ratio analysis and comparative study at bhushan steel1

8/3/2019 Ratio Analysis and Comparative Study at Bhushan Steel1

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RATIO ANALYSIS AND COMPARATIVE BALANCE

SHEET OF BHUSHAN STEEL

Submitted for the partial fulfillment of the requirement for the award

Of

Master in Business Administration

SUBMITTED BY

PREFACE


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Theory of any subject is important but without its practical knowledge it becomes useless

particularly for the management students. As students of the Busines Administration, I have

studied many theories and concepts in the classroom, but only after taking up this project

work I have experienced & understood these Management theories & practices in its fullest

sense, which plays a very vital role in business field today. The knowledge of management is

incomplete without knowing the practical application of the theories studied. This grand

project provides golden opportunity for all students, especially when the management

students do not have prefect understanding of the working of a unit.

I have undertaken project report at Bhushan Steel Ltd. which is BSE listed company and in

the business of steel manufacturing. I have taken this project in finance department and tried

to apply all the theoretical concept of ratio analysis in the company. I have given my best to

complete this project.

ACKNOWLEDGEMENT


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It is a matter of great satisfaction and pleasure to present this presentation on RATIO

ANALYSIS AND COMPARATIVE BALANCE SHEET OF BHUSHAN STEEL ".

I am grateful to Mr. A. Paul (AGM Finance) of BHUSHAN STEEL Ltd. who spared his

precious time in guiding me and for making valuable suggestions in compiling this project

report.

I acknowledge my gratitude and indebtness to my project guide

Mr._________________________ for his encouragement and able guidance at every stage of

this report.

I express my gratitude towards all those people who have helped me directly or indirectly in

completing this report.

TABLE OF CONTENT

Chapter No. Content Page No.


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Executive Summary

1 Company Profile

Introduction

VisionProducts

2 Objective and Research Methodology

3 Theoretical framework of Ratio analysis

Financial Ratio Analysis

Meaning and Rationale

Importance and Limitation of Ratio analysis

Precautions for use of Ratio

User of Financial Analysis

Types of Ratios4 Data Analysis and Interpretation

Liquidity Ratio

Leverage Ratio

Activity Ratio

Profitability Ratio

5 Findings

6 Suggestion

7 Bibliography

Executive Summary

Every countries economic condition depends upon the performance of its Industry. How the

investors are interested in it as it will help in the increment in the flow of foreign exchange. A

sound and well performing industry will always attract investors as it will give them a return

in a less time period. But it is not easy for a layman to understand or to properly analyze the

performance of the company.

To understand the performance of any company we have to do financial statement analysis.

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of

ratio to interpret the financial statements so that the strength and weaknesses of a firm as well


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as its historical performance and current financial condition can be determined. The term

ratio refers to the numerical or quantitative relationship between two variables.

Ratio analysis helps in inter-firm comparison by providing necessary data. An

interfirm comparison indicates relative position. It provides the relevant data for the

comparison of the performance of different departments. If comparison shows a variance, the

possible reasons of variations may be identified and if results are negative, the action may be

initiated immediately to bring them in line.

In my study I have tried to make out a clear picture of Bhushan steel ltd. and its

performance in the steel industry with the help of Ratio analysis and Comparative Balance

sheet. While doing my interpretation through Ratio analysis I have focused on 5 main areas:

1. Liquidity

2. Investment/shareholder

3. Gearing

4. Profitability

5. Financial

First chapter contains information about the company and its product. Second chapter is

about the research methodology. Third chapter has detailed study of theoretical concept of

ratio analysis and last part is about the data analysis. I have taken 7 years data to have

financial analysis. Suggestion is made on the basis of finding.


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CHAPTER -1

COMPANY PROFILE

Introduction

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 Indias 3rd largest Secondary Steel

Producer company with an existing steel production capacity of 2 million tonnes per annum.

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


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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 Orissa Plant (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, 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 countrys 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.

