A PROJECT REPORT

ON
FINANCIAL STATEMENT ANALYSIS
THROUGH RATIO ANALYSIS
AT

BHUSHAN STEEL LIMITED

SUBMITTED TO THE
UTKAL UNIVERSITY

INPARTIAL FULFILLMENT OF BACHELOR OF BUSINESS ADMINISTRATION

By

Name : rishiraj singh shekhawat

Regn. No. :56324ut10035

Under the Guidance of :

EXTERNAL GUIDE INTERNAL GUIDE

MR. Jayant Lakra Mrs. Evani Pattanaik

AVP, RMHS (BSL) Asst. Professor (Finance)

TRIDENT GROUP OF INSTITUTION

1
 CERTIFICATE

Guide Name: Mrs. Evani Pattanaik

Designation : Asst. Professor ( Finance)

This is to certify that the project report entitled

“Financial Statement Analysis on Bhushan Steel Ltd. Through
Ratio Analysis” has been prepared by RISHIRAJ SINGH
SHEKHAWAT under my supervision and guidance, for the
fulfilment of Bachelor Business Administration. His field work is
satisfactory.

Mr. Sanjeeb Bal

HOD, BBA
TACT, BBSR

Signature of Guide

Mrs. Evani Pattanaik

Asst. Professor (Finance)

2
 EXAMINER CERTIFICATE

This is to certify that this piece of work entitled

“Financial Statement Analysis on Bhushan Steel Ltd. Through Ratio
Analysis" submitted on partial fulfilment for degree of BBA is a
record of studies and bonafied project work for degree of BBA
of a student of BBA programme 2010-2013 of Trident Academy
of Creative Technology, Bhubaneswar.

I wish him all success in life.

INTENAL EXAMINER EXTERNAL EXAMINER

3
 DECLARATION
I hereby declare that this project report titled
“Financial Statement Analysis on Bhushan Steel
Ltd. Through Ratio Analysis” is done by me and
has not previously formed the basis for award of
any degree of business management.
The work contain in this report is authentic
matters drawn from other known sources are
properly mentioned. All kind of resemble of any
published work to this report are purely
coincidental in nature.

RISHIRAJ SINGH SHEKHAWAT

TACT (BHUBANESHWAR)

REG No: 56324UT10035

Session: 2010-2013

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 Executive summary
Bhushan Steel Ltd. formerly known as Bhushan Steel & Strips Ltd. is a globally
renowned one of the leading prominent player in Steel Industry. Backed by
more than two decades, of experience in Steel making, Bhushan Steel is now
India’s 3rd largest Secondary Steel Producer Company with an existing steel
production capacity of 2 million tons per annum’s (approx.). Given a vibrant
Steel industry dynamics in India, we are on a course to become a fully
Integrated Steel & Power Company with market leading offerings in value
added Steel in Automotive and White Good Segment with the quality been
approved by ISO 9002 and QS 9000.

It was the vision of the founder, Brij Bhushan Singhal that the first stake was
driven into the soil of Sahibabad (Uttar Pradesh) in 1987. His vision helped BSL
overcome several periods of adversity and strive to improve against all odds.

The company is “centralized source” for wide variety of products such as Cold
Rolled Closed Annealed, Galvanized Coil and Sheet, High Tensile Steel
Strapping, Corrugated Sheets, Galume Sheets and Coils, Hardened & Tempered
Steel Strips, Billets, Sponge Iron and Precision Tubes. Manufactured in its
various plants. BSL has the distinction of being the only producer In India of the
widest width CR Sheet, besides being a preferred supplier of automotive grade
steel sheets for inner and outer panels to all leading 4-wheeler and 2-wheeler
manufacturers in the country.

The company has three manufacturing units in the state of

Uttar Pradesh (Sahibabad Unit)

Maharashtra (Khopoli unit)

Orissa (Meramandali unit)

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 Meramandali Plant:

BSL is currently implementing a backward integration project to set up an

integrated steel plant of 2.3 MTPA capacities at Meramandali, district
Dhenkanal, Orissa to manufacture Hot Rolled (HR) coils (which is the key raw
material for its existing operations) / billets, so as to guard against future
increase in prices / possible shortages of HR coils for its cold rolling facilities.
The steel plant is being implemented through Direct Reduced Iron (DRI) – Blast
Furnace (BF) – Electric Arc Furnace (EAF). The steel plant will have the capacity
to manufacture 2.0 MTPA of HR coils and 0.3 MTPA of billets and power
generation capacity of 110 MW. The plant has introduced the new products –
Billets and Sponge Iron.

The sales network of the company is distributed globally across many countries
such Germany, Japan, China etc.

• Nowadays there are different structures of supply chain management based

On collaboration among the companies which belong to the same chain. This
Work deeply analyzes the advantages and disadvantages of using these
Structures, in particular, Vendor Managed Inventory (VMI) and Electronic Point
Of Sales (EPOS) compared to the Traditional Supply Chain.
Moreover, it devises several models of Supply Chain Management, developed
Using the Dynamic Systems Methodology, where the structures are shaped
and
Simulated.
These models are an efficient tool to recreate different management
Backgrounds, which fit a greater or lesser extent with business objectives
(Tactical or operational) as proposed.
In that way, analyzing the variations of the Bullwhip effect, as the main causes
Of instabilities in the demand process management along the supply chain,
will
Be possible.
• Keywords: logistics, Bullwhip effect, Systems Dynamics, Supply Chain
Management, Vendor Managed Inventory (VMI), Electronic Point of Sales
(EPON)

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contents
Chapter Page no.

