Introduction of Indian oil

8/7/2019 Introduction of Indian oil

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PROJECT REPORT

ON

Ratio analysis of Indian Oil Corporation

Submitted to

Rashtrasant Tukdoji Maharaj

Nagpur University, Nagpur

In Partial Fulfillment of the requirement of the

Bachelor of Business Administration

Submitted byKaustubh A. Dalal

Guidance by

Prof. Prabhjot Kaur Nayyar

Dr. Ambedkar Institute of Management Studies &Research Deeksha Bhoomi Nagpur-440012

(2010-2011)

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CERTIFICATE

This is to certify that Mr./Ms. kaustubh a. dalal has satisfactorily

completed the Project work entitled Ratio analysis of Indian oil

corporation in not less than one academic session. This also certify

that this Project work is the result of the candidates own work and is

of sufficiently high standard to warrant its presentation for the BBA

program.

To the best of my knowledge this project or its part has not been

submitted to this university or any other university for any

Degree/Diploma.

Prof. Prabhjot Kaur Nayyar

Internal Examiner External Examiner

Place: Director

Date

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ACKNOWLEDGEMENT

Words have never expressed human sentiments. This only an

attempt to express my deep gratitude which comes from my heart.

It is a great pleasure for me to express my deep feeling of gratitude

to my respected guide Prof. Prabhjot Kaur Nayyar Lecturer,

DAIMSR, for her great encouragement & unfailing support which

provided needed moral & confidence to carry on my work.

I am grateful to the Dr. S.Metre, Director of Dr. Ambedkar Institute

of Management Studies & Research, Nagpur for making all facilities

available for my work.

It is with profound gratitude that I wish to express my indebtedness

to Dr. Nirzar.Kulkarni(Coordinator, DAIMSR) for his invaluable

guidance & unning supervision completion of this project work.

Thank you, Sir for all you have done.

I am great to my parents for their lovable support. I wish special

thanks to Prof. Avish Petras for his inspiration. Last but not least I

am thankful to my friends & other faculty Member for their direct &

indirect help for completion of this work.

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DECLARATION

I, KAUSTUBH A. DALAL hereby declare that the project entitled

RATIO ANALYSIS OF INDIAN OIL CARPORATION is the

out come of my own research work based on personal study during

academic session 2010 - 2011 and has not been submitted previously

for award of any degree or diploma to this university or any other

university.

Kaustubh A. Dalal

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index

Index Page no.

Introduction 6

Company profile

Objectives of study

Research methodology

Comparative financial statements of Indian oil

corporation

Ratio analysis

Suggestion and recommendation

Conclusion

Bibliography

Annexure.

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Introduction

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Introduction

A tool used by individuals to conduct a quantitative analysis of information in a

company's financial statements. Ratios are calculated from current year numbers

and are then compared to previous years, other companies, the industry, or even

the economy to judge the performance of the company. Ratio analysis is

predominately used by proponents of fundamental analysis

Ratio analysis is a method of analyzing data to determine the overall financial

strength of a business. Financial analysts take the information off the balance

sheets and income statements of a business and calculate ratios that can then be

used to make assessments of the operating ability and future prospects of that

business. These ratios are useful only when compared to other ratios, such as the

comparable ratios of similar businesses or the historical trend of a single

business over several business cycles. There are various ratios that measure a

company's efficiency, short-term strength, and solvency.

The type of ratio analysis that is most effective depends upon who needs the

information. Credit analysts are concerned with risk evaluation, and they

therefore will concentrate of ratios that measure whether a company can pay its

financial obligations and how much debt is involved in capital structure. On the

opposite end of the spectrum, analysts looking at a business in terms of an

investment opportunity will employ ratios that determine if a company is

efficient and how great is its potential profitability.

For example, knowing that a company has a particular as determined by a

corresponding ratio is meaningless by itself. Financial analysts know it's more

important to determine how that ratio looks in terms of other similar companies,

or even how that ratio looks compared to prior profitability levels of that same

company. In addition, these ratios must be studied over a proper time period,

allowing for major changes within the company to be taken into consideration.

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Ratio analysis is useful in determining the solvency of a business and the

amount of reliance it has on its creditors. Specific ratios included in this group

are current ratio, which measures financial strength by dividing a company's

assets by its and, which takes the essence of the current ratio but excludes. By

focusing on of a business, a quick ratio can measure its strength even in a worst-

case scenario whereby all of its funding was suddenly removed.

In contrast, income statement analysis is more concerned with the profitability

of a business. Among this type of ratio analysis, ratio measures the profit from

sales available to pay while margin ratio is an indicator on the company's

financial return on sales. Ratios known as management ratios can also becalculated from balance sheet information. These ratios measure efficiency in

terms of collecting accounts receivable and managing inventory, the ability to

turn assets into profit, and how much of a return the owners of the business are

getting on their investment.

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Ratio Analysis

Ratio Analysis compares significant numbers from your financial statements.

Rather than focusing on specific volumes, ratios are indicators of the broad state

of your business.

What they indicate is dependent upon the nature of your company, comparisons

to your companys historical ratio values, and Comparisons to competitive

companies in the same industry.

