Escolar Documentos
Profissional Documentos
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RATIO ANALYSIS
SUBMITTED BY
UPPADA VAMSEE
EMPLOYEE No. 124108
CONTROLLING OFFICER
Shri. S GANESAN
AGM (F&A) Corporate Accounts
Visakhapatnam Steel Plant
CONTENTS
CHAPTER
I
Introduction
CHAPTER
II
Theoretical frame work
CHAPTER
III
Data Analysis &Interpretation
CHAPTER
IV
Summary
Suggestions
Conclusion
CHAPTER-I
(INTRODUCTION)
COMPANY PROFILE
the importance of steel the following integrated steel plant with foreign collaborations was
constructed in the public sector in the post independence era.
ORGANIZATION CHART
Director
(Finance)
GM
(Finance)
Company
Secretary
AGM
(Int.
Audit)
Director
(Commercial)
ED (MM)
Addl. GM
(Mktg)
Addl. GM
(Mktg)
- Services
& Exports
Director
(Personnel)
DGM
(M&HS) I/C
GM
(Works)
Director
(Operations)
ED
(Maint.)
GM (P&A)
Addl. GM
(QATD)
Addl. GM
(P&IR)
DGM (Trg)
Addl. GM
(Audio &
Telco)
DGM (HRD)
DGM (Legal
Affairs)
Addl. GM
(Services)
Addl. GM
(Steel)
Addl. GM
(C, S & C)
GM
(Maint.)
Addl. GM
(CR&RM)
DGM
(System)
GM
(D&E)&
I/C PECS
VISION:
VISION 2025
To be the most efficient steel maker having the largest
single location shore based steel plant in the country
Core Values:
Initiative:
Decisiveness:
Ethics:
Accountability:
Leadership:
Lead by example
Speed:
everything we do.
OBJECTIVES:
Plan for finishing mill to integrate with 7.3 Mt capacity and commission the same by
2017-18.
Capture markets for high-end value added products by focusing on sector specific
applications and customer needs.
Create a high performance and safe work culture by nurturing talent and developing
leaders.
CHAPTER-II
(THEORETICAL FRAME WORK)
DEFINITION:
The relation of one amount, a to another b, expressed as the ratio of a to b
KHOLER
Ratio is the relationship or proportion that one amount bears to another the first
number being the numerator and the later denominator.
H.G.GUTHMANN
CLASSIFICATION OF RATIOS:
Classification from the point of view of financial management or objective
Liquidity ratios.
Turnover ratios.
Profitability ratios.
Solvency ratios
1. LIQUIDITY RATIO: (Short term solvency)
Liquidity means ability of a firm to meet its current obligations. The liquidity
ratios, therefore, try to establish a relationship between current liabilities, which are
the obligations soon becoming due and current assets, which presumably provide the
source from which these obligations will be meet. In other words the liquidity ratios
answer the questions : will the company probably be able to meet its obligation
when they become due? The following ratios are commonly used to indicate the
liquidity of business.
I.
Current ratio.
Quick ratio.
Absolute liquid ratio.
CURRENT RATIO:
10
This ratio is most commonly used to perform the short-term financial analysis.
Also known as the working capital ratio, this ratio matches the current assets of the
firm to its current liabilities.
Formula:
Current asset
Current ratio = _______________
Current liabilities
II.
QUICK RATIO:
This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of
liquidity of a company. It shows the ability of a business to meet its immediate financial
commitments. It is used to supplement the information given by the current ratio.
Formula:
Quick assets
Quick ratio = _____________________
Quick liabilities
11
to meet its short term liabilities out of its short term assets. This ratio is of great importance
for banks and financial institutions.
Generally a quick k ratio of 1 : 1 is considered to represent a satisfactory
current financial position. In the illustration 14 .2 above, the quick ratio of 0.47: 1 is not all
satisfactory because it is less than 1 : 1. On account of such a low ratio the business may gind
itself in serious financial difficulties.
2. TURNOVER RATIO:
Turnover ratios are used to indicate the efficiency with which assets
and resources of
the firm are being utilized. These ratios are known as turnover
ratios because they indicate the speed with which assets are being converted or
turned over into sales. These ratios thus express the relationship between sales and
various assets. A higher turnover ratio generally indicates better use of capital
resources which in turn has a favorable effect on the profitability of the firm.
turnover ratio is considered better into indicated that more sales are being produced
by each rupee of investment in stock but a higher stock turnover ratio may not always
be an indicator of a favorable results. It may be the result of a very low level of stock
whis meeting customers demands and the company cannot earn maximum profits.
Thus too high and too low inventory turnover ratio may not be good and
should be investigated further a company should have a proper inventory turnover
ratio so that it is able to earn a reasonable margin of profit.
