Ioc Project
Transcript of Ioc Project
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A COMPARATIVE STUDY OF DOWNSREAM
REFINERIES(IOC, HPCL, BPCL) THROUGH
FINANCIAL RATIO ANALYSIS WITH SPECIALREFERENCE TO INDIAN OIL CORPORATION.
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CHAPTER- 1
INTRODUCTION
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INTRODUCTION
Financial Management is the specific area of finance dealing with
the financial decision corporations make, and the tools and analysis used to make
the decisions. The discipline as a whole may be divided between long-term and
short-term decisions and techniques. Both share the same goal of enhancing firm
value by ensuring that return on capital exceeds cost of capital, without taking
excessive financial risks.
Capital investment decisions comprise the long-term choices about
which projects receive investment, whether to finance that investment with equity
or debt, and when or whether to pay dividends to shareholders. Short-term
corporate finance decisions are called working capital managementand deal with
balance of current assets and current liabilities by managing cash, inventories, and
short-term borrowings and lending (e.g., the credit terms extended to customers).
Corporate finance is closely related to managerial finance, which is
slightly broader in scope, describing the financial techniques available to all forms
of business enterprise, corporate or not.
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NEED FOR THE STUDY
1. The study has great significance and provides benefits to various parties
whom directly or indirectly interact with the company.
2. It is beneficial to management of the company by providing crystal clear
picture regarding important aspects like liquidity, leverage, activity and
profitability.
3. The study is also beneficial to employees and offers motivation by showing
how actively they are contributing for companys growth.
4. The investors who are interested in investing in the companys shares will
also get benefited by going through the study and can easily take a decision
whether to invest or not to invest in the companys shares.
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OBJECTIVES OF THE PROJECT
The major objectives of the resent study are to know about financial
strengths and weakness of IOC, HPCL and BPCL through FINANCIAL RATIO
ANALYSIS.
The main objectives of resent study aimed as:
To evaluate and compare the performance of the companies by using
ratios as a yardstick to measure the efficiency of the companies. To understand the
liquidity, profitability and efficiency positions of the companies during the study
period. To evaluate and analyze various facts of the financial performance of the
company.To make comparisons between the ratios during different periods.
OBJECTIVES
1. To study the present financial system at these three downstream companies.
2. To determine the Profitability, Liquidity Ratios.
3. To analyze the capital structure of the companies with the help
of Leverage ratio.
4. To offer appropriate suggestions for the better performance of the
organizations.
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RESEARCH METHODOLOGY.
Research is a systematic method of finding solutions to problems. It is
essentially an investigation, a recording and an analysis of evidence for the
purpose of gaining knowledge.
According to Clifford woody, research comprises of defining and
redefining problem, formulating hypothesis or suggested solutions, collecting,
organizing and evaluating data, reaching conclusions, testing conclusions to
determine whether they fit the formulated hypothesis
Methods of Data Collection: The information is collected through secondary
sources during the project. That information was utilized for calculating
performance evaluation and based on that, interpretations were made.
Sources of secondary data:
1. Most of the calculations are made on the financial statements of thecompany provided statements.
2. Referring standard texts and referred books collected some of the
information regarding theoretical aspects.
3. Method- to assess the performance of he company method of observation of
the work in finance department in followed.
Nature of Research: Descriptive research, also known as statistical research,
describes data and characteristics about the population or phenomenon being
studied. Descriptive research answers the questions who, what, where, when
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and how. Although the data description is factual, accurate and
systematic, the research cannot describe what caused a situation. Thus,
descriptive research cannot be used to create a causal relationship, where one
variable affects another. In other words, descriptive research can be said to have a
low requirement for internal validity.
Variables of the Study: The direct variable of the study is the employee
motivation.Indirect variables are the incentives, interpersonal relations,
career development opportunities and performance appraisal system.
Presentation of Data: The data are presented through charts and tables.
Tools and Techniques for Analysis: Correlation is used to test the hypothesis and
draw inferences.
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LIMITATIONS
1. The study provides an insight into the financial, personnel, marketing andother aspects of LANCO. Every study will be bound with certain limitations.
2. The below mentioned are the constraints under which the study is carried
out.
3. One of the factors of the study was lack of availability of ample information.
Most of the information has been kept confidential and as such as not
assed as art of policy of company.
Time is an important limitation. The whole study was conducted in a
period of 60 days, which is not sufficient to carry out proper interpretation and
analysis.
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CHAPTER-2
COMPANYPROFILE
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INDIANOIL CORPORATION
COMPANY OVERVIEW
Indias Flagship National Oil Company, Incorporated as Indian Oil CompanyLtd. on 30th June 1959, it was renamed as Indian Oil Corporation Ltd. on 1stSeptember 1964 following the merger of Indian Refineries Ltd. (established1958) with it. Indian Oil and its subsidiaries account for approximately 48%
petroleum products market share, 34% national refining capacity and 71%downstream sector pipelines capacity in India.
The Indian Oil Group of companies owns and operates 10 of India's 20refineries with a combined refining capacity of 60.2 million metric tones perannum. These include two refineries of subsidiary Chennai PetroleumCorporation Ltd.
The Corporation's cross-country network of crude oil and product pipelines,spanning over 10,550 km and the largest in the country, meets the vital energyneeds of the consumers in an efficient, economical and environment-friendlymanner.
IndianOil is currently investing Rs. 47000 crore in augmentation of refining andpipeline capacities, expansion of marketing infrastructure and product quality
upgradation.
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VISION OF IOC
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AWARDS AND RECOGNITION
y IndianOil yet again clinched the top slot among the seven Indian companiesfeatured in the Fortune 'Global 500' listing of the world's largest companies for2008, improving its ranking to 105.
y IndianOil was the only petroleum company among 100 other industrial giants toemerge as 'The Most Trusted Fuel Pump Brand' in ET's Brand Equity annualsurvey for the year 2008. Among the 'Top 50 Service Brands' of the country, itbagged the 7th position.
y IndianOil received the coveted World Petroleum Congress Excellence Award2008 at Madrid, Spain, in the technical development category for its pathbreakingR&D work in hydro-processing technology for Green Fuels.
y IndianOil won the SCOPE Gold Trophy for Environmental Excellence &
Sustainable Development and Commendation Certificate for Good CorporateGovernance for the year 2007-08.
KEY CHALLENGES OF IOC
Ensure accounting of correct quantities in business transactionsEnsure on-time update of end-product ratesPrevent delays in signing of joint certificates (JCs) Prevent mismatch between JC and system quantities to prevent disputes intransactionsUse correct valuation for transactions.
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HINDUSTAN PETROLEUM CO. LIMITED
HPCL is a Fortune 500 company, with an annual turnover of Rs. 1,08,599Crores and sales/income from operations of Rs 1,14,889 Crores (US$ 25,306Millions) during FY 2009-10, having about 20% Marketing share in India and astrong market infrastructure.
HPCL operates 2 major refineries producing a wide variety of petroleum fuels &specialties, one in Mumbai (West Coast) of 6.5Million Metric Tonnes Per
Annum(MMTPA) capacity and the other in Vishakapatnam, (East Coast) with acapacity of7.5 MMTPA. HPCL holds an equity stake of 16.95% in MangaloreRefinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with acapacity of 9 MMTPA. In addition, HPCL is constructing a refinery at Bhatinda, inthe state of Punjab, as a Joint venture with Mittal Energy Investments Pte. Ltd.
