A FINANCIAL PERFORMANCE AND RATIO ANALYSIS FOR

BHARATHI AIRTEL

CHAPTER-1
1.1 INTRODUCTION

1.1. INTRODUCTION ABOUT THE STUDY:

In our present day economy, finance is the provision of money at the time when it is required.
Every enterprise whenever big, medium or small needs finance to carry on its operations and to
achieve its target. In fact, finance is so indispensable today that it is rightly said that, it is the life
hood of an enterprise without adequate finance, no enterprise can possible accomplish.

Finance guides and regulates investments decisions may be pertaining to capital

expenditure and revenue expenditure. To get the best out of the available funds is the major task
of financial management. The finance manager should perform his task most effectively.

“Finance is the lifeblood of business. It is rightly termed as the science of money. We

hold finance for the production of goods and services as their distribution”. The term business
finance indicates an activity or a process, which is concerned with acquisition of funds,
allocation of funds and finance controls.

The finance requirements of a company can be broadly classified into a long term,
medium term and short-term finance. Long term finance is needed for buying machinery and
equipment or for the provision of land, factory building and other fixed assets. Medium term
finance is needed for small tools, implements and major repairs. Short term finance is required
for new months for the purchase of raw materials for processing and meeting expenses like
wages, salaries etc. in order words to meet its working capital requirements.
 Accounting and other business functions. The wastage of funds can be avoided. The
finance functions is not just a service function through it is generally viewed as one of the most
important decisions on the basic of availability of funds. In the finance function bended with
productions marketing, personal.

In evaluating such investment proposals, it is important to carefully consider the expected

benefits of investment against the expenses associated with it.

Organizations are frequently faced with Capital Budgeting decisions. Any decision that requires
the use of resources is a capital budgeting decisions. Capital budgeting is more or less a
continuous process in any growing concern.

The management is efficient if it is able to accomplish the objective of the enterprise. It is

effective when it accomplishes the objectives with minimum effort and cost in order to attain
long-range efficiency and effectiveness management must chat out its course in advance. A
systematic approach to facilitate effective management performance is profit planning and
control or budgeting. Budgeting is therefore an integral part of management in a way, a
budgetary control system has been described as a historical combination of a “goal setting
machine for increasing an enterprises profits and a goal achieving machine for facilitating
organizational co ordination and planning while achieving the budgeted targets

IMPORTANCE OF FINANCE

Finance is regarding as the lifeblood of a business enterprise. This is because in the

modern money-oriented economy. Finance is one of the basic foundation of all the sources for
being employed in manufacturing and merchandising activities. It has rightly been said that
business needs money to make more money. However, it is also true that money begets more
money only when it is properly managed. Hence, efficient management of every business
enterprise is closely linked with efficient management of its finances.

FINANCIAL STATEMENT:
 A financial statement is an organized collection of data according to logical and
consistent accounting procedures. Its purpose is convey an understanding of some financial
aspects of a business firm. It may show position at a moment in time, as in the case of a balance
sheet or may reveal a series of activities over a given period of time, as in the case of income
statements. Thus the term financial statement generally refers to the two statements.

 The position statement (or) the balance sheet.

 The income statement (or) the profit & loss account.

FINANCIAL PERFORMANCE

INTRODUCTION

Analysis is the process of critically examining in detail accounting information given in

the financial statements. For the purpose of analysis individual items are studied, their
interrelationship with other related figures established, the data is sometimes rearranged ton have
a better understanding of the information with the help of different techniques of tools for the
purpose. Interpretation means explaining the meaning and significance of the data so simplified.
However both analysis and interpretation are interlinked.

MEANINNG:

Financial performance is the process of identifying the financial strengths and weakness
of the firm by properly establishing relationship between the items of the balance sheet and the
profit and loss account analysis and interpretation of financial statements refers to such a
treatment of data found in the financial statements so as to provide a full diagnosis of the
profitability and financial position of an enterprise.

Finance is a pre-requisite for mobilizing real resources to organize production and

marketing. Finance is rightly described as the life blood of any industry.

DEFINITION:
 Financial analysis is the starting point for making plans before using any sophisticated
forecasting and budgetary procedures. It is their overall responsibility to see that the resources of
enterprise are used more efficiently and effectively.

According to John .N.MYER, the balance sheet reflect the assets, liabilities and capital as
on a certain data and the income statement should the results of operation during a certain period.
Financial analysis is helpful in assessing the financial position and profitability of a concern.
This is done through comparison by ratios for the same concern. This is done through
comparison by ratios for the same concern over a period of years. For one concern against of
financial statements helps in assessing.

 The present and future earning capacity or profitability of the concern.

 The operation efficiency of the concern a sa whole.
 The financial stability of a business concern.
 Then real meaning and significance of financial data.
 The long term liquidity of its funds etc.,

RATIO ANALYSIS

Ratio analysis is powerful tool of financial analysis. A ratio is a statistical yard stick that
provides a measures of relationship between two accounting figures. The term “ratio” refers to a
simple arithmetic expression of one number to another.

DEFINITION

According to Kennedy, ratio may be defined as “the indicated quotient of two

mathematical expressions and as the relationship between two or more things”.

According to wixon, kell and Bedford, a ratio is defined as “an expression of the
quantitative relationship between two numbers”.

FINANCIAL STATEMENT
 There are number ratios, which can be calculated from the information given in the profit
and loss account and balance sheet. The selection of particular ratio dependents upon the purpose
of firm which it is calculated by the analyst.

ADVANTAGE OF FINANCIAL PERFORMACE:

1. Maximization of Profit:

The budgetary control aims at the maximization of profits of the enterprise. To achieve
this aim, a proper planning and co-ordination of different functions is undertaken. There is
proper control over various capital and revenue expenditures. The resources are put to the best
possible use.

2. Co-ordination:

The working of the different departments and sectors is properly co-ordinate. The
budgets of different departments have a bearing on one another. The co-ordination of various
executives and subordinates is necessary for achieving budgeted targets.

3. Specific Aims:

The plans, policies and goals are decided by the top management. All efforts are put
together to reach the common goal of the organization. Every department is given a target to be
achieved. The efforts are directed towards achieving come specific aims. If there is no definite
aim then the efforts will be wasted in pursuing different aims.

4. Tool for Measuring Performance:

 By providing targets to various departments, budgetary control provides a tool for
measuring managerial performance. The budgeted targets are compared to actual results and
deviations are determined. The performance of each department is reported to the top
management. This system enables the introduction of management by exception.

5. Economy:

The planning of expenditure will be systematic and there will be economy in spending.
The finances will be put to optimum use. The benefits derived for the concern will ultimately
extend to industry and then to national economy. The national resources will be used
economically and wastage will be eliminated.

An efficient allocation of capital is the most important finance function in modern times. It
involves decisions to commit firm’s funds to long-term assets. Such decisions are tend to
determine the value of company/firm by influencing its growth, profitability & risk.

Investment decisions are generally known as capital budgeting or capital expenditure

decisions. It is clever decisions to invest current in long term assets expecting long-term benefits
firm’s investment decisions would generally include expansion, acquisition, modernization and
replacement of long-term assets.

Such decisions can be investment decisions, financing decisions or operating decisions.

Investment decisions deal with investment of organization’s resources in Long tern (fixed)
Assets and / or Short term (Current) Assets. Decisions pertaining to investment in Short term
Assets fall under “Working Capital Management”. Decisions pertaining to investment in Long
term Assets are classified as “Capital Budgeting” decisions.

Capital budgeting decisions are related to allocation of investible funds to different long-term
assets. They have long-term implications and affect the future growth and profitability of the
firm.

In evaluating such investment proposals, it is important to carefully consider the expected

benefits of investment against the expenses associated with it.Organizations are frequently faced
with Capital Budgeting decisions. Any decision that requires the use of resources is a capital
budgeting decisions. Capital budgeting is more or less a continuous process in any growing
concern.

RATIO ANALYSIS INVOLVES THE FOLLOWING STEPS:

 Selection of relevant data from the financial statement depending upon the
analysis.
 Calculation of calculated ratio with the standard ratio or with the past ratio of the
same Concern or projected ratio.
 Interpretation based on comparison.

IMPORTANCE OF RATIOS

Importance of ratio analysis lies in the fact that it present facts on a comparative basic
and enables the sawing of inferences regarding the performance off a firm.

 Difficulty in comparison
 Impact of inflation
 Conceptual diversity

TO TEST THE ASSOCIATION OF OVERHEADS AND TURNOVER:

To the association of overheads and turnover with the help of correlation table, which
shows both are in positive manner. The result of analyzing the overheads and turnover with Karl
Pearson’s correlation model is given in the table.

