A

PROJECT REPORT

ON

“FINANCIAL STATEMENT ANALYSIS WITH THE HELP OF RATIO ANALYSIS OF BHARAT

FORGE INDIA LTD”

SUBMITTED
BY

Mr. NIKUDE SUMIT SUHAS

UNDER GUIDENCE OF
Dr. SATEESHCHANDRA JOSHI

SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY, PUNE

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE

OF
MASTER OF BUSINESS ADMINISTRATION (MBA)

THROUGH

VIDYA PRATISHTHAN’S
INSTITUTE OF INFORMATION TECHNOLOGY (VIIT), BARAMATI, DIST. PUNE

BATCH 2019-2021

1
 GUIDE CERTIFICATE

This is to certify that Mr. Nikude Sumit Suhas has completed his project
satisfactorily on “FINANCIAL STATEMENT ANALYSIS WITH THE
HELP OF RATIO ANALYSIS OF BHARAT FORGE INDIA LTD” under
my guidance.

The project work is of original nature and not copied from any other earlier
project work and further no part of it has been submitted to any other University
as a Partial fulfillment of condition for passing any examination.

Place:-Baramati Dr. Sateeshchandra joshi

Date: - (VIIT, Baramati)

2
 DECLARATION

I Mr. Nikude Sumit Suhas student of Vidya Pratishthan’s Institution of

Technology, Baramati, hereby declare that the project report entitled
“FINANCIAL STATEMENT ANALYSIS WITH THE HELP OF
RATIO ANALYSIS OF BHARAT FORGE LTD” is written and
submitted under the guidance of Dr. Sateeshchandra Joshi. It is my
original work. The empirical finding in this report are based on data
collection by myself. The matter consisting in this report is not copied from
any source.

I understand that if my work is found to be copied, I am liable to be

punished by rules of Savitribai Phule Pune University.

Place: - Baramati

Date: - Mr. Nikude Sumit Suhas

3
 ACKNOWLEDGMENT

I am heartily thankful to all the persons who spared their valuable time and helped me a
lot in preparation of this project report. There are many people behind making of this
report, without their help and guidance, this report would never be made possible.

I am greatly thankful to my project guide Dr. Sateeshchandra Joshi, for giving me

Proper guidance and cooperation for making this report more meaningful.
Finally, I am very much thankful to my parents and my friends for their support and
valuable help.

4
 SUMMERY

The project title as “A study of financial statement analysis with the help of ratio”
with a view to study the difference ratio of previous 3 year for financial & constructive
decision for company. Here selected two company Bharat forge for Ratio analysis. This
is a major component of financial and taken constructive decision for future prospect of a
company. Ratio analysis is also the process of determining & interpreting numerical
relation based on financial statement of ratio to interpret the financial statement. I have
collected primary and secondary data from financial statement of company also use of
company web site and internet.

5
 OBJECTIVE’S OF STUDY

 To study and analyze the financial position of the Company through ratio
analysis.
 To suggest measures for improving the financial performance of organization.

 To analyze the profitability position of the company.

 To determine the solvency position of company.

 To assess the return on investment.

 To analyze the asset turnover ratio.

 To suggest measures for effective and efficient usage of inventory.

6
 INDEX

Chapter Chapter Name Page No

no
GUIDE CERTIFICATE 2
Declaration 3
Acknowledgment 4
Executive Summery 5
Objective of study 6
1 Introduction 9
Ratio Analysis 9
2 Need of Study 10
Scope of study 10
Literature review 11
Nature of ratio analysis 13
Type of Ratio 15
Current ratio 15
Liquidity Ratio Quick ratio 16
Fixed asset inventory turnover ratio 16
Debt equity ratio 17
Solvency ratio Interest coverage ratio 18
Debt to asset ratio 18
Asset turnover ratio 18
Efficiency ratio EBITDA Margin % 19
Earnings per share 19
Research Methodology 18
3 Company Profile 21
4 Data Analysis and Interpretation 24
5 Finding 37
Suggestion 37

7
 Conclusion 38
6 Balance sheet 39
Profit and loss Account 41
Bibliography 42

8
 CHAPTER 1

1. INTRODUCTION

Ratio Analysis

The ratio analysis is the most powerful tool of financial analysis. Several ratios calculated
from the accounting data can be grouped into various classes according to financial
activity or function to be evaluated.

