FINANCIAL STATEMENT ANALYSIS FOR BHARAT OIL COMPANY, CHENNAI By (D. Anand, Regn. No. 351 3 11!

A PRO"ECT REPORT S#$%&''ed 'o '(e S.R.M SCHOOL OF MANA)EMENT In '(e FAC*LTY OF EN)INEERIN) AND TECHNOLO)Y

In +a,'&a- .#-.&--%en' o. '(e ,e/#&,e%en'0 Fo, '(e a1a,d o. '(e deg,ee O. MASTER OF B*SINESS ADMINISTRATION

S.R.M. EN)INEERIN) COLLE)E S.R.M. INSTIT*TE OF SCIENCE AND TECHNOLO)Y

DEEMED *NI2ERSITY "*NE 3 5

ii BONAFIDE CERTIFICATE

Certified that this project report titled 4FINANCIAL STATEMENT ANALYSIS5 is the bonafide work of M,. D. Anand, who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported here in does not form part of any other project report or dissertation on the basis of which a degree 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

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.

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 period,more 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, common,si#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. Pa8(a%#'(# 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 P,o.. R. 2en9a'a,a%an& M.Te8(, F.I.E., /rincipal of S74 *!S$*$8$5 O) SC*5!C5 "! & 5545 complete this project. $5CH!O3OG6 8!*257S*$6', for providing me with necessary facilities to

* e1press my gratitude to DR. (M,0.! S. "aya0(,ee S#,e0( B.A., M.B.A. and P(D ean, Head of the epartment of 4anagement Studies for providing me with all facilities and guidance to complete the project successfully.

iv

* am very much thankful to my guide M,. C(&nna'(a%$&, Sen&o, Le8'#,e, for his patient guidance in making the project a grand success. * would like to thank the management of B(a,a' O&- Co%+any for giving me an opportunity to do the project in their esteemed organi#ation. * would like to thank M,. P. C(and,a0e9a, for his useful suggestions and assistance through out the project. * wish to e1tend my sincere thanks to all the staff members of the 4anagement Studies department for their untiring support. * would also like to thank my In0'&'#'&on, my Fa8#-'y %e%$e,0 and my F,&end0 without whom this project have been a distant reality.

v CONTENTS

TITLES "bstract "cknowledgement $able of Contents 3ist of $able 3ist of Charts 9 )igures Chapters% : . *ntroduction ; . Statement of the /roblem < . Objective of the Study = . 7eview of 3iterature > . 4ethodology and 3imitations of the study @ . Company /rofile A . "nalysis and *nterpretation ? . )indings C . Suggestions : B . Conclusion 0ibliography

Page No iii iv v vi vii

: < = > ? :? ;B CB C; C= viii

vi

LIST OF TABLES TABLE N*MBER A.: A.; A.< A.= A.> A.@ A.A A.? A.C A.:B A.:: A.:; A.:< A.:= A.:> A.:@ A.:A A.:? A.:C A.;B A.;: A.;; A.;< A.;= A.;> A.;@ A.;A A.;? A.;C TABLE NAME Current 7atios "cid 7atio "bsolute 3i-uid 7atio *nventory $urnover 7atio ebtors $urnover 7atio Creditors $urnover 7atio !et Dorking Capital 7atio Changes in Dorking Capital ;BB: )unds from Operation ;BB: )unds )low Statement ;BB: Changes in Dorking Capital ;BB; )unds from Operation ;BB; )unds )low Statement ;BB; Changes in Dorking Capital ;BB< )unds from Operation ;BB< )unds )low Statement ;BB< Cash )low Statement ;BB: Cash )low Statement ;BB; Cash )low Statement ;BB< Common,si#e 0alance sheet ;BB: Common,si#e 0alance sheet ;BB; Common,si#e 0alance sheet ;BB< Common,si#e income statement ;BB: Common,si#e income statement ;BB; Common,si#e income statement ;BB< Comparative 0alance sheet ;BB: Comparative 0alance sheet ;BB; Comparative 0alance sheet ;BB< Comparative income statement PA)E NO. ;B ;< ;@ ;C <; <> <? =: =; =; =< == == => =@ =@ =A =C >: >< >> >A >C @: @< @> @A @C A:

A.<B A.<: A.<; A.<< A.<= A.<>

;BB: Comparative income statement ;BB; Comparative income statement ;BB< $rend analysis for current assets $rend analysis for current liabilities $rend analysis for sales $rend analysis for working capital

A< A> AA ?: ?= ?A

vii

LIST OF CHARTS CHART N*MBER )*G875 * )*G875 ** )*G875 *** )*G875 *2 )*G875 2 )*G875 2* )*G875 2** )*G875 2*** )*G875 *E )*G875 E )*G875 E* CHART NAME Current 7atios "cid test 7atios "bsolute li-uid 7atios *nventory $urnover 7atio ebtors $urnover 7atio Creditors $urnover 7atio !et Dorking Capital 7atio $rend analysis for current assets $rend analysis for current liabilities $rend analysis for sales $rend analysis for working capital PA)E NO. ;: ;= ;A <B << <@ <C ?B ?< ?@ ?C

viii

CHAPTER 1 INTROD*CTION

" company manufactures a product or renders a service, all its transactions are represented in terms of money. Similarly its performance whether its success or failures, is again evaluated in terms of money. $hus the common denominator is money or finance. $he activities of an enterprise, planning, control, operation etc, are all measured in financial terms with the onslaught of competition, growth inflationary pressure, and volatile e1change rates.

Since financial is viewed as most important factoring every enterprise, the management re-uires special mention and attention. $he modern approach to finance function in business highlights the procurement of funds on the most economic and favorable terms to the concern and to make use of the same in an efficient manner for successful running of the enterprise. )inancial management plays a vital role in procurement, allocation and control of funds. Hence the need and demand for rigorous financial management has increased greatly.

$he basis for financial planning and analysis is financial information. $he financial information of an enterprise is contained in the financial statement or accounting reports. *t contains summari#ed information of the firms financial affairs, organi#ed systematically. $hey are means to present the firmFs financial situation to management, shareholders9owners, potential investors, lenders, creditors, employees, trade union, customers, public, government and their agencies, ta1ation authorities and researchers.

$hus, the analysis of financial statement enables to judge the earning capacity, managerial efficiency, short and long term solvency, inter firm comparison enables to

ix forecast and prepare budget of an organi#ation in investment decision, financing decision and dividend policy decision.

"fter duly recogni#ing the important of financial statement analysis this topic has been chosen as the focus of the project. $he analysis of financial statement is a process of evaluating the relationships between component parts of financial statement to obtain a better understanding of the firmFs position and performance.

CHAPTER 3 STATEMENT OF PROBLEM

/urpose of the study is to diagnose the information contained in financial statement so as to judge the profitability and financial soundness of the firm. $he study aims at analy#ing the overall financial performance of the company over a period of = yrs &i.e.' ;BBB, ;BB< by using various tools to bring out the mystery behind the figures in the financial statement.

*f analysis is not done, the management will not be able to assess the financial strength of firm and to turn it to their advantage. $he analysis is essential to spot out the financial weakness of firm to take suitable corrective actions. $hus financial statement analysis is necessary for the firms to frame the future plans and also to convert weakness into strength.

CHAPTER 3 OB"ECTI2ES ? $o analy#e, interpret and suggest on the profitability and financial soundness of the company by comparing financial statement.

x ? $o highlight nature of changes influencing financial position and performance of the enterprises with the aid of comparative 0alance sheet analysis, common,si#e 0alance sheet and trend percentage analysis. ? $o determine the trend of the current assets, current liabilities, sales and working capital of the firm tend to change using trend analysis. ? $o highlight changes in financial position with help of funds flow G cash flow analysis. ? $o analyse the short,term financial position of the firm through the various li-uidity G efficiency ratios like current ratio, li-uid ratio, absolute li-uid ratio, working capital ratio, stock turnover ratio etc.

CHAPTER : RE2IE7 OF LITERAT*RE :.1 FINANCIAL ANALYSIS =.:.: 45"!*!G% $he term Hfinancial analysisF, also known as analysis and interpretation of financial statementsF, refers to the process of determining financial strengths and weakness of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data. $he purpose of financial analysis is to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. )inancial statement analysis is an attempt to determine and

meaning of the financial statement data so that forecast may be made of the future earnings, ability to pay interest and debt maturities &both current and long,term' and profitability of a sound dividend policy.

xi

=.:.; $6/5S O) )*!"!C*"3 "!"36S*S% *t can be classified into ; and they are%

? ?

On basis of material used On basis of modus operandi. TYPES OF FINANCIAL ANALYSIS

ON BASIS OF MATERIAL USED

ON BASIS OF MODUS OPERANDI

EXTERNAL ANALYSIS

INTERNAL ANALYSIS

HORIZONTAL ANALYSIS

VERTIC AL ANALY SIS

O! 0"S*S O) 4"$57*"3 8S5 % ? 5E$57!"3 "!"36S*S.

$he analysis is done by outsiders who do not have access to the detailed internal accounting records of the business firm. $hese outsiders include investors, creditors, potential creditors, government agencies and public. )or financial analysis, these e1ternal parties to the firm depend almost entirely on the published financial statement. 51ternal analysis, thus serves only a limited purpose. However, the recent changes in the government regulations re-uiring business firms to make available more detailed information to the public through audited published accounts have considerably improved the position of

the e1ternal analysis.

*!$57!"3 "!"36S*S.

xii $he analysis conducted by persons who have access to the internal accounting records of a business firm is known as internal analysis. Such an analysis can, therefore, be performed by e1ecutives and employees of the organi#ation as well as government agencies which have statutory powers vested in them. )inancial analysis for managerial purpose is the internal type of analysis that can be effected depending upon the purpose to be achieved. O! $H5 0"S*S O) 4O 8S O/57"! *% ? HO7*IO!$"3 "!"36S*S.

Hori#ontal analysis refers to the comparison of financial data of a company for several years. $he figure for this type of analysis is presented hori#ontally over a numbers of columns. $his type of analysis is called H ynamic "nalysisF. $he hori#ontal analysis makes it possible to focus attention on items that have changed significantly during the period under review. Comparison of an item over several periods with a base year may show a trend developing. Comparative statement and trend percentage are two tools employed in hori#ontal analysis. ? 257$*C"3 "!"36S*S.

