Project Kavya

SCOPE OF THE STUDY
The scope of the study is connected to one of the key areas of finance i.e Analysis
&interpretation of financial statements.The study appraises the companys
meeting the requirements for the process industries in the core sector such as
fertilizers,oil refineries,chemicals etc.
METHODOLOGY
The analysis of project was based on available information.Any information about
the topic is called the data.The data was gathered from various sources i.e
primary and secondary sources.
Types of data
Primary data
Secondary data
Primary data:Any information that is collected afresh and for the first time is
called primary data.The primary data happens to be original character .the
information is gathered from concerned employees.the employees and amanager
of the financial department have provided the information needed for study.
Secondary data:Information which has already been collected by somebody else
or some other agency with definite purpose and which has already been
processed is called secondary data .the secondary data for the study have beeb
gathered from the balance sheet ,profit and loss account annuakl reports and
others books and manuals of BHPV LIMITED.

LIMITATIONS OF THE STUDY
Every study is conducted under certain limitations.The study relates only to
financial data and other areas are not taken into consideration.The study is
carried out only for a period of 2 month.it was not possible to get cent percent
correct information.The research was made according to the information
available from related department and through annual reports published.The sent
study covers only for a period of five years.So the analysis will be made on this
basis.
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

CHAPTER II
INDUSTRY PROFILE
COMPANY PROFILE

INDUSTRY PROFILE
BHPV is a subsidiary of BHEL (Bharat Heavy Electricals Ltd),navratna central public
sector Enterprise and Heavy Electrical equipment conglomerate.
Market profile
In addition to BHPV legacy product such as process plants combustion
systems,boilers cryogenic equipments for refineries ,fertilizers plant etc,with the
takeover of the company by BHEL,the company diversified into manufacturing
equipments required for the power generation in and abroad.

Customers ptrofile
BHPVs clientele includes public,private,cooperative sector organization in
almost all the core sector of the economy such as all the fertilizer
plants,petroleum refineries and steel plants in india and abroad.Now,with the
diversification all major power plants in india.
Other major customers srev from paper,chemical,defence,space sectors.

Competitor profile
In the area of process plant: L&T, GR Engg, Lloyds steel, ISGEC,
John Thomson, Godrej etc.
In the area of cryogenics: ICCP, INOX, Sanghais oxygen, L&T,
Linde, VJU, Essar, LINDE, Air products,
Kobe, HOPM, Praxair, Hitachi.
In the area of combustion system: ISGEC, Babcock Thermax, Ignifluid
boilers, ABL, L&T, KTI, etc

COMPANY PROFILE
HEAD OFFICE:- Visakhapatnam, Andhra Pradesh.
BRANCH OFFICE:- Mumbai, Chennai, New Delhi
Bharat Heavy Plates and Vessels Ltd, it is a public limited Company. It is a job
order /shop production industry. According to customer specification and
requirements it produces various products. Fore seeing the countrys need for
fabricating equipment of an exclusive Factory with the main object of reducing
dependence on foreign suppliers and become self sufficient ourselves. Thus the
birth of BHPV in the year 1966 to meet the demands of process equipment for
core industry like Fertilizers, petrochemicals, petroleum and other chemical
industries initially. BHPV using different types of materials manufactured and
supplied several built equipments such as pressure vessels, heat exchangers,
column, internal trays etc. After executing some important orders, BHPV LTD
gained full confidence of customer which cleared the way to enter the line of
cryogenic field, pulp cooking plant, evaporation plant and industrial boilers on a
total turnkey basis which of later years helped in augmenting turnover of the
company and increasing profitability.

INTRODUCTION ABOUT BHPV LTD
In the liberalized economy of India and in the era of globalization a company must
rethink its business mission and all functional strategies. In these days company
find themselves competing in a race where the road signs and rules keep days
when it was business as usual companies should succeed only by having
innovative ideas combined with by effective financial management. Therefore, it
is not surprising that todays winning companies are those which foresee the
future and manage the finance effectively. One can manage finance effectively by
managing working capital, capital structure and taking decisions on capital
budgeting. Ultimately, finance is at best about value adding, developing new
products and raising the worlds standard of living. The heavy engineering
industry is a major strength of any economy. These heavy engineering industries
which produce capital goods are the most modern of the entire industrial group.
In India these heavy engineering industries occupy a crucial role in its economic
development in view of the huge investment as well as the crucial importance to
nation. These industries are mostly confined to the public sector only. BHPV Ltd.
Is the largest fabricator of process equipment in India for the petroleum, chemical
and allied industries. It is fully owned by the government of India and is managed
by an autonomous board of directors. Situated in the City of destiny of
Visakhapatnam on the western sea coast of the Deccan Plateau, BHPV is
accessible by road, rail, sea and is well connected to all metropolitan cities by air.
BHPV, Visakhapatnam is a public sector undertaking BHPV has been selected for
study.
The topic selected is A study on Financial Statement Analysis.

HISTORY OF BHPV
Licensed to start construction of plant at Visakhapatnam in 1966, BHPV
confronted many obstacles such as water problems, frequent power cuts both at
initial stage as well as at the time when construction was going on. In spite of all
those obstacles the civil and structural work was completed to a major extent by
the end of 31
st
March 1967. The licensed and installed capacity is 23210 MT. The
initial capital outlay being Rs 17.5 crores. Later after completion of installation
work BHPV has received orders for the 1
st
time from M/S BOKARO steel plant and
Fertilizer Corporation of India Ltd., for fabrication and deliver of equipment. The
factory at initial stages had suffered a loss in fabrication and supply of equipment
to customers due to delay in the procurement of required raw material. The
factory was scheduled to go into production initially in July 1967, but due to
backlog of some uncompleted construction work the Company went into
commercial production only in 1971. Sir K.C.Panth then the Minister of State for
steel and heavy engineering inaugurated the initial production in 1970 where
some production facilities had already been established by installation of
fabricating machinery like bending rolls, wedding equipment etc. During the first
year production, the company has incurred a loss of Rs 27.47 lakhs mailnly due to
incidence of fixed expenditure apportion-able to production like establishment
depreciation etc. The same loss position was continued till 1978-1979. The
continuous losses put BHPV far from profiteering companies.
In 1979-1980 BHPV has witnessed several significant events both on financial as
well as production fronts. BHPV for the first time in its years of commercial
production attained a break-even level with a marginal profit of Rs 33.09 lakhs as
against a net loss of Rs 129 lakhs projected at the beginning of the year. During
1980-81 the company for the second consecutive year, earned a net Profit (after
tax) Rs 48.21 lakhs from its operations. This year BHPV Ltd. Operations included
manufacturing of very critical and sophisticated equipment to core industries.
Again in 1981-82 the company operations resulted in a net profit of Rs 60.19 lakhs
as against a budheted loss of Rs 20/- lakhs. Major pending interest on loan from
GOI was cleared in this year. During 1982-83 BHPV reached 100% target
production and resulted in a net profit of Rs 103.71 lakhs as against the budgeted
loss of Rs 95 lakhs. With prestigious work orders from Visakhapatnam steel plant
for supply of air and gas separation plants BPV crossed a target production and its
operations resulted in a net profit of Rs 575 lakhs. Again in 1987-88 BHPVs
projects were successfully fabricated and its profits took an upward trend and its
operations resulted in PAT of Rs 290 lakhs. It was expected to emerge an
increasing trend in the profits of BHPV for the year.
However, due to changes in the economy with entry of global players in 1990s
increased private sector competitions, introduction of LSTK concept by customers
and Governments policy towards PSU i.e. implementation of VRS and proposals
for disinvestment, the Company has suffered huge losses in 2002-03 and 2003-04.
By virtue of this, entire net worth of the company got eroded. This resulted for
reference of the company to BIFR in August 2004.
Various revival proposals tried after 2004 for rehabilitation of the company
through outright sale, merging with other PSUs. Stand alone revival etc. However,
due to change in government policy after 2005 and considering the potential of
BHPV, GOI has finally made the company as subsidiary of BHEL, a Navaratna PSU.
AN OVERVIEW OF TOP MANAGEMENT

From May 2008 the company became subsidiary of BHEL. At corporate level the
companys affairs are managed by the Board consist of full time Managing
Director and CMD, BHEL as the chairman of the board. In addition, 1 Ex officio
from DHI (administrative ministry) & 2 functional Directors also constitute the
Board.
Technology & Market Issues:
The present plant & machinery & infrastructure utilizing by the company is of 30
years old and have been fully depreciated. At present the internal lead time is
high when compare to competitors. Similarly in the areas of engineering the lead
time required for design and drawings is to be reduced which requires
implementation of sophisticated process design software.
As per rehabilitation scheme approved by GOI, BHEL will invest Rs 231 crores for
modernization of the plant in the years 2011-2012 to 2013-2014.

Product Diversification
The company has undertaken several EPC contracts on EPC/LSTK basis at various
locations in India and abroad. The Company R&D Department has developed
technology for manufacture of compact Heat Exchanger for the light Combat
Aircraft (LCA) under the funding by Aeronautical development Agency (ADA).
BHPV now with the technology acquired from BHEL (Holding Company),
diversified into power plant equipment, namely HRSG Boilers, Dearators etc.

