Financial analysis of

BHEL
Submitted by:
Geetank juneja

Abstract

To analyze the financial position of Bharat Heavy
Electricals Limited.
Financial ratios of BHEL for the year 2010-2011
&2011-2012
The reports aims to assist the user to develop a
thorough understanding of concepts and theories
underlying financial management in a systematic
way.
Objective
The report is meant for financial executives who
want to update their knowledge about THE OVERALL
FINANCIAL POSITION OF THE BHEL & ITS FUTURE
PROJECTIONS, which helps them to improve their
ability into making effective financial decisions.

The report helps them to give new insight and ideas
in the field of financial decision-making and future
opportunities


Limitations

False result: Ratios are calculated from financial
statements so ratios correctness also depends on the
correctness of financial statements.
No standardized definitions: Elements and sub-elements
of financial statements not uniquely defined.
Window dressing: Manipulations of accounts is a way to
conceal vital facts and present the financial statements
better than what they actually are.


BHEL AN OVERVIEW
The first plant of B.H.E.L, was established nearly 40
years ago at Bhopal and was the genesis of the heavy
electrical equipment industry in India
B.H.E.L. is today the biggest engineering enterprise
among its type in India, with a very well recognized
track record of performance.
It is earning profits continuously since 1971-72 and
achieved a sales turnover of rs 49510 crores with a
profit before tax of Rs.103.2 crores in 2011-2012.

BUSINESS SECTORS
To provide a strong market orientation, BHELs operations are
organized around three business, viz., Power, Industry and
International.
Power: Power generation sector includes of thermal, gas,
hydro and atomic energy plant business.
Industry: Applications BHEL is a major contributor of
equipment and systems to industries like cement, fertilizers,
petrochemicals, steel, paper and telecommunication.
International Operations: BHEL is one amongst the most
important exporters of engineering product & services from
India, ranking among the main power house instrumentation
suppliers within the world.



VISION, MISSION &VALUES
Vision: A world category engineering enterprise
committed in enhancing stakeholders worth.
Mission: To be an Indian international engineering
enterprise providing total business solutions through
quality merchandise, systems and services within the
field of energy, industry, transportation, infrastructure
and different potential area.
Values:
:Zeal to stand out zest for modification.
: Integrity and fairness in all told matters


Financial analysis
Financial analysis is the process of determining the
operating and financial characteristics of a firm from
accounting data and financial statement.
The goal of such analysis is to determine efficiency
and performance of the firm management, as
reflected in the financial records and reports.
Its main motive is to calculate the companies
liquidity, profitability and other indications that
business conducts in a rational and orderly way.

Financial ratios and its users
A ratio may be defined as a fixed relationship in
degree or between two numbers. In finance, ratios
are used to relationships that are not obvious from
the raw data.
Users: Short term creditors, Long term creditors,
Stock holders.
With the use of ratios we can analyse weather the
firms would be able to meet its financial debt.
Over all operative potential and performance of the
firm.

Ratios
2010-2011
Current ratio:1.94
Quick ratio: 1.45
Debt equity ratio: 0.46
Total assets to debt ratio:
0.15
Proprietary ratio: 0.34
Stock turnover ratio: 6.97
times
Debtors turnover ratio:4.05
times
Creditors turnover ratio:
6.59 times

2011-2012
Current ratio: 1.86
Quick ratio: 1.35
Debt equity ratio: 0.30
Total assets to debt ratio:
8.70
Proprietary ratio: 0.38
Stock turnover ratio: 3.20
times
Debtors turnover ratio: 1.90
times
Creditors turnover ratio:
2.73 times

CONTD.
Working capital turnover
ratio:14.56 times
Fixed assets turnover
ratio:86.89 times
Gross profit ratio: 19.06%
Operating profit: 23.51%
Net profit:15.69%
Return on
investment:0.243%
Earning per share:49.11
per share




Working capital turnover
ratio:2.30 times
Fixed assets turnover
ratio: 8.19 times
Gross profit ratio: 18.81%
Operating profit: 23.33%
Net profit: 15.94%
Return on investment:
25.45%
Earning per share: 57.525
per share


CONTD.

