Accounts Project Example

8/12/2019 Accounts Project Example

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ADM 1 PROJECT

ONCOMPARATIVE ANALYSIS BETWEEM

JSW AND SAIL

Under the able guidance of Prof. Reena Agarwal)

SUBMITTED BY:-

ANKIT TRIPATHI-029

ARSHI SHAMEEM-040

ATEENDRA MISHRA-048

ATINDRA KUMAR SHUKLA-049

CHANDRA MOHAN MOHANTO-054

DAOOD ALI QIDWAI-055


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INDIAN STEEL INDUSTRY BirDs EYE viEw

India has indeed emerged in the global steel scenario. It has climbed to fourth spot for crude

steel production in 2011 from 8th in a span of few years and is now moving to take second

spot in net few years, second only to China.

Indian growth story, although driven by inherent demand potential and sustained economic

growth, has many other facets also, which are typical, as in any other part of the globe.

On the demand side, Indian steel sector probably holds the top spot as the fundamentals for

economic growth in India are better than most parts of the world. The potential in Indian steel

sector growth is also reflected in scope of increase in usage from the large gap between the

current per capita consumption vis a vis global average.

Indian steel majors have taken lead in creating capacities 3-4 years ago and the result is visible

now. Many more projects are underway and in next two to three years, they are likely to come

on stream propelling India to number two spot globally.

But the road of progress is never made of roses and Indian steel growth story also has hurdles

and blocks with raw material linkages, land availability, inadequate infrastructure and fundingissues being at the forefront. Another critical issue is the mismatch between the rate of demand

growth and rate of addition of capacities.

The country has acquired a central position on the global steel map with its giant steel mills,

acquisition of global scale capacities by players, continuous modernization & up gradation of

old plants, improving energy efficiency, and backward integration into global raw material

sources. Global steel giants from across the world have shown interest in the industry due to its

phenomenal performance.

Despite all these odds, India remains the shining star in the steel sector globally.


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Jindal steel works

JSW is part of US $16.5 billion O.P.Jindal Group. It has grown to US$ 9 billion in little over a

decade and has presence across various sectorsSteel, Energy, Minerals, Port & Infrastructure,

Cement, Aluminium.

JSW Steel, the flagship company of the JSW Group, is today an integrated steel manufacturer.

JSW Steel is the largest private sector steel manufacturer in terms of installed capacity.

The Group set up its first steel plant in 1982 at Vasind near Mumbai. Soon after, it acquired

Piramal Steel Ltd., which operated a mini steel mill at Tarapur in Maharashtra. The Jindals, who

had wide experience in the steel industry, renamed it as Jindal Iron and Steel Co. Ltd. (JISCO).

In 1994, in order to achieve the vision of moving up the value chain and building a strong,resilient company, Jindal Vijayanagar Steel Ltd. (JVSL) was setup, with its plant located at

Toranagallu in the Bellary-Hospet area of Karnataka, the heart of the high-grade iron ore belt

and spread over 3,700 acres of land. It is just 340 kms from Bangalore, and is well connected

with both the Goa and Chennai ports. In 2005, JISCO and JVSL merged to form JSW Steel Ltd.

JSW Steel is one of the lowest cost steel producers in the world. It has established a strong

presence in the global value-added steel segment with the acquisition of steel mill in US and a

service center in UK. JSW Steel has also formed a joint venture for setting up a steel plant in

Georgia. The Company has also tied up with JFE Steel Corp, Japan for manufacturing the highgrade automotive steel. JSW Steel has acquired a majority stake in Ispat Industries Ltd. Making

JSW Steel Indias largest steel producer with a combined capacity of 14.3 MTPA. The Company

has also acquired mining assets in Chile, USA and Mozambique.

