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On
Balance Sheet analysis of NTPC Ltd
SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT
OF BACHELOR OF BUSINESS ADMINISTRATION (BBA)
GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY
Submitted To:
Submitted By:
Lecturer
Students undertaking
This is to certify that Mr. Vijay Thapa, Enrollment No. 00514101709 student of
Bachelors
Of
Management
Business
Administration
School, affiliated
to
at
Jagannath
Guru Gobind
Singh
International
Indraprastha
University has successfully completed the project titled Balnce Sheet Analysis
Of Ntpc Ltd.
I certify that the project has been completed under my guidance ad it is an
authentic work and have never been submitted elsewhere or has not been
sourced through other means.
By Vijay Thapa
This is to certify that VIJAY THAPA student of BBA (2009-12) has completed
his project on BALANCE SHEET ANALYSIS OF NTPC
Ltd under
my
guidance.
His work is up to my satisfaction and worth appreciation.
I wish him all the best for future endeavors.
Acknowledgement
I express my gratitude and convey my thanks to all the teachers for their guidance
and motivation to complete this project. I also want to thank Indraprastha
University to give us opportunity to prepare independent projects in our interested
areas i.e. students can choose from Finance, Marketing, Production, Sales and
Human Resource etc
I am also thanks to Mrs. Tanvi Gupta, Internal Project Guide. Her constant
motivation and evaluation enabled me to make this project more analytical and
conclusive.
Vijay Thapa
Enrolment No. 00514101709
Bachelors of Business Administration
3rd Semester
Jagannath International Management School, Kalkaji
CONTENTS
Table Of Content
Executive Summary
Objectives
Companys Profile
1) About The Company
2) Board Of Directors
Research Methodology
Secondary Data
1) Balance Sheet
2) Profit & Loss Account
Ratio Analysis
i) Liquidity Ratio
ii) Solvency Ratio
iii) Activity Ratio
iv) Profitability Ratio
Analysis
Cash Flow Statement
Analysis Of Cash Flow Statement
Income Statement
Analysis Of Income Statement
Conclusion
Bibliography
Page No.
6
10
12
13
15
21
23
24
26
29
31
36
42
50
60
63
65
66
68
70
72
INTRODUCTION
NTPC
Limited or National Thermal Power Corporation Ltd is the largest
thermal power generating company of India. NTPC is the sixth largest thermal
power generator in the world and the second most efficient utility in terms of
capacity utilisation based on data of1998.
NTPC was founded in 1975 to give
It
also
provides
consultancy
in
the
area
of
power
plant
then,
every
year,
NTPC
has
been
of
India.
SUBSIDIARIES
NTPC Electric Supply Company Ltd (NESCL): NESCL is a wholly owned
subsidiary of NTPC. It was incorporated in August 2002 with the objective to
acquire, establish & operate Electricity Distribution Network in various
circles/cities across India. The company provides consultancy in the area of:
Turnkey execution, Project monitoring, Quality Assurance and Inspection, and
Third
Party
Quality
inspection
on
the
behalf
of
utility.
NTPC Vidyut Vyapar Nigam Ltd. (NVVN): It was formed to cater to and deal
with the vast potential of power trading in the country and optimum capacity
utilisation.
NTPC Hydro Limited (NHL): It was set up in December, 2002 to develop small
and medium sized Hydro Electric Power Projects of up to 250 MW capacity.
Major Achievements of NTPC
10
OBJECTIVE
The basic objective of the project is to know the financial position of NTPC Ltd.
By analysing the balance sheet of the company.
The objective was to determine the financial health of the company by finding out
various ratios and analysing the various financial statements of the company like
profit and loss account, balance sheet etc
11
12
The total installed capacity of the company is 31134 MW (including JVs) with 15
coal based and 7 gas based stations, located across the country. In addition
under JVs, 3 stations are coal based & another station uses naphtha/LNG as
fuel. By 2017, the power generation portfolio is expected to have a diversified
fuel mix with coal based capacity of around 53000 MW, 10000 MW through gas,
9000 MW through Hydro generation, about 2000 MW from nuclear sources and
around 1000 MW from Renewable Energy Sources (RES). NTPC has adopted a
multi-pronged growth strategy which includes capacity addition through green
field projects, expansion of existing stations, joint ventures, subsidiaries and
takeover of stations.
