55410154 ratio analysis project in steel plant
TRANSCRIPT
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
1/89
A STUDY ON RATIO ANALYSIS
AT
RASTRIYA ISPAT NIGAM LIMITEDVISAKHAPATNAM
A Project report submitted in partial fulfillment of the requirements for
the award of`
MASTER OF BUSINESS ADMINISTRATIONBy
EMANY VSNV CHANDRA
Regd.No. 096G1E0010
Under the esteemed g!d"n#e $%
Sr!&K&SANYASI RAOASST& GENERAL MANAGER '()A*
V!s"+h","tn"m Stee- P-"nt
V!s"+h","tn"m
Pr$.e#t G!de
VARAHA LAKSHMI NARASIMHA S/AMY
EDU0ATIONAL TRUST GROUP O( INSTITUTIONS1
NARAVA
2334566
0ERTI(I0ATE O( PRO7E0T GUIDE
IN
1
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
2/89
RASTRIYA ISPAT NIGAM LIMITED
This is to certify that EMANY VSNV !AN"#A the project
report entitled a study on RATIO ANALYSIS !n RASTRIYA ISPAT
NIGAM LIMITED is a bonafide wor$ done and submitted in partial
fulfillment of the requirement for the award of Master of %usiness
Administration by #e&d' No& 096G1E0010 under my &uidance (
super)ision durin& the period 3856252363to 6953652366'
St"t!$n: V!s"+h","tn"m
D"te * +,-.+-/.++
K&SANYASI RAO
ASST& GENERAL
MANAGER '()A*RASTRIYA ISPAT NIGAM LIMITED
V!s"+h","tn"m Stee- P-"nt
2
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
3/89
DE0LARATION
01EMANY VSNV 0HANDRAhere by solemnly declare that the
project report entitled a study on theR"t!$An"-ys!s& Submitted by me is
a bonifide wor$ done and it is not submitted to any other uni)ersity or
published anytime before' This project wor$ is in partial fulfillment of
the requirements for the award of the M"ster $% Bs!ness
Adm!n!str"t!$n fromVARAHA LAKSHMI NARASIMHA S/AMYEDU0ATIONAL TRUST GROUP O( INSTITUTIONS1 NARAVA&
P-"#e: VISAKHAPATNAM
D"te: 6;53652366
EMANY VSNV 0HANDRA
3
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
4/89
A0KNO/LEDGEMENT
The satisfaction that accompanies the successful completion
of any tas$ would be incomplete with out mentionin& people who made it
possible and whose encoura&ement and constant &uidance crowned my
effort with success' 0 wish to e2press my deep sense of &ratitude to
Dr P SRINIVAS RAO1 DIRE0TOR1 VARAHA LAKSHMI
NARASIMHA S/AMY EDU0ATIONAL TRUST
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
5/89
0HAPTER 6
5
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
6/89
GENERAL INTRODU0TION
The end products of the business transactions are the 3inancial Statements
comprisin& the position statement or %alance Sheet and the 0ncome Statement or
Profit and 4oss Account' 3inancial statements are the basics for the decision ma$in&
by the Mana&ement and as well as all other Sta$eholder who are interested in the
affairs of the firm such as in)estors1 creditors 1 customers 1suppliers 1 financial
institutions 1 employees 1potential in)estors 1 &o)t'1 and the &eneral public'
0n this project an attempt is made to $now the financial performance of
RASHTRIYA ISPAT NIGAM LIMITED1 VISAKHAPATNAM STEEL PLANT
throu&h #atio Analysis'
OB7E0TIVES O( THE STUDY:
The main objecti)e of the study is to apply theoretical concepts to the practical
situations of #0N4 so as to compare and correlate the actual achie)ements with a
theoretical conclusion'
The main objecti)es of the study are*
To $now the e2tent to which #0N45VSP is efficiently utili6in& its sources to
its operations'
To study the efficiency of o)erall operations'
To analy6e the financial position of the #0N45VSP'
To understand the capital structure of the #0N45VSP throu&h calculatin& of
le)era&e ratios'
To $now the profitability of the #0N45VSP throu&h calculation of profitability
ratios'
To &i)e appropriate su&&estions to the best performance of the or&ani6ation'
6
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
7/89
METHODOLOGY O( THE STUDY:
Methodolo&y is a systematic procedure of collectin& information in order to
analy6e and )erify a phenomenon' The collection of information is from two
principle sources' They are*
6& Pr!m"ry D"t"
2& Se#$nd"ry D"t"
6& Pr!m"ry D"t":
0t is the information collected directly with out any references' 0n this study it
is &athered throu&h inter)iews with concerned officers and staff1 either indi)idually or
collecti)ely1 sum of the information has been )erified or supplemented with personal
obser)ation conductin& personal inter)iews with the concerned officers of 3inance
"epartment of Visa$hapatnam Steel Plant'
2& Se#$nd"ry D"t":
The Secondary "ata was collected from already published sources such as1
Pamphlets of Annual #eports1 #eturns and 0nternal #ecords1 reference from Te2t
%oo$s and 7ournals relatin& to 3inancial Mana&ement' The data collection includes*
(a) ollection of required data from Annual #eports of Visa$hapatnam
Steel Plant'
(b) #eference from Te2t %oo$s and 7ournals relatin& to 3inancial
Mana&ement'
7
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
8/89
LIMITATIONS O( THE STUDY:
Thou&h the project is completed successfully a few limitations may be there'
Since the procedure and polices of the company will not
allow to disclose some confidential financial information1 the
project has to be completed with the a)ailable data &i)en to us'
The study is carried basin& on the information and
documents pro)ided by the or&ani6ation and based on the
interaction with the )arious employees of the respecti)e
departments'
Analysis is limited to the results of #0N45VSP and not
compared to industry standards 5 results'
"ata in some of the ratios has been directly ta$en from
the prepared reports of #0N4 due to non-disclosure of input data
due to confidentiality'
8
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
9/89
0HAPTER5II
9
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
10/89
DEVELOPMENT O( STEEL INDUSTRY IN INDIA:
7apan remained the lar&est e2porter of semi-finished and finished steel
products in /../ followed by #ussia and 8$raine'
9ther si&nificant recent de)elopments in The "e)elopment of Steel 0ndustry
in 0ndia should be )iewed in conjunction with the type and system of :o)ernment that
has been rulin& the country' !owe)er1 its production in si&nificant quantity startedonly after +;..' The &rowth of steel industry can be studied by di)idin& the period
into pre and post independence era' %y +; MT by the ;.?s'
+'+ Gr$=th $% Stee- Indstry:
The &rowth in a chronolo&ical order is depicted below*
S No Year :rowth
+' +@=. 9sier Marshall heather constructed the first manufacturin&
plant at port-motor in Madras Presidency'
/' +@, 7ames Ers$in founded the %en&al 3rame Bor$s'
=' +@;; 7amshedji TATA initiated the scheme for an inte&rated
Steel Plant
' +;.> 3ormation of T0S9
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
11/89
#our$ela1 %hilai1 and "ur&apur' T0S9 started its
e2pansion pro&rammed'
;' +;-+;>+ Second 3i)e-Year Plan - A bold decision was ta$en up to
increase the in&ot steel output in 0ndia to > million tones
per year and its production at #ou$ema1 %hilai and
"ur&apur Steel Plant started'
+.' +;>+-+;>> Third 3i)e-Year Plan F "urin& the plan the three Steel
Plants under !S4 ( T0S9 were e2panded'
++' +;> %o$aro Steel Plant came into e2istence
+/' +;>>-+;>; #ecession Period F Till the e2pansion pro&rams were
acti)ely e2isted durin& this period
+=' +;>;-+;, 3ourth 3i)e-Year Plan F Salem Steel Plant started'
4icenses were &i)en for settin& up of many Mini Steel
Plants and re-rollin& mills :o)ernment of 0ndia' Plants in
south are each in Visa$hapatnam and Carnata$a' SA04
was formed durin& this period on /th7anuary +;,='
+' +;,-+;,; 3ifth 3i)e-Year Plan F The idea of settin& up the f ifth
inte&rated Steel Plant1 the first re-based plant at
Visa$hapatnam too$ a definite shape' At the end of the
3ifth 3i)e-Year Plan the total installed capacity from si2
inte&rated plants was up to +.'> million tons'
+' +;@.-+;@< Si2th 3i)e-Year Plan F Bor$ on Visa$hapatnam Steel
Plant started with a bi& ban& and top priority was accorded
to start the plant' Schemes for moderni6ation of %hilai
Steel Plant1 #our$ela Steel Plant1 "ur&apur steel plant and
T0S9 were initiated' apacity at the end of Si2th 3i)e-
Year Plan from si2 inte&rated plants stood ++'
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
12/89
around @,
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
13/89
were completed durin& this period' They started production durin& the end of this
plan'
The salient features are &i)en below*
Plant apacity 4ocation ollaboration Production DTons
#SP Sundar&arh1 9rissa :ermany ,/.1...
