A

SUMMER INTERNSHIP PROJECT

ON
FINANCIAL STATEMENT ANALYSIS
AT

SUBMITTED TO

MAHENDRA INSTITUTE OF MANAGEMENT AND TECHNICAL STUDIES

At-Pitapalli, Po-Kumarbasta, Dist-Khordha, Odisha 752055
PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF
TWO YEAR FULL TIME POST GRADUATE DEGREE PROGRAMME IN MASTER
OF FINANCE AND CONTROL (MCOM. F&C)

Submitted By:
G. HEMRAJ RAO
Roll no: 13787U173006
UNDER THE GUIDANCE AND SUPERVISION OF

Internal guide External guide

Prof. Susanta Kumar Satapathy Mr. Debendu Mohapatra
Faculty, Finance Asst. Manager, OMC.
MIMTS

1
 DECLARATION
I Mr. G. HEMRAJ RAO a student of M.com (F&C) do here by declare that
the Summer Internship project entitled “ FINANCIAL STATEMENT
ANALYSIS at OMC” submitted for the partial fulfilment of the requirements
of the degree of Master of Finance and Control, MIMTS. This project is an
original piece of work done by me under the guidance of Prof. SUSANTA
KUMAR SATAPATHY, Mahendra Institute of Management and Technical
Studies (MIMTS) and has not been submitted for award of any other degree to
any other University, Academy, Institution nor published in magazine or
anywhere else in part or full.

Date: G. Hemraj Rao

Place: Roll. No: 13787U173006
MIMTS, Khordha

2
 ACKNOWLEDGEMENT

It is really a great pleasure to have this opportunity to describe the feeling of

gratitude imprisoned in the core of my heart.

I convey my sincere gratitude to Director General Manager Mr. Debendu

Mohapatra for giving me the opportunity to prepare my project Orissa
mining corporation Ltd. I express my sincere thanks to all the staff members
of Odisha Mining Corporation ltd.

I am thankful to prof. Susant Kumar Satpathy, CC, MFC for his guidance
during my project work and sparing his valuable time for same.

I express my sincere obligation and thanks to all the faculties of MIMTS, for
their valuable advice in guiding me at every stage in bringing out this report.

I am thankful to my family for their kind co-operation which made my take

easy.

The satisfaction that accompanies the successful completion of this task would
be incomplete without mentioning people who made it possible, whose
encouragement and consistent guidance crowned my effort success.

3
 CONTENTS

Chapter Topics Page No

1 Introduction
Objectives of Study
Research Methodology
Limitation of Study

2 Company profile
3 Literature review
4 Data analysis and
interpretation
5 Findings, suggestion and
conclusion
Bibliography

4
 CHAPTER-1

INTRODUCTION

5
 INTRODUCTION
In the real world, finance is the back bone of every sector. Finance
means the provision of money at the time when it is required. Every
enterprise, whether big, medium or small, needs finance to carry on
its operations and to achieve its objectives. In fact, finance is so
indispensable today that it is rightly said to be the lifeblood of an
enterprise. Without adequate finance, no enterprise can possible
accomplish its objectives.

FINANCIAL STATEMENT:-

A financial statement is a collection of data organized according to

logical and consistent accounting procedures. Its purpose is to convey
an understanding of some financial aspects of a business firm. It may
show a position at a moment in time, as in the case of balance sheet,
or may reveal a series of activities over a given period of time, as in
the case of an income statement. Thus, the term “Financial
Statements” generally refers to the two statements or the profit and
loss account. These statements are used to convey to management and
other interested outsiders the profitability and financial position of a
firm.

Accounting is the process of identifying and communicating

economic information to permit informed judgements and decisions
users of the information. It involves recording, classifying and
summarizing various business transactions. The end product of
business transactions are the financial statement comprising primarily
the position statement or the balance sheet and the income statement
6
or the net profit and net loss account. These statements are the
outcome of summarizing process of accounting and are; therefore the
sources of information on the basis of which conclusions are drawn
about the profitability and the financial position of the concern.

FINANCIAL STATEMENT ANALYSIS:-

A financial statement analysis is performed on the accounting reports

prepared by a company, either internally or by auditors, and is vital to
understanding the financial health of a company.

Financial statements are the accounting reports prepared by a

company. They are the historical record of the finances of the
company over a specified period. Investors use financial statement
analysis as the basis for their investment opinion on a company. These
statements can be prepared internally or by the company’s auditors
(the outside accountants used by the firm).

Present and prospective stakeholders of entity like to obtain

information regarding its financial position and financial performance.
This need is served by entity’s general public finance statements that
are prepared by the management of the entity and are usually audited
by the external auditor. Though the way financial statements are
structured and the way information is presented in the financial
statements is helpful to great extent however for deeper and to aid
specific decisions of the users of financial statements one has to
conduct financial analysis.

7
Financial analysis is the process of evaluating entity’s financial
performance, financial position in relevant period, industry or social,
economic or financial environment so that users can make informed
decisions in a better way. In less technical way, financial analysis
helps you understand the strength and weaknesses of the entity so that
one can decide whether to invest in the business or to lend money.

Such examinations and evaluations are conducted by trained

professionals known as financial analysts however, one need not to
have specific qualification or degree to apply the techniques and
methods to analyse entity in financial terms.

One of the major inputs for financial analysis purposes is entity’s

complete set of financial statements. With the help of these financial
statements one can assess how entity has performed in the past by
knowing incomes and expenses and what is entity’s current position
in terms of assets and liabilities.

Sources of financial information

For financial analysis purposes financial information may be extracted

either from financial statements or from other sources.

Entity’s complete set of financial statements include:

1. Statement of financial position / Balance Sheet

2. Statement of Comprehensive Income / Income Statement

8
 3. Statement of Changes in Equity

4. Statement of Cash flows

5. Notes to the accounts / Disclosures

Some other statements that are not part of complete set of financial
statements but accompany financial statements and thus considered
part of package of financial statements include:

1. Director’s report
2. Auditor’s report

Other sources of information include both internal and external

sources of information. Internal sources information may or may not
be part of regular accounting process. Similarly external sources of
information may be from the same or different period or industry.
Examples include:

1. Industry statistics released by relevant body or government.

2. Competitor’s financial statements.

3. Minutes to the meetings.

Sources of information are not restricted only to the examples

mentioned above. Financial analysts use and collect information from
every such source that is expected to provide relevant and reliable
financial information for analysis specific to users decision making
needs. It depends on the situation and the decisions itself that help
analyst decide which source and information is better. Understanding
financial statements is key to fundamental stock analysis and overall
9
investment research. Financial statements provide an account of a
company’s past performance, a picture of its current financial strength
and a glimpse into the future potential of a firm.

