Financial Statement Analysis

Amardeep Singh
(+91) 9711071834
amardeep_singh@hotmail.com
The next 3 worksheets include historical financial statements of a company.
Analyse all financial statements and comment on -
1) Profitability
2) Liquidity
3) Solvency and leverage
4) Working capital management

Interest coverage ratio = EBIT / Interest exp. P&L - Accrual accoun

ICR = EBITDA / Interest exp. Rev.

(-) Op.cost
ICR = EBIT / (Interest exp. - Income income) EBITDA
ICR = (EBIT + Interest income) / Interest exp. (-) Depn (non cash exp
EBIT
ICR = CFOA / Interest exp.
Cash flow statement
P&L - Accrual accounting

(-) Depn (non cash exp.)

Cash flow statement

P&L
Profit and Loss Account
(Unless otherwise specified, all financials a 2010 2011 2012 2013

Revenues
Personal Care 60 78 96 123
Pet Nutrition 211 240 278 307
Others 131 168 204 234
Total 402 486 578 664
21% 19% 15%
Operating Costs Pareto rule
Raw Material Cost 128 163 184 205
Employee Cost 51 58 72 86
Power Cost 2 2 3 4
Packaging Cost 9 10 12 14
Advertisement Cost 20 41 42 44
Commission 20 24 29 33
Maintenace Cost 1 1 1 1
Insurance Premium 2 2 2 2
Total Operating Costs 233 302 345 389

EBITDA 169 184 233 274

Depreciation 100 100 105 110
EBIT 69 84 128 164
Interest expense 60 59 56 53
PBT 9 25 72 112
Taxes 3 8 22 34
PAT 6 18 51 78
1.6% 3.6% 8.7% 11.8%

Revenues
Personal Care 15% 16% 17% 18%
Pet Nutrition 52% 49% 48% 46%
Others 33% 35% 35% 35%

Pet nutrition used to contribute 52% of the total rev in 2010 which has n

Op cost excl. adv.

Deprn
 2014 2015 2016 2017 2018 2019 CAGR

152 175 199 229 265 305 20%

331 368 410 457 509 567 12%
265 278 294 317 343 375 12%
748 821 903 1,004 1,117 1,247 13%
13% 10% 10% 11% 11% 12%

232 260 292 329 371 418

94 94 104 115 127 140
4 4 5 5 6 7
16 17 18 20 22 25
46 82 99 120 145 175
37 41 54 60 78 87
1 1 1 1 1 1
2 2 2 2 2 2
432 502 576 654 753 854
16%
315 320 327 350 364 393
110 160 170 170 170 170
205 160 157 180 194 223
50 47 44 41 38 35
156 113 113 140 156 188
47 34 34 42 47 56
109 79 79 98 109 132
14.6% 9.6% 8.8% 9.7% 9.8% 10.6%

20% 21% 22% 23% 24% 24%

44% 45% 45% 46% 46% 45%
35% 34% 33% 32% 31% 30%

2% of the total rev in 2010 which has now declined by 7% points to reach 45% in 2019

386 420 477 533 608 679

9%

45%
Growth
1) Year on year growth
2) Avg growth rate
(a) Simple average A.M.
13.5% <------- This is WRONG
Rev in Year 2010 = 402
1,253
(b) Compounded annual growth rate G.M.
CAGR = (Last Yr / First Yr) ^ (1/n) - 1
13.4%
402
1,247
CAGR can be computed in Excel using RRI function
13.4% =RRI(9,C9,L9)
BS
Balance Sheet
(Unless otherwise specified, all financials are in USD 2010 2011 2012 2013
Sources of Funds

Liabilities

Current Liabilities & Provisions

Provisions for Employees fund 10 6 8 9
Advances from customers 5 8 12 4
Commission payable 4 4 10 6
Accounts payable 18 20 27 24
Total Current Liabilities & Provisions 36 38 57 43

Non Current Liabilities

Secured Loans 200 190 180 170
Unsecured Loans 300 285 270 255
Total Non Current Liabilities 500 475 450 425

Shareholders Equity
Paid-up Capital 550 550 550 550
Retained Earnings 6 24 74 153
Total Shareholders' Equity 556 574 624 703