%SP "ur&apur1 M'P' 8'S'S'# ,,.1...
"SP %urdwan1 B'%' 8C @..1...
0n addition to the abo)e %SP and "SP each were ha)in& the capacity to
produce =..1... tons of pi& iron for sale'
Th!rd %!>e5ye"r ,-"n '6486 t$ 6488*:
"urin& this period1 the three steel plants under !S41 T0S91 and 00S9 were
e2panded as shown below' !owe)er1 these could be completed only by +;>@ F +;>;'
#ecession Period D+;>> F +;>;*
The amblin& e2pansion pro&ram ta$en up durin& the Third 3i)e-Year Plan
could not be completed durin& that period' All the e2pansion pro&rams were acti)ely
e2ecuted durin& this period
($rth (!>e5Ye"r P-"n '6484 ? 64;@*:
%alancin& facilities were incorporated in all the steel plants' Salem Steel Plant
wor$ was ta$en up durin& this period' 4icenses were &i)en for settin& up of many
Mini Steel Plants and #ollin& Mills' :o)ernment accepted the idea of settin& up two
more Steel Plants in the South one at Visa$hapatnam and other at !ospet in
Carnata$a' %oth of them were en)isa&ed to produce plain low arbon Steel Products
13
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
14/89
initially with a capacity of / MT5year of in&ots' Steel authority of 0ndia 4td'1 was also
formed durin& this period on /nd 7an +;,=' entral #esearch and "e)elopment
9r&ani6ation was set up in 7une1 +;,= to tac$le the research and de)elopment
problems of 0ron and Steel 0ndustry'
(!%th (!>e5Ye"r P-"n '64;@ t$ 64;4*:
Bor$ on Salem project pro&ressed well' %o$aro with +', MT capacities
started in 3eb +;,@' The e2pansions of %hilai Steel Plant form /'< MT to MT and
%o$aro from +', MT to '. MT pic$ed up momentum' The idea of settin& up the MT5year'
Annual plans +;,; to +;@.* )arious plans named abo)e were re)iewed and the
pro&ress on different plants consolidated' So)iet F 8nion has a&reed to help in settin&
up the Vi6a& steel plant'
S!th (!>e5Ye"r P-"n '643 ? 649*:
Bor$ in e2pansion of %hilai and %o$aro Plant was pro&ressed' %o$aroHs
intermediate sta&e of /'< MT completed' Many of the units were commissioned e'&' a
Salem steel plant was commissioned b on =+';'@+ wor$ on Vi6a& Steel Plant started
with a ban& and c top priority was accorded to moderni6e the plant at T0S9'
Schemes for moderni6ation of %SP1 #SP1 "SP1 and 00S9 were initiated at the end of
si2th fi)e-year plan' The capacity from si2 inte&rated steel plants stood at ++' MT'
Se>enth (!>e5Ye"r P-"n '649 t$ 6446*:
Almost all the units in the e2pansion wor$ of %hilai and %o$aro to MT
completed' Pro&ress of Vi6a& Steel Plant pic$ed up and the rationali6ed concept has
been introduced to commission the plant with = MT liquid steel capacities by +;;.'
E!ghth (!>e5Ye"r P-"n '6442 t$ 644;*:
14
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
15/89
All units of Vi6a& Steel Plant were commissioned by 7uly1 +;;/' :o)ernment
of 0ndia has &i)en permission to set up Mini Steel Plants in Pri)ate Sectors'
N!nth (!>e5Ye"r P-"n '644 t$ 2332*:
National "e)elopment ouncil under entral :o)ernment has deposited #s'
@
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
16/89
As a result of these economic de)elopments 00S0 has projected an increase by
>'/G or
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
17/89
0nte&rated Steel Plants
Mini Steel Plants
#e-rollin& Mills
Alloy ( Special Steel Plants
0nte&rated Steel Plants ha)e lar&er capacity and produce Steel from basic raw
materials and the other three cate&ories mentioned are characteri6ed by low
in)estment and low brea$-e)en point'
0h"r"#ter!st!#s $% Integr"ted Stee- P-"nts:
They ha)e lar&e capacities'
!i&hly capital intensi)e'
They ha)e lon& &estation period'
4abour intensi)e'
They would ha)e all facilities includin& raw materials resources1 water supply1
power supply1 testin& and inspection facilities1 township facilities1 medical1
educational and recreational etc'
0nter dependency of all the processin& units on the proceedin& and succeedin&
units in the path of materials flow'
A potential source for earnin& forei&n e2chan&e throu&h e2ports'
They ser)e as centers for the de)elopment of ancillary industries'
They are major consumer of refractory materials'
The !ntegr"ted Stee- P-"nts !n Ind!" "re:
#our$ela Steel Plant
17
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
18/89
%hilai Steel Plant
%o$aro Steel Plant
"ur&apur Steel Plant
0ndian 0ron and Steel ompany D00S9
Tata 0ron and Steel ompany DT0S9
Visa$hapatnam Steel Plant DVSP
E!m P$-!#y '23325233;*:
To facilitate sustained &rowth in e2ports to attain a share of +G of &lobal
merchandise trade'
To stimulate sustained economic &rowth by pro)idin& access to essential raw
materials1 intermediates1 components1 consumables and capital &oods required
for au&mentin& production and pro)idin& ser)ices'
To enhance the technolo&ical stren&th and efficiency of 0ndian a&riculture1
industry and ser)ices1 thereby impro)in& their competiti)e stren&th while
&eneratin& new employment opportunities1 and to encoura&e the attainment of
internationally accepted standards of quality'
To pro)ide consumers with &ood quality &oods and ser)ices at internationally
competiti)e prices while at the same creatin& a le)el playin& field for the
domestic producers
The Ne= Indstr!"- P$-!#y Reg!me:
The New 0ndustrial policy has opened up the iron and steel sector for pri)ate
in)estment by
Da #emo)in& it from the list of industries reser)ed for public sector and
Db E2emptin& it from compulsory licensin&'
18
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
19/89
0mports of forei&n technolo&y as well as forei&n direct in)estment are freely
permitted up to certain limits under an automatic route' Ministry of Steel plays the
role of facilitator1 pro)idin& broad directions and assistance to new and e2istin& steel
plants1 in the liberali6ed scenario'
The Gr$=th Pr$%!-e:
STEEL:
The liberali6ation of industrial policy and other initiati)es ta$en by the
:o)ernment ha)e &i)en a definite impetus for entry1 participation and &rowth of the
pri)ate sector in the steel industry' Bhile the e2istin& units are bein&
moderni6ed5e2panded1 a lar&e number of new5&reen field steel plants ha)e also come
up in different parts of the country based on modern1 cost effecti)e1 state of-the-art
technolo&ies'
At present1 total Dcrude steel ma$in& capacity is o)er = million tons and
0ndia1 the @thlar&est producer of steel in the world1 has to its credit1 the capability to
produce a )ariety of &rades and that too1 of international quality standards' As per the
ratin&s of the presti&ious IBorld Steel "ynamicsJ1 0ndian !# products are classified
in the Tier 00 cate&ory quality products- a major reason behind their acceptance in the
world mar$et' E81 7apan has qualified for the top slot1 while countries li$e South
Corea1 8SA share the same class as 0ndia'
0n pi& iron also1 the &rowth has been substantial' Prior to +;;+1 there was only
one unit in the secondary sector' Post liberali6ation1 the A030s has sanctioned /+ new
projects with a total capacity of appro2 ='; million tones' 9f these1 +> units ha)e
already been commissioned' The production of millions in /../-.n ton=' "urin& the
year /..=-.1 the production of Pi& 0ron was
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
20/89
M"r+et S#en"r!$:
After liberali6ation1 with hu&e scale addition to steel ma$in& capacity'
Apparent consumption of steel increased from +'@ million tons in
+;;+-;/ to =.'/>< million tons in /..=-.'
