1

Content

Sr.
No.
Topics Page
No.
1. Introduction 6.
2. History of the Company:
1960-1980
1981-2000
2001-Present
7.
7
7
7-8
3. Shareholding 9.
4. Listing 9.
5. Operations 9-
10.
6. Major subsidiaries and associates 10-
11.
7. Employees 12.
8. Environmental Record 12.
9. Awards and recognitions 12-
13.
10. Controversies 13-
14.
11. Principle Competitors 14.
12. Ratio Analysis
Meaning
Different modes of expressing ratio analysis
Standards for comparison
Nature of ratio

15.
15.
16.
17.
13. Profit and Loss Account 18.
14. Balance Sheet 19.
15. Calculation of Ratio
a. Management Efficiency Ratios
b. Financial Stability, Solvency and Liquidity
Ratio
c. Profitability Ratio
d. Overall Efficiency/Growth Potentialities
Credit Standing
20.
20.
25.
30.

32.
16. Conclusion 36
17. Bibliography 37.
2


A PROJECT REPORT ON
ADVANCED ACCOUNTING PROJECT IN RATIO ANALYSIS OF
RELIANCE INDUSTRIES LIMITED

SUBMITTED BY
MR/MISS Leena Ramesh Gavelkar,
ROLL NO: 6227
M.Com. SEM- I
(ADVANCE ACCOUNTANCY)
ACADEMIC YEAR: 2014-2015


Under the guidance of PROJECT GUIDE
PROF. S. V. RANE & (Mrs.) ANURADHA GANESH


SUBMITTED TO UNIVERSITY OF MUMBAI
MULUND COLLEGE OF COMMERCE
S N ROAD, MULUND (WEST)
MUMBAI - 400080


3

Declaration from the Student
I Miss. Leena Ramesh Gavelkar R. No6227 Student of Mulund College Of
Commerce, S. N. Road, Mulund (West) 400080, studying in M.Com Part- I hereby
declare that I have completed the project on RATIO ANALYSIS OF RE;IANCE
INDUSTRIES LIMITED under the guidance of project guide Prof. S. V. RANE &
Prof. (Mrs)ANURADHA GANESH during the academic year 2013-14. The
information submitted is true to the best of my knowledge.


Date: 23/092014 Signature
Place: MULUND LEENA RAMESH
GAVELKAR





4


CERTIFICATE
We, Prof. S. V. RANE & Prof.(Mrs)ANURADHA GANESH, hereby certify that
Mr/Miss LEENA RAMESH GAVELKARR.No. 6227 of Mulund College of
Commerce, S. N. Road, Mulund (West), Mumbai -400080 of M.com Part I (Advanced
Accountancy) has completed her project on RATIO ANALYSIS OF RE;IANCE
INDUSTRIES LIMITED during the academic year 2014-2015. The information
submitted is true and original to the best of my knowledge.

____________________ ___________________
Project Guide External guide

_____________________ ___________________
Co-coordinator Principal

Date: 23/09/2014


5

ACKNOWLEDGEMENT


I would like to express my sincere gratitude to Principal of Mulund
College of Commerce DR. (Mrs.) Parvathi Venkatesh, Course - Coordinator Prof.
Rane and our project guide Prof.S. V. RANE & Prof.(Mrs.)ANURADHA
GANESH, for providing me an opportunity to do my project work on RATIO
ANALYSIS OF RE;IANCE INDUSTRIES LIMITED. I also wish to express my
sincere gratitude to the non - teaching staff of our college. I sincerely thank to
all of them in helping me to carrying out this project work. Last but not the
least, I wish to avail myself of this opportunity, to express a sense of gratitude
and love to my friends and my beloved parents for their mutual support,
strength, help and for everything.


PLACE: MULUND Signature
DATE: 23/092014 LEENA RAMESH
GAVELKAR


6


I ntroduction
Reliance Industries Limited (RIL) is
an Indian conglomerate holding company headquartered in Mumbai,
Maharashtra, India. The company operates in five major
segments: exploration and production, refining and
marketing, petrochemicals, retail and telecommunications.
The group is present in many business sectors across India
including petrochemicals, construction, communications, energy, health
care, science and technology, natural resources, retail, textiles, and
logistics.
RIL is the second-largest publicly traded company in India
by market capitalisation and is the second largest company in India by
revenue after the state-run Indian Oil Corporation. The company is ranked
No. 99 on the Fortune Global 500 list of the world's biggest corporations,
as of 2013. RIL contributes approximately 14% of India's total exports.




















7


History

1960 1980
The company was co-founded by Dhirubhai Ambani and his
cousin Champaklal Damani in 1960s as Reliance Commercial
Corporation. In 1965, the partnership was ended and Dhirubhai continued
the polyester business of the firm. In 1966, Reliance Textiles Industries
Pvt Ltd was incorporated in Maharashtra. It established a synthetic
fabrics mill in the same year at Naroda in Gujarat. In 1975, company
expanded its business into textiles, with "Vimal" becoming its major brand
in later years. The company held its Initial public offering (IPO) in
1977. The issue was over-subscribed by seven times.
[11]
In 1979, a textiles
company Sidhpur Mills was amalgamated with the company. In 1980, the
company expanded its polyster yarn business by setting up a Polyester
Filament Yarn Plant in Raigad, Maharashtra with financial and technical
collaboration with E. I. du Pont de Nemours & Co., USA.

1981 2000
In 1985, the name of the company was changed from
Reliance Textiles Industries Ltd. to Reliance Industries Ltd. During the
years 1985 to 1992, the company expanded its installed capacity for
producing polyster yarn by over 145,000 tonnes per annum. The Hazira
petrochemical plant was commissioned in 199192. In 1993, Reliance
turned to the overseas capital markets for funds through a global
depositary issue of Reliance Petroleum. In 1996, it became the first private
sector company in India to be rated by international credit rating
agencies. S&P rated BB+, stable outlook, constrained by the sovereign
ceiling. Moody's rated Baa3, Investment grade, constrained by the
sovereign ceiling. In the year 199596, the company entered
the telecom industry through a joint venture with NYNEX, USA and
promoted Reliance Telecom Private Limited in India. In 199899, RIL
introduced packaged LPG in 15 kg cylinders under the brand name
Reliance Gas. During 19982000, the company completed setup of
integrated petrochemical complex at Jamnagar in Gujarat.

