Case study on financial statement analysis – profitability analysis of sail

The primary objective of this paper is to serve as a case study to illustrate the techniques used for performing financial statement analysis on a company. Hence, the paper demonstrates the methods to be employed for conducting a Profitability Analysis on SAIL through a combination of mathematical and statistical tools and techniques.

This paper tests whether there is significant difference between critical measures of profitability – return on capital employed, return on equity, gross profit margin, operating profit margin and net profit margin. The study also tests whether the variances of the above mentioned measures are homogenous. Basis the result from this, appropriate multiple comparison tests for these measures were carried out. The paper demonstrates the comparison with similar companies in the industry through ratio analyses as well as statistical tests like ANOVA, Test of Homogeneity of Variances and the Multiple Comparison Tests like the Bonferroni Test and Tamhane Test.

The results suggest that the by following this method exhibited in the paper, substantial information about the reasons behind the decrease in profitability of SAIL have been demystified. Also, by analysing the peers of SAIL, the relative position of the company's profitability could be established.