Definition

The indicate quotient of two mathematical expressions “and as “The relationship between
two or more things. “It evaluates the financial position and performance of the firm.

As started in the beginning many diverse groups of people are interested in analyzing
financial information to indicate the operating and financial efficiency and growth of
firm. These people use ratios to determine those financial characteristics of firm in which
they interested with the help of ratios one can determine.

 The ability of firm to meets its current obligation. The extent to which the firm
has used its long-term solvency by borrowing funds.
 The efficiency with which the firm is utilizing its assets in generating the sales
revenue.
 The overall operating efficiency and performance of firm

The information contained in these statements is used by management, creditors,

investors and others to form judgment about the operating performance and financial
position of firm. Uses of financial statement can get further insight about financial
strength and weakness of the firm if they properly analyze information reported in these
statements. Management should be particularly interested in knowing financial strength
of the firm to make their best use and to be able to spot out financial weaknesses of the
firm to take suitable corrective actions. The further plans firm should be laid down in

9
new of the firm’s financial strength and weaknesses. Thus financial analysis is the
starting point for making plans before using any sophisticated forecasting and planning
procedures.

CHAPTER 2

NEED OF THE STUDY

Ratio analysis is important while presenting the financials of the company to its
stakeholders. Ratios make it easy to understand than complex and huge numbers.
Sometimes numbers can be deceitful which leads to investors losing confidence, but ratio
analysis helps the investor to understand the situation of the company after comparison
and helps them to keep investing in the business.

Ratio analysis includes ratios, which measure various aspects of business like liquidity,
efficiency, solvency, leverage, profitability and market value. It gives reliable
information to investors and management from all perspectives to make their own
decisions. An investor should not depend on just one ratio to make investment decisions
but should perform a thorough analysis of various ratios and understand its meaning
related to the company’s future performance.

SCOPE OF THE STUDY

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 3years (2017– 20).

Using the ratio analysis, firms past, present and future performance can be analyzed 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.

10
 LITERATURE REVIEW

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and weakness of the
firm. It is done by establishing relationships between the items of financial statements
viz., balance sheet and profit and loss account. Financial analysis can be undertaken by
management of the firm, viz., owners, creditors, investors and others.

OBJECTIVE OF FINANCIAL ANALYSIS

1. To find out the financial stability and soundness of the business enterprise.

2. To assess and evaluate the earning capacity of the business

3. To estimate and evaluate the fixed assets, stock etc., of the concern.

4. To estimate and determine the possibilities of future growth of business.

5. To assess and evaluate the firm’s capacity and ability to repay short and long
term loans

PARTIES WHICH ARE INTERESTED IN FINANCIAL ANALYSIS

The users of financial analysis can be divided into two broad groups.

INTERNAL USERS EXTERNAL USERS

1. Financial executives 1. Investors
2. Top management 2. Creditor.
3. Workers
4. Customers
5. Government
6. Public
7. Researchers

11
SIGNIFICANCE OF FINANCIAL ANALYSIS

Financial analysis serves the following purpose:

 To know the operational efficiency of the business:

The financial analysis enables the management to find out the overall efficiency
of the firm. This will enable the management to locate the weak Spots of the
business and take necessary remedial action.
 Helpful in measuring the solvency of the firm:
The financial analysis helps the decision makers in taking appropriate decisions
for strengthening the short-term as well as long-term solvency of the firm.
 Comparison of past and present results:
Financial statements of the previous years can be compared and the trend
regarding various expenses, purchases, sales, gross profit and net profit can be
ascertained.
 Helps in measuring the profitability:
Financial statements show the gross profit, & net profit.
 Inter‐firm comparison:
The financial analysis makes it easy to make inter-firm comparison. This
comparison can also be made for various time periods.
 Bankruptcy and Failure:
Financial statement analysis is significant tool in predicting the bankruptcy and
the failure of the business enterprise. Financial statement analysis accomplishes
this through the evaluation of the solvency position.

METHODS OF ANALYSIS:

A financial analyst can adopt the following tools for analysis of the financial statements.
These are also termed as methods of financial analysis.

