A

SEMINAR PROJECT ON
A STUDY ON FINANCIAL STATEMENT
ANALYSIS OF SAIL

Submitted to department of commerce as a partial fulfillment for award of degree in

commerce

2018-19

Dharanidhar Autonomous College, Keonjhar

Session; 2016-2019

Submitted by: Under The Guidance by:

Michel Munda Prof. SHIRISH CHANDRA BHOI

COMMERCE, 3rd Year

Roll No:- 3116D054
Regd. No:- 04234/16

Department of Commerce D.D(Auto) College , Keonjhar ,Odisha ,758001

 DECLARATION
I , Michel Munda , hereby declared that, this dissertation “A Study On Financial
Statement Analysis Of Sail” submitted to D.D (Auto) College, under North Odisha
University as a partial fulfillment for the award of degree of commerce has been prepared by
own effort and it has not been submitted to any other institution, including this autonomous
college published in any time.

Place: Keonjhar Signature of the Candidate

Date:
 CERTIFICATE

This is to certify, that the dissertation entitled “A Study On Financial Statement Analysis
Of Sail” being submitted by me Mr. Michel Munda in partial fulfillment for the award of
degree of commerce is a genuine and bonafied work carried out by him under my guidance
and supervision.

Signature of Prof.

Place: Keonjhar

Date:
 ACKNOWLEDGEMENT

I heartly extend my profound gratitude to my exteemed teacher and guide Prof. Shirish
Chandra Bhoi (Asst. Prof.) in Commerce, Department of commerce, D.D (Auto.) College,
Keonjhar for encouraging to undertake this unexplore field of research for my study. I heartly
express my feeling of immense gratitude for his valuable guidance , consent supervision and
advice to make dissertation success. It is perennial encouragement and inspiration which
helped me to complete this thesis.

I heartly thankful to my exteemed HOD Prof. Dr. Shashikant Jena, (Assistant prof. in
commerce) for his kind and valuable support for providing me. Regarding my project and to
extend his cooperation and also thankful to all my faculty members for their kind support.

With deep sense of appreciation, I sincerely thanks to for their sincerity and skillful
computerization of is dissertation.

Last but not list, I express my heartful thanks my performance of gratitude and indeptness
thanks to my parents, wellwishers, friends for their affection and encouragement which have
enable me to complete this piece of work.

Signature of Candidate
 CONTENTS

Contents Page no:

Chapter-1 1-12

Introduction
Need of the study
Objective of the study
Parties interest in financial analysis
What is financial statement analysis
Types of financial analysis
Procedure of financial statement analysis
Methods of financial analysis
Limitation of the study
About SAIL
Chapter-2 13-18

Review of literature
Chapter-3 19-26

Profile and data analysis and interpretation of the company

Chapter-4 27-29

Research methodology
Research design
Data sources and collection
Methods of the study
Chapter-5 30-32

Findings
Suggestion
Conclusion
 CHAPTER: I

INTRODUCTION

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 Introduction

Introduction:-

In order to run and manage a company, funds are needed. Right from the promotional
stage up to end, finances play an important role in a company’s life. If funds are inadequate,
the business suffers and if the funds are not properly managed, the entire organization suffers.
It is, therefore, necessary that correct estimate of the current and future need of finance,
which shall help the organization to run its work smoothly and without any stress.

But it’s possible for a company should manage its Funds through "financial statement".
Because financial statement is a collection of data organized according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of some financial
aspects of a business firm.

In this study I have taken most highly profitable company which is SAIL to analysis the
financial statement of the company. The Financial statement is an important decision of the
business to check the profitability and the financial position of a concern. The study examines
the influence of financial statement on the performance of the company. In order to analyze
the financial statement of SAIL, a study had been conducted with the help of secondary data
for the period of 5 years (i.e.) 2014 to 2018.

The company's performance has been evaluated by analyzing its financial statement. The
financial condition and the liquidity status of the company are of fluctuating nature. In a
developing country like India, it is more important to acquire funds economically and allocate
them effectively for the optimal growth of the company and also it provides information
about the company to the users. Thus, attaining a financial statement is a vital challenge for
every company.

Need Of the study:-

Financial Analysis is usually done to Diagnose or Assess the following Parameters of

the company:-

I. Profitability
The ability of the company to earn income and sustained growth both in the long term
and short term prospects.
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 II. Solvency:-
It is ability of the company to pay obligations to creditors and third parties both in the
short term and long term.
III. Liquidity:-
Ability of the company to maintain positive cash flow while meeting immediate
obligations on paying of immediate obligations,
IV. Stability:-
That is ability to remain in business in long run without having to sustain significant
losses in the day to day operations.

With the help of financial analysis:-

a) Investors can evaluate the financial conditions of performance of a company.

b) The CEO can decide what the immediate prioritise for the future need to be.
c) Managers working in the company can monitor wheather the result achieved are in
lined with the budget.
d) Market Analyst can detect potential threats to the business.

Objectives:-

The following purpose or objectives of financial statements analysis may be

stated to bring out the significance of such analysis:-

 To identify the Liquidity position of the SAIL.

 To know the Solvency position of the firm.

