A Project Report On

FINANCIAL HEALTH OF RELIANCE INDUSTRIES LIMITED

INDIAN INSTITUTE OF FINANCIAL PLANNING

September-2013
SUBMITTED TO MR SANDEEP KAPOOR
Address:

2E/8, JhandewalanExt, near Jhandewalan metro station Delhi.

BY

SACHIN NIMBARK SHAHBAZ AKHTAR SIMHADRI ASHOK SUBHASH KUMAR

21312 21313 21314 21315

TABLE OF CONTENT
Sl.No Particulars Page no.
3 1. ACKNOWLEDMENT

2.

INTRODUCTION

4-9 10-13

3.
4.

COMPANY PROFILE

AWARDS AND RECOGNITONS

14

5.

DATA ANALYSIS & INTERPRETATION

15-47

6.

FINDINGS

48-49

7.

SUGGESTION & RECOMMENDATION

50

8.

CONCLUSION

51

9.

BIBLOGRAPHY

52

ACKNOWLEDMENT

It is difficult to acknowledge precious a debt as that of learning as it is the only debt that is difficult to repay except through gratitude. First and foremost I wish to express my profound gratitude to the almighty, the merciful & compassionate with those grace & blessings. I have been able to complete this work. It is my profound privilege to express my sincere thanks to SANDEEP SIR for giving me an opportunity to work on the project and giving me full support in completing this project. Last but not least, I would like to thank my parents & my friends for their full cooperation & continuous support during the course of this assignment.

INTRODUCTION
Meaning of Financial Statement
Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: -

The Balance Sheet Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm

Meaning of Financial Analysis

The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial

Features of Financial Analysis

To present a complex data contained in the financial statement in simple and understandable form. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various conclusions.

Purpose of Analysis of financial statements

To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of mgt. To provide useful information to mgt

Tools of Financial Statement Analysis Various tools are used to evaluate the significance of financial statement data. Three commonly used tools are these: Ratio Analysis Funds Flow Analysis Cash Flow Analysis

Meaning of Ratio Analysis:

Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented.Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis.

Purpose of Ratio Analysis:

1] To identify aspects of a businesss performance to aid decision making 2] Quantitative process may need to be supplemented by qualitative factors to get a complete picture. 3] 5 main areas-

Liquidity the ability of the firm to pay its way Investment/shareholders information to enable decisions to be made on the extent of the risk and the earning potential of a business investment

Gearing information on the relationship between the exposure of the business to loans as opposed to share capital

Profitability how effective the firm is at generating profits given sales and or its capital assets

Financial the rate at which the company sells its stock and the efficiency with which it uses its assets

Fund Flow Analysis

Fund may be interpreted in various ways as (a) Cash, (b) Total current assets, (c) Net working capital, (d) Net current assets. For the purpose of fund flow statement the term means net working capital. The flow of fund will occur in a business, when a transaction results in a change i.e., increase or decrease in the amount of fund.

According to Robert Anthony the funds flow statement describes the sources from which additional funds were derived and the uses to which these funds were put.

In short, it is a technical device designed to highlight the changes in the financial condition of a business enterprise between two balance sheets.

Objectives of Fund Flow Statement

The main purposes of FFS are:] To help to understand the changes in assets and asset sources which are not readily evident in the income statement or financial statement. To inform as to how the loans to the business have been used. To point out the financial strengths and weaknesses of the business.

Cash Flow Analysis

Cash is a life blood of business. It is an important tool of cash planning and control. A firm receives cash from various sources like sales, debtors, sale of assets investments etc. Likewise, the firm needs cash to make payment to salaries, rent dividend, interest etc. Cash flow statement reveals that inflow and outflow of cash during a particular period. It is prepared on the basis of historical data showing the inflow and outflow of cash.

Objectives of CFS
1. To show the causes of changes in cash balance between the balance sheet dates. 2. To show the actors contributing to the reduction of cash balance inspire of increasing of profit or decreasing profit.

Uses of CFS
1. It explaining the reasons for low cash balance. 2. It shows the major sources and uses of cash. 3. It helps in short term financial decisions relating to liquidity. 4. From the past year statements projections can be made for the future. 5. It helps the management in planning the repayment of loans, credit arrangements etc.

Company Profile
Reliance Industries Ltd is an India-based company. The company is India's largest private sector company on all major financial parameters. They are the first private sector company from India to feature in the Fortune Global 500 list of 'World's Largest Corporations' and ranks 117th amongst the world's Top 200 companies in terms of profits. The company operates worldclass manufacturing facilities across the country at Allahabad, Barabanki, Dahej, Hazira, Hoshiarpur, Jamnagar, Nagothane, Nagpur, Naroda, Patalganga, Silvassa and Vadodara. The company operates in three business segments: petrochemicals, refining, and oil and gas. The petrochemicals segment includes production and marketing operations of petrochemical products. The refining segment includes production and marketing operations of the petroleum products. The oil and gas segment includes exploration, development and production of crude oil and natural gas. The other segment of the company includes textile, retail business and special economic zone (SEZ) development. In the year 1966 the RIL was founded by Shri Dhirubhai H.Ambani, it was started as a small textile manufacturer unit. In May 8, 1973 RIL was incorporated and conformed their name as RIL in the year 1985. Over the years, the company has transformed their business from manufacturing of textiles products into a petrochemical major. The company has set up a texturising / twisting facilities in 1979, RIL has also set up plants for Polyester Staple Fiber (PSF) in 1986 and for Linear Alkyl Benzene (LAB) & Purified Terephthalic Acid (PTA) in 1988. RIL has setup a petrochemical facility to produce HDPE and PVC at Hazira, Gujarat in technical collaboration with DuPont and BF Goodich respectively. The Hazira petrochemical plant was commissioned in 1991-92. In the year 1995-96, the company entered the telecom industry through a joint venture with NYNEX, USA and promoted Reliance Telecom Private Limited in India.

Current composition of the Board and Category of Directors are as Follows:

"Between my past, the present and the future, there is one common Factor: Relationship and Trust. This is the foundation of our growth."

Shri Dhirubhai H. Ambani Chairman Reliance Group December 28, 1932 - July 6, 2002

Board of Directors of Reliance Industries Limited

Shri Mukesh D Ambani Chairman & Managing Director

Shri Nikhil R. Meswani Executive Director

Shri Hital R. Meswani Executive Director

Shri .S.Kohli Executive Director

Shri PMS Prasad Executive Director

Shri R. Ravimohan Executive Director

Shri Ramniklal H. Ambani

Shri Mansingh L.

Shri Yogendra P. Trivedi

Dr. D. V. Kapur Bhakta

Shri M. P. Modi

Prof. Ashok Misra

Prof. Dipak C Jain

MISSION & VISION

Continuously innovate to remain Partners in human progress by Harnessing science &

technology in the petrochemicals domain

OUR MISSION

Be a globally preferred Business associate with responsible Concern for ecology, society, and
stakeholders value.

VALUES & QUALITY POLICY YOUR VALUES

Integrity, Respect for People, Unity of Purpose, Outside-in Focus, Agility and Innovation.

Awards & Recognition

International Refiner of the Year in 2005 at the 23rd Annual In World Refining and Fuel Conference

Awards for managers

Mukesh D. Ambani received the United States of America-India Business Council (USIBC) leadership award for "Global Vision" 2007 in Washington in July 2007.

Mukesh D. Ambani was conferred the Asia Society Leadership Award by the, Washington, USA, May 2004.

Mukesh D. Ambani ranked 13th in Asia's Power 25 list of The Most Powerful People in Business published by,Fortune magazine August 2004.

Mukesh D. Ambani is Business Leader of the Year.

Data analysis and Interpretation Reliance Industries Balance Sheets from 2006 to 2009
in Rs. Cr.

Mar '06 12 months Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities 1,393.17 1,393.17 0.00 0.00 43,760.90 4,650.19 49,804.26 7,664.90 14,200.71 21,865.61 71,669.87

Mar '07 12 months

Mar '08 12 months

Mar '09 12 months

1,393.21 1,393.21 60.14 0.00 59,861.81 2,651.97 63,967.13 9,569.12 18,256.61 27,825.73 91,792.86

1,453.39 1,453.39 1,682.40 0.00 77,441.55 871.26 81,448.60 6,600.17 29,879.51 36,479.68 117,928.28

1,573.53 1,573.53 69.25 0.00 112,945.44 11,784.75 126,372.97 10,697.92 63,206.56 73,904.48 200,277.45

