INTRODUCTION

OVERVIEW OF FINANCIAL ANALYSES

Meaning of Financial Statement Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: The Balance Sheet Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm Meaning of Financial Analysis The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection, relation and evaluation.

Features of Financial Analysis To present a complex data contained in the financial statement in simple and understandable form. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various

conclusions. Purpose of Analysis of financial statements To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of mgt. To provide useful information to mgt Procedure of Financial Statement Analysis The following procedure is adopted for the analysis and interpretation of financial statements:2

The analyst should acquaint himself with principles and postulated of accounting. He should know the plans and policies of the managements that he may be able to find out whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided. If the aim is find out. Earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary.

The financial data be given in statement should be recognized and rearranged. It will involve the grouping similar data under same heads. Breaking down of individual components of statement according to nature. The data is reduced to a standard form. A relationship is established among financial statements with the help of tools & techniques of analysis such as ratios, trends, common size, fund flow etc.

The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for help indecision making.

The conclusions drawn from interpretation are presented to the management in the form of reports.

OBJECTIVES OF THE STUDY

To know the organizational structure of bharat heavy electrical limited To know the operations of bharat heavy electrical limited, haridwar. To know the Financial Statement of the Company and to know its investment in different sectors.

To know the techniques which were prevailing and used in the company for maintaining its profit as it was in loss.

To know the capital structure of bharat heavy electrical limited To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.

RESEARCH METHODOLOGY
Research is defined as a systematic, gathering recording and analysis of data about problem relating to any particular field. It determines strength reliability and accuracy of the project.

1. Research Design: Research Design pertains to the great research approach or strategy adopted for a particular project. A research project has to be the conducted scientifically making sure that the data is collected adequately and economically. The study used a descriptive research design for the purpose of getting an insight over the issue. It is to provide an accurate picture of some aspects of market environment. Descriptive research is used when the objective is to provide a systematic description that is as factual and accurate as possible. 2. Method of Data Collection: Secondary Data: Through the internet and published data

COMPANY PROFILE
BHEL was founded in 1950s. Bharat Heavy Electricals Limited-BHEL, has today emerged as the largest engineering and manufacturing enterprise of its kind in India and ranks amongst the top ten power generation equipment manufacturers in the world. With a massive network of 14 manufacturing Units located at various important centers all over India, BHEL manufactures almost all critical high technology products required for power sector like Gas Turbines, Steam Turbines, Turbo generators, Boilers, Pumps and Heat exchangers, Pulverisers and electrical switch gears. BHEL is one of the largest exporters of engineering products & services from India. BHEL has established its references in around 60 countries of the world, ranging from the United States in the West to New Zealand in the Far East. Its export range include: individual products to complete power stations, turnkey contracts for power plants, EPC contracts, HV/EHV Substations, O&M services for familiar technologies, specialized after-market services like Residual Life Assessment (RLA) studies and retrofitting, refurbishing & overhauling, and supplies to manufacturers & EPC contractors. BHEL has acquired certifications to Quality Management Systems (ISO 9001), Environmental Management Systems (ISO 14001) and Occupational Health & Safety Management Systems (OHSAS 18001) and is also well on its journey towards Total Quality Management. The company recorded revenues of INR 2,160,800 million (approximately $53,674.3 million) in the fiscal year ended March 2007, an increase of 15.3% over 2006. Its net profit was INR281,500 million (approximately $6,992.5 million) in fiscal year 2007, an increase of 16.6% over 2006.

VISION A World-class Engineering Enterprise Committed to enhancing Stakeholder Value. MISSION To be an Indian Multinational Engineering Enterprise providing Total Business Solutions through Quality Products, Systems and Services in the fields of Energy, Industry, Transportation, Infrastructure and other potential areas. The greatest strength of BHEL is its highly skilled and committed 43,636 employees. Every employee is given an equal opportunity to develop himself and grow in his career. Continuous training and retraining, career planning, a positive work culture and participative style of management all these have engendered development of a committed and motivated workforce setting new benchmarks in terms of productivity, quality and responsiveness.

