Anda di halaman 1dari 19

RATIO ANALYSIS OF BHEL 1

TABLE OF CONTENTS

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 2

ACKNOWLEDGEMENT

I would like to thank my faculty Mr. Kameshwar Pandey, whose assignment of such a
relevant and interesting topic made me work towards knowing the subject with a greater
interest and enthusiasm and moreover he guided me throughout the project.

I owe the present accomplishment of my project to my friends, who helped me immensely


with sources of research materials throughout the project and without whom I couldn’t have
completed it in the present way.

I would also like to thank the library staff for working long hours to facilitate us with
required material going a long way in quenching our thirst for education.

I would also like to extend my gratitude to my parents and all those unseen hands that helped
me out at every stage of my project.

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 3

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. it may be


understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind
the method used in the context of the research study.

 Research Design:

Descriptive research is used in this study because it will ensure the minimization of bias and
maximization of reliability of data collected. The researcher had to use fact and information
already available through financial statements of earlier years and analyze these to make
critical evaluation of the available material. Hence by making the type of the research
conducted to be both Descriptive and Analytical in nature. From the study, the type of data to
be collected and the procedure to be used for this purpose were decided.

 Data Collection:

The required data for the study are basically secondary in nature and the data are collected
from the audited reports of the company.Primary data are those data, which is originally
collected afresh. In this project, Questionnaire Method and Interview Method, has been used
for gathering required information.

 Sources of Data:

The sources of data are from the annual reports of the company from the year 2012-13, 2013-
14, 2014-15 of BHEL

 Methods of Data Analysis:

The data collected were edited, classified and tabulated for analysis.

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 4

INTRODUCTION

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick
indication of a firm's financial performance in several key areas.Ratio Analysis as a tool
possesses several important features. The data, which are provided by financial statements,
are readily available. The computation of ratios facilitates the comparison of firms which
differ in size. Ratios can be used to compare a firm's financial performance with industry
averages. In addition, ratios can be used in a form of trend analysis to identify areas where
performance has improved or deteriorated over time.

Because Ratio Analysis is based upon Accounting information, its effectiveness is limited by
the distortions which arise in financial statements due to such things as Historical Cost
Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in
financial analysis, to obtain a quick indication of a firm's performance and to identify areas
which need to be investigated further.

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 5

CHAPTER 1: BHARAT HEAVY ELECTRICALS LIMITED

Bharat Heavy Electricals Limited (BHEL) owned by the Government of India, is an


engineering and manufacturing company based in New Delhi, India. Established in 1964,
BHEL is India's largest power plant equipment manufacturer. The company has been earning
profits continuously since 1971-72 and paying dividends uninterruptedly since 1976-77.It has
been granted the prestigious Maharatna (big gem) status in 2013 by Govt of India for its
outstanding performance.The elite list of maharatna contains another 6 behemoth PSU
companies of India.

IMAGE: BHEL LOGO

BHEL is an integrated power plant equipment manufacturer and one of the largest
engineering and manufacturing company of its kind in India engaged in the design,
engineering, manufacture, construction, testing, commissioning and servicing of a wide range
of products and services for core sectors of the economy, viz. Power, Transmission, Industry,
Transportation (Railways), Renewable Energy, Oil & Gas, Water and Defence with over 180
products offerings to meet the needs of these sectors. BHEL has been the bedrock of India's
Heavy Electrical Equipment industry since its incorporation in 1964.

BHEL's growth has been synchronous with achieving self-sufficiency in the indigenous
manufacturing of heavy electrical equipment. Out of the available 35,000 MW per annum
capacity for power plant equipment manufacturing in the country, BHEL alone constitutes a
mammoth 20,000 MW per annum capacity. A widespread network of 17 Manufacturing
Divisions, 2 Repair Units, 4 Regional Offices, 8 Service Centres, 6 Overseas Offices, 6 Joint
Ventures, 15 Regional Marketing Centres and current project execution at more than 150
project sites across India and abroad corroborates the humungous scale and size of its
operations.

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 6

Adding to its achievements, BHEL has joined the elite club of select global giants having an
installed base of over 170 GW of power generating equipment globally. In FY 2015-16 the
company has recorded the highest-ever commissioning of projects in its history. Enhanced
focus on project execution has resulted in BHEL creating history by way of
commissioning/synchronizing an all-time high 15,059 MW of power generating equipment
during the year. This includes the highest-ever power generation capacity addition of 13,061
MW to the Indian utility segment, a quantum jump of 59% over the previous year. With this,
BHEL has already achieved 94% of the capacity addition target for the XII Plan in first 4
years itself. 55% of the supercritical sets commissioned in the country are contributed by
BHEL, a testimony to its valuable contribution towards nation building.

