INTRODUCTION

Financial statements are records that provide an indication of the organizations financial status. It quantitatively describes the financial health of the company. It helps in the evaluation of companys prospects and risks for the purpose of making business decisions. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. They give an accurate picture of a companys condition and operating results in a condensed form. Reported assets, liabilities and equity are directly related to an organization's financial position whereas reported income and expenses are directly related to an organization's financial performance. Analysis and interpretation of financial statements helps in determining the liquidity position, long term solvency, financial viability, profitability and soundness of a firm. There are four basic types of financial statements: balance sheet, income statements, cashflow statements, and statements of retained earnings. Mining industries are capital intensive. Hence a lot capital is invested in it. Unfortunately very limited work has been done on analysis and interpretation of financial statements of Indian for mining companies. An attempt has been carried out in this project to analyze and interpret the financial statements of five coal and non- coal mining companies. OBJECTIVES To understand, analyze and interpret the basic concepts of financial statements of different mining companies. Interpretation of financial ratios and their significance.

FINANCIAL STATEMENTS
Financial statements (or financial reports) are activities of a business, person, formal records of the financial or other entity. Financial statements provide an

overview of a business or person's financial condition in both short and long term. All the relevant financial information of a business enterprise, presented in a structured manner and in a form easy to understand is called the financial statements. There are four basic financial statements: 1. Balance sheet: It is also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity as of a given point in time. 2. Income statement: It is also referred to as Profit and Loss statement (or "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. 3. Statement of Retained Earnings: It explains the changes in a company's retained earnings over the reporting period. 4. Cash Flow Statement: It reports on a company's cash flow activities, particularly its operating, investing and financing activities.

Industry overview: Indian steel sector

India has emerged as the fourth largest steel producing nation in the world, as per the recent figures release by World Steel Association in April 2011. In 2010, India was the 5th largest producer, after China, Japan, USA and Russia had recorded a growth of 11.3% in steel production as compared to 2009. Overall domestic crude steel production grew at a compounded annual growth rate of 8.4% during 2005-06 to 2009-10. The Indian steel industry accounted for around 5% of the worlds total production in 2010. Total crude steel production in India for 2010-11 was around 69 million tonnes and its expected that the crude steel production in capacity in the country will increase to nearly 110 million tonne by 2012-13. Further, if the proposed expansion plans are implemented as per schedule, India may become the second largest crude steel producer in the world by 2015-16. The demand for steel in the country is currently growing at the rate of over 8% and it is expected that the demand would grow over by 10% in the next five years. However, the steel intensity in the country remains well below the world levels. Our per capita consumption of steel is around 110 pounds as compared to 330 Pounds for the global average. This indicates that there is a lot of potential for increasing the steel consumption in India.

Immense growth potential in Indian Steel Sector

Domestic crude steel production grew at a compounded annual growth rate of 8.4% in the last few years. Crude steel production capacity of the country is projected to be around 110 million tonne by 201213. 222 Memorandum of Understandings (MOU) have been signed with various states for planned capacity of around 276 million tonnes by 2019-20. Investments at stake are to the tune of $187 billion in the Steel sector. Increase in the demand of steel in India is expected to be 14% against the global average of 5-6% due to its strong domestic economy, massive infrastructure needs and expansion of industrial production.

Demand of steel in the major industries like infrastructure, construction, housing, automotive, steel tubes and pipes, consumer durables, packaging and ground transportation. Target for $ 1 trillion of investments in infrastructure during the 12th Five Year Plan. Infrastructure projects (like Golden Quadrilateral and Dedicated Freight Corridor) will give boost to the demand in the steel sector in near future. Projected New Greenfield & up-gradation of existing Airport shall keep the momentum up. Increased demand of specialized steel in hi-tech engineering industries such as power generation, automotive petrochemicals, fertilizers etc.

ANALYSIS
Jindal Steel & Power Ltd.
Table : Balance Sheet of Jindal Steel & Power Ltd. as at 31st Mar-2009 Liabilities Share Capital Reserves & Surplus Net Worth (1) Secured Loans (2) Unsecured Loans (3) Total Liabilities(1+2+3 Assets Gross Block (-) Acc. Depreciation Net Block (A) Capital Work in Prgs. (B) Investments (C) Inventories Sundry Debtors Cash And Bank Loans And Advances (i) Current Liabilities Provisions (ii) Net Curr. Assets (i ii) (D) Misc. Expenses (E) Total Assets (A+B+C+D+E) March- 2009 (Rs in millions) 154.70 53,998.50 54,153.20 21,054.90 28,571.60 103,779.70 March- 2009 73,629.00 16,170.00 57,459.00 23,180.10 12,334.00 12,099.60 3,914.60 3,089.60 32,789.00 51,892.80 31,258.30 9,858.10 41,116.40 10,776.40 30.20 103,779.70 March- 2008 (Rs in millions) 154.00 37,409.80 37,563.80 17,833.90 20,799.60 76,197.30 March- 2008 59,189.40 11,831.10 47,358.30 6,604.80 10,361.90 9,805.60 2,873.80 5,779.10 14,537.20 32,995.70 15,335.40 5,819.40 21,154.80 11,840.90 31.40 76,197.30 March- 2007 (Rs in millions) 154.00 24,813.30 24,967.30 21,156.10 13,921.10 60,044.50 March- 2007 49,290.30 7,817.50 41,472.80 9,378.40 7,098.20 6,424.40 3,203.10 529.70 7,859.40 18,016.60 12,099.10 3,854.80 15,953.90 2,062.70 32.40 60,044.50

Table : Profit & Loss Statement of Jindal Steel & Power Ltd. March - 2009 (Rs in millions) 76,778.30 Sales 1,994.60 Other Income 78,772.90 Total Income Raw Material 34,194.20 Cost 7,559.80 Excise Other 8,645.70 Expenses Operating 26,378.60 Profit Interest 2,678.90 Name 23,699.70 Gross Profit 4,330.30 Depreciation Profit Bef. 21,362.00 Tax 4,654.00 Tax 16,708.00 Net Profit Other Non-1,343.20 Recurring Income Reported 15,364.80 Profit Equity Dividend 853.30 March - 2008 (Rs in millions) 53,681.40 573.10 54,254.50 17,274.00 7,634.90 5,813.40 22,959.10 2,430.20 20,528.90 4,515.10 16,584.20 2,655.50 13,928.70 -1,559.10 12,369.60 620.20 March - 2007 (Rs in millions) 35,230.80 360.80 35,591.60 10,685.00 3,967.10 6,480.60 14,098.10 1,731.90 12,366.20 3,364.70 9,359.60 2,418.50 6,941.10 88.80 7,029.90 554.30

Ratio Analysis for 2009 Table : Analysis of Financial Ratios for 2009 Sl. No. 01. Ratios Net Working Capital = Current assets-Current liabilities Current Ratio = 02. Current Assets Current Liabilities Acid test or Quick ratio = 03. Quick Assets Current Liabilities Debt-Equity Ratio = 04. Long term debt Shareholder s Equity Particulars (Rs in millions) Current Assets = 51892.80 Current Liabilities = 41116.40 Current Assets = 51892.80 Current Liabilities = 41116.40 Quick Assets =39793.2 Current Liabilities = 41116.40 Total debt = 49626.5 Shareholder Equity = 54153.20 Values 10776.4 Remarks Liquidity position is good.

1.26

It is not safe.

0.96

It is safe.

0.91

It is good.

Interest Coverage = 05. Operating Pro&it Interest Operating Profit margin = 06. Operating Pro&it 100 Sales

Operating Profit = 26378.60 Interest = 2678.90 Operating Profit = 26378.60 Sales = 76778.30

9.84

It is not safe.

34%

It is safe.

Sl. No 07.

Ratios Gross Profit margin = Gross Pro&it 100 Sales Net Profit margin =

Particulars (Rs in millions) Gross Profit = 23699.70 Sales = 76778.30 Net Profit = 15364.80 Sales = 76778.30 Operating Profit = 26378.60 Average Assets = 132045.9

Values

Remarks

30.86 %

It is good.

08.

Net Pro&it 100 Sales Return on Assets =

20.01 %

It is not desirable.

09.

Operating Pro&it 100 Average Assets

19.97%

It is not satisfactory

Return on Investments = 10. Net Pro&it before Tax 100 Net Worth Return on Net Worth = Net Pro&it 100 Average Net Worth

Profit Before Tax = 21362 Net Worth = 54153.20 Net profit = 16,708.00 Average Net Worth = 45858.5

It is satisfactory 39.44%

11.

36.4%

It is satisfactory

Sl. No 12.

Ratios Return on Capital Employed = Operating Pro&it 100 Average Capital Employed

Particulars (Rs in millions) Operating Profit = 26378.60 Avg. Capital Employed = 152228.9

Values

Remarks

17.32%

It is not good.

Cost of Goods Sold Ratio = 13. Cost of Goods Sold Sales

Cost of goods sold = 34,194.20 Sales =76778.30 Other Expenses = 8,645.70

0.45

It is not satisfactory.

Operating Ratio = 14. Cost of Goods sold + otherExpenses Sales

0.55

It is not satisfactory.

15.

Fixed Assets turnover =

6789: ;<=9> 7::9?:

Fixed Assets = 92973.1 Sales =76778.30

0.82

It is good.

Ratio Analysis for 2008 Table: Analysis of Financial Ratios for 2008 Sl. No 01. Ratios Net Working Capital = Current assets-Current liabilities Current Ratio = 02. Current Assets Current Liabilities Acid test or Quick ratio = 03. Quick Assets Current Liabilities Debt-Equity Ratio = 04. Long term debt Shareholder s Equity Particulars (Rs in millions) Current Assets = 32,995.70 Current Liabilities = 21,154.80 Current Assets = 32,995.70 Current Liabilities = 21,154.80 Quick Assets = 23190.1 Current Liabilities = 21,154.80 Total debt = 38633.5 Shareholder Equity = 37,563.80 Values 11840.9 Remarks Liquidity position is good.

1.5

It is not safe.

1.0

It is safe.

1.0

It is good.

Interest Coverage = 05. Operating Pro&it Interest Operating Profit margin = 06. Operating Pro&it 100 Sales

Operating Profit = 22,959.10 Interest = 2,430.20 Operating Profit = 22,959.10 Sales = 53,681.40

9.44

It is not safe.

42%

It is safe.

Sl. No 07.

Ratios Gross Profit margin = Gross Pro&it 100 Sales Net Profit margin =

Particulars (Rs in millions) Gross Profit = 20,528.90 Sales = 53,681.40 Net Profit = 12369.60 Sales = 53,681.40 Operating Profit = 22,959.10 Average Assets = 86643.35

Values

Remarks

38.24%

It is good.

08.

Net Pro&it 100 Sales Return on Assets =

23.04%

It is not good.

09.

Operating Pro&it 100 Average Assets

26.49%

It is not good.

Return on Investments = 10. Net Pro&it before Tax 100 Net Worth Return on Net Worth = Net Pro&it 100 Average Net worth

Profit Before Tax =16584.20 Net Worth = 37563.80 Net profit = 13928.70 Average Net Worth = 31265.55

44.14%

It is satisfactory

11.

44.54%

It is satisfactory

Sl. No 12.

Ratios Return on Capital Employed = Operating Pro&it 100 Average Capital Employed

Particulars ( Rs in millions) Operating Profit = 22,959.10 Avg. Capital Employed = 105197.7

Values

Remarks

21.8%

It is not good

Cost of Goods Sold Ratio = 13. Cost of Goods Sold Sales

Cost of goods sold = 17,274.00 Sales = 53,681.40 Other Expenses = 5813.40

0.32

It is not satisfactory.

Operating Ratio = 14. Cost of Goods sold + otherExpenses Sales

0.43

It is not satisfactory.

15.

Fixed Assets turnover =

6789: ;<=9> 7::9?:

Fixed Assets = 64325 Sales = 53,681.40

0.83

It is good.

Ratio Analysis for 2007 Table: Analysis of Financial Ratios for 2007 Sl. No 01. Ratios Net Working Capital = Current assets-Current liabilities Current Ratio = 02. Current Assets Current Liabilities Acid test or Quick ratio = 03. Quick Assets Current Liabilities Debt-Equity Ratio = 04. Long term debt Shareholder s Equity Particulars (Rs in millions) Current Assets = 18,016.60 Current Liabilities =15,953.90 Current Assets = 18,016.60 Current Liabilities =15,953.90 Quick Assets = 11592.2 Current Liabilities =15,953.90 Total debt = 35077.2 Shareholder Equity = 24,967.30 Values Remarks

2062.7

Liquidity position is good.

1.12

It is not satisfactory.

It is not satisfactory. 0.72

1.40

It is good.

Interest Coverage = 05. Operating Pro&it Interest Operating Profit margin = 06. Operating Pro&it 100 Sales

Operating Profit = 14,098.10 Interest = 1,731.90 Operating Profit = 14,098.10 Sales = 35,230.80

8.14

It is not safe.

40 %

It is satisfactory.

Sl. No 07.

