Chapter One: Bachelor of Management Studies 1

CHAPTER ONE
INTRODUCTION
The 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 remove statements.
Financial statement analysis can be under taken either by the management of the firm or by the
outside parties. The nature of analysis defers depending upon the purpose of the analysis. The analyst is able
to say how well the firm could utilize the resource of the society in generating goods and services. Turnover
ratios are the best tools in deciding these aspects.
Hence it is overall responsibility of the management to see that the resource of the firm is used most
efficiently and effectively and that the firm’s financial position is good. Financial statement analysis does
indicate what can be expected in future from the firm.
MEANING OF FINANCIAL STATEMENT

Financial statements refer to such statements which contains financial information about an enterprise. They
report profitability and the financial position of the business at the end of accounting period. The team
financial statement includes at least two statements which the accountant prepares at the end of an
accounting period. The two statements are: -
 The Balance Sheet
 Profit and Loss Account
They provide some extremely useful information to the extent that balance Sheet mirrors the financial
position on a particular date in terms of the structure of assets, liabilities and owners’ equity, and so on and
the Profit and Loss account shows the results of operations during a certain period of time in terms of the
revenues obtained and the cost incurred during the year. Thus, the financial statement provides a
summarized view of financial position and operations of a firm
DEFINITION OF FINANCIAL STATEMENTS
John N. Myres defines that “Financial statement analysis is largely a study of relationships among the
various financial factors in a business, as disclosed by a single set of statements and a study of the trends of
these factors as shown in a series of statements.”
BACHELOR OF MANAGEMENT STUDIES 1

CONCEPTS OF FINANCIAL STATEMENTS
One of the most important functions at the accounting process is to accumulate and report historical
accounting information. The most prominent examples at such reports are the general-purpose financial
statement showing an organizational financial position and results of its operation. These financial
statements are the end results of its operations. These financial statements are the end result of the process at
financial accounting. In the words at Hampton,” A financial statement is an organized collection of data
organized according to logical and insistent accounting procedure”. Therefore, all the statements and
accounting reports which the accountants prepare the end at period for a business enterprise may be taken as
financial statements. But the principal financial statements are the ‘balance sheet’ and the profit and loss
account.
In the word at Howard and Upton” although any formal financial statements expressed in only values meant
be thought at as financial statements, The term has come to be limited sheet’ and the ‘ profit and loss
statements’ The balance sheet states the assets, liabilities and capital of the business profit and loss
statements shows the results of reparations achieved during a certain period These financial statement may
be of various types, but according to the financial statement may be broadly classified in the following
manner:
1. The audited statement
2. The interim statement
3. The unedited year-end statement
4. The “estimated” statement
Accounting which is the process at evolution has three phases: (1) the recording at transaction in the books
at original entry. (2) The classification at these rams’ action in ledges and (3) the summarization of the
records. The construction at the financial statement is a part at the third phase at accounting techniques.
Thus, financial statements summarized periodical reports at financial and operating data accumulated by an
enterprise in its books at accounts financial statements are periodical statements and the period for which
they relate is known as accounting period, usually at one years’ duration.

OBJECTIVES OF FINANCIAL STATEMENTS
The accounting principles board of America mentions the objectives of financial statement as follows:
1. To provide reliable financial information about economic resources and obligations at a business
enterprise
2. To Provide reliable information about in net resources at on enterprise that results from it activates
3. To provide financial information that assists in estimating the earning potentials at a business.
4. To provide others needed information about changes in economic resources of obligation
5. To disclose, to the extent possible, others information related to the financial statements that is relevant to
the needs of the users at these statements.
The above objectives and to suit the needs of the varied users, the accountant entrusted with the task of
compiling and presenting financial statements must follow a set at guidelines to ensure consistency,
completeness and fairness of the statements. This guideline is called a statement. These guidelines are called
“generally accepted accounting principles” in the absence of these’ generally accepted accounting principles.
The statement prepared may be un-understandable and misleading for the various groups of users.
WHAT IS THE IMPORTANCE OF A COMPANY'S FINANCIAL STATEMENT
A company's financial statements provide vital information about its financial health. These statements are
compiled based on day-to-day bookkeeping that tracks funds flowing in and out of the business. The
information the statements provide offers benchmarks and feedback that help the company make minor
adjustments and also determine its overall direction. Financial statements are useful for making decisions
regarding expansion and financing. They also figure into marketing decisions, providing data indicating
which aspects of company operations provide the best return on investment.
PROFIT AND LOSS
A profit and loss statement details how much profit -- or loss -- a business has made during a designated
period, once operating expenses are subtracted from overall revenue. The upper part of the statement lists
different sources of operating income, such as revenue from wholesale and retail sales, and rental or interest
income. The lower part of the income statement lists different categories of expenditures such as materials,
labour, rent and depreciation. The most important pieces of information gleaned from a profit and loss
statement are whether or not your business is earning a profit, and how much it is earning or losing.

BALANCE SHEET
A balance sheet captures the financial health of your business at a particular moment in time. The assets
section lists what your business owns, such as cash on hand, money in the bank, and money that is owed to
you. The liabilities section lists everything your business owes, such as outstanding principle on loans,
unpaid payroll, and unpaid bills. The most important piece of information that a balance sheet provides is
your company's net worth, or its value once you subtract liabilities from assets.
CASH FLOW PROJECTION
A cash flow projection is a document that maps anticipated income and expenditures during an upcoming
period. It is an essential planning tool that helps you to anticipate and plan for potential revenue shortfalls by
conserving resources or seeking financing. The cash flow projection contains sections detailing categories of
anticipated expenditures such as payroll, rent and loan payments, as well as a section listing sources of
anticipated revenue such as sales from wholesale and retail operations, and capital infusions from loans.
Comparing total anticipated income with total anticipated expenditures tells you whether you can expect to
have sufficient operating capital.
OVERVIEW
Your company's financial statements function in tandem to provide information about the overall health of
your company. If your profit and loss statement tell you that you are earning a profit but your balance sheet
and cash flow statement show you operating in the red, then you are probably on the right track and it's just a
matter of time before you catch up. If your balance sheet and cash flow projection show that you have
sufficient capital but your profit and loss statement show that your business is losing money, you should
conserve resources and strategize about ways to begin earning a profit before you run out of money.
FINANCIAL CONDITIONS OF A COMPANY
A company’s financial conditions are of a major concern to investors and creditors. As sources of finance for
your company operations, investors and creditors rely on financial reports to gauge conditions for both the
safety and profitability of their investments. More specifically, investors and creditors need to know where
their money went and where it is now.
Your financial balance sheet addresses such issues by providing detailed information about the company’s
asset investments.

MEANING OF FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by
establishing relationships between the item of the balance sheet and the profit and loss account. Financial
analysis can be undertaken by management of the firm, or by parts outside the firm.
FEATURES OF FINANCIAL ANALYSIS
 To present a complex data contained in the financial statement in simple and understandable form.
 To classify the items contained in the financial statement inconvenient and rational groups.
 To make comparison between various groups to draw various

conclusions.
PURPOSE OF ANALYSIS OF FINANCIAL STATEMENTS
 To know the earning capacity or profitability.

 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest & dividends.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of mgt.
 To provide useful information to mgt
PROCEDURE OF FINANCIAL STATEMENT ANALYSIS
A common procedure is followed for financial statement analysis. Such procedure is briefly explained
below.
1. Objective of Analysis: The objective of analysis is differing from one interested party to another. In other
words, the user of financial statement analysis fixes or determines the objectives of analysis.

2. Decide the Extent of Analysis: The extent of analysis is also decided by the interested party. For
example: Shareholder considers long term solvency of the business concern. The debenture holder considers
short term solvency of the business concern.
3. Scope of Analysis: It means that an analyst should determine the depth of the analysis. This can be
decided depending upon the nature of problem.
4. Going Through the Financial Statements: The analyst should go through every item of the financial
statements. If not so, the hidden facts cannot be found out through analysis.
5. Pooling of Relevant Data: The analyst should collect relevant data from the financial statements. If not
so, he/she can get relevant information from the published financial statements.
6. Rearrangement of Financial Data: The contents of the financial statements are rearranged before
making actual analysis and interpretation. Under this step, approximation of figures, consolidation of items
etc. is done.
7. Understanding: The analyst should go through financial documents and other documents for clearly
understand the problem.
8. Classification: After understanding the problem, the collected relevant data are to be classified according
to the needs of the problem to find out a correct solution.
9. Analysis: After making above preparation, actual analysis is done. Any one of the tools or techniques of
financial statement analysis can be used.
10. Interpretation and Conclusion: The interpretation is made and the inferences are drawn only on the
basis of analysis.
11. Report Form: All the inferences and interpretation should be presented in a report form to the
management.

FINANCIAL ANALYSIS OF ASIAN PAINTS
INTRODUCTION OF ASIAN PAINTS
Asian Paints Limited is a paint company. The Company is engaged in the business of manufacturing, selling
and distribution of paints, coatings, products related to home decor, bath fittings and providing related
services. The Company's business segments are Paints and Home Improvement. The Home Improvement
segment includes its bath fittings business. Its geographical segments are Domestic and International
operations. The Domestic segment includes operations of the Company and its Indian subsidiaries, and joint
ventures. It manufactures a range of paints for decorative and industrial use. Its products include special
effects, plain finishes and distempers for interior walls; textures finish, plain finishes and design for exteriors
for exterior walls; wallpapers; wood finishes; metal finishes; waterproofing solutions; adhesives, and
painting tools and implements. It operates in over 20 countries and has over 30 manufacturing facilities,
servicing consumers in over 65 countries.
HISTORY OF ASIAN PAINTS
The company was started in a garage in Gaiwadi, Girgaum - Mumbai by four friends Champaklal Choksey,
Chimanlal Choksi, Suryakant Dani and Arvind Vakil. All four belong to the Jain Bania Family, founded the
company in February 1945. During World War II and the Quit India Movement of 1942, a temporary ban on
paint imports left only foreign companies and Shalimar Paints in the market. Asian Paints took up the market
and reported annual turnover of ₹23 crore in 1952 but with only 2% PBT margin. By 1967, it became the
leading paints manufacturer in the country.
The four families together held the majority shares of the company. But disputes started over global rights in
the 1990s when the company expanded beyond India. The disputes resulted in Choksey selling their 13.7%
shares and exiting in 1997. Champaklal died in July 1997 and his son Atul took over. After failed
collaboration talks with the British company Imperial Chemical Industries, Choksey's shares were mutually
bought by the remainder three family and Unit Trust of India. As of 2008, the Choksi, Dani and Vakil
families hold a share of 47.81%.
THE INDIAN PAINT INDUSTRY
The Indian paint industry is over 100 years old. Its beginning can be traced back to the setting up of a factory
by Shalimar Paints in Calcutta (now Kolkata) in 1902. Until World War II, the industry consisted of small
producers and two foreign companies. After the war, the imports stopped, which led to the setting up of

