CHAPTER – 5

ANALYSIS OF FINANCIAL STATEMENT

Financial statements are written records that convey the business activities and the
financial performance of a company. Financial statements are often audited by
government agencies, accountants, firms, etc. to ensure accuracy and for tax,
financing, or investing purposes.

Financial statement used for

Investors and financial analysts rely on financial data to analyses the performance of
a company and make prediction about its future direction of the company's stock
price. One of the most important resources of reliable and audited financial data is
the annual report, which contains the firm's financial statements
The financial statements are used by investors, market analysts, and creditors to
evaluate a company's financial health and earnings potential. The three major
financial statement reports are the balance sheet, income statement, and statement
of cash flows.

Ratio Analysis
A financial ratio, or accounting ratio, shows the relative magnitude of selected
numerical values taken from those financial statements. It is a foundation for
evaluating and pricing credit risk and for doing fundamental company valuation. It is
derived from a company’s financial statements and is a calculation showing the
relative magnitude of selected numerical values taken from those financial
statements.

Ratio are classified in to main 3 Types:

 Profitability ratio: - Analyses the profit based on sales, net worth, assets etc.

 Liquidity ratio: - Analysis the ability to repay short term obligations.

 Solvency ratio: -Analysis the ability to repay long term obligation.

 STATEMENT OF BALANCE SHEET

As on As on As on As on
March March
March March
Not 2022 2020
Particulars 2023 2021
e No

(Rupees (Rupees (Rupees in (Rupees

in lakhs) in lakhs) lakhs) in lakhs)

I EQUITY AND LIABILITIES

1 Shareholders’ Funds

a. Share capital 3 781.47 781.47 781.47 781.47

b. Reserve and surplus 4 10785.5 11863.12 13361.37 14606.8

8 5

2 Noncurrent Liabilities

a. long term borrowings 5 7407.16 6905.22 6394.85 6231.54

b. Other long-term liabilities 6 1731.88 1315.66 352.35 327.17

c. long term provisions 7 33.52 3.91

3 Current liabilities

a. short term borrowings 8 3317.02 1680.85 1364.73 1943.3

b. Trade payables 9
 (i) Total outstanding dues of 161.22 335.18 68.66 52.56
micro and small enterprises

(ii) Total outstanding dues of

creditors other than micro
and small enterprises 1925.28 1362.76 2257.19 2534.15

c. Other current liabilities 10 527.09 280.07 537.81 550.65

d. Short-term provisions 11 169.08 103.14 965.22 100.53

Total Equity and liabilities 26839.3 24627.47 26083.65 27132.1

3

II ASSETS

1 Noncurrent asset

a. Properly plant and 12

equipment

(i) Tangible asset 12.1 6623.3 7669.82 8822.39 9655.1

(ii) Intangible asset 12.2 16.79 3.04 286.08 40.16

(iii) Capital work in progress 13.3 14.8 66.5 167.09

b. non-current investment 13 4466.54 4466.54 4466.53 4466.53

c. long term loans and 14 1277.58 1277.58 1277.57 1277.57

advances
 d. Other non-Current assets 15 655.29 634.41 600.16 533.31

2 Current asset

a. Inventories 16 8464.65 6180.61 6308.74 5619.79

b. Trade receivables 17 4818.01 3588.39 3495.74 4676.8

c. Cash and bank balances 18 206.58 465.67 450.34 390.28

d. short term loans and 19 175.68 202.04 168.07 165.44

advances

e. Other current assets 20 134.88 124.57 141.53 140.06

Total Assets 26839.3 24627.47 26083.65 27132.1

3

STATEMENT OF PROFIT & LOSS

As on As on As on As on
Not
March March March
e March
2022 2020
Particulars No 2023 2021

(Rupees (Rupee (Rupees (Rupee

in lakhs) s in in lakhs) s in
lakhs) lakhs)

INCOME:

a. Revenue from operation 21

 i. sales of products 12694.8 8987.2 12263.86 16070.
9 5 14

ii. other operating revenues 397.29 275.03 450.53 998.77

13092.1 9262.2 12714.39 17068.

