bharat oil

7/27/2019 Bharat Oil

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FINANCIAL STATEMENT ANALYSIS

FOR BHARAT OIL COMPANY, CHENNAI

By

(D. Anand, Regn. No. 351311!

A PRO"ECT

REPORT

S#$%&''ed

'o 'e

S.R.M SCHOOL OF MANA)EMENTIn 'e FAC*LTY OF EN)INEERIN) ANDTECHNOLO)Y

In +a'&a- #-&--%en' o 'e

e/#&e%en'0 Fo 'e

aad o 'e degee

O

MASTER OF B*SINESS ADMINISTRATION


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S.R.M. EN)INEERIN) COLLE)E

S.R.M. INSTIT*TE OF SCIENCE ANDTECHNOLO)Y

DEEMED

*NI2ERSITY "*NE

5


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ii

BONAFIDE CERTIFICATE

Certified that this project report titled 4FINANCIAL STATEMENTANALYSISis the

bonafide work of M. D. Anand, who carried out the researchunder my supervision.

Certified further, that to the best of my knowledge the work reportedhere in does not form

part of any other project report or dissertation on the basis of which adegree or award was

conferred on an earlier occasion on this or any other certificate.

Signature of the Guide Signature of the HO

!ame of the Guide

ABSTRACT

" financial statement is a collection of data organi#ed according to

logical and consistent accounting procedures. $he term financial

statement generally refers to the two statements%

&i' the position statement or the balance sheet( and &ii' the income


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statement or the profit and loss account. )inancial statements are

prepared as an end result of financial accounting and are the major

sources of financial information of an enterprise.


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iii

)inancial statements are also called financial reports. *n the words of

"nthony, + financial statements, essentially, are interim reports,

presented annually and reflect a division of the life of an enterprise

into more or less arbitrary accounting periodmore fre-uently a year.

$he )inancial statement analysis helps in finding out the following%

? /rofitability and financial soundness of the company by

comparing financial statement.

? *t highlights nature of changes influencing financial position and

performance of the enterprises with the aid of comparative

0alance sheet ana lysis, commonsi#e 0alance sheet and trend

percentage analysis.

? *t determines the trend of the current assets, current liabilities,

sales and working capital of the firm tend to change using trend

analysis

AC6NO7LED)EMENT

* e1press my heartiest thanks and indebt ness to S&. T.R.Pa8a%#'# B.S8., M.I.E.,

)ounder and Chairman, 2"33*"44"* SOC*5$6, Chancellor, S74

*!S$*$8$5 O) SC*5!C5 "! $5CH!O3OG6 &5545 8!*257S*$6' for

providing me with necessary facilities to complete this project.

* e1press my heartiest thanks to Po. R. 2en9a'aa%an& M.Te8,

F.I.E., /rincipal of S74 *!S$*$8$5 O) SC*5!C5 "! $5CH!O3OG6

&5545 8!*257S*$6', for providing me with necessary facilities to

complete this project.


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* e1press my gratitude to DR. (M0.! S. "aya0ee S#e0 B.A.,

M.B.A. and PD ean, Head of the epartment of 4anagement

Studies for providing me with all facilities and guidance to complete

the project successfully.


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iv

* am very much thankful to my guide M. C&nna'a%$&, Sen&o

Le8'#e for his patient guidance in making the project a grand

success.

* would like to thank the management of Baa' O&- Co%+any for

giving me an opportunity to do the project in their esteemed

organi#ation. * would like to thank M. P.Canda0e9a for his useful

suggestions and assistance through out the project.

* wish to e1tend my sincere thanks to all the staff members of the

4anagement Studies department for their untiring support.

* would also like to thank my In0'&'#'&on,my Fa8#-'y %e%$e0

and my F&end0without whom this project have been a distant reality.


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v

CONTENTS

TITLES Page No

"bstract iii

"cknowledgement iv

$able of Contents v

3ist of $able vi

3ist of Charts 9 )igures vii

Chapters%:. *ntroduction :;. Statement of the /roblem . 4ethodology and 3imitations of the study ?@. Company /rofile :?A. "nalysis and *nterpretation ;B?. )indings B. Suggestions ;

:B. Conclusion =

0ibliography viii


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vi

LIST OF TABLES

TABLE N*MBER TABLE NAME PA)E NO.A.: Current 7atios ;BA.; "cid 7atio ;E STATEMENT

$he commonsi#e statements, 0alance sheet and income statement

are shown in analytical percentages. $he figures are shown as

percentages of total assets, total liabilities and total sales. $he total

assets are taken as :BB and different assets are e1pressed as a

percentage of the total. Similarly, various liabilities are taken as

particulars of total liabilities. $hese


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statements are also known as component percentage or :BB

percentage statement because every individual item is stated as a

percentage of :BB. $he shortcomings in comparative statement and

trend percentages where changes in items could not be compared with

the totals have been covered up. $he analyst is able to assess the

figure in relation to total values. $he commonsi#e statement may be

prepared in the following way.

1. $he totals of assets or liabilities are taken as :BB.

2. $he individual assets are e1pressed as percentage of totalassets.