MAIN RECENT FEATURES OF THE COMPANY Power Generation: In Power generation segment, BHEL is the largest manufacturer in India supplying wide range of products & systems for thermal, nuclear, gas and hydro-based utility and captive power plants. BHEL has the capability to execute power projects on turnkey/EPC basis from concept-tocommissioning. BHEL supplies steam turbines, generators, boilers and matching auxiliaries up to 800 MW ratings, including sets of 660/700/800 MW based on supercritical technology. BHEL has facilities to go up to 1000 MW unit size. To make efficient use of high ash content coal available in India, BHEL also supplies circulating fluid based bed combustion (CFBC) boilers for thermal plants. BHEL is the only Indian company capable of manufacturing large-size gas based power plant equipment, comprising of

advanced-class gas turbines up to 289 MW (ISO) rating for open and combined-cycle operations. BHEL engineers and manufactures custom-built hydro power equipments. Its range covers turbines of Francis, Pelton and Kaplan runners, pump turbines, bulb turbines and mini-micro hydro plants, with matching generators, for different head-discharge combinations. With realization of enhanced capability, the company is well positioned to capitalise on growing demand for power plant equipment in the country. Industries BHEL is a leading manufacturer of a variety of Industrial Systems & Products to meet the demand of a number of industries, like metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals etc besides Captive / Industrial utilities. BHEL has supplied systems and individual products including a large number of cogeneration Captive power plants, Centrifugal compressors, Drive Turbines, Industrial boilers and auxiliaries, Waste heat recovery boilers, Gas turbines, Pumps, Heat exchangers, Electrical machines, Valves, Heavy castings and forgings, Electrostatic precipitators, ID/FD fans, Seamless steel tubes etc. to a number of industries other than power utilities. BHEL has also emerged as a major supplier of controls and instrumentation systems, especially distributed digital control systems for various power plants and industries. The Industry business sector of the company is fully geared to execute EPC contracts for captive power plants from concept to commissioning. Transportation Most of the trains of Indian Railways, whether electric or diesel powered, are equipped with BHELs traction propulsion system and controls. The range includes traction motors, traction generators/alternators, transformers, substation equipment, vacuum circuit breakers, locomotive

bogies, smoothening reactors, exciters, converters, inverters, choppers and associated control equipment, viz. master controllers, chopper controllers, brake and door equipment, electronic controls including software based controls extending to rolling stock and other transport applications. The systems supplied are both with the conventional DC and state-ofthe-art AC drives. Indias first underground metro at Kolkata runs on drives and controls supplied by BHEL. Almost all the EMUs in service are equipped with electrics manufactured and supplied by BHEL. BHEL has proved once again its capabilities and technological excellence by successfully establishing itself as an indigenous manufacturer of energy efficient IGBT based propulsion system for AC drives, a landmark achievement in transportation sector. BHEL has also diversified into the area of track maintenance machines and coach building for Indian Railways and undertakes retrofitting and overhauling of rolling stock. Renewable Energy In conformity with its concern for the environment, BHEL has been contributing to the national effort for developing and promoting renewable energy based products on a sustained basis. Starting from small applications like Solar Powered Street Lighting, Rural Water Pumping Systems, Railway signalling, Offshore. Drilling Platforms, etc., BHEL has supplied and commissioned large size stand-alone as well as Gridinteractive Solar Power Plants. With an aim to perform a significant role in National Solar Missions proposed target of 20,000 MW of grid connected solar power, BHEL signed an agreement with Abengoa, Spain, a leader in solar projects to provide EPC solutions in Concentrated Solar Thermal Power (CSP) areas. The company is working jointly with IOCL and IIT-Rajasthan for development work of product and systems in the Concentrated Solar Power (CSP) area. A new record has been set by installing 15MWp Grid Interactive Solar Photo Voltaic

