Scribd Logo
Upload

Welcome to Scribd!

  • Chap 4 Peenar

    Uploaded by

    Sharmila Devi
    4 views38 pages
    Pennar

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    Pennar

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    4 views38 pages

    Chap 4 Peenar

    Uploaded by

    Sharmila Devi
    Pennar

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 38
    CHAPTER-IV ORMANCE ANALYSIS PERFORMANCE ANALYSIS Performance Analysis is the process of stud ng or evaluating the performance of a ~ particular scenario in comparison of the objective which was to be achieved A performance analysis isan evaluation of how the company has performed over a certain amount of time. It is important to interpret this data by measuring any variations from projected metrics, understanding why these variations happened, putting the company’s progress in the context of market and consumer behavior and using that information to decide what to encourage, discourage and plan for in the future ‘The Company may use performance analysis to understand how the industry has performed relative to projections over a month or a year. The Company may also use performance analysis techniques to measure individual performance for periodic reviews or employce evaluations. For cach situation, different metries and goals are relevant.A performance analysis is a tool the company can use to check important metrics every month or year and make plans for adjustment and improvement. Performance analysis refers to a variety of techniques used to quantify the performance of the company over a given period of time. Performance analysis plays a vital role in helping the management towards the performance of the organization with the help of tools and technique and ratios and cash flows measures. Performance analysis can be done in the finance department on the basis of return on investment profits ete., A performance analysis could be done on just about any area of business. provided the correct key performance indicators are factored in the analysis. A Key Performance Indicator or KPI, is a matrix that best depicts the performance of a particular area of the business. Performance analysis can be used for a variety of decisions such as security analysis, analysis of credit and debit analysis. Some of the tools used to analysis the performance are: 22 ww eevee es view wheel ae values. The exchange, or selling, process has implied rules and identifiable stages. It is implied that the selling process will proceed fairly and ethically so that the parties end up nearly equally rewarded. Sales may be defined as money paid by customers. Sales are a company's core revenue for a given period. Logically, revenue is the larger figure. However, total revenue for a period may ‘occasionally be smaller than total sales. ‘Take, for example, a business that sells only hats. If the store's revenue formula deducts all discounted sales, returns, and damaged merchandise, the company's gross sales could be greater than its revenue. A sale is a transaction between two or more parties that involves the exchange of tangible or intangible goods, services, or assets for money. In some cases, assets other than cash are paid to a seller. In the financial markets, a sale can also refer to an agreement that a buyer and seller make regarding a financial security, its price, and specific arrangements for its delivery. Regardless of the context, a sale is essentially a contract between a seller of a particular ‘00d or service and a buyer who is willing to pay for that good or service. 23 2017 2018 2019 2020 RPRETATION ie ete hart shows the Sales of the Pennar industries which is showing the amount in lakhs inthe company are growing each yearn the year 2017-2021 the ar from 2017-2021. The sales of the pany’s sales values were increasing from 50,000 to 2,50,000. 24 Profit before tax or PBT is the gross profit that a business earns before in EBT. ‘The profit before tax value is found on the income statement which is generated either quarterly, half-yearly, or annually. The profit before tax value is used to determine how much tax the business has to pay based on its income. The profit before tax value is calculated based on a formula that takes into account the total revenue, operating expenses, interest expenses, and cost of goods sold Profit before tax allows you to know and evaluate your profit margins. Profit margins allow you to understand the effectiveness of your ability to wr. your revenue into profit. This is quite useful for the stakeholders of the business. Another benefit of the profit before tax value is that it is viewed along with the net profit and operating profit by the investors. This allows them to analyze your business and make decisions based on these values collectively. 