Executive Summary

Project is as opportunity given to management studies where one gets an insight into the practical aspects in the day to day working of an organization. Its imparts a real time environment to the theoretical knowledge that one acquires in a business school. The project was undertaken to conduct a detailed study on various aspects of ratio analysis. The project work was started with the study of annual reports which include study of balance sheet, profit and loss account, of five years. Various ratio was taken into consideration and on that basis of analysis where made. Finance and industries are strongly interrelated and inseparable from each other. Financial analysis helps to assess about the strength and weakness of firm. For this purpose I choose my project title namely Financial statement analysis of RELAINCE LIE INSURANCE ltd. The main objective of study is to ascertain the financial performance through RATIO ANALYSIS with the help of secondary information such as balance sheet and profit and loss account. The findings, suggestions and recommendation will be discussed in fourth coming chapter. Ratio analysis isnt just comparing numbers from balance sheet and cash flow statement. Ratio looked at the relationships between individual values and relates them how a company has performed in the past and might performing future.

INTRODUCTION

1.1

Introduction to financial statement analysis

Definition of Financial statement: A financial statement is a formal record of the financial activities of a business, person, or other entity.

For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements.

Definitions of the Finance statement analysis: Financial statement analysis is defined as the process of identifying financial strengths and weaknesses 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 immense use in making decisions through analysis and interpretation of financial statements.

Nature and component of Financial Statement: Companies issue annual reports after the close of each fiscal Year financial statement are at the center of the annual report. Other component of the annual report is the board of directors report, management discussion and analysis (MDA), corporate governance report and voluntary disclosures. Board of director report provides an
2

analysis of the performance of the company during this fiscal Year covered in the report. MDA provides futuristic information such as management perceptions about the business averment in the next and subsequent fiscal Year company strategy to take advantage of future opportunities and to face potential threats, and the risk management strategy corporate governance code.

Component of financial statement: Balance sheet- which lists the assets, liabilities and equity at the balance sheet date, thus provides information on the financial position of the company at the end of the fiscal Year.

Income statement -Profit and loss account-which list out income and expenses for the fiscal Year and thus provides information on the operating result for the fiscal Year, Cash flow statement- which present cash flow from operating activities, investing activities, and financial activities during the fiscal Year. Accounting policies and explanatory notes- which provide explanations and clarification to facilitated understanding of number appearing in financial statement and also additional information that is relevant user of financial statement

Ratio analysis: Meaning: Ratio analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the profit and loss account.

Users of ratio Analysis: Trade Creditors: They are interested in firms ability to meet their claims over a very short period of time. Their analysis will, therefore confine to the evaluation of the firms liquidity position. Long term debt supplier: They are concerned with the firms long term solvency and survival. They analyze the firms profitability over time. Its ability to generate cash to be able to pay interest and repay principal and the relation between various sources of fund. Investors: They are the people who invested their money in the firms shares are most concerned about the firms earnings. They restore more confidence in those firms that show steady growth in earnings. They are interested in firms earning ability, risk, present and future profitability.

Management: The management is interested in overall financial analysis. It is their responsibility to see that the resources are used effectively and efficiently. And firms financial condition is sound. Standards of comparison may be

Past Ratios: i.e. ratios calculated from the past financial statements of the firm. Competitors Ratios: i.e. ratios of some selected firms, especially the most progressive and successful competitor, at the same point of time. Industry Ratios: i.e. ratios of the industry to which the firm belongs. Projected Ratios: i.e. ratios developed using the projected or pro forma, financial statements of the firm. Following are the few ways of analyzing the firms financial ratio:
4

Time series or Trend analysis, the easiest way to evaluate the performance of the firm is to compare its present ratios with the past ratios. When financial ratios over the period of time are compared, it is known as time series or trend analysis. It gives an indication of the direction of change and reflects whether the firms financial performance has improved, deteriorated or remained constant over the time.

1.2

Objective of financial statement

Useful Information: The financial statement of business enterprise should provide information, within the limits if financial accounting that is useful to present financial position of company.

Potential investor and creditors use these statements in making rational investment and credit decision. Financial statement should be comprehensible to investor and creditors who have a reasonable understanding of business and economic activities. In a financial accounting and who are willing to spend the time effort needed to study financial statement.

Required and sufficient information: Financial statement of business enterprise should provide information that help investors and creditor to asses the prospect of receiving cash in form of dividend or interest and from the proceeds from the sale, redemption or maturely of security or loans. Their prospects are ability to obtain enough cash through its earning and financial activities to meet its obligation when due and its other cash operating needs, to reinvesting earning resources and pay cash dividend above perceptions of investor and creditors.

Primary Information: The financial statement of a business enterprise should provide information about the economics resources of an enterprise which are sources of prospective cash inflow to the enterprise to its obligation to transfer economic resources to other which are cusses of prospective cash outflow from enterprise earning which are the financial result, which are the financial result of its operation and other events and conditions that effects the enterprise since that in information income statement useful to investor
5

and creditors in assessing and enterprise income statement ability to pay cash dividend, and interest and to settle obligation when they mature it should be the focus of financial accounting and financial statement.

may be in inactive of current economy realities and increase in sales volume stated in rupees may or may not be the result of a larger no. or unit. Financial statement do not reflect many factory which affect financial condition and operating result, because they cannot be stated in term of money.

Company Profile Reliance Life Insurance Company (RLIC)

Reliance Life Insurance Company (RLIC)is amongst the leading private sector life insurance companies in terms of new business premium with a market share of 5% of the private sector life insurance industry. The company has over 9 million policy holders with a strong distribution network of close to 1,230 branches with over 100,000 agents as of March 31, 2013. Reliance Life offers life insurance products targeted at individuals and groups, catering to four distinct segments: protection, children, retirement and investment plans. As of March 31, 2013, the Total Premium (net of re-insurance) was Rs. 4,015 crores, whereas new business premium stood at Rs. 1,188 crores. The company achieved a profit of Rs. 380 crores. The company sold 7.6 lakh policies during 2012-13 with total managed funds valuing to Rs. 18,189 crores, through a wide network of distribution with 1,230 offices and over 100,000 advisors. Rated amongst the Top 3 Most Trusted Service Brands in the Insurance Category, the company aims to emerge as a transnational life insurer of global scale and standards. Reliance Life Insurance is a part of Reliance Capital of the Reliance Anil DhirubhaiAmbani Group. Reliance Capital is one of India's leading private sector financial services companies, and ranks among the top private sector financial services and banking companies, in terms of net worth. Reliance Capital has interests in asset management and mutual funds, stock broking, life and general insurance, proprietary investments, private equity and other activities in financial services. Reliance Group also has presence in Communications, Energy, Natural Resources, Media, Entertainment, Healthcare and Infrastructure. Nippon Life Insurance Company acquired 26% interest in equity share capital of the Company effective October 7, 2011 subsequent to receipt of all regulatory approval. Nippon Life Insurance (26% share), also called Nissay, is Japan's largest private life insurer with revenues of Rs. 346,834 crore (US$ 80 Billion) and profits of over Rs. 12,199 crore (US$ 3 billion). The Company has over 14 million policies in Japan, offers a wide range of products, including individual and group life and annuity policies through various distribution channels and mainly uses face-to-face sales channel for its traditional insurance products. The company primarily operated
7

in Japan, North America, Europe and Asia and is headquartered in Osaka, Japan. It is ranked 81st in Global Fortune 500 firms in 2011.

OUR FOUNDRES:-

Our Founder Few men in history have made as dramatic a contribution to their countrys economic fortunes as did the founder of Reliance, Shri. Dhirubhai H Ambani. Fewer still have left behind a legacy that is more enduring and timeless. As with all great pioneers, there is more than one unique way of describing the true genius of Dhirubhai: The corporate visionary, the unmatched strategist, the proud patriot, the leader of men, the architect of Indias capital markets, the champion of shareholder interest. But the role Dhirubhai cherished most was perhaps that of Indias greatest wealth creator. In one lifetime, he built, starting from the proverbial scratch, Indias largest private sector enterprise. When Dhirubhai embarked on his first business venture, he had a seed capital of barely US$ 300 (around `14,000). Over the next three and a half decades, he converted this fledgling enterprise into a ` 60,000 crore colossusan achievement which earned Reliance a place on the global Fortune 500 list, the first ever Indian private company to do so.

