w Õ
  

  The study concentrates on the financial

statement of the company. It involves the study of ratio analysis it helps
to present a broader picture of the financial position of an organization.

 It provides the financial position of a company

 To find out any cross sectional linkages between various ratios,

 Help in decision making for investments and operations

w {
  
 
À Õatio analysis involves methods of calculating and interpreting in order
to assess a firms performance and status .
À By the ratio analysis we can find out profit, having enough cash,
efficiently using assets etc.
6 ›e can use different ratios for different findings as

 îrofitability : has the business made a good gross profit compare to

its turnover?

 Liquidity : does the firm has enough money to pay its bill?

 Activity : how is the business used its fixed and current assets?

 Financial leverage: how much financial risk the company has taken on?

w ¦
{{{{
 


G I used balance sheet of BEC as a secondary data for ratio analysis.

6 Bhilai Engineering Corporation Ltd. is located in Bhilai, India. It
manufactures hi-tech-engineering castings, equipments for steel plants,
mining, railways, power plants, ports, defense and petrochemical
industries. The range of products includes equipment for Blast furnaces,
coke ovens, steel rolling, feeder breakers, and stacker recliners.
6 Õ 

 BEC has six regional offices in different places across
the India,
V olkata region
V Mumbai region
V Delhi region
V Bangalore region
V Chennai region
V Õanchi region
6 BEC do work on turnkey projects. These turnkey projects are mainly in different areas:
ΠBurnpur site (IISCO) in Best Bengal
Œ Õaurkela site (ÕSî) in Orissa
Œ Bhilai site (BSî) in Chhattisgarh
Œ Vishakhapatnam site (VSî)
ΠBokaro site (BSL) in Jharkhand
Œ Durgapur site (DSî) in ›est Bengal
 ×
 ×



  


Mining Industry Railways

Steel Industry Cement Industry

Port Power Plants Defense

Process Industry
Equipment
6 Õatio analysis means the process of computing, determining and presenting the
relationship of related items and groups of items of the financial statement.

6 They provide in a summarized and concise form of fairly good ides about the
financial position of a unit.

^


 Accounting ratio classified on the following basisM

 Liquidity ratio
 îrofitability ratio
 Efficiency ratio or Activity ratio
 Financial leverage ratio
×

  ×
 
 

Financial ratio Operating ratio Composite ratio

Current ratio Gross profit ratio Fixed asset turnover ratio

Quick asset ratio Operating ratio Õetune on total resource ratio
îroprietary ratio Expense ratio Õeturn on own funds ratio
Debt equity ratio Net profit ratio Earning per share ratio
Stock turnover ratio Debtors turnover ratio
6 Current ratio :- This ratio establishes the relationship between
current assets and current liabilities.
current assets
Current ratio =
current liabilities

î  

 
 
 
Current Ratio 1•15 1•18 1•

w Quick Õatio :- This ratio is establishing relationship between quick

current assets and current liabilities•
current assets - inventory
Quick ratio =
current liabilities

î  

 
 
 

uick Ratio 0• 0• 0•

6 îrofitability ratios are based on the premise that a firm should earn
sufficient profit on each rupee of sales.

6 

 : - This ratio is the ratio of gross profit to sales. This
ratio indicates how much of every rupees of sales is left after cost of good
sold.
Gross profit
Gross profit ratio =
Sales

î  

 
 

ëross profit Ratio
1•5%
0•1%

6    Õ:- The net profit ratio reveals the overall profitability of
the firm. It reveals the efficiency of management in manufacturing, selling,
administrative, and other activity of the firm.
Net profit
Net profit ratio = x 100
Sales

î  

 
 


et Profit Ratio Î
  
 

6 {   Õ This ratio establishes the relationship between

the total cost including interest and tax to sales which is used to find out the
over all operational efficiency of the business concern
Operating profit
Operating profit ratio = x 100
Net sales



 Î
  Î
   Î


Operating profit
ratio  Î
 



6 A Company can finance its assets either by equity or by the debt.

6 Financing through debt involve risk because legally obligate the company
to pay interest and repay the principals as promised period.