HPCL also owns and operates the largest Lube Refinery in the country producingLube Base Oils of international standards, with a capacity of 335 TMT. This LubeRefinery accounts for over 40% of the India's total Lube Base Oil production.
HPCL's vast marketing network consists of 13 Zonal offices in major citiesand 101 Regional Offices facilitated by a Supply & Distribution infrastructurecomprising Terminals, Aviation Service Stations, LPG Bottling Plants, and InlandRelay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL, over theyears, has moved from strength to strength on all fronts. The refining capacitysteadily increased from 5.5 MMTPA in 1984/85 to 13 MMTPA presently. On thefinancial front, the turnover grew from Rs. 2687 Crores in 1984-85 to animpressive Rs 1,16,428Crores in FY 2008-09.
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MISSIONAND VISSIONOF HPCL
HPCL, along with its joint ventures, will be a fully integrated company in thehydrocarbons sector of exploration and production, refining and marketing;
focusing on enhancement of productivity, quality and profitability; caring forcustomers and employees; caring for environment protection and cultural
heritage.
It will also attain scale dimensions by diversifying into other energy related fieldsand by taking up transnational operations."
Our Vision
To be a World Class Energy Company known for caring and delighting thecustomers with high quality products and innovative services across domestic andinternational markets with aggressive growth and delivering superior financial
performance. The Company will be a model of excellence in meeting socialcommitment, environment, health and safety norms and in employee welfare andrelations.
AWARDSAND RECOGNITION
y HPCL Wins CIO 100 Award for the fourth Time in a Row
y
Enterprise Connect Award 2009y SAIL HR Excellence Award
y Readers Digest Trusted Brand Gold Award 2009
y Golden Peacock Corporate Governance Award 2008
y National Award For Excellence In Cost Management
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BHARATPETROLEUMCORPORATIONLIMITED
Bharat Petroleum Corporation Limited (BPCL) is engaged in the petroleum
industry in India. During the fiscal year ended March 31, 2009 (fiscal 2009), the
aggregate refinery throughput at BPCLs Refineries at Mumbai and Kochi, along
with that of BPCLs subsidiary company, Numaligarh Refinery Limited (NRL),
was 22.20 million metric tons (MMT). The Company is engaged in downstream
petroleum sector, which consists of refining and marketing activities. BPCL holds
61.65% interest in NRL as on March 31, 2009. Bharat PetroResources Limited
(BPRL), a 100% subsidiary of the Corporation, holds 50% equity in VB (Brazil)
Petroleo Private Ltda., a joint venture company. BPRL has participating interests
in nine exploration blocks. BPRL also has participating interests in five blocks in
the United Kingdom, Australia and Oman. Its subsidiaries include Bharat
PetroResources JPDA Limited, BPRL International BV, BPRL Ventures BV and
BPRL Ventures Mozambique BV.
VISION OF THE COMPANY
y We are a leading energy company with global presence through sustainedaggressive growth and high profitability
y We are the first choice of customers, alwaysy We exploit profitability growth opportunity outside energy
y We are the most environment friendly companyy We are a great organisation to work fory We are a learning organisationy We are a model corporate entity with social responsibility.
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AWARDS AND RECOGNITIONS
y BPCL IN THE FORTUNE 2009 GLOBAL 500 LIST
y BPCL recognized as Business Superbrand 2008!
y
BPCL Wins Asian CSR Award 2008
y BPC Lifts Marketing Company of the Year Award
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RATIO ANALYSIS
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths
and weaknesses of the firm and establishing relationship between the items of the
balance sheet and profit & loss account.
Financial ratio analysis is the calculation and comparison of ratios,
which are derived from the information in a companys financial statements. Thelevel and historical trends of these ratios can be used to make inferences about a
companys financial condition, its operations and attractiveness as an investment.
The information in the statements is used by
y Trade creditors, to identify the firms ability to meet their claims i.e.
liquidity position of the company.
y Investors, to know about the present and future profitability of the company
and its financial structure.
y Management, in every aspect of the financial analysis. It is the responsibility
of the management to maintain sound financial condition in the company.
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RATIO ANALYSIS
The term Ratio refers to the numerical and quantitative relationship
between two items or variables. This relationship can be exposed as
y Percentages
y Fractions
y Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret
the financial statements. So that the strengths and weaknesses of a firm, as well as
its historical performance and current financial condition can be determined. Ratio
reflects a quantitative relationship helps to form a quantitative judgment.
STEPSINRATIO ANALYSIS
y The first task of the financial analysis is to select the information relevant to
the decision under consideration from the statements and calculates
appropriate ratios.
y To compare the calculated ratios with the ratios of the same firm relating to
the pas6t or with the industry ratios. It facilitates in assessing success or
failure of the firm.
y
Third step is to interpretation, drawing of inferences and report writingconclusions are drawn after comparison in the shape of report or
recommended courses of action.
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BASISOR STANDARDSOF COMPARISON
Ratios are relative figures reflecting the relation between variables.
They enable analyst to draw conclusions regarding financial operations. They use
of ratios as a tool of financial analysis involves the comparison with related facts.
This is the basis of ratio analysis. The basis of ratio analysis is of four types.
y Past ratios, calculated from past financial statements of the firm.
y Competitors ratio, of the some most progressive and successful competitor
firm at the same point of time.
y
Industry ratio, the industry ratios to which the firm belongs to
y Projected ratios, ratios of the future developed from the projected or pro
forma financial statements
NATURE OF RATIO ANALYSIS
Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios for
helping in making certain decisions. It is only a means of understanding of
financial strengths and weaknesses of a firm. There are a number of ratios which
can be calculated from the information given in the financial statements, but the
analyst has to select the appropriate data and calculate only a few appropriate
ratios. The following are the four steps involved in the ratio analysis.
y Selection of relevant data from the financial statements depending upon the
objective of the analysis.
y Calculation of appropriate ratios from the above data.
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y Comparison of the calculated ratios with the ratios of the same firm in the
past, or the ratios developed from projected financial statements or the ratios
of some other firms or the comparison with ratios of the industry to which
the firm belongs.
INTERPRETATIONOFTHE RATIOS
The interpretation of ratios is an important factor. The inherent
limitations of ratio analysis should be kept in mind while interpreting them. The
impact of factors such as price level changes, change in accounting policies,
window dressing etc., should also be kept in mind when attempting to interpret
ratios. The interpretation of ratios can be made in the following ways.
y Single absolute ratio
y Group of ratios
y Historical comparison
y Projected ratios
y Inter-firm comparison
GUIDELINESOR PRECAUTIONSFOR USE OF RATIOS
The calculation of ratios may not be a difficult task but their use is not
easy. Following guidelines or factors may be kept in mind while interpretingvarious ratios are
y Accuracy of financial statements
y Objective or purpose of analysis
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y Selection of ratios
y Use of standards
y Caliber of the analysis
IMPORTANCE OF RATIO ANALYSIS
Aid to measure general efficiency
Aid to measure financial solvency
Aid in forecasting and planning
Facilitate decision making
Aid in corrective action
Aid in intra-firm comparison
Act as a good communication
Evaluation of efficiency
Effective tool
LIMITATIONSOF RATIO ANALYSIS
y Differences in definitions
y Limitations of accounting records
y
Lack of proper standards
y No allowances for price level changes
y Changes in accounting procedures
y Quantitative factors are ignored
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y Limited use of single ratio
y Background is over looked
y Limited use
y Personal bias
CLASSIFICATIONSOF RATIOS
The use of ratio analysis is not confined to financial manager only.
