Financial Statement Analaysis of Odisha Mining Corporation Ltd.

1

A

Project Report on

PLACE LOGO

OR COMPANY NAME HERE

Financial Statement Analysis of "The Odisha Mining

Corporation Ltd.", Bhubaneswar

Submitted By: Sangam Kumar Patra

Regd: 1206284082

Under guidance of

Internal Guide: External Guide:

Asst. Prof. Sushmita Pradhan Mr. S. Ramkumar

Dept. of Finance AGM, Finance,

Astha School of Management The Odisha Mining Corporation Ltd.

Asst. Prof. In Finance

(Astha School of Management)

Submitted To: Astha School of Management, Bhubaneswar

2

Acknowledgements

I acknowledge in the indebtedness gratitude to my internal guide Asst.

Prof. Sushmita Pradhan (Finance) for extending her cooperation and help for

successful completion of the project.

I would like to express my sincere gratitude to Mr. S. Ramkumar, AGM

(Finance), OMC for his valuable suggestion as well as I would like to thank Mr.

Debendu Mohapatra (Sr. Manager Finance, OMC) for his advises and guidance

in carrying out this project.

I would also like to thank Mr. P. C. Mohapatra, Sr. Manager (Personnel),

OMC for giving me an opportunity to undertake a project in OMC, Bhubaneswar.

I am also thankful to the staff members of finance department for their immense

support and assistance, for giving some time from his busy schedule to explain me

intricacies of the topic and guidance me to complete my project successfully.

Once again I express my sincere thanks & wholehearted gratitude to all

those persons with whom I was associated during my project & I’m very thankful

from the core of my heart to my Parents for their immense support & blessing for

which I could able to complete project.

Sangam Kumar Patra

Regd no-1206284082

3

DECLARATION

I do hereby declare that the project study entitled “FINANCIAL STATEMENT

ANALYSIS OF OMC” is being submitted by me to ASTHA SCHOOL OF

MANAGEMENT for partial fulfillment of MASTER OF BUSINESS

ADMINISTRATION. This is based on the study undertaken by me, and the information

presented in this report is true to the best of my knowledge and belief. This report has

neither been submitted or published anywhere else. This report is a part of my course

curriculum and the main objective of conducting this study is to know about the financial

strength and weakness of OMC through a detail study of its financial statement from

2007-2008 to 2011-2012. The information and data used in the report was collected from

published “Annual Report”, financial statement and various articles of the OMC. This

report shall be used for academic purpose only.

Sangam Kumar Patra

Regd no-1206284082

4

Abstract/Preface

This project report comprises the total study of financial statement

analysis of The Odisha Mining Corporation Ltd. during financial year

2007-08, 2008-09, 2009-10, 2010-11 and 2011-12. This is the concise

statement of last four year’s annual report which has been prepared by using

graphs, facts & figures. The detail analysis and interpretation has been made

by taking last four years profit and loss account & Balance sheet

information. The quantity and amounts involve in this report are in million

tons and crore respectively.

The interpretation part plays a vital role for the organization’s growth

and development which could help in the expansion of business. The

“Financial Statement Analysis” application is inherent as financial reports

are account balance arrayed in effective & meaning order, so that the facts

and concepts the priority may be readily interpreted & used as basic decision

by all people who are interpreted in the business.

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Contents

Chapter-I: INTRODUCTION

Introduction to the topic

Objectives

Scope of Study

Research Design

Place of Study

Methodology

Limitation

Chapter-II: PROFILE OF THE COMPANY

Brief History about OMC

Functions of OMC

Welfare & CSR activity

Awards & achievement

Chapter-III: Main text

Profit & loss account and Balance sheet details

Chapter-IV: Financial Statement analysis & Interpretation

Trend analysis

Ratio analysis

Interpretation

Chapter-V: Suggestion & Reference

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CHAPTER-1 BASIC INTRODUCTION,

FUNCTIONS & CSR

ACTIVITIES OF “OMC

”

7

Finance is the key for every business which plays a dominant role

on organizational activities. A firm mainly looks for wealth

maximization and profit maximization by minimizing its used funds. So

the firm always tries to utilize these funds in such a way that, it can get

maximum profit out of it. But to manage these funds is a challenging

task for the organization. The funds are generally raised through

various sources like shareholders, debenture, creditors, etc. Whereas

the funds are raised by taking decisions for long term or short term

investments so that the investors can get maximum return on their

investments.

For the above such reasons every organization prepares their own

annual report in order to facilitate their functions in an efficient manner.

In order for smooth running and growth of the business financial

statement analysis is vital.

Financial statement is prepared with the view to depict the

financial position of the concern. A proper analysis and interpretation of

these statements enables a person to judge the profitability and

financial strength of the business. It is also helpful for assessing

corporate expenses, judging credit worthiness, forecasting for the future

investments, etc.

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There are 3 basic financial statements are Balance sheet,

Profit & loss account and cash flow statement. The Balance sheet

shows the financial viability or state of affairs of a business on a

particular date. The Profit & Loss account reflects the performance of

income or expenses of business over a specific period of time.