Total Liabilities & Shareholders' Equity 1,092 1,087 1,131 1,170

Usage of Funds

Current Assets
Cash & Cash Equivalent 77 111 191 256
Inventory 36 60 65 69
Account Receivables 33 52 55 60
Loans & Advances 10 14 15 20
Total Current Assets 155 237 326 405

Non Current Assets

Gross Block (Fixed Assets) 1,000 1,000 1,050 1,100
Accumulated depreciation 100 200 305 415
Net Block 900 800 745 685

Investments 37 50 60 80

Total Assets 1,092 1,087 1,131 1,170

- - - -
Asset/Sales 2.7 2.2 2.0 1.8
Investments
1) Core Buys fixed assets
2) Non Core Purchase of shares / debentures / bonds of other companies f
 2014 2015 2016 2017 2018 2019

9 9 11 12 14 14
7 7 7 7 7 7
6 8 10 9 16 12
27 34 31 42 34 51
49 58 60 70 70 84

160 150 140 130 120 110

240 225 210 195 180 165
400 375 350 325 300 275

550 550 550 550 550 550

262 341 420 518 628 759
812 891 970 1,068 1,178 1,309

1,261 1,324 1,380 1,463 1,548 1,669

448 134 249 451 708 945

72 92 92 106 117 135
51 61 62 92 92 113
16 16 16 16 16 16
586 303 420 665 933 1,209

1,100 1,600 1,700 1,700 1,700 1,700

525 685 855 1,025 1,195 1,365
575 915 845 675 505 335

100 106 115 123 110 125

1,261 1,324 1,380 1,463 1,548 1,669

- - - - - -
1.7 1.6 1.5 1.5 1.4 1.3
/ bonds of other companies for investment purpose - This is NOT related to co.'s core business
Co. is efficient to utilize its assets
CFS
Cash Flow Statement
(Unless otherwise specified, all financials are in USD Mn) 2010 2011 2012

Cashflow from Operating Activities

PAT 18 51
Add: Depreciation 100 105
Add: Interest Expense 59 56

Net Change in Working Capital

Add: Increase in Provisions for Employees fund (4) 2
Add: Increase in Advances from customers 3 4
Add: Increase in Commission payable 0 6
Add: Increase in Accounts payable 2 7
Less: Increase in Inventory (24) (5)
Less: Increase in Account Receivables (19) (3)
Less: Increase in Loans & Advances (4) (1)
Net Change in Working Capital (45) 10

Cashflow from Operations 131 221

Cashflow from Investment Activities

Less: Capex - (50)
Less: Increase in Investments (13) (10)
Cashflow from Investment Activities (13) (60)

Cashflow from Financing Activities

Add: New Equity Raised - -
Add/ Less: Debt Raised / (Repaid) (25) (25)
Less: Dividends Paid - -
Less: Interest Expense (59) (56)
Cashflow from Financing Activities (84) (81)

Net Cashflow 34 81

Cash Balance
Opening Balance 77 111
Net Cashflow 34 81
Closing Balance 77 111 191
2013 2014 2015 2016 2017 2018 2019

78 109 79 79 98 109 132

110 110 160 170 170 170 170
53 50 47 44 41 38 35

1 1 - 2 0 2 0
(8) 3 - - - - -
(4) - 2 3 (1) 7 (4)
(3) 3 7 (3) 11 (8) 17
(4) (3) (20) 0 (14) (11) (17)
(5) 9 (10) (1) (29) (0) (21)
(5) 4 - - - - -
(29) 17 (22) 1 (33) (11) (24)

212 286 264 293 275 306 312

(50) - (500) (100) - - -

(20) (20) (6) (9) (8) 13 (15)
(70) (20) (506) (109) (8) 13 (15)

- - - - - - -
(25) (25) (25) (25) (25) (25) (25)
- - - - - - -
(53) (50) (47) (44) (41) (38) (35)
(78) (75) (72) (69) (66) (63) (60)

65 191 (314) 116 202 257 237

191 256 448 134 249 451 708

65 191 (314) 116 202 257 237
256 448 134 249 451 708 945
Ratio Analysis
Key Ratios and Metrics
(Unless otherwise specified, all financials a 2010 2011 2012 2013

