Gag me for re-evaluation days of yogi

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International Research Journal of Modernization in Engineering Technology and Science

( Peer-Reviewed, Open Access, Fully Refereed International Journal )
Volume:05/Issue:09/September-2023 Impact Factor- 7.868 www.irjmets.com
A STUDY ON THE FINANCIAL ANALYSIS OF BHARAT HEAVY

ELECTRICALS LIMITED - ELECTRONICS DIVISION
Shreya R.D*1, Dr. S Baskaran*2
*1MBA Student, Department Of MBA, Dr. Ambedkar Institute Of Technology, Bangalore, India.
*2Professor Of MBA, Dr. Ambedkar Institute Of Technology, Bangalore, India.
DOI : https://www.doi.org/10.56726/IRJMETS44581
ABSTRACT
Through financial ratios, this report provides a financial overview of BHEL-EDN. The largest engineering and
manufacturing firm of its kind in India, BHEL is involved in the design, engineering, manufacture, testing,
commissioning, and servicing of a wide range of products and services for the key industries and sectors of the
economy, including Power, Transmission, Industry, Transportation, Renewable Energy, Oil & Gas, and Defence.
One method for assessing a company's financial situation in its four primary areas—liquidity, solvency,
turnover, and profitability—is ratio analysis. The primary objective of this paper is to analyze BHEL-EDN's
financial performance. Further, five-year annual reports may be used to understand the financial performance
of BHEL-EDN.
Keywords: BHEL-EDN, Liquidity, Solvency, Turnover, Profitability, Ratio Analysis.
I. INTRODUCTION
Evaluation of the effectiveness and appropriateness of various businesses, projects, budgets, and financial
institutions is a component of financial analysis. Its main objective is to ascertain a company's dependability,
solvency, liquidity, and profitability in order to determine if it is an acceptable option for financial investment. A
financial analyst often concentrates on the income statement, balance sheet, and cash flow statement while
evaluating a specific company.
Financial analysis finds relevance in both corporate finance and investment finance domains. In the context of
corporate finance, this assessment is carried out internally, utilizing metrics like internal rate of return (IRR)
and net present value (NPV) to identify worthwhile projects for execution. Transforming historical
performance metrics such as gross revenue or profit margin into projections for future performance is a crucial
aspect of corporate financial analysis. This aids in budget planning and decision-making, such as determining
optimal inventory levels, based on historical trends. This study is based on the secondary source of data where
the annual reports from the year 2018-2022 are compared and analyzed. The tools used are Ratio analysis
which is used to analyze the data. The objective of the study is to analyze the financial performance of BHEL-
EDN.
STATEMENT OF THE PROBLEM
India suffers from a lack of money; the resources that are now accessible can be put to other purposes and have
the potential to attract more investment. Effective financial management and control is important to everyone
involved in the industry, the management, the employee, and the society because of the resources available in
the nation.
A company's strong success is reliant on carefully arranging its capital structure, investments, and distribution.
An organization that doesn't employ sound capital structure principles like cost, control, and flexibility, as well
as one that doesn't use scientific techniques for distribution and investment when managing money, won't
endure over a long period of time. To understand the financial performance of the organization by analyzing its
previous annual years financial records and suggest some ideas for its betterment in financial aspects.
II. REVIEW OF THE LITERATURE
1. Subbarayudu.S.et al "An Investigation into Working Capital at Ultratech Cements Ltd in the
Anantapuramu District" (2020):- The financial condition is analysed using a number of methodologies,
including ratio analysis and a statement of changes in working capital. From 2013–2014 through 2017–2018,
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annual reports and P & L accounts served as the main sources of data. This investigation revealed that Ultra
Tech Cement has a sound financial situation.
2. Chandrasekaran. S (2021):- Study's primary subject was XI Dynamics India Private Limited's financial
performance analysis. The business offers mortgage loans and housing loans to inexpensive market segments.
The objective of this research is to analyze the financial situation, identify firm's strengths and weaknesses, and
pinpoint the challenges in the mortgage procedure. The study's evaluation of financial position was held using
secondary data and a range of application methods, including ratio analysis and comparative balance sheets.
And came to the conclusion that the business is doing really well financially and is actively looking for further
money from other sources to expand its operation.
3. Kishore Kumar Das & Rupsa Mahapatra “a study on the MSME sector's financial analysis” (2021):-
The MSME is a critical part of the Indian economy because it consistently generates more than 70 million jobs,
produces more than 6000 different products, accounts for more than 45% of manufacturing output, and
generates 40% of exports. The aim of the paper is to assess the MSME Sector's financial performance. Diverse
statistical techniques, including correlation, regression, and ANOVA, are employed in the research for the
purpose of analyzing and measuring financial performance and trends. The strategies and innovative ideas are
implemented in this industry, which is showing the greatest results. This analysis found that the MSME sector is
the most promising and growing one.
4. Dr. Seema Pandit, Jash Gandhi “The Analysis compares the achievements of SBI and HDFC Bank.
(2021):- By using the CAMEL Model, the findings indicate that HDFC Bank fared well on the liquidity factors
whereas SBI Bank exhibited strong performance in terms of capital adequacy, asset quality, and management
attributes.
RESEARCH GAP
Fewer studies specifically look at the financial performance of SMEs; the greater part of research on the
evaluation of financial performance often focus on large agencies. In light of the reality that SMEs usually
operate in specialized environments and are subject to severe limitations relative to bigger businesses, more
research is required to examine the particular difficulties and variables influencing their financial success.
Many studies on measuring financial success focus on looking backward and providing assessments. However,
there is a research gap in investigating longitudinal analysis and developing predictive models that might help
forecast an organization's future economic performance based on present-day and historical data. Such trends
may aid decision-makers and financial result forecasters in their work.
NEED FOR THE STUDY
Decision Making: Financial analysis provides the tools and techniques essential for making wise judgments
about investments, financial planning, and resource allocation. By studying financial analysis, we can develop
the skills to evaluate financial data and make sound judgments regarding various financial matters.
Financial Planning: Financial analysis helps in developing effective financial plans. By studying financial
analysis, we can learn how to forecast financial performance, identify cash flow patterns, and assess funding
needs. This information is valuable for creating budgets, setting financial goals, and formulating strategies to
achieve those goals.
OBJECTIVES OF THE STUDY:
 To study BHEL's financial gain of the organization using Ratio analysis.
 To assess BHEL's general performance and operational effectiveness.
 To evaluate BHEL's liquidity and solvency condition.
TYPE OF RESEARCH
The survey is on “A Study on the Financial Analysis of BHEL-EDN”. This study is descriptive in nature and
this study an attempt is made to understand the financial performance of BHEL as compared with its previous
years. It determines the association between two or more variables using descriptive research. Numerous
surveys and fact-finding questions are included. The main objective of descriptive research is to explain the
situation as it is at the moment. The major features of this methodology are that the researcher cannot

