INDEX

CHAPTERS TITLE PAGE NO.

1 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
1.2 LITERATURE REVIEW
1.2 NEED OF THE STUDY
1.3 OBJECTIVE OF THE STUDY
1.4 RESEARCH METHODOLOGY
1.5 LIMITATION THE STUDY
1.6 CHAPTER PLANNING

2 CONCEPTUAL FRAME WORK

2.1 CONCEPT OF RISK AND RETURN

2.2 CONPANY PROFILE

3 DATA ANALYSIS &

INTERPRETATION

4 FINDINGS & SUGGESTIONS

5 CONCLUSIONS

6 BIBLIOGRAPHY
 CHAPTER: 1

INTRODUCTION
1.1 BACKGROUND OF THE STUDY
1.2 LITERATURE REVIEW
1.3 NEED OF THE STUDY
1.4 OBJECTIVE OF THE STUDY
1.5 RESEARCH MRTHODOLOGY
1.6 LIMITATION OF THE STUDY
1.7 CHAPTER PLANNING
 1.1 BACKGROUND OF THE
STUDY
Accounting is the process of identifying, measuring and communicating economic
information to permit informed judgement by users of information (American Accounting
Association, 1966). The objectives of financial statement are to provide information about the
financial position, performance and changes in financial position of the enterprise that is
useful to a wide range of users in making economic decisions
Analysis of financial statement is a systematic process of critical evaluation of the financial
information given in financial statement so that these information may be understood
properly. For the purpose of analysis individual items are studied, their relationship with
other relevant figures is establish and the data are sometime re-arranged to have better
understanding of the information with the help of various tools for the purpose.
Financial statement analysis is the process of identifying the strength and the weakness of the
firm by properly establishing relationships between the items of financial statements. It helps
analysts make an understanding of past performance of the firm based on which they make
prediction about future performance and risk of the firm. Financial statement analysis
ascertains the significance of the data contained in the financial statements with a view to
understanding the different aspects of the firm such as liquidity, solvency, leverage effect
and profitability of the firm.
Modern financial statements analysis is not, however, restricted to only financial statements.
It also covers the study of the environment – both internal and external, in which the
company operates. Thus, financial statements along with non- financial factors affecting the
firm such as competitive and regulatory environment, customer relations , risk involved,
employee morale, etc.

ADVANTAGE OF FINANCIAL STATEMENT ANALYSIS

The advantages of financial statement analysis are listed below:

 The most important benefit if financial statement analysis is that it provides an idea to the
investors about deciding on investing their funds in a particular company.
 Another advantage of financial statement analysis is that regulatory authorities like IASB
can ensure the company following the required accounting standards.

 Financial statement analysis is helpful to the government agencies in analyzing the taxation
owed to the firm.
 Above all, the company is able to analyze its own performance over a specific time period.
 1.2 LITERATURE REVIEW
[Link] Vancy (1993) conducted a study to measure the changes of status in the
families of United States of America by using financial ratios selected from different
categories for a period of four years ranging from 1983 to 1986. This study used the
financial ratios as indicators of progress to answer the question whether the households
were able to improve their financial status during the study period.

[Link] and Salvador (2003) also carried out a study on financial ratios of U.S
manufacturing firms for a period of eight years since 1993 to 2000 to understand the
behavior and adjustment process of the same. A proper balance between sales and
assets generally specify that the assets are managed and utilized well towards the sales
generation. The main aim of the company is to maximize its profit and profitability ratios
helps to measure overall performance and efficiency of the firm.

3. Peeler J. Patshula (2006), he define that a sound business analysis tells others a
lot about good sense and understanding of the difficulties that a company will face. We
have to make sure that people know exactly how we arrived to the final financial
positions. We have to show the calculation but we have to avoid anything that is too
mathematical. A business performance analysis indicates the further growth and the
expansion. It gives a physiological advantage to the employees and also a planning
advantage.

