CHAPTER 1

1.1. Introduction

Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions.
These statements include the income statement, balance sheet, statement of cash flows,
and a statement of changes in equity.

The present study of financial statement is prepared for the purpose of presenting a
periodical review or report by the management of and deal with the state of investment in
business and result achieved during the period under review. They reflect the financial
position and operating strengths or weaknesses of the concern by properly establishing
relationship between the items of the balance sheet and income statements. This study
attempts to analyze the financial performance of WIPRO Limited.

1.2 Need of the study

Financial Analysis is the process of identifying the financial strengths and weaknesses of
the firm by properly establishing relationships between the items of the balance sheet and
the profit & loss account. Financial analysis can be undertaken by management of the firm,
viz. Owners, creditors, investors and others. Ratio analysis is a powerful tool of financial
analysis. Typically, financial analysis is used to analyze whether an entity is stable, solvent,
liquid or profitable enough to warrant a monetary investment. When looking at a specific
company, a financial analyst conducts analysis by focusing on the income statement,
balance sheet, and cash flow statement.

Ratios help to summarize large quantities of financial data and to make qualitative
judgement about the firm’s financial performance. FINANCIAL ANALYSIS OF WIPRO
LTD. helps the management in taking decisions for the company.

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2.1. Theoretical Aspect of FSA
Financial statements are summaries of the operating, financing, and investment activities
of a business. Financial statements should provide information useful to both investors and
creditors in making credit, investment, and other business decisions. And this usefulness
means that investors and creditors can use these statements to predict,
compare, and evaluate the amount, timing, and uncertainty of potential cash flows. In
other words, financial statements provide the information needed to assess a company’s
future earnings and therefore the cash flows expected to result from those earnings. In
this chapter, we discuss the four basic financial statements: the balance sheet, the income
statement, the statement of cash flows, and the statement of shareholders ‘equity’.

2.1 Financial Statement

Financial analysis is the process of identifying the strengths and weakness of the firm with
the help of accounting information provided in the Profit and Loss Account and Balance
Sheet. It is the process of evaluation of relationship between component parts of financial
statements to obtain a better understanding of the firm’s position and performance.

Financial statement analysis (or financial analysis) is the process of reviewing and
analysing a company's financial statements to make better economic decisions. These
statements include the income statement, balance sheet, statement of cash flows, and a
statement of retained earnings. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial health, and future
prospects of an organization.

It is used by a variety of stakeholders, such as credit and equity investors, the government,
the public, and decision-makers within the organization. These stakeholders have different
interests and apply a variety of different techniques to meet their needs. For example,
equity investors are interested in the long-term earnings power of the organization and
perhaps the sustainability and growth of dividend payments. Creditors want to ensure the
interest and principal is paid on the organization’s debt securities (e.g., bonds) when due.

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Common methods of financial statement analysis:

Fundamental analysis

Technical analysis

DuPont analysis

Horizontal and vertical analysis

Financial ratios analysis

2.2 Accounting principle and assumptions

The accounting data in financial statements are prepared by the firm’s management
according to a set of standards, referred to as generally accepted accounting principles
(GAAP). The financial statements of a company whose stock is publicly traded must, by
law, be audited at least annually by independent public accountants (i.e., accountants who
are not employees of the firm). In such an audit, the accountants examine the financial
statements and the data from which these statements are prepared and attest through the
published auditor’s opinion-that these statements have been prepared according to GAAP.
The auditor’s opinion focuses on whether the statements conform to GAAP and that there
is adequate disclosure of any material change in accounting principles.

The financial statements are created using several assumptions that affect how we use and
interpret the financial data:

✓ Transactions are recorded at historical cost. Therefore, the values shown in the
statements are not market or replacement values, but rather reflect the original cost
(adjusted for depreciation, in the case of depreciable assets).

✓ The appropriate unit of measurement is the dollar. While this seems logical, the
effects of inflation, combined with the practice of recording values at historical
cost, may cause problems in using and interpreting these values.