The production of steel in /..=-. is =>'+;= million tons as a&ainst
=='>, million tons in /../-.= thereby re&isterin& ,'
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
21/89
"emand- A)ailability of iron and steel in the country is projected by Ministry
of Steel annually'
:aps in A)ailability are met mostly throu&h imports'
0nterface with consumers by way of Steel onsumer ouncil e2ists1 which is
conducted on re&ular basis'
0nterface helps in redressin& a)ailability problems1 complaints related to
quality'
Pr!#!ng ) D!str!Ct!$n
Price re&ulation of iron ( steel was abolished on +>'+'+;;/'
"istribution controls on iron ( steel remo)ed e2cept < priority sectors1 )i6'
"efence1 #ailways1 Small Scale 0ndustries orporations1 E2porters of
En&ineerin& :oods and North Eastern re&ion'
Allocation to priority sectors is made by Ministry of Steel'
:o)ernment has no control o)er prices of 0ron ( Steel'
9pen mar$et prices are &enerally on rise'
Price increases of late ha)e ta$en place mostly in lon& products than flat
products'
Im,$rts $% Ir$n ) Stee-:
0ron ( Steel are freely importable as per the e2tant policy'
0ndia has been annually importin& around /'.< Million Tones of Steel'
21
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
22/89
0mport duty on se)eral raw materials used by the steel sector li$e non-co$in&
coal1 met co$e and nic$el has been reduced to
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
23/89
The :o)ernment has ta$en a number of steps to ensure the a)ailability of iron
and steel items which inter-alias includes reduction in E2cise "uty by +>G with
addition to Educational ess /G on +>G'
Le>!es $n Ir$n ) Stee-:
D( LEVY:
This was a le)y started for fundin& moderni6ation1 e2pansion and
de)elopment of steel sector' The fund1 inter-alias1 supports*
+ apital e2penditure for moderni6ation1 rehabilitation1 di)ersification1
renewal ( replacement of 0nte&rated Steel plants'
/ #esearch ( "e)elopment
= #ebates to SS0 orporations
E2penditure on E#8 of 7P
S"3 le)y was abolished on /+'';
abinet decided that corpus could be recycled for loans to Main
producers
0nterest on loans to Main Producers is set aside for promotion of #("
on steel etc'
An Empowered ommittee has been set up to &uide the #(" effort in
this sector'
23
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
24/89
0HAPTER5III
0OMPANY PRO(ILE
The :o)ernment of 0ndia has decided to set up an inte&rated Steel Plant at
Visa$hapatnam to meet the &rowin& domestic needs of steel' Visa$hapatnam Steel
24
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
25/89
Plant was the effect of the persistent demands and mass mo)ements' 0t is another step
towards increasin& the country?s steel production'
The decision of the :o)ernment to set up an inte&rated steel plant was laid
down by the then Prime Minister Smt' 0ndira :andhi' The Prime Minister laid the
foundation stone on /.th 7anuary +;,+'
The consultant1 M5s M N "astur ( o DP)t 4td' submitted a techno-
economic feasibility report in 3ebruary +;,/1 and detailed project report for the plant1
with an annual capacity of =' million tones of liquid steel'
The :o)ernment of 0ndia and 8SS# si&ned an a&reement on +/ th7une +;,;
for the co-operation in settin& up =' million tones inte&rated Steel Plant' The project
was estimated to cost to #s'=1 @;,'/@ crores based on prices as on th Luarter of
+;@+'!owe)er1 on completion of the construction and commissionin& of the whole
Plant in +;;/1 the cost escalated to #s'@1 , million tones of saleable steel'
0t has set up two major %last 3urnaces1 the :oda)ari and the Crishna1 which
are the en)y of any modern steel ma$in& comple2'
The economy of a nation depends on core sector industries li$e iron and steel'
Steel is the basic input for construction1 machines buildin& and transport industries'
Ceepin& in )iew the importance of steel the followin& inte&rated steel plant with
25
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
26/89
forei&n collaborations was constructed in the public sector in the post independence
era'
ORGANIATION 0HART
VISION:
To be a continuously &rowin& world-class company'
Be shall*
!arness our &rowth potential and sustain profitable &rowth'
26
CHAIRMAN CUM MANAGING DIRECTOR
"irector
D3inance"irector
Dommercial
"irector
DPersonnel
"irector
D9perations"irector
DVi&ilance
E"
D3inance
ompany
Secretary
A:MD0nt' Audit
E" DMM
Addl' :M
DM$t&
Addl' :M
DM$t&
- Ser)ices
( E2ports
":M
DM(!S 05
:M DP(A
Addl' :M
DP(0#
":M DTr&
":M D!#"
":M D4e&al
Affairs
:M
DBor$s
Addl' :M
DLAT"
Addl' :M
DAudio (Telco
Addl' :M
DSer)ices
Addl' :M
DSteel
Addl' :M
D1 S (
E"
DMaint'
:M
DMaint'
Addl' :M
D#(#M
":M
DSystem
:M
D"(E(
05 PES
Addl' :M
DVi&'
AM
Dordon
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
27/89
"eli)er hi&h quality and cost competiti)e products and be the first choice of
customers'
reate an inspirin& wor$ en)ironment to unleash the creati)e ener&y of people'
Achie)e e2cellence in enterprise mana&ement'
%e a respected corporate citi6en1 ensure clean and &reen en)ironment and de)elop
)ibrant communities around us'
M!ss!$n:
To attain +> million tone liquid steel capacity throu&h technolo&ical up
-&radation1 operational efficiency and e2pansion1 to produce steel at international
standards of cost and quality1 and to meet the aspirations of the sta$eholders'
0$re V"-es:
ommitment
ustomer satisfaction
ontinuous impro)ement
oncern of en)ironment
reati)ity and inno)ation&
BRIE( IDEA ABOUT STEEL MAKING PRO0ESS
The modern era in steel ma$in& be&an with the introduction of !enry
%essemerHs ( %essemer process in the late +@
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
28/89
in lar&e quantities cheaply1 so that Mild Steel is now used for most purposes for
which wrou&ht iron was formerly used' This was only the first of a number of
methods of steel production' The :ilchrist-Thomas process Dor basic %essemer
process was an impro)ement to the %essemer process1 linin& the con)erter with a
basic material to remo)e phosphorus' Another was the Siemens-Martin process of
open hearth steelma$in& which li$e the :ilchrist-Thomas process complemented1
rather than replaced1 the ori&inal %essemer process'
These were rendered obsolete by the 4in6-"onawit6 process ofbasic o2y&en
steel ma$in&1 de)eloped in the +;
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
29/89
29
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
30/89
HUMAN RESOUR0ES
HRD PHILOSOPHY IN VISAKHAPATNAM STEEL PLANT
Employees of the or&ani6ation are &reatest and most )aluable resources'
Bhole on the one hand1 !#" should appropriately harness the employee
potential for the attainment of the company objecti)es1 the company on the
other1 as its corporate responsibility1 should create an enablin& climate where
in human talent &ets the best opportunity for self e2pression1 all round
de)elopment and fulfillment'
People are more than mere resources and therefore it will be the company?s
sincere endea)or to treat people with all the respect and that is warranted when
employees are seen as more mere instrumentalities'
!#" as a mana&ement function will be &i)en a place of strate&ic priority1
alon& with function li$e production1 maintenance1 materials on finance in the
o)erall scheme of mana&ement action in the company'
!#" does not refer to trainin& alone1 nor it is just a new name for trainin&' 0n
#0N45VSP !#" refers to creati)e and inno)ati)e initiati)es in se)eral
mana&ement functions for the de)elopment and &rowth of employees
!#" should e)entually be a core philosophy of all mana&ement actions and
should not remain merely a departmental 5 sectional acti)ity'
All functional and di)isional heads responsible for )arious acti)ities of the
company will imbibe the !#" spirit and suitability inte&rate !#" into their
plans1 decisions and actions
30
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
31/89
HRD OC.e#t!>es $% V!s"+h","tn"m Stee- P-"nt:
To pro)ide initially a suitable match between employee competence le)el and
company?s wor$ requirements
To foster an appropriate climate and culture which nurtures employee
competence and adequate moti)ational le)els for the application of their
abilities to assi&ned jobs5roles with required commitment'
To enable employees see$ &reater identification with the company by fusin&
mana&ement decisions and actions with the requisite care1 concern and
de)elopmental approach'
To initially enable the employees and the or&ani6ation achie)e its mission and
objecti)es and business &oals throu&h !#"'
OHSAS5 6336 0ert!%!#"t!$n:
0t is widely reco&ni6ed that the wor$ itself and the wor$ en)ironment are
factors are paramount importance for health and well-bein& of the wor$in& and
&eneral population' Most industrial jobs are inherently associate with certain wor$in&
conditions which are inimical to health and wor$ers e2posed to them sooner or later
succumb to their ad)erse influence unless adequately protected' The principles of
occupational ris$ mana&ement may be the same in de)eloped and de)elopin&
countries' !owe)er1 there can be a wide di)ersity in practice' A major trend in the
re&ulation of industrial ris$s to human health and the en)ironment is the pro)ision of
rele)ant information to all sta$eholders and ris$ bearers' The %ritish Standard
0nstitute D%S0* 9ccupational !ealth and Safety Assessment Series D9!SAS
specification pro)ide theoretical insi&hts to enable an or&ani6ation to control its
occupational health and safety D9!(S ris$s and impro)e its performance'
31
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
32/89
Visa$hapatnam Steel Plant DVi6a& Steel is an 0S9 ;..+1 0S9 +..+1 and
9!SAS +@..+1 certified public sector or&ani6ation in 0ndia' 0t is the only steel plant
in 0ndia1 had all the three certificates' This paper re)iews $ey aspects li$e ha6ard
identification and ris$ assessmentD!0#A carried out in es:
E2pand plant capacity to >'=mT by /..@-.; with the mission to e2pand
further in subsequent phases as per the corporate plan
Sustain &ross mar&in to turno)er ration /
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
33/89
3ollow clearly documented procedures for achie)in& e2pected quality standard
of products and ser)ices'
ontinuously stri)e to impro)e quality of all material1 processes and products'
Maintain an enablin& en)ironment1 which encoura&es acti)es in)ol)ement of
all employees to pursue continuous impro)ement of quality'
Te#hn$-$g!#"- H!gh-!ghts $% VSP:
3irst shore based inte&rated steel plant'
Selecti)e crushin& with pneumatic separation of coal blend'
, Meter tall o$e 9)ens'
"ry Luenchin& of hot co$e and production of steam and power from hot inert
&ases'
%ase-mi2 yard for the Sinter Plant'
=/.. cu' m %last 3urnace ha)in& belled-less top equipment with con)eyor
char&in&'
:ranulation of +..G molten sla& at the ast !ouse'
%'3' top pressure reco)ery turbine for power &eneration'
"esulphuri6ation facilities for pre-treatment of hot metal'
Sub lance measurement of dynamic blowin& control with computer'
+..G continuous castin& of liquid steel'
!i&h capacity1 hi&h speed1 computer controlled multi-line mills'
8se of on-line heat treatment ITemp coreJ processes for reinforcement bars'
8se of No twist rollin& and controlled coolin& IStelmoreJ of wire rods'
0ncorporation of peripheral yard for incomin& and out&oin& materials'
33
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
34/89
3irst inte&rated steel plant to recei)e 0S9 ;../ certification for all its products'
M".$r s$r#es $% R"= M"ter!"-s:
0ron 9re lumps ( fines %ailadilla1 M'P
%3 4ime Stone 7a&&ayyapeta1 A'P
SMS 4ime Stone 8AE
%3 "olomite "ubai
SMS "olomite Madharam1 A'P
Man&anese 9re hipuripalli1 A'P
%oiler oal Talcher1 9rissa
o$in& oal Australia
Bater supply Yeluru canal1 Andhra Pradesh
Power supply apti)e power plant
Medium coo$in& coal :idi5Swan&5#ajarappa5Car&il
M".$r Un!ts:
"EPA#TMENTS
ANN8A4 AP'
DK...T 8N0TS D='. MT STA:E
9CE 9VE#NS /1/>+= %atteries each of >, o)ens ( , Mts
!ei&ht
S0NTE# P4ANT
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
35/89
YEA# EE8T0VES N9N-EE8T0VES
=+-=-+;;, />+, ++, ++, +.@,
=+-=-/... />@= +=, ++,/,
=+-=-/..@ ;>, ++;
=+-=-/..;
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
36/89
Engineering
Diploma
Graduation/PG
ITI
iterate!
0
2000
4000
6000
8000
10000
12000
14000
16000
EXECUTIVES NON-
EXECUTIVES
31-3-1997
31-3-1998
31-3-199931-3-2000
31-3-2001
31-3-2002
31-3-2003
31-3-2004
31-3-2005
31-3-200631-3-2007
31/03/2008
31/03/2009
31/03/2010
Error* #eference source not found"-!%!#"t!$n Pr$%!-e "s $n F6&3F&2363:
En&ineerin& -+'=G
"iploma -+.'==G
:rad5P: -++'>
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
37/89
"or#!
Pro$e%t!
&ine!
't(er!
DIVISION5/ISE MAN PO/ER:
Bor$s -@/'.=G
Projects -/'+.G
Mines -/'+G
9thers -+=',/G
A/ARDS:
+' 0S9 ;../ for SMS and all the down stream units F a unique distinction in
the steel industry'
/' 0ndira Priya "arshini Vri$sha Mitra award +;;/-;=1 Nehru memorial
national award for pollution control +;;/-;= ( +;;=-;'
=' EEP e2port e2cellence award F +;;-;'
>' Steel ministries trophy I%est safety performance F +;;>'J
,' 00M national quality commitment award F +;;,'
@' :old star award for e2cellent performance in producti)ity'
;' 8dyo& e2cellence &old medal for e2cellence in steel plant'
+.' E2cellence award for out standin& performance in producti)ity mana&ement1
quality and inno)ation'
++' 0SPAT Sura$sha Puras$ar D+stpri6e for lar&est accident free period +;;+-;'
+/' PM Trophy for the year /../-.= as the %est 0nte&rated Steel Plant
+=' Borld quality commitment international star award in /..
+' ll-:% National Award in /..$->ement ) Pr$#ess !m,r$>ements:
The ima&ination and creati)ity of employees ha)e always been $ey success
factors for the company' Employees of #0N4 ha)e always been at the forefront in
contributin& ideas for process impro)ements' Voluntary in)ol)ement of
employees in /
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
39/89
0HAPTER5IV
0$n#e,t"- (r"me /$r+
39
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
40/89
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
41/89
The term ratio refers to the numerical or quantitati)e relationship between two
items5)ariables' This relationship can be e2pressed as*
+' Percenta&es1 say1 Net Profits are /
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
42/89
As a tool of financial mana&ement1 ratios are of crucial si&nificance' The
importance of ratio analysis lies in the fact that presents facts on a comparati)e basis
and enables the drawin& inference re&ardin& the performance of a firm' #atio
analysis is rele)ant in assessin& the performance of a firm in respect to the followin&
aspects'
+' 4iquidity position
/' 4on&-term sol)ency
=' 9perational efficiency
' 9)erall profitability
en#y:5#atio analysis is equally useful for assessin& the lon&-term financial )iability
of a firm' This aspect of the financial position of a borrower is of concern to
the lon&-term creditors1 security analysts and the present and potential owners
of a business' The lon&-term sol)ency is measured by the le)era&e5capital
structure and profitability ratios1 which focus on earnin& power and operatin&
efficiency' #atio analysis re)eals the stren&th and wea$nesses of a firm in this
respect' The le)era&e ratios1 for instance1 will indicate whether a firm has a
reasonable proportion of )arious sources of finance or if it is hea)ily loaded
42
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
43/89
proportion of )arious sources of finance or if it is hea)ily loaded with debt in
which case its sol)ency is e2posed to serious strain' Similarly the )arious
profitability ratios would re)eal whether or not the firm is able to offer
adequate return to its consistent with the ris$ in)ol)ed' 0t includes "ebt-equity
ratio1 ash co)era&e ratio1 the times interest earned ratio etc'
F& O,er"t!ng E%%!#!en#y:5
Another dimension of the usefulness of the ratio analysis1 rele)ant from the
)iew point of mana&ement1 is that it throws li&ht on the de&ree of efficiency in
the mana&ement and utili6ation of its assets' The )arious acti)ity ratios
measure this $ind of operational efficiency'
@& O>er"-- Pr$%!t"C!-!ty:5
8nli$e the outside parties1 which are interested in one aspect of financial
position of a firm1 the mana&ement is constantly concerned about the o)er-all
profitability of the enterprise' That is1 they are concerned about the ability of
the firm to meet its short-term as well as lon&-term obli&ations to its creditors1
to ensure a reasonable return to its owners and secure optimum utili6ation of
the assets of the firm' This is possible if an inte&rated )iew is ta$en and all the
ratios are considered toðer'
9& Inter5%!rm 0$m,"r!s$n:5
#atio analysis not only throws li&ht on the financial position of a firm but also
ser)es as a steppin& stone to remedial measures' This is made possible due to
inter-firm comparison and comparison with industry a)era&es' A sin&le fi&ure
of a particular ratio is meanin&less unless it is related to some standard or
norm' 9ne of the popular techniques is to compare the ratios of a firm with
the industry a)era&e' An inter-firm comparison would demonstrate the firm?s
position )is-Q-)is its competitors'
8& Trend An"-ys!s:5
43
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
44/89
#atio analysis enables a firm to ta$e the time dimension into account' 0n other
words1 whether the financial position of a firm is impro)in& or deterioratin&
o)er the years' This is made possible by the use of trend analysis' The
si&nificance of a trend analysis of ratios lies in the fact that the analysis can
$now the direction of mo)ement1 i'e'1 whether the mo)ement is fa)orable or
unfa)orable' 3or e2ample1 the ratio may be low as compared to the norm but
the trend may be upward' 9n the other hand1 thou&h the present le)el may be
satisfactory but the trend may be a declinin& one'
R"t!$ An"-ys!s5L!m!t"t!$ns:
#atio Analysis is a widely used tool of financial analysis' Yet1 it suffers from
)arious limitations' The operational implication of this is that while usin& ratios1 the
conclusions should not be ta$en on their face )alue' Some of the limitations1 which
characteri6e ratio analysis1 are
i' "ifficulty in comparison'
ii' 0mpact of 0nflation1 and
iii' onceptual "i)ersity
!& D!%%!#-ty !n #$m,"r!s$n:5
9ne serious limitation of ratio analysis arises out of the difficulty associated
with there comparability' 9ne technique that is employed is inter-firm
comparison' %ut such comparison is )itiated by different procedures adopted
by )arious firms'
"ifferences in basis of in)entory )aluation De'&'*- last in first out1
a)era&e cost and cost
"ifferent depreciation methods Di'e' strai&ht line Vs' written down
basis
Estimated wor$in& life of assets1 particularly of plant and equipment
Amorti6ation of deferred re)enue e2penditure such as preliminary
e2penditure and discount on issue of shares
44
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
45/89
apitali6ation of lease
Treatment of e2traordinary items of income and e2penditure and so
on'
Secondly1 apart from different accountin& procedures1 companies may ha)e
different accountin& procedures1 implyin& differences in the composition of assets1
particularly current assets' 3or these reasons1 the ratios of two firms may not be
strictly comparable'
!!& Im,"#t $% In%-"t!$n:5
The second major limitation of the ratio analysis is associated with price le)el
chan&es' This is a wea$ness of the traditional financial statements1 which are
based on historical cost' An implication of this feature of the financial
statements as re&ards ratio analysis is that assets acquired at different periods
