IOCL Ratios
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To study Ratio Analysis of Indian Oil Corporation Ltd. Chapter 1 INTRODUCTION
A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis Ratio analysis is a method of analyzing data to determine the overall financial strength of a business. Financial analysts take the information off the balance sheets and income statements of a business and calculate ratios that can then be used to make assessments of the operating ability and future prospects of that business. These ratios are useful only when compared to other ratios, such as the comparable ratios of similar businesses or the historical trend of a single business over several business cycles. There are various ratios that measure a company's efficiency, shortterm strength, and solvency. The type of ratio analysis that is most effective depends upon who needs the information. Credit analysts are concerned with risk evaluation, and they therefore will concentrate of ratios that measure whether a company can pay its financial obligations and how much debt is involved in capital structure. On the opposite end of the spectrum, analysts looking at a business in terms of an investment opportunity will employ ratios that determine if a company is efficient and how great is its potential profitability. For example, knowing that a company has a particular as determined by a corresponding ratio is meaningless by itself. Financial analysts know it's more important to determine how that ratio looks in terms of other similar companies, or even how that ratio looks compared to prior profitability levels of that same company. In addition, these ratios must be studied over a proper
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To study Ratio Analysis of Indian Oil Corporation Ltd. time period, allowing for major changes within the company to be taken into consideration. Ratio analysis is useful in determining the solvency of a business and the amount of reliance it has on its creditors. Specific ratios included in this group are current ratio, which measures financial strength by dividing a company's assets by its and, which takes the essence of the current ratio but excludes. By focusing on of a business, a quick ratio can measure its strength even in a worst-case scenario whereby all of its funding was suddenly removed. In contrast, income statement analysis is more concerned with the profitability of a business. Among this type of ratio analysis, ratio measures the profit from sales available to pay while margin ratio is an indicator on the company's financial return on sales. Ratios known as management ratios can also be calculated from balance sheet information. These ratios measure efficiency in terms of collecting accounts receivable and managing inventory, the ability to turn assets into profit, and how much of a return the owners of the business are getting on their investment.
RATIO ANALYSIS Ratio Analysis compares significant numbers from your financial statements. Rather than focusing on specific volumes, ratios are indicators of the broad state of your business. What they indicate is dependent upon the nature of your company, comparisons to your company‘s historical ratio values, and Comparisons to competitive companies in the same industry. Financial ratios are useful to you and potential investors because they allow comparisons to be made between your business and others of the same type.
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To study Ratio Analysis of Indian Oil Corporation Ltd. Standard ratios for many industries are available from on-line database services and are also published in various reference books available at most libraries. As part of an agreement for financing, your lender or investor may require that you maintain certain ratios. Any ratio that must be maintained at a specific value as part of a financing agreement should be calculated and monitored on a timely basis. If you neglect to do this, you risk being out of complain with your lender or investor, which could result in the debt being called for immediate repayment.
ADJUSTED EPS Net income-dividend on preferred stock Average outstanding share
The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio.
DIVIDEND PER SHARE Dps = d- sd S D
- Sum of dividends over a period (usually 1 year)-
SD
- Special, one time dividends
S
- Shares outstanding for the period The the sum of declared dividends for every ordinary share issued.
Dividend per share (DPS) is the total dividends paid out over an entire year
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To study Ratio Analysis of Indian Oil Corporation Ltd. (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. Dividends per share are usually easily found on quote pages as the dividend paid in the most recent quarter which is then used to calculate the dividend yield. Dividends over the entire year (not including any special dividends) must be added together for a proper calculation of DPS, including interim dividends. Special dividends are dividends which are only expected to be issued once so are not included. The total number of ordinary shares outstanding is sometimes calculated using the weighted average over the reporting period.
PROFITABILITY RATIOS A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. One of the primary reasons for operating most businesses is to generate profits. If you have outside investors, the return on their investment often comes from the net income the business generates (rather than from the sale of the business or some other form of pay back). There are many ways to measure Return on Investment (ROI). Return on Equity and Return on Assets, as shown below, are two easily calculated methods.
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To study Ratio Analysis of Indian Oil Corporation Ltd. OPERATING PROFIT MARGIN (RETURN ON SALES - ROS)= Operating profit margin = Operating income Total revenue A ratio used to measure a company's pricing strategy and operating efficiency.This value measures the percent of revenue remaining after paying all operating expenses (Operating Income). The operating profit margin is your operating income (gross profit minus all operating expenses) divided by your gross sales expressed as a percentage. Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar of sales. The higher the margin, the better.
GROSS PROFIT MARGIN Gross Profit Gros Profit Margin = Total Revenue
This value measures the percent of money your company generated over the cost of producing your goods or services. In other words, gross profit margin (or percent) is the ratio of your net sales (gross sales minus your cost of goods sold) divided by your gross sales, expressed as a percentage. You can do very well here when you really understand the value your product or service bring to your customers – your prices need not be built upon your costs. Better to determine the real value to your customers and sell them on that. This way you will enjoy higher gross margins
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To study Ratio Analysis of Indian Oil Corporation Ltd. NET PROFIT MARGIN Option 1:
Net Income after Taxes Revenue
Option 2: (Net Income + Minority Interest + Tax-Adjusted Interest) Revenue
This is the profit you made on this business. The net income divided by your gross sales, expressed as a percentage. Your company‘s after-tax profit margin tells you (and investors) the percentage of money your company actually earns per dollar of sales. Interpretation is similar to your profit margin, the after tax profit margin is more stringent as it takes into account taxes. Looking at the earnings of a company often doesn't tell the entire story… Profit can increase, but it does not mean that its profit margin is improving. For example, if your company increases sales, and if costs also rise, you‘ll have a lower profit margin then had been seen with a lower profit. This indicates that costs need to be better controlled. All three of these above percentages should usually be included on your income statements. To analyze your profitability, compare these percentages to your industry‘s averages or those of your immediate competitors (if you can obtain this information). Of course, you‘ll always want to compare your current year‘s profitability percentages to the percentages from your company‘s previous years in order to determine how well you are progressing.
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To study Ratio Analysis of Indian Oil Corporation Ltd. REPORTED RETURN ON NET WORTH (%) Net income Reported Return on NET Worth =
x 100 Shareholders equity
The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry. There are several variations on the formula that investors may use: 1. Investors wishing to see the return on common equity may modify the formula above by subtracting preferred dividends from net income and subtracting preferred equity from shareholders' equity, giving the following: return on common equity (ROCE) = net income - preferred dividends / common equity. 2. Return on equity may also be calculated by dividing net income by average shareholders' equity. Average shareholders' equity is calculated by adding the shareholders' equity at the beginning of a period to the shareholders' equity at period's end and dividing the result by two.
3. Investors may also calculate the change in ROE for a period by first using the shareholders' equity figure from the beginning of a period as a denominator to determine the beginning ROE. Then, the end-of-period shareholders' equity can be used as the denominator to determine the ending ROE. Calculating both beginning and ending ROEs allows an investor to determine the change in profitability over the period
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To study Ratio Analysis of Indian Oil Corporation Ltd. LEVERAGE RATIOS Long term debt / Equity The long term debt to equity ratio is simply similar to gearing, except that short term debt is excluded from the calculation. This is most simply interpreted as a measure of capital structure, but is also used as a measure of financial strength. One shortcoming of the use of long term debt/equity with regard to capital structure is that borrowing that appears to be short term on the face of the balance sheet may in fact be rolled over or be provided from a continuing facility such as an overdraft (which may be provided for many years, even though re-payable on demand) — so its economic effect is that of long term debt. TOTAL DEBT TO OWNERS’ EQUITY Total liability Total Debt to Owners Equity
= Shareholders equity
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. The debt to equity ratio is a common benchmark used to measure the leverage within a business. To relate Return on Equity to the Debt-to-Worth ratio, you need to remember that given a fixed total asset figure, the greater the debt, the lower the net worth. Therefore, given two companies of identical asset size and profitability, the company with the higher debt to worth ratio will also have a higher return on equity ratio. When potential lenders and investors consider the risks of investing in your business, they will look at your return on equity ratio. If the ratio is the same as lower risk investments such as certificates of deposit or US Treasury bills, it does not make sense for them to invest in your company. RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.
