FINANCIAL PERFORMANCE OF BHARTI AIRTEL LTD.

PROJECT REPORT

Submitted to Mahatma Gandhi University in partial fulfillment

of the requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted By

DIMPLE ROSE BOBAN

Reg. No. 180435

Under the guidance of
Dr.V.P.VIJAYAMOHAN
Faculty Guide

Accredited by NAAC with ‘A’ Grade

DEPARTMENT OF MANAGEMENT STUDIES
MAR ATHANASIOS COLLEGE FOR ADVANCED STUDIES
TIRUVALLA
2020

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 MAR ATHANASIOS COLLEGE FOR
ADVANCED STUDIES TIRUVALLA
Ph: 0469 2730323 Fax: 0469 2730317 macfast@macfast.org

www.macfast.org

CERTIFICATE

This is to certify that the project report entitled “FINANCIAL PERFORMANCE OF

BHARTI AIRTEL LIMITED”is a bonafide report of the project work undertaken by
DIMPLE ROSE BOBAN, fourth semester MBA student of our college during the period
from 27th April to 10th June,2020

Dr. V.P Vijayamohan Dr.Sudeep B Chandramana

Faculty Guide Head, Dept. of management Studies

Rev. Dr.Cherian J Kottayil University Examiner

Principal

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 DECLARATION

I hereby declare that this project report entitled “FINANCIAL PERFORMANCE

OF BHARTI AIRTEL LIMITED”is a bonafide report of the study undertaken by me,
under the guidance of Dr.V P VIJAYAMOHAN, Department of Management Studies,
MACFAST, Tiruvalla.

I also declare that this project report has not been submitted to any other University or
Institute for the award of any degree or diploma.

Place : Tiruvalla

Date :10-05-2020 DIMPLE ROSE BOBAN

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 ACKNOWLEDGEMENT

First and foremost, I thank the Lord Almighty, for his perpetual shower of blessings, which
led to the successful completion of my project.

I take this opportunity to express my deep sense of gratitude to all those who have helped me
throughout this project. It gives me immense pleasure to acknowledge all those who have
rented encouragement and support for the successful completion of this work

I express my profound gratitude and sincere thanks to Rev. Dr. Cherian J. Kottayil, principle
of MACFAST, Tiruvalla.

I express my heartfelt thanks to Dr. Sudeep B. Chandramana, head of department of

management studies, MACFAST, Tiruvalla for inspiration and valuable suggestions for
carrying out this endeavour.

I express my deep sense of gratitude to Dr. V P Vijayamohan, the faculty member of

department of management studies, MACFAST, for encouraging and inspiring me for
developing the project.

My project work involves many people at different stages. I would like to thank all those who
have directly or indirectly contributed to the success of the project.

I also take this opportunity to express profound gratitude to my parents, family members and
several people who have contributed for the successful completion of the project. It is my
duty and pleasure to acknowledge them.

DIMPLE ROSE BOBAN

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 LIST OF TABLES

Sl No Title Page No

5.1 Current ratio 45

5.2 Acid test ratio/quick ratio 45

5.3 Absolute liquidity ratio 46
5.4 Debt equity ratio 47
5.5 Proprietary ratio 48
5.6 Fixed asset to net worth ratio 49
5.7 Fixed asset turnover ratio 50
5.8 Capital turnover ratio 50
5.9 Working capital ratio 51
5.10 Gross profit ratio 52
5.11 Net profit ratio 53
5.12 Net profit 54
5.13 Estimated profit for 2021-2020 to 2024-25 56
5.14 Net sales 58
5.15 Estimated sales for 2020-2021 to 2024-25 60
5.16 Comparative balance sheet for the year 2015 &2016 62

5.17 Comparative balance sheet for the year 2016&2017 63

5.18 Comparative balance sheet for the year 2017&2018 64

5.19 Comparative balance sheet for the year 2018 &2019 65

5.20 Comparative balance sheet for the year 2019 &2020 67

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 LIST OF FIGURE
Sl No Title of the figure Page No

5.1 Chart on Net profit from 2015-16 to 2019-20 54

5.2 Chart on estimated profit for 2020-2021 to 2024-25 57

5.3 Chart on Net sales from 2015-16 to 2019-20 58

5.4 Chart on estimated sales for 2020-2021 to 2024-25 61

CONTENTS

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Sl.N0 CHAPTERS PAGE NO
i. Acknowledgement
ii. List of tables
iii. List of figures

INTRODUCTION 1-4
01
Background of the study 2
Statement of the problem 3
Relevance and scope of the study 3
Objectives of the study 4
PROFILE OF TELECOM INDUSTRY 5-18

2.1 Business process of the study 6

02 2.2 market demand supply-contribution to GDP- Revenue 8
generation
2.3 level and type of competition- firms operating in the 9
industry 13
2.4 pricing strategies in the industry 15
2.5 prospects and challenges of the industry 17
2.6 key drivers of the industry

REVIEW OF LITERATURE 19-38

03 3.1 Brief theoretical construct related to the problem 20

3.2 An overview of earlier studies 35
3.3 uniqueness of research study 38

METHODOLOGY OF THE STUDY 39-41

04 4.1 Research Approach and design 40

4.2 Sources of online data 40
4.3 Data analysis tools 41
4.4 Report structure 41
4.5 Limitation of the study 41
05 DATA ANALYSIS, INTERPERATION, INFERENCE 43

06 FINDINGS 68

07 CONCLUSION 70

BIBLOGRAPHY 72
ANNEXURES 74

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1
CHAPTER 1
INTRODUCTION

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1.1 BACKGROUND OF THE STUDY

Financial performance refers to the degree to which financial objectives being or has been
accomplished. It is the process of measuring the results of a firm's policies and operations in
monetary terms. It is used to measure firm's overall financial health over a given period of
time and can also be used to compare similar firms across the same industry or to compare
industries or sectors in aggregation Financial performance analysis includes analysis and
interpretation of financial statements. Financial statements are the statements showing the
financial position and results of business operation at the end of the accounting period. The
two basic financial statements are Balance Sheet and Profit And Loss Account. Analysis of
financial statement means establishing relationship between the items in financial statements
for determining the financial strength and weakness of the business. It involves analysing the
financial statements to extract the information that can facilitate decision making. The data
given in the financial statement should be put in simplified form to help in the analysis. After
putting the data in the simplified form, conclusions are arrived at.

In the words of Metcaff and Titard, “Analysing financial statements is a process of evaluating
the relationships between component parts of financial statements to obtain a better
understanding of a firm’s position and performance”. Thus financial analysis is the use of
financial statements to analyse the financial position and performance of the company, and to
assess future financial performance. In short, financial performance analysis is an
‘information processing system’ designed to provide the necessary information for decision
making.

Financial Analysis is the structural and logical way to present overall financial performance
of a financial institution. It also helps to evaluate and decision making for business operation.
It is used to analyze whether an entity is stable, solvent, liquid or profitable enough to be
invested in. Financial Statement Analysis is a method used by interested parties such as
investors, creditors, and management to evaluate the past, current, and projected conditions
and performance of the firm. Ratio analysis is the most common form of financial analysis. It
provides relative measures of the firm's conditions and performance. Horizontal Analysis and
Vertical Analysis are also popular forms. Horizontal analysis is used to evaluate the trend in
the accounts over the years, while vertical analysis, also called a Common Size Financial
Statement discloses the internal structure of the firm. It indicates the existing relationship

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between sales and each income statement account. It shows the mix of assets that produce
income and the mix of the sources of capital, whether by current or long term debt or by
equity funding.

The current analysis of Bharti Airtel Ltd. was carried out to identify and analyze the current
financial position based on financial statement. Ratio analysis is a tool used by individuals to
conduct a quantitative analysis of information in company’s financial statements. Ratio’s are
calculated from current year numbers and are the compared to previous years, other
companies, the industry, or even the economy to judge the performance of the company.

1.2 STATEMENT OF THE PROBLEM

The present study attempts to analyse the Financial Performance Analysis of Bharthi Airtel
Ltd. Financial performance analysis helps the management in reaching the overall operation
of business. It enables the management to see that the resources of the firm are used most
effectively, efficiently and that the firm’s financial position is sound. In order to understand
more about the profitability and financial position of the business, it is necessary to analyse
the financial performance. The problem for the study is stated as “A study on the Financial
Performance Analysis of Bharti Airtel Ltd” and is undertaken in order to evaluate the
financial performance of the company for the last five years commencing from 1st April 2015
to 31st March 2020.

1.3 SCOPE OF THE STUDY

Interest of various related groups is affected by the financial performance of a firm.

Therefore, these groups analyse the financial performance of the firm. The type of analysis
varies according to the specific interest of the party involved. The trade creditors are
interested in the liquidity of the firm were as the bond holders evaluate the cash-flow ability
of the firm by the appraisal of firm’s capital structure, the major sources and uses of funds,
profitability over time, and projection of future profitability. The investors are interested in
present and expected future earnings as well as stability of these earnings. For a management
it is essential to retain the internal control, better financial condition and better performance
through the appraisal of firm’s present financial condition, evaluation of opportunities in

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relation to this current position, return on investment provided by various assets of the
company, etc. Ratio analysis helps in understanding the financial health and trend of a
business. Comparative financial statement is done to make the financial data more
meaningful. Trend analysis means analysing general tendencies in each item of financial
statements on the basis of data of the base year. Thus the crucial analysis and interpretation of
financial performance is essential. Therefore financial information is needed to predict,
compare and evaluate the financial position of the firm.
The scope of the study is limited to analyses the efficiency of the financial management of
Bharti Airtel Limited, based on the financial statements collected from the website.

1.4 OBJECTIVES OF THE STUDY

 The primary objective of the study is to review the Financial Performance Analysis of
Bharti Airtel Ltd.
 To estimate the trend in sales and profit of the firm.
 To analyse the long term solvency of the company.
 To assess the overall efficiency of the company.
 To access the present and future profitability of Bharti Airtel Ltd.

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 CHAPTER 2
PROFILE OF TELECOMMUNICATION INDUSTRY

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2.1 BUSINESS PROCESS OF THE INDUSTRY

The telecommunications industries within the sector of information and communication

technology is made up of all telecommunications/telephone companies and internet service
providers and plays the crucial role in the evolution of mobile communications and
the information society.

Traditional telephone calls continue to be the industry's biggest revenue generator, but thanks

to advances in network technology, telecom today is less about voice and increasingly about
text (messaging, email) and images (e.g. video streaming). High-speed internet access for
computer-based data applications such as broadband information services and interactive
entertainment, is pervasive. Digital subscriber line (DSL) is the main broadband telecom
technology. The fastest growth comes from (value-added) services delivered over mobile
networks.

The telecom sector continues to be at the epicentre for growth, innovation, and disruption for
virtually any industry. Mobile devices and related broadband connectivity continue to be
more and more embedded in the fabric of society today and they are key in driving the
momentum around some key trends such as video streaming, Internet of Things (IoT),
and mobile payments.

The  Business Process Framework is an operating model framework for telecom service

providers in the telecommunications industry. The model describes the required business
processes of service providers, and defines key elements and how they should interact.

The development of the business process standardization for telecom service providers
started with the founding of the TM Forum in 1988. The initial goal was to facilitate the
creation of 'interoperable network management product'. The first approved standard was the
'OSI/NM Forum Protocol Specification,' an extension of OSI protocols developed since the
late 1970s.

The direct development towards the Business Process Framework (eTOM), as Brenner
(2007) explained, was "the Telecom Operation Map (TOM) was first published in 2001. The
goal of TOM was the creation of an industry-owned framework of business processes,
including the definition of a common enterprise-independent terminology for service
management. It was also supposed to serve as a basis for discussing the scope of information

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management necessary for the execution of the processes. The result of this latter effort has
meanwhile spawned its own TMF document family, the Shared Information and Data
Model (SID).

The Telecom Operation Map (TOM) was extended in 2001 to eTOM, an acronym for
Enhanced Telecom Operations Map. The process model eTOm was renamed "Enhanced
Telecom Operations Map (eTOM)," and in 2013 to "Business Process Framework (eTOM)."

There have been many versions of eTOM. Version 14 was published in May 2014. It also has
been developed into a component of NGOSS, which has been renamed framework.

The Business Process Framework model consists of processes at 5 levels:

 Strategy,
 Network Operations,
 Level-2,
 Level-3,
 Level-4.

These levels form a hierarchy, with each level encapsulating a group of processes at the next
level of detail.

The graphic representation of a Business Process Framework (eTOM) model consists of rows
and columns, the intersections of which denote specific business processes. The top row
includes customer facing activities such as marketing, While the bottom row includes
supplier facing and support activities. In this manner the Business Process Framework map
covers the whole value chain. The map also indicates the interaction between
processes.Business Process Framework (eTOM) processes fall into three major process
areas, as shown in the diagram:

 Strategy
 Infrastructure & Product (SIP)
 Operations and Enterprise Management.

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2.2 MARKET DEMAND AND SUPPLY CONTRIBUTION TO GDP-

REVENUE GENERATION.
India is currently the world’s second-largest telecommunications market with a subscriber
base of 1.20 billion and has registered strong growth in the past decade and half. The Indian
mobile economy is growing rapidly and will contribute substantially to India’s Gross
Domestic Product (GDP), according to report prepared by GSM Association (GSMA) in
collaboration with the Boston Consulting Group (BCG). As of January 2019, India has
witnessed a 165 per cent growth in app downloads in the past two years. 4.8 billion
downloads of mobile applications were registered in India in first three months of 2019.
The liberal and reformist policies of the Government of India have been instrumental along
with strong consumer demand in the rapid growth in the Indian telecom sector. The
government has enabled easy market access to telecom equipment and a fair and proactive
regulatory framework that has ensured availability of telecom services to consumer at
affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the
sector one of the fastest growing and a top five employment opportunity generator in the
country.
Market Size
India ranks as the world’s second largest market in terms of total internet users. The number
of internet subscribers in the country increased at a CAGR of 45.74 per cent during FY06-
FY19 to reach 636.73 million in 2018-19. The internet subscribers reached 687.62 million till
September 2019. Total wireless data usage in India grew 10.58 per cent year-on-year to
19,838,886 terabytes between July-September 2019.
Further, India is also the world’s second largest telecommunications market, total telephone
subscriber base and tele-density reached 1,172.44 million and 88.56 per cent, respectively, as
on December 2019.
Gross revenue of the telecom sector stood at Rs 121,527 crore (US$ 17.39 billion) in FY20
(April-September 2019).
Over the next five years, rise in mobile-phone penetration and decline in data costs will add
500 million new internet users in India, creating opportunities for new businesses.
Investment/Major development
With daily increasing subscriber base, there have been a lot of investments and developments
in the sector. FDI inflows into the telecom sector during April 2000 – December 2019

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totalled to US$ 37.11 billion, according to the data released by Department for Promotion of
Industry and Internal Trade (DPIIT).
Some of the developments in the recent past are:

 As of January 2020, more than 542 banks have been permitted to provide mobile banking
services in India.
 In December 2019, Airtel disclosed its plans to invest US$ 2.86 billion in its business as a
part of company’s annual target.
 As per report by Ericsson, India has the world’s highest data usage per smartphone at an
average of 9.8 GB per month.
 As of August 2019, Jio's IoT platform is ready to be commercially available from January
2020.
 In August 2019, commercially launched Jio GigaFiber as wired broadband service.
 During the first quarter of 2018, India became the world’s fastest-growing market for
mobile applications. The country remained as the world’s fastest growing market for
Google Play downloads in the second and third quarter of 2018.               
 Vodafone India and Idea Cellular have merged into ‘Vodafone Idea’ to become India’s
largest telecom company, as of September 2018.

2.3 FIRMS OPERATING IN THE INDUSTRY, LEVEL OF COMPETITON

The Communication Companies in India are on the ever rising trend and there has been a
stupendous growth in this sector over the last decade. The telecommunication industry in
India is one of the rapidly growing industries in the world and has also developed the second
largest communication network. The total number of telephone subscribers in India reached
1.18 billion as of 31 March 2020. The number of wireless subscribers is over 1.17 billion and
the number of wireline subscribers are 20.58 million. The country's telecom regulator
is Telecom Regulatory Authority of India (TRAI).

Major Telecom Companies in India

 In 1975, the Department of Telecom (DoT) was given separate authority for running the
telephone services in the country.
 The Mahanagar Telephone Nigam Limited (MTNL)initiated its services in the year 1985
for carrying out the telephone operations in the metros of India, viz. Delhi and Mumbai.

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 In October 2000, the Bharat Sanchar Nigam Limited (BSNL) was set up by the
Department of Telecom.
 Thereafter several private companies as Reliance Communications, Tata Indicom, Airtel
etc in the sector came up.

The major players in the mobile phone service industry are enlisted as:

1. BSNL

The Bharat Sanchar Nigam Limited, country’s largest cellular service operator was set up in
the year 2000. It is a state owned telecom company with its headquarters located in New
Delhi. BSNL is also the largest land line telephone establishment in India. As of April, 2019
87.1 million users have been reported to be BSNL users.

2. RELIANCE JIO
Reliance Jio is an entire ecosystem that allows Indians to live the digital life to the fullest.
This ecosystem consists of powerful broadband networks, useful applications, best-in-class
services and smart devices distributed to every doorstep in India. Jio’s media offerings
include the most comprehensive libraries and programmes of recorded and live music, sports,
live and catch up television, movies and events. Jio is about creating connected intelligence
for 6 billion global minds to unleash the power of a young nation. The three-pronged focus
on broadband networks, affordable smartphones and the availability of rich content and
applications has enabled Jio to create an integrated business strategy from the very beginning,
and today, Jio is capable of offering a unique combination of telecom, high speed data, digital
commerce, media and payment services.

3. MTNL

Mahanagar Telephone Nigam Limited (MTNL) was set up in the year 1985, to run telecom
operations in the major metro cities of India, Mumbai and Delhi. Its headquarters are based in
Mumbai. MTNL was the first company in India to initiate 3G services in India, having the
brand name of “MTNL 3G Jadoo Services” which provided options as Video call, Mobile
TV,MobileBroadbandtothecustomers.

4. Airtel

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Bharti Airtel Limited is a leading global telecommunications company with operations in 18
countries across Asia and Africa. It is headquartered in New Delhi, India. The company ranks
amongst the top three mobile service providers globally in terms of subscribers. In India, the
company's product offerings include 2G, 3G and 4G wireless services, mobile commerce,
fixed line services, high speed home broadband, DTH, enterprise services including national
& international long-distance services to carriers. In the rest of the geographies, it offers 2G,
3G, 4G wireless services and mobile commerce. Bharti Airtel had over 403 million customers
across its operations at the end of June 2019.

5. Reliance Communications

Also known as RCOM was set up in 2004, with its head office in Navi Mumbai. Reliance
Communications as of now has more than 128 million users all across the world.

6. Aircel

Aircel was founded in 1999, with its head office in New Delhi. It is a joint enterprise between
Maxis Communications and the Apollo Hospitals.

7. Vodafone Essar

Vodafone Essar was founded in 1994 with its head office at Mumbai. Vodafone provides
services to 23 telecom circles across India.

8. Tata Indicom

The Tata Teleservices was founded in 1996, with its headquarters in Navi Mumbai.

9. Idea Cellular

Idea Cellular was started in 1995, with its head office in Mumbai. It also provides 3G
services to its subscribers.

OLIGOPOLY MARKET IN TELECOM INDUSTRY

Indian Telecommunication industry, with about 929.37 million phone connections (June
2012), is the third largest telecommunication network in the world and the second largest in
terms of number of wireless connections. For the past decade or so, telecommunication

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activities have gained momentum in India. The Indian Telecommunication Market has been
dominated by few major players, and hence it is a perfect case of Oligopoly.

Oligopoly refers to a market structure where an industry is dominated by a small number of

large sellers. Because there are few participants in this type of market, each oligopolistic is
aware of the actions of the others. The decisions of one firm influence, and are influenced by,
the decisions of other firms. Oligopoly is a common market form. As a quantitative
description of oligopoly, four-firm concentration ratio is often utilized. This measure
expresses the market share of the four largest firms in an industry as a percentage.
Oligopolistic competition can give rise to a wide range of different outcomes. In some
situations the firms may employ restrictive trade practices (collusion, market sharing etc)to
raise prices and restrict production in much the same way as a monopoly. Where there is a
formal agreement for such collusion, this is known as a cartel.

Classification of Indian Oligopolistic Telecom Market

1) On the basis of product differentiation

a) Airtel - Main concentration on youth

b) Vodafone - Business people and youth

c) Reliance - Target lower class people by providing cell phone in 500 Rs

2) On the basis of entry of firms

To enter into mobile service market in India you need to get license from DOT there are

lot of restrictions from TRAI (Telephone Regulatory Authority of India).

3) On the basis of presence of or absence of price leadership

Absence of price leadership in mobile service providers in India.

4) On the basis of deliberate agreement

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There is no deliberate agreement between any companies. Plans & tariffs are almost
same of all companies but they are not into any deliberate agreement

2.4 PRICING STARTEGIES IN THE INDUSTRY

Pricing strategy is one of the important issues in telecom industry for each player in the tri-
game model. Being a conjunctive focus between users and service provider, carrier’s pricing
strategy takes an outstanding role in telecom chain. By analyzing the relation among the
players, a dynamic relation model between carrier and service provider was provided to
solve this tri-game problem and its solutions were found. Furthermore, the stability of the
solution was also investigated via isoclinic lines method. In addition, supposing the game
model was disturbed because of carrier’s unexpected price adjustment, three responses of
service provider were discussed with corresponding comments. By quantitative analysis,
finally the work made a conclusion that, in order to keep a sustainable development in an
uncertain market, service provider must endeavor to enhance the service’s attraction by
constantly improving quality of its content.

Factors such as “Number of Subscribers”, “Technology Innovation” and “Government

Regulation and Polices” were found to be the most influential and contributing factors
towards the growth of the Telecom industry in India. Analysis based on historical statistics
revealed that, there is no direct impact on the industrial revenue from the “number of
Subscribers” factor, unlike the “Technology Innovation” factor. Also, the contribution of
“Government Regulation and Polices” as a factor, seems to be more obvious for the Indian
Telecom industry.

Earlier, regulators focused on providing telecom operators with a specified rate of return
which ensured financial viability while keeping the price low for consumers. Experience
showed that this methodology requires considerable information and gives rise to perverse
incentives, leading to inefficient operation and investment. More recently, due mainly to
increasing competition in the sector, the focus has been on prices which encourage dynamic
elements such as efficiency, innovation and flexibility. Prices can be based on costs or
demand, and could be specified in terms of a particular level or with some flexibility for the
operator to decide the price level. An increasing trend in certain countries has been to exclude
services from price regulation if there is adequate competition in their markets. Enhanced

13
competition has also led to tariff restructuring in several countries to alter the previously
prevailing pattern of cross- subsidizing local calls and rentals through relatively high prices
for long distance and international calls. This restructuring has basically meant that prices are
getting more cost-oriented. Such cost-orientation of prices can arise either through the
determination of a price level based on costs, or through a flexible process such as under a
price cap methodology.

a) Prices based on costs

Short run marginal (or variable) costs, long-run incremental costs (which include investment
costs), and fully-allocated costs have been considered for specifying prices based on costs.
All cost-based pricing requires considerable information and monitoring, and a number of
conceptual and practical problems arise in properly measuring and assigning costs to the
various telecom services. Prices based on short-run marginal costs and long-run incremental
costs promote efficient production. However, the revenue derived on the basis of these two
cost- concepts does not cover total costs because they do not account for all the costs that are
incurred by a telecom operator. In contrast, fully- allocated costs cover all costs. Despite this,
there is increasing emphasis on using long- run incremental costs for cost-based pricing
because they promote efficiency, while fully- allocated costs foster inefficiency. Long-run
incremental costs cover a greater portion of total costs than marginal costs, and incorporate
dynamic elements such as technical change and economies of scale. Different variants of
long-run incremental costs can be calculated depending on the level of output, time period
and technologies used. A wide coverage is provided by total service long-run incremental
costs (TSLRIC), which basically shows the cost the firm would avoid in the long run if it
stopped providing a particular service.

b) Mark-up

A mark-up is required to cover the deficit that would arise if an efficient cost-based price
were determined. Different methods for ascertaining the mark-up include: mark-up varying
inversely with elasticity of demand of different users or services (Ramsey rule); applying a
rule-of-thumb, such as a risk-adjusted reasonable commercial return; an applying different
price slabs to different units of usage, or obtaining the requisite revenue through rentals. The
rule-of-thumb is the most straight-forward of the mark-up methodologies. Since demand is
not easy to estimate, Ramsey rule provides at best a rough guide on the nature of the markup.

