Project Report on

Financial Statement Analysis

Subject: Fundamental of Management Accounting

SUBMITTED BY:

Name: DHRUB AGRAWAL

Roll No. IC21-022
Registration No.

Under the Supervision of:

SURAJMAL COLLEGE RAMPELLA

SAMBALPUR, ODISHA

YEAR: 2022-23
 Acknowledgement

I would like to express my special thanks of gratitude to my Fundamental of

Management Accounting Teacher who gave me the golden opportunity to do this

wonderful project on topic ‘Financial Statement Analysis’. It also helped me in doing

a lot of research and I came to know about so many new things. I had made this

project from my heart and shown utmost sincerity to complete it.

Secondly, I would also like to thank my parents and friends who helped me a lot in

completing this project within the limited time.

Name of student – DHRUB AGRAWAL

Roll No. – IC21-022
 Content

S.L No. Topics Page No.

1. About Financial Statement 4-4

2. About Financial Statement Analysis 5-5

3. Objectives of Financial Statement Analysis 6-8

4. About Reliance Industries 9-9

5. About Owner of Reliance Industries 10-10

6. Balance Sheet of Reliance Industries 11-11

7. Comparative Balance Sheet of Reliance Industries 12-12

8. Income Statement of Reliance Industries 13-13

10. Comparative Income Statement of Reliance 14-14

Industries
11. Analysis & Interpretation 15-15

12. Conclusion and Bibliography 16-16

 Financial Statement

Meaning :
The statement which are prepared to ascertain income earned or loss suffered and position of
assets and liabilities at a particular date are known as financial statements. Financial
statements are prepared using facts relating to events, which are recorded chronologically. Thus,
we have to first record all these facts in monetary terms. Then, we have to process them using all
applicable rules and procedures. Finally, we can now use all this data to generate financial
statements.

Definition :
“The financial statements provide a summary of accounts of a business enterprise, the balance
sheet reflecting the assets, liabilities and capital as on a certain date and income statement
showing the results and operations during a certain period”
- By John N Myer

These statements basically include the following reports:

1. Balance sheet - The balance sheet a summary of the company position on one day at a
certain point in time. The balance sheet lists the assets, liabilities, and owners’ equity
on one specific date
2. Profit and Loss statement - The income statement shows the revenue and expenses of
the company over a period of time
3. Notes to Accounts - Balance Sheet and statements of profit and loss are supported by
the notes giving details of items in the Balance Sheet and statement of profit and loss
4. Statement of cash flow - It is a statement prepared to show inflow and outflow of cash
and cash equivalents
 Financial Statement Analysis

Meaning :

Financial statement analysis (or financial analysis) is the process of reviewing and analyzing
a company's financial statements to make better economic decisions to earn income in
future. Financial statement analysis is a method or process involving specific techniques for
evaluating risks, performance, financial health, and future prospects of an organization. The
results can be used to make investment and lending decisions.

Definition :

“Analysing Financial statements is a process of evaluating the relationship between

component parts of a financial statement to obtain a better understanding of a firm’s
position and performance.”

- By Metcalf and Titard

“Financial Statement analysis is largely a study of relationship among the various financial
factor in a business as disclosed by a single set-of statements, and a study of the trend of
these factors as shown in a series of statements.”
- By Myer
 Objectives of Financial Statement Analysis

1. To assess the earning capacity or profitability of the firm

financial analysis aims at assessing the profitability of a firm. Here, profitability refers to a
firm’s ability to earn income and sustain its growth in both long-term and short-term. All the
external users especially investors and potential investors are interested in earning capacity
so that they can take decisions whether to invest in the company or not.

2. To know the current position of the company

Financial statements are very essential for the board and promoters of the company, as it
helps them to compare and understand the trend of the company operations. The statements
make it easy to compare the past performance with current performance; also it helps to
understand the projected vs actual growth of the company. Regular recording of all the
financial transactions of the company is very useful to draw a clear picture about the
performance of the company.

3. Predicting growth & profitability prospects

The top management is concerned with future prospects of the company. Financial analysis
helps them in reviewing the investment alternatives for judging the earning potential of the
enterprise. With the help of financial statement analysis, assessment and prediction of the
bankruptcy and probability of business failure can be done.
4. Intra firm and inter firm comparison

Intra firm comparison means comparison of current year result with that of the previous year
result of the same firm whereas inter firm comparison means comparison of current year
result with that of the previous year result of different firms. This comparisons will help in
finding out efficiency, effectiveness, strength and weakness of the firm and will enable to
make changes to improve the performance of the firm.

5. Helps in prediction of bankruptcy and failure

Financial statement analysis is a significant tool in predicting the bankruptcy and failure
probability of business enterprises. After being aware about probable failure, both managers
and investors can take preventive measures to avoid/minimise losses. Creditors or suppliers
are interested to know the short term financial position/solvency or liquidity of the enterprise
and Debenture holders are lenders interested to know the long term financial position of the
enterprise.

6. Loan Decision by Financial Institutions and Banks

Financial statement analysis is used by financial institutions, loaning agencies, banks

etc to decide whether a loan can be given to a company or not. It helps in determining
credit risk, deciding the terms and conditions if the loan is sanctioned, interest rate,
maturity date etc.
7. Assessing the marginal efficiency

The financial statement analysis helps to identify the areas where the managers have been
efficient and the areas where they have been inefficient. Any favourable and unfavourable
variation can be identified reasons thereof can be ascertained to pin point managerial
efficiency and inefficiency.

8. Stability

Stability implies the ability of a business firm to maintain its existence in the long run.
However, this stability should not include significant losses during the conduct of this
business. The process of assessing the stability of a firm through financial statement
analysis involves the use of the balance sheet as well as the income statement. Besides,
other non-financial and financial indicators also play a vital role in the process.

9. Forecasting and preparing budgets

The analysis provides sufficient information regarding profitability, performance and

financial soundness of the firm. On the basis of this performance, we can make effective
forecasting and budgeting.
 About Reliance Company

Reliance Industries Limited is an Indian multinational

conglomerate company headquartered
in Mumbai, India. Reliance owns businesses across
India engaged in energy, petrochemicals, textiles,
natural resources, retail, and telecommunications.
Reliance is one of the most profitable companies in India. The company is ranked 96th on
the Fortune Global 500 list of the world's biggest corporations as of 2020. It is ranked 8th
among the Top 250 Global Energy Companies by Platts as of 2016.

Reliance Group was founded by Dhirubhai

Ambani, who went into business in the 1950s. The
company expanded into textiles in the 1960s and
entered the petrochemical sector in the 1980s,
amassing a fortune for Ambani. After Ambani died
in 2002, his sons Mukesh, the eldest, and Anil
had a row over corporate policy. The group was divided in 2005 as Mukesh took over the
petrochemical and textile operations while Anil took charge of the financial and
telecommunications segments. Mukesh leads Reliance Industries as chairman and expanded
its operations by pushing into retail and telecommunications services.
 About the Owner

Mr. Mukesh D. Ambani is a Chemical Engineer from the

Institute of Chemical Technology, Mumbai (erstwhile the
University Department of Chemical Technology, University
of Mumbai). He pursued an MBA from Stanford University
in the US. He has been on the Board of Reliance since
1977. He initiated Reliance’s backward integration journey – from textiles to polyester fibres
and further onto petrochemicals and petroleum refining, and going upstream into oil and gas
exploration and production. In the late nineties, Mr. Mukesh Ambani spearheaded the creation
of the world’s largest grassroots petroleum refinery at Jamnagar in Gujarat, India, with a
capacity of 660,000 barrels per day (33 million tonnes a year), and integrated it with
petrochemicals, power generation, port and related infrastructure. Further, he steered the
setting up of another 580,000-barrels-per-day refinery next to the first one in Jamnagar. He
also led Reliance’ development of infrastructure
facilities and implementation of a pan-India
organized retail network spanning multiple
formats and supply chain infrastructure. Today,
Reliance Retail is the largest organised retail player
in India. He has created global records in
customer acquisition for Jio, Reliance’ digital services initiative. He led and established one of
the world’s most expansive 4G broadband wireless network offering end-to-end solutions that
address the entire value chain across various digital services in key domains of national
interest.
 Balance Sheet of Reliance Industries

PARTICULARS MAR 22 MAR 21

EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 6,339.00 6,339.00
Reserves and Surplus 418,244.00 398,983.00
NON-CURRENT LIABILITIES
Long Term Borrowings 178,751.00 118,098.00
Deferred Tax Liabilities [Net] 50,556.00 47,317.00
Other Long Term Liabilities 3,428.00 504.00
Long Term Provisions 1,410.00 2,483.00
CURRENT LIABILITIES
Short Term Borrowings 51,276.00 39,097.00
Trade Payables 71,048.00 88,241.00
Other Current Liabilities 186,787.00 73,900.00
Short Term Provisions 1,072.00 783.00
TOTAL CAPITAL AND LIABILITIES 968,912.00 775,745.00
ASSETS
NON CURRENT ASSETS
Tangible Assets 297,847.00 194,895.00
Intangible Assets 8,624.00 8,293.00
Capital Work-In-Progress 15,638.00 105,155.00
FIXED ASSETS 334,436.00 314,745.00
Non-Current Investments 419,073.00 272,043.00
Long Term Loans And Advances 44,348.00 31,806.00
Other Non-Current Assets 4,458.00 4,287.00
CURRENT ASSETS
Current Investments 70,030.00 59,640.00
Inventories 38,802.00 44,144.00
Trade Receivables 7,483.00 12,110.00
Cash And Cash Equivalents 8,443.00 3,768.00
Short Term Loans And Advances 15,028.00 4,876.00
Other Current Assets 26,811.00 28,326.00
TOTAL ASSETS 968,912.00 775,745.00
 Comparative Balance Sheet of Reliance Industries as on March 2022

Particulars Mar-22( in cr.) Mar-21( In Cr.) Absolute Figure Percentage

EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 6,339.00 6,339.00 NIL NIL
Reserves and Surplus 418,244.00 398,983.00 19261 4.82%
NON-CURRENT LIABILITIES
Long Term Borrowings 178,751.00 118,098.00 60653 51.35%
Deferred Tax Liabilities [Net] 53,556.00 47,317.00 6239 6.84%
Other Long Term Liabilities 428.00 504 -76 -15.07%
Long Term Provisions 1,410.00 2,483.00 -1073 43.21%
CURRENT LIABILITIES
Short Term Borrowings 51,276.00 39,097.00 12179 31.15%
Trade Payables 71,048.00 88,241.00 -17193 -19.48%
Other Current Liabilities 186,787.00 73,900.00 112887 152.75%
Short Term Provisions 1,072.00 783 289 36.90%
TOTAL CAPITAL & LIABILITIES 968,912.00 775,745.00 193167 24.90%
ASSETS
Non current Assets
Tangible Assets 297,847.00 194,895.00 102952 52.82%
Intangible Assets 8,624.00 8,293.00 331 3.99%
Capital Work-In-Progress 15,638.00 105,155.00 -89517 -85.12%
FIXED ASSETS 334,436.00 314,745.00 19691 6.25%
Non-Current Investments 419,073.00 272,043.00 147030 54.04%
Long Term Loans & Advance 44,348.00 31,806.00 12542 39.43%
Other Non-Current Assets 4,458.00 4,287.00 171 3.98%
CURRENT ASSETS
Current Investments 70,030.00 59,640.00 10390 14.83%
Inventories 38,802.00 44,144.00 -5324 -12.10%
Trade Receivables 7,483.00 12,110.00 -4672 -38.57%
Cash And Cash Equivalents 8,443.00 3,768.00 4675 124.07%
Short Term Loans & Advance 15,028.00 4,876.00 10152 208.20%
Other Current Assets 26,811.00 28,326.00 -1515 -5.34%
TOTAL ASSETS 968,912.00 775,745.00 193167 24.90%
 Income Statement Of Reliance Industries

PROFIT & LOSS ACCOUNT OF RELIANCE MAR 22 MAR 21

INDUSTRIES (in Rs. Cr.)
GROSS REVENUE FROM OPERATION 365,202.00 401,583.00

Less: Excise/Sevice Tax/Other Levies 29,224.00 29,967.00

NET OPERATING REVENUES 335,978.00 371,616.00

Add: Other Income 14,541.00 8,822.00

TOTAL REVENUE 350,519.00 380,438.00

Less: Cost Of Materials Consumed 237,342.00 265,288.00

Less: Operating And Direct Expenses 21,424.00 24,839.00

Less: Changes In Inventories Of FG,WIP 77.00 3,294.00
And Stock-In Trade
Less: Employee Benefit Expenses 6,067.00 5,834.00
Less: Finance Costs 12,105.00 9,751.00
Less: Depreciation And Amortization 9,728.00 10,558.00
Expenses
Less; Other Expenses 14,306.00 14,252.00
PROFIT/LOSS BEFORE TAX 49,470.00 46,622.00
Less: Exceptional Items 4,245.00 0.00
PROFIT/LOSS BEFORE TAX 45,225.00 46,622.00
Less; Current Tax 7,200.00 9,440.00
Less: Deferred Tax 2,213.00 2,764.00
PROFIT/LOSS AFTER TAX 35,812.00 34,418.00
 Comparative Income Statement

PROFIT & LOSS ACCOUNT OF Mar-22 Mar-21 Absolute Figure Percentage

RELIANCE INDUSTRIES (in Rs. Cr.)

GROSS REVENUE FROM 365,202.00 401,583.00 -36381 -9.05%

OPERATION
Less: Excise/Service Tax/Other 29,224.00 29,967.00 -748 -2.47%
Levies
NET OPERATING REVENUES 335,978.00 371,616.00 -35638 -9.59%

Add: Other Income 14,541.00 8,822.00 5719 64.82%

TOTAL REVENUE 350,519.00 380,438.00 -29919 -7.86%

Less: Cost Of Materials Consumed 237,342.00 265,288.00 -27946 -10.53%

Less: Operating And Direct 21,424.00 24,839.00 -3415 -13.74%

Expenses
Less: Changes In Inventories Of 77 3,294.00 -3217 -97.66%
FG,WIP And Stock-In Trade
Less: Employee Benefit Expenses 6,067.00 5,834.00 233 3.99%

Less: Finance Costs 12,105.00 9,751.00 2354 24.14%

Less: Depreciation And 9,728.00 10,558.00 -830 -7.86%

Amortization Expenses
Less; Other Expenses 14,306.00 14,252.00 54 0.37%

PROFIT/LOSS BEFORE TAX 49,470.00 46,622.00 2848 6.10%

Less: Exceptional Items 4,245.00 0 4245 NIL

PROFIT/LOSS BEFORE TAX 45,225.00 46,622.00 -1397 -2.99%

Less; Current Tax 7,200.00 9,440.00 -2240 -23.72%

Less: Deferred Tax 2,213.00 2,764.00 -551 -19.93%

Profit/loss after tax 35,812.00 34,418.00 1394 4.05%

 Analysis And Interpretation

From Comparative Balance Sheet following observations are made :-

1. Equity Share has no change
2. Reserve has increased by 4.82%
3. Long Term Borrowings has increased by 51.35%
4. Long Term Provisions has decreased by 43.21%
5. Short Term Borrowings has increased by 31.15%
6. Short Term Provision has increased by 36.90%
7. Other Current Liabilities has increased by 152.75%
8. Tangible Assets has increased by 52.82
9. Intangible Assets has increased by 3.99%
10.Fixed Assets has increased by 6.25%
11. Inventories has decreased by 12.10%
12.Cash and Cash Equivalents has increased by 124.07%

From Comparative Income Statement following Observations are made :-

1. Gross Revenue from operation has decreased by 9.05%
2. Net Operating Revenues has decreased by 9.59%
3. Operating and Direct Expenses has decreased by 13.74%
4. Employee Benefit Expenses has increased by 3.99%
5. Financial Cost has increased by 24.14%
6. Depreciation and Amortization Expenses has been decreased by 7.86%
7. Profit/Loss Before Tax hs decreased by 2.99%
8. Current Tax hs decreased by 23.72%
9. Profit/Loss After Tax has increased by 4.05%
 Conclusions
Analysis and interpretation financial statement is an important tool in assessing company’s

Performance. It reveals the strength and weakness of the firm. The purpose of financial

analysis is to diagnose the information contained in financial statements so as to judge

the profitability and financial soundness of the company. Financial statement analysis

is an attempt to determine the significance and meaning of financial statement data so

that forecast may be made of the future earnings, ability to pay interest and debt maturities

and profitability of a sound dividend policy.

Bibliography
1. Fundamental of Management Accounting Book

2. T.S. Grewal’s Double Entry Book Keeping (Accounting for Companies)

3. https://www.moneycontrol.com/financials/relianceindustries/profit-lossVI/ri

4. https://www.moneycontrol.com/financials/relianceindustries/balance-

sheetVI/RI?classic=true

5. https://en.wikipedia.org/wiki/Reliance_Industries

6. https://www.yourarticlelibrary.com/accounting/financial-statements/financial-

statement-analysis-definition-and-4-objectives/53031