LOVELY PROFESSIONAL UNIVERSITY

Mittal School of Business

Name of the Faculty Member : Mrs. Lipika Dhingra

Course Code : ACC301 Course Title : Management

Accounting
Academic Task No : 01 Academic Task Title : Comparative &
Common Size Statement Analysis
Date of Allotment : Aug. 16, 2020 Date of Submission : Aug. 22, 2020

Student Roll No : RL1902A08 Student Reg. No. : 11917023

Term : Spring Term Section : L1902

Max Marks : 30 Marks Obtained :

Evaluation Parameters

Declaration :

I declare that this assignment is my individual work. I have not copied it from
any other students work or from any other source except where due
acknowledgment is made explicitly in the text, nor has any part been written
for me by any other person.

Evaluation Criteria : Rubrics on different parameters

Student’s Signature

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Evaluator’s Comments (For Instructors Use Only)

General Observations Suggestions for Best Part of Assignment

Improvement

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 Gandhi Special Tubes Ltd.

Introduction

Gandhi Group is manufacturing automobile components

since 1959. The products are marketed all over India
and are also exported all over the world including Germany, UK, South East Asian countries
etc. It has a plant located in Halol (Gujarat), and windmills at Bhogat, Navadara and Kutch
(Gujarat), and Sangli (Maharashtra).

Gandhi Special Tubes Ltd. is formerly known as ―GANDHI SPECIAL 07 TUBES LTD.‖
and was a project set up by Gandhi Group. The project was for manufacturing small diameter
welded and cold drawn seamless steel tubes. All the critical equipment were imported from
Germany. The plant situated at Gujarat, started commercial production in April 1988.

Its segments include Steel Tubes, Wind Power and Others. Its products are supplied to the
original equipment manufacturers of the automotive sector, farm equipment manufacturers,
construction equipment manufacturers, refrigerator manufacturers and other engineering
industries. It also operates in the power sector through windmills installed in Maharashtra and
Gujarat.

The organization has given due importance to developing reliable quality systems.
Company's quality system has been certified as per ISO/TS 16949 : 2009 as well as ISO
9001: 2008 by M/S TUV. The organization's philosophy is to aim at continuous growth by
giving priority to customer satisfaction through assured product quality and use of state of art
technology.

Mission –

To continually improve our products and processes through State of the art Technology and
empowerment of Human Resources with the aim to continue meeting Global standards on
Quality, Cost and Delivery.

Vision –

To establish as one of the top 10 globally admired companies manufacturing small diameter
seamless & welded Tubes.

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Products & Services

Gandhi Special Tubes Ltd. is manufacturing Cold Formed Tube Nuts for Fuel Injection Tube
Assemblies, Hydraulic & other Tube Assemblies. This was a pioneering effort in India as
hitherto tube nuts were being manufactured by machining.

The various products of Gandhi Special Tube Ltd. are as follows :

S.No. Product Name Logo/Image of the Same

1. Cold Drawn Bright Annealed
Seamless Tubes

2. Precision Electric Resistance Welded

Tubes

3. Cold Formed Coupling Nuts

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 4. High Pressure Diesel Fuel Injection
Tube

Board of Directors (BoD)

 Manhar G Gandhi – CEO  Dharmen B Shah – Director

 Manhar G Gandhi – Chairman &  Jayesh M Gandhi – Director
Managing Director  Kawas N Warden – Director
 Bhupatrai G Gandhi – Joint  Jeegeesha G Shroff – Secretary
Managing Director  Shobhana Rajan Vartak – Chief
 Bhavi Jatin Koradia – Director Financial Officer

Some Major Competitors

 Bharat Forge  Srikalahasthi

 Electrosteel St  Electrosteel
 Ratnamani Metal  Geekay Wires
 Welspun Corp  Kalyani Forge

SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an
incredibly simple, yet powerful tool to help you develop your business strategy, whether
you’re building a startup or guiding an existing company.