14
c) Subsidized pricing

Subsidies to price are given normally for achieving social objectives such as promoting the
provision of universal service in telecom or providing preferential telecom access to specific
users such as hospitals or those living in remote areas. The subsidy could be given, for
example, in terms of access charges, rentals or price of the calls made. With greater
competition and pressure for changing the prevailing pattern of cross- subsidization, there is a
great need to improve the transparency of the extent and nature of the subsidies being
provided. This requires greater transparency of costs and revenues, and an unbundling of the
services being provided. With such information, the policy-maker would have a better basis
to consider alternative policies to fund the subsidies.

d) Demand-based pricing

Under this methodology, prices reflect willingness to pay for the use of a product, or the
value given to a particular product. These prices are shown by the demand curve. In assessing
the social value from a demand-price, it would be necessary to specify the social value of
consumption of the service by different customer groups. Demand-based prices are not easy
to determine on account of the difficulty of determining the demand curve.

e) Flexibility

With increasing complexity of emerging telecom products, difficulty of monitoring and

ascertaining costs of production, and the market providing price discipline as the level of
competition increases, telecom regulators are increasingly relying on flexible pricing
methodologies. This is done either by providing a range within which prices can be fixed by
the operators, or by not extending price regulation to certain products (normally products
with competitive markets or those that are not considered essential).

2.5 PROSPECTS AND CHALLENGES OF THE INDUSTRY

Revenues from the telecom sector are expected to grow to US$ 26.4 billion by 2020. The
number of internet subscribers in the country is expected to double by 2021 to 829 million
and overall IP traffic is expected to grow 4-fold at a CAGR of 30% by 2021. The Indian
Government is planning to develop 100 smart city projects, where IoT would play a vital role
in development of those cities. The National Digital Communications Policy 2018 has
envisaged attracting investments worth US$ 100 billion in the telecommunications sector by

15
2022. The fixed line business continues to remain muted despite the low penetration levels in
the country. The increasing demand for data based services such as the Internet is the major
catalyst in the growth of the sector. The scale of the mobile opportunity in India is therefore
immense. Increasing choice and one of the lowest tariffs in the world have made the cellular
services in India attractive for the average consumer. The teledensity in urban areas is about
153.5%. Therefore, the main driver for future growth would be the rural areas where wireless
tele-density is around 57.6%. India’s growth momentum is likely to accelerate in FY20, with
continued focus on infrastructure creation and manufacturing, and trickle-down impact of
past policy reforms. In addition, long-term economic growth will be driven by major factors:
low interest rates; benign inflation; favourable demographics (half of the population is below
the age of 35); and greater focus on formalisation and digitisation of the economy.

Challenges faced by the telecom industry are:

1. Telcos have to decentralize the purchasing and decision power, both internally and
externally, because of the essential agile reconfiguration of the cloud.

2. With the availability of new technologies, the variety and quality of services from
telecom companies and internet service providers (ISP) are increasing, profit margins are
decreasing, and the lines between telecom companies and technology vendors are
blurring. Hence, telcos have to take a fresh look at the level of ICT innovation and adapt
their organization to digital transformation by creating strong cross-functional interfaces
and by seeking tools for maintaining organizational flexibility.

3. With millions of subscribers, a variety of new products, bundled and customized

solutions, the operational support services like service configuration, order fulfillment,
customer care, and billing are becoming increasingly complex. Hence, the cost of
handling these operations require resources and different tools, thus, increasing the
financial overhead.

4. Telecommunication providers need to upgrade their IT and connectivity infrastructure

and focus on providing data and voice services that are high quality, reliable, and
affordable. Security of the networks has become a major priority for the telcos and they
are facing challenges with the emergence of new threats that are powered by new
technologies. So, a number of operational and technical innovations are needed to meet
customer expectations of complete system security from network till the device level.

16
5. One more challenge waiting in the wings for telcos and ISPs is the impact of Internet
of Things (IoT) that is leading to explosive growth in the connected devices. This growth
is generating billions and trillions of new data sources and thus, it is expected that this
growth will push the data to be handled by networks to zettabytes per year.

2.6 KEY DRIVERS OF THE INDUSTRY

The telecom industry is rapidly evolving, shaped by changes in technology and light-speed
innovation. It is also an industry continually redefining its parameters, providing
communications service providers (CSPs) with tremendous opportunities for
growth. However, as CSPs expand their partner ecosystem to deliver innovative new services
and implement new business models, new threats arise – both known and unknown.
Currently, five main forces are shaping this future in telecom:

 5G

 NFV/SDN

 Growing Mobile Ecosystem

 Artificial Intelligence and Machine learning

 Value-added Managed Services

Each of these forces are emerging, albeit at different paces and at different stages of maturity.
They interact with each other in a complex thread of dependencies, driving the evolution of
our industry.

 5G and NFV/SDN – The first two forces, 5G and the transforming network
infrastructures of NFV/SDN, serve as the base to the promise for faster data speeds and
better and wider connectivity. Network functions virtualization (NFV) capabilities will
enable network slicing, the architecture that will allow multiple service levels and
custom-made services to be offered to vertical industries. Software defined networking
(SDN) provides the ability for CSPs to dynamically collaborate with a wide partner
ecosystem. Together, these technologies will bring greater network efficiency to deliver
the high-value, differentiated services promised by 5G.

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 Growing Mobile Ecosystem – A growing mobile ecosystem, which includes the rise of
the Internet of Things (IoT), represents a substantial growth opportunity for CSPs.
According to Gartner, the number of connected things in use this year alone is predicted
to hit 14.2 billion, and then grow to 25 billion by 2021. Many of these connected things
will be enabled by a complex web of partners and service providers, opening up new
avenues for risk, including fraud and revenue leakage.

 Artificial Intelligence and Machine Learning – As technologies evolve, the vast

amount of data we have at our fingertips continues to grow. The exciting aspect around
technologies such as Artificial Intelligence (AI) and Machine Learning (ML) is a greater
ability to learn from this tremendous amount of data and identify patterns and trends to
make better informed decisions with limited human or manual intervention. In today’s
digital environment, there are greater security risks. Service providers utilizing AI and
ML will have a greater ability to predict, identify and mitigate these risks in real-time.

 Value-Add Managed Services – Intense competition, demanding customers, evolving

technologies, regulatory hurdles and shrinking margins are putting tremendous pressure
on the telecom industry. To survive these pressures, CSPs are adopting new technologies
and methodologies to improve operations and business processes. To boost business
performance in this disruptive era, many service providers are relying on outsourcing
certain services to experienced partners in order to take advantage of scalable, innovative
technology and expertise that may be too expensive, too difficult to find, and too time-
consuming to build in-house. The result is predictable, effective and agile operations with
quick ROI and reduced exposure to risk.

While there is an unprecedented amount of pressure on CSPs and their networks, the future
for the telecom industry is filled with opportunity to grow business, increase revenue and
provide exceptional service to customers.

18
 CHAPTER 3
REVIEW OF LITERATURE

19
3.1 THEORETICAL CONSTRUCT RELATED TO THE PROBLEM

Finance is defined as the provision of money at the time when it is required. Financial
statements are store house of information’s can be taken out by using various tools. The
financial analysis tools are used for generating information’s and interpreting the results. On
the basis of such analysis the users are taking decisions. Therefore, the significance of these
statements lies not in their preparation but in their analysis and interpretation.

Meaning and Concept of Financial Analysis

The term ‘financial analysis’, also known as analysis and interpretation of financial
statements , refers to the process of determining financial strengths and weakness of the firm
by establishing strategic relationship between the items of the balance sheet , profit and loss
account and other operative data The purpose of financial analysis is to diagnose the
information contained in financial statements so as to judge the profitability and financial
soundness of the firm. A financial analyst analysis the financial statements with various tools
of analysis before commencing upon the financial health or weakness of an enterprise. The
analysis and interpretation of financial statements is essential to bring out the mystery behind
the figures in financial statements. Financial statements analysis is an attempt to determine
the significance and meaning of the financial statements data so that forecast may be made of
the future earnings, ability to pay interest and debt maturities and profitability of a sound
dividend policy. The term ‘financial statement analysis ‘includes both ‘analysis’ and
‘interpretation ‘. A distinction should be made between the two terms. While the term
‘analysis’ is used to mean 12 the simplification of financial data by methodical classification
of the data given in the financial statements ,’interpretation’ means , explaining the meaning
and significance of the data so simplified ‘. However, both ‘analysis and interpretation’ are
interlinked and complimentary to each other analysis is useless without interpretation and
interpretation without analysis is difficult or even impossible. Most of the authors have used
the term ‘analysis’ only to cover the meanings of both analysis and interpretation as the
objective of analysis is to study the relationship between various items of financial statements

20
by interpretation . We have also used the term ‘Financial Statement Analysis’ or simply
‘Financial Analysis’ to cover the meaning of both analysis and interpretation.

Objective and Importance of Financial Statement Analysis

The primary objective of financial statement analysis is to undertake and diagnose the
information contained in the financial statement with a view to judge the profitability
financial soundness of the firm and to make forecast about future prospects of the firm. The
purpose of analysis depends upon the person interested in such analysis and his object.
However the following purpose or objective of financial statement analysis may be stated to
bring out significance of such analysis.

Objectives

 To indulge the earning capacity of the business in terms of profitability both for current
period as well as future prospects.
 To judge the managerial efficiency and highlight the areas of the concern.
 To judge the short term and long term solvency position of the enterprise to maintain their
credit worthiness
 To facilitate inter firm comparison i.e. assessing own performance with that of other firms
in the same industry.
 To facilitate making forecasts, preparing budget and predict likely developments of the
future.
 To facilitate understanding of the complicated data provided in the financial statements
for both its internal and external users.
 To assess the overall financial position of the firm.
 To determine the debt capacity of the firm.
 To assess the fluctuations in share prices.
 To take capital investment decisions
 To evaluate the accounts receivable and accounts payable management.
 To assess the inventory management strategies.

21
Importance

 Enables to take correct decisions.

 Better understanding of accounting data
 Identify the weaknesses
 Indicating the trend
 Inter firm comparison
 Assessing profitability
 Assess overall financial strength
 Assess solvency of the firm.

TYPES OF FINANCIAL ANALYSIS

1. On the basis of material used

 External Analysis: The analysis done by outsiders who have no access to detailed internal
accounting records of business firm is called external analysis. These outsiders include
owners (shareholders),creditors,bankers, present and prospective investors,customers,
government agencies, and the general public. These external parties makes analysis solely
on the basis of published data. Therefore, their analysis serves only limited purposes.
 Internal Analysis: The analysis done by insiders of the firm like management, employees
as well as by government agencies (which have statutory powers to examine account
records) who have access to internal accounting records of a business firm is called
internal analysis. This is more effective as, such persons can verify internal records of the
firm.

2. On the basis of modus operandi

 Horizontal Analysis: It is also called ‘trend analysis’ or ‘dynamic analysis’. Comparison
of many years of financial data is known as horizontal analysis. The result of analysis of
many years is presented horizontally over a number of columns. Changes are measured in
values as well as in percentages. A particular year is taken as a base for calculating
changes. Comparison of an item over several years with years shows trend. Comparative
Statements and trend percentages are two tools used in horizontal analysis
 Vertical Analysis In vertical analysis the study is made on the various items in the
financial statements of a particular year. Data of several years are not compared. For e.g.

22
 the ratios of different items of cost of a particular year may be calculated with the sales
for that period. It is good for comparing the performance of several companies of the
same industry or several divisions or departments of the same company. Vertical analysis
is also called ‘static analysis’. Common size financial statement is a tool employed in
vertical analysis.

3. On the basis of entities involved

 Inter firm or Cross Sectional Analysis Inter firm analysis or Cross Sectional Analysis
involves comparison of financial data of a firm with other firms (competitors) or industry
averages for the same time period.
 Intra firm or Time series Analysis Intra firm or Time Series Analysis involves the study
of performance of the same firm over a period of time.

4. On the basis of period of analysis

 Short term Analysis It is made for knowing the short term positive or negative aspects
related with liquidity and working capital.
 Long term Analysis It is made for knowing the long term strengths and weaknesses like
solvency, return on investment, consistency in profit etc.

