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FINANCIAL STATEMENTS

INTRODUCTION

Accounting process involved recording, classifying and summarizing


various business transactions. The aim of maintaining various records is to
determine profitability of the enterprise from operation of the business and also
to find out is financial position.

Financial statements are in term reports,

presented annually and reflect a division of the life of an enterprise in to more


or less arbitrary accounting period more frequently a year.

The financial

statement is an organized collection of data according to logical and consistent


accounting procedures its purpose is to convey of a business firm.

DEFINATIONS
According to John N.Myer The financial statements provide a summary
of the accounts of a business enterprise, the balance sheet reflecting the
assets, liabilities, and capital as on a certain date and the income statement
showing the results of operations during a certain period.

The term financial statement generally refers to following basic


statements:

The income Statement.

The Balance Sheet.

A Statement of Retained earring.

A Statement of Changes in financial position.

FINANCIAL STATEMENT

STATEMENT OF

CHANGES IN FINANCIAL POSITION

STATEMENT OF RETAINED EARNINGS

INCOME STATEMENT

BALANCE SHEET

Income Statement
The income statement (also termed as profit and loss account) is
generally considered to be the most useful of all financial statements.
explains what has happened to a balance sheet dates.

It

The nature of the

income which is the focus of the income statement can be well understood if a
business is taken as an organization that uses inputs to produce output.
Balance Sheet

It is a statement of financial position of a business at a specified


moment of time. It represents all assets owned by the business at a particular
moment of time and the claims of the owners and outsiders against those
assets at that time.

The important distinction between as income statement is

for a period while balance sheet is on a particular date.

Statement of Retained Earnings

The term retained earnings means the accumulated excess earnings over
losses and dividends. The balance shown by the income statement is
transferred to the balance sheet through this statement after making necessary
appropriations. It is fundamentally a display of things that have caused the
beginning of the period retained earnings balance to be changed in to the one
show in the end-or-the-period balance sheet.

Statement of Changes in Financial Position

The balance sheet shows the financial condition of the business at


a particular moment of time while the income statement discloses the results
of operations of business over a period of time for a better understanding of the
affairs of the business, it is essential to identify the movement of working
capital or cash in the statement of changes in financial position.

Nature of Financial Statements

The financial statements are prepared on the basis of recorded


facts. The recorded facts are those which can be expressed in monetary terms.
The statements are prepared for a particular period, generally one year. The
transactions are recorded in a chronological order as and when the events
happen.

The financial statements by nature are summaries of the items

recorded in the business and there statements are prepared periodically


generally for the accounting period.

Nature of Financial Statements

Recorded Facts
The term Recorded facts; refers to the data taken out from the

accounting records. The records are maintained on the basis of actual cost
data. The figures of various accounts such as cash in hand, cash at bank, bills
receivables, Sundry debtors, fixed assets are taken as per the figure recorded in
the accounting books.

As the recorded facts are not based on replacement

costs the financial statements do not show current financial condition of the
concern.

Accounting Conversions
Certain

financial statements.

accounting

converters

are

followed

while

preparing

The conversion of valuating inventory at cost or market

price, whichever is lower, is followed.

The valuing of assets at cost less

depreciation principle for balance sheet purposes statements comparable,


simple and realistic.

Postulates
The

accountants

make

certain

assumption

while

making

accounting records. One of these assumptions is that the enterprise is treated


as a going concern. The other alternative to this postulate is that the concern
is to be liquidated the concern. So the assets are shows on a going concern
basis. An other important assumption is to presume that the value of money
will remain in the same in different periods.

Personal Judgments:
Even though certain standard accounting conversions are followed

in preparing financial statement but still personal judgment of the accountant


plays on important part.

Characteristics of Financial Statement

The financial statements are prepared with a view to depict


financial position of a concern. The financial statements should be prepared in
such a way that they are able to give a clear and orderly picture of the concern.
The ideal financial statement has the following characteristics.

Depict True Financial Position

The information contained in the financial statements should be


such that a true and correct idea is taken about the financial position of the
concern.

Attractive

The financial statements should be prepared in such a way that


important information is underlined so that it attracts the eye of the reader.

Comparability

The results of financial analysis should be comparable.

The

financial statements should be presented in such a way that they can be


compared to the previous years statements.

Previous years figures in the

balance sheet.

Brief

If possible, the financial statements must be prepared in brief. The


reader will be able to form as idea about the figures.

Importance of Financial Statements

Financial statements contain a lot of useful and valuable


information regarding profitability financial position and future prospective of

business concern. The utility of financial statement to different parties may be


summarized as follows:

Management

The financial statements are useful for assessing the efficiency of


different cost centers. The management is able to decide the course of action
to be adopted in future.

Creditors

The trade creditors are to be paid in a short period. The CRS will be
interested in current solvency of the concerns.

The calculations of current

ratio and liquid ratio will enable the creditors to assess the current financial
position of the concerns in relation to their debts.

Investors

The investors include both short-term and long term investors. They are
interested in the security of the principal amounts of loan and regular
payments by the concern.

The investors will not only analyse the parent

financial position but will also study


plans of the concern.

the future prospectus and expansion

Government

The financial statements are used assess tax liability of business


enterprises. The Government studies economic situation of the country from
these statements. These statements enable the government to find out whether
business is following various rules and regulations or not.

Trade Associations

These associations provide service and protection to the members.


They may analyze the financial statements for the purpose of providing
facilities to these members.

They may develop standard ratios and design

uniform system of accounts.

Stock Exchange

The stock exchange deal in purchase and sale of securities of


different companies. The financial statements enable the stock broker to judge
the financial position of different concerns. The fixation of prices for securities
etc. is also based on the statements.

LIMITATIONS OF FINANCIAL STATEMENTS

Financial statements are relevant and useful for the concern, still
they do not present a final picture of the concern, otherwise misleading
conclusions may be drawn. The financial statements suffer from following
limitation:

Ignoring of Non-Monetary Aspects


These statements are prepared with the help of accounting

information which mainly consider monetary aspects only. The value of


business depends both on qualitative and quantitative factors.

Historical Cost
The statements are prepared on the basis of historical cost. The

values of fixed assets are at there original cost less depreciation. The balance
sheet value are not shown the value of assets may be sold more over they do
not reflect the market value which is as important factor in determining the
solvency of an enterprise.

Personal Judgment
In preparing financial statements certain items are left to the

personal Judgment of the accountant.

If any accountant is not following

accounting principles correctly his judgment will give wrong picture.

Conversion of Conservation
Due to conversion of conservation the income statement may not

disclose true income

of the business. This is due to ignorance of probable

incomes and accounting probable losses.

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial


strength and weakness of the firm by properly establishing between the items
of the balance sheet and profit and loss account. There are various methods or
techniques used in analysis financial statements such as comparative
statements, trend analysis, common size statements, schedule of changes in
working capital,

funds flow and cash flow analysis Cost Volume Profit

Analysis and Ratio Analysis.

Meaning and Concept of Financial Analysis

The terms financial analysis also known as analysis and


interpretation of financial statements refers to the process of determining
financial strength and weaknesses of the firm by establishing strategic

relationship between the items of the balance sheet, profit and loss account
and other operative data.

Types of Financial Analysis

Financial analysis can be classified in to different categories depending up on:

A. On the basis of material used.


B. On the basis of modules operandi

[1] In the Basis of Material Used

According to the basis, financial analysis can be of two types.

External Analysis
This analysis is done by those who are outsiders for the business.
These persons mainly depend up on the published financial statements.
analysis serves only a limited purpose.
Internal Analysis

Their

This analysis is done by persons who have access to the books of


account and at other information related to the business. Such as analysis
can be done by executives and employees of the organization. The analysis is
done depending up on the objective to be achieved through this analysis.

[2] On the Basis of Modules Operandi


According to this financial analysis can also be of two types:

Horizontal Analysis

In case of this type of analysis, financial statements for a number


of years are reviewed and analysed the current years figures are compared with
the standard or base year. The analysis statement usually contains figures for
two or more year and the change are shown regarding each item from the base
year usually in the form of percentage. Since this type of analysis based on the
data from year to year rather than on date, it is also termed as Dynamic
Analysis

Vertical Analysis

In case of this type of analysis a study is made of the quantitative


relationship of various items in the financial statement on a particular date.
Since this analysis depends on the data for one period, this is not very
conductive to a proper analysis of the companys financial position. It is also
called static analysis

as it is frequently used for referring to ratio developed

on one date or for one accounting period.

Techniques of Financial Analysis

A financial can adopt one or more of the following techniques/


tools of financial analysis:
Financial Analysis Techniques

Funds flow Analysis


Ratio Analysis
Trend Percentages

Comparative Financial Statements


Cash Flow Analysis
Ratio C.V.P. Analysis

Common Size Financial Statements

COMPARATIVE FINANCIAL STATEMENTS


The statements which have been designed in a way so as to provide

time perspective to the consideration of various elements of financial position


embodied in such statements figures for two or more period side by side to
facilitate comparison.

Both the income statement and balance sheet can be prepared Ni


the form of comparative financial statements.
The comparative financial statements contain the following items.

Absolute figures (amount in Rs. /-) as given in the final accounts.

Absolute figures expressed in terms of percentages.

Increase of decrease in absolute figures in terms of money value.

Increase or decrease in terms of percentages.

Comparison expressed in ratios.

Percentages of totals.

Comparative Income Statements


The income statement (profit & loss A/c) gives the results of the
operations during a definite period.

It reveals the profit carried or loss

incurred by the cancers. The comparative study if income statement for more
than 1 year may enable us to know the program of the concern.
columns gibe figures of various items for two years.

First two

The third and fourth

column used to show increase or decrease in figures in absolute adopted in


preparing comparative balance sheet.

In first step, find out the changes in absolute figures i.e., increase or
decrease should be calculated.

In second step percentage of change should be calculated with the


help of following formula.

Change in amount
Percentage of change =

-----------------------------Base year amount

Table No.1.1

x 100

PROFORMA OF COMPARITIVE INCOME STATEMENT

PARTICULARS

Net Sales
(Less): Cost of
goods sold
Gross Profit
(Less): Operating
Expenses:Office &
Administration
Expenses
Selling &
Distribution
Expenses
Total Operating
Expenses
(Add): Operating
Incomes
Total Operating
Incomes
Operating Profit
(Add): NonOperating
Incomes:Income on
Investment
Profit on sale of
assets
Dividends received
Total NonOperating
Incomes
(Less): NonOperating

PREVIOUS

CURRENT

INCREASE/DECREASE
AMOUNT
PERCENT
(Rs)
AGE
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Expenses:Loss on sale of
Fixed Assets
Net Profit Before
Interest & Tax
[EBIT]
(Less): Interest Paid
Net Profit Before
Tax
(Less): Income Tax
Paid
Net Profit After
Tax

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Guidelines For Interpretation

The increase

or decrease in sales should be compared with

increase or decrease in cost of goods sold. If increase in sales is


more than the cost of goods sold. It means that the profitability of
the concerns is increased.

The amounts of gross profit should be studied.

Operating profits should be studied.

The express should be

deducted from gross profit to find out operating profit and then
operating incomes should be added.

The next step is some of the non operating expenses are to be


deducted from the operating profits and non operating incomes
should be added to get net profit

The opinion should be formed the profitability of the business


concern and it should be given at the end.

Comparative Balance Sheet

The balance sheet prepared on a particular date reveals the


financial position of the concern on the date to study the trends of business
over a period of time comparative balance sheet reveals the cause for changes
in the financial position on amount of various transactions. The comparative
studies throw light on financial policies adopted by management.
The comparative balance sheet consists of two columns for the
original data. A third column used to show increase or decrease in various
items. A south column containing the parentage of increase or decrease may
be added.

Table No.1.2
PROFORMAE OF COMPARITIVE BALANCE SHEET
PARTICULARS

ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors

PREVIOUS

CURRENT

YEAR

YEAR

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INCREASE/DECREASE
AMOUNT
PERCENT
(Rs)
AGE

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Bills Receivable
Stock (Inventories)
Prepaid Expenses
Marketable Securities
Temporary Investments
Accured Incomes
Total Current Assets
Investments:
Short-term loans and
advances
Staff Advances
Other Advances
Fixed Assets: (F.A)
Good Will
Land
Buildings
Plant & Machinery
Furniture & Fittings
Free Hold Property
Lease Hold Property
Preliminary Expenses
Patent Rights
Trade Marks
Other Deferred Expenses
Total Fixed Assets
TOTAL ASSETS
[ C.A + F.A ]

Current Liabilities: (C.L)


Sundry Creditors
Bills Payable
Out Standing Expenses
Bank Over Draft
Unclaimed Dividends
Propose Dividends
Provision For Tax
Accrued Expenses

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Total Current Liabilities


Long Term Liabilities:
(L.T.M)
Mortigage Loan
Debentures
Total Long Term
Liabilities
Share Capital & Reserves:
(CAP. & RES.)
Equity Share capital
Preference Share Capital
Share Premium
General Reserve
Appropriation of Profits
Total Capital & Reserve

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TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

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Guide Lines for Interpretation of Balance Sheet

The short term financial position can be studied y comparing the


working capital of both years.

To study the liquidity position changes in liquid assets must be


ascertain if there is any increase in liquid assets.

We must

understand that is an improvement in the liquidity position of the


concern and vice versa.

A high increase in sundry debtors and bills receivable mean in


increase in risk in collecting the amount of dues.

A high increase in closing stock may mean that decrease in the


demand.

Long term financial position of the business concern car be analysed


by studying the changes in fixed assets, long term liabilities and
capital.

Fixed assets must be compared with long term loans and capital. If
the increase in fixed assets is more than the increase in long term
financiers from the working capital which is not good.

COMMON SIZE STATEMENTS

The common size statements, balance sheet and income statement


are shown in analytical percentages.
total assets, total liabilities and sales.

The figures are shown as percentages of


The total assets are taken as 100 and

different assets are expressed as percentage of the total.


liabilities are taken as a part of total liabilities.

Similarly various

These statements are also

known as component parentage or 100% statements because every individual


item is stated as a percentage of the total 100 the short statements because
every individual item is stated as a percentage of the total 100 the shortcomings in comparative statements and trend percentages where changes in
item could not be compared with the total have been covered up.
The common size statements may be prepared in the following way.

The totals of assets or liabilities are taken as 100.

The individual assets are expressed as a percentage of total


assets i.e., 100 and different liabilities are calculated in relation
to that liability.

Common Size Income Statement

The items in income statement can be shown as percentages of


sales to show the relation of each item to sales. A significant relationship can
be established between items of income statement and volume of sales.

The

increase in sales will certainly increases selling expression and volume of sales.
The increase in sales will certainly increases selling expresses and not
administrative or financial expenses. In case the volume of sale increases to a
considerable extent, administrative and financial expenses may go up. In case
the sales are declining, the selling expenses should be reduced at once. So, a
relationship is established between sales and other in income statement and
this relationship is helpful in evaluating operational activities of the
enterprises.

Common Size Balance Sheet


Statement in which balance sheet items are expressed as the ratio of
each asset to total assets and the ratio of each liability is expressed as a ratio of
total liabilities is called common size balance sheet. The common size balance
sheet is a horizontal analysis. The comparison of figures in different periods is
not useful becomes total figure may be affected by a number of factors. It is
not possible to establish standard norms for varios assets.

The trends of year

to year may not be studied and even they may not give proper results.

Table No.1.3
PROFORMAE OF COMMON SIZE BALANCE SHEET
Rs.Crs

Previous
Year

Percentage

Current
Year

Percentage

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Total Fixed Assets

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TOTAL ASSETS
[ C.A + F.A ]

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Particulars
ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors
Bills Receivable
Stock (Inventories)
Prepaid Expenses
Marketable Securities
Temporary Investments
Accured Incomes
Total Current Assets
Investments:
Short-term loans and
advances
Staff Advances
Other Advances
Fixed Assets: (F.A)
Good Will
Land
Buildings
Plant & Machinery
Furniture & Fittings
Free Hold Property
Lease Hold Property
Preliminary Expenses
Patent Rights
Trade Marks
Other Deferred
Expenses

Current Liabilities:

(C.L)
Sundry Creditors
Bills Payable
Out Standing
Expenses
Bank Over Draft
Unclaimed Dividends
Propose Dividends
Provision For Tax
Accrued Expenses
Total Current
Liabilities
Long Term Liabilities:
(L.T.M)
Mortigage Loan
Debentures
Total Long Term
Liabilities
Share Capital &
Reserves: (CAP. &
RES.)
Equity Share capital
Preference Share
Capital
Share Premium
General Reserve
Appropriation of Profits
Total Capital &
Reserve
TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

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TREND ANALYSIS
Trend analysis is an important and useful technique of financial
analysis. It involves computation of index numbers of the moments of the
various financial items in the financial statements for a number of periods. It
enables to know the changes in the financial position and the operational
efficiency between the period chosen.
Through trend analysis the analysis can give his opinion as to
whether favorable or unfavorable tendencies are reflected by the accounting
date.
The comparative and common size balance sheets suffer from a
major limitation i.e., absence of basic standard to indicate whether the
proportion of an item is normal or analysis values are calculated for each item
in isolation but conclusions are to be drawn by studying the related items also.
Trend analysis can be analysis in the following ways:

By calculating trend ratio (or) percentage.

By plotting on graph paper (or) charge.

Trend Ratio (or) Percentage


It involves the ascertainment of arithmetical relationship which
each item of several year to the same item of base year. Any year maybe as the
base year, it is usually the earliest year.
Procedure for Calculating Trend Ratio
The following procedure maybe adopted for calculating trend ratio.

Select any year as base year the selected year should be normal year
for the base year the trend value is taken as 100.

Trend percentage of each item should be calculated with the help of


following formula.

Current year value


Trend Percentage =

------------------------- X 100
Base year value

COST-VOLUME-PROFIT ANALYSIS
Cost Volume Profit analysis is an important tool of profit
planning. It studies the relationship between cost, volume of production, sales
and profit.

It is not strictly a technique used for analysis of financial

statements. However, it is an important tool for the management for decision


making. Since the data is provided both cost and financial records. It tells the
volume of account of variation in output, selling price and cost, and finally, the
quantity to be produced and sold to reach the target profit level.

RATIO ANALYSIS
Financial analysis depends to very large extents of the use of ratios
through there are other equality important tools of such analysis.

Thus, a

direct examination of the magnitude of two released items is somewhat


enlightening but the comparison is greatly facilitated by expressing the
relationship as a ratio.
Ratio analysis of business enterprises enters on efforts to derive
quantitative measures or guides concerning the expected capacity of the firm to
meet its future financial obligation or expectations present and past data are

used for the purpose and whatever extrapolations appear necessary. They are
made to provide no indication of feature performance.

Alexander Walt, who

criticized the bankers for its lap sided development owing to their decisions
regarding the grant of credit on current ratios a lone, made the presentation of
an elaborate system of ratio analysis in1919.

Ratio
Ratio is an expression of the quantitative relationship that exists
between the two numbers. The ratio is defined as the indicated quotient of
two mathematical expressions the ratio should be determined between related
accounting variables to be meaningful and effective.

CASH FLOW ANALYSIS


Cash flow analysis enables the management to plan an co-ordinate the
financial operations of the enterprise, and furnish the basis for evaluating
financing policies. It provides a barometer for ensuring the profitability of the
business and makes financing problems of the business much more managble.
This statement is prepared to know clearly the various items of
inflow and outflow of cash. It is an essential tool for short-term financial
analysis and is very helpful in the evaluation of current liquidity of a business
concern. It helps the business executives of a business in the efficient cash
management and internal financial management.
A statement of changes in the Financial Position of firm on cash
basis is called a cash flow statement.
The cash flow statement is to be presented as per the AS-III of the
institute of Charted Accountants of India (ICAI). The ICAI issued AS-III in June

1981 for the first time; later in March 1997 it is revised and standard. All the
listed companies / Estates whose financial year ends on March 1996 and
thereafter will be required to give cash flow statement comes into effect
immediately i.e., on 15/02/1996.

FUNDS FLOW ANALYSIS


The Funds Flow Statements is the statement which shows the
movement of funds and is a report of the financial operations of the business
under takings. It indicates various stages by which funds obtained during a
particular period of time and the wages which these funds were employed. In
simple words it is a statement of sources and application of funds.

The term fund has been defined a number of ways. In narrow


sense fund means cash only. In broader sense the term fund refers to any
current assets and liabilities. In popular sense the term fund means Working

Capital. Every firm should forecast the requirement of working capital to


estimate the working capital is the help of Funds Flow Statements.

This statement is prepared in order to reveal clearly the various


sources where from the funds are produced to finance the activities of a
business concern during the accounting period and also brings to highlight the
uses to which these funds are put during the said period.

The following process is adopted for the preparation of Funds Flow


Statement.

Preparation of schedule of changes in Working capital (Working Capital


Statement).

Calculation of funds from operations with the help of Non-current assets


and Non-current liabilities ledger A/Cs.

Preparation of Funds Flow Statement.

VISAKHAPATNAM STEEL PLANT

INDUSTRY PROFILE
Steel comprises one of the most important inputs in all sectors of
economy. Steel is the basic input for automobiles, construction, and machine
building fabrication and transportation industries.

Keeping in view the

Government of India constituted Visakhapatnam Steel Plant in 1982 by Prime


Minister Mrs. India Gandhi with the collaboration of Russia. Its process is to
produce a range of Steel Products. It is subsidiary of Rashtriya Ispat Nigam
Limited.

LOCATION
The plant is located on the coast of Bay of Bengal, 16 kms to the
south west of the Visakhapatnam port. It lies between the northern boundaries
of the National Highway No.5 from Madras to Calcutta and 7 kms to the southwest of Howrah Madras Railway line.

BACK GROUND
To meet the growing domestic needs of Steel, Government of India
signed an agreement with erstwhile USSR in 1979 for co-operation is setting up
3.4 Mt integrated steel plant at Visakhapatnam. The project was obtaining the
higher levels of operational efficiency and labour productively over maximum
output from the equipment already installed, planned for procurement,
achieving what was envisaged earlier. Under the rationalized concept,
3.0million tones of liquid steel is to be produced in estimated to cost
Rs.3897.28 crores, based on prices as on 4 th quarter of 1981. But during the
implementation of Visakhapatnam, it has been observed that the project cost,
mainly dues to price escalation and upper provisions in DPT estimates.

In view of this and critical find situation, alternatives for


implementation of Visakhapatnam steel plant rationalization of approved
concept were studied in 1986. The rationalization has basically been from the
point of view of a year and the project estimated to cost Rs.5822.17 crores

based on as fourth quarter of 1987.

Finally the overall cost of the project

worked to 8200 crores as per the revised rationalized detailed project report.

PRODUCT MIX
Visakhapatnam steel plant products angles, channels, bars, wire
rods and billets for re-rolling. The plant also produces pig iron & 1.44 MT of
granulated slag, besides normal by- products from the coke oven and Coal
Chemical Plant.

