FINANCIAL STATEMENT ANALYSIS

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A Project Report on

“FINANCIAL STATEMENT ANALYSIS”
National Aluminium Company Ltd.
Corporate Office, Bhubaneswar

By
MRUTYUNJAY DASH
(ROLL NO: -PGDM/14-16/25)
(Submitted for the partial fulfillment of the degree of Master in Finance and
Control)

For the Session: 2014-2016
ASIAN SCHOOL OF BUSINESS MANAGEMENT

ACKNOWLEDGEMENT
I express my deep gratitude to the individuals who have guided me and helped a lot in
completing my summer internship project. I am really thankful to my project guide, Mr. M.R
Rath (AGM of Finance) NALCO to permit me to avail this project and for his valuable advice
and guidance in each and every step towards completion of the project.
I would like to thanks the staffs of finance department (corporate) NALCO for their kind cooperation.
I take this opportunity to express deep sense of gratitude and reverence to my professor Mr.
Padmanav
Mohapatra,
ASIAN
SCHOOL
OF
BUSINESS
MANAGEMENT,BHUBANESWAR for his suggestions, constant inspirations and guidance
to carry out & complete this project.

DECLARATION
I do here by declare that I have worked on the topic “FINANCIAL STATEMENT
ANALYSIS”from 20th APRIL,2015 to 13th JUNE 2015. All Financial Year has neither been
purchased nor acquired by any other unfair means. The data and information exists in this
report are accurate and updated to the current data, to the best of my knowledge. However, for
this purpose of the project, information already compiled in my sources has been utilized. All
the information in this report is true representation of what I have experienced during the
project.

CONTENTS
Executive Summary
Objective of the Study:
Methodology
Chapter-1: Overview of Aluminium Industry



Global status
Status of Indian Industry

Chapter-2: Company profile






Introduction
Background
Project segments
Previous five years performance-Physical & Financial
Achievements

Chapter-3: Introduction of the Project undertaken






Overview of Financial statement analysis
Types of Financial statements
Objectives Characteristics
Limitations
Techniques

Chapter-4: Financial Statement Analysis of NALCO





Comparative Statements
Common Size Statements
Ratio Analysis
Cash flow statement

Financial Performance of NALCO
Holistic Report
Finding & Inferences
Conclusion
Bibliography.

Executive Summary
India's share of global aluminium production is hovering around 4-5 per cent. The Indian Aluminium industry
is highly concentrated with only five primary plants in the country from three business houses. The Adyta
Birla Group: Hindustan Aluminium Company Limited (HINDALCO), Vedanta Resources: Bharat
Aluminium Company Limited (BALCO), Madras Aluminium Company Limited (MALCO), Public Sector
Undertaking: National Aluminium Company Limited (NALCO).
NALCO Aluminium Company Ltd. truly a national venture to take the country forward in the world of
Aluminium market was incorporated on Jan 7, 1981. NALCO has contributed to India's need for selfsufficiency in Aluminium. NALCO heralded a new era of Aluminium making in the country as well as in the
world acquiring the 5th position. I had been fortunate to be a part ofNALCO Corporate Office, Bhubaneswar
as a summer intern in the field of finance on the topic "Financial statement Analysis ".The project was carried
out with the aim of evaluating the financial statements of the company as it provide valuable insight into a
firm performance. The analysis was done by analyzing the various liquidity ratios, Solvency ratios, activity
turnover ratios, profitability ratios in order to determine the operational efficiency & operations of the
company. Holistic report has been made. Thereafter interpretations are derived from the analysis. The
objective of the project was to understand the financial condition & performance ofNALCO & its financial
strength & weakness of the firm by properly establishing relationship between the items of the balance sheet"
the profit & loss account and cash flow statement which has been carried out by' applying the methodology of
ratio analysis. .
Study was done taking the period of 3 years ofNALCO from 2010-11 to 2012-13 & data has been collected
from annual reports, internet. To prepare a holistic report is based upon the:
a) The LME price effect on average aluminium price, net profit, net sales of the companies.
b) On the basis of CSR activities undertaken by the companies.
Further based on these financial statement analysis conclusion has been drawn that NALCO's GP margin has
been declining due to economic recession all over the' world. The liquidity analysis depicts that NALCO has
the ability to meet its current obligations. The solvency ratios of NALCO show that NALCO has a good long
solvency position.
Keeping in view of the present scenario ofNALCO, it can work on cost control &increase in profitability. It
can invest in surplus cash to generate returns & try to manage the debtor turnover ratio to higher profitability.
It should aim at increasing the turnover through diversification &
innovation which can increase its sales volume. As the company does not has long term debt so it should aim
to have proper debt-equity ratio which would increase its EPS & gain advantage on its low cost debt.

Objective of the Study:
• To analysis the financial performance progress of NALCO by establishing relationship between the
items of balance sheet and profit and loss Account.
• To identify company strength and weakness of NALCO by in comparison to its competitors.
• To assess the operational efficiency of the management of the company.
• To evaluate the financial condition and performance as well as to study the relationship among various
financial factors and also measures the profitability of the business by the various profitability ratios.
• To have a comparative analysis of the company based upon the holistic report.

CHAPTER-01
(Over view of Aluminium Industry)

GLOBAL STATUS
Today, the global aluminium industry has only a bare resemblance to what it was in the early 1970s. the most
important structural changes are the geographical relocation of bauxite, Alumina and aluminium production
centres; shifts in the degree of concentration and Integration; the emergence of new consuming regions, the
development of new end-use Markets and the threat of substitutes, including recycled metal; the historical
decline in real Prices of the metal and the recent upward shift in the industry cost curve; the market
adjustment Mechanisms and, more recently, the rising popularity of commodities as an asset class.
The main objective of this paper is to highlight and analyze these changes over the last four decades.
Commencing with an identification of the main characteristics of the aluminium industry in the early 1970s,
the paper then examines the main forces or drivers that have deeply modified the structure of the global
aluminium industry, factors such as energy crises, arrival of new players, variations in exchange rates, shifting
trends in aluminium cost curves, and the role of emerging economies. The main characteristics of current
global aluminium Industry is then presented, with a view on future demand and production.

The Global Aluminium Industry in the Early 1970s
The year 1972 saw bauxite production dominated by four countries - Australia, Jamaica, Suriname and USSR
- which together held a 60% global market share. Today, only Australia is on a list of the top six producers.
Even greater changes have occurred in the location of Alumina-producing countries. In 1972, more than 45%
of global alumina production was concentrated in five industrialized countries, poorly- endowed with bauxite
reserves: United States, Japan, Canada, France and Germany. The other major producers were then Australia
(13%), USSR (12%), Jamaica (9%) and Surinam (6%). Today, among the countries Mentioned above, only
Australia is still a significant producer, with alumina production having generally shifted from industrialized
or aluminium producing countries to bauxite producing regions.
Major shifts have also occurred in the geographic location of aluminium production centres. The Combined
share of United States, USSR and Japan reached almost 60% of global primary Production in 1972. Today,
their corresponding share barely exceeds 10%. Norway, Germany and France has also been replaced on the
list of top aluminium producers.
LONDON, Feb. 24, 2014/PRNewswire/-- Reportbuyer.com just published a new market research report:
Global Aluminum Market 2014-2018TechNavio's analysts, forecast the Global Aluminum market to grow at
a CAGR of 5.90 percent over the period 2013-2018.
One of the key factors contributing to this market growth is the use of aluminium in the automotive industry.
Till Global Aluminum market has also been witnessing the increase in production capacities by major
producers around the world.
However, the high price volatility of aluminum could pose a challenge to the growth of this market.
TechNavio's report, the Global Aluminum Market 2014-2018, has been prepared based on an in-depth market
analysis with inputs from industry experts.
The report covers the AP AC and EMEA regions, and the Americas; it also covers the Global Aluminum
market landscape and its growth prospects in the coming years.

STATUS OF INDIAN INDUSTRY:
Indian Aluminium Industry was first established in the year 1808 and it took almost 46 years to make its
production commercially viable. The research work of the country took several years and resulted in
extracting the Aluminium from the ore. On earth Aluminium is the third most available element constituting
almost 7.3% by mass. Currently Aluminium is also the second most used metal in the world after steel. Due to
the fact that consistent growth of Indian economy at a rate of 8%, the demand for metals, used for various
sectors, is also on the higher side. As a result, the Indian Aluminium Industry is also growing consistently as
in the year 2009 the aluminium industry in India saw a growth of about 9%.
In the year 1938 the production of Aluminium started in India when the Aluminium Corporation of India's
plant was commissioned. The plant was set up with a financial and technical collaboration with Alcan, Canada
which had a capacity of producing: 2,500 tonnes per annum. In the year 1959 the Hindustan Aluminium
Corporation (Hindalco) was set up; which had a capacity of producing 20,000 tonnes per annum. A public
sector enterprise Malco which had a capacity of 10,000 tonnes per annum was commissioned in 1965. Then
later in the year 1987, National Aluminium Company (NALCO) was commissioned to produce Aluminium
with a capacity of producing 0.218 million tonnes.
Indian Aluminium Industry Government started regulating and controlling during the 1970's. Restrictions in
entry and price distribution controls were common in the Aluminium Industry. Aluminium Control Order has
been implemented where the aluminium producers had to sell 50% of their products for electrical usages in
the country. Later in 1989, the order was removed as the govemment decontrolling was revoked. In the year
1991 with de-licensing of industry, the liberal import of technologies and capital goods was started. The
liberalization resulted in a growth rate of 12% of the industry, comparing to the growth rate of 6% during the
1980.
The Indian per capita Aluminium consumption is less than 1 kg compared to about 3kgs in China and 30 kgs
in the US. The fact that almost 44% of the domestic aluminium is consumed by the electrical sector and there
are only about 300 applications for the metal in India leaves a lot of room for the domestic sector to grow. Just
to put things in perspective, aluminium usage on the global front is tilted towards transportation and
packaging sectors and there are an estimated 3,000 applications for the metal.

