PROJECT REPORT ON

Financial Statement Analysis of Indian Railway Catering

and Tourism Corporation Limited (IRCTC)







Submitted in the Fulfilment for the Requirement of
Bachelors of Business Administration (BBA)
Guru Govind Singh Indraprastha University






Submitted by: Aarti
roll no:04224501709
6th semester(2009-12)










Jagannath International Management School
Kalkaji, New Delhi










INDEX

Declaration
Acknowledgement
Executive summery
Objective of the study
Research Methodology
Introduction
Company Profile
Financial Statements
Balance Sheet
Income statement
Financial Statement analysis
o Comparative Financial Statement Analysis
Comparative Balance Sheet
Common size Balance Sheet
Trend percent analysis of Balance Sheet
Comparative Income statement
Common size Income statement
Trend percent analysis of Income statement
Cash Flow Statement
o Ratio Analysis
Current Ratio
Quick Ratio
Earnings per share
Earnings Yield
Return on share holder's fund
Net Profit Margin
Return on capital employed
o Graphical Analysis Of Ratios

Who uses these analyses?
Importance
Advantages
Limitations
Conclusion
Bibliography







DECLARATION


I hereby declare that the project titled FINANCIAL STATEMENT ANALYSIS OF
IRCTC Ltd. is an original piece of research work carried out by me under the
guidance and supervision of Project Guide: The information has been collected from
genuine & authentic sources. The work has been submitted in partial fulfilment of the
requirement of BACHLOR OF BUSINESS ADMINISTRATION (BBA).


Place: Delhi Signature:

Date:
























ACKNOWLEDGEMENT


The SATISFACTION EUPHORIA THAT ACCOMPANIES THE SUCCESSFUL
COMPLETION OF ANY WORK WOULD BE INCOMPLETE UNLESS WE MENTION
THE NAME OF THE PERSON, WHO MADE IT POSSIBLE, WHOSE CONSTANT
GUIDANCE AND ENCOURAGEMENT SERVED AS A BECKON OF LIGHT AND
CROWNED OUR EFFORTS WITH SUCCESS. I CONSIDER IT A PRIVILEGE TO
EXPRESS THROUGH THE PAGES OF THIS REPORT, A FEW WORDS OF
GRATITUDE AND RESPECT TO THOSE WHO GUIDED AND INSPIRED IN THE
COMPLETION OF THIS PROJECT.

I AM DEEPLY INDEBTED TO --------------WHO GUIDED AND HELPED ME IN MY
PROJECT MAKING WHO LEAD ME TO THE SUCCESSFUL COMPLETION PF
MY PROJECT.

IT WOULD BE A SINE TO FORGET TO EXPRESS DEVOTIONAL THANKS TO
DIFFERENT AUTHORS TO WHOM I TOOK REFERENCE AND TO INTERNET
TECHNOLOGY WHICH MADE GETTING INFORMATION SO EASY.












EXECUTIVE SUMMARY


Project Title: Financial Statement Analysis

Company Name: Indian Railway Catering and Tourism Corporation
Limited(IRCTC)

The training at IRCTC Limited involved the day to day working at corporate accounts
departments with the senior & junior managers in the company. This project helped
me to get the deeper understanding of the process of Financial Statement Analysis
and how decisions are taken to strengthen the financial position.
For this study four years comparative Income Statement & Balance Sheet have
been taken for calculating ratio analysis. Main objective in undertaking this project is
to supplement academic knowledge with absolute practical exposure to day to day
functions of the sector.
Financial analysis which is the topic of this project refers to an assessment of the
viability, stability and profitability of a business. This important analysis is performed
usually by finance professionals in order to prepare financial or annual reports.
These financial reports are made with using the information taken from financial
statements of the company and it is based on the significant tool of Ratio Analysis.
These reports are usually presented to top management as one of their basis in
making crucial business decisions.
During the summer training period at IRCTC Limited, I had close connection with
preparation of financial statements and also their analysis which was made by
professionals in the accounting team of the company. This experience was an
emphasis on the importance of these Ratios which could be the roots of decisions
made by management that can make or break the company. So, I was influenced to
allocate the aim of this project to study the details about these ratios and their
possible effects on the decisions.


















OBJECTIVE OF THE STUDY

There have been various objectives for this study, the first of which is a detailed
analysis of the financial statements that is the balance sheet and the income
statement of IRCTC Ltd.
The second objective, however the most important one or in other word the principle
aim of this project is the understanding and assessment of financial ratios based on
the statements of the company.
The next aim of the project is to recognize the position of the company through those
ratios and data available. This recognition is a leading factor in changes of each and
every company and the base and root of lots of management decisions.

































RESEARCH METHODOLOGY

Research framework: This study is based on the data about IRCTC LTD for a
detailed study of its financial statements, documents and system ratios and finally to
recognize and determine the position of the company.

Types of data which helped to prepare this report:
1. First type is the primary data which was collected personally to be used and
studied to prepare and reach the objectives already mentioned.

2. The secondary data which was already prepared so these data was only used to
reach the aims and objectives of this project. These data has been collected from the
financial reports of the company.

How the data was collected:
The sources of collecting the primary data was through interviews, observation and
questionnaire, however the secondary one was collected from the financial
statements already available to the employees of the company and some of which
was published.

Personal Interview:
Personal Interview method requires a person known as the interviewer asking
questions generally in a face to face contact to the other person or persons.

Different questions and information I could collect during these two methods are:

1. The beginning and history of the IRCTC Ltd.
2. Numbers of staff working for different departments.
3. The mission & vision of the company.
4. Areas of operations
5. Other company related information.

Printed and Digital Sources:
The secondary data I collected was through the study of the financial statements
already existed in the company in form of printed files or digital files reserved in the
company for further references. I had chosen these files because of the reliability
and suitability of these information which I was also sure about the accuracy of them.
These files consist of:

1. Annual report of the company
2. Financial balance sheets
3. Income statements
4. Financial reports
5. Different reports prepared by Finance Department



INTRODUCTION


FINANCIAL STATEMENTS
Financial statements are summaries of the operating, financing, and investment
activities of a business. Financial statements should provide information useful to
both investors and creditors in making credit, investment, and other business
decisions. And this usefulness means that investors and creditors can use these
statements to predict, compare, and evaluate the amount, timing, and uncertainty of
potential cash flows. In other words, financial statements provide the information
needed to assess a companys future earnings and therefore the cash flows
expected to result from those earnings. In this chapter, we discuss the four basic
financial statements: the balance sheet, the income statement, the statement of cash
flows, and the statement of shareholders equity. The analysis of financial statements
is provided in Part Six of this book.

ACCOUNTING PRINCIPLES AND ASSUMPTIONS
Being a MINI RATNA GOVT. OF INDIA ENTERPRISE;IRCTC has to follow
DPE(Department of Public Enterprise ) guidelines

The accounting data in financial statements are prepared by the firms management
according to a set of standards, referred to as generally accepted accounting
principles (GAAP). The financial statements of a company whose stock is publicly
traded must, by law, be audited at least annually by independent public accountants
(i.e., accountants who are not employees of the firm). In such an audit, the
accountants examine the financial statements and the data from which these
statements are prepared and attestthrough the published auditors opinionthat
these statements have been prepared according to GAAP. The auditors opinion
focuses on whether the statements conform to GAAP and that there is adequate
disclosure of any material change in accounting principles.
The financial statements are created using several assumptions that affect how we
use and interpret the financial data:
statements are not market or replacement values, but rather reflect the original cost
(adjusted for depreciation, in the case of depreciable assets).
of measurement is the dollar. While this seems logical, the
effects of inflation, combined with the practice of recording values at historical cost,
may cause problems in using and interpreting these values.
eriods of time. Generally, statements
are produced to cover a chosen fiscal year or quarter, with the income statement and
the statement of cash flows spanning a periods time and the balance sheet and
statement of shareholders equity as of the end of the specified period. But because
the end of the fiscal year is generally chosen to coincide with the low point of activity
in the firms operating cycle, the annual balance sheet and statement of
shareholders equity may not be representative of values for the year.
Most businesses use accrual accounting, where income and revenues are matched
in timing such that income is recorded in the period in which it is earned and
expenses are reported in the period in which they are incurred to generate revenues.
The result of the use of accrual accounting is that reported income does not

necessarily coincide with cash flows. Because the financial analyst is concerned
ultimately with cash flows, he or she often must understand how reported income
relates to a companys cash flows.
that the business enterprise will continue indefinitely justifies the appropriateness of
using historical costs instead of current market values because these assets are
expected to be used up over time instead of sold.
requirement that there be full disclosure means that, in addition to the accounting
numbers for such accounting items as revenues, expenses, and assets, narrative
and additional numerical disclosures are provided in notes accompanying the
financial statements. An analysis of financial statements is therefore not complete
without this additional information.
one interpretation of an event is possible, statements are prepared using the most
conservative interpretation.

The financial statements and the auditors findings are published in the firms annual
and quarterly reports sent to shareholders and the 10K and 10Q filings with the
Securities and Exchange Commission (SEC).Also included in the reports, among
other items, is a discussion by management, providing an overview of company
events. The annual reports are much more detailed and disclose more financial
information than the quarterly reports.


















COMPANY PROFILE


Indian Railway Catering and Tourism Corporation (IRCTC) is a subsidiary of
the Indian Railways that handles the catering, tourism and online ticketing operations
of the railways. The Corporation has posted impressive operational and financial
numbers during the year 2009-10. The total income of the Corporation reached
Rs.721.97 Crore registering an increase of 16.68 per cent over previous year and it
made a contribution of Rs.82.28 Crore to the Railways revenues, which was an
increase of 7.50 % over the previous year. The Corporation earned a net profit of
Rs.63.05 Crore, indicating an increase of 35.6 per cent over the previous year. It
recommended a dividend of Rs.12.61 Crore, again indicating an increase of 35.5 per
cent. The dividend payout is 63.05 per cent on the Equity Share Capital.
The Corporation realized 85 % payment of the current bills from its customers
indicating sound commercial performance. The total outstanding at the end of the
year was Rs. 232 Crore out of which Rs. 144 Crore was to come from the Railways.
The Corporation has a nationwide presence spread over 1008 stations of the Indian
Railways and 350 pair of trains. It has provided catering in 18 numbers of additional
new trains that got introduced during 2009-10 and for the first time there has been a
paradigm shift in providing mandatory catering in non-AC sleeper coaches of
Duronto Trains as against the earlier provision in the AC coaches of Rajdhani and
Shatabdi Trains. During the year 2009-10, 9 new Duronto trains have been
introduced. In the premium food segment IRCTC commissioned 13 new Food Plazas
/ Fast Food units during the year and taking the number to 78 and also
commissioned 25 Jan Ahaar outlets for sale of low priced wholesome food and
regional cuisines for not so affluent travelling passengers.
During the year, the Ministry of Railways started the process of review of Catering
Policy and recently, on 21st July, 2010, the Ministry of Railways has issued the New
Catering Policy, 2010. The revised policy has laid down that all catering services
other than Food Plazas and fast food units would be managed by Zonal Railways.
With the new challenges come greater opportunities.
IRCTC has a tremendous potential for growth in tourism and it would aim to expand
its business to become a major tourism player in the country. Also the premier
catering segment on Railways would be expanded apart from the industrial and
institutional catering business to enlarge its activities and sustain its revenues.

Two Plants of Railneer Packaged Drinking water are being operated by IRCTC at
Nangloi (Delhi) and Danapur (Bihar). During the year, the production of Railneer at
Nangloi and Danapur was 3.19 Crore and 2.23 Crore bottles respectively as against
installed capacity of 3.34 Crore and 2.45 Crore bottles respectively.
During the year, the capacity of Danapur Plant was increased from 5,500 Cartons
per day to 8,500 Cartons per day.
Two new plants at Palur and Ambernath are in the process of setting up by IRCTC.
The construction of Railneer Plant at Palur (Tamil Nadu) is in advance stage and
likely to be commissioned soon. The plan for Ambernath plant has been finalized and
the tender process is likely to start in a few months.
The Corporation continued to provide greater customer focus with improved methods
of feedback and customer complaints management and has shown continued
improvement in food and safety audit ratings as well as customers satisfaction
surveys conducted by independent 3rd parties. The majority ratings have been
above 80 %, it has also made progress in ISO certification and HACCP certification.
During the year, the Corporations Tourism activities increased manifold. The
numbers of tourist have gone up by 35 %. The train / coach charters have gone up
by 55 %. The number of Bharat Darshan Trains has been increased by 30 % and Hill
charters increased by 44 %. The Corporation has successfully tied up with Kendriya
Vidyalaya for undertaking students educational trips under its Travel to learn
schemes as well as with Tamil Nadu Government under Sarva Shiksha Abhiyan. At
the top end, it has successfully launched its super luxury tourist train The
Maharajas Express. The train has also been voted as best Luxury Tourist
Train in the country.









The following awards have been conferred on IRCTC :

Rated Excellent for MOU Evaluation for the year 2008-09 by Department of Public
Enterprises.
CNBC Awaaz-Travel Awards The Special Commendation for Redefining Indian
Railways Award 2009 for E-ticketing by Ms. Selja, Honble Minister of Tourism.
PC Quest awarded the Excellence Award for Most Innovative Project in 2009 for
139-Rail Sampark.
QCI DL Shah National Award on Economics of Quality QCI - D. L. Shah National
Award for our initiatives on food safety and Economics of Quality by Quality Council
of India by Dr. Masaki Imai , Quality Guru of Japan.
The Grand Jury of the M Billionth Award South Asia for the year 2010 Certificate
of Recognition SMS 139 Railway Enquiry.
ICWAI National Quality Award for Excellence in Cost Management 2009: First
Prize under public service sector medium category by Shri Salman Khurshid,
Honble Minister of State for Corporate Affairs.
CNBC Awaaz Travel Award 2010 for the Maharajas Express-The Best Luxury
Train from Honble Union Minister for Tourism, Kumari Selja.
The India Pride Award-Gold from Shri Pranab Mukherjee, Honble Union Minister of
Finance for Internet Ticketing.
The SKOCHs-The World Open Award for Integrated Train Enquiry System (ITES)
from the Controller of Certifying Authority, Government of India.The Corporations e-
ticketing website www.irctc.co.in continued to be voted as one of the most popular
websites with more than one Crore hits per day. Its internet ticketing in terms number
of passengers has grown by more than 60 % and in terms of value of tickets it has
grown by more than 50 %. It touched a highof 3 lakh 7 thousand tickets booked in a
day and on an average during March, 2010 it sold more than 2 lakh 50 thousands
tickets per day.
The integrated train enquiry system has won several awards and has handled more
than 7 lakh calls per day. It has successfully launched the SMS service for providing
the train running and PNR information and handled over one crore SMS in 2009 - 10.
The Comptroller and Auditor General of India has conducted the supplementary
audit on audited accounts of the Corporation for the year ended 31st March, 2010
under Section 619(4) of Companies Act, 1956 andhas offered NIL Comments on the
same.
IRCTC has been complying with the requirements of Corporate Governance as
stipulated by the Department of Public Enterprises (DPE), Government of India.






Board of Directors

Chairman
Shri Vivek Sahai,
Chairman Railway Board and Member Traffic

Managing Director
Shri Rakesh Kumar Tandon,

Functional Directors
Dr. Nalin Shinghal,
Director (Tourism & Marketing)

Shri Vinod Asthana,
Director(Catering Services)

Shri V.R. Gupta,
Director(Finance)

Government Directors
Smt. Mani Anand
Executive Director(T&C),Railway Board,
Ministry of Railways

Shri Naresh Salecha
Executive Director(FC),Railway Board,
Ministry of Railways

Independent Directors
Shri Jagdeep S. Chhokar
Shri Alok Shivapuri
Shri R.N. Bhardwaj
Shri R.K. Agrawal
Audit Committee:
Chairman
Shri R.N. Bhardwaj,

Members
Shri Vinod Asthana,
Shri Jagdeep S. Chhokar
Shri Alok Shivapuri
Shri R.K. Agrawal

Company Secretary:
Shri Rakesh Gogia

Statutory Auditors:
M/S S.P. Marwaha & Co.,
Chartered Accountants,New Delhi.

OFFICES
Registered and Corporate Office:
9th Floor, Bank of Baroda Building,
16 Parliament Street, New Delhi-110 001.

Part Portion of Corporate Office:
2nd and 5th Floor, STC Building,
Jawahar Vyapar Bhawan,
1 Tolstoy Marg, New Delhi - 110001

Internet Ticketing Office:
New Operations Centre,
Northern Railway Reservation Office,
IRCA Complex, Chelmsford Road,
New Delhi-110055.

Railneer Plant, Nangloi:
Northern Railways Wireless Station Area,
Opp. Nangloi Bus Depot, Rohtak Road,
Nangloi, Delhi-110 041.

Railneer Plant, Danapur:
Loco Colony,
South of R.P.F. Barracks, Khagul,
Danapur-801105 (Bihar)
North Zone :
Ginger Rail Yatri Niwas,
Ground Floor,
New Delhi Railway Station,
Ajmeri Gate Side,New Delhi-110001

East Zone I & II:
Old Koilaghat Building,
3, Koilaghat Street,Kolkata-700001.

West Zone :
2nd Floor,
New Administrative Building,
Central Railway, CST,Mumbai-400001.

South Zone :
6A, The Rain Tree Place,
9, Mc Nicolas Road, Chetpet,Chennai-600034.

South Central Zone :
2nd Floor, Am Sri Classic Complex,
Sarojini Devi Road,Secunderabad-500071

Financial Achievements

During the year 2009-10, the Corporation achieved a total income of Rs.721.97
Crore as compared to Rs.618.77 Crore in 2008-09 thereby registering a growth of
approx. 17 %. The increase in income was achieved mainly due to quantum jump in
internet ticketing (from Rs.74.81 Crore to Rs.112.07 Crore) and tourism activities
(from Rs.27.94 Crore to Rs.44.73 Crore).
Quantum jump in internet ticketing was witnessed due to excellent level of service
and upgraded infrastructure. The growth in tourism business was achieved due to
IRCTCs focused approach on developing tourism business segment.
A net profit of Rs.63.05 Crore was earned during 2009-10 as compared to Rs 46.50
Crore in 2008-09 due to enhanced revenue and control on expenditure. An amount
of Rs.30.00 Crore has been provided towards Haulage Charges as was provided
during the previous year. As at 31st March 2010, the Reserves and Surplus of the
Corporation stood at Rs.142.76 Crore. The Net Worth went up from Rs.114.46
Crore during the previous year to Rs.162.76 Crore during the year under review.


Profit earned by the Corporation has been appropriated in the following manner:


CONTRIBUTION TO REVENUES OF RAILWAYS:
During the year the Corporation contributed a sum of Rs. 82.28 crore to the
revenues of Indian Railways as against a sum of Rs. 76.54 Crore during the
previous year. Contribution to the Revenues of Railways comprises Haulage
Charges, Concession fee, License fee, User Charges and Dividend. The
sharing of revenues with the various Zonal Railways has been made in terms
of Memorandum of Understanding dated 17th January, 2007. In addition to
the above, tickets worth Rs.6011 Crore were booked during the year as
against Rs.3889 Crore during the previous year.








Scorecard of Packages from IRCTC


During 2009-10, a total of 43,258 passengers availed of IRCTC tour
packages (rail tour packages and land tour packages) as against 31,943
passengers during the previous year.

248 Train / Coach Charters were undertaken by the Corporation as against
159 Charters during the previous year.

57 Bharat Darshan - Village on Wheels trips were operated with a total of
22,621 passengers as against 47 trips with 18,801 passengers during the
previous year.

36 Hill Charters were operated on hill railways as against 25 Charters
operated during the previous year.

Mahaparinirvan Express, Buddhist Circuit Special Train and other
Buddhist trains during its Third season, the trains have gained popularity
with an increase of almost 110 % in number of passengers. A multi-pronged
marketing strategy has been put in place for the forthcoming season.

Educational Tours:
7,829 students and teachers have availed the facility of educational tours as
against 22,801 students and teachers during the last year to various
destinations. The decline was due to shifting of Delhi Govt. Business to
various State Tourism Corporations etc.
During the year, IRCTC made a tie-up with the Kendriya Vidyalaya Sangathan
for operating Educational Trips under its travel and learn scheme. A tie-up
was made with Tamil Nadu Government for operating educational tours for
children from backward and under privileged classes under the Sarva Shiksha
Abhiyan scheme, under which 3,272 children participated.

Maharajas Express; IRCTCs top end luxury tourist train the Maharajas
Express was completed in the current year. The train made two trial trips from
6th 13th and 14th 20th March, 2010 and was formally flagged of on 20th
March, 2010 at Kolkata by Honble Minister for Railways, Ms. Mamta Banerjee

Luxury trains Palace on wheels ; fairy queen ; deccan Odyssy have given
a 100% performance.







OTHER AREAS OF INVOLLVEMENT OF IRCTC

Integrated Train Enquiry System (139-Rail Sampark Call Centre):
IRCTC is managing a Call Centre for passenger enquiry. A customer can dial 139
from anywhere in the country and get all information from Call Centre related to train
timing, PNR confirmation, train routes and other relevant information related to
Indian Railways.

Tourism Portal
IRCTC continue to strengthen its national tourism award winning tourism portal

www.railtourismindia.com,
as a One Stop Travel Shop meeting all the travel & tourism needs of customers. This
includes online booking of tour packages, hotels, air tickets and Cab Rental across
the country.


Packaged Drinking Water (Railneer):
Two Plants of Railneer Packaged Drinking water are operating at Nangloi (Delhi) and
Danapur (Bihar).During the year, the production of Railneer at Nangloi and Danapur
was 3.19 Crore and 2.23 Crore bottles respectively. During the year, the capacity of
Danapur Plant was increased from 5,500 Cartons per day to 8,500 Cartons per day.
Two Railneer Plants at Palur (Tamil Nadu and Ambernath (Maharashtra) are being
set up.The distribution of the Railneer is being done at various Railway Stations, in
addition to, supplies to Parliament House, PMO, Railway Board and Ministry of
External Affairs etc.
The results of the tests carried out by accredited laboratories on Railneer Packaged
Drinking Water indicate that the quality of Railneer, conforms to European Economic
Community (EEC) norms for pesticides residue.

