Measurement of performance of bharti airtel by using different ratios
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Measurement of performance of bharti airtel by using different ratios

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  • 1. NORTH EASTERN REGIONAL INSTITUTE OF MANAGEMENT PROJECT REPORT ON MEASUREMENT OF PERFORMANCE BY USING DIFFERENT ACCOUNTING RATIOSSUBMITTED TO SUBMITTED BY Reshma Tiwari MBA 2nd Sem (B) Faculty, NERIM Partha Pratim Mahanta
  • 2. CONTENTS TOPIC PAGE NO.1. OBJECTIVES AND METHODOLOGIES 12. BHARTI AIRTEL LTD. 23. INTRODUCTION OF THE PROJECT 34. BALANCE SHEET (As at March 31, 2011) 45. PROFIT AND LOSS A/C (For the year ending March 31, 2011) 56. LIQUIDITY RATIOS 67. LEVERAGE RATIOS 78. ACTIVITY RATIOS 89. PROFITABILITY RATIOS 9-1010. CONCLUSION AND FINDINGS 11
  • 3. OBJECTIVES OF THE PROJECT To enable us to complete the accounting ratios in real business situations. To develop the competence of reading accounting data and interpret the information. To analyse the financial statements of business firms and to derive meaningful information there from. To know the performance and financial position of “Bharti Airtel” by using accounting ratios. METHODOLOGY Surfing Internet Using library Books, Journal and Magazines. Study of Annual Reports 1
  • 4. BHARTI AIRTEL LIMITEDAIRTEL is an Indian telecommunications company that operates in 19 countries across SouthAsia, Africa and the Channel Islands. It operates a GSM network in all countries, providing2G or 3G services depending upon the country of operation. Airtel is the fifth largest telecomoperator in the world with about 230.8 million subscribers across 19 countries at the end ofJune 2011. It is the largest cellular service provider in India, with over 169.18 millionsubscribers as of June 2011. Airtel is the 3rd largest in-country mobile operator by subscriberbase, behind China Mobile and China Unicom.Airtel is the largest provider of mobile telephony and second largest provider of fixedtelephony in India, and is also a provider of broadband and subscription television services. Itoffers its telecom services under the Airtel brand and is headed by Sunil Bharti Mittal. BhartiAirtel is the first Indian telecom service provider to achieve this Cisco Gold Certification. Toearn Gold Certification, Bharti Airtel had to meet rigorous standards for networkingcompetency, service, support and customer satisfaction set forth by Cisco. The company alsoprovides land-line telephone services and broadband Internet access (DSL) in over 96 citiesin India. It also acts as a carrier for national and international long distance communicationservices. The company has a submarine cable landing station at Chennai, which connects thesubmarine cable connecting Chennai and Singapore.The company is structured into four strategic business units - Mobile, Telemedia, Enterpriseand Digital TV. The mobile business offers services in 18 countries across the IndianSubcontinent and Africa. The Telemedia business provides broadband, IPTV and telephoneservices in 89 Indian cities. The Digital TV business provides Direct-to-Home TV servicesacross India. The Enterprise business provides end-to-end telecom solutions to corporatecustomers and national and international long distance services to telcos. 2
  • 5. INTRODUCTION TO THE PROJECTThe project work is to make observations on the performance and financial position of BhartiAirtel Limited on the basis of Income Statements and Balance Sheet for the two years, i.e;2009-2010 and 2010-11.Income Statements and Balance sheets for two years are extracted in the report and are usedfor the purpose of the project.The project work is planned and executed by calculating following ratios: 1. Liquidity Ratios : These are the ratios which measures the short-term solvency or financial position of a firm. These ratios are calculated to comment upon the short- term paying capacity of a concern of the firm’s ability to meet its current obligation. 2. Long-term Solvency or Leverage Ratios: Long-term solvency ratios convey a firm’s ability to meet the interest cost and repayments schedules of its long-term obligations. 3. Activity Ratios : Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. These ratios are also called turnover ratios because they indicate the speed with which assets are being turnover into sales. 4. Profitability Ratios : These ratios measures the results of business operations or overall performance and effectiveness of the firm. 3
  • 6. Profit & Loss A/c Rs. Millions Particulars 2011 2010Sale of Goods 380,158 356,095EXPENDITUREAccess Charges 49872 44,357Networking Operating 85,712 74,467Cost of Good Sold 161 203Personnel 14,512 15,305Sales and Marketing 31,802 24,049Administrative and Other 21,353 22,401Total Expenditure (203,412) (180,782)Profit before other Income 176,746 175,313Profit after other Income (89,488) (68,320)Profit before Tax 87,258 106,993Tax Expenses (10,089) (12,731)Profit after Tax 77169 94,262Appropriation (10,134) (14,505)Profit after Appropriation 67,035 82,757Profit brought forward 267,785 185,028Profit Carried to Balance Sheet 334,820 267,785
