INTRODUCTION

When we talk of Research Methodology, we not only talk of the research methods but also consider the logic behind the methods we use in the context of our research study and explain why we are using a particular method or technique and why we are not using so that research results are capable of being evaluated either by research himself or by others. As the title of the project suggests the project is about the study of the Comparative Financial Analysis of the organization. So my objective was to know that how the capital should be maintained and utilized in the company and accordingly study the effect of each upon the profit contributed by each in the profits of the company and thereby even study the method that should be used in this respect.

SAMPLE SIZE
The sample size refers to the no. of employees i.e. head of various section of finance selected from the company to know about its various section and there functioning constitute a sample. The sample size used for study includes 12 Employees of the organization those were the respective heads of their department who were appointed to help the trainees. For doing Comparative Financial Analysis I select 5 aircraft manufacturing companies and calculate there ratios by using there financial statements and annual general report and compare them.

METHOD OF SAMPLING ADOPTED

The process employed for the sample was Cluster Sampling. Sample Size: 5 Method of Sampling: Cluster Area of work: Comparative Financial Analysis Method of Data collection: Secondary Tools: Annual report, Balance sheet, Internal sources.

SOURCES OF DATA COLLECTION

SECONDARY DATA
Secondary data are those which have already been collected by someone else and have already been passed through the statistical process. Acc. to Dessel-Data collected by other persons All the data has been collected from internal source that includes:a) Staff b) Magazines c) Books d) Websites e) Reports f) Files. g) Journal h) Manual 2

COMPARATIVE ANALYSIS OF THE BALANCE SHEET

(Rs. in crore)

Particulars ASSETS: Current Assets:Inventories Debtors Cash Loans & Advances

31st 31st March,2008 March,2007

Increase/decrease %increase/Decrease

841463.82 148610.5 1964631.86 421341.58

722251.99 128117.86 1670552.11 404932.74 2925854.7

119211.83 20492.64 294079.75 16408.84 470193.06

16.51% 16.00% 17.60% 4.05% 16.07%

-1 3396047.76 Fixed Assets:Blocks Tools & Equipment Investment Deffered Tax Assets -2 (1+2) LIABILITIES: Loans:Secured Un-secured Deffered Deffered tax Liability

132276.7 295410.66 1920.26 32285.99 461893.61 3857941.37

123125.4 255355.79 1527.76 21779.62 401788.57 3327643.27

9151.3 40054.87 392.5 10506.37 60105.04 530298.1

7.43% 15.69% 25.69% 48.24% 14.96% 15.94%

0 0 202.52 137904.62

0 233.73 168.8 133473.3 133875.83

0 -233.73 33.72 4431.32 4231.31

100% -100.00% 19.98% 3.32% 3.16%

(A) 138107.14 Current Liability & Provision:-

Liabilities Provisions (B)

3237223.16 117671.82 3354894.98

2884915.36 76880.72 2961796.08

352307.8 40791.1 393098.9

12.21% 53.06% 13.27%

Capital & Reserves:Capital 12050 Reserves & 516322.34 Surplus (C) (A+B+C) 528372.34 4021374.46

12050 391391.74 403441.74 3499113.65

0 124930.6 124930.6 522260.81

0.00% 31.92% 30.97% 14.93%

Interpretations: There has been an increase in Current Assets by 16.07% and the main contributories for the increase in the liquidity position of the company are INVENTORIES (shown an increase of approx.17%) and CASH (increased approx by18 %). Fixed asset show an increase of Rs 60000crore (approx) which is a percentage increase of 14.96%. Reserves has been increased by 32% because of which it may be concluded that the company can issue further shares to their existing shareholders as they altogether remained content during the year. The overall financial position of the company can be regarded to satisfactory.

COMPARATIVE ANALYSIS OF THE PROFIT& LOSS ACCOUNT

ANALYSIS OF THE PROFIT& LOSS ACCOUNT COMPARATIVE

(Rs. in crore)

Particulars

2008

2007 Increase/decrease

% Increase/decrease 10.81% -21.67%

Sales Less:-Material consumed GROSS PROFIT(1) Add:Change in WIP(a) Other Incomes(b) Capital income(c) Total(1+a+b+c)

862533.06 468443.05

778360.9 598039.81

84172.16 -129596.76

394090.01

180321.09

213768.92

118.55%

16820.49 171484.5 40397.61 622792.61

141855.62 114347.28 35088.82 471612.81

-125035.13 57137.22 5308.79 151179.8

-88.14% 49.97% 15.13% 32.06%

OPERATING EXPENCES:Amortization 35552.83 Salaries & 175927.94 Wages Other Expenses Interest Depreciation 123164.87 1322.96 11795

26470.17 105021.88 113934.39 1594.23 10028.43

5

9082.66 70906.06 9230.48 -271.27 1766.57

34.31% 67.52% 8.10% -17.02% 17.62%

Provision -2 Profit Before Tax(Total-2)

53074.88 400838.48 221954.13

44918.71 301967.81 169645

8156.17 98870.67 52309.13

18.16% 32.74% 30.83%

Less:Tax Profit After Tax

53234.95 168719.18

59484.27 110160.73

-6249.32 58558.45

-10.51% 53.16%

Interpretations: It is noticed that in spite of increase in sales by 11% approx. company is incurring gross profit by 118.55%. The major reason behind this is that the consumption of raw material is decrease by 21.67 s% in comparison to increase in sales. Work-in-progress decreases significantly i.e. 88.14%. Profit Before Tax has been increased considerably from Rs. 169645crore to Rs.221954.13crore. The taxes of the company have also decreased significantly by approx. 10%, which further increases the Net Profit to 53.16%. The overall profitability can be regarded to be satisfactory.

