What Is Financial Performance?: Introduction To The Topic

Comparitive study on financial performance of SAIL and TATA STEELS for the yr 2010-2013
INTRODUCTION TO THE TOPIC
What is Financial Performance?

The word Performance is derived from the word parfourmen, which means to do, to
carry out or to render. It refers the act of performing; execution, accomplishment,
fulfillment, etc. In border sense, performance refers to the accomplishment of a given task
measured against preset standards of accuracy, completeness, cost, and speed. In other words,
it refers to the degree to which an achievement is being or has been accomplished. In the
words of Frich Kohlar The performance is a general term applied to a part or to all the
conducts of activities of an organization over a period of time often with reference to past or
projected cost efficiency, management responsibility or accountability or the like. Thus, not
just the presentation, but the quality of results achieved refers to the performance.
Performance is used to indicate firms success, conditions, and compliance.
Financial performance refers to the act of performing financial activity. In broader sense,
financial performance refers to the degree to which financial objectives being or has been
accomplished. It is the process of measuring the results of a firm's policies and operations in
monetary terms. It is used to measure firm's overall financial health over a given period of
time and can also be used to compare similar firms across the same industry or to compare
industries or sectors in aggregation.
Financial Performance Analysis

In short, the firm itself as well as various interested groups such as managers, shareholders,
creditors, tax authorities, and others seeks answers to the following important questions:
1. What is the financial position of the firm at a given point of time?
2. How is the Financial Performance of the firm over a given period of time?
These questions can be answered with the help of financial analysis of a firm. Financial
analysis involves the use of financial statements. A financial statement is an organized
collection of data according to logical and Conceptual Framework 50 consistent accounting
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procedures. Its purpose is to convey an understanding of some financial aspects of a business

firm. It may show a position at a moment of time as in the case of a Balance Sheet, or may
reveal a series of activities over a given period of time, as in the case of an Income Statement.
Thus, the term financial statements generally refers to two basic statements: the Balance
Sheet and the Income Statement. The Balance Sheet shows the financial position (condition)
of the firm at a given point of time. It provides a snapshot and may be regarded as a static
picture. Balance sheet is a summary of a firms financial position on a given date that shows
Total assets = Total liabilities + Owners equity.
The income statement (referred to in India as the profit and loss statement) reflects the
performance of the firm over a period of time. Income statement is a summary of a firms
revenues and expenses over a specified period, ending with net income or loss for the
period. However, financial statements do not reveal all the information related to the
financial operations of a firm, but they furnish some extremely useful information, which
highlights two important factors profitability and financial soundness. Thus analysis of
financial statements is an important aid to financial performance analysis. Financial
performance analysis includes analysis and interpretation of financial statements in such a
way that it undertakes full diagnosis of the profitability and financial soundness of the
business. The analysis of financial statements is a process of evaluating the relationship
between component parts of financial statements to obtain a better understanding of the
firms position and performance.
The financial performance analysis identifies the financial strengths and weaknesses of the
firm by properly establishing relationships between the items of the balance sheet and profit
and loss account. The first task is to select the information relevant to the decision under
consideration from the total information contained in the financial statements. The second is
to arrange the information in a way to highlight significant relationships. The final is
interpretation and drawing of inferences and conclusions. In short, financial performance
analysis is the process of selection, relation, and evaluation.
Techniques/Tools of Financial Performance Analysis
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An analysis of financial performance can be possible through the use of one or more tools /
techniques of financial analysis:
A) Accounting Techniques: It is also known as financial techniques. Various accounting

techniques such as Comparative Financial Analysis, Common-size Financial Analysis, Trend
Analysis, Fund Flow Analysis, Cash Flow Analysis, CVP Analysis, Ratio Conceptual
Framework Analysis, Value Added Analysis etc. may be used for the purpose of financial
analysis.
1. Ratio Analysis
2. Common size Financial Analysis
3 Trend Analysis
B) Statistical Techniques: Every analysis does involve the use of various statistical
techniques. Some of the important statistical techniques which are suitable for the financial
analysis are:
1. Measures of Central Tendency
2. Measures of Dispersion
C) Mathematical Techniques: Financial analysis also involves the use of certain mathematical
tools such as Programme Evaluation and Review Techniques (PERT), Critical Path Method
(CPM), and Linear Programming etc. However, they are not useful for the present study.
Financial Performance is the level of performance of a business over a specified period of