JSW Steel offers the entire gamut of steel products Hot Rolled, Cold Rolled, Galvanized,

Galvalume, Pre-painted Galvanised, Pre-painted Galvalume, TMT Rebars, Wire Rods & Special

Steel Bars, Rounds & Blooms. JSW Steel has manufacturing facilities at Toranagallu in

Karnataka, Vasind & Tarapur in Maharashtra and Salem in Tamil Nadu.

By 2020, the Company aims to produce 34 million tons of steel annually with Greenfield

integrated steel plants coming up in West Bengal and Jharkhand.


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Steel authority of India

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully

integrated iron and steel maker, producing both basic and special steels for domestic

construction, engineering, power, railway, automotive and defence industries and for sale in

export markets. SAIL is also among the five Maharatnas of the country's Central Public Sector

Enterprises.

SAIL manufactures and sells a broad range of steel products, including hot and cold rolled

sheets and coils, galvanised sheets, electrical sheets, structurals, railway products, plates, bars

and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated

plants and three special steel plants, located principally in the eastern and central regions of

India and situated close to domestic sources of raw materials, including the Company's iron

ore, limestone and dolomite mines. The company has the distinc tion of being Indias second

largest producer of iron ore and of having the countrys second largest mines network. This

gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and

dolomite which are inputs for steel making.

The Government of India owns about 86% of SAIL's equity and retains voting control of the

Company. However, SAIL, by virtue of its Maharatna status, enjoys significant operational and

financial autonomy


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SOLVENCY RATIOS

Liability to equity ratioIt expresses the relationship between long-term capital contributions of creditors as related to

that contributed by owners (investors). As opposed to DEBT TO EQUITY, Long-Term Debt to

Equity expresses the degree of protection provided by the owners for the long-term creditors. A

company with a high long-term debt to equity is considered to be highly leveraged. But,

generally, companies are considered to carry comfortable amounts of debt at ratios of 0.35 to

0.50, or $0.35 to $0.50 of debt to every $1.00 of book value (shareholders equity). These could

be considered to be well-managed companies with a low debt exposure. It is best to compare

the ratio with industry averages.

LiaBiLitY to EquitY ratio = aLL LiaBiLitiEs / sharEhoLDErs

equity where asall liabilities = total liabilities

sharEhoLDErs EquitY

Liability to equity ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 0.79 1.01 1.34 1.23 0.72 0.65SAIL 0.22 0.12 0.21 0.39 0.32 0.29

JSW-INTRA ANALYSIS

In 2007-2008,liability to equity ratio has inceased from .79 in 2006-2007 to 1.01 in2007-2008 because of the increase in total liabilities from 9767.08 crores to 15223.78

Here liability to equity ratio is increased to it shows that dependence on liabilities is

increased.


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SAIL-INTRA ANALYSIS

In 2007-2008,Here as we can see that liability to equity ratio has dereased from .22 to.12 because of the decrease in total liabilities.

A decrease liability to equity ratio shows decreasing dependence on liabilities.

Jsw-sail Inter analysis

Comparing both SAIL and JSW we can see here that SAIL is doing better job ascompared to JSW in the year 2007-2008 because liability to equity ratio of JSW has

increased to 1.01 while for SAIL it is decreased to .12 which means SAIL dependence on

liability is decreased because total liabilities have decreased.

Interest coverage ratio

This ratio also known as times interest earned ratio indicates the firms ability to meet interest

(and other fixed-charges) obligations. This ratio is computed as :

Interest coverage ratio = profit before interest and tax /

interest expense

Profit before interest and taxes are used in the numerator of this ratio because the ability to pay

interest is not affected by tax burden as interest on debt funds is deductible expense. This ratio

indicates the extent to which earnings may fall without causing any embarrassment to the firm

regarding the payment of interest charges.

A high interest coverage ratio means that an enterprise can easily meet its interest obligations

even if earnings before interest and taxes suffer a considerable decline. A lower ratio indicates

excessive use of debt or inefficient operations.