1. Title Page

2. External Guide certificate

3. Internal Guide certificate

4. Examiner’s Certificate

5. Acknowledgement

6. Declaration

7. Executive Summary

8. Chapter 1 :- Introduction of Financial

Statement

Objectives of the study

Scope of the study

Limitations of the study

Research Methodology

9. Chapter 2 :- Company Profile

Flowcharts

10. Chapter 3 :- Data Analysis &

Discussions

11. Chapter 4 :- Findings &

Recommendation

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12. Chapter 5 :- Conclusion

Bibliography

8
CHAPTER-1
(Introduction
Objective of study
Scope of study
Limitation of study)

9
INTRODUCTION TO FINANCIAL STATEMENT
A financial statement is a Collection Of data of organized according to logical
and consistent accounting procedures. Its purpose is to convey an
understanding of some financial aspects of a business firm.

“Financial Statement generally refers to the two statements:

• The position statement or the balance sheet.

• The income statement or the profit and loss Account.

These statement are used to convey to management and other interested

Outsiders the profitability and financial position of a firm

OBJECTIVE OF FINANCIAL STATEMENT:-

Financial statements are the sources of information on the basis of which

conclusions are drawn about the profitability and financial position of the
concern. They are the major means employed by firms to present their
statement is to assist in decision making. The Accounting Principles board of
America (APB) States the following Objectives of financial statements:

(1) To provide reliable information about economic resources and obligation

of a business firm.

(2) To provide other needed information about changes in such economic

resources and obligation.

(3) To provide reliable information about changes in net resources (resources

less obligations) arising out of business activity.

(4) To provide financial information that arises in estimating the earning

potentials of business activities

(5) To disclose, to the extent possible, other information related to the

financial statements that is relevant to the needs of the users of these
statement.

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USE AND IMPORTANCE OF FINANCIAL STATEMENTS:-
The financial statements are mirror which reflect the financial position and
operating strength or weakness of the concern. These statements are useful to
management, investors, creditors, bankers, workers, government and public at
large. George 0 may points out the following the major uses of financial
statement:

• As a report stewardship.

• As a basis for fiscal policy.

• To determine the legality of dividend.

• As guide to advice dividend action.

• As a basis for granting of credit.

• As informative for prospective investor in an enterprise.

• As an aid to government supervision.

• As a guide to the value of investment already made.

• As a basis for price or rate regulation.

• As a basis for taxation.

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 The utility of financial statement to different parties is discussed in details as
follows:

• MANAGEMENT:

The financial statements are useful for assessing for the efficiency for different
cost centre. The management is able to exercise cost control through these
statements. The efficient and inefficient spot are brought to the notice of the
management. The management is able to decide the course of action to be
adopted in future.

• CREDITORS:

The trade creditors are to be paid in short period. This liability is to met out of
current assets. The creditors will be interested in current solvency of the
concern. The calculation of current ratio and liquid ratio will enable the
creditors to access the current financial position of the concern in relation to
their debts.

• BANKERS:

Through financial statements, a banker can keep a watch on business plan and
performance of its customers, these statements also helps the bankers to
determine the amount of securities, it will ask from the customers as a cover
for loans.

• INVESTORS:

The investors include both short term and long term investors. They are
interested in the security of the principle amount of loan and regular interest
payment by the concern. So he will be interested to study the long term
solvency of the concern with the help of financial statements.

• GOVERNMENT:

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 The financial statements are used to assess takes liability of the business. The
statements enable the government to find out whether the business is
following various rules and regulations or not.

• TRADE ASSOCIATION:

This association provides services and protection to the members. They

may analyze the financial statements for the purpose of providing facilities
to these members by developing standards ratios and uniform statements
of accounts.

• STOCK EXCHANGE:

Stock exchange deals in sale and purchase of securities of different

companies. The financial statements enable the stock brokers to judge

The financial position of different concern. Fixation of prices for securities is

also based on these statements.

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LIMITATIONS OF FINANCIAL STATEMENT:-
Through financial statements are relevant and useful for the concern, still they
do not present a final picture of the concern. The utility of the statement is
dependent upon a number of factors. The analysis and interpretation of these
statements should be done very carefully otherwise misleading conclusion may
be drawn. The financial statement suffers from the following limitations:

• It is a study of interim report.

• Financial analysis based upon only monetary information and non-

monetary factor are ignored.

• It does not consider changes in price level.

• It fails to answer how much fund has been generated from operation.

• It fails to answer does the firm process adequate working capital.

• It fails to answer has the liquidity position of firm is improved.

• It fails to answer why the firm not paid dividend in spit of adequate
profit.

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TYPES OF FINANCIAL STATEMENT:-
Financial statement primarily comprises two basis statements:

• The position statement or the balance sheet;

• The income statement or the profit and loss account

Generally Accepted Accounting Principles (GAAP) specifies that a complete set

of financial statements must include:

• A balance sheet

• An income statement

• A statement of changes in owners accounts

• A statement of changes in financial position

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Before we discuss the form and contents of the statements, Let us explain the
meaning and significance of each of these statements.