There are different parties interested in the ratio analysis for knowing the financial
position of a firm for different purposes. Various accounting ratios can be
classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios
1.Traditional Classification
It includes the following.
y Balance sheet (or) position statement ratio: They deal with the relationship
between two balance sheet items, e.g. the ratio of current assets to current
liabilities etc., both the items must, however, pertain to the same balance
sheet.
y Profit & loss account (or) revenue statement ratios: These ratios deal with
the relationship between two profit & loss account items, e.g. the ratio of
gross profit to sales etc.,
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y Composite (or) inter statement ratios: These ratios exhibit the relation
between a profit & loss account or income statement item and a balance
sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios,
activity ratios and profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify them
as primary and secondary ratios. The primary ratio is one, which is of the prime
importance to a concern. The other ratios that support the primary ratio are called
secondary ratios.
INTHE VIEWOF FUNCTIONAL CLASSIFICATIONTHE RATIOSARE
1.Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current
obligations as & when there becomes due. The short term obligations of a firm can
be met only when there are sufficient liquid assets. The short term obligations are
met by realizing amounts from current, floating (or) circulating assets The current
assets should either be calculated liquid (or) near liquidity. They should be
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convertible into cash for paying obligations of short term nature. The sufficiency
(or) insufficiency of current assets should be assessed by comparing them with
short-term current liabilities. If current assets can pay off current liabilities, then
liquidity position will be satisfactory.
To measure the liquidity of a firm the following ratios can be
calculated
y Current ratio
y Quick (or) Acid-test (or) Liquid ratio
y
Absolute liquid ratio (or) Cash position ratio
(a) CURRENT RATIO:
Current ratio may be defined as the relationship between
current assets and current liabilities. This ratio also known as Working capital ratio
is a measure of general liquidity and is most widely used to make the analysis of a
short-term financial position (or) liquidity of a firm.
Current assets
Current ratio =
Current liabilities
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Components of current ratio
CURRENT ASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses
(b) QUICKRATIO
Quick ratio is a test of liquidity than the current ratio. The term
liquidity refers to the ability of a firm to pay its short-term obligations as & when
they become due. Quick ratio may be defined as the relationship between quick or
liquid assets and current liabilities. An asset is said to be liquid if it is converted
into cash with in a short period without loss of value.
Quick or liquid assets
Quick ratio =
Current liabilities
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Components of quick or liquid ratio
QUICKASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Sundry debtors Short-term advances
Marketable securities Sundry creditors
Temporary investments Dividend payable
Income tax payable
(c) ABSOLUTE LIQUID RATIO
Although receivable, debtors and bills receivable are generally more
liquid than inventories, yet there may be doubts regarding their realization into
cash immediately or in time. Hence, absolute liquid ratio should also be calculated
together with current ratio and quick ratio so as to exclude even receivables from
the current assets and find out the absolute liquid assets.
Absolute liquid assets
Absolute liquid ratio =
Current liabilities
Absolute liquid assets include cash in hand etc. The acceptable forms
for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are
considered to pay Rs.2 worth current liabilities in time as all the creditors are nor
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accepted to demand cash at the same time and then cash may also be realized from
debtors and inventories.
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Components of Absolute Liquid Ratio
ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Interest on Fixed Deposit Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income tax payable
2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to
meet its long term obligations. Accordingly, long term solvency ratios indicate
firms ability to meet the fixed interest and costs and repayment schedules
associated with its long term borrowings.
The following ratio serves the purpose of determining the solvency of
the concern.
y Proprietory ratio
(a) PROPRIETORY RATIO
A variant to the debt-equity ratio is the proprietory ratio which is also
known as equity ratio. This ratio establishes relationship between share holders
funds to total assets of the firm.
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Shareholders funds
Proprietory ratio =
Total assets
SHARE HOLDERS FUND TOTAL ASSETS
Share Capital Fixed Assets
Reserves & Surplus Current Assets
Cash in hand & at bank
Bills receivable
Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid Expenses
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2. DEBT- EQUITY RATIO
The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion
of shareholders' equity and debt used to finance a company's assets.Closely related
to leveraging, the ratio is also known as Risk, Gearing or Leverage. The two
components are often taken from the firm's balance sheet or statement of financial
position (so-called book value), but the ratio may also be calculated using market
values for both, if the company's debt and equity are publicly traded, or using a
combination of book value for debt and market value for equity financially.
DE RATIO = LONG TERMS DEBTS/SHAREHOLDERS FUNDS
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3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn
profits. The efficiency with which assets are managed directly effect the volume of
sales. Activity ratios measure the efficiency (or) effectiveness with which a firm
manages its resources (or) assets. These ratios are also called Turn over ratios
because they indicate the speed with which assets are converted or turned over into
sales.
y Working capital turnover ratio
y Fixed assets turnover ratio
y Capital turnover ratio
y Current assets to fixed assets ratio
(a) WORKING CAPITAL TURNOVER RATIO
Working capital of a concern is directly related to sales.
Working capital = Current assets - Current liabilities
It indicates the velocity of the utilization of net working capital. This
indicates the no. of times the working capital is turned over in the course of a year.
A higher ratio indicates efficient utilization of working capital and a lower ratio
indicates inefficient utilization.
Working capital turnover ratio=cost of goods sold/working capital.
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Components of Working Capital
CURRENT ASSETS CURRENT LIABILITIES
Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses
(b) FIXED ASSETS TURNOVER RATIO
It is also known as sales to fixed assets ratio. This ratio measures the
efficiency and profit earning capacity of the firm. Higher the ratio, greater is the
intensive utilization of fixed assets. Lower ratio means under-utilization of fixed
assets.
Cost of Sales
Fixed assets turnover ratio =
Net fixed assets
Cost of Sales = Income from Services
Net Fixed Assets = Fixed Assets - Depreciation
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(c) CAPITAL TURNOVER RATIOS
Sometimes the efficiency and effectiveness of the operations are
judged by comparing the cost of sales or sales with amount of capital invested in
the business and not with assets held in the business, though in both cases the same
result is expected. Capital invested in the business may be classified as long-term
and short-term capital or as fixed capital and working capital or Owned Capital and
Loaned Capital. All Capital Turnovers are calculated to study the uses of various
types of capital.
Cost of goods sold
Capital turnover ratio =
Capital employed
Cost of Goods Sold = Income from Services
Capital Employed = Capital + Reserves & Surplus
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(d) CURRENT ASSETS TO FIXED ASSETS RATIO
This ratio differs from industry to industry. The increase in the ratio
means that trading is slack or mechanization has been used. A decline in the ratio
means that debtors and stocks are increased too much or fixed assets are more
intensively used. If current assets increase with the corresponding increase in
profit, it will show that the business is expanding.
