Authors: Margi Parmar, Jayshree Parmar, Prof. Shonakshi Sharma
DOI Link: https://doi.org/10.22214/ijraset.2023.49159
Certificate: View Certificate
The project assigned to me was to study the financial health of any organization in the country. I decided to choose one of India’s largest companies in a sector that has rapidly grown over the last few years and a company where leaders like Mr. Dhirubhai Ambani, or rather, a company that has been made Mr. Dhirubhai Ambani. Through this report, I try and analyze the financial environment in which Reliance Industry Limited is operating. Through a thorough financial analysis, my aim to understand the financial factors is influencing the company and its decision making. Later, I try and evaluate the various ratios to appreciate their impact on company’s performance over the last four years. The financial statements of last four years are identified, studied and interpreted in light of company’s performance. Critical decisions of distributing dividends, Issue of bonus Debentures and other current news are analyzed and their impact on the bottom line of the company is assessed.
I. INTRODUCTION
Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period.They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm.
II. LITERATURE REVIEW
III. OBJECTIVE OF STUDY
To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.
IV. LIMITATION OF THE STUDY
A. Estimates
Financial statements contain numerous estimates. Estimates are used in determining the allowance for uncollectible receivables, periodic depreciation, the costs of warranties, and contingent losses.
B. Cost
Traditional financial statements are based on cost. They are not adjusted for price-level changes. Comparisons of unadjusted financial data from different periods may be rendered invalid by significant inflation or deflation. me period.
C. Alternative Accounting Methods
Companies vary in the generally accepted accounting principles they use. Such variations may hamper comparability. For example, one company may use the FIFO method of inventory costing: another company in the same industry may use LIFO. If inventory is a significant asset to both companies, it is unlikely that their current ratios are comparable. In addition to differences in inventory costing methods, differences also exist in reporting such items as depreciation, depletion, and amortization.
V. RESEARCH METHODOLOGY
Sources of Data: The secondary data were collected from company’s annual reports and their websites.
The data collected on different waspects were analyzed.
Data collection method :-
Secondary
VI. RELIANCE IND. 2020-21 ANNUAL REPORT ANALYSIS
RELIANCE IND. Income Statement 2020 --21
No. of Mths Year Ending |
12 Mar-20* |
12 Mar-21* |
% Change |
|
Net Sales |
Rs m |
5,350,730 |
3,946,100 |
-26.3% |
Other income |
Rs m |
132,790 |
171,420 |
29.1% |
Total Revenues |
Rs m |
5,483,520 |
4,117,520 |
-24.9% |
Gross profit |
Rs m |
844,500 |
855,640 |
1.3% |
Depreciation |
Rs m |
222,030 |
265,720 |
19.7% |
Interest |
Rs m |
220,270 |
211,890 |
-3.8% |
Profit before tax |
Rs m |
534,990 |
549,450 |
2.7% |
Tax |
Rs m |
137,260 |
17,220 |
-87.5% |
Profit after tax |
Rs m |
397,730 |
532,230 |
33.8% |
Gross profit margin |
% |
15.8 |
21.7 |
|
Net profit margin |
% |
7.4 |
13.5 |
A. RELIANCE IND. Income Statement Analysis
RELIANCE IND. Balance Sheet as on March 2021
No. of Mths Year Ending |
12 Mar-20* |
12 Mar-21* |
% Change |
|
Networth |
Rs m |
4,491,470 |
6,994,350 |
55.7 |
|
||||
Current Liabilities |
Rs m |
4,129,160 |
2,775,680 |
-32.8 |
Long-term Debt |
Rs m |
1,976,310 |
1,636,830 |
-17.2 |
Total Liabilities |
Rs m |
11,630,150 |
13,200,650 |
13.5 |
|
||||
Current assets |
Rs m |
2,582,600 |
3,730,110 |
44.4 |
Fixed Assets |
Rs m |
9,047,550 |
9,470,540 |
4.7 |
Total Assets |
Rs m |
11,630,150 |
13,200,650 |
13.5 |
B. RELIANCE IND. Balance Sheet Analysis
RELIANCE IND. Cash Flow Statement 2020-21
Particulars |
No. of months |
12 |
12 |
% Change |
Year Ending |
Mar-20 |
Mar-21 |
||
Cash Flow from Operating Activities |
Rs m |
948,770 |
261,850 |
-72.4% |
Cash Flow from Investing Activities |
Rs m |
-725,200 |
-1,416,340 |
- |
Cash Flow from Financing Activities |
Rs m |
-25,410 |
1,019,020 |
- |
Net Cash Flow |
Rs m |
198,390 |
-135,230 |
- |
C. RELIANCE IND. Cash Flow Statement Analysis
VII. KEY RATIO ANALYSIS
No. of Mths Year Ending |
12 Mar-20* |
12 Mar-21* |
|
Current ratio |
x |
0.6 |
1.3 |
Debtors’ Days |
Days |
1 |
2 |
Interest coverage |
x |
3.4 |
3.6 |
x |
0.4 |
0.2 |
|
Return on assets |
% |
5.3 |
5.6 |
Return on equity |
% |
8.9 |
7.6 |
VIII. SUGGESTION & RECOMMENDATION
The company’s overall position is at a very good position. The company achieves sufficient profit in past four years. The long term solvency position of the company is very good. The company maintains low liquidity to achieve the high profitability. The company distributes dividends every year to its share holders. The profit of the company decreased in the last year due to maintaining the comparatively high liquidity. The net working capital of the company is maximum in the last year shows the maximum liquidity.
[1] Anaual Reports Of Reliance Industries Limited 2020-2021 [2] www.moneycontrol.com
Copyright © 2023 Margi Parmar, Jayshree Parmar, Prof. Shonakshi Sharma. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Paper Id : IJRASET49159
Publish Date : 2023-02-19
ISSN : 2321-9653
Publisher Name : IJRASET
DOI Link : Click Here