TOP COMPANIES:
• Hindustan
AluminiumCmpa
ny (HINDALCO)
• National
Aluminium
Company
(NALCO)
• Bharat
Aluminium
Company
(BALCO)
• MALCO
• INDAL

Company
(Location)
Hindalco
Nalco(Angul)
Balco (Corba)
Malco
(Mettur)
VAL
(Jharsuguda)
Total

Capacity
(in tonnes)

Production (in tonnes)

445000
345000
345000
40000

FY 09
523400
360000
357000
23000

250000

82000

Q1 FY10
125000

1345400

Indian aluminium industry on fast growth
Figures and forecasts of a market with great potential
The three major producers of aluminium in India are Hinda1co, Vedanta Group and the state owned Na1co,
who mine/procure bauxite and convert it into aluminium ingots. These three together account for the majority
of share of total domestic aluminium production.

Indian scenario
Bauxite: India is endowed with large deposits of high quality bauxite ore, amounting to almost 5% of the
world's reserves, totaling to about 3 billion tonnes. At 5.3 milliontonnes of aluminium production, (expected
capacities by 2015) these reserves are likely to last for 100 years. At 10 million tonnes per annum production,
which India should reach between 2020 & 2025 our bauxite reserves will last for 45-50 years. Power (Coal):
All Indian primary metal producers have captive power plants. Greenfield smelters are also being planned,
based on captive power generation, using coal. India's 250 bntonnes non-coking coal reserves (proven and
indicated), are the fourth largest in the world. Technical Manpower: India has a formidable pool of manpower
- both skilled and unskilled; to support the manufacture of aluminium, which is a labour-intensive process.
Per Capita Consumption: With the Indian economy projected to be amongst the top five in the world by 2025,
the overall consumption of aluminium is projected to be about 5 million tonnes by 2015, and 10 million
tonnes by 2020. India's consumption has grown at a CAGR of 15% in the last five years, almost double the
word average of 8.1 %. End-use sectors of aluminium. The per capita aluminium consumption in India is just
l.3 kgs, compared to about 12 kgs in China, 28 kgs in the US and 39 kgsin Germany. The world average is 7.4
kgs.
Growing Market & Economical Production: Apart from its potentially large, growing market India has ready
availability of the three important inputs to manufacture aluminium: bauxite, power (coal) and manpower.

Indian aluminium companies are amongst the lowest cost producers of the metal in the world, which is a
significant advantage, especially during times of cyclical downturns. Abundant bauxite reserves and access to
economical manpower give the domestic aluminium manufacturers a competitive advantage.

GDP and consumption growth
Primary aluminium consumption in India has grown from 450 kt in 1991, to 1,140 ktin 2008 and currently
accounts for 3.1 % of global consumption. Total aluminium consumption (primary + recycled) has grown
significantly, at a CAGR of around 15% during 2002-09 and reached 1.5 million tonnes. As per Mckinsey&
Co., "Indian Aluminium use will grow 9 to 11 % to 2.10 to 2.75 million tonnes, by 20 15". The aluminium
consumption follows the GDP growth curve, hence these would also be growth drivers for the consumption of
aluminium. The major sectors contributing to Indian aluminium consumption growth are Electrical (Power),
Building and Construction, Packaging and Transportation. These sectors are expected to grow in double digits
in the next decade, to reach a per capita consumption of approx 10 kg. To be in line with China's per capita
consumption in 2020, consumption in India has to reach 10 million tonnes.

Planned growthin Indian aluminium production
The Indian aluminium industry's enthusiasm to grow smelting capacity on an ambitious scale here and abroad
- the wanderlust is that of Nalco - was not dimmed in any way by the adverse performance of the metal during
the recession. According to sources, Nalco is working to give shape to three mega projects simultaneously,
including a $4-billion 500,000 tonnes smelter along with a captive 1,250 power complex at East Kalimantan
in Indonesia. Nalco is also pursuing a project of similar configuration at Jharsuguda in Orissa. The promised
access to 80 million tonnes of bauxite deposits at Gudem and KR Konda in Andhra Pradesh will also lead
Nalco to build a 1.4-million tonne alumina refinery in the state.
Hindalco has also got big things on its plate. If all its projects get commissioned on revised schedule, then
Hindalco will see its smelting capacity rising to 1.7 million tonnes from 500,000 tonnes and alumina refining
capacity to 6.5 million tonnes from 1.7 million tonnes by 2013. Meanwhile, Novelisacquisition has given
Hindalco global leadership in that value added segment where path breaking technologies are in application.
Vedanta has arrived on the Indian aluminium scene much later than Hindalco and Nalco. While it has made up
for the lost time by gaining control of Balco and Madras Aluminium, Vedanta is aggressively building new
capacity through greenfield .and brownfield routes.

India to face major aluminium surplus by 2013
Aluminium industry in India is moving towards overcapacity, since supply is likely to grow in excess of
demand going forward. Considering that all aluminium projects would begin commercial production with
expanded capacity as planned, there could be at least 2 million tonnes of additional capacity for exports by
2013. Fitch Ratings report recently said that India's aluminium productions will more than treble to 4.4
Million tonnes by mid 2012 with new capacities coming on stream, along with requisite captive Power
generation capacities.

CHAPTER-02
(COMPANY PROFILE)

COMPANY PROFILE:
NATIONAL ALUMINUM COMPANY LIMITED (NALCO) The East Coast bauxite discovery led to the
setting up of India's largest Alumina-Aluminium complex, National Aluminium Company Ltd (NALCO) in
1981 following technical collaboration agreement with Aluminium Pechiney of France. The project cost of
Rs.2,408 crore was part financed by 980 million euro dollar loan extended by a consortium of International
banks. The Company has long back prepaid the loan, besides contributing more than Rs.16,000 crore to
Central and State exchequer as tax and duties etc, besides having huge cash reserve for future growth
activities.
Presently, Govt. of India holds 87.15% share in NALCO. It is an integrated and diversified mining, metal and
power group "A” CPSE with annual sales of' 6,370 cores in FYI 0-11. The Company has bulk shipment
facilities at Vizag port, besides utilizing the facilities at Kolkata and Paradeep ports.
With the emergence of NALCO on the aluminium scene, there has been a quantum jump in alumina and
aluminium production in the country. NALCO is the 1 st Public Sector Company in the country to venture
into International market in a big way with LME registration since May 1989. Export sales account for almost
30-35% of its turnover with business in more than 30 countries in recent past. Its alumina and metal enjoy
premium in world market on account of quality and international standard.
The production units at NALCO are operating consistently near or more than 100% capacity. Due to its
consistent track record in managing operations and improving costs and output, the Company has been
accorded prestigious Navratna status by' Govt. of India in 2008. NALCO is one of the lowest cost producers
of alumina and aluminium in the world.
In addition to existing operations, NALCO has extensive plans for brown field and green field expansion
projects worth ' 40,000 crore in the country and abroad. Further, the Company has taken up steps for
commissioning of allotted coal block (Utkal-E in Odisha) at a cost of' 338 crore. At the same time, to offset
the vagaries of international market related to aluminium, NALCO is looking beyond its core strength and
venturing into other metals and energy sectors. NALCO has signed agreement with Nuclear Power
Corporation of India Limited (NPCIL) to form a joint venture Company for establishment of2X 700 MW
nuclear power plants at Kakrapara in Gujarat, where the construction work has already started. To harness the
non-conventional energy source, the Company is setting up a wind power project of 50.4 MW capacity in
Andhra Pradesh for which order has been placed in June, 2011. The Company has also been shortlisted by
Govt. of Gujarat for alumina refinery 10.8 NALCO has plans to set up thermal power plants as independent
power project (IPP) and even Ultra Mega Power Projects (UMPP) and exploring for solar plants also. Further,
the Company is developing bauxite mines (Gudem and KR Konda in Andhra Pradesh and likely to start
Pottangi in Odisha); besides setting up forward and backward integration projects.
Leveraging the technical collaboration with Aluminium Pechiney (now Rio Tinto Alcan) since 1982, NALCO
has continued to add value and is poised to grow further.

Company vision
To be reputed global Company in the Metals and Energy Sectors

Company Mission




To continuously develop human resources, create safe working conditions, improve productivity and
quality and reduce cost and waste.
To be a good corporate citizen, protecting and enhancing the environment as well as discharging social
responsibility in order to ensure sustainable growth.
To intensify R&D for technology development.

ORGANISATIONAL STRUCTURE
NALCO is a govt. of INDIA Enterprise under the administration control of the ministry of mines. The
company is managed by Board of Directors appointed by the president of INDIA. The Board consists of 10
Directors including the Chairman cum Managing Director of the company. There are 4 functional full-time
directors heading production, finance, project and technical personal and administrative disciplines. There are
four senior Govt. officials nominated to the Board as Directors on ex- officio basis. Besides there are three
non-official directors in the appointed to represent the interests of financial institutions, allied Industries and
R&D objectives of the company. Thus the Board of company is a full of highly experienced and outstanding
potentials drawn from various fields of specialization.
The company enjoys maximum possible operational autonomy consistent with the overall corporate
objectives, basic policies and programmes with a view to achieve optimum utilization of its resources subject
to the provision of Indian: companies act. The memorandum of understanding signed with the govt. and also
subject to policies formulated by the Board of Directors from time to time the Chairman cum MD has full
power to sanction expenditures or to deal with other matters for effective functioning of the company.
The management Control System is based on delegation of authority and individual accountability for results.
The responsibility and authority to take decisions on various matters are delegated by the Chairman-cum MD
to different levels in the management.

SWOT ANALYSIS OF NALCO:

1. STRENGTH:









Skilled and committed manpower.
Good quality bauxite reserves.
Efficient technology.
Various well planned and ideally located infrastructure facilities.
Efficient operations.
Manufacture of good quality alumina&aluminium product at competitive cost.
Excellent customer service.
Prudential financial management & commitment to good co-operate governance practices in all facets
of operations.