time, expressed in terms of overall profits and losses during that time. A subjective measure
of how well a firm can use assets from its primary mode of business and generate revenues.
This term is also used as a general measure of a firm's overall financial health over a given
period of time, and can be used to compare similar firms across the same industry or to
compare industries or sectors in aggregation. Evaluating the financial performance of a
business allows decision maker to judge the results of the business strategies and activities in
objective monetary terms.
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RATIO ANALYSIS
INTRODUCTION:Ratio analysis is an important technique, which is widely used for interpreting financial
statement. The technique serves as a tool for assessing the current and long-term financial
soundness of a business. It is also used to analysis various aspects of operating efficiency and
level of profitability. A German scholar used ratios for the first time in 1919.
DEFINITION:1. Wixon, Kell and Bedford, Ratio is an expression of quantitative
relationship between figures drawn from financial statements.
2. Hunt, Willant Donaldosa, Ratios are simply a means of highlighting in
arithmetical terms, of relationship between figures drawn from financial
statements.
Conclusion: - Financial ratios are useful because they summarize briefly the result of
detailed and computation.
IMPORTANCE OF RATIO ANALYSIS

Ratios are useful for the following reasons:1) Helpful in Forecasting: - The ratio can be used by financial managers for future
financial planning. Ratio calculated for a number of years work as a guide for the future.
2) Useful in Co-ordination: - Ratios are useful in co-ordination, which is very much
needed in business. The efficiency and weakness of an enterprise if communicated
properly, will establish a better co-ordination among areas of appreciation and control.
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3) Helpful in Control: - The most important aspect of ratio analysis is that is very useful in
controlling the areas of inefficiencies or weakness. It can be use by the management as a
technique of correction.
4) Helpful in Communication: - Ratios are used for communication weak and good point
to the concerned parties.
5) Helpful in Efficiency Appraisal: - Ratios are the scale of comparison; here the
variations in financial statement, if they need appreciation, are brought to limelight.
6) Helpful in Evaluation of Financial Position: - The ratio analysis is useful for financial
diagnosis of an enterprise.
The under mentioned ratios will make the above clear:
Current Ratio: - It speaks about the working capital the company is having
and the funds to
pay-off its short-term commitments.

Solvency Ratio: - Profitability Ratio, Capital Gearing Ratio are all such ratio that can
evaluate the financial soundless or weakness of a company.
7) Helpful to Investors, Financial Institutions and Employees: - The ratios are economic
barometer useful to all mentioned above as they can know the good and bad position of a
company by making a comparative study of financial statement.
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INTRODUCTION TO THE COMPANY
SAIL
INTRODUCTION
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a
fully integrated iron and steel maker, producing both basic and special steels for domestic
construction, engineering, power, railway, automotive and defence industries and for sale in
export markets. SAIL is also among the seven Maharatnas of the country's Central Public
Sector Enterprises. SAIL manufactures and sells a broad range of steel products, including
hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railway
products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and
steel at five integrated plants and three special steel plants, located principally in the eastern
and central regions of India and situated close to domestic sources of raw materials, including
the Company's iron ore, limestone and dolomite mines. The company has the distinction of
being Indias second largest producer of iron ore and of having the countrys second largest
mines network. This gives SAIL a competitive edge in terms of captive availability of iron
ore, limestone, and dolomite which are inputs for steel making.
SAIL's wide ranges of long and flat steel products are much in demand in the domestic as
well as the international market. This vital responsibility is carried out by SAIL's own Central
Marketing Organization (CMO) that transacts business through its network of 37 Branch
Sales Offices spread across the four regions, 25 Departmental Warehouses, 42 Consignment
Agents and 27 Customer Contact Offices. CMOs domestic marketing effort is supplemented
by its ever widening network of rural dealers who meet the demands of the smallest
customers in the remotest corners of the country. With the total number of dealers over 2000,
SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts
of the country. SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000
accredited unit of CMO, undertakes exports of Mild Steel products and Pig Iron from SAILs
five integrated steel plants.
With technical and managerial expertise and know-how in steel making gained over four
decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and
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consultancy to clients world-wide. SAIL has a well-equipped Research and Development

Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and
develop new technologies for the steel industry. Besides, SAIL has its own in-house Centre
for Engineering and Technology (CET), Management Training Institute (MTI) and Safety
Organization at Ranchi. Our captive mines are under the control of the Raw Materials
Division in Kolkata. The Environment Management Division and Growth Division of SAIL
operate from their headquarters in Kolkata. Almost all our plants and major units are ISO
Certified.
Companys Vision:
To be a respected world Class Corporation and the leader in Indian steel business in quality,
productivity, profitability and customer satisfaction.
We build lasting relationships with customers based on trust and mutual benefit.
We uphold highest ethical standards in conduct of our business.
We create and nurture a culture that supports flexibility, learning and is proactive to
change.
We chart a challenging career for employees with opportunities for advancement and
rewards.
We value the opportunity and responsibility to make a meaningful difference in

people's lives.
Companys History
SAIL traces its origin to the formative years of an emerging nation - India. After
independence the builders of modern India worked with a vision - to lay the infrastructure for
rapid industrialization of the country. The steel sector was to propel the economic growth.
Hindustan Steel Private Limited was set up on January 19, 1954.
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Expanding Horizon (1959-1973)

