, Saudi Arabia, Iraq, Ethiopia, Nepal, Bangladesh, and Afghanistan, Execution of these overseas projects has also provided BHEL the experience of working with world renowned consulting organizations and inspection agencies.
The company has been successful in meeting the demanding requirements of international markets in terms of complexity of work as well as technology, quality and other requirements viz. HSE requirements, financing packages and associated O&M services, to name a few. BHEL has proved its capability to undertake projects on fast- track basis. The company has also established its versatility to successfully meet the varying needs of different sectors, be it captive power, utility power generation or the oil sector. Besides undertaking turnkey projects on its own, BHEL also possesses the requisite flexibility to interface and 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.
The corporate R&D Division at Hyderabad leads BHEL’S research efforts in a number of areas of importance to BHEL’S product range. Research and product development centers at each of the manufacturing divisions play a complementary role. Centres of excellence have been set up for Simulators, computational Fluid Dynamics, Permanent Magnet Machines and Surface Engineering. As the fifth in the series, BHEL has established a centre of
Excellence for Intelligent Machines and Robotics (COEIMAR ). Centre of excellence is being established for Compressors & Pumps.
In addition to the Corporate R&D Division, BHEL has four specialized institutes, viz., Welding Research Institute at Trichy, ceramic Technological Institute at Bangalore, Centre for Electric Traction and Hydro lab at Bhopal and Pollution Control Research Institute at Haridwar. BHEL has introduced, several state –of –the- art products viz. 60MW Bubbling Fluidised Bed Combustion Boiler for power generation, 260 MW
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, high-efficiency 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 cylinder reheat Steam turbine in 120-150MW range, Deaerator for 1000 MW power plants, combined HP-IP module in the output range of 500-650 MW with
subcritical parameters, IGBT based 3-phase drive system for 700HP diesel electric locomotives, technology for manufacture of 400KV long- rod composite insulators with improved properties by adding nano materials, performance Analysis, 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.
Reinforcing its position as a total solution provider, BHEL has developed and successfully commissioned a Maintenance Controller (an Integrated Asset Management and Decision Support System) at the Western Mountain Power Project, Libya. Based on Power Pac-G, software jointly developed by BHEL and TCS, this is a system for complete power plant maintenance for Combined Cycle Power Plant application and takes care of all the maintenance needs of a power station. The company is also engaged on research on futuristic areas like fuel cells for distributed environment-friendly power generation, clean coal technology applications, standardization of electrode making process, development of process for addition of Nano/Micro particles for improving material characteristics, super conductivity applications in transformers, generators/motors etc. With an array of new technologies at its command, BHEL is confident of meeting the challenges
ahead and fulfilling its responsibilities as the premier engineering and manufacturing enterprise of India. Human Resource Development Institute The Human Resource Development Institute (HRDI) situated in Noida, is the corner stone of BHEL’S learning Infrastructure, along woth the Advanced Technical Education Centre (ATEC) at Hyderabad and the Human Resource Development Centres (HRDCs) at different units. Through various
organizational developmental efforts, these centres ensure that the prime resource of the organization –the Human Capital – is always in a state of readiness to meet the dynamic challenges posed by the fast changing environment. it is their constant Endeavour to take the HRD activities to the strategic level of becoming an active partner in achieving the organizational goals. Guided by the HRD Mission statement “To promote and inculcate a valuebased culture utilizing the fullest potential of Human Resources for achieving the BHEL Mission”, the HRDI through a step by step strategic long term training process and several short term need based programmes based on comprehensive organizational research, enables the human resources to unearth and polish their potential. HRDI is spearheading the HRD initiatives in the company and focusing on competency, commitment and culture building. Some of the Core programmes, Strategic need based programmes; Competency based programmes and Functional Programmes like Advanced Management Programmes, General Management Programmes, Strategic
Management
Programmes,
Senior
Management
Programmes,
Missle
Management Programmes, and Young Managers Programmes. In addition, the HRDI provides professional support to Corporate HR and HRDCs at Units/Divisions. HRDI is also accepting consulting assignments from other organizations in a selective manner.