Strengths and weaknesses are internal to your company—things that you have some control
over and can change. Examples include who is on your team, your patents and intellectual
property, and your location.

Opportunities and threats are external—things that are going on outside your company, in the
larger market. You can take advantage of opportunities and protect against threats, but you

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can’t change them. Examples include competitors, prices of raw materials, and customer
shopping trends.

A SWOT analysis organizes your top strengths, weaknesses, opportunities, and threats into
an organized list and is usually presented in a simple two-by-two grid.

SWOT Analysis of Gandhi Special Tubes Ltd. –

Gandhi Special Tubes Ltd’s Strength – Internal Strategic Factors

1. Company with No Debt

2. Company with Zero Promoter Pledge

Gandhi Special Tubes Ltd’s Weakness – Internal Strategic Factors

1. Negative Breakdown Second Support (LTP < S2)

2. Degrowth in Revenue and Profit
3. Decline in Net Profit (QoQ)
4. Decline in Quarterly Net Profit (YoY)
5. Degrowth in Quarterly Revenue and Profit in Recent Results
6. Declining profits every quarter for the past 3 quarters
7. Major fall in TTM Net Profit
8. Recent Results : Fall in Quarterly Revenue and Net Profit (YoY)
9. Recent Results: Declining Operating Profit Margin and Net Profits (YoY)

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Gandhi Special Tubes Ltd’s Opportunities – External Strategic Factors

1. Rising Delivery Percentage Compared to Prey Day

2. Volume Shockers

Gandhi Special Tubes Ltd’s Threats – External Strategic Factors

1. Degrowth in Revenue Profits, Profits and Opertaing Profits Margin in Recent Results
(QoQ)
2. Increasing Trend in Non-Operating Income

Company’s Balance Sheet

A company's balance sheet, also known as a "statement of financial position," reveals the
firm's assets, liabilities and owners' equity (net worth). The balance sheet, together with the
income statement and cash flow statement, make up the cornerstone of any
company's financial statements.

Comparative Financial Analysis (Balance Sheet & Income 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
give an idea of financial position at two or more periods. Any statement prepared in a
comparative form will be covered in comparative statements. From practical point of view,
generally, two financial statements (balance sheet and income statement) are prepared in
comparative form for financial analysis purposes. Not only the comparison of the figures of
two periods but also be relationship between balance sheet and income statement enables an
in depth study of financial position and operative results.

To make comparative analysis we need two things i.e. absolute change and percentage
change. They are calculated as :

(i) Absolute Change = Current Year Amount – Previous Year Amount

Absolute Change
(ii) Percentage Change = Previous × 100
Yea r ′ s Amount

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 Comparative Balance Sheet Analysis of Gandhi Special Tubes Ltd. for 3 Years