Parties Interest In Financial Analysis:-

The following parties are interested in the analysis of financial statement:-

 Investors or potential investors

 Management

 Employees

 Creditors or suppliers

 Bankers and Financial institutions

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  Government

 Trade Associations

 Stock exchanges

 Economists and Researchers

 Taxation Authorities

What is Financial Statement Analysis:-

You often hear corporate officers, professional investors, and investment analysts discuss a
company's financial statement. You may not know what a financial statement is or why you
should even concern yourself with something that sounds so technical but rest assured that
the concept is extremely important. The financial success of every firm depends mainly on its
financial statement analysis.

Financial statements are prepared primarily for decision-making. They play a dominant role
in setting the framework of managerial decisions. But the information provided in the
financial statements is not an end in itself as no meaningful conclusions can be drawn from
these statements alone. However, the information provided in the financial statements is of
immense use in making decisions through analysis and interpretation of financial statements.

So, The term 'financial analysis', also known as analysis and interpretation of 'financial
statements'. It refers to the process of determining financial strength and weaknesses of the
firm by establishing strategic relationship between the items of the balance sheet, profit and
loss account and other operative data. There are various methods or techniques used in
analyzing financial statements, such as comparative statements, trend analysis, common-size
statements, schedule of changes in working capital, funds flow and cash flow analysis, cost-
volume-profit analysis and ratio analysis.

Defination of Financial Statement Analysis:-

"Analysing financial statements," according to Metcalf and Titard, "is a process of

evaluating the relationship between component parts of a financial statement to obtain
a better understanding of a firm's position and performance."

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 In the words of Myers, "Financial statement analysis is largely a study of
relationship among the various financial factors in a business as disclosed by a single
set-of statement, and a study of the trend of these factors as shown in a series of
statements."

TYPES OF FINANCIAL ANALYSIS:-

There are various types of financial analysis into different categories depending upon the
Material used, on the basis of Modus operandi and on the basis of Time horizon.

I. On the basis of material used. According to material used, financial analysis can be of
two types: (a) External analysis, and (b) Internal analysis.

(a)External Analysis: This analysis is done by outsiders who do not have access to the
detailed internal accounting records of the business firm. These outsiders include
investors, potential investors, creditors, potential creditors, government agencies, credit
agencies, and the general public. For financial analysis, these external parties to the firm
depend almost entirely on the published financial statements.

(b)Internal Analysis: This analysis conducted by persons who have access to the
internal accounting records of a business firm is known as internal analysis. Such an
analysis can, therefore, be performed by executives and employees of the Organisation as
well as government agenesis which have statutory powers vested in them.

II. On the basis of modus operandi. According to the method of operation follow in the
analysis, financial analysis can also be of two types:

(a) Horizontal analysis and (b) Vertical analysis

(a)Horizontal Analysis: Horizontal analysis refers to the comparison of financial

data of a company for several years. The figures for this type of analysis are presented
horizontally over a number of columns. The figures of the various years are compared with
standard or base year. A base year is a year chosen as beginning point. This type of analysis
is also called 'Dynamic Analysis' as it based on the data from year to year rather than on data
of any one year. Comparative statements and trend percentages are two tools employed in
horizontal analysis.

(b)Vertical Analysis: Vertical analysis refers to the study of relationship of

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the various items in the financial statements of one accounting period. In this types of
analysis the figures from financial statement of a year are compared with a base selected from
the same year's statement. It is also known as 'Static Analysis'. Common-size financial
statements and financial ratios are the two tools employed in vertical analysis.

iii. On the basis of time horizon or objective of analysis. On the basis of time
horizon, financial analysis can be classified under two categories:

(a)Short-term analysis, and (b) Long-term analysis.

(a)Short-term Analysis: Short-term analysis measures the liquidity

position of a firm, i.e. the short-term paying capacity of a firm or the firm's ability to meet its
current obligations.

(b)Long-term Analysis: Long-term analysis involves the study of firm's

ability to meet the interest costs and repayment schedules of its long-term obligations. The
solvency, stability and profitability are measured under this type of analysis.

Procedure of Financial Statements Analysis:-

Broadly speaking there are three steps involved in the analysis of financial
statements. These are: (i) Selection, (ii) Classification, and (iii) Interpretation.

The following procedure is adopted for the analysis and interpretation of financial
statements:

 The analyst should acquaint himself with the principles and postulates of accounting.

 The extent of analysis should be determined so that the sphere of work may be decided.

 The financial data given in the statements should be re-organized and re-arranged.

 A relationship is established among financial statements with the help of tools and
techniques of analysis such as ratios, trends, common size, funds flow etc.

 The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for helping decision-taking.

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

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Tools/Methods Or Devices Of Financial Analysis:-

The analysis and interpretation of financial statements is used to determine the financial
position and results of operations as well. A number of methods or devices are used to study
the relationship between different statements. An effort is made to use those devices which
clearly analyze the position of the enterprise.

The following methods of analysis are generally used:

 Comparative statements;

 Trend analysis;

 Common-size statements;

 Funds flow analysis;

 Cash flow analysis;

 Ratio analysis;

 Cost-volume-profit analysis.

 Comparatives statements:

Comparative financial statement is a tool of financial analysis used to

study the magnitude and direction of changes in the financial position and performance of a
firm over a period of time. The preparation of comparative statements is based on the premise
that a statement covering a period of a number of years is more meaningful and significant
than for a single year only.

