A COMPREHENSIVE PROJECT

on
TOPIC: FINANCIAL STATEMENT ANALYSIS OF
COLGATE PALMOLIVE INDIA LTD.”

SUBMITTED TO
Sardar Patel University, Vallabh Vidhyanagar,
for the award degree
Bachelor of business administration (BBA)
BBA SEMESTER VI

PREPARED BY:
STUDENT’S NAME: GAURAV P. VIRADIYA
SPU Exam Seat No:221

FACULTY GUIDE
Dr.PINKIBEN NENWANI

C.P. PATEL & F. H. SHAH COMMERCE COLLEGE,

N.S.Circle, Bhalej Road, Anand. -388001
APRIL-2023
 A COMPREHENSIVE PROJECT
ON
“FINANCIAL STATEMENT ANALYSIS OF
TATA STEEL LTD”

NAME : GAURAV PRAFULBHAI VIRADIYA

ROLL NO : 26
STD : TY BBA (GENERAL)
SUBJECT : COMPREHENSIVE PROJECT
ACADEMIC : 2022-23
COLLEGE : C.P.PATEL&F.H.SHAH
COMMERCE COLLEGE
 PREFACE

B.B.A standard for “bachelor of business administration” and it deals

with the aspects of management. B.B.A is the bachelor degree in the
Commerce and business administration

B.B.A programmed was introduced in the year 1980 in India for

first time. It was designed to give broad knowledge of company and
their interconnection while also allowing for specialization in a
particular are to student.

Comprehensive project is an important subject of third year B.B.A

programmer. It helps student to improve their practical knowledge.
The purpose of this subject is to enable the student for in depth
analysis of topic relating to his area of specialization and develop a
comprehensive understanding of the same. Under the scope of this
subject student are given a change to undertake a small research
project and it contributes to the overall development of a
management student.

I have also conducted a research on FINANCIAL STATEMENT

ANALYSIS OF TATA STEEL. And the experience was so much
exciting and helpful as I observed practical application of theories of
financial management.

Report writing is the most important part of the “comprehensive

project” here student are require to include all the figure related to the
research work that has been undertaken my them. I have prepared my
project according to the prescribed syllabus of Sardar Patel
university.
 ACKNOWLEDGMENT

I am student of T.Y.B.B.A in Anand CP PATEL AND FH SHAH

COLLEGE and I have successfully completed my comprehensive
project report. I am grateful to many person and authority for same
work.
First of all i would like to thank Sardar Patel university for farming
this subject for the T.Y.B.B.A student i am also thankful to
Dr. R.d.modi sir the principal of our college as the provides me an
opportunity for understanding such valuable research work
connecting this project. I would like to thanks Dr. Pinki Nenwani
mam for giving me valuable guidance for completing my research
work.
Because this subject boosts up the practical knowledge of student.
Last but not last; i also thank all the faculty member and student who
helped me in the preparation of this report.
 C P PATEL & F H SHAH COMMERCE COLLEGE,
ANAND
(Managed by Sardar Patel Education Trust)
Bhalej Road, Anand-388001
COMPREHENSIVE PROJECT
BBA SEMESTER V
EXAMINATION APRIL-2023

CERTIFICATE

Name of the Candidate: ARPIT A. PIPALAVA

University Exam Seat No: 221
Elective: Advanced Financial Management –II
Topic: FINANCIAL STATEMENT ANALYSIS OF COLGATE
PALMOLIVE INDIA LTD.”

The above candidate had undergone COMPREHENSIVE

PROJECT work as prescribed in the syllabus and prepared the report
under the guidance of the professors concerned.
Date:
Place: Anand
Faculty in-charge Principal
DR.R D MODI
 TABLES OF CONTENTS

CHAPTER CONTENTS
NO.
LIST OF TABLES

CHAPTER 1 INTRODUCTION

CHAPTER 2 REVIEW OF LITERATURE

CHAPTER 3 RESEARCH METHODOLOGY

CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

CHAPTER 5 FINDING & SUGGESTIUON

CHAPTER 6 CONCLUSION
 CHAPTER 1
INTRODUCTION
Introduction
There are so many industries contribute to economic development of
nation. The steel industry is often considered an indicator of
economic progress, because of the critical role played by steel in
infrastructural and overall economic development. The level of per
capital consumption of steel is an important determinant of socio-
economic development of country.

In India being a core sector, industry tracks overall economic growth

in long term. India is the fourth largest producer of steel in the world.
Indian steel sector enjoys advantage of domestic availability of raw
materials and cheap workers. Tata steel is among the top steel
producing company in the world having subsidiary and joint venture
throughout the world.
This research paper aims at analysing the financial performance of
Tata steel ltd using the frame work of ratio analysis. The basic
objective of the paper is evaluates and judge the performance of Tata
steel during the research period. To determine the firms efficiency the
analyst attempt to measure the firm’s solvency, liquidity, profitability
and other indicators in rational and normal way.

