ACCOUNTANCY PROJECT

Name- Deep Gala

Class- XII Commerce B
Roll No.- 5
Subject- Accountancy
Teacher- Mrs. Snehal Joshi
 ACKNOWLEDGMENT
I would like to convey my heartful thanks to Mrs. Snehal Joshi,
my accountancy teacher who always gave me valuable suggestions
and guidance during the completion of this project. She helped me
understand and remember important details of the project that I
would otherwise forget.
Secondly, I would also like to express my gratitude towards my
parents and friends who helped me in nalizing this project within
the limited time frame.
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 INDEX
Sr No. Particulars Slide No.

1 L&T Company Pro le 5-7

2 L&T Board of Directors 8-11

3 Financial Statement & Income Statement 12-18

4 Analysis of Financial Statement 19

5 Ratios & Analysis 20-39

6 Ratios at Glance 40
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Larsen & Toubro Ltd, commonly known as L&T, is an Indian multinational conglomerate,
with business interests in engineering, construction, manufacturing, technology and
financial services, headquartered in Mumbai. It was founded by two Danish engineers
taking refuge in India.As of 2021, L&T Group comprises 118 subsidiaries, 6 associates,
25 joint-venture and 35 joint operations companies, operating across basic and heavy
engineering, construction, realty, manufacturing of capital goods, information
technology, and financial services.
➤ HISTORY-
Larsen & Toubro originated from a company founded in 1938 in Mumbai by two Danish
engineers, Henning Holck-Larsen and Søren Kristian Toubro. The company began as a
representative of Danish manufacturers of dairy and allied equipment. However, with the
start of the Second World War in 1939 and the resulting blockade of trade lines, the
partners started a small workshop to undertake jobs and provide service facilities.
Germany's invasion of Denmark in 1940 stopped supplies of Danish products.
The war-time need to repair and refit and degauss ships offered
L&T an opportunity, and led to the formation of a new
company, Hilda Ltd, to handle these operations. L&T also
started to repair and fabricate ships signaling the expansion of
the company. The sudden internment of German engineers in
British India (due to suspicions caused by the Second World
War), who were to put up a soda ash plant for the Tata's, gave
L&T a chance to enter the field of installation.

After India's independence in 1947, L&T set up offices in Calcutta (now Kolkata), Madras (now Chennai)
and New Delhi. In 1948, 55 acres of undeveloped marsh and jungle was acquired in Powai, Mumbai. A
previously uninhabitable swamp subsequently became the site of its main manufacturing hub. In December
1950, L&T became a public company with a paid-up capital of ₹20 lakh (equivalent to ₹21 crore or
US$2.8 million in 2021). The sales turnover in that year was ₹1.09 crore (equivalent to A₹112 crore or
US$15.1 million in 2021). In 1956, a major part of the company's Mumbai office moved to ICI House in
Ballard Estate, which would later be purchased by the company and renamed as L&T House, its present
headquarters.
Today, Larsen & Toubro Limited (‘Larsen & Toubro’ or ‘L&T’) is a USD 17 billion
technology, engineering, construction, projects, manufacturing and financial services
conglomerate, with global operations. It addresses critical needs in key sectors –
infrastructure, construction, defense, hydrocarbon, heavy engineering, power,
shipbuilding, aerospace, electrical & automation, mining and metallurgy. L&T’s
integrated capabilities span the spectrum of ‘design to deliver’ solutions. Over seven
decades of a strong, customer-focused approach and a sharp focus on world-class quality
have enabled it to maintain a leadership position in its major lines of business. The
Company has manufacturing facilities and offices in several countries, and a global
supply chain. It delivers landmark projects and products, helping clients in 30 countries
to create long-term progress and economic growth. Characterized by professionalism,
high standards of corporate governance and sustainability, L&T continues to evolve,
seeking better ways of engineering to meet emerging challenges.
 BOARD OF DIRECTORS
➤ A.M. Naik (Group Chairman)-Mr. A. M. Naik mirrors the values of the
organization he heads - professionalism, entrepreneurship and a passionate
commitment to advancing the interests of all stakeholders. Under his leadership,
L&T overcame multiple challenges and emerged stronger with a sharper focus on
profitable growth. Media surveys and peer group assessments rank Mr. Naik as
among the world’s best performing business leaders.

➤ S.N. Subrahmanyan (CEO & MD)- SNS is responsible for leading the breadth
and width of L&T’s considerable business interests to new growth levels, riding
on the enormous benefits of digitalization, big data, and predictive analysis that
he drives internally with exceptional zeal. He places a premium on innovation,
project management and talent development, particularly in leadership roles.
➤ R. Shankar Raman (Whole-time director & CFO)- Mr. Shankar Raman
assumed responsibilities to oversee the entire finance function at the Group level
including functions like Risk Management and Investor Relations.

➤ D.K. Sen (Sr. Executive VP[Development Projects])- Driven by a passion to

succeed and possessing the requisite talent, Mr. Sen steadily rose up the ranks and
during this period he led several marquee projects that underscored L&T’s
standing as ‘a builder of nations’.

➤ M.V. Satish (Sr. Executive VP[Buildings])- He drives L&T’s expertise of

‘Design and Build’ construction solutions on an EPC (Engineering,
Procurement & Construction) basis, is an excellent exponent of tunnel form and
aluminum formwork systems and an early adopter of precast technology for
housing projects. A firm believer in safety and as the organization embraces
digitalization in its myriad manifestations, MVS is leading the charge by
driving greater espousal of digitalization across his various spheres of operation
with extremely encouraging results.
➤ J.D. Patil (Executive Sr. VP[Defense & Smart Technologies])-He has a rich,
more than four-decade long career in L&T and has been instrumental in growing
the nascent Technology and Product Development Group of L&T’s corporate
R&D with a focus on top end inter-disciplinary Product Development.

➤ Subramanian Sarma (Sr. Executive VP[Energy])- He is responsible for the

Hydrocarbon and Power businesses. During his career span, Mr. Sarma has
handled the complete Oil & Gas value chain including Executive Management,
Business Development, Project Management and Process Engineering.

➤ S.V. Desai (Sr. Executive VP[Civil Infrastructure])- Mr. Desai is known for his
expertise in the areas of Bid-estimation, negotiation and finalization of Mega
Projects. In Heavy Civil, he was instrumental in bagging landmark
infrastructure projects like Riyadh Metro, Qatar Metro, mega Defence
infrastructure project. He has been inducted as a member of Executive
Committee of L&T in 2020.
 ➤ T. Madhava Das (Sr. Executive VP[Utilities])- Under his leadership, the
domestic Transmission Line EPC, Tower Manufacturing, Tower Testing
Services and the PT&D business in UAE, Saudi Arabia, Oman and Kuwait
have grown significantly, besides moving to new geographies in ASEAN and
Africa. He has successfully incubated Solar Business and has steered it to
grow to the current level, besides adding microgrid and energy storage
capabilities, making it one of the largest Solar EPCs in the country.

FINANCIAL & INCOME STATEMENT

ANALYSIS OF FINANCIAL STATEMENT
ACCOUNTING RATIOS AND ANALYSIS
 LIQUIDITY RATIOS
➤ Also called ‘Short-term Solvency Ratios’, these ratios are used to assess the short-term financial position
of the concern. They indicate the firm’s ability to meet its current obligations out of current resources.
These include two ratios:
1.Current Ratio or Working Capital Ratio
2. Quick Ratio, Acid Test Ratio or Liquid Ratio
 1. CURRENT RATIO
➤ This ratio explains the relationship between current assets and current liabilities of a business. It is used
to assess the firm’s ability to meet its short-term liabilities on time.

