Ntpc Final

MANAGEMENT IS MOST IMPORTANT ASPECT FOR THE WORLD

TODAY. FINANCE IS ONE OF THE MAJOR FUNCTIONAL ARE OF

MANAGEMENT. “FINANCE IS THE PROCESS OF ORGANIZING THE

FLOW OF FUNDS SO THAT BUSINESS CAN CARRY OUT ITS OBJECTIVE

IN THE MOST EFFICIENT MANNER AND MET ITS OBLIGATION THE

FALL DUE.”

THIS REPORT IS BASED ON FINANCIAL MANAGEMENT AND

FINANCIAL ACCOUNTS. THIS REPORT ALLOWED ME TO PRACTICALLY

STUDY A REAL BUSINESS WORLD ONLY THE THEORETICAL

KNOWLEDGE DOES NOT IMPARTED COMPLETE EDUCATION IT MUST

BE ACCOMPANIED WITH PRACTICAL KNOWLEDGE IT ADD MEANING

TO EDUCATIONS.

MY OBJECTIVE AND PURPOSE OF THE STUDY OF NTPC LIMITED

IS TO KNOW THE POSITION OF THE COMPANY FROM INVESTORS,

MANAGEMENT, MONEYLENDERS AND FINANCIERS, GOVERNMENT

AND SOCIETY AS A WHOLE. THE PROJECT IS ABLE TO SEE THE LIGHT

OF THE DAY BECAUSE OF DEEP STUDY, HARD WORK AND PROPER

GUIDANCE OF FACULTY MEMBERS.

THE PREPARATION OF THE REPORT IN THIS FORM WOULD HAVETHE PREPARATION OF THE REPORT IN THIS FORM WOULD HAVE

NOT BEEN POSSIBLE WITHOUT THE GUIDANCE OF OUR LEARNEDNOT BEEN POSSIBLE WITHOUT THE GUIDANCE OF OUR LEARNED

PROFESSOR CHARMI SHAH AND PROFESSOR ASHWIN DAVEPROFESSOR CHARMI SHAH AND PROFESSOR ASHWIN DAVE

THIS REPORT IS AN IMPORTANT ASPECT TOWARDS PRACTICALTHIS REPORT IS AN IMPORTANT ASPECT TOWARDS PRACTICAL

EXPOSURE MY TROUBLE GRATITUDE TO THE MANAGEMENT ATEXPOSURE MY TROUBLE GRATITUDE TO THE MANAGEMENT AT

CPIMR WITH A SPECIAL MENTION THANKS TO THE DIRECTOR OF THECPIMR WITH A SPECIAL MENTION THANKS TO THE DIRECTOR OF THE

INSTITUTE FOR IMPARTING VALUABLE FACILITY AND CO-OPERATIONINSTITUTE FOR IMPARTING VALUABLE FACILITY AND CO-OPERATION

FURTHER MY SPECIAL THANKS AND ACKNOWLEDGEMENTS GO FURTHER MY SPECIAL THANKS AND ACKNOWLEDGEMENTS GO

TO THE LEADING MAGAZINES, WEBSITES, BOOKS AND PERIODICALS TO THE LEADING MAGAZINES, WEBSITES, BOOKS AND PERIODICALS

WHICH HAVE HELPED ME A LOT IN MY UNDERSTANDING THE WHICH HAVE HELPED ME A LOT IN MY UNDERSTANDING THE

COMPANY AND EXPRESS MYSELF IN THIS PROJECT REPORT IN A COMPANY AND EXPRESS MYSELF IN THIS PROJECT REPORT IN A

BETTER WAYBETTER WAY

2

2

INDEX

BACKGROUND OF THE INDUSTRY

COMPANY PROFILE:

1. Introduction of a company

2. Vision & mission

3. Details of company’s products & services

4. Competitors

5. Mergers & acquisitions & joint ventures

6. Financial highlights

REPORTS:

1. Directors report

2. Auditors report

3. Corporate governance report

4. Management discussion & analysis

STATEMENT OF P&L A/C

BALANCESHEET ANNALYSIS

ANALYSIS & INTERPRETATION OF RATIOS

ANALYSIS OF CASH FLOW STATEMENT (AS-3)

5

Background of the Industry

Power Infrastructure in India:

The Power industry in India derives its funds and financing from the government, some

private players that have entered the market recently, World Bank, public issues and other

global funds. The Power Ministry India has set up Power Finance Corporation of India that

looks after the financing of the power sector in India. The Power Finance Corporation

Limited provides finance to major power projects in India for power generation and

conversion, distribution and supply of power in India.

Power Finance Corporation (PFC) Ltd India also looks after the installation of any new

power projects as well as renovation of an existing power project India. The PFC in

association with central electricity authority and the ministry of power facilitates the

development in infrastructure of the power sector India. They have taken up construction of

mega power projects that will answer to the power shortage in various states through power

transmission through regional and national power grids.

Power Supply Units India:

Power is derived from various sources in India. These include thermal power, hydropower

or hydroelectricity, solar power, biogas energy, wind power etc. the distribution of the power

generated is undertaken by Rural Electrification Corporation for electricity power supply to

the rural areas, North Eastern Electric Power Corporation for electricity supply to the North

East India regions and the Power Grid Corporation of India Limited for an all India supply of

electrical power in India.

Thermal Power in India is mainly generated through coal, gas and oil.

India coal power forms a majority share of the source of power supply in India. The

electric power in India is generated at various thermal power stations in India. The

power generated at these thermal power plants is then distributed all over India

through a network of powergrid at regional and national levels. The power ministry

organization responsible for the thermal power management in India is the NTPC.

Hydropower is India is one of the mega power generators in India. Various

hydropower projects and hydro power plants have been set up by the ministry of

power for generation of hydro power in India. Various dams and reservoirs are

constructed on major rivers and the kinetic energy of the flowing water is utilized to

generate hydroelectricity. The power generator here is the running water. The

hydroelectric power plants and the hydro power generation companies are managed

by the National Hydro Electric Power Corporation (NHPC).

Wind Power in India is available in plenty as India witnesses high intensity

winds in various regions due to the topographical diversity in India. Efforts have been

made to utilize this natural source of energy available free of cost for wind power

generation. Huge wind energy farms have been set up by the government for

tapping the wind energy by using gigantic windmills and them converting the kinetic

energy of the wind into electricity by the use of power converters. The wind power

advantages start with the very fact that a wind energy power plant does not require

much infrastructure input and the raw material i.e. wind itself is available free of cost.

Solar Power in India is being utilized to generate electricity on smaller

scale by setting up massive solar panels and capturing the solar power. Solar power

India is also being utilized by the power companies in India to generate solar energy

for domestic and small industrial uses.

Nuclear Power in India is generated at huge nuclear power plants and

nuclear power stations in India. A nuclear power plant generates the electricity using

nuclear energy. All the nuclear power plants in India are managed by the Nuclear

Power Corp of India Ltd (NPCL). The electricity from all India nuclear plants is

distributed by the NPCL as per the nuclear power project scheme.

Biogas Production in India is still in its infancy stage. Also the number of

biogas plants in India is still very low. India being the largest domestic cattle

producer has plenty of biogas fuel and thus utilization of the fuel for mass biogas

production by setting up more biogas plants in India would solve the power shortage

problem to some extent.

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COMPANY PROFILE

NTPC, the largest power Company in India, was setup in 1975 to accelerate power development in the country. It is among the world’s largest and most efficient power generation companies. In Forbes list of World’s 2000 Largest Companies for the year 2007, NTPC occupies 411th place. NTPC has installed capacity of 29,394 MW. It has 15 coal based power stations (23,395 MW), 7 gas based power stations (3,955 MW) and 4 power stations in Joint Ventures (1,794 MW). The company has power generating facilities in all major regions of the country. It plans to be a 75,000 MW company by 2017.

Vision-A world class integrated power major, powering India's growth with increasing global presence.

Mission-Develop and provide reliable power related products and services at competitive prices, integrating multiple energy resources with innovative & Eco-friendly technologies and contribution to the society

Core Values - BCOMIT

Business ethics Customer Focus Organizational & Professional Pride Mutual Respect & Trust Innovation & Speed Total Quality for Excellence

Corporate mission“Develop and provide reliable power, related products and services at competitive prices, integrating multiple energy sources with innovative and eco-friendly technologies and contribute to society”

Products and services

1. Power generation- The Company has formulated a long term Corporate Plan for 15 years up to 2017. The Corporate Plan seeks to integrate the Company's vision, mission and strategies for growth with the national plans and to provide the company the cutting edge in the emerging competitive environment. NTPC is targeting to become a 75,000 MW Plus company by 2017.NTPC has also demonstrated its ability in turning around sub-optimally performing stations. The phenomenal improvement in the performance of Badarpur (705 MW), Unchahar (420 MW,) and Talcher (460 MW), by NTPC stand testimony to this.

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Installed Capacity Overview

No Of Plants Capacity MW

NTPC Owned

Coal 15 23,895

Gas/Liquid Fuel

7 3,955

Total 22 27,850

Owned By JVs

Coal & Gas 4 2,044

Total 26 29,894

2. Consultancy-The Consultancy Wing of NTPC, with an ISO 9001:2000 accreditation, undertakes all the Consultancy and turnkey project contracts for Domestic and International clients in the different phases of Power plants viz. construction supervision, Project management, FQA, Inspection services, O&M, RLA/R&M of various power utilities. With the string of achievements behind it, NTPC has emerged as the acknowledged leader in engineering, construction, O&M, RLA/R&M and management of poer projects. NTPC is registered as a consultant with several leading international development and financial institutions such as The World Bank, The Asian Development Bank, The African Development Bank and UNDP.

3. Power Management Institute- NTPC has full fledged facilities at the Power Management Institute, NOIDA for providing training in all aspects of power Plant Management and Systems. It also has Full Scope Replica Training Simulators both for Coal as well as Gas based Stations for training personnel in Operation and Maintenance of power plants. Apart from our own employees, we have imparted simulator training on operation and maintenance of power plants to operating personnel from other power utilities from India and abroad.

Competitors-Many government as well as private organizations have taken up the task of power generation in India. The major Indian power companies playing prime are:

Bhakra Beas Management Board Enercon Systems India

Essar Group

GMR Group

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Gujarat State Petroleum Corporation Ltd

Jindal Steel & Power Limited

Reliance Energy Ltd.

GE Power Controls India

Green Power India

Acquisition

Business development through Acquisition serves both NTPC's own commercial interest as well as the interest of the Indian economy Taking over being a part of the acquisition process, is also an opportunity for NTPC to add to its power generation capacity through minimal investment and very low gestation period. NTPC has, over the years, acquired the following three power stations belonging to other utilities/SEBs and has turned around each of them using its corporate abilities.

POWER STATIONS TAKEN OVER YEAR ORIGINAL OWNER

2x210 MW FEROZE GANDHI UNCHAHAR THERMAL POWER STATION

1991UP RajyaVidyut Utpadan Nigam of Uttar Pradesh

4x60 MW + 2x110 MW TALCHER THERMAL POWER STATION

1995Orissa State Electricity Board

4x110 MW TANDA THERMAL POWER STATION 2000UP State Electricity Board

705MW Badarpur Thermal Power Station 2006Central Electricity Authority

Joint ventures: NTPC -ALSTOM POWER SERVICES PVT. LTD. (NASL)( EQUITY: 50:50)

(Incorporated in 1999 and formerly known as NTPC-ABB ALSTOM POWER SERVICES PVT. LTD)

UTILITY POWER TECH LTD (EQUITY: 50:50)(Incorporated in 1996) This JV has been promoted with Reliance Energy Limited (formerly BSES Limited) a private sector Indian power company.

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PTC(India) Ltd (Incorporated in 1998) ( EQUITY: 50:50) NTPC-SAIL POWER COMPANY (PVT) LTD (NSPCL) ( EQUITY: 50:50) NTPC TAMIL NADU ENERGY COMPANY LIMITED ( EQUITY: 50:50) Vaishali Power Generating Company LIMITED (Equity 51-74% : 49-26%) ARAVALI POWER COMPANY PRIVATE LTD (Equity: 50%IPGCL-25%, HPGCL-

25%)

FINANCIAL HIGHLIGHT The total income of the company for the year increased by 13.10% to Rs.400,113 million from Rs.353,766 million during the previous year. The profit after tax but before provisions and prior period adjustments increased by 12.08% to Rs. 76,900 million from Rs 68611 million. Net profit after tax increased to Rs. 74,148 million from Rs 68,647 million registering a growth of 8% over last year.

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DIRECTORS’ REPORT

The total income of the company for the year increased by 13.10% to Rs, 400,113 million from Rs, 353,766 million during the previous year. The profit after tax but before provisions and prior period adjustment increased by 12.08% to Rs. 76,900 million from Rs. 68,611 million. Net profit after tax increased to Rs. 74,148 million from Rs. 68,647 million registering a growth of 8% over last year.

In addition to interim dividend of Rs. 2.70 per share paid in February 2008, your directors have recommended a final dividend of Rs. 0.80 per share for the year 2007-2008. The total dividend for the year is Rs. 3.50 per share as against Rs. 3.20 per share paid last year. The total dividend pay-out for the year amounting to Rs. 28,859 million represents 38.92% of the profit after tax as against 38.43% in the previous year. The total dividend payout including tax accounts for 45.54% of the profit after tax.

Your directors believe that growth of the company through capacity addition, backward and forward integration and strategic diversification of its operation would lead to increase in shareholders’ value.

AUDITORS REPORTS

We have audited the attached balance sheet of NTPC LIMITED as on 31st march 2008, the profit and loss account and also the cash flow statement for the year ended on that day these financial statement are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit

33

includes examining, on test basis, evidence supporting the amounts and disclosers in the financial statements. An audit also includes assessing the accounting principles used significant estimates made by the management, as well as evaluation the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As require by the companies order,2003 issued by government of India in terms of sub section (4A) of section 227 of the companies act 1956 we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said order.

CORPORATE GOVERNANCE REPORT

In our company, corporate governance philosophy stems from our belief that corporate governance is a key element in improving efficiency and growth as well as enhancing investor confidence and accordingly the corporate governance philosophy has been scripted as under.

“As a good corporate citizen, the company is committed to sound corporate practices based on conscience, openness fairness, professionalism and accountability in building confidence of its various stakeholders in it thereby paving the way for its long term success.”

We are therefore, making continuous efforts to adopt the best practices in corporate governance and we believe that the practices we are putting into place for the company shall go beyond adherence to regulatory framework. Our corporate structure, business and discloser practices have been aligned to our corporate philosophy.