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total Current Assets, Loans & 24,696.15 Advances Differed Credit Current Liabilities Provisions Total Current Liabilities & 21,547.00 Provisions 25,858.06 32,221.16 45,675.71 0.00 17,656.02 3,890.98 0.00 24,145.19 1,712.87 0.00 29,228.54 2,992.62 0.00 42,664.81 3,010.90 30,210.99 44,743.86 56,298.09 84,970.13 29,253.38 55,716.75 6,957.79 5,846.18 10,119.82 4,163.62 239.31 14,522.75 8,266.55 1,906.85 99,532.77 35,872.31 63,660.46 7,528.13 16,251.34 12,136.51 3,732.42 308.35 16,177.28 12,506.71 1,527.00 104,229.10 42,345.47 61,883.63 23,005.84 20,516.11 14,247.54 6,227.58 217.79 20,692.91 18,441.20 5,609.75 149,628.70 49,285.64 100,343.06 69,043.83 20,268.18 14,836.72 4,571.38 500.13 19,908.23 13,375.15 23,014.71

Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

3,149.15 0.00 71,669.87 24,897.66 324.03

4,352.93 0.00 91,792.86 46,767.18 439.57

12,522.70 0.00 117,928.28 37,157.61 542.74

10,622.38 0.00 200,277.45 36,432.69 727.66

Reliance Industries Profit & Loss Accounts from 2006 to 2009 in Rs. Cr.

Mar '06 12 months Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments 89,124.46 8,246.67 80,877.79 546.96 2,131.19

Mar '07 12 months

Mar '08 12 months

Mar '09 12 months

118,353.71 6,654.68 111,699.03 236.89 654.60

139,269.46 5,463.68 133,805.78 6,595.66 -1,867.16

146,328.07 4,369.07 141,959.00 1,264.03 427.56

Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Exp. Selling and Admin Exp. Miscellaneous Expenses Preoperative Exp.

83,555.94

112,590.52

138,534.28

143,650.59

59,739.29 1,146.26 978.45 668.31 5,872.33 300.74

80,791.65 2,261.69 2,094.09 1,112.17 5,478.10 321.23

98,832.14 2,052.84 2,119.33 715.19 5,549.40 412.66

109,284.34 3,355.98 2,397.50 1,162.98 4,736.60 562.42

-155.14 Capitalised Total Expenses 68,550.24

-111.21

-175.46

-3,265.65

91,947.72

109,506.10

118,234.17

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax

3,400.91 0.00 10,711.18 0.88 10,712.06 1,642.72 9,069.34

4,815.15 0.00 14,528.75 0.51 14,529.26 2,585.35 11,943.40

4,847.14 0.00 23,018.14 48.10 23,066.24 3,559.85 19,458.29

5,195.29 0.00 18,446.66 0.00 18,446.66 3,137.34 15,309.32

Extra-ordinary items Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakh) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

3,400.91 10,711.18 0.88 8,810.95 0.00 1,393.51 195.44

4,815.15 14,528.75 0.51 11,156.07 0.00 1,440.44 202.02

4,847.14 23,018.14 48.10 10,673.96 0.00 1,631.24 277.23

5,195.29 18,446.66 0.00 8,949.83 0.00 1,897.05 322.40

13,935.08 65.08 100.00 324.03

13,935.08 85.71 110.00 439.57

14,536.49 133.86 130.00 542.74

15,737.98 97.28 130.00 727.66

Calculation and Interpretation of Ratios

1] Current Ratio:
Current ratio = Current assets/Current liablities

YEAR

2005-2006 24,696.15 21,547.00 1.14

2006-2007 30,210.99 25,858.06 1.16

2007-2008 44,743.86 32,221.16 1.38

2008 -2009 56,298.09 45,675.71 1.23

Current assets Current liabilities

Current ratio

current ratio
3 2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09

current ratio

Comments: In Reliance Industries Ltd. the current ratio is 1.23:1 in 2008-2009. It means that for one rupee of current liabilities, the current assets are 1.23 rupee is available to the them. In other words the current assets are 1.23 times the current liabilities. Almost 4 years current ratio is same but current ratio in 2007-2008 is bit higher, which makes company sounder. The consistency increase in the value of current assets will increase the ability of the company to meets its obligations & therefore from the point of view of creditors the company is less risky. Thus, the current ratio throws light on the companys ability to pay its current liabilities out of its current assets. The Reliance Industries Ltd. has a goody current ratio.