RATIO ANALYSIS OF HINDUSTAN AERONAUTICS LIMITED

1. LIQUIDITY RATIOS:-

The liquidity ratios measure the liquidity position of the firm and its ability to meet its maturing short-term obligations. Liquidity is defined as the ability to realize value in money, the most liquid form of assets. Liquidity ratios are calculated to measure the short-term financial soundness of the business. The ratio assesses their capacity of the company to repay its short-term liability. Banks and other moneylenders are interested in the current assets of the company that is short term Solvency of the business. The important ratios in measuring short term solvency are:-

Current ratio: The Current Ratio is a measure of the firms Short-term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. Ratio of greater than one means that the firm has more current assets than current claims against them.

Quick Ratio: Also called as the acid test ratio, it establishes a relationship between quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted into cash 7

immediately or reasonably soon without a loss of value. Cash is the most liquid asset, other assets that are considered to be relatively liquid and included in quick assets are Debtors, Bills receivables and Marketable securities (temporary quoted investments).

Absolute liquid ratio: Since cash is the liquid asset, a financial analyst may examine Cash ratio and its equivalent to current liabilities. Trade investments or marketable securities are equivalent of cash; therefore they may be included in the computation of cash ratio/absolute liquid ratio.

RATIOS Current Ratio

CALCULATED BY (Current assets, Loans & advances) (Current liabilities & advances)

IDEAL RATIO 2:1

Quick Ratio

(Current assets - inventories) (Current LiabilitiesBank overdraft)

1:1

Absolute Liquid Ratio

(Absolute liquid assets*) (Current liabilities) * =Cash in hand + at bank + short term investments

1:2

Following is the comparison of H.A.L.s LIQUIDITY RATIO of Current year (2007) with that of previous year (2006) Ratios Years H.A.L. Current Ratio 2008 0.98 2007 0.98 Quick Ratio 2008 0.74 2007 0.77 Absolute Liquidity ratio 2008 0.78 2007 0.52

Interpretations: For CURRENT RATIOS: It can be concluded here that for HINDUSTAN AERONAUTICS LIMITED, the ratio stands out to be 0.98 and while comparing it with the previous year, we can conclude that there is no change in the current ratio of the organization. The ratio is not an ideal ratio and the solvency position of the firm can be regarded to be quite weak. It can be followed from the ratio that the firm is not comfortable in paying off its current liabilities. It can be also said that the firm follows a faulty investment policies as too much money remains blocked.

For QUICK RATIOS: A quick ratio of 1:1 is considered to be the ideal one. For H.A.L.s current year as compared to the previous year we can see that there is a slight decline in the ratio, which concludes that either company buys inventory or pay back some lone. .

For ABSOLUTE LIQUIDITY RATIO: HINDUSTAN AERONAUTICS LTD. stands to satisfy the ratio which says that an ideal ratio is 50%(1:2) i.e. absolute liquid assets worth one-half of the value

of the current liabilities are sufficient for a satisfactory liquid position of the company.

H.A.L. can be regarded to be the sound enterprise as there has been a remarkable increase in the cash ratio position of the company.

2. LEVERAGE RATIOS: -

The long term financial stability of the firm may be considered as dependent upon its ability to meet all its liabilities, including those not currently payable, The ratios which are important in measuring the financial leverage of the company are: -

Debt-Equity Ratio: Several debt ratios may be used to analyze the long-term solvency of a firm. The firm may be interested in knowing the proportion of the interest-bearing debt (also called funded debt) in the capital structure.

Shareholders Equity Ratio: It is calculated to find the worth of the shareholders in comparison to the total assets of the firm. To see whether the firm is capable of paying to the equity shareholders out of the assets available.

10

 Long Term Debt to Shareholders Net worth Ratio: The ratio compares long term debts to the net worth of the firm i.e., the capital and free reserves less intangible assets. This ratio is finer than the debt equity ratio and includes capital, which is invested in fictitious assets like deferred expenditure and carried forward losses.

Fixed assets to long Term funds Ratio:

This ratio indicates the proportion of long term funds deployed in fixed assets. Fixed assets represent the gross fixed assets less depreciation provided on this bill till the date of calculation.

RATIOS

CALCULATED BY

Debt-Equity Ratio

(Long term Debt) (Shareholders fund)

Shareholders Equity Ratio Long term debt to shareholders net worth Fixed Assets to Long term funds Ratio

(Shareholders equity) (Total Assets (tangible)) (Long Term Debt) (Shareholders Net Worth) (Fixed Assets) (Long Term Funds)

11

Calculation of Ratios:-

Debt-Equity Shareholders

Long Term Debt to Fixed assets to Long Shareholders worth ratio Net term funds ratio

Ratios

ratio

Equity ratio

2008

2007

2008

2007 0.04

2008 0.33

2007 11.42

2008 3.00

2007 2.31

H.A.L.