BALANCE SHEET:

Balance sheet has been defined by kholer as a statement of financial position and an
economic unity disclosing as at a given movement of time its assets, at cost depreciated cost, on
their incited value; its liabilities; and its ownership equities usually, the balance sheet is
prospered by a firm to present a summary of financial position at the end of financial year. It
balances the assets of a firm against its financing.

CURRENT ASSESTS:

Current assets which are changed to liquid assets of the firm are convertible into cash
within an accounting period. Cash in hand, cash at bank and other short term investments
constitute these assets.

FIXED ASSESTS:

Assets acquired for utilization and not for resale are termed as fixed or permanent assets,
are those assets, which are intended to be held for a long period.

CURRENT LIABILITIES:

The current liabilities are those liabilities, which are expected to be discharged within a
period of one year.

LIABILITIES:

A liability is a amount which a business is legally bound to pay. It is a claim by an

outsider on the assets of a business.

RATIOS:

Ratio analysis is one of the techniques of financial analysis where ratio is used a sa
yardstick for evaluating for financial conditions and performance of a firm.

It is a financial and quantitative statement, prepared and approved prior to a defined

period of time of policy to be pursued during that period for purpose of attaining a given
objective. It may include income, expenditure and employment capital.

In other words is a pre-determined detailed plan of action developed and distributed as a guide to
current operations and as a partial basis for the subsequent evaluation of performance the
techniques of financial analysis where ratio is used a sa yardstick for evaluating for financial
conditions and performance of a firm

1.2 Meaning Of Finance:-

Finance is rightly been termed as ‘master key’ providing accretes to are sources required for
running business activities. Finance is the management of monetary affairs of a company.

Definition of Finance:-

Ray G Jones and Dean Dudely observe that the word finance come indirectly from Latin word
“Finis”.
In simple words “Finance is economics and Accounting”. Economics is proper utilization of
scare resources and accounting Economics is proper utilization of scarce resources and
Accounting is keeping a record or tract of things.

Kenneth Ridgeley and Ronald Bums Accent, “Financing is the process of organizing the flow of
funds so that a business can carry out its objectives in the most efficient manner of meeting its
obligation as they are due”

1.3 Scope Of Finance:-

What is finance? What are firm’s financial activities? How are they related to firm’s
other activities?

There exists an inseparable relation between finance on one hand and on the other.
Almost all kinds of business activities directly or indirectly involved the acquisition and
use of funds. E.g.: recruitment and promotion of employees, buying of machines,
advertising, sales promotion activities requires outlay of cash and therefore affect
financial resources. Finance functions or decision includes investment decision, finance
decision, dividend decision, and liquidity decision.
A firm performs functions simultaneously and continuously in the normal c ourse of
business. They do not necessarily occur in a sequence. Finance functions call for skillful
planning control and execution of firm’s attitudes.

1.4 Functions Of Finance:-

There are three major functions of finance:

a) Investment decision
b) Financing decision
c) Dividend decision.
a) Investment decision:

Investment decision relates to selection of asset in which funds will be inverted by a firm. The
assets that can be acquired by a firm may be long term asset and short term assets.

b) Financing decision:

Financing decision is concerned with financing mix or capital structure the mix of department
and equity is known as capital structure. Determination of the proportion of equity and debt is
the main issue in financing to share holders and also financial risk.

c) Dividend decision:

A firm may distribute its profits or retain the balance with it the decision depends upon the
preference of the shareholders and investment opportunities available to the firm. Dividend
decision has a strong influence on the market price of share.

Therefore, the dividend policy is too determined in terms of its impact on shareholders’ value.
The optimum dividend policy is one. Which maximize the value of shares and wealth of
shareholders the financial manager should determine the optimum payout ratio that is the
proportion of net profit to be paid out to shareholders? The financial manager should also
consider those factors. This determines the dividend policy in practice.
1.5 Financial Management:-

Financial management is a part of managerial activity, which is mainly concerned with the
planning, and controlling of financial resources of a firm. Prof Solomon defines “Financial
management is concerned with efficient use of an important economic resource is capital funds.

1.6 Importance Of Financial Management:-

Financial management is that managerial activity which is concerned with the planning
and control of firm’s financial resources. As a separate activity or discipline it is of
recent origin. It was a branch of economics till 1890 still today it has no unique body of
knowledge of its own and draws heavily on economics for its theoretical concepts. The
subject of financial management is of immense interest to both academicians and
practicing managers. It is of great interest to academicians, because the subject is still
developing and are still certain areas where controversies exist for which no enormous
solution have been reached as yet. The most crucial decision of the firm are those which
relate to finance and an understanding of the theory of financial management provides
than with conceptual and analytical insights to make those decisions skillfully.

1.7 Objectives Of Financial Management:-

The term objective reforms to a goal or decision criterion for taking financial decisions. There
are two objectives:

a) Profit maximization
b) Wealth maximization

a) PROFIT MAXIMIZATION:

The term profit maximization is deep rooted in the economic theory. It is needed that when
pursue the policy of maximizing profits society’s resources are efficiently utilized. The firms
should undertake those actions that would pursue profits and drop those actions that would
decrease profits. The financial decisions should be oriented to the maximization of profits.
Profits provides yardstick for measuring the economic performance of firms. It makes allocation
of resources to profitable and desirable areas. It also ensures maximum social welfare. On these
grounds profit maximization serves as criteria for financial decision.

b) WEALTH MAXIMISATION:

Wealth maximization or value maximization or net present Value maximization provides an

appropriate and operationally feasible decision criterion for financial management decisions. It
provides an unambiguous measure of what financial management should seek to maximize in
making investment and financing decisions. It satisfies the three requirements of a suitable
criterion namely precise, time value of money and quality of benefits.

In wealth maximization criterion the benefits associated with assets are measured in terms of
cash flows rather than accounting profits. The cash flows are a precise concept with definite
meaning. It overcomes the deficiencies associated with accounting profits.
 CHAPTER -2
REVIEW OF LITERATURE

2.1 Meaning and Importance of Financial Statement Analysis

Author: Rashid Javed

All financial documents are essentially historical documents. Financial statement
involves careful selection of the data for the primary purpose of forecasting the financial health
of the company. This is accomplished by examining trends in key financial data, comparing
financial data across companies and analyzing key financial ratios.

Managers are widely concerned with financial ratios. The specific ratios selected depend
on the company’s strategy. Since managers must report to shareholders and may wish to raise
funds from external sources, managers must pay attention to the financial ratios by external
inventories to evaluate the company’s investment potential and creditworthiness.

Although financial statements analysis is a highly useful tool, it has two limitations.

These two limitations involve the comparability of financial data between companies and
the need to look beyond ratios. Comparison of one company with another can provide valuable
clues about the financial health of organization. Unfortunately, differences in accounting
methods between companies sometime make it difficult to compare the companies financial data.

Ratios should not be viewed as an end, but rather they should be viewed as a starting
point, as indicators of what to pursue in greater depth. They raise many questions, but they
rarely answer any questions by themselves. The analyst should look at industry trends,
technology changes, changes in consumer tastes changes in broad economic factors and changes
within the firm itself. A recent change in a key management position might provide a basis of
optimism about the future, even though the past performance of the firm may have been
mediocre.

2.1.2 The importance of Business Financial Analysis and Management

 Author: Frank Goley
Planning and control are the two most important ingredients to a successful business. A
business plan takes most of the guess work out of business strategy and control through solid
financial analysis. Financial data provides a way to gauge where you are in your strategic plan,
telling you where changes in your plan are necessary. Because of this, financial data analysis
and management are vitally important to run a successful business.

2.1.3 Understanding Financial Statements

Author: Matt Bacak

The value of the accurate financial statements generated is undisputed. This is as
financial statements are like windows into the health of a company. Just by viewing financial
statements, adept business owners will be able to determine the strengths and weaknesses at the
time that the statement was generated. With this, the owner can then chart the way into the
future for the company has.

A person can call himself a full or part-time stock trader/investor while maintaining other
professions. When a stock trader/investor has clients, and acts as a money manager or advisor
with the intention of adding value to his clients finances, he is also called I financial advisor or
manager.

2.1.4 Financial Statement Analysis

Author: Shubhra
The financial statement analysis provides a systematic approach for extracting and
evaluating the accounting information needed for a specific business purpose. Although every
analysis is different, the process used is likely to be similar.

