PROJECT REPORT

ON

PERFORMANCE ANALYSIS OF IOCL

Submitted in the partial fulfillment of the degree of

Bachelor of Business Administration

(2020 - 2023)

SUBMITTED BY

SHRUTI RANA
04713401720

Under the guidance of

MS. JASMANDEEP KAUR

(ASSOCIATE PROFESSOR, BBA 1st SHIFT)

Ideal Institute of Management & Technology

(Affiliated to GGSIP University)

(16 X, Karkardooma Institutional Area, Delhi-92)

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 CERTIFICATE

This is to certify that Project Report entitled, “PERFORMANCE ANALYSIS OF IOCL” is bonafide work
carried out by SHRUTI RANA student of BBA GEN 5 in Ideal Institute of Management and Technology
(affiliated to GGSIP University, Delhi) in partial fulfillment of the requirement for the award of degree of
Bachelor of Business Administration, under my guidance & direction to the best of my knowledge and belief
the data & information presented by her in the project report has not been submitted for the award of any other
degree.

(MS. JASMANDEEP KAUR)

(ASSOCIATE PROFESSOR, BBA 1st SHIFT)

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 ACKNOWLEDGEMENT

I am writing this final Project for the program of Bachelor of Business Administration on “PERFORMANCE
ANALYSIS OF IOCL” for Ideal Institute of Management & Technology Affiliated to Guru Gobind Singh
Indraprastha University.

It has been a great challenge but a plenty of learning and opportunities to gain a huge amount of knowledge on
the way of writing this Project report. I could not have completed my Project without the constant guidance of
Associate Professor of BBA 1st shift MS. JASMANDEEP KAUR who helped me along the way and was
always prepared to give me feedback and guidelines whenever I needed it.

SHRUTI RANA
04714401720

Date:

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 TABLE OF CONTENTS

S no. Particular Page no. Signature

1 Title
2 Certificate
3 Acknowledgement
4 Table of Content
5 List of figures & tables with page numbers
6 Chapter -1 Introduction
Objective of Study
Research Methodology
a. Research Design
b. Scope of Study
c. Importance of Study

Limitations of Study

7 Chapter - 2 Company Profile

8 Chapter – 3 Analysis and Interpretation of Data

9 Chapter – 4 Conclusion and Recommendations

10 Chapter - 5 Bibliography
11 Annexure – A Questionnaire
12 Annexure - B List of Contacted Person

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 Executive summary

This project report entitled to PERFORMANCE ANALYSIS OF INDIAN OIL CORPORATION LIMITED.
The main objective of the study is to analyze the financial position of the company. It is the process of
identifying the financial strength and weakness of the firm properly establishing relationship between the item
of balance sheet and profit and loss account. The details regarding the history and financial details of the bank
were collected through discussion with the company officers Secondary data are based on the annual reports of
2010-11 to 2013-14. The various tools used for the study are Dupont Analysis, Motaal's Liquidity Test, Altman
Z-score Test, Ratio Analysis, Comparative Statement, Common Size Income Statement and Trend Analysis.
Table and charts are used for better understanding. Through ratio analysis the company could understand the
Profitability. Liquidity, Leverage, Turnover Position of the company. Finally, findings &benefits to the
company, valuable suggestion and recommendations are given to the company for better prospects and
improving the performance in future.

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CHAPTER -1

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1. Introduction

The Indian oil and gas (O&G) sector is projected to touch US$ 139,814.7 million by 2015 from US$ 117,562.9
million in 2012. The sector provides vast opportunities for investors. The New Exploration Licensing Policy
(NELP) of 1997-98 was envisioned to deal with the ever-growing gap between demand and supply of gas in
India. It has successfully attracted both foreign and domestic investment, as attested by the presence of Cairn
India and Reliance Industries Limited in the country. India's economic growth, as with all other countries, is
closely linked to energy demand. The need for oil and gas, which are among the primary sources for meeting
energy requirements, is thus projected to grow further. To meet this demand, the government has adopted
several policies, such as allowing 100 per cent foreign direct investment (FDI) in several segments of the sector,
including petroleum products, natural gas, pipelines, and refineries.

