financial analysis of tata steel and jindal steel and power ltd.
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Transcript of financial analysis of tata steel and jindal steel and power ltd.
INTRODUCTION
Financial statements are records that provide an indication of the organization’s financial status.
It quantitatively describes the financial health of the company. It helps in the evaluation of
company’s prospects and risks for the purpose of making business decisions. 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. Financial statements should be understandable, relevant, reliable and
comparable. They give an accurate picture of a company’s condition and operating results in a
condensed form. Reported assets, liabilities and equity are directly related to an organization's
financial position whereas reported income and expenses are directly related to an organization's
financial performance. Analysis and interpretation of financial statements helps in determining
the liquidity position, long term solvency, financial viability, profitability and soundness of a
firm. There are four basic types of financial statements: balance sheet, income statements, cash-
flow statements, and statements of retained earnings.
Mining industries are capital intensive. Hence a lot capital is invested in it. Unfortunately very
limited work has been done on analysis and interpretation of financial statements of Indian for
mining companies. An attempt has been carried out in this project to analyze and interpret the
financial statements of five coal and non- coal mining companies.
OBJECTIVES
To understand, analyze and interpret the basic concepts of financial statements of different
mining companies.
Interpretation of financial ratios and their significance.
FINANCIAL STATEMENTS
Financial statements (or financial reports) are formal records of the financial
activities of a business, person, or other entity. Financial statements provide an
overview of a business or person's financial condition in both short and long term. All
the relevant financial information of a business enterprise, presented in a structured
manner and in a form easy to understand is called the financial statements. There are
four basic financial statements:
1. Balance sheet: It is also referred to as statement of financial position or condition,
reports on a company's assets, liabilities, and Ownership equity as of a given point in
time.
2. Income statement: It is also referred to as Profit and Loss statement (or "P&L"),
reports on a company's income, expenses, and profits over a period of time. Profit &
Loss account provide information on the operation of the enterprise. These include
sale and the various expenses incurred during the processing state.
3. Statement of Retained Earnings: It explains the changes in a company's retained
earnings over the reporting period.
4. Cash Flow Statement: It reports on a company's cash flow activities, particularly its operating, investing and financing activities.
Industry overview: Indian steel sector
India has emerged as the fourth largest steel producing nation in the world, as per the recent figures
release by World Steel Association in April 2011. In 2010, India was the 5th largest producer, after
China, Japan, USA and Russia had recorded a growth of 11.3% in steel production as compared to
2009. Overall domestic crude steel production grew at a compounded annual growth rate of 8.4%
during 2005-06 to 2009-10. The Indian steel industry accounted for around 5% of the world’s total
production in 2010.
Total crude steel production in India for 2010-11 was around 69 million tonnes and it’s expected
that the crude steel production in capacity in the country will increase to nearly 110 million tonne
by 2012-13. Further, if the proposed expansion plans are implemented as per schedule, India may
become the second largest crude steel producer in the world by 2015-16.
The demand for steel in the country is currently growing at the rate of over 8% and it is expected
that the demand would grow over by 10% in the next five years. However, the steel intensity in the
country remains well below the world levels. Our per capita consumption of steel is around 110
pounds as compared to 330 Pounds for the global average. This indicates that there is a lot of
potential for increasing the steel consumption in India.
Immense growth potential in Indian Steel Sector
Domestic crude steel production grew at a compounded annual growth rate of 8.4% in the last few
years.
Crude steel production capacity of the country is projected to be around 110 million tonne by 2012-
13.
222 Memorandum of Understandings (MOU) have been signed with various states for planned
capacity of around 276 million tonnes by 2019-20.
Investments at stake are to the tune of $187 billion in the Steel sector.
Increase in the demand of steel in India is expected to be 14% against the global average of 5-6%
due to its strong domestic economy, massive infrastructure needs and expansion of industrial
production.
Demand of steel in the major industries like infrastructure, construction, housing, automotive, steel
tubes and pipes, consumer durables, packaging and ground transportation.
Target for $ 1 trillion of investments in infrastructure during the 12th Five Year Plan.
Infrastructure projects (like Golden Quadrilateral and Dedicated Freight Corridor) will give boost
to the demand in the steel sector in near future.
Projected New Greenfield & up-gradation of existing Airport shall keep the momentum up.
Increased demand of specialized steel in hi-tech engineering industries such as power generation,
automotive petrochemicals, fertilizers etc.
ANALYSISJindal Steel & Power Ltd.