• BALANCE SHEET: The balance sheet is one of the important statements

depicting the financial strength of the concern. It shows on the one hand
the properties that it utilizes and on other hand the sources of those
properties. The balance sheet shows all the assets owned by the concern
and all the liabilities and claims it owes to owners and outsiders. The
balance sheet is prepared on a particular date. The companies Act, 1956 has
prescribed a particular form of showing assets and liabilities in the balance
sheet for companies registered under this Act.

The balance sheet of a company may be either in the form of:

• Horizontal form

• Vertical form

Horizontal Analysis: Horizontal analysis refers to the comparison of financial

data of the company for several years

Vertical Analysis: Vertical refers to the study of relationship of the various

items in the financial statement of one accounting period

SOURCES OF FUNDS:
SHARE CAPITAL:-

• The share capital is shown as a first item on the liability side of balance
sheet

• The number of shares for which public has applied are mentioned along
with the type of capital

• i.e. A)performance share

B) Equity Share

• If the capital is issued other than cash. The amount of such capital is
mentioned.

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RESERVE AND SURPLUS:

All those loans against which securities are given are shown under this
category loans and advances from bank, subsidiary company etc. should be
shown separately and the nature of securities should be mentioned.

DEFERED TAXATION: -

Deferred tax expense or benefit is recognized on timing difference being the

difference between taxable incomes and accounting income. That originates in
one period and is capable of reversal in one or more subsequent period.

FIXED ASSETS: -

Fixed assets are purchased for use over a long period. These assets are meant
to increase production capacity of the business but are used for a considerable
period of time.

This statement does not deal with accounting for the following items to which
special considerations apply:

• forests, plantations and similar regenerative natural resources;

• wasting assets including mineral rights, expenditure on the

exploration for and extraction of minerals, oil, natural gas and similar
non-regenerative resources;

• expenditure on real estate development; and

• Livestock.

Expenditure on individual items of fixed assets used to develop or maintain the

activities covered in (1) to (IV) above, but separable from those activities, are
to be accounted for in accordance with this Statement.

The following terms are used in this Statement with the meanings specified:

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Fixed asset is an asset held with the intention of being used for the purpose of
Producing or providing goods or services and is not held for sale in the normal
course of business.

Fair market value is the price that would be agreed to in an open &
unrestricted market between knowledgeable and willing parties dealing at
arm's length who are fully informed and are not under any compulsion to
transact.

Gross book value of a fixed asset is its historical cost or other amount
substituted for historical cost in the books of account or financial statements.
When this amount is shown net of accumulated depreciation, it is termed as
net book value.

IMPAREMENT OF ASSETS: -

The following terms are used in this Statement with the meanings specified:

Recoverable amount is the higher of an asset's net selling price and its value
in use.

Value in use is the present value of estimated future cash flows expected to
arise from the continuing use of an asset and from its disposal at the end of its
useful life or a reasonable estimate thereof.

Net selling price is the amount obtainable from the sale of an asset in an arm's
length transaction between knowledgeable, willing parties, less the costs of
disposal.

Costs of disposal are incremental costs directly attributable to the disposal of

an asset, excluding finance costs and income tax expense.

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An impairment loss is the amount by which the carrying amount of an asset
exceeds its recoverable amount.

Carrying amount is the amount at which an asset is recognised in the balance

sheet after deducting any accumulated depreciation (amortisation) and
accumulated impairment losses thereon.

Depreciation (Amortisation) is a systematic allocation of the depreciable

amount of an asset over its useful life.

Depreciable amount is the cost of an asset, or other amount substituted for

cost in the financial statements, less its residual value.

Useful life is either the period of time over which an asset is expected to be
used by the enterprise or the number of production or similar units expected
to be obtained from the asset by the enterprise.

A cash generating unit is the smallest identifiable group of assets that

generates cash inflows from continuing use that are largely independent of the
cash inflows from other assets or groups of asset

Corporate assets are assets other than goodwill that contribute to the future
cash flows of both the cash generating unit under review and other cash
generating units.

An active market is a market where all the following conditions exist :

(a) The items traded within the market are homogeneous;

(b) Willing buyers and sellers can normally be found at any time;

(c) Prices are available to the public.

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INVESTMENT: -
Investment under various sub-heads such as investment in Government
or trust securities in shares, debentures, bonds & immovable properties are
given separately in the inner column of the Balance Sheet.

The following is the text of Accounting Standard (AS) 13, ‘Accounting for
Investments', issued by the Council of the Institute of Chartered Accountants
of India.

1. This Statement deals with accounting for investments in the financial

statements of enterprises and related disclosure requirements.

2. This Statement does not deal with:

• the bases for recognition of interest, dividends and rentals earned on

investments which are covered by Accounting Standard 9 on Revenue
Recognition;

• Operating or finance leases;

• Investments of retirement benefit plans and life insurance enterprises;

and

• Mutual funds and venture capital funds4 and/or the related asset
management companies, banks and public financial institutions formed
under a Central or State Government Act or so declared under the
Companies Act, 1956.

3. The following terms are used in this Statement with the meanings assigned:

Investments are assets held by an enterprise for earning income by way of

dividends, interest, and rentals, for capital appreciation, or for other benefits
to the investing enterprise. Assets held as stock-in-trade are not 'investments'.

