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Chapter 1

EXECUTIE SUMMARY

Financial ratios illustrate relationships between different aspects of a

businesss operations. They involve the comparison of element from a balance sheet

or income statement, and are crafted with the particular points of focus in mind.

Financial ratios con provide managers with a valuable tool to measure their progress

against predetermined internal goals, a certain competitor, of the overall industry. In

addition, tracking various ratios over time is a powerful way to identify trends as they

develop. Ratios are also used by bankers, investors, and business analysts to assess

various attributes of a companys financial strength or operating results.

Ratio are determined by dividing one number by another, and usually

expressed as a percentage. They enable managers to examine the relationship between

seemingly unrelated items and thus gain useful information for decision making.

They are simple to calculate, easy to use, and provide a wealth of information that

cannot be gotten anywhere else, James O. Gill noted in his book Financial Basics Of

Small Business Success. But, he added, Ratio are aids to judgment and cannot take

the place of experience. They will not replace good management, but they will make a

good manager better. They help to pinpoint areas that need investigation and assist in

developing an operating strategy for the future.

Virtually any financial statistics can be compared using a ratio. In reality,

however, managers need to be concerned only with a small set of ratios in order to

identify where improvement are needed. As you run your business you juggle

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dozens of different of different variable, David H. Bangs Jr. wrote in his book

Managing by the Numbers. Ratio analysis is designed to help you identify those

variables which are out of balance.

It is important to keep in mind that financial ratios are time sensitive; they can

only present a picture of the business at the time that the underlying figures were

prepared. For example, a retailer calculating ratios before and after the Christmas

season would get very different results. In addition, ratios can be misleading when

taken singly, though they can be quite valuable when a business tracks them over time

or uses them as a basis for comparison against company goals of industry standards.

As a result, managers should compute a variety of applicable ratios and attempt to

discern a pattern, rather than relying on the information provided by only one or two

ratios. Gill also noted that business managers should be certain to view ratios

objectively, rather than using them to confirm a particular strategy or point of view.

Perhaps the best way for managers to use financial ratios is to conduct a

formal ratio analysis on regular basis. The raw data used to compute the ratios should

be recorded on a special from monthly. Then the relevant ratios should be computed,

reviewed, and saved for future comparisons. Determining which ratios to compute

depends on the type of business, the age of the business, the points in the business

cycle, and any specific information sought. For example, if a business depends on a

large number of fixed assets, ratios that measure how efficiently these assets are being

used may be the most significant. In general, financial ratios can be broken down into

four main categories-profitability or return on investment, liquidity, leverage, and

operating or efficiency-with several specific ratio calculations prescribed within each.

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The main objectives of the Ratio analysis are

To standardize financial information for comparison.


To evaluate current operations.
To compare performance with past performance.
To compare performance against other firm or industry standards.
To study the efficiency of the operation.
To study the risk of the operation.
To assessment of the firms present, past and the future financial condition
To find out firms financial strength and weaknesses.
To facilitates inter-firm and intra-firm comparison.

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Chapter 2

THEORETICAL BACKGROUND

MEANING

The Ratio Analysis is a simple arithmetic expression of relationship of one

number to the another. It may be defined as the indicated quotient of two

mathematical calculations.

The Ratio analysis is the process of determining and presenting the

relationship of items in the statement. According to the Batty J. management

accounting Ratio can assist management in its basic functions of Forecasting.

Planning, Co-ordination, Control and Communication.

It is helpful to know about the liquidity, Solvency, Capital structure and

profitability of an Organization. It is helpful tools to aid in applying judgment

otherwise complex situation.

The Ratio Analysis is the important techniques of financial analysis. The ratio

are important and helpful in the references that.

To simplify that the comprehension of financial statement and tell the whole

story of changes in the financial condition of the business.


To provide the data for inter firm comparison. The ratio highlighted the factors

associated with the successful and unsuccessful firms also reveal strong and

weak firms.
It helps in Planning and forecasting these can assist management in the basic

function of forecasting, Planning, Co-ordination and Control.


It helps in investment decision in the case of investors and lending decision in

case of bankers etc.

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The Ratio analysis can be representing in the following three methods.

1) Pure Ratio or Simple Ratio:

It is a expressed by simple division of one number by another , For example :-

If the current assets of the business are Rs- 2,00,000 and its Current Liabilities are Rs-

1,00,000. The Ratio of Current assets and Current liabilities is 2:1.

2)Rates or So many Times:

In this type, it is calculated how many times a figure is in comparison in

another figure. For example : If a firm Credit sale during the year are 2,00,000 and its

debtors at the end of the year are Rs- 40,000, Its Debtors turnover Ratio is

2,00,000/40,000= 5 Times It should that the credit sale are in the comparison of the

Debtors.

3) Percentage:

In this type the relationship between the two figure is expressed in hundredth.

For example : If a firm capital is Rs-10,00,000 and its profit is Rs-2,00,000 the ratio

of the profit capital in terms of percentage is 2,00,000/10,00,000*100=20%.

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SIGNIFICANCE/ IMPORTANTS OF RATIO ANALYSIS.

1) It helps in evaluating firms performance:

With the help of ratio analysis conclusion can be drown regarding the several

aspects such as Financial Health, Profitability and operational efficiency of the

undertaking. The ratio point out the operating efficiency of the firms i:e weather the

management has utilized the firms aspects correctly, to increase the investor wealth. It

ensure a fair returns to its owner and secure optimum utilization of firm aspects.

2) It helps in inter firms comparisons:

Ratio analysis help in inter firm comparison indicates relative position. It

provides the relevant data for the comparison of performance of different

departments. If comparison shows a variances, the possible reason of variation may be

identified and if returns to negative. The action may be indicated immediately to bring

them in line.

3) It simplifies the Financial Statement:

The information is given in basic financial statement serves no useful it is

interrupted and analyzed some comparables items. The Ratio analysis is one of the

tools in the hands of theses who want to know something more from the financial

statement in the simplified manner.

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4) Long terms Solvency:

The Ratio analysis is equally useful for accessing the long term financial

visibility of the firms. This aspects of the financial position of a borrowers is of

concern to the long terms creditors security analysis.

5) Operating Efficiency:

Yet another dimension of the usefulness of the ratio analysis, relevant from the

viewpoint of the management, it that it throws light on the degree of efficiency in the

management and utilization of its assets/The various activity ratio are measures this

kind of operational efficiency. In fact, the solvency of the firms is, in the ultimate

analysis, dependent upon the sales revenue generated by the use of its assets-total as

well as its components.

6) Overall profitability:

Unlike the outsides parties which are interested in one aspect of the financial

position of the firm, in management is constantly concerned about the overall

profitability of the enterprise. This is, they are concern about the ability of the firms to

meets its short term as well as long terms obligation to its creditors, to ensure a

reasonable returns to its owner and secure optimum utilization of the assets of the

firms. This is possible if an integrated view is taken and all the ratios are considered

together.

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7) Inter- firm Comparison:

Ratio analysis not only throws light on the financial position of a firm but also

serves as a stepping stone to remedial measures. This is made possible due to inter

firm comparison with industry average. A single figure of a particular ratio is

meaningless unless it is related to some standard or norm. One of the popular

techniques is to compare the ratio of a firm with the industry average. It should be

reasonably expected that the performance of a firm should be in board conformity

with that the industry to which it belongs. An inter-firms comparison should be

demonstrate the firms position vis--vis its competitors.

9) Liquidity Position:

With the help of ratio analysis conclusions can be drown regarding the

liquidity position of the firm. The liquidity position of the firms would be satisfactory

if it is able to meet its current obligation when they became due.

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ADVANTAGES OF RATIO ANALYSIS

The ratio analysis is a tools or a techniques through which one can do the

analysis of the financial statement of the company. There are many advantages of

ratio Analysis are as follows.

Liquidity ratio can be helpful to the measuring the liquidity position of the

company that is weather the company will able to meet the obligation as and

when they arise.


Since the ratio is simplified figure of the complex financial statement it can be

easily understood by a person who does not have the accounting knowledge.

The various profitability ratio are help in judging the operation efficiency of

the company and also whether or not company using resources judiciously.
With the help of the ratio, it is easy to make the comparison of a company with

other companies in the same industry and determine the position of the

company with respect of its competitors.

With the help of ratio analysis one can do trend analysis that is weather the

financial position of the company is improving or getting worse over the years.

As ratio is easy to und3erstand it becomes easy for a company to communicate

to the ratio to those who are interested in the financial performance of the

company.
The Ratio study the past and relate the finding to the present. Thus useful

inference their function of Planning, Forecasting etc, efficiency.


The Ratio are increasingly used in trends analysis.

Ratio being measure of efficiency can be used to control efficiency and

Profitability of the business entity.

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The Ratio are yard stick increasingly used by bankers and financial institution

in evaluating the credit standing of their borrowers and customers.

LIMITATION OF RATIO ANALYSIS

Through the Ratio Analysis is an important tools for analyzing the financial

statement of the company and has many advantages, however it has certain limitations

of the Ratio Analysis.

1) While Ratio analysis can be great for comparison between companies however

if has certain limitation of the Ratio analysis.


2) Since the Ratio analysis is done from the data in the financial statement like

Profit and Loss Accounts and Balance Sheet .In case of any mistake in those

financial statement will reflects in the ratio also.


3) Since the ratio are to manipulate that are misused by managers window

dressing reflect to presenting of better picture of the company then what it is.
4) Ratio analysis does not take into account in qualitative factors; it only presents

the figures as they are over. So for example it may possible that company may

have higher current ratio indicating that liquidity position of the company is

good, However if the large portion of those current assets includes inventory

then it does not mean a sound liquidity position.


5) The Ratio are not same for everybody that is different people have different

perception regarding the ratio. So as current assets ratio is2:1 may be good for

some people, however some people may think it is not adequate.

WHY RATIO ANALYSIS IS IMPORTANT

The Ratio analysis are does Two things, immediately. The first thing it is

allows the company to compare itself with other like companies. If management feels
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things arent going well, they can help to pinpoint the problems through comparing

their ratios with other companies, they may be several ratio that are comparable, but a

couple which they are way off. That might be where the problem is.

Also, ratio analysis may help by comparing your company with prior period. If

the particular ratio is declining when it would be better if it were staying the same or

increasing then again looking at the ratios are important to find out where the problem

lies.

TYPES OF RATIO ANALYSIS

Once we go ahead with detailed discussion on different ration which fall under

each group. It will be realized that liquidity, solvency and activity ratios measures

risks where as profitability ratios measures return. Further some of these ration focus

shorts. Run while other focus long runs. The solvency ration have long run

perspective while other category ratio are primarily focused to the short run.

