Académique Documents
Professionnel Documents
Culture Documents
On
Submitted By
Surendra Kumar Shukla 3rd Sem. ICCMRT, LUCKNOW
Acknowledgement
I would like to take this opportunity to convey my sincere thanks to the management of my institute i.e. Institute of Co-Operative and Corporate, Management, Research and Training (Lucknow) and Principal sir Dr. Ajay Prakash who had allowed me to venture into this project.
My special thanks and deep felt gratitude is due to Ms. Kirti Verma under whose kind endeavor and guidance has allowed me to carry this project.
I owe my sincere and whole hearted thanks to Mr.S.D.Gupta (Sr.Finance Officer N.T.P.C,NRHQ,LUCKNOW), Mr. S.S. Ojha (Sr. Finance Officer,NTPC/NRHQ,Lucknow) for constantly guiding me and tackling hurdles with implicit patience throughout my project .
PREFACE
In the broad sense training is necessary to make the students of professional institutions familiar with the industrial environment. This not only helps professionals to speedily accommodate themselves in industries but also to have better usage of their studies. To be dynamic, strategic and work aggressively they need to know the policies, procedures and trends going in the present industrial environment apart from their studies. The training fulfills all these needs. Whether it is the question of demonstrating a modernized procedure, step by step to an old production hand or guiding a new division head through the intricacies of preparing his own budget, the responsible supervisor or manager must make the trainee learn and communicate. The purpose and objective of the study is to analyze the different aspect of financial position of the organization and list out the suggestions based on the studies. The main source of the study is secondary data collected from the annual and other public reports and other information received from Institute Of Co-operative & Corporate, Management, Research and Training,Lucknow. The analysis of the data is carried out by the various modern and standard tools to achieve the objective of the study.
TABLE OF CONTENTS
1. Acknowledgment .2 2. Preface...3 3. Introduction of NTPC... 5 4. SWOT Analysis of NTPC....17 5. Introduction of topic.19 6. Research Methodology ....37 7. Objective of project report....39 9. Balance sheet of NTPC40 10. Ratios of NTPC..41 10. Introduction of Reliance Power.43 11. Introduction of Tata Power50 12. Comparison of all ratios.59 13. Interpretation of all ratios...63 14. Conclusion .72 15. Bibliography73 16. My learning at NTPC..74
INTRODUCTION
About Organization
-: Introduction
of organization:-
TypeTraded as-
State owner Enterprises BSE 53255 NSE NTPC BSE SENSEX Constituent
Electricity Utility 1975 Delhi, India Arup Roy Choudhury Electrical Power Natural Gas
ServicesRevenue-
Net Income-
EmployeeWebsite-
National Thermal Power CorporationIndias largest power company, NTPC was set up in 1975 to accelerate power development in India. NTPC is emerging as a diversified power major with presence in the entire value chain of the power generation business. Apart from power generation, which is the mainstay of the company, NTPC has already ventured into consultancy, power trading, ash utilization and coal mining. NTPC ranked 341st in the 2010, Forbes Global 2000 ranking of the Worlds biggest companies. NTPC became a Maharatna company in May, 2010, one of the only four companies to be awarded this status.
The total installed capacity of the company is 34,194 MW (including JVs) with 15 coal based and 7 gas based stations, located across the country. In addition under JVs, 5 stations are coal based & another station uses naptha/LNG as fuel. The company has set a target to have an installed power generating capacity of 1,28,000 MW by the year 2032. The capacity will have a diversified fuel mix comprising 56% coal, 16% Gas, 11% Nuclear and 17% Renewable Energy Sources(RES) including hydro. By 2032, non fossil fuel based generation capacity shall make up nearly 28% of NTPCs portfolio. NTPC has been operating its plants at high efficiency levels. Although the company has 17.75% of the total national capacity, it contributes 27.40% of total power generation due to its focus on high efficiency.
In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as fresh issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed company in November 2004 with the Government holding 89.5% of the equity share capital. In February 2010, the Shareholding of Government of India was reduced from 89.5% to 84.5% through Further Public Offer. The rest is held by Institutional Investors and the Public.
At NTPC, People before Plant Load Factor is the mantra that guides all HR related policies. NTPC has been awarded No.1, Best Workplace in India among large organizations and the best PSU for the year 2010, by the Great Places to Work Institute, India Chapter in collaboration with The Economic Times. The concept of Corporate Social Responsibility is deeply ingrained in NTPC's culture. Through its expansive CSR initiatives, NTPC strives to develop mutual trust with the communities that surround its power stations. NTPC Sale of energy up by 13.90% and Profit up by 5.6 % The state-owned power utility NTPC Ltd, formerly National Thermal Power Corp, posted a net profit after tax of Rs.8,201crore in 2008-09 against Rs.7,415 crore netted the last fiscal, an increase of Rs.786 crore. Total income increased from Rs.40, 018 crore 2008-09 to Rs.45, 273 crore the previous fiscal, NTPC said in a regulatory statement. Its net profit for the quarter ended March 31, 2009 was also up at Rs.2, 113.4 crore, as compared to the near Rs.1, 340 crore for the corresponding quarter the year before.