The financial statement analysis process includes establishing a goal or goals that the
analysis is supported to achieve which helps draw the analyst’s attention to the most relevant
information. The selection of techniques to generate the information required depends on the
goal of the analysis. As ratios, common techniques include common-size statements, vertical
analysis and horizontal analysis. Finally, interpretation of the results requires putting the results
in context, for example, by comparing results with industry benchmarks.

Kothari C.R., “Quantitative Techniques”, Pg10-20, “I have taken knowledge about

research design, sample design & sampling. In this I got what type of sample can be chosen and
more about sample design”

Berry G.C., “Marketing Research10”, “Some theoretical knowledge about the type of
data”

Pandey, I.M “Financial Management” Pg-143-145 “How to prepare comparative

balance sheet and how can we evaluate”.

Research Design:-

Research design of study is a conceptual structure a sketch or plan laid out for conducting the
study. It is considered as a blue print of the final copy of the project where it shows the activities
undertaken while doing the study. It constitutes the steps taken beginning with of collection of
clarifying it. Analyzing, interpreting, processing and finally putting it is an actual form.

2.4 Objectives of the Study:-

1. To ascertain the overall profitability of the company.

2. To analyze trends on the basis of ratios for consecutive 4 years.
3. To gain insight as to how a financial statement can be use to predict future.
4. To analyze working capital funds with the help of ratios.
2.5 Scope of Study:-

The scope of the study is limited to Bharti Airtel and is an attempt to find out the
financial position during past 4 years from the Annual report of the company with special
reference to financial analysis.

2.3 Data Source:-

This study makes extensive use of secondary data collected in the forms of annual reports. The
nature of secondary data collected was both qualitative and quantitative in nature. Considering
the above plan, research plan for the study is essentially a combination of qualitative and
quantitative aspects.

The secondary sources of data can be divided in to mainly two parts.

Internal
 Accounting section
 Finance section
 HRD department
 Miscellaneous records
External
 Information for published materials like,
 Annual reports of the company
 Balance sheets and profit and loss accounts
 Magazines
There was also primary data, which was through discussions held with the concerned company
officials from finance department. The primary data was obtained through survey method i.e.
personal interview method.
2.4 Techniques of Analysis:-

The data are analyzed through ratio analysis common size balance sheet, comparative balance
sheet and fund flow analysis.

2.5 Limitations Of The Study:-

1. The study is limited to Bharti Airtel and the finding need not apply in similar
sense to other firms.
2. The inferences that have been framed only on the basis of financial statement.
3. Based on the limited information it is not possible to arrive at a proper conclusion.
4. Limitations of Financial analysis.
 CHAPTER -3

COMPANY PROFILE
Sunil Bharti Mittal founded the Bharti Group. In 1983, Sunil Mittal was into an
agreement with Germany's Siemens to manufacture the company's push-button telephone models
for the Indian market. In 1986, Sunil Bharti Mittal incorporated Bharti Telecom Limited (BTL)
and his company became the first in India to offer push-button telephones, establishing the basis
of Bharti Enterprises. This first-mover advantage allowed Sunil Mittal to expand his
manufacturing capacity elsewhere in the telecommunications market. By the early 1990s, Sunil
Mittal had also launched the country's first fax machines and its first cordless telephones. In
1992, Sunil Mittal won a bid to build a cellular phone network in Delhi. In 1995, Sunil Mittal
incorporated the cellular operations as Bharti Tele-Ventures and launched service in Delhi. In
1996, cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises acquired
control of JT Holdings, and extended cellular operations to Karnataka and Andhra Pradesh. In
2000, Bharti acquired control of Sky cell Communications, in Chennai. In 2001, the company
acquired control of Spice Cell in Calcutta. Bharti Enterprises went public in 2002, and the
company was listed on Bombay Stock Exchange and National Stock Exchange of India. In 2003,
the cellular phone operations were rebranded under the single Airtel brand. In 2004, Bharti
acquired control of Hexagon and entered Rajasthan. In 2005, Bharti extended its network to
Andaman and Nicobar.’2009; Airtel launched its first international mobile network in Sri Lanka.
In 2010, Airtel began operating in Bangladesh.

Today, Airtel is the largest cellular service provider in India and fifth largest in the world.

3.2 Type of Organizational Structure:-

The organizational structure that existed till recently concentrated on the hierarchy of the
operations (not services) inside the company as a whole. The structure depicts the corresponding
operation/region of different in-charges and hence it didn't hold anyone responsible for each of
its services. So, the company found it better to restructure its organizational chart and it came
into implementation from 1 August. The transformed organizational structure will have two
distinct Customer Business Units (CBU) with clear focus on B2C (Business to Customer) and
B2B (Business to Business) segments. Bharti Airtel's B2C business unit will comprehensively
service the retail consumers, homes and small offices, by combining the erstwhile business units
– Mobile, Telemedia, Digital TV, and other emerging businesses (like M-commerce, M-health,
M-advertising etc.). The B2C organization will consist of Consumer Business and Market
Operations.

3.3 BOARD OF DIRECTORS:-

Sunil Bharti Mittal Chairman and Managing Director

Ajay Lal Non Executive Director

Chua Sock Koong Non Executive Director

Lord Evan Mervyn Davies Non Executive Director

N Kumar Non Executive Director

Pulak Prasad Non Executive Director

Rakesh Bharti Mittal Non Executive Director

Tan Yong Choo Non Executive Director

Manoj Kohli Joint Managing Director and CEO

Akhil Gupta Non Executive Director

Craig Ehrlich Non Executive Director

Hui Weng Cheong Non Executive Director

Nikesh Arora Non Executive Director

Rajan Bharti Mittal Non Executive Director

Salim Ahmed Salim Non Executive Director

Tsun-Yan Hsieh Non Executive Director

3.4 AWARDS AND ACHIVEMENTS:-

Airtel has won the ‘Most Preferred Cellular Service Provider Brand’ award at the CNBC Awaaz
Consumer Awards in Mumbai. This is 6th year in a row that Airtel has won the award in this
category. This year, the awards were based on an exhaustive consumer survey done by The
Nielsen Company. Over 3,000 consumers, spanning 19 cities and 16 states in India, rated brands
across different categories to choose brands which delivered true value for money.

Bharti Airtel has received the prestigious Business world-FICCI-SEDF Corporate Social
Responsibility Award 2009-2010. The FICCI Socio Economic Development Foundation (FICCI-
SEDF) and Business world CSR award was instituted in 1999 to recognize exemplary
responsible business practices by the Indian industry.
 CHAPTER -4

DATA ANALYSIS & INTERPERTATION

Financial Analysis:

Financial analysis is the analysis of financial statement of a Company to assess its financial
health and soundness of its management. ‘Financial Statement Analysis’ involves a study of the
financial statements of a company to ascertain its prevailing state of affairs and the reasons
thereof. Such a study would enable the public and the investors to ascertain whether one
company is more profitable than the other and also to state the causes and factors that are
probably responsible.

Ratio Analysis:-

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions as relationship between two or more things”.
In financial analysis, a ratio is used as a bench mark for evaluating the financial position
and performance of a firm. The absolute accounting figures reported in the financial
statement do not provide a meaningful understanding of the performance and financial
position of a firm. An accounting figure conveys meaningful message when it is related
to some other relevant information. For example Rs 5 corer net profit may look
impressive but the firm’s performance can be said to be good or bad only when the net
profit figure is related to firm’s investments. The relationship between two accounting
figures expressed mathematically is known as financial ratio. A ratio quantitative
relationship, which can be in turn used to make a qualitative judgment.
Classification of Ratios:-

Ratios may be classified in a number of ways keeping in view the particular

purpose. Ratios indicating profitability are calculated on the basis of the profit and loss
account; those indicating financial position are computed on the basis of balance sheet.
This classification is rather crude and unsuitable to determine the profitability and
financial position of business. To achieve these purpose ratios may be classified as

1. Liquidity Ratios
2. Return On Investments Ratios
3. Solvency Ratios
4. Efficiency or Turnover Ratios
5. Profitability Ratios
6. Capital Market Ratios

Liquidity Ratios:-
i. Current Ratio
ii. Quick or Acid Test Ratio
iii. Debtors Ratio
iv. Debtors Turnover Ratio
v. Creditors Ratio
vi. Creditors Turnover Ratio
vii. Inventory Holding Period
viii. Inventory Turnover Ratio
RATIO ANALYSIS
The primary uses of financial statement are evaluating past performance and predicting
future performance and both of these are facilitated by comparison. Therefore the focus of
financial analysis is always on the crucial information contained in the financial statements. This
depends on the objectives and performance of such analysis. The purpose of evaluating such
financial statement is different from person to person depending on its relationship. In other
words, even though the business unit itself and shareholders, debentures holders, investors, etc.
all undertake the financial analysis, the purpose, means and extent of such analysis differs. For
example, trade creditors may be interested primarily in the liquidity of the firm because the
ability of the business unit to the business unit to pay their claims are best judged by means of
through analysis of its liquidity.