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.

Vision

The vision of evolving into a totally Integrated Steel Producer by committing to achieve the highest

standards of Quality through Cutting-Edge Technology.

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
http://bhushan-group.org/sahibabad.asphttp://bhushan-group.org/khopoli.asphttp://bhushan-group.org/dhenkanal.asphttp://bhushan-group.org/cold_rolled.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/product_colourcoated.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/alloybillets.asphttp://bhushan-group.org/alloybillets.asphttp://bhushan-group.org/spongeiron.asphttp://bhushan-group.org/Drawntubes.asphttp://bhushan-group.org/wirerod.asphttp://bhushan-group.org/khopoli.asphttp://bhushan-group.org/dhenkanal.asphttp://bhushan-group.org/cold_rolled.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/galvanised.asphttp://bhushan-group.org/Hightensilesteel_striping.asphttp://bhushan-group.org/product_colourcoated.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/product_glumespec.asphttp://bhushan-group.org/HardenedTempered_strip.asphttp://bhushan-group.org/alloybillets.asphttp://bhushan-group.org/spongeiron.asphttp://bhushan-group.org/Drawntubes.asphttp://bhushan-group.org/wirerod.asphttp://bhushan-group.org/sahibabad.asp


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exhorts its members to behave consistently with its order, security and growth.

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 Steels endeavor 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.

Products

COLD ROLLED STEEL COILS :

Parameters Technical Details/Specifications

Thickness (mm) 0.10 to 4.00

Width (mm) 10 to 1700 (Max)

Coil Weight (MT) Up to 30 MT (7 to 18 kg/mm

width)

Surface Finish Super Bright, Bright, Dull & Matte. (RaValue with

controlled Rmax on request).

Grades Specifications - As per JIS/BIS/ ASTM/EN Standards

Low Carbon CRCA Grades

Super EDD/DD/D (SPCX, SPCEN, SPCD, SPCC) non-

aging, IF-High

Strength steel(IF-HSS), High Strength Low Alloy Steel

(HSLA), viz., ST -42,

ST-45, ST-52, SAPH-400/41O, Steel for Porcelein

Enammeling, Corrosion

Resistant Steel, viz., Tin Mill Black Plate (TMBP)

Medium & High Carbon CRCA Grades


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C- 30, C-40,MC -ll,EN - 8, for spring steel application, C-

55,MC-12,

EN- 9 C-62,C-60, C-80,HC-14,EN-42J

ELECTRICAL Grades Elec -I, Elec-n, Elec-nI,

SemiProcessed Elect. Steel

OTHER CRCA Grades

Case Hardening Steel- 15Cr3, SAE 1010, SAE 1012

Through Hardening Grades- SAE 1040, SAE 1045, 1055,

1065, 1080, 1541

H.R PICKLED/ SKIN PASSED & OILED

Thickness

Up to 3.00 mm

3.00 mm - 4.00 mm

Above 4.00 mm

Max. Width for Cut Size1500 mm

1250 mm

600 mm

Width for Coil 50 mm - 1700 mm

50 mm - 1700 mm

50 mm - 1700 mm

COLD ROLLED STEEL SHEETS :


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Parameters Technical Details/Specifications

Thickness (mm) 0.10 t0 4.00

Width (mm) 10 to 1700 (Max)

Cut- to -Length (mm) Up to 4500mm with tolerance

of +2/-0 mm(Further close

tolerance

on - request)

Coil Weight (MT)Up to 30 MT (7 to 18 kg/mm width)

Surface Finish Super Bright, Bright, Dull & Matte. (RaValuewith

controlled Rmax on request).