STEEL INDUSTRY IN INDIA


Iron had occupied an important place in the service of mankind, not only
in India but also abroad from time immemorial steel is indispensable to
modern civilization in peace and was in other to understand.

The background of the entry of iron and steel into the public sector
in India, it would be desirable to trace if briefly, the history of iron and steel
making India through the centuries.

The total installed capacity for steel production during

pre

Independence era was by the seventies. This result of bold steps taken by the
government to develop this sector.

The Growth And Chronological Order Is As Following


1830

Josiah Marsh all health constructed the first


manufacturing plant at port move in madras presidency.

1874

James Erikson founded the Bengal iron works.

1899

Jamshedji Tata initiated the scheme for integrated


steel plant.

1906

Formation of TISCO

1911

Tata Iron & Steel company started production.

1916

TISCO was founded.

1950-56

First five year plan.


No new plant came up. The Hindustan steel Ltd. Was born

on 19th January, 1954; with the decision of setting up three steel plants each
with one million tones input steel per year at Rourkela, Bhilai and Durgapur,
TISCO

stared its expansion programme.

1956-61 Second five year plan.


A bold decision was taken up to increase the steel output in
India to 6 million tons per year and production at Rourkela, and Durgapur steel
plants started.
1961-66

Third five year plan.

During the third five year the three steel plants under
HSL, TISCO & HSCO were expanded as show
TABLE NO 2.1

Steel plant
Rourkela

Original (MT/Year)
1.0

Expanded (MT/Year)
1.8

Bhilai

1.1

2.5

Durgapur

1.0

1.6

TISCO

1.0

2.0

IISCO

0.5

In January 1964

1966-69

1.0
- Bokaro steel plant came into existence.

- Recession Period.
The entire expansion programme was
actively
executed during this period.
- Fourth Five year plan
Salem Steel Plant started Licenses were given for

1969.74

setting up of many mini

steel plant and re-

scrolling mills.
Govt. of India accepted setting up two more steel
plants in South: One each at Visakhapatnam

(Andhra Pradesh) and Hospet (Karnataka).


SAIL was formed during this period
24th January 1973.

on

The total installed capacity

from 6 integrated plants was 106 MT.


1979

- Fifth Five Year plan

The erstwhile Soviet Union Agreed to help in setting


up the Visakhapatnam Steel Plant.

1980-85

- Sixth Five Year Plan

Work on Visakhapatnam Steel Plant was started


with a big bank and top priority war accorded to
start the plant.

Scheme for modernization of Bhilai Steel Plant,


Rourkela, Durgapur Steel Plant and TISCO were
initiated.

1985-91

- Seventh Five Year Plan

Expansion work of Bhilai and Bokaro Steel Plants


completed.

Progress on Visakhapatnam Steel Plant picked-up


and the rationalized concept has been introduced to
commission the plant with 3.0 MT liquid steel
capacities by 1990.

1991-96

- Eighth Five Year Plan

Visakhapatnam Steel Plant started its production.

Modernization of other steel plants is also duly


envisaged.

- Ninth Five Year Plan


10. Steel Plant had foreseen a 7% growth during
the entire plan period
- Tenth Five Year Plan
11. Steel industry registers a growth of 9.9%.

TECHNOLOGY

RINL was equipped with state of the art technology of steel making,
large-scale computerization and automation was incorporated in the plant to
achieve

International

Level

of

Efficiency

and

Productivity,

and

organizational manpower has been rationalized.

The following are some of the important technologies used in the plant.

7 meter tall coke over batteries with coke dry quenching plant

the

3200 cubic meter blast furnace, biggest in the country.

Bell-less top charging system in blast furnace.

100% slag granulation at BF cast house

Suppressed combustion LD gas recovery

100% continuous casting of liquid steel

Tempcore and stelmore cooling process

Extensive Waste Heat Recovery System

Comprehensive Pollution Control Measures

TABLE No 2.2
The Company Started Its Commercial Production in 1990-91 And Its
Financial Results

YEARS
92-93
93-94
94-95
95-96
96-97
97-98
98-99
99-00
00-01
01-02
02-03
03-04
04-05
05-06

Gross

Operating

Sales
Profit
245
-88
772
-101
1185
-31
1751
114
2209
416
3039
633
3135
606
3071
460
2761
15
2973
252
3436
504
4081
690
5058
1162
6169
2053

Interest
192
437
198
346
366
407
430
198
361
382
351
290
187
49

Depreciation
197
449
340
340
415
430
422
439
111
432
445
475
455
457

Net Profit
-478
-987
-568
-573
-364
-204
-246
-177
-457
-562
-291
-75
521
1547

06-07
07-08
08-09

8181
8482
9151

3271
2336
2219

11
31
48

1006
416
315

2254
1890
1363

09-10
10-11

10433
10410

2994
2022

31
88

471
240

1942
1336

It can be seen from the above table, during the year 2003-04, the
company turned around by earning a net profit of Rs.521 Crores. In the same
year, it bagged the PRIME MINISTER TROPHY for its excellent performance in
the Steel Industry. In October 2004, RINL became a DEBT FREE COMPANY.

Table No 2.3
Major Sources of Inputs

Raw Material
Iron Ore lumps and fines
BF Limestone Indigenous

Import
BF Dolomite
SMS Dolomite
Manganese Ore
Boiler Coal
Coking Coal
Coke
Quartz lump & Fines

Area/Location
Bailadilla, MP
Jaggayyapeta, AP

Dubai
Madharam, AP
Madharam, AP
Chipurapalli, AP
Talcher, Orissa
Australia
China
Garbhamam, AP

Water Supply:

Operational water requirement of 36 MGD is being met from Yeleru


Water Supply Scheme.

Power Supply

Operational power requirement of 180-200 MW is being met through


captive power plant. The capacity of captive power plant is 286.5 MW. The plant
is selling around 60 MW of power to APSEB (Andhra Pradesh State Electricity
Board).

Table No 2.4
Major Units of RINL

DEPARTMENTS

ANNUAL CAPACITY UNITS AT 3 MT STAGE


000T

COKE OVENS

2261

BLAST FURNACE

3400

SINTER PLANT

5256

STEEL MELTING
SHOP
LMMM
WRM
MMSM

3000

710
850
850

3 batteries each of 67 Ovens


of 7Meter height.
2 furnaces of 3200 m3 each
2 sinter machines of 312 sq
Meter grate area each
3 LD converters each of 150
M3

volume

and

six

four

Strand
Bloom caster.
Four strand finishing mill
2x10 strand finishing mill
6 strand finishing mill

Extensive facilities have been provided for repair and maintenance


as well as manufacture of spare parts. A power plant, captive mines for flux,
oxygen plant, acetylene plant, and compressed air plant also forms parts of the
plant facilities. A part from the above works departments, the non-works
departments in VSP are Personnel, Training & Development center, purchase,
Marketing, Finance, Design & Engineering & Township Administration.

Table No 2.5
MAIN PRODUCTS OF VSP
STEEL PRODUCTS
Angles

BY PRODUCTS
Nut Coke

Billets

Coke Dust

Channels

Coal Tar

Beams

Anthracite Oil

Squares

Hp Naphthalene

Flats

Benzene

Rounds

Toluene

Re-bars

Zylene

Wire rods

Wash Oil

ACHIVEMENTS, ACCLADES & MILESTONES:-

The company has become the first integrated steel plant in the
country to obtain the three International system standards certification -ISO
9001 for quality, ISPO 14001 for environment management and OHSAS
18001 for occupational health and safety

Table No 2.6
MILE STONE OF RINL
S. No.

Date

17-04-1970

June, 1970

30-11-1970

4
5

20-01-1971
27-02-1971

Milestone
Prime Minister of India announces
In parliament to construct a new steel plant at
Visakhapatnam
Site selection committee appointed
Committees report approved for site
Prime Minister
Foundation stone laid by
Consultant appointed feasibility
Reports submitted in 1972 and other Investigation
carried out.

6
7-04-1974

First block of land taken over for

15-10-1977

24-05-1979

12-06-1979

Visakhapatnam Steel Plant


Detailed Project Report submitte by
Consultant
Public Investment Board accords
Approval for 3.4 MT steel projects
Inter Government Agreement signed

19-10-1979

Between India and erstwhile USSR at MOSCOW


for the co-operation in the construction at
Visakhapatnam Steel Plant
Government approved setting up of

10

Visakhapatnam Steel Plant. Soviet side carried-out


the revision of Detailed Project Report.
11
12

Jan. 1980
30-11-1980

Site leveling work started


M.N. Dastur & Company, Principal
Consultant submits the comprehensive revised
detailed project report with certain modifications.

13

6-01-1981

14

5-02-1981

15

23-02-1981

16

10-07-1981

Expert committee submits


Recommendations for approval of comprehensive
revised detailed project report with certain
modifications.
Contract signed with Erstwhile
Soviet Union for preparation of working drawings
for coke ovens, blast furnace and sinter plant
Comprehensive revised detailed
Project report along with expert committee
recommendations approved.
Protocol signed with Erstwhile

17

23-01-1982

18

1-02-1982

19

18-02-1982

20

29-01-1987

Soviet Union for supply of equipments


specialists.
Blast Furnace foundation laid.
Zero date of the construction of the
Project
Rashtriya Ispat Nigam Limited
(RINL) formed.
Commissioning of Structural Shop
With This commissioning of various

and

units commenced
21

6-091989

22

14-11-1989

23

28-03-1990

24

3-05-1990

25

6-09-1990

26

28-09-1990

Coke oven battery No.1 starts


Pushing of coke. With this the commissioning of
metallurgical units started.
Sinter plant (Machine-1) Commissioned.
GODAVARI" the First Blast
Furnace Commissioned
Prime Minister dedicates 'Godavari"
To the nation.
The first converter and the first
Continuous casting machine of the steel melt shop
started production.
Billet production in the light and
Medium merchant mill started.
Wire Rod Mill commissioned.

27
21-11-1990

28

4-30-1991

29

30-06-1991

30

28-10-1991

The second convertor Commissioned


Yeluru water supply scheme made
Ready for supply of water to Visakhapatnam Steel
Plant.
Trial production commenced
in the Bar mill of height and medium

Merchant mills.
31

31-10-1991

32

27-12-1991

33

20-03-1992

Coke Oven Battery No.2


Commission
Sinter machine 2 commissioned
Medium Merchant and Structural

37

Aug-1992

38

2001-02

39

2002-03

40

2003-04

41

2004-05

42

2005-06

43

2006-07

Mill Commissioned.
"KRISHNA" Blast furnace 2
Commissioned.
Coke Oven Battery No.3 Commissioned.
Convertor No. 3 of
Steel Melt Shop
Commissioned. This marks the completion of
commissioning of all the units of the 3 million
tonnes plant.
Dedication of the plant to the nation
By the Prime Minister
Surpassed rated capacity
Achieved Turnaround & Received
PM`s Trophy.
Became a Debt free Company
Achieved maximum Net Profit after tax.
Wiped out accumulated net losses.
Conferred Mini Ratna Status

44

2007-08

Expansion of Plant Capacity to 6.3 MT.

34

21-03-1992

35

July, 1992

36
July, 1992

HRD IN RINL
As a deliberate recruitment philosophy, RINL selected young skilled
Manpower and properly planned to induct them through carefully chalked out
training programs to understand about the Company. RINL today has young
and enthusiastic reservoir of dynamic and highly skilled manpower in the
average age group of 35-40 years. It also achieved excellence in production
front, working in overlapping shifts, task based performance appraisal and
productivity oriented training and management development.