 Comparative statement analysis

 Trend analysis
 Funds flow analysis
12
  Ratio analysis

 Common-size statement analysis

NATURE OF RATIO ANALYSIS

Ratio Analysis is a powerful tool of financial analysis. A ratio is defined as "the indicated
quotient of mathematical expression" and as "the relationship between two or more
things". A ratio is used as benchmark for evaluating the financial position and
performance of the firm. The relationship between two accounting figures, expressed
mathematically, is known as a financial ratio. Ratio helps to summarizes large quantities
of financial data and to make qualitative judgment about the firm's financial performance.

The persons interested in the analysis of financial statements can be grouped under three
head owners (or) investors who are desired primarily a basis for estimating earning
capacity. Creditors who are concerned primarily with Liquidity and ability to pay interest
and redeem loan within a specified period. Management is interested in evolving
analytical tools that will measure costs, efficiency, liquidity and profitability with a view
to make intelligent decisions.

STANDARDS OF COMPARISON

The ratio analysis involves comparison for a useful interpretation of the financial
statements. A single ratio in itself does not indicate favorable or unfavorable condition. It
should be compared with some standard. Standards of comparison are:

 Past Ratios
 Competitor's Ratios
 Industry Ratios
 Projected ration

Past Ratios: Ratios calculated from the past financial statements of the same firm

Competitor's Ratios: Ratios of some selected firms, especially the most progressive and
successful competitor at the same point in time.
13
Industry Ratios: Ratios of the industry to which the firm belongs.

Projected Ratios: Ratios developed using the projected financial statements of the same
firm.

TIME SERIES ANALYSIS

The easiest way to evaluate the performance of a firm is to compare its present ratios with
past ratios. When financial ratios over a period of time are compared, it is known as the
time series analysis or trend analysis. It gives an indication of the direction of change and
reflects whether the firm's financial performance has improved, deteriorated or remind
constant over time.

CROSS SECTIONAL ANALYSIS

Another way to comparison is to compare ratios of one firm with some selected firms in
the industry at the same point in time. This kind of comparison is known as the cross-
sectional analysis. It is more useful to compare the firm's ratios with ratios of a few
carefully selected competitors, who have similar operations.

INDUSTRY ANALYSIS

To determine the financial conditions and performance of a firm. Its ratio may be
compared with average ratios of the industry of which the firm is a member. This type of
analysis is known as industry analysis and also it helps to ascertain the financial standing
and capability of the firm & other firms in the industry. Industry ratios are important
standards in view of the fact that each industry has its characteristics which influence the
financial and operating relationships.

14
TYPES OF RATIOS

Management is interested in evaluating every aspect of firm's performance. In view of the

requirement of the various users of ratios, we may classify them into following four
important categories:

 Liquidity Ratio
 Solvency Ratio
 Efficiency Ratio

LIQUIDITY RATIO

It is essential for a firm to be able to meet its obligations as they become due. Liquidity
Ratios help in establishing a relationship between cast and other current assets to current
obligations to provide a quick measure of liquidity. A firm should ensure that it does not
suffer from lack of liquidity and also that it does not have excess liquidity. A very high
degree of liquidity is also bad, idle assets earn nothing. The firm's funds will be
unnecessarily tied up in current assets. Therefore it is necessary to strike a proper balance
between high liquidity. Liquidity ratios can be divided into three types:

 Current Ratio
 Quick Ratio
 Fixed Asset Inventory turnover Ratio
A. CURRENT RATIO

Current ratio is an acceptable measure of firm’s short-term solvency Current assets

includes cash within a year, such as marketable securities, debtors and inventors. Prepaid
expenses are also included in current assets as they represent the payments that will not
made by the firm in future. All obligations maturing within a year are included in current
liabilities. These include creditors, bills payable, accrued expenses, short-term bank loan,
income-tax liability in the current year.

The current ratio is a measure of the firm's short term solvency. It indicated the
availability of current assets in rupees for every one rupee of current liability. A current

Current Ratio = Current asset 15

Current liabilities
ratio of 2:1 is considered satisfactory. The higher the current ratio, the greater the margin
of safety; the larger the amount of current assets in relation to current liabilities, the more
the firm's ability to meet its obligations. It is a cured -and-quick measure of the firm's
liquidity.