Interest coverage ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 5.85 6.13 3.00 3.84 4.44 3.43SAIL 30.64 48.48 40.02 26.26 15.86 9.00


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JSW-INTRA ANALYSIS

In 2006-2007, In 2006-07 interest coverage ratio increases, which means that there isadequate safety for payment of interest even if there were to be a drop in the co.

earnings.

In 2007-2008,we see that JSW has a marginal increase in interest coverage ratio i.e.6.13 because profit before tax has increased from INR 1915.18 crores to INR 2484.12

crores and interest expense change marginally.

High interest coverage ratio means that there is safety in the payment of interest.

In2008-2009, a significant decrease in the PBIT has caused a change on the lower sideto the Interest Coverage Ratio.

SAIL-INTRA ANALYSIS

In 2006-2007, there is increase in ratio, which means that there is adequate safety ofinterest, even if there were to be a drop in the co. earnings.

In 2007-2008,there is huge change in the interest coverage ratio of SAIL to 48.48 from30.64 because profit before tax has increased from INR 9381.02 crores to INR

11406.82 crores and interest expence has decreased. A high interest coverage ratio

leads adequate safety in the payment of interest.


Between SAIL and JSW, SAIL has better standing as compared to JSW as percentagechange in profit and interest expense is greater for SAIL than JSW.

Debt equity ratio

The debt-to-equity ratio D/E) is a financial ratio indicating the relative proportion ofshareholders' equity and debt used to finance a company's assets.[1Closely related to leveraging,

the ratio is also known as Risk, Gearingor Leverage. The two components are often taken from


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the firm's balance sheet or statement of financial position (so-called book value), but the ratio

may also be calculated using market values for both, if the company's debt and equity are

publicly traded, or using a combination of book value for debt and market value for equity

financially.

A measure of a company's financial leverage calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt the company

is using to finance its assets.

Debt equity ratio = debt / equity

Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the

calculation.

Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial

statements as well

Debt equity ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 0.84 1.06 1.59 1.26 0.74 0.69SAIL 0.24 0.13 0.27 0.5 0.34 0.40

JSW-INTRA ANALYSIS

In 2007-2008, there is an in increase in the debt equity ratio, because there is anincrease in the debt of secured and unsecured loan in 2007-2008 as compared toprevious year i.e. from INR 4173.03 crores to INR 7546.53 crores.

As debt equity ratio is high so aggressive use of leverage is done but a highly leverage

company is more risky for creditors.

In 2008-2009, there is an in increase in the debt equity ratio, because there is anincrease in the debt in 2008-2009 as compared to previous year i.e. from INR 7, 546.53


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crores to INR 11, 272.63 crores., which in turn is mainly due to a significant increase in

rupee term loans from INR 3, 300.48 crores to INR 4, 712.71 crores.

SAIL-INTRA ANALYSIS

In 2007-2008,there is a decrease in the debt equity ratio, because there is a decrease inthe debt of secured and unsecured loan in 2007-2008 from INR 4180.52 crores to INR

3045.24 crores.

Debt equity ratio is decreased and a small degree of leverage is used here and the

company is too constructive.


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Capital market RATIOS

Price earning ratioThe price earning ratio indicates the expectation of equity investors about the earnings of the

firm. It relates earnings to market price and is generally taken as a summary measure of

growth potential of an investment, risk characteristics, shareholders orientation, corporate

image and degree of liquidity. It is calculated as:

Price earning ratio = average stock price / earning per share

Price earning ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 11.48 8.45 26.39 10.93 9.43 9.68SAIL 12.49 9.42 10.48 13.02 11.05 11.17

JSW-INTRA ANALYSIS

In 2006-2007,price earning ratio increases, which means that stock market isconfident in the co. future earning growth.

In 2007-2008, price earning ratio is decreased from 11.48 in 2006-07 to 8.45 in2007-2008 because EPS is increased from 77.09 to 90.84 and market price has

remained the same. As price earning ratio is decreased in 2007-08 so there is less faith

of stock market in companys future growth.