The shareholder and the potential investors may be interested in the present and the
further earnings per share, the stability of such earnings and comparison of these earnings with
other units in the industry. Similarly the debenture holders and the financial institution lending
long term loans term may be concerned with the cash flow ability of the business unit to pay
pack the debt in the long run. The management of the business unit, in contrast, looks to the
financial statement from various angles. These statement are required not only for the
management own evaluation and decision making but also for internal control and overall
performance of the firm. Thus the scope, extent and means of any financial analysis are a part of
the larger information processing system which from the very basic of any “decision making”
process.

The financial analysts always need certain yardstick to evaluate the efficiency and
performance of any business unit. The one of the most frequently used yardstick is ratio analysis.
Ratio analysis involves the use of various methods for calculating and interpreting financial
ratios of assess the performance and status of the business unit. It is a tool of financial analysis,
which studies the numerical or quantitative relationship between two variables and item. A ratio
can be worked out by dividing one of the variables of the relationship with other variable and
such ratio value is compared with standards/ norms.
 In other words, ratio are relative figures reflection the relationship between variables and
enable the analysis to draw conclusion regarding the financial operations.

It is very important that the base(or denominator) selected for each ratio is relevant with
the numerator. The two must be such that one is closely connected with and is influenced by the
other.

This is the measure of inter relationship between different sections of the financial
statement which then is compared with the budgeted or forecasted results, prior year results and
or the industrial results. To be most important ratios must include a study of underlying data.
Ratios should be taken as guides that are useful in evaluating a company’s financial position and
operations and making comparison with results in previous year of with other companies. The
primary purpose of ratios is to point out areas needing further investigations. A part from the
ratios other information which should be looked at includes.

Financial Analysis:

Financial analysis is the analysis of financial statement of a Company to assess its financial
health and soundness of its management. ‘Financial Statement Analysis’ involves a study of the
financial statements of a company to ascertain its prevailing state of affairs and the reasons
thereof. Such a study would enable the public and the investors to ascertain whether one
company is more profitable than the other and also to state the causes and factors that are
probably responsible.

Ratio Analysis:-

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated
quotient of two mathematical expressions as relationship between two or more things”.
In financial analysis, a ratio is used as a bench mark for evaluating the financial position
and performance of a firm. The absolute accounting figures reported in the financial
statement do not provide a meaningful understanding of the performance and financial
position of a firm. An accounting figure conveys meaningful messa ge when it is related
to some other relevant information. For example Rs 5 corer net profit may look
impressive but the firm’s performance can be said to be good or bad only when the net
profit figure is related to firm’s investments. The relationship between two accounting
figures expressed mathematically is known as financial ratio. A ratio quantitative
relationship, which can be in turn used to make a qualitative judgment.

Classification of Ratios:-

Ratios may be classified in a number of ways keeping in view the particular

purpose. Ratios indicating profitability are calculated on the basis of the profit and loss
account; those indicating financial position are computed on the basis of balance sheet.
This classification is rather crude and unsuitable to determine the profitability and
financial position of business. To achieve these purpose ratios may be classified as

7. Liquidity Ratios
8. Return On Investments Ratios
9. Solvency Ratios
10. Efficiency or Turnover Ratios
11. Profitability Ratios
12. Capital Market Ratios

Liquidity Ratios:-
ix. Current Ratio
x. Quick or Acid Test Ratio
xi. Debtors Ratio
xii. Debtors Turnover Ratio
xiii. Creditors Ratio
xiv. Creditors Turnover Ratio
xv. Inventory Holding Period
xvi. Inventory Turnover Ratio
4.1 Current Ratio (Working Capital Ratio)
= Current Assets
Current Liabilities
Table: 4.1 Current Ratio (2008 to 2012) (Rs in CRS.)

YEAR CURRENT CURRENT RATIO

ASSETS LIABILITIES

2014-15 8439.39 14362.33 0.59

2015-16 10466.63 14466.89 0.73

2016-17 10021.39 13638.30 0.73

2017-18 13730.10 16732.40 0.82

2018-19 23957.90 17842.70 1.34

Analysis: The current ratio of the company for the year 2014-15 is 0.59, 2015-16 is 0.73,
2015-16is 0.73, 2017-18 is 0.82 and 2018-19 is 1.34, the current ratio has increased by 23.73%
in the year 2015-16, and in 2015-16it remains constant. There was increase positive value is
found by 12.33% in year 2017-18 and increased by 63.41% in the year 2018-19.

Interpretation: From the above table we can indicate that the current assets are very less
compared to current liability of the company. The company doesn’t have enough current assets
in meeting their liabilities. So, the company can’t meet immediate emergencies.

The company needs to increase current assets in order to meet its short-term obligation. We can
conclude that the ratio isn’t favorable as the current asset is less than the current liabilities.
4.2 Quick (Acid Test or Liquid) Ratio:
= Quick Assets

Current Liabilities

Table: 4.2 Quick Ratio (2008 to 2012) (Rs in CRS.)

YEAR QUICK CURRENT RATIO

ASSETS LIABILITIES

2014-15 8382.53 14362.33 0.58

2015-16 10404.48 14466.89 0.72

2016-17 9994.15 13638.30 0.73

2017-18 13695.70 16732.40 0.82

2018-19 22866.90 17842.70 1.28

Analysis: The quick ratio of the company for the year 2014-15 is 0.58, 2015-16 is 0.72, 2015-
16is 0.72, 2017-18 is 0.82, and 2018-19 is 1.28. The quick ratio has increased by 24.14 % in the
year 2015-16 and the year 2015-16is increased by 1.39% there is increased positive value is
found by 12.33% for the year 2017-18 and increased by 56.10% in the year 2018-19.

Interpretation: As per as quick ratio is concern whether a firm has enough short-term assets
to cover its immediate liabilities without selling inventory. Here, Bharti Airtel review that in
2015-16 increase their assets and then after very small percentage increase. That point of Time it
has not enough asset to cover its liabilities. Company ideal ratio is 1.5 so is below the ratio. This
is not good for company should be improving that point.
4.3 Debtors Turnover Ratio
= Credit Sales
Avg. Debtors
Table: 4.3 Debtors Turnover Ratio (2008 to 2012) (Rs in CRS.)

YEAR CREDIT SALES AVG. DEBTORS RATIO DAYs

2014-15 25761.11 2097.49 12.28 30

2015-16 34048.32 1515.76 22.46 16

2016-17 35609.54 2327.52 15.30 24

2017-18 38015.80 2240.39 16.97 23

2018-19 41,603.80 2134.50 18.45 18

Analysis: The debtors turnover ratio of the company for the year 2014-15 is 12.28 times, 2015-
16 is 22.46 times, 2015-16is 15.30 times, 2017-18 is 16.97 times, and 2018-19 is 18.45 times the
debtors turnover ratio has increased by 82.90% in the year 2015-16, and in 2015-16it decreased
by 31.88%. There was increase positive value is found by 10.92% in year 2017-18 and increased
by 8.72% in the year 2018-19.

Interpretation: Higher turnover signifies speedy and effective collection. Lower turnover
indicates sluggish and inefficient collection leading to the doubts that receivables might contain
significant doubtful debts. Receivables collection period is expressed in number of days. Here
the company in 1st year 1month to collection & after decline then after increase. Company does
not maintain lower collection period.
Return On Investments Ratios:-
i. Return On Net Worth
ii. Earnings Per Share (EPS)
iii. Cash Earnings Per Share (CEPS)
iv. Return On Capital Employed

4.4 Return on Net Worth

PAT – Preference Dividend x 100
Net Worth
Table: 4.4 Return On Net Worth (2008 to 2012) (RS IN CRS.)