Hindustan Steel (HSL) was initially designed to manage only one plant that was coming up at
Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron
and Steel Ministry. From April 1957, the supervision and control of these two steel plants
were also transferred to Hindustan Steel. The registered office was originally in New Delhi. It
moved to Calcutta in July 1956 and ultimately to Ranchi in December 1959.
The 1 MT phases of Bhilai and Rourkela Steel Plants were completed by the end of
December 1961. The 1 MT phase of Durgapur Steel Plant was completed in January 1962
after commissioning of the Wheel and Axle plant. The crude steel production of HSL went up
from .158 MT (1959-60) to 1.6 MT. A new steel company, Bokaro Steel Limited, was
incorporated in January 1964 to construct and operate the steel plant at Bokaro. The second
phase of Bhilai Steel Plant was completed in September 1967 after commissioning of the
Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela - the Tandem Mill - was
commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel Plant was
completed in August 1969 after commissioning of the Furnace in SMS. Thus, with the
completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur, the
total crude steel production capacity of HSL was raised to 3.7 MT in 1968-69 and
subsequently to 4MT in 1972-73.
Holding Company
The Ministry of Steel and Mines drafted a policy statement to evolve a new model for
managing industry. The policy statement was presented to the Parliament on December 2,
1972. On this basis the concept of creating a holding company to manage inputs and outputs
under one umbrella was mooted. This led to the formation of Steel Authority of India Ltd.
The company, incorporated on January 24, 1973 with an authorized capital of Rs. 2000 crore,
was made responsible for managing five integrated steel plants at Bhilai, Bokaro, Durgapur,
Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was
restructured as an operating company.
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Since its inception, SAIL has been instrumental in laying a sound infrastructure for the
industrial development of the country. Besides, it has immensely contributed to the
development of technical and managerial expertise. It has triggered the secondary and tertiary
waves of economic growth by continuously providing the inputs for the consuming industry.
TATA STEELS
INTRODUCTION
Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO)) is Indian
multinational steel -making company. It was the 11th largest steel producing company in the
world in 2013, and the second largest private-sector steel company in India after SAIL. It one
of the most geographically diversified steel producers, with operations in 26 countries and
commercial offices in 35 countries. Tata Steel is guided by the long term vision to benefit the
society and so they operate in a way which is safe for the people and respectful to the
environment.
The Tata groups mission is to improve the quality of life of the communities it serves
globally, through long-term stakeholder value creation based on leadership with trust.
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Founded by Jamsetji Tata in 1868, the Tata group is a global enterprise headquartered in
India, and comprises over 100 operating companies, with operations in more than 100
countries across six continents, exporting products and services to over 150 countries. The
revenue of Tata companies, taken together, was $103.27 billion (around Rs 6, 24,757 crore)
in 2013-14, with 67.2 percent of this coming from businesses outside India. Tata companies
employ over 581,470 people worldwide. Good corporate citizenship is part of the Tata
groups DNA. Sixty six percent of the equity of Tata Sons, the promoter holding company, is
held by philanthropic trusts, thereby returning wealth to society. As a result of this unique
ownership structure and ethos of serving the community, the Tata name has been respected
for more than 140 years and is trusted for its adherence to strong values and business ethics.
Each Tata company or enterprise operates independently and has its own board of directors
and shareholders, to whom it is answerable. There are 32 publicly-listed Tata enterprises and
they have a combined market capitalization of about $141.02 billion (as on September 25,
2014), and a shareholder base of 3.9 million. Tata companies with significant scale include
Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata Global
Beverages, Tata Teleservices, Titan, Tata Communications and Indian Hotels. Many Tata
companies have achieved global leadership in their businesses. For instance, Tata
Communications is the worlds largest wholesale voice carrier and Tata Motors is among the
top five commercial vehicle manufacturers in the world. Tata Steel is among the top 10 best
steelmakers and TCS is amongst the top 10 global IT services companies. Tata Global
Beverages is the second-largest player in tea in the world and Tata Chemicals is the worlds
second-largest manufacturer of soda ash. Employing a diverse workforce in their operations,
Tata companies have made significant local investments in different geographies.
In tandem with the increasing international footprint of Tata companies, the Tata brand is also
gaining international recognition. Brand Finance, a UK-based consultancy firm, valued the
Tata brand at $21.1 billion and ranked it 34th among the top 500 most valuable
global brands in their Brand Finance Global 500 2014 report. With its pioneering and
entrepreneurial spirit, the Tata group has spawned several industries of national importance in
India: steel, hydro-power, hospitality and airlines. The same spirit, coupled with
innovativeness, has been displayed by entities such as TCS, Indias first software company,
and Tata Motors, which made Indias first indigenously developed car, the Tata Indica and the
smart city car, the Tata Nano. Pursuit of excellence has similarly been manifested in recent
innovations like the Silent Track technology developed by Tata Steel Europe and the nextTirpude Institute of Management and Education
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generation Terrain Response, including infrared laser scanning to predict terrain, and Wade
Aid to predict water depth, by Jaguar Land Rover.
The Tata trusts, majority shareholders of Tata Sons, have endowed institutions for science and
technology, medical research, social studies and the performing arts. The trusts also provide
aid and assistance to non-government organizations working in the areas of education, health
care and livelihoods. Tata companies themselves undertake a wide range of social welfare
activities, especially at the locations of their operations, as also deploy sustainable business
practices. Going forward, Tata companies are building multinational businesses that seek to
differentiate
themselves
through
customer-centricity,
innovation,
entrepreneurship,
trustworthiness and values-driven business operations, while balancing the interests of