Health, Safety and Environment Management BHEL is an environment friendly company in all its activities, products and services, providing safe and healthy working environment to all stakeholders, In fact this aspect has become an integral part of the company’s business performances. Environment improvement Administrative ministry. Some of the major EIPs at BHEL plants & townships included tree plantation drives, installation of rain water harvesting plants, Energy and Conservation Projects utilizing efficient technologies, reduction in noise level, improvement in
chemical storage & handling systems, improvement in fumes extraction systems, Resource conservation Plants (Lubricants/ Metals/Coolants), utilization of Nonconventional energy resources etc. Significantly, BHEL has also taken initiatives on Clean Development Mechanism (CDM) projects to reduce greenhouse gas emissions in amore focused way and vigorous efforts are being made to achieve milestones in this area. A broad reference list of CDM activity projects both of in –house implementation
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 BHEL’s 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.
Corporate Social Responsibility BHEL has developed a CSR scheme and its mission Statement of CSR is“Be a Committed Corporate Citizen, alive towards its Corporate Social Responsibility”. Thrust is being given in eight areas-Self employment generation, Environment protection, Community development, Education, Health
management & medical aids, Orphanages & Old-age Homes, Infrastructural development and Disaster/ Calamity Management. Quarterly and
Disaster/Calamity Management. Quarterly and annual CSR reports are prepared containing the activities carried out, benefits accrued to neighboring communities, the number of people benefited and the amount spent etc.
BHEL adopted 56 villages having nearly 80,000 inhabitants. In addition , BHEL provides financial assistance to various NGOs/ Trusts/Social Welfare Societies that are engaged in social activities throughout the country.
Participation in the UN’s Global Compact Programme The company reiterate its commitment to United Nation’s Global compact programme and the set of core values enshrined in its ten principles and the intent to advance Global Compact principles within the company’s sphere of influence on human rights, labour standards, environment and anti corruption. As the world’s largest global compact is the first and the citizenship initiative, the Global Compact is the first and the foremost concern which is exhibiting and building the social legitimacy of business and markets. BHEL has made these a part of the
strategy, culture and day-to-day operations. As part of this programme, BHEL continues to play a lead role in the activities of the Global Compact Society in India, which acts as an apex level nodal agency representing Indian corporate bodies and institutions / organizations that are committed to UN’s Global Compact Programmes. Company publicly advocates with its employees and other stakeholders and regularly incorporates its commitments towards Global compact programme through its Annual report, press conferences and other public documents.
BHEL - AN OVERVIEW
BHEL is the largest engineering and manufacturing enterprise in India in the energy, related/ infrastructure & sector today. BHEL has built over the years, robust domestic market position by becoming the largest supplier of power plant equipment in India, and by developing a strong market. Presence in select
segments of the industries sector, and the Railway.
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 with a well recognized track record of performance. Defying the scourge of worldwide recession, in 2008-09, BHEL save a spectacular top line growth of 31% with a turnover of Rs.28,033 crore and net profit rising by 9,8% toRs.3,138 crore over the privies year. Order inflow diving 2008-09 was at record high of Rs.59, 618 crore with total orders in hand in the 2 nd quarter of 2009 at Rs.1,25,800 crore. The cumulative capacity of BHEL’s projects installed worldwide stands at around 1,05,000 mw BHEL’s manufacturing 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.
Global Liknks :The achievements have earned an international reputation of BHEL,
Trichy. The plant has so far supplied boilers for around 1350 MW of power generation capacity to Malaysis, Libya, Iran, Eqypt etc. BHEL’s valves have
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 Malaysia. been exported to
CHAPTER-IV ANALYSIS AND INTERPRETATION OF DATA In this chapter an attempt has been made to analysis how efficiently the analysis of Financial statement is managed in Bharat Heavy Electricals
limited. Financial tools such as schedule of changes in ratio analysis, least squares, comparative statements have been used for the purpose of analysis.
The financial statement involves recording classifying and summarizing of various business transactions. It is prepared for the purpose of presenting a periodical review or report of the progress made by the concern and deals with the state of the investment, in the business and ‘result achieved’ during the accounting period. Financial statement, income statement and position statement are the outcome of accounting process.
Ratio analysis is a technique of analysis and interpretation of financial statements. It is used as a device to analysis and interpret the financial health of
a firm. Analysis
of a financial statement with the aid of ratio helps to
arrangements in decision making control.
