Professional Documents
Culture Documents
Chapter – 1
INTRODUCTION
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Introduction
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1. Nature of work
2. Working conditions
3. Employment
5. Job outlook
6. Earnings
7. Related occupations
1. Nature of work
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2. Working conditions
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3. Employment
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5. Job outlook
6. Earnings
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Rupees in Crores
Treasurer 301,200
Controller/comptroller 268,600
Director 227,200
Manager 167,000
Large organizations often pay more than small ones, and salary
levels also can depend on the type of industry and location. Many financial
managers in both public and private industry receive additional
compensation in the form of bonuses, which also vary substantially by size
of firm. Deferred compensation in the form of stock options is becoming
more common, especially for senior level executives.
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7. Related occupations
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OBJECTIVES
OBJECTIVES
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METHODOLOGY
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LIMITATIONS
2. The below mentioned are the constraints under which the study
is carried out.
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INDUSTRY PROFILE
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POWER SCENARIO
HYDEL POWER
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They are
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300MW at “low heads and low Discharge” points. Particular drops and
irrigation systems.
1. They do not require larger capital investment and their gestation period is
only 12 to 18 months.
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THERMAL POWER:
HIGHLIGHTS:
1. Two part system for thermal tariffs and single tariff for hydel projects.
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Chapter – 2
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RATIO ANALYSIS
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RATIO ANALYSIS
FINANCIAL ANALYSIS
• Trade creditors, to identify the firm’s ability to meet their claims i.e.
liquidity position of the company.
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RATIO ANALYSIS
• Percentages
• Fractions
• Proportion of numbers
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• To compare the calculated ratios with the ratios of the same firm
relating to the pas6t or with the industry ratios. It facilitates in
assessing success or failure of the firm.
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• Comparison of the calculated ratios with the ratios of the same firm in
the past, or the ratios developed from projected financial statements or
the ratios of some other firms or the comparison with ratios of the
industry to which the firm belongs.
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• Group of ratios
• Historical comparison
• Projected ratios
• Inter-firm comparison
The calculation of ratios may not be a difficult task but their use
is not easy. Following guidelines or factors may be kept in mind while
interpreting various ratios are
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• Selection of ratios
• Use of standards
• Evaluation of efficiency
• Effective tool
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• Differences in definitions
• Limited use
• Personal bias
CLASSIFICATIONS OF RATIOS
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1. Traditional Classification
2. Functional Classification
1. Traditional Classification
• Balance sheet (or) position statement ratio: They deal with the
relationship between two balance sheet items, e.g. the ratio of current
assets to current liabilities etc., both the items must, however, pertain
to the same balance sheet.
• Profit & loss account (or) revenue statement ratios: These ratios deal
with the relationship between two profit & loss account items, e.g. the
ratio of gross profit to sales etc.,
• Composite (or) inter statement ratios: These ratios exhibit the relation
between a profit & loss account or income statement item and a
balance sheet items, e.g. stock turnover ratio, or the ratio of total
assets to sales.
2. Functional Classification
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3. Significance ratios
Some ratios are important than others and the firm may classify
them as primary and secondary ratios. The primary ratio is one, which is of
the prime importance to a concern. The other ratios that support the primary
ratio are called secondary ratios.
1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
1. LIQUIDITY RATIOS
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short term nature. The sufficiency (or) insufficiency of current assets should
be assessed by comparing them with short-term current liabilities. If current
assets can pay off current liabilities, then liquidity position will be
satisfactory.
• Current ratio
current assets and current liabilities. This ratio also known as Working
It measures the liquidity position of the firm with its future events. Main
purpose of this ratio is to know the has the power to meet its current
liabilities .
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Current assets
Current ratio =
Current liabilities
Quick ratio is a test of liquidity than the current ratio. The term
liquidity refers to the ability of a firm to pay its short-term obligations as &
when they become due. Quick ratio may be defined as the relationship
liquid if it is converted into cash with in a short period without loss of value.
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more liquid than inventories, yet there may be doubts regarding their
should also be calculated together with current ratio and quick ratio so as to
exclude even receivables from the current assets and find out the absolute
liquid assets.
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forms for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid
assets are considered to pay Rs.2 worth current liabilities in time as all the
creditors are nor accepted to demand cash at the same time and then cash
2. LEVERAGE RATIOS
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to meet its long term obligations. Accordingly, long term solvency ratios
indicate firm’s ability to meet the fixed interest and costs and repayment
• Proprietary ratio
Shareholders’ funds
Proprietary ratio =
Total assets
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Bills receivable
Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid Expenses
3. ACTIVITY RATIOS
and earn profits. The efficiency with which assets are managed directly
effect the volume of sales. Activity ratios measure the efficiency (or)
effectiveness with which a firm manages its resources (or) assets. These
ratios are also called “Turn over ratios” because they indicate the speed with
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This indicates the no. of times the working capital is turned over in the
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measures the efficiency and profit earning capacity of the firm. Higher the
ratio, greater is the intensive utilization of fixed assets. Lower ratio means
Cost of Sales
Fixed assets turnover ratio =
Net fixed assets
are judged by comparing the cost of sales or sales with amount of capital
invested in the business and not with assets held in the business, though in
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both cases the same result is expected. Capital invested in the business may
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ratio means that trading is slack or mechanization has been used. A decline
in the ratio means that debtors and stocks are increased too much or fixed
assets are more intensively used. If current assets increase with the
Current Assets
Current Assets to Fixed Assets Ratio =
Fixed Assets
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4. PROFITABILITY RATIOS
profits. Because profit is the engine, that drives the business enterprise.
