A Study on

RATIO ANALYSIS

Rashtriya Ispat Nigam Limited (RINL)

SUBMITTED BY
UPPADA VAMSEE
EMPLOYEE No. 124108

CONTROLLING OFFICER
Shri. S GANESAN
AGM (F&A) Corporate Accounts
Visakhapatnam Steel Plant

CONTENTS

CHAPTER

I
Introduction

CHAPTER

II
Theoretical frame work

CHAPTER

III
Data Analysis &Interpretation

CHAPTER

IV

Summary

Suggestions

Conclusion

CHAPTER-I
(INTRODUCTION)

COMPANY PROFILE

The Government of India has decided to set up an integrated Steel Plant at

Visakhapatnam to meet the growing domestic needs of steel. Visakhapatnam Steel Plant was
the effect of the persistent demands and mass movements.

It is another step towards

increasing the countrys steel production.

The decision of the Government to set up an integrated steel plant was laid down by
the then Prime Minister Smt. India Gandhi. The Prime Minister laid the foundation stone on
20th January 1971.
The consultant, M/s M N Dastur & Co (Pvt) Ltd. submitted a techno-economic
feasibility report in February 1972, and detailed project report for the plant, with an annual
capacity of 3.4 million tones of liquid steel.
The Government of India and USSR signed an agreement on 12 th June 1979 for the
co-operation in setting up 3.4 million tones integrated Steel Plant. The project was estimated
to cost to ` 3,897.28 cores based on prices as on 4 th Quarter of 1981.However, on completion
of the construction and commissioning of the whole Plant in 1992, the cost escalated to
` 8,755 cores based on prices as on 2nd Quarter of 1994.
Unlike other integrated Steel Plants in India, Visakhapatnam Steel Plant is one of the
most modern steel plants in the country. The plant was dedicated to the nation on 1 st August
1992 by the then Prime Minister, Sri.P.V.Narasimha Rao.
New technology, large-scale computerization and automation etc, are incorporated in
the Plant at the international levels and attain such labor productivity, the organizational
manpower has been rationalized. The manpower in the VSP has been limited to17, 500
employees. The plant has the capacity of producing 3.0 million tones of liquid steel and 2.656
million tones of saleable steel.
It has set up two major Blast Furnaces, the Godavari and the Krishna, which are the
envy of any modern steel making complex.
The economy of a nation depends on core sector industries like iron and steel. Steel is
the basic input for construction, machines building and transport industries. Keeping in view
4

the importance of steel the following integrated steel plant with foreign collaborations was
constructed in the public sector in the post independence era.
ORGANIZATION CHART

CHAIRMAN CUM MANAGING DIRECTOR

Director
(Finance)

GM
(Finance)
Company
Secretary
AGM
(Int.
Audit)

Director
(Commercial)
ED (MM)
Addl. GM
(Mktg)
Addl. GM
(Mktg)
- Services
& Exports

Director
(Personnel)
DGM
(M&HS) I/C

GM
(Works)

Director
(Operations)
ED
(Maint.)

GM (P&A)
Addl. GM
(QATD)

Addl. GM
(P&IR)
DGM (Trg)

Addl. GM
(Audio &
Telco)

DGM (HRD)
DGM (Legal
Affairs)

Addl. GM
(Services)
Addl. GM
(Steel)
Addl. GM
(C, S & C)

GM
(Maint.)

Addl. GM
(CR&RM)
DGM
(System)
GM
(D&E)&
I/C PECS

VISION:

VISION 2025
To be the most efficient steel maker having the largest
single location shore based steel plant in the country

Core Values:

Initiative:

Have a self-propelled & proactive approach

Decisiveness:

Decide with speed & clarity.

Ethics:

Be consistent with professional & moral values

Accountability:

Take responsibility for actions.

Leadership:

Lead by example

Speed:
everything we do.

Demonstrate swiftness and efficiency in

OBJECTIVES:

Achieve Gross Margin to Turnover ratio > 10%.

Plan for finishing mill to integrate with 7.3 Mt capacity and commission the same by
2017-18.

Achieve rated capacity of new & revamped units by 2017-18.

Capture markets for high-end value added products by focusing on sector specific
applications and customer needs.

Achieve leadership in Energy consumption by achieving 5.6 Gcal/tcs by 2017-18.

Globalisation of operations through acquisition of mines and setting up of marketing

network abroad.

Diversify through operationalizing of Bhilwara Mines, setting up of Pelletization

plant, DRI-EAF unit, Wheel & Axle Plants.

Create a high performance and safe work culture by nurturing talent and developing
leaders.

To grow in harmony with the environment & communities around us.

CHAPTER-II
(THEORETICAL FRAME WORK)

MEANING OF RATIO AND RATIO ANALYSIS:

According to J.Batty The term accounting ratio is used to describe significant
relationship which exist between figures shown in a balance sheet in a profit and loss
account in a budgetary control system or in any other part of the accounting
organization.
The relationship between two figures expressed mathematically is called a
ratio.
It is a numerical relationship between two numbers which are related in some
manner.

DEFINITION:
The relation of one amount, a to another b, expressed as the ratio of a to b
KHOLER
Ratio is the relationship or proportion that one amount bears to another the first
number being the numerator and the later denominator.
H.G.GUTHMANN

SIGNIFICANCE OF RATIO ANALYSIS:

The major benefits arising from ratio analysis are as follows:
Ratio analysis is a very powerful analytical tool useful for measuring
performance an organization.
Ratio analysis concentrates on the interrelationship among the figures
appearing in the financial statements.
Ratios make comparison easy. The said ratio is compared with the standard
ratio and this shows the degrees of efficiency utilization of assets, etc..
Ratio analysis helps the management to analyze the past performance of the
firm and to make further projections.
Ratio analysis allows interested parties like shareholders, investors, creditors,
government and analysts to make on evaluation of certain aspects of a firms
performance.

LIMITATIONS OF RATIO ANALYSIS:

The following limitations must be taken in to account;

 Over use of ratios as controls on managers could be dangerous, in that management

might concentrate more on simply improving the ratio that on dealing with the
significant issues. Ex: the return on capital employed can be improved by reducing
assets rather than increasing profits.
Ratios provide only guidelines to the management they are only the mean however,
they scratch surfaces and raise questions.
Since ratios are calculated from past records, there are no indicators of future.
The change is price level due to inflation will distort the reliability of ratio analysis.
Ratios are calculated from financial statements which are agented by the financial
bases and policies adopted on such matters as depreciation and the valuation of
stocks.
The analyst should have through knowledge of methods of window dressing.
Since ratios are calculated from past records, there are no indicators of future.
Ratio are based only on the quantitative information, hence qualitative information
(i.e., character, managerial ability, etc.,) puts limit on the ratios.
Ratios are computed on the basic financial statements which are historical in nature.

CLASSIFICATION OF RATIOS:
Classification from the point of view of financial management or objective
Liquidity ratios.
Turnover ratios.
Profitability ratios.
Solvency ratios
1. LIQUIDITY RATIO: (Short term solvency)
Liquidity means ability of a firm to meet its current obligations. The liquidity
ratios, therefore, try to establish a relationship between current liabilities, which are
the obligations soon becoming due and current assets, which presumably provide the
source from which these obligations will be meet. In other words the liquidity ratios
answer the questions : will the company probably be able to meet its obligation
when they become due? The following ratios are commonly used to indicate the
liquidity of business.

I.

Current ratio.
Quick ratio.
Absolute liquid ratio.

CURRENT RATIO:

10

This ratio is most commonly used to perform the short-term financial analysis.
Also known as the working capital ratio, this ratio matches the current assets of the
firm to its current liabilities.
Formula:
Current asset
Current ratio = _______________
Current liabilities

SIGNIFICANCE AND OBJECTIVE:

Current ratio throws good light on the short term financial position and
policy. It is an indicator of a firm ability to promptly to meet the current liabilities. A
relatively high current ratio indicates that the firm is liquid and has the ability to meet its
current liabilities. On the other hand a relatively low current ratio indicates that the firm will
find it difficult to pay its bills.
Normally a current ratio of 2 : 1 is considered satisfactory in other words,
current assets should be twice the amount of current liabilities. If the current ratio is 1:1 it
means that funds yielded by current assets are just sufficient of pay the amounts due to
various creditors and there will be nothing left to meet the expenses which are being currently
incurred. Thus the ratio should always be more than 1 : 1 a very high current ratio is also not
desirable because it indicates idleness of fund which is not a sign of efficient financial
management.

II.