Current Assets
Current Assets to Fixed Assets Ratio =
Fixed Assets
Component of Current Assets to Fixed Assets Ratio
CURRENT ASSETS FIXED ASSETS
Cash in hand Machinery
Cash at bank Buildings
Bills receivable Plant
Inventories Vehicles
Work-in-progress
Marketable securities
Short-term investments
Sundry debtors
Prepaid expenses
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4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits.
Because profit is the engine, that drives the business enterprise.
y Net profit ratio
y Return on total assets
y Reserves and surplus to capital ratio
y Earnings per share
y Operating profit ratio
y Price earning ratio
y Return on investments
(a) NET PROFIT RATIO
Net profit ratio establishes a relationship between net profit (after tax)
and sales and indicates the efficiency of the management in manufacturing, selling
administrative and other activities of the firm.
Net profit after tax
Net profit ratio=
Net sales
Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax
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Net Sales = Income from Services
It also indicates the firms capacity to face adverse economic
conditions such as price competitors, low demand etc. Obviously higher the ratio,
the better is the profitability.
(b) RETURN ON TOTAL ASSETS
Profitability can be measured in terms of relationship between net
profit and assets. This ratio is also known as profit-to-assets ratio. It measures the
profitability of investments. The overall profitability can be known.
Net profit
Return on assets =
Total assets
Net Profit = Earnings before Interest and Tax
Total Assets = Fixed Assets + Current Assets
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(c) RESERVES AND SURPLUS TO CAPITAL RATIO
It reveals the policy pursued by the company with regard to growth
shares. A very high ratio indicates a conservative dividend policy and increased
ploughing back to profit. Higher the ratio better will be the position.
Reserves& surplus
Reserves & surplus to capital =
Capital
(d) EARNINGS PER SHARE
Earnings per share is a small verification of return of equity and is
calculated by dividing the net profits earned by the company and those profits after
taxes and preference dividend by total no. of equity shares.
Net profit after tax
Earnings per share =
Number of Equity shares
The Earnings per share is a good measure of profitability when
compared with EPS of similar other components (or) companies, it gives a view of
the comparative earnings of a firm.
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e) OPERATING PROFIT RATIO
Operating ratio establishes the relationship between cost of goods sold
and other operating expenses on the one hand and the sales on the other.
Operating cost
Operation ratio =
Net sales
However 75 to 85% may be considered to be a good ratio in case of a
manufacturing under taking.
Operating profit ratio is calculated by dividing operating profit by
sales.
Operating profit = Net sales - Operating cost
Operating profit
Operating profit ratio =
Sales
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(f) PRICE - EARNING RATIO
Price earning ratio is the ratio between market price per equity share
and earnings per share. The ratio is calculated to make an estimate of appreciation
in the value of a share of a company and is widely used by investors to decide
whether (or) not to buy shares in a particular company.
Generally, higher the price-earning ratio, the better it is. If the price
earning ratio falls, the management should look into the causes that have resulted
into the fall of the ratio.
Market Price per Share
Price Earning Ratio =
Earnings per Share
Capital + Reserves & Surplus
Market Price per Share =
Number of Equity Shares
Earnings before Interest and Tax
Earnings per Share =
Number of Equity Shares
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(g) RETURN ON INVESTMENTS
Return on share holders investment, popularly known as Return on
investments (or) return on share holders or proprietors funds is the relationship
between net profit (after interest and tax) and the proprietors funds.
Net profit (after interest and tax)
Return on shareholders investment =
Shareholders funds
The ratio is generally calculated as percentages by multiplying the
above with 100.
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CHAPTER-3
DATAANALYSISANDINTERPRETATION
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I. LIQUIDITY RATIOS
1. Current Ratio = Current Assets/ Current Liabilities.
For IOC
FOR HPCL
Current Ratio of IOC
Year CurrentAssets CurrentLiabilities Ratio
2006 38423.26 27890.47 1.37
2007 39060.38 29709.08 1.31
2008 52931.30 34580.98 1.53
2009 44535.19 35358.04 1.25
2010 59,388.80 44,751.73 1.32
Current Ratio of HPCL
Year CurrentAssets CurrentLiabilities Ratio
2006 11,009.98 7,954.89 1.38
2007 11464.70 10119.49 1.13
2008 19297.37 12433.69 1.55
2009 15992.69 11755.81 1.36
2010 20,641.94 16,555.11 1.24
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Current ratio of BPCL
Current Ratio of BPCL
Year CurrentAssets CurrentLiabilities Ratio
2006 13,528.98 10,978.85 1.23
2007 14841.40 12957.44 1.14
2008 20971.33 16365.51 1.28
2009 17275.18 14694.12 1.17
2010 24,883.94 17,990.45 1.38
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GRAPHICAL PRESENTATION
INTERPRETATION
The current ratio with 2:1 (or) more is considered as satisfactory position of the firm.When
compared, IOC and HPCL have almost similar ratio although the five years with small changes.
But the current ratio of all three companies is not seemed satisfactory.
In IOC, Inventories and Loans & Advances are higher in 2008 than that in 2007 & 2009. The
sundry debtors have increased due to the increase to corporate taxes. And provisions is also very
less in 2008 which makes its liabilities lesser than 2007&09. In 2010, the current assets increase
due to increase in inventories and loans & advances, which again increases current ratio.
In HPCL and BPCL ,the current ratio follows the same pattern as of IOC. It increased in 2008
and then decrease again in 2009. It is due to rise in inventories and loans & advances in 2008 in
both companies. In case of BPCL, the current assets are increasing more than liabilities and
hence, the current ratio increases.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
IOC HPCL BPCL
2006
2007
2008
2009
2010
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2. QUICK RATIO = QUICK ASSETS/CURRENT LIABILITIES
FOR IOC
FOR HPCL
Quick Ratio of IOC
Year Quick Assets CurrentLiabilities Ratio
2006 14286.17 27890.47 .51
2007 14357.69 29709.08 .48
2008 21989.82 34580.98 .63
2009 19385.59 35358.04 .54
2010 22984.72 44,751.73 .51
Quick Ratio of HPCL
Year Quick Assets CurrentLiabilities Ratio
2006 3199.69 7,954.89 .40
2007 3366.3 10119.49 .33
2008 7277.09 12433.69 .58
2009 7199.45 11755.81 .61
2010 8062.72 16,555.11 .49
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FOR BPCL
Quick Ratio of BPCL
Year Quick Assets CurrentLiabilities Ratio
2006 6904.58 10,978.85 .62
2007 8872.32 12957.44 .68
2008 9001.03 16365.51 .55
2009 7200.11 14694.12 .49
2010 10265.73 17,990.45 .57
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GRAPHICAL PRESENTATION
INTERPRETATION
Quickassets are those assets which can be converted into cash with in a short period of
time, say to sixmonths. So, here the inventories which are with the long period does not
include in the quickassets.
In IOC, the ratio is increasing in 2008 and then again decreasing in nextconsequent years.
Itis due to increase of the sundry debtors and loans and advances in year 2008 and these
are decreasing in 2009 & 2010. Because of this ratio is showing such pattern.