Financial ratios are useful to you and potential investors because they allow

comparisons to be made between your business and others of the same type.

Standard ratios for many industries are available from on-line database services

and are also published in various reference books available at most libraries.

As part of an agreement for financing, your lender or investor may require that

you maintain certain ratios. Any ratio that must be maintained at a specific value

as part of a financing agreement should be calculated and monitored on a timely

basis. If you neglect to do this, you risk being out of complain

with your lender or investor, which could result in the debt being called for

immediate repayment.

for the period

We keep saying period because you can and should measure these ratios for

different periods (Months /

Quarters / Years) and compare in order to see any trends that may be developing

and that can be corrected if necessary.

Adjusted EPS

Net income-dividend on preferred stock

Average outstanding share

The portion of a company's profit allocated to each outstanding share of

common stock. Earnings per share serves as an indicator of a

company's profitability.

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Earnings per share are generally considered to be the single

most important variable in determining a share's price. It is also a major

component used to calculate the price-to-earnings valuation ratio.

Dividend per share

Dps= d- sd

S

D - Sum of dividends over a period (usually 1 year)-

SD - Special, one time dividends

S - Shares outstanding for the period

The the sum of declared dividends for every ordinary share issued.

Dividend per share (DPS) is the total dividends paid out over an

entire year (including interim dividends but not including special

dividends) divided by the number of outstanding ordinary shares

issued.

Dividends per share are usually easily found on quote pages as the dividend

paid in the most recent quarter which is then used to calculate the

dividend yield. Dividends over the entire year (not including any

special dividends) must be added together for a proper calculation of

DPS, including interim dividends. Special dividends are dividends

which are only expected to be issued once so are not included. The

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total number of ordinary shares outstanding is sometimes calculated

using the weighted average over the reporting period.

Profitability Ratios

A class of financial metrics that are used to assess a business's ability to

generate earnings as compared to its expenses and other relevant costs incurred

during a specific period of time. For most of these ratios, having a higher value

relative to a competitor's ratio or the same ratio from a previous period is

indicative that the company is doing well.

One of the primary reasons for operating most businesses is to

generate profits. If you have outside investors, the return on

their investment often comes from the net income the business

generates (rather than from the sale of the business or someother form of pay back). There are many ways to measure

Return on Investment (ROI). Return on Equity and Return on

Assets, as shown below, are two easily calculated methods.

Operating Profit Margin (Return On Sales - ROS)=

Operating profit margin = Operating income

Total revenue

A ratio used to measure a company's pricing strategy and operating efficiency.

This value measures the percent of revenue remaining after

paying all operating expenses (Operating Income). Theoperating profit margin is your operating income (gross profit

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minus all operating expenses) divided by your gross sales

expressed as a percentage.

Operating margin gives analysts an idea of how much a company makes (before

interest and taxes) on each dollar of sales. When looking at operating margin to

determine the quality of a company, it is best to look at the change in operating

margin over time and to compare the company's yearly or quarterly figures to

those of its competitors. If a company's margin is increasing, it is earning more

per dollar of sales. The higher the margin, the better.

Gross Profit Margin=

Gross Profit

Total Revenue

This value measures the percent of money your company generated over the

cost of producing your goods or services. In other words, gross profit margin (or

percent) is the ratio of your net sales (gross sales minus your cost of goods sold)

divided by your gross sales, expressed as a percentage. You can do very

well here when you really understand the value your product or service bring to

your customers your prices need not be built upon your costs. Better to

determine the real value to your customers and sell them on that. This way you

will enjoy higher gross margins

Net Profit Margin=

Option 1: Net Income after Taxes

Revenue

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Option 2: (Net Income + Minority Interest + Tax-Adjusted

Interest)

Revenue

This is the profit you made on this business. The net income divided by your

gross sales, expressed as a percentage. Your companys after-tax profit margin

tells you (and investors) the percentage of money your company actually earns

per dollar of sales. Interpretation is similar to your profit margin, the after tax

profit margin is more stringent as it takes into account taxes. Looking at the

earnings of a company often doesn't tell the entire story Profit can increase,

but it does not mean that its profit margin is improving. For example, if your

company increases sales, and if costs also rise, youll have a lower profit margin

then had been seen with a lower profit. This indicates that costs need to be better

controlled.

All three of these above percentages should usually be included on your incomestatements. To analyze

your profitability, compare these percentages to your industrys averages or

those of your immediate competitors (if you can obtain this information). Of

course, youll always want to compare your current years profitability

percentages to the percentages from your companys previous years in order to

determine how well you are progressing.

Reported return on net worth (%)

Net income *100

Shareholders equity

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The amount of net income returned as a percentage of shareholders

equity. Return on equity measures a corporation's profitability by revealing how

much profit a company generates with the money shareholders have invested.

The ROE is useful for comparing the profitability of a company to that of other

firms in the same industry.

There are several variations on the formula that investors may use:

1. Investors wishing to see the return on common equity may modify the

formula above by subtracting preferred dividends from net income and

subtracting preferred equity from shareholders' equity, giving the following:

return on common equity (ROCE) = net income - preferred dividends / common

equity.