MANAGEMENT DISCUSSION & ANALYSIS

A management discussion and analysis report, highlighting the performance and prospects of company’s energy and environment businesses, is attached and forms part of this report.

The company’s equity strength &shares are listed on two stock exchange the national stock exchange of India (NSE) and Bombay stock exchange limited (BSE).

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In order to sustain a GDP growth rate of 8% plus per annum, the power sector also needs to grow at appropriate pace in the medium to long term the growth of GDP vis-à-vis-growth rate.

The gross income of the company comprises of the income from sale of electricity, consultancy and other services, and interest earned on investments such as term deposits and bonds issued under one time settlement scheme. The gross income of the company for the fiscal 2008 was Rs. 400,113 Million against Rs. 353,766 Million in the previous year registering an increase of 13%. This gross income excludes provisions written back.

Cash generated from operating activity During the year improved substantially to Rs,. 101,711 million compared to Rs. 80,653 million in the previous year.

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P & L A/C FOR THE YEAR ENDED 31ST MARCH 2008

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Analysis

PROFIT AND LOSS ACCOUNT SHOWS THE INCOME AND EXPENDITURES MADE BY THE COMPANY DURING THE FINANCIAL YEAR. BY THIS ACCOUNT STACK OWNERS CAN GET THE IDEA IN WHICH WAY COMPANY SPEND THEIR MONEY

THE TOTAL INCOME OF THE COMPANY INCREASED BY 13.10% TO THE PREVIOUS YEAR IN THE SAME WAY EXPENDITURES ALSO INCREASED BY 11.34% TO THE PREVIOUS YEAR. THIS GROWTH RATE IS SLIGHTLY LOWER THEN THE INCOME GROWTH RATE

PROFIT AFTER TAX WAS INCREASED BY 38.56%

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BALANCESHEET AS ON 31ST MARCH 2008

Analysis

BY COMPARING THE BALANCE SHEET OF THE COMPNY TO THE PREVIOUS YEAR WE CAN GET THE IDEA OF WHAT TYPE OF MAJER CHANGES TAKEN PLACE DURING THE YEAR WHICH ULTIMETELY AFFECTS THE MARKET VALUE OF THE COMPANY.

HERE THE SHAREHOLDERS’ FUND, INCRESDED BY 8.3% TO THE PREVIOUS YEAR.AND LOAN FUNDS ALSO INCRESED BY 11.05% TO THE PREVIOUS YEAR

WHILE ON THE APPLICATION OF FUNDS SIDE FIXED ASSEST INCRESED BY 14.32% INVESTMENTS INCRESED BY 15.17%

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BUT CURRENT LIABILITY AND PROVISION ARE INCRESE BY 12.87%

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COMMON SIZE STATEMENT

FINANCIAL STATEMENTS WHEN READ WITH ABSOLUTE

FIGURES ARE NOT EASILY UNDERSTANDABLE SOME TIMES

THEY EVEN MISLEAD THEREFORE IT IS NECESSARY THAT

FIGURES REPORTED IN THE STATEMENTS SHOULD BE

CONVERTED INTO PERCENTAGE SOME COMMON SIZE BASE.

IN THE PROFIT AND LOSS ACCOUNT NET SALES IS ASSUMED

TO BE EQUAL TO 100 AND OTHER FIGURE ARE EXPECTED

AS PERCENTAGE OF SALES. SIMILARLY IN THE BALANCE

SHEET THE TOTAL OF ASSETS OR LIABILITIES IS TO BE

TAKES AS 100 AND ALL OTHER FIGURES ARE EXPECTED AS

PERCENTAGE IS CALLED THE COMMON SIZE STATEMENT.

THERE ARE TWO TYPES OF COMMON SIZE STATEMENT.

COMMON SIZE PROFIT AND LOSS ACCOUNT

COMMON SIZE BALANCE SHEET

INCOME STATEMENT

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Profit / Loss A/C 31-Mar-08(12) 31-Mar-07(12)

Rs million %OI Rs million %OI

Net Sales 378902.00 91.14 326317.00 91.20

Operating Income (OI) 415717.00 100.00 357793.00 100.00

OPBDIT 144922.00 34.86 127960.00 35.76

OPBDT 126622.00 30.46 109285.00 30.54

OPBT 105237.00 25.31 88531.00 24.74

Non-Operating Income 57.00 0.01 434.00 0.12

Extraordinary/Prior Period -2660.00 -0.64 109.00 0.03

Tax 28486.00 6.85 20427.00 5.71

Profit after tax(PAT) 74148.00 17.84 68647.00 19.19

Cash Profit 95533.00 22.98 89401.00 24.99

Dividend-Equity 28859.00 6.94 26385.00 7.37

BALANCESHEET STATEMENT

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Rs. In million

Liabilities 2006-2007 Percentage 2007-2008 Percentage

Equity share capital 82455 11.182 82455 10.122

Profit & loss A/c 899 0.122 211 0.026

Provision 17028 2.309 23816 2.924

Other liability 53235 7.219 55483 6.811

Secured loans 68229 9.253 73147 8.980

Unsecured loans 176615 23.952 198759 24.400

TOTAL OF BALANCESHEET 737380 100 814581 100

Assets

Investments 160943 21.826 152672 18.742

Inventories 25102 3.404 26757 3.285

Sundry Debtors 12523 1.698 29827 3.662

Cash & Bank Balances 133146 18.057 149332 18.332

Loans & Advances 40476 5.489 40354 4.954

TOTAL OF BALANCESHEET 737380 100 814581 100

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RATIO ANALYSIS:

33

A RATIO IS COMPARISON OF TWO SPECIFIC VALUES FROM THE COMPANIES P & L ACCOUNT AND BALANCE SHEET FOR BETTER UNDERSTANDING OF FINANCIAL POSITION OF COMPANY.

RATIO ANALYSIS IS A WIDLEY USED TOOL OF FINANICIAL ANALYSIS. IT CAN BE USED

TO COMPARE THE RISK AND RETURN RELATIONSHIPS OF FIRMS OF DIFFERENT SIZES.

IT IS DEFINED AS THE SYSTEMATIC USE OF RATIO TO INTERPRET THE FINANICIAL

STATEMENTS SO THAT THE STRENGHTS AND WEAKNESSES OF A FIRM AS WELL AS ITS

HISTORICAL PERFOMANCE AND CURRENT FINANICIAL CONDITION CAN BE

DETERMINED. THE TERM RATIO REFERS TO THE NUMERICAL OR QUANTITATIVE

RELATIONSHIP BETWEEN TWO VARIABLES/ITEMS.THIS RELATIONSHIP CAN BE

EXPRESSED AS

PERCENTAGES SAY, NET PROFIT ARE 25% OF SALES.

IN FRACTION NET PROFIT IS ONE FOURTH OF SALES.

IN NO. OF TIME

THERE ARE CERTAIN TYPES OF RATIOS THAT WE USED FOR REFLECTING THE

RELATIONSHIP BETWEEN TWO VARIABLES.

