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RATIO ANALYSIS AND COMPARATIVE BALANCE
SHEET OF BHUSHAN STEEL
Submitted for the partial fulfillment of the requirement for the award
Of
Master in Business Administration
SUBMITTED BY
PREFACE
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Theory of any subject is important but without its practical knowledge it becomes useless
particularly for the management students. As students of the Busines Administration, I have
studied many theories and concepts in the classroom, but only after taking up this project
work I have experienced & understood these Management theories & practices in its fullest
sense, which plays a very vital role in business field today. The knowledge of management is
incomplete without knowing the practical application of the theories studied. This grand
project provides golden opportunity for all students, especially when the management
students do not have prefect understanding of the working of a unit.
I have undertaken project report at Bhushan Steel Ltd. which is BSE listed company and in
the business of steel manufacturing. I have taken this project in finance department and tried
to apply all the theoretical concept of ratio analysis in the company. I have given my best to
complete this project.
ACKNOWLEDGEMENT
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It is a matter of great satisfaction and pleasure to present this presentation on RATIO
ANALYSIS AND COMPARATIVE BALANCE SHEET OF BHUSHAN STEEL ".
I am grateful to Mr. A. Paul (AGM Finance) of BHUSHAN STEEL Ltd. who spared his
precious time in guiding me and for making valuable suggestions in compiling this project
report.
I acknowledge my gratitude and indebtness to my project guide
Mr._________________________ for his encouragement and able guidance at every stage of
this report.
I express my gratitude towards all those people who have helped me directly or indirectly in
completing this report.
TABLE OF CONTENT
Chapter No. Content Page No.
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Executive Summary
1 Company Profile
Introduction
VisionProducts
2 Objective and Research Methodology
3 Theoretical framework of Ratio analysis
Financial Ratio Analysis
Meaning and Rationale
Importance and Limitation of Ratio analysis
Precautions for use of Ratio
User of Financial Analysis
Types of Ratios4 Data Analysis and Interpretation
Liquidity Ratio
Leverage Ratio
Activity Ratio
Profitability Ratio
5 Findings
6 Suggestion
7 Bibliography
Executive Summary
Every countries economic condition depends upon the performance of its Industry. How the
investors are interested in it as it will help in the increment in the flow of foreign exchange. A
sound and well performing industry will always attract investors as it will give them a return
in a less time period. But it is not easy for a layman to understand or to properly analyze the
performance of the company.
To understand the performance of any company we have to do financial statement analysis.
Ratio analysis is a 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 weaknesses of a firm as well
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as its historical performance and current financial condition can be determined. The term
ratio refers to the numerical or quantitative relationship between two variables.
Ratio analysis helps in inter-firm comparison by providing necessary data. An
interfirm comparison indicates relative position. It provides the relevant data for the
comparison of the performance of different departments. If comparison shows a variance, the
possible reasons of variations may be identified and if results are negative, the action may be
initiated immediately to bring them in line.
In my study I have tried to make out a clear picture of Bhushan steel ltd. and its
performance in the steel industry with the help of Ratio analysis and Comparative Balance
sheet. While doing my interpretation through Ratio analysis I have focused on 5 main areas:
1. Liquidity
2. Investment/shareholder
3. Gearing
4. Profitability
5. Financial
First chapter contains information about the company and its product. Second chapter is
about the research methodology. Third chapter has detailed study of theoretical concept of
ratio analysis and last part is about the data analysis. I have taken 7 years data to have
financial analysis. Suggestion is made on the basis of finding.
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CHAPTER -1
COMPANY PROFILE
Introduction
Bhushan Steel Ltd formerly known as Bhushan Steel & Strips Ltd. is a globally renowned
one of the leading prominent player in Steel Industry. Backed by more than two decades, of
experience in Steel making, Bhushan Steel is now Indias 3rd largest Secondary Steel
Producer company with an existing steel production capacity of 2 million tonnes per annum.
It was the vision of the founder; Brij Bhushan Singal, that the first stake was driven into the
soil of Sahibabad (Uttar Pradesh) in 1987. His vision helped BSL overcome several periods
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of adversity and strive to improve against all odds.