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capital whereas stock better than Stock Turnover Ratio because it shows the utilization of
the inventories which is only a part of working capital.
CAPITAL TURNOVER RATIO:
This ratio shows the relationship between cost of sales (or sales) and the total capital
employed.
Formula;
Cost of Sales (or sales)
Capital Turnover Ratio=
Total Capital Employed
14
CHAPTER III
(DATA ANALYSIS AND INTERPRETATION)
15
CURRENT
CURRENT
ASSETS
LIABILITIES
RATIOS
2010-2011
5660.17
3271.43
1.73
2011-2012
8492.11
7221.61
1.17
2012-2013
9977.75
10184.67
0.98
2013-2014
8400.66
10211.56
0.82
2014-2015
9637.46
15059.38
0.64
CHART PREPARATION
CURRENT RATIOS
2
1.5
RATIOS
1
0.5
0
2010-2011
2011-2012
2012-2013
16
2013-2014
2014-2015
INTERPRETATION:
It has been observed that the quick ratio of VSP is high compared with ideal ratio
till 2010-2011. But it is below ideal ratio for the year 2011-2012 onwards.
As the quick ratio during the period of study is higher than that of the ideal ratio
till 2011--2012, the liquidity position was very good but it is not satisfactory from
the year 2012-2013.
CURRENT
CURRENT
ASSETS
1998.89
2068.34
1625.02
175.89
63.94
LIABILITIES
3271.43
7221.61
10184.67
10211.56
15059.38
CHART PREPARATION
17
RATIOS
0.61
0.28
0.16
0.02
0.004
0.4
0.3
0.2
0.1
0
2010-2011
2011-2012
2012-2013
INTERPRETATION:
2013-2014
2014-2015
The Absolute ratio has decreased drastically for the year 2012-2013. It enjoyed
high liquidity position till 2011-2012 as the ratio was above ideal ratio.
LIQUID RATIO
LIQUID ASSETS
Liquid Ratio=
CURRENT LIABILITIES
TABLE SHOWING ON LIQUID RATIO
(` in Crores)
YEAR
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
LIQUID ASSETS
7074.35
4930.93
2405.46
508.9
6149.15
4537.62
4457.95
CURRENT
LIABILITIES
2560.79
2871.95
3271.43
7221.61
10184.67
10211.56
15059.38
CHART PREPARATION
18
RATIOS
2.76
1.71
0.73
0.7
0.6
0.44
0.30
LIQUID RATIOS
0.8
0.7
0.6
0.5
RATIOS
0.4
0.3
0.2
0.1
0
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
INTERPRETATION:
The liquid ratio in the year 2013-2014 is 0.44
It is slightly decrease in 2014-2015
GROSS PROFIT
1412
1301
886
887
538
SALES
10471.18
13232.61
12110.69
12028.33
9314.36
CHART PREPARATION
19
RATIOS
13.4
13.4
9.8
7.37
5.78
8
6
4
2
0
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
INTERPRETATION:
It has been observed that the gross profit ratio is in increasing trend up to 2009-10 and
it is decreasing from 2010-2011.
Sales are in increasing trend but the profit ratio is decreasing. It is due to decreased
cost of production.
(`. in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
NET PROFIT
SALES
982
751
353
366
62
10471.18
13232.61
12110.69
12028.33
9314.36
CHART PREPARATION:
20
RATIOS
9.37
5.67
2.91
3.04
0.67
6
5
4
3
2
1
0
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
INTERPRETATION:
Net profit is in decline position from 2014-15 in comparative with 2013-14.
Main attributable reason for the declining the profit is overall global meltdown.
Even in adverse market conditions, the company is able to earn net profits.
21
OPERATING
SALES
RATIOS
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
PROFIT
10732.8
751
352.83
366.45
62.38
10471.18
13232.61
12110.69
12028.33
9314.36
1.02
5.67
2.91
3.04
0.67
CHART PREPARATION
4
3
2
1
0
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
INTERPRETATION:
It indicates the companys operational efficiency.
(` in Crores)
YEAR
PROFIT AFTER
SHARE
TAX
658.49
751
353
366.45
62.38
HOLDER FUNDS
13229.22
13659.29
12477.32
12140.74
11593.93
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
RATIOS
0.04
0.05
0.02
0.03
0.005
CHART PREPARATION
INVESTMENT RATIOS
0.06
0.05
0.04
RATIOS
0.03
0.02
0.01
0
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
INTERPRETATION:
Highest return on investment was recorded in 2011-12.
It has been observed that the ROI is fluctuating from year to year.
More reserves and surplus funds have been diverted to expansion activities.