Dividend per
share:24.23 per share
Price earning ratio:
40.73 times

Dividend per share:
14.656 per share
Price earning ratio: 4.47
times

FINANCIAL ANALYSIS
Current ratio: the current ratio of the company has decreased the reason
is that the value of assets has decreased whereas the value of liabilities
has remained the same. Current ratio is the relationship of current assets
to current liabilities and is computed to calculate the short term financial
position of the enterprise. A decrease in current ratio means that the
company would have a problem in meeting its current liabilities on time
and inadequate working capital.
Quick ratio: quick ratio is the relationship of liquid assets with current
liabilities and is calculated to check the short term liquidity of the
enterprise in its correct form. The quick ratio of the company has
decreased . This can create problem in the debt paying capacity of the
enterprise .
Debt equity ratio: this is computed to ascertain the soundness of the
long term financial position of the firm. The ratio has decreased which is a
good sign for the company as a higher ratio indicates risky financial
position while a lower ratio indicates a safer financial position.


CONTD.
Total assets to debt ratio: this ratio establishes a relationship between total assets
and total long term debts. This ratio has increased by a huge margin which
represents a higher security to lenders for extending long term loans to the
business.
Proprietary ratio: This ratio establishes the relationship between proprietors funds
and total assets. This ratio is basically calculated for the safety of creditors who can
ascertain the proportion of shareholders funds in the total assets employed in the
firm. The ratio has increased which indicates higher safety for creditors.
Stock turnover ratio: this ratio establishes a relationship between the cost of goods
sold during a given period and the average amount of stock carried during total
period. The ratio has decreased which reflect inefficient use of investments, over
investments in stock accumulation of stocks at the end of the period in
anticipation of higher prices or unsalable goods etc.
Debtors turnover ratio: this ratio establishes a relationship between net credit
sales and average debtors. The ratio has decreased which indicates that there is
inefficiency in collection and more investment in debtors than required.

CONTD.
Creditors turnover ratio: this shows the relationship between net credit purchases and
total average creditors. The ratio is decreasing which means availability of more credit
or delayed payments.
Working capital turnover ratio: this ratio establishes a relationship between working
capital and sales . The ratio has decreased by a huge amount which means the company
is not trading properly or undertrading .
Fixed assets turnover ratio: this ratio establishes a relationship between fixed assets
and net sales indicating how efficiently they have been used in achieving the sales. The
ratio has decreased which indicates inefficient use of fixed assets.
Gross profit ratio: this establishes a relationship of gross profit on sales to net sales of a
firm. The ratio is decreasing which means gross profit is not adequate to cover the
operating expenses.
Operating ratio: this ratio is computed to establish relationship between operating costs
and net sales. The ratio has decreased which is better as it would leave higher margin to
meet interest dividends in the figure of sales.

CONTD.
Net profit ratio: this ratio establishes relationship between net profit and sales.
The ratio has increased which is better for the firm as it helps in detrmining the
operational efficiency of the business.
Return on investment: this ratio establishes a relationship between profit before
interest tax and dividend and capital employed. The ratio has increased which
means the firm is earning more profit.
Earning per share: it is the earnings of a company attributable to the equity
shareholders dividend by the number of equity shares. The ratio has increased
which means the better is the prospects and earnings of the company
Dividend per share: this represents the dividend distributed per equity share. This
has decreased which means the company has given less dividend this year as
compared to the last year.
Price earning ratio: This ratio is helpful in governing the market price of the share.
The ratio has decreased that is the faith of investors has decreased in stability and
appreciation of the companies earnings .


CONCLUSION
From this project I have concluded that B.H.E.L has a huge market
to deal in like power, industry, transportation, telecommunication,
renewable energy, oil and gas, international operations. The
company is fully working according to there vision mission and
values.
From the ratio analysis I have concluded that the company is
having a problem in paying there debt in short run whereas they
are in a good position to pay debt in long run. The companies assets
are increasing which provides lenders with a security.
In all the ratio calculated where creditors are termed are increasing
which indicates higher security for the creditors. The gross profit
has decreased which is not adequate to cover the operating
expenses. Companies profit is increasing but they are declaring less
amount of dividend against each share.