SJIF Impact Factor: 6.260| ISI I.F.Value:1.241 | Journal DOI: 10.

36713/epra2016 ISSN: 2455-7838(Online)

EPRA International Journal of Research and Development (IJRD)
Volume: 5 | Issue: 3 | March 2020 - Peer Reviewed Journal

A STUDY ON FINANCIAL PERFORMANCE ANALYSIS

OF INDIAN OIL CORPORATION LIMITED

Divya Bharathi.R
Student of III B.Com.(PA), Department of Commerce with Professional Accounting, Dr. N. G. P
Arts and Science College, Coimbatore.

N.Ramya
Assistant Professor, Department of Commerce with Professional Accounting, Dr. N. G. P Arts and
Science College, Coimbatore.

ABSTRACT
Indian Oil Corporation Limited owns and operates a network of crude oil and petroleum product pipeline in
India. The main objective of this analysis is to determine the firm’s liquidity and profitability position by using
tools like ratio analysis. Various ratios like current ratio, liquid ratio, absolute liquid ratio, Gross profit ratio,
Net profit ratio, operating profit ratio, operating ratio have been used to measure the financial performance of the
company. Secondary data was used for the study. For a better understanding of the analysis, the findings are
interpreted in tables. This analysis consists of interpretation, findings and suggestions to assists the company to
improve its performance.
KEY WORDS: Financial Performance, Ratio Analysis, Liquidity Ratios, Profitability Ratios.

INTRODUCTION is to determine the efficiency and performance of

Financial Performance analysis is the process of firm’s management, as reflected in the financial
Identifying the financial strengths and weakness of the records. The study has undertaken to analyse the
firm by properly establishing the relationship between financial performance of Indian Oil Corporation
the items of Balance sheet and Profit and Loss limited with a view to understand how management of
account. It also helps in short-term and long-term finance plays a crucial role in the growth.
forecasting and growth can be identified with the help
of financial performance analysis. The dictionary SCOPE OF THE STUDY
meaning of ‘analysis’ is to resolve or separate a thing The scope of the study is to find the
into its element or components parts for tracing their financial performance of Indian Oil Corporation
relation to the things as whole and to each other. The Limited. The study is based on accounting
analysis of financial statement is a process of information of Indian Oil Corporation for past five
evaluating the relationship between the components of years. The study is mainly made to know the profit
financial statement to obtain a better understanding of earnings, financial growth and financial performance
the firm’s position and performance. The analysis can of the company. These findings and the suggestions
be undertaken by management of the firm or by would help them re-orient their policies towards better
parties outside the firm namely, owners, creditors, financial performance so as to set the industry in the
investors. pace of its higher growth.

STATEMENT OF THE PROBLEM OBJECTIVES OF THE STUDY

Financial performance analysis is the  To study the liquidity position of Indian
process of determining the operation and financial Oil Corporation Limited.
characteristics of an Indian Oil Corporation Limited  To analyse profitability status of Indian Oil
from accounting and financial statements. The study Corporation Limited.

2020 EPRA IJRD | Journal DOI: https://doi.org/10.36713/epra2016 | www.eprajournals.com |250 |

 SJIF Impact Factor: 6.260| ISI I.F.Value:1.241 | Journal DOI: 10.36713/epra2016 ISSN: 2455-7838(Online)
EPRA International Journal of Research and Development (IJRD)
Volume: 5 | Issue: 3 | March 2020 - Peer Reviewed Journal