4. Susan Ward (2008), emphasis that financial analysis using ratios between key
values help investors cope with the massive amount of numbers in company financial
statements. For example, they can compute the percentage of net profit a company is
generating on the funds it has deployed. All other things remaining the same, a company
that earns a higher percentage of profit compared to other companies is a better
investment option.

5. Ahmed and Ahmed (2014) conducted a study to analyze the effect of mergers
upon financial performance of manufacturing industries in Pakistan. Twelve
manufacturing companies were selected for the study which had involved in the process
of merger during 2000-2009. Three years data before merger and three years data after
merger were used to test the significance of study. Paired sample t-test was applied on
accounting ratios. The study revealed that overall financial performance of acquiring
manufacturing corporations were insignificantly improved after the merger. The
liquidity, profitability and capital position of the selected companies were insignificantly
improved and the efficiency deteriorated after the merger. Finally, it was concluded that
merger impacted on different industries of manufacturing sector differently.

6. Rooh Ollah Arab, Seyed Saadat Masoumi and Azadeh Barati (2015)
examined the financial performance of identified units in the steel industry in India in
terms of financial ratios such as Liquidity, Solvency, Activity and Profitability position. For
this study, Tata Steel Ltd., Jindal Steel & Power Ltd., J S W Steel Ltd., Bhushan Steel Ltd.
and Steel Authority of India Ltd. are selected for this study. The study evaluated the
impact of selected variables on the financial performance of identified units in the steel
industry, ANOVA-Test analysis is used.

7. Ramaratnam and Jayaraman (2010) used financial ratios in terms of liquidity,

profitability, variability and sustainability to measure the financial performance of Indian
steel industry for a period of five years from 2005 to 2010. Their study reveals that the
critical situation faced by the Indian steel industry is due to over capacity and demand
slowdown resulting in price cuts.

8. A study has been conducted by Pal (2011) on the Indian steel companies for a
period of ten years range between 2000-01 and 2009-10 to measure the profitability of
the selected companies which is of major importance to the internal and external
stakeholders to determine the earning capacity together with the credibility of the
companies to sustain in the competition for a long run.

9. Tiwari (2013) examined working capital management efficiency in Indian cement

industry. They found that though some of the sample firms had successfully improved
efficiency during these years, the existence of a very high degree of inconsistency in this
matter clearly pointed out the need for adopting sound working capital management
policies by these firms. It was suggested that the firms under study should have taken
necessary steps in order to improve their efficiency.

10. Acharya (2013) compared the liquidity position of TATA Steel Ltd. and SAIL and
studied the relationship that exists between liquidity and profitability of both the
companies. The purpose of the study was to investigate the liquidity management
efficiency and profitability position of selected steel companies. Therefore, an attempt
was made to investigate the liquidity position and its impact on the profitability of Tata
Steel Ltd. and Steel Authority of India Ltd for a period of ten years ranging from 2004 to
2013. Various accounting ratios were analyzed with the help of statistical techniques,
such as multiple correlations, multiple regression analysis and t-test. Through the
analysis of the data, it was found that liquidity position had positive impact on the
profitability of the selected firms.

Comparing profit earning capacity of selected Steel companies in India, Popat (2012)
analyzed that TATA steel’s profitability was better than other selected companies while
JINDAL steel’s profitability was next to TATA steel. It was also found that JSW and SAIL
showed fluctuation in their profitability while UTTAM had a decreasing trend in the
profitability during the period of study.