A. LIQUIDITY RATIO.

B. CAPITAL STRUCTURE or LEVERAGE RATIOS.

C. PROFITABLITY RATIOS.

D. ACTIVITY RATIOS

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A: LIQUIDITY RATIO:

THE IMPORTANCE OF ADEQUATE LIQUIDITY IN THE SENSE OF THE ABILITY OF A FIRM TO MEET CURRENT/SHORT TERM OBLIGATIONS WHEN THEY BECOME DUE FOR THE PAYMENT CAN HARDLY BE OVERSTRESSED. IN FACT, LIQUIDITY IS A PREREQUISITE FOR THE VERY SURVIVAL OF A FIRM. THE SHORT TERM CREDITORS OF THE FIRM ARE ALWAYS INTRESTED IN LIQUIDITY OR SOLVENCY OF THE FIRM. THE LIQUIDITY RATIOS MEASURE THE ABILITY OF A FIRM TO MEET ITS SHORT TERM OBLIGATIONS AND REFLECT THE SHORT TERM FINANICAIL STRENGTH / SOLVENCY OF A FIRM. THE RATIOS WHICH INDICATE THE LIQUIDITY OF A FIRM ARE

(1) NET WORKING CAPITAL RATIOS

(2) CURRENT RATIO

(3) ACID TEST RATIO or QUICK RATIO

(4) SUPER QUICK RATIOS.

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NET WORKING CAPITAL:

THE TERM NET WORKING CAPITAL REFERS THE EXCESS OF CURRENT ASSETS OVER CURRENT LIABLITIES. CURRENT ASSETS REFERS TO ASSETS WHICH IN THE NORMAL COURSE OF BUSSINESS GET CONVERTED IN TO CASH WITHOUT DIMUNITION IN VALUE OVER A SHORT PERIOD. CURRENT LIABLITIES ARE THOSE WHICH HAS TO BE PAID IN THE SHORT PERIOD. ALTHOUGH NET WORKING CAPITAL IS NOT THE RATIO, IT IS FREQUENTLY EMPLOYED AS A MEASURE OF COMPANY’S LIQUDITY’S POSITION. THE COMPANY SHOULD HAVE ENOUGH N.W.C. IN ORDER TO MEET THE CLAIMS OF THE CREDITORS AND THE DAY TO DAY NEEDS OF THE COMPANY.

Formula:

Rs. millionPARTICULARS 2006-07 2007-08

TOTAL CURRENT ASSETS 2,21,827 2,55,488TOTAL CURRENT LIABLITIES 70263 79299

NET WORKING CAPITAL 1,51,564 1,76,189

HERE WE CAN SEE THAT THE NET WORKING CAPITAL HAS GONE UP FROM Rs.million 1,51,564 TO 1,76,189 SO WE CAN SAY THAT NWC HAS BEEN INCRESED 6 TIMES FROM YEAR 2006-07 TO 2007-08. WE CAN SAY THAT THE NWC HAS BEEN INCRESED BY NEARLY 16% AT THE YEAR 2007-08 FROM THE PREVIOUS YEAR.

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CURRENT RATIO

THE CURRENT RATIO IS THE RATO OF TOTAL CURRENT ASSETS TO TOTAL CURRENT LIABLITIES. IT IS CALCULATED BY DIVIDING CURRENT ASSETS BY CURRENT LIABLITIES.

Formula:

Calculation:

Rs. In million 2006-2007 2007-2008

Particulars Total current assets 2,21,827 2,55,488Total Current liability 70263 79299 CURRENT RATIO 3.157 3.222

Interpretation:

THE CURRENT RATIOS OF A FIRM MEASURES ITS SHORT-TERM SOLVENCY, THAT IS ITS ABILITY TO MEET SHORT-TREM OBLIGATIONS. AS A MEASURE OF SHORT-TREM/ CURRENT FINANICIAL LIQUIDITY, IT INDICATES THE RUPEES OF CURRENT ASSETS (CASH BALANCE AND ITS POTENTIAL SOURCE OF CASH) AVAILABLE FOR EACH RUPEE OF CURRENT LIABLITY/ OBLIGATION PAYABLE. THE HIGHER THE CURRENT RATIO, THE LARGER IS THE AMOUNT OF RUPESS AVAILABLE PER RUPEE OF CURRENT LIABLITY, THE MORE IS THE FIRM’S ABILITY TO MEET CURRENT OBLIGATIONS AND THE GREATER IS THE SAFETY OF FUNDS TO SHORT TERM CREDITORS.

CONTI….

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IN THIS COMPANY WE CAN SEE THAT THE CURRENT RATIOS FOR THE COMPANY IS 3.15:1, 3.22:1, FOR THE YEAR RESPECTIVLY 2006-2007, 2007-2008

THE IDOL CURRENT RATIO IS 2:1(CURRENT ASSETS TWICE CURRENT LIABLITIES). HERE IN THE YEAR 2006-2007 WE CAN SEE THAT THE RATIO IS 3.15:1. SO IT IMPLIES THAT FOR EVERY ONE RUPEE OF CURRENT LIABLITIES, CURRENT ASSESTS OF 3.15 RUPEES ARE AVAILABLE TO MEET THEM. LATER ON THE RATIO INCRESED TO 3.22 OVER ALL WE CAN CONCLUDE THAT THE COMPANY IS HAVING ENOUGH FUNDS TO MEET ITS DAY TO DAY REQUIREMENTS AND PAYMENTS TO CREDITORS. IN 2006-2007 THE CURRENT RATIO IS 3.15:1. IT IMPLIES THE INDICATES THE SLACK MANAGEMENT PRACTICES, AS IT SIGNAL EXCESSIVE INVENTORIES FOR THE CURRENT REQUIREMENTS AND POOR CREDIT MANAGEMENT IN TERMS OF OVEREXTENDED RECEIVABLE.

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QUICK RATIO OR ACID TEST RATIO OR LIQUID RATIO

THE ACID TEST RATIO IS THE RATIO BETWEEN QUICK CURRENT ASSETS AND CURRENT LIABLITIES AND IS CALCULATED BY DIVIDING THE QUICK ASSETS BY THE CURRRENT LIABLITIES.

Formula:

Calculation:

Year 2006-2007 Year 2007-2008Total current assets =221,827 =255,488Stock + prepaid Expanses = =

INTERPRETATION:-

IN THIS RATIO, IDEAL RATIO IS 0.5: 1. BUT COMPANY’S RATIO OF LAST THREE YEAR IS LOW. CURRENT YEAR RATIO 0.06: 1 IS NOT ABLE FOE THE COMPANY.

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(B) CAPITAL STRUCTURE/LEVERAGE RATIOS:

THE SECOND CATEGORY OF FINANICIAL RATIOS IS LEVERAGE OR CAPITAL STRCTURE RATIOS. THE LONG-TERM LENDERS/CREDITORS WOULD JUDGE THE SOUNDNESS OF A FIRM ON THE BASIS OF THE LONGTERM FINANICIAL STRENGTH MEASURED IN TERMS OF ITS ABILITY TO PAY INTEREST REGULARLY AS WELLA STHE REPAYMENT OF THE INSTALLMENT OF THE PRINCIPAL ON DUE DATES OR IN ONE LUMP SUM AT THE TIME OF MATURITY. THE LONG TERM SOLVENCY OF THE COMPANY CAN BE EXAMINED BY USING LEVERAGE OR CAPITAL STRUCTURE RATIOS. THERE ARE THREE TYPES OF LEVERAGE RATIOS.

1. DEBT EQUITY RATIO

2. EQYITY ASSETS RATIO.

3. LONG TERM FUNDS TO FIXED ASSETS.

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(1).DEBT EQUITY RATIO:

THE D/E RATIO IMPLIES THE RATIO OF TOTAL OUTSIDE LIABLITIES TO OWNERS’ TOTAL FUNDS.