diverse stakeholders including shareholders, employees and civil society.
PURPOSE AND CORE VALUES

Purpose
At the Tata group we are committed to improving the quality of life of the communities we
serve. We do this by striving for leadership and global competitiveness in the business sectors
in which we operate. Our practice of returning to society what we earn evokes trust among
consumers, employees, shareholders and the community. We are committed to protecting this
heritage of leadership with trust through the manner in which we conduct our business.
Core values
Tata has always been values-driven. These values continue to direct the growth and business
of Tata companies. The five core Tata values underpinning the way we do business are:
Integrity: We must conduct our business fairly, with honesty and transparency. Everything we
do must stand the test of public scrutiny.
Understanding: We must be caring, show respect, compassion and humanity for our
colleagues and customers around the world, and always work for the benefit of the
communities we serve.
Excellence: We must constantly strive to achieve the highest possible standards in our day-today work and in the quality of the goods and services we provide.
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Unity: We must work cohesively with our colleagues across the group and with our
customers and partners around the world, building strong relationships based on tolerance,
understanding and mutual cooperation.
Responsibility: We must continue to be responsible, sensitive to the countries, communities
and environments in which we work, always ensuring that what comes from the people goes
back to the people many times over.
COMPANYs HISTORY
The foundation of what would grow to become the Tata Group was laid in 1868 by Jamsetji
Nusserwanji Tata then a 29-year-old who had learned the ropes of business while working
in his fathers banking firm when he established a trading company in Bombay. A
visionary entrepreneur, an avowed nationalist and a committed philanthropist, Jamsetji Tata
helped pave the path to industrialization in India by seeding pioneering businesses in sectors
such as steel, energy, textiles and hospitality.
Empress Mills, a textiles venture set up in Nagpur in central India in 1877, was the first of the
big industrial projects undertaken by the Tata Group. Jamsetji Tata was by this time, though,
already gripped by what would the three great ideas of his life: setting up an iron and steel
company, generating hydroelectric power and creating an institution that would tutor Indians
in the sciences. These trusts today control 65.8 per cent of the shares of Tata Sons, the
holding company of the group, and they support an assortment of causes, institutions and
individuals.
In 1892, Jamsetji Tata established the JN Tata Endowment to encourage Indian scholars to
take up higher studies. It was the first of a multitude of philanthropic initiatives by the Tata
Group. Over generations, members of the Tata family have bequeathed much of their
personal wealth to the many trusts they have created. These trusts today control 65.8 per cent
of the shares of Tata Sons, the holding company of the group, and they support an assortment
of causes, institutions and individuals.
The most dazzling of the Tata enterprises that came into being during Jamsetji Tatas lifetime
was the Taj Mahal Hotel in Bombay, which opened for business in 1903. Legend has it that
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Jamsetji Tata set his mind on building it after being denied entry into one of the city's fancy
hotels for being an Indian. Today, the Taj Group of Hotels is a byword for luxury and quality,
with standout properties across the world.
Following Jamsetji Tatas death, in Germany in 1904, the chairmanship of the Tata Group
passed to the elder of his two sons, Sir Dorab Tata, who accomplished the daunting task of
turning his fathers extraordinary ideas into reality.
Sir Dorab was the force behind the setting up, in 1907, of the Tata Iron and Steel Company.
Seven years later, India's first iron and steel plant, in Jamshedpur in the eastern part of the
country, started production. In 1915, the Tata Group broke new ground once again, this time
by generating hydroelectric power from a site near Bombay. Tata Steel introduced eight-hour
working days in 1912; well before it became statutory in much of the West, and the first Tata
provident fund scheme was started in 1920 (governmental regulation on this came into force
in 1952). The Tata townships, and the facilities they have, are another example of the manner
in which the Group extends itself to care for its employees.
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RESEARCH METHODOLOGY
SOURCES OF DATA COLLECTION
Data for this project is collected through Secondary sources. Secondary data is collected with
the help of following
1] Annual report:
Majority of information gathered from data exhibited in the annual reports of the company.
These includes annual reports of the year 2005-06,2006-07,2007-08,2008-09 and 2009-10.
2] Reference Books:
Theory relating to the subject matter and various concepts taken from various financial
reference books
TYPES OF RATIO CALCULATED

