A PROJECT REPORT

ON
FINANCIAL STATEMENT
ANALYSIS OF
RELIANCE INDUSTRIES

Submitted to

RAJDHANI COLLEGE BHUBANESWAR

AFFILIATED UNDER
UTKAL UNIVERSITY, VANIVIHAR

In partial fulfillment of +3 Commerce (Hons.)-2021`

Submitted by - SAROJ KUMAR KHADANGA

(6th Semester, +3 Commerce Hons.)
University Regd No/Roll No 1803010190080007
College Roll No. BC 18 023
 ABSTRACT

Financial statements are formal record of the financial activities of a business,

person or other entity and provide an overview of a business or person's
financial condition in both short and long term they give an accurate picture of a
company's condition and operating results in a condensed form. Financial
statements are used as a management tool primarily by company executive and
investor's in assessing the overall position and operating results of the company.

Analysis and Interpretation of financial statements help in determining the

liquidity position, long term solvency, financial viability and profitability of a
firm. Ratio analysis shows whether the company is improving or deteriorating
in past years. Moreover, comparison of different aspects of all the firms can be
done effectively with this. It helps the clients to decide in which firm the risk is
less or in which one they should inset so that maximum benefit can be earned.

Industries are capital intensive; hence a lot of money is invested in it. So before
investing in companies one has to carefully study its financial condition and
worthiness. An attempt has been carried out in this project to analyze and
interpret the financial statements of a company.
 CERTIFICATE

This is to certify that Saroj kumar khadanga a student of Bachelor of

Commerce bearing the registration number / university roll no.
1803010190080007 of Rajdhani college Bhubaneswar, affiliated
under UTKAL UNIVERSITY, VANIVIHAR has successfully
completed his final semester project entitled “A Project report on
Financial statement analysis of reliance industries” as a Partial
fulfillment of academic curriculum.

Exam head

Utkal university

External Examiner Internal Examiner

Date - Date –

Mark Allotted –
 DECLARATION

I Saroj kumar khadanga continuing +3 Commerce B.Com at

Rajdhani college Bhubaneswar, affiliated under Utkal university
hereby declare that the project work entitled “A Project report on
Financial statement analysis of reliance industries” is an authentic
work developed by me for the fulfillment of the award for the degree
of Bachelor of Commerce.

Place – Bhubaneswar Name – Saroj kumar khadanga

Date – 25th June 2021 Roll no. 1803010190080007

6th semester B.COM

 ACKNOWLEDGEMENT

I would like to extend my sincere and heartfelt gratitude to my college professor

Mr. Rabindra mohapatra who help me in this endeavour and has always been
very cooperative and without his help, cooperation, guidance and
encouragement, the project couldn’t have been what it evolved to be.

I extent my heartfelt thanks to my faculty for their guidance and constant

supervision as well as for providing me the necessary information regarding this
project.

I am also thankful to my parents for their cooperation and encouragement.

At last but not least, gratitude to all my friends who helped me to completed this
project within a limited time frame.

Place – Bhubaneswar Name – Saroj kumar khadanga

Date – 25th June 2021 Roll no. 1803010190080007

 INDEX

Chapter 1. Introduction to company

Chapter 2. Methodology

Chapter 3. Analysis and findings

Chapter 4. Conclusions

Chapter 5. Bibliography
 Chapter - 1

Introduction to company

1
Introduction to company –

Reliance Industries Limited (RIL) is an Indian multinational conglomerate

company headquartered in Mumbai, India. Reliance owns businesses across India engaged in
energy, petrochemicals, textiles, natural resources, retail, and telecommunications. Reliance
is one of the most profitable companies in India, the largest publicly traded company in India
by market capitalization, and the largest company in India as measured by revenue after
recently surpassing the government-controlled Indian Oil Corporation. On 10 September
2020, Reliance Industries became the first Indian company to cross $200 billion in market
capitalization.

The company is ranked 96th on the Fortune Global 500 list of the world's biggest
corporations as of 2020. It is ranked 8th among the Top 250 Global Energy Companies
by Platts as of 2016. Reliance continues to be India's largest exporter, accounting for 8% of
India's total merchandise exports with a value of ₹1,47,755 crore and access to markets in
108 countries. Reliance is responsible for almost 5% of the government of India's total
revenues from customs and excise duty. It is also the highest income tax payer in the private
sector in India.

2
Company profile –

1. History –
1960–1980
The company was co-founded by Dhirubhai Ambani and Champaklal Damani in
1960's as Reliance Commercial Corporation. In 1965, the partnership ended and
Dhirubhai continued the polyester business of the firm. In 1966, Reliance Textiles
Engineers Pvt. Ltd. was incorporated in Maharashtra. It established a synthetic
fabrics mill in the same year at Naroda in Gujarat. On 8 May 1973, it became
Reliance Industries Limited. In 1975, the company expanded its business into
textiles, with "Vimal" becoming its major brand in later years. The company held
its Initial public offering (IPO) in 1977. The issue was over-subscribed by seven
times. In 1979, a textiles company Sidhpur Mills was amalgamated with the
company. In 1980, the company expanded its polyester yarn business by setting up
a Polyester Filament Yarn Plant in Patalganga, Raigad, Maharashtra with financial
and technical collaboration with E. I. du Pont de Nemours & Co., U.S.

1981–2000
In 1985, the name of the company was changed from Reliance Textiles Industries
Ltd. to Reliance Industries Ltd. During the years 1985 to 1992, the company
expanded its installed capacity for producing polyester yarn by over 1,45,000
tonnes per annum.
The Hazira petrochemical plant was commissioned in 1991–92.
In 1993, Reliance turned to the overseas capital markets for funds through a global
depository issue of Reliance Petroleum. In 1996, it became the first private sector
company in India to be rated by international credit rating agencies. S&P rated
Reliance "BB+, stable outlook, constrained by the sovereign
ceiling". Moody's rated "Baa3, Investment grade, constrained by the sovereign
ceiling".
In 1995/96, the company entered the telecom industry through a joint venture
with NYNEX, USA and promoted Reliance Telecom Private Limited in India.

3
In 1998/99, RIL introduced packaged LPG in 15 kg cylinders under the brand
name Reliance Gas.
The years 1998–2000 saw the construction of the integrated petrochemical
complex at Jamnagar in Gujarat, the largest refinery in the world.

2001 onwards
In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two
largest companies in terms of all major financial parameters. In 2001–02, Reliance
Petroleum was merged with Reliance Industries.
In 2002, Reliance announced India's biggest gas discovery (at the Krishna
Godavari basin) in nearly three decades and one of the largest gas discoveries in
the world during 2002. The in-place volume of natural gas was in excess of 7
trillion cubic feet, equivalent to about 120 crore (1.2 billion) barrels of crude oil.
This was the first ever discovery by an Indian private sector company.
In 2002–03, RIL purchased a majority stake in Indian Petrochemicals Corporation
Ltd. (IPCL), India's second largest petrochemicals company, from the government
of India, RIL took over IPCL's Vadodara Plants and renamed it as Vadodara
Manufacturing Division (VMD). IPCL's Nagothane and Dahej
manufacturing complexes came under RIL when IPCL was merged with RIL in
2008.
In 2005 and 2006, the company reorganised its business by demerging its
investments in power generation and distribution, financial services and
telecommunication services into four separate entities.
In 2006, Reliance entered the organised retail market in India with the launch of its
retail store format under the brand name of 'Reliance Fresh'. By the end of 2008,
Reliance retail had close to 600 stores across 57 cities in India.
In November 2009, Reliance Industries issued 1:1 bonus shares to its shareholders.
In 2010, Reliance entered the broadband services market with acquisition of
Infotel Broadband Services Limited, which was the only successful bidder for pan-
India fourth-generation (4G) spectrum auction held by the government of India.

4
 In the same year, Reliance and BP announced a partnership in the oil and gas
business. BP took a 30 per cent stake in 23 oil and gas production sharing contracts
that Reliance operates in India, including the KG-D6 block for $7.2 billion.
Reliance also formed a 50:50 joint venture with BP for sourcing and marketing of
gas in India.
In 2017, RIL set up a joint venture with Russian Company Sibur for setting up
a Butyl rubber plant in Jamnagar, Gujarat, to be operational by 2018.[32]
In August 2019, Reliance added Fynd primarily for its consumer businesses and
mobile phone services in the e-commerce space.
2. Shareholding –
Chairman and MD: Mukesh Ambani. The number of shares of RIL are approx. 310
crore (3.1 billion). The promoter group, the Ambani family, holds approx. 49.38%
of the total shares whereas the remaining 50.62% shares are held by public
shareholders, including FII and corporate bodies. Life Insurance Corporation of
India is the largest non-promoter investor in the company, with 7.98%
shareholding.
In January 2012, the company announced a buyback programme to buy a
maximum of 12 crore (120 million) shares for ₹10,400 crore (US$1.5 billion).
By the end of January 2013, the company had bought back 4.62 crore (46.2
million) shares for ₹3,366 crore (US$470 million).
3. Operations –

The company's petrochemical, refining, oil and gas-related operations form the
core of its business; other divisions of the company include cloth, retail business,
telecommunications and special economic zone (SEZ) development. In 2012–13, it
earned 76% of its revenue from refining, 19% from petrochemicals, 2% from oil &
gas and 3% from other segments.

In July 2012, RIL informed that it was going to invest US$1 billion over the
next few years in its new aerospace division which will design, develop,
manufacture, equipment and components, including aircraft, engine, radars,
avionics and

5
 accessories for military and civilian aircraft, helicopters, unmanned airborne
vehicles and aerostats.

On 31 March 2013, the company had 158 subsidiary companies and 7 associate
companies.\

Subsidiaries –

 Jio Platforms Limited, essentially a technology company, is a majority-owned

subsidiary of RIL. It is the result of a corporate restructuring announced in October
2019, resulting in all the digital initiatives and the telecommunication assets being
housed under this new subsidiary. This new subsidiary holds all the digital business
assets including Reliance Jio Infocomm Ltd, which in turn holds the Jio connectivity
business - Mobile, broadband and enterprise and also the other digital assets (JIO
Apps, Tech backbone and Investments in other tech entities like Haptic, Hathaway
and Den Networks among others. In April 2020, RIL announced a strategic
investment
of ₹43,574 crore (US$6.1 billion) by Facebook into Jio Platforms. This investment
translated into a 9.99% equity stake, on a fully diluted basis. Further in May 2020, RIL
sold roughly 1.15% stake in Jio Platforms for ₹5,656 crore (US$790 million) to the
American private equity investor, Silver Lake Partners. Intel became the 12th
company to invest in Reliance Jio platforms after it invested ₹1,894.50 crore ($250
million),the total investments in Jio platforms is ₹117,588.45 crore so far. On 16 July
2020, Google announced that it will acquire a 7.7% stake in Jio Platforms for
₹33,737 crore.
 Reliance Retail is the retail business wing of the Reliance Industries. In March
2013, it had 1466 stores in India. It is the largest retailer in India. Many brands
like Reliance Fresh, Reliance Footprint, Reliance Time Out, Reliance Digital,
Reliance Wellness, Reliance Trends, Reliance Autozone, Reliance Super, Reliance
Mart, Reliance iStore, Reliance Home Kitchens, Reliance Market (Cash n Carry)
and Reliance Jewel come under the Reliance Retail brand. Its annual revenue for
the financial year 2012–13 was ₹108 billion (US$1.5 billion) with an EBITDA of
₹780 million (US$11 million).
6
 Reliance Life Sciences works around medical, plant and
industrial biotechnology opportunities. It specialises in manufacturing, branding, and
marketing Reliance Industries' products in bio-pharmaceuticals, pharmaceuticals,
clinical research services, regenerative medicine, molecular medicine, novel
therapeutics, biofuels, plant biotechnology, and industrial biotechnology sectors of the
medical business industry.
 Reliance Logistics is a single-window company selling transportation, distribution,
warehousing, logistics, and supply chain-related products. Reliance Logistics is an
asset based company with its own fleet and infrastructure. It provides logistics
services to Reliance group companies and outsiders.
 Reliance Solar, the solar energy subsidiary of Reliance, was established to produce
and retail solar energy systems primarily to remote and rural areas. It offers a range
of products based on solar energy: solar lanterns, home lighting systems, street
lighting systems, water purification systems, refrigeration systems and solar air
conditioners.
 Reliance Industrial Infrastructure Limited (RIIL) is an associate company of RIL.
RIL holds 45.43% of total shares of RIIL. It was incorporated in September 1988 as
Chembur Patalganga Pipelines Limited, with the main objective being to build and
operate cross-country pipelines for transporting petroleum products. The company's
name was subsequently changed to CPPL Limited in September 1992, and thereafter
to its present name, Reliance Industrial Infrastructure Limited, in March 1994. RIIL is
mainly engaged in the business of setting up and operating industrial infrastructure.
The company is also engaged in related activities involving leasing and providing
services connected with computer software and data processing. The company set up
a 200-millimetre diameter twin pipeline system that connects the Bharat Petroleum
refinery at Maul, Maharashtra, to Reliance's petrochemical complex at Patalganga,
Maharashtra. The pipeline carries petroleum products including naphtha and kerosene.
It has commissioned facilities like the supervisory control and data acquisition system
and the cathodic protection system, a jackwell at River Tapi, and a raw water pipeline
system at Hazira. The infrastructure company constructed a 71,000 kilo-litre
petrochemical product storage and distribution terminal at the Jawaharlal Nehru Port
Trust (JNPT) Area in Maharashtra.

7
 Network 18, a mass media company. It has interests in television, digital
platforms, publication, mobile apps, and films. It also operates two joint ventures,
namely Viacom18 and History TV18 with Viacom and A+E Networks respectively. It
also have acquired ETV Network and since renamed its channels under the Colors
TV brand.
 Reliance Eros Productions LLP, joint venture with Eros International to produce
film content in India.
 Reliance Industrial Investments and Holdings Limited (RIIHL), a wholly-owned
subsidiary of RIL provides financial services. The Company owns securities of
companies other than banks, as well as offers investment services. RIIHL bought
majority stakes in two companies - logistics firm Grab A Grub Services Private
Limited (Grab) and software company C-Square Info Solutions - for over ₹146
crore in March 2019. RIIHL also sponsored the Tower Investment trust (InvITs) for
the acquisition of 49% equity in RJio’s tower assets for ₹25,215 crore by the
Canadian asset management firm Brookfiel Infrastructure Partners. On April 22,
2021, RIIHL acquired the entire issued share capital of Stoke Park Ltd, company
that owns and manages sporting and leisure facilities in Stoke Poges,
Buckinghamshire for £57 million.
 Reliance Strategic Business Ventures Limited (RSBVL), a wholly-owned
subsidiary of RIL bought a 51.78% stake in robotics and AI firm Asteria Aerospace
for ₹23.12 crore and an 85% stake in NowFloats Technologies for ₹141.63 crore in
Dec 2019. It also holds 18.83% in EIH Limited, the flagship company of The Oberoi
Group, one of the largest luxury hotel chains in India. In November 2019, RSBVL
invested an undisclosed amount in SkyTran Inc. for 12.7%, increased it further to
26.3% by April 2020. In February 2021, RIL became the majority stakeholder with
54.46% with an additional investment of $26.76 million.
 Reliance Sibur
 Embibe, Bengaluru-based EdTech start-up raised a funding of ₹89.91 crore from
RIL in February 2020. Over a period of three years, Reliance Industries had invested
around $180 million in the start-up. A part of it was towards acquiring a stake of
72.69% from Embibe's existing investors. In December 2019, Embibe, under the
proprietary name (Individual Learning Private Limited), announced that it picked up