13
NTPC has been operating its plants at high efficiency levels. Although the
company has 18.79% of the total national capacity it contributes 28.60% of total
power generation due to its focus on high efficiency. NTPCs share at 31 Mar
2001 of the total installed capacity of the country was 24.51% and it generated
29.68% of the power of the country in 2008-09. Every fourth home in India is lit
by NTPC. 170.88BU of electricity was produced by its stations in the financial
year 2005-2006. The Net Profit after Tax on March 31, 2006 was INR 58,202
million. Net Profit after Tax for the quarter ended June 30, 2006 was INR 15528
million, which is 18.65% more than for the same quarter in the previous financial
year. 2005).
14
BOARD OF DIRECTORS
Shri Arup Roy Choudhury, Chairman & Managing Director since September
2010, has an illustrious career spanning over 32 years of outstanding
contribution in the fields of engineering, general management, strategic
management and business leadership. He is a Graduate in Civil Engineering
from Birla Institute of Technology, Mesra and a Post-Graduate in Management
and Systems from IIT-Delhi. A keen learner of the latest professional
developments, he is currently pursuing a doctorate in Select Study of Project
Performance Metrics in Indian Construction Industry from IIT-Delhi.
Shri A.K. Singhal, Director (Finance) since August 2005, a Chartered
Accountant, comes with rich experience of 29 years of Corporate Finance
Management. He is also a member of All India Management Association (AIMA)
and Institute of Internal Auditors (IIA). Prior to joining NTPC in 2001, he was the
Executive Director (Finance) in National Fertilizers Limited (NFL) as head of
Finance & Accounts department. He held various managerial positions in Krishak
Bharati Cooperative Limited (KRIBHCO) and Engineering Projects of India
Limited (EPIL). As Finance Director on the Board of NTPC, he is responsible for
formulating financial strategies and plans to enable the company in achieving its
Vision.
Sh. I.J.Kapoor, Director (Commercial) since December 2008 is a Graduate in
Mechanical Engineering and Masters in Business Administration (Marketing). He
joined NTPC in 1978 as 3rd batch Engineering Executive Trainee (EET) and
is the first EET to be on the Board of the Company. He has a rich and varied
experience of over 31 years in the areas of Commercial, Engineering, Contracts
& Materials Management, Consultancy, Cost Engineering, Project co-ordination,
Station Engineering and Quality Assurance & Inspection. Prior to his elevation as
Director (Commercial), he was Regional Executive Director (National Capital),
15
more
than
th of NTPCs
turn
over
along
with
project
16
of the Company with effect from August 26, 2008 as a non-official part - time
director.
Shri M.N. Buch is M.A. (History) from Delhi University, M. Phil (Public
Administration) from Indian Institute of Public Administration, Punjab University,
PG Diploma holder in Port Management and Administration from University
College, London and an Indian Administrative Officer of Gujarat Cadre, 1964
batch. He has held various posts in Gujarat Government. He had held the
position of Joint Secretary to the Government of India in Department of Banking,
Ministry of Finance, Additional Secretary to the Ministry of Labour, GOI, DirectorGeneral, Sports Authority of India prior to becoming Member of Public
Enterprises Selection Board, GOI. He has been also on the Board of various
public sector banks. He has wide experience in both Development and
Regulatory Administration at the Central, State and District levels. He has been
on the Board of the Company with effect from August 26, 2008 as a non-official
part - time director.
Shri Shanti Narain is B.Sc (Hons. in Physics) and M.Sc. (Mathematics) from
Delhi University and has pursued Management Development Programme at
British Transport Staff College, UK. He has held various posts in Railways prior
to becoming Member (Traffic), Railway Board. He has key expertise in strategic
management of transport systems with special focus on Railways, involving
planning, marketing, customer relations, monitoring and control of operational
and commercial activities and development of transport infrastructure. He has
been on the Board of the Company with effect from August 26, 2008 as a nonofficial part - time director.
Shri Shanti Narain is B.Sc (Hons. in Physics) and M.Sc. (Mathematics) from
Delhi University and has pursued Management Development Programme at
British Transport Staff College, UK. He has held various posts in Railways prior
to becoming Member (Traffic), Railway Board. He has key expertise in strategic
17
18
19
been on the Board of the Company with effect from January 30, 2009 as a nonofficial part - time director.
Shri I.C.P. Keshari, is a Government nominee Director. He graduated with a
Master of Arts degree from Delhi University and holds Junior Research
Fellowship of UGC for Master of Philosophy. Shri Keshari is an Indian
Administrative Services officer of Madhya Pradesh cadre. He is currently Joint
Secretary in the Ministry of Power. Prior to this, Shri Keshari was in the Ministry
of Commerce & Industry and has also held various administrative posts in the
State of Madhya Pradesh and Chhattisgarh. Shri Keshari appointed as a Director
on Board in May, 2009.