11.11 11.72 0.03

Interpretations: For Debt-Equity Ratio:

Since we know that the use of Debt capital has direct implications for the profit accruing to the ordinary shareholders, and the expansion is often financed in this manner with the objective of increasing the shareholders rate of return. Regarding Hindustan Aeronautics Limited we can say that the capital gearing position is satisfactory and the company can benefit from issuing capital, as it is not able to reap the benefit of trading with shareholders fund.

For Shareholders Equity Ratio:

It is being said that the larger the proportion of the shareholders equity, the stronger is the financial position of the company.

12

We can conclude from the data calculated above that the financial position of the company is not strong from the point of view of the shareholders funds as their ratio to the fixed assets is even less than 50%

For Long Term Debt to Shareholders Net Worth Ratio:

It shows the capacity of the Net Worthiness of the shareholders to cover the Long term Debts of the company. Since the long-term debt represents only 30%of the shareholders net worth leaving balance 70% to other current liabilities, gives an indication of strong short-term as well as long-term solvency of the company. As compared to the previous year we can say that there is a sudden decline in the long-term debt with reference to the shareholders net worth.

For fixed Assets to long Term funds Ratio: The high ratio indicates the high proportion of long term funds deployed in fixed assets. It indicates the long-term solvent position of the company. In the calculation done above we can say that the company is running in a solvent position and that the funds deployed in the fixed assets are appropriate.

3. ASSET MANAGEMENT RATIOS:Asset Management ratios measure how effectively the firm employs its resources. These ratios are also called activity or Turnover ratios which involves comparison between the level of

13

sales and investment in various accounts- inventories, debtors, fixed assets, etc. asset Management Ratios are used to measure the speed with which various accounts are converted into sales or cash. The following asset Management ratios are calculated for analysis: -

Inventory Turnover Ratio: The Inventory Turnover Ratio measures how many times a companys inventory has been sold during the year. If the inventory turnover ratio has decreased from past, it means that either inventory is growing or sales are dropping in addition to that, if a firm has a turnover that is slower than for its industry, then there may be obsolete goods on hand, or inventory stocks may be high. Low inventory has impact on the liquidity of the business.

Inventory Ratio: The level of inventory in the company may be assessed by the use of the inventory ratio, which measures how much has been tied up in the inventory.

Fixed Assets Turnover Ratio: An increase in the fixed asset figure may result from the replacement of an asset at an increase price or the purchase of an additional asset intended to increase production capacity.

Total Assets Turnover Ratio:The higher the ratio indicates overtrading of total assets, while a low indicates idle capacity. 14

RATIOS Inventory Turnover Ratio

CALCULATED BY (Cost of goods sold/Sales) (Average Inventory*) *=(Opening stock + closing stock)/2

Inventory Ratio

(Inventory) *100 (Current Assets)

Fixed Assets Turnover Ratio

(Sales) (Fixed Assets)

Total Assets Turnover Ratio

(Sales) (Total Assets)

Calculation of Ratios:-

Ratios

Inventory Turnover Ratio 2008 2007 0.89

Inventory Ratio

Fixed

Assets Total

assets

Turnover Ratio 2008 24.69% 2007 2008 2007 1.58

Turnover Ratio 2008 0.23 2007 0.22

H.A.L.

0.99

22.59% 1.94

Interpretations: For Inventory Turnover Ratio:

The Inventory Turnover Ratio measures that, how many times a companys inventory has been sold during the year. Inventory turnover rate in H.A.L. is comparatively high when compared to the previous year 2007, it show better position of company.

15

 There has been a slight variation seen in the Inventory Turnover Ratio i.e. it has
increased from 0.89 to 0.99, which means that the ability of the firm to convert its assets in sales has increase.

For Inventory Ratio: It means that how much amount of inventory is being contributed by current assets. Here we may say that H.A.L. holds approx. 25% of the current assets as inventory, which means that it is been strongly backed up by 75% of fixed assets. But with this 25% contribution from current assets fixed assets somewhere block the liquidity of the company.

For Fixed Assets Turnover Ratio: This ratio is used for calculating the contribution of the fixed assets in terms of sales made by the company. In the above calculation we can see that the 75% backup being given by the fixed assets is having the capacity to be converted into sales amount. For Total asset Turnover Ratio: Under this it can be concluded that higher ratio indicates overtrading of total assets, while a low ratio indicates idle capacity.

16

The firm can be regarded as using the assets effectively.

4. PROFITABILITY RATIOS:

The purpose of study of profitability ratios are to help assessing the adequacy of profits earned by the company and also to discover whether profitability is increasing or decreasing. The profitability of the firm is the net result of a large number of policies and decisions. The profitability ratios show the combined effects of liquidity, asset management and debt management on operating results. Profitability ratios are measured with reference to sales, capital employed, total assets employed, shareholders funds etc., the major profitability rates are as follows:

Gross Profit Margin:

The ratio measures the gross profit on the total net sales made by the company. The gross profit represents the excess of sales proceeds during the period under Observation over their cost, before taking into account administration, selling and Distribution and financing charges. The ratio measures the efficiency of the Companys operations and this can also be compared with the previous years Results to ascertain the efficiency.