2] Liquid Ratio:
Liquid ratio = Quick assets/ Quick liabilities

YEAR Quick assets

2005-2006 14,576.33 21,547.00 0.67

2006-2007 18,674.48 25,858.06 0.69

2007-2008 24,227.75 32,221.16 0.75

2008 -2009 36029.91 45,675.71 0.78

Quick liabilities
Liquid ratio

liquid ratio
0.8 0.78 0.76 0.74 0.72 0.7 0.68 0.66 0.64 0.62 0.6 2005-06 2006-07 2007-08 2008-09 liquid ratio

Comments: The liquid or quick ratio indicates the liquid financial position of an enterprise. Almost in all 4 years the liquid ratio is same, which is better for the company to meet the urgency. The liquid ratio of the Reliance Industries Ltd. has increased from 0.67 to 0.78 in 2008-2009 which shows that company follow low liquidity position to achieve high profitability.This indicates that the dependence on the long-term liabilities & creditors are more & the company is following an aggressive working capital policy. Liquid ratio of Company is not favorable because the quick assets of the company are less than the quick liabilities. The liquid ratio shows the companys ability to meet its immediate obligations promptly.

3] Proprietary Ratio:

Proprietary ratio =

Shareholders fund/ Fixed assets + current liabilities

YEAR

2005-2006 49,804.26 68,520.72 0.72

2006-2007 63,967.13 87,439.93 0.73

2007-2008 81,448.60 105,405.58 0.77

2008 -2009 126,372.97 189,655.07 0.66

Proprietary fund
Total fund Proprietary ratio

proprietary ratio
0.78 0.76 0.74 0.72 0.7 0.68 0.66 0.64 0.62 0.6 2005-06 2006-07 2007-08 2008-09 proprietary ratio

Comments: The Proprietary ratio of the company is 0.66 in the year 2008-2009. It means that the for every one rupee of total assets contribution of 66 paisa has come from owners fund & remaining balance 34 paisa is contributed by the outside creditors. This shows that the contribution by owners to total assets is more than the contribution by outside creditors. As the Proprietary ratio is very favorable of the company. The Companys long-term solvency position is very sound.

4] Stock Working Capital Ratio:

Stock working capital ratio =

Stock/ Working Capital

YEAR

2005-2006 10,119.82 3149.15 3.21

2006-2007 12,136.51 4352.93 2.78

2007-2008 14,247.54 12,522.70 1.13

2008 -2009 14,836.72 10,622.38 1.39

Stock
Working Capital Stock capital ratio working

stock working capital ratio

3.5 3 2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 stock working capital ratio

Comments: This ratio shows that extend of funds blocked in stock. The amount of stock is decreasing from the year 2005-2006 to 2008-2009. However in the year 2008-2009 it has increased a little to. In the year 20072008 the sale is increased which affects decrease in stock that effected in increase in working capital in 2007-2008.It shows that the solvency position of the company is sound.

5] Capital Gearing
Capital gearing ratio = Preference capital+ secured loan/Equity capital, reserve & surplus

YEAR

2005-2006 7,664.90 49,804.26

2006-2007 9,569.12 63,967.13

2007-2008 6,600.17 81,448.60

2008 -2009 10,697.92 126,372.97

Secured loan
Equity capital & reserves & surplus Capital gearing ratio

16%

15%

8.2%

8.5%

capital gearing ratio

18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2005-06 2006-07 2007-08 2008-09 capital gearing ratio

Comments:

Gearing means the process of increasing the equity shareholders return through the use of debt. Capital gearing ratio is a leverage ratio, which indicates the proportion of debt & equity in the financing of assets of a company.For the last 2 years [i.e.2007-2008 TO
2008-2009] Capital gearing ratio is all most same which indicates, near about 8.5% of the fund covering the secured loan position. But in the year 2005-2006 the Capital-gearing ratio is 16%. It means that during the year 2005-2006 company has borrowed more secured loans for the companys expansion.