manufacturing facilities by local entrepreneurs. Still, the foreign companies continued to dominate the
market. Initially British paint companies such as Goodlass Walls (now Goodlass Nerolac), ICI, British Paints
(now Berger Paints), Jenson & Nicholson and Blundell & Eomite dominated the market.
There are now twelve players in the organized sector of India's paint and coatings market and over 2,000 in
the unorganized sector. In 2003-04, the organized sector held 70% share of the approximately $1.5 billion
(Rs 6,800 crore) industry, while the balance was made up of the unorganized units.
The major players are Asian Paints, Goodlass Nerolac, Berger, ICI and Shalimar. Recently, world leaders
like Akzo Nobel, PPG, DuPont and BASF have set up bases in India with product ranges such as auto
refinishes, powder coatings and industrial coatings. Kansai Paints of Japan, which entered into collaboration
with Goodlass Nerolac in 1984, is now the holding company for Goodlass Nerolac with 64.52%equity
holding. PPG has a joint venture with Asian Paints to manufacture industrial coatings. Jenson & Nicholson
and Snowcem India are no longer active players because of dwindling sales in recent years.
In the 1990s, helped by a growing economy, the Indian paint industry recorded a healthy growth of 12-13%
annually. This was mainly due to a drastic reduction in exercise from a staggering 40% to 16%. However,
the growth was restricted in 2002-03 to single digits. There was a revival in 2003-04 with a robust growth of
13%.
The Indian paint industry has two main market segments-industrial and decorative paints. While industrial
paints are used for protection against corrosion and rust on steel structures, vehicles, white goods and
appliances, decorative paints are used in protecting valuable assets like buildings.
The Indian decorative business has a share of approximately 77% in total sales. In foreign countries 50-70%
of the business is from the industrial segment.
The trends are likely to shift in India too, but at a slower pace, in favour of industrial paints. The per capita
consumption of paint in India is 700 grams versus 19 kg in the U.S. and 2.7 kg and 5.8 kg in other
developing countries like China and Brazil. Because consumption relates to affordability, the low Indian
figure is not a surprise.
Within the decorative segment, the share of exterior paints is 21%, interior emulsions 11%, distempers 30%,
solvent-based enamel paint 36% and wood finishes two percent.

The exterior category, particularly exterior emulsions, is the fastest growing segment at 20% for the last
three years.
The industrial coatings segment includes high performance coatings with 30% market share, powder
coatings with ten percent, coil coatings with five percent, marine coatings five percent and automotive
coatings 50%.
While Asian Paints was a clear market leader with a turnover of approximately $420 million (Rs 1,943
crores) in 2003-04, Goodlass Nerolac was second with approximately $220 million (Rs 1,010 crores) during
the same period.
ORGANIZATION SYSTEM
Most of the organized companies in India's paint and coatings market have a nationwide presence with multi
location manufacturing facilities. The companies in the unorganized sector are mostly regional, spread in
and around their manufacturing facilities and deal in low value products.
Asian Paints has created a nationwide marketing campaign focusing on all small interior markets. Not only
was the company able to establish itself in interior markets, the demand percolated to main towns allowing
the company to enlist support of large customers.
Being restrained by FERA (Foreign Exchange Regulations Act) and MRTP (Monopolies & Restrictive
Trade Practices Act), most players were not allowed to increase production capacities until the Nineties.
With liberalization, these shackles were removed and other companies have expanded, though the gap
between Asian Paints, which could expand continually and others has widened.
Another winning point for Asian Paints was its strategy to focus on smaller packs while others were focusing
on larger packs. Asian Paints has also been introducing new product categories, which helped in expanding
the market.
This made distribution still more complex as precise forecasts for more than 3,000 SKUs became a challenge
for every organization. With the advent of colour dispensing machines supported by all paint companies and
sophisticated IT enabled distribution tools, the situation has eased considerably.
BUSINESS REENGINEERING
With the industry business becoming complex, most companies have restructured and have used information
technology as the key driver for reengineering. They have aligned their organized structures on the basis of
expanding business and its complexities. This was essential in order to tighten controls. Today, companies

have divided their sales organizations into decorative, industrial and high-performance coatings business
units. The national level organization structure is split into zones, regions and branches.
Colour dispensing machines, both computerized and manual, have transformed the business, particularly on
the manufacturing and distribution sides. Earlier, paint companies were required to manufacture all the
shades (30-50 depending on a product line) in all the packs (five to eight packs).
The demand pattern was difficult to predict even with the support of historical data/trends as consumer
preferences were changing fast. The machines altered the production pattern from shades to producing bases
thus providing economies of scale, reduced inventory levels and eliminated redundancy of stocks. It has cut
down the new products introduction cycle considerably. This has helped expand the range of shades for each
product category, offering a choice of shades to consumers in the hundreds. For the retailers also, it
eliminated the sales loss for want of range/desired shade. The machines have brought a total change in the
way business is transacted and revolutionized business processes as well.
There are approximately 11,000 colour-tinting machines installed at the dealers' end including multiple
machines on some counters. Also popular are the gear mixers for 2K finishes in auto refinishes, which are
installed at the dealers' end and at leading garages.
The dependence on information technology has increased remarkably from a corner room EDP operation to
playing a pivotal role in the way business is transacted. While Asian Paints has invested in i2 technology,
Goodlass Nerolac has backed up IBM enabled APO and has upgraded to the latest 3.1 version to improve its
distribution and optimize production scheduling. Both companies are operating on an ERP (SAP R3)
operating system through full connectivity across the factories and branches via V-SATS, thus virtually
working on live data for sales, accounting and purchasing.
Goodlass Nerolac has moved one step further by launching its intranet-employee portal to capture
knowledge sitting in the minds/desktops of individuals to a common platform, which can be accessed by all
employees. It has also invested in advanced business plan performance measurement tools like balanced
score cards to track, review and align performance.
Most companies in the Indian paint industry are functioning on multi-division models with individual
functions controlled by business heads. Some manage their business through sub-committees. As in the case
of Goodlass Nerolac there are two levels of teams managing/guiding business.
While all the policy and major decisions are looked at by the management committee (MC), which reviews
operations on a monthly basis, there is a parallel team-business analyst team (BAT)-which analyses the

businesses and discusses new initiatives, working as the think-tank for the company. Recently CAT
(Creative Analysis Team) has been created to work on new long-term initiatives.
PRODUCT CULTURE
Most companies have an identical range of products for the decorative paint market. In the industrial
segment, the range of products is more customized and guided by the technology support provided by the
collaborators. In the case of decorative products, the technology has been mostly indigenously perfected
over the years and the products can be divided on the basis of interior and exterior application or in
categories like water-based and solvent-based. Moreover, most companies have been advertising their
products in the exterior emulsion’s category, which has expanded the market and triggered a shift from
cement paint.
While solvent-based enamels are still popular in India, outside India there is a clear shift visible from
solvent- to water-based gloss enamels. India will take some time before this change is accepted on account
of three hurdles currently faced including cost (water-based is expensive), low level of gloss in water-based
enamels and the psychological barrier that water-based coatings cannot be superior to solvent-based coatings
for protecting wood or metal surfaces.
Companies not working on operational efficiency business models have been losing. Asian Paints and
Goodlass Nerolac have been aggressively working on cutting costs/operating expenses. Berger has been
managing well with economical yet acceptable formulations and low operating costs.
The industry is not capital intensive and depreciation charges are not significant. Working capital
requirements are moderate. However, most companies in the lower rungs are unaware about the realization
of debtors. Added to this has been the problem related to collection of instalments on colour dispensing
machines, which are mostly purchased on lease.
The highest efficiency required is in physical distribution. The poor forecasts of demand result in poor
distribution. As a result, companies are investing in sophisticated supply chain management tools. Margins
have remained under pressure due to dropping prices, which have been more strategic and forced by the
market leader. Companies have been working on improving internal efficiencies to retain profits. The
pressure from OEMs to reduce prices has also been a cause for low profits for paint companies. Even with
the turnaround of the Indian economy, the pressure has not relented. The customer, or retailer, has also been
dictating his terms as most companies have common counters to meet their objectives. So, they have no

choice but to lure more customers through incentives. Lower productivity of high cost labour in the old units
has been another problem. This in totality has increased operating pressures.
Some of the international players are already present in India's paint and coatings market, but mostly for
industrial coatings. They include Akzo Nobel, BASF, Henkel (pre-treatment chemicals), PPG, ICI
(decorative) and DuPont (auto refinishes). A few others are present through collaborations like Kansai and
Nippon.
For the decorative range of products, it is difficult for international companies to set up shop on a stand-
alone basis because of existing barriers such as the strong network of established players, brand image, range
of products (Indian context) and required distribution logistics. Therefore, the safer route has been and will
be to tag along with existing companies. For industrial products, however, this may not apply and based on
their tie-ups in home countries and their OEM customers, the required range can be made and sold.
There is however room for niche players, with radical and unique ranges of products properly conceived and
marketed in the Indian context and supported with machines.
CURRENT TRENDS
The Indian paint and coatings industry are riding high on the growth in the Indian automobile industry, new
construction in the housing segment and improving infrastructure throughout the country. Thirty percent of
the paint business is comprised of new construction projects. GDP growth projections of six to 6.5% in the
current year mean a growth of nine to ten percent in Indian paint business. The growth will be 12-13% in the
industrial segment and eight to nine percent for decorative paint. The Indian automobile industry has been
performing remarkably well and will benefit the market leader in the segment, Goodlass Nerolac.
As for the future, the industry has predicted a CAGR of eight to nine percent for the next five years
compared to last year's growth levels of 27.4% for cars and 8.9% for two wheelers. The Indian housing
industry is likely to do well in the current year as well, recording a growth rate of 35% last year. As a result
of the overall health of India's economy, it is safe to predict a nine to ten percent growth rate for the Indian
paint industry in the next five years.
Consumers can look forward to new product launches, some for application in special areas. Companies will
be increasing the value-added services available to customers by offering a variety of finishes through
specialized and trained applicators. There will be more options like ranges of colours/finishes for wood
applications through the tinting machines. Additionally, the trend towards water-based coatings is likely to
set in both for industrial and decorative applications. While India has not yet embraced the DIY concept as

cheap labour is still available, exclusive retail chain stores sponsored and run by Indian paint companies will
become a reality.
The Indian paint industry has progressed well and moving ahead is likely to be influenced by several factors
including new technologies, new innovative products, new associations, consolidation of industry and poor
performers getting out of the market. Ultimately, in the years ahead there will be only four or five key
players operating in the Indian paint market.
BASIC INFORMATION OF PAINT INDUSTRY
Today manufacturers in India hardly face any threat from the foreign players. Most of them have deals with
global players in terms of latest technology and market accessibility. A large number of Paint outlets or
shops have automated/manual dealer tinting systems. Today India has more than 20,000 outlets in operation,
probably the highest for any country. There are only approximately 7,000 tinting systems in China for a
market two and half times of India’s size. 30% of the paint industry revenue in India is accumulated from
Industrial Paints. The size of the Indian Paint Industry is around 940 million litres and is valued at
approximately $2 billion. The organized sector comprises 54% of the total volume and 65% of the value. In
the last ten years, the Indian Paint Industry has grown at a compounded annual growth rate (CAGR) of 12-
13%.
Today India is booming in the field of infrastructure and industrial development. Rapid industrialization and
improvements in the infrastructure such as transport, energy and communication during the last decade gave
a further fillip to the growth of the paint industry. So, the demand of the paint industry is relatively more.
Aided by Government’s liberal policy of technology import, the automotive and consumer durable segments
expanded phenomenally, with a flurry of foreign collaboration. Increased demand for decorative, protective
and functional coatings was a natural fall out, which brought, in its stride, a host of indigenous development
as well as the injection of new technology. Indian Paint Industry makes great changes in the rapid industrial
development as well as country development. Therefore, the paint industry is of crucial importance to India.
TOP & MAJOR MANUFACTURERS IN PAINT INDUSTRY
1. PPG
2. The Sherwin-Williams Co.
3. AkzoNobel
4. Nippon Paint Holdings Co.
5. RPM International Inc.