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influence the variables and can only provide a report on what actually occurred. Survey methods of various
types, including the comparison and correlation methods, are used in descriptive research.
SCOPE OF THE STUDY
Investigation's scope is established both before and after. The study's main goal was to put its theoretical
components to use in real-world working scenarios. The following ratio analysis research is determined on the
previous five years BHEL Ltd. annual reports.
III. RESEARCH METHODOLOGY
SOURCES OF DATA COLLECTION
Data is being collected from previous years Financial Records of BHEL for five years period. (2018-2022) are
gathered from the Additional Source of data.
SAMPLING METHOD
Random sampling method is being used. Random sampling is widely used because it helps to reduce bias and
increase the generalizability of research findings to the larger population. Making certain that everyone in the
public gets an equal chance to participate enables researchers to more accurately derive generalizations about
the population from the sample's features.
PERIOD OF THE STUDY
An Overall study of the Financial Performance of BHEL is conducting for five years (2018-2022). The period
used for this topic is a company's 5-year annual reports that consist of balance sheets and profit or loss
statements, various elements are taken, such as the company's size, industry, and the level of accuracy desired.
DATA ANALYSIS
The study uses the tools such as ratio analysis.
LIMITATIONS OF THE STUDY
 The analysis only involves one company, Bharat Heavy Electricals Limited, and is restricted to a five-year
time (2018-2022) period.
 The study discusses Financial Statements That Are Simpler Measures of Financial Performance and Position
are discussed in the study.
IV. DATA ANALYSIS AND INTERPRETATION
A. Liquidity Ratios:-
1) Current Ratio:-
A company's capacity to cover short-term commitments with Current Assets is measured by its current ratio.
When Current. Assets exceed Current Liabilities, the ideal ratio is 2:1.
Table 1:- Calculation Of Current Ratio

