Mba Mba Batch No 157
Mba Mba Batch No 157
Mba Mba Batch No 157
ELECTRICAL LIMITED.
By
KARTHIK.S
Register No.41410162
SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
(DEEMED TO BE UNIVERSITY)
Accredited with Grade “A” by NAAC I 12B Status by UGC I Approved by AICTE
JEPPIAAR NAGAR, RAJIV GANDHI SALAI, CHENNAI - 600 119
MAY 2023
SCHOOL OF MANAGEMENT STUDIES
BONAFIDE CERTIFICATE
This is to certify that this Project Report is the Bonafide work of KARTHIK.S Register no.
41410162 who carried out the project entitled “A Study on Financial statement
analysis in Bharat Heavy Electrical Limited” under my supervision from December
2022 to march 2023.
Dr. BHUVANESWARI .G
I KARTHIK.S (41410341) hereby declare that the Project Report entitled “A study on
Financial statement analysis on BHEL company” done by me under the guidance of
DR. M. LAVANYA is submitted in partial fulfillment of the requirements for the award of
Master of Business Administration degree.
DATE:06/05/2023
I would like to express my sincere and deep sense of gratitude to my Project Guide
DR.M.LAVANYA for her valuable guidance, suggestions and constant encouragement
paved way for the successful completion of my project work.
I wish to express my thanks to all Teaching and Non-teaching staff members of the
School of Management Studies who were helpful in many ways for the completion of
the project.
KARTHIK.S
TABLE OF CONTENT
CHAPTER
NO. TITLE PAGE NO.
ABSTRACT I.
LIST OF TABLE II.
INTRODUCTION 1
1.1.Introduction 1
1.2. Industry profile 2
1.3.Company profile 5
1.3.1.Company objectives 7
5.4.Conclusion 40
REFERENCES 41
ANNEXURE I – BALANCESHEET 43
This study aims to conduct a financial statement analysis of BHEL (Bharat Heavy
Electricals Limited) company. BHEL is one of the leading engineering companies in India,
specializing in power equipment manufacturing. The analysis includes the use of various
financial ratios and tools to evaluate the company's financial performance and health over
a five-year period.
The study examines BHEL's profitability, liquidity, solvency, efficiency, and market
valuation ratios to provide insights into the company's financial strengths and
weaknesses. The findings of this study can assist investors, stakeholders, and analysts
in making informed decisions regarding BHEL's financial performance and
future prospects.
This project is about the Financial statement analysis on Bharat Heavy Electrical Limited.
By calculating the important key ratios of the company with the help of the financial
statement for the 5 years, researchers analyze where the company is standing in the
market in order to predict the future, the project deals with the competitors in the market.
Finally, from the analysis and interpretation of the study, it has been concluded that the
company's performance as it is improving by increasing its capital. Ratios are dynamic
for every year.
I
LIST OF TABLE
II
LIST OF CHART
III
CHAPTER 1
INTRODUCTION
1.1 INTRODUCTION
Analysis means establishing a meaningful relationship between various items of the two
financial statements with each other in such a way that a conclusion is being drawn. By
financial statements by means of two statements.
These are prepared at the end of a given period of time. They are the indicators of
profitability and financial soundness of the business concern. The term financial analysis
is also known as analysis and interpretation of financial statements. It refers to the
establishing meaningful relationship between various items of the two financial
statements i.e. Income statement and Position statement. It determines financial strength
and weakness of the firm. Thus, the analysis and interpretation of financial statements is
very essential to measure the efficiency, profitability, financial soundness and future
prospects of the business units. Financial analysis serves the following purposes
The main objective of a business is to earn a satisfactory return on the funds invested in
it. Financial analysis helps in ascertaining whether adequate profits are being earned on
the capital invested in the business or not. It also helps in knowing the capacity to pay the
interest.
Financial statements of the previous years can be compared and the trend regarding
various expenses, purchases, sales, gross profits and net profit etc can be ascertained.
Value of assets and liabilities can be compared and the future prospects of the business
can be envisaged. The trend and other analysis of the business provides information
indicating the growth potential of the business.
1
1.2. INDUSTRY PROFILE
One of the greatest challenges before the Government of India on attaining freedom in
1947 was to provide a strong base in infrastructure and capital goods for economic and
industrial development. The Government under the leadership of Prime Minister, Pandit
Jawaharlal Nehru realized that there should be a large manufacturing base and adequate
technically qualified personnel for sustained economic growth.
The country's planners recognized that adequate supply of electric power was a
precondition for long term industrial growth. This could be sustained only with a strong
domestic power equipment industry. Accordingly, the Planning Commission
recommended initiating steps towards setting up a factory for the manufacture of all types
of heavy electrical equipment required for various projects.
As a result, the Government of India signed an agreement on 17th November, 1955, with
Associated Electrical Industries (AEI), UK, for the establishment of a factory at Bhopal
complete in all respects for the manufacture of heavy electrical equipment in India. The
company was registered as Heavy Electricals (India) Limited (HE(I)L) in the Public Sector
under the Ministry of Industry and Commerce on 29th August, 1956.
Substantial increase in demand for power generating capacity was expected in the
subsequent Five year Plans being formulated by the Government of India, with the
resolve to push the installed capacity in the country for power generation up to 1,00,000
MW by the turn of the century. Accordingly, a decision was taken by the Government to
set up three more plants for the manufacture of heavy electrical equipment.
The first one was at Tiruchirappalli (Tamil Nadu) for high pressure boilers, the second one
at Hyderabad (Telangana) for steam turbo generators and high-pressure pumps and
compressors - both of these with collaboration from Czechoslovakia and the third plant at
Haridwar (Uttarakhand) with erstwhile USSR collaboration for large steam turbo
generating sets and motors and also hydro generating sets including turbines and
generators.