FIXED ASSETS TURNOVER RATIO Net sales Fix asset turnover = Net property, plan and equipment A financial ratio of net sales to fixed assets. The fixed-asset turnover 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. This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When
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To study Ratio Analysis of Indian Oil Corporation Ltd. companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was.
LIQUIDITY RATIOS Current asset Current ratio = Current liability A liquidity ratio that measures a company's ability to pay short-term obligations. Also known as "liquidity ratio", "cash asset ratio" and "cash ratio" The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry. This ratio is similar to the acid-test ratio except that the acid-test ratio does not include inventory and prepaids as assets that can be liquidated. The components of current ratio (current assets and current liabilities) can be used to derive working capital (difference between current assets and current liabilities). Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio of sales.
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LIQUID OR LIQUIDITY OR ACID TEST OR QUICK RATIO: Total Current Assets Total Current Liabilities A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. These values come from your balance sheet and are a measure of your liquidity. Your current ratio indicates your ability to pay your current debt out of your current assets. The higher the ratio, the greater your ―cushion.‖ Although a satisfactory value for a current ratio varies from industry to industry, a general rule of thumb is that a current ratio of 2 to 1 or greater is fairly healthy. Thinking in terms of dollars, a 2 to 1 ratio means that you have 94rupees of current assets from which to pay every 47rupees of current bills. A smaller current ratio may mean that you have successfully negotiated to pay your suppliers later than the usual 30 days, which essentially gives your company an interest-free source of cash. Let‘s say your current assets are 7, 05,000 rupees and current liabilities are 4, 70,000rupees this gives you a current ratio of 1.5 to 1. In this scenario, you could improve your current ratio to 2 to 1 by paying 2,35,000 RS of your current liabilities with your current assets, reducing both by If your suppliers were willing to wait for payment without charging you interest, this would probably be a bad idea (unless your 2,35,000 RS financing agreement requires you to maintain a current ratio of 2 to 1). Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. short-term debts in an emergency. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern
INVENTORY TURNOVER RATIO COGS Inventory Turnover Ratio = Inventory A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days". Although the first calculation is more frequently used, COGS (cost of goods sold) may be substituted because sales are recorded at market value, while inventories are usually recorded at cost. Also, average inventory may be used instead of the ending inventory level to minimize seasonal factors. This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall. Number of times inventory turns in period. High turn can indicate better liquidity or good merchandising or shortage of needed inventory for sales. Low turn can mean overstocking, obsolescence, builds to inaccurate sales forecast – can also a planned inventory build-up in anticipation of possible material shortages.
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To study Ratio Analysis of Indian Oil Corporation Ltd. PAYOUT RATIOS Dividend payout ratio (net profit) Dividend Payment per Share -----------------------------------Earnings per Share
Dividend Payout Ratio =
The percentage of earnings paid to shareholders in dividends. The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. In the U.K. there is a similar ratio, which is known as dividend cover. It is calculated as earnings per share divided by dividends per share.
Earning retention ratio Earning retention ratio
=
Net income-dividends --------------------------Net income
The percent of earnings credited to retained earnings. In other words, the proportion of net income that is not paid out as dividends. The retention ratio is the opposite of the dividend payout ratio. In fact, it can also be calculated as one minus the dividend payout ratio.
COMPONENT RATIOS Working Capital Cycle Receivables Turnover
=
Net Sales -------------------------------Trade Account Receivable
An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. (Sales/Receivables Ratio) Measures number of times AR turns over during the period. Higher the turn, shorter the time between sale and RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. collection of the cash. Does not take into consideration seasonal fluctuations or a large proportion of cash sales compared to total sales. By maintaining accounts receivable, firms are indirectly extending interest-free loans to their clients. A high ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. A low ratio implies the company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm.
Sales / Working Capital turnover Sales / Working Capital turnover =
Sales ---------------------Working capital
A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. Net Working Capital equals current assets minus current liabilities. Working Capital measures the margin of protection for current creditors and reflects your ability to finance current operations. Comparing sales to working capital this way measures how efficiently your working capital is employed. Low ratio may mean ineffective use of WC. High ratio may mean ―overtrading‖— a vulnerable position for creditors. A company uses working capital (current assets - current liabilities) to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. that the company is generating a lot of sales compared to the money it uses to fund the sales.
OPERATING RATIOS Operating ratios help measure the effectiveness of management performance. Gross profit ratio
=
Gross Profit x 100 ----------------------Net Sales
Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. It may vary from business to business. However, the gross profit earned should be sufficient to recover all operating expenses and to build up reserves after paying all fixed interest charges and dividends.
Operating Ratio Operating Ratio
=
Operating Expense -----------------------Net Sales
This ratio shows management efficiency by comparing your operating expenses to your net sales. The Smaller the ratio, the greater your company‘s ability to generate a profit if revenue decreases this ratio However, does not take into account any debt repayment or debt increase. The smaller the ratio, the greater the organization's ability to generate profit if revenues decrease. When using this ratio, however, investors should be aware that it doesn't take debt repayment or expansion into account.
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To study Ratio Analysis of Indian Oil Corporation Ltd. Chapter 2
INTRODUCTION TO ORGANISATION Indian Oil owns and operates 6 of the refineries with a combined refining capacity of over 25 million tones per annum (5,00,000bpd). Another 6 million tones per annum (1,20,000bpd) refinery will be ready during fiscal 1997. Constant technology up gradation enables achievement of over 100% capacity utilization. Indian Oil has the largest network of over 5,300 km onshore crude oil and petroleum product pipelines in the country which operate at over 100% capacity and are equipped with latest technology. Indian Oil sold 41.97 million tones of petroleum products during the year 1996-97. It markets 55% of the petroleum products consumption of India. In aviation fuels, its market participation is 69%. Its nationwide retail network of nearly 18,000 sales points (6,731 petrol stations, 3,413 kerosene dealers, 2,834 LPG distributors and 4,820 bulk consumer outlets) is backed for supplies by 178 bulk storage terminals and depots having a tank age of five million kilolitres. There are 92 aviation fuel stations besides 39 LPG bottling plants with a capacity of 1.5 million tones to cater to nearly 15 million customers in over 1,300 towns all over the country. Indian Oil is India‘s flagship national oil company, with Business interests straddling the entire hydrocarbon Value chain and the highest ranked Indian corporate in the prestigious Fortune ‗Global 500‘ listing. With over a 34,000- strong workforce, Indian Oil has been meeting India‘s energy demands for over five decades. The company‘s operations are strategically structured along business verticals - Refineries, Pipelines, Marketing, R&D and Business Development. To achieve the next level of growth, Indian Oil is currently forging ahead on a well laid-out road map through vertical integration – upstream into oil exploration & production (E&P) and downstream into petrochemicals – and RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. diversification into natural gas marketing and alternative energy, besides globalization of its downstream operations. Having set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), Indian Oil is simultaneously scouting for new business opportunities in the energy markets of Asia and Africa. Indian Oil and its subsidiaries have a dominant share of the petroleum products market share, national refining capacity and the downstream sector pipelines capacity in India.
With a steady aim of maintaining its position as a market leader and providing best quality products and services, Indian Oil is currently investing Rs. 47,000 crore in a host of projects for augmentation of refining and pipelines capacities, expansion of marketing infrastructure and product quality up gradation. The Indian Oil Group of companies owns and operates 10 of India‘s 20 refineries and the largest network of crude oil and profile product pipelines in the country. Indian Oil has a keen customer focus and a formidable network of customer touch-points dotting the landscape across urban and rural India, backed for supplies by bulk storage terminals and depots, aviation fuel stations and LPG gas bottling plants. Indian Oil‘s ISO-9002 certified Aviation Service commands a dominant market share in aviation fuel business, successfully servicing the needs of domestic and international flag carriers, private airlines and the Indian Defense Services.
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To study Ratio Analysis of Indian Oil Corporation Ltd.
