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CHAPTER I

INTRODUCTION

1.1 FINANCIAL PERFORMANCE


Finance is regarded as the lifeblood of a business enterprise. In
general, finance may be defined as a provision of money at the time it
is wanted. “Business finance can broadly be defined as the activity
controlling, and administering of the funds used in the business”.

According to Solomon, “Financial management is concerned


with the efficient use of an important economic resource, namely,
capital funds.

A company ability to generate new resources, from day-to-day


operations, over a given period time.

According to Philippians, “Financial management is concerned


with the management decisions that result in the acquisition and
financing of long term and short term credits for the firm. As such it
deals with the situation that require selection of specific assets (or
combination of liabilities) as well as the problem of size and growth
of an enterprise. The analysis of these decisions is based on the
expected inflows of funds and their effects upon managerial
objectives.

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Financial Performance Management is more than satisfying
the obstacles of regulations. It is applying best practices that have
emerged to improve the financial strength and reporting capabilities
of an enterprise. Through performance management systems,
analytics, dashboards and technology, corporate financial processes
can become a cornerstone for making decisions and growing an
organization.

NATURE OF FINANCIAL PERFORMANCE


The term “finance” can be defined as the management of
the flows of money through an organization. A firm’s success and its
survival depended upon how efficiency it is able to generate funds, as
and when needed. Financial management refers to that part of the
management activity which is concerned with the planning ad
controlling of firms, financial resources, managing, controlling of
firms, financial resources. Managing f finance is on important task in
industry. It requires both short-term and long –term planning. The
business finance may be said to deal with acquisition of funds and
distribution of profits by a business organizations.

1.2. OBJECTIVES OF THE STUDY


PRIMARY OBJECTIVE:
The main purpose of the study the financial performance of
PHYTO CHEM (INDIA) LIMITED.

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SECONDARY OBJECTIVES:
• To study the financial position of the firm.
• To find out the liquidity and profitability of the firm.
• To find out the nature of changes in the financial position of
the company.
• To make a comparative study through trend analysis.

1.3. RESEARCH METHODOLOGY


STUDY PERIOD:
This study cover the period of five years from 2003-2007. The
accounting year commenced from April to March.

SECONDARY DATA:
The data formulate company records were used for the
analysis. It includes the annual reports and other published sources.

TOOLS USED:
RATIO ANALYSIS:
Ratio Analysis is one of the techniques of financial analysis
where ratios used as a yardstick for evaluating the financial
condition and performance of a firm. Analysis and interpretation of
various accounting ratios gives a skilled and experienced analyst, a
better understanding of the financial condition and performance of
the firm than what he could have obtained only through a perusal of
financial statements.

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Ratios represent the relationship, expressed in mathematical
terms between figures, which are connected with each other in some
manner. Obviously, no purpose will be served by comparing two sets
of figures, which are not at all connate with each other. Moreover,
absolute figures are also unfit for comparison. They are expressed as
percentage, times and in ratio.

COMPARATIVE STATEMENTS ANALYSIS:


The single balance sheet shows assets and liabilities as on a
particular date. The comparative balance sheet shows the value of
assets and liabilities on two different dates. A comparative balance
sheet has two columns to record the figure of the current year and
the previous year. A third column is used to show the increase or
decrease in figures. A forth column may be added for given
percentage of increase or decrease.

TREND ANALYSIS:
In financial analysis the direction of changes over a period of
years is of crucial important, time series or trend of change. This
kind of analysis is practically applicable to the items of profit and
loss account. It is advisable that trends of sales.

Trend Analysis or Trend percentage also plays a significant


role in the analysis of horizontal financial statements. The world
‘Trend’ means future possibilities. An efficient and effective

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management tries to know the actual performance and also discovers
future prospects of the business.

1.4. REVIEW OF LITERATURE


1
Bharati pathak, December 2003
The bulk of the banking business in the country is in the public
sector comprising the State Bank of India and its seven associate
banks and twenty nationalized commercial banks. Till 1991, the
Indian banking industry was operating in a highly regulated and
protected regime. But with the acceptance of Narsimham committee
recommendations, competition has been injected into the banking
industry in two forms.

In this study, it has been found that HDFC Bank emerged as a


leader in this financial analysis of the year ended 2000-01. Its closest
competitor was ICICI Bank. Financial performance of the other
three, no doubt, lagged behind them, but it by no means, depressing.
These banks obviously, have to focus more improving parameters
like credit quality and cost control for the emerge as the top
performers.

1
Bharathi pathak, Finance India, vol, xvii, No-4, December 2003 .

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2
R. Hamsalakshmi, M. Manicham, September 2005
In this study, it has been found that liquidity position and
working capital position were favorable and good during the period
of study. Regarding turnover ratios, efficiency in management of
fixed assets and total assets must be increased. Regarding Return on
Investment and Return on Equity was proved that the overall
profitability position of the software companies had been increasing
at a moderate rate.

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G. Sudarsana Reddy, September 2003
In this study, it has been found that the paper industry in
Andhra Pradesh needs the induction of additional funds along with
restructuring of finances, modernization of technology for better
operating performance, use of fixed assets efficiently, creation of
adequate depreciation provision, optimizing inventory, investments,
the degree of liquidity, adoption of sound credit policies, creative
efforts on marketing frond and government concessions and support.
These would go a long way towards strengthening the profitability of
paper mills. With this, there is a very possibility of the industry
flourishing and touching the new heights in future.

1.5 SCOPE OF THE STUDY


2
R.Hamsalakshmi, M.Manicham, Finance India, vol xix, No-3, September 2005.
3
G.Sudarsana reddy, Finance India, vol xvii, September 2003.

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The scope of the study is defined below in terms of concepts
adopted and the period under focus:
 The study which deals with the management of comparison of
financial performance is confined only to the PHYTO CHEM
(INDIA) LTD.
 The study is based on annual reports of the company for a
period of four years from 31-03-2003 to 31-03-2007.
 The study will help to analyze the financial status of the firm.
 The study reveals the present liquidity and profitability
position of the company.

CHAPTER II

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COMPANY PROFILE

PHYTO CHEM (India) Ltd, State-of-the-art plant is


strategically situated in Bonthapally about 40 kms from Hyderabad.
It is well connected by road, rail and air as well as the latest
communication facilities. The most shophisticated carboforah plant.
One of the very few in country has been installed to ensure
economical and top quality products.

PHYTO CHEM (India) Ltd was established in Hyderabad on


11th January 1989 as a private limited company and on 8th may 1992,
the company was registered as public limited company. The
company was incorporated with a capital investment of Rs.5 crores.

OBJECTIVES OF THE COMPANY:


1. To manufacture, produce, refine, process, formulate,
buy, sell, import, export, market, develop, distribute or otherwise
engage or deal in all types of pesticides, insecticides, fungicides,
sips, sprays, verifies, medicines, drugs and scientific chemicals or
any nature used or capable of being used in the pharmaceutical
industry, agricultural chemicals, petrol chemicals, industrial
chemicals or any mixtures derivatives and compounds there of.

2. To manufacture, produce, refine, process, formulate,


buy, sell, import, export, market, develop, distribute, trade or

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otherwise engage or deal in all type of organic and inorganic
chemicals fertilizers, micro fertilizers of any nature used or capable
of being used in all types of agricultural and commercial crops and
to carry on the activities of cotton ginning, spinning sale of cotton
bales and seeds.

3. To Extract, produce, refine, process, buy, sell, import,


export, market, develop, distribute, trade or otherwise engage or
deal in all type of oils edible and non-edible oils and its by-product
and any other commodities or products.