QUICK RATIO:
This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of

liquidity of a company. It shows the ability of a business to meet its immediate financial
commitments. It is used to supplement the information given by the current ratio.
Formula:
Quick assets
Quick ratio = _____________________
Quick liabilities

SIGNIFICANCE AND OBJECTIVE:

Quick ratio is a more rigorous test of liquidity of a firm than the current ratio.
When quick ratio is used along with current ratio, it gives a better picture of the firms ability

11

to meet its short term liabilities out of its short term assets. This ratio is of great importance
for banks and financial institutions.
Generally a quick k ratio of 1 : 1 is considered to represent a satisfactory
current financial position. In the illustration 14 .2 above, the quick ratio of 0.47: 1 is not all
satisfactory because it is less than 1 : 1. On account of such a low ratio the business may gind
itself in serious financial difficulties.

2. TURNOVER RATIO:
Turnover ratios are used to indicate the efficiency with which assets
and resources of

the firm are being utilized. These ratios are known as turnover

ratios because they indicate the speed with which assets are being converted or
turned over into sales. These ratios thus express the relationship between sales and
various assets. A higher turnover ratio generally indicates better use of capital
resources which in turn has a favorable effect on the profitability of the firm.

Important Turnover ratios:

Inventory turnover ratio

Debtors turnover ratio
Fixed assets turnover ratio
Working capital turnover ratio
Capital turnover ratio
Creditors turnover ratio.

INVENTORY TURNOVER RATIO:

This ratio is calculated by dividing the cost of goods sold by average
inventory.
Formula:
Cost of goods sold
Inventory turnover ratio= _______________________
Average stock (or inventory)

SIGNIFICANCE AND OBJECTIVES:

Inventory or stock turnover ratio indicates the efficiency of a firms inventory
management. This ratio gives the rate at which h stocks are converted into sales and
then into cash a low inventory or unsalable gods etc. generally speaking, a high stock
12

turnover ratio is considered better into indicated that more sales are being produced
by each rupee of investment in stock but a higher stock turnover ratio may not always
be an indicator of a favorable results. It may be the result of a very low level of stock
whis meeting customers demands and the company cannot earn maximum profits.
Thus too high and too low inventory turnover ratio may not be good and
should be investigated further a company should have a proper inventory turnover
ratio so that it is able to earn a reasonable margin of profit.

DEBTORS TURNOVER RATIO:

This ratio indicates the relationship between net credit and trade
debtors. it shows the rate at which cash is generated by the turnover of debtors.
Formula:
Credit sales
Debtors turnover ratio=______________________
Average debtors

SIGNIFICANCE AND OBJECTIVES:

The significance of this ratio lies in the fact that debtors constitute the important items
of current assets and this ratio indicates as follows to how many days average sales are tied
up in the amount of debtors. Changes in this ratio are an excellent supplement to the
information provided by current ratio.

WORKING CAPITAL TURNOVER RATIO:

This ratio indicates the efficiency or inefficiency in the utilization of forking capital in
making sales. It is computed as follows;
Sales (or Cost of Sales)
Working capital turnover Ratio=
Net working Capital
SIGNIFICANCE AND OBJECTIVE:
A high working capital turnover ratio shows the efficient utilization working capital in
generating sales. A low ratio, on the other hand, may indicate excess of net considered
capital. This ration thus shows whether working capital is efficiently of the entire working

13

capital whereas stock better than Stock Turnover Ratio because it shows the utilization of
the inventories which is only a part of working capital.
CAPITAL TURNOVER RATIO:
This ratio shows the relationship between cost of sales (or sales) and the total capital
employed.
Formula;
Cost of Sales (or sales)
Capital Turnover Ratio=
Total Capital Employed

SIGNIFICANCE AND OBJECTIVE:

This ratio shows the efficiency with which capital employed in a business is used. A
high capital turnover ratio indicates the possibility of greater profit and a low capital turnover
ratio is assign of insufficient sales and possibility of lower profits.