(SPV) plants across the country. In the context of Jawaharlal Nehru National Solar Mission, BHEL is executing the orders for Renovation and Operation & Maintenance of SPV plants (aggregate 2.15MWp) at various Islands of Lakshadweep. Oil and Gas BHEL possesses expertise to design, manufacture and service various types of onshore rigs to suit the Indian service conditions. The range of equipment covers onshore deep drilling rigs, super-deep drilling rigs, helirigs, work-over rigs, mobile rigs and desert rigs with matching draw works and hoisting equipment. BHEL now has the capability to manufacture conventional on shore deep drilling rigs up to a depth of 9,000 meters, mobile rigs to a depth of 3,000 meters and well servicing rigs to a well depth of 6,100 meters. The company is in the process of manufacturing environment friendly AC technology based oil rings for on shore application. Transmission BHEL has significant presence in the field of power transmission in India with a wide range of transmission systems and products. The products manufactured by BHEL include Power transformers, Instrument transformers, Dry type transformers, Shunt reactors, Vacuum and SF6 switchgear, Gas insulated switchgears, Ceramic insulators, etc. Major critical hardware such as capacitor banks, circuit breakers, control and protection equipment and thyristor valves are in its manufacturing range. International Business BHEL has, over the years, established its references in 75 countries across all inhabited continents of the world. These references encompass almost the entire range of BHEL products and services, covering

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Thermal, Hydro and Gas-based turnkey power projects, Substation projects, Rehabilitation projects, besides a wide variety of products like Transformers, Compressors, Valves, Oil field equipment, Electrostatic Precipitators, Photovoltaic equipment, Insulators, Heat Exchangers, Switchgears, Castings and Forgings etc. Technology Up-gradation, Research & Development BHELs products and systems are technology intensive and the company emphasizes on R&D/technology development in its endeavor to realize its strategic aspiration of becoming engineering conglomerate. Accordingly BHEL pursued the strategy of in-house product development by encouraging innovation in line with the Decade of Innovations (2010-2020) declared by Govt. of India. As a major step towards this, the company has updated its R&D policy. Significantly during 201112, BHEL invested ` 1,198.82 Crore on R&D efforts 22% higher than the previous year. BHELs efforts for encouraging innovation have resulted in raising BHELs IPR capital tally to 1786 with highest ever IPRs (351 no.) filed during 2011-12. A growth of 26% over last year has been recorded in turnover of 9,832 Crore from in house developed products and services. BHEL has been ranked the Ninth Most Innovative Company in the world by the renowned US business magazine Forbes. Significantly, BHEL is the only Indian engineering company on the list, and is ranked much higher than similar multinational companies in the power equipment field. Human Resource Development Institute Guided by the HRD Mission statement To promote and inculcate a value-based culture utilizing the fullest potential of Human Resources for achieving the BHEL Mission, the HRDI through a step by step strategic long term training process and several short term need based programmes based on comprehensive

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organisational research, enables the human resources to unearth and hone their potential. in EDN, Bangalore and Emergency Solar lighting at the main receiving stations at HPEP Hyderabad during 2011-12. In bid to ensure green supply chain, Study of Supply Chain Management was completed at Hyderabad unit. Energy audit was completed in Insulator Plant, Jagdishpur; EPD, Bangalore and HPEP Hyderabad units. Corporate Social Responsibility BHEL has developed a CSR scheme and its Mission Statement on CSR is Be a Committed Corporate Citizen, alive towards its Corporate Social Responsibility. BHEL has adopted a CSR Policy in line with the CSR Guidelines issued by Department of Public Enterprises. Participation in the UNs Global Compact Programme: As the worlds largest global corporate citizenship initiative, the Global Compact Program is the first and the foremost concern which is exhibiting and building the social legitimacy of business and markets. BHEL has continued to play a prominent part in the United Nations Global Compact Programme on CSR by promoting the core values on human rights, labour standards, environment and anti-corruption and intends to advance these principles forming part of its strategy & culture within its sphere of influence. BHEL demonstrated its commitment through regular pooling of communication of progress (COP) on the UNGC website. BHEL periodically submits annual Communication of Progress on the relevant principle of global compact in respect of Environmental issues.

