Completed Project
Completed Project
Completed Project
Chapter-I
INTRODUCTION
With the details study of the financial performance, one can make an
attempt to ascertain profitability to show whether company is getting
satisfactory return on its investments, liquidity position to know
company’s ability to meet all its financial obligations in its day-to-day
business operation.
FINA
NCIAL PERFORMANCE PARAMETRES–AN OVER VIEW:
Balance sheet
The financial statements are mirror that reflects the financial position
and operating strength and weakness of the concern. These statements
are useful to management, investors, creditors, bankers, workers, and
government and public at large. George. O May points out the following
major uses of financial statements.
➢ As a report of stewardship
1.3 LIMITATIONS:
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Financial performance
Though financial statements are relevant and useful for the concern
still they do not present a final picture of the concern. The utility of these
statements is dependent upon a number of factors. The analysis and
interpretation of these statements should be done very carefully
otherwise misleading conclusions may be drawn.
Profitability:
Chapter-II
RESEARCH DESIGN
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Financial performance
1. To study the financial performance of the company for the last four
years.
2. To analyze the financial performance of the company with the help of
the trend analysis using various statements of the company.
3. To suggest improvement in financial performance.
The feasibility of the project was analyzed and the necessary financial
analysis was made with the help of trend analysis, comparative
statement, and ratio analysis along with the necessary tables and graphs
2. Secondary data:
The gathered data have been analyzed to draw the conclusions with
the help of statistical tools and techniques, such as averages and
Chapter-III
PROFILE OF BESCOM
Core group
Project management
Construction management
Material management
Operations management
Receipts
All receipts are accepted only through cheques & demand drafts. To
account for it a separate receipts ledger is maintained. Some of the
major receipts are from power sale, surplus funds, & Plan loans. Non-
plan loans scrap sales, money deposits, provident fund & other
miscellaneous incomes. These accounts are prepared daily and monthly
wise reports on collection.
Payments
All payments are made only though bank cheques & drafts. A rough
cashbook is prepared to record the daily payments and at the end of the
month a consolidated payment ledger is prepared. The major payments
are salary, wages, materials, interest on over draft and other sundries.
Source of funds
Authorized capital
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Financial performance
Loan funds
The secured loan funds are loan from rural electrification corporation
Ltd New Delhi, term loans from commercial banks namely UCO Bank,
State bank of India, Oriental bank of commerce & corporation bank. The
unsecured loan funds are loan from Govt. - PMGY, APDRP, term loan from
PFC, Loan from Govt. of Karnataka for power sector automation, Loan
from Govt. of Karnataka Ganga kalyana.
Method of accounting
Fixed assets
Depreciation
Retirement benefits: -
Pension and gratuity are provided base on the revised rates prescribed
by KPTCL and ESCOM’s. Leave encashment is provided on the basis of
estimate made by the company and not on the basis of actuarial
valuation.
Taxes on income
Power purchase
Chapter- VI
PART-A
ANALYSIS OF BALANCESHEET
BALANCESHEET FOR THE PERIOD FROM 2004-05 TO
2007-08(4YEARS) OF BESCOM
Analysis:
Table 01 & graph 01 show that trend & growth rate in reserves & surplus
of BESCOM over a period of 4 years.
Trend:
The trend analysis is made by taking 2004-2005 as basis. The
trend in the year 2004 & 05 was assumed to be 100% in reserves &
surplus, in 2005 & 06 trend rise to 143.48%, in the year 2006 & 07 it
rises to 191.91%, in 2006 & 07 it again rises to 261.33
Growth rate:
In the year 2004 & 05 shows 0% rise in reserves & surplus of
BESCOM. In the following year 2005 & 06 it was found a growth of
43.48%, in the year 2006 & 07 there was increase in the growth of
reserves & surplus by 91.91., in 2007-08 it was increased by 161.33.
Interpretation:
From the above analysis it was inferred that reserves & surplus has
been increasing year by year, which shows that there was increase in the
profit.
Analysis:-
Table 2 & graph 2 showing the trend & growth in loan funds of
BESCOM over a period of 4 years.
Trend:-
The trend in the 2004 & 05 was assumed to be 100% in loan funds,
in 2005 & 06 trend rises to 108.85%, in 2006 & 07 again rises to
153.23% and in 2007-08 declines to 110.51%.