Grades Specifications - As per JIS/BIS/ ASTM/EN Standards

Low Carbon CRCA Grades

Super EDD/EDD/DD/D (SPCX, SPCEN, SPCD, SPCC)

non-aging, IF-High

Strength steel (IF-HSS), High Strength Low Alloy Steel

(HSLA), viz., ST -42,

ST-45, ST-52, SAPH-400/41O, Steel for Porcelein

Enammeling, Corrosion

Resistant Steel, viz., Tin Mill Black Plate (TMBP)

Medium & High Carbon CRCA Grades

C- 30, C-40,MC -ll, EN - 8, C-55, MC-12,

EN- 9 C-62, C-60, C-80, HC-14, EN-42J

ELECTRICAL Grades Elec -I, Elec-n, Elec-nI,

SemiProcessed Elect. Steel

OTHER CRCA Grades

Case Hardening Steel- 15Cr3, SAE 1010, SAE 1012

Through Hardening Grades- SAE 1040, SAE 1045, 1055,


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RATIO ANALYSIS:

Ratio analysis is a widely used tool of financial analysis. The

term ratio in it refers to the relationship expressed in mathematical terms

between two individual figures or group of figures connected with each other in

some logical manner and are selected from financial statements of the concern.

The ratio analysis is based on the fact that a single accounting figure by it self

may not communicate any meaningful information but when expressed as a

relative to some other figure, it may definitely provide some significant

information the relationship between two or more accounting figure/groups is

called a financial ratio helps to express the relationship between two accounting

figures in such a way that users can draw conclusions about the performance,

strengths and weakness of a firm.

Classification of ratios:

A) Liquidity ratios

B) Leverage ratios

C) Activity ratios

D) Profitability ratios


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A) Liquidity ratios:

These ratios portray the capacity of the business unit to meet its short

term obligation from its short-term resources (e.g.) current ratio, quick ratio.

i) Current ratio:

Current ratio may be defined as the relationship between current assets and

current liabilities it is the most common ratio for measuring liquidity. It is

calculated by dividing current assets and current liabilities. Current assets are

those, the amount of which can be realized with in a period of one year. Current

liabilities are those amounts which are payable with in a period of one year.

Current assets

Current assets = -------------------------

Current liabilities

TABLE -1

CURRENT RATIO: ( In Crore)

Year Current asset

Current

liabilities Ratio

2004-05 1,069.44 473.07 2.26

2005-06 1,201.92 544.23 2.22

2006-07 1,762.75 818.95 2.15


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2007-08 2,418.38 1,263.63 1.91

2008-09 2,749.78 1,796.84 1.53

2009-10 3,770.21 1,603.58 2.35

2010-11 5,017.69 2,067.58 2.42

CHART-1

CURRENT RATIO

I

nterpretation and Analysis:

The above table and diagram shows that the current ratio in the year 2010-11

was 2.42 which is the highest. In the year 2004-05, current ratio was 2.26 and

thereafter up to 2008-09 it shows decreasing trend. But again it shows

increasing trend for the year 2009-10, 2010-11. In all the year current ratio is

above 2 :1 except year 2007-08 and 2008-09. This shows companys liquidity

position is good except year 2007-08 and 2008-09. Company has enough


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current assets to meet its current liability. We can say there is the safety of funds of

short-term creditors.

ii) LIQUID RATIO:

The term liquidity refers to the ability of a firm to pay its

short-term obligation as and when they become due. The term quick assets or

liquid assets refers current assets which can be converted into cash immediately

it comprises all current assets except stock and prepaid expenses it is

determined by dividing quick assets by quick liabilities.

Liquid assets

Liquid ratio = -------------------------

Liquid liabilities

TABLE-2

LIQUID RATIO:

( Rs. In Crore)

Year Liquid Asset Current Liabilities Liquid Ratio

2004-05 487.77 473.07 1.03

2005-06 727.14 544.23 1.34

2006-07 1006.41 818.95 1.23

2007-08 1288.75 1,263.63 1.02


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2008-09 1519.42 1,796.84 0.85

2009-10 1807.54 1,603.58 1.13

2010-2011 1849.28 2,067.58 0.89

CHART-2

LIQUID RATIO:

Interpretation and Analysis:

The above table and diagram shows the liquid ratio during the

study period. In all the year except 2008-09 and 2010-11, it is more than 1:1 or

equal to 1:1. We can say that company has enough quick asset to meet current

liabilities.