Revival and Turnaround of the company:
On 09.05.2008, the company was formally taken over by BHEL, a navaratna
PSU, as per the revival scheme sanctioned by GOI.
The salient features of revival scheme are as below.
(As per the Govt. of India, Ministery of Heavy Industries & Public Enterprises,
department of Heavy Industry, letter F.No. 1(11)/2004-PE(IV) dated 07.05.2008)
1. GOI will waive and write off loan and interest amounting to Rs 415.61 Crs.
2. GOI to provide guarantee amounting to Rs 250 Crs to enable BHPV to raise
bonds from the domestic market subject to the conditions as intimated
wide this office letter of even no. dated 29.04.2008
3. The entire paid up capital of BHPV to the tune of Rs. 33.79 Crs would be
transferred to BHEL at a notional value of Re 1/-.
4. BHEL will takeover both the assets and liabilities (including contingent
liabilities) of BHPV as a going concern.
5. The takeover will entail the following concessions from the Government of
Andhra Pradesh.
6. Government of Andhra Pradesh:
a) Transfer of title of land measuring 386.73 acres in possession of BHPV as
gift along with waiver of registration and stamp duty.
b) Waiver of Sales Tax arrears amounting to Rs 42.16 Crs.
c) Waiver of NALA Tax of Rs 43 lakh and
d) Waiver of dues towards Water Tax, Property Tax, and Vacant Land Tax
of Rs 3.96 Crs.
7. The consortium of bankers has agreed for One-Time Settlement BHEL may
take timely advantage of the offer.
8. BHEL will infuse at least Rs 34 Crs as additional Equity Capital and adequate
funds for up-gradation of manufacturing facilities, Capex and Working
Capital.
9. BHEL will take over BHPV with all its employees.
10. DHI will assist BHEL in settling the disputed demands relating to excise,
customs, income-tax etc., on a case to case basis.
11. BHEL will take over BHPV as its subsidiary and take all possible steps for its
revival. The matter regarding reconstitution of the Board of Directors is
under consideration of the competent authority.
The Sanctioned Rehabilitation-cum-Take-over Scheme:
The Revival Scheme envisages take-over of Bharat Heavy Plate and Vessels
Limited (BHPV), a Government of India Enterprise and Subsidiary of Bharat
Yantra Nigam Limited (under The Ministry of Heavy Industries and Public
Enterprises) by Bharat Heavy Electricals Limited (BHEL), a Government of India
Enterprise (also under the Ministry of Heavy Industries and Public Enterprises)
as its subsidiary. As per scheme, the entire undertaking of BHPV shall be
transferred to BHEL as its subsidiary. The entire paid-up capital of Rs 33.79 Crs
would bt transferred to BHEL at a nominal value of Re 1/-. BHEL will take over
both assets and liabilities (including contingent liabilities) of BHPV as a going
concern. BHEL will take over BHPV with all its employees. BHEL will infuse at
least Rs 34 Crs as additional Equity Capital and adequate funds for up-
gradation of manufacturing facilities, CAPEX and working capital. Above cited
Sanctioned Rehabilitation over Scheme has been found acceptable to all
employees and secured creditor.
Above scheme was approved by BIFR in October 2010.
Synergy of Business between BHEL and BHPV:
In addition to improvement in present business of BHPV, the take-over by
BHEL will have the following advantages:
Managerial and marketing support from BHEL
Diversification into High Pressure Power Boilers.
Financial Support for up-gradation of manufacturing facilities, Capex and
Working Capital Requirements.
Ensured flow of new orders.
Synergy between the two organizations in view of similarity of
products/technologies.
Business advantage due to excellent Brand Image of BHEL.
Factors for revival of BHPV through takeover by BHEL:
BHEL on its part has worked out the viability of the BHPV takeover, taking into
consideration the points: BHEL to enhance the capabilities and capacities of BHPV
to build upon its strengths in the existing business of supplying process
equipment to sectors like oil, petrochemicals, fertilizers etc. in addition, BHEL
plans to enhance BHPVs capabilities and capacities in the area of industrial
boilers, heat exchangers, condensers etc. in capital investments of Rs 235 Crs is
envisaged for the up-gradation of required facilities. Expected growth in the
market for the BHPVs products, especially in process equipment and cryogenics.
As per industry analysis, order worth Rs 1700 Crs per annum are expected in the
next five years from Oil Refineries and Petrochemicals projects to flow the
engineering and fabrication industry.
With a market share of BHPV of 15% -18% in the past in this segment, BHPV can
become more confident in addressing this market overcoming its financial
constraints by participating in some of the tenders with BHEL support. As such,
BHPVs financial weakness would be mitigated once its restricting is completed
and BHEL takes over its functioning. The Captive Power Project (CPP) and
Industrial boiler market segment is expected to grow from around Rs 1800 Crs in
2007-2008 to an estimated level of Rs 2400 Crs in next five years based on
projected 12% industrial growth in the coming years. BHPV can target a share of
25%-30% of this market, provided market expectation on delivery and prices are
fulfilled. Currently, the Trichy unit of BHEL is constraints in targeting the industrial
boilers market due to heavy load of boiler orders from the utility segment. In this
regard BHPV can develop as a dedicated centre of Industrial boilers by BHEL. The
sales turnover from this segment has been projected to reach to level of Rs 800
Crs by the 5th year after functional takeover by BHEL, based on factors like
increased volume, better financial capabilities leading to lower working Capital
borrowing costs etc.
BHPV: AN OVERVIEW
1. INTRODUCTION

Incorporation of the Company : 1966
Primary Objective : To manufacture custom built
Capital Equipment for the
process of Industries such as
Fertilizers,Petrochemicals,
Petroleum Refineries,
Chemicals etc.
Technical Collaboration provided by : SKODA, Czechoslovakia
Commencement of Construction : 1968
Completion of Construction : 1971
Commencement of Production : 1971
Initial Project Cost : Rs 17.5 Crs
Initial Product Mix : Heat Exchangers, column,
Pressure vessels, Technological
Structures, Piping etc.
Installed Capacity : 23,210 M.T.
Turnover for the year 2009-10 : Rs 104 crore

2. RESOURCES PRODUCTION FACILITIES

Factory Area : 197 Acres
Total Covered Areas : 90,000 sq. Meters
Covered area of Production Shops : 56,000 sq Meters
Power Requirement : 3,000 KW from APSEB
No. of Ancillary Units : Around a Dozen

IMPORTANT MACHINERY
The maximum crane lifting capacity is 120 tones, but loads up to 250 tones can be
lifted with improvisation. Maximum Rolling capacity is 60mm in cold condition
and 170mm in hot condition. BHPV has the largest heat treatment furnace in
India, the size being Meters width, 5.5 meters height and 36.5 meters long. One
more furnace of 200 Ton capacity and 15 mts. Bogie length has been added.
Other critical equipment available with BHPV are Deep Drawing Hydraulic Press of
1600T capacity Single Spindle CNC Deep hole Drilling Machine with Gun Drilling
attachment and 2 Nos. CNC drilling machines which can employ conventional
drills. Another CNC Deep hole drilling machine has been installed recently by
HMT. A number of Welding Rotators of capacity up to 250 Tones. Welding
equipment such as manual Arc, Sub merged Arc, TIG, MIG, Plasma including the
latest high productive welding equipment such tune head submerged arc welding,
and Bi-cathode TIG welding. Tube fining Machine. A number of vertical and
horizontal boring machines with a maximum capacity of 5 meters dia and 200 mm
spindle dia respectively. Different types of Non-destruction Testing Equipment.
Well equipped Physical and Chemical laboratories. Metrology section etc. HCl
Super-Mini Computer, Two Mini computers 56 CAD Machines and 118 Personal
computers.

MAN POWER (As on 31
st
Mar, 2011)
Workmen/ Staff :
Supervisors :
Executives :
Total :
EMPLOYEE WELFARE AMENITIES
Township Area 151 Acres
No. of Quarters 1192
20 bed Hospitals
Protected Water Supply
Underground drainage system
English medium school with CBSE Syllabus
Telugu medium school with AP State Syllabus
Special school for mentally handicapped children.
Vocational training centre for mentally handicapped
Community center for cultural activities & sports-open air theatre facilities
Kalyana Mandapam

By absorbing know-how from various world renowned collaborators, BHPV
upgraded its status from a mere fabricator of process equipment to that of an
engineering company of international repute.

PROJECTS OF NATIONAL IMPORTANCE EXECUTED/UNDER EXECUTION
S.NO CUSTOMER PROJECT/EQUIPMENT
1. IOCL, Panipat Hydro cracker reactors 3 Nos
2. IOCL, Panipat Reactor, Regenerator & Office
Chamber
3. IOCL, Panipat Reformer & WHR Package
4. IOCL, Mumbai 150 MT Capacity LPC bullets
5. IOCL, Chennai Sphere
6. BOKARO STEEL PLANT, Bokaro Argon Recovery Unit
7. NRL, Numaligarh Air Fin coolers/SS Clad Vessels,
Spheres etc.
8. HPCL, Visakhapatnam CDU Heater with APH System/
VDU Heater
9. HPCL, VREP-II Visakhapatnam Clad/CS Columns/ CS heat
Exchangers etc
10. HPCL, Visakhapatnam Co-boiler
11. HPCL, Visakhapatnam Revamping of 50TPH oil & gas
fired boiler
12. HPCL Mumbai 50 TPH Boiler
13. BPCL, Mumbai Nitrogen Plant
14. Hyundai Heavy Industries, New Delhi Cryo Nitrogen Plant
15. Space application centre, Ahmadabad 505m Dia thermal vaccum
system
16. TECHNIMONT ICB LTD. Mumbai Nitrogen Plant
17. OSWAL CHEMI FERTILIZER LTD
Paradeep Waste Heat LP boilers

As a part of total quality management program, BHPV has acquired ISO 9001
certification during the year 1993-94, particularly to boost uo its exports and to
be competitive in the international market.
Re-certification of ISO 9001 has been obtained in September, 1996.
In recognition of high standards of our quality, confederation of Indian
Industry (CII), Southern Region, AP presented the Quality Award.
RESEARCH & DEVELOPMENT
Research & Development department was establishment in 1975 and is well
equipped with high tech equipment to cater to Applies Research and Product
development. R&D has developed 136 Projects so far. Some of the products
commercialized include:
Titanium Anodes
Titanium Air Bottles
Cryogenic Vats
Individual Quick Freezing Unit
Super Insulated Piping
Super Insulated Cryogenic Storage tanks
D.M. Water Plants

A prestigious order for Development of Heat Exchangers for Light Combat Aircraft
(LCA) Phase II has been received from Aeronautical Development Agency,
Bangalore.
Some of the Awards received for excellence in R&D include:
CIS Award for R&D achievement in 1992-93.
ANCILLARISATION
BHPV has developed some ancillary industries in its vicinity to cater to its
requirements. Apart from offering sufficient work load to these industrial units,
BHPV has been assigning work to a number of small sector industries. BHPV
provides material, transportation and inspection services to the Ancillaries to help
them rise to its quality requirements.
PRESENT STRENGTHS
Financial, Managerial, Technical back up and support of Navaratna
PSU, BHEL
Excellent Design & Engineering capabilities
State of the Art Manufacturing facilities
Accomplished image as a supplier of Quality Products in the domestic
and international markets.
High Degree of customer confidence.
Technological tie-up arrangements
Well trained and qualified work force and Engineers.
Sound work culture & harmonious Industrial Relatiuons.
Extensive computerization.
Capability to supply Projects & System on turnkey basis.
Project Management Skills.
PLANS & STRATEGIES
To grow as an Engineering, Procurement and Construction Company,
To enlarge Export Business.
To resort to extensive computerization and Automation for reduction of
cycle time, improvement of quality and reducing costs.
To forge strategic business alliances with International Companies to derive
technological and marketing advantages.
To strive for continuous updating of technologies to be on par with
International Companies.
To focus on Human Resource Development.
To change the work culture to be compatible with market demands.
CONSTRAINTS
Non computerization/ No ERP
High average age of employees/ no execution recruitment since 1998
Working Capital constraints
Replacement/ updating of machinery.

