analysis of larson and tubro

KES SHROFF COLLEGE OF ARTS AND COMMERCE

PROJECT REPORT ON

LARSEN & TOUBRO LIMITED

SUBMITTED BY

NIRALI G. PATEL

M.Com.-1

ADVANCED FINANCIAL ACCOUNTING

(SEMESTER I)

SUBMITTED TO

UNIVERSITY OF MUMBAI

PROJECT GUIDE

MRS.JIGNA VYAS

ACADEMIC YEAR

2012 – 2013

KANDIVLI EDUCATION SOCIETY’SB.K.ShroffCollege of Arts

&

1

M.H.ShroffCollege of Commerce

Bhulabhai Desai Road, Kandivli (West), Mumbai – 400067

PROJECT REPORT

LARSEN & TOUBRO LIMITED

SUBMITTED BY

NIRALI G. PATEL

SUBMITTED TO

UNIVERSITY OF MUMBAI

PROJECT GUIDE

NAME OF THE GUIDE

MRS. JIGNA VYAS

ACADEMIC YEAR

2012 – 2013

KANDIVLI EDUCATION SOCIETY’SB.K.ShroffCollege of Arts&M.H.ShroffCollege of CommerceBhulabhai Desai Road, Kandivli (West), Mumbai – 400067

2

C E R T I F I C A T E

This is to certify that NIRALI G. PATEL of M.Com.-1 has successfully

completed a project on LARSEN& TOUBRO LIMITED for the Semester –I under

the guidance of MRS. JIGNA VYAS during the academic year 2012-13.

Co-ordinator Project Guide Principal

Internal Examiner External Examiner

College Seal

DECLARATION

I NIRALI G. PATEL of K.E.S. SHROFF COLLEGE OF ARTS & COMMERCE M.Com.-1(SEMESTER 1) hereby declare that I have completed my project title “LARSEN & TOUBRO LIMITED”

3

I also declare that this project which has been the partial fulfillment of the requirement of the degree of M.COM-1(SEM1) of the “Mumbai University” has been the result of my efforts.

Signature of Student

_________________

ACKNOWLEDGEMENT

I have sincerely done my project alloted to me. I would like to thank MRS.

JIGNA VYAS, the guide for giving her valuable suggestion and guidance.

4

I would also like to thank our PrincipalDr. LILY BHUSHAN and our vice

Principal Mr .V.S.Kannan.

It gives me immense pleasure to present this project in the course of M.COM-1,

and I also would like to share the credit with Mrs. ALKA WADHWANA for

her valuable, helps in this project. I would like to thank all those people who

gave me their opinion without their help this project would not be possible to

submit in time.

INDEX

SR.NO

TOPIC PAGE NO

1. Introduction to Larsen & Toubro 7& 8

5

2. History of Larsen & Toubro 9 to 12

3. Analysis of balance sheet

Trend analysis

Comparative analysis

Common size analysis

Ratio analysis

13 to 27

4. Accounting Policies of Larsen & Toubro 28 to 32

5. Suggestion &Conclusion. 33 & 34

6. Bibliography. 35

6

INTRODUCTION

Today, L&T is one of India's biggest and best known industrial organizations with a

reputation for technological excellence, high quality of products and services, and strong

customer orientation. It is also taking steps to grow its international presence.

Larsen & Toubro Limited (L&T) is a technology, engineering, construction and

manufacturing company. It is one of the largest and most respected companies in India's

private sector.

More than seven decades of a strong, customer-focused approach and the continuous quest

for world-class quality have enabled it to attain and sustain leadership in all its major lines of

business.

L&T has an international presence, with a global spread of offices. A thrust on international

business has seen overseas earnings grow significantly. It continues to grow its global

footprint, with offices and manufacturing facilities in multiple countries. 

The company's businesses are supported by a wide marketing and distribution network, and

have established a reputation for strong customer support.

L&T believes that progress must be achieved in harmony with the environment. A

commitment to community welfare and environmental protection are an integral part of the

corporate vision.

In response to changing market dynamics, L&T has gone through a phased process of

redefining its organisation model that facilitates growth through greater levels of

empowerment. The new structure is built around multiple businesses designated ‘Independent

Companies’ or ‘ICs’.  

A strong, customer-focussed approach and the constant quest for top-class quality have

enabled the company to attain and sustain leadership in its major lines of business. It has

established an international presence, with a global spread of offices. A thrust on

international business across the last few years has seen overseas earnings growing to 18 per

cent of total revenue. With factories and offices located around the country,further

supplemented by a comprehensive marketing and distribution network, L&T enjoys an image

and equity in virtually every district of India.The company’s business can be primarily

divided into the following segments: Engineering & Construction – Projects, Heavy

7

Engineering, Shipbuilding, Construction, Electrical & Electronics, Information Technology,

Machinery & Industrial Products.

The L&T vision reflects the collective goal of the company. It was drafted through a large

scale interactive process which engaged employees at every level, worldwide.

Larsen & Toubro Limited operates as a technology, engineering, construction, and

manufacturing company. The company engages in the design, engineering, and construction

of hydrocarbon upstream, mid and downstream, and construction and pipelines projects; coal

and gas based power plants; and refinery, petrochemical, fertilizers, modular process plant,

and gas processing projects. It is also involved in the construction of infrastructure, buildings

and factories, power transmission and distribution, metallurgical and material handling, and

realty projects; manufacture and supply of equipment and systems for refinery, oil and gas,

fertilizer, coal gasification, aerospace, thermal power plant, nuclear power plant, and defense

industries; and provision of solutions for power projects, such as thermal, hydropower,

nuclear, plant automation, power transmission and distribution, and power development. In

addition, the company manufactures and sells switchgear products, energy management and

home automation solutions, metering solutions, electrical systems, control and automation

solutions, medical equipment and systems, and tooling solutions; and provides integrated

engineering and information technology services, as well as construction and mining

equipment, material handling products, crushing systems and equipment, hydraulic

equipment, valves, rubber processing machinery, plastics processing machinery, paper

machinery, welding products, and castings. Further, it provides various financial services,

including portfolio management, equipment and infrastructure finance, general insurance, and

mutual funds; undertakes railway projects; and engages in the shipbuilding activities.

SALIENT FEATURES OF L&T :-

A public limited company.

Over eight lakh shareholders.

More than 25,800 employees.

A professionally managed company.

Largest Engineering & Construction Company.

Quality systems at most of L & T’s factories are ISO 9000 certified

8

HISTORY

The company was founded in Mumbai in 1938 by two Danish engineers, Henning Holck-

Larsen and SørenKristian Toubro. The company began as a representative of Danish

manufacturers of dairy equipment. However, with the start of the Second World War in 1939

and the resulting restriction on imports, the partners started a small workshop to undertake

jobs and provide service facilities. Germany's invasion of Denmark in 1940 stopped supplies

of Danish products. The war-time need to repair and refit ships offered L&T an opportunity,

and led to the formation of a new company, Hilda Ltd., to handle these operations. L&T also

started two repair and fabrication shops signalling the expansion of the company. The sudden

internment of German engineers in India (due to suspicions caused by the War), who were to

put up a soda ash plant for the Tatas, gave L&T a chance to enter the field of installation. In

1944, ECC was incorporated by the partners; the company at this time was focused on

construction projects (Presently, ECC is the construction division of L&T). L&T decided to

build a portfolio of foreign collaborations. By 1945, the company represented British

manufacturers of equipment used to manufacture products such as hydrogenated oils,

biscuits, soaps and glass. In 1945, the company signed an agreement with Caterpillar Tractor

Company, USA, for marketing earth moving equipment. At the end of the war, large numbers

of war-surplus Caterpillar equipment were available at attractive prices, but the finances

required were beyond the capacity of the partners. This prompted them to raise additional

equity capital, and on 7 February 1946, Larsen & Toubro Private Limited was born.

POST-INDEPENDENCE

Independence and the subsequent demand for technology and expertise offered L&T the

opportunity to consolidate and expand. Offices were set up in Kolkata (Calcutta), Chennai

(Madras) and New Delhi. In 1948, fifty-five acres of undeveloped marsh and jungle was

acquired in Powai, Mumbai. That uninhabitable swamp is presently its main manufacturing

hub.

In December 1950, L&T became a public company with a paid-up capital of  20 lakhs. The

sales turnover in that year was  1.09 crore. Notable orders executed by the Company during

this period included the Amul Dairy at Anand and Blast Furnaces at Rourkela Steel Plant.

9

With the successful completion of these jobs, L&T emerged as the largest erection contractor

in the country.

In 1956, a major part of the company's Mumbai office moved to ICI House in Ballard Estate,

Mumbai; which would later be purchased by the company and renamed as L&T House, its

present Corporate Office. The sixties were also a decade of rapid growth for the company,

and witnessed the formation of many new ventures: UTMAL (set up in 1960), Audco India

Limited (1961), Eutectic Welding Alloys (1962) and TENGL (1963).

In 1976, Holck-Larsen was awarded the Magsaysay Award for International Understanding

in recognition of his contribution to India's industrial development. He retired as Chairman in

1978.

10

NATIONWIDE NETWORK

Larsen & Toubro Limited (L&T) is a technology, engineering, construction and

manufacturing company. It is one of the largest and most respected companies in

India's private sector.

 More than seven decades of a strong, customer-focused approach and the continuous

quest for world-class quality have enabled it to attain and sustain leadership in all its

major lines of business.

 L&T has an international presence, with a global spread of offices. A thrust on

international business has seen overseas earnings grow significantly. It continues to

grow its global footprint, with offices and manufacturing facilities in multiple

countries.

 The company's businesses are supported by a wide marketing and distribution

network, and have established a reputation for strong customer support.

 L&T believes that progress must be achieved in harmony with the environment. A

commitment to community welfare and environmental protection are an integral part

of the corporate vision.

 In response to changing market dynamics, L&T has gone through a phased process of

redefining its organisation model that facilitates growth through greater levels of

empowerment. The new structure is built around multiple businesses designated

‘Independent Companies’ or ‘ICs’

The various business groups of L&T are:

Engineering & Construction - Projects: L&T has an enviable track record of successful

implementation of turnkey projects in major core and infrastructure sectors. L&T's core

competencies in engineering include highly qualified and experienced personnel from various

disciplines, state-of-the-art 2-D and 3-D CAD facilities with sophisticated plant design

systems and basic engineering capabilities. L&T is the only Indian EPC company pre-

qualified for executing large, process-intensive projects for oil & gas, refinery, petrochemical

and fertiliser sectors. 

Heavy Engineering: L&T has been among Indian corporate sector in introducing new

processes, products and materials in manufacturing. It is acknowledged as one of the top five

11

fabrication companies in the world and has globally-benchmarked workshops are located in

Mumbai, Hazira, Baroda and Kansbahal. 