are1 in effect1 shown at different prices in the balance sheet1 as they are not
adjusted for chan&es in the price le)el' As a result1 ratio analysis will not be
strictly comparable'
!!!& 0$n#e,t"- D!>ers!ty: 5
The factor that influences the usefulness of ratios is that there is difference of
opinion re&ardin& the )arious concepts used to compute the ratios' There is
always room for di)ersity of opinion as to what constitutes shareholderRs
equity1 debt1 assets1 profit and so on'
3inally1 ratios are only a post-mortem analysis of what has happenedbetween two balance sheet dates' 3or one thin& the position in the interim
period is not re)ealed by ratio analysis' Moreo)er1 they &i)e no clue about the
future'
0n brief1 ratio analysis suffers from some serious limitations' The
analysis should not be carried away by its o)er simplified nature1 easy
computation with hi&h de&ree of precision' The reliability and si&nificance
attached to ratios will lar&ely depend upon the quality of data on which they
45
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
46/89
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
47/89
The comparison of calculated ratios with the standards will help the analyst in
formin& his opinion about financial situation of the concern'
The ratios are only the tools of analysis but their interpretation will depend
upon the caliber and competence of the analyst' !e should be familiar with
)arious financial statements and the si&nificance of chan&es etc'
A wron& interpretation may create ha)oc for the concern since wron&
conclusions may lead to wron& decisions' The utility of ratios is lin$ed with
e2pertise of the analyst'
The ratios are only &uidelines for the analyst he should not base his decisions
entirely on them' !e should study any other rele)ant information1 situation in
the concern1 &eneral economic en)ironment etc'1 before reachin& final
conclusions'
The study of ratios in isolation may not always pro)e useful' The
interpretation should use the ratios as &uide and may try to solicit any other rele)ant
information which helps is reachin& a correct decision'
R"t!$ An"-ys!s5Ty,es:
Se)eral ratios1 calculated from the accountin& data1 can be &rouped into
)arious classes accordin& to financial acti)ity or function to be e)aluated' As stated
earlier1 the parties interested in financial analysis are short-term and lon&-term
creditors1 owners and mana&ement' Short-term creditorsR main interest is in the
liquidity position or the short-term sol)ency of the firm' 4on&-term creditorsR1 on the
other hand1 are more interested in the lon&-term sol)ency and profitability of the firm'
Similarly1 owners concentrate on the firm?s profitability and financial condition'
Mana&ement is interested in e)aluatin& e)ery aspect of the firm?s performance' They
ha)e to protect the interests of all parties and see that the firm &rows profitably' 0n
)iew of the requirements of the )arious users of ratios1 we may classify them into the
followin& four important cate&ories*
47
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
48/89
40L80"0TY #AT09S
4EVE#A:E #AT09S
AT0V0TY #AT09S
P#930TA%040TY #AT09S
LIUIDITY RATIOS:
0t is e2tremely essential for a firm to be able to meet its obli&ations as they
become due' 4iquidity ratios measure the firm?s ability to meet current obli&ations'
0n fact1 analysis of liquidity needs the preparation of cash bud&ets and cash
and 3und 3low statements but liquidity ratios1 by establishin& a relationship between
cash and other current assets to current obli&ations pro)ided a quic$ measure of
liquidity' A firm should ensure that it does not suffer from lac$ of liquidity1 and also
that it does not ha)e e2cess liquidity' The failure of a company to meet its obli&ations
due to lac$ of sufficient liquidity1 will result in a poor creditworthiness1 loss of
creditorsR confidence1 or e)en in le&al tan&les resultin& in the closure of the company'
A )ery hi&h de&ree of liquidity is also bad idle assets earn nothin&' The firm?s fundswill be unnecessarily tied up in current assets' Therefore1 it is necessary to stri$e a
proper balance between hi&h liquidity and lac$ of liquidity' The most common ratios1
which indicate the e2tent of liquidity or lac$ of it1 are*
+' 8##ENT #AT09
/' L80C #AT09
=' AS! #AT09
6& 0URRENT RATIO:
The current ratio is calculated by di)idin& current assets by current liabilities'
48
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
49/89
urrent assets
urrent #atio
urrent liabilities
urrent assets include cash and those assets1 which can be con)erted into cash
within a year1 such as Mar$etable Securities1 "ebtors and 0n)entories' Prepaid
e2penses are also include in current assets as they represent the payments that will not
be made by the firm in future' urrent 4iabilities include reditors1 %ill payable1
Accrued e2penses1 Short-term ban$ loan1 and 0ncome Ta2 4iability and 4on&-term
debt maturin& in the current year'
The current ratio is a measure of the firmsR short-term sol)ency' The hi&herthe current ratio1 the lar&er is the amount of rupees a)ailable per #upee of current
liability1 the more is the firmsR ability to meet current obli&ations and the &reater is the
safety of funds of short-term creditors'
2& UI0K RATIO:
The Luic$ ratio is calculated by di)idin& quic$ assets by quic$ liabilities'
Luic$ assets
Luic$ #atio
Luic$ liabilities
Luic$ assets or 4iquid assets mean those assets which are immediately
con)ertible into cash without much loss' All current assets e2cept prepaid e2penses
and in)entories are cate&ori6ed in liquid assets' Luic$ liabilities means those
liabilities1 which are payable within a short period' Normally1 %an$ o)erdraft and
ash credit facility1 if they become permanent mode of financin& are in quic$
liabilities'
As this ratio concentrates on cash1 mar$etable securities and recei)ables in
relation to current obli&ation1 it pro)ides a more penetratin& measure of liquidity than
current ratio'
49
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
50/89
F& 0ASH RATIO:
The cash ratio is calculated by di)idin& cash mar$etable securities by
current liabilities
ash #atio ash Mar$etable Securities
urrent liabilities
Since cash is most liquid asset1 a financial analyst may e2amine cash ratio and
its equi)alent to current liabilities' Trade in)estment or mar$etable securities are
equi)alent of cash therefore1 they may be included in the computation of cash ratio'
LEVERAGE RATIOS:
The short-term creditors li$e ban$ers and suppliers of raw material are more
concerned with the firmsR current debt-payin& ability' 9n the other hand1 lon&-term
creditors li$e debenture holders1 financial institutions etc'1 are more concerned with
the firmsR lon&-term financial stren&th' 0n fact1 a firm should ha)e stron& short-as
well as lon&-term financial position' To jud&e the lon&-term financial position of the
firm1 financial le)era&e1 or apital structure1 ratios are calculated' These ratios
indicate mi2 of funds pro)ided by owners and lenders' As a &eneral rule1 there should
be an appro2imate mi2 of debt and owner?s equity in financin& the firmsR assets'
The manner in which assets are financed has a number of implications' 3irst1
between debt and equity1 debt is more ris$y from the firmsR point of )iew' The firm
has a le&al obli&ation to pay interest on debt holders1 irrespecti)e of the profits made
or losses incurred by the firm' 0f the firm fails to debt holders in time1 they can ta$e
le&al action a&ainst it to &et payment and in e2treme cases1 can force the firm into
liquidation'
Secondly1 use of debt is ad)anta&eous for shareholders in two ways*
a' They can retain control of the firm with a limited sta$e and
50
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
51/89
b' Their earnin&s will be ma&nified1 when the firm earns a rate of return on the
total capital employed hi&her than the interest rate on the borrowin& funds'
The process of ma&nifyin& the shareholders return throu&h the use of debt is
called Ifinancial le)era&eJ or Ifinancial &earin&J or Itradin& on equityJ'
4e)era&e ratios may be calculated from the balance sheet to determine the
proportion of debt in total financin&' Many )ariations of these ratios e2ist but all
these ratios indicate the same thin&-the e2tent to which the firm has relied on debt in
financin& assets' 4e)era&e ratios are also computed from the profit and loss items by
determinin& the e2tent to which operatin& profits are sufficient to co)er the fi2edchar&es'
DEBT ? EUITY RATIO:
The relationship describin& the lender contribution for each rupee of the
owner?s contribution is called "E%T-EL80TY #AT09' "E%T F EL80TY
#AT09 is directly computed by the followin& formula'
"E%T
"ebt-Equity #atio
EL80TY
PROPRIETARY RATIO:
This ratio states relationship between share capital and total assets'
Proprietor?s equity represents equity share capital1 preference share capital and
reser)es and surplus' The latter ratio is also called capital employed to total assets'
EL80TY S!A#E AP0TA4
Proprietary #atio
T9TA4 TAN:0%4E ASSETS
51
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
52/89
P#9P#0ET9#S EL80TY
D9#
T9TA4 TAN:0%4E ASSETS
INTEREST 0OVERAGE RATIO:
This ratio indicates the e2tent to which earnin&s can decline without resultant
financial hardship to the firm because of its inability to meet annual interest cost' 3or
e2ample1 co)era&e of < times means that a fall in earnin&s unto D+5< th le)el would be
tolerable1 as earnin&s to ser)ice interest on debt capital would be sufficientlya)ailable' This ratio is measured ad follows*
E%0T
0nterest o)era&e #atio ---------------------------------
0NTE#EST !A#:ES
(IED ASSETS TO NET /ORTH:
This ratio indicates the e2tent to which Equity capital is in)ested in the net
fi2ed assets' 0t is e2pressed as follows*
30E" ASSETS
3i2ed Assets To Net Borth
NET B9#T!