1. Profitability Ratio
(a) Gross Profit Ratio
(b) Operating Ratio
(c) Net profit Ratio
(d) Return on Long Term Funds
2. Liquidity Ratio
(a) Current Ratio
(b) Quick Ratio
(c) Total Debt Equity Ratio
3. Management Efficiency Ratio
(a) Inventory Turnover Ratio
4. Investment Valuation Ratio
(a) Dividend Per Share
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IMPORTANCE OF THE STUDY
1. This helps in understanding the trends in financial performance of the top leading
company.
2. Through financial performance owners of the company can take decision regarding
their continuance towards holding of the companys share or sell them out.
3. It helps to take decisions regarding future plans of the company as well as various
investment decisions.
4. It will help the industries to know their position in the steel industry.
5. The ratio can be used by financial managers for future financial planning.
6. The most important aspect of ratio analysis is that is very useful in controlling the
areas of inefficiencies or weakness. It can be use by the management as a technique of
correction.
OBJECTIVES OF THE STUDY

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1. To evaluate and analyze the trends in financial performance of the selected

company.
2. To analyze and evaluate overall performance of the company in the market.
3. To analyze the present performance of selected company with its past
performance.
4. To identify the comparative financial strengths and weakness
5. To know the liquidity position of the company, with the help of Current ratio.
6. Through the net profit ratio and other profitability ratio, understand the
profitability position of the company.
SCOPE OF THE STUDY
The scope of the project is limited to financial analysis of past 3 years. Since financial
performance
covering a large period say 20 or 30 years give a clear picture of
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management practices and our study covering a period of 3 years can touch a part of
it.
The present study is confined to the two leading units in the steel industry namely
SAIL and Tata Steels.
The study covers a period of 3 years which is enough to cover both the short and
medium term fluctuations and to set reliability.
LIMITATIONS OF THE STUDY
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1) The main source of information is annual reports. They represent financial

information/position on particular date. What happened between such two dates cannot easily
be presumed or predicated.
2) The annual reports mostly contain quantitative and financial information and as regards to
qualitative aspect of financial performance, my source was limited due to far away location
of head offices of the selected company.
3) The financial performance covering a large period say 20 years or 30 years can give a
much clear picture of management practices of financial performance. Our study covering a
period of 3 years can touch only a part of the problem.
[I] PROFITABILITY RATIO

1] GROSS PROFIT RATIO:-
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GROSS PROFIT RATIO = GROSS PROFIT X 100
SALES
As there is no standard Ratio, company has to determine its standard ratio based on past GP ratios or
GP ratios of other concern. The Ratio if we compare it shows that1) Failure in managing purchases, production, sales and inventory
2) Loose control over direct costs of labour, fuel, freights etc.
3) Lower productivity and lower margin to meet other expenses
YEAR/COMPANY
TATA STEELS
2010-2011
2011-2012
2012-2013
40
35
30
25
20
15
10
5
0
SAIL
2010-2011
35.16
30.60
24.83
SAIL
12.88
9.60
7.20
TATA STEELS
2011-2012
2012-2013
Interpretation:
From the above table & graph it is clear that SAIL have 12.88% gross profit in the year
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2010-2011.It became 9.60% in the year 2011-2012, but in the last year of the study i.e. in
2012-2013 the gross profit of SAIL is 7.20%. On the other hand gross profit of TATA STEEL
LTD. is 35.16% in 2010-2011 and 24.83% in the year 2012-2013. From the above it can be
calculated that the financial position of TATA STTEL is better than the SAIL in term of gross
profit because SAIL has more variation in Gross Profit as compared to TATA STEEL LTD.
2] OPERATING RATIO:OPERATING RATIO = COGS + OPERATING EXPENSES X 100