8
 equity shares in Bengaluru-based K12 startup Funtoot (eDreams Edusoft). The deal
was capped at ₹71.64 crore in cash, which holds for 90.5% in the equity share
capital of Funtoot. In February 2020, it acquired the rival platform OnlineTyari.
 NowFloats
 Model Economic Township

Associates –

 Relicord is a cord blood banking service owned by Reliance Life Sciences. It was
established in 2002. It has been inspected and accredited by AABB, and also has been
accorded a licence by Food and Drug Administration (FDA), Government of India.
 Reliance Jio Infocomm Limited (RJIL), previously known as Infotel Broadband,
is a broadband service provider which gained 4G licences for operating across India.
 Reliance Institute of Life Sciences (RILS), established by Dhirubhai Ambani
Foundation, is an institution offering higher education in various fields of life
sciences and related technologies.
 Reliance Clinical Research Services (RCRS), a contract research organization
(CRO) and wholly owned subsidiary of Reliance Life Sciences, specialises in
the clinical research services industry. Its clients are primarily pharmaceutical,
biotechnology and medical device companies.
 LYF, a 4G-enabled VoLTE device brand from Reliance Retail.

9
4. Awards and recognition –

 International Refiner of the year in 2017 at Global Refining and

Petrochemicals Congress 2017.
 International Refiner of the Year in 2013 at the HART Energy's 27th World
Refining & Fuel Conference. This is the second time that RIL has received this
Award for
its Jamnagar Refinery, the first being in 2005.
 The Brand Trust Report ranked Reliance Industries as the 7th most trusted brand
in India in 2013 and 9th in 2014.
 RIL was certified as 'Responsible Care Company' by the American Chemistry
Council in March 2012.
 RIL was ranked at 25th position across the world, on the basis of sales, in the
ICIS Top 100 Chemicals Companies list in 2012.
 RIL was awarded the National Golden Peacock Award 2011 for its contribution in
the field of corporate sustainability.
 In 2009, Boston Consulting Group (BCG) named Reliance Industries as the world's
fifth biggest 'sustainable value creator' in a list of 25 top companies globally in
terms of investor returns over a decade.
 The company was selected as one of the world's 100 best managed companies for
the year 2000 by IndustryWeek magazine.
 From 1994 to 1997, the company won National Energy Conservation Award in
the petrochemical sector.

10
Board of directors –

 Mukesh ambani. Chairman and Managing Director.

 Nita M. Ambani. Non-Executive, Non Independent Director.

 Hital R. Meswani. Executive Director.

 Nikhil R. Meswani. Executive Director.

 P.M.S. Prasad. Executive Director.

 P.K. Kapil. Executive Director.

 R.A. Mashelkar. Independent Director.

 Adil Zainulbhai. Independent Director.

 Dipak C. Jain. Independent Director.

 Yogendra P. Trivedi. Independent Director.

 Ramindar S. Gujral. Independent Director.

 Shumeet Banerji. Independent Director.

 Arundhati Bhattacharya. Independent Director.

 K. V. Chowdary. Non-Executive Director.

11
Chapter - 2

Methodology

12
 Introduction to project –

FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is an information processing system designed to provide data
for people concerned with the economic situation of a firm and predicting its future course.

Definition
In the words of John N. Myers, “Financial statement analysis is largely a study of the
relationships among the various financial factors in a business as disclosed by a single set of
statements and a study of the trends of these factors as shown in a series of statements.”

The major groups of users are:-

1. Investors for making portfolio decisions

2. Managers, for evaluating the operational and financial efficiency of the firm.
3. Lenders for determining the credit worthiness of the loan applicants
4. Labour unions, for establishing an economic basis for collective bargaining.
5. Regulatory agencies for controlling the activities of companies under the jurisdictions.

6. Researchers, for studying firm and individual behaviour.

Objectives of Analysis of Financial Statements –

1. To judge the financial stability of an enterprise.

2. To measure the short-term and long-term solvency of enterprise.

3. To measure the operating efficiency and profitability of enterprise.

4. To compare intra-firm position, inter-firm position and pattern position within industry.

5. To assess the future prospects of the enterprise.

13
Advantages of financial statement analysis –

1. Security Analysis It helps the investors to know whether the firm is fulfilling
their expectation with regard to payment od dividend, capital appreciation
and security of money.
2. Credit analysis When a firm offer credit to a new customer or a dealer,
such analysis helps in determining whether to extend credit or not.
3. Debt analysis It helps to determining the borrowing capacity of a
perspective borrower.
4. Dividend decision It help the firm in determining the rate of dividend.
How much portion of earnings to be distributed and how much to retained.
5. General business analysis This analysis helps to assess the profit potential
of the firm by identifying the key profit driven and business risk.

Limitation of financial statement analysis –

1. Window dressing Firm manipulate the data contained in the financial statement so
as to cover up their weak financial position.
2. Use of diverse procedures When two different firm adopt different
accounting policies, comparison between such firms becomes difficult.
3. Qualitative aspects ignored Information which can be expressed in monetary term
is generally recorded in financial statement.
4. Historical Financial statement record past events and facts, hence are historical
in nature.
5. Not free from bias conclusion drawn from the analysis of financial statement
depend upon the personal ability and knowledge of an analyst.

14
Tools of financial statement analysis –

1. Comparative statement

2. Common size statement

3. Ration analysis

4. Cash flow statement

1. Comparative Statements -
Comparative statements is an art of presenting financial statements i.e., income statement
and balance sheet of a firm relating to different periods (intra-firm comparison) or different
firms but for the same period (inter-firm) in order to assess the weak and strong points of
the business entity.
Comparative statements are part of management information system. These are the internal
documents prepared by a
Business. These statements are not the part of the financial statements. Inter-firm or intra-
firm comparisons are reflected by the preparation of comparative financial statements.
When financial statements of two or more firms are compared, it is known as an inter-firm
comparison. The comparison of financial statements of two or more years of the same firm is
referred to as an intra-firm comparison.

1.1 Objectives or Purposes of Comparative Statements

Following are the objectives or purposes of comparative financial statements
(i) To know the nature of changes influencing financial position.
(ii) To know the weaknesses and soundness about liquidity, profitability and solvency of
the enterprise.
(iii) To forecast and plan.

15
A. Comparative Income Statement or Statement of Profit and Loss.
It shows the operating results for a number of accounting periods so that changes in data in
terms of absolute amountand percentage from one period to another may be known.
Advantages of Comparative Income Statement
The advantages of comparative income statement are

(i) Comparative income statement helps in analyzing the income and expenditure for two
or more years.
(ii) Comparative income statement helps in analyzing the increase or decrease in the
income and expenditure in terms of rupees and also the percentage.
(iii) It helps to review the business operations of the last year and its likely effect on
the current year's operations.

Preparation of Comparative Income Statement.

A comparative income statement has five columns.
First Column (Particulars) The items of statement of profit and loss (e.g., revenue from
operations, i.e., sales, cost of materials consumed, purchase of stock-in-trade, change in
inventories of finished goods. WIP and stock-in-trade, employees benefit expenses,
depreciation and amortization expenses) are entered in this column.
Second Column (Previous year's data) Figures of previous year are entered in this column.
Third Column (Current year's data) Figures of current year are entered in this column.
Fourth Column (Absolute change) Differences (increase or decrease) in figures between
the previous accounting period and current accounting period are recorded in this column.
Fifth Column (Percentage change) The differences (increase or decrease) expressed in
percentage are shown in this column.

16
Comparative Income Statement

Particulars Previous Current Absolute Percentage

year year change change
i. Revenue from Operations … … … …
ii. Other Income … … … …
iii. Total Revenue ( i + ii ) … … … …
iv. Expenses
a) Cost of materials consumed … … … …
b) Purchase of stock-in-trade … … … …
c) Changes in inventories of … … … …
finished goods, Work-in-progress and
stock-in trade … … … …
d) Employees benefit … … … …
expenses e)Finance cost … … … …
f) Depreciation and Amortisation … … … …
g) Other Expenses … … … …
Total Expenses … … … …
v. Profit before tax ( iii – iv ) … … … …
( - ) Income tax … … … …
vi. Profit after tax

17
B. Comparative Balance Sheet
Comparative balance sheet analysis is the study of the trend of the same items, group of
items and computed items in two or more balance sheets of the same business enterprise on
different dates.

Advantages of comparative balance sheet

(i) It shows the balances of accounts as at different dates but also the extent of their
increase or decrease between these dates.
(ii) Comparative balance sheet emphasizes on change.
(iii) Comparative balance sheet contains data not only of single balance sheet but used in
studying the trend in the enterprise.

Preparation of Comparative Balance Sheet

A comparative balance sheet has five columns
First column (Particulars) The components or elements or items of balance sheet are entered
in this.
Second Column (Previous year's data) Data (amounts) of previous year's balance sheet are
entered in this column.
Third Column this column. (Current year's data) Data (amounts) of current year's balance
sheet are entered in.
Fourth Column (Absolute change) Differences (increase or decrease) in amounts between
the previous year and current year are shown in this column.
Fifth Column (Percentage change) the differences (increase or decrease) expressed as
percentage, taking previous year's amount as the base is shown in this column.

18
Comparative Balance Sheet
Particulars Previous Current Absolute Percentage
year year change change
I. Equity and Liabilities
1. Shareholder’s Funds
a) Share Capital … … … …
i) Equity Share Capital … … … …
ii) Preference Share Capital … … … …
b)Reserves and Surplus … … … …
2. Non-current Liabilities
a) Long-term Borrowings … … … …
b) Other Long-term Liabilities … … … …
c) Long-term Provisions … … … …
3. Current Liabilities
a) Short-term Borrowings … … … …
b) Trade Payables … … … …
c) Other Current Liabilities … … … …
d) Short-term provisions … … … …

Total … … … …
II. Assets
1. Non-current Assets
a) Fixed Assets … … … …
i) Tangible Assets … … … …
ii) Intangible Assets … … … …
b) Non-current Investments … … … …
c) Long-term Loans and Advances
d) Other Non-current Assets … … … …
2. Current Assets
a) Current Investments … … … …
b) Inventories … … … …
c) Trade Receivables … … … …
d) Cash and Cash Equivalents … … … …
e) Short-term Loans and Advances … … … …
f) Other Current Assets
… … … …
Total … … … …

19
2. Common Size Statements –
There are the statements in which amounts of individual items of balance sheet and income
statement (statement of profit and loss) for two or more years are written which are further
converted into percentages to a common base. Comparison can be easily made with the
percentage so calculated with the corresponding percentages in other periods and meaningful
conclusions can be drawn.
Common size analysis is of immense use for comparing enterprises which differ
substantially in size, as it provides an insight into the structure of financial statements. Inter-
firm comparison or comparison of the company's position with the related industry as a
whole is possible with the help of common size statement analysis.

Types of Common Size Statements

Common Size Income Statement
Common Size Balance Sheet

Common size income statement

Statement in which amount of revenue from operations (net sales) is assumed to be equal to
100 and other amounts are expressed as percentage of revenue from operations (net sales).
Advantages Common Size Income Statement.
The advantages associated with common size income statement are
1.It helps in analyzing change in individual items of income statement.
2. It helps to study the trend in different items of income and expenditure.
Preparation of Common Size Income Statement
A common size income statement has five columns
First Column (Items) Items of income statement are entered in first column.
Second Column (Previous year's data) Absolute amounts of different items (i..,
income/expenses) of income statement further previous year are entered in second column.
Third Column (Current year's data) Absolute amounts of different items (i.e.,
income/expenses)
of income statement for the current year's are entered in this column.

20
Fourth Column (Percentage change for previous year's) Percentage relation of different
items of income statement for the previous year to net sales (which is taken as 100) are
entered in fourth column.
Fifth Column (Percentage change for current year) Percentage relation of different items
of income statement for thecurrent year to net sales (which is taken as 100) are entered in
fifth column.

Common Size Income Statement

Absolute Amounts Percentage of Revenue
Particulars from Operation(Net
sales)
Previous Current Previous Current year
year year year (%) (%)
i. Revenue from Operations … … … …
ii. Other Income … … … …
iii. Total Revenue ( i + ii ) … … … …
iv. Expenses
a) Cost of materials consumed … … … …
b) Purchase of stock-in-trade … … … …
c) Changes in inventories of finished … … … …
goods, Work-in-progress and stock-in
trade
d) Employees benefit … … … …
expenses e)Finance cost … … … …
f) Depreciation and Amortisation … … … …
g) Other … … … …

Expenses Total … … … …

Expenses … … … …

v. Profit before tax ( iii – iv … … … …

) ( - ) Income tax … … … …

vi. Profit after tax

21
Common size Balance sheet
It shows the percentage relation of each asset/liability to total assets/total liabilities
including capital. In this total assets or total equity and liabilities are taken as 100 and all the
figures are expressed as percentage of the total.

Advantages of Common Size Balance Sheet

Following are the advantages of common size balance sheet
(i) It helps in analyzing the changes in individual items of balance sheet.
(ii) It helps to see the trend of different items of assets, equity and liabilities.
(iii) In understanding the financial statements

Preparation of Common Size Balance Sheet

A common size balance sheet has five columns.
First Column (Items) Enter the items of balance sheet in first column. Second Column
(Previous year's data) Enter the absolute amounts of different items (assets/liabilities) of
previous year's balance sheet in second column.
Third Column (Current year's data) Enter the absolute amounts of different items
(i.e., assets/liabilities) of balance sheet for current year.
Fourth Column (Percentage change for previous year) Calculate and enter the percentage
relation of different items ofprevious year's balance sheet to total equity and
liabilities/total assets (which are taken as 100) in this column.
Fifth Column (Percentage change for current year) Calculate and enter the percentage
relation of different items of current year's balance sheet to total equity and liabilities/total
assets (which are taken as 100) in this column.

22
Common Size Balance Sheet
Absolute Percentage of Balance
Particulars Amounts sheet Total
Previous Current Previous Current year
year year year (%) (%)
I. Equity and Liabilities
1. Shareholder’s Funds
a) Share Capital … … … …
i) Equity Share Capital … … … …
ii) Preference Share Capital … … … …
b)Reserves and Surplus … … … …
2. Non-current Liabilities
a) Long-term Borrowings … … … …
b) Other Long-term Liabilities … … … …
c) Long-term Provisions … … … …
3. Current Liabilities
a) Short-term Borrowings … … … …
b) Trade Payables … … … …
c) Other Current Liabilities … … … …
d) Short-term provisions … … … …

Total … … … …

23
II. Assets
1. Non-current Assets
a) Fixed Assets
i) Tangible Assets
ii) Intangible Assets … … … …
b) Non-current Investments … … … …
c) Long-term Loans and Advances … … … …
d) Other Non-current Assets … … … …
2. Current Assets … … … …
a) Current Investments
b) Inventories … … … …
c) Trade Receivables … … … …
d) Cash and Cash Equivalents … … … …
e) Short-term Loans and Advances … … … …
f) Other Current Assets … … … …
… … … …
Total
… … … …

24
3. Ratio analysis –
When ratios are calculated on the basis of accounting information these are called
'accounting ratios.
An accounting ratio is a mathematical expression of the relationship between two items or
group of items shown in the financial statements.
Ratio analysis is a technique which involves regrouping of data by application of
arithmetical relationships. It is the most important and powerful tool for measuring
performance of business enterprises.
It requires a fine understanding of the way and the rules used for preparing final statements.

Objectives of Ratio Analysis

The objectives of ratio analysis are
(i) Estimation of Business Earnings Present as well as future earnings of enterprises can
be estimated with the help of ratio analysis, which further helps in taking decisions in
various segments of the business enterprise.
(ii) Judging Managerial Efficiency The overall efficiency of an enterprise can be
determined with the help of ratio analysis by making use of the financial information
provided by the management. It helps the management to bring out the strong and
weak points of the enterprise and to take timely preventive measures.
(iii) Solvency Determination Short-term and long-term solvency of the firm can be
ascertained with the help of ratio analysis, which is helpful for various parties interested in
the business concern, e.g., shareholders, debenture holders, creditors etc. Ratio analysis, by
providing simplified figures facilitates the job of various stakeholders in taking decisions
to enter into a contract with a firm.
(iv) Making Comparison Ratio analysis facilitates comparison, inter as well as intra
firm. Such comparison helps the management in rating their operations and tracing the
lacking sections operative in the business with other firms as well as with their own past
results.
(v) Formulation of Policies Results obtained from ratio analysis helps in forecasting.
Consequently, they even direct the management in formulation of business policies
and budgets.

25
Advantages of Ratio Analysis
(i) Analysis of Financial Statements Financial position of the enterprise can be understood
with the help of accounting ratios. Bankers, investors, creditors, etc, all analyze balance
sheet and statement of profit and loss by means of ratios.
(ii) Simplifying Accounting Figures Accounting ratios help in simplifying, summarizing
and systematizing accounting figures to make them understandable. Its main contribution
lies in communicating precisely the inter relationships which exist between the elements
of financial statements.
(iii)Judging the Operating Efficiency of Business Ratios help in understanding the
operating efficiency of an enterprise. They are also useful for ascertaining the financial
health of an enterprise. This is done by evaluating liquidity. Solvency, profitability, etc.
Such an evaluation enables the management to assess financial requirements.
(iv) Identification of Problem Areas Weak spots in the business can be located through
accounting ratios even though the overall performance may be quite good, which in turn
helps management to take remedial action.
(v) Inter-Firm and Intra-Firm Comparison Accounting ratios facilitate inter and intra
firm comparison. When a firm compares its performance with that of other firms and
industry in general it is called inter-firm comparison. If the performance of different
units belonging to the same firm is to be compared, it is called intra-firm a comparison.
(vi) Enables SWOT Analysis Ratios help in explaining the changes which occur in the
business. The information regarding changes helps the management in understanding
the current threats and opportunities and allows business to do its own SWOT (Strength-
Weakness Opportunity-Threat) analysis,
(vii) Helpful in Comparative Analysis Calculation of ratios for various years helps in
exploring the trends visible in the business. This knowledge of trends further helps in
making projections about the business.

26
Limitations of Ratio Analysis
Limitations of ratio analysis are
(i) False Result Reliability of ratio and its analysis is dependent upon the correctness of
the financial statements as ratios are calculated from the financial statements. If the
financial statements are not true and fair, the analysis will give a false picture of the affairs.
(ii) Qualitative or Non-monetary Factors are Ignored Ratio analysis is a technique of
quantitative analysis and thus, ignores qualitative factors, which may be important in
decision making.
(iii) Lack of Standard Ratio No single standard ratio is available, against which the
ratio may be measured and compared.
(iv) Variations in Accounting Practices If different accounting policies and procedures are
followed by different firms in respect of certain items such as valuation of stock,
depreciation, etc,
ratios may not be comparable.
(v) Effect of Price Level Changes changes in price level affects the comparability of
ratios. But no consideration is given to price level changes in the accounting variables from
which ratios are computed.

Types of Ratios –
 Liquidity ratio
 Leverage
 Turnover ratio
 Profitability ratio
 Valuation ratio
Let’s evaluate this one by one

27
RATIO SUB – FORMULA
RATIOS
1. Liquidity Current ratio 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
ratio 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
Acid test ratio 𝑄𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

RATIO SUB - FORMULA

RATIOS
2. Leverage Debt equity 𝐷𝑒𝑏𝑡
ratio 𝐸𝑞𝑢𝑖𝑡𝑦
Debt asset ratio 𝐷𝑒𝑏𝑡
𝐴𝑠𝑠𝑒𝑡𝑠
Interest 𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥𝑒𝑠
coverage ratio 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
3. Turnover Inventory turn 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
over 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Accounts 𝑁𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠
receivable 𝐴𝑣𝑒𝑟𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
Fixed assets 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
turn over 𝑁𝑒𝑡 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
Total assets 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
turn over 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
4. Profitability Gross profit 𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
margin 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Net profit 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
margin 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Return on 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
assets 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑎𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Return on 𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑
capital 𝑡𝑎𝑥(1 − 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒)
employed 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

28
 Return on 𝐸𝑞𝑢𝑖𝑡𝑦 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠
equity 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑤𝑜𝑟𝑡ℎ

5. Valuation Price earnings 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

ratio 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Market value 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
to book 𝐵𝑜𝑜𝑘 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

4. Cash flow statement -

'Cash flow' implies movement of cash in and out of non-cash items. Receipt of cash from a
non-cash item is termed as cash inflow while cash payment in respect of such items is
termed as cash outflow.
For example, purchase of machinery by paying cash is cash outflow while sale proceeds
received from sale of machinery is cash inflow.
Cash flow statement is a statement showing the changes in financial position of a business
concern during different intervals of time in terms of cash and cash equivalents.

Benefits of Cash Flow Statement –

Cash flow statement provides the following benefits
(i) A cash flow statement when used along with other financial statements information
that enables users to evaluate provides changes in net assets of an enterprise, its financial
structure (including its liquidity and solvency) and its ability to affect the amounts and
timings of cash flows in order to adapt to changing circumstances and opportunities.
(ii) 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.
(iii) 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 flow of different enterprises.
(iv) Historical cash flow information is often used as an indicator of the amount, timing and
certainty of future cash flows. It is also helpful in checking the accuracy of past
assessments

29
of future cash flows and in examining the relationship between profitability and net cash
flow, and impact of changing prices.

Limitations of Cash Flow Statement –

Limitations for using cash flow statement are
(i) Non-cash Transactions Ignored Cash flow statement ignores non-cash transactions e.g.,
issue of shares against purchase of machine or furniture. As these transactions do not
result in flow of cash, so these transactions do not find place in the cash flow statement.
(ii) Historical in Nature Cash flow statement is a historical statement which is prepared after
the completion of an accounting year. Due to continuous changes in the demand of
products, policies of the government etc analysis based on past information does not serve
any useful purpose and give only post-mortem report.
(iii) Misleading Results if based on Wrong Data Cash flow statement uses the data of
financial statements. Any error in the data of financial statements will reflect the error in
the cash flow statement.
(iv) Ignores Basic Accounting Principles Cash flow statement ignores the two basic
accounting principles viz full disclosure' and 'accrual concept'. As cash flow statement is
based on cash basis hence, some significant business transactions having monetary value
do not find place in this statement.

Classification of Business Activities as per Revised AS-3 for the Preparation of Cash
Flow Statement –
Accounting Standard-3 (Revised) requires that the changes resulting in inflows and outflows
of cash and cash equivalents be classified into following three activities
1. Cash flow from operating activities
2. Cash flow from investing activities
3. Cash flow from financing
activities Let’s discuss it one by one

30
1. Cash Flow from Operating Activities
Operating activities are the principal revenue-producing activities of the enterprise and other
activities that are notinvesting or financing activities. Cash flows from operating activities
being the principal revenue-producing activity of the enterprise, it generally results from the
transactions and other events that determine the net profit or loss.

Operating Activities

Cash Inflow Cash Outflow

i) Cash sales i) Cash purchase

ii) Cash received from debtors ii) Payment to creditors
iii) Cash received from iii) Cash operating expenses
commission and fees
iv) Royalty iv) Payment of wages
v) Income tax

For a Finance Company

v) Cash received for interest and dividends vi) Cash paid for interest
vi) Sales of securities vii) Purchase of securities

For an Insurance Company

vii) Premiums and claims received viii) Premium and claims paid

For a Real Estate (Infrastructure) Company

viii) Rent received ix) Rent paid

31
2. Cash Flow from Investing Activities -
As per AS-3, investing activities are the acquisition and disposal of the long-term assets and
other investments, not included in cash equivalents. These activities include transactions
involving purchase and sale of the long-term productive assets like machinery, land and
building, etc which are not held for resale.
Separate disclosure of cash flows from investing activities is important because they
represent to which investments have been made for resources, intended to generate future
income and cash flows.
Investing Activities

Cash Inflow Cash Outflow

i) Sale of fixed assets i) Purchase of fixed assets

ii) Sale of investments ii) Purchase of investments
iii) Interest received
iv) Dividends received
v) Rent received

3. Cash Flow from Financing Activities –

Financing activities are the activities which result in change in the size and composition of
the owner's capital (including preference share capital) and borrowings (including
debentures) of the enterprise from other sources. It includes proceeds from issue of shares or
other similar instruments, issue of debentures, loans, bonds, other short-term or long-term
borrowings and repayments of amounts borrowed. 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.

32
 Financing Activities

Cash Inflow Cash Outflow

i) Issue of shares in cash i) Payment of loans

ii) Issue of debentures in cash ii) Redemption of preference
shares, debentures
iii) Proceeds from long- iii) Buy-back of equity shares
term borrowings iv) Payment of dividend
iv) Securities Premium received v) Payment of interest
vi) Premium paid on redemption
of preference shares, debentures

Preparation of Cash Flow Statement

On the basis of calculation of business activities, given below are the steps to be followed
for preparation of cash flow statement.
Step 1 Compute the cash flow from operating
activities. Step 2 Compute the cash flow from investing
activities. Step 3 Compute the cash flow from
financing activities
Step 4 Cash flow under each of the above activities are shown in the cash flow statement
and aggregate of these three activities will be either an increase or decrease in cash
equivalent Step 5 Add cash and cash equivalents balance in the beginning to the net increase
or decrease in cash equivalents in order to obtain the cash and cash equivalents at the end.

(PTO)
33
Cash Flow Statement
Particulars Amt
1. Cash Flow from Operating Activities
Net Profit before Taxation and Extraordinary …
Items Adjustment for Non-cash and Non-operating …
Items (+) Items to be Added
Depreciation …
Unamortised Expenses (such as discount in issue of shares, share issue expenses
and loss on issue of debentures, etc) Written off …
Goodwill, Patents and Trademarks Amortised …
Interest on Borrowings and Debentures …
Loss on Sale of Fixed …
Assets (-) Items to be
Deducted Interest Income …
Dividend Income …
Rental Income …
Profit on Sale of Fixed Assets …
Operating Profit before Working Capital Changes …
(+) Decrease in Current Assets and Increase in Current …
Liabilities (-) Increase in Current Assets and Decrease in Current …
Liabilities Cash Generated from Operations …
(-) Income Tax paid (Net of tax refund received) …
Cash Flow before Extraordinary …
Items (+/-) Extraordinary Items …
Net Cash from ( or used in) Operating Activities …

2. Cash Flow from Investing

Activities Proceeds from Sale of Fixed …
Assets Proceeds from Sale of …
Investments Proceeds from Sale of …
Intangible Assets …
Interest and Dividend Received (for non-financial companies only) …
Rent Income
34
Purchase of Fixed Assets …
Purchase of Investments …
Purchase of Intangible Assets like Goodwill …
(+/-) Extraordinary Items …
Net Cash from ( or used in) Investing Activities …

3. Cash Flow from Financing Activities

Proceeds from Issue of Shares and Debentures …
Proceeds from Other Long-term Borrowings …
Final Dividend Paid …
Interim Dividend Paid …
Interest on Debentures and Loans Paid …
Repayment of Loans …
Redemption of Debentures / Preference Shares …
Share Issue Expenses …
(+/-) Extraordinary Items …
Net Cash from ( or used in) Financing Activities …

4. Net Increase/Decrease in Cash and Cash Equivalents ( i + ii + iii ) …

5. (+) Cash and Cash Equivalents in the Beginning of the year …
Cash in Hand …
Cash in Bank [(-) Bank Overdraft] …
Short-term Deposits …
Marketable Securities …

6. (+) Cash and Cash Equivalents at the End of the year …

Cash in Hand …
Cash at Bank [(-) Bank Overdraft] …
Short-term Deposits …
Marketable Securities …

35
 Chapter - 3

Analysis and Findings

Financial statement of reliance industries pvt ltd

36
Consolidated Balance Sheet as at 31st March, 2020 (rupees in crore)

Particular Note 31st march 2020 31st march 2019

EQUITY AND LIABILITES
Equity
Equity share capital 4990.40 4989.54
Other equity 13280.58 7668.33
Liabilities
Non-current liabilities
Financial liabilities 12.48 _
Long term provision 38.21 26.75
Differed tax liability 917.15 35.21
Current liabilities
Financial liabilities
Borrowings 4665.74 12800.56
Trade payable 5958.19 4550.35
Other financial liabilities 5322.40 4353.87
4.18 2.94
Provision
1123.82 760.26
Other current liabilities
36313.15 35187.81
Total equity and
liabilities ASSETS
Non-current assets
7271.91 6140.19
Property, plant, equipment
6070.47 2532.16
Capital work-in-progress
87.14 87.14
Goodwill on consolidation
982.76 1092.04
Intangible assets
2752.74 1788.99
Intangible assets under
development Financial assets 348.00 388.42
Investment 2359.29 1051.09
Loan 237.13 159.82
Other non-current assets
Current assets 9583.11 11493.53
Inventories
Financial assets 233.14 3218.28
Investment 2759.23 4632.14
Trade receivable 348.69 387.59
Cash and cash 1507.03 383.44
equivalents Other financial 1736.51 1832.92
assets Other current assets 36313.15 35187.81
Total assets

37
Consolidated Statement of Profit and Loss for the year ended 31st March,
2020

Particular Note 31st march 2020 31st march 2019

INCOME
Value of sales 146693.04 120129.34
Income from service 14272.12 9012.40
Less: GST / service tax recovered (16447.81) (13952.76)
Revenue from operation 144517.35 115188.98
Other income 271.59 131.99
Total income 144788.94 115320.97
EXPENSES
Cost of martial consumed 2.99 3.20
Purchase of stock in trade 122745.81 100084.49
Change in inventories of finished goods and stock 1941.48 (813.68)
in trade
Employee benefit expenses 975.28 923.07
Finance cost 868.32 611.70
Depreciation and amortisation expenses 1122.42 612.05
Other expenses 9596.03 8974.28
Total expenses 137252.33 110395.11
Profit Before share of Profit/(Loss) of Joint
7536.61 4925.86
Ventures and Tax
(9.43) 53.81
Share of Profit/(Loss) of Joint Ventures
7527.18 4979.67
Profit before tax
Tax expense:
1033.74 1081.75
Current tax
Tax for earlier years (2.94) _
Deferred tax 881.94 643.51
Profit for the year 5614.44 3254.41
Other Comprehensive Income (OCI)
Items that will not be reclassified to Profit and Loss (14.59) 1.88
income tax relating to items that will not be 1.95 (0.40)
reclassified to profit or loss
Items that will be reclassified to Profit or loss 13.87 6.33
Income tax relating to items that will be reclassified (3.46) (1.45)
to profit or loss
Total Comprehensive Income (Net of Tax) 5612.23 3260.77

Earnings per equity share of face value of ₹10

each Basic 10.55 6.12
Diluted 8.88 5.15

38
Tools of financial statement
1.Comparative satement

39
Comparative balance sheet

Particular 31st march 31st march Absolute Percentage

2020 2019 change
EQUITY AND LIABILITES
Equity
Equity share capital 4990.40 4989.54 0.86 0.02
Other equity 13280.58 7668.33 5612.25 73.19
Liabilities
Non-current liabilities
Financial liabilities 12.48 _ 12.48 _
Long term provision 38.21 26.75 11.46 42.84
Differed tax liability 917.15 35.21 881.94 2504.8
Current liabilities
Financial liabilities
Borrowings 4665.74 12800.56 (8134.82) (63.55)
Trade payable 5958.19 4550.35 1407.84 30.94
5322.40 4353.87 968.53 22.25
Other financial liabilities
4.18 2.94 1.24 42.18
Provision
1123.82 760.26 363.56 47.82
Other current liabilities
36313.15 35187.81 1125.34 3.2
Total equity and
liabilities ASSETS
Non-current assets
7271.91 6140.19 1131.72 18.43
Property, plant, equipment
6070.47 2532.16 3538.31 139.74
Capital work-in-progress
87.14 87.14 0 0
Goodwill on consolidation
982.76 1092.04 (192.28) (10)
Intangible assets
2752.74 1788.99 963.75 53.88
Intangible assets under
development
Financial assets 348.00 388.42 (40.42) (10.40)
Investment 2359.29 1051.09 1308.20 124.47
Loan 237.13 159.82 77.31 48.38
Other non-current assets
Current assets 9583.11 11493.53 (1910.42) (16.63)
Inventories
Financial assets 233.14 3218.28 (2985.14) (95.76)
Investment 2759.23 4632.14 (1872.91) (40.44)
Trade receivable 348.69 387.59 (38.9) (10.04)
Cash and cash 1507.03 383.44 1123.59 293.03
equivalents Other financial 1736.51 1832.92 (96.41) (5.26)
assets Other current assets 36313.15 35187.81 1125.34 3.2
Total assets

40
Comparative statement of profit and loss.
Particular 31st march 31st march Absolute Percentage
2020 2019 change change
INCOME
Value of sales 146693.04 120129.34 2656.37 22.12
Income from service 14272.12 9012.40 5259.72 58.37
Less: GST / service tax recovered (16447.81) (13952.76) 2495.05 17.89
Revenue from operation 144517.35 115188.98 29467.97 25.59
Other income 271.59 131.99 139.6 105.77
Total income 144788.94 115320.97 29467.97 25.56
EXPENSES
Cost of martial consumed 2.99 3.20 (0.21) (6.57)
Purchase of stock in trade 122745.81 100084.49 22661.32 22.65
Change in inventories of finished goods 1941.48 (813.68) 2755.16 (338.61)
and stock in trade
Employee benefit expenses 975.28 923.07 52.21 5.66
Finance cost 868.32 611.70 256.62 41.96
Depreciation and amortisation expenses 1122.42 612.05 510.37 83.39
Other expenses 9596.03 8974.28 621.75 6.93
Total expenses 137252.33 110395.11 26857.22 24.33
Profit Before share of Profit/(Loss) of
7536.61 4925.86 2610.75 53.01
Joint Ventures and Tax
(9.43) 53.81 (63.24) (117.53)
Share of Profit/(Loss) of Joint Ventures
7527.18 4979.67 2547.51 51.16
Profit before tax
Tax expense:
1033.74 1081.75 (48.01) (4.44)
Current tax
Tax for earlier years (2.94) _ (2.94) _
881.94 643.51 238.43 37.06
Deferred tax
Profit for the year 5614.44 3254.41 2360.03 72.52
Other Comprehensive Income (OCI)
Items that will not be reclassified to
Profit and Loss (14.59) 1.88 (16.47) (876.07)
income tax relating to items that will not
be reclassified to profit or loss 1.95 (0.40) 2.35 (587.5)
Items that will be reclassified to Profit or
loss 13.87 6.33 7.54 119.12
Income tax relating to items that will be (3.46) (1.45) (4.91) 338.63
reclassified to profit or loss
Total Comprehensive Income (Net of 5612.23 3260.77 2351.56 72.12
Tax)

Earnings per equity share of face value

of ₹10 each
Basic 10.55 6.12 4.43 72.39
Diluted 8.88 5.15 3.73 72.43

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Tools of financial statement
Common size statement

42
Common size balance sheet
Particular 31st march 31st march Percentage Percentage
2020 2019 31/03/2020 31/03/2019
EQUITY AND LIABILITES
Equity
Equity share capital 4990.40 4989.54 13.74 14.18
Other equity 13280.58 7668.33 36.57 21.8
Liabilities
Non-current liabilities
Financial liabilities 12.48 _ 0.035 _
Long term provision 38.21 26.75 0.11 0.077
Differed tax liability 917.15 35.21 2.53 0.10
Current liabilities
Financial liabilities
Borrowings 4665.74 12800.56 12.85 36.38
Trade payable 5958.19 4550.35 16.41 12.93
5322.40 4353.87 14.66 12.37
Other financial liabilities
4.18 2.94 0.012 0.008
Provision
1123.82 760.26 3.09 2.16
Other current liabilities
36313.15 35187.81 100 100
Total equity and
liabilities ASSETS
Non-current assets
7271.91 6140.19 20.03 17.45
Property, plant, equipment
6070.47 2532.16 16.72 7.2
Capital work-in-progress
87.14 87.14 0.24 0.25
Goodwill on consolidation
982.76 1092.04 2.71 3.10
Intangible assets
2752.74 1788.99 7.58 5.09
Intangible assets under
development
Financial assets 348.00 388.42 0.96 1.10
Investment 2359.29 1051.09 6.5 3
Loan 237.13 159.82 0.65 0.45
Other non-current assets
Current assets 9583.11 11493.53 26.4 32.67
Inventories
Financial assets 233.14 3218.28 0.64 9.15
Investment 2759.23 4632.14 7.6 13.17
Trade receivable 348.69 387.59 0.96 1.10
Cash and cash 1507.03 383.44 4.15 1.09
equivalents Other financial 1736.51 1832.92 4.78 5.21
assets Other current assets 36313.15 35187.81 100 100
Total assets

43
Common size statement of profit and loss
Particular 31st march 31st march Percentage Percentage
2020 2019 31/03/20 31/03/19
INCOME
Value of sales 146693.04 120129.34 101.31 104.29
Income from service 14272.12 9012.40 9.88 7.82
Less: GST / service tax recovered (16447.81) (13952.76) (11.39) (12.11)
Revenue from operation 144517.35 115188.98 100 100
Other income 271.59 131.99 0.19 0.11
Total income 144788.94 115320.97 100.19 100.11
EXPENSES
Cost of martial consumed 2.99 3.20 0.002 0.003
Purchase of stock in trade 122745.81 100084.49 84.93 86.89
Change in inventories of finished goods 1941.48 (813.68) 1.34 (0.71)
and stock in trade
Employee benefit expenses 975.28 923.07 0.67 0.8
Finance cost 868.32 611.70 0.60 0.53
Depreciation and amortisation expenses 1122.42 612.05 0.78 0.53
Other expenses 9596.03 8974.28 6.64 7.8
Total expenses 137252.33 110395.11 94.98 95.83
Profit Before share of Profit/(Loss) of
7536.61 4925.86 5.22 4.28
Joint Ventures and Tax
(9.43) 53.81 (0.006) 0.047
Share of Profit/(Loss) of Joint Ventures
7527.18 4979.67 5.21 4.32
Profit before tax
Tax expense:
1033.74 1081.75 0.72 0.94
Current tax
Tax for earlier years (2.94) _ (0.002) _
881.94 643.51 0.61 0.56
Deferred tax
Profit for the year 5614.44 3254.41 3.89 2.83
Other Comprehensive Income (OCI)
Items that will not be reclassified to
Profit and Loss (14.59) 1.88 (0.01) 0.001
income tax relating to items that will not
be reclassified to profit or loss 1.95 (0.40) 0.001 (0.0003)
Items that will be reclassified to Profit or
loss 13.87 6.33 0.009 0.005
Income tax relating to items that will be (3.46) (1.45) 0.002 0.0013
reclassified to profit or loss
Total Comprehensive Income (Net of 5612.23 3260.77 3.88 2.83
Tax)

Earnings per equity share of face value

of ₹10 each
Basic 10.55 6.12 0.007 0.005
Diluted 8.88 5.15 0.006 0.004

44
Tools of financial statement
Ratio analysis

45
Ratio analysis
RATIO SUB – FORMULA 31/03/20 31/03/19
RATIOS
Liquidity Current 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 0.63 0.73
ratio ratio 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
Acid test 𝑄𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 0.45 0.52
ratio 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
Leverage Debt equity 𝐷𝑒𝑏𝑡 0.65 0.70
ratio 𝐸𝑞𝑢𝑖𝑡𝑦
Debt asset 𝐷𝑒𝑏𝑡 0.5 0.64
ratio 𝐴𝑠𝑠𝑒𝑡𝑠
Interest 𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 3.63 4.34
coverage 𝑎𝑛𝑑 𝑡𝑎𝑥𝑒𝑠
ratio 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Turnover Inventory 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 8.09 8.43
turn over 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Fixed assets 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 10.84 13.29
turn over 𝑁𝑒𝑡 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠
Total assets 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 51.25 56.78
turn over 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Profitabili Net profit 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 6.65 6.98
ty margin 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Return on 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 3.37 3.94
assets 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑎𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Return on 𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 10.62 10.45
capital 𝑡𝑎𝑥(1 − 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒)
employed 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
Return on 𝐸𝑞𝑢𝑖𝑡𝑦 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠 8.76 10.22
equity 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑤𝑜𝑟𝑡ℎ

Valuation Price 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 10.55 6.12

earnings 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
ratio

46
Tools of financial statement
Cash flow statement

47
Cash flow statement
Particulars 2019-2020 2018-219
A: CASH FLOW FROM OPERATING
ACTIVITES
Net Profit before Tax as per Statement
of Profit and Loss 7,527.18 4,979.67
Loss on sale/ discarding of Property,
Plant and Equipment (net) 44.05 30.50
Depreciation and Amortization 1,122.42 612.05
Expense Effect of Exchange Rate 8.26 34.72
Change (67.66) (25.83)
Net Gain on Financial Assets 9.43 (53.81)
Share in (Profit)/ Loss of Joint (176.94) (71.72)
Ventures Interest Income (2.75) (6.32)
Dividend Income 868.32 1805.13 611.70 1131.29
Finance Costs
Operating Profit before Working Capital 9332.31 6110.96
Changes
Adjusted for: 856.00 (2221.71)
Trade and Other 1910.42 (820.88)
Receivables Inventories 5481.57 8247.99 (378.60) (3421.19)
Trade and Other Payables 17580.30 2689.77
Cash Generated from (1123.16) (996.69)
Operations Taxes Paid (Net) 16457.14 1693.08
Net Cash flow from Operating
Activities
B. CASH FLOW FROM INVESTING
ACTIVITES (7198.76) (4792.14)
Purchase of Property, Plant and 429.19 49.31
Equipment and Intangible Assets
Proceeds from disposal of Property, (1308.20) (648.77)
Plant and Equipment and Intangible _ (2.50)
Assets Movement in Loans (16795.64)
Share Application money Paid (55933.52) 16781.97
Purchase of Other Investments 59000.43 26.61
Proceeds from Sale of Financial Assets 164.56
Interest Income
Net Cash Flow used in (4783.30) (5381.16)
Investing Activities

48
C. CASH FLOW FROM FINANCING
ACTIVITES
Proceeds from issue of Preference Share /
Equity Instruments 0.88 381.20
Movement in Deposits (2720.11) (2292.44)
Repayment of Lease (2.59) _
Liabilities _ (0.22)
Repayment of Borrowings Non-current (8134.82) 9352.76
Borrowings - Current (net) (856.10) (609.20)
Interest paid (11712.74) 6832.10
Net Cash flow from / (Used in)
Financing Activities (38.90) 3144.02
Net (decrease)/ increase in Cash and Cash
Equivalents 387.59 246.46
Opening Balance of Cash and Cash
Equivalents 348.69 3390.48
Closing Balance of Cash and
Cash Equivalents
Cash and Cash Equivalents 348.69 3390.48
Cash and Cash Equivalents as
above Less: _ (3002.89)
Investment in Liquid Mutual Fund 348.69 387.59
Closing Balance of Cash and Cash
Equivalents

49
 CHAPTER – 4

CONCLUSION AND SUGGESTION

50
COCLUSION
A study on financial statement analysis was carried out in Reliance industries. Financial
Statement Analysis is one of the important factors in analyzing company’s performance
hence while knowing the company’s growth and profitability financial analysis would be
helpful.
The data was collected from various sources and also through tools like company’s annual
report and relevant transactions with the company staffs. They were identified in the form of
findings and suitable suggestions were put forth to the concerned authorities for further
discussion.

SUGGESTIONS
1. Company’s liquidity position is not good according to the analysis, company should
increase its liquidity position because customers can anytime come to collect their
funds.

2. Company should reduce its debt equity ratio.

3. Company should increase its profit margins, last year profits margin increase in its
value basis but still it is not covered in percentage basis compared to the competitors.

4. Company’s managerial expenses is decreased, it shows good control on managerial cost

but still company should adopt more techniques to control the managerial cost to increase
the company’s profit.

5. Company should look forward to increase the EPS or else it will lose its Finance.

6. Risk management techniques should be adopted in order to avoid investing in

risky projects.

7. Found there was a decrease in shareholders founds comparing to the previous years
may be because of loss in those years so company should increase its profits to retain its
investors.

8. The company should take steps in training and development program in upgrading
the technological knowledge for their employees.

51
 CHAPTER – 5

BIBILOGRAPHY

52
BIBILOGRAPHY

REFERENCE BOOKS:
 Financial statement analysis & reporting B K sahu
 Class 12 Accountancy NCERT
th

WEBSITES:
 https://www.ril.com/InvestorRelations/FinancialReporting.aspx
 https://www.ril.com/
 https://en.wikipedia.org/wiki/Reliance_Industries

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