Financial Statement Analysis:

Financial statement plays a crucial role in setting the framework

of managerial decision. It provides the summary of accounts of a

business enterprise and to understand financial performance of a

corporation, its stockholders and the application of fund statements

But the information provided in income statement or financial

results aren’t sufficient to make the managerial decision directly. So the

financial statement analysis report helps to the management to draw an

effective, convenient and flexible managerial decision. Financial

statement analysis of an organization can be prepared by taking

previous few years annual report information which could help to view

the growth and development of the business. An annual report of an

organization usually contains the detail information about financial

affairs and other developmental activities of an organization during a

particular financial year.

This report has prepared by taking all the information provided

by Odisha Mining Corporation, Bhubaneswar. It is a concise statement

of last four years annual report information which has analyzed by

taking graphs, charts, facts and figures.

9

Objectives of the study: To know the financial viability of the business.

To analyze the sales growth of various ores like chrome, iron and

manganese ores.

To get the idea about performance of the business.

To find out the reason of increase in expenses or incomes over

last several financial years.

To analyze the shareholders dividend over last few years.

To find out the different sources and application of funds.

To draw the depreciation view in favor of investments in

machineries and other fixed assets.

To show the increase or decrease of reserve surplus and general

reserve balance of the organization.

To view the organizations endeavors towards development of

rural areas and other welfare activities.

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Scope of the study:

The Odisha Mining Corporation (OMC) is a “gold” category state

PSU of our country. This study about financial statement analysis is

important on the view of organization’s managerial decision as well

as our state’s efficient use of natural resources.

Research Design: Research design is just like a blue print for collection of data,

measuring those data and doing analysis.

When we design a research we should consider the following

aspects.

A) SOURCES OF DATA COLLECTION:-

I have collected the data from primary source, by discussing with

my concerned external guide of the organization and secondary data

with the help of last four years annual report of Odisha Mining

Corporation.

B) DATA INTERPRETATION :-

Data interpretation has been prepared by using graph, bar

diagram, Pi-chart and percentage.

C) TIME DURATION:-

The allotted time duration was 6 weeks.

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Place of the study: I had been allotted to Odisha Mining Corporation, Bhubaneswar to

conduct my research on behalf of summer project for the partial

fulfillment of MBA curriculum. The corporate office of OMC is situated at

Bhubaneswar which regulates all the functional activities of the

organization. The total accumulated expenses and incomes of all the

mines are regulated by the head office of OMC. My external guide Mr. S.

Ramkumar (AGM, Finance) & Mr Debendu Mohapatra (Sr. Manager,

Finance) had taught me the detail concepts, meanings, functions of the

financial affairs in the organization which helped me to understand the

facts and figures properly.

Research Methodology: The data that are present in this report have been taken from the

secondary sources i.e. annual reports of the organization. These data

have been brought from the “Profit & loss account” and “Balance

sheet” information of the relevant financial year’s annual report of the

organization. As per the guidance of my external guide the detail

procedures and methods have been written with the help of graphs,

charts and symbols.

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Limitation of the study: As the report has prepared by taking certain assumptions like the

provided data are correct as far as the corporation is concerned in fact

there are certain limitations which I faced during my study are given

below.

Time factor was the only reason which didn’t lead to analyze all

the facts and figures thoroughly.

To write exact quantitative figure was not possible in fact they

were written up to four decimals for clear understanding purpose.

The complete explanation was not possible to mention on the

report because the given interpretation in this report was made

by analyzing to the relevant years annual reports.

The trend has been prepared by assuming 2007 as the base year

for our research.

Last two years data was unavailable for our research which could

be the major reason to give in depth analysis on the report.

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Brief History of Odisha Mining Corporation: Odisha Mining Corporation (OMC) was initially started in the year

1956 with the joint venture of Odisha govt. and govt. of India to explore

minerals from the various mines in order to make value addition to the

mining industry. Eventually on 1961 it became a wholly state-owned

corporation of Odisha. Now OMC has been classified as “Gold” category

state PSU. The major minerals mined by OMC are chrome ore,

manganese ore, iron ore which cater to the requirement of mineral

based industries like steel, ferro-chrome, pig iron, etc.

But at present it only caters to the mining of “Chrome & Iron ores”

from various mines such as “South Kaliapani”, “Sucrangi”, “Daitarigiri”,

“Gandhamardan” and “Kurumitar”. Here “south kaliapani” and

“Sucrangi” are involved in mining of chrome ores where as other three

mines are currently working for mining of iron ores in respective

districts. The growth of OMC has been impressive over these years and

today it stands as the largest State PSU in the mining sector of the

country. It recorded the highest turn-over of Rs. 2756 crore in 2010-

11.

OMC is managed by a Board of Directors consisting of

Government Directors and Independent Directors. The day-to-day

management of the Corporation is looked after by the Chairman and the

Managing Director as authorized by the Board of Directors.

OMC has adopted SAP software, an ERP tool, since 2004 to

streamline its business processes, bring synergy in functional activities

across the organization, handle numerous business locations and

expanding volumes. It also helps in bringing greater transparency in

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financial transactions and effective monitoring and financial control

enabling the organization to take informed and timely decisions. For

successfully implementing the ERP package, OMC was awarded with the

Golden Peacock Award in 2006-07 by the Institute of Directors, New

Delhi.