  • 7. LIQUIDITY RATIOS Current Assets 1. Current Ratio : Current Liabilities 93,299 Year 2010 = = 0.72:1 129,435 129,492 Year 2011 = = 0.84:1 154,239 Liquid Assets 2. Acid Test Ratio : Current Liabilities 93,027 Year 2010 = = 0.72:1 129,435 129,148 Year 2011 = = 0.84:1 154,239 Cash + Bank Balances + Marketable securities 3. Cash Ratio : Current Liabilities 71,313 Year 2010 = = 0.55:1 129,435 104,375 Year 2011 = = 0.68:1 154,239Notes : Loans and advances (under the Current Assets, Loans andAdvances) are considered as short term investment.Comments : The current ratio 0.72 in 2010 does not show the good liquidityposition as it is much below than the standard norms of 2:1. In the year 2011, it increases to0.84, although this ratio also does not show the good liquidity position. Again, the standardnorms of acid test ratio are 1:1. In 2010 it shows a ratio of 0.72:1 and it increases in 2011 to0.84:1. This ratio shows a satisfactory liquidity position. The cash ratio also shows asatisfactory result, as in both the year it is the above of the standard norms of 0.5:1. Thefinancial position of the company is quite satisfactory. 6
  • 8. LONG-TERM SOLVENCY OR LEVERAGE RATIOS Outsider ′ s Funds 1. Debt Equity Ratio : Shareholder ′ s Funds 50,389 Year 2010 = = 0.14:1 367,372 118,975 Year 2011 = = 0.27:1 441,116 Shareholder ′ s Fund 2. Proprietory Ratio : Total Assets 367,372 Year 2010 = × 100 = 87.93% 417,794 441,116 Year 2011 = × 100 = 78.02% 565,367 Outsider ′ s Fund 3. Total Assets to Debt Ratio : × 100 Total Assets 50,389 Year 2010 = × 100 = 12.06% 417,794 118,975 Year 2011 = × 100 = 21.04% 565,367Comments : Debt equity ratio indicates that the proportion of funds provided bylong-term lenders in comparison to the funds provided by the owners is only 0.14 in 2010.This portion has further increases to 0.27 in 2011. It shows that the long-term solvencyposition of the company is very sound. The proprietory ratio in 2010 and 2011 are 87.93%and 78.02% respectively. Although, in 2011 this goes decrease but this ratio shows the betterlong-term solvency position. This fact is also supported by total assets to debt ratio. Itindicates that the proportion of assets financed through long-term loans is only 12.06% in theyear 2010 and it has increases to 21.04% in the year 2011. 7
  • 9. ACTIVITY RATIOS Cost of Good Sold 1. Stock Turnover Ratio : Average Stock 203 Year 2010 = = 0.75 times 272 161 Year 2011 = = 0.52 times 308 Notes : Closing Inventory of 2010 will be treated as the Opening Inventory. 272 + 344 Hence, Average Stock = 2 = 308 Sales 2. Debtors Turnover Ratio : Average Debtors 356,095 Year 2010 = = 16.92 times 21,050 380,158 Year 2011 = = 16.97 times 22,404 Notes : Closing Debtors of 2010 will be treated as the Opening Debtors. 21,050 + 23,758 Hence, Average Debtors = 2 = 22,404Comment : Stock turnover ratio has dropped from 0.75 times to 0.52 times. Itindicates that the company is not rapidly turning the stock into sales. Unsaleable items havebeen purchased which are included in the stock of the company. Debtors turnover ratio hasincreased from 16.92 times to 16.97 times. It indicates that the company’s policy relating tocollection of debts and selection of customers for credit sales is quite satisfactory. 8
  • 10. PROFITABILITY RATIO Gross Profit1. Gross Profit Ratio : × 100 Sales 175,313 Year 2010 = × 100 = 49.23 % 356,095 176,746 Year 2011 = × 100 = 46.49 % 380,158 Cost of Goods Sold +Operating Expenses2. Operating Ratio : × 100 Sales 203+24,049+22401 Year 2010 = × 100 = 13.10 % 356,095 161 + 31,802+21,353 Year 2011 = × 100 = 14.02 % 380,158 Net Profit after tax3. Net Profit Ratio : × 100 Sales 94,262 Year 2010 = × 100 = 26.47 % 356,095 77,169 Year 2011 = × 100 = 20.30 % 380,158 Net Profit after tax4. Return on Equity (ROE) : × 100 Shareholder ′ s Funds 94,262 Year 2010 = × 100 = 25.66 % 367,372 77,169 Year 2011 = × 100 = 17.49 % 441,116 9
  • 11. Net Profit after tax 5. Earning Per Share (EPS) : No .of Equity Shares 94,262 Year 2010 = = Rs. 24.82 3798 77,169 Year 2011 = = Rs. 20.32 % 3798Comment : Gross profit ratio has declined from 49.23 % in 2010 to 46.49 % in2011, which reflects a decrease in sales price of goods sold without corresponding decreasein cost of sales.Operating ratio has increase by 0.92 % in 2011 in respect to 2010. Increasing of operatingratio has resulted in lower margin of profit in sales.Net profit ratio has also decline from 26.47 % to 20.30 % in 2011, which is an indication ofdecreasing in the overall efficiency and profitability of the firm.Return on equity (ROE) has also declining from 25.66 % to 17.49 % in 2011, which indicatesthat shareholder’s funds are not being utilized more efficiently.Earning per share (EPS) has also decline from Rs. 24.82 in 2010 to Rs. 20.32 in 2011, whichindicates that overall profitability of the company is declining. This ratio also indicates thatmarket price of Bharti Airtel Ltd shares is likely to be decrease in the upcoming year. 10
  • 12. CONCLUSION AND FINDINGSFrom the comparative study of various Accounting Ratios for 2010 and 2011 of “BhartiAirtel”, we found the following results, whose enable us to know the performance and thefinancial position of the company: 1. The Liquidity Ratio is not so impressive in 2011. Though, the short-term solvency or financial position of a “Bharti Airtel” is quite satisfactory in 2011. 2. The long-term solvency position of the company is very sound, as the Leverage ratio has improved in 2011 as comparative to 2010. 3. The company’s policy relating to collection of debts and selection of customers for credit sales is quite satisfactory, as Activity Ratio is in sound position in 2011. 4. The Profitability Ratio of “Bharti Airtel” shows that the profit of the company goes declining in 2011 as compared to 2010. 5. The overall profitability and financial position of Bharti Airtel has goes in declining stage in 2011. 11