Summer Training Project Report

On

FINANCIAL STATEMENT ANALYSIS

SESSION : 2019-20

Submitted To: - SubmittedBy:-

Mrs. Arti Dhall Divya Pathak

H.I.M.T,ROHTAK MBA (3rd Sem)

.

HINDU INSTITUTE OF MANAGEMENT& TECHNOLOGY, ROHTAK

Affiliated to

M.D. University (ROHTAK)

 DECALARATION

I, Divya Pathak, Roll no. 15 M.B.A, final Year (3rd semester) of Hindu Institute Of
Management & Technology,Rohtak Hereby declare that the summer Training
report entitled “Financial Statement Analysis at “VITA.” is an original work and
the same has not been submitted to any other institute for the award of any other
degree.

Presentation Incharge Signature of Candidate

 Acknowledgement

I consider it a privilege to express a few words of gratitude and respect to all who
guided and inspired me in successful completion of this project .

I am overwhelmed with pleasure to express my gratitude towards Mrs. INDU at VITA .

For granting this project to me and giving me an opportunity to work with such an
esteemed organization .

It is my sincere duty to do my best ,so as to recognize as one amongst the most

successful professional ,which I always strive to be .This bring along and frame to my
beloved institution, the HINDU INSTUTUTE OF MANAGEMENT & TECHNOOGY .

I also extend particular thanks to our Director Mrs.Monika and my Project

Guide Mrs. Arti Dhall for guiding me in my project. I would also like to thank
all the teaching and non teaching staff member and all others who helped me
directly or indirectly in the successful completion of this project .

There is no love like parents. I pay my most sincere regards to my parents ,deserves a very
special word of appreciation for their invaluable support ,encouragement and pains taking
efforts ,without which this goal would have been a much difficult .

DIVYA PATHAK

Research Student
 PREFACE

Practical training constitutes an integral part of management studies. Training gives an

opportunity to the students to expose themselves to the industrial environment, which is quit
different from the classroom teachings. One cannot rely on theoretical knowledge. It has to
be coupled with practical to be fruitful. Training also enables the management students to
see themselves the working condition under which they have to work in the future. It thus
enables the students to undergone those experiences, which will help them later when th ey
join any organization.
After liberalization the Indian economic sense is changed. Industrial activity in India
has become a thing to watch & I really wanted to be a part of it &it is essential for me being
a finance student.
I underwent Eight weeks of training at VITA. I consider myself lucky to get my
summer training in VITA. It really helped me to get a practical insight into actual business
environment & provide me an opportunity to make my financial management concepts more
clear.

Divya Pathak
 INDEX

Sr. No. Content Page no.

1 Introduction of company 1-13
2 14-41
Introduction of the Financial statement
(i) Meaning of Financial Statement
(ii) Limitation of Financial Statement
(iii) Advantages of Financial Statement
(iv) Objectives of Financial Statement
(v) Cash Flow statement
(vi) Ratio Analysis
3 Research Methadology 41-51

(i) Research Design

(ii) Sample Design
(iii) Advantages
(iv) Limitation
4 Data Analysis and Interpretation 52-65
5 Conclusion and Summary 65-66
6 Annexure 67-71

(i) Financial statement

(ii) Bibliography
INTRODUCTION

OF

COMPANY
Hyundai Motor India Ltd is a wholly owned subsidiary of the Hyundai Motor Company in
India. It is the second largest automobile manufacturer in India.
Hyundai Santro Xing/Atos Prime (Discontinued-2014) was manufactured only by Hyundai
Motor India Limited.
Hyundai Motor India Limited was formed on 6 May 1996 by the Hyundai Motor Company of
South Korea. When Hyundai Motor Company entered the Indian Automobile Market in 1996 the
Hyundai brand was almost unknown throughout India. During the entry of Hyundai in 1996,
there were only five major automobile manufacturers in India, i.e. Maruti, Hindustan, Premier,
Tata and Mahindra. Daewoo had entered the Indian automobile market with Cielo just three
years back while Ford, Opel and Honda had entered less than a year back.
For more than a decade till Hyundai arrived, Maruti Suzuki had a near monopoly over the
passenger cars segment because Tata Motors and Mahindra & Mahindra were solely utility and
commercial vehicle manufacturers, while Hindustan and Premier both built outdated and
uncompetitive products.
History
HMIL's first car, the Hyundai Santro was launched on 23 September 1998 and was a runaway
success. Within a few months of its inception HMIL became the second largest automobile
manufacturer and the largest automobile exporter in India. Hyundai Motor India Limited (HMIL)
is a wholly owned subsidiary of Hyundai Motor Company (HMC), South Korea and is the
largest passenger car exporter and the second largest car manufacturer in India. HMIL presently
markets 10 models - Eon, Grand i10, Xcent, Elite i20, i20 Active, Verna, Elantra, Creta,Tucson
and SantaFe
HMC has set up a research and development facility (Hyundai Motor India Engineering - HMIE)
in the cyber city of Hyderabad.
As HMC’s global export hub for compact cars, HMIL is the first automotive company in India to
achieve the export of 10 lakh cars in just over a decade. HMIL currently exports cars to more
than 87 countries across EU, Africa, Middle East, Latin America, Asia and Australia. It has been
the number one exporter of passenger cars of the country for the eighth year in a row.
To support its growth and expansion plans, HMIL currently has 475 strong dealer network and
more than 1,226 strong service points across India, which will see further expansion in 2017.
In July 2012, Arvind Saxena, the Director of Marketing and Sales stepped down from the
position after serving the company for 7 years.

Manufacturing Facilities

The Hyundai i10 (Discontinued-2016) was exclusively manufactured only by HMIL.HMIL has
two manufacturing plants in Irungattukottai, Sriperumbudur, Chennai, Tamil Nadu. HMIL’s
manufacturing plant near Chennai claims to have the most advanced production, quality and
testing capabilities in the country. To cater to rising demand, HMIL commissioned its second
plant in February 2008, which produces an additional 300,000 units per annum, raising HMIL’s
total production capacity to 600,000 units per annum. Current Production Capacity with these 2
plants in Irungattukottai, Sriperumbudur, Chennai increased to 7,00,000 cars per year.

R&D Centre
Hyundai Motor India Engineering (HMIE) is a fully owned subsidiary of Hyundai Motor
Company, South Korea, which is located at Hyderabad, Telangana. HMIL established HMIE in
November 2006 and contributed to the development of Hyundai Motors' popular new models for
the Indian market starting with the Eon and followed now by the "i" series, and also in SUV
segments like the Creta. Hyundai Motors' other overseas R&D centres are located in the United
States, Germany, Japan, Korea, and China.

Hyundai Motor India Engineering (HMIE) is a fully owned subsidiary of Hyundai Motor
Company, South Korea, which is located at Hyderabad. It is located in the Hi-tech city region of
Hyderabad in Telangana State. Often referred to as India’s Silicon Valley, Hyderabad is the IT
technology centre of India, hosting leading international IT companies.
Hyundai Motor established HMIE in November 2006 in order to hire some of the talented IT
workers found in the region. HMIE has contributed to the development of Hyundai Motor’s
popular new models for the Indian market starting with the EON and followed now by the “I”
series and also in SUV segments like Creta.

HMIE Vision is to support Head Quarters Hyundai Motor Company, Namyang, South Korea in
the area of Research & Development support services, along with this, enhancing support to
Hyundai Motor India Limited, Chennai, India, in the area of Power Train support, design
support, evaluation and certification activities. Also focuses on Indian unique car development
activities.
HMIE is a centre with one of the most advanced research and development facilities which
focuses on state of the art product and design engineering and rigorous quality enhancement. It
will play an important role leading on the development of new models for key emerging markets
including India.

Global Quality Centre

Named Indian Quality Centre(INQC),The centre is one of the five quality Centre worldwide after
the U.S,China , Europe and Middle East. The India centre located at Faridabad, Haryana will
conduct durablity study of existing models and benchmark parts and systems for constant
improvement. The key activity of India quality Centre would be to "contribute in new car
development from pilot stage to create quality product with zero defect" . Besides ,the centre will
also be responsible for ensuring "top level safety quality "through proactive customer oriented
management system and understanding feedback from them to eliminate potential risks. The
centre also has an objective to study market conditions and other Asia Pacific regions to develop
new cars and adapt strategies for continuous product quality improvement.

Manufactured locally

1. Hyundai Eon (Launched 2011)

2. Hyundai Grand i10 Facelift (Launched Feb-2017)
3. Hyundai Xcent Facelift (Launched April-2017)
4. Hyundai Elite i20 (Launched 2014)
 5. Hyundai i20 Active (Launched 2015)
6. Hyundai Elantra (Launched 2016)
7. Hyundai Creta (Launched 2015)
8. Hyundai Tucson (Launched 2016)
9. Hyundai 3rd Gen-Verna (Launched 2017)

Sales and Service Network

HMIL has 475 dealers and more than 1,226 service points across India. HMIL also operates its
own dealerships known as Hyundai Motor Plazas in large metros across India. HMIL has the
second largest sales and service network in India after Maruti Suzuki.

Hyundai Motor India Limited Annual

Sales

Year Domestic sales Exports Total

1998 8,447 0 8,447

1999 17,627 20 17,647

2000 82,896 3,823 86,719

2001 87,175 6,092 93,267

2002 1,02,806 8,245 111,051

2003 1,20,325 30,416 150,741

2004 1,39,759 75,871 215,630

2005 1,56,291 96,560 252,851

2006 1,86,174 1,13,339 299,513

2007 2,00,411 1,26,749 327,160

2008 2,45,397 2,43,919 489,316

2009 2,89,863 2,70,017 559,880

2010 3,56,717 2,47,102 603,819

2011 3,73,709 2,42,330 616,039

 Hyundai Motor India Limited Annual
Sales

Year Domestic sales Exports Total

2012 3,91,276 2,50,005 641,281

2013 3,80,000 2,33,260 613,260

2014 4,10,000 1,91,221 601,221

2015 4,76,001 1,67,268 643,269

2016 5,00,537 1,61,517 662,054

Exports
HMIL currently exports vehicles to over 92 countries across Africa, Middle East, Latin America,
Australia and Asia. It has been India’s number one exporter for the last 10 years consecutively.
HMIL has been consecutively awarded "Top Exporter Of The Year" for 10 years by EEPC.The
Highest Exported volume was 2,70,017 in year 2009.

Sales Performance
Hyundai Motor India Ltd (HMIL), the country’s second largest car manufacturer and the largest
passenger car exporter, registered 4.6% growth in exports for the month of May 2013. The
domestic sales accounted for 32,102 units and exports stood at 24,754 units. sales 476000 in
2015 domestic sales 17.1% market share.
In 2016 It sold 30K units more thereby hitting the 5 lakh mark. Hence domestic sales stood at
500537 which is an increase by 5.2% compared to last year,with 17.13% market share. "2016 has
been an Year of Excellence for Hyundai in India achieving various milestones - Celebrating 20
years in India, the roll out of 7 Millionth car in November'16, crossing the 5 lakh domestic sales
in CY2016 and the fastest 50,000 unit sales in the month of October," YK Koo, MD & CEO,
Hyundai Motor India said, in a statement.
Hyundai's Holy trinity-the Grand-i10,Elite-i20&Creta has cumulatively achieved 1.3 Million
sales in less than 4 years which includes 1.1 Million domestic and 0.29 Million for exports.
With exceeding 2,50,000 sales in first quarter of 2017 Hyundai aims to target half million sales
in domestic market in 2017.
Awards and Achievements

 Indian Car Of The Year (ICOTY)

o 2008 — Hyundai i10
o 2014 — Hyundai Grand i10
o 2015 — Hyundai Elite i20
o 2016 — Hyundai Creta

 J D Power Appeal Awards 2016 demonstrating excellence of 'Made In India' Products as

per global standards for Grand-i10,Elite-i20 & Creta.

Brand Ambassador

The carmaker gets Shah Rukh Khan on board as its brand ambassador for the Hyundai Xcent,the
company’s recently launched sub-compact sedan in India. Back in 1998, SRK shot his first TVC
for the Hyundai Santro, and his association with the car brand has now turned 19. In 2010 Shah
Rukh Khan won the "Brand Ambassador of the Year" for Hyundai i10 at NDTV Profit Car and
Bike Awards. SRK also promotes the "Be The Better Guy" road safety campaign for Hyundai
In,July-2017 Hyundai India extended the contract of Shah Rukh Khan for 2 Years

Electric and hybrid vehicles

Hyundai Motor Company began developing flexible-fuel vehicles (FFVs) in 1988. The test
vehicle was 1991 MY Scoupe FFV. Since March, 1992, in Seoul, Korea, through at least
November 1993, field trials of several FFVs had been performed over more than 30,000 miles.
The Hyundai Sonata Hybrid uses a lightweight lithium polymer battery.
The first pure electric car developed by Hyundai was the Sonata Electric Vehicle in 1991. The
car started as a Sonata sedan based model. Hyundai later produced electric vehicles utilizing the
Excel, Grace, Accent, Atos and Kia Sportage platforms.
Hyundai planned to have six electric vehicles available for testing by the end of 1992. The
company was using batteries from Ovonic Battery Company Inc. in Troy, MI. The Excel and the
Sonata were the two different models on which the electric vehicles wersed. The vehicles were
scheduled to likely be tested in the United States .
The new hybrid-electric FGV-1 was unveiled at the Seoul Motor Show in 1995. The car featured
full-time electric drive technology. The 1995 Hyundai FGV-1 was the result of Hyundai's first
experiments with hybrid propulsion systems in 1994.
Hyundai produced its second generation hybrid-electric vehicle in 1999. The company is using
the “parallel” type design, which utilizes either the ICE or the electric motor. The FGV-2 was the
second vehicle to be produced. Others are the Elantra HEV and the Hyundai Accent HEV, which
were unveiled in 1999 and 2000, respectively. The new hybrid electric Sonata made its debut at
the Los Angeles International Auto Show in November 2008. The car featured lithium polymer
battery technology. The 2011 Hyundai Sonata Hybrid sales in the U.S. began near the end of
February 2011.
The Hyundai BlueOn electric car (Hyundai i10 EV).
Hyundai began producing hybrid electric vehicles in 2009. The company is using Hybrid Blue
Drive, which includes lithium polymer batteries, as opposed to lithium-ion. The Avante was the
first vehicle to be produced. Other are the Santa Fe Hybrid, the Elantra, Sonata Hybrid and the
Hyundai i20, which will replace the Hyundai Getz.
Hyundai Elantra LPI Hybrid (or Avante in the local market) was launched in the South Korean
domestic market in July 2009. The Elantra LPI (Liquefied Petroleum Injected) is the world's first
hybrid electric vehicle to be powered by an internal combustion engine built to run on liquefied
petroleum gas (LPG) as a fuel. The Elantra PLI is a mild hybrid and the first hybrid to adopt
advanced lithium polymer (Li–Poly) batteries. The Hyundai Blue Will plug-in hybrid has made
its U.S. debut at the North American International Auto Show in Detroit 2010.
At the 2010 Geneva Motor Show, Hyundai unveiled the i-flow, a concept car using a variant of
the BLUE-WILL hybrid system. The i-flow Concept uses a 1.7-liter twin-turbo diesel engine
along with electric batteries to achieve fuel economy of 3 litres per 100 kilometres. Hyundai says
a production car based on the i-flow's design will be in production by 2011.
The Hyundai BlueOn is a subcompact five-door hatchback electric car produced by Hyundai
Motor Company. The prototype, an electric version of i10, was first unveiled at the Frankfurt
Motor Show in 2009. The pre-production testing model was unveiled in Seoul in September
2010, when the first of 30 units were delivered to South Korean government agencies for field
testing. The carmaker planned to build 2,500 units by the end of 2012. The BlueOn is equipped
with a LG 16.4 kWh lithium polymer (Li–Poly) battery pack and charges in 6 hours with a 220 V
power outlet and in 25 minutes to 80% with three-phase electric power (in a 380 V outlet). The
maximum speed is 130 km/h (81 mph) and 0–100 km/h is achieved in 13.1 seconds. According
to Hyundai Motor Company, the total investment to develop the BlueOn, its first production
electric car, was around 40 billion won .
As of March 2014, cumulative global sales totaled 200 thousand hybrids, including both
Hyundai Motors and Kia Motors hybrid models.

Environmental record

On 23 April 2008, Hyundai Motor announced the beginning of a five-year project to turn 50 km²
of infertile land into grassland by 2012. Hyundai is doing so with the help of the Korean
Federation for Environmental Movement (KFEM). The project, named Hyundai Green Zone, is
located 660 km north of Beijing. The goal of the project is to end the recurring dust storms in
Beijing, block desertification and protect the local ecosystem. Local weeds will be planted in the
region that have the ability to endure sterile alkaline soil. This is the first environmental project
of the company's social contribution programme. Hyundai also made electric car concept i10
recently.
Hyundai Motor plans to aid Chevron Corporation in the construction of up to six hydrogen
fueling stations that will be located in California, including locations at the University of
California-Davis and the Hyundai America Technical Center in Chino. Hyundai is going to
provide a collection of 32 Tucson fuel cell vehicles, which are powered by UTC Fuel Cell power
plants.

Motorsport

Hyundai entered motorsport by competing in the F2 class of the World Rally Championship in
1998 and 1999. In September 1999, Hyundai unveiled the Accent WRC, a World Rally Car
based on the Hyundai Accent. The Hyundai World Rally Team debuted the car at the 2000
Swedish Rally and achieved their first top-ten result at that year's Rally Argentina, when Alister
McRae and Kenneth Eriksson finished seventh and eighth, respectively. Eriksson later drove the
car to fifth place in New Zealand and fourth in Australia. In 2001, Hyundai debuted a new
evolution of the Accent WRC, which was intended to improve reliability, but the performance of
the car was still not good enough to challenge the four big teams (Ford, Mitsubishi, Peugeot and
Subaru). However, at the season-ending Rally GB, the team achieved their best result with
McRae finishing fourth and Eriksson sixth.
For the 2002 season, Hyundai hired the four-time world champion Juha Kankkunen, along with
Freddy Loix and Armin Schwarz. Kankkunen's fifth place in New Zealand was the team's best
result, but they managed to edge out Škoda and Mitsubishi by one point in the battle for fourth
place in the manufacturers' world championship. In September 2003, after a season hampered by
budget constraints, Hyundai announced withdrawal from the WRC and planned to return in
2006, which did not happen.
In 2006, following the announcement that Korea was scheduled to earn a Formula One Grand
Prix, Hyundai planned to enter the sport. The Korean Grand Prix was first held in 2010, but
Hyundai have not entered the championship. Hyundai announced they would be revealing their
future rally plans at the 2011 Chicago Auto Show, on February 9. The current plans for rallying
are focused around the newest Hyundai release, the Veloster. In September 2012 Hyundai
announced that they were due to start the WRC with a rally model of its i20 to rival the likes of
the Ford Fiesta, the Citroen DS3 and the Mini Countryman.

Hyundai i20 WRC

The Hyundai i20 WRC is a World Rally Car built by Hyundai for use in the 2014 World Rally
Championship. It is based on the Hyundai i20 subcompact car, and was unveiled at the 2012
Paris Motor Show. The launch of the i20 marks Hyundai's return to the World Rally
Championship after a ten-year absence. The car is scheduled to make its first competitive
appearance at the 2014 Rallye Monte Carlo, but may compete during the 2013 season to aid
development
 INTRODUCTION

OF

FINANCIAL STATEMENT
 INTRODUTION OF FINANCIAL STATEMENT

Financial Statement (or financial report) is a formal record 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 easy to

understand. They typically include 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 statement of comprehensive income, statement of revenue &
expense, P&L or profit and loss report, reports on a company's income, expenses,
and profits over a 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 during the stated period.
 A cash flow statement reports on a company's cash flow activities, particularly its
operating, investing and financing activities.

