Working Capital Analysis

of

By:
Supraneet Arya
PGDM I Year

Ajay Kumar Garg Institute of Management,

Ghaziabad.
Contents
1. Objective of the study
2. Company Profile
3. Financial Statements
4. Table of Financial Ratios
5. Calculations, pictorial representation and Analysis
of the Financial Ratios
6. Conclusion
Objectives of the study
• To develop analytical skills required to interpret the information (explicit as well as
implicit) provided by the financial statements and to measure the company’s
performance during the past few years.

• To analysis the liquidity position of Reliance Communications on the basis of some

important parameters of liquidity management like current ratio, quick ratio, current
assets to total assets, inventory turnover ratio and debtors turnover ratio, turnover ratios.

• To analyze the behavior and trend of various current assets and current liability with the
help of ratio analysis.

• In valuing and assessing the financial health of any company, various types of analyses
are necessary to develop a competent report and conclusion, whether it is digging into
the qualitative aspects of a company, or the quantitative.
Anil Dhirubhai Ambani Group - ADAG
Reliance Communications
• Reliance Communications (formerly Reliance Infocomm) started laying 60,000
route kilometres of a pan-India fibre optic backbone.

• This backbone was commissioned on 28 December 2002, the auspicious

occasion of Dhirubhai’s 70th birthday.

• Reliance Communications has a reliable, high-capacity, integrated (both

wireless and wireline) and convergent (voice, data and video) digital network.

• It is capable of delivering a range of services spanning the entire infocomm

(information and communication) value chain, including infrastructure and
services — for enterprises as well as individuals, applications, and consulting.
Board Of Directors of ADAG
• Shri Anil D. Ambani - Chairman  
Promoter, non-executive and non-independent Director  
• Prof. J Ramachandran  
Independent Director  
• Shri S.P. Talwar  
Independent Director  
• Shri Deepak Shourie  
Independent Director  
• Shri A.K.Purwar  
Independent Director
 Calculations,
Pictorial Representation
&
Analysis of Financial Ratios
 Current Ratio
Year Current Assets Current Liabilities Current Ratio

2005 Rs. 0.01 Cr. - 0

2006 Rs. 3154.71 Cr. Rs. 4.25 Cr. 742.28

2007 Rs. 9374.90 Cr. Rs. 10732.14 Cr. 0.87

2008 Rs. 7277.13 Cr. Rs. 11238.16 Cr. 0.64

2009 Rs. 16177.55 Cr. Rs. 9365.46 Cr. 1.72

Current Ratio
Current Ratio

742.28

0
0.87 0.64 1.72
2005 2006 2007 2008 2009
 Quick Ratio

Year Quick Assets Current Liabilities Quick Ratio

2005 - - -
2006 Rs. 3158.96 Cr. Rs. 4.25 Cr. 742.28

2007 Rs. 20107.04 Cr. Rs. 10,732.14 Cr. 1.87

2008 Rs. 18515.29 Cr. Rs. 11238.16 Cr. 1.64

2009 Rs. 25543.01 Cr. Rs. 9365.46 Cr. 2.72

Quick Ratio
800
700
600
500 Quick Ratio
400 742.28
300
200
100
0
0 1.87 1.64 2.72
2005 2006 2007 2008 2009
 Debt-Equity Ratio
Year Total Debt Shareholders’ D/E Ratio
Equity
2005 - - 0
2006 - Rs. 15395.05 Cr. 0

2007 Rs. 14567.84 Cr. Rs. 20525.54 Cr. 0.71

2008 Rs. 20286.43 Cr. Rs. 24840.03 Cr. 0.82

2009 Rs. 30903.61 Cr. Rs. 51690.32 Cr. 0.60

Debt Equity Ratio

Debt Equity Ratio

0.71 0.82

0.6

0
0
2005
2006
2007
2008
2009
 Current Asset to Total Assets Ratio

Year Current Assets Total Assets C.A to T.A

Ratio
2005 Rs. 0.01 Cr. Rs. 0.01 Cr. 1
2006 Rs. 3154.71 Cr. Rs. 15395.05 Cr. 0.20
2007 Rs. 9374.90 Cr. Rs. 35093.38 Cr. 0.26
2008 Rs. 7277.13 Cr. Rs. 45126.46 Cr. 0.16
2009 Rs. 16177.55 Cr. Rs. 82593.93 Cr. 0.19

Current Assets to Total Assets Ratio

Current Assets to Total Assets Ratio 1
1

0.2 0.26
0.16 0.19
2005
2006
2007
2008
2009
 Inventory Turnover Ratio

Year COGS/ Avg. Inventory

Net Sales Inventory Turnover
Ratio
2005 - - 0
2006 - - 0
2007 Rs, 12756.30 Cr. Rs.98.51 Cr. 129.50