The company has three manufacturing units in the state of Uttar Pradesh (Sahibabad Unit),
Maharashtra(Khopoli unit), and Orissa Plant (Meramandali unit) in India and sales network
is across many countries.
The company is a source for vivid variety of products such as Cold Rolled Closed Annealed,
Galvanized Coil and Sheet, High Tensile Steel Strapping, Colour Coated Coils , Galume
Sheets and Coils,Hardened & Tempered Steel Strips ,Billets,Sponge Iron, Precision Tubes
and Wire Rod.
As one of the prime movers of the technological revolutions in Indian Cold Rolled Steel
Industry, BSL has emerged as the countrys largest and the only Cold Rolled Steel Plant with
an independent line for manufacturing Cold Rolled Coil and Sheet up to a width of 1700mm,
as well as Galvanized Coil and Sheet up to a width of 1350 mm.
In due course of time, BSL has grown incredibly its turnover and production capacity by
successive expansions as well as improved realizations with these manufacturing units.
Given a vibrant Steel industry dynamics in India, we are on a course to become a fully
Integrated Steel & Power Company with market leading offerings in value added Steel in
Automotive and White Good Segment with the quality been approved by ISO 9001:2008 &
ISO 14001:2004.
Vision
The vision of evolving into a totally Integrated Steel Producer by committing to achieve the highest
standards of Quality through Cutting-Edge Technology.
About Culture: -To make it a place where all the people can thrive living, learning and
working in a clean, safe and healthy environment.
About Values:-To corporate values as the rules or guidelines by which a corporation
http://bhushan-group.org/sahibabad.asphttp://bhushan-group.org/khopoli.asphttp://bhushan-group.org/dhenkanal.asphttp://bhushan-group.org/cold_rolled.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/product_colourcoated.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/alloybillets.asphttp://bhushan-group.org/alloybillets.asphttp://bhushan-group.org/spongeiron.asphttp://bhushan-group.org/Drawntubes.asphttp://bhushan-group.org/wirerod.asphttp://bhushan-group.org/khopoli.asphttp://bhushan-group.org/dhenkanal.asphttp://bhushan-group.org/cold_rolled.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/product_colourcoated.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/alloybillets.asphttp://bhushan-group.org/spongeiron.asphttp://bhushan-group.org/Drawntubes.asphttp://bhushan-group.org/wirerod.asphttp://bhushan-group.org/sahibabad.asp -
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exhorts its members to behave consistently with its order, security and growth.
About People: - See the good in people and try to develop those qualities i.e. preparation
and grooming of the next generation of the young thinkers.
About Customers: - Sell good merchandise at reasonable price; treat our customer like we
would treat our friends and the business will take care of itself. Bhushan Steels endeavor is to
attain the highest level of Customer Satisfaction.
About Products: - We should always be the pioneers with our products out front leading
the market.
Products
COLD ROLLED STEEL COILS :
Parameters Technical Details/Specifications
Thickness (mm) 0.10 to 4.00
Width (mm) 10 to 1700 (Max)
Coil Weight (MT) Up to 30 MT (7 to 18 kg/mm
width)
Surface Finish Super Bright, Bright, Dull & Matte. (RaValue with
controlled Rmax on request).