An important aspect of ratio analysis is that it is similar to performing arts

endowed with lot of creativity and imaginations. The choice of a set of ratio through

condition by the objectives and purpose of the analyses yet the interpretation depends

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on ingenuity of the Annual analyst. Through we have certain set of given ratio yet

there is enough fertile ground for designing unique ratio to suit the need of financial

analysis keeping in view the ever changing complexities and dimension of business.

Liquidity ratio:

The liquidity means ability to meet short term obligation as they become due.

We honors of obligation through liquid assets. A liquid assets is one that can be easily

converted into cash. If our liquid assets are of poor quality, meaning thereby that we

find it difficult to convert them into cash when needed or if the investment in liquid

assets is less as compared to our short-terms obligations then our ability to honors our

short-term liabilities will be impaired.

Short term lender is primarily interested in this type of analysis. They want to

evaluate the liquating of the enterprise with an integration to ascertain weather their

short term credit will be safe. Also the management is interested to know whether it

will be able to honors its commitments.

CAPITAL STRUCTURE RATIO/ SOLVENCY RATIO

The term solvency implies the ability of the enterprise to meet its obligation

on the due date. Some payments have short term maturity and some have long term

maturity. The firm has to plan for both short term and long term obligation. We have

analyzed short term liquidity of a business enterprise in the previous section. Now we

extend an analysis to long term liquidity. Long term liquidity means ability to meet

long term commitments or obligation. Long terms lenders are primarily interested in

this type of analysis.


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Long term lenders of funds are basically interested in two things. The safety

of principles which is to be given by way of a loan and regular servicing of the loan in

the form of payment of interest of commitment and repayment of installation of loan.

For e.g. A loan extend for Rs. 2 crore to 5 crore for 5 year period with 10% interest

paid in annually once would like to be sure that the principle amount of Rs. 1 crore is

safe for the duration of loan and the lender will regularly get Rs. 10 lacs as interest

every year.

To capture these two aspects of long term liquidity two ratios are calculated

debts to equity ratio and interest ratios. Interest coverage ratio deals with the ability of

the enterprise to honors its interest payment out of the cash generated by it. It is

expressed as number of times the operating cash inflow are to the interest payment in

other word interest coverage ratio= Net cash inflow from operation, interest charge.

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Assets Turnover Ratio

An Assets Turnover Ratio means inefficient utilization or obsolescence of

fixed assets, which may be caused by excess capacity or interruption in the supply of

Raw Material.

Assets Turnover Ratio = Sales

Fixed Assets

Return on Assets Ratio

The Return on Assets Ratio provides a standard for evaluating how efficiently

financial management employs the average invested in the firms assets weather the

amount came from investors or creditors.

A how return on assets ratio indicates that the earning are low for the amount

of assets.

The return on assets ratio measures how efficiently profit are being generated

from the assets employed.

A return on assets ratio compares to industry average indicates inefficient use

of business assets.

Return on Assets Ratio = PBT

Total Assets

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Debts Equity Ratio

Debt equity ratio refers to the relationship of the long terms debts and the

equity of the enterprise. The degree of indebtedness of an enterprise is captured by

these ratios. A long term lender wants to know about the status of outsiders Long

term funds being used by a business enterprise via-a-via owners funds. By

establishing this relationship one will come to know that at point of time how much is

the stake of owners as compared to those who have given long items loans.

Debts are long terms liabilities having maturity after one year. It includes

debenture, long term loans from bank and financial institution and public deposits.

Equity (also called shareholders fund) includes equity share capital, preference share

capital general reserve, capital reserves, securities premium account balance and all

other reserve and surplus available for equity share holder. For the computation of

equity, miscellaneous expenses and debit balance of profit and loss account, if any are

to be deducted.

Debt Equity Ratio = Debt (Long term loans)

Equity (Long terms funds)

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Proprietary Ratio:

The proprietary ratio is a variant of debt equity ratio. It capture relationship

between equity and total assets. It attempts to indicate the part of the total assets

funded through equity. The following is the formula.

Proprietary Ratio = Equity x 100

Total Assets

Activity/turnover Ratio

These ratio helps in commenting on the efficiency of the firm in the managing

its assets. The speed with which asset are converted into sales is captured by activity

ratio. The activity of any business enterprise is reflected by the volume of sale it is

able to generate. All assets are used by the business in the guest of generation sales.

So one can comment on the efficiency of different assets in relation to sale generated

during a defined period.

These ratio is calculated on the basis of cost of sale or sales. Therefore these

ratios are called as turnover ratio. The turnover indicates the sped or number of times

the capital employed have been related in the process or doing business. Higher

turnover ratio indicates the better use of capital or resources and in turn leads to

higher profitability.

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Inventory Turnover Ratio:

Inventory is an element of current assets, inventory is needed for smooth flow

of production and sales. Inventory is of three types. i.e. raw material, work-in-

progress and finished goods. Raw materials and work in progress inventory is

maintained for the uninterrupted flow of production. Finish goods inventory is kept

for meeting of demand of customer. Due to uncertain nature of demand fluctuation as

also the likelihood of creeping the logistics bottleneck for unforeseen reason. We

usually maintain finished goods inventory. Inventory turnover ratio measure the

efficiency with which inventory has been converted into sales. The ratio could be put

like this.

Inventory Turnover Ratio = Sales

Average Inventory

Inventory is generally valued at cost. In order to have a logical relationship

with the denominator. The numerator should also be a cost variable. Sales includes an

element of profit. By eliminating and then inventory turnover ratio will be

Assets Turnover Ratio:

Assets Turnover Ratio = Cost of Goods Sold

Average Inventory

The figure of cost of goods sold is not separately available in the published

account of Indian companies. The external analysts do not have an access to cost of

goods sold dat. So they use sales in the numerator. However management should use

cost of goods sold data in order to calculate these ratios.