2001 Present.
In 2001, Reliance Industries Ltd. and Reliance Petroleum
Ltd. became India's two largest companies in terms of all major financial
parameters. In 200102, Reliance Petroleum was merged with Reliance
Industries. In 2002, Reliance announced India's biggest gas discovery (at
the Krishna Godavari basin) in nearly three decades and one of the largest
8

gas discoveries in the world during 2002. The in-place volume of natural
gas was in excess of 7 trillion cubic feet, equivalent to about 1.2 billion
barrels of crude oil. This was the first ever discovery by an Indian private
sector company. In 200203, RIL purchased a majority stake in Indian
Petrochemicals Corporation Ltd. (IPCL), India's second largest
petrochemicals company, from Government of India. IPCL was later
merged with RIL in 2008. In the years 2005 and 2006, the company
reorganized its business by demerging its investments in power generation
and distribution, financial services and telecommunication services into
four separate entities. In 2006, Reliance entered the organised retail
market in India with the launch of its retail store format under the brand
name of 'Reliance Fresh'. By the end of 2008, Reliance retail had close to
600 stores across 57 cities in India. In 2010, Reliance entered Broadband
services market with acquisition of Infotel Broadband Services Limited,
which was the only successful bidder for pan-India fourth-generation (4G)
spectrum auction held by Government of India. In the same year, Reliance
and BP announced a partnership in the oil and gas business. BP took a 30
per cent stake in 23 oil and gas production sharing contracts that Reliance
operates in India, including the KG-D6 block for $7.2 billion. Reliance
also formed a 50:50 joint venture with BP for sourcing and marketing of
gas in India. In 2012, RIL set up a joint venture with Russian
Company Sibur for setting up a Butyl rubber plant in Jamnagar, Gujarat.
The plant is scheduled to be operational in 2015. Presently, Vivek Lall is
the President and CEO of New Ventures in the Chairmans Office at
Reliance Industries Limited.












9


Shareholding
The number of shareholders in RIL are approx. 3 million. The
promoter group, Ambani family, holds approx. 45.34% of the total shares
whereas the remaining 54.66% shares are held by public shareholders,
including FII and bodies corporate. Life Insurance Corporation of India is
the largest non-promoter investor in the company with 7.98%
shareholding.
Buyback: In January 2012, the company announced a buyback
programme to buy a maximum of 120 million shares for 104
billion(US$1.7 billion). By the end of January 2013, the company bought
back 46.2 million shares for 33.66 billion (US$550 million).



Listing
The company's equity shares are listed on the National Stock
Exchange of India Limited (NSE) and the BSE Limited. The Global
Depository Receipts (GDRs) issued by the Company are listed
on Luxembourg Stock Exchange. It has issued approx. 56 million GDRs
wherein each GDR is equivalent to 2 equity shares of the company.
Approx. 3.46% of its total shares are listed on Luxembourg Stock
Exchange.
Its debt securities are listed at the Wholesale Debt Market (WDM)
Segment of the National Stock Exchange of India Limited (NSE).

Credit Ratings: It has received domestic credit ratings of AAA from
CRISIL (S&P subsidiary) and Fitch. Moodys and S&P have provided
investment grade ratings for international debt of the Company, as Baa2
positive outlook (local currency issuer rating) and BBB+ outlook
respectively.


Operations
The company's petrochemicals, refining, and oil and gas-
related operations form the core of its business; other divisions of the
company include cloth, retail business, telecommunications and special
economic zone (SEZ) development. In 201213, it earned 76% of its
revenue from Refining, 19% from Petrochemicals, 2% from Oil & Gas
and 3% from Other segments.
10

In July 2012, RIL informed that it was going to invest
US$1 billion over the next few years in its new aerospace division which
will design, develop, manufacture, equipment and components,
including airframe, engine, radars, avionics and accessories for military
and civilian aircraft, helicopters, unmanned airborne vehicles
and aerostats.


Major subsidiaries and associates
On 31 March 2013, the company had 123 subsidiary
companies and 10 associate companies.
Reliance Retail is the retail business wing of the Reliance Industries.
In March 2013, it had 1466 stores in India. It is the largest retailer in
India.

Many brands like Reliance Fresh, Reliance Footprint, Reliance
Time Out, Reliance Digital, Reliance Wellness, Reliance Trends,
Reliance Autozone, Reliance Super, Reliance Mart, Reliance iStore,
Reliance Home Kitchens, Reliance Market (Cash n Carry) and
Reliance Jewel come under the Reliance Retail brand. Its annual
revenue for the financial year 201213 was 108
billion (US$1.8 billion) with an EBITDA of 780
million (US$13 million).

Reliance Life Sciences works around medical, plant and
industrial biotechnology opportunities. It specializes in manufacturing,
branding, and marketing Reliance Industries' products in bio-
pharmaceuticals, pharmaceuticals, clinical research
services, regenerative medicine, molecular medicine, novel
therapeutics, biofuels, plant biotechnology, and industrial
biotechnology sectors of the medical business industry.

Reliance Institute of Life Sciences (RILS), established by Dhirubhai
Ambani Foundation, is an institution offering higher education in
various fields of life sciences and related technologies.

Reliance Logistics is a single-window company selling transportation,
distribution, warehousing, logistics, and supply chain-related products,
supported by in-house telematics and telemetry solutions. Reliance
Logistics is an asset based company with its own fleet and
11

infrastructure.

It provides logistics services to Reliance group
companies and outsiders.

Reliance Clinical Research Services (RCRS), a contract research
organisation (CRO) and wholly owned subsidiary of Reliance Life
Sciences, specialises in the clinical research services industry. Its
clients are primarily pharmaceutical, biotechnology and medical device
companies.

Reliance Solar, the solar energy subsidiary of Reliance, was
established to produce and retail solar energy systems primarily to
remote and rural areas. It offers a range of products based on solar
energy: solar lanterns, home lighting systems, street lighting
systems, water purification systems, refrigeration systems and solar air
conditioners.

