CHAPTER - 1 INTRODUCTION OF THE STUDY ABOUT THE TOPIC The present study on financial performance analysis of L&T Shipbuilding Ltd attempts to understand the financial performance and condition of a firm, its stakeholders look at the financial statements, viz. the balance sheet, the profit and Joss account. The analysis of the financial statement is a process of evaluating the relationship between component parts of financial statement top obtains a better understanding of the firm’s position and performance. This study attempts to analyse the financial performance by using various tools. FINANCIAL STATEMENT Financial Statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance and liquidity of a company. Financial Statements reflect the financial effects of business transactions and events on the entity. Four Types of Financial Statements The four main types of financial statements are: 1. Statement of Financial Position Statement of Financial Position, also known as the Balance Sheet, presents the financial position of an entity at a given date. It is comprised of the following three elements: Assets: Something a business owns or controls (e.g. cash, inventory, plant and machinery, etc) = Liabi ities: Something a business owes to someone (e.g. creditors, bank loans, etc) Equity: What the business owes to its owners. This represents the amount of capital that remains in the business after its assets are used to pay off its outstanding liabilities. Equity therefore represents the difference between the assets and liabilities. 2. Income Statement Income Statement, also known as the Profit and Loss Statement, reports the company's financial performance in terms of net profit or loss over a specified period. Income Statement is composed of the following two elements: Income: What the business has earned over a period (e.g. sales revenue, dividend income, etc) Expense: The cost incurred by the business over a period (e.g, salaries and wages, depreciation, rental charges, etc) aNet profit or loss is arrived by deducting expenses from income. View detailed explanation and Example of Income Statement 3. Cash Flow Statement Cash Flow Statement, presents the movement in cash and bank balances over a period. The , movement in cash flows is clas ed into the following segments: + Operating Activitie: Represents the cash flow trom primary activities of a business. = Inves ing Activities: Represents cash flow from the purchase and sale of assets other than inventories (e.g. purchase of a factory plant) + Financing Activities: Represents cash flow generated or spent on raising and repaying share capital and debt together with the payments of interest and dividends. View detailed explanation and Example of Cash Flow Statement 4, Statement of Changes in Equity Statement of Changes in Equity, also known as the Statement of Retained Earnings, details the movement in owners’ equity over a period. The movement in owners’ equity is derived from the following components: + Net Profit or loss during the period as reported in the income statement + Share capital issued or repaid during the period * Dividend payments + Gains or losses recognized directly in equity (e.g. revaluation surpluses) + Effects of a change in accounting policy or correction of accounting error Advantages of financial statement analysis ‘The different advantages of financial statement analysis are listed below: + The most important benefit if financial statement analysis is that it provides an idea to the investors about deciding on investing their funds in a particular company. + Another advantage of financial statement analysis is that regulatory authorities like IASB can ensure the company following the required accounting standards. + Financial statement analysis is helpfull to the government agencies in analyzing the taxation owed to the firm. + Above all, the company is able to analyze its own performance over a specific time period.Limitations of financial statement analys In spite of financial statement analysis being a highly useful tool, it also features some limitations Dependence on historical c Transactions are initially recorded at their cost. This is a concern when reviewing the balance sheet, whe liabilities may change over time. Some items, such as marketable securities, are altered to match changes in their market values, but other items, st ce the values of assets and ch as fixed assets. do not change. Thus, the balance sheet could be misleading if a large part of the amount presented is based on historical costs. Inflationary effects. If the inflation rate is relatively high, the amounts associated with assets and liabilities in the balance sheet will appear inordinately low, since they are not being adjusted for inflation. This mostly applies to long-term assets. Intangible assets not recorded. Many intangible assets are not recorded as assets. Instead, any expenditure made to create an intangible asset_are immediately charged to expense. This policy can drastically underestimate the value of a business, especially one that has spent a large amount to build up a brand image or to develop new products. It is a particular problem for startup companies that have created intellectual property, but which have so far generated minimal sales. Based on specific time period. A user of financial statements can gain an incorrect view of the financial results or cash flows of a business by only looking at one reporting period. Any one period may vary from the normal operating results of a -business, pethaps due to a sudden spike in sales or seasonality effects. It is better to view a large number of consecutive financial statements to gain a better view of ongoing results. Not always comparable across companies. If a user wants to compare the results of different companies, their financial statements are not always comparable, because the entities use different accounting practices, These issues can be located by examining the disclosures that accompany the financial statements. Subject to fraud. The management team of a company may deliberately skew the results presented. This situation can arise when there is undue pressure to report excellent results, such as when a bonus plan calls for payouts only ifthe reported sales level increases. One might suspect the presence of this issue when the reported results spike to a level exceeding the industry norm. No discussion of non-financial issues. The financial statements do not addres financial issues, such as the environmental attentiveness of a company's operations, or how well it works with the local community. A business reporting excellent financial results might be a failure in these other areas. non-+ Not verified, If the financial statements have not been audited, this means that no one has examined the accounting policies, practices, and controls of the issuer to ensure that it has created accurate financial statements. An audit opinion that accompanies the financial statements is evidence of such a review, + No predictive value, The information in a set of financial statements provides information about cither historical results or the financial status of a business as of a specific date. The statements do not necessarily provide any value in predicting what Will happen in the future. For example, a business could report excellent results in one month, and no sales at all in the next month, because a contract on which it was relying has ended, Financial Performance The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm’s position and performance. Financial performance analysis includes analysis and interpretation of financial statements in such a way that it undertakes full diagnosis of the profitability and financial soundness of the business. The financial performance analysis identifies the financial strengths — and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and profit and loss account. The first task is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second is to arrange the information in a way to highlight significant relationships. The final is interpretation and drawing of inferences and conclusions. In short, “financial performance analysis is the process of selection, relation, and evaluation.CHAPTER - 11 REVIEW OF LITERATURE evIEW OF LITERATURE, 21k are different mathematical Measures 10 evaluate how well a company is using its ere Bo make a profit, Common examples of financial performance include operating ys before interest and taxes, and net asset value. It is important to note that no sme. cari income Kore of financial performance should be taken on its own. Rather, a thorous one sformance s 5 one meat oFa company’s performance should take into account many different measures assess et ak 2001) examined the determinants of fitm performance for 566 Indian firms vol ROA. ROCE, cash flow ratio, Sales to asset, gross profit $2 margin, net profit m on Net worth etc., as dependent variable and size, age, leverage, working s determinants of They margin. ret capital ratio. that size, mart business group affiliation ete m performance and found ket expenditure and international diversification had a positive relation with ike valuation for firms. A firms ownership composition, particularly the level of equity Mrrership by domestic financial Institutions and Dispersed public shareholders, and the Tage of the firm were important factors aflecting its finan I performanc lever Pe krishna Prasad Upadhyay (2004) used different types of financial ratios to check up the financial performance of the selected finance companies. Basically in this study he used solvency ratio, liquidity ratio, efficiency ratio, profitability ratio and valuation ratio, Different measures like return on investment, return on equity, retum on assets, earning per share, dividend per share, and asset utilization ratio are used to assess the profitability of the companies. He concluded his study stating that the solvency position of both companies is not sound and credit creation capacity is good in both the companies in aggregate. Bala Ramaswmy, Darrylong and Mattew C.H. Yeung (2005) has found empirical evidence that firm size and the firm ownership are important determinants af financial performance in the Malaysian palm oil sector-findings lend support to industry analysts who have highlighted