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Debtors Turnover Ratio

Debtors turnover ratio measures the efficiency with which the debtors are

converted into cash the ratio indicates both of the quality of debtors and the collection

efforts of the business enterprise. These ratios are calculated as follows.

Debtors Turnover Ratio = Sales

Average Debtors

The numerator of this ratio should be credit sale. These is so because the

denominator is logically related to the credit sale as it arises from credit sales only.

Cash sales do not generate debtors. However as the information related to credit sale

is not separately available in corporate accounts. So total sales could be taken in the

numerator. Average debtors are calculated by dividing the some of the beginning-of-

year and end-of-year balance of debtors by 2.

Sometimes, the debtors turnover ratio can be converted number of days. It

takes to get cash collected from the debtors in the following manner.

Average Collection Period= Days in a year (365 days)

Debtors turnover ratio

Creditors turnover ratio:

This ratio reflects the Efficiency in making payment to the creditors. Prudence

demands that one should not make payment to the creditors at a pace which is faster

than the pace of receiving the payments from debtors. So, normally we compare this

ratio will debtors turnover ratio is observe our pace of discharging payable apart from

observing this ratio over a period of time and in relation to over compactions.
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This ratio is indicates the relationship between credit purchase and average

creditor during the year.

Creditor Turnover Ratio = Purchase

Average Creditors

The creditor turnover ratio could be converted into the number of days by

dividing the days in a year by this ratio.

Average Payment Period = Days in a year

Creditors Turnover Ratio

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Chapter 3

ORGANIZATION PROFILE

BALLARPUR INDUSTRIES LIMITED, popularly known as BILT is

efficiently managed, financially sound, and self sufficient and self made

company is The flagship of the coveted THAPAR GROUPS.

The Thapar Group is one of the leading business houses in India. It

has a turn over of Rest 5000/- Cores; BILT is one of the leading companies

with in the Thapar Group.

The Thapar Group has a wide range of activities like paper, engineering,

electronics, textiles, chemicals, glass, tele communications, biotechnology, leather

etc.

There are 54 companies and 84 plants under this group. Some of the main

companies under this group are Crompton Greaves, K.C.T & Bros. Limited, JCT

Limited, BILT.

Ballarpur Industries Ltd. (BILT) promoted by LM Thapar, is the leader

in Indian paper industry with an annual production capacity of 460000 MT

spread over in five manufacturing facilities produces ordinary and superior

varieties of writing, printing and specialty papers etc. The company is also

backwardly integrated with its Caustisoda/Chlorine manufacturing facility, which

is a vital material consumed in the production process of paper.

BILT, which is originally incorporated in 1945 as Ballarpur Straw Board

Mills, has changed its name in March 1946 to Ballarpur Paper and Straw

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Board Mills and again it was changed to the present name in Oct. 1975. Since

then the company has grown to be a leader in paper industry by continuous

expansion and modernization of its capacity and plant and strategic

acquisitions. In 1969 the company has merged Shree Gopal Paper Mills with

itself and the company which has acquired the Sinar Mass Pulp and Paper

(India) Ltd. (Now BILT Graphic Papers Ltd.)

The company which was one of the most diversified companies in the

pre-liberalization era of industrial licensing with interests in Paper, Chemicals

(Phosphoric Acid, STPP, Chlor Alkalies), Vanaspati & Edible oils and Glass

has decided to focus on its core competence that is in paper and exit from its

non-core businesses. First major steps on these lines were initiated in the year

1994-95 with hiving off the glass business. Thereafter the company sold its

vanaspati and edible oils business in 1996-97. And in 1998, the chemical division

of the company with its plant at Karwar, Karnataka and which has interests in

Phosphates, Chlor Alkali and Bromine and Bromine Chemicals was spun of

into a separate company that is Ballarpur Chemicals Ltd (now Solaris

ChemTech Ltd). To complement its Restructuring and to enable it to emerge

as a stronger and more competitive organization, the company is implementing

a project involving modernization and expansion of capacity at its Units in

Shree gopal, Ballarpur and Sewa by 105000 TPA. The Project will be

implemented in two phases.

In the first phase, the capacity expansion of 35000 TPA and 28000 TPA

is planned over a two-year period from 2000-01 to 2002-03 for Units Sewa
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and Shree Gopal. In the second phase 42000 TPA of capacity is expected to

come on stream at Unit Ballarpur by 2003-04. During the year 2001-02, the

company has completed the up gradation of pulp mill at unit Sewa resulting in

increase in capacity by 37 tones from the earlier 125 tones of unbleached pulp

per day. The company has also completed the installation of a 2.4 meter wide

blade coater at Unit Shree Gopal in FY2001-02. BILT entered into strategic

alliance with Hansol of South Korea to provide world class blade coated paper

to the Indian customer. it is the first company in the world to commercially

exploit the fractionation of bamboo and has applied for the world patent for

this process. It has also entered into direct retail distribution with the launch of

A4 size, 100-sheet pack of Royal Executive Bond.

Mr. Gautam Thapar, Managing Director of BILT, has been associated

with BILT since 1986 when joined the company as Shop floor Management

Apprentice-Paper Mills and was instrumental in turning around BILT in the late

1990s.