Key Statistics

In 2011, India's O&G sector witnessed one of the biggest FDI deals in the country, with British Petroleum (BP)
formalizing a US$ 7.2 billion partnership with Reliance Industries, for exploring offshore gas reserves. At the
end of FY 2011-12, India had total reserves of 1330 billion cubic metres (bcm) of natural gas and 760 million
metric tonnes (mt) of crude oil.

Diesel & Petrol

Diesel is the country's most consumed fuel, accounting for almost 45 per cent of the total demand for petroleum
products. Since 2003-04, the demand for the transportation fuel has been increasing at a rate of 6–8 per cent.

About 62 per cent of petrol in the Indian market is consumed by two-wheelers, 27 per cent by cars, and 6 per
cent by three-wheelers. The rest are consumed for other purposes such as operating generators, and by people in
rural areas who need the fuel to run their livelihood, according to a survey conducted by global information and
measurement company, Nielsen.

Gas

 India's natural gas output was 3.01 bcm in July 2013.

 India's natural gas output will increase by 67 per cent in the next three years owing to higher production
from several blocks, especially Reliance Industries-operated KG- D6, according to the country's Oil
Minister, Mr M VeerappaMoily.

2. Objective of Study

 To study the financial performance of Indian Oil Corporation Limited over the period of four years.

 To study the liquidity, solvency and profitability position of Indian Oil Corporation Limited.
 To establish a relationship between profitability and size of IOCL

 . To assess the financial soundness of the company.

 To examine the overall performance of the company.

 To suggest ways and means to improve the present condition.

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3. Research Methodology

3.1 Research Design

A research design is the specification of method and procedure for accruing the information needed. It is overall
operational pattern of frame work of project that stipulates what information is to be collected for source by the
procedures. Analytical Research design is appropriate for this study.

Scope of Study

The scope of the study is to find out financial performance of the Indian Oil Corporation Limited. A sincere
attempt has been made to include all the aspect relating to the study. For this purpose analysis of financial
performance of the company has done from the last four years published financial statement and all the aspects
should be included in the report.

Financial Performance analysis can be used for chalking out the budget and for planning purposes. And it's
provide a peek into the results and are based on historical facts and figures. It is calculated by the analyzing the
previous records of the company. It is particularly useful for the investors and shareholders who invest their
money into a company after going through the economic and financial position.

Importance of Study

 Financial analysis is a powerful mechanism which helps in ascertaining the strengths and weakness in
the operation and financial position of an company.
 According to Myers, Financial analysis is defined as "Financial statement analysis is largely a study of
the relationship among the various financial factors in a business as disclosed by a single set statement
and a study of the trend of these factors as shows in series of statement".
 "Financial analysis is the process of identifying the financial strengths and weakness of the firm by
properly establishing relationship between the items of the balance sheet and the profit and loss
accounts”.
 A company's financial position tells about its general well-being, and the study of it is essential for any
serious investor wanting to understand and value a company in the appropriate manner.
 The study aims at assessing the financial health of the business.
 It helps in improvement of the business and will help in future decision making

3 Limitations of Study

 The scope of the study is limited to Guwahati Refinery.

 Time taken to complete the study is very limited.
 The analysis of the analysis of the companies and suggestion totally depends upon the information
shared.
 Non-monetary aspects are not considered making the results unreliable.
 Different accounting procedures may make results misleading.
 In spite of precautions taken there are certain procedural and technical limitations.
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 Accounting concepts and conventions cause serious limitation to Financial analysis

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 CHAPTER –2
(Company Profile)

1. Indian Oil Corporation Limited

Indian Oil Corporation Ltd. (Indian Oil) was formed in 1964 through the merger of Indian Oil Company Ltd.
(Estd. 1959) and Indian Refineries Ltd. (Estd. 1958).

