A SUMMER INTERNSHIP REPORT

ON
FINANCIAL STATEMENT ANALYSIS, MIS AND FINANCIAL KPIs
AT
HAPPY ORDER
RANCHI

A Report Submitted in partial fulfillment of the Bachelor’s Degree in Business

Administration
(St. Xavier’s College Ranchi)

By
ISHA SNEHAL
Exam Roll No. 20PBBA046726 Session. (2020 – 2023)

Department of BBA
St. Xavier’s College- 834001
Ranchi

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 ACKNOWLEDGEMENT

There are a lot of people I would like to thank for the successful completion of the project.
I would like to express my gratitude to MISS SAKSHI SRIVASTAVA (Director, Happy Order)
for giving me the opportunity to do the project work at Happy Order. I thank MR. SAURAV
KANT (Finance Head, Happy Order) for providing me with all the support, guidance and his
valuable time due to which I was able to complete the project properly and on time.
Next, I would like to thank our project head SANDEEP SIR, for his able guidance and support. I
would also like to extend my gratitude to MR ABHIJIT DEY (HOD, Department of BBA) for
his guidance for successful completion of the project.
Last but not the least, I would like to thank my parents, siblings and friends whose support was
always there with me.

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 CERTIFICATE

This is to certify that Isha Snehal, Roll No.–2058, Exam Roll No.-20PBBA046726, Semester ‘V’
has completed the project report on Financial Statements Analysis, MIS and Financial KPIs at
Happy Order, Ranchi in partial fulfilment of the requirement for a degree of Bachelor of
Business Administration (BBA).

PROF. ABHIJIT DEY

HEAD OF DEPARTMENT
DEPARTMENT OF BBA
ST. XAVIER’S COLLEGE, RANCHI

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CERTIFICATE OF THE COMPANY

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 CERTIFICATE OF APPROVAL

This is to certify that the undersigned have assessed and evaluated the project on Financial
Statements Analysis, MIS and Financial KPIs submitted by Isha Snehal of part-III (Semester v)
for the academic year 2022-2023. This project is original to the best of our knowledge and has
been accepted for Internal Assessment.

INTERNAL EXAMINER EXTERNAL EXAMINER

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 DECLARATION

I ISHA SNEHAL, a student of BBA (Part-III) Class Roll No.- 2058, Exam Roll No.-
20PBBA046726 hereby declare that the project report on ‘Financial Statements Analysis, MIS
and Financial KPIs’ is submitted by me for Semester ‘V’ of the academic year 2022-2023, is
based on actual work carried out by me under the guidance of Miss Sakshi Srivastava, Director,
Mr. Saurav Kant, Finance head, Happy Order and Prof. Abhijit Dey. I further state that this work
is original and not submitted anywhere else for any examination.

(ISHA SNEHAL)
Name and signature of the student

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 TABLE OF CONTENTS

INDEX PAGE
NO.
CHAPTER 1: INTRODUCTION 9-22
1.1 Introduction to financial statements analysis
1.2 Management information system
1.3 Introduction to financial Key Performance
Indicators

CHAPTER 2: FACTORS TO BE STUDIED UNDER THE TOPIC 23-28

2.1Cashflow Statement
2.2 Ratio Analysis
CHAPTER 3: ABOUT THE ORGANISATION 29-31
3.1Company profile
3.2 Key highlights
3.3 Mission
CHAPTER 4: RESEARCH STUDY 32-45
4.1 Objectives and scope of the study
4.2 Research problem and design
4.3 Data collection method
4.4 Research measuring tools
4.5 Research methodology adapted for the study
4.6 Steps involved
4.7 SWOT Analysis

CHAPTER 5: DATA INTERPRETATION, TESTING OF 46-63

HYPOTHESIS AND SUGGESTIONS
5.1 Ratio Analysis and data interpretation
5.2 Hypothesis testing
5.3 Suggestions
CHAPTER 6: BIBLIOGRAPHY 64-65

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 EXECUTIVE SUMMARY

Financial statement analysis is the process of analyzing a company’s financial statements for
decision-making purposes. External stakeholders use it to understand the overall health of an
organization and to evaluate financial performance and business value. Internal constituents use
it as a monitoring tool for managing the finances. Ratio analysis is a quantitative method of
gaining insight into a company's liquidity, operational efficiency, and profitability by studying its
financial statements such as the balance sheet and income statement. Ratio analysis is a
cornerstone of fundamental equity analysis.
A management information system is an information system used for decision-making, and for
the coordination, control, analysis, and visualization of information in an organization. The study
of the management information systems involves people, processes and technology in an
organizational context.
Financial KPIs (key performance indicators) are metrics organizations use to track, measure, and
analyze the financial health of the company. These financial KPIs fall under a variety of
categories, including profitability, liquidity, solvency, efficiency, and valuation.

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CHAPTER 1-INTRODUCTION

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INTRODUCTION TO FINANCIAL ANALYSIS, MIS AND FINANCIAL KPIs

1.1 FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is the process of analyzing a company’s financial statements for
decision-making purposes. External stakeholders use it to understand the overall health of an
organization and to evaluate financial performance and business value. Internal constituents use
it as a monitoring tool for managing the finances.
The financial statements of a company record important financial data on every aspect of a
business’s activities. As such, they can be evaluated on the basis of past, current, and projected
performance.

In general, financial statements are centered around generally accepted accounting principles
(GAAP) in the United States. These principles require a company to create and maintain three
main financial statements: the balance sheet, the income statement, and the cash flow statement.
Public companies have stricter standards for financial statement reporting. Public companies
must follow GAAP, which requires accrual accounting.

Private companies have greater flexibility in their financial statement preparation and have the
option to use either accrual or cash accounting.

Several techniques are commonly used as part of financial statement analysis. Three of the most
important techniques are horizontal analysis, vertical analysis and ratio analysis. Horizontal
analysis compares data horizontally, by analyzing values of line items across two or more years.
Vertical analysis looks at the vertical effects that line items have on other parts of the business
and the business’s proportions. Ratio analysis uses important ratio metrics to calculate statistical
relationships.

TYPES OF FINANCIAL STATEMENTS

Companies use the balance sheet, income statement, and cash flow statement to manage the
operations of their business and to provide transparency to their stakeholders. All three

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statements are interconnected and create different views of a company’s activities and
performance.

Balance Sheet

The balance sheet is a report of a company’s financial worth in terms of book value. It is broken
into three parts to include a company’s assets, liabilities, and shareholder equity. Short-term
assets such as cash and accounts receivable can tell a lot about a company’s operational
efficiency; liabilities include the company’s expense arrangements and the debt capital it is
paying off; and shareholder equity includes details on equity capital investments and retained
earnings from periodic net income. The balance sheet must balance assets and liabilities to
equal shareholder equity. This figure is considered a company’s book value and serves as an
important performance metric that increases or decreases with the financial activities of a
company.

The term balance sheet refers to a financial statement that reports a company's assets, liabilities,
and shareholder equity at a specific point in time. Balance sheets provide the basis for
computing rates of return for investors and evaluating a company's capital structure. In short,
the balance sheet is a financial statement that provides a snapshot of what a company owns and
owes, as well as the amount invested by shareholders. Balance sheets can be used with other
important financial statements to conduct fundamental analysis or calculate financial ratios.

The balance sheet provides an overview of the state of a company's finances at a moment in
time. It cannot give a sense of the trends playing out over a longer period on its own. For this
reason, the balance sheet should be compared with those of previous periods. Investors can get a
sense of a company's financial wellbeing by using a number of ratios that can be derived from a
balance sheet, including the debt-to-equity ratio and the acid-test ratio, along with many others.
The income statement and statement of cash flows also provide valuable context for assessing a
company's finances, as do any notes or addenda in an earnings report that might refer back to
the balance sheet.