CURRENT
PERIOD CURRENT ASSETS CURRENT LIABILITIES
RATIO
2017-2018 43188.39 22250.23 1.92 times
2018-2019 38339.89 23055.77 1.67 times
2019-2020 32703.53 22647.41 1.45 times
2020-2021 28334.02 20321.66 1.39 times
2021-2022 27861.98 21371.15 1.30 times

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CURRENT RATIO
2.5
1.92
2
1.67
1.45 1.39
1.5 1.3
RATIOS
0.5
0
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
YEARS
Graph 1:- Current Ratio

INTERPRETATION:-
The organization might be less able to satisfy its short-term obligations with its Current Assets since the
Current Ratio is diminishing over time. Although the present ratio is still consistently above 1, which is a good
indicator, it's crucial to recognize the downward tendency .If the Current Ratio is greater than 1, it states
company's Current assets are sufficient to fulfil its present commitments, but higher values (closer to 2 or
more) are generally considered better as they provide a larger buffer for unexpected financial challenges.
The company should monitor its current ratio closely to ensure it remains at a healthy level. A sharp decline or
a current ratio consistently below 1 could indicate financial difficulties in meeting short-term obligations. A 2:1
Current Ratio is optimal. The Current Ratio of a company measures its capacity to satisfy short-term
commitments, or short-term solvency. The Current Ratio in the graph above is 1.92 for 2017–2018 and 1.30 for
2021–2022. The value produced from the data above is larger than 1. The firm is in a positive stage and can
fulfil its short-term commitments, but the Current Ratio has a downfall from the years 2017–2018 to 2021–
2021; this suggests that the company is utilizing its idle cash to pay its debts.
B. Efficiency Ratio:
2) Asset Turnover Ratio:
This financial percentage shows how often net tangible assets change ownership each year. The greater the
ratio, the better. A company's capacity to produce sales from its assets is calculated by its asset turnover ratio.
Table 2:- Calculation of Asset Turnover Ratio

AVERAGE TOTAL
PERIOD REVENUE ATR
ASSETS
2017-2018 28813.00 63789.15 0.45
2018-2019 30348.95 64416.01 0.47
2019-2020 21486.06 61271.42 0.35
2020-2021 17308.44 55701.24 0.31
2021-2022 21211.09 56708.32 0.37

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ATR
0.5 0.47
0.45
0.45
0.4 0.37
0.35
0.35
0.31
0.3
0.25
0.2
0.15
0.1
0.05
0
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
Graph 2:- Asset Turnover Ratio

