Project

(A Government of India enterprise)
SUMMER INTERNSHIP REPORT ON RATIO ANALYSIS WITH RESPECT TO N.H.P.C
PG DIPLOMA IN MANAGEMENT
Submitted in partial fulfillment of the requirement for the Award of the degree of SUBMITTED BY: Nishant Kapoor PGDM - GENERAL Roll No.:M2011080
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APEEJAY INSTITUTE OF TECHNOLOGY, GREATER NOIDA
DECLARATION
I Nishant Kapoor student of Apeejay Institute of Technology, Gr. Noida certify that Project work on FINANCIAL ANALYSIS WITH RESPECT TO NHPC PARBATI HYDRO ELECTRIC PROJECT STAGE -2 NAGWAIN Distt. MANDI State HIMACHAL PRADESH is my original piece of work for the award of degree of PGDM.I have completed the project under the guidance of Mr.Vishal(Accounts officer) in NHPC, PARBATI HYDRO ELECTRIC PROJECT STAGE-2.
Nishant Kapoor
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SUPERVISOR CERTIFICATE
This is to certify that the project work done on FINANCIAL ANALYSIS WITH RESPECT TO NHPC HYDROELECTRIC PROJECT STAGE -2 NAGWAIN Submitted to Apeejay School of Management, Gr. Noida by Nishant Kapoor in partial fulfillment of the requirement for the award of PG Diploma in Business Management, is a bonafide work carried out by him under my supervision and guidance. This work has not been submitted anywhere else for any other degree/diploma. The original work was carried out during May 1st 2012 to June 30th 2012 in NHPC, PARBATI PROJECT STAGE-2 NAGWAIN.
Date: Place: Mrs. Deepti Sinha (SUPERVISOR) AIT-School of Management Gr. Noida (U.P)
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DIRECTOR CERTIFICATE
This is to certify that the project work done on FINANCIAL ANALYSIS WITH RESPECT TO NHPC HYDROELECTRIC PROJECT STAGE -2 NAGWAIN, Submitted to Apeejay School of Management, Gr. Noida by Nishant Kapoor in partial fulfillment of the requirement for the award of PG Diploma in Business Management under the supervision of Mrs. Deepti Sinha, is a bonafide work carried out by him. This work has not been submitted anywhere else for any other degree/diploma. The original work was carried out from May 1st 2012 to June 30th 2012 in NHPC, PARBATI PROJECT STAGE-2 NAGWAIN.
Date: Place:
Prof. D.N BAJPAI DIRECTOR AIT-School of Management
Gr. Noida
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ACKNOWLEDGEMENT
I would like to express my sincere thanks to the management of NHPC who gave me the opportunity to work and study in such an esteemed organization. I express my thanks to MR. K L Acharyulu (Senior Manager) under whose constant guidance I completed my project. I thank to my parents who have supported me in building my career. I also express my gratitude to Mrs. Deepti Sinha (Faculty Guide). Last but not the least, I would like to thank all who supported me in this study by way of sparing their precious time, providing relevant information and sharing experience, I needed, without which the project would have been incomplete.
Greater Noida
Nishant Kapoor
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PREFACE
Finance is the life blood and nerve centre of business just as circulation of blood is essential for maintaining human life: without adequate finance a business cant run smoothly. Application of Management of Principles in all branches whether Production, Personnel, Finance, Marketing etc results in more efficient and effective utilization of available resources. Now days the theory without practice is of little use. No doubt, theory provides the fundamental stone for the Guidance of practice. Therefore a strong cooperation of theory and practice is very essential to make a management student perfect. As the project title FINANCIAL ANALYSIS WITH RESPECT TO NHPC PARBATI HYDROELECTRIC PROJECT STAGE-2 NAGWAIN suggests that project report is all about knowing what is Store management and its efficiency, its importance and its uses. The project report also includes the type of financing NHPC has used recently in appraising its new project of 800MW generation at Prbati river at PARBATI PROJECT STAGE-2.The confidence of an individual is boosted as one successfully completes the responsibilities shouldered on him. The theoretical concepts only help us to gain Knowledge. However an administrative skill, the pre-requirement for the completion of a success story comes with experience. The ON THE JOB practical training is a stepping stone towards the success story. A mere tenure of One and Half months in the industrial training world gives you a birds view of the internal happening of the vast and complex world. It was a privilege to undergo practical training in NHPC Limited (Formerly known as National Hydro Electric Power Corporation Ltd.) which allowed me to see the most recent management tools, techniques and methods being put in to practice. NHPC has given me so much in this short duration that I feel confident and capable of taking up challenge in this industrial world and make a success story of my career. Out of different offices located in different states of India, I worked in Himachal Pradesh at NAGWAINn (Mandi) i.e. Parbati Hydro Electric Project Stage-II.The present training report deals with the work done during training period of 2 months in Finance department. It is outcome of observation, discussions, practical work and some of the assignments given to me
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TABLE OF CONTENT
CONTENTS 1. Company Profile
Hydro scenario in India Overview of Organization Vision of the Organization Objectives of the Organization Mission of the Organization Core Value Capital structure of NHPC Joint venture and Projects of NHPC Corporate plan of NHPC NHPC Power station location map Sales and Profit statement H R Policies
Page No.
9-34 11-13 14-16 17 17 18 19 20 21-25 26 27 29-33 34 35-42 43-50 47 48-50 51-52 53-57 56 57 58-124 61 61
2. Power Sector in India 3. Introduction about PHEP Stage-II

Location map of PHEP stage-II Profile
4. Objective of the Study 5. Research Methodology

Page 7 of 142 SWOT Analysis Financial Analysis
6. Ratio Analysis
Nature of Ratio Analysis Interpretation
Guidelines and Importance Advantages and Limitations Balance sheet and P&L account of NHPC Data table Table of Ratio Classification of Ratio with Calculations Liquidity Ratio Activity Ratio Profitability Ratio Solvency Ratio
62 63 64-75 76 77-78 79-124
7. Trend Analysis of Ratios 8. Suggestions and Recommendations based on Findings 9. Conclusion 10. Reference and Bibliography
125-131 132-135 136-137 138-140
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COMPANY PROFILE
NHPC LTD. (INDIA)
NATIONAL HYDRO POWER CORPORATION LIMITED (INDIA)
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THE COMPANY
NHPC Limited
Type Industry Founded
Public company(BSE: 533098,NSE: NHPC) Electric utility 1975
Headquarters Faridabad, India Key people Products Revenue Net income Website
A.B.L. Srivastava (Chairman & MD) Generation, Transmission and Distribution; energy $1.1 billion (2010) $485 million (2010) nhpcindia.com
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HYDRO SCENERIO IN INDIA

India is blessed with immense amount of hydro-electric potential and ranks 5th in terms of exploitable hydro-potential on global scenario. As per assessment made by CEA (Central Electricity Authority) is endowed with economically exploitable hydro-power potential to the tune of 148700 MW of installed capacity. The basin wise assessed potential is as under:-
Basin/Rivers Indus Basin Ganga Basin Central Indian River system
Probable Installed Capacity (MW) 33,832 20,711 4,152
Western Flowing Rivers of southern 9,430 India Eastern Flowing Rivers of southern India 14,511 Brahmaputra Basin Total 66,065 1,48,701
In addition, 56 number of pumped storage projects have also been identified with probable installed capacity of 94000 MW. In addition to this, hydro-potential from small, mini & micro schemes has been estimated as 6782 MW from 1512 sites. Thus, in totality India is endowed with hydro-potential of about 250000 MW. However, exploitation of hydro-potential has not been up to the desired level due to various constraints confronting the sector.
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NEED FOR A HYDRAL POLICY

The Power Sector in the country has grown manifold since independence. There is a continuous gap between the supply and demand, besides peaking shortage almost all times in a year. In spite of growth of sub-transmission and distribution sector, it could not match the investments in capacity addition. A section of our population is yet to see the electricity in their homes. In the monopolistic set up with state control customer satisfaction is neglected and realization of revenue is not given due importance. There is a need to focus on commercial approach in the power sector to encourage investments in this vital infrastructure addition. Hydro power is a renewable, economic, non-polluting and environmentally friendly source of energy. Hydro power stations have inherent ability for instantaneous starting, stopping, load variations etc. and help in improving reliability of power System. Hydro stations are the best choice for meeting the peak demand. The Generation cost is not only inflation free but reduces with time. Hydroelectric projects have long useful life extending over 50 years and help in conserving scarce fossil fuels. They also help in opening of avenues for development of remote and backward areas. Our country is endowed with enormous economically exploitable and viable hydro potential assessed to be about 84,000 MW at 60% load factor (1,48,700 MW installed capacity). In addition, 6781.81 MW in terms of installed capacity from small, mini and micro hydel schemes have been assessed. Also, 56 sites for pumped storage schemes with an aggregate installed capacity of 94,000 MW have been identified. However, only 15% of the hydroelectric potential has been harnessed so far and 7% is under various stages of development. Thus,78% of the potential remains without any plan for exploitation. Despite hydroelectric projects being recognised as the most economic and preferred source of electricity, share of hydro power has been declining steadily since 1963. The share of hydro power has been continuously declining during the last three decades. The hydro share has declined from 44 per cent in 1970 to 25 per cent in 1998. The ideal hydro thermal mix should be in the ratio of 40:60. Because of an imbalance in the hydel thermal mix especially in the Eastern and Western regions, many thermal power stations are required to back down during off peak hours. The capacity of the thermal plants cannot be fully utilised resulting in a loss of about 4 to 5 per cent in the plant load factor. Even if the share of hydro power is to be maintained at the existing level of 25 per cent, the capacity addition during the 9th and 10th Plan would work out to 23,000 MW. If the share were to be enhanced to 30 per cent, it would require a further addition of 10,000 MW of hydro capacity.
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The constraints which have affected hydro development are technical (difficult Investigation, inadequacies in tunnelling methods), financial (deficiencies in providing long term financing), tariff related issues and managerial weaknesses (poor contract management). The hydro projects are also affected by geological surprises (especially in the Himalayan region where underground tunnelling is required), inaccessibility of the area, problems due to delay in land acquisition, and resettlement of project affected families, law & order problem in militant infested areas.
Advantages of Hydro Power

A renewable source of energy - saves scarce fuel reserves. Non-polluting and hence environment friendly. Long life - The first hydro project completed in 1897 is still in operation at Darjeeling is still in operation. Cost of generation, operation and maintenance is lower than the other sources of energy. Ability to start and stop quickly and instantaneous load acceptance/rejection makes it suitable to meet peak demand and for enhancing system reliability and stability. Has higher efficiency (over 90%) compared to thermal (35%) and gas (around 50%). Cost of generation is free from inflationary effects after the initial installation. Storage based hydro schemes often provide attendant benefits of irrigation, flood control, drinking water supply, navigation, recreation, tourism, pisciculture etc. Being located in remote regions leads to development of interior backward areas (education, medical, road communication, telecommunication etc.)
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OVERVIEW OF ORGANIZATION
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INTRODUCTION TO NHPC
NHPC has become the largest organization for hydropower development in India, with capabilities to undertake all the activities from conceptualization to commissioning in relation to setting up of hydro projects. Its capability includes complete spectrum of Hydro Power concept to commissioning. Besides providing consultation services in field of hydro-power, NHPC is also planning to take up Wind and Tidal power projects in the country.
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INTRODUCTION
National Hydroelectric Power Corporation (NHPC) was established in 1975. NHPC is a schedule A Enterprise of the Government of India. With an authorized capital of Rs 15000 Crore and an investment base of about Rs 25400 Crores, NHPC is ranked as a premier organization in the country for development of Hydropower. Accredited with ISO-9001:2000 & ISO 14001:2004 certificates for its quality system and environment concerns, NHPC is a multidisciplinary organization and has acquired sufficient expertise and state-of-the-art technology for investigation , planning, designing, and executing both small and large size hydro power projects. It has the strength of highly qualified and experienced professionals in design and engineering, geo-technical engineering, construction planning and construction management for building hydroelectric projects. The technical and engineering proficiency and experience of NHPC places it in a leading position in the field of hydropower development in India and neighboring countries.
The Saga of NHPC is replete with many challenges. To begin with NHPC took over three most difficult and almost abandoned projects in geological weak Himalayan Ranges. These Projects were the 180 MW Baira Siul in Himachal Pradesh, 105 MW Loktak Project in Manipur and the 345 MW Salal stage-I in Jammu & Kashmir. The successful commissioning of these projects in most difficult areas and their operation is a testimony to NHPCs success. With the commissioning of 180 MW Baira Siul project in 1981, NHPC started earning profit since 1982, the first year turnover was Rs 24 Crores and its Net Profit was Rs 8 Crores. Since then the net profit of the corporation increases year after year. Net profit of the corporation was Rs 2090.50 Crores during the year 2009-10 as against 2166.67 Crores during 2010-11. NHPC is planning to take projects in neighboring countries like Nepal and Bhutan. NHPC has been conferred MINI RATNA status by the Govt. of India.
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CORPORATE VISION
A world class organization , diversified & transnational sustainable for development of Hydro power and water resources with strong environment conscience.
CORPORATE OBJECTIVES
Development of vast hydro potential at faster pace and optimum cost elimination, time and cost over-run.
Completion of all ongoing projects within stipulated time frame. Ensure maximum utilization of installed capacity and help in better system stability. Generation of sufficient internal resources for expansion and setting up new projects. Corporate development along with simultaneous human resource development.
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CORPORATE MISSION
To achieve international standards of excellence in all aspects of hydro power and

diversified business
To execute and operate projects in a cost effective, environment friendly and socioeconomically responsive manner
To foster competent trained and multi-disciplinary human capital To continually develop state-of-the-art technologies thru innovative R&D and adopt
best practices
To adopt the best practices of corporate governance and institutionalize value based
management for a strong corporate identity.
To maximize creation of wealth through generation of internal funds and effective

management of resources.
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CORE VALUE
Business Ethics Customer Focus Organizational & professional Pride Mutual Respect and Trust Innovation and Speed Total Quality for Excellence
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CAPITAL STRUCTURE: FINANCIAL PROFILE

Authorized Capital Value of Assets Paid Up Capital Projects Completed Projects Under Construction Projects Awaiting Clearances Projects Under Survey and Investigation Stage Joint Venture Projects Projects on Turnkey Basis Rs. 1,50,000 Million Rs. 3,87,180 Million Approx. Rs. 123,010 Million 31.03.2010 14 Nos. (5295 MW) 10 Nos. (4502 MW) 12 Nos. (9651 MW) 7 Nos. (2485 MW) 7 Nos. (5206 MW) 5 Nos. (89.35 MW)
In 2010-2011
Energy Generated Capacity Index Sales Turnover Net Profit Performance Rating 18606 MU 85.2% 4046.59 crore 2166.67 crore "Very Good"
In 2009-2010
Energy Generated Capacity Index Sales Turnover Net Profit Performance Rating 16960.45 MU 84.1% 42189.0 Million 20905.0 Million "Very Good"
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JOINT VENTURE OPERATIONS