Growth rate:
The year 2004 &05 shows 0% rise in loan funds of BESCOM and in
the following year 2005-06 it increased by 8.85%, in the year 2006 & 07
further increased by 53.23%, in the year 2007 & 08 there was a decline
in growth of loan funds to 10.51%.
Interpretation:
The above analysis shows that there was a constant increased in
trend & growth of loan funds of BESCOM up to 2006-07, but in 2007-08
there was a decreased in growth rate loan fund.
Analysis:-
Table 3 & graph 3 showing the trend & growth in fixed assets of
BESCOM over a period of 4 years.
Trend:-
The trend in the 2004 & 05 was assumed to be 100% in fixed
assets, in 2005 & 06 trend raised to 136.84%, in 2006 & 07 it raised to
172.01%. In the following year it was further raises to 215.71%.
Growth rate:
The year 2004 &05 shows 0% rise in fixed assets of BESCOM and in
the following year 2005-06 there was a growth of 36.84%, in the year
2006-07 further raised by 72.01%, in 2007-08 there was a further growth
of 115.71.
Interpretation:
The above analysis shows that in there were constant increase in
trend & growth of fixed assets of BESCOM.
Analysis:-
Table 4 & Graph 4 showing the trend & growth in current asset, loans
& advances of BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 was assumed to be 100% in current
assets, loans & advances, in 2005-06 trend increased to 123.26%, in
2006-07 there was slight decline in the trend of current assets, loans &
advances to 120.38%. In the following year it was increased to 132.93%.
Growth rate:
The year 2004-05 shows 0% rise in current assets,loans & advances
of BESCOM and in the following year 2005-2006 there was a growth of
23.26% , in the year 2006 & 07 it was declined to 20.38%, in the last
year it increased by 32.93%.
Interpretation:
The above analysis shows that there were increases and decreases
in the growth rate of current assets, loans& advances of BESCOM over a
period. But in the last year it was increased.
Analysis:-
Table 5 & Graph 5 showing the trend & growth in current liabilities
& provision of BESCOM over a period of 4 years.
Trend:-
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Financial performance
Growth rate:
The year 2004-05 shows 0% rise in current liabilities & provisions of
BESCOM and in the following year 2005-06 there was a growth of
29.10%, in the year 2006-07 declined to 3.93%, in the last year there
was a further growth of 51.42.
Interpretation:
The above analysis shows that there were constant increases and
decreases in current liabilities & provisions of BESCOM up to 2006-07, but
in the last year it was increased.
PART-B
ANALYSIS OF INCOME STATEMENT
INCOME STATEMENT OF BESCOM FROM 2004-05 TO
2007-08
Year 2004-05 2005-06 2006-07 2007-08
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Financial performance
in (%)
Analysis:-
Table 6 & Graph 6 showing the trend & growth in Net sales of
BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 was assumed to be 100% in Net sales,
in 2005-06 trend raised to 117.52%, in 2006-07 it once again increased
to 144.52% in the trend of Net sales. In the following year it was further
increased to 159.36%.
Growth rate:
The year 2004-05 shows 0% rise in Net sales of BESCOM and in the
following year 2005-06 there was a growth of 17.52% in Net sales, in the
year 2006-07 increased by 44.52%, in the last year there was a further
growth of 59.36%.
Interpretation:
The above analysis shows that there was a constant increase in
growth rate of net sales of BESCOM from 2004-05 to 2007-08.
Analysis:-
Table 7 & Graph 7 showing the trend & growth in Cost of Goods
Sold of BESCOM over a period of 4 years.
Trend:-
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Financial performance
Growth rate:
The year 2004-05 shows 0% rise in cost of goods sold of BESCOM
and in the following year 2005-06 there was a growth of 10.46% & in
2006-07 & 2007-08 it has a further growth of 50.60 & 62.42%
respectively in the cost of goods sold.
Interpretation:
The above analysis shows that there was a constant increase in the
growth rate of cost of goods sold of BESCOM.
Analysis:-
Table 7 & Graph 7 showing the trend & growth in Cost of Goods
Sold of BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 was assumed to be 100% in cost of
goods sold, in 2005-06 trend increased to 110.46%, in 2006-07 & 2007-
08 it further increased to 150.60 & 162.42% respectively.
