1

PROJECT REPORT ON
CORPORATE PUBLISHED ANNUAL
REPORT
IN THE SEATUBJECT OF
ADVANCE FINANCIAL
ACCOUNTING
SUBMITTED

BY

SHRIKANT SAHU
IN THE ACADEMIC YEAR 2015-16
UNIVERCITY OF MUMBAI
UNDER THE GUIDANCE
Prof. RAJIV MISHRA
SUBMITTED FOR QUALIFYING IN
M.COM SEMESTER I
EXAMINATION
V.K KRISHANA MENON COLLAGE
OF
COMMERCE AND ECONOMICS &
SHARAD

SHANKAR DIGHE COLLEGE OF

SCIENCE
BHANDUP(EAST),
MUMBAI-400042

CERTIFICATE
This is to certified that project in the subject of Advance
Financial Accounting undertaken by Mr. Rajiv Mishra ,
Semester

Mcom

Examination (Academic Year 2015-16 ) has not

been submitted for any other examination and does not form
part of any courses under gone by the candidate . It is
further certified that he have completed all required phases of
the project.

-----------------------Internal Examiner

-----------------------------------------------------External Examiner
Principal

---------------------------College Seal

DECLARATION
I , SHRIKANT SAHU of M.COM Semester-I , Roll No .
48.
Hereby declare that the Project Title CORPORATE PUBLISHED

ANNUAL REPORT , submitted by me , In the subject of

ADVANCE FINANCIAL ACCOUMTING during the year 2015-16 is
based on original work Carried by me Under the guidance and
supervision of Prof . Rajiv Mishra.

I further State that this work is original and not submitted

in any other university for any other examination

SHRIKANT SAHU
ROLL .NO 48
-------------------(Signature)

ACKNOWLEDGEMENT
This Project on is a result of co- operative , hard
work and good
Wishes of many people . It Would not have been
possible without the
Kind support and help of many individuals and would
like to extend my
Sincere thanks to all of them.

My sincere thanks to V .K KRISHNA MENON

COLLEGE for their
guidance
providing

and constant supervision as well as

for

necessary
for their

information regarding the project & also

support in completing the project.

My special gratitude and thanks to Mr. P.A Menon

chairman of
V. K KRISHANA MENON COLLEGE , Mrs. SAROJ
PHANDNIS The
Principal for their constant guidance and giving me an
Opportunity
to do a project work.

My sincere thanks also goes to Prof RAJIV MISHRA

, Project

guide for 100% attention throughout the project

and his kind cooperation and encouragement which helped me in
completion of
this project.

CONTENTS
CHAPTER 1
INTRODUCTION
OBJECTIVE OF THE STUDY
NEED AND IMPORTANCE OF STUDY
SOURCE OF THE DATA
METHODOLOGY
SCOPE OF THE STUDY
LIMITATIONS OF THE STUDY
CHAPTER 2
COMPANY PROFILE
CHAPTER 3
DATA ANALYSIS AND INTERPRETATION
CHAPTER 4

FINDINGS
CONCLUSION AND SUGGESTIONS
BIBILOGRAPHY

Annual Report
INTRODUCTION

Annual reports are formal financial statements that are

published yearly and sent to company stockholders and various
other interested parties. The reports assess the year's
operations and discuss the companies' view of the upcoming
year and the companies' place and prospects. Both for-profit
and not-for-profit organizations produce annual reports.
Annual reports have been a Securities and Exchange
Commission (SEC) requirement for businesses owned by the
public since 1934. Companies meet this requirement in many
ways. At its most basic, an annual report includes:

General description of the industry or industries in which

the company is involved.

Audited statements of income, financial position, cash

flow, and notes to the statements providing details for various
line items.

A management's discussion and analysis (MD&A) of the

business's financial condition and the results that the company
has posted over the previous two years.

A brief description of the company's business in the most

recent year.

Information related to the company's various business

segments.

Listing of the company's directors and executive officers,

as well as their principal occupations, and, if a director, the
principal business of the company that employs him or her.

Market price of the company's stock and dividends paid.

Some companies provide only this minimum amount of
information. Annual reports of this type usually are only a few
pages in length and produced in an inexpensive fashion. The
final product often closely resembles a photocopied document.
For these companies, the primary purpose of an annual report
is simply to meet legal requirements.