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Indian Oil Corporation Ltd. (Indian Oil) is India's largest commercial enterprise, with a sales turnover of Rs.
4,14,909crore (US $ 76200 million) and profits of Rs. 5,005 crore (US $ 919 million) for the year 2012-13.
With a net revenue of Rs. 466937.49 crore, Indian Oil has maintained its position as the country's largest
company according to the list of 500 Indian companies released by Financial Express. With market
capitalization of Rs. 68334.65 crore and operating profit of 13812.55 crore, Indian Oil stands way ahead of its
competitors. Indian Oil had topped the ranks in previous years listings too. It is also the 18th largest petroleum
company in the world. It is the world's 83rd largest corporation, according to the Fortune Global 500 list, and
the largest public corporation in India when ranked by revenue. Indian Oil and its subsidiaries account for
46.9% petroleum products market share in the industry, 31% share in national refining capacity and 67%
downstream sector pipelines capacity.

At 88th position in the Global Fortune 500 list of the world's biggest corporations, it continued to be the
highest-ranking company from India. Net Profit rose to `5005 crore, registering a growth of 26.6 percent over
the previous year. Refineries exceeded 100 percent capacity utilization for sixth consecutive year in a row,
improved distillate yield to a record78.1 percent and achieved the best levels of energy efficiency so far by
recording the lowest MBN of56.3 during the year. Domestic product sales scaled up to a record level of 68.76
MMT.

Indian Oil and its subsidiaries own and operate 10 of India's 22 refineries and its cross-country network of over
11,000 kms of crude oil, product and gas pipelines is the largest in the country, meeting the vital energy needs
of consumers in an efficient and environment-friendly manner.

2. Location of IOCL in India

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The current Refining capacity stands at 55.01 million ton per annum. Yet another refinery is being set up on the
East Coast at Paradip (Orissa). The outlay includes provision for Expansion of Barauni Refinery, Quality
improvement for HSD at Haldia, Gujarat, Mathura, Grass Root Refinery in Eastern Sector, Residue Up
gradation at Gujarat, and Implementation of Lube Quality improvement at Haldia etc. The company is mainly
controlled by the Government of India which owns approx.. 79% shares in the company. It is one of the
Maharatna status companies of India apart from Coal India Limited, NTPC Limited, Oil and Natural Gas
Corporation, Steel Authority of Indian Limited, Bharat Heavy Electricals Limited and Gas Authority of India
Limited.

Indian Oil Corporation Limited operates a network of 11,214 km long crude oil, petroleum product and gas
pipelines with a capacity of 77.258 million metric tonnes per annum of oil and 10 million metric standard cubic
meter per day of gas. Cross-country pipelines are globally recognized as the safest, cost-effective, energy-
efficient and environment friendly mode for transportation of crude oil and petroleum products. Indian Oil has
one of the largest petroleum marketing and distribution networks in Asia with over 35,000 marketing points
Indian Oil's countrywide network of over 22,000 sales points (as on 1st April, 2004) is backed for supplies by
its extensive, well spread out marketing infrastructure comprising 167 bulk storage terminals, installations and
depots, 94 aviation fuelling stations and 87 LPG bottling plants. Its subsidiary, IBP Co. Ltd. is a stand-alone
marketing company with a nationwide network of over 3,000 retail sales point

3. Guwahati Refinery (Noonmati)

Guwahati Refinery is one of the largest production based organization in the entire Northeast having more
than 900 employees. Guwahati Refinery, the first public sector refinery of the country, was built with
Romanian collaboration and was inaugurated by the first Prime Minister of India, Pandit Jawaharlal Nehru,
on 1st January 1962. Indian Oil commissioned India's first product pipeline, the Guwahati - Siliguri
pipeline, in 1965. This 435-Km pipeline connecting Guwahati Refinery to different installations was
designed to carry about 0.818 MMT of oil per year. As on 1st April 2003 Indian Oil operates the country's
largest network of 7170 km of crude and product pipeline with a total capacity of 52.75 million metric tons
per annum.

