Brief History of HAL

The history and growth of Hindustan Aeronautics Limited is

synonymous with the growth of Aeronautical industry in India for
more than 85 years.
The Company had its origin as Hindustan Aircraft Limited was
incorporated on 23 Dec 1940 at Bangalore by Shri Walchand
Hirachand, in association with the then Government of Mysore, with
the aim of manufacturing aircraft in India. In March 1941, the
Government of India became one of the shareholders in the
Company and subsequently took over its management in 1942.
In August 1963, Aeronautics India Limited (AIL) was incorporated as
a Company wholly owned by the Government of India, to undertake
manufacture of MiG-21 aircraft.
The company in the present form was incorporated on 1 st Oct 1964
by the amalgamation
of the two companies i.e. Hindustan Aircraft Limited and Aeronautics
India Limited by an Amalgamation Order issued by the Government
of India and the Company after the amalgamation was named as
“Hindustan Aeronautics Limited (HAL)” with its principal business
being design, development, manufacture, repair and overhaul of
aircraft, helicopters, engines and related systems like avionics,
instruments and accessories.
HAL plays a crucial role in India's defence capabilities, focusing on self-reliance in military aviation. The
company's developments, like the Light Combat Aircraft (LCA) namely Tejas and the Light Utility
Helicopter (LUH), are central to modernizing the Indian Armed Forces. HAL's commitment to innovation
and quality has positioned it as a significant player in the global aerospace industry.

Over the decades, HAL expanded its product range to include helicopters, engines, and advanced
avionics systems. It also established a dedicated Aerospace division to support India's space missions,
contributing components for ISRO’s satellites and launch vehicles. In 1970, a division was set up in
Bangalore to manufacture ‘Chetak’ and ‘Cheetah’ helicopters under license from M/s SNIAS, France.
License agreements were established with several companies, including Dunlop (wheels and brakes),
Dowty (undercarriages), and Normal Air Garret (cabin systems), as well as Smiths, SFENA, SFIM
(instruments and gyros), Martin Baker (ejection seats), and Lucas (fuel systems) for various aircraft.
Similar arrangements were made with Soviet authorities for MiG-21 accessories.

HAL has engaged in multiple international partnerships for technology transfer and joint ventures,
enhancing its capabilities in aircraft production, including the manufacture of the Sukhoi-30 MKI. To
align with HAL’s mission of becoming a global player, exports have been prioritized as a key focus area.
HAL has supplied international customers with Dhruv, Lancer, Chetak, and Cheetah helicopters, as well
as Do-228 aircraft, and provides ongoing product support for these platforms. The company has
established credibility by delivering high-precision structural and composite work packages, assemblies,
and avionics to major global aviation firms, including Airbus, Boeing, Rolls Royce, IAI, and
Rosoboronexport.

HAL’s recognition as a Maharatna company is a testament to its growth, resilience, and strategic
contributions to India’s aerospace and defence sectors. This achievement not only reflects HAL's robust
financial health but also underscores its critical role in advancing India’s self-reliance in defence
production and enhancing its global standing in the aerospace industry.

Acknowledgement
I would like to express my sincere thanks to our Principal Ms Aparna
Maggie for giving me the opportunity and infrastructure to do this
project. It gives me immense pleasure to express my gratitude to my
Accountancy Teacher, Ms Preeti Bansal who always gave me valuable
suggestions and guidance during the project. She has a source
inspiration and helped to understand and remember important details
of the project. She gave me an amazing opportunity to do this
wonderful project Accounting Ratios.
I also thank my parents and friends for their help and support in
finalizing this project within the limited time frame.

Place Name

Date Signature
 DELHI PUBLIC SCHOOL, SUSHANT LOK
CERTIFICATE
This is to certify that of Class XII-C has
completed this project titled Accounting Ratios under my guidance
and this project may be considered as part of the practical exam of All
India Senior Secondary Certificate Examination 2026 conducted by
CBSE.

Ms Preeti Bansal
Deptt. Of Commerce
 COMPANY PROFILE

Hindustan Aeronautics Limited (HAL) is a leading aerospace and defense manufa

cturer in India, known for its extensive range of
aircraft, helicopters, and avionics systems.

 Founded: HAL was established on August 16, 1963, through the merger of Hindustan
Aircraft Limited, which was founded in 1940. The company is headquartered in Bengalu
ru, India.
 Ownership: HAL is a Govt owned entity with around 71% of total equity share capital of the
company is held by the President of India through the Ministry of Defence.

