1. NORTH EASTERN REGIONAL INSTITUTE OF
MANAGEMENT
PROJECT REPORT ON
MEASUREMENT OF PERFORMANCE BY USING DIFFERENT
ACCOUNTING RATIOS
SUBMITTED TO SUBMITTED BY
Reshma Tiwari MBA 2nd Sem (B)
Faculty, NERIM
Partha Pratim Mahanta

2. CONTENTS
TOPIC PAGE NO.
1. OBJECTIVES AND METHODOLOGIES 1
2. BHARTI AIRTEL LTD. 2
3. INTRODUCTION OF THE PROJECT 3
4. BALANCE SHEET (As at March 31, 2011) 4
5. PROFIT AND LOSS A/C (For the year ending March 31, 2011) 5
6. LIQUIDITY RATIOS 6
7. LEVERAGE RATIOS 7
8. ACTIVITY RATIOS 8
9. PROFITABILITY RATIOS 9-10
10. CONCLUSION AND FINDINGS 11

3. OBJECTIVES OF THE PROJECT
 To enable us to complete the accounting ratios in real business
situations.
 To develop the competence of reading accounting data and interpret
the information.
 To analyse the financial statements of business firms and to derive
meaningful information there from.
 To know the performance and financial position of “Bharti Airtel” by
using accounting ratios.
METHODOLOGY
 Surfing Internet
 Using library Books, Journal and Magazines.
 Study of Annual Reports
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4. BHARTI AIRTEL LIMITED
AIRTEL is an Indian telecommunications company that operates in 19 countries across South
Asia, Africa and the Channel Islands. It operates a GSM network in all countries, providing
2G or 3G services depending upon the country of operation. Airtel is the fifth largest telecom
operator in the world with about 230.8 million subscribers across 19 countries at the end of
June 2011. It is the largest cellular service provider in India, with over 169.18 million
subscribers as of June 2011. Airtel is the 3rd largest in-country mobile operator by subscriber
base, behind China Mobile and China Unicom.
Airtel is the largest provider of mobile telephony and second largest provider of fixed
telephony in India, and is also a provider of broadband and subscription television services. It
offers its telecom services under the Airtel brand and is headed by Sunil Bharti Mittal. Bharti
Airtel is the first Indian telecom service provider to achieve this Cisco Gold Certification. To
earn Gold Certification, Bharti Airtel had to meet rigorous standards for networking
competency, service, support and customer satisfaction set forth by Cisco. The company also
provides land-line telephone services and broadband Internet access (DSL) in over 96 cities
in India. It also acts as a carrier for national and international long distance communication
services. The company has a submarine cable landing station at Chennai, which connects the
submarine cable connecting Chennai and Singapore.
The company is structured into four strategic business units - Mobile, Telemedia, Enterprise
and Digital TV. The mobile business offers services in 18 countries across the Indian
Subcontinent and Africa. The Telemedia business provides broadband, IPTV and telephone
services in 89 Indian cities. The Digital TV business provides Direct-to-Home TV services
across India. The Enterprise business provides end-to-end telecom solutions to corporate
customers and national and international long distance services to telcos.
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5. INTRODUCTION TO THE PROJECT
The project work is to make observations on the performance and financial position of Bharti
Airtel Limited on the basis of Income Statements and Balance Sheet for the two years, i.e;
2009-2010 and 2010-11.
Income Statements and Balance sheets for two years are extracted in the report and are used
for the purpose of the project.
The project work is planned and executed by calculating following ratios:
1. Liquidity Ratios : These are the ratios which measures the short-term solvency
or financial position of a firm. These ratios are calculated to comment upon the short-
term paying capacity of a concern of the firm’s ability to meet its current obligation.
2. Long-term Solvency or Leverage Ratios: Long-term solvency ratios convey a
firm’s ability to meet the interest cost and repayments schedules of its long-term
obligations.
3. Activity Ratios : Activity ratios are calculated to measure the efficiency with
which the resources of a firm have been employed. These ratios are also called
turnover ratios because they indicate the speed with which assets are being turnover
into sales.
4. Profitability Ratios : These ratios measures the results of business operations or
overall performance and effectiveness of the firm.
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6. Profit & Loss A/c Rs. Millions
Particulars 2011 2010
Sale of Goods 380,158 356,095
EXPENDITURE
Access Charges 49872 44,357
Networking Operating 85,712 74,467
Cost of Good Sold 161 203
Personnel 14,512 15,305
Sales and Marketing 31,802 24,049
Administrative and Other 21,353 22,401
Total Expenditure (203,412) (180,782)
Profit before other Income 176,746 175,313
Profit after other Income (89,488) (68,320)
Profit before Tax 87,258 106,993
Tax Expenses (10,089) (12,731)
Profit after Tax 77169 94,262
Appropriation (10,134) (14,505)
Profit after Appropriation 67,035 82,757
Profit brought forward 267,785 185,028
Profit Carried to Balance Sheet 334,820 267,785