From a small beginning with a sale of 0.032 million kiloliters, Indian Oil achieved sales of 10 million
kiloliters with a turnover of Rs. 635 crore and profit Rs. 22.5 crore by the late 60's. From then on, the
company has grown from strength to strength and presently the company sold 46.46 million tons of
petroleum products in the domestic market during the financial year 2003. Guwahati Refinery is amongst
those Indian Refineries who have been rewarded with ISO- 9001 certification of International Quality

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Standards as well as ISO-14001, for Environment Management System and Occupational Health and Safety
Management System (OSHMS) which is also a stringent International Standard which very few Indian
Companies have achieved till date. M/s DNV has certified Guwahati Refinery with International Safety
Rating System (ISRS) level-6 certification. These achievements show the deep commitment of Guwahati
Refinery to Quality, Safety and Environmental Management System.

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CHAPTER – 3
(Analysis and Interpretation)

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1. Dupont Analysis

 The name comes from the Dupont Corporation, U.S. That started using this formula in the 1920s.
 DuPont analysis is an expression which breaks ROE (Return On Equity) into three parts.
 Return on Equity = Net Profit Margin X Asset Turnover X Financial Leverage.
 The DuPont system for financial analysis is a means to fairly quickly and easily assess where the
business strengths and weaknesses potentially lie and thus where management time may optimally
be spent. It is a fairly straight-forward and systematic means to drill back into the financial numbers
to determine the source or lack thereof for financial performance.
 The DuPont system has disadvantages as does any financial analysis system. However, its advantage
beyond simplicity of use is that it takes into account the major ― levers of firm profitability –
efficiency, asset use, and debt leverage.

ROA and ROE ratio

 The return on assets (ROA) ratio developed by DuPont for its own use is now used by many firms
to evaluate how effectively assets are used. It measures the combined effects of profit margins and
asset turnover.
 The return on equity (ROE) ratio is a measure of the rate of return to stockholders. Decomposing
the ROE into various factors influencing company performance is often called the Du Pont system

Figure 4.1 – Dupont system

Table 3.1
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Table 3.2 Dupont Three factor Calculation

Figure 3.2 Dupont Three factor chart

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 Table 3.3 – Return on Equity

Figure 3.3 Return on Equity chart

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 Figure 3.4 – 4-years trend line for Dupont system

Interpretation:
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  If a company's ROE goes up due to an increase in the net profit margin or asset turnover, this is a very
positive sign for the company. However, if the equity multiplier is the source of the rise, and the
company was already appropriately leveraged, this is simply making things more risky.
 If the company is getting over-leveraged, the stock might deserve more of a discount despite the rise in
ROE.
 The company could be under-leveraged as well. In this case it could be positive and show that the
company is managing itself better.
 To find the highly influencing factor from those three factors like (i.e.) Net income ratio, Asset turnover
ratio and financial leverage ratio. By keeping Return on Equity (ROE) as the dependent variable and
other three factors are independent variables.
 From the above table we can find that financial leverage of the company was highly influencing the
Return on Equity (ROE) (significant level is 0.011) when compared to other two factors Net income and
Asset turnover both are reached more than 0.5 in the significant level. So, IOCL's ROE is highly
influenced by its financial leverage.

2. Motaal’s Liquidity Test

 The liquidity position of a company is largely affected by the composition of working capital in as
much as any considerable shifts from the relatively more current assets to the relatively less current
assets and vice versa will materially affect a company's ability to pay its current debts promptly.
 Therefore, to determine the liquidity position of the company under this study is more precise.

It contains four constrains

I. Inventory Current Asset × %

II. Debtors Current Asset × %
III. Cash & Bank Current Asset × %
IV. (Loans & Advances + Other Asset) Current Asset × %

Table 3.4 - Motaal’s Liquidity Test (Rank Calculation)

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Interpretation:

In this Test we can observed that the company under study registered the most sound liquidity position in the
year 2011-12, This yearly ranking indicates that there is no any moderate improvement in the liquidity
performance of the company.

3. Altman – Z Score Test

Altman Z-Score is a mathematic (quantitative balance-sheet method) model used to evaluate the company's
probability of bankruptcy in the next two years. This model was created combining five different financial
ratios, calculated using the accounting data of those companies that had already gone bankrupt in the past. This
model does not calculate the exact probability of a company's bankruptcy. It is more of a statistics-based
model, developed in 1968, but is still the most widely used one. Data needed to calculate this ratio is collected
from the balance sheet, income statement and stock market bulletin, and the cash flow statement

There are five variables

 X1 = (Working Capital/Total Assets).

 X2 = (Retained Earnings/Total Assets).
 X3 = (EBIT/Total Assets).
 X4 = (Market Value of Equity/Total Liabilities).
 X5= (Net Sales/Total Assets).
 For Public Companies, the Model is calculated as follows:
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 Z = 1.2*X1 + 1.4*X2 + 3.3*X3 + 0.6*X4 + 1.0*X5

Altman Z- Score gives as follows:

 Z-SCORE ABOVE 3.0 -The Company is considered 'Safe' based on the financial figures only.
 Z-SCORE BETWEEN 2.7 and 2.99 - 'On Alert'. This zone is an area where one should 'Exercise
Caution'.
 Z-SCORE BETWEEN 1.8 and 2.7 - Good chance of the company going bankrupt within 2 years of
operations from the date of financial figures given.
 Z-SCORE BELOW 1.80- Probability of Financial Catastrophe is Very High.
 If the Altman Z-Score is close to or below 3, then it would be as well to do some serious due diligence
on the company in question before even considering investing.
 In overall Altman Z-score test was the very useful tool to find the whether the company have the chance
of getting bankrupt.

Table 3.5 – Data required for Altman Z-Score Test

Table 3.6 – Altman Z-score Calculation

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 Figure 3.5 – Altman Z-Score Chart

Interpretation

The above shows that in the past four years the company never faced the danger zone like

(Chance of the company going bankrupt within 2 years of operations.)

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 4. Ratio Analysis

4.4.1 Short – Term solvency

I. Current Ratio

The simplest measure of a firm's ability to raise fund to meet short term obligation is the current ratio. Current
ratio is the ratio of the firm's total current assets to its current liabilities. Apparently the higher the current ratio
shows the greater the short-term solvency. A low ratio an indication that a firm may not be able to pay its future
bills on time.

(Current Ratio = Current Assets Current Liabilities)

Table 3.7 – Current Ratio Calculation

Figure 3.6 - Current Ratio Chart

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 Interpretation:

The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. Acceptable
current ratios vary from industry to industry. If a company's current assets are in the range of 2:1, then it is
generally considered to have good short-term financial strength. If current liabilities exceed current assets (the
current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current
ratio is too high, then the company may not be efficiently using its current assets. As a conventional rule a current
ratio of 2 to 1 or more is considered satisfactory. This rule is based on the logic that in a worse situation, even if the value
of current assets becomes half, the firm will be able to meet its obligation. However, an arbitrary standard of 2 to 1 should
not be blindly followed. Firms with less than 2 to 1 current ratio may be doing well, while firms with 2 to 1 or even higher
current ratios may be struggling to meet their obligations. This is because current ratio is a measure of quantity and not
quality.

II. Liquid Ratio

Liquidity ratio expresses a company's ability to repay short-term creditors out of its total cash. The liquidity
ratio is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term
liabilities are covered by cash. If the value is greater than 1.00, it means fully covered.