OBJECTIVES

To provide, initially a suitable match between employee competence levels


and company's work requirements.

To faster an appropriate climate and culture which nurtures employee


competence and creates adequate motivational levels for the application
of their abilities to assigned jobs/roles with required commitment.

To enable employees seek greater identification with the company by


infusing most management decisions and actions with the requisite care,
concern and developmental approach.

To work towards enabling the employees and other stake holders seek
self fulfillment even as they work for the growth and prosperity of the
company.

To enable employees and the organization ultimately to achieve its


mission, objectives and business through HRD.

PRODUCTION FACILITIES

The production facilities in the RINL are most modern amongst the Steel
Industry in the country. The know-how and the technology have been acquired
from different parts of the world from the reputed/established manufacturers.

Some of the production facilities in RINL are:

7 meter coke ovens of RINL are the tallest so far built in the country.

Base mix yard for sinter plant introduced for the first time in the country
helps in excellent blending of the faced material to sinter machine and
production of consistent good quality sinter.

3200 cubic meter two Blast Furnaces i.e. Godavari and Krishna with Bell
Less Top Charging Equipment and 100% cast house slag granulation, the
biggest to be set up in the country have done away with the conventional
bell charging system.

100% continuous casting of liquid steel into blooms resulted in lowest


losses and better quality of blooms.

RINL has sophisticated and latest features of automation of large Rolling


Mills consisting of 1) Light and Medium Merchant Mill (LMMM) which
include Billet and Bar Mill, 2) Wire Road Mill (WRM) and 3)

Medium Merchant and Structure Mill (MMSM).

The operation of Blast Furnace, Steel Melting Shop and Rolling Mills has
been entirely computerized to ensure consistent quality and efficient
performance.

MARKETING IN RINL

RINL is marketing its products on its own. RINL is one of the


competitive Players in the domestic and international markets.

It mostly

exports of steel to China, Japan, USA, Srilanka etc. RINL is now focusing on
expanding and consolidating its markets in these countries by entering into
long term tie ups with its clients.

The company is also in the process of broad branding its product


range to take a share of the growing, high value niche markets. The efforts to
go global are not at the expense of neglecting the domestic markets.

RINL has established an extensive dealer net work to effectively


service the growing demand for Visakhapatnam Steel. In addition to this net
work of dealers and stockiest in high demand areas, RINL, also has customer
counseling cell fully equipped and manned by trained personnel.

The products are being sold through 22 branches/stockyards located all


over India. Regional Managers/Branch Managers/Dealers/ Customers Meet at
Head quarters and at Regional Offices are conducted regularly to assess the
market situation and to evolve suitable marketing strategies.

FINANCING AND ACCOUNTING WING


In RINL main function of the finance and Accounts Department is
to look after the treasury management and to render service in financial
aspects for effectively conducting the business of the company. The finance
Department has many sub sections. It has about 275 employees consisting of

about 260 executives and 15 non executives. The entire department is headed
by the general manager. Finance and Accounting Department of RINL is divided
into

several

sections

for

administrative

control

and

assignment

of

responsibilities and fixing of accountability etc. To name a few are:

The following are the sections of finance and Account department in


RINL.

Raw material Accounts

Stores Accounting

Sales Accounts

Pay and PF Accounts

Works accounts section

Operational Bills Accounts

General Accounts Section

Cash Section

Loans and Advances

Corporate Accounts

Internal Audit Section

Budget Section

Costing Section

Project Accounts

Concurrence Sections

Table No 2.7
FINANCIAL HIGHLIGHTS
2010-11

2009-10

A OPERATING RESULTS (Rs Crs)


Turnover
Gross Income
Gross Expenditure
Gross Profit
Gross Profit (Excluding Interest On Term
Deposits)
Profit Before Tax
Net Profit After Tax
B YEAR END FINANCIAL POSITION (Rs Crs)
Share Capital
Reserves And Surplus
Capital Employed
Capital Employed (Excluding Term
Deposits)
Net Worth
Gross Block
Depreciation
Net Block
Inventory

10433
11337
8310
3027
2336

9151
9812
7540
2271
1750

2995
1943

2222
1363

7827
3654
9935
2249

7827
1711
9427
2321

11481
8901
7516
1385
1761

9523
8876
7085
1790
1203

29.00
18.60
26.40
16.90

24.80
14.90
23.80
14.30

103.90

75.40

19.60
38.70
16.90
105.00

14.50
29.00
13.10
97.10

3.60

3.70

C PROFITABILITY AND OTHER RATIOS


Percentage Of
Gross Profit To Sales
Net Profit To Sales
Gross Profit To Net Worth
Net Profit To Net Worth
Gross Profit (Excluding Interest on Term
Deposits) To Capital Employed (Excluding
Term Deposits)
Net Profit To Capital Employed
Gross Profit To Share Capital
Inventory Sales
Sales To Capital Employed

Ratio Of
Current Assets To Current Liabilities

Quick Assets To Current Liabilities

3.10

3.30

PERFORMANCE OF RINL AT A GLANCE


PRODUCTION PERFORMANCE
Achieving new targets year after year in production has become a
part of the work culture.
The production performance of VSP in the last four years is as follows:
Table No 2.8
PRODUCTION PERFORMANCE (000 TONS)

YEAR

HOT
METAL

LIQUID
STEEL

SALABLE
STEEL

POWER EXPORT
(MW) GROSS

2002-2003

3120

2530

2217

44.20

2003-2004

3120

2730

2411

45.40

2004-2005

3400

3000

2675

30.60

2005-2006

3850

3235

2900

6.30

2006-2007

3950

3300

2958

3.60

2007-2008

4000

3500

3125

-0.40

2008-2009

4100

3567

3205

-6.28

2009-2010

4100

3620

3210

2.03

2010-2011

3850

3450

3080

0.00

COMMERCIAL PERFORMANCE:
The commercial performance of VSP for the past four years is as
follows
Table No 2.9
(In corers)
SALES
YEAR
2002-2003
2003-2004
2004-2005
2005-2006

TURNOVER
3436
4080
5058
6169

DOMESTIC

CASH

SALES

PROFIT
3122
3710
4433
5406

153
399
975
2023

2006-2007
2007-2008

8190
8491

7942
8048

3259
2338

2008-2009

9151

8726

2584

2009-2010

10433

9878

3483

2010-2011

10140

8950

2652

FINANCIAL PERFORMANCE:
VSP had to bear the burnt of huge project cost right from the day of its
inception. This has affected the companys balance sheet due to very high
interest burden. The company, in spite of making operating profit every year
had to report net loss during all financial years. This on the other hand had
resulted in making VSP to take great care in planning the financial resources.
The financial performance of VSP for the past ten years is as follows:
Table No 2.10

YEAR
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

GROSS

CASH

NET

SALES

MARGIN

PROFIT

PROFIT

3435
4081
5058
6169
8181
8482
9151
10433

504
690
1162
2072
3271
2369
2632
3513

153
399
975
2024
3260
2337
2583
3482

291
(-) 75
521
1547
2008
1252
1363
1943

10410

2785

2652

1336

FUTURE PLANS:VISION:
To be a continuously growing world class company we shall

Harness our growth potential and sustain profitable growth.

Deliver high quality and cost competitive products and be the first
choice of customers.

Create an inspiring work environment to unleash the creative energy


of people.

Achieve excellence in enterprise management.

Be respected corporate citizen, ensure clean and green environment


and develop vibrant communities around us.

MISSION:

To attain 16 million ton liquid steel capacity through technological


up-gradation, operational efficiency and expansion; to produce steel at
international standards of cost and quality; and to meet the aspirations of the
stakeholders.
OBJECTIVES:

Expand plant capacity to 6.3 Mt by 2011-12, with the mission to expand


further in subsequent phases as per the Corporate Plan.

Sustain gross margin to turnover ratio>25%.

Be amongst top five lowest cost liquid steel producers in the world by
2010-11.

Achieve higher levels of customer satisfaction than competitors.

Instill right attitude amongst employees and facilitate them to excel in


their professional, personal and social life.

Be recognized as an excellent business organization by 2010-11.

Be proactive in conserving environment, maintaining high levels of safety


and addressing social concerns.

CORE VALUES:

Commitment

Customer Satisfaction

Continuous Improvement

Concern for Environment

Creativity & Innovation

CAPITAL COST:

Approved Cost

Rs.8692 Crores (Base June 05)

Debt component

Rs.4346 Crores

FE component

Rs.1477 Crores

Pay back period

5 years 2 months

IRR

23%

Project cost (net of caveat)

Rs.7998 Crores

SOURCES OF FUNDS:
VSP raise its working capital from of 10 Bankers. The following are
the 10 banks. Where funds for finance are raised.

State Bank of India

Canara Bank

UCO Bank

Bank of Baroda

Andhra Bank

State Bank of Hyderabad

Allahabad Bank

HSBC Bank Ltd

Industrial Development Bank of India (IDBI) Bank Ltd

Indian Overseas Bank (IOB)

Indian Bank

ICICI Bank

POLICIES & RULES OF RINL/VSP:

VSP takes all necessary actions for the fulfillment of regulatory


requirements. In this regard VSP follows the following policies.
1. Quality Policy:

Continuously improve the quality of all materials

processes and product services for customers.


2. Energy Policy:

By adopting appropriate energy conservation

technologies VSP. Controls the consumption of various forms of energy.


3. Environment Policy:

Maintain

high

level

of

environmental

consciousness amongst employees and prevention of pollution by minimizing


the emissions and discharge.
4. OSAS Policy: VSP

committed

to

occupational health and

safety of

employees and contract workers.


5. HR Policy: VSP believe that their employees are the most important
resources, so it provides good working environment that makes the employees
committed and motivated for maximizing productivity.

VSP SPECIAL FEATURES:

7m tall coke over batteries with coke dry quenching.

Biggest Blast Furnace in the country.

Bell less top charging system in Blast Furnace.

100% slag granulation at the BF cast house.

Suppressed combustion-LD gas recovery system.

100% continuous casting of liquid steel.

Tempcore and Stelmor cooling process in LMMM & WRM


respectively.

Extensive waste heat recovery systems.

High Speed rolling mills

Comprehensive pollution control measures

Higher level of labour productivity

All products certified to ISO 9002 standards

On the way to TQM

THE COMPANY PAYS:

Excise duty - 2 Crores/day

Sales Tax

- 12 Crores/month

Custom duty

- 12 Crores/month

Employee salary

- 35 Crores/month

Iron ore

- 15 Crores/month

Railway freight

- 50 Crores/month

Ocean Freight

- 15 Crores/month

Coal Blast

- 70 Crores/month

A LAND MARK YEAR OF GROWTH:


The year 2007-2008 saw the company registering then best ever
sales turnover of Rs.8482 cores a 3.6% growth over previous year. The company
stated a record net profit of Rs.1252.37 crores and this is the third consecutive
year that the company has been earning net profit with this the accumulated
losses have bought down with this accumulated losses have set up to out the
Rs.906 crores and your company is all shortly also your 'MINI RATNA' by the
government of India.
It works under the following slogan:
Let Excellence not only be our goal.
Let us make it our standard
Table No 2.11
BOARD OF DIRECTORS
CHAIRMAN/MANAGING DIRECTOR

Sri A.P.CHOUDHARY

DIRECTOR (PERSONNEL)

Sri Y. R.REDDY

DIRECTOR (FINANCE)

Sri P.MADHUSUDAN

DIRECTOR (COMMERCIAL)

Sri T.K.CHAND

DIRECTOR (OPERATIONS)

Sri UMESH CHANDRA

DIRECTORS:-

Sri S.MACHENDRA NATHAN


& Dr.DALIP SINGH

COMPANY SECRETARY

Sri P. MOHAN RAO

REGISTRED OFFICE

ADMINISTRATIVE BUILDING,

VISAKHAPATNAM STEEL PLANT.