2ertical analysis refers to the study of relationship of the various items in the financial statement of one accounting period. *n this types of analysis the figure from financial statement of a year are compared with a base selected from the same years statement. *t is also known as HStatic "nalysisF. Common,si#e financial statement ratios are the two tools employed in vertical analysis. Since vertical analysis considers data for one time period only, it is not very conductive to a proper analysis of financial statement. However, it may be used with hori#ontal analysis to make it more effective and meaningful.

CHAPTER 5 METHODOLO)Y OF ST*DY $he methodology of study involves the study of the financial statement that is followed by 0OC. $he project involves the analysis with the help of 7atio analysis, Comparative statement, Common,si#e statement, )und flow analysis &)unds )low statement', Cash flow analysis &Cash )low statement' and $rend analysis for the current assets, current liabilities, sales and working capital. $he various methods are e1plained in brief in the following paragraphs.

xiii

5.1 SO*RCE OF DATA; $he source of data comes mainly from the following% 1. CompanyFs annual reports. 2. 0alance Sheets of the firm for the last three years. 5.2 RATIO ANALYSIS " ratio is a simple arithmetical e1pression of the relationship of one number to another. *t is an e1pression of the -uantitative relationship between two numbers. 7atio analysis is a techni-ue of analysis and interpretation of financial statements. *t is the process of establishing and interpreting various ratios for helping in making certain decisions. *t is a means of better understanding of financial strengths and weaknesses of a firm. $here are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate ratios from the same keeping in mind the objective of analysis. $he following four steps are involved in the ratio analysis%

? ? ?

Selection

of

relevant

data

from

the

financial

statements

depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. Comparison of the calculated ratios of the same firm in the past, or the ratios developed from the projected financial statements or some other firms or the comparison with ratios of the industry to which the firm belongs. ? *nterpretation of the ratios.

$he ratios that have been considered and used for the financial statement analysis in this project are as follows%

1) 3i-uidity 7atios J ) Current 7atio !) "cid $est 7atio

xiv

") "bsolute 3i-uid 7atio or Cash /osition 7atio 2) 5fficiency 7atios J ) *nventory $urnover 7atio !) 7eceivables $urnover 7atio ") Dorking Capital $urnover 7atio 5.3.1 L&/#&d&'y Ra'&o0 $he term H3i-uidityF refers to the ability of a concern to meet its current obligations as and when these become due. $o measure the li-uidity position of a firm, the current ratio, acid test ratio and the absolute li-uid ratio are to be calculated. 5.3.1.1C#,,en' Ra'&oJ *t may be defined as the relationship between current assets and current liabilities. "lso known as the working capital ratio this measures the general li-uidity and is most widely used to make the analysis of a short,term financial position or li-uidity of a firm. $he current ratio is determined by the formula, Current 7atio K Current "ssets Current 3iabilities 5.3.1.3 A8&d Te0' Ra'&o J *t is also known as -uick ratio and is a more rigorous test of li-uidity than in the current ratio. *t is defined as the relationship between the -uick9li-uid assets and the current or li-uid liabilities. $he acid test ratio is determined by the formula, "cid $est 7atio K 3i-uid "ssets Current 3iabilities 5.3.1.3 A$0o-#'e L&/#&d Ra'&o J *t is also known as cash ratio and here the receivables, debtors and inventories are not considered and the cash which is the most li-uid asset is only taken in consideration. $he absolute li-uid ratio is determined by the formula,

"bsolute 3i-uid 7atio K "bsolute 3i-uid "ssets Current 3iabilities

5.3.3 E..&8&en8y Ra'&o0

x v )unds are invested in various assets in business to make sales and earn profits. $he efficiency of with which assets are managed directly affect the volume of sales. 5fficiency ratios measure the efficiency or effectiveness with which a firm manages its resources or assets. $hese ratios are called as 5fficiency ratios. $o measure the efficiency of the firm the stock9inventory turnover ratio, debtors9receivables turnover ratio, creditors9payable turnover ratio and working capital turnover ratio are a naly#ed. 5.3.3.1 In<en'o,y T#,no<e, Ra'&o J*t is also known as stock velocity and indicates whether inventory has been efficiently used or not. *t indicates the no. of times the stock has been turned over during the period and evaluates the efficiency with which the firm is able to manage its inventory. $he inventory turnover ratio is calculated by the formula, *nventory $urnover 7atio K Sale s *nven tory 5.3.3.3 Re8e&<a$-e0 T#,no<e, Ra'&o J ebtors turnover ratio indicates the velocity of debt collection of the firm. *t indicates the number of times the debtors are turned over during a year. $he receivables turnover ratio is calculated by the formula, ebtors $urnover 7atio K $otal Sales ebtors 5.3.3.3 7o,9&ng Ca+&'a- T#,no<e, Ra'&o J $his ratio indicates the no. of times the working capital is turned over the course of the year. $his ratio measures the efficiency with which the working capital is being used by the firm. $he working capital turnover ratio is calculated by the formula,

Dorking Capital $urnover 7atio K Cost of Sales &or, Sales' !et Dorking Capital 5.3 COMMON=SI>E STATEMENT $he common,si#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

xvi

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 common,si#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 total assets.

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 in,depth 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

and the ways by which these funds were employed. $he flow of funds occurs when a transaction changes on the one hand of a non,current 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.

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 Pa,'&8#-a,0 !et /rofit epreciation eferred 7evenue 51penditure *ncrease in 5-uity Capital *ncrease in $erm 3iabilities Others ecrease in Dorking Capital R0. LLL LLL A++-&8a'&on0 Pa,'&8#-a,0 !et 3oss 7edemp tion Share Capital R0. LLL of/reference LLL LLL LLL

LLL LLL

*ncrease in )i1ed "ssets ividend paid /aymen deferred t of 7evenue 51pendi ture Others *ncrease in Dorking Capital To' a-

LLL LLL

LLL LLL

LLL To'a????

LLL ????

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

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.

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-o1 0'a'e%en' .o, '(e yea, Pa,'&8#-a,0 Ca0( F-o10 .,o% O+e,a'&ng A8'&<&'&e0 !et profit 93oss before ta1 and e1traordinary items "djustments for% epreciation Gain 9 3oss on sale of fi1ed assets )oreign 51change 4iscellaneous e1penditure written off *nvestment *ncome *nterest ividend Con'd.. Operating profit before working capital changes "djustments for% $rade and other receivables *nventories $rade /ayables Cash generated from operations *nterest paid irect ta1es paid Cash flow before items R0. LLL LLL LLL LLL LLL LLL LLL LLL LLLL LLL LLL LLL LLL LLL LLL LLL

51traordinary items !et Cash from Operating "ctivities Ca0( F-o10 .,o% In<e0'&ng A8'&<&'&e0 /urchase of )i1ed "ssets

LLL LLLL LLL

xix Sales of )i1ed "ssets /urchase of investments Sale of investments *nterest received ividend received !et Cash from9used in *nvesting "ctivities Ca0( F-o10 .,o% F&nan8&ng A8'&<&'&e0 /roceeds from issue of share capital /roceeds from long,term borrowings9banks /ayment of long,term borrowings ividend paid !et Cash from9used in )inancing "ctivities Ne' In8,ea0eADe8,ea0e &n Ca0( and Ca0( E/#&<a-en'0 Ca0( and Ca0( E/#&<a-en'0 a0 a'B.(O+en&ng Ba-an8e! Ca0( and Ca0( E/#&<a-en'0 a0 a'B.(C-o0&ng Ba-an8e! LLL LLL LLL LLL LLL LLLL LLL LLL LLL LLL LLLL LLL LLLL LLLLL

5.C TREND ANALYSIS; $his method is used to analyse the trend in the growth of the companyFs current assets and current liabilities, sales and working capital. )or this the $rend analysis method is used to make a clear idea. $he trend analysis is done based on the following method. $he trend e-uation is to be analy#ed for this purpose. $he trend e-uation is 6 K a M bE S'e+1% Calculation of HbF b K !N E6 , N EN 6 !N EO , &N E'O

S'e+3% Calculation of HaF

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

x x

S'e+3% Substitute the value of HaF and HbF 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 &current assets, 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<, so study is about past only, it needs not be indicative of future.

$ime is major limiting factor of study. *t is not possible to analy#e all the aspects in details within time allowed because of lack of time( the study does not cover the areas relating to industrial analysis and economic growth of 0harat Oil Company.

xxi

CHAPTER @ COMPANY PROFILE @.1 HISTORY *n the early CBPs, 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 by products. $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 CBB: certified manufacturing facility that has been e1tensively upgraded in the last three years.

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

xxii 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 $he companyFs markets and sells the following products% ? ? ? ? 3ubrication oil of HCastrolF. ;$ oil of Shell. ;$ and =$ oil of 5lf G *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 C ANALYSIS AND INTERPRETATION C.1 RATIO ANALYSIS

xxiii

A.:.: Current 7atio $able A.: PARTIC*LA RS C#,,en' A00e'0; Cash in hand Cash at bank Sundry ebtors Stock Other current assets $otal C." C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other C.3 $otal C.3 C#,,en' Ra'&o; :;=;=; A.>A :@>::. =@ ?>A<@ :<==@A >.B< :=B:<@B.>? ;B;>:C.<: >@>=B :@@B=: C.?C :=A?BB?.C B , <:=@; :>BC=AB.C :<?:A<; .;= , <C::; :=;B?== .;= ;>>@@. C= , :=B;<C ;.B? ==@@A@ A>BBB :;B?>.;; =;<.=< :A?;;<<.>> :;>@>B AABBB >;C<?.?; C=:C.:< :>C<?>=.: ; :<;:;B AABBB A>=?;.? C =;<.=< :>;>C;? .== @;>@>B AABBB 3 3 1 3 3 3 3

1.:5

1.3

1.3:

1.@3

Idea- Ra'&o; = 3;1 A8'#a- Ra'&o; = 1.:5, 1.3 , 1.3:, 1.@3 respectively.

xxiv

CURRENT RATIOS

2 1.5 1 0.5 0 Year Year Year Year RATIO S

RATIOS 1.45

1.2

1.24

1.62

)*G875 i

C.1.1.1 INTERPRETATION; = ? Current 7atio of the company is not satisfactory because the ratios are R:.=>,:.;B,:.;=,:.@;S 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 short,term financial position.

xxv ? ? ? 0ank o9d has been paid off in ;BB; G ;BB<. *n ;BB< they had enough current assets to pay of their liabilities. Cash in hand was constantly increasingly which showed a good sign to pay of immediate e1penses. ? Current liabilities have been decreasing from ;BB:, which shows a high working capital. ? ? Stock flows are uneven during ;BB: G ;BB<. 5ven though current assets are high than current liabilities the current ratio are less than the ideal one.

