Financial Statement Analysis

Financial Statement Analysis:

  

Need for Financial Analysis Financial Statements Ratios

Need for Financial Analysis



Assessment of the firms past financial conditions & prediction of future. Done to find firms financial strengths and weaknesses

Sources of Data
  

Annual reports

company websites news papers, consultants http://nseindia.com http://www.bseindia.com

Published collections of data

Investment sites on the web such as

Annual Report


Annual Report is an annual publication that public corporations must provide to shareholders to describe their operations and financial conditions.

Contents of Annual Report

     

Financial Highlights Letter to the Shareholders Management's Discussion and Analysis Financial Statements Notes to Financial Statements Auditor's Report

Financial Statements
  

Profit & Loss a/c

performance of the company for the year ended. financial status as on date. cash inflows & outflows during the year.

Balance Sheet

Cash Flow

Purpose of Financial Statements

To provide information to:


Shareholders:

about the financial position of the company to help them to take investment decisions. decision making awareness about the performance of the management tax

Creditors /Lenders:

Management:

Workers:

Government:

Who uses Financial Statement Analysis?



Almost Everyone in the Business World

analyze loans and cash flow projections of stock prices market penetration & impacts to profitability Human Resources compensation analysis Senior Management corporate strategy Sourcing Manager Sourcing Strategy Sales Managers commission rates on sales Internal Financial Analysts profitability analysis Customer Service Managers efficiency ratios

Bankers Portfolio Managers Marketing Managers

Souring Strategy
Analysis of Financial Statements to:
  

Understand the suppliers financial & cost structure. Assessment of a supplier from long term business perspective. Analyse competitive performance of companies.

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Balance Sheet as on.

SOU CES OF FUN S
LI BILITIES quity etained ea nin s NETWO TH Lon Te ebt 170 215 385 151

PPLIC TION OF FUN S

SSETS oss Fi ed ssets ep eciatiom et Fi ed ssets In estments C ent ssets Cash ecei a les In ento ies Othe Cu ent ssets TOT CU T SS TS 594 365 229 2 73 189 355 99 716

C ent L ab l t es C edito s Othe Cu ia ilities TOT CU T I

330 99 429

I ITI

TOT L LI BILITIES

965

TOT L SSETS

965

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Indicates Financial Status of the Company as on date.

Balance Sheet:
(Interpretaion for Analysis viewpoint)

 

Tangible Net worth Net Working Capital (Li uidity Measure)

12

Profit & oss A/c for the Y ..

s . ro re ( o -A is e ) 1 th s

o t a l in c o m e a le s In d u s t r ia l s a le s t h e r in c o m e

P r io r p e r io d in c o m e

t r a o r d in a r y in c o m e

m a t e r ia l e

Pa c Po

a g in g e fuel

penses a te r c h a r g e s

P u r c h a s e o f f in is h e d g o o d s C o m p e n s a t io n t o e m p lo y e e s In d ir e c t t a e s

e llin g d is t r i u t io n e e p r e c ia t io n i s io n f o r d ir e c t t a

penses

13

Indicates Financial Performance of the Company during the financial year.

Pro

es

u t s o u r c e d p r o f e s s io n a l o ir e c t o r s f e e s

0 %

)4 3

In s u r a n c e p r e m iu m p a id u t s o u r c e d m f g . o s i n c l. o

e p a ir s

m a in t e n a n c e or s e tc .

o y a lt ie s t e c h n ic a l n o eas e rent o th e r r e n t

-h o

er

)#

% ) ( 

o ta l e

penses penses

fees

e tc .

' 1  & 1   & "  "   " ' '"  1 "   ' 1 "& "& " " &"     ' 

C h a n g e in s t o c

 & "   "          

. . . . . . . . . . . . . . . . . .

M r

P r o f it &

o s s A /c f o r t h e

 $ #

r e

.. 8

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( 2 (

  @

Profit & Loss a/c

(Interpretation from Analysis view point)

  

Trends in perating Income Trends in perating Expenses Trends in Net Profit

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Cashflow Statement
Cost & expenses of property, plant and equipment, salaries, raw material

quity investors

Cashflow from Investing Cashflow from Financing Activities CASH

ncome from Sales De t investors

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Cashflow from Operating Activities

Ratio Analysis

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Objectives of Ratio Analysis

    

Standardize financial information for comparisons Evaluate current operations Compare performance with past performance Benchmarking performance against other firms Study the efficiency of operations

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Ratio Analysis
   

Li uidity Ratios Efficiency Ratios Profitability Ratios Long Term Viability Ratios

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Li uidity Ratios


Current Ratio:

Current Assets / Current Liabilities : ( / )= .

Li uid Ratio

(Current Assets Stocks) / Current Liabilities : ( )/ = .

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Efficiency Ratios


Inventory Turnover Ratio:

Sales / inventory: ( / )= .

Debtor Turnover Ratio:

(Sales/Receivables)=( / )= .

Creditor Turnover Ratio:

(Purchase / Creditor)

Fixed Asset Turnover Ratio: Sales /Fixed Assets

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Profitability Ratios


Operating Profit Ratios:

Operating Profit / Sales: ( / )= %

Return on E uity (ROE):

Profit After Tax / Net Worth : ( / )= %

Return on Capital Employed (ROCE):

Profit Before Interest & Tax / Total Capital Employed: ( /( )= %

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Long erm Viability Ratios

Debt quity Ratios:
Debt / Networth: (  / = . )

Debt Service Coverage Ratios DSCR :

(Profit After Tax + Depreciation + Interest) / (Repayment + Interest): ( + + )/( + )= .

Interest Coverage Ratio:

Profit Before Depreciation, Interest & Tax / Interest: ( / = . )

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Limitation of Ratios
   

Based on numbers Creative accounting distorts ratios Sometimes difficult to interpret deviations in the ratios Other analysis also important

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CAS S UDY

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SUPR
Income Sales ther Income Total Income

AU OS
(R cs)

LL INDIA PV LTD
(Rs cs) % of S es % of S es

2762.71 4.14 2766.85

1906.91 0.23 1907.1

100.0% 0.1% 100.1%

100.0% 0.0% 100.0%

Raw material consumption cost has gone up in 09. Employee cost Cost Labour & of labour charges have charges has come down. come down.

Expenditure Increase /Decrease in stock Raw Material Consumed Labour Charges ther Direct Expenses Employee Cost Administrative Exps Total Exps PBDIT Depreciation PBI Finance Charges Misc Exps w/off PB ax PA

-122.15 2053.09 213.67 36.41 174.55 118.64 2474.20 292.65 87.25 205.40 182.26 0.82 22.33 8.09 14.24

-112.77 1294.18 214.17 37.56 171.41 84.47 1689.02 218.12 57.375 160.74 96.79 0.82 63.14 7.975 55.16

-4.4% 74.3% 7.7% 1.3% 6.3% 4.3% 89.6% 10.6% 3.2% 7.4% 6.6% 0.0% 0.8% 0.3% 0.5%

-5.9% 67.9% 11.2% 2.0% 9.0% 4.4% 88.6% 11.4% 3.0% 8.4% 5.1% 0.0% 3.3% 0.4% 2.9%

Interest costs have gone up.

Profits have come down mainly due to rise in R cost & Interest cost.

Closing Stock (RM + WIP + FG) Debtors

534.84 1279.06 2.32 5.56

286.65 596.94 1.80 3.76

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Stock in months Debtors in months

Investment in stock & debtors is high.

Thank you

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