Financial statement analysis at bsnl

financial analysis at bsnl

1. 1 | P a g e

Financial Statement Analysis
AT

BHARATH SANCHAR NIGAM LTD
(NATIONAL ACADEMY OF TELECOM FINANCE AND MANAGEMENT)
By
PEDA BABU VADIYALA
(2015MBA0155)
Under the guidance of
Sri S.Sethu, Dy. General Manager and P.Srikanth
Junior Accounts Officer
BHARATH SANCHAR NIGAM LTD
(NATIONAL ACADEMY OF TELECOM FINANCE AND MANAGEMENT)
&
Dr. Ganapathi Sinnor
Assistant Professor of Management
Central University of Karnataka, Gulbarga



Department of Business Studies
School of Business Studies
Central University of Karnataka, Gulbarga

23.04.2016-07.06.2016

2. 2 | P a g e



DECLARATION
I the undersigned, hereby declare that the report entitled “FINANCIAL
STATEMENT ANALYSIS ” carried out at NATFM-BSNL is my
original work written and submitted by me in partial fulfillment of
Master‟s Degree in Business Administration in CENTRAL
UNIVERSITY OF KARNATAKA, GULBARGA. I also declare that
the project has not been submitted earlier to any other university or
institution.



Date:
Place: (PEDA BABU VADIYALA)

3. 3 | P a g e

ACKNOWLEDGEMENT
I take this opportunity to extend my profound thanks and deep sense of
gratitude to the authorities of NATFM-BSNL, for giving me this
opportunity to undertake this project work in their esteemed
organization. I profusely thank P.SRINIVASA RAO AO (HR), Sri
S.Sethu, Dy. General Manager and P.Srikanth Junior Accounts Officer
of BSNL and I am greatly indebted to NATFM-BSNL, for sparing his
valuable time and exceptional guidance during the course of my project
work.

My sincere thanks to honorable Professor & Head of the Department
(HOD) Dr.M.V.Alagwadi and my project guide Dr.Ganapathi sinnor,
MBA assistant professor for the encouragement and constant support
extended in completion of this project work from the bottom of my
heart. I am also thankful to all those who have incidentally helped me,
through their valued guidance, co-operation and support during the
course of my project.

4. 4 | P a g e

ABSTRACT
Financial statements are the end products of the financial accounting
practices. The two major financial statements are the balance sheet and
the income statement. Financial statement analysis is a study of the
relationship among various financial facts and figures as given in a set of
financial statements. Financial analysis focuses on the high lighting the
facts and relationships related to managerial performance, corporate
efficiency, financial strengths and weaknesses and credit worthiness of
the company.
The term „financial analysis‟ includes both „analysis and interpretation‟ .
The term analysis means simplification of financial data, by methodical
classification, given in the financial statements. Interpretation means
explaining and significance of the data so simplified. These two are
complimentary to each other. Analysis is useless without interpretation
and interpretation without analysis is difficult.
Financial analysis can be undertaken by the management of the firm, or
by the parties outside the firm, owners, trade creditors, lenders,
investors, labor unions, analysts and others. The nature of analysis will
differ depending on the purpose of the analyst. Most widely used
techniques of financial statements analysis are comparative statements,
common size statements, trend analysis, ratio analysis, funds flow
analysis and cash flow analysis.

5. 5 | P a g e

CONTENTS

CHAPTER TITLE PAGE NO.
1 INTRODUTION 6-11
2 INDUSTRY
PROFILE
12-32
3 COMPANY
PROFILE
33-48
4 REVIEW OF
LITERATURE
49-59
5 DATA ANALYSIS &
INTERPRETATION
60-78
6 FINDINGS,
SUGGESSTIONS
AND CONCLUSION
79-83
7 BIBLIOGRAPHY 84-85
8 GLOSSARY 86-88
ANNEXURES 89-99

6. 6 | P a g e







CHAPTER-1
INTRODUCTION

7. 7 | P a g e

INTRODUCTION
The term „analysis of financial performance‟ also known a „analysis of
preparation of financial statements‟, refer to the process of determining
financial strength and weaknesses of the firm by establishing strategic
relationship between the items of the balance sheet, profit and loss
account and other operative data.
Accounting is the process of identifying, measuring and communicating
economic information to permit informed judgments and decisions by
users of the information. It involves recording, classifying and
summarizing various business transactions. The end products of business
transactions are the financial statements comprising primarily the
position statement or the balance sheet and the income statement or the
profit and loss account. These statements are the outcome of
summarizing process of accounting and are therefore the sources of
information the basis of which conclusions are drawn about the
profitability and the financial position of a concern.
Financial statements are the basis for decision making by the
management as well as all other outsiders who are interested in the
affairs of the firm such as investors, creditors, customers, suppliers,
financial institutions, employees, potential investors, government and
the general public, the analysis and interpretation of financial statement
depend upon the nature and type of information of financial statement
depend upon the nature and type of information available in these
statements.
An analysis of financial statements is an important aid to the
management of any organization for decision making focus of financial
analysis is on key finger in the financial statements and the significant
relationship exists between key fingers. The analysis of financial

8. 8 | P a g e

statement is a process evaluating relationship between component parts
of firm‟s financial analysis which involves three approaches.
 The first approach views finance as to providing of funds needed
by a business on most suitable terms. This approach confines to the
raising of funds and to the study of financial institutions and
instruments from where funds can be procured.
 The second approach relates finance to cash.
 The third approach views finance as being concerned with rising of
funds and their effective utilization.
DEFINITION:
The process of reviewing and evaluating a company‟s financial
statements, thereby gaining an understanding of the financial health
of the company and enabling more effective decision making.
MEANING OF FINANCIA L STATEMENTS:
A financial statement is an organized collection of data according to
logical and consistent accounting procedures. Its purpose is to convey
an understanding of some financial aspects of business firm. It may
show position at a moment of time as in the case of a balance sheet or
may reveal a service of activities over a given period of time as in the
case of profit and loss account.
Thus, the term financial generally refers to two basic statements:
 The profit and loss account or the income statement and
 The balance sheet or the position statement.
Of course, a business may also prepare
1. Statement of retained earnings and

9. 9 | P a g e

2. Statement of changes in financial position in addition to the
above statements.
These statements are the basic and formal means through which the
corporate management communities financial information to various
users. They are primarily directed towards the needs of owners and
incidentally to the needs of
Owners and incidentally to the needs of external parties, which include
investors, tax authorities, government, employees etc.
SCOPE OF THE STUDY:
The study covers almost the entire area of financial operations covered
by “BHARAT SANCHAR NIGAM LIMITED” the study is been
conducted with the help of data obtained from audited financial records.
The audited financial records are the company annual reports pertaining
to past 5 years from 2010-11 to 2014-15 and the audited financial
records are obtained from the company‟s annual report. The researcher
tries to measure the performance of the organization and its working
capital management in terms of financial wealth.
OBJECTIVES OF THE STUDY:
 To study the financial performance analysis of “BHARAT
SANCHAR NIGAM LIMITED”.
 To analyze the financial changes over a period of five years.
 To analyze the financial statements of the company by using
financial tools.
 To evaluate the financial position of the company in terms of
solvency, profitability, activity and earnings ratios.
 To suggest effective measure in the existing system of the
company.

10. 10 | P a g e

RESEARCH METHODOLGY:
Research means “know about new things”. Sometimes, it may refer to
scientific search pertinent information on specific topic. In fact research
is an art of scientific investigation.
REDMAN AND MORAY defines research as a “systematic effort to
gain knowledge”.
DEFINITION:
Research is defined as “the process used to collect information and data
for the purpose of making business decisions”. The methodology may
include publication research, interviews, surveys and other research
techniques, and could include both present and historical information.
DATA COLLECTION: The data collection is classified into two types
they are as follows.
1. Primary data
2. Secondary data
PRIMARY DATA COLLECTION:
The information collected directly without any reference is primary data.
In this study it is mainly though conversation with concerned officers
and staff numbers individually.
SECONDARY DATA COLLECTION:
The secondary data are collected from information which is used by
other. It is not direct information. This information is already collected
and analyzed by other and that information is used by others. The
secondary data are collected from following ways.
1. Company‟s annual reports

11. 11 | P a g e

2. Company‟s website
3. Manual
LIMITATIONS OF THE STUDY:
 The study is restricted for a period of five years.
 Assumed that years are a responsible period to get fault accurate
picture, policies and practices of management of the company.
 Due to the inadequate time it is not possible to analyze all respects
relevant to the study.
 The analysis is based on annual reports of the company.
 Authorities were reluctant to reveal full information about the
working of the company.

12. 12 | P a g e








CHAPTER-2
INDUSTRY PROFILE

13. 13 | P a g e

INDUSTRY PROFILE
Introduction:
Telecommunication has evolved a basic infrastructure like electricity,
water, roads etc. and also has emerged as one of the critical components
of economic growth required for overall socio economic development of
the country. India‟s telecommunication network is the second largest in
the world based on the total number of telephone users (both fixed and
mobile phone).
The history of Indian telecom can be started with the introduction of
telegraph. The Indian postal and telecom sectors are one of the world‟s
oldest. In 1850, the first experimental electronic telegraph line was
started between Calcutta and Diamond Harbor. In 1851, it was opened
for the use of the British East India Company. The Posts and Telegraphs
department occupied a small corner of the public works department, at
that time.
The Indian Telecom Sector, like most of the infrastructure sectors is
controlled by the state. The Department of Telecommunications (DoT),
reporting to the Ministry of Communications (MoC) is the key body for
the policy issues and regulation, apart from being a basic service
provider to rest of the country. By an act of Parliament, the Telecom
Regulatory Authority of India (TRAI) was formed to be the regulatory
agency

14. 14 | P a g e

Present status of Telecommunication Sector (As on December 31,
2015)
The Indian telecom network with 895.51 million telephone connections,
including 864.72 million wireless telephone connections, at the end of
December 2015 is second largest network in the world after china. Out
of this, 338.59 million telephone connections are in rural areas and
556.92 million are in urban areas of the country. There were 24.01
million Internet subscribers including 14.68 million Broadband
subscribers at the end of September 2015. The number of Broadband
subscribers increased to 14.98 million, end of December 2015.
Key Points:
 Overall Tele-density in the country is 73.34%.
 Urban Tele-density is 149.55%, whereas rural Tele-density is
39.90%.
 The share of wireless telephones in total telephones is 96.56%.
 The share of private sector in total telephones is 85.51%.
Network status during current financial year (2014-15)
The total number of telephones continued to increase till June 2015 and
increased from 951.35 million to 965.52 million during the period April
to June 2015. Thereafter, number of connections declined to 895.51
million by the end of December 2015. The decline in telecom user base
after June 2015 has been primarily due to the removal of inactive mobile
telephone connections by the service providers. The rural telephones
have increased from 330.83 million to 343.88 million during the period
April to June 2015 and declined thereafter to 338.59 million by the end
of December 2015. The urban telephones increased from 620.52 million
to 621.65 million during the period April to June 2015 and then declined
to 556.92 million by the end of December 2015.

15. 15 | P a g e

Evolution of the Indian Telecom Industry:
Indian telecom sector is more than 165 years old. Telecommunications
was first introduced in India in 1851 when the first operational land lines
were laid by the government near Kolkata (then Calcutta), although
telephone services were formally introduced in India much later in 1881.
Further, in 1883, telephone services were merged with the postal system.
In 1947, after India attained independence, all foreign
telecommunication companies were nationalized to form the Posts,
Telephone and Telegraph (PTT), a body that was governed by the
Ministry of Communication. The Indian telecom sector was entirely
under government ownership until 1984, when the private sector was
allowed in telecommunication equipment manufacturing only. The
government concretized its earlier efforts towards developing R&D in
the sector by setting up an autonomous body – Centre for Development
of Telematics (C-DOT) in 1984 to develop state-of-the-art
telecommunication technology to meet the growing needs of the Indian
telecommunication network. The actual evolution of the industry started
after the Government separated the Department of Post and Telegraph in
1985 by setting up the Department of Posts and the Department of
Telecommunications (DoT).
The entire evolution of the telecom industry can be classified into three
distinct phases.
 Phase I- Pre-Libralisation Era (1980-89)
 Phase II- Post Libralisation Era (1990-99)
 Phase III- Post 2000
Until the late 90s the Government of India held a monopoly on all types
of communications – as a result of the Telegraph Act of 1885. As
mentioned earlier in the chapter, until the industry was liberalised in the
early nineties, it was a heavily government-controlled and small-sized
market, Government policies have played a key role in shaping the
structure and size of the Telecom industry in India. As a result, the
Indian telecom market is one of the most liberalised market in the world

16. 16 | P a g e

with private participation in almost all of its segments. The New
Telecom Policy (NTP-99) provided the much needed impetus to the
growth of this industry and set the trend for libralisation in the industry.

17. 17 | P a g e

CURRENT STATUS:
Globalisation has made telecommunication an integral part of the
infrastructure of the Indian economy. The telecom sector in India has
developed as a result of progressive regulatory regime.
According to the TRAI, the total gross revenue of the Indian telecom
services industry was Rs 1,524 bn in FY09 up from Rs 1,291 bn in FY08
registering a growth of 18.03% over FY08 and its subscriber base grew
by 43% over FY08 to touch 429.70 mn subscribers in FY09.

The telecom sector in India experienced a rapid growth over the past
decade on account of regulatory libralisation, structural reforms and
competition, making telecom one of the major catalysts in India‟s
growth story. However, much of this growth can be attributed to the
unprecedented growth in mobile telephony as the number of mobile
subscribers grew at an astounding rate from 10 million in 2002 to 392
million in 2009. Besides, the growth in the service and IT and ITeS
sector also increased the prominence of the telecom industry in India.
Telecom has emerged as a key infrastructure for economic and
consumer growth because of its multiplier effect and the fact that it is
beneficial to trade in other industries. The contribution of the sector to
GDP has been increasing gradually (its contribution in GDP has more
than doubled to 2.83% in FY07 from 1.0% in FY92).

18. 18 | P a g e

Telecom is one of the fastest-growing industries in India; on an average
the industry added 8 million wireless subscribers every month in FY08.
The government had set a target of 500 million telecom connections by
2010. However, according to the TRAI, the total subscriber base
(wireless and wireline) in the industry crossed the 500-mn-mark and
reached 509.03 mn by the end of September 2009, which took India to
the second position in terms of wireless network in the world next only
to China. Prior to liberalisation, the telecom sector was monopolised by
the public sector and recorded marginal growth; in fact, during 1948-
1998, the incremental teledensity in the country was just 1.92%.
However, the introduction of NTP‟99 accelerated the growth of the
sector and the teledensity increased from 2.33 in 1999 to 36.98 in 2009;
however, much of this growth was brought about by the NTP-99 policy
changes such as migration from fixed license fee to revenue sharing
regime and cost-oriented telecom tariffs. From 2003 onwards the
government has taken certain initiatives such as unified access licensing
regime, reduced access deficit, introduction of calling party pays (CPP)
and revenue sharing regime in ADC that has provided further impetus to
the sector.
The Indian telecom industry is characterised with intense competition,
and continuous price wars. Currently, there are around a dozen telecom
service providers who operate in the wired and wireless segment. The
government has been periodically implementing suitable fiscal and
promotional policies to boost domestic demand and to create volumes
for the industry.
The Indian telecom industry has immense growth potential as the
teledensity in the country is just 36 as compared with 60 in the US, 102
in the UK and 58 in Canada. The wireless segment growth has played a
dominant role in taking the teledensity to the current levels. In the next
few years, the industry is poised to grow further, in fact, it has already
entered a consolidation phase as foreign players are struggling to acquire
a pie in this dynamic industry.

19. 19 | P a g e

Role in India’s Development
Contribution to GDP
According to the UNCTAD, there is a direct correlation between the
growth in mobile teledensity and the growth in GDP per capita in
developing countries, which tend to have a high percentage of rural
population. The share of the telecom services industry in the total GDP
has been rising over the past few years (the telecom sector contribution
in GDP went up from 2.52% in FY05 to 2.83% in FY07).


Employment
The Indian telecommunication industry employs over 400,000 direct
employees and about 85% of these employees are from government-
owned companies. The ratio of number of subscribers to employees, an

20. 20 | P a g e

indication of efficiency and profitability, is much higher for private
companies than for government companies.

Foreign Direct Investment (FDI)
Foreign direct investment has been one of the major contributors in the
growth of the Indian economy, and therefore, the need for higher FDI is
felt across sectors in the Indian economy. The telecom sector has played
a crucial role in attracting FDI in India. The share of telecom sector in
the total FDI inflows in India has gone up to 10% in FY09 as compared
with just 3% in FY05.
The telecom sector requires huge investments for its expansion as it is
capital-intensive and FDI plays a vital role in meeting the fund
requirements for expansion of the telecom sector. Telecom accounts for
almost 10% of the total FDI inflows in the country and has been the
third-largest sector to attract FDI in India in the post-liberalisation era

21. 21 | P a g e


The Indian telecom industry has been an attractive avenue for foreign
investors over the years. As per DIPP figures, the cumulative FDI inflow
during August 1991 to June 2009 period, in the telecommunication
sector amounted to US$ 113 bn. FDI calculation takes into account radio
paging, cellular mobile and basic telephone services in the
telecommunication sector.
In the 2004-05 Budget, the government raised the FDI limit from 49% to
74% in the telecom services segment subject to retention of local
management control. According to the new norms, 26% share out of the
74% should be held by an Indian company or an Indian citizen with
Indian management. Further, 100% FDI is permitted in telecom
manufacturing, category I infrastructure providers, ISPs without
gateway, call centres and IT-enabled services. Further, direct or indirect
FDI up to 74% is permitted subject to licensing and security
requirements for ISPs with gateways, radio paging operators and
category II infrastructure providers.
The relaxation in FDI norms has attracted many foreign telecom majors
to the sector. The presence of foreign players has not only encouraged
faster infrastructure development and upgradation but also has opened
up the domestic industry to foreign competition. Since 2004, there has