23
3. TURNOVER RATIO:
STOCK TURNOVER RATIO
Sales
Stock Turnover Ratio =
Stock
TABLE SHOWN ON STOCK TURNOVER RATIO
(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
SALES
10471.18
13232.61
12110.69
12028.33
9314.36
STOCK
3254.71
3403.11
3828.6
3863.04
5179.51
RATIOS
3.21
3.89
3.16
3.11
1.80
CHART PREPARATION
2
1.5
1
0.5
0
2010-2011
2011-2012
2012-2013
2013-2014
INTERPRETATION:
24
2014-2015
The Inventory Turnover Ratio during the year 2014-15 was 1.80
SALES
10471.18
13232.61
12110.69
12028.33
9314.36
DEBTORS
330.61
427.15
1009.65
803.65
1035.43
RATIOS
31.67
31.00
11.99
14.97
9.00
CHART PREPARATION
RATIOS
15
10
5
0
2010-2011
2011-2012
2012-2013
2013-2014
INTERPRETATION:
25
2014-2015
(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
SALES
WORKING
10471.18
13251.04
12110.69
12028.33
9314.36
CAPITAL
2388.74
1270.5
-206.92
-1810.90
-5421.92
RATIOS
4.38
10.41
-58.52
-6.64
-1.72
CHART PREPARATION
INTERPRETATION:
26
RATIOS
The working capital turnover ratio during the year 2014-15 is -1.72 times. It shows
that negative indication.
The higher working capital ratio indicates that the efficient utilization of working
capital.
(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
SALES
10471.18
13232.61
12110.69
12028.33
9314.36
TOTAL ASSETS
18691.84
21504.84
24652.52
24671.83
27860.13
RATIOS
0.56
0.61
0.50
0.49
0.33
CHART PREPARATION
RATIOS
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
INTERPRETATION:
The Total Assets Turnover Ratio is the decrease from previous year to current year,
thatis
2014-2015 year of Total Assets Turnover Ratio is 0.33
27
It can be concluded that the management is not efficient in converting the Assets into cash.
4. SOLVENCY RATIO:
DEBT EQUITY RATIO
Long Term Debts
Debt equity Ratio =
Share Holders Funds
LONG TERM
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
SHARE HOLDERSD
DEBTS
274.89
623.94
1990.54
2319.53
1206.82
RATIOS
FUNDS
13229.22
13659.29
12477.32
12140.74
11593.93
0.02
0.04
0.16
0.19
0.10
CHART PREPARATION
RATIOS
INTERPRETATION:
The debt equity ratio is the increasing of the debt equity holders. The ratio of 0.19 in
the year 2013-14 and in the year of 2014-15 it is 0.10
28
(` in Crores)
Year
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
RATIO
85
126
48
62
9
CHART PREPARATION:
2011-2012
2012-2013
INTERPRETATION:
29
2013-2014
2014-2015
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.
Net profit after tax is decreased due to the huge decrease in the income from
services. That is the amount which is available to the shareholders to take. The share capital
is constant from the year 2008. Due to the decrease in net profit the earnings per share is
decreased in 2015.
30
CHAPTER-IV
(FINDINGS AND SUGGESTIONS)
31
SUMMARY:
Visakhapatnam Steel Plant was founded on 20th Jan 71 but became fully operational
on 1st Aug 92. VSP is the first shore based integrated steel plant with new technology, large
scale computerization and automation. The organizational manpower has been rationalized
to operate it at international levels of efficiency and to attain international labor productivity.
The production, commercial and financial performance has been improving with the
passage of years. The financial analysis of VSP by the use of various techniques i.e. Ratio
analysis shows that:
1)
2)
3)
4)
5)
6)
7)
The companys accumulated funds are being used for expanding business
operations and expansion works and there by the Current Assets are reducing
and the Current ratio is decreasing year by year.
8)
9)
32
SUGGESTIONS
The following suggestions will improve the financial position of the VSP.
PRODUCTION
1)
2)
3)
Using the natural gas reserves of KG basin, Hot metal production capacity can
be enhanced with the present BF facility with negligible investment.
FINANCE
1)
PERSONNEL:
1)
2)
3)
4)
MARKETING
1)
Continuously monitoring the indigenous sale, export sale ratio to capture the
best of markets.
2)
3)
4)
5)
Value added products (high value items) are to be produced instead of selling
semi-finished products in order to increase profit margin.
33
BIBLIOGRAPHY
BOOKS:
1. Financial Management: Theory & Practice (4th Edition)
Eugene F. Brigham and Michael C. Gerhardt
WEBSITES
http://vizagsteel.com
http://www.indiansteel.com
http://www.bee-india.nic.in.com
http://www.answer.com
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