Table No 2.12
MAN POWER AT A GALANCE
2010-2011
AS on 31/03/2010
4534

Executives
Works
Projects
Mines
Others
Junior Officers
Works

2745
316
71
1402
684
504

Projects

13

Mines

22

Others

145
12007

Works

10476

Non-Executives

Projects
Mines
Others
Total

63
267
1201
17225

Works

13725

Projects

392

Mines

360

Others

2748

NEED FOR THE STUDY

The main aim of any firm is to maximize the wealth of the profits.
Which in turn depend on successful sales activity? To generate sales,
investment of sufficient funds in current assets is required. The need of current
assets should be emphasized, as the sales dont convert into cash immediately
but involved a cycle of operations, namely operating cycle.

Rashtriya Ispat Nigam limited is a multi-product steel-manufacturing


unit with varying cycle time for each product. The capital required by each
department in a large organization like RINL depends on the product target for
that year.

The study on financial performance position of which using financial


statement. It is very much essential to know the RASHTRIYA ISPAT NIGAM
LIMITED financial performance for overcome the problem of the company. This
comparative statement analysis will help us to know the exact financial
position of the VSP through the financial performance. This company is
selected as it helps us to known even the exact position our country as steel
industry is backbone of every country.

Here in this project an attempt is made by financial statements for


knowing the financial performance of the company.

OBJECTIVES OF THE STUDY

To

know

the

long

term

solvency

position

of

RINL

through

Comparative statement analysis.

To know about the short term solvency position of RINL.

To examine profitability position of RINL, during the year 2006-2007 to


2010-2011.

To know the income statement analysis and interpreting financial


statements or income statement

To know about the expansion measures taken by the company.

To give suggestions, if any, for better financial performance of RINL.

SCOPE OF THE STUDY


Financial analysis depends primarily on financial statements to diagnose
financial performance there are three principle reasons.

As longer as the accounts bases remain more or less the some overtime,
meaningful mitered is can be drawn by examining trends in raw data and
financial ratios.

Since similar basis characterize various firms in the same industries, incur
firm comparisons are useful.

Experience seems to suggest the financial analysis works one is accounting


basis and more adjustments for the same.

The following points explain the nature of the financial

statement analysis in

steel industries.
The records are maintained on the boards of actual costs data.
Certain neither accounts nor conversions are followed while preprimary
financial statement. Still personal judgment

DATACOLLECTION

Methodology is a systematic procedure of collecting information in


order to analyze and verify a phenomenon. The data can be collected through
two principle sources.

They are as follows:

Primary data

Secondary data

Primary data:-

It is the information collected directly without any references. In


this study it is gathered through interviews concerned officers and staff either
individually or collectively, sums of the information has been verified or
supplemented with personal observation conducting personal interviews with
the concerned officers of finance department of Visakhapatnam steel plant.

Secondary data:-

The secondary data was collected from already published sources


such as, pamplets of annual reports, returns and internal records. The data
collection includes:-

Collection of required data from annual records of RINL.

Reference from textbooks and journals relating to financial performance


and management.

DATA SOURCES
DATA SOURCES
INSIDE THE COMPANY

SECONDARY SOURCES

PRIMARY SOURCES

OUTSIDE THE COMPANY

MANAGEMENT

RESPONDENTS

TEXT BOOKS, JOURNELS


ANNUAL REPORTS

PERSONAL OBSERVANCE

CHAPTERSATION

The study has been presented in six chapters as follows

Chapter 1: Introduction, which deals with the importance and significance of


financial performance in Visakhapatnam steel plant.

Chapter 2:

Profile of the Company, which deals with industry profile and

financial profile.

Chapter3: Provides Research Methodology, which deals with objectives, scope,


data chapterization and collection, limitations.

Chapter 4: Deals with Data Presentation interpretation and Analysis

Chapter 5: Deals with findings

Chapter 6: Deals with Conclusion and summery Suggestions


Bibliography

LIMITATIONS OF THE STUDY

The period of study that is 8 weeks as not enough to go in the detailed


aspects of the study.

The study is carried basing on the information and documents provided


by the organization and based on the Interaction with various employees
of respective departments.

Respondents may not provide accurate information due to various


reasons.

Most of the matters related to budgets were confidential so it is not


possible to gather information.

Time is a major constraint.

Budgeting process is very dynamic.

There was no scope of gathering current information as the auditing has


not been done at the time of project work.

TABLE NO 4.1
COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS 2010-11.
Rs. Crs
INCREASE/DECREASE

PARTICULARS

2010

2011

7699.10 1
93.41
1761.15
1958.49
292.43

6624.17
191.27
3215.28
1569.69
258.91

AMOUNT(Rs)

PERCENT AGE

ASSETS:
CurrentAssets:(C.A)
Cash&BankBalances
Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets

-1074.94
+97.86
+1454.13
-388.8
-33.52

+13.97%
+104.76%
+82.57%
-19.85%
-11.46%

Total Current Assets

11804.59

11859.32

-54.73

-0.46%

-----

-----

---

------

0.05
----

0.05
-----

0.05
------

0.00
-----

51.74
1.10
5.92

85.67
1.07
3.53

+33.93
-0.03
-2.39

+65.78%
-2.73%
-40.37%

96.81

106.56

+9.75

+10.07%

474.50
600.81
5.36

448.5
468.36
6.12

-26
-132.45
+0.76

-5.45%
-22.05%
+14.18%

11.08
3.80
59.68

9.69
4.80
54.63

-1.39
+1
-5.05

-12.55%
+26.32%
-8.46%

44.91

31.78

-13.13

-29.23%

25.42

32.32

+6.9

+27.15%

3.51

3.22

-0.29

-8.27%

0.04
2087.19

0.05
4617.81

+0.01
+2530.62

+25.00%
+121.25%

3471.92

5874.16

+2402.24

+69.19%

15276.51

17733.48

+2456.97

+16.08%

Miscellaneous
Assets:

Deferred Revenue
Expenditure
Investments
Profit & Loss a/c
Fixed Assets: (F.A)
Land-Free Hold
Land-Lease Hold
Railway Lines &
Sidings
Roads, Bridges &
Culverts
Buildings
Plant & Machinery
Furniture &
Fittings
Locomotives
Vehicles
Electrical
Installations
Water Supply &
Sewerage systems
Miscellaneous
Articles
Mining Lease
Rights
Held For Disposal
Capital Work-inprogress
Total Fixed Assets
TOTAL ASSETS
[ C.A + F.A ]
Current
Liabilities: (C.L)

Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money,
Security & Other
Deposits
Interest Accured
but not Due
Other Liabilities

501.31
136.97

1149.44
137.46

+648.13
+0.49

+129.29%
+0.36%

1.57
99.32

1.43
137.87

-0.14
+38.55

-8.92%
+38.8%

4.89

0.14

-4.75

-97.14%

866.09

1134.45

+268.36

+30.99%

Total Current
Liabilities
Long Term
Liabilities &
Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans
Deferred Tax
Liability

1610.15

2560.79

+950.64

2.47%

1581.47
332.78
107.95
163.12

1620.53
907.72
100.04
124.49

+39.06
+574.94
-7.91
-38.63

+2.69%
+172.77%
-7.32%
-23.68%

Total Long Term


Liabilities &
Provisions
Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves &
Surplus

2185.32

2752.78

+488.28

+22.34%

7827.32
3653.72

7827.32
4592.59

0.00
+938.87

0.00
+25.69%

Total Capital &


Reserve

11481.04

12419.91

+938.87

+8.18%

TOTAL
LIABILITIES
[C.L + L.T.M +

15276.51

17733.48

+2456.97

+16.08%

CAP. & RES.]


INTERPRETATION

During the financial year 2011, the long-term liabilities were increased by Rs
488.28 i.e.;22.34 comparison to the previous year 2010.

In comparison to the previous year i.e.; 2010the current liabilities were


increased by Rs.598.62 i.e.; by 59.18%.

The fixed assets have been increased by Rs.2402.24 in comparison to the


previous year i.e.; by 69.19%.

Current assets have been in decreased by Rs.54.73 in comparison to previous


year i.e.; -0.46% shows which that the working capital of the company is
strengthened.

The liquidity position of the company during the year 2010-2011 is


satisfactory.

TABLE NO 4.2
COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS 2009-2010.

Rs. Crs
INCREASE/DECREASE

PARTICULARS
ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets
Total Current Assets
Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c
Fixed Assets: (F.A)
Land-Free Hold
Land-Lease Hold
Railway Lines &
Sidings
Roads, Bridges &
Culverts
Buildings

AMOUNT
(Rs)

PERCENT
AGE

2009

2010

7194.68
216.80
1203.24
1518.90
314.48

7699.11
93.41
1761.15
1958.49
292.43

+504.43
-123.39
+557.91
+439.59
-22.05

+7.01%
-56.91%
+46.37%
+28.94%
-7.01%

10448.10

11804.59

+1356.49

+12.98%

14.95

0.00

-14.95

-100.00%

0.05

0.05

0.00

0.00%

----

----

----

----

51.74
1.16
10.25

51.74
1.10
5.92

0.00
-0.06
-4.33

0.00%
-5.17%
-42.24%

82.39

96.81

+14.42

+17.50%

522.43

474.50

-47.93

-9.17%

Plant & Machinery


Furniture & Fittings
Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems
Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-inprogress
Total Fixed Assets
TOTAL ASSETS
[ C.A + F.A ]
Current Liabilities:
(C.L)
Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money,
Security & Other
Deposits
Interest Accured but
not Due
Other Liabilities
Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans

926.29
3.95
16.21
1.96
73.49
68.54

600.81
5.36
11.08
3.80
59.68
44.91

-325.48
+1.41
-5.13
+1.84
-13.81
-23.63

-35.14%
+35.70%
-31.65%
+93.88%
-18.79%
-34.48%

28.15
3.90
0.00
597.19

25.42
3.51
0.04
2087.19

-2.73
-0.39
+0.04
+1490.00

-9.70%
-10.00%
+100.00%
+249.50%

2402.65

3471.92

+1069.27

+44.50%

12850.75

15276.51

+2425.76

+18.88%

365.83
119.91

501.31
136.97

+135.48
+17.00

+37.03%
+14.18%

2.02
82.54

1.57
99.32

-0.45
+16.78

-22.28%
+20.33%

18.41

4.89

-13.52

-73.44%

422.82

866.09

+443.27

+104.84%

1011.53

1610.15

+598.62

+59.18%

1092.77
604.45
312.51

1581.47
332.78
107.95

+488.70
-271.67
-204.56

+44.72%
-44.94%
-65.46%

Deferred Tax Liability

291.29

163.12

-128.17

-44.00%

Total Long Term


Liabilities &
Provisions
Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves & Surplus

2301.02

2185.32

-115.70

-5.03%

7827.32
1710.88

7827.32
3653.72

0.00
+1942.84

0.00%
+113.56%

Total Capital &


Reserve

9538.20

11481.04

+1942.84

+20.37%

12850.75

15276.51

+2425.76

+18.88%

TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

INTERPRETATION

During the financial year 2010, the long-term liabilities were decreased
by Rs 115.70 i.e.; 5.03% comparison to the previous year 2009.