Net Profit Margin: The ratio is designed to focus attention on the net profit margin arising from business

17

operations before interest and tax is deducted. The convention is to express profit after tax and interest as a percentage of sales. A drawback is that the percentage which results varies depending on the sources employed to finance business activity; interest is charged above the line while dividends are deducted below the line

Cash Profit Ratio:

The cash profit ratio is a more reliable indicator of performance where there are sharp fluctuations in the profit before tax and net profit from year to year owing to difference in depreciation charged Return On Total Assets: The profitability of the firm is measured by establishing relation of net profit with the total assets of the organization. This ratio indicates the efficiency of utilization of assets in generating. Ratio Calculated By (Sales Cost of goods Sold) *100 (Sales) Net Profit Margin (Net Profit before Interest and Tax)*100 (Sales) Cash Profit Ratio (Cash Profit) * 100 (Sales) Return on Total Asset (Net Profit after Tax)* 100 (Total Assets)

Gross Profit Margin

18

Calculation of Ratios:Ratios Gross Margin 2008 H.A.L. 0.90 2007 0.89 2008 22.41% 2007 Profit Net profit Margin Cash Ratio 2008 2007 1.58% Profit Return on total asset 2008 2007

21.09% 1.94%

21.38% 16.03%

Interpretations:o The gross profit margin has increased but by a very small margin.

o There has been a considerable increase in the net profit margin which means that
the liquidity position of the company is good and that they are in a good position to give returns to their investors.

o The cash position of the company has also increased although the increase is less
considerable.

o The return on total asset position of the company has increased tremendously and
that they are getting a benefit in investing.

19

Comparative Study of Various Aeronautic Industries with H.A.L.

After Discussing the Introduction of various Companies, we can now do a comparative study of these Companies with HINDUSTAN AERONAUTICS LIMITED.

1. LIQUIDITY RATIOS: Current Ratio Quick Liquid/ Acid Test Ratio Absolute Liquid/Super Quick Ratio

CURRENT RATIO:

Companies

Valuation (2008)

H.A.L. British Airways EADS Boeing Goodrich Corp. Lockheed Martin Corp.

0.98 0.77 1.13 0.97 0.09 2.04

20

Fig.7

Interpretation:

From the data and statistics given above we can conclude that the solvent position of GOODRICH CORP. is very good. As compared to other industry players we can say that H.A.L. is Ranked 3 rd, which means that the financial position is below satisfactory and that other companies are doing fairly well.

It even concludes this that current assets are not sufficient to fulfill the requirements of the current liabilities.

21

QUICK RATIO:

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Goodrich Corp. Lockheed Martin Corp.

0.74 0.75 0.57 0.95 0.09 0.90

Fig.8

22

Interpretations:

The major advantage holder in the comparison is Boeing. Although it is even not the ideal ratio but yet it is highly earned ratio in our study above and on this analysis we can even conclude that the company is able to fulfill its current obligations very actively.

H.A.L. once again we can see that is earning a less than satisfactory returns. And competing in the world it stands out to be equivalent to British Airways.

ABSOLUTE LIQUID RATIO:

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Goodrich Corp. Lockheed Martin Corp.

0.78 0.03 0.27 0.66 0.23 0.04

23

Fig.9

Interpretation:

We can see clearly that H.A.L. is the most beneficiary organization amongst this analysis, and that it is having a substantial market share. Although it is a monopolistic concern in the country but when competing globally it is having an adequate share.

2. LEVERAGE RATIO

Debt-Equity Ratio Shareholders Equity Ratio Long term Debt to Shareholders Net worth Ratio Fixed assets to Long Term Funds Ratio

24

Debt-Equity Ratio

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

0.04 2.22 0.30 0.90 0.32 1.18

Fig.10

25

Interpretation:
H.A.L. amongst all can be regarded to the least or the lowest geared company. Therefore we can say that the earning of the shareholders from the company is very low or negligible. Among the comparative firms British Airways is the Highly Geared Company as it is fairly able to give returns to its shareholders.

Shareholders Equity Ratio

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

0.03 0.29 0.30 0.90 0.32 1.18

26

Fig.11

Interpretation:

H.A.L. amongst all can be regarded to the least or the Lowest Geared Company. Among the comparative firms Goodrich Corp. is the Highly Geared Company as it is fairly able to give returns to its shareholders followed by Boeing.

27

Long Term Debt to Shareholders Net Worth Ratio

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

0.33 2.27 3.22 3.06 3.63 1.25

Fig.12

28

Interpretation:

As the data gives the factual idea about of the assets available to meet long term liabilities, we can see that H.A.L. does not show the actual picture and therefore they are not able to satisfy the long term requirement through Shareholders worth.

4. ASSET MANAGEMENT RATIO

Inventory Turnover Ratio Inventory Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio

Inventory Turnover Ratio

Company Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

0.99 107.15 1.91 2.72

29

Fig.13

Interpretation:

H.A.L. being an order based organization i.e. they receive orders and manufacture product has inventory in hand which they are not able to sale on the required time, whereas on the contrary we can see that the stock turnover of British Airways is quite good as they dont have to keep stock stored as its being sold very easily in the market.

30

Inventory Ratio

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

24.59% 3.01% 49.23% 3.56% 0.37% 50.03%

Fig.14

31

Interpretation:

We may say that H.A.L. holds approx. 25% of the current assets as inventory which means that it is been strongly backed up by 75% of fixed assets, Which is quite low when compared with EADS and GOODRICH CORP. but still gives a more than satisfactory ratio.

Fixed Assets Turnover Ratio

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

1.94 0.82 0.67 --0.75

32

Fig. 15

Interpretation:

In the above calculation we can see that the 75% backup being given by the fixed assets is having the capacity to be converted into sales amount.

Total Assets Turnover Ratio

Company

Valuation (2008)

H.A.L. British Airways EADS Boeing Lockheed Martin Corp. Goodrich Corp.

0.23 0.66 0.52 --0.85

33

Fig.16

Interpretation:

It can be easily interpreted that the most advantageous amongst them is Goodrich Corp. On comparing H.A.L. with its competitors we can say that the performance of H.A.L. is for behind than its competitors.

34

On analyzing the financial performance of HAL and its competitors the following points came into light:
The Comparative Vertical study of the Balance Sheet shows that the Current Assets show an increase by 16.07% and also the liquidity position of the company has increased because of the INVENTORIES (that shows an increase of approx.16.51%), DEBTOR(increased by approx 16%) and CASH (which has increased approx by 17.7%). Fixed asset show an increase of Rs. 60000crore (approx) which has approx. increased by 14.96%. Reserves has been increased by 32% because of which it may be concluded that the company can issue further shares to their existing shareholders as they altogether remained content during the year. The Comparative analysis of P & L a/c reveals that the increase in the sales is 53% approx. and the resultant change is the gross profit of around 200000 i.e.120% approx. The taxes of the company have also decrease significantly by approx. 10%, which increases the Net Profit to 53%. Individually however the firms ratio reveals out to be positive but when they are compared with the worlds leading companies they lack far behind (reasons can be many).

The comparison however concludes that current assets are not sufficient to fulfill the requirements of the current liabilities.

Talking about the liquidity position of the company it has a considerable share over the market. We can see from our study that H.A.L. is the most beneficiary organization and although it is a monopolistic concern in the country but when competing globally it is not having an adequate share.

35

CONCLUSION
Following are the conclusions that are derived from the purchase procedure: Organization has a high goodwill in the market and that the work culture resembles with the Corporate Work Environment. As per the topic of the study is concerned, we can conclude that the company is having a very good procedure of purchasing. The pattern of purchasing is very systematic as before purchasing they found the need of the material required, and therefore the organization from time to time inspect the inventory of the organization due to which it is up to date and no efficiency comes of raw material or any other material related to organization. As for purchasing of the material they first do the planning and follow the MPRs (material purchase requirement) with related departments, authorize issue of material, liaise with shop engineer for day to day production problem related to material. For purchasing they prepare RFQ (request for quotation) and tendering, receiving quotation/tender opening, commercial, vetting, evaluation of quotes and completion of comparative statements. convening and coordinating PC/MPC meeting , arrange for negotiations if any, and arrange long term business agreement/rate contract if any, issuance of purchase order after coordination with finance and approval of corporate office level. Purchase order progression is done for ensuring the availability of material in time and ensures prompt payment to supplier after receipt of material follow up of replacement/rectification against any rejection and warranty claim. 36 proposal at division/ complex/

 Vendor evaluation and directory is done. Coordination with regards to contract management, licence agreement, co-production agreement etc has been done after that they resolve commercial disputes /arbitration. At last preparation of Purchase budget /Foreign exchange budget is being done. So, this is the procedure in shot and according to me there is no loop whole or any weaker section founded by me in the procedure of purchasing.

37

Recommendations\Suggestions
Company should try to decrease its operating cycle, so that appropriate profit of the company can be shown in the balance sheet to the share holders. Company should increase the sale as the net profit is 53% inspite the increase in sale is only 10%. Companys current asset are less than the current liabilities it means that shortterm solvency of the company is not good, so the organization should pay attention towards satisfying and achieving an optimum level of 2:1, so that the company may not suffer from high/low ratios. The firm should have an optimum amount of cash so that the cash requirement can be fulfilled adequately. HAL should go for more expansion in the form of Shares as this will help building the confidence of the shareholders and their participation in the management. The company should invest in current account more. Ideal fixed asset should be disposed of and converted into cash so that the liquidity of the firm can be increased and in turn the productivity of fixed asset can be increased. Company should tries to use more long term loans for enjoying benefits of gearing, so that earning of the share holders can be increased. Company should try to explore new foreign market and should enter in manufacturing of commercial aircraft for domestic as well as for international market so that it can utilize its resources well and can increase its profitability. 38

Reference Books:
Pandey I.M. Management Accounting ( Vikas, 3rd Edition), 2009 Kishore Ravi M - Taxmanns Financial Management (taxmann , 7th edition)2008 Goel D.k. Accountancy (arya 6th edition )2005 Kothari C.R.- Research Methodology (New Age International , 2nd edition) 200 M.Y Financial Management (Tata McGraw Hill, 3rd Edition), 2003.

Websites:
www.google.com www.hal-india.com www.goodrich.com www.britishairways.com www.eads.eu Corporate website of Boeing www.wikipedia.com

Journals and magazines:

Manual of H.A.L. Monthly Journal produced by H.A.L.