Because of huge accumulated profits, OMC is in a position to

undertake new Projects which are essential to sustain its good

performance in the long run.

i) JV Projects - OMC has decided to diversify its activities and has

entered into sectors such as coal and bauxite mining and power

generation. A number of Joint Venture Companies have been formed/

are in the process of formation like South West Bauxite Mining

Company (Pvt.) Ltd., East Coast Bauxite Mining Company (Pvt.) Ltd., etc.

ii) Own Projects - A number of Projects have already been taken up/are

being taken up by OMC to enhance the present performance level of the

Company.

15

Functions of Odisha Mining Corporation(OMC):

Production

OMC has shown consistent growth in the production of ore and

ore concentrate over the last 5 years. The production of iron ore has

increased substantially from 34 lakh tonnes in 2005-06 to about 8

million tonnes in 2008-09. Similarly the production of chrome ore and

chrome concentrate has been fairly consistent in the last 5 years.

Whereas the production of chrome ore increased from 9 lakh tones in

2007-08 to about 11 lakh tones in 2010-11. At the present rate, OMC is

producing about 10 % of total iron ore production of the State and

about 30 % of the total chrome ore production of the State. Presently

Daitari, Gandhamardan and Kurmitar (Khandadhar) are the major Iron

ore Mines of OMC whereas South Kaliapani is the main Chrome ore Mine

of OMC. Bangur Chrome ore Mine is the first and only underground

mine of OMC.

Sales & Distribution

The Sales and Distribution function of OMC have been carrying

out in OMC through ERP & SAP since 2006-07. It has facilitated in

creation of contract at Head office, sales order, financial document and

billing at the R.O Level and issue D.O at the mines levels and so on.

Customer master is maintained in the system which facilitates sale of

material to all customers, mines-wise and maintaining the customer

16

balance. In Generation of Reports and Documents MIS has helped

in quicker decision making.

(A) Domestic Sale:

The rates for domestic sale of Iron, Chrome and Manganese Ores

are decided by quarterly Price Setting Tender (PST) Mechanism.

Sale of ore to buying units/industries is restricted to their

capacity.

Verification of the units/industries is done to ascertain their

requirement of Ore.

No ore is sold to traders except iron ore fines, manganese ore with

less than 35% Mn. and non-moving items (materials seized by

various Govt. enforcement authorities and old stock).

Non-moving items and old stock as well as excess stock are sold

through Open Sale notice to liquidate the stock.

Iron ore is supplied to various units/industries as given below:

(i) MoU Steel Plants of Odisha - 70%

(ii) Sponge Iron Plants of Odisha - 30%

(iii) Crusher Units of Odisha - Soft ore only.

(iv) Outside State unit - Through Open Sale

and Tender route

Chrome ore is sold to the following categories of industries.

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(a) Ferro-chrome units

(b) Chemical units

(c) Refractory units

State based units are given preference over outside units.

Chrome ore below 40% Cr203 is sold to State based Beneficiation

Plants through tender process.

Chrome ore is not supplied to any trader/anybody having chrome

ore Mining Lease.

Manganese ore is sold to the following categories of units:

(a) Ferro manganese units

(b) Silico Manganese units

(c) Ferro Alloys Units

(d) Processing units

(e) Chemical units

(B) Export Sale

All export sale of chrome ore and chrome concentrate (known as

canalized items) are made as per the decision of Minerals &

Metals Trading Corporation (MMTC) of Govt. of India. MMTC

decides the export rate and also allocates quantities to be

exported.

18

Iron ore fines is exported by OMC directly after finalizing the

rate through tender process.

All exports are made through Paradip Port.

HR Functionality

Implementation of HR and ESS function has facilitated the viewing

by employees, of their personal information, salary slip, loan balance,

leave balance and IT Form-16. Annual Self Appraisal respect of all

executives and CCRs of non-executive employees are submitted and

reporting done through online system. All type of leave quota, automatic

calculation of accrued leave, submission and approval of leave

application are all done on line.

Financial Performance of OMC

OMC has been a consistently growing state PSU over a period of 5

years. It has recorded substantial profit in last few years which directly

contributes its production growth on the increase of GDP of our country.

The detail information of the financial performance of OMC has been

described below.

19

FOR THE LAST FIVE YEARS.

(Rs. in Lakh

Year Turnover Profit before tax

Profit after tax

Cumulative Reserves & surplus at the end of the

year

2008-09 208526.78 189022.37 123687.26 293786.37

2009-10 157784.85 108932.15 71686.68 337994.98

2010-11 275581.81 144696.42 94816.68 421112.16

2011-12 214181.41 188058.64 126938.54 514927.28

2012-13(Provisional)

165824.00 158849.00 107310.44 584572.00

20

PAYMENT MADE TO GOVT. BY OMC

DURING LAST FIVE YEARS

(Rs. In lakh)

Year Royalty Dividend Sales Tax

Income Tax

2008-09 5027.50 25000.00 8219.30 65328.51

2009-10 11804.62 10000.00 6273.31 41513.00

2010-11 24422.44 28500.00 11691.56 47065.55

2011-12 25633.40 50000.00 8564.31 61092.71

2012-13(Provisional)

28350.34 - 8526.71 79349.64

Total 95238.30 113500.00 43275.19 294349.41

21

UDGETED AND ACTUAL PERFORMANCE OF O.M.C. LTD.