8 8 91

b. other income 22 142.41 61.78 43.13 99.43

Total Revenue 13234.5 9324.0 12757.52 17168.

9 6 34

I EXPENSES:
I

a. Cost of material 23 8026.73 4007.5 7173.96 10438.

consumed 3 38

b. Changes in inventories 24 -1303.69 516.53 -741.89 -738.46

c. Employee benefit 25 1200.41 761.96 917.38 912.47

expenses

d. Finance costs 26 348.54 188.39 226.45 229.59

e. Depreciation & 12 1254.3 1215.4 1199.78 1177.1

amortization 8 6

f. other expenses 27 4794.46 3722.3 4768.25 5711.6

8 7

Total Expenses 14320.7 10412.2 13543.93 17730.

5 7 81

Profit/ (Loss) before -1086.16 - -786.41 37.54

 exceptional items and tax 1088.2
Exceptional items 1

(i) Exchange gain/(Loss) on

foreign currency loan 151.06 -244.61 -429.07 237.1

(ii) Others 28 -142.44 -195.44

Profit/(loss) before tax - - -1215.48 274.64

1077.54 1528.2
0 6

Tax expenses

(i) Current tax - -

7 (ii) Deferred tax - -

Profit/(Loss) for the year -1077.54 - -1215.48 274.64

after the tax 1528.2
6

Earning per equity share

(EPS): Basic and diluted 29

Basic and diluted -137.89 -195.56 -155.54 35.14

Comparative analysis of income statement

As on As on Increase Increas
or e
March March
2022 or
Note decrease
2023
decreas
Particulars No e
 %

(Rupees in (Rupees in
lakhs) lakhs)

I INCOME:

a. Revenue from operation 21

i. sales of products 12694.89 8987.25 3707.64 41.3%

ii. other operating revenues 397.29 275.03 122.26 44.5%

13092.18 9262.28 3829.9 41.3%

b. other income 22 142.41 61.78 80.63 130.5%

Total Revenue 13234.59 9324.06 3910.53 41.9%

II EXPENSES:

a. Cost of material 23 8026.73 4007.53 4019.2 100.3%

consumed

b. Changes in inventories 24 -1303.69 516.53 -1820.22 -

352.4%

c. Employee benefit 25 1200.41 761.96 438.45 57.5%

expenses

d. Finance costs 26 348.54 188.39 160.15 85.0%

e. Depreciation & 12 1254.3 1215.48 38.82 3.2%

 amortization

f. other expenses 27 4794.46 3722.38 1072.08 28.8%

Total Expenses 14320.75 10412.27 3908.48 37.5%

Profit/ (Loss) before

exceptional items and tax

Exceptional items -1086.16 -1088.21 2.05 -0.2%

(i) Exchange gain/(Loss) on

foreign currency loan 151.06 -244.61 395.67 -161.8%

(ii) Others 28 -142.44 -195.44 53 -27.1%

Profit/(loss) before tax -1077.54 -1528.26 450.72 -29.5%

Tax expenses

(i) Current tax - -

(ii) Deferred tax - -

Profit/(Loss) for the year -1077.54 -1528.26 450.72 -29.5%

after the tax

Earning per equity share

(EPS): Basic and diluted 29

Basic and diluted -137.89 -195.56 57.67 -29.5%

The total revenue on the year 2022 was 9324.06 and 13234.59 on the year 2023.
The percentage increase in the total revenue of 2022 from 2023 is 41.09%.

RATIO ANALYSIS
Liquidity ratio: It gives idea about company’s ability to convert its assets into cash
and pay its current Liabilities with the cash whenever required.

A) CURRENT RATIO:
It is a liquidity ratio that measures a company’s ability to pay short-term obligations
or those due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current debt and other
payables.

Current ratio=Current asset/Current liabilities

Years Current Assets Current Liability Ratio

2020 10992.37 5181.19 2.12:1

2021 10564.42 5193.61 2.03:1

2022 10561.2 3762 2.80:1

2023 13799.8 6099.69 2.26:1

Interpretation: The standard current ratio is2:1, which indicates the ability of a
company to pay its current or short-term obligations and if it less than 2 then
company cannot pay its current obligations. I can say that the company is safe
because current assets are more than current liabilities and the company is not
facing any liquidity problem.