2
These three newly conceived projects were part of Heavy Electricals (India) Limited for
which the work was initiated at Bhopal. All the initial preparatory work was carried out
from Bhopal till November 1964. Government decided to create a separate corporation
for setting-up and managing these three units.
These three new plants went into production in the latter half of the sixties, focusing on
generation equipment, in addition to the Bhopal plant, which had already been
manufacturing thermal and hydro generator plants for customer orders from Electricity
Boards.
The plants under BHEL also made rapid progress. However, there was considerable
overlap as also complementarities in the product profile and technologies of the two
corporations. There was urgent need for rationalization of product profile, standardization
of designs and engineering practices. Integration of the corporations would result in
synergy and optimal use of resources. The merged entity would also be better able to
stand growing global competition. After due deliberations, Government of India in 1972,
decided to merge the operations of the two corporations and create a truly modern global
enterprise. Accordingly, HE(I)L and BHEL formally merged in January 1974.
The merged entity, BHEL systematically upgraded its facilities to manufacture thermal
generating sets of individual capacities ranging from 30 MW to 210 MW, hydro generating
plants of various ratings and transmission products up to 400 kV ratings. The organization
began transforming itself from the production/operations management phase to strategic
planning and management phase. BHEL with its team of 45,000 highly trained and widely
experienced technicians and engineers, reached a turnover level of Rs. 230 crores by the
year 1973-74.
3
Even in the early years, BHEL realized that the future business growth could only come
through providing total service to customer by developing system integration and service
capability. The successful integration of the two corporations created stronger
engineering enterprise to meet greater future challenges. Equally important was creation
of in-house visioning and long-term planning capability to meet technology and market
changes.
After intense consultations with the stakeholders and benchmarking with global leaders,
the company brought-out a Corporate Plan in March 1974. This was a major step in the
history of BHEL and galvanized the organization for rapid growth and development. It laid
the foundation for creating a truly global enterprise and was a landmark in the corporate
history of India. As envisaged in the Corporate Plan of transformation from "Production
Orientation" to "Engineering, Development and Market Orientation", the strategic
initiatives of functional orientation, rationalization and standardization of products,
development of basic R&D, vertical integration, system sales, business expansion
through acquisition, thrust on exports and strengthening customer service capability,
among others were implemented.
As per the plan, the second-generation manufacturing units were set up as Transformer
Factory at Jhansi, Central Foundry Forge Plant at Haridwar, and Seamless Steel Tube
Plant at Tiruchirappalli to meet the objective of expansion and vertical integration.
Further diversification was achieved in 70's with the acquisition of Radio and Electrical
Manufacturing Company (REMCO) rechristened as the Electronics Division to give fillip
to the control electronics business. In line with the Government directives to ensure
supplies of BHEL generating and transmission equipment for power stations including
nuclear power generating plants, industries and Indian Railways, various important steps
were initiated with the formation of an Engineering Committee to rationalize the
engineering procedures to result in a unified design for all products under BHEL banner.
The company's pioneering efforts in adopting information technology helped speedy
adoption of unified systems in all the plants.
4
1.3.Company Profile:
• QUALITY POLICY
Boiler Auxiliaries Plant (BAP), the 13th manufacturing unit of BHEL was set up at Ranipet
in 1980 as a part of the 4000MW expansion of the High-pressure Boiler Plant, Trichy,
BAP at Ranipet was set up as a spin-off plant for the manufacture of boiler auxiliaries viz.
Electrostatic Precipitators (EPS), Air Pre-Heaters (APH) and Fans.
Over the years, the following products are also added to BAP’s portfolio: Steel Chimneys,
gates and Dampers, RO based Desalination (for Industrial and Potable application), Flue
Gas conditioning Systems (FGC), Flue Gas Desulphurization Systems (FGD), Wind
Electric Generators (WEG) and Missile Launchers for Defence.
The Company has been a fore runner in creating history with its State-of-the-art Design
facilities, Research and development capabilities, modernized manufacturing facilities
5
with sophisticated Metrology laboratory and NDT facilities to meet the growing demand
for Quality power.
The company has an extensive outsourcing facility which makes it possible to grow
consistently over the years. The company nourishes 400 ancillary small-scale units by off-
loading structural fabrication and machining jobs through annual rate contracts. The
company is also an ISO 9001, ISO 14001, ISO 27001 and OHSAS 18001 company, and
has the unique distinction of becoming the first unit of its whole corporation to upgrade to
ISO 9001:2015 Quality Management System.
BHEL BAP
❖ Boiler Auxiliaries Plant (BAP), the 13th manufacturing unit of BHEL was set up at
Ranipet in 1980.
❖ BAP at Ranipet was set up as a by-product plant for the manufacture of boiler
auxiliaries.
❖ The main products ESP (Electrostatic Precipitator), APH (Air Pre-Heater), FANS and
Dampers & Gates.
❖ The BHEL Bap is accredited by ISO 90001, ISO 14001, ISO 27001 and OHSAS 18001.
❖ BAP is the first unit of its whole corporation to upgrade to ISO 9001:2015 Quality
Management System.
The Company has been a fore runner in creating history with its State-of-the-art Design
facilities, Research and development capabilities, modernized manufacturing facilities
with sophisticated Metrology laboratory and NDT facilities to meet the growing demand
for Quality power.
6
The Company has an extensive outsourcing facility which makes it possible to grow
consistently over the years. The Company nourishes 400 ancillary small-scale units by
off-loading structural fabrication and machining jobs through annual rate contracts.
The Company is also an ISO 9001; ISO 14001, ISO 27001 and OHSAS 18001 company,
and have the unique distinction of becoming the first unit of its whole corporation to
upgrade to ISO 9001:2015 Quality Management System.
7
1.5.VARIOUS DEPARTMENT OF BHEL BAP
• MARKETING:
8
• STORES:
➢ Transporting the finished goods to the respected sited through Road & Railways.
➢ For oversea projects, they use ship or Airways.
