AN ORGANISATIONAL STUDY AND

ANALYSIS OF RATIO ANALYSIS

MANAGEMENT AND CASH MANAGEMENT
OF HDFC STANDRAD LIFE INSURENCE LTD.

1. INTRODUCTION
Ratio analysis of financial statements

It is a systematic use of ratios to interpret/ assess the performance and status of the firm.

 A ratio expresses a mathematical relation between two quantities.

 Ratios are tools providing us which clues and symptoms of underlying conditions. Ratios
can help us to identify areas requiring further investigation.
 The usefulness of ratio depends on the quality of the numbers in their calculation.
That is our ability to draw useful insights and make valid intercompany comparisons is
enhanced by our skill in adjusting reported numbers prior to inclusion in these analyses.

 Ratios are interpretable only in comparison with

1) Prior ratios

2) Predetermined standards.

3) Ratios of competitors.

Ratio analysis of a firm’s financial statements is of interest to shareholders, creditors, and the
firm’s management. Stockholders are interested in the firm’s current and future level of risk and
return, which directly affect the stock price. The firm’s creditors are primarily interested in the
short-term liquidity of the company and in its ability to make interest and principal payments.

Internal management is concerned with all aspects of the firm’s financial performance.
Therefore, they attempt to produce financial ratios that will be considered favorable to both
owners and creditors. Additionally, management uses ratios to monitor the firm’s performance
from period to period. Unexpected changes or variances are identified to isolate developing
problem areas.
 2. IMPORTANCE OF RATIO ANALYSIS

Ratio analysis does two things, immediately.

The first thing is it allows the company to compare itself with other like companies. If
management feels things aren't going well, they can help pinpoint the problem through
comparing their ratios with other companies.

They may have several ratios that are comparable, but a couple which are way off. That might be
where the problem is.

Also, ratio analysis may help by comparing your company with prior periods. If a particular ratio
is declining when it would be better if it were staying the same or increasing, then again looking
at the ratios are important to find out where the problem lies. Ratios are important to spot trends
easily.

Types of ratios:

Ratios can be classified into six broad groups:

1. Liquidity ratios
2. Capital structure/ leverage ratios
3. Profitability ratios
4. Activity/ efficiency ratios
5. Integrated analysis of ratios
6. Growth ratios

3. Statement of the problem

Finance is the life blood of all business activities. Financial soundness is the basic requirement
on which the progress and success of any business firm rests in the long run. Firms should be
able to mobilize adequate funds to carry on their regular and normal activities without any
difficulty.

The year 08-09 has been a difficult year for the financial sector and the impacts have been felt in
the Indian life insurance industry. Growth rate in the private sector have declined over the year
on the back of a much more cautious attitude adopted by individual customers. There have been
changes in asset allocation and preferences during the year. Main purpose of this topic is to
analyze the financial statement to know regarding the performance of the company and to know
whether it has performed well in this financial year (2009) compare to past five years.
 4. Objectives of the study

 To study the overall financial performance of the company.

 To know the debt and equity position in the company
 To analyze whether company is in good financial position or not.
 And to gain the professional knowledge while working in corporate environment

5. Methodology

This project is on descriptive research and some extent it regards to causal research, and to use
the available facts as information and analyze these to make a critical evaluation of the materials
this is also a causal research with an aim to find a solution for an immediate problem facing by
industry or business organization. The control aim of descriptive research is to discover a
solution for some pressing problem.

1. Type of research – descriptive research

2. Tool – Ratio analysis

3. Company annual reports and e-mail at www.hdfcinsurance.com

6. TOOLS FOR DATA COLLECTION

Secondary data:

Secondary was collected through available records/annual reports of 5 year period from 2005-
2009 and web sites of hdfc standard life insurance company.

Data Collection:

The required data was collected from the annual report of the company and direct Personal
interview with the officer of the company and also through company website
 7. ANALYSIS /DESIGN
Ratio analysis of financial statements
It is a systematic use of ratios to interpret/ assess the performance and status of the firm.

 A ratio expresses a mathematical relation between two quantities.

 Ratios are tools providing us which clues and symptoms of underlying conditions. Ratios
can help us to identify areas requiring further investigation.
 The usefulness of ratio depends on the quality of the numbers in their calculation.
That is our ability to draw useful insights and make valid intercompany comparisons is
enhanced by our skill in adjusting reported numbers prior to inclusion in these analyses.

 Ratios are interpretable only in comparison with

1) Prior ratios

2) Predetermined standards.

3) Ratios of competitors.

Ratio analysis of a firm’s financial statements is of interest to shareholders, creditors, and the
firm’s management. Stockholders are interested in the firm’s current and future level of risk and
return, which directly affect the stock price. The firm’s creditors are primarily interested in the
short-term liquidity of the company and in its ability to make interest and principal payments.

Internal management is concerned with all aspects of the firm’s financial performance.
Therefore, they attempt to produce financial ratios that will be considered favorable to both
owners and creditors. Additionally, management uses ratios to monitor the firm’s performance
from period to period. Unexpected changes or variances are identified to isolate developing
problem areas.

8. Limitations of the study

 It was difficult to collect some information because of some company rules.

 Interaction with the employees was limited because of the work schedule.

 It was difficult to cover all the types of ratios because of lack of information i.e. regarding
inventories, debtor’s turnover etc…..
 9. Scope of the study
 Hdfc standard life financial statements analysis with comparison of financial statements of
past five years.
 To study regarding insurance industry
 To know about hdfc standard life insurance company
 To know the status of hdfc standard life in the market

10. CHAPTER SCHEME

Chapter1: INTRODUCTION

Chapter2: RESEARCH DESIGN

Chapter3: PROFILE OF THE COMPANY

Chapter4: ANALYSIS AND INTERPRETATION OF DATA

Chapter5: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

BIBLIOGRAPHY

ANNEXURE