Construction: ECC, the Engineering Construction & Contracts Division of L&T, is India's

largest construction organization. It is credited with building some of India's famous

landmarks such as exquisite buildings, tallest structures, largest industrial projects, longest

flyovers, highest viaducts, longest pipelines etc. 

Electrical & Electronics: L&T is a major international manufacturer of a wide range of

electrical and electronic products and systems. In the electrical segment, L&T is India's

largest manufacturer of low tension switchgear. In the electronic segment, L&T offers a wide

range of meters and provides complete control and automation systems for diverse

industries. 

Information Technology: L&T Infotech Limited, a 100 per cent subsidiary of L&T, caters

to leading international companies across the globe and offers comprehensive, end to end

software solutions and services with a focus on Manufacturing, BFSI and Communications &

Embedded Systems. 

Machinery & Industrial Products:   L&T manufactures, markets and provides service

support for critical construction and mining machinery such as surface miners, hydraulic

excavators, aggregate crushers, loader backhoes and vibratory compactors. 

ACHIEVEMENTS OF L&T

Built India's first indigenous hydrocracker reactor.

Built the world's largest continuous catalyst regeneration reactor.

Built the world's biggest fluid catalytic cracking regenerator.

Built the world's longest product splitter.

Built Asia's highest

12

13

viaduct - Panvalnadi for the Konkan Railway.

Built the world's longest LPG pipeline.

PROFIT & LOSS ACCOUNT

Mar '10 Mar '11 Mar '12

IncomeSales Turnover 37,187.50 44,055.55 53,849.48Excise Duty 317.31 398.84 583.53Net Sales 36,870.19 43,656.71 53,265.95Other Income 2,321.67 1,781.28 885.32Stock Adjustments -422.99 559.49 539.77Total Income 38,768.87 45,997.48 54,691.04ExpenditureRaw Materials 9,593.53 12,372.32 14,456.43Power & Fuel Cost 334.08 355.45 638.79Employee Cost 2,379.14 2,884.53 3,506.72Other Manufacturing Expenses 16,913.31 19,886.12 24,286.29Selling and Admin Expenses 1,854.23 2,103.38 2,439.36Miscellaneous Expenses 325.58 773.7 689.1Preoperative Exp Capitalised -36.25 -37.87 -18.75Total Expenses 31,363.62 38,337.63 45,997.94

Operating Profit 5,083.58 5,878.57 7,807.78PBDIT 7,405.25 7,659.85 8,693.10Interest 995.37 1,199.23 1,683.31PBDT 6,409.88 6,460.62 7,009.79Depreciation 383.65 575.81 699.46Other Written Off 30.95 23.41 0Profit Before Tax 5,995.28 5,861.40 6,310.33Extra-ordinary items -45.13 -49.05 -3.89PBT (Post Extra-ord Items) 5,950.15 5,812.35 6,306.44Tax 1,577.02 1,858.47 1,853.83Reported Net Profit 4,375.52 3,957.89 4,456.50Total Value Addition 21,770.09 25,965.31 31,541.51Preference Dividend 0 0 0Equity Dividend 752.75 882.84 1,010.46Corporate Dividend Tax 110.25 112.82 101.44Per share data (annualised)

14

Shares in issue (lakhs) 6,021.95 6,088.52 6,123.99Earning Per Share (Rs) 72.66 65.01 72.77Equity Dividend (%) 625 725 825Book Value (Rs) 303.28 352.4 411.53

BALANCE SHEET OF LARSEN AND TOUBRO------------------- in Rs. Cr. -------------------

Mar '10 Mar '11 Mar '12

Rs. Rs. Rs.

SOURCES OF FUNDSHAREHOLDER'S FUNDEquity Share Capital 120.44 121.77 122.48Share Application Money 25.09 368.31 0Preference Share Capital 0 0 0Reserves 18,142.82 21,334.05 25,079.40Revaluation Reserves 23.29 22.13 21.14NETWORTH 18,311.64 21,846.26 25,223.02Secured Loans 955.73 1,063.04 1,453.34Unsecured Loans 5,845.10 6,098.07 8,442.43TOTAL DEBT 6,800.83 7,161.11 9,895.77TOTAL SOURCES OF FUND 25,112.47 29,007.37 35,118.79

APPLICATION OF FUNDFIXED ASSETGross Block 7,235.78 8,897.02 10,618.74Less: Accum. Depreciation 1,727.68 2,220.82 2,952.61Net Block 5,508.10 6,676.20 7,666.13Capital Work in Progress 857.66 785 807.94Investments 13,705.35 14,684.82 15,871.90CURRENT ASSETInventories 1,415.37 1,577.15 1,776.62Sundry Debtors 11,163.70 12,427.61 18,729.84Cash and Bank Balance 1,104.89 1,518.98 1,020.09Total Current Assets 13,683.96 15,523.74 21,526.55Loans and Advances 12,662.55 19,499.23 21,445.72Fixed Deposits 326.98 211.37 885.17Total CA, Loans & Advances 26,673.49 35,234.34 43,857.44LESS : CURRENT LIABILITIESLiabilities 19,443.77 26,139.56 30,697.53Provisions 2,188.36 2,233.43 2,387.09Total CL & Provisions 21,632.13 28,372.99 33,084.62

15

Net Current Assets 5,041.36 6,861.35 10,772.82Miscellaneous Expenses 0 0 0TOTAL APPLICATION OF FUND 25,112.47 29,007.37 35,118.79

TREND BALANCE SHEET

Mar '10 Mar '11 Mar '12 TREND %

BASE YEAR : 2010

Rs. Rs. Rs.Mar '10

Mar '11

Mar '12

SOURCES OF FUNDSHAREHOLDER'S FUND

Equity Share Capital 120.44 121.77 122.48 100101.10

101.69

Share Application Money 25.09 368.31 0 100 1467.96 0.00

Preference Share Capital 0 0 0 100 0.00 0.00

Reserves 18,142.82

21,334.05

25,079.40

100117.59

138.23

Revaluation Reserves 23.29 22.13 21.14 100 95.02 90.77

NETWORTH 18,311.64

21,846.26

25,223.02

100119.30

137.74

Secured Loans 955.73 1,063.04 1,453.34 100111.23

152.07

Unsecured Loans 5,845.10 6,098.07 8,442.43 100104.33

144.44

TOTAL DEBT 6,800.83 7,161.11 9,895.77 100105.30

145.51

TOTAL SOURCES OF FUND 25,112.47

29,007.37

35,118.79

100115.51

139.85

APPLICATION OF FUNDFIXED ASSET

Gross Block 7,235.78 8,897.02 10,618.74

100122.96

146.75

Less: Accum. Depreciation 1,727.68 2,220.82 2,952.61 100128.54

170.90

Net Block 5,508.10 6,676.20 7,666.13 100121.21

139.18

Capital Work in Progress 857.66 785 807.94 100 91.53 94.20

Investments 13,705.35

14,684.82

15,871.90

100107.15

115.81

CURRENT ASSET

Inventories 1,415.37 1,577.15 1,776.62 100111.43

125.52

16

Sundry Debtors 11,163.70

12,427.61

18,729.84

100111.32

167.77

Cash and Bank Balance 1,104.89 1,518.98 1,020.09 100 137.48 92.33

Total Current Assets 13,683.96

15,523.74

21,526.55

100113.44

157.31

Loans and Advances 12,662.55

19,499.23

21,445.72

100153.99

169.36

Fixed Deposits 326.98 211.37 885.17 10064.64

270.71

Total CA, Loans & Advances 26,673.49

35,234.34

43,857.44

100132.09

164.42

LESS : CURRENT LIABILITIES

Liabilities 19,443.77

26,139.56

30,697.53

100134.44

157.88

Provisions 2,188.36 2,233.43 2,387.09 100102.06

109.08

Total CL & Provisions 21,632.13

28,372.99

33,084.62

100131.16

152.94

Net Current Assets 5,041.36 6,861.35 10,772.82

100136.10

213.69

Miscellaneous Expenses 0 0 0 100 0.00 0.00TOTAL APPLICATION OF FUND

25,112.47

29,007.37

35,118.79

100115.51

139.85

17

Meaning & Importance of Trend Analysis

Trend Analysis compares account balances over accounting periods of months, quarters and

years as the date ranges and cutoff dates for account activity. It can be helpful in determining

unusual changes in balances from period to period. Unusual changes in account balances can

pinpoint errors, under/over payments and fraud.

Trend analysis is useful because:

Trend shows the direction of the changes .

Trends are easy to calculate and interpret.

It is quick method of analysis.

It is accurate because it is based on percentage.

The base year trend percentage is always 100.0%. A trend percentage of less than 100.0%

means the balance has decreased below the base year level in that particular year. A trend

percentage greater than 100.0% means the balance in that year has increased over the base

year. A negative trend percentage represents a negative number.

COMMENT ON TREND BALANCESHEET

Capital ofL&T has increased from base of 100% in march 2010 to 101.10% in 2011

and 101.69% in 2012. Increase in share capital indicate issue of shares.

Reserve of the company increased from 100% in 2010 to 117.59% in 2011 and

further higher to 138.23% in 2012.

Net worth increased from 100% in 2010 to 119.30% in 2011 and further

increased to 137.74% in 2012.

There is increase in total loan taken by firm in 2011. It has gone up from

100% in 2010 to 105.30% in 2011 and 145.51% in 2012. The additional

borrowing indicate increased the interest burden of the company.

The fixed asset after charging depreciation have gone up to 121.21% in 2011

and 139.18% in 2012. This seems to have been financed by capital

contribution by the company and increased loan fund.

18

The investment of company increased from 100% in 2010 to 107.15% in 2011

and 115.81% in 2012. It shows company had purchase investment.

The total current asset and loans & advances have increased from 100% in

2010 to 132.09% in 2011 and 164.42% in 2012. This increased due to

increase in debtor, inventories, loans and advances. Increase in total current asset

and loans & advances shows that company has smooth cash flow.

There is position of total liabilities has change drastically. The total liabilities

have gone up from 100% in 2010 to 131.16% in 2011 and 152.94% in 2012.

This is due to may be increase in creditors.

There is increased net current asset from 100% in 2010 to 136.10% in 2011

and 213.69% in 2012. It shows high level of operations.

From the above trend analysis it can be said that company have upward

trend. This is because company make growth every year.