that profitability is higher in privately owned firms. Woo Gon Kim, Baker Ayoun (2005) the study attempts to investigate the technique applied in this industry. Hospitability — related industry segments may comprise hotels, restaurants, airlines, and other amusement and recreational 53 services. The objective of the study is to provide information to a variety of entities that might be interested in comparing major financial characteristics of companies on its different segments. The researcher used financial ratios, ime series and Multivariate analysis of variances’ test as statistical tools. ‘The study Concludes that increased volatility of hospitability industry due to unpredictable external ¢nvironment for the past four to five years. More volatile trends are depicted for the other three segments over the time period of this study. 26and Cartas Dorantes (2006) investizates the impact of information security wt Ko on performance. To evaluate the financial impact of security breaches related rc) er sential information the eens comparison group” method is used. The pentiened atos an woe ‘ as and percentage of change in sales and scorer We co see iF these Measures are better indicators for identifying differences in ind dering the context of this study. Profit ratios have been the most commonly peat ance consi formance measures. reo Fob 8 as Moneva, Juana M. Rivera-Lirio, (2007) Maria J. Munoz=Tores analyses the oor MR Tents and the sustainability reports, of a sample of $2 Spanish listed firms rjonal financial and econtomic-indieators are used to analyze the company's .e. Results show a not very high level of the stakeholder approach in level of publication and quality of sustainability reports and, ‘ant relationship between these variables and a positive rformane’ i panies a high mea positive and not sign final performance. 54 cial fin igh com ad Roberts (2008) argued that financial measures are given more value over ann a . . Nomen measures and ROI is the single performance measures to which managers give spore weightABe- setigln. M2010) explores the impact of strategic planning on financial performance of a vedustrial enterprises of Turkey. This paper is one of the few studies to examine the sic planning process in a sample of firms from a transitional economy. It can be sen gered a longitudinal study because it examines a set of institutions to identity changes in their performance overtime, as they incorporate the use of strategic tools in a dynamic competitive environment. The research sample was drawn from the Turkish chamber of industry database which listed the top 500 manufacturing firms in 2006. The findings of this sudy provide a contribution to our understanding of the nature and practice of strategic planning in Turkish companies and possibilities of correlations between their efforts and performance. Mahdi Salehi, Mehrdad Alipour and Morteza Ramazani (2010), the objective of the anicle is to establish the extent to which just-in-time may effect to Iranian company’s financial performance. The researcher used regression analysis as statistical tool. Eventually the researcher concludes that the application of the JIT system in Iran increases the financial and non financial performance of the companies. Because of the weakness in performing the JIT, they cannot benefit from it. The researchers strongly suggest that the barriers of performing the JIT system must be identified and removed as soon as possible, so that the Iranian companies increase their financial performances. Verdi Ali (2010) identifies whether this company has a strong financial fundamentals and ‘whether investment in the company will be of a long term nature, Its financial statements had been analyzed during 5 years period (2004-2008). Financial analysis has been measured by nts fatios. The study concludes that current ratio has declined in the last 4 years. ever, itis still well above the industry level, and it maintains a good level of liquidity. 27peen Alam, Ali Raza and Muhammad Akram (2011) examine financial f leasing companies since 2008 to 2010, Ratio ance © analysis technique has been rer wo evaluate financial performance of leasing companies. All data has been retrieved from ’ ig Exchange commission of Pakistan, _ 2 ciation 0! and leasing company’s websites. Nine jes are selected for analysis out of fiflecn and this study covers three year period compan'’g9 and 2010) . The researcher used ratios as statistical tools. This study concludes Asian financial service association. Leasing f Pakistan. State Bank of Pakistan (208710 the financial ratios are showing the positive change but there is a decline in we at performance of leasing companies in 2009 when compared to 2008. finat akend Bhunia, Sri Somnath Mukhuti and Sri Gautam Roy (2011) aims to identify we financial strengths: and weaknesses of the Indian public sector Pharmaceutical enterprises the Fina y establishing relationships between the items of the balance sheet and profit and tm rfount The sty has been undertaken forthe period of twelve years ftom 1997-98 to woeo9 and the necessary data have been oblained from CMIE database and public “onerprises survey. If order to analyze the financial performance in terms of liquidity. which iy fim! by dividin a tyre (a a rae A) of a company with its long-term finds. It shows the amount of ti aerermn financial ° s finane pee Rane AS Net Fixed Assets ch unit of long-term funds ee Ratio = wee Long-term Funds (Total of fixed assets — Total depreciation till date) + Trade Investments uc aed 259088 sides. aise OES ger funds: Share capital + Reserves + Long-term loans. TABLE 4.4 “ __eahe capacity ofa company t0 discharge its oligations towards long-term | strength and ensuring its long-term survival TABLE SHOWING THE FIXED ASSETS RATIO OF THE COMPANY YEAR NET FIXED LONG - TERM FIXED ASSETS | ASSETS FUNDS RATIO 34-2015 3600.61 1557.42 2.31 3015-2016 3406.95, 1849.4 1.84 2016-2017 3529.51 2066.46 1.70 2017-2018 3829.61 1794.18 2.13 2018-2019 2972.76 2049.09 1.45 SOURCES: Annual Report of the company from 2015-2019 Interpretation : Maly fixed assets should be sourced from long-term funds & current assets from short-term fds. a more than 1 from the year 2015-2019 indicates net fixed assets of the company are fe, han its longterm funds which demonstrates that the company has bought some ofits 4ssels with the help of short-term funds. This depicts operational inetficien a40% RA nine the PrOpErtion Uf lolal Assets of the company (ahi ri a ail ato der on-Curtent Assets) which are financed i my i hieh i paar Assets cof the business jebt and helps un ne eal IY oh eae FO ~ . otal Liabilities —_— we otal Assets TABLE 4.5 TABLE SHOWING DEBT RATIO OF THE COMPANY TOTAL TOTAL ASSETS | DEBT RAT YEAR LIABILITIES, [BT RATIO | LIABILITIES || a 1006.82 683.24 a sree 1136.66 tae mu 3017 1108.14 231.04 aa ssi 1021.53 313.73 5 e209 1038.31 828.21 i GERCES: Annual Report ‘of the company from 2015-2019 Interpretation : a det ratio greater than 1.0 (100%) indicates that a company has more debt than assets. veanwhile, a debt ratio less than 1.0 (100%) indicates that a company has more assets than see liabilities. The debt ratio from the year 2015-2019 is higher than 1.0. It means that the business uses ‘nore of debt to fuel its funding. In other words higher the ratio, higher is the leverage and {nancial risk on account of heavy debt obligation (in the form of Interest and Principal Payments) on the part of the business. 43esr TIO: pf ay TURNOVER RATIOS: 7 ve ck turnover ratio which is CC , ad. as the St0 Used to measure the n fer 7 ct : lumber of sa les 28 fo its inventory and how efficiently the inventories in a company is used. “The 1 ya fOr Sa = Cost of Goods Sold / Aver or Sales / Closing Inventory qumover Ratio ‘Age Stock pa er Ratio= qumover 10" et TABLE 4.6 anbe SHOWING INVENTORY TURNOVER RATIO OF THE COMPANY ean SALES CLOSING INVENTORY INVENTORY TURNOVER RATIO nian 1561.73 841.26 1.85 eG 1657.08 654.56 2.53 3016-2017 920.91 485.89 1.89 S708 1347.76 31737 2.60 7018-2019 1386.42 350.29 3.95 SURCES: Annual Report of the company from 2015-2019 Interpretation The ideal inventory turnover ratio is 4 which usually means the rate at which the company retock items is well balanced with its sales. Above table shows inventory turnover ratio is lssthan 4 from the year 2015-2019 which indicates that the company is not efficiently using is asets to generate sales. Hence the lower the rate, the longer the stock is taking to turn ove, 45URNOVER RATIO: oe “_ measures how much sale is generated from churning the fixed e a? ed how efficiently it is done. The fixed assets of a company are very ge come ration and thus the optimization of the fixed asset use increases the Sales or Net Sales guet Tarnover Ratio = Fixed Assets TABLE 4.7 “ABLE SHOWING FIXED ASSET TURNOVER RATIO OF THE COMPANY, Tv YEAR NET SALES FIXED ASSETS FIXED ASSET | TURNOVER RATIO wiezos | ———*1561-73 3600.61 0.43 50152016 1657.08 3406.95 0.48 016-2017 920.91 3529.51 0.26 5017-2018 1347.76 3829.61 0.35 5018-2019) 1386.42 2972.76 0.46 URCES: Annual Report of the company from 2015-2019 Interpretation ‘The company shows low tumnover from the year 2015-2019 which indicates that the company isit using its assets to their fullest extent. The return on fixed assets is not favourable with this low ratio, due to the fact that the amount of the investment made on property and equipment is the biggest among the asset categories; therefore, revenue generation is reliant pon these assets, 47se T enh ich determin yao pests for the & RNOVER RATIO nes the connection between the sales and the total asset of a {ficiency with which the company’s all assets are utilized to earn ] ee fe ne formula FOF om Sales (Net Sales) 7 qurnover Ratio = ws ‘Total Assets of the Company TABLE 4.8 ipSHOWING TOTAL ASSET TURNOVER RATIO OF THE COMPANY 1A GAR NET SALES TOTAL ASSETS | TOTAL ASSET Y TURNOVER RATIO | 361.73 683.24 2.28 (42015 ! 7 O16 1657.08 438.90 377 5162017 920.91 231.04 3.98 5017-2018 1347.76 313.73 4.29 5018-2019 1386.42 828.21 1.67 GURCES: Annual Report of the company from 2015-2019 ‘nerpretation Tetigher the asset turnover ratio, more is the company efficient. Conversely, if a company isslow asset tumover ratio, it indicates it is not efficiently using its assets to ‘se year 2018-2019 total assets turnover ratio is less as compared to previous y erate sales. s this ndtates that the company should analyze how the assets should be used and ways to "prove the productivity of each asset and how to increase the output without any signi ‘wase in any other expenses. 