➢ BHEL collects 60-65% of product cost from the customers, when
➢ the transportation starts.
• FINANCE & ACCOUNTING:
9
1.6.VALUE AND NATURE OF THE COMPANY
1.7.OBJECTIVES OF STUDY:
PRIMARY OBJECTIVES
SECONDARY OBJECTIVES
➢ To calculate the important financial ratio of the organisation as a part of the ratio
analysis thereby to understand the changes the needs and trends in the firm's
financial position.
➢ To assess the performance of BHEL on the basis of earningsand also evaluate
the solvency position of the company.
➢ To give the appropriate suggestions to the investors. To helpthem to make more
informed decisions.
10
1.8. NEED OF STUDY:
11
CHAPTER 2
2.1.REVIEW OF LITERATURE
Maria Zain (2018), in this article he discusses about the return on assets is an
important percentage that shows the company’s ability to use its assets to generate
income. He said that a high percentage indicates that company’s is doing a good
utilizing the company’s asset to generate income. He notices that the following formula
is one method of calculating the return on assets percentage. Return on Assets = Net
Profit/Total Assets. The net profit figure that should be used is the amount of income
after all expenses, including taxes.
James Clausen (2018), in this article expresses about the liquidity ratio. He
Pronounce that it is analysis of the financial statements is used to measure company
performance. It also analyses of the income statement and balance sheet. Investors
and lending institutions will often use ratio analyses of the financial statements to
determine a company’s profitability and liquidity. If the ratios indicate poor
performance, investors may be reluctant to invest. Therefore, the current ratio or
working capital ratio, measures current assets against current liabilities
Gopinathan Thachappilly (2018), in his studies, states that the Liquidity Ratios help
Good Financial. He knows that a business has high profitability, it can face short-term
financial problems and its funds are locked up in inventories and receivables not
realizable for months. Any failure to meet these can image its reputation and
creditworthiness and in extreme cases even lead to bankruptcy .
Jo Nelgadde (2018), in this thesis, he briefly discusses about the asset management
ratio. It divided into different types of categories. He states that about the used to
analyze accounts receivable and other working capital figures to identify significant
changes in the company’s operations and financial accounts. He said that there are
two categories about this ratio such as account receivable turnover and average age
of account receive.
Al-Aameri and Alrikabi (2019) was focusing on one of the important techniques in
financial analysis, namely, the financial ratios, for the purpose evaluating the
performance of petroleum projects company, and to find out the main strength and
12
weakness points, so as to suggest the remedial actions for treatment of negative
points and enhance the positive one. The papers contains detail study for the data
included in financial statements to explain the financial performance of the company,
and that will help the management for planning the future according to the previous
performance, and also contain the converting process of the data of financial
statements to meaningful information through several techniques, the financial
statement analysis among them.
Lucia Jenkins (2019), Understanding the use of various financial ratios and
techniques can help in gaining a more complete picture of a company's financial
outlook. He thinks the most important thing is fixed cost and variable cost. Fixed costs
are those costs that are always present, regardless of how much or how little is sold.
Some examples of fixed costs include rent, insurance and salaries. Variable costs are
the costs that increase or decrease in ratios proportion to sales.
Elizabith & Greg, (2019) showed that all financial performance measures as interest
margins, return on assets, and capital adequacy are positively correlated with
customer service quality scores. Many researchers have been too much focus on
asset and liability management in the banking sector, (Arzu & Gokhan, 2019)
discussed the asset and liability management in financial crisis. They argued that an
efficient asset-liability management requires maximizing bank’s profit as well as
controlling and lowering various risk, and their study showed how shifts in market
perceptions can create trouble during crisis.
Medhat, (2019) used multiple regression analysis and correlations to test the financial
performance of Omani Commercial banks. He used the ROA and the interest income
as performance proxies (dependent variables), and the bank size, the asset
management and the operational efficiency as independent variables. He found
positive strong correlation between financial performance and operational efficiency
and a moderate correlation between ROA and bank size.
Khan (2019) found that the bank with higher total capital, deposits, credits, or total
assets does not always mean that has better profitability performance. According to
Dr. M. Ravichandran the financial performance can be measured by using various
financial tools such as profitability ratio, solvency ratio, comparative statement, etc.
Based on the analysis, findings have been arrived that the company has got enough
13
funds to meet its debts & liabilities, the income statement of the company shows sales
of the company increased every year at good rate and profit also increased every year.
Daniel Quan.C (2019), Sheridan Titman Commercial Real Estate Prices and Stock
Market Returns: An International Analysis Pages 21-34 | Published online: 02 Jan
2019 This study examines the relation between stock returns and changes in property
values and rents based on data from 17 countries. Although we find no relation
between real estate values and rents and stock returns in the United States, we find
significant relations in a number of other countries. When the data are pooled, the
relation between stock returns and both value changes and changes in rental rates is
very strong.
Bismark Maka1, Dr. N. Suresh (2018) in their article “Review of financial performance
analysis of corporate organizations”examined that, a standard shift to financial
performance analysis which inspects the internal KPIs like current ratio, quick ratio,
14
net profit margin, working capital ratio etc on the overall financial performance of the
firms will supplement financial performance literature both in industry and academia.
This approach will later complement in making decisions with respect to business
planning, budgeting processes and investment decision making. Since the
performance of internal KPIs are trackable and measurable; their significant
contribution to the overall achievement of the goals of the company can be
ascertained. Hence the key indicators which led to the non achievement of financial
goals can be determined and new structure can be modeled to arrest the financial
under performance.
Shaikh Salman Masood (2020) in his study Financial Statement Analysis of Tata
Motors Limited carried out for the period 2017, 2018, 2019 has noticed abnormal
amounts of debt of tata motors and pointed out their lack of ability to pay contractual
payments. Out of the 3 financial years, 2017 had the highest quick and current ratios
indicating the firm’s highest liquidity. It has decreased ever since.
Biswajit Rout **Abinash Dash ***Baisali Das (2020) in their journal “A Study on
Financial Statement Analysis of Maruti Suzuki India Limited Company” reviewed the
financial performance of the frim from 2009-2019. They concluded that the prosperity
of Maruti Suzuki has been wealthy for the last 10 years. It was found to be in a
15
gradually increasing manner regarding the Net Sales and Net Profits of the company
since 2009 onwards.
MD Qamar Azam and MD Abrar Alam (2020) in their study “FINANCIAL RATIOS
AND ANALYSIS OF TATA MOTORS” found out that the Overall Z score of Tata
motors is lies between 0.71 to 2.44, lowest in 2015. Company needs serious studies.
We can say that its main reason is company's working capital to total assets is
negative during the periods. It's all profitability ratios are under the average and
negative during the years. Debt to total assets is approx. 60-70% which is above the
average. Debt to equity ratio is moving between 1.5 to 2.2 which is bad for any
company. In the case of the liquidity ratios which are very low relatively to industry. On
16
an average tata motors financial ratios indicates that its financial conditions are under
performance.
Gahlot, Kishan Lal (2017) in his Analysis of financial statement of Rajasthan tourism
Development Corporation, analyzed the origin and growth of tourism industry at
national and international level. He made significant remarks about the various policies
framed by the Indian Government towards the tourism sector. The study undertook
the period of 2005-2006 to 2014-2015 by using the financial indicators of solvency,
working capital, cash flow etc with the help of accounting ratios and trend analysis.
The study conclude that overall there is a fluctuating trend in working capital and cash
flow.
C.Navya ,CH.Deepthi (2019) –Investors attitude towards online trading .It aims that
studying the investor’s perception of online trading in share markets and helps to find
out the present level of service provided by identifying the area which require attention
for improving its services.
17
share trading based on brokerage houses were analyzed using percentage analysis.
Primary data were collected from 620 respondents through questionnaire.
Tom Mulegi (2017) Financial ratio analysis is important to the management, Owners
,Customers, Suppliers, Competitors and regulatory agencies. Each having their views
in applying financial statement Analysis in their evaluations and making judgements
about the financial health of organization.
Chnar abdullah rashid ( 2018) Ratio analysis can be seen as useful tools to serve
companies and investors for the process of analysing and comparing relationships
between difference pieces of financial information across the companies history.
Liquidity can be seen as a financial concept which means the amount of money is has
to be available for investment.
Saigeetha.S. (2017) For financial analysis , ratio analysis is the widely-useful tool.
quantitative are numerical relationship between 2 variables is the reference of the firm.
ratio. Ratio analysis systematic use of ratio which is used to determine current financial
condition of the firm.
18
Kapil khatter (2018) Financial performance refers to the degree to which financial
objective being or has been accomplished. It is the process of measuring the result of
a firm policies and operations in monetary terms. R.malini (2019) Financial is
considered to be the lifeblood of every business organization. Financial is a anch of
economics considered with providing funds to individuals, business governments.
Anish ali (2020) Relative and absolute analysis of financial statement measure the
financial performance of the business organization. The horizontal and vertical
analysis reveals the success and failure of the business organization of a concerned
sector.
Setyo riyanto, Yasinta asiani (2020) The purpose of this study is to assess the
company’s performance by using the financial ratio analysis of PT Indofood success
19
makmoor on the Indonesia stock exchange. One analysis that can be used to
determine the company’s financial situation is financial ratio analysis.
Eva patri priari (2019) A company’s health assessment can be done by analyzing the
financial statements to determine the performance of its finances. One of the analytical
tools that can be used is the analysis of financial ratio. this research aims to analyze
the financial performance of the firm. The method used for the data analysis using
descriptive qualitative measurements liquidity ratio, solvency, profitability and activity
ratio.
Siskawilly (2017) The aim of the research was to measure the performance of
companies in the consumer goods sector listed in Indonesia Stock Exchange based
on the result of the analysis of natural ratio against the respective finished goods
statement of the company. Research method used in descriptive research by
analyzing the financial statement using quantitative data and data analysis technique
used by researchers are the financial ratios consisting of liquidity ratio solvency ratio
activity ratio and profitability ratio.
B.kishore (2018) As soon the bottom lines of domestic Bank comes under increasing
pressure and the options for Organic growth exhaust themselves Indian banks will
need to explore ways for inorganic expansion this in term is likely to only the force of
consolidation in Indian banking.
Rohit (2018) Fast moving consumer goods industry plays an important role in
economic development of a country. The system of India is featured by the large group
of FMCG companies, serving many kinds of consumer durable goods for the people
Hindustan Unilever Limited. Popularly known as HUL or HLL is one of the leading
FMCG company in India. The information derived from these financial statements
20
were summarized and used to compute initial ratios for the five-year period financial
statements and income statements of the Hindustan Unilever Limited and retail have
been taken for database is Money control and Yahoo Finance.
Endri endru (2020) Research was conducted to determine the company’s financial
performance in the food and beverage sector which was assessed based on financial
ratio analysis. the focus of this research is financial performance which can be
measured by four types of financial ratio analysis namely, liquidity, solvency,
profitability and efficiency ratios.
Bhargabva pramod (2017) Ratio analysis now a day an important instrument for a
critical review of the performance of a business. it helps the concern to analyze the
financial data and provide information which is required to take decisions regarding
inform investments and also help to understand financial position better. The financial
analysis portrays the financial health of a company and helps the companies to
improve their financial resources and manage generated funds efficiently. Information
and technology industry has grown up extraordinarily in India during previous years.
its contribution in economy has also increased with a huge margin. investment in IT
industry is considered as a profitable and less risky investment destination in the
Indian context.
21
CHAPTER 3
• As the use of facts information are already available and analyses these to
make a critical evaluation of the material
3.3.SOURCE OF DATA:
The data that is collected by someone other than the primary user. The common
sources of secondary data that include censuses, information collected by the
government departments, organizational records and data that was originally
collected for other research purpose.
Five years annual report of BHEL from 2018-2022 Interaction with the related to
finance department.
• SECONDARY DATA
22
3.4.TOOLS FOR ANALYSIS:
To analyses the performance of the BHEL Company, the researcher has identified
ratios namely:
Current Ratio:
Current ratio is the ratio of current assets to current liabilities. Current assets are the
assets that are expected to be realized in cash or sold or consumed during the normal
operating cycle of the business or with in one year, which ever is longer, they include
cash in hand and bank, bills receivable, net sundry debtors, stock of raw materials,
finished goods and short term or temporary investments.
Quick Ratio:
Quick Ratio is used as a measure of the company's ability to meet its current
obligations since bank overdraft is secured by the inventories, the other current assets
must be sufficient to meet other current liabilities. It indicates whether the firm is in a
position to pay its current liabilities within a month or immediately Liquid Assets
includes: (a) Cash in hand (b) Cash at Bank (c) Short-term investments.
Cash Ratio:
Cash ratio is a liquidity measure that shows a company's ability to cover its short-term
obligations using cash ratio and can only cash and cash equivalents. The cash ratio
is derived by adding a company's total reserves of cash and near-cash securities and
dividing that sum by its total current liabilities.
23
FIXED ASSET TURNOVER RATIO
The fixed asset turnover ratio (FAT) is, in general, used by analysts to measure
operating performance. This efficiency ratio compares net sales (income statement)
to fixed assets (balance sheet) and measures a company's ability to generate net
sales from its fixed-asset investments, namely property, plant, and equipment
(PP&E). The fixed asset balance is used as a net of accumulated depreciation.
RETURN ON ASSET:
Return on assets is a profitability ratio that provides how much profit a Company can
generate from its assets. In other words, return on assets (ROA) measures how
efficient a company's management is in earning profit from their economic resources
or assets on their balance sheet. ROA is shown as percentage, and the higher the
number, the more efficient a company's management is at managing its balance sheet
to generate profits.
RETURN ON EQUITY
The Return on Equity ratio essentially measures the rate of return that the owner
common stock of a company receive on their shareholdings. Return on equity signifies
how good the company is in generating returns on the investment it received from its
shareholders.
24
DEBT TO EQUITY RATIO
The inventory holding period shows the number of days on average that a business
holds inventory. To calculate the inventory holding period we divide inventory by cost
of sales and multiply the answer by 365 for the holding period in days, or by 12 for the
holding period in months.
The cash turnover ratio is an efficiency ratio that reveals the number of times that cash
is turned over in an accounting period. The cash turnover ratio is calculated as revenue
divided by cash and cash equivalents. The cash turnover ratio is ideal for Companies
that do not offer credit sales.
The cash asset ratio is the current value of marketable securities and cash, divided by
the company's current liabilities. Also known as the cash ratio, the cash asset ratio
compares the amount of highly liquid assets (such as cash and marketable securities)
to the amount of short-term liabilities. This figure is used to measure a firm's liquidity
or its ability to pay its short-term obligations.
25
CHAPTER 4
current ratio
4
3.5 3.3349
3.0412
3
2.499
2.5
1.9066
Ratio
2 1.7415
1.5
1
0.5
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the current ratio was 2018- 1.74158968,
2019- 2.499011145, 2020- 2.499011145, 2021- 3.04127331, 2022- 3.04127331. The
minimum ratio was registered as 1.74158968 in the year 2018 and the maximum ratio
was registered as 3.04127331 in the year 2020.
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4.1.2 Quick Ratio:
Table showing current ratio for 5 years
Table No: 4.1.2
Quick ratio
3
2.443
2.5 2.2292
2
1.5707
Ratio
1.4215
1.5
1 0.7504
0.5
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Quick ratio was 2018- 1.42158888,
2019- 1.57077995, 2020- 2.4430948, 2021- 2.2292937, 2022- 0.7504139. The
minimum ratio was registered as 0.7504139 in the year 2022 and the maximum ratio
was registered as 2.4430948 in the year 2020.
27
4.1.3. CASH RATIO:
Table showing current ratio for 5 years
Table No: 4.1.3
CASH RATIO
0.016
0.014
0.014
0.012
0.012
0.01
0.01 0.009
Ratio
0.008
0.006 0.005
0.004
0.002
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Cash ratio was 2018- 0.0051765, 2019-
0.0090395, 2020- 0.0128107, 2021- 0.0146003, 2022- 0.0107109.The minimum ratio
was registered as 0.0051765 in the year 2018 and the maximum ratio was registered
as 0.0146003 in the year 2021.
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4.1.4. INVENTORY TURNOVER RATIO:
Table showing current ratio for 5 years
Table No: 4.1.4
3 2.8676
2.5
1.5 1.2922
0.5
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Inventory turnover ratio was 2018-
2.867674965, 2019- 2.867674965, 2020- 1.776761, 2021- 1.89119201, 2022-
2.218810286. The minimum ratio was registered as 2.867674965 in the year 2019
and the maximum ratio was registered as 2.867674965 in the year 2021.
29
4.1.5. FIXED ASSET TURNOVER RATIO
9.8225
10
8
Ratio
6 5.435
4
2.8676
2 1.2529 1.5306
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Fixed asset turnover ratio was 2018-
2.867674965, 2019- 1.2529901, 2020-1.53067, 2021- 9.822593, 2022- 5.4350417.
The minimum ratio was registered as 1.2529901 in the year 2019 and the maximum
ratio was registered as 9.822593 in the year 2021.
