ANALYSIS OF FINANCIAL STATEMENTS

VERTICAL ANALYSIS
Analyzing Total Asset of Balance Sheet Vertically analysis basically compares each amount with a base amount selected from the same year. By taking the accounts of balance sheet, total assets are given the value of 100% and all other accounts are evaluated in comparison to total assets. By taking into consideration the data for the year 2008, it has been observed that fixed assets are 67.933% of the total assets. Fixed assets/total assets=38063299/56030320*100 =67.93 Comparison of 2008 with 2007 Fixed assets in 2007 are 57.02% of the total assets, which shows that out of 100%, fixed assets show an amount of 57.02% .current assets, are showing an amount of 42.973% of the total assets. By comparing the value of current assets of 2007 with 2008, it has been noticed that the percentage of current asset is greater in 2007 as compared to 2008, which shows that the liquidity of the company was higher in 2007 as compared to 2008. Comparison of 2008 With 2005 When we make a comparison of 2008 with the year 2005, we have noticed that fixed assets are contributing 64,486% to total assets. While comparing it with 2008, it is observed that contribution of fixed assets has increased in 2008; this shows that more fixed asset is being acquired to increase the capacity of firm. While talking about the current assets, in year 2005 they have 35.514 % of the total assets, but this amount has decreased by moving to the year 2008, it has decreased to an amount 32.067%, it is indicating that the liquidity (the ability to convert into cash has decreased, showing that the company is facing difficulty in meeting its short term needs. This shows a decrease in net working capital and the current ratio.

Analyzing Total Liabilities and Owners Equity First of all total liabilities and owner equity is given the value of 100% and all the other accounts are evaluated in comparison to that account. By taking the information from 2008, total liability and owners equity is 6030320 and non current liabilities are 25624764 then non current liabilities are 45.734% of the total liability and owners equity. Non current liabilities/total liability and owners equity*100=25624764/6030320*100 =45.734 Similarly by moving to current liabilities it is representing 14.573% of total liability and owners equity. By moving to owners equity it is showing 39.693% of total liabilities and owners equity. Analyzing Net Sales of Income Statement The data in 2008 shows that cost of good sold is 64.892% of the net sales. In this data it is being analyzed that CGS has a major contribution in net sales. Gross profit is showing a value which is 35.108% net sales. In income statement net sales is given a value of 100% and the remaining accounts are compared with net sales. Comparison of 2008 With 2007 CGS for the year 2007 is 78.77 % of the net sales. Looking into the cost of goods figure for the year 2008, it has been seen that CGS has decreased in 2008 as compared to 2007, which shows that we are bearing less cost for sales which is a positive point for the company.

Comparison of 2008 With 2005 By taking net income of the year 2008 which is 22% of net sales, hence indicating that net income is contributing 22.881 % in net sales. By making a comparison with the previous years, it has been observed that the volume of net sales in percentages is increasing from 2005 to 2008, which shows that the company is increasing its profitability.

HORIZONTAL ANALYSIS
Horizontal analysis is used to evaluate the trend in the accounts over the year. As in the year 2005-2004 there is no change, hence indicating that there is no increase or decrease in share capital.

SHARE CAPITAL By taking the year 2006-2005 there seems no change in the value because the share capital is not showing any increase or decrease in its amount. The year 2007-2006 shows an increase of 50%, which indicates that the share capital is increasing as compared to the previous year. The year 2008-2007 is showing no change indicating that the share capital is not increasing or decreasing.

GENERAL RESERVES The company is maintaining the same level of general reserves hence showing no increase or decrease in the value during the period 2004-2008.

OWNERS EQUITY The year 2005-2004 is showing a change of 11.99%, which is due to the reason that the owner equity is increasing from 2004 to 2005. The year 2006-2005 shows that the percentage is increasing from the past year because of the reason that owner s equity is increasing from 7375566 to 9370097. In the year 2007-2006 there is a large increase in the percentage value which is due to the increase change in owners equity.