39

ANNEXURES

I. Financial Statement of Hindustan Aeronautics Limited..

II. Financial statement of British Airways...

ii

III. Financial statement of EADS..

iii

IV. Financial Statement Of Boeing..

iv

V. Financial statement of Goodrich Corporation

Annexure (i) 40

41

42

Annexure (ii) Profit & Loss Account Date of Accounts Consolidated Subsidiary No. of Weeks Currency 31/03/2008 Yes No 52 ( '000) 31/03/2007 Yes No 52 ( '000)

Audit Qualification

No

No

1 Turnover Cost of Sales Gross Profit 2 Operating Profit Non Trading Income Interest Payable Pre-tax Profit Taxation Profit After Tax Dividends Payable Retained Profit Value Added

8,940,000 8,679,000 261,000 (21,000) 371,000 345,000 5,000 15,000 (10,000) 195,000 (216,000) 2,602,160

8,892,000 8,273,000 619,000 353,000 196,000 324,000 225,000 19,000 206,000 191,000 15,000 2,816,784

43

Balance Sheet Date of Accounts Consolidated Subsidiary No. of Weeks Currency 31/03/2008 Yes No 52 ( '000) 31/03/2007 Yes No 52 ( '000)

3 Tangible Fixed Assets Intangible Assets Total Fixed Assets

10,861,000 62,000 10,923,000

10,241,000 0 10,241,000

Stocks Trade Debtors Cash 4 Miscellaneous Current Assets Total Current Assets

78,000 889,000 103,000 1,522,000 2,592,000

84,000 905,000 112,000 1,482,000 2,583,000

5 Creditors: Amounts falling due within 3,366,000 one year 3,048,000

44

Total Assets less Current Liabilities

10,149,000

9,776,000

6 Total Long Term Liabilities

7,002,000

6,421,000

Total Liabilities

10,368,000

9,469,000

7 Share Capital & Reserves P & L Account Reserve Revaluation Reserve Shareholders' Funds Capital Employed

1,055,000 1,807,000 285,000 3,147,000 10,149,000

1,032,000 2,033,000 290,000 3,355,000 9,776,000

Net Worth Working Capital Contingent Liabilities

3,085,000 (774,000) 254,000

3,355,000 (465,000) 182,000

Cash Flow

Date of Accounts Consolidated Subsidiary

31/03/2008 31/03/2007 Yes No Yes No

45

No. of Weeks Currency

52 ( '000)

52 ( '000)

Net Cashflow from Operating Activities Net Cashflow from Return on Investment and Servicing of Finance Net Cashflow before Financing Net Cashflow from Financing Increase in Cash

1,186,000 1,241,000 (513,000) 316,000 (319,000) (3,000) (411,000) 303,000 (235,000) 68,000

46

Annexure (iii) INCOME STATEMENT Currency in Millions of European Union Euros Revenues TOTAL REVENUES Cost of Goods Sold GROSS PROFIT Selling General & Admin Expenses, Total R&D Expenses Other Operating Expenses OTHER OPERATING EXPENSES, TOTAL OPERATING INCOME Interest Expense Interest and Investment Income NET INTEREST EXPENSE Income (Loss) on Equity Investments Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) EBT, EXCLUDING UNUSUAL ITEMS Dec 31 2007 39,434.0 39,434.0 34,665.0 4,769.0 2,274.0 2,458.0 188.0 4,920.0 -151.0 -575.0 491.0 -84.0 152.0 -90.0 130.0 -43.0 Dec 31 2008 39,123.0 39,123.0 34,129.0 4,994.0 2,178.0 2,608.0 97.0 4,883.0 111.0 -701.0 588.0 -113.0 210.0 -279.0 -188.0 -259.0

47

Merger & Restructuring Charges Gain (Loss) on Sale of Investments Gain (Loss) on Sale of Assets Other Unusual Items, Total Legal Settlements EBT, INCLUDING UNUSUAL ITEMS Income Tax Expense Minority Interest in Earnings Earnings from Continuing Operations NET INCOME NET INCOME TO COMMON INCLUDING EXTRA ITEMS NET INCOME TO COMMON EXCLUDING EXTRA ITEMS

--134.0 -57.0 -34.0 -81.0 -16.0 99.0 99.0 99.0

-624.0 -162.0 -49.0 --770.0 -333.0 -9.0 -446.0 -446.0 -446.0

99.0

-446.0

48

BALANCE SHEET:NET PROPERTY PLANT -10,667.0 Assets AND EQUIPMENT Cash and Equivalents Goodwill Short-Term Investments 10,605.0

Dec 31 -10,498.0 2007

Dec 31 2008

10,964.0 8,143.0 9,519.0 652.0 6,482.0 1,764.0 7,549.0

Long-Term Investments 9,565.0 TOTAL CASH AND SHORT TERM Deferred Tax Assets, Long 5,055.0 INVESTMENTS Term Accounts Receivable Deferred Charges, Long Notes Receivable Term Other Receivables Other Intangibles 2,624.0

8,795.0 2,705.0 4,852.0 37.0 873.0 1,437.0 413.0 6,326.0 8,017.0 16,892.0 384.0 2,584.0 34,981.0 7,398.0 21,272.0 49 6,068.0 900.0

9,313.0 4,639.0 101.0 1,446.0 6,186.0 18,906.0 401.0 3,599.0 38,405.0 21,462.0

TOTAL RECEIVABLES Other Long-Term Assets 417.0 Inventory TOTAL ASSETS Prepaid Expenses LIABILITIES & EQUITY Other Current Assets TOTAL CURRENT ASSETS Accounts Payable Gross Property Plant and Equipment Accrued Expenses Accumulated Depreciation 7,461.0