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
TABLE – 4.1 Current Ratio (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Current Assets 13343 16331 21063 27705 36901 Current liabilities 8446 10321 14420 19821 28333 Current Ratio 1.57 1.58 1.46 1.39 1.30
Source : secondary Data Interpretation
Current ratio during the year 06-07 is the 1.57. In the next year 2007-08 it was maximum 1.58 and in the year 2008- 09 it was 1.46. In the year 2009-10 the current ratio is 1.39 and in the last year 2010--11 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. CHART NO.1
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 all current assets except stock and prepaid expenses. It is determined by dividing quick assets by quick liabilities. Liquid Assets
Liquid Ratio = Liquid Liabilities
TABLE – 4.2 Liquid Ratio (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Current Assets 10427 12587 21021 27648 36823 Current liabilities 8446 10321 14420 19821 28333 Current Ratio 1.23 1.21 1.45 1.39 1.29
Source : Secondary Data Interpretation Liquid ratio during the year 2008-2009 it attains the maximum value of 5.20. in the above year it was slightly reduced to 2006 – 07 to 1.23. In the next year, 2007-08 it further decreased to 1.21 and in the next year 2009-10 1.39. in the last year decreased 2010—2011 to 1.29.
During the period of study, the value of liquid ratio is higher than the ideal value which indicates the efficiency of the company to meet is immediate requirements. The overall trend of liquid ratio shows up and down ward trend.
CHART NO.2
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 proprietor’s funds by the total tangible assets. Proprietor’s Funds Proprietary Ratio = ------------------------------Total Tangible Assets TABLE – 4.3 Proprietory Ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Proprietary Fund 6027 7301 8788 10774 12939
Total Assets 14483 17498 22354 29344 39528
Proprietary Ratio 0.41 0.41 0.39 0.36 0.32
Source : Secondary Data Interpretation
Proprietory ratio during the year 2006-07 and 2007-08 it attains the maximum value of 0.41. In the year2006-07 the proprietory ratio was slightly reduced to 0.39. In the next year, 2009-10 It further reduced to 0.36. During the year 2010-11 it further decreased to 0.32.
CHART NO.3
4) Fixed Assets to Net Worth Ratio: This ratio shows the relationship between fixed assets and proprietor’s funds. The purpose of this ratio is to fend out the percentage of the owners fund invested in fixed assets. Fixed Assets Fixed Assets to Net worth Ratio = -------------------------------
Proprietor’s funds TABLE - 4.4 fixed assets to Net worth Ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Fixed asset 1140 1167 1291 1639 2627
Proprietory Fund 6027 7301 8788 10774 12939
Fixed asset to Net worth ratio 0.18 0.15 0.14 0.15 0.20
Sources : Secondary Data Interpretation
Fixed asset to Net worth Ratio during the year 2006-07 was 0.18. it was slightly reduced to 0.14 in the 2006-07 year. In the next year 2007-08 and 200910 the net worth ratio 0.15. The same is increased to a maximum of 0.20 in the year 2010-2011
CHART NO.4
5) Net Profit Ratio Net Profit Ratio establishes a relationship between net profit (after taxes) and sales. It is determined by dividing the net income after tax to the net sales for the period and measures the profit per rupees of sales. Net Profit
Net Profit Ratio
=
------------------------------- x 100 Sales
TABLE- 4.5 Net Profit Ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Net Profit 953 1679 2415 2859 3138
Sales 10336 14,525 18739 21401 28033
Net Profit Ratio 9.2% 11.6% 12.9% 13.4% 11.20%
Source : Secondary Data
Interpretation
From the table, it is found that the net profit has been fluctuating during the study period. In the year 2006-07 the net profit ratio was 9.2%. In the year 200708 it was increased to 11.6%. In the next year 2008-09 it was further increased 12.9%. During the year 2009-10 there was a slight increases to 13.4%. During the year 2010-11 the net profit ratio was 11.20%.