2. Return on equity may also be calculated by dividing net income

by average shareholders' equity. Average shareholders' equity is calculated by

adding the shareholders' equity at the beginning of a period to the shareholders'

equity at period's end and dividing the result by two.

3. Investors may also calculate the change in ROE for a period by first using the

shareholders' equity figure from the beginning of a period as a denominator to

determine the beginning ROE. Then, the end-of-period shareholders' equity can

be used as the denominator to determine the ending ROE. Calculating both

beginning and ending ROEs allows an investor to determine the change inprofitability over the period

Leverage ratios

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Long term debt / Equity

The long term debt to equity ratio is simply similar to gearing, except that short

term debt is excluded from the calculation. This is most simply interpreted as a

measure ofcapital structure, but is also used as a measure of financial strength.

One shortcoming of the use of long term debt/equity with regard to capital

structure is that borrowing that appears to be short term on the face of

thebalance sheet may in fact be rolled over or be provided from a continuing

facility such as an overdraft (which may be provided for many years, even

though re-payable on demand) so its economic effect is that of long term

debt.

Total Debt to Owners Equity=

Total liability

Shareholders equity

A measure of a company's financial leverage calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt

the company is using to finance its assets.

The debt to equity ratio is a common benchmark used to measure the leverage

within a business. To relate

Return on Equity to the Debt-to-Worth ratio, you need to remember that given a

fixed total asset figure,the greater the debt, the lower the net worth. Therefore, given two companies of

identical asset size and

profitability, the company with the higher debt to worth ratio will also have a

higher return on equity

ratio. When potential lenders and investors consider the risks of investing in

your business, they will look

at your return on equity ratio. If the ratio is the same as lower risk investmentssuch as certificates of

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deposit or US Treasury bills, it does not make sense for them to invest in your

company.

A high debt/equity ratio generally means that a company has been aggressive in

financing its growth with debt. This can result in volatile earnings as a result of

the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the

company could potentially generate more earnings than it would have without

this outside financing. If this were to increase earnings by a greater amount than

the debt cost (interest), then the shareholders benefit as more earnings are being

spread among the same amount of shareholders. However, the cost of this debt

financing may outweigh the return that the company generates on the debt

through investment and business activities and become too much for the

company to handle. This can lead to bankruptcy, which would leave

shareholders with nothing. The debt/equity ratio also depends on the industry in

which the company operates. For example, capital-intensive industries such as

auto manufacturing tend to have a debt/equity ratio above 2, while personal

computer companies have a debt/equity of under 0.5.

Fixed assets turnover ratio

Fix asset turnover=net sales

Net property, plan and equipment

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A financial ratio of net sales to fixed assets. The fixed-asset turnover

ratio measures a company's ability to generate net sales from fixed-

asset investments - specifically property, plant and equipment(PP&E) - net of depreciation. A higher fixed-asset turnover ratio

shows that the company has been more effective in using the

investment in fixed assets to generate revenues.

This ratio is often used as a measure in manufacturing industries,

where major purchases are made for PP&E to help increase output.

When companies make these large purchases, prudent investors

watch this ratio in following years to see how effective the

investment in the fixed assets was.

Liquidity ratios

Current ratio=

Current asset

Current liability

A liquidity ratio that measures a company's ability to pay short-termobligations.

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Also known as "liquidity ratio", "cash asset ratio" and "cash ratio"

The ratio is mainly used to give an idea of the company's ability to

pay back its short-term liabilities (debt and payables) with its short-

term assets (cash, inventory, receivables). The higher the current

ratio, the more capable the company is of paying its obligations. A

ratio under 1 suggests that the company would be unable to pay

off its obligations if they came due at that point. While this shows

the company is not in good financial health, it does not necessarily

mean that it will go bankrupt - as there are many ways to access

financing - but it is definitely not a good sign.

The current ratio can give a sense of the efficiency of a company's

operating cycle or its ability to turn its product into cash. Companies

that have trouble getting paid on their receivables or have long

inventory turnover can run into liquidity problems because they are

unable to alleviate their obligations. Because business operations

differ in each industry, it is always more useful to compare

companies within the same industry.

This ratio is similar to the acid-test ratio except that the acid-testratio does not include inventory and prepaids as assets that can be

liquidated. The components of current ratio (current assets and

current liabilities) can be used to derive working capital (difference

between current assets and current liabilities). Working capital is

frequently used to derive the working capital ratio, which is working

capital as a ratio of sales.

Liquid or Liquidity or Acid Test or Quick Ratio:

Total Current Assets

Total Current Liabilities

A class of financial metrics that is used to determine a company's

ability to pay off its short-terms debts obligations. Generally, the

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higher the value of the ratio, the larger the margin of safety that the

company possesses to cover short-term debts.

These values come from your balance sheet and are a measure of

your liquidity. Your current ratio indicates your ability to pay your

current debt out of your current assets. The higher the ratio, the

greater your cushion. Although a satisfactory value for a current

ratio varies from industry to industry, a general rule of thumb is that

a current ratio of 2 to 1 or greater is fairly healthy. Thinking in terms

of dollars, a 2 to 1 ratio means that you have 94rupees of current

assets from which to pay every 47rupees of current bills.

