Chapter-1

Financial Statements

What we focus on?

When we look a performance of a company we
usually focus on
1. Profitability
2. Sales
3. Growth in sales
4. Reduction in costs
Why then do you have three financial statements?
Are we missing a bigger picture while we analyze
companies based on any p&l statement?

?
Which of the financial statements do you
focus on, usually, while evaluating a company?
1. Balance Sheet
2. P&L Account
3. Cash Flows.

Case - 1
Consolidate Balance Sheet

March, 2010

March, 2009

March, 2008

Sources of funds
Net Worth
Total Debt
Total Liabilities

30,433
21,677
52,737

24,154
16,320
41,108

19,688
12,277
32,355

Application of Funds
Net Block
Investments
Inventories
Sundry Debtors
CA
CL
TA

17,826
5,505
12,481
1,619
27,559
9,282
52,737

10,177
1,400
10,928
2,165
31,788
7,947
41,108

6,912
910
9,454
7,611
26,618
7,269
32,355

7,459
3,847
3,612
3,944
1,100
2,834
1,708

10,047
4,379
5,668
6014
555
5,459
4,518

14,498
4,655
9,843
10000
310
9,690
7,821

P/L
Income
Total expense
OPP
PBDIT
Interest
PBDT
NP

Case Study - 2

Sales
Op. Profit
OPM
Other Income
EBIDT
Interest
Depreciation
PBT
Tax
NP
Div. Payout

March, 2010

March, 2011

March, 2012

7,797.19
59.44
0.76%
112.47
171.91
12.94
5.57
153.4
48.55
107.27
32.95%

9,094.39
137.22
1.51%
154.33
291.55
44.89
10.5
236.09
73.28
166.03
26.65%

8,058.53
405.47
5.03%
51.69
457.16
94.53
9.16
353.48
94.21
204.12
21.68%

Case-2
Cash Flows
Cash from Operating
Activities
Cash flow from
investment
activities

March,
2010

March ,2011

March ,2012

-508.55

-585.88

-1219.53

-39.97

-111.28

599.41

742.13

610.29

-53.96

193.61

-56.88

-674.09

Cash flow from financing

activities
Net Cash Flow

?
Which of the three financial ststements is
depicting information as on a particular point
of time not a period?
1. P&L
2. Balance Sheet
3. Cash Flows

Financial Statements
Snap Shots

Annual Report Card

P/L Account

Balance Sheet as
on

Balance Sheet as on
Business Transaction

March 31, 2012

Cash Transaction

March 31, 2013

Bank Account
Cash Flow Statements

Cash flows from operating Activities

1.
2.

Any Cash flows due to operations of the firm

Usually you can relate this activities from the P&L
statements

Cash Flows from Investing Activity

1. Any cash flows due to investment activities such as buying and
selling of assets
2. Usually you can relate this activities from the asset side of the
B/S

Cash flow from financing activities

1. Any Cash flows arising out due to raising and deploying
money
2. Usually you can relate this activities from the liability side
of the B/S

Cash Flows-Broad Interpretation

Company A
Cash flows from Opearting
Activities
100
Cash flows from
investmenting activities
-150
Cash flows from Financing
activities
40
Net increase in cash -10

Company B
Cash flows from operating
activities
-100
Cash flows from
investing activities 250
Cash flows from
financing activities -100
Net increase in cash

50

Wockhardt
Dec.04 Dec.05 Dec.06 Dec.07 Dec.08
Sales

Mar.10

Mar.11

Mar.12

1253

1409

1731

2654

3594

4502

3751

4614

270

329

400

639

808

796

909

1440

Other Income

21

43

47

47

35

26

16

23

Dep

37

43

62

78

113

148

117

123

EBIT

255

329

386

607

730

674

808

1341

20

26

41

164

400

342

267

214

Profit before tax

235

303

345

443

330

332

541

1126

Net Profit

214

257

241

386

-139

-1001

91

343

Operational Profit
OPM

interest

Balance Sheet
Dec.04

Dec.05

Dec.06

Dec.07

Dec.08

Mar.10

Mar.11

Mar.12

55

55

55

55

55

55

55

55

Reserves

562

761

1012

1219

963

-52

143

655

Secured loans

408

412

1475

2344

3161

3552

3379

2958

Unsecured loans

483

494

495

556

1074

465

470

1508

1723

3037

4174

5253

4689

4723

4438

Net Block

498

548

1398

2549

2996

2529

2580

2975

Capital work in

163

240

309

522

634

708

887

499

71

93

95

90

91

846

934

1329

1031

1530

1357

1235

874

1508

1723

3037

4174

5253

4689

4793

4438

Dec.04

Dec.05

Dec.06

Dec.07

Dec.08

Mar.09

Mar.10

Mar.11

Operating activity

209

205

189

377

125

-193

642

1184

Investing activity

-152

-146

-876

-1671

-1198

698

-277

-305

Financing activity

521

-91

954

678

908

-404

-209

-827

Net Cash Flow

578

-32

265

-650

-165

102

156

220

Equilibrium

Total

Progress
Investments
Working Expenre

Cash Flow

Perils in relying on only P&L a/c

Companies book sales aggressively
Companies book costs slowly
Companies sell more but are not able to
recover the sales.