✓ The statements are recorded for predefined periods of time. Generally, statements
are produced to cover a chosen fiscal year or quarter, with the income statement

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 and the statement of cash flows spanning a period’s time and the balance sheet and
statement of shareholders ‘equity’ as of the end of the specified period. But because
the end of the fiscal year is generally chosen to coincide with the low point of
activity in the firm’s operating cycle, the annual balance sheet and statement of
shareholders ‘equity’ may not be representative of values for the year.

✓ Statements are prepared using accrual accounting and the matching principle. Most
businesses use accrual accounting, where income and revenues are matched in
timing such that income is recorded in the period in which it is earned and expenses
are reported in the period in which they are incurred to generate revenues. The result
of the use of accrual accounting is that reported income does not necessarily
coincide with cash flows. Because the financial analyst is concerned ultimately with
cash flows, he or she often must understand how reported income relates to a
company’s cash flows.

✓ It is assumed that the business will continue as a going concern. The assumption
that the business enterprise will continue indefinitely justifies the appropriateness
of using historical costs instead of current market values because these assets are
expected to be used up over time instead of sold.

✓ Full disclosure requires providing information beyond the financial statements. The
requirement that there be full disclosure means that, in addition to the accounting
numbers for such accounting items as revenues, expenses, and assets, narrative and
additional numerical disclosures are provided in notes accompanying the financial
statements. An analysis of financial statements is therefore not complete without
this additional information.

✓ Statements are prepared assuming conservatism. In cases in which more than one
interpretation of an event is possible, statements are prepared using the most
conservative interpretation.

The financial statements and the auditors’ findings are published in the firm’s annual and
quarterly reports sent to shareholders and the 10K and 10Q filings with the Securities and
Exchange Commission (SEC). Also included in the reports, among other items, is a

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discussion by management, providing an overview of company events. The annual reports
are much more detailed and disclose more financial information than the quarterly reports.

There are three basic financial statements:

✓ Balance sheet

✓ Income statement

✓ Cash Flow statement

2.3 Financial Analysis

Financial analysis is a tool of financial management. It consists of the evaluation of

the financial condition and operating performance of a business firm, an industry,
or even the economy, and the forecasting of its future condition and performance.
It is, in other words, a means for examining risk and expected return. Data for
financial analysis may come from other areas within the firm, such as marketing
and production departments, from the firm’s own accounting data, or from financial
information vendors such as Bloomberg Financial Markets, Moody’s Investors
Service, Standard & Poor’s Corporation, Fitch Ratings, and Value Line, as
well as from government publications, such as the Federal Reserve Bulletin.
Financial publications such as Business Week, Forbes, Fortune, and the Wall Street
Journal also publish financial data (concerning
individual firms) and economic data (concerning industries, markets, and
economies), much of which is now also available on the Internet.
Within the firm, financial analysis may be used not only to evaluate the
performance of the firm, but also its divisions or departments and its product lines.
Analyses may be performed both periodically and as needed, not only to ensure
informed investing and financing decisions, but also as an aid in implementing
personnel policies and rewards systems. Outside the firm, financial analysis may
be used to determine the creditworthiness of a new customer, to evaluate the ability
of a supplier to hold to the conditions of a long-term contract, and to evaluate the
market performance of competitors. Firms and investors that do not have the
expertise, the time, or the resources to perform financial analysis on their own may

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 purchase analyses from companies that specialize in providing this service. Such
companies can provide reports ranging from detailed written analyses to simple
creditworthiness ratings for businesses. As an example, Dun & Bradstreet, a
financial services firm, evaluates the creditworthiness of many firms, from small
local businesses to major corporations. As another example, three Companies-
Moody’s Investors Service, Standard & Poor’s, and Fitch-evaluate the credit
quality of debt obligations issued by corporations and express these views in the
form of a rating that is published in the reports available from these three
organizations.
➢ Who uses these analyses?

Financial statements are used and analysed by a different group of parties, these
groups consist of people both inside and outside a business. Generally, these users
are:
A. Internal Users: are owners, managers, employees and other parties who are
directly connected with a company:
1. Owners and managers require financial statements to make important business
decisions that affect its continued operations. Financial analysis is then performed
on these statements to provide management with more detailed information.
These statements are also used as part of management & report to its stockholders,
and it form part of the Annual Report of the company.
2. Employees also need these reports in making collective bargaining agreements
with the management, in the case of labour unions or for individuals in discussing
their compensation, promotion and rankings.
B. External Users: are potential investors, banks, government agencies and other
parties who are outside the business but need financial information about the
business for numbers of reasons.
1. Prospective investors make use of financial statements to assess the viability of
investing in a business. Financial analyses are often used by investors and is
prepared by professionals (financial analysts), thus providing them with the basis
in making investment decisions.