Dhirubhai is widely regarded as the father of Indias capital markets. In 1977, when Reliance Textile Industries Limited first went public, the Indian stock market was a place patronised by a small club of elite investors which dabbled in a handful of stocks. Undaunted, Dhirubhai managed to convince a large number of first-time retail investors to participate in the unfolding Reliance story and put their hard-earned money in the Reliance Textile IPO, promising them, in exchange for their trust, substantial return on their investments. It was to be the start of one of great stories of mutual respect and reciprocal gain in the Indian markets. Under Dhirubhais extraordinary vision and leadership, Reliance scripted one of the greatest growth stories in corporate history anywhere in the world, and went on to become Indias largest private sector enterprise. Through out this amazing journey, Dhirubhai always kept the interests of the ordinary shareholder uppermost in mind, in the process making millionaires out of many of the initial investors in the Reliance stock, and creating one of the worlds largest shareholder families.

Vision & Mission

Vision Empowering everyone live their dreams. Mission Create unmatched value for everyone through dependable, effective, transparent and profitable life insurance and pension plans. Our Goal Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:

Emerge as transnational Life Insurer of global scale and standard Create best value for Customers, Shareholders and all Stake holders Achieve impeccable reputation and credentials through best business practices

Achievements

Largest Private Life Insurance in terms of Number of Policies for two consecutive years as of 31st March 2012

A wide network of 1230 branches and 1,50,000 advisors Over 9 million policies RLIC continues to be amongst the foremost Life Insurance companies in India to be certified ISO 9008:2001

Winner of Best Non-Urban Coverage Award at Indian Insurance Awards 2011

RLICs Boundaries for Books Campaign won the 'Silver' at the Indian Digital Media Awards (IDMA) 2012, under Best Integrated Campaign Social Cause and Best Use of Social Network Social Cause

10

Amongst the top 3 Most Trusted Service Brands in the Insurance category as per the Brand Equitys Most Trusted Service Brands 2011 Survey.

Top Management Team-Reliance Life Insurance. Anup Rau Chief Executive Officer and Executive Director Anup Rau, is the Chief Executive Officer and Executive Director of Reliance Life Insurance Company Limited, one of the largest life insurance companies in India. Reliance Life is a joint venture between Reliance Capital Limited and Nippon Life. His key focus areas at Reliance Life includes ensuring a sustainable and profitable growth for the Company with a vision to become the most admired Life Insurance Company in the Country and to strengthen the companys partnership with Nippon Life by adopting their long sustaining values and singular focus on customers. He brings tremendous amounts of energy and belief in ideas that would help realise this vision.

Prior to joining Reliance Life, Anup was Head Sales & Distribution at HDFC Life Insurance. Under his leadership at HDFC Life, the company enjoyed a consistent Top 3 position, achieved amongst the lowest cost of acquisition in the industry, dominated the Bancassurance channel, fostered the Agency distribution channel that scaled to the top quartile and introduced new distribution channels like Broker and International Business, which also grew to enjoy leadership positions in the industry.

Anup has over 17 years of experience in the Financial Services and FMCG sectors. He started out in the life insurance industry with ICICI Prudential, where he spent almost a decade. He began as a Branch Manager Agency, and worked across geographies in various key positions in Sales, Sales Planning & Strategy since their formative years. He was Senior Vice President Agency Distribution for West and South before he became Head Bancassurance& Alliances.

A philanthropist by nature, Anup is passionate about Corporate Social Responsibility (CSR) and strongly believes in giving back to the community.

Anup is an Economics Graduate from University of Delhi and holds a Masters in Management Studies from Mumbai University.