19

COMMON SIZE BALANCE SHEET

20

Mar '10 Mar '11 Mar '12Rs. % Rs. % Rs. %

SOURCES OF FUNDSHAREHOLDER'S FUNDEquity Share Capital 120.44 0.48 121.77 0.42 122.48 0.35Share Application Money 25.09 0.10 368.31 1.27 0 0.00Preference Share Capital 0 0.00 0 0.00 0 0.00

Reserves 18,142.82

72.25 21,334.05

73.55 25,079.40 71.41

Revaluation Reserves 23.29 0.09 22.13 0.08 21.14 0.06

NETWORTH 18,311.64

72.92 21,846.26

75.31 25,223.02 71.82

Secured Loans 955.73 3.81 1,063.04 3.66 1,453.34 4.14Unsecured Loans 5,845.10 23.28 6,098.07 21.02 8,442.43 24.04TOTAL DEBT 6,800.83 27.08 7,161.11 24.69 9,895.77 28.18

TOTAL SOURCES OF FUND 25,112.47

100.00

29,007.37

100.00

35,118.79

100.00

APPLICATION OF FUNDFIXED ASSET

Gross Block 7,235.78 28.81 8,897.02 30.67 10,618.74 30.24

Less: Accum. Depreciation 1,727.68 6.88 2,220.82 7.66 2,952.61 8.41Net Block 5,508.10 21.93 6,676.20 23.02 7,666.13 21.83Capital Work in Progress 857.66 3.42 785 2.71 807.94 2.30

Investments 13,705.35

54.58 14,684.82

50.62 15,871.90 45.19

CURRENT ASSETInventories 1,415.37 5.64 1,577.15 5.44 1,776.62 5.06

Sundry Debtors 11,163.70

44.45 12,427.61

42.84 18,729.84 53.33

Cash and Bank Balance 1,104.89 4.40 1,518.98 5.24 1,020.09 2.90

Total Current Assets 13,683.96

54.49 15,523.74

53.52 21,526.55 61.30

Loans and Advances 12,662.55

50.42 19,499.23

67.22 21,445.72 61.07

Fixed Deposits 326.98 1.30 211.37 0.73 885.17 2.52

Total CA, Loans & Advances 26,673.49

106.22

35,234.34

121.47

43,857.44

124.88

LESS : CURRENT LIABILITIES

Liabilities 19,443.77

77.43 26,139.56

90.11 30,697.53 87.41

Provisions 2,188.36 8.71 2,233.43 7.70 2,387.09 6.80

Total CL & Provisions 21,632.13

86.14 28,372.99

97.81 33,084.62 94.21

Net Current Assets 5,041.36 20.08 6,861.35 23.65 10,772.82 30.68

21

Miscellaneous Expenses 0 0.00 0 0.00 0 0.00

TOTAL APPLICATION OF FUND 25,112.47

100.00

29,007.37

100.00

35,118.79

100.00

22

Meaning & importance of common size balance sheet

A commonsize balance sheet presents not only the standard information contained in

a balance sheet, but also a column that notes the same information as a percentage of the

total assets (for asset line items) or as a percentage of total liabilities and shareholders'

equity (for liability or shareholders' equity line items).

Common size balance sheet is a statement in which total of assets or liabilities is assumed to

100 and all the figure are expressed as % of total. In other words each asset is expressed as %

of total asset & each liabilities expressed as % to total liabilities. That is why it is also known

as percentage balance sheet.

A comparison of common size balance sheet for different periods helps to highlight the trends

in different items.

COMMENT ON COMMON SIZE BALANCE SHEET

Share of companies reduces. In 2010 It was 0.48%, in 2011 it was 0.42% and in 2011

it is 0.35%. The fund raise from this may be utilized for the purpose of purchase of

fixes asset.

From the above balance sheet it can be observe that reserve constitutes a major

portion of the total liabilities. The second thing is that there is reduction in percentage

of reserve from 73.55% in 2011 to 71.41% in 2012, almost 2% reduction.

There is reduction in total borrowed fund is 24.69% in 2011 as compared to earlier

year but there is increase in borrowed fund in the 2012 as it is 28.18%. Increase in

borrowed fund because company may be took loan for purchase of real estate to

expand their operations.

The fixed asset of company is increases in 2011 as it is 30.67% it shows that company

had purchase the fixed asset but in the year 2012 there is decrease in fixed asset after

charging depreciation compared to 2011 this is due to sale of fixed asset .

There current asset in the year2010 is 106.22% and it is increases in 2011 and 2012 as

it is 121.47% and 124.88%.This is because there is increase or decrease in item

current asset. in total current asset sundry debtor and loans & advances constitute

23

major part it is shoes that company will received money from the debtor because

company sale goods on credit and in loans & advances company will get money in

future with interest because the company give loan to other company.

Total current liabilities of company increases in 2011 and it was 97.81% compared

2010 but there is decrease in liabilities in the year 2012 is 94.21%.

The working capital of company is increases. In 2010 it is 20.08%. In 2011 & 2012 it

is increases by 23.65% and 30.68%. It is indicate that the company have more current

asset as compared to c

urrent liabilities. Increase

in working capital shows that more fund kept for day to day business.

24

COMPARATIVE BALANCE SHEET

Mar '10 Mar '11

Absolute increase or decrease

Percentage increase or decreaseRs. Rs.