w     This ratio shows the relationship between

borrowers fund and equity or owners capital. The debt equity ratio is
related to the debt- to ±assets ratio.
w The capital structure is the mix of debt and equity that a company used to
finance its assets.
Debt
Debt equity ratio =
Equity



  Î
   Î


    Î Î Î Î
w    
 


Õ This ratio indicates how much
portion of company¶s assets is financed with the long-term debts.
Long-Term debt to assets ratio
Long ± term debt to assets ratio =
Total tangible assets



 ¦ Î
  ¦ Î

  



 
  Î
6   Õ :- It indicates to which extent tangible assets are
financed with owner¶s fund. The main objective of this ratio is to know
the share of proprietary fund in the total assets and satisfy for creditors
how long there loans are secured.
Tangible Test ›orth
îroprietary ratio = x 100
Total tangible assets

î   

  


î  

•8%
0•1%

6 ¬ 
    :-The interest coverage- ratio indicates to
which extent earning can decline without resultant financial hardship to
the company because of its inability to meet annual interest cost.
Earning before interest and tax
Interest coverage ratio =
Interest


 ¦ Î
  ¦ Î


¬ 
      

6   


      This ratio indicates to which
extent the relationship between fixed assets to net worth.
Fixed assets
Fixed assets to net worth =
Net worth


 ¦ Î
  ¦ Î


 


   
 Î

 Activity ratio measures how well a company uses assets. These measures
how effectively the company is putting its investment to work. A
company will invest in assets and then use these assets to generate
revenues.
w ¬     This ratio indicates the relationship
between cost of good sold to inventory. This ratio indicates that how
efficiently the firm is managing its inventory.

À This ratio roughly indicates how many times per year the inventory is
replaced.
Cost of good sold
Inventory turnover ratio =
Inventory



 ¦ Î
  ¦ Î


¬    Î Î  Î

6





  Õ  The total assets turnover ratio measures
the ability of a company to use its asset to generate sales. The total assets
turnover ratio considers all assets.
Net Sales
Assets turnover ratio =
Total assets

î  

 




  1.18 1.32

w   



  Õ  The fixed assets turnover ratio
measures the company¶s ability to generate net sales from fixed assets
investment.
Net sales
Fixed assets turnover ratio =
Fixed assets



 ¦ Î
  ¦ Î


 


 
  Î

6 Increasing current ratio reflects improving the liquidity position of the company.

6 Gross profit ratio, net profit ratio & operating profit ratio are decreasing
comparison to previous year because of increasing in the net sales . It is negative
sign for the company.

6 Debt- equity ratio is increasing. It is negative sign for the company because it
means company using debt more then equity.
6 Long ±term debt to asset ratio is increasing comparison to previous year. It means
long ±term loans increasing comparison to previous year means company is using
more long term debt for asset financing.

6 îroprietary ratio is less then 50% so it is also risky for the creditors.
6 Interest coverage ratio is decreasing due to increasing in interest payment.

6 Total asset turnover ratio is increasing comparison to previous year means

company using its assets efficiently.
6 The fixed assets turnover ratio is low as compared to previous year. It means
investment in plant and machinery is too much.
6 The company should focus on increment of their current and quick ratios; current ratio
indicates liquidity position of the company.

6 There is no such particular ratio, which represents a good asset turnover ratio. It is
varying from company to company, for BEC this ratio indicates efficient use of total
asset to generate sales. Company should try to improve this ratio because it will be better
for the company.

6 Inventory stay time with company was 107.61 days in previous year it decreases in the
next year and becomes 83.06 days and turnover ratio increase. It is an efficient position
for the company. Therefore, this reflects efficient management of inventory. Company
should try to reduce number of days inventory stay with the company.

6 Bhilai Engineering Corporation Limited, the flagship company of the BEC Group, has
evolved over four decades into a company, manufacturing core sector industries - Steel,
Mining, Õailways, Cement, îrocess Industries, and Defense & îort Equipment every
area has their own production cycle. BEC is progressing overall and strengthening its
position in comparison to previous years.
"