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thulasi pptfin

thulasi pptfin

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financial statement anayasis
financial statement anayasis

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Published by: thulasik on May 16, 2013
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07/01/2014

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Project report on financial statement analysis

          CONTENTS: Introduction to study Overview of paper industry Company introduction Introduction to financial statement analysis Tools for financial statement analysis Comparative statement analysis Cash flow statement analysis Ratio analysis and interpretation Conclusion. .

 To analyse the financial stability and overall performance of industry in general. .OBJECTIVES  To study the financial position of the company.  To analyse the profitability and solvency position of the unit with the existing tools of financial analysis.

4% while paper consumption will grow at a CAGR of 9% till 2012-13.34 million people indirectly.PAPER INDUSTRY OVERVIEW: The Indian Paper Industry accounts for about 1. 2918 crore (USD 0.6% of the world’s production of paper and paperboard. paper production is likely to grow at a CAGR of 8.  As per industry estimates.000 crore (USD 5. the investment arm of the World Bank is already associated with at least three of the IPMA member mills. IFC.  The industry provides employment to more than 0.  The estimated turnover of the industry is Rs 25. .12 million people directly and 0.  Foreign funds interest in the Indian paper sector is growing.69 billion).95 billion) approximately and its contribution to the exchequer is around Rs.

By financial statements we mean two statements : • (i) Profit and loss Account or Income Statement • (ii) Balance Sheet or Position Statement • These are prepared at the end of a given period of time. The term financial analysis is also known as analysis and interpretation of financial statements. They are the indicators of profitability and financial soundness of the business concern.AN INTRODUCTION • A Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. It determines financial strength and weaknesses of firm. . It refers to establishing meaningful relationship between various items of the two financial statements i. Income statement and position statement.FINANCIAL STATEMENTS ANALYSIS .e.

• Indicating the trend of Achievements. • Assess solvency of the firm. the analysis and interpretation of financial statements is very essential to measure the efficiency. profitability. • Assess overall financial strength. • Comparative position in relation to other firms. • Assessing the growth potential of the business. Thus.• Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. . • FINANCIAL ANALYSIS SERVES FOLLOWING PURPOSES : • Measuring the profitability. financial soundness and future prospects of the business units.

PARTIES INTERESTED           Investors Management Trade unions Lenders Suppliers and trade creditors Tax authorities Researchers Employees Government and their agencies Stock exchange .

reserves. shareholders. TECHNIQUES AND TOOLS OF FINANCIALSTATEMENT ANALYSIS . They are not readily understandable to interested parties like creditors. investors etc. equity. various techniques are employed for analysing and interpreting the financial statements. Thus. • Cash flow analysis. expenses and profit and loss of an enterprise. • The following are the important tools which are commonly used for analysing and interpreting financial statements : • Comparative/Horizontal financial statements. • Trend analysis . • Common size statements. liabilities.• Financial statements give complete information about assets. • Ratio analysis.

While interpreting comparative Balance sheet the interpreter is expected to study the following aspects : (i) Current financial position and Liquidity position (ii) Long-term financial position (iii) Profitability of the concern . A third column is used to show change (increase/decrease) in figures.COMPARATIVE BALANCE SHEET The comparative balance sheet shows the different assets and liabilities of the firm on different dates to make comparison of balances from one date to another. The fourth column may be added for giving percentages of increase or decrease. The comparative balance sheet has two columns for the data of original balance sheets.

. selling expenses. This statement traditionally is known as trading and profit and loss A/c.Comparative Income statement: The income statement provides the results of the operations of a business. The comparative income statement gives an idea of the progress of a business over a period of time. office expenses etc. Important components of income statement are net sales. cost of goods sold. The changes in money value and percentage can be determined to analyse the profitability of the business.

Kell and Bedford. capital structure and profitability of an organization. It may be defined as the indicated quotient of two mathematical expressions. otherwise complex situations. “a ratio is an expression of the quantitative relationship between two numbers”. . planning coordination. Ratio analysis: Ratio analysis is the process of determining and presenting the relationship of items and group of items in the statements. It is helpful to know about the liquidity. Management Accounting “Ratio can assist management in its basic functions of forecasting. According to Accountant’s Handbook by Wixon.RATIO ANALYSIS:Meaning of Ratio:A ratio is simple arithmetical expression of the relationship of one number to another. It is helpful tool to aid in applying judgement. control and communication”. solvency. According to Batty J.

Activity Ratio or Turnover Ratio a. Average Payment Period f. Stock Turnover Ratio b.CLASSIFICATION OF RATIO Ratio may be classified into the four categories as follows: A. Fixed Assets to Proprietor’s Fund Ratio e. Leverage or Capital Structure Ratio a. Debt Equity Ratio b. Liquidity Ratio a. Proprietary Ratio d. Current Ratio b. Capital Gearing Ratio f. Interest Coverage Ratio C. Creditors or Payables Turnover Ratio e. Fixed Assets Turnover Ratio g. Debt to Total Fund Ratio c. Working Capital Turnover Ratio . Debtors or Receivables Turnover Ratio c. Quick Ratio or Acid Test Ratio B. Average Collection Period d.

Return on Equity Shareholder’s Funds c. Earning and Dividend Yield g. Dividend Payout Ratio f. Expenses Ratio (B) Profitability Ratio Based on Investment : I. Gross Profit Ratio b. Operating Ratio d. Return on Shareholder’s Funds : a. Return on Total Shareholder’s Funds b. Earning Per Share d. Dividend Per Share e. Return on Capital Employed II. Net Profit Ratio c.D. Profitability Ratio or Income Ratio (A) Profitability Ratio based on Sales : a. Price Earning Ratio .

Acceptable ratios as they are quite close to the industry averages. There is sales growth in this business. Good cash flows from operating activities and .CONCLUSION The strong forecast for the industry (ie general prospects looking good and world demand for paper products remaining strong).

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