A Critical Study On Ratio Analysis Between Indian Oil Corporation Ltd. & Hindustan Petroleum Corporation Ltd. - 074334

A CRITICAL STUDY ON RATIO ANALYSIS BETWEEN
INDIAN OIL CORPORATION LIMITED & HINDUSTAN

PETROLEUM CORPORATION LIMITED.
A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting & Finance)
Under the Faculty of Commerce
By
AMISHA MILIND SHIRKE
ROLL NO 110
Under the Guidance of
MR. PIYUSH AGARWAL
K.P.B.HINDUJA COLLEGE OF COMMERCE
315, NEW CHARNI ROAD, MUMBAI 400004
APRIL 2021
CERTIFICATE
This is to certify that Ms. AMISHA MILIND SHIRKE has worked and duly completed her
Project Work for the degree of Bachelor in Commerce (Accounting & Finance) under the
Faculty of Commerce and her project is entitled “A CRITICAL STUDY ON RATIO
ANALYSIS BETWEEN INDIAN OIL CORPORATION LIMITED & HINDUSTAN
PETROLEUM CORPORATION LIMITED” under my supervision.
I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any Degree or Diploma of any University.
It is her own work and facts reported by her personal findings and investigations
______________________ _____________________
Co-ordinator Guiding Teacher
______________________ _______________________
External Examiner Internal Examiner
______________________ ________________________
Principal College seal
Date of submission
DECLARATION
I undersigned Ms. AMISHA MILIND SHIRKE hereby, declare that the work embodied in
this project work titled “A CRITICAL STUDY ON RATIO ANALYSIS BETWEEN
INDIAN OIL CORPORATION LIMITED & HINDUSTAN PETROLEUM
CORPORATION LIMITED”, forms my own contribution to the research work carried out
under the guidance of MR. PIYUSH AGARWAL is a result of my own research work has
not been previously submitted to any other University for any other Degree/ Diploma to this or
any other University.
Wherever reference has been made to previous works of others, it has been clearly indicated as
such and included in bibliography.
I, here by further declare that all the information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
________________________
AMISHA MILIND SHIRKE
ROLL NO 110
Acknowledgment
To list who all have helped me in difficult because they are so numerous and the depth is so
enormous.
I would like to acknowledge the following as being idealistic channels and fresh dimensions in
the completion of this project.
I take this opportunity to thanks the University of Mumbai for giving me chance to do this
project.
I would like to thank my Principal, Dr. Minu Madlani for providing the necessary facilities
required for completion of this project.
I take this opportunity to thank our coordinator Dr. Samira Sayed for the moral support and
guidance.
I would also like to express my sincere gratitude towards my project guide Mr. Piyush
Agarwal whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books and
magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my parents and peers who supported me throughout my
project.
PREFACE
It was a pleasurable experience for me to work on this project report

“A Critical Study on Ratio Analysis between Indian Oil
Corporation Limited & Hindustan Petroleum Corporation
Limited”
It has not only helped me to enhance my knowledge about
various strategies followed by the company but also reviewed my
knowledge. In this project report every possible effort has been made
to highlight the major aspects related to the topic by a comprehensive
study of literature and by secondary information.
To make it easier different tabular and diagrammatic approach has

been used which help in understanding the theme. It gives brands, a
market image as well as depicts phase of their life cycle to understand
the company value in a better way. Secondary data is an important
document and contains information that can be used to find out what
are the findings of the research. I have tried my best to explore the
truth in my project reality regarding the ratio analysis and
understanding practical way of working.
TABLE OF CONTENTS
CHAPTER TABLE OF CONTENTS PAGE
NO
Introduction 08 - 11
1
2 Research Methodology 12 - 25
2.1 Objectives of Research as a Subject
2.2 Types Of Research
2.3 Scope of Research
2.4 Objectives of My Research
2.5 Research Design
2.6 Hypothesis
Statement of Hypothesis
2.6.1
2.7 Data Collection Method
2.8 Data Analysis
2.9 Limitations
2.10 Significance of the Study & Tools Techniques Used
3 Literature Review 26 – 29
3.1 Book keeping and Accountancy are fore runners of finance.
3.1.1 John Myer

3.1.2 Literature on Economics
3.1.3 EF Donaldson
3.1.4 Robert Anthony
3.1.5 SC Kuchhal
3.1.6 Remarkable Contributions
3.1.7 William Beaver
3.1.8 L.C. Gupta
3.1.9 E.I. Altman
3.1.10 Eltman’s Study
4 Ratio Analysis 30 - 58
4.1 Advantages of Ratio
4.2 Disadvantages Of Ratio
4.3 Types of Ratio
5 A brief Profile & Study of Selected Companies. 59 – 76

5.1 Indian Oil Corporation Ltd.
5.1.1 Green Initiatives
5.1.2 Statement Of Profit & Loss (March 2016 - March 2020)
5.1.3. Balancesheet (March 2016 – March 2020)
5.2 Hindustan Petroleum Corporation Ltd.
5.2.1 CSR Initiatives
5.2.2 Statement Of Profit & Loss (March 2016 – March 2020)
5.2.3 Balancesheet (March 2016 – March 2020)
6 Data Analysis, Interpretation & Presentation 77 – 99

 List of Tables & Observations
7 Findings, Conclusions & Suggestions 100 -

113
8 Bibliography 114 -
116
A CRITICAL STUDY ON RATIO ANALYSIS BETWEEN INDIAN OIL CORPORATION 2020 -
LIMITED & HINDUSTAN PETROLEUM CORPORATION LIMITED. 2021
CHAPTER 1: INTRODUCTION
There is almost always a reason why someone picks up an organization’s financial statements
and begins to analyse them. Lenders or creditors may be interested in determining whether they
will be repaid money they have lent or may lend to the organization. Investors may be interested
in comparing a potential investment in one organization with that of another. Employees may
want to compare the current performance or financial status of
their employer with earlier periods. Regulatory agencies often
need to assess organizational or industry’s financial health and
performance. Financial analysis is always based on a set of
questions, and the specific questions requiring answers depend
on who the financial statement user is and the reasons for his or
her analysis.
Fundamental Analysis has a very broad scope. One aspect looks

at the general (qualitative) factors of a company. The other side
considers tangible and measurable factors (quantitative). This
means crunching and analysing numbers from the financial statements. If used in conjunction
with other methods, quantitative analysis can produce excellent results.
Oxford defines the word ‘analysis’ as detailed examination of the elements or structure of
something and the word ‘ratio’ as the quantitative relation between two amounts showing
the number of times one value contains or is contained within the other.
Thus, financial ratio analysis, in layman language would mean examination of the company’s
finance in terms of relation between two variables.
The analysis of the financial statements and interpretations of financial results of a particular
period of operations with the help of 'ratio' is termed as "financial ratio analysis." Ratio analysis
used to determine the financial soundness of a business concern.
Alexander Wall designed a system of ratio analysis and presented it in useful form in the year
1909. Accounting instructors have for years recognized the pioneering work of Alexander
Wall in the field of ratio analysis of financial statements. His ‘Analytical Credits’ in 1921
K.P.B. HINDUJA COLLEGE OF COMMERCE Page 8

indicated that he was already in the field of analysing statements, and that the business world
might expect something more definite and conclusive at a later date.
According J. Batty, ‘Ratio’ can be defined as "the term accounting ratio is used to describe
significant relationships which exist between figures shown in a balance sheet and profit and
loss account in a budgetary control system or any other part of the accounting management."
Ratio can be used in the form of (1) Percentage (2) Quotient (3) Rates. In other words, it can
be expressed as a to b; a : b or as a simple fraction, integer and decimal. A ratio is calculated
by dividing one item or figure by another item or figure.
Financial analysis based on accounting information consistently involve comparisons.

Amounts or ratios may be compared with industry norms, the same measurement in a prior
period, the same measurement in a competitor’s organization, or with planned and budgeted
amounts previously established. Figuring out which comparisons will best answer the questions
motivating the analysis is one of the necessary steps in making the best use of accounting
information.
Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement and cash flow statement. It's comparing the number against previous years, other
companies, the industry or even the economy in general. Ratios look at the relationships
between individual values and relate them to how a company has performed in the past, and
how it might perform in the future.
For example, current assets alone don't tell us a whole lot, but when we divide them by current
liabilities we are able to determine whether the company has enough money to cover short-
term debts.
This project aims at comparing, analysing and concluding intercompany and intracompany
results for two companies over a period of five years based on the financial ratios computed.
This project is specially designed to understand the subject matter of Financial Ratio Analysis
through the use of various ratios used in the company. This project gives us information and
report about company’s financial position. Throughout the project, the focus has been on
presenting information and comments in easy and intelligible manner. The purpose of the

project was to have practical experience and to have exposure to the various ratios used in the
field of finance.
The companies, Indian Oil Corporation Limited and Hindustan Petroleum Corporation
Limited, which I have selected for the purpose of this research, belong to Oil and Natural Gas
Industry.
Indian Oil Corporation is India's largest commercial Maharatna status enterprise, with business
interests straddling the entire hydrocarbon value chain from refining pipelines transportation
& marketing of petroleum products. IndianOil is ranked 161st among the world's largest
corporates (and first among Indian enterprises) in the prestigious Fortune ‘Global 500’ listing
for the year 2016.
Indian Oil has been meeting India’s energy demands for over half a century with a corporate
vision to be 'The Energy of India' and to become 'A globally admired company.’
Propelling airplanes, mechanizing agriculture, energizing industries, igniting stoves, lighting

lanterns... HP is synonymous with energy in India.
HPCL is a Government of India Enterprise with a Navratna Status, and a Forbes 2000 and
Global Fortune 500 company. It had originally been incorporated as a company under the
Indian Companies Act 1913. It is listed on the Bombay Stock exchange (BSE) and National
Stock Exchange (NSE), India.
This report provides an analysis and evaluation of the profitability, liquidity and financial
stability of Indian Oil Corporation Limited and Hindustan Petroleum Limited. Methods of
analysis include horizontal and vertical analyses and mainly ratios such as Liquidity
Profitability, Solvency, Leverage, Efficiency and ratios important for Equity Shareholders.
Other calculations include rates of return on Shareholders’ Equity and Total Assets and
earnings per share to name a few. Results of data analysed show that all ratios are mostly below
industry averages such current ratio, quick ratio to name a few. In particular, comparative
performance is poor in the areas of profit margins, liquidity, and credit control.
The report finds the prospects of Indian Oil Corporation Limited in its current position are more
investor friendly due to its better performance over the span of five years of research than

Hindustan Petroleum Corporation Limited. The major areas of weakness require further
investigation and remedial action by management not only for Hindustan Petroleum Limited
but also for Indian Oil Corporation.
Recommendations discussed include:

 Improving the average collection period for accounts receivable·
 Increase your sales volume without increasing your cost of goods sold per unit
 Early payments to creditors can save interest cost etc.
The report also investigates the fact that the analysis conducted has limitations. Some of the
limitations include:
 The data is confined to a period of only 5 years which is not sufficient to judge a
company’s intrinsic and competitive performance
 The analysis is based on the secondary information collected from the Annual Reports
of five years for both Indian Oil Corporation and Hindustan Petroleum Corporation.
 The study is based on only on the past records.

CHAPTER 2:
RESEARCH
METHODOLOGY
No matter what walk of life a person

may belong but he/she always wants to
define problems in day to day life and
also work out suitable solution. The
thirst for knowledge has not ended right
from the time of inception of this universe.
The word Research is derived from the French word “Researcher” meaning to search back.
Broadly, research refers to a search for knowledge. It is an attempt to find answers to problems
both theoretical and practical through the application of scientific methods.
Research is also an academic exercise. Research is an enquiry into the nature of, the reason for,
and the consequences of any particular set of circumstances, whether they are experimentally
controlled or recorded as they take place.
According to Robert Ross, “Research is essentially an investigation, a recording and analysis

of evidence for the purpose of gaining knowledge.”
According to Fred Kerlinger, “Research is an organised enquiry designed and carried out to
provide information for solving a problem.”
2.1 OBJECTIVES OF RESEARCH AS A SUBJECT
1. To Identify The Problem:

The basic responsibility of a researcher is to correctly identify the problem. A correct
problem definition is the key to getting the most out of the research.
2. To Collect Information:
The researcher must remain alert while collecting information to make it reliable,
adequate and complete in all aspects. This will enable the researcher to arrive at correct
conclusions and make useful recommendations.
3. To Adopt Scientific Approach:

One of the main objectives of research is to find answers to question through the
application of scientific methods. It adopts a step by step logical and organised method
to identify the problems, gather data, analyse them and to draw valid conclusions.
4. To Present Benefits Of Research:
The benefits of research must be made available to one and all. The findings and
recommendations of a research will be an eye opener to the society enabling responsible
people to take preventive measures.
5. To Examine Relationship Between Variables:
Variable is a characteristic that can be measured. Variables are subject to change.
6. To Maintain Objectivity:
Objectivity means conclusions should be based on the facts of the findings and not on
our subjective or emotional values. Also personal bias must be avoided.
7. To Make Future Predictions:

Based on the findings, the researcher is called upon to make future predictions.
Depending on the nature of issue it will ring warning bell to the higher authorities in
the government and corporate world.
8. To Study Variables:
Our life is influenced by numerous variables. Research is conducted to study the
relationship between variables.
9. To Help In Framing Laws:
Research is based on observation and experimentation. Observation is the basis for
collecting knowledge. Observation becomes a scientific inquiry when it is conducted
to answer a research question. Experimentation is the scientific method to establish
cause-effect relationship.
2.2 TYPES OF RESEARCH:
1. Pure Research:
 Often pure research is called theoretical, basic or fundamental research.

 It is not directly concerned with solving marketing problems. Primarily, it

aims at improving academic knowledge about the subject matter.
 Pure research is for expanding the frontiers of knowledge and does not
directly involve in dealing with pragmatic problems.
 Pure research may address itself to issues like drug addiction among the
youth or reasons for youngsters fleeing to Mumbai to make career in
Bollywood.
 Its findings constitute the foundation of applied research.
2. Applied Research:
 Applied research is also called as “decisional research” that it directly deals
with commercial problems.
 It tackles the business problems and attempts to find alternative solutions to
the problems.
 Applied research can be of two types:
i. Problem Solving Research:
This related to a specific problem and it can be conducted either by
marketing research department of the firm or by an outside research
agency.
ii. Problem Oriented Research:
This deals with problems that may be of interest to many firms. This
type of research puts into practice the knowledge obtained through
basic research.
 This is the age of applied knowledge and not pure knowledge. Business
research being a practical subject gains more importance because it can be
applied tp varied organisational aspects.
 Applied research is more practical, result oriented and directly useful to the
company for dealing with a specific business problem.
 Utility of applied research is as follows:
iii. Applied research develops such theories which are useful for pure
research.
iv. It clarifies as to how and which of the facts are useful to the society
and in what way.

v. It promotes the process of socialization and empowers social

institutions.
vi. It studies social problems and issues. It makes available probable
solutions to the policy makers.
vii. It collects useful information and facts based on experiments and
empirical knowledge about human behaviour and social relations.
3. Empirical Research:
 Empirical research uses “empirical evidence”.
 It is a way of gaining knowledge by means of direct and indirect observation or
experience.
 It derives knowledge from actual experience rather than from theory or belief.
 The term empirical means information gained by experience, observation or
experiment. It is a word attributed to Greek medical practitioners who rejected
dogmatic doctrines and preferred to rely on the observation of phenomena.
 This type of research has empirical cycle consisting of:
i. Observation: Collecting and organising empirical facts and forming
hypothesis
ii. Induction: Formulating hypothesis.
iii. Deduction: Deducting consequences of hypothesis as testable
predictions.
iv. Testing: Testing the hypothesis
v. Evaluation: Evaluating the result of testing.
4. Scientific Research:
 Scientific research is application of scientific method to the investigation of
relationships among neutral phenomenon or to solve a medical or technical
problem.
 This type of research requires huge capital investment but provides significant
results.
 Scientific research is the scientific investigation of the known for the purpose
of discovering the unknown.
 The essentials of a scientific research are as follows:

i. Clearly Defined Goal

ii. Neutral Wordings
iii. Proper Sampling
iv. Controlled Research
v. Statistical significance
5. Social Research:
 Social research is conducted by social scientists following a systematic plan.
 Social research methods can be classified along a quantitative or qualitative
dimension.
 Social scientists use various methods to study social phenomena from census
survey data derived from millions of individuals to the in depth analysis of a
single issue such as a family break up.
 Social research is scientific study of the society.
 Social research examines a society’s attitudes, assumptions, beliefs, trends and
rules.
 Popular topics of social research include poverty, racism, class issues, voting
pattern, criminal behaviours, sexuality etc.
6. Historical Research:
 Historical research is an objective evaluation and synthesis of evidence and
facts helping the researcher to draw conclusions relating to the past.
 Some business problems can be effectively studied only through historical
research e.g.; problems in Economics, management and related areas.
 Historical research is founded on facts and figures e.g.; a study of factors
contributing to the growth of sugar factories in Maharashtra is a part of
historical research. The researcher would mainly consider factors like social,
economic, political, financial, technical marketing, personnel and
demographic. These factors are of historical significance.
 The evaluation f such research is done by taking into account developments at
different times, source of documents and interpretation of the hypothesis.

