Objectives of the study :

Ratio analysis is done for the following purposes:

1) To study the financial position of the company. 2) To analyze the financial stability and overall performance of ISPAT

INDUSTRIES LIMITED in general.

3) To analyze the profitability and solvency position of the unit with the existing

tools of financial analysis.

4) To study the changes in the assets, liabilities structure of the company during

the period of study.

OBJECTIVES

The objects behind selection of the subject are as follows:

To know the financial position and determine long term and short-term solvency of the company.

To analyze the financial stability and liabilities structure of the company during the study period.

To analyze the profitability and solvency position of the unit with the existing tools of financial analysis.

To know how many times the inventory and debtors are easily converted into cash.

CONCLUSION

After analyzing and interpreting the whole financial statement of Ispat Industries Limited for three years starting from 2005-06 to 2007-08 and on the basis of annual reports, the researcher have arrived at inferences which are shown at the end of

analysis.

On the basis of inferences the researcher has arrived on final conclusions. They are as follows: REPORT SUBMITTED BY: JIGAR PATEL ~ 44 ~

FINANCIAL ANALYSIS & INTERPRETAT ION OF ISPAT INDUSTRIES LIMITED

A)

Liquidity Position:
The Liquidity position of the company is not good during the year. It can be judged by the unsatisfactory result of Current Ratio, Quick Ratio and Cash Ratio during the period, when these ratios are not less than the ideal ratios. The Current Ratio is lower than the ideal ratio. It shows the company does not have the ability to meet its current requirements.

In overall the liquidity position of the company is not satisfactory which shows the management is not efficient in utilizing current assets in the business.

B)

Leverage Position:
The Leverage position of the company is good in long term position of the company due to higher Interest Coverage Ratio and Debt to Equity Ratio; whereas it is also good in short term position as Debt Ratio shows the decreasing trend.

C)

Profitability Position:
The Gross Profit of the company is declining, which has affected the profitability of the company. Beside this ratio, the overall profitability of the company is

REPORT SUBMITTED BY: JIGAR PATEL ~ 45 ~

FINANCIAL ANALYSIS & INTERPRETAT ION OF ISPAT INDUSTRIES LIMITED

satisfactory during the study period, which is the positive sign for the company. The profitability has also affected due to low Earning per Share, which indicates that the shareholders are not gaining much out of every share they own.

Therefore the overall financial position of the company is good, on the basis of determinants of ratio analysis i.e. Liquidity, Leverage, Activity and Profitability Ratios. The financial position of the company can be said sound in short term and long term, which indicates that there may be no financial crisis in future.

D)

Activity Position:
The business activity of the company is efficient and effective during the period, which is beneficial to the Liquidity, Leverage and Profitability Position of the company. The increasing Inventory Turnover Ratio and Assets Turnover Ratio highlights the overall effective and efficiency of the business activities and management in making productive utilization of the assets and capital of the company so that there is better profitability during the period.

The Debtors Turnover Ratio as well as collection period is also increasing which shows that the company is efficient in converting debtors into cash and able to use the cash in purchasing raw materials.

LIMITATIONS

The analysis and interpretation are based on secondary data contained in

the published annual reports of ISPAT INDUSTRIES LIMITED for the study period.
Due to the limited time available at the disposable of the researcher, the

study has been confined for a period of 3 years (FY 2006-2008).

Ratio itself will not completely show the companys good or bad

financial position. REPORT SUBMITTED BY: JIGAR PATEL ~ 47 ~

FINANCIAL ANALYSIS & INTERPRETAT ION OF ISPAT INDUSTRIES LIMITED

Inter firm comparison was not possible due to the non availability of

competitors data.
The study of financial performance can be only a means to know about the

financial condition of the company and cannot show a thorough picture of the activities of the company.

RECOMMENDATION

After analysis & interpretation of the financial statements of Larsen & Toubro Limited, the following are the suggestions for the betterment of the company:

REPORT SUBMITTED BY: JIGAR PATEL ~ 48 ~

FINANCIAL ANALYSIS & INTERPRETAT ION OF ISPAT INDUSTRIES LIMITED

It is emphasized here that one has to keep in mind; there will be always scope for future development in any concern and in any department.

1. Liquidity Position:
The company should try to improve its Current Ratio, as some margin is required to protect the interest of the creditors and to provide cushion to the firm in adverse circumstances. It should try to maintain its current assets by proper inventory management because even a slight decline in the value of current assets will adversely affects its ability to meet its working requirements and therefore, from the viewpoint of creditors, it is more risky venture. The company could raise funds by the source of banks etc.

2.

Leverage Position:

The company should minimize external financing to lower the interest burden which will help to enhance the shareholders ability to earn and will lower the risk for them.

3. Profitability Position:
The management needs to increase in its production line, expansion capacity and more exports, which push the bottom line and in turn shows a positive sign in the growth of the company.

REPORT SUBMITTED BY: JIGAR PATEL ~ 49 ~

Another area where the management needs to draw its attention as far as working capital management is concerned is to manage its debtors. Although the company demands an open letter of credit from all its customers, the credit policy needs to be tightened especially with the increase number of plants, which would lead to the substantial amount of investment in debtors.

The company should try to improve its Earning Per Share which enables the existing and new investors to invest more so that liquidity will be increases.

The company should also try to improve its P/E Ratio, so that investors are very optimistic about the future of the company since the price, which reflects market value, is selling for well above current earnings.

4.

Activity Position:

The company should try to maintain its Inventory Turnover Ratio and Debtors Turnover Ratio so that business activity will run efficiently and effectively as inventory and debtors are converting into cash in less time.

Limitations of the study The duration of the study is short & so the data collected may not be Sufficient. The information is collected is only for with academic interest. Data for preparing this project report on organization study based on Organization report & other secondary data not on the actual position. However, I made sincere attempt to prepare this internship project report in systematic manner.

Scope of the study :

When the project report is prepared it includes all the aspects of projects like companys product and its market, manufacturing process, operational viability, its financial projection and various ratios. This helps the management to understand whether the project is practically possible or not. Ratio analysis gives the idea about the profitability of the project. Project report gives projected financial statements and on basis of that ratios are calculated. Ratio analysis helps in judging the operational efficiency of the managements ability to repay short and long term loans, doing inter-firm comparison and to assess the future growth of the company. The ratio analysis of the company is done before investing or providing credit to the company. This is the reason of selecting the project.