SALES
It indicates the cost of Expenses .As there is no standard Ratio, company has to determine its standard
ratio based on past GP ratios or GP ratios of other concern. The Ratio if we compare it shows that1) High efficiency in managing the Operations of the concern like purchases made at lower
prices, optimum level of production, good inventory management and good control of direct
cost of labour, fuel, freight etc.
2) 2) A very good Margin available to meet non-operating Expenses.
YEAR/COMPANY
TATA STEELS
2010-2011
2011-2012
2012-2013
39.06
33.99
29.12
SAIL
16.37
13.04
10.34
50
40
30
20
SAIL
TATA STEELS
10
0
2010-2011
2011-2012
2012-2013
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Interpretation:
From the above table & graph it is clear that SAIL have 16.37% operating profit in the year
2010-2011.It became 10.34% in the year 2012-2013. %. On the other hand operating profit of
TATA STEEL LTD. is 39.06% in 2010-2011 and 29.12% in the year 2012-2013. From the
above it can be calculated that the financial position of SAIL is better than the TATA STEELS
in term of operating profit because TATA steel has more variation in operating profit as
compared to SAIL.
3] NET PROFIT RATIO:NET PROFIT RATIO = NPAT X 100

SALES
It indicates the relationship between net profit and sales.
As there is no standard Ratio, company has to determine its standard ratio based on past NP ratios or
NP ratios of other concern. The Ratio if we compare it shows that1)
2)
3)
4)
5)
Inefficiency in managing its activities like trading, production, financing and investment.
unsatisfactory control over operating as well as non operating costs
Unusual losses like loss by fire, flood etc.
Low increase in the net worth or the proprietors funds.
Weak capacity of the concern to face bad economic situation.
YEAR/COMPANY
2010-2011
2011-2012
2012-2013
TATA STEELS
22.94
19.23
12.94
SAIL
11.03
7.67
4.76
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35
30
25
20
15
SAIL
TATA STEELS
10
5
0
2010-2011
2011-2012
2012-2013
Interpretation:
Above chart shows that net profit ratio of SAIL is 11.03% in the year 2010-2011 and 4.76%
in the year 2012-2013. It is very low. On the other hand the net profit ratio of TATA STEEL
LTD 22.94% in the year 2010-2011 it became 12.94% in the year 2012-2013. The financial
position of TATA STEEL LTD. is better than the SAIL in terms of net profit.
4] RETURN ON LONG TERM FUNDS:
This ratio shows that how much return is earned from long term funds. If this ratio is higher
than this is consider better.
YEAR/COMPANY
2010-2011
2011-2012
2012-2013
TATA STEELS
14.93
14.78
12.81
SAIL
15.10
11.87
7.66
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35
30
25
20
SAIL
15
TATA STEELS
10
5
0
2010-2011 2011-2012 2012-2013
Interpretation:
From the above table & graph it is clear that SAIL have 15.10% returns on their long term
funds in the year 2010-2011. It became 11.87% in the year 2011-2012. But in the last year of
the study i.e. 2012-2013 the return on long term funds was 7.66%. On the other hand it is
clear that TATA STEEL have 14.93% returns on their long term funds in the year 2010-2011.
It became 14.78% in the year 2011-2012. But in the last year of the study i.e. 2012-2013 the
return on long term funds was 12.81%. During the study period the SAIL earn more return on
their long term assets but in the last year this became low but the TATA STEEL return was
stable. From the above it can be concluded that both the companies have more variations. But
the last year of the study the TATA STEEL have better position than the SAIL.
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[II] LIQUIDITY RATIO

5] CURRENT RATIO:One of important function of the financial manager is to maintain sufficient liquidity. Current
ratio is an important criterion to test the liquidity and also the short term solvency. The ratio
of 2:1 is considered as standard of current ratio.
CURRENT RATIO = Current Assets