Table : Balance Sheet of Jindal Steel & Power Ltd. as at 31st Mar-2009
LiabilitiesMarch- 2009
(Rs in millions)March- 2008
(Rs in millions)March- 2007
(Rs in millions)
Share Capital 154.70 154.00 154.00
Reserves & Surplus 53,998.50 37,409.80 24,813.30
Net Worth (1) 54,153.20 37,563.80 24,967.30
Secured Loans (2) 21,054.90 17,833.90 21,156.10
Unsecured Loans (3) 28,571.60 20,799.60 13,921.10
TotalLiabilities(1+2+3
103,779.70 76,197.30 60,044.50
AssetsMarch- 2009 March- 2008 March- 2007
Gross Block 73,629.00 59,189.40 49,290.30
(-) Acc. Depreciation 16,170.00 11,831.10 7,817.50
Net Block (A) 57,459.00 47,358.30 41,472.80
Capital Work inPrgs. (B)
23,180.10 6,604.80 9,378.40
Investments (C) 12,334.00 10,361.90 7,098.20
Inventories 12,099.60 9,805.60 6,424.40
Sundry Debtors 3,914.60 2,873.80 3,203.10
Cash And Bank 3,089.60 5,779.10 529.70
Loans And Advances 32,789.00 14,537.20 7,859.40
(i) 51,892.80 32,995.70 18,016.60
Current Liabilities 31,258.30 15,335.40 12,099.10
Provisions 9,858.10 5,819.40 3,854.80
(ii) 41,116.40 21,154.80 15,953.90
Net Curr. Assets (i - ii) (D)
10,776.40 11,840.90 2,062.70
Misc. Expenses (E) 30.20 31.40 32.40
Total Assets(A+B+C+D+E)
103,779.70 76,197.30 60,044.50
Table : Profit & Loss Statement of Jindal Steel & Power Ltd.
March - 2009 (Rs in millions)
March - 2008 (Rs in millions)
March - 2007 (Rs in millions)
Sales 76,778.30 53,681.40 35,230.80
Other Income 1,994.60 573.10 360.80
Total Income 78,772.90 54,254.50 35,591.60
Raw MaterialCost
34,194.20 17,274.00 10,685.00
Excise 7,559.80 7,634.90 3,967.10
OtherExpenses
8,645.70 5,813.40 6,480.60
OperatingProfit
26,378.60 22,959.10 14,098.10
InterestName
2,678.90 2,430.20 1,731.90
Gross Profit 23,699.70 20,528.90 12,366.20
Depreciation 4,330.30 4,515.10 3,364.70
Profit Bef. Tax
21,362.00 16,584.20 9,359.60
Tax 4,654.00 2,655.50 2,418.50
Net Profit 16,708.00 13,928.70 6,941.10
Other Non- Recurring Income
-1,343.20 -1,559.10 88.80
ReportedProfit
15,364.80 12,369.60 7,029.90
EquityDividend
853.30 620.20 554.30
Ratio Analysis for 2009
Table : Analysis of Financial Ratios for 2009
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
01. Net Working Capital =
Current assets-Current liabilities
Current Assets= 51892.80Current Liabilities= 41116.40
10776.4 Liquidity position is good.
02.Current Ratio =
Current Assets
Current Liabilities
Current Assets= 51892.80Current Liabilities= 41116.40
1.26 It is not safe.
03.Acid test or Quick ratio =
Quick Assets
Current Liabilities
Quick Assets=39793.2Current Liabilities= 41116.40
0.96 It is safe.
04.Debt-Equity Ratio =
Long term debtShareholder s
Equity
Total debt= 49626.5Shareholder Equity= 54153.20
0.91 It is good.
05.Interest Coverage =
Operating Pro&it
Interest
Operating Profit= 26378.60Interest= 2678.90
9.84 It is not safe.
06.Operating Profit margin =
Operating Pro&it ∗ 100
Sales
Operating Profit= 26378.60Sales= 76778.30
34% It is safe.
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
07. Gross Profit margin =
Gross Pro&it ∗ 100
Sales
Gross Profit= 23699.70Sales= 76778.30
30.86 % It is good.
08.Net Profit margin =
Net Pro&it ∗ 100
Sales
Net Profit= 15364.80Sales= 76778.30
20.01 % It is not desirable.