Relicord is a cord blood banking service owned by Reliance Life
Sciences. It was established in 2002. It has been inspected and
accredited by AABB, and also has been accorded a license by Food
and Drug Administration (FDA), Government of India.

Reliance Jio Infocomm (RJIL), previously known as Infotel
Broadband, is a broadband service provider which gained 4G licences
for operating across India. Now it is wholly owned by RIL for 48
billion (US$790 million). Sandip Das, former ceo of Maxis Malaysia,
is the current group president of Reliance Jio Infocomm.

Reliance Industrial Infrastructure Limited (RIIL) is an associate
company of RIL. RIL holds 45.43% of total shares of RIIL. It was
incorporated in September 1988 as Chembur Patalganga Pipelines
Limited, with the main objective being to build and operate cross-
country pipelines for transporting petroleum products. The company's
name was subsequently changed to CPPL Limited in September 1992,
and thereafter to its present name, Reliance Industrial Infrastructure
Limited, in March 1994. RIIL is mainly engaged in the business of
setting up and operating industrial infrastructure. The company is also
engaged in related activities involving leasing and providing services
12

connected with computer software and data processing. The company
set up a 200-millimetre diameter twin pipeline system that connects the
Bharat Petroleum refinery at Mahul,Maharashtra, to Reliance's
petrochemical complex at Patalganga, Maharashtra. The pipeline
carries petroleum products including naphtha and kerosene. It has
commissioned facilities like the supervisory control and data
acquisition system and the cathodic protection system, a jackwell at
River Tapi, and a raw water pipeline system at Hazira. The
infrastructure company constructed a 71,000 kilo-litre petrochemical
product storage and distribution terminal at the Jawaharlal Nehru Port
Trust (JNPT) Area in Maharashtra.

Employees
As on 31 March 2013, the company had 23,519 employees of
which 1,159 were women and 83 were employees with disabilities. It also
had 29,462 temporary employees on the same date. As per its
Sustainability Report for 201112, the attrition rate was 7.57%.
In its 39th Annual General Meeting, its Chairman informed
the shareholders of the investment plans of the company of about 1500
billion (US$25 billion) in next three years. This would be accompanied by
increasing the staff strength in Retail division from existing strength of
35,000 to 120,000 in next three years and increasing employees in
Telecom division from existing 3,000 to 10,000 in 12 months.


Environmental Record
Reliance Industries is the world's largest polyester producer and as a result
one of the largest producers of polyester waste in the world. In order to
deal with large quantities of waste, they operate the largest polyester
recycling centre that uses the polyester waste as a filling and stuffing.

Awards and Recognitions
International Refiner of the Year in 2013 at the HART Energys 27th
World Refining & Fuel Conference.
[1]
This is the second time that RIL has
received this Award for its Jamnagar Refinery, the first being in 2005.
According to survey conducted by Brand Finance in 2013, Reliance is
the second most valuable brand in India.
The Brand Trust Report, 2013 has ranked 'Reliance' as the 7th most
trusted brand in India.
[66]

13

RIL was certified as 'Responsible Care Company' by the American
Chemistry Council in March, 2012.

RIL was ranked at 25th position across the world, on the basis of sales,
in the ICIS Top 100 Chemicals Companies list in 2012.

RIL was awarded the National Golden Peacock Award 2011 for its
contribution in the field of corporate sustainability.
In 2009, Boston Consulting Group (BCG) named Reliance Industries
as the world's fifth biggest 'sustainable value creator' in a list of 25 top
companies globally in terms of investor returns over a decade. The
company was selected as one of the world's 100 best managed
companies for the year 2000 by Industry Week magazine. From 1994
to 1997, the company won National Energy Conservation Award in the
petrochemical sector.

Controversies

De-merger of RIL in 200506
The Ambani family holds around 45% of the shares in RIL.
[72]
Since its
inception the company was managed by its founder and chairman
Dhirubhai Ambani. After suffering a heart attack in 1986, he handed over
the daily operations of the company to his sons Mukesh Ambani and Anil
Ambani. After the death of Dhirubhai Ambani in 2002, the management
of the company was taken up by both the brothers. In November 2004,
Mukesh Ambani, in an interview, admitted to having differences with his
brother Anil over 'ownership issues'.
[73]
He also said that the differences
"are in the private domain". The share prices of RIL were impacted by
some margin when this news broke out. In 2005, after a bitter public feud
between the brothers over the control of the Reliance empire, mother
Kokilaben intervened to broker a deal splitting the RIL group business
into the two parts.
[74]
In October 2005, the split of Reliance Group was
formalized. Mukesh Ambani got Reliance Industries and IPCL. Younger
brother Anil Ambani received telecom, power, entertainment and financial
services business of the group. The Anil Dhirubhai Ambani Group
includes Reliance Communications, Reliance Infrastructure, Reliance
Capital, Reliance Natural Resources and Reliance Power.
The division of Reliance group business between the two brothers also
resulted in de-merger of 4 businesses from RIL. These businesses
immediately became part of Anil Dhirubhai Ambani Group. The existing
shareholders in RIL, both the promoter group and non-promoters, received
shares in the de-merged companies.


14

RIL Plane grounded
Business jet owned by Reliance Industries (RIL) was grounded by The
Directorate General of Civil Aviation (DGCA) on 22 March 2014 during a
surprise inspection, for carrying expired safety equipment on-board and
also suspended its pilot for flying without a licence.

ONGC Controversy
In May 2014, ONGC moved to Delhi High Court accusing RIL of
pilferage of 18 billion cubic metres from its gas-producing block in
the Krishna Godavari basin. Subsequently, the two companies agreed to
form an independent expert panel to probe any pilferage.

Petition against Reliance Jio
A PIL filed in the Supreme Court by an NGO Centre for Public Interest
Litigation, through Prashant Bhushan, challenged the grant of pan-India
licence to RJIL by the Government of India. The PIL alleged that RJIL
was allowed to provide voice telephony along with its 4G data service, by
paying an additional fees of just 16580 million (US$270 million) which
was arbitrary and unreasonable, and contributed to a loss of 228420
million (US$3.7 billion) to the exchequer. The CAG in its draft report
alleged rigging of the auction mechanism, whereby an unknown ISP,
Infotel Broadband Services Pvt Ltd, acquired the spectrum by bidding
5000 times its net worth, after which the company was sold to Reliance
Industries within minutes of acquiring license.