SOURCES OF FUNDSHAREHOLDER'S FUNDEquity Share Capital 120.44 121.77 1.33 1.10Share Application Money 25.09 368.31 343.22 1367.96Preference Share Capital 0 0 0 0.00Reserves 18,142.82 21,334.05 3191.23 17.59Revaluation Reserves 23.29 22.13 -1.16 -4.98NETWORTH 18,311.64 21,846.26 3534.62 19.30Secured Loans 955.73 1,063.04 107.31 11.23Unsecured Loans 5,845.10 6,098.07 252.97 4.33TOTAL DEBT 6,800.83 7,161.11 360.28 5.30TOTAL SOURCES OF FUND 25,112.47 29,007.37 3894.9 15.51

APPLICATION OF FUNDFIXED ASSETGross Block 7,235.78 8,897.02 1661.24 22.96Less: Accum. Depreciation 1,727.68 2,220.82 493.14 28.54Net Block 5,508.10 6,676.20 1168.1 21.21Capital Work in Progress 857.66 785 -72.66 -8.47Investments 13,705.35 14,684.82 979.47 7.15CURRENT ASSETInventories 1,415.37 1,577.15 161.78 11.43Sundry Debtors 11,163.70 12,427.61 1263.91 11.32Cash and Bank Balance 1,104.89 1,518.98 414.09 37.48Total Current Assets 13,683.96 15,523.74 1839.78 13.44Loans and Advances 12,662.55 19,499.23 6836.68 53.99Fixed Deposits 326.98 211.37 -115.61 -35.36Total CA, Loans & Advances 26,673.49 35,234.34 8560.85 32.09LESS : CURRENT LIABILITIESLiabilities 19,443.77 26,139.56 6695.79 34.44Provisions 2,188.36 2,233.43 45.07 2.06Total CL & Provisions 21,632.13 28,372.99 6740.86 31.16Net Current Assets 5,041.36 6,861.35 1819.99 36.10Miscellaneous Expenses 0 0 0 0.00TOTAL APPLICATION OF FUND 25,112.47 29,007.37 3894.9 15.51

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Meaning & Importance of Comparative Statement

A comparative balance sheet will include several different types of

accounting data.A list of assets and liabilities is also included. All of these

factors are necessary to see what the total worth of the company is through

the balance sheet. The comparative balance sheet allows the company or

business to see at a glance how its profits differ from one year to another.

These comparative balance sheets are aligned so that business people can

see at a glance the financial differences from year to year.

Without a comparative balance sheet, businesses would not know how to

change their strategy from year to year. All they would have to go on would

their current balance statements. This would be detrimental to most

businesses. It is very important to be able to look at past profit information

to judge how to act for the future.

Procedure of Comparative Balance Sheet:

The Comparative balance sheet has two columns for the data of  original

balance sheet.

Third column is used to show increases in figures.

The forth column is use to give percentages of increase or decrease.

COMMENT ON COMPARATIVE BALANCESHEET

Capital of the company increased by Rs. 1.33 as compared to earlier year.

There is increase in reserve of Rs. 3191.23 which shows 17.59% as compared to earlier

year which is sign of financial soundness. The company followed good financial policy.

Total loan fund have increased by Rs.360.28 or 5.30% over the year. The firm has taken

the additional loan from the bank.

As a result net worth and total loan, long term sources of fund increased by Rs.3894.9 or

by 15.51%.

The company had purchase additional fixed asset out of a new loan of Rs. 1661.24 as

compared to earlier year.

The company had purchase new investment of Rs. 979.47or increased by 7.15%.

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The total current asset, loans & advances of company increased by Rs.8560.85 which

shows 32.09% as compared to earlier year. It shows that company block majority fund

for temporary purpose.

There is increase in total current liabilities and provisions of Rs.6740.86 or increased by

31.16% as compared to last year. The increased in current liabilities shows that the

company had to pay more liabilities during the year.

There is increased in working capital of Rs.1819.99 which shows 36.10% as compared to

earlier year. Despite of increase in current liabilities the companys working capital is

increases which shows that firm is able to continue its operation & that it has sufficient

fund to satisfy both short term debt and upcoming expenses.

from the above analysis it is said that company earn more profit in 2011 compared previous

year.the comp

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RATIO ANALYSIS

MEANING AND IMPORTANCE OF RATIO ANALYSIS

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of

ratio to interpret the financial statements so that the strength and weaknesses of a firm as well

as its historical performance and current financial condition can be determined. The term

ratio refers to the numerical or quantitative relationship between two variables.

IMPORTANCE OF RATIO ANALYSIS :

It helps in evaluating the firms performance

It helps in inter-firm comparison.

The short term creditors like bankers and suppliers of materials can determine the

firm’s ability to meet its current obligation with the help of liquidity ratio and quick

ratio.

The long term creditors like debenture holders and financial institutions can determine

the firm’s long term financial strength and survival with the help of leverage or capital

structure ratio as debt equity ratio.

Balance Sheet Ratios

1. CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITIES

2010 2011

26673.49 / 21632.13 35234.34 / 28372.99

=1.23 : 1 =1.24 : 1

2012

43857.44 / 33084.62

=1.33 : 1

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Current ratio is average in all year. In 2012 there is no significant change in this ratio. This

ratio indicate that for every one rupee of current liabilities, the company has increase its

current asset every year. In other words it means that after paying current liabilities of rupee

one out of current asset of Rs. 1.23 in 2010, Rs.1.24 in 2011 and Rs.1.33 in 2012, the

company will have working capital of Rs.0.23, Rs. 0.24 and Rs.0.33.

2. QUICK RATIO = QUICK ASSET / QUICK LIABILITIES

2010 2011

24931.14 / 21632.13 33445.82 / 28372.9

= 1.15:1 =1.18:1

2012

41195.65 / 33084.62

=1.25:1

Here quick assets are more in than quick liabilities in every year. The companies’ quick ratio is increases. The inventory’s contribution is less than other asset so there is quick ratio is increases in every year. In 2010 the quick ratio is 1.15 it is increases in 2011 and 2012 i.e.1.18, 1.25. The quick ratio of 1.15:1, 1.18:1, & 1.25:1 means that for every one rupee of a quick liabilities, the companies has got Rs1.15, Rs1.18, Rs1.25 in the form of quick assets. This indicates that company can pay its all immediate liabilities out of its liquid assets.