6] Debt Equity Ratio:

Debt equity ratio = Total long term debt/ Total shareholders fund

YEAR

2005-2006 21,865.61

2006-2007 27,825.73 63,967.13

2007-2008 36,479.68 81,448.60

2008 -2009 73,904.48 126,372.97

Long term debt

Shareholders fund 49,804.26

Debt Equity Ratio

0.44

0.44

0.45

0.59

debt equity ratio

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005-06 2006-07 2007-08 2008-09 debt equity ratio

Comments: The debt equity ratio is important tool of financial analysis to appraise the financial structure of the company. It expresses the relation between the external equities & internal equities. This ratio is very important from the point of view of creditors & owners. The rate of debt equity ratio is increased from 0.44 to 0.59 during the year 2005-2006 to 2008-2009. This shows that with the increase in debt, the shareholders fund also increased. This shows long-term capital structure of the company is sound. The lower ratio viewed as favorable from long term creditors point of view.

7] Gross Profit Ratio:

Gross profit ratio = (Gross profit/Net sale) *100

YEAR Gross profit Net sales Gross profit Ratio

2005-2006 18345.48 80,877.79 22.7

2006-2007 25,439.43 111,699.03 22.7

2007-2008 30,086.28 133,805.78 22.4

2008 -2009 25,758.2 141,959 18.14

gross profit ratio

25

20

15 gross profit ratio 10

0 2005-06 2006-07 2007-08 2008-09

Comments: The gross profit is the profit made on sale of goods. It is the profit on turnover. In the year 2005-2006 the gross profit ratio is 22.7%. It has decreased to 18.14% in the year 2008-2009 due to increase in sales with corresponding more increase in cost of goods sold. It is continuously declined from 2005-2006 t0 2008-2009 due to high cost of purchases & overheads. Although the gross profit ratio is declined during the years 2005-2006 to 2008-2009. The net sales and gross profit is continuously increasing from the year 2005-20063 to 2008-2009.

8] Operating Ratio:

Operating ratio =

(COGS+ operating expenses/ Net sales) *100

YEAR

2005-2006

2006-2007 91,947.72

2007-2008 109,506.10

2008 -2009 118,234.17

COGS + Operating 68,550.24 expenses Net sales Operating ratio 80,877.79 84.75%

111,699.03 82.31%

133,805.78 81.80%

141,959 83.28%

operating ratio
85.00% 84.50% 84.00% 83.50% 83.00% 82.50% 82.00% 81.50% 81.00% 80.50% 80.00% 2005-06 2006-07 2007-08 2008-09 operating ratio

Comments: The operating ratio shows the relationship between costs of activities & net sales. Operating ratio over a period of 4 years when compared that indicate the change in the operational efficiency of the company.The operating ratio of the company has decreased in 3 year and increase a little in last year. This is due to increase in the cost of goods sold, which in 2005-2006 was 84.75%, in 2006-2007 was 82.31%, in 2007-2008 was 81.80% & in 2008-2009 it is 83.28%. Though the cost has increased in 20062007 as compared to 2005-2006, it is reducing continuously over the next two years, indicate downward trend in cost but upward / positive trend in operational performance.

10) Net Profit Ratio:

Net profit ratio = ( NPAT/Net sales)* 100

YEAR

2005-2006 9,069.34 80,877.79 11.21%

2006-2007 11,943.40 111,699.03 10.69%

2007-2008 19,458.29 133,805.78 14.54%

2008 -2009 15,309.32 141,959.00 10.78%

NPAT
Net sales Net profit ratio

net profit ratio

16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005-06 2006-07 2007-08 2008-09 net profit ratio

Comments: The net profit ratio of the company is high in all year but the net profit is increasing order from this ratio of 4 year it has been observe that the from 2005-2006 to 2007-2008 the net profit is increased and it decreased in the year 2008-2009.Profitability ratio of company shows considerable increase in 3 years and decreased in the last year. Companys sales have increased in 3 years and decreased in the last year. At the same time company has been successful in controlling the expenses i.e. manufacturing & other expenses.It is a clear index of cost control, managerial efficiency & sales promotion.