 In the process of identification, selection and formulation of research problem,

the researcher has consultation of past records that constitute historical data.
 Such records include: newspapers and magazines, archives, diplomatic
agreements, time capsules, autobiographies etc.
7. Exploratory Research:
 Exploratory research is undertaken when not much is known about the problem
or how similar problems were solved in the past.
 In such cases, extensive preliminary work is needed to get familiar with the
problem before the researcher develops a model for complete investigation.
 Exploratory research is conducted to understand the problem in the right
perspective since very few studies might have been done in that area.
 In order to get the correct feel of the problem, extensive interviews with many
people might have to be undertaken.
 In exploratory research, data is collected through observation and interviews.
 When data reveal some pattern, theories are developed and hypotheses are
formulated for subsequent testing.
8. Descriptive Research:
 Descriptive research is undertaken to describe the characteristics of the
variables of interest in a situation e.g.; a study of a class in terms of age groups,
sex composition and number of semesters left until graduation can be
considered as subjects of descriptive research.
 Descriptive research is also undertaken to study the characteristics of an
organisation such as effects of participative management or benefits of job
enrichment.
 Descriptive research studies the phenomena as they exist. It identifies and
obtains information on the characteristics of a particular problem.
 The characteristics of descriptive research are as follows:
i. Descriptive research is of great utility in the study of new subjects and
issues.

ii. It describes problems and passes through various stages such as

collection of facts, classification, analysis, interpretation and
explanation.
iii. It aims at the study of only a particular aspect of the subject matter.
iv. It maintains objectivity and impartiality in conducting the investigation.
v. It expects the researcher to maintain scientific outlook in thought and
work.
9. Causal Research:
 Research that involves finding the effect of one thing on another or the effect of one
variable on another is called Causal Research.
 For e.g.; in a business environment to quantify the effect that a change will have on
tis future production to helping business planning process.
 Causal research establishes cause and effect relationships between variables.
 This research is used to measure what impact a specific change will have on existing
norms and allows market researchers to predict hypothetical scenarios upon which
the company can base its business plan.
 Experiments are the most popular data collection methods in studies with causal
research design.
 Some advantages of Causal Research are:
i. Due to systematic selection of subjects, there is a greater level of internal
validity.
ii. It identifies reasons behind a wide range of processes as well as assessing
the impact of changes on existing norms, processes etc.
iii. It offers the benefits of reproducing details, if need arises.
 Some of the disadvantages of this research are as follows:

i. Coincidences in events may be seen as cause and effect relationships.
ii. Cause and effect relationships can be drawn but it cannot be proved with
high degree of certainty.

iii. Correlation between two variables can be established but identifying which
variable is a cause and which one is the effect can become a difficult
matter.
2.3 SCOPE OF RESEARCH:
The scope of the study is limited to collecting financial data published in the annual
reports of the company every year. The analysis is done to suggest the possible
solutions. The study is carried out for 5 years (2016–20). Using the ratio analysis, firms
past, present and future performance can be analysed and this study has been divided
as short term analysis and long term analysis. The firm should generate enough profits
not only to meet the expectations of owner, but also to expansion activities.
2.4 OBJECTIVES OF MY RESEARCH:
The basic objective of this research work is to assess or know the

importance/usefulness of financial ratios as a tool for evaluating the performance
of companies for investment decision. The secondary objectives are:
1. To study and analyse the financial position of the Company through ratio analysis.
2. To suggest measures for improving the financial performance of organization.
3. To analyse the profitability position of the two company.
4. To assess the return on investment.
5. To analyse the asset turnover ratio.
6. To determine the solvency position of company using Solvency Ratios.
2.5 RESEARCH DESIGN
Research Design is important as it prepares a proper framework within which the

research work/activity will be actually carried out.
The types of research design are enumerated as follows:

EXPLORATORY RESEARCH DESIGN
DESCRIPTIVE RESEARCH DESIGN
CAUSAL RESEARCH DESIGN
1. EXPLORATORY RESEARCH DESIGN:
Exploratory research design is adopted when the researcher does not know how and
why certain phenomenon occurs.
Here, the hypothetical solutions or actions are explored and evaluated by the decision
maker.
The research design for exploratory research is best characterised by its lack of
structure and flexibility.
2. DESCRIPTIVE RESEARCH DESIGN:
Descriptive research design is undertaken when the researcher desires to know the
characteristics of certain groups such as age, sex, occupation, income or education.
Descriptive studies are usually factual and simple. However such studies can be
complex demanding scientific skill on the part of researcher.
3. CAUSAL RESEARCH DESIGN:
Causal Research Design is also known as Diagnostic research. It is important to

remember that causal research focuses only on causes and others analyse the effects.
Causal Research is widely used in business discipline.
In view of the objectives of the study listed above, descriptive research design has been
adopted in this project.

Historical Research is one which is largely interprets and already available information
and it lays particular emphasis on analysis and interpretation of the existing and
available information and provide answers to following issues:
• To know the financial status of the company.
• To know the credit worthiness of the company.
• To offer suggestions based on research finding.
2.6 HYPOTHESIS:
 The word hypothesis is derived from the Greek word “hypo”(under) and
“tithenas”(to place and suggests that when the hypothesis is placed under the
evidence as a foundation they tend to support one another.
 According to Rummel and Balline,”A hypothesis is a statement capable of being
tested and thereby verified of rejected.”
2.6.1 STATEMENT OF HYPOTHESIS
The hypothesis below would be subjected to testing:
Null Hypothesis (Ho):

The use of financial ratios has negative impacts on investment decision for investors when
alternating between two companies.
Alternative Hypothesis (H1):

The use of financial ratios has positive impacts on investment decision for investors while
comparing between two companies.

2.7 DATA COLLECTION METHODS
SOURCES OF
DATA
COLLECTION
SECONDARY
PRIMARY DATA
DATA
Researchers need to consider the sources on which to base and confirm their research and
findings. They have a choice between primary data and secondary sources and the use of
both, which is termed triangulation, or dual methodology.
Primary data is the data collected by the researcher themselves, i.e.
1. Interview
2. Observation
3. Action Research
4. Case Studies
5. Life Histories
6. Questionnaires
7. Ethnographic Research
8. Longitudinal Studies
Secondary sources are data that already exists:
1. Previous Research
2. Official Statistics
3. Mass Media Products
4. Diaries
5. Letters
6. Government Reports

7. Web Information
8. Historical Data And Information
2.8 DATA ANALYSIS
There are many methods of analysing data. One should read up those that are appropriate to
your particular study.
At one extreme is statistical analysis. The steps here are:
 Decide what one is going to measure. Check that the proposed measurements are
valid and sensible. If appropriate check the reliability of the measurements.
 Produce diagrams and/or tables to show the values of your measurements and the
relationships and differences between them. It is more difficult than it might
appear to design tables and diagrams which are clear and unambiguous.
 If appropriate, doing statistical hypothesis tests or work out confidence intervals
to indicate the likely effects of sampling error.
 Writing the report : A standard layout is:
* Abstract
* Acknowledgments (if any)
* Contents
* Introduction (including background and context - this would normally lead

on to the aims in the next chapter)
* Aims of the project (what you intend to achieve)
* Literature review (briefly and critically reviews relevant previous research

and discusses its relation to your study)
* Research design or method (what you did and why)

* Investigation results and analysis

* Conclusions and recommendations (possibly two chapters). One should

also discuss the limitations of the research and possibly include
suggestions for future extensions.
* References
* Appendices (supporting material to which readers may want to refer – e.g.

questionnaires, examples of interview transcripts)
 Whatever the structure of the report, one should, as far as possible, ensure that readers
can check your analysis to see if they accept your conclusions. Above all, please
ensure that the report is clear, concise and does not exceed the permitted length.
 All books and other sources should be clearly referenced using one of the standard
styles. There is a leaflet on this available from the library, but you may find it easier
to copy the style used in a particular academic paper. In my view the easiest style is to
refer to works in the text by the author's name and the date of publication only - for
example, Plato (1956) - and then to list the publications in alphabetical order of
authors' names at the end. Every reference you give in the text should appear in the list
of references at the end - check for Plato (1956) in the references at the end of this
document.
 Analysis of data is a process of inspecting, cleaning, transforming, and
modelling data with the goal of discovering useful information, suggesting
conclusions, and supporting decision-making. Data analysis has multiple facets and
approaches, encompassing diverse techniques under a variety of names, in different
business, science, and social science domains.
 Data mining is a particular data analysis technique that focuses on modeling and
knowledge discovery for predictive rather than purely descriptive
purposes. Business intelligence covers data analysis that relies heavily on
aggregation, focusing on business information. In statistical applications, some
people divide data analysis into descriptive statistics, exploratory data
analysis (EDA), and confirmatory data analysis (CDA). EDA focuses on
discovering new features in the data and CDA on confirming or falsifying existing
hypotheses. Predictive analytics focuses on application of statistical models for
predictive forecasting or classification, while text analytics applies statistical,

linguistic, and structural techniques to extract and classify information from textual
sources, a species of unstructured data. All are varieties of data analysis.
 Data integration is a precursor to data analysis, and data analysis is closely linked
to data visualization and data dissemination. The term data analysis is sometimes
used as a synonym for data modelling.
2.9 LIMITATIONS:
1. First the study of Ratio Analysis is confined only to the Indian Oil Corporation
Limited and Hindustan Petroleum Limited.
2. Secondly the study is based on the annual reports of the company for a period
of 5 years from 2015-16 to 2019-20; the reason for restricting the study to this
period is due time constraint.
3. The study is purely based on secondary data which were taken primarily from
Published annual reports of Indian Oil Corporation Ltd. and Hindustan
Petroleum Corporation Limited.
4. There is no set industry standard for comparison and hence the inference is
made on general standards.
5. The ratio is calculated from past financial statements and these are not
indicators of future.
6. The study is based on only on the past records.
7. The short span of the time provided is also one of limitations.
2.10 SIGNIFICANCE OF THE STUDY & TOOLS TECHNIQUES USED :
1. The technique used for the study is Statistical Analysis.

2. The study is based on the samples collected from the financial statements of both the
companies from their official website.
3. The significance of the study is analysing the ratios of both the companies which gives
us deep insight on how the industry works & to study the inter-firm comparison.

CHAPTER 3: LITERATURE
REVIEW
3.1 Book keeping and Accounting are the fore

runners of Finance. In fact, the science of financial
management is based on Accounting and Economics.
Accounting is defined as the art of recording and
summarizing business transactions and of interpreting
their effect on the affairs and activities of an economic
unit. This definition given long back in 1955, is
referring to management's use of accounting data for quantifying and appraising of the
business activities.
3.1.1 John Myer, a renowned authority on Financial Statements Analysis, has referred that in
the initial years of 20th century, the bankers and securities exchange authorities were
extensively relying on the financial statements of the companies for analysis, monitoring and
control of the activities and performance of businesses. The history, principles and financial
statement analysis has been referred by another authority also: Kennedy and McMullen
3.1.2 Literature on Economics also has a reference to accounting and financial

management. The aim of financial management has been linked with
(1) The field of basic economics, and especially micro economics (use of scarce
resource).
(2) By examining the many and diverse activities and decisions which occupy
financial managers.

3.1.3 Long back (1957), EF Donaldson referred to the importance of business and financial
reporting. He highlighted that the economy depends on the business organizations for goods
and services. United States believes in corporate world. The financial activities of business
enterprises of production and sale are of utmost importance. In his well-known publication
(Corporate Finance, 1957) he has referred to all important aspects of business finance like
organization structure, securities, production, capitalization, working capital, administration
of income, expansion and combinations (mergers), reorganization and readjustments
3.1.4 Robert Anthony, Professor of Accounting and Financial Control at Harvard University
has written many authoritative books on accounting and financial management.
3.1.5 SC Kuchhal, noted Indian authority on Financial Management and Professor of

Finance, IIM, Ahmedabad wrote an authoritative publication on Financial Management way
back in 1969 which served as a valid guide to corporates, banks, financial institutions,
Professors, management students and researchers. He defines Finance as a science of money
3.1.6 The remarkable contributions by other well-known authorities on Financial

Management include:
1) Brigham E F and Houston JF (Fundamentals o f Corporate Finance, 1930)
2) HG Guthman (Analysis of Financial Statements, 1925)
3) Solomon E. (Theory of Financial Management, 1969)
4) Van Home JC (Financial Management and Policy, 1989)
5) Weston J. Fred et. Al. (Managerial Finance, 1981)
6) R A Foulke (Practical Financial Statements Analysis, 1976 )
7) John Myer ( Financial statement Analysis, 1961)
8) H. Black & J. Champion (Accounting in Business Decisions, 1961)
9) HG Guthman & H. Dougall (Corporate Financial Policy, 1955)
10) Carl Moore & Robert Jadicke (Managerial Accounting, 1974)
11) Charles Horngren (Accounting for Management Control, 1974)

12) McMennamin Jim (Financial Management, 2000).
13) RM Srivastav (Financial Decision Making, 1972)
14) Bhattacharya & Dearden (Accounting for Management, 1976)
15) PV Kulkarni (Financial Management, 1972)
16) Prasanna Chandra (Financial Management, 1980)
17) MY Khan & PK Jain (Financial Management, 1981)
18) IM Pandey (Financial Management, 1978)
In the financial literature a lot of importance has been attached to financial ratios for
assessing the financial health of a firm. Financial health will decide the repayment
capacity of the debt sought by any business enterprise.
3.1.7 William Beaver studied important ratios of 79 Companies. These ratios were important
ratios which decided the success and failure of the concerned Companies. The important ratios
identified by this researcher were: (1) Cash flow to total debt. (2) Net income to total assets.
(3) Total debt to total assets. (4) Working capital to total assets. (5) Current ratio. The
failed firms had more debt and lower return on assets. They had less cash but more receivables
as well as low current ratio. The also had less inventory.
3.1.8 In the Indian context, LC Gupta attempted a refinement of Beaver’s method with the
objective of building a forewarning system of corporate sickness. A simple non-parametric test
of measuring the relative differentiating power of the various financial ratios was used. The
study covered cross section of companies falling under various industries. Fifty six (56) ratios
were tested for the period of 1962 to 1974, i.e. for twelve (12) years. As per this study, it was
found that the following five (5) ratios have high degree of predictive power. These are: (1)
Earnings before depreciation, interest and taxes (EBDIT) to Sales. (2) Operating cash
flow (OCF) to Sales. (3) EBDIT/Total assets including accumulated depreciation. (4)
OCF/Total assets including accumulated depreciation. (5) EBDIT/ (Interest + 0.25 Debt)
3.1.9 Another important research was carried out by E.I. Altman which is referred to as
Multiple Discriminant Analysis (MDA). After studying 66 Companies, Altman concluded
that a set of ratios can be developed which has failure predictive power. Altman developed a

discriminant function, covering following ratios. (1) Net working capital/total assets
(percentage). (2) Retained earnings/total assets (percentage). (3) EBIT/total assets
(percentage). (4) Market value of total equity/book value of debt (Percentage). (5) Sales/total
assets (times). The mixed result of these five ratios was Z score, on the basis of which the
firms can be classified either financially sound or otherwise. Eltman found that a score above
2.675 was believed to be healthy. The score below this, warranted overall financial weakness.
In Eltman’s study, half of the firms became bankrupt.
3.1.10 Eltman’s study was refined later on in 1977 which is more broad and 70 % accurate.

CHAPTER 4 : RATIO
ANALYSIS
Ratio analysis is a quantitative method of

gaining insight into a company's liquidity,
operational efficiency, and profitability by studying its financial statements such as the
balance sheet and income statement. Ratio analysis is a cornerstone of fundamental equity
analysis.
4.1 ADVANTAGES OF RATIOS
Ratio analysis is necessary to establish the relationship between two accounting figures
to highlight the significant information to the management or users who can analyse
the business situation and to monitor their performance in a meaningful way. The
following are the advantages of ratio analysis:
(1) It facilitates the accounting information to be summarized and simplified in a

required form.
(2) It highlights the inter-relationship between the facts and figures of various
segments of business.
(3) Ratio analysis helps to remove all type of wastages and inefficiencies.
(4) It provides necessary information to the management to take prompt decision
relating to business.
(5) It helps to the management for effectively discharge its functions such as planning,
organizing, controlling, directing and forecasting.
(6) Ratio analysis reveals profitable and unprofitable activities. Thus, the management
is able to concentrate on unprofitable activities and consider improving the efficiency.

(7) Ratio analysis is used as a measuring rod for effective control of performance of
business activities.
(8) Ratios are an effective means of communication and informing about financial
soundness made by the business concern to the proprietors, investors, creditors and
other parties.
(9) Ratio analysis is an effective tool which is used for measuring the operating results
of the enterprises.
(10) It facilitates control over the operation as well as resources of the business.
(11) Effective co-operation can be achieved through ratio analysis.
(12) Ratio analysis provides all assistance to the management to fix responsibilities.
(13) Ratio analysis helps to determine the performance of liquidity, profitability and
solvency position of the business concern.
4.2 DISADVANTAGES OF RATIOS
Ratio analysis is one of the important techniques of determining the performance of financial
strength and weakness of a firm. Though ratio analysis is relevant and useful technique for the
business concern, the analysis is based on the information available in the financial statements.
There are some situations, where ratios are misused; it may lead the management to wrong
direction. The ratio analysis suffers from the following limitations:
(1) Ratio analysis is used on the basis of financial statements. Number of limitations of
financial statements may affect the accuracy or quality of ratio analysis.
(2) Ratio analysis heavily depends on quantitative facts and figures and it ignores
qualitative data. Therefore this may limit accuracy.
(3) Ratio analysis is a poor measure of a firm's performance due to lack of adequate
standards laid for ideal ratios.
(4) It is not a substitute for analysis of financial statements. It is merely used as a tool for
measuring the performance of business activities.
(5) Ratio analysis clearly has some latitude for window dressing.
(6) It makes comparison of ratios between companies which is questionable due to
differences in methods of accounting operation and financing.