(Liquid Ratio = Liquid Assets ÷ Current Liabilities)

Table 3.8 - Liquid Ratio Calculation

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 Figure 3.7 – Liquid Ratio Chart

Interpretation:

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 All current assets are not equally liquid. While cash is readily available to make payments to suppliers and
debtors can quickly convert into cash, inventories are two steps away from conversion into cash (sale &
collection). Thus, a larger current ratio by itself is not a satisfactory measure of liquidity when inventories
constitute a major part of the current assets. Therefore, the quick ratio, or acid test ratio, is computed as a
supplement to the current ratio. The ratio relates highly liquid current assets, usually current assets less
inventories, to current liabilities. A general rule of thumb states that the ratio should be 1 to 1 (or 1:1 or 1/1)

Liquid Ratio = {Current Assets- (Inventories + Prepaid expenses)} / {Current Liabilities -Bank Overdraft}

Generally, a quick ratio of 1to 1 is considered to represent a satisfactory financial condition. However, it should
be remembered that all debtors may not be liquid, and all the inventories are not absolutely non- liquid. Thus, a
company with a high value of quick ratio can suffer from the shortage of funds if it has slow paid, doubtful and
long-duration outstanding debtors. On the other hand, a company with a low value of quick ratio may really be
prospering and paying its current obligation in time if it has been turning over its inventories effectively.

III. Cash Ratio / Absolute Liquid ratio

CASH RATIO = (CASH + MARKETABLE SECURITIES)/CURRENT LIABILITIES

TABLE 3.9 - Cash Ratio Calculation

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 FIGURE 3.8 – Liquid Ratio Chart

Interpretation:

Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent to current
liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may be included in
the computation of cash ratio. Cash Ratio shows the extent to which cash and marketable securities are able to
meet the current liabilities.

There is nothing to be worried about the lack of cash if the company has reserve borrowing power. In India,
firms have credit limits sanctioned from banks, and can easily draw cash.

IV.4.2 Long – Term Solvency

I. Debt Equity Ratio

The debt-to-equity ratio (also called the risk ratio or leverage ratio) provides a quick tool to financial
analysts and prospective investors for determining the amount of financial leverage a company is using,
and thus its exposure to interest rate increases or insolvency. Knowing how to analyze the debt-to-equity
ratio can help you assess a company's financial health before investing.

Debt Equity Ratio = Debt/Equity

Table 3.9 – Debt Equity ratio Calculation

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 Figure 3.8 – Debt Equity Ratio Chart

Interpretation:

Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent to current
liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may be included in
the computation of cash [Link] Ratio shows the shows the extent to which cash and marketable securities
are able to meet the current liabilities. There is nothing to be worried about the lack of cash if the company has
reserve borrowing power. In India, firms have credit limits sanctioned from banks, and can easily draw cash.

a) Proprietary Ratio

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 Proprietary Ratio Proprietary ratio (also known as Equity Ratio or Net worth to total assets or shareholder
equity to total equity). Establishes relationship between proprietor's funds to total resources of the unit. Where
proprietor's funds refer to Equity share capital and Reserves, surpluses and Total resources refer to total assets.
(Proprietary Ratio = Proprietor's Fund ÷ Total Asset)

Table 3.10 – Proprietary Ratio calculation

Figure 3.9 – Proprietary Ratio Chart

Interpretation:
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This ratio shows that how the company face very low level of net worth in the financial year 2013-14 and
overall proprietary ration level is unbalanced when compared to normal norms.

IV.4.3 Profitability

a. Net Profit Ratio

Net Profit Ratio The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from sales, and income
taxes recognized. It is also used to compare the results of a business with its competitors.