This is the first in a new AAII Journal series on financial statement

analysis. The goal is to enhance your ability to make a sound
judgment about a company’s financial strength and future prospects
by showing you the benefits of using financial statements in your
personal investment research.

Given the varied financial knowledge of our readers, I will address

many topics that some may find very basic. However, to build a
strong understanding of advanced topics, you need a solid foundation.
As we progress through this series, I expect to touch on more
advanced topics when explaining how I personally use financial
statements to analyse a firm. In this introductory article, I explain the
major components of each financial statement and why they matter in
security analysis.

OBJECTIVE OF STUDY-
 To know the financial viability of the business
 To analyse the sales growth of various ores like chorme, iron and
manganese ores.
 To get the idea about performance of the business.
 To find out the reason of increase in expenses or incomes over last
several financial years.
 To analyse the shareholders dividend over last few years.
 To find out the different sources and application of funds.

10
SCOPE OF THE STUDY

The Odisha Mining Corporation(OMC) is a “gold” category state PSU

of our country . This study about financial statement analysis is
important on view of organization’s managerial decision as well as
our state’s efficient use of natural resources.

RESEARCH DESIGN
Research design is just like a blue print for the collection of data
measuring those data and doing analysis.
When we design a research we should consider the following
aspects.

A) SOURCES OF DATA COLLECTION:-

I have collected the data from primary source, by discussing with

my concerned external guide of the organization and secondary data
with the help of last five year annual report of Odisha Mining
Corporation.

B) DATA INTERPRETATION:-

Data interpretation has been prepared by using graph, bar

diagram,pi-chart and percentage.

C) TIME DURATION:-

The allotted time duration was 4weeks.

11
 PLACE OF THE STUDY

I had been allotted to Odisha Mining Corporation, Bhubaneswar

to conduct my research on behalf of summer project for the partial
fulfilment of MFC curriculum. The corporate office of OMC is situated
at Bhubaneswar which regulates all the functional activities of the
organization. The total accumulated expenses and incomes of all the
mines are regulated by the head offices of OMC. My external guide
Mr. debendu mohapatra had taught me the detail concepts,
meaning, function of the financial affairs in the organization which
helped me to understand the facts and figures properly.

RESEARCH METHODOLOGY
i. To achieve the objective of studying the financial statement
analysis data has been collected.
ii. Research methodology carried for this study can be two types.

 Primary
 Secondary

 PRIMARY:
In this project the primary data has been taken from OMC staff
and guide of the project
 SECONDARY:
The secondary information is mostly taken from websites, books,
journals OMC annual reports etc.

12
Limitation
As the report has prepared by taking certain assumption like the
provided data are correct as far as the corporation is concerned in
fact there are certain limitation which I faced my study are given
below.

 Time factor was the only reason which didn’t lead to analyse all
the facts and figures thoroughly.

 To write exact quantitative figure was not possible in fact they

were written up to four decimals for clear understanding
purpose.

 To complete explanation was not possible to mention on the

report because the given interpretation in this report was made
by analysing to the relevant years annual reports.

 The trend has been prepared by assuming 2012-13 as the base

year for our research.

13
 CHAPTER-2

COMPANY PROFILE

14
 COMPANY PROFILE

Odisha Mining Corporation (OMC) was initially started in the year 1956 with
the joint venture of Odisha govt of India to explore minerals from the
various mines in order to make value addition to the mining industry.

Eventually on 1961 it became a wholly state-owned corporation of Odisha.

Now OMC has been classified as Gold category state PSU. The major minerals
mined by OMC are chrome ore, manganese ore, iron ore which cater to the
requirement of mineral based industries like steel, ferro-chrome, pig iron, etc.

But at present it only caters to the mining of Chrome & Iron ores from various
mines such as South Kaliapani , Sucrangi , Daitarigiri , Gandhamardan and
Kurumitar . Here South kaliapani and Sucrangi are involved in mining of
chrome ores where as other three mines are currently working for mining of
iron ores in respective districts. The growth of OMC has been impressive over
these years and today it stands as the largest State PSU in the mining sector of
the country. It recorded the highest turn-over of Rs. 2756 crore in 2010- 11.

OMC is managed by a Board of Directors consisting of Government

Directors and Independent Directors. The day-to-day management of the
Corporation is looked after by the Chairman and the Managing Director as
authorized by the Board of Directors.

OMC has adopted SAP software, an ERP tool, since 2004 to streamline its
business processes, bring synergy in functional activities across the
organization, and handle numerous business locations and expanding
volumes. It also helps in bringing greater transparency in financial
transactions and effective monitoring and financial control enabling the
organization to take informed and timely decisions. For successfully
implementing the ERP package, OMC was awarded with the Golden
Peacock Award in 2006-07 by the Institute of Directors, New Delhi.

15
Because of huge accumulated profits, OMC is in a position to undertake
new Projects which are essential to sustain its good performance in the long
run.

i. JV Projects - OMC has decided to diversify its activities and has

entered into sectors such as coal and bauxite mining and power
generation. A number of Joint Venture Companies have been formed/ are
in the process of formation like South West Bauxite Mining Company
(Pvt.) Ltd., East Coast Bauxite Mining Company (Pvt.) Ltd., etc.
ii. Own Projects - A number of Projects have already been taken up/are
being taken up by OMC to enhance the present performance level of the
Company.

Functions of Odisha Mining Corporation (OMC):

Production
OMC has shown consistent growth in the production of ore and ore
concentrate over the last 5 years. The production of iron ore has increased
substantially from 34 lakh tonnes in 2005-06 to about 8 million tonnes in
2008-09. Similarly the production of chrome ore and chrome concentrate has
been fairly consistent in the last 5 years. Whereas the production of chrome
ore increased from 9 lakh tones in 2007-08 to about 11 lakh tones in 2010-11.
At the present rate, OMC is producing about 10 % of total iron ore
production of the State and about 30 % of the total chrome ore
production of the State. Presently Daitari, Gandhamardan and Kurmitar
(Khandadhar) are the major Iron ore Mines of OMC whereas South
Kaliapani is the main Chrome ore Mine of OMC. Bangur Chrome ore
Mine is the first and only underground mine of OMC.

Sales & Distribution

The Sales and Distribution function of OMC have been carrying out in OMC
through ERP & SAP since 2006-07. It has facilitated in creation of contract at
Head office, sales order, financial document and billing at the R.O Level and
issue D.O at the mines levels and so on. Customer master is maintained in the
system which facilitates sale of material to all customers, mines-wise and
maintaining the customer balance. In Generation of Reports and Documents
MIS has helped in quicker decision making.