(7) Ratio analysis does not consider the change in price level, as such; these ratios will
not help in drawing meaningful inferences.
4.3 TYPES OF RATIOS:
Ratios can be classified broadly into the following 6 categories. There are sub categories to
each of the below mentioned which shall follow in the coming pages.
LIQUIDITY RATIOS
PROFITABILITY RATIOS
SOLVENCY RATIOS
LEVERAGE RATIOS
EFFICIENCY RATIOS
RATIOS RELEVANT TO
EQUITY SHAREHOLDERS
I. LIQUIDITY RATIOS:
Liquidity refers to the ability of a firm to meet its obligation in the short run, usually a
year. These ratios measure the ability of a firm to meet its current obligations and in
dictate its short term financial stability.
Liquidity is not only a measure of how much cash a business has. It is also a measure
of how easy it will be for the company to raise enough cash or convert assets into cash.
Assets like accounts receivable, trading securities, and inventory are relatively easy for
many companies to convert into cash in the short term. Thus, all of these assets go into
the liquidity calculation of a company.
The most basic liquidity ratio or metric is the calculation of working capital. Working
capital is the difference between current assets and current liabilities. If a business has
a positive working capital, this indicates it has more current assets than current

liabilities and in the event of an emergency; the business can pay all of its short-term
debts. A negative working capital indicates that a company is illiquid. It covers the
following ratios:
LIQUIDITY RATIOS CURRENT RATIO
LIQUID RATIO
1. CURRENT RATIO
The current ratio is a liquidity ratio that measures a company's ability to pay short-
term and long-term obligations. To gauge this ability, the current ratio considers the
current total assets of a company (both liquid and illiquid) relative to that company’s
current total liabilities. The formula for calculating a company’s current ratio is:
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES
The current ratio is called “current” because, unlike some other liquidity ratios, it
incorporates all current assets and liabilities.
The current ratio is also known as the working capital ratio. Normally, the current
ratio is considered safe and sound if it is 2:1 or more.
ADVANTAGES OF CURRENT RATIOS:
(1) Current ratio helps to measure the liquidity of a firm.

(2) It represents general picture of the adequacy of the working capital position of
a company.
(3) It indicates liquidity of a company.

(4) It represents a margin of safety, i.e., cushion of protection against current

creditors.
(5) It helps to measure the short-term financial position of a company or short-
term solvency of a firm.
DISADVANTAGES OF CURRENT RATIO:
(1) Current ratios cannot be appropriate to all businesses it depends on many other
factors.
(2) Window dressing is another problem of current ratio for example, overvaluation
of closing stock.
(3) It is a crude measure of a firm's liquidity only on the basis of quantity and not
quality of current assets.
2. QUICK RATIO
The liquid ratio is the relationship between liquid assets and liquid liabilities. It is
designed to show the amount of cash available for meeting immediate payments. It
is one of the strongest measures of liquidity of a firm. It is also known as acid test
ratio, liquid ratio. The formula for calculating a company’s quick ratio is:
QUICK RATIO = LIQUID ASSETS / LIQUID LIABILITIES
Liquid assets mean all current assets except inventories and prepaid expenses.
Similarly, liquid liabilities mean all current liabilities except bank overdrafts.
Normally, liquid ratio of 1:1 is indicative of a firm having good short term
liquidity.
II. PROFITABILITY RATIOS

Profitability is the final result of business operations. Every business organisation has
to earn profit in order to survive and grow. Therefore it is necessary to know whether
it is earning adequate profits. Profitability ratios compare income statement accounts
and categories to show a company's ability to generate profits from its operations.

Investors and creditors can use profitability ratios to judge a company's return on
investment based on its relative level of resources and assets. In other words,
profitability ratios can be used to judge whether companies are making enough
operational profit from their assets. In this sense, profitability ratios relate to efficiency
ratios because they show how well companies are using their assets to generate profits.
Profitability is also important to the concept of solvency and going concern.
It covers the following ratios:
GROSS PROFIT
PROFITABILITY RATIOS RATIO
OPERATING PROFIT
TO SALES RATIO
NET PROFIT RATIO
RETURN ON
INVESTMENT RATIO
RETURN ON EQUITY
RATIO
1. GROSS PROFIT RATIO

Gross Profit Ratio established the relationship between gross profit and net sales.
This ratio is calculated by dividing the Gross Profit by Sales. It is usually indicated
as percentage. The formula for calculating the gross profit ratio is:
GROSS PROFIT RATIO = GROSS PROFIT / NET SALES X 100
Higher Gross Profit Ratio is an indication that the firm has higher profitability. It
also reflects the effective standard of performance of firm's business. Higher Gross
Profit Ratio will be result of the following factors.
(1) Increase in selling price, i.e., sales higher than cost of goods sold.
(2) Decrease in cost of goods sold with selling price remaining constant.
(3) Increase in selling price without any corresponding proportionate increase in
cost.

(4) Increase in the sales mix.
A low gross profit ratio generally indicates the result of the following factors :
(l) Increase in cost of goods sold.
(2) Decrease in selling price.
(3) Decrease in sales volume.
(4) High competition.
(5) Decrease in sales mix.
Advantages of Gross Profit Ratio:

(1) It helps to measure the relationship between gross profit and net sales.
(2) It reflects the efficiency with which a firm produces its product.
(3) This ratio tells the management, that a low gross profit ratio may indicate
unfavourable purchasing and mark-up policies.
(4) A low gross profit ratio also indicates the inability of the management to
increase sales.
2. OPERATING PROFIT TO SALES RATIO:

Operating Ratio is calculated to measure the relationship between total operating
expenses and sales. The total operating expenses is the sum total of cost of goods
sold, office and administrative expenses and selling and distribution expenses. In
other words, this ratio indicates a firm's ability to cover total operating expenses. In
order to compute this ratio, the following formula is used:
OPERATING PROFIT TO SALES RATIO = OPERATING COST / NET SALES X 100
Operating Cost = Cost of goods sold + Administrative Expenses+ Selling and

Distribution Expenses
Net Sales = Sales - Sales Return (or) Return Inwards.
3. NET PROFIT RATIO

Net Profit Ratio is also termed as Sales Margin Ratio (or) Profit Margin Ratio (or)
Net Profit to Sales Ratio. This ratio reveals the firm's overall efficiency in operating
the business. Net profit Ratio is used to measure the relationship between net profit
(either before or after taxes) and sales. This ratio can be calculated by the following
formula:
NET PROFIT RATIO = NET PROFIT AFTER TAX / NET SALES X 100
Net profit includes non-operating incomes and profits. Non-Operating Incomes

such as dividend received, interest on investment, profit on sales of fixed assets,
commission received, discount received etc. Profit or Sales Margin indicates margin
available after deduction cost of production, other operating expenses, and income
tax from the sales revenue. Higher Net Profit Ratio indicates the standard
performance of the business concern.
ADVANTAGES OF NET PROFIT RATIO:
(1) This is the best measure of profitability and liquidity.

(2) It helps to measure overall operational efficiency of the business concern.
(3) It facilitates to make or buy decisions.
(4) It helps to determine the managerial efficiency to use a firm's resources to
generate income on its invested capital.
(5) Net Profit Ratio is very much useful as a tool of Investment Evaluation.
4. RETURN ON INVESTMENT RATIO

This is a measure of efficiency and it provides a starting point for analysing the
influences and trends in a firm’s performance. This ratio is also called as ROI. This
ratio measures a return on the owner's or shareholders' investment. This ratio
establishes the relationship between net profit after interest and taxes and the
owner's investment. The Return on Investment can be calculated by employing the
following formula:
RETURN ON INVESTMENT = PROFIT / CAPITAL EMPLOYED X 100

Profit for this purpose means net profit before interest, taxes and abnormal and non-
recurring gains and losses.
Capital employed for this purpose, can be determined as follows:
(a) Gross Capital Employed = Fixed Assets + Current Assets OR
(b) Net Capital Employed = Fixed Assets + Current Assets – Current Liabilities OR
(c) Proprietor’s Net Capital Employed = (Fixed Assets + Current Assets)-(Current
Liabilities + Long Term Borrowings) OR
(d) Capital Employed = Equity Capital + Preference Capital + Reserves & Surplus
– Fictitious Assets
ADVANTAGES OF RETURN ON INVESTMENT RATIO:
(1) This ratio highlights the success of the business from the owner's point of view
or perspective.
(2) It helps to measure an income on the shareholders' or proprietor' investments.
(3) This ratio helps to the management for important decision making
(4) It facilitates in determining efficiently handling of owner's investment.
5. RETURN ON EQUITY RATIO

Return on equity (ROE) is the amount of net income returned as a percentage
of shareholders equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders have
invested. ROE is expressed as a percentage and calculated as:
RETURN ON EQUITY RATIO = NET PROFIT AFTER TAX/

SHAREHOLDER’S EQUITY X 100
Net income is for the full fiscal year (before dividends paid to common
stock holders but after dividends to preferred stock) Shareholder's equity does not
include preferred shares. It is also known as "return on net worth" (RONW).
The true benefit of a high return on equity comes from a company's earnings being
reinvested into the business or distributed as a dividend. In fact, return on equity is
presumably irrelevant if earnings are not reinvested or distributed.

A big problem with return on equity is that it does not take into consideration the
amount of debt of a company. It only takes into consideration the net income and
the shareholders equity. Therefore, a company could have massive amounts of
excessive debt and still look like it is handling things well according to the return
on equity calculation. Even though it might show a good ratio, it could be close to
crumbling because it has more debt than it can handle.
III. SOLVENCY RATIOS

Solvency of a firm is indicated by its ability to meet its immediate commitments.
Whether the firm is solvent or otherwise is determined by adequacy of its quick assets
as compared to its immediate liabilities. The solvency ratios are a sub set of other
financial ratios.
Moreover, the solvency ratio quantifies the size of a company's after tax income, not
counting non-cash depreciation expenses, as contrasted to the total debt obligations of
the firm. A solvent company is one that owns more than it owes; in other words, it has
a positive net worth and a manageable debt load. The different ratios included in this
category are as follows:
SOLVENCY RATIOS
CURRENT RATIO
LIQUID RATIO
PROPRIETARY
RATIO
DEBT EQUITY
RATIO
INTEREST
COVERAGE RATIO

Current and Liquid Ratio have already been mentioned under the Liquidity ratios. So,
I will proceed to explain the other three ratios of solvency.
1. PROPRIETARY RATIO
The proprietary ratio (also known as the equity ratio) is the proportion of
shareholders' equity to total assets, and as such provides a rough estimate of the
amount of capitalization currently used to support a business. If the ratio is high,
this indicates that a company has a sufficient amount of equity to support the
functions of the business, and probably has room in its financial structure to take on
additional debt, if necessary. Conversely, a low ratio indicates that a business may
be making use of too much debt or trade payables, rather than equity, to support
operations (which may place the company at risk of bankruptcy).
The proprietary ratio is not a clear indicator of whether or not a business is properly
capitalized. For example, an excessively high ratio can mean that management has
not taken advantage of any debt financing, so the company is using nothing but
expensive equity to fund its operations. Instead, there is a balance between too high
and too low a ratio, which is not easy to discern.
Also, the ratio is not necessarily a good indicator of long-term solvency, since it
does not make use of any information on the income statement, which would
indicate profitability or cash flows. The formula for calculation of this ratio is
PROPRIETARY RATIO = NET WORTH / TOTAL ASSETS
Assumptions of Proprietary Ratio:
 Depends on Risk Appetite: The ideal value of the proprietary ratio of the company
depends on the risk appetite of the investors. If the investors agree to take a large
amount of risk, then a lower proprietary ratio is preferred. This is because, more
debt means more leverage means profits and losses both will be magnified. The
result will be highly uncertain payoffs for the investors.

On the other hand, if investors are from the old school of thought, they would prefer
to keep the proprietary ratio high. This ensures less leverage and more stable returns
to the shareholders.
 Depends on Stage of Growth: The ideal value of the proprietary ratio also depends
upon the stage of growth the company is in. Most companies require a lot of capital
when they are at the early stages. Issuing too much equity could dilute the earnings
potential at this stage. Therefore a lower proprietary ratio would be desirable at such
a stage allowing the firm to access the capital it wants at a lower cost.
 Depends on Nature of Business: The firm has to undertake many risks and balance
them out. There are market risks which are external to the firm and there are capital
structure risks that are internal to the firm. If the external risks are high, the firm
must not undertake aggressive financing because this could lead to a complete
washout of the firm. On the other hand, if the external environment is stable, the
firm can afford to take more risks.
The proprietary ratio should not be too high or too low. Normally, 60% to 75% of
the total assets can be financed by proprietor’s funds. However, the optimum
proprietary ratio depends upon the type of business. Thus the general principle
is that the outside liabilities should be kept within such limits that the company can
be in confident position to face the adverse possibilities of business depression
without fear of insolvency. In other words, the higher the share of proprietor’s
capital in the total capital of the company, the less is the likelihood of insolvency in
future.
2. DEBT-EQUITY RATIO
This ratio also termed as External - Internal Equity Ratio. This ratio is calculated
to ascertain the firm's obligations to creditors in relation to funds invested by the

owners. The ideal Debt Equity Ratio is 2:1. This ratio also indicates all external
liabilities to owner recorded claims.
Expressed as a percentage, the debt to equity ratio shows the proportion of equity
and debt a firm is using to finance its assets, and the ability for shareholder equity
to fulfil obligations to creditors in the event of a business decline. A low debt-to-
equity ratio indicates lower risk, since debt holders have fewer claims on the
company's assets.
A higher debt-to-equity ratio, on the other hand, shows that a company has been
aggressive in financing its growth with debt, and there may be a greater potential
for financial distress if earnings do not exceed the cost of borrowed funds.
The formula for debt to equity ratio is as follows:
DEBT-EQUITY RATIO = TOTAL DEBT / EQUITY
The total debt includes preference shares, debentures and long term loans. The
preference shares can be considered under equity if it is redeemable after 12 years.
Significance: This ratio indicates the proportion of owner's stake in the business.
Excessive liabilities tend to cause insolvency. This ratio also tells the extent to
which the firm depends upon outsiders for its existence.
3. INTEREST COVERAGE RATIO

The interest coverage ratio is a financial ratio that measures a company’s ability to
make interest payments on its debt in a timely manner. Unlike the debt service
coverage ratio, this liquidity ratio really has nothing to do with being able to make
principle payments on the debt itself. Instead, it calculates the firm’s ability to afford
the interest on the debt.
Creditors and investors use this computation to understand the profitability and risk
of a company. For instance, an investor is mainly concerned about seeing his
investment in the company increase in value. A large part of this appreciation is
based on profits and operational efficiencies. Thus, investors want to see that their
company can pay its bills on time without having to sacrifice its operations and
profits.

A creditor, on the other hand, uses the interest coverage ratio to identify whether a
company is able to support additional debt. If a company can’t afford to pay the
interest on its debt, it certainly won’t be able to afford to pay the principle payments.
Thus, creditors use this formula to calculate the risk involved in lending. The
formula for calculation of this ratio is:
Interest Coverage Ratio = Profit Before Interest & Taxes / Interest on Debt
It is calculated for each accounting period. If the interest coverage ratio is high,
that means the firm can easily meet its interest burden even if the profit before
interest and taxes suffer a considerable decline. On the other hand, a low interest
coverage ratio may result in financial difficulties when profits before interests and
taxes decline.
IV. LEVERAGE RATIOS
Leverage is an ability of a company to use fixed cost assets or funds to magnify the
return to its owners. The leverage ratios are useful as an analytical tool for creditors,
financial institutions and debenture holders. They are a measure of the extent to which
company finances its assets through debt and are indicators of the financial risk.
Leverage is important because a company’s rate of return on assets is in excess of
interest rate, the profits to equity investors are magnified in direct proportions to
increase in leverage.
Companies rely on a mixture of owner’s equity and debt to finance their operations. A
leverage ratio is any one of several financial measurements that look at how
much capital comes in the form of debt (loans), or assesses the ability of a company to
meet financial obligations. It covers the following ratios:

LEVERAGE RATIOS
INTEREST COVERAGE
RATIO
DEBT-EQUITY RATIO
SHAREHOLDER'S EQUITY
TO TOTAL CAPITAL
FUNDED DEBT TO NET

WORKING CAPITAL
Interest Coverage and Debt- Equity Ratio has been explained in the previous category
of Solvency Ratios. The other two ratios are explained as below.
1. SHAREHOLDER’S EQUITY TO TOTAL CAPITAL

RATIO
This ratio is used to determine the long term solvency of the company.
Given, normally efficient management, the higher the share of owned
capital, the less is the likelihood of insolvency in future. In general, if the
equity ratio is lower, the earnings of the company can be more stable. It will
be considered acceptable and safe. This ratio refers to a financial
ratio indicative of the relative proportion of equity applied to finance the
assets of a company. This ratio equity ratio is a variant of the debt-to-equity-
ratio and is also, sometimes, referred as net worth to total assets ratio. The
equity ratio communicates the shareholder’s funds to total assets in addition
to indicating the long-term or prospective solvency position of the business.
The equity ratio throws light on a company’s overall financial strength.
Besides, it is also treated as a test of the soundness of the capital structure.
A higher equity ratio or a higher contribution of shareholders to the capital
indicates a company’s better long-term solvency position. A low equity
ratio, on the contrary, includes higher risk to the creditors.