11

SrinivasanIyengar Chief Operating Officer Srinivasan Iyengar is the Chief Operating Officer of Reliance Life Insurance Company

Srinivasan has over 26 years of rich experience in Operations, Customer Service and Techonolgy. His key focus areas at Reliance Life are, integrating systems and processes for delivering operational excellence, customer value proposition and developing cost efficient service delivery platform

Prior to joining us ,Srinivasan was with AegonReligare Life Insurance where in capacity of the COO he led several projects to achieve Service Excellence and Operational Efficiencies to support business strategy.

He has also been associated with companies like LIC, ICICI-Prudential, Prudential Malaysia & TCS in various capacities.

Srinivasan has done his Graduation in Commerce from Mumbai University and an advanced course in Systems Management & Technology.

Andleeb Rabbi Chief Human Resources Officer Andleeb is the Chief Human Resources Officer and is responsible for providing leadership for Human Resources, Administration and Infrastructure functions of Reliance Life Insurance Company.

Andleeb is one of the founding team members of Reliance Life Insurance and has been involved from the acquisition of AMP Sanmar days. He has been with the Reliance Capital and worked for Reliance Commercial Finance and Home Finance as their Head of HR and Admin. Begining his career as a management trainee in Elbee-UPS, he subsequently worked with ICICI Bank and Hutch-3G in the Human Resource function.

12

RESEARCH METHODOLOGY

2.1

Objectives

Primary objective: Financial statement analysis seeks to evaluate the performance, financial strength, ability to generate enough cash and the growth outlook of a company.

Secondary objectives: Financial statement analysis helps the company to know the adequacy or profits earned by the company. We can know the financial strength of the company by analyzing financial statements. Analysis of financial statements helps to generate enough cash and cash equivalents and the timing and certainty of their generation The future growth outlook of company can be known by doing financial statement analysis.

Methodology: The adoption of proper methodology is an essential step in conducting my project work. The tactical question is to be considering after finalizing our objective what sources are available? and what resources should be used? to acquire the desired information.

Research Design: In the financial statement analysis of RLIC within these five years, descriptive research design is to be used to interpret the financial position of the company.

13

Data collection: Data collection is the most important part of any project. And from where those data are taken is also very important. For my project work I have used secondary data as the main basic of my study. These data is collected from internet. I had collected the last five years annual report of the RLIC from where I get profit & loss account and balance sheet of company that I had selected for my report for financial statement analysis .And I also used books for analyzing of the financial statements to gain more knowledge about financial ratios.

Finding and analysis: After collecting the data I did ratio analysis and cash flow statement analysis. This gives the detail of the companys current and past position

2.2

Tools and Techniques of Final Statement

Ratio Analysis

2.3

Interpretation of the Analysis

In interpretation I have done intercompany comparison of five year data of RELIANCE LIFE INSURANCE COMPANY LIMITED. Through this comparison I came to know about the financial performance of the RELIANCE LIFE INSURANCE COMPANY LIMITED. within these five years. 2.4 LIMITATIONS OF THE STUDY

1. Comparison not possible cause different firms adopt different accounting policies. 2. Ratio analysis becomes less effective due to price level changes. 3. Ratios may be misleading in the absence of absolute data. 4. Ratios alone are not adequate for proper conclusion. 5. It is not possible to collect some data which are very essential for analysis of financial statement during the project work due to non cooperation of higher and middle level management.

14

Theoretical Background
o

Reliance insurance plans good over long term

October 21, 2007 | SRIKALA BHASHYAM [Link] insurance-plans at 1.55am on 29/7/2013 [Link] BHASHYAM, A few days ago, an investor complained that he was taken for a ride by his insurance company. His grouse was that he had lost more than 50 percent of his premium money in a matter of a few weeks though the agent had assured him that his premium would earn annual returns of over 30 percent. With the stock market refusing to reverse its bearish mood, it's not just the equity market investors who are scanning the stock pages. Even insurance policyholders are keeping a close watch...

[Link]: Sashi Krishnan Chief Investment Officer Birla Sun Life Insurance Unit-linked insurance plans or ULIPs, as they are popularly known, offer not only a professionally-managed investment-cum-protection platform but also provide an entry point into the equity markets. Apart from equities, investments in highest-rated debt instruments also make Ulips a perfect choice for investors looking for a long-term investment instrument that offers transparency and flexibility.

15

Data Interpretation and Analysis Current ratio Current ratio is the most common ratio for measuring liquidity. Current ratio expresses the relationship between current assets and current liabilities. The current ratio is calculated by dividing current assets by current liabilities:

Current ratio =

Current assets Current liabilities

Current assets include cash and those assets which can be converted in to cash within a Year such as marketable securities, debtors, inventories etc. Prepaid expenses are also included in current assets. All obligations maturing within a Year are included in current liabilities. Current liabilities include creditors, bills payable, accrued expenses, short term bank loan, income-tax liability and long term maturing in current Year.
(Figures in thousands)

YEAR 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

CURRENT ASSET 5815326 6332983 4778622 4941020 6329210

CURRENT LIABILITY 6874497 7375716 6013243 6601872 17135102

CURRENT RATIO 0.85:1 0.86:1 0.79:1 0.75:1 0.36:1

CURRENT RATIO
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 CURRENT RATIO

16

INTERPREATION:As we know the ideal current ratio is 2:1. And in the Year 2009-2010 the current ratio is very high. More over the debtors turnover ratio was very low.

Due to more debtors the proportion of current assets is comparatively higher than previous year.

The reliance capital has higher current ratio in all years as compared to the ideal ratio except 2012-2013. This shows the strong liquidity position of the company. But the higher ratio indicates higher cash blocking in current assets.

Even the current ratio is decreasing the liquidity position of the company is strong. The ratio is coming nearer to ideal ratio, which shows good turnover of current assets.

17

NET WORKING CAPITAL RATIO

The difference between current assets and current liability is called net working capital. It is measure the liquidity position of company. Net working capital ratio is calculated by dividing net working capital by net assets.

Net working capital ratio =

Net working capital Net assets

(Figures in thousands)

YEAR

NET WOKING CAPITAL (1059171) (1042733) (1234621) (1660852) (10805892)

NET ASSET

NET WORKING CAPITAL RATIO (0.18:1) (0.16:1) (0.26:1) (0.34:1) (1.70:1)

2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

5815326 6332983 4778622 4941020 6329210

NET WORKING CAPITAL RATIO

0 -0.2 -0.4 -0.6 -0.8 -1 -1.2 -1.4 -1.6 -1.8 NET WORKING CAPITAL RATIO 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

18

INTERPREATION:The net working capital ratio of the company is reducing. The net working capital is reducing as compared to net assets. But the company has sufficient working capital.

In before years the investment in working capital is very high. Now a day the working capital ratio is decreasing, but the company has enough current assets to fulfill its current obligation. So even the working capital ratio is decreasing the companys financial position is not affecting.

The financial position of company is improved. And the ratio shows the effective utilization of working assets.

19

CASH TO CURRENT LIABILITY

Since cash is the most liquid asset, a financial analyst may be examining cash ratio and its equivalent to current liabilities. Trade investment or marketable securities are equivalent of cash; therefore, they may be included in the computation of cash ratio:

Cash ratio =

Cash + Marketable Securities Current Liabilities

Marketable Securities = NIL

(Figures in thousands)

YEAR

CASH

CURRENT LIABILITY

CASH TO CURRENT LIABILITY 0.60:1 0.68:1 0.45:1 0.30:1 0.14:1

2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

41049872526 4987798 2722027 1995536 2512672

6874974 7375716 6013243 6601872 17135102

CASH TO CURRENT LIABILITY

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2008-2009 2009-2010

2010-2011

2011-2012

CASH TO CURRENT LIABILITY

2012-2013

20

INTERPREATION:The ideal cash position ratio is 1:1. The companys cash position ratio is not good. Ratio in 2009-2010 shows good ratio than other years. It shows that the company doesnt have cash in in time. hand. So the company is not able to pay its cu rrent liability

The ratio has decreasing trend throughout the last four years. The cash position ratio is 0.68:1 of 2009-2010. Even not having high cash in hand we cannot say that the company has not having fund because the company have to pay its some creditors within some days. So the company must have to keep some higher cash on hand for emergency purpose.