S No. 1. 2. 3. 4. 5. 6. 7. Project State Capacity Total Status Capacity 66 1000 520 1000 600 520 66 5206 Awaiting clearances Commissioned Commissioned Awaiting clearances Awaiting clearances Awaiting clearances Awaiting clearances
Loktak Manipur 2 * 33 Downstream Indira Sagar Madhya 8 * 125 Pradesh
Omkareshw Madhya 8 * 65 ar Pradesh Pakal dul Kiru Kawar J&K J&k J&k 4*250 4*150 4*130
Loktak Manipur 2*33 downstream Total
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PROJECTS ABROAD
1. Successfully commissioned Devighat H.E Project (14.1 MW) in Nepal in 1984 on turnkey basis in a record time of three and half years.
2. Successfully commissioned The Nuwakot Rural Electrification Project in Nepal covering 64 villages along with sub-station and connecting lines one year ahead of schedule.
3. Commissioned Kurichu HE Project (60 MW) , and Nganglam Tintibi Gelephu Single Circuit 132 KV Transmission Line on Turnkey basis for Kurichu Project Authority, Government of Bhutan, ahead of schedule
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PROJECTS UNDER CONSTRUCTION

UPDATED ON 27/07/2010
S Project No. 1 2 3 4 5 6 7 8 9 10 Parbati - II Sewa - II Subansiri (Lower) Uri-II Chamera-III Teesta Low Dam - III
States H.P. J&K Assam J&K H.P. West Bangal
Total Installed Capacity Capacity(MW) (MW) 4 * 200 3 * 40 8 * 250 4 * 60 3 * 77 4 * 33 3 * 110 4 * 40 4 * 130 3 * 15 4 * 11 Total 800 120 2000 240 231 132 330 160 520 45 44 4622
Kishenganga J & K Teesta Low West Dam - IV Bangal Parbati - III NimmoBazgo H.P. J&K J&K
11 Chutak
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PROJECTS AWATING CLEARENCE AND INVESTIGATION

S No. Project
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Vyasi Dibang Kotli Bhel Stage - I B Kotli Bhel Stage - II Pakal Dul Kotli Bhel Stage - I A Teesta - IV Loktak Downstream* Kishenganga Bursar Karmoli Lumti Tulli Garba Tawaghat Chungar Chal Lachen Tawang-I Subansiri (Middle) Goriganga-IIIA Dhauliganga Intermediate Tawang-II Subansiri (Upper)
Country/State Capacity
Uttarakhand Arunachal Pradesh Uttarakhand Uttarakhand Jammu & Kashmir Uttarakhand Sikkim Manipur Jammu & Kashmir Jammu & Kashmir Uttarakhand Uttarakhand Uttarakhand Sikkim Arunachal Pradesh Arunachal Pradesh Uttarakhand Uttarakhand Arunachal Pradesh Arunachal Pradesh 2 * 60 12 * 250 4 * 80 8 * 66.25 4 * 250 3 * 65 4 * 130 2 * 33 3 * 110 4 * 255 2 * 27.5 3 * 210 2 * 120 3 * 70 3 * 250 8 * 200 3 * 40 3 * 70 3 * 250 8 * 250 Total
Total Status Capacity

120 3000 320 530 1000 195 520 66 330 1020 55 630 240 210 750 1600 120 210 750 2000 13666 Awaiting clearances Awaiting clearances Awaiting clearances Awating clearances Awaiting clearances Awaiting clearances Awaiting clearances Awaiting clearances Under Construction Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage Under Survey and Investigation Stage
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POWER STATIONS
S Project No. 1 2 3 4 5 6 7 8 9 Baira Siul Loktak Salal Tanakpur Chamera - I Uri - I Rangit Chamera - II
State
Installed Total Year Of Capacity(MW) Capacity Commission (MW) 3 * 60 3 * 35 6 * 115 3 * 180 4 * 120 3 * 20 3 * 100 8 * 125 180 105 690 120 540 480 60 300 1000 280 390 520 510 5175 1981 1983 1987 1992 1994 1997 1999 2003 2004-05 2005-06 2006-07 2007 2008
H.P. Manipur J&K H.P. J&K Sikkim H.P.
Uttarakhand 3 * 40
Indira Sagar* M.P.
10 Dhauliganga - Uttarakhand 4 * 70 I 11 Dulhasti 13 Teesta - V J&K Sikkim 3 * 130 8 * 65 3 * 170 Total 12 Omkareshwar M.P.
* NHDC - A Joint venture between NHPC & Govt. of Madhya Pradesh

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FINANCIAL PERFORMANCE
NHPC started generated power in 1982 with a turnover of Rs.24 crore and made a net profit of Rs.7.68 crore in the first year. Since then the financial performance of NHPC has shown a north trend year after year. In the financial year 2010-11 the net sales turnover of the company has increased to Rs.4046.59 crore and the net profit (after tax) of the company has increased to Rs.2166.67 crore paid. The company paid a dividend of Rs.738.04 crore @ Rs.0.06 per share including Rs.637.40 crore paid to the govt. of India in the year 2010-11. The company had target to add 5322 MW of capacity in the XI five plan for which coped of Rs.21,600 crore will be required which will be met through internal resources, subordinating debt taken from govt. if India. Proceeds from IPO, borrowing etc. steps have already been taken to mobilize the required funds for timely completion of all the on-going and new projects.
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LOCATION MAP OF NHPC PROJECTS
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INFORMATION TECHNOLOGY
NHPC has created a robust, scalable und secured communication network connecting all Project locations, Corporate Office and Regional Load dispatch Centers using VSAT based satellite communication technologies. The communication network has been expanded to 36 such locations for data, voice, fax, video conferencing and internet e-mail connectivity. The Corporation is also provided consultancy services in the area of information technology to organizations like BBMB, SJVNL etc.
THE HUMAN RESOURCE DEVELOPMENT

NHPC has about 12500 employees to fulfill its business plans. The company has the largest skilled manpower in the country as far as hydro power sector is concerned. The human resources development is an important corporate function responsible for up gradation of supervisory, managerial and technical skills of employees at various levels. Employees are regularly sent for attending training programmers / seminars / workshops covering various technical and managerial topics both in India and abroad. A large number of training programmers are organized in -house to achieve constant up gradation of managerial and technical skills covering various functional area.
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SALES
The Bulk Power Consumers of NHPC Limited in North India are the power utilities belonging to the states of Haryana, Punjab, Himachal Pradesh, Uttar Pradesh, Uttarkhand, Rajasthan, Delhi and J&K and Union Territory of Chandigarh. These states are being supplied power from Baira Siul, Salal-I & II, Tanakpur, Chamera-I, Chamera-II, Uri, Dhauliganga & Dulhasti Power Stations. In the Eastern Region, Rangit and Teesta-V, Power Stations are supplying energy to the states of West Bengal, Sikkim, Bihar, Jharkhand, Gridoo and Damodar Valley Corporation. In the North-Eastern Region, Loktak Power Station is supplying energy to the states of Assam, Manipur, Meghalaya, Tripura,Nagaland,ArunachalPradeshandMizoram. Since commencing of commercial generation in 1982, the Energy sales and revenues of the corporation have grown significantly. The Energy sales from all operating projects of the Corporation during the last 25 years has risen from Rs. 228.60 Million in the year 1982-83 to Rs. 40466 Million in the year 2010-2011. Year-wise details of sales after deduction of advance against depreciation since 1982-83 are given below :-
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YEARLY SALES OF NHPC

Year
1982-1983 1983-1984 1984-1985 1985-1986 1986-1987 1987-1988 1988-1989 1989-1990 1990-1991 1991-1992 1992-1993 1993-1994 1994-1995 1995-1996 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Sale & Revenue (Million Rs.)

229 260 324 412 468 582 1435 1389 1581 1556 1552 2087 4805 5091 5344 9930 11944 10757 11799 12210 11723 12761 14500 16141 19630 23110 26718 41532 40466
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BALANCE SHEET OF NHPC LTD.

PARTICULARS Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities PARTICULARS Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) Page 31 of 142 Mar '11 12 mths 12,300.74 12,300.74 0.00 0.00 12,283.15 0.00 24,583.89 10,884.36 3,684.90 14,569.26 39,153.15 Mar '11 12 mths 22,874.92 5,774.04 17,100.88 17,142.39 5,399.50 33.71 1,908.60 2,864.14 4,806.45 2,034.61 0.00 6,841.06 0.00 3,917.09 3,413.59 7,330.68 -489.62 0.00 39,153.15 13,210.23 19.99 Mar '10 12 mths 12,300.74 12,300.74 0.00 0.00 10,972.45 0.00 23,273.19 10,953.18 2,915.04 13,868.22 37,141.41 Mar '10 12 mths 21,279.70 4,907.44 16,372.26 14,047.69 2,894.05 71.15 1,140.21 343.00 1,554.36 2,013.05 6,254.38 9,821.79 0.00 3,706.13 2,288.25 5,994.38 3,827.41 0.00 37,141.41 14,702.49 18.92 Mar '09 12 mths 11,182.49 11,182.49 0.00 0.00 6,798.13 0.00 17,980.62 8,212.38 4,021.65 12,234.03 30,214.65 Mar '09 12 mths 21,460.08 3,816.27 17,643.81 10,498.62 2,793.60 56.71 294.66 240.79 592.16 2,167.95 1,659.16 4,419.27 0.00 3,479.72 1,663.26 5,142.98 -723.71 2.33 30,214.65 15,373.26 16.08 Mar '08 12 mths 11,182.49 11,182.49 0.00 0.00 6,093.34 0.00 17,275.83 7,003.49 2,952.84 9,956.33 27,232.16 Mar '08 12 mths 20,626.52 3,262.66 17,363.86 7,408.97 3,049.22 739.63 348.06 287.37 1,375.06 1,586.11 1,553.90 4,515.07 0.00 3,165.92 1,939.38 5,105.30 -590.23 0.34 27,232.16 12,735.45 15.45 Mar '07 12 mths 11,207.04 11,207.04 0.00 0.00 5,367.05 0.00 16,574.09 4,622.79 2,909.16 7,531.95 24,106.04 Mar '07 12 mths 12,941.89 2,850.92 10,090.97 12,258.10 3,322.75 324.93 291.22 230.90 847.05 1,033.84 236.00 2,116.89 0.00 2,317.66 1,390.81 3,708.47 -1,591.58 25.80 24,106.04 14,252.82 14.80
PROFIT AND LOSS ACCOUNT

PARTICULARS Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-odd Items) Mar '11 12 mths 4,225.25 0.00 4,225.25 708.66 0.00 4,933.91 3.94 0.00 699.62 162.14 0.00 514.06 0.00 1,379.76 2,845.49 3,554.15 413.56 3,140.59 916.74 0.00 2,223.85 648.32 2,872.17 Mar '10 12 mths 4,331.98 0.00 4,331.98 567.04 0.00 4,899.02 4.28 0.00 529.84 114.78 288.50 286.41 0.00 1,223.81 3,108.17 3,675.21 463.98 3,211.23 1,033.25 1.00 2,176.98 323.72 2,500.70 Mar '09 12 mths 2,720.82 0.00 2,720.82 379.29 0.00 3,100.11 8.92 0.00 492.51 98.56 41.85 300.66 0.00 942.50 1,778.32 2,157.61 506.84 1,650.77 518.24 0.00 1,132.53 72.63 1,205.16 Mar '08 12 mths 2,570.36 0.00 2,570.36 537.22 0.00 3,107.58 6.15 0.00 316.78 82.92 259.84 466.74 -239.09 893.34 1,677.02 2,214.24 611.54 1,602.70 443.74 0.00 1,158.96 -26.47 1,132.49 Mar '07 12 mths 1,882.93 0.00 1,882.93 242.55 0.00 2,125.48 6.56 21.17 237.19 31.36 369.67 281.90 -397.70 550.15 1,332.78 1,575.33 231.75 1,343.58 290.55 0.00 1,053.03 6.84 1,059.87
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PROFIT AND LOSS ACCOUNT (cont.)

PARTICULARS Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 123,007.43 1.76 6.00 19.99 123,007.43 111,824.93 1.70 0.96 5.50 18.92 2.91 16.08 111,824.93 111,982.13 0.90 0.83 2.68 15.45 2.48 14.80 Mar '11 12 mths 703.70 2,166.67 1,375.82 0.00 738.04 119.73 Mar '10 12 mths 404.81 2,090.50 1,219.53 0.00 676.54 112.36 Mar '09 12 mths 119.99 1,075.22 933.58 0.00 325.00 55.23 Mar '08 12 mths 127.46 1,004.09 887.19 0.00 300.00 50.99 Mar '07 12 mths 134.68 924.80 543.59 0.00 278.00 45.11
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H.R.POLICY
Policy is a process of thoughts, which helps to achieve the organizational objectives within the guiding principles through performance output.
Why HR Policy?
To facilitate an organization to fulfill the laid down objectives by its Human Resources requires: Framing of HR Policies to ensure uniform code of operation of / by employees and provide a common platform with distinctive boundary for their function and to provide a framework for conductive work atmosphere.
HR POLICIES / RULE IN NHPC