16
 A. Domestic Sale:
• The rates for domestic sale of Iron, Chrome and Manganese Ores are
decided by quarterly Price Setting Tender (PST) Mechanism.
• Sale of ore to buying units/industries is restricted to their capacity.
• Verification of the units/industries is done to ascertain their requirement of
Ore.
• No one is sold to traders except iron ore fines, manganese ore with less
than 35% Mn. and non-moving items (materials seized by various Govt.
enforcement authorities and old stock).
• Non-moving items and old stock as well as excess stock are sold through
Open Sale notice to liquidate the stock.
• Iron ore is supplied to various units/industries as given below:
a) MoU Steel Plants of Odisha - 70%
b) Sponge Iron Plants of Odisha - 30%
c) Crusher Units of Odisha - Soft ore only.
 Outside State unit - Through Open Sale and tender route
 Chrome ore is sold to the following categories of industries.
a. Ferro-chrome units
b. Chemical units
c. Refractory units

State based units are given preference over outside units.

• Chrome ore below 40% Cr203 is sold to State based Beneficiation Plants
through tender process.
• Chrome ore is not supplied to any trader/anybody having chrome ore
Mining Lease.
• Manganese ore is sold to the following categories of units:
I. Ferro manganese units
II. Silicon Manganese units
III. Ferro Alloys Units
IV. Processing units
V. Chemical units

B. Export Sale
• All export sale of chrome ore and chrome concentrate (known as
canalized items) are made as per the decision of Minerals & Metals
Trading Corporation (MMTC) of Govt. of India. MMTC decides
the export rate and also allocates quantities to be exported.
• Iron ore fines are exported by OMC directly after finalizing the rate
through tender process.
17
 • All exports are made through Paradip Port.

HR Functionality
Implementation of HR and ESS function has facilitated the viewing by
employees, of their personal information, salary slip, loan balance, leave
balance and IT Form-16. Annual Self Appraisal respect of all executives and
CCRs of non-executive employees are submitted and reporting done through
online system. All type of leave quota, automatic calculation of accrued leave,
submission and approval of leave application are all done on line.

Financial Performance of OMC

OMC has been a consistently growing state PSU over a period of 5 years. It has
recorded substantial profit in last few years which directly contributes its
production growth on the increase of GDP of our country. The detail
information of the financial performance of OMC has been described below.

FOR THE LAST FIVE YEARS.

(Rs. in Crores)

18
 Year Turnover Profit Profit Cumulative
before tax after Reserves &
tax surplus at the
end of the year
2015-16 1546.42 876.27 567.59 5622.34
(Provisional)
2014-15 1881.26 1487.10 977.32 5656.55

2013-14 1853.88 1449.95 867.82 5864.17

2012-13 1658.15 1383.46 896.1 5149.82

2011-12 2141.81 1880.59 1269.39 5149.27

PAYMENT MADE TO GOVT. BY OMC DURING LAST FIVE YEARS

(Rs. In Crores)

Year Royalty Dividend Sales Income Tax

Tax

2015-16 343.80 500 81.46 357.65

(Provisional)

2014-15 435.94 500 94.66 520.98

2013-14 239.46 500 85.09 660.66

2012-13 213.37 400 85.27 793.50

2011-12 256.33 500 85.64 610.93

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 Total 1488.90 2400 432.13 2943.72

BUDGETED AND ACTUAL PERFORMANCE OF O.M.C. LTD. FOR

LAST FIVE YEARS

(Rs. In Lakh)

ITEM YEAR

2011 2012 2013- 2014- 2015-16

-12 -13 14 15 (Provisional)

TURNOVER BUDGET 211559 185148 186103 194007 156563

ACTUAL 214181 165815 185388 188126 154642

BUDGET 40982 51455 48739 51521 40828

OTHER
RECEIPTS
ACTUAL 46200 54061 58100 53526 44766

REVENUE BUDGET 72671 63263 89439 84505 100007

EXP.

ACTUAL 71212 80316 97438 91849 110688

DEPRECIATI BUDGET 1633 955 745 968 993

ON

ACTUAL 1110 1214 1055 1093 1093

20
 BUDGET 178237 172385 144658 160057 96391
PROFIT
BEFORE TAX
ACTUAL 188059 138346 144995 148710 87627

THE FOLLOWING TABULAR STATEMENT REFERS TO THE ACHIEVEMENTS DURING LAST 5 YEARS

ITEM YEAR

2011-12 2012-13 2013-14 2014-15 2015-16

Production 4273092 2454622 1871826 3206039 6019741

IRON ORE (in ‘000MT)
Sales 3973485 2710304 3191483 3483773 4338368
(in ‘000MT)
Production 433557 596736 580572 701441 959515
CHROME (in ‘000MT)
ORE
Sales 258901 399267 585081 566384 614213
(in ‘000MT)
Production 31 3 - - -
MANGANES (in ‘000MT)
E ORE
Sales 134 7 - - -
(in ‘000MT)
Production 3454 - - - -
LIME ( in ‘000MT)
STONE
Sales 4504 - - - -
(in ‘000MT)
Production - - - - -
GE STONE ( in ‘000MT)

Sales - - - - 16,18,627
(in ‘000MT) (In grams)

OMC has shown consistency in the production of ore and ore

concentrate over the last 5 years. At the present rate, OMC is
producing about 10 % of total iron ore production of the State and
about 30 % of the total chrome ore production of the State. Presently

21
Daitari, Gandhamardan and Kurmitar (Khandadhar) are the major
Iron ore Mines of OMC whereas South Kaliapani is the main Chrome
ore Mine of OMC. Bangur Chrome ore Mine is the first and only
underground mine of OMC.
The rates for domestic sale of Iron, Chrome and Manganese Ores are
decided on e-auction basis. The Sale of ore to buying units/industries
is restricted to their capacity and verification of the units/industries is
done to ascertain their requirement of Ore.
No one is sold to traders except iron ore fines and manganese ore with
less than 35% Mn. Iron ore sized by Government and non-moving
items and is supplied to various units/industries.
Chrome ore is sold to Ferro-chrome units, Chemical units and
Refractory units.