Companies having a higher equity ratio have to pay less interest thus having
more free cash on hand for future expansions, growth, and dividends. On
the contrary, a company with a lower equity ratio is more prone to losses for
a large portion of its earnings is spent in paying interests. Besides
a higher equity ratio provides a freer access to capital at lower interest rates.
A lower equity ratio, on the other hand, makes it difficult for a company to
obtain loan from banks and other financial institutions. If, in any case, they
manage to get a loan, it is at comparatively higher interest rates.
The formula for calculation of shareholder’s equity to total capital ratio is
as follows:
SHAREHOLDER’S EQUITY TO TOTAL CAPITAL RATIO = OWNED

CAPITAL / TOTAL CAPITAL
Owned capital in the above mentioned formula equals Equity Capital +

Reserves and Total Capital refers to Fixed Assets + Working Capital.
2. FUNDED DEBT TO NET WORKING CAPITAL RATIO:
This ratio is used to measure the company’s ability to retire funded debt by
using available relatively liquid assets. This ratio can be calculated using the
following formula:
FUNDED DEBT TO NET WORKING CAPITAL RATIO = FUNDED DEBT /

NET WORKING CAPITAL
Funded Debt is a debt with maturity of more than one year which includes
bonds, debentures, term loans and mortgages. The net working capital is the
difference between current assets and current liabilities.
This ratio helps in examining creditors’ contribution on the liquid assets of
the company. IF net working capital is less than the funded debt, difficulty
in meeting financial obligation is likely to arise in the long run.

V. EFFICIENCY RATIOS
Efficiency ratios also called activity ratios measure how well companies utilize their
assets to generate income. Efficiency ratios often look at the time it takes companies to
collect cash from customer or the time it takes companies to convert inventory into
cash—in other words, make sales. These ratios are used by management to help
improve the company as well as outside investors and creditors looking at the
operations of profitability of the company.
Efficiency ratios go hand in hand with profitability ratios. Most often when companies
are efficient with their resources, they become profitable. Wal-Mart is a good example.
Wal-Mart is extremely good at selling low margin products at high volumes. In other
words, they are efficient at turning their assets. Even though they don't make much
profit per sale, they make a ton of sales. Each little sale adds up.
Efficiency ratios are useful for measuring the company’s managerial efforts in
managing inventories, production process, credit and assets and effectiveness of
marketing and sales force. These are very useful in judging the performance of the
company. These ratios indicate the managerial capabilities in effectively utilizing the
assets of the company.
The various ratios included in the Efficiency Ratios are as follows:
AVERAGE COLLECTION
PERIOD
EFFICIENCY RATIOS
INVENTORY TURNOVER
TOTAL ASSETS TURNOVER
NET WORTH TURNOVER
NET WORKING CAPITAL

TURNOVER

1. AVERAGE COLLECTION PERIOD
An average collection period shows the average number of days necessary to

convert business receivables into cash. The degree to which this is useful for a
business depends on the business's relative reliance on credit sales to generate
revenue; a high balance in accounts receivable can be a major liability.
In terms of business management, the average collection period is an extension of

operating efficiency. Much like the receivables turnover ratio, the average
collection period can be used in conjunction with liquidity ratios to highlight
problems in cash flow or solvency. This ratio is an indication of the company’s
credit policies and aggressiveness in collecting its receivables by sales per day.
The formula for calculation of this ratio is as follows:
AVERAGE COLLECTION PERIOD = RECEIVABLES / CREDIT SALES X 360
The Receivables includes debtors and bills receivables. The average collection
period should be close to sales terms granted by the company.
The average collection period represents the average number of days between the date
a credit sale is made and the date payment is received from the credit sale.
When calculating the average collection period for an entire year, 360 may be used as
the number of days in one year for simplicity.
2. INVENTORY TURNOVER RATIO

Inventory turnover is a ratio showing how many times a company's inventory is
sold and replaced over a period of time. The days in the period can then be divided
by the inventory turnover formula to calculate the days it takes to sell the inventory
on hand.
Inventory turnover measures how fast a company is selling inventory and is
generally compared against industry averages. A low turnover implies weak sales

and, therefore, excess inventory. A high ratio implies either strong sales and/or
large discounts.
The speed with which a company can sell inventory is a critical measure of business
performance. It is also one component of the calculation for return on assets (ROA);
the other component is profitability. The return a company makes on its assets is a
function of how fast it sells inventory at a profit. As such, high turnover means
nothing unless the company is making a profit on each sale.
The formula for calculation of inventory turnover ratio is as follows:
INVENTORY TURNOVER RATIO = COST OF GOODS SOLD / AVERAGE

STOCK
Cost of goods sold is the difference between net sales and operating profit. Average
inventory is the average opening and closing inventory of a particular year.
A high inventory turnover ratio indicates that smaller amount is blocked in
inventory and which requires less amount of working capital. A high inventory
turnover ratio also indicates that the manufacturing activity is capable of being
sustained with the help of smaller inventory and consequently the chances of
absolute stock are less.
3. TOTAL ASSETS TURNOVER RATIO

This is a financial ratio that measures the efficiency of a company's use of its assets
in generating sales revenue or sales income to the company.
Companies with low profit margins tend to have high asset turnover, while those
with high profit margins have low asset turnover. Companies in the retail industry
tend to have a very high turnover ratio due mainly to cut-throat and competitive
pricing.
It is a measure of the company’s overall effectiveness in generating sales.
TOTAL ASSETS TURNOVER RATIO = NET SALES / TOTAL ASSETS

Asset turnover is typically calculated over an annual basis using either

the fiscal or calendar year. The total assets number used in the denominator can be
calculated by taking the average of assets held by a company at the beginning of
the year and at the year’s end.
4. NET WORTH TURNOVER RATIO

The net worth ratio states the return that shareholders could receive on their
investment in a company, if all of the profit earned were to be passed through
directly to them. Thus, the ratio is developed from the perspective of the
shareholder, not the company, and is used to analyse investor returns.
The ratio is useful as a measure of how well a company is utilizing the shareholder
investment to create returns for them, and can be used for comparison purposes with
competitors in the same industry.
NET WORTH TURNOVER RATIO = TOTAL ASSETS – TOTAL

LIABILITIES *100
Net worth is the amount by which assets exceed liabilities. Net worth is a concept
applicable to individuals and businesses as a key measure of how much an entity is
worth. A consistent increase in net worth indicates good financial health;
conversely, net worth may be depleted by annual operating losses or a substantial
decrease in asset values relative to liabilities. In the business context, net worth is
also known as book value or shareholder’ equity.
If the net worth turnover ratio is less than the industry average, it indicates that the
company has been using less efficient use of equity financing.
5. NET WORKING CAPITAL TURNOVER RATIO:

The working capital turnover ratio measures how well a company is utilizing
its working capital to support a given level of sales. Working capital is current
assets minus current liabilities.

Working capital turnover is a measurement comparing the depletion of working

capital used to fund operations and purchase inventory, which is then converted into
sales revenue for the company. The working capital turnover ratio is used to analyse
the relationship between the money that funds operations and the sales generated
from these operations.
NET WORKING CAPITAL TURNOVER RATIO = NET SALES / NET

WORKING CAPITAL
A high working capital turnover ratio shows a company is running smoothly and
has limited need for additional funding. Money is coming in and flowing out on a
regular basis, giving the business flexibility to spend capital on expansion or
inventory. A high ratio may also give the business a competitive edge over similar
companies.
However, an extremely high ratio, typically over 80%, may indicate a business
does not have enough capital supporting its sales growth. Therefore, the company
may become insolvent in the near future. The indicator is especially strong when
the accounts payable (AP) component is very high, indicating that management
cannot pay its bills as they come due. For example, gold mining and silver mining
have average working capital turnover ratios of approximately 82%. Gold and silver
mining requires on-going capital investment for replacing, modernizing and
expanding equipment and facilities, as well as finding new reserves. An excessively
high turnover ratio may be discovered by comparing the ratio for a specific business
to ratios reported by other companies in the industry.
If net working capital turnover ratio is less than the industry average, it indicates
that the company is efficiently managed.
VI. RATIOS RELEVANT FOR EQUITY SHAREHOLDERS

There are two important sources from which you can get shareholder’s equity. The first
source is the money originally invested in the company and all the other investments
that are made in the company after the initial payment and the second source is the
earnings that the company has retained over a period of time through its operations.
Shareholders equity is the amount that shows how the company has been financed with
the help of common shares and preferred shares. Shareholders equity is also called
Share Capital, Stockholder’s Equity or Net Worth.
The shareholders want greater returns from the company for the capital invested and
use the following ratios to determine the stability of the firm.
EARNING PER SHARE
PRICE TO EARNING RATIO

RATIOS FOR EQUITY
DIVIDEND PAYOUT RATIO

SAREHOLDERS
DIVIDEND YEILD RATIO
BOOK VALUE PER SHARE
RETURN ON NETWORTH RATIO
CAPITAL GEARING RATIO
DIVIDEND COVER
1. EARNING PER SHARE (EPS)

Earning per Share, simply put, is the profit earned by each share. It is calculated on
the basis of number of shares outstanding in a company.
Earning per share, also called net income per share, is a market prospect ratio that
measures the amount of net income earned per share of stock outstanding. In other
words, this is the amount of money each share of stock would receive if all of the
profits were distributed to the outstanding shares at the end of the year.
Earning per share is also a calculation that shows how profitable a company is on a
shareholder basis. So a larger company's profits per share can be compared to

smaller company's profits per share. Obviously, this calculation is heavily

influenced on how many shares are outstanding. Thus, a larger company will have
to split its earning amongst many more shares of stock compared to a smaller
company.
The formula for EPS is as follows:
EARNING PER SHARE = PROFIT AFTER TAX – PREFERRED DIVIDEND /

NO. OF EQUITY SHARES
You'll notice that the preferred dividends are removed from net income in the
earnings per share calculation. This is because EPS only measures the income
available to common stockholders. Preferred dividends are set-aside for the
preferred shareholders and can't belong to the common shareholders.
This is the most important ratio for investors. The shareholder should know the
earnings that he receives on his share. Higher the EPS, the better is the chance of
getting income on investment as well as capital appreciation. The investors can
compare the EPS of different companies in the same industry and take the decision
regarding their investment.
2. PRICE TO EARNINGS RATIO (P/E RATIO)

The price earnings ratio, often called the P/E ratio or price to earnings ratio, is a
market prospect ratio that calculates the market value of a stock relative to its
earnings by comparing the market price per share by the earnings per share. In
other words, the price earnings ratio shows what the market is willing to pay for a
stock based on its current earnings.
Investors often use this ratio to evaluate what a stock's fair market value should be
by predicting future earnings per share. Companies with higher future earnings are
usually expected to issue higher dividends or have appreciating stock in the future.
The PE ratio helps investors analyse how much they should pay for a stock based
on its current earnings.
The formula for calculation of P/E Ratio is as follows:

P/E RATIO = MARKET PRICE PER SHARE (MPS) / EARNING PER SHARE
(EPS)
It is an overall measure of the desirability of a company.

A company with a high P/E ratio usually indicated positive future performance
and investors are willing to pay more for this company's shares.
A company with a lower ratio, on the other hand, is usually an indication of poor
current and future performance. This could prove to be a poor investment.
In general a higher ratio means that investors anticipate higher performance and
growth in the future. It also means that companies with losses have poor PE ratios.
3. DIVIDEND PAY-OUT RATIO:

The dividend pay-out ratio measures the percentage of net income that is distributed
to shareholders in the form of dividends during the year. In other words, this ratio
shows the portion of profits the company decides to keep funding operations and
the portion of profits that is given to its shareholders.
Investors are particularly interested in the dividend pay-out ratio because they want
to know if companies are paying out a reasonable portion of net income to
investors.
A proper dividend pay-out ratio is dependent upon the company’s ability to invest
retained earnings.
It is the ratio of dividends per share to earnings per share. It is also ratio of total
dividends to net income.
The formula for calculation of the Dividend Pay-out Ratio is as follows:
DIVIDEND PAY-OUT RATIO = DIVIDEND PER SHARE (DPS) / EARNING

PER SHARE (EPS)
OR
DIVIDEND PAY-OUT RATIO = TOTAL DIVIDENDS / NET INCOME
For instance, most start-up companies and tech companies rarely give dividends at all.
In fact, Apple, a company formed in the 1970s, just gave its first dividend to
shareholders in 2012.
Conversely, some companies want to spur investors' interest so much that they are
willing to pay out unreasonably high dividend percentages. Inventors can see that these
dividend rates can't be sustained very long because the company will eventually need
money for its operations.
4. DIVIDEND YIELD RATIO:

The dividend yield is a financial ratio that measures the amount of cash dividends
distributed to common shareholders relative to the market value per share. The
dividend yield is used by investors to show how their investment in stock is
generating either cash flows in the form of dividends or increases in asset value by
stock appreciation.
Investors invest their money in stocks to earn a return either by dividends or stock
appreciation. Some companies choose to pay dividends on a regular basis to spur
investors' interest. These shares are often called income stocks. Other companies
choose not to issue dividends and instead reinvest this money in the business.
These shares are often called growth stocks.
The formula for dividend yield ratio is as follows:
DIVIDEND YIELD RATIO = DIVIDEND PER SHARE (DPS) / MARKET

PRICE PER SHARE (MPS)
An investor gains from both capital appreciation and dividends. Dividend is a

regular income. The investor would like to know the yield or relationship which the
rate of dividend bears to the market price of the share. His primary interest is the
amount of return that he’ll get through dividends in relation to the price he paid for
the share.

Investors use the dividend yield formula to compute the cash flow they are getting
from their investment in stocks. In other words, investors want to know how much
dividends they are getting for every rupee that the stock is worth.
A company with a high dividend yield pays its investors a large dividend compared
to the fair market value of the stock. This means the investors are getting highly
compensated for their investments compared with lower dividend yielding stocks.
A high or low dividend yield is relative to the industry of the company. As I
mentioned above, tech companies rarely give dividends at all. So even a small
dividend might produce a high dividend yield ratio for the tech industry. Generally,
investors want to see a yield as high as possible.
5. BOOK VALUE PER SHARE:

Book value per common share is a measure used by owners of common shares in a
firm to determine the level of safety associated with each individual share after all
debts are paid accordingly.
The book value per share is the measure of the historical cost value of a
company’s assets on a per share basis.
The book value per common share is an accounting measure based on historical
transactions. The book value of common equity in the numerator reflects the
original proceeds a company receives from issuing common equity, increased by
earnings or decreased by losses, and decreased by dividends paid out. A
company's stock buybacks decrease the book value and total common share count.
Stock repurchases occur at current stock prices, which can result in significant
reductions in a company's book value per common share.
The formula for Book Value per Share is as follows:
BOOK VALUE PER SHARE = EQUITY SHARE CAPITAL + RESERVES &

SURPLUS / NUMBER OF EQUITY SHARES

The difference between Market Value per Share and Book Value per Share is
that the market value per share is a company's current stock price, and it reflects
a value that market participants are willing to pay for its common share. The book
value per share is calculated using historical costs, but the market value per share is
a forward-looking metric that takes into account a company's earning power in the
future. With increases in a company's estimated profitability, expected growth and
safety of its business, the market value per share grows higher. Significant
differences between the book value per share and the market value per share arise
due to the ways in which accounting principles look upon certain transactions.
Book Value per Share is also different from face value of a share. Book value may
be higher or lower than the face value. If Book Value is higher than face value,
it indicates that the company has made profits and has accumulated reserves. A
high book value denotes a high reserve and profits and good past performance of
the company. It also denotes that the company may consider a bonus issue in the
future.
6. RETURN ON NET WORTH RATIO:

Return on Net Worth is a measure for judging the returns that a shareholder gets on
his investment. It reveals how much profit a company generates with the money
that equity shareholders have invested.
Return On Net Worth is useful to investors to determine if the company has made
proper use of shareholder’s funds.
The formula for Return On Net Worth is as follows:
RETURN ON NET WORTH RATIO = NET PROFIT / NET WORTH X 100
Net Profit is taken as after tax profits and net worth is equal to equity capital plus
reserves and surplus. This is significant because Indian accounting norms do not
include the premium amount in the share capital but it is included in the reserves
and surplus. If the investors want to invest in a company’s share, its Return On
Net Worth should be more than 15 per cent.
7. CAPITAL GEARING RATIO:

Capital gearing ratio is mainly used to analyse the capital structure of a company.
The term capital structure refers to the relationship between the various long-term
form of financing such as debentures, preference and equity share capital
including reserves and surpluses. Leverage of capital structure ratios is
calculated to test the long-term financial position of a firm.
The term “capital gearing” or “leverage” normally refers to the proportion of
relationship between equity share capital including reserves and surpluses to
preference share capital and other fixed interest bearing funds or loans. In other
words it is the proportion between the fixed interest or dividend bearing funds and
non-fixed interest or dividend bearing funds. Equity share capital includes equity
share capital and all reserves and surpluses items that belong to shareholders. Fixed
interest bearing funds includes debentures, preference share capital and other long-
term loans.
Capital gearing is the degree to which a company acquires assets or to which it

funds its on-going operations with long- or short term debt. Capital gearing will
differ between companies and industries, and will often change over time. The
formula for this ratio is as following:
CAPITAL GEARING RATIO = (PREFERENCE CAPITAL + DEBENTURES

+ TERM LOANS) / (EQUITY SHARE CAPITAL + RESERVES)
This ratio brings out the relationship between the equity share capital and preference
share capital plus long term borrowings. This is also known as Capital Structure
Ratio or Financial Leverage Ratio. It is also the relationship between capital
entitled to fixed rate of interest or dividend and capital not so entitled. If the equity
capital is higher than the preference capital, debentures and term loans, the
company is said to be low geared and vice versa.