ORGANIZATION CHART
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Chapter 3 REVIEW OF LITERATURE 1) Using Financial Statements & Ratio Analysis to manage your business effectively; Kobus Barnard AGA (SA) – B.Compt. (Hons) (2007) This case study will help with a better understanding of business by using simple but effective tools such as ratio analysis to identify areas of concern, in order to take corrective action with the ultimate aim of converting profits into cash. After completing this workshop you will be able to read and use financial information to more effectively manage your profitability, asset efficiency and cash flows and more confidently liaise with your accountant or bank manager on the financial health of your business. The case study covers Concepts and rules used in preparing financial statements, with a focus on IFRS for SME‘s. The Statement of Financial Position, Comprehensive Income and Cash Flow statement are examined in detail, with a 5-point methodology used in reading these statements. Introduction of ratio analysis to understand the key relationships between the three financial statements. A Financial Analysis workbook is introduced using a case study for practical application. Focus is on what the three key users of the financials will be looking at: SARS, Bankers and owners of the business
2) Ratio analysis featuring the dupont method: an overlooked topic in the finance module of small business management and entrepreneurship courses; Thomas J. Liesz (2006) Many business students, along with a lot of small business management instructors, tend to shy away from quantitative analysis. The qualitative aspects of a business – such as generating novel product ideas and creating marketing campaigns– are far more ―fun‖ than record keeping and financial analysis. However, there is much evidence that a lack of financial control is often a quick path to business failure. According RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. to Dun & Bradstreet‘s Business Failure Records (1994), ―poor financial practices‖ is second only to ―economic conditions‖ as a cause of business failures. Further, studies have been published as far back as 80 years ago (see Meech (1925)), as well as more recently (such as those published by Bruno, Leidecker, and Harder (1987); Gaskill, Van Auken,
and Manning
(1993); Lauzen (1985); and Wood (1989) that specifically cite poor financial control as a chief cause of unsuccessful businesses. Firer (1999), and more recently Kelly
(2005), stress the importance of monitoring the ―financial
health‖ of a small business. 3) Financial Ratio Analysis; Chetan Bhargav (2004) Ratio
analysis
is
a
process
of
determining
and
interpreting
relationships between the items of financial statements to provide a meaningful understanding of the performance and financial position of an enterprise. Ratio analysis is an accounting tool to
present accounting
variables in a simple, concise, intelligible and understandable form. As per Myers ―Ratio analysis is a study of relationship among
various financial
factors in a business‖ Objectives of Financial Ratio Analysis The objective of ratio analysis is to judge the earning capacity,
financial soundness and
operating efficiency of a business organization. The use of ratio in accounting and financial
management analysis helps the management to know the
profitability, financial position and operating efficiency of an enterprise. 4) How accouting ratios affecting an investor’s decision, some cases of construction companies; by Nguyen Thi Kim Thoa (2008) Accounting ratios are values of the relationships between 2 related accounts that appear in the financial statements such as: income statement, balance sheet, cash flows statement, and changes in equity. They present a company condition in the previous time, and predict by how the company will operate in the future. This research works to
evaluate the values of
accounting ratios to make investment decisions. By conducting of standard RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. financial statements, calculating of accounting ratios and comparing these ratios in variety of companies are a burning issue and crucial mission to investors. As Vietnam is a developing and urbanizing country, it is a benefit condition for construction industry
to grow. This project aims to discover
definitions of accounting or financing ratios also the calculations of these accounting, and then it shows how of accounting ratios affect on investor‘s decision making. The results of the study provide evidence to measure ratios and lastly it show out some recommendations and suggestions in applying accounting ratios in investment decisions to investors.
5) FINANCIAL RATIO ANALYSIS: PUTTING THE NUMBERS TO WORK; By John Bajkowski (2010) Financial statement analysis consists of applying analytical tools and techniques to financial statements in an attempt to quantify the operating and financial conditions of a firm. The emphasis of the analysis changes depending upon one‘s relationship with the company. A credit analyst extending a shortterm, unsecured loan to a company will examine the firm‘s cash flow and the liquidity of the company‘s assets. A stock investor, on the other hand, is primarily looking for future growth in cash flow and earnings. Investors typically examine variables that might significantly impact a firm‘s financial structure, sales, earnings production, and dividend policy. Having examined the structure and basic interpretation of the balance sheet, income statement, and statement of cash flows in the first three parts of this series on financial statement analysis, we come to the central issue of how the data can be used in investment analysis. [Note: All of the articles from this series can be found on the AAII Web site in the section titled ―Focus on Financial Statements‖ in the stocks area of our Web site (www.aaii.com/stocks)]. This article will consider financial ratio construction and interpretation with a focus on ratios grouped into operating performance and liquidity and financial risk
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To study Ratio Analysis of Indian Oil Corporation Ltd. categories. The financial data used to illustrate the ratios will be taken from the balance sheet and income statements developed previously in this series
6) Ratio Analysis: Financial Benchmarks For The Club Industry Raymond S. Schmidgall and Agnes L. DeFranco (2003) General managers of clubs are often inundated with operations and member- ship issues and may not be able to spend quality time engaging in the analysis of the financial health of the club. With the aid of a handful of ratios, general managers and club controllers can assess the business trends and financial viability of their operations very easily. The top ratios used by club managers are: payroll cost percentage, cost of food sold percentage, cost of beverage sold percentage, current ratio, and debt-equity ratio. The results of several ratios focusing primarily on clubs' balance
sheets are
presented in this article. The purpose of this study is to provide the industry with some new and meaningful measurements. As seen from the results, certain ratios (such as profit margins and cost percentages) are more often used than others in the club business. Others, such as current ratio or cash flows to short- and long-term debt, are also important. Ratio analysis is a powerful financial and diagnostic tool.
7) Analyzing Financial Information Using Ratios ; Kate Barr (2005) Leaders of nonprofits who seek to understand the organization‘s financial situation usually start
by reviewing the financial reports.
Understanding the financial information is the building block of any financial discussion. Beyond understanding the reports, much can be learned from analysis of the information and interpretation of what it is telling you. The basic analysis includes comparing financial reports to a benchmark such as the budget or the financial report from the
previous year. One essential
question is: does this information match our expectations?
For a more
technical financial analysis, ratios can be used to deepen the understanding RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. and interpretation. Financial ratios are an established tool for businesses and nonprofits. While there are dozens of ratios that can be calculated, most nonprofits can use a handful of them to
learn more about their financial
condition. This tool provides the description and calculation of
14 ratios
including a mix of balance sheet and income statement ratios. Individual nonprofits must decide for themselves which calculations are valuable.
8) Ratio Analysis for the Hospitality Industry: A cross Sector Comparison of Financial Trends in the Lodging, Restaurant, Airline and Amusement Sectors; Woo Gon Kim, Baker Ayoun (2002) This study uses ratio analysis to examine salient financial trends within four major
sectors of the hospitality industry for the 1997-2001 period –
namely lodging, restaurants,
airlines and the amusement sectors. Cross-
sectional analysis results indicate that at least for the test period, eight out of thirteen financial ratios were statistically different across the four hospitality segments. As such, financial trends and cross sectional anomalies within the examined hospitality industry segments are better understood. This study has compared key financial ratios of four segments of the hospitality industry. These segments are hotels and motels, restaurant, amusement and recreational services, and airline companies. Both types of ratio analysis were performed.
Trend analysis of the financial ratios indicated that the ratios
measuring profitability (namely, net profit margin, ROA, and ROE) are the lowest for the amusement and recreational services segment compared with the other three segments. However, companies in each of these segments have varied levels in terms of these ratios. Except for the amusement and recreational services segment, other hospitality industry segments achieved steady levels of liquidity over the five-year period as measured by the current and quick ratios.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 9) Financial Indicators for Critical Access Hospitals; Chris Haris (2009) The purpose of this project was to develop and disseminate comparative financial
indicators specifically for Critical Access Hospitals
(CAHs) using Medicare Cost Report (Healthcare Report Information System) data. A Technical Advisory Group of individuals with extensive experience in rural hospital finance and operations provided advice to a research team from the University of North Carolina at Chapel Hill. A literature review identified 114 financial ratios that have proven useful for assessing financial condition. Twenty indicators deemed appropriate for assessment of CAH financial condition were chosen. In September 2004, the CEOs of 853 CAHs were mailed a CAH Financial Indicators Report© (the Report) that included values specifically for their CAH and national median values.