NON CURRENT LIABILITIES In the year 2005-2004 there is an increase in percentage this is because increase in non current liabilities. In the year 2006-2005 there is a decrease in percentage which indicates that the non current liabilities are decreasing due to the decrease in redeemable capital. In the year 2007-2006 there is an increase in percentage, this is due to the reason that non current liabilities are increasing due to the increase in redeemable capital.

CURRENT LIABILITIES By analyzing the trend in current liabilities we have seen that the percentage is decreasing as the current liabilities are decreasing in 2005 as compared to the previous period. In the year 2006-2005 the percentage is showing an increase, this is due to the reason that the current liabilities are increasing due to the increase in short term borrowings. In the year 2007-2006 the percentage is increasing as the trade and other payables are increasing due to which the current liability is also increasing.

GROSS PROFIT The percentage of gross profit is increasing during the year 2005-2004 due to the increase in net sales; hence the gross profit would also increase. But in the year 20062005 it is showing a decrease in value, no doubt it is not negative, but the volume of sales and cost of goods sold are decreasing as compared to the previous period.

NET INCOME In the year 2005-2004 there is an increase in percentage, this is because of the reason that the net income is increasing in the year 2005.hence during the year 2006-2005 there is a decrease in percentage this is because of the reason that the taxation has decreased. In the year 2007-2006 there is an increase in percentage, this is due to the reason that net income and taxation has increased as compared to the previous year.

TREND ANALYSIS
SHARE CAPITAL AND RESERVES When we look into the trend values as comparison to the base year they are increasing .in this case the company is maintaining a constant amount of reserves and the unappropriaed profit is increasing along the previous years, hence increasing the owners equity.

NON CURRENT LIABILITIES When we look into the values in trend we have seen that the value in the year 2005 in trend is increasing this is due to the increase in the non current liabilities in the year 2005,by further looking the trend value has decreased due to the decrease in non current liabilities because the redeemable capital has decreased. In the year 2007 the trend value is showing a tremendous increase because of the increase in non current liabilities. In the year 2008 trend value is showing increase due to the increase in non current liabilities.

CURRENT LIABILITIES The value of trend in the year 2005 is decreasing as compared to the year 2004, because the current liabilities is also decreasing in 2005.trend value in the year 2006 is increasing due to the increase in current liabilities as the value of taxation has increased. in the year 2007 trend value is showing a larger increase , because trade and other payables have increased due to which current liability has also increased. by looking into the year 2008 the trend value has increased due to increase in short term borrowing and taxation.

NON CURRENT ASSETS The trend value is showing an increase in the year 2005, thus showing that fixed assets are also increasing due to the increase in long term investments as compared to the previous year. similarly in the year 2006 trend value is also increasing due to the increase in the fixed assets .in the year 2007 trend value is showing a tremendous increase due to the increase in fixed assets, as long term investments and most importantly plant and equipment is increasing. In the year we have seen a greater change in the trend due to the large increase in fixed assets as plant property has increased remarkably.

CURRENT ASSETS The trend value has increased in the year 2005 due to the increase in the current assets as the receivables are increasing during 2005 as compared to the previous period. The year 2006 also shows an increase in the trend value due to the increase in the current assets because receivables and trade debt is increasing. Similarly the trend value in the years 2007 and 2008 is also showing substantial increase as current assets are increasing because the cash at bank and other receivables are increasing.

NET SALES The trend value is showing an increase in the value in 2005 as compared to the value in 2004, this is because sales are increasing in the year 2005 as compared to 2004.the trend value in the year 2006 is decreasing hence showing that the sales volume is decreasing in the year 2006.by looking into the values of 2007 in trend they are increasing as compared to 2006, because the sales level has gone up. In 2008 the trend value is decreasing showing a decreasing trend in the sales volume during 2008.