11] Stock Turnover Ratio:

Stock Turnover Ratio = COGS/ Average stock

YEAR COGS Average stock Stock Ratio

2005-2006 18,90,98 5,49,90

2006-2007 21,96,32 5,97,58 3.6

2007-2008 28,33,02 6,73,11 4.20

2008 -2009 25,72,26 6,89,30 3.73

Turnover 3.4

stock turnover ratio

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 stock turnover ratio

Comments: Stock turnover ratio shows the relationship between the sales & stock it means how stock is being turned over into sales.The stock turnover ratio is 2001-2002 was 3.4 times which indicate that the stock is being turned into sales 3.4 times during the year. The inventory cycle makes 3.4 rounds during the year. It helps to work out the stock holding period, it means the stock turnover ratio is 3.4 times then the stock holding period is 3.5 months [12/3.4=3.5months]. This indicates that it takes 3.5 months for stock to be sold out after it is produced. For the last 4 years stock turnover ratio is lower than the standard but it is in increasing order. Inurn the year 2001-2002 to 2004-2005 the stock turnover ratio has improved from 3.4 to 3.73 times, it means with lower inventory the company has achieved greater sales. Thus, the stock of the company is moving fast in the market.

12] Return on Capital Employed:

Return on capital employed = (NPAT/ Capital employed)*100

YEAR

2005-2006 9,069.34 71,669.87 12.65%

2006-2007 11,943.40 145,415.73 8.21%

2007-2008 19,458.21 117,928.28 16.50%

2008 -2009 15,308.32 200,277.45 7.64%

NPAT
Capital employed Return on capital employed

return on capital employed

18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005-06 2006-07 2007-08 2008-09 return on capital employed

Comments: The return on capital employed shows the relationship between profit & investment. Its purpose is to measure the overall profitability from the total funds made available by the owner & lenders. The return on capital employed of Rs.7.64 indicate that net return of Rs. 7.64 is earned on a capital employed of Rs.100. this amount of Rs. 7.64 is available to take care of interest, tax,& appropriation. The return on capital employed is show-mixed trend, i.e. it decrease in 2006-2007 , then increase in 2007-2008 and finally decrease in 2008-2209.In 2007-2008 It is highest that is 16.50%. This indicates a very high profitability on each rupee of investment & has a great scope to attract large amount of fresh fund.

13] Earning Per Share:

Earning per share = NPAT/ Number of equity share

YEAR

2005-2006 9,06934 13,935.08 65.08

2006-2007 11,943,40.00 13,935.08 85.71

2007-2008 19,458,29.00 14,536.49 133.86

2008 -2009 15,309,32.00 15,737.98 97.28

NPAT
No.of equity share Earning per share

earning per share

160 140 120 100 80 60 40 20 0 2005-06 2006-07 2007-08 2008-09 earning per share

Comments: Earning per share is calculated to find out overall profitability of the company. Earning per share represents the earning of the company whether or not dividends are declared.The Earning per share is 97.28 means shareholder gets Rs. for each share of Rs. 10/-. In other words the shareholder earned Rs. 97.28 per share. The net profit after tax of the company is increasing in all years accepts 2008-2009. Therefore the shareholders earning per share is increased continuously from 2005-2006 to 2007-2008 by 65.08-133.86% and decrease in 2008-2009 to 97.28%. This shows it is continuous capital appreciation per unit share for consecutive three years and capital depreciation per unit share in the last year.The above analysis shows the Earning per share and Dividend per share is increasing rapidly. It is beneficial to the shareholders and prospective investor to invest the money in this company.

Calculations and Interpretation of Fund Flow Statement Fund flow statement (in Rs. Cr.)
Mar ' 09 Source of funds Mar ' 08 Mar ' 07 Mar ' 06

Issue of shares

1,393.17

1,393.21

1,453.39

1,573.53

Long term borrowings

21,865.61

27,825.73

36,479.68

73,904.48

Operating profit

14,458.74

20,405.91

2,432.52

24,152.39

37,717.52 Application of funds

49,624.85

60,365.59

99,630.4

Investment

5,846.18

16,251.34

20,516.11

20,268.18

Inventories

10,119.82

12,136.51

14,247.54

14,836.72

Payment dividends

1393.51

1,440.44

1,631.24

1,897.05

Payment of tax

1,642.72

2,585.35

3,559.85

3,137.34

19,000.23

32,413.64

39,954.74

40,139.29

Net increase in working capital

18,717.29

17,211.21

20,410.85

59,491.11

Comments
The fund flow analysis shows that the funds increase continuously from the year 2006-2009 due to the maximum long term borrowings and more operating profit .The funds are maximum in the year 2009 because in this year the company borrowed maximum long term loan. The application of funds also increases continuously from the tear 2006 to 2009. It was minimum in the year 2006 and maximum in the year 2009. The net working capital available to the company was maximum in the year 2009 shows the high liquidity position of the firm and it was minimum in the year 2007 shows the low liquidity position of the firm.