Industry Profile

The iron steel industries are among the most important industries in
India. During 2014 through 2016, India was the third largest producer
of raw steel. In 2019 India become the second largest producer in the
world after china and the largest producer of steel and iron in the
world. The industry produced 82.68 million tons of total finished
steel and 9.7 million tons of raw iron. Most iron and steel in India is
produced from iron ore. Policy of sector is governed by the Indian
ministry of steel, which concerns itself with coordination and
planning the growth and development of the iron and steel industry,
both in the public and private sectors; formulation of policy with
respect to production, pricing, distribution, import and export of iron
and steel, Ferro alloys and refractories; and the development of input
industries relating to iron ore, manganese ore, chrome ore and
refractories etc., required mainly by steel industry. Most of public
sector undertaking markets their steel through the steel authority of
India (SAIL). The Indian steel industry was delicensed and de-
controlled in 1991 and 1992 respective.
The Iron and Steel Industry: a global prospective
The iron and steel industry is a very complex sector which is
intrinsically linked with the world economy as a whole. Steel
products are needed by many industries, such as automotive,
construction, and other manufacturing sectors. The steel industry uses
significant amounts of raw materials (mainly iron ores, coal and
scrap) and energy, and is also a major source of environmental
releases such as (among others) emissions of dust, heavy metals,
sulphur dioxide, hydrochloric acid, hydrofluoric acid, polycyclic
aromatic hydrocarbons and persistent organic pollutants from sinter
plants and coke ovens; waste water from pollution; dust and waste
water from blast and basic oxygen furnaces; or emissions of filter
dust, slag dust, and inorganic and organic compounds from electric
arc furnaces (European Commission. 2011). Most raw materials are
located remote from the areas of highest steel demand, and so both
steel products and inputs are traded internationally and in large
quantities. This trade is carried out mostly by sea-going vessels, with
raw materials flowing from coal and ore-rich producing countries in
South America, Africa and Oceania to major producing areas in
Europe, North America, and the Far East, followed by shipments
through rail and inland waterways, and semi-finished and finished
steel products moving in the opposite direction. That has a particular
impact on supply and demand patterns, and consequently on prices.

The steel industry consists of some large firms that operate globally
and have a significant output, and many small firms that operate at a
lesser scale. Recently, some of those firms have consolidated into
large multinationals (such as ArcelorMittal, formed in 2006 by the
merger of Arcelor and Mittal Steel, Arcelor being the result of the
previous merger of Aceralia (ES), Usinor (FR), and Arbed (LX) in
2002, see section 2 for more details on the consolidation of the steel
industries). The industry has been the subject of oligopolistic
analyses since the 50s to date, either concentration index-based
(Herfindahl 1950; Lee 2011), or model-based (Warrell, Lundmark
2008). However, despite the recent consolidation trends towards
multinational companies, those analyses focus on specific countries
and regions. The aim of this paper is to provide an overview of the
iron and steel industry, focusing on steelmaking technologies and
international steel markets. The results of this paper will form the
basis for further long- and mid-term analyses of the development of
the global steel industry. To this purpose, section 1 describes how
steel is currently produced, section 2 shows the main characteristics
of the steel markets, and section 3 concludes with some
recommendations for further research.
History of Indian Steel Industry
The history of the Indian steel industry can be traced back to the year
1874, when Bengal Iron Works at Kulti near Asansol (West Bengal)
started producing iron. The beginning of modern steel industry can be
traced back to 1913, when commercial steel production was
commenced by TISCO. Thereafter, in 1918 IISCO was set up by a
British firm, Burn and Co. and till 1937 it produced pig iron only.
Subsequently, other prominent steel manufacturers, Mysore Iron and
Steel Works in 1923 and Steel Corporation of Bengal in 1937 came
into action.
However, World War I, early 20‟s decline in steel prices and
government protectionist measures depressed the Indian iron and
steel industry during British raj.
But in spite of that, Indian iron and steel industry continued its
progress at steady rate. In late 1920‟s, British authorities introduced
tariffs system to protect British and Indian steel, and also raised
barriers against import from other countries. To exclude the
indigenous newcomers effectively, British authorities divided the
Indian market in the ratio of 70: 30 between TISCO and British
producers. By 1939, TISCO was producing 75% of the steel
consumed in that time of Indian empire consisting of present day
India, Pakistan, Sri Lanka, Bangladesh and Burma.
In late 1930‟s price hike in iron and steel was recorded due to
European rearmament, as a result Indian pig iron export increased
and also Mysore Iron and Steel Works (set up by the maharaja of
Mysore, 1923 to produce pig iron) and the Steel Corporation of
Bengal (a subsidiary established by IISCO, 1937) emerged to directly
compete with TISCO in steel production. But the Steel Corporation
of
Bengal was re-absorbed into IISCO in the year 1953. The above three
companies gain profit due to British involvement in World War II.
The annual outcome which was 1 MT in 1939 rose to average of 1.4
MT during 1940-1945.
Growth Prospective of the Indian Steel Industry
On the back of sustained domestic demand, India’s steel industry
witnessed robust growth in the last 10-12 years. Since 2008,
production has gone up by 75% while domestic steel demand has
grown by around 80%. Steel-making capacity has also increased in
tandem, and the growth has been fairly organic. The Indian
government has always support the steel industry and introduced the
National steel policy in 2017, which envisions the growth trajectory
of the Indian steel till 2030-
31. The broad contours of the policy are as follows:
 Steel-making capacity is expected to reach 300 million tonnes
per annum by 2030-31.
 Crude steel production is expected to reach 225 million tonnes
by 203031, at 85% capacity utilization.
 Production of finished steel to reach 230 million tonnes,
assuming a yield loss of 10% for conversion of crude steel to
finished steel – that is , a conversion ratio of 90%.
 With 24 million tonnes of net exports, consumption is expected
to reach 206 million tonnes by 2030-31.
 As a result, per capita steel consumption is anticipated to rise to
160 kg.
 An additional investment of INR 10 lakh crore is envisaged.
While the National steel policy, 2017, is a vision document of Indian
government, it nevertheless emphasizes the growth potential of the
Indian steel industry. As per the data from joint plant committee, at
the end of 2018-19, India produced 110.9 million tonnes of crude
steel.
In order to reach 255 million tonnes of crude steel production by
2030-31, production needs to grow at a CAGR of about 7.2%.
This is easily achievable given that in 2018-19, crude steel
production grew by
7.6%. therefore, the growth potential that the government has charted
out in the
National steel policy, 2017,is I sync with the industry’s growth
trajectory.