BILT consists of Five Units:

1. Ballarpur Unit, Distt. Chandrapur, Maharastra.

2. Shree Gopal, Yamuna Nagar, Haryana.

3. Ashti, Maharastra.

4. Bhigwan, Maharashtra

5. Sewa, Orissa

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BILT - VISION

As per the leading company in Thapar Groups:

Maximize shareholders value by the speed and quality of their response

to market forces and business opportunities.

Be market leader in their core business.

Achieve and sustain global competitiveness in all their business.

Be the preferred supplie by providing their customer products and

services that always exceed their requirements.

Grow as institution of strength of their people.

Be industry leaders in their commitment to safety and the environment.

BILT MISSION

To Consistently out perform the expectation & deliver superior value to both

are customers & stake holders.

To achieve this we will energise our people with a positive culture that

rewards innovations, breeds initiatives & encourages intelligent risk taking.

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BILT CORE VALUES

Honesty We will be principled , straight forward and fair in all our

Dealings.

Integrity We will maintain the highest standards of professionalism

Flexibility We will adapt ourselves to stay a step ahead of change

Respect We will give each person room to contribute & grow.

Respect for Knowledge We will acquire & apply leading edge expertise

In all aspects of our business.

Team Performance : The teams comes first; none of us is as good as all Of

us.

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TOP ORGANISATION STRUCTURE

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DEPARTMENTS C.G.M
Administrative Department

1. PDC - People Development and Communication.

2. Accounts Department
Head P.R. Secretary
3. Material Department

4. Sales Department
Head R &D Head Paper Head Pro. Head Engg.
5. Raw Material Department
Product Chem.
6. Traffic Department

Process Department Mill


Head Medical Head Head Human Head Raw
1. Pulp Mill Commercial Resource Material
2. Machine House

3. Coating Plant

4. Soda Recovery Plant

5. CSCP

Engineering Department

1. Electrical Engineering.

2. Mechanical Engineering

3. Civil Engine

4. Instrumentation Engineering

5. Power House

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AWARDS AND EXCELLENCE:

ERI Award for CSR, 2003-04


Business for Social Responsibility (BSR) Award for CSR, 2005-06
Businessworld FICCI- SEDF CSR Award, 2005-06
Asian CSR Award, 2005-06
Golden Peacock Global Award for CSR in Emerging Economies, 2007
Intel - AIM Corporate Responsibility Award, 2007
TERI Corporate Awards for Business Response to HIV/AIDS, 2008
BILT Receives National Award for Prevention of Pollution 2010
Bilt was conferred the prestigious TERI Corporate Award for Business

Response to HIV/AIDS 2011


Pulp and paper international awards 2013

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Chapter 4

RESEARCH METHODOLOGY

The research methodology is a way to systematically solve the research

problems. It may be understood as a science of studying how researcher is done

scientifically. In it we study the various steps that generally adopted by a researcher in

studying his research problem along with the logic behind .

PRIMARY RESEARCH

Primary data are those which are collected afresh and for the fresh time and

thus happen be original in characters. It collected from oral discussion with finance

manager, Human resource Manager, Production Manager and Company employees.

There are following methods for obtaining the Primary Data.

Personal discussion with head of the finance department.

SECONDARY RESEARCH

Secondary data means that the data are already available i:e they refer to the

data which have already been collected by someone else. Secondary data is collected

from finance Department of the company which includes following documents.

1) Annual Reports of the Company.

2) Various References Books.


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3) Websites and Newspapers.

4) Magazines and Journals of the company.

5) Trade association and other Technical and Professional Groups.

Methodology

The whole project is carried out under the supervision of Finance manager of

Ballarpur Graphic paper product ltd., Ballarpur.

My project is based on the secondary data. And I have collected this data from

companys website and different reference books. All the quantitative work of

secondary data collected by me had been carried out on MS Excel. Because of the

user-friendly and reliability of it was good to use.

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OBJECTIVES OF THE STUDY

1) To study and express the relationship between two values of the comparative

statement.
2) To study the various ratios to determine the relationship of different factor which

have impact on the financial position of the company.


3) To study the operating efficiency of profitability of the company
4) To study the liquidity position of the company.
5) To determine the financial position of the company.

SCOPE OR WORK AND LIMITATION

Scope

1) To get the knowledge about the financial performance.

2) To know the financial condition of BGPPL, Ballarpur by

knowing the figures.

3) It helps to know different financial aspects in Company.

4) It will also helpful in knowing financial management of company.

5) The study will be helpful to the financial advisors to determine financial position.

Limitation

1) The study is limited for the BGPPL, Ballarpur.


2) The balance sheets of last three years are studied in this research.
3) The study is only limited for the ratio analysis.
4) The time for the collection and analysis was very short hence study has limited data

contents.
5) The study is limited only for the academic purpose.

HYPOTHESIS

1) The study of ratio analysis play very important role to obtained financial data easily.
2) There is considerable increase in net sales compared to previous years sales.

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3) Company has strict control over total expenditure when compared with increase in

production.
4) There is considerable increase in earning per share.
5) The investment turnover ratio of the company is decreased in recent years.

STATISTICAL PROCESSING

1) Ratio Analysis
2) Tabulation of data
3) Line and pie graphs.