State-level reports
were sent to State Flex Coordinators.
10) The Impact of Financial Ratio Analysis on Financial Decisions; Laura Lase (2003) The objective clearly sets out the project aim for the current dissertation. The study will cover the financial ratio analysis highlighting different ratios which are commonly used by companies and shareholders to evaluate the financial position of the company at any point in time. However, the availability of up to date companies' information is somewhat limited for its external users. This restricts the use of financial ratio analysis by shareholders. Management of a company is considered as internal user and shareholders orinvestment companies or research analysts are considered as external users. The study will estimate the impact of financial ratios on financial decisions of both internal users and external users of information. A case study of Muslim Commercial Bank, a local bank incorporated in Pakistan would be investigated and compared with its competitor bank – Habib Bank Limited that is also based in Pakistan. Both primary and secondary sources will be RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. collected and subject to different analytical procedures. For primary results Likert modeling will be used to determine the level of impact on financial decisions. While on the other hand secondary sources will be used for performing a financial ratio analysis of the banks under review. Overall conclusions regarding the topic will be presented in the final chapter of the current dissertation.
11) A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis; Timo Salmi, Teppo Martikainen (2011) This paper provides a critical review of the theoretical and empirical basis of four central areas of financial ratio analysis. The research areas reviewed are the functional form of the financial ratios, distributional characteristics of financial ratios, classification of financial ratios, and the estimation of the internal rate of return from financial statements. It is observed that it is typical of financial ratio analysis research that there are several unexpectedly distinct lines with research traditions of their own. A common feature of all the areas of financial ratio analysis research seems to be that while significant regularities can be observed, they are not necessarily stable across the different ratios, industries, and time periods. This leaves much space for the development of a more robust theoretical basis and for further empirical research.
12) Financial Management and Ratio Analysis for Cooperative Enterprises; David S. Chesnick RBS Agricultural Economist (2003) This study discusses differences in financial management and goals between the investor-oriented firms and cooperatives. It briefly reviews what bankers look for when appraising potential borrowers. A summary of standard financial ratios used to analyze a variety of business structures is included, along with other modified ratios to address deficiencies evident in standard ratios. Financial reports contain a lot of information. The main objective of RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. financial analysis is to sort through that information to find useful and relevant data in analyzing a business. Literature is rich with financial analysis tools that examine the performance and strength of businesses. However, not all businesses are alike. Differences between IOFs and cooperatives mean that some standard financial analyses do not relate well with cooperatives. This is especially relevant for profit-oriented ratios. This report provides a supplement to standard analysis with an eye toward cooperatives. Some ratios help analyze the cooperative‘s financial performance and cash flow analysis. Managers and creditors should find these findings helpful in appraising the financial strength of the cooperative. While there is no set standard at this time, using these analysis tools should help the cooperative develop its own performance measurements.
13) Liquidity Analysis Using Cash Flow Ratios and Traditional Ratios: The Telecommunications Sector in Australia ; Ross Kirkham (2003) The purpose of this study is to examine the value in analysis of the liquidity of companies using the traditional ratios as compared to the more recently devised cash flow ratios. The study revealed that differences existed between the traditional liquidity ratios and the cash flow ratios. A conclusion based solely on the traditional ratios could well have lead to an incorrect decision regarding the liquidity of a number of companie. In ceratin instances that may have been that a company was deemed to be liquid when it faced cah flow problems or that a company was not liquid when in fact it had sufficient
cash flow resources. The results support the proposition that
analysis based on the traditional liquidity ratios is best compared against the cash flow
ratios before reaching any conclusions regarding the financial
liquidity position.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 14) the effect of financial ratios, firm size and cash flows from operating activities on earnings per share:
(an applied study: on
jordanian industrial sector); khalaf Taani (2006) The objective of this study is to examine the effect of accounting information on earning per share (EPS) by using five categories of financial ratios. A sample of 40 companies listed in the Amman Stock Market was selected. To measure the impact of financial ratios on EPS multiple regression method and stepwise regression models are used by taking profitability, liquidity, debit to equity, market ratio, size which is derived from firm‘s total assets, and cash flow from operation activities as independent variables ,and EPS (Earning Per Share) as dependent variable. The results show that profitability ratio (ROE), Market ratio (PBV), cash flow from operation/sales, and leverage ratio (DER) has significant impact on earning per share. 15) Application of the Factor Analysis on the Financial Ratios and Validation of the Results by the Cluster Analysis: An Empirical Study on the Indian Cement Industry; Anupam De, Gautam Bandyopadhyay, B.N. Chakraborty (2008) The initial objective of the study was to identify the underlying ategories present amongst the financial ratios so as to confirm or modify the conventional categorization of financial ratios. Another objective of this study was to reduce the number of financial ratios to a smaller number of financial ratios which can capture almost the same amount of desired information as the original larger set of ratios could do. We started the study with 44 financial ratios of 130 India Iron and Steel companies for a period of 10 years grouped in 7 conventional categories. However, with the help of a series of statistical analysis, we could reach to a final conclusion which speaks about the presence of 8 underlying categories. A comparison can be made between the categories of financial ratios used in the study and categories appeared in the final results. RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. 16) Ratio analysis - case study - Stortford Yachts Limited; Bob This case study is intended as a self-test exercise on all of ratio analysis. The answers are given as popup boxes to each question. However, do try to work through them all first before submitting to temptation. The more you practise calculating ratios, the easier it gets - we promise! Paul Marriot is the director of Stortford Yachts Ltd. The company has traded for 30 years and has in the past achieved very good levels of growth and return on capital, but this is now changing. In recent time it has failed to introduce new product lines, relying on traditional products and little has been invested in Research or Product Development. You are a business planning consultant for a firm of Management Consultants. Stortford Yachts is one of your clients. In recent times the business has experienced increased turnover but a downturn in overall performance. Paul Marriot has had a meeting with your Director and he has stated that he wants to introduce tighter management control within the company by introducing a system of responsibility accounting.
17) Analysis And Interpretation Of Financial Statements: Case Studies; Sudip Das (2008) Financial statements are formal records of the financial activities of a business, person, or other entity and provide an overview of a business or person's financial condition in both short and
long term. They give an
accurate picture of a company‘s condition and operating results in a condensed form. Financial statements are used as a primarily by company
management tool
executives and investor‘s in assessing the overall
position and operating results of the company. Analysis and interpretation of financial statements help in determining the liquidity position,
long term
solvency, financial viability and profitability of a firm. Ratio analysis shows whether the ompany is improving or deteriorating in past years. Moreover, Comparison of ifferent aspects of all the firms can be done effectively with this. It helps the clients to decide in which firm the risk is less or in which one RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. they should invest so that maximum benefit can be earned. Mining industries are capital intensive; hence a lot of money is invested in it. So before investing in such companies one has to carefully study its financial condition and worthiness. Unfortunately very limited work has been done on analysis and interpretation of financial statements of Indian for mining companies. An attempt has been carried out in this project to
analyze and interpret the
financial statements of five coal and non- coal mining companies.
18) Decision making techniques A CIMA case study l; Jenipher Pringley (2010) Businesses generate a huge amount of data. Management accountants can use a number of the company‘s key accounting statements to extract greater meaning from this information. Prospect plc - Balance sheet/statement of financial position as at 31 March 2012 The income statement sets out the total sales revenue and subtracts the costs of generating that revenue to give operating profit. This is the surplus earned by the normal operations of the company and tells us most about underlying business performance. To continue to use the earlier illustrative example, Prospect plc is expanding rapidly as it builds a commercial property portfolio consisting mainly of shops and offices. The company receives rents and also benefits from any profits when it sells property and sites. The result is a danger signal! Management accountants investigate this sort of data in order to alert managers to worrying trends, as well as to possible opportunities.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 19) An example of the use of financial ratio analysis: the case of Motorola; H. W. Collier; T. Grai; S. Haslit; C. B. McGowan (2007) In this paper, we demonstrate the use of actual financial data for financial ratio analysis. We construct a financial and industry analysis for Motorola Corporation. The objective is to show students exactly how to compute ratios for an actual company. This paper demonstrates the difficulties in applying the principles of financial ratio analysis when the data are not homogeneous as is the case in textbook examples. We use Motorola as an example because the firm has several segments, two of which account for the
ajority of sales and represent two industries (semi-conductor and
communications) that have different
aracteristics. The case illustrates the
complexity of financial analysis.