NHPC has dynamic and pragmatic Personnel Policies to provide a conductive work environment to its employees. New Rules/Policies and necessary changes in the existing Rules/Policies are incorporated from time to time keeping in view the changes taking place in the economy and the emerging challenges. Some of the major Rules/Policies in NHPC are as follows:1. Recruitment Rules 2. Promotion Policies/ Rules for Executives/ Supervisors/ Workmen/ Teaching and paramedical staff. 3. Joining Time Rules 4. Pay Fixation Rules 5. Seniority Rules.
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POWER SECTOR IN INDIA
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INTRODUCTION
The electricity sector in India is predominantly controlled by Government of India's public sector undertakings (PSUs). Major PSUs involved in the generation of electricity include National Thermal Power Corporation (NTPC), National Hydroelectric Power Corporation (NHPC) and Nuclear Power Corporation of India (NPCI). Besides PSUs, several state-level corporations, such as Maharashtra State Electricity Board (MSEB), are also involved in the generation of electricity. The intra state distribution is managed by the State Electricity Boards (SEBs) and private companies. Power grid Corporation of India is responsible for the interstate transmission of electricity and the development of national grid. India is world's 6th largest energy consumer, accounting for 3.4% of global energy consumption. Due to India's economic rise, the demand for energy has grown at an average of 3.6% per annum over the past 30 years. More than 50% of India's commercial energy demand is met through the country's vast coal reserves. About 76% of the electricity consumed in India is generated by thermal power plants, 21% by hydroelectric power plants and 4% by nuclear power plants. The country has also invested heavily in recent years on renewable sources of energy such as wind energy. In July 2009, India unveiled a $19 billion plan to produce 20 GW of solar power by 2020. In March 2009, the installed power generation capacity of India stood at 147,000 MW while the per capita power consumption stood at 612 Kwh. The country's annual power production increased from about 190 billion kWh in 1986 to more than 680 billion kWh in 2006. The Indian government has set an ambitious target to add approximately 78,000 MW of installed generation capacity by 2012. The total demand for electricity in India is expected to cross 950,000 MW by 2030. Electricity losses in India during transmission and distribution are extremely high and vary between 30 to 45%. In 2004-05, electricity demand outstripped supply by 7-11%. Due to shortage of electricity, power cuts are common throughout India and this has adversely effected the country's economic growth. Theft of electricity, common in most parts of urban India, amounts to 1.5% of India's GDP. Despite an ambitious rural electrification program, some 400 million Indians still have no access to electricity. While 80 percent of Indian villages have at least an electricity line, just 44 percent of rural households have access to electricity. According to a sample of 97,882 households in 2002, electricity was the main source of lighting for 53% of rural households compared to 36% in 1993. Multi Commodity Exchange has sought permission to offer electricity future markets.
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STRATEGIES
Power Generation Strategy with focus on low cost generation, optimization of capacity utilization, controlling the input cost, optimization of fuel mix, Technology up gradation and utilization of Non Conventional energy sources Transmission Strategy with focus on development of National Grid including Interstate connections, Technology up gradation & optimization of transmission cost. Distribution strategy to achieve Distribution Reforms with focus on System up gradation , loss reduction, theft control, consumer service orientation, quality power supply commercialization, Decentralized distributed generation and supply for rural areas. Regulation Strategy aimed at protecting Consumer interests and making the sector commercially viable. Financing Strategy- to generate resources for the required growth of the power sector. Conservation Strategy- to optimize the utilization of electricity with the focus on Demand Side management, Load management and Technology advancement in order to provide energy efficient equipment / gadgets. Communication Strategy- for the political consensus, media support to enhance the general public awareness.
ENERGY POLICY IN INDIA

The energy policy of India is characterized by tradeoffs between four major drivers: 1. Rapidly growing economy, which needs dependable and reliable supply of electricity, gas, and petroleum products. 2. Increasing household incomes, with a need for affordable and adequate supply of electricity, and clean cooking fuels. 3. Limited domestic reserves of fossil fuels, and the need to import a vast fraction of the gas, crude oil, and petroleum product requirements, and recently the need to import coal as well; and 4. Indoor, urban and regional environmental impacts which are necessitating the need for the adoption of cleaner fuels and cleaner technologies.
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The major reasons for inadequate, erratic and unreliable power supply are:
Inadequate power generation capacity; Lack of optimum utilization of the existing generation capacity; Inadequate inter-regional transmission links; Inadequate and ageing sub-transmission & distribution network leading to power cuts and local failures/faults; Large scale theft and skewed tariff structure; Slow pace of rural electrification; Inefficient use of electricity by the end consumer; and Lack of grid discipline
Strengths and opportunities in the sector

Abundant coal reserves (enough to last 200 years) Vast hydroelectric potential (150,000 MW). Large pool of highly skilled technical personnel. Impressive power development in absolute terms (comparable in size to those of Germany and UK). Expertise in integrated and coordinated planning. Emergence of strong and globally comparable central utilities Wide outreach of state utilities. Enabling framework for private investors. Well laid out mechanisms for dispute resolution. Political consensus on reforms. Potentially, one of the largest power markets in the world.
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Objectives

To provide 'Power on Demand by 2012'. To make the sector commercially sound and self sustaining. To provide reliable and quality power at an economic price. To achieve environmentally sustainable power development. To promote general awareness to achieve consensus on the need for reforms.
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CURRENT SCENARIO
Recent trends in power sector
With the world population nearly doubling in the past three decades, the present surge in electricity demand, and the projected increase of the global population, the importance of available energy cannot be underestimated. India, the burning of coal accounts for approximately one half of all electricity generation, nuclear energy approximately one fourth of all electricity generation, and hydro, and gas roughly ten percent of the total electricity generation. Globally, India is presently positioned as the eleventh largest manufacturer of energy, representing roughly 2.4% of the overall energy output p.a. Usually energy, especially electricity, has a major contribution in speeding up the economic development of the country. The existing production of per capita electricity in India is around 600 kWh per annum. Ever since 1990s, Indias gross domestic product (GDP) has been increasing very rapidly and it is estimated that it will maintain the pace in the next couple of decade. The Report on the Indian Power Sector draws attention the following matters: The aggressive market scenario of Indian Power Industry. The significance of the role of private players and foreign investments in the Power sector. Impact of political condition, collaborations with private participants, new strategies and reforms in regulating the Oil & Gas sector in India. Significance of renewable sources of energy for Power Generation. The different prospects and difficulties faced by the Power Industry. Growing concern about pollution and global warming has led many individuals and nations to consider the nuclear industry as an excellent alternative for future power generation. Technological advancements and increased public awareness concerning nuclear power are critical to the success of the nuclear industry. Investments made by the nuclear industry in both technology and education will likely be seen in the near future. The future power reforms will be in the field of nuclear energy.
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Power for ALL by 2012

The Government of India has an ambitious mission of POWER FOR ALL BY 2012. This mission would require that our installed generation capacity should be at least 200,000 MW by 2012 from the present level of 144,564.97 MW. Power requirement will double by 2020 to 400,000MW.
OBJECTIVES
Sufficient power to achieve GDP growth rate of 8% Reliable power Quality power Optimum power cost Commercial viability of power industry Rural electrification
SUBSIDIES
Several state governments in India provide electricity at subsidized rates or even free to some sections. This includes for use in agriculture and for consumption by backward classes. The subsidies are mainly as cross-subsidization, with the other users such as industries and private consumers paying the deficit caused by the subsidized charges collected. Such measures have resulted in many of the state electricity boards becoming financially weak. At present (2009), the price per unit of electricity in India is about Rs.4 for domestic consumers, and Rs9 for the commercial.
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POWER SECTOR AT A GLANCE

POWER GENERATION IN INDIA
SECTOR POWER GENERATION MW POWER GENERATION
State sector Central sector Private sector Total
76115.67 48970.99 22878.75 147965.41
% 52.5 34.0 13.5 100
TYPE OF POWER
POWER GENERATION (MW) POWER GENERATION(%)
TYPE
FUEL
Thermal Coal Gas Oil Sub total Hydro (renewable) Nuclear RES TOTAL Water Nuclear Fuel 77648.88 14876.71 1199.75 93725.24 36647.76 4120.00 13242.41 147965.51 53.3 10.5 0.9 64.6 24.7 2.9 7.8 100
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INTRODUCTION
The State of Himachal Pradesh is blessed with abundant water resources in its five major rivers i.e. Chenab, Ravi, Beas, Satluj and Yamuna, which emanate from the western Himalayas and flow through the State. These snow fed rivers and their tributaries carry copious discharge all the year round and flow with sleep bed-slopes, which can be exploited for power generation. The expeditious harnessing of this vast and economically viable hydro-electric potential, estimated to be more than 20,000 MW, is the only answer to the prevailing chronic and ever-growing power shortage in the Northern region. In India, since independence, concerted efforts have been made to increase the availability of power to various segments of Indian society. The hydropower development in India has not taken place in a systematic manner since year 1950 till date with more advantage to thermal / nuclear Station during the last 50 years, which resulted in improper hydro-thermal mix of power generation.
PARBATI HYDROELECTRICITY PROJECT

NHPC has been associated with the development of hydro power potential of Himachal Pradesh since its inception. Commissioning of Baira Siul in May 1981 and Chamera Stage-I in March,1991 have given a fillip to hydro power generation and development of the State. These projects are now supplying power to various beneficiary states in the North. Construction of Chamera Stage-II Project has been taken up. In November 1998 agreement for harnessing power potential of Parbati basin has been executed with Government of Himachal Pradesh. Potential of river Parbati will be harnessed in three stages comprising Stage-I (750 MW). Stage-II (800 MW) And Stage-III (520 MW). NHPC has therefore taken up planned development of the Basin with construction of Stage-II initially, and completion of balance investigation of Stage-I and Stage-Ill projects before taking up these for construct
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PARBATI STAGE- II H.E. PROJECT
The Parbati Hydroelectric Project (Stage-II) is a run-of-the-river scheme proposed to harness hydro potential of lower reaches of the River Parbati. The proposed scheme is 'inter basin transfer' type. It is proposed to divert the river near Village Pulga in Parbati valley & water shall be carried through a tunnel across Garsa valley to Sainj valley where the Power House shall be located at village Suind. Thus, a gross head of 862 m between Pulga and Suind will be utilized for generating 800 MW power. Diverting the discharge of various nallas falling along the HRT alignment has further augmented the diverted discharge of the river Parbati. A 83.7 m high, 110 m long, concrete gravity dam is proposed near village Pulga across Parbati river to divert 145 cumec of water. The reservoir will have a gross storage capacity as 6.83 Mecum. This diurnal storage will be sufficient to run power station at full capacity for 4 hours in a day even during lean flow period. The spillway section consisting of three bays is designed to pass a maximum probable flood of 1850 cumec.
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Further, it is planned to divert the discharge of Jigrai Nallah, located just downstream of Plulga diversion dam, into the reservoir for augmentation. The proposed intake structure is located on the left bank of Parbati river just upstream of Pulga diversion dam to cater to a designed discharge of 145 cumec. For trapping suspended silt particles carried by river, it is proposed to construct an underground desilting chamber at the end of inlet tunnels. A 31.525 km long, 6 m dia tunnel has been proposed on the left bank of Parbati to carry a design discharge of 116 cumec. The construction of tunnel will be carried out by five construction adits by deploying modern tunneling equipments like Tunnel Boring Machine (TBM), Rock Bolting Jumbos, and Drilling Jumbos etc. In order to augment the power generation, the discharge of Hurla Nala and its tributaries viz Manihar & Pancha are proposed to be diverted to HRT through diversion structures and drop shafts. The flow of the Manihar Nala is proposed to be diverted to Pancha Nala by constructing a trench weir across Manihar Nala and a 2.252 km long, 3m-dia feeder tunnel connecting the Manihar Nala with Pancha Nala. Flow of Manihar Nala and that of Pancha Nala is proposed to be carried into Hurla Nala through a 717m long feeder tunnel and a trench weir in Pancha Nala. The Hurla Nala diversions works include a trench weir across Hurla Nala, a desilting chamber and a feeder tunnel to carry the diverted flow of Manihar, Pancha & Hurla nala to the HRT. Jiwa Nala is a right bank tributary of Sainj River. Discharge of Jiwa Nala is proposed to be utilised by diverting the flow to the HRT through a trench weir and a 4.560 km long feeder tunnel and a drop shaft. At the end of Head Race Tunnel a 17m dia and 124m high underground Surge Shaft to feed two steel lined pressure shafts each of 3.50 dia and 2626m long shall be constructed. The inclined pressure shafts of length 1546m are excavated with TBM. The proposed surface powerhouse is located on right bank of Sainj river near village Suind, 200m downstream of confluence of Jiwa Nala & Sainj River. The powerhouse shall have an installed capacity of 800 MW with four generating units of 200 MW each. Short Tail Race Channels shall discharge the water from Power House to river Sainj.
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LOCATION MAP OF PHEP-II
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PARBATI PROJECT-II (A PROFILE)

LOCATION
PARBATI HYDROELECTRIC PROJECT (STAGE -II) KULLU DISTRICT HIMACHAL PRADESH STATE KIRATPUR (190 KM FROM SAINJ, POWER NEAREST RAIL HEAD HOUSE SITE) BHUNTER (35 KM FROM SAINJ, POWER NEAREST AIRPORT HOUSE SITE) PARBATI (A TRIBUTARY OF RIVER BEAS) RIVER LOCATION OF DAM & DIVERSION DAM ON RIVER PARBATI AT PULGA VILLAGE AND POWREHOUSE ON POWERHOUSE RIVER SAINJ RIGHT BANK OF SUIND VILLAGE. 4 X 200 (800 MW) INSTALLED CAPACITY 3108.66 MILLION UNITS ANNUAL GENERATION DATE OF CCEA SEPTEMBER 2002 APPROVAL SCHEDULED DATE OF SEPTEMBER 2014 COMMISSIONING NAME
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HYDROLOGY
Four Catchments of the project are: 1.Parbati River Catchment Area at Diversion 1155Sq.km. Dam Snow Catchment 971Sq.km. Maximum observed discharge 369.10Cumecs 2. Jigrai Nallah Catchment Area at Diversion 42Sq.km. site Snow Catchment 21Sq.km. 3. Hurla Nallah Catchment Area at Diversion 34Sq.km. site Snow Catchment 9.5Sq.km. 4. Jiwa Nallah Catchment Area at Diversion 180Sq.km. site Snow Catchment 54Sq.km.
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POWER HOUSE
The proposed surface power house is located on the right bank of River Sainj near Village Sainj at about 200 m downstream of the confluence of River Sainj and Jiwa Nallah. The power house shall have an installed capacity of 800 MW with four generating units of 200 MW each. Short Tail Race Channels shall discharge the water from Power House to river Sainj.
COST
The estimated cost for construction of Project is worked out to be Rs. 5607.66 crores at August 2000 price level.
BENIFITS
The Project is planned to be operated as a peaking power station. A: 800 MW installed capacity the Project will generate 3108.66 million units of Power in 90% dependable year. The construction of the Project will bring social & economic development in the region. Other facilities like infrastructure. Education Medical and employment will get boost with the execution of the Project.
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OBJECTIVES OF THE STUDY
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OBJECTIVE OF THE STUDY

To analyze the financial performance of NHPC (National Hydro Power Co-operation) through ratio analysis of last 4 years from the balance sheet and Profit & loss account can be assessed.
The main objective of the study:

To evaluate and analyze the financial performance of the company by using ratios as a tool to know the position of the company through the study, by evaluate and analyze various facts related to the financial performance of the company and to make comparison between the ratios during these four financial years
Other objectives:
To perform ratios analysis for years 2008-2009, 2009-2010 & 2010-2011 of NHPC. To interpret the financial performance and other facts related to Financial Management so as to find out the strengths and weaknesses of NHPC. To examine the past and present status of NHPC. To evaluate the trend in the financial performance of the NHPC over last few years.
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RESEARCH METHODOLO GY
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RESEARCH
Research study has its own specific purpose but the research design of the project on NHPC is exploratory in nature as the objective is the development of the hypothesis rather than their testing.
The research design method of ratio analysis through financial statements: The study is done on the balance sheet and profit & loss account of last four years i.e. 2008, 2009, 2010 &2011 of NHPC . Accordingly the analyses and INTERPRETATION has done.
METHODOLOGY
Research Methodology comprises of defining & redefining problem, collecting, organizing & evaluating data, making deductions & researching to conclusion. CLIFFORD WOODY Page 54 of 142
Accordingly the methodology used in the project is simply collection of information in the form of last four years balance sheet and profit & loss accounts. The information is utilized for calculating performance evaluation & based on that INTERPRETATIONs are done.
SOURCE OF DATA
1. Most of the calculations are made on the financial statements provided by the company. 2. Referring standard texts & referred books collected from where some of the information regarding theoretical aspects 3.
METHOD
To assess the performance of the company method of observation of the work in finance department is followed. In order to reach relevant conclusion, research work needed to be designed in a proper way.
This research methodology also includes: Familiarization with the concept of finance and its various merits, demerits. Thorough study of the information collected.
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Conclusion based on findings.
STATISTICAL TOOL USED

The main statistical tools used for the collection and analyses of data in this project are:
Cylindrical Bar charts Square bar/ column charts
According to the observation of the finance department, various strengths, weaknesses have come across. They are as follows:
SWOT ANALYSIS OF NHPC

Strengths: 1. Good corporate Image. 2. Complete range of product for transmission & distribution. 3. Established brand name with executive oriented program. 4. Strong & wide networks of manpower across India. 5. Considered to be having technology & design ability.
Weakness: 1. The procurement process in the companies is cumbersome and subject to auditing. 2. Low exposure to the needs & dynamics of distribution business. 3. Role clarity on the requirement of being an equipment supplier or a solution provider. As there are very few supplier of equipment manufacturing plant.
Opportunities: 1. Huge Investment leading to greater demand of goods and services. 2. Demand leading to Industry operating at full & over capacity. 3. Better Price realization. Page 56 of 142
4. Early birds to learn faster and thus achieve repeat orders. Policy made to bid for ultra mega power plant. 5. Vertical integration for supply chain management of coal by acquiring coal blogs.
Threats: 1. Purchases preference may be extended to distribution sector. 2. Increase in no. of small contractors leading to price war. 3. Emergence of competitors in the market like Schneider, Reliance, Tata etc. 4. Change in government policies for open trade or stock trading or energy trading. 5. Reduce the time lag.
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and weakness of the firm and establishing relationship between the items of the balance sheet and profit & loss A/c. Financial ratio analysis is the calculation and comparison of ratio which are derived from the information in the companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial conditions, its operations and attractiveness as an investment.
The information in the statements is used by: Trade creditors to identify the firms ability to meet their claims i.e. liquidity positions of the company. Investors to know about the present and future profitability of the company and its financial structure.
Management in every aspect of the financial of the financial analysis. It is the responsibility of the management to maintain sound financial condition in the company.
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RATIO ANALYSIS
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RATIO ANALYSIS
Meaning of Ratio:- A ratio is simple arithmetical expression of the relationship of one
number to another. It may be defined as the indicated quotient of two mathematical expressions. According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression o f the quantitative relationship between two numbers.
Ratio Analysis:- Ratio analysis is the process of determining and presenting the relationship
of items and group of items in the statements. According to Batty J. Ratio can assist management in its basic functions of forecasting, planning coordination, control and communication. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgment, otherwise complex situations. Ratio may be expressed in the following three ways: 1. Pure Ratio or Simple Ratio: - It is expressed by the simple division of one number by another. For example, if the current assets of a business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio of Current assets to current liabilities will be 2:1. Page 59 of 142
2. Rate or So Many Times: - In this type, it is calculated how many times a figure is, in comparison to another figure. For example , if a firms credit sales during the year are Rs. 200000 and its debtors at the end of the year are Rs. 40000 , its Debtors Turnover Ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors. 3. Percentage: - In this type, the relation between two figures is expressed in hundredth. For example, if a firms capital is Rs.1000000 and its profit is Rs.200000 the ratio of profit capital, in term of percentage, is 200000/1000000*100 = 20% Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements of a company. So that the strengths and weakness of a firm, as well as its historical performances and current financial condition can be determined. Ratio reflects quantitative relationship that helps to form quantitative adjustments.
STEPS IN RATIO ANALYSIS

1. The first task of financial analysis is to select the information relevant to decision under
consideration from the statements and calculates appropriate ratios.
2. To compare the calculated ratios with the ratios of the same firm relating to the past or
with the industry ratios. It facilitates in accessing success or failure of the firm.
3. The INTERPRETATION, drawing of inferences, report writing and conclusions are

drawn after the comparison in the shape of report or recommended course of action
BASIS OR STANDARDS OF COMPARISONS

Ratios are relative figures reflecting the relationship between variables. They enable analyst to draw conclusion regarding financial operations. The use of ratios as tools of financial analysis is involved in the comparison with related facts. This is the basis of ratio analysis is of 4 types:
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o Past ratios: calculated from past financial statements of the firms. o Competitors ratios: of some of the most progressive & successful competitors firm at the same point of time. o Industry ratios: the industry ratios which the firm belongs to. o Projected ratios: ratios of the future development from the projected or pro-form financial statements.
NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis & INTERPRETATION of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decision. It is only a means of understanding of financial strengths and weakness of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the 4 steps involved in the ratio analysis: o Selection of relevant data from the financial statements depending upon the objective of the analysis. o Calculation of appropriate ratios from the above data. o Comparison of the calculated ratios with the same firm in the pas 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.
INTERPRETATION OF THE RATIOS

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The INTERPRETATION of the ratios in an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies etc. should also be kept in mind when attempting interpret ratios. The INTERPRETATION of ratios can be made in the following ways. Single absolute ratios Group of ratios Historical comparison Projected ratio Inter-firm comparison
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS

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 is:
Accuracy of financial statements Objectives or purpose of analysis Selection of ratio Use of standards Caliber of the analysis
IMPORTANCE OF RATIO ANALYSIS

Aid to measure general efficiency.
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Aid to measure financial solvency. Aid in forecasting & planning. Facilitate decision making. Aid in corrective action. Aid in intra-firm comparison. Act as a good communication Evaluation of efficiency. Effective tool.
ADVANTAGE OF RATIO ANALYSIS

Helpful in analysis of Financial Statements. Helpful in comparative Study. Helpful in locating the weak spots of the business. Helpful in Forecasting. Estimate about the trend of the business. Fixation of ideal Standards. Effective Control. Study of Financial Soundness.
LIMITATIONS OF RATIO ANALYSIS

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Comparison not possible if different firms adopt different accounting policies. Ratio analysis becomes less effective due to price level changes. Ratio may be misleading in the absence of absolute data. Limited use of a single data. Lack of proper standards. False accounting data gives false ratio. Ratios alone are not adequate for proper conclusions. Effect of personal ability and bias of the anal
DATAS OF THE YEARS i.e. 2008-2009, 2009- 2010 & 2010- 2011
BALNCE SHEET AS AT 31ST MARCH 2009

( S c
SOURCES OF FUND
in crore)
31ST MARCH 2009 (in Rs. crore)
A
i) ii)
SHAREHOLDERS FUND Share capitl
1 2 3 4
11182.49 6798.13 17980.62
11182.49 6094.57 17277.06
Reserves and surplus LOAN FUNDS B i) Secured Loans ii) Unsecured Loans C INCOME RECEIVED IN ADVANCE ON ACCOUNT OF ADVANCE AGAINST DEPRICIATION DEFERRED TAX LIABILITY(NET) D Deferred Tax Liabilities
8212.38 4021.65 12234.03 1329.47
7003.49 2952.84 9956.33 1303.26
2412.98
2017.06
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Less: Deferred Tax Recoverable TOTAL APPLICATION OF FUNDS FIXED CAPITAL EXPENDITURE 1.Fixed assets a) Gross Block Less: Depreciation b) Net Block 2.Capital Work In Progress 3.Construction Stores And Advances INVESTMENTS B
2412.98
-----------31544.12
2017.06
-----28563.65
5
21460.08 3816.27 17643.81 20639.51 3262.66 17376.85 6313.20 28142.43 2793.60 1076.96 24767.01 3049.22
CURRENT ASSETS, LOANS AND ADVANCES
6 7 8 9
81.01 37.16 19.55
9401.77 1096.85
i) Interest Accrued On Investment ii) Inventories iii) Contract Work In Progress
91.91 37.12 15.16
S c iv) v) vi) vii)

Sundry Debtors Cash And Bank Balances

294.66 1899.95 393.74 1693.20 4419.27

348.06 1841.27 216.40 784.55 3370.47
Other Current Assets Loans And Advances LESS: CURRENT LIABILITIES AND PROVISIONS i) Liabilities ii) Provisions NET CURRENT ASSETS MICSELLANEOUS EXPENDITURE (To the extent not written off or adjusted) TOTAL
1 0
2150.25 1663.26 3813.51 605.76 2.33 1155.07 1495.32 2650.39 720.08 0.34
1 1
31544.12
28536.65
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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2009
( in crore)
SCH 31ST MARCH 2009 31st MARCH 2008

INCOME i) Sales Less: Advance Against Depreciation 12 12A
2698.06 26.21 2671.85 23010.00 57.27 2243.73
ii) Revenue from Contract, Project 13 Management and Consultancy Works iii) Other Income 14 TOTAL INCOME i) ii) iii) iv) v) EXPENDITURE Generation, Administration and Other Expenses Employees Remuneration and Benefits Depreciation Interest and Finance Charges Provisions 15 16 17 18 19
48.97
39.19
540.67 3261.49
405.02 2687.94
326.47
263.58
492.51 518.24 505.18 190.97
316.78 443.74 453.40 11.43
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vi) Expenditure on contract, Project 20 Management and Consultancy Works TOTAL EXPENDITURE
61.16
31.66
2094.53
1520.59
Profit Before Tax and Prior Period Adjustment

Prior Period Adjustment PROFIT BEFORE TAX 21
1166.96
1167.35
(11.38) 1178.34
20.70 1146.65
Provision for Taxation

i) ii) iii) iv) Current Tax Fringe benefit tax Adjustment relating to earlier years Deferred tax Less: Deferred tax recoverable adjustment PROFIT AFTER TAX
110.54 9.45 (16.87) 395.91 395.91 103.12 1075.22 248.13 248.13 142.56 1004.09 117.96 9.50 15.10
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S c Balance brought forward Add: Amount written back from bond redemption reserve Amount written back from self insurance Reserve Tax on dividend written back BALANCE AVAILABLE FOR APPROPRIATION Transfer to bond redemption reserve Transfer to self insurance fund Dividend : -Interim -Proposed Tax on dividend -Interim -Proposed BALANCE CARRIED OVER TO BALANCE SHEET

1344.53 14.25

715.18 23.75
i) ii) iii)
0.06
8.57 2442.63
1743.02
i) ii) iii)
98.74
125.00 200.00
100.00 200.00
iv)
21.24 33.99 1963.66
17.00 33.99 1344.53
Earnings per share (Equity shares, face value of 10/- each) Basic Diluted
0.96 0.96
0.90 0.90

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( S c SOURCES OF FUND
in crore)
31
ST
MARCH 2010 (in Rs. crore)
31
ST
MARCH 2009 (in Rs. crore)
A
i) ii)
B
i) ii)
C D
A
i)
ii) iii)
B C
SHAREHOLDERS FUND Share capital Reserves and surplus LOAN FUNDS Secured Loans Unsecured Loans INCOME RECEIVED IN ADVANCE ON ACCOUNT OF ADVANCE AGAINST DEPRICIATION DEFERRED TAX LIABILITY(NET) Deferred Tax Liabilities Less: Deferred Tax Recoverable TOTAL APPLICATION OF FUNDS FIXED CAPITAL EXPENDITURE Fixed assets a) Gross Block Less: Depreciation b) Net Block Capital Work In Progress Construction Stores And Advances INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES
1 2 3 4
12300.74 10972.45 23273.19
11182.49 6798.13 17980.62
10953.18 2915.04 13868.22 1437.44
8212.38 4021.65 12234.03 1329.47
2509.64 2370.54 139.10 38717.95
2412.98 2412.98 -----------31544.12
5
21302.37 4907.44 16394.93 21460.08 3816.27 17643.81 9401.77 30419.95 4394.05 1096.85 28142.43 2793.60
6 7 8 9
182.65 44.31 24.22
12802.50 1222.52
i) Interest Accrued On Investment ii) Inventories iii) Contract Work In Progress
81.01 37.16 19.55
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S c viii) ix) x) xi) Sundry Debtors Cash And Bank Balances Other Current Assets Loans And Advances 1 0

1140.21 5097.38 534.66 1295.74 8319.17

294.66 1899.95 393.74 1693.20 4419.27
LESS: CURRENT LIABILITIES AND PROVISIONS iii) Liabilities iv) Provisions NET CURRENT ASSETS
2129.59 2288.25 4415.22 3903.95
2150.25 1663.26 3813.51 605.76 2.33
D MICSELLANEOUS EXPENDITURE
(To the extent not written off or adjusted) TOTAL
1 1
---
38717.95
31544.12
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( in crore)
SCH 31ST MARCH 2010 31st MARCH 2009

INCOME iv) Sales Less: Advance Against Depreciation 12 12A
4261.18 107.97 4153.21 2698.0 6 26.21 2671.85
v) Revenue from Contract, Project 13 Management and Consultancy Works vi) Other Income 14 TOTAL INCOME vii) viii) ix) x) xi) xii) EXPENDITURE Generation, Administration and Other Expenses Employees Remuneration and Benefits Depreciation Interest and Finance Charges Provisions Expenditure on contract, Project Management and Consultancy Works TOTAL EXPENDITURE 15 16 17 18 19 20
113.08
48.97
545.73 4812.02
540.67 3261.49
238.67
326.47
529.84 1018.87 457.08 80.50 82.39
492.51 518.24 505.18 190.97 61.16
2407.35
2094.53
Profit Before Tax and Prior Period Adjustment

Prior Period Adjustment PROFIT BEFORE TAX 21
2404.67
1166.96
2.59 2402.08
(11.38) 1178.34
Provision for Taxation

v) vi) vii) viii) Current Tax Fringe benefit tax Adjustment relating to earlier years Deferred tax Less: Deferred tax recoverable adjustment PROFIT AFTER TAX
388.65 (93.23) 96.66 80.50 16.16 311.58 2090.50 395.91 395.91 103.12 1075.22 110.54 9.45 (16.87)
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S c Balance brought forward Add: Amount written back from bond redemption reserve Amount written back from self insurance Reserve Tax on dividend written back BALANCE AVAILABLE FOR APPROPRIATION Transfer to bond redemption reserve Transfer to self insurance fund Dividend : -Interim -Proposed Tax on dividend -Interim -Proposed BALANCE CARRIED OVER TO BALANCE SHEET