B. QUICK RATIO

Quick Ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or reasonably
soon without a loss of value. Cash is the most liquid asset, other assets that are considered
to be relatively liquid asset and included in quick assets are debtors and bills receivables
and marketable securities (temporary quoted investments).

Inventories are converted to be liquid. Inventories normally require some time for
realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found
out by dividing quick assets by current liabilities

Quick ratio = current asset – inventories

Current liabilities

Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial

condition. Quick ratio is a more penetrating test of liquidity than the current ratio, yet it
should be used cautiously. A company with a high value of quick ratio can suffer from
the shortage of funds if it has slow- paying, doubtful and long duration outstanding
debtors. A low quick ratio may really be prospering and paying its current obligation in
time.

3 FIXED ASSET INVENTORY TURNOVER RATIO

The ratio is supposed to measure the efficiency with which fixed assets are employed a
high ratio indicates a high degree of efficiency in asset utilization and a low ratio reflects
inefficient use of assets. However, in interpreting this ratio, one caution should be borne
in mind. When the fixed assets of the firm are old and substantially depreciated, the fixed
assets turnover ratio tends to be high because the denominator of the ratio very low.

16
 Fixed Asset turnover ratio = Net sale

Fixed Asset

SOLVENCY RATIO

A solvency ratio is a key metric used to measure an enterprise’s ability to meet its long-
term debt obligations and is used often by prospective business lenders. A solvency ratio
indicates whether a company’s cash flow is sufficient to meet its long-term liabilities and
thus is a measure of its financial health. It can indicate the likelihood that a company will
default on its debt obligations.

The main solvency ratios are the current ratio, the interest coverage ratio and the debt-to-
equity ratio.

TYPE OF SOLVENCY RATIO

A. DEBT EQUITY RATIO

The debt-to-equity ratio is similar to the debt-to-assets ratio, in that it indicates how a
company is funded, in this case, by debt. The higher the ratio, the more debt a company
has on its books, meaning the likelihood of default is higher. The ratio looks at how much
of the debt can be covered by equity if the company needed to liquidate.

Debt-to-equity ratio = Total liabilities

Total shareholder equity

B. INTEREST COVERAGE RATIO

The interest coverage ratio measures the ability of a company to meet the interest
payments on its debt with its earnings. Specifically, it measures how many times over a

17
company can meet its interest payment with its current earnings, as such, it includes a
margin of safety

The higher the ratio, the better, and when the ratio reaches 1.5 or below, then it indicates
that a company will have difficulty meeting the interest on its debt.

Interest coverage ratio = Earnings before interest and taxes (EBIT)

Interest expense

3 DEBT TO ASSET RATIO

The debt-to-assets ratio measures a company's total debt to its total assets. It measures a
company's leverage and indicates how much of the company is funded by debt versus
assets, and therefore, its ability to pay off its debt with its available assets.

A high ratio, above 1, indicates that a company is significantly funded by debt and may
have difficulty meetings its obligations

TOTAL DEBT

Debt to Asset Ratio = X100

TOTAL ASSET

EFFICIENCY RATIO

The efficiency ratio is typically used to analyze how well a company uses its assets and
liabilities internally. An efficiency ratio can calculate the turnover of receivables, the
repayment of liabilities, the quantity and usage of equity, and the general use of inventory
and machinery. This ratio can also be used to track and analyze the performance of
commercial and investment banks.

1. ASSET TURN OVER RATIO

Asset turnover ratio = Total Sell

Total Asset 18
The asset turnover ratio measures the value of a company's sales or revenues relative to
the value of its assets. The asset turnover ratio can be used as an indicator of the
efficiency with which a company is using its assets to generate revenue.

The higher the asset turnover ratio, the more efficient a company is at generating revenue
from its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is
not efficiently using its assets to generate sales.

2 EBITDA Margin %

EBITDA margin is a measure of a company's operating profit as a percentage of its

revenue. The acronym stands for earnings before interest, taxes, depreciation, and
amortization. Knowing the EBITDA margin allows for a comparison of one company's
real performance to others in its industry

EBITDA

EBITDA Margin % =

TOTAL SALES

3 EARNINGS PER SHARE

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding
shares of its common stock. The resulting number serves as an indicator of a company's
profitability. It is common for a company to report EPS that is adjusted for extraordinary
items and potential share dilution. The higher a company's EPS, the more profitable it is
considered to be.