This ratio also indicates the extent of trading on equity which means taking
advantage of equity capital to borrowed capital on reasonable basis. It is the
arrangement of using borrowed funds carrying a fixed rate of interest in such a way
so as to increase the rate of return on the equity shares. A company which is highly
geared has greater prospects of higher profits.
8. DIVIDEND COVER RATIO

Dividend Coverage Ratio states the number of times an organization is capable of
paying dividends to shareholders from the profits earned during an accounting
period. Dividend Coverage Ratio indicates the capacity of an organization to pay
dividends out of profit attributable to the shareholders. A dividend cover of 3
implies that a company has sufficient earnings to pay dividends amounting to 3
times of the present dividend pay-out during the period. When calculating
dividend coverage for ordinary share capital, it is necessary to deduct any dividend
paid on irredeemable preference shares from the net profit earned during the
accounting period in order to arrive at the earnings attributable to ordinary
shareholders. Dividend on redeemable preference shares is already deducted from
the income statement as interest expense (finance cost) and hence no further
adjustment is required in its respect in the dividend cover calculation.
The formula for Dividend Cover Ratio is as follows:
DIVIDEND COVER RATIO = EARNINGS PER SHARE (EPS) / DIVIDEND PER

SHARE (DPS)
Dividend Ratio is the reciprocal of the Dividend Pay-out Ratio. It is calculated

to find out the ties the dividend is protected in terms of earnings. Dividend Policy
is significant in affecting price earnings ratio. With higher dividend ratio, equity
price goes up and thus raises price earnings ratio. Dividend rates are raised to push
in share prices up.

CHAPTER 5 : A BRIEF PROFILE AND STUDY OF

SELECTED COMPANIES.
5.1 INDIAN OIL CORPORATION LIMITED (IOCL)
Indian Oil Corporation Ltd (Indian Oil) is India's flagship national oil company with
business interests straddling the entire hydrocarbon value chain - from refining
pipeline transportation and marketing of petroleum products to exploration &
production of crude oil & gas marketing of natural gas and petrochemicals. It is
ranked 1st in Fortune India 500 list for year 2016 also it retains the top spot as
India’s Highest ranked PSU in Fortune Global 500 list of world's largest companies
in the year 2020. The company's operations include refineries pipelines and
marketing. As of 2020, IndianOil's employee strength is 33,498. Their portfolio of

brands includes Indane LPGas, SERVO lubricants, XTRAPREMIUM petrol and

XTRAMILE diesel and Propel Petrochemicals.
In exploration and production Indian Oil's domestic portfolio includes 11 oil and
gas blocks and two coal bed methane blocks while the overseas portfolio consists
of 10 blocks spread across Libya Iran Gabon Nigeria Timor-Leste Yemen and
Venezuela. Indian Oil Corporation Ltd was established in the year 1959 as Indian
Oil Company Ltd. In the year 1964 Indian Refineries Ltd merged with Indian Oil
Corporation Ltd. Indian Oil Blending Ltd a wholly owned subsidiary was merged
with Indian Oil on May 2006. The company transferred their entire equity holding
in Indian Strategic Petroleum Reserves Ltd (ISPRL) to the Oil Industry
Development Board a government body functioning under the Ministry of
Petroleum & Natural Gas. Consequently ISPRL ceased to be a wholly owned
subsidiary in May 2006.
The company was conferred with the 'Maharatna' status by the Government of India
which provides enhanced autonomy and larger flexibility for its operation.
In February 2020, the company signed a deal with the Russian oil company Rosneft
to buy 40,000 barrels per day of crude in year 2020.[15] By 1 April 2020, IndianOil
was in absolute readiness to launch BS-VI (Bharat Stage VI) fuels in all its retail
outlets in Telangana and adopt world-class emission norms.[16]
Key Dates:
1948: India's government passes the Industrial Policy Resolution, which states that its
oil industry should be state-owned and operated.
1958: The government forms its own refinery company, Indian Refineries Ltd.
1959: Indian Oil Company is founded as a statutory body to supply oil products to
Indian state enterprise.
1964: Indian Refineries and Indian Oil Company merge to form the Indian Oil
Corporation.
1976: The Burmah-Shell and the Caltex refineries are nationalized.
1981: Half of India's 12 refineries are operated by Indian Oil.

1998: The Company’s seventh refinery is commissioned at Panipat.
2002: The Indian petroleum industry is deregulated.
2013 : The government formally conferred the coveted 'Maharatna' status on state-
owned Indian Oil Corporation (IOC).
2018 : IOCL became India's most profitable state-owned company for the second
consecutive year.
2020 : IndianOil was in absolute readiness to launch BS-VI (Bharat Stage VI) fuels in
all its retail outlets in Telangana and adopt world-class emission norms.
5.1.1 GREEN INITIATIVES:
Indian Oil has ambitious means to broaden its energy basket with alternative energy options
such as wind, solar, bio fuels and nuclear power.
Green fuels (petrol and diesel) conforming to Euro-III emission norms have already been
introduced in 13 cities/states; the rest of the country is getting BS-II fuels. The Centre has been
certified under ISO-14000:1996 for environment management systems.
All IndianOil refineries fully comply with the prescribed environmental standards and
incorporate state-of-the-art effluent treatment technologies. Sustained efforts are being made
to further improve the standards by introducing new state-of-the-art technologies further
improve the existing standards and facilities.
Indian Oil Corporation Ltd (IOCL) has been introducing several initiatives to protect the
environment near its operating locations. Apart from the large ecological parks close to its
refineries, the oil major had also taken up an urban afforestation initiative under the title –
'Lungs of the city' – and covered 13 cities across India by planting more than 80,000 trees in
2019-20.
IOCL’s recently concluded all-India campaign – ‘TreeCheers’ – aimed at promoting

environmental consciousness and boosting the country's green cover, has been a huge success.
For every new vehicle that zoomed into the IOC fuel station during the campaign period, IOC
took a pledge to plant a sapling on behalf of customers. Over 226,000 customers drove into
Indian Oil fuel stations to get their new vehicles refuelled during the campaign of 12-16
November 2020 and the company is expected to complete planting the required saplings across
the country soon.

 5.1.2 STATEMENT OF PROFIT & LOSS OF INDIAN OIL

CORPORATION LIMITED (MARCH 2016 – MARCH 2020) :
PROFIT & LOSS MAR 20 MAR 19 MAR 18 MAR 17 MAR 16

ACCOUNT OF INDIAN
OIL CORPORATION (in
Rs. Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
REVENUE FROM 571,695.25 612,211.27 509,825.14 452,128.07 407,088.86

OPERATIONS [GROSS]
Less: Excise/Sevice 92,226.67 89,093.91 94,050.07 98,415.73 68,776.37

Tax/Other Levies
REVENUE FROM 479,468.58 523,117.36 415,775.07 353,712.34 338,312.49

OPERATIONS [NET]
TOTAL OPERATING 484,362.26 528,157.50 421,491.82 355,379.00 346,044.74

REVENUES
Other Income 2,790.29 2,714.28 3,419.88 3,862.20 2,186.49
TOTAL REVENUE 487,152.55 530,871.78 424,911.70 359,241.20 348,231.23
EXPENSES
Cost Of Materials 281,080.13 306,472.22 217,228.51 179,874.35 164,178.97

Consumed
Operating And Direct 5.73 3.29 0.00 0.00 0.00

Expenses
Employee Benefit 9,336.93 11,596.28 10,680.70 10,262.76 7,501.80

Expenses
Finance Costs 6,578.74 4,887.98 3,810.51 3,721.26 3,468.99

Depreciation And 9,854.88 8,506.45 7,675.83 6,872.39 5,698.39

Amortisation Expenses
Other Expenses 43,065.57 39,237.57 32,359.19 35,909.73 30,076.51
TOTAL EXPENSES 484,391.01 506,329.26 391,372.63 331,925.46 331,769.23
PROFIT/LOSS BEFORE 2,761.54 24,542.52 33,539.07 27,315.74 16,462.00

EXCEPTIONAL,
EXTRAORDINARY
ITEMS AND TAX
Exceptional Items -11,304.64 0.00 0.00 0.00 1,364.25
PROFIT/LOSS BEFORE -8,543.10 24,542.52 33,539.07 27,315.74 17,826.25

TAX
TAX EXPENSES-
CONTINUED
OPERATIONS
Current Tax 221.23 5,310.26 7,648.32 7,794.77 3,784.21
Less: MAT Credit 0.00 0.00 0.00 0.00 0.00

Entitlement
Deferred Tax -5,521.92 3,342.79 4,175.55 -224.37 1,874.23
Other Direct Taxes 0.00 0.00 0.00 0.00 0.00
TOTAL TAX EXPENSES -5,300.69 8,653.05 11,823.87 7,570.40 5,658.44
PROFIT/LOSS AFTER -3,242.41 15,889.47 21,715.20 19,745.34 12,167.81

TAX AND BEFORE
EXTRAORDINARY
ITEMS
PROFIT/LOSS FROM -3,242.41 15,889.47 21,715.20 19,745.34 12,167.81

CONTINUING
OPERATIONS
PROFIT/LOSS FOR THE -3,242.41 15,889.47 21,715.20 19,745.34 12,167.81

PERIOD
Minority Interest 983.18 102.85 -436.90 -535.91 -390.87

CONSOLIDATED -893.14 17,376.70 22,189.45 19,849.49 12,022.45

PROFIT/LOSS AFTER
MI AND ASSOCIATES
OTHER ADDITIONAL
INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) -1.00 18.00 23.00 40.00 25.00
Diluted EPS (Rs.) -1.00 18.00 23.00 40.00 25.00
DIVIDEND AND
DIVIDEND
PERCENTAGE
Equity Share Dividend 4,820.34 9,671.50 9,478.96 10,545.42 2,867.53
Tax On Dividend 986.58 2,028.98 1,968.37 2,221.04 605.01
 5.1.3 BALANCESHEET OF INDIAN OIL CORPORATION

LIMITED (MARCH 2016 – MARCH 2020) :
BALANCE SHEET OF MAR 20 MAR 19 MAR 18 MAR 17 MAR 16

INDIAN OIL
CORPORATION (in Rs. Cr.)
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 9,181.04 9,181.04 9,478.69 4,739.34 2,369.67
TOTAL SHARE CAPITAL 9,181.04 9,181.04 9,478.69 4,739.34 2,369.67
Reserves and Surplus 86,216.87 103,288.20 104,395.13 97,356.76 87,609.94
TOTAL RESERVES AND 86,216.87 103,288.20 104,395.13 97,356.76 87,609.94

SURPLUS

TOTAL SHAREHOLDERS 95,397.91 112,469.24 113,873.82 102,096.10 89,979.61

FUNDS
Minority Interest 876.27 1,877.36 2,151.22 1,904.56 1,426.04
NON-CURRENT
LIABILITIES
Long Term Borrowings 56,070.61 39,152.45 23,060.51 25,545.93 27,941.30
Deferred Tax Liabilities [Net] 11,439.29 16,509.71 12,367.85 6,888.66 6,970.70
Other Long Term Liabilities 2,837.68 2,215.48 1,932.17 1,214.34 18,187.79
Long Term Provisions 1,597.23 2,211.99 2,422.65 3,225.91 2,634.12
TOTAL NON-CURRENT 71,944.81 60,089.63 39,783.18 36,874.84 55,733.91

LIABILITIES
CURRENT LIABILITIES
Short Term Borrowings 69,897.44 53,559.29 39,080.51 33,284.10 20,207.90
Trade Payables 27,603.54 41,194.12 36,766.69 31,196.50 24,336.64
Other Current Liabilities 54,407.87 55,791.42 49,767.44 49,138.40 30,013.85
Short Term Provisions 9,608.99 10,174.05 14,249.43 19,066.54 9,857.48
TOTAL CURRENT 161,517.84 160,718.88 139,864.07 132,685.54 84,415.87

LIABILITIES
TOTAL CAPITAL AND 329,736.83 335,155.11 295,672.29 273,561.04 231,555.43

LIABILITIES
ASSETS
NON-CURRENT ASSETS
Tangible Assets 144,076.30 129,647.12 122,987.42 114,972.98 99,274.49
Intangible Assets 2,944.79 2,845.60 1,064.54 983.77 757.85
Capital Work-In-Progress 29,628.86 23,401.01 15,286.08 12,992.67 22,018.75

FIXED ASSETS 179,865.93 160,773.46 143,182.34 132,735.15 126,251.33
Non-Current Investments 27,279.69 35,510.76 36,607.27 36,217.83 24,089.05
Deferred Tax Assets [Net] 0.00 0.00 0.00 0.00 0.00
Long Term Loans And 3,279.78 2,291.10 2,158.71 1,099.31 1,133.60

Advances
Other Non-Current Assets 8,685.95 6,802.72 8,048.48 7,190.33 6,345.39

ASSETS
CURRENT ASSETS
Current Investments 8,291.18 8,416.90 8,198.78 7,469.41 7,095.74
Inventories 67,010.76 77,126.48 70,567.90 65,724.06 42,256.72
Trade Receivables 13,259.48 15,797.72 10,696.48 8,899.19 7,684.50
Cash And Cash Equivalents 2,296.01 1,064.68 494.28 409.75 1,050.36
Short Term Loans And 1,104.52 1,592.05 672.08 1,765.09 755.70

Advances
OtherCurrentAssets 18,662.49 25,778.20 15,044.93 12,049.88 14,892.00
TOTAL CURRENT ASSETS 110,624.44 129,776.03 105,674.45 96,317.38 73,735.02
TOTAL ASSETS 329,736.83 335,155.11 295,672.29 273,561.04 231,555.43
OTHER ADDITIONAL
INFORMATION
CONTINGENT LIABILITIES,
COMMITMENTS
Contingent Liabilities 47,749.03 47,434.95 34,284.65 32,687.30 23,760.11
BONUS DETAILS
Bonus Equity Share Capital 9,037.98 9,037.98 9,331.00 4,708.22 2,280.27

NON-CURRENT
INVESTMENTS
Non-Current Investments 0.00 0.00 35,955.77 36,139.84 0.00

Quoted Market Value

Unquoted Book Value
CURRENT INVESTMENTS
Current Investments Quoted 0.00 0.00 0.00 0.00 0.00

Market Value
Current Investments 204.79 1.10 333.15 274.00 0.00

Unquoted Book Value
5.2 HINDUSTAN PETROLEUM CORPORATION LIMITED

(HPCL)
Hindustan Petroleum Corporation Limited (HPCL) was formed on July 15, 1974. HPCL is a
Maharatna Central Public Sector Enterprise (CPSE) and a S&P Platts Top 250 Global Energy
Company with a ranking of 55 with Annual Gross sales of Rs. 2,86,250 Crore during financial
year 2019-20.
HPCL enjoys over 18% market share in India and has a strong presence in Refining &
Marketing of petroleum products in the country. During 2019-20, HPCL recorded Profit after
Tax (PAT) of Rs. 2,637 Crore.
HPCL owns and operates Refineries at Mumbai (west coast) & Visakhapatnam (East coast)
with designed capacities of 7.5. MMTPA (Million Metric Tonnes Per Annum) & 8.3 MMTPA
respectively. HPCL also owns the largest Lube Refinery in the country at Mumbai for
producing Lube Oil Base Stock with a capacity of 428 TMTPA. HPCL holds 48.99% equity
stake in JV company, HPCL-Mittal Energy Limited (HMEL) which operates a 11.3 MMTPA
capacity refinery at Bathinda (Punjab) and also has 16.96% equity stake in Mangalore Refinery
and Petrochemicals Limited (MRPL) which operates a 15 MMTPA capacity refinery at
Mangalore (Karnataka).

