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Research Report On
Financial analysis of Reliance Industries Limited
DEPARTMENT OF MANAGEMENT
Babu Banarasi Das
National Institute of Technology & Management
Sector-I, Dr. Akhilesh Das Nagar, Faizabad Road, Lucknow
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ACKNOWLEDMENT
It is difficult to acknowledge precious a debt as that of learning as it is the only debt that
is difficult to repay except through gratitude.
First and foremost I wish to express my profound gratitude to the almighty, the merciful
& compassionate with those grace & blessings. I have been able to complete this work.
It is my profound privilege to express my sincere thanks to ________, for giving me an
opportunity to work on the project and giving me full support in completing this project.
I am very thankful to my guide _________for his full support in completing this project
work.
Last but not least, I would like to thank my parents & my friends for their full
cooperation & continuous support during the course of this assignment.
(______)
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PREFACE
Decision making is a fundamental part of the research process. Decisions regarding
that what you want to do, how you want to do, what tools and techniques must be used
for the successful completion of the project. In fact it is the researchers efficiency as a
decision maker that makes project fruitful for those who concern to the area of study.
Basically when we are playing with computer in every part of life, I used it in my project
not for the ease of my but for the ease of result explanation to those who will read this
project. The project presents the financial analysis of reliance industries ltd.
I had toiled to achieve the goals desired. Being a neophyte in this highly competitive
world of business, I had come across several difficulties to make the objectives a reality.
I am presenting this hand carved efforts in black and white. If anywhere something is
found not in tandem to the theme then you are welcome with your valuable suggestions.
My research project Financial analysis of Reliance Industries Ltd. is based on
study conducted by me under the guidance of_______
I believe that my research project report will have been very helpful to the
practical knowledge in the field of financial analysis of any organization. This includes
the following:
1- The executive summary which gives the brief description about the research work.
And what basically is done in the assigned research work.
2- Secondly it includes the introduction to the topic, which clearly explains about the
topic upon which research is done.
3- Third chapter includes Objective of the research which is being considered for
accomplishment of the research work.
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4- Fourth chapter include the research methodology applied for conducting the research
work it also include the limitation of the study.
5- Preface also comprises of the company profile of Reliance Industries Ltd. which
includes detailed information about the company, its balance sheet and profit & loss
account of past four years.
6- Sixth chapter include summary of the current financial position of the reliance
industries ltd.
7- Seventh chapter covers the analysis and interpretation of the gathered data through
ratio analysis, fund flow and cash flow analysis.
8- Findings count for the eighth chapter of the research report, which explains the
outcome of interpreted data.
9- Suggestion and recommendation covers the forwarded measures that should be
adopted by the company to make strong its financial analysis.
10- Preface also include conclusion, which explains what actually being concluded from
the research work after analysis and interpretation of the data.
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TABLE OF CONTENT
Sl.No Particulars Page No.
1. EXECUTIVE SUMMARY 5
2. INTRODUCTION 6-52
3. OBJECTIVE OF STUDY 53
4. RESEARCH METHODOLOGY 54
5. COMPANY PROFILE 55-68
6.
FINANCIAL POSITION OF RELIANCE INDUSTRIES
LTD.ssssss
69-70
7. DATA ANALYSIS & INTERPRETATION 71-88
8. FINDINGS 89-90
9. SUGGESTION & RECOMMENDATION 92
10. CONCLUSION 193
11. BIBLOGRAPHY
Executive Summary
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The project assigned to me was to study the financial health of any organization in the
country. I decided to choose one of Indias largest companies in a sector that has
rapidly grown over the last few years and a company where leaders like Mr. Dhirubhai
Ambani, or rather, a company that has been made Mr. Dhirubhai Ambani.
Through this report, I try and analyze the financial environment in which Reliance
Industry Limited is operating.
Through a thorough financial analysis, my aim to understand the financial factors is
influencing the company and its decision making. Later, I try and evaluate the various
ratios to appreciate their impact on companys performance over the last four years
The financial statements of last four years are identified, studied and interpreted in light
of companys performance. Critical decisions of distributing dividends, Issue of bonus
Debentures and other current news are analyzed and their impact on the bottom line of
the company is assessed.
Finally, I study ratio analysis, fund flow analysis and cash flow analysis of the company
to analyzing the financial position of the company in last four years.
Introduction
Meaning of Financial Statement
Financial statements refer to such statements which contains financial information about
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an enterprise. They report profitability and the financial position of the business at the
end of accounting period. The team financial statement includes at least two statements
which the accountant prepares at the end of an accounting period. The two statements
are: -
The Balance Sheet
Profit And Loss Account
They provide some extremely useful information to the extent that balance Sheet
mirrors the financial position on a particular date in terms of the structure of assets,
liabilities and owners equity, and so on and the Profit and Loss account shows the
results of operations during a certain period of time in terms of the revenues obtained
and the cost incurred during the year. Thus the financial statement provides a
summarized view of financial position and operations of a firm
Meaning of Financial Analysis
The first task of financial analysis is to select the information relevant to the decision
under consideration to the total information contained in the financial statement. The
second step is to arrange the information in a way to highlight significant relationship.
The final step is interpretation and drawing of inference and conclusions. Financial
statement is the process of selection, relation and evaluation.
Features of Financial Analysis
To present a complex data contained in the financial statement in simple and
understandable form.
To classify the items contained in the financial statement inconvenient and
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rational groups.
To make comparison between various groups to draw various
conclusions.
Purpose of Analysis of financial statements
To know the earning capacity or profitability.
To know the solvency.
To know the financial strengths.
To know the capability of payment of interest & dividends.
To make comparative study with other firms.
To know the trend of business.
To know the efficiency of mgt.
To provide useful information to mgt
Procedure of Financial Statement Analysis
The following procedure is adopted for the analysis and interpretation of financial
statements:-
The analyst should acquaint himself with principles and postulated of
accounting. He should know the plans and policies of the managements that he
may be able to find out whether these plans are properly executed or not.
The extent of analysis should be determined so that the sphere of work may be
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decided. If the aim is find out. Earning capacity of the enterprise then analysis of
income statement will be undertaken. On the other hand, if financial position is to
be studied then balance sheet analysis will be necessary.
The financial data be given in statement should be recognized and rearranged. It
will involve the grouping similar data under same heads. Breaking down of
individual components of statement according to nature. The data is reduced to a
standard form. A relationship is established among financial statements with the
help of tools & techniques of analysis such as ratios, trends, common size, fund
flow etc.
The information is interpreted in a simple and understandable way. The
significance and utility of financial data is explained for help indecision making.
The conclusions drawn from interpretation are presented to the management in
the form of reports.
Analyzing financial statements involves evaluating three characteristics of a company:
its liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is
primarily interested in the ability of the borrower to pay obligations when they come due.
The liquidity of the borrower is extremely important in evaluating the safety of a loan. A
long-term creditor, such as a bondholder, however, looks to profitability and solvency
measures that indicate the companys ability to survive over a long period of time. Long -
term creditors consider such measures as the amount of debt in the companys capital
structure and its ability to meet interest payments. Similarly, stockholders are interested
in the profitability and solvency of the company. They want to assess the likelihood of
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dividends and the growth potential of the stock.
Comparison can be made on a number of different bases.
Following are the three illustrations:
1. Intra-company basis.
This basis compares an item or financial relationship within a company in the current
year with the same item or relationship in one or more prior years. For example, Sears,
Roebuck and Co. can compare its cash balance at the end of the current year with last
years balance to find the amount of the increase or decrease. Likewise, Sears can
compare the percentage of cash to current assets at the end of the current year with the
percentage in one or more prior years. Intra-company comparisons are useful in
detecting changes in financial relationships and significant trends.
2. Industry averages.
This basis compares an item or financial relationship of a company with industry
averages (or norms) published by financial ratings organizations such as Dun &
Bradstreet, Moodys and Standard & Poors. For example, Searss net income can be
compared with the average net income of all companies in the retail chain-store
industry. Comparisons with industry averages provide information as to a companys
relative performance within the industry.
3. Intercompany basis.
This basis compares an item or financial relationship of one company with the same
item or relationship in one or more competing companies. The comparisons are made
on the basis of the published financial statements of the individual companies. For
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example, Searss total sales for the year can be compared with the total sales of its
major competitors such as Kmart and Wal-Mart. Intercompany comparisons are useful
in determining a companys competitive position.
Tools of Financial Statement Analysis
Various tools are used to evaluate the significance of financial statement
data. Three commonly used tools are these:
Ratio Analysis
Funds Flow Analysis
Cash Flow Analysis
Ratio Analysis:
Fundamental Analysis has a very broad scope. One aspect looks at the general
(qualitative) factors of a company. The other side considers tangible and measurable
factors (quantitative). This means crunching and analyzing numbers from the financial
statements. If used in conjunction with other methods, quantitative analysis can produce
excellent results.
Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years,
other companies, the industry, or even the economy in general. Ratios look at the
relationships between individual values and relate them to how a company has
performed in the past, and might perform in the future.
Meaning of Ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick
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that measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus
a ratio is an expression relating one number to another. It is simply the quotient of two
numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in
absolute figures as so many times. As accounting ratio is an express ion relating two
figures or accounts or two sets of account heads or group contain in the financial
statements.
Meaning of Ratio Analysis:
Ratio analysis is the method or process by which the relationship of items or group of
items in the financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the
financial health and profitability of business enterprises. Ratio analysis can be used both
in trend and static analysis. There are several ratios at the disposal of an analyst but
their group of ratio he would prefer depends on the purpose and the objective of
analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we will
focus on a technique, which is easy to use. It can provide you with a valuable
investment analysis tool.
This technique is called cross-sectional analysis. Cross-sectional analysis compares
financial ratios of several companies from the same industry. Ratio analysis can provide
valuable information about a company's financial health. A financial ratio measures a
company's performance in a specific area. For example, you could use a ratio of a
company's debt to its equity to measure a company's leverage. By comparing the
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leverage ratios of two companies, you can determine which company uses greater debt
in the conduct of its business. A company whose leverage ratio is higher than a
competitor's has more debt per equity. You can use this information to make a judgment
as to which company is a better investment risk.
However, you must be careful not to place too much importance on one ratio. You
obtain a better indication of the direction in which a company is moving when several
ratios are taken as a group.
Objective of Ratios:
Ratios are worked out to analyze the following aspects of business organization-
A) Solvency-
1) Long term
2) Short term
3) Immediate
B) Stability
C) Profitability
D) Operational efficiency
E) Credit standing
F) Structural analysis
G) Effective utilization of resources
H) Leverage or external financing
Forms of Ratio:
Since a ratio is a mathematical relationship between two or more variables / accounting
figures, such relationship can be expressed in different ways as follows
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A] As a pure ratio:
For example the equity share capital of a company is Rs. 20, 00,000 & the preference
share capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital
is
20,00,000: 5,00,000 = 4:1.
B] As a rate of times:
In the above case the equity share capital may also be described as 4 times that of
preference share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit
sales are Rs. 30,00,000. So the ratio of credit sales to cash sales can be described as
2.5 [30,00,000/12,00,000] = 2.5 times are the credit sales that of cash sales.
C] As a percentage:
In such a case, one item may be expressed as a percentage of some other items. For
example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs.
10,00,000, then the gross profit may be described as
20% of sales [ 10,00,000/50,00,000]
Steps in Ratio Analysis
The ratio analysis requires two steps as follows:
1] Calculation of ratio
2] Comparing the ratio with some predetermined standards. The standard ratio may be
the past ratio of the same firm or industrys average ratio or a projected ratio or the ratio
of the most successful firm in the industry. In interpreting the ratio of a particular firm,
the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared
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with some predetermined standard. The importance of a correct standard is oblivious as
the conclusion is going to be based on the standard itself.
Types of comparisons
The ratio can be compared in three different ways
1] Cross section analysis:
One of the way of comparing the ratio or ratios of the firm is to compare them with the
ratio or ratios of some other selected firm in the same industry at the same point of time.
So it involves the comparison of two or more firms financial ratio at the same point of
time. The cross section analysis helps the analyst to find out as to how a particular firm
has performed in relation to its competitors. The firms performance may be compared
with the performance of the leader in the industry in order to uncover the major
operational inefficiencies. The cross section analysis is easy to be undertaken as most
of the data required for this may be available in financial statement of the firm.
2] Time series analysis:
The analysis is called Time series analysis when the performance of a firm is evaluated
over a period of time. By comparing the present performance of a firm with the
performance of the same firm over the last few years, an assessment can be made
about the trend in progress of the firm, about the direction of progress of the firm. Time
series analysis helps to the firm to assess whether the firm is approaching the long-term
goals or not. The Time series analysis looks for
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(1) Important trends in financial performance
(2) Shift in trend over the years
(3) Significant deviation if any from the other set of data\
3] Combined analysis:
If the cross section & time analysis, both are combined together to study the behavior &
pattern of ratio, then meaningful & comprehensive evaluation of the performance of the
firm can definitely be made. A trend of ratio of a firm compared with the trend of the ratio
of the standard firm can give good results. For example, the ratio of operating expenses
to net sales for firm may be higher than the industry average however, over the years it
has been declining for the firm, whereas the industry average has not shown any
significant changes.
The combined analysis as depicted in the above diagram, which clearly shows that the
ratio of the firm is above the industry average, but it is decreasing over the years & is
approaching the industry average.
Pre-Requisites to Ratio Analysis:
In order to use the ratio analysis as device to make purposeful conclusions, there are
certain pre-requisites, which must be taken care of. It may be noted that these
prerequisites are not conditions for calculations for meaningful conclusions. The
accounting figures are inactive in them & can be used for any ratio but meaningful &
correct interpretation & conclusion can be arrived at only if the following points are well
considered.