2008 Rs. 14792.05 Cr. Rs. 201.22 Cr. 73.51

2009 Rs. 15086.66 Cr. Rs. 253.14 Cr. 59.60

Inventory Turnover Ratio

InventoryTurnover Ratio

129.5
73.51 59.6
0 0

2005 2006 2007 2008 2009

 Cash & Bank Balances to Current Assets Ratio

Year Cash & Bank Current Cash & Bank

Balances Assets Balance to Current
Assets Ratio
2005 - - 0
2006 Rs. 0.05 Cr. Rs. 0.05 Cr. 1
2007 Rs.28.08 Cr. Rs. 928.70 Cr. 0.03
2008 Rs. 192.65 Cr. Rs. 1487.08 Cr. 0.13
2009 Rs. 534.89 Cr. Rs. 2270.25 Cr. 0.23

Cash & Bank Balances to Current Asset Ratio

Cash & Bank Balances to Current Asset Ratio

2009 0.23

2008 0.13

2007 0.03

2006 1

2005 0
 Debtors to Current Assets Ratio
Year Debtors Current Assets Debtors to
Current Assets
Ratio

2005 - - 0
2006 - Rs. 0.05 Cr. 0
2007 Rs. 802.11 Cr. Rs. 928.70 Cr. 0.86
2008 Rs. 1093.21 Cr. Rs. 1487.08 Cr. 0.73
2009 Rs. 1428.22 Cr. Rs. 2270.25 Cr. 0.65

Debtors to Current Assets Ratio

0.9
0.8 0.86
0.7
0.6 0.73
0.5 Debtors to Current Assets Ratio
0.65
0.4
0.3
0.2
0.1
0
2005
2006
2007
2008
2009
 Inventories to Current Assets Ratio

Year Inventories Current Assets Inventories to

Current Assets Ratio

2005 - - 0

2006 - Rs. 0.05 Cr. 0

2007 Rs.98.51 Cr. Rs. 928.70 Cr. 0.10

2008 Rs. 201.22 Cr. Rs. 1487.08 Cr. 0.13

2009 Rs. 253.14 Cr. Rs.2270.25 Cr. 0.11

Inventories to Current Assets Ratio

2009 2007
0.11 0.10

2008
0.13
 Creditors to Current Liabilities Ratio

Year Creditors Current Creditors to

Liabilities Current
Liabilities
Ratio
2005 - - 0
2006 - Rs. 1.68 Cr. 0
2007 Rs. 14567.84 Cr. Rs.10732.14 Cr. 1.35
2008 Rs. 20286.43 Cr. Rs. 11238.16 Cr. 1.80
2009 Rs. 30903.61 Cr. Rs. 9365.46 Cr. 3.30

Creditors to Current Liabilities Ratio

3.5
3
2.5
2
1.5
1
0.5
0
2005 2006 2007 2008 2009
 Debt to Total Assets Ratio

Year Total Total Debt to

Debts Assets Total Assets
Ratio
2005 - - 0
2006 - Rs. 15395.05 Cr. 0
2007 Rs. 14567.84 Cr. Rs. 35093.38 Cr. 0.41
2008 Rs. 20286.43 Cr. Rs. 45126.46 Cr. 0.45
2009 Rs. 30903.61 Cr. Rs. 82593.93 Cr. 0.37

Debt to Total Assets Ratio

Debt to Total Assets Ratio

0.41 0.45

0.37
0
2005 0
2006
2007
2008
2009
 Table: Financial Ratios

Key Financial Ratios Mar’05 Mar’06 Mar’07 Mar’08 Mar’09

Current Ratio
0 742.28 0.87 0.64 1.72

Quick Ratio
0 742.28 1.87 1.64 2.72

Debt Equity Ratio

0 - 0.71 0.82 0.60

Current Asset to Total Asset Ratio

1 0.20 0.26 0.16 0.19

Inventory Turnover Ratio

0 0 129.50 73.51 59.60

Cash & Bank Balances to Current Assets Ratio

0 1 0.03 0.13 0.23

Debtors to Current Assets Ratio

0 0 0.86 0.73 0.65

Inventories to Current Assets Ratio

0 0 0.10 0.13 0.11

Creditors to Current Liabilities

0 0 1.35 1.80 3.30

Debt to Total Assets Ratio

0 0 0.41 0.45 0.37
Conclusion
• Reliance Communications has a strong financial strength as its Current Ratio and
Quick Ratio in 2006 was the highest of ever which made company capable to
discharge or meet its obligations effectively for its next years.

• The assets of the company in last five years mostly financed through shareholders’ due
to low debt equity ratio.

• Current assets after 2005 were very less as compared to total assets of the company
which results in unsatisfactory level of liquidity.

• Inventory turnover of the company for last five years was good. Cash and Bank
Balances of the company were not adequate as against other current assets.

• The company had fewer debtors as compared to its creditors.

• So, the overall liquidity of the company is good and it meets its current or future
obligations or liabilities effectively.
 Reliance Communications Ltd. : Profile

Industry Telecommunications BSE Code 532712 Face Value Rs. 5.00

-

Chairman Mr. Anil D Ambani NSE RCOM Market Lot 1

Code

Group ADA Ent. Group ISIN No INE330H01018 Book Closure 22/09/2009

Thank You!