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

There are 3 steps in the analysis of financial statements

 Selection
 Classification
 Interpretation

The first step involves the selection of information relevant to the purpose of the analysis

of financial statements. The second step involves the methodical classification of the data and

the third step includes drawing of inferences and conclusions .The following procedure is

adopted for the analysis and interpretation of financial statements:

23
 The analysis should acquaint itself with the principles and postulates of accounting. It
should know the plans and policies of the management so that it may be able to find out
whether these plans are properly executed or not.
 The extent of analysis should be determined so that the sphere of work may be decided. If
the aim is to find out the earning capacity of the enterprise then analysis of income
statement will be undertaken. On the other hand, if the financial position is to be studied
then balance sheet analysis will be necessary. The financial data given in the statement
should be reorganized and rearranged. It will involve the grouping of similar data under
same head, breaking down of individual components of financial statements according to
the nature. The data is reduced to a standard form.
 A relationship is established among financial statements with the help of tools and
techniques of analysis such as ratios, trends, comparative, common size, etc...
 The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for helping decision taking.
 The conclusions drawn from interpretation are presented to the management in the form
of reports.

ADVANTAGES AND LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

Advantages
 It reveals hidden information’s from financial statements
 Our firm can be compared with other similar firms and can understand our position.
 It highlights efficiency or inefficiency of management.
 Analysis and interpretation provides a basis for predicting future situations.
 It enables to prepare budgets and forecasts.
 It reveals the income earnings capacity of our firm.
 It reveals suitability or unsuitability of capital structure of our firm.
 It enables investors to take investment decisions.
 It helps lenders to assess the risk involved in lending.
 It helps to assess the short term and long term solvency of our firm.
 It helps to make arrangements for cash at proper time.
 Efficiency in working capital management can be assessed.
 It helps to frame suitable inventory management strategies.

24
 It enables the management to take suitable capital investment decisions.
 It helps to understand the complicated data provided in the financial statements for both
its internal and external users.

Limitations
 It reveals facts only .Proper interpretation is required for putting meaning to facts.
 Different persons may interpret findings differently.
 Non-monetary information’s have no relevance in analysis and interpretation. But
actually they have high relevance in a business.
 It does not consider current values. Historical data only are considered.
 Changes in accounting procedure by a firm may often make financial analysis misleading.
 It is only a study of interim reports.
 For getting a useful conclusion data of many years are to be compared. It is a laborious
work.
 Window dressing in accounting data leads to wrong analysis and interpretation.
 The real situation on the date of analysis and interpretation may be different. This is
because analysis and interpretations may be made after a few months of preparation of
financial statements.
 Analysis does not reveal the reasons for change in the current year comparing to the
previous years.

TOOLS OR TECHIQUES OF FINANCIAL ANALYSIS

Financial analysis is done for understanding the financial soundness of an enterprise. For
knowing this effective tools of analysis are to be used. Application of a single tool may not
reveal the exact position. Many tools can be applied jointly to get a comprehensive view.
There are many effective tools for financial analysis. The following are the tools of analysis
generally used.

 Ratio Analysis
 Trend Analysis
 Comparative Financial statement
 Common size Statement

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 DuPont Analysis

1.RATIO ANALYSIS

Accounting ratio or ratio analysis is an important technique of analysis of financial

statements. It is the most widely used technique of financial analysis. Ratio analysis was
perhaps the first financial tool developed to analyse and interpret the financial statements.
Ratios express the numerical relationship between two or more things. This relationship can
be expressed as percentages (25% of revenue), fraction (one-fourth of revenue), or proportion
of numbers (1:4) and also in times (4 times the revenue). Accounting ratios are used to
describe significant relationships, which exist between figures shown on a balance sheet, in a
profit and loss account, in a budgetary control system or in any other part of the accounting
organization. Ratio analysis plays an important role in determining the financial strengths and
weaknesses of the company relative to that of other companies in the same industry. The
analysis also reveals whether the company's financial position has been improving or
deteriorating over time. Ratios can be classified into four broad groups on the basis of items
used:

 Liquidity Ratio,
 Capital Structure/Leverage Ratios,
 Activity Ratios and
 Profitability Ratios.

A.LIQUIDITY RATIO

The term liquidity refers to the firm’s ability to pay its current liabilities out of its current
assets. Liquidity ratios are used to measure the liquidity position or short term financial
position of the firm. These ratios are highly useful to creditors and commercial banks that
provide short term credit. Important liquidity current ratio, quick ratio, super quick ratio etc.

 CURRENT RATIO

Current ratio is one of the oldest of all financial ratios. It is defined as the ratio of current
assets to current liabilities. It shows the relationship between total current assets and total

26
current liabilities. Current ratio is also called working capital ratio. Generally a current ratio
of 2:1 is considered satisfactory. This means that current assets shall be at least the current
liabilities. It is calculated as;

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 /𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

The two basic components of current ratio are current assets and current liabilities. Current
assets mean cash or those assets which can be converted in to cash within a year (cash in
hand and at bank, marketable securities, bills receivable, sundry debtors, inventories, prepaid
expenses etc.). Current liabilities are those liabilities which are to be repaid within a
year(sundry creditors, bills payables, accrued expenses, short term advances dividend
payable, bank overdraft etc.).

 QUICK RATIO
Quick ratio is the ratio of liquid assets to current liabilities. It establishes the relationship
between quick assets and current liabilities. It measures the instant debt paying ability of the
business enterprise. It is also called acid test ratio. A quick ratio of 1:1 is considered as
satisfactory. It means that the liquid assets are equal to and are sufficient to pay off the
current liabilities. It is computed as;
𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜 = 𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡𝑠 /𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
The basic components of quick ratio are quick assets and current liabilities. Quick assets are
those assets which are quickly convertible in to cash; it includes all current assets except
inventories and prepaid expenses.
 ABSOLUTE LIQUIDITY RATIO
Absolute liquidity ratio establishes the relationship between absolute liquid asset and current
liabilities. The desirable standard ratio is 0.5:1 (i.e. 50% of current liabilities should be
maintained in cash). It can be calculated by;
𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐿𝑖𝑞𝑢𝑖𝑑𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠/ 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
The absolute liquid assets include cash in hand, cash at bank and marketable securities or
short term investments. The absolute liquid ratio is also called super quick ratio or cash ratio.

B.LEVERAGE RATIO (SOLVENCY RATIO)

Solvency or leverage ratios are used to analyse the long term financial position of a business.
In other words, the ratios are used to analyse the capital structure of the firm. There are two
types of leverage ratios, structural ratios and coverage ratios. Structural ratios are based on

27
the relationship between owned capital and borrowed capital. These are calculated to know
the ability of the firm to repay the principal amount when due. Coverage ratios are computed
from the Profit and Loss account. These are calculated to ascertain the firm’s capacity to pay
interest and dividend regularly.

 DEBT EQUITY RATIO

Debt equity ratio indicates the relative proportionof debt and equity in financing the assets of
a firm. It expresses the relationship between debt and equity. The standard debt equity ratio is
1:1. This means the funds provided by the outsiders and shareholders must be equal. It can be
estimated as;
𝐷𝑒𝑏𝑡 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡/ 𝐸𝑞𝑢𝑖𝑡y
The two basic components are total debt and equity. Total debt includes all debts whether
long term or short term means long term debt and current liabilities. Equity means fund
invested by the shareholders. It includes equity share capital, preference share capital,
reserves and surpluses.
 PROPRIETARY RATIO
Proprietary ratio establishes the relationship between shareholder’s fund and total assets.
This ratio shows how much funds have been contributed by the shareholders in the total
assets of the firm. Proprietary ratio is also known as net-worth ratio or equity ratio. Generally
0.5:1 is considered as ideal. It can be determined as follows;
𝑃𝑟𝑜𝑝𝑟𝑖𝑒𝑡𝑎𝑟𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐹𝑢𝑛𝑑 /𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
The two basic components of proprietary ratio are shareholder’s fund and total assets. The
shareholder’s includes equity share capital, preference share capital, reserves and surpluses.
Total asset includes all current asset and fixed assets. Fictitious assets such as preliminary
expenses, underwriting commission etc. are excluded.
 SOLVENCY RATIO
The ratio expresses the relationship between total assets and total liabilities of a business. It
measures the solvency of the business. That is why the ratio is called solvency ratio. This
ratio is generally expressed as a proportion. For the solvency ratio, standard is not fixed.
Generally higher the solvency ratio, the stronger is its financial position and vice versa. The
solvency ratio can be calculated as;
𝑆𝑜𝑙𝑣𝑒𝑛𝑐𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡/ 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏t

28
The major components of solvency ratio are total assets and total debt. Total asset include
total fixed assets and total current assets. Total debt means total outside liabilities which
includes long term liabilities and short term liabilities
 FIXED ASSET TO PROPRIETORS FUND RATIO
It is also known as fixed assets to net worth ratio . It shows the relationship between fixed
assets after depreciation and net worth of a firm . Net worth , here implies the total of equity
share capital , all reserves both capital and revenue , retained earnings , minus accumulated
losses and fictitious assets . Preference share capital is excluded . This formula is:
𝐅𝐢𝐱𝐞𝐝 𝐀𝐬𝐬𝐞𝐭𝐬 𝐭𝐨 𝐏𝐫𝐨𝐩𝐫𝐢𝐞𝐭𝐨𝐫𝐬 𝐅𝐮𝐧𝐝 𝐑𝐚𝐭𝐢𝐨 = 𝐅𝐢𝐱𝐞𝐝 𝐀𝐬𝐬𝐞𝐭𝐬 /𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬 𝐅𝐮𝐧𝐝 ∗
𝟏𝟎𝟎 This ratio reveals the extend of shareholders fund invested in fixed assets . If the ratio is
higher than 100% it indicates that a portion of fixed assets are financed by outsiders funds. If
the ratio is less than 100% it implies that all the fixed assets are financed by shareholders
funds and also a portion of working capital is from shareholders funds
 INTEREST COVERAGE RATIO
On borrowed funds, the borrowing firm required to pay the interest regularly. The lenders are
interested in finding out whether the firm would earn sufficient profits to pay interest
periodically. Interest coverage ratio is computed for this purpose. This ratio measures the
capacity of the firm to pay interests on loans and debentures regularly. It establishes the
relationship between operating profit and interest charges. The standard for Interest coverage
ratio is 6 to 7 times. It is calculated as;
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 = 𝐸𝐵𝐼𝑇(𝑃𝑟𝑜𝑓𝑖𝑡 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑇𝑎𝑥) /𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Profit and interest are the components of Interest coverage ratio. Profit before interest and
tax is used for the computation of this ratio. This is so because the tax is paid after deducting
the interest.

C. ACTIVITY RATIOS
Activity ratios show how effectively a firm uses its available resources or assets. These ratios
indicate efficiency in asset management. It indicates the cash elasticity of current assets. In
other words, these ratios indicate the speed with which the resources are turned over ratio
means better use of resources. It further means higher profitability. It should be noted that
turnover ratios are always expressed in number of times, i.e., rate of turnover.

 INVENTORY TURNOVER RATIO

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Inventory or stock turnover ratio shows the relationship between costs of goods sold and
average inventory or stock. It indicates the number of times the stock is turned over or
converted into sales. Generally the ratio of 8 times is considered satisfactory. Stock turnover
is computed by;
𝑆𝑡𝑜𝑐𝑘 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑/ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘
Cost of goods sold and average stock are the components of stock turnover ratio. Instead of
sales cost of goods sold is taken because stock is valued at cost.
 DEBTORS TURNOVER RATIO
Debtor’s turnover ratio explains the relationship between net credit sales and average debtors
including bills receivables. The ratio shows how quickly the debtors are realised or converted
in to cash. It indicates how effectively the firm collects cash from debtors. Debtor’s turnover
ratio can be estimated as;
𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝑁𝑒𝑡 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠/𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝐼𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝐵𝑖𝑙𝑙𝑠
𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
The two components of this ratio are net credit sales average debtors. Net credit sales means
gross credit sales minus sales return. Debtors arise in respect of credit sales. The second
component debtors include bills receivables

 AVERAGE COLLECTION PERIOD

This ratio is related with and dependent upon debtor’s turnover ratio. It means the number of
days or months for which debtors and bills receivables remain outstanding. In short, it refers
to debtors turnover ratio expressed in days or months. It can be computed by;
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑 = 360/𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

 CREDITORS TURNOVER RATIO

Creditor’s turnover ratio shows the relationship between net credit purchases and average
creditors including bills payable. The ratio indicates the number of times the creditors are
paid. It is found out by;
𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝑁𝑒𝑡 𝐶𝑟𝑒𝑑𝑖𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠/ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠 𝐼𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔
𝐵𝑖𝑙𝑙𝑠 𝑃𝑎𝑦𝑎𝑏𝑙e
Creditors arise in respect of credit purchases. Therefore, credit purchases and average
creditors are the two components. Credit purchases exclude returns and creditors include bills
payable.