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1) The dates of different financial statements from where data is taken must be
same.
2) If possible, only audited financial statements should be considered, otherwise
there must be sufficient evidence that the data is correct.
3) Accounting policies followed by different firms must be same in case of cross
section analysis otherwise the results of the ratio analysis would be distorted.
4) One ratio may not throw light on any performance of the firm. Therefore, a group
of ratios must be preferred. This will be conductive to counter checks.
5) Last but not least, the analyst must find out that the two figures being used to
calculate a ratio must be related to each other, otherwise there is no purpose of
calculating a ratio.
Classification of Ratio:
CLASSIFICATION OF RATIO
BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER
STATEMENT
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1] BALANCE SHEET 1] LIQUIDITY RATIO 1] RATIOS FOR
RATIO 2] LEVERAGE RATIO SHORT TERM
2] REVENUE 3] ACTIVITY RATIO CREDITORS
STATEMENT 4] PROFITABILITY 2] RATIO FOR
RATIO RATIO SHAREHOLDER
3] COMPOSITE 5] COVERAGE 3] RATIOS FOR
RATIO RATIO MANAGEMENT
4] RATIO FORLONG TERMCREDITORS
Based on Financial Statement
Accounting ratios express the relationship between figures taken from financial
statements. Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of
classification of ratios is based upon the sources from which are taken.
1] Balance sheet ratio:
If the ratios are based on the figures of balance sheet, they are called Balance Sheet
Ratios. E.g. Ratio of current assets to current liabilities or Debt to equity ratio. While
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calculating these ratios, there is no need to refer to the Revenue statement. These
ratios study the relationship between the assets & the liabilities, of the concern. These
ratios help to judge the liquidity, solvency & capital structure of the concern. Balance
sheet ratios are Current ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio,
Debt equity ratio, and Stock working capital ratio.
2] Revenue ratio:
Ratio based on the figures from the revenue statement is called revenue statement
ratios. These ratios study the relationship between the profitability & the sales of the
concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit
ratio, Net operating profit ratio, Stock turnover ratio.
3] Composite ratio:
These ratios indicate the relationship between two items, of which one is found in the
balance sheet & other in revenue statement.
There are two types of composite ratios-
a) Some composite ratios study the relationship between the profits & the
investments of the concern. E.g. return on capital employed, return on proprietors
fund, return on equity capital etc.
b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios,
dividend payout ratios, & debt service ratios
Based on Function:
Accounting ratios can also be classified according to their functions in to liquidity ratios,
leverage ratios, activity ratios, profitability ratios & turnover ratios.
1] Liquidity ratios:
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It shows the relationship between the current assets & current liabilities of the concern
e.g. liquid ratios & current ratios.
2] Leverage ratios:
It shows the relationship between proprietors funds & debts used in financing the assets
of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.
3] Activity ratios:
It shows relationship between the sales & the assets. It is also known as Turnover ratios
& productivity ratios e.g. stock turnover ratios, debtors turnover ratios.
4] Profitability ratios:
a) It shows the relationship between profits & sales e.g. operating ratios, gross profit
ratios, operating net profit ratios, expenses ratios
b) It shows the relationship between profit & investment e.g. return on investment,
return on equity capital.
5] Coverage ratios:
It shows the relationship between the profit on the one hand & the claims of the
outsiders to be paid out of such profit e.g. dividend payout ratios & debt service ratios.
Based on User:
1] Ratios for short-term creditors:
Current ratios, liquid ratios, stock working capital ratios
2] Ratios for the shareholders:
Return on proprietors fund, return on equity capital
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3] Ratios for management:
Return on capital employed, turnover ratios, operating ratios, expenses ratios
4] Ratios for long-term creditors:
Debt equity ratios, return on capital employed, proprietor ratios.
Liqui
dity
Ratio: -
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Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year)
obligations. The ratios, which indicate the liquidity of a company, are Current ratio,
Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below
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Current Ratio
Meaning:
This ratio compares the current assets with the current liabilities. It is also known as
working capital ratio or solvency ratio. It is expressed in the form of pure ratio.
E.g. 2:1
Formula:
Current assets
Current ratio =
Current liabilities
The current assets of a firm represents those assets which can be, in the ordinary
course of business, converted into cash within a short period time, normally not
exceeding one year. The current liabilities defined as liabilities which are short term
maturing obligations to be met, as originally contemplated, with in a year.
Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL).
Current assets include cash and bank balances; inventory of raw materials, semi-
finished and finished goods; marketable securities; debtors (net of provision for bad and
doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of
trade creditors, bills payable, bank credit, and provision for taxation, dividends payable
and outstanding expenses. This ratio measures the liquidity of the current assets and
the ability of a company to meet its short-term debt obligation.
CR measures the ability of the company to meet its CL, i.e., CA gets converted into
cash in the operating cycle of the firm and provides the funds needed to pay for CL. The
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higher the current ratio, the greater the short-term solvency. This compares assets,
which will become liquid within approximately twelve months with liabilities, which will be
due for payment in the same period and is intended to indicate whether there are
sufficient short-term assets to meet the short- term liabilities. Recommended current
ratio is 2: 1. Any ratio below indicates that the entity may face liquidity problem but also
Ratio over 2: 1 as above indicates over trading, that is the entity is under utilizing its
current assets.
Liquid Ratio:
Meaning:
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the
quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1.
The term quick assets refer to current assets, which can be converted into, cash
immediately or at a short notice without diminution of value.
Formula:
Quick assetsLiquid ratio =
Quick liabilities
Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to
those current assets that can be converted into cash immediately without any value
strength. QA includes cash and bank balances, short-term marketable securities, and
sundry debtors. Inventory and prepaid expenses are excluded since these cannot be
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turned into cash as and when required.
QR indicates the extent to which a company can pay its current liabilities without relying
on the sale of inventory. This is a fairly stringent measure of liquidity because it is based
on those current assets, which are highly liquid. Inventories are excluded from the
numerator of this ratio because they are deemed the least liquid component of current
assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick
ratio is that it ignores the timing of receipts and payments.
Cash Ratio:
Meaning:
This is also called as super quick ratio. This ratio considers only the absolute liquidity
available with the firm.
Formula:
Cash + Bank + Marketable securities
Cash ratio =
Total current liabilities
Since cash and bank balances and short term marketable securities are the most liquid
assets of a firm, financial analysts look at the cash ratio. If the super liquid assets are
too much in relation to the current liabilities then it may affect the profitability of the firm.
Investment/ Shareholder
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EARNI
NG
PER
SHARE:-
Meaning:
Earnings per Share are calculated to find out overall profitability of the organization.
Earnings per Share representearning of the company whether or not dividends are
declared. If there is only one class of shares, the earning per share are determined by
dividing net profit by the number of equity shares.
EPS measures the profits available to the equity shareholders on each share held.