25 applied, Other names of profi before tax ace pro-ak ott end cams e-Samemey lakhs in the year from 2017-2021. The Profit ofthe company is increasing and decreasing Yeas year before the levitation of tax. This profit before the tax levitation is getting lower and before the levitation of tax. The profit has started from 1,00,000 to 10,00,000, 6 Profit after-tax is the earnings of a business after all income taxes have been This amount is the final, residual amount of profit generated by an organization, © The profit after-tax figure is considered the best measure of the ability of an entity | ‘generate a return, since it incorporates both operating income and income from other ‘sources, such as interest income. ‘© The profit after-tax margin is closely watched by investors to see if the income-generating ability ofa firm is changing over time ‘© If so, this could be considered a valuation indicator that may result in a change in the stock price. If company is publicly-held, it also reports profit after-tax on a per share basis. information appears on the face ofthe income statement. 27 2017 2018 2019 2020 2021 “The chart shows the Profit After the tax of the Pennar industries which is showing the amount in ‘aks in the year from 2017-2021. The Profit of the company is increasing and decreasing year ‘by year after the levitation of tax. During the year 2017 the company’s profit very low and the ‘Year 2018 profit after the levitation of tax has reached a peak level and the profit were getting lower every year. 28 permitted they are said to be issued ata discount or partly paid. Share capital is the money a company raises by issuing common or preferred stock The amount of share capital or equity financing a company has can change over time with additional public offerings, ‘© The term share capital can mean slightly different things depending on the context. ‘Accountants have a much narrower definition and their definition rules on the balance sheets of public companies. It means the total amount raised by the company in sales of shares ‘A company's share capital is the money it raises from selling common or preferred stock Authorized share capital is the maximum amount a company has been approved to raise in a public offering.A company may opt for a new offer of stock in order to increase the share capita on its balance sheet 29 2017 2018 «2019 2020 2021 is showing the amount in lakhs ‘in the year from 2017-2021. The Share capital of the company is increasing every year. The ‘company’s share capital has been getting higher in the year 2017-19 and at the same time the “company’s share capital has been getting lower from the next years 2020-2021. The share capital the company is now at 7,00,000 30 which lies in their useful lives. ‘© Current assets are typically liquid, which means they can be co ‘than a year. a Non-current assets refer to assets and property owned by a business that are not cas converted fo cash and include long-term investments, deferred charges, intangible assets, and fixed assets. © Fixed assets lose value as they age. Because they provide long-term income, these assets ae expensed differently than other items. * Tangible assets are subject to periodic depreciation while intangible assets are subject to amortization. A certain amount of an asset's cost is expensed annually. The asset's value decreases along with its depreciation amount on the company's balance sheet. The Corporation can then match the asset's cost with its long-term value, 31 2017 2018 «2019 ©2020-2021 -RPRETATION “The chart shows the fixed assets of the Pennar industries which is showing the amount in lakhs the year from 2017-2021. It can be noted that there has been a change in fixed assets of the “Gompany during the past 5 years. The fixed assets started to gradually increase due to the litions and suitable investments made by the company in purchase of fixed assets. On the int of various market factors, the company recognized an impairment loss based on the 2 statement. _ Iralso stands for the process of developing and presenting the rela ‘groups of items in the financial statement, ——s ‘A financial ratio or accounting ratio isa relative magnitude of two values taken from an enterprise's financial statements. Often used in many standard ratios used to ty 10 evaluate the overall financial es corporation or other organization. , Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) ofa firm, and by a firm's editors. Finaneial analysts use financial ratios to compare the strengths and weaknesses in various companies. Ratios can be expressed as a decimal value, such as 0.10, or given as