14

CHAPTER III
(DATA ANALYSIS AND INTERPRETATION)

15

DATA ANALYSIS & INTERPRETATION

Ratio analysis in VSP/RINL
1. LIQUIDITY RATIO:
CURRENT RATIO
Current assets
Current ratio = ----------------------------------------Current liabilities

TABLE SHOWS YEAR WISE CURRENT RATIO

(` in Crores.)
YEAR

CURRENT

CURRENT

ASSETS

LIABILITIES

RATIOS

2010-2011

5660.17

3271.43

1.73

2011-2012

8492.11

7221.61

1.17

2012-2013

9977.75

10184.67

0.98

2013-2014

8400.66

10211.56

0.82

2014-2015

9637.46

15059.38

0.64

CHART PREPARATION

CURRENT RATIOS
2
1.5
RATIOS
1
0.5
0
2010-2011

2011-2012

2012-2013

16

2013-2014

2014-2015

INTERPRETATION:

It has been observed that the quick ratio of VSP is high compared with ideal ratio
till 2010-2011. But it is below ideal ratio for the year 2011-2012 onwards.
As the quick ratio during the period of study is higher than that of the ideal ratio
till 2011--2012, the liquidity position was very good but it is not satisfactory from
the year 2012-2013.

ABSOLUTE LIQUID/ CASH RATIO

ABSOLUTE ASSETS
Absolute liquid/ cash ratio: -------------------------------------CURRENT LIABILITIES

TABLE SHOWING YEAR WISE ABSOLUTE LIQUID RATIO

(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

CURRENT

CURRENT

ASSETS
1998.89
2068.34
1625.02
175.89
63.94

LIABILITIES
3271.43
7221.61
10184.67
10211.56
15059.38

CHART PREPARATION
17

RATIOS
0.61
0.28
0.16
0.02
0.004

ABSOLUTE LIQUID RATIOS

0.7
0.6
0.5
RATIOS

0.4
0.3
0.2
0.1
0
2010-2011

2011-2012

2012-2013

INTERPRETATION:

2013-2014

2014-2015

Ideal Ratio 0:5:1

The Absolute ratio has decreased drastically for the year 2012-2013. It enjoyed
high liquidity position till 2011-2012 as the ratio was above ideal ratio.

LIQUID RATIO
LIQUID ASSETS
Liquid Ratio=
CURRENT LIABILITIES
TABLE SHOWING ON LIQUID RATIO
(` in Crores)
YEAR
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

LIQUID ASSETS
7074.35
4930.93
2405.46
508.9
6149.15
4537.62
4457.95

CURRENT
LIABILITIES
2560.79
2871.95
3271.43
7221.61
10184.67
10211.56
15059.38

CHART PREPARATION
18

RATIOS
2.76
1.71
0.73
0.7
0.6
0.44
0.30

LIQUID RATIOS
0.8
0.7
0.6
0.5

RATIOS

0.4
0.3
0.2
0.1
0
2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

INTERPRETATION:
The liquid ratio in the year 2013-2014 is 0.44
It is slightly decrease in 2014-2015

GROSS PROFIT RATIO:

GROSS PROFIT (PBIT)
100
Gross Profit Ratio=
SALES
TABLE SHOWN IN GROSS PROFIT RATIO
(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

GROSS PROFIT
1412
1301
886
887
538

SALES
10471.18
13232.61
12110.69
12028.33
9314.36

CHART PREPARATION

19

RATIOS
13.4
13.4
9.8
7.37
5.78

GROSS PROFIT RATIOS

14
12
10
RATIOS

8
6
4
2
0
2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

INTERPRETATION:
It has been observed that the gross profit ratio is in increasing trend up to 2009-10 and
it is decreasing from 2010-2011.
Sales are in increasing trend but the profit ratio is decreasing. It is due to decreased

cost of production.

NET PROFIT RATIO

Net profit (after tax)
Net profit ratio = --------------------------------------------- X 100
Sales
TABLE SHOWING YEAR WISE NET PROFIT RATIO

(`. in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

NET PROFIT

SALES
982
751
353
366
62

10471.18
13232.61
12110.69
12028.33
9314.36

CHART PREPARATION:

20

RATIOS
9.37
5.67
2.91
3.04
0.67

NET PROFIT RATIOS

10
9
8
7
RATIOS

6
5
4
3
2
1
0
2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

INTERPRETATION:
Net profit is in decline position from 2014-15 in comparative with 2013-14.
Main attributable reason for the declining the profit is overall global meltdown.
Even in adverse market conditions, the company is able to earn net profits.