FOR LAST FIVE YEARS

(Rs. In Lakh)

ITEM YEAR

2008-09

2009-10

2010-11

2011-12

2012-13

TURNOVER BUDGET 207653 156656 277693 211559 185148

ACTUAL 208527 157785 275582 214181 165824(Prov.)

OTHER RECEIPTS

BUDGET 18375 24881 28305 40982 51455

ACTUAL 29242 24846 27324 46200 51455(Prov.)

REVENUE EXP.

BUDGET 56817 72865 168333 72671 63263

ACTUAL 47288 72013 156575 71212 57405(Prov.)

DEPRECIATION

BUDGET 879 1310 1594 1633 955

ACTUAL 1459 1686 1635 1110 1025(Prov.)

PROFIT BEFORE TAX

BUDGET 168331 107362 136071 178237 172385

ACTUAL 189022 108932 144696 188059 158849(Prov.)

22

THE FOLLOWING TABULAR STATEMENT REFERS TO THE

ACHIEVEMENTS DURING 2011-12 AS COMPARED TO PREVIOUS YEARS

ITEM YEAR

2007-08 2008-09 2009-10 2010-11 2011- 12

IRON ORE

Production (in ‘000MT)

5174 8589 7325 5367 3908

Sales (in ‘000MT)

4510 5209 6210 4798 3971

Sales Value (in Lakh)

83794.57 121198.08 101236.64 167385.99 171232.81

CHROME ORE

Production (in ‘000MT)

1158 926 507 1044 501

Sales (in ‘000MT)

1092 698 858 1023 314


108342.32 86616.84 56548.21 108195.81 42927.35

MANGANESE ORE

Production(in ‘000MT)

31 3 - - -

Sales (in ‘000MT)

134 7 - - -


4182.51 711.86 - - -

LIME STONE


3454 - - - -

Sales (in ‘000MT)

4504 - - - -


7.38 - - - -

GE STONE


- - - - -

Sales (in ‘000MT)

- - - - 16,18,627 (In grams)


- - - - 21.25

23

Human Resource Development and staff welfare:

In order to keep good industrial relations, the company has taken

steps ofr development of human resources and the welfare measures

for achieving higher productivity.

The company has introduced several welfare activities such as

medical facilities, rent free accommodation in mines and camps,

maintenance of schools, providing grant-in-aid to privately managed

students for higher studies after matriculation, sanctioning substantial

amount for recreation and cultural activities, Group Insurance Scheme,

house building advance for construction of houses, advance for

purchase of vehicles, T.V., Computer etc. The daily rated workers and

piece rated miners have been given Moped advance.

For encouragement to the children of OMC employees, a scheme

has been introduced to give cash award of Rs. 3,000.00 for securing

higher marks in HSC examination as well as CBSE/ICSE examination and

Rs.5,000.00 in case of holding position in best 20 list.

Employees Pension Scheme, 1995 under EPF & MP Act, 1952 has

been implemented w.e.f. 1.11.1995 as social security measure enforced

by Government of India. The employees as well as PRM & DRMP

workers, on completion of 15 years of services in OMC are being

honored with presentation of a watch and are also given presentation

worth Rs.15, 000.00 on the day of retirement.

24

Corporate Social Responsibilities:

CSR in OMC has been implemented since its inception, however, a

policy to this effect has been formulated since 2010. Importance has

always been given for the development of peripheral villages of the

operating mines. Construction of roads, and school buildings, extension

of class rooms, supply of infrastructural facilities to the educational

institutions, provision of safe drinking water and promotion of cultural

activities were mainly covered under CSR activities. Every year a

substancial amount of the net profit have been utilized by OMC for

undertaking various social development works.

OMC has also contributed about Rs.319 crores to the Chief Minister’s

Relief Fund in last 5 years. OMC has contributed Rs.5 crores to Odisha

Environment Management Fund to fulfill its commitment for a ‘Clean and

Green Environment’. Apart from this it has also spent for the

development in the backward/mining areas of the state through differet

Government Departments like Health & FW, Mass Education, Water

Resources, ST/SC Development Department, Women & Child Welfare

Department etc. The detail information regarding expenditure incurred

under CSR and Peripheral Development activities in the last 3 years is

given below.

25

DETAILS OF CSR AND PERIPHERAL DEVELOPMENT WORKS IN OMC

DURING LAST 3 YEARS

2010-11

a) PD works undertaken by OMC

b) (i) Keonjhar District 3538840.00

(ii) Sundargarh District 105290000.00

(iii) Jajpur District 11727528.00

(iv) In other District (CSR)

6276850.00

c) v) CMRF 2200000000.00

d) vi) Advertisement 1312700.00

Total 2328145918.00

2011-12 a) PD works undertaken

by OMC





14020968.00

c) v) CMRF 150000000.00


26

Total 176842420.00

2012-13 a) PD works undertaken

by OMC





26373313.00

c) v) CMRF 740000000.00


Total= 963001414.00

27

Major achievements by OMC: (quick, absolute)

For successfully implementing the ERP package, OMC was

awarded with the “Golden Peacock” Award in 2006-07 by the

Institute of Directors, New Delhi.

For consistent good performance the Odisha Mining Corporation

Ltd. has been classified as a “Gold” Category State PSU in the year

2012.