VISIONTo be the worlds largest and best power producer, powering Indias growth.
MISSIONDevelop and provide reliable power related products and services at competitive prices, integrating multiple energy sources with innovative & Eco-friendly technologies and contribute to society.
Scope meritorious award for best practices in Human Resources Management on occasion of Public Sector Day(2010-2011)
Most Respected Company in the Power sector by Business world 2011 PSU Excellence award 2010in the Best Financial Performance Category by Chamber of Commerce and Department of Public Enterprise.
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Award for Best HR Strategy in line with Business and award for Talent Management at the Asia Best Employer Brand held by Singapore in 2010.
CII-EXIM Bank Excellence Award has conferred commendation for Anta and Kobra stations for Strong Commitment to Excel and commendation for Significant Achievement for Dadri Station.
Achievements:
Sixth largest thermal power generator in the World and the Second most efficient utility in terms of capacity utilization.
Contribution of NTPC in power generation: NTPC has contribution of 28% of total power generation capacity of India.
NTPCS CULTURE
Core values are both intensely and widely shared Climate of high behavioral control Low employee turnover High agreement among the employees, for what NTPC stands for.
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All these point to the fact that strong cohesiveness, loyalty and organization commitment exist in NTPC lowering he attrition Rate
Singrauli
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Talcher Kaniha Unchahar Talcher Thermal Simhadri Tanda Anta Auraiya Kawas Dadri Gas Jhanor-Gandhar Kayamkulam Faridabad
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Power Generation -
Presently, NTPC generates power from Coal and Gas. With an installed capacity of 28840 MW, NTPC is the largest power generating major in the country. It has also diversified into hydro power, coal mining, power equipment manufacturing, oil & gas exploration, power trading & distribution. With an increasing presence in the power value chain, NTPC is well on its way to becoming an Integrated Power Major.
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Total income for the quarter increased to Rs.12, 481.5 crore from Rs.11, 487.5 crore in the like period the previous fiscal. The company said its board has recommended a final dividend at 8 percent of the paid-up equity capital in addition to the 28 percent interim dividend paid in February. (IANS)
Largest thermal power generating company of India. Sixth largest thermal power generator in the world. Second most efficient utility in terms of capacity utilization. One of the nine PSUs to be awarded the status of Navratna. Provides power at the cheapest average tariff in the country.
Business strengths 24,375 highly trained employees Senior executives possess extensive experience of the industry Executive Turnover Rate 1.19% Planned interventions at various stages of career Systematic training ensures 7 man days training per employee per year Efficient and timely completion of projects Best-integrated project management systems Company with an excellent record and high profits An early starter-more than 30 years experience in power sector.
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Excellent growth prospects with significant additions, modifications and replacements. Employee-friendly personnel policies. Low project cost of NTPCs plants.
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STRENGTHS OF NTPC
The company has kept itself sufficient liquid funds to meet any kind of cash requirements. Efficient working capacity of the plants Efficient & timely completion of projects A minimum risk factor Best integrated project management system Company with excellent records & high profits An early starter more than 30 years experience in power sector One among the 9 jewels of India called as NAVRATANS Highly motivated & dedicated workers & officers. Excellent growth prospects with significant additions, modifications & replacements Employee friendly personnel policies Low project cost of NTPCs plants. one of the listed company on Bombay stock exchange
WEAKNESS OF NTPC
Depleting raw materials. Some of the plants of NTPC have become old and need investments for replacements or modifications.
THREATS TO NTPC
Rising prices of raw materials makes working costly. Huge competition from SEBs, Reliance Energy, Tata Power & other private players in power industry. Coming up of other sources of power generation & consumption. Huge capital requirement for expansion, diversification, horizontal & vertical integration.
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Reliance Power Limited is a part of the Reliance Group, one of Indias largest business houses. The group comprises companies in the telecommunications, financial services, media and entertainment, infrastructure and energy sectors. The energy sector companies include Reliance Infrastructure Ltd and Reliance Power Limited. Reliance Power has been established to develop, construct and operate power projects domestically and internationally. The Company on its own and through subsidiaries has a portfolio of over 35,000 MW of power generation capacity, both operational as well as under development.
The power projects are planned to be diverse in geographic location, fuel type, fuel source and off-take, and each project is planned to be strategically located near an available fuel supply or load center. The company has 600 MW of operational power generation assets. The projects under development include seven coalfired projects to be fueled by reserves from captive mines and supplies from India and abroad, two gas-fired projects to be fueled primarily by reserves from the Krishna Godavari Basin (the "KG Basin") off the east coast of India, and seven hydroelectric projects, six of them in Arunachal Pradesh and one in Uttarakhand. The company has won three of the four Ultra Mega Power Projects (Sasan UMPP, Krishnapatnam UMPP & Tilaiya UMPP) awarded by the Govt. of India till date. The UMPP is an initiative by the government to collaborate with power generation companies to set up 4,000 MW projects to ease the countrys power deficit situation.Besides these, Reliance Power is also developing coal bed methane (CBM) blocks to fuel gas based power generation. The company is also planning to register projects with the Clean Development Mechanism executive board for issuance of Certified Emission Reduction (CER) certificates to augment its revenues.