HPCL has a vast marketing network consisting of 14 Zonal offices in major cities and 133
Regional Offices facilitated by a Supply & Distribution infrastructure comprising 43
Terminals/TOPS/ Installations, 44 Aviation Fuel Stations, 50 LPG Bottling Plants and 68
Inland Relay/Lube Depots. The customer touch points constitute of 16,868 Retail Outlets,
1,638 SKO/LDO dealers and 6,137 LPG Distributorships, 115 carrying and forwarding agents,
253 Lube distributorships with a customer base of over 8.4 Crore domestic LPG consumers.
HPCL has the second largest share of product pipelines in India with a pipeline network length
of 3,775 kms.
HPCL undertakes Exploration & Production (E&P) of hydrocarbons through its wholly owned
subsidiary M/s. Prize Petroleum Company Limited (PPCL). HPCL also conducts business
through 19 Joint Venture (JV) & Subsidiary companies operating across oil & gas value chain.
Consistent excellent performance has been made possible by highly motivated workforce of
over 9,800 employees working all over India at various refining and marketing locations.
HPCL is committed to conducting business with an objective of preserving the environment,
sustainable development, being a safe work place and enrichment of the quality of life of
employees, customers and the community.
HPCL’s CSR reaffirms the continuing commitment of corporation toward societal
development. The key focus areas are in the fields of Child Care, Education, Health Care, Skill
Development & Community Development, positively impacting the lives of less privileged.
The overall spend on CSR activities was Rs. 182 crore during 2019-20.
5.2.1 CORPORATE SOCIAL RESPONSIBILTY INITIATIVES:

As a responsible Corporate Citizen, HPCL has taken up Education, Health Care, Child care,
Livelihood and Community Development as the themes of CSR to make a difference to the
underprivileged.
Under CSR, HPCL has undertaken projects under 5 different themes, They are:
Child Care
 Child Rights - "Bal Haq"

 Care of Slum Children - "Muskan"
 Rescue of Children in destress- "Child Line"
Education
 Computer awareness- "Unnati"
 Girl Child - Nanhi Kali
 Children with special needs- ADAPT
 Mid-Day Meals for Govt. schools- Akshaya Patra
Health Care
 Medical facilities at Rehabilitation centres- Navjyot
 Awareness on HIV among truckers -"Suraksha"
 Medical Care in Rural Areas -Wockhardt
 Sushrut Hospital
Livelihood
 Skill Development - "Swavalamban"
 Employability for youth in Urban Slums -Smile
Community Development
 Rain water harvesting -"Jal-tarang"
 Solar lighting- LaBL
 Community Kitchen -"Rasoi Ghar"

 5.2.2 STATEMENT OF PROFIT & LOSS OF HINDUSTAN

PETROLEUM CORPORATION LIMITED (MARCH 2016 –
MARCH 2020) :
PROFIT & LOSS MAR 20 MAR 19 MAR 18 MAR 17 MAR 16

ACCOUNT OF
HINDUSTAN
PETROLEUM
CORPORATION (in Rs.
Cr.)
INCOME
REVENUE FROM 286,574.27 295,986.87 243,399.40 213,904.15 197,655.81

OPERATIONS
[GROSS]
Less: Excise/Sevice 18,650.52 21,731.64 24,752.47 26,795.76 20,054.10

Tax/Other Levies
REVENUE FROM 267,923.75 274,255.23 218,646.93 187,108.39 177,601.71

OPERATIONS [NET]
TOTAL OPERATING 269,091.53 275,490.64 219,509.64 187,492.89 177,910.22

REVENUES
Other Income 1,681.62 1,453.12 1,527.88 1,384.39 1,082.62
TOTAL REVENUE 270,773.15 276,943.76 221,037.52 188,877.28 178,992.84
EXPENSES
Cost Of Materials 59,906.49 69,808.71 51,365.48 45,273.13 40,918.92

Consumed
Operating And Direct 6,141.13 6,098.79 5,872.92 5,333.44 5,283.51

Expenses
Employee Benefit 3,224.06 2,971.24 2,892.57 2,969.35 2,339.31

Expenses

Finance Costs 1,138.85 785.64 617.88 609.24 723.18
Depreciation And 3,369.87 3,085.30 2,834.40 2,776.37 2,846.09

Amortisation Expenses
Other Expenses 7,277.74 6,738.33 5,543.97 4,668.09 5,076.41
TOTAL EXPENSES 267,937.76 267,834.29 212,248.96 179,998.84 173,200.01

EXCEPTIONAL,
EXTRAORDINARY
ITEMS AND TAX
Exceptional Items -1,002.93 0.00 0.00 0.00 0.00

TAX
TAX EXPENSES-
CONTINUED
OPERATIONS
Current Tax 166.95 2,727.65 2,570.98 2,236.24 1,433.56
Less: MAT Credit 0.00 0.00 0.00 0.00 0.00

Entitlement
Deferred Tax 116.73 600.52 466.57 777.84 747.23
Other Direct Taxes 0.00 0.00 0.00 0.00 0.00
TOTAL TAX -1,264.44 3,348.57 2,891.86 2,961.60 2,060.41

EXPENSES
PROFIT/LOSS AFTER 3,096.90 5,760.90 5,896.70 5,916.84 3,732.42

TAX AND BEFORE
EXTRAORDINARY
ITEMS
PROFIT/LOSS FROM 3,096.90 5,760.90 5,896.70 5,916.84 3,732.42

CONTINUING
OPERATIONS
PROFIT/LOSS FOR 3,096.90 5,760.90 5,896.70 5,916.84 3,732.42

THE PERIOD

Minority Interest 0.00 0.00 0.00 0.00 0.00
CONSOLIDATED 2,638.73 6,690.63 7,218.29 8,235.82 4,674.69

PROFIT/LOSS AFTER
MI AND ASSOCIATES
OTHER ADDITIONAL
INFORMATION
EARNINGS PER
SHARE
Basic EPS (Rs.) 17.00 44.00 47.00 54.00 46.00
Diluted EPS (Rs.) 17.00 44.00 47.00 54.00 46.00
DIVIDEND AND
DIVIDEND
PERCENTAGE
Equity Share Dividend 1,432.39 1,371.44 2,321.29 3,477.70 1,456.10
Tax On Dividend 294.43 281.90 472.56 707.98 296.43
 5.2.3 BALANCESHEET OF HINDUSTAN PETROLEUM

CORPORATION LIMITED (MARCH 2016 – MARCH 2020) :
BALANCE SHEET OF MAR 20 MAR 19 MAR 18 MAR 17 MAR 16

HINDUSTAN PETROLEUM
CORPORATION (in Rs. Cr.)

EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 1,524.21 1,524.21 1,524.21 1,016.27 339.01
TOTAL SHARE CAPITAL 1,524.21 1,524.21 1,524.21 1,016.27 339.01
Reserves and Surplus 29,456.41 28,876.45 24,008.23 20,055.16 16,324.76
TOTAL RESERVES AND 29,456.41 28,876.45 24,008.23 20,055.16 16,324.76

SURPLUS
TOTAL SHAREHOLDERS 30,980.62 30,400.66 25,532.44 21,071.43 16,663.77

FUNDS
Minority Interest 0.00 0.00 0.00 0.00 0.00
NON-CURRENT
LIABILITIES
Long Term Borrowings 23,109.63 12,127.80 9,655.94 7,117.80 11,358.76
Deferred Tax Liabilities [Net] 5,491.44 7,396.25 6,804.82 6,149.27 5,034.20
Other Long Term Liabilities 225.53 153.46 34.83 24.05 9,426.39
Long Term Provisions 54.62 58.41 79.27 183.33 164.64

LIABILITIES

CURRENT LIABILITIES
Short Term Borrowings 16,276.12 13,908.68 10,879.42 10,914.38 3,991.28
Trade Payables 11,468.79 17,133.37 15,845.91 12,699.66 9,464.80
Other Current Liabilities 26,668.89 24,085.67 18,468.81 19,888.55 11,802.53
Short Term Provisions 2,630.56 2,082.18 2,370.31 2,270.57 1,646.64
TOTAL CURRENT 57,044.36 57,209.90 47,564.45 45,773.16 26,905.25

LIABILITIES
TOTAL CAPITAL AND 116,906.20 107,346.48 89,671.75 80,319.04 69,553.01

LIABILITIES
ASSETS
NON-CURRENT ASSETS
Tangible Assets 48,391.57 41,168.63 38,225.68 36,438.56 33,654.83
Intangible Assets 543.52 456.18 452.77 421.01 414.80
Capital Work-In-Progress 17,144.10 9,495.91 3,989.02 1,794.54 1,852.77
FIXED ASSETS 66,104.85 51,143.54 42,688.98 38,727.06 35,984.08
Deferred Tax Assets [Net] 0.00 0.00 0.00 0.00 0.00

Long Term Loans And 1,409.35 1,141.43 444.84 406.05 481.17

Advances
Other Non-Current Assets 2,706.74 2,341.13 1,497.66 1,438.46 1,086.71

ASSETS
CURRENT ASSETS
Current Investments 5,344.86 5,083.76 4,999.38 5,108.73 4,991.44
Inventories 19,325.99 20,443.62 18,612.23 18,629.16 13,354.83
Trade Receivables 3,934.19 5,667.79 5,587.02 4,091.66 3,776.28
Cash And Cash Equivalents 223.12 218.50 1,305.18 136.40 154.15
Short Term Loans And 409.86 850.83 63.87 125.49 55.81

Advances
OtherCurrentAssets 8,379.80 11,225.50 6,573.28 4,974.64 5,458.77
TOTAL CURRENT ASSETS 37,617.82 43,490.00 37,140.96 33,066.08 27,791.28
TOTAL ASSETS 116,906.20 107,346.48 89,671.75 80,319.04 69,553.01
OTHER ADDITIONAL
INFORMATION
CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 43,440.41 34,549.11 25,017.11 5,158.64 8,304.30
BONUS DETAILS
Bonus Equity Share Capital 1,449.63 1,449.62 1,449.62 941.68 264.43
NON-CURRENT
INVESTMENTS
Non-Current Investments 221.25 495.85 576.00 594.88 2,411.69

Quoted Market Value
Non-Current Investments 8.68 2.15 0.05 0.07 4,394.46

Unquoted Book Value
CURRENT INVESTMENTS
Current Investments Quoted 5,344.86 5,083.76 4,999.38 5,100.96 4,987.55

Market Value
Current Investments 0.00 0.00 0.00 7.78 3.89

Unquoted Book Value

CHAPTER 6 : DATA ANALYSIS, INTERPRETATION AND

PRESENTATION.
1. CURRENT RATIO:
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 0.87 0.73 0.76 0.81 0.68
HPCL 1.03 0.72 0.78 0.76 0.66
0.81 0.68 0.66

0.76
1.5 0.76 0.78
0.73 1.03
0.87 0.72 2019-20
1
2018-19
2017-18
0.5
2016-17
2015-16
0
IOCL HPCL
2015-16 2016-17 2017-18 2018-19 2019-20
2. QUICK RATIO:

Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 0.37 0.23 0.25 0.33 0.27
HPCL 0.54 0.32 0.39 0.40 0.32
0.4 0.32
0.27
0.33
0.39
0.54
0.6
0.25 0.32
0.37
2019-20
0.4 0.23
2018-19
2017-18
0.2
2016-17
2015-16
0
IOCL HPCL
2015-16 2016-17 2017-18 2018-19 2019-20
3. GROSS PROFIT RATIO (%)
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 4.67 7.10 7.68 4.98 2.06
HPCL 2.92 4.33 3.61 3.04 0.67

7.68
7.1 4.98
8
7 3.04
2.06 3.61
6 4.33
4.67
5 0.67
4 2.92 2019-20
3 2018-19
2 2017-18
2016-17
1
2015-16
0
IOCL HPCL 2015-16 2016-17 2017-18 2018-19 2019-20
4. OPERATING PROFIT TO SALES RATIO (%)
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 0.07 0.1 0.1 0.07 0.03
HPCL 0.14 0.06 0.05 0.04 0.02

0.07
0.03
0.15 0.1 0.02
2019-20
0.1 0.04
0.07 2018-19
0.05 2017-18
0.05
2016-17
2015-16
0 0.14
IOCL HPCL 2015-16 2016-17 2017-18 2018-19 2019-20
5. NET PROFIT RATIO (%):
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 3.51 5.55 5.15 3.00 -0.66
HPCL 2.09 3.15 2.68 2.09 1.15
5.15
3 2.15
5.55 2.09
6 2.68
2019-20
3.51 3.15
4 2018-19
-0.66 2.09 2017-18
2 2016-17
2015-16
0
IOCL HPCL
-2
2015-16 2016-17 2017-18 2018-19 2019-20

6. RETURN ON INVESTMENT RATIO (%)
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 13.54 22.03 23.97 16.87 5.55
HPCL 10.96 27.46 22.33 19.73 6.63
23.97 22.33
16.87 19.73
30 22.03 27.46
5.55
6.63
20 13.54 2019-20
10.96 2018-19
10 2017-18
2016-17
2015-16
0
2015-16 2016-17 2017-18 2018-19 2019-20
IOCL HPCL
7. RETURN ON EQUITY RATIO (%)
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 13.48 20.63 20.11 14.04 -3.12
HPCL 22.43 31.36 25.31 20.60 10.09

25.31 20.6
20.11 14.04 31.36 10.09
40
20.63
30 2019-20
22.43 2018-19
20 13.48 -3.12
2017-18
10 2016-17
2015-16
0
IOCL HPCL
-10
2015-16 2016-17 2017-18 2018-19 2019-20
8. PROPRIETARY RATIO:
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 0.01 0.02 0.03 0.03 0.03
HPCL 0.0 0.01 0.02 0.01 0.01
0.03
0.03
0.03
0.02
0.03 0.01
0.02
0.025 0.01
0.02
0.01 2019-20
0.015 0.01 2018-19
0.01 2017-18
0.005 2016-17
0
2015-16
0
IOCL HPCL 2015-16 2016-17 2017-18 2018-19 2019-20

9. DEBT EQUITY RATIO:
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 0.78 0.63 0.60 0.72 1.09
HPCL 1.95 1.17 0.95 0.90 1.18
1.09 1.18
0.95
0.72
0.9
2 0.6 2019-20
1.17
0.63 2018-19
1 0.78 2017-18
2016-17
1.95 2015-16
0
IOCL HPCL
2015-16 2016-17 2017-18 2018-19 2019-20
10. INTEREST COVERAGE RATIO:

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

IOCL 5.75 8.34 9.80 6.02 1.42
HPCL 9.01 15.57 15.22 12.59 3.49
15.22
15.57 12.59
20 6.02
9.8
1.42 3.49
15 8.34
9.01 2019-20
10 2018-19
5.75
2017-18
5 2016-17
2015-16
0
IOCL HPCL
2015-16 2016-17 2017-18 2018-19 2019-20
11. RETURN ON NET WORTH RATIO (%):
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 13.36 19.44 19.48 15.45 -0.93
HPCL 28.05 39.08 28.27 22.00 8.51

28.27 22
15.45 39.08
8.51
40 19.48
19.44 28.05 2019-20
30
-0.93 2018-19
20 13.36 2017-18
10 2016-17
2015-16
0
IOCL HPCL 2015-16 2016-17 2017-18 2018-19 2019-20
-10
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 385.73 219.44 122.41 124.55 104.86
HPCL 491.54 207.34 167.51 199.45 203.26
491.54 203.26
500 199.45
385.73 104.86
400 124.55
219.44 167.51
300 2019-20
122.41 207.34
2018-19
200
2017-18
100 2016-17
2015-16
0
IOCL HPCL
2015-16 2016-17 2017-18 2018-19 2019-20
13. INVENTORY TURNOVER RATIO:

Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 8.19 5.41 5.97 6.85 7.23
HPCL 13.32 10.06 11.79 13.48 13.92
13.92
13.48
7.23
11.79
6.85
15
5.97 13.32 10.06
8.19 2019-20
10 5.41
2018-19
2017-18
5
2016-17
2015-16
0
IOCL HPCL
2015-16 2016-17 2017-18 2018-19 2019-20
14. TOTAL ASSETS TURNOVER RATIO:
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 149.44 129.90 142.55 157.58 146.89
HPCL 255.79 233.43 244.79 256.63 230.17

256.63
230.17
146.89
157.58 244.79
300 142.55 233.43
250 2019-20
129.9 255.79
200 149.44 2018-19
150
2017-18
100
2016-17
50
2015-16
0
2015-16 2016-17 2017-18 2018-19 2019-20
IOCL HPCL
15. NET WORTH TURNOVER RATIO

Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 13.36 19.44 19.48 15.45 -0.93
HPCL 28.05 39.08 28.27 22.00 8.51
15.45 39.08 22
40 19.48 28.27
28.05 8.51
19.44
30 -0.93 2019-20
2018-19
20 13.36
2017-18
10 2016-17
2015-16
0
IOCL HPCL
-10 2015-16 2016-17 2017-18 2018-19 2019-20
16. NET WORKING CAPITAL TURNOVER RATIO:

Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL -32.40 -9.22 -12.32 -17.07 -9.52
HPCL 223.43 -14.75 -21.06 -20.08 -13.85
250 223.43
200
-13.85
150 -9.52 2019-20
-20.08
2018-19
100 -17.07 -14.75 2017-18
50 2016-17
-9.22-12.32 2015-16
0 -32.4 -21.06
IOCL HPCL
-50
2015-16 2016-17 2017-18 2018-19 2019-20
17. EARNING PER SHARE:
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 25.37 20.94 23.41 18.41 -0.97
HPCL 46.02 54.05 47.37 43.91 17.32

43.91
47.37
17.32
18.41
60 54.05
23.41 2019-20
20.94
40 46.02 2018-19
25.37 2017-18
-0.97
20 2016-17
2015-16
0
IOCL HPCL
-20
2015-16 2016-17 2017-18 2018-19 2019-20
18. PRICE TO EARNINGS RATIO:
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 6.46 10.92 8.63 9.57 5.96
HPCL 6.17 8.84 8.16 8.99 10.73
10.73
9.57
8.99
10.92 5.96
8.16
12 8.63
8.84
10
8 6.46 6.17 2019-20
6 2018-19
4 2017-18
2 2016-17
2015-16
0
IOCL HPCL 2015-16 2016-17 2017-18 2018-19 2019-20

Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 0.13 0.11 0.13 0.12 -0.01
HPCL 0.18 0.15 0.14 0.15 0.09
0.15
0.12
0.13 0.14 0.09
0.2 0.15
0.11
0.13 -0.01 0.18 2019-20
0.15
2018-19
0.1 2017-18
0.05 2016-17
2015-16
0
IOCL HPCL
-0.05
2015-16 2016-17 2017-18 2018-19 2019-20
Company 2015-16 2016-17 2017-18 2018-19 2019-20
IOCL 23.85 53.12 42.71 55.65 -539.70
HPCL 31.14 42.22 32.15 20.49 54.28

54.28
55.65 28.49
2019-20
42.71 2018-19
32.15 2017-18
23.85 2016-17
100 53.12 31.14 42.22 2015-16
0
-100 IOCL HPCL
-200 -539.7
-300
-400
-500
-600
2015-16 2016-17 2017-18 2018-19 2019-20
1. CURRENT RATIO:
 The current ratio of Indian Oil Corporation shows a steady decline over the 5
years.
 The current ratio has not increased in any of the successive years from 2015-
16.
 It shows a decrease from 0.87 to 0.68 over the 5 years of research with no
increase in any of the intermediate years.
 The current ratio of Hindustan Petroleum Limited shows a steady decline over
the 5 years.
 The current ratio then declines for Hindustan Petroleum from being 1.03 in
2015-16 to 0.66 in 2019-20.
2. QUICK RATIO:
 The quick ratio for Indian Oil Corporation Limited has decreased from the
year 2015-16 to 2019-20.
 The quick ratio shows a sharp decline in 2016-17 falling up to 0.23.
 It has fallen from 0.37 in year 2015-16 to 0.27 in the year 2019-20.