Human Resource Development and Staff Welfare:

In order to keep good industrial relations, the company has taken
steps of development of human resources and the welfare measures
for achieving higher productivity.
The company has introduced several welfare activities such as
medical facilities, rent free accommodation in mines and camps,
maintenance of schools, providing grant-in-aid to privately managed
students for higher studies after matriculation, sanctioning substantial
amount for recreation and cultural activities, Group Insurance
Scheme, house building advance for construction of houses, advance
for purchase of vehicles, T.V., Computer etc. The daily rated workers
and piece rated miners have been given Moped advance.
For encouragement to the children of OMC employees, a scheme has
been introduced to give cash award of Rs. 3,000.00 for securing
higher marks in HSC examination as well as CBSE/ICSE examination
and Rs.5,000.00 in case of holding position in best 20 list.
22
Employees Pension Scheme, 1995 under EPF & MP Act, 1952 has
been implemented w.e.f. 1.11.1995 as social security measure
enforced by Government of India. The employees as well as PRM &
DRMP workers, on completion of 15 years of services in OMC are
being honoured with presentation of a watch and are also given
presentation worth Rs.15, 000.00 on the day of retirement.
Corporate Social Responsibilities:
CSR in OMC has been implemented since its inception; however, a
policy to this effect has been formulated since 2010. Importance has
always been given for the development of peripheral villages of the
op erating mines. Construction of roads, and school buildings,
extension of class rooms, supply of infrastructural facilities to the
educational institutions, provision of safe drinking water and
promotion of cultural activities were mainly covered under CSR
activities. Every year a substantial amount of the net profit have been
utilized by OMC for undertaking various social development works.
OMC has also contributed about Rs.319 crores to the Chief Minister’s
Relief Fund in last 5 years. OMC has contributed Rs.5 crores to
Odisha Environment Management Fund to fulfil its commitment for a
Clean and Green Environment . Apart from this it has also spent for
the development in the backward/mining areas of the state through
different Government Departments like Health & FW, Mass
Education, Water Resources, ST/SC Development Department, and
Women & Child Welfare Department etc. The detail information
regarding expenditure incurred under CSR and Peripheral
Development activities in the last 3 years is given below.

DETAILS OF CSR AND PERIPHERAL DEVELOPMENT WORKS IN

OMC DURING LAST 5 YEARS

(2015-2016) UPTO 31.03.2016

23
 Keonjhar District 101826120.00
Sundargarh District 15834749.64
Jajpur District 170870000.00
In other District (CSR) 378963921.00

TOTAL 667494790.64

(2014-2015)

Keonjhar District 8944000.00

Sundargarh District 500000.00

Jajpur District 8764838.00

In other District (CSR) 321533218.00

TOTAL 339742056.00

(2013-2014)

Keonjhar District 3014403.00

Sundargarh District 315000.00

Jajpur District 8735000.00

In other District (CSR) 114418572.00

24
 CMRF 500000000.00

TOTAL 626482975.00

(2012-2013)

Keonjhar District 188957438.00

Sundargarh District 5668000.00

Jajpur District 1719633.00

In other District (CSR) 26373313.00

CMRF 740000000.00
Advertisement 283030.00
TOTAL 963001414.00

(2011-2012)

Keonjhar District 10865931.00

Sundargarh District 225000.00

Jajpur District 722000.00

In other District (CSR) 14020968.00
CMRF 150000000.00

25
 Advertisement 1008521.00
TOTAL 176842420.00

Major Achievements by OMC

 For successfully implementing the ERP package, OMC was

awarded with the Golden Peacock Award in 2006-07 by the
Institute of Directors, New Delhi.

 For consistent good performance the Odisha Mining Corporation

Ltd. has been classified as a Gold Category State PSU in the
year 2012.

 For the proper security protection in IT department OMC has

adopted certain important steps like H.O LAN reconfiguration,
Antivirus server configuration, and process oriented incident
management has been carried out keeping network Security in
mind. Recommended Firewall deployment at Gateway level has
been implemented to enhance the level of security.

26
 Chapter -3

LITERATURE REVIEW
27
 REVIEW OF
LITERATURE
There are four parts to this literature review. First of all, the objectives
of financial reporting and the characteristics of useful reports are
discussed in order to indicate which aspects of financial reports
should be looked at in more detail. The second part establishes a link
between the usefulness of financial reporting and the financial crisis.
Key concepts of complexity and understand ability as well as
reliability and relevance are discussed here. The debate on fair value
accounting plays a strong part also as its effect on reliability and

28
relevance has been a fairly controversial subject. Thirdly, there is a
discussion on the implications of financial reporting on regulation
reform. In order to access this discussion, the reactions of several
institutions and regulatory bodies on the financial crisis are studied.
Since the actions of regulatory bodies aim to heal the financial
environment and promote trust in financial markets, it is important to
study the areas where they have found problems and are working to
improve standards. In the final part, issues of transparency and
disclosure are discussed. This is because in the literature reviewed
these issues were widely considered as providing possible solutions to
the problems that have surfaced. This review also exposes gaps in the
literature. The unstable environment during the crisis caused changes
in financial reporting of banks. This raises several questions as to how
this has affected client confidence. The literature does not address
these questions adequately. The review therefore gives a base for the
upcoming survey presented to corporate clients of banks.
Barth and Landsman (2010) discuss the role of financial reporting by
banks in the financial crisis. They discuss such financial reporting
features as fair values, asset securitisations, derivatives and loan loss
provisioning. They conclude that a lack of transparency on derivative
financial instruments and the pooling of debt resulted in problems in
determining the real financial position of a bank. Determining the real
position of a bank through financial reports is the key to reliability,
which in turn affects the usefulness of the reports in decision making.
Miller and Bahnson (2009) state that the role of financial reporting is
to reveal the truth honestly, openly, completely, clearly,
unambiguously, and with sufficient frequency to be timely. They say
that financial reporting should fulfil this role before, during and after a
crisis. Before a crisis, transparent financial reporting would give signs
of trouble ahead and give a forewarning to investors. During a crisis,

29
financial reporting should provide information about where the
problem areas are and how future cash flow prospects are affected.
According to Miller and Bahnson, in the recent crisis information
flowed too slowly and was misinterpreted to indicate credit risks of
other debt instruments. After a crisis, the role of financial reporting is
to signify when the economy starts improving and by how much. In
Miller's and Bahnson's view, this positive information should not be
artificially created but should reflect the actual situation.
Miller and Bahnson (2009) also recommend that reporting
frequencies should be shortened as to provide information that is as
up to date as possible. Timeliness is related to the relevance of the
reports as relevant information has to be timely in order to be useful.
Miller and Bahnson argue that financial 10 information during the
crisis was not available to decision makers early enough and was not
useful to the decision making process. Miller and Bahnson require
both relevance and reliability of financial reports and say that both
aspects have failed in the crisis. Their point of view is in agreement
with Barth and Landsman (2010), who view transparency and
disclosure as being key in preventing crises.
James Turley (2009), CEO of Ernst & Young, sees the key causes of
the crisis being too much leverage, misuse of financial instruments,
bad loans, unrealistic expectations, improper handling of risk and
gaps in regulatory systems. He states that normal lending from banks
will not continue until statements of financial position are sorted.
Martin Taylor (2009) blamed bankers for the crisis stating that banks
paid out bonuses that did not consist of actual cash but unrealised
profits derived from booking revenues. Giving out cash that did not
exist then led to a crisis in liquidity. Taylor concludes that the crisis
was a result of the bankers inability to count.