Hence the firm is controlling its stock position because there linear

relationship between current ratio and liquid ratio.


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ii) ABSOLUTE LIQUIDITY RATIO:

Absolute liquid assets include cash, bank, and marketable securities.

This ratio Obtained by dividing cash and bank and marketable securities by

current liabilities.

Cash + bank +marketable securities

Absolute liquidity ratio = ----------------------------------------------

Current liability

TABLE-3

ABSOLUTE LIQUID RATIO:

Year Cash andSecurities CurrentLiabilities Absolute LiquidRatio

2004-05 10.69 473.07 0.023

2005-06 81.52 544.23 0.150

2006-07 100.14 818.95 0.122

2007-08 27.62 1,263.63 0.022

2008-09 124.37 1,796.84 0.069

2009-10 120.2 1,603.58 0.075

2010-11 35.08 2,067.58 0.017

CHART-3

ABSOLUTE LIQUID RATIO:


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The above table and diagram shows the absolute ratio for the study period

2010-11 absolute liquid ratio is 0.017 which is the lowest in all seven year. In

the year 2004-05 ratio is 0.023 which increases up to 2006-07 and then came

down to 0.022 in the year 2007-08. Again it increases up to 2009-10 and then

went down to 0.017 in the year 2010-11.

This shows that company doesnt keep much in cash and bank balances.


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B) LEVERAGE RATIOS :

Many financial analyses are interested in the relative use of debt and

equity in the firm. The term solvency refers to the ability of a concern to meet

its long-term obligation. Accordingly, long-term solvency ratios indicate a

firms ability to meet the fixed interest and costs and repayment schedules

associated with its long-term borrowings. (E.g.) debt equity ratio, proprietary

ratio, etc.

i) DEBT EQUITY RATIO:

It expresses the relationship between the external funds borrowed

and internal equities or the relationship between borrowed funds and owners

capital. It is a popular measure of the long-term financial solvency of a firm.

This relationship is shown by the debt equity ratio. This ratio indicates the

relative proportion of debt and equity in financing the assets of a firm. This ratio

is computed by dividing the total debt of the firm by its equity (i.e.) net worth.

Outsiders funds

Debt equity ratio = ------------------------------

Proprietors funds


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TABLE-4

DEBT EQUITY RATIO:

Year Total Debt Net WorthDebt equity

ratio

2004-05 1,317.47 730.59 1.80

2005-06 2,036.18 889.67 2.29

2006-07 3,241.98 1,214.50 2.67

2007-08 5,718.14 1,625.32 3.52

2008-09 8,066.25 2,034.20 3.97

2009-10 11,404.11 3,991.67 2.86

2010-11 16,592.63 5,896.41 2.81

CHART-4

DEBT EQUITY RATIO:



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In the year 2004-05, debt equity ratio is 1.80 and thereafter up to year 2008-09

it shows increasing trend. This means that firm has higher debt compared to its

equity. This is risky composition. But in the year 2009-10 and 2010-11, debt

equity ratio shows decreasing trend. It is good sign for the firm as outsiders

fund decreased compared to share capital.

ii) PROPRIETARY RATIO:

Proprietary ratio relates to the proprietors funds to total assets. It

reveals the owners contribution to the total value of assets. This ratio shows the

long-time solvency of the business it is calculated by dividing proprietors funds

by the total tangible assets.