IN OTHER WORDS IT IS THE RATIO OF THE AMOUNT INVSTED BY OUTSIDERS TO THE

AMOUNT INVESTED BY THE OWNERS. THIS RATIO REFERS TO THE SAFTY OF THE OUTSIDERS FOR

THE MONEY THAT HAD INVESTED IN D COMPANY BY THEM.

FORMULA:

Rs. MILLIONSPARTICULARS 2006-2007 2007-2008 EQUITY SHARE CAPITAL 82455 82455RESERVE N SURPLUS 403513 443931

Total= 485968 526386 LONG TERM DEBTS 68229 73141

DEBT - EQUITY RATIO 0.50 0.52

THE IDOL RATIO OF D/E IS 1:2 IT IMPLIES THAT FOR EVERY ONE RUPEE OF LONG TERM

LIABLITY THERE IS THE OWNERS’ CAPITAL OF TWO RUPEES. BUT IN OUR COMPANY IT HAS BEEN

GRADUALLY INCRESED. IN THE YEAR 2006-2007 THE RATIO IS 0.14:1. THIS RATIO IMPLIES THAT THE

COMPANY IS HAVING MORE OUTSIDERS FUND THAN IT’S OWN FUNDS. A HIGH RATIO IMPLIES

LARGE SHARE OF FINANICING BY THE CREDITORS OF THE COMPANY WHERE LOW RATIO IMPLIES A

SMALLER CLAIM OF CREDITORS. IN THE YEAR 2007-2008 COMPANY HAS TRIED TO MAINTAIN THE

SATISFACTORY RATIO. IN THE YEAR 2007-2008 COMPANY HAS MAINTAINED THE SATISFACTORY

RATIO OF 1:2. (0.13:1)

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(2).PROPRIETARY RATIO:

RATIO IMPLICATES THE PROPORITION OF OWNER’S FUND TO TOTAL ASSETS EMPLOYED IN THE BUSINESS.

THIS RATIO ESTABLISHED THE RELATIONSHIP BETWEEN

PROPRIETOR’S FUND AND TOTAL ASSET. IT IS TEST OF LONG TERM

CREDIT STRENGTH. IT MEASURES THE EXTENT OF PROTECTION

VALUABLE TO THE CREDITORS. HIGHER THE RATIO THE STRANGER

THE FINANCIAL POSITION OF THE ENTERPRISE

FORMULA:

X 100

Rs. in millionsPARTICULARS 2006-2007 2007-2008 EQUITY SHARE CAPITAL 82455 82455RESERVE N SURPLUS 403513 443931

Total 485968 526386 TOTAL CURRENT ASSETS 221827 255488FIXED ASSETS 424873 485720

TOTAL REAL ASSETS 646700 741208

PROPRIETARY RATIO 75.146 71.017

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THIS RATIO IMPLICATES THE PROPORITION OF OWNER’S FUND TO TOTAL ASSETS EMPLOYED IN THE BUSINESS. THE HIGHER THE RATIO, THE STRONGER THE FINANICIAL POSITION OF THE COMPANY, AS IT SINGNIFIES THAT THE PROPRITORS HAVE PROVIDED LARGER FUNDS TO PURCHASE THE ASSETS. HERE A VERY HIGH RATIO IS NOT DESIRABLE BECAUSE IT MEANS THAT INSUFFICENT USE IS BEING MADE OF OUTSIDE FUNDS. ACCORDING TO ONE SURVEY BY RESERVE BANK OF INDIA THE RATIO WAS 36 TO 38% IN MOST OF THE INDIAN COMPANIES.

IN OUR COMPANY IN THE YEAR OF PREVIOUS YEAR THIS RATIO IS 75.146%. IN THE YEAR 2007 IT HAS INCRESED TO 71.017%.

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(3). LONG TERM FUNDS TO FIXED ASSEST

THE FIXED ASSETS SHOULD ALWAYS BE REQUIRED OUT OF LONG-TERM FUNDS MEANING THAT THIS RATIO SHOULD NOT BE LESS THAN 100 LONG TERM FUNDS INCLUDE SHARE CAPITAL RESERVE AND LONG-TERM LIABILITIES.

FORMULA:

Rs. in millionPARTICULARS 2006-2007 2007-2008

EQUITY SHARE CAPITAL 82455 82455RESERVE N SURPLUS 403513 443931LONGTERM LIABILITY 68229 73147

TOTAL LONG TERM FUNDS 554197 599533

TOTAL LONG TERM FUNDS 554197 599533FIXED ASSETS 424873 485720

RATIO 1.304 1.234

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(C) PROFITABILITY RATIO

THE THIRD CATEGORY OF FINANICIAL RATIOS IS PROFITABILITY RATIOS. THE LONG-TERM LENDERS/CREDITORS WOULD JUDGE THE SOUNDNESS OF A FIRM ON THE BASIS OF THE LONGTERM FINANICIAL STRENGTH MEASURED IN TERMS OF ITS ABILITY TO PAY INTEREST REGULARLY AS WELLA STHE REPAYMENT OF THE INSTALLMENT OF THE PRINCIPAL ON DUE DATES OR IN ONE LUMP SUM AT THE TIME OF MATURITY. THE LONG TERM SOLVENCY OF THE COMPANY CAN BE EXAMINED BY USING LEVERAGE OR CAPITAL STRUCTURE RATIOS. THERE ARE SIX TYPES OF LEVERAGE RATIOS.

1. GROSS PROFIT RATIO

2. NET PROFIT RATIO

3. OPERATING PROFIT RATIO

4. RETURN ON CAPITAL EMPLOYED

5. RETURN ON SHAREHOLDER FUNDS RATIO

6. EARNING PER SHARE

7. PRICE EARNINGS RATIO OR P/E RATIO

8. BOOK VALUE PER SHARE:

Gross Profit Ratio

THIS RATIO MEASURES THE RELATIONSHIP BETWEEN GROSS PROFIT AND THE NET SALES. LOWER THE RATIO INDICATES LOWER PROFITABILITY AND UNFAVORABLE MAKE-UP POLICY. THE OBJECTIVE OF COMPUTING THIS RATIO IS TO DETERMINE THE EFFICIENCY THAT WHICH THE PRODUCTION AND PURCHASE OPERATIONS ARE CARRIED ON IT INDICATES THE PROFIT AVAILABLE FOR NON MANUFACTURING OVERHEADS.

Formula:

Rs. MILLIONS

PARTICULARS 2006-2007 2007-2008 GROSS PROFIT 89074 102549SALES 325952 370501

GROSS PROFIT RATIO 27.327% 27.678%

INTERPRETATION:-

THE G.P RATIO OF THE COMPANY IN THE YEAR 06-07 VERY GOOD BUT IN THE YEAR 04-05 AND 03-04 IT RAISE A LITTLE BIT WHICH SHOWS GOOD PROFITABILITY OF THE COMPANY

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NET PROFIT RATIO

THE RATIO IS CALCULATED FOR THE PURPOSE OF MEASURING OVERALL PROFITABILITY OF THE BUSINESS AND SHOW THE EFFICIENCY OF OPERATING THE BUSINESS. HIGHER THE RATIO INDICATES HIGHER PROFITABILITY.