In HPCL, the ratio is less in 2007, itkeeps on increasing till 2009 and decreases in 2010,
but very less incrementis there in year 2009. There is decrease in the liabilities, but the
quickassets increase very little thatkeeps the ratio high in 2009.
In BPCL, due to increase ofcurrent liabilities in 2007, the ratio decreases in that year. It
firstincreases and then decreases due to the fluctuation in the quickassets which are
effected by sundry debtors.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
IOC HPCL BPCL
2006
2007
2008
2009
2010
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3. ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID
ASSETS/CURRENT LIABILITIES
FOR IOC
FOR HPCL
Absolute Liquid Ratio of IOC
Year Absolute Liquid Assets CurrentLiabilities Ratio
2006 962.23 27890.47 .03
2007 925.97 29709.08 .03
2008 824.43 34580.98 .02
2009 798.02 35358.04 .02
2010 1,315.11 44,751.73 .03
Absolute Liquid Ratio of HPCL
Year Absolute Liquid Assets CurrentLiabilities Ratio
2006 85.66 7,954.89 .02
2007 86.79 10119.49 .008
2008 294.01 12433.69 .02
2009 608.31 11755.81 .05
2010 243.17 16,555.11 .01
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FOR BPCL
Absolute Liquid Ratio of BPCL
Year Absolute Liquid Assets CurrentLiabilities Ratio
2006 244.87 10,978.85 .02
2007 259.15 12957.44 .02
2008 490.96 16365.51 .03
2009 293.88 14694.12 .02
2010 424.65 17,990.45 .02
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GRAPHICAL PRESENTATION
INTERPRETATION
The current assets which are ready in the form of cash are considered as absolute liquid assets.
Here, the cash and bank balance and the interest on fixed assets are absolute liquid assets.
In IOC, the absolute liquid ratio in the year 2008 & 2009, the cash and bank balance is decreased
due to decrease in the deposits. This decreases the ratio. In 2010, again the liquidity increases
due to availability of cash in hand.
In HPCL, there is continuous increase in the ratio and there is a huge increase in the cash and
bank balances and also the current liabilities decrease which shoots up its absolute liquid ratio in
2009. This increases its current liquidity. In 2010 the liability increases and the cash decreases.
And in BPCL, the ratio increases in year 2008 and then decreases due to the fluctuation in the
absolute assets i.e, cash and bank balance.
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
0.05
IOC HPCL BPCL
2006
2007
2008
2009
2010
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II. LEVERAGE RATIOS
1. PROPRIETORY RATIO = Shareholders fund/Total Assets
FOR IOC
FOR HPCL
Proprietory Ratio of IOC
Year Shareholders fund TotalAssets Ratio
2006 29302.67 467474.79 .62
2007 34857.29 52996.41 ..65
2008 43619.52 72577.32 .60
2009 43998.18 67329.51 .65
2010 50,552.93 122238.5 .41
Proprietory Ratio of HPCL
Year Shareholders fund TotalAssets Ratio
2006 8735.74 18427.18 .47
2007 9598.65 22919.7 .42
2008 10563.29 29319.64 .36
2009 10730.63 28479.43 .65
2010 11,557.97 36029.167 .32
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FOR BPCL
Proprietory Ratio of BPCL
Year Shareholders fund TotalAssets Ratio
2006 9077.88 30905.82 .29
2007 10273.54 34298.98 .30
2008 11676.84 42472.26 .27
2009 12128.11 39797.51 .30
2010 13086.71 50296.46 .26
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GRAPHICAL PRESENTATION
INTERPRETATION
The proprietary ratio establishes the relationship between shareholders funds to
total assets. It determines the long-term solvency of the firm. This ratio indicates
the extent to which the assets of the company can be lost without affecting the
interest of the company.
In IOC, HPCL & BPCL, the proprietary ratio follows the same pattern. It first
decreases in year 2008 and then increase again in year 2009.
The share holders funds include capital and reserves and surplus. The reserves
and surplus is increased due to the increase in balance in profit and loss account,
which is caused by the increase of income from services.
Total assets, includes fixed and current assets. And the cost of current assets in
2008 is very high and the fixed assets are almost same which affected the
proprietary ratio.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
IOC HPCL BPCL
2006
2007
2008
2009
2010
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2. DEBT-EQUITY RATIO = DEBT(long-term loans)/EQUITY
FOR IOC
FOR HPCL
Debt-Equity Ratio of IOC
Year Debt Equity Ratio
2006 26404.31 29302.67 .90
2007 27082.69 34857.29 .78
2008 35523.17 41086.25 .87
2009 44972.06 43998.18 1.02
2010 44,566.25 50,552.93 .88
Debt-Equity Ratio of HPCL
Year Debt Equity Ratio
2006 6663.83 8735.74 .77
2007 10517.53 9598.65 1.096
2008 16786.70 10563.29 1.589
2009 22755.17 10730.63 2.120
2010 21,302.37 11,557.97 1.84
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FOR BPCL
Debt-Equity Ratio of BPCL
Year
Debt Equity Ratio
2006 8373.6 9077.88 .92
2007 21102.78 10273.54 2.05
2008 26699.22 11676.84 2.29
2009 21102.78 10273.54 2.05
2010 22195.2 13086.71 1.69
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GRAPHICAL REPRESENTATION
INTERPRETATION
The debt- equity ratio compares the total debts with the total assets. Higher liabilities imply
greater financial risk. It measures the degree of indebtedness of the firm out of the total financing
of the firm.
IOC has the low DE Ratio. It implies a low risk to lenders and creditors of the firm and also non-
existence of trading on equity. Its Debt as well as equity is increasing every year which increases
its ratio. But in 2010, the debt portion decreases.
In HPCL, the ratio is increasing year after year as the company is incorporating more debt from
outside. But the debt decreases to much extent in 2010 same as IOC.
BPCL has high DE Ratio. There is huge increase in debt in year 2008 which increases its ratio
and the debt decreases again in 2009 and 2010 and so as the debt-equity ratio.
0
0.5
1
1.5
2
2.5
IOC HPCL BPCL
2006
2007
2008
2009
2010
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III.THE ACTIVITY RATIOS
1. WORKING CAPITAL TURNOVER RATIO
= Net Sales/working capital
y Working capital = Current Assets Current Liabilities.
FOR IOC
FOR HPCL
Working Capital Turnover Ratio of IOC
Year NetSales Working Capital Ratio
2006 1,67,085.86 6,484.63 25.76
2007 199396.17 9351.30 20.66
2008 224428.14 18350.32 12.23
2009 262654.42 9177.15 28.62
2010 2,56,912.75 9,881.06 26.00
Working Capital Turnover Ratio of HPCL
Year NetSales Working Capital Ratio
2006 70,615.68 1,670.65 42.26
2007 83571.14 1345.21 62.10
2008 96442.92 6863.68 14.05
2009 109377.60 4236.88 25.81
2010 101,347.51 4,086.83 24.8
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FOR BPCL
Working Capital Turnover Ratio of BPCL
Year NetSales Working Capital Ratio
2006 74,432.14 2,550.13 29.19
2007 92839.06 1883.97 49.28
2008 107057.16 4605.83 23.24
2009 129532.80 2581.06 50.18
2010 1,17,782.48 6,893.49 17.10
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GRAPHICAL REPRESENTATION
INTERPRETATION
In this graph it is clearly shown that the working capital turnover ratio of all the three companies
is least in the year 2008. A high WCT Ratio reflects the better utilization of the working capitalof the company. The working capital is also increased greater due to the increase in from
services because the huge increase in current assets.