GROSS PROFIT Trend value in 2005 is increasing as compared to 2004 because the gross profit is showing an increase due to the increase in sales in the year 2005.in the year 2006 trend value is increasing because sales are increasing due to which the gross profit is also increasing. in the year 2007 trend value is showing increase as the sales are increasing due to which the gross profit is also increasing. in the year 2008 trend value is showing an increase in the value , in this case we have observed that sales are decreasing as compared to the previous year but at the same time cost of goods are decreasing hence gross profit is increased in this way.

NET INCOME By comparing the trend values in different years it has been seen that the trend value is increasing from 2004 to 2008 because net income is also increasing along the successive years.

RATIO ANALYSIS
Ratio is basically a comparison between related variables. The basic objective of ratios is to create more useful information. Liquidity ratio Liquidity is a companys ability to meet its short term requirements. Net working capital
Net Working Capital 2,211,461 2,042,031 11,132,524 9,801,622

Net working capital is equal to current assets less current liabilities. Current assets are expected to convert into cash easily within one year. Current liabilities are paid out from the current assets. in this data the net working capital for the year 2007 is greater than 2008 ,It means that the liquidity of the company has decreased in 2008, this shows that it has a lower capacity to meet its short term needs as compared to 2007. Current ratio and quick ratio
Current Ratio 1.79 1.56 3.11 2.20

This measure is used to know that how a company meet its current liabilities out of current assets.

3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2005 2006 2007 2008 current ratio quick ratio

In order to test the liquidity current and quick ratio has been calculated which show that company had been experiencing excessive liquidity levels, by passing through different

years it has been noticed that in the year 2007 current assets are 3 times the current liabilities, which is showing that a company has an ability to meet its short term obligations. Quick ratio This ratio relates most liquid current assets to current liabilities
quick ratio 0.97 1.19 2.43 0.68

According to the table quick ratio is showing change within a given year. it has increased from 2005 in the year 2006 , then it has also shown an increasing amount in 2007,this is showing that company has enough most liquid Current assets to meet its current liabilities. But looking into the year 2008 quick ratio has decreased, may be due to the decrease in short term investments.

Activity ratio
Activity is basically related with how a company is operating cash (buying and selling).this ratio determines that how quickly various accounts are converted into cash or sales. Accounts Receivables Ratios It gives number of times accounts receivables is collected during the year.
account receivable turnover 34.29 30.17 22.82 13.85

Account receivable turnover 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2005 2006 2007 2008 Account receivable turnover

Account receivable Ratio show a significant decrease from 2005 -2008, which shows that company is having problem in collecting from customers. The company should have to reevaluate its credit policy. Average collection period The Collection Period is the number of days it takes to collect on receivables.

average collection period

10.64

12.10

16.00

26.36

Average collection period 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2005 2006 2007 2008 Average collection period

Average collection Period is increasing from 2005- 2008 which shows that number of days for a sale to be converted in to cash is increasing. This increase in Average collection Period shows that there exists a danger that customer balances may become uncollectible. Inventory turnover It tells us liquidity of the inventory.
inventory turnover 11.57 9.16 1.36 1.36

Inventory turnover 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2005 2006 2007 2008 Inventory turnover

According to the given figure the inventory turnover is decreasing as we are moving from 2005 to 2008 , the decrease in inventory turnover indicated the stocking of goods however the inventory turnover is increasing in the year 2005 hence indicating that the inventory is efficiently being converted into sales.

Average age of inventory Age of inventory tells us the holding period of inventory.
average age of inventory 31.55 39.83 268.51 268.51

Average age of inventory 300.00 250.00 200.00 150.00 100.00 50.00 0.00 2005 2006 2007 2008 Average age of inventory

According to the graph average age of inventory for the year 2005 and 2006 is giving a good sign for the company. However average age of inventory is increasing in the case of 2007 and 2008, perhaps indicating to develop a new product. Operating cycle Operating cycle of a business is the number of days it takes to convert inventory and receivables into cash.
operating cycle 42.19 51.92 284.51 294.87

operating cycle 350.00 300.00 250.00 200.00 150.00 100.00 50.00 days operating cycle

In this graph the number of days to 2 convert inventory and receivables into cash increases, 1 3 4 hence this is an unfavorable trend.2005,2006,2007,2008 Total asset turnover Total Asset Turnover shows the efficient use of assets to generate revenues.