From particular point of view, generally, two financial

statements (balance sheet and income statement) are prepared in comparative form for
financial analysis purpose.

The two comparative statements are: (a) comparative balance sheet and (b)
comparative income statement.

(a) Comparative Balance Sheet:- Comparative Balance sheet of an enterprise

is prepared to show different assets, liabilities and capital as on two or more dates so as to

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compare and ascertain any increase or decrease in absolute items and also percentages
changes. The Comparative balance sheet analysis, in the words of foulke, "is the study of the
trend of the same items, group of items and computed items in two or more balance sheets of
the same business enterprise on different dates."

(b) Comparative Income Statement:- The Income Statement gives the results
of the operations of a business. It shows the net profit or net loss on account of business
operations. The comparative income statement gives an idea of the progress of a business
over a period of time. The changes in absolute data in money values and percentages can be
determined to analyze the profitability of the Business.

 Trend Analysis:

The Financial statements may be analyzed by computing trends of series of

information. This method determines the direction Upwards or Downwards and involves the
computation of the percentage relationship that each statement item bears to the same item in
base year. The Figures of the base year are taken as 100 and trend ratios for other years are
calculated on the basis of base year.

For Example- If sales figures for the year 2008 to 2013 are to be
studied, then sales of 2008 will be taken as 100 and the percentage of sales for all other years
will be calculated in relation to the base year.

 Common-Size Statement:

The Common-size statements, Balance Sheet and Income statement are shown
in analytical percentages. The figures are shown as percentages of (statement of profit and
loss), total assets revenue from operations, total liabilities and total sales. The Total assets
are taken as 100 and different assets are expressed as a percentage of the total. Similarly,
various liabilities are taken as a part of total liabilities.

These statements are also known as Component percentage or 100

percent statements because every individual item is stated as a percentage of the total 100.

Also, there are two common-size statement :-(a) Common-size Balance

Sheet and (b) Common-size Statement of profit and loss.

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 (a) Common-size Balance Sheet:- A Statement in which Balance Sheet
items are expressed as the ratios of each asset to total assets and the ratio of each liability is
expressed as a ratio of total liabilities, is called Common-size Balance Sheet. The Common-
size Balance sheet can be used to compare companies of differing size.

(b) Common-size Statement of Profit and Loss:- The items in statement of

profit and loss can be shown as percentages of revenue from operations(sales) to show the
relation of each item to sales. A significant relationship can be established between items of
income statement and volume of sales. And, this Relationship is helpful in evaluating
operational activities of the enterprise.

 Funds Flow Analysis:

The Funds flow statement analysis is designed to analyze the changes

in the financial condition of a business enterprise between two periods. The word
'Fund' is used to denote working capital. This statement will show the sources from
which the funds are received and the uses to which these have been put. This
statement helps the management in policy formulation and performance appraisal.

 Cash Flow Analysis:

A statement of changes in the financial position of a firm on cash basis

is called Cash Flow Statement Analysis. It summarizes the causes of changes in cash
position of a business enterprise between dates of two balances sheets. A cash flow
statement focuses attention on cash changes only. It describes the sources of cash and
its uses. In other Words "Cash Flow Analysis" is a statement which describes the
inflows (sources) and outflows (uses) of cash and cash equivalents in an enterprise
during a specified period of time.

 Ratio Analysis:

The Ratio Analysis is one of the most powerful tools of financial

analysis. Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios for helping in
making certain decisions. However, ratio analysis is not an end in itself. It is only a means
of better 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,

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 but the analyst has to select the appropriate data and calculate only a few appropriate
ratios from the same keeping in mind the objectives of analysis.

 Cost-Volume-Profit Analysis:

Cost-volume-profit analysis is used to determine how changes in costs

and volume affect a company's operating income and net income. In performing this
analysis, there are several assumptions made, including:

- Sales price per unit is constant.

- Variable costs per unit are constant.

- Total fixed costs are constant.

- Everything produced is sold.

- Costs are only affected because activity changes.

-If a company sells more than one product, they are sold in the same
mix.

CVP analysis requires that all the company's costs, including manufacturing, selling,
and administrative costs, be identified as variable or fixed.

Limitations of the study:

Some of the important limitations of financial analysis are describe in the below:

 It is only a study of interim reports

 Financial analysis is based upon only monetary information and non-monetary factors
are ignored
 It does not consider changes in price levels
 Accounting concepts and conventions cause a serious limitation to financial analysis
 Changes in accounting procedure by a firm may often make financial analysis
misleading

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About SAIL:-

Steel Authority of India Limited (SAIL) is an Indian state-owned steel making

company based in New Delhi, India. It is a public sector undertaking, owned and operated by
the Government of India with an annual turnover of INR 44,452 Crore (US$6.83 Billion)
for fiscal year 2016-17. Incorporated on 24 January 1973, SAIL has 74,719 employees (as of
01-Sep-2018). With an annual production of 14.38 million metric tons, SAIL is the largest
steel producer in India and one of the largest steel producers in the world. The Hot Metal
production capacity of the company will further increase and is expected to reach a level of
50 million tonnes per annum by 2025. Sri Anil Kumar Chaudhary is the current Chairman of
SAIL.