Components of a Balance Sheet

Assets

Accounts within this segment are listed from top to bottom in order of their liquidity. This is the
ease with which they can be converted into cash. They are divided into current assets, which can
be converted to cash in one year or less; and non-current or long-term assets, which cannot.

Liabilities

A liability is any money that a company owes to outside parties, from bills it has to pay to
suppliers to interest on bonds issued to creditors to rent, utilities and salaries. Current liabilities
are due within one year and are listed in order of their due date. Long-term liabilities, on the
other hand, are due at any point after one year.

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Shareholder Equity

Shareholder equity is the money attributable to the owners of a business or its shareholders. It is
also known as net assets since it is equivalent to the total assets of a company minus its
liabilities or the debt it owes to non-shareholders.

Retained earnings are the net earnings a company either reinvests in the business or uses to pay
off debt. The remaining amount is distributed to shareholders in the form of dividends .

Importance of a Balance Sheet

Regardless of the size of a company or industry in which it operates, there are many benefits of
a balance sheet,

Balance sheets determine risk. This financial statement lists everything a company owns and all
of its debt. A company will be able to quickly assess whether it has borrowed too much money,
whether the assets it owns are not liquid enough, or whether it has enough cash on hand to meet
current demands.

Balance sheets are also used to secure capital. A company usually must provide a balance sheet
to a lender in order to secure a business loan. A company must also usually provide a balance
sheet to private investors when attempting to secure private equity funding. In both cases, the
external party wants to assess the financial health of a company, the creditworthiness of the
business, and whether the company will be able to repay its short-term debts.

Managers can opt to use financial ratios to measure the liquidity, profitability, solvency, and
cadence (turnover) of a company using financial ratios, and some financial ratios need numbers
taken from the balance sheet. When analyzed over time or comparatively against competing
companies, managers can better understand ways to improve the financial health of a company.

Last, balance sheets can lure and retain talent. Employees usually prefer knowing their jobs are
secure and that the company they are working for is in good health. For public companies that
must disclose their balance sheet, this requirement gives employees a chance to review how
much cash the company has on hand, whether the company is making smart decisions when
managing debt, and whether they feel the company's financial health is in line with what they
expect from their employer.

The Balance Sheet Formula

A balance sheet is calculated by balancing a company's assets with its liabilities and equity. The
formula is: total assets = total liabilities + total equity.

Total assets is calculated as the sum of all short-term, long-term, and other assets. Total
liabilities is calculated as the sum of all short-term, long-term and other liabilities. Total equity

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is calculated as the sum of net income, retained earnings, owner contributions, and share of
stock issued.

Income Statement

The income statement breaks down the revenue that a company earns against the expenses
involved in its business to provide a bottom line, meaning the net profit or loss. The income
statement is broken into three parts that help to analyze business efficiency at three different
points. It begins with revenue and the direct costs associated with revenue to identify gross
profit. It then moves to operating profit, which subtracts indirect expenses like marketing costs,
general costs, and depreciation. Finally, after deducting interest and taxes, the net income is
reached.

Basic analysis of the income statement usually involves the calculation of gross profit margin,
operating profit margin, and net profit margin, which each divide profit by revenue. Profit
margin helps to show where company costs are low or high at different points of the operations.

The Income Statement is one of a company’s core financial statements that shows their profit
and loss over a period of time. The profit or loss is determined by taking all revenues and
subtracting all expenses from both operating and non-operating activities .The income statement
is one of three statements used in both corporate finance (including financial modeling) and
accounting. The statement displays the company’s revenue, costs, gross profit, selling and
administrative expenses, other expenses and income, taxes paid, and net profit in a coherent and
logical manner.

The statement is divided into time periods that logically follow the company’s operations. The
most common periodic division is monthly (for internal reporting), although certain companies
may use a thirteen-period cycle. These periodic statements are aggregated into total values for
quarterly and annual results .This statement is a great place to begin a financial model, as it
requires the least amount of information from the balance sheet and cash flow statement. Thus,
in terms of information, the income statement is a predecessor to the other two core statements.

Components of an Income Statement

The income statement may have minor variations between different companies, as expenses and
income will be dependent on the type of operations or business conducted. However, there are
several generic line items that are commonly seen in any income statement.

The most common income statement items include:

Revenue/Sales: Sales Revenue is the company’s revenue from sales or services, displayed at the
very top of the statement. This value will be the gross of the costs associated with creating the
goods sold or in providing services. Some companies have multiple revenue streams that add to a
total revenue line.

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Cost of Goods Sold (COGS): Cost of Goods Sold (COGS) is a line-item that aggregates the
direct costs associated with selling products to generate revenue. This line item can also be
called Cost of Sales if the company is a service business. Direct costs can include labor, parts,
materials, and an allocation of other expenses such as depreciation (see an explanation of
depreciation below).

Gross Profit: Gross Profit Gross profit is calculated by subtracting Cost of Goods Sold (or Cost
of Sales) from Sales Revenue.

Marketing, Advertising, and Promotion Expenses: Most businesses have some expenses related
to selling goods and/or services. Marketing, advertising, and promotion expenses are often
grouped together as they are similar expenses, all related to selling.
General and Administrative (G&A) Expenses: SG&A Expenses include the selling, general, and
administrative section that contains all other indirect costs associated with running the business.
This includes salaries and wages, rent and office expenses, insurance, travel expenses, and
sometimes depreciation and amortization, along with other operational expenses. Entities may,
however, elect to separate depreciation and amortization in their own section.
EBITDA: While not present in all income statements, EBITDA stands for Earnings before
Interest, Tax, Depreciation, and Amortization. It is calculated by subtracting SG&A expenses
(excluding amortization and depreciation) from gross profit.
Depreciation & Amortization Expense: Depreciation and amortization are non-cash expenses
that are created by accountants to spread out the cost of capital assets such as Property, Plant,
and Equipment (PP&E).
Operating Income (or EBIT): Operating Income represents what’s earned from regular business
operations. In other words, it’s the profit before any non-operating income, non-operating
expenses, interest, or taxes are subtracted from revenues. EBIT is a term commonly used in
finance and stands for Earnings Before Interest and Taxes.
Interest: Interest Expense. It is common for companies to split out interest expense and interest
income as a separate line item in the income statement. This is done in order to reconcile the
difference between EBIT and EBT. Interest expense is determined by the debt schedule.
Other Expenses: Businesses often have other expenses that are unique to their industry. Other
expenses may include fulfillment, technology, research and development (R&D), stock-based
compensation (SBC), impairment charges, gains/losses on the sale of investments, foreign
exchange impacts, and many other expenses that are industry or company-specific.
EBT (Pre-Tax Income): EBT stands for Earnings Before Tax, also known as pre-tax income, and
is found by subtracting interest expense from Operating Income. This is the final subtotal before
arriving at net income.
Income Taxes: Income Taxes refer to the relevant taxes charged on pre-tax income. The total tax
expense can consist of both current taxes and future taxes.
Net Income: Net Income is calculated by deducting income taxes from pre-tax income. This is
the amount that flows into retained earnings on the balance sheet, after deductions for any
dividends.

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Cash Flow Statement

The cash flow statement provides an overview of the company’s cash flows from operating
activities, investing activities, and financing activities. Net income is carried over to the cash
flow statement, where it is included as the top line item for operating activities. Like its title,
investing activities include cash flows involved with firm-wide investments. The financing
activities section includes cash flow from both debt and equity financing. The bottom line
shows how much cash a company has available.

Free Cash Flow and Other Valuation Statements

Companies and analysts also use free cash flow statements and other valuation statements to
analyze the value of a company. Free cash flow statements arrive at a net present value by
discounting the free cash flow that a company is estimated to generate over time. Private
companies may keep a valuation statement as they progress toward potentially going public.