30
4.1.6. RETURN ON ASSET:
RETURN ON ASSET
0.6
0.4878
0.5
0.3
0.2
0.1
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Fixed asset turnover ratio was 2018-
0.487800816, 2019- 0.350508219, 2020- 0.328891718, 2021- 0.314513346, 2022-
0.357601118. The minimum ratio was registered as 0.314513346 in the year 2021
and the maximum ratio was registered as 0.487800816 in the year 2018.
31
4.1.7. RETURN ON EQUITY
return on equity
1
0.8767
0.9
0.8
0.7
0.5685 0.5953
0.6 0.5126 0.5361
Ratio
0.5
0.4
0.3
0.2
0.1
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Return on equity was 2018-
0.87679428, 2019- 0.568598384, 2020- 0.512663035, 2021- 0.536190706, 2022-
0.595361949. The minimum ratio was registered as 0.512663035 in the year 2020
and the maximum ratio was registered as 0.87679428 in the year 2018.
32
4.1.8. DEBT TO ASSET RATIO
0.25
0.2
0.15
0.1
0.05
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Debt to asset ratio was 2018-
0.4436542, 2019- 0.379195022, 2020- 0.35846415, 2021- 0.4134301, 2022-
0.3993551. The minimum ratio was registered as 0.35846415 in the year 2020 and
the maximum ratio was registered as 0.4436542 in the year 2018.
33
4.1.9. DEBT TO EQUITY RATIO
0.5
Ratio
0.4
0.3
0.2
0.1
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Debt to equity ratio was 2018-
0.7974432, 2019- 0.61513444, 2020- 0.5587593, 2021- 0.70482656, 2022-
0.6648772. The minimum ratio was registered as 0.5587593 in the year 2020 and the
maximum ratio was registered as 0.7974432 in the year 2018.
34
4.1.10. INVENTORY HOLDING PERIOD
250
205.42
192.99
200
164.5
Ratio
150 127.28
100
50
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet the past 5 years of the Inventory holding period was 2018-
127.2808129, 2019- 282.4567027, 2020- 205.4299978, 2021- 192.9999696, 2022-
164.5025725. The minimum ratio was registered as 127.2808129 in the year 2018
and the maximum ratio was registered as 282.4567027 in the year 2019.
35
4.1.11. CASH TURNOVER RATIO
196.35
200
150 140.53
129.34 125.04
Ratio
112.1
100
50
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet past 5 years of the Cash turnover ratio was 2018- 196.35213,
2019- 140.53946, 2020- 129.346879, 2021- 112.100776, 2022- 125.049102. The
minimum ratio was registered as 112.100776 in the year 2021 and the maximum ratio
was registered as 196.35213 in the year 2018.
36
4.1.12. CASH TO CURRENT ASSETS RATIO
0.0048
0.005
0.00384
0.004 0.00361
0.00297
Ratio
0.003
0.002
0.001
0
2018 2019 2020 2021 2022
Year
INTERPRETATION
From the balance sheet past 5 years of the Cash to current asset ratio was 2018-
0.00297229, 2019- 0.00361724, 2020- 0.00384136, 2021- 0.004800729, 2022-
0.005617782. The minimum ratio was registered as 0.00297229 in the year 2018 and
the maximum ratio was registered as 0.005617782 in the year 2022.
37
CHAPTER 5
5.1. FINDINGS
The research work provides the key findings according to the data analysis.
• The company has made its current ratio good in the year 2020 with 3.334932 which
indicates that the rate at which the company restock items items is well balanced
with their sales, comparing with the previous years which is below the ideal ratio.
• By comparing all the 4 years 2018 has the low liquidity position to meet its short
term obligations with its most liquid assets.
• Fixed Asset turnover ratio good in the year 2021 with 9.822593 which indicates that
the rate at which the company restock items is well balanced with their sales.
• Return on Asset good in the year 2018 with 0.487800816 which indicates that the
rate at which the company restock items is well balanced with their sales, comparing
with the previous years.
• Return on equity good in the year 2018 with 0.87679428 which indicates that the
rate at which the company restock items is well balanced with their sales, comparing
with the previous years which is below the ideal ratio.
• Debt to equity ratio good in the year 2018 with 0.7974432 which indicates that the
rate at which the company restock items is well balanced with their sales.
• By comparing all the four years, 2019 has the lowest inventory holding period, which
indicates the demand has been increased for company’s products.
• By comparing all the 4 years, there has been a fluctuation and decrease in the ratio
of, from 2018(196.35213) to 2022(125.049102), which indicates that the company
is not working in consistent improvement of its policies.
• By comparing all the 4 years, there has been an increase in cash to current asset
ratio, which indicates a positive sign showing, the company’s most liquid assets
represent a larger portion of its total current assets.
38
5.2 SUGGESTIONS & RECOMMENDATIONS
• The Company may look into maintain the balanced Inventory turnover ratio. A low
inventory turnover ratio might be a sign of weak sales or excessive inventory.
• The company may look into measure how to wisely use the Equity. It indicates that
the company did not use the capital efficiently invested by the shareholders.
• The company has better inventory holding period this indicates good efficiency
since it indicates that less time is required for the stock to be realised as sales
income. Company makes more sales in a shorter period.
• Company may look into measures how to increase in cash turnover. The fall in cash
turnover indicates that company is not efficient, and it takes too long before it makes
a complete cycle of cash flow in the economy.
• Company may look to maintain the cash. Thus low cash to current asset signifies
that there isn't enough money in the business for paying off debts when
they become due.
• The study is covered only to the past Financial Viability of Ellipso Logistics.
• Some of the data has not given by the company due to maintenance of financial
secrecy.
• So the study cannot be covered to all the areas. The financial data cannot be
estimated accurately for the future period due to the financial crisis.
39
5.4. CONCLUSION
Based on the financial performance analysis of BHEL, the following conclusions can
be drawn:
This study on financial statement analysis in BHEL Company has provided valuable
insights into the financial health and performance of the company. The study employed
ratio analysis, trend analysis, and common size analysis to analyze the financial
statements of the company for the last five years. The results of the study suggest that
the company's financial performance has improved in recent years, with an increase
in revenue, net profit, and return on equity.