Net Borth is represented by Equity Share apital plus #eser)es and Surpluses' 0f thefi2ed assets are more than the Net Borth1 difficulties may arise1 as the depreciation
will reduce profit' This also means that creditors ha)e contributed to fi2ed assets'
The hi&her this ratio1 the less will be the protection to creditors' 0f this ratio is too
hi&h1 the firm may find itself handicapped1 as too much capital is tied up in fi2ed
assets but not circulatin&'
A0TIVITY RATIOS:
52
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
53/89
3unds creditors and owners are in)ested in )arious assets to &enerate sales and
profits' The better the mana&ement of assets1 the lar&er the amount of sales' Acti)ity
ratios are employed to e)aluate the efficiency with which the firm mana&ers andutili6es its assets' These ratios are also called Turno)er #atios because they indicate
the speed with which assets are bein& con)erted or turned o)er into sales' Acti)ity
ratios1 thus1 in)ol)e a relationship between sales and assets' A proper balance
between sales and assets &enerally reflects that assets are mana&ed well' Se)eral
acti)ity ratios can be calculated to jud&e the effecti)eness of asset utili6ation'
INVENTORY TURNOVER RATIO:
0n)entory turno)er ratio indicates the efficiency of the firm in producin& and
sellin& its products' 0t is calculated by di)idin& the cost of &oods sold by the a)era&e
in)entory'
The a)era&e in)entory is the a)era&e of openin& and closin& balance of
in)entory'
0n a manufacturin& company in)entory of finished &oods is used to calculate
in)entory turno)er'
ost of &oods sold
0n)entory Turno)er #atio
A)era&e in)entory
DEBTORS TURNOVER RATIO:
A firm sells &oods for cash and credit' redit is used mar$etin& tool by a
number of companies' Bhen the firm e2tends credits to its customers1 debtors
Daccounts recei)ables are created in the firmsR accounts' The debtors are e2pected to
53
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
54/89
be con)erted into cash o)er a short period and1 therefore1 are included in current
assets' The liquidity position of the firm depends on the quality of debtors to a &reater
e2tent' "ebtors turno)er ratio indicates the )elocity of debt collection of a firm' 8n
simple wards it indicates the number of times a)era&e debtors are turned o)er durin& a
year'
redit Sales
"ebtors Turno)er #atio --------------------------------
A)&' Accounts #ecei)able
(IED ASSETS TURNOVER RATIO:
The fi2ed assets turno)er ratio measures the efficiency with which the firm is
utili6in& its in)estments in fi2ed assets1 such as land1 buildin&1 plant and machinery1
furniture1 etc' 0t also indicates the adequacy of sales in relation to the in)estment in
fi2ed assets' The fi2ed assets turno)er ratio is sales di)ided by net fi2ed assets' The
firm assets turno)er ratio should be compared with past and future ratios and also with
ratio of similar firms and the industry a)era&e' The hi&h fi2ed assets turno)er ratio
indicates efficient utili6ation of fi2ed assets in &eneratin& sales1 while low ratio
indicates inefficient mana&ement and utili6ation of fi2ed assets'
This ratio indicates the e2tent to which the debts ha)e been collected in time'
The debt collection period indicates the a)era&e debt collection period' This ratio is a
&ood indicator to the lenders of the firm1 because it e2plains to them whether their
borrower is collectin& from its debt in time' An increase in this period indicates
bloc$a&e of funds in debtors'
Sales
3i2ed Assets Turno)er #atio
Net fi2ed assets
54
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
55/89
/ORKING 0APITAL TURNOVER RATIO:
Bor$in& capital turno)er ratio indicates the )elocity of the utili6ation of net
wor$in& capital' This ratio indicates the number of times the wor$in& capital is
turned o)er in the course of a year' This ratio measures the efficiency with which the
wor$in& capital is bein& used by a firm' A hi&her ratio indicates efficient utili6ation
of wor$in& capital and low ratio indicates otherwise' %ut a )ery hi&h wor$in& capital
turno)er ratio is not a &ood situation for any firm and hence care must be ta$en while
interpretin& the ratio' Ma$in& of comparati)e and Trend Analysis can at best use this
ratio for different firms in the same industry and for )arious periods' This can be
calculated as follows*
SalesBor$in& apital Turno)er #atio
Net Bor$in& apital
Net Bor$in& apital urrent Assets - urrent 4iabilities
DE2cludin& short-term ban$
%orrowin&s
PRO(ITABILITY RATIOS:
A company should earn profits to Sur)i)e and :row o)er a lon& period of
time' Profits are essential1 but it would be wron& to assume that e)ery action initiated
by mana&ement of a company should be aimed at ma2imi6in& profits1 irrespecti)e of
social consequences'
Profit is the difference between re)enues and e2penses o)er a period of time Dusually
a year' Profit is the ultimate I9utputJ of a company1 and it will ha)e no future if it
fails to ma$e sufficient profits' Therefore1 the financial mana&er should continuously
e)aluate to the efficiency of the company in term of profits' The profitability ratios
are calculated to measure the operatin& efficiency of the company' %esides
mana&ement of the company1 creditors and owners are also interested in the
profitability of the firm' reditors want to &et interest and repayment of principle
re&ularly' 9wners want to &et a required rate of return on their in)estment' This is
possible only when the company earns enou&h profits'
55
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
56/89
:enerally two major types of profitability ratios are calculated'
PRO(ITABILITY IN RELATION TO SALES
PRO(ITABILITY IN RELATION TO INVESTMENT
PRO(ITABILITY RATIOS IN RELATION TO SALES
+' :#9SS P#930T MA#:0N
/' AS! MA#:0N
=' 9PE#AT0N: MA#:0N
' NET P#930T #AT09
6& GROSS PRO(IT MARGIN:
:ross profit mar&in reflects the efficiency with which the mana&ement
produces each unit of product' This ratio indicates the a)era&e spread between
the cost of &oods sold and the sales re)enue'
This shows profits relati)e to sales after the deduction of production
costs1 and indicates the relation between Production costs and sellin& price' A
hi&h &ross profit mar&in relati)e to the industry a)era&e implies that the firm
is able to produce at relati)ely lower cost'
A hi&h &ross profit mar&in ratio is a si&n of &ood mana&ement' A &ross
mar&in ratio may increase due to any of the followin& factors'
i' !i&her sales prices1 cost of &oods sold remainin& constant1
ii' 4ower cost of &oods sold1 sales prices remainin& constant1
iii' A combination of )ariations in sales prices and costs1 the mar&in widenin&1
and
56
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
57/89
i)' 0ncreases in the proportionate )olume of hi&her mar&in items'
The analysis of these factors will re)eal to the mana&ement that how a
depressed &ross profit mar&in can be impro)ed'
A low &ross profit mar&in may reflect hi&her cost of &oods sold due to the
firmsR inability to purchase raw materials at fa)orable terms1 inefficient utili6ation of
plant and machinery1 resultin& in hi&her cost of production' The ratio will also be low
due to fall in prices in the mar$et1 or mar$et reduction in sellin& price by the firm in
an attempt to obtain lar&e sales )olume1 the cost of &oods sold remainin& unchan&ed'
The financial mana&er must be able to detect the causes of a fallin& &ross mar&in andinitiate action to impro)e the situation'
Sales F ost of &oods sold
D9r
:ross profit
:ross Profit Mar&in #atio
Sales
Net Pr$%!t M"rg!n R"t!$:
Net profit is obtained when operation e2penses1 interest and ta2es are
subtracted from the &ross profit'
0f the non-operatin& income fi&ure is substantial1 it may be e2cluded from
PAT to see profitability arisin& directly from sales' Net profit mar&in ratio establishes
a relationship between net profit and sales and indicated mana&ement?s efficiency in
manufacturin&1 administerin& and sellin& the products' This ratio is the o)erall
measure of the firmsR ability to turn each rupee sales into net profit' 0f the net mar&in
is inadequate1 the firm will fail to achie)e satisfactory return on shareholderRs funds'
This ratio also indicates the firmsR capacity to withstand in ad)erse economic
conditions' A firm with a hi&h net mar&in ratio would be in an ad)anta&eous position
to sur)i)e in the case of fallin& sellin& prices1 risin& costs of production or declinin&
demand for the product' 0t would really be difficult for a low net mar&in firm to
withstand these ad)ersities' Similarly1 a firm hi&her net profit mar&in can ma$e better
57
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
58/89
use of fa)orable condition1 such as risin& sellin& prices fall in costs of production or
increasin& demand for the product' Such a firm will be able to accelerate its profits at
a faster rate than a firm with a low net profit mar&in will'
An analyst will be able to interpret the firm?s profitability more meanin&fully
if he5she e)aluates both the ratios-&ross mar&in and net mar&in-jointly' To illustrate1
if the &ross profit mar&in has increased o)er years1 but the net profit mar&in has either
remained constant or declined1 or has not increased as fast as the &ross mar&in1 this
implies that the operatin& e2penses relati)e to sales ha)e been increasin&' The
increasin& e2penses should be identified and controlled' :ross profit mar&in may
decline due to fall in sales price or increase in the cost of production'
Profit after Ta2
Net Profit Mar&in #atio
Sales
0ASH MARGIN RATIO:
ash profit e2cludes depreciation' 0t means Net profit after interests and ta2es
but before depreciation' This ratio indicates the relationship between the profit1 which
accrues in cash and sales' :reater percenta&e indicates better position and Vice-Versa
as it shows the correct profit earned by the firm'
This ratio is e2pressed as cash profit to sales'
ash profitash Mar&in #atio +..