Ratios Gross Profit margin = Gross Pro&it 100 Sales Net Profit margin =

Particulars (Rs in millions) Gross Profit = 12,366.20 Sales = 35,230.80 Net Profit = 7,029.90 Sales = 35,230.80 Operating Profit = 14,098.10 Average Assets = 66821.95

Values

Remarks

35%

It is satisfactory

08.

Net Pro&it 100 Sales Return on Assets =

19.9%

It is not satisfactory.

09.

Operating Pro&it 100 Average Assets

21.09%

It is not satisfactory

Return on Investments = 10. Net Pro&it before Tax 100 Net Worth Return on Net Worth = Net Pro&it 100 Average Net worth

Profit Before Tax = 9,359.60 Net Worth = 24,967.30 Net profit = 6,941.10 Average Net Worth = 21707.2

37.48%

It is safe.

11.

31.9%

It is good.

Sl. No 12.

Ratios Return on Capital Employed = Operating Pro&it 100 Average Capital Employed

Particulars (Rs in millions) Operating Profit = 14,098.10 Avg. Capital Employed = 80691.15

Values

Remarks

17.47%

It is not safe.

Cost of Goods Sold Ratio = 13. Cost of Goods Sold Sales

Cost of goods sold = 10,685.00 Sales = 35,230.80

0.30

It is not satisfactory.

Operating Ratio = 14. Other Expenses Cost of Goods sold + otherExpenses = 6,480.60 Sales Fixed Assets turnover = 15.
6789: ;<=9> 7::9?:

0.48

It is not satisfactory

Fixed Assets = 57949.4 Sales = 35,230.80

0.61

It is not good.

Summary for Balance Sheet and Profit & Loss Statement

Table : Summary of Balance Sheet 2007 (Rs in millions) Current Assets 18016.60 2008 ( Rs in millions) 32995.7 2009 (Rs in millions) 51892.80 Remarks Current asset position has increased. Liquidity position is very good. Fixed Assets have increased due to increase in gross block. Current Liabilities have increased marginally. Debts have increased due to more investment.

Fixed Assets

57949.4

64325

92973.1

Current Liabilities Long term Liabilities

3854.80

5819.40

9858.10

35077.2

38633.5

49626.5

Table : Summary of Profit & Loss Statement 2007 (Rs in millions) 35,230.80 10,685.00 14,098.10 9,359.60 6,941.10 2008 (Rs in millions) 53,681.40 17,274.00 22,959.10 16,584.20 13,928.70 2009 (Rs in millions) 76,778.30 34,194.20 26,378.60 21,362.00 16,708.00 Remarks Sales position has doubled. Purchase of raw material has increased. Operating profit has increased. PBT has increased. Net profit has increased 140.7%

Sales Raw Material Cost Operating Profit Profit Bef. Tax (PBT) Net profit

Tata Steel
Table :Balance Sheet of Tata Steel as at 31st mar-2009 Liabilities Share Capital Reserves & Surplus Net Worth (1) Secured Loans (2) Unsecured Loans (3) Total Liabilities(1+2+3) Assets Gross Block (-) Acc. Depreciation Net Block (A) Capital Work in Prgs. (B) Investments (C) Inventories Sundry Debtors Cash And Bank Loans And Advances (i) Current Liabilities Provisions (ii) Net Curr. Assets (i - ii) (D) Misc. Expenses (E) Total Assets (A+B+C+D+E) March- 2009 March- 2008 March- 2007 (Rs in millions) (Rs in millions) (Rs in millions) 62,034.50 62,033.00 7,277.30 235,011.50 297,046.00 39,130.50 230,331.30 566,507.80 March- 2009 200,570.10 90,624.70 109,945.40 34,876.80 423,717.80 34,804.70 6,359.80 15,906.00 58,846.10 115,916.60 89,657.60 29,341.90 118,999.50 -3,082.90 1,050.70 566,507.80 210,974.30 273,007.30 35,205.80 145,011.10 453,224.20 March- 2008 164,795.90 82,234.80 82,561.10 43,674.50 41,031.90 26,049.80 5,434.80 4,650.40 345,828.40 381,963.40 68,422.60 29,135.20 97,557.80 284,405.60 1,551.10 453,224.20 133,684.20 140,961.50 37,589.20 58,864.10 237,414.80 March- 2007 160,294.90 74,863.70 85,431.20 24,974.40 61,061.80 23,329.80 6,316.30 76,813.50 40,259.50 146,719.10 63,492.40 19,304.60 82,797.00 63,922.10 2,025.30 237,414.80

