Steel Authority of India Limited (SAIL) and Tata Steel Limited are the two largest steel producers in India. The former is a public sector giant set up in the year 1973 with over 85% of the capital currently owned by the government of India, the latter is the premier company of TATA Group, set up in the year 1907. Both the companies follow financial year as the accounting period.

The comparative profit and loss statements for Tata Steel and SAIL for the year ended 31st March 2017 are given as follows:

 Questions for Discussion

Both the companies have almost similar revenue from operations. However, TISCO has reported a profit whereas SAIL has reported a loss for the year 2016–17. Using appropriate profitability and expense ratios identify the reasons for the same.

Transcribed Image Text:

Particulars 1. Revenue from operations II. Other income III. Total income (I + II) IV. Expenses: Cost of materials consumed Purchase of stock-in-trade Changes in inventories of finished goods, work-in-progress Excise duty on sales of goods Employee benefit expense Finance costs Depreciation and amortization expense Other expenses Total expenses (IV) V. Profit/(loss) before exceptional items and tax (III-IV) VI. Exceptional items VII Profit/(loss) before tax (V-VI) VIII. Tax expense: (1) Current tax (2) Deferred tax IX. Profit/(loss) from the period from continuing operations (VII-VIII) X. Profit/(loss) from discontinued operations XI. Tax expense of discounted operations XII. Profit/(loss) from discontinued operations (X-XI) XIII. Profit/(Loss) for the period (IX + XII) XIV. Other comprehensive income A (i) Items that will not be reclassified to profit & loss (ii) Income tax relating to items that will not be reclassified to profit & loss B (i) Items that will be reclassified to profit & loss (ii) Income tax relating to items that will be reclassified to profit & loss XV. Total comprehensive income for the period (XIII + XIV) comprising profit (loss) and other comprehensive Income for the period) SAIL 49,767 536 50,303 21,126 12,497 881 121 (1,330) 5,314 5,268 8,948 4,605 2,528 2,689 2,680 3,541 14,220 19,464 54,937 47,615 (4,634) 6,060 (217) (703) (4,851) 5,357 (2,018) (2,833) I (2,833) (542) 188 TISCO (3,187) 53,261 414 53,675 1,400 512 3,445 1 I 3,445 601 75 (1) 4,120