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FINANCIAL STATEMENT ANALYSIS AND BENEISH MANIPULATION INDEX
Sandeep K BiswalAshish BaghelAnand Avakanvar
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CONTENTS
• Management Discussion Analysis (MDA) and Director’s Report (DR)
• Notes on Accounting Procedure
• Balance Sheet Analysis
• P&L Analysis
• Financial Ratio Analysis
• Beneish Index Analysis
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MDA & DR
• Greek sovereign debt crisis
• Japan Earthquake
• RBI’s contractionary monetary policy
• Persistent hike in fuel price
• COGS increased
• Reduced production cost backed by R&D
• Auto ancillary sector growth has declined
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NOTES ON AP• Value of fixed assets include
transportation and installation costs
• All R&D expenses capitalized
• Provision has been made to review fixed asset prices
• Sona Koyo understated depreciation on intangible assets
• Lease hold depreciation considers less of useful life and lease period
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B/S ANALYSIS (VA)
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B/S ANALYSIS (HA)
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P&L ANALYSIS (VA)
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P&L ANALYSIS (HA)
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FINANCIAL RATIOS
• In comparison to other two firms Sona Koyo has better inventory management
• WCT is the least in case of Sundaram Clayton
• Sundaram Clayton is in a better position to meet short term debt obligations
• Gabriel India is generating more income from operations
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FINANCIAL RATIOS contd.
• Long term risk prospects are more in case of Gabriel India
• Sundaram Clayton has a better net profit margin
• Due to high ROE Gabriel India can raise more equity capital at reduced cost
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BENEISH INDEX ANALYSIS
• Considering a cut off value of 11.72 %, the probability of manipulation received for three companies show a slight inclination towards GAAP violation
• The companies under study have significant figures of leveraging which is necessary for the industry they belong to. Hence, the cut off value can be increased a little
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ROAD AHEAD
• Increased competition and inflation remains a major concern
• However, buoyant demand side factors are expected to keep growth momentum of the sector going
• Hence, cost and efficiency optimization shall be the key words
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THANK YOU