4. To manufacture, purchase, sell, export, import, repair,


or otherwise deal in all types of Pac materials, tins required for the
above said products.

5. To manufacture, purchase, sell, export, repair or


otherwise deal in all types of plant and machine used for the
manufacture of the above said products.

6. To acquire, the running proprietor concern “PHY TO


CHEM (INDIA) LTD” as going concern with all assets and
liabilities.

7. To carry on the research and development work for the


above mentioned main objects.

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Keeping pace with technological revolution around the world,
PHYTO CHEM(INDIA) Ltd, installed the latest technologies to yield
the best products with the rock solid commitment to quality.

ORGANIZATION STRUCTURE
The organization of PHYTO CHEM (INDIA) Ltd is divided
into three levels of management as Top level management, Middle
level management ,Lower level management.

The top level consists of the chairman and managing director.


Chairman of the company is non-official member elected from the
Board of Directors.

The middle level management includes the general manager


and functional manager. The functional manager VIZ production,
finance, personal, marketing, Medical etc are directly reporting to
the general manager and managing director.

The lower level management involved in the implementation of


the policies and strategies of the organization. They include the
supervisors, clerical staff and workers.

BOARD OF DIRECTORS:
Dr. P.Sreemannarayana - Chairman

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Mr. Y. Nayudamm - Managing Director
Mr. U. Venkateswararao - Whole time Director
Mr. P. Anjaneyulu - Director
Mr. C.N.Chary - Director

AUDITORS:
M S F Adinarayana & Co are the chartered accountants who
makes auditing every year.

FUNCTIONAL AREA OF PHYTO CHEM (INDIA) LTD:


This organization has the following departments.
o Finance Department

o Personal Department

o Research and Development


Deportment

o Production Department

o Employees Relation Department

o Technical Service Department

PRODUCTION CAPABILITIES
Liquid formulations -- 2700 KL per annum

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(Monocrotophos 36%, Endosulfan 36%, Quinalphos
25%, Fenvalerate 20%, Cypermethrin 10%,
Cypermethrin 25%)
Wettable Powders -- 900 MT per annum
Groundless Formulation -- 4000 MT per annum
TECHNICAL
Cypermethrin _ 150MT per annum
Fenvelerate _ 150MT per annum
PRODUCTS PRODUCED
Insecticides: Accphate, Alphamethrain, Carbofuran, Chlorphriphos,
Cypermethrin, Deltamethrin, Diehlororos, Dimethoate, Dicofol,
Endosulfan, Ethion, Fenvalerate, Lindane, Moulouthion,
Methylaparathion, Monocrotophos, Phorate, Profenphos,
Quinolphos
Fungicides: Captan, Carbendiazim, Hexaconazole, Manconazole,
Ziram, Metalaxyi
Herbicides: Anilophos, Atratine, Butachior, Isoproturon

EXPORTS
The company has been exporting its products within and
outside the country. The major exports were made to South Africa,
Tunisia and Nigeria.

SOURCES OF RAW MATERIAL

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Raw materials purchased from Gujarat, Indore. In order to
manufacture the products the company is importing Raw materials
from Hang Kong and China.

FINANCIAL ASSISTANCE
The capital was contributed in cash by the N R I’ s and Federal
Bank Ltd and they receive non cash shares issued towards
compensation of technical knowledge. Rest of the share capital was
contributed by the general public.
WORKING CONDITIONS AND WELFARE HOURS OF WORK
AND SHIFT SYSTEM:
1st shift - 23:00 to 7:00 Hrs
2nd shift - 07:oo to 15:00 Hrs
3rd shift - 15:00 to 23:00 Hrs
4th shift - 08:00 to 16:30 Hrs

SAFETY:
The department will conduct periodical training programs in
safety to all the workmen as well as to managerial staff inculcate safe
work habits among the workmen.

AMBULANCE ROOM:
A well furnished Ambulance Room is provided for immediate
medical aid with round the clock service for the benefit of the

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Employees headed by the chief Medical officer major competitors of
PHYTO CHEM (INDIA) Ltd.

GOGGLES AND FACE SHIELDS:


It is necessary to wear splash-proof goggles when working
with pesticides. Not only can the pesticide be absorbed through the
eyes but the acidity of a pesticide can cause permanent eye injuries
also. Use goggles meeting or Exceeding ANSI Standard 287.1,1968
estimate. When pouring or mixing concentrates it is preferable to use
a full-face shied to protect face from splashes. Always wash the
goggles or face shied with soap and water after use.

BOOTS:
Unlined rubber or neoprene (nit rile etc.,) books should be
worn over work shoes or in place of work shoes when mixing or
applying pesticides. Pull the legs of trousers over the tops of boots to
help prevent spilled pesticide from getting inside boots. Wash boots
with soap and water after each use. “Never wear cloth or leather
boots when Mixing or Applying Pesticides.” Cloth or leather boots
will absorb pesticides and allow the pesticide to contact the skin of
the leg or foot and will be a source of residues causing chronic
exposure.

HEAD WEAR:

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A water proof hat should be worn when mixing or applying
pesticides because pesticides can be readily absorbed through the
scalp. The hat should have a brim to keep drift or splashes off curs
and neck. Plastic Safety hats are ideal for use with pesticides and
should be washed in soap and water after each use. Cloth hats may
absorb pesticides and contaminate the wearer. Do not use Cloth
Hats.

RESPIRATORS:
Respirators are designed to prevent in haling toxic fumes and
mists. They should be used when mixing or applying pesticides. If the
label specifies the need. Choose the correct cartridge for the type of
pesticide being used. The manufacturer or supplier can provide
guidance on selecting correct cartridges. Replace cartridges when the
odor of the pesticide becomes noticeable or when. Breathing becomes
difficult during use. The life of cartridges will vary with the
concentration of pesticide in the air around the air around the
respirator breathing rate of the user temperature humidity and
composition of the cartridge.

PERSONAL PROTECTIVE EQUIPMENT:


Pesticides are necessary for agricultural production but
potential hatreds to users are not adequately emphasized. accidents

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involving pesticides are usually due to improper handling, mixing,
application of pesticides, or failure to use proper personal protective
equipment and clothing.

GENERAL GUIDELINES:
The minimum protection when working with pesticides is long
sleeves, long pants, shoes and socks, rubber gloves and splash-proof
eye protection regardless of the toxicity level of the pesticides.
Rubber boots and a respirator are necessary when working with
moderately or highly toxic pesticides. EPA’s recommendations
include wearing a double layer of clothing. This can be accomplished
by wearing coveralls over the long pants and long sleeve shirt, and
rubber boots over the shoes and socks.

UNIFORM:
The company maintains a unique feature on dues uniform all
the individual working in the organization maintain an unique
uniform which is in Blue colored. This shows that all are equal and
there are no discriminations.

GLOVES:
The use of gloves is mandatory when working with highly toxic
pesticides. It is recommended that only unlined rubber or neoprene
(nit rile etc) gloves be used when handling or using all pesticides.
Unlined gloves should be thoroughly washed (Inside and Outside)

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after each use. Gloves should be at least 12 inches long to provide
adequate protection for wrists and the cuffs should be inside sleeves
for most work. This will keep run of pesticide from getting into the
gloves.

CATETERIA:
The PHYTO CHEM (INDIA) Ltd right from its inception is
maintaining highly subsidized canteen. Lunch or dinner is served in
the cafeteria at nominal prices. Snacks, coffee are supplied to
different sections or plants in the company.

TURNOVER:
The turnover the company is around 15 crores.

FUNCTION OF SALES DEPARTMENT:


• Organization sales territories and fix sales quota.

• Organization and development of channels of distribution.

• Organization and development of advertising at souls


promotion strategies.