 The quick ratio of Hindustan Petroleum Limited has decreased from 0.54
to 0.32 in the first financial year of research.
 Then it shows a declining pattern for the remaining 3 financial years.
 It falls to 0.54 in 2015-16 to 0.32 in 2019-20.
3. GROSS PROFIT RATIO:

 The gross profit of Indian Oil Corporation Limited declines from 4.67% to
2.06% from 2015-16 to 2019-20.
 It increases in the year 2017-18 to 7.68% and again shows a decline to
4.98% in the year 2018-19.
 There is a sharp increase in gross profit for the year 2017-18 which is 7.68%
 The Hindustan Petroleum Corporation Limited experienced a decline from

2.92% in 2015-16 to 0.67% in 2019-20.
 The gross profit again increased to 4.33% in the year 2016-17.
 The steady decline is seen in the next two financial years growing from
3.61% in 2017-18 to 3.04% in 2018-19.

 This ratio shows an alternate pattern of upswing and downswing in every
year for Indian oil Corporation Limited.
 It starts with a increase in year 2016-17 from 0.07% in 2015-16 to 0.1%
in 2016-17.
 The ratio goes up to a steady 0.1% in 2017-18 and declines to 0.07 in
2018-19.
 The company records the highest ratio in 5 years in 2017-18 showing a
sharp increase to 0.1%
 The Hindustan Petroleum Corporation Limited experiences a steady

decrease from 0.14% to 0.06% in the first comparative year.
 The year 2015-16 shows highest 0.14% which is minimal to 0.02% in
2019-20.

 Alike IOCL, this company also records the highest of this ratio for the 5
years standing at 0.14% in 2015-16.
5. NET PROFIT RATIO:

 The Indian Oil Corporation Limited enjoys a steady increase in this ratio
spanning from 3.51% in 2015-16 to 5.55% in 2016-17.
 The Ratio falls down to -0.66% in 2019-20.
 The Net profit ratio for Hindustan petroleum Limited only declines highly
for the year 2019-20 to 1.15%.
 From 2015-16, the ratio goes on increasing and decreases at 2018-19 to
2.09% in then settles at 1.15% in 2019-20.
6. RETURN ON INVESTMENT RATIO:

 The ROI for Indian Oil Corporation Limited experienced a sharp decline
from 13.54% in 2015-16 to 5.55% in 2019-20.
 A sharp increase can be noticed in the year 2017-18 (23.97%) and a
gradual decrease at 5.55% in 2019-20.
 The company enjoys a five year high at 23.97% in the year 2017-18.
 Hindustan Petroleum Corporation Limited shows a decline in ROI from

10.96% in 2015-16 to 6.63% in 2019-20.
 There is a mediocre increase to 19.73% in 2018-19.
 The company enjoys a sharp increase in the financial year of research
recording 27.46% in 2016-17.
7. RETURN ON EQUITY RATIO:

 IOCL experienced a sharp decrease in this ratio spanning from 13.48% in
2015-16 to -3.12% in 2019-20.
 It hit a decline in the year 2019-20 when the ROE fell from 14.04% in
2018-19 to -3.12% in 2019-20.

 Hindustan Petroleum Corporation Limited hit a minimal decline in year

2018-19 when the ROE fell from 25.31% to 20.60%.
 The ROE then decreased to 10.09% in 2019-20.
 The proprietary ratio remained more or less steady throughout the five
years for Indian Oil Corporation Limited.
 A noticeable increase was witnessed in year 2017-18 when the ratio
increased from 0.02 in 2016-17 to 0.03.
 The five year low is recorded in year 2015-16 with the ratio as 0.01.
years for Hindustan Petroleum Corporation Limited.
 The five year low is recorded in year 2015-16 with the ratio as 0.

 The debt equity ratio shows a steady decline pattern for the Indian Oil
Corporation Limited.
 It records a high only in 2019-20 when it increases from 0.72 in 2018-19 to
1.09.
 After2015-16, it falls to 0.63 in 2016-17 and further declines to 0.60 in
2017-18.
 The year 2017-18 records a 5 year low.
 The debt equity ratio shows a steady decline pattern for the Hindustan
 It records a high only in 2015-16 that is 1.95.
 After that, it falls to 1.17 in 2016-17 and further declines to 0.95 in 2017-
18 and 0.90 in 2018-19.

10.INTEREST COVERAGE RATIO:

 Indian Oil Corporation records a good 6.02 interest coverage ratio in the
year 2018-19 and then declines to 1.42 in 2019-20.
 Again the ratio shows upswing from 5.75 in 2015-16 to 8.34 in 2016-17.
 The 5 year high is recorded in the year 2017-18 with the interest coverage
ratio as 9.80.
 The Hindustan Petroleum Corporation Limited shows a steady increase in
this ratio for the first two years and goes on to show a sharp increase.
 The range spans from 9.01 in 2015-16 to 15.57 in 2016-17 with little
decline in the intermediate years.

 Return on Net Worth goes on increasing for Indian Oil Corporation Limited
except for the year 2019-20.
 The ratio increased from 13.36% to 19.44% to 19.48% from 2015-16 to
2017-18.
 A steep decrease to -0.93% was witnessed in 2019-20.
 Return on Net Worth goes on increasing for Hindustan Petroleum

Corporation Limited except for the year 2019-20.
 It declined to 22.00% in 2018-19 from 28.27% in 2017-18.
 After 2015-16, it showed a sharp increase to 39.08% in 2016-17 from
28.05% and 22.00% in 2015-16 and 2018-19 respectively.

 Indian Oil Corporation Limited records a steady decline in the book value
of share for all the five years of research.
 The book value decreased from Rs. 385.73 in 2015-16 to Rs. 104.86 in
2019-20.
 It further decreased in 2018-19 to 124.55 from 122.41 in 2017-18.
 Hindustan Petroleum Corporation Limited also records an all-time decrease

in the book value of their shares.
2019-20.
 It further decreased from Rs. 207.34 in 2016-17 to Rs. 167.51 in 2017-18.

 The inventory turnover ratio remains steady for Indian Oil Corporation
Limited for the first three financial years of research.
 The inventory turnover is 8.19, 5.41 & 5.97 for 2015-16, 2016-17 and
2017-18 respectively.
 It then shows an decrease to 6.85 in 2018-19 and 7.23 in year 2019-20.
 Inventory Turnover ratio for Hindustan Petroleum Corporation Limited

shows awkard pattern.
 Firstly, it experienced a steady decrease from 13.32 in 2015-16 to 10.06 in
2016-17. A minimal fall to 11.79 is witnessed in the year 2017-18.
 The company again experiences a sharp increase to 13.92 in 2019-20.
14.TOTAL ASSET TURNOVER RATIO:

 The total asset turnover ratio remains, more or less, steady for all the five
years of research for Indian Oil Corporation Limited.
 The ratio increases from 142.55 in 2017-18 to 157.58 in 2018-19.
 A minor sharp increase in seen in 2018-19 recording the ratio as 157.58 and
then a decline to 146.89 in 2019-20.
 The total asset turnover ratio for Hindustan Petroleum Limited shows a
gradual increase in average.
 A sharp increase to 256.63 is recorded in 2018-19 and thereafter the ratio
declines to 230.17 in 2019-20.

15. NET WORTH TURNOVER RATIO:

 The net worth turnover ratio remains, more or less, steady for all the five
 The ratio increases from 13.36 in 2015-16 to 19.44 in 2016-17 to 19.48 in
2017-18.
then a decline to -0.93 in 2019-20.
 The net worth turnover ratio for Hindustan Petroleum Limited shows a
 The ratio increases from 28.05 in 2015-16 to 39.08 in 2016-17 and
decreases to 28.27 in 2017-18.
16. NET WORKING CAPITAL RATIO:

 The net working capital turnover ratio mostly shows the negative values for
both the companies.
 For Indian Oil Corporation Limited, the ratio starts from -32.40 in 2015-16
to -9.52 in 2019-20.
 It increases to -9.22 in 2016-17 .
 For Hindustan Petroleum Corporation Limited, it increases for the last three
years to -13.85 in 2019-20.
 It has positive net working capital ratio for the year 2015-16 that is 223.43.

 The EPS for Indian Oil Corporation Limited shows a haphazard pattern
over the five years.
 It decreases from Rs. 25.37 in 2015-16 to Rs. 20.94 and Rs. 23.41 in 2016-
17 and 2017-18.

 EPS recorded a low in 2019-20 with Rs. -0.97.
 The EPS for Hindustan Petroleum Corporation Limited shows a steep

increase except for the year 2019-20.
 It fell from Rs. 43.91 in 2018-19 to Rs. 17.32 in 2019-20.
 It sky rocketed to Rs. 54.05 in 2016-17, Rs. 47.37 in 2017-18 and Rs. 46.02
in 2015-16.

 The P/E Ratio for Indian Oil Corporation Limited was 6.46 in 2015-16 and
10.92 in 2016-17.
 The P/E Ratio suffered a sharp decline in 2019-20 at 5.96.
 The P/E Ratio in 2019-20 was a five year low at 5.96.
 The Hindustan Petroleum Corporation Limited had a major P/E Ratio of

10.73 in 2019-20.
 The P/E Ratio suffered a sharp decline in 2015-16 at 6.17 but again gained
8.84 in 2016-17.

 The dividend yield ratio for Indian Oil Corporation limited has ups and
down trends for all the years.
 It increased from 0.11 in 2016-17 to 0.13 in 2017-18 and decreased to 0.12
in 2018-19.
 It declined to -0.01 in 2019-20.
 The dividend yield for Hindustan Petroleum Corporation Limited shows

upward and downward both the trends.

 It witnessed a sharp increase to 0.18 in 2015-16 but declined in the

subsequent year to 0.15.
 The ratio further went down to 0.09 in the year 2019-20.

 The dividend pay-out ratio for Indian Oil Corporation Limited was 23.85
in 2015-16 and declined to -539.70 in 2019-20.
 The company declared a pay-out of 42.71 in 2017-18 and rose to 55.65 in
the year 2018-19.
 A generous pay-out of 53.12 was declared in the year 2016-17.
 The dividend pay-out ratio for Hindustan Petroleum Corporation Limited

was 31.14 in 2015-16 and jumped to 42.22 in 2016-17.
the year 2019-20.
 The pay-out was reduced to 20.49 in the year 2018-19.

CHAPTER 7: FINDINGS, CONCLUSIONS AND

SUGGESTIONS.
I] FINDINGS
1. CURRENT RATIO:
 The current ratio of Indian Oil Corporation

shows a steady decline over the 5 years.
 The current ratio has not increased in any of
the successive years from 2015-16.
 It shows a decrease from 0.87 to 0.68 over
the 5 years of research with no increase in
any of the intermediate years.
 The current ratio of Hindustan Petroleum Limited shows a steady decline over
the 5 years.
 The current ratio then declines for Hindustan Petroleum from being 1.03 in
2015-16 to 0.66 in 2019-20.
2. QUICK RATIO:
 The quick ratio for Indian Oil Corporation Limited has decreased from the
year 2015-16 to 2019-20.
 The quick ratio shows a sharp decline in 2016-17 falling up to 0.23.
 It has fallen from 0.37 in year 2015-16 to 0.27 in the year 2019-20.
 The quick ratio of Hindustan Petroleum Limited has decreased from 0.54
to 0.32 in the first financial year of research.
 Then it shows a declining pattern for the remaining 3 financial years.
 It falls to 0.54 in 2015-16 to 0.32 in 2019-20.

3. GROSS PROFIT RATIO:

 The gross profit of Indian Oil Corporation Limited declines from 4.67% to
2.06% from 2015-16 to 2019-20.
 It increases in the year 2017-18 to 7.68% and again shows a decline to
4.98% in the year 2018-19.
 There is a sharp increase in gross profit for the year 2017-18 which is 7.68%
 The Hindustan Petroleum Corporation Limited experienced a decline from

2.92% in 2015-16 to 0.67% in 2019-20.
 The gross profit again increased to 4.33% in the year 2016-17.
 The steady decline is seen in the next two financial years growing from
3.61% in 2017-18 to 3.04% in 2018-19.

 This ratio shows an alternate pattern of upswing and downswing in every
year for Indian oil Corporation Limited.
 It starts with a increase in year 2016-17 from 0.07% in 2015-16 to 0.1%
in 2016-17.
 The ratio goes up to a steady 0.1% in 2017-18 and declines to 0.07 in
2018-19.
 The company records the highest ratio in 5 years in 2017-18 showing a
sharp increase to 0.1%
 The Hindustan Petroleum Corporation Limited experiences a steady

decrease from 0.14% to 0.06% in the first comparative year.
 The year 2015-16 shows highest 0.14% which is minimal to 0.02% in
2019-20.
 Alike IOCL, this company also records the highest of this ratio for the 5
years standing at 0.14% in 2015-16.
5. NET PROFIT RATIO:

 The Indian Oil Corporation Limited enjoys a steady increase in this ratio
spanning from 3.51% in 2015-16 to 5.55% in 2016-17.
 The Ratio falls down to -0.66% in 2019-20.
 The Net profit ratio for Hindustan petroleum Limited only declines highly
for the year 2019-20 to 1.15%.
 From 2015-16, the ratio goes on increasing and decreases at 2018-19 to
2.09% in then settles at 1.15% in 2019-20.
6. RETURN ON INVESTMENT RATIO:

 The ROI for Indian Oil Corporation Limited experienced a sharp decline
from 13.54% in 2015-16 to 5.55% in 2019-20.
 A sharp increase can be noticed in the year 2017-18 (23.97%) and a
gradual decrease at 5.55% in 2019-20.
 The company enjoys a five year high at 23.97% in the year 2017-18.
 Hindustan Petroleum Corporation Limited shows a decline in ROI from

10.96% in 2015-16 to 6.63% in 2019-20.
 There is a mediocre increase to 19.73% in 2018-19.
 The company enjoys a sharp increase in the financial year of research
recording 27.46% in 2016-17.
7. RETURN ON EQUITY RATIO:

 IOCL experienced a sharp decrease in this ratio spanning from 13.48% in
2015-16 to -3.12% in 2019-20.
 It hit a decline in the year 2019-20 when the ROE fell from 14.04% in
2018-19 to -3.12% in 2019-20.
 Hindustan Petroleum Corporation Limited hit a minimal decline in year
2018-19 when the ROE fell from 25.31% to 20.60%.
 The ROE then decreased to 10.09% in 2019-20.
years for Indian Oil Corporation Limited.
 The five year low is recorded in year 2015-16 with the ratio as 0.01.
years for Hindustan Petroleum Corporation Limited.
 The five year low is recorded in year 2015-16 with the ratio as 0.

 The debt equity ratio shows a steady decline pattern for the Indian Oil
 It records a high only in 2019-20 when it increases from 0.72 in 2018-19 to
1.09.
 After2015-16, it falls to 0.63 in 2016-17 and further declines to 0.60 in
2017-18.
 The debt equity ratio shows a steady decline pattern for the Hindustan
 It records a high only in 2015-16 that is 1.95.
 After that, it falls to 1.17 in 2016-17 and further declines to 0.95 in 2017-
18 and 0.90 in 2018-19.
10.INTEREST COVERAGE RATIO:

 Indian Oil Corporation records a good 6.02 interest coverage ratio in the
year 2018-19 and then declines to 1.42 in 2019-20.

 Again the ratio shows upswing from 5.75 in 2015-16 to 8.34 in 2016-17.
 The 5 year high is recorded in the year 2017-18 with the interest coverage
ratio as 9.80.
 The Hindustan Petroleum Corporation Limited shows a steady increase in
this ratio for the first two years and goes on to show a sharp increase.
 The range spans from 9.01 in 2015-16 to 15.57 in 2016-17 with little
decline in the intermediate years.

 Return on Net Worth goes on increasing for Indian Oil Corporation Limited
except for the year 2019-20.
 The ratio increased from 13.36% to 19.44% to 19.48% from 2015-16 to
2017-18.
 A steep decrease to -0.93% was witnessed in 2019-20.
 Return on Net Worth goes on increasing for Hindustan Petroleum

Corporation Limited except for the year 2019-20.
 It declined to 22.00% in 2018-19 from 28.27% in 2017-18.
 After 2015-16, it showed a sharp increase to 39.08% in 2016-17 from
28.05% and 22.00% in 2015-16 and 2018-19 respectively.
12.BOOK VALUE PER SHARE:

 Indian Oil Corporation Limited records a steady decline in the book value
of share for all the five years of research.
2019-20.
 It further decreased in 2018-19 to 124.55 from 122.41 in 2017-18.
 Hindustan Petroleum Corporation Limited also records an all-time decrease

in the book value of their shares.
2019-20.