BHEL also has a widespread overseas footprint in 78 countries with cumulative overseas
installed capacity of BHEL manufactured power plants nearing 10,000 MW including
Belarus, Bhutan, Egypt, Indonesia, Iraq, Kazakhstan, Malaysia, New Zealand, Oman,
Rwanda, Sudan, Tajikistan and UAE.

The high level of quality & reliability of BHEL products is due to adherence to international
standards by acquiring and adapting some of the best technologies from leading companies in
the world including General Electric Company, Alstom SA, Siemens AG and Mitsubishi
Heavy Industries Ltd., together with technologies developed in its own R&D centres. Most of
its manufacturing units and other entities have been accredited to Quality Management
Systems (ISO 9001:2008), Environmental Management Systems (ISO 14001:2004) and
Occupational Health & Safety Management Systems (OHSAS 18001:2007).

BHEL's greatest strength is its highly skilled and committed workforce of around 42,200
employees that have been the cornerstone of BHEL's journey ensuring success. Further, the
concept of sustainable development is inculcated in the DNA of BHEL which is evident from
its mission statement-"providing sustainable business solutions in the fields of energy,
industry and infrastructure". BHEL is also engaging with the society with its social initiatives
aimed at Community Development, Health & Hygiene, Education, Environment Protection,
Disaster Management, and Talent up gradation/Skill development.

The future is filled with both exciting opportunities & gruelling challenges. BHEL has
embraced new business opportunities by expanding its offerings and enhancing
competitiveness seeking to realize its long term vision. Creating new business avenues and
maximizing the utilization of available infrastructure will be the key to future growth and
stakeholders' wealth enhancement.

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 7

IMAGE: BHEL BUILDING

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 8

CHAPTER 2: BHEL- OPERATIONS AND PRODUCTS

BHEL is engaged in the design, engineering, manufacturing, construction, testing,


commissioning and servicing of a wide range of products, systems and services for the core
sectors of the economy, viz. power, transmission, industry, transportation, renewable energy,
oil & gas and defence.

It has a network of 17 manufacturing units, 2 repair units, 4 regional offices, 8 service


centres, 8 overseas offices, 15 regional centres, 7 joint ventures, and infrastructure allowing it
to execute more than 150 projects at sites across India and abroad. The company has
established the capability to deliver 20,000 MW p.a. of power equipment to address the
growing demand for power generation equipment.

BHEL has retained its market leadership position during 2015-16 with 74% market share in
the Power Sector. An improved focus on project execution enabled BHEL record its highest
ever commissioning/synchronization of 15059 MW of power plants in domestic and
international markets in 2015-16, marking a 59% increase over 2014-15. With the all-time
high commissioning of 15000 MW in a single year FY2015-16, BHEL has exceeded 170 GW
installed base of power generating equipments.

It also has been exporting its power and industry segment products and services for over 40
years. BHEL's global references are spread across over 76 countries across all the six
continents of the world. The cumulative overseas installed capacity of BHEL manufactured
power plants exceeds 9,000 MW across 21 countries including Malaysia, Oman, Iraq, UAE,
Bhutan, Egypt and New Zealand. Their physical exports range from turnkey projects to after
sales services.

Main manufacturing facilities—

1. Centralised Stamping Unit & Fabrication Plant (CSU & FP), Jagdishpur
2. Insulator Plant (IP), Jagdishpur
3. Electronics Division (EDN), Bangalore
4. Electronic System Division (ESD), Bangalore
5. Electro-Porcelains Division (EPD), Bangalore
6. Heavy Electrical Plant (HEP), Bhopal
7. Industrial Valves Plant (IVP), Goindwal
8. Heavy Electrical Equipment Plant (HEEP), Ranipur (Haridwar)
9. Central Foundry Forge Plant (CFFP), Ranipur (Haridwar)
10. Heavy Power Equipment Plant (HPEP), Hyderabad
11. Transformer Plant (TP), Jhansi
12. Boiler Auxiliaries Plant (BAP), Ranipet
13. Component Fabrication Plant (CFP), Rudrapur

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 9

14. High Pressure Boiler Plant (HPBP), Tiruchirappalli


15. Seamless Steel Tube Plant (SSTP), Tiruchirappalli
16. Power Plant Piping Unit (PPPU), Thirumayam
17. Heavy Plates & Vessels Plant (HPVP), Visakhapatnam

The company is also setting up a new Greenfield Power Equipment Fabrication Plant
(GPEFP) at Bhandara, Maharashtra, the foundation stone for which was laid on 14 May
2013. Further, BHEL is planning to enter solar manufacturing in a big scale, as it has
announced its plans for a 600 MW Solar Module Factory.

Products and Services

1. Thermal power Plants


2. Nuclear power Plants
3. Gas based power Plants
4. Hydro power Plants
5. DG power Plants
6. Boilers (steam generator)
7. Boiler Auxiliaries
8. Gas generator
9. Hydro generator
10. Steam turbine
11. Gas turbine
12. Hydro turbine
13. Transformer
14. Switchgear
15. Oil field equipment
16. Boiler drum
17. Piping System
18. Soot Blowers
19. Valves
20. Seamless Steel Tubes
21. Condenser s and Heat exchangers
22. Pumps
23. Desalination and Water treatment plants
24. Automation and Control systems
25. Power electronics
26. Transmission system control
27. Semiconductor devices
28. Solar photo voltaics
29. Software system solutions
30. Bus ducts
31. Insulators

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 10

32. Control panels


33. Capacitors
34. Bushings
35. Electrical machines
36. DC, AC heavy duty Motors
37. Compressors
38. Control gears
39. Traction motors
40. Research and development product

IMAGE: BHEL VISION MISSION AND VALUES

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 11

CHAPTER 3: RATIO ANALYSIS

Ratio analysis is the process of determining and interpreting numerical relationships based on
financial statements. A ratio is a statistical yardstick that provides a measure of the
relationship between two variables or figures. This relationship can be expressed as a percent
or as a quotient. Ratios are simple to calculate and easy to understand. Ratio analysis is a
medium to understand the financial weakness and soundness of an organization. Keeping in
mind the objective of analysis, the analyst has to select appropriate data to calculate
appropriate ratios. Interpretation depends upon the caliber of the analyst.

The persons interested in the analysis of financial statements can be grouped under three
heads:

i) owners or investors
ii) creditors and
iii) financial executives.

Although all these three groups are interested in the financial conditions and operating
results, of an enterprise, the primary information that each seeks to obtain from these
statements differs materially, reflecting the purpose that the statement is to serve.

Investors desire primarily a basis for estimating earning capacity. Creditors are concerned
primarily with liquidity and ability to pay interest and redeem loan within a specified period.
Management is interested in evolving analytical tools that will measure costs, efficiency,
liquidity and profitability with a view to make intelligent decisions.

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 12

CHAPTER 4: FINANCIAL STATEMENTS OF BHEL FOR VARIOUS


YEARS

2012-2013

BALANCE SHEET

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 13

PROFIT AND LOSS STATEMENT

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 14

2013-2014

BALANCE SHEET

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 15

PROFIT AND LOSS STATEMENTS

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 16

2014-2015

BALANCE SHEET

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 17

PROFIT AND LOSS STATEMENT

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 18

CHAPTER 4: CALCULATION OF DIFFERENT RATIOS

 PROFITABILITY RATIOS:-
Profitability ratios compare income statement accounts and categories to show a
company's ability to generate profits from its operations. Profitability ratios focus on
a company's return on investment in inventory and other assets. These ratios basically
show how well companies can achieve profits from their operations.

Investors and creditors can use profitability ratios to judge a company's return on
investment based on its relative level of resources and assets. In other words,
profitability ratios can be used to judge whether companies are making enough
operational profit from their assets. In this sense, profitability ratios relate to
efficiency ratios because they show how well companies are using thier assets to
generate profits. Profitability is also important to the concept of solvency and going
concern.

1. GROSS PROFIT RATIO-

Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship
between gross profit and total net sales revenue. It is a popular tool to evaluate
the operational performance of the business . The ratio is computed by dividing
the gross profit figure by net sales.

Formula:

Following formula is used to calculated gross profit ratio (GP Ratio):

Gross profit / (Net sales × 100)

Where Gross profit = Net sales - Cost of goods sold

Cost of goods sold = Opening stock + Net purchases + Direct expenses - Closing
stock

Net sales = Sales - Returns inwards

2. NET PROFIT RATIO—

Net profit ratio (NP ratio) expresses the relationship between net profit after taxes
and sales. This ratio is a measure of the overall profitability net profit is arrived at
after taking into account both the operating and non-operating items of incomes

PRINCIPLES OF ACCOUNTING AND AUDIT


RATIO ANALYSIS OF BHEL 19

and expenses. The ratio indicates what portion of the net sales is left for the
owners after all expenses have been met.

Formula:

Following formula is used to calculate net profit ratio:

Net profit ratio = (Net profit after tax / Net sales) × 100

It is expressed in percentage. Higher the net profit ratio, higher is the profitability
of the business.

3. OPERATING PROFIT—

Operating net profit ratio is calculated by dividing the operating net profit by
sales. This ratio helps in determining the ability of the management in running the
business.

Formula:

Operating profit ratio = (Operating profit / Net sales) × 100

Operating profit = Gross profit - Operating Expenses

OR

Operating profit = Net sales - Operating cost

OR

Operating profit= Net sales - (Cost of goods sold + Administrative and office
expenses + Selling and distribution exp.)

OR

(Net profit + Non-operating expenses) - (Non-operating incomes)

Higher the ratio, better it is

PRINCIPLES OF ACCOUNTING AND AUDIT