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Chapter 5

DATA ANALYSIS AND INTERPRETATIONS

Balance Sheet of Ballarpur Industries


------------------- in Rs. Cr. -------------------
Year 2013 Year 2012 Year 2011
Sources Of Funds
Total Share Capital 131.12 131.12 131.12
Equity Share Capital 131.12 131.12 131.12
Share Application Money 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 1,455.96 1,487.49 1,520.18
Revaluation Reserves 0.00 0.00 0.00
Networth 1,587.08 1,618.61 1,651.30
Secured Loans 65.01 306.74 386.45
Unsecured Loans 535.73 676.15 475.63
Total Debt 600.74 982.89 862.08
Total Liabilities 2,187.82 2,601.50 2,513.38
Application Of Funds
Gross Block 1,623.13 1,625.16 1,566.17
Less: Accum. Depreciation 696.94 675.15 594.59
Net Block 926.19 950.01 971.58
Capital Work in Progress 141.59 139.87 88.48
Investments 813.89 1,196.25 1,151.03
Inventories 251.26 269.39 178.33
Sundry Debtors 235.37 243.84 221.87
Cash and Bank Balance 14.63 11.71 6.19
Total Current Assets 501.26 524.94 406.39
Loans and Advances 362.00 420.06 457.46
Fixed Deposits 0.00 0.79 76.00
Total CA, Loans & Advances 863.26 945.79 939.85
Deffered Credit 0.00 0.00 0.00
Current Liabilities 483.83 342.94 376.08
Provisions 73.28 287.47 261.47
Total CL & Provisions 557.11 630.41 637.55

32
Net Current Assets 306.15 315.38 302.30
Miscellaneous Expenses 0.00 0.00 0.00
Total Assets 2,187.82 2,601.51 2,513.39
Contingent Liabilities 107.79 109.66 82.66
Book Value (Rs) 24.21 24.69 25.19

33
Key Financial Ratios of Ballarpur Industries

Year 2013 Year 2012 Year 2011


Investment Valuation Ratios
Face Value 2.00 2.00 2.00
Dividend Per Share 0.50 0.60 0.50
Operating Profit Per Share (Rs) 1.88 2.54 2.90
Net Operating Profit Per Share (Rs) 16.69 16.74 16.20
Free Reserves Per Share (Rs) -- 20.93 21.49
Bonus in Equity Capital 11.76 11.76 11.76
Profitability Ratios
Operating Profit Margin(%) 11.26 15.14 17.91
Profit Before Interest And Tax
3.04 7.40 9.85
Margin(%)
Gross Profit Margin(%) 3.06 7.48 10.05
Cash Profit Margin(%) 8.76 9.99 12.89
Adjusted Cash Margin(%) 8.76 9.99 12.89
Net Profit Margin(%) 0.59 2.72 5.37
Adjusted Net Profit Margin(%) 0.59 2.72 5.37
Return On Capital Employed(%) 1.76 3.58 4.97
Return On Net Worth(%) 0.41 1.86 3.52
Adjusted Return on Net Worth(%) 0.41 1.65 3.19
Return on Assets Excluding
24.21 24.69 25.19
Revaluations
Return on Assets Including
24.21 24.69 25.19
Revaluations
Return on Long Term Funds(%) 1.76 3.58 4.97
Liquidity And Solvency Ratios
Current Ratio 1.55 1.50 1.47
Quick Ratio 1.10 1.05 1.17
Debt Equity Ratio 0.38 0.61 0.52
Long Term Debt Equity Ratio 0.38 0.61 0.52
Debt Coverage Ratios
Interest Cover 1.46 2.02 2.91
Total Debt to Owners Fund 0.38 0.61 0.52
Financial Charges Coverage Ratio 4.86 3.81 4.91

34
Financial Charges Coverage Ratio Post
4.65 3.46 4.36
Tax
Management Efficiency Ratios
Inventory Turnover Ratio 4.58 6.33 9.09
Debtors Turnover Ratio 4.57 4.71 4.97
Investments Turnover Ratio 4.58 6.33 9.09
Fixed Assets Turnover Ratio 0.69 0.70 0.70
Total Assets Turnover Ratio 0.51 0.43 0.43
Asset Turnover Ratio 0.46 0.43 0.45

Average Raw Material Holding -- 98.44 47.20


Average Finished Goods Held -- 26.32 27.45
Number of Days In Working Capital 100.71 103.45 102.50
Profit & Loss Account Ratios
Material Cost Composition 51.46 52.00 48.26
Imported Composition of Raw
33.24 47.97 26.86
Materials Consumed
Selling Distribution Cost Composition -- 6.39 6.97
Expenses as Composition of Total
1.72 2.42 2.49
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 579.90 151.59 65.57
Dividend Payout Ratio Cash Profit 39.52 40.03 26.30
Earning Retention Ratio -479.90 -70.49 27.54
Cash Earning Retention Ratio 60.48 58.77 72.66
AdjustedCash Flow Times 6.23 8.87 6.17

Earnings Per Share 0.10 0.46 0.89

35
LIQUIDITY RATIO

Current Ratio

Current Ratio = Current Assets

Current Liabilities

Year
Year 2013 Year 2011
2012
Current Ratio 1.55 1.50 1.47

1.56 1.55

1.54

1.52
1.5
1.5

1.48 1.47

1.46

1.44

1.42
Year 2013 Year 2012 Year 2011

Interpretation

Current ratio of the BGPPL in year 2013 is 1.55, in year 2012 it decreases to

1.50 and even in year 2011 it goes on decreasing to 1.47.

The ratio indicates the coverage of current assets to the current liabilities. In

other words it indicates the proportion of current assets available for meeting the

current liabilities. Normally it should be 2:1. From above ratio we can determine that

it is not up to the mark but it is satisfactory.