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 2. Financial institutions (banks and other lending companies) use them to decide
whether to give a company with fresh loans or extend debt securities (such as a
long- term bank loan).
3. Government entities (tax authorities) need financial statements to ascertain the
propriety and accuracy of taxes and duties paid by a company.
4. Media and the general public are also interested in financial statements of some
companies for a variety of reasons.

2.4 Classification of FSA

Horizontal Analysis:

It is practically a Time Series Analysis of data contained in financial statements. It throws

light on the companion of financial data for a number of years against a base year. It
indicates the progress or otherwise of the firm over a number of years by a comparative
time series analysis.
In this type of analysis, comparative financial statements and trend percentage analysis
are the common tools for measuring the comparison. The data are taken from the Income
Statements, Balance Sheets and other relevant information. The comparison is made
between two years or over a number of years.
The data are arranged horizontally in a statement; one column being used for each year.
These figures can also be graphically presented. Since it covers a number of years for
such analysis it is also called Dynamic Analysis. This analysis helps to understand the
trend of the firm. This proves particularly very meaningful and significant when it is
supported by comparative statements.
Vertical Analysis:
This analysis is done usually at a particular point of time, say at the closing day of the
year/year end i.e. when financial statements are analyzed and interpreted on a single set
of statement. Practically it presents the structural relationship of different items contained
in the financial statements.
It provides the structural balance and financial soundness or otherwise of a firm. For
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example, Current Ratio (Current Assets / Current Liabilities), Net Profit Ratio (Net Profit
/ Sales x 100) etc. Since it considers only one year’s financial statement it is called static
analysis. Accounting ratios and Common Size statements are two tools that are used for
this analysis.

This method has some advantage; they are:

(i) It is very easy to analyze and interpret since only single set of financial statement is
taken;
(ii) It is a short period analysis of data;

(iii) Usually it relates to current year’s financial statement analysis etc.

Similarly, it has got some limitations. Some of them are:
(i) It does not recognize the past and future data for comparison;
(ii) It throws light on the current financial position taken the data from the Income
Statement and Balance Sheet.
Trend Analysis:
It is the directional movement of a particular item with specific period.

3.1 Company Profile

Business-Description
Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services
Company globally. Wipro provides comprehensive IT solutions and services, including
systems integration, Information Systems outsourcing, package implementation,

8
software application development and maintenance, and research and development
services to corporations globally.
The Group's principal activity is to offer information technology services. The services
include integrated business, technology and process solutions including systems
integration, package implementation, software application development and
maintenance and transaction processing. These services also comprise of information
technology consulting, personal computing and enterprise products, information
technology infrastructure management and systems integration services. The Group
also offers products related to personal care, baby care and wellness products. The
operations of the Group are conducted in India, the United States of America and Other
countries. During fiscal 2007, the Group acquired Wipro Cyprus Pvt Ltd, Retail box
By, Enabler Informatica SA, Enabler France SAS, Enabler Uk Ltd, Enabler Brazil Ltd,
Enabler and Retail Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd, Saraware
Oy, Quantech Global Services and Hydro auto Group AB.

Global IT Services and Products

The Company's Global IT Services and Products segment provides IT services to
customers in the Americas, Europe and Japan. The range of its services includes IT
consulting, custom application design, development, re-engineering and maintenance,
systems integration, package implementation, technology infrastructure outsourcing,
BPO services and research and development services in the areas of hardware and
software design. Its service offerings in BPO services include customer interaction
services, finance and accounting services and process improvement services for
repetitive processes.

The Global IT Services and Products segment accounted for 74% of the Company's
revenues and 89% of its operating income for the year ended March 31, 2007 (fiscal
2014-18). Of these percentages, the IT Services and Products segment accounted for
68% of its revenue, and the BPO Services segment accounted for 6% of its revenue
during fiscal 2007.

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Customized IT solutions
Wipro provides its clients customized IT solutions in the areas of enterprise IT services,
technology infrastructure support services, and research and development services. The
Company provides a range of enterprise solutions primarily to Fortune 1000 and Global
500 companies. Its services extend from enterprise application services to e-Business
solutions. Its enterprise solutions have served clients from a range of industries,
including energy and utilities, finance, telecom, and media and entertainment. The
enterprise solutions division accounted for 63% of its IT Services and Products
revenues for the fiscal 2014-18.

Technology Infrastructure Service

Wipro offers technology infrastructure support services, such as help desk
management, systems management and migration, network management and
messaging services. The Company provides its IT Services and Products clients with
around-the-clock support services. The technology infrastructure support services
division accounted for 11% of Wipro's IT Services and Products revenues in fiscal
2014-18.

Research and Development Services

Wipro's research and development services are organized into three areas of focus:
telecommunications and inter-networking, embedded systems and Internet access
devices, and telecommunications and service providers. The Company provides
software and hardware design, development and implementation services in areas,
such as fiber optics communication networks, wireless networks, data networks, voice
switching networks and networking protocols. Wipro's software solution for embedded
systems and Internet access devices is programmed into the hardware integrated circuit
(IC) or application-specific integrated circuit (ASIC) to eliminate the need for running
the software through an external source. The technology is particularly important to
portable computers, hand-held devices, consumer electronics, computer peripherals,
automotive electronics and mobile phones, as well as other machines, such as process-

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 controlled equipment. The Company provides software application integration,
network integration and maintenance services to telecommunications service
providers, Internet service providers, application service providers and Internet data
centers.

Business Process Outsourcing Service

Wipro BPO's service offerings include customer interaction services, such as IT-
enabled customer services, marketing services, technical support services and IT
helpdesks; finance and accounting services, such as accounts payable and accounts
receivable processing, and process improvement services for repetitive processes, such
as claims processing, mortgage processing and document management. For BPO
projects, the Company has a defined framework to manage the complete BPO process
migration and transition. The Company competes with Accenture, EDS, IBM Global
Services, Cognizant, Infosys, Satyam and Tata Consultancy Services. India and Asia
Pac IT Services and Products
The Company's India and Asia Pac IT Services and Products business segment, which
is referred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and Middle-East
markets, and provides enterprise clients with IT solutions. The India and Asia Pac IT
Services and Products segment accounted for 16% of Wipro's revenue in fiscal 2014-
18. The Company's suite of services and products consists of technology products;
technology integration, IT management and infrastructure outsourcing services;
custom application development, application integration, package implementation and
maintenance, and consulting.

Wipro's system integration services

Include integration of computing platforms, networks, storage, data center and
enterprise management software. These services are typically bundled with sales of the
Company's technology products. Wipro's infrastructure management and total
outsourcing services include management and operations of customer's IT
infrastructure on a day-to-day basis. The Company's technology support services
include upgrades, system migrations, messaging, network audits and new system

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 implementation. Wipro designs, develops and implements enterprise applications for
corporate customers. The Company's solutions include custom application
development, package implementation, sustenance of enterprise applications, including
industry-specific applications, and enterprise application integration. Wipro also
provides consulting services in the areas of business continuity and risk management,
technology, process and strategy.

Consumer Care and Lighting

Wipro's Consumer Care and Lighting business segment accounted for 5% of its revenue
in fiscal 2014-18. The Company's product lines include hydrogenated cooking oil,
soaps and toiletries, wellness products, light bulbs and fluorescent tubes, and lighting
accessories. Its product lines include soaps and toiletries, as well as baby products,
using ethnic ingredients. Brands include Santoor, Chandrika and Wipro Active. The
Wipro Baby Soft line of infant and child care products includes soap, talcum powder,
oil, diapers and feeding bottles and Wipro Sanjeevani line of wellness products.
The Company's product line includes incandescent light bulbs, compact fluorescent
lamps and luminaries. It operates both in commercial and retail markets. The Company
has also developed commercial lighting solutions for pharmaceutical production
centers, retail stores, software development centers and other industries. Its product line
consists of hydrogenated cooking oils, a cooking medium used homes, and bulk
consumption points like bakeries and restaurants. It sells this product under the brand
name Wipro Sunflower.

Research Methodology
Research methodology is considered as the nerve of the project. Without a proper well-
organized research plan, it is impossible to complete the project and reach to any
conclusion. It explains about the methods and logic behind the methods used in the context
of research study and also explains the reason behind for a particular method has been used
in the preference out of other methods.

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4.1 Research Design
It includes all about the WIPRO revenue and the margin of profit earned in the last 5 years.
According to the sample the data will collected for this project to ascertain the actual
financial position of the company.
Sampling area-
The region of research is located at Wipro Limited, India.

4.2 Research Objectives

To understand the financial statement analysis of Wipro Limited.
To examine and assess the financial statement through comparative, common size
and trend analysis of Wipro Limited.

4.3 Data Sources and Data Collection Method

This study is based on the data about Wipro Limited for a detailed study of
its income statement, balance sheet, other policy documents and finally to recognize and
determine the position of the Wipro Limited.

Types of data which helped to prepare this report:

The secondary source of data was only used to reach the aims and objectives of this
project. These data have been collected from the financial reports of the company.

How the data was collected?

However, the secondary source of data was collected from the financial statements
already available to the finance section of the company and some of which was
published.

METHOD OF DATA ANALYSIS

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For the purpose of this project I usually collect secondary source of data. It is the
structural research made of data collection. The data collected is the secondary data it
will be analyzed through tables and charts.

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Data Analysis Procedure & Tools
5.1 Horizontal Analysis
Hear we assume that the total income is 100 then what is the of particular compare to total
income. Horizontal analysis of Profit & Loss Account deals with the amount changes and
the percentage changes of the items of the Profit & Loss Account in every year individually.
Table No:5.1 Horizontal analysis of income statement
PARTICULARS 2018 2017 2016 2015
SALES -1.73% 8.20% 9.14% 8.12%
EXPENSES -0.06% 9.10% 10.36% 8.48%
OPERATING PROFIT -8.25% 4.86% 4.83% 6.89%
OPM % -5.00% -4.76% -4.55% 0.00%
OTHER INCOME -2.78% -4.69% 12.33% 27.47%
INTEREST -1.85% 6.45% 59.43% -8.62%
DEPRECIATION -8.57% 54.41% 27.32% 10.85%
PBT -7.22% -3.96% 2.41% 10.97%
TAX% -4.35% 4.55% 0.00% 4.76%
NET PROFIT -5.77% -4.66% 2.85% 8.98%
(Source: compiled & computed)
Fig. 5.1 Horizontal analysis of income statement
60000
50000
40000
30000
20000
10000
0
-10000

SALES EXPENSES OPERATING PROFIT

OPM % OTHER INCOME INTEREST
DEPRECIATION PBT TAX%
NET PROFIT

Interpretation: Sales-In 2015, sales were 46,951 it upgraded to 51,244 in 2016. Coming
to 2017 it was 55,448 which then interprets the fall of 1.73% which brings the sales down
to 54,487.
Expenditure

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 • In 2014 expenditure was 33,788 it increased to 36,652 in 2015. It then increased to
40,448 in 2016. It again took an increase of 9.10% resulting in 44,128 in 2017.
Luckily, it decreased to 44,100 with a decrease of 0.06% in 2018 resulting in cutting
off of expenditure in 2018 from previous year.
Income
• In 2014 – 1922, 2015 – 2450, 2016 – 2752. Unfortunately, there was a decrease in
4.69% resulting in 2623 & again in 2018 with a decrease of 2.78% resulting in 2550
which overall results in a wave in the graph.
Profit Before Tax (PBT)
• In 2014, 10,114 + 10.97% = 11,224 in 2015. With an increase of 270, 11,494 in
2016, with a decrease of 3.96%, 11039 in 2017. Again, with a decrease of 7.22%
or 797, the resulting factor of 2018 is 10,242.
Profit After Tax (PAT)
• In 2015, the profit was the highest i.e. 8.98% and then there was a sudden fall in
the profit in the year 2016. There was a negative fall in the year 2017 & 2018 i.e. -
4.66% and -5.77% respectively.
5.2 Vertical Analysis
This is carried out by taking the items of the past financial year used as base year and items
of other years are expressed as percentage of the base year. Here 2004-05 is taken as base
year

Table No:5.2 Vertical analysis of income statement

PARTICULARS 2018 2017 2016 2015 2014
SALES 100.00% 100.00% 100.00% 100.00% 100.00%
EXPENSES 80.94% 79.58% 78.93% 78.06% 77.81%
OPERATING PROFIT 19.06% 20.42% 21.07% 21.94% 22.19%
OPM % 0.00% 0.00% 0.00% 0.00% 0.00%
OTHER INCOME 4.68% 4.73% 5.37% 5.22% 4.43%
INTEREST 1.07% 1.07% 1.09% 0.75% 0.88%
DEPRECIATION 3.88% 4.17% 2.92% 2.50% 2.44%
PBT 18.80% 19.91% 22.43% 23.91% 23.29%
TAX% 0.00% 0.00% 0.00% 0.00% 0.00%
NET PROFIT 14.69% 15.32% 17.38% 18.45% 18.30%
(Source: compiled & computed)
Fig. 5.2 Vertical analysis of income statement

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 60000

50000

40000

30000

20000

10000

0
2018 % 2017 % 2016 % 2015 % 2014 %

SALES EXPENSES OPERATING PROFIT

OPM % OTHER INCOME INTEREST
DEPRECIATION PBT TAX%
NET PROFIT

Interpretation
Sales
• The sales are assumed to be 100% in the last five years and then it is compared with
other factors.

Expenditure
• There is a unusual trend in expenditure over the past five years. We can see an
alternate increase and decrease every year.

Income
• As in the above figure, we can see the same trend in income over the last five years.

Profit Before Tax (PBT)

• There is hardly any difference in PBT from the year 2014-15 and there is gradual
decrease from the year 2016-18.

Profit After Tax (PAT)

• There is hardly any difference in PAT from the year 2014-15 and there is gradual
decrease from the year 2016-18. Thus, the growth was not constant.

5.3 Fiscal Year

Table No:5.3

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 PARTICULARS 2018 2017 2016 2015 2014
SALES 54,487 55,448 51,244 46,951 43,424
EBIT 1,00,343 1,06,871 1,04,821 1,05,570 96,082
INTEREST EXPENSE 3,843 4,680 5,278 3,629 3,747
TOTAL NET INCOME 10,387 11,320 10,796 10,299 9,636
BASIC EPS FROM TOTAL OPERATIONS 16 17 36 35 30
TOTAL ASSETS 77,945 81,949 74,766 59,367 49,688
ACCOUNTS PAYABLE 46,477 50,186 55,495 49,704 35,042
TOTAL LIABILITIES 77,945 81,949 74,766 59,367 49,688
RETAINED EARNINGS 4645 5766 7887 5563 9878
NET CASH FROM OPERATING ACTVITIES 64,709 73,707 66,867 77,036 65,886
FREE CASH FLOW 19,222 33,622 84,088 1,49,425 1,05,549
(Source: compiled & computed)

Fig.5.3

Interpretation
• There is a gradual increase in sales from 2014-17 but we see an unusual decline in
2018.
• There is a unusual trend in the EBIT over the past five years. We can see an alternate
increase and decrease every year. It shows how uncertain the earnings are.
• There is a decline in interest expense from 2014-15 and there is a growth in 2016
and then it gradually decreases in the year 2018.

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 • There is an increase total net income from 2014-17 and there is an sudden decline
in 2018.
• There is an increasing trend in baisc EPS from total operations from 2014-16 but
there is an sudden fall in 2017 & 2018 i.e. 17 and 16 respectively.
• There is an increasing trend in total assets from 2014-17. We see a sudden decline
in the year 2018.
• There is an increase in accounts payable from 2014-16 and then a fall in the recent
years of 2017 & 2018.
• There is a gradual increase in total liabilities from 2014-17 and we see a fall in the
year 2018.
• There is an usual trend in the retained earnings. There are uncertain and
unpredictable increase and decrease along the graph.
• We see an increase in net cash operating activities from the year 2014-15. Then
there is a decline in the year 2016 and then an increase in 2017 and there’s again a
decline in 2018.
• As in the above figure, we can see the same trend in free cash flow. There is an
increase in cash flow from 2014-15 and then an decrease from 2016-18.

5.4 ABSOLUTE RELATIVE GROWTH

Table No:5.4
PARTICULARS 2018 2017 2016 2015
SALES 98.27% 108.20% 109.14% 108.12%
EBIT 93.89% 101.96% 99.29% 109.87%
INTEREST EXPENSE 82.12% 88.67% 145.44% 96.85%
TOTAL NET INCOME 91.76% 104.85% 104.83% 106.88%
BASIC EPS FROM TOTAL OPERATIONS 96.79% 46.07% 103.37% 117.25%
TOTAL ASSETS 95.11% 109.61% 125.94% 119.48%
ACCOUNTS PAYABLE 92.61% 90.43% 111.65% 141.84%
TOTAL LIABILITIES 95.11% 109.61% 125.94% 119.48%
RETAINED EARNINGS 80.56% 73.11% 141.78% 56.32%
NET CASH FROM OPERATING ACTVITIES 87.79% 110.23% 86.80% 116.92%
FREE CASH FLOW 57.17% 39.98% 56.27% 141.57%
(Source: compiled & computed)
Fig. 5.4

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Interpretation
• There was an increase in sales from 2015-16 but after that there is a sudden fall in
the year 2016-18.
• There was a decrease in EBIT in the year 2015-16 and after that there was slight
increase in year 2016-17. During the year 2017-18 there is a sudden fall.
• During the year 2015 the interest expense was 96.85% and it was highest in 2016
and there was a sudden decline in 2017 & 2018 respectively.
• There was a slight decrease in total net income from the year 2015-16 and in 2017
being the same there was a decline in the year 2018.
• There was a decline in basic EPS from total operations from the year 2015-16.
Unexpectedly there was a sudden fall in 2017 but then due to some factors luckily
there was a rise in 2018.
• There was a slight increase in total assets from the year 2015-16 and there was a
sudden decrease in the year 2017 and same followed in the year 2018 also.
• From the year 2015-17 there was an unexpected decrease in accounts payable and
then there was a slight increase in the year 2018.

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 • There was a slight increase in total liabilities from the year 2015-16 and there was
a sudden decrease in the year 2017 and same followed in the year 2018 also.
• There was a huge growth in retained earnings from the year 2015-16 which resulted
in good profit for the company. Due to some factors there was a fall in the year
2017 and again there was a slight increase in the year 2018
• There was a fall in net cash from operating activities from the year 2015-16 but
then it increased in the year 2017 and again in 2018 it decreased.
• There was a huge fall in free cash flow from the year 2015-17 and then a gradual
increase in the year 2018. It seems to be the company’s cash and liquidity condition
is improving.

5.5 RELATIVE RATE

Table No:5.5
PARTICULARS 2018 2017 2016 2015
SALES -1.73% 8.20% 9.14% 8.12%
EBIT -6.11% 1.96% -0.71% 9.87%
INTEREST EXPENSE -17.88% -11.33% 45.44% -3.15%
TOTAL NET INCOME -8.24% 4.85% 4.83% 6.88%
BASIC EPS FROM TOTAL OPERATIONS -3.21% -53.93% 3.37% 17.25%
TOTAL ASSETS -4.89% 9.61% 25.94% 19.48%
ACCOUNTS PAYABLE -7.39% -9.57% 11.65% 41.84%
TOTAL LIABILITIES -4.89% 9.61% 25.94% 19.48%
RETAINED EARNINGS -19.44% -26.89% 41.78% -43.68%
NET CASH FROM OPERATING ACTVITIES -12.21% 10.23% -13.20% 16.92%
FREE CASH FLOW -42.83% -60.02% -43.73% 41.57%
(Source: compiled & computed)
Fig.5.5

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Interpretation
• We can see that there is consistent growth in sales from the year 2015-17 but in the
year 2018 there is a negative fall by -1.73%.
• In the year 2015 the EBIT was 9.87% which results in good revenue for the
company.
• The interest expense has an inconsistent growth except for the year 2016 i.e.
45.44%
• We can see that there is growth and decline in total net income from the year 2015-
17 but in the year 2018 there is a negative fall by -8.24%.
• There is a huge decrease in basic EPS from total operations after the year 2015.
• There is a increase in total assets from the year 2015-16 after that it starts declining
from 2016-18.
• There is a sudden fall in accounts payable from the year 2015-16 after it shows a
negative fall till 2018.
• There is a sudden increase in retained earnings from the year 2015-16 but then there
is a huge decrease in the year 2017-18.
• We can see that there is alternate increase and decrease in net cash from operating
activities from the year 2015-18.
• We can see that there is a negative fall in free cash flow from the year 2015-18.

5.5 FINANCIAL STATISTICAL ANALYSIS

Table No:5.6
PARTICULARS Arithmetic Mean Geometric Mean Difference Standard Deviation
SALES 5.93% 8.20% -2.27% 5.13%
EBIT 1.25% 1.96% -0.70% 6.66%
INTEREST EXPENSE 3.27% -11.33% 14.60% 28.75%
TOTAL NET INCOME 2.08% 4.85% -2.77% 6.95%
BASIC EPS FROM TOTAL OPERATIONS -9.13% -53.93% 44.80% 31.06%
TOTAL ASSETS 12.53% 9.61% 2.93% 13.42%
ACCOUNTS PAYABLE 9.13% -9.57% 18.70% 23.80%
TOTAL LIABILITIES 12.53% 9.61% 2.93% 13.42%
RETAINED EARNINGS -12.06% -26.89% 14.83% 37.30%
NET CASH FROM OPERATING ACTVITIES 0.44% 10.23% -9.79% 15.42%
FREE CASH FLOW -26.25% -60.02% 33.77% 45.90%
(Source: compiled & computed)

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 Fig. 5.6

Interpretation
• There is not much consistency in sales thus it indicates loss for the company.
• The EBIT (revenue) is only 1.25% which indicates poor growth for the company.
• The interest expense of the company is good i.e. only 3.27%.
• The total income of the company is only 2.08% which indicates insufficiency.
• There is a negative fall in basic EPS from total operations by -9.13%
• The company has 12.53% of total assets which is sufficient for the company.
• The accounts payable is 9.13%.
• There is consistency in total liabilities.
• There is a negative fall in retained earnings by -12.06%
• The net cash from operating activities is only 0.44%.
• There is a negative fall in free cash flow by -26.25%.

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6.1 Findings and Discussion

• There is a gradual increase in sales from 2014-17 but we see an unusual decline in
2018.
• There is a unusual trend in expenditure over the past five years. We can see an
alternate increase and decrease every year.
• There is an usual trend in the retained earnings. There are uncertain and
unpredictable increase and decrease along the graph.
• We see an increase in net cash operating activities from the year 2014-15. Then
there is a decline in the year 2016 and then an increase in 2017 and there’s again a
decline in 2018.
• The company has delivered a poor growth of 7.80% over the past five years.

SUGGESTIONS

▪ The company’s future plans for expansion seem clear due to increased
investment in Fixed Assets. Efficient use of these Assets has enabled the
company to observe an increased profit.
▪ Though the company’s sale is continuously rising but the net profit is not so
much increased so management should take some steps to decrease its
expenses.
▪ Company should try its best to increase sales and profit.

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6.2 CONCLUSION

According to this Research we find that the company's overall position is at a good position.
The company achieves sufficient profits in past four years. Fixed assets are efficiently
utilized by the company due to which the profit of the company is increasing every year.
The long-term solvency of the company is good. The company maintains low liquidity to
achieve high profitability. The company distributes dividend every year to its shareholders.
Inventory turnover ratio is increased as compared to after that all year so management
should take care about good efficiency of stock management. Though the company’s sale
is continuously rising but the net profit is not so much increased so management should
take some steps to decrease its expenses.
Thus, the company should focus on reducing the operating expenses as there is a decline
in net profit although there was in net sales. The drop in net profit was due to high operating
costs.

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