22. 22 | P a g e

been a large inflow of FDI in the sector. During 2004-05 and 2005-06, a
period during which the FDI norms were relaxed, the FDI inflow grew
by an astounding 300% to US$ 624 mn in 2005-06 from merely US$
125 mn in 2004-05. The inflow of FDI has provided tremendous impetus
to the sector in the past few years and the attractiveness of the sector has
kept the FDI inflows growing steadily. During FY09 the FDI in the
telecom sector at US$ 2,558 mn was 103% higher than that seen in
FY08 at US$ 1,261 mn. Further, the FDI in the sector has already
reached US$ 2010 mn for a six month period of FY10 (Apr-Sep 09) and
is expected to surpass the total FDI for FY09.
The government‟s liberalised FDI policies have resulted in several
foreign companies entering into the Indian markets. The influx of
foreign players in the Indian telecom industry has led to capacity
creation, and better infrastructure, which in turn has bettered the network
quality. The rise in FDI has also enabled technology transfer, market
access and has improved organisational skills; going forward, FDI could
be used for providing telecom services to rural areas, where teledensity
is still very low.
The change in FDI policy that has raised the FDI limit from 49% to 74%
for the sector has made it more attractive for foreign players. In the long
run the growth prospects of telecom players that have foreign partners
will improve and other players will get new avenues to raise capital.
Growth of IT-ITeS and Financial Sector
India has entered the league of countries with the most-advanced
telecommunication infrastructure after the industry was deregulated.
Furthermore, deregulation has stimulated India‟s economic growth
through industry growth and through rise in investments. It is evident
that a well-developed communication sector improves access to social
networks, lowers transaction costs, increases economic opportunities,
widens markets, and provides better access to information, healthcare
and educational services. The growth in Indian telecom sector has been
concomitant with overall growth in GDP, government revenue,

23. 23 | P a g e

employment et al. Besides, telecommunication has increased efficiency,
reduced transaction costs, attracted investments and has created new
opportunities for business and employment.
The NTP-99 was particularly helpful for the ITeS-BPO industry as it
ended the government monopoly in international calling by introducing
IP telephony. After the introduction of IP telephony, there was rapid
growth in the number of data processing centres and inbound/outbound
call centres, which ultimately led to the outsourcing revolution in India.
The telecom sector has been instrumental in creating jobs for a vast pool
of talented and knowledge professionals in the IT and ITeS-BPO
industry, which thrives on reliable telecommunication infrastructure.
India has become an important outsourcing destination for the world and
the boom in this sector also has transformed India‟s economic dynamics.
The evolution of telecom sector has brought about a revolutionary
change in the way some businesses operate.
Another beneficiary of the telecom revolution is the financial services
industry, which has been on a growth trajectory. The progress and
quality of the financial sector has been a key factor that has driven the
pace and diversity of the real economy. India has an extensive and well-
developed financial sector with wide and sophisticated banking network.
Banking in India has become service-oriented, and has matured greatly
from the days of walk-in customers to the present situation when banks
have migrated to a 24-hour banking platform to attract customers;
however, this disintermediation in the business has led banks to be
extremely prudent in terms of their internal operations and has led them
to adopt newer products and delivery channels. Further, with
introduction of internet & mobile banking the long ques at the banks are
slowly becoming a thing of the past.
Both the financial and the IT-ITeS segments rely on good domestic as
well as international network connectivity; therefore, there is a need for
a sound telecommunication network.

24. 24 | P a g e

Factors Facilitating Growth of the Sector
The phenomenal growth in the Indian telecom industry was brought
about by the wireless revolution that began in the nineties. Besides this,
the following factors also aided the growth of the industry.
Libralisation
The relaxation of telecom regulations has played a major role in the
development of the Indian telecom industry. The liberalisation policies
of 1991 and the consequent influx of private players have led the
industry on a high growth trajectory and have increased the level of
competition. Post-liberalisation, the telecom industry has received more
investments and has implemented higher technology.
Increasing Affordability of Handsets
The phenomenal growth in the Indian telecom industry was
predominantly aided by the meteoric rise in wireless subscribers, which
encouraged mobile handset manufacturers to enter the market and to
cater to the growing demand. Further, the manufacturers introduced
lower-priced handsets with add-on facilities to cater to the increasing
number of subscribers from different strata of the society. Now even
entry-level handsets come with features like coloured display and FM
radio. Thus, the falling handset prices and the add-on features have
triggered growth of the Indian telecom industry.
Prepaid Cards Bring in More Subscribers
In the late nineties, India was introduced to prepaid cards, which was yet
another milestone for the wireless sector. Prepaid cards lured more
subscribers into the industry besides lowering the credit risk of service
providers due to its upfront payment concept. Prepaid cards were quite a
phenomenon among first-time users who wanted to control their bills
and students who had limited resources but greater need to be connected.
Pre-paid cards greatly helped the cellular market to grow rapidly and

25. 25 | P a g e

cater to the untapped market. Further, the introduction of innovative
schemes like recharge coupons of smaller denominations and life time
incoming free cards has led to an exponential growth in the subscriber
base.
Introduction of Calling Party Pays (CPP)
The CPP regime was introduced in India in 2003 and under this regime,
the calling party who initiated the call was to bear the entire cost of the
call. This regime came to be applicable for mobile to mobile calls as
well as fixed line to mobile calls. So far India had followed the
Receiving Party Pays (RPP) system where the subscriber used to pay for
incoming calls from both mobile as well as fixedline networks. Shifting
to the CPP system has greatly fuelled the subscriber growth in the sector.
Changing Demographic Profile
The changing demographic profile of India has also played an important
role in subscriber growth. The changed profile is characterised by a large
young population, a burgeoning middle class with growing disposable
income, urbanisation, increasing literacy levels and higher adaptability
to technology. These new features have multiplied the need to be
connected always and to own a wireless phone and therefore, in present
times mobiles are perceived as a utility rather than a luxury.
Increased Competition & Declining Tariffs
Liberalisation of the telecom industry has fuelled intense competition,
especially in the cellular segment. The ever-increasing competition has
led to high growth of subscribers and has put pressure on tariffs, which
have seen a sharp drop over the years. When the cellular phones were
introduced, call rates were at a peak of Rs 16 per minute and there were
charges for incoming calls too. Today, however, incoming calls are no
longer charged and outgoing calls are charged at less than a rupee per
minute. Thus, the tariff war has come a long way indeed. Increased
competition and the subsequent tariff war has acted as a major catalyst

26. 26 | P a g e

for attracting more subscribers. Apart from these major growth drivers,
an improved network coverage, entry of CDMA players, growth of
value-added services (VAS), advancement in technology, and growing
data services have also driven the growth of the industry.
Outlook
The telecom industry in India has experienced exponential growth over
the past few years and has been an important contributor to economic
growth; however, the cut-throat competition and intense tariff wars have
had a negative impact on the revenue of players. Despite the challenges,
the Indian telecom industry will thrive because of the immense potential
in terms of new users. India is one of the most-attractive telecom
markets because it is still one of the lowest penetrated markets. The
government is keen on developing rural telecom infrastructure and is
also set to roll out next generation or 3G services in the country.
Operators are on an expansion mode and are investing heavily on
telecom infrastructure. Foreign telecom companies are acquiring
considerable stakes in Indian companies. Burgeoning middle class and
increasing spending power, the government‟s thrust on increasing rural
telecom coverage, favourable investment climate and positive reforms
will ensure that India‟s high potential is indeed realised.

27. 27 | P a g e

THE MAJOR PLAYERS IN THE MOBILE PHONE SERVICE
INDUSTRY ARE LISTED BELOW:
BSNL:

The Bharat Sanchar Nigam Limited, country‟s largest cellular service
operator was set up in the year 2000. It is a state owned telecom
company with its headquarters located in New Delhi. BSNL is also the
largest land line telephone established in India. As of April 2011, 87.1
million users have been reported to be BSNL users.
MTNL:

Mahanagar Telephone Nigam Limited (MTNL) was incorporated in the
year 1985, and it started in the year 1986 to run telecom operations in
the major metro cities of India, Mumbai and Delhi. Its headquarters are
based in Mumbai. MTNL was the first company in India to initiate 3G
services in India, having the brand name of “MTNL 3G jadoo Services”
which provided options as video call, mobile TV, mobile broadband etc.
to the customers.

28. 28 | P a g e

AIRTEL:

Also known as Bharti Airtel Limited was started in july 1995, with its
head office based in New Delhi. Airtel runs its operations in as many as
19 countries across the world and is also ranked fifth as telecom service
provider globally. As of April 2011, figures show that Airtel has over
164.61 million users which make it the biggest mobile service operator
in India. Its service includes both 2G and 3G facilities.
RELIANCE COMMUNICATIONS:

Also known as RCOM was set up in 2004, with its head office in Navy
Mumbi. Reliance communications as of now has more than 128 million
users all across the world.