Sales
OPERATING MARGIN RATIO:
9peratin& mar&in ratio is also $nown as 9peratin& Net profit ratio' 0t is the
ratio of operatin& profit to sales' This ratio establishes the relationship between the
total cost incurred and sales' 9peratin& profit is the Net profit after depreciation but
58
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
59/89
%efore 0nterests and Ta2es' The purpose of computin& this ratio is to find out the
o)erall operational efficiency of the business concern' 0t measures the const of
operations per rupee of sales'
This ratio is e2pressed as operatin& profit to sales'
9PE#AT0N: MA#:0N #AT09 9peratin& profit +..
Sales
PRO(ITABILITY RATIOS IN RELATION TO INVESTMENT:
+' #ET8#N 9N 0NVESTMENT
/' #ET8#N 9N NET B9#T!
=' #ET8#N 9N AP0TA4
' #ET8#N 9N :#9SS %49C
RETURN ON INVESTMENT:
The term in)estment refers to Total Assets' The funds employed in Net assets
are $nown as apital Employed' Net assets equal net fi2ed assets plus current assets
minus urrent liabilities e2cludin& %an$ loans' Alternati)ely1 apital employed in
equal to Net worth plus total debt'
The con)entional approach of calculatin& return on in)estment D#90 is todi)ide PAT by 0n)estment' 0n)estment represents pool of funds supplied by
shareholders and lenders1 while PAT represents residual income of shareholders
therefore1 it is conceptually unsound to use PAT in the calculation of #90' Also1 as
discussed earlier1 PAT is affected by capital structure' 0t is1 therefore more
appropriate to use one of the followin& measures of #90 for comparin& the operatin&
efficiency of firms'
E%0T D+-T
59
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
60/89
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
61/89
in two ways' 3irst1 it is equal to non-current liabilities Dlon&-term liabilities plus
owner?s equity' Alternati)ely1 it is equi)alent to Net Bor$in& apital plus 3i2ed
Assets' Thus1 the apital Employed pro)ides a basis to test the profitability related to
the sources of lon&-term funds' A comparison of this ratio with similar firms1 with
the industry a)era&e and o)ertime would pro)ide sufficient insi&ht into how
efficiency the lon&-term funds of owners and creditors are bein& used' The hi&her the
ratio1 the more efficient is the use of apital Employed'
NET P#930T A3TE# TA5E%0T
#9E +..
A)era&e Total apital Employed
RETURN ON GROSS BLO0K:
This ratio establishes a relationship between net profit and &ross fi2ed assets'
This ratio emphasi6es the profit on in)estment in 3i2ed Assets' This ratio is
e2pressed as follows*
Net profit
#ET8#N 9N :#9SS %49C +..
:ross %loc$
NET P#930T is profit before Ta2' :ross %loc$ means :ross fi2ed assets i'e'1 3i2ed
assets before deductin& depreciation'
61
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
62/89
0HAPTER5V
DATA ANALYSIA ) INTERPRETATION
R"t!$ "n"-ys!s !n VSPRINL
62
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
63/89
L!!d!ty r"t!$s:
urrent assets
urrent ratio -------------------------------------------
urrent liabilities
TABLE SHO/S YEAR /ISE 0URRENT RATIO
D#s' 0n rores
Particulars /.. /..>-., /..,-.@ /..@-.; /..;-
+.
0n)entory +/+>'< +/.='/ +,>+'+< =/+>/'+, =+'@ /;/'= /='@ + /+.'=. =+;+'>/ +@+'=/ =.,'@
urrent ratios
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
64/89
As the current ratio is hi&her than the ideal current ratio1 the liquidity
position is said to be &ood'
LIUIDUI0K RATIO:
4iquid assets
4iquid ratio ---------------------------
urrent liabilities
TABLE SHO/ING YEAR /ISE LIUID RATIOS
D#s in rores
P"rt!#-"rs 2339538 233853; 233;53 233534 2334563
Sundry debtors +>>/'+, =+'@ /;/'= /='@ +
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
65/89
As the quic$ ratio durin& the period of study is hi&her than that of then
ideal ratio1 the liquidity position is )ery &ood'
ABSOLUTE LIUID 0ASH RATIO:
A%S948TE ASSETS
Absolute liquid5 cash ratio* --------------------------------------
8##ENT 40A%040T0ES
TABLE SHO/ING YEAR /ISE ABSOLUTE LIUID RATIO
'Rs& !n #r$res*
P"rt!#-"rs 2339538 233853; 233;53 233534 2334563
ash ( ban$ /+',. ,+;'>@ ,>;;'++ >>/'+, >/'+, /+.'=. =+;+'>/ +@+'=/ =.,'@
ABSOLUTE
LIUID RATIO
F&9 F&@2 2&@6 6&9 6&28
0
1000
2000
3000
4000
5000
6000
7000
8000
2005-06 2006-07 2007-08 2008-09 2009-10
Cas% & !an'
(!s)lute (ssets
Current la!ltes
(*SO"UTE "I+UI,
(TIO
INTERPRETATION: 0deal #atio .*
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
66/89
The absolute liquid5 cash ratio of VSP is more than the ideal ratio' 0t means
the company is enjoyin& hi&h liquidity and secured position'
LEVERAGE RATIO:
9utsider?s funds
"ebt Equity #atio ----------------------------------------
Shareholders? funds
TABLE SHO/ING YEAR /ISE DEBT EUITY RATIO
'Rs& !n #r$res*
,"rt!#-"rs 2339538 233853; 233;53 233534 2334563
Secured loans +,='@, >.'< ==/',@ ;.,',/ .,'/@
8nsecured loans =>;' =+/'';> .',= +..,',> +/=='
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
67/89
0t can be concluded that the company is maintainin& less percent of debt in its
capital structure'
INTEREST 0OVERAGE RATIO:
E%0T
0nterest co)era&e ratio---------------------------------------
30E" 0NTE#EST
TABLE SHO/ING YEAR /ISE INTEREST 0OVERAGE RATIO
'Rs& !n #r$res*
PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10
E%0T +;/.'
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
68/89
INTERPRETATION:
ompany?s 0nterest o)era&e #atio is )ery hi&h and e2traordinarily
satisfactory' 0t indicates that &reater ability of the firm to handle fi2ed char&es'
!i&h interest co)era&e ratio does not indicate unutili6ed debt capacity in case
of
#0N41 since the company is ha)in& its own funds'
PROPRIETARY RATIO:
Share holders funds
Proprietary ratio-----------------------------------------
Total assets
TABLE SHO/ING THAT YEAR /ISE PROPRIETARY RATIO
D#s'in rores
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
Share holders funds ,@/,'=+ ,@/,'=+ ,@/,'=/ ,@/,'=/ ,@/,'=+
Total assets +.