Net Profit Ratio = Net Profit / Sales *100

Table 3.11 – Net Profit Ratio Calculation

Figure 3.10 – Net profit Ratio Chart

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Interpretation:

Net Profit Ratio establishes a relationship between Net Profit (After taxes) and Sales. This ratio is the overall
measure of firm's profitability. Thus

Net Profit Ratio= Net Profit/Net Sales*100

This ratio also indicates the firm's capacity to face adverse economic condition such as price competition, low
demand etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio, it should
be kept in mind that the performances of profits must also be seen in relation to investment of the firm and not
only in relation to sales.

b. Net Operating Profit Ratio

Net Operating Profit ratio is influenced by the methods of financing you utilize. Notice that this ratio employs
earnings before interest and taxes, not earnings after taxes. Profits are taken after interest is paid to creditors. A
fallacy of omission occurs when creditors support total assets. It is used to find how the company earn the profit
in their overall operations.

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 (Net Operating Profit Ratio = Net Operating Profit ÷ Sales × 100)

Table 3.12 Net Operating Profit Ratio Calculation

Figure 3.11 Net Operating Ratio Chart

Interpretation:

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This ratio clearly shows that the company made average on operating expenditure in last three years. And Net
Operating Profit Ratio is fluctuating in past three years.

c. Return on Capital Employed

The return on capital employed (ROCE) ratio, expressed as a percentage, complements the return on equity
(ROE) ratio by adding a company's debt liabilities, or funded debt, to equity to reflect a company's total
"capital employed". This measure narrows the focus to gain a better understanding of a company's ability to
generate returns from its available capital base.

(Return on Capital Employed = EBIT ÷ Capital Employed × 100

Table 3.13 – Return on Capital Employed

Figure 3.12 Return on Capital Employed

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Interpretation:

Here the chart shows that how the returns came for capital employed incurred in each year of the period of the
study. It shows clearly in 2012-13 the return on capital employed reached to lowest in that year. After that the
return is fluctuating.

d. Return on Total Asset

Since income is derived from assets in use through the year, including new plant or machinery, the value used
in the calculation is an average. Return on assets, or ROA, tests management's ability to earn a fair return on
assets. The calculation of this ratio is as follows:

(Return on Total Asset = EBIT÷ Total Asset × 100)

Table 3.13 – Return on Total Asset

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 Figure 3.12 – Return on Total Asset

Interpretation:

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Here the IOCL gets their returns on total asset in fully fluctuating level only.

IV.4.4 Turnover

1. Stock Turnover Ratio

Stock Turnover Ratio This next metric tells the analyst how well a company manages inventory. Once again,
this measure takes information from both the income statement and balance sheet. Typically, higher values of
inventory turnover are a positive sign.

(Stock Turnover Ratio = Cost of Goods sold ÷ Average stock)

Table 3.14 – Stock Turnover Ratio

Figure 3.13 – Stock Turnover Ratio Chart

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Interpretation:

It is observed from the chart that the stock turnover ratio shows lies 1 time throughout the four years period of
study. Hence IOCl has good inventory turnover ratio.

2. Receivable Turnover Ratio

The convenience of credit, and relatively attractive repayment terms, results in the vast majority of revenues
starting out as accounts receivable. This brings us to the next measure of efficiency: accounts receivable
turnover. This measure tells the analyst how effective a company is at managing the credit they're extending to
customers.

(Receivable Turnover Ratio = Sales Trade Receivables)

Table 3.15 – Receivable Turnover Ratio

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 Figure 3.14 – Receivable Turnover Ratio Chart

Interpretation:

Here the turnover ratio shows how the receivables are involved in total turnover. From the 2010-11 the time of
turnover lies high and gradually decreases. IOCL must concentrate deeply on it.

3. Fixed Asset Turnover Ratio

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his ratio is a rough measure of the productivity of a company's fixed assets (property, plant and equipment or
PP&E) with respect to generating sales. For most companies, their investment in fixed assets represents the
single largest component of their total assets. This annual turnover ratio is designed to reflect a company's
efficiency in managing these significant assets.