1963.66 14.25

1344.53 14.25
iv) v) vi)
---
0.06
3.98 4072.39
8.57 2442.63
v) vi) vii)
100.00 32.99
98.74
676.54
125.00 200.00
viii)
112.36 3150.50
21.24 33.99 1963.66
Earnings per share (Equity shares, face value of 10/- each) Basic Diluted
1.76 1.76
0.96 0.96
Page 72 of 142

( S c SOURCES OF FUND SHAREHOLDERS FUND iii) Share capital in crore)
1 2 3 4
12300.74 12283.15 24583.89
12300.74 10972.45 23273.19
iv) Reserves and surplus LOAN FUNDS B iii) Secured Loans iv) Unsecured Loans C INCOME RECEIVED IN ADVANCE ON ACCOUNT OF ADVANCE AGAINST DEPRICIATION DEFERRED TAX LIABILITY(NET) D Deferred Tax Liabilities Less: Deferred Tax Recoverable TOTAL APPLICATION OF FUNDS A FIXED CAPITAL EXPENDITURE iv) Fixed assets a) Gross Block Less: Depriciation b) Net Block v) Capital Work In Progress vi) Construction Stores And Advances INVESTMENTS B C CURRENT ASSETS, LOANS AND ADVANCES iv) Interest Accrued On Investment v) Inventories vi) Contract Work In Progress
10884.36 3684.90 14569.26 1406.55
10953.18 2915.04 13868.22 1437.44
2450.39 2289.06 161.33 40721.03
2509.64 2370.54 139.10 38717.95
5
22874.92 5774.04 17100.88 21302.37 4907.44 16394.93 12802.50 34223.33 5399.50 1222.52 30419.95 4394.05
6 7 8 9
157.87 33.71 19.94
15797.03 1325.42
182.65 44.31 24.22
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S c xii) xiii) xiv) xv) Sundry Debtors Cash And Bank Balances Other Current Assets Loans And Advances 1 0

1908.60 2864.14 511.32 1365.42 6861.00

1140.21 5097.38 534.66 1295.74 8319.17
LESS: CURRENT LIABILITIES AND PROVISIONS v) Liabilities vi) Provisions NET CURRENT ASSETS
2349.21 3413.59 5762.80 1098.20 2288.25 4415.22
2126.97
3903.95
D MICSELLANEOUS EXPENDITURE
(To the extent not written off or adjusted) TOTAL
1 1
40721.03 38717.95
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( in crore)
SCH 31ST MARCH 2011 31st MARCH 2010 INCOME

i) Sales Less: Advance Against Depreciation ii) Revenue from Contract, Project Management and Consultancy Works iii) Other Income 12 12A 13 14
3999.63 (46.96) 4046.59 4261.1 8 107.97 4153.21
178.66
113.08
706.86 4932.11
545.73 4812.02
TOTAL INCOME EXPENDITURE

i) Generation, Administration and Other Expenses ii) Employees Remuneration and Benefits iii) Depreciation iv) Interest and Finance Charges v) Provisions vi) Expenditure on contract, Project Management and Consultancy Works 15 16 17 18 19 20
522.43
238.67
699.62 916.74 413.56 34.46 123.25
529.84 1018.87 457.08 80.50 82.39
TOTAL EXPENDITURE Profit Before Tax and Prior Period Adjustment

Prior Period Adjustment 21
2710.06
2407.35
2222.05
2404.67
(656.38) 2878.43
2.59 2402.08
PROFIT BEFORE TAX Provision for Taxation

i) Current Tax ii) Adjustment relating to earlier years iii) Deferred tax Less: Deferred tax recoverable adjustment
558.53 5.06 (59.25) (204.42) 145.17
388.65 (93.23) 96.66 711.76 2166.67 80.50 16.16 311.58 2090.50
PROFIT AFTER TAX
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S c Balance brought forward Add: Amount written back from bond redemption reserve Amount written back from self insurance Reserve Tax on dividend written back BALANCE AVAILABLE FOR APPROPRIATION Transfer to bond redemption reserve Transfer to self insurance fund Dividend : -Proposed Tax on dividend -Proposed BALANCE CARRIED OVER TO BALANCE SHEET Earnings per share (Equity shares, face value of 10/- each) Basic Diluted

3150.50 14.25

1963.66 14.25
i) ii) iii)
0.04
---
1.80 5333.26
3.98 4072.39
i) ii) iii) iv)
100.00 39.31
100.00 32.99
738.04
676.54
119.73 4336.18
112.36 3150.50
1.76 1.76
1.76 1.76
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DATA TABLE:
( in crore)
PARTICULAR
Current Assets Current Liabilities Net sales Working capital Capital employed Gross profit Operating profit Fixed assets Shareholders Fund Equity Share Capital Net Profit
2008
3370.47 2650.39 2570.36 720.08 10896.93 2111.65 1677.02 17376.85 17277.06 11182.49 1004.09
2009
4419.27 3813.51 2720.82 605.76 18244.57 2166.77 1778.32 17643.81 17980.62 11182.49 1075.22
2010
8319.17 4415.22 4331.98 3903.95 20298.88 3459.12 3108.17 16394.93 23273.19 12300.74 2090.50
2011
6861 5762.80 4225.25 1098.20 18199.08 3274.46 2845.49 17100.88 24583.89 12300.74 2166.67
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RATIOS OF LAST 4 YEARS OF NHPC, INDIA

Table liquidity ratio
LIQUIDITY RATIOS:
1.Current ratios ( std. norm is 2:1) 2. Quick ratios (std. norm is 1:1)
2008
1.27:1 1.25:1
2009
1.16:1 1.15:1
2010
1.88:1 1.87:1
2011
1.19:1 1.18:1
Table activity ratio ACTIVITY RATIOS (in times)

1. Fixed assets turnover ratios 2. Current assets turnover ratios 3. Working capital turnover ratios 4. Capital turnover ratios
2008
0.14 0.76 3.57 0.14
2009
0.15 0.61 4.50 0.15
2010
0.26 0.52 1.11 0.21
2011
0.24 0.61 3.85 0.23
Table profitability ratio
PROFITABILITY RATIOS
1. Gross profit ratios 2. Operating ratios 3. Operating profit ratios 4. Net profit ratios 5.Earning per share 6. Return in investment 7. Return on share holders fund
2008
82.15% 34.76% 65.24% 39.06% 0.90 9.78% 5.81%
2009
79.64% 34.65% 65.35% 39.51% 0.96 8.98% 5.97%
2010
79.80% 28.25% 71.75% 48.25% 1.70 13.01% 8.98%
2011
77.49% 32.66% 67.34% 51.27% 1.76 14.5% 8.81%
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Table solvency ratios
SOLVENCY RATIOS
1.Debt-equity Ratio 2.Total Assets to Debt Ratio 3.Interest coverage Ratio 4.Debt to Total fund Ratio 5.Proprietary Ratio 6.Fixed Assets Ratio 7.Fixed asset to Current asset Ratio
2008
0.57:1 2.08:1 3.09:1 0.36:1 0.83:1 1.56:1 5.15:1
2009
0.68:1 1.80:1 2.13:1 0.40:1 0.81:1 1.71:1 3.99:1
2010
0.60:1 1.78:1 3.04:1 0.37:1 0.94:1 2.26:1 1.97:1
2011
0.60:1 1.64:1 2.63:1 0.37:1 1.02:1 2.29:1 2.49:1
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CLASSIFICATION OF RATIOS WITH CALCULATIONS

I. LIQUIDITY RATIOS: Short- term creditors are primarily interested in liquidity or short-term solvency of the enterprise since their claims are to be met in the short-run. Liquidity or short- term solvency means the ability of the enterprise to meet short-term obligations as and when they become due.
These liquidity ratios show the short-term financial solvency of the concern. This ratio measures the concerns ability to meet short-term obligations as and when they become due. Usually the following ratios are calculated for this purpose.
LIQUIDITY RATIOS
1. Current Ratios 2. Quick Ratios
1. CURRENT RATIOS:
MEANING: This ratio establishes a relationship between current assets and current liabilities.
OBJECTIVE: The objective of computing this ratio is to measure the ability of the firm to meet its short-term obligations and to reflect the short-term financial strengths/ solvency of a firm. In other words, the objective is to measure the safety margin available for short-term creditors.
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COMPONENTS: There are two components of this ratio as follows:
i.
Current Assets: Current Asset refers to those assets which are held for their conversion into cash normally within a year. An asset is classified either as a Current Assets or Non-current Assets on the basis of the purpose for which an asset is held in the hands of use
Examples of current assets

Cash balance Bank balance Debtors ( after deducting provision) Marketable securities (Realizable value) stock of raw material Stock of work-in-progress Stock of finished goods Prepaid expenses Short-term loans & advances ( debit balance) Incomes accrued but not due Incomes due but not received Advance payment of tax Tax deduced at source (TDS) [debit balance]
ii. Current liabilities: Current liabilities refer to those liabilities which are expected to be matured normally within a year.
Examples of current liabilities

Creditors for goods Bills payable Creditors for expenses (or O/S exp) Bank overdraft Provision for tax Short-term loans & advances (credit balance) Unclaimed dividend Income received-in advance
COMPUTATION: This ratio is computed by dividing the current assets by the current liabilities. This ratio is usually expressed as pure ratio e.g. 2:1. In the form of a formula, this ratio may be expressed as follows:
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Current Assets Current Ratio = Current liabilities
CALCULATIONS: 3370.47 Year 2008: 2650.47 4419.27 Year 2009: 3813.51 = 1.16:1 = 1.27:1
8319.17 Year 2010: 4415.22 = 1.88:1
6861 Year 2011: 5762.80 = 1.19:1
INTERPRETATION: 2008: NHPCs current assets are
3370.47 crores and its current liabilities are
2650.39
crores; then on dividing current ratio by current liabilities its current ratio would be equal to 1.27.it means that for every rupee the company owes in the short-term it has 1.27 available in assets that can be converted into cash in the short-term.
In 2008 the current ratios was 1.27. Traditionally, a current ratio of 2:1 is considered to be a satisfactory ratio. On the basis of this traditional rule here the current ratio is more less than 2, which means that the firm is inadequately liquid and has difficulty in meeting its current obligations.
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In this year the value of current assets is more than current liabilities, the firm will not have much difficulty in meeting its short-term obligations. The ratio is lower than the standard norm 2. Lower current ratio of NHPC may be perhaps being due to the fact that the company is largely using its internally generated savings in financing acquisitions.
2009: The current assets of this year were
4419.27 crores and the current liabilities were
3813.51 crores; when calculating the current ratio it comes to 1.16. It means that for every rupee the company owes in the short-term, it has 1.16 available in assets that can be converted into cash in the short-term.
In 2009 the current ratio was 1.16. Traditionally, a current ratio is 2:1 is considered to be a satisfactory ratio. This ratio is less than the standard norm 2, which means that the firm is inadequately liquid & has difficulty in meeting its current obligations.
The value of current assets is more, and then NHPC will not have much difficulty in meeting its short-term obligations. 2010: In the year 2010 the current assets were 8319.17 crores and its current liabilities were
4415.22 crores; when calculating current ratio is equal to 1.88. It implies that for every one rupee of current liabilities, current assets of one rupee and eighty eight paisa are available to meet them. In other words, the current assets are 1.88 times the current liabilities. Having a current ratio of 1.88:1 can be interpreted on the basis of the conventional rule, to be inadequately liquid from the point of view of its ability to always satisfy the claims of short-term creditors. 2011: In the year 2011 the current assets were 6861 crores and current liabilities were
5762.80 crores ; when calculating current ratio is equal to 1.19. it implies that for every one rupee of current liabilities, current assets of 1.19 rupees are available to meet them.
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It is inadequately liquid from the view point of its ability to always satisfy the claims of short term creditor
COMPARISON BETWEEN 2008, 2009 ,2010 & 2011
Looking to 2008 the current ratio was 1.27 which was comparatively more than 2009 with current ratio of 1.16. In both the cases, both are less than the standard norm 2.
In 2010, the current ratio was 1.88 which inclined from 2009 with 1.16. In 2011 again there is decline in the current ratio from 1.88 to 1.19. All the 4 consecutive years current ratios are less than 2:1 In 2009 & 2011 there was a slight decline in the value of current assets has adversely affected the ability of NHPC to meet its current obligations and therefore from the view point of creditors, it is a more risky venture currently.
2. QUICK RATIOS: MEANING: This ratio establishes a relationship between quick assets and current liabilities.
OBJECTIVE: The objective of computing this ratio is to measure the ability of the firm to meet its short-term obligations as and when due without relying upon the realization of stock.
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COMPONENTS: There are two components of this ratio as follows:
i. Quick assets: Quick assets refer to those current assets which can be converted into cash immediately or at a short notice without a loss of value.
Examples of Quick assets

Cash balance Bank balance Debtors (after deducting provisions) Bills receivable ( after deducting provisions) Marketable securities ( realizable value) Short-term loans & advances ( debit balance)
ii.
Current liabilities: Current liabilities refer to those liabilities which are expected to be matured normally within a year.
Examples of Current liabilities

Creditors for goods Bills payable Creditors for expenses (or O/S exp) Bank overdraft Provision for tax Short-term loans & advances (credit balance) Unclaimed dividend Income received-in advance
COMPUTATION: This ratio is computed by dividing the quick assets by the current liabilities. This ratio is usually expressed as a pure ratio e.g. 1:1. In the form of a formula, this ratio may be expressed as under:
Liquid Assets Quick Ratio = Current liabilities *Liquid Assets = Current assets stock / inventories
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CALCULATION:
3333.35 Year 2008: 2650.39 *Liquid Assets= 3370.47 37.12 = 3333.35 = 1.25:1
6827.29 Year 2011: 5762.80 *Liquid Assets= 6861 33.71 = 6827.29 = 1.18:1
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INTERPRETATION:
2008: In 2008 the Liquid assets was
3333.35 crores and the current liabilities was
2650.39
crores. When calculating the Quick ratio is equal to 1.25.it means that 1.25 of Quick ratio available for each rupee of current liabilities.
Traditionally, a Quick ratio of 1:1 is considered to be satisfactory ratio. In 2008 the Quick ratio was more than the standard norm of which implies that the NHPC may not be meeting its shortterm obligations in time. 2009: This year the Liquid Asset was 4382.11 crores and the current liabilities was 3813.51
crores. When calculated the quick ratio equals to 1.15; which is more that the standard norm 1. It implies that NHPC is not able to meet its short term obligation in time. 2010: The Liquid assets was 8274.86 crores and current liabilities were 4415.22 crores.
When calculated the Quick ratio equals to 1.87; which is also more than the standard Quick ratio of 1:1; implying not able to meet its short-term obligations in time. 2011: The Liquid assets was 6827.29 crores and current liabilities were 5762.80 crores.
When calculated the Quick ratio equals to 1.18; which is also more than the standard Quick ratio of 1:1; implying not able to meet its short-term obligations in time
COMPARISON BETWEEN 2008, 2009 , 2010 & 2011
The year 2011 was in the declining stage. When comparing 2011 with 2010; the former year can be said to be better because the Quick ratio of 2011 i.e. 1.18 which is making a slight increase from the standard norm 1, but the Quick ratio of 2010 was much more higher than 2011 with 1.87. Again in 2009 the quick ratio was little more than the standard form i.e. 1.15 but less than the ratio of 2008 which is 1.25.
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GRAPHICAL REPRESENTATIONS OF THE LIQUIDTY RATIOS