INTREPRETATION:-
The ATR, a financial indicator, evaluates how well an organization utilizes its resources to generate revenue. It
provides details on how well an organization uses its resources to create income.
The company's Asset Turnover Ratio (ATR) has varied over the years, reflecting its ability to generate revenue
in relation to its average total assets. In some periods, like 2018-2019, the ATR increased, showcasing improved
asset utilization and revenue generation efficiency. However, in 2019-2020 and 2020-2021, the ATR declined,
suggesting challenges in sales generation relative to its asset base, possibly due to economic downturns or
internal issues. The subsequent slight improvement in 2021-2022 indicates efforts to better utilize resources
for sales but remains lower than previous years. A higher ATR signifies better asset efficiency and revenue
generation, while a decreasing ATR can indicate inefficiencies or sales challenges. Maintaining a healthy and
consistent ATR is crucial for the company's profitability and operational effectiveness.
C. Profitability Ratios:-
3) Gross Profit Ratio
A financial indicator known as the Gross Profit ratio creates a connection between a organization's gross profit
and its net operating revenue. It is used for measuring a organization's profit after paying all of its direct
expenses, or costs directly related to production. This percentage is used to calculate the company's earning
efficiency. It is included in the profitability ratios in accounting theory and practice. The financial statistic used
to analyse a organization's capacity to produce profits in terms with its turnover, capital employed, assets
possessed, operational costs, etc. is called a profitability ratio.
Table 3:- Calculation Of Gross Profit Ratio

PERIOD GP (PROFIT BEFORE TAX) REVENUE GPR
2017-2018 1584.99 28813.00 5.50
2018-2019 2057.86 30348.95 6.78
2019-2020 (662.11) 21486.06 (3.08)
2020-2021 (3611.60) 17308.44 (20.87)
2021-2022 436.95 21211.09 2.06

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GPR
10
6.78
5.5
5
2.06
0
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
-5 -3.08
RATIOS
-10
-15
-20
-20.87
-25
YEARS
Graph 3:- Gross Profit Ratio

INTERPRETATION:-
In 2017-2018 and 2018-2019, the organization had positive gross profit ratios of approximately 5.50 And 6.78.
This states that the organization is earning a GP on its revenue in those years.
However, in 2019-2020 and 2020-2021, the company experienced negative gross profit ratios of approximately
-3.08 and -20.87 respectively. This suggests that the organization's COGS exceeded its gross profit, resulting in
losses at the GP level.
In 2021-2022, the company's GPR improved to approximately 2.06, indicating that it is capable in generating a
small GP on its revenue in that year.
D. Solvency Ratio:
4) Debt-Equity ratio:- The debt-to-equity (D/E) ratio, which measures a company's financial leverage, is
determined by dividing its total liabilities by the worth of its shareholders. The Debt equity ratio is a critical
indicator in corporate finance. It assesses how much debt an organization is using to fund operations as
opposed to using cash on hand. A specific kind of gearing percentage is the debt-to-equity ratio.
Table 4:- Calculation Of Debt-Equity Ratio

PERIOD TOTAL LIABILITIES TOTAL EQUITY DEBT EQUITY RATIO
2017-2018 31188.07 32601.08 0.96
2018-2019 33016.15 31399.86 1.05
2019-2020 32090.21 29181.21 0.01
2020-2021 29217.19 26484.05 1.10
2021-2022 29737.16 26971.16 1.10

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DEBT EQUITY RATIO

1.2 1.1 1.1
1.05
1 0.96
0.8
RATIOS
0.6
0.4
0.2
0.01
0
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
YEARS
Graph 4:- Debt-Equity Ratio