6. Axalta Coating Systems
7. BASF Coatings
8. Kansai Paint Co. Ltd.
9. Jotun
SHOWCASE:
BERGER PAINTS INDIA LTD. (BERGEPAINT) –
INTRODUCTION
Berger Paints India Ltd is an Indian paint company based in India. The company is headquartered at Kolkata
and has 14 manufacturing units in India, 2 in Nepal, 1 each in Poland and Russia. It has manufacturing units
at Howrah and Rishra, Arinso, Taloja, Naltoli, Goa, Devla, Hindupur, Jejuri, Jammu, Puducherry and
Udyognagar.
The company has presence in 5 countries – India, Russia, Poland, Nepal and Bangladesh. They have an
employee strength of over 3,500 and a countrywide distribution network of 25,000+ dealers.
COMPANY HISTORY
In 1770, Louis Steigenberger shifted from Frankfurt to London to sell a Prussian blue colour, which was
made using his own formula. He then changed his name to Lewis Berger. By 1870, Berger Paints was selling
19 different pigments such as black lead, sulphur, sealing wax and mustard. After his demise, his sons took
over the business. [Citation needed] In the 1900s, Sherwin-Williams, an American company took control of
the company. On 17 December 1923, Mr. Hadfield set up Hadfield's (India) Ltd., a small paint company in
Calcutta. Towards the end of 1947, British Paints acquired Hadfield's (India) Ltd and thus British Paints
(India) Ltd was incorporated in the State of West Bengal. In 1951, sales offices were opened in Delhi and
Mumbai and a depot was started in Guwahati. In 1969, Berger Jenson Nicholson Limited, UK bought British
Paints (India) Ltd. This marked the beginning of Lewis Berger’s legacy in India. In the year 1973, D.
Madhukar took over as the Managing Director. Sales figures reached over Rs. 160 million by 1978.The 80s
and the 90s saw the launch of many new products such as emulsions and distempers. In 1991, UB group sold
the company to Kuldip Singh Dhingra (Chairman) and Gurbachan Singh Dhingra (Vice Chairman). Subir
Bose took over as Managing Director on 1 July 1994.Bose retired on 30 June 2012, handing over the
company to Abhijit Roy, the current managing director.

CHAPTER TWO
OBJECTIVES OF THE STUDY
 To understand the market share of the Asian paint in the corporate world.
 Critically examined the performance of Asian Paints vis-à-vis closest competitor i.e. Berger paints.
 To analyse the level of consistency of Asian paints.
 To analyse the profitability of the business.
 To analyses the asset management of the firm.
 To analyse the financial statement of Asian paints company from the year 2014-15 to 2018-19
LIMITATIONS OF THE STUDY
Any study cannot be free from limitations. Some limitations for present research work are as under.
1. This research study is based on secondary data collected from annual reports and related websites. The
limitation of the secondary data and its findings depend entirely on the accuracy of such data.
2. The data, which is used for his study is based on annual reports of the company and secondary data
collected from published reports from time to time. Therefore, the quality of this research depends on
quality and reliability of data published in annual reports.
3. Results of this research are confined and limited to the Asian paints
4. The study is limited to five years (2014-15 to 2018-19) only
STATEMENT OF PROBLEM
There are so many industries contributing to economic development of nation and Modern paint operations
touch almost every sphere of economic activity. They have far reaching consequences on economic
development of country. Paint sector is one of the leading industries in manufacturing sector. Although the
paint sector is working effectively it does have to face many problems. One of the major problems faced by

the paint sector is inconsistency in the profit they earn. It is necessary to major the profitability of the
organization which is affected by various factors. Profit is the motive of every organization that needs to be
cared. Thus, it becomes necessary for every company to know its current trend of profit earned. In this
context my research work is aligned towards measuring profitability of ASIAN PAINT INDURTY through
various ratios based on the financial data of last five years.
SCOPE OF THE STUDY: -
The study is conducted to evaluate the financial position of the company. The performance of ASIAN
PAINTS Company is judged by its financial statements, which throws light on the operational efficiency and
financial position of the company. For this purpose, the various types of financial ratio have been examined
for the period from the financial year 2014-15 to 2018-19 of the Asian Paints. An attempt is also made to
analysis and interpretation of financial performance through the ratios of Asian Paints for the period under
study. Research work is quite useful for the Paints industry, Government, investors and research students.
SOURCE OF DATA: -
The kind of data collected and the methods used to collect the data has a very important aspect of the
research. There are two basic means of collection of data as follow:
 Primary data
 Secondary data
I have given more emphasis on secondary data because I undertakes research on analysis of financial
statements of Asian paint for which I have needed all Annual reports and records from the companies, which
are in nature of secondary data. I have been very careful in using secondary data and make a minute scrutiny
because it is just possible that the secondary data may be unsuitable or may be inadequate in the context of
the problem, which the I wants to study.
SIGNIFICANCE OF THE STUDY: -
The analysis will be helpful in evaluating profitability of Asian paints. It will be determining the
performance of Asian paints and analyze whether the entity is stable, solvent, liquid or profitable enough to
warrant a monetary investment.

The study will be helpful to investors for choosing best possible investment opportunities as far as Asian
paints. They, will be able to make an informed decision in investing. The project uses historical information
combined with a series of assumptions and adjustment, to the financial information that will be used to
project future performance of Asian paints.
The study will also assess the operational efficiency of the management of the company’ Asian paints.
PERIOD OF THE STUDY:
The study is made for a period of last 5 years data from 2014-15 to 2018-19.
SAMPLING DESIGN: -
There are 125 such companies which are working in India data available of 79 companies. I have selected
Asian Paints Company as the sample for this study . The sample has been selected considering following
factors.
 Data for the entire period of the study from 2014-15 to 2018-2019
 Allocation of the country in the region has been made according to CMA criteria.
 Company have been already been listed in the stock market.
 Asian Paint is performing well in Indian market.
 Asian Paints company selling are more than CMA criteria.
TOOLS AND TECHNIQUES FOR ANALYSIS OF FINANCIAL STATEMENTS: -
It is an empirical study, so I have followed scientific approach to design the research methodology for
investigation. For this study I have is using secondary data as a source of information for thus research e.g.
the Annual Reports, websites and other publications. The following tool & techniques have been
classification in the study
(A) Accounting Techniques (B) Statistical Techniques
ACCOUNTING TECHNIQUES:
I have picks up the techniques to suit their requirement and also basis to data available to them. The
accounting techniques which are used for the analysis is as under.
 Ratio Analysis -

A ratio is a quotient of two numbers and the relation expressed between two figures. Ratio analysis is a
process of comparison of one figure against another, which makes ratio. Ratio analysis is a very powerful.
The ratio analysis concentrates on the inter-relation-ship among the figures appearing in the financial
statement.
STATISTICAL TECHNIQUES:
The statistical techniques which are used for the analysis are as under:
 Arithmetic Mean
It is called as the average of difference of the values of items from some average of the series. According to
Gulerian “The most commonly used average is the arithmetic mean, briefly referred to as the mean” the
mean has been found by adding all the variables and dividing it by the total number of years taken.
 The Standard Deviation:
The standard deviation concept was introduced by „Karl Pearson‟ in 1823. Standard deviation is most
widely used measure of dispersion of a series and is commonly denoted by the symbol ““(pronounced as
„sigma‟). Standard deviation is retired as the square –root of the average of squares of deviations, when such
deviations for the values of individual items in series are obtained from the arithmetic average.
 Co-Efficient of Variation:
Co-efficient of variation is defining as the percentage of the standard deviation to the mean. It should be
noted that higher the variability the greater would be the co-efficient of variation. Therefore, it may be
pointed out that for the stability of results, Co-efficient of variation must be low. Co-efficient of variation
(C.V.) may be calculated with the help of standard deviation and mean.
FUTURE PLANS OF ASIAN PAINTS
Management commentaries by paint makers indicate that demand, which was hurt by demonetization and a
messy implementation of the goods and services tax (GST), is set to revive.
Now that the after-effects of GST are waning, paint companies are likely to benefit from a normal monsoon
and an increase in rural demand.