 To know the changes over working capital financial structure analysis, activity analysis and
for a period of five years. profitability analysis. The study aimed at analysing
 To analyse overall financial performance the financial performance of TNSC APEX CO-
of Indian oil Corporation Limited. OPERATIVE BANK. The researcher used analytical
type of research to analyse the firm’s position. The
RESEARCH METHODOLOGY researcher suggested the concern to increase the
The study is about financial performance so it working capital to meet short term obligations. The
deals with the secondary data. The data has been study concluded the performance of concern was
collected from annual reports of the company. The found to be good.
study covers the period of five years ranges from Seema Thakur (2019), financial performance means
2014-15 to 2018-19. Analytical research design is confirming the results of a firm’s strategies and
chosen for the study. The analytical research usually operations in economic terms. The researcher studied
concerns itself with cause-effect relationships. the financial performance, profitability and soundness
of Dabur India Limited. Analytical research design
Tools and Techniques has been chosen for the study. The study found that
For analysing the financial performance of Indian the financial performance was very well covered and
Oil Corporation Limited the following tools are the company was maintaining good financial
used: performance.
1. Ratio Analysis
DATA ANALYSIS AND
 Profitability ratios
INTERPRETATION
 Liquidity ratios
LIQUIDITY RATIO
2. Working capital Analysis.
A liquidity ratio is a financial ratio that
indicated whether a company’s current assets will be
LIMITATIONS OF THE STUDY sufficient to meet the company’s obligations when
 The analysis is based on annual reports of the they become due.
company.  Current ratio
 The statement studied are historical past, that  Liquid ratio
cannot be the index for future estimation.  Absolute liquid ratio
CURRENT RATIO
REVIEW OF LITERATURE This ratio measures the financial strength of
Deepika and Dhivya (2019), the analysis the company. Generally 2:1 is treated as the ideal
of financial statements is to obtain better ratio, but it depends on industry to industry.
understanding of firm’s position. The objective of the Current Ratio = Current Assets/Current
study was to know the profitability and solvency of
Liability
the business concern. The study covered a period of
2012-16. The research methodology was based on
secondary data. They found that sales were in
fluctuating trend. They concluded that profitability
and solvency was upto satisfactory level and their
growth was fluctuating.
Elayabharathi, et.al (2019), the study
included the area of working capital analysis,
Table No. 1
Table Showing Current Ratio
(Rs. in crores)

Year Current Asset Current Liabilities Current Ratio

2014–2015 58,783.23 77,606.37 0.76

2015–2016 50,991.58 79,508.98 0.64
2016–2017 75,033.00 88,437.90 0.85
2017–2018 81,758.66 1,00,834.15 0.81
2018–2019 93,989.00 1,15,712.00 0.81
(Source: Secondary Data)

2020 EPRA IJRD | Journal DOI: https://doi.org/10.36713/epra2016 | www.eprajournals.com |251 |

 SJIF Impact Factor: 6.260| ISI I.F.Value:1.241 | Journal DOI: 10.36713/epra2016 ISSN: 2455-7838(Online)
EPRA International Journal of Research and Development (IJRD)
Volume: 5 | Issue: 3 | March 2020 - Peer Reviewed Journal

Interpretation LIQUID RATIO

The standard norm of current ratio should be 2:1. This ratio is the best measure of the liquidity
From the above table, the Indian oil corporation has in the company. This ratio is more conservative than
current ratio of 0.81 during the year 2018-2019 and the current ratio. The quick asset is computed by
also in the year 2017-2018. The corporation has adjusting current assets to eliminate those assets
highest current ratio in the year 2016-2017 i.e. 0.85. It which are not in cash. Generally 1:1 is treated as an
gradually decreases to 0.64 in the year 2015-2016 and ideal ratio.
to 0.76 in the year 2016-2017. The corporation has
lowest current ratio 0.64 in the year 2015-2016. Liquid Ratio = Liquid Assets / Current Liability
Where, Liquid Assets = Current Assets –
Inventory – Prepaid Expenses.

Table No. 2
Table Showing Liquid Ratio
(Rs. in Crores)

Year Liquid Asset Current Liabilities Liquid Ratio

2014-2015 8,865.84 77,606.37 0.11
2015-2016 8,734.86 79,508.98 0.11
2016-2017 9,308.94 88,437.90 0.11
2017-2018 11,190.76 1,00,834.15 0.11
2018-2019 16,862.00 1,15,712.00 0.15
(Source: Secondary Data)