• Planning sales policies for their effective implementation.

• Planning the short term as well as long term marketing


program.

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• Co-ordination between the wants & needs of the consumers
and their satisfaction.

• Co-ordination the achieves of production, finance department.

• Ascertaining economic and political conditions and their


influences on the sales of cement.

• After sales service in the form of attending to the complaints


and suggestions of the consumers.

BRANCH OFFICES IN EVERY STATE


State Branch
Andhra Pradesh Hyderabad
Gujarat Ahmadabad
Haryana Bathinda
Karnataka Ballary
Maharashtra Nanded
Punjab Bathinda
Rajasthan Sriganganager
Tamilnadu Salem

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COMPETITORS OF THE COMPANY:
1. Hyderabad Chemicals

2. Bayer India Limited

3. Agasya

4. Aries

5. Magmani Chemicals

CHAPTER III
FINANCIAL STATEMENT ANALYSIS

A financial statement is a collection of data organized


according to logical and consistent accounting procedures. Its
purpose is to convey an understanding of same financial aspects of a
business firms. It may show a position at a moment in time as in case
of balance sheet otherwise or it may reveal series of activates over a
given period of time ,as the case of an income statement.

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 Finance is regarded as the lifeblood of a business enterprise.
In general, finance may be defined as a provision of money at
the time it is wanted. “Business finance can broadly be defined
as the activity controlling, and administering of the funds used
in the business”.
 Financial statement are used by the management as the
basis for planning operations including procurement of
adequate financing and as a means of exercising control
financing position of the business and efficient and profitable use
of the assets An understanding of different aspects of financial
statement is necessary for the development of financial skills.
 Financial statements are used by the management as the
basis for planning operations procurement of adequate
financing and are means of exercising control over financial
position of the business and efficient and profitable use of assets.
An understanding of different aspects of financial statements is
necessary for the development of financial skills.

Thus financial statements generally refer to the two statements


• The position statements or balance sheet.
• An Income statement or profit and loss a/c.

Financial statements are prepared as an end result financial


accounting and are the major sources of financial information’s of
enterprise financial statements are also called as financial reports.

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TYPES OF FINANCIAL STATEMENTS
Financial statement include
 A Balance sheet
 An Income statement
 A statement of changes in owners account
 A statement of changes in financial position.
The financial statements are prepared with a view to depict
financial position of the concord Proper analysis and interpretation
of this statement enables a person to judge the profitability and
financial strength of the business.

FINANCIAL STATEMENT ANALYSIS


Use and transformation of financial data into a form that can
be used to monitor and evaluate the firm's financial position, to plan
future financing, and to designate the size of the firm and its rate of
growth. Financial analysis includes the Financial Statement Analysis
and Funds Flow Analysis.

The basis of financial planning, analysis and decision-making is


the financial information. Is needed to predict, compare and evaluate
the firms earning ability. It is also required to aid in economic
decision making, investment and finding decision-making. The
financial information of the enterprise is contained in the financial
statement of accounting reports.

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The financial statements (balance sheet and profit and loss
account) are the basis instruments of an accounting system which
communicate financial information to users, Balance sheet contains
the information about the firm’s assets and liabilities. Assets
represent economic resources possessed by the firm. Fixed assets are
used in business for more than accounting period of one year, while
current assets are converted into cash payable within an accounting
period are called current liabilities.

Financial analysis is an aspect of the overall business finance


function that involves examining historical data to gain information
about the current and future financial health of a company.
Financial analysis can be applied in a wide variety of situations to
give business managers the information they need to make critical
decisions.

"The inability to understand and deal with financial data is a


severe handicap in the corporate world," Alan S. Donna hoe wrote in
his book What Every Manager Should Know about Financial
Analysis. "In a very real sense, finance is the language of business.
Goals are set and performance is measured in financial terms. Plants
are built, equipment ordered, and new projects undertaken based on
clear investment return criteria. Financial analysis is required in
every such case."

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The profit and loss account shows the profitability of the firm
by giving details above revenues and expenses. Revenues are benefits
which customers contribute of the firm in exchange for goods of
services provided buy the firm. The cost if the economic resource use
in providing goods and service to the customers is called expenses.
Thus the basic purpose of the profit and loss account is to is to
provided a concise summary of the firm’s revenues and expenses
during period of the time and measure its profitability.

The finance function in business organizations involves


evaluating economic trends, setting financial policy, and creating
long-range plans for business activities. It also involves applying a
system of internal controls for the handling of cash, the recognition
of sales, the disbursement of expenses, the valuation of inventory,
and the approval of capital expenditures. In addition, the finance
function reports on these internal control systems through the
preparation of financial statements, such as income statements,
balance sheets, and cash flow statements.

CONCEPT OF FINANCIAL STATEMENT ANALYSIS


Financial analysis is the process of determining financial
strength and weakness of the company by establishing strategic
relationship between the components of balance sheet and profit and
lose statement and other operative data.

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NEED FOR FINANCIAL STATEMENT ANALYSIS
Stockholders, creditors and management have concerns about
the financial data of a company, which can be resolved to some
degree predictive ability of financial statement analysis. Stockholders
are concerned about the future success of operation and their
leadership.

BENEFITS OF DOING FINANCIAL STATEMENT ANALYSIS


Financial statement are analyzed by different users for
different purposes. Even though aims vary according to the users,
the following may be the general objective of financial statement
analysis.
i. To estimate the profitability or earning capacity of the
enterprise.
ii. To aid in economic decision making – investment and financial
decision.
iii. To gauss the financial position and financial performance of
the concern.
iv. To determine the measure of efficiency of operations.
v. To calculate quickly and examine financial ratio and flow of
funds.
vi. To identify areas of mismanagement and potential danger.
vii. To ascertain the maintenance of financial leverage.
viii. To determine the movement of inventory.
ix. To identify diversion of funds.

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x. To decide about the future prospects of the firm. As a matter
of fact, the objectives of financial statement analysis, depend to
a large extent on the view-point of the analysis.

TOOLS OF FINANCIAL STATEMENT ANALYSIS:


A study of the relationship and trends is undertaken as part of
financial statement analysis, to evaluate the financial position, the
operational results as well as financial progress of a business
concern. There are certain tools or techniques used for measuring
the relationship among the financial statement items of a single set of
statement and changes have taken place in this items as disclosed in
successive financial statements.
i. Comparative financial statement
ii. Common-size financial statement
iii. Trend analysis
iv. Ratio analysis
v. Fund flow analysis
vi. Cash flow analysis.

COMPARATIVE FINANCIAL STATEMENTS:


The comparative financial statement can be a comparison
between two time periods for an enterprise. It can also be a
comparison for two or more enterprise for one or more accounting
periods. The former is known as “Inter-period” (or) Inter-firm

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comparison and the later is known as “Inter-unit” or Inter-firm”
comparison.

For either type of analysis, we can study the comparative


financial statement as follows:
a. Comparative balance sheet
b. Comparative profit & loss account

Comparative balance sheets as on two or more different dates


can be comparing assets, liabilities, capital and finding out any
increase or decrease in those items.

TREND ANALYSIS:
Trend Analysis or Trend percentage also plays a significant
role in the analysis of horizontal financial statements. An efficient
and effective management tries to know the actual performance and
also discovers future prospects of the business. This trend ratio can
be computed by dividing each amount in the other statement with
the corresponding item found in base statement.
• Trend analysis is a barometer of the changes taking place in
the economic profile of an enterprise.
• Trend analysis indicates the rate of changes in the value of an
item in terms of an index.
• Trend analysis rearranges the data in a manner which makes
it easy to identify change and interpret the same.