In comparison to the previous year i.e.; 2008 the current liabilities were
increased by Rs.598.62 i.e.; by 59.18%.

The fixed assets have been increased by Rs.1069.27 in comparison to the


previous year i.e.; by 44.50%.

Current assets have been increased by Rs.1356.49 in comparison to


previous year i.e.; 12.98% shows which that the working capital of the
company is strengthened.

The liquidity position of the company during the year 2009-2010 is


satisfactory.

TABLE NO 4.3
COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS 2008-2009.

Rs. Crs
INCREASE/DECREASE

PARTICULARS
ASSETS:
Current Assets: (C.A)
Cash & Bank Balances

2008

2009

AMOUNT
(Rs)

5621.70

7194.68

+1572.98

PERCENT
AGE

+27.98%

Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets

166.27
1218.35
1061.32
184.36

216.80
1203.24
1518.90
314.48

+50.53
-15.11
+457.58
+130.12

+30.39%
-1.24%
+43.11%
+70.58%

Total Current Assets


Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c

8252.00

10448.10

+2196.10

24.87

14.95

-9.92

+26.61%
%
-39.89%

0.00

0.05

+0.05

+100%

----

----

----

----

50.89
1.19
12.53

51.74
1.16
10.25

+0.85
-0.03
-2.28

+1.67%
-2.52%
-18.20%

67.17

82.39

+15.22

+22.66%

544.46
1179.46
3.68
19.20
1.72
85.51
73.71

522.43
926.29
3.95
16.21
1.96
73.49
68.54

-22.03
-253.17
+0.27
-2.99
+0.24
-12.02
-5.17

-4.05%
-21.46%
+7.34%
-15.57%
+13.95%
-14.06%
-7.01%

34.56
4.18
0.01
180.73

28.15
3.90
0.00
597.19

-6.41
-0.28
-0.01
+416.46

-18.55%
-6.70%
-100%
+230.43%

2283.87

2402.65

+118.78

+5.20%

10535.87

12850.75

+2314.88

+21.97%

Fixed Assets: (F.A)


Land-Free Hold
Land-Lease Hold
Railway Lines &
Sidings
Roads, Bridges &
Culverts
Buildings
Plant & Machinery
Furniture & Fittings
Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems
Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-inprogress
Total Fixed Assets
TOTAL ASSETS
[ C.A + F.A ]

Current Liabilities:
(C.L)
Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money,
Security & Other
Deposits
Interest Accured but
not Due
Other Liabilities

275.04
120.19

365.83
119.91

+90.79
-0.28

+33.01%
-0.23%

1.60
68.89

2.02
82.54

+0.42
+13.65

+26.25%
+19.81%

8.43

18.41

+9.98

+118.39%

311.62

422.82

+111.20

+35.68%

785.77

1011.53

+225.76

+28.73%

716.37
173.87
369.44
316.72

1092.77
604.45
312.51
291.29

+376.40
+430.58
-56.93
-25.43

+52.54%
+247.64%
-15.41%
-8.03%

Total Long Term


Liabilities &
Provisions
Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves & Surplus

1576.40

2301.02

+724.62

+45.97%

7827.32
346.38

7827.32
1710.88

0.00
+1364.50

0.00%
+393.93%

Total Capital &


Reserve

8173.70

9538.20

+1364.50

+16.47%

10535.87

12850.75

+2314.88

+21.97%

Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans
Deferred Tax Liability

TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

INTERPRETATION

During the financial year 2009, the long-term liabilities were increased by
Rs 724.62 i.e.; 45.97% comparison to the previous year 2008.

In comparison to the previous year i.e.; 2008 the current liabilities were
increased by Rs.225.76 i.e.; by 28.73%.

The fixed assets have been increased by Rs.118.73 in comparison to the


previous year i.e.; by 5.20%.

Current assets have been increased by Rs.2196.10 in comparison to


previous year i.e.; 26.61% shows which that the working capital of the
company is strengthened.

The liquidity position of the company during the year 2008-2009 is


satisfactory.

TABLE NO 4.4
COMPARITIVE BALANCE SHEET OF VSP LTD. FOR THE YEARS 2007-2008

Rs. Crs
INCREASE/DECREASE

PARTICULARS
ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets
Total Current Assets
Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c
Fixed Assets: (F.A)
Land-Free Hold
Land-Lease Hold
Railway Lines &
Sidings
Roads, Bridges &
Culverts

2007

2008

AMOUNT
(Rs)

PERCENT
AGE

3932.61
49.30
1257.53
710.12
100.18

5621.70
166.27
1218.35
1061.32
184.36

+1689.09
+116.27
-39.18
+351.20
+84.18

+42.95%
+235.84%
-15.21%
+49.46%
+84.03%

6049.74

8252.00

+2202.26

+36.40%

43.01

24.87

-18.14

-42.18%

0.00

0.00

0.00

0.00%

905.99

0.00

0.00

-100%

51.71
1.22
14.80

50.89
1.19
12.53

-0.82
-0.03
-2.27

-1.58%
-2.46%
-15.34%

62.84

67.17

+4.33

+6.89%

Buildings
Plant & Machinery
Furniture & Fittings
Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems
Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-inprogress

568.88
1492.25
3.18
22.06
0.51
98.30
85.70

544.46
1179.46
3.68
19.20
1.72
85.51
73.71

-24.42
-312.79
+0.50
-2.86
+1.21
-12.79
-11.99

-4.29%
-20.96%
+15.72%
-12.96%
+237.25%
-13.01%
-13.99%

35.39
4.46
0.00
58.85

34.56
4.18
0.01
180.73

-0.83
-0.28
+0.01
+121.88

-2.34%
-6.28%
+100%
+207.10%

Total Fixed Assets

3449.16

2283.87

-1165.29

-33.78%

TOTAL ASSETS
[ C.A + F.A ]

9498.90

10535.87

+1036.97

+10.92%

218.39
102.90

275.04
120.19

+56.65
+17.29

+25.94%
+16.80%

4.64
51.20

1.60
68.89

-3.04
+17.69

-65.52%
+34.55%

2.39

8.43

+6.04

+252.72%

332.94

311.62

-21.32

-6.40%

712.46

785.77

+73.31

+10.29%

269.27
88.94

716.37
173.87

+447.10
+84.93

+166.04%
+95.49%

Current Liabilities:
(C.L)
Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money,
Security & Other
Deposits
Interest Accured but
not Due
Other Liabilities
Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans

Unsecured Loans
Deferred Tax Liability

442.42
158.49

369.44
316.72

-72.98
+158.23

-16.49%
+99.83%

Total Long Term


Liabilities &
Provisions
Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves & Surplus

959.12

1576.40

+617.28

+64.36%

7827.32
0.00

7827.32
346.38

0.00
+346.38

0.00%
+100%

Total Capital &


Reserve

7827.32

8173.70

+346.38

+4.42%

TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

9498.90

10535.87

+1036.97

+10.92%

INTERPRETATION:

During the financial year 2008, the long-term liabilities were increased by
Rs 617.28 i.e.; 64.36% comparison to the previous year 2007.

In comparison to the previous year i.e.; 2006-05 the current liabilities were
increased by Rs.73.31 i.e.; by 10.29%.

The fixed assets have been decreased by Rs.1165.29 in comparison to the


previous year i.e.; by 33.78%.

Current assets during the year 2008 have been increased by Rs.2202.36 in
comparison to previous year i.e.; 36.40% shows which that the working
capital of the company is strengthened. .

The liquidity position of the company during the year 2007-2008 is


satisfactory.

TABLE NO 4.5
COMMON SIZE BALANCE SHEET OF VSP LTD. FOR THE YEARS

Particulars

2010
Amount

Percent
age

2010-2011

Rs.Crs
2011
Percent
age
Amount

ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors

7699.11
93.41

50.40%
0.61%

6624.17
191.27

37.45%
1.07%

Stock (Inventories)
Loans & Advances
Other Current Assets

1761.15
1958.49
292.43

11.53%
12.82%
1.91%

3215.28
1569.69
258.91

18.13%
8.95%
1.46%

Total Current Assets

11804.59

77.27%

11859.3
2
-----

66.88%

----

----

0.05

0.01%

0.01%

----

----

0.05
-----

51.74
1.10
5.92
96.81

0.34%
0.01%
0.04%
0.63%

85.67
1.07
3.53
106.56

0.58%
0.01%
0.01%
2.23%

Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c
Fixed Assets: (F.A)
Land-Free Hold
Land-Lease Hold
Railway Lines & Sidings
Roads, Bridges &
Culverts
Buildings
Plant & Machinery
Furniture & Fittings
Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems
Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-in-progress

474.50
600.81
5.36
11.08
3.80
59.68
44.91

3.11%
3.93%
0.03%
0.07%
0.02%
0.39%
0.29%

448.5
468.36
6.12
9.69
4.80
54.63
31.78

2.64%
0.35%
0.05%
0.03%
0.05%
0.31%
0.18%

25.42
3.51
0.04
2087.19

0.17%
0.02%
0.01%
13.66%

32.32
3.22
0.05
4617.81

0.2%
0.02%
0.18%
26.04%

Total Fixed Assets

3471.92

22.73%

5874.16

33.12%

15276.51

100.00%

17733.48

100%

TOTAL ASSETS
[ C.A + F.A ]
Current Liabilities:
(C.L)

Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money, Security
& Other Deposits
Interest Accured but not
Due
Other Liabilities

501.31
136.97

3.28%
0.90%

1149.44
137.46

6.5%
0.8%

1.57
99.32

0.01%
0.65%

1.43
137.87

0.1%
0.8%

4.89

0.03%

0.14

866.09

5.67%

1134.45

6.4%

Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans
Deferred Tax Liability

1610.15

10.54%

2560.79

14.45%

1581.47
332.78
107.95
163.12

10.35%
2.18%
0.71%
1.07%

1620.53
907.72
100.04
124.49

9.1%
5.1%
0.6%
0.7%

Total Long Term


Liabilities & Provisions
Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves & Surplus

2185.32

14.31%

2752.78

15.52%

7827.32
3653.72

51.23%
23.92%

7827.32
4592.59

44.1%
25.9%

Total Capital &


Reserve

11481.04

75.15%

12419.91

70%

TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

15276.51

100.00%

17733.48

100%

0.01%

INTERPRETATION

During the year 2010-11 the company is more traditionally financed as


compared to previous year. In 2010-11 the share capital consists of 70% of
total investment while the percentage is in previous year 75.15 %. The
company has relied more on shareholders fund in the current year.

In both the years the company has followed the policy of financing fixed
assets from long term funds. In the current year investments in fixed assets
are 22.73% while long term funds are 12.38% and these figures in previous
year is 33.12 and long term funds are 5.67% this shows that the company
in both the years have financed working capital from long term sources.

The working capital position of the company in both the years is good. In
the previous year the company has 77.27% of current assets while current
liabilities are of total investment. In the current year current assets
are66.88 % while current liabilities are 14.45%. The working capital of the
company in the year 2010 is much better than the year2010.

The analysis of various figures shows that the company for both the

TABLE NO 4.6
COMMON SIZE BALANCE SHEET OF VSP LTD. FOR THE YEARS

Particulars

2009
Amount

Percent
age

2009-2010

2010
Amount

Rs. Crs
Percent
age

ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets
Total Current Assets
Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c
Fixed Assets: (F.A)
Land-Free Hold
Land-Lease Hold
Railway Lines & Sidings
Roads, Bridges &
Culverts
Buildings
Plant & Machinery

7194.68
216.80
1203.24
1518.90
314.48

55.98%
1.69%
9.36%
11.82%
2.45%

7699.11
93.41
1761.15
1958.49
292.43

50.40%
0.61%
11.53%
12.82%
1.91%

10448.10

81.30%

11804.59

77.27%

14.95

0.11%

----

----

0.05

0.01%

0.05

0.01%

----

----

----

----

51.74
1.16
10.25
82.39

0.40%
0.01%
0.08%
0.64%

51.74
1.10
5.92
96.81

0.34%
0.01%
0.04%
0.63%

522.43
926.29

4.06%
7.21%

474.50
600.81

3.11%
3.93%

Furniture & Fittings


Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems
Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-in-progress

3.95
16.21
1.96
73.49
68.54

0.03%
0.13%
0.02%
0.57%
0.53%

5.36
11.08
3.80
59.68
44.91

0.03%
0.07%
0.02%
0.39%
0.29%

28.15
3.90
---597.19

0.22%
0.03%
---4.65%

25.42
3.51
0.04
2087.19

0.17%
0.02%
0.01%
13.66%

2402.65

18.70%

3471.92

22.73%

12850.75

100.00%

15276.51

100.00%

365.83
119.91

2.85%
0.93%

501.31
136.97

3.28%
0.90%

2.02
82.54

0.02%
0.64%

1.57
99.32

0.01%
0.65%

18.41

0.14%

4.89

0.03%

422.82

3.29%

866.09

5.67%

Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans
Deferred Tax Liability

1011.53

7.87%

1610.15

10.54%

1092.77
604.45
312.51
291.29

8.50%
4.70%
2.44%
2.27%

1581.47
332.78
107.95
163.12

10.35%
2.18%
0.71%
1.07%

Total Long Term

2301.02

17.91%

2185.32

14.31%

Total Fixed Assets


TOTAL ASSETS
[ C.A + F.A ]
Current Liabilities:
(C.L)
Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money, Security
& Other Deposits
Interest Accured but not
Due
Other Liabilities

Liabilities & Provisions


Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves & Surplus
Total Capital &
Reserve
TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

7827.32
1710.88

60.91%
13.31%

7827.32
3653.72

51.23%
23.92%

9538.20

74.22%

11481.04

75.15%

12850.75

100.00%

15276.51

100.00%

INTERPRETATION

During the year 2009-10 the company is more traditionally financed as


compared to previous year. In 2009-10 the share capital consists of 74.24%
of total investment while the percentage is in previous year 74.21 %. The
company has relied more on shareholders fund in the current year.

In both the years the company has followed the policy of financing fixed
assets from long term funds. In the current year investments in fixed assets
are 18.58% while long term funds are 9.37% and these figures in previous
year is 22.72 and long term funds are 3.93% this shows that the company
in both the years have financed working capital from long term sources.

The working capital position of the company in both the years is good. In
the previous year the company has 81.41% of current assets while current
liabilities are 16.37% of total investment. In the current year current assets

are77.27 % while current liabilities are 21.48%. The working capital of the
company in the year 2010 is much better than the year2009.

The analysis of various figures shows that the company for both the years
has satisfactory long-term and short term financial position in comparisons
the previous year.

TABLE NO 4.7
COMMON SIZE BALANCE SHEET OF VSP LTD. FOR THE YEARS

Particulars

2008
Amount

2008-2009

Rs. Crs
Percent
2009
age
Amount

Percent
age

ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets

5621.70
166.27
1218.35
1061.32
184.36

53.36%
1.58%
11.56%
10.07%
1.75%

7194.68
216.80
1203.24
1518.90
314.48

55.98%
1.69%
9.36%
11.82%
2.45%

Total Current Assets

8252.00

78.32%

10448.10

81.30%

Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c

24.87

0.24%

14.95

0.11%

0.00

0.00%

0.05

0.01%

0.00

0.00%

0.00

----

Fixed Assets: (F.A)


Land-Free Hold
Land-Lease Hold
Railway Lines & Sidings
Roads, Bridges &
Culverts
Buildings
Plant & Machinery
Furniture & Fittings
Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems
Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-inprogress

50.89
1.19
12.53
67.17

0.48%
0.01%
0.12%
0.64%

51.74
1.16
10.25
82.39

0.40%
0.01%
0.08%
0.64%

544.46
1179.46
3.68
19.20
1.72
85.51
73.71

5.17%
11.19%
0.03%
0.18%
0.02%
0.81%
0.70%

522.43
926.29
3.95
16.21
1.96
73.49
68.54

4.06%
7.21%
0.03%
0.13%
0.02%
0.57%
0.53%

34.56
4.18
0.01
180.73

0.33%
0.04%
0.00%
1.72%

28.15
3.90
0.00
597.19

0.22%
0.03%
---4.65%

Total Fixed Assets

2283.87

21.68%

2402.65

18.70%

10535.87

100%

12850.75

100.00%

275.04
120.19

2.61%
1.14%

365.83
119.91

2.85%
0.93%

1.60
68.89

0.01%
0.65%

2.02
82.54

0.02%
0.64%

TOTAL ASSETS
[ C.A + F.A ]

Current Liabilities:
(C.L)
Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money,

Security & Other


Deposits
Interest Accured but
not Due
Other Liabilities

8.43

0.08%

18.41

0.14%

311.62

2.96%

422.82

3.29%

785.77

7.45%

1011.53

7.87%

716.37
173.87
369.44
316.72

6.80%
1.65%
3.51%
3.01%

1092.77
604.45
312.51
291.29

8.50%
4.70%
2.44%
2.27%

Total Long Term


Liabilities &
Provisions
Share Capital &
Reserves: (CAP. &
RES.)
Share capital
Reserves & Surplus

1576.40

14.97%

2301.02

17.91%

7827.32
346.38

74.29%
3.29%

7827.32
1710.88

60.91%
13.31%

Total Capital &


Reserve

8173.70

77.58%

9538.20

74.22%

10535.87

100%

12850.75

100.00%

Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans
Deferred Tax Liability

TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

INTERPRETATION

During the year, i.e. 2009 the company is less traditionally financed as
compared to previous year. In 2009 the share capital consists of 74.21% of total
investment while the percentage is in previous year 77.58 %. The company has
relied less on shareholders fund in the current year.

In both the years the company has followed the policy of financing fixed assets
from long term funds. In the current year investments in fixed assets are
23.68% while long term funds are 11.4% and these figures in previous year is
18.58 and long term funds are 9.39 this shows that the company in both the
years have financed working capital from long term funds also.

The working capital position of the company in both the years is good. In the
current year the company has 76.31% of current assets while current liabilities
are 14.25% of total investment. In the year 2009 current assets are 86.42%
and current liabilities are 16.37%. The working capital of the company in the
year 2009 is much better than the year 2008.

The analysis of various figures shows that the company for both the years has
satisfactory long-term and short term financial position in comparisons the
previous year.

TABLE NO 4.8
COMMON SIZE BALANCE SHEET OF VSP LTD. FOR THE YEARS 2007-2008.

Particulars
ASSETS:
Current Assets: (C.A)
Cash & Bank Balances
Sundry Debtors
Stock (Inventories)
Loans & Advances
Other Current Assets
Total Current Assets
Miscellaneous Assets:
Deferred Revenue
Expenditure
Investments
Profit & Loss a/c
Fixed Assets: (F.A)
Land-Free Hold
Land-Lease Hold
Railway Lines & Sidings
Roads, Bridges &
Culverts
Buildings
Plant & Machinery
Furniture & Fittings
Locomotives
Vehicles
Electrical Installations
Water Supply &
Sewerage systems

2007
Amount

Percent
age

2008
Amount

Rs. Crs
Percent
Age

3932.61
49.30
1257.53
710.12
100.18

41.40%
0.52%
13.24%
7.48%
1.05%

5621.70
166.27
1218.35
1061.32
184.36

53.36%
1.58%
11.56%
10.07%
1.75%

6049.74

63.69%

8252.00

78.32%

43.01

0.45%

24.87

0.24%

0.00

0.00%

0.00

0.00%

905.99

9.54%

0.00

0.00%

51.71
1.22
14.80
62.84

0.54%
0.01%
0.16%
0.66%

50.89
1.19
12.53
67.17

0.48%
0.01%
0.12%
0.64%

568.88
1492.25
3.18
22.06
0.51
98.30
85.70

6.00%
15.71%
0.03%
0.23%
0.01%
1.03%
0.90%

544.46
1179.46
3.68
19.20
1.72
85.51
73.71

5.17%
11.19%
0.03%
0.18%
0.02%
0.81%
0.70%

Miscellaneous Articles
Mining Lease Rights
Held For Disposal
Capital Work-inprogress

35.39
4.46
0.00
58.85

0.37%
0.05%
0.00%
0.62%

34.56
4.18
0.01
180.73

0.33%
0.04%
0.00%
1.72%

Total Fixed Assets

3449.16

36.31%

2283.87

21.68%

TOTAL ASSETS
[ C.A + F.A ]

9498.90

100%

10535.87

100%

218.39
102.90

2.30%
1.08%

275.04
120.19

2.61%
1.14%

4.64
51.20

0.04%
0.54%

1.60
68.89

0.01%
0.65%

2.39

0.02%

8.43

0.08%

332.94

3.50%

311.62

2.96%

Total Current
Liabilities
Long Term Liabilities
& Provisions: (L.T.M)
Provisions
Secured Loans
Unsecured Loans
Deferred Tax Liability

712.46

7.50%

785.77

7.45%

269.27
88.94
442.42
158.49

2.83%
0.94%
4.66%
1.67%

716.37
173.87
369.44
316.72

6.80%
1.65%
3.51%
3.01%

Total Long Term


Liabilities &
Provisions
Share Capital &

959.12

10.10%

1576.40

14.97%

Current Liabilities:
(C.L)
Sundry Creditors
Advances from
Customers
Other Advances
Earnest Money,
Security & Other
Deposits
Interest Accured but
not Due
Other Liabilities

Reserves: (CAP. &


RES.)
Share capital
Reserves & Surplus

7827.32
0.00

82.40%
0.00%

7827.32
346.38

74.29%
3.29%

Total Capital &


Reserve

7827.32

82.40%

8173.70

77.58%

TOTAL LIABILITIES
[C.L + L.T.M + CAP. &
RES.]

9498.90

100%

10535.87

100%

INTERPRETATION
During the year, i.e. 2008 the company is less traditionally financed as
compared to previous year. In 2008 the share capital consists of 77.58% of
total investment while the percentage is in previous year 82.50%. The
company has relied less on shareholders fund in the current year. So
financial structure of current year is less safe as compare to previous year.
In both the years the company has followed the policy of financing fixed
assets from long term funds. In the current year investments in fixed assets
are 26.32% while long term funds are 7.34% and these figures in previous
year is 23.68 and long term funds are 11.4% this shows that the company
in both the years have capital from long term funds also. financed working
The working capital position of the company in both the years is good. In
the current year the company has 73.67% of current assets while current
liabilities are 10.33% of total investment. In the year 2008 current assets
are 76.31% and the current liabilities are 15.75%. the working capital of the
company in the year 2008 is much better than 2007.

The analysis of various figures shows that the company for both the
years has satisfactory long-term and short term financial position in
comparisons the previous year.