In IOC, there is high net sales but the working capital is very high which keeps the ratio low.
In HPCL, the working capital is very less in 2007 which increases the ratio, but the working
capital increases in the next years.
In BPCL, the net sales is increasing every year. But there is huge increase in the working capital
in 2008 which lower down the ratio. But again it increases in 2009.
0
10
20
30
40
50
60
70
IOC HPCL BPCL
2006
2007
2008
2009
2010
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2. FIXED ASSETS TURNOVER RATIO
= Cost of sales/Net fixed assets
y Cost of Sales = Income from Services
y Net Fixed Assets = Fixed Assets Depretiation
FOR IOC
FOR HPCL
Fixed Assets Turnover Ratio of IOC
Year NetSales Net FixedAssets Ratio
2006 1,67,085.86 22821.96 7.32
2007 199396.17 30584.62 6.52
2008 224428.14 29882.93 7.51
2009 262654.42 31570.47 8.32
2010 2,56,912.75 38353.9 6.70
Fixed Assets Turnover Ratio of HPCL
Year NetSales Net FixedAssets Ratio
200670,615.68
6648.43 10.6
2007 83571.14 12360.40 6.76
2008 96442.92 14394.41 6.70
2009 109377.60 15674.53 6.98
2010 101,347.51 14056.15 7.21
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FOR BPCL
Fixed Assets Turnover Ratio of BPCL
Year NetSales Net FixedAssets Ratio
2006 74,432.14 9149.37 8.13
2007 92839.06 10076.93 9.12
2008 107057.16 10870.46 9.85
2009 129532.80 10890.26 11.89
2010 1,17,782.48 12427.03 9.48
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GRAPHICAL REPRESENTATION
INTERPRETATION
This ratio shows the firms ability in generating sales from all financial resources
committed to total assets. The ratio indicates the account of one rupee investment
in fixed assets.
The ratio of BPCL is bit higher than that of two as the net fixed assets are higher
in BPCL which raise its fixed assets ratio over others.
And in all the companies the fixed assets turnover ratio is increasing for three
years.
The income from services is greatly increased in the current years due to the
increase in the Operations & Maintenance fee due to the increase in extra invoice
and the net fixed assets are reduced because of the increased charge of
depreciation. Finally, that effected a huge increase in the ratio compared with the
previous three years ratio.
0
2
4
6
8
10
12
IOC HPCL BPCL
2006
2007
2008
2009
2010
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3. CAPITAL TURNOVER RATIO
= Cost of Goods Sold/Capital Employed
Cost of Goods Sold = Income from Services
Capital Employed = Capital + Reserves and Surplus
FOR IOC
FOR HPCL
Capital Turnover Ratio of IOC
Year Cost of Goods Sold Capital Employed Ratio
2006 1,67,085.86 29302.67 5.70
2007 199396.17 34857.29 5.72
2008 224428.14 41086.25 5.46
2009 262654.42 43998.18 5.97
2010 2,56,912.75 50,552.93 5.08
Capital Turnover Ratio of HPCL
Year Cost of Goods Sold Capital Employed Ratio
200670,615.68 8396.8 8.40
2007 83571.14 9598.65 8.70
2008 96442.92 10563.29 9.13
2009 109377.60 10730.63 10.19
2010 101,347.51 11,557.97 8.67
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FOR BPCL
Capital Turnover Ratio of BPCL
Year Cost of Goods
Sold Capital Employed Ratio
2006 74,432.14 9077.88 8.19
2007 92839.06 10273.54 9.04
2008 107057.16 11676.84 9.17
2009 129532.80 12128.11 10.68
2010 1,17,782.48 13086.71 9.00
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GRAPHICAL REPRESENTATION
INTERPRETATION
This is another ratio to judge the efficiency and effectiveness of the company likeprofitability ratio.
IOC is having lesser capital turnover ratio than rest two oil companies. And that of
HPCL and BPCL is almost same increasing over four years and then decreases in
recent year. The cost of goods of IOC is higher, but its capital reserves are far
greater because of high general reserves which lessen its capital turnover ratio.
The income from services is greatly increased compared with the previous year
and the total capital employed includes capital and reserves & surplus. Higher ratio
shows that the greater sales are being made per rupee of Capital Employed in the
firm and there is higher profit.
0
2
4
6
8
10
12
IOC HPCL BPCL
2006
2007
2008
2009
2010
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4. CURRENT ASSETS TO FIXED ASSETS RATIO
= Current Assets/Fixed Assets
FOR IOC
FOR HPCL
Current Assets to Fixed Assets Ratio of IOC
Year CurrentAssets FixedAssets Ratio
2006 38423.26 25,023.42 1.53
2007 39060.38 33141.41 1.18
2008 52931.30 32558.56 1.63
2009 44535.19 34392.45 1.29
2010 59,388.80 41,132.99 1.44
Current Assets to Fixed Assets Ratio of HPCL
Year CurrentAssets FixedAssets Ratio
2006 11,009.98 7,337.40 1.5
2007 11464.70 8,820.84 1.29
2008 19297.37 11,929.28 1.61
2009 15992.69 11,654.55 1.37
2010 20,641.94 19,194.26 1.07
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FOR BPCL
Current Assets to Fixed Assets Ratio of BPCL
Year CurrentAssetss FixedAssets Ratio
2006 13,528.98
9,917.37
1.36
2007 14841.4010,981.04
1.35
2008 20971.3311,968.67
1.75
2009 17275.1811,965.79
1.44
2010 24,883.9413,669.35
1.82
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GRAPHICAL REPRESENTATION
INTERPRETATION
The graph shows that IOC is having good current assets to fixed assets ratio. its
having current assets as well as fixed assets higher than that of two companies dueto which its ratio has increased.
And in all the companies, the ratio is the highest. Current assets are increased due
to the increase in the sundry debtors and loans & advances, and the net fixed assets
of the firm are decreased due to the fall in proposed division and corporate
dividend tax and there is no major increment in the fixed assets.