Company profile
Tata Iron and Steel Company was founded by Jamshedji Tata and
established by Dorabji Tata, on 26 August 1907, as part of his
father’s Jamshedji Tata Group. By 1939 it operated the largest steel
plant in the British Empire. The company launched a major
modernization and expansion program in 1951. Later in 1958, the
program was upgraded to 2 million metric tonnes per annum (MTPA)
project by 1970, the company employed around 40,000 people at
Jamshedpur, with a further 20,000 in the neighbouring coal mines. In
1971 and 1979, there were unsuccessful attempts to nationalize the
company. In 1990, it started expansion plan and established its
subsidiary Tata Inc. in New York. The company changed its name
from TISCO to Tata Steel in 2005.Tata Steel on Thursday, 12
February 2015 announced buying three strip product services
Centre’s in Sweden, Finland and Norway from SSAB to strengthen
its offering in
Nordic region. The company, however, did not disclose value of the
transactions
Tata Steel Limited formerly Tata Iron and Steel Company Limited
(TISCO) is an Indian multinational steel-making company
headquartered in Mumbai, Maharashtra, India, and a subsidiary of the
Tata Group. It is one of the top steel producing companies globally
with annual crude steel deliveries of 27.5 million tones (in FY17),
and the second largest steel company in India (measured by domestic
production) with an annual capacity of 13 million tones after SAIL.
Tata Steel has manufacturing operations in 26 countries, including
Australia, China, India, the Netherlands, Singapore, Thailand and the
United Kingdom, and employs around 80,500 people. Its largest plant
located in Jamshedpur, Jharkhand. In 2007 Tata Steel acquired the
UK-based steel maker Corus. It was ranked 486th in the 2014
Fortune Global 500 ranking of the world's biggest corporations. It
was the seventh most valuable Indian brand of 2013 as per Brand
Finance.

Operations
Tata Steel is headquartered in Mumbai, Maharashtra, India and has
its marketing headquarters at the Tata Centre in Kolkata, West
Bengal. It has a presence in around 50 countries with manufacturing
operations in 26 countries including:
India, Malaysia, Vietnam, Thailand, UAE, Ivory Coast, Mozambique,
South Africa, Australia, United Kingdom, The Netherlands, France
and Canada. Tata Steel primarily serves customers in the
automotive, construction, consumer goods, engineering, packaging,
lifting and excavating, energy and power, aerospace, shipbuilding,
rail and defence and security sectors.

Vision
We aspire to be the global steel industry benchmark for value
creation and corporate citizenship.

Mission
Consistent with the vision and values of the founder Jamshedji’s
Tata, Tata Steel strives to strengthen India’s industrial base through
effective utilization of staff and materials. The means envisaged to
achieve this are cutting edge technology and high productivity,
consistent with modern management practices. Tata Steel recognizes
that while honesty and integrity are essential ingredients of a strong
and stable enterprise, profitability provides the main spark for
economic activity. Overall, the company seeks to scale the heights of
excellence in all it does it in an atmosphere free from fear, and
thereby reaffirms its faith in democratic values.
 CHAPTER 2
REVIEW OF LITERATURE
Conceptual Review

Company’s annual report is a comprehensive report or company’s

activity throughout the preceding year. Annual reports are intended to
give shareholders and other interested parties information about
company’s activity and financial performance. They may be
considered as grey literature. Grey literature means manifold
document type produced on all level of government, academics,
business and industry in print and electronic formats that are
protected my intellectual property rights of sufficient quality to be
collect and preserved by library holdings or institutional repositories.
Most jurisdictions requires companies to prepare and disclose annual
reports and many require the annual report to be filled at the
company’s listed in the stock exchange are also required to report at
more frequent intervals.
Accounting ratio or analysis is an important technique of analysis of
financial performance. It is most widely used technique of financial
performance. Ratio is first to developed to analysis and interprets
financial statement.

2.2 Empirical Literatures

Sneha Lata & Dr. Robin Anand (2017) they conducted financial
performance of Mahindra & Mahindra Ltd before merger and after
merger with the Korean company from the year 2007-2017. They
used tools such as ratio analysis, arithmetic mean, standard deviation
and t-test. Company’s profit margin has been pulled back after
merging that from 18% it went down to 13%.The merger made for
increasing profit has declined the value of business of Mahindra &
Mahindra Ltd and the reason they are stating are that sometimes
other merger took place in the recent years may be the reason for
decline.
Dr. A Ramya &Dr. S Kavitha (2017) they studied financial
performance of Maruti Suzuki Ltd from 2010-2015. Profitability
ratio activity ratio are used for the study. They found that gross profit
ratio, current ratio, asset turnover ratio, net profit turnover ratio all
declined when we reach 2014-2015. They also come to conclusion
that the calculation in the financial statement are prepared by desired
management and policies that it cannot produce complete picture
about its performance.
Imran Khan (2016) Here he studies analyse the financial
performance of Britannia from 2011-2012 to 2015-2016 and has used
ratio analysis as the tool for the same. Through his study he found
that sales, operating profit margin, net profit margin are in a
increasing trend and debt equity ratio and return on assets how
decrease. He also put up some suggestions like current asset should
be increased, debt capital should be increased.
Anupa Jayawardhana (2016) she studied on financial performance
of Adidas from the year 2010-2014. She uses tools like horizontal
analysis, trend analysis, vertical analysis financial ratio and key ratio.
He come to conclusion that they should reduce their operating
expenses and capital should be invested in productive asset.
Dr. M Ravichandran& M Venkat Subramanian (2016) studied on
Force Motors formerly known as Bajaj Tempo from 2010-2015.
They used ratio analysis, comparative financial statement analysis.
The company’s financial performance is good that it shows an
increase in reserve and surplus and decrease in borrowings. They
suggest that it can further improve by concentrates on its operating,
administrative and selling expenses and by reducing the expenses.
Krishnaveni M & Vidhya R(2015) They has selected 87 companies
out of 242 companies in capital line database to discuss the standard
current ratio of automobile industry is matched with factor and four
stages like engine parts, lamps, gears, and accessories with standard
norm. their study concludes that current and liquidity ratio of
automobile industry is matched with factor and four sectors but other
sectors have to improve the repaying capacity to strengthen the
financial aspects.
Anu B (2015) made an attempt to examine the relationship between
capital structure indicators, market price per share and also to test the