Proprietors funds

Proprietary ratio = ---------------------------

Total tangible assets

TABLE-5

PROPRIETARY RATIO:

Year Net Worth Total Assets Proprietary ratio

2004-05 730.59 2,048.06 0.36

2005-06 889.67 2,925.85 0.30

2006-07 1,214.50 4,456.48 0.27


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2007-08 1,625.32 7,343.46 0.22

2008-09 2,034.20 10,100.45 0.20

2009-10 3,991.67 15,395.78 0.26

2010-11 5,896.41 22,489.04 0.26

CHART-5

PROPRIETARY RATIO:


The above table and diagram shows the proprietary ratio during the study

period. In the year 2004-05 proprietary ratio is 0.36 and it shows down ward trend

up to the year 2008-09. We can say that proprietors contribution to total asset is on

an average between 20 to 30%.


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C) ACTIVITY RATIOS :

These ratios evaluate the use of the total resources of the business concern

along with the use of the components of total assets. They are intended to

measure the effectiveness of the assets management the efficiency with which

the assts are used would be reflected in the speed and rapidity with which the

assets are converted into sales. The greater the rate of turnover, the more

efficient the management would be (E.g.) stock turnover ratio, fixed assets

turnover ratios etc.

i) FIXED ASSETS TURNOVER RATIO:

The ratio indicates the extent to which the investments in fixed assets

contribute towards sales. If compared with a previous year. It indicates whether

the investment in fixed assets has been used effectively or not. The ratio is

calculated as follows.

Net sales

Fixed assets turnover ratio = -------------------

Fixed assets


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TABLE-6

FIXED ASSET TURNOVER RATIO:

Year Net Sales Fixed Asset Fixed assetturnover ratio

2004-05 2,674.99 1432.7 1.87

2005-06 2,716.20 2315.3 1.17

2006-07 3,806.81 3615.57 1.05

2007-08 4,152.30 6326.99 0.66

2008-09 4,943.25 9286.1 0.53

2009-10 5,611.27 13188.65 0.43

2010-11 6,967.65 19959.51 0.35

CHART-7

FIXED ASSET TURNOVER RATIO:



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In the year 2004-05, Fixed asset turnover was highest and it is 1.87.and it

shows decreasing trend. It is 0.35 in the year 2010-11. With the passage of

time, investment in assets has increased, in proportion to which sales has not

increased. This means that company is not using fixed asset efficiently to

generate sales.

ii) INVENTORY TURNOVER RATIO:

This ratio indicates how efficiently the firm is managing its inventory.

This ratio roughly indicates how many times per year the inventory is replaced.

SALES

INVENTORY TURNOVER RATIO =

INVENTORIES

TABLE-7

INVENTORY TURNOVER RATIO

Year Net Sales Inventory InventoryTurnover Ratio

2004-05 2,674.99 581.67 4.60

2005-06 2,716.20 474.78 5.72

2006-07 3,806.81 756.34 5.03

2007-08 4,152.30 1,129.63 3.68

2008-09 4,943.25 1,230.36 4.02


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2009-10 5,611.27 1,962.67 2.86

2010-11 6,967.65 3,168.41 2.20

CHART -7

INVENTORY TURNOVER RATIO


In the year 2004-05, inventory turnover ratio is 4.60 which shows

increasing trend and rise up to 5.72 then went down to 5.03 in the year 2006-07

and 3.68 in the year 2007-08. After 2008-09, it shows down ward trend and

came up to 2.20. As ratio went down it shows firm is not maintaining its

inventory efficiently.

iii) DEBTORS TURNOVER RATIO:


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Debtors constitute an important constituent of current assets.

Quality of debtors determines to a great extent a firms liquidity. Debtors

turnover ratio is very important as it depicts the efficiency of the staff entrusted

with the task of collection from debtors.