FINANCIAL PERFORMANCE

Financial statements are maintained by companies daily and used internally for business
management. In general, both internal and external stakeholders use the same corporate finance
methodologies for maintaining business activities and evaluating overall financial performance.

When doing comprehensive financial statement analysis, analysts typically use multiple years of
data to facilitate horizontal analysis. Each financial statement is also analyzed with vertical
analysis to understand how different categories of the statement are influencing results. Finally,
ratio analysis can be used to isolate some performance metrics in each statement and bring
together data points across statements collectively.

Below is a breakdown of some of the most common ratio metrics:

 Balance sheet: This includes asset turnover, quick ratio, receivables turnover, days to
sales, debt to assets, and debt to equity.
 Income statement: This includes gross profit margin, operating profit margin, net profit
margin, tax ratio efficiency, and interest coverage.
 Cash flow: This includes cash and earnings before interest, taxes, depreciation, and
amortization (EBITDA). These metrics may be shown on a per-share basis.
 Comprehensive: This includes return on assets (ROA) and return on equity (ROE), along
with DuPont analysis.

THE ADVANTAGES OF FINANCIAL STSTEMENTS

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Financial statement analysis evaluates a company’s performance or value through a company’s
balance sheet, income statement, or statement of cash flows. By using a number of techniques,
such as horizontal, vertical, or ratio analysis, investors may develop a more nuanced picture of a
company’s financial profile.

What are the different types of financial statement analysis?

Most often, analysts will use three main techniques for analyzing a company’s financial
statements.

First, horizontal analysis involves comparing historical data. Usually, the purpose of horizontal
analysis is to detect growth trends across different time periods.

Second, vertical analysis compares items on a financial statement in relation to each other. For
instance, an expense item could be expressed as a percentage of company sales.

Finally, ratio analysis, a central part of fundamental equity analysis, compares line-item data.
Price-to-earnings (P/E) ratios, earnings per share, or dividend yield are examples of ratio
analysis.

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1.2 MANAGEMENT INFORMATION SYSTEM (MIS)
A Management Information System (MIS) is a system that generates periodical reports of the
financial status of the company. This helps the management to ensure efficient and effective
decision-making. Reports generated by an MIS help to compare budgets and actuals in order to
adjust spending in certain areas. As a Founder, during the initial phase, you may be involved
with the prime activities of your new business.Especially in these early hours, you should think
carefully about putting such systems in place in order to not lose sight of your vision.
Summarised reports generated by the information system will come handy for you to get an
overview of the business, and thus, help make some key decisions based on the information.
To the managers, Management Information System is an implementation of the organizational
systems and procedures. To a programmer it is nothing but file structures and file processing.
However, it involves much more complexity.
The three components of MIS provide a more complete and focused definition,
where System suggests integration and holistic view, Information stands for processed data,
and Management is the ultimate user, the decision makers.
Management information system can thus be analyzed as follows −

Management

Management covers the planning, control, and administration of the operations of a concern. The
top management handles planning; the middle management concentrates on controlling; and the
lower management is concerned with actual administration.

Information

Information, in MIS, means the processed data that helps the management in planning,
controlling and operations. Data means all the facts arising out of the operations of theconcern.
Data is processed i.e. recorded, summarized, compared and finally presented to the management
in the form of MIS report.

System

Data is processed into information with the help of a system. A system is made up of inputs,
processing, output and feedback or control.
Thus MIS means a system for processing data in order to give proper information to the
management for performing its functions.

Definition

Management Information System or 'MIS' is a planned system of collecting, storing, and

disseminating data in the form of information needed to carry out the functions of management.

Objectives of MIS

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The goals of an MIS are to implement the organizational structure and dynamics of the enterprise
for the purpose of managing the organization in a better way and capturing the potential of the
information system for competitive advantage.
Following are the basic objectives of an MIS −
Capturing Data − Capturing contextual data, or operational information that will contribute in
decision making from various internal and external sources of organization.
Processing Data − The captured data is processed into information needed for planning,
organizing, coordinating, directing and controlling functionalities at strategic, tactical and
operational level. Processing data means −
o making calculations with the data
o sorting data
o classifying data and
o summarizing data
Information Storage − Information or processed data need to be stored for future use.
Information Retrieval − The system should be able to retrieve this information from the storage
as and when required by various users.
Information Propagation − Information or the finished product of the MIS should be circulated to
its users periodically using the organizational network.

Characteristics of MIS

Following are the characteristics of an MIS −

 It should be based on a long-term planning.
 It should provide a holistic view of the dynamics and the structure of the
organization.
 It should work as a complete and comprehensive system covering all
interconnecting sub-systems within the organization.
 It should be planned in a top-down way, as the decision makers or the
management should actively take part and provide clear direction at the
development stage of the MIS.
 It should be based on need of strategic, operational and tactical information of
managers of an organization.
 It should also take care of exceptional situations by reporting such situations.
 It should be able to make forecasts and estimates, and generate advanced
information, thus providing a competitive advantage. Decision makers can take
actions on the basis of such predictions.
 It should create linkage between all sub-systems within the organization, so that
the decision makers can take the right decision based on an integrated view.
 It should allow easy flow of information through various sub-systems, thus
avoiding redundancy and duplicity of data. It should simplify the operations with
as much practicability as possible.
 Although the MIS is an integrated, complete system, it should be made in such a
flexible way that it could be easily split into smaller sub-systems as and when
required.
 A central database is the backbone of a well-built MIS.

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THE MAIN COMPONENTS OF THE MIS ARE

Budget v/s Actual

Unit Metrics
KPIs
Summary of financial statements.

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1.3 FINANCIAL KEY PERFORMANCE INDICATORS

Keeping a start-up running efficiently is as difficult as starting one from the ground up. For this,
the entrepreneur has to keep himself informed about the performance of his/her venture on a
continuous basis. A business’s ongoing performance can be measured and tracked based on pre-
identified key performance indicators. Key Performance Indicators (KPIs) are measurable and
trackable values that show the performance of the organization with respect to the laid
objectives. In this session, you would be taken through with some Financial KPIs.

An entrepreneur needs to be active in tracking these KPIs to judge the financial performance of
his/her new venture. Financial key performance indicators (KPIs) are select metrics that help
managers and financial specialists analyze the business and measure progress toward strategic
goals. A wide variety of financial KPIs are used by different businesses to help monitor their
success and drive growth. For each company, it’s essential to identify KPIs that are the most
meaningful to its business.

Various financial KPIs which are important to be tracked by an entrepreneur for measuring the
performance of the venture continuously. The most important financial KPIs namely:
BOOKING v/s ACTUAL
Being a forward-looking metric, bookings represent the commitment of a customer to spend
money over a period of time and in return you provide them with the services. The commitment
in most cases is tied to a contract in the moment of the signup/subscription, that can be both be
signed physically or electronically in the case of full self-service platforms. Revenue is a
standard GAAP term and is defined as inflows of assets and/or settlements of liabilities
generated through core operations of a business. Revenue happens when the service is actually
provided. Is the company recognizing that money coming in exchange for its service or product
or not.
GMV v/s REVENUE
GMV means gross merchandise value or gross merchandise volume, usually referring to the
total value of merchandise sold over a given period of time through a customer-to-customer
(C2C) exchange site. Depending on the type of e-commerce site, GMV is the same as gross
revenue. However, for sites like eBay, it is a reflection of the total value of goods sold, but not
the actual revenue the company makes, as a portion of those revenues is for the sellers of the
goods. The actual revenue that eBay makes would be from the fees it charges on the sales.
REVENUE RUN RATE

Revenue Run Rate is an indicator of financial performance that takes a company’s current
revenue in a certain period (a week, month, quarter, etc.) and converts it to an annual figure to
get the full-year equivalent. This metric is often used by rapidly growing companies, as data
that’s even a few months old can understate the current size of the company. Another term for
this is the Sales Run Rate. In general, the run rate uses the current financial information, such as
present sales and present revenue, to forecast performance. As it extrapolates the current
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financial information and performance there is an implied assumption that the present financial
environment will not change significantly in the future.