CHAPTER III
THEORETICAL FRAME WORK

FINANCIAL STATEMENTS
Financial Statements are prepared for the purpose of presenting a periodical
review or report on the progress by the management and deal with the Status
of the investment business, and Results achieved during the period under review.
A financial review statement is a collection of data organized to logical and
consistent accounting procedures. Its purpose is to convey and understanding of
some financial aspects of a business firm. These statements are prepared with the
help of accounting information and known as financial statements. Thus the term
financial statement generally refers to the following two statements:
A. The income statement or the profit & loss account
B. The position statement or the balance sheet
INCOME STATEMENT:
The income statement may be prepared in the form of a manufacturing account
to find out the cost of production, in the form of trading account to determine
gross profit or gross loss, in the form of profit & loss account to determine net
profit or the net loss.
BALANCE SHEET:
The Balance Sheet is one of the important statements which shows the financial
position of the firm measured in terms of assets and liabilities i.e., balance Sheet
shows all the assets owned by the firm on one side and on the other side owners
funds and other external liabilities. The difference between the total assets and
the external liabilities is known as owners equity.
If the owners equity is increasing over a period of time, it means there is an
increase in the net worth of the owners. Otherwise it will be a case of financial
insolvency.

OBJECTIVES OF FINANCIAL STATEMENTS:
Financial statements are the sources of information on the basis of which
conclusions are drawn about the profitability and financial positions of a concern.
The primary objective of financial statements is to assist in decision-making to
those who are interested, in the financial affairs of the business enterprise. The
Accounting Principles Board of America (APB) states the following objectives of
financial statements:
To provide reliable financial information about economic resources and
obligations of a business firm i.e., cash inflows and cash outflow.
To provide other needed information about changes in such economic
resources and obligations.
To provide financial information that assists in estimating the earning
potentials of business.
To provide information about working capital and other funds flow.

LIMITATIONS OF FINANCIAL STATEMENTS:
The financial statement is a mirror, which reflects the financial position and
operating result of the business. Besides being very useful they do have certain
limitations, which the user of the statements should know. If limitations are
known in advance the data can be understood easily and correctly interpreted.
The following are some of the limitations.
NON-MONETORY ASPECT:
Financial statements are prepared with the help of accounting information, which
considers only monetary aspects. However the value of any business depends
upon both qualitative and quantitative factors. The reputation of the business,
efficiency of workers, credit worthiness of the enterprise, integrity of
management etc., are not quantifiable and as such they are not shown in financial
statement.
LACK OF UNIFORMITY:
Different units follow different methods of records transacting and there may be
difference in observing the accounting principles, disabling the reader for
comparison. If the same unit changes its methods of accounting policies then
lacks uniformity.
HISTORICAL COST:
The financial statements are prepared on the basis of original cost of assets less
accumulated depreciation. These assets do not reflect the market value, which is
an important factor in determining the solvency of an enterprise.
BIAS ON THE PART OF ACCOUNTS:
While preparing the financial accounts i.e., the financial statements, the accounts
have to make certain assumptions for e.g., determining the life of an asset for
depreciation purpose or provision for further losses etc.

TOOLS OF FINANCIAL STATEMENT ANALYSIS:
Analysis of financial statements involves two jobs-(a) Analyzing the data
(b) Interpretation of the data.
The process of applying different tools of analysis to know the nature of
accounting information is known as analysis and commenting upon the analyzed
data is known as interpretation. Financial statements are made simpler for any
reader to understand the operating results and the financial health of the
business. This is done with the help of the following tools of financial analysis.
a) Comparative statement Analysis
b) Common site statement Analysis
c) Trend Analysis
d) Ratio Analysis
COMPARATIVE STATEMENT ANALYSIS:
Comparative statement analysis is one of the most important techniques of
financial statement analysis. A simple method of tracing periodic changes in the
financial performance of a company is to prepare comparative statements. These
statements will contain items of two or more accounting period. The statements
are of two or more years increases or decreases in absolute data in value in terms
of percentages. Comparative statements can be prepared for both income
statement as well as balance sheet.
COMMON SIZE STATEMENT:
Common size statement is one of the most popular and important techniques of
financial statement analysis. The financial statements prepared in terms of
common base percentage are called common size statements.
TREND ANALYSIS:
The tendency of a variable is known as Trend. This method involves the
calculation of percentage relationship that each statement item bears to the
same item in base year. Trend percentage discloses changes in the financial and
operating data between specific period and make possible for the analyst to form
an opinion as to whether favorable or unfavorable tendencies are reflected by the
data.

RATIO ANALYSIS
INTRODUCTION:
We have already studied that there are various methods or techniques used in
analyzing financial statements, such as comparative and common size statements,
trend analysis etc.
The ratio analysis is one of the most powerful tools of financial analysis. It is the
process of establishing and interpreting various ratios.
MEANING OF RATIO:
The term Ratio means Reason in Latin word. A ratio is a simple arithmetic
expression of the relationship of one number to another. It may be defined as the
indicated quotient of two mathematical expressions. This means the arithmetical
relationship between two variables is treated as Ratio. Ratios provide clues to the
financial position of a concern.
NATURE OF RATIO ANALYSIS:
Ratio Analysis is a technique of analysis and interpretation of financial accounting
data.
Calculation of mere ratios does not serve any purpose, unless several appropriate
ratios are analyzed and interpreted. The following are the three important steps
involved in the ratio analysis. Selection of relevant data from the financial
statements depends upon the objective of analysis.
Calculation of appropriate ratios from the data.
Comparison of the calculated ratio with the ratio of the same firm in the past, or
the ratios developed from projected financial statements or the ratios analysis
facilitates easy understanding of financial statements. With the use of ratio
analysis one can measure the financial conditions of the firm and can point out
whether the condition is strong, good, questionable or poor. The importance of
Ratio analysis is summarized as under.
1. Ratio analysis helps in making decisions from the information provided in
financial statements.
2. It helps in forecasting and planning.
3. Ratio analysis helps in simplifying the financial statements.
4. It helps management to take better decisions by comparing actual with the
standard so as to take corrective action at the right time.
5. It helps in investigating the financial soundness.
6. It helps to know the relationship between the related items of financial
statements.

LIMITATIONS OF RATIO ANALYSIS:
RATIO ANALYSIS is a widely used tool of financial analysis. Though the ratios
offer various advantages they also suffer from the following limitations-
1. LIMITED USE OF SINGLE RATIO:
A Single Ratio, usually, does not convey much of a sense. To make a better
interpretation a number of ratios has to b calculated which is likely to
confuse the analyst than help him make any meaningful conclusion.
2. LACK OF ADEQUATE STANDARDS;
There are no well accepted standards or rules for calculation of ratios.
Hence it is very difficult to ascertain the standard ratio in order to make a
proper comparison.
3. RELIABILITY OF DATA:
The accuracy & correctness of ratios is totally dependent upon reliability of
data given in financial statements. If there are any mistakes or omissions in
financial statements, ratio analysis presents a wrong picture about a
concern.
4. CHANGE IN ACCOUNTING PROCEDURE:
Change in accounting procedure by a firm makes a ratio analysis misleading
e.g. a change in the valuation of method of inventories, from FIFO to LIFO
increases/decreases the cost of sales and the value of closing stock thereby
vitiating turnover ratio, gross profit ratio etc.
5. WINDOW DRESSING:
It means manipulation of accounts in a way so as to conceal vital tax and
present a better picture of its financial and profitability position to its
outsiders.
6. PERSONAL BIAS:
Ratios are most powerful tools of financial analysis. Hence they have to be
interpreted very carefully. if any personal bias takes place in any analysis
and interpretation, the firm suffers a lot.

CLASSIFICATION OF RATIOS:
In view of various users of ratios, there are many types of ratios which can be
calculated from the information given in the financial statements. Accounting
ratios are classified in various ways. Ratios are broadly classified into-
Liquidity Ratios
Leverage Ratios
Activity Ratio and
Profitability Ratios.
1. LIQUIDITY RATIOS:
Liquidity ratio measures the short-term solvency of a firm the following are
some of the important liquidity ratios.
A) CURRENT RATIO:
Current ratio is the ratio of current assets to current liabilities. A current
ratio of 2:1 is considered as ideal. A ratio less than 2 indicates that
business does not enjoy adequate liquidity. However a high ratio
indicates that firm has ideal funds.

B) QUICK RATIO:
Quick Ratio is also known as Acid Test Ratio or Liquid Ratio. It shows the
relationship between liquid assets to liquid/quick liabilities. A quick ratio
of 1 is usually considered as ideal. A quick ratio of less than 1 is
indicative as inadequate liquidity of business. A very high quick ratio is
also not advisable as funds cannot be properly employed.

C) ABSOLUTE LIQUID RATIO
This ratio enables us to known the immediately liquidity position of the
firm. It is the relationship between absolute liquid assets to current
liabilities. Absolute liquid assets, which can be converted into cash
within a very short period.

2. LEVERAGE RATIOS:
Leverage ratios indicate the relative interests of owners and creditors of
business. The long term creditors would judge the soundness of the firm
which can be known by leverage ratios. Some of the leverage ratios are:
A) DEBT-EQUITY RATIO:
This ratio explains the relationship between the owners funds and
burrowed funds. The ratio indicates the relationship between the external
equities or the outsiders funds and the internal equities or the
shareholders funds this is why this ratio is also known as External-Internal
Equity Ratio or Debt to Net worth Ratio.
A high ratio shows that the claims of the creditors are greater than that of
owners and is unfavorable from the firms point of view. Sometimes
sufficient profit cannot be earned to pay even the interest changes of the
creditors. Thus a low ratio shows a favourable position.

B) PROPRIETORY / EQUITY RATIO:
This ratio establishes the relationship between the equity share holders
funds to total assets of the firm. The ratio of proprietors funds to total
funds (Total assets) is an important ratio for determining long term
solvency of a firm. This ratio is also known as share holders to Net Worth
Ratio.

C) SOLVENCY RATIO:
This ratio establishes the relationship between the total liabilities to
outsiders and total assets. Solvency generally refers to the capacity or
ability of the business to meet its short term and long term obligations. If a
company is in a position to pay its long term liabilities easily, it is said to
poses long term solvency. If a companys financial position is strong to pay
current liabilities it is regarded as short term solvency.

D) INTEREST COVERAGE RATIO:
This ratio shows the relationship between the profit (before interest and
Tax) to interest. It is expressed the number of times. This ratio is useful to
debenture holders and other creditors who have lent their money.

Where PBIT = Profit Before Interest and Tax
E) FIXED ASSETS TO NET WORTH RATIO:
This ratio establishes the relationship between the fixed assets and share
holders funds of a firm

A ratio of 0.6 to 0.65 is considered favorable.
F) FIXED ASSETS RATIO:
This ratio establishes the relationship between the fixed assets of a firm
and its long term funds.

