Sail Accounting Analysis

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HRM 2012-14
FINANCIAL RATIO ANALYSIS OF SAIL FOR THE FINANCIAL YEARS 2006 2012 MALVIKA VARMA ( H12025 ) SIDDHANT MATHUR ( H12051 ) HRM A

[STEEL AUTHORITY OF INDIA LIMITED]
A project done as a part of the course curriculum (AFM) under the guidance of Prof. Prantik Ray

FINANCIAL RATIO ANALYSIS Table of contents 1. Introduction……………………………………………………………………………………………………3 2. Sail’s ratios i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. 3) Comparison i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. for the period 2006-2012…………………………………………………………..4 Current ratio……………………………………………………………………………..4 Quick ratio…………………………………………………………………………………5 Asset turnover ratio………………………………………………………………….6 Debtor turnover ratio……………………………………………………………….7 Stock turnover ratio………………………………………………………………….8 Return on Investment……………………………………………………………….9 Return on equity………………………………………………………………………10 Net profit ratio…………………………………………………………………………11 Debt – equity ratio…………………………………………………………………..12 Debt to total assets………………………………………………………………….13 Interest coverage ratio…………………………………………………………….14 of Sail with other companies……………………………………………………15 Current ratio…………………………………………………………………………….15 Quick ratio……………………………………………………………………………….16 Asset turnover ratio………………………………………………………………..17 Debtor turnover ratio……………………………………………………………..18 Stock turnover ratio………………………………………………………………..19 Return on Investment……………………………………………………………..20 Return on equity……………………………………………………………………..21 Net profit ratio………………………………………………………………………..22 Debt – equity ratio………………………………………………………………….23 Debt to total assets…………………………………………………………………24 Interest coverage ratio……………………………………………………………25

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RATIO ANALYSIS The financial ratio analysis is the calculation and subsequent comparison of the ratios which can be derived from information present in a company's financial statements which are present in the director’s report of that company for every financial year. A subsequent variation in terms of the level and historical trends of these ratios can be used as a better judge to make inferences and comment upon the company's financial condition and the worth of its operations. Most importantly, it serves a good tool to gauge the attractiveness for an investor to invest in the company’s shares. In isolation, a financial ratio is a useless piece of information. It must be always remembered that a r a t i o d e r i v e s u t i l i t y b y c o m p a r i s o n t o o t h e r s t a n d a r d s . A financial ratio can give an analyst an excellent picture of the company's current situation and the future trends that can be expected to develop. F o r e x a m p l e , a current ratio of 1.7 is meaningless by itself. If we know that this company's competitors have current ratio of 1, we know that it is better than its industry peers. If we also know that the historical trend has been increasing steadily for some years now, this would show that the management is implementing effective business strategies. Financial ratio analysis generally groups the ratios into 3 basic categories that further tell us about the various facets of a company's financial state of affairs. Some of the categories of ratios are described below: LIQUIDITY RATIOS Liquidity Ratios are ratios that come purely from the Balance Sheet and hence talk about the liquidity of the company on that particular day i.e. when the balance sheet was made. They basically give an estimate of the company’s short term and long term financial situation or solvency. TURNOVER RATIOS They are also known as the activity or efficiency ratios. It gives idea about how robust is the company is in its operations and how fast capital rotates in the company. Higher rotation speed ensures higher profitability. The inventory and debt management and the efficiency of its operations are the main things to look out for under this category. PROFITABILITY RATIOS Profitability ratios measure the company’s ability to generate profit with respect to its sales, assets and...
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