➤ Current Ratio= Current Assets/Current Liabilities

2021: 194966.83/137408.01 = 1.41:1

2020: 182689.89/144729.21 = 1.26:1

➤ Significance- It provides a measure of degree to which current assets cover current liabilities. The excess
of current assets over current liabilities provides a measure of safety margin available against
uncertainty. A current ratio of 2:1 is ideal. A higher ratio shows that the firm will be able to pay its
current liabilities easily. A low ratio indicates lack of liquidity and shortage of working capital. A much
higher ratio may indicate the poor investment policies of the management.
 2. QUICK RATIO
➤ This ratio indicates whether the firm is in a position to pay its current liabilities within a month or
immediately.

➤ Quick Ratio= Liquid Assets/Current Liabilities

2021: 194966.83 - 5820.54/137408.01 = 189146.29/137408.01 = 1.37:1

2020: 182689.89 - 5746.65/144729.21 = 176943.24/144729.21 = 1.22:1

➤ Significance- This ratio tests the short-term financial position of the company as it considers only those
assets which can be easily and readily be converted into cash. Ideal ratio is 1:1. The higher the ratio, the
better a company’s liquidity and financial health. The lower the ratio, the more likely the company
struggles in paying debts.
 SOLVENCY RATIOS
➤ These ratios are calculated to assess the ability of the firm to meet its long-term liabilities as and when
they become due. These ratios reveal the amount invested by proprietors and the amount raised from
outside sources.
These include four ratios:
1. Debt Equity Ratio 3. Proprietary Ratio
2. Total Assets to Debt Ratio 4. Interest Coverage Ratio
 1. DEBT EQUITY RATIO
➤ This ratio indicates the proportion of funds which are acquired by long-term borrowings in comparison
to shareholder’s funds.

➤ Debt Equity Ratio= Long Term Debts/Shareholder’s Funds

2021: 80996.38 + 773.78/76992.19 = 1.06:1

2020: 80927.30 + 708.67/68127.25= 1.19:1

➤ Significance- This ratio is calculated to assess the ability of the firm to meet its long term liabilities. A
ratio of 2:1 is consider safe. If the ratio is more than that, it shows a rather risky financial position from
the long-term point of view, as it indicates that more and more funds invested in the business are
provided by long-term lenders. Ratio lower than 2:1 is better for long-term lenders, as it provides
sufficient protection to long-term lenders.
 2. TOTAL ASSETS TO DEBT RATIO
➤ This ratio gives same indication as debt-equity ratio. In this ratio, total assets are expressed in relation
to long-term debts.

➤ Total Assets to Debt ratio= Total Assets/Long term Debts

2021: 97982.09+194966.83/76992.19 = 3.8:1

2020: 103101.4+182689.89/68127.25 = 1.51:1

➤ Significance- It measures the extent to which long-term debts are covered by assets which indicates the
margin of safety available to providers of long-term loans. A higher ratio implies use of lower debts in
financing assets which means a larger safety margin for lenders. Low ratio represents risky financial
position as it implies the use of higher debts in financing the assets of the business.
 3. PROPRIETARY RATIO
➤ This ratio indicates the proportion of total assets funded by owners or shareholders.

➤ Proprietary Ratio= Equity/Total Assets

2021: 76992.19/292948.92 = 0.26 or 26%

2020: 68127.25/285791.29 = 0.23 or 23%

➤ Significance- Higher ratio indicates sound financial position of the company as it means that a large
proportion of total assets is provided by equity and hence the firm is less dependent on external sources of
finance. Whereas, low ratio indicates low margin of safety for long-term lenders as with lower ratio the
long-term loans are less secured and thus they face risk of losing money. A ratio of 33% is ideal.
 4. INTEREST COVERAGE RATIO
➤ Also called ‘Debt Service Ratio’, it indicates how many times the interest charges are covered by the
profits available to pay interest charges.