A smaller current ratio may mean that you have successfully

negotiated to pay your suppliers later than the usual 30 days, which

essentially gives your company an interest-free source of cash. Lets

say your current assets are 7, 05,000 rupees and current liabilities are

4, 70,000rupees this gives you a current ratio of 1.5 to 1. In this

scenario, you could improve your current ratio to 2 to 1 by paying

2,35,000 RS of your current liabilities with your current assets,

reducing both by If your suppliers were willing to wait for payment

without charging you interest, this would probably be a bad idea

(unless your 2,35,000 RS financing agreement requires you to

maintain a current ratio of 2 to 1).

Common liquidity ratios include the current ratio, the quick ratio and

the operating cash flow ratio. Different analysts consider different

assets to be relevant in calculating liquidity. Some analysts will

calculate only the sum of cash and equivalents divided by current

liabilities because they feel that they are the most liquid assets, and

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would be the most likely to be used to cover short-term debts in an

emergency.

A company's ability to turn short-term assets into cash to cover debts

is of the utmost importance when creditors are seeking payment.

Bankruptcy analysts and mortgage originators frequently use

the liquidity ratios to determine whether a company will be able to

continue as a going concern

Inventory Turnover ratio=

_COGS

Inventory

A ratio showing how many times a company's inventory is soldand replaced over a period.

The days in the period can then be divided by the inventoryturnover formula to calculate the days it takes to sell theinventory on hand or "inventory turnover days".

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Although the first calculation is more frequently used, COGS(cost of goods sold) may be substituted because sales are

recorded at market value, while inventories are usuallyrecorded at cost. Also, average inventory may be used insteadof the ending inventory level to minimize seasonal factors.

This ratio should be compared against industry averages. Alow turnover implies poor sales and, therefore, excessinventory. A high ratio implies either strong sales or ineffectivebuying.

High inventory levels are unhealthy because they represent an

investment with a rate of return of zero. It also opens thecompany up to trouble should prices begin to fall.

Number of times inventory turns in period. High turn

can indicate better liquidity or good merchandising or

shortage of needed inventory for sales. Low turn can

mean overstocking, obsolescence, builds to inaccurate

sales forecast can also a planned inventory build-up

in anticipation of possible material shortages.

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Payout ratios

Dividend payout ratio (net profit)

Dividend Payout Ratio =Dividend Payment per Share

Earnings per Share

he percentage of earnings paid to shareholders in dividends.

The payout ratio provides an idea of how well earnings support the

dividend payments. More mature companies tend to have a higher

payout ratio.

In the U.K. there is a similar ratio, which is known as dividend

cover. It is calculated as earnings per share divided by dividends per

share.

Earning retention ratio=Net income-dividends

Net income

The percent of earnings credited to retained earnings. In other words,

the proportion of net income that is not paid out as dividends.

The retention ratio is the opposite of the dividend payout ratio. Infact, it can also be calculated as one minus the dividend payout ratio.

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Component ratios

Working Capital Cycle

Receivables Turnover=

Net Sales

Trade Account Receivable

An accounting measure used to quantify a firm's effectiveness in

extending credit as well as collecting debts. The receivables

turnover ratio is an activity ratio, measuring how efficiently a firm

uses its assets.

(Sales/Receivables Ratio) Measures number of times AR turns over

during the period. Higher the turn, shorter the time between sale and

collection of the cash. Does not take into consideration seasonal

fluctuations or a large proportion of cash sales compared to total

sales.

By maintaining accounts receivable, firms are indirectly extending

interest-free loans to their clients. A high ratio implies either that a

company operates on a cash basis or that its extension of credit and

collection of accounts receivable is efficient.

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A low ratio implies the company should re-assess its credit policies

in order to ensure the timely collection of imparted credit that is not

earning interest for the firm.

Account Payables Turnover=

_Account payable turnover

Average account Payables

An accounting measure used to quantify a firm's effectiveness in

extending credit as well as collecting debts. The receivables

turnover ratio is an activity ratio, measuring how efficiently a firm

uses its assets.

Number of times AP turns during the period. A higher turn for your

payables indicates a shorter the time between purchase and payment.

If your payables turnover I lower than your industry, a lender or

investor may wonder if you have a cash shortage, you are disputing

invoices with vendors, enjoying extended terms or purposefully

expanding your trade credit.

The measure shows investors how many times per period the

company pays its average payable amount

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Sales / Working Capital turnover=_Sales

Working capital

A measurement comparing the depletion of working capital to the

generation of sales over a given period. This provides some useful

information as to how effectively a company is using its working

capital to generate sales.

Net Working Capital equals current assets minus current liabilities.

Working Capital measures the margin

of protection for current creditors and reflects your ability to finance

current operations. Comparing sales

to working capital this way measures how efficiently your working

capital is employed. Low ratio may

mean ineffective use of WC. High ratio may mean overtrading a

vulnerable position for creditors.

A company uses working capital (current assets - current liabilities)

to fund operations and purchase inventory. These operations and

inventory are then converted into sales revenue for the company.