OPERATING PROFIT RATIO

Operating profit
Operating profit ratio = ---------------------------------------- X100
Sales

21

TABLE SHOWING YEAR WISE OPERATING PROFIT RATIO

(` in Crores)
YEAR

OPERATING

SALES

RATIOS

2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

PROFIT
10732.8
751
352.83
366.45
62.38

10471.18
13232.61
12110.69
12028.33
9314.36

1.02
5.67
2.91
3.04
0.67

CHART PREPARATION

OPERATING PROFIT RATIOS

6
5
RATIOS

4
3
2
1
0
2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

INTERPRETATION:
It indicates the companys operational efficiency.

RETURN ON INVESTMENT RATIO

NET PROFIT (AFTER TAX)
Return On Investment Ratio =

SHARE HOLDER FUNDS

TABLE SHOWN ON RETURN ON INVESTMENT RATIO

22

(` in Crores)
YEAR

PROFIT AFTER

SHARE

TAX
658.49
751
353
366.45
62.38

HOLDER FUNDS
13229.22
13659.29
12477.32
12140.74
11593.93

2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

RATIOS
0.04
0.05
0.02
0.03
0.005

CHART PREPARATION

INVESTMENT RATIOS
0.06
0.05
0.04

RATIOS

0.03
0.02
0.01
0
2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

INTERPRETATION:
Highest return on investment was recorded in 2011-12.
It has been observed that the ROI is fluctuating from year to year.
More reserves and surplus funds have been diverted to expansion activities.

23

3. TURNOVER RATIO:
STOCK TURNOVER RATIO
Sales
Stock Turnover Ratio =
Stock
TABLE SHOWN ON STOCK TURNOVER RATIO

(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

SALES
10471.18
13232.61
12110.69
12028.33
9314.36

STOCK
3254.71
3403.11
3828.6
3863.04
5179.51

RATIOS
3.21
3.89
3.16
3.11
1.80

CHART PREPARATION

STOCK TURNOVER RATIOS

4
3.5
3
2.5
RATIOS

2
1.5
1
0.5
0
2010-2011

2011-2012

2012-2013

2013-2014

INTERPRETATION:
24

2014-2015

The Inventory Turnover Ratio during the year 2014-15 was 1.80

less stock turnover ratio in the year 2014-2015

Higher ratio also indicates that the company is not able to meet the customers demand
properly.

DEBTORS TURN OVER RATIO

Net credit annual sales
Debtors Turn Over Ratio = -----------------------------------Average trade debtor

TABLE SHOWING YEAR WISE DEBTORS TURN OVER RATIO

(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

SALES
10471.18
13232.61
12110.69
12028.33
9314.36

DEBTORS
330.61
427.15
1009.65
803.65
1035.43

RATIOS
31.67
31.00
11.99
14.97
9.00

CHART PREPARATION

DEBTORS TURNOVER RATIOS

35
30
25
20

RATIOS

15
10
5
0
2010-2011

2011-2012

2012-2013

2013-2014

INTERPRETATION:
25

2014-2015

 The debtor turnover ratio for the year 2014-15 is 9.00

It can be concluded that the management is efficient in converting the debtors

into cash.

WORKING CAPITAL TURNOVER RATIO

Net sales
Working capital turnover ratio = ------------------------------------------------Working capital
TABLE SHOWING YEAR WISE WORKING CAPITAL TURNOVER RATIO

(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

SALES

WORKING

10471.18
13251.04
12110.69
12028.33
9314.36

CAPITAL
2388.74
1270.5
-206.92
-1810.90
-5421.92

RATIOS
4.38
10.41
-58.52
-6.64
-1.72

CHART PREPARATION

WORKING CAPITAL TURNOVER RATIOS

20
10
0
-10 2010-2011 2011-2012
2012-2013
2013-2014
-20
2014-2015
-30
-40
-50
-60

INTERPRETATION:

26

RATIOS

 The working capital turnover ratio during the year 2014-15 is -1.72 times. It shows
that negative indication.
The higher working capital ratio indicates that the efficient utilization of working
capital.

TOTAL ASSETS TO TURNOVER RATIO

Sales
Total Assets Turnover Ratio=
Total Assets
TABLE SHOWING YEAR WISE TOTAL ASSETS TO TURNOVER RATIO

(` in Crores)
YEAR
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

SALES
10471.18
13232.61
12110.69
12028.33
9314.36

TOTAL ASSETS
18691.84
21504.84
24652.52
24671.83
27860.13

RATIOS
0.56
0.61
0.50
0.49
0.33

CHART PREPARATION

TOTAL ASSETS TURNOVER RATIOS

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

RATIOS

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

INTERPRETATION:
The Total Assets Turnover Ratio is the decrease from previous year to current year,
thatis
2014-2015 year of Total Assets Turnover Ratio is 0.33
27

It can be concluded that the management is not efficient in converting the Assets into cash.