Current liabilities
YEAR/COMPANY
TATA STEELS
2010-2011
2011-2012
2012-2013
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
SAIL
2010-2011
1.53
0.93
0.86
SAIL
1.21
1.22
1.01
TATA STEELS
2011-2012
2012-2013
Interpretation:
From the above table and graph it is clear that SAIL have 1.21 times current ratio in the year
2010-2011. It became 1.01 times in the year 2012-2013.On the other hand current ratio of
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TATA STEEL LTD. is 1.53 times in 2010-2011 and 0.86 times in 2012-2013. From the above
it can be concluded that the financial position of SAIL is better than the TATA STEEL LTD.
in terms of current ratio because TATA STEEL LTD. have more variations in current ratio as
compare to SAIL.
6] QUICK RATIO:
This ratio also tests liquidity. But it is a more refined test of liquidity and solvency. This ratio
takes into consideration the liquid assets only which are directly convertible into cash. The
current assets like inventories which are two steps away from the cash are excluded. The
quick ratio is computed by dividing liquid assets by current liabilities. A quick ratio of 1:1 is
considered adequate.
YEAR/COMPANY
TATA STEELS
2010-2011
2011-2012
2012-2013
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
SAIL
2010-2011
1.31
0.69
0.61
SAIL
1.35
0.82
0.68
TATA STEELS
2011-2012
2012-2013
Interpretation:
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It is clear from the above table and graph that SAIL has 1.35 times quick ratio in the year
2010-2011. It became 0.82 times 2011-2012. But in the last year of the study i.e. in
2012-2013 the quick ratio of SAIL is 0.68 times. On the other hand quick ratio of TATA
STEEL LTD. is 1.31 times in 2010-2011 and 0.61 times in 2012-2013. From the above it can
be concluded that the financial position of SAIL is better than the TATA STEEL LTD. in
terms of quick ratio. TATA STEEL LTD. has more variations in quick ratio as compare to
SAIL.
7] DEBT EQUITY RATIO:
This ratio expresses the relationship between long term debts & shareholders funds. It
indicates the proportion of funds which are acquired by long term borrowings in comparison
to shareholders funds.
YEAR/COMPANY
TATA STEELS
2010-2011
2011-2012
2012-2013
0.56
0.45
0.47
SAIL
0.54
0.40
0.52
0.6
0.5
0.4
SAIL
0.3
TATA STEELS
0.2
0.1
0
2010-2011
2011-2012
2012-2013
Interpretation:
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From the above table & graph it is clear that SAIL have 0.54% debt equity ratio in the year
2010-2011, it become 0.40% in the year 2011-2012. But in the last year of the study i.e.
2012-2013 the debt equity ratio was 0.52%. On the other hand debt equity ratio of the TATA
STEEL is 0.56% in 2010-2011 & during the last year of the study i.e. 2012-2013 is 0.47%.
[III] MANAGEMENT EFFICIENCY RATIO

8] INVENTORY TURNOVER RATIO:
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This ratio indicates whether stock has been efficiently used or not. A high ratio is considered
better.
INVENTORY TURNOVER RATIO = Cost Of Goods Sold
Average Stock
YEAR/COMPANY
TATA STEELS
2010-2011
2011-2012
2012-2013
8
7
6
5
4
3
2
1
0
SAIL
7.44
6.98
7.27
5.13
3.37
2.79
SAIL
TATA STEELS
2010-2011 2011-2012 2012-2013
Interpretation:
This ratio indicates whether stock has been efficiently used or not. It shows the speed with the
stock is rotated into sales or the number of times the stock is turned into sales during the year.
Above chart & graph shows that inventory turnover ratio of SAIL is 5.13 times in the year
2010-2011 & 2.79 times in the year 2012-2013, it is very low. On the other hand the TATA
STEEL LTD. is 7.44 times in the year 2010-2011 & 7.27 times in the year 2012-2013. In term
of Inventory turnover ratio the TATA STEEL financial position is better than SAIL.
[IV] INVESTMENT VALUATION RATIO

