FINACIAL STATEMENTS

Financial statements (or financial reports) are formal records of the financial activities and
position of a business, person, or other entity.

Relevant financial information is presented in a structured manner and in a form which is easy to
understand. They typically include four basic financial statements accompanied by a
management discussion and analysis:

 A balance sheet or statement of financial position, reports on a company's assets,

liabilities, and owners equity at a given point in time.
 An income statement—or profit and loss report (P&L report), or statement of
comprehensive income, or statement of revenue & expense—reports on a company's
income, expenses, and profits over a stated period of time. A profit and loss statement
provides information on the operation of the enterprise. These include sales and the
various expenses incurred during the stated period.
 A statement of changes in equity or equity statement, or statement of retained earnings,
reports on the changes in equity of the company over a stated period of time.
 A cash flow statement reports on a company's cash flow activities, particularly its
operating, investing and financing activities over a stated period of time.

(Notably, a balance sheet represents a single point in time, where the income statement, the
statement of changes in equity, and the cash flow statement each represent activities over a stated
period of time.)

For large corporations, these statements may be complex and may include an extensive set of
footnotes to the financial statements and management discussion and analysis. The notes
typically describe each item on the balance sheet, income statement and cash flow statement in
further detail. Notes to financial statements are considered an integral part of the financial
statements.
 FINACIAL STATEMENT OF EME (Rs. In thousands)

Particulars 2017-2018 2016-2017

Income from operations 13650.62 13300.33
Other income 402.31 282.00
Total revenue 14052.93 13582.33
Operating expenses 9987.48 8705.79
Earning before interest, tax, depreciation 4065.45 4876.54
and ammortisation (EBITDA)
EBITDA % 28.93% 35.90%
Finance costs 0.40 0.25
Depreciation, goodwill and 482.42 517.96
ammortisation expenses
Earnings before exceptional items and 3582.63 4358.33
debts
Exceptional items 212.49 -
Net profit before tax 3795.22 4358.33
Taxes 895.80 819.03
Profit for the year before minority 2899.42 3539.30
interest
Minority interest (0.42) (0.97)
Profit of the year attributable to the 2899.84 3540.27
shareholders
NPM% 20.63% 26.07%

Results consolidated, results excludes extra ordinary/exceptional items Source: financial statements provided by company

If we see the financial statement the Net profit margin percentage it actually decreasing IN
FY2017-2018 as compared to FY2016-2017 i.e being 26.07% in 2016-2017 to 20.63%

So, if we see operating expenses have increased means company is spending more and might be
taking short term loans.
 INCOME STATEMENT OF EME

An income statement is one of the three important financial statements used for reporting a
company's financial performance over a specific accounting period, with the other two key
statements being the balance sheet and the statement of cash flows. Also known as the profit and
loss statement or the statement of revenue and expense, the income statement primarily focuses
on the company’s revenues and expenses during a particular period.

Particulars 31 March 2017 31 March 2018 % change

Amount=RS. Amount=Rs.
Net Sales 13,300,000 13,65,1000 2.6

Other income 282000 402000 42.7

Total Revenues 13,58,2000 14,05,3000 3.5

Gross profit 459,5000 366,3000 -20.3

Depreciation 518000 482000 -6.9

Interest 0 0 33.3
Profit before tax 4358000 3583000 -17.8
tax 819000 896000 9.4
Profit after tax 3539000 2899000 -18.1
Gross profit margin 34.5% 26.8%
Effective tax rate 18.8% 25.0%
Net profit margin 26.1% 20.6%

Results consolidated, results excludes extra ordinary/exceptional items Source: financial statements provided by company

 Operating income during the year 2017-2018 rose to 2.6% on a year-on-year (YoY)
basis.
 The company's operating profit decreased by 20.3% YoY during the fiscal. Operating
profit margins witnessed a fall and stood at 26.8% in FY18 as against 34.5% in FY17.
 Depreciation charges decreased by 6.9% and finance costs increased by 33.3% YoY,
respectively.
 Other income grew by 42.7% YoY.
 Net profit for the year declined by 18.1% YoY.
 Net profit margins during the year declined from 26.1% in FY17 to 20.6% in FY18

BALANCE SHEET
A balance sheet is a fiscal summary that reports an organization's advantages, liabilities and
investors' value at a particular point in time, and gives a premise to figuring rates of return and
assessing its capital structure. It is a fiscal summary that gives a depiction of what an
organization claims and owes, just as the sum contributed by investors.