Shri Rakesh Jain, born in 1957, is a Government nominee Director in our
Company. He holds Masters Degree in Physics from Delhi University. He is an
officer of Indian Audit & Accounts Service (1981). He is currently the Joint
Secretary & Financial Adviser (JS & FA) in the Ministry of Power and also holds
additional charge of the post of JS & FA of the Ministry of Labor & Employment.
He has held various important positions such as Director General (Accounts,
Entitlement, Complaints & Information System); Principal Director (Report States)
Office of Comptroller & Auditor General of India; Accountant General (AG)
(Audit), Rajasthan; AG(AE-II) Madhya Pradesh; Principal Director (Commercial
Audit), Ranchi and Principal Director of Audit, Embassy of India, Washington,
USA.
Shri T. Venkatesh,(48 years) has done his Post Graduation in Mechanical
Engineering and is an Indian Administrative Service officer of 1988 batch of U.P.
Cadre. Prior to his assignment as Jt. Secy. (DOPT) in the Ministry of Personnel &
Public Grievances & Pension, he held various administrative posts including DM
(Bareilly), Commissioner (Gorakhpur) and Secretary (PWD) in the state of Uttar
Pradesh. He is looking after the work of Chief Vigilance Officer of our company
since October, 2009.
20
21
RESEARCH METHODOLOGY
SECONDARY DATA : The methodology used for conducting the research is the
collection and analysis of secondary data; which is the data available in the published
form and is not primary in nature. The following forms of secondary data tools were
used for the research purpose:
1.
INTERNET SITES
2.
CONCERNED BOOKS
3.
PEOPLE
4.
MAGAZINES
22
23
BALANCE SHEET
Balance Sheet
31-Mar-09
%BT
31-Mar-08
%BT
31-Mar-07
%BT
Equity Capital
0.00
0.00
0.00
0.00
82455.00
10.21
Preference Capital
0.00
0.00
0.00
0.00
0.00
0.00
Share Capital
82455.00
7.84
82455.00
9.22
82455.00
10.21
491246.00
46.69
443931.00
49.66
403513.00
49.96
Loan Funds
345678.00
32.85
271906.00
30.42
244844.00
30.32
Current Liabilities
74391.00
7.07
55483.00
6.21
53235.00
6.59
Provisions
32495.00
3.09
23816.00
2.66
17028.00
2.11
106886.00
10.16
79299.00
8.87
70263.00
8.70
1052248.00
100.00
893880.00
100.00
807643.00
100.00
328974.00
31.26
260614.00
29.16
256402.00
31.75
383.00
0.04
303.00
0.03
63.00
0.01
Net Block
329357.00
31.30
260917.00
29.19
256465.00
31.75
264049.00
25.09
224783.00
25.15
168392.00
20.85
Fixed Assets
593426.00
56.40
485720.00
54.34
424873.00
52.61
Investments
139835.00
13.29
152672.00
17.08
160943.00
19.93
Inventories
32434.00
3.08
26757.00
2.99
25102.00
3.11
Accounts Receivable
35842.00
3.41
29827.00
3.34
12523.00
1.55
162716.00
15.46
149332.00
16.71
133146.00
16.49
12961.00
1.23
10475.00
1.17
12154.00
1.50
Current Assets
243953.00
23.18
216391.00
24.21
182925.00
22.65
65300.00
6.21
39097.00
4.37
38902.00
4.82
24
0.00
0.00
0.00
0.00
0.00
0.00
1052248.00
100.00
893880.00
100.00
807643.00
100.00
25
26
P&L Account
27
Mar '06
Mar '07
Mar '08
Mar '09
12 mths
12 mths
12 mths
12 mths
Sales Turnover
26,318.60
32,817.30
Excise Duty
175.70
185.60
Net Sales
26,142.90
32,631.70
Other Income
Stock Adjustments
2,897.90
0.00
2,875.60
0.00
Total Income
29,040.80
35,507.30
Expenditure
Raw Materials
25.00
23.70
16,497.10
19,947.60
Employee Cost
Other Manufacturing
Expenses
Selling and Admin
Expenses
Miscellaneous
Expenses
Preoperative Exp
Capitalised
1,137.50
Total Expenses
Particulars
Income
Operating Profit
PBDIT
37,302.4
0
211.40
37,091.0
0
3,119.70
0.00
40,210.7
0
42,196.80
221.60
41,975.20
3,012.80
0.00
44,988.00
31.00
1,362.60