Grades Specifications - As per JIS/BIS/ ASTM/EN Standards
Low Carbon CRCA Grades
Super EDD/DD/D (SPCX, SPCEN, SPCD, SPCC) non-
aging, IF-High
Strength steel(IF-HSS), High Strength Low Alloy Steel
(HSLA), viz., ST -42,
ST-45, ST-52, SAPH-400/41O, Steel for Porcelein
Enammeling, Corrosion
Resistant Steel, viz., Tin Mill Black Plate (TMBP)
Medium & High Carbon CRCA Grades
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C- 30, C-40,MC -ll,EN - 8, for spring steel application, C-
55,MC-12,
EN- 9 C-62,C-60, C-80,HC-14,EN-42J
ELECTRICAL Grades Elec -I, Elec-n, Elec-nI,
SemiProcessed Elect. Steel
OTHER CRCA Grades
Case Hardening Steel- 15Cr3, SAE 1010, SAE 1012
Through Hardening Grades- SAE 1040, SAE 1045, 1055,
1065, 1080, 1541
H.R PICKLED/ SKIN PASSED & OILED
Thickness
Up to 3.00 mm
3.00 mm - 4.00 mm
Above 4.00 mm
Max. Width for Cut Size1500 mm
1250 mm
600 mm
Width for Coil 50 mm - 1700 mm
50 mm - 1700 mm
50 mm - 1700 mm
COLD ROLLED STEEL SHEETS :
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Parameters Technical Details/Specifications
Thickness (mm) 0.10 t0 4.00
Width (mm) 10 to 1700 (Max)
Cut- to -Length (mm) Up to 4500mm with tolerance
of +2/-0 mm(Further close
tolerance
on - request)
Coil Weight (MT)Up to 30 MT (7 to 18 kg/mm width)
Surface Finish Super Bright, Bright, Dull & Matte. (RaValuewith
controlled Rmax on request).
Grades Specifications - As per JIS/BIS/ ASTM/EN Standards
Low Carbon CRCA Grades
Super EDD/EDD/DD/D (SPCX, SPCEN, SPCD, SPCC)
non-aging, IF-High
Strength steel (IF-HSS), High Strength Low Alloy Steel
(HSLA), viz., ST -42,
ST-45, ST-52, SAPH-400/41O, Steel for Porcelein
Enammeling, Corrosion
Resistant Steel, viz., Tin Mill Black Plate (TMBP)
Medium & High Carbon CRCA Grades
C- 30, C-40,MC -ll, EN - 8, C-55, MC-12,
EN- 9 C-62, C-60, C-80, HC-14, EN-42J
ELECTRICAL Grades Elec -I, Elec-n, Elec-nI,
SemiProcessed Elect. Steel
OTHER CRCA Grades
Case Hardening Steel- 15Cr3, SAE 1010, SAE 1012
Through Hardening Grades- SAE 1040, SAE 1045, 1055,
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RATIO ANALYSIS:
Ratio analysis is a widely used tool of financial analysis. The
term ratio in it refers to the relationship expressed in mathematical terms
between two individual figures or group of figures connected with each other in
some logical manner and are selected from financial statements of the concern.
The ratio analysis is based on the fact that a single accounting figure by it self
may not communicate any meaningful information but when expressed as a
relative to some other figure, it may definitely provide some significant
information the relationship between two or more accounting figure/groups is
called a financial ratio helps to express the relationship between two accounting
figures in such a way that users can draw conclusions about the performance,
strengths and weakness of a firm.
Classification of ratios:
A) Liquidity ratios
B) Leverage ratios
C) Activity ratios
D) Profitability ratios
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A) Liquidity ratios:
These ratios portray the capacity of the business unit to meet its short
term obligation from its short-term resources (e.g.) current ratio, quick ratio.
i) Current ratio:
Current ratio may be defined as the relationship between current assets and
current liabilities it is the most common ratio for measuring liquidity. It is
calculated by dividing current assets and current liabilities. Current assets are
those, the amount of which can be realized with in a period of one year. Current
liabilities are those amounts which are payable with in a period of one year.
Current assets
Current assets = -------------------------
Current liabilities
TABLE -1
CURRENT RATIO: ( In Crore)
Year Current asset
Current
liabilities Ratio
2004-05 1,069.44 473.07 2.26
2005-06 1,201.92 544.23 2.22
2006-07 1,762.75 818.95 2.15
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2007-08 2,418.38 1,263.63 1.91
2008-09 2,749.78 1,796.84 1.53
2009-10 3,770.21 1,603.58 2.35
2010-11 5,017.69 2,067.58 2.42
CHART-1
CURRENT RATIO
I
nterpretation and Analysis:
The above table and diagram shows that the current ratio in the year 2010-11
was 2.42 which is the highest. In the year 2004-05, current ratio was 2.26 and
thereafter up to 2008-09 it shows decreasing trend. But again it shows
increasing trend for the year 2009-10, 2010-11. In all the year current ratio is
above 2 :1 except year 2007-08 and 2008-09. This shows companys liquidity
position is good except year 2007-08 and 2008-09. Company has enough
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current assets to meet its current liability. We can say there is the safety of funds of
short-term creditors.