Table: Profit & Loss Statement Tata Steel March - 2009 (Rs in millions) Sales Other Income Total Income Raw Material Cost Excise Other Expenses Operating Profit Interest Name Gross Profit Depreciation Profit Bef. Tax Tax Net Profit Other NonRecurring Income Reported Profit Equity Dividend 243,483.20 3,053.60 246,536.80 82,794.40 24,952.10 43,972.30 91,764.40 14,895.00 76,869.40 9,734.00 70,189.00 21,148.70 49,040.30 2,977.10 52,017.40 11,689.50 March - 2008 (Rs in millions) 196,544.10 3,472.80 200,016.90 60,248.00 25,370.20 28,480.50 82,445.40 9,290.30 73,155.10 8,346.10 68,281.80 23,802.80 44,479.00 2,391.30 46,870.30 11,689.30 March - 2007 (Rs in millions) 174,526.60 4,851.40 179,378.00 56,799.50 23,041.80 25,547.80 69,137.50 2,512.50 66,625.00 8,192.90 63,283.50 20,404.70 42,878.80 -657.30 42,221.50 9,439.10

Ratio Analysis for 2009 Table Analysis of Financial Ratios for 2009 Sl. No. 01. Ratios Net Working Capital = Current assets-Current liabilities Current Ratio = 02. Current Assets Current Liabilities Acid test or Quick ratio = 03. Quick Assets Current Liabilities Debt-Equity Ratio = 04. Long term debt Shareholder s Equity Particulars (Rs in millions) Current Assets = 115,916.60 Current Liabilities =118,999.50 Current Assets = 115,916.60 Current Liabilities = 118,999.50 Quick Assets = 81111.9 Current Liabilities =118,999.50 Total debt = 269461.8 Shareholder Equity = 297,046.00 Values - 3082.9 Remarks Liquidity available is less.

0.97

It is not safe.

0.68

It is not safe.

0.91

It is good.

Interest Coverage = 05. Operating Pro&it Interest Operating Profit margin = 06. Operating Pro&it 100 Sales

Operating Profit = 91,764.40 Interest = 14,895.00 Operating Profit = 91,764.40 Sales = 243,483.20

6.16

It is not safe.

37 %

It is good.

Sl. No. 07.

Ratios Gross Profit margin = Gross Pro&it 100 Sales Net Profit margin =

Particulars (Rs in millions) Gross Profit = 76,869.40 Sales = 243,483.20 Net Profit = 52,017.40 Sales =243,483.20 Operating Profit = 91,764.40 Average Assets = 616843.75

Values

Remarks

31.57 %

It is good.

08.

Net Pro&it 100 Sales Return on Assets =

21.36%

It is not good.

09.

Operating Pro&it 100 Average Assets

14.87%

It is not good.

Return on Investments = 10. Pro&it Before Tax 100 Net worth Return on Net Worth = Net Pro&it 100 Average Net worth

Profit Before Tax = 70189 Net Worth = 297046 Net profit = 49040.30 Average Net Worth = 285026.65

23.62%

It is not satisfactory

11.

17.20%

It is not good.

Sl. No 12.

Ratios Return on Capital Employed = Operating Pro&it 100 Average Capital Employed

Particulars ( Rs in millions) Operating Profit = 91,764.40 Avg. Capital Employed = 725122.4

Values

Remarks

12.65% It is not good.

Cost of Goods Sold Ratio = 13. Cost of Goods Sold Sales

Cost of goods sold = 82,794.40 Sales = 243,483.20

0.34

It is not satisfactory

Operating Ratio = 14. Other Expenses Cost of Goods sold + otherExpenses = 43,972.30 Sales Fixed Assets turnover = 15.
6789: ;<=9> A::9?:

0.52

It is not satisfactory

Fixed Assets = 568540 Sales = 243,483.20

0.42

It is satisfactory

Ratio Analysis for 2008 Table: Analysis of Financial Ratios for 2008 Sl. No. 01. Ratios Net Working Capital = Current assets-Current liabilities Current Ratio = 02. Current Assets Current Liabilities Acid test or Quick ratio = 03. Quick Assets Current Liabilities Debt-Equity Ratio = 04. Long term debt Shareholder s Equity Particulars (Rs in millions) Current Assets = 381963.40 Current Liabilities = 97557.80 Current Assets = 381963.40 Current Liabilities = 97557.80 Quick Assets = 355913.6 Current Liabilities = 97557.80 Total debt = 180216.9 Shareholder Equity = 273007.30 Values 284405.6 Remarks Liquidity position is good.

3.92

It is safe

3.64

It is satisfactory

0.66 It is not safe

Interest Coverage = 05. Operating Pro&it Interest Operating Profit margin = 06. Operating Pro&it 100 Sales

Operating Profit = 82445.40 Interest = 9290.30 Operating Profit = 82445.40 Sales = 196544.10

8.87

It is not satisfactory

41%

It is satisfactory

Sl. No. 07.

Ratios Gross Profit margin = Gross Pro&it 100 Sales Net Profit margin =

Particulars (Rs in millions) Gross Profit = 73155.10 Sales = 196544.10 Net Profit = 46870.30 Sales =196544.10 Operating Profit = 82445.40 Average Assets = 433708.7

Values

Remarks

37.22%

It is good.

08.

Net Pro&it 100 Sales Return on Assets =

23.8%

It is not satisfactory.

09.

Operating Pro&it 100 Average Assets

19 %

It is not safe.

Return on Investments = 10. Pro&it before Tax 100 Net worth Return on Net Worth = Net Pro&it 100 Average Net worth

Profit Before Tax = 68281.80 Net Worth = 273007.30 Net profit = 44479 Average Net Worth = 206984.4

25.01%

It is not good.

11.

21.48%

It is not satisfactory

Sl. No. 12.

Ratios Return on Capital Employed = Operating Pro&it 100 Average Capital Employed

Particulars ( Rs in millions) Operating Profit = 82445.40 Avg. Capital Employed = 523886.1

Values

Remarks

15.73%

It is not safe

Cost of Goods Sold Ratio = 13. Cost of Goods Sold Sales

Cost of goods sold = 60248 Sales = 196544.10 Other Expenses = 28480.50

0.30

It is not satisfactory

Operating Ratio = 14. Cost of Goods sold + otherExpenses Sales Fixed Assets turnover = 15.
6789: ;<=9> A::9?:

0.45

It is not satisfactory

Fixed Assets = 167267.5 Sales = 196544.10

1.17

It is not safe

Ratio Analysis for 2007 Table: Analysis of Financial Ratios for 2007 Sl. No. 01. Ratios Net Working Capital = Current assets-Current liabilities Current Ratio = 02. Current Assets Current Liabilities Acid test or Quick ratio = 03. Quick Assets Current Liabilities Debt-Equity Ratio = 04. Long term debt Shareholder s Equity Particulars (Rs in millions) Current Assets = 146,719.10 Current Liabilities = 82,797.00 Current Assets = 146,719.10 Current Liabilities = 82,797.00 Quick Assets = 123389.3 Current Liabilities = 82,797.00 Total debt = 96453.3 Shareholder Equity = 140,961.50 Values Remarks

63922.1

Liquidity position is good.

1.77

It is not satisfactory.

1.49

It is safe.

0.68

It is not safe.

Interest Coverage = 05. Operating Pro&it Interest Operating Profit margin = 06. Operating Pro&it 100 Sales

Operating Profit = 69,137.50 Interest = 2,512.50 Operating Profit = 69,137.50 Sales = 174,526.60

27.51

It is not satisfactory.

39.6%

It is good.

Sl. No. 07.

Ratios Gross Profit margin = Gross Pro&it 100 Sales Net Profit margin =

Particulars (Rs in millions) Gross Profit = 66,625.00 Sales = 174,526.60 Net Profit = 42,221.50 Sales = 174,526.60 Operating Profit = 69,137.50 Average Assets = 253753.3

Values

Remarks

38.17%

It is satisfactory.

08.

Net Pro&it 100 Sales Return on Assets =

24.19%

It is not satisfactory.

09.

Operating Pro&it Average Assets

27.24%

It is not good.

Return on Investments = 10. Pro&it Before Tax 100 Net Worth Return on Net Worth = Net Pro&it 100 Average Net worth

Profit Before Tax = 63,283.50 Net Worth = 140,961.50 Net profit = 42,878.80 Average Net Worth = 119257.25

44.89%

It is safe.

11.

35.95%

It is good.

Sl. No. 12.

Ratios Return on Capital Employed = Operating Pro&it 100 Average Capital Employed

Particulars (Rs in millions) Operating Profit = 69,137.50 Avg. Capital Employed = 329720.95

Values

Remarks

20.96%

It is not satisfactory.

Cost of Goods Sold Ratio = 13. Cost of Goods Sold Sales

Cost of goods sold = 56,799.50 Sales = 174,526.60

0.32

It is not good.

Operating Ratio = 14. Other Expenses Cost of Goods sold + otherExpenses = 25,547.80 Sales Fixed Assets turnover = 15.
6789: ;<=9> 7::9?:

0.47

It is not good.

Fixed Assets = 171467.4 Sales = 174,526.60

1.01

It is not safe.

Summary for Balance Sheet and Profit & Loss Statement Table : Summary of Balance Sheet 2007 (Rs in millions) Current Assets Fixed Assets 146719.10 2008 (Rs in millions) 381963.40 2009 (Rs in millions) 115916.60 Remarks Short term liquidity available is very less.

171467.4

167267.5

568540

Fixed Assets have increased due to increase in investment. Substantial increase in liabilities. Liquidity position is not good. Debts have increased because of more investment.

Current Liabilities

82797

97557.80

118999.50

Long term Liabilities

96453.3

180216.9

269461.8

Table : Summary of Profit & Loss Statement 2007 ( Rs in millions) 174,526.6 2008 (Rs in millions) 196,544.10 2009 (Rs in millions) 243,483.20 Remarks Sales have increased by 39.5 % Expenses have increased. Operating profit has increased. PBT has increased. Net profit has increased marginally.

Sales

Raw Material Cost Operating Profit Profit Bef. Tax (PBT) Net profit

56,799.50

60,248.00

82,794.40

69,137.50

82,445.40

91,764.40

63,283.50 42,878.80

68,281.80 44,479.00

70,189.00 49,040.30

FINDINGS
Comparison of Current ratio of Tata Steel and Jindal Steel and Power Ltd. from 2004-09
Table: Comparison of Current ratio JSPL Dec , 2004-05 1.34 TATA STEEL 0.71 REMARKS JSPL has a better ratio JSPL has a better ratio Tata Steel has a better ratio TATA STEEL has a better ratio JSPL has a better ratio

Dec , 2005-06 Dec , 2006-07 Dec , 2007-08 Dec , 2008-09

1.26 1.1 1.5 1.26

0.72 1.77 3.92 0.97

From the above table, it can be concluded that current ratio of JSPL Ltd. was always more than 1 from 2004 -09. Short term liquidity of Jindal Steel & Power Ltd. was good as current ratio was more than 1. Liquidity position of Tata steel was not satisfactory as the ratio varied from 0.71 to 0.97 in five years.

In the period of 5 years JSPL has improved its liquidity position compared to TATA STEEL, while positions of Tata Steel has come down. Current ratio of Tata Steel decreased steeply from 2007 -09 due to its decrease in current assets position.

Comparison of Debt Equity ratio JSPL and TATA STEEL Companies from 2004-09 Table : Comparison of Debt Equity ratio JSPL TATA STEEL 0.38 0.25 0.68 0.66 0.91 Remarks

Dec , 2004-05 Dec , 2005-06 Dec , 2006-07 Dec , 2007-08 Dec , 2008-09

1.13 1.48 1.4 1 0.91

JSPL has a better ratio JSPL has a better ratio JSPL has a better ratio JSPL has a better ratio JSPL &Tata Steel has a better ratio

From table it can be seen that Debt position of JSPL was satisfactory as the ratio varied from 1.13 to 0.91 from 2004-09 because of increasing investment. However D-E ratio of Tata Steel remained less than 1 from 2004-09 as their debts were paid off. JSPL has the highest debt- equity ratio of 1.48 and 1.40 from 2005-07 compared to TATA STEEL. Tata Steel has improved its ratio from 0.38 to 0.91 in five years. Though owners share in the company has decreased but more outsiders have started investing in the company and that has lead to desirable ratio.

Comparison of Net Profit margin of JSPL and TATA STEEL companies from 2004-09 Table : Comparison of Net Profit Margin JSPL TATA STEEL 23.97% REMARKS TATA STEEL has a better net profit margin. TATA STEEL has a better net profit margin. TATA STEEL has a better net profit margin. TATA STEEL has a better net profit margin. TATA STEEL has a better net profit margin.

Dec , 2004-05

22.88%

Dec , 2005-06

22.33%

23.17%

Dec , 2006-07 Dec , 2007-08 Dec , 2008-09

19.9% 23.04% 20.01%

24.19% 23.8% 21.36%

From Table it can be seen that TATA STEEL has the highest profit margin in all the five years which is because of their increase in sales. Profit Margin of GMDC came down from 28.04 % to 23.6% from 2004-09. Though sales of the company JSPL increased, their profit percentage decreased from 2004-09 due to their decrease in net profit.

Comparison of ROI of Different Companies from 2004-09 Table : Comparison of ROI JSPL Tata Steel Remarks Tata steel has a better ratio TATA STEEL has a better ratio TATA STEEL has a better ratio JSPL has a better ratio JSPL has a better ratio

Dec , 2004-05

52.31%

74.57%

Dec , 2005-06 Dec , 2006-07 Dec , 2007-08 Dec , 2008-09

39.64% 37.48% 44.14% 39.44%

53.28% 44.89% 25.01% 23.62%

From the above table it can be seen that ROI of Tata Steel was highest in 2004-05 with 74.57% and then it declined to 23.62%. Similarly ROI of JSPL decreased from 52.31 % to 39.41 % due to significant increase in its expenses.

CONCLUSION
Analysis and interpretation of financial statements is an important tool in assessing companys performance. It reveals the strengths and weaknesses of a firm. It helps the clients to decide in which firm the risk is less or in which one they should invest so that maximum benefit can be earned. It is known that investing in any company involves a lot of risk. So before putting up money in any company one must have thorough knowledge about its past records and performances. Based on the data available the trend of the company can be predicted in near future. This project mainly focuses on the basics of different types of financial statements. Balance Sheet and Profit & Loss statements of five different coal and non coal mining companies have been studied. Short term liquidity position of JSPL in 2007 was good. However, current ratio, quick ratio, net profit margin, return on assets, return on investments and return on capital employed were unsatisfactory. The ratios that are found to be desirable are debt-equity ratio, operating profit margin and gross profit margin. In 2008-09, net working capital available with the company was adequate. The ratios that were found to be satisfactory are quick ratio, debt-equity ratio, return on investments, return on net worth, operating profit margin and gross profit margin. Current ratio, return on capital employed, return on assets and net profit margin of the company were unacceptable. For Tata Steel in 2007, net working capital, quick ratio, return on investments, return on net worth, operating profit margin and gross profit margin of the company were satisfactory. However, debt-equity ratio, current ratio, net profit margin, return on capital employed and return on assets were undesirable. In 2008, only companys current ratio improved due to substantial increase in current assets position. In 2009, net working capital available was inadequate. Companys debt-equity ratio, operating profit margin and gross profit margin were desirable and current ratio, return on investments, return on net worth, return on capital employed and return on assets were found to be unsatisfactory.

In this project, comparison of different ratios viz. current ratio, debt-equity ratio, net

profit margin and return on investment of all the companies from 2004-09 has been done. It was observed Current ratio of Jindal Steel & Power Ltd. was satisfactory as it remained more than 1 for all the five years. Liquidity position of Tata steel was not satisfactory as the ratio varied marginally from 0.71 to 0.97 in five years. Debt position of JSPL was satisfactory as the ratio varied from 1.13 to 0.91 from 2004-09. However D-E ratio of Tata Steel was less than 1 in five years as their debts were paid off. Though sales of the company JSPL andTata Steel increased, their profit percentage decreased from 2004-09 due to their decrease in net profit. ROI of Tata Steel was highest in 2004-05 with 74.57% and then it declined to 23.62%. Similarly ROI of JSPL decreased from 52.31% to 39.44%.

BIBLIOGRAPHY
Khan, M.Y. (1988). Financial Management, Tata Mc-Graw Hill , New st Delhi, 1 edition Bhattacharya, Asish. K. (2007). Introduction to Financial Statement Analysis, Elsevier, New Delhi , 1st edition Wanless, R.M. (1983). Finance For Mine Management, Chapman & Hall Ltd , New York , 1st edition Khanna, O.P. (1999). Industrial Engineering And management , Dhanpat st Rai , 1 edition, New Delhi

Web References:
http://en.wikipedia.org/wiki/Financial_statements http://en.wikipedia.org/wiki/Balance_sheet http://en.wikipedia.org/wiki/Asset http://en.wikipedia.org/wiki/Financial_statement http://en.wikipedia.org/wiki/Unsecured_loan http://en.wikipedia.org/wiki/Income_statement http://en.wikipedia.org/wiki/Cash_flow_statement