That is anticipated to translate into double-digit volume growth in fiscal year 2019 (FY19).
But the most important indicator of rising demand is that paint makers are expanding capacity.
Asian Paints Ltd, the leader in the decorative paints segment, is setting up two large plants. One is a 500,000
kilolitres per annum plant in Visakhapatnam at a capital expenditure (capex) of ₹ 1,785 crore. Another is a
600,000 kilolitres per annum capacity plant at Mysuru at a capex of ₹ 2,300 crore.
Demand has improved for the paint industry during the second half of FY18, Asian Paints’ management told
analysts in a post- March quarter earnings conference call. Further, rural growth was higher than urban
growth for the company during the March quarter.
While the first phase of both these plants will be commissioned in FY19, the second phase will be set up and
commissioned later based on the demand environment, the management said.
The company’s capex during FY18 was ₹ 1,350 crore, out of which ₹ 1,100 crore was towards these two
mega plants. Asian Paints will incur an additional capex of ₹ 1,000 crore in the current fiscal year for
completion of phase I.
Berger Paints India Ltd has pegged FY19 capex at around ₹ 200 crore. Recently, the company announced
the setting up of a plant in the Sandila Industrial area near Lucknow.
Meanwhile, the leader in the industrial paints segment Kansai Nerolac Paints Ltd would incur a capex
of ₹ 450-500 crore in FY19. The company intends to spend ₹ 1,100 crore to increase capacity by nearly
40% in the next two years by adding three greenfield plants in Gujarat, Punjab and Andhra Pradesh.
For this, Kansai Nerolac has already invested ₹ 300 crore in FY18 and the remaining of ₹ 800 crore
investment is likely to be spent evenly in FY19 and FY20. Facilities in Punjab and Andhra Pradesh would
cater to the decorative paints segment, while the Gujarat plant would be for industrial coatings, the
company’s management told analysts.
Kansai Nerolac has guided for double-digit growth in decorative paints in FY19, but expects volume growth
in the automotive coatings vertical to see some moderation.
Also, paint makers are pumping in funds to launch new products and expand dealer networks.
Although volume growth may bounce back in the coming quarters, the risk of further erosion in gross
margins remains. Paint companies resorted to price hikes in the months of March and May due to a spike in
raw material prices. However, it needs to be seen if these are enough to offset input costs pressures.
CHAPTER THREE
REVIEW OF LITERATURE
According to JOHN.N. MYER “The financial statements provide a summary of the accounts of a
business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and the
income statement showing the results of operation during a certain period”.
FINANCIAL DEFINITION:
A written report which quantitatively describes the financial health of a company. This includes an
income statement and a balance sheet, and often also includes a cash flow statement. Financial statements
are usually compiled on a quarterly and annual basis.
FINANCIAL MANAGEMENT DEFINITION:
Financial management refers to that part of the management activity which is concerned with the
planning and controlling of firm’s financial resources. It deals with finding out various sources for raising
funds for the firm. The sources must be suitable and economical for the needs of the business and the most
appropriate use of such funds also forms a part of financial management.
FINANCIAL STATEMENT ANALYSIS:
Evaluation of a firm’s financial statements in order to assess the firm’s worth and its ability to meet its
financial obligations.
TYPES OF FINANCIAL STATEMENTS:
Financial statements primarily compress two basic statements:
I) The position statement or balance sheet.

II) The income statement or profit & loss account.

I) THE POSITION STATEMENT OR BALANCE SHEET:
Balance sheet is sometimes called the statement of financial position. It shows the balance of assets,
liabilities, and equity at the end of the period of time.
The balance sheet is sometimes called the statement of financial position since it shows the values of the net
worth of the entity. You can find entity net worth by removing liabilities from total assets.
ASSETS:
Assets are resources own by an entity legally and economically. For example, building, land, cars, and
money are types of assets of the entity. Assets are classified into two main categories: Current Assets and
Noncurrent Assets.
Current Assets refer to short term assets including cash on hand, petty cash, raw materials, work in progress,
finished goods, prepayments, and a similar kind that convert and consume within 12 months from the
reporting date.
Noncurrent assets including tangible and intangible assets that expected to convert and consume in more
than 12 months from the reporting date. Those assets include land, building, machinery, computer
equipment, long term investment and similar kind of.
Intangible fixed assets are charged into income statements systematically based on their using and
contribution.
In the accounting equation, assets equal to liabilities plus equities. They are increasing on debit and
decreasing credit.
LIABILITIES:

Liabilities are the obligation that an entity owes to other persons or entities. For example, credit purchases,
bank loans, interests payable, taxes payable, and an overdraft.
The same as assets, liabilities are classified into two types: Current Liabilities and Non-current liabilities.
The liabilities are the balance sheet items and they represent the amount at the end of the accounting period.
EQUITY:
Equities are the difference between assets and liabilities. The items in equity include share capital, retain
earning, common stock, prefer sock, and accumulation of Other income.
II) INCOME STATEMENT OR PROFIT & LOSS ACCOUNT:
The income statement is one of the types of financial statement which stores all the income and expenditures
of the company. As the business does its day to day business, it keeps on incurring daily expenses and
earning income from its business activities and all these items are recorded in this statement. We earn our
income by way of selling our products and providing services to the client. There can be a variety of
expenses which the company can incur, some of which are mentioned below:
Salaries
Rent
Telephone & Internet
Water & Electricity
Taxes
Insurance
Advertising & Marketing Cost
Fuel
Stationary
Interest Paid and Other Bank Charges
ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS:
Financial statements are indicators to two significant factors:
1) Profitability
2) Financial soundness.

Analysis and interpretation of financial statements therefore refers to such treatment of the information
contained in the income statement and the balance sheet so as to afford full diagnosis of the profitability and
the financial soundness of the business.
A distinction here can be made between the two terms and analysis and interpretation. The term ‘analysis’
means methodical classification of the data given in financial statements. The figure given in the financial
statements will not help unless they are put in a simplified form. For example, all item ‘current assets’ are
put at one place while all items relating to the ‘current liabilities’ are put at another place. The term
‘interpretation’ means explaining the meaning and significance of the data so simplified. Analysis and
interpretation of financial statements involves a study of relationship among various financial factors and to
judge their meaning and significance.
The financial analyst must understand the plans and policies of management, determine the extent of
analysis, reorganize data available as per requirements, establish relationship among financial figures and
make interpretation.
According to Myers, Financial statements Analysis is largely a study of the relationship among the various
financial factors in a business as disclosed by a single set of statement and a study of the trend of these
factors as shown the series of statements.
TYPES OF FINANCIAL ANALYSIS
1. Internal Analysis
Internal analysis is made by the top management executives with the help of Management Accountant. The
finance and accounting department of the business concern have direct approach to all the relevant financial
records. Such analysis emphasis on the overall performance of the business concern and assessing the
profitability of various activities and operations.
2. External Analysis
Shareholders as investors, banks, financial institutions, material suppliers, government department and tax
authorities and the like are doing the external analysis. They are fully depending upon the published
financial statements. The objective of analysis is varying from one party to another.
3. Short Term Analysis

The short-term analysis of financial statement is primarily concerned with the working capital analysis so
that a forecast may be made of the prospects for future earnings, ability to pay interest, debt maturities – both
current and long term and probability of a sound dividend policy.
A business concern has enough funds in hand to meet its current needs and sufficient borrowing capacity to
meet its contingencies. In this aspect, the liquidity position of the business concern is determined through
analyzing current assets and current liabilities. Hence, ratio analysis is highly useful for short term analysis.
4. Long Term Analysis
There must be a minimum rate of return on investment. It is necessary for the growth and development of
the company and to meet the cost of capital. Financial planning is also necessary for the continued success of
a company. The fixed assets structure, leverage analysis, ownership pattern of securities and the like are
made in the long-term analysis.
5. Horizontal Analysis
It is otherwise called as dynamic analysis. When financial statements for a number of years are viewed and
analyzed, the analysis is called horizontal analysis. The preparation of comparative statements is an example
of this type of analysis.
6. Vertical Analysis
It is otherwise called as static analysis. Under this type of analysis, the ratios are calculated from the balance
sheet of one year and/or from the profit and loss account of one year. It is used for short term analysis only.
TECHNIQUES OF FINANCIAL ANALYSIS:
Among the techniques of financial analysis, the important tools of financial analysis are:
1. Comparative and Common size financial statements
2. Trend Analysis
3. Ratio Analysis
4. Fund Flow Analysis
5. Cash Flow Analysis
COMMON-SIZE STATEMENT:
The common-size statement, balance sheet and income statement are shown in analytical percentages. The
figures are shown as percentages of total assets, total liabilities and total sales. The total assets are taken as

100 and different assets are expressed as a percentage of the total. Similarly, various liabilities are taken as a
part of total liabilities.
These statements are also known as component percentage or 100 percent statements because every
individual item is stated as a percentage of the total 100. The shortcomings in comparative and trend
percentages where changes in items could not be compared with the totals have been covered up. The
analyst is able to assess the figures in relation to total values.
TREND ANALYSIS:
The financial statement may be analyzed by computing trends of series of information this method
determines the direction upwards or downwards and involves the computation of the percentage relationship
that each statement item bears to the same item in base year. The figures of the base year are taken as 100
and trend ratios for other years are calculated on the basis of base year. The analyst is able to see the trend of
figures, whether upward or downward.
For example, if sales figure for 2006 to 2007 are to be studied, then sales of 2006 will be taken as 100 and
the percentage of sales for all other years will be calculated in relation to the base year i.e., 2006.
It helps in understanding the nature and rate of movements in various financial factors. However,
conclusions should not be drawn on the basis of single trend. Trends of related items should be carefully
studied. Due weight age should be extraneous factors such as government policy, economic conditions etc.,
as they can affect the trend significantly.
STEPS IN COMPUTATION OF TREND VALUES:
1) Select one of the periods for which financial statements are available as the base period.
2) The selected period should be a normal period.
3) Every item in the base period is taken as 100.
4) Trend value of each item for any other period:
Absolute value of the item for the period
= ------------------------------------------------------- × 100
Absolute value of the item in the base period
FUNDS FLOW ANALYSIS:
“A statement of sources of application of funds is a technical device designed to analyze the change in the
financial condition of a business enterprise between two dates”
CASH FLOW ANALYSIS:

Cash plays very important role in the entire economic life of a business. What blood is a human
body, cash is to business enterprises. It is very essential for a business to maintain an adequate balance of
cash.
Comparative Statement
The comparative financial statements are statements of the financial position at different periods of
time. The elements of financial position are shown in a comparative form so as to given an idea of financial
position at two or more periods. Two financial statements are prepared in comparative from for financial
analysis purpose. The comparative statement may show.
 Absolute figures (Rupee amounts)
 Change in absolute figures i.e. increase or decrease in absolute figures.
 Absolute data in terms of percentages.
 Increase or decrease in terms of percentages.
 The financial data will be comparative only when same accounting principles are used in preparing
this (i) Balance sheet and (ii) Income Statement.
COMPARATIVE BALANCE SHEET:
The comparative balance sheet analysis is the study of the trend of the same items, group of items and
computed items in two or more balance sheets of the same business enterprise on different dates. The
changes in periodic balance sheet items reflect the conduct of a business. The comparative balance sheet has
two columns. A third column is used to show increase in figures. The fourth column may be added for
giving percentages of increase or decrease.
INTERPRETATION OF COMPARATIVE BALANCE SHEET:
While interpreting comparative balance sheet the interprets is expected to study the following
aspects.
 Current financial position and liquidity position.
 Long term financial position.
 Profitability of the concern (firm).
COMPARATIVE INCOME STATEMENTS:
The income statements give the results of the operations of a business. The comparative income
statement gives an idea of the progress of a business over period of time. The change in absolute data in
money values and percentages can be determined to analysis the profitability of the business. Income
statements also have four columns. First two columns give figures of various items for two years. Third and
fourth columns are used to show increase or decrease in figures in absolute amounts and percentages
respectively.
INTERPRETATION OF INCOME STATEMENTS:
The analysis and interpretation of income statement with involve the following steps:
 The increase or decrease in sales should be compared with the increase or decrease in cost of
goods sold. The amount of gross profit should be studied in the first step.
 The second step of analysis should be the study of operational profits.
 The increase or decrease in net profit, which give an idea about the overall profitability of the
concern (firm).
 An opinion should be formed about profitability of the concern and it should be given at the
end. It should be mentioned whether the overall profitability is good or not.
IMPORTANCE OF FINANCIAL STATEMENTS:
The information given in the Financial Statements is very useful to a number of parties. These are the
following:
1. Owners: The owners provide funds for the operations of a business and they want to know whether
their funds are being properly utilized or not. The financial statements prepared from time to time
satisfy their curiosity.
2. Creditors: Creditors (i.e. Suppliers of goods and services on credit, bankers and other lenders of
money) want to know the financial position of a concern before giving loans or granting credit, the
financial statements help them in judging such position.
3. Investors: Prospective investors, who want to invest money in firm, would like to make an analysis
of the financial statements of that firm to know how safe proposed investment will be.
4. Employees: Employees are interested in the financial position of a concern they serve, particularly
when payment of bonus depends upon the size of the profits earned. They would like to know the
bonus being paid to them is correct so they become interested in the preparation of correct profit and
loss account.
5. Government: Central and State governments are interested in the financial statements because they
reflect the earnings for a particular period for purpose of taxation. Moreover, these financial
statements are used for compiling national accounts.