In 2008-2009, a sudden decrease in the EPS from Rs. 90.84 In 2007-2008, to Rs.22.96, had caused a significant decrease in Price Earning Ratio.

SAIL-INTRA ANALYSIS

In 2006-2007, price earning ratio decreases which means, that stock market is notconfident in the co. future earning growth.


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In 2007-2008, price earning ratio is decreased from 12.49 in 2006-07 to 9.42 in2007-08 because EPS is increased from 15.02 to 18.25 and average stock price is

decreased.

Decrease price earning ratio shows lower faith of stock market in companys future

growth.


Between SAIL and JSW, SAIL is better as compared to JSW because percentage fall ofprice earning ratio is greater in JSW than SAIL so stock market will have lower faith in

JSWs future growth as compared to SAIL.

Dividend yield

This ratio indicates return on investment; this may be on average investment or closing

investment. Dividend (%) indicates return on paid up value of shares. But yield (%) is the

indicator of true return in which share capital is taken at its market value.

Dividend yield = dividend per share / average stock price

Dividend yield (in PERCENTAGE)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 1.41 1.87 0.16 0.81 1.46 1.08SAIL 1.65 2.15 1.65 1.54 1.82 2.08

JSW-INTRA ANALYSIS

In 2007-2008,dividend yield is increased from 1.41 in 2006-07 to 1.87 in 2007-08because dividend income has increased and average stock price has remained same.


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As dividend yield is increased in 2007-08 so it shows that cash return on shares has

gone up.

In2008-2009, dividend per share came to a low of Rs 1 as compared to previous yeardividend per share of Rs. 14, it is because of this reason that the dividend yield

decreased so considerably.

SAIL-INTRA ANALYSIS

In 2007-2008,dividend yield is increased from 1.65 in 2006-07 to 2.15 in 2007-08because dividend income has increased and average stock price has remained same.

Increase dividend yield of 2.15 shows a higher cash return on shares.


SAIL will be in better position here as compared to JSW because percentage increase ofdividend yield is greater for SAIL than JSW so SAIL will have higher cash return on

sales.

Price to book ratio

This ratio indicates market response of the shareholders investment. Undoubtedly, higher the

ratios better is the shareholders position in terms of return and capital gains.

Price to book ratio = Market price per share / book value per

share

Price to book ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 2.74 1.94 1.47 2.31 1.13 0.84SAIL 4.47 3.07 2.31 2.64 1.46 0.99

JSW-INTRA ANALYSIS


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In 2007-2008, price to book ratio has decreased from 2.74 in 2006-07 to 1.94 in2007-08 because market price per share is decreased and book value per share has

remained same.

A lower price to book ratio indicates here under pricing of shares but the market

expects the stock to earn higher as expected because it is greater than 1.

In2008-2009, an increase in the average market price from Rs. 606.07 in 2007-2008to Rs. 768.05 has caused a decrease in the price to book ratio.

SAIL-INTRA ANALYSIS

In 2007-2008, price to book ratio has decreased from 4.47 in 2006-07 to 3.07 in2007-08 because market price per share is decreased marginally and book value per

share has remained same.

As price to book ratio has decreased so it indicates that under pricing of shares has been

done but the market expects the stock to earn higher as expected because it is greater

than 1.


JSW have better standing as compared to SAIL because percentage decrease in price tobook ratio is lesser for JSW than SAIL so JSW will earn higher stock than SAIL in the

year 2007-2008.


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profitability RATIOS

Profit margin/return on salesThe net profit margin is simply the after-tax profit a company generates for each rupee of

revenue. Net profit margins vary across industries, making it important to compare a potential

investment against its competitors. Although the general rule of-thumb is that a higher net

profit margin is preferable, it is not uncommon for management to purposely lower the net

profit margin in a bid to attract higher sales.

Profit margin = [pat / sales] * 100

Net profit margin is a safety cushion; the lower the margin, the less room for error. A business

with 1% margins has no room for flawed execution. Small miscalculations on managements

part could lead to tremendous losses with little or no warning.