Formula:

Rs. MILLIONS

PARTICULARS 2006-2007 2007-2008 NET PROFIT 68647 74148SALES 325952 370501

NET PROFIT RATIO 21.060% 20.013%

INTERPRETATION :-

THIS RATIO INDICATES PROPORTION OF SALES REVENUE LEFT TO THE COMPANY AFTER ALL OPERATING EXPENSES ARE MET. HIGHER THE RATIO BETTER WILL BE THE PROFITABILITY. IN THE YEAR 2006-’07, THE RATIO IS HIGHER, BUT IN 2007-’08, IT HAS DECREASED.

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OPERATING RATIO

THIS RATIO MEASURES THE RELATIONSHIP BETWEEN THE OPERATING EXPENSE AND THE NET SALES. THE OPERATING EXPENSE RATIO GUIDES THE MANAGEMENT ABOUT OVERALL INCREASE OR DECREASE IN OPERATING EXPENSE. A STUDY OF THIS RATIO REVEALS WHETHER THESE COSTS ARE HIGHLY LOWER OR COMPARABLE TO OTHER FIRMS. OPERATING EXPENSE INCLUDES ADMINISTRATING SELLING AND FINANCIAL EXPENSES.

FORMULA:

Rs. MILLIONS

PARTICULARS 2006-2007 2007-2008

COST OF SALES(sales less G.P) 236878 267952

OPERATING EXPANCES 264842 294883

SALES 325952 370501

OPERATING RATIO 153.925 151.912

INTERPRETATION:-

IT IS A RATIO SHOWING RELATIONSHIP BETWEEN COST OF GOODS SOLD PLUS OPERATING EXP. AND NET SALES. IT SHOWS EFFICIENCY OF MANAGEMENT LOWER THE RATIO IS BETTER FOR THE COMPANY.

FROM THE LAST TWO YEARS RATIO, CURRENT YEAR RATIO IS LOWER. SO COMPANY TRIED TO DECREASE OPERATING RATIO.

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RETURN ON CAPITAL EMPLOYED

IT MEASURE RELATIONSHIP BETWEEN THE NET PROFIT EARNED AND THE CAPITAL EMPLOYED TO EARN IT. RETURN ON CAPITAL EMPLOYED IS THE BASIC PROFITABILITY RATIO. THEREFORE HIGHER THE RATIO BETTERS THE SITUATION. THE SUCCESS OF THE ENTERPRISE IS JUDGE WITH THE HELP OF THIS RATIO. THE OBJECTIVE OF COMPUTING THIS RATIO IS TO FIND OUT HOW EFFICIENTLY THE LONG TERM FUNDS SUPPLIED BY THE CREDITORS AND SHAREHOLDERS HAVE BEEN USED.

FORMULA:

Rs. In millionPARTICULARS 2006-2007 2007-2008 EQUITY SHARE CAPITAL 82455 82455RESERVE N SURPLUS 403513 443931LONGTERM LIABILITY 68229 73147TOTAL CAPITAL EMPLOYED 564331 588868 TOTAL CAPITAL EMPLOYED 564331 588868PROFIT BEFORE TAX AND ADJUSTMENT* 78385 82854 RETURN ON CAPITAL EMPLOYED 13.890 14.070

WE CAN SEE THAT FOR ALL THE YEAR THE COMPANY HAS MAINTAINED THE STAISFACTORY RATIOS. IT HAS BEEN GRADULY INCRESED FROM 2006-‘07 TO 2007-‘08. THIS SHOWS THAT THE COMPANY IS USING THE FUNDS MORE PROPERLY AND IN THE BETTER WAY.

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RETURN ON SHAREHOLDER FUNDS RATIO

THIS RATIO MEASURES THE RELATIONSHIP BETWEEN NET PROFIT AFTER INTEREST AND TAX AND SHAREHOLDER FUND. IT IS FOUND IN ORDER TO JUDGE THE EFFICIENCY WITH WHICH PROPRIETORS FUNDS ARE EMPLOYED IN BUSINESS.

FORMULA:

100

Rs. In millionPARTICULARS 2006-2007 2007-2008

PAT 68647 74148SH. FUNDS OR NET WORTH 526386 485968

RATIO 13.041 15.258

INTERPRETATION

IN ORDER TO JUDGE THE EFFICIENCY WITH WHICH THE PROPRIETOR FUNDS ARE EMPLOYED IN BUSINESS THIS RATIO IS ASCERTAINED. IN THE PREVIOUS YEAR IT COMES TO 13.041%. IN THE CURRENT YEAR IT COMES TO 15.258 THESE HIGH FIGURES ATTRACTED THE SHAREHOLDER TO INVEST IN THE COMPANY.

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EARNING PER SHARE

EPS MEASURES THE PROFIT AVAILABLE TO EQUOTY SHARE HOLDESRS ON A PER SHARE BASIS THAT IS THE AMOUNT THEY CAN GET ON EVERY SHARE THAT THEY HELD. THIS PROFIT IS CALCULATED BY DEDUCTING THE TAXES AND PREF. SHARE DIVIDEND FROM THE NET PROFIT OF THE COMPANY.

FORMULA

Rs. In million

PARTICULARS 2006-2007 2007-2008

PROFIT AFTER TAX 68647 74148

PREFERANCE SHARE DIVIDENT NILL NILL

NUMBER OF EQUITY SHARE 8245464400

8245464400

EARNING PER SHARE 8.3254 8.9926

HERE THERE HAS BEEN A VERY DRASTIC CHANGE FROM THE YEAR 2006-2007 TO 2007-2008. THIS CHANGE HAS BEEN OCURED BECAUSE OF INCREASING IN THE PROFIT. WE CAN SEE THAT THERE IS MORE THAN EIGHT TIMES OF PROFIT FROM THE YEAR 2006-2007 TO 2007-2008. SO THAT SHOWS THE COMPANY HAS PERFOMED REALLY WELL IN THE YEAR 2007-2008.

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PRICE EARNINGS RATIO OR P/E RATIO:

THE P/E RATIO REFLECTS THE PRICE CURRENTLY BEING PAID BY THE MARKET FOR EACH RUPEE OF CURRENTLY REPOTED E.P.S. IN OTHER WORDS THIS RATIO MEASURES INVESTORS’ EXPACATION AND THE MARKET APPRAISAL OF THE PERFOMANCE OF THE FIRMS.

PARTICULARS 2006-2007 2007-2008

MARKET PRICE OF SHARE 155.5 196.6

E.P.S. 8.3254 8.9926

P/E RATIO 18.67778125 21.86242021

WE CAN SEE THAT THE COMPANY HAD GOT THE VARIATIONS IN THE P/E RATIO. IN 2004-05 IT WAS 41.08 AND THAN IT WAS RAISED TO 103.66 AND THAN SUDDENLY DECRESSED TO 15.85. THE REASON IS THAT IN 2006-07 THE PROFIT OF THE COMPANY WAS RAISED. SO THAT BASIC E.P.S. HAS ALSO RAISED. AND THE MARKET PRICE HAS ALSO NOT INCRESED AS COMPARED TO THE PREVIOUS YEAR.