18
relationship between debt equity and market price per share of
selected companies. They study concludes that all three companies
support the hypothesis that there is relation between debt, equity and
MPS
Suragi Pradeepta Ketal (2014) undertook a study to forecast the
future trend of automobile industry. The study highlighted the 6
different experiments have been carried out for a period of 12 years
data to estimate values for the next 3 years. In each experiment graph
has been plotted using spreadsheet and then linear trend has been
drawn and expanded to calculate future values.
AnantLodha (2014) in his project studied on company accounts of
the year 2012, 2013. He uses tools like swot analysis, ratio analysis,
du-point analysis, cross sectional analysis and cash flow analysis.
And finally he come to a conclusion that company is depending on
owners fund rather than borrowed fund that its profits are increasing
in growing rate and its net income are 4% higher than its expenses.
Rapheal Nisha (2013) tries to evaluate the financial performance of
Indian tire industries. The study was conducted for a period 2013
to2012 to analyse the performance with financial indicators, sales
trend, export trend production trend etc. the result suggest the key to
success industry is to improve labour productivity and flexible and
capital efficiency
.

19
 CHAPTER 3
RESEARCH METHODOLOGY

20
MEANING
The research methodology is specific procedures or techniques to use
identify , Select, process And analyse information about topic.

DEFINATION

What is research methodology?

Research methodology simply refers to the practical “how” of any
given piece of research. More specifically, it’s about how a
researcher systematically designs a study to ensure Valid and reliable
results that address the research aims and objectives.

INTRODUCTION

Research Methodology – is a way to systematically solve a research

problem. It is a science Of studying how research is done
scientifically. Essentially it is the procedure by which the researchers
go about their work of describing, evaluating and predicting
phenomenon. It aims to give the work plan of research.

Generally, research is concerned with search for knowledge. It is a

systematic and scientific Search for Knowledge on a specific topic. It
is a called systematic because it involves a number Of steps like
identification .Of problem, developing working hypothesis,
collecting and analyzing Data and reaching at specific Conclusion-
and these all steps are required to be Performed in sequence.
Research has now become integral Part, not only of academic
pursuits But also of all areas of human activity. It is not only for
solving problems But also for increasing The knowledge.

OBJECTIVE

Well-defined objectives of research are an essential component of

successful Research. If you Want to drive all aspects of your research

21
methodology such as data collection, analysis And recommendation,
you need to lay down the objectives of research methodology. In
Other words, the objectives of research should address the underlying
purpose of investment and analysis. It should outline the steps you’d
take to achieve desirable outcomes. Research help Stay in focus in
our objective.

 To know profitability of the company.

 To assess liquidity position of the company.
 To assess solvency and debt equity position of the firm.

STATEMENT OF PROBLEM

Analysing financial performance is the process of evaluating the

common parts of financial statements to obtain a better understanding
of firm’s position and performance. Financial performance analysis
helps to evaluate past and current performance and financial position,
and to predict future performance.

The problem identified for the study is to find out the financial
analysis of the TATA STEEL LTD by analysing liquidity, solvency,
activity, and profitability position.

SOURCES OF DATA

There are main 2 type of data

1. Primary data
2.Secondary data

22
 For this project report required data are collected from the official
website of company, because We need company profit or loss
account details of their annual balance sheet which all are get from
Online mode.
Research method that involves using already existing data. Existing
data is summarized and collared to increase the overall effectiveness
of research. Secondary research includes research Published in
research reports and similar documents.

SAMPLE SIZE

Sample size is a research term used for defining the number of years.
This project is comparing and analysis of 5 year of period.

PERIOD OF STUDY
Period of study is the last 5 years from 2015-16 to 2019-2020

TOOL FOR ANALISING

• Ratio analysis
• Graph
• Chart

LIMITATION OF STUDY

• The study has been carried out for a period of 5 year only.

• Error in financial statement will reflected in the analysis.

• As we are analysis the performance of the company during

2016 to 2020 the accessibility of the banking data integration

23
is quite a problem, principally to collect banks annual report is
difficult.

24
 CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION

25
 FINANCIAL STATEMENT ANALYSIS INTRODUCTION
In financial statement analysis is that tool of financial analysis in
witch we create and highlight the significance relationship of
different items of financial statement. We also interpret that
relationship in simple words.
For example, an investor may be interested to know past earning
data with its relationship with company's investment. Two type of
financial statement analysis are very important. Once is horizontal
analysis and second is vertical analysis. In horizontal analysis, we
compare all items of balance sheet and profit and loss account with
previous years' balance sheet and profit and loss account' s items.
Financial statement analysis involves gaining an understanding of
an organisation financial situation by reviewing its financial
statement. This review involved identify the following items for a
company financial statements over a series of reporting.

MEANING

FINANCIAL STATEMENT ANALYSIS is the process of

reviewing and analysing a company financial statement to make
better economic decision. These statements include the income
statement, balance sheet, statement of cash flow, and a statement of
change in equity.
TRENDS. Create trend lines for key items in the financial statement
over multiple time period, to see how the company is performing.
Typical trend lines are for revenue. The gross margin, net profit,
cash, account receivable, and debt .
PROPORTION ANALYSIS. An array of ratio are available for
discerning the relationship between the size of various account in the
financial statement. For example, one can calculate a company quick
ratio to estimate its ability to pay its immediate liability, or its debt
to equity ratio to see if it has taken on too much dept.

26
 Financial statement analysis is an exceptionally powerful tool for a
variety of user of financial statement, each having different objective
in learning about financial circumstances of the entirety.