Objectives of the study

To calculate the important financial ratio of the organisation as
a part of the ratio analysis thereby to understand the changes
the needs and trends in the firms financial position.
To assess the performance of B.H.E.L on the basis of earnings
and also to evaluate the solvency position of the company.
To identify the financial strengths and weaknesses of the
organization.
To give the appropriate suggestions to the investors. To help
them to make more informed decisions.
Need and importance of study
Financial performance of an enterprise will affect other types of performance
and also the productivity of finances is good, the productivity of men and
material would be good.
Moreover the study of non-economic and qualitative performance, which
studies the non economic factors like customer satisfaction, citizen satisfaction
etc.
Source of data
The data is collected from the following sources.
Three year annual report of BHEL from 2007-2010
Interaction with the related finance department.

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METHODOLOGY
The study carried with the cooperation of the management who
permitted to carry on the study and provided the requisite data collected from
the following sources.
Primary data
Secondary data
PRIMARY DATA
The information collected directly without any reference is primary
data. In the study it is mainly through conversation with concerned officers or
staff members either individually or collectively. The data includes:
1. Conducting personal interview with the officers of the company.
2. Individual observation and inferences.
3. From the people who are directly involved with the transaction of
the firm.
Secondary data
Study has been taken from secondary sources i.e. published annual
reports of the company editing, classifying and tabulation of the financial data.
For this purpose performance data of BHEL for the years 2007-2008 to 20092010 has been used.

11

Scope of study
The scope and period of the study is being restricted to the following.
1. The scope is limited to the operations of the BHEL.
2. The information is obtained from the primary and secondary data was
limited to the BHEL.
3. The profit and loss, the balance sheet was on the last six years.
4. Comparison analysis was done by comparison of sister units.

Limitations of study
1. The study is confined to a period of last 4 years.
2. As most of the data is from the secondary sources, hence the accuracy is
limited.

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The main purpose and objectives of annual reports

The purpose of the annual report is to inform shareholders as to
the financial status of a company. Coy and Pratt (1998)
conclude that the annual report serve as aCOMMUNICATION
tool and determines the reality of the organization in the public
mind. However for this reality to be recognized, it depends on
the quality of information provided in the annual reports.
Annual reports are extremely significant sources of company
information (Stanga,1976). Furthermore studies by Chang and
Most (1985) and Hawkins and Hawkins (1985) concluded that
even though individual investors do not find the annual report
useful in decision making and do not meet their information
needs, still the annual report is the document used as reference
for investors and managers. Though annual report is not the
only source of information for a company, as in New Zealand
newspapers and magazines were also found as a source of
information, nevertheless the annual report is considered to be
an important resource due to its large reporting and availability.
Therefore the fundamental aims of preparing financial reports
are for decision making and accountability.

Accountability
Annual reports are considered as the main accountability
mechanism. In 1975, the American Accounting Association
(AAA) defined the purpose of accounting as "to provide
information for making useful economic decisions and which, if
provided will increase social welfare". Thus annual report can
be one tool forCOMMUNICATING economic information to allow
update decisions and judgements by users.
According to Stanton and Stanton (2002) the annual report
"uses
the
tools
of
management,MARKETING and
communication theory to construct a picture of the
organization". Thus, annual report is a tool for a firm to classify
its accountability for managing and controlling business
activities. Moreover, a number of researchers (Winfield, 1978;

13

Chang and Most, 1985; Boyne and Law, 1991), have noted the
importance of annual reports as a 'vehicle' releasing
accountability.
Furthermore accountability is involved in the monitoring,
evaluation and control of organizational agents to make sure
that they perform in the welfare of shareholders and other
stakeholders (Keasey and wright,1993). It can be classified as a
requirement for one party to another party for its performance
over certain time. In short, accountability is simply a must to
report upon as it gives an extent to which an entity has met its
responsibilities towards its owners and to fulfill this
role,FINANCIAL reports should reflect the nature and extent of
performance that are related to the entity. Moreover
accountability requires broadening the capacity of disclosure
beyond the financial focus to ensure that adequate and
meaningful qualitative information is also contained in the
annual report.
Besides, the owners of the companies, the shareholders, have a
right to know what actions and what developments are taking
place within the organization. Thus, the organizations are
accountable to its shareholders and the annual report plays a
great role in conveying the firm's performances to them.

Decision making
As per IAS 1, the financial statements' objective is to offer and
inform the performance and the evolution of the financial
situation, that could be helpful to a wide range of potential
users for evaluating and making economic decisions .It is
further claimed that, when the general purpose of financial
reports meet this objective, they will also enable entities to
discharge accountability.
Consequently the first aim of the Trueblood Report is the
provision of information for economic decision making is being
interpreted as being the primary function of financial
statements. Hence financial reports should seek to satisfy the
information needs of users. In 1989, the Solomons Report,
commissioned by the ICAEW (1989) reaffirmed that decision
usefulness is the fundamental aim of financial reporting.