49TURNOVER RATIO pLoveP _ penwect the capital employed in business and the sales or revenue pe relat o of it. The capital whether used in a proper direction to generate peaes OF ly it is Been employe is mcasuted with this ratio. ‘and how a a mover Ratio = employed tur , ! ital Employed 4g=Net worth + Long-term Borrowings cgi! Ene Capital + All Reserves tS TABLE 4.9 LE SHOWING CAPITAL EMPLOYED TURNOVER RATIO OF THE ™ COMPANY YEAR NETSALES — | CAPITAL CAPITAL EMPLOYED EMPLOYED ____| TURNOVER RATIO | Frea015 1561.73 798.28 195 _ 3015-2016 1657.08 1849.4 0.89 3016-2017 920.91 2066.46 0.44 7017-2018 1347.76 1794.18 0.75 7018-2019 1386.42 2049.09 0.67 SOURCES: Annual Report of the company from 2015-2019 Interpretation be year 2014-2015 capital employed turnover ratio was high which indicates better scion of capital employed and shows the ability of the firm to generate maximum profits wit he minimum amount of capital employed. From the 2015-2019 capital employed ‘nove ratio started reducing due to minimum sales with maximum amount of capital ‘pled by the company.L TURNOVER RATIO: anit Nt over ratio measures how well a company is utilizing its we ee gal to sales. Working capital is curre Bs working itt ca give evel 0 1g capital is current assets minus current +g ott ios eto : et sales ‘ae sales ( ce ‘Average Working Capital f ‘ ccurnent assets ~ Curent liabilities capital = . ana . re ee opital = (BEINNINE working capital + Ending working capital) /2 ia { TABLE 4.10 ‘ LE SHOWING WORKING CAPITAL TURNOVER RATIO OF THE Bl COMPANY Lo AVERAGE WORKING ypAR NET SALES WORKING CAPITAL } CAPITAL TURNOVER j RATIO | e015 1561.73 302.11 3.11 | ps2016 1657.08 209.39 791 | 50162017 920.91 52.685 TAT | 2017-2018 1347.76 228.1 5.90 | 70182019 1386.42 470.695 2.94 GERCES: Annual Report of the company from 2015-2019 P P% \ lnerpretation | | be year 2015-2017 there was a high turnover ratio which indicates that management 's | tewtemely efficient in using a firm's short-term assets and liabilities to support sales. In | Socecing yeas ie. 2017-2019 working capital turnover ratio started decreasing due to ieee in too many accounts receivable and inventory assets to support its sales, | icon eventually lead to an excessive amount of bad debts and obsolete inventory 53optTABILITY RATIOS pr prot RATIO NE ¥ aio’ measures the overall profitability of company considering all direct ay well as s i ese dsitive ret of act cost: A high ratio represents a positive return in the company and better the company indir is orl: Net Profit se profit ratio= x 100, Ne Sales profit = Gross Profit * Indirect Income ~ Indirect Expenses Net TABLE 4.11 TABLE SHOWING NET PROFIT RATIO OF THE COMPANY ;-_ YEAR NET PROFIT, SALES °T PROFIT RATIO 2014-2015 51.73 1561.73 331 2015-2016 164.44 1657.08 9.92 2016-2017 11.39 920.91 123 2017-2018 87.43 1347.76 6.48 3018-2019 110.32 1386.42 7.95 SOURCES: Annual Report of the company from 2015-2019 Interpretation This ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. Higher the ratio the better is the profitability. From the year 2016-2019 the net profit ratio of the company is gradually increasing since company is able to control costs that buy goods and services at prices than it costs to produce or provide them. gnificantly higher 55gross aio measures the marginal profit of the company. This ratio is also used to measure the is ratte ig eprecel : = . ent revenue. A high ratio represents the greater profit margin and it’s good for the eg : pany formula Gross Profit Gross profit te xiao Sales qs Proft= Sales + Closing Stock — opening stock ~ Purchases ~ Direct Expenses TABLE 4.12 TABLE SHOWING GROSS PROFIT RATIO OF THE COMPANY ~~ YEAR GROSS PROFIT SALES GROSS PROFIT RATIO 14-2015 117.27 1561.73 7.50 2015-2016 279.34 1657.08 16.85 2016-2017 46.77 920.91 3.07 2017-2018 156.71 1347.76 11.62 2018-2019 206.04 1386.42 14.86 ‘SOURCES: Annual Report of the company from 2015-2019 Interpretation Notice that in terms of managing cost of sales and generating gross profit, the company did better in Year 2015-2016. It also shows that the gross profit margin from the year 2017-2019 has improved by increasing sales price or decreasing cost of sales. Hence the company has more to cover for operating, financing, and other costs to gain higher gross profit margin. 57gn on ASSETS RATIO: pur ; : res the carning per rupee of assets invested in the company si measu the company is. isa , ms pas better se Net Profit Total Assets TABLE 4.13 A high ratio TABLE SHOWING RETURN ON ASSET RATIO OF THE COMPANY _—7yEaR NET PROFIT TOTAL ASSETS RETURN ON ASSET RATIO 7014-2015 31.73 683.24 0.07 15-2016 164.44 438.90 037 5016-2017 11.39 231.04 0.04 3017-2018 87.43 33.3 0.13 3018-2019 110.32 828.21 0.27 SOURCES: Annual Report of the company from 2015-2019 Interpretation in the year 2015-2016 there was a high percentage of return on assets indicating how efficiently a company can squeeze profit from its assets, regardless of size. From the year 2016-2019 the percentage of ROA was less as compared to the year 2015- 16 but showing a positive growth in the succeeding year's Hence high ROA is a tell-tale sign of solid financial and operational performance. 