A current investment is an investment that is by its nature readily realizable

and is intended to be held for not more than one year from the date on which
such investment is made.

A long term investment is an investment other than a current investment.

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An investment property is an investment in land or buildings that are not
intended to be occupied substantially for use by, or in the operations of, the
investing enterprise.

Fair value is the amount for which an asset could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's
length transaction. Under appropriate circumstances, market value or net
realisable value provides an evidence affair value.

Market value is the amount obtainable from the sale of an investment in an

open market, net of expenses necessarily to be incurred on or before disposal.

INVENTORY
The following is the text of the revised Accounting Standard (AS) 2, 'Valuation
of Inventories', issued by the Council of the Institute of Chartered Accountants
of India. This revised Standard supersedes Accounting Standard (AS) 2,
'Valuation of Inventories', issued in June, 1981. The revised standard comes
into effect in respect of accounting periods commencing on or after 1.4.1999
and is mandatory in nature.

The following terms are used in these statement meanings Inventories are
assets:

(a) Held for sale in the ordinary business

(b) In the process of production for such sale; or

(c) In the form of materials or supplies to be consumed in the production

process or in the rendering of services. Net realisable value is the estimate
selling price in the ordinary course of business less estimated costs necessary
to make the sale.

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 INCOME STATEMENT OR (PROFIT AND LOSS ACCOUNT)
• Income statement is prepared to determine operational position of the
concern. It is statement of revenues earning and the expenses incurred for
earning that revenue.

• If there is excess of revenue over expenditure it will show a profit

• If the expenditure is more than the income then there will be a loss.

• Profit loss account must comply with the requirements of part II of

Schedule VI.

Usefulness and limitations of income statement

Income statements should help investors and crthitom determine the past
performance of the enterprise, predict future performance, and assess the
capability of generating future cash flows.

However, information of an income statement has several limitations:

• Items that might be relevant but cannot be reliably measured are

not reported (e.g. brand recognition and loyalty),

• Some numbers depend on accounting methods used (e.g. FIFO or

LIFO accounting to measure Inventory level)

INCOME:

This is the total value of INVOICED products or services supplied LESS vat, and
trade discounts over a one year period. The words 'Turnover' and 'Sales' would
mean the same.

COST OF SALES:

This is the direct cost of goods or services SOLD. All other goods left at the end
of the period are entered as 'Stock' in the Balance Sheet. If you were a house
accounting builder, bricks, wood and glass would be direct costs within

22
'Materials'. As would the wages for the brick layer, joiner and glassier be direct
costs within 'Wages'. The cost of advertising the houses would not be a direct
cost as advertising is not part of the cycle. The same applies to wages for the
building/manufacturing/production administration staff.

GROSS PROFIT

This figure is the total amount of profit on all sales after deducting the direct
cost of making the goods or supplying the service. Expenses, tax and interest
are yet to be deducted.

EXPENSES

All costs in the P&L, figures exclude vat. Most of the expenses are self
explanatory; however, depreciation is not so straight forward.

DEPRECIATION

Depreciation is the reduction in value of a fixed asset.

NET PROFIT BEFORE TAX

This figure is the profit resulting from all sales in the period. Corporation Tax @
20% (or whatever the current rate if different) has to be deducted from this
amount for a true figure.

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• STATEMENT OF CHANGES IN OWNERS EQUITY (or RETAINED
EARNINGS):
The term owner’s equity' refers to the claims of the owners of the
business against the assets of the firm. It consists of two elements:

• Paid up share capital, i.e. the initial amount of funds invested

by the shareholder

• Retained earnings/reserves and surplus representing

undistributed profit. T he statement of changes in owners'
equity simply shows the beginning balance of each owner's
equity account, the reasons for increase and decreases in each,
and its ending balance. However, in most the only owner's
equity account that changes significantly is Retained Earnings
and hence the statement of changes in owners' equity
becomes merely a statement of retained earnings. A
statement of retained earnings is also known as Profit and Loss
Appropriation Account or Income Disposal Statement. As the
name suggest it shows appropriations of earnings. The
previous year's balance is first brought forward. The net profit
during the current year is added to this balance. The balance in
this account will show the amount of profit retained in hand
and carried forward. The appropriations cannot be more than
the profits so this account will not have debit balance. There
cannot be appropriations without profits.

• STATEMENT OF CHANGES IN FINANCIAL POSITION:

The basic financial statements, i.e.; the balance sheet and profit and loss
account or income statement of a business reveal the net effect of the
various transactions on the operational and financial position of the
company. The balance sheet gives a static view of the resources of the
business and the uses to which these resources have been put at a
certain point of time. The profit and loss account in a general way
indicates the resources provided by operations. But there are many
transactions that do not operate through profit and loss account. Thus,

24
 for a better understanding another statement called statement of
changes in financial position has to be prepared to show the changes in
assets and liabilities from the end of period to the end of another period
of time. The objectives of this statement are to show the movement of
funds (working capital or cash) during a particular period. The statement
of financial position may take any of the following two forms:

• FUNDS FLOW STATEMENT: The funds flow statement is designed to

analyze the changes in the financial condition of a business enterprise
between two periods. The word 'Fund' is used to denote working capital.
This statement will show the sources from which the funds are received
and uses to which these have been put. This statement enables the
management to have an idea about the sources of funds and their uses
for various purposes. This statement helps the management in policy
formulation and performance appraisal.