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BOOK VALUE PER SHARE:

THIS RATIO IS SOMETIMES USED AS A BENCHMARK FOR COMPARISION WITH THE MARKET PRICE PER SHARE. HOWEVER THE BOOK VALUE PER SHARE HAS A SERIOUS LIMITATION AS VALUATION TOOL AS IT BASED ON THE HISTORICAL COSTS OF THE ASSETS OF A FIRM. THERE MAY BE SIGNIFICANT DIFFERNCE BETWEEN THE MARKET VALUE OF ASSETS AND BOOK VALUE OF ASSESTS.

FORMULA:

Rs. In millions

PARTICULARS 2006-2007 2007-2008

EQUITY SHARE CAPITAL 82455 82455

RESERVE N SURPLUS 403513 443931

NET WORTH 485968 526386

NO. OF EQUITY SHARE HOLDERS

82455 82455

BOOK VALUE PER SHARE 58.93 63.83

HERE WE CAN COMAPRE THE BOOK VALUE PER SHARE TO THE MARKET VALUE OF SHARE. THE BOOK VALUE OF SHARE IN THE YEAR 2006-2007 IS 5.893 WHILE THE MARKET PRICE OF SHARE IS 155.5 IN THE YEAR 2007-2008 THE BOOK VALUE IS 6.383 WHILE THE MARKET VALUE IS 196.5. SO AGAIN WE FIND A BIG DIFFERNCE BETWEEN THE MARKET PRICE AND BOOK PRICE OF SHARE.

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ACTIVITY RATIOS

ACTIVITY RATIOS ARE CONCERNED WITH MEASURING THE EFFICIENCY IN ASSET MANAGEMENT. THESE RATIOS ARE CALLED EFFICIENCY RATIOS OR ASSET UTILLISATION RATIOS. THE EFFICENCY WITH WHICH THE ASSETS ARE USED WOULD BE REFLECTED IN THE SPPED AND RAPIDLY WITH WHICH ASSETS ARE CONVERTED IN TO SALES.THE GREATER THE RATIO SHOWS THE BETTER UTILISATION OF THE ASSETS. THERE ARE VARIOUS TYPES OF ACTIVITY RATIOS.

1. INVENTORY RATIO

2. DEBTORS TURNOVER RATIO

3. CREDITORS TURNOVER RATIO

4. FIXED ASSEST TURNOVER

5. TOTAL ASSEST TURNOVER

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INVENTORY TURNOVER RATIO

THE RATIO SHOWS THE RELATIONSHIP BETWEEN COSTS OF GOODS SOLD AND AVERAGE STOCK. THE PURPOSES OF THIS RATIO ARE TO CHECK UP WHETHER ONLY THE REQUIRED MINIMUM AMOUNT HAS BEEN INVESTED IN STOCK. A PROPER STOCK TURNOVER ENABLES THE BUSINESS TO EARN A REASONABLE MARGIN OF PROFITS.

FORMULA:

THIS RATIO CAN BE CALCULATED BY FINDING THE COST OF GOODS

SOLD AND AVG. INVENTORY. THE COST OG GOODS SOLD IS

CALCULATED BY DEDUCTING THE GROSS PROFIT FROM THE SALES.

AND AVG. INVENTORY IS CALCULATED BY GETTING THE AVG. OF

OPENING AND CLOSING INVENTORY.

COST OF SALES=SALES - GROSS PROFIT

AVERAGE STOCK= (OPEING STOCK +CLOSING STOCK) /2

INVENTORIES FOR YEAR 2005-2006 IS RS. 23405 million



Rs. In millionPARTICULARS 2006-2007 2007-2008 COST OF SALES 236878 267952AVERAGE STOCK 24253.5 25929.5

STOCK TURN OVER RATIO 9.767 10.334

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WE CAN SEE THAT THE INVENTORY RATIO IS ALMOST SAME

FOR TWO YEARS. IN CURRENT YEAR IT IS ALMOST 11 TIMES WHILE

IN PREVIOUS YEAR OF 10 TIMES THIS SHOWS THE COMPANY HAS

MAINTAINED THE SAME RATE OF TRANSFARING THE INVENTORY

INTO THE SALES FOR BOTH YEARS. IT SHOWS THE EFFICENT

MANGEMENT SYSTEM OF THE COMPANY. SO THE AVG. INVENTORY IS

CONVERTED ALMOST 10 TIMES INTO SALES IN A YEAR.

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DEBTORS TURNOVER RATIO

THIS RATIO ESTABLISHES THE RELATIONSHIP BETWEEN NET CREDIT SALES AND AVERAGE DEBTORS OF THE YEAR. AVERAGE DEBTORS ARE CALCULATED BY DIVIDING THE SUM OF DEBTORS IN THE BEGINNING AND AT THE END. A DEBTOR TURNOVER MEASURES THE AMOUNT OF RESOURCES TIED UP IN DEBTORS IS REASONABLE AND WHETHER THE COMPANY HAS BEEN EFFICIENT IN COLLECTING DEBTOR’S CASH.

Formula:

Rs. In millions

PARTICULARS 2006-2007 2007-2008

SALES 325952 370501

DEBTORS 12523 29827

DEBTORS TURNOVER RATIO 26.028 12.422

THIS RATIO SHOWS AFTER HOW MANY DAYS WE ARE GETTING MONEY. SO THE LESS NO. OF DAYS OR MORE NO. OF TIMES IS BETTER FOR THE COMPANY.

HERE THE COMPANY HAS MAINTED THE RATIO TO ARROUND 26 TO 27 TIMES. THIS SHOWS THAT AVERAGE DEBTORS ARE CONVERTED 26 TO 27 TIMES IN TO THE CASH OR LIQUDITY.

AVG. COLLECTION PERIOD:

THIS SHOWS THE AVG. COLLECTION PERIOD OF DEBTORS. THE LOW THE PERIOD THE BETTER THE COLLECTION MANAGMENT FOR THE COMPANY.

FORMULA:

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Rs. MILLIONS

PARTICULARS 2006-2007 2007-2008

DAYS IN A YEAR 365 365

DEBTORS TURNOVER RATIO 26.028 12.422

AVG. COLLECTION PERIOD(IN DAYS) 14.02 29.38

WE CAN SAY THAT FROM THE ABOVE INFORMATION THAT IN THE PREVIOUS YEAR DEBTORS PAY THEIR PAYMENT IN 14 TO 15 DAYS. BUT IN THE YEAR 2007-2008 DEBTORS PAY THEIR PAYMENT IN 29 TO 30 DAYS. WHICH SHOWS LIBERAL COLLECTION POLICY

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CREDITORS TURNOVER RATIO

THIS RATIO SHOWS THE RELATIONSHIP BETWEEN CREDITORS AND CREDIT PURCHASE. THE NUMBER OF DAYS WITHIN WHICH WE MAKE PAYMENT TO OUR CREDITORS FOR CREDIT PURCHASE IS OBTAINED FORM CREDITOR’S VELOCITY.

Formula:

Rs. In millions

PARTICULARS Year 2006-2007 Year 2007-2008

Total Credit purchase 198181 220202Average Creditors 15639 16338

RATIO 12.672 13.478

INTERPRETATION: -

IN THIS RATIO MORE THE NO. OF DAYS OR LESS NO. OF TIMES IS GOOD FOR COMPANY.

HERE, IN THE YEAR 2006-’07 THE RATIO IS 13 TIMES ,2007-’08 (14 TIMES). IT IS GOOD FOR THE COMPANY.

AVG. PAYMENT PERIOD:

AVG. PAYMENT PERIOD SHOWS THE PAYMENT PAID TO CREDTIORS IN THE DAYS. IT IS CALCULATED BY DAYS IN A YEAR TO THE CREDITORS TURNOVER RATIO.