For the proper security protection in IT department OMC has

adopted certain important steps like H.O LAN reconfiguration,

Antivirus server configuration, and process oriented incident

management has been carried out keeping network Security in

mind. Recommended Firewall deployment at Gateway level has

been implemented to enhance the level of security.

28

CHAPTER-2

TREND ANALYSIS &

INTERPRETAION ON FINDINGS

VISION & MISSION OF RUCHI

29

TREND Analysis on P/L Account: The financial statements may be analyzed by computing

trends of series of information. The method determines the

direction upwards or downwards and involves the

computation of percentage relationship that each statement

item bears to the same item in the base year. The information

for a no. of years is taken up and one year, generally the first

year, is taken as the base year. The figures of the base year are

taken as 100 and trend ratios for the other years are calculated

on the base year. By taking the detail figure of last 5 years

profit & loss account & Balance sheet information the trend has

been analyzed below.

Year

Total Income

Total Expenditure

Amount

(Rs. In Lakhs)

Trend%

Amount

(Rs. In Lakhs)

Trend%

2007-08 211373.38 100 48995.36 100

2008-09 237769.12 112 50230.84 102

2009-10 182631.27 86 73410.47 150

2010-11 302906.01 143 157771.46 322

2011-12 260381.44 123 72322.80 148

30

Interpretation:

From the above diagram the figure shows that in the year

2009-10 and 2010-11 the total expenses was increased in a

greater proportion in comparison to the base year i.e. 2007-08.

During financial year 2009-10 the “production & processing”

cost was increased to 5crore from 2.5crore of previous year

expenses. As well as the total expenses in the year 2010-11

increased due to the same reason i.e. increase of “production &

processing” cost to 11.78 crore from 5crore of last year

expenses. But for the year 2011-12 the “production and

processing cost” was increased in lesser proportion than base

year expenses which resulted in decrease to total expenses.

100%112%

86%

143%123%

100% 102%

150%

322%

148%

0%

50%

100%

150%

200%

250%

300%

350%

2007-08 2008-09 2009-10 2010-11 2011-12

Total Income Total Expenditure

31

Furthermore in the same year the interest rate was high than

that of base year.

By considering to the income side the total income was

increased to 2755crore in the year 2010-11 due to increase of

sales in Iron Ore & Chrome Ore.

TREND OBSERVATION WITH RESPECT TO SALES, OTHER INCOME,

INTEREST RECEIVED

Year

Sales

Other Income

Interest Received

Amount

(Rs. In Lakhs)

Trend%

Amount

(Rs. In Lakhs)

Trend

%

Amount

(Rs. In Lakhs)

Trend%

2007-08 196326.77 100% 623.04 100% 14423.27 100%

2008-09 208526.78 106% 678.90 108% 26938.58 187%

2009-10 157784.84 80% 881.87 141% 23960.87 166%

2010-11 275581.80 140% 2130.63 341% 25186.65 175%

2011-12 214181.41 109% 1277.91 205% 44920.50 311%

32

Interpretation:

The above figure indicates that in the year 2008-09, 09-

10, 10-11, 11-12 “interest received” has increased to 269, 239,

251, 449core respectively which resulted in the increase of

interest in subsequent years. Also “other income” has been

increasing in a greater proportion for last four years. But in the

year 2009-10 the sales of Chrome ore & Iron ore was reduced

to 1577crore due to recession for which it directly influenced

to the decrease of total income.

100% 106%

80%

140%

109%100% 108%

141%

341.97%

205.10%

100%

187%166%

175%

311%

0%

50%

100%

150%

200%

250%

300%

350%

400%

2007-08 2008-09 2009-10 2010-11 2011-12

Sales Other Income Interest Received

33

TREND ANALSIS ON PERCENTAGE CHANGE OF “SALES” FROM “TOTAL INCOME” Year Total Income

(in crore) Sales. (in crore)

Percentage change

2007-08 2113.73 1963.26 92.88% 2008-09 2377.69 2085.26 87.70% 2009-10 1826.31 1577.84 86.39% 2010-11 3029.06 2755.81 90.97% 2011-12 2603.81 2141.81 82.25%

INTERPRETATION:

The above figure shows that in the year 2007-08 the total

sales stood at 92.88% of total income, where as the rest income

was earned from the source of “interest received” and “other

income”. But in the year 2008-09 the contribution of ‘sales’ to

the “total income” reduced to 87.70% due to increase of

revenue from “Interest Received”, “Grant-in-Aid”. But later in

2007-08 2008-09 2009-10 2010-11 2011-12

Percentage change of "Sales" from "Total Income"

92.88% 87.70% 86.39% 90.97% 82.25%

76.00%

78.00%

80.00%

82.00%

84.00%

86.00%

88.00%

90.00%

92.00%

94.00%

Axi

s Ti

tle

Percentage change of "Sales" from"Total Income"

34

the year 2010-11 the total sales again increased to 90.97% of

“Total income” due to increase of production of Iron ore &

chrome ore to 2755core. Again in the year 2011-12 the sales

decreased to 82.25% due to less production of both iron as

well as chrome ore in compare to the previous year sales.