2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Current ratio Pure ratios Quick ratio 2008 2009 2010 2011
Liquidity ratios
II.ACTIVITY RATIOS (in times): Activity ratios measure the effectiveness with which a firm uses its available resources. These ratios help in commenting on the efficiency of the enterprise in managing its assets. These ratios are also called Turnover ratios since they indicate the speed with which the resources are being turned (or converted) into sales. Usually the following turnover ratios are calculated: ACTIVITY RATIOS 1. Fixed Assets Turnover Ratio 2. Current assets Turnover Ratio 3. Working Capital Turnover Ratio 4. Capital Turnover Ratio
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1. FIXED ASSETS TURNOVER RATIO: DEFINITION: Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. SIGNIFICANCE: Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. The ratio is calculated by using following formula: FORMULA:
Fixed assets turnover ratio turnover ratio is calculated by the following formula: Fixed Assets Turnover Ratio = Net Sales / Net Fixed Assets
CALCULATION: 2570.36 Year 2008: 17376.85 = 0.14 times
2720.82 Year 2009: 17643.81 = 0.15 times
4331.98 Year 2010: 16394.93 = 0.26 times
4225.25 Year 2011: 17100.88 = 0.24 times
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INTERPRETATION: In the four consecutive years i.e. 2008, 2009, 2010 & 2011; the ratios were 0.14 times, 0.15 times , 0.26 times & 0.24 times respectively. Through these ratio we can say that the assets are not being fully utilized by the organization. There is under utilization of the fixed assets.
COMPARISON BETWEEN 2008 , 2009 , 2010 , & 2011 2009 was slightly better than 2008. There was only a increase of 0.01 times i.e. 1% which is insignificant. Year 2009 shows more efficiency in the management & utilization of fixed assets as compared to 2008. 2010 was much better. In 2010 there was a increase in ratio as compared to 2009 i.e. from 0.15 to 0.26. The net block i.e. Due to decrease in the net sales and increase in the fixed assets the fixed assets turnover ratio of 2009 decreases. Also in 2011 there is a slight decrease in the ratio as compared to the 2010. The ratio decrease from 0.26 to 0.24. Now comparing the entire four years fixed assets turnover ratio, year 2010 was the most efficient management and utilization of fixed assets.
2. CURRENT ASSETS TURNOVER RATIOS: MEANING: T his ratio establishes a relationship between net sales and current assets. OBJECTIVE: The objective of computing this ratio is to determine the efficiency with which the Current assets are utilized. COMPONENTS: There are two components of this ratio as follows:
i. ii. Net sales which means gross sales minus sales return; Current assets: refers to those assets which are held for their conversion into cash normally within a year.
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FORMULA:
Net sales Current Assets turnover ratio = Current assets = in times
CALCULATIONS: 2570.36 Year 2008: 3370.47 = 0.76 times
2720.82 Year 2009: 4419.27 = 0.61 times
4331.98 Year 2010: 8319.17 = 0.52 times
4225.25 Year 2011: 6861 = 0.61 times
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INTERPRETATION: The current assets turnover ratios indicate the firms ability to generate sales per rupee of investment in current assets. The following are the ratios of 3 years: 2008 0.76 times 2009 0.61 times 2010 0.52 times 2011 0.61 times
COMPARISON BETWEEN 2008 & 2009 In 2008 the current assets turnover ratio was 0.76 times and in 2009 the current assets turnover ratio was 0.61 times. But by looking at the ratios it can be found that there was a decrease in 2009 by 0.15 times which is a big difference. Here in 2009 the management & utilization of current assets is less efficient as compared to 2008.
COMPARISON BETWEEN 2009 &2010 The current assets turn over by 0.61times in 2009 and 0.52 times in 2010 which is definitely not a good sign for the company to invest in current assets as sales per rupee.There has been decrease in 2010 by 0.9 times which is a small change. But still the turnover of the company has decreased their level in the investment of current assets.
COMPARISON BETWEEN 2010 &2011 The current assets turn over by 0.52 times in 2010 and 0.61 times in 2011 which is definitely a good sign for the company to invest in current assets as sales per rupee. There has been an increase in 2011 by 0.9 times which is a small change. But still the turnover of the company has increased their level in the investment of current assets.
Looking at all the 4 years; 2008 was good as compared to 2011. But on the contrary 2011 & 2009 also showed a good ratio, proving their level of efficiency.
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3. WORKING CAPITAL TURNOVER RATIO: DEFINITION: Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is turned over in the course of year. This ratio establishes a relationship between net sales and working capital. SIGNIFICANCE: The working capital turnover ratio measures the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation. COMPONENTS: There are two components of this ratio as follows: i. ii. Net sales which mean gross sales minus sales returns; and Working capital which means current assets minus current liabilities.
COMPUTATION: This ratio is computed by dividing the net sales by the working capital. This ratio is usually expressed as x number of times. In the form of a formula, this ratio may be expressed as follows: Net sales Working capital turnover ratio = Working capital *Working capital = Current assets Current liabilities = Net current assets = .times
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CALCULATION: 2570.36 Year 2008: 720.08 = 3.57 times
2720.82 Year 2009: 605.76 = 4.50 times
4331.98 Year 2010: 3903.95 = 1.11 times
4225.25 Year 2011: 1098.20 = 3.85 times
INTERPRETATION: Here the working capital turnover ratios of BSNL are in an increasing trend. The figures are as follows: 2008 3.57 times 2009 4.50 times 2010 1.11 times 2011 3.85 times
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From the figures of the last 4 years it is very clear that year 2009 had the highest working capital turnover ratio; which means that for every 1 rupee of sales the company needs 4.50 of the net current assets. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation.
4. CAPITAL TURNOVER RATIO: MEANING: This ratio establishes a relationship between net sales and capital employed. OBJECTIVE: The objective of computing this ratio is to determine the efficiency with which the capital employed is utilized. COMPONENTS: There are two components of this ratio as follows: i. Net sales: This means gross sales minus sales return. ii. Capital employed: which may be calculated as follows:
Liabilities side approach Equity share capital + Reserve & surplus Miscellaneous expenditure Equity shareholders fund + Preference share capital Shareholders funds + long-term debts Non-trading assets capital employed
Xxx xxx xxx xxx xxx xxx xxx xxx xxx
Assets side approach Net fixed assets + Trade investments + Current assets Total assets current liabilities Capital employed
Note: non-trading assets should not be included while calculating total assets.
Xxx xxx xxx xxx xxx xxx
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COMPUTATION: This ratio is computed by dividing the net sales by the capital employed. The ratio is usually expressed as x number of times. In the form of a formula, this ratio may be expressed as follows: Net sales Capital Turnover Ratio = Capital Employed = . Times
*Net Sales = Cost of goods sold + Gross profit; But here the Total Revenue/ Income of that particular year are considered as the Net Sales. *Capital Employed = Net Fixed Assets + Working capital #Working Capital = Current Assets Current liabilities OR Net Current Assets
CALCULATION:
2570.36 Year 2008: 18096.93 = 0.14 times
2720.82 Year 2009: 18244.57 = 0.15 times
4331.98 Year 2010: 20298.88 = 0.21 times
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4225.25 Year 2011: 18199.08 = 0.23 times
INTERPRETATION: It indicates the firms ability to generate sales per rupee of capital employed. The following are the ratios of 4 years:
2008 0.14 times 2009 0.15 times 2010 0.21 times 2011 0.23 times
Looking at the year 2008 the capital turnover ratio was 0.14 times and the capital turnover ratio in the year 2011 was 0.23 times. In the year 2011 the capital turnover ratio was higher than 2008, so the efficiency is more in the management & in the utilization of capital employed. In 2009 the capital turnover ratio was 0.15 times and the capital turnover ratio in the year 2011 was 0.23 times. Year 2011 was more was more efficient in management & in the utilization of capital. In 2010 the capital turnover ratio was 0.21 times and the capital turnover ratio in the year 2011 was 0.23 times. Year 2011 was more was more efficient in management & in the utilization of capital. 2008, 2009 , 2010 & 2011 On the other hand when the four consecutive years is compared, year 2011 is considered to be the most efficient in generating sales per rupee of capital employed.
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GRAPHICAL REPRESENTATION OF ACTIVITY RATIOS
5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Fixed assets turn over rati Current assets working capital Capital turnover turnover ratio turn over ratio ratio 2008 2009 2010 2011
Ratios in times
Activity ratios
Page 98 of 142
III. PROFITABILITY RATIOS:
PROFITABILITY RATIOS 1. Gross Profit Ratio 2. Operating Ratio 3. Operating Profit Ratio 4. Net Profit Ratio 5. Earnings per Share 6. Return in Investment 7. Return on Share holders fund
1. GROSS PROFIT RATIO: MEANING: Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.
OBJECTIVE: Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from business to business. However, the gross profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends.
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COMPONENTS: The basic components for the calculation of gross profit ratio are gross profit and net sales. Net sales mean that sale minus sales returns. Gross profit would be the difference between net sales and cost of goods sold. Cost of goods sold in the case of a trading concern would be equal to opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases. In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials, wages, direct expenses and all manufacturing expenses. In other words, generally the expenses charged to profit and loss account or operating expenses are excluded from the calculation of cost of goods sold.
COMPUTATION: This ratio is computed by dividing the gross profit by the net sales. It is expressed as percentage. In the form of a formula, this ratio may be expressed as follows: Gross profit Gross Profit Ratio = Net Sales 100 =%
CALCULATION:
2111.65 Year 2008: 2570.36 100 = 82.15%
2166.77 Year 2009: 2720.82 100 = 79.64%
3459.12 Year 2010: 4331.98 100 = 79.80%
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3274.46 Year 2011: 4225.25 100 = 77.49%
INTERPRETATION: Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operation. This ratio indicates (a) an average gross margin on a sale of Rs. 100, (b) the limit beyond which the fall in sales prices will definitely result in losses, and (c) what portion of sales is left to cover operating expenses (other than the cost of goods sold) & non operating expenses (e.g. interest on borrowed funds), to pay dividend and to create reserves.
Looking at the gross profit ratios of last 4 years; it was in a declining mode. From the figures it is found out that year 2008 was having a higher ratio; on the other hand in 2009, 2010 & 2011 it not too low but lower than compared to 2008.
2. OPERATING PROFIT RATIO: MEANING: This ratio measures the relationship between operating profit and net sales.
OBJECTIVE: The main objective of computing this ratio is to determine the operational efficiency of the management.
COMPONENTS: There are two components of this ratio as follows: (a) Operating Profit which is the excess of Gross Profit over other Operating expenses (e.g. office & administrative expenses, selling & distribution expenses, discount, bad debts, interest on short-term debts) andi
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(b) Net sales which mean Gross sales (both cash and credit) minus Sales return.
COMPUTATION: This ratio is computed by dividing the operating profit by Net sales. It is expressed as a percentage. In the form of a formula, this ratio may be expressed as follows: Operating profit Operating profit ratio = Net sales 100 = ..%
CALCULATION: 1677.02 Year 2008: 2570.36 100 = 65.24%
1778.32 Year 2009: 2720.82 100 = 65.35%
3108.17 Year 2010: 4331.98 100 = 71.75%
2845.49 Year 2011: 4225.25 100 = 67.34%
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INTERPRETATION: This ratio indicates (a) an average operating margin earned on a sale of Rs. 100 and (b) what portion of sales is left to cover non-operating expenses, to pay dividend and to create reserve. If we look at the ratios of the last 4 years year 2010 has the highest Operating profit ratio which means that the operating management is efficient. Here the operating profit ratio might have increased due to lower operating expenses as per the income statement. Now coming to year 2008, it was 65.24% which is the lowest among the 4 consecutive years. It implies that the company is not efficient enough. Needs to increase its gross profit and decrease its operating expenses.
3. OPERATING RATIOS: MEANING: The operating ratio is determined by comparing the cost of the goods sold and other operating expenses with net sales.
SIGNIFICANCE: Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns. This ratio is considered to be a yardstick of operating efficiency but it should be used cautiously because it may be affected by a number of uncontrollable factors beyond the control of the firm. Moreover, in some firms, non-operating expenses from a substantial part of the total expenses and in such cases operating ratio may give misleading results.
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COMPONENTS: The two basic components for the calculation of operating ratio are operating cost (cost of goods sold plus operating expenses) and net sales. Operating expenses normally include (a) administrative and office expenses and (b) selling and distribution expenses. Financial charges such as interest, provision for taxation etc. are generally excluded from operating expenses.
COMPUTATION: This ratio is computed by dividing the Operating cost by the Net Sales. It is expressed as a percentage. In the form of a formula, this ratio may be expressed as follows: Operating cost Operating ratio = Net sales OR Operating Ratio= 100- Operating Profit Ratio 100 = %
CALCULATION:
Year 2008: 100 - 65.24% = 34.76% Year 2009: 100 65.35% = 34.65% Year 2010: 100 71.75% = 28.25% Year 2011: 100 67.34% = 32.66%
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INTERPRETATION: This ratio is a test of the efficiency of the management in their business operation. COMPARING THE 2008, 2009 & 2010: 2008 34.76% 2009 34.65% 2010 28.25% 2011 32.66%
Looking at the figures of 2008 and 2009, 2008 has the highest percentage of operating ratio; but this means that the situation is less favorable because there will be smaller margin of profit available for the purpose of payment dividend & creation of reserves.2009 has the lowest operating ratio which means that the position of the company is better because of greater is the profitability and management efficiency of the concern.
If we look at the figure of 2010 which is lower than 2008 which means high profitability and less favorable situation.
4. NET PROFIT RATIOS: MEANING: This ratio measures the relationship between Net profit and Net sales.
OBJECTIVE: The main objective of computing this ratio is to determine the overall profitability due to various factors such as operational efficiency, trading on equity etc.
COMPONENTS: There are two components of this ratio as follows: (a) Net profit (b) Net sales
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COMPUTATION: This ratio is computed by dividing the Net profit by the Net sales. The figure of Net profit may be taken either before tax or after tax. It is expressed as percentage. In the form of a formula, this ratio may be expressed as follows: Net Profit Before tax Net profit ratio = Net sales OR Net Profit After tax Net profit ratio = Net sales Here the second formula has been considered. CALCULATION: 100 = % 100 = . %
1004.09 Year 2008 = 2570.36 100 = 39.06%
1075.22 Year 2009 = 2720.82 100 = 39.51%
2090.50 Year 2010 = 4331.98 100 = 48.25%
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2166.67 Year 2011= 4225.25 100 = 51.27%
INTERPRETATION: This ratio indicates (a) an average net margin earned on dsa sale of Rs. 100 (b) what portion of sales is left to pay dividend and to create reserves, and (c) firms capacity to withstand adverse economic conditions when selling prices is declining, cost of production is rising and the demand for the product is falling. Looking at the figures of the last 4 years; year 2011 had the maximum amount of Net profit ratio with 51.27 %. This implies that higher the ratio, greater is the capacity of the firm to withstand adverse economic conditions. In year 2010 the net profit ratio was less to 48.25 % which means that the company is not able to withstand the adverse economic conditions or may be the demand of the products and services is falling.
5. EARNING PER SHARE: It is expressed by dividing the profits available for equity shares by the number of equity shares. COMPUTATION: Net Profit Less Preference Dividend E.P.S = Number of Equity Shares
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SIGNIFICANCE: It is the most commonly used data which reflects the performance and prospects of the company. It affects the market price of shares. A higher ratio is considered favorable. CALCULATION: 1004.09 YEAR 2008 = 1118.24 = 0.90
1075.22 YEAR 2009 = 1118.24 = 0.96
2090.50 YEAR 2010 = 1230.07 = 1.70
2166.67 YEAR 2011 = 1230.07 = 1.76
INTERPRETATION: In the year 2011 company has maximum EPS (Earning per share) which is 1.76 and is continuously increasing from the previous 3 which have EPS of 1.70, 0.96, and 0.90 respectively.
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Higher the EPS better the performance of company and since the EPS is increasing this shows that the performance of the company is also increasing. We can also predict that over the past four years the earnings of the company is increasing.
6. RETURN IN INVESTMENT: It establishes relationship between profit before interest and tax and capital employed. This ratio is also known as return on capital employed. It measures the overall efficiency and profitability of the business in relation to investment made in the business. Higher the ratio , higher is the overall profitability of the business. COMPUTATION: Profit before interest and tax Return on investment = Capital employed 100 = %
SIGNIFICANCE: It is a measure of overall performance of the business. It shows how efficiently the resources are used in the business. Comparison of performance of one unit with that of the other or performance in one year with that of the other years of the same unit is made possible.
CALCULATION:
1770.5 YEAR 2008 = 18096.93 100 = 9.78%
1639.37 YEAR 2009 = 18244.57 100 = 8.98%
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2641.96 YEAR 2010 = 20298.88 100 = 13.01%
2637.41 YEAR 2011 = 18199.08 100 = 14.5%
INTERPRETATION: Return on investment ratio is considered to be the best measure of profitability in order to assess the overall performance of the business. It indicates how well the management has used the investment made by owners and creditors into the business. As it is seen from the above calculation year 2011 has the best return on investment. And this ratio is more than that of 2010 so the investment made is used more efficiently compared to the last 3 years. So also the profitability of the organization is also increasing. Year 2011 has maximum value of the ratio 14.5% where as 13.01%, 8.98%& 9.78% in the year 2010, 2009& 2008 respectively.
7. RETURN ON SHAREHOLDERS FUND: It is determined by dividing the net profit after deducing income tax and interest on long term loans by the shareholders funds. Here, shareholders funds include preference share capital, equity share capital, all reserve and surplus. It is expressed in percentage. COMPUTATION: Net Profit After Interest and Tax Return on Shareholders funds= Shareholders funds 100
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This ratio is also called as Return on Proprietors Fund or Return on Net Worth. SIGNIFICANCE: It measures the profitability of the business in view of the shareholders. It judges the earning capacity of the company and the adequacy of return on proprietors funds. Shareholders and potential investors are interested in this ratio.
CALCULATION:
1004.09 Year 2008 = 17277.06 100 = 5.81%
1075.22 Year 2009 = 17980.62 100 = 5.97%
2090.50 Year 2010 = 23273.19 100 = 8.98%
2166.67 Year 2011= 24583.89 100 = 8.81%
INTERPRETATION: Higher the ratio better the results. The year 2010 has maximum value 8.98% which decreased a little bit in 2011 to 8.81% and is at 5.97% and 5.81% in 2009 and 2008.The inter firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher.
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GRAPHICAL REPRESENTATION OF PROFITABILITY RATIOS
90 80 70 60 50 40
Ratios in percent
30 20 10 0
2008 2009 2010 2011
Profitability ratios
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IV. SOLVENCY RATIOS:
SOLVENCY RATIOS 1. Debt-equity Ratio 2. Total assets to Debt Ratio 3. Interest coverage Ratio 4. Debt to Total Fund Ratio 5. Proprietary Ratio 6. Fixed assets Ratio 7. Fixed assets to Current assets Ratio
1. DEBT-EQUITY RATIO: The debt equity ratio is calculated to find out the long term financial position of the firm. This ratio indicates the relationship between the long term debts and shareholders funds. If shows the portion between the long term borrowings and owners funds. The soundness of long term financial policies of a firm can be determined with the help of this ratio. Long term debt means a liability payable after one year, such as debentures, loan from long term financial institutions or banks, public deposits, mortgage loan, etc. shareholders funds include equity share capital, preference share capital, general reserves, share premium, capital reserves, dividend equalization fund, other reserves and credit balance of profit and loss account. Accumulated losses and fictitious assets like preliminary expenses, discount on issue of shares and debentures, underwriting commission, share issue expense etc., should be deducted. A debt equity ratio of 2:1 is generally acceptable. If it is higher than this it indicates risky long term financial position.
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COMPUTATION: Debt (Long- term loans) Debt-equity ratio= Shareholders funds or Net worth SIGNIFICANCE: It is an important ratio. It indicates the long term financial position of a business. It help to assess the soundness of long term financial policies of a business. It also helps to determine the relative stakes of outsiders and shareholders. Long term creditors can assess the security of their funds in a business. It indicates to what extent a firm depends on its lenders to meet its long term financial requirements. A low debt equity ratio is considered better from the point of view of creditors CALCULATION: 9956.33 Year 2008 = 17277.06 = 0.57:1
12234.03 Year 2009 = 17980.62 = 0.68:1
13868.22 Year 2010 = 23273.19 = 0.60:1
14569.26 Year 2011= 24583.89 = 0.60:1
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INTERPRETATION: From the view point of creditors a low debt equity ratio is better. Creditors can assess the security of their funds. The ratio of 2011 is 0.60 and of 2010 is also the same so this means that both the years are better for the creditors since company depends more on shareholders to achieve long term financial position. Also year 2009 and 2008 have ratios 0.68 and 0.57 which is also good. Thus the company depends less on lenders and more on shareholders to meet its long term financial requirements. 2. TOTAL ASSETS TO DEBT RATIO: The ratio of Total Assets to Debt Ratio establishes a relationship between total assets and long term debts. The two components of this ratio, i.e., total assets and debt are computed as follows:
(a) Total Assets: total assets includes fixed as well as current assets. However, it does not include fictitious assets like preminary expenses, underwriting commission, share issue expenses, discount on issue of shares/debentures, etc., and debit balance of Profit and Loss account. (b) Long term Debts: Long term debts refers to debt that will mature after one year. It includes debentures, bonds, loans from financial institutions.
COMPUTATION: This ratio is computed by dividing the total assets by long term debts. This ratio is usually expressed as pure ratio, e.g., 2:1.
Total Assets Total Assets to Debt Ratio= Long term Debts
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OBJECTIVE: The objective of computing the ratio is to establish the relationship between the total assets and long term debts of the business. It measures the safety margin available to the providers of long term debts. It measures the extent to which debt is covered by assets. A higher ratio represents higher security to the lenders for extending long term loans to the business. On the other hand, low ratio represents a risky financial position as it means that the business depend heavily on outside loans for its existence.
CALCULATION:
20747.32 Year 2008 = 9956.33 = 2.08:1
22063.08 Year 2009 = 12234.03 = 1.8:1
27714.10 Year 2010 = 13868.22 = 1.78:1
23961.88 Year 2011= 14569.26 = 1.64:1
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INTERPRETATION: In 2008 the ratio was 2.08 and then it is decreasing continuously and reaches to 1.64 in 2011. The ratio was 1.78 and 1.80 in the year 2010 and 2009. As this ratio tells about to what extent debt is covered by assets. A high ratio is expected so 2008 was the best year. Ratio 1.64:1 means debts are covered 1.64 times by the assets and lenders are in secure position but from the data in 2008 lenders are more secured. The decreasing of ratio is not a good sign for the company as well as for the lenders.
3. INTEREST COVERAGE RATIO: This ratio is helpful to determine whether the business can pay interest on long term loans out of profits of the year. The higher ratio is better to protect the interest of lenders. This ratio is also called Debt Service Ratio or Fixed Charges Coverage ratio. The ratio tells how many times the profit covers the interest. It measures the margin of safety for providers of long term loans. The ratio is determined by dividing the profit before interest and taxes by the total interest charges.
Net Profit before Interest and Tax Interest Coverage Ratio= Interest on Long term Loans
SIGNIFICANCE: A long term lender is interested in finding out whether the business is earning sufficient profits to pay interest regularly. The higher the ratio, the better it is from the view point of lenders. If profit is just sufficient to pay the interest , nothing is left out for shareholders. If the
interest coverage ratio is 5, it means the profit is 5 times the interest payment. In other words, if profit declines to 20%, the firm will still be able to pay the interest out of profit.
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CALCULATION:
1770.50 Year 2008 = 572.75 = 3.09:1
1178.34 Year 2009 = 770.97 = 2.13:1
2641.96 Year 2010 = 869.12 = 3.04:1
2637.41 Year 2011= 1002.24 INTERPRETATION: The ability to stay current with interest payment obligations is absolutely critical for a company as a going concern. While the non-payment of debt principal is a seriously negative condition, a = 2.63:1
company finding itself in financial/operational difficulties can stay alive for quite some time as long as it is able to service its interest expenses.
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Higher interest coverage ratio is better from the view point of the lenders. Interest coverage ratio of the four years is 2008-3.09, 2009-2.13, 2010-3.04 & 2011-2.63. The ratio is highest in 2008 which is 3.09:1 this means that the company profit is 3.09 times the interest payment and the company is earning sufficient profit however the ratio decreased in 2009 and 2011 but this does not affect the company too much because still the ratio is high enough.
4. DEBT TO TOTAL FUND RATIO: This ratio is a measure of long term financial strength of a business and is a variant of debt equity ratio. It indicates whether the company is able to meet its liabilities out of its assets.
Long Term Loans Debt to Total Funds Ratio= Shareholders Funds + Long term Loans
SIGNIFICANCE: A higher proportion of long term debt to total funds is risky. It shows the proportion of long term funds that has been raised by way of loans. A higher ratio creates a burden on the firm to pay interest and principal amount on maturity. If profits are reduced, the firm may find it difficult to make the payment. A lower ratio is considered better from the point of view of long term financial position. CALCULATION:
9956.33 Year 2008 = 27233.33 = 0.36:1
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12234.03 Year 2009 = 30214.65 = 0.40:1
13863.22 Year 2010 = 37141.41 = 0.37:1
14569.26 Year 2011= 39153.15 INTERPRETATION: A lower ratio is considered better for the long term financial position. The ratio is lowest in 2008 0.36:1 however in 2010 and 2011 it is 0.37:1 and in 2009 0.40:1. So from this we can say that the firm has the less burden of paying interest and principal on maturity and also reduce in the profit does not affect the company in this perspective. The firm is raising less proportion of funds from loans. = 0.37:1
5. PROPRIETARY RATIO: It is also called Shareholders Equity Ratio to Total Equity Ratio or Net Worth to Total Assets Ratio or Equity Ratio. It compares the shareholders funds to total assets. It is calculated by dividing shareholders funds by total assets .
Shareholders funds Proprietary Ratio= Total Assets Page 120 of 142
Shareholders fund do not includes the reserve maintained for special purposes. The total assets are taken into account but excludes the fictitious assets SIGNIFICANCE: It helps to determine the long term solvency of the company. This ratio measures the protection available to the creditors. Higher the ratio , lesser is the likelihood of insolvency in future, as a management has to use lesser debts and vice-versa. Thus, this ratio is of great importance to the creditors.
CALCULATION:
17277.06 Year 2008 = 20747.32 = 0.83:1
17980.62 Year 2009 = 22063.08 = 0.81:1
23273.19 Year 2010 = 24714.10 = 0.94:1
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24583.89 Year 2011= 23961.88 = 1.02:1
INTERPRETATION: This ratio is also of great importance to creditors. Higher the ratio lesser will be the risk for creditors. The ratio of the four years is as follow:-
2008 0.83
2009 0.81
2010 0.94
2011 1.02
So year 2011 has the highest ratio. The ratio of the remaining three years is also good. This ratio tells about the contribution of the creditors in the business higher the ratio lesser will be the contribution of the creditors.
6. FIXED ASSETS RATIO: This ratio is calculated to know whether or not funds have been arranged from long term sources for purchase of fixed assets. According to sound financial management, fixed assets should be purchased from long term sources of finance. If this ratio is one, it means that fixed assets and long term funds are equal. If this ratio is less than one, it means that the firm has purchased its fixed assets out of short term funds to some extent. In contrast to this, if this ratio is more than one, it means that the firm has used its long term funds to meet the requirements of working capital.
This ratio is calculated is as under:
Long term Funds Fixed Assets Ratio= Net Fixed Assets Page 122 of 142
CALCULATION:
27233.39 Year 2008 = 17376.85 = 1.56:1
30214.65 Year 2009 = 17643.81 = 1.71:1
37141.41 Year 2010 = 16394.93 = 2.26:1
39153.15 Year 2011= 17100.88 = 2.29:1
INTERPRETATION: Fixed asset ratio of 2008 is 1.56:1, 2009 is 1.71:1, 2010 is 2.26:1 and 2011 is 2.29:1.The ratio is constantly increasing from 2008 to2011 and maximum in 2011 i.e. is 2.29:1. If the ratio is more than one then it means that the firm has used its long term funds to meet the requirements of working capital. So as the trend shows the ratio is more than one in all the four years so the firm is using its long term funds.
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7. FIXED ASSETS TO CURRENT ASSETS RATIO: This ratio express the relationship between fixed assets and current assets. With the help of this ratio we can know whether investment in current assets is more or less in comparison to fixed assets. COMPUTATION: Fixed assets Fixed assets to current assets ratio = Current assets
CALCULATION:
17376.85 Year 2008 = 3370.47 = 5.15:1
17643.81 Year 2009 = 4419.27 = 3.99:1
16394.93 Year 2010 = 8319.17 = 1.97:1
17100.88 Year 2011= 6861 = 2.49:1
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INTERPRETATION: The fixed asset to current asset ratio of 2008 is 5.15:1, the ratio of year 2009 is 3.99:1, ratio of 2010 is 1.97:1 and of 2011 is 2.49:1. The ratio is maximum in 2008 i.e. is 5.15 this means that the investment in fixed assets is more as compared to current asset in the year 2008 and is more by 5.15 times . The ratio then decreased in 2009 than again decreased a lot in 2010 then increased in 2011, but in all the four years the investment is more in fixed assets then in current assets. Only the level of investment is decreasing and increasing.
GRAPHICAL REPRESENTATION OF SOLVENCY RATIOS
5 P U R 4 E R 3 A T I 2 O S 1 2008 2009 2010 2011
0 Debt equity Total assets ratio to Debt ratio Interest coverage ratio Debt to Proprietary Fixed Total fund ratio assets ratio ratio Fixed assets to Current assets ratio
SOLVANCY RATIOS
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TREND ANALYSIS
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TREND ANALYSIS
PARTICULAR Current Assets Current Liabilities Net sales Working capital Capital employed Gross profit Operating profit Fixed assets Shareholders Fund Equity Share Capital Net Profit
2008 3370.47 2650.39 2570.36 720.08 10896.93 2111.65 1677.02 17376.85 17277.06 11182.49 1004.09
2009 4419.27 3813.51 2720.82 605.76 18244.57 2166.77 1778.32 17643.81 17980.62 11182.49 1075.22
2010 8319.17 4415.22 4331.98 3903.95 20298.88 3459.12 3108.17 16394.93 23273.19 12300.74 2090.5
2011 6861 5762.8 4225.25 1098.2 18199.08 3274.46 2845.49 17100.88 24583.89 12300.74 2166.67
TREND ANALYSIS PARTICULARS Current Assets Current Liabilities Net sales Working capital Capital employed Gross profit Operating profit Fixed assets Shareholders Fund Equity Share Capital Page 127 of 142 2008 100 100 100 100 100 100 100 100 100 100 2009 131.1 143.9 105.9 84.1 167.4 102.6 106.0 101.5 104.1 100.0 2010 246.8 166.6 168.5 542.2 186.3 163.8 185.3 94.3 134.7 110.0 2011 203.6 217.4 164.4 152.5 167.0 155.1 169.7 98.4 142.3 110.0
Net Profit
100
107.1 208.2 215.8
Current Assets
300 C U R R E N T A S 200 S 150 E T 100 S 50 0 2008 2009 YEARS 2010 2011 250 246.8 203.6 131.1 100 Trendline(Current Assets) Current Assets
Current Liabilities
250 L I 200 C A U B150 R I R L 100 A I N T 50 T I 0 E S 217.4 166.6 143.9 Current Liabilities 100 Trendline(Current Liabilities)
2008
2009 YEARS
2010
2011
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Working capital
600 W O R K I N G C A P I T A L 500 400 300 200 100 100 0 2008 2009 2010 2011 YEARS 84.1 152.5 Working capital Linear (Working capital) 542.2
Capital employed
C A P I T A L E M P L O Y E D 200 180 160 140 120 100 80 60 40 20 0 186.3 167.4 167.0
100
Capital employed Linear (Capital employed)
2008
2009
2010
2011
YEARS
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Gross profit
P R O F I T 180 160 140 120 100 80 60 40 20 0 163.8 155.1
G R O S S
100
102.6 Gross profit Linear (Gross profit)
2008
2009
2010
2011
YEARS
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Operating profit
O P E R A T I N G P R O F I T 200 180 160 140 120 100 80 60 40 20 0 185.3 169.7
100
106.0 Operating profit Linear (Operating profit)
2008
2009
2010
2011
YEARS
Fixed assets
104 102 F I X E D A 100 S S 98 E 96 T 94 S 92 90 2008 2009 2010 2011 YEARS 101.5 100 98.4 Fixed assets Linear (Fixed assets)
94.3
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Shareholders Fund
160 S H A R E H O L D E S 140 120 100 F U N D 80 60 40 20 0 2008 2009 2010 2011 YEARS Linear (Shareholders Fund) Shareholders Fund 100 104.1 134.7 142.3
Equity Share Capital