2. WEAKNESS:





Shortage of coal.
Limited product range.
Escalating production cost including that of labour.
Fluctuation in the LME prices as well as in exchange rates.

3.0PPURTUNITIES:
 Growth of the potential domestic market.
 Wide spread uses of alumina for various purpose.

4. THREATS:





Competition in scrap imports.
Constraints in fuel supply & rise in material cost.
Energy crisis.
Dumping of metal at low cost by European countries.

ACHIVEMENTS:
• First Mines Safety Award-1988 by DGMS.
• Best Eco-friendly Factory Award 1994-95 to the Mines and Refinery Complex by Odisha State
Factory inspectorate.
• State Award-1995 to Captive Power Plant from state Factory inspectorate for Environment
Management.
• India Priyadarshini Vrikshamitra Award-1994 from MOEF, Govt. of India, for a forestation and
wasteland development.
• FICCI Environment A ward for Environment Conservation and Pollution Control- 1996-97.
• WEC-IIEE-IAEWP Environment award -1997 for contributing towards environment protection.
• Gem Granite Environment Award for -1997-98 by FIMI, New Delhi for Mines.
• Shri Sita Ram Rungta Memorial Social Awareness Award-I 997-98 by FIM.I, New Delhi.
• Pollution Control Excellence Award - 1998 by Odisha State Pollution Control Board for Mines.
• Special Commendation under Golden Peacock Environment Management Award 1998 Scheme by
World Environment Foundation.
• State Award for Best Occupational Health Centre to S&P Complex' -1998.
• Best Safety Performance Award to CPP by CII (ER)- 1999-2000.
• The prestigious Dun & Bradstreet's Best PSU Award - 2012 in Non-Ferrous Metal Category.

Products:
Aluminium metals








Ingots
Alloy Ingots
T-Ingots
Sows
Billets
Wire Rods
Cast Strips

Alumina and Hydrate
• Calcined Alumina
• Alumina Hydrate

Special Product
• Speciality Hydrate

Rolled Product

• Alumina Rolled Product

Product process
Bauxite Mines
On Panchpatmali hills of Koraput district in Orissa, a fully mechanized opencast mine of 4.8 million tpa
capacity is in operation -since November, 1985, serving- feedstock to Alumina Refinery at Damanjodi located
on the foothills. Presently, the- capacity is being expanded to 6.3 million tpa.

The salient features:








Area of deposit - 16 sq. km.
Resource - 310 million tonnes
Ore quality - Alumina 45%, Silica 2%
Mineralogy - Over 90% gibbsitic
Over burden - 3 meters (average)
Ore thickness - 14 meters (average)
Transport - 14.6 km long single flight multicurve cable belt conveyor of 1800 tph.

Alumina Refinery
The 15, 75, 000 tpa Alumina Refinery, having three parallel streams of equal capacity, is located in the
picturesque valley of Damanjodi in Koraput district. In, operation since September, 1986, the Refinery is
designed to
• Provide Alumina to the Company's Smelter at Angul
• Export the balance Alumina to overseas markets through Visakhapatnam Port.
Presently, the capacity is being expanded to 21,00,000tpa.

The salient features:





Atmospheric pressure digestion process
Pre-desilication and inter-stage cooling for higher productivity
Energy efficient fluidised bed calciners
Co-generation of 3x18.5 MW power by use of back pressure turbine in steam generation plant.

Aluminium Smelter
The 3,45,000tpa capacity Aluminium Smelter is located at Angul in Orissa. Based on energy efficient state-ofthe-art technology of smelting and pollution control, the Smelter Plant is in operation since early 1987.
Presently, the capacity is being expanded to 4,60,000tpa.

The salient features:










Advanced 180 KA cell technology
Micro-processor based pot regulation system
Fume treatment plant with dry-scrubbing systemfor pollution control and fluoride salt recovery.
Integrated facility for manufacturing carbon anodes, bus bars, anode stems etc.
4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 tph and 2 x 20 tph ingot casting machines
4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills
2 x 45 tonne furnaces and 60142 per drop billet casting machine
2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine
26,000 tpa strip casting machines

With the acquisition and subsequent merger of International Aluminium Products' Limited (IAPL)
with Nalco, the 50,000 tpa export-oriented Rolled Products Unit is all set to produce foil stock, fin
stock, can stock, circles, coil stock, cable wraps, standard sheets and coils.

Captive Power Plant
Close to the Aluminium Smelter at Angul, a Captive Power Plant of 960 MW capacity, comprising 8 x 120
MW clusters, has been established for firm supply of power to the Smelter.
Presently, the capacity is being expanded to 1200 MW.

The salient features:







Micro-processor based burner management system for optimum thermal efficiency.
Computer controlled data acquisition system for on-line monitoring
Automatic turbine run-up system
Specially designed barrel type high pressure turbine.
Electrostatic precipitators with advanced intelligent controllers
Wet disposal of ash

The water for the Plant is drawn from River Brahmani through a 7 km long double circuit pipeline. The coal
demand is met from a mine of 3.5 million tpa capacity opened up for Nalco at Bharatpur in Ta1cher by
Mahanadi Coalfields Limited. The Power Plant is inter-connected with the State Grid.
5 Years Performance at glance-Physical
Sl.
Particulars
2013-14 20122011No.
13
12
A. INCOME STATEMENT
1
Export
3,719
3,410
2,569
2
Domestic Sales
3,305
3,837
4,358
3
Gross Sales (1+2)
7,024
7,247
6,927
4
Less Excise duty
375
438
427
5
Net Sale (3-4)
6,649
6,809
6,500
6
OTHER INCOME:
7
Operating
132
107
112
8
Non-operating
558
511
542
9
Operating Expenses
5,847
6,010
5,467
10
Operating Profit (5+7+9)
934
906
1,145
11
Exceptional Exenditure
49
12
EBIT (10+8+11)
1,443
1,417
1,665
13
Interest and Financing charges
0
7
1
14
EBIT (12-13)
1,443
1,410
1,664
15
Depriciation and Amortization
525
505
467
16
PBT
918
905
1,198
17
Provision for Tax
276
312
348
18
Net Profit (PAT)(14-15)
642
593
850
19
B. BALANCE SHEET:
20
Equity Capital
1,289
1,289
1,289
21
Reserves & Surplus
10,834 10,644 10,426
22
Net Worth (19+20)
12,122 11,933 11,715
23
Loans
0
0

201011

200910

2,065
4,305
6,370
411
5,959

2,209
3,101
5,310
256
5,054

98
353
4,464
1,593

119
374
4,071
1,102

1,946
1,946
422
1,524
455
1,069

1,476
2
1,474
319
1,155
341
814

1,289
9,876
11,165
15

644
9,751
10,395
9

24
25
26
27

Working Capital
3,949
3,411
4,193
3,304
2,998
Capital Employed (23+24)
10,741 10,040 10,805
8,798
7,834
C. RATIO:
Operating Profit Margin (OPM)
14.05
13.31
17.62
26.73
21.80
(%)(10/5*100)
28
Net Profit Margin (%)(18/5*100)
9.66
8.71
13.07
17.94
16.11
29
Return on Capital employed (%)
5.98
5.91
7.86
12.15
10.39
(18/25*100) 5 Year Performance At a Glance- Physical
30
Return on Net worth (RONN)(%)
5.3
4.97
7.25
9.57
7.83
Sl. (18/21*100)
PARTICULARS
UNIT 2013-14
2012-13
2011-12
2010-11
2009-10
No. D. OTHERS:
31
PRODUCTION
321 Book
Value per share of 5 each
47.04
46.3
45.46
43.32
40.34
Bauxite
MT
32,92,377
54,19,39
50,02,62
48,23,62
18,78,888
33
Earnings per Share
2.49
2.3
3.30
4.15
3.16
11.25
6
6
34
Dividend
1.5
1.00
2.50
2.50

2

Alumina Hydrate

MT

19,25,000

1,80,200

1,68,700

Aluminium
Power (Net)
Wind Power

MT
MU
MU

3,16,492
4,989
144

4,03,384
6,076
14

MT
MT

13,09,473
1,01,243

9,44,117
1,44,161

7,92,552
98,399

6,39,855
98,200

7,02,554
1,43,947

Alumina, Hydrate
and other Chemicals

MT

33,288

40,605

50,253

45,916

44,420

Aluminium
Power (Net)
Wind Power

MT
MU
MU

2,18,420
27
144

28,941
26
14

3,17,517
16
-

3,40,752
56
-

2,89,032
15
-

4,31,488
6,293
-

EXPORT
SALES
Alumina Hydrate
Aluminium

3

15,91,500

4,13,089
6,200
-

15,56,00
0
4,43,597
6,608
-

DOMESTIC
SALES

PERFORMANCE HILIGHTS:
Production Achieved:
Production
Bauxite
Aluminium Hydrate
Aluminium Hydrate
Electricity (Net)

Unit
MT
MT
MT
MU

2013-14
62,92,677
19,25,000
3,16,492
4,989

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

2012-13
54,19,391
18,02,000
4,03,384
6,076

2012-13
2013-14

The Company has achieved its best performance in production of Bauxite and Aluminium Hydrate as
compared to its previous year. Transportation of Bauxite is 62.93 lakh MT (against 54.19 lakh MY in 201213). Aluminium Hydrate production of 19.25 lakh MT against 18.02 lakh unit last year. But the production of
Aluminium decrease from 4.03 lakh MT in 2012-13 to 3.16 lakh MT in 2013-14.
Financial Year
2009-10
2010-11
2011-12
2012-13
2013-14

Aluminium Hydrate (in 000MT)
1592
1556
1687
1802
1925

Aluminium (in 000MT)
431
444
413
403
316

2000
1800
1600
1400
1200
1000
800
600
400
200
0

Aluminium Hydrate (in
000MT)
Aluminium (in 000MT)

2009-10

2010-11

2011-12

2012-13

2013-14

Sales Performance
Financial Year
2009-10
2010-11
2011-12
2012-13
2013-14

Net Sale (Rs. In Crore)
5054
5959
6500
6809
6649

LME Aluminium Price
1866
2257
2318
1976
1773

7000
6000
5000
Financial Year

4000

Net Sale (Rs. In Crore)

3000

LME Aluminium Price

2000
1000
0
1

2

3

4

5

The Company has achieved the ever export sales at Rs. 3719 Cr. During the year against earlier highest ever
sale of Rs. 3410 Cr.During previous year. The Aluminium price US$ decrease to 1773 in 2013-14 from US$
1976 in 2013-13. However, domestic sales decrease to Rs. 3305 Cr. In 2013-14 to Rs. 3837 Cr.In previous
year 2012-13.