59on CAPITAL EMPLOYED RATIO;- kN uk ae —emputes percentage return in the company on the funds invested in the business es 'n high ratio represents better the company is pie inl fore Net Operating Profit ee — «100 jm Capital Employed sa Employed Equity share capital, Reserve & Surplus, Debentures & long-term Loans wi : | Employed = Total Assets — Current Liability cata TABLE 4.14 TABLE SHOWING RETURN ON CAPITAL EMPLOYED RATIO OF THE, COMPANY YEAR NET OPERATING CAPITAL RETURN ON PROFIT EMPLOYED CAPITAL EMPLOYED RATIO. 7014-2015, 123.04 798.28 15 2015-2016 283.74 1849.4 15 3016-2017 55.89 2066.46 02 5017-2018 164.40, 1794.18 09 5018-2019) 211.15 2049.09 10 SOURCES: Annual Report of the company from 2015-2019 Interpretation In the year 2015-2016 ROCE was same which shows the stability in return of the company but in the year 2016 -2017 it reduced drastically and from the year 2017-2019 the ROCE started increasing. As a result it shows a decent measure of the total resources that a business has available to it, although it is not perfect but with ROCE, higher the percentage figure, and the better is the company’s return. 61art eo pet mn better the comps esos an gorul® amon a ratio= R wheres ya worth = Equity RATIO y FQUITY pn any is, Profit after Tax Net worth share capital, and Reserve and Surplus TABLE 4.15 Profitability of equity fund invested the ; eases Profit . i x \d invested the company. It also measuires how i +s funds have been utilized to gener owners fund: generate company’s revenues. A high ratio TABLE SHOWING RETURN ON EQUITY RATIO OF THE COMPANY x YEAR PROFIT AFTER NET WORTH | RETURN ON EQUITY TAX RATIO 3014-2015 31.73 1006.82 0.05 515-2016 164.45 1136.66 014 5916-2017 1147 1083.14 0.01 517-2018 92.40 1021.53 0.09 5018-2019) 109.94 1038.31 0.10 ‘SOURCES: Annual Report of the company from 2015-2019 Interpretation In the year 2015-2016 return on equity ratio was high and from the year 2016-2019 it was low 2s compared to the previous year but started increasing at a decreasing rate. As a result it shows a decent return on equity, higher the percentage figure, and the better is the company’s return, 63IVE BALANCE SHEETS pARAT| co TABLE 4.16 COMPARATIVE BALANCE SHEET FY 2014-2015 March 2014 | “Absolute | Percentage (%) : __IncDec | __ Ine/Dee 1006.82 ae 0 0 2013.64 1993.23 _| March 2018 | Mareh 2014 563.81 533.87 29.94 36 198.07 170,99 27.08 15.83 365.74 362.88 2.86 0.78 11.21 1771 “65 -36.7 0 0 0 0 TS 841.26 5240.99 -4399.73 -83.94 Denon 158.51 46.56 111.95 240.85 sd Bank Balance 1734.05 447.96 1286.09 287.09 Se Cament Assets 3284.41 3984.41 -2700 45.11 sand Advances 350.6 248.91 301.69, 121.20 “area Liabilites 2888.7 5309.58 -2420.88 45.59 Provisions 66.33 124.12 “31.19 “46.55 Taal CL & Provisions 2955.02 5433.69, ~2478.67 ~45.61 Si Current Assets 329.39 350.72 ~221.33 40.18 Total Assets 13947.1 24472.39 10525.29 43.00 Interpretation: By analysing the comparative balance sheet from FY 2014 to 2015 of L&T Shipbuilding, we can see the following results. The company net current assets decreased by 40.18% which shows an unfavourable sign to pay down the short term obligations and the net worth was also decreased by 3.0%. Hence the liquidity position of the firm is not satisfactory. 65TABLE 4.17 COMPARATIVE BALANCE §) VY 2015-2016 Gourees OF Funds March 2016 | March 2018 | Absolute (%) Inc/Dec Inc/Dec Tad c igutapt ——— “hi ai [ees — — 1000.82. 128 | Net Me le = —— insets — 0 (mm La ebs 0 0 os 2273.31 2013.64 259.67 12.8 | —apetion ‘Of Funds Mareh 2016 | March 2015 Gross Block 566.4 563.81 2.59 04 or Accum. Depreciation 222.7 198.07 24.63 124 er flock 343.7 305.74 [22.08 6.0 ‘Capital ‘tok in Progress 22.28 W210 11.07 98.7 Jnvestments, 0 0 0 0 Prentores 654.56 841.26 “186.7 “22.1 Sundry Debtors 153.83 158.51 4.68 29 Cosh and Bank Balance 1852.5 1734.05 118.45 68 oval Current Assets 3373.63 3284.41 89.22 2.7 Loans and Advances 712.74 550.6 162.14 29.4 Current Liabilities 3210.2 2888.7 321.5 m1 Provisions. 74.04 66.33 711 11.6 Total CL & Provisions 3284.24 2955.02 329.22 Td Net Current Assets 0089.39 329.39 240 72.8 [Total Assets 14560.21 13947. 613.11 43 Interpretation: By analysing the comparative balance sheet from FY 2015 to 2016 of L&T Shipbuilding, we can see the following results. The company net current assets incre: sed by 72.8% this indicates there are sufficient current assets to pay for all current obligations. Since there are positive earnings on income statement at the end of the year, net worth of L&T Shipbuilding increased by 12.8%, 66TABL COMPARATIVE BALANCE SHEET FY 2016-2017 Sources OF Funds March 2016 | Absolute | Percentage (%) | InciDec | __Ine/Dee | 1012.82 1136.65 | }— 0 | =eecured Loans ——o ‘cual Debi 25 0 poral Liabilities 2216.28 273.31 Application OF Funds | March 2017 | March 2016 [AE ut — - Gross Block _ 412.63, 566.4 7153.77 274 Hess: Accum. Depreciation 34.29 222.7 -168.41 -75.6 Net Block 358.34 343.7 14.64 42 | Capital Work in Progress 23.18 22.28 0.9 4.0 Jnvestments 0 0 0 0 Inventories 485.89 654.56 ~168.67 “25.7 Sundry Debtors 198.86 153.83 45.03 29.2 “Cash and Bank Balance 1620.26 1852.5 232.24 12.5 Total Current Assets 3288.33, 3373.63 85.3, 25 I Loans and Advances 983.32. 