 FIXED ASSET TURNOVER RATIO

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 A business enterprise purchase fixed assets for carrying out the business. Without fixed
assets, it cannot make sales and profits. Thus sales depend on how fixed assets are utilised in
business. Fixed asset turnover ratio establishes the relationship between net sales and fixed
assets. It measures the efficiency with which a firm is utilising its fixed assets in producing
sales. It is computed as;
𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 = 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 /𝑁𝑒𝑡 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
There are two components of fixed assets turnover ratio. They are net sales and net fixed
assets. Net credit sales means gross credit sales minus sales return. The second component
net fixed assets mean fixed assets after depreciation.

 CURRENT ASSETS TURNOVER RATIO

This ratio establishes a relationship between net sales and current assets. The objective of
computing this ratio is to determine the efficiency with which the current assets are utilised.
There are two components of this ratio Net Sales and Current Assets. Net Sales means gross
sales minus sales returns. Current Assets refer to those assets which are held for their
conversion into cash normally within a year. An asset is classified either as a Current Asset or
Non-Current Asset on the basis for which an asset is held in the hands of user. This ratio is
computed by dividing the net sales by the current assets. This Ratio is usually expressed as x
number of times. In the form of a formula , this ratio may be expressed as follows :
Current Assets Turnover Ratio= Net Sales/Current Assets
 NET WORKING CAPITAL TURNOVER RATIO
This ratio establishes a relationship between net sales and working capital. The objective of
computing this ratio is to determine the efficiency with which the working capital is utilised.
There are two components of this ratio Net Sales and Working Capital. Net Sales means
gross sales minus sales returns and Working Capital which means current assets minus
current liabilities. This ratio is computed by dividing the net sales by the working capital.
This ratio is usually expressed as x number of items. In the form of a formula, this ratio may
be expressed as follows :
𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐓𝐮𝐫𝐧𝐨𝐯𝐞𝐫 𝐑𝐚𝐭𝐢𝐨 = 𝐍𝐞𝐭 𝐒𝐚𝐥𝐞𝐬 /𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥
 CAPITAL TURNOVER RATIO

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This ratio establishes a relationship between net sales and capital employed. The objective of
computing this ratio is to determine the efficiency with which the capital employed is
utilised. It can be expressed in x number of times.
𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐓𝐮𝐫𝐧𝐨𝐯𝐞𝐫 𝐑𝐚𝐭𝐢𝐨 = 𝐍𝐞𝐭 𝐒𝐚𝐥𝐞𝐬/ 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐦𝐩𝐥𝐨𝐲ed

D. PROFITABILITY RATIOS
The term profitability refers to the ability of the firm to earn maximum profit from best
utilisation of its resources. The profitability of the firm can be easily measured by its
profitability ratios. It measures the ability of the firm to earn an adequate return on sales, total
asset and invested capital. There are two types of profitability ratios. First, profitability ratios
based on sales and second, profitability ratios based on investment.

 GROSS PROFIT RATIO

This is the ratio of gross profit to sales expressed as a percentage. It is also known as gross
margin. The ideal ratio is 20% to 25%. This can be estimated as;
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜 = (𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 /𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠) ∗ 100
The basic components are gross profit and nets sales. Gross profit is the difference between
net sales and cost of goods sold

 NET PROFIT RATIO

Net profit ratio is the ratio of net profit earned by a business and it sales. It measures overall
profitability. The ideal Net profit ratio is 5% to 10%. It is calculated as;
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜 = (𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 /𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠) ∗ 100
Net profit and net sales are the two components of net profit ratio. Net profit is the balance of
Profit and Loss account. It is the final profit after adjusting all expenses and all incomes(both
operating and non-operating). It can also be calculated from operating profit.

 RETURN ON INVESTMENT

When a firm invest in a business, it naturally expresses adequate return on its investment.
ROI is computed, to know how much profit the firm is earning on its investments. It
measures the overall profitability. It establishes the relationship between profit on return and
investment. The ideal return on capital employed ratio is 15%. It is computed as follows;
𝑅𝑒𝑡𝑢r𝑛 𝑂𝑛 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 =( 𝑃𝐵𝐼𝑇 /𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 )∗ 100

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The components involved are Profit Before Interest and Tax and capital employed
(Investments). The capital employed refers to total of share capital, revenue reserves,
debentures and other long term loans.

 EARNING PER SHARE

The ratio indicates the profit available to equity shareholders per share basis. It is calculated
by dividing the earnings available to equity share holders by the number of equity shares
issued. It may be expressed as;
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 = 𝑃𝐴𝑇(𝑃𝑟𝑜𝑓𝑖𝑡 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥) /
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑆ℎ𝑎𝑟𝑒𝑠 EPS helps to determine the market price of equity shares. If EPS
is higher, market value of equity shares will be higher in the stock exchange. Thus it sounds
measure of profitability.
OBJECTIVE OF RATIO ANALYSIS
 To study the short term and long term solvency of the firm.
 To determine the profitability of the firm.
 To measure the performance of the firm.
 To facilitate the process of financial forecasting.
 To facilitate comparison.
 To communicate the strength and weakness of the firm.
 To enable managerial decision making.

2.TREND ANALYSIS

Trend simply means general tendency. Analysis of these general tendencies is called Trend
Analysis. In the context of financial analysis, trend analysis means analysing general
tendencies of certain item in the financial statements on the basis of the data of the base year.
In short, comparing the past data over a period of time with a base year is called trend
analysis. It indicates changes in an item or a group of items over a period of time and helps to
drown the conclusion regarding the changes in data. In this technique, a base year is chosen
and the amount of item for that year is taken as one hundred for that year. On the basis of that
the index numbers for other years are calculated. It shows the direction in which concern is
going. While calculating trend analysis, certain things to be taken care of;
 The base year selected should be normal and representative year.

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 Trend percentages should be calculated only for those items which have logical relationship
with one another.
 Trend percentages should also be carefully studied after considering the absolute figure
these are based. Otherwise, they may give misleading conclusions.
 To make the comparison meaningful, trend percentages of the current year should be
adjusted with the price level changes as compared to base year.
OBJECTIVES OF TREND ANALYSIS
 To find the trend or direction of movement over a period of time.
 To make comprehensive and comparative study of financial statements.
 To have a better understanding of financial and profitability position.

3.COMPARATIVE FINANCIAL STATEMENT ANALYSIS

Comparative statements compare the financial data for two or more years. This is done to
make the financial data more meaningful. The changes [increase or decrease] in the financial
data are presented in the absolute amounts and in percentages. Comparative statements can be
prepared for both income statement [Profit and Loss a/c] and balance sheet. In comparative
financial statements, the figures can be shown at the following values;
 In absolute figures [in rupee amount].
 Increase or decrease [change] in absolute figures.
 Increase or decrease in terms of percentages.

 COMPARATIVE BALANCE SHEET

A Comparative Balance Sheet shows the asset, liabilities and owner’s equity of the enterprise
at the beginning and at the end of the accounting period with increase or decrease in the
absolute data in terms of rupees and percentages. The single Balance Sheet focus on the
financial status of the firm on a particular date , while the Comparative Balance Sheet focus
on the changes that have taken place in one accounting period.
 COMPARATIVE INCOME STATEMENT
The comparative income statement will show the operating results for two periods and the
amount as well as percentage increase or decrease in them. It explains clearly the relationship
between sales and cost f goods sold and its effect on gross profit. It gives the idea of the
progress of a business over a period of time. Comparative financial statement can be prepared

34
for more than two periods. However it becomes difficult to study the trend with more than
two period data. In such cases trend percentages are more useful.

OBJECTIVE OF COMPARATIVE FINANCIAL ANALYSIS

 To make the data simpler and more understandable.

 To ascertain the changes occurring year by year in financial position and performance of the
enterprise.
 To find out the strengths and weakness of liquidity, solvency and profitability.
 To help the management in forecasting and planning.

4.Common size Financial Statement

Common size statements are prepared for balance sheet and income statement. The base
value of the statement is taken as 100%. The component items are expressed as percentage of
base. Common size statement is the expression of component items of income statement and
balance sheet as a percentage of their respective base. In the case of balance sheet base is its
total and in the case of profit and loss statement base is net sales. This type of statement is
Prepared to compare the financial statements of different periods of the same company or
financial statements of different similar companies. This statement is also called component
percentage statement or 100 percent statement. It is vertical analysis the benefit is that an
item can be compared to a similar item of another company regardless of the size of
companies. It may consist of two statements common size balance sheet and common size
income statement.
 COMMON SIZE BALANCE SHEET
A statement in which balance sheet items are expressed as the ratio of each asset to total
assets and the ratio of each liability is expressed as a ratio of total liabilities is called common
size balance sheet.
 COMMON SIZE INCOME STATEMENT
The items in income statement can be shown as percentages of sales to show the relation of
each items to sales. A significant relationship can be established between items of income
statement and volume of sales. The increase in sales will certainly increase selling expenses
and not administrative or financial expenses. In case the volume of sales increases to a
considerable extent, administrative and financial expenses may go up. In case the sales are
declining, the selling expenses should be reduced at once. So a relationship is established

35
between sales and other items in income statement and this relationship is helpful in
evaluating operational activities of the enterprise.

3.2 AN OVERVIEW OF EARLIER STUDIES

Financial analysis refers to an assessment of viability, stability and profitability of a business,

sub-business or project. It is performed by professionals who prepare reports using ratios that
make use of information taken from financial statements and other reports. Financial analysis
refers to the assessment of a business to deal with the planning, budgeting, monitoring and
forecasting and improving of all financial details within an organization. Financial analysis is
the process of critically examining in detail accounting information given in a financial
statement. Analysing financial statement is a process of evaluating relationships between
component parts of financial statements to obtain a better understanding of a firm’s position
and performance.
In the words of Metcalf and Titard, “Analyzing financial statement is a process of evaluating
relationships between component parts of financial statements to obtain a better
understanding of a firm’s position and performance.”
In the words of Myer, “Financial statement analysis is largely a study of relationship among
various financial factors in a business as disclosed by a single set of statements and a study of
the trend of these as shown in a series of statement.”
The analysis of financial statement refers to the treatment of the information contained in the
financial statement in a way so as to afford a full diagnosis of the profitability and financial
position of the firm concerned. For this purpose financial statement are classified, analyzed
and compared with the figures of previous years.
According to Kennedy and Memullez, “analysis and interpretation of financial statements are
an attempt to determine significance and meaning of the financial statements data so that a
forecast may be made of the prospectus for future earnings ability to pay interest and debt
maturities and profitability of an excellent dividend policy”. For the management, financial
performance analysis is a soul searching event. In short, financial performance analysis
provides valuable information for planning, controlling and decision making. “The purpose
of financial statement analysis is to examine past and current financial data so that a
company’s performances and financial position can be estimated.

36
Financial statement analysis can yield valuable information about trends and relationships,
the quality of the company earnings and the strength and weakness of its financial position.
Financial statement analysis begins with establishing the objectives of the analysis. After the
objectives of the analysis are established, the data is accumulated from the financial statement
and from other sources. The result of the analysis are summarized and interpreted.
Conclusions are reached and a report is made to the persons for whom the analysis was
undertaken”.
Prof. K. M. Upadhya(2004), Department of commerce and business studies, Jamia Milla
Islamia University conducted a study on ‘Diversification policies and performances of
selected textile companies in India’. Measures of financial performances reflect corporate
wide performances from the point of view of shareholders and financial markets and also
ensure comparability across companies. These measures of liquidity, profitability, leverage
growth in assets and risk assumed by the companies. The study reveals that diversification
strategies have shown that diversified business group has performed better than that of low
dominant business group. Related diversified companies might be possible to exploit its core
competency leading to economies of scale, efficiency of resources allocation etc.
Venkatachalan(2005) conducted a study on ‘Financing public enterprises in India’ has
pointed out the relation between the low profitability and poor generation of internal
resources of fund. The study suggest that for improving profitability position, the public
sector enterprises should concentrate on issues like better capacity utilization, maintain
effective industrial relations, efficient working capital management and marketing efforts.
Riedle, Edwardj; Srinivasan, Suraj,(2010) investigates whether managers presentation of
special items within the financial statements reflects economic performance or opportunism .
Specifically, we assess special items presented as a separate line item on the income
statement (income state presentation) to those aggregated within another item with disclosure
only in the footnotes (footnotes presentation). Our study is motivated by standard setting
interest in performance reporting and financial statement presentation, as well as prior
research investigation.
Verbeeten, Frank H.M ; Vijin, Pieter (2010) in their study investigates the association
between brand equity measures and business unit of financial performance . Brand equity
measures may complement historic accounting information in explaining business unit 6 of
financial performance. Capitalizing on a unique data set, we find association between some
(yet not all) brand equity measures and contemporaneous as well as future business unit of
financial performance. Our results provide important insights for both managers.