14

Financial reports should provide information that will be

accommodating to several users who have interest in financial
performance and making decisions about investing and
lending.
Gray (1994, pp9), have proved that accounting literature is
presently dominated by the idea of decision usefulness which
mean that financial reporting will have to be maintained in
order to meet the need of all users of accounting information. It
is seen that nowadays there has been a rise in the users of
accounting information for decision making hence objectives of
annual reports are regarded as the major means by which
companies distribute information to the external users (Firth,
1979).

OBJECTIVES OF ANNUAL REPORTS

According to FASB the main goals of annual reports can be
classified
in
three
parts:
Objectives for making potential economic decisions;
Objective of providing information about theFINANCIAL
position, performance and changes in financial position of
an entity;
Objectives for presenting and disclosing of information.
Hence it is the attributes of the qualitative characteristics that
make accounting information to be useful in annual reports.
CONTENTS OF FINANCIAL REPORT

Financial statements primarily comprise two basic statements:

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1. The position statements of the balance sheet.

2. The income statements or the profit and loss account.
Accounting principles specify that a complete set of financial statements must
include:
1. A balance sheet
2. An income statement
3. A statement of change in owners accounts.
4. A statement of changes in financial position.
BALANCE SHEET:
The balance sheet is one of the important statements
depicting the financial strength of concern. It shows the properties that are
owned on one hand and on the other hand the sources of the assets owned by the
concern and all the liabilities and claims it owes to owners and outsiders. The
balance sheet is prepared on a particular date. The right hand shows properties
and assets and the left hand shows liabilities.
INCOME STATEMENT OR PROFIT AND LOSS ACCOUNT:
Income statement is prepared to determine the operation position of the
concern. It is a statement of revenues. The income statement may be prepared in
the form of manufacturing account to find out the cost of the production in the
form of trading accounts to determine gross profit or loss, in the form of profit
and loss account to determine net profit or net loss.
STATEMENT OF CHANGES IN OWNERS EQUITY:
The term owners equity refers in the claims of the owners of the
business against the assets of the firm. It consist of two elements.

16

1. Paid up share capital i.e. the initial amount of funds invested by the
shareholders.
2. Retained earnings/reserves and surplus representing undistributed profits.
The statement of changes in owners equity simply shows
the beginning balance of each owners equity account, the reasons of
increases and decreases in each, and its ending balance. However, in most
cases the owners equity account changes significantly in retain earnings
and hence the statement of changes in owners equity becomes merely a
statement of retained earnings.
STATEMENT OF CHANGES IN FINANCIAL POSITION:
The basic financial statement i.e. the balance sheet and profit and loss
account and income statement of a business reveals the net effect of various
transactions on the operational position of the company. But there are many
transactions that do not operate through profit and loss account. Those for a
better understanding another statement of changes in financial position has to be
prepared to show the changes in assets and liabilities from the end of another
point of time. The statement of changes in financial position may take any of the
two forms. They are:
Funds statements
Cash flow statements
TOOLS OF FINANCIAL ANALYSIS USED IN THE STUDY:
MEANING OF COMPARATIVE STATEMENT:
The comparative financial statements are the statements of the
financial position of different periods; the elements of financial positions are

17

then in a comparative form to give idea of financial position of two or more

periods. The comparative statement may show:
Absolute figures
Changes in absolute figures i.e. increase or decrease in absolute figures.
Absolute data in terms of percentage.
Increase or decrease in terms of percentage.
COMPARATIVE BALACE SHEET:
It is a statement of financial position of a business at a specific
movement of time. It represents all assets owned by the business at a particular
movement of time and the claims of the owners and outsiders against those
assets at the time. It is a way they shape the financial condition of the business
at that time.
The important distinction between an income statement and
balance sheet is that the income statement is for a period where as balance sheet
is on a particular date.
COMPARATIVE INCOME STATEMENT:
The comparative income statement gives the results of the
operation of a business. The comparative income statement gives an idea of the
program of a business over a period of time. The changes in absolute data in
money values and percentages can be determined to analyze the profitability of
the business.
GUIDELINES FOR INTERPRETATION OF INCOME STATEMENT:

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The analysis and interpretation of income statement will involve

the following steps:
1. The increase or decrease in sales should be compared with the
increase or decrease in cost of goods sold. An increase in sales will
not always mean an increase in profit. The profitability will
improve if increase in sales promotion and the control of operating
expenses.
2. The second step of analysis should be the study of operation profit.
The operating expenses such as office and administrative expenses.
Selling and distribution expenses should be deducted from gross
profit to find out operating profit which will result from the
increase in sales position and control of operating expenses.
3. The increase or decrease in net profit give an idea about overall
profitability of the concern, non-operating expenses such as interest
paid, loss from sale of assets, writing off to deferred expenses or
deducted from operational profit we get the figure of operating
profit.
4. An opinion should be formed about profitability of the concern and
it should be given at the end. This should be mentioned whether the
overall profitability is good or not.
COMMON SIZE STATEMENTS:
The common size statement, balance sheet and income statement
are shown in analytical percentages. The figures are shown as percentages of
total assets, total liabilities and total sales. The total assets are taken as of and
different assets are expressed as a percentage of the total.

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1. Common size balance sheet: A statement in which balance sheet items are
expressed as the ration of each asset to total assets and the ratio of each
liability is expressed as a ratio of total liabilities is called common sized
balance sheet.
2. Common size income statement: The items in income statement can be
shown as percentage of sales to show the relation of each item to sales. A
significant relationship can be established between item of income
statement and value of the sales. The increase in sales will certainly
increase selling expenses and not administrative are financial expenses.

TREND ANALYSIS:
Trend percentages:
The method of trend percentages in useful analytical device
for the management since y substitution of percentage for large amounts, the
clarity and readability are achieved.
Trend percentages are immensely helpful in making
comparative study of the final statements for several years. The method of
calculating trend percentages involves the calculation of percentage relationship
that each item bears to the same item in the base year. The earliest year may be
taken as base year. Each item of the base year is taken as 100 and on the basis
the percentage for each of the item of each year is calculated.
Least Square Method:
This method is widely used in practised. It is a mathematical
method and with the help of a trend line fitted to the data in such a manner by
using the actual figures of the study period, we have to calculate the trend

20

values for these periods. Based on this value we can easily forecast the values of
the future period. The method of least square may be used either to fit a straight
line trend or a parabolic trend. The straight line is represented by the equation
Y(C)=A+B(X).
ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT:
An attempt has been made to analyze and interpret the
financial statements of BHEL for the period of 2007-2010. These statements
were prepared on the basis of the data in the balance sheets and profit and loss
accounts of the BHEL for the above period.

TARGET AUDIENCES FOR ANNUAL REPORTS

Current shareholders and potential investors remain the primary

audiences for annual reports. Employees (who today are also
likely to be shareholders), customers, suppliers, community
leaders, and the community-at-large are also targeted audiences.

Employees
The annual report serves many purposes with employees. It
provides management with an opportunity to praise employee
innovation, quality, teamwork, and commitment, all of which
are critical components in overall business success. In addition,
an annual report can also be used as a vehicle to relate those

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company successesa new contract, a new product, costsaving initiatives, new applications of products, expansions into
new geographiesthat have an impact on its work force.
Seeing a successful project or initiative profiled in the annual
report gives reinforcement to the employees responsible for the
success.
The annual report can help increase employee understanding of
the different parts of the company. Many manufacturing
locations are in remote areas, and an employee's
understanding of the company often does not go beyond the
facility where he or she works. An annual report can be a
source for learning about each of a company's product lines, its
operating locations, and who is leading the various operations.
The annual report can show employees how they fit into the
"big picture."
Employees also are often shareholders. So, like other
shareholders, these employees can use the annual report to
help gauge their investment in the company. In this case, the
annual report can serve as a reminder to employees of the
impact that the work they do has on the value of the company's
stock value.

Customers
Customers want to work with quality suppliers of goods and
services, and an annual report can help a company promote its
image with customers by highlighting its corporate mission and
core values. Describing company initiatives designed to
improve manufacturing processes, reduce costs, create quality,
or enhance service can also illustrate a company's customer
orientation. Finally, the annual report can also show the
company's financial strength. Customers are reducing their
number of suppliers, and one evaluation criterion is financial
strength. They want committed and capable suppliers that are
going to be around for the long term.

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Suppliers
A company's abilities to meet its customers' requirements will
be seriously compromised if it is saddled with inept or
undependable suppliers. Successful companies today quickly
weed out such companies. By highlighting internal
measurements of quality, innovation, and commitment, annual
reports can send an implicit message to suppliers about the
company's expectations of outside vendors. Sometimes an
annual report will even offer a profile of a supplier that the
company has found exemplary. Such a profile serves two
purposes. First, it rewards the supplier for its work and serves
to further cement the business relationship. Second, it provides
the company's other suppliers with a better understanding of
the level of service desired (and the rewards that can be reaped
from such service).