an equivalent percent value, such as 10%. Some ratios are usually quoted as percentages, especially ratios that are usually or always less than 1, such as carnings yield, while others are usually quoted as decimal numbers, especially ratios that are usually more than | 33 Rue revenue to profit. = i ce db ian el ene performance, the performance of other companies in its industry, or the industry average: Profitability ratios can shed light on how well a company's management is operating a business, Investors can use them, along with other research, to determine whether or mot a ‘company might be a good investment. Broadly speaking, higher profitability ratios can point to strengths and advantages that a company has, such as the ability to charge more or less for products and to maintain ower costs ‘A company's profitability ratios are most useful w hen compared to those of similar companies, the company's own performance history, or average ratios for the company's industry. Normally, a higher value relative to previous value indicates that the company I doing well a does not. ROA for public companies can vary substantially and industry in which they function so the ROA for a tech ‘correspond to that of a food and beverage company. ‘The ROA figure gives investors an idea of how effective the company is im money it invests into net income. The higher the ROA umber, the better, company is able to earn more money with a smaller investment, Put simply, ROA means more asset efficiency. FORMULAE : ROA = Net Income Average Total Assets 35 2017 «2018 = 2019 ‘profit of this ratio is affected Seasonally. The ratios were 2.49, 5.98, 3.68, 2.84, 1.43, The "company needed to increase their assets in the year 2022 respectively. ‘Anong, similar companies, « higher | particularly low one may indieate that a financing to expand, itcarries more risk than short-term obligations. © The Debt to Equity ratio is also called a leverage ratio that calculates iv debt and financial liabilities against total shareholders’ equity. ee ‘© Unlike the debt-assets ratio which uses total assets as a denominator, fe Dek oy Ratio uses total equity. This ratio highlights how a company’s capital structure is tilted — cither toward debt or equity financing. A higher debt-equity ratio indicates a levered firm, which is quite preferable for a company that is stable with significant cash flow generation, but not preferable when a company is in decline. Conversely, a lower ratio indicates a firm less levered and closer to being fully equity financed. The appropriate debt to equity ratio varies by industry. Debt Equity Ratio Total Debs Total Shareholders Equity t 37 2017. «2018 «= 2019 2020 2021 INTERPRETATION The calculation of debt equity ratio shows you the acceptable profit values were varying. Generally the ratio of the debt equity ratio of 0.28, 0.23, 0.22, 0.25, 0.25 is considered to be ‘acceptable, The highest ratio of debt equity is the more capable the company is to pay its obligations, The profit of this ratio is affected Seasonally. The debt of the company from 2017 « 2021 has a drastic increase 38 debts. “fs aratothat elon’ ability to pay ofits eb as and when ey bess ¢ In other words, we can say this ratio tells how quickly a company ean conver its current assets into cash so that it ean pay ofits laity ona timely bass. Generally, Liuidcy and short-term: solvency are used together. The liquidity ratio affects the credibility of the comp 1s in repayment of a short-term liability then this any as well asthe credit rating of the ‘company. If there are continuous defal will lead to bankruptcy. ‘© Hence this ratio plays an important role in the financial stability of any company and credit ratings 3” ith a current ratio of less than one, ‘Some types of businesses can operate wit however. If inventory turns into cash much more rapidly than the accounts payable become duc, then the firm's current ratio can comfortably remain tt and the firm intends to sell the inventor Jess than one. Inventory is valued at the cost of acquiring ii ry for more than this cost Current Ratio = Current.asseis Current liabilities 40 2017 2018 2019 2020 2021 =CURRENTASSETS = CURRENTLIABILITIES — " RATIO INTERPRETATION ‘As per the norms the Current ratio should be 2:1, but the ratio is below the ideal level for the past ‘years which indicates that the current assets are inadequate to meet the current liabilities. From the above table we can clearly see that the Bes 44, 1,21, 1-11, 1.15. This rapid increase of the assets and liabilities has broughi More profit to the company overall absolute increase every year. This ratio starts Jn finance, the quick ratio, also known as the acid-test rat ompany to use is near cash