INTERPRETATION:-
In 2017-2018 The debt-equity ratio was 0.96, stating that the organization has little more debt than equity
during this period. In 2018-2019 The debt-equity ratio increased to 1.05, indicating a higher reliance on debt
financing compared to equity. In 2019-2020 The debt-equity ratio decreased significantly to 0.01, which seems
unusually low. In 2020-2021 and 2021-2022 The debt-equity ratio remained constant at 1.10 for two
consecutive years.
The ideal debt equity is 2:1. A debt equity percentage from one to five is considered to be good. The ideal debt
equity will vary depending on the sector, though, as some organizations use debt financing more frequently
than others. The organization's debt equity for the year is lower than it was for the preceding periods, it depicts
that it is using debt financing more frequently than it is stock financing. A high debt-to-equity ratio is typically
associated with high risk.
V. FINDINGS
 If a company's current ratio is more than one, it means that its Current Assets surpass its Current Liabilities,
which typically denotes sound short-term accounting health as well as the capacity to satisfy obligations.
 The fluctuating asset turnover ratio indicates variations in the organization's effectiveness in utilizing its
assets to obtain revenue over the five-year period. A declining ratio may warrant further analysis to recognize
the factors affecting asset utilization and to implement strategies to improve efficiency. It's essential for the
organization to consistently monitor and optimize its Asset Turnover Ratio to enhance overall financial
performance and profitability.
 A higher Gross Profit implies that the organization is generating a greater proportion of Gross Profit for each
rs. of net sales, which is generally considered favourable.
 The Debt Equity shows a fluctuating trend over the years. Initially it was 0.96 in 2017-2018, increased to
1.05 in 2018-2019, dropped significantly to 0.01 in 2019-2020, and then increased to 1.10 in both 2020-2021
and 2021-2022.
VI. SUGGESTIONS
 The company's liquidity situation can be used for better or other more useful purposes.
 The company must reduce the debtors and utilize the owners fund to the fullest extent.
 The company's decreasing and negative gross profit ratios for the 2019–2020 and 2020–21 financial years

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are somewhat concerning given what they suggest that the organization's COGS is too high in comparison to its
net sales, which resulted in losses.
 It's essential for the organization to consistently monitor and optimize its asset turnover ratio to enhance
overall accounting position along with profitability.
VII. CONCLUSION
The study is made on the topic Financial statement analysis using ratio analysis with Five Years data in Bharat
Heavy Electrical Limited (EDN). The Current ratio, Cash ratio indicates the short term financial position of
BHEL. Whereas Gross profit indicates about the companies. Analysis of the company's financial statements for
the previous Five Years demonstrates that the business is financially solid.
Overall, BHEL's financial performance over the analysed period appears to be characterized by fluctuations in
various ratios and metrics. While some indicators show positive trends, others indicate challenges and
variations in the company's efficiency and profitability. It's important to further investigate the reasons behind
these fluctuations and consider qualitative factors that might impact BHEL's financial health and performance.
A comprehensive assessment of both quantitative and qualitative aspects will provide a more complete
understanding of BHEL's position in the market.
VIII. REFERENCES
[1] Subbarayudu.S.et al "An Investigation into Working Capital at Ultratech Cements Ltd in the
Anantapuramu District" (2020):- Journal of Research in Business and Management Volume 10 ~ Issue
3 (2022)
[2] Chandrasekaran. S (2021), A Study On Financial Performance Analysis With Reference To Super Auto
Forge Pvt Ltd Vol 19 (issue 3).
[3] Kishore Kumar Das & Rupsa Mahapatra “a study on the MSME sector's financial analysis” (2021), A
Study On Financial Performance Analysis With Reference To Super Auto Forge Pvt Ltd Vol 19 (issue 3).
[4] (Dr. Seema Pandit, Jash Gandhi2021)- )- “A STUDY ON FINANCIAL PERFORMANCE ANALYSIS OF HDFC
BANK”

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e-ISSN: 2582-5208

International Research Journal of Modernization in Engineering Technology and Science

A STUDY ON THE FINANCIAL ANALYSIS OF BHARAT HEAVY

www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

Table 1:- Calculation Of Current Ratio

www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

Graph 1:- Current Ratio

Table 2:- Calculation of Asset Turnover Ratio

www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

Graph 2:- Asset Turnover Ratio

Table 3:- Calculation Of Gross Profit Ratio

www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

Graph 3:- Gross Profit Ratio

Table 4:- Calculation Of Debt-Equity Ratio

www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

DEBT EQUITY RATIO

Graph 4:- Debt-Equity Ratio

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www.irjmets.com @International Research Journal of Modernization in Engineering, Technology and Science

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