Profitability Ratios
EBITDA Margin 42% 38% 40% 41%
EBIT Margin 17% 17% 22% 25%
PBT Margin 2% 5% 12% 17%
PAT Margin 2% 4% 9% 12%

Growth Rate Year on year growth rates

Revenue 21% 19% 15%
EBITDA 9% 27% 18%
EBIT 21% 53% 29%
PBT 180% 186% 55%
PAT 180% 186% 55%

Operating Cost as % of Sales Discretionary cost vs Mandatory cost

Raw Material Cost 31.9% 33.6% 31.9% 30.9%
Employee Cost 12.7% 11.8% 12.5% 12.9%
Power Cost 0.5% 0.5% 0.5% 0.5%
Packaging Cost 2.2% 2.2% 2.1% 2.2%
Advertisement Cost 5.0% 8.4% 7.2% 6.6%
Commission 5.0% 5.0% 5.0% 5.0%
Maintenace Cost 0.2% 0.2% 0.2% 0.2%
Insurance Premium 0.5% 0.4% 0.3% 0.3%
Total Operating Cost 58.0% 62.2% 59.7% 58.7%
53.0% 53.7% 52.6% 52.0%
Liquidity Ratios
Current Ratio 4.3x 6.3x 5.7x 9.5x

Rate of Returns
Return on average equity 3.1% 8.4% 11.8%
Return on average capital employed 8.0% 12.0% 14.9%
Return on average assets 1.6% 4.6% 6.8%

Leverage Ratios
Debt/ Equity 0.9x 0.8x 0.7x 0.6x
Debt/ EBITDA 3.0x 2.6x 1.9x 1.5x
Interest Coverage 2.8x 3.1x 4.2x 5.2x

Activity Ratios
Receivables Turnover 11.4x 10.8x 11.5x
Receivables Days 32 34 32
Inventory Turnover 3.4x 2.9x 3.1x
Inventory Days 107 124 119
Payables Turnover 8.6x 7.8x 8.1x
Payables Days 42 47 45
 2014 2015 2016 2017 2018 2019

42% 39% 36% 35% 33% 31%

27% 19% 17% 18% 17% 18%
21% 14% 13% 14% 14% 15%
15% 10% 9% 10% 10% 11%

13% 10% 10% 11% 11% 12%

15% 1% 2% 7% 4% 8%
25% -22% -2% 15% 8% 15%
39% -27% 0% 24% 12% 20%
39% -27% 0% 24% 12% 20%

31.0% 31.7% 32.4% 32.8% 33.3% 33.5%

12.6% 11.5% 11.5% 11.4% 11.3% 11.2%
0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
2.1% 2.0% 2.0% 2.0% 2.0% 2.0%
6.2% 10.0% 11.0% 12.0% 13.0% 14.0%
5.0% 5.0% 6.0% 6.0% 7.0% 7.0%
0.2% 0.1% 0.1% 0.1% 0.1% 0.1%
0.3% 0.2% 0.2% 0.2% 0.2% 0.2%
57.8% 61.1% 63.8% 65.1% 67.4% 68.5%
51.7% 51.1% 52.8% 53.1% 54.4% 54.5%

11.9x 5.2x 7.0x 9.5x 13.2x 14.3x

14.4% 9.3% 8.5% 9.6% 9.7% 10.6%

17.6% 12.9% 12.1% 13.3% 13.5% 14.5%
9.0% 6.1% 5.9% 6.9% 7.3% 8.2%

0.5x 0.4x 0.4x 0.3x 0.3x 0.2x

1.3x 1.2x 1.1x 0.9x 0.8x 0.7x
6.4x 6.9x 7.5x 8.6x 9.7x 11.4x

13.4x 14.6x 14.6x 13.0x 12.2x 12.2x

27 25 25 28 30 30
3.3x 3.2x 3.2x 3.3x 3.3x 3.3x
111 115 115 110 110 110
9.1x 8.5x 9.0x 9.1x 9.9x 9.9x
40 43 40 40 37 37
1.6%