29. 29 | P a g e

AIRCEL:

Aircel was founded in 1999, with its head office in New Delhi. It is a
joint enterprise between Maxis communications and the Apollo
Hospitals.
VODAFONE:

Vodafone Essar was founded in 1994 with its head office in Mumbai.
Vodafone provides services to 23 telecom circles across India.
TATA DOCOMO:

The Tata Teleservices was founded in 1996, with its headquarters in
Navy Mumbai.

30. 30 | P a g e

IDEA CELLULAR:

Idea cellular was started in 1995, with its head office in Mumbai. It also
provides 3G services to its subscribers.

TELENOR:

This company is a joint venture between Telenor group and Unitech
group and was started in 2009.

31. 31 | P a g e

MARKET SHARE OF MOBILE TELECOM SERVICE
OPERATORS IN INDIA:


MILE STONES OF POST AND TELEGRAPH SERVICES IN
INDIA:
1851: First operations land lines were laid by the government near
Kolkata.
1881: Telephone service introduced in India.
1883: Merger with postal system.
1923: Formation of Indian radio telegraphs company.
1932: Merger of ETC and IRT into the Indian radio and cable
communication company (IRCC).
1947: Nationalization of all foreign telecommunication companies to
form the posts, telephone and telegraph (PTT).

32. 32 | P a g e


1985: Department of telecommunication (DOT) established an exclusive
provider of domestic and long distance services.
1986: Conversion of DOT into wholly government owned companies.
The Videsh Sanchar Nigam Limited (VSNL) for international
telecommunications and Mahanagar Telephone Nigam Limited (MTNL)
for service in metropolitan areas.
1994: National Telecom Policy.
1997: Telecom Regulatory Authority of India (TRAI) created.
1999: New Telecom Policy.
2000: DOT becomes a corporation BSNL.
2001: Policy announced for additional licenses in basic and mobile
services.
2002: BSNL enters into GSM cellular operation.
2003: Unified Access (Basic of Cellular) service license (USAL)
introduced as a first step towards unified license Regime.
2003: National Numbering Plan.
2004: Broadband Policy.
2004: License fee reduced by 2% across the board for all access license.
2005: Introduced Broadband in the country.
2012: National Telecom Policy.

33. 33 | P a g e








CHAPTER-3
COMPANY PROFILE
OF
BHARAT SANCHAR NIGAM LIMITED

34. 34 | P a g e

INTRODUCTION:
Bharat Sanchar Nigam Ltd. was incorporated on 15th september 2000 .
It took over the business of providing of telecom services and network
management from the erstwhile Central Government Departments of
Telecom Services (DTS) and Telecom Operations (DTO), with effect
from 1st October„ 2000 on going concern basis.It is one of the largest &
leading public sector units providing comprehensive range of telecom
services in India.

BSNL has installed Quality Telecom Network in the country & now
focusing on improving it, expanding the network, introducing new
telecom services with ICT applications in villages & winning customer's
confidence. Today, it has about 43.74 million line basic telephone
capacity, 8.83 million WLL capacity, 72.60 million GSM capacity,
37,885 fixed exchanges, 68,162 GSM BTSs, 12,071 CDMA Towers,
197 Satellite Stations, 6,86,644 RKm. of OFC, 50,430 RKm. of
microwave network connecting 623 districts, 7330 cities/towns & 5.8
lakhs villages .

BSNL is the only service provider, making focused efforts & planned
initiatives to bridge the rural-urban digital divide in ICT sector. In fact
there is no telecom operator in the country to beat its reach with its wide
network giving services in every nook & corner of the country &
operates across India except New Delhi & Mumbai. Whether it is
inaccessible areas of Siachen glacier or North-Eastern regions of the
country, BSNL serves its customers with a wide bouquet of telecom
services namely Wireline, CDMA mobile, GSM mobile, Internet,
Broadband, Carrier service, MPLS-VPN, VSAT, VoIP, IN Services,
FTTH, etc.
BSNL is numero uno of India in all services in its license area. The
company offers wide ranging & most transparent tariff schemes
designed to suit every customer. BSNL has 90.09 million cellular & 5.06

35. 35 | P a g e

million WLL customers as on 31.07.2011. 3G Facility has been given to
all 2G connections of BSNL. In basic services, BSNL is miles ahead of
its rivals, with 24.58 million wireline phone subscribers i.e. 71.93%
share of the wireline subscriber base.
BSNL has set up a world class multi-gigabit, multi-protocol convergent
IP infrastructure that provides convergent services like voice, data &
video through the same Backbone & Broadband Access Network. At
present there are 8.09 million broadband customers.

The company has vast experience in planning, installation, network
integration & maintenance of switching & transmission networks & also
has a world class ISO 9000 certified Telecom Training Institute.
During the 2010-11, turnover of BSNL is around Rs. 29,700 Crores.
Board of Directors
The Board comprise of 12 Directors, of which 5 [including the CMD]
are whole time Directors and 2 Government Nominee Directors . The
present composition is as under
 Chairman & Managing Director- Shri Anupam Shrivastava
 Director - Consumer Fixed Access(CFA)- Shri N.K.Gupta
 Director - (Enterprise) - Shri N.K.Mehta
 Director - (CM) - Shri R.K.Mittal
 Director - (HRD) & (Fin)- Smt. Sujata Ray
 Govt. Director- Shri N.SIVASAILAM
 Govt. Director- Smt. Padma Iyer Kaul

36. 36 | P a g e

VISION:
 Be the leading telecom service provider in India with global
presence.
 Create a customer focused organization with excellence in
customer care, sales and marketing.
 Leverage technology to provide affordable and innovative telecom.
Services/products across customer segments.
MISSION:
Be the leading telecom service provider in India with global presence.
 Generating value for all stakeholders - employees, shareholders,
vendors & business associates
 Maximizing return on existing assets with sustained focus on
profitability
 Becoming the most trusted, preferred and admired telecom brand
 To explore International markets for Global presence
Creating a customer focused organization with excellence in
customer care, sales& marketing.
 Developing a marketing and sales culture that is responsive to
customer needs mer care, sales& marketing
 Excellence in customer service-”friendly, reliable, time bound,
convenient and courteous service”
Leveraging technology to provide affordable and innovative
products/ services across customer segments
 Offering differentiated products/services tailored to different
service segments
 Providing reliable telecom services that are value for money

37. 37 | P a g e

Providing a conducive work environment with strong focus on
performance
 Attracting talent and keeping them motivated
 Enhancing employees skills and utilizing them effectively
 Encouraging and rewarding individual and team/group
performance
Establishing efficient business processes enabled by IT
 Changing policies and processes to enable transparent, quick and
efficient decision making
 Building effective IT systems and tools
OBJECTIVES:
 To be the Leading Telecom Services provider by achieving higher
rate of growth so as to become a profitable enterprise.
 To provide quality and reliable fixed telecom service to our
customer and thereby increase customers confidence.
 To provide customer friendly mobile telephone service of high
quality and play a leading role as GSM operator in its area of
operation.
STRATEGY FOR:
 Rightsizing the manpower
 Providing greater customer satisfaction
CONTRIBUTE TOWARDS:
 Broadband customers base of 20 Mn in India by the end of 2011-
12 as per broadband policy 2004.
 Providing telephone connections in villages as per Government
policy.

38. 38 | P a g e


To leverage the existing infrastructure of BSNL for facilitating
implementation of other government programs and initiatives
particularly in the rural areas.
 Be the leading Telecom Service Provider in India with global
presence.
 Create a customer focused organization with excellence in sales,
marketing and customer care.
 Leverage technology to provide affordable and innovative
products/services across customer segments
 Provide a conducive work environment with strong focus on
performance
 Establish efficient business processes enabled by IT

39. 39 | P a g e

SERVICES:
1) UNIVERSAL TELECOM SERVICES


Fixed wire line services and landline in loop (WLL) using CDMA
technology called bfone and Tarang respectively.

2) CELLULAR MOBILE TELEPHONE SERVICES



BSNL is major provider of cellular mobile telephone services
using GSM platform under the brand name Cellone and excel
(BSNL Mobile).

40. 40 | P a g e

3) WLL-CDMA telephone services


BSNL‟s WLL (wireless in local loop) service is a service giving
both fixed line telephone & mobile telephone.


4) INTERNET

1
st
BSNL provides internet access services through dial-up
connection (as sancharnet through 2009) as prepaid, NetOne as
postpaid and ADSL broadband as BSNL Broadband.

41. 41 | P a g e

5) 3G

BSNL offers the 3G or the 3
rd
Generation services which includes
facilities like video calling, mobile broadband, live TV, 3G video portal,
streaming services and video on demand etc.
6) INTELLIGENT NETWORK


BSNL offers value added services, such as free phone services (FPH),
India telephone card (prepaid card), account card calling (ACC), virtual
private network (VPN), Tele-voting, universal access number (UAN).

42. 42 | P a g e

7) WiMax


BSNL has introduced INDIA‟S first 4
th
Generation High Speed wireless
broadband access technology with the minimum speed of 256 kbits/sec.
The focus of this service is mainly rural customer where the wired
broadband facility is not available.