5.# COMPARATI2E STATEMENT$he comparative financial statements are statement of the financial

position at different periods of time. $he elements of financial position

are shown in a comparative form so as to give an idea of financial

position at two or more periods. "ny statement prepared in a

comparative form will be covered in comparative statement. )rom

practical point of view generally two financial statement are prepared

in comparative form for financial analysis purposes. !ot only the

comparison of the figure of two periods but also be relationship

between 0alance sheet and income statement enables an indepth

study of financial position and operative results. $he comparative

statement may show%

1. "bsolute figure

2. Change in absolute figure

$. "bsolute data in terms of percentages.

#. *ncrease or decrease in terms of percentage.

5.5 F*ND FLO7 STATEMENT

)und )low Statement shows the movement of funds and is a report of

the financial operations of the business undertaking. *t indicates

various means by which funds were obtained during a particular period


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and the ways by which these funds were employed.

$he flow of funds occurs when a transaction changes on the one hand

of a noncurrent account and on the other a current account and vice

versa. )und )low Statements is a method by which we study changes

in financial position of a business enterprise between beginning and

ending financial statement dates.


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xvii

)und )low analysis reveals the changes in working capital position. *t

tells about the sources from which the working capital was obtained

and the purpose for which it was used. )unds flow statement deals

with the financial resources re-uired for running business activities.

$he )und )low Statement is prepared and the sources of funds and the

uses9application of funds are found and displayed in a tabular format.

$he format is as follows%

)und )low statement for the year

So#8e0 A++-&8a'&on0

Pa'&8#-a0 R0. Pa'&8#-a0 R0.

!et /rofit LLL!et3oss LLL

epreciation LLL7edemption of/reference

eferred 7evenue51penditure

ShareCapital LLL

*ncrease in 5-uityCapital LLL *ncrease in )i1ed "ssets LLL*ncrease in $erm

3iabilities LLL ividend paid LLL

Others/ayment of

deferred7evenue

ecrease in DorkingCapital LLL

51penditure LLL

LLL Others LLL*ncrease in DorkingCapital

LLL LLL

To'a- ????To'

a- ????

5.@ CASH FLO7 ANALYSIS

"n analysis of cash flow is useful for short term planning. " firm needs

sufficient cash to pay debts maturing in the near future, to pay interest

and other e1penses and to pay dividends to shareholders. $he firm can


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make projections of cash in flows and outflows and outflows for the

near future to determine the availability of cash.

" Cash )low Statement is a statement describing the changes in

financial position on cash basis. $his summari#es the causes of

changes in cash position between dates of two 0alance Sheets. *t

indicates the sources and uses of funds. $he cash flows statement is

similar to the fund flow statement e1cept that it focuses attention on

cash instead of working capital.


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xviii

$he cash flow statement helps out in taking short term financial

decisions and also in the preparation of cash budget for the ne1t

period. Cash flow analysis can reveal the causes for even highly

profitable firms e1periencing acute cash shortages. " detailed study of

the sources of cash can help to improve or accelerate the inflow from

each source and may even lead to the discovery of new sources.

Similarly a minute analysis of the different applications of cash may

help to slow down or reduce the cash outflows of cash.

$he cash flow analysis can be classified into three main categories%

? Cash flows from operating activities

? Cash flows from investing activities

?Cash flows from financing

activities $he format of cash flow

statement is as follows%

Ca0 F-o 0'a'e%en' o 'e yea

Pa'&8#-a0 R0.

Ca0 F-o0 o% O+ea'&ng A8'&


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51traordinary items LLL

!et Cash from Operating "ctivities LLLL

Ca0 F-o0 o% In


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Sales of )i1ed "ssets LLL/urchase of investments LLLSale of investments LLL*nterest received LLLividend received LLL

!et Cash from9used in *nvesting "ctivities LLLL

Ca0 F-o0 o% F&nan8&ng A8'&


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a K &N 6 9 !' J b &N E 9 !'


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x

x

S'e+3% Substitute the value of aF and bF in the trend e-uation &6Ka M

bE' and plot the value of 6 with respect to E in the chart. $he line

which is seen in the chart is referred to as the trend line.

S'e+:% $he chart is then interpreted based on the trend of the line for

each 6 value &currentassets, current liabilities and sales'.

LIMITATION OF ST*DY

? $he study is purely based on secondary data as obtained from

the audited annual reports of company that gives only limited

information regarding performance of the company.

? "nalysis is only a means and not an end itself. $he

researcher has to make interpretation and show his own

conclusion.

? )inancial statements are prepared on the basis of certain

accounting concepts and conventions any change in the

method or procedure of accounting limits the utility of financial

statement.

? $he data taken for analysis covers only a period of ;BBB;BB


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CHAPTER @

COMPANY PROFILE

@.1 HISTORY

*n the early BPs, 0harat oil company &0OC' was formed as a small

partnership firm, marketing the lubrication oil of brand Shell, Castrol,

5lf etc. !ow it has become a sole proprietorship. " few years and

several successes later, the company surprised everyone again by

spearheading the marketing of lubrication oils in the South. $he firm

has now marketed a number of byproducts oil for the same company.

0OC has become one of the key players in the lubrication oil in South

*ndia. *t has now consolidated its position as the largest private

company in Chennai.

"fter proving its strength in the lubrication oil industry the organi#ation

shifted its focus in the marketing and sale of lubrication oil and itFs byproducts. $he company started the products namely, Castrol and Shell.

Dithin a short period these products have become a popular product

and the company had been able to successfully sustain in the industry.

$he companyFs units are located in Chennai, $hirichangodu, and!aively.

%.2 6EY FEAT*RES IN OILS

? Capacity of handling :B,BB,BBB litres of Oil per day.

? State of the art laboratory for process control, product -uality

control and product development.

? *SO BB: certified manufacturing facility that has been

e1tensively upgraded in the last three years.


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? Spray drying capacity of :> tons per day.

$he company also has tie up with banks for arranging loans to the

producers. $he company has a strong logistics and distribution network

in oil and its byproduct sector. $he company


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has :; distribution points, strategically located for -uick and easy

distribution of its products. *n this segment, the CompanyFs distribution

network comprises of :B wholesale distributors and over A> dealers for

Castrol and around >B direct selling agents for Shell, 5lf, and *0/ oils.

$he company is the leader in oil sector among the private sector and

market leader for southern region, Chennai.

@.3 PROD*CTS OF BOC

$he companyFs markets and sells the following products%

? 3ubrication oil of CastrolF.

? ;$ oil of Shell.

? ;$ and =$ oil of 5lf *0/.

? 3ubrication oils and Grease.

%.# S*PPLIERS FOR BOC;

? Castrol? *0/? 5lf? Shell

%.5 C*STOMERS OF BOC;

? 4anufacturing industries

? Hotel industries? $ravel industries? Service industries

"part from marketing lubrication oils for the company they also market

and sell oil byproduct like grease to its customer. $hey are planning to

e1pand their operations in Qancheepuram, Chengalpet, and also in

Qerela and "ndhrapradesh.

CHAPTER

ANALYSIS AND INTERPRETATION

.1 RATIO ANALYSIS


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A.:.: Current 7atio

$able A.:

PARTIC*LARS 1 3

C#en'A00e'0;

Cash in hand;>>@@.= :;B?>.;; >;=.:;

:>;>;?.==

Stock ==@@A@ :;>@>B :@>B

Other currentassets A>BBB AABBB AABBB AABBB

$otal C."C#en'L&a$&-&'&e0;Sundrycreditors0ank o9d

Other C.3:;=;=;A.>A :=B:?

:=A?BB?.B

:A@>=B


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CURRENT

RATIOS

2

1.5

1

RATIO

S

0.5

0

Year Year Year Year

RATIOS 1.45 1.2 1.24 1.62

)*G875 i


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.1.1.1 INTERPRETATION; =

? Current 7atio of the company is not satisfactory because the

ratios are R:.=>,:.;B,:.;=,:.@; much below the accepted

standard of ;%:. 3ow current ratio indicates that the firm shall not

be able to pay its current liabilities in time. $he company needs

to improve its shortterm financial position.


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? 0ank o9d has been paid off in ;BB; ;BB


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Other currentassets A>BBB AABBB AABBB AABBB


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$otal 3."C#en'L&a$&-&'&e0;Sundry

creditors0ank o9d

Other C.3:;=;=;A.>A

:=B:?

:=A?BB?.B

:A@>=B


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xxvii

ACID TEST

RATIO

2

1.5

1

RATIO

S

0.5

0

Year Year Year YearRATIOS 1.45 1.2 1.151.18

F&g#e II


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.1..1 INTERPRETATION; =

1. "cid test ratio of the company is satisfactory

because the ratios are R:.=>,:.;B,:.:>,:.:? much

above the accepted standard of :%:.


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2. High acid test ratio indicates that the firm is li-uid and has

the ability to meet its current or li-uid liabilities in time. $he

company needs to improve its shortterm financial position.

$. 0ank o9d has been paid off, which is a good sign for thecompany.

#. Cash in hand and at bank are -uite high which indicates

ready payment of any e1penses.

5. Current assets are more than the current liabilities, which

indicates a high li-uidity position of the firm to pay off theircredits.

.1.3 A$0o-#'e L&/#&d Ra'&o

$able A.


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xxix

PARTIC*LARS 1 3

A$0o-#'eL&/#&d

A00e'0;

Cash in hand ;>>@@.= :;B?>.;; >;


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ABSOLUTE LIQUID RATIO

0.12

0.1

0.08

0.06

RATIO

S

0.04

0.02

0

Year Year Year Year

RATIOS 0.07 0.05 0.09 0.11

FI)*RE &&&

A.:..


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? However this ratio is not in much use even while evaluating the

li-uid position of a firm. $he company needs to improve its short

term financial position.

? Here current liabilities are more than current assets, which shows

a negative operation in the business.

? "bsolute 3i-uid ratios are less than B.> namely &B.BA, B.B>, B.B,

B.::' which shows they are in a very bad position to pay off the

credits.

? "n absolute 3i-uid ratio does not include stocks but includes onlycash and shortterm investments, which are very low than

current liabilities.

.1.: In


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Co0' o good0 0o-d;xxxii

Sales

&,' Gross profit >


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S

20

10

0Year Year Year Year

RATIOS 13.1 20.3 51.5 16.5

FI)*REI2

.1.:.1 INTERPRETATION

1. " high inventory turnover indicates efficient management of


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inventory because more fre-uently the stocks are sold out.


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2. Here in ;BB; the company was in their efficient form of

disposing their stocks on an average of A days which is very

good indicator and they should take steps to repeat the same,

efficient management of stocks.

$. *n ;BB; inventory turnover ratio was a head lower comparing to

;BBB, which shows a very poor management of stocks.

#. *n ;BB< inventory turnover ratio was high which indicates that

the firm was good at their stock management

5. $his kind of irregularities increase or decrease indicates the

firms inability to manage the stocks.

.1.5 De$'o0 T#no


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PARTIC*LARS 1 3

Ne' Ced&'0a-e0;

Sal

es

>@.; .@<


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DEBTORS TURNOVER RATIO

4.6

4.54.4

4.3 RATIO

S4.2

4.1

4

3.9

Year Year Year Year

RATIOS4.2 4.13 4.4 4.5

FI)*RE 2


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.1.5.1 INTERPRETATION

1. $here is a low debtors turnover ratio, which implies

inefficient management of debtors9sales.


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2. $he average collection period is not satisfactory because it is

more than the firmFs credit term of @B days. *t took more than

?B days to collect.

$. 0ut in ;BB;, ;BB< it has reduced which shows a good sign

comparing to previous years.

#. $he company should see that their collection period should be

below @B days for efficient performance.

5. "llowing the customer to pay after the credit period puts

the firm in a stress situation as it does not have good

li-uidity to pay his creditors

.1.@ Ced&'o0 T#no


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PARTIC*LARS 1 3

Ne' Ced&'

+#8a0e0;

/urchases=??:>=.@

=B@@:.B

= @@:>;[email protected]

:=B:? :=A?BB?.B :


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CREDITORS TURNOVER RATIO

4.8

4.6

4.4 RATIO

S4.2

4

3.8

Year Year Year Year

RATIOS4.3 4.2 4.6 4.7

FI)*RE 2I

[email protected] INTERPRETATION; =


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1. $he average number of days taken by the firm to pay its

creditors is more than ?B days.

2. 0ut ;BB< it has reduced to A? days, which is good sign, and the

company should see to perform efficiently in the coming future.


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x&

$. 3ower the ratio higher the li-uidity position, therefore in ;BBB

;BB: the firm has good li-uidity position.

#. /aying of the credit within the credit period helps the

firm to improve its relationship with the suppliers.

5. So ;BB; ;BB< are good signs for the firm as the paid their

credit within the credit period.

.1. 7o9&ng 8a+&'a- T#no


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x&i

Cost of sales>.


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WORKING CAPITAL TURNOVER RATIO

25

20

15

10

RATI

OS

5

0 Year2001

Year2002 Year 2003Year 2000

RATIOS 8.8 19.5 20.7 7.8

FI)*RE 2II

.1..1 INTERPRETATION;


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1. " high ratio indicates efficient utili#ation of working capital and

low ratio indicates otherwise. *t also indicates the number of

times the working capital is turned on.

2. $he working capital has increased to ;B.AT in ;BB; and then has

reduced to A.?T, which is a huge one, and it shows their

inefficient utili#ation of working capital.


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$. Sales were increasing till ;BB; and have decreased in ;BB


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A00e'0;

Cash in hand;>>@@.

=:;B?>.;

; :


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x&iv

C

O

$ota

lC."&"'

C

S

O

$

Dorkin

gCapital

&C.

" JC.3'

!etec

reasei

nDorkingCa

pital


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:=B;BBB

:[email protected];

:;=;=;A.>A

:@>::.=@

?>A.

@B=>.

Ta$-e .

Ta$

-e.

Ca-8#-a'F#nd0 FO+ea'&o


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Closing 0a

"dd% !onf

?


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x&v

$otal &"' 3ess% !onfund or !onoperatingincomes%

&A?A=A.>?'Opening 0alance of/3 a9c

$otal &0'

&A?A=A.>?'

::A>B.A=)unds )rom Operations R"0

Ta$-e .1

F#nd0 F-o S'a'e%en'

)or the year ending


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S8ed#-e o Cange0 &n 7o9&ng Ca+&'a-

o 'e yea end&ng

Pa'&8#-a0 1

*ncrease

in

ecrease

in

D.C D.C(R0!

(R0!


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x&vi

C

CO

$o

talC."&"'

C

S

O

$

DorkingCapital

&C." JC.3'

!et*n

crease

in

DorkingC

apital


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:;B?>.;;

=;@>B

AABBB

:A:.@>=B

:@@B=:.?


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x&vii


&?


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o 'e yea end&ng

Pa'&8#-a0 3

*ncrease

in

ecrease

in

D.C D.C(R0!

(R0!


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x&viii

C#

en'A00e'0;

Cashinhan

dCashatb

ankSundr

yebto

rsStockOth

ercurrent

assets

$ota

lC."&"'


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Curren

t3iabiliti

es%

S

u

n

d

r

y

c

r

e

d

i

t

o

r

s

O

t

h

e

r

C

ur

re

nt

lia

b.

$otalC.3&0'

D

orkingCapi

tal

&C."JC.

3'

!et*n


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creasein

Do

rkingCapital


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>;


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=:.:=.:

;:;AAA.

??;

Ta$-e.15

Ca-8#-a'F#nd0 FO+ea'&o

Closing 0ala

"dd% !onfu

?


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&;A


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&

Ca0 F-oS'a'e%en'

)or the year ending B.A=Operating profit before Dorking Capitalcharges"djustments for changes in current assets liabilities%"dd% *ncrease in liabilities ecrease inassets

?


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Ne' 8a0 #0ed &n &nan8&nga8'&>.=?Cash bank balance in the beginning of theperiod

Cash bank balance in the end of the period

&::=@;.;='

.3.1 INTERPRETATION%

1. Cash form operating activities a re 7s.?B=?.;? and cash

from investing activities is 7s. &


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&i

2. Cash from investing activities shows a negative balance due

to amount spent on purchase of fi1ed assets.

$. Cash from financing activities is 7s. &:A:BBB' which due to

repayment of loan creditors and increase in capitalinvested.

#. Overall cash and bank balance at the end showed a

negative balance of 7s. &::=@;.=;'

Co%+#'a'&on o Ca0 F-o S'a'e%en' o 'e yeaend&ng

Ta$-e A.:?&ii

Ca0 F-oS'a'e%en'

)or the year ending


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!et /rofit before ta1 ;@;.@="djustments for noncash operating items%"dd% !oncash operating e1penses @>:

? epreciation

3ess% !oncash operating incomes

:>?>


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.3. INTERPRETATION%


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&iii

1. Cash form operating activities are 7s.;=?>:.


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R0. R0.

Ca0 -o o% o+ea'&nga8'&Cash bank balance in the beginning of theperiod

Cash bank balance in the end of the periodA?AB.


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.3.3 INTERPRETATION%


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&v

1. Cash form operating activities are 7s. &=?;::.=A' and cash

from investing activities is 7s. :=B=A.

2. Cash from investing activities shows a positive balance due to

amount earned from sale of fi1ed assets.

$. Cash from financing activities is 7s.>BBAA@.?? which due to

raising of loan creditors and longterm loans.

#. Overall cash and bank balance at the end showed a positivebalance of 7s. A?AB.E STATEMENTS

Ta$-e .

Co%%on = 0&e Ba-an8e 0ee' o 'e

yea end&ng 310' Ma

G 1

1

"mount &7s' /ercentage"mount &7s'/ercentage

$otal

$otal


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ASSETS

C#en' A00e'0;


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&vi

Cash in hand;>>@@.

= :..;

; B.@Cash atbank , =;@>B @.;Other currentassets A>BBB .B> ;BBBBB .?

Capital

:;BA. @.:; ==;@B.


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.:.1 INTERPRETATION

1. Comparing both the years efficient management of workingcapital is seen in ;BBB.

2. Dorking capital for ;BBB ;BB: are T, :@.>T respectively,

which indicate a good sign in ;BBB.


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&vii

$. Current assets constitute nearly ?.AT, A.AT in ;BBB ;BB:,

which seems to have ade-uate cash to meet the obligations.

#. OutsiderFs funds constitute nearly @?.B?T, ?:.;T in ;BBB ;BB:.

5. 3oan creditors have been paid off during ;BB:, which impliesfewer dues to others.

%. )i1ed assets constitute only a small part in both the years.

'. 0ank o9d has been raised by nearly :;@T, which is not a good

sign and also increases outsiderFs dues.

(. Cash in hand bank is more, which indicate immediate li-uid of

funds and also capital has been raised by 7s.:BBBBB.

Ta$-e .1


yea end&ng 31 Ma 1

G

1

"mount&7s' /ercentage

"mount&7s'

/ercentage$otal

$otal

ASSETSC#en'A00e'0;Cash in hand :;B?>.;; B.@ >;


99/179

Sundry ebtors:A?;; ?A.;:>=.

:; ?=.;AStock :;>@>B @.; :


100/179

&viii

$otal C" &"':A:.@>=B ;.? B=AB.B A?.:@$otal C.3 &"'

, :::B= B.>A=

3oan*C*C* 0ank:=BBBB @. :@>;BB ?.>>

3oan Creditors

$otal 3iabilties&0'

:=BBBB @. :A@


101/179

$. Current assets constitute nearly A.AT, @.>T in ;BB:

;BB;, which seems to have ade-uate cash to meet the

obligations.

#. OutsiderFs funds constitute nearly ?:.;T, A?.;T in ;BB: ;BB;.


102/179

&ix

5. 3ongterm loans have been raised during ;BB;, which implies

more dues to others.

%. )i1ed assets constitute only a small part in both the years.

'. 0ank o9d has been paid off which is a good sign.

(. Cash in hand bank is more, which indicate immediate li-uidof funds.

Ta$-e .


yea end&ng 31 Ma

G 3

3

"mount&7s' /ercentage

"mount&7s'

/ercentage$otal

$otal

ASSETSC#en'A00e'0;

Cash in hand>;


103/179

Cash at bank =:.:< B.=? =;=

.:; ?=.;A:>;>;?.

== @=.A@Stock :@>B ;@.>>Other currentassets AABBB =.BA AABBB


104/179

&x

$otalC"&"'

F

&C'

$

:?@>


105/179

:=A?BB?.B

B=AB.B

:::B=

:@>;BB

:A@=;:.:A

:


106/179

htheyears

efficientmanag

ementofworking

capitalisseenin

;BB


107/179

in

g

c

a

pi

ta

l

fo

r

;

B

B

;

;

B

B

B

;

T

,

A.

A


110/179

?

T

in

;

B

B

;

;

B

B


111/179

at

e

c

a

s

h

to

m

e

et

t

h

e

o

bl

ig

at

io

n

s.


112/179

&xi

#. OutsiderFs funds constitute nearly A?.:@T, @B.


113/179

Co%%on=S&e In8o%e 0'a'e%en'

)or the year ending ;BBB and ;BB:

1

R0. R0.

!et Sales>.@< ??.>; >?:A@=.B= ??.>A:>=.:

< :BB A?:A@=.B=

??.>< @@


118/179

.:.5 INTERPRETATION


119/179

&xv

1. !early ??.>T.

$. !et profit after ta1 has been reduced to :.:T from :.;:T.

#. Selling e1penses has decreased to :.>:T from ;.B=T.

5. Office e1penses has reduced to A.>T from ?.:@T.

%. Comparing both the year ;BB: was good and satisfactory.

Ta$-e .5

Co%%on=S&e In8o%e 0'a'e%en' )or the year ending ;BB;and ;BB@:;B:A;.= A.=>

Selling 51pense%

&xvi

"dvertisement B.=@ ;@B>.> B.A@ ABA.:< :.B:

$otal Selling e1p.&;' :::=:.:@ :.>: ::;>.:< :.@;

To'a- O+ea'&ngE+. .:B .BA

(B! R:M; @A;A;


121/179

2. Operating e1penses have decreased to .BAT but operating

profit has been increased to :.>=T from :.;>T.

$. !et profit after ta1 has been increased to :.>BT from :.:T.

#. Selling e1penses has increased to :.@;T from :.>:T.

5. Office e1penses has reduced to A.=>T from A.>T.

%. Comparing both the year ;BB< was good and satisfactory.


122/179

&xvii

.5 COMPARATI2E STATEMENTS Ta$-e .@Co%+aa'&;.A'Cash at bank , =;.B:

&0'

$otal "ssets&"M0'

:A@@>>.B; ;B==@?B.; @?B;>.:?


123/179

LIABILITIES G

CAPITAL

C#en'L&a$&-&'&e0;

:;=;=;A.>A :=B:? :>?:. ::;@.>Sundry

creditors?>A@>=B &;:@' &>.B; ;B==@?B.; @?B;>.:?


124/179

&xix

2. )i1ed assets has been increased by nearly A>T and overall

assets have been increased by T

#. Sundry creditors have been increased by :;T but bank o9d has

been increased by nearly :;@T, which indicates poor

management of funds flow.

5. Overall financial position of the company is satisfactory.T!& '.2'

Co%+aa'&


125/179

&xx

ASSETSC#en'A00e'0;

Cash on hand:;B?>.;

;>;=.:

;&:??@>B :.;Other currentassets AABBB AABBB ,

$otal C" &"' :AA@

$otal "ssets&"M0' ;B==@?B.;

:.@'

&::@>=B&;B;>:.B=AB.

B &;>BA?':@@B=:.?

$otal C.3 &"' &.:'

:::B= :@>;BB

:::B=3oan*C*C* 0ank :=BBBB

:?3oan Creditors :A@


126/179

$otal 3iabilties&0'

:=BBBB

;BBBBB

;>;BB;@

;BBBBB=>=;:.:

A


127/179

&xxi

.5. INTERPRETATION

1. Current assets have been decreased by @.@T and liabilities by

.:T but working capital is more i.e. current asset is more than

current liabilities.

2. )i1ed assets has been increased by nearly .>T but bank o9d has

been paid off and other current liabilities have been decreased

which indicates good management of funds flow.

5. Overall financial position of the company is satisfactory.

Ta$-e .

Co%+aa'&


128/179

&xxii

ASSETS

C#

en'A00e'

0;

Cashonh

andCashat

bankSun

dryeb

torsStockO

thercurrentassets

$

otalC"&"'

F&

edA00e'0;

)


129/179

urniture

fi1tures

Other)i1e

d"ssets

$o

tal

)i1ed

"ssets

&0'

$otal"ssets&"M0'

LIABILIT

IESGCAPIT

ALC#en


130/179

'L&a$&-

&'&e0;S

u

n

d

ry

c

r

e

d

i

t

o

r

s

O

t

h

e

r

C

u

r

r

e

n

t

l

i

a

b

.

$otalCur

rent

liabilities&"'

3oan*C*C*0ank

3o

anCreditors

$ota

l3iabilties&0'


131/179

C

a

p

i

t

a

l

C

u

r

r

e

n

t

a

9

c&C'

$otal&"M0MC'

>;=.

:;:


132/179


133/179


134/179


135/179


136/179


137/179


138/179


139/179


140/179


141/179

:=A?BB?.B

B=AB.B

:::B=

:@>;BB

:A@=;:.:

A

:


142/179

&xxiii

.5.3 INTERPRETATION

1. Current assets have been increased by ;T and liabilities has

been decreased by >.?T but working capital is more i.e. currentasset is more than current liabilities.

2. )i1ed assets has been decreased by nearly ;:.


143/179

Ta$-e .&xxi

v

Co%+aa'&.A> >


144/179

R"03ess% Othere1penses

= =

!et /rofit beforeta1

A?A=A.>? ?


145/179

&xxv

.5.: INTERPRETATION

1. Sales have been increased by ;A:>=.:

3ess% Cost of

goods>?:A@=.B

=@@


146/179

/ostage $elegram :@B.>B ;=:B ?BB.>B =.A5lectricity


147/179

&xxvii

1. Sales have been increased by :;.>T and cost of goods by :=T

so overall gross profit has been increased by B.A>T.

2. "lthough operating e1penses have increased by B.


148/179

&xxviii


149/179

Co%+aa'&


150/179

ta13ess% income ta1 =:B ;:? &;A;:' &>>.=;'

Ne' +o&' &afterta1' ?A?;?.@ :B=@:

.5.@ INTERPRETATION


151/179

&xxix

1. Sales have been increased by >.@;T and cost of goods by >.AT

so overall gross profit has been increased by ;.>>T.

2. Operating e1penses have decreased by @T the increase in gross

profit is sufficient to compensate for the decrease in operating

e1penses and hence there has been an overall increase in

operational profits by :>.>=T.

$. $here is an increase in net profit after ta1 amounting to 7s.:A:: i.e. :.>:T

#. *t may be concluded that there is a sufficient progress in thecompany and the overall profitability of the company is good.

.@ TREND ANALYSIS

$he trend e-uation is to be found out for analy#ing the trend in which


152/179

the current assets of the Company is e1pected to grow by analy#ing

the past results. $he $rend e-uation is y K


153/179

&xxx

aMb1. Here the E represents the years for which the analysis is done

&;BBB, ;BB:, ;BB;, ;BB


154/179

!N 1 &N

1'

* =L&;:AA.=?'J &;'L ?::@?==.B>

=L@ J &;'

* :?@=A?.:?


155/179

&xxxi

;B

$ 3:.

Calculation of aF%

a K &N y 9 !' J bL &N 1 9 !'

a K &?::@?==.B>9=' J ?.=> M ?.=> M ?.=> M?.=> M?.=> M


156/179

&1K>?;.:>


157/179

&xxxii

*t is clear from the analysis that the values of 6 are considerably

increasing through the years during the study period. $he trend projection

of the current assets level also increases for the ne1t two years as seen. "

chart depicting the trend values and the actual values can be seen. $he

constant line in the chart depicts the trend values and the other one is the

actual values.


158/179

&xxxiii

TREND ANALYSIS CURRENT ASSETS

2500000

2000000

AS

SE

TS1500000

TREN

D

CU

RR

EN

T

1000000

ACTU

AL

500000

0

1999 - 2000 - 2001 - 2002 -

2000 2001 2002 2003

YEAR


159/179

figure viii

.@. Tend Ana-y0&0 o 'e C#en' L&a$&-&'&e0

&xxxiv

Ta$-e .33

YeaDe.A:'J &;'L >=:B.B@

=L@ J &;'

K

:>

>:

:A

.;

?

;B

$ 55.@:


160/179

Calculation of aF%

aK &N y 9 !' J bL &N 1 9 !'

aK &>=:B.B@9=' J AA>>.?@=L&;9='

a1:3.:5


161/179

&xxxv

Dhen EK;BBB&1K;'

6K:=?AAAA>>.?@=L&,;'

6K :=A;;:?.A;Dhen EK;BB:&1K:'

6K:=?AAAA>>.?@=L&:'

6K :=AA=.>

Dhen EK;BB;&1KB'

6K:=?AAAA>>.?@=L&B'

6K :=?AADhen EK;[email protected]&1K:B?.B=

$he analysis clearly depicts that the value of current liabilities of the

Company are also increasing. $he current liabilities tend to grow in the

forthcoming years as seen and the trend projections of the values also

reflect the same. $his effect must be balanced with an e-uivalent or

higher increase in the current assets. " chart depicting the trend

values and the actual values can be seen. $he constant line in the

chart depicts the trend values and the other one is the actual values.


162/179

&xxxvi

TREND ANALYSIS FOR CURRENT

LIABILITIES

1800000

1600000

1400000

1200000

1000000 TREN

D

800000

ACTU

AL

600000

400000

200000

0

1999 - 2000 - 2001 - 2002 -

2000 2001 2002 2003


163/179

figure i1

[email protected] Tend Ana-y0&0 o 'e Sa-e0

Ta$-e .3:&xxxvii

YeaDe.


164/179

; ;B

$5:.@@

Calculation of aF%

aK &N y 9 !' J bL &N 1 9 !'

aK &;@;?;@;.==9=' J >A=A.AL&;9='

a@51.

Dhen EK;BBB &1K;' 6K @?>?:A;.BM>A=A.@@L&;'


165/179

&xxxviii

YK>AB?:A@.:>

Dhen EK;BB:

&1K:'

6K@?>?:A;.BM>A=A.

@@L&:'6K @;??:A;.BDhen EK;BB@A.=A M &=:;>?;.B>='L&B'

6K =?B>@A.=ADhen EK;BB@A.=A M &=:;>?;.B>='L&;'

6K ;;:=B


171/179

x"ii

TREND ANALYSIS FOR NET

WORKING CAPITAL

1000000

900000

C

A

P

I

T

A

L

800000

700000

600000W

O

R

K

I

N

G

TREN

D500000 ACTU

AL

400000

300000

NE

T 200000

100000

0

1999 - 2000 - 2001 - 2002 -

2000 2001 2002 2003

YEAR


172/179

figure 1i

CHAPTER


173/179

x"iii

FINDIN)S

1. $he current asset ratio was in a increasing trend for the period

;BB


174/179

x"iv

%. $he working capital was in a increasing trend and also the

sales. So the company should try to increase the working

capital by reducing its current liabilities and take measures to

increase the sales of the company.

'. )rom the Common si#e balance sheet, we can infer that the

secured loans were in an increasing trend and sundry debtors

were also increasing. So the company has to take steps to

control the above said items, which will improve the performance

of the company in the coming years.

(. )rom the Common Si#e *ncome Statement we can find that the

sales was high so that gross profit was high enough to take of

the operating e1penses, which showed an operating profit and

also net profit after ta1 was increasing.

+. )rom the Comparative balance sheet we can find that current

assets was always high than the current liabilities which is a

good sing for the company but loans and other creditors are high

to pay off.

1,. )rom the Comparative income statement we can find that the

sales was high so that gross profit was high enough to take of

the operating e1penses, which showed an operating profit and

also net profit after ta1 was increasing.

11. 5ven in trend percentage ;BB< was the year in which current

assets was higher than current liabilities and working capital was

managed in an efficient way.


175/179

x"v

CHAPTER

S*))ESTIONS

1. )rom the li-uidity ratios we can suggest that the companyhas to take immediate measures to control the debtors for

which it can undertake any of the control techni-ues used by

management professionals.

2. )rom the /rofitability ratios, we can suggest that the

company has to take steps to improve the profits for the

company by applying proper control over cost of goods sold.

$. )rom the activity ratios we can suggest the company has to

take steps to reduce the producing properties or cost of goods

sold, since the increasing cost of goods sold has eroded the

profits of the company. "lso the company has to take steps to

increase the inventory level since the average inventory level

is very low when compared to the sales of the company.

#. )rom the financial stability ratios we can suggest that the

company should try to reduce its borrowings and also try to

make proper budget to reduce the producing properties of

cost of goods sold which was highly increasing for the

company. "lso the companyFs net worth level was at a

satisfactory level which they should maintain the same in the

coming years.

5. )rom the common si#e income statements we can suggest

that the company should take steps to increase its income

and should try to reduce its administration and finance

charges.


176/179

%. )rom the trend *ncome statement, we can suggest that the

company should try to decrease its administration e1penses,

which have eroded the profits of the company. So the

company has to take steps to reduce the administration cost.


177/179

x"vi

'. )rom the Comparative *ncome statement, we fan suggest that

the Sales was decreased in the current year and the stock

was very much increased in the current year. "lso the

company has taken steps to reduce the operating e1penses,

which they should continue to do.

(. Gross profit was enough to meet the operating e1penses

and operating profit was high and also the net profit after

ta1 was in an increasing nature.

+. $he average collection period is not satisfactory because it

is more than the firmFs credit term of @B days. *t took more

than ?B days to collect so care must be taken to reduce it.

1,.$he average number of days taken by the firm to pay its

creditors is more than ?B days. /aying of the credit within

the credit period helps the firm to improve its relationship

with the suppliersCHAPTER 1

CONCL*SION

)rom the detailed Study on )inancial "nalysis it was found that

the company was concentrating only on increasing the sales of the

company but not used any )inancial Strategy to show an attractive

0alance Sheet to the investors.

$he company has increased its capital and has maintained the

same and loans have bought to such an e1tent that dues have become


178/179

more and more burden to the company. "lso the impact of the increase

in debt was seen on the reduction in !et /rofit to a huge e1tent.


179/179

x"vii

So the company can follow suitable strategies to increase the

performance of the company by way of increasing the working capital,

reducing loan borrowings, paying the credit in the due time etc. in the

coming years.

BIBLIO)RAPHY

BOO6S

? Qothari C.7, 7esearch 4ethodology% 4ethods and $echni-ues,

&;ndedition, !ew elhi% 2iswa /rakasham, :@'

? 4alhotra, 7esearch 4ethodology &=thedition, !ew elhi /earson

education /rivate 3imited, 7eprint ;BB='

bharat oil

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