3
RESEARCH METHODOLOGY
3.1 INTRODUCTION
Research methodology lists the basic plan of the study and includes steps of data
collection, process of data and finally interpretation of data. This chapter describes the
procedure adopted in this study which includes research problem, objectives, methods
of collecting data, time period of study and different tools and techniques used.
3.2 STATEMENT OF THE PROBLEM
The Aluminium industry is playing an important role in the industrial and economic
growth of the country. Many of the aluminium firms have achieved growth in
production and sales and improvement in operating efficiently in market development.
They are providing gainful employment to thousands, helping their neighbourhood,
infrastructural socially and economically. The success of an enterprise to a great extent
depends up on its financial performance. A careful and well-planned financial
management is needed for raising resources and utilizing them effectively. In this
context, the researcher is interested to examine the financial performances of a
Navratna CPSE. The study is confined to the analysis and interpretation of financial
statements of NALCO. Many studies have been conducted on the financial
performance of NALCO, whereas very little work has been found which shows the
financial performance taking parameters like Profitability, Liquidity, Solvency and
Operating Efficiency. That's why the researcher Chosen this research project entitled
“Financial Statement Analysis Of National Aluminium Company Limited.”
3.3 SCOPE OF THE STUDY
The study aims to make an analysis of financial performance of NALCO. Hence,
the present study is pertaining to Indian Aluminium Company. The study have used
the financial facts of the selected companies from 2008-09 to 2011-12. The
financial performance of the sample company is evaluated in terms of profitability,
liquidity, financial health and value creation to its shareholders. The scope of
financial performance is very wide and the study is based on accounting
information.
The Aluminium sector is doing remarkably well and is registering high growth
rates for the past few years. The Aluminium industry is the major driver for the
phenomenal growth of the economy. The exports are pioneering the Aluminium
industry. Maximizing shareholder value is becoming the new corporate standard in
India. The corporate, who gave low preference to the shareholder inquisitiveness,
are now bestowing the utmost inclination to it. In order to help the corporate to
generate value to the shareholders, value-based management systems have been
developed. If a business enterprise is determined to maximize the economic value
of the shareholders claim to the assets, then it is quite beyond price to all those who
are patronized stakeholders.
3.4 OBJECTIVES OF THE STUDY
The researcher has analysed the financial statements of NALCO with the following
objectives:
a) To analyse the financial performance of NALCO
b) To determine the Profitability, Liquidity and Solvency position the company
c) To know the Cash flow and Fund flow of NALCO.
d) To analyze the capital structure of the company with the help of Leverage ratio.
e) To offer appropriate suggestions for the better performance of the organization
3.5PERIOD OF THE STUDY
The period of study has been confined to the years from 2008-09 to 2011-12. The
corporate performance has undergone rapid changes during the late eighties and early
nineties especially after the liberalization of the Indian economy in 1991. In the
liberalization process, government has made several policy decisions with regard to
industrial sector in general and aluminum sector in particular. Further , for analyzing the
trend at least 5 years data are essential because it can provide the trend behavior and
pattern of growth or otherwise of the industry to a large extent. In the present study a
period of 4 years has taken to examine the comparative study on the trend and behavior
of the performance of the sample companies. Apart from these, the inter-firm
comparison is made to find out the strength and weakness of each sample unit selected
for the study.
3.6 SOURCES OF DATA
The research is purely based on secondary data. The data for the research were collected
from published annual reports and accounts. Sometimes data were collected from
Economic Times, Business Standards and from NALCO website.
3.7 TOOLS AND TECHNIQUES USED
Keeping in view the nature of study the data collected have been analyzed and
interpreted with the help of following methods:
Comparative Statements
Common-Size Statements
Trend Percentages
Statement of Changes in Working Capital
Cash Flow Statement
Ratio Analysis
However, the researcher has mainly concentrated on Ratio Analysis. He has used
Liquidity Ratios, Activity Ratios and Profitability Ratios to test the Liquidity,
profitability and Operational Efficiency Position of the Company. Graphs and tables
have been used wherever necessary.
3.8LIMITATIONS OF THE STUDY
a) The study is limited to four financial years only i.e. from 2008-09 to 2011-12.
b) The researcher was unable to get separate data regarding fixed and variable items
of NALCO for which he was unable to make the cost-volume profit analysis.
c) The researcher was unable to make creditor’s turnover analysis because the data
regarding credit purchase was not available.
d) In some cases, the researcher has taken net sales instead of cost of goods sold,
because of unavailability of cost of goods sold figure from 2008-09 to 2011-12.
e) The study is fully based on secondary data. Hence the limitation of secondary
data was inherent the time and cost also were the limiting factors which did not
allow the researcher to understand the still more nuances of this problem.
f) The project was prepared in a short period of time because of time and finance
constraints. If more time could have been allowed for the research, the project
would have been more purposeful.
3.9 CHAPTERISATION OF THE STUDY
The dissertation is divided in six chapters.
Chapter one deals with Introduction about the Aluminium industry and financial
performance, problem focus, objectives, significance and scope of the study.
Chapter two, deals with Review of Literatures related in the field of finance and
financial statement analysis. While chapter Three deals with the profile of NALCO,
chapter Four deals with the Research Methodology including sources of data,
research techniques and limitations of the study. Chapter six deals with data
analysis and interpretations. Lastly, Chapter seven deals with summary of findings,
suggestions and conclusion.