CONCEPT OF FINANCIAL STRUCTURE

The word 'structure', originated from the field of engineering, means

different parts of a building. Similarly, financial structure consists od
three elements namely assets, liability and capital.
FINANCIAL STRUCTURE refers to the way; the firm's assets are
financed. It is the entire left-hand side of the balance sheet which
represent all the long term and short term source of capital.
CAPITAL STRUCTURE refers to the mix of long term source of
funds such as debentures long term debt preference shares capital and
equity shares capital including reserves and surpluses. It is only a part
of financial structure. If short term liability are add in capital
structure, it becomes financial structure. Thus, capital structure refers
to that part of the financial structure which represent long term
sources.
To confine the real area of the term capital structure it is necessary to
distinguish it from the term ' assets structure' ASSETS STRUCTURE
refers to the' makeup' of total assets as represented by fixed assets
and current assets. It is right hand side of the balance sheet which
represent total capital employees in the business.
However if should be noted here, that gerstenber has used the term
capital structure and financial structure interchangeable. According to
him financial structure also refers to the make up of the permanent
capital of the firm.
Task of format financial structure involved the decision regarding
the type of security to be issued and the relative proportion of each
type of security namely shares debentures retained earnings etc. In
the total capitalization. Each corporate security has got its own
advantage.

27
Their is not a single capital structure witch is suitable to all types of
business. Whether or not, a capital structure suitable for a particular
business depends upon the circumstances and nature of business.

Liquidity Ratio
The term liquidity refers to firm’s ability to pay its current liability
out of its current asset. Liquidity ratios are used to measure the
liquidity position or short term financial position of firm. These ratios
are used to assess the short term debt paying ability of firm.
Important liquidity ratios are current ratios, quick ratios and super
quick ratio.
a) Current Ratio
Current ratio is one of the oldest of all financial ratios. It was first
used in 1891. Current ratio is defined as the ratio of current asset to
current liabilities. It shows the relationship between total current
asset and total current liabilities.
Current ratio is also called working capital ratio or banker’s ratio.
Generally a current ratio of 2:1 is considered satisfactory or ideal. It
is calculated as follows

Current ratio =

b) Quick ratio
Quick ratio is the ratio of liquidity asset to current liability. It is the
measure of instant ability of the business enterprise. It is also called
acid test ratio. It is called so because the ratio is calculated to
eliminate all possible liquid elements from current asset. Ratio 1:1 is
considered ideal. It is computed as follows

Quick Ratio =

28
c) Super quick Ratio
It is the ratio which shows the relationship between the absolute
liquid asset and current liability. It is also called absolute liquid ratio.
Absolute liquid asset take into account cash in hand, cash at bank and
marketable securities. The most favorable and optimum value at this
ratio should be 0.5:1. It is calculated as follows

Super quick ratio =

2.1.2 Solvency ratio
Solvency refers to the ability of a firm to pay its outside liabilities
both short term and long term. Solvency ratios are used to analyze
long term financial position of business. In other words these ratios
are used to analyze the capital structure of firm. Important solvency
ratios are debt equity ratio, proprietary ratio, leverage ratio etc.

a) Debt Equity Ratio

Debt equity ratio is most commonly used ratio to test solvency of a
firm. This ratio indicates the relative proportion of debt and equity in
financing the asset of the firm. In shot it expresses the relationship
between the external equity and internal equity of company.
Sometimes it’s referred as security ratio. The formulae used is

Debt Equity Ratio =

b) Proprietary ratio
Proprietary ratio establishes the relationship between shareholders
fund and total asset. The ratio shows how much funds have been
contributed by shareholders in total asset by firm. It is also called net
worth ratio. Generally
0.5:1 is considered as ideal.

Proprietary Ratio =

29
c) Leverage Ratio
The ratio expresses the relationship between total asset and liability
of a company. It measures the solvency of business. This ratio is also
called solvency ratio, ratio of total asset to total debt. Higher
solvency ratio indicates financial position of a business is strong. A
lower solvency ratio indicates financial position of business is weak.
The following formula is used to compute solvency ratio

Leverage ratio =

Activity ratio
Activity ratios show how effectively a firm uses its available
resources or assets. This ratio indicates efficiency in asset
management. In other words, this ratio indicates the speed with
which the business resources are turned over or converted into cash.
Higher turnover ratio means better use of resources and lower
turnover ratios means worst use of resources. Important turnover
ratios are inventory turnover ratio, working capital turnover ratio and
fixed asset turnover ratio.

a) Inventory turnover ratio

This ratio show the relationship between costs of goods sold and
average inventory or stock. It is also called merchandise turnover
ratio. It is obtained by dividing cost of goods sold by average stock of
company. It indicates number of times stock is turn over or converted
in to cash. Generally ratio of 8 times is considered as satisfactory.
Stock turnover ratio is computed by the following formula

Stock turnover ratio

30
b) Working capital turnover ratio

Working capital offer to the ratio with current asset will change with
the change in sales of a company. This means working capital is
related with the sales. The relationship between sales and working
capital is called working capital turnover ratio. This ratio shows how
many times working capital is rotated to generate sales. Standard
working capital turnover ratio is 7 or 8 times. It is calculated as
follows

Working capital turnover ratio

c) Fixed asset turnover ratio

Fixed asset explains the purchase of fixed asset for the business.
Without fixed asset it cannot make sale and profit. These sales
depend on how fixed assets are utilized in the business for knowing
whether fixed assets are efficiently utilized or not fixed asset turnover
is used. Fixed asset turnover establishes the relationship between net
sales and fixed asset ratio. Higher the ratio indicates better utilization
and lower ratio indicates lower utilization of fixed assets. It is
computed as follows

Fixed asset turnover ratio =

Profitability ratio
The ultimate aim of a business enterprise is to earn profit. Profit is
the engine that drives a business enterprise or a company. Firm
should earn profit to survive and grow for a long period of time. To
the management profit is measure of efficiency and control of
business. Profitability refers to ability of a firm’s income.
Profitability can be easily measured by profitability ratio. The
important profitability ratios are gross profit ratio, net profit ratio,
operating profit ratio, return on investment and return on
shareholders fund.