09.Return on Assets =
Operating Pro&it ∗ 100
Average Assets
Operating Profit= 26378.60Average Assets= 132045.9
19.97% It is not satisfactory
10.Return on Investments =
Net Pro&it before Tax ∗ 100Net
Worth
Profit Before Tax= 21362Net Worth= 54153.20
39.44%It is satisfactory
11. Return on Net Worth =
Net Pro&it ∗ 100
Average Net Worth
Net profit= 16,708.00Average Net Worth= 45858.5
36.4% It is satisfactory
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
12.Return on Capital Employed =
Operating Pro&it ∗ 100
Average Capital Employed
Operating Profit= 26378.60Avg. CapitalEmployed= 152228.9
17.32% It is not good.
13.Cost of Goods Sold Ratio =
Cost of Goods Sold
Sales
Cost of goods sold= 34,194.20Sales=76778.30
0.45 It is not satisfactory.
14.Operating Ratio =
Cost of Goods sold + otherExpenses
Other Expenses= 8,645.70
0.55 It is not satisfactory.
Sales
15. Fixed Assets turnover =
6789:;<=9> 7::9?:
Fixed Assets= 92973.1Sales=76778.30
0.82 It is good.
Ratio Analysis for 2008
Table: Analysis of Financial Ratios for 2008
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
01. Net Working Capital =
Current assets-Current liabilities
Current Assets= 32,995.70Current Liabilities= 21,154.80
11840.9 Liquidity position is good.
02.Current Ratio =
Current Assets
Current Liabilities
Current Assets= 32,995.70Current Liabilities= 21,154.80
1.5 It is not safe.
03.Acid test or Quick ratio =
Quick Assets
Current Liabilities
Quick Assets= 23190.1Current Liabilities= 21,154.80
1.0 It is safe.
04.Debt-Equity Ratio =
Long term debtShareholder s
Equity
Total debt= 38633.5Shareholder Equity= 37,563.80
1.0 It is good.
05.Interest Coverage =
Operating Pro&it
Interest
Operating Profit= 22,959.10Interest= 2,430.20
9.44 It is not safe.
06.Operating Profit margin =
Operating Pro&it ∗ 100
Sales
Operating Profit= 22,959.10Sales= 53,681.40
42% It is safe.
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
07. Gross Profit margin =
Gross Pro&it ∗ 100
Sales
Gross Profit= 20,528.90Sales= 53,681.40
38.24% It is good.
08.Net Profit margin =
Net Pro&it ∗ 100
Sales
Net Profit= 12369.60Sales= 53,681.40
23.04% It is not good.
09.Return on Assets =
Operating Pro&it ∗ 100
Average Assets
Operating Profit= 22,959.10Average Assets= 86643.35
26.49% It is not good.
10.Return on Investments =
Net Pro&it before Tax ∗ 100Net
Worth
Profit Before Tax=16584.20Net Worth= 37563.80
44.14% It is satisfactory
11. Return on Net Worth =
Net Pro&it ∗ 100
Average Net worth
Net profit= 13928.70Average Net Worth= 31265.55
44.54% It is satisfactory
Sl.No
Ratios Particulars( Rs in millions)
Values Remarks
12.Return on Capital Employed =
Operating Pro&it ∗ 100
Average Capital Employed
Operating Profit= 22,959.10Avg. CapitalEmployed= 105197.7
21.8% It is not good
13.Cost of Goods Sold Ratio =
Cost of Goods Sold
Sales
Cost of goods sold= 17,274.00Sales= 53,681.40
0.32 It is not satisfactory.
14.Operating Ratio =
Cost of Goods sold + otherExpenses
Other Expenses= 5813.40
0.43 It is not satisfactory.
Sales
15. Fixed Assets turnover =
6789:;<=9> 7::9?:
Fixed Assets= 64325Sales= 53,681.40
0.83 It is good.
Ratio Analysis for 2007
Table: Analysis of Financial Ratios for 2007
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
01. Net Working Capital =
Current assets-Current liabilities
Current Assets= 18,016.60Current Liabilities=15,953.90
2062.7 Liquidity position is good.
02.Current Ratio =
Current Assets
Current Liabilities
Current Assets= 18,016.60Current Liabilities=15,953.90
1.12 It is not satisfactory.
03.Acid test or Quick ratio =
Quick Assets
Current Liabilities
Quick Assets= 11592.2Current Liabilities=15,953.90
0.72It is not satisfactory.
04.Debt-Equity Ratio =
Long term debtShareholder s
Equity
Total debt= 35077.2Shareholder Equity= 24,967.30
1.40 It is good.
05.Interest Coverage =
Operating Pro&it
Interest
Operating Profit= 14,098.10Interest
= 1,731.90
8.14 It is not safe.
06.Operating Profit margin =
Operating Pro&it ∗ 100
Sales
Operating Profit= 14,098.10Sales= 35,230.80
40 % It is satisfactory.