19
 RESEARCH METHODOLOGY

Research Design

In view of the objects of the study listed above an exploratory research design has been
adopted. Exploratory 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

Data Collection Methods

Primary Data

Information collected from internal guide and finance manager. Primary data is firsthand
information.

Secondary Data

Company balance sheet and profit and loss account. Secondary data is second hand
information.

Data Collection Tools

To analyze the data acquire from the secondary sources “Ratio Analysis “The scope of
the study is defined below in terms of concepts adopted and period under focus.

First the study of Ratio Analysis is confined only to the BHARAT FORGE LTD.

Secondly the study is based on the annual reports of the company for a period of 3 years
from 2017-18 to 2019-20 also company website use. The reason for restricting the study
to this period is due time constraint.

20
 CHAPTER 3

COMPANY PROFILE

BHARAT FORGE LTD

Bharat Forge Limited (BFL) is a Pune-based Indian multinational company involved in

automotive, power, oil & gas, construction & mining, locomotive, marine and aerospace
industries.
The company has now entered into the defense sector and is moving from being a
components manufacturer to a complete product maker.
The company was founded by Dr. Nilkanthrao A. Kalyani, in 1961. The current chairman
of the company is his son, Baba Kalyani. It is part of the Kalyani Group, which is a
US$2.5 billion conglomerate with a 10,000 personnel strength global work force. Amit
Kalyani, Baba Kalyani's son, is the Executive Director of the company.

Vision

 To be committed to listening and responding to the needs of our customer,

associate and business partners and honoring their individual value.

To be committed to entrepreneurial spirit that fuel the growth our companies and
increase shareholder value.

Mission
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  Spirit of innovation is the core of the organization’s DNA and plays
Paramount role in delivering value to customers through extensive focus on
technology and value addition.

Management

Name Designation
B N Kalyani Chairmen and Managing Director
G K Agarwal Deputy Managing Director
Amit B Kalyani Deputy Managing Director
B P Kalyani Executive Director
S E Tandale Executive Director

MANUFACTURING UNITS AND PRODUCTS

With manufacturing facilities spread across 12 locations and 6 countries four in India,
three in Germany, one each in Sweden, Scotland, USA and two in China, the company
manufactures a wide range of safety and critical components for passenger cars, SUV’s,
light, medium & heavy commercial vehicles, tractors and diesel engines. The company
also manufactures specialized components for the aerospace, power, energy, oil & gas,
rail & marine, mining & construction equipment, and other industries. It is capable of
producing complex large volume parts in both steel and aluminum.

CUSTOMER OF BHARAT FORGE

Its customer base includes virtually every global automotive OEM and Tier I supplier.
Daimler Chrysler, Toyota, BMW, General Motors, Volkswagen, Audi, Renault, Ford,
Volvo, Caterpillar - Perkins, Iveco, Arvin Meritor, Detroit Diesel, Cummins, Dana
Corporation, Honda, Scania and several others source their complex forging requirements
including machined crankshafts, front axle beams and steering knuckles from Bharat
Forge.

22
AWARD, RECOGNITION AND HONORS

BFL is a recipient of several national and international honors, recognition and awards
Forbes Magazine has listed it for consecutive three years in its global “Best under a
Billion” list. Automotive

Component Manufacturers Association of India (ACMA) has honored it over past four
years for its export excellence. Outlook recognized BFL as the Best Value Creator for
2004 among large companies. BFL has also been awarded the Indo German Chamber of
Commerce (IGCC) Award for ‘Outstanding Contribution towards Promotion of the Indo-
German Economic Relations for the Year 2005’. Bharat Forge received GKD-NIQR
award for “Outstanding Organization” in 2005.

COMPETITORS OF BHARAT FORGE LIMITED

Name Last Price Market cap Sales Net Profit Total Asset
(Cr) Turnover
Bharat Forge 508.35 23668.20 4563.88 473.52 8325.98
Kalyani Forge 131.45 47.82 200.95 -6.93 127.34
Ratnamani St 1,689.50 7,894.70 2,583.14 307.50 1,928.12

23
 CHAPTER 4

DATA ANALYSIS AND INTERPRITATION

LIQUIDITY RATIO’S

1. CURRENT RATIO

The ratio between all current assets and all current liabilities; another way of expressing
liquidity. It is a measure of the firm’s short-term solvency. It indicates the availability of
current assets in rupees for every one rupee of current liability. A ratio of greater than one
means that the firm has more current assets than current claims against them.

Current Assets
Current ratio =
Current Liabilities

Table current ratio

Sr.No (in cr. Year Current Asset Current Ratio

Rs.) Liabilities
1 2017-18 4580 3759 1.35
2 2018-19 5538 4108 1.56
3 2019-20 5271 3967 1.66

24
 Graph Current Ratio

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2017-18 2018-19 2019-20

column1 Column2 Column3

Interpretation:

The standard normal for current ratio is 1.2 to 2. During the year 2017-18 the ratio is 1.35
and it has increase to 1.56 during the year 2018-19 and again increased to 1.66 in 2019-
20.So the ratio was satisfactory.

2. QUICK RATIO

Quick ratio establishes a relationship between quick, or liquid, assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or reasonably
soon without a loss of value

Quick Ratio = Current Assets – Inventories

Current liabilities

25
 Table Quick Ratio

Sr.
NO YEAR QUICK CURRENT QUICK RATIO
ASSETS LIABILITIES
1 2017-18 3505.27 2571.31 1.36

2 2018-19 3694 2827.27 1.31

2019-20 3536.5 2552.58 1.33

3.

QUICK RATIO

1.36
1.35
1.34
1.33
1.32
1.31
1.3
1.29
1.28
2017-18 2018-19 2019-20

Series 1

Interpretation:

His standard norm for the quick r a t i o is 1:1. Quick ratio in the year 2017-18 is

1.36 to continuous decrease to 2019 -20.quick ratio is 2018 -19 is1.3.

And in year 2019-2020 is 1.33. Decreasing quick ratio is not good sign. But ratio is

26
Greater than one its good for company.

3 FIXED ASSET INVENTORY TURNOVER RATIO

The ratio is supposed to measure the efficiency with which fixed assets are employed a
high ratio indicates a high degree of efficiency in asset utilization and a low ratio reflects
inefficient use of assets. However, in interpreting this ratio, one caution should be borne
in mind. When the fixed assets of the firm are old and substantially depreciated, the fixed
assets turnover ratio tends to be high because the denominator of the ratio very low.

Fixed Asset turnover ratio = Net sale

Fixed Asset

Table Inventory Turnover Ratio

Sr.
NO YEAR NET SALE FIXED ASSET FIXED ASSET
TURN OVER
RATIO
1 2017-18 5315.96 2830.31 1.87

2 2018-19 6519.99 3346.79 1.94

2019-20 4563.88 3702.58 1.23

3.

27
 Inventory turn over

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2017-18 2018-19 2019-20

Column1 Column3 Column2

Interpretation:

Fixed assets turnover ratio is 1.87 in the year 2017-18 and it is increased to 1.94 in the
year 2018-19 here efficiency of company is generating net sales from its asset. In the year
2019-20 the ratio is 1.23.

SOLVENCY RATIOS

1. TOTAL DEBT TO EQUITY RATIO

The ratio is used to evaluate a company's financial leverage. The D/E ratio is an
important metric used in corporate finance. It is a measure of the degree to which a
company is financing its operations through debt versus wholly-owned funds. More
specifically, it reflects the ability of shareholder equity to cover all outstanding debts in
the event of a business downturn.

Total Debt

Total Debt to Equity Ratio = X100

Net Worth

28
 Table total debt equity ratio

SR NO Year Total Debt (in Net Worth (in RATIO (%)

cr.) cr.)
1 2017-18 3256.96 4651.71 0.70

2 2018-19 4029.31 5376.06 0.75

3 2019-20 4348.08 5219.74 0.83

Total debt equity ratio

0.84
0.82
0.8
0.78
0.76
0.74
0.72
0.7
0.68
0.66
0.64
0.62
2017-18 2018-19 2019-20

Column1 Column2 Column3

Interpretation:

Total debt equity ratio is 0.70 in the year 2017-18 and it is increased to 0.75 in the year
2018-19 here debt ratio increases to 0.83. In the year 2019-20 .A good debt to equity ratio
is around 1 to 1.5. From the above in fluctuating trend we can conclude that company’s

29
 dependence on debt is increasing. But not more than 1.5 .company is good condition in
debt compare with equity.