37
Timosalmi and TeppoMartikainen (1994) provides critical review of the theoretical and
empirical basis of four central areas of ratio analysis. The research area reviewed are the
functional form of the financial ratios , distributional characteristics of financial ratios , and
the estimation of the internal rate of return from financial statements . It is observed that it is
typical of financial ratio analysis research that are several unexpectedly distinct lines with
research traditions of their own. A common feature of all the areas of financial ratio analysis
research seems to be that while significant regularities can be observed, they are not
necessarily stable across the different ratios, industries and time periods. This leaves much
space for the development of a more robust theoretical basis and for further empirical
research.
Peeler J Patsuala (2006) define that a sound business analysis tells others a lot about good
sense and understanding of difficulties that a company will face. We have to make sure that
people know exactly how we arrived to the final financial positions. We have to show the
calculation but we have to avoid anything that is too mathematical. A business performance
analysis indicates the further growth and the expansion. It gives a physiological advantage to
the employee and also a planning advantage.
I.M. Pandey(2007) stated that the financial statements contain information about the
financial consequences and sources and uses of financial resources , one should be able to say
whether the financial condition of a firm is good or bad whether it is improving or
deteriorating . One can relate the financial variables given in financial statement in a
meaningful way which will suggest the actions which one may have to initiative to improve
the firm’s financial condition.

3.3 UNIQUENESS OF RESEARCH STUDIES

 The Telecom sector is one of the important industries in India.
India is also the world’s second largest telecommunications market, total telephone
subscriber base and tele-density reached 1,172.44 million and 88.56 per cent,
 Data collect from reliable sources
 The tools used for analysis are rational and effectual

38
 CHAPTER 4
METHODOLOGY OF THE STUDY

39
4.1. RESEARCH APPROACH AND DESIGN
Research design is a framework or the blueprint for conducting the research report. Research
design is the arrangement of conditions for collection and analysis of data in a manner that
aims to combine relevance to the research purpose with economy in procedure. Here the
research is analytical research. Analytical data based on the collection of secondary data
published by Bharti Airtel ltd and the design of the research is based on the balance sheet and
profit and loss account of the company.

4.2. SOURCES OF ONLINE DATA

Sources of online data in this study are:
 Previous company records
 Company websites
 Money control website of Bharti Airtel Ltd

4.3. DATA ANALYSIS TOOLS

Data Analysis tools in this study are:
1. Comparative balance sheet
2. Ratio analysis
3. Trend analysis
RATIO ANALYSIS
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The ratios are categorized as
 Liquidity Ratio
 Leverage Ratio
Turnover Ratio
Profitability ratio
LIQUIDITY RATIO:
 Current Ratio = Current Asset/Current Liabilities
 Acid Test Ratio = Quick Assets/Current liabilities
 Absolute liquid ratio = Absolute liquid assets/Current liabilities
LEVERAGE RATIO
 Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or Equity
 Proprietary (equity) ratio = Shareholder funds/Total assets
 Fixed assets to long term funds ratio = Fixed Assets /Long-term Funds
 Fixed assets to net worth ratio = Fixed Assets / Net Worth
TURNOVER RATIO
 Total asset turnover = Total Sales/Total Assets
 Net asset turnover = Total Sales/Net Assets
 Fixed asset turnover = Total Sales/Net Fixed Assets
 Current asset turnover = Total Sales/Current Assets
PROFITABILITY RATIO
 Gross profit margin or ratio = Gross profit /Net sales *100
 Net profit margin or ratio = Earnings after tax /Net Sales *100
 Operating profit margin or ratio = Operating expenses /Net sales *100

4.4 REPORT STRUCTURE

The report is presented in seven chapters as given below;
Chapter 1- Introduction.
Chapter 2- Profile of telecommunication industry
Chapter 3- Review of Literature
Chapter 4- Methodology of the study
Chapter 5- Analysis of the financial performance of Bharti Airtel Ltd.
Chapter 6- Findings of the Study
Chapter 7- Conclusion

41
4.5 LIMITATION OF THE STUDY
The study is affected by certain limitations. They are;
 The study is limited to the secondary data available from various records of the Bharti
Airtel Ltd Hence the analysis based on these secondary statements of data also suffers from
such weakness; the accuracy of the data depends.
 The data is limited for a period of five years from 2015-16 to 2018-19. Consequently the
results can be applied for the selected period only.
 Financial analysis is a quantitative measurement of the performance of the firm. It does not
show the skill, technical know-how and the efficiency of its employees and managers.ie, it
ignores qualitative aspects.
 The study does not count the other areas of financial management such as capital
budgeting, dividend policy, fund flow and cash flow management.

 As the study was mainly based on secondary information, the inherent limitations of the

Secondary data might have affected the findings of the study.

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 CHAPTER 5
DATA ANALYSIS, INTERPRETATION&INFERENCE

43
RATIO ANALYSIS

Ratio analysis is the process of examining and comparing financial information by

calculating meaningful financial statement figure percentages instead of comparing line items
from each financial statement. Ratio analysis compares relationships between financial
statement accounts. This means that one income statement or balance sheet account is being
compared to another. These relationships between financial statement accounts will not only
give a manager or investor an idea of the how healthy the business is on a whole, it will also
give them keen insights into business operations.

Classification of ratios:

A) Liquidity ratio

B) Leverage ratio

C) Turnover ratio

D) Profitability ratio

A) Liquidity ratios:

It measures the ability of the firm to meet its short-term obligations that is capacity of the
firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the short-
term financial solvency of a firm.

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1.Current ratio:

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current debt and other
payables.

Current Ratio = Current Asset

Current Liabilities

TABLE NO.5.1 CALCULATION OF CURRENT RATIO

YEAR CURRENT ASSET CURRENT CURRENT RATIO

LIABLITY
2015-16 5,310.50 16,861.30 0.31
2016-17 14,043.60 19,164.70 0.73
2017-18 6,203.80 19,425.70 0.31
2018-19 6,738.80 19,108.00 0.35
2019-20 14,756.40 23,051.50 0.64
AVERAGE 0.468

INTERPRETATION AND ANALYSIS:

The above table shows that the current ratio in the year 2015-16 is 0.31 and increased to 0.73
in the year 2016-17 and to 0.49 in the year 2017-18 and there was a increase in the year 2018-
19 to 0.35 and increased to 0.64 in the year 2018-19
Higher the current ratio, greater will be the firm’s ability to meet short term debt. Hence the
company will not find any difficulty in meeting its current liabilities. But the high current
ratio indicates that too much of money is blocked in the current assets, too much cash is idle
and too much money is blocked in stocks.

2.QUICK RATIO

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This ratio is the best measure of the liquidity in the company. This ratio is more conservative
than the current ratio. The quick asset is computed by adjusting current assets to eliminate
those assets which are not in cash. Generally 1:1 is treated as an ideal ratio.

Acid test ratio/Quick ratio = Quick asset

Current liabilities

TABLE NO.5.2 CALCULATION OF QUICK RATIO

YEAR QUICK ASSET CURRENT QUICK RATIO

LIABLITY
2015-16 1595.10 16,861.30 0.09
2016-17 2615.70 19,164.70 0.13
2017-18 2609.50 19,425.70 0.13
2018-19 2611.50 19,108.00 0.13
2019-20 3699.70 23,051.50 0.16
AVERAGE 0.128

INTERPRETATION AND ANALYSIS

Quick ratio indicates whether the firm is in a position to pay its current liabilities within a
month of immediately. The standard ratio is 1:1 and here the ratios are 0.09, 0.13, 0.13, 0.13,
0.16.. Usually assumed that quick asset remain equivalent to current liabilities then the
concern may be able to meet its short term obligations. The average ratio of the company is
0.128.
3. ABSOLUTE LIQUID RATIO
It measures the ability of the company to use its near cash or quick assets to extinguish its
current liabilities immediately. The desirable standard ratio is 1 (i.e. 50% of current liabilities
should be maintained in cash). It can be calculated by;

Absolute liquid ratio = Absolute liquid assets

Current liabilities

TABLE NO.5.3 CALCULATION OFABSOLUTE LIQUID RATIO

YEAR ABSOLUTE CURRENT ABSOLUTE

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 LIQUID ASSET LIABLITY LIQUID RATIO
2015-16 133.20 16,861.30 0.01
2016-17 481.20 19,164.70 0.02
2017-18 362.70 19,425.70 0.01
2018-19 446.00 19,108.00 0.02
2019-20 388.70 23,051.50 0.01
AVERAGE 0.01
INTERPRETATION AND ANALYSIS
The acceptable norm for this ratio is 1:2 to attain liquidity position. In Bharti Airtel liquidity
ratio is very low, and the average ratio of the company is 0.01 when the ratios are less than
the recommended level, the company fails to manage day to day cash management
progression.

B) LEVERAGE RATIO

1. DEBT EQUITY RATIO

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its
shareholder equity. These numbers are available on the balance sheet of a company’s
financial statements. The D/E ratio is an important metric used in corporate finance. It is a
measure of the degree to which a company is financing its operations through debt versus
wholly owned funds.
Debt equity ratio = Outsider’s fund/ proprietor’s fund

TABLE NO.5.4 CALCULATION OF PROPRIETOR’S RATIO

YEAR OUTSIDERS FUND PROPRIETOR’S DEBT

FUND EQUITYRATIO
2015-16 15,301.40 111,729.10 0.13
2016-17 14,218.30 101,207.30 0.14
2017-18 10,365.40 102,860.90 0.10
2018-19 21,569.90 98,359.30 0.21
2019-20 45,743.50 101,429.20 0.45
AVERAGE 0.212

INTERPRETATION AND ANALYSIS

The standard norm for debt equity ratio is 1:1.The above table depicts the relation between
the outsiders fund and shareholder’s fund. The ratio is relatively high during 2019-20 with
0.45:1 an high debt equity indicates that the claim of outsiders are greater than those of

47
owners, may not be considered by the creditors because it gives a lesser margin of safety for
them at the time of liquidation of the firm. And low during the year 2017-18 with 0.10:1 is
considered as favorable from the long term creditor’s point of view because a high proportion
of owner’s fund provides large margin of safety to them.

2. PROPRIETARY RATIO
This ratio shows the proportion of total assets of a company which are financed by
proprietors’ funds. The proprietary ratio is also known as equity ratio. It helps to determine
the financial strength of a company & is useful for creditors to assess the ratio of
shareholders’ funds employed out of total assets of the company.

Proprietary ratio = Proprietor’s fund

Total tangible asset

TABLE NO.5.5 CALCULATION OF PROPRIETARY RATIO

YEAR PROPRIETOR’S TOTAL TANGIBLE PROPRIETORY

FUND ASSET RATIO
2015-16 111,729.10 31,267.30 3.57
2016-17 101,207.30 38,117.60 2.65
2017-18 102,860.90 47,691.10 2.40
2018-19 98,359.30 56,545.50 1.73
2019-20 101,429.20 162,938.00 0.62
AVERAGE 2.19

INTERPRETATION AND ANALYSIS

In the year 2015-16, proprietary ratio is 3.57 which is high indicating a better long term
solvency position of the company. If owners’ funds are more than the fixed assets, it means
that a part of owners’ funds is invested in the current assets also. Again in the year 2019-20 it
is 0.62 which is low indicating greater risk to the creditors. If the owners’ funds are less than
fixed assets, then that means a part of fixed assets is financed by the creditors either long term
or short term. This shows that the company has to increase the owner’s fund so as to
minimize the risk.

48
3. FIXED ASSET TO NET WORTH RATIO
Fixed assets to net worth is a ratio measuring the solvency of a company.This ratio indicates
the extent to which the owners' cash is frozen in the form of fixed assets, such as property,
plant, and equipment, and the extent to which funds are available for the company's
operations (i.e. for working capital)

Fixed asset to net worth ratio = Fixed asset

Shareholder’s fund

TABLE NO.5.6 CALCULATION OF FIXED ASSET TO NET WORTH RATIO

YEAR FIXED ASSET SHAREHOLDER’S FIXED ASSET TO

FUND NET WORTH
RATIO
2015-16 95,755.80 111,729.10 0.85
2016-17 121,123.00 101,207.30 1.19
2017-18 128,152.10 102,860.90 1.24
2018-19 137,301.30 98,359.30 1.39
2019-20 162,938.00 101,429.20 1.60
AVERAGE 1.25

INTERPRETATION AND ANALYSIS

If the ratio is greater than one, it means that creditors fund have been used to acquire a part of
fixed asset. Here the ratios are more than one, and the average ratio of the company is 1.25
hence we can conclude that company need to use creditors fund for acquiring fixed asset.