The Community
Companies invariably pay a great deal of attention to
their reputation in the community or communities in which they
operate, for their reputations as corporate citizens can have a
decisive impact on bottom-line financial performance. A
company would much rather be known for its sponsorship of a
benefit charity event than for poisoning a local river, whatever
its other attributes. Annual reports, then, can be invaluable
tools in burnishing a company's public image. Many annual
reports discuss community initiatives undertaken by the
company, including community renovation projects, charitable
contributions, volunteer efforts, and programs to help protect
the environment. The objective is to present the company as a
proactive member of the community.
This sort of publicity also can be valuable when a company is
making plans to move into a new community. Companies seek
warm welcomes in new communities (including tax breaks and
other incentives). Communities will woo a company perceived
as a "good" corporate citizen more zealously than one that is
not. The good corporate citizen also will receive less resistance

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from local interest groups. The company's annual report will be

one document that all affected parties will pore over in
evaluating the business.
Investors

Investors need information to decide whether they should

continue to invest in an entity, to assess whether that particular
organization will be able to pay out dividends as well as how
the enterprise has been managed. The investors require
information
about
profitability,
volumes,
sales,
amountsINVESTED , assets owned, share price and information
about competitors.
Shareholders

Shareholders are the owners of the company. Thus, they have

the right to receive dividends from the company's profit.
Information in annual reports is very important to shareholders
as profit acts as an indicator of the amount of dividends they
ought to obtain.
Government

The government group makes use of an annual report for tax

purposes. The tax authorities such as the Inland Revenue needs
information on the profitability of an entity to levy corporation
tax and custom and excise make use of information to check
VAT returns. Hence tax authorities use FS information as a
source for enhancing social welfare by establishing tax policies.

PUBLIC
The public are usually considered as 'stakeholders' and
businesses form part of society at large and as a result create
much public interest. Marston and Shrives (1991, pp196), found
annual report as the main document available for the public
thus is being regarded as the main "disclosure vehicle".

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In summary, results from preceding studies shows that users

believed that annual reports is the main sources of information;
though each section was not considered as of equal
significance. The results also disclose a necessity to establish
some changes to the annual reporting that allow the
information to be more understandable and sufficient for
potential users.

READING AN ANNUAL REPORT

People read annual reports for widely different purposes and at
dramatically different levels. Generalizations, however, are
difficult. The stockholder with five shares might be as careful
and discriminating a reader of an annual report as the financial
analyst representing a firm owning one million shares.
It may require an MBA to understand all the details buried in an
annual report's footnotes. Nevertheless, a good understanding
of a company is possible by focusing on some key sections of
the report.
Company Description
Most companies will include a description of their business
segments that includes products and markets served. Formats
vary from a separate fold-out descriptive section to a few words
on the inside front cover. A review of this section provides
readers with at least a basic understanding of what the
company does.
The Letter
Whether contained under the heading of Letter to
Shareholders, Chairman's Message, or some other banner, the
typical executive message can often provide some informative
data on the company's fortunes during the previous year and
its prospects for the future. Readers should always bear in mind
that it is invariably in the executive's best interests to maintain
a fundamentally upbeat tone, no matter how troubled the
company may be. This is often the most widely read portion of

25

the entire annual report, so business owners and managers

should make a special effort to make it both informative and
engaging.
Management's Discussion and Analysis (MD&A)
This section of an annual report provides, in a fairly succinct
form, an overview of the company's performance over the
previous three years. It makes a comparison of the most recent
year with prior years. It discusses sales, profit margins,
operating income, and net income. Factors that influenced
business trends are outlined. Other portions discuss capital
expenditures, cash flow, changes in working capital, and
anything "special" that happened during the years under
examination. The MD&A is also supposed to be forward-looking,
discussing anything the company may be aware of that could
affect results either positively or negatively. An MD&A can be
written at all different levels of comprehension, but business
consultants generally urge companies to make the information
from
balance
sheets
to
management
analysis
comprehensible and accessible to a general readership. This
means forsaking jargon and hyperbole in favor of clear and
concise communication.
Financial Summary
Most companies will include a five-, six-, ten-, or eleven-year
summary of financial data. Sales, income, dividends paid,
shareholders' equity, number of employees, and many other
balance sheet items are included in this summary. This section
summarizes key data from the statements of income, financial
position, and cash flow for a number of years.
Management/Directors
A page or more of an annual report will list the management of
the company and its board of directors, including their
backgrounds and business experience.

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Investor Information
There almost always is a page that lists the company's address
and phone number, the stock transfer agent, dividend and
stock price information, and the next annual meeting date. This
information is helpful for anyone wanting additional data on the
company or more information about stock ownership.