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CHAPTER IV
ANALYSIS AND INTERPRETION OF FINANCIAL
STATEMENTS

Published financial statements are the only source of


information about the activities and affairs of a business. Groups
interested in the progress, position and prospects of business, are the
public, shareholders, investors, creditors and the government. For
this prose, financial statement have to be carefully studied, analyzed
and intelligently interpreted.

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Analysis and interpretation of financial statements are an
attempt to determine the significance and meaning of the financial
statement data so that forecast may be made of the prospect for
future earnings, to ability to pay interest, debt maturities – both
current as well as long term- and probability of a sound dividend
policy. This process involves both the analysis and the interpretation.

Analysis refers to the methodical classification of the data


given in the financial statements. All process which help in drawing
certain results from the financial statement are include in the
analysis. Analysis only establishes a relationship between various
amount mentioned in the balance sheet and the profit and loss
account.

Interpretation refers to the comparison of various components


and the examination of their content, so that useful and definite
conclusion may be drawn about the earning capacity, efficiency,
profitability, liquidity, solvency, trend etc. comparison is, therefore a
pre-requisite for meaningful interpretation.

In this study, the following analysis were made


1. Ratio analysis
2. Trend analysis
3. Comparative statement analysis

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4.1 RATIO ANALYSIS
Ratio analysis is one of the important tools of analyzing
financial statements. The financial statements are detailed and do not
furnish the required information at a glance. Accountants have to
strive hard to dig out the required information.

Ratio analysis is the process of determining and interpreting


numerical relationship between figures of the financial statements.
An absolute figure often does not convey much meaning. Generally,
it is only in the light of other information that the significance of a
figure is realized. It is an effective tool or a device to diagnose the
financial and operation diseases of business enterprise. It is an
important and useful technique to check upon the efficiency with
which working capital is being used in the enterprise.
In simple language, ratio is one number expressed in terms of
another and can be worked out by dividing one number with the
other. Since the analysis and interpretation of financial statement is
made with the help of ratio, it may be called ratio analysis. The ratio
analysis of financial statement stands for the process of arrangement
of data, computation of ratio, interpretation of the ratios so
computed and projections through ratios.

Some ratios indicate the trend or progress or down fall of the


firm. It helps the management in evaluating the financial position

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and performance of the firm. Through leverage and solvency ratios,
ratio analysis helps in assessing the financial position of the firm.
Current and liquid ratios indicate short term financial position,
whereas debt equity ratios, fixed assets ratios and proprietary ratios
show long term financial position. Similarly, activity ratios and
profitability ratios are useful in evaluating the efficiency of
performance.

4.1.1. PROFITABILITY RATIOS


Profitability is an indication of the efficiency with which the
operation of the business are carried on poor operational
performance may indicate poor sales and hence poor profits. A lower
profitability may arise due to the lack of control over the expenses.

1. OVERALL PROFITABILITY RATIO:


It is also called as “Return on investment”(ROI). It indicates
the percentage of return on the total capital employed in the
business. The Overall performance and the most important,
therefore, can be judged by working out a ratio between profit
earned and capital employed. The resultant ratio, usually expressed
as a percentage, is called Return on Investment.
Operating profit
Overall Profitability Ratio = ------------------------ * 100
Capital employed

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Table No-1 : Overall Profitability Ratio (Rupees in lakhs)
Year Operating profit Capital Ratio
employed
2002-03 -6,12,44,365 10,87,02,998 -56.34
2003-04 1,74,96,805 11,00,82,045 15.89
2004-05 62,09,979 12,85,06,154 4.83
2005-06 1,65,84,915 22,73,12,955 7.29
2006-07 61,86,590 89,48,47,694 6.91
Source: Annual reports of the company
The above table reveals the overall profitability ratio. The
trend of this ratio is dynamic. The indices of this ratio are -834.13,
15.89, 4.83, 7.29 and 6.91. It may be infested that the profitability is
not stable.

Chart No-1 : Overall Profitability Ratio

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Overall P ro fitab ility R atio

15.89
20
4.83 7.29 6.91
10
0
-10
Ra tio -20
-30
-40
-50 -56.34
-60
2002-03 2003-04 2004-05 2005-06 2006-07
Ye a rs

2. GROSS PROFIT RATIO:


The gross profit ratio is also known as “Gross margin ratio”.
This ratio expresses relationship between gross profit on sale and net

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sales in terms of percentage indicating the percentage of gross profit
earned on sales.

Gross profit
Gross Profit Ratio = -------------------- * 100
Net sales

Table No-2 : Gross Profit Ratio (Rupees in lakhs)


Year Gross Profit Sales Ratio
2002-03 59,04,875 6,39,27,820 9.23
2003-04 3,12,06,057 9,28,58,229 33.60
2004-05 2,27,12,871 14,60,40,088 15.55
2005-06 3,68,32,546 16,89,42,238 21.80
2006-07 2,30,86,590 11,82,62,000 19.52
Source: Annual reports of the company

The gross profit ratio shows a dynamic trend. This ratio is


fluctuating year by year. The highest ratio was in 2003-04, i.e. 33.60.
The ratio has the range from 9.23 to 19.52.

Chart No-2 : Gross Profit Ratio

33
G ro s s P ro fit R a tio

33.6
35
30
25 21.8
19.52
20 15.55
R a tio
15
9.23
10
5
0
2002-03 2003-04 2004-05 2005-06 2 006-07
ye a rs

3. NET PROFIT RATIO:

34
This ratio establishes the relationship between the amount of
Net profit and the amount of revenue. This ratio is taken in
percentage. Net profit or Net income is the gross profit less selling,
distribution and financial expenses. Net profit for calculating this
ratio is picked up from the profit & loss A/c.
Net profit
Net profit ratio = ------------------ * 100
Net sales

Table No-3 : Net Profit Ratio (Rupees in lakhs)


Year Net profit Sales Ratio
2002-03 -32,46,716 6,39,27,820 -5.07
2003-04 16,93,569 9,28,58,229 1.82
2004-05 22,86,720 14,60,40,088 1.56
2005-06 15,51,571 16,89,42,238 9.18
2006-07 11,99,732 11,82,62,000 1.01
Source: Annual reports of the company

From the above table, we can inter prêt that the Net Profit
Ratio are -5.07, 1.82,1.56,9.18,1.01. The average ratio is 1.7 .The net
profit ratio vary from -5.07 to 1.01, so it gain profits in spite of
having loss in 2002-2003.

35
Chart No-3 : Net Profit Ratio

N et profit R atio

10 9.18
8
6
4
1.82 1.56
Ra tio 2 1.01
0
-2
-4 -5.07
-6
2002-03 2003-04 2004-05 2005-06 2006-07
Ye a rs

4. OPERATING EXPENSES RATIO:


This ratio is the test of the operational efficiency with which
the business is being carried. The operating ratio should be low

36
enough to leave a portion of sales to give a fair return to the investor.
This ratio is a complementary of net profit ratio. In case the net
profit ratio is 20%, it means that the operating ratio is 80%.

Operating costs
Operating or Expenses Ratio = --------------------- * 100
Net sales

Table No-4: Operating or Expenses Ratio (Rupees in lakhs)


Year Operating costs Sales Ratio
2002-03 6,71,49,240 6,39,27,820 105.04
2003-04 7,53,61,424 9,28,58,229 81.16
2004-05 13,98,30,109 14,60,40,088 95.75
2005-06 15,23,57,322 16,89,42,238 90.18
2006-07 11,20,75,410 11,82,62,000 94.77
Source: Annual reports of the company

The above table ratio reveals that the operating ratio. The
higher the ratio occurred in 2003 – 04. The operating cost is having
more contribution towards sales . The indices of this ratio is 105.04,
81.16 , 95.75 , 90.18 , 94.77.