CHART NO.5
6) Stock Turnover Ratio: This ratio Indicates whether investment in inventory is efficiently used or not. It explains whether investment in inventories in within proper limits or not. It also measures the effectiveness of the firm’s sales calculated as follows. Cost of goods sold Stock Turnover = ------------------------------Average Stock Cost of goods sold = Sales- Gross Profit efforts. The ratio is
Average stock
=
Opening stock + Closing stock -------------------------------------2
TABLE – 4.6 STOCK TURNOVER RATIO (in crores) Year Cost of goods sold 8673 11902 14960 16936 23153 Average Stock 2919 3653 4971 7097 9350 Stock Turnover Ratio 2.97 3.25 3.00 2.38 2.47
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data Interpretation
From the table, it is found that the stock Turnover ratio has been fluctuating during the study period. In the year 2006-07 it was 2.97, It increases during the year 2007-08 was slightly to 3.25. In the year 2008-09 it was 3.00 and decreases to 2.38 in the year 2009-10 and during the year 2010-2011 it was increased to 2.47. CHART NO.6
7) Debtors turnover ratio The purpose of this ratio is to discuss the credit collector power and policy of the firm. This ratio is established between account receivable and net credit sales of the period. The debtors turnover ratio is calculated as follows. Credit Sales Debtors Turnover Ratio = -------------------------------
Average Account receivables Average account receivables = Total Debtors and B/R
TABLE No.4.7 Debtor Turn over (Rs in crores) Year Sales Sundry debtors Debtors turn over ratio Rs 5972 7168 9695 11975 15976 1.73 2.02 1.93 1.78 1.75
Rs 2006-2007 1033 6 2007-2008 1452 5 2008-2009 1873 9 2009-2010 2140 1 2010-2011 2803 3
Sources : Secondary Data 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
8) Average debt collection period The average number of days that lapsed between the receipt of the invoice by customers and the actual payment of the invoice . When measured against the
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 = ------------------------------Net Credit sales ABLE - 4.8 Debt Collection Period (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data Debtors 5972 7169 9695 11975 15976 Credit Sales 10336 14525 18739 21401 28033 Debt Collection Period 210 days 180 days 188 days 204 days 208 days
Interpretation Debt Collection period ratio in the year 06-07 was 210 days. In next year 07-08 it further reduced to 180 days. In the next year 08-09 it was 188 days. In the next year 2009-10 it was 204 days. During the years 2010-11 it was 208 days.
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
9) Creditors turnover ratio: It indicates the number of times on the average that the creditors turnover each year. Creditors turnover ratio indicates the number of items the accounts
payable rotate in a year. It signifies credit period enjoyed by the firm in paying its creditors. Account payable include traded creditors and bills payable. . Creditors Turnover Ratio = Credit Purchases ------------------------------Average account payable TABLE – 4.9 Creditor Turnover Ratio (in crores) Year Credit Purchase 4892 6866 10182 11821 17620 Average Account payable 2100 284 3538 4424 5852 Creditor Turnover ratio 2.32 24.17 2.87 2.67 3.0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data
The creditor Turnover ratio during the year 06-07 was 2.32. In the year 07-08 it was increased to 24.17. In the year 08-09 creditors turnover ratio slightly reduced to 2.87. In the year 07-08 it was reduced to 2.67. During the year 20102011 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
10) Average Payment period : The radio gives the average credit period enjoyed by the firm from its creditors. It can be computed as follows. Creditors + B/P Average Payment period days) = ------------------------------- X 365 (in
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) Credit Purchase year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Sources : Secondary Data 4892 6866 10182 11821 17620 Average Creditors 2100 284 3538 4424 5852 Average Payment period 156 days 15 days 126 days 136 days 121 days
The average payment period during the year 2006-07 was 156 days. From the year 2007-08 it was heavily decreased 15 days. In the year 2008-09 average payment period was 126 days. In the year 2009-10 it was 136 days. This last year 2010-2011 it was 121 days.
CHART NO.10
11) Fixed assets turnover Ratio: The ratio indicates that extent to which the investments in Fixed assets contributes towards sales. If compared with a previous year, it indicates whether the investment in Fixed assets has been judicious or not. The ratio is calculate as follows. Sales Fixed assets turnover ratio = ------------------------------Fixed assets
TABLE – 4.11 Fixed asset Turnover ratio (in crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source : Secondary Data Sales 10336 14525 18739 21401 28033 Fixed asset 1140 1167 1291 1639 2627 Fixed asset Turnover 9.06 12.44 14.51 13.05 10.67
Interpretation
The fixed asset turnover ratio during the year 2006-07 was 9.06. It is found that the fixed asset turnover ration has been fluctuating during the study period. In the year 07-08 it was 12.44. In the year 08-09 it was 14.51. During the year 200708 the fixed asset turn over ratio was 13.05. This, last year 2010-2011 it was decreased to 10.67. CHART NO.11
12) Capital Turnover Radio: Managerial efficiency is also calculated by establishing the relationship between cost of sales or sales with the amount of capital invested in the business. Capital turnover Ratio is calculated with the help of the following formula. Sales Capital turnover ratio = --------------------------------------
Net worth (Or) Proprietor’s fund
TABLE – 4.12 Capital Turnover ratio crores) Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Net worth (or) Proprietor’s fund 6027 7302 8789 10775 12939 Sales 10336 14525 18739 21401 28033
(in
Capital Turnover ratio 1.71 1.98 2.13 1.98 2.16
Sources : Secondary Data Interpretation It is inferred from the above table the capital turnover ratio for the year 0607 was 1.71. In the year 07-08 it was 1.98. where as In the year was 2008-09 it was increased to 2.13. In the year 2009-10 it was slightly decreased to 1.98. But during the year 08-09 it was increased further to 2.16. CHART NO.12
13) Return on total assets:
Profitability can be measured in terms of relationship between net profit and total assets. It measures the profitability profitability can be known by applying this ratio. of investment. The overall
Net Profit Return on total Assets = -------------------------- X100 Table assets TABLE – 4.13 Return on Total assets
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Net Profit 1582 2564 3736 4430 4849
Total asset 14482 17497 22354 29344 39528
Return on Total assets 10.92 14.65 16.71 15.09 12.26
Source : Secondary Data Interpretation From, the above table, it was found that the return on total asset has been fluctuating during the study period. In the year 2006-07 it was 10.92. In the year 2007-08 it was increased to 14.65. In the year 2008-09 was increased further increased to 16.71 and in the year 09-10 it was reduced to 15.09. During the year 2010-11 it was slightly decreased to 12.26.