Growth rate:
The year 2004-05 shows 0% rise in cost of goods sold of BESCOM
and in the following year 2005-06 there was a growth of 10.46% & in
2006-07 & 2007-08 it has a further growth of 50.60 & 62.42%
respectively in the cost of goods sold.
Interpretation:
The above analysis shows that there was a constant increase in the
growth rate of cost of goods sold of BESCOM.
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Financial performance
Analysis:-
Trend:-
The trend in the 2004-05 was assumed to be 100% in operating
expenses, in 2005-06 trend increased to 165.21%, in 2006-07 there was
decline to 158.33% in the trend of operating expenses. In the following
year it was a growth of 182.07%.
Growth rate:
The year 2004-05 shows 0% rise in operating expenses of BESCOM
and in the following year 2005-06 there was a raise in growth up to the
level of 65.21% in operating expenses. However in the year 2006-07 it
declines to 58.33%, in the last year there was a growth of 82.07%.
Interpretation:
The above analysis shows that there was increase in trend & growth
rate of operating expenses of BESCOM except in the year 2006-07.
Analysis:-
Table 9 & Graph 9 showing the trend & growth in Depreciation of
BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 was assumed to be 100% in Depreciation
and in 2005-06 trend increases to 111.95%, in 2005-06 there was a
decline to 10.72% in the trend Depreciation. In the following year also it
declines to 48.53%.
Growth rate:
The year 2004-05 shows 0% rise in the depreciation of BESCOM and
in the following year 2005-06 there was a slight growth of 11.95% in
Interpretation:
The above analysis shows that there was increase in depreciation in
2005-06, but last two years it was decreases because depreciation
withdrawn from contributions/subsidies were deducted from total
depreciation.
Analysis:-
Table10 & Graph 10 showing the trend & growth in Interest of
BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 was assumed to be 100% in Interest
and in 2005-06 trend suddenly increased to 414.37%, in 2006-07 &
2007-08 it increased to 549.77 & 691.34% respectively.
Growth rate:
The year 2004-05 shows 0% rise in of BESCOM and in the following
year 2005-06 there was a sudden growth of 314.37% ,in 2006-07 it
increased by 449.77% and in the last year it once again increased by
591.34%.
Interpretation:
From the above analysis it was inferred that trend & growth rate of
interest of BESCOM was increased frequently which shows that loan funds
of company increased frequently.
Analysis:-
Table11 & Graph 11 showing the trend & growth in Interest of
BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 was assumed to be 100% in Interest
and in 2005-06 trend suddenly increased to 414.37%, in 2006-07 &
2007-08 it increased to 549.77 & 691.34% respectively.
Growth rate:
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Financial performance
Interpretation:
From the above analysis it was inferred that trend & growth rate of
interest of BESCOM was increased frequently which shows that loan funds
of company increased frequently.
Analysis:-
Table 12 & Graph 12 showing the trend & growth in Profit after
Tax of BESCOM over a period of 4 years.
Trend:-
The trend in the 2004-05 assumed to be 100% in Profit after Tax
and in 2005-06 trends decreased to 63.46% and 2006-07 & 2007-08 it
once again decreased to 62.20% & 15.54% respectively.
Growth rate:
The year 2004-05 shows 0% rise in Profit after Tax of BESCOM and
in the following years from 2005-06 to 2007-08 the growth rate
decreased to -36.54%,-37.80%,-84.46% respectively.
Interpretation:
From the above analysis it was observed that the trend & growth
rate of profit after tax decreases frequently because of overall raise in
cost, interest, & expenses of the company.
PART-C
Ratio Analysis
1) Current ratio:
Current assets
Current Ratio =
Current liabilities
Interpretation:
It was inferred that BESCOM has maintained a moderate current
ratio that the standard of 2:1. The above table shows that current ratio
for the years 2004-05 to 2007-08 are 1.97, 1.88, 2.28 & 1.73
respectively. There has been a small decrease in the current ratio in the
year 2005-06 compared to 2004-05 and in year 2006-07 again increases.
But in year 2007-2008 it once again decreases, because there has been
decrease in current assets and increase in current liabilities in the year.