11. Prakash and Natarajan (2014) conducted a study on financial performance of

Salem Steel Authority of India Ltd. The analysis revealed that there is a fluxion in the
gross profit and net profit during the study period. The study helps to identify the
financial position of the company. Optimum utilization of working capital can be planned
so as to result in sound financial position of the company.
 1.3 NEED OF THE STUDY

This research project is about the study of financial performance of Tata steel ltd. The
project is done for the practical knowledge and academic compulsion purpose. For the study I
have taken the five year financial data of Tata steel ltd. I have use different type of ratios to
evaluate and analyze the financial performance of Tata steel ltd. This study is confined to tata
steel only. The scope of the study is limited to collecting financial data published in annual
reports of the company every year.
1.4 OBJECTIVES OF THE STUDY

OBJECTIVES OF THE STUDY:

 To know the financial position of Tata steel.
 To bring out the results of financial strength and weakness of industry through Ratio
analysis.
 To know the correct picture of financial operation of the industry in terms of liquidity and
solvency.
●lastly to grow knowledge on this topic.
 1.5 RESEARCH
METHODOLOGY

Research methodology is a way to systematically solve the research problem. It can be

understood as a science of studying how research is done scientifically. So the research
methodology not only talks about the research methods but also consider the logic behind
the method used in context of the research study.

The data used in this project is of secondary nature. The data is collected from secondary
sources such as various websites, journals, newspapers, books, etc., the analysis used in
this project has been done using selective technical tools.
The data collected were classified and tabulated for analysis. The analytical tool used in
this study. The study employs the following analytical tools:
 Graph
 Ratio analysis
 1.6 LIMITATIONS

The study is based on secondary data, obtained from the publish report and as its finding
depends entirely on the accuracy of such data.
• Based on past data
• It cannot be a substitute for judgment
• Different interpretations
• Changes in accounting methods
• Balance sheet reveals the financial position of a firm on a particular day at the end of the
accounting year
• Financial statement reflected the recorded facts and figures
• Financial statements do not keep with changing price levels.
● The scope of study is limited to collecting financial data published in the annual reports of the company every
year.
●The ratio analysis is done to suggest the possible solutions. The study is carried out for 5years
data of TATA STEEL.
●This study is confined to tata steel only
 1.7 CHAPTER PLANNING
The report of this study includes the following 4 chapters namely:

CHAPTER - 1: INTRODUCTION
This chapter includes introduction of various topics which is related to this study and it also deals
with the fundamentals of the field, definition and important concepts. This chapter also includes
brief literature review and the step-wise procedure of the research methodology was adopted to
carry out this study and its limitations.

CHAPTER -2: CONCEPTUAL FRAME WORK

This chapter gives brief concept about the topic risk and return analysis and also brief
contain of the profile of the company and the complete profile of industry including history,
types, nature, services etc.
CHAPTER - 3: DATA ANALYSIS AND INTERPRETATION
This chapter presents the organized data in the form of tables, graphs and diagrams. The data
would then be analysed using appropriate statistical techniques. And in this chapter the inferences
are made from the analysis.

CHAPTER - 5: FINDINGS, SUGGESTIONS & CONCLUSION

This chapter presents the summary of the study, the findings during the study, arrived conclusions
and acceptable and comprehensive suggestions.
 CHAPTER 2

CONCEPTUAL FRAME WORK:

2.1CONCEPT ON FINANCIAL STATEMENT
ANALYSIS
2.2 COMPANY PROFILE
FINANCIAL STATEMENT
A financial statement is a formal record of the financial activities of a business, person or other entity.
Relevant financial information is presented in a structured manner and in a form of easy to
understand. They typically include basic financial statements, accompanied by a management
discussion and analysis: a balance sheet also referred to as a statement of financial position, reports on
a company’s assets, liabilities and ownership equity at a given point in time. An income statement
also referred as a statement of comprehensive income, statement of revenue and expenses, profit and
loss report, report’s on company’s income, expenses and profit over a period of time.