Profit margin/ return on sales (in percentage)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 14.98 14.92 3.23 11.09 8.64 5.05SAIL 17.38 18.16 13.40 15.73 13.03 7.44

JSW-INTRA ANALYSIS

In 2006-2007, profit margin increases from 14.14% to 14.98% which means that theco. is going in a right direction.

In 2008-2009, we see very bad profit margin as compared to the previous year becauseof the reason that the PAT decreased considerably, from INR 1728.19 crores to INR

458.50 crores, which was mainly due to huge increase of expenditure in materials i.e.

from INR 5693.85 crores to INR 8450.10 crores.


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Also the turnover had increased from INR 11, 572.25 crores to INR 14, 260.81 crores.

In 2010-2011, the PAT has increased from Rs 5961 crores to Rs 7338 crores. On theother hand Sales has increased from Rs. 18202 crores to Rs. 23,435 crores. So because

of the higher percentage change in Sales as compared to the change in PAT, the profit

Margin has decreased.

The fall in profit margin shows that profitability has gone down and it shows that the

company has not generated the same level of profit in proportion to the sales this year

as compare to the previous year.

In 2011-2012, the material cost of JSW has increased from INR 15995.19 crores to INR22397.47 crores leading to decrease in the profit margin.

SAIL-INTRA ANALYSIS

In 2006-2007, Profit margin decrease from 36% to 23%, so we should check thematerial cost, salaries and wages, other operating exp.(advertisement).

In 2010-2012, the return on sales has reduced as compared to last year because therehas been an increase of 7.02% in Sales whereas the PAT has decreased by 23% in this

year.

The amount of net profit earned per rupee has declined. This shows that the companysprofitability has decreased.

In 2011-2012, the material cost of SAIL has increased from INR 2264.47 crores to INR25186.22 crores leading to decrease in the profit margin.

Asset turnover

The asset turnover ratio is a measure of how effectively a company converts its assets into sales.

It is calculated as follows:

Asset turnover = [sales / average total assets]


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The asset turnover ratio tends to be inversely related to the net profit margin; i.e., the higher the

net profit margin, the lower the asset turnover. The result is that the investor can compare

companies using different models (low-profit, high-volume vs. high-profit, low-volume) and

determine which one is the more attractive business.

Asset turnover (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 0.82 0.82 0.83 0.83 0.84 1.07SAIL 1.16 1.31 1.35 1.20 1.16 0.81

JSW-INTRA ANALYSIS

For 2011-2012, the ratio of JSW has increased showing that the company is managingits asset in an efficient manner.

SAIL-INTRA ANALYSIS

For 2011-2012, the ratio of SAIL has shown a decrease and therefore a low ratiorepresents presence of more assets than the business needs for its operation.

Return on assets

The profitability ratio is measured in terms of relationship between net profits and assets

employed to earn that profit. This ratio measures the profitability of the firm in terms of assets

employed in the firm. The ROA may be measured as follows:

Return on assets = [pat / average total assets]*100

Return on assets (in percentage)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 31.09 39.5 41.00 50.4 73.58 81.6


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SAIL 41.60 55.69 67.75 80.66 89.75 96.38

JSW-INTRA ANALYSIS

In 2007-2008, return on assets has marginally from 31.09 to 39.5 in 2007-2008because of the increase in profit after tax from INR 1292.00 crores in 2007 to INR

1728.19 crores in 2008.

Return on assets is lower because of lower profit margin and asset turn over.

In 2010-2011, the drastic rise in ROI is due to the increase in Total average asset of thefirm which has raised Rs.8341 crores on Rs. 31493.5 crores. Whereas the PAT has

increased by Rs .1456 crores on Rs 3883 crores. Thus due a greater % rise in PAT the

ROI has risen so drastically.The company has invested its funds very carefully and smartly which is showing in the

returns that it is earning on the same. Thus the overall profitability has increased by a

great margin.