The increment in current assets and the decrease in fixed assets resulted an increase
in the ratio of 2008 compared with the previous year
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
IOC HPCL BPCL
2006
2007
2008
2009
2010
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IV. PROFITABILITY RATIOS
1. NET PROFIT RATIO
= Net profit after tax/Net sales
y
Net profit after tax = Net profit(-) Depreciation(-) Interest(-)y Income tax.
y Net sales = Income from services
FOR IOC
FOR HPCL
Net Profit Ratio of IOC
Year Net profit after tax Net sales Ratio
2006 4,238.43 1,67,085.86 .026
2007 5,449.42 199396.17 .027
2008 6,078.13 224428.14 .027
2009 7,648.90 262654.42 .029
2010 10,304.14 2,56,912.75 .040
Net Profit Ratio of HPCL
Year Net profit after tax Net sales Ratio
2006 164.0570,615.68 .0023
2007 1571.17 83571.14 .019
2008 1134.88 96442.92 .012
2009 574.98 109377.60 .005
2010 1,301.37 101,347.51 .013
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FOR BPCL
Net Profit Ratio of BPCL
Year Net profit after tax Net sales Ratio
2006 430.79 74,432.14 .0058
2007 2,149.62 92839.06 .023
2008 1,353.26 107057.16 .013
2009 2,528.77 129532.80 .019
2010 1,597.73 1,17,782.48 .013
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GRAPHICAL REPRESENTATION
INTERPRRETATION
The net profit ratio is the overall measure of the firms ability to turn each rupee ofincome
from services in net profit. If the netmargin is inadequate the firm will fail to achieve
return on shareholders funds. High net profit ratio will help the firm service in the fall of
income from services, rise in cost of production or declining demand.
The net profit of IOC is the highest among the three oil companies because the income from
services is more to much extent. And in the nextconsequent year the ratio is increasing as
the income from services decreases than the last year i.e., 2010.
In HPCL net profit ratio is very less in 2006 as the net of t profit of the company is very low & it
fluctuates in the following years. In BPCL the net profit after tax is increasing and decreasing
after every alternate year due to corporate taxes, which makes the ratio fluctuating every year.
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
IOC HPCL BPCL
2006
2007
2008
20009
2010
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2.RESERVES AND SURPLUS TO CAPITAL RATIO
= Reserves& Surplus/Capital
FOR IOC
FOR HPCL
Reserves and surplus to capital ratio of IOC
Year Reserves andSurplus Capital Ratio
2006
8,777.8817,513.02
.50
2007
9,912.00 21,102.78.47
200811,315.30 26,699.22
.42
2009
11,766.57 33,299.52
.35
2010
12,725.17 35,281.91.36
Reserves and surplus to capital ratio of HPCL
Year Reserves andSurplus Capital Ratio
2006 8,396.80 15,399.57 .54
2007 9,259.70 20,116.18 .46
2008 10,224.28 27,349.99 .37
2009 10,391.62 33,485.80 .31
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2010 11,218.96 32,860.34 .34
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FOR BPCL
Reserves and surplus to capital ratio of BPCL
Year Reserves and
Surplus Capital Ratio
2006
8,777.88 17,513.02
.50
2007 991221,102.78
.47
2008 11315.3026,699.22
.42
2009 11766.57 33,299.52 .35
2010
12,725.17 35,281.91.36
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GRAPHICAL REPRESENTATION
INTERPRETATION
The ratio is used to reveal the policy pursued by the company a very
high ratio indicates a conservative dividend policy and vice-versa. Higher the ratiobetter will be the position.
This ratio is showing almost the same pattern for the five years in all
three companies. Its decreasing continuously because the capital of the
companies is increasing at faster rate than the reserves and surplus. And the
capital decreases in the recent year due to reduction in unsecured loans and
payment of the dividends.
0
0.1
0.2
0.3
0.4
0.5
0.6
IOC HPCL BPCL
2006
2007
2008
2009
2010
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3. EARNINGS PER SHARE
= Net profit after tax/No of Equity Share
FOR IOC
FOR HPCL
Earning per share of IOC
Year Net Profit No. of equity shares Ratio
2006 4,238.43 116.79 36.29
2007 5,449.42 119.24 46.66
2008 6,078.13 119.24 50.98
2009 7,648.90 119.65 64.15
2010 10,304.14 242.79 42.44
Earning per share of HPCL
Year Net Profit No of equity shares Ratio
2006 164.05 33.96 4.83
2007 1571.17 45.53 34.51
2008 1134.88 72.15 15.65
2009 574.98 23.84 24.12
2010 1,301.37 32.52 40.02
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FOR BPCL
Earning per share of BPCL
Year
Net sales
No. of equity s
hares Ratio
2006 430.79 30 14.36
2007 2,149.62 36.15 59.46
2008 1,353.26 36.15 37.43
2009 2,528.77 36.15 69.94
2010 1,597.73 36.15 44.19
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GRAPHICAL REPRESENTATION
INTERPRETATION
Earnings per share ratio are used to find out the return that the shareholders earn from their
shares. After charging depreciation and after payment of tax, the remaining amount will be
distributed by all the shareholders.
EPS of IOC is aapreciable and it has been increasing continuously every year as the net sales of
the company is increasing and the number of shares is same. But in 2010 it decreased due to
increase in the number of shares.
In HPCL, both the net sale and the number of shares are fluctuating every year, due to which the
EPS is fluctuating & in BPCL there is not much fluctuation in no. of shares, but net profit after
tax is changing every year which is fluctuating their earning per share ratio.
Net profit after tax is decreased due to the huge decrease in the income e from services. That is
the amount which is available to the shareholders to take.
0
10
20
30
40
50
60
70
IOC HPCL BPCL
2006
2007
2008
2009
2010
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4. OPERATING PROFIT RATIO
= Operating Profit/Net Sales
Operating Profit = Net Sales Operating cost
FOR IOC
FOR HPCL
Operating-Profit Ratio of IOC
Year Operating Profit NetSales Ratio
2006 7,809.26 1,67,085.86 .05
2007 10762.18 199396.17 .05
2008 11295.90 224428.14 .05
2009 13,524.35 262654.42 .05
2010 12453.59 2,56,912.75 .048
Operating-Profit Ratio of HPCL
Year Operating Profit NetSales Ratio
2006 814.9470,615.68 .01
2007 2,518.74 83571.14 .03
2008 1,846.68 96442.92 .02
2009 3,291.02 109377.60 .03
2010 2,543.18 101,347.51 .02
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FOR BPCL
Operating-Profit Ratio of BPCL
Year Operating Profit NetSales Ratio
2006 1,101.16 74,432.14 .015
2007 3,717.79 92839.06 .04
2008 3,150.97 107057.16 .03
2009 4,540.63 129532.80 .03
2010 2,434.51 1,17,782.48 .02
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GRAPHICAL REPRESENTATION
INTERPRETATION
The operating profit ratio is used to measure the relationship between net profits and sales of a
firm. Depending on the concept, it will decide.
The operating profit ratio of IOC is higher than that of two companies because of high operating
profit of the company. There is more purchases of raw material. It has been almost at the same
level for all the year.
In HPCL & BPCL it is pretty low and is fluctuating every year. And in the recent year the
operating profits reduced to low value which decreases the ratio.