2. INTEREST COVERAGE RATIO

The interest coverage ratio is a debt ratio and profitability ratio used to determine how
easily a company can pay interest on its outstanding debt. The interest coverage ratio may
be calculated by dividing a company's earnings before interest and taxes (EBIT) by its
interest expense during a given period by the company's interest payments due within the
same period.

EBIT

Interest coverage Ratio = X100

Interest payments

Table Interest coverage ratio

SR NO Year EBIT (in cr.) Interest RATIO (%)

payment (in cr.)
1 2017-18 1302.67 106.53 12.2

2 2018-19 1737.57 127.22 13.66

3 2019-20 675.94 171.33 3.95

30
 interest coverage ratio

14
12
10
8
6
4
2
0
2017-18 2018-19 2019-20

Column

Interpretation:

Interest coverage ratio is 12.2 in the year 2017-18 and it is increased to 13.66 in the year
2018-19.It is good sign of the company .A higher coverage ratio is better .But ratio
decrease to 3.95 in the year 2019-20 .it is not good sign of the company .they pay more
interest as compare previous year .this is not good condition for year 2020.

3. DEBT TO ASSET RATIO

The debt-to-assets ratio measures a company's total debt to its total assets. It measures a
company's leverage and indicates how much of the company is funded by debt versus
assets, and therefore, its ability to pay off its debt with its available assets.

A high ratio, above 1, indicates that a company is significantly funded by debt and may
have difficulty meetings its obligations

TOTAL DEBT

Debt to Asset Ratio = X100

TOTAL ASSET

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 Table debt to asset ratio

SR NO Year Debt (in cr.) Asset (in cr.) RATIO (%)

1 2017-18 2,711.05 10,016 0.16

2 2018-19 3,772.85 11,642 0.32

3 2019-20 3,878.36 11,562 0.33

Debt to Asset ratio

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2017-18 2018-19 2019-20

Column

Interpretation:

Total debt asset ratio is 0.16 in the year 2017-18 and it is increased to 0.32 in the year
2018-19 here debt ratio increases to 0.33 in the year 2019-20. A ratio is less than 1,

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 indicates that a company is significantly funded by debt and may have not difficulty
meetings its obligations.

EFFICIENCY RATIO

1 ASSET TURN OVER RATIO

The asset turnover ratio measures the value of a company's sales or revenues relative to
the value of its assets. The asset turnover ratio can be used as an indicator of the
efficiency with which a company is using its assets to generate revenue.

The higher the asset turnover ratio, the more efficient a company is at generating revenue
from its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is
not efficiently using its assets to generate sales.

TOTAL SELL

Asset turnover Ratio = X100

TOTAL ASSET

Table asset turnover ratio

SR NO Year TOTAL SELL (in cr ) TOTAL Asset (in RATIO (%)

cr.)
1 2017-18 8,414.67 10,016 0.84

2 2018-19 10,145.73 11,642 0.87

3 2019-20 8,055.84 11,562 0.69

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 asset turn over ratio

0.8

0.6

0.4

0.2

0
2017-18 2018-19 2019-20

Column

Interpretation:

Total asset turnover ratio is 0.84 in the year 2017-18 and it is increased to 0.87 in the year
2018-19 and then decreases to 0.69 in the year 2019-20. A ratio is more than 0.5 indicates
that a company generate more sale.

2 EBITDA Margin %

EBITDA margin is a measure of a company's operating profit as a percentage of its

revenue. The acronym stands for earnings before interest, taxes, depreciation, and
amortization. Knowing the EBITDA margin allows for a comparison of one company's
real performance to others in its industry

EBITDA

EBITDA Margin % =

TOTAL SALES
.

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 Table EBITDA Margin % ratio

SR NO Year EBITDA (in cr ) TOTAL SALES RATIO (%)

(in cr.)
1 2017-18 1858.81 8414.67 22.09

2 2018-19 2250.73 10145.73 22.18

3 2019-20 1298.19 8055.84 16.11

EBITDA Margin %

25

20

15

10

0
2017-18 2018-19 2019-20

Column

Interpretation:

EBITDA Margin % is 22.09 in the year 2017-18 and it is increased to 22.18 in the year
2018-19 and then decreases to 16.11 in the year 2019-20. A higher value indicates the
company is able to produce earnings more efficiently by keeping costs low.