CHAPTER-03
(INTRODUCTION OF THE PROJECT UNDER TAKEN)

FINANCIAL STATEMENT ANALYSIS-AN OVER VIEW
Financial statements are prepared primarily for a true and fair view of the statement of affairs of the company.
They play a dominant role in setting the framework of managerial 'decision. But the information provided in
the financial statements is not an end in itself as no meaningful conclusion can be drawn from these
statements alone. However, the information provide in the financial statement is, of immense use in making
decision through analysis and interpretation. Financial analysis is the process of identifying the financial
strength and weakness of the firm by properly establishing relationship between the items of the balance sheet
and profit & loss account.
The terms 'financial statement analysis' also known as analysis and interpretation of financial statements'
refers to process of determining financial strengths and weaknesses of the firm by establishing strategic
relationship between the items of the balance sheet ,profit & loss account and other operative data. "Analyzing
financial statements," according to Metcalf and Titard, Financial statement is a process of evaluating the
relationship between component part of a financial statement to obtain better understanding of a firm's
position and performance."

The purpose of financial analysis is to diagnose the information contained in financial statements so as to
judge the profitability and financial sounded of the firms:
The two basic financial statements prepared for the purpose of external reporting to owner investors and
creditors are:(1) Balance sheet or statement of financial position
(2) Profit &loss or income statement

BALANCE SHEET:Balance sheet is a statement of financial condition or the state of affairs of a business on a particular date. It
provides information about assets, liabilities and owner’s equity of a business firm t the close of the firm as on
the specific date. It provides a snapshot of the financial position of the firm at the close of the close of the
firm's accounting period.

FUNTION OF BALANCE SHEET:1. It gives a concise summery of the firm's resources and obligations.
2. It is a measure of the firm's liquidity.
3. It is a measure of the firm's solvency.

PROFIT &LOSS ACCOUNT:
The profit and loss account is a "score board" of the firm's performance during a , year. It is the summer of
revenues, expenses & net income resulting from business operation in a year.

FUNCTION OF PROFIT & LOSS ACCOUNT:
1.
2.
3.
4.

It gives a concise summery of the firm's revenues and expense during a periods of time.
It measures the firm's profitability.
It accumulates economic data.
It measures net profit by matching revenues and according to the basic accounting principle.

OBJECTIVES OF FINANCIAL STATEMENTS:
1.
2.
3.
4.
5.

To provide reliable financial information about economic resources and obligation of a business firms.
To provide other needed information about changes in such economic resources and" obligation. ,',
To provide reliable information about changes in net resources arising out of business activities.
To provide information that assist in estimating the earning potentials of business.
To disclose to the extent possible, other information related to the financial statements relevant to the
need of users of these statements.

CHARACTERISTICS OF FINANCIAL STATEMENT:

1. Depicts true financial position:- The information contained in financial statement should be such that the
true and correct idea is taken about the financial position of the concern & no material information should
be withheld.
2. Effective presentation:-it should be presented in a simple &lucid way so as to make them easily
understandable.
3. Relevance:-it should be relevant to the objectives of the enterprise.
4. Attractive: - important information's should be highlighted.
5. Comparability: - The result of the financial analysis should be in such a way that it can be compared with
the previous year's statements.
6. Analytical Representation:- The information should be analyzed in such a way that similar data is,
presented at the same place and a relationship can be established in similar type of information.
7. Brief: - If possible, it should be presented in brief.
8. Promptness: - it should be prepared and presented at the earliest possible.

LIMITATIONS OF FINANCIAL STATEMENT:
1. Though financial statements are relevant and useful for the concern, still it suffers from the following
limitation.
2. Financial statement ignore non-monetary events in a company, which may be either favorably affect the
company's performance and profitability.
3. Financial statements are historical or give report on past events. They fail to give current picture of future.
4. These are interim reports.
5. Comparison between financial statements of one firm with other may not be possible if different
according policies are followed.

FINANCIAL STATEMENT ANALYSIS:
It is the process through which the financial statement are evaluated and interpreted ' by various tools like
Ratios. Comparative balance sheet etc. to judge the financial strength of the company.

AIM:
1.
2.
3.
4.
5.

To judge and find-out the financial position of the company.
To know the solvency of the firm.
To help the investors in deciding whether to invest in the company or not.
To help the management in taking proper and timely decisions.
To have inter-firms comparison possible.

STEPS:
Financial statement analysis follows a series of steps that leads a user to a meaningful interpretation of
financial data. These steps are:1. Specify the purpose of analysis.

2. Identify the measurement base.
3. Collect and process the data.
4. Compare the process data with a standard.

ANALYSIS METHODS OF FINANCIAL STATEMENT:
1.
2.
3.
4.

Comparative statements
common-size statements
Ratio analysis
Cash flow statement

CHAPTER-04

(FINANCIAL STATEME ANALYSIS OF NALCO)

COMPARATIVE BALANCE SHEET - 31.03.2014

.

Particulars
Non-Current Assets
Fixed Assets
Tangible Assets
Intangible Assets
Capital Work-in-Progress
Non-Current Investment
Long term Loans and Advances
Other non-current Assets
TOTAL
Current Assets
Equity and liabilities and
Current Investment
shareholder’s fund
Inventories
Particulars
Trade Receivable
Share Capital
Cash & Bank Balance
Reserve and Surplus
Short term Loans and Advances
TOTAL
Other Current Assets
Non-Current Liabilities
TOTAL
Deferred Tax Liabilities (Net)
GRAND TOTAL
Other Long term Liabilities
Long term Provisions
TOTAL
Current Liabilities
Trade Payables
Other Current Liabilities
Short term Provisions
TOTAL
GRAND TOTAL

31.03.2014

6,688.80
103.14
768.74
1.04
1,517.27
43.32
9,122.31

31.03.2013

6,523.80
105.09
1,001.92
161.04
1,474.04
36.49
9,302.38

Inc/Dec

165
-1.95
-233.18
-160
43.23
6.83
-180.07

Inc/Dec (%)

2.48
-1.86
-30.33
-15,384.62
2.85
15.76
-1.97

1,244.00
1,329.02
-85.02
-6.83
1,173.66
1,380.64
-206.98
-17.64
2013-14
2012-13
Inc/Dec
Inc/Dec(%)
243.57
148.65
94.92
38.97
1,288.62
1,288.62
4,048.29
3,504.38
543.91
13.44
10,833.83
10,643.83
190
1.75
481.38
473.76
7.62
1.58
12,122.45
11,932.45
190
1.58
235.30
193.78
41.52
17.65
7,426.20
7,030.23
395.97
5.33
910.13
903.13
7
0.77
16,548.51
16,332.61
215.90
1.30
54.96
70.82
-15.86
-28.85
218.22
208.62
9.6
4.40
1,183.31
1,182.57
0.74
0.062
531.12
2,564.38
147.25
3,242.75
16,548.51

509.17
2,545.75
162.67
3,217.59
16,332.61

21.95
18.63
-15.42
25.16
215.90

4.13
0.72
-10.47
0.78
1.30

INTERPRETATION:The current liabilities of the Company increased by 0.78% only against 5.33% in Current Asset. This shows better management of
the Company. The increase in Tangible Asset by 2.48% and decrease in Capital work in progress was mainly due to capitalization of
wind power plant and upgradation of 4th stream at Alumina Refinery. The cash and Bank balance of the Company increases by
13.44% from previous year i.e. 543.91 Crore.The Company’s Balance Sheet reveals there is overall increase in Asset but decrease in
Non-Current Asset by (180.07) i.e. 1.97% and increase in Current Asset to 215.90 i.e. 1.3%. The Reserve and Surplus increased to
190 Cr. i.e. by 1.75% as the whole Company is in healthy financial position

COMPARATIVE INCOME STATEMENT FOR THE YEAR ENDED 31.03.2014.
(Rs. In Crores)
Sl.
No
.
1
2
3
4
5
6
7
8
9
10
11
12

13
14

Particulars

A. Income Statement
Exports
Domestic Sales
Gross Sales(1+2)
Less Excise Duty
Net Sales(3-4)
Other Income
Operating Income
Non-Operating Income
Total Revenue
Operating Expenses
Operating Profit (5+7-9)
Exceptional Expenditure
Earnings before Interest,
Dep. & Taxes (EBIDT)
(10+8-11)
Interest
&
Finance
Charges
Earning before Dep. &
Taxes (EBDT)(12-13)

31.03.201
4

31.03.201
3

Inc/Dec
(Amount
)

Inc/Dec
(%)

3,719
3,305
7,024
375
6,649
132
558
7,339
5,847
934
49
1,443

3,410
3,837
7,247
438
6,809
107
511
7,427
6,010
906
1,417

309
-532
-223
-63
-160
25
47
88
-163
28
49
26

8.31
-16.09
-3.17
-18.8
-2.40
23.36
8.42
1.20
-2.78
3.00
100
1.80

0

7

-7

-100

1,443

1,410

33

2.29

15

Depreciation&
Amortization
Profit before Tax
(PBT)(14-15)
Provision for Tax
Net Profit(PAT)(16-17)

16
17
18

525

505

20

3.81

918

905

13

1.42

276
642

312
593

36
49

13.04
7.63

INTERPRETATION:The Comparative Statement reveals that there is increase in total income of 88i.e. 1.20, which is increase in
both Operating and Non-Operating income. Whereas there is decrease in Operating expenses of 163 i.e. 2.78.
This shows the Company’s overall Operational and Financial Management is very good.