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Mission
1) To attain global best practices and become a leading power generating company. 2) To achieve excellence in project execution, quality, reliability, safety and operational efficiency. 3) To relentlessly pursue new opportunities, capitalizing on synergies in the power generation sector. 4) To consistently enhance our competitiveness and deliver profitable growth. 5) To practice highest standards of corporate governance and be a financially sound company. 6) To be a responsible corporate citizen nurturing human values and concern for society. 7) To improve the lives of local community in all our projects. 8) To be a partner in nation building and contribute towards Indias economic growth. 9) To promote a work culture that fosters learning, individual growth, team spirit and creativity to overcome challenges and attain goals. 10) To encourage ideas, talent and value systems and become the employer of choice. 11) To earn the trust and confidence of all stakeholders, exceeding their expectations. 12) To uphold the guiding principles of trust, integrity and transparency in all aspects of interactions and dealings.
Vision:1) To build a global enterprise for all our stakeholders 2) To be the largest private sector power generation company in India 3) To be the largest hydro power generation company in India 4) To be the largest green power company in India 5) To be the largest coal mining company in India
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Tata Power is Indias largest integrated power company with a significant international presence. The Company has an installed generation capacity of 5297 MW in India and a presence in all the segments of the power sector viz Generation (thermal, hydro, solar and wind), Transmission, Distribution and Trading. It has successful public-private partnerships in Generation, Transmission and Distribution in India namely Tata Power Delhi Distribution Limited" with Delhi Vidyut Board for distribution in North Delhi, 'Power links Transmission Ltd.' with Power Grid Corporation of India Ltd. for evacuation of Power from Tala hydro plant in Bhutan to Delhi and 'Maithon Power Ltd.' with Damodar Valley Corporation for a 1050 MW Mega Power Project at Jharkhand. It is one of the largest renewable energy players in India and is developing countrys first 4000 MW Ultra Mega Power Project at Mundra (Gujarat) based on super-critical technology. Its international presence includes strategic investments in Indonesia through 30% stake in coal mines and a geothermal project; in Singapore through Trust Energy Resources to securities coal supply and the shipping of coal for its thermal power generation operations; in South Africa through a joint venture called Cennergi to develop projects in South Africa, Botswana and Namibia; in Australia through investments in enhanced geothermal and clean coal technologies and in Bhutan through a hydro project in partnership with The Royal Government of Bhutan. With its track record of technology leadership, project execution excellence, world class safety processes, customer care and driving green initiatives, Tata Power is poised for a multi-fold growth and committed to 'lighting up lives' for generations to come. Recognized as Indias largest private sector power utility, with a reputation for trustworthiness, built up over nearly nine decades, Tata Power surges ahead into yet another year with plans of sustained growth, greater value to consumer and reliable power supply. Led by a powerful vision, Tata Power pioneered the generation of electricity in India. It has now successfully served the Mumbai consumers for over ninety years and has spread its footprints across the nation. Today, it is the countrys largest private player in the sector. Apart from Mumbai and Delhi, the company has generation capacities in Jojobera, Jharkhand and Karnataka.
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Tata Power has an installed power generation capacity of about 3000 Mega Watts, with the Mumbai power business, which has a unique mix of Thermal and Hydro Power, generated at the Thermal Power Station, Trombay, and the Hydro Electric Power Stations at Bhira, Bhivpuri and Khopoli, accounting for 1797 MW. Its diverse generation capability facilitates the company in producing low cost energy, thereby giving its consumers a greater value for money. Among its many achievements that Tata Power can proudly boast of are the installation and commissioning of Indias first 500 MW unit (at its Thermal Power Generating Station, Trombay) the 150 MW Pumped Storage Unit at its Hydro Generating Station, Bhira, and environmental control systems like the Flue Gas Desulphurization plant. Tata Power has a first of its kind joint venture with Power Grid Corporation of India for the 1200 km Tata Transmission Project.
International Projects
Leveraging upon its engineering skills and understanding of the power business, Tata Power has carried out several overseas projects and successfully completed erection, testing and commissioning of major power projects in Saudi Arabia, Bangladesh, Kuwait, Algeria, Myanmar and Thailand. The company has also undertaken projects pertaining to power plant / operations management and plant operations training.
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Awards
CII EXIM Bank Award 2005 "Certificate for Strong Commitment to Excel". Energy Efficient Unit Award at the National Award for Excellence in Energy Management 2005 for T&D divisions conducted by CII. Jojobera has been declared as the winner of Golden Peacock Special Commendation Certificate for the year 2005 (11 June 2005). Tata Power among the top 13 Best Managed Companies in India by Business Today AT Kearney (11 March 2005). The 2nd Wartsila Mantosh Sondhi Award for outstanding contribution to the Indian Power Sector in 2004.