GROSS PROFIT

Gross profit is the profit a company makes after deducting the costs associated with making and
selling its products, or the costs associated with providing its services. Gross profit will appear
on a company's income statement and can be calculated by subtracting the cost of goods sold
(COGS) from revenue (sales). These figures can be found on a company's income statement.
Gross profit may also be referred to as sales profit as gross income.

LIFETIME VALUE

It’s easier to sell to an existing customer than it is to acquire a new one. For this reason, you want
to ensure that your customers are satisfied with your product or service so that you can retain
them long enough to recoup the investment required to earn their business in the first place. The
last thing you want is for customers to churn so that you continue to scramble for new business.
One of the best ways to mitigate this is by measuring customer lifetime value (CLTV). Doing so
will help your business acquire and retain highly valuable customers, which results in more
revenue over time.

CUSTOMER ACQUISITION COST

Customer Acquisition Cost, or CAC, measures how much an organization spends to acquire new
customers. CAC – an important business metric – is the total cost of sales and marketing efforts,
as well as property or equipment, needed to convince a customer to buy a product or service.

MONTHLY BURN RATE

The burn rate is typically used to describe the rate at which a new company is spending
its venture capital to finance overhead before generating positive cash flow from operations. It
is a measure of negative cash flow. The burn rate is usually quoted in terms of cash spent per
month. For example, if a company is said to have a burn rate of $1 million, it would mean that
the company is spending $1 million per month.

AVERAGE REVENUE PER USER

The Average Revenue Per User (ARPU) quantifies the amount of revenue generated on average
from each customer. The implied ARPU can be calculated by dividing the total amount of
revenue generated by the company by the total number of users (i.e. customers).

CONVERSION RATE

The average number of conversions per ad interaction, shown as a percentage. Conversion rates
are calculated by simply taking the number of conversions and dividing that by the number of
total ad interactions that can be tracked to a conversion during the same time period.

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COHORT ANALYSIS

Cohort analysis is a tool to measure user engagement over time. It helps to know whether user
engagement is actually getting better over time or is only appearing to improve because of
growth. Cohort analysis is a subset of behavioral analytics that takes the data from a given
eCommerce platform, web application, or online game and rather than looking at all users as one
unit, it breaks them into related groups for analysis.

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CHAPTER 2 – FACTORS TO BE STUDIED UNDER THE TOPIC

2.1 CASH FLOW STATEMENT ANALYSIS

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A cash flow statement is an important tool used to manage finances by tracking the cash flow for
an organization. This statement is one of the three key reports (with the income statement and the
balance sheet) that help in determining a company’s performance. It is usually helpful for
making cash forecast to enable short term planning. The cash flow statement shows the source of
cash and helps you monitor incoming and outgoing money. Incoming cash for a business comes
from operating activities, investing activities and financial activities. The statement also informs
about cash outflows, expenses paid for business activities and investment at a given point in
time. The information that you get from the cash flow statement is beneficial for the management
to take informed decisions for regulating business operations. Companies generally aim for a
positive cash flow for their business operations without which the company may have to borrow
money to keep the business going.

Importance of a cash flow statement

For a business to be successful, it should always have sufficient cash. This enables it to pay
back bank loans, buy commodities, or invest to get profitable returns. A business is declared
bankrupt if it doesn’t have enough cash to pay its debts. Here are some of the benefits of a cash
flow statement:
 Gives details about spending: A cash flow statement gives a clear understanding of the
principal payments that the company makes to its creditors. It also shows transactions
which are recorded in cash and not reflected in the other financial statements. These
include purchases of items for inventory, extending credit to customers, and buying
capital equipment.
 Helps maintain optimum cash balance: A cash flow statement helps in maintaining the
optimum level of cash on hand. It is important for the company to determine if too much
of its cash is lying idle, or if there’s a shortage or excess of funds. If there is excess cash
lying idle, then the business can use it to invest in shares or buy inventory. If there is a
shortage of funds, the company can look for sources from where they can borrow funds
to keep the business going.
 Helps you focus on generating cash: Profit plays a key role in the growth of a company
by generating cash. But there are several other ways to generate cash. For instance,
when a company finds a way to pay less for equipment, it is actually generating cash.
Every time it collects receivables from its customers quicker than usual, it
is gaining cash.
 Useful for short-term planning: A cash flow statement is an important tool for controlling
cash flow. A successful business must always have sufficient liquid cash to fulfill short-
term obligations like upcoming payments. A financial manager can analyze incoming
and outgoing cash from past transactions to make crucial decisions. Some situations
where decisions have to be made based on the cash flow include forseeing cash deficit to
pay off debts or establishing a base to request for credit from banks.

Format of a cash flow statement

There are three sections in a cash flow statement: operating activities, investments, and financial
activities.

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Operating activities: Operating activities are those cash flow activities that either generate
revenue or record the money spent on producing a product or service. Operational business
activities include inventory transactions, interest payments, tax payments, wages to employees,
and payments for rent. Any other form of cash flow, such as investments, debts, and dividends
are not included in this section.
The operations section on the cash flow statement begins with recording net earnings, which are
obtained from the net income field on the company’s income statement. This gives an estimate of
the company’s profitability. After this, it lists non-cash items involving operational activities and
convert them into cash items. A business’ cash flow statement should show adequate positive
cash flow for its operational activities. If it doesn’t, the business may find it difficult to manage
its daily business operations.

Investment activities: The second section on the cash flow statement records the gains and
losses caused due to investment in assets like property, plant, or equipment (PPE) thus reflecting
overall change in the cash position for a company. When analysts want to know the company’s
investment on PPE, they check for changes on a cash flow statement.
Capital expenditure is another important line item under investment activities. Capital
Expenditure is the money which a business invests on fixed assets like buildings, vehicles or
land. An increase in Capital Expenditure means the company is investing on future operations.
However, it also shows that there is a decrease in company cash flow. Sometimes a company
may experience negative cash flow due to heavy investment expenditure, but this is not
always an indicator of poor performance, because it may be leading to high capital growth.

Financial activities: The third section on the cash flow statement records the cash flow between
the company and its owners and creditors. Financial activities include transactions involving
debt, equity, and dividends. In these transactions, incoming cash is recorded when capital is
raised (such as from investors or banks), and outgoing cash is recorded when dividends are paid.

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 2.2 RATIO ANALYSIS
Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational
efficiency, and profitability by studying its financial statements such as the balance sheet and
income statement. Ratio analysis is a cornerstone of fundamental equity analysis.
Investors and analysts employ ratio analysis to evaluate the financial health of companies by
scrutinizing past and current financial statements. Comparative data can demonstrate how a
company is performing over time and can be used to estimate likely future performance. This
data can also compare a company's financial standing with industry averages while measuring
how a company stacks up against others within the same sector.

Investors can use ratio analysis easily, and every figure needed to calculate the ratios is found
on a company's financial statements.

Ratios are comparison points for companies. They evaluate stocks within an industry. Likewise,
they measure a company today against its historical numbers. In most cases, it is also important
to understand the variables driving ratios as management has the flexibility to, at times, alter its
strategy to make its stock and company ratios more attractive. Generally, ratios are typically not
used in isolation but rather in combination with other ratios. Having a good idea of the ratios in
each of the four previously mentioned categories will give you a comprehensive view of the
company from different angles and help you spot potential red flags.
Application of Ratio Analysis
The fundamental basis of ratio analysis is to compare multiple figures and derive a calculated
value. By itself, that value may hold little to no value. Instead, ratio analysis must often be
applied to a comparable to determine whether or a company's financial health is strong, weak,
improving, or deteriorating.

