In the present analysis, we have investigated the effects of induced magnetic field and heat source/sink on fully developed laminar natural convective flow of a viscous incompressible and electrically conducting fluid in the presence of radial magnetic field by considering induced magnetic field into account. The governing equations of the considered model are transformed into simultaneously ordinary differential equations and solved analytically. We have analyzed the effect of Hartmann number, heat source/sink parameter and ratio of outer radius to inner radius on the fluid velocity, induced magnetic field, induced current density and temperature field by the graphs while the values of skin-friction, Nusselt number, mass flux and induced current flux are given in the tabular form. We observed that the values of the velocity, induced magnetic field and induced current density have decreasing tendency with increasing the values of the Hartmann number. The results show that an increasing value of the heat source/sink parameter leads to increase the velocity, induced magnetic field, induced current density and temperature in case of heat source and viceversa in case of heat sink.