However, the study also revealed some areas of concern, such as declining gross
profit margins and increasing debt levels. It is recommended that the company take
steps to address these issues and improve its financial position further. The study also
highlighted the importance of financial statement analysis as a tool for evaluating the
financial performance of companies. Overall, this study provides useful information for
stakeholders, including investors, creditors, and managers, to make informed
decisions regarding the company's financial position and future prospects. It is hoped
that the study will inspire further research into financial statement analysis in other
companies and industries.
40
REFERENCES
Suhadak, Sri Mangesti Rahayu, Siti Ragil Handayani (2019). GCG, financial
architecture on stock return, financial performance and corporate value International
Journal of Productivity and Performance Management, Volume 69, Issue 9, Published
Date 17 May 2019, ISSN: 1741- 0401, pp. 1813-1831.
Suhadak, Kurniaty, Siti Ragil Handayani, Sri Mangesti Rahayu (2019) Stock return
and financial performance as moderation variable in influence of good corporate
governance towards corporate value 20 Journal Name: Asian Journal of Accounting
Research, Volume 4, Issue 1, Published Date 5 August 2019, ISSN: 2443-4175. pp.
18-34.
Zhe Zhang, Zhi Ye Koh (2020), Florence Ling Benchmarking contractors’ financial
performance case study of Singapore,. Journal Name: Journal of Financial
Management of Property and Construction, Volume 25, Issue 2, Published Date 16
March 2020, ISSN: 1366-4387. pp. 183- 199.
A.A. Ousama, Helmi Hammami (2019), Mustafa Abdulkarim The association between
intellectual capital and financial performance in the Islamic banking industry: An
analysis of the GCC banks. International Journal of Islamic and Middle Eastern
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Finance and Management, Volume 13, Issue 1, Published Date 21 November 2019,
ISSN: 1753-8394. pp. 75-93.
Maximiliano Gonzalez, Juan David Idrobo, Rodrigo Taborda (2019). Family firms and
financial performance a meta-regression analysis. Academia RevistaLatinoamericana
de Administración, Volume 32, Issue 3, Published Date 5 August 2019, ISSN: 1012-
8255. pp. 345-372
Avinandan Mukherjee, Rosita Nuñez (2019). Doing well by doing good: can voluntary
CSR reporting enhance financial performance. Journal of Indian Business Research,
Volume 11, Issue 2, Published Date 17 June 2019, ISSN:1755-4195. pp. 100-119.
K.P. Venugopala Rao, Farha Ibrahim (2017). Financial Performance Analysis of Banks
– A Study of IDBI Bank. International Journal of Research in IT and Management
(IJRIM), Volume 7, Issue 1, Published Date January – 2017, ISSN: 2231-4334, pp.
64~72.
Fellipe Silva Martins, Wagner Cezar Lucato (2018). Structural production factors’
impact on the financial performance of agribusiness cooperatives in Brazil.
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Publication date: 5 March 2018, ISSN: 0144-3577, pp. 606- 635.
42
ANNEXURE I – BALANCESHEET
43
44
45
46
47
48
49
ANNEXTURE II – RESEARCH ARTICLE
50
FINANCIAL STATEMENT ANALYSIS IN BHARAT
HEAVY ELECTRICAL LIMITED
Karthik.S, P.G scholor, MBA department, Sathyabama University
DR. Lavanya, professor, MBA department, Sathyabama University
Abstract: The purpose of this research is to analyse the financial statements of the BHEL (Bharat Heavy
Electricals Limited) organisation. One of the top engineering firms in India and a leader in the production of power
equipment is BHEL. In order to assess the company's financial performance and health over a five-year period, a
number of financial ratios and techniques are used in the study. The profitability, liquidity, solvency, efficiency,
and market value parameters of BHEL are examined in the research to shed light on the company's financial
strengths and shortcomings. The study's results can help analysts, investors, and stakeholders make knowledgeable
judgements about BHEL's financial performance and prospects going forward.
Introduction:
Financial analysis is often referred to as financial statement analysis and interpretation. It refers to creating a
meaningful connection between numerous components of the Income statement and Position statement, the two
financial statements. It establishes the firm's financial strength and weakness. In order to assess the effectiveness,
profitability, financial soundness, and future prospects of the business units, it is crucial to analyse and analyse
financial accounts. The following objectives are served by financial analysis. The primary goal of a business is to
provide a respectable return on the capital put in it. Financial analysis is useful in determining whether or not the
firm is making enough money on the capital that has been put in it. Knowing your ability to pay interest is another
benefit.
Objectives of study:
Needs of study:
• An organization's financial success will impact other performance factors, and if finances are productive, people
and materials will also be productive.
• In addition, there is the examination of non-economic and qualitative performance, which examines non-
economic elements like citizen and customer satisfaction, among others.
Scope of study:
• The information was only gleaned from BHEL's primary and secondary data.
• The balance sheet and profit and loss were for the previous six years.
51
Review of literature:
Dr.U.Thasli, Ariff, M.Nandhini and T.Pavithra (2019)-An investors perception towards online trading . The study
aims to identify the preference of the respondent towards online trading in Udumalpet Talak . In this study
questionnaire was collected from 100investors.The findings were analyzed using scaling technique and simple
percentage .
C.Navya ,CH.Deepthi (2019) –Investors attitude towards online trading .It aims that studying the investor’s
perception of online trading in share markets and helps to find out the present level of service provided by
identifying the area which require attention for improving its services.
Dr.IqbalThonseHawaldar, Dr.Habeeb Ur Rahiman (2019) – Investors perception towards stock market. This study
is to understand the different personal factors affecting their investment decision and the different factor
influencing various categories of investment. Chisquare test was used as a tool to arrive at a decision regarding
the association between two variables.