A ratio of 1:1 is considered satisfactory.

3. PROFITABILITY RATIOS
The primary objective of a business undertaking is to earn profits. Profit
earning is considered essential for the survival of the business. Profitability
ratios are calculated to measure the overall efficiencies of the business.
Various Profitability ratios are discussed below.

A) GROSSPROFIT RATIO:
Gross profit ratio measures the relationship of gross profit to net sales
and is usually represented as a percentage. It indicates the extent to
which selling prices of goods per unit may decline without resulting in
losses on operation of a firm. A comparison of gross profit ratio over
time for different firms in the same industry is a good measure of
profitability.

A higher ratio is considered favorable.

B) NET PROFIT RATIO:
Net profit ratio establishes a relationship between net profit (after
taxes) and sales. It indicates the efficiency of the management in
manufacturing, selling, administrative and other activities of the firm.

C) OPERATING PROFIT RATIO:
This ratio establishes the relationship between operating profit to net
sales of a firm.

D) EXPENSES RATIO:
It indicates the relationship of various expenses to net sales. The
operating ratio reveals the average total variation in expenses. Expenses
ratios are calculated by dividing each item of expenses or groups of
expenses by net sales. These ratios can be for each individual item of
expenses.

OVERALL OTHER PROFITABILITY RATIOS:
This ratio indicates the overall profitability of the business. Profits are
the measures of the overall efficiency of the business. The higher the
profits, the more efficient are the business considered. Various types of
overall profitability ratios are
A) RETURN OF ASSETS RATIO:
This ratio is useful to measure the profitability of all the financial
resources invested in the firms assets. It indicates how effectively
the pool of funds is utilized to generate favorable earnings.

B) RETURN ON NET WORTH RATIO (RNW):
It indicates the post tax return on the share holders funds i.e., equity
and reserves. BHPV being a public limited company the question of
dividend does not arise. This ratio is one of the most important ratios
used for measuring the overall efficiency of a firm. This ratio is of
great importance to the present and prospective as well as the
management of the firm.

C) RETURN ON EQUITY CAPITAL:
This ratio establishes the relationship between the net profit after
tax and dividend and preference dividend and paid up equity share
capital.

D) EARNING PER SHARE (EPS)
This ratio enables us to know the profit earnings by the company for
every equity share.

4. ACTIVITY RATIOS:
Activity Ratio measures the efficiency or effectiveness with which a firm
manages its resources or assets. The ratios are also called turn over ratios
because they indicate the speed with which assets are converted or turned
over into sales.
A) INVENTORY TURN OVER RATIO:
Inventory Turnover Ratio (I.T.R) indicates the number of times the stock
has been turned over during the period and evaluates the efficiency
with which a firm is able to manage its inventory. If the turnover is
higher, then it means lesser amount of capital is blocked up in the form
of working capital. A very low ratio indicators excessive inventory.

B) DEBTORS TURN OVER RATIO:
A concern may sell goods on cash as well as on credit. Credit is one of
the important elements of sales promotion. Debtors velocity indicates
the number of times the debtors are turned over during a year.
Generally, the higher the value of debtors turn over, the more efficient
is the management. Similarly, low debtors turnover implies inefficient
management of debtors.

AVERAGE COLLECTION PERIOD:
Average collection period represents the average number of days for
which a firm has to wait before its receivables are converted into cash.

C) CREDITORS TURNOVER RATIO (CTR)
This ratio enables us to understand the efficiency of the payables

A lower CTR than DTR is considered favorable.

AVERAGE PAYMENT PERIOD:
This ratio represents the average no. of days taken by the firm to pay its
creditors.

D) WORKING CAPITAL TURNOVER RATIO (WCTR):
This ratio indicates the velocity of the utilization of net working capital.
It indicates the number of time the working capital is turned over in a
year.

E) FIXED ASSETS TURNOVER RATIO (F.A.T.R)
This ratio indicates the efficiency of the utilization of fixed assets of a
firm.

F) CAPITAL TURNOVER RATIO :
Capital turnover ratio is the relationship between cost of goods sold and
the capital employed. This ratio is calculated to measure the efficiency
or effectiveness with which a firm utilizes its resources or the capital
employed.

CHAPTER IV
Tabulation and Analysis

TABLE 4.1
COMPARATIVE PROFIT & LOSS OF B.H.P.V LIMITED
FOR THE YEAR 2005-2006
(Rs In Lakhs)
PARTICULARS 2005 2006 AMOUNT
INCREASE/DECREASE
PERCENTAGE
Turnover
Accretion/Decretion
(FG/WIP)
Gross turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
4777.76

3099.05
7876.81

1032.39
6844.42

7456.85

1794.97
218.48

-2625.88

6339.55

6809.13

-3095.46
4542.45

-7637.91
185.44

-7823.35
0

-7823.35
6651.29

-829
5822.29

744.89
5077.4

4114

1578.77
236.40

-851.77

5712.56

7009.05

-2148.26
4813.72

-6961.98
175.92

-7137.9
0

-7137.9
1873.53

-2270.05
2054.52

-287.5
-1767.02

3342.85

216.2
17.92

1774.11

-626.99

199.92

947.2
271.27

675.93
-9.52

685.45

685.45
39.21

-73.24
26.08

-27.84
-25.82

-44.83

-12.05
8.20

67.56

-9.89

2.94

-30.59
5.97

-8.85
-5.97

-8.76

8.76

INTERPRETATION: It can be observed that above table shows that turnover was
increased to 39.21% . It means the company sales was increases when compared
to last year. The value added is 67.56% it means that expenses are reduced. But
the Non-Operating expenses are increased. Due to expenses increased the profit
is decreases.

TABLE 4.2
(Rs In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Turnover
Accretion/Decretion
(FG/WIP)
Gross turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
6651.29

-829
5822.29

744.89
5077.4

4114

1578.77
236.40

-851.77

5712.56

7009.05

-2148.26
4813.72

-6961.98
175.92

-7137.9
0

-7137.9
3440.59

-1364.93
2075.66

986.64
1089.02

6423.13

2207.28
252.40

-7793.79

15422.42

5299.8

2328.83
5624.93

-3296.1
173.77

-3469.87
0

-3469.87
-3210.7

535.93
-3746.63

241.75
-3988.38

2309.13

628.51
16

535.93

9709.86

-1709.25

180.57
811.21

3665.88
-2.15

3668.03

3668.03
48.27

64.65
-64.35

32.45
78.55

56.13

39.81
6.76

-62.92

169.97

-24.39

8.40
16.85

-52.65
-1.22

-51.39

-51.39

decreased to 48.27%. It means sales of the company was drastically decreased. At
the same time expenses were also increased. It means that the Profit of the
company was decreased.

TABLE 4.3
(Rs In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Turnover
Accretion/Decretion
(FG/WIP)
Gross turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
3440.59

-1364.93
2075.66

986.64
1089.02

6423.13

2207.28
252.40

-7793.79

15422.42

5299.8

2328.83
5624.93

-3296.1
173.77

-3469.87
0

-3469.87
18029.96

955.42
18985.38

1486.93
17498.45

10492.98

2088.25
217.27

4699.95

499.23

9545.01

-4345.83
1096.84

-5442.67
146.13

-5588.8
16.05

-5604.85
-14589.37

-409.51
16909.72

500.29
16409.43

4069.85

-119.03
-35.13

-3093.84

-14923.19

4245.21

2017
-4528.09

-2146.57
-27.64

2118.93
-16.05

2134.98
424.03

-30
814.67

50.70
1506.80

63.36

-5.39
-13.92

-39.69

-96.76

80.10

86.61
80.50

65.12
-15.91

61.06

61.52

decreased to 424.03% in between 2007-08. Now the Operating expenses are
reduced to 39.69. Even though the company got loss, due to deducting
depreciation and non-operating expenses the company got the loss.

TABLE 4.4
(Rs In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Turnover
Accretion/Decretion
(FG/WIP)
Gross turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
18029.96

955.42
18985.38

1486.93
17498.45

10492.98

2088.25
217.27

4699.95

499.23

9545.01

-4345.83
1096.84

-5442.67
146.13

-5588.8
16.05

-5604.85
8439.45

597.78
9037.23

795.41
8241.82

4896.32

1366.39
257.06

1722.05

23655.36

13732.55

11644.86
1103.64

848.29
9692.93

57.41

9635.52
-9590.51

-357.64
-9948.15

-691.52
-9256.63

-5596.66

-721.86
39.79

-2977.9

23156.13

4187.54

7299.03
6.8

5098.55
702.16

4104.13
41.36

4030.67
-53.19

-37.43
-52.39

-46.51
-52.89

-53.34

-34.56
18.31

-63.36

4638.34

43.87

167.95
0.62

93.68
480.5

73.43
257.69

71.91

reduced to 53.19% in between 2008-09. Now the operating expenses are reduced
to 63.36%. But in 2008-09 the company got profit. In the year 2008-09 company
got extraordinary income through waivers of loan (Rs 224 Crores) and interest
(190 Crores) of Government of India, waiver of interest (Rs 38 Crores) from
bankers, sales tax (Rs 1 Crore) waiver from Government of AP etc. From the
projection it is observed that the company will fare better in the coming 3-4
years.

TABLE 4.5
(Rs In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Turnover
Accretion/Decretion
(FG/WIP)
Gross turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
8439.45

597.78
9037.23

795.41
8241.82

4896.32

1366.39
257.06

1722.05

23655.36

13732.55

11644.86
1103.64

10541.22
848.29

9692.93
57.41

9635.52
10431.32

-1052.14
9397.18

700.28
8678.90

4102.96

750.62
269.9

3555.42

529.32

4978.02

-893.28
-268.09

-625.19
125.80

-750.99
108.70

-859.69
1991.87

-454.36
359.95

-95.13
437.08

-793.36

-615.77
12.84

1833.37

-23126.04

-8754.53

-10751.58
-835.55

-9916.03
-722.49

-8941.94
51.29

-8775.83
23.60

76.00
3.98

-11.96
5.30

-16.20

-45.06
4.99

106.46

-97.76

-63.75

-92.32
-75.70

-94.06
-85.17

-92.25
89.33

-91.07

increased to 23.60% in between 2009-10. Now the operating expenses are
increased to 106.46% even though the company got loss. Due to deducting
depreciation and non-operating expenses the company got the loss.

TABLE 4.6
(Rs In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Turnover
Accretion/Decretion
(FG/WIP)
Gross turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
10431.32

-1052.14
9397.18

700.28
8678.90

4102.96

750.62
269.9

3555.42

529.32

4978.02

-893.28
-268.09

-625.19
125.80

-750.99
108.70

-859.69
13697.54

-105.78
13591.76

950.92
12640.84

6252.17

209.37
342.43

5836.87

444.28

5928.14

353.01
140.14

212.87
109.92

322.79
0.16

322.95
3266.22

-946.36
4212.58

250.64
3961.94

2149.21

-541.25
72.53

2281.45

-85.04

950.12

-540.27
-127.95

-412.32
-15.88

-428.20
-108.54

-536.74
31.31

89.94
44.91

35.79
45.69

52.38

-72.10
26.87

64.16

-16.06

19.08

-60.48
-47.72

-65.95
-12.62

-57.01
-99.85

62.43

increased to 31.31% in between 2009-10. Now the operating expenses are
increased 64.16% even though the company got profit . The Value Added is 64.16
% it means the expenses are reduced but the non operating expenses are
increased.

COMMON SIZE PROFIT & LOSS OF BHPV IN 2006
(In Lakhs)
PARTICULARS 2006 PERCENTAGE
Turnover
Work In Progress
Gross Turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
6651.29
-829
5822.29

744.89
5077.4

4114

1578.77
236.40

-851.77

5712.56

7009.05

-2148.26
4813.72

-6961.98
175.92

-7137.9
0

-7137.9

100
12.46
87.54

11.19
76.33

61.85

23.73
3.55

12.81

85.88

105.37

-32.29
72.37

-104.67
2.64

-107.31

-107.31
INTERPRETATION: Table is showing the common size profit and loss of BHPV
2006. By assuming a turn over as 100%. By dividing the each components with
turn over the ratios are calculated.
(In Lakhs)
Turnover
Work In Progress
Gross Turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
3440.59
-1364.93
2075.66

986.64
1089.02

6423.13

2207.28
252.40

-7793.79

15422.42

5299.8

2328.83
5624.93

-3296.1
173.77

-3469.87
0

-3469.87

100
-39.67
60.31

28.67
31.65

186.68

64.15
7.33

-226.52

448.24

154.03

67.68
163.48

-95.80
5.05

-100.85

-100.85
(In Lakhs)
Turnover
Work In Progress
Gross Turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
18029.96
955.42
18985.38

1486.93
17498.45

10492.98

2088.25
217.27

4699.95

499.23

9545.01

-4345.83
1096.84

-5442.67
146.13

-5588.8
16.05

-5604.85
100
5.29
105.29

8.24
97.05

58.19

11.58
1.20

26.60

2.76

52.93

-24.10
6.08

-30.18
0.81

-30.99
0.08

31.08

(In Lakhs)
Turnover
Work In Progress
Gross Turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
8439.45
597.78
9037.23

795.41
8241.82

4896.32

1366.39
257.06

1722.05

23655.36

13732.55

11644.86
1103.64

10541.22
848.29

9692.93
57.41

9635.52
100
7.08
107.08

9.42
97.65

58.01

16.09
3.04

20.40

280.29

162.71

137.98
13.07

124.90
10.05

114.85
0.68

114.17

(In Lakhs)
Turnover
Work In Progress
Gross Turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
10431.32
-1052.14
9397.18

700.28
8678.90

4102.96

750.62
269.9

3555.42

529.32

4978.02

-893.28
-268.09

-625.19
125.80

-750.99
108.70

-859.69
100
-10.08
90.08

6.71
83.20

29.24

7.19
2.58

34.08

5.07

47.72

-8.56
-2.57

-5.99
1.20

-7.19
1.04

-8.24

(In Lakhs)
Turnover
Work In Progress
Gross Turnover

Less Excise Duty
GTO Net of ED.

LESS
Direct Material
Consumption
Erection Expenses
Power & Fuel

VALUE ADDED

ADD
Other Incomes
LESS
Expenses

PBDIT
LESS Interest

PBDT
LESS Depreciation

PBT
LESS TAX

PAT
13697.54
-105.78
13591.76

950.92
12640.84

6252.17

209.37
342.43

5836.87

444.28

5928.14

353.01
140.14

212.87
109.92

322.79
0.16

322.95
100
-0.77
99.22

6.94
92.28

45.64

1.52
2.50

42.61

3.25

43.27

2.57
1.02

1.55
0.80

2.35
0.00

2.35

TABLE 4.1
COMPARATIVE BALANCE SHEET OF BHPV LIMITED FOR THE YEAR 2005-06
(Rs. In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Fixed Assets
Investments
TOTAL FIXED ASSETS

CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances
TOTAL CURRENT ASSETS

Miscellaneous Expenses
not written off
TOTAL ASSETS

LIABILITIES
Share Capital
Reserve
Secured Loans
Unsecured Loans

CURRENT LIABILITIES

Liabilities
Provisions
Profit & Loss
TOTAL LIABILITIES
1684.71
1.33
1686.04

6996.76
7273.08
921.96
9332.60

24524.4

4372.79
30583.23

3379.78
2.01
19498.54
27615.83

21974.12
391.82
-42278.87
30583.23

1570.18
1.31
1571.49

5531.49
7318.43
836.67
7588.23

21274.82

3782.82
26629.13

3379.78
2.01
19926.36
35171.35

17314.60
251.80
-49416.77
26629.13

-114.53
-2
-114.55

-1465.27
45.35
-85.29
-1744.37

-3249.58

-589.97
-3954.10

427.82
7555.52

-4659.52
-140.02
7137.90
3954.10
-6.80
1.50
-6.79

-20.94
0.62
-9.25
-18.69

-13.25

13.49
-12.93

2.90
27.35

-21.30
-35.74
16.88
-12.93
INTERPRETATION: Table, reveals Fixed Assets was decreased to 6.79% when
compared to last year. Current Assets were decreased 13.25%. Total Assets
decreased 12.93%. The Total Liabilities decreased 12.93%, when compared to last
year.
TABLE 4.14
(Rs. In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Fixed Assets
Investments
TOTAL FIXED ASSETS

CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

not written off
TOTAL ASSETS

LIABILITIES
Share Capital
Reserve
Secured Loans
Unsecured Loans

CURRENT LIABILITIES

Liabilities
Provisions
Profit & Loss
TOTAL LIABILITIES
1570.18
1.31
1571.49

5531.49
7318.43
836.67
7588.23
21274.82

3782.82
26629.13

3379.78
2.01
19926.36
35171.35

17314.60
251.80
-49416.77
26629.13

1435.93
1.31
1437.24

4550.01
7144.53
1465.26
6596.84
19756.64

3166.84
24360.72

3379.78
2.01
21734.92
40825.10

11034.01
271.34
-52886.64
24360.72

-134.25
0
134.25

-981.48
-173.90
628.59
-991.39
-1518.18

-615.98
-2268.41

0
0
1808.56
5653.75

-6280.59
19.74
3469.87
-2268.41

-8.55
0
-8.55

17.74
-2.38
75.13
-13.06
-7.14

-16.28
-8.52

0
0
9.08
16.07

-36.27
7.84
-7.02
-8.52

INTERPRETATION: Table is showing comparative balance sheet of BHPV for the
year 2006-07, revealing Fixed Assets was decreased to 8.55% when compared to
last year. Current Assets were also decreased to 7.14%. Total Assets decreased to
8.52%. The Total Liabilities decreased to 8.52%, when compared to last year.
TABLE 4.15
(Rs. In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Fixed Assets
Investments
TOTAL FIXED ASSETS

CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

not written off
TOTAL ASSETS

LIABILITIES
Share Capital
Reserve
Secured Loans
Unsecured Loans

CURRENT LIABILITIES

Liabilities
Provisions
Profit & Loss
TOTAL LIABILITIES
1435.93
1.31
1437.24

4550.01
7144.53
1465.26
6596.84
19756.64

3166.84
24360.72

3379.78
2.01
21734.92
40825.10

11034.01
271.34
-52886.64
24360.72
1348.57
1.31
1359.88

4847.90
9541.46
585.57
11039.14
26014.07

2563.87
29927.82

3379.78
2.01
21815.24
43033.18

18382.16
1806.90
-58491.45
29927.82
-87.36
0
-87.36

297.89
2396.93
-879.69
4442.30
6257.43

-602.97
5567.10

0
0
80.32
2208.08

7348.15
1535.36
5604.81
5567.10

-6.08
0
-6.08

6.55
33.55
-60.04
67.34
31.67

-19.04
22.85

0
0
0.36
5.01

66.59
565.43
-10.59
22.85

INTERPRETATION: Table is showing comparative balance sheet of BHPV for the
year 2007-08, revealing Fixed Assets was decreased to 6.08% when compared to
last year. Current Assets were increased 31.67%. Total Assets increased to
22.85%. The Total Liabilities increased to 22.85%, compared to last year.
TABLE 4.16
(Rs. In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Fixed Assets
Investments
TOTAL FIXED ASSETS

CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

not written off
TOTAL ASSETS

LIABILITIES
Share Capital
Reserve
Secured Loans
Unsecured Loans

CURRENT LIABILITIES

Liabilities
Provisions
Profit & Loss
TOTAL LIABILITIES
1348.57
1.31
1359.88

4847.90
9541.46
585.57
11039.14
26014.07

2563.87

29927.82

3379.78
2.01
21815.24
43033.18

18382.16
1806.90
-58491.45
29927.82
522.58
1.31
523.89

5347.82
6462.83
440.69
8006.73
20358.07

20781.96

3379.78
2.01

23839.68

18286.7
1649.39
-2675.6
20781.96

-825.99

-825.99

499.92
-3078.63
-144.88
-3032.41
-6581.99

-2563.87

-9145.86

0
0
-21815.24
19193.5

-95.46
-157.51
32115.85
-9145.86

-61.25

-61.18

10.31
-32.27
-24.74
-27.47
-24.05

-100

-30.55

0
0
-100
-44.6

-0.52
-8.72
-54.91
-30.55
INTERPRETATION: Table is showing comparative balance sheet of BHPV for the year 2007-
08, revealing Fixed Assets was decreased to 61.18% when compared to last year. Current Assets
were decreased to 24.05%. Total Assets decreased to 30.55%. The Total Liabilities decreased to
30.56%, when compared to last year.
TABLE 4.17
(Rs. In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Fixed Assets
Investments
TOTAL FIXED ASSETS

CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

not written off
TOTAL ASSETS

LIABILITIES
Share Capital
Reserve
Secured Loans
Unsecured Loans

CURRENT LIABILITIES

Liabilities
Provisions
Profit & Loss
TOTAL LIABILITIES
522.58
1.31
523.89

5347.82
6462.83
440.69
8006.73
20358.07

20781.96

3379.78
2.01

23839.68

18286.7
1649.39
-2675.6
20781.96
460.91
1.31
462.22

4569.06
9320.91
1564.04
7213.09
22667.10

0

23129.32

3379.78
2.01
183.11
26897.64

17792.52
2109.55
-27235.29
23129.32
-61.67

-61.67

-778.76
2858.76
1123.35
-793.64
2409.03

0

2347.36

0
0
183.11
3057.97

-494.18
-460.16
-859.69
2347.36

-11.80

-11.77

-14.56
44.22
254.90
-9.91
11.89

0

11.29

0
0
100
12.82

-2.70
27.89
-3.25
11.29
were increased to 2409.03%. Total Assets increased to 11.29%. The Total Liabilities increased to

TABLE 4.18
(Rs. In Lakhs)
INCREASE/DECREASE
PERCENTAGE
Fixed Assets
Investments
TOTAL FIXED ASSETS

CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

not written off
TOTAL ASSETS

LIABILITIES
Share Capital
Reserve
Secured Loans
Unsecured Loans

CURRENT LIABILITIES

Liabilities
Provisions
Profit & Loss
TOTAL LIABILITIES
460.91
1.31
462.22

4569.06
9320.91
1564.04
7213.09
22667.10

0

23129.32

3379.78
2.01
183.11
26897.64

17792.52
2109.55
-27235.29
23129.32
440.90
1.31
442.21

5257.09
9559.62
720.99
8100.04
23637.74

0

24079.95

3379.78
2.01
0
26048.40

18295.21
2712.28
-26357.73
24079.95
-20.01

-20.01

688.03
238.71
-843.05
886.05
970.64

O

950.63

0
0
-183.11
-849.24

502.69
602.73
-877.56
950.63

-4.34

-4.32

15.05
2.56
-53.90
12.29
4.28

0

4.11

0
0
-100
-3.15

2.82
28.57
-3.22
4.11
were increased to 4.28%. Total Assets increased to 4.11%. The Total Liabilities increased to
(In Lakhs)
CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

FIXED ASSETS
Net Block
Work In Progress
Investments
TOTAL FIXED ASSETS

Miscellaneous Expenses not
written off
TOTAL ASSETS

CURRENT LIABILITIES
Liabilities
Provisions

TOTAL CURRENT LIABILITIES

LONG TERM LIABILITIES
Reserve & Surplus
Secured Loans
Unsecured Loans
Profit & Loss
TOTAL LIABILITIES

5531.49
7318.43
836.67
7588.23
21274.82

1514.89
55.29
1.31
1571.49

3782.82

26629.13

17314.60
251.80

17566.40

3381.79
19926.36
35171.35
-49416.77
26629.13

20.77
27.48
3.14
28.49
79.89

5.69
0.21
0.004
5.90

14.21

100

65.02
0.95

65.97

74.83
132.07
12.69
-185.57
100
INTERPRETATION: Table is showing the common size balance sheet of BHPV
2006. The Total Assets were 100% the current assets were 79.89%. The Fixed
Assets 5.90% Total Liabilities were 100%. The Current Liabilities were 65.97%.
(Rs In Lakhs)
CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

FIXED ASSETS
Net Block
Work In Progress
Investments
TOTAL FIXED ASSETS

written off
TOTAL ASSETS

CURRENT LIABILITIES
Liabilities
Provisions


Reserve & Surplus
Secured Loans
Unsecured Loans
Profit & Loss
TOTAL LIABILITIES

4550.01
7144.53
1465.26
6596.84
19756.64

1434.89
1.04
1.31
1437.24

3166.84
24360.72

11034.01
271.34

11305.55

3381.79
21734.92
40825.10
-52886.64
24360.72

18.68
29.33
6.01
27.08
81.10

5.89
0.004
0.005
5.90

12.99
100

45.29
1.11

46.41

89.22
167.59
13.88
-217.09
100
(Rs In Lakhs)
CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

FIXED ASSETS
Net Block
Work In Progress
Investments
TOTAL FIXED ASSETS

written off
TOTAL ASSETS

CURRENT LIABILITIES
Liabilities
Provisions


Reserve & Surplus
Secured Loans
Unsecured Loans
Profit & Loss
TOTAL LIABILITIES

5347.82
6462.83
440.69
8006.73
20258.07

522.58

1.31
523.89

20781.96

18286.7
1649.39

19936.09

3381.79

23839.68
-26375.60
20781.96

25.73
31.09
2.12
38.52
97.48

2.51

0.006
2.53

100

87.99
7.94

95.93

114.71

16.27
-126.92
100
(Rs In Lakhs)
CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

FIXED ASSETS
Net Block
Work In Progress
Investments
TOTAL FIXED ASSETS

written off
TOTAL ASSETS

CURRENT LIABILITIES
Liabilities
Provisions


Reserve & Surplus
Secured Loans
Unsecured Loans
Profit & Loss
TOTAL LIABILITIES

4569.06
9320.91
1564.04
7214.09
22667.10

460.91

1.31
462.22

0
23129.32

17792.52
2109.55

19902.07

3381.79
183.11
26897.64
-27235.29
23129.32

19.75
16.95
6.76
31.18
98.00

1.99

0.005
2.00

0
100

90.09
10.68

86.04

0.92
136.19
16.27
-137.90
100
(Rs In Lakhs)
CURRENT ASSETS
Inventories
Debtors
Cash & Bank
Loan & Advances

FIXED ASSETS
Net Block
Work In Progress
Investments
TOTAL FIXED ASSETS

written off
TOTAL ASSETS

CURRENT LIABILITIES
Liabilities
Provisions


Reserve & Surplus
Secured Loans
Unsecured Loans
Profit & Loss
TOTAL LIABILITIES

5257.09
9559.62
720.99
8100.04
23637.74

440.90

1.31
442.21

0

24079.95

18295.21
2712.28

21007.49

3381.78

26048.40
-26357.73
24079.95

21.83
39.70
2.99
33.63
98.16

1.83

0.005
1.84

0

100

75.97
11.26

87.23

14.04
0
108.17
-109.46
100
RATIO ANALYSIS
A) CURRENT RATIO:
It is a ratio of current assets to current liabilities. It is measured by
formulae.

INTERPRETATION: Generally, a current ratio of 2:1 is considered satisfactory.
TABLE -4.25
TABLE SHOWING CURRENT RATIO OF BHPV LTD FOR THE PERIOD 2006-07 TO
2010-11
Year Current Assets
(Rs in Lakhs)
Current Liabilities
(Rs. In Lakhs)
Ratio
2006-07 19756.64 11034.01 1.79:1
2007-08 26014.07 18382.16 1.42:1
2008-09 20258.07 18286.70 1.11:1
2009-10 22667.10 17792.52 1.27:1
2010-11 23637.74 18295.21 1.29:1

INTERPRETATION: A current ratio of 2:1 is considered as ideal. The current ratio
of B.H.P.V. in 2006 is 0.63 and it is increased to 1.79 in 2007. The current ratio of
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
the firm was again slightly decreased in 08, 09 and 10. The liquidity position of
firm is not satisfactory.
B) QUICK RATIO:
It shows the relationship between liquid assets to liquid/quick liabilities.
INTERPRETATION: A quick ratio of 1:1 is considered satisfactory.

Where Quick assets = Current Assets Stock
TABLE-4.26
TABLE SHOWING QUICK RATIO OF BHPV LTD FOR
THE PERIOD 2006-07 TO 2010-11
Year Quick Assets
(Rs in Lakhs)
Current Liabilities
(Rs. In Lakhs)
Ratio
2006-07 15206.63 32437.50 0.47:1
2007-08 21166.17 18382.16 1.15:1
2008-09 14910.25 18286.70 0.81:1
2009-10 18098.04 17792.52 1:1
2010-11 18380.65 18295.21 1:1

INTERPRETATION: A Quick Ratio of 1:1 is considered as ideal. The Quick ratio is
0.47 during decreased in 2007, 07 and 08 and stood at 1.15 on 31.03.2008. The
Quick ratio of the firm is below the standards. The short term liquidity position of
the firm is satisfactory.
C) ABSOLUTE LIQUID RATIO:
This ratio enables us to known the immediate liquidity position of the firm.
It is the relationship between absolute liquid assets to liquid liabilities.
Absolute liquid assets, which can be converted into cash within a very short
period.

INTERPRETATION: An absolute liquid ratio of 0:1 is considered satisfactory.
TABLE-4.27
TABLE SHOWING ABSOLUTE LIQUID RATIO OF BHPV LTD FOR THE PERIOD
2006-07 TO 2010-11

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Year Absolute Assets
(Rs in Lakhs)
Current Liabilities
(Rs. In Lakhs)
Ratio
2006-07 1465.26 32437.50 0.01
2007-08 585.57 18382.16 0.03
2008-09 440.69 18286.70 0.02
2009-10 1564.04 17792.52 0.08
2010-11 720.99 18295.21 0.03

INTERPRETATION:
An Absolute ratio of 0:1 is considered as ideal. The ratio of the firm is 0.02 in
2005-06 and it decreased to0.01 in 2006-07 and again increased to 0.03 in 2007-
08 and to 0.02 in 2008-09 and 0.8 in 2009-10. The absolute liquidity position of
the firm is not satisfactory in the year as it is for below the standard.
II. LEVERAGE RATIOS:
Leverage Ratios or capital ratio or solvency ratio conveys a firms ability to meet
the interest costs and repayment schedule of its long-term obligations.
a) DEBT-EQUITY RATIO:
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
The ratio explains the relationship between the owners funds and
borrowed funds.

INTERPRETATION:
Generally, 1:1 is considered as an ideal ratio but 2:1 is also taken as
satisfactory position.
TABLE-4.28
TABLE SHOWING DEBT EQUITY RATIO OF BHPV LTD. FOR THE PERIOD
2006-07 TO 2010-11.
Year Outsiders Funds
(Rs in Lakhs)
Shareholdres
Funds
(Rs. In Lakhs)
Ratio
2006-07 62560.02 3380 18.50
2007-08 64848.42 3380 19.18
2008-09 23839.75 3380 7.05
2009-10 27080.75 3380 8.01
2010-11 26048.40 3380 7.70

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
INTERPRETATION:
A debt equity ratio of 1:1 is considered satisfactory. The debt of the
company is very high on 2007-08. The creditors of the company are in a
high risky position.

b) PROPRIETORY / EQUITY RATIO:
The ratio establishes the relationship between the equity share holders
funds to total assets of the firm.