 It further decreased from Rs. 207.34 in 2016-17 to Rs. 167.51 in 2017-18.

 The inventory turnover ratio remains steady for Indian Oil Corporation
Limited for the first three financial years of research.
 The inventory turnover is 8.19, 5.41 & 5.97 for 2015-16, 2016-17 and
2017-18 respectively.
 It then shows an decrease to 6.85 in 2018-19 and 7.23 in year 2019-20.
 Inventory Turnover ratio for Hindustan Petroleum Corporation Limited

shows awkard pattern.
 Firstly, it experienced a steady decrease from 13.32 in 2015-16 to 10.06 in
2016-17. A minimal fall to 11.79 is witnessed in the year 2017-18.
 The company again experiences a sharp increase to 13.92 in 2019-20.
14.TOTAL ASSET TURNOVER RATIO:

 The total asset turnover ratio remains, more or less, steady for all the five
then a decline to 146.89 in 2019-20.
 The total asset turnover ratio for Hindustan Petroleum Limited shows a
15. NET WORTH TURNOVER RATIO:

 The net worth turnover ratio remains, more or less, steady for all the five

 The ratio increases from 13.36 in 2015-16 to 19.44 in 2016-17 to 19.48 in

2017-18.
then a decline to -0.93 in 2019-20.
 The net worth turnover ratio for Hindustan Petroleum Limited shows a
 The ratio increases from 28.05 in 2015-16 to 39.08 in 2016-17 and
decreases to 28.27 in 2017-18.
16. NET WORKING CAPITAL RATIO:

 The net working capital turnover ratio mostly shows the negative values for
both the companies.
 For Indian Oil Corporation Limited, the ratio starts from -32.40 in 2015-16
to -9.52 in 2019-20.
 It increases to -9.22 in 2016-17 .
 For Hindustan Petroleum Corporation Limited, it increases for the last three
years to -13.85 in 2019-20.
 It has positive net working capital ratio for the year 2015-16 that is 223.43.

 The EPS for Indian Oil Corporation Limited shows a haphazard pattern
over the five years.
 It decreases from Rs. 25.37 in 2015-16 to Rs. 20.94 and Rs. 23.41 in 2016-
17 and 2017-18.
 EPS recorded a low in 2019-20 with Rs. -0.97.
 The EPS for Hindustan Petroleum Corporation Limited shows a steep

increase except for the year 2019-20.

 It fell from Rs. 43.91 in 2018-19 to Rs. 17.32 in 2019-20.

 It sky rocketed to Rs. 54.05 in 2016-17, Rs. 47.37 in 2017-18 and Rs. 46.02
in 2015-16.

 The P/E Ratio for Indian Oil Corporation Limited was 6.46 in 2015-16 and
10.92 in 2016-17.
 The P/E Ratio suffered a sharp decline in 2019-20 at 5.96.
 The Hindustan Petroleum Corporation Limited had a major P/E Ratio of

10.73 in 2019-20.
 The P/E Ratio suffered a sharp decline in 2015-16 at 6.17 but again gained
8.84 in 2016-17.

 The dividend yield ratio for Indian Oil Corporation limited has ups and
down trends for all the years.
 It increased from 0.11 in 2016-17 to 0.13 in 2017-18 and decreased to 0.12
in 2018-19.
 It declined to -0.01 in 2019-20.
 The dividend yield for Hindustan Petroleum Corporation Limited shows

upward and downward both the trends.
 It witnessed a sharp increase to 0.18 in 2015-16 but declined in the
subsequent year to 0.15.
 The ratio further went down to 0.09 in the year 2019-20.


 The dividend pay-out ratio for Indian Oil Corporation Limited was 23.85
in 2015-16 and declined to -539.70 in 2019-20.
the year 2018-19.
 A generous pay-out of 53.12 was declared in the year 2016-17.
 The dividend pay-out ratio for Hindustan Petroleum Corporation Limited

was 31.14 in 2015-16 and jumped to 42.22 in 2016-17.
the year 2019-20.
 The pay-out was reduced to 20.49 in the year 2018-19.
The hypothesis thus selected would be the alternative H1 since ratios like EPS, Return on
Investment, Book Value per Share, P/E Ratio and all relevant ratios for shareholders help to
choose among the best investment avenue amongst both the companies.
This project of Ratio analysis in the production concern is not merely a work of the project.
But a brief knowledge and experience of that how to analyse the financial performance of
the firm. The study undertaken has brought in to the light of the following conclusions for
the two companies i.e.; Indian oil Corporation Limited and Hindustan Petroleum
1. The current ratio is used to assess the firm’s ability to meet its short-term liabilities on
time. The higher the ratio, the better it is, because the firm will be able to pay its current
liabilities more easily. A current ratio between 1 and 1.5 is considered standard for Oil
& Gas companies.
Only HPCL under my study has achieved a current ratio nearing 1.5 i.e 1.03 in year
2015-16 although HPCL has higher ratio than IOCL. This suggests that both the
companies do not have satisfactory current ratios. When the current assets are financed
by equity rather than the creditors, the level of current assets would increase with

current liabilities remaining the same. Consequently, this exercise will improve the
current ratio. Also faster collection from debtors will help in improving the current
ratio.
2. The quick ratio is a ratio calculated to handle the defects that are present in Current
Ratio. The quick ratio alike the current ratio also does not meet satisfactory standard of
1:1 for both the companies. Still, HPCL performs better than IOCL in terms of all the
years of research. If the company has any unproductive assets, it is better to sell them
and have better liquidity. Reduction of such assets would result in better cash position
and therefore improvement in the numerator of quick ratio.
3. The gross profit ratio is better for IOCL which achieves 7.68% in the year 2017-18. On
the other hand, HPCL achieved only 0.67% which is not satisfactory. Also the increase
over subsequent years is more for IOCL.
4. In Operating Profit To Sales Ratio, IOCL has outperformed Hindustan petroleum

Corporation Limited by achieving a 0.1% against 0.02% OF HPCL. In the previous
years also, IOCL has remained at a position ahead of HPCL.
5. When a company's net margin exceeds the average for its industry, it is said to have
a competitive advantage, meaning it is more successful than other companies that have
similar operations.
The Net Profit Ratio has steadily decreased for both the companies but at the end i.e.;
2019-2020, IOCL records a negative net profit ratio of -0.66% against 1.15%.
6. If an investment does not have a positive ROI, or if an investor has other opportunities
available with a higher ROI, then these ROI values can instruct him or her as to which
investments are preferable to others.
By the data collected and interpreted, increase in Return on Investment is witnessed for
both the companies but sharp returns have been observed for HPCL. This is an
important ratio for investors.

7. Companies can finance themselves with debt and equity capital. By increasing the
amount of debt capital relative to its equity capital, a company can increase its return
on equity. HPCL records a higher growth rate in this ratio at 31.36% in the year 2016-
17.
IOCL has underperformed in comparison with only a gradual increase in5 years and
settling at -3.12%
8. The standard for Proprietary Ratio stands at 0.5:1. The companies have performed well
in this regard but HPCL has recorded NIL proprietary ratio in the year 2015-16.
A high proprietary ratio indicates a strong financial position of the company and greater
security for creditors. A low ratio indicates that the company is already heavily
depending on debts for its operations.
9. Optimal debt-to-equity ratio is considered to be about 1, i.e. liabilities = equity, but the
ratio is very industry specific. For large public companies the debt-to-equity ratio may
be much more than 2, but for most small and medium companies it is not acceptable.
The debt equity ratio is higher for HPCL even after a decline for 5 years.
10. For example, for an established utility company - a provider of power or water - an
interest-coverage ratio of 2 is an acceptable standard. However, both the companies
have performed very well recording 9.80 times and 15.57 times of coverage for IOCL
and HPCL respectively.
11. The higher the asset turnover ratio, the better the company is performing since higher
ratios imply that the company is generating more revenue per rupee of assets. Yet, this
ratio can vary widely from one industry to the next.
HPCL outperforms IOCL in this ratio and witnessed 255.79 turnover times against
149.44 turnover times.

12. Earnings per share increases when shares outstanding decreases, all other things staying
constant. Therefore, if the number of shares outstanding decreases (via a
buyback), EPS will increase, assuming that net income remains constant. The company
buys the stock and retires the shares.
13. In general, a high P/E suggests that investors are expecting higher earnings growth in
the future compared to companies with a lower P/E. With regards to this IOCL has
outperformed HPCL in the year 2016-17 with the ratio 10.92.
14. Dividend yield ratio shows what percentage of the market price of a share a company
annually pays to its stockholders in the form of dividends. Usually, the old and well
established companies are in a better position to pay a higher percentage to the
stockholders on their investment in the form of annual dividends as compared to new
ones. Both the companies fulfilling this requirement have close yields to each other.
Although for the year 2019-20, Dividend Yield is -0.01 for IOCL.
15. If the dividend pay-out ratio is increasing, this implies that the company is maturing
and planning on limited expansion. This can be a mixed signal, but it is one to which
you should pay attention. This is different from an increasing dividend.
Apple (AAPL) began to pay a dividend for the first time in nearly twenty years in 2012,
when the new CEO felt the company's enormous cash flow made a 0% pay-out ratio
difficult to justify. Because it implies that a company has moved past its initial growth
stage, a high pay-out ratio means share prices are unlikely to appreciate rapidly. Thus,
in our study it can be seen that both the companies IOCL and HPCL have maintained
more or less the same dividend pay-out ratio. A small increase in IOCL’s ratio in 2018-
19 has made it better for investors who look to earn through dividends of the company
but still there is a cause for the worry since there is -539.70 in the year 2019-20.

II] SUGGESTIONS
These are some Suggestions that I would like to make to both the companies alike
after going through data analysis and findings:
1. Faster rolling of money via debtors will keep the current ratio in control.
2. A constant follow up with the debtors can improve the collections from them. In the
first dealing itself, the payment terms should be made clear and should negotiate credit
period as low as possible.
3. Early payments to creditors can save interest cost and earn discount which will have a
direct impact on the profits of the firm.
4. Improvement in collection period can result in a number of debtor’s cycle during the
year resulting in better current assets. Moreover, the chances of long-term debtors,
sticky debtors and bad debts also reduce.
5. Increase your sales volume without increasing your cost of goods sold per unit or
lowering your selling price. Increasing sales volume can reduce the cost of goods sold
since the fixed manufacturing cost per unit becomes smaller as production volume
becomes bigger.
6. Operating expenses can be reduced by relocating headquarters to a cheaper part of
town, leasing smaller factory space or reducing the workforce, but all of these options
can have an important impact on the intangible assets of company, such as public
perception and goodwill. Another way to control costs is to find cheaper sources for
the raw materials needed to manufacture goods. However, if a company starts
producing inferior-quality products to cut expenses, it is likely to lose many of its
customers to competitors.
7. Funding expansion can be an effective long-term strategy for improving the net margin
because it increases production capacity, drives higher sales volume and reduces the
average cost per item produced.
8. A company achieving a higher profit return than its costs has more money to invest in
other business ventures. Investing your company's profits wisely can allow your
business to increase growth and overall value even if revenue slows down.

9. In general, the more sales a company produces relative to its assets, the more profitable
it should be, and the higher return on equity it should earn.
10. If you want to invest in a company, choose one which has consistently kept its debt
equity ratio at a minimum and preferably one which shows a decreasing trend year on
year.
11. A company can increase a low asset turnover ratio by continuously using assets,
limiting purchases of inventory and increasing sales without purchasing new assets.
12. Depending solely on dividend yield figure for making investment in a company may
not be a wise decision. A high dividend yield percentage may be due to a recent
decrease in the market price of stock of the company due to sever financial troubles.
13. Before making a final decision, one must have a hard look at the historical dividend
data, industry’s average dividend yield, the overall financial strength of the company
and all other available investment opportunities.
III] CONCLUSION
1. The project of ratio analysis in the production concern is not merely a work of the
project, but a brief knowledge and experience of that how to analyse the financial
performance of the firm.
2. A company achieving a higher profit return than its costs has more money to invest in
other business ventures. Investing your company's profits wisely can allow your
business to increase growth and overall value even if revenue slows down.
3. Before making a final decision, one must have a hard look at the historical dividend
data, industry’s average dividend yield, the overall financial strength of the company
and all other available investment opportunities.
4. If an investment does not have a positive ROI, or if an investor has other opportunities
available with a higher ROI, then these will be taken into consideration by the investor.
5. So, personally both the companies are best in their respective sectors but according to
investor point of view I would like to invest in HPCL as it has sharp Returns on
Investment.

CHAPTER 8: BIBLIOGRAPHY
(A) BOOKS AND JOURNALS
1. Annual Reports of Select Companies.
2. Casteuble, Tracy. "Using Financial Ratios to Assess

Performance." Association Management. July 1997.
3. Clark, Scott. "Financial Ratios Hold the Key to

Smart Business." Birmingham Business Journal. 11
February 2000.
4.Clark, Scott. "You Can Read the Tea Leaves of Financial Ratios." Birmingham
Business Journal. 25 February 2000.
5. P.K Bandgar & Darshak Doshi : “Investment Analysis And Portfolio Management”
Vipul Publication First Edition
6.N.G Kale & M. Ahmed: “Business Research Methods” Vipul Publication First
Edition
7. Gupta, R.K. (1990), Profitability, Financial Structure and Liquidity, Jaipur,

Printwell Publishers
8. Sharma, B.S. (1974): Financial Planning in Indian Public Sector-A Management

Approach, Vikas Publishing House, New Delhi.
9. William Burns(Sep 13, 2004) : “Introduction To Financial Ratios And Financial

Statement Analysis” Harvard Business School
(B) WEBSITES:
1. www.iocl.com
2. www.hindustanpetroleum.com

3. www.wikipedia.com
4. Profit.ndtv.com
5. www.accountingtools.com
6. shodhganga.inflibnet.ac.in
7. www.moneycontrol.com
8. www.studymode.com
9. www.academia.edu
10. www.crewinc.net
11. www.investopedia.com
12. blog.kissmetrics.com
13. alearning.wordpress.com
14. www.redflumarketing.com
15. www.hybridbizadvisors.com
16. smallbusiness.chron.com
17. www.efinancemanagement.com
18. www.entrepreneur.com
19. www.dbrs.com
20. www.scribd.com
21. economictimes.indiatimes.com
22. scholar.google.co.in
23. www.valueresearchonline.com
24. www.motilaloswal.com
25. www.equitymaster.com
26. En.wikipedia.org
27. Libweb.surrey.ac.uk
28. www.termpaperwarehouse.com
29. finance.zacks.com
30. dpe.nic.in
31. www.accountingformanagement.org
32. www.readyratios.com
33. money.livemint.com
34. money.rediff.com
35. in.investing.com

36. www.business-standard.com
37. independent.academia.edu
38. www.allprojectreports.com
39. xamidea.in
40. uwritingcenter.wikispaces.com
41. in.reuters.com
42. www.fundinguniverse.com
43. www.accountingdetails.com
44. www.investorwords.com
45. www.myaccountingcourse.com
46. www.investinganswers.com

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A CRITICAL STUDY ON RATIO ANALYSIS BETWEEN

INDIAN OIL CORPORATION LIMITED & HINDUSTAN

University of Mumbai for partial completion of the degree of

Bachelor in Commerce (Accounting & Finance)

Under the Faculty of Commerce

AMISHA MILIND SHIRKE

Under the Guidance of

MR. PIYUSH AGARWAL

K.P.B.HINDUJA COLLEGE OF COMMERCE

315, NEW CHARNI ROAD, MUMBAI 400004

Co-ordinator Guiding Teacher

External Examiner Internal Examiner

Principal College seal

AMISHA MILIND SHIRKE

It was a pleasurable experience for me to work on this project report

To make it easier different tabular and diagrammatic approach has

3.1.1 John Myer

5 A brief Profile & Study of Selected Companies. 59 – 76

6 Data Analysis, Interpretation & Presentation 77 – 99

7 Findings, Conclusions & Suggestions 100 -

Fundamental Analysis has a very broad scope. One aspect looks

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 8

Financial analysis based on accounting information consistently involve comparisons.

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 9

Propelling airplanes, mechanizing agriculture, energizing industries, igniting stoves, lighting

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 10

Recommendations discussed include:

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 11

No matter what walk of life a person

According to Robert Ross, “Research is essentially an investigation, a recording and analysis

2.1 OBJECTIVES OF RESEARCH AS A SUBJECT

1. To Identify The Problem:

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 12

7. To Make Future Predictions:

2.2 TYPES OF RESEARCH:

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 13

 It is not directly concerned with solving marketing problems. Primarily, it

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 14

v. It promotes the process of socialization and empowers social

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 15

i. Clearly Defined Goal

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 16

 In the process of identification, selection and formulation of research problem,

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 17

ii. It describes problems and passes through various stages such as

 Some of the disadvantages of this research are as follows:

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 18

2.3 SCOPE OF RESEARCH:

2.4 OBJECTIVES OF MY RESEARCH:

The basic objective of this research work is to assess or know the

2. To suggest measures for improving the financial performance of organization.

3. To analyse the profitability position of the two company.

4. To assess the return on investment.

5. To analyse the asset turnover ratio.

6. To determine the solvency position of company using Solvency Ratios.

2.5 RESEARCH DESIGN

Research Design is important as it prepares a proper framework within which the

The types of research design are enumerated as follows:

K.P.B. HINDUJA COLLEGE OF COMMERCE Page 19

EXPLORATORY RESEARCH DESIGN

DESCRIPTIVE RESEARCH DESIGN

CAUSAL RESEARCH DESIGN