31
a) Gross profit ratio

It is most common type of profitability ratio based on sales. Basic

component of gross profit ratio are gross profit and net sales. The
main objectives of gross profit ratio are to measure the efficiency
with which a firm produces its product. The ideal or standard form of
gross profit ratio is 20% to 25%. It is calculated as follows

Gross profit ratio

b) Operating profit ratio

Operating profit explains the relationship between operating profit

and net sales. Operating profit means profit from normal business
operations. It is the profit before adjusting non-operating expenses
and non-operating income. It measures the operational efficiency of a
company. Operating profit can be ascertained as follows

Operating profit ratio

c) Net profit ratio

Net profit ratio is ratio of net profit earned by the business and its net
sales. It measures overall profitability. Net profit ratio indicates the
efficiency as well as the profitability of the business. It determines
the return to the owner of the business. The ratio indicates how much
of sales are left after meeting all expenses of the business. Ideal form
of net profit ratio is 5% to 10%. It is calculated as follows

Net profit ratio =

32
d) Return on investment

It is a profitability ratio based on investment. When a firm invests

money in the business, it naturally expects return from the
investment. Therefore the firm wants to know how much profit is
earned from its investment. It establishes the relationship between
profit or return and investment. It is also called accounting ratio of
return. The standard return on investment ratio is 15%. It is
calculated as follows

ROI =

e) Return on shareholders fund

It is ratio of net profit to shareholders fund or net worth. It measures

the profitability from shareholders point of view. It is profitability
ratio based on investment. This ratio is also called the mother of all
ratios. This ratio is perhaps most important ratio because it measures
the return that is earned towards the owner’s capital. It is computed
as below

Return on shareholders fund =

33
CURRENT RATIO

Current ratio

Year Current asset Current liability Ratio

2016-17 45791.96 47953.97 0.95:1
2017-18 50935.03 50341.05 1.01:1
2018-19 67877.16 55661.41 1.22:1
2019-20 58990.98 61034.13 0.96:1
2020-21 58732.72 61660.91 0.95:1

Generally current ratio of 2:1 is considered as standard. From table it

is clear that it is the company is fails to attain the standard ratio.
Current ratio from 2016-17 to 2020-21 is fluctuating year by year.

Current Ratio
1.4

1.2

0.8

0.6

0.4

0.2

0
2005-16 2016-17 2017-18 2018-19 2019-20

34
QUICK RATIO

Quick ratio =
Quick asset = current asset-inventory

Year Quick asset Current liability Ratio

2016-17 25778.63 47953.97 0.54:1
2017-18 26131.21 50341.05 0.52:1
2018-19 39546.12 55661.41 0.71:1
2019-20 27334.88 61034.13 0.45:1
2020-21 27664 61660.91 0.45:1

Generally Quick ratio of 1:1 is considered as satisfactory. From table

it is clear that quick ratio is less than 1 which means financial
position of the company is unsound. So the company needs to
increase the liquid asset to attain standard ratio

Quick Ratio
0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2015-16 2016-17 2017-18 2018-19 2019-20

35
SUPER QUICK RATIO

Super quick ratio =

Super quick asset = cash + short term investment

Year Super Quick asset Current liability Ratio

2016-2017 10849.89 47953.97 0.23:1
2017-2018 10594.18 50341.05 0.21:1
2018-2019 22846.82 55661.41 0.41:1
2019-2020 5866.23 61034.13 0.09:1
2020-21 11486.59 61660.91 0.19:1

Generally super quick ratio of 0.5:1 is considered as ideal. From table

it is clear that company is not met the ideal ratio in any of the years
from 2016-17 to 2020-21. The Company does not keep much of
super quick asset to pay off its super quick liabilities

Super Quick Ratio

0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2015-16 2016-17 2017-18 2018-19 2019-20

36
 DEBT EQUITY RATIO

Debt equity Ratio =

Year Debt Equity Ratio

2016-2017 80594.9 41457.55 1.94
2017-2018 82350.37 35544.31 2.32
2018-2019 88674.08 58595.60 1.51
2019-2020 91144.81 66650.08 1.37
2020-2021 113289.95 71301.30 1.58

Generally debt equity ratio of 1:1 is considered standard. From the

table it is clear that company is above standard shows that company
tends to use more borrowed fund than owners fund.

Debt Equity Ratio

2.5

1.5

0.5

0
2015-16 2016-17 2017-18 2018-19 2019-20

37
 PROPRIETARY RATIO

Proprietary ratio=

Year Shareholders fund Total asset ratio

2016-2017 41457.55 177511.44 0.23:1
2017-2018 35544.31 173333.24 0.20:1
2018-2019 58595.60 209757.94 0.28:1
2019-2020 66650.08 233582.39 0.29:1
2020-2021 71301.30 250419.45 0.28:1

Generally proprietary ratio of 0.5:1 or above (or 50% or more) is

considered as ideal. A lower ratio indicates that the firm is highly
dependent on creditors for its working capital. Therefore lower
proprietary ratio indicate unsound financial position

Proprietary Ratio
0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2015-16 2016-17 2017-18 2018-19 2019-20

38
 SOLVENCY RATIO

Solvency ratio =

Year Total asset Total debt Ratio

2016-2017 177511.44 80594.9 2.20
2017-2018 173333.24 82350.37 2.10
2018-2019 209757.94 88674.08 2.36
2019-2020 233582.39 91144.81 2.56
2020-2021 250419.45 113289.95 2.21

Generally, solvency ratio of 1:1 is considered as ideal.it is clear that

leverage ratio is above standard this means higher degree of
solvency. That indicate company is solvent because assets are
sufficiently more than liability of company.

Solvency Ratio
3

2.5

1.5

0.5

0
2015-16 2016-17 2017-18 2018-19 2019-20

39
STOCK TURNOVER RATIO

Stock turnover ratio

or
=net sales/inventory

Year. Net sales Inventory Ratio

2016-2017 106339.92 20013.33 5.31
2017-2018 24803.82 24803.82 4.53
2018-2019 28331.04 28331.04 4.66
2019-2020 31656.10 31656.10 4.98
2020-2021 31068.72 31068.72 4.50

Generally stock turnover ratio of 8 times is considered as ideal. Table

shows that stock turnover ratio is lower than the standard in every
year. Which means companies inventory management or inventory
policy is not better.