INTERPRETATION:
Higher the ratio is better for the long term solvency position of the firm.
TABLE-4.29
TABLE SHOWING PROPRIETORY RATIO OF BHPV LTD FOR THE PERIOD 2006-07
TO 2010-11
Year Shareholders
Funds
(Rs in Lakhs)
Total Assets
(Rs. In Lakhs)
Ratio
2006-07 3380 21192.57 0.15
2007-08 3380 27362.64 0.12
2008-09 3380 20780.65 0.16
2009-10 3380 23128.01 0.14
2010-11 3380 24078.64 0.14

INTERPRETATION:
A high equity ratio is an indicator of a good financial position of the firm.
The proprietary ratio of the firm is very low 0.12 in the year 2007-2008.
Proprietary ratio of the firm is not satisfactory.

c) SOLVENCY RATIO:
This ratio establishes the relationship between the total liabilities to
outsiders and total assets.

INTERPRETATION: A lower is considered satisfactory.
TABLE 4.30
TABLE SHOWING SOLVENCY RATIO OF BHPV LTD
FOR THE PERIOD 2006-07 TO 2010-11

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Year Total Outsiders
Liabilities
(Rs in Lakhs)
Total Assets
(Rs. In Lakhs)
Ratio
2006-07 73865.57 21192.57 3.48
2007-08 85037.48 27362.64 3.10
2008-09 43775.77 20780.65 2.10
2009-10 46982.82 23128.01 2.03
2010-11 47055.89 24078.64 1.95

INTERPRETATION:
A lower solvency ratio is an indicator of the firm which is in good position.
The solvency ratio of the firm is 3.48 in 2006-07 and it decreased to 3.10 in
2007-08 and decreased in 2009, 10 at 2.03. The solvency position of the
firm is satisfactory.

d) INTEREST COVERAGE RATIO:
This ratio shows the relationship between the profit (before interest and
Tax) to interest. It is expressed the number of times.

Where PBIT = Profit Before Interest and Tax
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
INTERPRETATION:
Generally, the higher the ratio, more safe are the long term creditors
because even if the earning of the firm fall, the firm shall be able to meet
its commitment to fixed interest charges. But a too high interest coverage
ratio may not be good for the firm.
TABLE 4.31
TABLE SHOWING INTEREST COVERAGE RATIO OF BHPV LTD. FOR THE
PERIOD 2006-07 TO 2010-11
Year PBIT (Rs. In Lakhs) INTEREST
(Rs. In Lakhs)
Ratio
2006-07 2658.38 5624 0.47
2007-08 -4240.36 1097 -
2008-09 -9582.48 1103 -
2009-10 -1019.08 -268 3.80
2010-11 243.09 140.14 1.73

INTERPRETATION:
The higher the ratio is an indicator of a good financial strength of the firm.
So in the above data the interest is high in the year 2009-10. The interest
coverage ratio of the firm is satisfactory.

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
e) FIXED ASSETS TO NET WORTH RATIO:
This ratio establishes the relationship between the fixed assets and
shareholders funds of a firm.

INTERPRETATION:
A ratio of 0.6 to 0.65 is considered favorable.

TABLE 4.32
TABLE SHOWING FIXED ASSETS TO NET WORTH RATIO OF BHPV FOR THE
PERIOD 2006-07 TO 2010-11

Year Fixed Assets
(Rs. In Lakhs)
Net Worth
(Rs. In Lakhs)
Ratio
2006-07 1435.93 -52671.69 -
2007-08 1348.57 -57673.53 -
2008-09 522.58 -22993.81 -
2009-10 460.91 -23853.50 -
2010-11 440.90 -22975.94 -

INTERPRETATION:
A fixed asset to net worth ratio of 0.06 to 0.065 is considered as ideal. As
the net worth is negative the ratio cannot be calculated. The position is not
satisfactory.

f) FIXED ASSETS RATIO:
This ratio establishes the relationship between the fixed assets of the firm
and its long term funds.

TABLE 4.33
TABLE SHOWING FIXED ASSETS RATIO OF BHPV LTD
Year Fixed Assets
(Rs. In Lakhs)
Long Term Funds
(Rs. In Lakhs)
Ratio
2006-07 1435.93 65940.02 0.02
2007-08 1348.57 68228.24 0.02
2008-09 522.58 27219.68 0.02
2009-10 460.91 30460.75 0.02
2010-11 440.90 29428.18 0.01

INTERPRETATION:
A fixed asset ratio 1:1 is considered satisfactory. The fixed assets ratio of
the firm is 0.03 in 2005-06 and it decreased to 0.02 in 2007,08,09,10. The
ratio of the firm is far below the standard.

PROFITABILITY RATIO
Profitability ratio measures the profitability of a concern. They are
calculated in relation to sales or investments.
a) GROSS PROFIT RATIO:
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
The Gross profit ratio is also known as margin ratio. The gross profit
ratio provides clue to the company pricing, cost structure. It is very
important ratio.

INTERPRETATION:
TABLE 4.34
TABLE SHOWING GROSS PROFIT RATIO OF BHPV LTD
Year Gross Profit
(Rs. In Lakhs)
Net Sales
(Rs. In Lakhs)
Ratio
2006-07 6801.68 15684.49 43.37
2007-08 4586.66 17144.68 26.75
2008-09 1978.4 8241.82 24.00
2009-10 3555.42 8678.90 40.97
2010-11 5836.87 12640.84 46.17

INTERPRETATION:
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
The higher the gross profit ratio the better the financial performance of
the firm. In the year2006-07 the gross profit ratio is increased from
42.95 to 43.37 and started declining from the year 2007-09 to 24.00.
Then again the ratio got increased in 2009-10 40.97. So the gross profit
ratio is satisfactory.

b) NET PROFIT RATIO:
The net profit ratio is mostly commonly used ratio a low net profit ratio
indicates that low amount of earnings required to fixed costs. Net profit
tell about profitability.

INTYERPRETATION:
TABLE 4.35
TABLE SHOWING NET PROFIT RATIO OF BHPV LTD
Year Net Profit
(Rs. In Lakhs)
Net Sales
(Rs. In Lakhs)
Ratio
2006-07 (-) 3470 15684.49 -
2007-08 (-) 5605 17144.68 -
2008-09 9635 8241.82 117
2009-10 (-) 859 8678.90 -
2010-11 877.56 12640.84 6.94

INTERPRETATION:
The higher net profit ratio is an indicator of the strong financial
performance of the firm. In the year 2008-09 NPR is 117 but the rest of
the NPR of the firm is negative and not satisfactory.

c) OPERATING PROFIT RATIO:
This ratio establishes the relationship between operating profit to net
sales of a firm.

Where Operating profit = Net Sales Operating Cost (or) Gross Profit
Operation Expenses
INTERPRETATION:
Higher the ratio the more favorable is the profitability of the concern.
TABLE 4.36
TABLE SHOWING OPERATING PROFIT RATIO OF BHPV LTD

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Year Operating Profit
(Rs. In Lakhs)
Net Sales
(Rs. In Lakhs)
Ratio
2006-07 28382.15 15684.49 1.80
2007-08 (-) 4094.23 17144.68 -
2008-09 (-) 8734.19 8241.82 -
2009-10 (-) 893.28 8678.90 -
2010-11 353.01 12640.84 0.02

INTERPRETATION:
Higher operating profit is an indicator of good financial performance of the
company. In the year 2006-07 the OPR is 1.80 nut the rest of the operating profit
is negative hence operating profit ratio of the firm is bad.
d) EXPENSES RATIO:
It indicates the relationship of various expenses to net sales. The
operating ratio reveals the average total variation in expenses. Expenses
ratios can be calculated for each individual item of expenses.

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
OVERALL OTHER PROFITABILITY RATIOS:
These ratios indicate the overall profitability of the business. Profits are the
measures of the overall efficiency of the business. The higher the profits the more
efficient is the business concerned. Various types of profitability ratios are:
a) RETURN OF ASSET RATIO:
This ratio is useful to measure the profitability of all the financial resources
invested in the firms assets. It indicates how effectively the pool of funds is
utilized to generate favorable earnings.

b) RETURN ON NET WORTH RATIO (RNW):
It indicates the post tax return on the shareholders funds i.e., equity and
the reserves. B.H.P.V. Ltd., being a public limited company the question of
dividend does not arise. This ratio is one of the most important ratios used
for measuring the overall efficiency of the firm.
This ratio is of great importance to the process and prospective
shareholders as well as the management of the firm. As this ratio reveals
how well the resources of a firm are being used, higher the ratio, better the
result.

TABLE 4.38
TABLE SHOWING RETURN ON NETWORTH RATIO OF BHPV LTD

Year PAT
(Rs. In Lakhs)
Net Worth
(Rs. In Lakhs)
Ratio
2006-07 -3470 -52672 -
2007-08 -5605 -57673 -
2008-09 9635 -22994 -
2009-10 -859 -23853 -
2010-11 877.56 -22975.94 -

INTERPRETATION:
The higher the return on net worth ratio the better is the financial performance of
the firm from the perspective of the shareholders. The net worth ratio of the firm
is negative during the above period. It indicates the bad financial performance of
the firm.
c) RETURN ON EQUITY CAPITAL:
This ratio establishes the relationship between the net profit after tax and
preference dividend and paid up equity share capital.

TABLE-4.39
TABLE SHOWING RETURN ON EQUITY CAPITAL RATIO OF BHPV LTD FOR
THE PERIOD 2006-07 TO 2010-11
Year NP(after tax)
(Rs. In Lakhs)
Preference
Dividend

E.S.Capital Ratio
2006-07 -3470 - 3380 -
2007-08 -5605 - 3380 -
2008-09 9635 - 3380 2.85
2009-10 -859 - 3380 -
2010-11 877.56 - 3380 0.26

INTERPRETATION:
A higher ratio of return on capital employed indicates the better
profitability situation of the firm. So in the year 2008-09 there is a positive
ratio of 2.85 but the rest of the years. Net profit of the firm are negative.
The firms overall profitability is not encouraging.

d) EARNING PER SHARE (EPS):
The ratio enables us to know the profit earning by the company for every
equity share.

INTERPRETATION:
A higher EPS is considered favorable from the perspective of shareholders.

TABLE 4.40
TABLE SHOWING EARNING PER SHARE RATIO OF BHPV LTD

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Year PAT
(Rs. In Lakhs)
No. of E.Ss

Ratio
2006-07 -3470 3380 -
2007-08 -5605 3380 -
2008-09 9635 3380 2.85
2009-10 -859 3380 -
2010-11 877.56 3380 0.26

INTERPRETATION:
A higher EPS indicates the better performance of the firm. So in the year
2008-09 there is a positive ratio of 2.85 but the rest of the years EPS of the
firm are negative which includes the financial weakness of the firm.

e) EARNING POWER RATIO (EPR):
It establishes a relationship between profit after tax and capital employed.
It is of great significance to the shareholders as it measures how much of
return on each rupee of capital employed is gained.