30
The same concern about remuneration is repeated in a study
conducted by Ernst and Young (2011). The study showed that
executive remuneration was quoted by 80% (U.S) and 69% (U.K.) of
interviewed retail bank customers as being one of the reasons for loss
of trust in banks. Still, only 40% of the 500 surveyed senior
executives in another report by Ernst and Young (2010) answered that
bonuses should be regulated and capped. The study underlines the
lack of reliability in financial reports and customer trust in them.
According to Taylor, the numbers produced in financial reports did
not reflect the real situation.

Parties Interested in Financial Analysis:

The following parties are interested in the analysis of financial
statements:
(1) Investors or potential investors.

(2) Management.

(3) Creditors or suppliers.

(4) Bankers and financial institutions.

(5) Employees.

(6) Government.

(7) Trade associations.

(8) Stock exchanges.

(9) Economists and researchers.

(10) Taxation authorities

31
 Financial Statements and Their Key
Elements
The role of financial reporting for companies is to provide
information about their fiscal health and financial performance. As
investors, we use financial reports to evaluate the past, current and
prospective performance and financial position of a company. These
statements allow us to compare one firm to another and form the basis
of valuing the worth of a stock.

Several financial statements are reported by companies. The most

important three, and the three used most often by investors, are:

 The income statement,

 The balance sheet and
 The cash flow statement.

Income Statement

The income statement reports how much revenue the company

generated during a period of time, the expenses it incurred and the
resulting profits or losses. The basic equation underlying the income
statement is:

Revenue - Expenses = Income

All companies use a reporting period of one year, which can start and
end at the same time as a calendar year, or could start and end at
different point in the year (the firm’s fiscal year).

There are several important pieces of information on the income

statement that are relevant to stock analysis. Investment analysts use
the income statement to monitor revenues, expenses and profits and
32
their trends over time. The direction and rate of change in not only
profits but also top-line revenue influence the valuation of the firm.
The rate of growth, and whether it is accelerating or decelerating, for
both revenue and net income, is a critical component in stock
valuation. Investors often reward high-growth companies with a
higher valuation.

Near the bottom of the income statement is earnings per share.

Earnings per share are simply the earnings the company generated per
share of outstanding company stock. This is the figure used in the
denominator of the price-earnings ratio, a key ratio used frequently in
investment analysis.

Balance Sheet

Although the income statement may be the most popular financial

statement, the balance sheet provides vital information on a
company’s financial position. In contrast to the income statement,
which provides revenue and earnings data over a period of time, the
data contained in the balance sheet is a snapshot for a specific date.

The balance sheet provides information on what a company owns

(assets), what it owes (liabilities), and the shareholder ownership
interest (equity). The equation underlying the balance sheet is:

Assets = Liabilities + Equity

TOOLS AND TECHNIQUES OF

FINANCIAL STATEMENT ANALYSIS
To FLERBLOGGER OCTOBER 5, 2015 comments on tools and
techniques of financial statement analysis. re

33
The previous article in the Financial Statement Analysis Series gave
an introduction to the financial analysis and mentioned the various
statements for analysis and the various users who would be interested
in the same. In this article, we will take a look at the various tools and
techniques used for doing the analysis. The articles to follow will
focus on an elaborate discussion of the various financial statements
and will further take up each tool and technique separately and
explain them in detail as well.

Financial Statement Analysis is done in different ways using various

tools and techniques. As discussed in the previous article, there are
different users of financial analysis and they may be interested in
some tools and techniques and uninterested in the others.

The various tools and techniques available for financial statement are
mentioned below.

34
1. Comparative Financial Statement Analysis (Horizontal Analysis):

As the name suggests, comparative analysis provides a year-on-

year review of the various financial statements. For example, in the
Income Statement, the Sales figure may be compared over a period
of consecutive years to understand how the sales figures have
grown (or declined) over the year. It should be noted that

35
 horizontal analysis compares the internal performance of the
company.

2. Common-size Financial Statement Analysis (Vertical Analysis) :

Vertical analysis is applicable for internal performance review as

well as for comparison to peers and bench-marking. In vertical
analysis all the items in a particular statement are represented as a
percentage of a particular item. For example, Operating Expenses,
Depreciation, Amortization, Profit before tax, Tax, Profit after tax,
etc. may be represented as a percentage of Sales in the Income
Statement. Common standard base can easily reveal the internal
make-up of financial statements and any proportionate increase
and decrease of the same.

Vertical analysis is also put to use for comparison across

companies as financial statements are converted to common-size
format, which can then be used to compare with competitor or
industry averages, highlighting key differences which can then be
analyzed.

Below is an example of a Common Size Income Statement. Values

are expressed as %age of Revenue.

3. Ratio Analysis:

Ratio analysis is the most widely used tool of financial statement

analysis. A ratio gives relationship between two numbers, in this
case items in the financial statements. Ratios are popular because
they readily allow internal evaluation as well as comparison across
firms. The ratios are categorized according to activities or

36
 functions they perform or the information they provide. For
example, profitability ratios measure the profit making capability
of the company.

4. Graphical Analysis:

Graphs provide visual representation of the performance that can

be easily compared over time. The graphs may be line graphs,
column graphs or pie charts.

5. Trend Analysis:

Trend analysis is used to reveal the trend of items with the passage
of time and is generally used as a statistical tool. Trend analysis is
used in conjunction with ratio analysis, horizontal and vertical
analysis to spot a particular trend, explore the causes of the same
and if required prepare future projections.

6. Regression Analysis:

Regression analysis is a statistical tool used to establish and

estimate relationship among variables. Generally, the dependent
variable is related to one or more independent variables. In case of
financial statement analysis, the dependent variable may be, say,
sales, and it is required to estimate its relationship with the
independent variable, say, a macroeconomic factor like Gross
Domestic Product.

For example, in the Top Down approach of sales forecasting, an

analyst would first forecast GDP growth and then establish a
relationship between GDP and industry growth rate through
regression analysis. He may then estimate the future sales growth
based on the industry growth. As such, regression analysis is widely
used in forecasting models.

37
The various tools and techniques are there to enable the decision
making. It should be understood that any particular technique should
not be viewed in isolation. Different companies may have different
accounting methods and hence, comparison with peers has to be done
carefully. Moreover, a holistic use of various techniques should be
done to arrive at any conclusion.

Having understood how to do financial analysis, we need to further

delve into the financial statements that are used to prepare this
analysis. In the next article, we will take a look at the various
financial statements that are used for the purpose of Financial
Statement Analysis.