Principal Competitors
Indian Oil Corporation Ltd.; Hindustan Petroleum Corporation Ltd.;
Bharat Petroleum Corporation Ltd.; Indian Petrochemicals Corporation
Ltd.; Mangalore Refinery and Petrochemicals Ltd.; Kochi Refineries Ltd.;
Chennai Petroleum Corporation Ltd.; Parker Agro-chemical Exports Ltd.




15

Ratio Analysis
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. The ratios are categorized as Short-term Solvency Ratios, Debt
Management Ratios, Asset Management Ratios, Profitability Ratios, and
Market Value Ratios.
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.
The pages below present the most widely used ratios in each of the
categories given above. Please keep in mind that there is not universal
agreement as to how many of these ratios should be calculated. You may
find that different books use slightly different formulas for the
computation of many ratios. Therefore, if you are comparing a ratio that
you calculated with a published ratio or an industry average, make sure
that you use the same formula as used in the calculation of the published
ratio.

DI FFERENT MODES OF EXPRESSI NG AN ACCOUNTI NG RATI O
Ratio may be expressed in different ways. They are as follows:

a) Simple or Pure Ratios,
b) Percentages,
c) Rate.

a) Simple or Pure Ratios: Simple or pure ratio is merely a quotient arrived
by simple division of one number by another.
Example: When the current assets of a business organisation are
Rs.60,000 and current liabilities are Rs.15,000 the ratio is derived by
dividing Rs.60,000 by Rs.15,000.
It will be expressed as = 60,000 4 or as 4:1
15,000
16




b) Percentages: Ratios are expressed as percentage relations when the
simple or ratios are multiplied by 100. The resulting ratios are known as
percentage ratios.
Example: Thus, the current ratio in the above example expressed in
percentage by multiplying 4 by 100. The ratio will be as 400%.
60,000 i.e. 100
15,000

c) Rate
Sometimes, ratios are expressed as rates which refer to ratios over a period
of time. Example: Stock has turned over 6 times a year.

Standards for Comparison (Bench Marks): While interpreting
financial statements benchmark should be considered. In order to make
judgement about financial status, actual ratio has to be compared with the
yardstick Benchmark may be.

1. Intra-company-The company under analysis can provide standards for
comparisons based on its own prior performance and relations between
its financial items. Research in Motion's current net income, for
instance, can be compared with its prior years' net income and in
relation
to its revenues or total assets.

2. Ratio of Competitive firms -One or more direct competitors of the
company being analysed can provide standards for comparisons. Coca-
Cola's profit margin, for instance, can be compared with PepsiCo's
profit margin.

3. Industry Average-Industry statistics can provide standards of
comparisons. Such statistics are available
from services such as Dun & Bradstreet, Standard & Poor's, and
Moody's.
4. Rules of thumb-General standards of comparisons can develop from
experience. Examples are the 2:1 level for the current ratio or 1:1 level
for the acid-test ratio. Guidelines, or rules of thumb, must be carefully
applied because context is crucial.







17


Nature of ratio Analysis

Though ratio analysis is all the rage among the users of accounting
information, it is better to understand the nature of ratios so that they can
be employed judiciously under appropriate conditions.

1. The relation between two or more financial data brought out by an
accounting ratio is not an end in itself. They are means to get to know the
financial position of an organisation.

2. An Individual ratio may not be capable of providing the answers
required for the various problems facing an executive.
Industrial ratios may provide valuable information only when
they are studied and compared with several other related ratios.

3. Ratio analysis will tend to be more meaningful when certain standards
and norms are laid down so that what the ratios indicate can be compared
with the said standards. This provides a base for decision-making and
assists in taking measures to rectify any drawback or deficiency.












Particulars Amount
(Rs.)
Amount
(Rs.)
18

In The Book of Reliance Industries Limited
Profit And Loss Account For The Year Ended 31
st
March 2013, 2014




Balance sheet as on 31
st
March 2013, 2014
Income

Sales Turnover 390117.00 360297.00
Excise Duty 00.00 00.00
Net Sales 390117.00 360297.00
Other Income 8936.00 7998.00
Stock Adjustment -412.00 -412.00
Total Income 398641.00 371612.00
Expenditure
Raw Materials 334283.00 310428.00
Power & Fuel Cost 10153.00 7166.00
Employee Cost 3370.00 3354.00
Other Manufacturing Expenses 1985.00 0.00
Selling & Administration Expenses 0.00 0.00
Miscellaneous Expenses 9037.00 11879.00
Preoperative Expenses Capitalised 0.00 0.00
Total Expenses 358828 332827
Operating Profit 30877 30787
PBDIT 39813 38785
Interest 3206.00 3036.00
PBDT 36607.00 35749.00
Depreciation 8789.00 9465.00
Profit Before Tax 27818.00 26284.00
Extra-Ordinary Items 0.00 0.00
Profit Before Tax (Post Extra-Ord. Items) 27818.00 26284.00
Tax 5834.00 5281.00
Reported Net Profit 21984.00 21003.00
Total Value Addition 24545.00 22399.00
Preference Dividend 0.00 0.00
Equity Dividend 2793.00 2628.00
Corporate Dividend Tax 475.00 447.00
Per Share Data (annualised)
Share In Issue (lakhs) 32319.02 32286.63
Earning Per Share (Rs.) 68.02 65.05
Equity Dividend (%) 95.00 90.00
Book Value (Rs.) 609.78 557.49
19






Particulars Amount
(Rs.)
Amount
(Rs.)
Sources of Funds
Total Share Capital 3232.00 3229.00
Equity Share Capital 3232.00 3229.00
Share Application Money 17.00 25.00
Preference Share Capital 0.00 0.00
Reserves 193842.00 176766.00
Revaluation Reserves 0.00 0.00
Net Worth 197091 180020
Secured Loans 10744 2422
Unsecured Loans 74737.00 52101.00
Total Debt 85481.00 54523.00
Total Liabilities 282572.00 234543.00