ii) LIQUID RATIO:
The term liquidity refers to the ability of a firm to pay its
short-term obligation 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-2
LIQUID RATIO:
( Rs. In Crore)
Year Liquid Asset Current Liabilities Liquid Ratio
2004-05 487.77 473.07 1.03
2005-06 727.14 544.23 1.34
2006-07 1006.41 818.95 1.23
2007-08 1288.75 1,263.63 1.02
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2008-09 1519.42 1,796.84 0.85
2009-10 1807.54 1,603.58 1.13
2010-2011 1849.28 2,067.58 0.89
CHART-2
LIQUID RATIO:
Interpretation and Analysis:
The above table and diagram shows the liquid ratio during the
study period. In all the year except 2008-09 and 2010-11, it is more than 1:1 or
equal to 1:1. We can say that company has enough quick asset to meet current
liabilities.
Hence the firm is controlling its stock position because there linear
relationship between current ratio and liquid ratio.
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ii) ABSOLUTE LIQUIDITY RATIO:
Absolute liquid assets include cash, bank, and marketable securities.
This ratio Obtained by dividing cash and bank and marketable securities by
current liabilities.
Cash + bank +marketable securities
Absolute liquidity ratio = ----------------------------------------------
Current liability
TABLE-3
ABSOLUTE LIQUID RATIO:
Year Cash andSecurities CurrentLiabilities Absolute LiquidRatio
2004-05 10.69 473.07 0.023
2005-06 81.52 544.23 0.150
2006-07 100.14 818.95 0.122
2007-08 27.62 1,263.63 0.022
2008-09 124.37 1,796.84 0.069
2009-10 120.2 1,603.58 0.075
2010-11 35.08 2,067.58 0.017
CHART-3
ABSOLUTE LIQUID RATIO:
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Interpretation and Analysis:
The above table and diagram shows the absolute ratio for the study period
2010-11 absolute liquid ratio is 0.017 which is the lowest in all seven year. In
the year 2004-05 ratio is 0.023 which increases up to 2006-07 and then came
down to 0.022 in the year 2007-08. Again it increases up to 2009-10 and then
went down to 0.017 in the year 2010-11.
This shows that company doesnt keep much in cash and bank balances.
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B) LEVERAGE RATIOS :
Many financial analyses are interested in the relative use of debt and
equity in the firm. The term solvency refers to the ability of a concern to meet
its long-term obligation. Accordingly, long-term solvency ratios indicate a
firms ability to meet the fixed interest and costs and repayment schedules
associated with its long-term borrowings. (E.g.) debt equity ratio, proprietary
ratio, etc.
i) DEBT EQUITY RATIO:
It expresses the relationship between the external funds borrowed
and internal equities or the relationship between borrowed funds and owners
capital. It is a popular measure of the long-term financial solvency of a firm.
This relationship is shown by the debt equity ratio. This ratio indicates the
relative proportion of debt and equity in financing the assets of a firm. This ratio
is computed by dividing the total debt of the firm by its equity (i.e.) net worth.
Outsiders funds
Debt equity ratio = ------------------------------
Proprietors funds
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TABLE-4
DEBT EQUITY RATIO:
Year Total Debt Net WorthDebt equity
ratio
2004-05 1,317.47 730.59 1.80
2005-06 2,036.18 889.67 2.29
2006-07 3,241.98 1,214.50 2.67
2007-08 5,718.14 1,625.32 3.52
2008-09 8,066.25 2,034.20 3.97
2009-10 11,404.11 3,991.67 2.86
2010-11 16,592.63 5,896.41 2.81
CHART-4
DEBT EQUITY RATIO:
Interpretation and Analysis:
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In the year 2004-05, debt equity ratio is 1.80 and thereafter up to year 2008-09
it shows increasing trend. This means that firm has higher debt compared to its
equity. This is risky composition. But in the year 2009-10 and 2010-11, debt
equity ratio shows decreasing trend. It is good sign for the firm as outsiders
fund decreased compared to share capital.
ii) PROPRIETARY RATIO:
Proprietary ratio relates to the proprietors funds to total assets. It
reveals the owners contribution to the total value of assets. This ratio shows the
long-time solvency of the business it is calculated by dividing proprietors funds
by the total tangible assets.