712.74 270.58 37.9 Current Liabilities 3272.35 32102 62.15 19 Provisions: 149.01 74.04 TAIT Tor “Total CL & Provisions 3421.36 3284.24 137.12, 41 Net Current Assets 133.03 89.39 43.64 48.8 Total Assets 14400.85 14560.21 =159.36 -1.0 Interpretation: By analysing the comparative balance sheet from FY 2016 to 2017 of L&T Shipbuilding, we can see the following results. The company net current assets increased at a decreasing rate by 48.8% this indicates there are sufficient current assets to pay for all current obligations. Also there is a negative net worth by 4.7% because company borrowed too much money and subsequently had its income fall as its debt payments rose. 67ot I eg foil Capita _—__——— bgevetves$_————— | xe worth eed oa s sd TABLE 4.19 COMPARATIVE BALANCE SHEET PY 2017-2018 March 2018 1455 906.98, 1021.54 March 2017 ie 959.4 Hosta | 5 Absolute Percentage (%) | Inc/D | 2043.07 T2628 | -20. plication Of Funds Mareh 2018, March 2017 [Aas Gross Block. - 412.63 59.7 14.4 ~ Accum, Depreciation 54,29 28.87 53.1 i 358.34 30.83, 860 | Capital Work in Progress 23.18 “1.15 “30.8 Investments. 0 0 0 inventories 517.37 485.89 31.48 64 ‘Sundry Debtors 202.06 198.86 32 16 + Cash and Bank Balance 1022.15 1620.26 -598.11 36.9 Total Current Assets 2514.24 3288.33 -774.09 23.5 ‘Loans and Advances 12.05 983.32 -210.67 “214 Current Liabilities 3074.02 3272.35 =198.33 6.0 Provisions 147.61 49.01 [14 0.9 Total CL & Provisions 3221.63 3421.36 -199.73 “5.8 [Net Current Assets 501.17 133.03, 368.14 276.7 Total Assets 13139.81 14400.85 9.29 715 Interpretation: By analysing the comparative balance sheet from FY 2017 to 2018 of L&T Shipbuilding, we can see the following results, The company net current assets increased by 276.7% this indicates there are sufficient current assets to pay for all current obligations, But there is a ‘egative net worth by 5.6% because company borrowed too much money and subsequently ‘ad its income fall as its debt payments rose. 68TABLE 4.20 COMPARATIVE BALANCE SHEET FY 2018-2019 ces OF Funds March 2019 | March 2018 Absolute | Percentage (%) Sour ff | AneDee | tne/Dee 114.55 | ee. eee ee 1 923.76 906.98 | 1678 «|S | 1038.31 1021.54 16.77 0 0” 0 fli 0 0 0 0 7 0 0 0 0 2076.62 2043.07 33.55 16 pation OF Funds March 2019 | March 2018 | 399.59 FIZS “72.74 Gs Be Depreciation 97.33 83.16 14.17 ck 302.26 389.17 “86.91 Capital Work in Progress 34.19 16.03 18.16 ments 183 0 1.83 Hee ries 350.29 31737 -167.08 Hondry Debtors 219.86 202.06 178 Cash and Bank Balance 1989.4 1022.15 967.25 otal Current Assets 3570.34 2514.24 1056.1 Tans and Advances 1010.78 772.65 238.13, Garrent Liabilities 2927.64 3074.02 “146.38 Frovisions 141.53, 147.61 -6.08 Total CL & Provisions 3069.17 3221.63 “152.46 [Net Current Assets 707.39 SOL.17 206.22 Total Assets 14615.38 13139.81 1475.57 Interpretation: By analysing the comparative balance sheet from FY 2018 to 2019 of L&T Shipbuilding, we can see the following results. The company net current assets increasing at a decreasing rate 4) 41.1% which shows a favourable sign to pay down the short term obligations and as aresult of assets exceeding liabilities, there is a positive net worth of 1.6%. Finally it can be Concluded that there is a good sign witnessed during this period. 69LANCE SHEETS: ON SIZE BA! comm TABLE 4.21 COMMON SIZE BALANCE SHEET FOR THE PY 2014-2015 [Mar-I5 | Percentage | Mar-14 123.84 61 123.84 62 | 882.98 [438 $31.08 46 | 1006.82 50 1038.31 32.0 0 0 0 0 } 0 0 0 0 0 0 0 0 2013.64 100 1993.23 100 Mar-I5 | Percentage | Mar-14__| Percentage 563.81 27.9 533.87 26.7 198.07 98 170.99 8.57 365.74 18.1 362.88 18.2 120 OS 17.71 08 0 0 0 0 841.26 4N7 5240.99 262.9 158.51 78 46.56 23 1734.05 86.1 447.96 22.4 3284.41 163.1 5984.41 300.2 550.6 273 248.91 12.4 2888.7 143.4 5309.58 266.3 ? 66.33 32 124.12 62 Taal CL & Provisions 2955.02 146.7 5433.69 272.6 ‘Nat Current Assets: 329.39 16.3 550.72 276 Total Assets 2013.64 100 1993.23, 100 Interpretation: The above table reveals the common-size balance sheet of L&T Shipbuilding for the year 2014 and 2015. The company net fixed assets decreased slightly from 18.2% to 18.1%. The vompany's net current assets found to decrease from 27.6% to 16.3%. Net worth decreased ‘tm 52.0% to 50.0%. 70MMON SIZE BALANCE TABL col FOR THE FY 2015-2016 — | Marto] Percentage [ Percentage | 123.84 34 Gl 1012.82 445 ~ BS 1136.65 49.9 1000.82 0 0 0 - 0 a) 0 0 _0 0 0 0 0 0 2273.31 100 2013.64 ‘100 Mar-16 Percentage Mar-15 Percentage | ck 366.4 249 363.81 279 Gass Bloel val 222.7 97 198.07 98 Gms. reciation ress Accu Dep 343.7 15.1 365.74 18.1 Block ___ 28 09 0.5 Sal Work in Progress ZH X 1 a z “vestments 654.56 28:7, 841.26 47 Inventory 153.83 67 158.51 78 Sundry Debiors 1852.5 814 1734.05 86.1 ch and Bank Balance Cah rent Asses 3373.63 1484 3284.41 163.1 Toe 712.74 313 350.6 273 ‘Advances 5 La ls 3210.2 1412 2888.7 143.4 Cu f 74.04 3.2 66.33 32 Provisions: [Pew CL & Provisions 3284.24 1444 2955.02 146.7 Kar Curront Assets 89.39 39 329.39 16.3 ep 2273.31 100 2013.64 100 Interpretation: The above table reveals the common-size balance sheet of L&T Shipbuilding for the year 2015 and 2016. The company net fixed assets decreased slightly from 18.1% to 15.1%, The company’s net current assets found to decrease from 16.3% to 3.00%, Net worth decreased from 50.0% to 49.9%. 