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Greentech Environment Excellence Award: Platinum to Jojobera Thermal Power Plant, Jharkhand in 2004. Greentech Safety Award: Gold to Trombay Thermal Power Station, Mumbai in 2004. The Power Plant Award, instituted by Electric Power International, to the Trombay Thermal Power Station in 1995. Outstanding Structures of the Year by the American Concrete Institute: Bronze Award to the Trombay Thermal Power Station for the year 1988 1989.
Vision, Mission & ValuesStrong values are the base of any laudable mission and vision is vital to its realization. Tata Power's fundamentals have always been very clear in this direction.
Vision
To be the most admired Integrated Power and Energy Company delivering sustainable value to all stakeholders
Mission
They will become the most admired Company delivering sustainable value by: 1) Being the supplier and partner of choice 2) Achieving excellence in safety, operations and project management 3) Focusing on the culture of sustainability 4) Ensuring growth and delivering value to the stakeholders 5) Caring for the community
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Values
Integrity: Honesty, fairness and transparency in our conduct and transactions Trust: Faith and belief in each other Care: Being concerned about the well being of all employees Collaboration: Excellence through teamwork, within employees and partners Agility: Speedy, responsive and proactive, achieved through empowering employees Respect: Treat all stakeholders with respect and dignity Excellence: Bettering standards continuously, with passion and pride
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INTRODUCTION OF TOPIC
Meaning of ratio What is Ratio Analysis.??? Advantage of Ratio Analysis Limitations of Ratio Analysis Classification of Ratio Analysis
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Meaning of RatioA ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to Accountants Handbook by Wixom, Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers.
Ratio Analysis:Ratio analysis is the process of determining and presenting the relationship of items and group of items in the statements. According to Batty J. Management Accounting Ratio can assist management in its basic functions of forecasting, planning coordination, control and communication. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgment, otherwise complex situations.
1. Pure Ratio or Simple Ratio:It is expressed by the simple division of one number by another. For example, if the current assets of a business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio of Current assets to current liabilities will be 2:1.
2. Rate or So Many Times:In this type , it is calculated how many times a figure is, in comparison to another figure. For example , if a firms credit sales during the year are Rs. 200000 and its debtors at the end of the year are Rs. 40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors.
3. Percentage:In this type, the relation between two figures is expressed in hundredth. For example, if a firms capital is Rs.1000000 and its profit is Rs.200000 the ratio of profit capital, in term of percentage, is 200000/1000000*100 = 20%
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ADVANTAGE OF RATIO ANALYSIS:There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to work out a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: 1-To workout the profitability: Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business. 2-To workout the solvency: With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans. 3- Helpful in analysis of financial statement: Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc. 4-Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them. 5-To simplify the accounting information: Accounting ratios are very useful as they briefly summarize the result of detailed and complicated computations. 6-To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources. 7-To workout short-term financial position: Ratio analysis helps to workout the short-term financial position of the company with the help of liquidity ratios. In case short-term financial position is not healthy efforts are made to improve it.
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8-Helpful for forecasting purposes: Accounting ratios indicate the trend of the business. The trend is useful for estimating future. With the help of previous years ratios, estimates for future can be made. In this way these ratios provide the basis for preparing budgets and also determine future line of action.
Limitations of Ratio AnalysisIn spite of many advantages, there are certain limitations of the ratio analysis techniques and they should be kept in mind while using them in interpreting financial statements. The following are the main limitations of accounting ratios: 1-Limited Comparability: Different firms apply different accounting policies. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc. 2-False Results: Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct. 3-Effect of Price Level Changes: Price level changes often make the comparison of figures difficult over a period of time. Changes in price affect the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before any comparison. 4-Qualitative factors are ignored: Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis. 5-Effect of window-dressing: In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the convenience to show the financial position of the company in a better way.
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6-Costly Technique: Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it. 7-Misleading Results: In the absence of absolute data, the result may be misleading. For example, the gross profit of two firms is 25%. Whereas the profit earned by one is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs. 10, 00,000 and sales are Rs. 40, 00,000. Even the profitability of the two firms is same but the magnitude of their business is quite different. 8-Absence of standard university accepted terminology: There are no standard ratios, which are universally accepted for comparison purposes. As such, the significance of ratio analysis technique is reduced.
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CLASSIFICATION OF RATIO
LIQUIDITY RATIOS
Liquidity Ratios are ratios that come off the Balance Sheet and hence measure the liquidity of the company as on a particular day i.e. the day that the Balance Sheet was prepared. These ratios are important in measuring the ability of a company to meet both its short term and long term obligations. 1) Current Ratio: This ratio is obtained by dividing the 'Total Current Assets' of a company by its 'Total Current Liabilities'. The ratio is regarded as a test of liquidity for a company. It expresses the 'working capital' relationship of current assets available to meet the company's current obligations. Formula: Total Current Assets/ Total Current Liabilities
2) Quick Ratio: This ratio is obtained by dividing the 'Total Quick Assets' of a company by its 'Total Current Liabilities'. Sometimes a company could be carrying heavy inventory as part of its current assets, which might be obsolete or slow moving. Thus eliminating inventory from current assets and then doing the liquidity test is measured by this ratio. The ratio is regarded as an acid test of liquidity for a company. It expresses the true 'working capital' relationship of its cash, accounts receivables, prepaid and notes receivables available to meet the company's current obligations. Formula: Quick Ratio = Total Quick Assets/ Total Current Liabilities Quick Assets = Total Current Assets (minus) Inventory
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3) Debt to Equity Ratio: This ratio is obtained by dividing the 'Total Liability or Debt ' of a company by its 'Owners Equity or Net Worth'. The ratio measures how the company is leveraging its debt against the capital employed by its owners. If the liabilities exceed the net worth then in that case the creditors have more stake than the shareowners. Formula: Total Liabilities / Owners Equity or Net Worth
PROFITABILITY RATIOS
Profitability Ratios show how successful a company is in terms of generating returns or profits on the Investment that it has made in the business. If a business is liquid and efficient it should also be Profitable.