• CASH FLOW STATEMENT: A statement of changes in the financial

position of a firm on cash basis is called Cash Flow Statement. It
summarizes the causes of changes in cash position of a business
enterprise between dates of two balance sheets. This statement is very
much similar to the statement of changes in working capital, i.e. funds
flow statement. A cash flow statement focuses attention on cash
changes only. It describes the sources of cash and its uses.

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METHODS OR DEVICES OF FINANCIAL ANALYSIS

The analysis and interpretation of financial statements is used to determine

the financial position and results of operations as well. A number of methods
or devices are used to study the relationship between different statements. An
effort is made to use those devices which clearly analyze the position of the
enterprise.

The following methods of analysis are generally used:

(1)Comparative Statements.
(2) Trend Analysis.
(3)Common-size Statements.
(4)Funds Flow Analysis.
(5)Cash Flow Analysis.
(6)Ratio Analysis.
(7)Comparative STATEMENT:
(8) The comparative financial statements are statements of the financial
position at different period; of time Generally, two financial statements
(Balance sheet and Income statement)are prepare in comparative form for
financial analysis purpose. The comparative statement may show:

• Absolute Figure

• Changes in absolute figures i.e., Increase or Decrease in absolute

figures.

• Absolute data in terms of percentages.

• Increase or Decrease in terms of percentage

(9)COMPARATIVE BALANCE SHEET: The comparative balance sheet analysis is

the study of the trend of the items and computed items in two or more
balance sheet of same items, group the same business enterprise on different
dates. The changes in periodic balance sheet items reflect the conduct of a
business. The comparative balance sheet has two columns for the data of
original balance sheets. A third column is used to show increases figures. The
fourth column may be added for giving percentages of increases or decreases.

26
 • COMPARATIVE INCOME STATEMENT:
The comparative income statement gives an idea of the progress of a business
over a period of time. The changes in absolute data in money values and
percentages can be determined to analyze the profitability of the business.
Income statement also has four columns. First two columns give figures of
various items for two years. Third and fourth columns are used to show
increase or decrease in figures in absolute amounts and percentages
respectively.

• TREND ANALYSIS:
The financial statements may be analyzed by computing trends
of series of information. This method determines the direction upwards
or downwards and involves the computation of percentage relationship
that each statement item bears to the same item in the base year. The
information for a number of years is taken up and one year, generally
the first year, is taken as the base year. The figures of the base
year are taken as 100 and trend ratios for the other years are calculated
on the base year.

• COMMN-SIZE STATEMENT:

The common-size statements, balance sheet and income

statement are shown in analytical percentages. The figures are shown as
percentages of total assets, total liabilities and total sales. The total
assets are taken as 100 and different assets are expressed as a
percentage of the total. Similarly, various liabilities are taken as a part of
total liabilities. These statements are also known component
Percentage" or 100 per cent statements because every individual: tem is
stated as a percentage of the total 100.

• COMMON-SIZE BALANCE SHEET:

27
 A statement in which balance sheet items are expressed as a
ratio of each 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 co be used to compare companies of
different size. The comparison of figures in different periods is not useful
because total figures may be affected by a number of factors. It is not
possible to establish standard norms for various assets. The trends of
figures from year to year may not be studied and even they may not vive
proper results.

• 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 increase selling expenses and not
administrative or financial expenses. In case the volume of sales
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 items in income statement and this relationship is helpful in
evaluating operational activities of the enterprise.

• FUNDS FLOW STATEMENT:

The funds flow statement is designed to analyze the changes in the
financial condition of a business enterprise between two periods. The
word 'Fund' is used to denote working capital. This statement will show
the sources from which the funds are received and uses to which these
have been put. This statement enables the management to have an idea
about the sources of funds and their uses for various purposes. This
statement helps the management in policy formulation and
performance appraisal.

• CASH FLOW STATEMENT:

28
 A statement of changes in the financial position of a firm on cash basis is
called Cash Flow Statement. It summarizes the causes of changes in cash
position of a business enterprise between dates of two balance sheets.
This statement is very much similar to the statement of changes in
Working capital, i.e. funds flow statement. A cash flow statement
focuses attention on cash changes only. It describes the sources of cash
and its uses.

29
RATIO ANALYSIS
It is a principal tool of the financial statement analysis. Ratio in an arithmetical
relationship between two figures. It is defined as the systematic use of ratio to
interpret the financial statements so that the strengths and weaknesses of a
firm as well as its historical performance and current financial condition can be
determined. Financial ratio analysis is a study of ratio between various items or
groups of items in financial statement. Ratio analysis is process of determine
and interpreting numerical relationship between figures of financial statement.
It is an important technique of financial analysis. It is a means for judging the
financial help of the concern.

30
CHAPTER-2
(Company profile)

31
Company Profile :

“Our mission is to grow our company by providing innovative strong and high
performanceproducts and solutions to meet our global customer needs.”