Formula:
Net Profit after Tax
Earnings per share =
Number of equity share
The higher EPS will attract more investors to acquire shares in the company as it
indicates that the business is more profitable enough to pay the dividends in time. But
remember not all profit earned is going to be distributed as dividends the company also
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retains some profits for the business
Dividend Per Share:-
Meaning:
DPS shows how much is paid as dividend to the shareholders on each share held.
Formula:
Dividend Paid to Ordinary Shareholders
Dividend per Share =
Number of Ordinary Shares
Dividend Payout Ratio:-
Meaning:
Dividend Pay-out Ratio shows the relationship between the dividends paid to equity
shareholders out of the profit available to the equity shareholders.
Formula:
Dividend per share
Dividend Payout ratio = *100Earning per share
D/P ratio shows the percentage share of net profits after taxes and after preference
dividend has been paid to the preference equity holders.
Gearing
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CA
PIT
AL GEARING RATIO:-
Meaning:
Gearing means the process of increasing the equity shareholders return through the
use of debt. Equity shareholders earn more when the rate of the return on total capital is
more than the rate of interest on debts. This is also known as leverage or trading on
equity. The Capital-gearing ratio shows the relationship between two types of capital
viz: - equity capital & preference capital & long term borrowings. It is expressed as a
pure ratio.
Formula:
Preference capital+ secured loan
Capital gearing ratio =Equity capital & reserve & surplus
Capital gearing ratio indicates the proportion of debt & equity in the financing of assets
of a concern.
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Profitability
These ratios help measure the profitability of a firm. A firm, which generates a
substantial amount of profits per rupee of sales, can comfortably meet its operating
expenses and provide more returns to its shareholders. The relationship between profit
and sales is measured by profitability ratios. There are two types of profitability ratios:
Gross Profit Margin and Net Profit Margin.
GROSS
PROFIT
RATIO:-
Meaning:
This ratio measures the relationship between gross profit and sales. It is defined as the
excess of the net sales over cost of goods sold or excess of revenue over cost. This
ratio shows the profit that remains after the manufacturing costs have been met. It
measures the efficiency of production as well as pricing. This ratio helps to judge how
efficient the concern is I managing its production, purchase, selling & inventory, how
good its control is over the direct cost, how productive the concern , how much amount
is left to meet other expenses & earn net profit.
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Gross profitGross profit ratio = * 100
Net sales
Net Profit Ratio:-
Meaning:
Net Profit ratio indicates the relationship between the net profit & the sales it is usually
expressed in the form of a percentage.
Formula:
NPATNet profit ratio = * 100
Net sales
This ratio shows the net earnings (to be distributed to both equity and preference
shareholders) as a percentage of net sales. It measures the overall efficiency of
production, administration, selling, financing, pricing and tax management. Jointly
considered, the gross and net profit margin ratios provide an understanding of the cost
and profit structure of a firm.
Return on Capital Employed:-
Meaning:
The profitability of the firm can also be analyzed from the point of view of the total funds
employed in the firm. The term fund employed or the capital employed refers to the total
long-term source of funds. It means that the capital employed comprises of shareholder
funds plus long-term debts. Alternatively it can also be defined as fixed assets plus net
working capital.
Capital employed refers to the long-term funds invested by the creditors and the owners
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of a firm. It is the sum of long-term liabilities and owner's equity. ROCE indicates the
efficiency with which the long-term funds of a firm are utilized.
Formula:
NPAT
Return on capital employed = *100
Capital employed
Financial
These ratios determine how quickly certain current assets can be converted into cash.
They are also called efficiency ratios or asset utilization ratios as they measure the
efficiency of a firm in managing assets. These ratios are based on the relationship
between the level of activity represented by sales or cost of goods sold and levels of
investment in various assets. The important turnover ratios are debtors turnover ratio,
average collection period, inventory/stock turnover ratio, fixed assets turnover ratio, and
total assets turnover ratio. These are described below:
DEB
TOR
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S TURNOVER RATIO (DTO)
Meaning:
DTO is calculated by dividing the net credit sales by average debtors outstanding during
the year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit
sales minus returns, if any, from customers. Average debtors are the average of debtors
at the beginning and at the end of the year. This ratio shows how rapidly debts are
collected. The higher the DTO, the better it is for the organization.
Formula:
Credit salesDebtors turnover ratio =
Average debtors
Inventory or Stock Turnover Ratio (ITR)
Meaning:
ITR refers to the number of times the inventory is sold and replaced during the
accounting period.
Formula:
Cost of Goods SoldStock Turnover Ratio =
Average stock
ITR reflects the efficiency of inventory management. The higher the ratio, the more
efficient is the management of inventories, and vice versa. However, a high inventory
turnover may also result from a low level of inventory, which may lead to frequent stock
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outs and loss of sales and customer goodwill. For calculating ITR, the average of
inventories at the beginning and the end of the year is taken. In general, averages may
be used when a flow figure (in this case, cost of goods sold) is related to a stock figure
(inventories).
Fixed AssetsTurnover (FAT)
The FAT ratio measures the net sales per rupee of investment in fixed assets.
Formula:
Net sales
Fixed assets turnover =Net fixed assets
This ratio measures the efficiency with which fixed assets are employed. A high ratio
indicates a high degree of efficiency in asset utilization while a low ratio reflects an
inefficient use of assets. However, this ratio should be used with caution because when
the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover
ratio tends to be high (because the denominator of the ratio is very low).
Proprietors Ratio:
Meaning:
Proprietary ratio is a test of financial & credit strength of the business. It relates
shareholders fund to total assets. This ratio determines the long term or ultimate
solvency of the company.
In other words, Proprietary ratio determines as to what extent the owners interest &
expectations are fulfilled from the total investment made in the business operation.
Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed
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in the form of percentage. Total assets also know it as net worth.
Formula:
Proprietary fundProprietary ratio = OR
Total fund
Shareholders fund
Proprietary ratio =Fixed assets + current liabilities
Stock Working Capital Ratio:
Meaning:
This ratio shows the relationship between the closing stock & the working capital. It
helps to judge the quantum of inventories in relation to the working capital of the
business. The purpose of this ratio is to show the extent to which working capital is
blocked in inventories. The ratio highlights the predominance of stocks in the current
financial position of the company. It is expressed as a percentage.
Formula:
StockStock working capital ratio =
Working Capital
Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the
working capital. This ratio also helps to study the solvency of a concern. It is a
qualitative test of solvency. It shows the extent of funds blocked in stock. If investment
in stock is higher it means that the amount of liquid assets is lower.
Debt Equity Ratio:
Mening:
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This ratio compares the long-term debts with shareholders fund. The relationship
between borrowed funds & owners capital is a popular measure of the long term
financial solvency of a firm. This relationship is shown by debt equity ratio. Alternatively,
this ratio indicates the relative proportion of debt & equity in financing the assets of the
firm. It is usually expressed as a pure ratio. E.g. 2:1
Formula:
Total long-term debt
Debt equity ratio =Total shareholders fund
Debt equity ratio is also called as leverage ratio. Leverage means the process of the
increasing the equity shareholders return through the use of debt. Leverage is also
known as gearing or trading on equity. Debt equity ratio shows the margin of safety
for long-term creditors & the balance between debt & equity.
Return on Proprietor Fund:
Meaning:Return on proprietors fund is also known as return on proprietors equity or return on
shareholders investment or investment ratio. This ratio indicates the relationship
between net profits earned & total proprietors funds. Return on proprietors fund is a
profitability ratio, which the relationship between profit & investment by the proprietors in
the concern. Its purpose is to measure the rate of return on the total fund made
available by the owners. This ratio helps to judge how efficient the concern is in
managing the owners fund at disposal. This ratio is of practical importance to
prospective investors & shareholders.
Formula:
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NPATReturn on proprietors fund = * 100
Proprietors fund
Creditors Turnover Ratio:
It is same as debtors turnover ratio. It shows the speed at which payments are made to
the supplier for purchase made from them. It is a relation between net credit purchase
and average creditors
Net credit purchaseCredit turnover ratio =
Average creditors
Months in a yearAverage age of accounts payable =
Credit turnover ratio
Both the ratios indicate promptness in payment of creditor purchases. Higher creditors
turnover ratio or a lower credit period enjoyed signifies that the creditors are being paid
promptly. It enhances credit worthiness of the company. A very low ratio indicates that
the company is not taking full benefit of the credit period allowed by the creditors.
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Importance of Ratio Analysis:
As a tool of financial management, ratios are of crucial significance. The importance of
ratio analysis lies in the fact that it presents facts on a comparative basis & enables the
drawing of interference regarding the performance of a firm. Ratio analysis is relevant in
assessing the performance of a firm in respect of the following aspects:
1] Liquidity position
2] Long-term solvency
3] Operating efficiency
4] Overall profitability
5] Inter firm comparison
6] Trend analysis.
1] Liquidity position: -
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With the help of Ratio analysis conclusion can be drawn regarding the liquidity position
of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its
current obligation when they become due. A firm can be said to have the ability to meet
its short-term liabilities if it has sufficient liquid funds to pay the interest on its short
maturing debt usually within a year as well as to repay the principal. This ability is
reflected in the liquidity ratio of a firm. The liquidity ratio is particularly useful in credit
analysis by bank & other suppliers of short term loans.
2] Long-term solvency: -
Ratio analysis is equally useful for assessing the long-term financial viability of a firm.
This respect of the financial position of a borrower is of concern to the long-term
creditors, security analyst & the present & potential owners of a business. The long-term
solvency is measured by the leverage/ capital structure & profitability ratio Ratio
analysis s that focus on earning power & operating efficiency.
Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage
ratios, for instance, will indicate whether a firm has a reasonable proportion of various
sources of finance or if it is heavily loaded with debt in which case its solvency is
exposed to serious strain. Similarly the various profitability ratios would reveal whether
or not the firm is able to offer adequate return to its owners consistent with the risk
involved.
3] Operating efficiency:
Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of
management, is that it throws light on the degree of efficiency in management &
utilization of its assets. The various activity ratios measure this kind of operational
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efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the
sales revenues generated by the use of its assets- total as well as its components.
4] Overall profitability:
Unlike the outsides parties, which are interested in one aspect of the financial position
of a firm, the management is constantly concerned about overall profitability of the
enterprise. That is, they are concerned about the ability of the firm to meets its short
term as well as long term obligations to its creditors, to ensure a reasonable return to its
owners & secure optimum utilization of the assets of the firm. This is possible if an
integrated view is taken & all the ratios are considered together.
5] Inter firm comparison:
Ratio analysis not only throws light on the financial position of firm but also serves as a
stepping-stone to remedial measures. This is made possible due to inter firm
comparison & comparison with the industry averages. 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 ratios of a firm with the industry average. It should be
reasonably expected that the performance of a firm should be in broad conformity with
that of the industry to which it belongs. An inter firm comparison would demonstrate the
firms position vice-versa its competitors. If the results are at variance either with the
industry average or with those of the competitors, the firm can seek to identify the
probable reasons & in light, take remedial measures.
6] Trend analysis:
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Finally, ratio analysis enables a firm to take the time dimension into account. In other
words, whether the financial position of a firm is improving or deteriorating over the
years. This is made possible by the use of trend analysis. The significance of the trend
analysis of ratio lies in the fact that the analysts can know the direction of movement,
that is, whether the movement is favorable or unfavorable. For example, the ratio may
be low as compared to the norm but the trend may be upward. On the other hand,
though the present level may be satisfactory but the trend may be a declining one.
Advantages of Ratio Analysis
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 advantages of ratio analysis can be summarized as follows:
Ratios facilitate conducting trend analysis, which is important for decision
making and forecasting.
Ratio analysis helps in the assessment of the liquidity, operating efficiency,
profitability and solvency of a firm.
Ratio analysis provides a basis for both intra-firm as well as inter-firm
comparisons.
The comparison of actual ratios with base year ratios or standard ratios helps
the management analyze the financial performance of the firm.
Limitations of Ratio Analysis
Ratio analysis has its limitations. These limitations are described below:
1] Information problems
Ratios require quantitative information for analysis but it is not decisive about analytical
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output.
The figures in a set of accounts are likely to be at least several months out of
date, and so might not give a proper indication of the companys current financial
position.
Where historical cost convention is used, asset valuations in the balance sheet
could be misleading. Ratios based on this information will not be very useful for
decision-making.
2] Comparison of performance over time
When comparing performance over time, there is need to consider the changes
in price. The movement in performance should be in line with the changes in
price.
When comparing performance over time, there is need to consider the changes
in technology. The movement in performance should be in line with the changes
in technology.
Changes in accounting policy may affect the comparison of results between
different accounting years as misleading.
3] Inter-firm comparison
Companies may have different capital structures and to make comparison of
performance when one is all equity financed and another is a geared company it may
not be a good analysis.
Selective application of government incentives to various companies may also
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distort intercompany comparison. Comparing the performance of two enterprises
may be misleading.
Inter-firm comparison may not be useful unless the firms compared are of the
same size and age, and employ similar production methods and accounting
practices.
Even within a company, comparisons can be distorted by changes in the price
level.
Ratios provide only quantitative information, not qualitative information.
Ratios are calculated on the basis of past financial statements. They do not
indicate future trends and they do not consider economic conditions.
Purpose of Ratio Analysis:
1] To identify aspects of a businesss performance to aid decision making
2] Quantitative process may need to be supplemented by qualitative factors to get a
complete picture.
3] 5 main areas-
Liquidity the ability of the firm to pay its way
Investment/shareholders information to enable decisions to be made on the
extent of the risk and the earning potential of a business investment
Gearing information on the relationship between the exposure of the business
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to loans as opposed to share capital
Profitability how effective the firm is at generating profits given sales and or its
capital assets
Financial the rate at which the company sells its stock and the efficiency with
which it uses its assets
Role of Ratio Analysis:
It is true that the technique of ratio analysis is not a creative technique in the sense that
it uses the same figure & information, which is already appearing in the financial
statement. At the same time, it is true that what can be achieved by the technique of
ratio analysis cannot be achieved by the mere preparation of financial statement.
Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of
performance, either individually or in relation to those of other firms in the same
industry. The process of this appraisal is not complete until the ratio so computed can
be compared with something, as the ratio all by them do not mean anything. This
comparison may be in the form of intra firm comparison, inter firm comparison or
comparison with standard ratios. Thus proper comparison of ratios may reveal where a
firm is placed as compared with earlier period or in comparison with the other firms in
the same industry.
Ratio analysis is one of the best possible techniques available to the management to
impart the basic functions like planning & control. As the future is closely related to the
immediate past, ratio calculated on the basis of historical financial statements may be of
good assistance to predict the future. Ratio analysis also helps to locate & point out the
various areas, which need the management attention in order to improve the situation.
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As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e.
liquidity, solvency, activity, profitability & overall performance, it enables the interested
persons to know the financial & operational characteristics of an organisation & take the
suitable decision.
Fund Flow Analysis
Fund may be interpreted in various ways as
(a) Cash,
(b) Total current assets,
(c) Net working capital,
(d) Net current assets.
For the purpose of fund flow statement the term means net working capital. The flow of
fund will occur in a business, when a transaction results in a change i.e., increase or
decrease in the amount of fund.
According to Robert Anthony the funds flow statement describes the sources from
which additional funds were derived and the uses to which these funds were put.
In short, it is a technical device designed to highlight the changes in the financial
condition of a business enterprise between two balance sheets.
Different names of Fund-Flow Statement
A Funds Statement
A statement of sources and uses of fund
A statement of sources and application of fund
Where got and where gone statement
Inflow and outflow of fund statement
Objectives of Fund Flow Statement
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The main purposes of FFS are:]
To help to understand the changes in assets and asset sources which are not
readily evident in the income statement or financial statement.
To inform as to how the loans to the business have been used.
To point out the financial strengths and weaknesses of the business.
Format of Fund Flow Statement
Sources Applications
Fund from operation Fund lost in operations
Non-trading incomes Non-operating expenses
Issue of shares Redemption of redeemable preference
share
Issue of debentures Redemption of debentures
Borrowing of loans Repayment of loans
Acceptance of deposits Repayment of deposits
Sale of fixed assets Purchase of fixed assets
Sale of investments (Long
Term)
Purchase of long term investments
Decrease in working
capital
Increase in working capital
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Steps in Preparation of Fund Flow Statement.
1. Preparation of schedule changes in working capital (taking current items only).
2. Preparation of adjusted profit and loss account (to know fund from or fund lost
in operations).
3. Preparation of accounts for non-current items (Ascertain the hidden
information).
Preparation of the fund flow statement.
Cash Flow Analysis
Cash is a life blood of business. It is an important tool of cash planning and control. A
firm receives cash from various sources like sales, debtors, sale of assets investments
etc. Likewise, the firm needs cash to make payment to salaries, rent dividend, interest
etc.
Cash flow statement reveals that inflow and outflow of cash during a particular period. It
is prepared on the basis of historical data showing the inflow and outflow of cash.
Objectives of CFS
1. To show the causes of changes in cash balance between the balance sheet
dates.
2. To show the actors contributing to the reduction of cash balance inspire of
increasing of profit or decreasing profit.
Uses of CFS
1. It explaining the reasons for low cash balance.
2. It shows the major sources and uses of cash.
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3. It helps in short term financial decisions relating to liquidity.
4. From the past year statements projections can be made for the future.
5. It helps the management in planning the repayment of loans, credit
arrangements etc.
Steps in Preparing CFS
1. Opening of accounts for non-current items (to find out the hidden information).
2. Preparation of adjusted P&L account (to find out cash from operation or profit,
and cash lot in operation or loss).
3. Comparison of current items (to find out inflow or outflow of cash).
4. Preparation of Cash Flow Statement.
To preparing Account for all non-current items is easier for preparing Cash Flow
Statement.
Cash from operation can be prepared by this formula also.
Net Profit + Decrease in Current Assets - Increase in Current Assets
OR OR
Increase in Current Liabilities Decrease in Current Liabilities.
Usefulness of the Statement of Cash Flows
The information in a statement of cash flows should help investors, creditors, and others
assess the following aspects of the firms financial position.
The entitys ability to generate future cash flows.
By examining relationships between items in the statement of cash flows,
investors and others can make predictions of the amounts, timing, and
uncertainty of future cash flows better than they can from accrual basis data.
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The entitys ability to pay dividends and meet obligations.
If a company does not have adequate cash, employees cannot be paid, debts
settled, or dividends paid. Employees, creditors, and stockholders should be
particularly interested in this statement, because it alone shows the flows of
cash in a business.
The cash investing and financing transactions during the period.
By examining a companys investing and financing transactions, a financial
statement reader can better understand why assets and liabilities changed
during the period.
1. The reasons for the difference between net income and net cash
Net income provides information on the success or failure of a business enterprise.
However, some are critical of accrual basis net income because it requires many
estimates. As a result, the reliability of the number is often challenged. Such is not the
case with cash. Many readers of the statement of cash flows want to know the reasons
for the difference between net income and net cash provided by operating activities.
Then they can assess for themselves the reliability of the income number.
In summary, the information in the statement of cash flows is useful in answering the
following questions.
How did cash increase when there was a net loss for the period?
How were the proceeds of the bond issue used?
How were the expansions in the plant and equipment financed?
Why were dividends not increased?
How was the retirement of debt accomplished?
How much money was borrowed during the year?
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Is cash flow greater or less than net income?
Cash Flow Statement
Inflow of Cash Amount Outflow of cash Amount
Opening cash balance *** Redemption of
preference shares
***
Cash from operation *** Redemption of
debentures
***
Sales of assets *** Repayment of loans ***
Issue of debentures *** Payment of dividends ***
Raising of loans *** Pay of tax ***
Collection from
debentures
*** Cash lost in debentures ***
Refund of tax *** Closing cash balance ***
Cash from operation can be calculated in two ways:
Cash Sales Method
Cash Sales (Cash Purchase + Cash Operation Expenses)
Net Profit Method
It can be prepared in statement form or by Adjusted Profit and Loss
Account.
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Objective of Study
To understand the information contained in financial statements with a view to know the
strength or weaknesses of the firm and to make forecast about the future prospects of
the firm and thereby enabling the financial analyst to take different decisions regarding
the operations of the firm.
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Research Methodology
Research is defined as a systematic, gathering recording and analysis of data
about problem relating to any particular field.
It determines strength reliability and accuracy of the project.
1. Research Design: Research Design pertains to the great research approach or
strategy adopted for a particular project. A research project has to be the
conducted scientifically making sure that the data is collected adequately and
economically.