Proprietors funds
Proprietary ratio = ---------------------------
Total tangible assets
TABLE-5
PROPRIETARY RATIO:
Year Net Worth Total Assets Proprietary ratio
2004-05 730.59 2,048.06 0.36
2005-06 889.67 2,925.85 0.30
2006-07 1,214.50 4,456.48 0.27
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2007-08 1,625.32 7,343.46 0.22
2008-09 2,034.20 10,100.45 0.20
2009-10 3,991.67 15,395.78 0.26
2010-11 5,896.41 22,489.04 0.26
CHART-5
PROPRIETARY RATIO:
Interpretation and Analysis:
The above table and diagram shows the proprietary ratio during the study
period. In the year 2004-05 proprietary ratio is 0.36 and it shows down ward trend
up to the year 2008-09. We can say that proprietors contribution to total asset is on
an average between 20 to 30%.
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C) ACTIVITY RATIOS :
These ratios evaluate the use of the total resources of the business concern
along with the use of the components of total assets. They are intended to
measure the effectiveness of the assets management the efficiency with which
the assts are used would be reflected in the speed and rapidity with which the
assets are converted into sales. The greater the rate of turnover, the more
efficient the management would be (E.g.) stock turnover ratio, fixed assets
turnover ratios etc.
i) FIXED ASSETS TURNOVER RATIO:
The ratio indicates the extent to which the investments in fixed assets
contribute towards sales. If compared with a previous year. It indicates whether
the investment in fixed assets has been used effectively or not. The ratio is
calculated as follows.
Net sales
Fixed assets turnover ratio = -------------------
Fixed assets
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TABLE-6
FIXED ASSET TURNOVER RATIO:
Year Net Sales Fixed Asset Fixed assetturnover ratio
2004-05 2,674.99 1432.7 1.87
2005-06 2,716.20 2315.3 1.17
2006-07 3,806.81 3615.57 1.05
2007-08 4,152.30 6326.99 0.66
2008-09 4,943.25 9286.1 0.53
2009-10 5,611.27 13188.65 0.43
2010-11 6,967.65 19959.51 0.35
CHART-7
FIXED ASSET TURNOVER RATIO:
Interpretation and Analysis:
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In the year 2004-05, Fixed asset turnover was highest and it is 1.87.and it
shows decreasing trend. It is 0.35 in the year 2010-11. With the passage of
time, investment in assets has increased, in proportion to which sales has not
increased. This means that company is not using fixed asset efficiently to
generate sales.
ii) INVENTORY TURNOVER RATIO:
This ratio indicates how efficiently the firm is managing its inventory.
This ratio roughly indicates how many times per year the inventory is replaced.
SALES
INVENTORY TURNOVER RATIO =
INVENTORIES
TABLE-7
INVENTORY TURNOVER RATIO
Year Net Sales Inventory InventoryTurnover Ratio
2004-05 2,674.99 581.67 4.60
2005-06 2,716.20 474.78 5.72
2006-07 3,806.81 756.34 5.03
2007-08 4,152.30 1,129.63 3.68
2008-09 4,943.25 1,230.36 4.02
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2009-10 5,611.27 1,962.67 2.86
2010-11 6,967.65 3,168.41 2.20
CHART -7
INVENTORY TURNOVER RATIO
Interpretation and Analysis:
In the year 2004-05, inventory turnover ratio is 4.60 which shows
increasing trend and rise up to 5.72 then went down to 5.03 in the year 2006-07
and 3.68 in the year 2007-08. After 2008-09, it shows down ward trend and
came up to 2.20. As ratio went down it shows firm is not maintaining its
inventory efficiently.
iii) DEBTORS TURNOVER RATIO:
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Debtors constitute an important constituent of current assets.
