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BALANCE SHEET ANALYSIS
2009 ² 2010
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Horizontal Balance Sheet of Asian Paints Ltd. As at 31 March 2010
Horizontal Balance Sheet of Asian Paints Pvt Ltd as at 31st March 2010
2010 2009 Increase/Decrease over 2009
(Rs in Crores) (Rs in Crores) (Rs in Crores) %age
FUNDS EMPLOYED
Shareholders' Funds
Share Capital 95.92 95.92 0 0.00
Reserves and Surplus 1,461.30 998.55 462.75 46.34
1,557.22 1,094.47 462.75 42.28
Loan Funds
Secured Loans 24.59 25.59 24.59 1 4.07
Unsecured Loans 43 49.94 -6.94 -13.90
68.59 74.53 -5.94 -7.97
APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,194.39 1,116.93 77.46 6.94
Less : Depreciation/Amortisation 486.93 494.02 -7.09 -1.44
Net Block 707.46 622.91 84.55 13.57
Add : Capital Work in Progress 380.72 88.86 291.86 328.45
1,088.18 711.77 376.41 52.88
Common Sized Balance Sheet of Asian Paints Pvt Ltd as at 31st March 2010
2010 2009
(Rs in Commom Sized (Rs in Commom Sized
Crores) %age Crores) %age
FUNDS EMPLOYED
Shareholders' Funds
Share Capital 95.92 5.73 95.92 7.88
Reserves and Surplus 1,461.30 87.31 998.55 82.06
1,557.22 93.04 1,094.47 89.94
Loan Funds
Secured Loans 24.59 25.59 1.53 24.59 2.02
Unsecured Loans 43 2.57 49.94 4.10
68.59 4.10 74.53 6.12
APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,194.39 71.36 1,116.93 91.78
Less : Depreciation/Amortisation 486.93 29.09 494.02 40.60
Net Block 707.46 42.27 622.91 51.19
Add : Capital Work in Progress 380.72 22.75 88.86 7.30
1,088.18 65.02 711.77 58.49
Horizontal Analysis
1.c Net Sales growth by 20.15896754
2.c Increase in expenses like material cost by 8.949607393, interest & finance charges by
32.30769231 and extra-ordinary expenses by 331.5254237 much more than growth in
net sales. However increase in interest & finance charges is inconsequential in view of
the very small base last year as well as in absolute terms. In case of extra-ordinary
expenses absolute figures are not high compared to sales.
3.c Depriciation increased by 6.281714786
4.c Decrease in operating income by -3.974895397 because of decrease in processing
charges.
5.c Growth in Non operating income by 139.5104895 due to increase in short term & long
term investments.
6.c PBT has grown by 102.3464547 due to profit from exceptional items
2010=56.5
2009=35.24
The Increase in the ratio means a high Dividend, more Internal Accruals, suppliers willing to
extend more favourable terms, strengthening of the financial position of the Company .
2010= 78.09
2009=38.39
The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serves as an indicator of a company's profitability.
3)c CEPS Cash Earning Per Share
2010=84.42
2009=43.12
The company would be able to fulfil it·s financial obligations in the long term in a better
manner.
A measure of financial performance that looks at the cash flow generated by a company on a
per share basis. The higher a company's cash EPS, the better it is considered to have
performed over the period. A company's cash EPS can be used to draw comparisons to other
companies or to the company's own past results.
Solvency Ratios:
1)c NAV Net Asset Value
2010: 162.3
2009: 114.1
The Company has built reserves & surplus to fall back upon.
Higher the ratio higher is the capacity of the co. to raise further capital .
2010: .44
2009: .68
Co. is relying less on Debt and more on Equity shareholding fund indicating that the co. is
taking less financial risk.
2010: 62.01
2009: 41.33
The Co,s ability to pay interst out of revenue has increased. The f inancial risk of co. defaulting
has reduced leading to higher comfort level of lenders.
2010: 62.01
2009: 41.33
Increased ability to service debt.
Liquidity Ratios:
2010: .918
2009: 1.2822
A Ratio of under 1 suggests that a co. would be unable to pay of its obligations if they came up
due at that point. While this shows the company is not in good financial health, it does not
necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is
definitely not a good sign
The current ratio can give a sense of the efficiency of a company's operating cycle or its ability
to turn its product into cash.
2010-0.3965
2009-0.7155
It adds further value to all the analytical values of the current ratio. The quick ratio is more
conservative than the current ratio because it excludes inventory and other current assets, which
are more difficult to turn into cash. Therefore, a higher rat io means a more liquid current
position.
Therefore it means there liquidity has reduced.
2010: 89.017
2009: 69.47
Inventory holding period has increased by around 20 days leading to more cash being blocked
towards keeping inventories.
Advantage: there would be enough raw material present incase of sudden increase in demand.
Disadvantage: Income could have been used for generating profit instead.