Operations and Facilities

 Complexes: HAL operates through five main complexes: Bangalore Complex, MiG Co
mplex, Helicopter Complex, Accessories Complex, and Design [Link] facilities
encompass 21 production divisions and 11 research and development centers
across India.
Products: The company designs, develops, manufactures, repairs, and overhauls a
wide range of aerospace products, including:
 Aircraft: Light Combat Aircraft (LCA) Tejas, Do228, and various trainer aircraft.
 Helicopters: Advanced Light Helicopter (Dhruv), Light Combat Helicopter (LCH), and Li
ght Utility Helicopter (LUH).
 Engines: Aero-engines and marine gas turbines.
 Avionics and Accessories: Various systems and components for aircraft and
helicopters.

Achievements and Recognition

 Maharatna Status: In October 2024, HAL was conferred with "Maharatna" status,
granting it enhanced operational autonomy and strategic decision-making capabilities.

 Performance: HAL has consistently received "Excellent" ratings from the Government
of India for its performance since 2002, reflecting its commitment to quality and
efficiency in meeting defense needs.

Global Reach: HAL has successfully exported its products and services to various
countries, enhancing its international presence in the aerospace sector.

Revenue: In the fiscal year 2024-25, HAL reported a revenue of ₹30981 crore and net
profit of ₹8364 crore.

Workforce: The company employs over 8,000 professionals, contributing to its robust
operational capabilities.

Public Listed Company- It became public listed company in 2018 when the Govt.
offloaded its holding through Initial Public Offer. Its shares are listed on the Bombay
Stock Exchange and National Stock Exchange
 Board of Directors

LIQUIDITY RATIOS- “Liquidity” refers to the ability of the firm to meet its current liabilities as they
become due for payment. These ratios are used to assess the short term financial position of the
concern. They indicate the firm’s ability to meet its current liabilities out of current resources.

Liquidity ratios include two ratios:

(1) Current Ratio = Current Assets

------------------
Current Liabilities

According to accounting principles, a current ratio of 2:1 is considered as ideal ratio. It means that that
current assets of a business should, at least, be twice of its current liabilities. The higher the ratio, the
better it is, because the firm will be able to pay its current liabilities more easily.

Current Ratio of HAL 2023-24 2024-25

1.73: 1 2.04:1

It shows that the company has improved its current ratio from last year and now meeting the
requirement of ideal ratio.

(2) Quick Ratio or Acid Test Ratio- This ratio indicates whether
the firm is in a position to pay its current liabilities within a
 month or if they have to be paid immediately. As per
accounting norms, an ideal quick ratio is said to be 1:1.
Quick Ratio or Acid Test Ratio= Liquid Assets
------------------
Current Liabilities
Liquid Assets= Current Assets-Inventories-Prepaid Expenses
and Advance Tax

Liquid Ratio of HAL 2023-24 2024-25

1.37:1 1.55:1

In both years, company is having comfortable position in Quick Ratio to meet its short term financial
obligation. It is considered to be better than current ratio to assess the liquidity position of the company.
as the same is considering only those assets which can be easily converted into cash.

SOLVENCY RATIOS-

(i) Debt Equity Ratio: This ratio expresses the relationship between long term debts and
shareholder’s funds. It indicates the proportion of funds which are acquired by long term
borrowings in comparison to shareholder’s funds. This ratio is used to ascertain the
soundness of the financial policies of the company.

Debt Equity Ratio: Long Term Debts

----------------------
Shareholder Funds

Normally Debt to Equity Ratio of 2:1 is considered to be ideal ratio. If this ratio is higher than
2:1, it means long term borrowings are more than twice in comparison to funds provided by
owners and it will indicate a risky financial position.

Debt Equity Ratio of HAL 2023-24 2024-25

NIL NIL

Since the company do not have long terms borrowings therefore Debt Equity is nil in both the years.
Company has done entire long term investments through shareholder’s funds.

(ii) Total Assets to Debt Ratio: In this ratio, total assets are expressed in relation to long term
debts. It measures the extent to which long term debts are covered by assets which
 indicates the margin of safety available to providers of long terms loans. On other hand, low
ratio represents risky financial position as it implies the use of higher debts in financing the
assets of the business.