2) Quick Ratio:
Quick Assets
Quick Ratio=
Current Liabilities
Interpretation:
In the above table, quick assets include current assets, loans &
advances less inventory. And quick liabilities include current liabilities less
bank overdraft. It was inferred from the above table that quick ratio for
the year 2004-05 to 2007-08 are 1.92, 1.82, 2.17 & 1.66 respectively. It
indicates amount of quick assets available to meet its short-term
obligations. A quick ratio of 1:1 is considered as satisfactory ratio. This
shows that the BESCOM has higher than standard ratio. So BESCOM has
more liquid assets to meet sort-term obligations.
solvency ratio measures the extent to which borrowed funds support the
firm’s assets.
Total liabilities
Solvency Ratio =
Total assets
The numerator of the ratio includes all the debt, short term as well as
long term and the denominator of the ratio is the total of all assets (the
balance sheet total).
Interpretation:
The solvency ratios from 2004-05 to 2007-08 are 0.48, 0.48, 0.43,
0.42respectively. Generally, lower solvency ratio indicates more stable or
satisfactory in the long term solvency position of a firm. The solvency
ratios of BESCOM are low in all the years, so it has a stable solvency
position.
Interpretation:
A ratio of 1:1 may be usually considered to be satisfactory ratio. A
high debt equity ratio which indicates that the claims of outsiders are
greater than those of owners. In the year 2004-05 the debt equity ratio is
0.82 and it decreased to 0.70 in 2005-06, but in 2006-07 it once again
increased to 0.80, in the fallowing year it once again decreases. The
ratios are below 1 in all the years so the claims of the outsiders to assets
is lower than claims of owners.
Cost of sales
Working capital turnover ratio= -------------------------------
Average working capital
Interpretati
on:
From the above table the working capital turnover ratio for the year
2004-05 to 2007-08 are 3.10, 3.15, 3.67, and 4.01 respectively. This
ratio indicates the number of times the working capital is turned over in
the course of year. The working capital turnover should be neither very
high nor very low. It should be just normal.
Interpreta
tion:
From the above table the stock turnover ratio for the year 2004-05 to
2007-08 are 58.11, 52.60, 47.56, 42.97respectively. a stock turnover of
8 times a year is considered ideal. As such in above table the stock
turnover ratio is above ideal level, so a high inventory turnover indicates
efficient management of inventory because more frequently the stocks
are sold, the lesser amount of money is required to finance the inventory.
Interpretation:
The above situation the gross profit margin of the firm from 2004-05 to
2007-08 is 16.53, 21.54, 13.10, 14.92 respectively. In 2005-06 it has a
highest gross profit than the other years, because the gross profit and
sales are high, but at a same time cost of goods sold is decreased
compared to other years. In 2006-07 & 2007-08 sales are increased, but
gross profit decreased compared to 2005-06, because the cost of goods
sold increased.
Interpretation:
The net profit ratio of the company from 2004-05 to 2007-08 are
2.21, 1.19, 0.95, 0.21, respectively. From the above ratios it was
necessary to understand the operating cost of BESCOM was a drastically
high because the company was getting decrease in operational profit and
net profit ratio even though the company earns maximum gross profit
ratio. In 2004-05 it has a highest net profit then it gradually decreases,
because operating expenses were increased.
Operating profit
Operating profit Ratio = * 100
Net sales
profit
2004-05 2240860609 36437359781 6.15
2005-06 2977816994 42823482792 6.95
2006-07 865768600 52661032621 1.65
2007-08 1779731673 58066884560 3.07
Interpretation:
The standard operating profit ratio is 10%. So, an operating profit ratio
of 10% or more is an indication of the operating efficiency of the business
and vice versa, but in above situation the operating profit ratio is less
than standard level in all the year because of higher operating cost. In the
year 2006-07 it has a very low operating profit ratio of 1.64.
Operating cost
Operating Ratio = * 100
Net sales
Interpretation:
The operating cost ratio of the company from 2004-05 to 2007-08 are
93.85, 93.04, 98.35, 96.93respectively. Generally a low operating ratio is
an indication of the operating efficiency of the business and vice versa.
But in above situation the operating cost ratio is high in all the years so
the company inefficient in operating costs which results in decrease the
profits.
Interpretation:
It was inferred from the above table that earning per share throws
light on the performance of the company. The EPS of the company from
2004-05 to 2007-08 are 3.92, 2.49, 2.44, 0.61 rupees respectively. In
2004-05 the company has a highest EPS of 3.92 rupees than, it was
gradually decreased in the subsequent years, because of decreases in the
net profit of the company from 2005-06 to 2007-08. In 2007-08 the EPS
of the company was very low compared to other years.
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