71COMMON SIZE BALANCE SHEET FOR THE FY 2016-2017 TABLE 4.23 Mar-17 Percentage | March 2016 | Percentage | 123.84 5.5 123.84 _ 5A | 959.3 43.2 1012.82 44.5 1083.14 48.8 1136.65 49.9 aoe i 0 0 0 0 oF 0 25 112 0 0 2216.28 100 2273.31 100 —;pplication OF Funds Mar-17 | Percentage | March 2016 | Percentage a a 412.63 18.6 366.4 249 Gross BS i 34.29 24 222.7 97 Depreciation Lesh 358.34 16.1 343.7 15.1 Net Blo 23.18 1.04 22.28 09 Progress c : Capital Work in a a a ; [ne 485.89 219 654.56 28.7 inven 198.86 8.9 153.83 67 ; biors : . san ank Balance 1620.26 Bal 1852.5 814 Tash and Bank Bi i tal Current Assets 3288.33 148.3 3373.63 148.4 ea and Advances 983.32 443 712.74 313 Zaent Liabilities 3272.35 147.6 3210.2 1412 j 149.01 67 74.04 32 sions ral CL & Provisions 3421.36 134.3 3284.24 1444 [Net Current Assets 133.03 60 89.39 39 [ Total Assets 2216.28 100 2273.31 100 Interpretation: The above table reveals the common-size balance sheet of L&T Shipbuilding for the year 2016 and 2017. The company net fixed assets increased slightly from 15.1% to 16.1%. The company’s net current assets found to increase from 3.9% to 6.0%. Net worth decreased from 49.9% to 48.8%, 72TABLE 4.24 COMMON SIZE BALANCE SHEET FOR THE FY 2017-2018 1 cas OF Fumls | March 2018 | Percentage | March 2017 | Percentage -—_a 114.55 5.6 123,84 55 (ceconil® 906.98 W439 9303 ag kk sen 1021.54 50.0 1083.14 48.8 [Ree al 0 r Sed Loans 0 FI 3 a [see Loans 7 fi soot 0 0 25 12 Foal “piles 2043.07 100 2216.28 100 al bi “Application Of Funds March 2018 | Percentage | March 2017 | Percentage ak 472.33 BA 412.63 18.6 San Depreciation 83.16 4.0 54.29 24 Les ock 389.17 19.0 358.34 16.1 Sal ‘Work in Progress ies a 23.18 1.04 0 0 its: IS 317.37 25.3 485.89 21.9 in sundry Debtors 202.06 98 198.86 89 a and Bank Balance 1022.15 30.0 1620.26 B.1 ayn xvi TABLE 4.26 TABLE SHOWING TREND FOR SALES 2 EARS x oH ae 5 x 7 ae : TREND VALUE | DEVIATION a - = - 1507.952 ist estates ret sa ate 2017 = 0 1375.356 5 — 3018 | 1 | 1347.76 1} __1347.76 1309.058 —— a 2] 1386.42 4] 2772.84 1242.76 14 6876.78 10| _-662.98 - 366 7 oe TS = 1375.356 =-662,98/10 = -66.298 CHART 4.16 9 —————————— - 160 ] o| 140 | 0 4 “DEVIATION 100 = TREND 0 600 ~ 201 201 201 201 75TABLE 4.27 ROJECTED TREND VALUE — EXPECTED SALES Pi FOR THE FORTHCOMI YEARS (2019-2023) [___ FUTURE TREND (Trend value + B) [ 1176.462 | 1016 SSSS~«&d 1043266 977.568 11.27 CHART 4.17 CHART SHOWING TREND ANALYSIS = FUTURE | of 20 0 2019 2021 2022 INTERPRETATION:- The trend analysis for the above years shows a decreasing trend. This is mainly due to the reson that these data’s have been arrived in comparison with the last 5 years of sales. There 'saphenomenal decrease in growth in terms of sales during 2017 and this is one of the major ‘easons that the projections are also showing a decreasing trend. In reality if we assume that ‘heWvend continues compared to 2019, the ratio of above five years will be still lower. 76TABLE 428 ZABLE SHOWING TREND FOR EXPENSES OTL SS SRN TTT - = : < —— . : Lower wa CHART AIS CHART SHOWING TREND AND DEVIATION w Q - ° ~~ ° ° @ DEVIATION w se TREND Q = 00 7TABLE 429 pRoseCTED TREND VALUE - EXPECTED EXPENSES FOR THE FORTHCOMING YEARS (2019-2023) ARS FUTURE TREND (Treed valee news SSS Ps 1010. 087 CHART 4.19 (CHART SHOWING TREND ANALYSIS. | FUTURE TERPRETATION:- Proected trend analysis for the period of 2019-2023, for expenses trend is decreasing one i is a good sign. This shows that the L&T Shipbuilding might have control over its Syeases by focusing on common issues like reducing the cost of building, lowering the Scrll cost of shipbuilding. This will help to reduce the expenses amd inerease the M\kctivity & profit of the company in near future.TABLE 4.30 TABLE SHOWING TREND FOR PROFITS 201 201 201 201 Y x2 XY TREND VALUE DEVIATIO a7 | -103.46 77.028 -25.298 164.44 | 1 7164.44 81.045 83.395 {1139 0 0 85.062 -73.672 | 87.43 1 87.43 89.079 -1.649 | ri032 | 4 | 22064 93.096 11224 | 725.31 10 40.17 CHART 4.20 CHART SHOWING TREND AND DEVIATION DEVIATION —*— TREND 79TABLE 4.31 pROJECTED TREND VALUE ~ EXPECTED PROFITS FOR THE FORTHCOMING YEARS (2019-2023) YEARS FUTURE TREND 81.045 101.13 105.147 109.164 113.181 CHART 4.21 CHART SHOWING TREND ANALYSIS 12 10 | FUTURE | on | 20 201 202 202 202-202 | INTERPRETATION:- Prjcted trend analysis for the period of 2019-2023, for profits trend is a ‘ *4g00d sign, As L&T Shipbuilding plans to continue strengthening its strong flatonships “ithe Indian Navy and the Indian Coast Guard and also planning to ramp ee ‘air and refitting of Indian Navy and Indian Coast Guard vessels. Additionally : ™ Pe © ‘nctease its research and development spends to boost efforts in the Sours an us a TWarships along with engineering product development will help the company to ga ‘ute shipbuilding projects and increase profits. 80