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
07. Gross Profit margin =
Gross Pro&it ∗ 100
Sales
Gross Profit= 12,366.20Sales= 35,230.80
35% It is satisfactory
08.Net Profit margin =
Net Pro&it ∗ 100
Sales
Net Profit= 7,029.90Sales= 35,230.80
19.9% It is not satisfactory.
09.Return on Assets =
Operating Pro&it ∗ 100
Average Assets
Operating Profit= 14,098.10Average Assets= 66821.95
21.09% It is not satisfactory
10.Return on Investments =
Net Pro&it before Tax ∗ 100Net
Worth
Profit Before Tax= 9,359.60Net Worth= 24,967.30
37.48% It is safe.
11. Return on Net Worth =
Net Pro&it ∗ 100
Average Net worth
Net profit= 6,941.10Average Net Worth= 21707.2
31.9% It is good.
Sl.No
Ratios Particulars(Rs in millions)
Values Remarks
12.Return on Capital Employed =
Operating Pro&it ∗ 100
Average Capital Employed
Operating Profit= 14,098.10Avg. CapitalEmployed= 80691.15
17.47% It is not safe.
13.Cost of Goods Sold Ratio =
Cost of Goods Sold
Sales
Cost of goods sold= 10,685.00Sales= 35,230.80
0.30 It is not satisfactory.
14.Operating Ratio =
Cost of Goods sold + otherExpenses
Other Expenses= 6,480.60
0.48 It is not satisfactory
Sales
15.Fixed Assets turnover =
6789:;<=9> 7::9?:
Fixed Assets= 57949.4Sales= 35,230.80
0.61 It is not good.
Summary for Balance Sheet and Profit & Loss Statement
Table : Summary of Balance Sheet
2007(Rs in millions)
2008( Rs in millions)
2009(Rs in millions)
Remarks
Current Assets 18016.60 32995.7 51892.80Current assetposition has increased. Liquidity position is very good.
Fixed Assets 57949.4 64325 92973.1Fixed Assets haveincreased due to increase in gross block.
CurrentLiabilities
3854.80 5819.40 9858.10Current Liabilitieshave increased marginally.
Long termLiabilities
35077.2 38633.5 49626.5Debts haveincreased due to more investment.
Table : Summary of Profit & Loss Statement
2007(Rs in millions)
2008(Rs in millions)
2009(Rs in millions)
Remarks
Sales 35,230.80 53,681.40 76,778.30 Sales position hasdoubled.
Raw Material Cost 10,685.00 17,274.00 34,194.20Purchase of rawmaterial has increased.
Operating Profit 14,098.10 22,959.10 26,378.60 Operating profit has increased.
Profit Bef. Tax(PBT)
9,359.60 16,584.20 21,362.00 PBT has increased.
Net profit 6,941.10 13,928.70 16,708.00Net profit hasincreased 140.7%
Tata Steel
Table :Balance Sheet of Tata Steel as at 31st mar-2009
LiabilitiesMarch- 2009
(Rs in millions)March- 2008
(Rs in millions)March- 2007
(Rs in millions)
Share Capital 62,034.50 62,033.00 7,277.30
Reserves & Surplus 235,011.50 210,974.30 133,684.20
Net Worth (1) 297,046.00 273,007.30 140,961.50
Secured Loans (2) 39,130.50 35,205.80 37,589.20
Unsecured Loans (3) 230,331.30 145,011.10 58,864.10
TotalLiabilities(1+2+3) 566,507.80 453,224.20 237,414.80
AssetsMarch- 2009 March- 2008 March- 2007
Gross Block 200,570.10 164,795.90 160,294.90
(-) Acc. Depreciation 90,624.70 82,234.80 74,863.70
Net Block (A) 109,945.40 82,561.10 85,431.20
Capital Work inPrgs. (B)
34,876.80 43,674.50 24,974.40
Investments (C) 423,717.80 41,031.90 61,061.80
Inventories 34,804.70 26,049.80 23,329.80
Sundry Debtors 6,359.80 5,434.80 6,316.30
Cash And Bank 15,906.00 4,650.40 76,813.50
Loans And Advances 58,846.10 345,828.40 40,259.50
(i) 115,916.60 381,963.40 146,719.10