43. 43 | P a g e

8) IPTV


BSNL also offers the „Internet Protocol Television‟ facility which
enables customers to watch television through internet.
BSNL PRODUCT MIX/LINE
1) BSNL landline
2) BSNL mobile
 Postpaid
 Prepaid
 GPRS
 FTTH
3) BSNL WLL
4) INTERNET SERVICE
 Broadband
 Wi-Fi
 Dial up internet
5) ISDN
6) INTELLIGENT NETWORK
7) VIDEO CONFERENCING

44. 44 | P a g e

8) AUDIO CONFERENCING
9) LEASED LINE
The changing external environment for BSNL can be well captured by
the potter‟s model diagram which shows that the industry structure has
become bit unfavorable.
In such an environment BSNL definitely requires to redefine its
strategies. What is required is to identify the potential opportunities and
threats implied by this changing environment for the BSNL. In changing
trends, situations, and events gaining an accurate understanding of
BSNL‟s strengths and limitations will help in better strategic
management of organization. The SWOT analysis for BSNL is as
follows – BSNL- SWOT ANALYSIS.

45. 45 | P a g e

STRENGTHS WEAKNESSES
 Pan India reach
 Experienced telecom service
provider
 Total telecom service provider
 Huge resources (financial &
technical pool)
 Huge customer base
 Most trusted telecom brand
 Transparency in billing
 Easy development of new
services
 Copper in last mile can be
used for easy broadband
development
 Huge optical fibre network
and associated bandwidth
 Non-optimization of network
capabilities
 Poor marketing strategy
 Bureaucratic organizational set
up
 Inflexibility in mind-set (DOT
period legacies)
 Limited number of value
added services
 Poor franchise network
 Legacy of poor service image
 Huge and aged manpower
 Procedural delays
 Lack of strategic alliances
 Problems associated with
incumbency like outdated
technologies, unproductive
rural assets, social obligations,
political interference, poor IT
penetration with in
organization
 Poor knowledge management

46. 46 | P a g e







OPPORTUNITIES THREATS
 Tremendous market growing at
20 lac customers per month
 Untapped broadband services
 Untouched international
market
 Can capitalize on public sector
image to grab government‟s
ICT initiates
 ITEB service markets
 Diversification of business to
turn-key projects
 Leveraging the brand image to
source funds
 Almost un-invaded VSAT
market
 Fuller utilization of slack
resources
 Can make a kill through deep
penetration and low cost
advantage
 Broaden market expected from
convergence of broadcasting,
telecom and entertainment
industry
 Completion from private
operations
 Keeping pace with fast
technological changes
 Market maturity in basic
telephone segment
 Manpower churning
 Multinational eyeing Indian
telecom market
 Private operations demand for
sharing last mile
 Decreasing per line revenues
due to competitive pricing
 Private operators demand to
do away with ADC can
seriously effect revenues
 Populist policies of
government like “One India”
rates

47. 47 | P a g e

IMPROVEMENT BEING UNDERTAKEN:
 BSNL is introducing new value added services to existing
customer as well as potential customers.
 Company is adopting effective marketing strategies to gain
marketing leadership.
 BSNL is forwarding steps in a variety of schemes for both
subscribers commercial and residential.
 Technological up gradation of network.
 Better customer care, customer delight are objectives.

48. 48 | P a g e

COMPETITORS
BSNL competes with other mobile operators throughout India.




 AIRCEL
 AIRTEL
 IDEA
 MTNL
 MTS
 RELIANCE COMMUNICATIONS
 TATA DOCOMO
 TATA INDIA
 TELENOR
 VODAFONE

49. 49 | P a g e








CHAPTER-4
REVIEW OF LITERATURE

50. 50 | P a g e

FINANCIAL ACCOUNTING:
Financial accounting is the process of systematic recording of the
business transactions in the various books of accounts maintained by the
organization with the ultimate intention of preparing the financial
statement. These financial statements are basically in two forms. One,
profitability statement which indicates the result of operations carried
out by the organization during a given period of time and second balance
sheet which indicates the state of affairs of the organization at any given
point of time of its assets and liabilities.
Main purpose of financial accounting is to ascertain profit or loss and to
indicate financial position of an enterprise. Two fundamental statements
of financial accounting are income and expenditure statement and
balance sheet. The profit and loss account or income and expenditure
account is prepared for a particular period to find out the profitability of
the firm and balance sheet is prepared on a particular date to determine
the financial position of the firm.
Financial accounting summaries transactions taking place during a
period with the objective of preparing the financial statement.
FINANCIAL PERFORMANCE ANALYSIS:
Financial performance analysis is the process of identifying the financial
strengths and weakness of the firm by properly establishing the
relationship between the items of balance sheet and profit and loss
account. It also helps in short term and long term forecasting and growth
can be identified with the help of financial performance analysis.
The dictionary meaning of “analysis” is to resolve or separate a thing in
to its element or components parts for tracing their relation to the things
as whole and to each other.

51. 51 | P a g e

FINANCIAL STATEMENTS:
„FINANCIAL STATEMENT‟ refers to formal and original statements
prepared by a business concern to disclose its financial information.
According to John.N.Meyer, “The financial statement provides
summary of accounts of a business enterprise, the balance sheet showing
the result of operation during a certain period”.
The financial statements are prepared with a view to depict the financial
position of the concern. They are based on the recorded facts and are
usually expressed in monetary terms. The financial statements are
prepared periodically that is generally for the items of the balance sheet
and the profit and loss account.
Financial statement analysis is defined as the process of identifying
financial strengths and weakness of the firm by properly establishing
relationship between the items of the balance sheet and the profit and
loss account.
There are various methods or techniques that are used in analyzing
financial statements, such as comparative statements, schedule of
changes in working capital, common size percentages, funds analysis,
trend analysis, and ratios analysis.
Financial statements are prepared to meet external reporting obligations
and also for decision making purposes. They play a dominant role in
setting the framework of managerial decisions. But the information
provided in the financial statements is not an end in itself as no
meaningful conclusions can be drawn from these statements alone.
However, the information provided in the financial statements is of
sense use in making decisions through analysis and interpretation of
financial statements.

52. 52 | P a g e

NEED OF THE STUDY:
Financial statement analysis is an important tool for measuring the
financial performance of any company. The main aspect of financial
management is working capital management and it should be done on
day to day basis. Hence the company permits me to do in the area of
finance. This study helps to review the financial performance of the
company.
NATURE OF THE STUDY:
The use of financial statement analysis and interpretation in investment
decision has been addressed by a series of authors in one way or the
other. In some instances, the sue of this analysis to determine
profitability of a company and specifically returns on investment and
optimal management decisions have been stated.
According to Pandey (2005), profitability is the ability of an entity to
earn income. It can be assessed by computing various relevant measures
including the ratio of net sales to assets, the rate earned on total assets
etc.
Meigs and Meigs (2003) stated that the rate of return on investment
(ROI) is a test of management‟s efficiency in using available resources.
This review is organized under the following sub-heads for ease of
comprehension.
1. What is financial statement?
2. Objective of financial statement analysis
3. Uses and users of financial statement analysis
4. Classification of financial statement
5. Techniques of financial statement analysis and interpretation.
6. Limitations of financial statement analysis
7. Features of a good management decision
8. Decision making environment
9. Impact of inflation on financial statement analysis

53. 53 | P a g e

What is Financial Statement?
According to Meigs and Meigs (2003), financial statement are a
structured representation of the financial position and financial
performance of an entity. The objective of financial statements is to
provide information about the financial position, financial performance
and cash flows of an entity that is useful to a wide range of users in
making economic decisions.
Financial statements also show the results of the management‟s
stewardship of the resources entrusted to it. To meet these objectives,
financial statements provide information about an entity‟s:
i) Assets
ii) Liabilities
iii) Equity
iv) Income and expenses, including gains and losses
v) Contribution by and distribution to owners in their capacity as
owners, and
vi) cash flows

A complete set of financial statement comprises:
1) A statement of financial position as at the end of the period:
2) A statement of comprehensive income for the period;
3) A statement of changes in equity for the period:
4) A statement of cash flow for the period.

5) Notes of Account comprising a summary of significant accounting
policies and other explanatory information; and
6) A statement of financial position as at the beginning of the earliest
comparative period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in its
financial statements or when it reclassifies items in its financial
statements.

54. 54 | P a g e

Objective of a Financial Statement Analysis
Business decisions are made on the basis of the best available estimates
of the outcome of such decisions. According to Meigs and Meigs (2003),
the purpose of financial statement analysis is to provide information
about a business unit for decision making purpose and such information
need not to b limited to accounting data. White ratios and other
relationships based on past performance may be helpful in predicating
the future earnings performance and financial health of a company, we
must be aware of the inherent limitations of such data.
According to Meigs and Meigs (2003), the key objectives of financial
analysis are to determine the company‟s earnings performance and the
soundness and liquidity of its financial position. We are essentially
interested in financial analysis as a predictive tool.
Accordingly, we want to examine both quantitative and qualitative data
in order to ascertain the quality of earnings and the quality and
protection of assets. In periods of recession when business failures are
common, the balance sheet takes on increase importance because the
question of liquidity is uppermost in the minds of many in the business
community. However, when business conditions are good, the income
statement receives more attention.
Nevertheless, a financial analyst has to grapple on the above
complexities of using financial statement analysis to achieve a specific
purpose.