6. Research Scholars: The financial statements, being a mirror of the financial position of a firm are of
immense value to research scholars who wants to make a study into financial operation of particular
firm.
7. Consumers: Consumers are interested in the establishment of good accounting control so that cost of
production may be reduced with the resultant reduction of the prices of goods they buy.
CHAPTER FOUR
Asian paints
Income Statement as at 31st March,2019 & Vertical Analysis
As at As at As at As at As at
PARTICULARS 31/03/2015 31/03/2016 31/3/2017 31/3/2018 31/3/2019
1. INCOME
Total Revenue 11,835.65 12,871.18 12,947.28 14,445.36 16,670.59
91.90 91.98 91.42 100.81 102.84
2. EXPENSES
Total 9638.31 10,166.32 9,976.27 11,247.36 13,083.83
74.83 72.65 70.42 78.48 80.71
3. EBITDA 2197.34 2,704.86 2,971.01 3,198 3,586.76

1.70 19.33 20.97 22.31 22.12
4. PROFIT BEFORE
EXCEPTIONAL ITEMS,
& TAXES 1947.10 2,443.10 2,656.72 2,865.83 3,174.57
15.11 17.46 18.75 19.99 19.58
5. PROFIT BEFORE TAX 1933.57 2,377.75 2,656.72 2,865.83 3,174.57

15.01 16.99 18.75 19.99 19.58
6. PROFIT AFTER TAX 1327.40 1,597.43 1,801.72 1,894.80 2,134.76

10.30 11.41 12.72 13.22 13.16
Asian Paints
Trend Analysis of INCOME STATEMENT
2015 2016 2017 2018 2019
REVENUES
108.64 109.96 111.26 125.86
Revenue from sales
EXPENSES
80.812 620.524 128.623 475.567
TOTAL EXPENSES
123.097 135.209 145.539 163.23

EBITDA
122.972 137.399 148.214 164.181
PBT
120.342 135.733 142.745 160.822

NET INCOME

TREND ANALYSIS OF INCOME STATEMENT OF ASIAN PAINTS
1200
1000
800
600
400
200
0
2015-16 2016-17 2017-18 2018-19
Revenue from sales TOTAL EXPENSES EBITDA

PBT NET INCOME

Asian paints
Balance sheet as at 31st March,2019 & Vertical Analysis
As at As at As at As at As at
PARTICULARS 31/03/2015 31/03/2016 31/3/2017 31/3/2018 31/3/2019
1. EQUITY AND
LIABILITIES
(1
) Shareholders’ Funds
Total Shareholders’ Fund 4,230.26 4,963.16 7,09475 7,798.16 8,887.56
58.16 59.33 99.54 67.29 67.57
(2
) Non-Current liabilities
Total Non-Current 285.12 335.15 387.35 390.81 548.62
Liabilities
3.92 4.00 0.05 3.37 4.17
(3
) Current Liabilities
Total Current Liabilities 2,757.82 3,065.84 2,875.93 3,398.96 3,176.19
37.91 36.65 0.40 29.33 28.25
II ASSETS
(1
) Non-Current Assets
Total Non-Current 3,103.93 3,866.59 4,927.83 6,086.84 7,099.02
Assets
42.67 46.22 0.69 52.52 53.97
(2 Current Assets
)
Total Current Assets 4,169.27 4,497.56 5,430.20 5,500.17 6,053.35
57.32 53.77 0.76 47.46 46.02

From the above table we can see that shareholder’s Funds is increases by 58.16, 59.33, 99.54, in the year
2015,2016 and in 2017 but it starts decreases in 4 year in 2018 ratio was 67.29 and again it increases in last
year in 2019 ratio was 67.57. Total Non-Current Liabilities is increases by 3.92, 4.00 in the year 2015,2016
and in 2017 the ratio was 0.05 it decreases and again it increases in last 2 years in 2017, 2018 ratio was 3.37,
4.17. Total Current Liabilities is decreases in 1st 2 years in 2015, 2016 ratio was 37.91, 36.65 and in 3 rd year
it decreases by 0.40 in 2017 and again it increases in the 2018 by 29.33 and in last year it decreases by
28.25. Total Non-Current Assets it increases in 1 st 2 years in 2015, 2016 ratio was 42.67, 46.22 and it
decreases in 3rd year 2017 ratio was 0.69 and again it increases in last 2 years 2018, 2019 ratio was 52.52,
53.97. Total Current Assets it decreases in 1st 3 years 2015, 2016,2017 ratios were 57.32, 53.77, 0.76 and it
increases 4-year 2018 ratio was 47.46 and again it decreases in last year 2019 ratio was 46.02.

Asian Paints
Trend Analysis of BALANCE SHEETS
ASSETS 2015 2016 2017 2018 2019
Total Current Assets 444.284 591.389 472.538 585.269
Total Non-current Assets 253.852 324.185 1166.517 407.587
EQUITIES & LIABILTIES
Reserves & Surplus 117.727 169.285 186.299 212.649
Total Current Liabilities 330.427 400.844 450.551 504.456
TREND ANALYSIS OF BALANCE SHEETS OF ASIAN PAINTS

2500
2000
1500
1000
500
0
2015-16 2016-17 2017-18 2018-19
TOTAL CURRENT ASSETS TOTAL NON-CURRENT ASSETS

RESERVES & SURPLUS TOTAL CURRENT LIABILITIES
From the above table we can see Total Current Assets, Total Non-current Assets, Reserves & Surplus, Total
Current Liabilities of all this is increase year by year it knows that Asian paints is performance well.

LIQUIDITY RATIOS
It’s a ratio which tells one’s ability to pay off its debt as and when they become due. In other words, we can
say this ratio tells how quickly a company can convert its current assets into cash so that it can pay off its
liability on a timely basis. Generally, Liquidity and short-term solvency are used together.
Liquidity ratio affects the credibility of the company as well as the credit rating of the company. If there are
continuous defaults in repayment of a short-term liability then this will lead to bankruptcy. Hence this ratio
plays important role in the financial stability of any company and credit ratings.
DIFFERETENCE TYES OF LIQUIDITY RATIOS
1. Quick Ratio.
2. Working Capital Ratio
3. Inventory Turnover Ratio
4. Cash Ratio

QUICK RATIO:
Quick ratio or liquid ratio gives a more in-depth view of the liquidity position of a company. Quick ratio
does not consider inventories and prepaid expenses as part of current assets. This is a logical exclusion as the
company may not be able to convert inventory into cash easily. Inventories need to be sold first for
converting into cash. Selling inventory is a time-consuming process. When and how the inventories will be
sold is dependent on many factors such as economic conditions, consumer preferences, and so on. These
factors are often not controllable by the company. Therefore, inventories are not really that current in real
sense. Prepaid expenses are also excluded because they cannot be converted into cash. Thus, it is a more
conservative measure of liquidity. The basic purpose of computing liquidity ratios is to assess the capability
of repaying the current liabilities on demand.
Quick or liquid assets
Quick ratio = Current Liabilities
COMPONENTS OF QUICK OR LIQUID RATIO
QUICK ASSETS CURRENT LIABILITIES
Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Sundry debtors Short-term advances
Marketable securities Sundry creditors
Temporary investments Dividend payable
Income tax payable

QUICK RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-2016 2016-2017 2017-2018 2018-2019
Current assets 4,169.27 4,497.56 5,429.88 5,501.09 6,053.35
Inventories 1,802.18 1,610.12 2,194.09 2,178.43 2,585.10
Current liabilities 2,757.82 3,065.84 2,875.73 3,398.96 3,716.19
Quick Ratio 0.85 0.94 1.12 0.97 0.93
Average – 0.962 S. D – 0.563 C.V – 0.523 Min – 0.93 Max -1.12
QUICK RATIO
12
10

 ASIAN PAINTS
During the study period of this industry the highest ratio was 2.40, in the year 2007- 2008 and the lowest
ratio was 0.61, in the years 2011-2012. To get quick liquid assets, debtors also are deducted. It is possible
that collection may not be made immediately as and when required.
In the year 2007-2008 the ratio was increased it was 2.40, and after than the normally decreased in the year
2008-2009, the ratio was 1.42, and after again decreased ratio in the year 2009-2010, the ratio was 0.99, and
again increased ratios in the year 2010- 2011, the ratio was 1.52 and again decreased ratio in the year 2011-
2012 the ratio was 0.61.
A good condition of this industry for quick ratio compare with ideal ratio 1:1. But good condition of this
industry compared with other industries.
It should be below 1:1. Sometime 1:1 is also considered to be an ideal ratio. If liquid (Quick) assets are 2/3
of the liquid liabilities, it is satisfactory.

WORKING CAPITAL RATIO -
The working capital ratio, also called the current ratio, is a liquidity ratio that measures a firm’s ability to
pay off its current liabilities with current assets. The working capital ratio is important to creditors because it
shows the liquidity of the company. Current liabilities are best paid with current assets like cash, cash
equivalents, and marketable securities because these assets can be converted into cash much quicker than
fixed assets. The faster the assets can be converted into cash, the more likely the company will have the cash
in time to pay its debts. The reason this ratio is called the working capital ratio comes from the working
capital calculation. When current assets exceed current liabilities, the firm has enough capital to run its day-
to-day operations. In other words, it has enough capital to work. The working capital ratio transforms the
working capital calculation into a comparison between current assets and current liabilities. In the form of a
formula, this ratio may be express as follows:
Working Capital Ratio= Current Assets / Current Liabilities
COMPONENTS OF CURRENT RATIO
CURRENT ASSETS CURRENT LIABILITIES
Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

WORKING CAPITAL RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-2016 2016-2017 2017-2018 2018-2019
Current assets 4,169.27 4,497.56 5,429.88 5,501.09 6,053.35
Ratio 1.51 1.46 1.88 1.61 1.62
Average – 1.1616 S.D - C.V - Min - 1.46 Max - 1.88
WORKING CAPITAL RATIO OF ASIAN PAINTS

2
1.8
1.6
1.4
1.2
0.8
0.6
0.4
0.2
0
2014-15 2015-16 2016-17 2017-18 2018-19

INTERPRETATION
During the study period of this industry the highest ratio was 1.88, in the year 2016- 2017 and the lowest
ratio was 1.46, in the year 2015-2016. It is so believed that liquidity of company is higher if the ratio is
higher. The ideal ratio is 2:1 it means that if the current assets are twice the current liabilities, the liquid
position of a company is said to be satisfactory.
In the year 2014-2015 the ratio was increased it was 1.51, and after than the decreased in the year 2015-
2016, the ratio was 1.47, and after than again increased in the year 2016-2017 the ratio was ,and decrease in
2017-2018 the ratios was 1.61, and again normally increased ratio in the year 2018-2019 the ratios was 1.61.
A normally good condition of this industry for current ratio compare with ideal ratio 2:1. But good
condition of this industry compared with other industries.
This ratio is measure working capital position and useful to creditors and short-term money-lenders. With
the help of this ratio, one can judge whether or not the company is able to pay back the debt within a short
period.