Short-Term Borrowings Current Portion of Long-

881.0 630.0

843.0 785.0

50

Current Portion of Capital 1,566.0 Lease Obligations Current Income Taxes Payable Other Current Liabilities, 218.0 Total Unearned Revenue, Current TOTAL CURRENT LIABILITIES Long-Term Debt Capital Leases Minority Interest 31,152.0 3,383.0 178.0 14,658.0 5,738.0 97.0

939.0

69.0

179.0

7,004.0

16,920.0

34,068.0 2,969.0 121.0 85.0 9,173.0 2,188.0 9,380.0 62,366.0 51

Unearned Revenue, Non- 137.0 Current Pension & Other PostRetirement Benefits Other Non-Current Liabilities TOTAL LIABILITIES Common Stock 7,418.0 2,465.0 8,787.0 59,122.0

Additional Paid in Capital 816.0 Retained Earnings Treasury Stock Comprehensive Income and Other TOTAL COMMON EQUITY TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 8,160.0 --349.0 4,388.0 13,015.0 13,015.0 72,137.0

814.0 7,968.0 --206.0 4,514.0 13,090.0 13,090.0 75,456.0

52

CASH FLOW STATEMENT:NET INCOME Depreciation & Amortization Amortization of Goodwill and Intangible Assets DEPRECIATION & AMORTIZATION, TOTAL (Gain) Loss from Sale of Asset Asset Writedown & Restructuring Costs Other Operating Activities (Income) Loss on Equity Investments Minority Interest Change in Accounts Receivable Change in Inventories Change in Accounts Payable Change in Unearned Revenues Change in Other Working Capital CASH FROM OPERATIONS Capital Expenditure Sale of Property, Plant, and Equipment Cash Acquisitions Divestitures Investments in Marketable & Equity Securities

Dec 31 2007

Dec 31 2008

99.0 1,299.0 203.0 1,502.0 -336.0 189.0 2,223.0 -152.0 16.0 -7.0 -1,942.0 686.0 1,564.0 -444.0 3,398.0 -2,855.0 291.0 -82.0 86.0

-446.0 1,545.0 227.0 1,772.0 -125.0 -2,862.0 -210.0 9.0 -148.0 -2,998.0 44.0 4,817.0 -540.0 5,037.0 -2,058.0 533.0 -29.0

53

CASH FROM INVESTING Long-Term Debt Issued TOTAL DEBT ISSUED Long Term Debt Repaid TOTAL DEBT REPAID Issuance of Common Stock Repurchase of Common Stock Common Dividends Paid TOTAL DIVIDEND PAID Other Financing Activities CASH FROM FINANCING Foreign Exchange Rate Adjustments NET CHANGE IN CASH

3,795.0 1,988.0 1,252.0 1,252.0 -468.0 -468.0 94.0 -35.0 -520.0 -520.0 -2,895.0 -2,572.0 -57.0 2,757.0

-2,938.0 -4,743.0 236.0 236.0 -955.0 -955.0 46.0 --97.0 -97.0 -1.0 -771.0 -117.0 -594.0

54

Annexure (iv) Group million Non-current assets Property, plant and equipment: Fleet Property Equipment Goodwill Landing rights Software Investments in subsidiaries Investments in associates Available-for-sale financial assets Employee benefit assets Derivative financial instruments Prepayments and accrued income Total non-current assets Non-current assets held for sale Current assets and receivables Inventories Trade receivables Other current assets Derivative financial instruments Other current interest-bearing deposits Cash and cash equivalents Total current assets and receivables Total assets Shareholders equity Shareholders equity: Issued share capital Share premium Investment in own shares Other reserves Total shareholders equity Minority interest Total equity Note 14 5,976 977 310 7,263 40 159 22 221 227 80 85 80 19 7,975 112 586 308 278 1,181 683 1,864 3,148 11,123 6,153 932 272 7,357 40 139 33 212 125 107 116 8 20 7,945 8 76 654 268 78 1,642 713 2,355 3,431 11,384 2008 2007

17 17 17 19 19 20 35 31

16 21 22 23 31 24 24

32

34 34 55

288 937 (10) 1,818 3,033 200 3,233

288 933 (10) 1,000 2,211 200 2,411

Non-current liabilities Interest-bearing long-term borrowings Employee benefit obligations Provisions for deferred tax Other provisions Derivative financial instruments Other long-term liabilities Total non-current liabilities Current liabilities Current portion of long-term borrowings Trade and other payables Derivative financial instruments Current tax payable Short-term provisions Total current liabilities Total equity and liabilities

27 35 11 29 31 26

2,751 330 1,154 210 33 168 4,646 423 2,590 57 4 170 3,244 11,123

2,929 1,142 930 153 6 188 5,348 417 2,726 18 54 410 3,625 11,384

27 25 31 29

56

Annexure (v)

Annual Income Statement

Period Ended Net Sales Cost of Goods Sold Gross Profit R & D Expenditure Selling, General & Admin Expenses Depreciation & Amort. Non-Operating Income Interest Expense Income Before Taxes Prov. For Inc. Taxes Minority Interest Realized Investment (Gain/Loss) Other Income Net Income Before Extra Items Extra Items & Disc. Ops. Net Income 12/31/08 6,392.20 4,483.30 1,908.90 n/a 1,027.60 n/a -39.50 124.90 716.90 220.90 n/a n/a n/a 496.00 -13.40 482.60 12/31/07 5,719.10 4,143.40 1,575.70 n/a 935.90 n/a -57.00 126.00 456.80 -21.20 n/a n/a n/a 478.00 4.10 482.10

57

Annual Balance Sheet

As of Total Liabilities Cash Shareholder Equity Marketable Securities Minority Interest Preferred Stock Receivables Common Stock Total Inventories 12/31/08 4,954.60 406.00 n/a n/a 1,080.80 n/a 711.90 1,775.60 12/31/07 201.30 n/a 4,924.50

Capital Surplus Raw Materials Retained Earnings Work In Progress Treasury Stock Other Liabilities Finished Goods Total Shareholders Equity Notes Receivable Total Liabilities & Shareholders Equity Other Current Assets
Total Current Assets Property, Plant & Equipment, Net Property, Plant & Equipment, Gross Accumulated Depreciation Interest and Advance to Subsidiaries Other Non-Current Assets Deferred Charges Intangibles Deposits & Other Assets Total Assets Notes Payable Accounts Payable Curr. Long-Term Debt Curr. Port. Cap Lease Accrued Expense Income Taxes Other Current Liabilities Total Current Liabilities Mortgages Deferred Charges/Inc. Convertible Debt Long-Term Debt Non-Curr. Capital Leases Other Long-Term Liab.

1,453.10

n/a n/a 897.60 695.20 1,520.10 367.50

433.70 1,054.80 1,010.90 654.80

14.40 331.00 2,579.40 n/a 7,534.00 286.40

3,548.80 1,387.40 2,952.90 1,565.50 160.10 n/a 46.90 1,815.30 575.50 7,534.00 21.90 586.70 162.20 0.70 713.40 40.30 217.40 1,742.60 n/a 170.20 n/a 1,554.10 8.80 1,478.90

1,313.30 666.50 835.20 437.50 317.40-260.80 n/a 1,976.70 6,901.20 463.20

3,082.20 1,256.00 2,662.90 1,406.90 46.80 n/a 61.80 1,813.30 641.10 6,901.20 11.80 576.70 1.40 n/a 611.50 215.80 216.90 1,634.10 n/a 55.80 n/a 1,712.30 9.40 1,512.90

As of Cash Marketable Securities Receivables

12/31/08 406.00 n/a 1,080.80

12/31/07 201.30 n/a 897.60

58

Total Inventories Raw Materials Work In Progress Finished Goods Notes Receivable Other Current Assets Total Current Assets Property, Plant & Equipment, Net Property, Plant & Equipment, Gross Accumulated Depreciation Interest and Advance to Subsidiaries Other Non-Current Assets Deferred Charges Intangibles Deposits & Other Assets Total Assets Notes Payable Accounts Payable Curr. Long-Term Debt Curr. Port. Cap Lease Accrued Expense Income Taxes Other Current Liabilities Total Current Liabilities Mortgages Deferred Charges/Inc. Convertible Debt Long-Term Debt Non-Curr. Capital Leases Other Long-Term Liab. Total Liabilities Shareholder Equity Minority Interest Preferred Stock Common Stock Capital Surplus Retained Earnings Treasury Stock Other Liabilities Total Shareholders Equity Total Liabilities & Shareholders Equity

1,775.60 433.70 1,010.90 331.00 n/a 286.40 3,548.80 1,387.40 2,952.90 1,565.50 160.10 n/a 46.90 1,815.30 575.50 7,534.00 21.90 586.70 162.20 0.70 713.40 40.30 217.40 1,742.60 n/a 170.20 n/a 1,554.10 8.80 1,478.90 4,954.60 n/a n/a 711.90 1,453.10 1,054.80 654.80 14.40 2,579.40 7,534.00

1,520.10 367.50 835.20 317.40 n/a 463.20 3,082.20 1,256.00 2,662.90 1,406.90 46.80 n/a 61.80 1,813.30 641.10 6,901.20 11.80 576.70 1.40 n/a 611.50 215.80 216.90 1,634.10 n/a 55.80 n/a 1,712.30 9.40 1,512.90 4,924.50 n/a n/a 695.20 1,313.30 666.50 437.50 -260.80 1,976.70 6,901.20

Annual Cash Flow Statement

12/31/07 12/31/06 59 12/31/05

Net Income (Loss) Depreciation/Amortization Net Incr (Decr) in Assets/Liab. Cash Flow from Disc. Operations Other Adjustments-Net Net Cash Flow from Operating Incr (Decr) in Prop. Plant & Equip (Acq.)Disp. of Subs. Business Incr (Decr) in Securities Invest. Other Cash Flow from Investing Net Cash Flow from Investing Issue (Purchase) of Equity Issue (Repayment) of Debt Incr (Decr) in Borrowing Dividends, Other Distribution Other Cash Inflow (Outflow) Net Cash Flow from Financing Effect of Exchange Rate on Cash Cash or Equivalents at Year Start Cash or Equivalents at Year End Net Change in Cash or Equiv

496.00 250.20 -294.70 1.30 140.90 593.70 -279.30 88.80 n/a -88.80 -279.30 -118.70 -1.40 9.20 -108.20 16.60 -202.50 92.80 201.30 406.00 204.70

482.10 233.80 -414.30 21.10 -57.20 265.50 -250.60 -2.20 n/a 2.20 -250.60 45.90 -21.80 -11.60 -103.40 0.50 -90.40 25.50 251.30 201.30 -50.00

60