Bhushan Steel Ltd formerly known as Bhushan Steel & Strips Ltd. is a globally
renowned one of the leading prominent player in Steel Industry. Backed by
more than two decades, of experience in Steel making, Bhushan Steel is now
India’s 3rd largest Secondary Steel Producer company with an existing steel
production capacity of 2 million tones per annum’s (approx.).

It was the vision of the founder; Brij Bhushan Singal, that the first stake was
driven into the soil of Sahibabad (Uttar Pradesh) in 1987. His vision helped BSL
overcome several periods of adversity and strive to improve against all odds.

The company has three manufacturing units in the state of Uttar Pradesh
(Sahibabad Unit), Maharashtra (Khopoli unit), and (Meramandali unit) in India
and sales network is across many countries.

The company is a source for vivid variety of products such as Cold Rolled
Closed Annealed, Galvanized Coil and Sheet, High Tensile Steel Strapping,

32
Colour Coated Coils, Galume Sheets and Coils, Hardened & Tempered Steel
Strips , Billets, Sponge Iron, Precision Tubes and Wire Rod.

As one of the prime movers of the technological revolutions in Indian Cold

Rolled Steel Industry, BSL has emerged as the country’s largest and the only
Cold Rolled Steel Plant with an independent line for manufacturing Cold Rolled
Coil and Sheet up to a width of 1700mm, as well as Galvanized Coil and Sheet
up to a width of 1350 mm.

In due course of time, BSL has grown incredibly its turnover and production
capacity by successive expansions as well as improved realizations with these
manufacturing units.

The dynamic reason of awesome and unparallel growth of BSL, is rapid

integration on the Steel value chain; conceivably, it would be its unwavering
focus on acquiring the latest technology and know how, also the BSL’s
commitment to provide its customers with the best quality products.

Given a vibrant Steel industry dynamics in India, we are on a course to become

a fully Integrated Steel & Power Company with market leading offerings in
value added Steel in Automotive and White Good Segment with the
quality been approved by ISO 9001:2008 & ISO 14001:2004.

33
POLICIES:
BHUSHAN STEEL LTD, SAHIBABAD
Integrated Quality, Environment, Occupational Health & Safety
Management System Policy
Bhushan Steel Ltd. commits to produce cold rolled and galvanized steel sheets of world class
quality in a safe, healthy and clean environment by involving employees with continual
improvements in system implementation, technological advancement, operational
integration, prevention of pollution & hazards maintaining.

Legal compliance and satisfying needs & expectations of

Customers
 For Environmental Management System we have ISO 14001:2004
Certification

 For Quality System we have ISO/TS 16949:2002 Certification

 For Safety Management System we have OHSAS 18001:2007 Certification

CHAIRMAN SPEAKS:
Mr. Brij bhushan Singhal

“Everything associated with the trademark of Bhushan Steel

Reflects the company’s
position of leadership and quality. At Bhushan Steel, It is our endeavour to
attain the
highest level of customer satisfaction.”

As one of the leading initiators of the technological revolution in the Indian

steel industry, BSL's infrastructure, equipment and machinery are well-
complemented by its people and continue to create benchmarks for the
industry.

34
Bhushan Steel Ltd. (BSL) is in the process of setting up one of the most
advanced Hot Rolling Plants of the world in Orissa. The construction of the first
phase is being carried out with speed and is nearing completion. Together with
its state-of-the-art Cold Rolling Plant at Sahibabad and another one at Khopoli,
the company is well poised in the industry. The company has recently launched
Galume- zinc and aluminium coated sheet, for the first time in India. Thereby,
it is all set to revolutionize the industry and demand patterns.

Be it specialized steel for the automotive and white goods industry, or steel for
highly discerning international clients, BSL's advanced manufacturing facilities
and stringent quality standards have earned appreciation and acceptance in
international markets.

BSL is currently exporting to Europe, USA, Canada, Africa, China and the Middle
East, in addition to the Asian markets. And, is eagerly looking ahead, steadily
defining the future of steel day by day.

35
VISION:
“The vision of evolving into a totally Integrated Steel Producer by
committing to achieve the highest standards of Quality through
Cutting-Edge Technology.”

The key to Vision is to use rigorous conceptual framework and to

understand how that framework connects to the underlying DNA of
enduring great companies.

A well-conceived vision consists of two major components—“CORE

IDEOLOGY” and an “ENVISIONED FUTURE”. A good vision builds on
the interplay between these two complementary Yin-and-Yang
forces; it defines “What we stand for and Why we exist” that does
not change the Core Ideology and sets forth “What we aspire to
become, to achieve, to create” that will require significant change
and progress to attain the Envisioned Future.

Our Vision

 About Culture: -“To make it a place where all the people can
thrive living, learning and working in a clean, safe and healthy
environment.”
 About Values:-To corporate values as “the rules or guidelines
by which a corporation exhorts its members to behave
consistently with its order, security and growth.”

36
  About People: - “See the good in people and try to develop
those qualities” i.e. preparation and grooming of the next
generation of the young thinkers.
 About Customers: - “Sell good merchandise at reasonable
price; treat our customer like we would treat our friends and the
business will take care of itself. Bhushan Steel’s endeavour is to
attain the highest level of Customer Satisfaction.”
 About Products: - “We should always be the pioneers with our
products – out front leading the market.”