SAIL-INTRA ANALYSIS

In 2007-2008, return on assets has significantly increased to 55.69 from 41.60 in2006-07 because PAT has increased from INR 6202.29 crore in 2007 to INR 7536.78

crore in 2008. Higher return on assets here shows that profit margin and assets turn

over have increased.

In 2010-2011, In this year the profit after tax has increased from 6794 crores to 4904crores and on the other hand average total assets has increased from 51272 to 58765

but the percentage rise in PAT is greater than percentage change in average total assets.

Hence this rise in ROI.The companys profitability from its investments has gone up,

indicating that the companys investments is bearing fruits and giving higher and

higher returns.


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Return on equity

Return on Equity measures the profitability of equity funds invested in the firm. This ratio

reveals how profitably of the owners funds have been utilized by the firm. This ratio is

computed as:

rEturn EquitY = [pat / avEragE sharEhoLDErs EquitY] * 100

Return on equity is one of the most important indicators of a firms profitability and potential

growth. Companies that boast a high return on equity with little or no debt are able to grow

without large capital expenditures, allowing the owners of the business to withdraw cash and

reinvest it elsewhere. Many investors fail to realize, however, that two companies can have

the same return on equity, yet one can be a much better business.

Return on equity (in percentage)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 23.10 22.99 5.59 21.14 12.07 8.77SAIL 35.82 32.76 2.06 20.27 13.23 8.89

JSW-INTRA ANALYSIS

In 2007-2008,we see a negligible change in the Return on Equity, because there is abig downslide in the PAT from INR 1728.19 crores to INR 458.50 crores.

If ROE decreases then it may imply lack of opportunities that would yield higher

returns.

In 2008-2009, we see a huge change in the Return on Equity, because there is a bigdownslide in the PAT from INR 1728.19 crores to INR 458.50 crores, which was mainly

due to huge increase of expenditure in materials i.e. from INR 5693.85 crores to INR

8450.10 crores.

In 2010-2011, The average shareholders Equity has doubled from Rs. 9706 crores toRs. 17255 crores. Whereas the PAT has risen from Rs 5905 crores to Rs. 7338 crores.


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Due to this huge rise in Shareholders Equity and a comparatively smaller rise in PAT

has led to the fall in Return on Equity. The companys ROE has taken a drastic dip

showing that the firm has used shareholders funds on unproductive activities and

hence the ROE has gone down.

SAIL-INTRA ANALYSIS

In 2007-2008,it is seen here a negligible change in the Return on Equity, because PAThas increased from INR 6202.29 crores to INR 7536.78 crores but average shareholder

equity is decreased considerably.

Shareholders` expect managers to earn a ROE higher than the firm's cost of equity but if

ROE decreases it means that there were lack of opportunities that would have yield

higher return.

In 2010-2011,The average shareholder Equity in this year has decrease from 37019 crores to33316 crores and so is the case with PAT which decreased from 6794 crores to 4904 crores.

Therefore we can see a fall in the ROE.

The company hasnt utilized shareholders funds carefully and tactfully and the implications has

shown by way of fall in ROE.

Earnings per share

The profitability of a firm from the point of view of ordinary shareholders can be measured in

terms of number of equity shares. This is known as Earnings per share:

Earnings per share = net profit after tax attributable to

equity shareholders / no. of equity shares o/s during that

period

Earnings per share (in Indian rupees)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 77.09 90.84 22.96 106.59 88.87 71.62SAIL 15.02 18.25 14.95 16.35 11.87 8.58


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JSW-INTRA ANALYSIS

In 2007-2008,a substantial increase in the EPS, is because of the reason that the PAThad increased from INR 1292.00 crores to INR 1728.19 crores. It also means that the

company is doing better.Here a high EPS is showing that the company is doing better than before.