For large corporations, these statements may be complex and may include an extensive set
of footnotes to the financial statementsand 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.

The analysis of financial statement is a process of evaluating the relationship between

component parts of financial statement to obtain a better understanding of firm financial position.
Analysis is a process of critically examining the accounting information given in financial
statements. For the purpose of analysis, individual items are studied; their interrelationship with
other related figures is established.
 Thus analysis of financial statement refer to treatment of information contain in financial
statement in a way so as to afford a full diagnosis of the profitably and financial position of the
firm concern.
Limitations of financial statements

The limitations of financial statements are those factors that a user should be aware of
before relying on them to an excessive extent. Knowledge of these factors could result in a
reduction of invested funds in a business, or actions taken to investigate further.
The following are all limitations of financial statements:

 Dependence on historical costs. Transactions are initially recorded at their cost. This is a
concern when reviewing the balance sheet, where the values of assets and liabilities may
change over time. Some items, such as marketable securities, are altered to match changes
in their market values, but other items, such as fixed assets, do not change. Thus, the
balance sheet could be misleading if a large part of the amount presented is based on
historical costs.
 Inflationary effects. If the inflation rate is relatively high, the amounts associated with
assets and liabilities in the balance sheet will appear inordinately low, since they are not
being adjusted for inflation. This mostly applies to long-term assets.
 Intangible assets not recorded. Many intangible assets are not recorded as assets. Instead,
any expenditures made to create an intangible asset are immediately charged to expense.
This policy can drastically underestimate the value of a business, especially one that has
spent a large amount to build up a brand image or to develop new products. It is a particular
problem for startup companies that have created intellectual property, but which hav e so far
generated minimal sales.
 Based on specific time period. A user of financial statements can gain an incorrect view of
the financial results or cash flows of a business by only looking at one reporting period. Any
one period may vary from the normal operating results of a business, perhaps due to a
sudden spike in sales or seasonality effects. It is better to view a large number of
consecutive financial statements to gain a better view of ongoing results.
 Not always comparable across companies. If a user wants to compare the results of different
companies, their financial statements are not always comparable, because the entities use
different accounting practices. These issues can be located by examining the disclosures that
accompany the financial statements.
 Subject to fraud. the management team of a company may deliberately skew the results
presented. This situation can arise when there is undue pressure to report excellent results,
such as when a bonus plan calls for payouts only if the reported sales level increases. One
might suspect the presence of this issue when the reported results spike to a level exceeding
the industry norm.
 No discussion of non-financial issues. The financial statements do not address non-financial
issues, such as the environmental attentiveness of a company's operations, or how well it
works with the local community. A business reporting excellent financial results might be a
failure in these other areas.
 Not verified. If the financial statements have not been audited, this means that no one has
examined the accounting policies, practices, and controls of the issuer to ensure that it has
created accurate financial statements. An audit opinion that accompanies the financial
statements is evidence of such a review.
 No predictive value. The information in a set of financial statements provides information
about either historical results or the financial status of a business as of a specific date. The
statements do not necessarily provide any value in predicting what will happen in the future.
For example, a business could report excellent results in one month, and no sales at all in
the next month, because a contract on which it was relying has end.

Advantages of financial statement analysis

Financial analysis determines a company's health and stability. The data gives you an intuitive
understanding of how the company conducts business. Stockholders can find out how
management employs resources and whether they use them properly. Governments and
regulatory authorities use financial statements to determine the legality of a company's fiscal
decisions and whether the firm is following correct accounting procedures. Finally, government
agencies, such as the Internal Revenue Service, use financial statement analysis to decide the
correct taxation for the company.
Liquidity
The balance sheet provides liquidity rations that show how much monetary worth the company
has on a given day, which helps determine if the firms financial reliability. The current ratio
shows “the 'working capital' relationship of current assets available to meet the company's
current obligations,” reports Credit Guru. The quick ratio is similar, calculating those assets
easily convertible into cash, determining the immediate working capital relationship. The debt to
equity ratio establishes who owns more of the company, creditors or shareholders.

Efficiency
Efficiency ratios measure how efficiently the company turns inventory into revenue. The day
sales outstanding ratio focuses on the time required to turn inventory into cash and the age of
your accounts receivable. The inventory turnover ratio “indicated the rapidity with which the
company is able to move its merchandise,” reports Credit Guru. Accounts payable to sales shows
the percentage of sales funded with supplier's money.

Full Disclosure
Full disclosure is one of the main advantages of, and one of the main purposes for, financial
statements. The Securities and Exchange Commission made the 10K report a requirement for all
public companies. This 10K includes full disclosure of all financial statements as well as notes
explaining all assumptions contained with the notes.

Intrinsic Value vs. Market Value

While financial statements are good for the data needed to conduct a thorough ratio analysis,
they are based on the accrual system of accounting, which is not market based. This is both an
advantage and a disadvantage. It's good to have a basis for comparing book value to market
value. Above all it helps to pinpoint bargains in the market. However, value discrepancies can
also work to the disadvantage of financial statement analysis. It can make it difficult to know the
real value of assets, which translates into unreliable ratios.

Transparency
Financial statements are easy for everyone to understand, it's also very easy for people to hide
information. For instance, an analyst has to look at the cash flow statement to know if cash flow
is coming from operations or additional financing activities. There are also certain conventions
like depreciation and inventory accounting that can increase or decrease net income, depending
on the convention used.

Profitability
Profitability ratios reveal a firm's success at generating profits. “The profit margin of a company
determines its ability to withstand competition and adverse conditions,” reports Credit Guru.
Return on assets, reveals the profits earned for each dollar of assets and measures the company's
efficiency at creating profit returns on assets. Net worth focuses on financial returns generated by
the owner's invested capital.

Limits
It is important to know that financial statement analysis has limits; simply manipulating numbers
hides the actual state of the company. Different accounting methods will look different on paper,
and the method a particular firm uses can change the visible health and profit levels for either
better or worse. Quantitative financial analysis is an art, and different analysts may get slightly
different results from the same information, or may return different data about the same business.

Help in Evaluating the operational efficiency of the Concern

It is necessary to analyze the financial statement for matching the total expenses incurred in
manufacturing, Advertising, selling and distribution of the finished goods and total financial
expanses of the current year comparing with the total expanses of the previous year and evaluate
the managerial efficiency of concern.

Help in Evaluating the short and long term financial position:-

It is necessary to analyze the financial statement for comparing the current assets and current
liabilities to evaluate the short term and long term financial soundness.
Help in calculating the profitability:- It is necessary to analyze the financial statement to know
the gross profit and net profit.

Help in indicating the trend of achievements:-

Analysis of financial statement helps in comparing the Financial position of previous year
and also compare various expenses, purchases and sales growth, gross and net profit. Cost of
goods sold, total value of assets and liabilities can be compare easily with the help of Analysis of
financial statement.

Forecasting, budgeting and deciding future line of action:-

The potential growth of the business can be predicts by the analysis of financial statement which
helps in deciding future line of action. Comparisons of actual performance with target show all
the shortcomings.

Objectives Of Financial Statement Analysis

1.Assessment Of Past Performance

Past performance is a good indicator of future performance. Investors or creditors are interested
in the trend of past sales, cost of good sold, operating expenses, net income, cash flows and
return on investment. These trends offer a means for judging management's past performance
and are possible indicators of future performance.

2.Assessment of current position

Financial statement analysis shows the current position of the firm in terms of the types of assets
owned by a business firm and the different liabilities due against the enterprise.

3.Prediction of profitability and growth prospects

Financial statement analysis helps in assessing and predicting the earning prospects and growth
rates in earning which are used by investors while comparing investment alternatives and other
users in judging earning potential of business enterprise.

4.Prediction of bankruptcy and failure

Financial statement analysis is an important tool in assessing and predicting bankruptcy and
probability of business failure.

5. Assessment of the operational efficiency

Financial statement analysis helps to assess the operational efficiency of the management of a
company. The actual performance of the firm which are revealed in the financial statements can
be compared with some standards set earlier and the deviation of any between standards and
actual performance can be used as the indicator of efficiency of the management.

BALANCE SHEET

In financial accounting, a balance sheet or statement of financial position is a summary of the

financial balances of an individual or organization, whether it be a sole proprietorship, a business
partnership, a corporation, private limited company or other organization such
as Government or not-for-profit entity. Assets, liabilities and ownership equity are listed as of a
specific date, such as the end of its financial year. A balance sheet is often described as a
"snapshot of a company's financial condition".[1] Of the four basic financial statements, the
balance sheet is the only statement which applies to a single point in time of a business' calendar
year.

A standard company balance sheet has two sides: assets, on the left and financing, which itself
has two parts, liabilities and ownership equity, on the right. The main categories of assets are
usually listed first, and typically in order of liquidity.[2] Assets are followed by the liabilities. The
difference between the assets and the liabilities is known as equity or the net assets or the net
worth or capital of the company and according to the accounting equation, net worth must equal
assets minus liabilities

If applicable to the business, summary values for the following items should be included in the
balance sheet:[15] Assets are all the things the business owns. This will include property, tools,
vehicles, furniture, machinery, and so on.

