SPECIFIC PROJECT WORK (1).pdf for assignment

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1. SPECIFIC PROJECT WORK- 2025
CLASS- XII
SUBJECT: - ACCOUNTANCY (055)
One specific project based on financial statement analysis of a
company covering two aspects:
1. Accounting Ratios
2. Cash Flow Statements

Company: - RELIANCE INDUSTRIES LIMITED
About the Company
The Reliance Group, founded by Dhirubhai H Ambani (1932-2002), is India’s largest
private sector enterprise, with businesses in the energy and materials value chain.
Group’s annual revenues are in excess of US$ 66 billion. The flagship company,
Reliance Industries Limited, is a Fortune Global 500 company and is the largest
private sector company in India.
The Group’s activities span exploration and production of oil and gas, petroleum
refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and
chemicals), textiles, retail, infotel and special economic zones.
Reliance enjoys global leadership in its businesses, being the largest polyester yarn
and fibre producer in the world and among the top five to ten producers in the world
in major petrochemical products.
Major group companies are Reliance Industries Limited, including its subsidiaries
and reliance Industrial Infrastructure Limited.
Q. Following is the balance sheet and statement of profit and loss of
Reliance Industries Ltd for the year ending 31st March, 2023 and 2024.
Reliance Industries Limited
Balance Sheet
As at 31
st
March 2024
Particulars Note
No.
As at 31
st

March 2024
(Rs in crore)
As at 31
st

March 2023
(Rs in crore)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
a. Share Capital
b. Reserve and Surplus


14
15


6,766
5,08,330


6,766
4,72,312

2. 2. Non-current Liabilities
Financial Liabilities
Borrowing
Lease liabilities
Other Financial liabilities
Provision
Deferred tax liabilities (net)
Other Non-current liabilities
3. Current Liabilities
Financial Liabilities
Borrowing
Lease Liabilities
Trade Payable
Other Financial liabilities
Other Current Liabilities
Provisions

TOTAL

II. ASSETS
1. Non-Current Assets
Property, Plant and
Equipment
Intangible assets
Capital Work-in-progress
Intangible assets under
development
Financial assets
Investments
Loans
Other Financial assets
Other non-current assets
2. Current Assets
Inventories
Financial assets
Investments
Trade Receivables
Cash & cash equivalents
Loans
Other financial assets
Other Current Assets

TOTAL



16

17
18
19
20


21

22
23
24
25






1
1
1

1

2
3
4
5

6

7
8
9
10
11
13





1,61,059
2,692
-
1,710
36,259
2,822


50,731
93
1,29,859
27,493
30,866
972

9,59,643




2,58,911
40,719
44,294

17,338

3,01,400
10,051
16,902
7,403

85,100

68,663
14,740
69,248
-
11,747
13,127

9,59,643



1,35,561
2,786
584
1,296
33,968
-


80,262
97
1,19,811
42,468
25,735
1,014

9,22,660




2,52,967
29,334
30,972

23,385

2,65,067
12,431
2,215
2,832

84,756

86,074
24,143
61,007
595
35,109
11,773

9,22,660

3. Reliance Industries Limited
Statement of Profit and Loss
for the year ended 31
st
March, 2024
Particulars Note
No.
2023-24
(Rs in crore)
2022-23
(Rs in crore)
Income
Revenue from operation
Other Income

Total Income

Expenses
Cost of material Consumed
Purchased of Stock-in-trade
Change in Inventories of Finished
goods, Work-in progress and Stock in
trade
Excise Duty
Employee Benefits expense
Finance Costs
Depreciation/Amortisation and
Depletion Expenses
Other Expenses

Total Expenses

Profit Before Tax
Tax Expenses
Current Tax
Deferred Tax

Profit From Continuing Operations
Profit From Discontinued
Operations (Net of Tax)

Profit for the Year

Earning per Equity Share of Face
Value of Rs 10 each
Basic and Diluted (in Rs)


26
27








28

29
30

1
31










32





33

5,47,942
12,128

5,60,070


3,76,418
13,453


2,700
13,408
7,807
13,430

17,690
59,891

5,04,797

55,273

(10,922)
(2,309)

42,042

-

42,042



62.14

5,52,823
11,149

5,63,972


3,99,644
9,974


(5,862)
13,476
6,265
12,633

11,167
62,557

5,09,854

54,118

(6,186)
(4,930)

43,002

1,188

44,190



65.37

4. Additional Information
The company’s closing inventory on 31
st
March, 2022 was Rs 45,923.
You are required to calculate accounting ratios for each of two years i.e.
2023 and 2024 and comment briefly on the results of the business using
these ratios.
i. Current ratio
ii. Quick ratio
iii. Inventory turnover ratio
iv. Fixed assets turnover ratio
v. Current assets turnover ratio
vi. Debt collection period
vii. Net profit ratio
viii. Earnings per share
ix. Return on total assets

