FINANCIAL and MANAGERIAL ACCOUNTING

GROUP PROJECT
on
“RATIO ANALYSIS OF BERGER PAINTS and
VARIANCE ANALYSIS ON JOSH AND CO.”

Submitted by: Group 4

1. Anchal Baheti A007 80672300015

2. Neil Kothari A062 80672300216
3. Prachi Mishra A038 80672300194
4. Rahul Kelkar A040 80672300139
5. Shweta Gajewar A052 80672300104
6. Aashi Bharti A002 80672300205
7. Anisha Agarwal A009 80672300102
8. Kakarla Ranga Sai Mahith A023 80672300095
9. Kunwar Aditya A030 80672300123
10. Priya Jain A039 80672300147

Submitted to:
Prof.(Dr.) Chandan Dasgupta

0
 ❖ Data Analysis and Interpretations
RATIO
➢ LIQUIDITY RATIOS:
ANALYSIS OF 1. CURRENT RATIO:
“BERGER Current assets
Current Ratio = -----------------------
Current Liabilities
PAINTS” YEAR CURRENT CURRENT CURRENT
ASSETS LIABILITIES RATIO
❖ INTRODUCTION: 2019-20 25,864,500 17,065,900
1.52
Financial statement analysis entails the 2020-21 35,063,300 20,506,800 1.71
examination and assessment of a
company's financial records with the aim of 2021-22 40,574,200 28,517,200
1.42
enhancing decision-making. This practice
encompasses specialized methodologies 2022-23 41,644,500 29,745,500
1.40
designed to appraise an organization's risk
factors, operational performance, fiscal
well-being, and forthcoming opportunities. Current ratio
In this project, we will apply these 2
techniques to scrutinize the financial
statements of Berger Paints, aiming to 1.5

gauge and interpret the company's financial 1

condition comprehensively.
0.5

0
❖ Need For Financial Analysis: 2019-20 2020-21 2021-22 2022-2023

➢ Insightful Evaluation: Financial ratio Current ratio

analysis provides a nuanced
understanding of a company's
financial statements, enabling the
assessment of performance trends,
risk exposure, efficiency, and
competitiveness.
➢ Informed Decision-Making: By
offering benchmarks for industry
comparisons, aiding investment
assessments, and guiding strategic
choices, financial ratio analysis
equips stakeholders with the
information needed to make well-
informed decisions.
INTERPRETATION:
The standard ratio of the company must be 2:1.
A current ratio ranging from 1.40 to 1.71
suggests a balanced liquidity position for
the company. This indicates that the
company has a reasonable buffer of current
assets to cover its short-term obligations,
reflecting effective working capital
management and operational efficiency.
Such a ratio signifies the ability to meet
immediate financial commitments while
maintaining flexibility for unforeseen
circumstances.

1
 2. QUICK RATIO: YEAR DEBT EQUITY DEBT
EQUITY
Quick assets
RATIO
Quick Ratio = -------------------------
2019-20
Current liabilities 76,69,000 2,66,72,400 0.29
YEAR QUICK CURRENT QUICK 2020-21
ASSETS LIABILITIES RATIO 63,37,600 3,38,39,300 0.19
2019-20 19,079,900 17,065,900 2021-22
1.12 1,01,35,300 3,93,41,600 0.26
2020-21 18,902,000 20,506,800 2022-23
0.92 1,18,89,700 4,50,22,600 0.26
2021-22 17,415,900 28,517,200
0.61

2022-23 18,453,300 29,745,500 DEBT EQUITY RATIO

0.62
0.4
0.3
0.2
QUICK RATIO
0.1
1.5
0
1 2019-20 2020-21 2021-22 2022-23
0.5 DEBT EQUITY RATIO
0
2019-20 2020-21 2021-22 2022-23

QUICK RATIO
INTERPRETATION:
A quick ratio in this range implies that the
company can meet its short-term
obligations using a combination of cash,
marketable securities, and receivables. The
standard quick ratio of the company must
be 1:1. A quick ratio ranging from 0.61 to
1.12 suggests a reasonably solid ability for
the company to cover immediate liabilities
with its most liquid assets, indicating a
satisfactory short-term liquidity position.
INTERPRETATION:
A debt-to-equity ratio ranging from 0.19 to
0.26 reflects a conservative and prudent
financial structure for the company. This
interval suggests that the company relies
modestly on debt financing in relation to its
equity, indicating a lower financial risk and
a more secure position for creditors and
investors. Such a ratio signifies a healthy
balance between external obligations and
internal investment, implying the company
is less vulnerable to potential financial
distress and better positioned to navigate
market fluctuations.

➢ SOLVENCY RATIOS: 2. DEBT SERVICE COVERAGE RATIO:

1. DEBT EQUITY RATIO: Net operating income
Total Debt Debt service coverage = ----------------------
Debt Service
Debt Equity Ratio = -------------------------------
Total Shareholders equity

2
 YEAR NET DEBT DEBT
OPERATING SERVICE SERVICE
INCOME COVERAG
E
2019-20 992,300 1.01
87,75,600
2020-21 1,00,91,700 507,200 1.47
2021-22 1,11,86,400 441,000 1.06
2022-23 1,22,31,700 470,400 0.99

DEBT SERVICE COVERAGE RATIO

2
1.5
1
0.5
0
2019-20 2020-21 2021-22 2022-23

DEBT SERVICE COVERAGE RATIO

INTERPRETATION:
A debt service coverage ratio between 0.99
to 1.47 indicates a moderate capacity for
the company to meet its debt payments
from its operating income. This range
indicates that the company's cash flow is
typically sufficient to service its debt
payments, albeit with a relatively narrower
margin. While there's a reasonable ability
to cover obligations, a closer look at trends
and industry standards is advised for a
comprehensive assessment.

3
 which allows for immediate corrective
VARIANCE actions to bring expenditures in line
with budgets. Moreover, it provides
ANALYSIS OF essential information for decision-
making by highlighting the reasons
behind variances, helping managers
“JOSH and Co.” make informed choices about resource
allocation and strategic adjustments.

❖ INTRODUCTION: ❖ Data Analysis and Interpretations

Variance analysis in accounting is a method DATA:

used to compare actual financial results
with the budgeted or expected figures. It Particulars Amount Amount
helps businesses assess the differences (millions) (millions)
(variances) between planned and actual Sales 400 484
performance, such as revenue, expenses, Material 200 253
and profits. This analysis is vital for several Labour 80 115
reasons. It assists in financial control,
Variable 40 48
enabling companies to identify
Overheads
inefficiencies, cost overruns, or revenue
Fixed 60 69
shortfalls, thereby facilitating timely
Overheads
corrective actions. Additionally, variance
Profit/Loss 20 (1)
analysis aids in performance evaluation and
decision-making by providing insights into
what went right or wrong, guiding strategic
adjustments, and enhancing financial CALCULATION:
planning and forecasting accuracy.
Ultimately, it contributes to optimizing Particulars Amount
financial health and operational efficiency. (millions)
Profit as per budget 20
❖ Need For Variance Analysis: Add:
Inc in Sales Price 44
Performance Evaluation: Variance analysis Inc in Sales Volume 8
allows businesses to assess their (A) 72
performance by comparing actual results
against budgeted or expected figures. It Less:
identifies areas where performance Inc in MR Rate 23
exceeds expectations and where it falls Inc in MC Consumption 10
short, enabling management to recognize Inc in Labour Rate 15
and reward success, as well as pinpoint Dec in Labour Efficiency 12
areas needing improvement. Inc in Variable o/h 4
❖ Cost Control and Decision-Making: Inc in Fixed o/h 9
Variance analysis is crucial for cost (B) 73
control. It helps in identifying cost Profit as per actual (A-B) -1
overruns or unexpected expenses,

4

WORKING NOTES:
1) Inc in Sales Price:
Given: 10%
Calculation: 484/1+10%
= 440
Therefore increase = 484-440
= 44
Inference: The increase in sales
price is indicated by favourable sales
variance, is a positive factor for the
company’s financial performance.
2) Inc in Sales Volume:
As after deducting the increase in
sales price, we are left with 440
Sales value, which indicates 10%
sales volume increase
((440-400)/400)) = 10%
Out of this some of them are a part
of variable expenses like material,
labour, variable o/h
Therefore the solution is:
Increase in sales volume
= (440-400)-(200*10%)-(80*10%)-
(40*10%)
= 40 – 20 – 8 – 4
=8
Inference: Increase in sales volume
affects all the variable costs as well,
so in the calculation, we are taking
them into consideration.
3) Inc in MR Rate:
Given: 10%
Calculation: 253/1+10%
= 230
Therefore increase = 253-230
= 23
Inference: The unfavourable
material rate variance of $23 million
suggests that the actual cost of
5
materials was higher than
anticipated due to the 10% increase.
4) Inc in MC Consumption:
Inc in material due to increase in
sales volume = 200 + 10%
= 220
Material after deducting the
increase in material cost = 230
(Calculated in 3))
Therefore, Variance in MC
Consumption = 230 – 220
= 10
Inference: Despite of increase in
material rate and sales volume, still
there was a variance of 10,
indicating MC Consumption
Variance.
5) Inc in Labour Rate:
Given: 15%
Calculation: 115/1+15%
= 100
Therefore increase = 115-100
= 15
Inference: The unfavourable labour
rate variance of $15 million suggests
that the actual cost of materials was
higher than anticipated due to the
15% increase.
6) Dec in Labour Efficiency:
Inc in labour due to increase in sales
volume = 80 + 10%
= 88
Labour after deducting the increase
in labour cost = 100 (Calculated in
5))
Therefore, Decrease in Labour
Efficiency = 100 – 88
= 12
Inference: Despite of increase in
labour rate and sales volume, still
there was a variance of 12,
 indicating decrease in labour
efficiency.

7) Inc in Variable o/h:

Inc in variable o/h due to increase in
sales volume = 40 + 10%
= 44
Therefore variable o/h variance
= 48 – 44
=4
Inference: The unfavourable
variable o/h variance of $4 million
suggests that the actual cost of
variable o/h was higher than
anticipated.

8) Inc in Fixed o/h:

= 69 – 60
=9
Inference: The unfavourable fixed
o/h variance of $9 million suggests
that the actual cost of fixed o/h was
higher than anticipated.