Turnover Ratios
1)c Fived Asset Turnover Ratio
2010: 7.211
2009: 6.816
The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-
asset investments. A higher fixed-asset turnover ratio shows that the company has been more
effective in using the investment in fixed assets to generate revenues.
2)c Net Worth Turnover Ratio
2010:1.3499
2001:3.87
It measures the extent of turnover of gross income generated by the networth of the co.
The co.s efficiency of using its net worth to generate net sales has reduced.
2010: 36.68
2009: 30.27
The co. has reduced it·s manufacturing expenses and employee costs leading to higher GP%
Materials Cost (Materials Consumed, Purchase of goods & Stock
Adjustments) 2840.24 2606.93
Manufacturing Expenses 129.46 115.09
Employee Cost 260.84 238.9
Cost of Goods Sold (COGS) 3230.54 2960.92
Gross Profit 1871.59 1285.23
2)c PBDIT
2010: 19.79
2009: 13.21
By excluding depreciation, taxes and interest expenses, the figure hones in on the
company's ability to profit and thus makes for easier cross -company comparisons.
3)c OP Operating Profit Margin / PBIT profit before interest and tax
2010: 18.6
2009: 11.87
As operating margin has increased the co. is earning more.
2010: 55.66
2009: 61.39
Rawmaterial used more efficiently. Co. has increased its productivity.
2010: 30.15
2009: 29.8
Effective Tax Rate hasn·t changed much which implies that the co. hasn·t concentrated much
on tax planning.
2010: 25.25
2009: 20.80
An Investor when investing looks at EPS. So a n increase means that the investors perception of
the co. has improved and increased co.s perception in the borrowers market.
2010: 12.562
2009: 6.847
As the industry has come out of the economic slowdown, the share prices have increased.
2010: 19554.61
2009: 7539
Helpful in negotiating mergers, acquisitions and takeovers. An increase suggests improved
financial strength of the co.
AS 9
2. Revenue Recognition:
Revenue from sale of goods is recognised on transfer of all significant risks and rewards of
ownership to the buyer which is on dispatch of goods. The amount recognised as sale is
exclusive of sales tax/VAT and are net of returns. Sales are stated gross of excise duty as well as
net of excise duty; excise duty being the amount included in the amount of gross turnover. The
excise duty related to the difference between the closing stock and opening stock is recognised
separately as part of ¶material cost·.
Revenue from service is recognised on rendering of services to customers.
Dividend income is recognised when the right to receive payment is established.
Interest income is recognised on the time proportion basis.
AS 19
3. Lease Accounting:
Assets taken on operating lease:
Lease rentals on assets taken on operating lease are recognised as expense in the Profit and
Loss Account on an accrual basis over the lease term.
Assets given on operating lease:
The Company has provided tinting systems to dealers on an o perating lease basis. Lease rentals
are accounted on accrual basis in accordance with the respective lease agreements.
AS 2
4. Inventory:
(a) Raw materials, work in progress, finished goods, packing materials, stores, spares, traded
items and consumables are carried at the lower of cost and net realisable value. The
comparison of cost and net realisable value is made on an item-by-item basis. Damaged,
unserviceable and inert stocks are suitably depreciated.
(b) In determining cost of raw materials, packin g materials, traded items, stores, spares and
consumables, weighted average cost method is used. Cost of inventory comprises all costs of
purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all
other costs incurred in bringing the inventory to their present location and condition.
(c) Cost of finished goods and work -in-process includes the cost of raw materials, packing
materials, an appropriate share of fixed and variable production overheads, excise duty as
applicable and other costs incurred in bringing the inventories to their present location and
condition. Fixed production overheads are allocated on the basis of normal capacity of
production facilities.
AS 13
5. Investments:
Long term investments are carried at cost. Provision for diminution in the value of long term
investments is made only if such a decline is other than temporary in the opinion of the
management.
Current investments are carried at lower of cost and fair value. The co mparison of cost and fair
value is done separately in respect of each category of investments. Profit and loss on sale of
investments is determined on a first-in-first-out (FIFO) basis.
AS 11
6. Transactions in Foreign Exchange:
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the
transaction. Exchange differences arising on foreign exchange transactions settled during the
year are recognised in the Profit and Loss Account of the year.
Monetary assets and liabilities denominated in foreign currencies, which are outstanding as at
the year end are translated at the closing exchange rate and the resultant exchange differences
are recognised in the Profit and Loss Account.
The premium or discount on forward exchange contracts is recognized over the period of the
contracts in the Profit and Loss Account.
AS 29
7. Provisions and Contingencies:
The Company creates a provision when there exists a present obligation as a result of a past
event that probably requires an outflow of resources and a reliable estimate can be made of the
amount of the obligation. A disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not require an outflow of
resources. When there is a possible obligation or a present obligation in respect of which
likelihood of outflow of resources is remote, no provision or disclosure is made.
AS 20
8. Earnings Per Share:
The Basic and Diluted Earnings Per Share (´EPSµ) is computed by dividing the net profit after
tax for the year by weighted average number of equity shares outstanding during the year.