26.80
22,160.7
0
2,229.30
705.10
842.90
920.00
940.00
353.20
410.80
389.80
473.20
247.20
292.40
368.20
394.90
-256.40
-418.40
-544.70
-637.40
18,708.70
22,461.60
25,550.1
0
31,391.60
Mar '06
Mar '07
Mar '08
12 mths
12 mths
12 mths
7,434.20
10,170.10
10,332.10
13,045.70
Interest
2,004.60
2,055.70
PBDT
8,327.50
10,990.00
11,540.9
0
14,660.6
0
1,982.20
12,678.4
0
27,292.30
2,897.60
Mar'09
12 mths
10,583.60
13,596.40
28
1,737.00
11,859.40
29
As on
31-Mar-09
31-Mar-08
31-Mar-07
8.70
11.50
10.90
14.50
14.60
14.10
20.00
24.90
19.20
26.90
32.70
32.50
19.50
25.40
24.50
19.50
20.00
21.00
19.80
20.70
21.00
Asset Turnover(x)
0.50
0.50
0.50
2.19
1.63
0.50
3.04
3.28
0.30
0.60
0.50
0.50
5.20
6.40
5.10
2.28
2.72
2.70
1.97
2.39
3.00
2.20
2.70
2.50
0.40
0.40
0.40
146.70
157.40
145.10
31.00
29.20
14.00
61.90
47.50
46.80
--
--
--
--
--
--
23.10
26.40
24.70
Return Related
Profitability
Leverage
Liquidity
Working Capital
30
Per Share
Book Value Per Share (Rs)
59.50
53.80
58.90
9.90
9.00
8.30
3.60
3.50
3.20
13.16
13.67
22.08
EBITDA
-8.52
14.47
25.29
EBIT
-12.86
17.44
33.46
Net Profit
10.61
8.01
17.95
Total Assets
16.05
10.47
12.41
Growth(%)
Current ratio:-
Ratio
Years
Current Ratio
Current Ratio
Year
2008
216391/79299
2.72:1
2009
243953/106886
2.28:1
31
2.8
2.7
2.6
2.5
2.4
Ratios
2.3
2.2
2.1
2
2008
2009
Comments
As we can see in the above ratio table as well as in the graph the current
ratio for the year 2009-10 have decreased as compared to current ratio for
the year 2008-09 but yet it is slightly greater then 2:1. As ideal ratio is always
2:1.
This signifies that the company has better capacity to meet its liabilities or we
can say that the company has enough resources to discharge its obligations.
As very high current ratio shows the idleness of the source or funds available
at its disposal.
32
2. Quick Ratio
It establishes a relationship between quick assets and current liabilities.
Its objective is to measure the ability of the firm to meet its short term obligations.
Ratio
Years
Quick Ratio
Quick Ratio
Year
2008
189634/79299
2.39:1
2009
211519/106886
1.97:1
33
2.5
2
1.5
Ratio
1
0.5
0
2008
2009
Comments:As we can see in the above ratio as well as in the graph the quick ratio for
the year, 2009 have decreased as compared to the quick ratio for the
previous year i.e. 2009 but it is slightly greater than 1:1 i.e. 1.97:1. As we
know that the ideal ratio is 1:1
Even if the ratio has decreased but it still represents the good short term
position of the company.
34
WORKING NOTES
Quick Assets = current assets inventory prepaid expenses
Quick asset for the year 2008 = 2, 16,391-26,957-0
Quick asset for the year 2008 = 1, 89,434
35
II) Solvency Ratio:1. Debt Equity Ratio:It establishes a relationship between long-term debts and
shareholders funds.
Its objective is to measure the relative proportion of debt and equity in
financing the assets of a firm.
FORMULA => DEBT EQUITY RATIO:- DEBT
EQUITY
IDEAL RATIO:- 2:1
Ratio
Years
Debt Equity Ratio
Debt Equity Ratio
Year
2008
134782/82454
1.63:1
2009
181277/82454
2.19:1
36
2.5
2
1.5
Ratios
1
0.5
0
2008
2009
Comments:As we can see in the above ratio as well as in the graph the debt-equity
ratio for the year, 2009 have decreased as compared to the debt equity
ratio for the previous year i.e. 2008
As we know that the ideal ratio is 2:1
Therefore this increase in the debt equity ratio to 2.19 slightly impacts both
the creditors and the firm. Now the firm will enjoy benefits of trading on
equity but there will be a greater risk to the creditors.
37
2. Total Assets to Debt Ratio:Its establishes a relationship between total assets and long term debts.
Its objectives are to measure the safety margin available to the suppliers
of long term debts. It measures the extent to which the assets can cover
the debt.
Formula => Total Assets to Debt Ratio: Total Assets
Long Term Debts
Ideal Ratio: 2:1
Ratio
Years
Total Asset Debt Ratio
Total Asset Debt Ratio
Year
2008
893880/271906
3.28
2009
1052248/345678
3.04
38
3.3
3.25
3.2
3.15
3.1
Ratio
3.05
3
2.95
2.9
2008
2009
Comments:As we can see in the above ratio as well as in the graph the total assets to debt
ratio for the year 2009 have slightly decreased as compared to total assets to
debt ratio for the previous year i.e. 2008. As we know, that ideal ratio is 2:1.
Therefore, this decrease in the total assets to debt equity ratio to 3.04:1 implies
that the company is using less equity then debt, which means less safety
margins for creditors.
39
3. Proprietary Ratio:It measures a relationship between proprietors fund and total assets.
Its objectives are to measure how the proprietors have financed the
assets.
Ratio
Years
Proprietors Ratio
Proprietors Ratio
Year
2008
2009
443931*100/893880 491246*100/1052248
49.66
46.68
40
50
49.5
49
48.5
48
47.5
Ratio
47
46.5
46
45.5
45
2008
2009
Comments:As we can see in the above ratio as well as in the graph the total Proprietors
Ratio for the year 2009 have slightly decreased as compared to Proprietors
Ratio for the previous year i.e. 2008.
Therefore, this decrease in the Proprietors Ratio to 46.68% implies that the
Proprietors Funds are not using properly i.e. there is some problem while using
funds so the company has to take some decision unless their company will
suffer..
41
III) Activity Ratio:1. Capital Turnover Ratio:It establishes a relationship between Net sales and Capital Employed.
Its objective is to measure the efficiency with which the capital employed
is utilised.
Ideal Ratio: Higher the ratio, the more efficient the management and
utilization of capital employed.
Ratio
Years
Capital Turnover Ratio
Year
2008
20
2009
24.9
42
25
20
15
Ratio
10
5
0
2008
2009
Comments:We can see in the above ratio as well as in the graph the capital turnover ratio
for the year, 2009 have increased as compared to the capital turnover ratio for
the previous year i.e.2008
Therefore, the increase in the capital turnover ratio to 24.9 times imply that the
management is trying to work efficiently and capital employed has increased in
the same proportion as the net sales increases. That is why the ratio increases
for the year 2009.
43
2. Fixed Assets Turnover Ratio:a. I establish a relation between Net sales and fixed assets.
b. Its objective is to determine the efficiency with which the fixed
assets are utilised.
Ideal Ratio:- Higher the Ratio, the more efficient the management and
utilization of fixed assets and vice versa.
Ratio
Years
Fixed Assets Turnover
Year
2008
.50
2009
.50
Ratio
44
0.5
0.4
0.3
FixedAssets
Turnover Ratio
0.2
0.1
0
2008
2009
Comments:We can see in the above ratio as well as in the graph the fixed asset turnover
ratio for the year 2008 has been the same to the fixed asset turnover ration for
the year 2009.
Therefore, the no change in the fixed asset ratio implies that the company has
not utilised nor over utilised its assets in efficient way.
45
3. Working Capital Turnover Ratio:a. This establish a relation between Net sales and working capital.
b. Its objective is to determine the efficiency with which the working
capital is utilised.
Formula => Working Capital Turnover Ratio: - Net Sales
Working Capital
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilization of fixed assets and vice versa.
Ratio
Years
Working Capital Turnover
Year
2008
.40
2009
.40
Ratio
46
0.4
0.35
0.3
0.25
0.2
Ratio
0.15
0.1
0.05
0
2008
2009
Comments:We can see in the above ratio as well as in the graph, the working capital
turnover ratio in the year 2009 has not increased or decreased as compared to
previous year i.e. 2008 working capital turnover ratios.
This signifies that the company is not utilizing the working capital efficiency in the
year 2009.
47
4. Stock Turnover Ratio:a. It establishes a relation between Cost of Goods Sold and Average
Inventory.
b. Its objective is to determine the efficiency with which the Inventory
is utilised.
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilization of fixed assets and vice versa.
Ratio
Years
Stock Turnover Ratio
Year
2008
14.60
2009
14.50
48
14.6
14.58
14.56
14.54
14.52
Ratio
14.5
14.48
14.46
14.44
2008
2009
Comments:We can see in the above ratio as well as in the graph, the stock turnover ratio in
the year 2009has decreased as compared to the previous year i.e. 2008 stock
turnover ratios.
This decrease in stock turnover ratio to 14.50 times in the year 2009 might be
due to inventory levels, obsolete inventory and due to this; the firm may incur hgh
carrying costs.
49
(IV)Profitability Ratio
A. In relation To Sales
1. Gross Profit Ratio:a. It measures a relation between Net sales and Gross Profit.
b. Its objective is to determine the efficiency with which the production
operation is carried out.
Ideal Ratio: - Higher the Ratio, the more efficient the management
Ratio
Gross Profit Ratio
Year
2008
32.70
2009
26.90
50
35
30
25
20
Ratio
15
10
5
0
2008
2009
Comments:We can see in the above ratio as well as in the gross profit ratio in the year 2009
has decreased as a compared to previous year i.e. 2008 gross profit ratios.
This decrease in the gross profit ratio in the year 2009 might be due to lower
sales price with constant cost of goods sold.
51
2. Net Profit Ratio:a. It measures a relation between Net sales and Net Profit.
b. Its objective is to determine the overall profitability due to various
factors.
Formula => Net Profit Ratio: - Net Profit before Tax * 100
Net Sales
Ideal Ratio: - Higher the Ratio, the more efficient the capacity of the firm
and the demand for the product is falling.
Ratio
Net Profit Ratio
Year
2008
20.00
2009
19.50
52
20
19.9
19.8
19.7
19.6
Ratio
19.5
19.4
19.3
19.2
2008
2009
Comments:We can see in the above ratio as well as in the graph, the net profit ratio in the
year 2009 have fall down drastically as compared to previous year i.e. 2008.
This decline in the net profit ratio indicates the cost of production is increasing
and also expenses are increasing as a result there is a decline in the net profit so
the company should try to reduce its expenses otherwise the company might
have pay huge amount of money or might be shut down its operations for a while.
Working Notes
Here we are considering Net profit be equal to net profit before interest and
tax.
B. In Relation to Investment
53
3. Return On Total Assets:a. It measures a relation between Net Profit before interest and tax
and total Assets.
b. Its objective is to find out how efficiently the total assets have been
used by the management.
(Formula)
Return On Total Assets: - Net Profit Before Interest and Tax *100
Total Assets
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilisation of total assets.
Ratio
Net Profit Ratio
Year
2008
11.50
2009
8.70
54
12
10
8
6
Ratio
4
2
0
2008
2009
Comments:We can see in the above ratio as well as in the graph, the return on total assets
in the year 2009 have decreased as compared to previous year i.e. 2008 return
on total assets.
This decrease in the return on total assets to 1.87% in the current year implies
that the management is not efficient enough and the assets are not utilized
properly.
55
4. Return On Capital Employed/ Return On Investment(ROI):a. It measures a relation between Capital Employed and Net Profit
before Interest and Tax.
b. Its objective is to find out how efficiently the long term funds
supplied by the creditors and shareholders have been used.
(Formula)
Return on Investment: - Net Profit before Interest and Tax * 100
Capital Employed
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilisation of capital employed.
Ratio
Net Profit Ratio
Year
2008
14.60
2009
14.50
56
14.6
14.58
14.56
14.54
14.52
Ratio
14.5
14.48
14.46
14.44
2008
2009
Comments:We can see in the above ratio as well as in the graph, the return on investment in
the year 2009 have decreased as compared to previous year i.e. 2008 return on
investment of 14.60%
This decrease in the return on investment implies that the management is not
working efficiently and capital employed is not utilized at its fullest.
57
5. Return On Shareholders Fund:a. It measures a relation between Shareholders Fund and Net Profit
after Interest and Tax.
b. Its objective is to find out how efficient the management and
utilization of shareholders have been used.
Formula => Return on Net Worth: - Net Profit after Interest and Tax * 100
Shareholders Fund
Ideal Ratio: - Higher the Ratio, the more efficient the management and
utilization of shareholders funds.
Ratio
Return On Shareholders Fund
Year
2008
14.60
2009
14.50
58
Comments:As we can see in the above ratio as well as in the graph, the return on
shareholders Funds in the year 2009 have changed slightly as compared to
previous year i.e. 2008 Return On shareholders Fund of 14.60
This change in the Return on shareholders Funds is a danger for the company as
there is no proper utilization of shareholders funds.
59
60
Analysis
1. Companys Current ratio has declined from 2.39 to 1.97 in the year 2009.
But yet it is above ideal ratio of 2:1. As in previous year the current ratio is
too high which shows that the company has idle funds available at its
pocket. But now in this year i.e.2008 this high ratio slows down. As a
result we can say that now there is good margin for short term creditors.
2. Now again we see in the case of Quick Ratio that this year 2009 this ratio
has declined to 1.97:1 as compared to previous year having quick ratio to
be equal to 2.39:1 which is too high than the ideal ratio of 1:1. As we can
see in the profit and loss account the amount of debtors is the chief
reason for the decline in this ratio. So this makes the ratio as a satisfactory
ratio.
3. Companys debt equity ratio has slightly increased from the previous year
having ratio of 1.63:1 which makes ratio a safety margin for the creditors
since the owners equity is treated as a margin of safety by creditors.
4. Companys Total Assets to debt ratio has decreased from 3.28:1 to 3.04:1
which means less safety for short term as well as long term creditors as
owners equity is treated as margin of safety by creditors.
5. Proprietary Ratio of the company has declined from 49.66% to 46.68% in
the year 2009. It means now the assets of the firm are not financed out of
proprietors funds.
6. Companys Capital Turnover Ratio has increased from 20.00 to 24.9 times
in the year 2009. This shows that company is on the path of using capital
employed efficiently and the management is also becoming efficient. Now
this is positive sign for the company.
61
7. In year 2008 companys fixed turnover ratio did not changed at all. It was .
50 times in 2008 and still .50 times in 2009. There is no direct relationship
between sales and fixed assets.
8. In the year 2009 companys working capital ratio didnt increase at all. It
means management didnt become more efficient and firm has no ability
to generate sales per rupee of working capital.
9. Companys stock turnover Ratio didnt move from .50 times.
If there is decline it is due to excessive inventory levels.
Slow moving and obsolete inventory etc.
As a result the firm may have to incur high carrying costs.
10. In the year 2009 the companys net profit ratio has declined as compared
to net profit ratio in the year 2008 which is 20.00%. Due to this decline in
the net profit ratio there is a danger for the company with regard to future
adverse economic conditions.
11. Due to decline in net profit ratio last year i.e. 2009 return on total assets
also decreases which is shows that the management is not utilizing the
total assets efficiently.
12. Due to decline in the net profit before interest and tax in the year 2009
return on investment also declines to 8.70%. this shows that the capital
employed is not utilized properly.
13. Decline in companys return on net worth in the year 2009 is very low
compared to 2008 which is 14.60% declined. But in this year this goes
down to 14.50% it shows that the management is not taking this issue as
serious issue as a result inefficient utilisation of shareholders funds. This
decline is also due to increase in house tax which reduces the net profit.
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63
Mar '07
Mar '08
Mar '09
Mar '10
12 mths
12 mths
12 mths
12 mths
12 mths
6271.20
8896.50
10529.40
9467.80
10807.60
6206.40
8065.30
10171.10
9688.10
10594.20
-2713.60
-3145.80
-6203.80
-7500.40
-10497.70
-1099.70
-76.30
-2348.70
-849.30
-1908.60
2393.10
4843.20
1618.60
1338.40
-1812.10
6078.30
8471.40
13314.60
14933.20
16271.60
8471.40
13314.60
14933.20
16271.60
14459.50
64
The cash flow statement shows how much cash comes in and goes out of the
company over the quarter or the year.
Cash Flows from Operating Activities
This section shows how much cash comes from sales of the company's goods
and services, less the amount of cash needed to make and sell those goods and
services. Investors tend to prefer companies that produce a net positive cash
flow from operating activities. High growth companies, such as technology firms,
tend to show negative cash flow from operations in their formative years. At the
same time, changes in cash flow from operations typically offer a preview of
changes in net future income. Normally it's a good sign when it goes up. Watch
out for a widening gap between a company's reported earnings and its cash flow
from operating activities. The net income is higher than cash flow in year 2010,
the company is speeding or slowing its booking of income or costs.
Cash Flows from Investing Activities
This section largely reflects the amount of cash the company has spent
on capital expenditures, such as new equipment or anything else that needed to
keep the business going. It also includes acquisitions of other businesses and
monetary investments such as money market funds.
Cash Flow From Financing Activities
This section describes the goings-on of cash associated with outside financing
activities. Typical sources of cash inflow would be cash raised by selling stock
and bonds or by bank borrowings. Likewise, paying back a bank loan would
show up as a use of cash flow, as would dividend payments and common stock
repurchases.
65
66
31-Mar-
31-Mar-
31-Mar-
09(12)
08(12)
07(12)
Rs mn
%OI
419765.00
100.00 370936.00
100.00 326335.00
100.00
Material Cost
310.00
0.07
268.00
0.07
237.00
0.07
0.00
0.00
0.00
0.00
0.00
0.00
Personnel Expenses
25012.00
5.96
19289.00
5.20
11908.00
3.65
Manufacturing Expenses
281563.00
67.08 229985.00
62.00 208109.00
63.77
112880.00
26.89 121394.00
32.73 106081.00
32.51
7291.00
1.74
1.61
1.61
105589.00
25.15 115419.00
31.12 100826.00
30.90
5.63
5.77
6.36
Gross Profit
Rs mn
%OI
Rs mn
%OI
5975.00
21385.00
5255.00
20754.00
81944.00
19.52 94034.00
25.35 80072.00
24.54
Interest Expense
20229.00
4.82
17981.00
4.85
19806.00
6.07
Other Income
32963.00
7.85
29241.00
7.88
28699.00
8.79
94678.00
22.56 105294.00
28.39 88965.00
27.26
11582.00
2.76
28401.00
7.66
20427.00
6.26
-1083.00
-0.26
-2745.00
-0.74
109.00
0.03
Net Profit
82013.00
19.54 74148.00
19.99 68647.00
21.04
82013.00
19.54 74148.00
19.99 68647.00
21.04
Dividend - Preference
0.00
0.00
0.00
0.00
0.00
0.00
Dividend - Equity
29683.00
7.07
28859.00
7.78
26385.00
8.09
Pretax Income
Provision for Tax
Extra Ordinary and Prior Period Items
Net
The income statement is basically the first financial statement you will come
across in an annual report or quarterly Securities And Exchange
67
Commission (SEC) filing. It also contains the numbers most often discussed
when a company announces its results -numbers such as
revenue, earnings and earnings per share. Basically, the income
statementshows how much money the company generated (revenue), how much
it spent (expenses)andthedifference between the two (profit) over a certain time
period.
NET SALES
Revenue, also commonly known as sales, is generally the most straightforward
part of the income statement. Often, there is just a single number that represents
all the money a company brought in during a specific time period, although big
companies sometimes break down revenue by business segment or geography.
The company have improved profitability by increasing sales revenue for the year
2009.
EXPENSES
There are many kinds of expenses, but the two most common are the cost of
goods sold (COGS) and selling, general and administrative expenses (SG&A).
Cost of goods sold is the expense most directly involved in creating revenue. It
represents the costs of producing or purchasing the goods or services sold by
the company.
excludes certain expenses and revenues that may not be related to its central
operations. High operating margins can mean the company has effective control
of costs, or that sales are increasing faster than operating costs. Operating profit
also gives investors an opportunity to do profit-margin comparisons between
companies that do not issue a separate disclosure of their cost of goods sold
figures (which are needed to do gross margin analysis). Operating profit
measures how much cash the business throws off, and some consider it a more
reliable measure of profitability since it is harder to manipulate with accounting
tricks than net earnings.
Net income generally represents the company's profit after all expenses,
including financial expenses, have been paid. This number is often called the
"bottom line" and is generally the figure people refer to when they use the word
"profit" or "earnings".
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70
Conclusion
After analyzing the Ratios, Balance sheet, Income statement, Cash Flows, I
came to the conclusion that NTPC (National Thermal Power Corporation) ltd.
From the past 2 years there is an increase in the profit of the company NTPC
Ltd.
This is due to high efficiency of the management of the company and resources
have been utilized properly in this year 2009-10.
So we can say that company is taking this issue of making the company more
efficient and effective through proper management in the future. And the issue of
making the company more indulge in social services and less focussing on profit
making.
The company more and more achievement has made the company liable to
show better improvement in the nest few years.
So overall companys performance is satisfactory.
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72
Bibliography
BOOKS
SITES
http://www.bseindia.com
http://en.wikipedia.org/wiki/National_Thermal_Power_Corporation
https://www.ntpc.co.in/
http://www.moneycontrol.com/financials/ntpc/balance-sheet/NTP
http://money.rediff.com/companies/ntpc-ltd/15130025/balance-sheet
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