SAIL operates and owns 5 integrated steel plants

at Bhilai, Rourkela, Durgapur, Bokaro and Burnpur(Asansol) and 3 special steel plants
at Salem, Durgapur and Bhadravathi. It also owns a Ferro Alloy plant at Chandrapur. As a
part of its global ambition, the company is undergoing a massive expansion and
modernisation programme involving upgrading and building new facilities with emphasis on
state of the art green technology. According to a recent survey, SAIL is one of India's fastest
growing Public Sector Units. Besides, it has R&D centre for Iron & Steel (RDCIS), Centre
for Engineering in Ranchi, Jharkhand.

History of SAIL:

SAIL traces its origin to the Hindustan Steel Limited (HSL) which was set up on 19 January
1954. HSL was initially designed to manage only one plant that was coming up at Rourkela.

For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and Steel
Ministry. From April 1957, the supervision and control of these two steel plants were also
transferred to Hindustan Steel. The registered office was originally in New Delhi. It moved to
Calcutta in July 1956 and ultimately to Ranchi in December 1959.

A new steel company, Bokaro Steel Limited (Bokaro Steel Plant), was incorporated on 29
January 1964 to construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai
and Rourkela Steel Plants were completed by the end of December 1961. The 1 MT phase of
Durgapur Steel Plant was completed in January 1962 after commissioning of the Wheel and
Axle plant. The crude steel production of HSL went up from 1.58 MT (1959–60) to 1.6 MT.
The second phase of Bhilai Steel Plant was completed in September 1967 after
commissioning of the Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela – the

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Tandem Mill – was commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel
Plant was completed in August 1969 after commissioning of the Furnace in SMS. Thus, with
the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur,
the total crude steel production capacity of HSL was raised to 3.7 MT in 1968–69 and
subsequently to 4 MT in 1972–73. IISCO was taken over as a subsidiary in 1978 and later
merged in 2006.

Major units:

SAIL integrated steel plant

 Rourkela Steel Plant (RSP) in Odisha set up with German collaboration (The first
integrated steel plant in the Public Sector in India, 1959)
 Bhilai Steel Plant (BSP) in Chhattisgarh set up with Soviet collaboration (1959)
 Durgapur Steel Plant (DSP) at Durgapur, West Bengal set up with British
collaboration (1965)
 Bokaro Steel Plant (BSL) in Jharkhand (1965) set up with Soviet collaboration (The
Plant is hailed as the country's first Swadeshi steel plant, built with maximum
indigenous content in terms of equipment, material and know-how)
 IISCO Steel Plant (ISP) at Burnpur in Asansol, West Bengal (Plant equipped with
Largest Blast Furnace of country, Modernized in 2015 with investment of 16000 crore
which will yield total production of 2.9 Million Ton annually

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 CHAPTER: II

REVIEW OF LITERATURE

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 Review of literature
1. Sinku Sumita and Kumar Prashant (2014)

Discriminant analysis may be applied for production of sickness,

market research, credit rating portfolio selection identification of growth and classification of
officers/manager or personals. Discriminant analysis has been widely used to identify and to
predict financial health of industrial units “Multiple Discriminant Analysis (MDA) is a
straight forward statistical technique for calculating how much weight to put on each variable
in order to separate the sheep’s from goats.”William H. Beaver (1967) selected five ratios out
of thirty financial ratios to study the financial health of 79 successful units and 79
unsuccessful units. the ratios were (1)cash flow to total debt (2)net income to total asset
(3)total debt to total asset (4)net working capital to total asset (5)current asset to current
liabilities expected , failed firm more and lower return on asset. They has less cash but more
receivable as well as low current ratio. They also had fewer inventories.

RESEARCH METHODOLOGY:

Data for the study: The study is based on secondary data collected from the published Annual
Reports of SAIL. For the purpose of the study, Journals, conference proceedings and other
relevant published literature has been also consulted to supplement the data.

2. Period of the study: The study will cover the period of five years from 2005-06 to 2009-10
.

3. Methodology: The data have been tabulated and then analysed and interpreted with help of
Altman’s Z- Score Model as developed by Prof. Altman.

4. Limitations of the study:

(a)The study is completely relied on secondary source of study.

(b)The study is confined to a period of 10 years.

2. Thyigranjan M. And Kumar J. Uday (2015) in their paper “Profitability Analysis of

select Aluminium Companies in India” the main objective of this research paper is to analyse
the profitability position of the aluminium companies for 10 years (2005-2014) .The study
based on the secondary data , the tool used for analysis are Mean , Standard Deviation , Co-

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efficient of variation and Compound Annual growth . The study ascertain the National
Aluminium Company limited shows satisfactory performance in concern with profitability.

3. S.K. Khartiktitto Varghese (2011) they found the probability more or less depends
upon the better utilization of resources and to manpower. It is worthwhile to increase
production capacity and use advance technology to cut down cost of production and wage
cost in order to increase profitability, not only against the investment, but also for investor’s
return points of view.

4. Sharma Asha and Sharma R.B. (2011) these attempts identify and study the movement
of key financial parameters and their relationship with profitability of textile industry. It is an
attempt to and whether the key identified parameters move in a synchronous way going up
and coming down with base profitability parameters.

5. Roy Manisha and Osamah Mustafa (2013):

Ratio analysis is such a significant technique for financial analysis. It indicates relation
of two mathematical expressions and the relationship between two or more things. Financial
ratio is a ratio of selected values on an enterprise’s financial statement. Financial ratios are
used by managers within a firm, by current and potential stockholder’s of a firm, and by a
firm’s creditor. Financial analysis use financial ratios compare the strengths and weaknesses
in various companies. From the analysis in the article it can understood that Liquidity can be
properly balanced only when the company can manage current assets and current liabilities
properly i.e. balancing. A lower turnover indicates low liquidity. Investment in fixed assets
should be properly managed for revenue generation.

6. Adedeji Elijah (2014):

Ratios analysis has served as a veritable means of monitoring measuring and

improving performance in an organisation. The purpose of the financial statements of a
company is to convey information on the overall performance and state of affairs of such an
organisation to all interested parties. Besides, user of these financial statements in such a way
to reveal the financial strengths and weaknesses of such an organization in order to form an
opinion as regard its going concern. However, ratio analysis is one of the ways through which
the financial statement could be interpreted. Ratios are effective tool of management in

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providing information and data needed in planning and determining the efficiency of
management for a particular period. Ratios are used to establish a relationship and trends in
the financial statements. Ratio analysis is required for management control decision,
investment decision and credit purposes. Profitability ratios are useful to the management of a
company. They are used to determine the profitability of a company and the efficiency in the
utilization of the resources of a company.

7. Maja Andrijasevic (2014), Vesna Pasic (2014):

Ratio analysis, due to its simplicity has for a long time, been one of the most
frequently used method of financial analysis. Being one of the simplest techniques, ratio
analysis is most frequently the first step in the analysis of financial condition and earning
capacity of a company providing the basic information on the state of liquidity, solvency, the
structure of assets and their resources, management efficiency and the degree of success.
Basic purpose of ratio number is to enable evaluation of financial condition of a company, as
well as, the trend of change in the financial condition of a company. Financial analysts use
financial ratios to determine financial health of a company – its financial condition and its
profitability. Though ratio analysis has its limitation for analysing progress of the company
especially in terms of liquidity, profitability turnover and solvency ratios are used in wide
manner.

8. Pal Shrabanti (2012):

India is the fourth largest steel producer in the world after China, Japan and USA.
Indian steel industry is contributing around 2 percent to Gross Domestic Product (GDP) and
its weight in the Index of Industrial Production (IIP) is 6.2 percent. The public sector
company Steel Authority of India is holding the highest market share followed by TATA
Steel Limited , JSW Steel Limited , Essar Steel Limited , JSW Ispat and Steel Limited,
Rastriya Ispat Nigam Limited, Jindal Steel and Power Limited , Bhusan Steel Limited ,
Llyods Steel Industries Limited and National Steel and Agro industries Limited . From the
study it can be understood that RINL must take care in fixed assets management. Sales is not
only the main determinant for the profit maximisation overall profitability depends on the
other financial indicators like liquidity, profitability, activity and financial leverage.
Therefore, the companies should concentrate to improve the overall liquidity, solvency and
efficiency to enhance the profitability to the maximum otherwise the profitability of the
companies will be affected in other way.

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9. Maisuria Mahendra and Allad Idrish (2015):

Ratio analysis is one of the tools of Financial Statement Analysis , and means either :
Calculation of Ratios related reported figures bear to each other , under identical heads in
financial statements of the same firm in different periods of time to identify and analyse
trends in performance of that firm , or calculation of ratios related reported figures bear to
each other , under identical heads under financial statements of the different firms (usually in
same industry) , or against an industry standard , in the same time period (s) and / or in
different periods to identify and analyse how the firm is performing comparatively . Financial
statements mean the Balance sheet, income statement, statement of retained earnings and the
cash flow statement. Every ratio should be used in conjunction with a related ratio or ratios
who draw a meaningful overall conclusion concerning a particular performance factor. Ratio
Analysis is useful for analysing trends in performance both internally and with reference to
industry, assessing performance and liquidity, budgetary control and managerial decision
making.

10. Sasikala R. and Balakrishnan K.P. :

Financial Analysis is a powerful mechanism which helps in understanding

financial position of companies. Financial Ratios are methodical assessment of financial
statement account. These relationships between the financial statement accounts help
investors; creditors and internal company management recognise how well a business is
developing in financial terms. The financial performance of TATA Steel SAIL Steel
Companies are evaluated by: liquidity ratio, activity ratio, profitability ratios. It can be
observed from the article that a liquidity and activity ratio of SAIL are more satisfactory
compared to TATA Steel and profitability ratio of TATA Steel is more satisfactory as
compared to SAIL .

11. Vijayakumar (1998) has examined the determinants of corporate size, growth and
profitability – the Indian experience. To meet the objective of the study, Indian public sector
industries were selected. The date relating to size, growth and profitability was collected from
their annual reports published by the Bureau of Public Enterprise (BPE), Government of
India. The study covers the period from 1980-81 to 199-96. The technique of average,
correlation and linear and linear and multiple regression analysis has been used in this study.
Inter- industry analysis reveals that the growth is positive and significantly associated with
the size in all the industry groups except textiles.

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12. Reddy Sudarsan (2003) studied the financial performance of Paper Industry in A.P.
The main objective set for the study are to evaluate the financing methods and practises to
analyse the investment pattern and utilization of fixed assets , to ascertain the working
capital condition , to review the profitability performance and to suggest measures to
improve the profitability . The data collected have been examined through ratios, trend ,
common size , comparative financial statement analysis and statistical tests have been applied
in appropriate context . The main findings of the study are that A.P. paper industry needs the
introduction of additional funds along with restructuring of finances and modernisation of
technology for better operating performance.

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 CHAPTER: III

PROFILE AND DATA ANALYSIS AND INTERPRETATION OF THE

COMPANY

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 Profile of the company and data analysis

Data analysis and interpretation:

1. Ratio analysis:
A ratio is a simple arithmetical expression of the relationship of one number to another. It
may be defined as the indicated quotient of two mathematical expressions. A ratio
analysis is a quantitative analysis of information contained in a company’s financial
stalemates.

Ratio of reserves to equity capital = Reserves .*100

Equity capital
Table 1: ratio of reserves to equity capital (In crores)
years Reserves Equity capital Ratio
(Rs) (Rs) (in times)
2013-14 38536 4131 9.32
2014-15 39374 4131 9.53
2015-16 35065 4131 8.48
2016-17 31879 4131 7.71
2017-18 31583 4131 7.64

From the above table, it is noted that the ratio of reserves to equity capital is high in
the year 2014-15 with 9.53 times, whereas, it is low in the year2017-18 with 7.64 times. The
ratios had been in a fluctuating trend during the study period (2013-2018). The higher ratio
shows a better financial position of SAIL. Hence, the reserves and equity capital has to be
raised to a certain extent in order to maintain an increasing trend in future.

2. Current ratio:

Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio, also known as working capital ratio, is a measure of general liquidity
and is most widely used to make the analysis of a short-term financial position or liquidity of
a firm. It is calculated by dividing the total of current assets by total of the current liabilities.

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 Current ratio= . Current Assets .

Current liabilities

Table 2: current ratio, (in crores)

Years Current Assets Current Liabilities Ratio

(Rs) (Rs) (In times)
2013-14 26891 15212 1.76
2014-15 28482 16338 1.74
2015-16 24304 18992 1.27
2016-17 25545 21486 1.18
2017-18 29638 24068 1.23

From the above table, it is depicted that the current ratio is increasing in the year 2013-14
(means that current assets are 1.76 times of current liabilities). Whereas decreasing in the
year 2016-17 with 1.18 times. It has been found during the study that the ratio fluctuates.
Hence, there had been a poor performance of SAIL for the last five years.

Because, there is a standard for the determination of current ratio is 2:1. A high current ratio
is preferable to know the good liquidity of a firm.

3. Quick or liquid ratio:

Quick ratio, also known as Acid test or liquid ratio, is a more rigorous test of liquidity
than the current ratio. Quick ratio may be defined as the relationship between quick/liquid
assets and current liabilities. An asset is said to be liquid, if it can be converted into cash
within a short period without loss of value. In that sense, inventories and prepaid
expenses cannot be termed to be liquid asset because they cannot be converted into cash
immediately without sufficient loss of value.

Quick or Acid test Ratio= . Quick or liquid assets .

Current liabilities

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 Table 3: Quick ratio, (In crores)
Years Quick assets Current liabilities Ratio
(Rs) (Rs) (In times)
2013-14 12615.57 15212 0.82
2014-15 9797.37 16338 0.59
2015-16 9587.45 18992 0.50
2016-17 10866.60 21486 0.50
2017-18 13246.62 24068 0.55

From the above table, it is noticed that the quick ratio shows a fluctuating trend. The ratio is
higher in the year 2013-14 with 0.82 times and it is lower in the year 2015-16 and 2016-17
with 0.50 times. Thus, there had been a poor performance of SAIL for the last previous 5
years, as a low quick ratio represents that the firm’s liquidity position is not good. Because,
the standard for the liquid ratio is 1:1.

4. Absolute Liquid Ratio or Cash Ratio:

Absolute liquid assets include cash in hand and at bank and marketable securities or
temporary investment. The acceptable norm for this ratio is 50% or 0.5:1 or 1:2. The formula
of absolute liquid ratio is in the below:
Absolute liquid ratio = Absolute Liquid Assets
Current liabilities
Table 3: Absolute liquid ratio, (In crores)
Years Absolute liquid Current liabilities Ratio
assets (Rs) (Rs) (In percentage)
2013-14 5030.75 15212 0.33
2014-15 4497.59 16338 0.27
2015-16 4527.65 18992 0.23
2016-17 4571.09 21486 0.21
2017-18 5888.06 24068 0.24

From the above table, it is noted that the ratio of absolute liquid assets to current
liabilities is high in the year 2013-14 with 0.33 %, whereas, it is low in the year 2016-17 with
0.21 %. The ratios had been in a decreasing trend during the study period (2013-2018).

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 This ratio analyse the poor performance of SAIL. Because there is a standard norm
for the determination of cash ratio which is acceptable is 50% or 0.5:1 or 1:2. Here, the study
of previous 5 years ratio analysis indicate below standard norm.

5. Debt-equity ratio:

Debt-Equity Ratio is also known as external-internal equity ratio which is calculated

to measure the relative claims of outsiders and the owners (i.e. shareholders) against the
firm’s assets. This ratio indicates the relationship between the external equities or the outsider
funds and the internal equities or the shareholders funds, thus:

Debt-equity ratio =. outsiders funds .

Shareholders funds

Table 5: Debt-Equity Ratio, (In crores)

Years Outsiders fund Shareholders fund Ratio
(Rs) (Rs) (In times)
2013-14 20387.62 42666.35 0.47
2014-15 22084.47 43504.78 0.50
2015-16 25240.42 39195.53 0.64
2016-17 27397.23 36009.53 0.76
2017-18 28156.53 35713.53 0.78

From the above table, it is found that debt-equity ratio shows a increasing trend. The
ratio is increasing in the year 2017-18 with 0.78 times and it is decreasing in the year 2013-14
with 0.47 times. This ratio analyse the poor performance of SAIL. Because there is a standard
for the determination of debt-equity ratio is 1:1.

A very low ratio is not considered satisfactory for the shareholders because it
indicates that the firm has not been able to use low-cost outsiders funds to magnify their
earnings. Thus, interpretation of the ratio depends upon the purpose of analysis, the financial
policy and the nature of business of the firm.

6. Solvency ratio or The Ratio of Total Liabilities to Total Assets:

This ratio is a small variant of equity ratio and can be simply calculated as 100-equity ratio.
Generally, lower the ratio of total liabilities to total assets, more satisfactory or stable is the
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long-term solvency position of a firm. The ratio indicates the relationship between the total
liabilities to outsiders to total assets of a firm and can be calculated as follows:
Solvency ratio = Total Liabilities to Outsiders *100
Total Assets
Table 6: ratio of total liabilities to total assets (in crores)
Years Total Liabilities to Total Assets Ratio
Outsiders (Rs) (Rs) (in percentage)
2013-14 20387.62 91961.89 0.22
2014-15 22084.47 99326.87 0.22
2015-16 25240.42 98269.44 0.25
2016-17 27397.23 106539 0.25
2017-18 28156.53 114190 0.24

From the above table, it is found that the total liabilities to total assets ratio is increasing in
the year 2016-17 with 25% and it is lower in the year 2014-15 with 22%. The value of total
liabilities to outsider and also the total assets should be increased and to have a good financial
performance in future.
Because, lower the ratio of total liabilities to total assets, more satisfactory or stable is
the long-term solvency position of a firm.

7. Fixed assets to total long term funds or fixed assets ratio:

This ratio indicates the extent to which the total of fixed assets financed by long term
funds of the firm, generally, the total of the fixed assets should be equal of the long-term
funds or, says, the ratio should be 100%. The long-term funds consist of shareholders funds
as calculated in the debt-equity ratio plus long-term borrowings.

A variant to the ratio of fixed assets to net worth is the ratio of fixed assets to total
long term funds which is calculated:

Fixed assets ratio = Fixed assets (after depreciation)

Total long-term funds

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 Table 7: Fixed assets ratio (in crores)
Years Fixed assets Total long-term Ratio
(Rs) fund (Rs) (in percentage)
2013-14 26771 56298.57 0.47
2014-15 36169 57530.34 0.62
2015-16 45926 56691.53 0.81
2016-17 50285 55096.53 0.91
2017-18 58612 65490.53 0.89

From the above table, it is found that the fixed assets ratio is increasing in the year
2016-17 with 0.91 % whereas decreasing in the year 2013-14 with 0.47 %. It has been found
during the study that the ratio fluctuates. Hence, there had been a poor performance of steel
authority of India limited for the 5years, as it has not properly utilized its long-term funds in
generating the fixed assets.

8. Ratio of current assets to proprietor’s fund:

The purpose of this is to calculate the percentage of shareholder’s funds invested in

current assets. There is no ‘rule of thumb’ for this ratio. Depending upon the nature of the
business there may be different ratios for different firms.

The ratio is calculated by dividing the total of current assets by the amount of
shareholders funds.

Current assets to proprietors fund = Current Assets . *100

Shareholders funds

Table: 8 Current assets to proprietors fund (in crores)

Years current assets proprietors fund Ratio

(Rs) (Rs) (in percentage)
2013-14 26891 42666.35 0.63
2014-15 28482 43504.78 0.65
2015-16 24304 39195.53 0.62
2016-17 25545 36009.53 0.70
2017-18 29638 35713.53 0.82

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From the above table, it is depicted that the current assets to proprietors fund ratio shows a
fluctuating trend. The trend has occurred because the ratio is higher in the year 2017-18 with
0.82 % and it is lower in the year 2015-16 with 0.62 %. The value of proprietor fund had
been remained more or less during the five years of the study. Therefore, the value of current
assets should be increased and kept constant in order to over come the fluctuating trend and
to have a good financial performance in future.

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 CHAPTER: IV

RESEARCH METHODOLOGY

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 Research Methodology

Research design:

A research design is the specification of method and procedure for accruing the
information needs. It is overall operational pattern of frame work of project that stipulates
what information is to be collected for source by the procedures.

Descriptive Research design is appropriate for this study. Descriptive study is used to study
the situation. This study helps to describe the situation. A detail description about present and
past situation can be found out by the descriptive study.

