BALANCE SHEET ANALYSIS: VIP INDUSTRIES by Avinash Katoch (Roll No 17A EPGDIB 2013-15

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Introduction The study of Balance Sheet of VIP Industries pertains to the financial year 2012-13 where all the figures have been given in Crores. It has been analysed to get answers to the following questions:Question 1. Can the firm meet its financial obligation? Question 2. How much money has already been invested in this company? Question 3. What kind of assets has the company purchased with its financing?

Financial Results (FY2012-13)

VIP Industries has not posted very encouraging financial results for FY 201213. The key takeaways are as under:1.

a. While the total revenue from operations and other income increased marginally from 861.68 Cr to 876.86 Cr, the profit before tax decreased substantially from 95.96 Cr to 45.36 Cr showing a drop of more than 50%. b. Profit Margin Profit Margin = PAT / Revenue or Net Sales FY 11 :(31.52/876.86) = 0.036 FY 12 : (67.69/861.68) = 0.0785 Profit margin decreased by almost 50% in FY 2012 which is not a positive sign for the company. c. EPS (earning per share): It represent overall profitability of the company. EPS = PAT/ No of shares. FY 2012-13 = 4.79 FY 2011-12 = 21.94 There has been a significant drop in earnings per share for the firm thereby leading to erosion in investor confidence.

28 (320. and Profitability Ratios Liquidity Ratio (a) Current Ratio = Current Assets / Current Liabilities. current assets should be 1. P/E ratio P/E ratio of the firm is calculated as under:- FY 2012-13 = 62.21/185.97-145.41 1.03 FY 2012-13 = 99. Liquidity Ratios. (b) Acid Test Ration = (Current Assets – Inventory) / Current Liabilities FY 2012-13 FY 2011-12 = (301.73 While there is no fixed norm. FY 2012-13 = = 301.25)/152. i.50/21.94 = 4.98 FY 2011-12 320.d.12)/ 185. Low P/E suggests that investors are not expecting higher earnings growth in future from the company.45/4. The company scores well on this account.97/152. a benchmark norm is 1. Ratio Analysis There are broadly three types of ratios: – – – 2.. .41 = 1.79 = 13.5:1.5 times that of current liabilities.08 0.08 suggesting that the firm will not have any problem in meeting its current liabilities.e.21-144.53 There has been a considerable decrease in P/E not commensurate with EPS.28 1.95 Acid-Test Ratio has increased in FY 2012-13 to 1. Leverage Ratios.

A return of 7.69 Cr FY 2011-12 320.8 Cr Working Capital is simply the amount that current assets exceed current liabilities.27/242.23/257.69 Cr YoY.8 Cr to 149.6% FY 2011-12 67.52 = 0.28 149.013 FY 2011-12 4. Many times. a company does not have enough liquidity.58 0.21-185. 3. it measures how a company finances its assets.26 0. (b) Return on equity (ROE) = Earnings after Taxes / Equity . Leverage is a ratio that measures a company's capital structure.Current Liabilities FY 2012-13 = = 301. This is often the cause of being over leveraged.52/413.97-152. 4.41 134. A further reduction in leverage ratio provides the firm the ability to raise more debt easily.16 or 16% ROA tells how well management is performing on all the firm's resources. the greater is the security to the investors that the firm will be able to meet its financial obligations.018 VIP industries is almost a zero debt company. Leverage Ratio (a) Leverage Ratio = Long-term Debt / Total Equity FY 2012-13 = 3. VIP Industries working capital has increased from 134.03 = 0.(c) Working Capital = Current Assets . Profitability Ratios (a) Return on assets = Earnings after Taxes / Total Assets FY 2012-13 = 31. In other words.69/432.6% on assets is on the lower side and the firm needs to work towards improving this ratio. The higher the amount.076 or 7.

99/144.40 ______40.07 FY 2011-12 413.69/242.61_________ (124. Where inventory figure average is not available. 5.29 = VIP Industries as has a very healthy RTR which means that it is able to maintain good turnover of their receivables or their conversion into cash.24 = 3.58 27.34)/2 0. VIP Industries has posted a decent figure on ROE when the stock market is not doing that well though YoY the figure has declined by more than 50%. it is calculated simply as: (Opening Inventory + Closing Inventory) 2 FY 2012-13 Inventory Turnover Ratio= 449.65)/2 0.24% FY 2011-12 67. . Turnover Ratios (a) Inventory Turnover Ratio = Cost of Sales/Average Inventory The ratio gives an indication of how quickly inventory gets converted into cash.52/257.25/145.87 VIP Industries has a healthy turnover ratio and is able to realise good return from its inventory. (b) Receivables Turnover Ratio = Credit Sales/Average Receivables FY 2012-13 FY 2011-12 = ______45.52 12.10+124. because it tells how much earnings they are getting for each rupee of their investments.70______ (104.9% ROE measures how well management is doing for the investor.FY 2012-13 = = 31.12 2.65+139.

. Analysis 7. (a) Cash Flow from Operations.06 Cr in the previous year showing a decline of 26. The total cash generated from operations stood at 82. VIP Industries was able to pass on only part of the cost increases to its customers due to weak macroeconomic demand. there was continued pressure on gross margins due to the weak Rupee against US Dollar on imported soft luggage. Cash from financing activities increased from 55. Its subsidiary in Bangladesh also needs to deliver on promise to take the company to the next level.52 Cr showing an increase of 10. It needs to introduce new ranges to further strengthen its market share in the coming years. (a) Cash Flow from Financing Operations. The economic decisions that are taken by users require an evaluation of the ability of an entity to generate cash and cash equivalents and the timing and certainty of their generation. This was mainly on account of decrease in interest payment on borrowings. The company needs to work on strengthening its distribution network to increase international sales.4%.46 Cr to 15.Cash Flow Analysis 6. (a) Cash Flow from Investing Operations. which constitutes majority of the Company's sales.3%. The outlook for the current year is challenging across traditional trade and modern retail sales channels mainly due to a sluggish economy. Information about the cash flows of an entity is useful in providing users of financial reports with a basis to assess the ability of the entity to generate cash and cash equivalents and the needs of the entity to utilize those cash flows.05 showing a decline of 25%. 8.43 Cr versus 112. During the year under review. Net cash used in investing activities decreased from 20.19 Cr to 61. Highly uncertain market conditions and weak economic scenario in European and Asia Pacific Countries led to decline in business and is the prime reason for overall decline in exports.