Importance of financial statement

Financial statements are the importance sources of information to all
the users of accounting information like; management, owners,
debtors, creditors, employees, government agencies, financial
analysis, etc. the following are the points which heights.

The importance of financial statement;

i. Financial statements are the summary of information relating to

profitability, and resources owned by the firm.

ii. Financial statements provide the information which can be

compared with those of other firms.

iii. Employs can use them to demand for increment in salary and
other benefits.

38
 iv. Bankers and other financial institutions can use them to make
the lending decisions.

v. Government bases on financial statements of the companies for

the calculation of tax revenue from the firms.

vi. Financial statements can be used as the basis for management

decision-making purpose like planning, promotion, research and
development decision, etc.

vii. Existing investors can use them to assess how efficiently the
firm is using their funds.

viii. Potential investors can obtain information which can be useful

to take the investment decisions.

ix. Financial statements reveal the history of the firm.

x. They can be used to assets the firm's liquidity and solvency

position.

Importance of financial statement analysis

Financial statement analysis is equally important to the management,
shareholders creditors, debtors, potential investors, government
agencies, bankers, general public, etc. the importance of financial
statement
analysis can be summarized as follows:
I. Helpful in planning and decision making.
ii. Helps in the evaluation of performance.
iii. Helps in the diagnosis of managerial and operating problems.
iv. Helpful to the bankers for credit decision.
v. Basis for tax calculations.

39
vi. Helps the government to formulate polices.
vii. Basis of controlling.

Features of financial statements

The following are the features of financial statements.
i. They are always expresses in monetary terms. They ignore the
qualitative aspects. In other words, the non-monetary events do
not come under the scope of financial statements.
ii. They are always prepared for a certain period of time. They
generally cover the period of one year.
iii. They are historical in nature since they always present the past
performance. Hence, they do not carry the futuristic approach.

6 Steps to an Effective Financial Statement Analysis

For any financial professional, it is important to know how to
effectively analyze the financial statements of a firm. This requires an
understanding of three key areas:

1. The structure of the financial statements

2. The economic characteristics of the industry in which the firm
operates and
3. The strategies the firm pursues to differentiate itself from its
competitors.

There are generally six steps to developing an effective analysis of

financial statements.
1. Identify the industry economic characteristics:
First, determine a value chain analysis for the industry—the chain of
activities involved in the creation, manufacture and distribution of the
firm’s products and/or services. Techniques such as Porter’s Five
Forces or analysis of economic attributes are typically used in this

40
step.
2. Identify company strategies:
Next, look at the nature of the product/service being offered by the
firm, including the uniqueness of product, level of profit margins, and
creation of brand loyalty and control of costs. Additionally, factors
such as supply chain integration, geographic diversification and
industry diversification should be considered.
3. Assess the quality of the firm’s financial statements:
Review the key financial statements within the context of the relevant
accounting standards. In examining balance sheet accounts, issues
such as recognition, valuation and classification are keys to proper
evaluation. The main question should be whether this balance sheet is
a complete representation of the firm’s economic position. When
evaluating the income statement, the main point is to properly assess
the quality of earnings as a complete representation of the firm’s
economic performance. Evaluation of the statement of cash flows
helps in understanding the impact of the firm’s liquidity position from
its operations, investments and financial activities over the period in
essence, where funds came from, where they went, and how the
overall liquidity of the firm was affected.
4. Analyze current profitability and risk.
This is the step where financial professionals can really add value in
the evaluation of the firm and its financial statements. The most
common analysis tools are key financial statement ratios relating to
liquidity, asset management, profitability, and debt
management/coverage and risk/market valuation. With respect to
profitability, there are two broad questions to be asked: how profitable
are the operations of the firm relative to its assets independent of how
the firm finances those assets and how profitable is the firm from the
perspective of the equity shareholders. It is also important to learn
how to disaggregate return measures into primary impact factors.
Lastly, it is critical to analyze any financial statement ratios in a

41
comparative manner, looking at the current ratios in relation to those
from earlier periods or relative to other firms or industry averages.
5. Prepare forecasted financial statements:

Although often challenging, financial professionals must make

reasonable assumptions about the future of the firm (and its industry)
and determine how these assumptions will impact both the cash flows
and the funding. This often takes the form of pro-forma financial
statements, based on techniques such as the percent of sales approach.

6. Value the firm.

While there are many valuation approaches, the most common is a

type of discounted cash flow methodology. These cash flows could be
in the form of projected dividends, or more detailed techniques such
as free cash flows to either the equity holders or on enterprise basis.
Other approaches may include using relative valuation or accounting-
based measures such as economic value added.

The next steps

Once the analysis of the firm and its financial statements are
completed, there are further questions that must be answered. One of
the most critical is: Can we really trust the numbers that are being
provided? There are many reported instances of accounting
irregularities. Whether it is called aggressive accounting, earnings
management, or outright fraudulent financial reporting, it is important
for the financial professional to understand how these types of
manipulations are perpetrated and more importantly, how to detect
them.

42
8 Things we are must cover in a Financial Analysis
As a small business owner, the number of records you must keep can
be immense. From contracts and leases to marketing plans and payroll
to profit and loss statements and balance sheets, it’s a never-ending
stream of necessary paperwork that must be generated and organized.
All of these combine to explain the viability of your organization in
black and white. Whether used to justify costs, make a case for
expenses or demonstrate to lenders why you’re a safe investment bet,
all of these statements help make the case that your organization is a
viable and smart choice in today’s business world.
For investors, lenders and shareholders, the financial analysis is
probably the most important thing to see in order to gauge the
organization’s health.
So, what exactly is a financial analysis report and how do you
generate one? Below are seven key parts to the analysis and what
goes into each.
1. Company Overview or Executive Summary:
Similar to writing a business plan, a financial analysis is a way for
investors (or those new to your company) to understand who you are
and what you do. This overview should include aspects of the
business, as well as a snapshot of the industry, the company’s
motivations and an understanding of how the company stacks up to
its competitors.
This overview should also include a list of the report’s objectives and
a glossary of financial terms so anyone who reads the report can
easily understand it.

7. Investment Thesis:
Dust off your old English papers from college; it’s time to write
another thesis statement. In a financial analysis, the investment

43
thesis covers the positive and negatives of the company as an
investment property.
This section can also include a fundamental analysis, which is a more
in-depth view of the company’s overall viability as an investment.
Fundamental analyses typically include company-specific factors (e.g.
management capability, financial stability) as well as industry-specific
factors (e.g. overall economic conditions, industry outlook).