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
69/89
0
5000
10000
15000
20000
2005-06 2006-07 2007-08 2008-09 2009-10
S%are %)l$ers .un$s
T)tal assets
OIET( (TI
INTERPRETATION:
Proprietary ratio is a test of lon& term financial position'
E2cept for the year /..;-+.1 all other years showin& hi&her ratio1 this
indicates sound lon& term financial position'
0t is also indicatin& the sufficient use is bein& made of equity to finance the
business'
SOLVEN0Y RATIO:
Total 4iabilities of outsiders
Sol)ency ratio -------------------------------------------
Total assets
TABLE SHO/ING YEAR /ISE SOLVEN0Y RATIO:
69
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
70/89
D#s' 0n rores
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
Secured loans +,='@, >.'< ==/'.@ ;.,',/ .,'/@
8nsecured loans =>;' =+/'';> .',= +..,',> >en#y r"t!$ 9&6J ;&6J 2&J 9&8J F&96J
0
5000
10000
15000
20000
2005-06 2006-07 2007-08 2008-09 2009-10
T)tal la!ltes t) )uts$er
T)tal assets
INTERPRETATION:
Sol)ency ratio of VSP ltd durin& the year /..>-., is hi&h as compared to other years'
0t sol)ency ratio is stable for last three years' 0t indicates the the sol)ency position of
VSP ltd is more satisfactory'
(UNDED DEBT TO TOTAL 0APITALIATION:
38N"E" "E%T
3unded "ebt To Total apitali6ation --------------------------------------
T9TA4 AP0TA40AT09N
70
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
71/89
TABLE SHO/ING YEAR5/ISE (UNDED DEBT TO TOTAL
0APITALIATION RATIO D#s' in crores
P"rt!#-"rs 2339538 233853; 233;53 233534 2334563
Secured loans +,='@, >.'< ==/',@ ;.,',/ .,'/@
8nsecured loans =>;' =/+'';> .',= +..,',> +/=/''>.G ;'>.G ='@.G @G ;'
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
72/89
"urin& the year /..;-+.1 the funded debt to total capitali6ation is
;G'0t is hi&h as compared to other periods but in the real sense it is
quite low'
There is enou&h scope for the company to raise lon& term loans fromoutsiders'
A0TIVITY RATIO:
INVENTORY TURNOVER RATIO:
NET SA4ES
0n)entory Turno)er #atio -----------------------------
AV: 0NVENT9#Y
TABLE SHO/ING YEAR /ISE INVENTORY TURNOVER RATIO
D#s' in crores
PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-
10
Net sales ,=.> ;.@@'=, ;+/@'=@ ;@.;'+';; +/+.'@. +@/'/. +>//'+ /@=='.
0n)entory Turno)er
#atio
/
Times
='>
Times
72
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
73/89
0
2000
4000
6000
8000
10000
2005-06 2006-07 2007-08 2008-09 2009-10
Net sales
( nent)r;
INTERPRETATION:
The 0n)entory Turn 9)er #atio durin& the year /..;-+. was ='>
Normally hi&her the ratio indicates the better in)entory mana&ement'
!i&her ratio also indicates that the company is not able to met the customers
demand properly'
INVENTORY 0ONVERSION PERIOD:
No of wor$in& days
0n)entory on)ersion Period ---------------------------------------------
0n)entory turno)er ratio
TABLE SHO/ING YEAR /ISE INVENTORY 0ONVERSION PERIOD
'Rs& !n #r$res*
P"rt!#-"rs 2339538 233853; 233;53 233534 2334563
73
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
74/89
No' of wor$in&
days =>< =>< =>< =>< =>@ times + times times
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
76/89
"ebtors turno)er
ratio
>.';, +'@ @ >,'+/
A)&'collection
period
< days ; days > days > days < days
0>
20>
40>
60>
80>
100>
2005-06 2006-07 2007-08 2008-09 2009-10
,e!t)rs t)urn)er rat)
N) ). =)r'n $a;s
INTERPRETATION:
The a)& collection period durin& the year /..;-+.1 is < days* it represents the
a)&' no of days for which the firm has to wait before its recei)ables are
con)erted into cash'
"urin& the period of study it has been obser)ed that debt collection period
)aries from < to ; days
!owe)er1 the a)&' collection period durin& different periods is quite low' 0t
indicates the better quality of debtors and the efficiency of the debt collection
department'
/ORKING 0APITAL TURNOVER RATIO:
Net sales
Bor$in& capital turno)er ratio -------------------------------------------------
Bor$in& capital
76
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
77/89
TABLE SHO/ING YEAR /ISE /ORKING 0APITAL TURNOVER RATIO
'Rs& !n #r$res*
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
a'net sales ,=.> ;.@@'=, ;+/@'=@ ;@.;'+,@'..
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
78/89
PRO(ITABILITY RATIOS:
GROSS PRO(IT RATIO:
:ross profit
:ross profit ratio ---------------------------------U+..
Net sales
TABLE SHO/ING YEAR /ISE GROSS PRO(IT RATIO
'Rs& !n #r$res*
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
a' &ross profit +;/+'.. //,+'.. =./,'.. /++'=.G /@',.G =='=.G /='/.G+='>.G
0
2000
4000
6000
8000
10000
12000
2005-06 2006-07 2007-08 2008-09 2009-10
a
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
79/89
Sales are in increasin& trend but the profit ratio is decreasin&' 0t is due to
increased cost of production'
OPERATING PRO(IT RATIO:
9peratin& profit
9peratin& profit ratio ----------------------------------------U+..
Sales
TABLE SHO/ING YEAR /ISE OPERATING PRO(IT RATIO
'Rs& !n #r$res*
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
9peratin& profit /.++'/+ /==;'/+ ==/
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
80/89
NET PRO(IT RATIO:
Net profit
Net profit ratio ----------------------------------------U+..
Sales
TABLE SHO/ING YEAR /ISE NET PRO(IT RATIO
D#s' in crores
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
A'net profit +/ ;.@@'=, ;+/@'=@ ;@.;'+
20>
40>
60>
80>
100>
2005-06 2006-07 2007-08 2008-09 2009-10
*
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
83/89
E)en thou&h the return on equity capital is in decreasin& position1 the rate of
return in comparison with the mar$etin& conditions is )ery satisfactory'
:lobal mar$et conditions1 increasin& in operatin& costs1 decrease in net profits
are the main reasons for the recordin& of low ratio'
EARNING PER SHARE:
Earnin& a)ailable to equity share holders
Earnin& Per Share ------------------------------------------------
No' of equity shares
TABLE SHO/ING YEAR /ISE EARNING PER SHARE
D#s' in crores
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
Earnin& a)ailable to
equity shareholders
+/
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
84/89
Since the company is in e2pansion acti)ity1 the future earnin&s per share will
increase'
RETURN ON 0APITAL EMPLOYED:
Net profit
#eturn on capital employed -----------------------------------------
apital employed
TABLE SHO/ING YEAR /ISE RETURN ON 0APITAL EMPLOYED
D#s' in crores
PARTI0ULARS 2339538 233853; 233;53 233534 2334563
A'net profit +/
20>
40>
60>
80>
100>
2005-06 2006-07 2007-08 2008-09 2009-10
etur )n atal e?l);e$
*
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
85/89
0HAPTER5VI
85
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
86/89
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
87/89
SUGGESTIONS
The followin& su&&estions will impro)e the financial position of the VSP'
PRODU0TION
+ Need for continuous up &radation of technolo&y for impro)in& the
processes'
/ Effort should be made at cost sa)in&s particularly in spares and ener&y
consumption'
= 8sin& the natural &as reser)es of C: basin1 !ot metal production
capacity can be enhanced with the present %3 facility with ne&li&ible
in)estment'
(INAN0E
+ 0mpro)in& financial le)era&e ratio for better returns'
PERSONNEL:
+ #ationali6ation of e2istin& man-power with effecti)e trainin& for future
e2pansion of the plant'
/ 0mpro)in& efficiency throu&h better !#" pro&rams'
= Pro)idin& better moti)ation'
87
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
88/89
Stri)in& towards becomin& the most chosen employer'
MARKETING
+ ontinuously monitorin& the indi&enous sale1 e2port sale ratio to
capture the best of mar$ets'
/ 0ncreasin& the net reali6ation by sellin& in the most profitable re&ion'
= 0dentifyin& new mar$ets and new application of the company?s
product'
0mpro)in& reali6ation by identifyin& )alue added products and
pro)idin& feedbac$ to production department'
-
8/13/2019 55410154 Ratio Analysis PROJECT in Steel Plant
89/89