COMMON SIZE BALANCE SHEET AS ON 31.03.2014.
Sl.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

Particulars
Assets
Non-Current Assets
Fixed Assets
Tangible Assets
Intangible Assets
Capital Work in Progress
Non-Current Investments
Long
term
Loans
&
Advances
Other Non-Current Assets
TOTAL
Current Assets
Current Investments
Inventories
Trade Receivables
Cash & Bank Balances
Short term Loan and &
Advances
Other Current Assets
TOTAL
GRAND TOTAL
Equity & Liabilities

31.03.201
4

(%)

31.03.201
3

(%)

6,688.80
103.14
768.74
1.04
1,517.27

40.42
0.62
4.65
0.01
9.17

6,523.80
105.09
1,001.92
161.04
1,474.04

39.94
0.64
6.13
0.99
9.03

43.32
9,122.31

0.26
55.12

36.49
9,302.38

0.22
56.96

1,244
1,173.66
243.57
4,048.29
481.38

7.51
7.09
1.47
24.46
2.91

1,329.02
1,380.64
148.65
3,504.38
473.76

8014
8.45
0.91
21.45
2.90

235.30
7,426.20
16,548.51

1.42
44.88
100

193.78
7,030.23
16,332.61

1.19
43.04
100

18
19
20
21
22
23
24
25
26
27
28

Shareholder's fund
Share Capital
Reserve & Surplus
TOTAL
Non-Current Liabilities
Deferred Tax Liabilities
Other Long term Liabilities
Long term Provision
TOTAL
Current Liabilities
Trade Payables
Other Current Liabilities
Short term Provision
TOTAL
GRAND TOTAL

1,288.62
10,833.83
12,122.45

7.79
65.47
73.25

1,288.62
10,643.83
11,932.45

7.89
65.17
73.06

910.13
54.96
218.22
1,183.31

5.50
0.33
1.32
7.15

903.13
70.82
208.62
1,182.57

5.53
0.43
1.28
7.24

531.12
2,564.38
147.25
3,242.75
16,548.51

3.21
15.50
0.89
19.60
100

509.17
2,545.75
162.67
3,217.59
16,332.61

3.12
15.59
0.10
19.70
100

INTERPRETATION:Out of the total Liabilities 73.25% of the funds are Shareholder fund. Out of which Share Capital is 7.79%
only. This shows that the Company relies more on its own fund.The Working Capital management of
Company is very good during financial year 2013-14 as Current Asset increase from previous year and
decrease in Current Liabilities from previous year i.e. 2012-13.The Non-Current Asset stood at 55.12%
against 56.96% during 2012-13. This indicates decrease in Non-Current Asset and increase in Cash & Bank
Balances.

COMMON SIZE INCOME STATEMENT
Sl.
Particulars
No.
1 Exports
2 Domestic Sales
3 Gross Sales (1+2)
4
5
6
7
8
9
10
11
12
13
14
15

Less-Excise Duty
Net Sales (3-4)
Other Income
Operating
Non-Operating
Operating Expenses
Operating Profit (5+7-9)
Exceptional Expenditure
EBIDT(10+8-11)
Interest & Financing
Charges
EBDT (12-13)
Depreciation &

31.03.2014
(%)
31.03.2013
(Amount)
(Amount)
3,719 55.93
3,410
3,305 49.71
3,837
7,024 105.63
7,247

(%)

375
6,649

5.64
100

438
6,809

50.08
56.35
106.4
3
6.43
100

132
558
5,847
934
49
1,443
0

1.99
8.39
87.93
14.04
0.74
21.70
0

107
511
6,010
906
1,417
7

1.57
7.50
88.26
13.30
0
20.81
0.10

1,443
525

21.70
7.90

1,410
505

20.70
7.42

16
17
18

Amortization
PBT (14-15)
Provision for Tax
Net Profit

918
276
642

13.81
4.15
9.66

905
312
593

13.29
4.58
8.71

INTERPRETATION:On Export Sales Company’s performance increased and in domestic sales it decreases. Overall Operating
Expenses decrease in % term and it is a sign of good cost management. Operating Profit has been increased
marginally to 934 during 2013-14 from 906 during 2012-13. Overall it is a good performance by Company.

RATIO
ANALYSIS

1. LIQUIDITY RATIO
• Working capital
• Acid test or quick ratio
• Current ratio
2. PROFITABILITY RATIO





Gross Profit
Net profit
Return on capital employed
Return on net worth

3. ACTIVITY RATIO

• Stock turnover ratio
• Working capital turnover ratio
• Debtor turnover ratio

CONCEPT OF RATIO ANALYSIS
DEFINATION:Ratio analysis is a tool used by individuals to conduct a quantitative analysis of information in a company
financial statement. Ratios are calculated from current year numbers & then compared previous year, other
companies & industries or even, the economy to judge the performance of the company. Ratio analysis is
predominately used by proponents of fundamental analysis.
Objectives of Ratio Analysis
Financial ratios are true test of the profitability, efficiency and financial soundness of the firm. These ratios
have following objectives:
(1) Measuring the profitability: Profitability is the profit earning capacity of the business. This can be
measured by Gross Profit, Net Profit, Expenses and Other Ratios. If these ratios fall we can take
corrective measures.
(2) Determining operational efficiency: Operational efficiency of the business can be determined by
calculating operating / activity ratios.
(3) Measuring financial position: Short-term and long-term financial position of the business can be
measured by calculating liquidity and solvency ratios. In case of unhealthy short or long-term position,
corrective measures can be taken.
(4) Facilitating comparative analysis: Present performance can be compared with past performance to
discover the plus and minus points. Comparison with the performance of other competitive firms can also
be made.
(5) Indicating overall efficiency: Profit and Loss Account shows the amount of net profit and Balance Sheet
shows the amount of various assets, liabilities and capital. But the profitability can be known by
calculating the financial ratios.
(6) Budgeting and forecasting: Ratio "analysis is of much help in financial forecasting and planning. Ratios
calculated for a number of years work as a guide for the future. Meaningful conclusions can be drawn for
future from these ratios.

Advantages
1.
2.
3.
4.

It simplifies the financial statements.
It helps in comparing companies of different size with each other.
It helps in trend analysis which involves comparing a single company over a period.
It highlights important information in simple form quickly. A user can judge a company by just
looking at few numbers instead of reading the whole financial statements.

Limitations
Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of financial ratio
analysis are:

1. Different companies operate in different industries each having different environmental conditions such
as regulation, market structure, etc. Such factors are so significant that a comparison of two companies
from different industries might be misleading.
2. Financial accounting information is affected by estimates and assumptions. Accounting standards allow
different accounting policies, which impairs comparability and hence ratio analysis is less useful in such
situations.
3. Ratio analysis explains relationships between past information while users are more concerned about
current and future information.

Ratios and Formulas in Customer Financial Analysis
Financial statement analysis is a judgmental process. One of the primary objectives is identification of major
changes in trends, and relationships and the investigation of the reasons underlying those changes. The
judgment process can be improved by experience and the use of analytical tools. Probably the most widely
used financial analysis technique is ratio analysis, the analysis of relationships between two or more line items
on the financial statement. Financial ratios are usually expressed - in percentage or times. Generally, financial
ratios are calculated for the purpose of evaluating aspects of a company's operations and fall into the
following categories:
• Liquidity ratios measure a firm's ability to meet its current obligations.
• Profitability ratios measure management's ability to control expenses and to earn a return on the
resources committed to the business.
• Leverage ratios measure the degree of protection of suppliers of long-term funds and can also aid in
judging a firm's ability to raise additional debt and its capacity to pay its liabilities on time.
• Efficiency, activity or turnover ratios provide information about management's ability to control
expenses and to earn a return on the resources committed to the business.
A ratio can be computed from any pair of numbers. Given the large quantity of variables included in financial
statements, a very long list of meaningful ratios can be derived. A standard list of ratios or standard
computation of them does not exist. The following ratio presentation includes ratios that are most often used
when evaluating the credit worthiness of a customer. Ratio analysis becomes a very personal or company
driven procedure. Analysts are drawn to and use the ones they are comfortable with and understand.

Liquidity Ratio:1. Working Capital
Working Capital compares Current Assets Current Liabilities, and serves as the liquid reserve available to
satisfy contingencies and uncertainties. A high Working Capital balance is mandated if the entity is unable to
borrow on short notice. The ratio indicates the short-term solvency of a business and in determining if a firm
can pay its current liabilities when due.
 Formula

Current Assets
- Current Liabilities

Financial Year
2010-11
2011-12
2012-13
2013-14

Current Asset
6045.17
6269.09
7075.81
7426.20

Current Liabilities
2740.95
2676.89
3211.93
3242.75

Working Capital
3304.22
3592.2
3863.98
4183.45

8000
7000
6000
5000

Current Asset

4000

Current Liabilities

3000

Working Capital

2000
1000
0
2010-11

2011-12

2012-13

2013-14

2. Acid Test or Quick Ratio
A measurement of the liquidity position of the business. The quick ration compares the cash plus cash
equivalents and accounts receivable to the current liabilities. The primary difference between the current ratio
and the quick ratio is the quick ratio does not include inventory and prepaid expenses in the calculation.
Consequently, a business’s quick ratio will be lower than its current ratio. It is a stringent test of liquidity.
 Formula

Financial Year
2010-11
2011-12
2012-13
2013-14

Cash+Marketable Securities+Accounts Receivable
Current Liabilities

Total Quick Asset
4986.70
5056.39
5695.17
6299.14

Total
Current Quick Ratio
Liabilities
2740.95
1.82
2676.89
1.88
3211.93
1.78
3242.75
1.94

100%
90%
80%
70%
60%

Quick Ratio

50%

Total Current Liaabilities

40%

Total Quick Asset

30%
20%
10%
0%
2010-11

2011-12

2012-13

2013-14

INTERPRETATION (Quick Ratio):The quick ratio of Company is more than satisfactory. The ideal quick ratio is 1:1. But last four year shows
quick ratio of 1.82, 1.88, 1.78 and 1.94 respectively. It shows the liquid cash position is much more. It is
better to invest liquid cash more profitable manner.