Particulars

2011

2010

2009

2008

2007

Sales
Cost of goods sold
Gross profit/loss
General, Admin & Selling
exp
Operating profit (EBIT)
Inters
Earnings Before Tax
(EBT)
TAX
Earnings After Tax (EAT)

9128
5312
3816

9088
4766
4322

7933
4269
3664

7306
6972
3343

7360
3927
3433

1706

1297

1397

976

1168

2110
88

3025
31

2267
48

2367
31

2265
11

2022

2994

2219

2336

2254

686
1336

1051
1943

856
1363

1085
1251

246
2008

TABLE NO 4.9

COMMON SIZE INCOME STATEMENTS of VSP LTD 2007- 11


INTERPRETATION

The Cost of goods Sold have been increased in the year of 2008 compared with
other years
The Gross Profit is also improved in2010 higher then other years
The General, Administrative & Selling Expenses are fluctuating during the
period 2007-2011.

The Operating profit has been immensely increased upto2007 to 2010, but
in2011 it was decreased
The EAT and Net Profit of the Firm is also high in

2007

compared with

reaming year.

Common Measurement Analysis shows that Profits have been decreased


in relation with Sales because of increase in the Cost of Goods Sold and
relatively less decrease in the Administration & Selling Expenses.

TABLE NO 4.10

COMPARITIVE INCOME STATEMENT OF VSP LTD.FOR THE YEARS


2010-11
RS.Crs

Particulars

Sales
Cost of goods sold
Gross profit/loss
General, Admin
&Selling exp
Operating profit (EBIT)
Inters

2011
9128
5312
3816

2010
9088
4766
4322

INCREASE/
AMOUNT
Rs.
+40
+546
-506

1706
2110
88

1297
3025
31

+409
-915
+57

DECREAS
E
PERCENT
AGE
+0.44
+11.45
-11.71
+31.53
-30.25
+183.87

Earnings Before Tax


(EBT)
TAX
Earnings After Tax
(EAT)

2022
686

2994
1051

-972
-365

-32.46
-34.73

1336

1943

-607

-31.24

INTERPRETATION
In the above calculations we observe that while sales for the year 2011
increased by narmally0.44%, gross profit decreased by 11.71% only due to a
higher increased in cost of goods sold. In spite of an decreased in gross profit,
the net profit decreased by 31.24% due to higher operation expenses. While
general expenses admin expenses and selling expenses increased by 409crors
over the yea2010 ;this resulted in the decrease of net operating income or profit
there was a saving in the taxes by 365 crors since the rate remained the net
operating profit also decreased by the percentage namety32.73%

TABLE NO 4.11

COMPARITIVE INCOME STATEMENT OF VSP LTD.FOR THE YEARS


2009-2010
RS.Cr
Particulars

2010

2009

INCREASE
AMOUNT Rs.

Sales
Cost of goods sold
Gross profit/loss

9088
4766
4322

7933
4269
3664

+1155
+497
+658

/DECREASE
PERCENTAGE

+14.56%
+11.64%
+17.95%

General, Admin & Selling


exp
Operating profit (EBIT)
Inters
Earnings Before Tax
(EBT)
TAX
Earnings After Tax (EAT)

1297
3025
31

1397
2267
48

-100
+758
-17

-7.15%
+33.43%
-35.41%

2994
1051
1943

2219
856
1363

+775
+195
+580

+34.93%
+22.78%
+42.55%

INTERPRETATION
In the above calculations we observe that while sales for the year 2010
increased by normally 14.56%, gross profit increased by 17.95% only due to a
higher increased in cost of goods sold. In spite of an increased in gross profit,
the net profit increased by 42.55% due to higher operation expenses. While
general expenses admin expenses and selling expenses increased by 758crors
over the year 2009 ;this resulted in the increased of net operating income or
profit there was a saving in the taxes by 195crors since the rate remained the
net operating profit also increased by the percentage namety33.43%

TABLE NO 4.12

COMPARITIVE INCOME STATEMENT OF VSP LTD.FOR THE YEARS


2008-2009
RS.Crs

Particulars

2009

2008

Sales
Cost of goods sold
Gross profit/loss
General,Admin&Sellin
gexp
Operating
profit
(EBIT)
Inters
Earnings Before Tax
(EBT)
TAX
Earnings After Tax
(EAT)

7933
4269
3664

7306
6972
3343

1397

976

2267
48

INCREA
SE/ DECREASE
AMOUNT PERCENTAG
Rs.
E%
+627
+8.58
-2703
-38.76
+321
+9.6
+421

+43.13

2367
31

-100
+17

-4.22
+54.83

2219
856

2336
1085

-117
-229

-5.01
-21.1

1363

1251

+112

+8.95

INTERPRETATION
In the above calculations we observe that while sales for the year 2009
increased by normally 8.58%, gross profit increased by 9.6% only due to
decreased in cost of goods sold. In spite of an increased in gross profit, the net
profit increased by 8.95% due to operation expenses. While general expenses
admin expenses and selling expenses decreased by 421crors over the year 2008
;this resulted in the decreased of net operating income or profit there was a
saving in the taxes by 229crors since the

rate remained

profit also decreased by the percentage namety 5.01%

the net operating

TABLE NO 4.13

COMPARITIVE INCOME STATEMENT OF VSP LTD.FOR THE YEARS


2007-08
RS.Crs

Particulars

Sales
Cost of goods sold
Gross profit/loss
General Admin&Selling
exp
Operating profit (EBIT)
Inters
Earnings Before Tax
(EBT)
TAX
Earnings After Tax
(EAT)

DECREAS
INCREASE/ E
AMOUNT
PERCENT
Rs.
AGE
-54
-0.73%
+3045
+77.54%
-90
-2.62%

2008
7306
6972
3343

2007
7360
3927
3433

976
2367
31

1168
2265
11

-192
+102
+20

-16.43%
+4.5%
+181.82%

2336
1085

2254
246

+82
+839

+3.64%
+341.06%

1251

2008

-757

-37.7%

INTERPRETATION
In the above calculations we observe that while sales for the year 2008
decreased by normally 0.73%, gross profit decreased by 2.62% only due to
increased in cost of goods sold. In spite of an decreased in gross profit, the net
profit decreased by 8.95% due to operation expenses. While general expenses
admin expenses and selling expenses increased by 421crors over the year 2007
;this resulted in the increased of net operating income or profit there was a

saving in the taxes by 839crors since the

rate remained

the net operating

profit also decreased by the percentage namety37.1%

FINDINGS

During the financial year 2011, the long-term liabilities were increased
by Rs 567.46 i.e.; 25.67% comparison to the previous year 2010.

During the financial year 2006, the long-term liabilities were decreased
by Rs 1084.25 i.e.; 84.84% comparison to the previous year 2005.

The fixed assets have been increased by Rs.2402.19 in comparison to the


previous year i.e.; by 69.19%.

The fixed assets have been decreased by Rs.441.83 in comparison to the


previous year i.e.; by 11.49%.

Current assets have been increased by Rs.54.73 in comparison to


previous year i.e.; 0.46% shows which that the working capital of the
company is strengthened.

Current assets have been decreased by Rs.702.02 in comparison to


previous year i.e.; 10.96% shows which that the working capital of the
company is weakened.

The liquidity position of the company during the year 2010-2011 to


2005-06 is satisfactory.

CONCLUSION
The Visakhapatnam Steel Plant has been dedicated to nation in
1992 and it is one of the major steel plants in the Asia and having much more
capital investment. We know that the Visakhapatnam Steel Plant as a large
organization might have long gestation period and while establishing the
Visakhapatnam Steel Plant so much of lands were taken from the local people
and provided the jobs to them in VSP thought they may not skillful. But the top
management of VSP conducts so many training and development programs to
improve their performance, not only this but also frequent technological
changes due to the above factors in the initial stage.

The VSP incurred some losses but with the remedial measures
taken by the top management the past scenario was changed and the

organization was stepped towards the profits and recorded 449.66 crores as a
profit for the year 2004. However the top management must take care to
improve the profitability and must try to reduce / remove the accumulated
losses, which is important for the wealth of the organization.

This study concentrated on the financial state of

affairs of the

company RINL. It involved study of Balance sheet profit and loss account and
ratio analysis and also their comparison over the last five years, it has
presented a broader picture of the financial position of the company. The study
analyzed the companys success in being able to effectively manage its day to
day

requirements

pertaining

to

cash

and

funds

flow

and

effectively

channelizing the short term and long term funds of the company to meet the
requirements.

The performance of the Company in terms of both

Production and

Sales Revenue has been satisfactory, the Company surrounded various adverse
situations during the past 25 years and has now been conferred the status of

Mini Ratna by now been conferred the status of Mini Ratna by Government of
India . The Companys plan to expand its capacity to 6.3 mtpa of liquid steel
has been approved by Government of India and the project is under progress.

SUGGESTIONS

High profit realization by selling the products in higher margins will


eventually result in higher cash accrual and hence higher credit rating.

Since the firm performance is largely dependent on availability of raw


materials, In order to avoid the uncertainties in acquiring the raw
materials New and innovative steps will be taken to effectively utilize the
surplus funds.

The present level of the cash is Rs 7106 crores, this can be used in
expansion II in order to maintain the current ratio i.e., between current
assets and current liabilities at the optimum level.

The other main area where RINL has tremendous scope for improvement
is in manufacturing value added products.

This will result in better

sales realization and higher profits.

Standardization of general stores material and spares and reduce the


number of items.

BIBLIOGRAPY

FINANCIAL MANAGEMENT

- I.M.PANDEY

FINANCIAL MANAGEMENT

- PRASANNA
CHANDRA

COST AND MANAGEMENT


ACCOUNTING

- I.M.PANDEY

COST AND MANAGEMENT


ACCOUNTING

- S.P.JAIN,
K.L.NARANG,
SIMMI AGRAWAL,
MONICA SEHGAL

ADVANCED ACCOUNTANCY

R.L. Gupta

Volume- II

M. Radhaswamy

Annual Reports of Rashtriya Ispat Nigam Limited.


General Articles and Magazines of Rashtriya Ispat Nigam Limited.
Website: www.vizagsteel.com, www.infoline.com.
News papers: Deccan Chronicle, The Hindu.

ANNEXURE
RASHTRIYA ISPAN NIGHAM LIMITAD
ANNUAL ACCOUNTS 2008-09

Schedules

SOURCE OF THE FUNDS

As at

As at

31.march 2011

31. march 2010

share Holders funds


share capital

7827.32

7827.32

reserved surplus

4592.59

3653.72

secured loans

907.72

332.78

un secured loans

100.01

107.95

LOAN FUNDS

Defferd tax liability (net)


Total

124.49

163.12

13552.13

12084.89

APPLICATION OF FUNDS
FIXED ASSETS
Gross block

9005.99

8006.83

less depreciation

7749.74

7516.19

net block

1256.25

1384.64

hoid for disposal

0.05

0.04

capial working-in process

4617.81

2087.19

INVESTMENT
CURRENT ASSETS LOANS &
ADVENCES

Inventors

10

3215.28

1761.15

sundry debitors

11

191.27

93.41

cash & Bank balance

12

6624.17

7699.11

CURRENT ASSETS

13

258.91

292.43

loans & advance

14

1569.69

1958.49

11859.32

11804.59

5874.11

3471.87

0.05

0.05

LESS CURRENT
&PROVISIONS
Liabilities

15

2560.79

1610.15

Provisions

16

1620.53

1581.47

4181.32

3191.62

Net Current assets


Total

7678.08

8612.97

13552.24

12084.89

BALANCE SHEET AS AT 31 MARCH 2011

Rs. Crs
As per 02rseparate report of even data
For RAO& KUMAR
Chartered accountants
(K.S. Shankar)
Director (finance)

(P. Mohan Rao)


(Company secretary)

(CA AURBAN PAL)


M no 214919

Rashtriya Ispat Nigam Ltd., Vishakapatnam