Solution: -
Meaning of Accounting ratio: - When ratios are calculated on the
basis of accounting information, then these are called ‘accounting
ratio’. An accounting ratio is a mathematical expression of the
relationship between two items or group of items shown in the
financial statements.
Expression of Accounting Ratio: -
1. Pure or Simple- It is expressed as a quotient, e.g., 2, that implies
2:1.
2. Percentage: - It is expressed in percentage, e.g., 25%
3. Times, Rate or Number: - It is expressed in a number of times a
particular figure is, when compared to another figure, e.g., 4
times.
4. Fraction- it is expressed in fraction, e.g., 3/4
Types of Ratios: -
1. Liquidity Ratio
2. Solvency Ratio
3. Activity/Turnover/Performance Ratio
4. Profitability Ratio

5. Performance Evaluation of Reliance Industries Limited through
Ratio Analysis

Detailed Study of the Project
Introduction
The project is to compute accounting ratios i.e., current ratio,
quick ratio, fixed assets turnover ratio, current assets turnover
ratio, inventory turnover ratio, debt collection period, net profit
ratio, earning per share and return on total assets and also to
comments on these ratios. The necessary data to compute the
accounting ratios has been provided i.e., balance sheet and
statement of profit and loss.

Execution of Project Work
1. Two liquidity ratios i.e., current ratio and quick ratio have been
computed and analysed to make observations on the short-term
financial position of the company.
2. Debt collection period has been computed to assess whether the
company is able to collect its debts efficiently.
3. Earning per share has been computed to assess the return on
share.
4. Activity ratio i.e., inventory turnover ratio is computed to assess
whether the company is able to use its inventories efficiently.
5. Profitability ratios i.e., net profit ratio and have been computed
to assess the profitability of the company.
6. Return on total assets has been computed and analysed to assess
whether the company has used its fixed assets efficiently.
Computation of Various Ratios
2023 2024
1. Current ratio =
Current assets/ Current liabilities
3,03,457/2,69,387
= 1.13:1
2,62,625/2,40,014
= 1.09:1
2. Quick ratio =
Quick assets/ Current liabilities
[Quick assets = Current assets –
Inventories]
2,18,692/2,69,387
= 0.81:1
1,77,525/2,40,014
= 0.74:1

6. 3. Inventory Turnover ratio =
Cost of revenue from operations/
Average Inventory
[Cost of revenue from operation =
Cost of material consumed +
Purchased of stock in trade +
Changes in inventories of finished
goods]
[Average Inventories =
Opening Inventory + Closing
Inventory/ 2]
3,97,156/65,340
= 6.08 times
3,92,571/84,928
= 4.62 times
4. Fixed assets turnover ratio =
Revenue from operation i.e., sales/
Fixed assets
[Fixed assets include Property,
Plant and Equipment as well as
intangible assets]
5,52,823/2,82,301
= 1.96 times
5,47,942/2,99,630
= 1.83 times
5. Current assets turnover ratio =
Revenue from operation i.e., sales/
Current assets
5,52,823/3,03,457
= 1.82 times
5,47,942/2,62,625
=2.09 times
6. Debt collection ratio =
Accounts receivable/ Average daily
credit sales
24,143/5,52,823x365
= 16 days
14,740/5,47,942x365
= 10 days
7. Net profit ratio =
Net profit after tax/ revenue from
operation x 100

44,190/5,52,823x100
= 8 %
42,042/5,47,942x100
= 7.68 %
8. Earning per share =
Net profit available for equity
shareholder/ Number of equity
shares
44,190/676
= 65.37 per share
42,042/676
= 62.14 per share
9. Return on total assets =
Profit after tax/ total assets x 100
44,190/9,22,660x100
= 4.79 %
42,042/9,59,643x100
= 4.38 %

Conclusions
1. Against the accepted norm for current ratio i.e., 2:1, the current ratio of Reliance Ltd is
1.13:1 in 2023 and 1.09:1 in 2024. The current ratios of both the years are close to the
accepted norms i.e., it indicates that the company has a comfortable current assets
position and it is in a good position to meet its current liabilities on time but not that
much. However, the ratio has decreased in 2024 as compared to 2023.
2. Against the accepted norm for quick ratio i.e., 1:1, the quick ratio of Reliance Ltd is
0.81:1 in 2023 and 0.74:1 in 2024. It is indicating that the company has a less liquidity
position and is not that much better place to meet its current liabilities at a short notice.
3. After analysing all the activity ratios of two years i.e., fixed assets turnover ratio,
current assets turnover ratio and inventory turnover ratio, it has been observed that the

7. company is making better utilization of available resources to achieve sales except
fixed asset turnover ratio has decreased in 2024 to 1.83 times from 1.96 in 2023, the
ratio is not satisfactory.
4. EPS has decreased from 65.37 per share in 2023 to 62.14 per share in 2024. It is not a
good sign for the company. The situation is not much favourable. A high EPS would
mean higher market price of a company’s share.
5. Debt collection period provides an approximation of the average time that it takes to
collect debtors. The debt collection period has reduced to 10 days in 2024 from 16
days in 2023 which is a good sign for the company.
6. Return on total assets is favourable. The ratio is almost same in both the years. It
indicates that the fixed assets are utilized efficiently.
7. Net profit ratio of 2024 is less than 2023. Net profit ratio is a result of better gross
profit ratio, it means company is either making less economical purchases or products
are lesser priced, or both.