2) Return on Assets:
The Return on Assets of a company determines its ability to utilize the Assets employed in the company efficiently and effectively to earn a good return. The ratio measures the percentage of profits earned per dollar of Asset and thus is a measure of efficiency of the company in generating profits on its Assets. Formula: - (Net Profit / Total Assets) x 100
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equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. ROEs between 15% and 20% are generally considered good.
ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. As with many financial ratios, ROE is best used to compare companies in the same industry. High ROE yields no immediate benefit. Since stock prices are most strongly determined by earnings per share (EPS), you will be paying twice as much (in Price/Book terms) for a 20% ROE Company as for a 10% ROE company.
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MANAGEMENT EFFICIENCY RATIOS Efficiency ratios are ratios that come off the Balance Sheet and the Income Statement and therefore incorporate one dynamic statement, the income statement and one static statement, the balance sheet. These ratios are important in measuring the efficiency of a company in either turning their inventory, sales, assets, accounts receivables or payables. It also ties into the ability of a company to meet both its short term and long term obligations. This is because if they do not get paid on time how will you get paid on time. You may have perhaps heard the excuse 'I will pay you when I get paid' or 'my customers have not paid me!'
Regular DSO =
(Total Accounts Receivables/Total Credit Sales) x Number of Days in the period that is being analyzed
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The book value of a company is the value of a company's assets expressed on the balance sheet. It is the difference between the balance sheet assets and balance sheet liabilities and is an estimation of the value if it were to be liquidated. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm.
Formula:
2) Price/Cash Flow Ratio:The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a value standpoint, of a company's stock. This metric compares the stock's market price to the amount of cash flow the company generates on a per-share basis. This ratio is similar to the price/earnings ratio, except that the price/cash flow ratio (P/CF) is seen by some as a more reliable basis than earnings per share to evaluate the acceptability, or lack thereof, of a stock's current pricing. The argument for using cash flow over earnings is that the former is not easily manipulated, while the same cannot be said for earnings, which, unlike cash flow, are affected by depreciation and other non-cash factors.
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Formula:
3) Price/Earnings Ratio:
The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by investment professionals and the investing public. The financial reporting of both companies and investment research services use a basic earnings per share (EPS) figure divided into the current stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per each dollar of EPS). It's not surprising that estimated EPS figures are often very optimistic during bull markets, while reflecting pessimism during bear markets. Also, as a matter of historical record, it's no secret that the accuracy of stock analyst earnings estimates should be looked at skeptically by investors. Nevertheless, analyst estimates and opinions based on forward-looking projections of a company's earnings do play a role in Wall Street's stockpricing considerations. Historically, the average P/E ratio for the broad market has been around 15, although it can fluctuate significantly depending on economic and market conditions. The ratio will also vary widely among different companies and industries.
Formula:
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Formula:
5) Price/Sales Ratio:
A stock's price/sales ratio (P/S ratio) is another stock valuation indicator similar to the P/E ratio. The P/S ratio measures the price of a company's stock against its annual sales, instead of earnings. Like the P/E ratio, the P/S reflects how many times investors are paying for every dollar of a company's sales. Since earnings are subject, to one degree or another, to accounting estimates and management manipulation, many investors consider a company's sales (revenue) figure a more reliable ratio component in calculating a stock's price multiple than the earnings figure.
Formula:
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6) Dividend Yield:
A stock's dividend yield is expressed as an annual percentage and is calculated as the company's annual cash dividend per share divided by the current price of the stock. The dividend yield is found in the stock quotes of dividend-paying companies. Investors should note that stock quotes record the per share dollar amount of a company's latest quarterly declared dividend. This quarterly dollar amount is annualized and compared to the current stock price to generate the per annum dividend yield, which represents an expected return. Income investors value a dividend-paying stock, while growth investors have little interest in dividends, preferring to capture large capital gains. Whatever your investing style, it is a matter of historical record that dividend-paying stocks have performed better than non-paying-dividend stocks over the long term.
Formula:
This valuation metric is calculated by dividing a company's "enterprise value" by its earnings before interest expense, taxes, depreciation and amortization (EBITDA). Overall, this measurement allows investors to assess a company on the same basis as that of an acquirer. As a rough calculation, enterprise values multiple serves as a proxy for how long it would take for an acquisition to earn enough to pay off its costs (assuming no change in EBITDA).