CHART NO.13
14) Operating Ratio Operating ratio is an indicative of the proportion that the cost of sales bears to sales. ‘Cost of sales’ includes direct cost of goods sold as well as other operating expenses. It is an important ratio that is used to discuss the general
profitability of the concern. It is calculated by dividing the total operating cost by net sales. Cost of goods sold + Net operating expenses Operating ratio = ----------------------------------------------------- X100 Sales Cost of goods sold = sales = gross profit. TABLE – 4.14 TABLE – 4.14 Operating ratio (in crores) Year Cost of goods sold + operating 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 expenses 8673 11902 14960 16936 23153 10336 14525 18739 21401 28033 83.9 81.9 79.8 79.1 82.5 Sales Operating ratio
Source : Secondary Data Interpretation The above table clearly reveals that the Operating ratio for the year 06-07 was 83.9. But in the year 07-08 it was slightly reduced to 81.9 and in the year 0809 it was further reduced to 79.8. In the year 09-10 It was 79.1. During the year last year 2010-2011 it was increased to 82.5. CHART NO.14
15) Assets Turnover Ratio This ratio is also called as Investments Turnover Ratio”. It expresses the relationship between cost of goods sold / net sales and assets/ investments of a firm. The figure of net sales can be used where information regarding cost of goods sold is not available. There are many variants of this ratio accordingly as there are differences in the concept of assets employed. Total Assets
Assets Turnover Ratio
= ------------------------------Sales
TABLE – 4.15 Asset turnover ratio (in crores)
Year
Fixed assets
Current assets 13343 16331 21063 27705 36901
Total assets 14481 17496 22353 29343 39528
Sales
Assets Turnover
2006-2007 1139 2007-2008 1166 2008-2009 1291 2009-2010 1639 2010-2011 2627 Source : Secondary Data Interpretation
10336 14525 18739 21401 28033
ratio 1.4 1.2 1.1 1.3 1.4
From the table, it is understood that the Asset turnover ratio for the 200607 was 1.4. In the year 2007-08 it was reduced to 1.2. In the year 2008-09 it was further reduced to 1.1. In the year 2009-2010 there is slight increase to 1.3.while in the year 2010-2011 it was slightly increaed to 1.4
CHART NO.15
16) Gross Profit Ratio: Gross Profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. This ratio plays an important role in two management areas. In the area of financial management, the ratio serves as a valuable indicator of the firm’s ability to utilize effectively outside sources of
fund. Secondly, this ratio also serves as important tool in shipping the pricing policy of the firm. This ratio is calculated by dividing gross profit by net sales. Gross Profit Gross Profit Ratio = -------------------------- X 100 Net Sales Table – 4.16 Gross Profit ratio (in crores)
Year 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Gross profit 1663 2623 3779 4465 4880
Sales 10336 14525 18739 21401 28033
Gross Profit Ratio 16.0% 18.0% 20.1 % 20.8 % 17.4 %
Source : Secondary Data
The above table shaows that the Gross profit Ratio during the year 2006-07 was 16.0%. In the year 2007-08 it was increased to 18.0%. In the following year 2008-09 increased to 20.1 %. In the year 2009-10 there was slight increases to 20.8 %. In this last year was 2010-11 the gross profit ratio was 17.4 %
CHART NO.16
TABLE – 4.17 Comparative Statement for the year 2006-07 to 2007-08 (in crores) Particulars Assets: 2006-07 2007-08 Absolute change % of change
Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total
1140 13343 14483 7120 1325 8445
1167 16331 17498 8808 1512 10320
27 2988 3015 1688 187 1875
2.36 22.39 20.81 23.70 14.11 22.20
Sources : Secondary Data Interpretation From this table, it is found that the comparative statement for the year has been fluctuating during the study period. In the year 2006-07 to 2007-08 having fixed assets was 2.36 & current asset was increased to 22.39. and in the year 2006-07 to 2007-08 current liabilities increased 23.70 and other liabilities it was 14.11. CHART NO.17