Quality of debtors determines to a great extent a firms liquidity. Debtors
turnover ratio is very important as it depicts the efficiency of the staff entrusted
with the task of collection from debtors.
SALES
DEBTORS TURNOVER RATIO =
DEBTORS
TABLE 8
DEBTORS TURNOVER RATIO
Year Net sales DebtorDebtor's
turnover ratio
2004-05 2,674.99 339.44 7.88
2005-06 2,716.20 404.48 6.72
2006-07 3,806.81 538.9 7.06
2007-08 4,152.30 617.38 6.73
2008-09 4,943.25 619.82 7.98
2009-10 5,611.27 733.92 7.65
2010-11 6,967.65 483.53 14.41
CHART 8
DEBTORS TURNOVER RATIO
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Interpretation and Analysis:
In the year, 2004-05, Debtors turnover ratio is 7.88 which decreased to 6.72 in 2005-
06, again increased to 7.06 in 2006-07 and decreases to 6.73 in 2007-08. In the year 2010-11
it jumped to 14.41 which is highest in all the year. This shows that firm is able to collect
debtor 14.41 times in a year. This shows that debtors are collected soon.
iv) WORKING CAPITAL TURNOVER RATIO:
Working capital turnover ratio indicates the velocity of the utilization of
net working capital. This ratio indicates the number of times the working capital
is turned over in the course of a year. It is a good measure over trading and
under-trading.
Net sales
Working capital turnover ratio = ----------------------------
Net working capital
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TABLE-9
WORKING CAPITAL TURNOVER RATIO:
Year Net SalesNet working
capital
Net working
capital turnover
2004-05 2,674.99 596.37 4.49
2005-06 2,716.20 657.69 4.13
2006-07 3,806.81 943.8 4.03
2007-08 4,152.30 1154.75 3.60
2008-09 4,943.25 952.94 5.19
2009-10 5,611.27 2166.63 2.59
2010-11 6,967.65 2950.11 2.36
CHART-9
WORKING CAPITAL TURNOVER RATIO:
Interpretation and Analysis:
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The above table and diagram shows the relationship between net working
capital and net sales. In the year 2004-05, working capital turnover ratio is 4.49
which shows decreasing trend up to 2007-08. In the year 2008-09 it has jumped
to 5.19 which shows firm has utilized it s working capital very efficiently to
generate sales.
v) TOTAL ASSETS TURNOVER RATIO:
This ratio is an indicator of how the resources of the organization
utilized for increasing the turnover. It shows the ratio between the total assets
and the net sales of the company.From this ratio one can understand how the
assets are performing and being utilized in achieving the objectives of the
company.
Net Sales
Total assets turnover ratio = -------------------
Total assets
TABLE-10
TOTAL ASSETS TURNOVER RATIO:
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Year Total Assets Net SalesTotal asset
turnover ratio
2004-05 2,048.06 2,674.99 1.30
2005-06 2,925.85 2,716.20 0.92
2006-07 4,456.48 3,806.81 0.85
2007-08 7,343.46 4,152.30 0.56
2008-09 10,100.45 4,943.25 0.49
2009-10 15,395.78 5,611.27 0.36
2010-11 22,489.04 6,967.65 0.31
CHART-10
TOTAL ASSETS TURNOVER RATIO:
Interpretation and Analysis:
The above table and diagram shows the relationship between the total
assets to net sales. Total asset turnover ratio show decreasing trend from the
year 2004-05 to 2010-11. This shows Firms total asset is not utilized efficiently
to generate sales.
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vi) CAPITAL TURNOVER RATIO:
This is a ratio which shows how much sales are entertained from
the capital. It shows how the sales are attracted from the Proprietor's Fund.