The working capital turnover ratio is used to analyze the relationship

between the money used to fund operations and the sales generated

from these operations. In a general sense, the higher the working

capital turnover, the better because it means that the company is

generating a lot of sales compared to the money it uses to fund the

sales.

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Operating RatiosOperating ratios help measure the effectiveness of management

performance.

Gross profit ratio

Gross Profit x 100

Net Sales

Gross profit ratio may be indicated to what extent the selling prices

of goods per unit may be reduced without incurring losses on

operations. It reflects efficiency with which a firm produces its

products. As the gross profit is found by deducting cost of goods

sold from net sales, higher the gross profit better it is. There is no

standard GP ratio for evaluation. It may vary from business to

business. However, the gross profit earned should be sufficient to

recover all operating expenses and to build up reserves after paying

all fixed interest charges and dividends.

Operating Ratio=

Operating Expense

Net Sales

This ratio shows management efficiency by comparing your

operating expenses to your net sales. The Smaller the ratio, the

greater your companys ability to generate a profit if revenue

decreases this ratio

However, does not take into account any debt repayment or debt

increase.

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The smaller the ratio, the greater the organization's ability to

generate profit if revenues decrease. When using this ratio,

however, investors should be aware that it doesn't take debtrepayment or expansion into account.

_NOTE: Each industry and each business will have a

set of ratios that are especially helpful to it. The

point to remember is that ratios are a comparison of

two numbers. So if you find a ratio that is helpful to

you in the financial management of your firm, by all

means use it. Standard ratio values for many

industries are available from on-line database

services, from organizations that collect financial data

(such as BizStats, Dun & Bradstreet and Robert Morris

Associates (RMA)), and from various reference

books available at most libraries. Other ratios, often

made up to suit a particular business can be useful

as Key Indicators.

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What do we want ratio analysis to tell us?

The key question in ratio analysis isn't only to get the right answer:

for example, to be able to say that a business's profit is 10% of

turnover. We have to start working on ratio analysis with the

following question in our heads:

What are we trying to find out?

Isn't this just blether, won't the exam just ask me to tell them that

profit is 10% of turnover? Well, yes, but then they want to know that

you are a good student who understands what it means to say that

profit is 10% of turnover.

We can use ratio analysis to try to tell us whether the business

1.is profitable

2.has enough money to pay its bills

3.could be paying its employees higher wages

4.is paying its share of tax

5.is using its assets efficiently6.has a gearing problem

7.is a candidate for being bought by another company or

investor

and more, once we have decided what we want to know then we can

decide which ratios we need to use to answer the question or solve

the problem facing us.

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Company profile

Company profile

Indian Oil owns and operates 6 of the refineries with a combined

refining capacity of over 25 million tones per annum (5,00,000bpd).

Another 6 million tones per annum (1,20,000bpd) refinery will be

ready during fiscal 1997. Constant technology up gradation enables

achievement of over 100% capacity utilization.

Indian Oil has the largest network of over 5,300 km onshore crude

oil and petroleum product pipelines in the country which operate at

over 100% capacity and are equipped with latest technology.

Indian Oil sold 41.97 million tones of petroleum products during

the year 1996-97. It markets 55% of the petroleum products

consumption of India. In aviation fuels, its market participation is

69%. Its nationwide retail network of nearly 18,000 sales points

(6,731 petrol stations, 3,413 kerosene dealers, 2,834 LPG

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distributors and 4,820 bulk consumer outlets) is backed for supplies

by 178 bulk storage terminals and depots having a tank age of five

million kilolitres. There are 92 aviation fuel stations besides 39LPG bottling plants with a capacity of 1.5 million tones to cater to

nearly 15 million customers in over 1,300 towns all over the

country.

Indian Oil is Indias flagship national oil company, with

Business interests straddling the entire hydrocarbon

Value chain and the highest ranked Indian corporate in the

prestigious Fortune Global 500 listing. With over a 34,000- strong

workforce, Indian Oil has been meeting Indias energy demands for

over five decades. The companys operations are strategically

structured along business verticals - Refineries, Pipelines,

Marketing, R&D and Business Development.

To achieve the next level of growth, Indian Oil is currently forging

ahead on a well laid-out road map through vertical integration

upstream into oil exploration & production (E&P) and downstream

into petrochemicals and diversification into natural gas marketing

and alternative energy, besides globalization of its downstream

operations. Having set up subsidiaries in Sri Lanka, Mauritius and

the United ArabEmirates (UAE), Indian Oil is simultaneously scouting for new

business opportunities in the energy markets of Asia and Africa.

Indian Oil and its subsidiaries have a dominant share of the

petroleum products market share, national refining capacity and the

downstream sector pipelines capacity in India. With a steady aim of

maintaining its position as a market leader and providing best quality

products and services, Indian Oil is currently investing Rs. 47,000

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crore in a host of projects for augmentation of refining and pipelines

capacities, expansion of marketing infrastructure and product quality

up gradation.The Indian Oil Group of companies owns and operates 10 of Indias

20 refineries and the largest network of crude oil and profile product

pipelines in the country.