3. Current Ratio
It provides an indication of the liquidity of the business by comparing the amount of current assets to current
liabilities. A business's current assets generally consist of cash, marketable securities, accounts receivable, and
inventories. Current liabilities include accounts payable, current maturities of long-term debt, accrued income
taxes, and other accrued expenses that are due within one year. In general, businesses prefer to have at least
one dollar of current assets for every dollar of current liabilities. However, the normal current ratio fluctuates
from industry to industry. A current ratio significantly higher than the industry average could indicate the
existence of redundant assets. Conversely, a current ratio significantly lowers than the industry average could
indicate a lack of liquidity.
 Formula

Financial Year
2010-11
2011-12
2012-13
2013-14

Current Assets
Current Liabilities

Current Asset
6045.17
6269.09
7075.81
7426.20

Current Liabilities
2740.95
2676.89
3211.93
3242.75

Current Ratio (%)
2.21
2.34
2.20
2.29

8000
7000
6000
5000

Current Asset

4000

Current Liabilities

3000

Current Ratio (%)

2000
1000
0
2010-11

2011-12

2012-13

2013-14

INTERPRETATION:Conventionally 2:1 current ratio is very satisfactory. The Company’s current ratio of last four years is 2.21,
2.34, 2.20 and 2.29. This implies that Company can pay its Current Liabilities immediately. Its management
practice is very good.

Profitability Ratios:4. Gross Profit Margin

It indicates the relationship between net sales revenue and the cost of goods sold. This ratio should be
compared with industry data as it may indicate insufficient volume and excessive purchasing or labor costs.

 Formula

Gross Profit
Net Sales

Financial Year
2010-11
2011-12
2012-13
2013-14

Gross Profit
1524
1198
905
967.18

Net Sales
5959
6500
6809
6648.8

Profitability Ratio
25.57
18.43
13.29
14.55

INTERPRATATION:The Gross Profit ratio for the year has decreased from 2010-11 to 2012-13, but it increases in 2013-14. PBT
has shown a decline due to decrease in sales. The Gross Profit ratio decline indicates cost rise to manpower,
inefficiency in proper management of input materials and other element of cost. Further, this may be due to
global slowdown in Aluminium and inability to increase sales price.

7000
6000
5000
4000

Gross Profit

3000

Net Sales
Profitability Ratio

2000
1000

Profitability Ratio

0
2010-11

Net Sales
2011-12

2012-13

Gross Profit
2013-14

6.Net Profit Margin (Return on Sales)
A measure of net income dollars generated by each dollar of sales.
 Formula

Net Profit
Net Sales

Refinements to the net income figure can make it more accurate than this ratio computation. They could
include removal of equity earnings from investments, “other income” and “other expense” items as well as
minority share of earnings and nonrecurring items.

Financial Year
2010-11
2011-12
2012-13
2013-14

Net Profit
1069
850
593
642

Net Sales
5959
6500
6809
6648.80

Net Profit Ratio (in %)
17.94
13.07
8.71
9.66

INTERPRETATION:The ratio has decrease from the year 2010-11 to 2012-13 due to PAT decrease from 2010-11 to 2012-13. But
there is improvement in PAT during 2013-14 in percentage term. Although Net Sales decrease the Net profit
increased. The increase in profitability shows good operational and financial management of the Company.

2013-14

2012-13

Net Profit Ratio (in %)
Net Sales
Net Profit

2011-12

2010-11
0%

20%

40%

60%

80%

100%

5.Return on Capital Employee
The ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and
capital employed to earn it.

ROCE=

Net Profit after Tax
Capital Employed
Financial Year
2010-11
2011-12
2012-13
2013-14

PAT
1069
850
593
642

Capital Employed
8798
10805
10040
13306

ROCE (%)
9.57
7.25
4.97
4.82

INTERPRETATION:The ratio decrease from 2010-11 to 2013-14 due to decrease in PAT and increase in Capital Employed. Capital
Employed increased due to increase in Fixed Asset and Current Asset. This indicates the firm has not able to
use its available resources properly to generate income. Further, during 2013-14 the PAT increases the Capital
Employed increased is much more.

PAT
2010-11
2011-12
2012-13
2013-14

5. Return on Net Worth
It is the ratio of Net Profit After Tax to Net Worth. It measures the rate of return of shareholder i.e. it
measure the amount of earnings for each rupee that the shareholders have invested in the Company.
Return on Net Worth =

PAT
Net Worth

100

Net Worth = Share Capital+Reserve& Surplus

Financial Year

PAT

Net Worth

Return on Net Worth

2010-11
2011-12
2012-13
2013-14

1069
850
593
642

11165
11715
11933
12122

9.58
7.25
4.97
5.30

INTERPRETATION:The RONW decrease from the year 2010-11 to 2012-13 due to increase in Net Worth and decrease in PAT. Net
Worth increases due to increase in Reserve & Surplus. PAT decrease due to decrease in sales and increase in
expenses. But during year 2013-14 there is improvement in RONW. The PAT increases and Net Worth also

increase. Despite of that RONW on higher side this indicates Company’s better management towards cost
reduction.

PAT
2010-11
2011-12
2012-13
2013-14

Long-Term Solvency and Leverage Ratios:6. Debt-equity Ratio
The Ratio measure the contribution of lender relative to its contribution to owners. This ratio also measure the
debt exposure i.e. the to which the firm is financed by debt.
Debt-equity Ratio =

Long term Debts
Shareholder’s funds

Long term Debt = Debenture+Mortgageloan+Bankloan+Loan from Financial Institution
Shareholder’s fund = Equity share Capital+Preference Share Capital+Reserves&Surplus+Security Premium

Financial
year
2010-11
2011-12
2012-13
2013-14

Total Long term
fund
0
0
0
0

Total Shareholder
fund
11164.61
11715.08
11932.45
12122.45

Debt equity
Ratio
0
0
0
0

INTERPRETATION:Debt-equity ratio is zero all the four years from 2010=11 to 2013-14. Since the Company finance does not
depend upon long term finance. Shareholder’s fund increases sharply due to increase in Reserve and Surplus.
14000
12000
10000
8000

Total Long term fund
Total Shareholder fund

6000

Debt equity Ratio

4000
2000
0
2010-11

2011-12

2012-13

2013-14

7. Proprietary Ratio
This ratio shows the proportion of total asset of a business finance by the Shareholder’s fund. It is used to
ascertain the solvency & financial stability of the firm in the long run.
Proprietary Ratio =

Shareholder’s fund
Total Asset

Shareholder’s fund
Premium

= Equity Share Capital+ Preference Share Capital+Reserves&Surplus+Security

Total Asset = Fixed Asset+Investment+Current Asset

Financial Year
2010-11
2011-12
2012-13
2013-14

INTERPRETATION:-

Shareholders fund
11164.61
11715.08
11932.45
12122.45

Total Asset
14948.90
15520.78
16332.61
16548.51

Proprietary Ratio (%)
74.69
75.48
73.05
73.25

The proprietary Ratio is increase in 2011-12 as compared to 2010-11 and it was highest in 2011-12 due to
increase in Shareholder’s fund from 11164.61 to 11715.08 and increase in total 14948.90 to 15520.78 and then
suddenly the Proprietary Ratio is decline in 2012-13 and 2013-14.

100%
90%
80%
70%
60%

Proprietary Ratio (%)

50%

Total Asset

40%

Sharehoder fund

30%
20%
10%
0%
2010-11

2011-12

2012-13

2013-14

Activity Ratios:These ratios measure how well the resources at disposal of the concern are being utilized. These ratios
measure the efficiency & rapidity of the resources of the Company.

8. Stock Turnover Ratio:It is ratio of cost of goods sold or sales to average stock in trade. The Stock Turnover Ratio how quickly
inventories are sold i.e. the number of times a business stock turnover during a year.
Stock Turnover Ratio = Cost of goods sold = number of times
Average stock
Cost of goods sold =
Average stock =

Net sales-Gross profit
Opening stock+Closing stock
2

Financial Year

Cost of goods sold

Inventory

2010-11
2011-12
2012-13
2013-14

4891.78
5934.08
6522.53
6372

1001.70
1108.59
1288.22
1277.15

INTERPRETATION:-

Stock turnover
ratio (in times)
4.42
5.35
5.06
4.99

Stock turnover ratio is in the range of 4.42 to 4.99 during last four years i.e. 2010-11 to 2013-14. The high
stock turnover ratio indicates good inventory management by the Company.
7000
6000
5000
4000

Cost of goods sold
Inventory

3000

Stock turnover ratio (in times)

2000
1000
0
2010-11

2011-12

2012-13

2013-14

9. Working Capital Turnover Ratio
This is the ratio between turnover (sales) & working capital. This shows the extent to which a
business is using its working capital to generate sales.
Working Capital Turnover Ratio =

Net Sales

= Number of time

Working Capital
Financial Year
2010-11
2011-12
2012-13
2013-14

INTERPRETATION:-

Net Sales
5959
6500
6809
6648.8

Working
Capital
3304.22
3592.2
3863.88
4183.45

Working Capital
Turnover Ratio
1.8
1.81
1.75
1.76

The ratio decrease from 2011-12 to 2012-13 due to increase in Working Capital, which indicates
under utilization of Working Capital i.e. cash balance.
12000
10000
8000
Working Capital Turnover Ratio
6000

Working Capital
Net Sales

4000

Financial Year

2000
0
1

2

3

4

Debtor Turnover Ratio
Financial
Year
2010-11
2011-12
2012-13
2013-14

Net Credit
Sales
1787.96
1950.08
2042.7
1994.64

Average Trade
Debtor
147.09
124.89
140.56
196.11

Debtor Turnover Ratio
12
16
14
10.17

INTERPRETATION:Debtor Turnover Ratio indicates how quickly debtors are converted in to cash. Debtor Turnover Ratio
is better during 2011-12 and 2012-13 than 2013-14.