20) The role of ratio analysis in business decisions a case study of o. jaco bros. ent. (nig.) ltd., aba, abia state; ilorah fabian uzochukwu (2010) Accounting information provided by means of financial statements- The income statement and the Balance Sheet are often in summarized form. Viewed on the surface, the truths about the results and the financial position of a business hidden in them remain veiled. To be of optimal benefit and as well enable the users make well – informed decisions, financial statements need to be analyzed by means of ratios. Therefore, in order to establish the role of ratio analysis in business decisions, this research is carried out, using O. Jaco Bros. Ent. (Nig.) LTD., Aba Abia State as the Case study. The researcher made use of both primary and secondary sources of data collection.
However, for the former, questionnaires were administered,
whereas for the later, relevant were received. The data Collected via the primary data sources were analyzed using simple averages and percentages. After ratios analysis conducted on the chapter four, mode at 95 level of
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To study Ratio Analysis of Indian Oil Corporation Ltd. confidence (5% level of significance). Finally, it was established that ratios analysis evils business decision. 21) Ratio anaylsis (Profitability analysis) Operating profit; Mack Roswell (2003) Ratios are determined from a company's financial information and used for comparison purposes, e.g. operating profit to sales. This can be set out in the form: Operating Profit : Revenue. Alternatively, it can be set out as a percentage. If you refer back to the Profit and Loss Account, you can see the operating profit margin shown in the chart. This figure is crucial to Cadbury Schweppes as it relates to the second performance goal. Here is another ratio you will find in your current course. This ratio shows whether the company owes more money to its suppliers and bankers than the assets it holds in the form of stocks, debtors and cash. If this number is less than 1, then the company's short-term or liquid assets are greater then its short-term liabilities. This ratio is used in different ways for small and large companies. Businessmen and women considering whether to trade with a new small company would prefer to see this figure at 1.5 or above - as an indication that the company is solvent and will be able to pay its debts. For large established companies with good credit ratings, a lower ratio indicates an efficient use of capital. 22) Company ratio analysis- case study of Tesco.; Peter Samsburg (2011) In 2010, the turnover of Tesco was £56,910m, compared to 2011, it was £60,931m. In the first year of Tescoâs financial period, the company had a total of £41,57m expenses and a final profit of £2336.0m while in 2011 they had a total expense of £42,21m and a profit of £2671.0m. This meaning that they made a profit, as the total profit the company made was greater than their expenses, which also increased in the following year, 2011. RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. It was observed that the more money they spent in the running of the company, the more profit they made at the end of the year. It was found that from the estimated gross profit that, for every £1 of turnover the company made a profit. This can be seen as the gross profit for the year 2010, came to 8.10% while that of 2011 came up to 8.30%.
23) A financial Ratio Analysis of Commercial Bank Performance in South Africa Mabwe Kumbirai and Robert Webb* (2001) This paper investigates the performance of South Africa‘s commercial banking sector for the period 2005- 2009. Financial ratios are employed to measure the profitability, liquidity and credit quality performance of five large South African based commercial banks. The study found that overall bank performance increased considerably in the first two years of the analysis. A significant change in trend is noticed at the onset of the global financial crisis in 2007, reaching its
peak during 2008-2009. This resulted in falling
profitability, low liquidity and deteriorating credit quality in the South African Banking sector.
24) Financial Ratio Analysis, Using Annual Statement STUDIES General: Mhd. Tariq Husain (2006) Accounting ratios are probably the most widely used indictors in bankruptcy studies and therefore in supplier solvency risk assessments. In identifying which contractors pose the greatest potential risk of nonperformance, published financial statements provide readily available information. Ratio analysis of non-public companies may be suspect since it is based on self-disclosure. The Securities and Exchange Commission (SEC) has identified critical information that they believe a potential equity holder should have of firms. Since there is a high likelihood that a potentially insolvent firm can also become a non-performing supplier, we may use the financial statements to gain crucial business information. A brief review of the RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. literature suggests that there may be over a hundred ratios that can be calculated from accounting numbers included in financial statements. Many of these, however, will reflect similar attributes. Some means is generally used to reduce the number of ratios to manageable proportions and avoid duplication.
25) Financial ratio analysis of dcc bank limited rajnandgaon a case study Anil Kumar Soni & Harjinder Pal Singh Saluja (2010) District Central Cooperative Bank plays a vital role in the agriculture and rural development of the Rajnandgaon. The DCC Bank has more reached to the rural area of Rajnandgaon, through their huge network. The DCC Bank Rajnandgaon acts as intermediaries between State Cooperative Bank (Apex Bank) and Primary Agriculture Cooperative Societies (PACSs). The success of cooperative credit movement in a district is largely depends on their financial strength. DCC Bank is a key financing institution at the district level which shoulders responsibility of meeting credit needs of different types of cooperatives in the district. At present, most of the district central ooperative banks are facing the problems of overdue, recovery, nonperforming assets and other problems. Therefore, it is necessary to study financial ratios of DCC Bank Rajnandgaon. This paper attempts to analyze the financial ratios of DCC Bank Rajnandgaon during the period 2008-2009 to 2010-2011. An analytical research design (Financial Ratio Analysis) is followed in the present study. The study is based on secondary data. Empirical results show positive and ufficient growth of DCC Bank Rajnandgaon. The liquidity and solvency position of the bank was found to be sound.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 26) Fuzzy Expert System for Financial Ratio Analysis (Case Study: Cement Industry) J. Nazemi*, M.R. Asgari & S. A. Banijamali (2007) This paper presents a new mathematical programming model for an integrated production and air transportation in supply chain management with sequence-dependent setup times in order to design an applied procedure for the production and distribution schedule. The aim of this model is to minimize the total supply chain cost consisting of the costs of distribution, production earliness and tardiness, and delivery. Because of the complexity and NPhardness of this problem, two meta-heuristics based on genetic algorithm (GA) and variable neighborhood search (VNS) are proposed. The parameters of these algorithms and their appropriate operators are set and determined by the use of the Taguchi experimental design. Then, the quality of the results obtained by these algorithms is compared. The computational results show that the developed VNS outperforms the proposed GA.
27) Analysis ratios for detecting financial statement fraud By Cynthia Harrington, Associate Member, CFA (2006) Detection of financial statement fraud is on the front burner. With billions of losses behind us from such companies as Enron, Tyco, and WorldCom, the numbers of cases has slowed but not stopped. Catching the deeds early is important because the average financial statement fraud costs businesses an average of $1 million, according to the ACFE's 2004 Report to the Nation. Analysis ratios tested by an Indiana University professor show promise in identifying possible infractions and helping CFEs focus their efforts once retained to look into suspicions. Although the study is now six years old, it appears to be increasingly used to help detect signs of financial manipulations.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 28)
Victoria's
Milling
Case;
Essay
by renesmee, College,
Undergraduate, January 2010 Point of View:Assumed in this case is the perspective of VICMICO‘s Finance OfficerProblem:What are the possible causes of VICMICO‘s cash flow problem and how can they be addressed?Case Context:This case requires an analysis of Victoria Milling Co.‘s financial statements in order to present a comprehensible explanation regarding the company‘s debt position. This paper utilizes the concept of Ratio Analysis to solve the afore-mentioned problem. The case also examines issues of cash flow problem for VICMICO in light of a formation of a working committee consisting of VICMICO‘s stakeholders. A statement released by VICMICO‘s Board Chairman reported that 70- 80% of VICMICO‘s problem was due to the crisis of the whole industry. Massive importation and dwindling prices of sugar were observed. 29) Case study – Horizontal trend analysis; Business Accounting and Finance 2nd Edition Catherine Gowthorpe 2005 Thomson Learning Ben asks Barney for the company figures towards the end of 20X4, but Barney is able to provide figures up to 31 March 20X3 only. Nine months or so after the yearend of 31 March 20X4 it would be reasonable to expect 20X4 accounts to be available. If they are not yet available it may indicate some serious administrative problems within the business. There would be good grounds for serious doubts if the accounts had been prepared but Barney was unwilling to provide them. The question could be easily resolved by checking the latest filing at Companies House. Also, the information Barney provides is limited to the basic profit and loss and balance sheet statements. Although he assures Ben that the audit report is fine, he does not include it in the information; nor are the notes to the accounts or the directors‘ report made available. This looks a little suspect.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 30) Comparison between Financial Ratios Analysis and Balanced Scorecard; Khalad M.S. Alrafadi and Mazila Md-Yusuf Graduate Business School, Faculty of Business Management, (2005) Financial ratios have long been used as a tool to evaluate the overall financial performance of a company. However, in early 1990s, a new method called Balanced Scorecard has been introduced by Robert Kaplan and David Norton to evaluate the overall controlling of a company. This study is a conceptual paper comparing between the financial ratios analysis and balanced scorecard method. The objective of this paper is to compare between the benefits and problems of using financial ratios analysis and Balanced Scorecard method in evaluating the overall control of the company. As a result, we found that the Balanced Scorecard is more efficient than financial ratios analysis.
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To study Ratio Analysis of Indian Oil Corporation Ltd. Chapter 4
RESEARCH METHODOLOGY Definition: Methodology refers to the body of method used in conducting a study. Different type of method is used in social research. In selecting method a researcher should take in to account not only the suitability of method but also adequate knowledge of method.
PRIMARY DATA: Primary data can be collected either through experiment or through survey. It the researcher conducts an experiments, he observes some cluantitive measurements, or the data with help of which he examine the truth contained in the hypothesis. Primary data can be obtained by common or by observation. Common involve questioning respondents either verbally or in writing. It is the data collected for one‘s own research purpose. In my project the primary sources of data used are1. Desk Procedures:It used as the tool to understand the general procedures of Accounting Department of the company. 2. Accounting Policies:The Accounting Policies help me lot in getting all the accounting concepts clear. It was also useful in understanding the accounting procedures. 3. Formal Discussions:I got a lot of opportunities to get into formal discussion with the Project guide and manager of company. 4. Observation:One of the methods that I used to collect the data was the observation, the careful observation of company‘s overall activities and functioning gave me good insight into the topic under study. RIMS Chandrapur
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To study Ratio Analysis of Indian Oil Corporation Ltd. Primary data collection methods can be classified as:1) Survey (Techniques) Method 2) Observational Method
SECONDARY DATA: Secondary data is data, which has been collected by individual or agencies for purpose other than those of our particular research study. In my project the secondary data used is books, internet sites, company sites, memorandum of settlement and company‘s documents. This method includes the collection of data by using various system, such like Internet, News paper etc.
Some of various systems are: 1. Internet. 2. News paper. 3. Magazines etc.
STATISTICAL PROCESSING 1) Ratio Analysis 2) Tabulation of data 3) Line and pie graphs.
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To study Ratio Analysis of Indian Oil Corporation Ltd.
OBJECTIVES OF THE STUDY 1) To study and express the relationship between two values of the comparative statement. 2) To study the various ratios to determine the relationship of different factor which have impact on the financial position of the company 3) To study the operating efficiency of profitability of the company 4) To study the liquidity position
IMPORTANCE AND SCOPE OF THE STUDY 1) This study will help to know financial position of Indian Oil Corporation. 2) It also covers study of balance sheets of last five years. 3) It helps to know different financial aspects in Company. 4) It will also helpful in knowing financial management of company.
HYPOTHESIS 1) The study of ratio analysis play very important role to obtained financial data easily. 2) There is considerable increase in net sales compared to previous years sales. 3) Company has strict control over total expenditure when compared with increase in production. 4) There is considerable increase in earning per share.
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To study Ratio Analysis of Indian Oil Corporation Ltd.
DATA ANALYSIS AND INTERPRETATION
Profit loss account in crore Mar ' 13
Mar ' 12
Mar ' 11
Mar ' 10
Income Operating income
2,69,438.08 3,07,123.99 2,47,359.24 2,16,498.85
Expenses Material consumed
2,35,668.52 2,75,383.54 2,21,256.55 1,93,471.53
Manufacturing expenses Personnel expenses Selling expenses
1,755.28
1,500.51
1,558.14
1,112.87
5,723.96
5,686.96
2,894.86
2,586.80
10,488.13
9,684.04
8,753.07
7,733.07
Administrative expenses Expenses capitalised Cost of sales Operating profit
1,824.74
1,888.60
2,004.30
1,375.23
-1,121.28
-544.01
-403.58
-542.83
Other income
2,54,339.35 2,93,599.64 2,36,063.34 2,05,736.67 15,098.73 13,524.35 11,295.90 10,762.18
recurring 3,320.35
2,709.59
2,422.73
1,836.69
Adjusted PBDIT
18,419.08
16,233.94
13,718.63
12,598.87
Financial expenses
1,572.35
4,020.98
1,589.73
1,496.25
Depreciation Other write offs
3,227.14 133.98
2,881.71 317.64
2,709.70 236.53
2,590.31 113.43
Adjusted PBT Tax charges Adjusted PAT Non recurring items
13,485.61 3,097.87 10,387.74 -130.67
9,013.61 1,364.71 7,648.90 -5,615.51
9,182.67 3,104.54 6,078.13 705.81
8,398.88 2,949.46 5,449.42 1,973.32
915.26
178.64
76.73
Other non adjustments
cash -36.52
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To study Ratio Analysis of Indian Oil Corporation Ltd. Reported net profit
10,220.55
2,948.65
6,962.58
7,499.47
Earnings before 15,525.63 appropriation
8,254.63
6,962.58
7,499.47
Equity dividend
3,156.34
910.48
655.81
2,250.89
Preference dividend
-
-
-
-
Dividend tax Retained earnings
508.83 11,860.46
154.74 7,189.41
76.48 6,230.29
361.72 4,886.86
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To study Ratio Analysis of Indian Oil Corporation Ltd. Balance sheet In crore Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity shares outstanding (Lacs)
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Mar ' 13
Mar ' 12
Mar ' 11
Mar ' 10
2,427.95 48,124.88
1,192.37 21.60 42,789.29
1,192.37 39,893.88
1,168.01 24.36 33,664.92
18,292.45 17,565.13 26,273.80 27,406.93 95,119.08 88,975.32
6,415.78 5,671.42 29,107.39 21,411.27 76,609.42 61,939.98
71,780.60 62,104.64 30,199.53 27,326.19
56,731.50 54,770.29 23,959.68 21,400.07
41,581.07 34,778.45 21,268.63 18,186.05
32,771.82 33,370.22 9,170.22 4,394.30
22,370.25 32,232.13
21,535.78 19,990.86
60,971.48 45,234.47
53,506.07 43,966.26
51,090.52 41,493.74
40,499.06 39,938.93
9,880.96 18.17
13,007.01 4,027.33 124.59 157.27
3,740.73 37.96
95,119.08 88,975.32 22,370.25 29,527.27
76,609.42 61,939.98 18,682.05 17,137.21
23,844.00 15,318.66
21,437.75 17,958.41
25,715.07 26,317.31 24279.52 11923.74
25,574.96 22,676.47 11923.74 11680.12
42
To study Ratio Analysis of Indian Oil Corporation Ltd. RATIO ANALYSIS AND INTERPRETATION 1) Adjusted EPS (Rs) Net income-dividend on preferred stock Average outstanding share
Year
Adjusted EPS (Rs)
70
Mar
Mar
Mar
Mar
2013
2012
2011
2010
42.78
64.15
50.98
46.66
64.15
60 50.98 50
46.66 42.78
40 30 20 10 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: In the year 2009 there was adjusted eps was 36.29, the average annual growth is17.88% As we can see in graph the rise in the adjusted eps from 2009 to 2012 but in the year 2013 there is fall in Adjusted EPS (Rs) Thus the adjusted EPS of the company is reduced in year 2013 as compared to that previous years.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 2) Dividend per share Dps = d- sd S Year Dividend
per
Mar 2013
Mar 2012
Mar 2011
Mar 2010
13.00
7.50
5.50
19.00
share
19
20 18 16 14
13
12 10 7.5
8
5.5
6 4 2 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: In year 2010 there is noted highest growth among the five year because equity dividend was greater than 2009, 2011, 2012. In 2013 equity dividend is maximum than 4 years but dividend per share could not rise because share outstanding period was maximum. Divident per share is decreased every year which is not good sign.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 3) Profitability ratio: a) Operating Profit Margin (Return On Sales - ROS)= Operating profit margin = Operating income Total revenue
Years
Operating margin (%)
6
Mar
Mar
Mar
Mar
2013
2012
2011
2010
5.60
4.40
4.56
4.97
5.6 4.97
5
4.4
4.56
Year 2012
Year 2011
4 3 2 1 0 Year 2013
Year 2010
Interpretation: Higher the profit margin is better for Operating profit margin, the highest profit margin is noted in year 2013 company‘s pricing strategy and operating efficiency is better in year 2013. That indicates increase in operating income of the company.