CASH RATIO -
The cash ratio or cash coverage ratio is a liquidity ratio that measures a firm’s ability to pay off its current
liabilities with only cash and cash equivalents. The cash ratio is much more restrictive than the current ratio
or quick ratio because no other current assets can be used to pay off current debt–only cash. This is why
many creditors look at the cash ratio. They want to see if a company maintains adequate cash balances to
pay off all of their current debts as they come due. Creditors also like the fact that inventory and accounts
receivable are left out of the equation because both of these accounts are not guaranteed to be available for
debt servicing. Inventory could take months or years to sell and receivables could take weeks to collect.
Cash is guaranteed to be available for creditors. Cash ratio can be calculated as follows:
= Cash and cash equivalents/Current liabilities
COMPONENTS OF CASH RATIO
CURRENT LIABILITIES
Outstanding or accrued expenses
Bank over draft
Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income tax payable

CASH RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Cash and cash

61.81 155.02 61.34 106.70 98.33
equivalents
Ratio 0.02 0.05 0.02 0.03 0.02
Average - S. D - C.V - Min - Max -
CASH RATIO OF ASIAN PAINTS

0.06
0.05
0.04
0.03
0.02
0.01
0
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
During the study period of this industry the highest ratio was 0.05, in the 2015-16and the lowest ratio was
0.2, in the year 2014-2015, 2016-17, 2018-19.
In the year 2014-2015 the ratio was increased by 0.02, and after than the its start increased in the year 2015-
2016, the ratio was 0.05 and again it decreased in 3rd year’s ratio was 0.02 and again its increased in the
4nd years in 2017-18 the ratio was 0.03, and again it decreased in last year’s ratio was 0.02

ASSET MANAGEMENT RATIOS
Asset management (turnover) ratios compare the assets of a company to its sales revenue.
Asset management ratios indicate how successfully a company is utilizing its assets to generate revenues.
Analysis of asset management ratios tells how efficiently and effectively a company is using its assets in the
generation of revenues. They indicate the ability of a company to translate its assets into the sales.
Asset management ratios are also known as asset turnover ratios and asset efficiency ratios.
Asset management ratios are computed for different assets. Common examples of asset turnover ratios
include fixed asset turnover, inventory turnover, accounts payable turnover ratio, accounts receivable
turnover ratio, and cash conversion cycle. These ratios provide important insights into different financial
areas of the company and its highlights its strengths and weaknesses.
High asset turnover ratios are desirable because they mean that the company is utilizing its assets efficiently
to produce sales. The higher the asset turnover ratios, the more sales the company is generating from its
assets.
Although higher asset turnover ratios are preferable, but what is considered to be high for one industry, may
be low for another. Therefore, it is not useful to compare asset turnover ratios of different industries.
Different industries have different requirements with regard to assets. It would be unwise to compare an
ecommerce store which requires little assets to a manufacturing organization which requires large
manufacturing facilities, plant and equipment.
Low asset turnover ratios mean inefficient utilization of assets. Low asset turnover ratios mean that the
company is not managing its assets wisely. They may also indicate that the assets are obsolete. Companies
with low asset turnover ratios are likely to be operating below their full capacity.

INVENTORY TURNOVER RATIO -
Inventory turnover is the number of times a company sells and replaces its stock of goods during a period.
Inventory turnover provides insight as to how the company manages costs and how effective their sales
efforts have been. The higher the inventory turnover, the better since a high inventory turnover typically
means a company is selling goods very quickly and that demand for their product exists. Low inventory
turnover, on the other hand, would likely indicate weaker sales and declining demand for a company’s
products. Inventory turnover provides insight as to whether a company is managing its stock properly. The
company may have overestimated demand for their products and purchased too many goods as shown by
low turnover. Conversely, if inventory turnover is very high, they might not be buying enough inventory and
may be missing out on sales opportunities. Inventory turnover also shows whether a company’s sales and
purchasing departments are in sync. Ideally, inventory should match sales. It can be quite costly for
companies to hold onto inventory that isn’t selling, which is why inventory turnover can be an important
indicator of sales effectiveness but also for managing operating costs. Alternatively, for a given amount of
sales, using less inventory to do so will improve inventory turnover. The inventory turnover ratio is defined
as follows:
Inventory Turnover = Sales/Average inventory
where Average inventory = (Opening inventory + Closing inventory)/2
INVENTORY TURNOVER RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
sales 11,485.67 12,458.65 13,332.18 13,923.33 16,209.44
Opening inventory 728.87 759.06 2,194.09 2,178.43 2,585.10
Closing inventory 612.03 94.23 109.84 107.35 118.48
Ratio 17.13 29.20 11.57 12.18 11.99

Average – 16.41 S. D - C.V - Min – 11.57 Max – 29.20
INVENTORYTURNOVER RATIO OF ASIAN PAINTS

35
30
25
20
15
10
0
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
Here from the above-mentioned table, Asian paints turned their inventory 17.13 times in 2014-15 and the
turnover rate started to rise in 2015-16 ratio was 29.20 time and 2016-17 it declines ratio was 11.57 time.
and in 4 year it increases again ratio was 12.18 time and again it declines in last year ratio was 11.99 time.
This happened because they had more inventories piled up than the sales proceeds which indicate the
company over spent by buying too much inventory. Over the last five years the inventory turnover
ratios were fluctuating from the standard ratio.

ACCOUNTS RECEIVABLE TURNOVER RATIO -
Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business
can turn its accounts receivable into cash during a period. In other words, the accounts receivable turnover
ratio measures how many times a business can collect its average accounts receivable during the year. A turn
refers to each time a company collects its average receivables. If a company had $20,000 of average
receivables during the year and collected $40,000 of receivables during the year, the company would have
turned its accounts receivable twice because it collected twice the number of average receivables. This ratio
shows how efficient a company is at collecting its credit sales from customers. Some companies collect their
receivables from customers in 90 days while other take up to 6 months to collect from customers. In some
ways the receivables turnover ratio can be viewed as a liquidity ratio as well. Companies are more liquid the
faster they can convert their receivables into cash
Accounts receivable turnover ratio = Net sales/Average accounts receivable
where,
Average accounts receivable
= (Opening accounts receivable + Closing accounts receivable)/2
ACCOUNTS RECEIVABLE TURNOVER RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Sales 11,485.67 12,458.65 13,332.18 13,923.33 16,209.44
Opening receivable 1,802.18 1,610.12 2,194.09 2,178.43 2,585.10
Closing receivable 1,665.05 1,802.18 1,610.12 2,194.09 2,178.43
Ratio 11.48 13.56 15.36 14.56 18.55

20
18
16
14
12
10
0
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
11.48, in the year 2014-2015.
In the year 2014-2015 the ratio was increased by 11.48, and after than the its start increased in the year
2015-2016, 2016-17, the ratio was 13.56, 15.36 and again its decreased in the 4nd years in 2017-18 the ratio
was 14.56, and again it increased in last year’s ratio was 18.55.

RECEIVABLE COLLECTION PERIOD
Receivable collection period also called days sales outstanding measures the average number of days that
accounts receivable are outstanding. Accounts receivable collection period measures the average number of
days between sending invoices to customers and collecting payments from them. To calculate this ratio, the
average accounts receivable is divided by the average daily sales in the period. The average accounts
receivable can be determined by adding beginning accounts receivable to ending accounts receivable and
dividing the result by two. The average daily sales can be determined by dividing the sales for the period
(e.g., a year) by the number of days in the period (e.g., 365 days)
Average collection period (ACP) = 360/Accounts receivable turnover ratio
RECEIVABLE COLLECTION PERIOD
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Accounts
receivable 11.48 13.56 15.36 14.56 18.55
turnover ratio
Days in the
360 360 360 360 360
period
Ratio 0.031888 0.037666 0.042666 0.040444 0.051527777

Series 1
5
4.5
3.5
2.5
1.5
0.5
0
Category 1 Category 2 Category 3 Category 4
INTERPRETATION
11.48, in the year 2014-2015.
In the year 2014-2015 the ratio was increased by 11.48, and after than the its start increased in the year
2015-2016, 2016-17, the ratio was 13.56, 15.36 and again its decreased in the 4nd years in 2017-18 the ratio
was 14.56, and again it increased in last year’s ratio was 18.55.

FIXED ASSET TURNOVER RATIO –
The fixed asset turnover ratio is an efficiency ratio that measures a company’s return on their investment in
property, plant, and equipment by comparing net sales with fixed assets. In other words, it calculates how
efficiently a company is a producing sale with its machines and equipment.
Investors and creditors use this formula to understand how well the company is utilizing their equipment to
generate sales. This concept is important to investors because they want to be able to measure an
approximate return on their investment. This is particularly true in the manufacturing industry where
companies have large and expensive equipment purchases. Creditors, on the other hand, want to make sure
that the company can produce enough revenues from a new piece of equipment to pay back the loan they
used to purchase it.
FATR = Sales/Net fixed asset
COMPONENTS OF FIXED ASSET TURNOVER RATIO
NET FIXED ASSETS
Buildings
Computer equipment
Software
Furniture
land
Machinery
Vehicles

FIXED ASSET TURNOVER RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Sales 11,485.67 12,458.65 13,332.18 13,923.33 16,209.44
Net fixed asset 1,886.42 2,532.97 2,512.01 2,447.44 4,580.57
Ratio 6.08 4.91 6.19 5.68 3.53
Average – 5.278 S. D - C.V - Min – 3.53 Max - 6.19
FIXED ASSETS TURNOVER RATIO OF ASIAN PAINTS

7
0
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
3.53, in the year 2018-2019.
In the year 2014-2015 the ratio was increased by 6.08, and after than the its start decreased in the year 2015-
2016, the ratio was 4.91 and again it increased in 3rd year’s ratio was 6.19 and again its start decreased in the
last 2nd years in 2017-18,2018-19 the ratio was 5.68, 3.53.