DIVIDEND & CAPITAL STRUCTURE of IRCTC

DIVIDEND
Keeping in view the financial results, the Board of Directors recommended interim
dividend of Rs.4.00 Crore. The Board of Directors have now recommended a Total
Dividend of Rs.12.61 Crore (Approximately, 20 % of the Net Profit) including interim
dividend for the year 2009-10.
The total dividend for the year will be Rs. 6.31 per share as against Rs.4.65 per
share paid for the previous year.The total dividend pay out for the year would be
Rs.12.61crore as against Rs.9.31 crore paid for the previous year.

CAPITAL STRUCTURE
As on 31st March 2010, paid-up share capital of the Corporation stood at Rs.20.00
Crore. The Government of India holds the entire paid up share capital of the
Corporation. During the year, there was no change in the paid-up share capital.























Financial Statements of Indian Railway Catering and
Tourism Corporation Limited(IRCTC)




















Balance Sheet
In financial accounting, a balance sheet or statement of financial position is a
summary of the financial balances of a sole proprietorship, a business partnership or
a company. Assets, liabilities and ownership equity are listed as of a specific date,
such as the end of its financial year. A balance sheet is often described as a
"snapshot of a company's financial condition". Of the four basic financial statements,
the balance sheet is the only statement which applies to a single point in time of a
business' calendar year.
A standard company balance sheet has three parts: assets, liabilities and ownership
equity. The main categories of assets are usually listed first, and typically in order
of liquidity. Assets are followed by the liabilities. The difference between the assets
and the liabilities is known as equity or the net assets or the net worth or capital of
the company and according to the accounting equation, net worth must equal assets
minus liabilities.
Another way to look at the same equation is that assets equals liabilities plus owner's
equity. Looking at the equation in this way shows how assets were financed: either
by borrowing money (liability) or by using the owner's money (owner's equity).
Balance sheets are usually presented with assets in one section and liabilities and
net worth in the other section with the two sections "balancing."
A business operating entirely in cash can measure its profits by withdrawing the
entire bank balance at the end of the period, plus any cash in hand. However, many
businesses are not paid immediately; they build up inventories of goods and they
acquire buildings and equipment. In other words: businesses have assets and so
they can not, even if they want to, immediately turn these into cash at the end of
each period. Often, these businesses owe money to suppliers and to tax authorities,
and the proprietors do not withdraw all their original capital and profits at the end of
each period. In other words businesses also have liabilities.










BALANCE SHEET(as at 31st march2008)

Amt. Total
Sources of Funds:

Shareholders Funds

Share Capital Rs. 2,000.00

Reserves and Surplus Rs. 5,884.92

Deferred Tax Liability (net) Rs. 258.97

TOTAL
Rs.
8,143.89

Application of Funds:

Fixed Assets

Gross Block Rs. 6,137.97

Less: Depreciation Rs. -2,438.02

Net Block Rs. 3,699.95

Add : Capital Work in Progress Rs. 90.58


Rs.
3,790.53
Investments

Rs.
0.20
Deferred Tax Asset

nil
Current Assets, Loans and advances:

Interest accrued on Investment
Rs.
0.10

Inventories Rs. 573.19

Sundry Debtors Rs. 19,206.69

Cash and Bank Balances Rs. 11,677.32

Other Current Assets Rs. 651.52

Loans & Advances Rs. 8,554.20


Rs.
40663.02
Less: Current Liabilities and provisions:

Current Liabilities Rs. -32,389.69

Provisions Rs. -3,920.17


Rs -36,309.86
Net Current Assets /working capital

Rs.
4,353.16
Miscellaneous Expenditure to the extent not written off or adjusted

nil
TOTAL
Rs.
8,143.89







Note: All figures in lakh Rupees

BALANCE SHEET(as at 31st march2009)

Amt. Total
Sources of Funds:

Shareholders Funds

Share Capital Rs. 2,000.00

Reserves and Surplus Rs. 9,445.80

Deferred Tax Liability (net) Rs. 186.70

TOTAL
Rs.
11,632.51

Application of Funds:

Fixed Assets

Gross Block Rs. 7,636.09

Less: Depreciation Rs. -3,423.54

Net Block Rs. 4,212.56

Add : Capital Work in Progress Rs. 995.84


Rs. 5,208.39
Investments

Rs.
250.20
Deferred Tax Asset

nil
Current Assets, Loans and advances:

Interest accrued on Investment
Rs.
0.12

Inventories Rs. 519.19

Sundry Debtors Rs. 23,972.02

Cash and Bank Balances Rs. 13,732.94

Other Current Assets Rs. 448.04

Loans & Advances Rs. 13,348.30


Rs.
52,020.61
Less: Current Liabilities and provisions:

Current Liabilities Rs. -38,334.64

Provisions Rs. -7,512.05

Rs-45,846.69
Net Current Assets /working capital

Rs. 6,173.92
Miscellaneous Expenditure to the extent not written off or adjusted

nil
TOTAL
Rs.
11,632.51







Note:All figures in lakh Rupees



Amt. Total Amt. Total

BALANCE SHEET(as at 31st march2010)

Amt. Total Description % Amt. Total Description % Amt. Total
Sources of Funds:





Shareholders Funds





Share Capital Rs. 2,000.00

24.56%
Rs.
2,000.00

17.19% Rs. 2,000.00

Reserves and Surplus Rs. 5,884.92

72.26%
Rs.
9,445.80

81.20% Rs. 14,275.66

Deferred Tax Liability (net) Rs. 258.97

3.18%
Rs.
186.70

1.60% nil

TOTAL
Rs.
8,143.89 100.00% Rs. 11,632.51 100.00% Rs. 16,275.66





Application of Funds:





Fixed Assets

% contr.in F.A.

% contr.in F.A.



Gross Block Rs. 6,137.97

161.93% 75.37%
Rs.
7,636.09

146.61% 65.64% Rs. 12,683.74

Less: Depreciation Rs. -2,438.02

-64.32% -29.94% Rs. -3,423.54

-65.73% -29.43% Rs. -4,613.58

Net Block Rs. 3,699.95

97.61% 45.43%
Rs.
4,212.56

80.88% 36.21% Rs. 8,070.58

Add : Capital Work in Progress Rs. 90.58

2.39% 1.11%
Rs.
995.84

19.12% 8.56% Rs. 759.99


Rs.
3,790.53

46.54%

Rs.
5,208.39

44.77% Rs. 8,830.15
Investments

Rs.
0.20

0.00%

Rs.
250.20

2.15%
Rs.
250.20
Deferred Tax Asset

nil

0.00%

nil

0.00% Rs. 93.89
Current Assets, Loans and advances:

% contr.in Net C.A.

% contr.in Net C.A.



Interest accrued on Investment
Rs.
0.10

0.00% 0.00%
Rs.
0.12

0.00%

Rs.
0.12

Inventories Rs. 573.19

13.17% 7.04%
Rs.
519.19

8.41% 4.46% Rs. 778.83

Sundry Debtors Rs. 19,206.69

441.21% 235.84%
Rs.
23,972.02

388.28% 206.08% Rs. 23,231.94

Cash and Bank Balances Rs. 11,677.32

268.25% 143.39%
Rs.
13,732.94

222.43% 118.06% Rs. 19,800.43

Other Current Assets Rs. 651.52

14.97% 8.00%
Rs.
448.04

7.26% 3.85% Rs. 472.41

Loans & Advances Rs. 8,554.20

-744.05% 105.04%
Rs.
13,348.30

216.20% 114.75% Rs. 16,231.08


Rs.
40663.02

0.00%

Rs. 52,020.61

447.20% Rs. 60,514.81
Less: Current Liabilities and provisions:





Current Liabilities Rs. -32,389.69

-744.05% -397.72% Rs. -38,334.64

-620.91% -329.55% Rs. -47,852.94

Provisions Rs. -3,920.17

-90.05% -48.14% Rs. -7,512.05 -121.67% -64.58% Rs. -5,560.46


Rs -36,309.86

-445.85%

Rs. -
45,846.69

-394.13% Rs. -53,413.40
Net Current Assets /working capital

Rs.
4,353.16

53.45%

Rs.
6,173.92

53.07% Rs. 7,101.42
Miscellaneous Expenditure to the extent not written off or adjusted

nil

0.00%

nil

nil
TOTAL
Rs.
8,143.89 100.00% Rs. 11,632.51 100.00% Rs. 16,275.66

BALANCE SHEET(as at 31st march2011)

Amt. Total
Sources of Funds:

Shareholders Funds

Share Capital Rs. 2,000.00

Reserves and Surplus Rs. 19,141.04

Deferred Tax Liability (net) nil

TOTAL
Rs.
21,141.04

Application of Funds:

Fixed Assets

Gross Block Rs. 13,517.96

Less: Depreciation Rs. -5,953.83

Net Block Rs. 7,564.13

Add : Capital Work in Progress Rs. 1,636.08


Rs.
9,200.21
Investments

Rs.
0.20
Deferred Tax Asset

nil
Current Assets, Loans and advances:

Interest accrued on Investment
Rs.
0.12

Inventories Rs. 620.92

Sundry Debtors Rs. 26,163.88

Cash and Bank Balances Rs. 24,810.76

Other Current Assets Rs. 841.53

Loans & Advances Rs. 14,698.27


Rs.
66,935.48
Less: Current Liabilities and provisions:

Current Liabilities Rs. -46,120.34

Provisions Rs. -8,274.51


Rs.-54,994.85
Net Current Assets /working capital

Rs.
11,940.63
Miscellaneous Expenditure to the extent not written off or adjusted

nil
TOTAL
Rs.
21,141.04



Note:All figures in lakh Rupees







Income statement
Income statement (also referred to as profit and loss statement (P&L), statement of
financial performance, earnings statement, operating statement or statement of
operations) is a company's financial statement that indicates how
the revenue (money received from the sale of products and services before
expenses are taken out, also known as the "top line") is transformed into the net
income (the result after all revenues and expenses have been accounted for, also
known as the "bottom line"). It displays the revenues recognized for a specific period,
and the cost and expenses charged against these revenues, including write-
offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of
the income statement is to show managers and investors whether the company
made or lost money during the period being reported.
The important thing to remember about an income statement is that it represents a
period of time. This contrasts with the balance sheet, which represents a single
moment in time.
Charitable organizations that are required to publish financial statements do not
produce an income statement. Instead, they produce a similar statement that reflects
funding sources compared against program expenses, administrative costs, and
other operating commitments. This statement is commonly referred to as
the statement of activities. Revenues and expenses are further categorized in the
statement of activities by the donor restrictions on the funds received and expended.
The income statement can be prepared in one of two methods. The Single Step
income statement takes a simpler approach, totaling revenues and subtracting
expenses to find the bottom line. The more complex Multi-Step income statement (as
the name implies) takes several steps to find the bottom line, starting with the gross
profit. It then calculates operating expenses and, when deducted from the gross
profit, yields income from operations. Adding to income from operations is the
difference of other revenues and other expenses. When combined with income from
operations, this yields income before taxes. The final step is to deduct taxes, which
finally produces the net income for the period measured
























Financial Statement analysis












Comparative Financial Statement analysis
Comparative Financial Statement analysis provides information to assess the
direction of change in the business. Financial statements are presented as on a
particular date for a particular period. The financial statement Balance Sheet
indicates the financial position as at the end of an accounting period and the financial
statement Income Statement shows the operating and non-operating results for a
period. But financial managers and top management are also interested in knowing
whether the business is moving in a favourable or an unfavourable direction. For this
purpose, figures of current year have to be compared with those of the previous
years. In analyzing this way, comparative financial statements are prepared.
Comparative Financial Statement Analysis is also called as Horizontal analysis.
The Comparative Financial Statement provides information about two or more years'
figures as well as any increase or decrease from the previous year's figure and it's
percentage of increase or decrease. This kind of analysis helps in identifying the
major improvements and weaknesses. For example, if net income of a particular
year has decreased from its previous year, despite an increase in sales during the
year, is a matter of serious concern. Comparative financial statement analysis in
such situations helps to find out where costs have increased which has resulted in
lower net income than the previous year.
Comparative Balance Sheet

In order to analyze comparative balance sheets and develop Statement of Cash
Flows, we first consider any increases or decreases in your current asset and current
liability accounts between the two years of balance sheet information.
Here's the rule we should always remember when developing your Statement of
Cash Flows:

Increases in current asset accounts, decrease cash.
Decreases in current asset accounts, increase cash.
Increases in current liability accounts, increase cash.
Decreases in current liability accounts, decrease cash.
We must look at the last two years of the firm's balance sheets and compare the
differences between the two in order to develop the Statement of Cash Flows.
A comparative balance sheet usually has two columns of amounts that appear to the
right of the account titles or other descriptions such as Cash and Cash Equivalents,
Accounts Receivable, Accounts Payable, etc. The first column of amounts contains
the amounts as of a recent moment or point in time, say December 31, 2009. To the
right will be a column containing corresponding amounts from an earlier date, such
as December 31, 2008. The older amounts appear further from the account titles or
descriptions as the older amounts are less important.
Providing the amounts from an earlier date gives the reader of the balance sheet a
point of reference ;something to which the recent amounts can be compared.


Comparative Income statement

A comparative income statement shows revenue and expenses over the current and
previous years, how much revenue and expenses have increased or decreased, and
the percentage they have increased or decreased.
A comparative income statement is a multi-column income statement, where the
results of multiple accounting periods are shown in separate columns. The intent of
this format is to allow the reader to compare the results of multiple historical periods,
thereby giving a view of how the business is performing over time.
The most common presentation format for a comparative income statement is to
show the results of the most recent accounting period in the column immediately
adjacent to the row titles, while the results of earlier periods are shown progressively
further to the right.
An example of this format for a multi-month presentation is March | February |
January.
An alternative presentation format is the reverse, where the results of the most
recent period are listed furthest to the right. However, this is a less usable format,
since if many columns are used, the reader cannot easily associate the line
descriptions on the far left side of the presentation with the most recent financial
results listed on the far right side.


Cash Flow Statement
In financial accounting, a cash flow statement, also known as statement of cash
flows or funds flow statement, is a financial statement that shows how changes
in balance sheet accounts and income affect cash and cash equivalents, and breaks
the analysis down to operating, investing, and financing activities. Essentially, the
cash flow statement is concerned with the flow of cash in and cash out of the
business. The statement captures both the current operating results and the
accompanying changes in the balance sheet. As an analytical tool, the statement of
cash flows is useful in determining the short-term viability of a company, particularly
its ability to pay bills. International Accounting Standard 7 (IAS 7), is the International
Accounting Standardthat deals with cash flow statements.
People and groups interested in cash flow statements include:
Accounting personnel, who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors, who want a clear picture of a company's ability to
repay
Potential investors, who need to judge whether the company is financially sound
Potential employees or contractors, who need to know whether the company will
be able to afford compensation
Shareholders of the business.

Purpose
The cash flow statement was previously known as the flow of Cash statement. The
cash flow statement reflects a firm's liquidity.
The balance sheet is a snapshot of a firm's financial resources and obligations at a
single point in time, and the income statement summarizes a firm's financial
transactions over an interval of time. These two financial statements reflect
the accrual basis accounting used by firms to match revenues with the expenses
associated with generating those revenues. The cash flow statement includes only
inflows and outflows of cash and cash equivalents; it excludes transactions that do
not directly affect cash receipts and payments. These non-cash transactions include
depreciation or write-offs on bad debts or credit losses to name a few.The cash flow
statement is a cash basis report on three types of financial activities: operating
activities, investing activities, and financing activities. Non-cash activities are usually
reported in footnotes.
The cash flow statement is intended to
1. provide information on a firm's liquidity and solvency and its ability to
change cash flows in future circumstances
2. provide additional information for evaluating changes in assets, liabilities and
equity
3. improve the comparability of different firms' operating performance by
eliminating the effects of different accounting methods
4. indicate the amount, timing and probability of future cash flows
The cash flow statement has been adopted as a standard financial statement
because it eliminates allocations, which might be derived from different accounting
methods, such as various timeframes for depreciating fixed assets.









Cash flow activities
The cash flow statement is partitioned into three segments, namely:
1) cash flow resulting from operating activities;
2) cash flow resulting from investing activities ; and
3) cash flow resulting from financing activities.
The money coming into the business is called cash inflow, and money going out from
the business is called cash outflow.
Operating activities
Operating activities include the production, sales and delivery of the company's
product as well as collecting payment from its customers. This could include
purchasing raw materials, building inventory, advertising, and shipping the product.
Under IAS 7, operating cash flows include:
Receipts from the sale of goods or services
Receipts for the sale of loans, debt or equity instruments in a trading portfolio
Interest received on loans
Dividends received on equity securities
Payments to suppliers for goods and services
Payments to employees or on behalf of employees
Interest payments (alternatively, this can be reported under financing activities in
IAS 7, and US GAAP)
Items which are added back to [or subtracted from, as appropriate] the net income
figure (which is found on the Income Statement) to arrive at cash flows from
operations generally include:
Depreciation (loss of tangible asset value over time)
Deferred tax
Amortization (loss of intangible asset value over time)
Any gains or losses associated with the sale of a non-current asset, because
associated cash flows do not belong in the operating section.(unrealized
gains/losses are also added back from the income statement)




Investing activities
Examples of Investing activities are
Purchase or Sale of an asset (assets can be land, building, equipment,
marketable securities, etc.)
Loans made to suppliers or received from customers
Payments related to mergers and acquisitions
Financing activities
Financing activities include the inflow of cash from investors such
as banks and shareholders, as well as the outflow of cash to shareholders
as dividends as the company generates income. Other activities which impact the
long-term liabilities and equity of the company are also listed in the financing
activities section of the cash flow statement.
Under IAS 7,
Proceeds from issuing short-term or long-term debt
Payments of dividends
Payments for repurchase of company shares
Repayment of debt principal, including capital leases
For non-profit organizations, receipts of donor-restricted cash that is limited to
long-term purposes
Items under the financing activities section include:
Dividends paid
Sale or repurchase of the company's stock
Net borrowings
Payment of dividend tax
Disclosure of non-cash activities
Under IAS 7, non-cash investing and financing activities are disclosed in footnotes to
the financial statements. Under US General Accepted Accounting Principles (GAAP),
non-cash activities may be disclosed in a footnote or within the cash flow statement
itself. Non-cash financing activities may include Leasing to purchase an asset
Converting debt to equity
Exchanging non-cash assets or liabilities for other non-cash assets or liabilities
Issuing shares in exchange for assets


Preparation methods
The direct method of preparing a cash flow statement results in a more easily
understood report. The indirect method is almost universally used, because FAS 95
requires a supplementary report similar to the indirect method if a company chooses
to use the direct method.
Direct method
The direct method for creating a cash flow statement reports major classes of gross
cash receipts and payments. Under IAS 7, dividends received may be reported
under operating activities or under investing activities. If taxes paid are directly linked
to operating activities, they are reported under operating activities; if the taxes are
directly linked to investing activities or financing activities, they are reported under
investing or financing activities
Indirect method
The indirect method uses net-income as a starting point, makes adjustments for all
transactions for non-cash items, then adjusts from all cash-based transactions. An
increase in an asset account is subtracted from net income, and an increase in a
liability account is added back to net income. This method converts accrual-basis net
income (or loss) into cash flow by using a series of additions and deductions.








































Ratio Analysis
























Ratio Analysis

A tool used by individuals to conduct a quantitative analysis of information in a
company's financial statements. Ratios are calculated from current year numbers
and are then compared to previous years, other companies, the industry, or even the
economy to judge the performance of the company. Ratio analysis is predominately
used by proponents of fundamental analysis.
There are many ratios that can be calculated from the financial statements pertaining
to a company's performance, activity, financing and liquidity. Some common ratios
include the price-earnings ratio, debt-equity ratio, earnings per share, asset turnover
and working capital

Which Ratio for whom:
As before mentioned there are varieties of people interested to know and read these
information and analyses, however different people for different needs. And it is
because each of these groups have different type of questions that could be
answered by a specific number and ratio.
Therefore we can say there are different ratios for different groups, these groups with
the ratio that suits them is listed below:

1. Investors: These are people who already have shares in the business or they are
willing to be part of it. So they need to determine whether they should buy shares in
the business, hold on to the shares they already have or sell the shares they already
own. They also want to assess the ability of the business to pay dividends. As a
result the Return on Capital Employed Ratio is the one for this group.

2. Lenders: This group consists of people who have given loans to the company so
they want to be sure that their loans and also the interests will be paid and on the
due time. Gearing Ratios will suit this group.

3. Managers: Managers might need segmental and total information to see how they
fit into the overall picture of the company which they are ruling. And Profitability
Ratios can show them what they need to know.

4. Employees: The employees are always concerned about the ability of the
business to provide remuneration, retirement benefits and employment opportunities
for them, therefore these information must be find out from the stability and
profitability of their employers who are responsible to provide the employees their
need. Return on Capital Employed Ratio is the measurement that can help them.

5. Suppliers and other trade creditors: Businesses supplying goods and materials
to other businesses will definitely read their accounts to see that they don't have
problems, after all, any supplier wants to know if his customers are going to pay
them back and they will study the Liquidity Ratio of the companies.



6. Customers: are interested to know the Profitability Ratio of the business with
which they are going to have a long term involvement and are dependent on the
continuance of presence of that.

7. Governments and their agencies: are concerned with the allocation of
resources and, the activities of businesses. To regulate the activities of them,
determine taxation policies and as the basis for national income and similar
statistics, they calculate the Profitability Ratio of businesses.

8. Local community: Financial statements may assist the public by providing
information about the trends and recent developments in the prosperity of the
business and the range of its activities as they affect their area so they are interested
in lots of ratios.

9. Financial analysts: they need to know various matters, for example, the
accounting concepts employed for inventories, depreciation, bad debts and so on.
therefore they are interested in possibly all the ratios.

10. Researchers: researchers' demands cover a very wide range of lines of enquiry
ranging from detailed statistical analysis of the income statement and balance sheet
data extending over many years to the qualitative analysis of the wording of the
statements depending on their nature of research.















Current Ratio

The current ratio is a popular financial ratio used to test a company's liquidity (also
referred to as its current or working capital position) by deriving the proportion of
current assets available to cover current liabilities.

The concept behind this ratio is to ascertain whether a company's short-term assets
(cash, cash equivalents, marketable securities, receivables and inventory) are
readily available to pay off its short-term liabilities (notes payable, current portion of
term debt, payables, accrued expenses and taxes). In theory, the higher the current
ratio, the better.


Formula:
CURRENT RATIO = CURRENT ASSET
CURRENT LIABILITIES




Calculation of current ratio for IRCTC

Year Ratio

2008 40663.02/32389.69
=1.26

2009 52020.61/3833.64
=1.35

2010 60514.81/47852.94
=1.26

2011 66935.48/48720.34
=1.37









Quick Ratio
The quick ratio or the quick assets ratio or the acid-test ratio is a liquidity indicator
that further refines the current ratio by measuring the amount of the
most liquid current assets there are to cover current liabilities. The quick ratio is more
conservative than the current ratio because it excludes inventory and other current
assets, which are more difficult to turn into cash. Therefore, a higher ratio means a
more liquid current position.


Formula:


QUICK RATIO = LIQUID ASSETS OR (CASH OR EQUIVALENTS+SHORT TERM INVESTMENTS+
A/Cs RECEIVABLE)
CURRENT LIABILITIES

OR
=TOTAL CURRENT ASSET NON LIQUID ASSET
CURRENT LIABILITIES



Calculation of quick ratio for IRCTC

Year Ratio

2008 (40663.02-19858.21)
32389.64
=0.63
2009 (5020.61-2320.06)
38334.64
=1.28

2010 (60514.81-23704.35)
47852.94
=0.76

2011 (66935.48-27005.41)
40720.34
=0.98








Earnings per share
The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serves as an indicator of a company's profitability.


Formula:
E.P.S. = Net Income Dividends on Preferred Stock or Profit Available for appropriation
Average Outstanding Shares


When calculating, it is more accurate to use a weighted average number of shares
outstanding over the reporting term, because the number of shares outstanding can
change over time. However, data sources sometimes simplify the calculation by
using the number of shares outstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or
warrants outstanding in the outstanding shares number.


Calculation of EPS for IRCTC (Face Value of Rs.10 per share)

Year E,P.S

2008 Rs. 297825000 /28720000
= Rs. 10.37

2009 Rs. 554333000 /23842000
= Rs. 23.25


2010 Rs. 725933000 /23024000
= Rs. 31.53


2011 Rs. 736259000 /24227000
= Rs. 30.39



Earnings Yield
The earnings per share for the most recent 12-month period divided by the current
market price per share. The earnings yield (which is the inverse of the P/E ratio)
shows the percentage of each dollar invested in the stock that was earned by the
company.

The earnings yield is used by many investment managers to determine optimal asset
allocations.


Earning Yeild = E.P.S.
Market Price Per Share.

Money managers often compare the earnings yield of a broad market index (such as
the S&P 500) to prevailing interest rates, such as the current 10-year Treasury yield.
If the earnings yield is less than the rate of the 10-year Treasury yield, stocks as a
whole may be considered overvalued. If the earnings yield is higher, stocks may
considered undervalued relative to bonds.

Economic theory suggests that investors in equities should demand an extra risk
premium of several percentage points above prevailing risk-free rates (such as T-
bills) in their earnings yield to compensate them for the higher risk of owning stocks
over bonds and other asset classes.

Calculation of Earnings Yield for IRCTC(Face Value of Rs.10 per share)

Year Earnings Yield


2008 10.37 /45.60
=0.227

2009 23.25 /70.32
=0.330

2010 31.53 /95.22
=0.331

2011 30.39 /95.65
=0.317


Return on share holder's fund
It is the ratio of net profit to share holder's investment. It is the
relationship between net profit (after interest and tax) and share
holder's/proprietor's fund.
This ratio establishes the profitability from the share holders' point of
view. The ratio is generally calculated in percentage.
The two basic components of this ratio are net profits and shareholder's funds.
Shareholder's funds include equity share capital, (preference share capital) and all
reserves and surplus belonging to shareholders. Net profit means net income after
payment of interest and income tax because those will be the only profits available
for share holders.
Formula:
Return on share holder's fund = Net profit (after interest and tax) 100
Share holder's fund

This ratio is one of the most important ratios used for measuring the overall
efficiency of a firm. As the primary objective of business is to maximize its earnings,
this ratio indicates the extent to which this primary objective of businesses being
achieved. This ratio is of great importance to the present and prospective
shareholders as well as the management of the company. As the ratio reveals how
well the resources of the firm are being used, higher the ratio, better are the results.

Calculation of Return on share holder's fund

Year Return
2008 2074.91 x 100
8143.89
=25.48
2009 4650.11 x 100
11632.51
=39.97

2010 5305.22 x 100
16275.66
=32.59

2011 5078.63 x 100
21141.04
=24.02




Net Profit Margin.
A ratio of profitability calculated as net income divided by revenues, or net profits
divided by sales. It measures how much out of every dollar of sales a company
actually keeps in earnings.

Profit margin is very useful when comparing companies in similar industries. A higher
profit margin indicates a more profitable company that has better control over its
costs compared to its competitors. Profit margin is displayed as a percentage; a 20%
profit margin, for example, means the company has a net income of Rs.0.20 for each
dollar of sales.

Looking at the earnings of a company often doesn't tell the entire story. Increased
earnings are good, but an increase does not mean that the profit margin of a
company is improving. For instance, if a company has costs that have increased at a
greater rate than sales, it leads to a lower profit margin. This is an indication that
costs need to be under better control.


Formula:
Net Profit Margin = Net profit (before interest and tax) 100
Sales
Calculation of Net Profit Margin on share holder's fund
Year Net Profit Margin
2008 3297.52 x 100
50850.85
=6.48
2009 7384.60 x 100
59330.64
=12.46

2010 9475.96 x 100
69202.47
=13.69

2011 12578.96 x 100
73796.09
=17.04




Gross Profit Margin
A financial metric used to assess a firm's financial health by revealing the proportion
of money left over from revenues after accounting for the cost of goods sold. Gross
profit margin serves as the source for paying additional expenses and future savings.

Formula:
Gross Profit Margin = (Revenue COGS) OR Gross Profit 100
Sales


Suppose that ABC Corp. earned Rs.20 lakh in revenue from producing widgets and
incurred Rs.10 lakh in COGS-related expense. ABC's gross profit margin would be
50%. This means that for every dollar that ABC earns on widgets, it really has only
Rs.0.50 at the end of the day.

This metric can be used to compare a company with its competitors. More efficient
companies will usually see higher profit margins.
A measure of how well a company controls its costs. It is calculated by dividing a
company's profit by its revenues and expressing the result as a percentage. The
higher the gross profit margin is, the better the company is thought to control
costs. Investors use the gross profit margin to compare companies in the same
industry and well as in different industries to determine what are the most profitable.
It is also called the profit margin or simply the margin.

A measure calculated by dividing gross profit by net sales. Gross profit margin is an
indication of a firm's ability to turn a dollar of sales into profit after the cost of goods
sold has been accounted for.








Calculation of Gross Profit Margin

Year Gross Profit Margin

2008 50850.85 - 4517.17 x 100
50850.85

=44633.68 x 100
50850.85

=87.78%


2009 59330.64 -342418 x 100
59330.64

=21906.46 x 100
59330.64

=37%


2010 69202.47 24563.28 x 100
69202.47

=44639.19 x 100
69202.47

=64.5%


2011 73796.09 -44349.36 x 100
73796.09

=29446.73 x 100
73796.09

=40%





Return on capital employed
A ratio that indicates the efficiency and profitability of a company's capital
investments.

Formula:
Gross Profit Margin = E.B.I.T 100
Capital Employed

Capital Employed = Total assets-current liabilities

ROCE should always be higher than the rate at which the company borrows,
otherwise any increase in borrowing will reduce shareholders' earnings.

A variation of this ratio is return on average capital employed (ROACE), which takes
the average of opening and closing capital employed for the time period.
The prime objective of making investments in any business is to obtain satisfactory
return on capital invested. Hence, the return on capital employed is used as a
measure of success of a business in realizing this objective.
Return on capital employed establishes the relationship between the profit and
the capital employed. It indicates the percentage of return on capital employed in the
business and it can be used to show the overall profitability and efficiency of the
business.
Calculation of Return on capital employed
Year Net Profit Margin
2008 3297.52 x 100
7884.92
=41.82
2009 7384.60 x 100
11445.81
=64.51

2010 9475.96 x 100
16275.66
=58.22

2011 12578.96 x 100
21141.04
=59.50




GRAPHICAL ANALYSIS OF RATIOES




















0
20
40
60
80
2008
2009
2010
2011
RETURN ON CAPITAL EMPLOYED
RETURN ON CAPITAL
EMPLOYED







Who uses these analyses?

Financial statements are used and analyzed by a different group of parties, these
groups consists of people both inside and outside a business. Generally, these users
are:
A. Internal Users: are owners, managers, employees and other parties who are
directly connected with a company:

1. Owners and managers require financial statements to make important business
decisions that affect its continued operations. Financial analysis is then performed on
these statements to provide management with more detailed information. These
statements are also used as part of management's report to its stockholders, and it
form part of the Annual Report of the company.

2. Employees also need these reports in making collective bargaining agreements
with the management, in the case of labour unions or for individuals in discussing
their compensation, promotion and rankings.


B. External Users: are potential investors, banks, government agencies and other
parties who are outside the business but need financial information about the
business for numbers of reasons.

1. Prospective investors make use of financial statements to assess the viability of
investing in a business. Financial analyses are often used by investors and is
prepared by professionals (financial analysts), thus providing them with the basis in
making investment decisions.

2. Financial institutions (banks and other lending companies) use them to decide
whether to give a company with fresh loans or extend debt securities (such as a
long- term bank loan ).

3. Government entities (tax authorities) need financial statements to ascertain the
propriety and accuracy of taxes and duties paid by a company.

4.Media and the general public are also interested in financial statements of some
companies for a variety of reasons.














IMPORTANCE
Ratio analysis is an important technique of financial analysis. It is a means for
judging the financial health of a business enterprise. It determines and interprets the
liquidity,solvency,profitability,etc. of a business enterprise.

to understand various figures in the financial statements
through the use of different ratios. Financial ratios simplify, sumarise, and systemise
the accounting figures presented in financial statements.

profitability and financial soundness
can be made between one industry and another. Similarly comparision of current
year figures can also be made with those of previous years with the help of ratio
analysis and if some weak points are located, remidial masures are taken to correct
them.

of costs, sales, profits and other important facts. Such trends are useful for planning.

el of activities, can be set as standards for
judging actual performance of a business. For example, if owners of a business aim
at earning profit @ 25% on the capital which is the prevailing rate of return in the
industry then this rate of 25% becomes the standard. The rate of profit of each year
is compared with this standard and the actual performance of the business can be
judged easily.

discloses the position of business with liquidity viewpoint, solvency view point,
profitability viewpoint, etc. with the help of such a study, we can draw conclusion
regardings the financial health of business enterprise.


ADVANTAGES

Ratio analysis is an important and age-old technique of financial analysis. The
following are some of the advantages of ratio analysis:
1. Simplifies financial statements: It simplifies the comprehension of financial
statements. Ratios tell the whole story of changes in the financial condition of the
business.
2. Facilitates inter-firm comparison: It provides data for inter-firm comparison.
Ratios highlight the factors associated with successful and unsuccessful firm. They
also reveal strong firms and weak firms, overvalued and undervalued firms.
3. Helps in planning: It helps in planning and forecasting. Ratios can assist
management, in its basic functions of forecasting. Planning co-ordination, control
and communications.
4. Makes inter-firm comparison possible: Ratios analysis also makes possible
comparison of the performance of different divisions of the firm. The ratios are
helpful in deciding about their efficiency or otherwise in the past and likely
performance in the future.
5. Help in investment decisions: It helps in investment decisions in the case of
investors and lending decisions in the case of bankers etc.

LIMITATIONS
The ratios analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand, they suffer from
serious limitations.
1. Limitations of financial statements: Ratios are based only on the information
which has been recorded in the financial statements. Financial statements
themselves are subject to several limitations. Thus ratios derived, there from, are
also subject to those limitations. For example non-financial changes though
important for the business are not relevant by the financial statements. Financial
statements are affected to a very great extent by accounting conventions and
concepts. Personal judgment plays a great part in determining the figures for
financial statements.
2. Comparative study required: Ratios are useful in judging the efficiency of the
business only when they are compared with past results of the business. However,
such a comparison only provide glimpse of the past performance and forecasts for
future may not prove correct since several other factors like market conditions,
management policies, etc. may affect the future operations.
3. Problems of price level changes: A change in price level can affect the validity
of ratios calculated for different time periods. In such a case the ratio analysis may
not clearly indicate the trend in solvency and profitability of the company. The
financial statements, therefore, be adjusted keeping in view the price level changes if
a meaningful comparison is to be made through accounting ratios.
4. Lack of adequate standard: No fixed standard can be laid down for ideal ratios.
There are no well accepted standards or rule of thumb for all ratios which can be
accepted as norm. It renders interpretation of the ratios difficult.
5. Limited use of single ratios: A single ratio, usually, does not convey much of a
sense. To make a better interpretation, a number of ratios have to be calculated
which is likely to confuse the analyst than help him in making any good decision.
6. Personal bias: Ratios are only means of financial analysis and not an end in
itself. Ratios have to interpret and different people may interpret the same ratio in
different way.
7. Incomparable: Not only industries differ in their nature, but also the firms of the
similar business widely differ in their size and accounting procedures etc. It makes
comparison of ratios difficult and misleading.


CONCLUSION


Ratios make the related information comparable. A single figure by itself has no
meaning, but when expressed in terms of a related figure, it yields significant
interferences. Thus, ratios are relative figures reflecting the relationship between
related variables. Their use as tools of financial analysis involves their comparison
as single ratios, like absolute figures, are not of much use.

company over a period of time. Decisions affecting product prices, per unit costs,
volume or efficiency have an impact on the profit margin or turnover ratios of a
company.

accounting data relationships, which give the decision-maker insights into the
financial performance of a company.

ancial statements is a process of evaluating the relationship
between component parts of financial statements to obtain a better understanding of
the firms position and performance.

vant to the
decision under consideration from the total information contained in the financial
statements. The second step is to arrange the information in a way to highlight
significant relationships. The final step is interpretation and drawing of inferences
and conclusions. In brief, financial analysis is the process of selection, relation and
evaluation.

for analysis rather than as an end in itself. The reliability and significance attached to
ratios will largely hinge upon the quality of data on which they are based. They are
as good or as bad as the data itself. Nevertheless, they are an important tool of
financial analysis.


BIBLIOGRAPHY

WWW.irctc.co.in



Principles of Management Accounting : Dr S.N. Maheshwari

Theory and Problems in Financial Management- M Y Khan P K Jain