C.1.3 A8&d Te0' Ra'&o

Ta$-e C.3 PARTIC*LA RS L&/#&d A00e'0; Cash in hand Cash at bank Sundry ebtors 3 ;>>@@.C= , :=B;<C;.B ? 3 1 3 3 3 3

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

>;C<?.?; C=:C.:< :>C<?>=.: ;

A>=?;.?C =;<.=< :>;>C;?. ==

Other current assets

A>BBB

AABBB

AABBB

AABBB

xxvi

$otal 3." C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other C.3 $otal C.3 A8&d 'e0' Ra'&o; :;=;=;A.> A :@>::.=@ ?>A<@ :<==@A>.B < 1.:5 :=B:<@B.> ? ;B;>:C.<: >@>=B :@@B=:C.? C 1.3 :=A?BB?.C B , <:=@; :>BC=AB.C 1.15 :<?:A<; .;= , <C::; :=;B?== .;= 1.1D

Idea- Ra'&o; = 1;1 A8'#a- Ra'&o; = 1.:5, 1.3 , 1.15, 1.1D respectively.

xxvii

ACID TEST RATIO

2 1.5 1 0.5 0 Year RATIOS 1.45 Year 1.2 Year Year 1.151.18 RATIO S

F&g#,e II

C.1.3.1 INTERPRETATION; = 1. "cid test ratio of the company is satisfactory because the ratios are R:.=>,:.;B,:.:>,:.:?S much above the accepted standard of :%:.

xxviii 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 short,term financial position. $. 0ank o9d has been paid off, which is a good sign for the company. #. 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 their credits.

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

xxix PARTIC*LA RS A$0o-#'e L&/#&d A00e'0; Cash in hand Cash at bank Other current assets $otal 3." C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other C.3 $otal C.3 A$0o-#'e -&/#&d Ra'&o; :;=;=;A.> A :@>::.=@ ?>A<@ :<==@A>.B < . C :=B:<@B.> ? ;B;>:C.<: >@>=B :@@B=:C.? C . 5 :=A?BB?.C B , <:=@; :>BC=AB.C . E :<?:A<; .;= , <C::; :=;B?== .;= .11 ;>>@@.C= , A>BBB :;B?>.;; =;<.=< AABBB >;C<?.?; C=:C.:< AABBB A>=?;.? C =;<.=< AABBB

A8'#a- Ra'&o; =

. C,

Idea- Ra'&o; = .5;1 . 5, . E, .11 respectively.

xxx

ABSOLUTE LIQUID RATIO

0.12 0.1 0.08 0.06 0.04 0.02 0 Year RATIOS 0.07 Year 0.05 Year 0.09 Year 0.11 RATIO S

FI)*RE &&&

A.:.<.: *!$57/75$"$*O! ? "bsolute li-uid ratio is not satisfactory as it is much lower than the rule of thump i.e. B.>.

xxxi

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.BC, 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 only cash and short,term investments, which are very low than current liabilities.

C.1.: In<en'o,y T#,no<e, Ra'&o Ta$-e C.: PARTIC*LARS 3 3 1 3 3 3 3

Co0' o. good0 0o-d; xxx ii Sales &,' Gross profit Cost of goods sold "verage *nventory at cost% Opening Stock &M' Closing Stock ><<@?<<.=< @>A:C>=.:< A<C=@=B.;? @:;@@A.? A><CCB.B A>C@@;.= B C > =A;=:@>.@< >?:AC@=.B= @@<=CAA.?<

@CAC;@=. @B A=B<;B @;<?C==. @B

;A;@?A ==@@A@

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

:;>@>B :<;:;B

:<;:;B @;>@>B

$otal Stock&9;' "verage *nventory at cost In<en'o,y T#,no<e, Ra'&o; (&n '&%e0! In<en'o,y Con<e,0&on Pe,&od; (&n day0!

A:C<@< <>C@?:. > 13.1

>A;<;@ ;?@:@< 3 .3

;>AAAB :;???> 51.5

A>AAAB <A???> 1@.5

3C.D

1C.E

C.1

33.1 xxxiii

INVENTORY TURNOVER RATIO

60 50 40 30 RATIO

S 20 10 0 RATIOS Year 13.1 Year 20.3

FI)*RE I2

Year 51.5

Year 16.5

C.1.:.1 INTERPRETATION 1. " high inventory turnover indicates efficient management of

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

xxxiv 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.

C.1.5 De$'o,0 T#,no<e, Ra'&o Ta$-e C.5 xxxv

PARTIC*LA RS Ne' C,ed&' 0a-e0; Sal es &,' 7eturns !et credit sales A<e,age De$'o,0; Opening ebtors &M' Closing ebtors $ot. &9;' "vg. eb tors ebtors ebtors $urno ver

><<@?<<. =< , ><<@?<<. =<

@>A:C>=.:< , @>A:C>=.:<

A<C=@=B.;? , A<C=@=B.;?

@CAC;@=.@B , @CAC;@=.@B

::=>@C<. :; :=B;<C;. B? ;>=?B?>. ; :;A=B=;. @ :.3 D@

:=B;<C;.B? :A?;;<<.>> <:?=@;>.@< :>C;<:;.?: > :.13 DC

:A?;;<<.>> :>C<?>=.:; <<A@B?A.@A :@??B=<.?<> :.: D1

:>C<?>=.:; :>;>C;?.== <::CA?;.>@ :>>C?C:.;? :.5 D

7atio% &in times' A<e,age 8o--e8'&on Pe,&od; (&n day0!

xxxvi

DEBTORS TURNOVER RATIO

4.6 4.5 4.4 4.3 4.2 4.1 4 3.9 Year RATIOS4.2 Year 4.13 Year 4.4 Year 4.5

RATIO S

FI)*RE 2

C.1.5.1 INTERPRETATION 1. $here is a low debtors turnover ratio, which implies inefficient management of debtors9sales.

xxxvii 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

C.1.@ C,ed&'o,0 T#,no<e, Ra'&o Ta$-e C.@

xxxviii

PARTIC*LA RS Ne' C,ed&' +#,8(a0e0; /urchases &,' 7eturns !et credit purchases A<e,age 8,ed&'o,0; Opening Creditors &M' Closing Creditors $ot. Creditors &9;' "vg. Creditors Creditors $urnover 7atio% &in times' A<e,age +ay%en' +e,&od; (&n day0!

=?C?:>=.@ < , =?C?:>=.@ <

>=CB@@:.B = , >=CB@@:.B =

@@:>;=@.<< , @@:>;=@.<<

@@?;A;C.@B , @@?;A;C.@B

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

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

:=B:<@B.>? :=A?BB?.CB ;?AC<@C.=?

:=A?BB?.CB :<?:A<;.;= ;?>CA=:.:=

:.3

:.3

:.@

:.C

D5

DC

CE

CD

xxxix

CREDITORS TURNOVER RATIO

4.8 4.6 4.4 4.2 4 3.8 Year RATIOS4.3 Year 4.2 Year 4.6 Year 4.7 RATIO S

FI)*RE 2I

C.1.@.1 INTERPRETATION; =

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.

x&

$. 3ower the ratio higher the li-uidity position, therefore in ;BBB G ;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; G ;BB< are good signs for the firm as the paid their credit within the credit period.

C.1.C 7o,9&ng 8a+&'a- T#,no<e, Ra'&o Ta$-e C.C PARTIC*LA RS Co0' o. Sa-e0; Sales ><<@?<<. =< @>A:C>=. :< A<C=@=B. ;? @CAC;@=.@ B 3 3 1 3 3 3 3

x&i

Cost of sales !et Dorking Capital% Current "ssets &"' Current 3iabilities &0' !et D.C% RC." J C.3S 7o,9&ng Ca+&'aT#,no<e, Ra'&o; (&n '&%e0!

><<@?<<. =<

@>A:C>=. :<

A<C=@=B.;?

@CAC;@=.@B

:C=C@<>. B; :<==@A>. B<

:CCA<C;.; :@@B=:C.? C

:?@><<;.BA :>BC=AB.C

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

@B=C>C.C C D.D

<<@CA;.<: 1E.5

<>>?@:.:A 3 .C

??<@=B.>; C.D

x&ii

WORKING CAPITAL TURNOVER RATIO 25 20 15 RATI OS 10 5 0 RATIOS Year 2000 8.8 Year 2001 19.5 Year 2002 20.7 Year 2003 7.8

FI)*RE 2II

C.1.C.1 INTERPRETATION;

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.

x&iii

$. Sales were increasing till ;BB; and have decreased in ;BB<. #. Dorking capital ratio was increasing till ;BB; and suddenly has fallen to A.?T, which has showed their inefficient management.

A.; )8!

)3OD "!"36S*S Co%+#'a'&on o. F#nd0 F-o1 S'a'e%en' .o, '(e yea, end&ng 3 1 S8(ed#-e o. C(ange0 &n 7o,9&ng Ca+&'a.o, '(e yea, end&ng *ncreas e 3 1 D.C (R0! i ecreas n e D.C (R0! i n

Pa,'&8#a,0

C#,,en'

A00e'0; Cash in hand ;>>@@.C = :;B?>.; ; , :<=?:.A;

x&iv r e C a O s e $o ta i l n C. D " o &" r ' k i n C g

C O a p i $ t a Dl o r k i n g C a p i t a l &C. "J C. 3' ! e t e c

, :=B;<C;.B ? ==@@A@ A>BBB :C=C@<>.B ;

=; :A?;

:; AA

:CCA

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

:=B:

;B;> >@

:@@B

@B=C>C.CC

<<@C

;@AC @B=C>C.CC

@B=C

Ta$-e C.D

T a $ e C . E

Ca-8#-a'&on o. F#nd0 F,o% O+e,a'&on

Closing 0alance o "dd% !on,fund an ?

eprec

x&v $otal &"' 3ess% !on,fund or !on,operating incomes% Opening 0alance of /G3 a9c , &A?A=A.>?' &A?A=A.>?' ::A>B.A=

$otal &0'

)unds )rom Operations R",0S Ta$-e C.1 F#nd0 F-o1 S'a'e%en' )or the year ending <:,<,;BB: So#,8e0 *ncrease in capital )unds from operations !et ecrease *n Dorking Capital <?:=BC. =; A%o#n' R0. :BBBBB ::A>B.A= ;@AC?A. @? A++-&8a'&o n $a1 paid /urchase of )i1ed "ssets !on,$rading payments 7epayment of loan cr.