Indian Oil has a keen customer focus and a formidable network of

customer touch-points dotting the landscape across urban and rural

India, backed for supplies by bulk storage terminals and depots,

aviation fuel stations and LPG gas bottling plants. Indian Oils ISO-

9002 certified Aviation Service commands a dominant market share

in aviation fuel business, successfully servicing the needs of

domestic and international flag carriers, private airlines and the

Indian Defense Services.

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OBJECTIVES

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OBJECTIVES

A] To study and express the relationship between two

values of the comparative statement.

B] To study the various ratios to determine the

relationship of different factor which have impact on the

financial position of the company

C] To study the operating efficiency of profitability of the

company

D] To study the liquidity position

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RESEARCH

METHODOLOGY

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RESEARCH METHODOLOGY

DEFINATION: Methodology refers to the body of method

used in conducting a study. Different type of method is used in

social research. In selecting method a researcher should take

in to account not only the suitability of method but also

adequate knowledge of method.

Primary data: - 1) Interviews2) Communication

Secondary data: - Books

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COMPARATIVE

FINICIAL

STATEMENT OF

INDIAN OIL

CORPORATION37


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Profit loss account in crore

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Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Income

Operating

income

2,69,438.0

8

3,07,123.9

9

2,47,359.2

4

2,16,498.8

5

1,74,895.12

Expenses

Material

consumed

2,35,668.5

2

2,75,383.5

4

2,21,256.5

5

1,93,471.5

3

1,56,413.53

Manufacturin

g expenses

1,755.28 1,500.51 1,558.14 1,112.87 961.22

Personnel

expenses

5,723.96 5,686.96 2,894.86 2,586.80 1,799.23

Selling

expenses

10,488.13 9,684.04 8,753.07 7,733.07 6,721.97

Administrative

expenses

1,824.74 1,888.60 2,004.30 1,375.23 1,596.65

Expenses

capitalised

-1,121.28 -544.01 -403.58 -542.83 -406.74

Cost of sales 2,54,339.3

5

2,93,599.6

4

2,36,063.3

4

2,05,736.6

7

1,67,085.86

Operating

profit

15,098.73 13,524.35 11,295.90 10,762.18 7,809.26

Other

recurringincome

3,320.35 2,709.59 2,422.73 1,836.69 1,426.92

Adjusted

PBDIT

18,419.08 16,233.94 13,718.63 12,598.87 9,236.18

Financial

expenses

1,572.35 4,020.98 1,589.73 1,496.25 995.44

Depreciation 3,227.14 2,881.71 2,709.70 2,590.31 2,201.46

Other write

offs

133.98 317.64 236.53 113.43 10.47

Adjusted PBT 13,485.61 9,013.61 9,182.67 8,398.88 6,028.81

Tax charges 3,097.87 1,364.71 3,104.54 2,949.46 1,790.38

Adjusted PAT 10,387.74 7,648.90 6,078.13 5,449.42 4,238.43Non recurring

items

-130.67 -5,615.51 705.81 1,973.32 178.24

Other non

cash

adjustments

-36.52 915.26 178.64 76.73 498.45

Reported net

profit

10,220.55 2,948.65 6,962.58 7,499.47 4,915.12

Earnings

before

appropriation

15,525.63 8,254.63 6,962.58 7,499.47 4,915.12

Equity

dividend

3,156.34 910.48 655.81 2,250.89 1,460.02

Preference

dividend

- - - - -

Dividend tax 508.83 154.74 76.48 361.72 204.77

Retained

earnings

11,860.46 7,189.41 6,230.29 4,886.86 3,250.33

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Balance sheet In crore

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Ratio analysis and

interpretation

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Ratio analysis and interpretation

1} Adjusted EPS (Rs)

Net income-dividend on preferred stock

Average outstanding share

0

10

20

30

40

5060

70

2006 2007 2008 2009 2010

Adjusted EPS (Rs)

Interpretation:

year Mar2010 Mar2009 Mar2008 Mar2007 Mar2006

Adjusted EPS (Rs) 42.78 64.15 50.98 46.66 36.29

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In the year2006 there was adjusted eps was36.29, the average annual

growth is17.88%

As we can see in graph the rise in the adjusted eps from2006 to 2009 but in

the year 2010 there is fall in Adjusted EPS (Rs)

2} dividend per share

Dps= d- sd

S

D - Sum of dividends over a period (usually 1 year)-

SD - Special, one time dividends

S - Shares outstanding for the period

0

5

10

15

20

2006 2007 2008 2009 2010

Dividend per share

Interpretation:

In year 2007 there is noted highest growth among the

five year because equity dividend was greater than 2006,

2008, 2009. In 2010 equity dividend is maximum than 4

year mar2010 mar2009 mar2008 mar2007 mar2006

Dividend per share 13.00 7.50 5.50 19.00 12.50

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years but dividend per share could not rise because

share outstanding period was maximum

3} Profitability ratio:

a)

Operating Profit Margin (Return On Sales - ROS)=

Operating profit margin = Operating income

Total revenue

Years Mar2010 Mar2009 mar2008 Mar2007 Mar2006

Operating margin (%) 5.60 4.40 4.56 4.97 4.46

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0

1

2

3

4

5

6

2010 2009 2008 2007 2006

Operating margin(%)