Current Liabilities 89,657.60 68,422.60 63,492.40
Provisions 29,341.90 29,135.20 19,304.60
(ii) 118,999.50 97,557.80 82,797.00
Net Curr. Assets (i - ii) (D)
-3,082.90 284,405.60 63,922.10
Misc. Expenses (E) 1,050.70 1,551.10 2,025.30
Total Assets(A+B+C+D+E)
566,507.80 453,224.20 237,414.80
Table: Profit & Loss Statement Tata Steel
March - 2009 (Rs in millions)
March - 2008 (Rs in millions)
March - 2007 (Rs in millions)
Sales 243,483.20 196,544.10 174,526.60
Other Income 3,053.60 3,472.80 4,851.40
Total Income 246,536.80 200,016.90 179,378.00
Raw Material Cost 82,794.40 60,248.00 56,799.50
Excise 24,952.10 25,370.20 23,041.80
Other Expenses 43,972.30 28,480.50 25,547.80
Operating Profit 91,764.40 82,445.40 69,137.50
Interest Name 14,895.00 9,290.30 2,512.50
Gross Profit76,869.40
73,155.10 66,625.00
Depreciation 9,734.00 8,346.10 8,192.90
Profit Bef. Tax 70,189.00 68,281.80 63,283.50
Tax 21,148.70 23,802.80 20,404.70
Net Profit 49,040.30 44,479.00 42,878.80
Other Non- Recurring Income
2,977.10 2,391.30 -657.30
Reported Profit52,017.40
46,870.30 42,221.50
Equity Dividend11,689.50
11,689.30 9,439.10
Ratio Analysis for 2009
Table Analysis of Financial Ratios for 2009
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
01. Net Working Capital =
Current assets-Current liabilities
Current Assets= 115,916.60Current Liabilities=118,999.50
- 3082.9 Liquidity available is less.
02.Current Ratio =
Current Assets
Current Liabilities
Current Assets= 115,916.60Current Liabilities= 118,999.50
0.97 It is not safe.
03.Acid test or Quick ratio =
Quick Assets
Current Liabilities
Quick Assets= 81111.9Current Liabilities=118,999.50
0.68 It is not safe.
04.Debt-Equity Ratio =
Long term debtShareholder s
Equity
Total debt= 269461.8Shareholder Equity= 297,046.00
0.91 It is good.
05.Interest Coverage =
Operating Pro&it
Interest
Operating Profit= 91,764.40Interest
= 14,895.00
6.16 It is not safe.
06.Operating Profit margin =
Operating Pro&it ∗ 100
Sales
Operating Profit= 91,764.40Sales= 243,483.20
37 % It is good.
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
07. Gross Profit margin =
Gross Pro&it ∗ 100
Sales
Gross Profit= 76,869.40Sales= 243,483.20
31.57 % It is good.
08.Net Profit margin =
Net Pro&it ∗ 100
Sales
Net Profit= 52,017.40Sales=243,483.20
21.36% It is not good.
09.Return on Assets =
Operating Pro&it ∗ 100
Average Assets
Operating Profit= 91,764.40Average Assets= 616843.75
14.87% It is not good.
10.Return on Investments =
Pro&it Before Tax ∗ 100Net
worth
Profit Before Tax= 70189Net Worth= 297046
23.62% It is not satisfactory
11. Return on Net Worth =
Net Pro&it ∗ 100
Average Net worth
Net profit= 49040.30Average Net Worth= 285026.65
17.20% It is not good.
Sl.No
Ratios Particulars( Rs in millions)
Values Remarks
12.Return on Capital Employed =
Operating Pro&it ∗ 100
Average Capital Employed
Operating Profit= 91,764.40Avg. CapitalEmployed= 725122.4
12.65%It is not good.
13.Cost of Goods Sold Ratio =
Cost of Goods Sold
Sales
Cost of goods sold= 82,794.40Sales= 243,483.20
0.34 It is not satisfactory
14.Operating Ratio =
Cost of Goods sold + otherExpenses
Other Expenses= 43,972.30
0.52 It is not satisfactory
Sales
15.Fixed Assets turnover =
6789:;<=9> A::9?:
Fixed Assets= 568540Sales= 243,483.20
0.42 It is satisfactory
Ratio Analysis for 2008
Table: Analysis of Financial Ratios for 2008
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
01. Net Working Capital =
Current assets-Current liabilities
Current Assets= 381963.40Current Liabilities= 97557.80
284405.6 Liquidity position is good.
02.Current Ratio =
Current Assets
Current Liabilities
Current Assets= 381963.40Current Liabilities= 97557.80
3.92 It is safe
03.Acid test or Quick ratio =
Quick Assets
Current Liabilities
Quick Assets= 355913.6Current Liabilities= 97557.80
3.64 It is satisfactory
04.Debt-Equity Ratio =
Long term debtShareholder s
Equity
Total debt= 180216.9Shareholder Equity= 273007.30
0.66It is not safe
05.Interest Coverage =
Operating Pro&it
Interest
Operating Profit= 82445.40Interest= 9290.30
8.87 It is not satisfactory
06.Operating Profit margin =
Operating Pro&it ∗ 100
Sales
Operating Profit= 82445.40Sales= 196544.10
41% It is satisfactory
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
07. Gross Profit margin =
Gross Pro&it ∗ 100
Sales
Gross Profit= 73155.10Sales= 196544.10
37.22% It is good.
08.Net Profit margin =
Net Pro&it ∗ 100
Sales
Net Profit= 46870.30Sales=196544.10
23.8% It is not satisfactory.
09.Return on Assets =
Operating Pro&it ∗ 100
Average Assets
Operating Profit= 82445.40Average Assets= 433708.7
19 % It is not safe.
10.Return on Investments =
Pro&it before Tax ∗ 100Net
worth
Profit Before Tax= 68281.80Net Worth= 273007.30
25.01% It is not good.
11. Return on Net Worth =
Net Pro&it ∗ 100
Average Net worth
Net profit= 44479Average Net Worth= 206984.4
21.48% It is not satisfactory
Sl.No.
Ratios Particulars( Rs in millions)
Values Remarks
12.Return on Capital Employed =
Operating Pro&it ∗ 100
Average Capital Employed
Operating Profit= 82445.40Avg. CapitalEmployed= 523886.1
15.73% It is not safe
13.Cost of Goods Sold Ratio =
Cost of Goods Sold
Sales
Cost of goods sold= 60248Sales= 196544.10
0.30 It is not satisfactory
14.Operating Ratio =
Cost of Goods sold + otherExpenses
Other Expenses= 28480.50 0.45 It is not satisfactory
Sales
15.Fixed Assets turnover =
6789:;<=9> A::9?:
Fixed Assets= 167267.5Sales= 196544.10
1.17 It is not safe
Ratio Analysis for 2007
Table: Analysis of Financial Ratios for 2007
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
01. Net Working Capital =
Current assets-Current liabilities
Current Assets= 146,719.10Current Liabilities= 82,797.00
63922.1 Liquidity position is good.
02.Current Ratio =
Current Assets
Current Liabilities
Current Assets= 146,719.10Current Liabilities= 82,797.00
1.77 It is not satisfactory.
03.Acid test or Quick ratio =
Quick Assets
Current Liabilities
Quick Assets= 123389.3Current Liabilities= 82,797.00
1.49 It is safe.
04.Debt-Equity Ratio =
Long term debtShareholder s
Equity
Total debt= 96453.3Shareholder Equity= 140,961.50
0.68 It is not safe.
05.Interest Coverage =
Operating Pro&it
Interest
Operating Profit= 69,137.50Interest
= 2,512.50
27.51 It is not satisfactory.
06.Operating Profit margin =
Operating Pro&it ∗ 100
Sales
Operating Profit= 69,137.50Sales= 174,526.60
39.6% It is good.
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
07. Gross Profit margin =
Gross Pro&it ∗ 100
Sales
Gross Profit= 66,625.00Sales= 174,526.60
38.17% It is satisfactory.
08.Net Profit margin =
Net Pro&it ∗ 100
Sales
Net Profit= 42,221.50Sales= 174,526.60
24.19% It is not satisfactory.
09.Return on Assets =
Operating Pro&itAverage Assets
Operating Profit= 69,137.50Average Assets= 253753.3
27.24% It is not good.
10.Return on Investments =
Pro&it Before Tax ∗ 100Net
Worth
Profit Before Tax= 63,283.50Net Worth= 140,961.50
44.89% It is safe.
11. Return on Net Worth =
Net Pro&it ∗ 100
Average Net worth
Net profit= 42,878.80Average Net Worth= 119257.25
35.95% It is good.
Sl.No.
Ratios Particulars(Rs in millions)
Values Remarks
12.Return on Capital Employed =
Operating Pro&it ∗ 100
Average Capital Employed
Operating Profit= 69,137.50Avg. CapitalEmployed= 329720.95
20.96% It is not satisfactory.