Ratio Analysis Over Time

A company can perform ratio analysis over time to get a better understanding of the trajectory of
its company. Instead of being focused on where it is today, the company is more interested doing
this type of analysis is more interested in how the company has performed over time, what
changes have worked, and what risks still exist looking to the future. Performing ratio analysis is
a central part in forming long-term decisions and strategic planning.

To perform ratio analysis over time, a company selects a single financial ratio, then calculates
that ratio on a fixed cadence (i.e. calculating its quick ratio every month). Be mindful of
seasonality and how temporarily fluctuations in account balances may impact month-over-month
ratio calculations. Then, a company analyzes how the ratio has changed over time (whether it is
improving, the rate at which it is changing, and whether the company wanted the ratio to change
over time).

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Ratio Analysis Across Companies
Imagine a company with a 10% gross profit margin. A company may be thrilled with this
financial ratio until it learns that every competitor is achieving a gross profit margin of 25%.
Ratio analysis is incredibly useful for a company to better stand how its performance compares
to similar companies.

To correctly implement ratio analysis to compare different companies, consider only analyzing
similar companies within the same industry. In addition, be mindful how different capital
structures and company sizes may impact a company's ability to be efficient. In addition,
consider how companies with varying product lines (i.e. some technology companies may offer
products as well as services, two different product lines with varying impacts to ratio analysis).

Different industries simply have different ratio expectations. A debt-equity ratio that might be
normal for a utility company that can obtain low-cost debt might be deemed unsustainably high
for a technology company that relies heavier on private investor funding.
Ratio Analysis Against Benchmarks
Companies may set internal targets for what they want their ratio analysis calculations to be
equal to. These calculations may hold current levels steady or strive for operational growth. For
example, a company's existing current ratio may be 1.1; if the company wants to become more
liquid, it may set the internal target of having a current ratio of 1.2 by the end of the fiscal year.

Benchmarks are also frequently implemented by external parties such lenders. Lending
institutions often set requirements for financial health. If these benchmarks are not met, an entire
loan may be callable or a company may be faced with an adjusted higher rate of interest to
compensation for this risk. An example of a benchmark set by a lender is often the debt service
coverage ratio which measures a company's cash flow against it's debt balances.

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Page | 28
CHAPTER 3- ABOUT THE ORGANISATION

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 HAPPY ORDER

3.1 COMPANY PROFILE

Happy Order is a hyper-local on-demand multi delivery service app. By charging a no delivery
fee, Happy Order delivers anything and everything to its users. For instance, if you forgot your
key at your home, if you forgot some important files at home, Happy Order can get them to
your demand. And if you want to buy some grocery from the local market and a shirt from a
store, the on-demand delivery service company will get it for you. Happy Order intends to
connect the consumers with its app based modern technology.

3.2 HAPPY ORDER- KEY HIGHLIGHTS:

App name Happy Order

Category Online consumer services

website www.happyorder.in

Headquarters Ranchi, India

Parent Organization A1 ENTERPRISES

Service Entire Ranchi (hyper local delivery)

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ABOUT THE APP:

Happy order is an online grocery store offering the customers the convenience of shopping
everything that one needs for one's home - be it fresh fruits and vegetables, rice, dal, oil,
packaged food, dairy items, frozen, pet foods, household cleaning items and personal care
products from a single virtual Store.

3.3 MISSION:

Happy Order has tie ups with the shops, restaurants, grocery stores, clothing stores and some
general stores too. The company is providing its on demand delivery services in Ranchi. This
app has turned out to be of great help and convenience to users, who cannot go out themselves
for some reason and those who just don’t want to do shopping and pickup things on their own
and want to shop some products or send over.

Users have the options to order anything they like which is available in a store and happy order
delivery partner will deliver them the products ordered from the app. Some of the examples of
the products that a customer can order using the app- Groceries, food, medicines, toys and
more.

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CHAPTER 4 – RESEARCH STUDY

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 A. OBJECTIVES AND SCOPE OF THE STUDY

The objectives of the study are as follows:

1. To know about the work culture in a startup, the company’s profile and its functioning.
2. To understand and identify the financial requirements and sources of finance of a startup.
3. To analyze the financial statements of the company and know its performance efficiency and
managerial ability.
4. To determine the profitability and performance of Happy Order with the help of important
ratios.
5. To study the importance of using Management Information System.
6. To get an understanding about the various financial Key Performance Indicators.
7. To offer suggestions for better performance of the company.

SCOPE OF THE STUDY

The main scope of the study is to analyze the various financial statements of the company and to
find out its performance on the basis of various financial ratios and thereby to know the financial
position of the organization. Also, to provide conclusions and suggestions thereafter.

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 B. RESEARCH PROBLEM AND DESIGN

RESEARCH PROBLEM
A research problem is defined as an area of concern that requires a meaningful understanding of
a specific topic, a condition, a contradiction, or a difficulty. A research problem means finding
answers to questions or strengthening existing findings to bridge the knowledge gap to solve
problems.
A research problem statement is defined as an issue that needs to be addressed. It is described as
the gap in knowledge about a particular problem or issue. A functional research problem helps
close the gap in knowledge in a field that can lead to more research. An accurate statement to the
problem helps you identify the motive of the research project.
A problem statement in research seeks to achieve the following:

1. Introduce the importance of the topic in the research proposal.

2. Position the problem in an appropriate context.
3. Provide a framework to analyze and report results.

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 RESEARCH DESIGN
The challenges faced while conducting research can all be solved with research design. The
greatest power of research design is that it elevates the efficiency and performance of the
research when tested in a practical setup. Therefore, to incentivize your design or make it reach
the masses, a research design must be at the center of everything. At the start of the research, a
researcher usually chooses the techniques and methodologies they will use for the research
process. The framework of research techniques and tools is called research design. It is
imperative to have a well-designed and structured research design to ensure the research reaches
its goal. Interestingly, experts define research design as the glue that holds the research project
together. Moreover, they exclaim that the right research design helps provide a structure and
direction to the research that yields favorable results. Also, it is believed to be the blueprint of
the research.

Here are the top characteristics of a research design:

Reliability
Different types of research are conducted regularly. In such research, the researcher expects the
research design to formulate questions that evoke similar results every time. And a good research
design is reliable to satiate the researcher’s needs to generate the same results every time.

Validity
There are many ways to measure the results of research. However, with the help of a good
research design, a researcher can select the right measuring tools that help in gauging the
research results and align them with the research objectives to measure its success or failure.
Therefore, the research design’s measuring tools must be valid and reliable enough to generate
favorable results.

Generalized
A good research design draws an outcome that can be applied to a large set of people and is not
limited to sample size or the research group. The more applicable the research results are, the
more the chances of it being accurate. Therefore, a good research design helps prove the
research’s relevance and accuracy.

Neutrality
At the start of every research, a researcher needs to make some assumptions that will be tested
throughout the research. A proper research design ensures that the assumptions are free of bias
and neutral. Furthermore, the data collected throughout the research is based on the assumptions
made at the beginning of the research.

A researcher must be well-versed in different types of research design. Moreover, a clear

understanding of different research design types helps choose the right technique that incites
favorable outcomes. Research design is broadly divided into quantitative and qualitative research
design.
Quantitative research design aims at finding answers to who, what, where, how, and when
through the course of research. Moreover, the outcome of the quantitative research is easy to

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represent in the form of statistics, graphs, charts, and numbers. Qualitative research design aims
at answering the how and why. It uses open-ended questions and helps the subjects express their
views clearly.

Qualitative research is ideal for businesses that aim to understand customers’ behavior and
requirements.

IN THIS STUDY, QUANTITATIVE RESEARCH DESIGN IS USED. UNDER

QUANTITATIVE RESEARCH DESIGN, DESCRIPTIVE RESEARCH DESIGN IS USED.

When conducting a study, researchers are generally trying to find an explanation for the
existence of a phenomenon. They want to understand “why” the phenomenon
occurred. However, before you can identify why a phenomenon took place, it is integral to
answer other questions first. You need to have answers to the “what”, “when”, “how”, and
“where” before you can understand the “why”. This is where descriptive research comes in. The
descriptive research design involves using a range of qualitative and quantitative research
methods to collect data that aids in accurately describing a research problem.

Descriptive research design is a type of research design that aims to obtain information to
systematically describe a phenomenon, situation, or population. More specifically, it helps
answer the what, when, where, and how questions regarding the research problem, rather than
the why. The descriptive method of research can involve the use of many different kinds of
research methods to investigate the variables in question. It predominantly employs quantitative
data, although qualitative data is also used sometimes for descriptive purposes. It is important to
note that in the descriptive method of research, unlike in experimental research, the researcher
does not control or manipulate any variables. Instead, the variables are only identified, observed,
and measured.

The characteristics of the descriptive research design:

1. Quantitative in Nature: Descriptive research involves the collection of quantifiable and

systematic data that can be used for the statistical analysis of the research problem.

2. Uncontrolled Variables: One of the most prominent characteristics of descriptive research is

that, unlike in experimental research, the variables are not controlled or manipulated. Instead,
they are simply identified, observed, and measured.

3. A Basis for Further Research: The data collected in descriptive research provides a base for
further research as it helps obtain a comprehensive understanding of the research question so that
it can be answered appropriately.

4. Cross-sectional Studies: The descriptive method of research is generally carried out through
cross-sectional studies. A cross-sectional study is a type of observational study that involves
gathering information on a variety of variables at the individual level at a given point in time.

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 C. DATA COLLECTION METHOD

In Statistics, data collection is a process of gathering information from all the relevant sources to
find a solution to the research problem. It helps to evaluate the outcome of the problem. The data
collection methods allow a person to conclude an answer to the relevant question. Most of the
organizations use data collection methods to make assumptions about future probabilities and
trends. Once the data is collected, it is necessary to undergo the data organization process.
The main sources of the data collections methods are “Data”. Data can be classified into two
types, namely primary data and secondary data. The primary importance of data collection in any
research or business process is that it helps to determine many important things about the
company, particularly the performance. So, the data collection process plays an important role in
all the streams. Depending on the type of data, the data collection method is divided into two
categories namely,

 Primary Data Collection methods

 Secondary Data Collection methods

IN THIS PROJECT, SECONDARY DATA HAS BEEN USED.

Secondary data is an important source of information and can provide valuable knowledge and
insight into a broad range of issues. Collecting information about different community aspects
will help explain factors that influence the community’s health. Types of secondary data can
often be categorized by specific area or population, such as Demographics, Health Behaviors,
Social Determinants of Health, or Environmental Factors.

Steps to collecting secondary data include:

1. Determine what the purpose of the data collection is and what type of information is necessary to
collect to meet that purpose

2. Determine who would likely have collected the information you are seeking.

3. Identify what data sources are available to gather the necessary information. There are multiple
data sources available, depending on the purpose of the data collection.

Methods of secondary data collection are:

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 Secondary data is data collected by someone other than the actual user. It means that the
information is already available, and someone analyses it. The secondary data includes
magazines, newspapers, books, journals, etc. It may be either published data or unpublished data.
Published data are available in various resources including:

 Government publications
 Public records
 Historical and statistical documents
 Business documents
 Technical and trade journals
Unpublished data includes

 Diaries
 Letters
 Unpublished biographies, etc.

In this study, the data collected includes all the financial statements of the company
collected from the finance department of the organization.

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 D. RESEARCH MEASURING TOOLS
Measurement tools are instruments used by researchers and practitioners to aid in the assessment
or evaluation of subjects, clients or patients. The instruments are used to measure or collect data
on a variety of variables ranging from physical functioning to psychosocial wellbeing.
THE RESEARCH MEASURING TOOLS USED HERE ARE RATIO ANALYSIS AND
CASHFLOW STATEMENT.

RATIO ANALYSIS
Ratio analysis is important for the company to analyze its financial position, liquidity,
profitability, risk, solvency, efficiency, operations effectiveness, and proper utilization of funds.
It also indicates the trend or comparison of financial results helpful for decision making for
investment by company shareholders.

Types of Ratio Analysis

The various kinds of financial ratios available may be broadly grouped into the following six
silos, based on the sets of data they provide:
1. Liquidity Ratios: Liquidity ratios measure a company's ability to pay off its short-term debts
as they become due, using the company's current or quick assets. Liquidity ratios include the
current ratio, quick ratio, and working capital ratio.
2. Solvency Ratios: Also called financial leverage ratios, solvency ratios compare a company's
debt levels with its assets, equity, and earnings, to evaluate the likelihood of a company staying
afloat over the long haul, by paying off its long-term debt as well as the interest on its debt.
Examples of solvency ratios include: debt-equity ratios, debt-assets ratios, and interest coverage
ratios.
3. Profitability Ratios: These ratios convey how well a company can generate profits from its
operations. Profit margin, return on assets, return on equity, return on capital employed, and
gross margin ratios are all examples of profitability ratios.
4. Efficiency Ratios: Also called activity ratios, efficiency ratios evaluate how efficiently a
company uses its assets and liabilities to generate sales and maximize profits. Key efficiency
ratios include: turnover ratio, inventory turnover, and days' sales in inventory.
5. Coverage Ratios: Coverage ratios measure a company's ability to make the interest payments
and other obligations associated with its debts. Examples include the times interest earned ratio
and the debt-service coverage ratio.
6. Market Prospect Ratios: These are the most commonly used ratios in fundamental analysis.
They include dividend yield, P/E ratio, earnings per share (EPS), and dividend payout ratio.
Investors use these metrics to predict earnings and future performance.

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THE RATIOS USED IN THIS STUDY ARE AS FOLLOWS:
1. LIQUIDITY RATIOS
i. Current ratio
ii. Liquid ratio
2. SOLVENCY RATIOS
iii. Debt to equity ratios
iv. Total asset to debt ratio
v. Proprietary ratio
3. ACTIVITY RATIOS
vi. Inventory turnover ratio
4. PROFITABILITY RATIOS
vii. Gross profit ratio
viii. Operating ratio
ix. Operating profit ratio
x. Net profit ratio

CASHFLOW STATEMENT ANALYSIS

Cash flow is a measure of how much cash a business brought in or spent in total over a period of
time. Cash flow is typically broken down into cash flow from operating activities, investing
activities, and financing activities on the statement of cash flows, a common financial statement.
While it’s also important to look at business profitability on the income statement, cash flow
analysis offers critical information on the financial health of a company. It tells you if cash
inflows are coming from sales, loans, or investors, and similar information about outflows. Most
businesses can sustain a temporary period of negative cash flows, but can’t sustain negative cash
flows long-term.
Newer businesses may experience negative cash flow from operations due to high spending on
growth. That’s okay if investors and lenders are willing to keep supporting the business. But
eventually, cash flow from operations must turn positive to keep the business open as a going
concern.
Cash flow analysis helps you understand if a business’s healthy bank account balance is from
sales, debt, or other financing. This type of analysis may uncover unexpected problems, or it may

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show a healthy operating cash flow. But you don’t know either way until you review your cash
flow statements or perform a cash flow analysis.
In addition to looking at the standard cash flow statement and details, it’s often also useful to
calculate different versions of cash flow to give you additional insights. For example, free cash
flow excludes non-cash expenses and interest payments and adds in changes in working capital,
which gives you a clearer view of operating cash flows. Unlevered free cash flow shows you
cash flow before financial obligations while levered free cash flow explains cash flow after
taking into account all bills and obligations.
Depending on the size of your company, your financial situation, and your financial goals,
reviewing and tracking various forms of cash flow may be very helpful in financial planning and
preparing for future quarters, years, and even a potential downturn in sales or economic
conditions.

Cashflow statements of two financial years (2019 and 2020) have been formulated and used.

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 E. RESEARCH METHODOLOGY USED FOR THE STUDY
Research methodology is a way of explaining how a researcher intends to carry out their
research. It's a logical, systematic plan to resolve a research problem. A methodology details a
researcher's approach to the research to ensure reliable, valid results that address their aims and
objectives. It encompasses what data they're going to collect and where from, as well as how it's
being collected and analyzed.
A research methodology gives research legitimacy and provides scientifically sound findings. It
also provides a detailed plan that helps to keep researchers on track, making the process smooth,
effective and manageable.
Since the data used in the study is secondary data, the research methodology used is secondary
research or desk research.
Secondary research or desk research is a research method that involves using already existing
data. Existing data is summarized and collated to increase the overall effectiveness of research.

Secondary research includes research material published in research reports and similar
documents. These documents can be made available by public libraries, websites, data obtained
from already filled in surveys etc. Some government and non-government agencies also store
data, that can be used for research purposes and can be retrieved from them.

Secondary research is much more cost-effective than primary research, as it makes use of already
existing data, unlike primary research where data is collected first hand by organizations or
businesses or they can employ a third party to collect data on their behalf.

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 F. STEPS INVOLVED

1. Identification and development of topic

In the first step, we identify and develop the topic.

2. Preliminary search for the information.

In the second step, we search for information related to the topic.

3. Location of materials.
In the third step we locate the materials required for research.

4. Evaluation of the sources.

Next, we try to evaluate the sources of data.

5. Creating the hypothesis.

In the fifth step, we create the hypothesis to be tested.

6. Forming the research design.

Next, we form the research design to carry out the research.

7. Data collection
The next step is collection of data.

8. Data analysis
Eighth step comprises of analysis of the data and finding the conclusions.

9. Report writing.
Last step is report writing where all the findings and suggestions have to be reported.

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 G. SWOT ANALYSIS

SWOT analysis (or SWOT matrix) is a strategic planning and strategic management technique
used to help a person or organization identify Strengths, Weaknesses, Opportunities, and Threats
related to business competition or project planning. It is sometimes called situational assessment
or situational analysis.

This technique is designed for use in the preliminary stages of decision-making processes and
can be used as a tool for evaluation of the strategic position of organizations of many kinds (for-
profit enterprises, local and national governments, NGOs, etc.). It is intended to identify the
internal and external factors that are favorable and unfavorable to achieving the objectives of the
venture or project. Users of a SWOT analysis often ask and answer questions to generate
meaningful information for each category to make the tool useful and identify their competitive
advantage. SWOT has been described as a tried-and-true tool of strategic analysis, but has also
been criticized for its limitations, and alternatives have been developed.

STEPS INVOLVED IN CARRYING SWOT ANALYSIS ARE:

1. Identify SWOT factors

Perform a Brainstorm and capture:

Strengths (Internal Focus): business or project characteristics that give advantages over others.
Weaknesses (Internal Focus): business or project characteristics that give disadvantages relative
to others.
Opportunities (External Focus): elements in the environment that could exploit advantage for the
business or project. What Opportunities can I have because of my Strengths? — these will be
your positive risks.
Threats (External Focus): elements in the environment that could cause trouble for the business
or project. What Threats can I have because of my Weaknesses?

2. Analyze SWOT factors

In a group, analyze the strengths, weaknesses, opportunities, and threats:
combine the similar ones and discard the unnecessary brainstorm ideas collected in the step
before.
prioritize all factors in rank order.

3. Identify risks based on SWOT factors

After completing the SWOT analysis, add in your risk register:
Positive risks: all identified opportunities.
Negative risks: all identified threats.
It is important to remember that for each new risk identify you should define strategies where
you can use the strengths and opportunities to minimize weaknesses and avoiding threats.

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SWOT ANALYSIS OF THE STUDY IS AS FOLLOWS:

STRENGTHS:

 It gives an insight about the financial health of the company and tells whether the
performance of the company is satisfactory or not.

 It gives a clear picture of the strengths and weaknesses of the company, its areas of pros
and cons through data interpretation.

WEAKNESSES:

 The data provided by the company is, to some extent, fabricated due to privacy reasons.
 The project is based only on secondary data and no primary data is involved.
 The duration of the internship was very short (30 days) and hence all the required data
could not be collected properly.
 Deep and thorough conversation with the finance head and other officials of the company
could not be carried out dur to time constraints.

OPPORTUNITIES:

 The research study provided an excellent opportunity to know and understand the work
culture of a startup.
 The study also provided an opportunity to get a deep understanding of financial
statements analysis, various financial KPIS and MIS and their relevance in a startup.

THREATS:

 All the calculations and data interpretations are based on secondary data and hence may
posses some misinterpretation and errors in calculations.

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CHAPTER 5- DATA INTERPRETATION, TESTING OF HYPOTHESIS
AND SUGGESTIONS

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5.1 DATA INTERPRETATION
RATIO ANALYSIS:

LIQUIDITY RATIOS

1. CURRENT RATIOS
Current ratio=Current assets/Current liabilities

Current ratio for 2 financial years from 2019 to 2020:

2019
Current Assets=Rs.666746
Current Liabilities=Rs.194895758
Current Ratio=666746 / 194895758
=0.003
=3:1000
2020
Current Assets=Rs.948290
Current Liabilities=Rs.329534062
Current Ratio=948290 / 329534062
=0.002
=1:500

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Current ratio measures a company’s ability to pay its short term obligations. The current ratio of
the company is decreasing from 0.003 in 2019 to 0.002 in 2020 indicating a decrease in the
company’s ability to pay its short term debts as the a result of increasing current liabilities and
less current assets.

2. QUICK RATIO

Quick Ratio= (Current Assets – Inventory) / Current Liabilities

2019
Current Assets – Inventory = 666746 – 300000
=366746
Current Liabilities = 194895758
Quick Ratio = 366746 / 194895758
= 0.001

2020
Current Assets – Inventory = 948290 – 300000
=648290

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Current Liabilities = 329534062
Quick Ratio = 648290 / 329534062
= 0.001

The quick ratio indicates the extent to which a company can pay its short term obligations with
its most liquid assets. Here the ratio remains unchanged from 2019 to 2020 showing no change
in its liquid assets.

SOLVENCY RATIOS

1. Debt to Equity Ratio

Debt to Equity ratio = Debt / Equity

2019
Debt=Rs. 194895758
Equity= Rs. (188185791)
Debt to Equity Ratio = 194895758 / (188185791)
=-1.03
2020
Debt=Rs. 329534062
Equity= Rs. (322346036)

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Debt to Equity Ratio= 329534062 / (322346036)
=-1.02

Debt to equity ratio shows the proportion of equity and debt a company is using to finance its
assets. Here increases from -1.03 in 2019 to -1.02 in 2020 indicating an initial high proportion of
debt with a slight increase in equity from 2019 to 2020.

2. Total Asset to Debt Ratio:

Total Asset to Debt Ratio=Total assets/Debt

2019:
Total assets=6709967
Debt=194895758
Total Asset to Debt Ratio=0.03

2020:
Total assets=7188025
Debt=329534062
Total Asset to Debt Ratio=0.02

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 The ratio indicates how much of a business is owned by creditors compared with those of
shareholders. The ratio decreases from 0.03 in 2019 to 0.02 in 2020 indicating an
increase in shareholders owned assets and a slight decrease in creditors.

3. Proprietary ratio:
Proprietary ratio=Equity/Total assets

2019:
Equity=188185791
Total assets=6709967
Proprietary ratio= 28.04

2020:
Equity=322346036
Total assets=7188025
Proprietary ratio=44.8

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The ratio indicates the contribution of proprietors towards the total assets of the business.
The ratio increases from 28.04 in 2019 to 44.8 in 2020 indicating an increase in
proprietor’s fund in the finances of the company.

ACTIVITY RATIOS:

1. Inventory turnover ratio:

Inventory turnover ratio=COGS/Average inventory
2019:
COGS=7569840
Inventory=300000
Inventory turnover ratio=25.23

2020:
COGS=14818800
Inventory=300000
Inventory turnover ratio=49.39

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Inventory turnover ratio indicates the number of times a company has sold and
replenished its inventory. The ratio increases from 25.23 in 2019 to 49.39 in 2020
which shows a growth in sales of the firm from 2019 to 2020.

PROFITABILITY RATIOS:

1. Gross profit ratio:

Gross profit ratio= Gross profit / Revenue from operations * 100

2019:
Gross profit=5044560
Revenue from operations=12614400
Gross profit ratio=39.99%

2020:
Gross profit=9877200
Revenue from operations=24696000
Gross profit ratio=39.99%

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 Gross profit ratio is a financial ratio that measures the performance and efficiency
of a business by dividing its gross profit figure by the total net sales. Here the
gross profit is 39.99% for both the years indicating no change in the gross profit
from 2019 to 2020.

2. Operating Ratio:
Operating Ratio=COGS+ Operating expenses/Revenue from operations*100

2019:
COGS=7569840
Operating expenses=34203600
Revenue from operations=12614400
Operating Ratio=331.15%

2020:
COGS=14818800
Operating expenses=47109490
Revenue from operations=24696000
Operating Ratio=250.76%

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 The operating ratio shows the efficiency of a company’s management by
comparing the total operating expenses of a company to net sales. As the ratio
decreases from 331.15 in 2019 to 250.76 in 2020 indicating an increase in
operating expenses in proportion to the net sales.

3. Operating profit ratio:

Operating profit ratio=Operating profit/Revenue from operations*100

2019:
Operating profit= (29159040)
Revenue=12614400
Operating profit ratio=-231.15%

2020:
Operating profit= (37232290)
Revenue=24696000
Operating profit ratio=-150.76%

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 Operating ratio defines a relationship between the operating profit and net sales. It
shows how much profit a company makes from its principal business in relation
to its total sales. As the ratio increases from -231%in 2019 to -150% in 2020, it
indicates an increase in profits made from total sales.

4. Net profit ratio:

Net profit ratio=Net profit after tax/Revenue from operations*100

2019:
Net profit after tax= (100207672)
Revenue=12614400
Net profit ratio=-794.39%

2020:
Net profit after tax= (124160245)
Revenue=24696000
Net profit ratio=-502.75%

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 Net profit ratio measures the company’s profits to the total amount of money
brought into the business. The ratio increases from -794% in 2019 to -502% in
2020 which shows that the profits of the company have increased in comparison
to its capital in 2020.

RATIO TABLE

RATIOS 2019 2020

LIQUIDITY RATIOS
Current ratio 0.003 0.002

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quick ratio 0.001 0.001

SOLVENCY RATIOS
debt to equity ratio -1.03 -1.02
total assets to debt ratio 0.03 0.02
proprietary ratio 28.04 44.8

ACTIVITY RATIOS
inventory turnover ratio 25.23 49.39

PROFITABILITY RATIOS
gross profit ratio 39.99 39.99
operating ratio 331.15 250.76
operating profit ratio -231.15 -150.76
net profit ratio -794.39 -502.75

CASHFLOW STATEMENTS

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Page | 59
CASHFLOW ANALYSIS
As we can see the major cashflow during the 5 years is majorly from operating activities.
The major sources of cash inflow are from financing activities that are new fundings and
operating activities that are cash sales and accounts receivables for the first 3 years and cash
sales and account receivables in the 4th and 5th year.
The major cash outflows are from investing activities that are purchase of new fixed assets and
cost of goods sold. Major cashflows from operating activities are from operating expenses and
payroll. The major financing activities which led to cash outflows are loan payments and interest
payments.
It is noticeable that cash outflows have always been higher than cash inflows the major reasons
being operating expenses and payrolls.

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5.2 TESTING OF HYPOTHESIS

HO: There is no significant difference between current ratio and quick ratio of Happy Order.
H1: There is significant difference between current ratio and quick ratio of Happy Order.

CURREN
CURRENT T
CURRENT Y=
LIABILITI RATIO(A (A-MEAN
YEAR ASSETS ES ) A) Y*Y
2020 364668 7192372 0.051 0.036 0.00129
2019 408073 35519071 0.011 -0.003 0.00001
2018 497816 94144871 0.005 -0.009 0.00009
2017 666746 194895758 0.003 -0.006 0.00003
2016 948290 329534062 0.003 -0.006 0.00004
TOTA
L 0.074 0.00146

MEAN 0.015

CURRENT QUICK
Z=
QUICK LIABILITI RATIO(B (B-MEAN
YEAR ASSETS ES ) B) Z*Z
2020 64668 7192372 0.009 0.0054 0.0000291
2019 108073 35519071 0.003 -0.0006 0.0000003
2018 197816 94144871 0.002 0.0021 0.0000044
2017 366746 194895758 0.002 0.0019 0.0000035

2016 648290 329534062 0.002 0.0020 0.0000039

TOTA
L 0.018 0.0000412
MEAN 0.004

t = (Ma-Mb)/(S2/Na+S2/Nb)
= (0.015-0.004)/ (0.086/5 +
0.086/5)
=0.011

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 S2= ∑(Y)2+∑(Z)2 / Na+Nb-2=0.086

WHERE,
a and b represent the two groups to compose.
Ma and Mb represent the mean of two groups respectively.
Na and Nb represent the sizes of the groups a and b respectively.
t is the t test statistical value
S2 is the estimator of the common variance of the two samples.

Once the t test value is determined we read in t test table the critical value of students t
distribution corresponding to the significance level alpha of choice (5%).
Degree of freedom (df)= Na + Nb / 2
= (5+5)/ 2 = 10/2 = 5
So df = 2.571
Now, we have to compare the t test value with the critical value. If the absolute value of the t test
statistics is greater than the critical value, there is a significant difference, otherwise, it isn’t.
Since the absolute value of t test statistics is less than the critical value, null hypothesis is
accepted.
So, there is no significant difference between the current ratio and quick ratio of the company
over a period of 5 years.

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5.3 SUGGESTIONS

Company is at a high risk.

Current liabilities are much higher than current assets.
To meet the current liabilities, the company needs more funds, which, it should arrange from
debt sources rather than equity.
So, more debt than equity should be introduced in the financial structure because, profits though
increasing, are not enough to pay to the shareholders.
Sales are growing at a positive rate, so there is scope of survival and growth.
But the company must arrange for funds with least interest rates.
Proprietors own fund is a good option. Also, benefits can be derived from various funding
schemes of the government launched under the startup India scheme.

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CHAPTER 6- BIBLIOGRAPHY

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BIBLIOGRAPHY

WEBSITES:
https://www.happyorder.in
https://academicguides.waldenu.edu
https://www.nhcc.edu
https://salesgrowth.com
https://www.ncbi.nlm.nih.gov
https://www.voxco.com
https://www.netsuite.com

BOOKS:
TS GREWAL’S ANALYSIS OF FINANCIAL STATEMENTS
FINANCIAL RATIOS AND FINANCIAL STATEMENTS ANALYSIS BY RAIYANI
JAGDISH R.

APPS:
SILP (STARTUP INDIA LEARNING PROGRAMME) POWERED BY UPGRAD

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 ANNEXTURES

i. BALANCE SHEET

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ii. INCOME STATEMENT

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