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Formula :

Rs. In millionPARTICULARS 2006-07 2007-08

DAYS IN A YEAR 365 365 CREDITORS TURNOVER 12.672 13.478 CREDITORS RATIO (IN DAYS) 28.804 27.081

THIS AGAIN SHOWS THE POOR CREDIT MANAGEMENT OF THE COMPANY. THE PAYMNET PERIOD NEARLY 27 DAYS IN BOTH YEAR THE COMPANY SHOULD DECIDE IN ADVANCE THE PAYMENT PERIOD FOR THEIR CREDITORS.

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FIXED ASSEST TURNOVER

TO ASCERTAIN THE EFFICIENCY & PROFITABILITY OF THE BUSINESS, THE TOTAL FIXED ASSETS ARE COMPARED TO SALES.

FORMULA:

Rs. in millionsPARTICULARS 2006-2007 2007-2008 SALES 325952 370501FIXED ASSEST 256481 260937 FIXED ASSEST TURN OVER RATIO 1.271 1.420

INTERPRETATION: -

MORE THE SALES, THE MORE EFFICIENT USE OF FIXED ASSETS. THE LAST TWO YEARS RATIO HAS INCREASED, WHICH IS GOOD FOR THE COMPANY.

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TOTAL ASSEST TURNOVER

THE EFFICIENCY OF THE BUSINESS HOUSE IN UTILIZING ITS TOTAL ASSETS.

THIS SHOWS THAT WHAT AMOUNTS OF THE TOTAL ASSETS ARE

EMPLOYED. THIS RATIO SHOWS THE EFFICIENCY OF THE BUSINESS

HOUSE IN UTILIZING ITS TOTAL ASSETS. THE OBJECTIVE OF

COMPUTING THIS RATIO IS TO DETERMINE THE EFFICIENCY WITH

WHICH THE TOTAL ASSETS ARE UTILIZED. IF THERE IS INCREASE IN

THE RATIO IT WILL INDICATE THAT THERE IS IMPROVEMENT IN THE

UTILIZATION OF TOTAL ASSETS.

FORMULA:

Rs. MILLIONS

PARTICULARS 2006-2007 2007-2008

SALES 325952 370501

TOTAL ASSEST 807643 893880

TOTAL ASSEST TURN OVER RATIO 0.404 0.414

HIGHER THE RATIO IS BETTER FOR THE

COMPANY. HERE FROM ABOVE TWO RATIOS, WE CAN SEE THAT, IT IS

INCREASED IN CURRENT YEAR COMPARE TO THE PREVIOUS YEAR

WHICH IS GOOD FOR COMPANY.

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CAPITAL BUDGETING IS CONCERNED WITH INVESTMENT

DECISION WHICH YIELD RETURN OVER A PERIOD OF THE

TIME IN FUTURE. THE FOREMOST REQUIREMENT FOR

EVALUATION OF ANY CAPITAL INVESTMENT PROPOSAL IS TO

ESTIMATES THE FUTURE BENEFITS ACCRUING FROM THE

INVESTMENT PROPOSAL. THEORETICALLY TWO

ALTERNATIVES CRITERIA AVAILABLE TO QUANTITY OF THE

BENEFITS ARE

1)ACCOUNTING PROFITS

2)CASH FLOWS

THE CASH FLOW APPROACH MEASURING BENEFITS OF

PROJECTS IS SUPERIOR TO THE ACCOUNTING APPROACH AS

CASH FLOW ARE THEORETICALLY BETTER MEASURES OF

THE NET ECONOMIC BENEFITS OF COST ASSOCIATED WITH

THE PROPOSED PROJECTS. WHILE CONSIDERING AN

INVESTMENT PROPOSAL A FIRM IS INTERESTED IN

ESTIMATING ITS ECONOMIC VALUE. THIS ECONOMIC VALUE

IS DETERMINED BY THE ECONOMIES OUTFLOWS AND

INFLOWS RELATED WITH THE INVESTMENT PROJECTS.

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ONLY CASH FLOW REPRESENTS THE CASH

TRANSACTION THE FIRM MUST PAY FOR THE PURCHASE OF

ASSETS WITH CASH. THE CASH OUTLAY REPRESENTS A

FOREGONE AN OPPORTUNITY TO USE CASH IN SOME OTHER

PRODUCTIVE. CONSEQUENTLY THE FIRM SHOULD LASER’S

FUTURE NET BENEFITS IN CASH TERMS.

ONLY CASH FLOWS REFLECT THE ACTUAL

TRANSACTIONS ASSOCIATED WITH THE PROJECT. SINCE

INVESTMENT ANALYSIS IS CONCERNED WITH FINING OUT

WHETHER FUTURE ECONOMIES INFLOW ARE SUFFICIENTLY

LARGE OF WARRANT THE INITIAL INVESTMENT, ONLY THE

CASH FLOW METHODS IS APPROPRIATED FOR INVESTMENT

DECISION ANALYSIS. IT IS ONLY CASH FLOW APPROACH

THAT TAKES COGNIZANCE OF THE TIME VALUE OF MONEY.

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Analysis

Cash flow statement shows cash inflow as well as out flow of the company

Here in current year cash flow from operation activity is Rs. 101,711 in million against Rs. 80,653 in million which shows net increase of 26.11% while from investing activity in current year is Rs. 62,038 in million against Rs. 31,458 in million fo previous year which shows net increase of 97.20%

And cash flow from financing activity in current year is Rs. 23,487 in million against previous year of Rs. 763 in million Which shows Net increase of 2978.25%

Closing cash balance of previous year is Rs. 149,332 in million against previous year of Rs. Rs. 133,146 in million Which shows Net increase of 12.15%

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AT LAST I WOULD TO CONCLUDE THAT THE FUTURE OF

“NTPC LTD” IS VERY BRIGHT. ITS PROGRESS AT A VARIOUS

STAGE HAS MADE THE FINANCIAL POSITION OF THE

COUNTRY MORE THAN THE HEALTHY AND BETTER. ONE OF

THE SILENT FEATURES OF “NTPC LIMITED” IS THAT THE

ENTIRE MANAGEMENT FUNCTION IS CARRIED OUT WITH

FULL CO-OPERATION AND UNITY.

AS QUALITY OF THE PRODUCT IS VERY GOOD, NTPC IS

ABLE TO ATTRACT VARIOUS FOREIGN AND MULTINATIONAL

COMPNIES.

Particulars 2006-2007 2007-2008

EARNING PER SHARE 8.33 8.99

BOOK VALUE PER SHARE 58.94 63.84

Net Profit Ratio 8.38% 6.04%Return On Capital Employed 13.89% 14.07%Current Ratio 3.16 3.22Debt Equity Ratio 0.5 0.52

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33

BIBLIOGRAPHY

REPORT:

32ND ANNUAL REPORT OF NTPC LIMITED

LIST OF REFERENCE BOOKS FOR PREPARATION OF PROJECT REPORT:

1. ACCOUNTING FOR MANAGEMENT : D.R. PATEL

2. COST & MANAGEMENT ACCOUNTING : RAVI M. KISHORE ( REFER IT

FOR POINTS 4 & 5)

3. COST & MANAGEMENT ACCOUNTING : S. N. MAHESHWARI

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Ntpc Final

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