13.Cost of Goods Sold Ratio =
Cost of Goods Sold
Sales
Cost of goods sold= 56,799.50Sales= 174,526.60
0.32 It is not good.
14.Operating Ratio =
Cost of Goods sold + otherExpenses
Other Expenses= 25,547.80
0.47 It is not good.
Sales
15.Fixed Assets turnover =
6789:;<=9> 7::9?:
Fixed Assets= 171467.4Sales= 174,526.60
1.01 It is not safe.
Summary for Balance Sheet and Profit & Loss Statement
Table : Summary of Balance Sheet
2007(Rs in millions)
2008(Rs in millions)
2009(Rs in millions)
Remarks
CurrentAssets
146719.10 381963.40 115916.60Short term liquidityavailable is very less.
Fixed Assets 171467.4 167267.5 568540 Fixed Assets have increased due to increase in investment.
CurrentLiabilities
82797 97557.80 118999.50Substantial increasein liabilities. Liquidity position is not good.
Long termLiabilities
96453.3 180216.9 269461.8Debts have increasedbecause of more investment.
Table : Summary of Profit & Loss Statement
2007( Rs in millions)
2008(Rs in millions)
2009(Rs in millions)
Remarks
Sales 174,526.6 196,544.10 243,483.20 Sales haveincreased by 39.5%
Raw MaterialCost
56,799.50 60,248.00 82,794.40 Expenses have increased.
OperatingProfit
69,137.50 82,445.40 91,764.40 Operating profit hasincreased.
Profit Bef. Tax(PBT)
63,283.50 68,281.80 70,189.00 PBT has increased.
Net profit 42,878.80 44,479.00 49,040.30Net profit hasincreased marginally.
FINDINGS
Comparison of Current ratio of Tata Steel and Jindal Steel and Power Ltd. from 2004-09
Table: Comparison of Current ratio
JSPL TATASTEEL
REMARKS
Dec , 2004-05 1.34 0.71JSPL has abetter ratio
Dec , 2005-06 1.26 0.72JSPL has abetter ratio
Dec , 2006-07 1.1 1.77Tata Steel has abetter ratio
Dec , 2007-08 1.5 3.92TATA STEEL has a betterratio
Dec , 2008-09 1.26 0.97JSPL has a betterratio
From the above table, it can be concluded that current ratio of JSPL Ltd. was always
more than 1 from 2004 -09. Short term liquidity of Jindal Steel & Power Ltd. was good
as current ratio was more than 1. Liquidity position of Tata steel was not satisfactory
as the ratio varied from 0.71 to 0.97 in five years.
In the period of 5 years JSPL has improved its liquidity position compared to TATA
STEEL, while positions of Tata Steel has come down. Current ratio of Tata Steel
decreased steeply from 2007 -09 due to its decrease in current assets position.
Comparison of Debt –Equity ratio JSPL and TATA STEEL Companies from 2004-09
Table : Comparison of Debt –Equity ratio
JSPL TATASTEEL
Remarks
Dec , 2004-05 1.13 0.38 JSPL has a better ratio
Dec , 2005-06 1.48 0.25 JSPL has a better ratio
Dec , 2006-07 1.4 0.68 JSPL has a better ratio
Dec , 2007-08 1 0.66 JSPL has a better ratio
Dec , 2008-09 0.91 0.91JSPL &Tata Steel has abetter ratio
From table it can be seen that Debt position of JSPL was satisfactory as the ratio varied from 1.13 to 0.91 from 2004-09 because of increasing investment. However D-E ratio of Tata Steel remained less than 1 from 2004-09 as their debts were paid off. JSPL has the highest debt- equity ratio of 1.48 and 1.40 from 2005-07 compared to TATA STEEL. Tata Steel has improved its ratio from 0.38 to 0.91 in five years. Though owner’s share in the company has decreased but more outsiders have started investing in the company and that has lead to desirable ratio.
Comparison of Net Profit margin of JSPL and TATA STEEL companies from 2004-09
Table : Comparison of Net Profit Margin
JSPL TATASTEEL
REMARKS
Dec , 2004-05 22.88% 23.97%TATA STEEL has a better net profit margin.
Dec , 2005-06 22.33% 23.17% TATA STEEL has a better net profit margin.
Dec , 2006-07 19.9% 24.19%TATA STEEL has a better netprofit margin.
Dec , 2007-08 23.04% 23.8%TATA STEEL has a better netprofit margin.
Dec , 2008-09 20.01% 21.36% TATA STEEL has a better net profit margin.