The study used a descriptive research design for the purpose of getting an
insight over the issue. It is to provide an accurate picture of some aspects of market
environment. Descriptive research is used when the objective is to provide a systematic
description that is as factual and accurate as possible.
2. Method of Data Collection:
Secondary Data: Through the internet and published data
Limitation of the study
Significant business decisions are frequently made using one or more of the analytical
tools illustrated in this term paper. But, one should be aware of the limitations of these
tools and of the financial statements on which they are based.
Estimates
Financial statements contain numerous estimates. Estimates are used in determining
the allowance for uncollectible receivables, periodic depreciation, the costs of
warranties, and contingent losses. To the extent that these estimates are inaccurate,
the financial ratios and percentages are inaccurate.
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Cost
Traditional financial statements are based on cost. They are not adjusted for price-level
changes. Comparisons of unadjusted financial data from different periods may be
rendered invalid by significant inflation or deflation. me period.
Alternative Accounting Methods
Companies vary in the generally accepted accounting principles they use. Such
variations may hamper comparability. For example, one company may use the FIFO
method of inventory costing: another company in the same industry may use LIFO. If
inventory is a significant asset to both companies, it is unlikely that their current ratios
are comparable. In addition to differences in inventory costing methods, differences also
exist in reporting such items as depreciation, depletion, and amortization. These
differences in accounting methods might be detectable from reading the notes to the
financial statements. But, adjusting the financial data to compensate for the different
methods is difficult, if not impossible in some cases.
Atypical Data
Fiscal year-end data may not be typical of the financial condition during the year. Firms
frequently establish a fiscal year-end that coincides with the low point in operating
activity or in inventory levels. Therefore, certain account balances (cash, receivables,
payables, and inventories) may not be representative of the balances in the accounts
during the year.
Diversification of Firms
Diversification in U.S. industry also limits the usefulness of financial analysis. Many
firms today are so diversified that they cannot be classified by a single industry they
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are true conglomerates. Others appear to be comparable but are not.
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Company Profile
The Reliance group, founded by Dhirubhai H Ambani (1932-2002), is Indias largest
private sector enterprise, with businesses in the energy and material value chain. The
flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is
the largest private sector company in India. The chairman of the company is Mukesh
Ambani.
The company is Indias largest petrochemical firm and among the countrys largest
companies (along with the likes of Indian Oil and Tata Group). Oil refining and the
manufacture of polyfines account for nearly all of Reliances sales. It also makes textiles
and explores for oil and gas, though those businesses are relatively small. In 2009 the
company merged with its oil and gas refining subsidiary (Reliance Petroleum) in order to
boost the operational and financial synergies of Reliance as a major refining company.
Reliance Industries Limited (NSE: RELIANCE) is India's largest private sector
conglomerate(by market value) , with an annual turnover ofUS $35.9 billion and profit of
US$ 4.85 billion for the fiscal year ending in March 2008 making it one of India's private
sector Fortune Global 500 companies, being ranked at 206th position (2008). It was
founded by the Indian industrialist Dhirubhai Ambani in 1966. Ambani has been a
pioneer in introducing financial instruments like fully convertible debentures to the Indian
stock markets. Ambani was one of the first entrepreneurs to draw retail investors to the
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stock markets. Critics allege that the rise of Reliance Industries to the top slot in terms
of market capitalization is largely due to Dhirubhai's ability to manipulate the levers of a
controlled economy to his advantage. Though the company's oil-related operations form
the core of its business, it has diversified its operations in recent years. After severe
differences between the founder's two sons,Mukesh AmbaniandAnil Ambani, the group
was divided between them in 2006. In September 2008, Reliance Industries was the
only Indian firm featured in theForbes's list of "world's 100 most respected companies
Stock
According to the company website "1 out of every 4 investors in India is a Reliance
shareholder.. Reliance has more than 3 million shareholders, making it one of the
world's most widely held stocks. Reliance Industries Ltd, subsequent to its split in
January 2006 has continued to grow. Reliance companies have been among the best
performing in the Indian stock market.
Products
Reliance Industries Limited has a wide range of products from petroleum products,
petrochemicals, togarments(under the brand name of Vimal),Reliance Retailhas entered
into the fresh foods market as Reliance Freshand launched a new chain called Delight
Reliance Retail and NOVA Chemicals have signed a letter of intent to make energy-
efficient structures. The primary business of the company is petroleum refining and
petrochemicals. It operates a 33 million tone refinery at Jamnagar in the Indian state of
Gujarat. Reliance has also completed a second refinery of 29 million tons at the same
site which started operations in December 2008. The company is also involved in oil &
gas exploration and production. In 2002, it struck a major find on India's eastern coast in
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theKrishna Godavari basin. Gas production from this find was started on April 2, 2009. As
of the end of 3rd quarter of 2009-2010, gas production from the KG D6 ramped up to 60
MMSCMD.
Subsidiaries
Major Subsidiaries & Associates
Reliance Petroleum Limited (RPL) was a subsidiary of Reliance Industries
Limited (RIL) and was created to exploit the emerging opportunities, creating
value in the refining sector worldwide. Currently, RPL stands amalgamated with
RIL.
Reliance Life Sciences is a research-driven, biotechnology-led, life sciences
organization that participates in medical, plant and industrial biotechnology
opportunities. Specifically, these relate to Biopharmaceuticals, Pharmaceuticals,
Clinical Research Services, Regenerative Medicine, Molecular Medicine, Novel
Therapeutics, Bio-fuels, Plant Biotechnology and Industrial Biotechnology.
Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of
setting up / operating Industrial Infrastructure that also involves leasing and
providing services connected with computer software and data processing.
Reliance Institute of Life Sciences (Rils) established by Dhirubhai Ambani
Foundation, is an institution of higher education in various fields of life sciences
and related technologies.
Reliance Logistics (P) Limited is a single window solutions provider for
transportation, distribution, warehousing, logistics, and supply chain needs,
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supported by in house state of art telemetric and telemetry solutions.
Reliance Clinical Research Services (RCRS), a contract research organization
(CRO) and wholly owned subsidiary of Reliance Life Sciences, has been set up
to provide clinical research services to pharmaceutical, biotechnology and
medical device companies.
Reliance Solar,The solar energy initiative of Reliance aims to bring solar energy
systems and solutions primarily to remote and rural areas and bring about a
transformation in the quality of life.
Relicordis the first and one of the most dependable stem-cell banking services
of South East Asia offered byMukesh Ambanicontrolled Reliance Industries.
Reliance's Oil & Gas find
Andhra PradeshnearVishakhapatnam. It was the largest discovery of natural gas in world
in financial year 2002-2003. On 2 April 2009, Reliance Industries (RIL) commenced
natural gas production from its D-6 block in the Krishna-Godavari (KG)
The gas reserve is 7 trillion cubic feet in size. Equivalent to 1.2 billion barrels (165 mil in
2002, Reliance foundnatural gasin theKrishna Godavari basinoff the coast of lion tonnes)
ofcrude oil, but only 5 trillion cubic feet are extractable.