Interpretation:

higher the profit margin is better for Operating profit

margin, the highest profit margin is noted in year2010

companys pricing strategy and operating efficiency is better inyear2010

Gross profit margin (%)

Gross Profit

Total Revenue

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Interpretation:

in the year2006 it is noted that was lowest among the

years. Year after year the profit margin is increasing so

that company profit margin is better

Net Profit Margin=

Option 1: Net Income after Taxes

Revenue

Years M2010 M 2009 M2008 M2007 M2006

Gross profit margin (%) 4.40 3.46 3.47 3.77 3.20

46

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2010 2009 2008 2007 2006

Gross profit

margin (%)


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0

0.5

1

1.52

2.5

3

3.5

4

2010 2009 2008 2007 2006

Net profit margin

(%)

Interpretation:

rom the figure it is noted that net profit margin was

decreased in 2009 because there was decrease in net

income after tax, but it showing rise in year 2010

because net income after tax was maximum in this year

compare to other year

d) REPORTED RETURN ON NET WORTH (%)

Reported return on net worth (%)

Net income *100

Shareholders equity

Year 2010 2009 2008 2007 2006

Net profit margin (%) 3.74 0.95 2.78 3.43 2.78

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0

5

10

15

20

25

2010 2009 2008 2007 2006

REPORTEDRETURN ON NETWORTH (%)

Interpretation:

The average rise in reported return on net worth is20.35

from2006to2010 so that we can say that the company

profit is better from shareholder fund

e) Return on long term funds (%)

Years 2010 200

9

2008 2007 2006

Reported return on net worth (%) 20.2

2

6.71 16.99 21.62 16.80

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0

5

10

15

20

25

2010 2009 2008 2007 2006

Return on longterm funds (%)

Interpretation:

There is observed in graph that continuous rise in return

on long term fund %it shows good financial position

year 2010 2009 2008 2007 2006

Return on long term funds (%) 21.20 20.72 19.54 20.59 16.18

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4) Leverage ratios:

a) Long term debt / Equity:

0

0.1

0.2

0.3

0.4

0.5

0.6

2010 2009 2008 2007 2006

Long term debt /

Equity

Interpretation:

There is showing average financial growth that is

recorded16.66%

Years 2010 200

9

200

8

200

7

2006

Long term debt / Equity 0.40 0.43 0.34 0.38 0.48

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b) Total debt to equity

0

0.2

0.4

0.6

0.8

1

1.2

2010 2009 2008 2007 2006

Total debt/equity

Interpretation:

years 2010 200

9

200

8

200

7

2006

Total debt/equity 0.88 1.02 0.86 0.77 0.90

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The company uses the financial budgets are in average

level

c) Owners fund as % of total source

46

48

50

52

54

56

58

2010 2009 2008 2007 2006

Owners fund as % oftotal source

Interpretation:

Years 2010 2009 2008 200

7

2006

Owners fund as % of total source 53.14 49.44 53.63 56.25 52.60

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There is showing maximum as owners fund as % of total

source

d) Fixed assets turnover ratio

net sales

Net property, plan and equipment

year 2010 200

9

2008 200

7

2006

Fixed assets turnover ratio 3.78 4.98 4.38 3.97 4.02

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0

1

2

3

4

5

6

2010 2009 2008 2007 2006

Fixed assetsturnover ratio

Interpretation:In the year2009 it was noted that the

company is used the net property ,plan effectively so

that graph is in gone high than other years

5) Liquidity ratios:

a) Current ratio: Current asset

Current liability

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0

0.2

0.4

0.6

0.8

1

1.2

1.4

2010 2009 2008 2007 2006

Current ratio

Interpretation:

The entire ratio shows more than 1 so that it directs us

that company is having good financial condition

years 2010 2009 2008 2007 2006

Current ratio 1.19 1.09 1.32 1.10 1.18

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b) Current ratio (inc. st loans)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.80.9

2010 2009 2008 2007 2006

Current ratio (inc. stloans)

Interpretation:

There is in 2006 the ratio 1.18 it is decreased in 2008 as 0.08 even also it is rise

in2010

Year 2010 2009 2008 2007 2006

Current ratio (inc. st loans) 0.76 0.60 0.83 0.79 0.83

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c) Acid test ratio or liquid test ratio or quick ratio:

Liquid asset

Liquid liability

0

0.1

0.2

0.3

0.4

0.5

0.6

2010 2009 2008 2007 2006

Quick ratio

Interpretation: Larger the acid test ratio shows higher

the margin of safety, in he year2008 it was noted greater than of

other 4 year because total current asset was noted maximum in year 2010 it

fall down because liquid liability was maximum and liquid asset was also

greater

Year2010 200

9

2008 200

7

2006

Quick ratio 0.44 0.46 0.54 0.47 0.49

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Inventory Turnover ratio=

_COGS

Inventory

0

2

4

6

8

10

12

14

2010 2009 2008 2007 2006

Inventoryturnover ratio

Interpretation:

Years 2010 2009 2008 2007 2006

Inventory turnover ratio 8.37 13.98 9.09 10.10 8.26

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High inventory levels are unhealthy because they represent aninvestment with a rate of return of zero. It also opens thecompany up to trouble should prices begin to fall.