PACKAGING THE ANNUAL REPORT

For most companies, large or small, the financial

information and the corporate message are the most
important aspects of an annual report. Many companies
also want to be sure, however, that their targeted
audiences are going to read and understand the
message. This is less essential for privately owned
businesses that do not need to impress or soothe
investors, but they too recognize that disseminating a
dry, monotonous report is not in the company's best
interests.
The challenge for producers of annual reports is to
disseminate pertinent information in a comprehensible
fashion while simultaneously communicating the
company's primary message. In many ways the annual
report serves as an advertisement for the company, a
reality that is reflected in the fact that leading business

27

magazines now present awards to company reports

deemed to be of particular merit. In recent years,
companies have also chosen to make their annual
reports available in a variety of electronic media that
lend themselves to creative, visually interesting
treatments.
Of course, the personality of the companyand
perhaps most importantly, the industry in which it
operateswill go a long way toward dictating the
design format of the annual report. The owner of a
manufacturer of hospital equipment is far less likely to
present a visually dramatic annual report to the public
than are the owners of a chain of suntanning salons.
The key is choosing a design that will best convey the
company's message.

ANALYSE ANNUAL REPORT OF

RELIANCE LTD
Objective of Study
To understand the information contained in financial statements with a view to
know the strength or weaknesses of the firm and to make forecast about the
future prospects of the firm and thereby enabling the financial analyst to take
different decisions regarding the operations of the firm.

28

1.

To study the present financial system at Reliance

Industry.

2.

To determine the Profitability, Liquidity Ratios, Cash

flow and Fund flow statement.

3.

To analyze the capital structure of the company with

Leverage ratio.

the help of
4.

To offer appropriate suggestions for the better

performance of the organization

Research Methodology
Research is defined as a systematic, gathering recording and analysis of
data about problem relating to any particular field.
It determines strength reliability and accuracy of the project.
1. Research Design: Research Design pertains to the great research approach
or strategy adopted for a particular project. A research project has to be the
conducted scientifically making sure that the data is collected adequately
and economically.
The study used a descriptive research design for the purpose of getting an
insight over the issue. It is to provide an accurate picture of some aspects of
market environment. Descriptive research is used when the objective is to
provide a systematic description that is as factual and accurate as possible.
2. Method of Data Collection:
Secondary Data: Through the internet and published data

29

Company Profile
The Reliance group, founded by Dhirubhai H Ambani (1932-2002), is Indias
largest private sector enterprise, with businesses in the energy and material
value chain. The flagship company, Reliance Industries Limited, is a Fortune
Global 500 company and is the largest private sector company in India. The
chairman of the company is Mukesh Ambani.
The company is Indias largest petrochemical firm and among the countrys
largest companies (along with the likes of Indian Oil and Tata Group). Oil
refining and the manufacture of polyfines account for nearly all of Reliances
sales. It also makes textiles and explores for oil and gas, though those
businesses are relatively small. In 2009 the company merged with its oil and gas
refining subsidiary (Reliance Petroleum) in order to boost the operational and
financial synergies of Reliance as a major refining company.

Reliance Industries Limited (NSE: RELIANCE) is India's largest private

sector conglomerate (by market value) , with an annual turnover of US $ 35.9
billion and profit of US$ 4.85 billion for the fiscal year ending in March 2008
making it one of India's private sector Fortune Global 500 companies, being
ranked at 206th position (2008). It was founded by the Indian industrialist
Dhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financial

30

instruments like fully convertible debentures to the Indian stock markets.

Ambani was one of the first entrepreneurs to draw retail investors to the stock
markets. Critics allege that the rise of Reliance Industries to the top slot in terms
of market capitalization is largely due to Dhirubhai's ability to manipulate the
levers of a controlled economy to his advantage. Though the company's oilrelated operations form the core of its business, it has diversified its operations
in recent years. After severe differences between the founder's two sons,
Mukesh Ambani and Anil Ambani, the group was divided between them in
2006. In September 2008, Reliance Industries was the only Indian firm featured
in the Forbes's list of "world's 100 most respected companies

MISSION & VISION

Continuously innovate to remain Partners in human progress by Harnessing

science & technology in the petrochemicals domain

OUR MISSION

Be a globally preferred Business associate with responsible Concern for ecology,

society, and stakeholders value.

VALUES & QUALITY POLICY YOUR VALUES

Integrity, Respect for People, Unity of Purpose, Outside-in Focus, Agility and
Innovation.

QUALITY POLICY

Bare committed to meet customers requirements through continual improvement of

our quality management systems. We shall sustain organizational excellence
through visionary leadership and innovative efforts.