On 2008 Oct 8, Anil Ambani's Reliance Natural Resources took Reliance Industries to
the Bombay High Court to uphold a memorandum of understanding that said RIL will
supply the natural gas at $2.34 per millionBritish thermal unitsto Anil Ambani.
Reliance Retail
Reliance Retail is the retail business wing of the Reliance business. Many brands like
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Reliance Fresh, Reliance Footprint, Reliance Time Out, Reliance Digital, Reliance
Wellness, Reliance Trends, Reliance AutoZone, Reliance Super, Reliance Mart,
Reliance iStore, Reliance Home Kitchens, and Reliance Jewel come under theReliance
Retail brand. Reliance saw opportunity in retailing chicken, mutton and other meat
products (halal and non-halal) through one of its retail arms called "Delight Non Veg."
One of the Delight outlets has been shut down due to protest by anti-animal cruelty
activists at Gandhi Nagar, Delhi who want Reliance to close its non-veg food marketing.
Environmental record
Reliance Industry is the worlds largest polyester producer and as a result one o f the
largest producers of polyester waste in the world. In order to deal with this large amount
of waste they had to create a way to recycle the waste. They operate the largest
polyester recycling center that uses the polyester waste as a filling and stuffing. They
use this process to develop a strong recycling process which won them a reward in the
Team Excellence competition.
Reliance Industries backed a conference on environmental awareness in New Delhi in
2006. The conference was run by the Asia Pacific Jurist Association in partnership with
the Ministry of Environment & Forests, Govt. of India and the Maharashtra Pollution
Control Board. The conference was to help bring about new ideas and articles on
various aspects of environmental protection in the region. Maharashtra Pollution Control
Board invited various industries complied with the pollution control norms to take active
part in the conference and to support as a sponsor. The conference proved effective as
a way to promote environmental concern in the area.
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Awards & Recognition
International Refiner of the Year in 2005 at the 23rd Annual Hart's World Refining
and Fuels Conference.
Awards for managers
Mukesh D. Ambani received the United States of America-India Business Council
(USIBC) leadership award for "Global Vision" 2007 in Washington in July 2007.
Mukesh D. Ambani was conferred the Asia Society Leadership Award by theAsia
Society, Washington, USA, May 2004.
Mukesh D. Ambani ranked 13th in Asia's Power 25 list of The Most Powerful
People in Business published byFortune magazine, August 2004.
Mukesh D. Ambani isEconomic TimesBusiness Leader of the Year.
Current composition of the Board andCategory of Directors are as Follows:
"Between my past, the present and the future, there is one common Factor:Relationship and Trust. This is the foundation of our growth."
Shri Dhirubhai H. AmbaniChairman Reliance Group
December 28, 1932 - July 6, 2002
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Board of Directors of Reliance Industries Limited
Shri Mukesh D AmbaniChairman & Managing
Director
Shri Nikhil R. Meswani Shri Hital R. Meswani Shri .S.KohliExecutive Director Executive Director Executive Director
Shri PMS Prasad Shri R. Ravimohan Shri Ramniklal H.Executive Director Executive Director Ambani
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Shri Mansingh L. Shri Yogendra P. Trivedi Dr. D. V. KapurBhakta
Shri M. P. Modi Prof. Ashok Misra Prof. Dipak C Jain
MISSION & VISION
Continuously innovate to remain Partners in human progress by Harnessing science &technology in the petrochemicals domain
OUR MISSION
Be a globally preferred Business associate with responsible Concern for ecology,society, and stakeholders value.
VALUES & QUALITY POLICY YOUR VALUES
Integrity, Respect for People, Unity of Purpose, Outside-in Focus, Agility andInnovation.
QUALITY POLICY
Bare committed to meet customers requirements through continual improvement ofour quality management systems. We shall sustain organizational excellence throughvisionary leadership and innovative efforts.
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Reliance Industries Balance Sheets from 2006 to 2009
in Rs. Cr.
Mar '06 Mar '07 Mar '08 Mar '09
12 months 12 months 12 months 12 months
Sources Of Funds
Total Share Capital 1,393.17 1,393.21 1,453.39 1,573.53
Equity Share Capital 1,393.17 1,393.21 1,453.39 1,573.53
Share Application Money 0.00 60.14 1,682.40 69.25
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 43,760.90 59,861.81 77,441.55 112,945.44
Revaluation Reserves 4,650.19 2,651.97 871.26 11,784.75
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Net worth 49,804.26 63,967.13 81,448.60 126,372.97
Secured Loans 7,664.90 9,569.12 6,600.17 10,697.92
Unsecured Loans 14,200.71 18,256.61 29,879.51 63,206.56
Total Debt 21,865.61 27,825.73 36,479.68 73,904.48
Total Liabilities 71,669.87 91,792.86 117,928.28 200,277.45
Application Of Funds
Gross Block 84,970.13 99,532.77 104,229.10 149,628.70
Less: Accum. Depreciation 29,253.38 35,872.31 42,345.47 49,285.64
Net Block 55,716.75 63,660.46 61,883.63 100,343.06
Capital Work in Progress 6,957.79 7,528.13 23,005.84 69,043.83
Investments 5,846.18 16,251.34 20,516.11 20,268.18
Inventories 10,119.82 12,136.51 14,247.54 14,836.72
Sundry Debtors 4,163.62 3,732.42 6,227.58 4,571.38
Cash and Bank Balance 239.31 308.35 217.79 500.13
Total Current Assets 14,522.75 16,177.28 20,692.91 19,908.23
Loans and Advances 8,266.55 12,506.71 18,441.20 13,375.15
Fixed Deposits 1,906.85 1,527.00 5,609.75 23,014.71
Total Current Assets, Loans &
Advances24,696.15 30,210.99 44,743.86 56,298.09
Differed Credit 0.00 0.00 0.00 0.00
Current Liabilities 17,656.02 24,145.19 29,228.54 42,664.81
Provisions 3,890.98 1,712.87 2,992.62 3,010.90
Total Current Liabilities &
Provisions 21,547.00 25,858.06 32,221.16 45,675.71
Net Current Assets 3,149.15 4,352.93 12,522.70 10,622.38
Miscellaneous Expenses 0.00 0.00 0.00 0.00
Total Assets 71,669.87 91,792.86 117,928.28 200,277.45
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Contingent Liabilities 24,897.66 46,767.18 37,157.61 36,432.69
Book Value (Rs) 324.03 439.57 542.74 727.66
Reliance Industries Profit & Loss Accounts from 2006 to 2009
in Rs. Cr.
Mar '06 Mar '07 Mar '08 Mar '09
12 months 12 months 12 months 12 months
Income
Sales Turnover 89,124.46 118,353.71 139,269.46 146,328.07
Excise Duty 8,246.67 6,654.68 5,463.68 4,369.07
Net Sales 80,877.79 111,699.03 133,805.78 141,959.00