Financial Statement Analysis on JSW STEEL Ltd.

Submitted To: Prof. Dharmesh Shah

Submitted By: Ridham Rawal Roll no. P1038

Batch: Pgdm 10-12

On (Date)

N. R. I NSTITUTE

OF

B USINESS M ANAGEMENT

AHMEDABAD

Liquidity ratio
a) Net working capital:
Meaning: working capital is used to measure firms ability to meet current obligation. A high level of working capital indicates significant liquidity. its also called as a net current ratio. Formula: Total current assets total current liability Table: ( Rs in million) particular 2007-08 2008-09 2009-10
current assets current liabilities cureent ratio 19332774 53426822 34094048 21550793 58366562 36815769 25014175 30041277 5027102

40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2007-08 2008-09 2009-10 cureent ratio

Interpretation:

NWC of the company in 2007-08 around 900000 which indicates that net working capital is positive. Than in 2008-09 and in 2009-10 working capital is constantly increase because companys loans. Advances all are increase in comparison of each year.

b) current ratio: Meaning: it is a measure of general liquidity and is most widely used to make the
analysis of short term financial position and liquidity of the firm. it is calculated by dividing the total of the current assets by total of the current liability.

Formula:
Current assets/ current liability

Table
particular current assets current liabilities cureent ratio 2007-08 2008-09 2009-10 19332774 21550793 25014175 53426822 58366562 30041277 0.36 0.36 0.83

cureent ratio
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2007-08 2008-09 2009-10 0.36 0.36 cureent ratio 0.83

Interpretation:

In 2007-08 companys current ratio is 1.16 times. While in 2008-09 the ability of company to meet short term obligation is 1.2 times more than 2007-08. In 2009-10 companys current ratio is 1.37 which indicates that company has more liquidity in comparison of 2008-09.

c) Quick ratio:
Meaning: An indicator of companys short term liquidity. The quick ratio measures a companys ability to meet its short-term obligation with its most liquid assets. The higher the quick ratio, the better the quick position of the company. Formula: Quick assets / current liabilities Quick assets= current assets-stock-prepaid expenses Table:
particulars quick assets quick liabilities quick ratio 2007-08 9699.9 27438.19 0.35 2008-09 47827.37 27114.83 1.76 2009-10 38178.15 39192.19 0.97

2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

quick ratio

quick ratio 2007-08 2008-09 2009-10

Interpretation: Quick ratio of 2007-08 is 1.06. while In 2008-09 it is 1.09 that

indicates slightly increase in the quick ratio. And in comparison of 2007-08 and 2008-09 the quick ratio is increase to 1.37.

Debtors turnover ratio: Debtors turnover ratio indicates the velocity of the debt collection of a firm. In simple terms it
indicates the number of the times average debtor are turnover during year. Formula: Net credit sales / average debtors Table:
particulars net credit sales average debtors debtor turover ratio 2007-08 10468583 679087 15.42 2008-09 10824238 688300 15.72 2009-10 8436974 429078 19.66

debtor turover ratio

20 15 10 5 0 2007-08 2008-09 2009-10 debtor turover ratio

Interpretation:

Cash from operations ratio:

A measure of how well current liabilities are covered by the cash flow generated from a companys operations.

Formula:
Cash flow from operations/current liabilities

Table:
particulars cash flow from operation current liabilities cash flow from operation ratio 2007-08 1342284 5242616 0.26 2008-09 890726 3988694 0.22 2009-10 1177226 3856858 0.31

cash flow from operation ratio

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2007-08 2008-09 2009-10 cash flow from operation ratio

Interpretation:

Gross profit ratio

The gross profit margin is a measurement of a companys manufacturing and distribution efficiency during the production process.

Formula:
Gross profit/sales *100

Table:
Particulars Gross profit sales Gross profit margin 2007-08 2416840 10824238 22.32 2008-09 1318112 8436974 15.62 2009-10 1371058 7517277 18.24

Gross profit margine

25 20 15 10 5 0 2007-08 2008-09 2009-10 Gross profit margine

Interpretation:

Return on Assets:
An indicator of how profitable a company is relative to its total assets.ROA gives an idea as to how efficient management is at using its assets to generate earning.

Formula:
Net profit after tax/average total assets * 100

Table:

Particulars Net profit after tax Average total assets

2007-08 482261 11939482

2008-09 -233709 10239540

2009-10 42390 10214820

ROA

4.04

-2.28

0.41

ROA
5 4 3 2 1 0 -1 -2 -3 2007-08 2008-09 2009-10 ROA

Interpretation:

Operating expenses ratio:

An expense ratio is determined through an annual calculation where a funds operating expenses are divided by the average rupee of its assets under management. Operating expenses are taken out of a funds assets and lower the return of a funds investor.

Formula:
Administrative expenses + selling expenses / net sales * 100

Table:
particulars operating expenses 2007-08 1626010 2008-09 1456033 2009-10 1059449

net sales operating expenses ratio

10824238 15.02

8436974 17.26

7517277 14.09

operating expenses ratio

20 18 16 14 12 10 8 6 4 2 0 2007-08 2008-09 2009-10

operating expenses ratio

Interpretation:

Operating profit ratio:

Formula:
EBIT-other income/ net sales * 100

Table:
particualrs 2007-08 2008-09 2009-10

EBIT-Other income Net sales Operating profit ratio

686131 10824238 6.34%

-180650 8436974 -2.14%

112492 7517277 1.50%

Operating profit ratio

7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% 2007-08 2008-09 2009-10 Operating profit ratio

Interpretation:

Pretax profit ratio:

Formula:
EBT/Net sales * 100

Table:

particulars EBT Net sales Pre-tax profit ratio

2007-08 744989 10824238 6.88%

2008-09 -240771 8436974 -2.85%

2009-10 133930 7517277 1.78%

Pre-tax profit ratio

8.00% 6.00% 4.00% 2.00% 0.00% 2007-08 -2.00% -4.00% 2008-09 2009-10 Pre-tax profit ratio

Interpretation: