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4.

1 Introduction
These section efforts have been made to cover all relevant aspects of the financial performance
of ATLAC. Overtime comparison and Common Size analysis are carried out with the view to
extract concrete conclusion to describe financial standing and performance of the Firm.

4.2 Financial Analysis


Financial statements are the principal means of reporting the financial condition and results of
operations of a business entity. These statements are meant to assist various parties in decision
making who are interested in the activities of the business. These statements are means to an end
of helping stakeholders in decision-making. To improve the quality of decision making proper
analysis of these statements helps a lot. Financial statements analysis helps in determining the
financial conditions at any particular points in time and effectiveness of operations of a firm
during a specific period.
The various stakeholders of business are interested in the analysis of financials statements. But
the focus of interest of all is not the same. For example,. Short term creditors are interested in
short term liquidity of the business and long term creditors are interested in the long term cash
flow which the firm can generate over the long period of time. Investors are interested in the
firms ability to sustain profitability over a period of time. Government agencies analyze
financial data for tax purposes. The internal users of financial statements like management also
analyze financial data for planning and control.

4.2.1 Common Size Analysis of Balance Sheet


Common size analysis is an analysis of financial statements where the total assets divide all balance sheet
items of asset side and all credit side balances divided by all liability items, and all income statement
items are divided by net sales/revenues. Common size analyses are extremely helpful to highlight changes
over the time in financial performance and financial conditions of the company. The table shows common
size analysis of the balance sheets for the years 2011-12, 2012-13 & 2013-14.

Short-term advances have shown a significant change. Where as total advances show a total
change of only 1.70%. This is very significant to note that major decrease has occurred in longterm performing and non-performing advances.
On the liability side the total current liability has shown change of about 4%. The main reason
for which is increase in current deposits, which are about 6%. The long-term liability of the
organization is also decreased by 2%. The main reason for this is that fixed deposits of
organization are decreased by 2%, which shows that there is a slight change in the organizations
position by decrease in fixed deposits.

Table: 4-1 Common size analysis of Balance Sheet


Common size (%)
Assets

2011-12

2012-13

2013-14

Cash/Bal. With Firms

10.85

8.26

9.86

Balance with other Firms

0.79

1.23

0.87

lending to F.Is

4.67

3.76

3.73

Investment

21.82

19.21

21.97

Advances-Performing

55.32

59.75

55.20

Advances Non-Performing

1.12

1.53

1.84

Fixed Assets

3.19

2.97

3.54

0.33

0.1

Other Assets

2.24

3.0

2.78

Total Assets

100

100

100

B/Payables

1.14

0.85

0.83

Borrowings ST

11.14

7.59

5.67

Deposits - Current

75.74

79.85

79.40

Sub-ordinated loans

1.08

1.98

1.93

Deferred tax liability

0.42

Other Liabilities

2.50

2.49

2.34

Total Liability

92.02

92.76

90.17

Share Capital

1.52

1.67

1.80

Reserves

1.93

2.56

3.05

Accumulated Losses/Profits

2.95

2.74

3.58

Deferred tax asset-net

Liabilities

Equity

Minority Interest

Surplus on revaluation

1.58

0.27

1.40

Total Equity

7.98

7.24

9.83

Source: Self made

Figure 4-2 Assets In 2013.

Assets in 2013

3.54
56.86

9.86
3.73
21.97

Cash
lending to F.Is
Investment
Advances
Fixed Assets

Figure 4-3 Liabilities and Equity in 2013.

4.2.2 Common Size Analysis of Income Statement


The common size analysis of income statement is given in the table. Which shows that the
ATLAC has been not able to control its interest or mark up expense. As a result of increase in
mark up expense as a percentage of total revenues the gross profit margin has shown a trend of
continuous decrease.
The decreases G/P Margin shows deficiency of the Firm and lack of controlling cost of
(Markup expense) and better strategy of pricing, products and services.
The provision for non-performing loans has a increasing trend making provision for nonperforming loans and diminution in value of investment, which decreases the profit of current
year. The addition in provision is a bad sign, which shows that the Firm is not recovering its
disbursed advances. It shows the bad credit management of the Firm.
Non markup expenses also show a decreasing trend in absolute amount though the common size
in percentages have shown a mixed trend due to the changes in revenue figures. The nonperforming expanses also decrease to about 12%, which is a very high percentage, but the other
aspect of this is that it increased the efficiency and credit management of the staff.

Like gross profit the net profit margin before tax has also decreased with 37% . The tax expanse
is decreased about 29% because of the decrease in profit. Profit brought forward from previous
year is reduced by 10%.
The common size analysis of the ATLAC is clearly showing that the Firm has no improvement in its
performance. The organization shows low profit in last two years which is a negative sign. Employees
which they can work more effectively and efficiently increasing

Table: 4-4 Common size analysis of Income Statement


Common size (%)
ITEMS

2011-12

2012-13

2013-14

Mark up revenue

100

100

100

Mark up expense

41.26

46.34

46.27

Gross profit

58.74

53.66

53.73

Provisions and B/Debts

15.63

15.60

20.72

Net Mark up Income

43.1

38.06

33.1

Total Non Mark up Income

21.9

20.57

19.17

Total Income

65.0

58.62

52.16

Total non mark up Expenses

33.31

31.9

29.10

Profits before tax

31.68

26.72

23.06

Taxation

11.21

10.67

7.95

Profit after tax

20.47

15.10

16.05

30.28

30.15

27.28

Unappropriated profit brought


forward

Surplus on revaluation of Assets

0.44

0.48

0.41

Profit available for apropriation

50.9

46.68

42.80

Source: Self made

Figure 4-5 Common Size Analysis of Income statement.

4.2.3 Horizontal Analysis


Horizontal analysis compares each amount with a base amount for a selected base year. The base year
item we take 100%. This is good tool the vertical analysis to understand change of each percentage.
Assets increase in 2013-14 by 16% as compared to 2011-12. Liabilities increase in 2013-14 was 14%.
Owner equity of Firm change by 43%.
Mark up revenue increase in 2013-14 by 48% and mark up expense increase by 66% as compared to the
base year. Net mark up income increase by 35% in 201314. net income increase by 9%.

Table: 4-6 Horizontal analysis of Balance Sheet.


Horizontal Analysis (%)
Assets
Cash/Bal. With Firms

2011-12

2012-13

2013-14

100

87

106.31

Balance with other Firms

100

178.88

129.2

lending to F.Is

100

92.3

93.47

Investment

100

100.64

117.78

Advances-Performing

100

123.34

116.82

Advances Non-Performing

100

155.07

191.05

Fixed Assets

100

106.51

129.59

Other Assets

100

144.76

144.58

Total Assets

100

116.87

116.87

B/Payables

100

84.45

84.67

Borrowings ST

100

74.78

59.47

Deposits - Current

100

122.50

122.5

Sub-ordinated loans

100

200

200

Other Liabilities

100

130.58

113.08

Total Liability

100

115.13

114.54

Share Capital

100

137.5

137.50

Reserves

100

184.75

184.75

Accumulated Losses/Profits

100

141.74

141.75

Surplus on revaluation

100

102.95

102.95

Total Shareholder's Equity

100

103.40

143.64

Liabilities

Shareholder's Equity

Source: Self made

Table: 4-7 Horizontal Analysis of Income Statement


Horizontal Analysis (%)
ITEMS

2011-12

2012-13

2013-14

Mark up revenue

100

126.5

148.26

Mark up expense

100

142.07

166.29

Gross profit

100

115.54

135.60

Provisions and B/Debts

100

126.08

196.43

Non Mark up Income

100

111.71

29.77

Total Income

100

114.09

119.0

Total non mark up Expenses

100

121.13

129.53

Profits before tax

100

106.68

107.91

Taxation

100

120.40

105.20

Profit after tax

100

99.10

109.40

forward

100

125.93

133.58

Profit available for apropriation

100

116.0

124.66

Unappropriated profit brought

Source: Self made

4.2.3 Ratio Analysis.


Ratio analysis is the most commonly used analysis to judge the financial strength of a company. It is a
quantitative relation between two magnitudes of the same kind. This comparison allows the firm to detect
major operating differences. the main categories of ratios are.