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METHODS OF FINANCIAL ANALYSIS

A number of methods can be used for the purpose of analysis of financial statements. These are also termed as techniques or tools of financial analysis. Out of these, and enterprise can choose those techniques which are suitable to its requirements. The principal techniques of financial analysis are: a. Comparative Financial Statements. b. Ratio Analysis. c. Trend Analysis. d. Cash Flow Statement. e. Common size Statement. COMPARATIVE FINANCIAL STATEMENTS When financial statements figures for two or more years are placed side-side to facilitate comparison, these are called comparative Financial Statements. Such statements not only show the absolute figures of various years but also provide for columns to indicate to increase or decrease in these figures from one year to another. In addition, these statements may also show the change from one year to another on percentage form. Such cooperative statements are of great value in forming the opinion regarding the progress of the enterprise.

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PURPOSE OR UTILITY OR IMPORTANCE OF COMPARATIVE STATEMENTS i. ii. iii. iv. v. To make the Data simpler and more understandable. To indicate the Trend. To indicate the strong points weak points of the concern. To compare the firms performance with the average performance of the industry. To help in forecasting. FORMS OF PRESENTING COMPARATIVE STATEMENTS i. To show only the absolute data of various items or in other words to show only rupee amounts of various items. ii. iii. iv. v. To show the increases and decreases in data in terms of money values. To show the increases and decreases in data in terms of percentages. Comparison expressed in ratios. Use of cumulative figures and averages.

COMPARATIVE BALANCE SHEET The Comparative Balance Sheet as on two or more different dates can be prepared to show the increase or decrease in various assets, liabilities and capital. Such a comparative Balance Sheet is very useful in studying the trends in a business enterprise.

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ADVANTAGES OF COMPARATIVE BALANCE SHEET i. ii. iii. iv. Helpful for comparison. Helpful in knowing changing in the size of items. Helpful in knowing trends. Link between income statement and Balance sheet. COMPARATIVE PROFIT & LOSS ACCOUNT Profit and loss account shows the net profit or net loss of a particular year whereas comparative profit and loss account for a number of years provides the following information1.Rate of increase or decrease in gross profit. Rate of increase or decrease in operating profit. Rate of increase or decrease in cost of goods sales. Rate of increase or decrease in net profit. Rate of increase or decrease in sales.

TREND ANALYSIS Trend percentage are very useful is making comparative study of the financial statements for a number of years. These indicate the direction of movement over a long time and help an analyst of financial statements to form an opinion as to whether favorable or unfavorable tendencies have developed. This helps in future forecasts of various items.

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For calculating trend percentages any year may be taken as the base year. Each item of base year is assumed to be equal to 100 and on that basis the percentage of item of each year calculated. RATIO ANALYSIS MEANING: Absolute figures expressed in financial statements by themselves are meaningfulness. These figures often do not convey much meaning unless expressed in relation to other figures. Thus, it can be say that the relationship between two figures, expressed in arithmetical terms is called a ratio.

TYPES OF RATIOS Proportion or Pure Ratio or Simple ratio. Rate or so many Times. Percentage Fraction. OBJECTS AND ADVANTAGES OR USES OF RATIO ANALYSIS Ratios are worked out to analyze the following aspects of business organization Solvency1) Long term 2) Short term 3) Immediate

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 Stability Profitability Operational efficiency Credit standing Structural analysis Effective utilization of resources Leverage or external financing LIMITATION OF RATIO ANALYSIS False accounting data gives false ratios Comparisons not possible of different firms adopt different accounting policies. Ratio analysis becomes less effective due to price level change Ratios may be misleading in the absence of absolute data. Limited use of a single Ratio. Window-Dressing Lack of proper standards. Ratio alone are not adequate for proper conclusions Effect of personal ability and bias of the analyst.