or quick assets to extinguish defined as the ratio between quickly current assets that can which measures the ability of a c or retire its current liabilities immediately. It is assets and current liabilities. Quick assets are book values. ith a quick ratio of less than ! available or liquid presumably be quickly converted to cash at close to their mid ratio is considered to be 1:1. A company wil bilities. but provides a more conservative assessment it does not consider as A normal liq ‘cannot currently fully pay back its current lil ratio The quick ratio is similar to the current Judes inventory, which it of the liquidity position of firms as it exe sufficiently liquid. Quick Ratio= z Quick Assets Current Liabilities 42 = PARTICULARS 1m QUICK ASSETS ‘CURRENT LIABILITIES RATIO 2017 2018 2019 2020 2021 is below the ideal level for the past the current liabilities Ratios 74, 0.66, 0.69, There ee Per the norms the Quick ratio shoul ars Whi i ich indicates that the current as: id be 1:1, but the ratio to meet re 0.54, 0:88 0 ties of the compan sets are inadequate durin ig 2017-202 2021 was near to the ideal ratio. The ratios wet Sa, increas se in ever C1 ry because of having more current liabili “umover ratios are only useful for comparing similar companies, and are ‘important for retailers. Jow inventory turnover ratio may be a sign of weak sales or excess inventory, ‘a higher ratio signals strong sales but may also indicate inadequate inventory ‘socking. Accounting policies, rapid changes in costs, and seasonal factors may distort ‘inventory turnover comparisons. A low tumover rate may point to overstocking, ‘product line or marketing effort. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or expected market shortages '* Another insight provided by the inventory tumover ratio 1s that obsolescence, or deficiencies im the if inventory is tuning ‘over slowly, then the warehousing cost attributable to each unit will be higher * Conversely a high turnover rate may indicate inadequate inventory levels, which may This often can result im stock lead 10 a loss in business as the inventory is too low Inventory Turnover Ratio» Costof Goods Sold Average Inventory 44 ly low inventory turnover ratio may be a sign of weak sales or excess inventory, ratio signals strong sales but may also indicate inadequate inventory ‘Accounting policies, rapid changes in costs, and seasonal factors may distort turnover comparisons. turnover rate may point to overstocking, obsolescence, or deficiencies in the line or marketing effort. However, in some instances a low rate may be appropriate such as where higher inventory levels occur in anticipation of rapidly rising prices or expected market shortages. “Another insight provided by the inventory turnover ratio is that if inventory is tuming " overslowly, then the warehousing cost attributable to each unit will be higher. ly a high turnover rate may indicate inadequate inventory levels, which may to a loss in business as the inventory is too low. This often can result in stock Inventory Turnover Ratio Cost of Goods Sol Average Inventory 44 a ff se 2017 2018 2019 2020 2021 RETATION ‘Per the norms the Inventory turnover ratio should be between $ and 10 but the ratio is below ‘deal level for the past years which indicates that the Average inventory is inadequate to meet Me Turnover of the profit of the company. Ratios during the year 2017-2021 were 1.98, 4,17 | 4.81, 4.52 were probably on the line to reach the ideal level. It was increasing every year the company had more Inventories. re eat 1_| 430 nae 1-6 s27e7_| 20458 | 63.28% “a346_| cans | 22059 | 57.53% 5505 | toes | 457s 83.16% 0 0 0 ° 20a | 467 as37__ | 79.73% 2639 [341 2098 | 79.50% uy | 2376 m7 | 14.9463 328 786 458 | 139.638 ros | 14283 | 3328 | 30.46% 30305 | 23544 mao | 15 95% r3104 | 37183 | 14079 | 609 0 0 0 ° TT ia333 [2282 Tosi | 81 sa78_| 2486 2a02 | 53.70% | 300 1000 nad | __10138 73232 4157 m2 43091_} 43647 556 129029 3 52U1 “I ¥ Maal — | 246065. S722 14.1841 im 1320 “1851 58373 and cash equivalents 1706 2321 615 36.0492. 1999 1954 45 22511 3216 3031 “185; “51595 jones | 8760 =1504 714.653, sees 10721 112307, 1586 1.43243 1s1261_| 173760 | 22499 148743 TES E 7618 7618 0 0 52787 | 58881 6094 115445 cuss | 66499 6094 10.0886 10083 | 10031 52 05157 0 0 0 0 461 312 45 9163597 - 341 862 321 59.3346 abilities(ne 2376 2680 308 12.2946, liabilities 786 (04 182 23.155 liabilities qa2s3_| 14689 436 3.05901 i Tasaa_| 31258 ma 32.764 3713 | 44784 7601 20.4421 Liabilities 0 0 abil 2252 5655 E (net 24no | 1560} — 1000 | _850__ we | as re eas | 5 sous | 107261 Li a sue 173760 22517912 58,.264599 6.335616 arrent assets 3.445912 aH 173760 __|_ 184360 6.103683 |

    You might also like