➤ Interest Coverage Ratio= Profit before charging interest and income tax/Fixed Interest Charges
2021: 12235.8/3913.44 = 3.12 times

2020: 13430.95/2796.66 = 4.8 times

➤ Significance- It measures the margin of safety for long-term lenders. The higher the ratio, the more
secure the lender is in respect of payment of interest regularly. A ratio of 6 to 7 times is consider
appropriate. If the profit is just equal to interest, it is an unsafe position for the lender as well as for the
company, as nothing will be left for shareholders. It also indicates the long term solvency position of the
company.
 ACTIVITY RATIOS
➤ Also called ‘Turnover Ratios’, these ratios indicate how efficiently the working capital and the
inventory is being used to obtain revenue from operations.
These include four ratios:
1. Inventory or Stock Turnover Ratio 3. Creditors or Payables Turnover Ratio
2. Debtors or Receivable Turnover Ratio 4. Working Capital Turnover Ratio
 1. INVENTORY OR STOCK TURNOVER RATIO
➤ This ratio indicates the relationship between Cost of Revenue from Operations during the year and avg.
inventory kept during the year.

➤ Inventory Turnover Ratio= Cost of Revenue from Operations/Avg. Inventory

2021: 122240.95/5783.59 = 21.13 times

2020: 130877.10/6080.29 = 21.52 times

➤ Significance- This ratio indicates whether inventory has been efficiently used or not. It shows the no. of
times the inventory is turned into revenue from operations during the year. The higher the ratio, the
better it is, since it indicates that inventory is selling quickly. Low ratio indicates that inventory does not
sell quickly and remains lying in the godown for quite a long time.
 2. DEBTORS OR RECEIVABLES TURNOVER RATIO
➤ This ratio indicates the relationship between Credit Revenue from Operations and avg. trade receivables
during the year.

➤ Trade Receivables Turnover Ratio = Credit Revenue From Operations/Avg. Trade Receivables
2021: 139408.38/41480.65 = 3.36 times

2020: 147813.26/38788.69 = 3.81 times

➤ Significance- This ratio indicates the speed with which the amount is collected from trade receivables.
The higher the ratio, the better it is, since it indicates that amount of trade receivables is being collected
more quickly. A lower ratio indicates inefficient credit sales policy of the management, since credit sales
have been made to those who do not deserve much credit.

Note: Here, Credit Revenue from Operations is considered to be equal to total Revenue from Operations.
 3. CREDITORS OR PAYABLES TURNOVER RATIO
➤ This ratio indicates the relationship between credit purchases and avg. trade payables during the year.

➤ Trade Payable Turnover Ratio= Net Credit Purchases/Avg. Trade Payables

2021: 16784.98/44574.27 = 0.37 times

2020: 16389.75/43319.37 = 0.37 times

➤ Significance- This ratio indicates the speed with which the amount is being paid to trade payables. The
higher the ratio, the better it is, since it indicates that the trade payables are being paid more quickly
which increases the credit worthiness of the firm.
 4. WORKING CAPITAL TURNOVER RATIO
➤ This ratio indicates how efficiently working capital has been utilized in making Revenue from
Operations.

➤ Working Capital Turnover Ratio= Revenue from Operations/Working Capital

2021: 134476.75/57558.82 = 2.33 times

2020: 144308.05/37960.68 = 3.80 times

➤ Significance- It shows the no. of times working capital has been rotated in producing revenue from
operations. A high ratio shows efficient use of working capital whereas a low ratio indicates under-
utilization of working capital. A very high ratio is dangerous, as it is a sign of over-trading. It is an
indicator of the shortage of working capital and may put the concern in financial difficulties. A very low
ratio may be a sign of under-trading. It indicates that the working capital is in excess of the
requirements of the business.
 PROFITABILITY RATIOS
➤ Also called ‘Income Ratios’, these ratios measure the various aspects of profitability of a company, such
as, the efficiency and the success of a business.
These include five ratios:
1. Gross Profit Ratio 3. Operating Profit Ratio 5. Return on Investment
2. Operating Ratio 4. Net Profit Ratio
 1. GROSS PROFIT RATIO
➤ This ratio establishes a relationship between gross profit and Revenue from Operations.