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CLASSIFICATION OF RATIOS Based on Financial Statement Accounting ratios express the relationship between figures taken from financial statements. Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of classification of ratios is based upon the sources from which are taken. 1] Balance sheet ratio: If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios. E.g. Ratio of current assets to current liabilities or Debt to equity ratio. While calculating these ratios, there is no need to refer to the Revenue statement. These ratios study the relationship between the assets & the liabilities, of the concern. These ratios help to judge the liquidity, solvency & capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio. 2] Revenue ratio: Ratio based on the figures from the revenue statement is called revenue statement ratios. These ratios study the relationship between the profitability & the sales of the concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio, Stock turnover ratio. 3] Composite ratio: These ratios indicate the relationship between two items, of which one is found in the balance sheet & other in revenue statement. There are two types of composite ratiosa) Some composite ratios study the relationship between the profits & the investments of the concern. E.g. return on capital employed, return on proprietors fund, return on equity

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capital etc. b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend payout ratios, & debt service ratios Based on Function: Accounting ratios can also be classified according to their functions in to liquidity ratios, leverage ratios, activity ratios, profitability ratios & turnover ratios. 1] Liquidity ratios: It shows the relationship between the current assets & current liabilities of the concern e.g. liquid ratios & current ratios. 2] Leverage ratios: It shows the relationship between proprietors funds & debts used in financing the assets of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios. 3] Activity ratios: It shows relationship between the sales & the assets. It is also known as Turnover ratios & productivity ratios e.g. stock turnover ratios, debtors turnover ratios. 4] Profitability ratios: a) It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios, operating net profit ratios, expenses ratios b) It shows the relationship between profit & investment e.g. return on investment, return on equity capital. 5] Coverage ratios: It shows the relationship between the profit on the one hand & the claims of the outsiders to be paid out of such profit e.g. dividend payout ratios & debt service ratios.

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Based on User: 1] Ratios for short-term creditors: Current ratios, liquid ratios, stock working capital ratios 2] Ratios for the shareholders: Return on proprietors fund, return on equity capital 3] Ratios for management: Return on capital employed, turnover ratios, operating ratios, expenses ratios 4] Ratios for long-term creditors: Debt equity ratios, return on capital employed, proprietor ratios.

COMMONSIZE STATEMENTS A company financial statement that displays all items as percentages of a common base figure. This type of financial statement allows for easy analysis between companies or between time periods of a company. The values on the common size statement are expressed as percentages of a statement component such as revenue. While most firms don't report their statements in common size, it is beneficial to compute if you want to analyze two or more companies of differing size against each other.

Formatting financial statements in this way reduces the bias that can occur when analyzing companies of differing sizes. It also allows for the analysis of a company over various time periods, revealing, for example, what percentage of sales is cost of goods sold and how the value has changed over time

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Consolidated Balance Sheet of BHEL as on 31st March 2012

I. EQUITY AND LIABILITY 31/03/2012 (Rs)

1)Shareholders Fund a)Share Capital b) Reserves and Surplus 2) Non Current Liabilities a) Long term borrowings b) Other Long Term borrowings c) Long Term Provisions 3)Current Liabilities a) Short Term Borrowings b) Trade Payables c) Other Current Liabilities d) Short Term Provisions TOTAL 10271.31 15815.93 2635.69 28722.93 66776.02 123.43 7550.77 5005.68 12679.68 489.52 24883.69 25373.21

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II ASSETS 1) Non Current Assets a) Fixed Assets i) Tangible Assets ii) Intangible Assets iii) Capital Work in Progress iv) Intangible Assets under development b) Non Current Investments c) Deferred Tax Asset d) Long term Loans and Advances e) Other Non Current Assets 2) Current Assets a) Inventories b) Trade Receivables c) Cash and Cash Equivalents d) Short Term Loans and advances e) Other Current Assets
TOTAL

31/03/2012 (Rs)

4160.72 136.09 1324.63 22.98 461.67 1546.24 900.10 9508.65 12416.66 5644.42

13444.50 26336.13 6671.98 2111.72 150.61 48714.94 66776.02

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Consolidated Statement of Profit and loss of BHEL for the year ended 31st March 2012 31/03/2012 (Rs) 50,260.81 2,530.22 47,730.59 1,265.55 823.2 49,819.34 25,113.12 510.25 5,465.83 3,830.21 0 3,831.25 0 38,750.66 9,803.13 11,068.68 51.28 11,017.40 800 0 10,217.40 -19.25 10,198.15 3,262.30 7,039.96 13,637.54 0 1,566.47 254.12

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 Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ordinary Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax

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RATIO ANALYSIS OF THE BALANCE SHEET of BHEL

Current Ratio = Current Assets ---------------------Current Liabilities

48714.94 = ------------28722.93 = 1.696 The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. The components of current ratio (current assets and current liabilities) can be used to derive working capital (difference between current assets and current liabilities). Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio of sales.

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Acid Test Ratio = Quick Assets ---------------------Quick Liabilities 35119.83 = ------------10271.31 = 3.419

Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Furthermore, if the acid-test ratio is much lower than the working capital ratio, it means current assets are highly dependent on inventory. Retail stores are examples of this type of business. The term comes from the way gold miners would test whether their findings were real gold nuggets. Unlike other metals, gold does not corrode in acid; if the nugget didn't dissolve when submerged in acid, it was said to have passed the acid test. If a company's financial statements pass the figurative acid test, this indicates its financial integrity.

Stock Stock working capital ratio = Working Capital 13444.50 = ---------------19390.55 = 0.693

This Ratio indicated the component of Inventories in the Working Capital of any companies balance sheet.

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Proprietary Ratio = Shareholders Funds ----------------------Total Assets

25373.21 = ---------------66776.02 = 0.380 This is a variant of the debt-to-equity ratio. It is also known as equity ratioor net worth to totalassets ratio.This ratio relates the shareholder's funds to total assets.Proprietary / Equity ratio indicates the long-term or future solvency position of the business.

Shareholder'sfundsinclude equity share capital plus all reserves and surpluses items. Total assets include all assets, including Goodwill. Some authors exclude goodwill from total assets. In that case the total shareholder'sfundsare to be divided by total tangible assets. As the total assets are always equal to total liabilities., the total liabilities, may also be used as the denominator in the above formula. This ratio throws light on the general financial strength of the company. It is also regarded as a test of the soundness of the capital structure. Higher the ratio or the share of shareholders in the total capital of the company, better is the long-term solvency position of the company. A low proprietary ratiowill include greater risk to the creditors.

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Debt Equity Ratio = Long Term Loans ---------------------Shareholders Funds = 7674.2 -------------25373.21

= 0.302 The two basic components of debt to equity ratioare outsiders funds i.e. external equities and share holders funds, i.e., internal equities. The outsiders funds include all debts /liabilities tooutsiders, whetherlong termor short term or whether in the form of debentures, bonds, mortgages or bills. The shareholders funds consist of equity share capital, preference share capital, capital reserves, revenue reserves, and reserves representing accumulated profits and surpluses like reserves for contingencies, sinking funds, etc. The accumulated losses and deferred expenses, if any, should be deducted from the total to find out shareholder's funds Debt to equity ratioindicates the proportionate claims of owners and the outsiders against the firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. However, the interpretation of the ratio depends upon the financial and business policy of the company. The owners want to do the business with maximum of outsider's funds in order to take lesser risk of their investment and to increase theirearnings(per share) by paying a lower fixed rate of interest to outsiders. The outsiders creditors) on the other hand, want that shareholders (owners) should invest and risk their share of proportionate investments. A ratio of 1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or standard norm for all types of businesses. Theoretically if the owners interests are greater than that of creditors, the financial position is highly solvent. Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or

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shareholders funds. It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company. Debt to equity ratio indicates the proportionate claims of owners and the outsiders against the firms assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. However, the interpretation of the ratio depends upon the financial and business policy of the company. The owners want to do the business with maximum of outsider's funds in order to take lesser risk of their investment and to increase their earnings (per share) by paying a lower fixed rate of interest to outsiders. The outsiders creditors) on the other hand, want that shareholders (owners) should invest and risk their share of proportionate investments. A ratio of 1:1 is usually considered to be satisfactory ratio although there cannot be rule of thumb or standard norm for all types of businesses. Theoretically if the owners interests are greater than that of creditors, the financial position is highly solvent. In analysis of the long-term financial position it enjoys the same importance as the current ratio in the analysis of the short-term financial position.

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TREND ANALYSIS OF BALANCE SHEET

Sources of Funds Total Share Capital Equity Share Capital Reserves Net worth Unsecured Loans Total Debt Total Liabilities 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 Current Liabilities Provisions Total CL & Provisions Net Current Assets Total Assets 31/03/2012 (Rs) 489.52 489.52 24,883.69 25,373.21 123.43 123.43 25,496.64 31/03/2011 (Rs) 489.52 489.52 19,664.32 20,153.84 163.35 163.35 20,317.19

100 100 126.5423 125.8976 75.56168 75.56168 125.4929

100 100 100 100 100 100 100

9,729.62 5,409.83 4,319.79 1,324.63 461.67 13,444.50 26,336.13 6,671.98 46,452.61 14,217.32 0 60,669.93 33,638.01 7,641.37 41,279.38 19,390.55 25,496.64

8,049.30 4,648.82 3,400.48 1,762.62 439.17 10,963.03 27,354.62 1,430.15 39,747.80 13,267.07 8,200.00 61,214.87 31,469.58 15,030.37 46,499.95 14,714.92 20,317.19

120.8754 116.37 127.0347 75.1512 105.1233 122.6349 96.27672 466.5231 116.8684 107.1625 0 99.10979 106.8906 50.83953 88.77296 131.7748 125.4929

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

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COMPARATIVE BALANCE SHEET

Sources of Funds Total Share Capital Equity Share Capital Reserves Net worth Unsecured Loans Total Debt Total Liabilities

31/03/2012 (Rs.) 489.52 489.52 24883.69 25373.21 123.43 123.43 25496.64 31/03/2012 (Rs.) 9729.62 5409.83 4319.79 1324.63 461.67 13444.50 26336.13 6671.98 46452.61 14217.32 0.00 60669.93 33638.01 7641.37 41279.38 19390.55 25496.64

31/03/2011 (Rs.) 489.52 489.52 19664.32 20153.84 163.35 163.35 20317.19 31/03/2011 (Rs.) 8049.30 4648.82 3400.48 1762.62 439.17 10963.03 27354.62 1430.15 39747.80 13267.07 8200.00 61214.87 31469.58 15030.37 46499.95 14714.92 20317.19

(Increase)/Decrease 0.00 0.00 (5219.37) (5219.37) 39.92 39.92 (5179.45)

% (Increase)/Decrease 0.00 0.00 (26.54) (25.90) 24.44 24.44 (25.49)

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 Current Liabilities Provisions Total CL & Provisions Net Current Assets Total Assets

% (Increase)/Decrease (Increase)/Decrease (1680.32) (20.88) (761.01) (16.37) (919.31) (27.03) 437.99 24.85 (22.50) (5.12) (2481.47) (22.63) 1018.49 3.72 (5241.83) (366.52) (6704.81) (16.87) (950.25) (7.16) 8200.00 100.00 544.94 0.89 (2168.43) (6.89) 7389.00 49.16 5220.57 11.23 (4675.63) (31.77) (5179.45) (25.49)

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COMMONSIZE BALANCE SHEET

31/03/2012 (Rs.) 489.52 489.52 24883.69 25373.21 123.43 123.43 25496.64 31/03/2011 (Rs.) 489.52 489.52 19664.32 20153.84 163.35 163.35 20317.19

Sources of Funds Total Share Capital Equity Share Capital Reserves Net worth Unsecured Loans Total Debt Total Liabilities 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 Current Liabilities Provisions Total CL & Provisions Net Current Assets Total Assets

31/03/2012 31/03/2011 1.920 2.409 1.920 2.409 97.596 96.787 99.516 99.196 0.484 0.804 0.484 0.804 100 100

9729.62 5409.83 4319.79 1324.63 461.67 13444.50 26336.13 6671.98 46452.61 14217.32 0.00 60669.93 33638.01 7641.37 41279.38 19390.55 25496.64

8049.30 4648.82 3400.48 1762.62 439.17 10963.03 27354.62 1430.15 39747.80 13267.07 8200.00 61214.87 31469.58 15030.37 46499.95 14714.92 20317.19

38.160 21.218 16.943 5.195 1.811 52.730 103.293 26.168 182.191 55.762 0.000 237.953 131.931 29.970 161.901 76.051 100.000

39.618 22.881 16.737 8.676 2.162 53.959 134.638 7.039 195.636 65.300 40.360 301.296 154.891 73.979 228.870 72.426 100.000

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FINDINGS
The current ratio is 1.69:1 as compared to the standard ratio of 2:1 The acid test ratio is 3.419:1 as compared to the standard ratio of 1:1 The Stock to working capital Ratio is 0.693:1 hence working capital has more than 60% portion of stock in it. The Debt Equity ratio is 0.302:1 as compared to the standard of 2:1 The reserves have increased by 26.54% from last year. The unsecured loans have decreased by 24.44% from last year. The fixed assets have increased by 27.03% from last year. The inventories have increased by 22.63% from last year. The provisions have decreased by 49.16% from last year. Net current assets i.e working capital has increased by 31.77% from last year. The total assets and total liabilities have increased by 25.49% from last year. There a fixed depsoit this year which was not there on the asset side.

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RECOMMENDATIONS
The current ratio is less than the standard ratio and hence it means that current assets are not double than the liablities which it should be. The company should take measures to increase current assets or decrease current liabilites. The acid test ratio is much more than the standard ratio hence it means that quick assets are much more than the quick liabilites. The company should take steps to decrease some quick assets like debtors or cash. It also means that companies cash turnover is less this year. The stock to working capital ratio indicated the quantity of stock in the working capital. Here we can see that stock has a huge portion in the working capital. It is unfavourable for the company as stock is a non quick asset and may also contain bsolete items which cannot be converted into cash immediately. The debt equity ratio is lower than the standard prescribed by the market. Hence Company is well balanced but can have even more long term loans as the cost of these loans is surely less than equity shares. There is a good amount profits as we can see than reserves have increased by 26.45%. Also the analysis of note of reserves and surplus also tells us than dividend has also been issued properly and even more than last year. There is a decrease in long term unsecured loans which is a good sign for the equity shareholders as they can enjoy more profits and dividends. Even the company is a Govt Co. and thus it giving public proper returns

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There is pattern of expansion which can be noticed as there is increase in fixed assets have increased by 27.03% from last year. Company is growing its business plus there is also can increase in intangible assets under development and intangible assets. The company shoud continue its growth.

The inventories have increased which means that it is occupying more portion in working capital and hence it should be reduced by the company. This also proves that company has a lot of unsold stock or unproceessed stock.

The provisions include payable dues which are decreased which is a good sign for the company and company should follow this trend.

The working capital of the company has increased which is avery good sign of companies growth. The company is prospering and should continue to do that for the benefit of it stakeholders.

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CONCLUSION
Bharat Heavy Electrical Ltd seems to be progressing with leaps and bounds. It is one of the few government companies which has shown and given good results in the past few years. I conclude that it is not very good as the current assets are in the form of inventories and debtors and inventories are least liquid current assets. So maintaining the inventories are relatively costly affair for the company and the management must have to investigate properly. It is very necessary so that fund should not be blocked unreasonably. Efficient inventory management is required in BHEL..On seeing the leverage position of the BHEL, I conclude that it is very good as the stake of owners in company is continuously increasing and its long-term debt continuously decreasing it means that company is paying its debt promptly and creditors will not face any risk in investing in BHEL as also BHEL is giving assured ROI. On seeing turnover, fixed assets and current assets turnover of company goes on increasing which is a good indicator as it brings commensurate gain and also the average collection goes on decreasing but management should take more efficient steps to reduce it. On seeing the profitability of the BHEL its overall performance is very good. A continuous increase in the values of EPS (except year 1999) and DPS results, investors feel safe to invest money in BHEL.

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BIBLIOGRAPHY

Annual report of Bharat Heavy Electrical Ltd. for 2012 www.moneycontrol.com www.wikipedia.com www.bseindia.com www.investopedia.com www.accounting4management.com Management accounting TYBCOM- Ainapure and Ainapure

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