Inventory turn over ratio

5.4

5.2

4.8

4.6

4.4

4.2

4
2015-16 2016-17 2017-18 2018-19 2019-20

40
WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio =

Working capital = current asset-current liability

Year Net sales Working capital Ratio

2016-2017 106339.92 -2162.01 -49.18
2017-2018 112299.42 593.98 189.06
2018-2019 132155.75 12215.75 10.81
2019-2020 157668.78 -2043.15 -77.16
2020-2021 139816.65 -2928.19 -47.74

Generally, a working capital turnover ratio is 7 or 8 times is

considered as ideal. From table it is clear that working capital
turnover ratio shows a negative sign. Which means it shows negative
figures in each year expect 2017-18 and 2018-19. It indicates under
trading and working capital is not utilized in generating sales.

Working Capital Turn Over Ratio

250

200

150

100

50

0
2015-16 2016-17 2017-18 2018-19 2019-20
-50

-100

41
FIXED ASSET TURNOVER RATIO

Fixed asset turnover ratio =

Table 4.9
Year Net sales Fixed asset Ratio
2016-2017 106339.92 104128.29 1.02
2017-2018 112299.42 104295.95 1.08
2018-2019 132156.75 108619.85 1.21
2019-2020 157668.78 139086.50 1.13
2020-2021 139816.65 149992.96 0.93

Generally Fixed Asset turnover ratio of 4 times is considered as

satisfactory. From the table it is clear that fixed asset turnover ratio
is below standard.

Fixed Asset Turn Over Ratio

1.4

1.2

0.8

0.6

0.4

0.2

0
2015-16 2016-17 2017-18 2018-19 2019-20

42
PROFITABILITY RATIOS
OPERATING QUICK RATIO

Operating profit ratio=

Year Operating profit Net sales Ratio

2016-2017 7968.33 106339.92 7.49
2017-2018 17007.82 112299.42 15.14
2018-2019 21890.53 132155.75 16.56
2019-2020 29383.34 157668.78 18.64
2020-2021 17463.06 139816.65 12.49
Generally Standard form of operating profit ratio is 15 %. The
operating profit ratio is showing an increasing trend till the year
2019-20, then it is showing a decreasing trend. However the
operating profit ratio of the firm is reaching above the ideal ratio for
the year’s 2017-18. High operating profit ratio indicates profits
generated from operations are better compared with the total revenue
generated from sales of the company.

OPERATING QUICK RATIO

20
18
16
14
12
10
8
6
4
2
0
2016-17 2017-18 2018-19 2019-20 2020-21

43
NET PROFIT RATIO

Net profit ratio

Year Net profit Net sales Ratio

2016-2017 - - -
2017-2018 - - -
2018-2019 13260.23 132155.75 10.03
2019-2020 9993.63 157668.78 6.34
2020-2021 1368.57 139816.65 0.97

Generally Ideal form of net profit ratio is 10%. From table shows
that the company only meet standard ratio at 2018-19.which means in
other years company is under pricing. Also shows lower profitability
and lower return to the shareholders of the company.net profit ratio
from 2019-20 is decreasing year by year.

NET PROFIT RATIO

12

10

0
2016-17 2017-18 2018-19 2019-20 2020-12

44
RETURN ON INVESTMENT

Return on investment

Capital employed = fixed asset + current asset – current liability

Year PBIT Capital employed Ratio

2016-2017 6126.52 101966.28 6
2017-2018 5356.93 104889.93 5.10
2018-2019 6638.25 120835.6 5.49
2019-2020 16227.25 137043.35 11.84
2020-2021 6610.98 147064.77 4.49

Generally, return on investment of 15% is considered as standard.

The figure shows that firm is not having sufficient return on capital
employed. it shows that there is inefficient use of capital employed.

RETURN ON INVESTMENT
14

12

10

0
2016-17 2017-18 2018-19 2019-20 2020-21

45
RETURN ON SHAREHOLDERS FUND

Return on shareholders fund

Year Net profit after tax Shareholders fund Ratio

2016-2017 4900.95 41457.55 11.82

2017-2018 3444.55 35544.31 9.96
2018-2019 4169.55 58595.60 7.11
2019-2020 10533.19 66650.08 15.80
2020-2021 6743.80 71301.30 9.45

Generally ideal form of return on shareholders’ fund is 15%. From

table it is clear that company’s return on shareholders fund in all the
years is below the standard ratio except in the year 2019-20.it shows
that return on shareholders fund is not satisfactory.

RETURN ON SHAREHOLDERS FUND

18

16

14

12

10

0
2016-17 2017-18 2018-19 2019-20 2020-21

46
 CHAPTER 5
FINDING & SUGGESTION

47
FINDINGS
• Current ratio is below standard and fluctuating year by year.
• Quick ratio is also below standard hence the firm will face
difficulties in pay off its liabilities in correct time
• Super quick ratio is also below standard so short term liquidity
position very poor
• Debt equity ratio is above the standard, it indicate that the
extent to which company depends on its outsiders for its
existence.
• Proprietary ratio is below standard.
• Solvency ratio shows this company is strong because assets are
sufficiently more than liabilities.
• Stock turnover ratio is below standard hence it indicates the
company’s stock cannot converted in to cash very quickly
• Working capital turnover ratio is fluctuating and it indicates
that working capital is not effectively utilized in generating
sales.
• Fixed asset turnover ratio is below standard which means
worse utilization of fixed asset in generating sales.
• Operating profit ratio shows better operational efficiency of the
company.
• Net profit ratio shows decreasing trend means decreasing
profitability.
• Return on investment is below the standard that means there
is inefficient use of capital employed.
• Return on shareholders fund is not satisfactory.

48
SUGGESTION
• It will be better if company uses its current assets effectively to
improve liquidity ratio and liquidity position.
• It is advisable to increase quick assets to maintain a standard
ratio.
• Company must try to use working capital effectively for
generating sales.
• Company has to increase net sales for increasing profitability of
the entity and higher profitability will attract shareholders.
• They should give more importance while they are investing
money in different securities.
• Improve Return on shareholder fund ratio.
• Also improve fixed asset turn over ratio to fix asset in
generating sales.