Total Assets to Debt Ratio: Total Assets

-------------------

Long Term Debts

Total Assets to Ratio of HAL 2023-24 2024-25

NIL NIL

As stated above, that the company do not have long term borrowings therefore Total Assets to Debt
Ratio is nil in both the years.

(iii) Proprietary Ratio: This ratio indicates the proportion of total assets funded by owners or
shareholders.

Proprietary Ratio- Shareholder’s Funds

---------------------------

Total Assets( Non Current Assets + Current assets)

An ideal proprietary ratio is generally considered to be 0.5:1 or higher. A higher proprietary

ratio signifies that a larger portion of the company’s assets are financed by equity rather
than external debit. This is viewed favourably by lenders and investors because it indicates
a strong financially stable company with a lower risk of insolvency.

Proprietary Ratio of HAL 2023-24 2024-25

0.37 or 37% 0.33 or 33%

(iv) Interest Coverage ratio - This ratio is also termed as Debt Service ratio. It is calculated
by dividing the profits before charging interest and income tax by fixed interest charges.

Interest coverage ratio: Profits before charging interest and income tax

---------------------------------------------------------------

Fixed Interest Charges

This ratio indicates how many times the interest charges are covered by the profits available
to pay interest charges. It measure the margin of safety for long term lenders
 Since HAL do not have any interest bearing long terms loans therefore this ratio is nil in both
the years.

Interest Coverage Ratio of HAL 2023-24 2024-25

NIL NIL

(iv) Debt to Capital Employed Ratio: This ratio establish the relationship between Long Term
Debts and Capital Employed. It is computed to ascertain the financial soundness of the
enterprise.

Long Term Debts

-----------------------------------
Capital Employed
A high debt to capital employed ratio shows a rather risky financial financial position as it
indicates that more and more funds invested in the business are provided by long term
lenders. The lower this ratio, the better it is for long term lenders because they have higher
safety cover.

Since HAL do not have any interest bearing long terms debts therefore this ratio is nil in both
the years.

Debit to Capital Employed Ratio of HAL 2023-24 2024-25

NIL NIL

Activity Ratio or Turnover Ratio or Efficiency Ratios- These ratios measure how well the
resources available with any company are being utilized to produce revenue from the
operations.

(i) Inventory Turnover ratio- This ratio indicates the relationship between the cost of
revenue from operations (i.e., Cost of Goods Sold) during the year and average
inventory kept during that year.

Inventory Turnover Ratio= Cost of Revenue from Operations (Cost of Goods Sold)

-------------------------------------------------------------------------

Average Inventory

Cost of Revenue from Operations- Opening inventory + Purchases+ Carriage+ Wages

+ Other Direct Charges- Closing Inventory

Average Inventory = Opening Inventory+ Closing Inventory

--------------------------------------------------

2
 This ratio shows the speed with which the inventory is turned into revenue from
operations during the year. The higher the ratio, the better it is, since it indicates
that inventory is selling quickly. In a business where the inventory turnover ratio is
high, goods can be sold at a lower margin of profit and even then profitability may
be quite high. A lower ratio, indicate that the inventory remains lying in warehouse
for quite a long time resulting into storage costs, blocking of working capital and
losses on account of goods becoming obsolete.

Inventory Ratio of HAL 2023-24 2024-25

2.22 1.73

There is a reduction in the ratio in current year due to increase in the project inventory of
LCA Mk 1A, AL-31FP and others.

(ii) Trade Receivable Turnover Ratio- Credit Sales

----------------------------------
Average Trade Receivables

This ratio indicates the speed with which the amount is collected from trade
receivables. The higher the ratio, the better it is, since it indicates that amount from
trade receivables is being collected more quickly.

Trade Receivables Turnover Ratio of HAL 2023-24 2024-25

6.03 6.50
In HAL case, Trade Receivable Ratio is higher because most of the orders are
executed for country’s defence requirement where Central Govt. is the primary
customers.

(iii) Trade Payables Turnover Ratio:

Formula= Net Credit Purchases

----------------------------
Average Trade Payables

This ratio indicates the speed with which the amount is being paid to trade
payables. The higher the ratio, the better it is, since it indicates that trade payables
are being paid more quickly which increases credit worthiness of the firm.