YEAR PAT – PREFERENCE NET WORTH RATIO

DIVIDEND

2014-15 6244.19 20241.49 30.85

2015-16 7743.84 27643.97 28.01

2016-17 9426.15 36737.18 25.66

2017-18 7716.90 44111.60 17.49

2018-19 5266.00 49429.60 10.65

Analysis: The return on net worth of the company for the year 2014-15 is 30.85, 2015-16 is
28.01, and 2015-16is 25.66, 2017-18 is 17.49, and 2018-19 is 10.65. The return on net worth has
decreased by 9.21% in the year 2015-16, and decreased by 8.39% in the year 2015-16and again
decreased by 31.84% in the year 2017-18 and again decreased by 39.11% in the year.

Interpretation: As per as net worth ratio states the return that shareholders could receive on
their investment in a company. Here the company continuous declines year by year this not well
for company. But actually is right because bank rate is low like 12 % is good for investors.
4.5 .09
PAT
No. Equity Shares
Table: 4.5 Earnings Per Share (2008 to 2011) (RS IN CRS.)

YEAR PAT NO. OF EQUITY RATIO

SHARES

2014-15 6244.19 189.79 32.90

2015-16 7743.84 189.82 40.79

2016-17 9426.15 379.75 24.82

2017-18 7716.90 379.75 20.32

2018-19 5266.00 379.75 13.87

Analysis: The earnings per share of the company for the year 2014-15 is 32.90, 2015-16 is
40.79, and 2015-16is 24.82, 2017-18 is 20.32, and 2018-19 is 13.87. The earnings per share has
increased by 23.98% in the year 2015-16, and decreased by 39.15% in the year 2015-16and
again decreased by 18.13% in the year 2017-18 and again decreased by 31.74% in the year 2018-
19.

Interpretation: As per as EPS ratio is concern the portion of a company's profit allocated to
each outstanding share of common stock. Earnings per share serve as an indicator of a
company’s profitability. Here the company shows high profitability so it is good for company
as well as investor.
4.6 Return on Capital Employed
PBIT
Capital Employed
Table: 4.6 Earnings Per Share (2008 to 2011) (RS IN CRS.)

YEAR PBIT CAPITAL EMPLOYED RATIO

2014-15 9450.20 56009.10 16.87

2015-16 11194.72 41776.10 26.80

2016-17 8747.65 35357.53 24.74

2017-18 7599.87 26811.63 28.35

2018-19 7514.80 11565.07 0.64

Analysis: The return on capital employed of the company for the year 2014-15 is 16.87, 2015-
16 is 26.80, and 2015-16is 24.74, 2017-18 is 28.35 and 2018-19 is 0.64. The return on capital
employed has increased by 58.87% in the year 2015-16, and decreased by 7.69% in the year
2015-16and increased by 14.59% in the year 2017-18 and again decreased by 97.74% in the
year.

Interpretation: It is expressed as a percentage and can be very revealing about the industry a
company operates in, the skills of the management and occasionally the general business climate.
Here, the company continuous increases efficiency. It is good for the company.
Solvency Ratios:-
i. Net Asset Value (NAV)
ii. Debt Equity Ratio
iii. Int. Coverage Ratio
iv. Debt Service Coverage Ratio
v. Proprietary Ratio
vi. Total Assets to Debt Ratio
vii. Liabilities to Equity Ratio

4.7 Net Asset Value

Net Worth
No. Equity Share
Table: 4.7 Net Asset Value (2008 to 2012) (RS IN CRS.)

YEAR NET WORTH NO. OF EQUITY RATIO

SHARES

2014-15 20241.49 189.79 106.65

2015-16 27643.97 189.82 145.63

2016-17 36737.18 379.75 96.74

2017-18 44111.60 379.75 116.16

2018-19 49429.60 379.75 130.16

Analysis: The return on net asset value of the company for the year 2014-15 is 106.65, 2015-
16 is 145.63, and 2015-16is 96.74, 2017-18 is 116.16, and 2018-19 is 130.16. The net asset
value has increased by 36.55% in the year 2015-16, and decreased by 33.57% in the year 2015-
16and again increased by 20.01% in the year 2017-18, and again increased by 12.05% in the year
2018-19.

Interpretation: The net asset value in companies is the book value deducting liabilities and
intangible assets from the total assets. For companies, the net asset value is always used in
market book ratio or price book ratio to compare the net asset value of the company with its
market value. Here condition of company is good due to high profitability.

4.8 Debt Equity Ratio

Long Term Debt
Share Holder Fund
Table: 4.8 Debt Equity Ratio (2008 to 2012) (RS IN CRS.)

YEAR LONG TERM DEBT SHARE RATIO

HOLDER FUND

2014-15 6570.43 20241.49 0.32

2015-16 7713.65 27643.97 0.29

2016-17 5038.92 36737.18 0.14

2017-18 11897.50 44111.60 0.27

2018-19 14129.40 49429.60 0.28

Analysis: The debt equity ratio of the company for the year 2014-15 is 0.32, 2015-16 is 0.29,
and 2015-16is 0.14, 2017-18 is 0.27, and 2018-19 is 0.28. The debt equity ratio has decreased
by 9.38% in the year 2015-16, and decreased by 51.72% in the year 2016-17, increased by
92.29% in the year 2017-18 and again increased by 3.70% in the year 2018-19.

Interpretation: A measure of a company's financial leverage calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is
using to finance its assets. Here the company ratio so good in the current situation as to the
previous years. This is good for the company.
4.9 Proprietary Ratio
Proprietary Fund
Total Asset
Table: 4.9 Proprietary Ratio (2008 to 2012) (RS IN CRS.)

YEAR PROPRIETARY TOTAL ASSET RATIO

FUND

2014-15 20241.49 26811.84 0.75

2015-16 27643.97 35357.62 0.78

2016-17 36737.18 41776.12 0.88

2017-18 44111.60 56009.10 0.79

2018-19 49429.60 63559.00 0.78

Analysis: The proprietary ratio of the company for the year 2014-15 is 0.75, 2015-16 is 0.78,
and 2015-16is 0.88, 2017-18 is 0.79, and 2018-19 is 0.78. The proprietary ratio has increased by
4.00% in the year 2015-16, and increased by 11.54% in the year 2015-16and decreased by
10.23% in the year 2017-18 and again decreased by 1.27% in the year 2018-19.

Interpretation: Proprietary Ratio refers to a ratio which helps the creditors of the company
in seeing that their capital or loans which the creditors have given to the company are safe. Ideal
ratio is <1 so Here company has all year is <1 so it is good for company.
4.10 Total Asset to Debt Ratio
Total Asset
Long Term Debt
Table: 4.10 Total Asset to Debt Ratio (2008 to 2012) (RS IN CRS.)

YEAR TOTAL ASSET LONG TERM RATIO

DEBT

2014-15 26811.84 6570.43 4.08

2015-16 35357.62 7713.65 4.58

2016-17 41776.12 5038.92 8.29

2017-18 56009.10 11897.50 4.71

2018-19 63559.00 14129.40 4.50

Analysis: The total assets to debt ratio of the company for the year 2014-15 is 4.08, 2015-16 is
4.58, and 2015-16is 8.29, 2017-18 is 8.71, and 2018-19 is 4.50. The total asset ratio has
increased by 12.25% in the year 2015-16, and increased by 81.00% in the year 2015-16and
decreased by 43.18% in the year 2017-18 and again decreased by 4.46% in the year 2018-19.

Interpretation: As per as the total asset to debt ratio to debt ratio is concern ratio
between asset & long term debt. In the ratio total asset more than long term debt. So here
company total asset is high in 2015-16but company can’t maintain that so improve that
point is actually it is good.
4.11 Liabilities to Equity Ratio
Total Liabilities
Share Holders Equity
Table: 4.11 Liabilities to Equity Ratio (2008 to 2012) (RS IN CRS.)

YEAR TOTAL SHARE HOLDERS RATIO

LIABILITIES EQUITY

2014-15 26811.84 20241.49 1.32

2015-16 35357.62 27643.97 1.28

2016-17 41776.12 36737.18 1.14

2017-18 56009.10 44111.60 1.27

2018-19 63559.00 49429.60 1.28

Analysis: The liabilities to equity ratio of the company for the year 2014-15 is 4.08, 2015-16 is
4.58, and 2015-16is 8.29, 2017-18 is 8.71, and 2018-19 is 1.28. The liabilities to equity ratio has
decreased by 3.03% in the year 2015-16, and decreased by 10.94% in the year 2015-16and
increased by 11.40% in the year 2017-18 and again increased by 0.79% in the year 2018-19.

Interpretation: The liability to equity ratio is the relationship between the capital contributed
by creditors and the capital contributed by shareholders. It also shows the extent to which
shareholders' equity can fulfill a company's obligations to creditors in the event of liquidation.
Here the company increases their equity year by year. Ideal ratio is 1 here company is work on
more than 1 so it is good for the company.
Efficiency Ratios or Turnover Ratios:-
i. Fixed Assets Turnover Ratio
ii. Net Worth Turnover Ratio
iii. Working Capital Turnover Ratio

4.12 Fixed Assets Turnover Ratio

Net Sales
Net Block of Fixed Asset
Table: 4.12 Fixed Assets Turnover Ratio (2008 to 2012) (RS IN CRS.)

YEAR NET SALES NET BLOCK OF RATIO

FIXED ASSET

2014-15 25761.11 19030.65 1.35

2015-16 34048.32 25013.36 1.36

2016-17 35609.54 28024.97 1.27

2017-18 38015.80 40700.80 0.93

2018-19 41603.80 43984.30 0.94

Analysis: The fixed asset turnover ratio of the company for the year 2014-15 is 1.35, 2015-16
is 1.36, and 2015-16is 1.27, 2017-18 is 0.93, and 2018-19 is 0.94. The fixed asset turnover ratio
has increased by 0.70% in the year 2015-16, and decreased by 6.62% in the year 2015-16and
again decreased by 26.77% in the year 2017-18 and increased by 1.07% in the year 2018-19.

Interpretation: Ratio measures a company's ability to generate net sales from fixed-asset
investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher
fixed-asset turnover ratio shows that the company has been more effective in using the
investment in fixed assets to generate revenues. Here the company’s decline the use of the asset
continues decline. This is not good for the company.
4.13 Net Worth Turnover Ratio
Net Sales
Net Worth
Table: 4.13 Net Worth Turnover Ratio (2008 to 2012) (RS IN CRS.)

YEAR NET SALES NET WORTH RATIO

2014-15 25761.11 20241.49 1.27

2015-16 34048.32 27643.97 1.23

2016-17 35609.54 36737.18 0.97

2017-18 38015.80 44111.60 0.86

2018-19 41603.80 49429.60 0.84

Analysis: The net worth turnover ratio of the company for the year 2014-15 is 4.08, 2015-16 is
4.58, and 2015-16is 8.29, 2017-18 is 8.71, and 2018-19 is 0.84. The net worth turnover ratio has
decreased by 3.15% in the year 2015-16, and decreased by 21.14% in the year 2015-16and
decreased by 11.34% in the year 2017-18 and again decreased by 2.32% in the year 2018-19.

Interpretation: As per as Net worth Turnover Ratio is concern it show the relationship
between the net worth & net sales. Ideal ratio is 1.5 but company is not performance
better in this case ratio is continues decline. It is not good for the company.
4.14 Working Capital Turnover Ratio
Net Sales
Working Capital
Table: 4.14 Working capital Turnover Ratio (2008 to 2012) (RS IN CRS.)

YEAR NET SALES WORKING RATIO

CAPITAL

2014-15 25761.11 (-)5922.94 (-)4.35

2015-16 34048.32 (-)4000.26 (-)8.51

2016-17 35609.54 (-)3616.91 (-)9.85

2017-18 38015.80 (-)3002.30 (-)12.66

2018-19 41603.80 6115.20 6.80

Analysis: The working capital turnover ratio of the company for the year 2014-15 is -4.35,
2015-16 is -8.51, and 2015-16is -9.85, 2017-18 is -12.66, and 2018-19 is 6.80. The working
capital turnover ratio has decreased by 95.63% in the year 2015-16, and decreased by 15.75% in
the year 2015-16and again decreased by 28.53% in the year 2017-18 and increased by 153.71%
in the year 2018-19.

Interpretation: The working capital turnover ratio concern to increasing ratio indicates that
working capital is more active; it is supporting, comparatively, higher level of production and
sales; it is being used more intensively. Here company is not performing well due to negative
working capital. This is not good for company.
Profitability Ratios:-
i. Gross Profit Ratio
ii. Profit Before Depreciation, Interest & Tax Ratio (PBDIT)
iii. Profit Before Interest & Tax Ratio (PBIT) or Operating Profit Ratio
iv. Profit Before Tax Ratio (PBT)
v. Net Profit or Profit After Tax Ratio (PAT)
vi. Defective Tax Rate
vii. Operating Ratio

4.14 PBDIT Ratio

PBDIT x 100
Net Sales
Table: 4.14 PBDIT Ratio (2008 to 2012) (RS IN CRS.)

YEAR PBDIT NET SALES RATIO

2014-15 10766.45 25761.11 41.79%

2015-16 11953.93 34048.32 35.11%

2016-17 15084.80 35609.54 42.36%

2017-18 13643.90 38015.80 35.89%

2018-19 13430.80 41603.80 32.28%

Analysis: The PBDIT ratio of the company for the year 2014-15 is 41.79%, 2015-16 is
35.11%, and 2015-16is 42.36%, 2017-18 is 35.89%, and 2018-19 is 32.28%. The PBDIT ratio
has decreased by 15.98% in the year 2015-16, and increased by 20.65% in the year 2015-16and
decreased by 15.27% in the year 2017-18 and again decreased by 10.05% in the year 2018-19.

Interpretation: Financial metric used to assess a company's profitability by comparing its

revenue with earnings. More specifically, since PBDIT is derived from revenue, this metric
would indicate the percentage of a company is remaining after operating expenses. Here high
ratio indicate good position in market this is good for company.
4.15 PBIT or Operating Profit Ratio
PBIT x 100
Net Sales
Table: 4.15 PBIT Ratio (2008 to 2012) (RS IN CRS.)

YEAR PBIT NET SALES RATIO

2014-15 7333.80 25761.11 28.47%

2015-16 8568.83 34048.32 25.17%

2016-17 10986.88 35609.54 30.85%

2017-18 9032.30 38015.80 23.76%

2018-19 7514.80 41603.80 18.06%

Analysis: The PBIT ratio of the company for the year 2014-15 is 28.47%, 2015-16 is 25.17%,
and 2015-16is 30.85%, 2017-18 is 23.76%, and 2018-19 is 18.06%. The PBIT ratio has
decreased by 11.59% in the year 2015-16, and increased by 22.57 in the year 2016-17, decreased
by 22.98% in the year 2017-18 and decreased by 23.98% in the year 2018-19.

Interpretation: As per as ratio is concern a higher operating margin means that the company
has less financial risk. Here company has average high ratio so the company is a good position.
4.16 PBT Ratio
PBT x 100
Net Sales
Table: 4.16 PBT Ratio (2008 to 2012) (RS IN CRS.)

YEAR PBT NET SALES RATIO

2014-15 6879.70 25761.11 26.71%

2015-16 8088.52 34048.32 23.75%

2016-17 10652.75 35609.54 29.92%

2017-18 8747.40 38015.80 23.00%

2018-19 6989.70 41603.80 16.80%

Analysis: The PBIT ratio of the company for the year 2014-15 is 26.71%, 2015-16 is 23.75%,
and 2015-16is 29.92%, 2017-18 is 23.00% and 2018-19 is 16.80%. The PBT ratio has decreased
by 11.08% in the year 2015-16, and increased by 25.99% in the year 2015-16and again
decreased by 23.12% in the year 2017-18 and decreased by 26.97% in the year 2018-19.

Interpretation: As per as ratio is concern a higher interest margin means that the company
has less financial risk. Here company has average high ratio so the company is a good position.
4.17 Net Profit Ratio
Net Profit x 100
Net Sales
Table: 4.17 Net Profit Ratio (2008 to 2012) (RS IN CRS.)

YEAR NET PROFIT NET SALES RATIO

2014-15 6244.19 25761.11 24.24%

2015-16 7743.84 34048.32 22.74%

2016-17 9426.15 35609.54 26.47%

2017-18 7716.90 38015.80 20.30%

2018-19 5266.00 41603.80 12.66%

Analysis: The net profit ratio of the company for the year 2014-15 is 24.24%, 2015-16 is
22.74%, and 2015-16is 26.47%, 2017-18 is 20.30% and 2018-19 is 12.66. The net profit ratio
has decreased by 6.19% in the year 2015-16, and decreased by 16.40% in the year 2015-16and
again decreased by 23.31% in the year 2017-18 and decreased by 37.63% in the year 2018-19.