8. LIQUIDITY RATIOS
Current Assets
1. Current Ratio :
Current Liabilities
93,299
Year 2010 = = 0.72:1
129,435
129,492
Year 2011 = = 0.84:1
154,239
Liquid Assets
2. Acid Test Ratio :
Current Liabilities
93,027
Year 2010 = = 0.72:1
129,435
129,148
Year 2011 = = 0.84:1
154,239
Cash + Bank Balances +
Marketable securities
3. Cash Ratio :
Current Liabilities
71,313
Year 2010 = = 0.55:1
129,435
104,375
Year 2011 = = 0.68:1
154,239
Notes : Loans and advances (under the Current Assets, Loans and
Advances) are considered as short term investment.
Comments : The current ratio 0.72 in 2010 does not show the good liquidity
position as it is much below than the standard norms of 2:1. In the year 2011, it increases to
0.84, although this ratio also does not show the good liquidity position. Again, the standard
norms of acid test ratio are 1:1. In 2010 it shows a ratio of 0.72:1 and it increases in 2011 to
0.84:1. This ratio shows a satisfactory liquidity position. The cash ratio also shows a
satisfactory result, as in both the year it is the above of the standard norms of 0.5:1. The
financial position of the company is quite satisfactory.
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9. LONG-TERM SOLVENCY OR LEVERAGE RATIOS
Outsider ′ s Funds
1. Debt Equity Ratio :
Shareholder ′ s Funds
50,389
Year 2010 = = 0.14:1
367,372
118,975
Year 2011 = = 0.27:1
441,116
Shareholder ′ s Fund
2. Proprietory Ratio :
Total Assets
367,372
Year 2010 = × 100 = 87.93%
417,794
441,116
Year 2011 = × 100 = 78.02%
565,367
Outsider ′ s Fund
3. Total Assets to Debt Ratio : × 100
Total Assets
50,389
Year 2010 = × 100 = 12.06%
417,794
118,975
Year 2011 = × 100 = 21.04%
565,367
Comments : Debt equity ratio indicates that the proportion of funds provided by
long-term lenders in comparison to the funds provided by the owners is only 0.14 in 2010.
This portion has further increases to 0.27 in 2011. It shows that the long-term solvency
position of the company is very sound. The proprietory ratio in 2010 and 2011 are 87.93%
and 78.02% respectively. Although, in 2011 this goes decrease but this ratio shows the better
long-term solvency position. This fact is also supported by total assets to debt ratio. It
indicates that the proportion of assets financed through long-term loans is only 12.06% in the
year 2010 and it has increases to 21.04% in the year 2011.
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10. ACTIVITY RATIOS
Cost of Good Sold
1. Stock Turnover Ratio :
Average Stock
203
Year 2010 = = 0.75 times
272
161
Year 2011 = = 0.52 times
308
Notes : Closing Inventory of 2010 will be treated as the Opening Inventory.
272 + 344
Hence, Average Stock = 2
= 308
Sales
2. Debtors Turnover Ratio :
Average Debtors
356,095
Year 2010 = = 16.92 times
21,050
380,158
Year 2011 = = 16.97 times
22,404
Notes : Closing Debtors of 2010 will be treated as the Opening Debtors.
21,050 + 23,758
Hence, Average Debtors = 2
= 22,404
Comment : Stock turnover ratio has dropped from 0.75 times to 0.52 times. It
indicates that the company is not rapidly turning the stock into sales. Unsaleable items have
been purchased which are included in the stock of the company. Debtors turnover ratio has
increased from 16.92 times to 16.97 times. It indicates that the company’s policy relating to
collection of debts and selection of customers for credit sales is quite satisfactory.
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11. PROFITABILITY RATIO
Gross Profit
1. Gross Profit Ratio : × 100
Sales
175,313
Year 2010 = × 100 = 49.23 %
356,095
176,746
Year 2011 = × 100 = 46.49 %
380,158
Cost of Goods Sold +Operating Expenses
2. Operating Ratio : × 100
Sales
203+24,049+22401
Year 2010 = × 100 = 13.10 %
356,095
161 + 31,802+21,353
Year 2011 = × 100 = 14.02 %
380,158
Net Profit after tax
3. Net Profit Ratio : × 100
Sales
94,262
Year 2010 = × 100 = 26.47 %
356,095
77,169
Year 2011 = × 100 = 20.30 %
380,158
Net Profit after tax
4. Return on Equity (ROE) : × 100
Shareholder ′ s Funds
94,262
Year 2010 = × 100 = 25.66 %
367,372
77,169
Year 2011 = × 100 = 17.49 %
441,116
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12. Net Profit after tax
5. Earning Per Share (EPS) :
No .of Equity Shares
94,262
Year 2010 = = Rs. 24.82
3798
77,169
Year 2011 = = Rs. 20.32 %
3798
Comment : Gross profit ratio has declined from 49.23 % in 2010 to 46.49 % in
2011, which reflects a decrease in sales price of goods sold without corresponding decrease
in cost of sales.
Operating ratio has increase by 0.92 % in 2011 in respect to 2010. Increasing of operating
ratio has resulted in lower margin of profit in sales.
Net profit ratio has also decline from 26.47 % to 20.30 % in 2011, which is an indication of
decreasing in the overall efficiency and profitability of the firm.
Return on equity (ROE) has also declining from 25.66 % to 17.49 % in 2011, which indicates
that shareholder’s funds are not being utilized more efficiently.
Earning per share (EPS) has also decline from Rs. 24.82 in 2010 to Rs. 20.32 in 2011, which
indicates that overall profitability of the company is declining. This ratio also indicates that
market price of Bharti Airtel Ltd shares is likely to be decrease in the upcoming year.
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13. CONCLUSION AND FINDINGS
From the comparative study of various Accounting Ratios for 2010 and 2011 of “Bharti
Airtel”, we found the following results, whose enable us to know the performance and the
financial position of the company:
1. The Liquidity Ratio is not so impressive in 2011. Though, the short-term solvency or
financial position of a “Bharti Airtel” is quite satisfactory in 2011.
2. The long-term solvency position of the company is very sound, as the Leverage ratio
has improved in 2011 as comparative to 2010.
3. The company’s policy relating to collection of debts and selection of customers for
credit sales is quite satisfactory, as Activity Ratio is in sound position in 2011.
4. The Profitability Ratio of “Bharti Airtel” shows that the profit of the company goes
declining in 2011 as compared to 2010.
5. The overall profitability and financial position of Bharti Airtel has goes in declining
stage in 2011.
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