Uses and Users of Financial Statement
According to Akpan (2002), financial statement may be used by users
for different purposes:
a) OWNERS AND MANAGERS: Require financial statement to make
important business decisions that affect its operations. Financial analysis
is then performed on these statements to provide management with a
more detailed understanding of the figures. These statement are also
used as part of management‟s annual report to the stockholders.
b) EMPLOYERS: Also need these reports in making collective
bargaining agreements (CBA) with the management, in the case of

55. 55 | P a g e

labour unions or for individuals in discussing their compensation
promotion and rankings.
c) PROSPECTIVE INVESTORS: They make use of financial
statements to assess the viability of investing in a business. Financial
analysis are often used by investors and are prepared by professionals
(financial analyst), thus providing them with the basis for making
investment decisions.
d) FINANCIAL INSTITUTIONS: Financial institutions (banks and
other lending company) use them to decide whether to grant a company
with fresh working capital or extend debt securities (such as a long term
bank loan or debentures) to finance expansion and other significant
expenditures.
e) GOVERNMENT ENTITIES: Government entities (Tax authorities)
need financial statements to ascertain the property and accuracy of taxes
and other duties declared and paid by a company.
f) VENDORS: They require financial statement to access the credit
worthiness of the business
g) MEDIA AND GENERAL PUBLIC: They are also interested in
financial statements for a variety of reasons.

Classification of Financial Statement
According to Diamond (2006), all watchful business owners have an
innate sense of how well their business is doing. Almost without
thinking about it, these business owners can tell you any time during the
month how close they are to butting budgeted figures. Certainly, cash in
bank plays a part, but its more than that.
Helpful is the nowtine review of financial statements. They are three
types of financial statements. Each will give important information
about how efficiency and effective the business is operating.
1) INCOME STATEMENT:
The income statement shows all items of income and expense for arts or
crafts business. It reflects a specific time period. So an income statement
for the quarter ending March 31, shows revenue and expense for
January, February and March, if the income statement is for the calendar
year-ending December 31, it would contain all the information from

56. 56 | P a g e

January 1 to December 31. Note that the normal accounting period for
income statement is 12 months or year.
Income statements are also known as profit and loss account. The button
line on an income statement is income less expenses. If when income is
more than expenses it is known as net profit and when expense is more
than income it is a net loss.
2) BALANCE SHEET:
Accounting is based upon a double entry system. For every entry into
the books there has to be an opposite and equal entry. The net effect of
the entries is zero, which results your books being balanced. The proof
of this balancing act is shown in the balance sheet when Asset =
Liability + Equity.
The balance sheet shows the health of a business from day one to the
date on the balance sheet. Balance sheet are always dated on the late day
of the reporting period. If you have been in business since 1st January
2011 and your balance sheet is dated as of 31 December of the current
year the balance sheet will show the
results of your operations from 1st January 2011 to December 31, 2011.
3) STATEMENT OF CASH FLOWS :
The statement of cash flows the ins and outs of cash during the reporting
period. You may be thinking-well who needs that type of report? I will
just look at the checkbook. Good point, unless you are reporting things
that don‟t immediately affect cash such as depreciation, accounts
receivable, accounts payable.
If I could only choose one of those three financial statements to evaluate
the ability of a company to pay dividends and meet obligations
(indicating a healthy business), I would pick the statement of cash flows.
The statement of cash flows takes aspects of the income statement and
balance sheet and kind of crams them together to show cash sources and
uses for the period.
4) THE STATEMENT OF RETAINED EARNINGS :
The statement of retained earnings shows the break down of retained
earnings. Net income for the year is added to the beginning of year
balance, and dividends are subtracted. This results in the end of year
balance for retained earnings.

57. 57 | P a g e

Remember that expenses, revenues and dividends impact retained
earnings. Since net income equals revenue minus expenses, we need to
include dividends when computing end of period retaining earnings, plus
net income and minus dividends.
Relationship among the Statement of Financial Position, Income
Statement, Statement of Cash Flows and Statement of Retained
Earnings.
As mentioned above, the balance sheet shows the financial position at a
point in time. It therefore cannot contain information that is related to
some period, such as sales or wages expense.
It is a common practice to include beginning of a period balance sheet as
well as an end period balance sheet in a financial report. This way the
reader can form an opinion about how the firm‟s financial position has
changed.
The cash flow statement and the income statement-statement both give
information about the firms performance over the period, albeit from
different angles. The cash flow statement explains the change in cash. In
other words, it explains how the beginning of period cash has turned into
the end of period cash by differentiating between operating, investing
and financial activities.
The income statement shows a presentation of the sales, the main
expenses and the resulting net income over the period. Net income is
based on accounting principles which gives guidance/rules on when to
recognize revenues and expenses, whereas cash from operating
activities, obviously is cash based.
As dividends do not reduce net income, the income statement does not
always explain the change in retained earnings over the year (Net
income always equals the change in retained earnings when no dividend
is paid out). The statement of retained earnings is
included to show how equity has changed because of net income and
possible dividend payments. It shows the beginning value of retained to
which net income is added and dividends subtracted, resulting in end of
year retained earnings.

58. 58 | P a g e

In the view of the requirements of the various users of ratios, it is
divided in to the following important categories.
1) Liquidity ratios
2) Activity ratios
3) Profitability ratios
4) Earning ratios
1) Liquidity Ratios:
Liquidity ratios measure the ability of the firm to meet it‟s a current
obligation. In fact, analysis of liquidity needs the preparation of cash
budgets and cash and fund flow statements but liquidity ratios, by
establishing a relationship between cash and other current assets to
current obligation provide a quick measure of liquidity.
A firm should ensure that it does not suffer from lack of liquidity, and it
does not have excess liquidity the failure of the company to meet its
obligations due to its lack of liquidity, will result in poor
creditworthiness, loss of creditors confidence, or even in legal tangles
resulting in the closure of the company a very high degree of liquidity is
also bad idle assets earn nothing. The firms fund will be unnecessarily
tied up in current assets. Therefore it is necessary to strike a proper
balance between high liquidity and lack of liquidity.
2) Activity Ratio or Turnover Ratios:
Activity ratio highlights the activity and the operational efficiency of the
business concern. The better management of assets are the larger the
amount of sales. Activity ratio measures the relationship between the
sales and assets. Turnover ratios are employed to evaluate the efficiency
with which the firm managers and utilizes its assets. Their ratio indicates

59. 59 | P a g e

the speed with which assets are brought converted as turn over into
sales.


3) Profitability Ratios:
Profitability reflects the final results of the business operations. Profit
earning is considered essential for the survival of the business. There are
two types of profitability ratios.
 Profit margin ratio
 Rate of return ratio
Profit margin ratio shows the relationship between profit and sales.
Rate of return ratio reflects between profit and investment. The
important rates of return measures are ratio of return on total assets and
rate in equity.
4) Earnings Ratios:
Earnings are incomes to the shareholders of the share invested by them.
Hence the earnings ratio will be to the investors to the value of the
shares that is been holding by them.
It is proposed to study the liquidity and solvency position of BSNL. For
analyzing the liquidity, the following have been computed.
 Current ratio
 Quick ratio

60. 60 | P a g e















CHAPTER-5
DATA ANALYSIS
AND
INTERPRETATION

61. 61 | P a g e

CURRENT RATIO:
The ratio 2:1 is considered an idle for current ratio and it is a
conventional rule. It represents a margin of safety of creditors. The
higher the current ratio, the greater the margin of safety: the larger the
amount of current assets in relation current liabilities the most the firm‟s
ability to meet its current obligations. However, current ratio should not
be followed blind because a company with less than 2:1 ratio may be
doing well and the one of high ratio only struggles to meet its
obligations because current ratio only measures the quality and not the
quality.

Current Ratio= Current Assets/ Current Liabilities

CALCULATION OF CURRENT RATIO OF BSNL:
(Rs.in lakhs)
Year Current assets Current liabilities Ratio
2010-2011 2555149 2839272 0.89
2011-2012 2267653 1929361 1.17
2012-2013 1655204 1944007 0.85
2013-2014 2122331 1994332 1.06
2014-2015 1705246 2260356 0.75

62. 62 | P a g e

Current Ratio Graph:



Interpretation:
 As a conventional rule a current ratio of 2:1 or more is considered
satisfactory. BSNL has a current ratio in the financial 2011-2012
gone up to 1.17 times than it is gradually decreasing in year 2014-
15. Hence BSNL is maintaining slight standard current ratio which
is not a good sign of property.
 Also it is not always necessary that a good current ratio indicates a
comfortable liquidity position. If current assets comprise a greater
proposition of less marketable assets or investments, current ratio
has not significance.
 Larger the amount of current assets in relation to current liabilities
greater the firm‟s ability to meet its current obligations.