Assets

Non-current assets (Fixed assets)

 Property, plant and equipment

 Investment property, such as real estate held for investment purposes
 Intangible assets such as (patents, copyrights and goodwill)
 Financial assets (excluding investments accounted for using the equity method, accounts
receivables, and cash and cash equivalents), such as notes receivables
 Investments accounted for using the equity method
  Biological assets, which are living plants or animals. Bearer biological assets are plants
or animals which bear agricultural produce for harvest, such as apple trees grown to
produce apples and sheep raised to produce wool.[16]
 Loan To (More than one financial period)

Current assets

 Prepaid expenses for future services that will be used within a year
 Accounts receivable
 Cash and cash equivalents
 Cash at bank, Petty Cash, Cash On Hand
 Revenue Earned In Arrears (Accrued Revenue) for services done but not yet received for
the year
 Loan To (Less than one financial period)

Liabilities

 Accounts payable
 Provisions for warranties or court decisions (contingent liabilities that are both probable
and measurable)
 Financial liabilities (excluding provisions and accounts payables), such as promissory
notes and corporate bonds
 Liabilities and assets for current tax
 Deferred tax liabilities and deferred tax assets
 Unearned revenue for services paid for by customers but not yet provided
 Interests on loan stock

Equity / capital

The net assets shown by the balance sheet equals the third part of the balance sheet, which is
known as the shareholders' equity. It comprises:

 Issued capital and reserves attributable to equity holders of the parent

company (controlling interest)
  Non-controlling interest in equity

Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to
shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in the
more restrictive sense of liabilities excluding shareholders' equity. The balance of assets and
liabilities (including shareholders' equity) is not a coincidence. Records of the values of each
account in the balance sheet are maintained using a system of accounting known as double-entry
bookkeeping. In this sense, shareholders' equity by construction must equal assets minus
liabilities, and thus the shareholders' equity is considered to be a residual.

ASSETS

In financial accounting, an asset is an economic resource. Anything tangible or intangible that

can be owned or controlled to produce value and that is held by a company to produce
positive economic value is an asset. Simply stated, assets represent value of ownershipthat can be
converted into cash (although cash itself is also considered an asset).

The balance sheet of a firm records the monetary value of the assets owned by that firm. It
covers money and other valuables belonging to an individual or to a business. One can classify
assets into two major asset classes: tangible assets and intangible assets. Tangible assets contain
various subclasses, including current assets and fixed assets. Current assets include inventory,
while fixed assets include such items as buildings and equipment.

Intangible assets are nonphysical resources and rights that have a value to the firm because they
give the firm some kind of advantage in the marketplace. Examples of intangible assets
include goodwill, copyrights, trademarks, patents and computer programs, and financial assets,
including such items as accounts receivable, bonds and stocks.

Current assets

Current assets are cash and other assets expected to be converted to cash or consumed either in a
year or in the operating cycle (whichever is longer), without disturbing the normal operations of
a business. These assets are continually turned over in the course of a business during normal
business activity. There are 5 major items included into current assets:
  Cash and cash equivalents – it is the most liquid asset, which includes currency, deposit
accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts).
 Short-term investments – include securities bought and held for sale in the near future
to generate income on short-term price differences (trading securities).
 Receivables – usually reported as net of allowance for non-collectable accounts.
 Inventory – trading these assets is a normal business of a company. The inventory value
reported on the balance sheet is usually the historical cost or fair market value, whichever
is lower. This is known as the "lower of cost or market" rule.
 Prepaid expenses – these are expenses paid in cash and recorded as assets before they
are used or consumed (common examples are insurance or office supplies).

Marketable securities: Securities that can be converted into cash quickly at a reasonable price.

The phrase net current assets (also called working capital) is often used and refers to the total of
current assets less the total of current liabilities.

Long-term investments

Often referred to simply as "investments". Long-term investments are to be held for many years
and are not intended to be disposed of in the near future. This group usually consists of three
types of investments:

 Investments in securities such as bonds, common stock, or long-term notes.

 Investments in fixed assets not used in operations (e.g., land held for sale).
 Investments in special funds (e.g. sinking funds or pension funds).

Different forms of insurance may also be treated as long term investments.

Fixed assets

Also referred to as PPE (property, plant, and equipment), these are purchased for continued and
long-term use in earning profit in a business. This group includes as an
asset land, buildings, machinery, furniture, tools, IT equipment, e.g., laptops, and certain wasting
resources e.g., timberland and minerals. They are written off against profits over their anticipated
life by charging depreciation expenses (with exception of land assets). Accumulated depreciation
is shown in the face of the balance sheet or in the notes. An asset is an important factor in a
balance sheet.

These are also called capital assets in management accounting.

Intangible assets

Intangible assets lack of physical substance and usually are very hard to evaluate. They
include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are
(according to US GAAP) amortized to expense over 5 to 40 years with the exception of
goodwill.

Websites are treated differently in different countries and may fall under either tangible or
intangible assets.

Tangible assets

Tangible assets are those that have a physical substance, such as currencies, buildings, real
estate, vehicles, inventories, equipment, art collections, precious metals, rare-earth metals,
Industrial metals, and crops.

Depreciation is applied to tangible assets when those assets have an anticipated lifespan of more
than one year. This process of depreciation is used instead of allocating the entire expense to one
year.

Tangible assets such as art, furniture, stamps, gold, wine, toys and books have become
recognized as an asset class in their own right and many high-net-worth individuals will seek to
include these tangible assets as part of their overall asset portfolio. This has created a need
for tangible asset managers.
Comparison: current assets, liquid assets and absolute liquid assets

Current assets Liquid assets Absolute liquid assets

Stocks

Prepaid expenses

Bills receivable Bills receivable

Cash in hand Cash in hand Cash in hand

Cash at bank Cash at bank Cash at bank

Accrued incomes Accrued incomes Accrued incomes

Loans and advances (short Loans and advances (short Loans and advances (short
term) term) term)

Trade investments (short term) Trade investments (short term) Trade investments (short term)

Liability (financial accounting)

A liability is a company's financial debt or obligations that arise during the course of its business
operations. Liabilities are settled over time through the transfer of economic benefits including
money, goods or services. Recorded on the right side of the balance sheet, liabilities include
loans, accounts payable, mortgages, deferred revenues and accrued expenses.
Liabilities are a vital aspect of a company because they are used to finance operations and pay
for large expansions. They can also make transactions between businesses more efficient. For
example, in most cases, if a wine supplier sells a case of wine to a restaurant, it does not demand
payment when it delivers the goods. Rather, it invoices the restaurant for the purchase to
streamline the dropoff and make paying easier for the restaurant. The outstanding money that the
restaurant owes to its wine supplier is considered a liability. In contrast, the wine supplier
considers the money it is owed to be an asset.

A liability is defined by the following characteristics:

 Any type of borrowing from persons or banks for improving a business or personal income
that is payable during short or long time;
 A duty or responsibility to others that entails settlement by future transfer or use of assets,
provision of services, or other transaction yielding an economic benefit, at a specified or
determinable date, on occurrence of a specified event, or on demand;
 A duty or responsibility that obligates the entity to another, leaving it little or no discretion to
avoid settlement; and,
 A transaction or event obligating the entity that has already occurred

Liabilities in financial accounting need not be legally enforceable; but can be based on equitable
obligations or constructive obligations. An equitable obligation is a duty based on ethical or
moral considerations. A constructive obligation is an obligation that is implied by a set of
circumstances in a particular situation, as opposed to a contractually based obligation.

Long-Term Liabilities

Long-term liabilities, in accounting, form part of a section of the balance sheet that
lists liabilities not due within the next 12 months including debentures, loans, deferred tax
liabilities and pension obligations. The current portion of long-term debt is excluded to provide a
more accurate view of a company's current liquidity and the company’s ability to pay current
liabilities as they become due. Long-term liabilities are also called long-term debt or noncurrent
liabilities.
Accounts payable

Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a
company's balance sheet. It is distinct from notes payable liabilities, which are debts created by
formal legal instrument documents.

An accounts payable is recorded in the Account Payable sub-ledger at the time an invoice is
vouched for payment. Vouchered, or vouched, means that an invoice is approved for payment
and has been recorded in the General Ledger or AP subledger as an outstanding, or open, liability
because it has not been paid. Payables are often categorized as Trade Payables, payables for the
purchase of physical goods that are recorded in Inventory, and Expense Payables, payables for
the purchase of goods or services that are expensed. Common examples of Expense Payables are
advertising, travel, entertainment, office supplies and utilities. AP is a form of credit that
suppliers offer to their customers by allowing them to pay for a product or service after it has
already been received. Suppliers offer various payment terms for an invoice. Payment terms may
include the offer of a cash discount for paying an invoice within a defined number of days. For
example, 2%, Net 30 terms mean that the payer will deduct 2% from the invoice if payment is
made within 30 days. If the payment is made on Day 31 then the full amount is paid.

Interest

Interest is payment from a borrower or deposit-taking financial institution to a lender or

depositor of an amount above repayment of the principal sum (i.e. the amount borrowed). It is
distinct from a fee which the borrower may pay the lender or some third party.

For example, a customer would usually pay interest to borrow from a bank, so they pay the bank
an amount which is more than the amount they borrowed; or a customer may earn interest on
their savings, and so they may withdraw more than they originally deposited. In the case of
savings, the customer is the lender, and the bank plays the role of the borrower.

Interest differs from profit, in that interest is received by a lender, whereas profit is received by
the owner of an asset, investmentor enterprise. (Interest may be part or the whole of the profit on
an investment, but the two concepts are distinct from one another from
an accounting perspective.)
The rate of interest is equal to the interest amount paid or received over a particular period
divided by the principal sum borrowed or lent.

Accrued expenses

For example, goods supplied by a vendor in one accounting period, but paying for them in a later
period results in an accrued expense that prevents a fictitious increase in the receiving company's
value equal to the increase in its inventory (assets) by the cost of the goods received, but unpaid.
Without such accrued expense, a sale of such goods in the period they were supplied would
cause that the unpaid inventory (recognized as an expense fictitiously incurred) would effectively
offset the sale proceeds (revenue) resulting in a fictitious profit in the period of sale, and in a
fictitious loss in the latter period of payment, both equal to the cost of goods sold.

Period costs, such as office salaries or selling expenses, are immediately recognized
as expenses (and offset against revenues of the accounting period) also when employees are paid
in the next period. Unpaid period costs are accrued expenses (liabilities) to avoid such costs (as
expenses fictitiously incurred) to offset period revenues that would result in a fictitious profit. An
example is a commission earned at the moment of sale (or delivery) by a sales representative
who is compensated at the end of the following week, in the next accounting period. The
company recognizes the commission as an expense incurred immediately in its current income
statement to match the sale proceeds (revenue), so the commission is also added to accrued
expenses in the sale period to prevent it from otherwise becoming a fictitious profit, and it is
deducted from accrued expenses in the next period to prevent it from otherwise becoming a
fictitious loss, when the rep is compensated.

Deferred expenses

A Deferred expense (prepaid expenses or prepayment) is an asset used to costs paid out and not
recognized as expenses according to the matching principle.

For example, when the accounting periods are monthly, an 11/12 portion of an annually
paid insurance cost is added to prepaid expenses, which are decreased by 1/12 of the cost in each
subsequent period when the same fraction is recognized as an expense, rather than all in the
month in which such cost is billed. The not-yet-recognized portion of such costs remains
as prepayments (assets) to prevent such cost from turning into a fictitious loss in the monthly
period it is billed, and into a fictitious profit in any other monthly period.

Similarly, cash paid out for (the cost of) goods and services not received by the end of
the accounting period is added to the prepayments to prevent it from turning into a fictitious loss
in the period cash was paid out, and into a fictitious profit in the period of their reception. Such
cost is not recognized in the income statement (profit and loss or P&L) as the expense incurred
in the period of payment, but in the period of their reception when such costs are recognized as
expenses in P&L and deducted from prepayments (assets) on balance sheets.

Depreciation

Depreciation is used to distribute the cost of the asset over its expected life span according to the
matching principle. If a machine is bought for $100,000, has a life span of 10 years, and can
produce the same amount of goods each year, then $10,000 of the cost (i.e. $100,000/10 years)
of the machine is matched to each year, rather than charging $100,000 in the first year and
nothing in the next 9 years. So, the cost of the machine is offset against the sales in that year.
This matches costs to sales and therefore gives a more accurate representation of the business,
but results in a temporary discrepancy between profit/loss and the cash position of the business.

Equity

In accounting, equity (or owner's equity) is the difference between the value of the assets and the
value of the liabilities of something owed. It is governed by the following equation:

For example, if someone owns a car worth $15,000 (an asset), but owes $5,000 on a loan against
that car (a liability), the car represents $10,000 of equity. Equity can be negative if liabilities
exceeds assets. Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders'
capital or similar terms) represents the equity of a company as divided
among shareholders of common or preferred stock. Negative shareholders' equity is often
referred to as a shareholders' deficit.

Alternatively, equity can also refer to the capital stock of a corporation. The value of the stock
depends on the corporation's future economic prospects. For a company
in liquidation proceedings, the equity is that which remains after all liabilities have been paid.
Owner Equity

When starting a business, the owners fund the business to finance various operations. Under the
model of a private limited company, the business and its owners are separate entities, so the
business is considered to owe these funds to its owners as a liability in the form of share capital.
Throughout the business's existence, the equity of the business will be the difference between its
assets and debt liabilities; this is the accounting equation.

When a business liquidates during bankruptcy, the proceeds from the assets are used to
reimburse creditors. The creditors are ranked by priority, with secured creditors being paid first,
other creditors being paid next, and owners being paid last. Owner's equity (also known as risk
capital or liable capital) is this remaining or residual claim against assets, which is paid only after
all other creditors are paid. In such cases where even creditors could not get enough money to
pay their bills, the owner's equity is reduced to zero because nothing is left to reimburse it.

Shareholders' equity

When the owners are shareholders, the interest can be called shareholders' equity;
the accounting remains the same, and it is ownership equity spread out among shareholders. If all
shareholders are in one and the same class, they share equally in ownership equity from all
perspectives. However, shareholders may allow different priority ranking among themselves by
the use of share classes and options. This complicates analysis for both stock valuation and
accounting.

Shareholders' equity is obtained by subtracting total liabilities from the total assets of the
shareholders

Share Capital

A corporation's share capital (or capital stock in US English) is the portion of a

corporation's equity that has been obtained by the issue of shares in the corporation to a
shareholder, usually for cash.

In a strict accounting sense, share capital is the nominal value of issued shares (that is, the sum of
their par values, as indicated on share certificates). If the allocation price of shares is greater than
their par value, e.g. as in a rights issue, the shares are said to be sold at a premium (variously
called share premium, additional paid-in capital or paid-in capital in excess of par). Commonly,
the share capital is the total of the aforementioned nominal share capital and the premium share
capital. Conversely, when shares are issued below par, they are said to be issued at a discount or
part-paid.

CASH FLOW STATEMENT

In financial accounting, a cash flow statement, also known as statement of cash flows, is
a financial statement that shows how changes in balance sheet accounts and income affect cash
and cash equivalents, and breaks the analysis down to operating, investing and financing
activities. Essentially, the cash flow statement is concerned with the flow of cash in and out of
the business. The statement captures both the current operating results and the accompanying
changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in
determining the short-term viability of a company, particularly its ability to pay bills.
International Accounting Standard 7 (IAS 7), is the International Accounting Standard that deals
with cash flow statements.

Method of cash flow statement

The direct method of preparing a cash flow statement results in a more easily understood
report.The indirect method is almost universally used, because FAS 95 requires a supplementary
report similar to the indirect method if a company chooses to use the direct method.

Direct method

The direct method for creating a cash flow statement reports major classes of gross cash receipts
and payments. Under IAS 7, dividends received may be reported under operating activities or
under investing activities. If taxes paid are directly linked to operating activities, they are
reported under operating activities; if the taxes are directly linked to investing activities or
financing activities, they are reported under investing or financing activities. Generally Accepted
Accounting Principles (GAAP) vary from International Financial Reporting Standards in that
under GAAP rules, dividends received from a company's investing activities is reported as an
"operating activity," not an "investing activity."
Indirect method

The indirect method uses net-income as a starting point, makes adjustments for all transactions
for non-cash items, then adjusts from all cash-based transactions. An increase in an asset account
is subtracted from net income, and an increase in a liability account is added back to net income.
This method converts accrual-basis net income (or loss) into cash flow by using a series of
additions and deductions.

RATIO ANYLYSIS

A ratio analysis is a quantitative analysis of information contained in a company’s financial

statements. Ratio analysis is based on line items in financial statements like the balance
sheet, income statement and cash flow statement; the ratios of one item – or a combination of
items - to another item or combination are then calculated. Ratio analysis is used to evaluate
various aspects of a company’s operating and financial performance such as its
efficiency, liquidity, profitability and solvency. The trend of these ratios over time is studied to
check whether they are improving or deteriorating. Ratios are also compared across different
companies in the same sector to see how they stack up, and to get an idea of
comparative valuations. Ratio analysis is a cornerstone of fundamental analysis.

Advantages of ratio analysis

1. Forecasting and Planning:

The trend in costs, sales, profits and other facts can be known by computing ratios of relevant
accounting figures of last few years. This trend analysis with the help of ratios may be useful for
forecasting and planning future business activities.

2. Budgeting:
Budget is an estimate of future activities on the basis of past experience. Accounting ratios help
to estimate budgeted figures. For example, sales budget may be prepared with the help of
analysis of past sales.

3. Measurement of Operating Efficiency:

Ratio analysis indicates the degree of efficiency in the management and utilisation of its assets.
Different activity ratios indicate the operational efficiency. In fact, solvency of a firm depends
upon the sales revenues generated by utilizing its assets.

4. Communication:
Ratios are effective means of communication and play a vital role in informing the position of
and progress made by the business concern to the owners or other parties.

5. Control of Performance and Cost:

Ratios may also be used for control of performances of the different divisions or departments of
an undertaking as well as control of costs.

6. Inter-firm Comparison:
Comparison of performance of two or more firms reveals efficient and inefficient firms, thereby
enabling the inefficient firms to adopt suitable measures for improving their efficiency. The best
way of inter-firm comparison is to compare the relevant ratios of the organisation with the
average ratios of the industry.

7. Indication of Liquidity Position:

Ratio analysis helps to assess the liquidity position i.e., short-term debt paying ability of a firm.
Liquidity ratios indicate the ability of the firm to pay and help in credit analysis by banks,
creditors and other suppliers of short-term loans.

8. Indication of Long-term Solvency Position:

Ratio analysis is also used to assess the long-term debt-paying capacity of a firm. Long-term
solvency position of a borrower is a prime concern to the long-term creditors, security analysts
and the present and potential owners of a business. It is measured by the leverage/capital
structure and profitability ratios which indicate the earning power and operating efficiency. Ratio
analysis shows the strength and weakness of a firm in this respect.

9. Indication of Overall Profitability:

The management is always concerned with the overall profitability of the firm. They want to
know whether the firm has the ability to meet its short-term as well as long-term obligations to
its creditors, to ensure a reasonable return to its owners and secure optimum utilisation of the
assets of the firm. This is possible if all the ratios are considered together.

10. Signal of Corporate Sickness:

A company is sick when it fails to generate profit on a continuous basis and suffers a severe
liquidity crisis. Proper ratio analysis can give signal of corporate sickness in advance so that
timely measures can be taken to prevent the occurrence of such sickness.

11. Aid to Decision-making:

Ratio analysis helps to take decisions like whether to supply goods on credit to a firm, whether
bank loans will be made available etc.

12. Simplification of Financial Statements:

Ratio analysis makes it easy to grasp the relationship between various items and helps in
understanding the financial statements.

Limitations of Ratio Analysis

The technique of ratio analysis is a very useful device for making a study of the financial health
of a firm. But it has some limitations which must not be lost sight of before undertaking such
analysis.

Some of these limitations are:

1. Limitations of Financial Statements:

Ratios are calculated from the information recorded in the financial statements. But financial
statements suffer from a number of limitations and may, therefore, affect the quality of ratio
analysis.

2. Historical Information:
Financial statements provide historical information. They do not reflect current conditions.
Hence, it is not useful in predicting the future.

3. Different Accounting Policies:

Different accounting policies regarding valuation of inventories, charging depreciation etc. make
the accounting data and accounting ratios of two firms non-comparable.

4. Lack of Standard of Comparison:

No fixed standards can be laid down for ideal ratios. For example, current ratio is said to be ideal
if current assets are twice the current liabilities. But this conclusion may not be justifiable in case
of those concerns which have adequate arrangements with their bankers for providing funds
when they require, it may be perfectly ideal if current assets are equal to or slightly more than
current liabilities.

5. Quantitative Analysis:
Ratios are tools of quantitative analysis only and qualitative factors are ignored while computing
the ratios. For example, a high current ratio may not necessarily mean sound liquid position
when current assets include a large inventory consisting of mostly obsolete items.

6. Window-Dressing:
The term ‘window-dressing’ means presenting the financial statements in such a way to show a
better position than what it actually is. If, for instance, low rate of depreciation is charged, an
item of revenue expense is treated as capital expenditure etc. the position of the concern may be
made to appear in the balance sheet much better than what it is. Ratios computed from such
balance sheet cannot be used for scanning the financial position of the business.

7. Changes in Price Level:

Fixed assets show the position statement at cost only. Hence, it does not reflect the changes in
price level. Thus, it makes comparison difficult.

8. Causal Relationship Must:

Proper care should be taken to study only such figures as have a cause-and-effect relationship;
otherwise ratios will only be misleading.

9. Ratios Account for one Variable:

Since ratios account for only one variable, they cannot always give correct picture since several
other variables such Government policy, economic conditions, availability of resources etc.
should be kept in mind while interpreting ratios.
10. Seasonal Factors Affect Financial Data:
Proper care must be taken when interpreting accounting ratios calculated for seasonal business.
For example, an umbrella company maintains high inventory during rainy season and for the rest
of year its inventory level becomes 25% of the seasonal inventory level. Hence, liquidity ratios
and inventory turnover ratio will give biased picture.

Type of Ratio

Cost of goods sold Ratio:-

Cost of goods sold (COGS) refers to the carrying value of goods sold during a particular
period.Costs are associated with particular goods using one of the several formulas, including
specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of
purchase, costs of conversion and other costs that are incurred in bringing the inventories to their
present location and condition. Costs of goods made by the businesses include material, labor,
and allocated overhead. The costs of those goods which are not yet sold are deferred as costs of
inventory until the inventory is sold or written down in value.

FORMULA:-

= cost of goods sold / Net sales *100

Gross Profit Ratio

Gross profit is a company's total revenue (equivalent to total sales) minus the cost of goods sold.
Gross profit is the profit a company makes after deducting the costs associated with making and
selling its products, or the costs associated with providing its services. Gross profit will appear
on a company's income statement or can be calculated with this formula:
Gross profit = revenue - cost of goods sold

FORMULA

= Gross profit / Net sales *100

Selling and distribution expences ratio

Expense ratios are calculated to ascertain the relationship that exists between operating expenses
and volume of sales. Expense ratios are calculated by dividing each item of expense or group of
expenses with the net sales so analyze the cause of variation of the operating ratio. It indicates
the portion of sales which is consumed by various operating expenses.

FORMULA

=Selling and distribution expenses / net sales *100

Operating Ratio

The operating ratio shows the efficiency of a company's management by comparing operating
expense to net sales. The smaller the ratio, the greater the organization's ability to generate profit
if revenues decrease. When using this ratio, however, investors should be aware that it doesn't
take debt repayment or expansion into account.

FORMULA
=Operating costs / Net sales *100

OPERATIN PROFIT RATIO

Operating net profit ratio is calculated by dividing the operating net profit by sales. This ratio
helps in determining the ability of the management in running the business.

FORMULA
=Net operating profits / Net sales *100

Net profit ratio

The net to gross ratio is used by businesses to determine the amount of profit made compared to
the operating costs of the business. This ratio also allows business owners to determine
reasonable reductions in sales prices. The reason for using this ratio when deciding to lower sale
prices is simple: if the ratio is too low, money will be lost instead of profit gained.

FORMULA

= Net profit / Net sales *100

Total Assets turnover ratio

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company.

The total asset turnover ratio compares the sales of a company to its asset base. The ratio
measures the ability of an organization to efficiently produce sales, and is typically used by
third parties to evaluate the operations of a business.

Companies with low profit margins tend to have high asset turnover, while those with high profit
margins have low asset turnover. Companies in the retail industry tend to have a very high
turnover ratio due mainly to cutthroat and competitive pricing.

FORMULA

= (Net sales / total assets)*100

Current ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-
term obligations. To gauge this ability, the current ratio considers the current total assets of a
company (both liquid and illiquid) relative to that company’s current total liabilities.

FORMULA

= (Current Assets / Current liabilities)

Quick assets ratio

The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a
company’s ability to meet its short-term obligations with its most liquid assets.

FORMULA

= (Current Assets –stock ) /current liabilities

Debt to total assets ratio

The debt to total assets ratio is an indicator of financial leverage. It tells you the percentage
of total assets that were financed by creditors, liabilities, debt. The debt to total assets ratio is
calculated by dividing a corporation's total liabilities by itstotal assets.

FORMULA

=(Short term debt + long term debt) / total assets

 RESEARCH

METHADOLOGY
Introduction:
Research is common parlance refers to a search for knowledge. One cans also define research
“As scientific and systematic search pertinent information on a specify topic”. In fact research is
an art of scientific investigation. Another meaning of research as “A careful investigation or
inquiry especially through for new facts in any branch of knowledge.”The system of collecting
and processing of data for research project is known as research methodology. Some important
factors in research methodology include validity of research data, ethics, reliability of measures
and logical sequence.
“Research is an organized systematic data based scientific inquiry or investigation into a specific
problem under taken with the purpose of finding answer or solution to it”
Research is basically a human activity engaged in intellectual pursuit of discovering something
new. It could be a product, a method, a service, a system etc. It could also be in abstract forms
like idea, thinking process, strategy etc.

Meaning of Research:
 Research is discovery of facts, development of facts and verification of facts.
 Research is an endeavor to discover intellectual and practical solutions to the problems
through the applications of scientific methods to the knowledge universe.
 Research is the last resort when individuals, organizations and societies face some
problems for which there are no answers or when there is inconsistence among answers.
 Research is carried out to settle controversies, contradictions, misunderstandings and
disputes about the nature of some aspects of the universe.
 Research is the systematic approach concerning generalization and formulation of a
theory.

Definitions:
Advanced Learner’s Dictionary of Current English (OXFORD):
“Research defined as a careful investigation or inquiry specially though search for new facts in
any branch of knowledge.”

Clifford Woody:
“Research is defined as the process which includes defining and redefining problems,
formulating hypothesis or suggested solutions, collecting, organizing and evaluating data,
reaching conclusions and at last careful testing the conclusions to determine whether they fit for
the formulating hypothesis”

Kerlinger:
“Research is systematic, controlled, commercial and critical investigation of hypothetical
propositions about the presumed relations among natural phenomenon”

P. V. Young:
“Research may be defined as a method of studying , analyzing and conceptualizing social life in
order to extent modify, correct or verify knowledge whether that knowledge aids is construction
of theory or in practice of an arts.”

Black and Champion:

“Scientific research concerns itself with obtaining information through empirical observation that
can be used to systematically develop logically relate propositions so as to attempt to establish
casual relationships among variables”

Characteristics of Research:

 Predictions of future occurrences.

 Directions towards to solution.
 Accuracy in observation and description.
 Basis of research is experience.
 Gathering of new data.
 Research is scientific programme.
 Generalizations of principles of theories.
 Quest for answer.
 Patient activity.
 Social relevance.
 Objective and logical
 Careful designed procedure.
  Needs expertise.
 Task to discover, develop and verify knowledge
 Careful critical inquiry.

Research Design:
Research design is a plan of action, a plan for collecting and analyzing data in an economic,
efficient and relevant manner.

Types of Research Design

 Exploratory Research Design.

 Descriptive Research Design.
 Experimental Research Design

Exploratory Research:

Exploratory research is conducted to provide a better understanding of a situation. It isn’t

designed to come up with final answers or decisions. Through exploratory research, researchers
hope to produce hypotheses about what is going on in a situation.

Descriptive Research :

Descriptive research can be used to accomplish a wide variety of research objectives. However,
descriptive data become useful for solving problems only when the process is guided by one or
more specific research problems, much thought and effort, and quite often exploratory research
to clarify the problem and develop hypotheses.

Experimental Research:

The experiment is a situation in which a researcher attempts to objectively observe phenomena

which are made to occur in a strictly controlled situation where one or more variables are varied
and the others are held constant.
 Sample design

Sampling may be defined as the procedure in which a sample is selected from an individual or a
group of people of certain kind for research purpose. In sampling, the population is divided into a
number of parts called sampling units. A sample design is made up of two elements.
Sampling method. Sampling method refers to the rules and procedures by which some elements
of the population are included in the sample. Some common sampling methods are simple
random sampling, stratified sampling , and cluster sampling.

Guidelines

Design

 When determining sample size, take into account the required levels of precision needed
for the survey estimates, the type of design (e.g., clustering, stratification) and estimator
to be used, the availability of auxiliary and contact information, budgetary constraints, as
well as other factors, such as nonresponse, presence of out-of-scope units, attrition in
longitudinal surveys, etc. For periodic surveys, take into account expected births and
deaths of units within the changing survey population. It's worth noting that the precision
of survey estimates is usually influenced more by the total sample size than by the
sampling fraction (ratio of the sample size to the population size).

 It is important to remember that most surveys produce estimates for many different
variables, and optimizing the sample for one particular variable may have detrimental
effects on other important variables. Handle this problem by first identifying the most
important variables and then using this subset of variables to determine the sampling
strategy to be adopted, which often requires a compromise between optimal strategies for
the variables in the subset. See Bethel (1989).

 Stratification consists of dividing the population into subsets (called strata). Within each
stratum, an independent sample is selected. The choice of strata is determined by the
 objectives of the survey, the availability of variables on the frame, the distribution of the
variable of interest, and the desired precision of the estimates. Most surveys produce
estimates for various domains of interest (e.g., provinces). If feasible, take this into
account in the design by stratifying appropriately (e.g., by province). Otherwise, it will be
necessary to consider special methods at the estimation stage to produce estimates for
these domains (see Imputation). To achieve statistical efficiency, create strata in such a
way that each stratum contains units that are as homogeneous as possible with respect to
the information collected in the survey. For longitudinal surveys, choose stratification
variables that correspond to characteristics that are stable over time.

 Conduct studies to evaluate alternative sampling methods, stratification options and

allocation schemes. The usefulness of these studies depends on the availability and
vintage of data used to conduct the studies, whether from previous censuses, surveys or
administrative data and their relation to the variables of importance to the survey. See
Kish (1988).

 Establish an expected response rate using a pre-test or data from previous occasions of
the same or similar surveys. This rate can in turn be used in sample size determination. A
sample can be divided into waves and additional waves of sample can be released as
needed based on the achieved sample by stratum. For longitudinal surveys, expected
cumulated attrition for the given number of cycles must be used.

Advantages of sample Design

Sampling ensures convenience, collection of intensive and exhaustive data, suitability in limited
resources and better rapport. In addition to this, sampling has the following advantages also.

Low cost of sampling

If data were to be collected for the entire population, the cost will be quite high. A sample is a
small proportion of a population. So, the cost will be lower if data is collected for a sample of
population which is a big advantage.
Less time consuming in sampling
Use of sampling takes less time also. It consumes less time than census technique. Tabulation,
analysis etc., take much less time in the case of a sample than in the case of a population.

Scope of sampling is high

The investigator is concerned with the generalization of data. To study a whole population in
order to arrive at generalizations would be impractical. Some populations are so large that their
characteristics could not be measured. Before the measurement has been completed, the
population would have changed. But the process of sampling makes it possible to arrive at
generalizations by studying the variables within a relatively small proportion of the population.

Accuracy of data is high

Having drawn a sample and computed the desired descriptive statistics, it is possible to
determine the stability of the obtained sample value. A sample represents the population from
which its is drawn. It permits a high degree of accuracy due to a limited area of operations.
Moreover, careful execution of field work is possible. Ultimately, the results of sampling studies
turn out to be sufficiently accurate.

Organization of convenience
Organizational problems involved in sampling are very few. Since sample is of a small size, vast
facilities are not required. Sampling is therefore economical in respect of resources. Study of
samples involves less space and equipment.

Intensive and exhaustive data

In sample studies, measurements or observations are made of a limited number. So, intensive and
exhaustive data are collected.

Suitable in limited resources

The resources available within an organization may be limited. Studying the entire universe is
not viable. The population can be satisfactorily covered through sampling. Where limited
resources exist, use of sampling is an appropriate strategy while conducting marketing research.
Better rapport
An effective research study requires a good rapport between the researcher and the respondents.
When the population of the study is large, the problem of rapport arises. But manageable
samples permit the researcher to establish adequate rapport with the respondents.

Disadvantages of sample Design

The reliability of the sample depends upon the appropriateness of the sampling method used. The
purpose of sampling theory is to make sampling more efficient. But the real difficulties lie in
selection, estimation and administration of samples.

Chances of bias
The serious limitation of the sampling method is that it involves biased selection and thereby
leads us to draw erroneous conclusions. Bias arises when the method of selection of sample
employed is faulty. Relative small samples properly selected may be much more reliable than
large samples poorly selected.

Difficulties in selecting a truly representative sample

Difficulties in selecting a truly representative sample produces reliable and accurate results only
when they are representative of the whole group. Selection of a truly representative sample is
difficult when the phenomena under study are of a complex nature. Selecting good samples is
difficult.

In adequate knowledge in the subject

Use of sampling method requires adequate subject specific knowledge in sampling technique.
Sampling involves statistical analysis and calculation of probable error. When the researcher
lacks specialized knowledge in sampling, he may commit serious mistakes. Consequently, the
results of the study will be misleading.
Changeability of units
When the units of the population are not in homogeneous, the sampling technique will be
unscientific. In sampling, though the number of cases is small, it is not always easy to stick to
the, selected cases. The units of sample may be widely dispersed.
Impossibility of sampling
Deriving a representative sample is di6icult, when the universe is too small or too heterogeneous.
In this case, census study is the only alternative. Moreover, in studies requiring a very high
standard of accuracy, the sampling method may be unsuitable. There will be chances of errors
even if samples are drawn most carefully.
DATA ANALYSIS

AND

INTERPRETATION
 CASH FLOW STATEMENT

In financial accounting, a cash flow statement, also known as statement of cash flows, is
a financial statement that shows how changes in balance sheet accounts and income affect cash
and cash equivalents, and breaks the analysis down to operating, investing and financing
activities. Essentially, the cash flow statement is concerned with the flow of cash in and out of
the business. The statement captures both the current operating results and the accompanying
changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in
determining the short-term viability of a company, particularly its ability to pay bills.
International Accounting Standard 7 (IAS 7), is the International Accounting Standard that deals
with cash flow statements.

Method of cash flow statement

The direct method of preparing a cash flow statement results in a more easily understood
report.The indirect method is almost universally used, because FAS 95 requires a supplementary
report similar to the indirect method if a company chooses to use the direct method.

Direct method

The direct method for creating a cash flow statement reports major classes of gross cash receipts
and payments. Under IAS 7, dividends received may be reported under operating activities or
under investing activities. If taxes paid are directly linked to operating activities, they are
reported under operating activities; if the taxes are directly linked to investing activities or
financing activities, they are reported under investing or financing activities. Generally Accepted
Accounting Principles (GAAP) vary from International Financial Reporting Standards in that
under GAAP rules, dividends received from a company's investing activities is reported as an
"operating activity," not an "investing activity."

Indirect method

The indirect method uses net-income as a starting point, makes adjustments for all transactions
for non-cash items, then adjusts from all cash-based transactions. An increase in an asset account
is subtracted from net income, and an increase in a liability account is added back to net income.
This method converts accrual-basis net income (or loss) into cash flow by using a series of
additions and deductions.
PARTICULAR AMOUNT
Net Income/Starting Line 5719653
Cash From Operating Activities 996964
Depreciation/Depletion 2164635
Amortization 1194191
Deferred Taxes -
Non-Cash Items 7806519
Cash Receipts -
Cash Payments -
Cash Taxes Paid 2070794
Cash Interest Paid 1670859
Changes in Working Capital -15888034
Cash From Investing Activities -6311750
Capital Expenditures -4377513
Other Investing Cash Flow Items, Total -1934237
Cash From Financing Activities 5691418
Financing Cash Flow Items -112780
Total Cash Dividends Paid -1084546
Issuance (Retirement) of Stock, Net -236016
Issuance (Retirement) of Debt, Net 7124760
Foreign Exchange Effects 181994
Net Change in Cash 558626
 RATIO ANYLYSIS

A ratio analysis is a quantitative analysis of information contained in a company’s financial

statements. Ratio analysis is based on line items in financial statements like the balance
sheet, income statement and cash flow statement; the ratios of one item – or a combination of
items - to another item or combination are then calculated. Ratio analysis is used to evaluate
various aspects of a company’s operating and financial performance such as its
efficiency, liquidity, profitability and solvency. The trend of these ratios over time is studied to
check whether they are improving or deteriorating. Ratios are also compared across different
companies in the same sector to see how they stack up, and to get an idea of
comparative valuations. Ratio analysis is a cornerstone of fundamental analysis.
Cost of goods sold Ratio:-

Cost of goods sold (COGS) refers to the carrying value of goods sold during a particular
period.Costs are associated with particular goods using one of the several formulas, including
specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of
purchase, costs of conversion and other costs that are incurred in bringing the inventories to their
present location and condition. Costs of goods made by the businesses include material, labor,
and allocated overhead. The costs of those goods which are not yet sold are deferred as costs of
inventory until the inventory is sold or written down in value.

2016 2015 2014

Cost 75959720 73701296 70126276
Net Sales 93649024 91958736 89256319
Cost of goods sold ratio 81.11 80.14 78.56
 81.5

81

80.5

80

79.5
81.11
79
80.14
78.5

78 78.56
77.5

77
2016 2015 2014

Interpretation:
Cost of goods sold of the company increase every year from 2014 to 2016 , company should
have to reduce wastage of the product and eliminate the unnecessary product . If company not
reduce it then company’s position will not be able to improve.

Gross Profit Ratio

Gross profit is a company's total revenue (equivalent to total sales) minus the cost of goods sold.
Gross profit is the profit a company makes after deducting the costs associated with making and
selling its products, or the costs associated with providing its services. Gross profit will appear
on a company's income statement or can be calculated with this formula:

2016 2015 2014

Gross profit 17689304 18257440 19130043
Net Sales 93649024 91958736 89256319
Gross profit Ratio 18.89 19.82 21.43
 22
21.43
21.5

21

20.5

20 19.82

19.5

19 18.89

18.5

18

17.5
2016 2015 2014

Interpretation:

Gross profit ratio is very important for any business and it helps to check the company
condition.Gross profit ratio of the company is decreasing every year and company profit is being
decreased. Company should have to maintain its position by retaining the customer and by
attracting the customers.

Selling and distribution expences ratio

Expense ratios are calculated to ascertain the relationship that exists between operating expenses
and volume of sales. Expense ratios are calculated by dividing each item of expense or group of
expenses with the net sales so analyze the cause of variation of the operating ratio. It indicates
the portion of sales which is consumed by various operating expenses.

2016 2015 2014

selling & distribution exp 11476616 10970254 10787342

Net Sales 93649024 91958736 89256319
selling & distribution exp. 12.2 11.92 12.08
Ratio

12.25
12.2
12.2

12.15

12.1 12.08

12.05

12

11.95 11.92
11.9

11.85

11.8

11.75
2016 2015 2014

Interpretation:

Selling and distribution expenses increased in the year of 2016 i.e company wants to increase its
sale by incurring various selling expenses.

Operating Ratio

The operating ratio shows the efficiency of a company's management by comparing operating
expense to net sales. The smaller the ratio, the greater the organization's ability to generate profit
if revenues decrease. When using this ratio, however, investors should be aware that it doesn't
take debt repayment or expansion into account.

2016 2015 2014

operating cost 88480708 85576624 81749375
Net Sales 93649024 91958736 89256319
operating ratio 94.48 93.05 91.59
 95

94.5

94

93.5

93

92.5
94.48
92

91.5 93.05

91
91.59
90.5

90
2016 2015 2014

Interpretation:
The operating ratio shows the efficiency of a company’s management by comparing operating
expenses to net sales. High operating profit shows the low net profit of the company.

OPERATIN PROFIT RATIO

Operating net profit ratio is calculated by dividing the operating net profit by sales. This ratio
helps in determining the ability of the management in running the business.

2016 2015 2014

operating profit 5168316 6382112 7506944
Net sales 93649024 91958736 89256319
operating profit Ratio 5.51 6.94 8.41
 9

5
8.41
4 6.94
3 5.51

0
2016 2015 2014

Interpretation:
A decrease in the operating profit margin is usually not beneficial to a business.

Net profit ratio

The net to gross ratio is used by businesses to determine the amount of profit made compared to
the operating costs of the business. This ratio also allows business owners to determine
reasonable reductions in sales prices. The reason for using this ratio when deciding to lower sale
prices is simple: if the ratio is too low, money will be lost instead of profit gained.

2016 2015 2014

Net Profit 5406435 6417303 7346807
Net Sales 93649024 91958736 89256319
Net Profit Ratio 5.77 6.97 8.23
 9

4 8.23
6.97
3 5.77

0
2016 2015 2014

Interpretation:
Net profit of the company is decreasing every year it means company’s liquidity position is not
good and company has to reduce its wastage and has to promote its product. If company wants to
retain its position in the market and earn profit than company has to reduce its indirect expenses
and also incur the expenses for promoting the product.

Total Assets turnover ratio

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company.

The total asset turnover ratio compares the sales of a company to its asset base. The ratio
measures the ability of an organization to efficiently produce sales, and is typically used by
third parties to evaluate the operations of a business.

Companies with low profit margins tend to have high asset turnover, while those with high profit
margins have low asset turnover. Companies in the retail industry tend to have a very high
turnover ratio due mainly to cutthroat and competitive pricing.
 2016 2015 2014
Net Sales 93649024 91958736 89256319
Total Assets 178835928 165367946 147225117
52.3 55.6
Total Assets Turnover Ratio 6 1 60.63

62

60

58

56

54 60.63

52 55.61

50 52.36

48
2016 2015 2014

Interpretation:
It measures how efficiently a firm uses its assets to generate sales ,so higher ratio is always more
favourable but the ratio of the company is decreasing every year i.e company is not using its
assets more efficiently.

Current ratio
The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-
term obligations. To gauge this ability, the current ratio considers the current total assets of a
company (both liquid and illiquid) relative to that company’s current total liabilities.
 2016 2015 2014
Current Assets 72449600 67529210 65025684
Current Liabilities 43609793 41213520 35179673
Current Ratio 1.66:1 1.63:1 1.85:1

Interpretation:
Current ratio of the company is not good .Generally, a current ratio of 2:1 is considered to be
acceptable and the ratio of the company does not reach the minimum ratio . It says that the
financial position of the company is not good.

Quick assets ratio

The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a
company’s ability to meet its short-term obligations with its most liquid assets.Quick ratio is
considered a more reliable test of short term solvency than current ratio.

2016 2015 2014

Current Assets 72449600 67529210 65025684
stock 10523812 9198999 7417239
prepaid expenses 1074671 1262216 1149217
Current
Liablities 43609793 41213520 35179673
Quick ratio 1.4:1 1.38:1 1.60:1

Interpretation:
The higher Quick ratio does not mean that the company has a strong liquidity position because a
company may have high quick ratio .

Debt to total assets ratio

The debt to total assets ratio is an indicator of financial leverage. It tells you the percentage
of total assets that were financed by creditors, liabilities, debt. The debt to total assets ratio is
calculated by dividing a corporation's total liabilities by itstotal assets.
 2016 2015 2014
Short term debt 8760678 9384165 6845920
Long term debt 49846375 44760126 37732514
Total assets 178835928 165367946 147225117

Debt to Total assets Ratio .32:1 .32:1 .30:1

Interpretation:

A decrease in long term debt to total assets ratio shows the company is progressively becoming
less dependent on debt to grow its business.
CONCLUSION

AND

SUMMARY
 Cost of goods sold of the company increase every year from 2014 to 2016 , company
should have to reduce wastage of the product and eliminate the unnecessary product . If
company not reduce it than company’s position will not be able to improve.

 Gross profit ratio is very important for any business and it helps to check the company
condition.Gross profit ratio of the company is decreasing every year and company profit
is being decreased. Company should have to maintain its position by retaining the
customer and by attracting the customers.

 Selling and distribution expenses increased in the year of 2016 i.e company wants to
increase its sale by incurring various selling expenses.

 The operating ratio shows the efficiency of a company’s management by comparing

operating expenses to net sales. High operating profit shows the low net profit of the
company.

 Net profit of the company is decreasing every year it means company’s liquidity position
is not good and company has to reduce its wastage and has to promote its product. If
company wants to retain its position in the market and earn profit than company has to
reduce its indirect expenses and also incur the expenses for promoting the product.
 It measures how efficiently a firm uses its assets to generate sales ,so higher ratio is
always more favourable but the ratio of the company is decreasing every year i.e
company is not using its assets more efficiently.
 Current ratio of the company is not good .Generally, a current ratio of 2:1 is considered to
be acceptable and the ratio of the company does not reach the minimum ratio . It says that
the financial position of the company is not good.
 The higher Quick ratio does not mean that the company has a strong liquidity position
because a company may have high quick ratio .

 A decrease in long term debt to total assets ratio shows the company is progressively
becoming less dependent on debt to grow its business.
 ANNEXURES

INCOME STATEMENT

YEARS 2016 2015

Total Revenue 93649024 91958736
Cost of Revenue, Total 75959720 73701296
Gross Profit 17689304 18257440
Total Operating
Expenses 88480708 85576624
Operating Income 5168316 6382112
Interest Income (Expense),
Net Non-Operating 1950896 1910403
Gain (Loss) on Sale of
Assets -106465 9444
Other, Net 294325 157414
Net Income Before Taxes 7307072 8459373
Provision for Income
Taxes 1587419 1950208
Net Income After Taxes 5719653 6509165
Minority Interest -313218 -91862
Equity In Affiliates - -
U.S GAAP Adjustment - -
Net Income Before
Extraordinary Items 5406435 6417303
Total Extraordinary Items - -
Net Income 5406435 6417303

BALANCE SHEET
 2016 2015
Total Current Assets 72449600 67529210
Cash and Short Term Investments 27710265 24355525
Cash - -
Cash & Equivalents 7890089 7331463
Short Term Investments 19820176 17024062
Total Receivables, Net 32895347 32594253
Accounts Receivables - Trade,
Net 5973266 6606046
Total Inventory 10523812 9198999
Prepaid Expenses 1074671 1262216
Other Current Assets, Total 245505 118217
Total Assets 178835928 165367946
Property/Plant/Equipment, Total
– Net 50722976 46418533
Property/Plant/Equipment, Total
– Gross 73102725 66254440
Accumulated Depreciation, Total -22379749 -19835907
Goodwill, Net 290293 292078
Intangibles, Net 4295879 4006010
Long Term Investments 20794597 19894812
Note Receivable - Long Term 27994898 25455047
Other Long Term Assets, Total 2287685 1772256
Other Assets, Total - -
Total Current Liabilities 43609793 41213520
Accounts Payable 6985942 7081124
Payable/Accrued - -
Accrued Expenses 2752047 3051435
Notes Payable/Short Term Debt 8760678 9384165
Current Port. of LT Debt/Capital
Leases 14836967 10788763
Other Current liabilities, Total 10274159 10908033
Total Liabilities 111646270 103343988
Total Long Term Debt 49846375 44760126
Long Term Debt 49846375 44760126
Capital Lease Obligations - -
Total Debt 73444020 64933054
Deferred Income Tax 4622226 4257834
Minority Interest 5154920 4857443
Other Liabilities, Total 8412956 8255065
Total Equity 67189658 62023958
Redeemable Preferred Stock,
Total - -
Preferred Stock - Non
Redeemable, Net - -
Common Stock, Total 1488993 1488993
Additional Paid-In Capital 4202597 3520395
Retained Earnings (Accumulated
Deficit) 64361408 60035088
Treasury Stock – Common -1640096 -1588697
ESOP Debt Guarantee - -
Unrealized Gain (Loss) -73808 184578
Other Equity, Total -1149436 -1616399
Total Liabilities &
Shareholders' Equity 178835928 165367946
Total Common Shares
Outstanding 268.67 268.67
 BIBLIOGRAPHY
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