3. Resources and Data Collection Methods:

This section should list any and all resources used to generate the
findings in the report. Similar to a term paper, all your sources should
be mentioned, including your own documents (e.g. balance sheets,
operating costs, inventory ratios, etc.). Any external sources, such as
industry trade journals or articles, should also be cited.
How you collected the data in the report is also important. Not only
do you need to record your data’s source, but you should also note the
sources methodology for collecting the data in the first place. This is a
time-consuming but necessary task that helps anyone reading the
document to fully understand all of the assumptions upon which the
data is based.

4. Significant Financial Events:

Review your ledger for the past time frame you’re using to
extrapolate future data, and make note of any significant events that
might have had a major impact to your finances over this time period.
These can be positive or negative events, but they should be noted so
that discrepancies are explained up front and, hopefully, provide very
little impact to the report in general.

44
5. Valuation:
This is really the crux of the financial statement. As such, the
company’s valuation should be the most robust and thoroughly
researched. At its core, a company’s valuation is defined as an
independently-determined value for the company’s stock coupled with
a comparison of this value to the current market price. Valuation can
be arrived at using one of three methods:
 Discounted Cash Flow Analysis: This method requires the use
of future free cash flow projections and discounting them using
a weighted average cost of capital to arrive at the present value.
That value is then used to evaluate if it’s a good investment. If
the DCF analysis is higher than the current cost, the investment
is considered a good one.
 Relative Value: This method takes into account the financial
statements of the company’s competitors to see if the current
investment cost is in line with its peers. Enterprise ratio and
price-to-earnings ratio are two equations often used when
determining relative value.
 Book Value Analysis: Book value is defined as the initial outlay
for an investment. By comparing the book value to the market
value, it can be determined if the company’s stock is over- or
under-priced.
6. Key Risks:
Any and all factors that could be classified as a risk should be
included in this section. Risk factors are defined as anything that
could negatively impact the company’s valuation in the short- or long-
term. A pharmaceutical company losing a drug patent or a technology
company launching their sole product are examples of factors that can
negatively impact a company’s value as an investment.

45
Outside factors can be considered as well, including industry trends,
corporate governance or the industry’s regulatory climate.

Ignoring legitimate risks or pretending they don’t exist will not help
you or your organization in the long run. Investors are looking for a
good investment with a projected ROI that makes the initial outlay of
money a smart move. If you hope to fool investors by simply
pretending there are no inherent risks, you and your organization can
come off as, at best, naïve to the current situation or, at worst,
unethical and non-transparent.

7. Detailed Results:
As you might have guessed, this section includes very specific
information regarding investment returns, balance sheets and
productivity ratios. It can also include different interpretations of
these results through the use of pie charts, graphs or other illustrations
that can make the data easy to understand.
From a investor and/or creditor standpoint, the most important ratios
to include are those that measure the solvency of your
organization. Liquidity, leverage and profitability ratios are the most
important to investors. These ratios can be compared to industry ratios
to further examine the company’s performance.

8. Recap and Wrap-Up:

Everything presented in the financial analysis should be easily and
accurately summarized, giving the investor a recap of the key points.
Primarily, you want to highlight the key growth factors you’ve
already stated (i.e. the reason your company is a smart investment)
while honestly stating any risk factors that could prove to be a
hindrance.

46
Take your time when conducting your financial analysis and don’t be
afraid to ask for help. One of the primary functions of a financial
analyst is to review companies, take a look at past and current
performance and generate an accurate description of the company’s
financial situation. A key factor in this process is also highlighting
how elements positively and negatively impact a company’s
investment viability.

When looking for investors or simply taking the financial temperature

of your organization, you’ll be grateful for all of those financial
records you kept straight, as they will make this analysis process
much easier.

A good financial analysis will give you important insight into the
health of your business. Once you have that insight, however, you
might still be wondering if that investment is still worth it. If you’re
wondering how to gauge your opportunity, here are four questions to
ask yourself before investing more capital into your business.

CHAPTER-4
47
 DATA ANALYSIS AND
INTERPRETATION

IRON ORE (Product wise quantity)

Year
Quantity Trend % in
(in 000 quantity
MT)
2012-13 2710 100
48
Interpretation;

From the above the diagram the figure shows that the total production
of iron ore was increased in a greater proportion in comparison to the
base year 2012-13. During the financial year 2016-17 “Iron ore (Qty)”
was increase 4338 to7162 of previous year quantity with a large
increasing rate of 264%.

IRON ORE (Product wise sales value)

Year Sales values Trend% in sales

(in crores) value

49
 2012-13 1112.10 100
2013-14 1007.43 90.58
2014-15 1083.92 94.46
2015-16 838.04 75.35
2016-17 1257.80 113.10

Year Rate = sales Trend %

value(0000)/quantity
2012-13 4103.69 100
2013-14 3157.09 76.93
2014-15 3099.57 75.53
2015-16 1931.85 47.07
2016-17 1756.21 42.79
Interpretation:

50
From the above diagram figure shows that In the year 2012-13 the
percentage of sales value was 100%. After that the total sales value of
Iron ore was fluctuating continuously from 2013-14 to 2015-16. But
in a year 2016-17 the total sales value was increases in a higher
proportion to 1257.80(113.10%).

IRON ORE (Product wise rate)

Interpretation

51
 Year Sales value (Rs in crore) Trend %
2012-13 546.04 100 From

2013-14 846.45 155.01 the

2014-15 797.34 146.02

2015-16 710.04 130.03

2016-17 1073.63 196.62

Quantity (in
Year 000mt) Trend %
2012-13 476 100
2013-14 709 148.94
2014-15 615 129.2
2015-16 628 131.93
2016-17 849 178.36
above diagram that in the year 2012-13 the rate of the iron ore
4103.69 . After that the rate of the iron ore gradually decreases from
3157.09 to 1756.21. I conclude that the huge rate of proportion
decrease from 2013-14 to 2016-17.

CHROME ORE (Product wise quantity)

52
Interpretation:
From the above diagram the quantity of the Chrome Ore
709(in000mt) in financial year 2013-14 against 476(in000mt) in FY
2012-13 which was increase of 48.94%. In year 2014-15 the quantity
of chrome ore 615(in000mt) against 709(in000mt)in FY 2013-14
which was decrease 19.74% . At last the quantity of Chrome ore
849(in000mt) in FY 2016-17 against 628(in000mt) in FY 2015-2016
which was increase of 46.43%.