Interpretation ABSOLUTE LIQUID RATIO

The standard liquid ratio is considered to be 1:1. This ratio measures the total liquidity
The corporation has a liquid ratio of 0.11 in the year available to the company. This ratio only considers
2014-2015. The liquid ratio remains the same i.e. marketable securities and cash available to the
0.11 for succeeding another three years 2015-2016, company. This ratio only tests short-term liquidity in
2016-2017 and 2017-2018. It gradually increases to terms of cash, marketable securities, and current
0.15 in the year 2018-2019. investment.
Absolute Liquid Ratio = Cash & Bank +
Marketable Securities / Current Liability

Table No. 3
Table Showing Absolute Liquid Ratio

(Rs. in Crores)

Year Absolute Liquid Current Liabilities Absolute Liquid Ratio

Asset

2014-2015 1,221.07 77,606.37 0.016

2015-2016 1,050.36 79,508.98 0.013
2016-2017 409.75 88,437.90 0.005
2017-2018 494.28 1,00,834.15 0.005
2018-2019 1,064.00 1,15,712.00 0.009
(Source: Secondary Data)

Interpretation and 0.009 in the year 2018-2019. The absolute liquid

The acceptable norm of absolute liquid ratio is 1:2. ratio decreased to 0.013, 0.005 during 2015-2016,
The Indian oil corporation has absolute liquid ratio 2016-2017 and 2017-2018 respectively.
0.016 in the year 2014-2015, 0.013 in the year 2015-
2016, 0.005 in the year 2016-2017 and 2017-2018

2020 EPRA IJRD | Journal DOI: https://doi.org/10.36713/epra2016 | www.eprajournals.com |252 |

 SJIF Impact Factor: 6.260| ISI I.F.Value:1.241 | Journal DOI: 10.36713/epra2016 ISSN: 2455-7838(Online)
EPRA International Journal of Research and Development (IJRD)
Volume: 5 | Issue: 3 | March 2020 - Peer Reviewed Journal

PROFITABILITY RATIO  Operating Profit Ratio

Profitability ratios are a class of financial  Operating Ratio
metrics that are used to assess a business’s ability to GROSS PROFIT RATIO
generate earnings relative to its revenue, operating Gross profit ratio establishes the relationship
costs, balance sheet assets, and shareholder’s equity. between gross profit and Revenue from operations,
Over time, using data from a specific point in time. i.e., Net Sales of an enterprise.
Gross Profit Ratio = (Gross Profit / Net Sales) *
 Gross Profit Ratio 100
 Net Profit Ratio

Table No. 4
Table showing Gross Profit Ratio
(Rs. in Crores)

Year Gross Profit Sales Gross Profit Ratio

2014-2015 34,389.73 4,49,508.66 7.65
2015-2016 46,991.04 3,46,044.74 13.58
2016-2017 3,70,471.13 3,55,379.00 104.25
2017-2018 67,154.66 4,21,491.82 15.93
2018-2019 74,455.89 5,28,148.93 14.10
(Source: Secondary Data)

Interpretation NET PROFIT RATIO

The corporation has a Gross Profit Ratio 7.65 Net profit ratio measures the relationship between
during the year 2014-2015. It increased to 13.58 in Net Profit and Net Sales. It shows the percentage of
the year 2015-2016. It again increased to 104.25 Net Profit earned on Revenue from Operations.
during the year 2016-2017. Later it gradually
decreased to 15.93 and 14.10 during the year 2017- Net Profit Ratio = (Net Profit / Net Sales) * 100
2018 and 2018-2019 respectively.
Table No. 5
Table showing Net Profit Ratio
(Rs. in Crores)

Year Net Profit Sales Net Profit Ratio

2014-2015 4,871.78 4,49,508.66 1.08
2015-2016 11,776.94 3,46,044.74 3.40
2016-2017 19,209.43 3,55,379.00 5.41
2017-2018 21,278.30 4,21,491.82 5.05
2018-2019 15,889.47 5,28,148.93 3.01
(Source: Secondary Data)