In2008-2009, a substantial change in the EPS is because of the reason that the PAT haddecreased from INR 1728.19 crores to INR 458.50 crores, which was mainly due to

huge increase of expenditure in materials i.e. from INR 5693.85 crores to INR 8450.10

crores.

In 2010-2011, although the profit has increased from Rs 5905 crores to Rs. 7338crores. But due simultaneous and a larger rise in the total number of shares, the forced

the EPS to come down.

The profitability of the firm has gone down due to increase in the liabilities and hence

has a lesser profit after tax to distribute amongst its shareholders.

SAIL-INTRA ANALYSIS

In 2007-2008,EPS is increased from 15.02 to 18.25 because PAT had increased fromINR 6168.82 crores to INR 7534.08 crores.

From the shareholders perspective the company did better because EPS is higher than

the previous year.

In 2010-2011, the number of shares (4130400545) has remained the same where asthe profit has decreased from Rs 6794 crores to Rs 4904 crores. therefore the fall in EPS

of this year.

This year the firm has not done its business in the manner they would have wanted and

the implication is that the profit has decreased.


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liquidity RATIOS

CURRENT RATIOThe Current Ratio is one of the beat known measures of financial strength. The main questionthis ratio addresses is: "Does your business have enough current assets to meet the payment

schedule of its current debts with a margin of safety for possible losses in

current assets?"

A generally acceptable current ratio is 2 to 1.

But whether or not a specific ratio is satisfactory depends on the nature of the business and

the characteristics of its current assets and liabilities.

Current Ratio = Current Assets / Current Liabilities

Current ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 0.64 0.51 0.44 0.58 0.78 0.76SAIL 1.52 1.68 1.61 1.60 1.21 1.22

JSW-INTRA ANALYSIS

In 2007-2008, current ratio decreases from .64 to .51 which shows that it does notsatisfy the ratio of 2:1 and also the company dont have sufficient current assets to meet

its current liabilities.

Here current assets are lesser to clear of the current liabilies because current asset ratio

is less than 1.

In 2008-2009, we see a decrease in the current ratio, because there is a significantincrease in the acceptances i.e., from INR 2060.26 crore to INR 5293.09 crore.

In 2010-2011, The current liabilities has increased from Rs 7621 crores to Rs 10045crores. Whereas the Current assets has increased from Rs. 23356 crores to Rs. 31493

crores. Thus due a larger increase in current assets as compared to current liabilities the

Current ratios has shown a positive growth. The liquidity of the firm has decreased and


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this indicates that the company has lesser current assets per rupee of current liabilities.Which has happened because of the sale of assets and increase in current liabilities.

Although the firm anyways dint have enough current assets to payoff its current

liabilities .

SAIL-INTRA ANALYSIS

In 2007-2008, current ratio has increased from 1.52 to 1.68 which tells that thecompany has sufficient current assets to satisfy its current liabilities.

From here it is clear that the companys current assets are greater than the current

liabilities to clear of the current liabilities as current ratio is greater than 1.

In 2010-2011, current assets in the year 2011 has decreased from (39154.1 to38090.5 crores) as compared to the current assets of the year 2010, whereas the

liabilities has remained almost the same for both the year. Therefore the fall in current

ratio. The firms liquidity has increased and its capacity to pay off its liabilities which is

a very good sign for the firm.

Quick ratio

The Quick Ratio is sometimes called the "acid-test" ratio and is one of the best measures of

liquidity.

The Quick Ratio is a much more conservative measure than the Current Ratio. It helps answer

the question: "If all sales revenues should disappear, could my business meet its current

obligations with the readily convertible `quick' funds on hand?"

quick ratio = quick assets / current liabilities

where as quick assets = current assets inventories

Quick Assets consist of only cash and near cash assets. Inventories are deducted from currentassets on the belief that these are not near cash assets. But in a sellers market

inventories are also near cash assets.


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An acid-test of 1:1 is considered satisfactory unless the majority of "quick assets" are in

accounts receivable, and the pattern of accounts receivable collection lags behind the

schedule for paying current liabilities.

Quick ratio/acid test ratio (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 0.43 0.28 0.28 0.31 0.49 0.54SAIL 1.01 1.23 1.24 1.53 1.35 0.82

JSW-INTRA ANALYSIS

In 2006-2007, we see a significant decrease in the Quick ratio, because of an decreasein the Loans and Advances i.e. from INR 789.80 crores to INR 549.28 crores, and also a

decrease in other current liabilities.

In 2007-2008,we see a significant decrease in the Quick ratio, because of decrease inthe loans and advances from INR 1008.75 crores to INR 997.26 crores whereas the

current liabilities have increased by greater percentage than current assets therefore

ratio has fall.

It indicates lower quick assets to pay off current liabilities.

SAIL-INTRA ANALYSIS

In 2007-2008,quick ratio is increased from 1.01 to 1.23 because loans and advanceshave increased from INR 3097.70 crores to INR 3644.22 crores while current assets

have increased at a greater percentage than current liabilities.

Increase in quick ratio here indicates satisfactory ratio of 1:1 which shows higher quick

ratio to pay off current liabilities.

In 2010-2011, Because of the fall in cash and bank balance of Rs .50672 crores thisyear as compared to the last year the quick ratio has come down a little bit. Current

Liability changing by a very small amount. It shows that cash and bank balance has

reduced which has decreased the liquidity of the firm.


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Debtor turnover

In case firm sells goods on credit, the realization of sales revenue is delayed and the receivables

are created. The cash is realized from these receivables later on.

The speed with which these receivables are collected affects the liquidity position of the firm.

The debtors turnover ratio throws light on the collection and credit policies of the firm. It is

calculated as follows:

Debtor turnover = sales / average debtors

Debtor turnover (in times)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 36.24 39.11 38.09 37.79 32.95 29.12SAIL 16.36 14.90 14.43 14.46 11.11 10.30

JSW-INTRA ANALYSIS

In 2007-2008 debtor turnover has quite increased from 36.24 in 2006-07 to 39.11 in2007-2008 which means that sales have increased while average debtor have

decreased marginally.

Here a high debtor turn over means debtors are being converted rapidly into cash and

the quality of the company's portfolio of debtors is good.

SAIL-INTRA ANALYSIS

In 2007-2008, debtor turnover ratio has decreased from 16.36 to 14.90 because saleshave remain constant while the average debtor have grown.

Debtor turnover is low so it means debtors are not rapidly converted to cash and quality

of company portfolio is not good.


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Inventory turnover

This ratio also known as stock turnover ratio establishes the relationship between the cost of

goods sold during the year and average inventory held during the year. It is calculated as

follows:

Inventory turnover = cost of goods sold / average

inventories

This ratio indicates that how fast inventory is used/sold. A high ratio is good from the view

point of liquidity and vice versa. A low ratio would indicate that inventory is not used/ sold/ lost

and stays in a shelf or in the warehouse for a long time.

Inventory turnover (in times

)YOY 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012JSW 8.52 9.26 8.75 8.95 7.10 7.97SAIL 5.36 8.62 5.86 6.02 5.13 3.71

JSW-INTRA ANALYSIS

In 2007-2008, the inventory turnover has increased marginally and that hashappened because of the average inventory holding period is less(38.87 days) as

compared from previous year(42.25) days.

If the inventory turnover is high then it indicates inventory management is efficient

and It runs lower risk of obsolescence and reduces interest, insurance and storage

charges.

SAIL-INTRA ANALYSIS

In 2007-2008, the inventory turnover has increased from 5.36 to 8.62 because theinventory has also increased from 6412.77 to 6754.35 and inventory holding period isdecreased from 67.16 days to 41.76 days.

Same is the case here, inventory turnover is high so inventory management is efficient

and It runs lower risk of obsolescence and reduces interest, insurance and storage

charges.

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