Profitability ratios

Profitability ratios are the financial statement ratios which focus on how well a business is performing in
terms of profit.

Net Interest Margin:

Net interest margin (NIM) is a measure of the difference between the interest income generated by Firms
or other financial institutions and the amount of interest paid out to their lenders, relative to the amount of
their assets. It is similar to the gross margin of non-financial companies

Interest Expenses / Interest


Years

Income

2011-12

16,936,187/41,045,543

0.41

2012-13

24,061,790/51,919,229

0.46

2013-14

28,163,787/60,857,035

0.46

Interpretation.
This ratio examines how successful a firm's investment decisions are compared to its debt
situations. The interest margin ratio in 2013-14 is deceases as compared to 2011-12 favourable
for the Firm, because investment decisions are well planed.

Earning Asset to total assets


An asset that produces money for a company without any work needing to be done. Earning
assets include such things as loan, Lease, stocks, bonds, certificates of deposit, and generally
anything that earns interest or dividends.

Earning assets include loan, Lease, investment securities and money market assets. This ratio
show that the contribution of these assets to total assets.

Earning Assets/Total
Years
2011-12
2012-13
2013-14

Assets
241,828,285/530,283,956
321,069,710/605,539,341
292,931,035/619,744,051

0.45
0.53
0.47

Interpretation.
The ratio of earning to total assets in 2013 is 0.47 and in 2012-11 0.53 and 0.45.As return on total Assets
is Increased in 2013 as compare to 2011 which is favourable for Firm. But compared to 2012 return on
total assets decreases which is not favourable for Firm because in 2011 earn assets low return.

Net Interest Margin to Average Earning Assets

Return on Earning Assets.

An indicator of how profitable a company is relative to its earning assets. ROEA gives an idea as to how
efficient management is at using its assets to generate earnings.

Years
2011-12
2012-13
2013-14

Net income/average
earning assets
8,402590/241,828,285
8,333,120/281,448,997
9,192,687/307,000,372

0.034
0.030
0.030

Interpretation.
Return on earning assets is decreases in 2013 as compared to previous year, due to inefficient
management of ATLAC, showing unfavorable trend.

Figure No. 4.10 Net interest Margin To Average Earning Assets.

Operating Cost to income ratio

The cost/income ratio is an efficiency measure similar to operating margin. Unlike the operating margin,
lower is better. The cost income ratio is most commonly used in the financial sector

Years
2011-12
2012-13
2013-14

Non interest cost/income


13,674,688/8,402,590
16,565,344/8,333,120
17712934/9,192687

1.62
1.98
1.92

Interpretation.
Operating Cost to income ratio is decrease as compared to previous year which shows Firm efficiently
managed his non interest cost. This is favourable for Firm because that effect on net income with
positively. But compared as 2011 operating cost increase.

Figure No. 4.11 Operating Cost to Income Ratio.

Operating Cost to incom Ratio


1.98

1.92

1.62
1.5
Operating Cost to incom
Ratio

1
0.5
0

2011

2012

2013

Equity to Total Assets.


The equity to debt ratio show how much ABL have equity out of total assets.

YEARS
2011
2012
2013

EQUITY/TOTAL ASSETS
42,421,404/16,936,187
43,862,759/24061,790
60,936,723/28163,787

0.079
0.072
0.098

Interpretation.
This ratio shows the ownership of the Firm. In 2013 it is 0.098 while in 2011 it is only 0.79 which shows
in 2013 Firm equity are increases.

Figure No. 4.12 Equity to Total Assets.

Equity To Total Assets


0.098

0.1
0.08

0.079

0.072

0.06
Equity To Total Assets

0.04
0.02
0

2011

2012

2013