3 EARNINGS PER SHARE

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding
shares of its common stock. The resulting number serves as an indicator of a company's
profitability. It is common for a company to report EPS that is adjusted for extraordinary

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items and potential share dilution. The higher a company's EPS, the more profitable it is
considered to be.

Table Earning per share

SR NO Year EPS

1 2017-18 16.38

2 2018-19 22.17

3 2019-20 7.51

EPS

25

20

15

10

0
2017-18 2018-19 2019-20

Column

Interpretation:

EPS is 16.38 in the year 2017-18 and it is increased to 22.17 in the year 2018-19 and then
decreases to 7.51 in the year 2019-20. A higher value EPS which show good profitability
of company.

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 CHAPTER 5

1. FINDING

a) Current ratio which are continuously increasing year to year standard which
indicates the ability of the firm to meet its current obligations is more. It shows
that the company is strong in working funds management.
b) The company is maintaining of quick assets more than one. As the company
having high value of quick ratio. Quick assets would meet all its quick liabilities
without any difficulty.
c) In above all current assets and liabilities ratios are better that also it is double the
normal position.
d) Fixed asset inventory turnover ratio is greater than one is good sign .it increases
use of asset to generate sale.
e) In the year 2018 debt equity ratio is 0.70 but it is increased to 0.75 & 0.83 in 2019
and 2020 increased every year. It shows that the company is losing its condition.
f) Debt Equity ratio is increasing every year. It indicates the company depends on
the debt fund increasing.
g) Total liabilities ratio is also increasing year by year.
h) In the year 2018, the interest coverage ratio 12.2 which increased to 13.66 in the
year 2019 and high fluctuations in the followed 2020 years due to epidemic
diseases to3.95. In this position, outside investors are interested to invest their
money in this company.
i) The company is declining of its coverage ratio to serve long term debts.
j) Inventory turnover also increased for year by year that is company production is
also increased. Subsequently sales are also increased.

SUGGESTIONS

a) The company has to increase the profit maximization and has to decrease the
operating expenses.
b) By considering the profit maximization in the company the earning per share,
investment and working capital also increases. Hence, the outsiders are also
interested to invest.
c) The company should maintain sufficient cash and bank balances; they should
invest the idle cash in marketable securities or short term investments in shares,
debentures, bonds and other securities.

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 d) The company must reduce its debtors collection period from 83 & 84 days to 40
days be adopting credit policy by providing discounts to the debtors.
e) The company should increase its interest coverage ratio to serve long term debts.
f) The EPS has observed as raising trend over the study period, hence it may be
suggested Bharat Forge Limited should take key interest to maximize the
shareholder wealth by increasing dividend payout.

CONCLUSION

Liquidity ratios, both current ratio and quick ratio are showing effectiveness in liquidity
as in all the years current ratio is greater than 1 and quick ratio is greater than the
standard 1. ratio.

The firm is maintaining a low cash balance and marketable securities which means they
done cash payments.

Debt equity ratio, solvency ratio and interest coverage ratio are showing an average
increase in the long term solvency of the firm.

Average payment period of the firm is showing the credit worthiness of the firm to its
suppliers.

Fixed assets turnover ratio is showing that the firm needs lesser investment in fixed assets
to generate sales.

The increasing trend of current assets turnover ratio indicates that the firm needs more
investment in current assets for generating sales.

Company’s profit divided by the outstanding shares of its common stock. The resulting
number serves as an indicator of a company's profitability. The higher a company's EPS,
the more profitable it is considered.

The interest that has to be paid is very less when compared to the sales. The firm is not
utilizing the debt conservatively.

The company financial performance is very good and also they will increase their
business year by year by expanding their branches.

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 CHAPTER 6

BALANCESHEET

39
40
PROFIT AND LOSS ACCOUNT

41
BIBLOGRAPHY

I.M.Pandey : Financial Management

Web-sites:

a) www.google.co.in
b) www.amaron.co.in
c) www.moneycontro.com
d) stockedge.com
e) www.Investopedia.com

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