That is showing in year 2009

6) Payout ratios:A) Dividend Payout Ratio =

Dividend Payment per Share

Earnings per Share

0

5

10

15

20

25

30

35

40

2010 2009 2008 2007 2006

Dividend payout ratio(net profit)

Interpretation:The payout ratio provides an idea of how well earnings support the

dividend payments.In year2008 it was noted the fall in dividend payout ratio because the dividend

per share was low

If there is dividend profit ratio is maximum, than it shows better performance of

company

Years 2010 2009 2008 2007 2006

Dividend payout ratio (net profit) 35.86 36.11

10.51 34.83 33.87

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b) Earning retention ratio

Net income-dividends

Net income

0

10

20

30

40

50

60

70

80

90

2010 2009 2008 2007 2006

Earning retention ratio

Interpretation:

Tracking year-on-year earnings retention ratios is important to fundamentalanalysis to investigate whether a company is increasing or decreasing its rateof re-investment

It is noted the fluctuation in Earning retention ratio showing average

0.06%growth only

year 2010 2009 2008 2007 2006

Earning retention ratio 64.72 86.08 87.96 52.06 60.73

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c) Cash earnings retention ratio

0

1020

30

40

50

60

70

80

90

100

2010 2009 2008 2007 2006

Cash earningsretention ratio

Interpretation:

Showing inTracking year-on-year earnings retention ratios is important to fundamentalanalysis to investigate whether a company is increasing or decreasing its rateof re-investment

Showing the average growth 0.01 during five years

7) Coverage ratios

a) Financial charges coverage ratio(pre tax)

year 2010 2009 2008 2007 2006

Cash earnings retention ratio 73.35 90.1

9

91.89 67.9

6

74.20

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0

2

4

6

8

10

12

2010 2009 2008 2007 2006

Financial chargescoverage ratio(pretax)

Interpretation: the figure showing the average profit is

ofFinancial charges coverage ratio (pre tax)is 0.26 so that finicial chargescoverage ratio very low

Sales / Working Capital turnover=

_Sales

Working capital

Years 2010 2009 200

8

2007 2006

Financial charges coverage ratio(pre

tax)

11.71 4.04 8.63 8.42 9.28

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YEAR 2010 2009 2008 2007 2006

W.C 11.65 16.144 25.74 46.82 17.36

0

10

20

30

40

50

2010 2009 2008 2007 2006

Sales / WorkingCapital turnover=

Interpretation:

The figure showing that in year2006 the company shows

that company is not using sales and working capital

properly

It rised in year2007 but fall from 2008 to 2010

Gross profit ratio

Gross Profit x 100

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Net Sales

YEARS 2010 2009 2008 2007 2006

GROSS

PROFIT

RATIO

28.22 21.10 24 26.6 26.1

0

5

10

15

20

25

30

2010 2009 2008 2007 2006

GROSS PROFITRATIO

Operating Ratio=

Operating Expense

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Net Sales

YEARS 2010 2009 2008 2007 2006

OPERATING

RATIO

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Adjusted EPS (Rs) 42.78 64.15 50.98 46.66 36.29

Dividend per share 13.00 7.50 5.50 19.00 12.50

Profitability ratios

Operating margin (%) 5.60 4.40 4.56 4.97 4.46Gross profit margin (%) 4.40 3.46 3.47 3.77 3.20

Net profit margin (%) 3.74 0.95 2.78 3.43 2.78

Reported return on net worth (%) 20.22 6.71 16.99 21.62 16.80

Return on long term funds (%) 21.20 20.72 19.54 20.59 16.18

Leverage ratios

Long term debt / Equity 0.40 0.43 0.34 0.38 0.48

Total debt/equity 0.88 1.02 0.86 0.77 0.90

Owners fund as % of total source 53.14 49.44 53.63 56.25 52.60

Fixed assets turnover ratio 3.78 4.98 4.38 3.97 4.02

Liquidity ratios

Current ratio 1.19 1.09 1.32 1.10 1.18

Current ratio (inc. st loans) 0.76 0.60 0.83 0.79 0.83

Quick ratio 0.44 0.46 0.54 0.47 0.49

Inventory turnover ratio 8.37 13.98 9.09 10.10 8.26

Payout ratios

Dividend payout ratio (net profit) 35.86 36.11 10.51 34.83 33.87

Earning retention ratio 64.72 86.08 87.96 52.06 60.73Cash earnings retention ratio 73.35 90.19 91.89 67.96 74.20

Coverage ratios

Financial charges coverage

ratio(pre tax)

11.71 4.04 8.63 8.42 9.28

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SUGGESTION AND

RECOMMENDATION

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1)

Operating profit margin is showing

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CONCLUSION

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1)Overall financial performance of company is good and even rising every

year but only small fall in year 2009

2)

BIBILOGRAPHY70


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1>Financial Ratio analysis

AUTHOR: Charles K. Vandke

2>Financial management

AUTHOR: V.K BHALLA

3>Corporate finance

4>Element of financial management

Websites:-

1) www.Google.com

2) www.investopedia.com

3) www.eicherworld.com

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Introduction of Indian oil

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