31

Reliance Industries Balance Sheets from 2006 to 2009

in Rs. Cr.

Mar '06
Mar '07
Mar '08
Mar '09
12 months 12 months
12 months
12 months
Sources Of Funds
Total Share Capital
1,393.17
1,393.21
1,453.39
1,573.53
Equity Share Capital
1,393.17
1,393.21
1,453.39
1,573.53
Share Application Money
0.00
60.14
1,682.40
69.25
Preference Share Capital
0.00
0.00
0.00
0.00
Reserves
43,760.90
59,861.81
77,441.55
112,945.44
Revaluation Reserves
4,650.19
2,651.97
871.26
11,784.75
Net worth
49,804.26
63,967.13
81,448.60
126,372.97
Secured Loans
7,664.90
9,569.12
6,600.17
10,697.92
Unsecured Loans
14,200.71
18,256.61
29,879.51
63,206.56
Total Debt
21,865.61
27,825.73
36,479.68
73,904.48
Reliance
Industries
Profit
&
Loss
Accounts
from
2006
to
2009
Total Liabilities
71,669.87
91,792.86
117,928.28
200,277.45
Gross Block
Less: Accum. Depreciation
Net Block
CapitalSales
WorkTurnover
in Progress
Investments
Excise Duty
Inventories
Net Sales
Sundry
OtherDebtors
Income
CashStock
and Bank
Balance
Adjustments
Total Current Assets
Total Income
Loans and Advances
Fixed Deposits
Raw Assets,
MaterialsLoans &
Total Current
Power & Fuel Cost
Employee
Cost
Advances
Other
Manufacturing
Differed Credit Exp.
Selling
and
Admin Exp.
Current
Liabilities
Miscellaneous
Expenses
Provisions
Preoperative
Exp. &
Total Current Liabilities
Capitalised
Provisions
Expenses
NetTotal
Current
Assets
Miscellaneous Expenses
Operating
Profit
Total
Assets
PBDIT
Contingent
Liabilities
Interest
Book Value (Rs)
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Shares in issue (lakh)
Earning Per Share (Rs)
Equity Dividend (%)

Application
Of Cr.
Funds
in Rs.
84,970.13
99,532.77
Mar '06
Mar '07
29,253.38
35,872.31
12 months
12 months
55,716.75
63,660.46
Income
6,957.79
7,528.13
89,124.46
118,353.71
5,846.18
16,251.34
8,246.67
6,654.68
10,119.82 111,699.03
12,136.51
80,877.79
4,163.62
3,732.42
546.96
236.89
239.31
308.35
2,131.19
654.60
14,522.75
16,177.28
83,555.94
112,590.52
8,266.55
12,506.71
Expenditure
1,906.85
1,527.00
59,739.29
24,696.15 80,791.65
30,210.99
1,146.26
2,261.69
978.45
2,094.09
668.31
1,112.17
0.00
0.00
5,872.33
5,478.10
17,656.02
24,145.19
300.74
321.23
3,890.98
1,712.87
21,547.00
25,858.06
-155.14
-111.21

68,550.24
91,947.72
3,149.15
4,352.93
0.00
0.00
3,400.91
4,815.15
71,669.87
91,792.86
0.00
0.00
24,897.66
46,767.18
10,711.18
14,528.75
324.03
439.57
0.88
0.51
10,712.06
14,529.26
1,642.72
2,585.35
9,069.34
11,943.40
3,400.91
4,815.15
10,711.18
14,528.75
0.88
0.51
8,810.95
11,156.07
0.00
0.00
1,393.51
1,440.44
195.44
202.02
Per share data (annualized)
13,935.08
13,935.08
65.08
85.71
100.00
110.00

104,229.10
Mar '08
42,345.47
12 months
61,883.63
23,005.84
139,269.46
20,516.11
5,463.68
14,247.54
133,805.78
6,227.58
6,595.66
217.79
-1,867.16
20,692.91
138,534.28
18,441.20
5,609.75
98,832.14
44,743.86
2,052.84
2,119.33
715.19
0.00
5,549.40
29,228.54
412.66
2,992.62
32,221.16
-175.46

149,628.70
Mar '09
49,285.64
12 months
100,343.06
69,043.83
146,328.07
20,268.18
4,369.07
14,836.72
141,959.00
4,571.38
1,264.03
500.13
427.56
19,908.23
143,650.59
13,375.15
23,014.71
109,284.34
56,298.09
3,355.98
2,397.50
1,162.98
0.00
4,736.60
42,664.81
562.42
3,010.90
45,675.71
-3,265.65