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
0.05
IOC HPCL BPCL
2006
2007
2008
2009
2010
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5. PRICE-EARNING RATIO = Market Price Per Share/No. of Equity
Share
y Market Price Per Share = (Capital + Reserves & Surplus)/
No. of Equity Shares
y EPS = Earning Before Interest& Tax/No. of Equity Share
FOR IOC
FOR HPCL
Price Earning Ratio of IOC
Year Market price per share EPS Ratio
2006 250.90 36.29 6.91
2007 292.93 46.66 6.28
2008 344.57 50.98 6.76
2009 362.2 64.15 5.65
2010 208.22 42.44 4.91
Price Earning Ratio of HPCL
Year Market price per share EPS Ratio
2006 246.46 4.83 51.02
2007 210.82 34.51 6.10
2008 146.41 15.65 9.35
2009 450.11 24.12 18.66
2010 356.03 40.02 8.89
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FOR BPCL
Price Earning Ratio of BPCL
Year Market price per share EPS Ratio
2006 302.60 14.36 21.07
2007 284.19 59.46 4.76
2008 322.92 37.43 8.63
2009 335.49 69.94 4.80
2010 362.01 44.19 8.19
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GRAPHICALREPRESENTATION
INTERPRETATION
The ratio is calculated to make an estimate of application in the value of share of a company. The
investors expectations are reflected in the market price of the shares
The graph shows that price-earning ratio of IOC is decreasing from 2006 to 2010 due to increase
in the market price of the share and EPS is decreasing.
In HPCL the EPS in 2006 is very low which is shooting up its price earning ratio upto 50. In
year 2009 also, it increased at rapid. Its because of decrease in EPS due to less earnings after tax.
But BPCLs ratio shows the different pattern because its EPS has increased as the net sales of the
company increased. In 2006, EPS is very low due to which PER is high. And then every next
year the ratio is fluctuating due to fluctuation in the EPS.
0
10
20
30
40
50
60
IOC HPCL BPCL
2006
2007
2008
2009
2010
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CHAPTER- 4
FINDINGS&
CONCLUSION.
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FINDINGS OF THE STUDY
y The Current Ratio of IOC is higher in each of the three years. And the
companies are having the highest ratio in year 2008 due to moreacquisition of current assets in that year.
y Quick asset ratio is highly affected by the sundry debtors. HPCL is more
capable over others in the current year to convert its assets quickly into
cash and is more efficient to meet its short-term liabilities.
y The absolute liquidity ratio analysis shows that HPCL is having strong
position of holding ready cash in the current year. IOC & BPCL are more or
less have the same capability of absolute liquidity.
y The proprietary ratio in three years shows that IOC is more capable in long-term solvency. It has more shareholders capital as well as total assets. And
all of the three companies are having lowest ratio in year 2008 because of
rise in the current and fixed assets.
y The Debt-Equity ratio of IOC is low as the company is more dependent on
shareholders rather than borrowing from outside. BPCLs DE Ratio is high
and hence having high degree of financial leverage.
y The working capital turnover ratio of IOC Is the least as its current assets
are high. The ratio of BPCL is appreciable. It means there is high
profitability in the company.
y IOC has high fixed assets turnover ratio. It means the company is utilizing its
fixed assets efficiently.
y Both HPCL as well as BPCL have high capital turnover ratio. It means the
sales made per rupee of Capital Employed in the firms is greater and hence
higher is the profit. Whereas in IOC there is low sales in relation to
excessive capital is being used.
y The analysis of current assets to fixed assets depicts that the IOC has the
higher ratio. IOC has current as well as fixed ratio in large quantity which
provides the company to make more profits by utilizing them.
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y The net profit ratio of IOC shows that the company is efficient in
manufacturing, administrative, selling and distributing the product. And
there is high increase in corporate taxes every year.
y BPCL has the high return on assets. It means that high profit is earned by
the firm per rupee of assets used.
y The reserves & surplus and the capital employed in the companies are not
same and not changing over the years.
y EPS of companies is fluctuating every year due change in net sales. ROE of
IOC is constant for two years with still greater amount of PAT indicating an
increasing EPS.
y The Price Earning ratio of IOC & HPCL is high, indicating that the share has
low risk and investor expect high dividend growth.
y The shareholders of BPCL are getting high returns on their funds in the
company.
FINDINGS OF THE STUDY
y The Current Ratio of all three companies is not appreciable and not
satisfactory because of high current liabilities due to short term borrowings
from the government. The current ratio of the three companies is more or
less following the same pattern. And the companies are having the highest
ratio in year 2008 due to more acquisition of current assets in that year.
y Quick asset ratio is highly affected by the sundry debtors. IOC is slightly
more capable over others in the current year to convert its assets quickly
into cash and is more efficient to meet its short-term liabilities.
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y The absolute liquidity ratio analysis shows that HPCL is having strong
position of holding ready cash in the current year. IOC & BPCL are more or
less have the same capability of absolute liquidity.
y The proprietary ratio in three years shows that IOC is more capable in long-
term solvency. It has more shareholders capital as well as total assets. And
all of the three companies are having lowest ratio in year 2008 because of
rise in the current and fixed assets.
y The Debt-Equity ratio of IOC is low as the company is more dependent on
shareholders rather than borrowing from outside. BPCLs DE Ratio is high
and hence having high degree of financial leverage.
y The working capital turnover ratio of IOC Is the least as its current assets
are high. The ratio of BPCL is appreciable. It means there is highprofitability in the company.
y IOC has high fixed assets turnover ratio. It means the company is utilizing its
fixed assets efficiently.
y Both HPCL as well as BPCL have high capital turnover ratio. It means the
sales made per rupee of Capital Employed in the firms is greater and hence
higher is the profit. Whereas in IOC there is low sales in relation to
excessive capital is being used.
y The analysis of current assets to fixed assets depicts that the IOC has thehigher ratio. IOC has current as well as fixed ratio in large quantity which
provides the company to make more profits by utilizing them.
y The net profit ratio of IOC shows that the company is efficient in
manufacturing, administrative, selling and distributing the product. And
there is high increase in corporate taxes every year.
y BPCL has the high return on assets. It means that high profit is earned by
the firm per rupee of assets used.
y The reserves & surplus and the capital employed in the companies are not
same and not changing over the years.
y EPS of companies is fluctuating every year due change in net sales. ROE of
IOC is constant for two years with still greater amount of PAT indicating an
increasing EPS.
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y The Price Earning ratio of IOC & HPCL is high, indicating that the share has
low risk and investor expect high dividend growth.
y The shareholders of BPCL are getting high returns on their funds in the
company.
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CONCLUSION
y The short term solvency of IOC & HPCL is fine but that of BPCL is quite
low. But no company is touching the general standard of 2:1 of current ratio.
The quick ratio of firms are not good enough far away from the normalstandard of 1:1.
So all the Liquidity Ratios indicate not good enough short term
solvency/liquidity position of the firm.
y All the Leverage Ratio depict that none of the company has a sound
financial position. These are more in debt. But IOC position is better than
that of the two in terms of leverage. The shareholders funds are satisfactory.
The firms are paying high interest on the outstanding debts which makes
unfavorable trading on equity due to high debt, which increases risk forshareholders.
y As far as the Activity and Turnover ratios are concerned, nothing concrete
can be said as the results of three companies are very fluctuating every year
in term of sales.
y In the year 2008 all three companies are showing good results and the
turnover is satisfactory. But it decrease in 2009 due to decrease in working
capital, the fixed assets of the companies which affected their sales. And
IOC is very strong in acquisition of the fixed assets as well as current assets.y On the basis of various profitability ratios the sales of the firms is found to
be decreasing in the last year. But BPCL has managed well to maintain its
net profit. The share value of HPCL is better.
y This analysis shows that the companies were in strong position in year 2008,
but the recession in 2009 has highly affected the companies growth and their
profit came down and they are more in debts.
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