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
TABLE - 4.41
TABLE SHOWING EARNING POWER RATIO OF BHPV LTD

Year PAT
(Rs. In Lakhs)
Capital Employed

EPR (%)
2006-07 -3470 9887.02 -
2007-08 -5605 7173.58 -
2008-09 9635 844.56 11.08
2009-10 -859 3225.94 -
2010-11 877.56 3071.15 0.28

INTERPRETATION:
A higher ratio of return on capital employed earning power ratio indicates
the strength of the profitability of the firm. So in the year 2008-09 there is a
positive ratio of 11.08 but in the rest of the years EPR are negative. Then
the firm EPR is bad.

IV. ACTIVITY RATIOS:
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Activity Ratio measures the efficiency or effectiveness with which a firm
manages its resources or assets. The ratios are also called turn over ratios
because they indicate the speed with which assets are converted or turned
over into sales.

a) INVENTORY TURN OVER RATIO:
Every firm has to maintain a certain level of inventory of finished goods
so as to be able to meet the requirements of the business. But the level
of inventory should neither be too high nor too low.
Inventory Turnover Ratio (I.T.R.) indicates the number of times the stock
had been turned over during the period and evaluates the efficiency
with which a firm is able to manage its inventory. If the turnover is
higher, then it means lesser amount of capital is blocked up in the form
of working capital. A very low ratio indicators excessive inventory.

TABLE 4.42
TABLE SHOWING INVENTORY TURN OVER RATIO OF BHPV LTD FOR
THE PERIOD 2006-07 TO 2010-11
Year CGS
(Rs. In Lakhs)
Average Inventory

ITR
2006-07 8882.81 5041 1.76
2007-08 12558.02 4699 2.67
2008-09 6263.42 5098 1.22
2009-10 5123.48 4958 1.03
2010-11 6803.97 3245.55 2.09

INTERPRETATION:
An Inventory turnover ratio of 8 is considered ideal. The inventory
turnover ratio shows decrease in recent years in B.H.P.V. Then the firm
is inefficient inventory management.
b) DEBTORS TURN OVER RATIO:
A concern may sell goods on cash as well as credit. Credit is one of the
important elements of sales promotion. Debtors velocity indicates the
number of times the debtor are turned over a year. Generally, the
higher the value of debtors turn over, the more efficient is the
management. Similarly, low debtors turnover implies inefficient
management of Debtors.

TABLE 4.43
TABLE SHOWING DEBTORS TURN OVER RATIO OF BHPV LTD

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Year SALES
(Rs. In Lakhs)
Average Debtors

ITR
2006-07 18036 7231 2.49
2007-08 18029 8343 2.16
2008-09 8439 8002 1.05
2009-10 10431 7892 1.32
2010-11 13697 9440 1.45

INTERPRETATION:
A higher Debtor turnover is considered favorable as it indicates the
efficient management of Debtors.

AVERAGE COLLECTION PERIOD:
Average collection period represents the average the average number of days for
which a firm has to wait before its receivables are converted into cash.

INTERPRETATION:
0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
The lower the average the collection period the better is the debtors
management of the company.
a) CREDITORS TURNOVER RATIO (CTR)
This ratio enables us to understand the efficiency of the payables

INTERPRETATION:
A lower CTR than DTR is considered favorable.

TABLE 4.44
TABLE SHOWIING CREDITORS TURNOVER RATIO OF BHPV LTD
Year Purchases
(Rs. In Lakhs)
Average Creditors

ITR
2006-07 7759.58 1160 6.69
2007-08 10413.49 1125 9.25
2008-09 4642.01 1475 3.14
2009-10 3517.68 2498 1.40
2010-11 6231.15 3014 2.06

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio

INTERPRETATION:
Though the ratio is low during 2005-06 but in the year 2006-08 the CTR
increased from 3.07 to 9.11. However, it has declined in subsequent years
and it is the highest during 2007-08.

AVERAGE PAYMENT PERIOD:
The ratio represents the average no. of days taken by the firm to pay its
creditors.

c) WORKING CAPITAL TURNOVER RATIO (WCTR) :
This ratio indicates the velocity of the utilization of net working capital.
It indicates the number of time the working capital is turned over in a
year.

TABLE 4.45
TABLE SHOWING WORKING CAPITAL TURN OVER RATIO OF BHPV LTD
Year Cost of Sales
(Rs. In Lakhs)
Average W.C.
(Rs. In Lakhs)

Ratio
2006-07 8882.81 6079 1.46
2007-08 12558.02 7138 1.75
2008-09 6263.42 3073 2.03
2009-10 5123.48 1543 3.32
2010-11 6803.97 2697.64 2.52

INTERPRETATION:
A higher W.C. turnover ratio indicates the efficient management of
working capital. The W.C.T.R is 1.46 in 2006-07 which is very low butin
the year 2007-10 WCTR is slightly increased to 3.32. So the firms WCTR
is satisfactory.
d) FIXED ASSETS TURNOVER RATIO (F.A.T.R.)
This ratio indicates the efficiency of the utilization of the fixed assets of
a firm.

TABLE 4.46
TABLE SHOWING FIXED ASSETS TURNOVER RATIO OF BHPV LTD
Year Cost of Goods sold
(Rs. In Lakhs)
Fixed Assets
(Rs. In Lakhs)

Ratio
2006-07 8882.81 1435.93 6.18
2007-08 12558.02 1348.57 9.31
2008-09 6263.42 522.58 11.98
2009-10 5123.48 460.91 11.11
2010-11 6803.97 440.90 15.43

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio

INTERPRETATION:
A higher fixed assets turnover ratio indicates efficient management of
company. The F.A.T.R. of the firm is 3.7 in 2005-06 then it got decreased
in the year 20062006-07 to 0.6 but from the years 2007-10 FATR
increased in high scale. The FATR of the firm is high and it indicates the
efficiency of the management.
e) CAPITAL TURNOVER RATIO:
Capital turnover ratio is the relationship between cost of goods sold and
the capital employed. This ratio is calculated to measure the efficiency
or effectiveness with which a firm utilizes its resources or the capital
employed.

TABLE- 4.47
TABLE SHOWING CAPITAL TURNOVER RATIO OF BHPV LTD FOR THE
PERIOD 2006-07 TO 2010-11

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio
Year Cost of Goods sold
(Rs. In Lakhs)
Capital Employed
(Rs. In Lakhs)

CTOR
2006-07 8882.81 9887.02 0.89
2007-08 12558.02 7173.58 1.75
2008-09 6263.42 844.56 7.41
2009-10 5123.48 3225.94 1.58
2010-11 6803.97 3071.15 2.21

INTERPRETATION:
The ratio indicates the stability of efficient utilization of owners and
long-term creditors funds.

0
1
2
3
4
5
6
7
8
2006-07 2007-08 2008-09 2009-10 2010-11
Ratio
Ratio

CHAPTER V
Summary
Findings
Suggestions
Bibliography

SUMMARY
Financial statements analysis is the process of Identifying the financial strengths
and weaknesses of a concern by properly analyzing the interrelationship between
various items in the balance sheet and profit and loss account. As the primary
objective of such analysis is to ascertain the profitability and financial soundness
of a concern, the study has been undertaken in order to get an insight of financial
strength and weakness of the company.
The analysis and interpretation of profit and loss is essential to bring out the
mystery behind the figures in the profit and loss this analysis in an attempt to
determine the significance and meaning of the profit and loss data so that
forecast may be made of the future earnings ability to pay the interest and debt
maturities, profitability and sound dividend policy.
Financial statements are the source of information the basis of which conclusions
are drawn about the profitability and financial position of a concern. Financial
statements are prepared from the accounting records maintained by the firm.
They are the major means employed by the firms to present their statements to
assist in decision making.
The Generally Accepted Accounting Principles (GAAP) and procedures are
followed to prepare this statement.
Broadly speaking there are three steps involved in the analysis of financial
statements these are
(1) Selection
(2) Classification
(3) Interpretation
The analysis and interpretation of financial statement used to determine the
financial position and results of operations. 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 analyzer the position of the enterprise.
The following methods of analysis are generally used.
Comparative statements
Trend Analysis
Common Size statements
Ratio Analysis
Funds Flow Analysis
Cash Flow Analysis
Financial analysis is a powerful mechanism of determining financial strength and
weakness of a firm but, the analysis is based on the information available in the
financial statement. Thus the financial analyst has to be careful about the impact
of price level changes, Windows-dressing of financial statement, changes in
accounting policies of a firm accounting concept and convention, and personal
judgements etc., though financial are relevant and useful for the concern, still
they do not present a final picture of the concern. The utility of the statements is
dependent upon a number of factors. The analysis and interpretation of the
statements should be done very carefully. Otherwise misleading conclusion may
be drawn.

FINDINGS
It is observed that the gross profit position of the firm is not good except in
the year 2006-2007.
As per the result of the net profit of the firm is negative and unsatisfactory.
Return on net worth resulted negative all 5years. It indicates the financial
performance.
It is identified that earnings per share of the company is not good which
indicates the firms financial position is so weak.
Inventory turnover ratio of the firm is not good. It shows inefficiency
inventory management of the firm.
It is observed that debtors turnover ratio is fluctuating trend during the
study period. Maximum 2.9 times in the year 2006-07 and minimum 1.05
times was in 2008-09.
As per the result of working capital is not good.
It has been seen that debt equity ratio of the firm is fluctuating trend so the
higher debt equity ratio firm is having more interest burdens.
The procurement lead-time should be kept in mind by the materials control
section before giving their approval.
It should be seen that the spares of a particular machine are disposed off
along with it, If the company is going to install machinery of a new design
or technology.

SUGGESTIONS

It is suggested that firm should control its monetary aspects of the
firm with proper planning.
Firm should maintain standard debt equity ratio i.e. 2:1 it is
suggested that firm should maintain good quality control techniques
for improving their efficiency.
Firm should maintain gross profit and net profit at optimum level. It
is suggested that firm should capture good market reputation.
Firm should forecast and plan to optimize the number of orders
economically.
Financial management should identified the financial weakness take
necessary corrective actions with in a time.
Team work and interdepartmental to coordination must be elevated
to finish the jobs within the stipulated time by leaving personal
fancies.
The management and employees should trust each other to
overcome their inventory crisis situation by performing the entrusted
jobs properly.
Unnecessary overhead costs are should be minimized by planning the
activities in a proper manner by using the scientific methods of
principles of management like operations research, project
evaluation and management, MIS, and security analysis and portfolio
management.

BIBILOGRAPHY

Reference Author/Source

1. Financial management R.K.SHARMA &SHASHI K GUPTA

2. Financial management L.M.PANDEY

3. Management Accounting R.S.N.PILLAI &BAGAVATHI

4. Annual Report for the financial BHPV Ltd
Year 2005-2011
5. Journals and Magazines.

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