(Fixed Asset Turnover Ratio = Sales / Fixed Asset)

Table 3.15 – Fixed Asset Turnover Ratio Calculation

Figure 3.14 – Fixed Asset Turnover Ratio Chart

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Interpretation:

From the chart it is known that the Fixed Asset Turnover Ratio of IOCL is fluctuating for past four years.
Generally higher the total asset turnover ratio betters the profit being. So total asset turnover ratio of IOCL is
satisfied.

4. Working Capital Turnover Ratio

The Working Capital Turnover Ratio is used to measure the efficiency of the firm. This also indicates whether
or not working capital has been effectively utilized in making sales. It measures the efficiency in working
capital management. In case company can achieve higher volume of sales with relatively small amount of
working capital. It is an indication of the operating efficiency of the company.

(Working Capital Turnover Ratio) = Sales / Working Capital

Table 3.16 – Working Capital Turnover Ratio Calculation

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 Figure 3.15 – Working Capital Turnover Ratio Chart

Interpretation:

Working capital turnover indicates the efficiency of the firm in utilizing the working capital in the business. It is
observed from the table that the working capital turnover ratio of IOCL show the negative value on 2010-11 and
sudden increment in the 2013-14. It shows that the company earns sufficient returns using working capital
increases.

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 Trend Analysis
For Five Years (Trend % when 2010-11 as base year)

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 Figure 3.16 – Trend Line for Financial Highlights

Interpretation:

The above chart and table show that the company's financial highlights are increasing or vice versa from 2010-
11(base year). Cash and Bank balance increase in 2012-13 and payables is remained same in every years.
Reserves & surplus is increase as more than twice from the base year. In overall the major financial highlights
of the company shows increasing trend only except cash and bank balance.

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 CHAPTER – 4
(Conclusion and Recommendations)

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 A. Conclusion

This project of Performance analysis in the production concern is not merely a work of the project. But a brief
knowledge and experience of that how to analyze the financial performance of the firm. The study undertaken
has brought in to the light of the following conclusions. According to this project I came to know that from the
analysis of financial statements it is clear that Indian Oil Corporation Ltd have been doing a satisfactory job.
But the firm has certain areas to ponder upon like capital employment and management of working capital. So
the firm should focus on getting of profits in the coming years by taking care internal as well as external factors.
And with regard to resources, the firm is take utilization of the assets properly.

B. Recommendations

 The company must keep on making profit in the forthcoming years, which will also enhance the share
value of the company.
 They should increase the value of Net Margin and Asset Turnover for influencing the high rate of
Return on equity.
 The company must concentrate on the improvement of Liquidity position by making balanced
liabilities.
 The activity ratios tell that company operates efficiently but it needs to accelerate the process of
collection period form debtors. The fixed assets and inventory turnover must be maintained well in
order to achieve efficiency in its operations.
 The company can invest in marketable securities to improve its cash ratio.
 The company's working capital has been found to be low. It is advised that the company should try to
reduce its investment and try to make more profit so that the ratio increases.
 The company should try to try to achieve maximum sales with minimum of capital employed.
 Try to increase the Debt equity ratio, by concentrate on controlling Debt issues.
 The company must try to control the operating expenses which give unexpected loss.
 The company should try to increase the profit before interest and tax so that the Investments in the firm
are attractive as the investors would like to invest only where the return is higher
 The company has shown huge growth in terms of profitability in the year 2012-13 when compared to
recent years. So, it must now make a constant effort to achieve those heights by its efficient way
operating as the investors first see only the profit of the firm.
 The company must increase their research and development process for its own improvements.

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 The company must switch over to new technology machines to enhance their production capability. The
company should regularly make use of ratio analysis and measure should be taken to improve
undesirable ratios at least as to the point of industry's average.
 Operational efficiency should be increased by reducing cost and wastage that improves operating and
management performance. Supply of working capital should be adequate.

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