PROJECT REPORT ON
RATIO ANALYSIS OF SAIL
GURU NANAK INSTITUTE OF TECHNOLOGY
Kumari Garima
REGISTRATION
NO:143112010012
ROLL NO: 31105014011
Agenda
Introduction
Objective
Ratio analysis
Analysis of Financial Statement of
SAIL
Findings
Recommendation
About the Company
Steel Authority of India Limited (SAIL) is the leading steel-making company in India.
SAIL is also among the seven Maharatnas of the country’s Central Public Sector
Enterprises.
The company, incorporated on January 24, 1973 with an authorized capital of Rs. 2000
crore.
SAIL traces its origin to the Hindustan Steel Ltd.
In 1974- SAIL in export & import business.
In 1978- Indian Iron & Steel co. ltd became subsidary of SAIL.
In 2005- GAIL ties up with SAIL.
SAIL has more than 1 lakh employees.
Annual turnover of Rs. 43,337 crore (US$6.4 billion) in 2015-2016.
Annually it produces over 13 million tonnes of various steel products.
Shri P.K Singh is the current chairman of SAIL.
SAIL’s products have found ready acceptance in about 75 countries the world over.
SAIL operates and owns 5 integrated steel plants at Bhilai, Rourkela, Durgapur,
Bokaro and Burnpur and 3 special steel plants at Salem, Durgapur and Bhadravathi.
SAIL is one of the India’s fastest growing Public Sector Units.
SAIL is a public sector company, owned and operated by the Government of India.
Objective of the project
To see the financial position of
the company for last 5 years
What is Ratio Analysis
The term - Ratio‖ refers to the numerical and quantitative relationship
between two items or variables. This relationship can be exposed as
Percentages
Fractions
Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret
the financial statements so that the strengths and weaknesses of a
firm, as well as its historical performance and current financial
condition can be determined Ratio reflects a quantitative relationship
helps to form a quantitative judgment. It is process of interpreting
numerical relationships based on financial statements.
Nature of Ratio Analysis
Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various
ratios for helping in making certain decisions. It is only a means of
understanding of financial strengths and weaknesses of a firm. There are
a number of ratios which can be calculated from the information given in
the financial statements, but the analyst has to select the appropriate
data and calculate only a few appropriate ratios. The following are the
three steps involved in the ratio analysis-
(a) Selection of relevant data from the financial statement depending
upon the objective of the analysis.
(b) Calculation of appropriate ratios from the above data.
(c) Comparison of the calculated ratios with the ratios of the same
firm in the past, or the ratios developed from projected financial
statement or the ratios of some other firms or the comparison with ratio
of the industry to which the firm belongs.
Importance and Limitation of Ratio
Analysis
Importance Limitation
Aid to measure general Limitations of accounting
efficiency records
Aid to measure financial Lack of proper standards
solvency No allowances for price level
Aid in forecasting and planning changes
Facilitate decision making Changes in accounting
procedures
Aid in corrective action
Quantitative factors are
Aid in intra-firm comparison ignored
Background is over looked
Limited use
Analysis of Financial Statement
of SAIL
Financial Ratios are found below
LIQUDITY RATIO
QUICK or ACID TEST RATIO
PROFITABILITY RATIO
RETURN ON EQUITY
RETURN ON CAPITAL EMPLOYED
OPERATING PROFIT RATIO
MARKET RATIO
DIVIDEND PAYOUT RATIO
PROPRIETARY RATIO
ACTIVITY RATIO
Liquidity ratio
CURRENT RATIO=CURRENT ASSET/CURRENT LIABILITY
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
1.51 1.20 0.95 0.83 0.58
Column2
1.6
1.4 In 2012, the firms ability to
1.2
cover its current liabilities with
its current assets was 1.51.But
1
in next four year, the ratios goes
0.8 down to 1.20, 0.95, 0.83, 0.58
0.6 as compared to 2012, which
0.4
means that the company will
not be able to pay its bills in
0.2
immediate basis.
0
2012 2013 2014 2015 2016
QUICK or ACID TEST RATIO
QUICK RATIO= CURRENT ASSETS-INVENTORIES-PREPAID
EXPENSES/CURRENTLIABILITIES-BANK
YEAR 2012 YEAR 2013 YEAR 2014
OVERDRAFT
YEAR 2015 YEAR 2016
0.76 0.49 0.41 0.31 0.18
0.8
0.7
0.6
According to the definition of acid
test ratio, the company should have 0.5
the ability to pay its liabilities 0.4
through its most liquid assets. A
Decreasing quick ratio says that the 0.3
company’s sales are decreasing, the 0.2
company is having a hard time
0.1
collecting its account receivable or
perhaps the company is paying its 0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
bills too quickly. Series 3
PROFITABILITY RATIO
RETURN ON ASSET= {PAT/NET FIXED ASSETS}*100
YEAR YEAR YEAR YEAR YEAR
2012 2013 2014 2015 2016
4.65 2.70 2.97 2.19 -4.20
6
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016 A negative return on asset,
indicates that the company
-2
trended toward having more
invested capital or earning
-4
lower profits.
-6
Column3
RETURN ON EQUITY
PAT-PREFERENCE DIVIDEND/EQUITY}*100
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
9.22 5.37 6.25 4.86 -10.00
15
10
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016 Lower return on equity
means that the company is
-5
not able to generate more
money, which shows that
-10
this company does a bad
job.
-15
Series 3
RETURN ON CAPITAL EMPLOYED
{EBIT/CAPITAL EMPLOYED}*100
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
10.36 6.72 6.42 5.40 -7.06
12
10
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
-2
-4
-6
-8
Column2
A lower value of return on capital employed indicates the lower profitability.
OPERATING PROFIT RATIO
{OPERATING PROFIT/NET SALES}*100
YEAR YEAR YEAR YEAR YEAR
2012 2013 2014 2015 2016
16.52 12.65 10.39 12.22 -7.81
20
15
10
A decline in operating profit
is due to decrease in sales or 0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
an increase in expenses.
-5
-10
Column3
MARKET RATIO
EARNING PER SHARE [EPS]:
PAT-PREFERENCE DIVIDEND/NO.OFOUTSTANDING SHARES
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
8.58 5.25 6.33 5.07 -10.02
10
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
EPS tells how well a company is
-5
generating profit for its
shareholders. A negative EPS
-10 tells how much money the
company lost per share of
-15
outstanding stock. In other
Column2 words , it means the company
is losing money.
DIVIDEND PER SHARE [DPS]:
DPS= DIVIDEND/NO.OF SHARES
YEAR YEAR YEAR YEAR YEAR
2012 2013 2014 2015 2016
2.00 2.00 2.00 2.00 0.00
2.5
1.5
Decrease in dividend per share is
0.5 due to reinvestment in company’s
operations, debt reduction and poor
earnings.
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
Column2
DIVIDEND PAYOUT RATIO
DIVIDEND PAYOUT RATIO= {DPS/EPS}*100
YEAR YEAR YEAR YEAR YEAR
2012 2013 2014 2015 2016
0.23 0.38 0.31 0.39 0
0.45
0.4
0.35
0.3
0.25
A decrease in dividend payout 0.2
ratio would imply that when 0.15
companies with increasing
0.1
earnings do not increase their
dividend payments at a 0.05
corresponding rate. 0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
Column2
PROPRIETARY RATIO
PROPRIETARY RATIO= PROPRIETORS FUND/TOTAL ASSETS
YEAR YEAR YEAR YEAR YEAR
2012 2013 2014 2015 2016
0.52 0.48 0.46 0.43 0.39
0.6
0.5
0.4 Proprietary ratio highlights
the financial position of the
0.3 company and therefore a
decrease in proprietary ratio
0.2 imply that company is not in
a position to pay all of its
0.1 creditors and therefore a
low proprietary ratio is a
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016 cause of concern for the
Column2 creditors of the company.
ACTIVITY RATIO
INVENTORY TURNOVER RATIO= SALES/INVENTORY
YEAR YEAR YEAR YEAR YEAR
2012 2013 2014 2015 2016
3.37 2.78 3.07 2.58 2.58
3.5
3 A decreasing inventory
indicates that the
2.5
company is not
2
converting its inventory
1.5 into cash as quickly as
1
before.
0.5
0
YEAR 2012 YEAR 2013 YEAR 2014 YEAR 2015 YEAR 2016
Column2
FINDINGS
Company’s performance has deteriorated as far as creating value
for shareholders is concerned since return on capital employed
percentage has been decreasing continuously
Company’s profitability has decreased in current year as compared
to previous years which is an area of concern for its stakeholders.
If we talk about company’s capacity to pay its creditors, it needs to
improve.
The comparative statement shows that the sales of the year 2016
are very less compared to the past.
Proprietary ratio of the company fluctuates during the period of
study. It shows the change in the value of reserve & surplus in the
form of shareholders fund.
RECOMMENDATION
The company may increase the performance by reducing the
borrowed capital, so that the interest on finance charges will be less.
The company may increase the sales if it attempts to move into
export market.
The company may strike a balance between the current assets and
current liabilities to maintain the solvency position.
There is an urgent need to upgrade & modernize the plants for
improving the profitability of SAIL.