ASSET TURNOVER RATIO –
The asset turnover ratio measures the value of a company's sales or revenues relative to the value of its
assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using
its assets to generate revenue. The higher the asset turnover ratio, the more efficient a company. Conversely,
if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.
TATR = Sales/Total assets
COMPONENTS OF FIXED ASSET TURNOVER RATIO
NET TOTAL ASSETS
Accounts Receivable
Inventory
Prepaid Expenses
cash
Marketable Securities
Goodwill
Current Investments
Land & Building
Plant & Machinery

ASSET TURNOVER RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Sales 11,485.67 12,458.65 13,332.18 13,923.33 16,209.44
Total asset 7,273.20 8,364.15 10,214.06 11,587.93 13,152.37
Ratio 1.57 1.48 1.30 1.20 1.23
ASSET TURNOVER RATIO OF ASIAN PAINTS

1.8
1.6
1.4
1.2
0.8
0.6
0.4
0.2
0
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
1.20, in the year 2017-2018.
In the year 2014-2015 the ratio was increased by 1.57, and after than the its start decreased in the year 2015-
2016, 2016-17, 2017-18 the ratio was 1.48, 1.30, 1.20 and again it increased in last year’s ratio was 1.23.

CURRENT ASSET TURNOVER RATIO -
Current Assets Turnover Ratio indicates that the current assets are turned over in the form of sales a greater
number of times. A high current assets turnover ratio indicates the capability of the organization to achieve
maximum sales with the minimum investment in current assets. Higher the current ratio better will be the
situation.
CATR = Sales/Current assets
COMPONENTS OF CURRENT ASSET TURNOVER RATIO
CURRENT ASSETS
Accounts Receivable
Inventory
Prepaid Expenses
cash
Marketable Securities
Goodwill
Current Investments
CURRENT ASSETS TURNOVER RATIO OF ASIAN PAINTS

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Sales 11,485.67 12,458.65 13,332.18 13,923.33 16,209.44
Current asset 4,169.27 4,497.56 5,429.88 5,501.09 6,053.35
Ratio 2.75 2.77 2.45 2.53 2.67
CURRENT ASSETS TURNOVER RATIO OF ASIAN PAINTS

2.8
2.7
2.6
2.5
2.4
2.3
2.2
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
During the study period of this industry the highest ratio was 2.77, in the 2015-16 and the lowest ratio was
2.45, in the year 2016-2017.
In the year 2014-2015 the ratio was increased by 2.75, and after than the again increased in the year 2015-
2016, the ratio was 2.77, and after than again decreased in the last 2 nd years ratio was 2.45 for 2016-17 and in
2017-18 ratio was 2.53 and again it increased in last year’s ratio was 2.67.

SOLVENCY RATIOS
A company usually does not only run on owner’s fund. Most companies have a debt factor, whether it is
loans, deposits, debentures etc. So, a check has to be kept on the cost of such debt and whether the company
is capable of meeting such costs. This is where solvency ratios are useful. Let us take a look.
Solvency ratios also known as leverage ratios determine an entity’s ability to service its debt. So, these ratios
calculate if the company can meet its long-term debt. It is important since the investors would like to know
about the solvency of the firm to meet their interest payments and to ensure that their investments are safe.
Hence solvency ratios compare the levels of debt with equity, fixed assets, earnings of the company etc.
One thing to make note of is the difference between solvency ratios and liquidity ratios. These two are often
confused for the other. Liquidity ratios compare current assets with current liabilities, i.e. short-term debt.
Whereas solvency ratios analyze the ability to pay long-term debt.

DEBT TO ASSETS RATIO
The debt to asset ratio is a leverage ratio that measures the amount of total assets that are financed by
creditors instead of investors. In other words, it shows what percentage of assets is funded by borrowing
compared with the percentage of resources that are funded by the investors.
Basically, it illustrates how a company has grown and acquired its assets over time. Companies can generate
investor interest to obtain capital, produce profits to acquire its own assets, or take on debt. Obviously, the
first two are preferable in most cases. This is an important measurement because it shows how leveraged the
company by looking at how much of company’s resources are owned by the shareholders in the form of
equity and creditors in the form of debt. Both investors and creditors use this figure to make decisions about
the company.
Investors want to make sure the company is solvent, has enough cash to meet its current obligations, and
successful enough to pay a return on their investment. Creditors, on the other hand, want to see how much
debt the company already has because they are concerned with collateral and the ability to be repaid.
The ratio can be measured as
Debt to assets ratio = Total liabilities/Total assets
COMPONENTS OF DEBT TO ASSETS RATIO
TOTAL LIABILITIES TOTAL ASSETS
Outstanding or accrued expenses Cash in hand
Bank over draft Cash at bank
Bills payable Bills receivable
Short-term advances Inventories
Sundry creditors Work-in-progress
Dividend payable Marketable securities
Income-tax payable Short-term investments
Sundry debtors
Prepaid expenses

DEBT TO ASSETS RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Total liabilities 3,042.94 3,400.99 3,263.08 3,789.77 4,264.81
Total assets 7,273.20 8,364.15 10,214.06 11,587.93 13,152.37
Ratio 0.41 0.40 0.31 0.32 0.32
Average – S. D - C.V - Min – Max –
DEBT TO ASSETS RATIO

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

DEBT TO EQUITY RATIO -
Debt to equity ratio (also termed as debt equity ratio) is a long-term solvency ratio that indicates the
soundness of long-term financial policies of a company. It shows the relation between the portion of assets
financed by creditors and the portion of assets financed by stockholders. As the debt to equity ratio expresses
the relationship between external equity (liabilities) and internal equity (stockholder’s equity), it is also
known as “external-internal equity ratio”.
D/E ratio = Total liabilities/Total equity
COMPONENTS OF DEBT TO EQUITY RATIO
TOTAL LIABILITIES
Outstanding or accrued expenses
Bank over draft
Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income-tax payable

DEBT TO EQUITY RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Total liabilities 3,042.94 3,400.99 3,263.08 3,789.77 4,264.81
Total equity 4,230.26 4,963.16 1,803.10 7,798.16 8,887.56
Ratio
DEBT TO EQUITY RATIO

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

PROFITABILITY RATIOS
profitability ratios, having a higher value relative to a competitor's ratio or relative to the same ratio from a
previous period indicates that the company is doing well. Ratios are most informative and useful when used
to compare a subject company to other, similar companies, the company's own history, or average ratios for
the company's industry as a whole. One of the fundamental reasons (and not the only one) behind the
existence of a firm is ‘earn-ing profit’. Stakeholders are primarily interested in knowing if the firm is earning
profit or not. Profitability ratios are handy tools for assessing the earning performance of a firm. These ratios
demonstrate the return earned by the company relative to other parameters; for example, sales, as-sets, and
so on. These ratios provide an important insight into the operations, liquidity, and asset management
performance of the company.
EXAMPLES OF PROFITABILITY RATIOS
Profitability ratios are the most popular metrics used in financial analysis, and they generally fall into two
categories: margin ratios and return ratios. Margin ratios give insight, from several different angles, on a
company's ability to turn sales into a profit.
Return ratios offer several different ways to examine how well a company generates a return for its
shareholders. Some examples of profitability ratios are profit margin, return on assets (ROA) and return on
equity (ROE).

PROFIT MARGIN RATIO -
The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a profitability ratio that
measures the amount of net income earned with each dollar of sales generated by comparing the net income
and net sales of a company. In other words, the profit margin ratio shows what percentage of sales are left
over after all expenses are paid by the business. Creditors and investors use this ratio to measure how
effectively a company can convert sales into net income. Investors want to make sure profits are high
enough to distribute dividends while creditors want to make sure the company has enough profits to pay
back its loans. In other words, outside users want to know that the company is running efficiently. An
extremely low profit margin formula would indicate the expenses are too high and the management needs to
budget and cut expenses.
A higher ratio implies higher capacity of generating profit.
PMR = Net income/Net sales
PROFIT MARGIN RATIO OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Net Income 1,327.40 1,597.43 1,803.10 1,894.80 2,134.76
Sales 11,485.67 12,458.65 13,332.18 13,923.33 16,209.44
Ratio 0.11 0.12 0.13 0.13 0.13

PROFIT MARGIN RATIO OF ASIAN PAINTS
0.14
0.13
0.13
0.12
0.12
0.11
0.11
0.1
2014-15 2015-16 2016-17 2017-18 2018-19
INTERPRETATION
During the study period of this industry the highest ratio was 0.13, in the last 3 rd years and the lowest ratio
was 0.11, in the year 2014-2015.
In the year 2014-2015 the ratio was increased it was 0.11, and after than the increased in the year 2015-
2016, the ratio was 0.12, and after than again increased in the last 3rd years ratio was 0.13.

RETURN ON EQUITY
(ROE) is a ratio that provides investors with insight into how efficiently a company (or more specifically, its
management team) is handling the money that shareholders have contributed to it. In other words, it
measures the profitability of a corporation in relation to stockholders’ equity. The higher the ROE, the more
efficient a company's management is at generating income and growth from its equity financing. ROE is
often used to compare a company to its competitors and the overall market. The formula is especially
beneficial when comparing firms of the same industry since it tends to give accurate indications of which
companies are operating with greater financial efficiency and for the evaluation of nearly any company with
primarily tangible rather than intangible assets. This is the basic formula for calculating ROE is:
ROE = Net Income

Shareholder Equity
RETURN ON EQUITY OF ASIAN PAINTS
Particulars 2014-15 2015-2016 2016-2017 2017-2018 2018-2019
Net Income 1,327.40 1,597.43 6,950.98 1,894.80 2,134.76
Shareholder Equity 4,230.26 4,963.16 1,803.10 7,798.16 8,887.56
Ratio 0.31 0.32 3.85 0.24 0.24
Average - S. D - C.V - Min – 0.24 Max – 3.85

RETURN ON EQUITY
5
4.5
3.5
2.5
1.5
0.5
0
INTERPRETATION
was 0.11, in the year 2014-2015.

RETURN ON TOTAL ASSETS
Return on assets is a profitability ratio that provides how much profit a company is able to generate from its
assets. In other words, return on assets (ROA) measures how efficient a company's management is in
generating earnings from their economic resources or assets on their balance sheet. ROA is shown as a
percentage, and the higher the number, the more efficient a company's management is at managing its
balance sheet to generate profits.
ROTA = Net income/Total assets
TOTAL ASSETS
Cash in hand
Cash at bank
Bills receivable
Inventories
Work-in-progress
Marketable securities
Short-term investments
Sundry debtors
Prepaid expenses

RETURN ON TOTAL ASSETS OF ASIAN PAINTS
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Net Income 1,327.40 1,597.43 6,950.98 1,894.80 2,134.76
Total Assets 7,273.20 8,364.15 10,214.06 11,587.93 13,152.37
Ratio
Series 1
5
4.5
3.5
2.5
1.5
0.5
0
INTERPRETATION
was 0.11, in the year 2014-2015.