Interpretation: This ratio is a measure of the overall profitability net profit is arrived at after
taking into accounts both the operating and non-operating items of incomes and expenses. The
ratio indicates what portion of the net sales is left for the owners after all expenses have been
met. Here the company high profit in year 2015-16then decline. This is not good for company.
Company should be maintaining the NP ratio.
Capital Market Ratios:-
i. Price Earnings Ratio (PE Ratio)
ii. Market Price to NAV Ratio
iii. Market Capitalization Ratio
iv. Yield to Investor
v. Price to Book Ratio

4.18 Price Earnings Ratio

Market Price of a Share
Earnings per Share
Table: 4.18 Price Earnings Ratio (2008 to 2012) (RS IN CRS.)

YEAR MARKET PRICE EARNINGS PER RATIO

OF A SHARE SHARE

2014-15 420.00 32.90 12.77

2015-16 508.30 40.79 12.46

2016-17 174.60 24.82 7.03

2017-18 270.70 20.32 13.32

2018-19 273.30 15.09 18.11

Analysis: The net profit ratio of the company for the year 2014-15 is 12.77, 2015-16 is 12.46,
and 2015-16is 7.03, 2017-18 is 13.32 and 2018-19 is 18.11. The net profit ratio has decreased by
2.43% in the year 2015-16, and decreased by 43.57% in the year 2015-16and increased by
89.47% in the year 2017-18 and again increased by 35.96%.

Interpretation: The P/E looks at the relationship between the stock price and the company’s
earnings. Here the company has a high P/E ratio in last year it suggests that stock is undervalued
and investor can earn from it.
4.19 Market Price to NAV Ratio
Market Price of a Share
NAV
Table: 4.19 Market Price to NAV Ratio (2008 to 2012) (RS IN CRS.)

YEAR MARKET PRICE NAV RATIO

OF A SHARE

2014-15 420.00 106.65 3.94

2015-16 508.30 145.63 3.49

2016-17 174.60 96.74 1.80

2017-18 270.70 116.16 2.33

2018-19 273.30 130.16 2.10

Analysis: The market price to NAV ratio of the company for the year 2014-15 is 3.94, 2015-16
is 3.49, and 2015-16is 1.80, 2017-18 is 2.33 and 2018-19 is 2.10. The market price to NVA ratio
has decreased by 11.42% in the year 2015-16, and decreased by 48.42% in the year 2015-16and
increased by 29.44% in the year 2017-18 and decreased by 9.87% in the year.

Interpretation: As per as this ratio is concern the investment potential of a share. It also

offers opportunity to the company to buy back its own shares from the market. Hear the

company has higher ratio represent the ability to buy own shares in the market. Ideal ratio is 2 so

all year is above the 2.

4.20 Market Capitalization Ratio
Market Price of a Share x Total No. of Shares

Table: 4.20 Market Capitalization Ratio (2008 to 2012) (RS IN CRS.)

YEAR MARKET PRICE TOTAL NO. OF RATIO

OF A SHARE SHARES

2014-15 420.00 189.97 79787.40

2015-16 508.30 189.82 96485.15

2016-17 174.60 379.75 66304.35

2017-18 270.70 379.75 102798.33

2018-19 273.30 379.75 103785.67

Analysis: The market capitalization ratio of the company for the year 2014-15 is 79787.40,
2015-16 is 96485.15, and 2015-16is 66304.35, 2017-18 is 102798.33 and 2018-19 is 103785.67.
The market capitalization ratio has increased by 20.93% in the year 2015-16, and decreased by
31.28% in the year 2015-16and increased by 55.04% in the year 2017-18 and increased by
0.96% in the year 2018-19.

Interpretation: The ratio provides a base for total valuation of a company based on the

market price of its equity. It immensely helpful in negotiating mergers, takeover, acquisition ect.

Hear the company perfume well in market but decline way so company should be improve &

take expansion strategy.

Multi Step Profit & Loss Account (RS IN CRS.)

Particulars C.Y. P.Y.

(2018-19) (2017-18)
Gross Sales 41603.80 38015.80
Less: Excise duty - -
Net Sales 41603.80 38015.80
-Administrative, Selling and Other Expenses 27843.50 24590.10
+ other income (operating) 329.50 218.20
Profit Before Depreciation Interest and Tax - PBDIT 13430.80 13643.90

Profit Before Depreciation Interest and Tax - PBDIT 13430.80 13643.90

-Depreciation 5916.00 4193.70
-Amortisation - 417.90
-Impairment - -
Operating Profit – PBIT 7514.80 9032.30

Operating Profit – PBIT 7514.80 9032.30

-Interest & Finance Charges 1199.30 296.70
+Other Income (Non-Operating) - -
Profit Before Tax & Extra Ordinary Items - PBTEOT 6315.50 8735.60

Profit Before Tax & Extra Ordinary Items - PBTEOT 6315.50 8735.60

+/ - extra ordinary items 17.50 11.8

Profit Before Tax for the year – PBT-Y 6333.00 8747.40

+/ - Prior year adjustments - -

Profit Before Tax 6333.00 8747.40

Profit Before Tax 6333.00 8747.40

Provision for tax:
Current income tax 1226.20 1007.60
+/ - deferred income tax liability - -
+ fringe benefit tax - -
+/ - tax adjustments for previous year - -
Total Income Tax 1067.00 1030.50
Profit After Tax – NP/PAT 5266.00 7716.90

Analysis and Interpretation:

It equally, and probably, more to study analysis the profitability of the company at different step
or at intermediate levels, of business activities, in relation to net sales. It may be observed that in
case of Bharti Airtel profit has decline at every intermediate stage. However, since absolute
figures are not amenable to further analysis.
Horizontal Analysis:-

Horizontal Profit & Loss Acc of Bharti Airtel for the year 2017-18 & 2018-19:
(RS IN CRS.)

2018-19 2017-18 Increase/ Increase/

Particular (C. Y.) (P. Y.) Decrease Decrease
(%)
Sales 41603.80 38015.80 3588.00 9.44
(-) Administrative, Selling
and Other Expenses 27843.50 24590.10 3253.40 13.23
PBDIT 13760.30 13425.70 334.60 2.50
(-) Depreciation & Amortization 5916.00 4611.60 1304.40 28.28
PBIT
7844.30 8814.10 (-)969.80 (-)11.00
(-) Interest Expenses
545.90 308.50 237.40 76.95
PBT
7298.40 8505.60 (-)1207.20 (-)14.19
(-) Income Tax
1067.00 1030.50 (-)196.10 (-)15.99
PAT
6231.40 7475.10 (-)1243.70 (-)16.64
Horizontal Balance Sheet of Bharti Airtel for the year 2017-18 & 2018-19:
(RS IN CRS.)

2018-19 2017-18 Increase/ Increase/

Particular (C. Y.) (P. Y.) Decrease Decrease
(%)
Sources of Funds:-
Owned Funds:
Share Capital 1898.80 1898.80 0.00 0.00
Reserves & Surplus 47530.80 42212.80 5318.00 21.17
49429.60 44111.60 5318.00 12.05
Loan Funds:
Secured Loans 2.90 17.10 (-)14.20 (-)83.04
Unsecured Loans 14126.40 11880.40 2246.00 18.90
14129.30 11897.50 2231.80 18.76
Total 63558.90 56009.10 7549.80 13.48

Application of Funds:-
1.)Fixed Assets
 Gross Block 70450.30 61437.50 9012.80 14.67
 Less: depreciation (-)26466.0 (-)20736.7 5729.30 27.62
 Net Block 43984.30 40700.80 3283.50 8.07
 Capital work in progress 1072.50 6497.60 (-)5425.10 (-)83.45
2.)Investments 12337.80 11813.00 524.80 4.44
3.)Current Assets, Loans &
Advances
 Inventories 32.10 34.40 (-)2.3 26.28
 Sundry Debtors 2134.50 2375.80 (-)270.82 (-)6.69
 Cash & Bank Balance 159.20 126.60 32.60 25.75
 Fixed Deposit 322.60 7.20 315.4 43.80
 Loans & Advances 23957.90 11186.10 12771.80 114.17
Less: Current Liabilities
 Provisions (-)17145.2 (-)16104.8 1040.4 6.46
Net Current Assets: (-)697.50 (-)627.60 69.90 11.13
4.) Miscellaneous Exp. 6115.20 (-)3002.30 614.61 (-)303.68
Profit & Loss Account - -
Total - -
63559.00 56009.10 7549.90 13.48

Analysis and Interpretation of Bharti Airtel:-

Profit & loss account
1. Net sales growth by 9.44%
2. Increase in expenses like Administrative, Selling and Other Expenses by 13.23% this is
very high to camper to sales growth so it is not good for the company.
3. Depreciation & Amortization even increase by 28.28% that shows that company noncash
charges increase not well for the company.
4. Interest Expenses is decline by 76.95% this is good for the company.
5. Decline in income tax by 15.99% due to low profit margin. This is not good for company.
6. Decline in PAT by 16.64% is not good for company.