• Return on investments
(after tax) and sales and indicates the efficiency of the management in
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Net Profit after Tax = Net Profit (–) Depreciation (–) Interest (–) Income Tax
conditions such as price competitors, low demand etc. Obviously higher the
net profit and assets. This ratio is also known as profit-to-assets ratio. It
known.
Net profit
Return on assets =
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Total assets
and increased ploughing back to profit. Higher the ratio better will be the
position.
Reserves& surplus
Reserves & surplus to capital =
Capital
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is calculated by dividing the net profits earned by the company and those
profits after taxes and preference dividend by total no. of equity shares.
goods sold and other operating expenses on the one hand and the sales on
the other.
Operating cost
Operation ratio =
Net sales
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Operating profit
Operating profit ratio =
Sales
Price earning ratio is the ratio between market price per equity
share and earnings per share. The ratio is calculated to make an estimate of
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price earning ratio falls, the management should look into the causes that
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the relationship between net profit (after interest and tax) and the
proprietor’s funds.
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Chapter – 3
DATA ANALYSIS
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LIQUIDITY RATIO
1. CURRENT RATIO
(Amount in Rs.)
Current Ratio
Interpretation
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for tax, because the debtors are raised and for that the provision is created.
corporate taxes.
In the year 2006, the cash and bank balance is reduced because
that is used for payment of dividends. In the year 2007, the loans and
government. The loans and advances reduced because the employees set off
their claims. The other current assets include the interest attained from the
ratio, which is above the benchmark level of 2:1 which shows the
GRAPHICAL REPRESENTATION
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CURRENT RATIO
8.00 7.41
7.00
6.00
4.48
5.00 3.82
Ratio 4.00
2.19 1.94
3.00 Ratio
2.00
1.00
0.00
2003 2004 2005 2006 2007
Years
2. QUICK RATIO
(Amount in Rs.)
Quick Ratio
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Interpretation
Quick assets are those assets which can be converted into cash
with in a short period of time, say to six months. So, here the sundry debtors
which are with the long period does not include in the quick assets.
sundry debtors are increased due to the increase in the corporate tax and for
that the provision created is also increased. So, the ratio is also increased
GRAPHICAL REPRESENTATION
QUICK RATIO
8.00 7.41
7.00
6.00
5.00 4.35 3.81
Ratio 4.00
3.00 Ratios
1.90
1.65
2.00
1.00
0.00
2003 2004 2005 2006 2007
Years
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(Amount in Rs.)
Interpretation
The current assets which are ready in the form of cash are
considered as absolute liquid assets. Here, the cash and bank balance and the
In the year 2006, the cash and bank balance is decreased due to
decrease in the deposits and the current liabilities are also reduced because
year’s ratio.
GRAPHICAL REPRESENTATION
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LEVERAGE RATIOS
4. PROPRIETORY RATIO
(Amount in Rs.)
Proprietory Ratio
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Interpretation
the firm. This ratio indicates the extent to which the assets of the company
holder’s funds include capital and reserves and surplus. The reserves and
surplus is increased due to the increase in balance in profit and loss account,
Total assets, includes fixed and current assets. The fixed assets
are reduced because of the depreciation and there are no major increments in
the fixed assets. The current assets are increased compared with the year
2006. Total assets are also increased than precious year, which resulted an
GRAPHICAL REPRESENTATION
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PROPRIETORY RATIO
0.90 0.86
0.79 0.75
0.80
0.70 0.60
0.53
0.60
0.50
Ratios
0.40
Ratios
0.30
0.20
0.10
0.00
2003 2004 2005 2006 2007
Years
• ACTIVITY RATIOS
Interpretation
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invoice for Operations & Maintenance fee and the working capital is also
increased greater due to the increase in from services because the huge
The income from services is raised and the current assets are
also raised together resulted in the decrease of the ratio of 2007 compared
with 2006.
GRAPHICAL REPRESENTATION
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(Amount in Rs.)
Interpretation
Fixed assets are used in the business for producing the goods to
be sold. This ratio shows the firm’s ability in generating sales from all
financial resources committed to total assets. The ratio indicates the account
year due to the increase in the Operations & Maintenance fee due to the
increase in extra invoice and the net fixed assets are reduced because of the
GRAPHICAL REPRSENTATION
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1.00
0.00
2003 2004 2005 2006 2007
Years
(Amount in Rs.)