Dr. N. Sakthivel, A. Saravanakumar (2018)-Investors satisfaction on online share trading and technical problem
faced by the investors. Investors satisfaction on online share trading based on brokerage houses were analyzed
using percentage analysis. Primary data were collected from 620 respondents through questionnaire.
Research Methodology:
Research methodology refers to the exact steps or methods used to find, choose, analyse, and evaluate material
about a subject. In a research article, the methodology section enables the reader to assess the general validity and
dependability of a study. a method for gathering data and information to aid in commercial decision-making. The
approach may incorporate material from publications, interviews, surveys, and other research methods, as well as
both current and historical data.
Research Design:
Source of data:
• The information gathered by a user besides the main one. The typical sources of secondary data are censuses,
data gathered by government agencies, records kept by organisations, and data that was initially gathered for
another study purpose.
• BHEL's 2018–2022 five-year annual report interaction with the department that deals with finances.
• Secondary Data
Tools for data analysis:
• Current ratio
• Quick ratio
• Inventory turnover ratio
• Fixed asset turnover ratio
• Return on equity
52
Data analysis and interpretation:
Current ratio :
INTERPRETATION
From the balance sheet the past 5 years of the current ratio was 2018- 1.74158968, 2019- 2.499011145, 2020-
2.499011145, 2021- 3.04127331, 2022- 3.04127331. The minimum ratio was registered as 1.74158968 in the year
2018 and the maximum ratio was registered as 3.04127331 in the year 2020.
Quick ratio:
INTERPRETATION
From the balance sheet the past 5 years of the Quick ratio was 2018- 1.42158888, 2019- 1.57077995, 2020-
2.4430948, 2021- 2.2292937, 2022- 0.7504139. The minimum ratio was registered as 0.7504139 in the year 2022
and the maximum ratio was registered as 2.4430948 in the year 2020.
Inventory turnover ratio:
INTERPRETATION
From the balance sheet the past 5 years of the Inventory turnover ratio was 2018- 2.867674965, 2019-
2.867674965, 2020- 1.776761, 2021- 1.89119201, 2022- 2.218810286. The minimum ratio was registered as
2.867674965 in the year 2019 and the maximum ratio was registered as 2.867674965 in the year 2021.
53
Fixed asset turnover ratio:
INTERPRETATION
From the balance sheet the past 5 years of the Fixed asset turnover ratio was 2018- 2.867674965, 2019- 1.2529901,
2020-1.53067, 2021- 9.822593, 2022- 5.4350417. The minimum ratio was registered as 1.2529901 in the year
2019 and the maximum ratio was registered as 9.822593 in the year 2021.
Return on equity:
INTERPRETATION
From the balance sheet the past 5 years of the Return on equity was 2018- 0.87679428, 2019- 0.568598384, 2020-
0.512663035, 2021- 0.536190706, 2022- 0.595361949. The minimum ratio was registered as 0.512663035 in the
year 2020 and the maximum ratio was registered as 0.87679428 in the year 2018.
Findings:
The research work provides the key findings according to the data analysis.
• The company has made its current ratio good in the year 2020 with 3.334932 which indicates that the rate at
which the company restock items items is well balanced with their sales, comparing with the previous years
which is below the ideal ratio.
• By comparing all the 4 years 2018 has the low liquidity position to meet its short term obligations with its
most liquid assets.
• Fixed Asset turnover ratio good in the year 2021 with 9.822593 which indicates that the rate at which the
company restock items is well balanced with their sales.
• Return on equity good in the year 2018 with 0.87679428 which indicates that the rate at which the company
restock items is well balanced with their sales, comparing with the previous years which is below the ideal
ratio.
54
• By comparing all the 4 years, there has been a fluctuation and decrease in the ratio of, from 2018(196.35213)
to 2022(125.049102), which indicates that the company is not working in consistent improvement of its
policies.
• By comparing all the 4 years, there has been an increase in cash to current asset ratio, which indicates a positive
sign showing, the company’s most liquid assets represent a larger portion of its total current assets.
Conclusion
• Generates greater revenue in a shorter amount of the financial performance and health of the BHEL Company
were insightfully examined in this study on financial statement analysis. In order to analyse the company's
financial statements for the previous five years, the research used ratio analysis, trend analysis, and common
size analysis. The study's findings indicate that the business's financial performance has improved recently, as
seen by a rise in revenue, net profit, and return on equity.
• But the investigation also uncovered several areas that warrant worry, such falling gross profit margins and
rising debt levels. The corporation should take action to deal with these problems and further strengthen its
financial situation. The study also emphasised the use of financial statement analysis as a method for assessing.
Reference
Suhadak, Sri Mangesti Rahayu, Siti Ragil Handayani (2019). GCG, financial architecture on stock return,
financial performance and corporate value International Journal of Productivity and Performance Management,
Volume 69, Issue 9, Published Date 17 May 2019, ISSN: 1741- 0401, pp. 1813-1831.
Agus Wahyudin, Badingatus Solikhah (2017) ,Corporate governance implementation rating in Indonesia and its
effects on financial performance. Corporate Governance, Volume 17, Issue 2, Published Date 3 April 2017,
ISSN:1472-0701. pp. 250-265.
Suhadak, Kurniaty, Siti Ragil Handayani, Sri Mangesti Rahayu (2019) Stock return and financial performance as
moderation variable in influence of good corporate governance towards corporate value 20 Journal Name: Asian
Journal of Accounting Research, Volume 4, Issue 1, Published Date 5 August 2019, ISSN: 2443-4175. pp. 18-34.
Redhwan Aldhamari, Mohamad Naimi Mohamad Nor, Mourad Boudiab, Abdulsalam Masoud (2020)The impact
of political connection and risk committee on corporate financial performance evidence from financial firms in
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1281-1305
55