Chart No-4 : Operating or Expenses Ratio

37
Operating Expenses Ratio

120
105.04
95.75 94.77
100 90.18
81.16
80

Ratio 60

40

20

0
2002-03 2003-04 2004-05 2005-06 2006-07
Yea rs

4.1.2. TURNOVER RATIOS:


Turnover means ”sales”. So turnover ratios are related to
sales. It is an accepted conclusion that sales has a direct relationship
with the performance of the business. The turnover ratio are also

38
known as activity or efficiency ratios. They indicated in the efficiency
with which the capital employed is rotated in the business.

1. FIXED ASSETS TURNOVER RATIO:


This ratio indicates the extent to which the investments in fixed
assets contribute towards sales. If compared with a previous period,
it indicates whether the investment in fixed assets has been judicious
or not.
Net sales
Fixed Assets Turnover Ratio = ----------------
Fixed assets
Table No-5: Fixed Assets Turnover Ratio (Rupees in lakhs)
Year Sales Fixed assets In times
2002-03 6,39,27,820 2,31,24,299 2.764
2003-04 9,28,58,229 2,17,58,173 4.267
2004-05 14,60,40,088 2,06,62,370 7.067
2005-06 16,89,42,238 2,14,65,947 7.870
2006-07 11,82,62,000 2,09,96,680 5.632
Source: Annual reports of the company

From the above table we can interpret that the highest ratio
(indicated in 2005-06 i.e.) is 7.8. The lowest ratio was in 2002-03 i.e.
2.7. This ratio represents the how many times fixed assets has
turnover to sales. The indices of this ratio are 2.7, 4.2, 7.06, 7.8 & 5.6.

Chart No-5 : Fixed Assets Turnover Ratio

39
Fixed Assets Turnover R atio

7.87
8 7.067
7
5.632
6
5 4.267
Ra tio 4
2.764
3
2
1
0
2002-03 2003-04 2004-05 2005-06 2006-07
Ye a rs

2. WORKING CAPITAL TURNOVER RATIOS:


This is also known as working capital leverage ratio. This ratio
shows the number of times the working capital result in sales. In
other words, this ratio indicates the efficiency or otherwise in the
utilization of short term funds in making sales.
Net sales
Working Capital Turnover Ratios = --------------------

40
Working capital

Table No-6: Working Capital Turnover Ratios (Rupees in lakhs)


Year Sales Net working Ratio
capital
2002-03 6,39,27,820 6,31,60,790 1.01
2003-04 9,28,58,229 6,67,28,301 1.39
2004-05 14,60,40,088 7,74,22,816 0.18
2005-06 16,89,42,238 10,90,50,955 1.54
2006-07 11,82,62,000 10,36,74,753 0.11
Source: Annual reports of the company

From the above table we can interpret that the turnover of Net
working capital is not satisfactory because the ratio is not state.

Chart No-6 : Working Capital Turnover Ratios

41
Working capital turnover Ratio

1.8
1.54
1.6
1.39
1.4
1.2 1.01
Ratios

1
0.8
0.6
0.4
0.18
0.2 0.11
0
2003 2004 2005 2006 2007
Years

3. DEBTORS TURNOVER RATIO:

42
Debtors constitute an important constituent of current assets
and therefore the quality of debtors to a great extent determines a
firm’s liquidities.
Sales
Debtors Turnover Ratio = -----------------------------------
Average accounts receivable

Table No-7 :Debtors Turnover Ratio (Rupees in lakhs)


Year Sales Debtors Ratio
2002-03 6,39,27,820 3,83,63,309 1.67
2003-04 9,28,58,229 4,83,44,179 1.92
2004-05 14,60,40,088 5,38,22,496 2.71
2005-06 16,89,42,238 9,11,77,645 1.85
2006-07 11,82,62,000 6,71,68,236 1.76
Source: Annual reports of the company

The debt turnover ratio has been increased year to year. The
highest ratio has indicated in the year 2005. then it has been declined.
The ratio ranges from 1.67 to 1.76.

Chart No-7 : Debtors Turnover Ratio

43
Debtors Turnover Ratio

3 2.71

2.5
1.92 1.85
2 1.67 1.76
Ratio

1.5

0.5

0
2002-03 2003-04 2004-05 2005-06 2006-07
Ye a rs

4.1.3 LIQUIDITY RATIOS


These ratio are also termed as working capital or short-term
solvency ratio. An enterprise must have adequate working capital to

44
run its day-to-day operations. Inadequacy of working capital may
bring the entire business operation to a grinding halt because of
inability of the enterprise to pay for wages materials and other
regular expenses.

1. CURRENT RATIO:
This ratio is also known as working capital ratio and can be
expressed as a pure ratio or percent ratio. This ratio is an indicator
of the firm’s commitment to meet its short-term liabilities. A current
ratio of 2:1 is considered an ideal one.
Current assets
Current Ratio = -----------------------
Current liabilities
Table No-8 : Current Ratio (Rupees in lakhs)
Year Current assets Current Ratio
liabilities
2002-03 7,43,06,690 1,11,45,900 6.67
2003-04 7,77,74,448 1,10,46,147 7.04
2004-05 9,44,39,400 1,70,16,584 5.55
2005-06 14,38,08,962 3,47,58,007 4.14
2006-07 12,67,84,753 2,31,10,000 5.49
Source: Annual reports of the company

The above table reveals the current ratio of the firm. The ratio
varies from 6.67 to 5.49. The current assets position of the company
is very high. The average ratio is 5.78. This can be in forced that the
firm has been current assets to meet one its current liabilities.

45
Chart No-8 : Current Ratio

Current Ratio

8
7.04
6.67
7
6 5.55 5.49
5
Ratios

4.14
4
3
2
1
0
2003 2004 2005 2006 2007
Years

2. LIQUID RATIO:
This ratio is also termed as acid test ratio. This ratio is
ascertained by comparing the liquid assets to current liabilities.
Prepaid expenses and stock are not taken as liquid assets. The
standard ratio is 1:1.

46
Liquid Assets
Liquid Ratio = ---------------------
Current Liability
Liquid Assets = Current Assets-Inventory

Table No-9 : Liquid Ratio (Rupees in lakhs)


Year Liquid assets Current liabilities Ratio
2002-03 4,68,73,623 1,11,45,900 4.24
2003-04 6,21,69,352 1,10,46,147 5.68
2004-05 5,93,65,098 1,70,16,584 3.52
2005-06 7,69,01,069 3,47,58,007 2.79
2006-07 7,47,44,779 2,31,10,000 3.25
Source: Annual reports of the company

The above table reveals the liquidity ratio of the firm. The
ratio varies from 4.24 to 3.25. The liquidity assets position of the
company is very high. The average ratio is 3.89.