TABLE – 4.18 Comparative Statement for the year 2007-08 to 2008-09
(in crores) Particulars Assets: Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total 1512 10320 2522 14420 1010 4100 66.79 39.72 2007-08 1167 1633 17498 8808 2008-09 1291 21063 22354 11898 Absolute change 124 4732 4856 3090 % of change 10.62 28.97 27.75 35.08
Sources : Secondary Data Interpretation From this, table was comparative statement for the year has been fluctuating during the study period. In the year 2007-08 Fixed assets was
increased by 10.62 . Current assets was 28.97. and the current liabilities was 35.08. CHART NO.18
TABLE – 4.19 Comparative Statement for the year
2008-09 to 2009-10 (in crores)
Particulars Assets: Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total
2008-09 1291 21063 22354 11898 2522 14420
2009-10 1639 27705 29344 16576 3244 19820
Absolute change 348 6642 6990 4678 722 5400
% of change 26.95 31.53 31.26 39.31 28.62 37.44
Sources : Secondary Data Interpretation In the year comparative statement from the 2008-09 to 2009-10. The fixed assets was increased by 26.95 while the Current assets was increased by 31.53 and current liabilities by 39.31.
CHART NO.20
TABLE – 4.20
Comparative Statement for the year 2009-2010 to 2010-2011
Particulars Assets: Fixed Asset Current asset Total Liabilities : Current Liabilities Others Total
2009-10 1639 27705 29344 16576
2010-11 2627 36901 39528 23357
Absolute change 988 9196 10184 6781
% of change 60.28 33.19 34.70 40.90
3244 19820
4976 28333
1732 8513
53.39 42.95
In the year comparative statement from the 2009-2010 to 20102011. The above table clearly reveals that the was tremendous increase in the fixed asset to 60.28. In the same year current asset was increased by 33.19 and the current liabilities was by 40.90.
CHART NO.20
Method of Least square: TABLE – 4.21
Fitting the straight Line Trend To sales (Rs. In Crores)
Year 2006-07 2007-08 2008-09 2009-10 2010-11 N=S Interpretation
Y (Sales) 4136 5034 5541 6471 7750 £y=28932
X (year codes) -2 -1 0 1 2 £x=0
X2 4 1 0 1 4 2 £x =10
Xy
Trent
values Yc -8272 953.4 -5034 3369.9 0 5786.4 6471 8202.9 31000 10619.4 £zy= 24165 £yc=28932
The equation of straight Line Trend is yc since £ x = 0 a= £Y/N £y = 28932 le = £x7/£x2 £xy=24165 N=5 £x2=10 = a+ lex
Substituting the values, we get A D = = 28932/5 24165/10 = = 5786.4 2416.5
The Linear trend for sales by the method of least squares is For 2009-10 x would be 3 Hence y 2010 = = = For 2010 – 11 5786.4 + (2416.5 (3) 5786.4 + 7249.5 13035.9 (in Crores)
x would be 4
Hence y 2011
= = =
5786.4 + (2416.5 (4) ) 5786.4 + 9666 15452.4 (in crores)
Forecasted value Year Sales (In Crores) 2012 13035.9 2013 15452.4
CHAPTER-V FINDINGS, SUGGESTIONS AND CONCLUSION FINDINGS
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 firm’s 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 2009-2010 to 12.26 in the 2010-2011. 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 2009-2010 to 17% in 2010-11. 8. Sales shows the increasing trend at the rate in every year. SUGGESTIONS
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 taking steps to reduce the cost of sales , which have done by
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 of the concern. The concern is required to
develop an effective inventory management system. Sales are to be increased to keep with increased in fixed Assets in order improve its fixed Assets turnover ratio.
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 is developing corporate social responsibility such as self
Employment generation, Environment protection, Education Health management and medical aids and so an. It’s focus attention is on 56 adopted villages having nearly 80000in habitations in addition to financial assistance. Finally, I pray God requesting to develop the unit more and in day by day. BHEL should run in successful manner in future also.
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