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To study Ratio Analysis of Indian Oil Corporation Ltd. Gross profit margin (%) Gross Profit Total Revenue
Years
Gross profit margin (%)
March
March
March
March
2013
2012
2011
2010
4.40
3.46
3.47
3.77
5 4.4
4.5
3.77
4 3.5
3.46
3.47
Year 2012
Year 2011
3 2.5 2 1.5 1 0.5 0 Year 2013
Year 2010
Interpretation: In the year 2009 it is noted that was lowest among the years. Year after year the profit margin is increasing so that company profit margin is better Gross profit margin of the company is highest in year 2013 as compared to that of previous years which indicates good financial position of the company.
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To study Ratio Analysis of Indian Oil Corporation Ltd. Net Profit Margin= Option 1:
Net Income after Taxes Revenue
Year
2013
Net profit margin (%)
3.74
2012
2011
2010
0.95
2.78
3.43
4 3.5
3.74 3.43
3 2.5
2.78
2 1.5 1 0.95
0.5 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: From the figure it is noted that net profit margin was decreased in 2012 because there was decrease in net income after tax, but it showing rise in year 2013 because net income after tax was maximum in this year compare to other year. Increase in Net profit margin indicates good financial condition of the company.
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To study Ratio Analysis of Indian Oil Corporation Ltd. REPORTED RETURN ON NET WORTH (%) Reported return on net worth (%) Net income x 100 Shareholders equity
Years
Reported return on
March
March
March
March
2013
2012
2011
2010
20.22
6.71
16.99
21.62
net worth (%) 25
20
21.62 20.22
15
16.99
10
5
6.71
0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: The average rise in reported return on net worth is 20.35 from 2009 to 2013 so that we can say that the company profit is better from shareholder fund.
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To study Ratio Analysis of Indian Oil Corporation Ltd. LEVERAGE RATIOS: a) Long term debt / Equity: Years
2013 2012 2011 2010
Long term debt / Equity
0.40
0.43
0.34
0.38
0.5 0.45 0.4
0.43 0.4
0.35
0.38 0.34
0.3 0.25 0.2 0.15 0.1 0.05 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: Long term debt/equity ratio is 0.40 in 2013, and 0.43 in year 2011, 0.34 in year 2011 and 0.38 in year 2010. There is increase long term debt/equity in last four years. There is showing average financial growth that is recorded16.66%
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To study Ratio Analysis of Indian Oil Corporation Ltd. b) Total debt to equity
years
2013 2012 2011 2010
Total debt/equity
0.88
1.02
0.86
0.77
1.2 1.02 1
0.88
0.86 0.77
0.8 0.6 0.4 0.2 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: The total debt/equity is highest in year 2012 and decreased in year 2013. Which shows that the company uses the financial budgets are in average level.
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To study Ratio Analysis of Indian Oil Corporation Ltd. Fixed assets turnover ratio net sales Net property, plan and equipment
year
2013 2012 2011
2010
Fixed assets turnover ratio
3.78
3.97
4.98
4.38
6 4.98 5 4
4.38 3.97
3.78
3 2 1 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: Fixed asset turnover ratio is decreased in year 2013 as compared to that of in previous three years. In the year 2012 it was noted that the company is
used the net
property, plan effectively so that graph is in gone high than other years
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To study Ratio Analysis of Indian Oil Corporation Ltd. 5) LIQUIDITY RATIOS: a) Current ratio:
Current asset Current liability
Current Assets Current Liabilities Current Ratio
2013
2012
2011
2010
60971.48
45,234.47
53,506.07
43,966.26
51090.52
41,493.74
40,499.06
39,938.93
1.193401
1.0901517
1.3211682
1.1008372
years
2013
2012
2011
2010
Current ratio
1.19
1.09
1.32
1.10
1.32
1.4 1.19
1.1
1.09
1.2 1 0.8 0.6 0.4 0.2 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: The entire ratio shows more than 1 so that it directs us that company is having good financial condition
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To study Ratio Analysis of Indian Oil Corporation Ltd. Acid test ratio or liquid test ratio or quick ratio: Liquid asset Liquid liability
Year
Quick ratio
2013 2012 2011
2010
0.44
0.47
0.46
Year 2010
0.54
0.47
Year 2011
0.54
Year 2012
0.46
Year 2013
0.44
0
0.1
0.2
0.3
0.4
0.5
0.6
Interpretation: Larger the acid test ratio shows higher the margin of safety, in he year 20118 it was noted greater than of other 4 year because total current asset was noted maximum in year 2013 it fall down because liquid liability was maximum and liquid asset was also greater
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To study Ratio Analysis of Indian Oil Corporation Ltd. Inventory Turnover ratio COGS Inventory Years
2013
Inventory turnover ratio
8.37
2012
2011
2010
13.98
9.09
10.10
13.98 14 12
10.1
10
9.09
8.37
8 6 4 2 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall. That is showing in year 2012. But this ratio is decreased in year 2013.
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To study Ratio Analysis of Indian Oil Corporation Ltd. 6) PAYOUT RATIOS: A) Dividend Payout Ratio = Dividend Payment per Share Earnings per Share Years Dividend
payout
ratio
(net
2013
2012
2011
2010
35.86
36.11
10.51
34.83
profit)
40
35.86
36.11
34.83
35 30 25 20 15
10.51
10 5 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: The payout ratio provides an idea of how well earnings support the dividend payments. In year 2011 it was noted the fall in dividend payout ratio because the dividend per share was low If there is dividend profit ratio is maximum, than it shows better performance of company
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To study Ratio Analysis of Indian Oil Corporation Ltd.