Trade Payables Turnover Ratio of HAL 2023-24 2024-25

3.58 3.67
In HAL Trade Payable Turnover Ratio is lower due to delay in realization of funds
against the Govt. orders.
 (iv) Fixed Assets Turnover Ratio- It shows the number of times a unit of Rupee invested
in fixed assets produces sales. This ratio shows how efficiently the fixed assets are
being utilized in generating sales.

Fixed Assets Turnover Ratio = Revenue from Operations (Net Sales)

---------------------------------------------------
Net Fixed Assets
Net Fixed Assets- Fixed Assets-Depreciation

Fixed Assets include Property, Plant & Equipment and Intangible assets.

Fixed Assets Turnover Ratio of HAL 2023-24 2024-25

3.67 3.57
There is marginal reduction in the ratio in comparison to previous year.

(v) Working Capital Turnover Ratio - Revenue from operations

---------------------------------------
Working Capital
Working Capital= Current Assets- Current Liabilities

A high working capital turnover ratio shows efficient use of working capital and
quick turnover of current assets like inventory and trade receivables. A low ratio
indicates underutilization of working capital.

Working Capital Turnover Ratio of HAL 2023-24 2024-25

1.14 0.67

HAL is having low working capital turnover ratio and it is falling in the current year in
comparison to previous year. From the financial statement it is observed that the
substantial portions of currents assets are blocked in bank deposits and inventory.

Profitability Ratios or Income Ratios

(i) Gross Profit Ratio- This ratio establishes the relationship between gross profits and revenue
from operations i.e. Net Sales. This ratio is presented in percentage.

Gross Profit Ratio = Gross Profits

---------------------------------------- x 100
 Revenue from operations i.e. Net Sales

Gross Profit = Revenue from operations- Cost of Revenue from Operations

Cost of Revenue from operations = Opening Inventory + Net Purchases + Direct Expenses

(like Carriage and Wages etc.) – Closing Inventory

Computation of Gross Profit Ratio of HAL 2023-24 2024-25

Revenue from Operations (in Rs lakhs) 3038084 3098092

Gross Profits 1930217 1866754

Gross Profit Ratio 64% 60%

Though there is marginal dip in the Gross Profit Ratio of HAL in 2024-25 in comparison to 2023-24 which
is primarily attributed to increased (almost double) closing inventory of Work in Process and Finished
Goods.

(ii) Operating Ratio – This ration measures the proportion of enterprise’s cost of Revenue from
Operations and Operating Expenses in comparison to its Revenue from Operations.

Operating Ratio= Cost of Revenue from operations + Operating Exp.- Operating Income

--------------------------------------------------------------------------------------- x 100
Revenue from Operations

Computation of Operating Ratio of HAL 2023-24 2024-25

71% 73%

(iii) Operating Profit Ratio –This ratio shows the relationship between operating profit and net
Revenue from Operations.
Operating Profit
Operating Profit Ratio = ---------------------------------------------- x 100
Revenue from Operations
Operating Profit= Gross Profit- Operating Expenses+ Operating Income

Computation of Operating Profit Ratio of HAL 2023-24 2024-25

29% 27%
On comparing the Gross Profit Ratio and Operating Ratio of HAL, it is observed that there is a difference
in the range of 33% -35% which shows that the company is having Net Operating Expenses in the range
of 33% -35% of the Net Sales Revenue.

(iv) Net Profit Ratio – This ratio shows the relationship between net profit and net revenue from
operations.

Net Profit Ratio = Net Profit after tax

---------------------------------------------- x 100
Revenue from Operations

The main difference between Operating Profit and Net Profit is arising due to interest on long term
borrowings, taxes and non-operating income/loss (which is primarily due to capital assets).

Computation of Net Profit Ratio of HAL 2023-24 2024-25

27% 28%

(v) Return on Investment or ROI- This ratio reflects the overall profitability of the business. It is
calculated by comparing the profit earned and capital employed to earn it. This ratio is
computed in percentage and also known as Rate of Return or Return on Capital Employed.
The term ‘investment refers to long term funds deployed in the enterprise which cover both
shareholder funds and long term funds.

Return on Investment= Net Profit before interest, taxes and dividend

----------------------------------------------------------------- x 100
Capital Employed

In HAL, there is no long term borrowings therefore Return on Net Worth (Net Profit earned
on Shareholder funds) and Return on Investment is same.

Computation of Return on Net Worth Ratio of HAL 2023-24 2024-25

26% 24%