TREND ANALSIS ON PERCENTAGE CHANGE OF “Interest Received” FROM “TOTAL INCOME” Year Total Income

(Rs. In Lakhs) Interest Received (Rs. In Lakhs)

Percentage change

2007-08 211373.38 14423.27 6.83% 2008-09 237769.12 26938.58 11.32% 2009-10 182631.27 23960.87 13.11% 2010-11 302906.01 25186.65 08.31% 2011-12 260381.44 44920.50 17.25%

2007-08 2008-09 2009-10 2010-11 2011-12

Percentage change of "Interest Received" from "Total Income"

6.83% 11.32% 13.11% 8.31% 17.25%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

pe

rce

nta

ge c

han

ge--

----

->

Percentage change of "Interest Received" from "Total Income"

35

INTERPRETATION:

On the above figure I found that the contribution of

Interest Received” to the “Total Income” was high in the years

2008-09, 09-10, 11-12. Where as in the year 2011-12 it stood

at 17.25% but in the year 2007-08 it was 6.55%.

TREND ANALSIS ON PERCENTAGE CHANGE OF “DEPRECIATION” FROM “TOTAL EXPENDITURE” Year Total

Expenditure (Rs in Lakhs)

Depreciation (Rs in Lakhs)

Percentage change

2007-08 48995.36 967.51 1.97% 2008-09 50230.84 1458.84 2.90% 2009-10 73410.47 1686.01 2.29% 2010-11 157771.46 1634.84 1.03% 2011-12 72322.80 1109.93 1.53%

2007-08 2008-09 2009-10 2010-11 2011-12

Percentage Change of "Depreciation" from "Total

Expenditure"1.97% 2.90% 2.29% 1.03% 1.53%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

Percentage Change of "Depreciation" from "Total Expenditure"

36

INTERPRETATION:

From the above figure it clearly indicates that the

depreciation cost for the year 2008-09 was 2.90% of total

expenditure where as in the year 2010-11 it was 1.03% of total

expenditure. From the report I found that the depreciation is

charged on “Ore Handling Plant’, “Railway Siding”, Platform

Dump yard, Stockpile and “Stockyard’ at 30%. Finally it clearly

shows that due to high expenditure in 2008-09 the

depreciation cost is also high.

VARIATION OF TREND BETWEEN TOTAL INCOME WITH

PAYMENTS AND PROVISIONS FOR EMLPOYEES.

DATA

(RUPEES IN CRORE)

Year Payment And

Provision For

Employee

Total Income % Change In

Payment And

Provision For Emp.

2007-08 11252.60 211373.38 5.32

2008-09 12136.82 237769.12 5.10

2009-10 13935.35 182631.27 7.63

2010-11 12156.07 302906.01 4.01

2011-12 13354.28 260381.44 5.13

37

INTERPRETATION:-

The above trend signifies that in the year 2009-10 the

payment & provision expenses with respect to “Total income”

was high i.e 7.63 in comparison to other year’s expenses.

During that particular year both “Sales” as well as “Total

income” was less because of recession in business. Again it

reduced to 4.01 in the year 2010-11 hence the firm is utilizing

its resources effectively.

2007-08 2008-09 2009-10 2010-11 2011-12

% change in payment and provision for employee

5.32 5.1 7.63 4.01 5.13

0

1

2

3

4

5

6

7

8

9

Axi

s Ti

tle

% change in payment and provision for employee

38

VARIATION OF TREND BETWEEN TOTAL

INCOME WITH PRODUCTION AND PROCESSING

COST (RUPEES IN CRORE)

Year Production And Processing Cost

Total Income % Change In Income

2007-08 25688.52 211373.38 12.15

2008-09 29977.97 237769.12 12.06

2009-10 50884.42 182631.27 27.86

2010-11 117889.62 302906.01 38.91

INTERPRETATION:-

From the above trend it is clear that the

percentage of production and processing cost with

respect to income is high in the year 2009-10 and 2010-

11 as comparison of others, because of increase in the

volume of “production” & “sales”.

2007-08 2008-09 2009-10 2010-11

% change of production & processing cost from total

income12.15 12.06 27.86 38.91

0

10

20

30

40

50

Axi

s Ti

tle

% change of production & processing cost from total income

39

CHAPTER-3

RATIO ANALYSIS, SUGGESTION, & REFERENCE

VISION & MISSION OF RUCHI

40

Ratio Analysis The analysis of the financial statements and

interpretations of financial results of a particular period of

operations with the help of ‘ration’ is termed as “ratio

analysis.” Ratio analysis used to determine the financial

soundness of a business concern.

Advantages of Ratio Analysis

Ratio analysis is necessary to establish the relationship

between two accounting figures to highlight the significant

information to the management or users who can analyze the

business situation and to monitor their performance in a

meaningful way. The following are the advantages of ratio

analysis:

It facilitates the accounting information to be summarized

and simplified in a required form.

It highlights the inter-relationship between the facts and

figures of various segments of business.

Ratio analysis helps to remove all type of wastages and

inefficiencies.

It provides necessary information to the management to

take prompt decision relating to business.

41

It helps to the management for effectively discharge its

functions such as planning, organizing, controlling,

directing and forecasting.

Ratio analysis reveals profitable and unprofitable

activities. Thus, the management is able to concentrate on

unprofitable activities and consider to improve the

efficiency.