A%o#n' R0. :?< <<>BA A@A:C.=; ;A:BBB <?:=BC.= ;

C.3.1 INTERPRETATION% , $he statement of working capital reveals a net decrease in working capital of 7s. ;@AC??. $he statement of application of funds while confirming the decrease in working capital discloses that it is due to purchase of fi1ed assets which was 7s.<<>BA. Hence working capital has been used to buy fi1ed assets, which may lead to working capital shortage and difficulties in paying current liabilities in the near future. Co%+#'a'&on o. F#nd0 F-o1 S'a'e%en' .o, '(e yea, end&ng 3 3 Ta$-e C.11

S8(ed#-e o. C(ange0 &n 7o,9&ng Ca+&'a.o, '(e yea, end&ng *ncreas e 3 3 D.C (R 0! i ecreas n e D.C (R0 ! i n

Pa,'&8#a,0

x&vi c r C e C a O s e $o ta i l n C. D " o &" r ' k i n C g

C O a p i $ t a Dl o r k i n g C a p i t a l &C. "J C. 3' ! e t * n

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

>;C C=: :>C<

:< AA

:?@> :CCA<C;.;

:=B:<@B.> ? ;B;>:C.<: >@>=B :@@B=:C.? C

:=A?

<:

:>BC

<<@CA;.<: :????.? @ <>>?@:.:A

<>>?

<>>?

Closing 0alance o "dd% !on,fund an ?

eprec

x&vii $otal &"' 3ess% !on,fund or !on,operating incomes% Opening 0alance of /G3 a9c , &?<=A@.<;' &?<=A@.<;' :>?><.@=

$otal &0'

)unds )rom Operations R",0S $able A.:< F#nd0 F-o1 S'a'e%en' )or the year ending <:,<,;BB; So#,8e0 )unds from operations 7aising of loan *ncrease in loan cr A%o#n' R0. :>?><.@= :::B= ;>;BB A++-&8a'&o n $a1 paid /urchase of )i1ed "ssets !et *ncrease *n Dorking Capital

A%o#n' R0. ?:= <;=>=.A? :????.?@

>;:>A.@=

>;:>A.@=

C.3.3 INTERPRETATION% , $he statement of working capital reveals a net increase in working capital of 7s. :????.?@. $he statement of application of funds while confirming the increase in working capital also discloses the purchase of fi1ed assets, which was 7s.<;=>>. Hence working capital has been used to buy fi1ed assets, rising of loan etc. that may lead to working capital shortage and difficulties in paying current liabilities in the near future.

Computation of )unds )low Statement for the year ending ;BB< Ta$-e C.1: S8(ed#-e o. C(ange0 &n 7o,9&ng Ca+&'a-

Pa,'&8#a,0

.o, '(e yea, end&ng *ncreas e 3 3 D.C (R 0!

i ecreas n e D.C (R0 !

i n

x&viii

y Ce #b ,t ,o er ns ' S At 0o 0c ek 'O 0t ; h Ce ar s hc u i r nr e hn at n da s Cs ae st hs a t b a n k S u n d r $ o t a l C . " & " '

C ur C re u nt r r lia e b. n t $o 3 ta i l a C. b3 i &0 l ' i t D i o e r s k % i n S g u n C d a p r i y t a c l r & e C d . " i t J o C r . s 3 ' O ! t e h t e r * n

cr e a s e in D o r k i n g C a p it a l

>;C<?.? ;

A>=?

C=:C.:< :>C<?>=.: ; :<;:;B AABBB :?@><<;.B A

=;< :>;> = @;> AAB

;<B= @

:=A?BB?.C B <:=@; :>BC=AB.C B

:<?: = <C:

:=;B =

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

??<@

??<@

Ta $e C. 15

Ca-8#-a'&on o. F#nd0 F,o% O+e,a'&on

Closing 0alance of "dd% !on,fund and ?

epreci

x&ix $otal &"' 3ess% !on,fund or !on,operating incomes% Opening 0alance of /G3 a9c , &C;A<?.C@' &C;A<?.C@' :?A=B.>:

$otal &0'

)unds )rom Operations R",0S Ta$-e C.1@ F#nd0 F-o1 S'a'e%en' )or the year ending <:,<,;BB< So#,8e0 Sale of )i1ed "ssets 7aising of long term loan )unds from operations A%o#n' R0. :=B=A =CAA:;. ?= :?A=B.>: A++-&8a'&o n $a1 paid !et *ncrease *n Dorking Capital

A%o#n' R0. ;A;: >;AAAC.< >

><B>BB. <>

><B>BB.< >

C.3.3 INTERPRETATION% , $he statement of working capital reveals a net increase in working capital of 7s. >;AAAC.<>@. $he statement of application of funds while confirming the increase in working capital also discloses the sale of fi1ed assets, which was 7s.:=B=A. Hence working capital has been gained from sale fi1ed assets, which was used for rising of loan, which may lead to working capital surpluses paying current liabilities in the near future. A.< C"SH )3OD "!"36S*S Co%+#'a'&on o. Ca0( F-o1 S'a'e%en' .o, '(e yea, end&ng 3 1 Ta$-e C.1C

& Ca0( F-o1 S'a'e%en' )or the year ending <:st 4arch ;BB: A%o# Pa,'&8#-a,0 n' R0. Ca0( .-o1 .,o% o+e,a'&ng a8'&<&'&e0 !et /rofit before ta1 =A;?.A= "djustments for non,cash G operating items% "dd% , !on,cash G operating e1penses AB;; ? epreciation , 3ess% , !on,cash G operating incomes Operating profit before Dorking Capital charges "djustments for changes in current assets G liabilities% "dd% , *ncrease in liabilities G ecrease in assets ? Stocks 3ess% , assets ? Creditors ecrease in liabilities G increase in ? ? ebtors G other C." Other C.3

A%o# n' R0.

::A>B.A=

<;:B;@ :>?C<<.B: &<?:?=:.=A ' &;C:C@' ?B@A;.;? &:?<' ?B=?C.; ?

Cash used in operation before ta1 3ess% , *ncome ta1 Ne' 8a0( #0ed &n o+e,a'&ng a8'&<&'&e0 Ca0( .-o1 .,o% In<e0'&ng a8'&<&'&e0 /urchase of fi1ed assets Ne' 8a0( #0ed &n &n<e0'&ng a8'&<&'&e0 Ca0( .-o10 .,o% F&nan8&ng a8'&<&'&e0 7aising capital 7epayment of loan creditors.

&<<>BA' &<<>BA'

:BBBBB &;A:BBB' &:A:BBB

Ne' 8a0( #0ed &n .&nan8&ng a8'&<&'&e0 !et *ncrease in cash G cash e-uivalents Cash G bank balance in the beginning of the period

&:;=B:A.A; ' CB>>.=? &::=C@;.;= '

Cash G bank balance in the end of the period

C.3.1 INTERPRETATION% , 1. Cash form operating activities a re 7s.?B=?C.;? and cash from investing activities is 7s. &<<>BA'.

&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 capital invested. #. Overall cash and bank balance at the end showed a negative balance of 7s. &::=C@;.=;'

Co%+#'a'&on o. Ca0( F-o1 S'a'e%en' .o, '(e yea, end&ng 3 3 Ta$-e A.:? &ii Ca0( F-o1 S'a'e%en' )or the year ending <:st 4arch ;BB; A%o# Pa,'&8#-a,0 n' R0. Ca0( .-o1 .,o% o+e,a'&ng a8'&<&'&e0

A%o# n' R0.

!et /rofit before ta1 "djustments for non,cash G operating items% "dd% , !on,cash G operating e1penses ? epreciation 3ess% , !on,cash G operating incomes Operating profit before Dorking Capital charges "djustments for changes in current assets G liabilities% "dd% , *ncrease in liabilities G ecrease in assets ebtors ? 3ess% , assets ? Creditors ecrease in liabilities G increase in ? ? Other C.3 Stock

C;@;.@= @>C: ,

:>?><.@=

:??<AC.=< A@@=?.<;

&;>BA?' &@=AB' ;=C<<<.<C &?:=' ;=?>:C.<C

Cash used in operation before ta1 3ess% , *ncome ta1 Ne' 8a0( #0ed &n o+e,a'&ng a8'&<&'&e0 Ca0( .-o1 .,o% In<e0'&ng a8'&<&'&e0 /urchase of fi1ed assets Ne' 8a0( #0ed &n &n<e0'&ng a8'&<&'&e0 Ca0( .-o10 .,o% F&nan8&ng a8'&<&'&e0 7aising of long,term loan 7aising of loan creditors. Ne' 8a0( #0ed &n .&nan8&ng a8'&<&'&e0 !et *ncrease in cash G cash e-uivalents Cash G bank balance in the beginning of the period Cash G bank balance in the end of the period

&<;=>=.A?' &<;=>=.A?'

:::B= ;>;BB <@<B= ;>;<@?.@: &:CBB:B.@ @' @;<>A.C>

C.3.3 INTERPRETATION% ,

&iii 1. Cash form operating activities are 7s.;=?>:C.<C and cash from investing activities is 7s. &<;=>=.A?'. 2. Cash from investing activities shows a negative balance due to amount spent on purchase of fi1ed assets. $. Cash from financing activities is 7s.<@<B= which due to raising of loan creditors and long,term loans. #. Overall cash and bank balance at the end showed a positive balance of 7s. @;<>A.C> 5. Cash has been positively used in operating and financing activities.

Co%+#'a'&on o. Ca0( F-o1 S'a'e%en' .o, '(e yea, end&ng 3 3 $able A.:C &iv Ca0( F-o1 S'a'e%en' )or the year ending <:st 4arch ;BB< A%o# Pa,'&8#-a,0 n'

A%o#n'

R0. Ca0( .-o1 .,o% o+e,a'&ng a8'&<&'&e0 !et /rofit before ta1 "djustments for non,cash G operating items% "dd% , !on,cash G operating e1penses ? epreciation 3ess% , !on,cash G operating incomes Operating profit before Dorking Capital charges "djustments for changes in current assets G liabilities% "dd% , *ncrease in liabilities G ecrease in assets ? ebtors 3ess% , assets ? Other C.3 ecrease in liabilities G increase in ? ? Sundry Creditors. Stock :==:<.>: =<;A ,

R0.

:?A=B.>:

@AC;>.@? A@>B

&C@;A@.@@' &=C<><B' &=C>=CB.=A ' &;A;:' &=C?;::.= A'

Cash used in operation before ta1 3ess% , *ncome ta1 Ne' 8a0( #0ed &n o+e,a'&ng a8'&<&'&e0 Ca0( .-o1 .,o% In<e0'&ng a8'&<&'&e0 Sale of fi1ed assets Ne' 8a0( #0ed &n &n<e0'&ng a8'&<&'&e0 Ca0( .-o10 .,o% F&nan8&ng a8'&<&'&e0 7aising of long,term loan 7aising of loan creditors. Ne' 8a0( #0ed &n .&nan8&ng a8'&<&'&e0 !et *ncrease in cash G cash e-uivalents Cash G bank balance in the beginning of the period Cash G bank balance in the end of the period

:=B=A :=B=A

=?BC>;.?? :C?;= >BBAA@.? ? :@@:;.=: @;<>A.C> A?CAB.<@

C.3.3 INTERPRETATION% ,

&v 1. Cash form operating activities are 7s. &=C?;::.=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 long,term loans. #. Overall cash and bank balance at the end showed a positive balance of 7s. A?CAB.<@ 5. Cash has been positively used in investing and financing activities.

C.: COMMON=SI>E STATEMENTS Ta$-e C.3 Co%%on = 0&Fe Ba-an8e 0(ee' .o, '(e yea, end&ng 310' Ma, 3 G3 3 3 "mount &7s' /ercentage $otal 1 "mount &7s'/ercentage $otal 1

ASSETS C#,,en' A00e'0;

&vi ;>>@@. C= , :=B;<C;. B? ==@@A@ A>BBB :C=C@<>. B; ;AB;B :CA@@>>. B; :;B?>.; ; =;<.=< :A?;;<<.>> :;>@>B AABBB :CCA<C;.; =A;?? ;B==@?B.;

Cash in hand Cash at bank Sundry ebtors Stock Other current assets $otal C" &"' F&Hed A00e'0; )i1ed "ssets &net'&0' $otal "ssets &"M0' LIABILITIES G CAPITA L C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other Current liab. $otal C.3 &"' 3oan Creditors &0'

:.< , AB.C> ;;.@ <.? C?.@ :.= :BB

B.@ B.B; ?A.; @.; <.? CA.A ;.< :BB

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

@;.C B.?= =.<= @?.B?

:=B:<@B.>? ;B;>:C.<: >@>=B :@@B=:C.?C

@?.> C.C ;.? ?:.;

Capital Current a9c &C ' 3iabil $otal ties &"M0M C'

:BBBBB :;BCAC.C C

>.B> @.:;

;BBBBB ==;@B.<:

C.? ;.;

C.:.1 INTERPRETATION 1. Comparing both the years efficient management of working capital is seen in ;BBB. 2. Dorking capital for ;BBB G ;BB: are <B.>T, :@.>T respectively, which indicate a good sign in ;BBB.

&vii $. Current assets constitute nearly C?.AT, CA.AT in ;BBB G ;BB:, which seems to have ade-uate cash to meet the obligations. #. OutsiderFs funds constitute nearly @?.B?T, ?:.;T in ;BBB G ;BB:. 5. 3oan creditors have been paid off during ;BB:, which implies fewer 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 G bank is more, which indicate immediate li-uid of funds and also capital has been raised by 7s.:BBBBB.

Ta$-e C.31 Co%%on = 0&Fe Ba-an8e 0(ee' .o, '(e yea, end&ng 31 Ma, 3 G3 3 1 "mount &7s' ASSETS C#,,en' A00e'0; Cash in hand Cash at bank /ercentage $otal "mount &7s' 3 3 3 /ercentage $otal 1

:;B?>.;; =;<.=<

B.@ B.B;

>;C<?.?; C=:C.:<

B.@?= B.=C?

Sundry ebtors Stock Other current assets

:A?;;<<. >> :;>@>B AABBB

?A.; @.; <.?

:>C<?>=. :; :<;:;B AABBB

?=.;A @.C? =.BA

&viii :CCA<C;. ; =A;?? ;B==@?B. ;

$otal C" &"' F&Hed A00e'0; )i1ed "ssets &net'&0' $otal "ssets &"M0'

CA.A ;.< :BB

:?@><<;.BA @>?@= :C<::C@.BA

C@.>B; <.=? :BB

LIABILITIES G CAPITAL C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other Current liab. $otal C.3 &"'

:=B:<@B. >? ;B;>:C.< : >@>=B :@@B=:C. ?C , :=BBBB

@?.> C.C ;.? ?:.; , @.C

:=A?BB?.CB , <:=@; :>BC=AB.CB :::B= :@>;BB

A@.>< , :.@< A?.:@ B.>A= ?.>>

3oan,*C*C* 0ank 3oan Creditors $otal 3iabilties &0' Capital Current a9c &C ' $otal &"M0MC'

:=BBBB

@.C

:A@<B= =>=;:.: A :C<::C@ .BA C.:.3

C.:<

==;@B.<: ;B==@?B. ;

;.; :BB

;.<> :BB

INTERPRETATION 1. Comparing both the years efficient management of working capital is seen in ;BB;. 2. Dorking capital for ;BB: G ;BB; are :?.<T, :@.>T respectively, which indicate a good sign in ;BB;.

$. Current assets constitute nearly CA.AT, C@.>T in ;BB: G ;BB;, which seems to have ade-uate cash to meet the obligations. #. OutsiderFs funds constitute nearly ?:.;T, A?.;T in ;BB: G ;BB;.

&ix

5. 3ong,term 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 G bank is more, which indicate immediate li-uid of funds.

Ta$-e C.33 Co%%on = 0&Fe Ba-an8e 0(ee' .o, '(e yea, end&ng 31 Ma, 3 G3 3 3 "mount &7s' ASSETS C#,,en' A00e'0; Cash in hand >;C<?.? ; B.@?= A>=?;.? C <.;B /ercentage $otal "mount &7s' 3 3 3 /ercentage $otal 3

Cash at bank Sundry ebtors Stock Other current assets

C=:C.:< :>C<?>= .:; :<;:;B AABBB

B.=C? ?=.;A @.C? =.BA

=;<.=< :>;>C;?. == @;>@>B AABBB

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

&x

:?@><<;. $ot BA al C" &"' @>?@= F :C<::C@. BA

&C' $

:=A?BB?.C B <:=@; :>BC=AB.C B :::B= :@>;BB :A@<B= ;BBBBB =>=;:.:A :C<::C@.B A C . : . 3 I N T E R P R E T A T I O N 1. Co m p ar in g b ot

A :

B ?

h t h e y e ar s ef fi ci e n t m a n a g e m e n t of w or ki n g c a pi ta l is s e e n in ; B B <. 2. Do rk

in g c a pi ta l fo r ; B B ; G ; B B < ar e : ?. < > T , < A. > T re

s p e ct iv el y, w hi c h in di c at e a g o o d si g n in ; B B <. $. Cu

rr e n t a s s et s c o n st it u te n e ar ly C @. > B ; T , C A. A C

? T in ; B B ; G ; B B <, w hi c h s e e m s to h a v e a d e u

at e c a s h to m e et t h e o bl ig at io n s.

&xi #. OutsiderFs funds constitute nearly A?.:@T, @B.<BT in ;BB; G ;BB<. 5. 3oan creditors and long,term loans have been raised off during ;BB<, which implies higher dues to others. %. )i1ed assets constitute only a small part in both the years. '. Sundry creditors have been reduced and stock has been increased which is a good sign and also decreases outsiderFs dues. (. Cash in hand G bank is more, which indicate immediate li-uid of funds and also capital has not affected.

Ta$-e C.33

Co%%on=S&Fe In8o%e 0'a'e%en' )or the year ending ;BBB and ;BB: 3 3 1 R0. I R0. ><<@?< <.=< =A;=:@ >.@< @:;@@A. ?B

!et Sales 3ess% Cost of goods sold ),o00 P,o.&' (A! O+e,a'&ng EH+en0e0% Office G "dmn e1p% 7ent

:BB ??.>;

@>A:C>=.:< >?:AC@=.B=

:BB ??.><

::.=?

A><CCB.BC

::.=A

=?BBB

B.CB

><BBB

B.?:

&xii Salaries /ostage G $elegram 5lectricity Other e1penses. $otal office e1p. &:' Selling 51pense% "dvertisement Sales Commission Sales /romotion e1p Other e1penses. $otal Selling e1p. &;' To'a- O+e,a'&ng EH+. (B! R:M;S Operating /rofit R",0S 3ess% Other e1penses !et /rofit before ta1 3ess% income ta1 Ne' +,o.&' &after ta1' :??B>B ;BCB <<;C ;B;<:@.A> ==<A?>.A> =B<C@.AB :@B;> <:AB <B>=;.AA CB:<=.=A ><<C;B.;; A?A=A.>? = A?A=A.>? <C:< A=?<=.>? <.>; B.B= B.B@ <.AC ?.<; B.A@ B.<B B.B@ B.>A :.@C :B :.=? , :.=? B.BA :.=B ;BC>BB :@BC.>B <?C= ;@?;B;.CA ><@;B@.=A <@<>A =C:>A :=;A =A<@@.<B :<=<BA.< @AB>:<.AA ?<=A@.<; = ?<=A@.<; =BC@ AC<?B.<; <.:C B.B; B.B@ =.B? ?.:@ B.>> B.A> B.B; B.A; ;.B= :B.;B :.;A , :.;A B.B@ :.;:

C.:.: INTERPRETATION; 1. !early ??.>;T, ??.><T is spent on cost of goods sold which results in ::.=?T, ::.=AT in gross profit for the year ;BBB, ;BB:. 2. Operating e1penses have increased to :B.;T but operating profit has been reduced to :.;AT from :.=?T. $. !et profit after ta1 has been reduced to :.;:T from :.=BT.

#. Selling e1penses has increased to ;.B=T from :.@CT. 5. Office e1penses has reduced to ?.:@T from ?.<;T.

&xiii

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

Ta$-e C.3: Co%%on=S&Fe In8o%e 0'a'e%en' )or the year ending ;BB: and ;BB; 3 3 1 3 R R0 0 . I . I

&xiv

!et Sales 3ess% Cost of goods sold ),o00 P,o.&' (A! O+e,a'&ng EH+en0e0% Office G "dmn e1p% 7ent Salaries /ostage G $elegram 5lectricity Other e1penses. $otal office e1p. &:' Selling 51pense% "dvertisement Sales Commission Sales /romotion e1p Other e1penses. $otal Selling e1p. &;' To'a- O+e,a'&ng EH+. (B! R:M;S Operating /rofit R",0S 3ess% Other e1penses !et /rofit before ta1 3ess% income ta1 Ne' +,o.&' &after ta1'

@>A:C>=.: < >?:AC@=.B = A><CCB.BC

:BB ??.>< ::.=A

A<C=@=B.;? @@<=CAA.?< A>C@@;.=>

:BB ?C.A :B.;

><BBB ;BC>BB :@BC.>B <?C= ;@?;B;.CA ><@;B@.=A

B.?: <.:C B.B; B.B@ =.B? ?.:@

>=BBB ;A>;>B ;=:B =CBA ;B;<:@.A> >@:<B=.<<

B.A< <.A; B.B< B.BA ;.A= A.>C

<@<>A =C:>A :=;A =A<@@.<B :<=<BA.< @AB>:<.AA ?<=A@.<; = ?<=A@.<; =BC@ AC<?B.<;

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

<=;=> ?B=B :;=A>.@B >@B>C.>B :::=:C.:@ @A;A;<.=C C;A<?.C@ , C;A<?.C@ =C:B ?A?;?.C@

B.=@ B.:: B.:A B.A@ :.>: C.:B :.;> , :.;> B.BA :.:C

C.:.5 INTERPRETATION

&xv 1. !early ??.><T, ?C.AT is spent on cost of goods sold which results in ::.=AT, :B.;T in gross profit for the year ;BB:, ;BB;. 2. Operating e1penses have decreased to C.:BT and operating profit has been reduced to :.;AT from :.;>T. $. !et profit after ta1 has been reduced to :.:CT from :.;:T. #. Selling e1penses has decreased to :.>:T from ;.B=T. 5. Office e1penses has reduced to A.>CT from ?.:@T. %. Comparing both the year ;BB: was good and satisfactory.

Ta$-e C.35 Co%%on=S&Fe In8o%e 0'a'e%en' )or the year ending ;BB; and ;BB< Pa,'&8#-a,0 R0. A<C=@= B.;? @@<=CA A.?< 3 3 I :BB.BB ?C.A< @;<?C ==.@ A=B<; B R0. @CAC; @=.@ 3 3 I :BB.BB ?C.<C

!et Sales 3ess% Cost of goods s o l d ),o00 P,o.&' (A! O+e,a'&ng EH+en0e0% Office G "dmn e1p% 7ent

A>C@@;. =>

:B.;A

:B.@:

>=BBB

B.A<

>@BBB

B.?B

Salaries /ostage G $elegram 5lectricity Other e1penses. $otal office e1p. &:' Selling 51pense%

;A>;>B ;=:B =CBA ;B;<:@. A> >@:<B=. <<

<.A; B.B< B.BA ;.A=

;?@>B B :<>C >?B@ :AB>B A.= >;B:A ;.=

=.:: B.B; B.B? ;.==

A.>C

A.=>

&xv i "dvertisement Sales Commission Sales /romotion e1p Other e1penses. $otal Selling e1p. &;' To'a- O+e,a'&ng EH+. (B! R:M;S Operating /rofit R",0S 3 e ss Other % e1penses !et /rofit before ta1 3 e ss % income ta1 Ne' +,o.&' &after ta1' <=;=> ?B=B :;=A>.@ >@B>C.> :::=:C.:@ @A;A;<.=C C;A<?.C@ :.;> B.=@ B.:: B.:A B.A@ :.>: C.:B @<<:@A.>< :BA:>;.=A :.>= ;<:@B ??AB :B;<B ABA<>.:< ::;CC>.:< B.<< B.:< B.:> :.B: :.@; C.BA

= C;A<?.C@

, :.;>

, :BA:>;.=A

, :.>=

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

B.BA :.:C

;:?C :B=C@<.=A

B.B< :.>B

C.:.@ INTERPRETATION 1. !early ?C.A<T, ?C.<CT is spent on cost of goods sold which results in :B.;AT, :B.@: in gross profit for the year ;BB;, ;BB<.

2. Operating e1penses have decreased to C.BAT but operating profit has been increased to :.>=T from :.;>T. $. !et profit after ta1 has been increased to :.>BT from :.:CT. #. Selling e1penses has increased to :.@;T from :.>:T. 5. Office e1penses has reduced to A.=>T from A.>CT. %. Comparing both the year ;BB< was good and satisfactory.

&xvii

C.5 COMPARATI2E STATEMENTS Co%+a,a'&<e Ba-an8e S(ee' 6ear ending *ncrease9 <: 4arch ecrease 3 3 1 &"mounts'

Ta$-e C.3@ *ncrease9 ecrease &/ercentage s' &xviii

ASSETS C#,,en' A00e'0; Cash on hand Cash at bank Sundry ebtors Stock Other current assets $otal C" &"' F&Hed A00e'0; )urniture G fi1tures Other )i1ed "ssets $otal )i1ed "ssets &0' $otal "ssets &"M0' :CA@@>>. B; ;B==@?B.; @?B;>.:? <.== ;>>@@.C = , :=B;<C;. B? ==@@A@ A>BBB :C=C@<>. B; :;B?>.;; =;<.=< :A?;;<<.>> :;>@>B AABBB :CCA<C;.; &:<=?:.A;' =;<.=< <AC?=:.=A &<;:B;@' ;BBB =AA>A.:? &>;.A' =;<.=< ;A.: &A:.C' ;.A ;.=>

:C:B; AC:? ;AB;B

:AC:@ ;C<A; =A;??

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

&@.;' ;AB.C A>.B:

LIABILITIES G CAPITAL C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other Current liab. $otal C.3 &"' 3oan Creditors &0' Capital Current a9c :;=;=;A. >A :@>::.= @ ?>A<@ :<==@A>. B< =::BBB :BBBBB :;BCAC. CC :=B:<@B.>? ;B;>:C.<: >@>=B :>?C<<.B: :?@BBA.?> &;C:C@' :;.? ::;@.> &<=.:'

:@@B=:C.?C :=BBBB ;BBBBB ==;@B.<:

<:>A==.?@ &;A:BBB' :BBBBB &A@A:C.@?'

;<.> &@>.C=' :BB &@<.=;'

&C :CA@@>>. ' B; $otal 3iabilities &"M0MC'

;B==@?B.;

@?B;>.:?

<.==

C.5.1 INTERPRETATION 1. Current assets have been increased by ;.=>T and liabilities by ;<.>T but working capital is more i.e. current asset is more than current liabilities.

&xix

2. )i1ed assets has been increased by nearly A>T and overall assets have been increased by <.==T $. Capital has been increased by :BBT and loan creditors have been decreased 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%+a,a'&<e Ba-an8e S(ee' 6ear ending <: 4arch 3 1 3 3 *ncrease9 ecrease &"mounts' *ncrease9 ecrease &/ercentage s'

&xx ASSETS C#,,en' A00e'0; Cash on hand Cash at bank Sundry ebtors Stock Other current assets $otal C" &"' F&Hed A00e'0; )urniture G fi1tures Other )i1ed "ssets $otal )i1ed "ssets &0' $otal "ssets &"M0' ;B==@?B.; :C<::C@.B A &::<=?=.:< ' :;B?>.; ; =;<.=< :A?;;<<.> > :;>@>B AABBB :CCA<C;.; >;C<?.? ; C=:C.:< :>C<?>=.: ; :<;:;B AABBB :?@><<;.B A =B?><.@ ?CC>.A &:??<AC.=< ' @=AB , &:<;B@B.:< ' <<?.: ;:;=.> &:B.@' >.; , &@.@'

:AC:@ ;C<A; =A;??

:@:;= =CA=B @>?@=

&:AC;' ;B< @? :?> A@

&:B' @C.< <C.< &>.@'

LIABILITIES G CAPITAL C#,,en' L&a$&-&'&e0; Sundry creditors 0ank o9d Other Current liab. $otal C.3 &"'

:=A?BB?.C B :=B:<@B.> ? ;B;>:C.<: >@>=B :@@B=:C.? C :>BC=AB.C B , <:=@; A@@=?.<; &;B;>:C.<: ' &;>BA?' &C.:' :::B= :@>;BB >.> &:BB' &==. ='

, 3oan,*C*C* 0ank 3oan Creditors :=BBBB

:::B= :::B= :?

:A@<B=

$otal 3iabilties &0'

:=BBBB ;BBBBB =>=;:.: A

;>;BB

;@

Capital Current a9c &C ' $otal &"M0MC'

;BBBBB ==;@B.< :

<@<B=

, ;.@

, :C<::C@.B A ;B==@?B.; &::<=?=.:< ' ::@B.?@

&>.@'

&xxi C.5.3 INTERPRETATION 1. Current assets have been decreased by @.@T and liabilities by C.:T but working capital is more i.e. current asset is more than current liabilities. 2. )i1ed assets has been increased by nearly <C.<T and overall assets have been decreased by >.@T $. Capital has not changed but loan has been raised by 7s.:::B= and loan creditors have been increased by :?T #. Sundry creditors have been increased by >.>T but bank o9d has been paid off and other current liabilities have been decreased which indicates good management of funds flow. 5. Overall financial position of the company is satisfactory. Ta$-e C.3D Co%+a,a'&<e Ba-an8e S(ee' 6ear ending <: 4arch 3 3 3 3 *ncrease9 ecrease &"mounts' *ncrease9 ecrease &/ercentage s'

&xxii

d r ASS y ETS Ce #b ,t ,o er ns ' S At 0o 0c ek 'O 0th ; er Cc aur s re hnt as ose nts h a n d $ o t a l C C a " s & h " ' a t F& H be ad nA k0 0 Se' u0; n)

u r" nss i et ts u &0 r ' e G$o ta fl i" 1ss t et us r &" eM s 0' O tL hI eA rB I ) L i I 1 T e dI E "S s sG e tC sA P $I oT tA aL l C )# i, 1, ee dn

'b . L & $o ata $l C & ur re & nt ' & lia ebi 0lit ; ie Ss u&" n' d r 3o ya n, c *C r *C e* d0 ia tn ok r 3o sa n OCr te hdi eto r rs
C$o uta rl r 3i ea nbi t lti es l &0 i' a

C a p i t >;C<?.? ; a l C=:C.:< :>C<?>=. :; C :<;:;B u AABBB r :?@><<;. r BA e n t :@:;= a =CA=B 9 c &C'

A>=?

=;< :>;>C = @;> AAB ;<B== @

:=>

<A<

>:?

$o :C<::C@. ta BA l &" M 0 M C'

;<>@< @

:=A?BB?. CB <:=@; :>BC=AB. CB :::B= :@>;BB :A@<B= ;BBBBB =>=;:.: A

:<?:A = <C::

=C;B> :?>B

@AAB?

;BBB >?<A@

:C<::C@. BA

;<>@< @

&xxiii

C.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. current asset is more than current liabilities. 2. )i1ed assets has been decreased by nearly ;:.<<T and overall assets have been increased by ;;.B:T $. Capital has not been changed but loan has been increased by nearly =BBT and loan creditors have been increased by :;T #. Sundry creditors have been decreased by @.>:T and current liabilities increased by nearly ;=.<T, which indicates poor management of funds flow. 5. 0ank o9d has been totally paid off last year but this year long, term loan have been raised nearly by =BBT, which indicates more dues to the firm. %. Overall financial position of the company is not satisfactory.

Ta$-e C.3E &xxi v Co%+a,a'&<e In8o%e S'a'e%en' 6ear ending 4arch /articulars 3 !et Sales 3ess% Cost of goods sold ),o00 P,o.&' (A! O+e,a'&ng EH+en0e0% Office G "dmn e1p% 7ent Salaries /ostage G $elegram 5lectricity Other e1penses. $otal office e1p. &:' Selling 51pense% "dvertisement Sales Commission Sales /romotion e1p Other e1penses. $otal Selling e1p. &;' To'a- O+e,a'&ng EH+. (B! R:M;S Operating /rofit ><<@?<<.= < =A;=:@>.@ < @:;@@A.?B 3 1 *ncrease9 ecrease &"mounts' :;<>:;B.A :BC<AC?.=: *ncrease9 ecrease &/ercenta ge' ;<.: ;<.;

@>A:C>=.: < >?:AC@=.B = A><CCB.BC

:=:<;;.;C

;<.:

=?BBB :??B>B ;BCB <<;C ;B;<:@.A> ==<A?>.A>

><BBB ;BC>BB :@BC.>B <?C= ;@?;B;.CA ><@;B@.=A

>BBB ;:=>B &=?B.>' >@> @>??@.;; C;=;B.A;

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

=B<C@.AB :@B;> <:AB <B>=;.AA CB:<=.=A

<@<>A =C:>A :=;A =A<@@.<B :<=<BA.<

&=B<C.A' <<:<; &:A=<' :@?;<.>< ==:A;.?<

&:B' ;BA &>>' >> =C.B:

><<C;B.;; A?A=A.>?

@AB>:<.AA ?<=A@.<;

:<@>C<.>> =A;?.A=

;>.@ @.B:

R",0S 3ess% Other e1penses !et /rofit before ta1 3ess% income ta1 Ne' +,o.&' &after ta1'

= A?A=A.>? <C:< A=?<=.>?

= ?<=A@.<; =BC@ AC<?B.<;

, =A;?.A= :?< =>=>.A=

, @.B: =.A @.:

&xxv

C.5.: INTERPRETATION 1. Sales have been increased by ;<.:T and cost of goods by ;<.;T so overall gross profit has been increased by ;<.:T. 2. "lthough operating e1penses have increased by ;>.@T the increase in gross profit is sufficient to compensate for the increase in operating e1penses and hence there has been an overall increase in operational profits by @.B:T. $. $here is an increase in net profit after ta1 amounting to 7s. =>=>.A> i.e. @.:T #. *t may be concluded that there is a sufficient progress in the company and the overall profitability of the company is good. &xxvi Ta$-e C.3 Co%+a,a'&<e In8o%e S'a'e%en' 6ear ending 4arch /articulars 3 !et Sales 3ess% Cost of goods sold ),o00 P,o.&' (A! O+e,a'&ng EH+en0e0% Office G "dmn e1p% 7ent Salaries 1 3 3 *ncrease9 ecrease &"mounts' ?;;@?@.:> ?:AB:<.AC >@A;.<@ *ncrease9 ecrease &/ercenta ge' :;.> := B.A>

@>A:C>=.: < >?:AC@=.B = A><CCB.BC

A<C=@=B.; ? @@<=CAA.? < A>C@@;.=>

><BBB ;BC>BB

>=BBB ;A>;>B

:BBB @>A>B

:.? <:.=

/ostage G $elegram 5lectricity Other e1penses. $otal office e1p. &:' Selling 51pense% "dvertisement Sales Commission Sales /romotion e1p Other e1penses. $otal Selling e1p. &;' To'a- O+e,a'&ng EH+. (B! R:M;S Operating /rofit R",0S 3ess% Other e1penses !et /rofit before ta1 3ess% income ta1 Ne' +,o.&' &after ta1'

:@BC.>B <?C= ;@?;B;.CA ><@;B@.=A <@<>A =C:>A :=;A =A<@@.<B :<=<BA.<

;=:B =CBA ;B;<:@.A> >@:<B=.<< <=;=> ?B=B :;=A>.@B >@B>C.>B :::=:C.:@

?BB.>B :B:< &@>??@.;;' ;>BCA.?@ &;::;' &=:::A' ::B=?.@ ?@C<.; &;;???.:='

=C.A ;@ &;=.@' =.A &>.?' &?<.@' AA=.< :?.= &:A'

@AB>:<.AA ?<=A@.<; = ?<=A@.<; =BC@ AC<?B.<;

@A;A;<.=C C;A<?.C@ , C;A<?.C@ =C:B ?A?;?.C@

;;BC.A; C;@;.@= , C;@;.@= ?:= ?==?.@=

B.<< ::.: , ::.: :C.? :B.@

C.5.5 INTERPRETATION% ,

&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.<<T the increase in gross profit is sufficient to compensate for the increase 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. ?==?.@= i.e. :B.@T #. *t may be concluded that there is a sufficient progress in the company and the overall profitability of the company is good.

Ta$-e C.31

&xxviii

Co%+a,a'&<e In8o%e S'a'e%en' 6ear ending 4arch /articulars 3 !et Sales 3ess% Cost of goods sold ),o00 P,o.&' (A! O+e,a'&ng EH+en0e0% Office G "dmn e1p% 7ent Salaries /ostage G $elegram 5lectricity Other e1penses. $otal office e1p. &:' Selling 51pense% "dvertisement Sales Commission Sales /romotion e1p Other e1penses. $otal Selling e1p. &;' To'a- O+e,a'&ng EH+. (B! R:M;S Operating /rofit R",0S 3ess% Other e1penses !et /rofit before 3 3 3 *ncrease9 ecrease &"mounts' =:><A>.@? <C@B<<.;< :C<=;.=> *ncrease9 ecrease &/ercenta ge' >.@; >.CA ;.>>

A<C=@=B.; ? @@<=CAA.? < A>C@@;.=>

@CAC;@=.@ B @;<?C==.@ B A=B<;B

>=BBB ;A>;>B ;=:B =CBA ;B;<:@.A> >@:<B=.< < <=;=> ?B=B :;=A>.@B >@B>C.>B :::=:C.:@

>@BBB ;?@>BB :<>C >?B@ :AB>BA.= >;B:A;.= ;<:@B ??AB :B;<B ABA<>.:< ::;CC>.:<

;BBB ::;>B &:B>:' ?CC &<:?BC.<>' &=::<:.C<' &::B?>' ?<B &;;=>.@' :=@A>.@< :>A>.CA

<.AB =.BC &=<.@' :?.<; &:>.A;' &A.<<' &<;.<A' :B.<; &:?' ;@.:? :.=:

@A;A;<.=C C;A<?.C@ = C;A<?.C@

@<<:@A.>< :BA:>;.=A = :BA:>;.=A

&<C>>>.C@' :==:<.>: , :==:<.>:

&@' :>.>= , :>.>=

ta1 3ess% income ta1 Ne' +,o.&' &after ta1'

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

;:?C :B=C@<.=A

&;A;:' :A:<=.>:

&>>.=;' :C.>:

C.5.@ INTERPRETATION

&xxix

1. Sales have been increased by >.@;T and cost of goods by >.CAT 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. :C.>:T #. *t may be concluded that there is a sufficient progress in the company and the overall profitability of the company is good.

C.@ TREND ANALYSIS $he trend e-uation is to be found out for analy#ing the trend in which

the current assets of the Company is e1pected to grow by analy#ing the past results. $he $rend e-uation is y K

&xxx

aMb1. Here the E represents the years for which the analysis is done &;BBB, ;BB:, ;BB;, ;BB<'. $he trend HyF values are calculated after determining the HaF and HbF values. " deviation, H1F is assigned for each year keeping the third year of the study period as the base year and subtracting the other years from the base year. )or e1ample, if the base year is ;BB;, the first year deviation is ,; &i.e.' &;BBB,;BB;'. $he y values represent the value of current assets, current liabilities, sales and working capital in the respective years. C.@.1 T,end Ana-y0&0 o. C#,,en' A00e'0 Ta$-e C.33 Yea, K ;BBB ;BB: ;BB; ;BB< De<&a'&o n, H ,; ,: B : C#,,en' A00e'0, y (R0. &n L 0! = : B : ,<?CC;AB.B= ,:CCA<C;.; B ;<B==?=.A@ M H?yN =35E31CC.:D :C=C@<>.B; :CCA<C;.; :?@><<;.BA ;<B==?=.A@ M yND11@D::. 5 HJ H?y

To'a-

M HN =3

M HJN@

Calculation of HbF% b K !N 1Ly,N 1LN y

!N 1O , &N 1' O * * =L&,<>C;:AA.=?'J &,;'L ?::@?==.B> =L@ J &,;' O :?@=CA?.:?

&xxxi ;B $ N E33:D.E

Calculation of HaF% a K &N y 9 !' J bL &N 1 9 !' a K &?::@?==.B>9=' J C<;=?.CL&,;9=' a N 3 C5D35.:5 Dhen EK;BBB &1K,;' 6K ;BA>?<>.=> M C<;=?.CL&, ;' YN 1DDE33C .@5 6K;BA>?<>.=> M C<;=?.C L&, :' 6K :C?;>?@.>> 6K ;BA>?<>.=> M C<;=?.CL&B' 6K ;BA>?<>.=> 6K ;BA>?<>.=> M C<;=?.CL&:' 6K ;:@CB?=.<>

Dhen EK;BB: &1K,:' Dhen EK;BB; &1KB' Dhen EK;BB< &1K:'

$rend /rojections for ne1t two years, Dhen EK;BB= &1K;' 6K ;BA>?<>.=> M C<;=?.CL&;' 6K ;;@;<<<.;> Dhen EK;BB> 6K ;BA>?<>.=> M

&1K<'

C<;=?.CL&<' 6K ;<>>>?;.:>

&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.

&xxxiii

TREND ANALYSIS CURRENT ASSETS

2500000

2000000 AS SE TS CU RR EN T

1500000 TREN D ACTU AL 1000000

500000 0

1999 - 2000 - 2001 - 2002 2000 2001 2002 2003 YEAR

figure viii

C.@.3 T,end Ana-y0&0 .o, '(e C#,,en' L&a$&-&'&e0 &xxxiv Ta$-e C.33 Yea, K ;BBB ;BB: ;BB; ;BB< To'aDe<&a'&o n, H ,; ,: B : M HN =3 C#,,en' L&a$&-&'&e0, y (R0. &n L 0! = : B : M HJN @ ,;@?C<>B.B@ ,:@@B=:C.?C B :=;B?==.;= M H?yN =3E3DE35.C1 :<==@A>.B< :@@B=:C.?C :>BC=AB.C :=;B?==.;= MyN 5E35:1 . @ HJ H?y

Calculation of HbF% b K !N 1Ly,N 1LN y NM HJ = (M H! J * K :> >: :A .; ? ;B $ N CC55.D@: =L&=;C;?C;>.A:'J &,;'L >C<>=:B.B@ =L@ J &,;' O

Calculation of HaF% aK &N y 9 !' J bL &N 1 9 !' aK &>C<>=:B.B@9=' J AA>>.?@=L&,;9=' aN1:DCC3 .:5

&xxxv

Dhen EK;BBB &1K,;' Dhen EK;BB: &1K,:'

6K :=?AA<B.=>OAA>>.?@ =L&,;' 6K :=A;;:?.A; 6K:=?AA<B.=>OAA>> .?@=L&,:' 6K :=ACCA=.>C 6K :=?AA<B.=>OAA>>.?@ =L&B' 6K :=?AA<B.=> 6K:=?AA<B.=>OAA>> .?@= L&:' 6K :=C>=?@.<:

Dhen EK;BB; &1KB' Dhen EK;BB< &1K:'

$rend /rojections for ne1t two years, 6K Dhen EK;BB= :=?AA<B.=>OAA>>.? &1K;' @=L&;' 6K :>B<;=;.:? 6K :=?AA<B.=>OAA>>.?@ =L&<' 6K :>:BCC?.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.

Dhen EK;BB> &1K<'

&xxxvi

TREND ANALYSIS FOR CURRENT LIABILITIES

1800000 1600000 1400000 1200000 1000000 TREN D ACTU AL

800000 600000 400000 200000 0 1999 - 2000 - 2001 - 2002 2000 2001 2002 2003

figure i1

C.@.3 T,end Ana-y0&0 .o, '(e Sa-e0 Ta$-e C.3: &xxxvi i De<&a'&o n, H ,; ,: B : M HN=3

Yea, K ;BBB ;BB: ;BB; ;BB< To'a-

Sa-e0, y (R0. &n L 0! ><<@?<<.=< @>A:C>=.:< A<C=@=B.;? @CAC;@=.@B

HJ = : B :

H?y ,:B@A<@@@.?@ ,@>A:C>=.:< B @CAC;@=.@B M H?yN= 1 3@@35@.3E

M yN3@3D3@E3.:: M HJN@

Calculation of HbF% bK !N 1Ly,N 1LN y !N 1O , &N 1' O K =L&,:B;@@<>@.<C'J&,;'L ;@;?;@C;.== =L@ J &,;' O K ::= CCC >C.<

; ;B $N5C:EEC.E@@ Calculation of HaF% aK &N y 9 !' J bL &N 1 9 !' aK &;@;?;@C;.==9=' J >A=CCA.CAL&,;9=' aN@D5D1C3. E

Dhen EK;BBB &1K,;' 6K @?>?:A;.BCM>A=CCA.C@@L&,;'

&xxxviii

YK >AB?:A@. :> Dhen EK;BB: &1K,:' Dhen EK;BB; &1KB' Dhen EK;BB< &1K:' 6K @?>?:A;.BCM>A=CCA.C @@L&,:' 6K @;?<:A=.:; 6K@?>?:A;.BCM>A=CC A.C@@L&B' 6K@?>?:A;.BC 6K@?>?:A;.BCM>A=CC A.C@@L&:' 6KA=<<:AB.B@ $rend /rojections for ne1t two years, 6K Dhen EK;BB= @?>?:A;.BCM>A=CCA.C &1K;' @@L&;' Dhen EK;BB> &1K<' 6K ?BB?:@?.B< 6K@?>?:A;.BCM>A=CC A.C@@ L&<' 6K ?>?<:@@ $he analysis clearly depicts that the value of sales of the Company is increasing during the study period. $he sales tend to grow in the forthcoming years as seen and the trend projections of the values also reflect the same. " 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.

&xxxix

TREND ANALYSIS FOR SALES

8000000 7000000 6000000 5000000 S A L 4000000 E S 3000000 2000000 1000000 0 1999 - 2000 - 2001 - 2002 2000 2001 2002 2003 YEAR TREN D ACTU AL

figure 1

C.@.: T,end Ana-y0&0 .o, '(e Ne' 7o,9&ng Ca+&'a-

x"

Ta$-e C.35 Yea, K ;BBB ;BB: ;BB; ;BB< To'aDe<&a'&o n, H ,; ,: B : M HN=3 Ne' 7o,9&ng Ca+&'a-, y (R0. &n L 0! = : B : M HJN@ &:;BCC:C.C?' &<<@CA;.<:' B ??<@=B.>; M H?yN(= @@3351.CC! @B=C>C.CC <<@CA;.<: <>>?@:.:A ??<@=B.>; MyN31D1:3: HJ H?y

Calculation of HbF% bK !N 1Ly,N 1LN y !N 1O , &N 1' O * =L&,@@<;>:.AA'J&, ;'L<B@?< =L@ J &,;' O * &,;>C:@=:.B?' ;B $N(=13E5D3. 5:! Calculation of HaF% aK &N y 9 !' J bL &N 1 9 !' aK &;:?:=<=9=' J &,:;C>?;.B>='L&,;9=' aN:D 5@C.:C

Dhen EK;BBB &1K,;' 6K =?B>@A.=A M &=:;C>?;.B>='L&,;' 6K A<CA<:.>? Dhen EK;BB: &1K,:' 6K=?B>@A.=A M &=:;C>?;.B>='L&,:'

x"i

Dhen EK;BB; &1KB' Dhen EK;BB< &1K:'

6K @:B:=C.>; 6K =?B>@A.=A M &= :;C>?;.B>='L&B' 6K =?B>@A.=A 6K=?B>@A.=A M &= :;C>?;.B>='L&:' 6K<>BC?>.=;

$rend /rojections for ne1t two years, Dhen EK;BB= 6K =?B>@A.=A M &= &1K;' :;C>?;.B>='L&;' Dhen EK;BB> &1K<' 6K ;;:=B<.<@ 6K =?B>@A.=A M &= :;C>?;.B>='L&<' 6K C:?;:.<: $he analysis clearly depicts that the value of Sales of the Company is constantly decreasing during the study period. )rom the trend analysis it is clear that the sales of the company will decrease in the forthcoming years too. " 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.

x"ii

TREND ANALYSIS FOR NET WORKING CAPITAL

1000000 900000 C A P I T A L W O R K I N G N E T 800000 700000

600000 500000 400000 300000 200000 100000 0 1999 - 2000 - 2001 - 2002 2000 2001 2002 2003 YEAR

TREN D ACTU AL

figure 1i

CHAPTER D

x"iii

FINDIN)S 1. $he current asset ratio was in a increasing trend for the period ;BB<, which was very good for company. $he company should try to maintain the same in the future. 2. $he acid test ratio was not constant it was fluctuating in nature. $he -uick assets and current liability was fluctuating alternatively, which is not good for the firm. $he changes in -uick "ssets show that it will not be able to meet its current obligation so the company should concentrate to maintain the ratio in a optimum level so that the company will meet all its current obligations.

$. $he net profit turnover ratio is -uite satisfactory. *t shows an increasing trend in the current year. Dhich infers that the net profit is increasing which is good for the company and to the shareholders.

#. $he debtor turnover ratio shows an increasing trend. $he sundry debtors was -uite fluctuating since ;BB;, so the company has to control the debtors otherwise it may evade the profits of the company.

5. $he Stock $urnover 7atio shows a fluctuating trend. CompanyFs *nventory level was very low when compared to the cost of goods sold. So the company has make efforts to increase the inventory level otherwise the firm may go in to a stock out situation.

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.

x"v

CHAPTER E S*))ESTIONS 1. )rom the li-uidity ratios we can suggest that the company has 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.

%. )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.

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 suppliers CHAPTER 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

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.

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, &;nd edition, !ew ? elhi% 2iswa /rakasham, :CC@' elhi /earson

4alhotra, 7esearch 4ethodology &=th edition, !ew education /rivate 3imited, 7eprint ;BB='

7.Q.Sharma, )inancila 4anagement &=th edition, !ew Qalayani /ublishers'.

elhi,

7EBSITES; ? ? www.investopedia.com www.indianinfo.com