Chart No-9 : Liquid Ratio

47
Liquid Ratio

6 5.68

5
4.24
4 3.52
3.25
2.79
Ratio 3

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

3. NET WORKING CAPITAL RATIO

48
The difference between current assets and current liabilities
excluding short-term Bank borrowing is called net working capital
(NWC) or net current assets (NCA). NWC is used as a measure of a
firm’s liquidity.
Net Working Capital
NWC = ---------------------------
Net Assets
Table No-10: Net working capital ratio (Rupees in lakhs)
Year Net working capital Fixed assets Ratio
2002-03 6,31,60,790 2,31,24,299 2.731
2003-04 6,67,28,301 2,17,58,173 3.066
2004-05 7,74,22,816 2,06,62,370 3.747
2005-06 10,90,50,955 2,14,65,947 5.080
2006-07 10,36,74,753 2,09,96,680 4.937
Source: Annual reports of the company

From the above table, we can interpret that the working


capital position contributing to fixed assets. This ratio ranges from
2.7 to 4.9.
The indices are 2.7 , 3.06 , 3.7 , 5.08 & 4.9……The highest
ratio was in the year 2005 – 06. i.e. 5.08 and lowest ratio was in 2002-
03 i.e. 2.7.
This can be inferred that working capital position is better for
all the years.
Chart No-10 : Net working capital ratio

49
Net working capital ratio

2006-07 4.937

2005-06 5.08
Years

2004-05 3.747

2003-04 3.066

2002-03 2.731

0 1 2 3 4 5 6
Ratio

4.1.4. SOLVENCY RATIO

50
Solvency means the ability of the business to repay its outside
liabilities. These liabilities are categorized as short term liabilities
and long term liabilities. Ratios concerning the short term solvency
of the business have been discussed under liquidity ratio.
LONG-TERM SOLVENCY RATIO:
1.FIXED ASSETS RATIO:
This ratio is also known as ratio of capital or long term funds
to fixed assets. one of the key principle of financial policy is that fixed
assets acquisition should be financed by long term funds only.
Fixed assets
Fixed assets ratio = ------------------------
Shareholder funds

Table No-11 : Fixed Assets Ratio (Rupees in lakhs)


Year Fixed assets Shareholder funds Ratio
2002-03 2,31,24,299 4,78,71,467 0.48
2003-04 2,17,58,173 4,95,65,037 0.43
2004-05 2,06,62,370 5,18,51,758 0.39
2005-06 2,14,65,947 5,34,03,329 0.40
2006-07 2,09,96,680 5,46,03,062 0.38
Source: Annual reports of the company

This ratio shows relationship between fixed assets and


shareholders funds…this ratio shows how much fixed assets has been

51
contributed by share holders fund. The higher the ratio indicates in
2002-03.i.e. 48%.
,

Chart No-11 : Fixed Assets Ratio

F ix e d As s e ts R a tio

0.6
0.48
0.5
0.43
0.39 0.4 0.38
0.4
Ratio

0.3

0.2

0.1

0
2002-03 2003-04 2004-05 2005-06 2006-07
Ye a rs

2. DEBT- EQUITY RATIO:

52
The debt-equity ratio is determined to ascertain the soundness
of the long-term financial policies of the company. It is also known as
external internal equity ratio.
External equities
Debt- Equity Ratio = -----------------------
Internal equities

Table No-12 : Debt- Equity Ratio (Rupees in lakhs)


Year External equities Internal equities Ratio
2002-03 3,56,88,640 4,78,71,467 0.74
2003-04 3,54,83,123 4,95,65,037 0.71
2004-05 4,23,30,706 5,18,51,758 0.81
2005-06 7,27,54,809 5,34,03,329 1.36
2006-07 6,66,50,000 5,46,03,062 1.22
Source: Annual reports of the company

From the above table, we can inter prêt that the debt-equity
ratio are 0.74, 0.71, 0.81, 1.36, 1.22. The average ratio is 0.97. The
ratio is in first three years found to be good and in the later years, it
is exceeding i.e external debts have increased.

Chart No-12 : Debt- Equity Ratio

53
Debt- Equity Ratio

2006-07 1.22

2005-06 1.36
Years

2004-05 0.81

2003-04 0.71

2002-03 0.74

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6


Ratio

4.1.5. LEVERAGE RATIOS

54
Leverage refers to the proportion between fixed interest or
dividend bearing funds and non-fixed interest or dividend bearing
funds in the total capital employed in the business. The fixed interest
funds include the funds provided by the debenture holders and
preference shareholders.
1. PROPRIETARY RATIO
This ratio is also known as ‘Owners fund ratio’ or ‘Net worth
ratio’. This ratio establishes the relationship between the proprietors
funds and total tangible assets. It is a variant of debt-equity ratio.
Shareholder funds
Proprietary Ratio = -----------------------------
Total tangible assets

Table No-13 : Proprietary Ratio (Rupees in lakhs)


Year Shareholder Total tangible Ratio
funds assets
2002-03 4,78,71,467 8,86,91,857 0.53
2003-04 4,95,65,037 9,01,79,911 0.55
2004-05 5,18,51,758 9,93,14,214 0.52
2005-06 5,34,03,329 13,12,89,889 0.41
2006-07 5,46,03,062 12,63,84,812 0.43
Source: Annual reports of the company

From the above table, proprietary ratio are 0.53, 0.55, 0.52,
0.41, 0.43. highest proprietary ratio is 0.55 in 2004. Lowest is 0.41 in
2006. The total average is 2.44.

55
Chart No-13 : Proprietary Ratio

Proprietary Ratio

0.6 0.55
0.53 0.52
0.5
0.41 0.43
0.4

Ratio 0.3

0.2

0.1

0
2002-03 2003-04 2004-05 2005-06 2006-07
Years

2. DEBT-RATIO:
Debt-ratio may be used to analyze the long-term solvency of a
firm. This helps to know the proportion of the interest-bearing debt
(also called funded debt) in the capital structure.

56
Total Debt
Debt ratio = ---------------------
Net assets

Table No-14 : Debt-Ratio (Rupees in lakhs)


Year Total debt Net assets Ratio
2002-03 6,39,27,820 4,55,42,208 1.40
2003-04 9,28,58,229 4,33,53,744 2.14
2004-05 14,60,40,088 5,10,83,338 2.86
2005-06 16,89,42,238 11,82,62,000 2.33
2006-07 11,82,62,000 79,11,72,941 1.49
Source: Annual reports of the company

From the above table, we can interpret, total debts is having


more share in net assets. The highest ratio was indicated in 2004-05
is 2.86.

Chart No-14 : Debt-Ratio

57
Debt Ratio

3.5
2.86
3
2.5 2.33
2.14
Ratios

2
1.4 1.49
1.5
1
0.5
0
2003 2004 2005 2006 2007
Years

4.2.TREND ANALYSIS
Trend analysis acquaints us with the profitability and the short
term, and long-term liquidity of the business. In addition it also

58
discovers the future prospects of the business in terms of
profitability, operational efficiency and financial soundness of the
enterprise. Under this technique, the profit and loss account and the
balance sheet of an accounting year are taken as base.

The rate of fixed expansion or secular trend in the growth of


the business and the general price level. It might be found in practice
that a number of firms would show a consistent growth over a period
of years. But to get a real trend of growth, the sales figures are
adjusted by a situated index of general prices. In other words, sales
figures should be defined for rising price level.

When the resulting figure are shown in graph, we will get


trend of growth prices. Another method of securing trend of growth
and one, which can be used instead of the adjusted, sales figure or as
check on then is to tabulate and plot the out put or physical volume
of sales expressed in suitable units of measures. If the general price
level is not considered while analyzing trend of growth, it can
mislead management. They may become unduly optimistic in periods
of prosperity and presumptive in dull periods

4.2.1 TREND ANALYSIS FOR SALES:

Table No-15 : Trend analysis for sales (Rupees in lakhs)

59
Years Sales (Y) Base year X XY
(X)
2002-03 6.39 -2 4 -12.78
2003-04 9.28 -1 1 -9.78
2004-05 14.60 0 0 0
2005-06 16.89 1 1 16.89
2006-07 11.82 2 4 23.64
∑Y=58.98 ∑X=0 ∑X2=10 ∑XY=18.47

∑Y = Na + b∑X ; ∑XY = a∑X + b∑X2

∑Y = Na + b∑X ∑XY = a∑X + b∑X2


58.98 = 5a + b(0) 18.47 = a(0) +10b
5a = 58.98 10b = 18.47
a =16.452 b = 1.85

YC = a + bX
Y2008 = 16.452 +1.85(4) = 16.452 +7.4 = 23.852
Y2009 = 16.452 +1.85(5) = 16.452 +9.25 = 25.705
Y2009 = 16.452 +1.85(6) = 16.452 +11.1 = 27.55

60
FUTURE PREDICTION:
(Rupees in lakhs)
Years Sales

2008 23.852

2009 25.705

2010 27.55

The sales in future may be increased.

4.2.2 TREND ANALYSIS FOR STOCK:

Table No-16 : Trend analysis for stock (Rupees in lakhs)

61
Years Stock Year base X XY
(Y) year
(X)
2002-03 2.72 -2 4 -5.44
2003-04 1.53 -1 1 -1.53
2004-05 3.48 0 0 0
2005-06 4.69 1 1 4.69
2006-07 52.03 2 4 104.06
∑Y= 64.45 ∑X= 0 ∑X2=10 ∑XY=
101.78

∑Y = Na + b∑X ∑XY = a∑X + b∑X2


64.45 = 5a + b(0) 101.78 = a(0) +10b
5a = 64.45 10b = 101.78
a =12.89 b = 10.18

YC = a + bX
Y2008 = 12.89 +10.18(4) = 53.61
Y2009 = 12.89 +10.18(5) = 63.79
Y2010 = 12.89 +10.18(6) = 73.97

FUTURE PREDICTION:
(Rupees in lakhs)
Years Stock
2008 53.61
2009 63.79
2010 73.97

62
The stock levels in future will be increasing up to 73.97. The
stock level is 53.61, 63.79,73.97.

4.3. COMPARATIVE STATEMENT ANALYSIS

Financial statements are prepared consistently and lending


themselves to comparative analysis, as accounting convention
requires. Comparative figures reveal trends in a company's financial
development and permit insight into the dynamics behind static
balance sheet figures.

63
Statement on which balance sheets, income statements, or
statements of changes in financial position are assembled side by side
for review purposes. Changes that have occurred in individual
categories from year to year and over the years are easily noted. The
key factor revealed is the trend in an account or financial statement
category over time. A comparison of financial statements over two to
three years can be undertaken by computing the year-to-year change
in absolute dollars and in terms of percentage change. Longer-term
comparisons are best undertaken by means of Index-Number Trend
Series.

4.3.1.a Comparative income statement of 5 years (Rupees in lakhs)


Particulars 2003 2004 Increase or %
decrease
Sales 6,39,27,820 9,28,58,229 2,89,30,409 45.25
Cost of goods sold 5,80,22,945 6,16,52,172 36,29,277 6.25

Gross profit 59,04,875 3,12,06,057 2,53,01,182 428.47

64
Administrative & 91,26,295 1,37,09,252 45,82,957 50.22
selling expenses
Financial charges 38,03,328 45,53,070 7,49,742 19.71
Other operating 14,82,009 15,13,702 31,693 2.09
expenses
Total 1,44,11,632 1,97,76,024 53,64,392 37.22
Operating profit -85,06,757 1,14,30,033 1,99,36,790 234.36

Less: operating - - - -
expenses
Profit before tax -85,06,757 1,14,30,033 1,99,36,790 234.36

4.3.1.b. Comparative income statement of 5 years (Rupees in lakhs)


Particulars 2003 2005 Increase or %
decrease
Sales 6,39,27,820 14,60,40,08 8,21,12,268 128.44
8
Cost of goods 5,80,22,945 12,33,27,21 6,53,04,272 112.54
sold 7

65
Gross profit 59,04,875 2,27,12,871 1,68,07,996 74.00
Administrative & 91,26,295 1,65,02,892 73,76,597 284.64
selling expenses
Financial charges 38,03,328 35,98,205 2,05,123 5.39
Other operating 14,82,009 16,02,118 1,20,109 8.10
expenses
Total 1,44,11,632 2,17,03,215 72,91,583 50.59
Operating profit -85,06,757 10,09,656 95,16,413 111.87
Less: operating - 32,727 - -
expenses
Profit before tax -85,06,757 9,76,929 94,83,686 111.48

4.3.1.c Comparative income statement of 5 years (Rupees in lakhs)


Particulars 2003 2006 Increase or %
decrease
Sales 6,39,27,820 16,89,42,23 10,50,14,41 1642.65
7 7
Cost of goods 5,80,22,945 13,21,09,69 7,40,86,746 127.79
sold 1
Gross profit 59,04,875 3,68,32,546 3,09,27,671 523.76

66
Administrative 91,26,295 2,02,47,631 1,11,21,336 121.86
& selling
expenses
Financial 38,03,328 41,83,130 33,85,018 89.00
charges
Other operating 14,82,009 17,75,955 2,93,946 19.83
expenses
Total 1,44,11,632 26,20,67,16 1,17,95,084 81.84

Operating profit -85,06,757 1,06,25,830 1,91,32,587 224.91

Less: operating - - - -
expenses
Profit before tax -85,06,757 1,06,25,830 1,91,32,587 224.91

4.3.1.d Comparative income statement of 5 years (Rupees in lakhs)


Particulars 2003 2007 Increase or %
decrease
Sales 6,39,27,820 11,82,62,00 8,21,12,268 128.45
0
Cost of goods 5,80,22,945 9,51,75,410 6,53,04,272 112.55
sold
Gross profit 59,04,875 2,30,86,590 1,68,07,996 284.65

67
Administrative 91,26,295 1,69,00,000 77,73,705 85.179
& selling
expenses
Financial 38,03,328 62,29,397 2,05,123 5.39
charges
Other 14,82,009 18,53,974 1,20,109 8.10
operating
expenses
Total 1,44,11,632 2,49,83,371 1,05,71,739 73.35
Operating -85,06,757 18,96,781 1,04,03,538 122.30
profit
Less: operating - - - -
expenses
Profit before -85,06,757 18,96,781 1,04,03,538 122.30
tax

From the above tables, the facts of last four years are
compared to the base year 2003. For these years, there has been an
increasing trend of accounting information. Gross profit ratio is
fluctuating year by year. The highest ratio was in 2003-04, i.e. 33.60.
The ratio has the range from 9.23 to 19.52. Administrative & selling
expenses compared to proves years decreasing. The higher the ratio
occurred in 2003. The operating cost is having more contribution
towards sales.

68
4.3.2.a Comparative Balance Sheet of 5 years
(Rupees in lakhs)
PARTICULARS 2003 2004 Increase %
(+) and
decrease (-)
(1) Shareholder funds
A) Capital 4,30,02,000 4,30,02,000 - -
B) Reserve and Surplus 48,69,467 65,63,037 16,93,570 34.77
(2) Loan Funds
A) Secured Loans 2,89,48,760 2,72,71,596 -16,77,164 6.14
B) Unsecured Loans 67,39,880 82,11,527 14,71,617 17.82
(3) Deferred Tax 51,31,750 51,31,750 - -
Total 8,86,91,857 9,01,79,911 14,88,054 1.67
ii. Application of funds
(1) Fixed assets

69
A) Gross block 3,32,29,680 3,33,77,257 1,45,577 0.44
B) Less Depreciation 1,01,05,381 1,16,19,084 15,13,703 13.02
C) Net Block 2,31,24,299 2,17,58,173 13,66,126 6.27
D) Investments 16,66,745 13,23,426 3,43,319 25.94
(2) Current Assets
A) Inventories 2,72,14,332 1,53,15,751 1,18,98,581 77.68
B) Sundry debtors 3,83,63,309 4,83,44,179 99,80,870 20.64
C) Cash and bank 2,88,842 44.50
balances 3,60,164 6,49,006
D) Loans and advances 83,68,884 1,34,65,512 50,96,628 37.84
Less: Current Liability
& Provisions 1,11,45,900 1,10,46,148 -99,752 0.90
Net current assets 6,31,60,790 6,67,28,300 35,67,510 5.34
Miscellaneous
Expenditure
A) Preliminary -3,70,011 99.99
Expenses 7,40,023 3,70,012
Total 8,86,91,857 9,01,79,911 14,88,054 1.67

4.3.2.a Comparative Balance Sheet of 5 years


(Rupees in lakhs)
PARTICULARS 2003 2005 Increase %
(+) and
decrease (-)
(1) Shareholder funds
A) Capital 4,30,02,000 4,30,02,000 - -
B) Reserve and Surplus 48,69,467 88,49,758 39,80,291 44.97
(2) Loan Funds
A) Secured Loans 2,89,48,760 3,15,65,784 26,17,024 8.29
B) Unsecured Loans 67,39,880 1,07,64,922 40,25,042 37.39
(3) Deferred Tax 51,31,750 51,31,750 - -
Total 8,86,91,857 9,93,14,214 1,06,22,357 10.69
ii. Application of funds
(1) Fixed assets
A) Gross block 3,32,29,680 3,38,70,700 6,41,020 1.89

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B) Less Depreciation 1,01,05,381 1,32,08,330 31,02,949 23.49
C) Net Block 2,31,24,299 2,06,62,370 -24,61,929 11.91
D) Investments 16,66,745 12,29,027 -4,37,718 35.61
(2) Current Assets
A) Inventories 2,72,14,332 3,48,07,347 1,11,93,015 32.15
B) Sundry debtors 3,83,63,309 5,38,22,496 1,54,59,187 64.89
C) Cash and bank
balances 3,60,164 8,39,699 4,79,535 57.10
D) Loans and advances 83,68,884 49,69,858 -33,99,026 68.39
Less: Current Liability
& Provisions 1,11,45,900 1,70,16,584 58,70,684 34.49
Net current assets 6,31,60,790 7,74,22,817 1,42,62,027 18.43
Miscellaneous
Expenditure
A) Preliminary - -
Expenses 7,40,023 -
Total 8,86,91,857 9,93,14,214 1,06,22,357 10.69

4.3.2.b Comparative Balance Sheet of 5 years


(Rupees in lakhs)
PARTICULARS 2003 2006 Increase %
(+) and
decrease (-)
(1) Shareholder funds
A) Capital 4,30,02,000 4,30,02,000 - -
B) Reserve and Surplus 48,69,467 1,04,01,329 55,31,862 53.18
(2) Loan Funds
A) Secured Loans 2,89,48,760 4,86,58,734 1,97,09,974 40.50
B) Unsecured Loans 67,39,880 2,40,96,075 1,73,56,195 72.09
(3) Deferred Tax 51,31,750 51,31,750 - -
Total 8,86,91,857 13,12,89,889 4,25,98,032 32.44
ii. Application of funds
(1) Fixed assets

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A) Gross block 3,32,29,680 3,64,50,232 32,20,552 8.83
B) Less Depreciation 1,01,05,381 1,49,84,285 48,78,904 32.56
C) Net Block 2,31,24,299 2,14,65,947 -16,58,352 7.72
D) Investments 16,66,745 7,72,987 -8,93,758 115.62
(2) Current Assets
A) Inventories 2,72,14,332 4,69,07,893 1,96,93,561 41.98
B) Sundry debtors 3,83,63,309 9,11,77,645 5,28,14,336 57.92
C) Cash and bank
balances 3,60,164 18,51,768 14,91,604 80.55
D) Loans and advances 83,68,884 38,71,656 -44,97,228 116.15
Less: Current Liability
& Provisions 1,11,45,900 3,47,58,007 2,36,12,107 67.93
Net current assets 6,31,60,790 10,90,50,956 4,58,90,166 42.08
Miscellaneous
Expenditure
A) Preliminary - -
Expenses 7,40,023 -
Total 8,86,91,857 13,12,89,889 4,25,98,032 32.44

4.3.2.a Comparative Balance Sheet of 5 years


(Rupees in lakhs)
PARTICULARS 2003 2007 Increase (+) %
and
decrease (-)
(1) Shareholder funds
A) Capital 4,30,02,000 4,30,02,000 - -
B) Reserve and Surplus 48,69,467 1,16,01,062 67,31,595 58.02
(2) Loan Funds
A) Secured Loans 2,89,48,760 5,14,38,000 2,24,89,240 43.7
B) Unsecured Loans 67,39,880 1,52,12,000 84,72,120 55.69
(3) Deferred Tax 51,31,750 51,31,750 - -
Total 8,86,91,857 12,63,84,812 3,76,92,955 29.82
ii. Application of funds

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(1) Fixed assets
A) Gross block 3,32,29,680 3,92,61,430 60,31,750 15.36
B) Less Depreciation 1,01,05,381 1,82,64,750 81,59,369 44.67
C) Net Block 2,31,24,299 2,09,96,680 -21,27,619 10.13
D) Investments 16,66,745 17,13,378 46,633 2.72
(2) Current Assets
A) Inventories 2,72,14,332 5,20,39,974 2,48,25,642 47.70
B) Sundry debtors 3,83,63,309 6,71,68,236 2,88,04,927 42.88
C) Cash and bank
balances 3,60,164 19,27,000 15,66,836 81.30
D) Loans and advances 8368884 56,49,544 -27,19,340 48.13
Less: Current Liability
& Provisions 1,11,45,900 2,31,10,000 1,19,64,100 51.77
Net current assets 6,31,60,790 10,36,74,754 4,05,13,964 39.07
Miscellaneous
Expenditure
A) Preliminary - -
Expenses 7,40,023 -
Total 8,86,91,857 2,63,84,812 -6,23,07,045 236.14

These tables reveals that, the share capital of the company


remains the same during 2003 – 2007. And net block shows the
decreasing trend every year. And then the reserves & surplus of the
company is increasing every year.

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CHAPTER V
FINDINGS & CONCLUSION
5.1 FINDINGS
• The factory should take necessary steps for the study up of
market department, which enables the factory to increase its
able in an effective manner. Similarly it should also establish a
Finance Department for making the best investment plans
raising of funds rate.
• Gross profit ratio indicates low performance of the company so
it is suggested that the company as to take steps in order to
increase sales and reduce cost of production.

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• The operating expenses ratio of the company is high so that the
company should try to reduce the manufacturing expenses so
as to improve the operating efficiency of the business.
• The Debtors ratio is increases year to year it means there is an
increase in receivable investment. It indicates the firm is not
managing the debtors effectively.
• The liquidity position of the division is in the better position.
On the average, it is good. The management should maintain
same liquidity position in feature also.
• Higher current ratio indicates grater margin of safety of the
firm.

• If the debtors are maintains same position in future also it will


be effective.

• Net profit ratio indicates low performance of the company.

• The company followed the idle current ratio from the past 5
years.

5.2 CONCLUSION

The company’s financial strength has to be reviewed by the


management and the excess fund, which is unnecessarily blocked in
inventory, has to be disposed of immediately. That means the
company can accept a project on the future cash flow that is likely to
accrue in the years.

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In handling of the financial statements professionalism may be
encouraged. The company’s overall position is satisfactory. During
my project work I had got good experience, regarding the PHYTO
CHEM INDIA LTD., HYDERABAD.

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