E Q U I T Y S H A R E C A P I T A L 112 110 108 106 104 102 100 98 96 94 92 110.0 110.0
100
100.0
Equity Share Capital Linear (Equity Share Capital)
2008
2009
2010
2011
YEARS
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Net Profit
250 N E T P R O F I T 208.2 200 150 100 100 50 0 2008 2009 2010 2011 YEARS 107.1 Net Profit Linear (Net Profit) 215.8
SUGGESTIO NS/
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RECOMMEND ATIONS
BASED ON FINDINGS
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FINDINGS
IN RESPECT OF LIQUIDITY RATIOS: After in-depth analysis and comparison 2008s current ratio was comparatively more than 2009 i.e. 1.27 & 1.16 respectively and 2010 also inclined from 2009 to 1.88 and in 2011 the ratio declined to1.19. All are less than the standard norm of 2:1. In 2008 the quick ratio was 1.25 comparatively more than year 2009 with 1.15 and on the other hand 2010 quick ratio is 1.87 and quick ratio of 2011 is 1.18 which is good up to the standard norm of 1:1 showing adequate liquidity.
IN RESPECT OF ACTIVITY RATIOS: In 2008 the fixed assets were decreased over 2009 and 2010 has also decreased over 2009 where as in 2011 the fixed assets increased over 2010. Fixed assets turnover has inclined through the years. Year 2010 was good by 0.26 times. Current assets were increased over the 3 consecutive years from 2008, 2009 & 2010. And then decreased in 2011 Current assets turnover ratio was in the fluctuating trend. 2008 had 0.76 times of turnover as compared to 2009 with 0.61 times 2010 with 0.52 times and 2011 with 0.61 times. Working capital turnover fluctuated from 2008 to 2009 to 2010to 2011. 2009 had the highest turnover of 4.5 times over 2008, 2010 & 2011 with 3.57 times , 1.11times & 3.85 times respectively.
IN RESPECT OF PROFITABILTY RATIOS: Gross profit has been declined through the years from 2008 to 2009 and then increased in 2010 then again decreased in 2011. Thus the gross margin also show a declining trend i.e. 2008 = 82.15 %, 2009 = 79.64% , 2010 = 79.80% & 2011=77.49. 2008 has the highest percentage of operating ratio of 34.76% . Year 2010 has the highest percentage of operating profit ratio of 71.75% over 2008, 2009 & 2011 which means that the operating management is efficient.
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Net profit ratio in 2011 was maximum to 51.27 % implying greater capacity of the firm to withstand adverse economic condition. 2008 has minimum net profit ratio of 39.06% which means that the company is not able to withstand the adverse economic condition. The return from investment is very low in 2009 by 8.98% which is not a good sign for the company.
IN RESPECT OF SOLVENCY RATIO:

Debt-equity ratio was maximum in 2009 i.e is 0.68:1 as compared to the ratio of the year
2008 , 2010 & 2011 which are 0.57 , 0.60 , 0.60 respectively.
2008 has recorded the year having maximum total assets to debt ratio which is very close
to its standard form of 2:1.Then from 2008 the ratio is declining. The ratios are 2.08 , 1.80, 1.78 , 1.64 from 2008 to 2011 respectively
Year 2008 has the maximum interest coverage ratio i.e is 3.09 then it decreases to 2.13 in
2009 , then increases in 2010 to 3.04 then again decreases in 2011 to 2.63.
Debt to total fund ratio is maximum in 2009 which is 0.40:1 where as it is 0.37:1 in both
the years 2010 & 2011 and 0.36:1 in 2008.

Proprietary ratio was maximum in 2011 which increased over the past 3 years from
0.83:1 in 2008 0.81:1 in 2009 and 0.94:1 in 2010 to 1.02:1 in 2011. Fixed assets ratio also has a inclined trend from 2008 to 2011. The ratios are 1.56:1 , 1.71:1 , 2.26:1 , 2.29:1 respectively.
SUGGESTIONS/ RECOMMENDATIONS
There should be increase in investment in NHPC so that more revenue could be generated resulting in more profits.
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There should be improvement in the working process of NHPC because working process of NHPC is conventional & more time consuming. Increasing the performance of the company by regular analysis & monitoring. Ratio analysis will help NHPC to work efficiently in the present cut throat competition era with other telecommunication companies. Regular financial & technical analysis & surveys must be done to improve its financial conditions. Inter-departmental conditions require to be strengthened. Better co-ordination among departments will lead to synergy and increase productivity. As far as ratio analysis is concerned NHPC must use these techniques of standard accounting so as to find out the level of their performance, efficiency, liquidity etc. Better financial planning is required so as to maintain the various budgets & estimates & project implementation.
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CONCLUSIO N
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CONCLUSION:
After doing the financial analysis of NHPC Limited for last four financial years, we have come to following conclusions: The company has maintained a fair liquidity during these financial years. The company has managed its assets very well over these years. The company has posted a good growth in profit due to its advantage over its peers which has one or other adverse effect or production problems with them. Due to the cleaner method of electricity production used it has immense growth prospect. It is being considered as a good future player in the share market and the investors expect good return from the stock in future. It has a greater protection against solvency which makes the stock more attractive for small as well as big investors considering the good growth prospect of the company. If we refer to the trend analysis of NHPC Limited we can say that it is most likely that the sales and the profit will see considerable growth in the coming years. Considering all these things we can say that NHPC Limited has a strong financial position in its industry concerned. It is one of that Public Sector Undertaking which is generating profit. The most clear production method that is used by the company make it stand apart from its peer group and also give the company more future opportunities in todays scenario where the world is moving towards more and more eco friendly production method.
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REFERENCE S& BIBLIOGRAP HY
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REFERENCES
M.Y Khan & P.K. Jain/Financial management/ Financial analysis- Ratio analysis/ R.K Mittal/A.K Jain/Analysis of Financial Statements P.C. Tulsian/Tulsians Accountancy- class XII- cbsc/ Ratio analysis/ pg- 12.1 to 12.178/ 10th revised edition. Wikipedia http://www.tele.net.in/company-stories/item/6237-bsnl-revival-strategies http://www.bsnl.co.in/company/result2010/Accounting%20Policies.pdf http://www.accountingformanagement.com/gross_profit_ratio.htm http://www.accountingexplanation.com/operating_ratio.htm http://www.accountingformanagement.com/operating_ratio.htm http://www.accountingexplanation.com/net_profit_ratio.htm
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http://www.accountingformanagement.com/working_capital_turnover_ratio.htm http://www.accountingformanagement.com/stock_turn_over_ratio.htm
http://en.wikipedia.org/wiki/Debtor_collection_period http://in.advfn.com/Help/debt-collection-period-302.html http://www.accountingformanagement.com/fixed_assets_turnover_ratio.htm
BIBLIOGRAPHY
Websites:
www.google.com www.scribe.com www.nhpcindia.com
Financial reports of the company: Balance sheets of 2008-2009, 2009 2010 & 2010-2011 Profit & loss a/c of 2008- 2009, 2009 2010 & 2010-2011
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(A Government of India enterprise)

SUMMER INTERNSHIP REPORT ON RATIO ANALYSIS WITH RESPECT TO N.H.P.C

APEEJAY INSTITUTE OF TECHNOLOGY, GREATER NOIDA

Prof. D.N BAJPAI DIRECTOR AIT-School of Management

2. Power Sector in India 3. Introduction about PHEP Stage-II

4. Objective of the Study 5. Research Methodology

62 63 64-75 76 77-78 79-124

125-131 132-135 136-137 138-140

NHPC LTD. (INDIA)

NATIONAL HYDRO POWER CORPORATION LIMITED (INDIA)

Type Industry Founded

Public company(BSE: 533098,NSE: NHPC) Electric utility 1975

HYDRO SCENERIO IN INDIA

Basin/Rivers Indus Basin Ganga Basin Central Indian River system

Probable Installed Capacity (MW) 33,832 20,711 4,152

NEED FOR A HYDRAL POLICY

Advantages of Hydro Power

To achieve international standards of excellence in all aspects of hydro power and

To maximize creation of wealth through generation of internal funds and effective

CAPITAL STRUCTURE: FINANCIAL PROFILE

JOINT VENTURE OPERATIONS

Loktak Manipur 2 * 33 Downstream Indira Sagar Madhya 8 * 125 Pradesh

Loktak Manipur 2*33 downstream Total

PROJECTS UNDER CONSTRUCTION

States H.P. J&K Assam J&K H.P. West Bangal

PROJECTS AWATING CLEARENCE AND INVESTIGATION

Total Status Capacity

H.P. Manipur J&K H.P. J&K Sikkim H.P.

Indira Sagar* M.P.

* NHDC - A Joint venture between NHPC & Govt. of Madhya Pradesh

LOCATION MAP OF NHPC PROJECTS

THE HUMAN RESOURCE DEVELOPMENT

YEARLY SALES OF NHPC

Sale & Revenue (Million Rs.)

BALANCE SHEET OF NHPC LTD.

PROFIT AND LOSS ACCOUNT

PROFIT AND LOSS ACCOUNT (cont.)

HR POLICIES / RULE IN NHPC

POWER SECTOR IN INDIA

ENERGY POLICY IN INDIA

Strengths and opportunities in the sector

Power for ALL by 2012

POWER SECTOR AT A GLANCE

State sector Central sector Private sector Total

76115.67 48970.99 22878.75 147965.41

% 52.5 34.0 13.5 100

PARBATI HYDROELECTRICITY PROJECT

PARBATI STAGE- II H.E. PROJECT

LOCATION MAP OF PHEP-II

PARBATI PROJECT-II (A PROFILE)

PARBATI PROJECT-II (A PROFILE)

PARBATI PROJECT-II (A PROFILE)

OBJECTIVES OF THE STUDY

OBJECTIVE OF THE STUDY

The main objective of the study:

Conclusion based on findings.

STATISTICAL TOOL USED

SWOT ANALYSIS OF NHPC

STEPS IN RATIO ANALYSIS

3. The INTERPRETATION, drawing of inferences, report writing and conclusions are

BASIS OR STANDARDS OF COMPARISONS

NATURE OF RATIO ANALYSIS

INTERPRETATION OF THE RATIOS