SALES

DEBTORS TURNOVER RATIO =

DEBTORS

TABLE 8

DEBTORS TURNOVER RATIO

Year Net sales DebtorDebtor's

turnover ratio

2004-05 2,674.99 339.44 7.88

2005-06 2,716.20 404.48 6.72

2006-07 3,806.81 538.9 7.06

2007-08 4,152.30 617.38 6.73

2008-09 4,943.25 619.82 7.98

2009-10 5,611.27 733.92 7.65

2010-11 6,967.65 483.53 14.41

CHART 8

DEBTORS TURNOVER RATIO


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In the year, 2004-05, Debtors turnover ratio is 7.88 which decreased to 6.72 in 2005-

06, again increased to 7.06 in 2006-07 and decreases to 6.73 in 2007-08. In the year 2010-11

it jumped to 14.41 which is highest in all the year. This shows that firm is able to collect

debtor 14.41 times in a year. This shows that debtors are collected soon.

iv) WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio indicates the velocity of the utilization of

net working capital. This ratio indicates the number of times the working capital

is turned over in the course of a year. It is a good measure over trading and

under-trading.

Net sales

Working capital turnover ratio = ----------------------------

Net working capital


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TABLE-9

WORKING CAPITAL TURNOVER RATIO:

Year Net SalesNet working

capital

Net working

capital turnover

2004-05 2,674.99 596.37 4.49

2005-06 2,716.20 657.69 4.13

2006-07 3,806.81 943.8 4.03

2007-08 4,152.30 1154.75 3.60

2008-09 4,943.25 952.94 5.19

2009-10 5,611.27 2166.63 2.59

2010-11 6,967.65 2950.11 2.36

CHART-9

WORKING CAPITAL TURNOVER RATIO:



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The above table and diagram shows the relationship between net working

capital and net sales. In the year 2004-05, working capital turnover ratio is 4.49

which shows decreasing trend up to 2007-08. In the year 2008-09 it has jumped

to 5.19 which shows firm has utilized it s working capital very efficiently to

generate sales.

v) TOTAL ASSETS TURNOVER RATIO:

This ratio is an indicator of how the resources of the organization

utilized for increasing the turnover. It shows the ratio between the total assets

and the net sales of the company.From this ratio one can understand how the

assets are performing and being utilized in achieving the objectives of the

company.

Net Sales

Total assets turnover ratio = -------------------

Total assets

TABLE-10

TOTAL ASSETS TURNOVER RATIO:


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Year Total Assets Net SalesTotal asset

turnover ratio

2004-05 2,048.06 2,674.99 1.30

2005-06 2,925.85 2,716.20 0.92

2006-07 4,456.48 3,806.81 0.85

2007-08 7,343.46 4,152.30 0.56

2008-09 10,100.45 4,943.25 0.49

2009-10 15,395.78 5,611.27 0.36

2010-11 22,489.04 6,967.65 0.31

CHART-10

TOTAL ASSETS TURNOVER RATIO:


The above table and diagram shows the relationship between the total

assets to net sales. Total asset turnover ratio show decreasing trend from the

year 2004-05 to 2010-11. This shows Firms total asset is not utilized efficiently

to generate sales.


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vi) CAPITAL TURNOVER RATIO:

This is a ratio which shows how much sales are entertained from

the capital. It shows how the sales are attracted from the Proprietor's Fund.

Sales

Capital turnover ratio = -----------------------

Proprietors fund

TABLE-11

CAPITAL TURNOVER RATIO:

Year Net Sales Net Worth Capital TurnoverRatio

2004-05 2,674.99 730.59 3.66

2005-06 2,716.20 889.67 3.05

2006-07 3,806.81 1,214.50 3.13

2007-08 4,152.30 1,625.32 2.55

2008-09 4,943.25 2,034.20 2.43

2009-10 5,611.27 3,991.67 1.41

2010-11 6,967.65 5,896.41 1.18

CHART-11

CAPITAL TURNOVER RATIO:


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The above table and diagram shows the relationship between the

sales and proprietors funds. In the year 2004-05 capital turnover ratio is 3.66

and it shows decreasing trend up to the year 2010-11.

v) RETURN ON TOTAL ASSETS:

Profitability can be measured in terms of relationship between net

profit and total assets. It measures the profitability of investment. The overall

profitability can be known by applying this ratio.