CROME ORE (Product wise sales value)

53
 Year Rate = sales Trend %
value(0000)/quantity
2012-13 11471.42 100
2013-14 11938.64 104.07
2014-15 12964.87 113.01
2015-16 11306.36 98.56
2016-17 12645.81 110.23

Interpretation

From the above diagram the sales value of the Chrome Ore 846.45(in
Cr) in financial year 2013-14 against 546.04(in cr) in FY 2012-13
which was increase of 55.01%. In year 2014-15 the sales value of
chrome ore 797.34(in cr) against 846.45(in cr) in FY 2013-14 which

54
was decrease 8.99%. At last the sales value of Chrome ore 1073.63(in
cr) in FY 2016-17 against 710.04(in cr) in FY 2015-2016 which was
increase of 66.59%.

CROME ORE (product wise rate):

INTERPRETATION
From the above diagram the rate of the Chrome Ore 119381.61(in cr)
in financial year 2013-14 against 11471.42(in cr) in FY 2012-13
which was increase of 4.07%. In year 2014-15 the rate of chrome ore
12964.87(in cr) against 11938.64(in cr)in FY 2013-14 which was
increase 8.94% . At last the rate of Chrome ore 12645.81(in cr) in FY
2016-17 against 11306.36(in cr) in FY 2015-2016 which was
increase of 11.67% .

Total sales value (Iron ore and Chrome ore)

55
 Year Total sales value (Iron Trend %
ore +Chrome ore)
2012-13 1658.14 100
2013-14 1853.88 111.80
2014-15 1881.26 113.45
2015-16 1548.08 93.36
2016-17 2331.43 140.60

Above Diagram shows that the Total sales values (Chrome Ore & Iron
Ore) 1853.88 (in cr) in financial year 2013-14 against 1658.14 (in cr)
in FY 2012-13 which was increase of 11.80% . In year 2014-15 the
total sales value (chrome ore & Iron Ore) 1881.26(in cr) against
1853.88(in cr) in FY 2013-14 which was increase 1.65%. At last the
total sales value (Chrome ore & Iron Ore) 2331.43(in cr) in FY 2016-
17 against 1548.08(in cr) in FY 2015-2016 which was increase of
47.21% .
56
Comparison of PBT and PAT (excluding other comprehensive
income) earned by the company
Years Profit Before Tax Profit After Tax
(PBT) in crore (PAT)in crore
2012-13 1382.85 895.96
2013-14 1449.95 867.82
2014-15 1487.10 977.32
2015-16 990.05 629.89
2016-17 1314.36 770.24

During the FY 2016-17 , the company earned a profit before tax

(PBT) of Rs 1314.36 crore (previous year Rs 990.05crore ) which is
an increase of 32.75% and Profit after Tax (PAT) of Rs 770.24 crore
(previous year Rs 629.89 crore) which is an increase of 22.28%
compared to its previous financial year’s performance.

Reserves and surplus comparison:

57
 Years Reserves and Surplus
(in crore)
2012-13 5150
2013-14 5864
2014-15 5657
2015-16 5699
2016-17 5867

The Reserves and surplus position of the company in the year of

2016-17 was 5867 crore (previous year Rs 5699 crore) which increase
by Rs168crore compared to last year.

Total revenue earned by the company

58
 Years Revenue from Other income Total revenue
operation (in (in crore) (in crore)
crore)
2012-13 1658.14 540.61 2198.75
2013-14 1853.88 580.94 2434.87
2014-15 1881.26 535.26 2416.52
2015-16 1546.42 481.22 2027.64
2016-17 2331.43 374.14 2705.57

Expenditure incurred every year by the company

59
 Year Cost of Changes in Employee Finance Depreciation Other
materia inventories benefit cost (in (in crore) expenditures
ls (in crore) expenses crore) (in crore)
consum (in crore)
ed (in
crore)
2012-13 6.25 -17.83 145.54 13.21 12.14 655.97

60
Year Cost of Changes in Employee Finance Depreciation Other
materials inventories benefit cost (in (in crore) expenditures
consumed (in crore) expenses crore) (in crore)
(in crore) (in crore)
2013- 14.71 56.12 158.71 15.78 10.54 729.04
14

Year Cost of Changes in Employee Finance Depreciation Other

materials inventories benefit cost (in (in crore) expenditures
consumed (in crore) expenses crore) (in crore)
(in crore) (in crore)
2014- 7.37 -145.74 162.91 33.54 10.93 843.51
15

61
Year Changes in Employee Finance Excise Depreciation Other
inventories benefit cost (in duty (in (in crore) expenditures
(in crore) expenses crore) crore) (in crore)
(in crore)
2015- -170.37 160.09 33.24 1.66 9.23 997.21
16

62
Year Changes in Employee Finance Excise Depreciation Other
inventories benefit cost (in duty (in (in crore) expenditures
(in crore) expenses crore) crore) (in crore)
(in crore)
2016- 17.94 250.65 8.83 8.11 76.44 1023.09
17

63
 FINDINGS
 On the above study of trend analysis observed that the quantity of IRON
ORE is always increasing but CHROME ORE quantity is always
decreasing.
 In this study the sales value of IRON ORE is fluctuating continuously
from 2013 -14 to2015-16 but in a year of 2016-17, it was increased in a
higher proportion to 1257.8 cr. And CHROME ORE is fluctuating in each
and every year.
 In this analysis the rate of IRON ORE is decreasing in every year but the
rate of CHROME ORE is increasing in every year.
 Total sales value of two product (IRON ORE & CHROME ORE)are
increasing but in comparison of two the IRON ORE is more increasing
than the CHROME ORE.
 In 2015-16 the Profit After Tax (PAT)is lowest as compare to other years.
 In 2012-13 the reserve & surplus is lowest and in 2016-17 highest
reserve & surplus.

CONCLUSION

64
 The company’s position is at very sound position.

 The company earns sufficient profit in past four years.

 The long term solvency position of the company is sound.

 The company maintains low liquidity to earn the high profitability.

 The company is able to distribute dividends from high profit to its

shareholders, in every year.

 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.

65
 SUGGESTIONS

 The company should use its current assets effectively in order to get
maximum revenue out of it.
 Less practical knowledge about day-to-day mining activities for which it
trusts on the contractors. So proper experience lead to minimise the cost
of production.
 Regular effort should be made to increase sales volume to generate
more revenue
 In order to effective mange of working capital management reserve and
surplus should be used properly.
 Technological up gradation must be made in order to increase
production volume.
 Increase in the price of iron stone per ton so as to increase the turnover
of OMC.

66
 BIBLIOGRAPHY

REFERENCE

 FINANCIAL MANAGEMENT - I. M. PANDEY

 MANAGEMENT ACCOUNTANCY - PILLAI & BAGAVATI

 MANAGEMENT ACCOUNTING – SHARMA & GUPTA

WEBSITE

 www.omcltd.in.

 www.ercap.org.

 www.wikipedia.com.

 www.odisha.gov.in.

67