Formula:
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Formula:
Formula:
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Formulas:
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Main objective of the project report is to find ratio analysis of the different power sector company and comparison between them and sub-objective of the company is-To gain the overall idea about the organization -To have an effective exposure of the actual working situation of NTPC, Lucknow -To study the rules and practices implemented at NTPC, depending on the local environment and circumstances
-To see the applicability and usability of theory which have been taught to us during the first year of the
course. -To find out the financial performance of the organization -To find out the importance of finance in business -To find out the future requirements of finance in business -To study the investment decisions based on the return which may beneficial to the organization
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Research:
The research design of this project is exploratory. Though each research study has its own specific purpose but the research design of this project on NTPC Ltd. is exploratory in nature as the objective is the development of the hypothesis rather than their testing. The research design method financial analysis. Through of comparative balance sheet in comparative statement, I am studying on balance sheet of NTPC Ltd. of year 2011. So taking comparative statement, I am going to analyze balance sheet of NTPC Ltd, TATA Power, and Reliance Power and comparison among them.
Methodology:
Every project work is based on certain methodology, which is a way to systematically solve the problem or attain its objectives. It is a very important guideline and lead to completion of any project work through observation, data collection and data analysis. Research Methodology comprises of defining 7 redefining problems, collecting, organizing & evaluating data, making deductions 7 researching to conclusions. According to Clifford Woody Accordingly, the methodology used in the project is as follow: Defining the objectives of the study Framing of questionnaire keeping objectives in mind (considering the objectives) Feedback from the employees, Analysis of feedback, Conclusion, findings and suggestions.
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SAMPLING TECHNIQUE:
Convenience sampling is used in exploratory research where the researcher is interested in getting an inexpensive approximation of the truth. As the name implies, the sample is selected because they are convenient.
Source of data Collecting primary data is not possible as my client will be companies so only
secondary data & previous analysis can be used.
Sample size - Approximately 3-4 companies. Sampling technique Here sampling technique used is convenience sampling. This type of sampling
technique is used where sampling technique.
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Balance sheet
Mar ' 11
Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs)
8,245.46 60,138.66 9,910.68 33,277.56 1,11,572.36 72,583.94 33,519.19 39,064.75 38,441.84 12,344.84 35,396.79 13,675.86 21,720.93 1,11,572.36 12,332.84 100.92 33,227.29 82454.64
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Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales 29.18 7.54 29.18 0.76 0.49 0.76 --142.33
0.05 -0.31 --
Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit 40.07 Dividend Payout Ratio Cash Profit 31.46 Earning Retention Ratio 54.26 Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value 65.14 4.13 Mar '11 11.04 82.94
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Balance sheet
Mar ' 11 Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs) 2,805.13 13,091.44 1,554.05 17,450.62 96.53 11.30 85.23 58.86 8,578.32 8,847.04 118.84 8,728.20 17,450.62 6,943.32 1,708.94 2.90 28051.26
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Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value
Expenses as Composition of Total Sales ---100.00 100.00 24.16 Mar '11 0.98 56.67
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Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Current assets, loans & advances Less : current liabilities & provisions Total net current assets
237.33 11,002.66 4,753.91 2,235.37 18,229.27 10,518.92 4,735.98 5,782.94 1,469.50 7,939.91 6,012.71
2,975.79 3,036.92
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Mar ' 11
Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs)
18,229.27
7,473.08
640.96 1,165.53
2373.07
Mar '11
Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs)
Net Operating Profit Per Share (Rs) 290.82 Free Reserves Per Share (Rs) 399.41 Bonus in Equity Capital 0.47 Profitability Ratios Operating Profit Margin (%) Profit Before Interest And Tax Margin (%) 22.00 13.68
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Gross Profit Margin (%) Cash Profit Margin (%) Adjusted Cash Margin (%) Net Profit Margin (%) Adjusted Net Profit Margin (%) Return On Capital Employed (%) Return On Net Worth (%) Adjusted Return on Net Worth (%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds (%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales
14.60 18.10 18.10 12.78 12.78 8.07 8.37 7.32 473.65 473.65 8.39 1.56 1.81 0.62 0.56 3.53 0.62 4.31 4.16
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Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit 33.26 Dividend Payout Ratio Cash Profit 21.57 Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value 61.97 76.52 5.24 Mar '11 39.67 473.65
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Comparison and Interpretation of Ratios of NTPC, Reliance Power and Tata Power
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NTPC
RELIANCE
TATA POWER
2.59
26.50
1.56
2.32
1.93
1.81
0.63
0.10
0.62
59
0.63
0.08
0.56
Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio
29.18 3.12 17.79 10.65 3.12 3.53
0.63
0.10
0.62
7.46
2.52
4.31
6.72
7.51
4.16
7.54
0.10
3.49
29.18
2.52
17.79
0.76
7.51
0.66
0.49
3.12
0.38
0.76
0.10
0.66
2.52
Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed
--
7.51
--
--
3.12
--
142.33
0.10
158.41
0.05
11.91
63.18
--
--
--
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Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit
0.31
10.60
0.88
--
--
1.70
40.07
--
33.26
Dividend Payout Ratio Cash 31.46 Profit Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value 54.26 65.14 4.13 11.04 82.94
--
21.57
100.00
61.97
100.00
76.52
24.16
5.24
0.98
39.67
56.67
473.65
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NTPC is maintaining a higher liquidity ratio, e.g. current ratio with TATA POWER and RELIANCE
which means it has a margin of safety to pay off its short term obligations.