21

Solvency ratio
It is also known as debt ratio. This ratio is found out between total asset and external liability of the company. External liability means all long and short period liability. Solvency Ratio= Long Term Debt Total funds
(Figures in thousands)

YEAR 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Long term debt 15570 301777 307962 316234 333617

Total fund 5815326 6332983 4778622 4941020 6329210

Solvency ratio 0.0026:1 0.047:1 0.064:1 0.064:1 0.052:1

SOLVENCY RATIO

SOLVENCY RATIO

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

22

INTERPRETATION:The solvency ratio shows the position of outside liability to total assets. We can see that the average solvency ratio is 0.064:1. It means the company has average 64% outside liability to its total assets. It shows the higher utilization of owners equity and sound solvency position of reliance capital. We can see that the solvency ratio is lower, it shows that the company total liability is only 64% of its total assets in the year 2011-2012. It shows the sound financial position of company. The reducing ratio indicates the improvement in solvency position of the company.

23

Proprietary ratio
Proprietary ratio is relates the shareholder fund to total assets. This ratio shows the long term solvency of the business. It is calculated by dividing shareholders fund by the total assets. Proprietary Ratio = Shareholders fund Total assets or total resources

(Figures in thousands)

YEAR 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Share holder fund 27360548 29764153 30961485 33920823 33932175

Total asset 5815320 6332983 4778622 4941020 6329210

Proprietary ratio 4.70:1 4.70:1 6.48:1 6.87:1 5.36:1

Proprietary ratio
7 6 5 4 Proprietary ratio 3 2 1 0 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

24

INTERPRETATION:The ideal Proprietary ratio is 1:3. The RELIANCE CAPITAL has the ratio of 6.87:1 in 2011-2012.

Most of the assets are financed by the Proprietors. The company is very less depending on outside fund. This shows the long term solvency position of the company and the higher secure position of creditors.

The fluctuation of the ratio is due to increase in the total assets. Shareholders fund is also increasing. This states that there is not too major fluctuation in this ratio.

25

Debt equity ratio

The financing of total assets of a business concern is done by owners equity(also as internal equity ) as well as outside debts (known as external equity) the relationship between borrowed fund and owners capital is popular measure of the long term financial solvency of firm. This Rrelationship is shown by the debt equity ratio.

Debt Equity Ratio =

Long Term Debt Shareholder Fund

(Figures in

thousands)

YEAR 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Long term debt + debenture 15570 301777 307962 316234 333617

Share holders fund 27360548 29764153 30961485 33920823 33932175

Debt equity ratio 0.0056:1 0.0101:1 0.0099:1 0.0093:1 0.0098:1

Debt equity ratio

0.012 0.01 0.008 0.006 0.004 0.002 0 2008-2009 2009-2010 2010-2011 Debt equity ratio 2011-2012 2012-2013 Debt equity ratio

26

INTERPREATION:As per the companys annual report the debt equity ratio is 0:001 for last four year but in 2009-2010 it slightly increased to .It means the company has no outside debt. Company gets all funds from owners equity. The company has secured non-current liabilities 301777 thausandsin 2009-2010 which is1557 in previous year.

27

Return on asset ratio

Return on assets can be measured in term of relationship between net profit to total assets. This ratio is also known as profit to assets ratio. It measured the profitability of investments. The overall profitability can be known.

Return on Assets=

Net profit Total Assets

X 100

There are various approaches possible to define net profit and assets, according to the purpose and intent of the calculated of the ratio.
(Figures in thousands)

YEAR 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Net profit (10849101) loss (2837884) loss (1292910) loss 3725713 3804172

Total asset 5815326 6332983 4778622 4941020 6329210

Return on asset ratio In % (18) (44) (27) 63 60

Return on asset ratio In %

80 60 40 20 0 -20 -40 -60 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Return on asset ratio In %

28

Interpretation Return on assets shows the profitability on investment. There are ups and downs in ratio every Year. We can see that there are changes in the ratios. This ratio shows that the company has good return on assets in last 2 years. The ratio of the year 2008-2010 is reduced because the increase in assets.