2500
2000
1500

Net Credit Sales
Average Trade Debtor

1000

Debtor Turnover Ratio

500
0
2010-11

2011-12

2012-13

2013-14

CASH FLOW STATEMENT
Cash flow statements and projections express a business's results or plans in terms of cash in and out of the
business, without adjusting for accrued revenues and expenses. The cash flow statement doesn't show whether
the business will be profitable, but if does show the cash position of the business at any given point in time by
measuring revenue against outlays.
The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for
the second year, and annually for the third year. The following 17 items are listed in the order they need to
appear on your cash flow statement:



Cash refers to cash on hand in the business.
Cash sales are income from sales paid for by cash.


















Receivables are income from the collection of money owed to the business resulting from sales.
Other income is income from investments, interest on loans that have been extended, and the
liquidation of any assets.
Total income is the sum of total cash, cash sales, receivables and other income.
Material/merchandise is the raw material used in the manufacture of a product (for manufacturing
operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers
and retailers), or the supplies used in the performance of a service.
Direct labour is the labour required to manufacture a product (for manufacturing operations only) or
to perform a service.
Overhead is all fixed and variable expenses required for the operations of the business.
Marketing/sales is all salaries, commissions and other direct costs associated with the marketing and
sales departments.
R&D is labour expenses required to support the research and development' operations of the business.
G&A is labour expenses required to support the general and administrative functions of the business.
Taxes are all taxes, except payroll, paid to the appropriate government institutions.
Capital represents the capital requirements to obtain any equipment needed to generate income.
Loan payments are the total of all payments made to reduce any long-term debts.
Total expenses are the sum of material, direct labour, overhead expenses, marketing, sales, R&D,
G&A, taxes, capital and loan payments.
Cash flow is the difference between total income and total expenses. This amount is carried over to
the next period as beginning cash.
Cumulative cash now is the difference between current cash flow and cash flow from the previous
period.

Objective.
Information about the cash flows of an enterprise is useful in providing users of financial statements with a
basis to assess the ability of the enterprise togenerate cash and cash equivalents and the needs of the enterprise
toutilizethose cash flows. The economic decisions that are taken by users require an evaluation of the ability
of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation.
The Standard deals with the provision of information about the historical changes in cash and cash equivalents
of an enterprise by means of cash flow statement which classifies cash flows during the period from
operating, investing and financing activities.

Scope

1) An enterprise should prepare a cash flow statement and should present it for each period for which
financial statements are presented.
2) Users of an enterprise's financial statements are interested in how the enterprise generates and uses
cash and cash equivalents. This is the case regardless of the nature' of the enterprise's activities and
irrespective of whether cash can be viewed as the product of the enterprise, as may be the case with a
financial enterprise. Enterprises need cash for essentially the same reasons, however different their
principal revenue- producing activities might be. They need cash to conduct their operations, to' pay
their obligations, and to provide returns to their investors.

Benefits of Cash Flow Information
3) A cash flow statement, when used in conjunction with the other financial statements, provides
information that enables users to evaluate the changes in net assets of an enterprise, its financial
structure (including its liquidity and solvency} and its ability to affect the amounts and timing of cash
flows in order to adapt 1'0 changing circumstances and opportunities. Cash flow information is useful
in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to
develop models to assess and compare the present value of the future cash flows of different
enterprises. It also enhances the comparability of the reporting of operating performance by different
enterprises because it eliminates the effects of using different accounting treatments for the same
transactions and events.
4) Historical cash flow information is often used as an indicator of the amount, timing and certainty of
future cash flows. It is also useful in checking the accuracy of past assessments of future cash flows
and in examining the relationship between profitability and net cash flow and the impact of changing
prices.

Presentation of a Cash Flow Statement
(1)
(2)

(3)

The cash flow statement should report cash flows during the period Classified by operating, investing
and financing activities.
An enterprise presents its cash flows from operating, investing and financing activities in a manner
which is most appropriate to its business. Classification by activity provides information that allows
users to assess the impact of those activities on the financial position of the enterprise and the amount
of its cash and cash equivalents. This information may also be used to evaluate the relationships
among those activities.
A single transaction may include cash flows that are classified differently. For example, when the
instalment paid in respect of a fixed asset acquired on deferred payment basis includes both interest

and loan, the interest element is classified under financing activities and the loan element is classified
under investing activities.

Operating Activities
(1)

(2)

a)
b)
c)
d)
e)
f)
g)
(3)

(4)

The amount of cash flows arising from operating activities is a key indicator of the extent to which the
operations of the enterprise have generated sufficient cash flows to maintain the operating capability of
the enterprise, pay dividends, repay loans and make new investments without recourse to external
sources of financing. Information about the specific components of historical operating cash flows is
useful, in conjunction with other information, in forecasting future operating cash flows.
Cash flows from operating activities are primarily derived from the principal revenue-producing
activities of the enterprise. Therefore, they generally result from the transactions and other events that
enter into the determination of net profit or loss. Examples of cash flows from operating activities are:
Cash receipts from the sale of goods and the rendering of services;
Cash receipts from royalties, fees, commissions and other revenue;
Cash payments to suppliers for goods and services;
Cash payments to and on behalf of employees;
Cash receipts and cash payments of an insurance enterprise for Premiums and claims, annuities and
other policy benefits;
Cash payments or refunds of income taxes unless they can be specifically identified with financing and
investing activities; and
Cash receipts and payments relating to futures contracts, forward contracts, option contracts and swap
contracts when the contracts are held for dealing or trading purposes.
Some transactions, such as the sale of an item of plant, may give rise to a gain or loss which is
included in the determination of net profit or loss. However, the cash flows relating to such
transactions are cash flows from investing activities.
An enterprise may hold securities and loans for dealing or trading purposes, in which case they are
similar to inventory acquired specifically for resale. Therefore, cash flows arising from the purchase
and sale of dealing or trading securities are classified as operating activities. Similarly, cash advances
and loans made by financial enterprises are usually classified as operating activities since they relate to
the main revenue-producing activity of that enterprise.

Investing Activities
The separate disclosure of cash flows arising from investing activities is important because the cash flows
represent the extent to which expenditures have been made for resources intended to generate future income
and cash flows. Examples of cash flows arising from investing activities are:
a) Cash payments to acquire fixed assets (including intangibles). These payments include those relating
to capitalized research and development costs and self-constructed fixed assets;
b) Cash receipts from disposal of fixed assets (including intangibles);
c) Cash payments to acquire shares, warrants or debt instruments of other enterprises and interests in
joint ventures (other than payments for those instruments considered to be cash equivalents and those
held for dealing or trading purposes);

d) Cash receipts from disposal of shares, warrants or debt instruments of other enterprises and interests in
joint ventures (other than receipts from those instruments considered to be cashequivalents and those
held for dealing or trading purposes);
e) Cash advances and loans made to third parties (other than advances and loans made by a financial
enterprise);
f) Cash receipts from the repayment of advances and loans made to third parties (other than advances
and loans of a financial enterprise);
g) Cash payments for futures contracts, forward contracts, option contracts and swap contracts except
when the contracts are held for dealing or trading purposes, or the payments are classified as financing
activities; and
h) Cash receipts from futures contracts, forward contracts, option contracts and swap contracts except
when the contracts are held for dealing or trading purposes, or the receipts are classified as financing
activities.

Financing Activities
1. The separate disclosure of cash flows arising from financing activities is important because it is useful in
predicting claims on future cash flows by providers of funds (both capital and borrowings) to the
enterprise. Examples of cash flows arising from financing activities are:
a) Cash proceeds from issuing shares or other similar instruments;
b) Cash proceeds from issuing debentures, loans, 'notes, bonds, and other short or long-term borrowings;
and
c) Cash repayments of amounts borrowed.

CASH FLOW STATEMENT FOR THE YEAR ENDED 2011-2012
Particulars
A. Cash flow from operating
activities
Net Profit Before Tax and
extraordinary
Income adjustment for:Depreciation
Interest and financing charges
and dividend
Provisions (net)

Year ended March 31, 2012

Year ended March 31, 2011

1197.75

1524.7

466.55
0.87

427.72
0.05

1.29

0.34

365.91

Claims and recoverable
written off
Dividend

2.81

Stores and spares written off

16.3

64.74

(98.47)

0.04

Dividend Income
Loss/profit on sale of assets
(net)

0.01
8.54

0.21
1587.31

Adjustments for
Inventories
Trade and other receivables
Trade payable
Tax generated from operations
And direct taxes paid
Cash flow before
extraordinary item
Extraordinary item
Net cash flow
B. CASH FLOW BEFORE
INVESTING ACTIVITIES
Purchase of fixed assets
Dividend incomes from
mutual funds
Net cash flow used in
investing activities

(162.91)
(163.39)
70.26

1890.61
(112.96)

(396.56)
1190.75

13.40
396.79

(304.05)

2178.64

886.7
886.70

(548.11)
1630.53
1630.53

(758.16)
577.41

833.22

98.47

64.74
(88.28)

C. CASH FLOW FROM
FINANCING ACTIVITIES
Interest and financing charges
Exchange variation gains
Proceeds from short term
borrowings
Dividend including dividend
tax paid
D. NET CHARGES IN
CASH AND CASH
EQUIVALENT
E. CASH AND CASH
EQUIVALENT OPENING
BALANCE

288.03

768.48

0.87

0.05

(14.88)
(415.55)

6.27

(301.53)

(225.39)
(431.5)
431.5

(219.17)
642 .88

373.12

3152.35

F.CASH AND CASH
EQUIVALENT CLOSING
BALANCE

3795.23

3795.23

4168.35

1524.7

CASH FLOW STATEMENT FOR THE YEAR ENDED 2012-2013
Particulars
Year ended March 31, 2013
Year ended March 31, 2012
A. Cash flow from
operating Period
Net Profit Before Tax and
905.04
1197.75
extraordinary Item
Depreciation
505.43
466.55
Interest and financing
7.45
0.87
charges