Current Ratio3 2.59 2.5 2.02 2 1.56 1.5 NTPC TATA RELAINCE 1
0.5
0 Current Ratio
The current ratio of NTPC on 2010-11 is 2.59, for TATA is 2.02 and for RELAINCE is 1.56. It indicates that NTPC has less current liabilities as compared to current assets. Current assets are 2.5 times more than current liabilities and others i.e. TATA POWER and RELAINCE have more current liabilities than current assets. NTPC has more liquid assets than TATA POWER and RELAINCE .Here, more liquid assets denote cash and bank balances, debtors etc.NTPC has 2.23 quick ratio as compared to TATA POWER which has 1.14 and Reliance which has 1.93.As there is a comparison among 3, we see that NTPC is better.
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8 7 6 5
7.53
The quality of sundry debtors is good at N.T.P.C as compared to Reliance and TATA POWER.NTPC has 7.53 debtors turnover ratio as compared to TATA POWER which has 3.7 and Reliance 2.93.So, this indicates that debtors of NTPC are realizable in earlier time as compared to other.
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7.54
NTPCs Debtors Turnover ratio is better than TATA POWER and Reliance .NTPC has 7.54 in comparison to Tata which has 3.49 and Reliance which has 2.98. This ratio indicates the speed with which the amount is collected from debtors. The higher the ratio, the better it is, since it indicates that amount from debtors is being collected more quickly. The more quickly the debtors pay, the less the risk from bad- debts, and so the lower the expenses of collection and increase in the liquidity of the firm.
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35
30
29.18
25
10
Inventory turnover ratio shows the movement of inventory. Thus, NTPCs inventory ratio is better than TATA POWER and Reliance which has its ratios respectively 29.18, 13.12 and 17.79. This ratio shows the number of times a companys inventory is turned into sales. Investment in inventory represents idle cash. The lesser the inventory, the greater the cash available for meeting operating needs. Besides, lean, fast-moving inventory runs a lower risk of obsolescence and reduces interest, insurance and storage charges. High inventory turnover is a sign of efficient inventory management.
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20
18.49
15
14.6
10
Reliance
-5
-3.79
This ratio measures the margin of profit available on sales. The higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but the gross profit ratio should be adequate enough not only to cover the operating expenses but also to provide for depreciation, interest on loans, dividends and creation of reserves. Here NTPC has 18.49% gross profit margin ratio which is better than Reliances -3.79% and Tata powers 14.60%.
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The same is with net profit margin ratio i.e. the higher the ratio the better it is. Thus Reliance has better net profit margin ratio that is 18.06 in comparison to NTPC which has 15.85 and Tata Power which has 12.76. The Profit Margin of a company determines its ability to withstand competition and adverse conditions like rising costs, falling prices or declining sales in the future. The ratio measures the percentage of profits earned per dollar of sales and thus is a measure of efficiency of the company.
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0.8 0.7 0.6 0.5 NTPC 0.4 0.3 0.2 0.1 0 Asset Turnover Ratio TATA Power Reliance
The higher the asset turnover indicates that the enterprise is managing its assets efficiently while a low asset turnover implies the presence of more assets than a business needs for its operations. TATA POWER has 0.66 ratios as compared to NTPC 0.76 and Reliance 0.10. This indicates that TATA POWER and NTPC are managing their assets efficiently as compared to Reliance.
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This ratio is particular importance in manufacturing concerns where the investment in fixed asset is quite high. Compared with the previous year, if there is increase in this ratio, it will indicate that there is better utilization of fixed assets. If there is a fall in this ratio, it will show that fixed assets have not been used as efficiently, as they had been used in the previous year. Here Reliance has fixed assets turnover ratio that is 7.51 which is better than NTPC which is 0.76 and Tata Power which is 0.66.
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The higher the EPS is, the better, because the value of the share will increase. EPS of NTPC is 11.04, TATA POWER is 39.68 and Reliance is 9.98. This helps the stockholders to decide in which company they should invest their money so as to get more dividends out of the profits. Then the higher the EPS is the better, since than more dividends will be received after each shares owned. Another implication of the Earnings per Share ratio is that it tells investors in what stock their invested money should go, as EPS tells how much each dollar or rupees invested earns.
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Findings:The Current ratio of NTPC on 2010-11 is 2.59, for TATA is 2.02 and for RELAINCE is 1.56. It indicates that NTPC has less current liabilities as compared to current assets. Current assets are 2.5 times more than current liabilities and others i.e. TATA POWER and RELAINCE have more current liabilities than current assets.
The quality of sundry debtors is good at N.T.P.C as compared to Reliance and TATA POWER.NTPC has 7.53 debtors turnover ratio as compared to TATA POWER which has 3.7 and Reliance 2.93.So, this indicates that debtors of NTPC are realizable in earlier time as compared to other.