49
CHAPTER 6

CONCLUSION

50
CONCLUSION

The study mainly concentrates on the analysis of financial

performance and soundness of the firm. The study is conducted to
analyses the liquidity solvency and profitability of the firm. From the
study of financial performance it can be concluded that Tata steel ltd
has satisfactory position in its operating profit but the firm needs to
improve its liquidity and solvency. If the firm continues to perform
with more efficiency and determination it can achieve greater success
in near future.

Efficient management of finance is very important for the success of

an enterprise. Term financial performance is very dynamic term. The
subject matter of financial performance has been changing very
rapidly. In present time greater importance is given to financial
performance.

So, here an attempt is made by me to analyze the financial

performance of TATA STEEL LTD. While analyzing the financial
performance it can be concluded that TATA Steel is performing good
in terms of Quick assets, better inventory management, management

51
of fixed assets, gross profit, return on capital employed and dividend
payout ratio.

BIBLIOGRAPHY

52
Books:
• VINOD, A. (2019). ACCOUNTING FOR MANAGEMENT (9th ed.,
pp.47-136). CALICUT: CALICUT UNIVERSITY.
• Jain, S. (2008). COST AND MANAGEMENT
ACCOUNTING. Ludhina: kalyani Publishers.
• Dr S N Maheswari , Cost and Management Accounting , New
Delhi
• FINANCIAL RATIO ANALYSIS ,CHANDRA SEKHER

Journals:

• Lata, S., & Anand, D. (2017). In International Conference on

Recent
Innovation in Science, Agricultural, Engineering and
Management ,Punjab.

• A Study on Financial Analysis of Maruti Suzuki India Limited

Company.(2017). IOSR Journal of Business and Management,
19(7), 93101.
• Khan, I. (2016). Britannia analysis of financial performance.
Retrieved from

53
 https://www.slideshare.net/ImranKhan994/britannia-analysis-
offinancial- performance

• Jayawardhana, A. (2016). Financial Performance Analysis of

Adidas AG. European Journal of Business And Management,
8(11).
• Subramanian,M(2016). A study on Financial Performance
Analysis of Force Motors Limited. International Journal For
innovative Research In Science And Technology

Websites:

• www.moneycontrol.com

• www.tatasteel.com

54
PROFIT & LOSS ACCOUNT MAR 21 MAR 20 MAR 19 MAR 18 MAR 17
12 MTHS 12 MTHS 12 MTHS 12 MTHS 12 MTHS

REVENUE FROM 82828.16 58,815.57 68,923.36 59,453.23 52564.93

OPERATION (GROSS)

LESS: SERVISE TAX 0.00 0.00 0.21 902.55 5267.94

REVENUE FROM
OPERATION(NET) 82828.16 58815.57 68923.15 58550.68 472966.99
TOTAL OPERATING 84132.16 60435.97 70610.71 59616.82 47993.02
REVENUE
OTHER INCOME 755.11 404.12 2405.08 763.66 414.46

TOTAL REVENUE 84888.03 60840.09 73015.79 60380.48 48407.48

EXPENCE

COST OF MATERIAL 20757.07 17407.03 19840.29 16877.63 12496.78

PURCHASE OF STOCK IN 1688.84 1563.10 1807..85 647.21 881.18

TRADE
OPERATING & DIRECT 0.00 0.00 0.00 0.00 0.00
EXPENCE
CHANEGES IN INVENTORIES 2176.56 -564.40 -554.33 545.36 -1329.65
OF FG,WIP& STOKE IN
TRADE
EMPLOY BENEFIT EXPENCE 5741.94 5036.62 5131.06 4828.85 4605.13

FINANCE COSTS 4541.02 3031.01 2823.58 2810.62 2688.55

55
DEPRICIATION & 5469.26 3920.12 3802.96 3727.46 3541.55
AMORTISATION EXP

OTHER EXP 27966.07 23803.18 24622.60 21275.47 19681.15

TOTAL EXP 67019.49 52525.63 56674.31 50375.94 42347.17

PROFIT/LOSS BEFORE EXTRA 17868.54 8314.56 16341.48 10004.54 6060.31

ORDINARY ITEM& TAX
EXCEPIONAL ITEM 741.30 -1703.58 -114.23 -3366.29 -703.38

POFIT/LOSS BEFORE TAX 18609.84 6610.98 16227.25 6638.25 5356.93

CORRENT TAX -1329.78 1787.95 6297.11 1586.78 1400.54

LESS:MAT CREDIT 0.00 0.00 0.00 0.00 0.00

ENTITLEMENT
DEFERRED TAX 2861.65 -1920.77 -603.05 881.92 511.84

TAX FOR EARLYER YEAR 0.00 0.00 0.00 0.00 0.00

TOTAL TAX EXP 1531.87 -132.82 5694.06 2468.70 1912.38

PROFIT & LOSS AFTER TAX 17077.97 6743.80 10533.19 4169.55 3444.55
& BEFORE EXTRA
ORDINARY ITEMS
PROFIT & LOSS FROM 17077.97 6743.80 10533.19 4169.55 3444.55
CONTINUING OPERATION
POFIT & LOSS FOR PERIOD 17077.97 6743.80 10533.19 4167.55 3444.55

56
EARNING PER SHARE

BASIC EPS (Rs) 145.00 57.11 90.41 38.57 31.74

DILUTED (Rs) 149.99 57.11 90.41 38.57 31.74

DIVIDEND AND
DIVIDEND PERSENTAGE

EQUITY SHARE DIVIDEND 1145.92 1489.67 1145.92 1237.35 1043.07

TAX ON DIVIDEND 0.00 297.71 224.86 95.71 55.65

EQUITY DIVIDEND RATE 250.00 100.00 130.00 100.00 100.00

(%)

57