Interpretation OPERATING PROFIT RATIO

The Net Profit Ratio of Indian Oil Corporation Operating profit ratio measures the
during the year 2014-2015 is 1.08. Later it increases relationship between Operating Profit and Revenue
to 3.40 and 5.41 during 2015-2016 and 2016-2017 from Operations, i.e. Net Sales.
respectively. Later it decreases to 5.05 and 3.01 in the Operating Profit Ratio is computed by dividing
succeeding years 2017-2018 and 2018-2019 operating profit by revenue from operations (Net
respectively. Sales) and is express in Percentage.
Operating Profit Ratio = (Operating Profit /
Revenue from Operations) * 100

2020 EPRA IJRD | Journal DOI: https://doi.org/10.36713/epra2016 | www.eprajournals.com |253 |

 SJIF Impact Factor: 6.260| ISI I.F.Value:1.241 | Journal DOI: 10.36713/epra2016 ISSN: 2455-7838(Online)
EPRA International Journal of Research and Development (IJRD)
Volume: 5 | Issue: 3 | March 2020 - Peer Reviewed Journal
Table No. 6
Table showing Operating Profit Ratio
(Rs. in Crores)

Year Operating Profit Sales Operating Profit Ratio

2014-2015 10,550.31 4,49,508.66 2.35
2015-2016 23,442.89 3,46,044.74 6.77
2016-2017 34,047.19 3,55,379.00 9.58
2017-2018 41,605.53 4,21,491.82 9.87
2018-2019 35,222.67 5,28,148.93 6.67
(Source: Secondary Data)

Interpretation OPERATING RATIO

The Operating Profit Ratio during the year 2014- The operating ratio shows the efficiency of a
2015 is 2.35. It becomes increasing during next three company’s management by comparing the total
years, that is, it increased to 6.77, 9.58, and 9.87 operating expenses of a company to net sales. The
during 2015-2016, 2016-2017 and 2017-2018 operating ratio shows how efficient a company’s
respectively. During 2018-2019 it decreases to 6.67. management is at keeping costs low while generating
revenue or sales.
Operating Ratio = 100 – Operating Profit Ratio

Table No. 7
Table showing Operating Ratio
(Rs. in Crores)

Year Operating Profit Ratio Operating Ratio

2014-2015 2.35 97.65
2015-2016 6.77 93.23
2016-2017 9.58 90.42
2017-2018 9.87 90.13
2018-2019 6.67 93.33
(Source: Secondary Data)

Interpretation TURNOVER RATIO

The Operating Ratio during the year 2014-2015 is CAPITAL TURNOVER RATIO
97.65. Later it decreased to 93.23, 90.42% and 90.13 Capital turnover compares the annual sales of
during 2015-2016, 2016-2017 and 2017-2018 a business to the total amount of its stockholder’s
respectively. During 2018-2019 it increased to 93.33. equity. The intent is to measure the proportion of
revenue that a company can generate with a given
amount of equity.
Capital Turnover Ratio = Sales / Capital
Employed
Where, Capital Employed = Total Assets –
Current Liabilities

Table No. 8
Table showing Capital Turnover Ratio
(Rs. in Crores)
Year Sales Capital Employed Capital Turnover Ratio
2014-2015 4,49,508.66 50,453.32 8.91
2015-2016 3,46,044.74 60,045.87 5.76
2016-2017 3,55,379.00 74,392.79 4.78
2017-2018 4,21,491.82 77,331.91 5.45
2018-2019 5,28,148.93 91,345.00 5.78
(Source: Secondary Data)

2020 EPRA IJRD | Journal DOI: https://doi.org/10.36713/epra2016 | www.eprajournals.com |254 |

 SJIF Impact Factor: 6.260| ISI I.F.Value:1.241 | Journal DOI: 10.36713/epra2016 ISSN: 2455-7838(Online)
EPRA International Journal of Research and Development (IJRD)
Volume: 5 | Issue: 3 | March 2020 - Peer Reviewed Journal

Interpretation SUGGESTIONS
A high capital turnover ratio indicates that a  The Indian Oil Corporation can take proper
business is using its capital resources efficiently. The steps in increasing its liquidity position as it
corporation has capital turnover ratio of 8.91, 5.76, was decreasing and fluctuating throughout
4.78, 5.45, 5.78 during the year 2014-2015, 2015- the year.
2016, 2016-2017, 2017-2018, 2018-2019 respectively.  The Corporation can invest in marketable
securities to improve its absolute liquid ratio.
FINDINGS, SUGGESTIONS AND  The liquidity ratios of the Indian Oil
CONCLUSION Corporation is not upto the standard ratio. So
Findings the corporation can take necessary steps to
 The Indian oil corporation has highest improve its liquidity position.
current ratio 0.85 in the year 2016-2017 and  The Corporation can keep on improving its
lowest current ratio of 0.64 in the year 2015- profit in forthcoming years, which will also
2016. enhance the share value of the Corporation.
 The corporation has highest liquid ratio 0.15  In general, the higher a company’s working
in the year 2018-2019 and lowest liquid ratio capital, the better. High working capital is
0.11 during 2014-2015, 2015-2016, 2016- considered a sign of a well-managed
2017 and 2017-2018. company with the potential for growth.
 The corporation has highest absolute liquid However, some very large companies
ratio 0.016 in the year 2014-2015. The actually have negative working capital. This
lowest absolute liquid ratio is 0.005 during means their short-term debts outweigh their
the year 2016-2017 and 2017-2018. liquidity.
 The Indian Oil Corporation has highest
Gross Profit Ratio in the year 2016-2017, CONCLUSION
that is, 104.25. It has the lowest Gross Profit The study reveals that the financial performance is
Ratio during the year 2014-2015, that is, fair. It has been maintaining good financial
7.65. performance and further it can improve if the
 The Indian Oil Corporation has the highest company concentrates on its operating, administration
Net Profit Ratio of 5.41 during the year and selling expenses and by reducing expenses. The
2016-2017.It has the lowest Net Profit Ratio company should increase sales volume as well as
1.08 during the year 2014-2015. gross profit. The company was able to meet its entire
 The Indian Oil Corporation has the highest requirements for capital expenditures and higher level
Operating Profit Ratio of 9.87 during the of working capital commitment with higher volume of
year 2017-2018. It has the lowest Operating operations and from its operating cash flows. In order
Profit Ratio of 2.35 during the year 2014- to compete with global economic scenario and to
2015. sustain its place in Petroleum Industry, it need to
 The Operating Ratio of the Indian Oil monitor its financial performance continually and take
Corporation is maximum during the year financial decisions rationally.
2014-2015, i.e. 97.65 and lowest Operating
Ratio during the year 2017-2018 i.e. 90.13. REFERENCE
1. Deepika.S and Dhivya.B(2019),”A study on
 The corporation has highest capital turnover
Financial statement Analysis of Oil and Natural
ratio 8.91 in the year 2014-2015 and lowest Gas Corporation limited”, International Journal
capital turnover ratio 4.78 in the year 2016- of Applied Research, Volume 3, Issue 3,
2017. pp.no.537-540.
 Net decrease in working capital is Rs. 12, 2. Mr. V. Elayabharathil, Mrs. D. Praveena, Mrs. S.
714.37 during 2015-2016. Rathilka (2019),”A study on Financial
 Net increase in working capital is Rs. 4, Performace Analysis with reference to TNSC
289.57 during 2016-2017. Bank, Chennai,” International Journal of
Advance Research and Innovative Ideas in
 Net increase in working capital is Rs. Education, Volume 5, Issue 2, pp.no.2949-2955.
3,769.37 during 2017-2018. 3. Dr. Seema Thakur (2019),”A study on Financial
 Net increase in working capital is Rs. 12, Performance Analysis pf Dabur India Limited,”
178.37 during 2018-2019. International Journal of Scientific Engineering
 It is found that the overall performance of the Research , Volume 10, Issue 9, pp.no.217-223.
Indian Oil Corporation is fair.

2020 EPRA IJRD | Journal DOI: https://doi.org/10.36713/epra2016 | www.eprajournals.com |255 |