NTPCs Debtors Turnover ratio is better than TATA POWER and Reliance .NTPC has 7.54 in comparison to Tata which has 3.49 and Reliance which has 2.98. This ratio indicates the speed with which the amount is collected from debtors. The higher the ratio, the better it is, since it indicates that amount from debtors is being collected more quickly. The more quickly the debtors pay, the less the risk from bad- debts, and so the lower the expenses of collection and increase in the liquidity of the firm.
Inventory turnover ratio shows the movement of inventory. Thus, NTPCs inventory ratio is better than TATA POWER and Reliance which has its ratios respectively 29.18, 13.12 and 17.79. This ratio shows the number of times a companys inventory is turned into sales. Investment in inventory represents idle cash. The lesser the inventory, the greater the cash available for meeting operating needs. Besides, lean, fast-moving inventory runs a lower risk of obsolescence and reduces interest, insurance and storage charges. High inventory turnover is a sign of efficient inventory management.
Gross Profit margin ratio measures the margin of profit available on sales. The higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but the gross profit ratio should be adequate enough not only to cover the operating expenses but also to provide for depreciation, interest on loans, dividends and creation of reserves. Here NTPC has 18.49% gross profit margin ratio which is better than Reliances -3.79% and Tata powers 14.60%. The same is with Net Profit Margin ratio i.e. the higher the ratio the better it is. Thus Reliance has better net profit margin ratio that is 18.06 in comparison to NTPC which has 15.85 and Tata Power which has 12.76. The Profit Margin of a company determines its ability to withstand competition and adverse conditions like rising costs, falling prices or declining sales in the future. The ratio measures the percentage of profits earned per dollar of sales and thus is a measure of efficiency of the company
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The higher the Asset Turnover Ratio indicates that the enterprise is managing its assets efficiently while a low asset turnover implies the presence of more assets than a business needs for its operations. TATA POWER has 0.66 ratios as compared to NTPC 0.76 and Reliance 0.10. This indicates that TATA POWER and NTPC are managing their assets efficiently as compared to Reliance. Earnings Per Share ratio is particular importance in manufacturing concerns where the investment in fixed asset is quite high. Compared with the previous year, if there is increase in this ratio, it will indicate that there is better utilization of fixed assets. If there is a fall in this ratio, it will show that fixed assets have not been used as efficiently, as they had been used in the previous year. Here Reliance has fixed assets turnover ratio that is 7.51 which is better than NTPC which is 0.76 and Tata Power which is 0.66.
CONCLUSION-
Ratio Analysis is the basic tool of financial analysis and financial analysis is itself an important part of any business planning process as SWOT, being basic tool of the strategic analysis plays a vital role in a business planning process and no SWOT analysis would be complete without an analysis of companys financial position. In this way ratio analysis is very important part of whole business strategic planning. As companies dispatch their long annual report once a year, the financial ratio helps us to profile a company easily. There is a huge crisis over energy in the world especially in the field of electricity. India is also victim of the same condition. In spite of several efforts taken by the governments in this regard, there is enormous possibility exists. NTPC is a key organization in India as far as the supply of power is concerned. After successfully conducting this project work, it can be said that the financial health of NTPC is sound good and it appears positive in accordance with its balance sheet and profit & loss A/c.
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Annexure
Balance Sheet of NTPC
(Rs crore)
Balance sheet
Mar ' 11
Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs)
8,245.46 60,138.66 9,910.68 33,277.56 1,11,572.36 72,583.94 33,519.19 39,064.75 38,441.84 12,344.84 35,396.79 13,675.86 21,720.93 1,11,572.36 12,332.84 100.92 33,227.29 82454.64
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Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Current assets, loans & advances Less : current liabilities & provisions Total net current assets
237.33 11,002.66 4,753.91 2,235.37 18,229.27 10,518.92 4,735.98 5,782.94 1,469.50 7,939.91 6,012.71
2,975.79 3,036.92
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Mar ' 11
Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs)
18,229.27
7,473.08
640.96 1,165.53
2373.07
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Balance sheet
Mar ' 11 Equity share capital Share application money Preference share capital Reserves & surplus Secured loans Unsecured loans Total Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs) 2,805.13 13,091.44 1,554.05 17,450.62 96.53 11.30 85.23 58.86 8,578.32 8,847.04 118.84 8,728.20 17,450.62 6,943.32 1,708.94 2.90 28051.26
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BIBLIOGRAPHY:-
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My Learning outcomes:This project has helped me in gaining and understanding the insights into what NTPC is and how it works. The importance of different ratios to the organization. In NTPC, I have also learnt SAP and ESS (Employee Self Service) and how to work on this i.e. - Passing and making entries in ESS for those who are employees of NTPC. - Learning how to make entries of E-Payments in SAP. - Making postings of E-Payments - In SAP software I used ZNS04- for note sheet payment ZNS02- for modification ZNS03- for verification of note sheet ZNS04- for payment below Rs. 10,000/MIRO- for payment above Rs 10,000/-
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