FINANCIAL STATEMENT ANALYSIS

“Analysis and interpretation of financial statements are an attempt to determine the significance and
meaning of the financial statement data so that forecast may be made of the prospects for future
earnings, ability to pay interest and debt maturities (both current and long term) and probability of a
sound dividend policy.” - KENNADY & MULLER
Methods or tools or technique of financial statement analysis
Ratio analysis – Ratio analysis is a technique of analysis, comparison and interpretation of financial
statement. It is a process through which various ratio are calculated and on that basis conclusions are
drawn which become the base of managerial decision.
Ratio analysis is the comparison of line items in the financial statements of a business. Ratio analysis
is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and
profitability. This type of analysis is particularly useful to analysts outside of a business, since their
primary source of information about an organization is its financial statements.

Types of Ratio
Liquidity ratios – liquidity refers to the ability of a concern to meet its current obligations as and
when they become due. Liquidity ratios measures the short- term solvency of a business and for this
purpose following ratio can be computed:
a) Current ratio = current ratio is a most widely used ratio to judge short term financial position or
solvency of a firm. it can be defined as relationship between current assets and current liabilities
current ratio of 2 : 1 is considered as satisfactory.
Current Ratio= current assets / current liabilities

b) Liquid Ratio = it is also called as Quick ratio or Acid test ratio, measures the ability of business
to pay its short- term liabilities by having assets that are readily converted into cash.

Liquid Ratio= current asset – inventory – prepaid expenses /current liabilities

c) Absolute liquid Ratio= This ratio is also known as super quick ratio and establishes relationship
between absolute liquid assets and liquid liabilities. The ideal level of absolute liquid ratio is 0.5:1.

Absolute liquid ratio= cash and bank balance/current liabilities

d) Cash ratio = it measures of the liquidity of a firm, namely the ratio of the total assets and cash
equivalents.

Cash ratio= cash and bank balance/ current assets

Solvency ratio - this ratio examines whether the total realizable amount from all assets of a firm is
enough to pay all of its external liability or not. In this context this ratio shows the relationship between
total assets and external liabilities of the firm.
a) Debt equity Ratio- this ratio reflects the long- term financial position of a firm and is
calculated in the form of relationship between external equities and internal equities or
shareholders fund. Debt equity ratio may also be called as ‘ratio long term debt to
shareholders funs’.
Debt Equity Ratio= long term debts/ shareholder funds
Or; debt/equity
b) Proprietary ratio- This ratio indicates the relationship between proprietors fund and total
assets. Greater is the proprietor funds better is the position of the creditor.

Proprietary ratio=proprietary funds or shareholders funds/Total assets

Profitability ratio - Profitability ratio is used to evaluate the company’s ability to generate income as
compared to its expenses and other cost associated with the generation of income during a particular
period. This ratio represents the final result of the company. The main category of this ratio are :
a) Gross profit ratio- This ratio measures the marginal profit of the company. This ratio is also
used to measure the segment revenue. A high ratio represents the greater profit margin and
it’s good for the company.

Gross profit ratio = Gross Profit /Sales × 100

Gross Profit= Sales + Closing Stock – opening stock – Purchases – Direct Expenses

b) Net profit ratio - This ratio measures the overall profitability of company considering all
direct as well as indirect cost. A high ratio represents a positive return in the company and
better the company is.
Net profit ratio = Net Profit / Sales × 100
Net Profit = Gross Profit + Indirect Income – Indirect Expenses
C) Return on equity - This ratio measures Profitability of equity fund invested the company. It
also measures how profitably owner’s funds have been utilized to generate company’s revenue.
Return on equity =Profit after Tax/ Net worth x 100
Where, Net worth = Equity share capital, and Reserve and Surplus
c) Return on capital employed- Return on capital employed (ROCE) is a financial ratio that can
be used in assessing a company's profitability and capital efficiency. In other words, this ratio
can help to understand how well a company is generating profits from its capital as it is put to
use.
 Return on capital employed (ROCE) = net profit before interest and tax / capital employed X
100

d) Operating profit ratio - Operating profit ratio establishes a relationship between operating
Profit earned and net revenue generated from operations (net sales). operating profit ratio is a
type of profitability ratio which is expressed as a percentage.