0.89
1.17
0.85
1.06
0.75
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2010-20112011-20122012-20132013-20142014-2015
Ratios

Years
Current Ratio
Current Ratio

63. 63 | P a g e

QUICK RATIO:
This is also known as acid test ratio; it establishes a relationship with
quick or liquid assets and current liabilities. It indicates the ability of the
company to meet its short term liabilities from its current assets without
having to sell stock. It is vital index of the firms liquidity. The ratio of
1:1 is considered to represent a satisfactory current financial condition.
But 1:1 in essence does not imply sound liquidity position because a
high value of quick ratio in a company may have problem of funds
shortage, if it has a slow paying doubtful and longer period outstanding
debtors. At the same time, if the firms are able to meet its current
obligations in time by turning over their inventories efficiently they can
prosper. Although quick ratio is a more penetrating test of liquidity than
the current ratio, yet it should be used cautiously.
Quick ratio may therefore be calculated as follows:
Quick Ratio= Quick Assets/ Current Liabilities
CALCULATION OF QUICK RATIO OF BSNL:
(Rs. In lakhs)
Year Quick assets Current liabilities Ratios
2010-2011 2160325 2200029 0.76
2011-2012 1907975 1929361 0.98
2012-2013 1277995 1944007 0.65
2013-2014 1767603 1994332 0.88
2014-2015 1335558 2260356 0.59

64. 64 | P a g e

Quick Ratio Graph:



Interpretation:
 The quick ratio for BSNL is below acceptable norms 2:1.
Comparing to 2011 and 2015 quick ratio has fallen further. It
shows that the absolute liquid assets of BSNL are not sufficient to
meet the current liabilities and is a question against liquidity. The
trend shows that quick ratio is falling down and is necessary to
take preventive measures. They should give more emphasis for
debt collection and generating more cash through operating
activities.


0.76
0.98
0.65
0.88
0.59
0
0.2
0.4
0.6
0.8
1
1.2
2010-20112011-20122012-20132013-20142014-2015
Ratios

Years
Quick Ratio
Ratios

65. 65 | P a g e

NET PROFIT RATIO:
This ratio indicates the firm‟s ability withstand adverse economic
conditions. It establishes a relationship between net profit and sales and
also indicates management‟s efficiency in manufacturing, administering
and selling of products. Net profit margin ratio is the overall measure of
the firm‟s ability to turn each Naira sales into Net profit, it is measured
by dividing profit after tax by sales:
Net Profit Ratio= Net Profit/ sales *100
CALCULATION OF NET PROFIT RATIO OF BSNL
(Rs. In lakhs)
Years Net Profit/ PAT Sales/ Total Revenue Percentage
2010-2011 (638426) 2968762 (21.50)
2011-2012 (885070) 2793350 (31.68)
2012-2013 (788444) 2712789 (29.06)
2013-2014 (701976) 2799635 (25.07)
2014-2015 (823409) 2864520 (28.75)

Note: sales are inclusive of other incomes.

66. 66 | P a g e

Net Profit Ratio Graph:



Interpretation:
 BSNL had net loss 21.50% in the year 2010-2011. Then after it
was increasing, now it is 28.75% in 2014-2015.
 Over all financial position in not good, it will not meet future
requirements also.





-21.5
-31.68
-29.06
-25.07
-28.75
-35
-30
-25
-20
-15
-10
-5
0
2010-20112011-20122012-20132013-20142014-2015
Ratios

Years
Net Profit Ratio
Percentage

67. 67 | P a g e

OPERATING PROFIT RATIO:
Average ration can be calculated from the balance sheet items to
determine the proportion of debt in total financing. And can equally be
calculated from the profit and loss account to determine the extent to
which operating profit are sufficient to cover the fixed charges (Pendey
2005).
Calculated as:
Operating Profit Ratio= Profit Before Tax/ Turnover Ratio*100
CALCULATION OF OPERATING PROFIT RATIO OF BSNL:
(Rs. In lakhs)
Years PBT TR Percentage
2010-2011 (657979) 2968762 (22.16)
2011-2012 (882093) 2793350 (31.60)
2012-2013 (795536) 2712789 (29.32)
2013-2014 (712419) 2799635 (25.44)
2014-2015 (884342) 2864520 (30.87)

SOURCES: computed on the basis of the information given in the
annual reports of BSNL.

68. 68 | P a g e

OPERATING PROFIT RATIO GRAPH:



Interpretation:
 The operating profit ratio indicates that in 2010-2011 BSNL have
-22.16%. After 4 years it has been increased to -30.87 i.e., in 2014-
2015. Because operating expenses are more. Higher operating
profit ratio enables the firm to meet interest, income tax dividends
and retain profits for expansion.






-22.16
-31.6
-29.32
-25.44
-30.87
-35
-30
-25
-20
-15
-10
-5
0
2010-20112011-20122012-20132013-20142014-2015
Ratios

Years
Operating Profit Ratio
Percentage

69. 69 | P a g e

RETURN ON INVESTMENT:
This ratio is a useful measure of the profitability of all the financial
resources invested in the firm‟s assets. Return on Investment (ROI),
measures the gain or loss generated on an investment relative to the
amount of money invested. ROI is usually expressed as a percentage and
is typically used for personal financial decisions, to compare a
company‟s profitability or to compare the efficiency of different.

Return on Investment= Profit after Tax/ Total capital+ reserve+
surplus*100

CALCULATION OF RETURN ON INVESTMENT OF BSNL:
(Rs. In lakhs)
Years Profit after tax Total capital+ reserve+ surplus percentage
2010-2011 (638426) 1250000+6756875 (7.97)
2011-2012 (885070) 1250000+5867102 (12.43)
2012-2013 (788444) 1250000+5076240+37633 (12.38)
2013-2014 (701976) 1250000+4470295+33037 (12.20)
2014-2015 (823409) 1250000+3506443+28497 (17.21)

SOURCES: computed on the basis of the information given in the
annual reports of BSNL.

70. 70 | P a g e

Return on Investment Graph:



Interpretation:
 Return on investment ratio decreased continuously from all the
years.
 It is decreasing in an increasing rate from -7.97 to -17.21 from
2010-11 to 2014-15.





-7.97
-12.43 -12.38 -12.2
-17.21
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2010-20112011-20122012-20132013-20142014-2015
Ratios

Years
Return on Investment
percentage

71. 71 | P a g e

DEBT-EQUITY RATIO:
This ratio expresses the direct proportion of debt to owner‟s equity. It is
indirectly computed by dividing total debt by net worth.
That is:

Debt-Equity Ratio = Total Debt/ Equity

CALCULATION OF DEBT -EQUITY RATIO OF BSNL:
(Rs. In Lakhs)
Years Equity Debt Ratio
2010-2011 8006875 550923 0.069
2011-2012 7117102 596575 0.084
2012-2013 6363873 574043 0.090
2013-2014 5753332 402074 0.069
2014-2015 4784940 350096 0.073

SOURCES: computed on the basis of the information given in the
annual reports of BSNL.

72. 72 | P a g e

Debt-Equity Ratio Graph:



Interpretation:
 The lower the Debt-Equity Ratio, the higher the degree of
protection enjoyed by the creditors.
 The Debt-Equity ratio is increasing year after year for 3 years from
2010 to 2013, after 2013 suddenly it fell down with increasing rate.
 It can have a financial leverage on company but as BSNL is not
making profits from 2010 it is not advisable to admit more debt
capital as it may cause the company to bear more financial burden
in terms of interest payments. Instead they can make effective
utilization of its reserves.


0.069
0.084
0.09
0.069
0.073
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
2010-20112011-20122012-20132013-20142014-2015
Ratios

Years
Debt-Equity Ratio
Ratio

73. 73 | P a g e

FIXED ASSETS TURNOVER RATIO:
It measures the willingness of the firm to efficiently utilize its fixed
assets and current assets separately.
It is computed by the following:

Fixed Assets Turnover Ratio= Net sales/ Net Fixed Assets

CALCULATION OF FIXED ASSETS TURNOVER RATIO OF
BSNL:
(Rs.in Lakhs)
Years Fixed assets Revenue FATR
2010-2011 7753915 2968762 0.38
2011-2012 7051480 2793350 0.40
2012-2013 6455700 2712789 0.42
2013-2014 5449945 2799635 0.51
2014-2015 4713414 2864520 0.61

SOURCES: computed on the basis of the information given in the
annual reports of BSNL.

74. 74 | P a g e

Fixed Assets Turnover Ratio Graph:



Interpretation:
 It indicates the firm‟s ability to generate sales per rupee of
investment in fixed assets. In general, higher the ratios, the more
efficient the management and utilization of fixed assets, and vice
versa, may be noted that there is no direct relationship between
sales are influenced by other factor. The main reason is the drop in
operating profits.