From Table it can be seen that TATA STEEL has the highest profit margin in all the five
years which is because of their increase in sales. Profit Margin of GMDC came down
from 28.04 % to 23.6% from 2004-09. Though sales of the company JSPL increased,
their profit percentage decreased from 2004-09 due to their decrease in net profit.
Comparison of ROI of Different Companies from 2004-09
Table : Comparison of ROI
JSPL Tata Steel Remarks
Dec , 2004-05 52.31% 74.57%Tata steel has a better ratio
Dec , 2005-06 39.64% 53.28%TATA STEEL has abetter ratio
Dec , 2006-07 37.48% 44.89%TATA STEEL has abetter ratio
Dec , 2007-08 44.14% 25.01%JSPL has abetter ratio
Dec , 2008-09 39.44% 23.62%JSPL has abetter ratio
From the above table it can be seen that ROI of Tata Steel was highest in 2004-05 with
74.57% and then it declined to 23.62%. Similarly ROI of JSPL decreased from 52.31 % to
39.41 % due to significant increase in its expenses.
CONCLUSION
Analysis and interpretation of financial statements is an important tool in assessing company’s
performance. It reveals the strengths and weaknesses of a firm. It helps the clients to decide in
which firm the risk is less or in which one they should invest so that maximum benefit can be
earned. It is known that investing in any company involves a lot of risk. So before putting up
money in any company one must have thorough knowledge about its past records and
performances. Based on the data available the trend of the company can be predicted in near
future.
This project mainly focuses on the basics of different types of financial statements. Balance
Sheet and Profit & Loss statements of five different coal and non coal mining companies have
been studied.
Short term liquidity position of JSPL in 2007 was good. However, current ratio, quick ratio, net
profit margin, return on assets, return on investments and return on capital employed were
unsatisfactory. The ratios that are found to be desirable are debt-equity ratio, operating profit
margin and gross profit margin.
In 2008-09, net working capital available with the company was adequate. The ratios that were
found to be satisfactory are quick ratio, debt-equity ratio, return on investments, return on net
worth, operating profit margin and gross profit margin. Current ratio, return on capital employed,
return on assets and net profit margin of the company were unacceptable.
For Tata Steel in 2007, net working capital, quick ratio, return on investments, return on net
worth, operating profit margin and gross profit margin of the company were satisfactory.
However, debt-equity ratio, current ratio, net profit margin, return on capital employed and
return on assets were undesirable.
In 2008, only company’s current ratio improved due to substantial increase in current assets
position. In 2009, net working capital available was inadequate. Company’s debt-equity ratio,
operating profit margin and gross profit margin were desirable and current ratio, return on
investments, return on net worth, return on capital employed and return on assets were found to
be unsatisfactory.
In this project, comparison of different ratios viz. current ratio, debt-equity ratio, net profit
margin and return on investment of all the companies from 2004-09 has been done.
It was observed Current ratio of Jindal Steel & Power Ltd. was satisfactory as it remained more
than 1 for all the five years. Liquidity position of Tata steel was not satisfactory as the ratio
varied marginally from 0.71 to 0.97 in five years.
Debt position of JSPL was satisfactory as the ratio varied from 1.13 to 0.91 from 2004-09.
However D-E ratio of Tata Steel was less than 1 in five years as their debts were paid off.
Though sales of the company JSPL andTata Steel increased, their profit percentage decreased
from 2004-09 due to their decrease in net profit.
ROI of Tata Steel was highest in 2004-05 with 74.57% and then it declined to 23.62%. Similarly ROI of JSPL decreased from 52.31% to 39.44%.
BIBLIOGRAPHY
Khan, M.Y. (1988). “Financial Management”, Tata Mc-Graw Hill , New Delhi, 1st
edition
Bhattacharya, Asish. K. (2007). “Introduction to Financial Statement Analysis”, Elsevier, New Delhi , 1st edition
Wanless, R.M. (1983). “Finance For Mine Management”, Chapman & Hall Ltd , New York , 1st edition
Khanna, O.P. (1999). “Industrial Engineering And management” , Dhanpat Rai , 1st
edition, New Delhi
Web References:
http://en.wikipedia.org/wiki/Financial_statements
http://en.wikipedia.org/wiki/Balance_sheet
http://en.wikipedia.org/wiki/Asset
http://en.wikipedia.org/wiki/Financial_statement
http://en.wikipedia.org/wiki/Unsecured_loan
http://en.wikipedia.org/wiki/Income_statement
http://en.wikipedia.org/wiki/Cash_flow_statement