Sales
Capital turnover ratio = -----------------------
Proprietors fund
TABLE-11
CAPITAL TURNOVER RATIO:
Year Net Sales Net Worth Capital TurnoverRatio
2004-05 2,674.99 730.59 3.66
2005-06 2,716.20 889.67 3.05
2006-07 3,806.81 1,214.50 3.13
2007-08 4,152.30 1,625.32 2.55
2008-09 4,943.25 2,034.20 2.43
2009-10 5,611.27 3,991.67 1.41
2010-11 6,967.65 5,896.41 1.18
CHART-11
CAPITAL TURNOVER RATIO:
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Interpretation and Analysis:
The above table and diagram shows the relationship between the
sales and proprietors funds. In the year 2004-05 capital turnover ratio is 3.66
and it shows decreasing trend up to the year 2010-11.
v) RETURN ON TOTAL ASSETS:
Profitability can be measured in terms of relationship between net
profit and total assets. It measures the profitability of investment. The overall
profitability can be known by applying this ratio.
Net profit
Return on total assets = ----------------------------- x100
Total assets
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TABLE-12
RETURN ON TOTAL ASSETS RATIO:
Year Net Profit Total AssetsReturn on total
assets
2004-05 153.35 2,048.06 7.48
2005-06 154.23 2,925.85 5.27
2006-07 312.28 4,456.48 7.00
2007-08 422.39 7,343.46 5.75
2008-09 420.62 10,100.45 4.16
2009-10 844.8 15,395.78 5.48
2010-11 1,003.43 22,489.04 4.46
CHART-12
RETURN ON TOTAL ASSET
Interpretation and Analysis:
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The above table and diagram shows the relationship between net profit
and total assets in percentage. Return on total asset ratio is 7.48 in the year2004-
05. Again it decrease to 5.27 and then increases to7.00 We can say that
profitability from total asset is quite low.
D) PROFITABILITY RATIOS :
The profitability ratios of a business concern can be measured by the
profitability ratios. These ratios highlight the end result of business activities by
which alone the overall efficiency of a business unit can be judged, (E.g.) gross
ratios, Net profit ratio.
i) GROSS PROFIT RATIO:
This ratio expresses the relationship between Gross profit and sales. It
indicated the efficiency of production or trading operation. A high gross profit
ratio is a good management as it implies that cost of production is relatively
low.
Gross profit
Gross profit ratio = ----------------------------------- x 100
Net sales
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TABLE-13
GROSS PROFIT RATIO
Year Gross Profit Net Sales GP ratio
2004-05 325.92 2,674.99 12.18
2005-06 325.42 2,716.20 11.98
2006-07 581.28 3,806.81 15.26
2007-08 750.34 4,152.30 18.07
2008-09 795.19 4,943.25 16.08
2009-10 1,360.51 5,611.27 24.24
2010-11 1,653.51 6,967.65 23.73
CHART-13
GROSS PROFIT RATIO:
Interpretation and Analysis:
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The above table and diagram shows the relationship between the gross
profit and net sales in percentage. GP ratio is 12.18 for the year 2004-05 and
shows increasing trend up to year 2010-11. As GP ratio increases it shows that
firms cost of production is going down.
ii) 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 rupee of sales.
Net profit
Net profit sales = ----------------- x 100
Net sales
TABLE-14
NET PROFIT RATIO:
Year Net Profit Net Sales Net profit ratio
2004-05 153.35 2,674.99 5.73
2005-06 154.23 2,716.20 5.67
2006-07 312.28 3,806.81 8.20
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2007-08 422.39 4,152.30 10.17
2008-09 420.62 4,943.25 8.50
2009-10 844.8 5,611.27 15.05
2010-11 1,003.43 6,967.65 14.40
CHART-14
NET PROFIT RATIO:
Inference:
The above table and diagram shows the relation ship between net profit
and net sales during 2005-06 it was 5.67% on sales and in 2006-07 it was 8.20,
which increased to 10.17 in the year 2007-08. In the year 2010-11 the net profit
margin was 14.40.
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iii) EXPENSES RATIO:
This ratio establishes the relationship between various indirect expenses
to net sales.