109,506.10
12,522.70
0.00
4,847.14
117,928.28
0.00
37,157.61
23,018.14
542.74
48.10
23,066.24
3,559.85
19,458.29
4,847.14
23,018.14
48.10
10,673.96
0.00
1,631.24
277.23

118,234.17
10,622.38
0.00
5,195.29
200,277.45
0.00
36,432.69
18,446.66
727.66
0.00
18,446.66
3,137.34
15,309.32
5,195.29
18,446.66
0.00
8,949.83
0.00
1,897.05
322.40

14,536.49
133.86
130.00

15,737.98
97.28
130.00

32

33

Book Value (Rs)

324.03

439.57

542.74

727.66

Financial Position of Reliance Industries

Ltd.
After going through the various ratios, fund flow and cash flow
analysis would like to state that:
The

long-term

solvency

of

the

company

is

very

satisfactory.
Immediate solvency position of the company is also quite
satisfactory. The company can meet its urgent obligations
immediately.
Credit policies are effective.
Overall profitability position of the company is quite
satisfactory.
Dividend payout ratio is satisfactory. Dividend paid in all
years to its shareholders.
The company is paying promptly to the suppliers.
The return on capital employed is satisfactory.
The

profitability

satisfactory.

position

of

the

company

is

very

34

FINDINGS
1. The current ratio has shown non fluctuating trend as 1.14, 1.16, 1.38 and 1.23
during 2006, 2007, 2008 and 2009.
2. The quick ratio is also in non fluctuating trend throughout the period 2006
09 resulting as 0.67, 0.69, 0.75, 0.78.The Company believes in high
profitability and low liquidity position.
3. The proprietary ratio has shown a non fluctuating trend. The proprietary ratio
is decreased compared with the last year.
4. The stock working capital ratio decreased from 3.21 to 1.39 in the year 2006
09.
5. The capital gearing ratio is decreased form 2006 08 (0.16, 0.15 and 0.82)
and increased in 2009 to 0.85.
6. The debt-equity ratio increased from 0.44-0.59 in the year 2006-09.
7. The gross profit ratio is in fluctuation manner. It decreased in the current year

35

compared with the previous year from 23.1% to 18.97%.

8. The net profit ratio is also decreased in the current year compared with the
previous year from 14.54% to 10.78%.
9. The operating ratio is increased in the current year compared with the
previous year from 81.8% to 83.28%.
10. The return on capital employed is increased in the year 2006 and 2008 while
it decreased in the year 2007 and 2009.
11. The earning per share is maximum in the year 2007-2008 and minimum in
the year 2005-2006.
12. Dividend payout ratio is maximum in the year 2005-2006 and minimum in
the 2007-2008.
13. Cost of goods sold shows a non fluctuating pattern in the year 2005-2008
and increased in the year 2008-2009.
14. The cash ratio shows a non fluctuating pattern in the year 2006, 2008 and
2009 but decreased in the year 2008.
15.

Return on proprietorship fund is maximum in the year 2007-2008 and

minimum in the year 2008-2009.

16. The operating profit ratio shows almost similar pattern in all years but it is
maximum in the year 2006-2007 and minimum in the year 2007-2008.

36

17..The net working capital available to the company was maximum in the year
2009 shows the high liquidity position of the firm and it was minimum in
the year 2007 shows the low liquidity position of the firm.

37

Suggestion & Recommendation

1. Liquidity refers to the ability of the concern to meet its current obligations as
and when these become due. The company should improve its liquidity position.
2. The company should make the balance between liquidity and solvency
position of the company.
3. The profit ratio is decreased in current year so the company should pay
attention to this because profit making is the prime objective o every business.
4. The cost of goods sold is high in every year so the company should do efforts
to control it.
5. The long term financial position of the company is very good but it should
pay a little attention to short term solvency of the company.

Conclusion

38

The companys overall position is at a very good position. The company

achieves sufficient profit in past four years. The long term solvency position of
the company is very good. The company maintains low liquidity to achieve the
high profitability. The company distributes dividends every year to its share
holders. The profit of the company decreased in the last year due to maintaining
the comparatively high liquidity. The net working capital of the company is
maximum in the last year shows the maximum liquidity.

Bibliography

39

REFERENCE BOOKS
FINANCIAL MANAGEMENT
Theory, Concepts & problems
ANAUAL REPORTS OF RELIANCE INDUSTRIES LIMITED

2005-2006

2006-2007

2007-2008

2008-2009

WEBSITES

www.ril.com
www.moneycontrol.com
www.wikipedia.com