Application of Funds
Gross Block 194793.00 187607.00
Less: Accumulated Depreciation 85387.00 77859.00
Net Block 109400 109748
Capital Work In Progress 41716.00 19116.00
Investments 86062.00 52509.00
Inventories 42932.00 42729.00
Sundry Debtors 10664.00 11880.00
Cash & Bank Balance 36624.00 49547.00
Total Current Assets 90220.00 104156.00
Loans & Advances 40179.00 32982.00
Fixed Deposit 0.00 0.00
Total C.A, Loans & Advances 130399.00 137138.00
Deffered Credit 0.00 0.00
Current Liabilities 80844.00 79620.00
Provisions 4167.00 4348.00
Total C.L &Provisions 85011.00 83968.00
Net Current Assets 45388.00 53170.00
Miscellaneous Expenses 0.00 0.00
Total Assets 282572.00 234543.00
Contingent Liabilities 77162.00 54600.00
Book Value 609.78 557.49
20

Calculation of Ratios
A. Management Efficiency Ratios:
1. Gross Profit Ratio: Gross Profit Ratio brings out relationship between
Goss Profit and Net Sales. It is also known as Turnover Ratio or
margin or Gross Margin Ratio or Rate of Gross Profit. It is
expressed as a percentage of net sales.
Gross Profit is a profit made on sale of goods. It is the
profit on turnover. It is defined as the excess of net sales over cost of
goods sold or excess of revenue over cost.
Thus gross profit= Net sales less Cost of goods sold.
Cost of Goods sold is the total of materials, labour,
production and other trading expenses incurred on the quantity of goods
sold. Cost of goods sold does not take into account certain operating
expenses like administrative, selling and distribution expenses. Finance
expenses like interest, which are charged to Profit & Loss account are also
not taken into consideration.
Cost of goods sold= Opening stock+ purchases+ Direct Expenses-
Closing stock.
Calculation:
Gross Profit Ratio=Gross Profit *100/Net Sales
Year 2013 Year 2014
Cogs=46046+ 310428+ 7166+ 3354

42729=324265
Gross Profit=360297-324265
=36032
Cogs=43344+ 334283+ 10153+
3370-
42932=348218
Gross Profit=390117-
334283=55834
Gross Profit
Ratio=36032*100/360297
=10%
Gross Profit
Ratio=55834*100/390117
=14.31%

Comments: The Gross profit ratio has increased by 4.31%. This is due to
the following factor:
The sales have increased by 3.97% over the corresponding figure of
2013, but the cost of goods sold to net sales in 2013 works out 89.07%
, whereas in 2014 it works out to 89.67%, which decreased the cost and
increased the sales.

2. Operating Ratio: Operating Ratio is the relationship between cost of
activities and net sales. This ratio brings out relationship between cost
of goods sold and net sales. In other words, operating ratio shows at
21

what percentage the operating expenses are comprised in net sales. It is
expressed as percentage.
The purpose of operating ratio is to ascertain the efficiency of the
management as regards operations. This ratio is the test of operational
efficiency of the business.
Operating cost is the total of Cost of goods sold and other
operating expenses except finance expenses and other non-operating
expenses.
Calculation:
Operating Ratio= Operating cost*100
Net Sales
Year 2013 Year 2014
Operating
cost=324548+11879=336427
Operating
cost=349791+9037=358828
Operating
Ratio=336427*100/360297
=93.37%
Operating
Ratio=358828*100/390117
=91.98%

Comments:
The operating efficiency of the business has decreased compared to the
previous year. This is due to the increase in cost of goods sold, which
in 2013 was 89.07% of sales while it was 89.67% in the year 2014.

3. Expenses Ratio: The ratio of each item of expense or each group of
expenses to sales is known as an Expense Ratio and such ratios are
collectively known as Expense Ratios. Thus, expense ratio bring out
the relationship between various elements of operating costs and net
sales.
Expense Ratio analyse each individual item of expense
or group of expense express them as a percentage in relation to net sales.
Expenses ratio enable the management in controlling
costs and improving the managerial efficiency. These ratios are important
to shareholders in the sense that ultimate profit is influenced and
conditioned by these ratios. It shows the proportion of expenses to sales. If
the ratio is 20% it means that per Rs.100 sales expenses are Rs.20.

a) Cost of Goods Sold Ratio
Cost of goods sold= Opening stock+ Purchases+ Expenses incurred for
manufacturing goods- Closing stock


22

Calculation:
Cost of Goods Sold Ratio= Cost of Goods Sold*100/Net Sales
Year 2013 Year 2014
Cogs=46046+ 310428+ 7166+ 3354-
42729=324265
Net Sales= 360297
Cogs=43344+ 334283+ 10153+
3370- 42932=348218
Net Sales= 390117
Cost of Goods
Sold=324265*100/360297
=89.99%
Cost of goods Sold=
348218*100/390117
= 89.25%

b) Raw Materials Ratio
Calculation:
Raw Materials Consumed Ratio= Raw Materials Consumed*100/Net Sales
Year 2013 Year 2014
Raw Materials Consumed= 310428
Net Sales= 360297
Raw Materials Consumed=
334283
Net Sales= 390117
Raw Materials Consumed
Ratio=310428*100/360297
=86.16%
Raw Materials Consumed
Ratio=334283*100/390117
=85.69%

c) Manufacturing Expenses Ratio
Calculation:
Manufacturing Expenses Ratio=Manufacturing Expenses*100/Net Sales
Year 2013 Year 2014
Manufacturing Expenses=0.00
Net Sales=360297
Manufacturing Expenses=1985
Net Sales=390117
Manufacturing Expenses Ratio=0.00 Manufacturing Expenses
Ratio=1985*100/390117
=0.05%

Comment:
The raw materials consumed ratio has decreased by 0.47% due to
which the cost of goods sold ratio by 0.74%
There were no manufacturing expenses in 2013, whereas in 2014 it
increased to 0.05%.

4. Net Operating Profit Ratio: It is the relationship between net
operating profit and net sales which is expressed in percentage.

23


Calculation:
Net Operating profit Ratio=Net Operating Profit *100/Net Sales
Year 2013 Year 2014
Net Operating Profit=30787 Net Operating Profit=30877
Net Operating Profit
Ratio=30787*100/360297
=8.54%
Net operating Profit
Ratio=30887*100/309117
=7.91%


Comment:
Even though the net sales in the year 2013 are less as compared in the
year 2014, the net operating profit in the year 2013 is more than in the
year 2014. This is because the operating expenses in the year 2013 are
less than in the year 2014.


5. Net Profit Ratio: Net Profit Ratio indicates the relationship between
net profit and net sales. Net profit can be either operating net profit
after tax or net profit before tax. This ratio is also known as Margin on
Sales Ratio.
It indicates as to what proportion of net sales is available for the
proprietors. It is a clear index of cost control, managerial efficiency and
sales promotion. The ratio is often called the index of operational
efficiency.
Calculation:
Net Profit Ratio=Net Profit After Tax*100/Net Sales
Year 2013 Year 2014
Net Profit After Tax=21003 Net Profit After Tax=21984
Net Profit
Ratio=21003*100/360297
=5.83%
Net Profit
Ratio=21984*100/390117
=5.64%

Comment:
Though the net profit in the year 2014 is higher than that in the year
2013, it clearly has low net profit ratio. This is because in the year
2014, the company has earned additional profit of Rs.981 on an
increased sales of Rs.29820.
24


6. Fixed Assets Turnover Ratio: It measures how productively the
firm is managing its fixed assets to generate sales. This ratio is
calculated by dividing sales by net fixed assets.
Calculation:
Fixed Assets Turnover Ratio=Net Sales/Fixed Assets
Year 2013 Year 2014
Net Fixed Assets=109748
Net Sales= 360297
Net Fixed Assets=109406
Net Sales= 390117
Fixed Assets Turnover
Ratio=360297/109748
=3.28
Fixed Assets Turnover
Ratio=390117/109406
=3.57


Comments:
Fixed assets turnover ratio is less in the year 2013 as compared in the
year 2014. In 2013, even though there are more fixed assets as
compared in the year 2014, but these assets are not utilised properly to
increase sales.
In the year 2014, the fixed asset are less as compared in the year 2013,
it means that even though less assets are utilised, the sales has
increased.


7. Total Assets Turnover Ratio: total assets turnover ratio measures
how productively the firm is managing all of its assets to generate
sales. This ratio is calculated by dividing sales by total assets.

Total Assets Turnover Ratio=Net sales/Total Assets
Year 2013 Year 2014
Total Assets=318511
Net Sales= 360297
Total Assets=367583
Net Sales= 390117
Total Assets Ratio=1.13 Total Assets Ratio=1.06


Comments:
The overall assets in the year 2013 as compared to the sales are
properly utilised, whereas in 2014 the assets are not properly utilised as
compared in the year 2013.

25


B. Financial Stability, Solvency & Liquidity Ratios:

1. Current Ratio: Current Ratio is also known as Working Capital
Ratio, Solvency Ratio or 2 to 1 ratio. This ratio expresses the
relationship between current assets and current liabilities.it expressed
as a pure ratio.
The current ratio is a test of the credit strength and
solvency of an organisation. It indicates the strength of working capital of
the business. It indicates the companys ability to meet its day-day
financial obligations. The ratio discloses possible tendencies of the
business to over-trade or under-capitalise or over-invest in stocks.
Calculation:
Current Ratio=Current Assets/Current Liabilities
Year 2013 Year 2014
Current Assets=104156
Current Liabilities=79620
Current Assets=90220
Current Liabilities=80844
Current Ratio=104156/79620
=1.31
i.e.1.31:1
Current Ratio=90220/80844
=1.11
i.e.1.11:1


Comments:
In the year 2013, the short term solvency position of the company is
good, whereas in the year 2014 also the short term financial position is
good.
But in the year 2013 it is much better than in the year 2014.


2. Quick Ratio: It is also known as Liquid Ratio or Quick Asset
Ratio or Near-Money Ratio, or 1 to 1 ratio. This ratio is designated
to indicate the liquid financial position of an enterprise. Thus, the ratio
shows the firms ability to meet its immediate obligation promptly. It
measures the relationship between quick assets and quick liabilities.

Quick Assets=Current Assets [Stock+ Prepaid Expenses]
Quick Liabilities=Current Liabilities - [Bank Overdraft + Income
Received in Advance
Calculation:
26

Quick Ratio=Quick Assets/Quick Liabilities
Year 2013 Year 2014
Quick Assets=137138-
42729=94409
Quick Liabilities=79620
Quick Assets=130399-
42932=87467
Quick Liabilities=80844
Quick Assets
Ratio=94409/79620
=1.19
i.e.1.19:1
Quick Assets
Ratio=87467/80844
=1.08
i.e.1.08:1

Comments:
The quick ratio in both the year is satisfactory as in the year 2013 it
was 1.19:1, whereas in the year 2014 it was 1.08:1 which is more than
standard ratio i.e.1:1
The Quick assets in the year 2013 are more than in the year 2014.


3. Proprietary Ratio: Proprietary Ratio is a test of the financial and
credit strength of the business. It relates shareholders fund to total
assets i.e., total funds. This ratio determines the long-term or ultimate
solvency of the company.
In other words, proprietary ratio determines as to what
extent the owners interest and expectations are fulfilled from the total
investments made in the business operations.
Proprietors Fund include: a) Equity Share Capital
b) Preference Share Capital
c) Capital Reserves
d) Revenue Reserves
e) Securities Premium
f) Surplus and Undistributed Profit
Less Accumulated losses and unamortised Miscellaneous Expenditure
Items




27

Calculation:
Proprietary Ratio=Proprietors Fund/Total Assets*100
Year 2013 Year 2014
Proprietors
Fund=3229+176766=179995
Total
Assets=109748+19116+52509+13713
8=318511
Proprietors Fund=3232+193842=197074
Total
Assets=109400+41716+86062+130399=3
67577
Proprietary
Ratio=179995/318511*100
=56.51%
Proprietary Ratio=197074/367577*100
=53.61%

Comments:
Of the total assets shareholders contribution is approximately 56.51%
in 2013 and 53.61% in 2014.
The proprietary ratio in 2014 is less than in 2013 even though the
proprietors fund and total assets are more in 2014 because the fixed
assets has decreased in 2014 by 348.


4. Capital Gearing Ratio: Capital Gearing Ratio brings out the
relationship between two types of capital i.e., capital carrying fixed
rate of interest or fixed dividend and capital that does not carry fixed
rate of interest or fixed dividend. It is a modified counterpart of Debt
Equity Ratio. In short, capital gearing ratio indicates the degree to
which capital has been geared in the capital structure of a company.
This ratio is also known as Leverage Ratio or Financial
Leverage Ratio or Capital Structure Ratio.
Capital Gearing ratio is the mechanism to ascertain whether a
company is practising trading on equity and if so to what extent. The
ratio aids in bringing about a balanced capital structure. According to
Securities and Exchange Board of India a ratio of 1:4 between equity and
preference capital is considered reasonable.
Calculation:
Capital Gearing Ratio=Fixed Interest Bearing Securities/Equity Capital &
Reserves & Surplus
Year 2013 Year 2014
Fixed Interest Bearing
Securities=2422
Equity Capital & Reserves &
Surplus=3229+176766=179995
Fixed Interest Bearing
Securities=10744
Equity Capital & Reserves &
Surplus=3232+193842=197074
28

Capital Gearing
Ratio=2422/179995
=0.013
i.e.0.013:1
Capital Gearing Ratio=10744/197074
=0.054
i.e.0.054:1

Comments:
The capital gearing ratio in both the years is low as compared to the
standard ratio i.e. in the year 2013 it was 0.013:1 and in the year 2014
it was 0.054:1.
The capital structure of the company is low geared.
The company depends on the equity to the greater extent
The burden of interest is also lower. This ratio is not suitable to the
company.


5. Debt Equity Ratio: It expresses the relationship between the
external equities and internal equities or the relationship between
borrowed capital and owners capital.
The ratio shares favourable or unfavourable financial
position of the concern. It shows long term capital structure. The low ratio
is viewed as favourable from long term creditors point of view. Higher
ratio is unfavourable. The standard ratio is 2:1
Debt=Secured Loans + Unsecured Loans
Equity=Share capital+ Reserves and Surplus
Calculation:
Debt Equity Ratio=Debt/Equity
Year 2013 Year 2014
Debt=2422+52101=54523
Equity=3229+176766=
Debt=10744+74737=85481
Equity=3232+193842=197074
Debt Equity
Ratio=54523/179995
=0.30 i.e.
0.30:1
Debt Equity Ratio=85481/197074
=0.43 i.e.
0.43:1



Comments:
The Debt Equity Ratio in the year 2013 is better than in the year 2014,
but it is lower as compared to the standard ratio.
29

The company gets benefit of trading on equity during the period of
slackness.
There is less burden of interest.
The company can rais additional loans without difficulty


C. Profitability Ratio:
1) Return on Capital Employed: This Ratio explains the relationship
between total profits earned by the business and total investments made
or total assets employed. This ratio, thus measures the overall
efficiency of the business operations.
This ratio is alternatively known as Return on Total Resources.
Return on total resources is calculated by dividing net profit before
preference dividend and interest on loans and debentures by total assets
(fixed and current). This is always expressed in percentage.
Capital Employed= Proprietors Fund+ Long Term Loans
OR
=Fixed Assets+ Current Assets- Current Liabilities
Calculation;
Return on Capital Employed=Net Profit Before Interest And Tax*100/Capital
Employed
Year 2013 Year 2014
Net Profit Before Interest And
Tax=30787
Capital Employed= 109748+ 19116+
52509+ 137138-
(79620+4348)
=234543
Net Profit Before Interest and
Tax=30877
Capital Employed= 109406+
41716+ 86062+ 130399 (80844+
4167)
=282572
Return on Capital Employed=
30787*100/234543
=13.12%
Return On Capital Employed=
30877*100/282572
=10.92%


Comments:
This ratio shows the earning capacity of the business.
Return on Capital Employed ratio in the year 2013 is good compared to
the year 2014 and it also shows that the market value of the shares in
2014 is lower than in the year 2013.
The above ratio indicates that in the year 2013 the assets were utiliser
economically well as compared in the year 2014.
30





2. Return on Proprietors Fund: Alternatively it is also known as
Return on Proprietors Equity or Return on Shareholders
Investment or Investors Ratio. It indicates the relationship between
net profit earned and total Proprietors Funds. This ratio is of practical
importance to prospective investors and shareholders. It shows the
amount of return earned on proprietors fund.
Proprietors Fund include: a) Equity Share Capital
b) Preference Share Capital
c) Capital Reserves
d) Revenue Reserves
e) Securities Premium
f) Surplus and Undistributed Profits
Less
Accumulated losses and unamortised Miscellaneous Expenditure
Items
Calculation:
Return On Proprietors Fund= Net Profit After Tax*100/Proprietors
Fund
Year 2013 Year 2014
Net profit After Tax= 21003
Proprietors
Fund=3229+176766
=179995
Net profit After Tax= 21984
Proprietors Fund=
3232+193842
= 197074
Return on Proprietors Fund=
21003*100/179995
=11.66%
Return on Proprietors Fund=
21984*100/197074
=11.16%

Comments:
The Return on Proprietors Fund in the year 2013 is better than in the
year 2014.
Proprietors fund is utilised less effectively.
In both the years the overall profitability of the company is
satisfactory.
31





D. Overall Efficiency /Growth Potentiality Credit Standing
ETC:

1. Stock Turnover Ratio: Stock Turnover Ratio is also known as
Inventory Ratio or inventory Turnover Ratio or Stock Turn Ratio
or Merchandise turnover Ratio or Stock Velocity Ratio or simply
Velocity of Stock.
This Ratio measures the number of times stock turns or flows or
rotates in an accounting period compared to the sales affected during that
period. In other words, the ratio indicates the frequency of inventory
replacement i.e. the number of times inventory has been sold and replaced
during a given period of time.

Cost of goods sold= Opening stock+ Purchases+ Expenses incurred for
manufacturing goods- Closing stock
Average stock= Opening stock+ Closing stock/2
Calculation:
Stock Turnover Ratio=Cost of goods Sold/Average Stock
Year 2013 Year 2014
Cogs=46046+ 310428+ 7166+ 3354-
42729=324265
Average Stock= 46046+
42729/2=44388
Cogs=43344+ 334283+ 10153+
3370- 42932=348218
Average stock= 43344+
42932/2=43138
Stock Turnover Ratio= 324265/44388
= 7.31 times
Stock Turnover Ratio=
348218/43138
=8.07 times

Comments:
In 2014, the inventory ratio has increased from 7.31 times to 8.07 times
i.e. with the lower inventory the company has achieved higher sales.


2. Debtors Turnover Ratio: Debtors Turnover is also known as
Turnover of Debtors Ratio or Accounts Receivable Turnover
32

Ratio. Some analysts prefer to call this ratio as Debtors Turnover
Period or as Average Collection Period.
This ratio attempts to measure the collectability of
debtors and other accounts receivables. In other words, it shows the rate at
which the trade debts are being collected.
If nothing is specified that whether the sales are on cash
or credit basis, for calculation of Debtors Turnover Ratio they are to be
considered as credit sales only.


Average Accounts Receivable= Average Trade Debtors+ Average
Bills Receivable
Calculation:
Debtors Turnover Ratio=Credit Sales/Average Accounts Receivable
Year 2013 Year 2014
Credit Sales=360297
Average Accounts Receivable=
11880
Credit Sales= 390117
Average Accounts Receivable=
10664
Debtors Turnover Ratio=
360297/11880
=30.33
times
Debtors Turnover Ratio=
390117/10664
=36.58
times


Comments:
This ratio indicates a liberal credit policy followed by the firm. This
will result in blocking of working capital, and reduced profits.
The Debtors Turnover ratio in the year 2013 is better than in the year
2014.


3. Debt Collection Period: The ratio indicates the extent to which the
debts have been collected in time. It gives the average debt collection
period. The ratio helps the lenders to know their borrowers are
collecting money from debtors within a stipulated period.
Calculation:
Debt Collection Period= No. of Days in a Year/Debtors Turnover Ratio
Year 2013 Year 2014
No. of days in a year=365 No. of days in a year=365
33

Debtors Turnover Ratio=30.33
times
Debtors Turnover Ratio=36.58 times
Debt Collection Period=365/30.33
= 12.03
Days
Debt Collection Period=365/36.58
= 9.98 Days

Comments:
The credit allowed to the debtors is 13.03 days in the year 2013, and is
9.98 days in the year 2014.
The collection from the debtors is correct as they can recover the
amount within minimum days.


4. Earning per Share: Earning per Share is calculate to find out
overall profitability of the organisation. Earning per share represents
earnings of the company whether or not dividends are declared. If there
is only one class of shares, the earnings per share are determined by
dividing net profit by the no. of equity shares. If there are both equity
and preference shares the net profit should be reduced by the amount
necessary to pay preference dividend. It is calculated by following
formula.
Calculation:
Earning per Share= Net Profit After Tax- Preference Dividend/Number
of Equity Shares
Year 2013 Year 2014
Net Profit After Tax=21003
No. of Equity Shares= 322.9
Net Profit After Tax=21984
No. of Equity Shares= 323.2
Earning Per Share=21003/322.9
=Rs.65.05 per
share
Earning Per Share=
21984/323.2
=Rs.68.02 per
share

Comments:
In the year 2013, earning per share was Rs.65.05 per share which is
less as compared in the year 2014, which is Rs.68.02 per share.
In both the years the equity capital was utilised effectively.


34

5. Dividend Payout Ratio: The purpose of this ratio is to find out the
proportion of earning used for payment of dividend and the proportion
of earning retained. The ratio is a relation between earning per equity
share and dividend per equity share, the ratio is calculated as follows.


Calculation:
Dividend Payout Ratio=Dividend per Equity Share/Earning per
Equity Share

Year 2013 Year 2014
Dividend per equity
share=2628/322.9=8.14
Earning per share= 65.05
Dividend per equity share=
2793/323.2=8.64
Earning per share= 68.02
Dividend Payout Ratio=8.14/65.05
= 0.125
Dividend Payout ratio= 8.64/68.02
= 0.127


Comments:
The above ratio shows that the dividend is paid at a higher rate which
makes equity shareholders happy.
And also the profit retained is not sufficient for the growth.
There is a scope to attract fresh funds from short term investments.



6. Debt Service Ratio: This is also called as Interest Coverage Ratio.
The purpose of this ratio is to find out the no. of times the fixed
financial charges are covered by income before interest and tax. The
ratio is calculated by the following formula.
Calculation:
Debt Service Ratio= Net Profit before Interest and Tax/Fixed Interest charges
Year 2013 Year 2014
Net Profit before interest and
Tax=38785
Fixed Interest= 3036
Net Profit before interest and
Tax=39813
Fixed Interest= 3206
Debt Service Ratio= 38785/3036
=12.78 times
Debt Service Ratio= 39813/3206
=12.42 times
35


Comments:
The above ratio calculated shows that the company has the capacity to
pay interest.
Larger amount of profit is available for interest.
There is a scope of fresh loans.

Conclusion
As we all know that reliance group is founded by Dhirubhai H.
Ambani. And reliance industry is Indias largest private sector enterprise.
The flagship company, the reliance industry limited, is a fortune Global
500 company and is the largest private sector company in India.
Starting as a small textile company, reliance has in its journey
crossed several milestone to become a fortune 500 company in less than 3
decades. Reliance Industry Limited operates world-class manufacturing
facilities across the country.
The company works under different business segments such as
exploration and production, petroleum refining and marketing,
petrochemicals, textile, retail. Reliance industry is a holding company of
many subsidiary companies.
From the above ratio analysis of the company, we come to
know that the equity shareholders get dividend at a higher rate of interest.
The debtors are also given sufficient time to pay the money. The company
has the ability to pay the interest. The net sales in the year 2014 are more
than in the year 2013.thus, the overall profitability of the company in both
the years are good.









36








Bibliography.

1. Company Information:
http://en.wikipedia.org/wiki/Reliance_Industries
2. Ratio Analysis: http://en.wikipedia.org/wiki/Financial_ratio
3. Calculation of Ratios: Referred T. Y. B.com(Accounting
&Finance)book of Sheth Publication.