The ratio for the year 2008-2010 is reduced due to less net profit margin.

29

Return on share holders equity

The term net profit as used here means net income after payment of interest and tax including net non-operating income (Non-operating income minus non-operating expenses). It is the final income that is available for distribution as dividend to shareholder. Shareholder funds include both preference and equity share capital all reserves and surplus belonging to shareholder.

Return on Shareholder Fund=

(Figures in thousands)

Net Profit

X 100

Shareholder Fund YEAR 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Net profit (10849101) (2837884) (1292910) 3725713 3804172 Share holders fund 27360548 29764153 30961485 33920823 33932175 Return on share holders equity in % (3.9) (9.5) (4.2) 10.98 11.21

Return on share holders equity in %

15 10 5 0 -5 -10 Return on share holders equity Returnin on %share holders equity in %

30

Interpretation Return on shareholders equity had decreasing trend from 2008-2009 to 2010-2011. It is because the shareholders fund decreasing every Year but the net profit is not increasing in that proportion. From 2008-2009 to 2010-2011 the net profit was in decrease. Hear we see that the return on shareholders equity was increased in the year 20112012,and the net profit also increased in same year. For this only the ratio increased This indicates that the company is using the shareholders fund efficiently.

31

Findings
The ideal current ratio is 2:1 the firms obtain in 0.86:1the financial year 20092010. It shows a negative impact. The net profit shows fluctuating trend, it shows that more or less the company is successful to maintained efficiency in sales volume and operating expense. The company is maintaining the proper record of inventory. Management is successful to manage the cost involved in inventory. The reliance life insurance is successful to manage its debt equity ratio below 0.0101:1 which shows that company is running by equity funds. Net working capital is decreasing of company, it means the company is utilizing there funds properly. The proprietary ratio of the firm shows fluctuating trend then also company is maintaining solvency of the firm.

32

SUGGESTIONS Considering the entire situation discussed above following points should be taken in to consideration for improvement in the financial position.

The company can use the debt fund at certain proportion. Because the increasing in equity capital will leads to increase in number of share holders. While the debt fund have no right in companys management. And the debt funds are available at very low cost.

The past ratio shows improvement in working capital utilization. The company has to try to improve it more by effective utilization of current assets.

The company have to expand their plant capacity of invest in a new plan. The reason is higher demand of investment policies in India. And there are only four or five major players in this insurance industry. They are not able to full fill the demand. So the company has to import it . Reliance Capital must want to be improved portfolio management of the fund.

\
33

CONCLUSION

The financial position of the company is very strong. Reliance life get its all fund from equity. The Reliance life is mostly using the proprietary fund.

It has the debt equity ratio of 0.0093:1 all the years except in 2011-2012. This shows the long term solvency position of the company. The company has to maintain certain critical terms in policies for the smooth and continuous running of organizations. So this may be the reason of high current ratio in 2012-2013. The company has less working capital investment as we can see that the current assets and current liability both are having minimum difference. The working capital turnover ratio was shows the decreasing trend. This shows the efficient utilization of working capital.

I find that the proportion of cash in current assets is high. It was higher then the total current liability. So the liquidity position of RLIC is very strong. The company has very less total outside liability as compared with total assets. The company has increasing inventory turnover ratio and debtors turnover ratio. This shows the high liquidity of current assets. So the working capital requirement is reduced. And we can invest the idle fund somewhere else for productive use. The net worth of the company is increasing year to year, which shows good return to equity share holders.

34

BIBLIOGRPHY

Annual report

Annual report of RELIANCE LIFE INSURANCE COMPANY 2008-2009 Annual report of RELIANCE LIFE INSURANCE COMPANY 2009-2010 Annual report of RELIANCE LIFE INSURANCE COMPANY 2010-2011 Annual report of RELIANCE LIFE INSURANCE COMPANY 2011-2012 Annual report of RELIANCE LIFE INSURANCE COMPANY 2012-2013

Financial management BY [Link], 3rdedition 2009, financial accounting for management, Pearson education.

Bibliography:[Link] @11.54pm 27/6/13 [Link] @3.45pm 11/7/13

35