36
Quick/Acid Test Ratio

Liquid Ratio = Liquid Assets

Current Liabilities

Year 2013 Year 2012 Year 2011


Quick Ratio 1.10 1.05 1.17

1.18 1.17
1.16
1.14
1.12
1.1
1.1
1.08
1.06 1.05
1.04
1.02
1
0.98
Year 2013 Year 2012 Year 2011

Interpretation

The quick ratio of the company is 1.1 in year 2013 which is higher as

compared to that with year 2012 which is 1.05. But in year 2011 it was 1.17 highest

among the other two years.

This ratio shows the liquidity position of the company. The graph shows that

the ratio changing year after year and shows high pick in year 2011. It means that the

company having a good liquid position, because the previous year liquidity ratio was

low.

37
Capital Structure/ Solvency Ratio

1. Debts Equity Ratio

Debt Equity Ratio = Debt (Long term loans)

Equity (Long terms funds)

Year 2013 Year 2012 Year 2011


Debt Equity Ratio 0.38 0.61 0.52

0.7
0.61
0.6
0.52
0.5

0.4 0.38

0.3

0.2

0.1

0
Year 2013 Year 2012 Year 2011

Interpretation

Debt equity ratio of the company was 0.52 in year 2011, 0.61 in year 2012 and

decreases in year 2013 i.e. 0.38

The debts equity ratio is the important tools of financial analysis to appear the

financial structure of the firms. It has important implication from the view point of the

creditors, owners and the firms itself. The high ratio shows the large share of financial

by creditors of the firms. A low ratio implies smaller claims.

38
PROFITABILITY RATIOS

Year 2013 Year 2012 Year 2011

Operating Profit
11.26 15.14 17.91
Margin(%)

20
17.91
18
16 15.14
14
12 11.26

10
8
6
4
2
0
Year 2013 Year 2012 Year 2011

Interpretation:

Operating profit margin of the company found to be 11.26 in 2013, 15.14 in

year 2012, 17.91 in year 2011

Operating profit margin ratio of the company is decreasing every year i.e.

from year 2011 to 2013 because of the increase in expenditure of the company in

these years.

39
Gross profit margin

Year
Year 2012 Year 2011
2013
Gross Profit Margin(%) 3.06 7.48 10.05

12

10.05
10

8 7.48

4 3.06

0
Year 2013 Year 2012 Year 2011

Interpretation:

Gross profit margin of the company is 10.05 in 2011, 7.48 in 2012 and 3.06 in

year 2013.

Along with the operating profit margin of the company gross profit margin is

also found to be decreasing in recent three years. i.e. from year 2011 to 2013.

40
Cash profit margin

Year
Year 2012 Year 2011
2013
Cash Profit Margin(%) 8.76 9.99 12.89

14
12.89

12
9.99
10
8.76
8

0
Year 2013 Year 2012 Year 2011

Interpretation:

Cash profit margin ratio of the company is 12.89 in year 2011, 9.99 in year

2012 and 8.76 in year 2013.

Cash profit margin ratio is highest in year 2011 i.e. 12.89 and then it is goes on

decreasing every year and achieves lowest position in year 2012 i.e. 9.99 and 8.76 in

year 2013. Which is not good sign for the company.

41
Net profit margin

Year 2013 Year 2012 Year 2011


Net Profit Margin(%) 0.59 2.72 5.37

6
5.37

3 2.72

1 0.59

0
Year 2013 Year 2012 Year 2011

Interpretation:

Net profit margin of the company is goes on decreasing in every year i.e. it

was 5.37 in 2011 which was highest in recent three years and in year 2013 it is 0.59.

Company is loosing its net profit margin which is not sign for the company.

42
MANAGEMENT EFFICIENCY RATIOS

Year
Year 2012 Year 2011
2013
Inventory Turnover
4.58 6.33 9.09
Ratio

9.09
10
9
8 6.33
7
6 4.58

5
4
3
2
1
0
Year 2013 Year 2012 Year 2011

Interpretation:

Inventory turnover ratio of the company was 9.09 in year 2011, 6.59 in year

2012 and 4.58 in year 2013.

Inventory turn over ratio is decreased in last three years. It is very 4.58 in year

2012 which indicates very good sign for the company.

43
Debtors Turnover ratio

Year
Year 2012 Year 2011
2013
Debtors Turnover Ratio 4.57 4.71 4.97

4.97

4.9
4.71
4.8

4.7 4.57

4.6

4.5

4.4

4.3
Year 2013 Year 2012 Year 2011

Interpretation:

BGPPL is successful in maintaining its debtors turn over ratio this ratio was

4.97 in year 2011 which is highest and lowest in 2013 (4.57). But in last three years

i.e. 2011, 2012 and 2013 this ratio is some what constant. Which indicates sound

position of the company.

44
Investment Turnover ratio

Year 2013 Year 2012 Year 2011


Investments Turnover
4.58 6.33 9.09
Ratio

9.09
10
9
8 6.33
7
6 4.58

5
4
3
2
1
0
Year 2013 Year 2012 Year 2011

Interpretation:

The ratio was 9.09 in year 2011, 6.33 in year 2012 and 4.58 in year 2013.

Investment turn over ratio is significantly lower in year 2013 (4.58) as

compared to that previous three years.