A) ADMINISTRATIVEEXPENSESRATIO:
Administrative expenses
Administrative expenses ratio = ------------------------------- x 100
Sales
b) SELLING &DISTRIBUTIONEXPENSESRATIO:
Selling &distribution expenses
Selling &distribution expenses ratio = ----------------------------------------- x 100
Sales
Administration expenses + selling expenses
Expenses ratio = _______________________________________ x 100
Sales
TABLE-15
EXPENSES RATIO:
YearSelling and
administrative expenseNet Sales Expense ratio
2004-05 53.11 2,674.99 1.99
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2005-06 83.83 2,716.20 3.09
2006-07 132.34 3,806.81 3.48
2007-08 129.94 4,152.30 3.13
2008-09 238.29 4,943.25 4.82
2009-10 376.21 5,611.27 6.70
2010-11 596.59 6,967.65 8.56
CHART-15
EXPENSES RATIO:
Interpretation and Analysis:
The above table and diagram shows the relation ship between the
administration and selling expenses and sales. It can be observed that the
expense increases year on year and in the year 2010-11 it has reached to 8.56
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CHAPTER -5
FINDINGS
1) In all the year current ratio is above 2 :1. This shows companys
liquidity position is good and has enough current assets to meet its
current liability. We can say there is the safety of funds of short-term
creditors.
2) The company liquidity position is more than 1:1 for the period under study.We
can say that company has enough quick asset to meet current
liabilities.
3) In the year 2009-10 and 2010-11, debt equity ratio shows decreasing
trend. It is good sign for the firm as outsiders fund decreased
compared to share capital.
4) The shows down ward trend up to the year 2008-09. We can say that
proprietors contribution to total asset is on an average between 20 to 30%.
5) The Fixed asset turnover shows decreasing trend. It is 0.35 in the year 2010-
11. With the passage of time, investment in assets has increased, in proportion to
which sales has not increased. This means that company is not using fixed asset
efficiently to generate sales.
6) Debtors turnover ratio is high in the year 2010-11 which shows firm is able
to collect debtor in short time.
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7) The working capital turnover ratio is 4.49 which shows decreasing trend up
to 2007-08. In the year 2008-09 it has jumped to 5.19 which shows firm has
utilized its working capital very efficiently to generate sales.
8) The total asset turnover ratio show decreasing trend from the year 2004-05 to
2010-11. This shows Firms total asset is not utilized efficiently to generate sales.
9) Return on total asset ratio is 7.48 in the year2004-05. Again it decrease to
5.27 and then increases to7.00 We can say that profitability from total asset is quite
low.
10) The Gross Profit ratio is 12.18 for the year 2004-05 and shows increasing
trend up to year 2010-11. As Gross Profit ratio increases it shows that firms cost
of production is going down.
11) The relationship between the administration and selling expenses to sales is
observed that the expense increases year on year and in the year 2010-11 it has
reached to 8.56
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CHAPTER -6
SUGGESTIONS
Companys debt equity ratio was initially high and then shows decreasing
trend. We can suggest that company has to maintain debt equity ratio so
that it should not have more burden of interest payment. And try to
reduce it further.
Fixed asset of the company has increased and even though they are not
utilizing the enhanced technology to increase sales. So the management
should take initiative steps for the proper utilization of the resources.
The liquidity position of the company is quite satisfactory. And this must
be improved further for the purpose of proper utilization of the liquid
assets of the company.
The sales of the organization can be further increased by improving the
quality through optimum utilization of company's resources (i.e. assets,
raw materials, credit system, etc.) and that in turn will increase the overall
profits of the organization.
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The Management must find out the reasons for the not much increase in
sales and must take appropriate measures.
The Management must also study the market position and it also find the
demand prevailing in the market for the products and thus this will guide
them to enhance their sales volume.
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CHAPTER -7
BIBLIOGRAPHY
Annual Reports OfBHUSHAN STEEL LTD
T.S Reddy and Y. Hariprasad Reddy, Financial management, New Delhi:
Tata Mc Graw hill Publishing company Ltd.
M.A Sahaf Management and Accounting 4th Edition, Tata McGraw Hill
Publishing Company Ltd.
IM .Pandey, Financial Management 8th Edition, Vikas Publishing house Pvt
Ltd.
R.K. Sharma & S.K. Gupta, Financial Management
R.P. Rustagi, Financial Management
Website:
www.bhushan-group.org
www.indianinfoline.com
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