Balance Sheet
1. Total asset / liabilities up by 13.48%

2. Net worth up by 12.05%

3. Lone fund also decreased by 13.48% this shoe the company good will in the market to
give lone.
Vertical Analysis:-

Vertical Profit & Loss Acc of Bharti Airtel for the year 2017-18 & 2018-19:
(RS IN CRS.)

Particulars Sche Current Year Previous Year

dule (2018-19) (2017-18)
Inner Outer Inner Outer
Column Column Column Column
Income
Sales 41603.80 38015.80
Less: return
Other Income 329.50 218.20
41933.30 38234.00
Expenditure
Administrative, Selling and Other 27843.50 24585.50
Expenses
Interest & Finance Charges 1199.30 296.70
Depreciation 5916.00 4193.70
Impairment loss on fixed assets 417.90
Adjustment due to (increase) / Decrease (-)2.30 (-)7.20
in stock of finished goods & W.I.P
Provision for contingencies
34961.10 29510.20
Profit Before Taxation 6989.70 8747.40
Provision for Income Tax 1067.00 1030.50
Profit After Taxation 5730.00 7716.90
Vertical Balance Sheet of Bharti Airtel for the year 2017-18 & 2018-19:
(RS IN CRS.)

Schedule Current Year Previous Year

Particulars
No. (2018-19) (2017-18)
I Sources of funds
1.) Shareholder’s Funds:
a.) Capital 1898.80 1898.80
b.) Reserves & Surplus 47530.80 42212.80
2.) Loan Funds
a.) Secured Loans 2.90 17.10
b.) Unsecured Loans 14126.50 11880.40
Total 63559.00 56009.10
II Application of Funds
1.) Fixed Assets
a.) Gross Block 70450.30 61437.50
b.) less: depreciation (-)26466.00 (-)20736.70
c.) Net Block 43984.30 40700.80
d.) Capital work-in progress 1072.50 6497.60
2.) Investments 12337.80 11813.00
3.) Current Assets, Loans & Advances:
a.) Inventories 32.10 34.40
b.) Sundry Debtors 2134.50 2375.80
c.) Cash And Bank Balances 159.20 126.60
d.) Fixed Deposit 322.60 7.20
e.) Loans And Advances 23957.90 11186.10
Less:
Current Liabilities and Provisions
a.) Liabilities 17145.20 16104.80
b.) Provisions 697.50 627.60
Net Current Assets: 6115.20 (-)3002.30
4.) a.) Miscellaneous Expenditure - -
b.) Profit and Loss Account - -
Total 63559.00 56009.10

Analysis and Interpretation:

1. Income is increase as camper to previous year due to sales increase.

2. Expenditure more than the previous year this bed for company that’s way decline in
profits margin.

3. Share holders fund is increase as camper to previous year this good for the company.

4. In application of fund is not proper managed by the company because net working capital
is in negative but we show the some improvement in this. So, this not good for the
company.

5. As all aspect of the vertical analysis part over all company tries to increase his
performance by increases of his efficiency.
Vertical Analysis:-

Common size Profit & Loss Acc of Bharti Airtel for the year 2017-18 & 2018-19:
(RS IN CRS.)

Particulars Current Year Previous Year

(2018-19) (2017-18)
Amount % Amount %
Sales 41603.80 100 38015.80 100
(-)Selling, Administrating & Other 27843.50 66.92 24371.90 64.11
Expenses
PDBIT 13760.30 33.07 13643.90 35.89
(-)Depreciation & Amortization 5916.00 14.22 4599.80 12.10
PBIT 7844.30 18.85 9044.10 23.71
(-)Interest 545.90 1.31 296.70 0.78

PBT 7298.40 17.54 8747.40 23.01

(-)Income Tax 1067.00 2.56 1030.50 2.71
PAT 6231.40 14.98 7716.90 20.30
Common size Profit & Loss Acc of Bharti Airtel for the year 2017-18 & 2018-19:
(RS IN CRS.)

Current Previous
Particulars Year % Year %
(2018-19) (2017-18)
Sources of funds
1.) Shareholder’s Funds:
a.) Capital 1898.80 2.99 1898.80 3.39
b.) Reserves & Surplus 47530.80 74.78 42212.80 75.37
2.) Loan Funds
a.) Secured Loans 2.90 0.00 17.10 0.03
b.) Unsecured Loans 14126.50 22.22 11880.40 21.21
Total 63559.00 100 56009.10 100
Application of Funds
1.) Fixed Assets
a.) Gross Block 70450.30 110.84 61437.50 109.69
b.) less: depreciation (-)26466.00 (-)41.64 (-)20736.70 (-)37.02
c.) Net Block 43984.30 69.21 40700.80 72.67
d.) Capital work-in progress 1072.50 1.69 6497.60 11.60
2.) Investments 12337.80 19.41 11813.00 21.09
3.) Current Assets, Loans & Advances:
a.) Inventories 32.10 0.05 34.40 0.06
b.) Sundry Debtors 2134.50 3.36 2375.80 4.24
c.) Cash And Bank Balances 159.20 0.25 126.60 0.23
d.) Fixed Deposit 322.60 0.51 7.20 0.01
e.) Loans And Advances 23957.90 37.69 11186.10 19.97
Less:
Current Liabilities and Provisions
a.) Liabilities 17145.20 26.97 16104.80 28.75
b.) Provisions 697.50 1.10 627.60 1.12
Net Current Assets: 6115.20 9.62 (-)3002.30 (-)5.36
4.) a.) Miscellaneous Expenditure - -
b.) Profit and Loss Account - -
Total 63559.00 100 56009.10 100
 CHAPTER- 4

Findings, Suggestions & Conclusion

1. 4.1 As camper to sales to other selling and administrative & other expense cover 64.11%
& 66.92% respectively for 2017-18 & 2018-19. cover the large amount of revenue so
that’s not good for the company and mostly affected the company performance.

2. Hear that profitability of company ‘s performance that sows as per profit before tax is as
camper to sale is 23.01 & 17.54 respectively 2017-18 & 2018-19.that shows that
company profit margin is low than capitalization rate that is 23.77% but is not good for
the company as well as investor.

3. According to reserve & surplus is 75.37% & 74.78% respectably to 2017-18 & 2018-19.
That’s show hat company is not maximize use of their funds in implication is not proper
meaner.

4. Company fixed asset is very high i.e. 72.67% & 69.21 % respectively 2017-18 & 2018-
19. it shows that company bare low fix cost during operation that is good for the
company.

5. As camper the total asset to investment that 21.09 % & 19.41 % respectively in 2017-18
& 2018-19 hear the company sales there in current year by same proportion this not good
for the company.

6. Overall performance of the company that better could in next year by that increasing
performance by sale and low cost that should be improving that.

4.2 SUGGESTIONS

 The growth rate in the net profit must be increased by reducing the non-operating
expenses.
  The liquidity assets of the company are to be increased to improve the liquidity position.
 The current level of debt equity ratio shall be maintained in the future.
 Steps must be taken the current ratio of the company to the standard norms 2:1.
 The gross profit of the company can be increased by reducing operating expenses.

4.3 CONCLUSION

The present studies aim to new financial position of the company using ratio analysis.
The research used secondary data were collected from the company annual reports. Ratio
analysis was processed from the year 2014-10 using the data. The research analyzed the data by
the method of the ratio analysis the provide that the company position was good.

Therefore the companies try to retain the position and also to improve it is financial
position further. The results show that inventory to current asset level and inventory turnover
ratio is good.

The firm must take steps to the cash in hand by the value of cash in hand at maintained
and the avoid fluctuation. Also the management is advised to the increasing the turnover ratio to
maintaining the financial trend of the company.
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1. http://www.docstoc.com/docs/7956270/Financial-Statement-Analysis

2. http://www.scribd.com/doc/13242036/Financial-Planning-and-Analysis

3. http://www.focus.com/briefs/finance/what-are-different-methods-financial-

statement-analysis/.

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5. http://www.bankersacademy.com/financial-statement-analysis-training.php

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1. Dr. S.N. MAHESWARI (2000) Tenth edition “Principles of Management

a. Accounting” Sultan Chand & Sons, Delhi-53.
2. M.Y.KHAN & P K JAIN (2002) Third edition “Management Accounting”
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APPENDIX