Interpretation
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with the previous year and the total capital employed includes capital and
reserves & surplus. Due to huge increase in the net profit the capital
employed is also increased along with income from services. Both are
GRAPHICAL REPRESENTATION
1.04
1.04
1.03
1.02 1.01
1.01
1.00
1.00
0.98
Ratios 0.99 0.98
0.98 Ratios
0.97
0.96
0.95
0.94
2003 2004 2005 2006 2007
Years
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(Amount in Rs.)
Interpretation
debtors and the net fixed assets of the firm are decreased due to the charge
GRAPHICAL REPRESENTATION
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9.00 8.17
8.00
7.00 6.07
6.00
5.00 4.20
Ratios 3.74
4.00 2.93
Ratios
3.00
2.00
1.00
0.00
2003 2004 2005 2006 2007
Years
PROFITABILITY RATIOS
Interpretation
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The net profit ratio is the overall measure of the firm’s ability to
turn each rupee of income from services in net profit. If the net margin is
inadequate the firm will fail to achieve return on shareholder’s funds. High
net profit ratio will help the firm service in the fall of income from services,
GRAPHICAL REPRESENTATION
0.50 0.42
0.40 0.33
0.30
Ratios 0.30 0.23
Ratios
0.20
0.10
0.00
2003 2004 2005 2006 2007
Years
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(Amount in Rs.)
Operating Profit
Interpretation
between net profits and sales of a firm. Depending on the concept, it will
decide.
year. The earnings are increased due to the increase in the income from
services because of Operations & Maintenance fee. So, the ratio is increased
GRAPHICAL REPRESENTATION
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(Amount in Rs.)
Return on Total Assets Ratio
Interpretation
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This is the ratio between net profit and total assets. The ratio
indicates the return on total assets in the form of profits.The net profit is
increased in the current year because of the increment in the income from
services due to the increase in Operations & Maintenance fee. The fixed
assets are reduced due to the charge of depreciation and no major increments
in fixed assets but the current assets are increased because of sundry debtors
and that affects an increase in the ratio compared with the last year i.e. 2006.
GRAPHICAL REPRESENTATION
0.35
0.31
0.30 0.27
0.25
0.18 0.19
0.20 0.17
Ratios
0.15 Ratios
0.10
0.05
0.00
2003 2004 2005 2006 2007
Years
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(Amount in Rs.)
Interpretation
The reserves & surplus is decreased in the year 2006, due to the
payment of dividends and in the year 2007 the profit is increased. But the
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GRAPHICAL REPRESENTATION
35.00 31.54
30.00
25.00
20.00
Ratios
15.00
Ratios
10.00
2.75 4.19
1.85 2.02
5.00
-
2003 2004 2005 2006 2007
Years
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(Amount in Rs.)
Interpretation
Earnings per share ratio are used to find out the return that the
shareholder’s earn from their shares. After charging depreciation and after
shareholders.
Net profit after tax is increased due to the huge increase in the
shareholders to take.
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constant from the year 2004. Due to the huge increase in net profit the
GRAPHICAL REPRESENTATION
120.00
101.56
100.00
80.00
R atios 60.00
Ratios
40.00 21.68
8.61 9.75
20.00 9.04
0.00
2003 2004 2005 2006 2007
Years
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(Amount in Rs.)
Interpretation
the reserves & surplus. The earnings per share are also increased greaterly
compared with the last year because of increase in the net profit. So, the
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GRAPHICAL REPRESENTATION
P/E RATIO
4.50 4.15
4.00
3.30
3.50 3.09
3.00 2.39
2.50
Ratios
2.00
Ratios
1.50
1.00
0.32
0.50
0.00
2003 2004 2005 2006 2007
Years
(Amount in Rs.)
Return on Investment
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Interpretation
This is the ratio between net profits and shareholders funds. The
from services ant the shareholders funds are increased because of reserve &
GRAPHICAL REPRESENTATION
0.45 0.42
0.40
0.31 0.32
0.35 0.30
0.30 0.24
0.25
Ratios
0.20
RatioS
0.15
0.10
0.05
0.00
2003 2004 2005 2006 2007
Years
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Chapter – 4
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SUMMARY
2) The company profits are huge in the current year; it is better to declare
the dividend to shareholders.
3) The company is utilising the fixed assets, which majorly help to the
growth of the organisation. The company should maintain that
perfectly.
4) The company fixed deposits are raised from the inception, it gives the
other income i.e., Interest on fixed deposits.
CONCLUSION
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BIBLIOGRAPHY
REFFERED BOOKS
INTERNET SITE
• www.ercap.org
• www.wikipedia.com
• www.nwda.gov.in
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• APPENDIX
(Amount in Rs.)
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Profit and Loss Account for the period ended on 31st March 2007
(Amount in Rs.)
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