45
Asset Turnover ratio

Year 2013 Year 2012 Year 2011


Asset Turnover Ratio 0.46 0.43 0.45

0.46

0.46
0.45
0.46
0.45
0.45
0.44
0.43
0.44
0.43
0.43
0.42
0.42
Year 2013 Year 2012 Year 2011

Interpretation:

Asset turnover ration was 0.45 in year 2011, 0.43 in year 2012 and 0.46 in

year 2013.

Asset turnover ratio was very high in 2013 i.e. 0.46 which was good sign for

BGPPL but company maintained its good financial performance and achieves good

asset turnover in other three years which is very good sign for company.

46
Earning per share ratio

Year 2013 Year 2012 Year 2011


Earnings Per Share 0.10 0.46 0.89

0.89

0.9
0.8
0.7
0.6 0.46

0.5
0.4
0.3
0.1
0.2
0.1
0
Year 2013 Year 2012 Year 2011

Interpretation:

Earning per share of the company was 0.89 in year 2011m 0.46 in year 2012

and 0.10 in year 2013.

Earning per share of the company gradually decreased every year which

shows poor share market position. Company have to improve its share market

position to maintain good Earning per share.

47
Chapter 6

FINDINGS, CONCLUSION AND SUGGESTIONS

From the above project findings are:

Normally current ratio should be 2:1 but here current ratio is less than 2:1.

We found that the working capital of the company is decreasing.

Gross profit and return on assets are fluctuating.

The liquid ratio shows that liquidity position of the company is changing year

after year and shows high pick in year 2008-09.

We found that the overall performance of the company is not bad and

satisfactory.

Net profit of the company is continuously increasing year after year.

48
CONCLUSION

Ratios make the related information comparable. A single figure by itself has

no meaning, but when expressed in terms of a related figure, it yields significant

interferences. Thus, ratios are relative figures reflecting the relationship between

related variables. Their use as tools of financial analysis involves their comparison as

single ratios, like absolute figures, are not of much use. Ratio analysis has a major

significance in analyzing the financial performance of a company over a period of

time. Decisions affecting product prices, per unit costs, volume or efficiency have an

impact on the profit margin or turnover ratios of a company.

49
Financial ratios are essentially concerned with the identification of

significant accounting data relationships, which give the decision-maker insights into

the financial performance of a company. The analysis of financial statements is a

process of evaluating the relationship between component parts of financial

statements to obtain a better understanding of the firms position and performance.

The first task of financial analyst is to select the information relevant to the

decision under consideration from the total information contained in the financial

statements. The second step is to arrange the information in a way to highlight

significant relationships. The final step is interpretation and drawing of inferences and

conclusions. In brief, financial analysis is the process of selection, relation and

evaluation.

Ratio analysis in view of its several limitations should be considered only as a

tool for analysis rather than as an end in itself. The reliability and significance

attached to ratios will largely hinge upon the quality of data on which they are based.

They are as good or as bad as the data itself. Nevertheless, they are an important tool

of financial analysis.

50
SUGGESTIONS

Company needs more competitive edge which can be given by modernization,

enhancing productivity, and selling excellent quality steel at competitive

prices. It needs quality management at every level of activity to enhance its

performance.

Company should look after the current ratio of the company by increasing

current assets in compare to current liabilities.

Company should its working capital for the increase in further production of

the company.

Company should maintain the gross profit and return on assets because

fluctuating gross profit and return on assets may convey the bad impact on the

financial position of the company.

Company should increase the liquidity position to avoid the crisis which

comes suddenly.

51
REFERENCES

BOOKS REFERED:

1) I.M. PANDEY, FINANCE MANAGEMENT; Vikas Publishing House New Delhi.

2) M.Y KHAN & P.K. JAIN; FINANCE MANAGEMENT;, Vikas Publishing House

New Delhi.

3) PRASANNA CHANDRA, FINANCE MANAGEMENT - THEORY &

PRACTICES; Tata McGraw Hill Publishing Company Ltd. New Delhi.

4) Sharma, R.K. & Gupta, Shashi K, Management Accounting, 1996 kalyani

Publisher

5) Jain, S.P, & Narang, K.L, Advance cost & Management Accounting, Kalyani

Publisher, Ludhiana,
6) Ravi M. Kishore; Financial Management 7th edition; Taxmans
7) C.R. Kothari, Research Methodology, Methods & Techniques; 2nd revised

edition, New Age International Publishers.


8) Shashi K. Gupta & R. K. Sharman; Financial Management Theroy and

Practice; 6th revised edition, Kalyani Publishers

MAGAZINES:

1) Money Mantra Vol. 207; Kesar Singh, Kesar Singh Pearls News Network Pvt. Ltd.

2) Business Today; Chaitnya Kalbag

3) Business India; Ashok H. Advani

4) Business Today Magazine;22nd December 2013

5) Times Magazine 10 Jan 2014

Websites

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2) http://www.onlineijra.com/catogery/english%20research

%20paper/WORKING_CAPITAL_FINANCING_BY_BANKS.pdf

3) http://sbioak.org/BANKING%20EBOOKS/Management%20of%20working

%20capital%20loan.pdf)

4) http://.bilt.com/aboutus.htm

5) http://bilt.com/awards.htm

6) http://moneycontrol.com/bilt/balancesheet.htm

7) http://www.scienpress.com/Upload/JAFB/Vol%202_1_10.pdf

8) http://gbr.sagepub.com/content/8/2/335.abstract?patientinform-

links=yes&legid=spgbr;8/2/335

9) http://www.iif.edu/data/fi/journal/Fi103/FI103Art6.PDF

53