as at March 31st, 2020

Particulars Mar, Mar, Mar, Absolute Absolute Percentage Percentage

2020 2019 2018 Change Change of 2019 of 2020
2019 2020
I. EQUITIES AND LIABILITIES
a. Shareholders’ Funds
1) Equity Share Capital 6.46 6.91 6.91 0 -0.45 Nil -6.51 %
2) Reserves and Surplus 140.11 194.14 170.32 23.82 -54.03 13.99 % -27.83 %
b. Non-Current Liabilities
1) Long Term Borrowings 0 0 0 0 0 Nil Nil
2) Deferred Tax Liabilities [Net] 6.63 8.57 8.06 0.51 -1.94 6.33 % -22.64 %
3) Other Long Term Liabilities 0.3 0 0 0 0.3 Nil 100 %
4) Long Term Provisions 3.27 3.09 3.07 0.02 0.18 0.65 % 5.83 %
c. Current Liabilities
1) Short Term Borrowings 0 0 0 0 0 Nil Nil
2) Trade Payables 1.02 1.73 1.62 0.11 -0.71 6.79 % -41.04 %
3) Other Current Liabilities 3.48 6.03 6.83 -0.8 -2.55 -11.71 % -42.29 %
4) Short Term Provisions 0.43 0.4 0.58 -0.18 0.03 -31.03 % 7.50 %
Total 161.7 220.87 197.4 23.47 -59.17 11.89 % -26.79 %
II. ASSETS
a. Non-Current Assets
1) Tangible Assets 48.4 51.26 51.39 -0.13 -2.86 -0.25 % -5.58 %
2) Intangible Assets 0 0.03 0 0.03 -0.03 100 % -100 %
3) Capital Work-In-Progress 0 0 0 0 0 Nil Nil
4) Other Assets 0 0 0 0 0 Nil Nil
b. Fixed Assets
1) Non-Current Investments 38.51 72.53 80.54 -8.01 -34.02 -9.95 % -46.90 %
2) Deferred Tax Assets [Net] 0 0 0 0 0 Nil Nil
3) Long Term Loans And
0 0 0 0 0 Nil Nil
Advances
4) Other Non-Current Assets 0.07 0.05 0.06 -0.01 0.02 -16.67 % 40 %
c. Current Assets
1) Current Investments 30.35 47.37 18.33 29.04 -17.02 158.43 % -35.93 %
2) Inventories 25.22 26.94 20.03 6.91 -1.72 34.50 % -6.38 %
3) Trade Receivables 14.72 15.38 19.45 -4.07 -0.66 -20.93 % -4.29 %
4) Cash And Cash Equivalents 2.11 3.52 4.53 -1.01 -1.41 -22.30 % -40.06 %
5) Short Term Loans And
0.76 0.8 0.65 0.15 -0.04 23.08 % -5 %
Advances
6) Other Current Assets 1.56 3.01 2.41 0.6 -1.45 24.90 % -48.17 %
Total 161.7 220.87 197.4 23.47 -59.17 11.89 % -26.79 %

(All Figures in Rupees & in Crores)

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Interpretation for Year Ended 2019–

a) The comparative balance sheet of the company reveals that during 2019 there has
been a decrease in fixed assets of Rs. 0.11 Crores i.e. (0.21%) while long-term
liabilities to outsiders have relatively not been raised and there is no change in equity
share capital. This fact depicts that the policy of the company is does not purchase
fixed assets from the long-term sources of finance thereby affecting the working
capital.
b) The current assets have increased by Rs. 31.61 Crores i.e. 48.33% and cash has
decreased by Rs. 1.01 Crores. On the other hand, there has been an increase in
inventories amounting to Rs. 6.91 Crores. The current liabilities have decreased only
by Rs. 0.88 Crores i.e. (9.73%). This further confirms that the company has not raised
long-term finances at all and has good number current assets resulting into an
improvement in the liquidity position of the company.
c) Reserves and surpluses have increased from Rs. 170.32 Crores to Rs. 194.14 Crores
i.e., 28.32 % which shows that the company has created more reserves and surpluses
for the payment of dividends to shareholders either in cash or by the issue of bonus
shares.
d) The overall financial position of the company is satisfactory.

Interpretation for Year Ended 2020–

a) The comparative balance sheet of the company reveals that during 2020 there has
been decrease in fixed assets of Rs. 2.88 Crores i.e. (5.62%) while long-term
liabilities to outsiders have relatively not been raised and there is no change in equity
share capital. This fact depicts that the policy of the company is does not purchase
fixed assets from the long-term sources of finance thereby affecting the working
capital.
b) The current assets have decreased by Rs. 22.3 Crores i.e. (22.99%) and cash has
decreased by Rs 1.41 Crores. On the other hand, there has been a decrease in
inventories amounting to Rs. 1.72 Crores. The current liabilities have decreased only
by Rs. 3.24 Crores i.e. (37.91%). This further confirms that the company has not
raised long-term finances at all and has sufficient current assets resulting into an
improvement in the liquidity position of the company.
c) Reserves and surpluses have decreased from Rs. 194.14 Crores to Rs. 140.11 Crores
i.e., (27.83 %) which shows that the company has utilized reserves and surpluses for
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 the payment of dividends to shareholders either in cash or by the issue of bonus
shares.
d) The overall financial position of the company is satisfactory.

Common Size Balance Sheet

A common size balance sheet allows for the relative percentage of each asset, liability, and
equity account to be quickly analyzed. Any single asset line item is compared to the value of
total assets. Likewise, any single liability is compared to the value of total liabilities, and any
equity account is compared to the value of total equity. For this reason, each major
classification of account will equal 100%, as all smaller components will add up to the major
account classification. Common size balance sheets are used by internal and external analysts
and are not a reporting requirement of generally accepted accounting principles (GAAP).

Common Size Balance Sheet Analysis of Gandhi Special Tubes Ltd. for 3 Years

as at March 31st, 2020

Particulars Mar, Mar, Mar, Percentage Percentage Percentage

2020 2019 2018 2018 2019 2020
I. EQUITIES AND LIABILITIES
a. Shareholders’ Funds
1) Equity Share Capital 6.46 6.91 6.91 3.50% 3.13% 4.00%
2) Reserves and Surplus 140.11 194.14 170.32 86.28% 87.90% 86.65%
b. Non Current Liabilities
1) Long Term Borrowings 0 0 0 Nil Nil Nil
2) Deferred Tax Liabilities [Net] 6.63 8.57 8.06 4.08% 3.88% 4.10%
3) Other Long Term Liabilities 0.3 0 0 Nil Nil 0.19%
4) Long Term Provisions 3.27 3.09 3.07 1.56% 1.40% 2.02%
c. Current Liabilities
1) Short Term Borrowings 0 0 0 Nil Nil Nil
2) Trade Payables 1.02 1.73 1.62 0.82% 0.78% 0.63%
3) Other Current Liabilities 3.48 6.03 6.83 3.46% 2.73% 2.15%
4) Short Term Provisions 0.43 0.4 0.58 0.29% 0.18% 0.27%
Total 161.7 220.87 197.4 100% 100% 100%
II. ASSETS
a. Non-Current Assets
1) Tangible Assets 48.4 51.26 51.39 26.03% 23.21% 29.93%

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2) Intangible Assets 0 0.03 0 Nil 0.01% Nil
3) Capital Work-In-Progress 0 0 0 Nil Nil Nil
4) Other Assets 0 0 0 Nil Nil Nil
a. Fixed Assets
1) Non-Current Investments 38.51 72.53 80.54 40.80% 32.84% 23.82%
2) Deferred Tax Assets [Net] 0 0 0 Nil Nil Nil
3) Long Term Loans And 0 0 0 Nil Nil Nil
Advances
4) Other Non-Current Assets 0.07 0.05 0.06 0.03% 0.02% 0.04%
b. Current Assets
1) Current Investments 30.35 47.37 18.33 9.29% 21.45% 18.77%
2) Inventories 25.22 26.94 20.03 10.15% 12.20% 15.60%
3) Trade Receivables 14.72 15.38 19.45 9.85% 6.96% 9.10%
4) Cash And Cash Equivalents 2.11 3.52 4.53 2.29% 1.59% 1.30%
5) Short Term Loans And 0.76 0.8 0.65 0.33% 0.36% 0.47%
Advances
6) Other Current Assets 1.56 3.01 2.41 1.22% 1.36% 0.96%
Total 161.7 220.87 197.4 100% 100% 100%

(All Figures in Rupees & in Crores)

Interpretation –

a) After looking at the common size balance sheet of Gandhi Special Tubes Ltd., it can
be interpreted that the reserves and surplus have increased to 87.90% in year 2018 and
again has been decreased to 86.65% in 2020 which shows that in the year ending 2019
reveres and surplus has been created whereas by the end of the year 2020 it has
decreased, the possible reason for this could be that it has been utilized for making
payments.
b) On comparison it was also analyzed that there was very little difference of Total
Current Liabilities, Total Non-Current Assets and Total Current Assets though they
were fluctuating a bit. This means that the company believes in playing safe and is not
willing to take the risks or making changes in the company’s assets.

Income Statement

An income statement is a financial statement that shows you how profitable your business
was over a given reporting period. It shows your revenue, minus your expenses and losses. It
is also known as the profit and loss statement or the statement of revenue and expenses.

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 Comparative Income Statement

A comparative income statement is a document which is used to compare a particular

financial statement with prior period statements. Previous financials are presented alongside
the latest figures in side-by-side columns, enabling investors to identify trends, track a
company's progress and compare it with industry rivals.

Comparative Income Statement Analysis of Gandhi Special Tubes Ltd for 3 Years

as at March 31st, 2020

Absolute Absolute
Mar, Mar, Mar, Percentage Percentage
Particulars Change Change
2020 2019 2018 2019 2020
2019 2020
I. INCOME
Revenue from Operations [Gross] 80.94 118.27 113.52 4.75 -37.33 4.18% -31.56%
Less: Excise/Service Tax/Other
0 0 3.34 -3.34 0 -100.00% Nil
Levies
Revenue from Operations [Net] 80.94 118.27 110.18 8.09 -37.33 7.34% -31.56%
Total Operating Revenue 80.94 122.91 113.93 8.98 -41.97 7.88% -34.15%
Other Income 5.71 7.71 8.24 -0.53 -2 -6.43% -25.94%
Total Revenue 86.65 130.62 122.18 8.44 -43.97 6.91% -33.66%
II. EXPENSES
Cost Of Materials Consumed 30.02 43.76 36.5 7.26 -13.74 19.89% -31.40%
Operating And Direct Expenses 0 0 0 0 0 Nil Nil
Changes In Inventories Of FG,WIP
-0.11 -1.22 0.66 -1.88 1.11 -284.85% -90.98%
And Stock-In Trade
Employee Benefit Expenses 6.56 8.47 8.34 0.13 -1.91 1.56% -22.55%
Finance Costs 0.04 0 0 0 0.04 Nil 100.00%
Depreciation And Amortisation
3.55 3.69 3.87 -0.18 -0.14 -4.65% -3.79%
Expenses
Other Expenses 20.56 26.17 27.33 -1.16 -5.61 -4.24% -21.44%
Total Expenses 60.62 80.86 76.7 4.16 -20.24 5.42% -25.03%
III. Profit Before Tax (I–II) 26.03 49.75 45.47 4.28 -23.72 9.41% -47.68%
IV. TAX EXPENSES
Current Tax 4.65 10.68 13.2 -2.52 -6.03 -19.09% -56.46%
Less: MAT Credit Entitlement 0 0 0 0 0 Nil Nil
Deferred Tax 0 0.44 -1.29 1.73 -0.44 -134.11% -100%
Tax For Earlier Years 0 0 0 0 0 Nil Nil
Total Tax Expenses 4.65 11.12 11.91 -0.79 -6.47 -6.63% -58.18%
V. Profit After Tax (III – IV) 21.37 38.63 33.57 5.06 -17.26 15.07% -44.68%

(All Figures in Rupees & in Crores)

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Interpretation–

a) The comparative income statement of the Gandhi Special Tubes Ltd. given above
reveals that there has been a decrease in cost of materials consumed by Rs. 30.02
Crores i.e. 31.40% in 2020 as compared to 2019.
b) It also reveals that there has been decrease in net sales of 33.66% in 2020 whereas in
the year 2019 the percentage of sales was good, it was around 6.91% while the cost of
goods sold has increased disproportionately by 5.42% which resulted in a decrease of
gross profit. The company needs to look into the causes of increase in cost of goods
sold and control the same.
c) Depreciation and Amortization expenses have also been decreased by 4.65% in 2020
and 3.79% in 2019 respectively. A huge amount of fall in taxes can be still observed
amounting to Rs.0.79 Crores in 2019 and Rs. 6.47 Crores in 2020. The company was
not able to much profit in the year 2019, the difference between the profits of last year
was of Rs. 5.07 Crores. It can simply be unsderstood that the profit in 2019 was
increased by 15.07% as compared to 2018. And in 2020 the company was in loss of
Rs.17.26 Crores i.e. 44.68% which is a major point to be worried as compare to 2019.

This further confirms that the company was in loss and it needs to take the effective steps at
the earliest to retain themselves in the growing market.

Common Size Income Statement

A common size income statement is an income statement in which each line item is
expressed as a percentage of the value of revenue or sales. It is used for vertical analysis, in
which each line item in a financial statement is represented as a percentage of a base figure
within the statement.

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 Common Size Income Statement Analysis of Gandhi Special Tubes Ltd for 3 Years

as at March 31st, 2020

Mar, Mar, Mar, Percentage Percentage Percentage

Particulars
2020 2019 2018 2018 2019 2020
I. INCOME
Revenue from Operations [Gross] 80.94 118.27 113.52 92.91% 90.55% 93.41%
Less: Excise/Sevice Tax/Other Levies 0 0 3.34 2.73% Nil Nil
Revenue from Operations [Net] 80.94 118.27 110.18 90.18% 90.55% 93.41%
Total Operating Revenue 80.94 122.91 113.93 93.25% 94.10% 93.41%
Other Income 5.71 7.71 8.24 6.74% 5.90% 6.59%
Total Revenue 86.65 130.62 122.18 100% 100% 100%
II. EXPENSES
Cost Of Materials Consumed 30.02 43.76 36.5 29.87% 33.50 34.65%
Operating And Direct Expenses 0 0 0 Nil Nil Nil
Changes In Inventories Of FG,WIP And
-0.11 -1.22 0.66 0.54% -0.93 -0.13%
Stock-In Trade
Employee Benefit Expenses 6.56 8.47 8.34 6.83% 6.48 7.57%
Finance Costs 0.04 0 0 Nil Nil 0.5%
Depreciation And Amortisation Expenses 3.55 3.69 3.87 3.17% 2.82 4.10%
Other Expenses 20.56 26.17 27.33 22.37% 20.04 23.73%
Total Expenses 60.62 80.86 76.7 62.78% 61.90 69.96%
III. Profit Before Tax (I–II) 26.03 49.75 45.47 37.22% 38.09 30.04%
IV. TAX EXPENSES
Current Tax 4.65 10.68 13.2 10.80% 8.18 5.37%
Less: MAT Credit Entitlement 0 0 0 Nil Nil Nil
Deferred Tax 0 0.44 -1.29 -1.06% 0.34 Nil
Tax For Earlier Years 0 0 0 Nil Nil Nil
Total Tax Expenses 4.65 11.12 11.91 9.75% 8.51% 5.37%
V. Profit After Tax (III – IV) 21.37 38.63 33.57 27.48% 29.57% 24.66%

(All Figures in Rupees & in Crores)

Interpretation–

a) Looking at the common size income statement of Gandhi Special Tubes Ltd., we are
able to analyze some major key trends of the company.
b) Firstly, the expenses of the company are increasing every year, which is not a good
point. In year 2018 the percentage of expenses was 62.18, in 2019 it was 61.90 and in
2020 it was 69.96. A slight decline was observed in year 2019 and in year 2020 there
was a major hike in the increase of percentage of expenses as compared to 2019.
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c) Its expenses are amounting to more than 80% of its total revenue.
d) Second, the profit for the company equals almost nothing. They are able just to earn
around 30% of net profit. Due to huge expenses, they are unable to save anything in
all the 3 years. It is good a point for the company that it is not facing any loss in any
year.
e) There is a broad scope of expansion, only if it continues its efforts and minimizes its
expenses.

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