Slide 1

Submitted by-Shabir AhmedBBA (V sem)

A SUMMER TRAINNING REPORT

Financial statement Ratio AnalysisofReliance Infrastructure Limited

ContentsIntroductionRATIO ANALYSISSTEPS IN RATIO ANALYSISNATURE OF RATIO ANALYSISFUNCTIONAL CLASSIFICATIONDATA ANALYSIS CURRENT RATIOQUICK RATIOPROPRIETOR RATIODebt Equity Ratio Gross Profit Ratio Net Profit Ratio Return On Net Worth Return On InvestmentInterest Coverage Ratio Finding and conclusion

IntroductionReliance Infrastructure Limited (formerly Reliance Energy Limited) is a part of the Reliance Anil Dhirubhai Ambani Group, Indias second largest business house. Reliance Infrastructure companies distribute more than 25 billion units of electricity to over 25 million consumers across an area that spans over 1,24,300 sq kms and includes Indias two premier cities, Mumbai and Delhi. The Company generates over 940 MW of electricity through its power stations located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa.

RATIO ANALYSIS

FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements.

RATIO ANALYSIS

The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed asPercentagesFractionsProportion of numbers

STEPS IN RATIO ANALYSIS

The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm.Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action.

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE

Liquidity ratio Leverage ratio Activity ratio Profitability ratio

DATA ANALYSIS

CURRENT RATIO: Current Ratio measures firms Short Term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. Current AssetsCurrent Ratio = Current Liabilities

Current ratioYearCurrent AssetsCurrent LiabilitiesRatio2012-1312967.913130.664.142013-149021.463377.812.672014-158803.635421.751.62

Continue.ANALYSIS AND INTERPRETATION: From the above table, it shows the decline trend during F.Y. 2012 to F.Y.2014.It was high in F.Y.2012 at 4.14 times which further reduced to 1.62 times in F.Y. 2014 which is lower than standard i.e. 2:1.In F.Y. 2012 the ratio was high due to the high Cash & Bank balance which further reduced to 2.67 times in F.Y. 2013. In F.Y.2014 the ratio was very low because of increase in Current Liability.The continuous decrease in Current Ratio is not good for companys financial health. So company has to take necessary action to improve current ratio.

QUICK RATIO:

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due.

Quick AssetsQuick Ratio= Quick Liabilities

Continue..YearQuick AssetCurrent LiabilitiesRatio201212675.223130.664.0520138721.173377.812.5920148362.955421.751.54

Continue..ANALYSIS AND INTERPRETATION:The table shows continuous decline trend from F.Y.2012 to F.Y. 2013. The ratio is above the standard i.e. 1:1. In F.Y. 2012 the ratio was high at 4.5 times due to tremendous increase in Cash & Bank Balance which was25 times greater than F.Y.2008, also in F.Y. 2012. Further it reduced to 1.54 times but we cannot say that the liquid position of the company is good because in F.Y. 2014 companys Cash & bank balance and Debtors has increased.Thus, the company can suffer the shortage of fund due to slow paying, doubtful & long duration outstanding debtors.

PROPRIETOR RATIO:

It measures the relationship between funds invested in business by the owners with the total fund invested in business. Proprietors FundProprietor Ratio: Total Asset

Continue.Year Proprietors FundTotal AssetProprietor Ratio20129339.2418584.150.50201311686.9620,322.320.58201411907.4424,855.320.48

Continue.ANALYSIS AND INTERPRETATION: The table shows fluctuation trend during the year. It was high in F.Y. 2013which indicates that company is less dependent on outside funds for working & company is quite solvent. In F.Y. 2014 it dipped by 21 % as compared to F.Y. 2008.

Debt-Equity Ratio: Higher the ratio less secured is the creditors, lower the ratio creditors enjoy higher degree of safety DebtDebt Equity Ratio: Equity

ContinueYear DebtEquityDebt-Equity Ratio20129339.245858.321.59201311686.964988.882.34201411907.447332.181.62

continue ANALYSIS AND INTERPRETATION: At early stage i.e. in F.Y. 2012 it was low at 1.59 times which further increased to 2.34 times in F.Y. 2013 and later on it further decreased to 1.62 times. The low ratio indicates that lenders contribution is lower than owners contribution. But in FY 2013 the lenders contribution is higher than owners contribution which indicates that Creditors are less secured than shareholders of the company.

Gross Profit RatioIt shows the operating efficiency of the business. It measures the efficiency of production as well as pricing.

Gross ProfitGross Profit Ratio = X100 Sales

ContinueYear G/PNet SalesGross Profit Ratio%2012872.373610.9524.1620131151.704419.8726.0620141193.437183.1016.61

Net Profit Ratio: It shows the overall efficiency of the business. Higher the ratio indicates higher efficiency of business and better utilization of total resources Net profit after taxNet Profit Ratio: X 100 Sales

ContinueYear N/PNet SalesNet Profit Ratio%2012801.453610.9522.1920131084.634419.8715.0120141138.887183.1015.85

Continue

Continue..ANALYS IS AND INTERPRETATION In FY 2012 & FY 2014 the G/P Ratio & Net Profit Ratio were increased simultaneously. There was slightly difference between them. But in FY 2013 the G/P increases at a faster rate as compared to Net profit. This indicates that operating expenses relative to sales have been increasing. The increasing expenses should be identified & controlled.

27

Return On Investment:It measures the overall performance of the company that is utilization of total resources and funds available with the company. EBT But AT Return On Investment: X100 Total Assets/ Liability

Continue..Year EBITTotal AssetsReturn On Investment Ratio (%)2012872.3718584.634.6920131151.7020322.325.6720141193.431193.434.80

Return On Net Worth It measures the productivity of shareholders funds. Higher the ratio indicates better utilization of shareholders funds or higher productivity of owners funds Net Profit After Tax Return On Net Worth: X100 Equity Shareholder Fund

ContinueYear PATNet WorthReturn On Net WorthRatio (%)2012801.459339.248.5820131084.6311686.969.2820141138.8811907.449.56

Other Ratio: Interest Coverage Ratio:-This ratio is used to test the firms Debt- Servicing Capacity. EBITInterest Coverage Ratio: Interest

ContinueYear EBITInterestInterest Coverage Ratio ( Rs.)2012872.37250.323.4920131151.70308.763.7320141193.43330.503.61

Continue. ANALYSIS AND INTERPRETATION: The Interest Coverage Ratio shows the number of times the interest charges are covered by funds that are ordinary available for their payment. The above chart shows relative constant fluctuation because it was Rs.3.49 in FY 2012 which further increased to Rs.3.73 in FY 2013 & 3.61 in FY 2014. Too high ratio indicates the firm is very conservative in using debt & that is not using credit to best advantage of shareholder. In R-INFRA the ratio is high in FY 2013 i.e. Rs. 3.73 crores.

FINDINGS

There is continuous decrease in Current Ratio. Thus, it is necessary to take corrective actions.The company can suffer the shortage of fund due to slow paying, doubtful & long duration outstanding debtors.The lenders contribution is higher than owners contribution which indicates that Creditors are less secured than shareholders of the company.The operating expenses relative to sales have been increasing.

ContinueProprietary ratio of the company fluctuates during the period of study. It shows the change in the value of reserves and surplus in the form of shareholders fund.R-INRA is far better in covering its fixed cost with the interest coverage ratio.The overall financial condition of R-INFRA is good.

CONCLUSION

The R-INFRAs overall position is at a good position. Particularly the current years position is well due to raise in the profit level from the last year position. It is better for the organization to diversify the funds to different sectors in the present market scenario.

Thank you