Operating profit ratio = operating profit / net sales X 100

Tata Steel Limited is an Indian multinational steel-making company based in Jamshedpur, Jharkhand
and is headquartered in Mumbai, Maharashtra, India. It is a subsidiary of the Tata Group.
Formerly known as Tata Iron and Steel Company Limited (TISCO), Tata Steel is among the top steel
producing companies in the world with an annual crude steel capacity of 34 million tons per annum. It
is one of the world's most geographically-diversified steel producers, with operations and commercial
presence across the world. The group (excluding SEA operations) recorded a consolidated turnover of
US$19.7 billion in the financial year ending 31 March 2020. It is the second largest steel company in
India (measured by domestic production) with an annual capacity of 13 million tons after SAIL.
Tata Steel operates in 26 countries with key operations in India, Netherlands and United Kingdom,
and employs around 80,500 people. Its largest plant (10 MTPA capacity) is located in Jamshedpur,
Jharkhand. In 2007, Tata Steel acquired the UK-based steel maker Corus. It was ranked 486th in the
2014 Fortune Global 500 ranking of the world's biggest corporations. It was the seventh most valuable
Indian brand of 2013 according to Brand Finance.
In July 2019 Tata Steel Kalinganagar (TSK) was included in the list of the World Economic Forum's
(WEF's) Global Lighthouse Network, showing leadership in applying Fourth Industrial Revolution
technologies to drive financial and operational impact.
Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing headquarters at the
Tata Centre in Kolkata, West Bengal. It has a presence in around 50 countries with manufacturing
operations in 26 countries including: India, Malaysia, Vietnam, Thailand, UAE, Ivory Coast,
Mozambique, South Africa, Australia, United Kingdom, The Netherlands, France, Canada.
Tata Steel primarily serves customers in the automotive, construction, consumer goods, engineering,
packaging, lifting and excavating, energy and power, aerospace, shipbuilding, rail and defence and
security sectors. Tata Iron and Steel Company (TISCO) was founded by Jamsetji Tata and established
by Dorabji Tata on 26 August 1907. TISCO started pig iron production in 1911 and began producing
steel in 1912 as a branch of Jamsetji's Tata Group. The first steel ingot was manufactured on 16
February 1912. During the First World War (1914-1918), the company made rapid progress. By 1939,
it operated the largest steel plant in the British Empire. The company launched a major modernization
and expansion program in 1951. Later, in 1958, the program was upgraded to 2 million metric tonnes
per annum (MTPA) project. By 1970, the company employed around 40,000 people at Jamshedpur,
and a further 20,000 in the neighbouring coal mines. In 1971 and 1979, there were unsuccessful
attempts to nationalise the company. In 1990, the company began to expand, and established its
subsidiary, Tata Inc., in New York. The company changed its name from TISCO to Tata Steel Ltd. in
2005.
Tata Steel on Thursday, 12 February 2015 announced buying three strip product services centres in
Sweden, Finland and Norway from SSAB to strengthen its offering in Nordic region. The company,
however, did not disclose the value of the transactions.
In September 2017, ThyssenKrupp of Germany and Tata Steel announced plans to combine their
European steel-making businesses. The deal will structure the European assets as Thyssenkrupp Tata
Steel, an equal joint venture. The announcement estimated that the company would be Europe's
second-largest steelmaker, and listed future headquarters in Amsterdam.

RATAN TATA (1937)

The beginning of the 1990s ushered in plenty of
change in Indian business. Economic reforms
opened up many sectors, signalling increased
competition and the arrival of foreign companies.
JRD Tata’s death, in 1993, symbolised the end of an
era in more ways than one. Ratan Tata, who took
over as chairman in 1991, guided the Tata group in
a fast-changing business environment where old
rules did not apply and new realities were taking hold. Mr Tata retired as Chairman of Tata Sons on
December 28, 2012.