0.38
0.4
0.42
0.51
0.61
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Ratios

Years
Fixed Assets Turnover Ratio
FATR

75. 75 | P a g e

CURRENT ASSETS TURNOVER RATIO:
It measures the willingness of the firm to efficiently utilize its fixed
assets and current assets separately.
It is computed by the following:
Current Assets to Net Worth= Current Assets/Total Capital+
reserve& surplus

CALCULATION OF CURRENT ASSETS TURNOVER RATIO
OF BSNL:
(Rs. In Lakhs)
Years Current Assets Revenue CATR
2010-2011 2555149 2968762 0.86
2011-2012 2267653 2793350 0.81
2012-2013 1655204 2712789 0.61
2013-2014 2122331 2799635 0.75
2014-2015 1705246 2864520 0.60

SOURCES: computed on the basis of the information given in the
annual reports of BSNL.

76. 76 | P a g e

Current Assets Turnover Ratio Graph:



Interpretation:
 The current assets turnover ratio is increasing every year, but it is
not real because if we look at figures of current assets every year it
is lower than the previous year. From 2010 current assets
investments fell down more in 2013 compared with 2010. So this
ratio is misleading. But it is good that even at decreasing trend of
revenue BSNL is able to cover its current assets investments from
the revenue generated.



0.86
0.81
0.61
0.75
0.6
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Ratios

Years
Current Assets Turnover Ratio
CATR

77. 77 | P a g e

WORKING CAPITAL TURNOVER RATIO:
This indicates the extent in which current assets (or working capital gap)
relate to sales calculated by:

Working Capital Turnover= Sales/ Working Capital

CALCULATION OF WORKING CAPITAL TURNOVER RATIO
OF BSNL:
(Rs. In Lakhs)
Year Net working Capital Sales WCTR
2010-2011 (284123) 2968762 (10.44)
2010-2012 338292 2793350 8.25
2012-2013 (288803) 2712789 (9.39)
2013-2014 127999 2799635 21.8
2014-2015 (555110) 2864520 (5.16)

SOURCES: computed on the basis of the information given in the
annual reports of BSNL.

78. 78 | P a g e

Working Capital Turnover Ratio Graph:



Interpretation:
 Working capital is fluctuating from every year, it is not constant in
its progress.
 Working capital measures how well a company is utilizing its
capital support a given level of sales.






-10.44
8.25
-9.39
21.8
-5.16
-15
-10
-5
0
5
10
15
20
25
2010-20112010-20122012-20132013-20142014-2015
Ratios

Years
Working Capital TR
WCTR

79. 79 | P a g e










CHAPTER-6
FINDINGS, SUGGESTIONS AND CONCLUSION

80. 80 | P a g e

FINDINGS:
Following are the findings that I have made from this study:
 BSNL is making losses continuously for five years from 2010
onwards.
 The root cause for such a situation is the loss in operating revenue
and other incomes.
 Depreciation is a significant charge against operating revenue.
 Looking into the total revenue of 2011, revenue of that year is 7%
lesser than 2010. Which means that additional investments made in
2010 was not fruitful.
 The huge investment in 2010 caused a large burden in terms of
current liability (Rs. 2260356 lakhs). It severely affected the
working capital position of that year where net working capital
shown a negative figure. The reason for this is, BSNL has invested
in LIC for a policy called leave encashment policy which resulted
in burden for the organization.
 The general trend in BSNL‟s business profile shows that revenue is
falling down while expenses are increasing every year.
 Keeping the same phase soon the BSNL will result in operating
loss.
 From the study, I‟ve learned that 2G scam had affected the ratios
of the companies.
 From this study I came to know that each company is
differentiating it from its other competitors by using new
techniques.
 The total revenues of BSNL have been reducing year by year since
2010-2011.
 The operating expenditure has reduced in consecutive years from
36002 crores in 2010-2011 to 34900 crores in 2012-2013.

81. 81 | P a g e

 Long term liabilities or borrowings have been increased from
11340 crores in 2010-2011 to 12610 crores in 2012-2013.
 The current ratio between current assets and current liabilities has
been fluctuating 0.89 in 2010-2011, 0.75 in 2014-2015.
 The debt equity ratio has shown a significant growth from 0.090 in
2012-2013 to 0.073 in 2014-2015.
 The fixed asset to net worth ratio has been quiet good from 0.38 in
2010-2011 to 0.61 in 2014-2015.
 The working capital of the company is not up to the mark.
 BSNL Company had more expenses due to which it is facing
losses continuously for the last five years.
 The total current liabilities are more than current assets.
 Financial position of BSNL for the last five years is not good.

82. 82 | P a g e

SUGGETIONS:
Following are my suggestions which may help to resolve the crisis of
BSNL.
 It is high time for BSNL to improve their operating efficiency.
They should concentrate on increasing both their operating
revenues as well as other revenues.
 Depreciation is a significant charge against their operating profit.
So that the company should take utmost good care in maintaining
their fixed assets.
 BSNL should develop their customer base of mobile as well as
broadband users as they are two major source of income. They
should also try to improve revenue from other operators.
 BSNL should conduct a brand revitalization campaign which can
attract more new users as well as maintain existing customers.
 They should concentrate on quality oriented mobile internet
business as the era is shifting towards mobile computing and smart
devices. They should optimize new investments and utilize their
existing infrastructure maximum.
 BSNL need to be more competitive in terms of their services
offered.
 They should make effective utilization of the large reserves
available.
 BSNL can explore other areas to improve revenue generation.
 Debt financing also will help the company to attain financial
leverage as the financial expenses are reducing.
 They can consider for public issue and issue debt securities.
 The root cause for existing financial crisis is the unproductive
investments.

83. 83 | P a g e

CONCLUSION:
The study “financial statement analysis” at BSNL is done by using
some widely accepted tools and techniques. Within the constraints I
believe that the study served its purpose. It is understood that financial
statements of BSNL is worsening especially regarding their operating
income. It is expected that a huge number of retirements, around a lakh
will happen on coming years which will certainly help them to reduce
the cost of administration. The reason for such financial distress is not
only the marginal efficiency, but also the huge competition in the
industry. Other changing socio-economic variables are also affecting the
performance of the company. BSNL needs to bring in large amount of
changes especially in marketing as a measure to increase the market
share as well as revenue. It is evident that BSNL as a prestigious
company has well brand image among the customers and can overcome
the present situation easily by adopting efficient management
techniques.

84. 84 | P a g e










CHAPTER-7
BIBLIOGRAPHY

85. 85 | P a g e

BIBLIOGRPHY:
 www.bsnl.co.in
 www.google.com
 www.natfm.bsnl.co.in
TEXT BOOKS:
 FINANCIAL MANAGEMENT by SUDARSHAN REDDY
 RATIO ANAYLSIS by F.M.MORLEY
 RATIO ANALYSIS FUNDAMENTALS -GOOGLE BOOKS
 FINANCIAL MANAGEMENT by I.M.PANDEY
 KHAN & JAIN, CORPORATIONS, TATA McGraw -Hill
Education.
 MTD Training, Managing Budgets, Book Boon.
 FINANCIAL MANAGEMENT by S.N.MAHESWARI
 FINANCIAL ACCOUNTING AND ANALYSIS by
Dr.PRASHANTHA ATHMA

86. 86 | P a g e








CHAPTER-8
GLOSSARY

87. 87 | P a g e

GLOSSARY:
 Income Statement: The income statement shows all items of
income and expense for arts or crafts business. It reflects a specific
time period. So an income statement for the quarter ending March
31, shows revenue and expense for January, February and March,
if the income statement is for the calendar year-ending December
31, it would contain all the information from January 1 to
December 31.
 Balance Sheet: Accounting is based upon a double entry system.
For every entry into the books there has to be an opposite and
equal entry. The net effect of the entries is zero, which results your
books being balanced. The proof of this balancing act is shown in
the balance sheet when Asset = Liability + Equity.
 Statement of Cash Flows: The statement of cash flows the ins and
outs of cash during the reporting period. You may be thinking-well
who needs that type of report? I will just look at the checkbook.
Good point, unless you are reporting things that don‟t immediately
affect cash such as depreciation, accounts receivable, accounts
payable.
 The Statement of Retained Earnings: The statement of retained
earnings shows the breakdown of retained earnings. Net income
for the year is added to the beginning of year balance, and
dividends are subtracted. This results in the end of year balance for
retained earnings.

88. 88 | P a g e


 Current Ratio= Current Assets/ Current Liabilities
 Quick Ratio= Quick Assets/ Current Liabilities
 Net Profit Ratio= Net Profit/ sales *100
 Operating Profit Ratio= Profit Before Tax/ Turnover Ratio*100
 Return on Investment= Profit after Tax/ Total capital+ reserve+
surplus*100
 Debt-Equity Ratio = Total Debt/ Equity
 Fixed Assets Turnover Ratio= Net sales/ Net Fixed Assets
 Current Assets to Net Worth= Current Assets/Total Capital+
reserve& surplus
 Working Capital Turnover= Sales/ Working Capital

89. 89 | P a g e








ANNEXURES

90. 90 | P a g e

91. 91 | P a g e

92. 92 | P a g e

93. 93 | P a g e

94. 94 | P a g e

95. 95 | P a g e

96. 96 | P a g e

97. 97 | P a g e

98. 98 | P a g e

99. 99 | P a g e