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3. PROPRIETORY RATIO = PROPRIETOR’S FUND / TOTAL ASSETS * 100

2010 2011

18311.64 / 45886.94 * 100 21846.26 / 56595.36 * 100

= 39.91% = 38.60%

2012

25223.02 / 67395.47 * 100

= 37.43%

From the above ratio it is clear thatproprietary ratio for 2010 is 39.91%. In 2011 it is 38.60%

and in 2012 it is 37.43% which is quite lower than earlier year.As compared to standard ratio

of 70% the above ratio is lower. The above lower ratio indicates that company is more

dependent on external fund that create problem during period of weakness in business

operation.

4. DEBT - EQUITY RATIO = DEBT / EQUITY

2010 2011

6800.83 / 18311.64 7161.11 / 21846.26

= 0.37 : 1 = 0.33 : 1

2012

9895.7 / 25223.02

= 0.39 : 1

From the above ratio it is clear that debt equity ratio in 2010 is 0.37 times . it was 0.33 times

in 2011 and 0.39 times in 2012.The ideal Debt-Equity Ratio is 2:1, in 2010, 2011,

2012 the ratio is less than two because lower amount of long term debt.but in

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2012 the debt ratio is high compared to earlier year then also above ratio is lower

than two so it indicate that long term debt are less. It good sign for the company

5. STOCK - WORKING CAPITAL RATIO = CLOSING STOCK / WORKING

CAPITAL * 100

2010 2011

1415.37 / 5041.36*100 1577.15 / 6861.35*100

= 28.08% = 22.99%

2012

1776.62 / 10772.82*100

= 16.49%

This ratio shows that extent of fund blocked in stock. The stock working capital ratio is

declining .in 2010 the ratio is 28.08% , in 2011 ratio is 22.99% and in 2012 it is 16.49%

which is lower than earlier year. In the year 2011, 2010 sale is increased which affects

decrease in stock that effected in increase in working capital in 2011 & 2012.

From the above ratio analysis it is observed that not only working capital is

increasing but also company sale is increasing.This shows that the company is on the verge of

profit.

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SIGNIFICANT ACCOUNTING POLICIES

1. Employee benefits

a) Short term employee benefits:All employee benefits falling due wholly within twelve

months of rendering the service are classified as short term employeebenefits. The

benefits like salaries, wages, short term compensated absences etc. and the expected cost

of bonus, ex-gratia. arerecognised in the period in which the employee renders the related

service.

b) Post-employment benefits:

i. Defined contribution plans : The Company’s superannuation scheme, state governed

provident fund scheme, employee stateinsurance scheme and employee pension

scheme are defined contribution plans. The contribution paid/payable under

theschemes is recognised during the period in which the employee renders the

related service.

ii. Defined benefit plans : The employees gratuity fund schemes, post-retirement

medical care scheme, pension scheme andprovident fund scheme managed by trust

are the Company’s defined benefit plans. The present value of the obligationunder

such defined benefit plans is determined based on actuarial valuation using the

Projected Unit Credit Method.

The obligation is measured at the present value of the estimated future cash flows. The

discount rate used for determining the present value of the obligation under defined benefit

plans, is based on the market yield on government securities of a maturity period equivalent

to the weighted average maturity profile of the related obligations at the Balance Sheet date.

Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.

The interest element in the actuarial valuation of defined benefit plans, which comprises the

implicit interest cost and the impact of changes in discount rate, is classified under finance

costs. The balance charge is recognisedas employee benefit expenses in the Statement of

Profit and Loss.

In case of funded plans, the fair value of the plan assets is reduced from the gross obligation

under the defined benefit plans to recognise the obligation on a net basis.

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Gains or losses on the curtailment or settlement of any defined benefit plan are recognised

when the curtailment or settlement occurs. Past service cost is recognised as expense on a

straight-line basis over the average period until the benefits become vested.

c) Long term employee benefits:The obligation for long term employee benefits such as

long term compensated absences, long service award etc. is recognized in the similar

manner as in the case of defined benefit plans as mentioned in (b)(ii) above.

d) Termination benefits:Termination benefits such as compensation under Voluntary

Retirement cum Pension Scheme are recognised as expense in the period in which they

are incurred.

2. Investments

Trade investments comprise investments in subsidiary companies, joint ventures, associate

companies and in the entities in which the

Company has strategic business interest.

Investments, which are readily realizable and are intended to be held for not more than one

year from the date of acquisition, are

classified as current investments. All other investments are classified as long term

investments.

Long term investments including trade investments are carried at cost, after providing for any

diminution in value, if such diminution

is other than temporary in nature. Investments in integrated joint ventures are carried at cost

net of adjustments for Company’s share

in profits or losses as recognised.

Current investments are carried at lower of cost and fair value. The determination of carrying

amount of such investments is done on the basis of weighted average cost of each individual

investment.

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3. Extraordinary and exceptional items

Income or expenses that arise from events or transactions that are clearly distinct from the

ordinary activities of the Company are classified as extraordinary items. Specific disclosure

of such events/transactions is made in the financial statements. Similarly, any external event

beyond the control of the Company, significantly impacting income or expense, is also

treated as extraordinary item and disclosed as such.

On certain occasions, the size, type or incidence of an item of income or expense, pertaining

to the ordinary activities of the Company, is such that its disclosure improves an

understanding of the performance of the Company. Such income or expense is classified as

an exceptional item and accordingly disclosed in the notes to accounts.

4. Foreign currency transactions, foreign operations, forward contracts and

derivatives

a) The reporting currency of the Company is Indian rupee.

b) Foreign currency transactions are recorded on initial recognition in the reporting currency,

using the exchange rate at the date of the transaction. At each balance sheet date, foreign

currency monetary items are reported using the closing rate. Non-monetary items, carried at

historical cost denominated in a foreign currency, are reported using the exchange rate at the

date of the transaction.

Exchange differences that arise on settlement of monetary items or on reporting of monetary

items at each balance sheet date at the closing rate are:

i) adjusted in the cost of fixed assets specifically financed by the borrowings contracted up

to March 31, 2004 to which the exchange differences relate

ii) adjusted in the cost of fixed assets specifically financed by borrowings contracted

between the period April 1, 2004 to March 31, 2007 and to which the exchange differences

relate, provided the assets are acquired from outside India

iii) recognized as income or expense in the period in which they arise, in cases other than (i)

and (ii) above.

c) Financial statements of foreign operations comprising jobs contracted prior to April 1,

2004, are translated as follows:

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i) Closing inventories at rates prevailing at the end of the year

ii) Fixed assets as at April 1, 1991 at rates prevailing at the end of the year in which the

additions were made. Subsequent additions are at rates prevailing on the dates of the

additions. Depreciation is accounted at the same rate at which the assets are translated.

iii) Other assets and liabilities at rates prevailing at the end of the year

iv) Net revenues at the average rate for the year.

d) Financial statements of foreign operations comprising jobs contracted on or after April 1,

2004, are treated as integral operations and translated as in the same manner as foreign

currency transactions, as described above. Exchange differences arising on such translation

are recognized as income or expense of the period in which they arise.

e) Forward contracts, other than those entered into to hedge foreign currency risk on

unexecuted firm commitments or highly probable forecast transactions, are treated as foreign

currency transactions and accounted accordingly as per Accounting Standard (AS) 11 “The

Effects of Changes in Foreign Exchange Rates”. Exchange differences arising on such

contracts are recognised in the period in which they ariseGains and losses arising on account

of roll over/cancellation of forward contracts are recognised as income /expense of the period

in which such roll over / cancellation takes place.

f) All the other derivative contracts, including forward contracts entered into to hedge foreign

currency risks on unexecuted firm commitments and highly probable forecast transactions,

are recognised in the financial statements at fair value as on the Balance Sheet date, in

pursuance of the announcement of the Institute of Chartered Accountants of India (ICAI)

dated March 29, 2008 on accounting of derivatives. The Company has adopted Accounting

Standard (AS) 30 “Financial Instruments: Recognition and Measurement” for accounting of

such derivative contracts, not covered under Accounting Standard (AS) 11 “The Effects of

Changes in Foreign Exchange Rates”, as mandated by the ICAI in the aforesaid

announcement.

Accordingly, the resultant gains or losses on fair valuation/settlement of the derivative

contracts covered under Accounting Standard (AS) 30 “Financial Instruments: Recognition

and Measurement” are recognised in the Statement of Profit and Loss or Balance Sheet as the

case may be after applying the test of hedge effectiveness. Where the hedge in respect of off-

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balance sheet items is effective, the gains or losses are recognised in the “hedging reserve”

which forms part of “reserves and surplus” in the Balance Sheet. The amount recognised in

the “hedging reserve” is transferred to the Statement of Profit and Loss in the period in which

the underlying hedged item affects the Statement of Profit and Loss. Gains or losses in

respect of ineffective hedges are recognised in the Statement of Profit and Loss in the period

in which such gains or losses are incurred.

g) The premium paid/received on a foreign currency forward contract is accounted as

expense/income over the life of the contract.

5. Presentation of financial statements

The Balance Sheet and the Statement of Profit and Loss are prepared and presented in the

format prescribed in the Schedule VI to the Companies Act, 1956 (“the Act”). The Cash Flow

Statement has been prepared and presented as per the requirements of Accounting Standard

(AS) 3 “Cash Flow Statements”. The disclosure requirements with respect to items in the

Balance Sheet and Statement ofProfit and Loss, as prescribed in the Schedule VI to the Act,

are presented by way of notes forming part of accounts along with the other notes required to

be disclosed under the notified Accounting Standards and the Listing Agreement.

Amounts in the financial statements are presented in Indian Rupees in crore [1 crore = 10

million] rounded off to two decimal places in line with the requirements of Schedule VI. Per

share data are presented in Indian Rupees to two decimals places.

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SUGGESTION

After analysis it is came to know about some factors, whichthe company should take in to

consideration. This is because ithave been analysis the balance sheet and able to give some

suggestion recommendation to the company as follows.

The very first thing is that the company having large amount of Reserves and Surplus

which should be taken for the use of expansion or the same kind of other activities.

The company should to reduce the investment in capital work in progress because the

large amount has been blocked in it.

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CONCLUSION

As the annual report of company is made very well and as per the law, it was very interesting

to analyze the financial statement of company.

From the above analysis it can be conclude that the company has good financial position due

to good management in company. Financial position is so much good because company

making expansion every year and it can be seen from its healthy balance sheet.

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BIBILIOGRAPHY

http://www.larsentoubro.com/lntcorporate/Uploads/AnnualReport2011-12-23.pdf Management accounting

Ainapure www.bized.ac.uk/compfact/ratio.

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