C) TURNOVER RATIO

1.FIXED ASSET TURNOVER RATIO

The fixed asset turnover ratio (FAT) is, in general, used by analysts to measure operating
performance. This efficiency ratio compares net sales (income statement) to fixed assets
(balance sheet) and measures a company's ability to generate net sales from its fixed-asset
investments, namely property, plant, and equipment

Fixed asset turnover ratio = Net sales/Fixed asset

49
TABLE NO.5.7 CALCULATION OF FIXED ASSET TURNOVER RATIO

YEAR NET SALES FIXED ASSET FIXED ASSET

TURNOVER
RATIO
2015-16 60300.30 95,755.80 0.62
2016-17 62276.30 121,123.00 0.51

2017-18 53663.00 128,152.10 0.41

2018-19 49608.00 137,301.30 0.36
2019-20 54317.10 162,938.00 0.33
AVERAGE 0.44

INTERPRETATION AND ANALYSIS

Fixed assets are used in the business for producing goods to be sold. The effective utilization
of fixed asset will result in increased production and reduced cost. and the average ratio of
the company is 0.44 The effective utilization of fixed asset shows a higher ratio in the year
2015. But the ratio is decreasing in the last years. This fluctuation indicates the need of better
utilization of fixed asset.

2. CAPITAL TURNOVER RATIO

This is a ratio which shows how much sales are entertained from the capital. It shows how the
sales are attracted from the Proprietor's Fund.

Capital turnover ratio = sales/Proprietor’s fund.

TABLE NO.5.8 CALCULATION OF CAPITAL TURNOVER RATIO

YEAR NET SALES SHAREHOLDER’S FIXED ASSET

FUND TURNOVER
RATIO
2015-16 60300.30 111,729.10 0.53
2016-17 62276.30 101,207.30 0.61

2017-18 53663.00 102,860.90 0.52

2018-19 49608.00 98,359.30 0.50
2019-20 54317.10 101,429.20 0.53

50
 AVERAGE 0.538

INTERPRETATION AND ANALYSIS

The above table shows the relationship between the sales and proprietors funds. In the year 2014-
15 the ratio 0.53 and then it increased and reached 0.61and again decreased to 0.52, 0.50 and 0.53
and the average ratio of the company is 0.538 It shows the firms is maintaining the better utilization
of own funds.

3.WORKING CAPITAL TURNOVER RATIO

Working capital turnover is a ratio that measures how efficiently a company is using its
working capital to support a given level of sales. Also referred to as net sales to working
capital, work capital turnover shows the relationship between the funds used to finance a
company's operations and the revenues a company generates as a result.

Working capital turnover ratio = Net sales / Working capital

TABLE NO.5.9 CALCULATION OF WORKING CAPITAL TURNOVER RATIO

YEAR NET SALES WORKING RATIO

CAPITAL
2015-16 60300.30 9,066.90 6.65
2016-17 62276.30 5,542.70 11.23

2017-18 53663.00 5,542.70 9.68

2018-19 49608.00 3,830.30 12.95
2019-20 54317.10 5,567.30 9.75
AVERAGE 10.05

INTERPRETATION AND ANALYSIS

Fluctuation in the working capital due to the variation of net working capital shows that the
need of consistent working capital management policy. The highest Working Capital
Turnover Ratio is 12.95 in 2018-19 and the lowest is 6.65 in 2015- 16. The average working
capital turnover ratio is 10.05.

D) PROFITABILITY RATIOS:

51
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings relative to its revenue, operating costs, balance sheet assets, and
shareholders' equity over time, using data from a specific point in time. Profitability ratios
consist of a group of metrics that assess a company's ability to generate revenue relative to its
revenue, operating costs, balance sheet assets, and shareholders' equity.

1.GROSS PROFIT RATIO

Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross
profit and total net sales revenue. It is a popular tool to evaluate the operational performance
of the business. The ratio is computed by dividing the gross profit figure by net sales.

Gross profit ratio = Gross profit /Net sales *100

TABLE NO.5.10 CALCULATION OF GROSS PROFIT RATIO

YEAR GROSS PROFIT NET SALES RATIO

2015-16 22,311.20 60300.30 37

2016-17 23,692.90 62276.30 38

2017-18 17,804.90 53663.00 33

2018-19 12,301.60 49608.00 24

2019-20 20133.60 54317.10 37

AVERAGE 33.8

INTERPRETATION AND ANALYSIS

The above table shows the relationship between the gross profit and net sales in percentage.
During 2014-15 the gross profit position was 37 and in the very next year it increased to 38
and then decreased to 33 and 24 and it increased to 37 and the average ratio is 33.8.

2. NET PROFIT RATIO

Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net
profit after tax and net sales. It is computed by dividing the net profit (after tax) by net sales.

Net profit ratio = Net profit/Net sales*100

52
TABLE NO.5.11 CALCULATION OF NET PROFIT RATIO

YEAR NET PROFIT NET SALES RATIO

2015-16 7,780.30 60300.30 12.9
2016-17 -9,925.60 62276.30 15.9

2017-18 79.20 53663.00 0.14

2018-19 -1,829.00 49608.00 3.68
2019-20 -36,088.20 54317.10 62.7
AVERAGE 19.1
*net loss is given
INTERPRETATION AND ANALYSIS
Higher the ratio better is the profitability. The net profit ratio in conjunction with the asset
turnover ratio helps in ascertaining how profitably the assets have been used during the
period. This means higher returns to shareholders. The ratio is higher in the year 2015-16
which is 12.9 and the average ratio is 19.1.

TREND ANALYSIS
TREND ANALYSIS OF NET PROFIT FROM THE YEAR 2015-16 TO 2019-20

Table no. 5.12 The table showing the trend for NET PROFIT from 2014-15 to 2018-19

YEAR X Y XY X2

53
2015-16 1 7,780.30 7,780.30 1

2016-17 2 -9,925.60 -19815.20 4

2017-18 3 79.20 237.6 9

2018-19 4 -1,829.00 -7316 16

2019-20 5 -36,088.20 -180441 25

TOTAL 15 -39983.30 -199554.30 55

FIGURE NO.5. 1 NET PROFIT FROM 2015-16 TO 2019-20

20000

10000

0
2015-16 2016-17 2017-18 2018-19 2019-20

-10000

-20000

-30000

-40000
NET
PROFIT

Y= a+bX

Where, b= N∑XY - ∑X∑Y

N ∑X2 -∑(X)2

b = 5*-199554.30 – 15*-39983.30

5* 55-(15*15)

54
b = -997771.50+599749.50

275-225

b= -398022

50

b = -7960.44

a= ∑Y - b ( ∑X)

a = -39983.30-(-7960.44*15)

a= -39983.30+119406.60

a= 79423.30

a= 15884.66

Profit for the year 2020- 2021 to 2024- 2025 are:

Y= a+bX

 2020- 2021
Y = 15884.66 +(-7960.44*6)

= 15884.66 – 47762.64

= -31877.98

 2021-22

Y= 15884.66 +(-7960.44*7)

55
 = 15884.66 –55723.08

= -39838.42

 2022-23

Y= 15884.66 +(-7960.44*8)

= 15884.66 – 63683.52

= -47798.86

 2023-24

Y= 15884.66 +(-7960.44*9)

= 15884.66 – 71643.96

= -55759.30

 2024-25

Y= 15884.66 +(-7960.44*10)

= 15884.66 –79604.40

= -63719.74

TABLE 5.13 Estimated profit for 2020-2021 to 2024-25

YEAR PROFIT

2020-21 -31877.98

2021-22 -39838.42

2022-23 -47798.86

2023-24 -55759.30

2024-25 -63719.74

56
 FIGURE NO.5.2 ESTIMATED PROFIT FROM 20210-21 TO 2024-25

ESTIMATED NET PROFIT

0
2020-21 2021-22 2022-23 2023-24 2024-25
-10000

-20000

ESTIMATED NET PROFIT

-30000

-40000

-50000

-60000

-70000

INTERPRETATION AND ANALYSIS:

On the basis of last five years profit position we can predict the profit trend for the future
years. Here this trend shows negative growth for the future period.

TREND ANALYSIS OF NET SALES FROM THE YEAR 2015-16 TO 2019-20

Table no. 5.14 The table showing the trend for NET SALES from 2015-16 to 2019-20

YEAR X Y XY X2

57
2015-16 1 60,300.30 60,300.30 1

2016-17 2 62,276.30 124552.60 4

2017-18 3 53,663.00 160989.00 9

2018-19 4 49,608.00 198432 16

2019-20 5 54,317.10 271585.50 25

TOTAL 15 280164.70 815859.40 55

FIGURE NO.5.3 NET SALES FROM 2015-16 TO 2019-20

NET SALES
70000

60000

50000

40000

30000

20000

10000

0
2015-16 2016-17 2017-18 2018-19 2019-20
NET
SALES

Y= a+bX

Where, b= N∑XY - ∑X∑Y

N ∑X2 -∑(X)2

b = 5*815859.40– 15*280164.70

5* 55-(15*15)

58
b = 4079297-4202470.50

275-225

b= -123173.50

50

b = -2463.47

a= ∑Y - b ( ∑X)

a = 280164.70-(-2463.47*15)

a= 280164.70+36952.05

a= 317116.75

a= 63423.35

Profit for the year 2020- 2021 to 2024- 2025 are:

Y= a+bX

 2020- 2021
Y = 63423.35+(-2463.47*6)

= 63423.35– 14780.82

= 48642.53

 2021-22

Y= 63423.35+(-2463.47*7)

59
 = 63423.35–17244.29

= 46179.06

 2022-23

Y= 63423.35+(-2463.47*8)

= 63423.35– 19707.76

= 43715.59

 2023-24

Y= 63423.35+(-2463.47*9)

= 63423.35– 22171.23

= 41252.12

 2024-25

Y= 63423.35+(-2463.47*10)

= 63423.35–24634.70

= 38788.65

TABLE 5.15 Estimated SALES for 2020-2021 to 2024-25

YEAR SALES

2020-21 48642.53

2021-22 46179.06

2022-23 43715.59

2023-24 41252.12

60
 2024-25 38788.65

FIGURE NO.5.4 ESTIMATED SALES FOR 2020-2021 TO 2024-25

60000

50000

40000

30000

20000

10000

0
2020-21 2021-22 2022-23 2023-24 2024-25

ESTIMATED SALES

INTEPRETATION AND ANALYSIS

Future trend of the sales is showing a negative trend and the estimated profit is negative.