Ratio analysis provides all assistance to the management

to fix responsibilities.

Ratio analysis helps to determine the performance of

liquidity, profitability and solvency position of the

business concern.

Limitations of Ratio Analysis

Ratio analysis is one of the important techniques of

determining the performance of financial strength and

weakness of a firm. Though ratio analysis is relevant and

useful technique for the business concern, the analysis is

based on the information available in the financial

statements. There are some situations, where ratios are

misused, it may lead the management to wrong direction.

The ratio analysis suffers from the following limitations:

Ratio analysis is used on the basis of financial

statements. Number of limitations of financial

42

statements may affect the accuracy or quality of ratio

analysis.

Ratio analysis heavily depends on quantitative facts

and figures and it ignores qualitative data. Therefore

this may limit accuracy.

Ratio analysis is a poor measure of a firm’s

performance due to lack of adequate standards laid for

ideal ratios.

Classifications of Ratio Analysis

Accounting Ratios are classified on the basis of the

different parties interested in making use of the ratios. A very

large number of accounting ratios are used for the purpose of

determining the financial position of a concern for different

purposes. Ratios may be broadly classified in to:

Liquidity Ratio

Profitability Ratio

Liquidity Ratio Liquidity Ratios are also termed as Short-Term

Solvency Ratios. The term liability means the extent of quick

convertibility of assets in to money for paying obligation of

short-term nature. Accordingly, liquidity ratios are useful in

43

obtaining an indication of a firm’s ability to meet its current

liabilities, but it does not reveal how effectively the cash

resources can be managed. To measure the liquidity of a firm,

the following ratios are commonly used:

1. Current Ratio

2. Quick Ratio

3. Absolute Liquid Ratio

4. Cash Position Ratio

1.Current Ratio: Current Ratio establishes the relationship between

current Assets and current Liabilities; it attempts to measure

the ability of a firm to meet its current obligations. In order to

compute this ratio, the following formula is used:

Current ratio= current asset/current liability

CURRENT RATIO (Rs in Lakhs):-

Year

Total Current Liability

Total

Current

44

Current Asset

Ratio

2007-

08 168100.22 355068.37 2.11

2008-09

233944.17 520302.59 2.22

2009-10

68497.01 397643.61 5.80

2010-11

82970.90 491267.94 5.92

2011-12

55370.93 554830.57 10.02

Interpretation: As we know the current ratio within 1.5 to 3 is good

for the firm hence if it is more than that the firm may not be

using its current assets efficiently. So from the study I

concluded that due to high balance in current asset side firm’s

2.11 2.22

5.8 5.92

10.02

0

2

4

6

8

10

12

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Ratio Series 2 Series 3

45

current ratio during year 2010-11 was 5.92. However still it is

high in 2011-12 as 10.02. Finally we can interpret that the firm

is experiencing a healthy growth.

2. Quick Ratio or Acid Test or Liquid Ratio Quick Ratio also termed as Acid Test or Liquid Ratio. It

is supplementary to the current ratio. The acid test ratio is a

more severe and stringent test of a firm’s ability to pay its

short-term obligations and when they become due. Quick Ratio

establishes the relationship between the quick assets and

current liabilities. In order to compute this ratio, the below

presented formula is used:

Liquid Ratio=Liquid Assets/Current Liabilities Liquid Assets= (Current Assets – Inventories) or (Sundry Debtors + Cash & Bank balances+ Loans and advances)

The ideal Quick Ratio of 1:1 is considered to be

satisfactory. High Acid Test Ratio is an indication that the firm

has relatively better position to meet its current obligation in

time. On the other hand, a low value of quick ratio exhibiting

that the firm’s liquidity position is not good.

46

Year

Liquid assets (Rs in lakhs )

Total Current Liability (Rs in Lakhs)

Quick Ratio

2007-08

343432.04 168100.22 2.04

2008-09

495431.47 233944.17 2.12

2009-10

371364.89 68497.01 5.42

2010-11

405264.24 82970.90 4.88

2011-12

453025.07 55370.93 8.18

47

Interpretation From the study it has been seen that the firm is

continuously experiencing effective fund management to meet

its current obligation in due time. If we see the figure during

year 2010-11 it was 4.88 which was less than previous year

ratio. Moreover as we know the firm is cash reach company so

it didn’t continue for next year.

3. Absolute Liquid Ratio Absolute Liquid Ratio is also called as Cash Position

Ratio or Over Due Liability Ratio. This ratio established the

relationship between the absolute liquid assets and current

liabilities. Absolute Liquid Assets include cash in hand, cash at

2.04 2.11

5.424.88

8.18

0

1

2

3

4

5

6

7

8

9

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Ratio rs in lakhs Series 3

48

bank, and short term marketable securities or temporary

investments. The optimum value for this ratio should be one,

i.e., 1:2. It indicates that 50% worth absolute liquid assets are

considered adequate to pay the 100% worth current liabilities

in time. If the ratio is relatively lower than one, it represents

that the company’s day-to-day cash management is poor. If the

ratio is considerably more than one, the absolute liquid ratio

represents enough funds in the form of cash to meet its short-

term obligations in time. The Absolute Liquid Ratio can be

calculated by dividing the total of the Absolute Liquid Assets by

Total Current Liabilities. Thus,

Absolute Liquid Ratio= Absolute Liquid Assets/ Current Liabilities Absolute Liquid Assets = Cash in hand + cash at bank+ short term marketable securities. Note** As the firm doesn’t poses any short term marketable

security hence only cash in hand and cash at bank has been

considered as Absolute Liquid Asset in the table.