Provisions
Claims and recoverable
written off
Dividend
Stores and spares written
off
Dividend income
Loss/profit on sale of
assets (net)

24.99
1.97

1.29
2.81

11.88

16.3

(73.10)
0.17

(98.47)
0.21
1383.83

Adjustments for
Inventories
Trade and other
receivables
Trade payable
Tax generated from
operations And direct taxes
paid
Cash flow before
extraordinary item

(205.25)
(75.32)
208.02

Extraordinary item
Net cash flow
B. CASH FLOW
BEFORE INVESTING
ACTIVITIES
Purchase of fixed assets
Dividend incomes from
mutual funds
Net cash flow used in
investing activities

1587.31
(162.91)
(163.39)

72.55

70.26

1311.28

1190.75

(435.11)

(304.05)

876.17
876.17

886.7
886.70

648.93
735.80

(758.16)
577.41

73.10

98.47
1311.63

C. CASH FLOW FROM
FINANCING
ACTIVITIES
Interest and financing
charges
Exchange variation gains
Proceeds from short term
borrowings

(396.56)

(88.28)

7 .45

(0.87)

-

(14.88)

(221.06)

(415.55)

Dividend including
dividend tax paid
D. NET CHARGES IN
CASH AND CASH
EQUIVALENT
E. CASH AND CASH
EQUIVALENT
OPENING BALANCE
F. CASH AND CASH
EQUIVALENT
CLOSING BALANCE

(225.39)

(301.53)
(228.51)
228.51

(431.5)
431.5

(663.91)

373.12

4168.35

3795.23

3504.38

4168.35

CASH FLOW STATEMENT FOR THE YEAR ENDED 2013-2014
Particulars

Year ended March 31, 2014

Year ended March 31, 2013

A. Cash flow from
operating Period
Net Profit Before Tax
and extraordinary Item

917.81

905.04

Depreciation
Interest and financing
charges
Provisions
Claims and recoverable
written off
Stores and spares written
off
Dividend income
Loss/profit on sale of
assets (net)

524.73

505.43

-

7.45
32.34

24.99

19.45

13.85

(122.48)

(73.10)

(7368.88)

(395.03)

0.06

0.17
1003.03

988.8

Adjustments for
Inventories
Trade and other
receivables
Trade payable

191.3

(205.25)

(122.37)

(120.66)

268.97

Tax generated from
operations And direct
taxes paid
Cash flow before
extraordinary item
Extraordinary item

213.68

876.57

(359.59)

(435.11)

981.34

441.46
-

876.17

886.7

(618.68)

(648.98)

Dividend incomes from
mutual funds

245.62

(735.8)

Interest income from
deposits, loans and
advances
Net cash flow used in
investing activities

112.48

73.16

329.23

434.71
78.05

C. CASH FLOW
FROM FINANCING
ACTIVITIES

(112.23)

1340.93

-

Net cashflow
B. CASH FLOW
BEFORE INVESTING
ACTIVITIES
Purchase of fixed assets

337.97

(876.92)

Interest and financing
charges
Exchange variation gains

-

7.45

(515.48)

(221.06)

(515.81)

(228.51)

D. NET CHARGES IN
CASH AND CASH
EQUIVALENT
E. CASH AND CASH
EQUIVALENT
OPENING BALANCE

(515.81)

(228.51)

543.91

(663.94)

F. CASH AND CASH
EQUIVALENT
CLOSING BALANCE

3504.38

4168.35

4048.29

3504.38

INTERPRETATION:During the year 2012-2014 the net cash flow of NALCO is increasing. That shows the better cash
management by the company, company also gain continuously due to depreciation of Rupees i.e gain from
foreign exchange. Working capital loan facilities is mortgaged by hypothecation of raw material, stock in
progress, finished goods, consumable, stores and spares, book depths, receivable and other current assets of
the company.

FINANCIAL PERFORMANCE OF NALCO
Financial Year
2005-06
2006-07

Income (Rs. In Crore)
5122
6354

Net Profit (Rs. In crore)
1562
2381

2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14

5576
5631
5547
6410
7154
7428
7339

1672
1272
814
1069
850
593
642

Thus from 2011-2012 the income has increased from Rs 7154 crore to Rs 7428 crore but Net Profit has
decreased from 2011-2012 from Rs 850 crore to Rs 593 crore. The income shown above is fully dependent on
the London metal Market & the net profit is calculated in different aspect keeping in mind the cost factor of
production. So in 2012-2013 the net profit is decreased due to the maintenance & raw material increase in
price.
HOLISTIC REPORT
1. Result of the LME price
The average price of aluminium on LME in 2011-2012 was $2317 per compared to $ 1976 in 2012-2013.
Thus the difference is of $341 per ton. This downfall in LME price of aluminium & high inputs cost has
affected it net profit which has decrease to Rs. 593 crore in the current yea!' as compared to Rs. 850 crore in
last year.
2. Comparison of CSR activities:Bhubaneswar: Na1co Foundation has bagged a prestigious award in the category of best Corporate Social
Responsibility Practices 2013, at the Responsible Business Summit & Awards.
On behalf of the Foundation, Aswini Kumar Choudhury, Chief Operating Officer, received the award at a
function held on Friday in Mumbai, a company release said here.
Right from inception, NALCO has been laying special emphasis on CSR and has been allocating I per cent of
its net profit every year for carrying out various developmental activities.
In order to strengthen its CSR activities, the company has set up standalone Nalco Foundation in 2010 and
increased its fund allocation by another 1 per cent of net profit.
The Foundation has taken up some significant projects in health, education, drinking water and other areas of
community development.
It has established 197 primary school-cum-cyclone shelters after super cyclone in 2009 with contribution of
RS 1.31Cr. which was the biggest CSR activities ever it has been involved in transforming a simple & naive
civilization to a vibrant industrial society, rehabilitating the displaced person, training the youth & youth &
job opportunities. It constructed SisuMandir in which each child get a subsidy of Rs 15000 per annum. It
commissioned 2 wind power plants at Ludarva.
54
 FINDINGS & INFERENCES
a) Findings from the analysis of balance sheet:






The equity share capital has increased from 2010-11 and it remains constant atRs 1288.62.
The reserve and surplus has increased over the year. The net worth even shows the similar trend.
Due to efficient management of NALCO has been zero debt company since 2007-08.
The fixed assets showed a substantial increase in the year 2008-09 to 2009-10 and thereafter increase
at increasing trend.
 The current assets have been fluctuating over the years but increases due to remarkable increase in
trade receivables & cash & bank balance.
b) Findings from the analysis of income statement:
 The net sales have been increasing from the year 2010-11 to 2012-l3.
 The expenses have been continuously increasing from 2010-11 due to increase in price of raw
material, power & fuel, employees remuneration.
 The net profit has declined from the year 2010-11 to 2012-13. The net profit is lowest in the year
2012-13 as compared to the year 2010-11 & 2011-12. The net profit declined due to decreased in sales
and increase in expenses.

55

CONCLUSION:
I would like to conclude that NALCO has travelled a long distance in pursuit of excellence in all the areas of
its performance, for which it has become a world class company.













Organization is based on the traditional approach on financing total funds i.e. Shareholders fund.
Organization is base on financing its working capital on conservative approach.
The organization is constantly improving its reserve and surplus which a good sign strengthening
future financial stabilities.
 Operating expenses of organization are to be improved the profitability of the, organization.
Liquidity Ratio:
It shows that NALCO has the ability to meet its current obligations. It doesn't suffer from excess
liabilities. It thus has a proper balance between high liquidity & lack of liability. It's a good sign for
NALCO as the creditors would definitely extend credit because of the satisfactory liquidity position
ofNalco.
Solvency Ratios:
The solvency ratios ofNALCO show that at present Nalco is debt free company or a zero debt company
hence there is no debt holder of NALCO& therefore it doesn't pay the fixed interest. Thus the solvency
ratio ofNALCO shows that it has a good long-term solvency position.
Activity Ratios:
The activity ratios show the speed with which the assets are converted to sales. The efficiencies in turning
its inventories ratio has considerable which despite, that NALCO is in the position to sell its stock quickly.
The company debtor turnover ratio has increased for some as well as decreases for some year but in' the
present year i.e.20 12-13 it has decreased which despite that the company operates on cash basis and
collection of account receivables is efficient enough.
Profitability Ratios:
The primary objective of a business concern is to earn profits which is required not only for existence but
also for expansion & diversification. The profitability ratio of NALCO has good one.

RECOMMENDATION
From the analysis of Balance sheet & Income statement of NALCO, some of the recommendations to the
company are as follows:-










The sales volume of NALCO is low. Therefore NALCO should aim to increase its turnover through
diversification & innovation.
One of the major concerns of NALCO is its declining profit. It should aim at working on it by
controlling it operating expenses. Raw material, power & fuel constitute the majority of operating
expenses. The company may go for backward integration for critical raw materials like coal, caustic
soda & lime. It may acquire more coal mines to keep power cost competitive.
It should transform from being only an aluminium producer & energy provider.
The EPS of NALCO has been showing a declining trend. The company should aim to maximize value
& long-term return it shareholders through a strategy of new investment & cost competitive mines.
The company has lots of stagnate cash. It should go for investments. The cash which remain stagnate
should be invest to increase profit.
The company has no long-term debt in its capital structure. The company should aim to have a proper
debt equity ratio in order to improve its EPS & gain advantages of low cost debt.
It should develop a powerful scientific & technical base. A part from investments in volume growth,
the company shall substantially finance R & D & modernization.

BIBLIOGRAPHY
Authorized Book



MANAGEMENT ACCOUNTING
(Shashi k. Gupta & R.K. Sharma)





Annual report ofNALCO 2010-2011
Annual report ofNALCO 2011-2012
Annual report ofNALCO 2012-2013

SEARCH ENGINES:




www.google.com
www.nalcoindia.co.in
www.Investopedia.com

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