COMPARATIVE STATEMENT ANALYSIS

TABLE 5.16

61
Comparative balance sheet of Bharti Airtel Limited for the year 2015 -2016

Particulars 2015 2016 Inc/dec % of changes

Equity and liabilities
Share capital 1,998.70 1,998.70 ------- ------
Reserves and surplus 76,272.10 109,730.40 33458.30 43.86

Non- current liabilities

Long term borrowing 19,626.70 41,457.00 21830.30 111.22
Deferred tax liabilities 1,072.10 1,698.40 626.30 58.41
Other long term liabilities 4,203.60 2,074.40 (2129.20) (50.65)
Long term provision 196.90 222.30 25.40 12.89

Current liabilities
Short term borrowing 625.90 699.90 74 11.82
Trade payable 7,123.20 11,970.60 4847.40 68.05
Other current liabilities 14,067.50 15,057.40 989.90 7.03
Short term provision 1,234.90 118.90 1116 90.37

Total 126,423.70 185,028.00 58604.70 46.35

Assets
Non- current asset
Fixed asset 62,511.30 95,755.80 33244.50 53.18
Non- current investment 38,395.80 69,896.50 31500.70 82.04
Deferred Tax Assets 0.00 2,307.00 2307.00 ------
Long term loans and advances 8,838.10 2,886.10 (5952) (67.34)
Other non- current asset 1,922.10 2,761.60 839.50 43.67
Current asset
Current investment 4,721.10 0.80 (4720.30) (99.98)
Inventories 9.40 5.30 (4.10) (43.61)
Trade receivable 3,311.00 3,172.40 (138.6) (4.18)
Cash and cash equivalents 388.70 46.60 (342.10) (88.01)
Short term loans and advances 5,394.20 4,337.60 (1056.60) (19.58)
Other current asset 932.00 3,858.30 2926.30 313.98

62
Total 126,423.70 185,028.00 58604.30 46.35

TABLE 5.17 Comparative balance sheet of Bharti Airtel Limited for the year 2016
-2017

Particulars 2016 2017 Inc/dec % of changes

Equity and liabilities
Share capital 1,998.70 1,998.70 ----- ------
Reserves and surplus 109,730.40 99,208.60 (10521.80) (9.5)

Non- current liabilities

Long term borrowing 41,457.00 50,342.10 8885.10 21.43
Deferred tax liabilities 1,698.40 00.00 (1698.40) (100)
Other long term liabilities 2,074.40 4,038.80 1964.40 94.69
Long term provision 222.30 233.00 10.7 4.81

Current liabilities
Short term borrowing 699.90 6,547.80 5847.90 835.53
Trade payable 11,970.60 14,969.80 2999.20 25.05
Other current liabilities 15,057.40 14,169.70 (887.70) (5.89)
Short term provision 118.90 129.10 10.20 8.57
Total 185,028.00 191,637.60 6609.60 3.57
Assets
Non- current asset
Fixed asset 95,755.80 121,123.00 25367.20 26.49
Non- current investment 69,896.50 45,959.00 (23910.50) (34.20)
Deferred Tax Assets 2,307.00 880.80 (1426.20) (61.82)
Long term loans and advances 2,886.10 1,038.90 (1847.20) (64)
Other non- current asset 2,761.60 5,952.90 3164.30 114.58
Current asset
0.80

63
 Current investment 5.30 0.00 (0.80) (100)
Inventories 3,172.40 3.90 (1.4) (26.41)
Trade receivable 46.60 3,211.80 39.40 1.24
Cash and cash equivalents 4,337.60 173.40 126.60 271.67
Short term loans and advances 3,858.30 7,208.10 2870.5 66.17
Other current asset 6,085.80 2227.50 57.73
Total 185,028.00 191,637.60 6609.60 3.57

TABLE 5.18
Comparative balance sheet of Bharti Airtel Limited for the year 2017 -2018

Particulars 2017 2018 Inc/dec % of changes

Equity and liabilities
Share capital 1,998.70 1,998.70 ----- ------
Reserves and surplus 99,208.60 100,862.20 1653.60 1.66

Non- current liabilities

Long term borrowing 50,342.10 54,468.10 4126 8.19
Deferred tax liabilities 00.00 0.00 0.00 -----
Other long term liabilities 4,038.80 3,784.90 (253.90) (6.28)
Long term provision 233.00 183.00 (50) (21.45)

Current liabilities
Short term borrowing 6,547.80 8,068.00 1520.20 23.21
Trade payable 14,969.80 17,699.00 2729.20 18.23
Other current liabilities 14,169.70 17,747.20 3577.5 25.24
Short term provision 129.10 126.20 (2.9) (2.24)

Total 191,637.60 204,937.30 13299.70 6.94

Assets
Non- current asset
Fixed asset 121,123.00 128,152.10 7029.10 5.80
Non- current investment 45,959.00 48,128.20 2169.20 4.71

64
 Deferred Tax Assets 880.80 1,424.40 543.60 61.71
Long term loans and advances 1,038.90 1,029.00 (9.9) (0.95)
Other non- current asset 5,952.90 4,707.70 (1245.20) (20.91))
Current asset
Current investment 0.00 0.00 ----- -----
6.30
Inventories 3.90 2.40 61.53
4,319.60
Trade receivable 3,211.80 1107.80 34.49
545.10
Cash and cash equivalents 173.40 371.70 214.35
7,249.60
Short term loans and advances 7,208.10 41.5 0.57
9,375.30
Other current asset 6,085.80 3289.50 54.05

Total 191,637.60 204,937.30 13299.70 6.94

TABLE 5.19
Comparative balance sheet of Bharti Airtel Limited for the year 2018 -2019

Particulars 2018 2019 Inc/dec % of changes

Equity and liabilities
Share capital 1,998.70 1,998.70 ----- ------
Reserves and surplus 100,862.20 96,360.60 (4501.60) (4.46)

Non- current liabilities

Long term borrowing 54,468.10 58,649.40 4181.30 7.67
Deferred tax liabilities 0.00 0.00 ------ ------
Other long term liabilities 3,784.90 5,021.00 1236.90 32.67
Long term provision 183.00 192.70 9.7 5.30

65
 Current liabilities
Short term borrowing 8,068.00 25,140.50 17072.50 211.60
Trade payable 17,699.00 19,168.80 1469.80 8.30
16,045.00
Other current liabilities 17,747.20 (1702.20) (9.59)
108.80
Short term provision 126.20 (17.4) 13.78

Total 204,937.30 222,685.50 17748.20 8.66

Assets
Non- current asset
Fixed asset 128,152.10 137,301.30 9149.20 7.13
Non- current investment 48,128.20 36,807.20 (11321) (23.52)
Deferred Tax Assets 1,424.40 5,151.20 3726.80 261.63
Long term loans and advances 1,029.00 15,103.20 14074.20 1367.75
Other non- current asset 4,707.70 7,802.00 3094.30 65.72
Current asset
Current investment 0.00 1,669.60 1669.60 ------
Inventories 6.30 1.00 (5.3) (84.12)
Trade receivable 4,319.60 3,849.00 (470.6) (10.89)
Cash and cash equivalents 545.10 219.60 (325.50) 59.71
Short term loans and advances 7,249.60 2,124.40 (5125.20) (70.69)
Other current asset 9,375.30 12,657.00 3281.70 35

Total 204,937.30 222,685.50 17748.20 8.66

TABLE 5.20
Comparative balance sheet of Bharti Airtel Limited for the year 2019 -2020

Particulars 2019 2020 Inc/dec % of changes

Equity and liabilities

66
Share capital 1,998.70 2,727.80 729.10 36.46
Reserves and surplus 96,360.60 98,701.40 2340.80 2.42

Non- current liabilities

Long term borrowing 58,649.40 70,471.20 11821.80 20.15
Deferred tax liabilities 0.00 0.00 ------ ------
Other long term liabilities 5,021.00 35,069.30 30048.30 598.45
Long term provision 192.70 191.90 (0.80) (0.41)

Current liabilities
Short term borrowing 25,140.50 11,892.00 (13248.50) (52.69)
Trade payable 19,168.80 19,247.80 79 0.41
Other current liabilities 16,045.00 21,312.40 5267.40 32.82
Short term provision 108.80 40,759.00 40650.20 37362.31
Total 222,685.50 300,372.80 77687.30 34.88
Assets
Non- current asset
Fixed asset 137,301.30 162,938.00 25636.70 18.67
Non- current investment 36,807.20 30,051.80 (6755.4) (18.35)
Deferred Tax Assets 5,151.20 22,701.40 17550.20 116.20
Long term loans and advances 15,103.20 00.00 (15103.20) (100)
Other non- current asset 7,802.00 25,900.30 18098.30 231.97
Current asset
Current investment 1,669.60 8,675.00 (7005.40) (419.58)
Inventories 1.00 3.10 2.10 210
Trade receivable 3,849.00 3,810.00 (39) (1.01)
Cash and cash equivalents 219.60 3,397.60 3178 1447.17
Short term loans and advances 2,124.40 0.00 ------ ------
Other current asset 12,657.00 42,895.60 30238.60 238.90

Total 222,685.50 300,372.80 77687.30 34.88

67
 CHAPTER 6
FINDINGS OF THE STUDY

FINDINGS

 The normal current ratio is 2:1. Bharti Airtel has an average current ratio of 0.468 . It
indicates that the company may have difficulty meeting its current obligations. Low

68
 values, however, do not indicate a critical problem. If Bharti Airtel has good long-term
prospects, it may be able to borrow against those prospects to meet current obligations.

 The present and future profitability of the company is not satisfactory.

 Over all liquidity position of the company is fluctuating.  The value of absolute liquid
ratio is fluctuating throughout the period due to the fluctuation of liabilities

 The net profitability of the firm follows an decreasing trend.

 Profitability position of the company is not stable due to decrease in sales.

 The estimated sales is also on decreasing trend . measures should be taken to increase the
sales and profit.

69
 CHAPTER 7

CONCLUSION

CONCLUSION

In this study, an attempt has been made to analyze the financial position of the company. The
study shows that the overall performance of the company is not satisfactory. Though the

70
company is a profit making organization, its profit is not up to the mark with respect to the
assets employed in the organization. It can be seen clearly that the organization faces a lot of
unavoidable expenses.

The overall success of any company depends upon the financial performance. So it should be
balanced properly because it shows the efficiency and the financial strength of the company.
Therefore the company should adhere to strict measures in every sphere of its activities to
bring the company back to sufficient working capital position and improve its financial
performance for better prospects in the coming days. There should be a short-term fund
management.

BIBLIOGRAPHY

BOOKS:

71
 Kothari, C.R.; Research Methodology; 2nd edition, 1990.
 Vinod; Accounting for Managerial Decisions; Prathiba Publishing.
 Phanaman, Stephen H; Financial Statement Analysis; Mac Graw Hills Publication.
 Gibson, Charles H; Analysis Financial Statements; India Edition.
 Pandey, I M; Financial management; 10th edition, 2011; Vikas publishing house pvt ltd.

JOURNALS & ARTICLES:

 Bharti Airtel Ltd. Annual Report 2015-16.

 Riedi EdwardJ- Srinivasan Suuraj 2010, Signaling Firm Performance Through Financial
Statement Presentation.

WEBSITES:

 http//www. Bhartiairtel.com
 http//www.Financial Analysis.com
 www.RatioAnalysis.com
 http//www.money control.com

ANNEXURE

72
BALANCE SHEET OF BHARTI MAR '20 MAR '19 MAR '18 MAR '17 MAR '16  
AIRTEL (in Rs. Cr.)

  12 mths 12 mths 12 mths 12 mths 12 mths  

SOURCES OF FUNDS  

Total Share Capital 2,727.80 1,998.70 1,998.70 1,998.70 1,998.70  

Equity Share Capital 2,727.80 1,998.70 1,998.70 1,998.70 1,998.70  

Reserves 98,701.40 96,360.60 100,862.2 99,208.60 109,730.4  

0 0

NETWORTH 101,429.2 98,359.30 102,860.9 101,207.3 111,729.1  

0 0 0 0

Secured Loans 82,363.20 0.30 -5,244.90 -3,483.00 0.00  

Unsecured Loans 0.00 83,789.60 67,781.00 60,372.90 42,156.90  

TOTAL DEBT 82,363.20 83,789.90 62,536.10 56,889.90 42,156.90  

TOTAL LIABILITIES 183,792.4 182,149.2 165,397.0 158,097.2 153,886.0  

0 0 0 0 0

Gross Block 162,938.0 198,221.4 180,754.6 163,428.0 137,060.8  

0 0 0 0 0

Less: Accum. Depreciation 0.00 66,487.40 58,145.20 51,905.20 45,135.30  

NET BLOCK 162,938.0 131,734.0 122,609.4 111,522.8 91,925.50  

0 0 0 0

Capital Work in Progress 0.00 5,567.30 5,542.70 9,600.20 3,830.30  

INVESTMENTS 38,726.80 38,476.80 48,128.20 45,959.00 69,897.30  

Inventories 3.10 1.00 6.30 3.90 5.30  

Sundry Debtors 3,810.00 3,849.00 4,319.60 3,211.80 3,172.40  

Cash and Bank Balance 3,397.60 219.60 545.10 173.40 46.60  

Total Current Assets 7,210.70 4,069.60 4,871.00 3,389.10 3,224.30  

Loans and Advances 91,497.30 42,837.80 23,786.00 21,166.50 16,150.60  

Total CA, Loans & Advances 98,708.00 46,907.40 28,657.00 24,555.60 19,374.90  

Current Liabilities 75,629.50 40,234.80 39,231.10 33,178.30 30,800.80  

Provisions 40,950.90 301.50 309.20 362.10 341.20  

73
Total CL & Provisions 116,580.4 40,536.30 39,540.30 33,540.40 31,142.00  
0

NET CURRENT ASSETS -17,872.40 6,371.10 -10,883.30 -8,984.80 -11,767.10  

TOTAL ASSETS 183,792.4 182,149.2 165,397.0 158,097.2 153,886.0

0 0 0 0 0

74