4. SOLVENCY RATIO:
DEBT EQUITY RATIO
Long Term Debts
Debt equity Ratio =
Share Holders Funds

TABLE SHOWING YEAR WISE DEBT EQUITY RATIO

(` in Crores)
YEAR

LONG TERM

2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

SHARE HOLDERSD

DEBTS
274.89
623.94
1990.54
2319.53
1206.82

RATIOS

FUNDS
13229.22
13659.29
12477.32
12140.74
11593.93

0.02
0.04
0.16
0.19
0.10

CHART PREPARATION

DEBT EQUITY RATIOS

0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0

RATIOS

2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:
The debt equity ratio is the increasing of the debt equity holders. The ratio of 0.19 in
the year 2013-14 and in the year of 2014-15 it is 0.10

28

EARNING PER SHARE

TABLE SHOWING YEAR WISE EARNING PER SHARE

(` in Crores)
Year
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

RATIO
85
126
48
62
9

CHART PREPARATION:

EARNING PER SHARE

150
100
RATIO
50
0
2010-2011

2011-2012

2012-2013

INTERPRETATION:

29

2013-2014

2014-2015

Earnings per share ratio are used to find out the return that the shareholders
earn from their shares. After charging depreciation and after payment of tax, the remaining
amount will be distributed by all the shareholders.
Net profit after tax is decreased due to the huge decrease in the income from
services. That is the amount which is available to the shareholders to take. The share capital
is constant from the year 2008. Due to the decrease in net profit the earnings per share is
decreased in 2015.

30

CHAPTER-IV
(FINDINGS AND SUGGESTIONS)

31

SUMMARY:
Visakhapatnam Steel Plant was founded on 20th Jan 71 but became fully operational
on 1st Aug 92. VSP is the first shore based integrated steel plant with new technology, large
scale computerization and automation. The organizational manpower has been rationalized
to operate it at international levels of efficiency and to attain international labor productivity.
The production, commercial and financial performance has been improving with the
passage of years. The financial analysis of VSP by the use of various techniques i.e. Ratio
analysis shows that:
1)

The liquidity position of the company is good.

2)

The company is low debt company.

3)

The net worth of VSP is satisfactory

4)

It is noted that the inventory level is increasing.

5)

The profitability ratio is in decline state

6)

Liquidity position of VSP is very good.

7)

The companys accumulated funds are being used for expanding business
operations and expansion works and there by the Current Assets are reducing
and the Current ratio is decreasing year by year.

8)

Security to share holders is envisaged.

9)

The working capital utilization is efficient in the particular year

32

SUGGESTIONS
The following suggestions will improve the financial position of the VSP.

PRODUCTION
1)

Need for continuous up gradation of technology for improving the processes.

2)

Effort should be made at cost savings particularly in spares and energy

consumption.

3)

Using the natural gas reserves of KG basin, Hot metal production capacity can
be enhanced with the present BF facility with negligible investment.

FINANCE
1)

Improving financial leverage ratio for better returns.

PERSONNEL:
1)

Rationalization of existing man-power with effective training for future

expansion of the plant.

2)

Improving efficiency through better HRD programs.

3)

Providing better motivation.

4)

Striving towards becoming the most chosen employers.

MARKETING
1)

Continuously monitoring the indigenous sale, export sale ratio to capture the
best of markets.

2)

Increasing the net realization by selling in the most profitable region.

3)

Identifying new markets and new application of the companys product.

4)

Improving realization by identifying value added products and providing

feedback to production department.

5)

Value added products (high value items) are to be produced instead of selling
semi-finished products in order to increase profit margin.

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BIBLIOGRAPHY

BOOKS:
1. Financial Management: Theory & Practice (4th Edition)
Eugene F. Brigham and Michael C. Gerhardt

2. Cost and Management Accounting

M.N. ARORA
3. Financial Accounting and Analysis.

WEBSITES
http://vizagsteel.com
http://www.indiansteel.com
http://www.bee-india.nic.in.com
http://www.answer.com

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