b) Earning retention ratio Net income-dividends Net income
year
2013
2012
2011
2010
Earning retention ratio
64.72
86.08
87.96
52.06
87.96
86.08
90 80 64.72
70
52.06
60 50 40 30 20 10 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: Tracking
year-on-year
earnings
retention
ratios
is
important
to fundamental analysis to investigate whether a company is increasing or decreasing its rate of re-investment It is noted the fluctuation in Earning retention ratio showing average 0.06%growth only
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To study Ratio Analysis of Indian Oil Corporation Ltd. c) Cash earnings retention ratio year
2013
2012
2011
2010
Cash earnings retention ratio
73.35
90.19
91.89
67.96
100
90.19
91.89
90 73.35
80
67.96
70 60 50 40 30 20 10 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: Tracking
year-on-year
earnings
retention
ratios
is
important
to fundamental analysis to investigate whether a company is increasing or decreasing its rate of re-investment Showing the average growth 0.01 during four years
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To study Ratio Analysis of Indian Oil Corporation Ltd. 7) Coverage ratios
a) Financial charges coverage ratio(pre tax) Years
Financial
charges
coverage
2013
2012
2011
2010
11.71
4.04
8.63
8.42
ratio(pre tax)
11.71 12 10
8.63
8.42
8 6
4.04
4 2 0 Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: Financial charges coverage ratio is 11.71 in year 2013 which is highest as compared to previous years. The figure showing the average profit is of Financial charges coverage ratio (pre tax) is 0.26 so that financial charges coverage ratio very low
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To study Ratio Analysis of Indian Oil Corporation Ltd. Sales / Working Capital turnover Sales Working capital
YEAR
2013
2012
2011
2010
W.C
11.65
16.144
25.74
46.82
46.82
50 45 40 35 25.74
30 25 16.144
20 11.65
15 10 5 0
Year 2013
Year 2012
Year 2011
Year 2010
Interpretation: The figure showing that in year 2010 the company shows that company is not using sales and working capital properly. It arised in year 2012 but fall from 2011 to 2013
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To study Ratio Analysis of Indian Oil Corporation Ltd. Financial ratios of the company
2013 42.78 13.00
2012 64.15 7.50
2011 50.98 5.50
2010 46.66 19.00
Operating margin (%) Gross profit margin (%) Net profit margin (%) Reported return on net worth (%) Return on long term funds (%) Leverage ratios
5.60 4.40 3.74 20.22
4.40 3.46 0.95 6.71
4.56 3.47 2.78 16.99
4.97 3.77 3.43 21.62
21.20
20.72
19.54
20.59
Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio Liquidity ratios
0.40 0.88 53.14
0.43 1.02 49.44
0.34 0.86 53.63
0.38 0.77 56.25
3.78
4.98
4.38
3.97
Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio Payout ratios
1.19 0.76 0.44 8.37
1.09 0.60 0.46 13.98
1.32 0.83 0.54 9.09
1.10 0.79 0.47 10.10
Dividend payout ratio (net profit) Earning retention ratio Cash earnings retention ratio Coverage ratios Financial charges coverage ratio(pre tax)
35.86
36.11
10.51
34.83
64.72 73.35
86.08 90.19
87.96 91.89
52.06 67.96
11.71
4.04
8.63
8.42
Adjusted EPS (Rs) Dividend per share Profitability ratios
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To study Ratio Analysis of Indian Oil Corporation Ltd. Chapter 5
FINDINGS AND CONCLUSION The rise in the adjusted eps from 2009 to 2012 but in the year 2013 there is fall in Adjusted EPS (Rs) In year 2010 there is noted highest growth among the five year because equity dividend was greater than 2009, 2011, 2012. In 2013 equity dividend is maximum than 4 years but dividend per share could not rise because share outstanding period was maximum Operating profit margin, the highest profit margin is noted in year 2013 company‘s pricing strategy and operating efficiency is better in year 2013 In the year 2009 it is noted that was lowest among the years. Year after year the profit margin is increasing so that company profit margin is better Net profit margin was decreased in 2012 because there was decrease in net income after tax, but it showing rise in year 2013 because net income after tax was maximum in this year compare to other year. The average rise in reported return on net worth is 20.35 from 2009 to 2013 so that we can say that the company profit is better from shareholder fund. In the year 2012 it was noted that the company is used the net property, plan effectively The Current ratio shows more than 1 so that it directs us that company is having good financial condition . Larger the acid test ratio shows higher the margin of safety, in he year 20118 it was noted greater than of other 4 year because total current asset was noted maximum in year 2013 it fall down because liquid liability was maximum and liquid asset was also greater High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall. That is showing in year 2012. In year 2009 the company shows that company is not using sales and working capital properly. It arised in year 2010 but fall from 2011 to 2013
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To study Ratio Analysis of Indian Oil Corporation Ltd.
REFERENCES 1) Kobus Barnard AGA (SA) – B.Compt. (Hons); Using Financial Statements & Ratio Analysis to manage your business effectively; (2007) 2) Thomas J. Liesz; Ratio analysis featuring the dupont method: an overlooked topic in the finance module of small business management and entrepreneurship courses; (2006) 3) Chetan Bhargav; Financial Ratio Analysis; (2004) 4) Nguyen Thi Kim Thoa; How accouting ratios affecting an investor‘s decision, some cases of construction companies; (2008) 5) John Bajkowski; Financial Ratio Analysis: Putting The Numbers To Work; (2010) 6) S. Schmidgall
and
Agnes L. DeFranco; Ratio Analysis: Financial
Benchmarks For The Club Industry Raymond (2003) 7) Kate Barr; Analyzing Financial Information Using Ratios ; (2005) 8) Woo Gon Kim, Baker Ayoun; Ratio Analysis for the Hospitality Industry: A cross Sector Comparison of Financial Trends in the Lodging, Restaurant, Airline and Amusement Sectors; (2002) 9) Financial Indicators for Critical Access Hospitals; Chris Haris (2009) 10)Laura Lase; The Impact of Financial Ratio Analysis on Financial Decisions; (2003) 11)Timo Salmi, Teppo Martikainen; A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis; (2011) 12)David S. Chesnick; Financial Management and Ratio Analysis for Cooperative Enterprises; RBS Agricultural Economist (2003) 13)Liquidity Analysis Using Cash Flow Ratios and Traditional Ratios: The Telecommunications Sector in Australia ; Ross Kirkham (2003
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To study Ratio Analysis of Indian Oil Corporation Ltd. 14) Khalaf Taani; The effect of financial ratios, firm size and cash flows from operating activities on earnings per share:
(an applied study: on
jordanian industrial sector); (2006) 15)Anupam De, Gautam Bandyopadhyay, B.N. Chakraborty; Application of the Factor Analysis on the Financial Ratios and Validation of the Results by the Cluster Analysis: An Empirical
Study on the Indian Cement
Industry; (2008) 16)Bob Kepler; Ratio analysis - case study - Stortford Yachts Limited; (2008) 17)Sudip Das; Analysis And Interpretation Of Financial Statements: Case Studies; (2008) 18)Jenipher Pringley; Decision making techniques A CIMA case study l; (2010) 19); H. W. Collier; T. Grai; S. Haslit; C. B. McGowan; An example of the use of financial ratio analysis: the case of Motorola (2007) 20)Ilorah Fabian Uzochukwu; The role of ratio analysis in business decisions a case study of o. jaco bros. ent. (nig.) ltd., aba, abia state; (2010) 21)Mack Roswell; Ratio anaylsis (Profitability analysis) Operating profit; (2003) 22)Peter Samsburg; Company ratio analysis- case study of Tesco.; (2011) 23)Mabwe Kumbirai
and Robert Webb; A financial Ratio Analysis of
Commercial Bank Performance in South Africa * (2001) 24)Financial Ratio Analysis, Using Annual Statement STUDIES General: Mhd. Tariq Husain (2006) 25)Anil Kumar Soni & Harjinder Pal Singh Saluja; Financial ratio analysis of dcc bank limited rajnandgaon a case study (2010) 26)J. Nazemi*, M.R. Asgari & S. A. Banijamali; Fuzzy Expert System for Financial Ratio Analysis (Case Study: Cement Industry) (2007) 27)Analysis ratios for detecting financial statement fraud By Cynthia Harrington, Associate Member, CFA (2006)
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To study Ratio Analysis of Indian Oil Corporation Ltd. 28)Victoria's
Milling
Case;
Essay
by renesmee, College,
Undergraduate, January 2010 29)Case study – Horizontal trend analysis; Business Accounting and Finance 2nd Edition Catherine Gowthorpe 2005 Thomson Learning 30)Khalad M.S. Alrafadi and Mazila Md-Yusuf Graduate Business School, Faculty of Business Management; Comparison between Financial Ratios Analysis and Balanced Scorecard; (2005)
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To study Ratio Analysis of Indian Oil Corporation Ltd.
BIBLIOGRAPHY 1) Financial Management,- Sushil Gupta ,6th edition, Kalyani Publishers 2) ―Financial Management theory and practice‖; Prasnna Chandra 7th edition , Tata McGraw hills publishing house 3) New age international publisher research methodology methods and techniques‖; C.R Kothari second rived edition
WEBSITES: 1) www.wikipedia.com 2) www.investopedia.com 3) www.moneycontrol.com 4) www.iocl.com
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