➤ Gross Profit Ratio= Gross Profit/Revenue from Operations * 100

2021: 12235.80/134476.75 * 100 = 9.09%

2020: 13430.95/144308.05 *100 = 9.30%

➤ Significance- This ratio measures the margin of profit available on revenue from operations. The higher
the ratio, the better it is. No ideal standard is fixed for this ratio, but the ratio should be adequate
enough to cover the operating expenses, depreciation, interest on loans, dividends and creation of
reserves.
 2. OPERATING RATIO
➤ This ratio measures the proportion of an enterprise’s Cost of Revenue from Operations and operating
expenses in comparison to its Revenue from Operations.

➤ Operating Ratio= CORFO+Operating Expenses - Operating Income/RFO * 100

2021: 16784.98+69572.55/134476.75 * 100= 64.21%

2020: 16389.75+80325.22/144308.05 * 100 = 67.01%

➤ Significance- This ratio indicates the extent of Revenue from Operations that is absorbed by Cost of
Revenue from Operations and operating expenses. Lower the ratio, the better it is, because it will leave
higher margin of profit on Revenue from Operations. Higher ratio is a negative sign as it indicates that
operating expenses are increasing relative to revenue. An operating ratio lower than 80% is preferable.
 3. OPERATING PROFIT RATIO
➤ This ratio shows the relationship between operating profit and net Revenue from Operations

➤ Operating Profit Ratio= Operating Profit/Revenue from Operations * 100 or 100 - OR

2021: 100 - 64.21 = 35.79%

2020: 100 - 67.01 = 32.99%

➤ Significance: This ratio helps to analyze a firm’s operational efficiency. It is very useful for inter-firm as
well as intra-firm comparisons. A high ratio may indicate better management of resources, since higher
ratio shows higher operational efficiency leading to higher operating profits. A low ratio may indicate
operational flaws and improper management of resources, since lower ratio is a sign of lower operational
profits which are not enough as compared to the total revenue generated from Revenue from Operations.
 4. NET PROFIT RATIO
➤ This ratio shows the relationship between net profit and net Revenue from Operations.

➤ Net Profit Ratio= Net Profit after tax/Revenue from Operations *100
2021: 4668.96/134476.75 * 100 = 3.47%

2020: 10167.75/144308.05 * 100 = 7.04%

➤ Significance- This ratio measures the rate of net profit earned on Revenue from Operations. An increase
in the ratio over the previous year shows improvement in the overall efficiency and profitability of the
business.
 5. RETURN ON INVESTMENT (ROI)
➤ It is calculated by comparing the profit earned and the capital employed to earn it. It is also called ‘Rate
of Return’ or ‘Return on Capital Employed’ or ‘Yield on Capital’.

➤ Return on Investment = Net Profit before Interest, tax and dividends/Capital Employed * 100
2021: 12235.80/158762.35 * 100 = 7.70%

2020: 13430.95/149763.22 * 100 = 8.96%

➤ Significance- This ratio reflects the overall profitability of the business. It measures how efficiently the
capital employed in the business is being used. It is also a measure of the earning power of the net assets
of the business. The ratio can be used to judge the borrowing capacity of the enterprise.
 RATIOS AT GLANCE
Ratios 2021 2020
1. Current Ratio 1.41:1 1.26:1
2. Quick Ratio 1.37:1 1.22:1
3. Debt Equity Ratio 1.06:1 1.19:1
4. Total Assets to Debt Ratio 3.8:1 1.51:1
5. Proprietary Ratio 26% 23%
6. Interest Coverage Ratio 3.12 times 4.8 times
7. Inventory Turnover Ratio 21.13 times 21.52 times
8. Trade Receivables Turnover Ratio 0.37 times 0.37 times
9. Trade Payables Turnover Ratio 2.74 times 3.01 times
10. Working Capital Turnover Ratio 2.33 times 3.8 times
11. Gross Pro t Ratio 9.09% 9.3%
12. Operating Ratio 64.21% 67.01%
13. Operating Pro t Ratio 35.79% 32.99%
14. Net Pro t Ratio 3.47% 7.04%
15. Return on Investment 7.7% 8.96%
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Thank You