B) QUICK RATIO:

The quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which
measures the ability of a company to use its near cash or quick assets to extinguish
or retire its current liabilities immediately. A normal liquid ratio is 1:1. A company
with a quick ratio of less than 1 cannot currently fully pay back its current liabilities.

Quick ratio=Quick asset/Quick liabilities

Years Quick Assets Quick Liability Ratio

2020 5372.58 5181 1.04:1

2021 4255.68 5194 0.82:1

 2022 4380.67 3762 1.16:1

2023 5335.15 6099.69 0.87:1

Interpretation: A quick ratio is 1:1. A company with a quick ratio of less than 1
cannot currently fully pay back its current liabilities. I can say that the company quick
ratio is fluctuating by comparing 2023-2020, quick liabilities are more than the quick
assets in the year 2023 which is not good for the company.

C) DEBT EQUITY RATIO:

Debt-to-equity (D/E) ratio is used to evaluate a company’s.
financial leverage and is calculated by dividing a company’s total liabilities by its
shareholder equity.

It is a measure of the degree to which a company is financing its operations with

debt rather than its own resources. Debt-equity ratio is a particular type of gearing
ratio.

Debt equity ratio = Total long-term debt/Shareholder’s fund

Years Total Long-Term Shareholders Ratio
Debt fund

2020 6231.54 15388.32 0.40

2021 6394.85 14142.84 0.45

2022 6905.22 12644.59 0.55

2023 7407.16 11567.05 0.64

Interpretation: Debt equity ratio of the company in the year 2020-21 and 2022-23 is
satisfactory because debt is high to the equity or funds.

D) PROPRIETARY RATIO:

Proprietary ratio is a type of solvency ratio that is useful for determining the amount
or contribution of shareholders or proprietors towards the total assets of the
business.
 Proprietary ratio = Shareholders fund/Total asset
Years Shareholders Total Asset Ratio
fund

2020 15388.32 27132.13 0.57

2021 14142.84 26083.65 0.54

2022 12644.59 24627.47 0.51

2023 11567.05 26839.3 0.43

Interpretation: The standard ratio of proprietary ratio is 2:1 or 60%. A high proprietary
ratio indicates that a business is in a strong position and provides relief to creditors,
while a low proprietary ratio shows the dependence of the company on the debt
financing to run its business. Proprietary ratio of the company it is indicating
decrease every year owner’s capital and total capital (Total Assets) of the company
so improve the long-term solvency position of the company.

E) FIXED ASSET RATIO:

The fixed asset turnover ratio is an efficiency ratio that measures a company’s
return on their investment in property, plant, and equipment by comparing net sales
with fixed assets.

Fixed asset ratio=Net sales/Average fixed asset

Years Net Sales Average Fixed Ratio
Asset

2020 17068.91 9862.35 1.73

2021 12714.39 9174.97 1.39

2022 9262.28 7687.66 1.20

2023 13092.18 6640.09 1.90

Interpretation: The fixed assets turnover ratio is 5 times. The fixed assets ratio in the
year 2022 was the lowest fixed asset turnover, and then there is increasing trend line
which is shown in the above graph. However, compared from the year 2020 to 2023,
in the year 2023 is the highest fixed asset ratio is 1.90.

F) NET PROFIT RATIO:

Net Profit Ratio, also referred to as the Net Profit Margin Ratio, is a profitability ratio
that measures the company’s profits to the total amount of money brought into the
business. In other words, the net profit margin ratio depicts the relationship between
the net profit after taxes and net sales taking place in a business.
Net profit ratio=Net profit/ Net sales
Years Net Income Net Ratio
Sales

2020 274.64 16070.14 1.71

2021 - 12263.86 -9.91

1215.48

2022 - 8987.25 -17.00

1528.26

2023 - 12694.9 -8.49

1077.54

Interpretation: Net Profit ratio of the company is decreases from 17% to 8.48% in the
year 2020-21 to 2022-23. Revenue is increased and profit also increased. Net profit
is minus sign because the net sales is less, and expenses are more than sales, so
the net profit is less