49

Year Absolute Liquid Assets (Rs in Lakh)

Current Liabilities (Rs in lakhs)

Total

2007-08

203893.15 168100.22 1.21

2008-09

279606.66 233944.17 1.19

2009-10

321558.21 68497.01 4.69

2010-11

405264.24 82970.90 4.88

2011-12

453025.07 55370.93 8.18

Interpretation: Here the same situation has been seen in year 2010-

11 as its current liability again increased to 82970.90 lakh

1.21 1.19

4.69 4.88

8.18

0

1

2

3

4

5

6

7

8

9

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Ratio

50

from 68497.01 lakh of 2009-10 current liability. However it

again decreased in the year 2011-12 which shows a positive

sign for the organization. Moreover the firm’s fund

management is appreciable.

4.Debtor’s Turnover Ratio: Debtor’s Turnover Ratio is also termed as Receivable

Turnover Ratio or Debtor’s Velocity. Receivables and Debtors

represent the uncollected portion of credit sales. Debtor’s

Velocity indicates the number of times the receivables are

turned over in business during a particular period. In other

words, it represents how quickly the debtors are converted

into cash. It is used to measure the liquidity position of a

concern. This ratio establishes the relationship between

receivables and sales. Two kinds of ratios can be used to judge

a firm’s liquidity position on the basis of efficiency of credit

collection and credit policy.

Debtors turnover ratio= Net Sales/ Sundry debtors

51

Year

Sales (Rs in lakhs)

Sundry Debtors (Rs in lakhs)

Ratio

2007-08

196326.77 4328.13 45.36

2008-09

208526.78 1679.54 124.15

2009-10

157784.84 4386.32 35.97

2010-11

275581.80 2163.72 127.36

2011-12

214181.41 1521.56 140.76

Interpretation: The graph and data clearly signifies that the firm’s

sundry debtor is decreasing day by day which is again a

positive sign for the organization. As it is used to measure the

45.36

124.15

35.97

127.36

140.76

0

20

40

60

80

100

120

140

160

2007-08 2008-09 2009-10 2010-11 2011-12

Debtors turnover ratio

52

liquidity position of a firm hence we can clearly define that the

firm is experiencing better growth among all state PSUs.

5.Net Profit Ratio: Net Profit Ratio is also termed as Sales Margin Ratio

(or) Profit Margin Ratio (or) Net Profit to Sales Ratio. This ratio

reveals the firm’s overall efficiency in operating the business.

Net profit Ratiois used to measure the relationship between

net profit (either before or after taxes) and sales. This ratio can

be calculated by the following formula..

Net Profit Ratio = (Net Profit After Tax/ Net Sales) x 100,

Net profit includes non-operating incomes and profits.

Non-Operating Incomes such as dividend received, interest on

investment, profit on sales of fixed assets, commission

received, discount received etc. Profit or Sales Margin indicates

margin available after deduction cost of production other

operating expenses, and income tax from the sales revenue.

Higher Net Profit indicates the standard performance of the

business concern.

Advantages

i. This is the best measure of profitability and liquidity.

53

ii. It helps to measure overall operational efficiency of the

business concern.

iii. It facilitates to make or buy decisions.

iv. It helpps to determine the managerial efficiency to use

firm’s resources to generate income on its invested

capital.

Year

Net Profit After Tax (Rs in Lakhs)

Sales (Rs in lakhs)

Ratio

2007-

08 105285.84 196326.77 53.62

2008-09

123687.25 208526.78 59.31

2009-10

71686.67 157784.84 45.43

2010-11

94816.68 275581.80 35.40

2011-12

126938.53 214181.41 59.27

54

Interpretation: If we look at the net profit side the wealth of the profit

might have not increased continuously but still it again

increased to 59.27% during 2011-12. The main reason behind

previous year decline might be due to change in tax percentage

or due to less in profit on sale.

53.62

59.31

45.43

35.4

59.27

0

10

20

30

40

50

60

70

2007-08 2008-09 2009-10 2010-11 2011-12

Net Profit Ratio

55

Suggestions

The company should use its current asset effectively in

order to get maximum revenue out of it.

Less practical knowledge about day to day mining

activities for which it trusts on the contractors. So

proper experience may lead to minimize the cost of

production.

Regular effort should be made to increase sales volume

to generate more revenue.

In order for effective mange of working capital

management reserve and surplus should be used

properly.

Technological up gradation must be made in order to

increase production volume.

56

Reference

The books which were referred during my SIP are

53rd ANNUAL REPORT 2008-09

55th ANNUAL REPORT 2010-11

Apart from this we had collected some information through

virtual medium, these websites are

http://www.orissamining.com

http://www.wikipedia.com

http://www.orissamining.com/

http://www.wikipedia.com/

Date post:	11-Nov-2014
Category:	Economy & Finance
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Financial Statement Analaysis of Odisha Mining Corporation Ltd.

Economy & Finance