Period of Study:

The study period for the research is 5 years starting from 2014 to 2018.

Data source and collection:

The study is based on the secondary data which have been collected from various
sources viz., published annual reports and records of the company, websites, etc., for the
period from 2013-14 to 2017-18. Ratio analysis has been used to analysis the data.

The secondary data included information like market capitalization, Reserves and
Surplus, Loan Funds-both secured and unsecured, fixed assets, Current assets, outsider fund ,
Equity capital, total sales and share holder fund. The various ratios calculated are Interest
Coverage Ratios (ICR), Debt - equity ratios, solvency ratios etc.

Analysis & Interpretation is done with an objective to study the analysis the financial
statement, its determinants, nexus with the value of the firm and moreover the finance
structure decisions on the performance of the Steel authority of India limited (SAIL). The
results of the research is limited to the study period.

The financial statements of SAIL for the 5 years are taken from www.sail.co.in

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Methods use for structure of financial statement analysis of SAIL:

There are various method or formula are used to analysis the financial statement of
the steel authority of India limited such as:

1. Ratio of reserves to equity capital = Reserves .*100

Equity capital

2. Current ratio = . Current Assets .

Current liabilities

3. Quick or Acid test Ratio = . Quick or liquid assets .

Current liabilities

4. Absolute liquid ratio = . Absolute liquid assets .

Current liabilities

5. Debt-equity ratio = . Outsider fund .

Shareholder fund

6. Solvency or ratio of total liabilities to total assets =

Total liabilities to outsiders
Total assets
7. Fixed asset to long-term fund or fixed asset ratio =
Fixed asset (after depreciation)
Total long term funds

8. Debt-service ratio or interest-coverage ratio =

Net profit (before int. and taxes)
Fixed int. charges

9. Ratio of current asset to proprietors funds =

Current Assets *100
Shareholders’ funds

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 CHAPTER: V

FINDING AND CONCLUSION

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Finding and suggestions:
This study is carried out with the objective of analyzing the financial performance of
steel authority of India limited (SAIL) to examine and understand the role of finance in the
growth of the company. This chapter attempts to highlight the findings of the study.

 The reserves to equity capital ratio are high in the year 2014-2015 with 9.53 times and
it is lower in the year 2017-2018 with 7.64 times. The ratio is lower in the year 2017-
18 as compared to previous year which shows a financial position of the company is
not good.
 The current ratio is increased in the year 2013-14 with 1.76 times and it is decreased
in the year 2016-17 with 1.18 times. The ratio had been in a decreasing trend during
the study period (2013-14 to 2016-17) but under this period the ratio does not show
even a single time upto 2.00 time. So that this ratio shows a poor performance of the
company, as it has not properly utilize its currents liabilities in generating the current
assets.
 The quick ratio shows a fluctuating trend. The ratio is higher in the year 2013-14 with
0.82 times and lower in the year 2015-16 and 2016-17 with 0.50 times. The ratio had
depicted a unhealthy position the company because as a convention or rule of thumb
of quick ratio of 1:1 is considered satisfactory.
 The absolute liquid ratio is high in the year 2013-14 with 0.33 % and it is low in the
year 2016-17 with 0.21 %. The absolute liquid ratio shows a very poor performance
of the company. Because the analysis of ratio is not acceptable for the compare of the
standard norm which is 50% or 0.5:1.
 The debt equity ratio is increased in the year 2017-2018 with 0.78 times and it is
decreased in the year 2013-2014 with 0.47 times. The debt equity ratio will depend
upon the future borrowings of the company. because a ratio of 1:1 may be usually
considered to be a satisfactory ratio.
 Total liabilities to total assets ratio is high in the year 2016-17 with 0.52% and it is
low in the year 2013-14 with 0.22 %. Therefore, the performance of the steel
authority of India ltd should be good and to have a good financial performance in
future. However , lower the ratio of total liabilities to total assets, more satisfactory or
stable is the long-term solvency position of a firm.
 Fixed assets to long-term fund ratio is increased in the year 2016-17 with 0.91% and it
is decreased in the year 2013-14 with 0.47%. The ratios had been fluctuating in trend
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 during the study period (2013-14 to 2017-18). These ratios show a poor performance
of the company, as it has not properly utilized its long-term funds in generating the
fixed assets.
 The current assets to proprietor’s fund ratio are used to calculate the percentage of
shareholders fund invested in current assets. This ratio is higher in the year 2017-2018
with 0.82% and it is lower in the year 2015-2016 with 0.62%. Therefore, the value of
current assets should be increased and kept constant in order to overcome the
fluctuating trend and to have a good financial performance in future.

Conclusion:
Finance is the life blood of every business. Without effective financial management a
company cannot in this competitive world. A prudent financial manager has to measure the
working capital policy followed by the company. The study is aimed to analyze the structure
of financial statement of “Steel authority of India limited” for the period of 2014 -2018. The
study has given the knowledge about the application of financial tools, its importance and its
usefulness in determining the financial statement of Steel authority of India limited. The
study has concluded that the financial statements analysis of SAIL could be ascertained by
using various ratios.

Steel authority of India limited (SAIL) continues to play an important role in the
industrial development of country. There is every possibility that SAIL would establish for
itself a permanent and unshakable position in the industrial map of India.

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