It is utilized close by other significant fiscal reports, for example, the salary explanation and
articulation of money streams in leading principal examination or computing budgetary
proportion.

BALANCE SHEET AS ON 31 MARCH 2018

Particulars 31 March 2017 31 March 2018 Percentage( % )change

Net worth 12154000 12048000 -0.9

Current liabilities 1362000 1628000 19.5

Long term debt 700000 600000 14.3
Total liabilities 14216000 14276000 4.2

Current assets 10121000 10375000 2.5

Fixed assets 4092000 3901000 5.1
Total assets 14216000 14276000 4.2

Results consolidated,results excludes exceptional items sources: financial statements of company

 As per balance sheet as on 31st March 2018, the net worth of the EME technologies
decreased by Rs. 106000.
 Current liabilities increased by Rs.266000 i.e 19.5% change which reduced the current
ratio of the company.
 Current assets also increased by 2.5%.
 Current liabilities increased more i.e 19.5% in comparison to current assets i.e 2.5%, thus
reducing the current ratio of the company, resulting in the reduction of the liquidity of
EME technologies which is not good for the company.
  Company have reduced their long term debts by repaying. So, current assets have
reduced.
We can clearly see this in the balance sheet table which clearly shows long term debts
reduced in March 31, 2018. And purchase of fixed assets can also be observed from the
balance sheet.

CASH FLOW STATEMENTS

Cash flow statements are the statements of changes in the financial position prepared on the basis
of funds defined in cash or cash equivalents. In short cash flow statements summarises the cash
inflow and outflow of the firm during a particular period of time.

Benefits for the company:

 To prepare the cash budget

 To compare the cash budgets

 To show the position of the cash and cash equivalents.

CASH FLOW STATEMENTS 2017-2018

Particulars 31 March 2017 31 March 2018 % change

(in thousands) (in thousands)

Cash flow from operating 3124 3050 -2.4

activities
Cash flow from investing activities -1695 170 -

Cash flow from financing activities -2453 -3035 -

Net cashflow -1082 278 -

Results consolidated source: financial statement of company

CASH FLOW STATEMENT ANALYSIS

 EME TECHNOLOGIES cash flow from operating activities (CFO) during FY18 stood at
Rs. 3050000 on a YoY basis.

 Cash Flow from investing activities (CFI) during FY18 stood at Rs. 170000 on a YoY
basis which clearly shows an increase which means EME sold some investment/fixed
assets.

 Cash Flow from finanancing activities (CFF) during FY18 stood at Rs. -3035000 on YoY
basis which is a decreasing value,thus there might be any long term borrowings.

 Overall, net cash flows for the EME during FY18 stood at Rs.278000 from Rs.-1082000
net cash flows seen during FY17.

Thus, with the help of cash flow statements changes in cash between two periods and
their courses can be ascertained.
RATIO ANALYSIS

Ratio analysis is the process of the determining and presenting the relationship of the items and
group of items in the statements. Ratio can assist management in its basic functions of
forecasting, planning, coordination, control and communication.

Benefits to the company:

 Helpful in analysis of financial statements

 Helpful in comparative study
 Helpful in locating the weak spots of the company
 Helpful in forecasting
 Estimate about the trend of the business.
 Fixation of ideal standards.
 Effective control
 Study of financial soundness

TYPES OF RATIOS

 Liquidity Ratio- They indicate the firms ability to meet its current obligations out of
current resources.
 Current ratio = current assets / current liabilities
 Quick ratio = liquid assets / currents liabilities

Liquid assets = current assets – stock- prepared expenses

 Leverage or Capital Structure Ratio- This ratio discloses the firms ability to meet ability
to meet the interest costs regularly and long term solvency of the firm.

 Debt equity ratio = long term loans / shareholders funds or net worth
 Debt to total fund ratio = long term loans / shareholders funds + long term loan
 Proprietary ratio = shareholders fund / shareholders funds + long term loans
 Activity ratio or turnover ratio- They indicate the rapidity with which the resources
available to the concern are being used to produce sales.

 Stock turnover ratio = cost of goods sold / average stock

 Cost of goods sold = net sales / gross profit,

Average stock = opening stock + closing stock/ 2

 Debtors turnover ratio = net credit sales / average debtors +

average B/R
 Average collection period = debtors + B/R Credit sales per day
Credit sales per day = net credit sales of the year/ 365
 Creditors turnover ratio = net credit purchases / average creditors +
avg. B/P
 Average payment period = creditors + B/P / credit purchase perday
 Fixed assets turnover ratio = cost of goods sold / net fixed assets
Net Fixed assets = fixed assets - depreciation
 Working capital turnover ratio = cost of goods sold / working
capital
 Working capital = current assets – current liabilities

 Profitability Ratios or Income Ratios- The main object of every business concern is to
gain profits. A business must be able to earn adequate profit in relation to the risk and
capital invested in it.

 Gross profit Ratio =gross profit / net sales * 100

Net sales =sales –sales return
 Net profit ratio = net profit / net sales* 100
Operating net profit = operating net profit / net sales * 100 or
gross profit – operating expenses
 Operating Ratio = cost of goods sold + operating expenses / net
sales * 100

cost of goods sold = net sales – gross profit

operating expenses = office and administration expenses +

selling and distribution expenses + discounts+ bad debts +
interest on short term loans

 Earning per share(EPS) = net profit – dividend on preference

share /no. of equity shares
 Dividend per share (DPS) = dividend paid to equity shareholders
/ no. of shares * 100
  Dividend payout ratio ( DP) = DPS/ EPS* 100

KEY RATIO ANALYSIS FOR EME TECHNOLOGIES

The table below shows financial data of the EME Technologies company on which basis the
ratio analysis have been done.

RATIO ANALYSIS OF THE COMPANY

particulars 31 March 2017 31 March 2018

Current ratio x 7.4 6.4

Debtors’ Days days 59 62

Interest coverage x 14528.7 8957.5

Debt to equity ratio x 0.0 0.0

Return on assets % 25.3 20.3

Return on Equity % 29.1 24.1

Return on capital employed % 35.8 31.5

Results consolidated exclude exceptional items source: company reports

 Solvency Ratios
Current Ratio : The company’s current ratio decreased and stood at 6.4x during FY18, from
7.4x during FY17. The current ratio measures the company’s ability to pay short term. As a
conventional rule, a current ratio of 2:1 or more is considered satisfactory. The ratio of the
company is more with time .So, we can say that in short run the EME technologies is financially
strong and its liquidity position can also be considered good.

Interest Coverage Ratio : The company’s interest coverage ratio deteriorated and stood at
8,957.5x during FY18, from 14528.7x during FY17. The interest coverage ratio of a company
states how easily a company can pay its interest expense on outstanding debt. A higher ratio is
preferable.

Interest coverage = EBIT / Interest

However, in this case the ratio indicates the excessive use of debt or inefficient operations.

 Profitability Ratios
Return on equity (ROE): The ROE of EME Technologies declined and down at 24.1% during
FY18, from 29.1% during FY17. The ROE measures the ability of a firm to generate profits from
its shareholders capital in the company. This also indicates that EME is not using the resources
of the owners properly.

Return on capital employed(ROCE) : The ROCE for the EME Technologies declined and
down at 31.5% during FY18, from 35.8% during FY17. The ROCE measures the ability of a
firm to generate profits from its total capital( shareholder capital plus debt capital) employed in
the company.

Return on Assets( ROA): The ROA of the EME Technologies declined and down at 20.3%
during FY18, from 25.3% during FY17 .The ROA measures how efficiently the company uses

FINDINGS

In 2018 there is increase in current assets by 2.5% than 2017 and there is increase in current
liability by 19.5%, because of greater increase in current assets than in current liabilities, the
position of Working Capital has improved.

 The % of fixed assets has come down in 2018 from 2017.

 As per current ratio of the company is satisfactory it means its able to pay its short term
loans.
 Quick ratio presents a better test of short term financial position, which shows better
working capital position of the firm.
 Gross profit and net profit have declined from previous year
 Cash flow statement indicates inflow of cash in comparison to past year.

Due to better long term and short term financial conditions firm’s working capital is better than
that of previous year.its assets to generate earnings. The data of company shows its efficiency in
this case.