Net profit

Return on total assets = ----------------------------- x100

Total assets


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TABLE-12

RETURN ON TOTAL ASSETS RATIO:

Year Net Profit Total AssetsReturn on total

assets

2004-05 153.35 2,048.06 7.48

2005-06 154.23 2,925.85 5.27

2006-07 312.28 4,456.48 7.00

2007-08 422.39 7,343.46 5.75

2008-09 420.62 10,100.45 4.16

2009-10 844.8 15,395.78 5.48

2010-11 1,003.43 22,489.04 4.46

CHART-12

RETURN ON TOTAL ASSET



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The above table and diagram shows the relationship between net profit

and total assets in percentage. Return on total asset ratio is 7.48 in the year2004-

05. Again it decrease to 5.27 and then increases to7.00 We can say that

profitability from total asset is quite low.

D) PROFITABILITY RATIOS :

The profitability ratios of a business concern can be measured by the

profitability ratios. These ratios highlight the end result of business activities by

which alone the overall efficiency of a business unit can be judged, (E.g.) gross

ratios, Net profit ratio.

i) GROSS PROFIT RATIO:

This ratio expresses the relationship between Gross profit and sales. It

indicated the efficiency of production or trading operation. A high gross profit

ratio is a good management as it implies that cost of production is relatively

low.

Gross profit

Gross profit ratio = ----------------------------------- x 100

Net sales


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TABLE-13

GROSS PROFIT RATIO

Year Gross Profit Net Sales GP ratio

2004-05 325.92 2,674.99 12.18

2005-06 325.42 2,716.20 11.98

2006-07 581.28 3,806.81 15.26

2007-08 750.34 4,152.30 18.07

2008-09 795.19 4,943.25 16.08

2009-10 1,360.51 5,611.27 24.24

2010-11 1,653.51 6,967.65 23.73

CHART-13

GROSS PROFIT RATIO:



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The above table and diagram shows the relationship between the gross

profit and net sales in percentage. GP ratio is 12.18 for the year 2004-05 and

shows increasing trend up to year 2010-11. As GP ratio increases it shows that

firms cost of production is going down.

ii) NET PROFIT RATIO:

Net profit ratio establishes a relationship between net profit (after taxes)

and sales. It is determined by dividing the net income after tax to the net sales

for the period and measures the profit per rupee of sales.

Net profit

Net profit sales = ----------------- x 100

Net sales

TABLE-14

NET PROFIT RATIO:

Year Net Profit Net Sales Net profit ratio

2004-05 153.35 2,674.99 5.73

2005-06 154.23 2,716.20 5.67

2006-07 312.28 3,806.81 8.20


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2007-08 422.39 4,152.30 10.17

2008-09 420.62 4,943.25 8.50

2009-10 844.8 5,611.27 15.05

2010-11 1,003.43 6,967.65 14.40

CHART-14

NET PROFIT RATIO:

Inference:

The above table and diagram shows the relation ship between net profit

and net sales during 2005-06 it was 5.67% on sales and in 2006-07 it was 8.20,

which increased to 10.17 in the year 2007-08. In the year 2010-11 the net profit

margin was 14.40.


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iii) EXPENSES RATIO:

This ratio establishes the relationship between various indirect expenses

to net sales.

A) ADMINISTRATIVEEXPENSESRATIO:

Administrative expenses

Administrative expenses ratio = ------------------------------- x 100

Sales

b) SELLING &DISTRIBUTIONEXPENSESRATIO:

Selling &distribution expenses

Selling &distribution expenses ratio = ----------------------------------------- x 100

Sales

Administration expenses + selling expenses

Expenses ratio = _______________________________________ x 100

Sales

TABLE-15

EXPENSES RATIO:

YearSelling and

administrative expenseNet Sales Expense ratio

2004-05 53.11 2,674.99 1.99


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2005-06 83.83 2,716.20 3.09

2006-07 132.34 3,806.81 3.48

2007-08 129.94 4,152.30 3.13

2008-09 238.29 4,943.25 4.82

2009-10 376.21 5,611.27 6.70

2010-11 596.59 6,967.65 8.56

CHART-15

EXPENSES RATIO:


The above table and diagram shows the relation ship between the

administration and selling expenses and sales. It can be observed that the

expense increases year on year and in the year 2010-11 it has reached to 8.56


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CHAPTER -5

FINDINGS

1) In all the year current ratio is above 2 :1. This shows companys

liquidity position is good and has enough current assets to meet its

current liability. We can say there is the safety of funds of short-term

creditors.

2) The company liquidity position is more than 1:1 for the period under study.We

can say that company has enough quick asset to meet current

liabilities.

3) In the year 2009-10 and 2010-11, debt equity ratio shows decreasing

trend. It is good sign for the firm as outsiders fund decreased

compared to share capital.

4) The shows down ward trend up to the year 2008-09. We can say that

proprietors contribution to total asset is on an average between 20 to 30%.

5) The Fixed asset turnover shows decreasing trend. It is 0.35 in the year 2010-

11. With the passage of time, investment in assets has increased, in proportion to

which sales has not increased. This means that company is not using fixed asset

efficiently to generate sales.

6) Debtors turnover ratio is high in the year 2010-11 which shows firm is able

to collect debtor in short time.


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7) The working capital turnover ratio is 4.49 which shows decreasing trend up

to 2007-08. In the year 2008-09 it has jumped to 5.19 which shows firm has

utilized its working capital very efficiently to generate sales.

8) The total asset turnover ratio show decreasing trend from the year 2004-05 to

2010-11. This shows Firms total asset is not utilized efficiently to generate sales.

9) Return on total asset ratio is 7.48 in the year2004-05. Again it decrease to

5.27 and then increases to7.00 We can say that profitability from total asset is quite

low.

10) The Gross Profit ratio is 12.18 for the year 2004-05 and shows increasing

trend up to year 2010-11. As Gross Profit ratio increases it shows that firms cost

of production is going down.

11) The relationship between the administration and selling expenses to sales is

observed that the expense increases year on year and in the year 2010-11 it has

reached to 8.56


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CHAPTER -6

SUGGESTIONS

Companys debt equity ratio was initially high and then shows decreasing

trend. We can suggest that company has to maintain debt equity ratio so

that it should not have more burden of interest payment. And try to

reduce it further.

Fixed asset of the company has increased and even though they are not

utilizing the enhanced technology to increase sales. So the management

should take initiative steps for the proper utilization of the resources.

The liquidity position of the company is quite satisfactory. And this must

be improved further for the purpose of proper utilization of the liquid

assets of the company.

The sales of the organization can be further increased by improving the

quality through optimum utilization of company's resources (i.e. assets,

raw materials, credit system, etc.) and that in turn will increase the overall

profits of the organization.


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The Management must find out the reasons for the not much increase in

sales and must take appropriate measures.

The Management must also study the market position and it also find the

demand prevailing in the market for the products and thus this will guide

them to enhance their sales volume.


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CHAPTER -7

BIBLIOGRAPHY

Annual Reports OfBHUSHAN STEEL LTD

T.S Reddy and Y. Hariprasad Reddy, Financial management, New Delhi:

Tata Mc Graw hill Publishing company Ltd.

M.A Sahaf Management and Accounting 4th Edition, Tata McGraw Hill

Publishing Company Ltd.

IM .Pandey, Financial Management 8th Edition, Vikas Publishing house Pvt

Ltd.

R.K. Sharma & S.K. Gupta, Financial Management

R.P. Rustagi, Financial Management

Website:

www.bhushan-group.org

www.indianinfoline.com
http://www.indianinfoline.com/http://www.indianinfoline.com/


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ratio analysis and comparative study at bhushan steel1

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