9] Dividend per Share:-
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Dividend per share means how much dividend per share the company is paying to its
shareholders.
YEAR/COMPANY
2010-2011
2011-2012
2012-2013
TATA STEELS
12
12
8
SAIL
2.40
2
2
14
12
10
8
SAIL
TATA STEELS
4
2
0
2010-2011
2011-2012
2012-2013
Interpretation:
From the above table & graph it is clear that SAIL have Rs.2.40 dividend per share in the
year 2010-2011. It became Rs.2.00 in the year 2012-2013. On the other hand the dividend per
share of TATA STEEL is Rs. 12.00 in 2010-2011 and 8.00 in 2012-2013. From the above it
can be concluded that the TATA STEEL LTD. is paying the more dividend than to SAIL.
OBSERVATION AND FINDINGS
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In this project I calculated some ratios; these ratios are very useful to interpret
financial position of the company. From that it is clear that the TATA STEELS &
SAIL are in advanced stage. From the ratios calculated above following conclusions
can be drawn.
The gross profit earned by the both the companies are declining every year. From
2010 to 2013, it is fluctuating a lot which is due to failure in managing purchases,
production, sales and inventory or loses control over direct costs of labor, fuel,
freights etc.
Operating ratio of SAIL going down from 2010 to 2013 which is nothing but due to
certain reasons like low efficiency in managing the operations of the company or low
margin available to meet non-operating expenses whereas as compared to TATA
STEELS the fluctuations are not much.
The net profit is nothing but profit earned by the company after deducting interest
and taxes. The graph is showing that in both the companies from 2010 to 2013, the
net profit is declining which is due to inefficiency in managing its activities like
trading, production, financing and investment or unsatisfactory control over operating
or non operating costs.
SAIL and TATA STEEL LTD. both the companies are major players in steel manufacturing
sector in India. After making the comparative analysis of both the firms we find that
performance of TATA STEEL LTD. is better than the SAIL. It is so because the Net profit of
TATA STEEL LTD. is greater than the SAIL Similarly the inventory management of the
TATA STEEL LTD. is better than the SAIL.
CONCLUSION
The in-depth analysis of key financial ratios in this project helps in measuring
the financial strength, liquidity conditions and operating efficiency of the
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company. It also provides valuable interpretation separately for each ratio that
helps organization implementing the findings that would help the organization
to increase its efficiency.

Ratios are only post mortem analysis of what has happened between two
balance sheet dates. For one thing the position of the company in the interim
period not revealed by analysis, moreover they give no clue about the future.
Ratio analysis in view of its several limitations should be considered only as a
tool for analysis rather than as an end itself.

From the analysis it is evident that the gross profit ratio is good, whereas the
operating ratio is around optimum level to the industry standards. As a whole
the liquidity position of the company is good.

The business environment of both the company is reasonably good. The
companys track record is always oriented towards profitable growth and with
strong fundamentals.
BIBLIOGRAPHY
1. C. Jeevanandam (1st Ed.), Management Accounting and Financial Management, Sultan
Chand & Sons, ISBN-81-8054-013-8.
2. Chandra Prasanna (6th ED.), Financial Management, Tata Mc Graw-Hill Publishing

Company Ltd., New Delhi. ISBN-0-07-058548-2.
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3. Gitman.L.J. (2001). Principles of Managerial Finance. New Delhi: Pearson Education

Asia.
4. Hampton, J. (1983). Financial Decision Making --Concepts, Problems and Cases (4th Ed.).
New Delhi: Prentice Hall.
5. Joy, O. (1978). Introduction to Financial Management (Madras: Institute for Financial
Management and Research, 1978).
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What Is Financial Performance?: Introduction To The Topic

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Comparitive study on financial performance of SAIL and TATA STEELS for the yr 2010-2013

INTRODUCTION TO THE TOPIC

What is Financial Performance?

Financial Performance Analysis

procedures. Its purpose is to convey an understanding of some financial aspects of a business

Techniques/Tools of Financial Performance Analysis

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A) Accounting Techniques: It is also known as financial techniques. Various accounting

Financial Performance is the level of performance of a business over a specified period of

IMPORTANCE OF RATIO ANALYSIS

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and the funds to

pay-off its short-term commitments.

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INTRODUCTION TO THE COMPANY

consultancy to clients world-wide. SAIL has a well-equipped Research and Development

We uphold highest ethical standards in conduct of our business.

We value the opportunity and responsibility to make a meaningful difference in

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Expanding Horizon (1959-1973)

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trustworthiness and values-driven business operations, while balancing the interests of

PURPOSE AND CORE VALUES

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TYPES OF RATIO CALCULATED

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IMPORTANCE OF THE STUDY

OBJECTIVES OF THE STUDY

1. To evaluate and analyze the trends in financial performance of the selected

SCOPE OF THE STUDY

covering a large period say 20 or 30 years give a clear picture of

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LIMITATIONS OF THE STUDY

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1) The main source of information is annual reports. They represent financial

[I] PROFITABILITY RATIO

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2] OPERATING RATIO:OPERATING RATIO = COGS + OPERATING EXPENSES X 100

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3] NET PROFIT RATIO:NET PROFIT RATIO = NPAT X 100

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[II] LIQUIDITY RATIO

CURRENT RATIO = Current Assets

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[III] MANAGEMENT EFFICIENCY RATIO

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2010-2011 2011-2012 2012-2013

[IV] INVESTMENT VALUATION RATIO

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OBSERVATION AND FINDINGS

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to increase its efficiency.