0.00

total asset turnover

1.34

1.17

0.86

0.31

Total asset turnover 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2005 2006 2007 2008

Total asset turnover

Total assets turnover are declining over different years as we move from 2005 to 2008, showing that the companys Total assets are not efficiently utilized to generate revenue.

Leverage ratio

Its the ability of a company to meet its short term and long term obligations. Debt Ratio It indicates the companys long term debt- paying ability
debt ratio 0.48 0.41 0.59 0.60

Debt ratio 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Debt ratio is decreasing in 2006 which determines that creditors are protected in case of 2005 2006 2007 insolvency. Debt Ratio is increasing in 2008 which shows slightly2008 degree of Debt to higher Total Assets. This increase is due to decrease in Total Assets of the company. Debt ratio

Debt/Equity Ratio It determines that how well creditors are protected in case of Insolvency.
debt/equity ratio 0.91 0.71 1.46 1.52

Debt/equity ratio 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2005 2006 2007 2008 Debt/equity ratio

Debt/Equity Ratio shows decrease in 2005 and again decrease in 2006 which is positive sign which shows Creditors are protected in case of Insolvency. There is increase is Debt/Equity ratio in 2008. This increase is due to Decrease in Stock holders equity over the previous year 2007. Times Interest Earned It tells us the number of times before-tax earning cover interest expense.
times interest earned 12.50 10.50 8.92 5.55

Times interest earned 14.00 12.00 10.00 8.00 Times interest earned

Time 6.00 interest earned is increasing in 2005 this shows that there is a safety margin for the company. In 2008 Times Interest earned decreases which indicate that fewer earnings are 4.00 available to meet interest charges. 2.00

Profitability Ratios 2006 2005

0.00

2007

2008

Profitability Ratios shows companys ability to earn profit and Return on Investments.
Gross profit margin units % 2005 21.58 2006 24.07 2007 21.22 2008 35.11

Return on Assets Profit Margin Return on Common Equity

% % %

16.99 12.69 31.44

16.93 14.47 27.19

11.65 13.61 20.38

7.13 22.88 15.10

40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2005 2006 2007 2008 Return on asset Profit margin Return on comman equity Gross profit margin

Gross Profit Margin The Gross Profit Margin reveals the %of each dollar left over after the business has paid for its goods. Gross Profit Margin of the Company is increasing in 2008 because Companys Gross profit and sales are increasing in this year. Gross Profit Margin decreases in 2007 because Goss Profit of the Company decreases in 2007. Profit Margin: It is a measure of net income dollars generated by each dollar of sales.Net Profit Margin is increasing in 2008 because net income is increasing and financial cost is decreasing. Return on Total Assets Return on Asset measures the firms ability to its assets to create profits by comparing profits with the assets that generate the profits. Return on total assets increases from 2005 due to the increase in net income, which means that resources are efficiently used to generate cash. In 2008 there is decrease in Return on total assets because Net Income is decreasing and total assets are increasing. Return on Equity It measures return of common and preferred shareholders. Return on equity increases in 2008 because of increase in Net Income. It shows that return earned by owners is increased.

Market value

This ratio is used to find a relationship between the firms stock prices to its earnings per share. Earning per Share: The amount of income earned on a share of common stock during an accounting period. Price/ Earning Ratio It tells us the relationship between the market price of a share of common stock and stocks current earning per share. Book Value per share It is the net assets available to common stockholders divided by share outstanding, where net assets are stock holders equity minus preferred stocks. Dividend Payout This ratio measures the portion of current earning per common share being paid out in dividends.

180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 2005 2006 2007 2008 BOOK VALUE D PAYOUT PER EPS