Calculations and Interpretation of Cash Flow Statement Cash flow Statement (in Rs. Cr).
Mar ' 09 Profit before tax 18,433.23 Mar ' 08 23,010.14 Mar ' 07 14,520.47 Mar ' 06 10,704.06

Net cash flow-operating activity

18,245.86

17,426.74

16,870.55

10,301.58

Net cash used in investing activity

-24,084.20

-23,955.08 -18,567.01

-12,130.88

Net cash used in fin. Activity

23,732.58

8,973.04

306.08

366.67

Net inc/dec in cash and equivalent

17,894.24

2,444.70

-1,390.38

-1,462.63

Cash and equivalent begin of year

4,282.29

1,835.35

3,225.73

3,608.79

Cash and equivalent end of year

22,176.53

4,280.05

1,835.35

2,146.16

Comments:
The cash flow statement shows that the net profit before tax increased continuously in the year 2006, 2007 and 2008 but decreased in the year 2009 due to the excessive liquidity. The net cash from the operating activities continuously increased from the 2006 to 2009, which shows the sound position of the firm. The statement shows that net cash from investing activities is negative in all four years that means the firm is not enough contribute in investing activities. The net cash used in financing activities is maximum in the year 2008 and 2009 in comparison to 2006 and 2007, when company contributed fewer amounts in financing activities. The cash and cash equivalents of the firm decreased in the year 2006 and 2007, which shows the low liquidity position of the firm in these years. The cash and cash equivalents of the firm increased in the year 2008 and 2009 showing the high liquidity position of the firm. The opening cash and cash equivalents are minimum in the year 2008 and maximum in the year 2009. The Closing cash and cash equivalents maximum in the year 2009 and minimum in the year 2007 shows maximum liquidity position in the year 2009. the firm maintain the

Findings

1. The current ratio has shown non fluctuating trend as 1.14, 1.16, 1.38 and 1.23 during 2006, 2007, 2008 and 2009. 2. The quick ratio is also in non fluctuating trend throughout the period 2006 09 resulting as 0.67, 0.69, 0.75, 0.78.The Company believes in high profitability and low liquidity position. 3. The proprietary ratio has shown a non fluctuating trend. The proprietary ratio is decreased compared with the last year. 4. The stock working capital ratio decreased from 3.21 to 1.39 in the year 2006 09. 5. The capital gearing ratio is decreased form 2006 08 (0.16, 0.15 and 0.82) and increased in 2009 to 0.85. 6. The debt-equity ratio increased from 0.44-0.59 in the year 2006-09. 7. The gross profit ratio is in fluctuation manner. It decreased in the current year compared with the previous year from 23.1% to 18.97%. 8. The net profit ratio is also decreased in the current year compared with the previous year from 14.54% to 10.78%.

9. The operating ratio is increased in the current year compared with the previous year from 81.8% to 83.28%. 10. The return on capital employed is increased in the year 2006 and 2008 while it decreased in the year 2007 and 2009. 11. The earning per share is maximum in the year 2007-2008 and minimum in the year 20052006. 12. Dividend payout ratio is maximum in the year 2005-2006 and minimum in the 2007-2008. 13. Cost of goods sold shows a non fluctuating pattern in the year 2005-2008 and increased in the year 2008-2009.

Suggestion & Recommendation

1.

Liquidity refers to the ability of the concern to meet its current obligations as and when these

become due. The company should improve its liquidity position. 2. The company should make the balance between liquidity and solvency position of the company. 3. The profit ratio is decreased in current year so the company should pay attention to this because profit making is the prime objective o every business. 4. The cost of goods sold is high in every year so the company should do efforts to control it. 5. The long term financial position of the company is very good but it should pay a little attention to short term solvency of the company.

Conclusion
The companys overall position is at a very good position. The company achieves sufficient profit in past four years. The long term solvency position of the company is very good. The company maintains low liquidity to achieve the high profitability. The company distributes dividends every year to its share holders. 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.

Bibliography

FINANCIAL MANAGEMENT Scribed .com Wikipedia encyclopedia www.ril.com

ANAUAL REPORTS OF RELIANCE INDUSTRIES LIMITED from

www.moneycontrol.com
2005-2006 2006-2007 2007-2008 2008-2009