It is true to say that most of our vision statements express an

element of ambition. BSL’s vision of total integration is a lot closer to
realization today. Through seamless backward integration, BSL is
consolidating its position on the entire steel value chain from iron
ore to specialized is surging ahead.

37
MAJOR COMPETITORS OF BHUSHAN STEEL LTD.

• ESSAR STEEL

• JINDAL STEEL AND POWER LTD.

• ROURKELA STEEL PLANT

• TISCO

• BOKARO STEEL PLANT

• TATA IRON AND STEEL COMPANY

• ABHIJEET STEELIUM

38
 Clientele
Our Products continue to be a favourite with all quality conscious users of
Automobiles & White Goods/Domestic Appliances & General Engineering
Industries. We take great pride in maintaining the highest standards of quality
which our customers expect and it is no wonder that eminent corporate like
Maruti Udyog, Honda Siel Cars, Telco, Hindustan Motors , General Motor,
Hyundai Motors, Ford Motors, Mahindra & Mahindra, Eicher Tractors, Ashok
Leyland, LG Electronics, Whirlpool, Videocon, Daikin Shriram, National
Matsushita, Samsung Electronics, Godrej, Voltas, IFB, Fedders Lloyd, Carrier
Refrigeration, Electrolux Group, Hitachi Airconditioners, SKF Bearing,
Crompton Greaves, Philips India, BHEL, Alstom Limited, L&T,BPL,GE Motors,
Jhonson Lift, Kone Elevator, Lucas TVS,NRB Bearing, Harsha Engineers Limited,
Bundy India Limited, Tecumesh, Bajaj Auto, Honda Motorcycle, Yamaha, Bajaj
Tempo and so many such big organizations continue their unbounded trust on
us and in regularly sourcing our products.

39
40
CHAPTER-3
(Theoretical framework)

41
OBJECTIVE OF STUDY:
A few studies have already been conducted on various aspects of BSL in the
present study an attempt made to analyse the financial statements. Hence the
study sets the following objectives before it:

1. To analyze the financial performance of the corporation

2. To analyze the operating efficiency of the corporation

3. To know the cash management system.

4. To analyze the financial statement through the different financial techniques

like trend analysis, ratio analysis etc.

42
CHAPTER- 4
(RESEARCH METHODOLOGY)

43
RESEARCH METHODOLOGY:
A research design is the arrangement of conditions for collection and analysis
of data in a manner that aims to combine relevance to the research purpose
with economy in procedure.

In fact the research design is the conceptual structure within which the
research is conducted it constitute the blue print for the collection,
measurement and analysis of data. Decisions regarding what when where, how
much, by what means concerning an inquiry or research study constitute a
research design.

Research design is needed because it facilitates the smoothing sailing of the

various research operations there by making research as efficient as possible
yielding maximal information with minimal expenditure of effort, time and
money.

Research design stands for advance planning of the methods to be adopted

for collecting the relevant data and the techniques to be used in there analysis
keeping in view the objective of the research and the availability of staff, time
and money. The design helps the researcher to organize his ideas in a form
whereby it will be possible for the researcher to look for flaws and
inadequacies. Preparation of the research design should be done with great
care as any error in it may upset the entire project. Research design in fact has
a great bearing on the reliability of the results. The firm foundation of the
entire edifice of the research work.

44
TYPES OF STUDY
The study conducted is a conclusive descriptive statistical study. Conclusive
because after concluding the study, the researcher comes to a decision which
is precise and rational. The study is descriptive because it is in the descriptive
study, that the data is collected for a definite purpose and here the purpose is
definite i.e. the data is collected, to find out the effectiveness of the
advertisement. The study is conclusive because after doing the study the
researcher comes to a conclusion regarding the position of the brand in the
minds of respondents of different age groups. The study is statistical because
throughout the study all the similar samples are selected and grouped
together (similarity of ages thus forming a group).

Thus, this conclusive descriptive statistical study is the best study for this
purpose as it provides the necessary information which is utilized to arrive at a
concrete decision.

METHODOLOGY
The methodology followed for this project is mainly descriptive and analytical
based on data collected from different sources such as company records,
books and journal, magazine and websites. Besides these secondary data the
study based on some primary data gained through discussion with the
executives of the organization.

45
CHAPTER- 5
(Research
methodology
Primary data
Secondary data)

46
DATANALYSIS INTERPRETATION:
ANAL YSIS OF FINANCIAL RATIOS:
(1)LIQUIDIT Y RATIOS:
These are the ratios which measure the short-term solvency or financial
positions of a firm. These ratios are calculated to comment upon the short-
term paying concern or the firm's ability to meet its current obligations. The
various liquidity ratios are:

(a)Current Ratio: Current ratio may be defined as the relationship between

current assets and current liabilities. This ratio is also known as working capital
ratio, is a measure of general liquidity and is most widely used to make the
analysis of a short term financial position or liquidity of a firm. It is calculated
by dividing the total of assets by total of the current liabilities. It is calculated
as follows:

CURRENT RATIO = CURRENT ASSESTS / CURRENT LIABILITIES

PARTICULARS 2008-09 2009-10 2010-11 2011-12

A. . Current
1,974.47 2,797.01 3,681.57 4,866.79
Assets (Rs.)

B. CURRENT
1,617.77 1,900.65 2,724.72 5,800.09
LIBILITIES

C. RATIO 1.22 1.47 1.35 0.83

47
Interpretation: -
A relatively current high ratio design indication that the firm is liquid and pay
its current obligations in time as and when they become due. A ratio equal or
nearer to the rule of thumb of 2:1 i.e.; current assets double the current
liabilities is satisfactory but by analysing the current ratio of BHUSHAN STEEL
LTD. it shows that the current assets is low because some advanced from is
kept at head office which is debited in head office account i.e. is a part of long-
term capital, so analysis of current ratio will not depict correct picture at
division level & also the sundry debtor in inventory balance have been reduced
considerably over the period. Overall the liquidity position is not impressive.

48
Note:
Current Assets = Inventories + Sundry Debtors + Cash &
Bank balances + Loans & Advances
Current Liabilities = Liability + Provisions
(b) Quick or Acid Test or Liquid Ratio:
Quick or acid test ratio is a more rigorous test of liquidity than the current
ratio. The term 'Liquidity' refers to the ability of a firm to pay its short-term
obligations as and when they become due. The two determinants of current
ratio, as a measure of liquidity, are current assets and current liabilities.
Current assets include inventories and prepaid expenses which are not easily
convertible into cash within a short period. Quick ratio may be defined as the
relationship between quick/liquid assets and current or liquid liabilities.

Quick/Liquid or Acid Test Ratio= Quick or Liquid

Assets / Current Liabilities
CALCULATION OF AVERAGE COLLECTION PERIOD

PARTICULARS 2008-09 2009-10 2010-11 2011-12

. LIQUID ASSETS 744.11 834.42 513.16 1555.36

.CURRENT 1617.77 1900.65 2724.72 5800.09

LIABILITIES

. RATIO 0.45 0.43 0.18 0.27

49
Note: Liquid Assets = Current Assets - Inventory

50
(2)ACTIVITY RATIOS:
Activity ratios are calculated to measure the efficiency with which the
resources of a firm have been employed. These ratios are also called turnover
ratios because they indicate the speed with which assets are being turned over
into sales. E.g. debtor’s turnover ratio. The various activity or turns over ratios
have been named in the chart classifying the ratios. These are as follows:

1. Inventory Turnover Ratio = Net Sales / Average Inventory

PARTICULARS 2008-09 2009-10 2010-11 2011-12

A. Net Sales 4985.72 5621.77 6943.81 9941.41

B. Average Inventory 1744.81 2211.69 3546.87 4824.12

C. Ratio 2.85 2.54 1.95 2.06

Note: Average Inventory = Opening Inventory + Closing Inventory/2

51
CHAPTER 6
(OBSERVATION
AND FINDINGS)

52
OBSERVATION AND FINDINGS
A relatively high ratio design indicates that the firm is liquid and have
ability to pay its current obligations in time as and when they become
due.

By analyzing quick ratio of Bhushan Steel ltd. Is found the advance

frome customers is kept at head office account.

By analyzing the liquidity ratio, shows that the absolute liquid assets
are around zero percent taking liquid assets above the required level.

In the year 2010-11 and 2011-12 inventory turnover ratio is less but in
previous year it increases. It indicates BSL not efficiently used or
managed its stock in these years.

Fixed assets turnover ratio indicates the velocity of utilizing of fixed

assets. The consistency ratio revels that BSL has efficiently managed
the introduction of new fixed assets.

As for equity ratio interpretation it show that with time the

shareholder funds to total assets increases.

53
LIMITATIONS:-

• Time frame is very less for studying this topic.

• The study of the solely depends upon reliability of the data

and information collected from secondary sources.

• It is not possible to collect information on all activities taken

over the year, thus the study incorporates on limitation that
are inherent in the available published information.

• Also there are other limitations such as financial, physical

facilities and human in conducting this study.

54
SUGGESTIONS:
. The organisation must take necessary steps to raise the amount of
interest on loans & advances in order to increase the revenue
sources of BSL.

. To maintain a good current ratio, it must try to increase the amount

of current assets.

. Enhancement of assets turnover may also yield better return on

investment.

. As the analysis revels, the division is facing a problem of liquidity

due to the reason that the payment to be received from the debtors
is not realized in time.

55
CONCLUSION:
The "ANALYSIS OF FINANCIAL STATEMENT" plays a vital role
in helping financial managers and top management of
company to plan and control their financial structural
operations. The present research work may be extended to
the pitfalls in management in terms of financial matters such
as income, expenditure, export and domestic sales,
profitability, fund availability, working capital requirements
etc. This gives an excellent idea about controllable and
uncontrollable variables. These may be re-examined and
integrated to evolve an innovative idea, which may give an
efficient financial decision. A sound financial decision gives
the way for higher profitability and performance. sIt is
nothing but a fine- tuning of control system in financial
structure.

56
CHAPTER 7
(BIBLOGRAPHY)

57
BIBLOGRAPHY
SP Jain, KL Narang; “Financial Accounting”; Kalyani Publisher;
Chennai; Tenth Edition; 2008

MY Khan, PK Jain; “Financial Management”;Tata McGraw hill; New

Delhi; Second editions; 1998

Dr. B.S. Goel “production and operation management”; Prakushan

Meerut; Meerut; Third editions; 2000

www.bhushan-group.org

www.wikipedia.com
www.google.com

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