EARNINGS PER SHARE
Earnings per share (EPS), also called net income per share, is a market prospect ratio that measures the
amount of net income earned per share of stock outstanding. In other words, this is the amount of money
each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of
the year.
Earnings per share is also a calculation that shows how profitable a company is on a shareholder basis. So, a
larger company’s profits per share can be compared to smaller company’s profits per share. Obviously, this
calculation is heavily influenced on how many shares are outstanding. Thus, a larger company will have to
split its earning amongst many more shares of stock compared to a smaller company.
EPS = Net income/No. of equity shares
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Net Income 1,327.40 1,597.43 6,950.98 1,894.80 2,134.76

No. of Equity
95,91,97,790 95,91,97,790 95,91,97,790 95,91,97,790 95,91,97,790
shares
Ratio

Series 1
5
4.5
3.5
2.5
1.5
0.5
0
INTERPRETATION
was 0.11, in the year 2014-2015.

Comparative Analysis of the balance sheet
From the 2014-2015 to 2015-2016
Particulars 2014-15 2015-16 Absolute % of change

change
Assets:
Non-Current 3,103.93 3,866.59 762.66 24.57
asset
Current asset 4,169.27 4,497.56 328.29 7.87
Total 7,273.20 8,364.15 1090.95 14.99

Liabilities:
Current 2,757.82 3,065.84 308.02 11.16
Liabilities
Non-Current
285.12 335.15 50.03 17.54
liabilities
Total 7,273.20 8,364.15 1,090.95 14.99
In the year comparative statement from the 2014-2015 to 2015-2016. The above table clearly
reveals that the was tremendous increase in the non-current asset to 60.28. In the same year current
asset was increased by 33.19 and the current liabilities was by 40.90 and non-current liabilities
increased by

From the 2015-2016 to 2016-2017
change
Assets:
Non-Current 3,866.59 4,784.18 917.59 23.73
asset
Current asset 4,497.56 5,429.88 932.32 20.72
Total 8,364.15 10,214.06 1,849.91 22.11
Liabilities:
Current 3,065.84 2,875.73 -190.11 6.20
Liabilities
Non-Current
335.15 387.35 52.2 15.57
liabilities
Total
In
the year comparative statement from the 2015-2016 to 2016-2017. The above table clearly reveals
that the was tremendous increase in the non-current asset to . In the same year current asset was
increased by and the current liabilities was by and non-current liabilities increased by

From the 2016-2017 to 2017-2018

change
Assets:
Non-Current 4,784.18 6,086.84 1,302.66 27.22
asset
Current asset 5,429.88 5,501.09 71.21 1.311
Total 10,214.06 11,587.93 1,373.87 13.45
Liabilities:
Current 2,875.73 3,398.96 523.23 18.19
Liabilities
Non-Current
387.35 390.81 3.46 0.89
liabilities
Total
In
the year comparative statement from the 2014-2015 to 2015-2016. The above table clearly reveals
that the was tremendous increase in the non-current asset to 60.28. In the same year current asset
was increased by 33.19 and the current liabilities was by 40.90 and non-current liabilities increased
by

From the 2017-2018 to 2018-2019

change
Assets:
Non-Current 6,086.84 7,099.02 1,012.18 16.62
asset
Current asset 5,501.09 6,053.35 552.26 10.03
Total 11,587.93 13,152.37 1,564.44 13.50
Liabilities:
Current 3,398.96 3,716.19 317.23 9.33
Liabilities
Non-Current
390.81 548.62 157.81 40.38
liabilities
Total
In
the year
comparative statement from the 2014-2015 to 2015-2016. The above table clearly reveals that the
was tremendous increase in the non-current asset to 60.28. In the same year current asset was
increased by 33.19 and the current liabilities was by 40.90 and non-current liabilities increased by

LEAST SQUARES (TREND VALUES)
By the method of lease square, a straight-line trend can be fitted to the given time series of data. It is a
mathematical, as well as, analytical method. With its help, economic and business time series data can be
fitted and this helps in forecasting and predicting. The trend line is called the line of best fit. The sum of
deviations of the actual values of Y and the trend value (Yc) is 0 and sum of square of deviations of the
actual value and the trend value is the least.
(Y-Yc) = 0 and (Y- Yc) = least. So, this method is called the least squares method or the line of best fit.
The method of least squares cab be used to explain the linear and nonlinear trend i.e. a straight-line
trend or parabolic trend.
The straight-line trend or the first-degree parabola is represented by the mathematical equation.
Yc = a + bx
Yc = require trend value
X = unit of time
Here a and b are constants or unknowns.

In the equation for the first – degree parabola Yc = a + bx, the values of the unknown or constants
can be calculated by the following two normal equations.
Y = Na +bx
xY = ax +bX2
N = the numbers or months for which data are given
When x = 0, the equation will take the form of
Y = Na
bx = 0
xY = bx2
bx2 = 0
by these equations we can know the values of a and b i.e.
a = Y/N and
b = xY / x2
a = the mean value of Y values
b = rate of change

Fitting the straight-Line Trend To sales (Rs. In Crores)
Year Y (Sales) X (year X2 Xy Trent

codes) values Yc
2014-15 11,485.67 -2 4 953.4
2015-16 12,458.65 -1 1 3369.9
2016-17 13,332.18 0 0 0 5786.4
2017-18 13,923.33 1 1 8202.9
2018-19 16,209.44 2 4 10619.4
N=S £y=67,409.27 £x=0 £x2=10 £zy= 24165 £yc=28932
Interpretation
The equation of straight-Line Trend is
yc = a+ lex
since £ x = 0
a= £Y/N le = £x7/£x2
£y = 28932 £xy=24165 N=5 £x2=10
Substituting the values, we get
A = 28932/5 = 5786.4
D = 24165/10 = 2416.5
The Linear trend for sales by the method of least squares is

For 2007-18 x would be 3
Hence y 2018 = 5786.4 + (2416.5 (3)
= 5786.4 + 7249.5
= 13035.9 (in Crores)
For 2018 – 19 x would be 4
Hence y 2019 = 5786.4 + (2416.5 (4))
= 5786.4 + 9666
= 15452.4 (in crores)

Forecasted value
Year 2020 2021

Sales 13035.9 15452.4
(In Crores)

CHAPTER FIVE
The present study entitled “analysis of financial statement of Asian Paints”. Is taken up by me in partial
fulfillment of the award of Degree of Master of Bachelor of Management Studies. During my study, based
on the data collected and presented the earlier chapter the following observations were made.
1. The sales to assets ratio are reveals that except in 2016-17, in all the years it is more than I indicating
good sales position of the firm in the market.
2. During the study period the working capital position is found to be satisfactory. In last 2 years of
study current assets are more than double to that of current liabilities.
3. The net profit is more in the last year i.e. 63.7% because of the reduced operation expenses.
4. It is observed that the total assets are almost same during the same period with a slight variation of
1% to 3%.
5. Over all the company current position is good but years 2014-15 & 2015-16 the company current
position not good.
6. The company paid to the dividend to shareholders in last year 2018-2019 it is the more than the last 4
years company debt position is good.
7. The company equity capital in year 2015-16 is 78125 million’s but last 3 years capital is 82455
million’s is increase of 5.5%.

Detail study on Analysis of financial statement of Asian Paints
A PROJECT REPORT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE DEGREE OF
BACHELOR OF MANAGEMENT STUDIES
UNDER THE FACULTY OF COMMERCE
By
Mr. Parth Premal Shah
Under the guidance of
Ms.
Kapol Vidyanidhi College of Management and Technology, Mahavir
Nagar, Kandivali West, Mumbai 400067
For the Academic Year 2019-20


Chapter One: Bachelor of Management Studies 1

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Chapter One: Bachelor of Management Studies 1

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CHAPTER ONE

MEANING OF FINANCIAL STATEMENT

 The Balance Sheet

 Profit and Loss Account

DEFINITION OF FINANCIAL STATEMENTS

BACHELOR OF MANAGEMENT STUDIES 1

1. The audited statement

2. The interim statement

3. The unedited year-end statement

4. The “estimated” statement

BACHELOR OF MANAGEMENT STUDIES 2

4. To provide others needed information about changes in economic resources of obligation

WHAT IS THE IMPORTANCE OF A COMPANY'S FINANCIAL STATEMENT

PROFIT AND LOSS

BACHELOR OF MANAGEMENT STUDIES 3

CASH FLOW PROJECTION

FINANCIAL CONDITIONS OF A COMPANY

BACHELOR OF MANAGEMENT STUDIES 4

FEATURES OF FINANCIAL ANALYSIS

 To make comparison between various groups to draw various

PURPOSE OF ANALYSIS OF FINANCIAL STATEMENTS

 To know the earning capacity or profitability.

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

BACHELOR OF MANAGEMENT STUDIES 5

BACHELOR OF MANAGEMENT STUDIES 6

INTRODUCTION OF ASIAN PAINTS

HISTORY OF ASIAN PAINTS

THE INDIAN PAINT INDUSTRY

BACHELOR OF MANAGEMENT STUDIES 7

BACHELOR OF MANAGEMENT STUDIES 8

BACHELOR OF MANAGEMENT STUDIES 9

BACHELOR OF MANAGEMENT STUDIES 10

BACHELOR OF MANAGEMENT STUDIES 11

BACHELOR OF MANAGEMENT STUDIES 12

BASIC INFORMATION OF PAINT INDUSTRY

TOP & MAJOR MANUFACTURERS IN PAINT INDUSTRY

2. The Sherwin-Williams Co.

4. Nippon Paint Holdings Co.

5. RPM International Inc.

BACHELOR OF MANAGEMENT STUDIES 13

8. Kansai Paint Co. Ltd.

BERGER PAINTS INDIA LTD. (BERGEPAINT) –

BACHELOR OF MANAGEMENT STUDIES 14

OBJECTIVES OF THE STUDY

 To analyse the level of consistency of Asian paints.

 To analyse the profitability of the business.

 To analyses the asset management of the firm.

LIMITATIONS OF THE STUDY

BACHELOR OF MANAGEMENT STUDIES 15

SCOPE OF THE STUDY: -

SIGNIFICANCE OF THE STUDY: -

BACHELOR OF MANAGEMENT STUDIES 16

PERIOD OF THE STUDY:

 Company have been already been listed in the stock market.

 Asian Paint is performing well in Indian market.

 Asian Paints company selling are more than CMA criteria.

TOOLS AND TECHNIQUES FOR ANALYSIS OF FINANCIAL STATEMENTS: -

(A) Accounting Techniques (B) Statistical Techniques

BACHELOR OF MANAGEMENT STUDIES 17

 The Standard Deviation:

FUTURE PLANS OF ASIAN PAINTS

BACHELOR OF MANAGEMENT STUDIES 18

FINANCIAL MANAGEMENT DEFINITION: