PROJECT REPORT

SUMMER TRAINING
ON
A FINANCIAL STATEMENT ANALYSIS AND INTERPRETATION
OF C.B ENTERPRISES
S.D. GUPTA & COMPANY
FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF

BACHELOR OF COMMERCE
UMDER THE SUPERVISION OF

UNDER THE SUPERVISION OF

Mrs. Unnati Jadaun

CA Shobhit Kumar

SUBMITTED BY

B.com (2015)
Enrolment No. 20130544

INSTITUTE OF BUSINESS MANAGEMENT,

MANGALAYATAN UNIVERSITY,
33rd KM STONE, ALIGARH MATHURA HIGHWAY,
BESWAN ALIGARH
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CERTIFICATE OF THE SUPERVISOR

This is to certify that the work entitled A Financial statement analysis & interpretation of C.B.
ENTERPRISES is a piece of SIP research work done by Ms. Pinkey Rana under my guidance
and supervision for the degree of B.COM (Hons.) from Mangalayatan University Aligarh. I
certify that the candidate has put 45 days in industry training at S.D.GUPTA & COMPANY.
To the best knowledge and belief the report:
(i)
(ii)
(iii)

Embodies the work of the candidate himself.

Has duly been completed.
Fulfills the requirement of the ordinance relating to the B.COM (Hons.) degree of the

(iv)

University and
Up to the standard both in respect of contents and language for being referred to the
examiner.

Signature of the Supervisor

Date

ACKNOWLEDGEMENT
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"I have taken efforts in this internship. However, it would not have been possible without the
kind support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them.
I am highly indebted to Mrs. Unnati Jadaun for their guidance and constant supervision as well
as for providing necessary information regarding the internship & also for their support in
completing the internship.
I would like to express my gratitude towards my parents & member of S.D.GUPTA &
COMPANY for their kind co-operation and encouragement which help me in completion of this
internship.
I would like to express my special gratitude and thanks to CA Shobhit Kumar for giving me such
attention and time.

PREFACE
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This Project Report has been prepared in partial fulfillment of the requirement for the subject:
the Summer Internship programme on the topic A Financial statement analysis and interpretation
of C.B ENTERPRISES in B.COM (HONS.) 4th Sem. in the academic year 2014-2015.
For preparing the Project Report, I have completed my Internship from S.D.GUPTA &
COMPANY under the CA Shobhit Kumar during the suggested duration for the period of 45
days to enhance my knowledge. The blend of learning and knowledge acquired during my Summer
Internship at the company is presented in this Project Report.
The rationale behind doing Summer Internship and preparing the project report is to study A Financial Statement
Analysis and Interpretation, what is company, what is Financial statement, why Analysis of statement is necessary
for a company, ratio analysis and how does it help to get liquidity position liquidity position and how does it
helpful of Investors for taking investing decision and Use of tally for maintain company account.

ABSTRACT

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Financial statements are formal record of the financial activities of a business, person or other
entity and provide an overview of a business or persons financial condition in both short and
long term. They give an accurate picture of a companys condition and operating results in a
condensed form. Financial statements are used as a management tool primarily by company
executive and investors in assessing the overall position and operating results of the company.
Analysis and Interpretation of financial statements help in determining the liquidity position,
long term solvency, financial viability and profitability of a firm. Ratio analysis shows whether
the company is improving or deteriorating in past years. Moreover, comparison of different
aspects of all the firms can be done effectively with this. It helps the clients to decide in which
firm the risk is less or in which one they should invest so that maximum benefit can be earned.
Industries are capital intensive; hence a lot of money is invested in it. So before investing in
companies one has to carefully study its financial condition and worthiness. An attempt has been
carried out in this project to analyze and interpret the financial statements of a company.
OBJACTIVE:

To understand, analyze and interpret the basic concepts of financial statements of

different mining companies.

Interpretation of financial ratios and their significance.
Use of Tally 9.0 package for the analysis and interpretation of financial statements of
mining companies.

This project mainly focuses in detail the basic types of financial statements of different
companies and calculation of financial ratios. Ratio analysis of C.B.ENTERPRISES was done.
Tally 9.0 was used for preparation of balance sheet, profit & loss statements and estimation of
few financial ratios of selected companies. Profit & Loss Statements of companies were not
calculated as Tally 9.0 has limitations in processing the data that was available. However, only
three ratios viz. current ratio, quick ratio and debt-equity ratio were calculated. An advanced
version can be developed for calculation of profit & loss statements and other financial ratios.
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From ratio analysis of Balance Sheet and P & L Statement of C.B.ENTERPRISES of 2013-15 it
was concluded that liquidity position of the company is good. Current ratio, debt-equity ratio,
quick ratio, net profit margin, operating profit margin, gross profit margin, return on assets,
return on investments and return on capital employed were found to be unacceptable.
In this project, comparison of different ratios viz. current ratio, debt-equity ratio, net profit
margin and return on investment of all the above e companies has been done for the period 201315.It was observed that current ratio of C.B.ENTERPRISES was always more than 1 from 201315which indicates that liquidity position of the company was good.
Debt-Equity ratio of C.B.ENTERPRISE increased in 2013-15 which the debts have been cleared.
Return on Investment of C.B.ENTERPRISES increased from 44.20% to 48.72% in Two years.

CONTENTS

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Sl. No.

Title

Chapter -01

INTODUCTION

Chapter-02

1.1
1.2

S.D.GUPTA & COMPANY

A Financial Statement Analysis and Interpretation

14
14

1.3

Objectives

15

FINANCIAL STATEMENTS

16

2.1

17
18

2.1.2 Contents of Balance Sheet

20

2.2

25

Profit and loss statements

2.2.1 Format of Profit and Loss Statement

26

2.2.2 Contents of Profit and Loss Statement

27

FINANCIAL RATIOS

2.3.1 Objectives

29

2.3.2 Financial Ratios And Their Interpretation

30

FINANCIAL RATIO ANALYSIS: CASE STUDY

3.1

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Balance Sheet

2.1.1 Format of Balance Sheet

2.3

Chapter-03

Page No.

Ratio Analysis of C.B ENTERPRISES

3.1.1 Balance sheet of C.B.ENTERPRISES for 2014

39

3.1.2 Balance sheet of C.B.ENTERPRISES for 2015

40

3.1.3 Profit & Loss Statement for 2014

42

3.1.4 Profit & Loss Statement for 2015

44

3.1.5 Ratio Analysis for 2014

46

3.1.6 Ratio Analysis for 2015

50

3.1.7 Summary for Balance sheet and profit & loss statement

53

3.2

54

RATIO ANALYSIS USING TALLY 9.0

3.2.1 Balance Sheet and Ratio Analysis for 2014

55

3.2.2 Balance Sheet and Ratio Analysis for 2015

56

Chapter-04

VARIATION OF FINACIAL RATIOS

S.B ENTERPRISES

Chapter-05

COMPRATIVE STATEMENT
5.1 Income Statement

61

5.2 Balance Sheet

62

FINDINGS

63

CONCLUSION

64

RECOMMENDATIONS

66

LIMITATIONS

68

BIBLIOGRAPHY

69

LIST OF TABLES
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57

Sl. No.

Title

Page No.

Table2.1

Balance Sheet Statement

18

Table2.2

Profit & Loss Statement

26

Table2.3

Different Financial Ratio

30

Table3.1

Balance Sheet of C.B ENTERPRISES,2014

39

Table3.2

Balance Sheet of C.B ENTERPRISES,2015

40

Table3.2

Profit & Loss Statement of C.B ENTERPRISES ,2014

42

Table3.3

Profit & Loss Statement of C.B ENTERPRISES. 2015

44

Table3.4

Analysis of Financial Ratio for 14

46

Table3.5

Analysis of Financial Ratio for 15

50

Table3.7

Summary of Balance Sheet

53

Table3.8

Summary of Profit & Loss Statement

54

Table5.1

Comparative Income Statement

61

Table5.2

Comparative Balance Sheet

62

LIST OF FIGURES

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Fig.3.1

Balance Sheet,2014

55

Fig.3.2

Ratio Analysis of C.B.ENTERPRISES for 2014

55

Fig.3.3

Balance Sheet,2015

56

Fig.3.4

Ratio Analysis of C.B ENTERPRISES for 2015

56

Fig.4.1

Current Ratio

57

Fig.4.2

Working Capital Ratio

57

Fig.4.3

Quick Ratio

58

Fig.4.4

Debt- equity Ratio

58

Fig.4.5

Inventory Turnover Ratio

58

Fig.4.6

Return On Assets

59

Fig.4.7

Return on Investment

59

Fig.4.8

Gross Profit Ratio

59

Fig.4.9

Net Profit Ratio

60

Fig.4.10

Return On Working Capital

60

Fig.4.11

Operating Cost Ratio

60

EXECUTIVE SUMMARY

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Subject Matter: This Project report provides an analysis and interpretation of the year 2013-14
and 2014-15 profitability, liquidity and financial stability of C.B.ENTERPRISES.
Methods of Analysis: Methods of analysis include horizontal and vertical analyses as well as
ratios such as Debt, Current and Quick ratios. Other calculations include rates of return on
Shareholders Equity and Total Assets and earnings before interest & Tax to name a few. Many
other calculation of can be found in this project.
Findings: Results of data analyzed show that all ratios are below industry averages. In particular,
comparative performance is poor in the areas of profit margins, liquidity, credit control, and
inventory management.

Assets have decreasing due to investment is decreasing.

Liquidity Position is good.

Purchase has decreased by 37.58%

COGS has decreased by 46.17%
Sales have decreased by 29.47%
Gross Profit has decreased by 45.79%
Net profit has decreased by 33.22%

Conclusion: The report finds the prospects of the company in its current position are not
positive. The major areas of weakness require further investigation and remedial action by
management.
Recommendations: Recommendations discussed include:

Improving the average collection period for accounts receivable

Improving/increasing inventory turnover
Reducing prepayments and perhaps increasing inventory levels.
Increase in purchase and Production activity.

Limitations of the report: three problems involved in such report are:

a) That firms use different accounting principles and methods.
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b) That it is often difficult to define what industry and firm is really a part of and
c) That accounting principles varies among countries

CHAPTER- 01

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INTRODUCTION
1.1 S.D.GUPTA & COMPANY: S.D. GUPTA & COMPANY was formed on May 2, 2015
in Greater Noida by 2 directors CA Shobhit Kumar and CA Deepali Gupta. It is registered
under the Act, CA Regulation Act. 1949 The Head Office is in GR. Noida and has its branch
in Mumbai also. They become a CA in Jan 19, 2013. CA Shobhit Kumar and CA Deepali
Gupta open their offices respective names- SHOBHIT KUMAR & ASSOCIATE in Jun 7,
2013 and DEEPALI GUPTA & COMPANIES in Jun 25, 2013 under the Act, CA Regulation
Act 1949. After that, an agreement was signed between both of them and they Opened S.D
GUPTA & COMPANY on May2, 2015 under the regulation act,

1.2 A FINANCIAL STAMENT ANALYSIS & INTERPRETATION:

Financial statements are records that provide an indication of the organizations financial status.
It quantitatively describes the financial health of the company. It helps in the evaluation of
companys prospects and risks for the purpose of making business decisions. The objective of
financial statements is to provide information about the financial position, performance and
changes in financial position of an enterprise that is useful to a wide range of users in making
economic decisions. Financial statements should be understandable, relevant, reliable and
comparable. They give an accurate picture of a companys condition and operating results in a
condensed form. Reported assets, liabilities and equity are directly related to an organization's
financial position whereas reported income and expenses are directly related to an organization's
financial performance. Analysis and interpretation of financial statements helps in determining
the liquidity position, long term solvency, financial viability, profitability and soundness of a
firm. There are four basic types of financial statements: balance sheet, income statements, cash
flow statements, and statements of retained earnings.
The analysis of financial statement is a process of evaluating the relationship between
component parts of financial statement to obtain a better understanding of firm financial position.
Analysis is a process of critically examining the accounting information given in financial

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statements. For the purpose of analysis, individual items are studied; their interrelationship with
other related figures is established.
Thus analysis of financial statement refer to treatment of information contain in financial
statement in a way so as to afford a full diagnosis of the profitably and financial position of the
firm concern. An attempt has been carried out in this project to analyze and interpret the financial
statements of C.B ENTERPRISES.

1.3 OBJECTIVE

To understand, analyze and interpret the basic concepts of financial statements of a

company.
Interpretation of financial ratios and their significance.
Use of Tally 9.0 package for the analysis and interpretation of financial statements of C.B

ENTERPRISES.
To know about Liquidity Position
To Know about Long- Term Solvency
To Know about Operating Efficiency
To know about Over-All Profitability
To Know About Inter- firm Comparison

This project mainly focuses in detail the basic types of financial statements of C.B
ENTERPRISES and calculation of financial ratios. Ratio analysis of C.B ENTRPRISES was
done.

CHAPTER -02
FINANCIAL STATEMENTS
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Financial statements (or financial reports) are formal records of the financial activities of a
business, person, or other entity. Financial statements provide an overview of a business or
person's financial condition in both short and long term. All the relevant financial information of
a business enterprise, presented in a structured manner and in a form easy to understand is called
the financial statements.
The analysis of financial statement is a process of evaluating the relationship between
component parts of financial statement to obtain a better understanding of firm financial
position.
A complete set of financial statement comprises:
1) A statement of financial position as at the end of the period:
2) A statement of comprehensive income for the period;
3) A statement of changes in equity for the period:
4) A statement of cash flow for the period.
5) Notes of Account comprising a summary of significant accounting policies and other
explanatory information.
There are four basic financial statements:
1. Balance sheet: It is also referred to as statement of financial position or condition,
reports on a

company's assets, liabilities, and ownership equity as of a given

point in time. The Balance Sheet shows the health of a business from day one to the date
on the balance sheet.
2. Income statement: It is also referred to as Profit and Loss statement (or "P&L"), reports
on a company's income, expenses, and profits over a period of time. Profit & Loss
account provide information on the operation of the enterprise. These include sale and the
various expenses incurred during the processing state.
The income statement shows a presentation of the sales, the main expenses and the
resulting net income over the period. Net income is based on accounting principles which
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gives guidance/rules on when to recognize revenues and expenses, whereas cash from
operating activities, obviously is cash based.
3. Statement of Retained Earnings: It explains the changes in a company's retained
earnings over the reporting period. The statement of retained earnings shows the
breakdown of retained earnings. Net income for the year is added to the beginning of year
balance, and dividends are subtracted. This results in the end of year balance for retained
earnings.
4. Cash Flow Statement: It reports on a company's cash flow activities, particularly its
operating, investing and financing activities. The statement of cash flows the ins and outs
of cash during the reporting period. The statement of cash flows takes aspects of the
income statement and balance sheet and kind of crams them together to show cash
sources and uses for the period.

2.1 BALANCE SHEET

In financial accounting, a balance sheet or statement of financial position is a summary of a
person's or organization's balances. A balance sheet is often described as a snapshot of a
company's financial condition. It summarizes a company's assets, liabilities and shareholders'
equity at a specific point in time. These three balance sheet segments give investors an idea as to
what the company owns and owes, as well as the amount invested by the shareholders. Of the
four basic financial statements, the balance sheet is the only statement which applies to a single
point in time.
A company balance sheet has three parts: assets, liabilities and ownership equity. The main
categories of assets are usually listed first and are followed by the liabilities. The difference
between the assets and the liabilities is known as equity or the net assets or the net worth or
capital of the company. It's called a balance sheet because the two sides balance out. A typical
format of the balance sheet has been given in Table 2.1. It works on the following formula:
Assets = Liabilities + Shareholders' Equity
2.1.1 FORMAT OF BALANCE SHEET
Table 2.1: Balance Sheet of C.B.ENTERPRISES

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LIABILITIES
1.Share Capital
Equity Share Capital
2. Reserves & surpluses
Capital Reserve
General Reserve
Security Premium Account
Capital Redemption Reserve
3. Secured Loans
Debentures
Loan from Bank
Long Term Loan
Other Secured Loans
4.Unsecured Loans
Fixed Deposit
Short Term Loans
Other Loans
5.Current Liabilities & Provisions
A) Current Liabilities
Bills Payable
Sundry Creditors
Bank Overdraft
Other Liabilities (if any)
B) Provisions
Provision for Tax
Proposed Dividend
Other Provision

TOTAL
ASSETS
1.Fixed Assets
Goodwill
Land
Building
Leaseholds
Plant & Machinery
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Furniture
Trade marks
Patents
Vehicle
2.Investment
3.Current Assets, Loan and Advances
A) Current Assets
Sundry Debtors
Bills Receivables
Closing Stock
Interest on Investment
Cash at Bank
Cash on Hand
Securities Deposit
Fixed Deposit with Banks
B) Loans and Advances
Prepaid Expenses
Tax Paid in Advance
Advances Paid
4.Miscellaneous Expenditure
Preliminary Expenses
Revenue Expenditures
Discount Allowed
5. Profit & Loss account

TOTAL

2.1.2 CONTENTS OF BALANCE SHEET

(A) Assets
In business and accounting, assets are economic resources owned by business or company. Any
property or object of value that one possesses, usually considered as applicable to the payment of
one's debts is considered an asset. Simplistically stated, assets are things of value that can be
readily converted into cash.
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The balance sheet of a firm records the monetary value of the assets owned by the firm. It is
money and other valuables belonging to an individual or business.
Types of Assets
There is two major type of assets:
Tangible assets
Intangible assets
Tangible Assets
Tangible assets are those have a physical substance, such as equipment and real estate.
Intangible Assets
Intangible assets lack physical substance and usually are very hard to evaluate. Assets which do
not possess any material value.
They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc.
Types of Tangible Assets
1. Fixed Assets.
2. Current Assets.
1. Fixed Assets
This group includes land, buildings, machinery, vehicles, furniture, tools, and certain
wasting resources e.g., timberland and minerals.
It is also referred to as PPE (property, plant, and equipment), these are purchased for
continued and long-term use in earning profit in a business.
2. Current Assets
Current assets are cash and other assets expected to be converted to cash, sold, or
consumed either in a year or in the operating cycle. These assets are continually turned
over in the course of a business during normal business activity. There are 5 major
items included into current assets:
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Cash and Cash Equivalents

It is the most liquid asset, which includes currency, deposit accounts, and negotiable
instruments (e.g., money orders, cheque, bank drafts).
Short-term Investments
It includes securities bought and held for sale in the near future to generate income on
short term price differences (trading securities).
Receivables
It is usually reported as net of allowance for uncollectable accounts.
Inventory
The raw materials, work-in-process goods and completely finished goods that are
considered to be the portion of a business's assets that is ready or will be ready for sale.
Prepaid Expenses
These are expenses paid in cash and recorded as assets before they are used or consumed
(a common example is insurance). The phrase net current assets (also called working
capital) are often used and refer to the total of current assets less the total of current
liabilities.

I. Gross Block
Gross block is the sum total of all assets of the company valued at their cost of acquisition. This
is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block
less accumulated depreciation on assets. Net block is actually what the asset are worth to the
company.
II. Capital Work in Progress
Work that has not been completed but has already incurred a capital investment from the
company. This is usually recorded as an asset on the balance sheet. Work in progress indicates
any good that is not considered to be a final product, but must still be accounted for because
funds have been invested toward its production.
III. Investments

Shares and Securities, such as bonds, common stock, or long-term notes

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Associate Companies
Fixed deposits with banks/finance companies
Investments in special funds (e.g., sinking funds or pension funds).
Investments in fixed assets not used in operations (e.g., land held for sale).

Remark: While fixed deposits with banks are considered as fixed assets, the investments in
associate concerns are treated as non-current assets.
IV. Loans and Advances include

House building advance

Car, scooter, computer etc. advance
Multipurpose advance
Transfer travelling allowance advance
Tour travelling allowance advance
DRS payment.

V. Reserves

Subsidy Received From The Govt.

Development Rebate reserve
Issue of Shares at Premium
General Reserves

(B) Liability
A liability is a debt assumed by a business entity as a result of its borrowing activities or other
fiscal obligations (such as funding pension plans for its employees). Liabilities are debts and
obligations of the business they represent creditors claim on business assets.
Types of Liabilities
Current Liabilities
Current liabilities are short-term financial obligations that are paid off within one year or one
current operating cycle. These liabilities are reasonably expected to be liquidated within a year. It
includes:
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Accrued expenses as wages, taxes, and interest payments not yet paid
Accounts payable
Short-term notes
Cash dividends and
Revenues collected in advance of actual delivery of goods or services.

Long-Term Liabilities
Liabilities that are not paid off within a year, or within a business's operating cycle, are known as
long-term or non-current liabilities. Such liabilities often involve large sums of money necessary
to undertake opening of a business, major expansion of a business, replace assets, ormake a
purchase of significant assets. These liabilities are reasonably expected not to be liquidated
within a year. It includes:

Notes payable- debt issued to a single investor.

Bonds payable debt issued to general public or group of investors.
Mortgages payable.
Capital lease obligations contract to pay rent for the use of plant, property or

equipments.
deferred income taxes payable, and
Pensions and other post-retirement benefits.

Contingent Liabilities
A third kind of liability accrued by companies is known as a contingent liability. The term refers
to instances in which a company reports that there is a possible liability for an event, transaction,
or incident that has already taken place; the company, however, does not yet know whether a
financial drain on its resources will result. It also is often uncertain of the size of the financial
obligation or the exact time that the obligation might have to be paid.
Fixed Liability
The liability which is to be paid of at the time of dissolution of firm is called fixed liability.
Examples are Capital, Reserve and Surplus.
Secured Loans

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A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan, which then becomes a secured debt owed to the creditor who gives the
loan.
Unsecured Loans
An unsecured loan is a loan that is not backed by collateral. It is also known as signature loan
and personal loan. Unsecured loans are based solely upon the borrower's credit rating. An
unsecured loan is considered much cheaper and carries less risk to the borrower. However, when
an unsecured loan is granted, it does not necessarily have to be based on a credit score.
2.2 PROFIT & LOSS STATEMENT
Income statement, also called profit and loss statement (P&L) and Statement of Operations is
financial statement that summarizes the revenues, costs and expenses incurred during a specific
period of time - usually a fiscal quarter or year. These records provide information that shows the
ability of a company to generate profit by increasing revenue and reducing costs. The purpose of
the income statement is to show managers and investors whether the company made or lost
money during the period being reported. The important thing to remember about an income
statement is that it represents a period of time. This contrasts with the balance sheet, which
represents a single moment in time. A typical format of the Profit & Loss Statement has been
given in Table 2.2.

2.2.1 FORMAT OF PROFIT & LOSS STATEMENT

Table 2.2: Profit & Loss Statement of C.B.ENTERPRISES
PARTICULARS
Gross Profit(Transferred)
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Amount

PARTICULARS
Gross Profit(Transferred)

Amount

Office and Administration Exp:

Salaries
Rent
Postage & telegrams
Office electric charges
Telephone charges
Printing and stationary
Selling and Distribution
Expenses:
Carriage outward
Advertisement
Salesmen's salaries
Commission
Insurance
Traveling expense
Bad debts
Packing expense
Financial and Other Expenses:
Depreciation
Repair
Audit fee
Interest paid
Commission paid
Bank charges
Legal charges
Profit before Interest
Less- Net Interest

Interest received
Rent received
Discount received
Dividend received
Bad debts recovered
Provision for discount on creditors
Provision for discount on creditors

Net loss

Profit before Tax

Less- Tax Payable
Profit after Tax
Less- Dividend
Retained Profit

2.2.2 CONTENTS OF PROFIT & LOSS STATEMENT

a. Revenue - Cash Inflows or other enhancements of assets of an entity during a period
from delivering or producing goods, rendering services, or other activities that constitute
the entity's ongoing major operations.

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b. Expenses - Cash outflows or other using-up of assets or incurrence of liabilities during a

period from delivering or producing goods, rendering services, or carrying out other
activities that constitute the entity's ongoing major operations.
c. Turnover
The main source of income for a company is its turnover, primarily comprised of sales of
its products and services to third-party customers.
d. Sales
Sales are normally accounted for when goods or services are delivered and invoiced, and
accepted by the customer, even if payment is not received until some time later, even in a
subsequent trading period.
e. Cost of Sales (COS)
The sum of direct costs of goods sold plus any manufacturing expenses relating to the sales (or
turnover) is termed cost of sales, or production cost of sales, or cost of goods sold. These costs
include:

Costs of raw materials stocks

Costs of inward-bound freight paid by the company
Packaging costs
Direct production salaries and wages
Production expenses, including depreciation of trading-related fixed assets.

(f) Other Operating Expenses

These are not directly related to the production process, but contributing to the activity of the
company, there are further costs that are termed other operating expenses. These comprises of
costs like:

Distribution costs and selling costs,

Administration costs, and
Research and development costs (unless they relate to specific projects and the costs may
be deferred to future periods).

(g) Other Operating Income

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Other operating income includes all other revenues that have not been included in other parts of
the profit and loss account. It does not include sales of goods or services, reported turnover, or
any sort of interest receivable, reported within the net interest category.

(h) Gross Margin (or Gross Profit)

The difference between turnover, or sales, and COS is gross profit or gross margin. It needs to be
positive and large enough to at least cover all other expenses.
(i) Operating Profit (OP)
The operating profit is the net of all operating revenues and costs, regardless of the financial
structure of the company and whatever exceptional events occurred during the period that
resulted in exceptional costs. The profit earned from a firm's normal core business operations. It
is also known as Earnings before Interest and Tax (EBIT).
Operating Profit = Turnover - COS - other Operating Expenses + Other Operating Income

(j) Profit before Tax (PBT)

A profitability measure that looks at a company's profits before the company has to pay corporate
income tax. This measure deducts all expenses from revenue including interest expenses and
operating expenses, but it leaves out the payment of tax.
(k) Profit after Tax (PAT)
PAT, or net profit, is the profit on ordinary activities after tax. The final charge that a company
has to suffer, provided it has made sufficient profits, is therefore corporate taxation.
PAT = PBT - Corporation Tax
(l) Retained Profit
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The retained profit for the year is what is left on the profit and loss account after deducting
dividends for the year. The balance on the profit and loss account forms part of the capital (or
equity, or shareholders funds) of the company.

2.3 FINANCIAL RATIOS

2.3.1 OBJECTIVES OF CALCULATION OF RATIO ANALYSIS
The importance of ratio analysis lies in the fact that it presents data on a comparative basis and
enables the drawing of inferences regarding the performance of the firm. Ratio analysis helps in
concluding the following aspects:
To know about Liquidity Position:
Ratio analysis helps in determining the liquidity position of the firm. A firm can be said to have
the ability to meet its current obligations when they become due. It is measured with the help of
liquidity ratios.
To Know about Long- Term Solvency:
Ratio analysis helps in assessing the long term financial viability of a firm. Long- term solvency
measured by leverage/capital structure and profitability ratios.
To Know about Operating Efficiency:
Ratio analysis determines the degree of efficiency of management and utilization of assets. It is
measured by the activity ratios.
To know about Over-All Profitability:
The management of the firm is concerned about the overall profitability of the firm which
ensures a reasonable return to its owners and optimum utilization of its assets. This is possible if
an integrated view is taken and all the ratios are considered together.

28 | P a g e

To Know About Inter- firm Comparison:

Ratio analysis helps in comparing the various aspects of one firm with the other.

2.3.2 FINANCIAL RATIOS AND THEIR INTERPRETATION

Table 2.3: Different Financial Ratios

Sl.

CATEGORY TYPE OF RATIO

ITNERPRETATION

No.
Net Working Capital =

Current assets-current liabilities

1.

Liquidity Ratio

It

measures

the

liquidity of a firm.

It measures the short

Current ratio =

term liquidity of a firm.

Current Assets

A firm with a higher

Current Liabilities

ratio

has

liquidity.
A ratio

of

better
2:1

is

considered safe.

Quick assets

firm.
A ratio

considered safe.
This ratio indicates how

fast inventory is sold.

A firm with a higher

Costs of goods sold

Average inventory

ratio
liquidity.

29 | P a g e

the

liquidity position of a

Inventory Turnover ratio =

Turnover Ratio

measures

Acid test or Quick ratio =

Current Liabilities

2.

It

of

has

1:1

is

better

This

ratio

Debtor Turnover ratio =

how

fast

Net credit sales

collected.
A high ratio indicates

Average debtors

Creditors Turnover ratio =

debts

time

lag

between

credit

sales

and cash collection.

A high ratio shows
that

Average Creditors

be settled rapidly

Debt-Equity ratio =

Structure Ratios

Long term debt

are

shorter

Net credit purchases

Capital
3.

measures

accounts are to

This ratio indicates the

relative proportions of
debt and equity in

Shareholders Equity

financing the assets of

a firm.
A ratio

of

1:1

is

considered safe.

It

indicates

what

Debt to Total capital ratio =

proportion

Long term debt

permanent capital of a

Permanent Capital

firm consists of long-

Or

Total debt
Permanent

capital

term debt.
A
ratio

of

1:2

the

is

considered safe.

Current

liabilities
Or

It measures the share of

Total Shareholders Equity

the total assets financed

Total Assets

by outside funds.
A low ratio is desirable

for creditors.
30 | P a g e

It shows what portion

of the total assets is
financed by the owners

capital.
A firm should neither
have a high ratio nor a
low ratio.

Coverage ratios
4.

Interest Coverage =

ratio

used

to

Earnings before interest and tax

determine how easily a

Interest

company can pay on

outstanding debt.
A ratio of more than 1.5

I satisfactory
It measures the ability

Dividend Coverage =

of firm to pay dividend

Earnings after tax

Preference Dividend

on preference shares.
A high ratio is better for

creditors.
It shows the overall

Total Coverage ratio =

ability of the firm to

Earning before interests and tax

fulfill the liabilities.

A high ratio indicates

Total Fixed charges

better ability.

5.

Profitability

Gross Profit margin =

ratios

Gross profit * 100

Sales

It measures the profit in

relation to sales.
A firm should neither
have a high ratio nor a

Net Profit margin =

31 | P a g e

low ratio.
It measures the net
profit of a firm with

Net Profit after tax before interest

Sales

respect to sale.
A firm should neither
have a high ratio nor a

Or

low ratio.

Net Profit after Tax and Interest

Sales
Or
Net profit after Tax and Interest
Sales

6.

Expenses ratios

Operating ratio shows

Operating ratio =

the

Cost of Goods sold + other

efficiency

expenses

business.
Lower operating ratio

sales

operational
of

the

shows higher operating

Cost of Goods sold ratio =

profit and vice versa .

It measures the cost of
goods sold per sale

Cost of Goods sold

Sales

Specific Expenses ratio =

It measures the specific

expenses per sale.

Specific Expenses
Sales

Return
7.

Investments

measures

the

on Return on Assets (ROA) =

profitability of the total

Net Profit after Taxes * 100

funds per investment of

Total Assets

a firm.
Or

(Net Profit after Taxes +interest)

*100

32 | P a g e

It

Total Assets
Or
(Net profit after Taxes + Interest)
* 100
Tangible Assets
Or
(Net Profit after Taxes + Interest)
* 100
Total Assets
Or
(Net Profit after Taxes + Interest)
* 100
Fixed Asset

It measures profitability

Return on Capital Employed

of the firm with respect

(ROCE) =

to

(Net Profit after Taxes) * 100

employed.
The higher the ratio, the

the

total

capital

more efficient use of

total capital employed

capital employed.

Or
(Net Profit after Taxes + Interest)
*100
Total Capital Employed
Or
(Net Profit after Taxes + Interest)
* 100
Total

Capital

Employed

-intangible assets

33 | P a g e

It

reveals

how

Return on Total Shareholders

profitably the owners

Equity =

fund has been utilized

Net Profit after Taxes * 100

by the firm.

Total shareholders equity

Return

on

Ordinary

It determines whether
the firm has earned

shareholders equity =

satisfactory return for

Net profit after taxes and Pref.

its equity holders or

dividend *100

not.

Ordinary Shareholders Equity

8.

It measures the profit

Shareholders

Earnings per Share (EPS) =

available to the equity

ratios

Net Profit of Equity holders

holders on a per share

Number

basis.

of

Ordinary

Shares

Dividend per Share (DPS) =

It is the net distributed

Net profits after interest and

profit belonging to the

preference

shareholders divided by

dividend

paid

to

the number of ordinary

ordinary shareholders
Number

of

ordinary

shares

shares

outstanding

It

shows

Dividend Payout ratio (D/P) =

percentage share of the

Total Dividend To Equity holders

net profit after taxes

Total net profit of equity holders

and preference dividend

Or

is paid to the equity

Dividend per Ordinary

Share Earnings per Share

holders.
A high D/P ratio is
preferred
investors
view.

34 | P a g e

what

from
point

of

Earnings per Yield =

Earnings per Share

of each rupee invested

Market Value per Share

in the stock that was

company pays out in

Dividend per share

dividends

Market Value per share

relative to its share

each

year

price.
It reflects the price

Price- Earnings ratio (P/E) =

currently paid by the

Market value per Share

market for each rupee

Earnings per Share

of EPS.
Higher the ratio better

it is for owners
It measures the overall

Earning Power =

profitability

and

Net Profit after taxes

operational

efficiency

Total Assets

of a firm
It
measures

9.

earned by the company.

It shows how much a

Dividend Yield =

Activity Ratios

It shows the percentage

how

Inventory turnover =

quickly

Sales

sold.
A firm should neither

Closing Inventory

inventory

is

have a high ratio nor a

low ratio.
Raw Material turnover =
Cost of Raw Material used
Average Raw Material Inventory
Work in Progress turnover =
35 | P a g e

Cost of Goods manufactured

Average

Work

in

process

inventory

It shows how quickly

Debtors turnover =

current assets that are

Cost of Goods manufactured

receivables or debtors

Average

are converted to cash.

A firm should neither

Work

in

Process

Inventory

have a high ratio nor a

10.

low ratio.
It
measures

the

Assets

Total Assets turnover =

efficiency of a firm in

Turnover

Cost of Goods Sold

managing and utilizing

Ratios

Total Assets

its assets.
Higher the ratio, more

Fixed Assets turnover =

efficient is the firm in

Cost of Goods Sold

utilizing its assets.

Fixed Assets
Capital turnover =
Cost of Goods Sold
Capital Employed
Current Assets turnover =
Cost of Goods Sold
Current Assets

CHAPTER- 03
FINANCIAL RATIO ANALYSIS

36 | P a g e

The ratio analysis of C.B ENTERPRISES from 2012-14 has been carried out below.
3.1 RATIO ANALYSIS
3.1.1 Balance Sheet of C.B ENTERPRISES for 2014
Table 3.1: Balance Sheet of C.B.ENTERPRISES as at 31st Mar -2014

37 | P a g e

Total
PARTICULARS

Amount

Source of Funds:
Capital Account
Sunil's Capital
Less- Credit card HDFC
Donation
Drawings
LIC
School fees
Loans (Liability)
Bank od A/C
Secured Loans

Amount

3.1.2
Balance

634,506.05
875860.05
50,489.00
2,502.00
109053
54,860.00
24,450.00
1851845.9
859142.95
992702.95

Unsecured Loans
Current Liabilities

1,638,085.9

Provision
Sundry Creditors

44,553.00
1570805

Unregistered Tax Payable

less- Duties & Taxes
Profit & Loss A/C

65,940.00
43,212.15

Opening balance Current Period

502558.24

less- Transferred

502558.24

Total

4,124,437.8

Application of Funds:
Fixed Assets

1579196.65

Car
Mobile

593850
59,773.74

Motor Bike
Plant & Machinery

31,181.65
687189.75

Tata Ace
Current Assets
Closing Stock
Loans & Advances (Assets)
Sundry Debtors
Cash in Hand
Bank Accounts
38 | P a g e
Total

207201.51
2545241.15
1035485
53,073.00
1425712.6
24869.00
6101.48
4124437.8

Sheet of C.B.

ENTERPRISES for 2015

Table 3.2: Balance Sheet of C.B.ENTERPRISE as at 31st Mar -2015
Total
PARTICULARS

Amount

Amount

Source of Funds:
Capital Account
Sunil's Capital
Less- Credit card HDFC
Star Health Insurance
Drawings
School fees
Loans (Liability)
Bank od A/C
Secured Loans
Unsecured Loans
Current Liabilities
Provision
Sundry Creditors
Unregistered Tax Payable
less- Duties & Taxes
Profit & Loss A/C
Opening balance Current Period

353,181.05
595406.05
12,500.00
9,343.00
181362
39,020.00
1908532.9
920609.95
837922.95
150000
2,493,868.57
76,703.00
2385328.5
65,940.00
34,102.93
3355599.45
3355599.45

Total

50,91,181.97

Application of Funds:
Fixed Assets
Car
Mobile
Motor Bike
Plant & Machinery
LCD Monitor
Tata Ace

1,352,287.87
504772.5
53,842.29
26,504.40
584111.4
6936
176121.28

Current Assets
Closing Stock
Loans & Advances (Assets)
39 | P a g e

3738894.1
1235091
35,642.00

Sundry Debtors
Cash in Hand
Bank Accounts

917360.62
1544699.00
6101.48

Total

5091181.97

3.1.3 Profit &loss

Table 3.3:

Profit & Loss Statement as per the year

Ending of 31st Mar, 2014

Particulars

Amount

Amount

Trading Account:
Sales Account
Sales Ag. E Form
Sales Ag. H Form
Sales central Tax 5%
Sales Tax Invoice 5%

5104025.95
450887
420469.5
1701502
2531167.45

Direct Incomes
Work Contract Received
Cost of Sales
Opening Stock
Add: Purchase Accounts
Less: Closing Stock
Direct Expenses
Cartage Inward
Job Work Paid
Power& Fuel Exp.
Gross Profit

1566780
1566780
6670805.95
4358261.6
343079
4068867.2
1035485
3376461.2
981800.4
342534
302586.4
336680
2312544.35

Income Statement:
Indirect Incomes
Cartage Outward
Interest
Indirect Exp.
Accounting Charges
40 | P a g e

644.32
644.32
2313188.67
1810630.43
15000

Advertising Exp.
Audit Fees
Bank Charges
Business Promotion Exp.
Commission Exp.
Convince Exp.
Depreciation
Factory Rent
Festival Exp.
Interest on Tata Ace Loan
Interest On C.C limit
Interest On Term Loan
Insurance
Legal & Professional Charges
Postage& Currier Exp.
Printing & Stationary Exp.
Repair & Maintenance Of Building
Repair & Maintenance Exp.
Salaries
Short & Excess
Staff Welfare
Telephone Exp.
Traveling Exp.
Vehicle Running & Maintenance

16120
10000
12556.54
15840
9680
71842
239417.59
275000
77425
42290.94
85655.96
44465.7
14832
23000
1872
12134
54670
43700.29
412633
0.66
56450
41488.75
65670
168886

Nett Profit:

502558.24

3.1.4 Profit & Loss Statement for 2015

Table 3.4:

Profit & Loss Statement as per the year

Ending of 31st Mar, 2015

Particulars

Amount

Amount

Trading Account:
Sales Account
Sales Ag. D Form
Sales Ag. E Form
Sales Tax Invoice 5%
Direct Incomes
Cost of Sales
Opening Stock
Add: Purchase Accounts
41 | P a g e

3599918
139550
667113
2793255
3599918
2346186.55
1035485
2539552.55

Less: Closing Stock

Direct Expenses
Cartage Inward
Job Work Paid
Gross Profit

1235091
2339946.55
6240
2210
4030
1253731.45

Income Statement:
Indirect Incomes
Indirect Exp.
Accounting Charges
Advertising Exp.
Audit Fees
Bank Charges
Business Promotion Exp.
Cartage Outward
Commission Exp.
Company Insurance
Convince Exp.
Depreciation
Donation (Charity)
Factory Rent
Festival Exp.
Interest on Tata Ace Loan
Interest Aon VAT
Interest On C.C limit
Legal & Professional Charges
Office Exp.
Printing & Stationary Exp.
Salaries
Short & Excess
Staff Welfare
Telephone Exp.
Toll Tax (Octory)
Vehicle Running & Maintenance
Weighting & Measurement
Nett Profit:

42 | P a g e

1253731.45
918132.03
13750
9752
12500
10752
7524
(-)2187.75
6582
14621
9850
238638.78
1401
120000
12580
20992
154
115379
9852
1880
9782
245864
(-)5
2356
15710
180
40145
80
335599.42

3.1.5 Ratio analysis for 2014

Table 3.5: Analysis of Financial Ratios for 2014
Sl.

RATIOS

PARTICULARS

VALUE

REMARKS

Current Assets =

907155.2

Liquidity position

Working Capital =

2545241.15

is good.

Current assets-Current liabilities

Current Liabilities =
1.55:1

It is safe.

0.92:1

It is not good.

No.
1.

1638085.90
Current Assets =

2.
Current Ratio =

2545241.15

Current Assets

Current Liabilities =

Current Liabilities

1638085.90

3.

liquid Assets =
Acid test or Quick ratio =

1509756.15

Liquid Assets

Current Liabilities =

Liquid Liabilities

1638085.90

4.

Long term debt

Debt-Equity Ratio =
Long term debt
Capital A/C+ Net Profit

1.63:1

It is safe

=1851845.90
Capital A/C =
634506.05
Net Profit= 502558.24

It is good
5.

44.20%
Return On Investment Ratio =

Net Profit
502558.24

Net Profit*100
43 | P a g e

Capital A/C

Capital a/c+ Net Profit

6.

634506.05
Gross Profit=

Gross Profit Ratio =

2312544.35

Gross Profit * 100

Sales=

Sales
7.
Net Profit Ratio =

= 502558.24

Net Profit * 100

Sales=

8.

It is not satisfactory

9.84%

It is not satisfactory

20.21%

It is not good

55.40%

It is good

85.38

It is not satisfactory

120.86

It is so high

5104025.95
Net Profit

Sales

45.31%

5104025.95
Net Income

Return on Assets Ratio =

502528.24

Net Income*100

Fix. Assets=

Fix. Assets+Net WorkingCapital

1579196.65
Net Working Capital=
907155.25

9.

Net profit=
Return on working capital =

502558.24

Net Profit 100

Net Working capital=

Working Capital

907155.25

10.

Cost of goods sold=

Cost of Goods Sold Ratio =

4358261.6

Cost of Goods Sold*100

Sales=

Sales

5104025.95

11.

COGS=
Operating Cost Ratio =

4358261.6

COGS+ Operating Exp.*100

Operating Exp.=

Net Sales

1810630.43
Sales=
5104025.95

44 | P a g e

12.

Sales a/c=
Fixed Assets turnover =

5104025.95

Sales a/c

Fixed Assets=

Fixed Assets

1579196.65
Sales=

13.
Working Capital Turnover=

5104025.95

Sales a/c

Working Capital=

working Capital

907155.25
Sales=

14.

Inventory Turnover=

5104025.95

Sales a/c

Closing Stock=

Closing stock

1035485

It is not safe
3.23

It is safe
5.63

It is not good
4.93

Liquid Assets = Total Current Assets Inventory Prepaid Exp.

= 2545241.15- 1035485
=1509756.15

Liquid Liabilities = Current Liabilities Bank Overdraft

= 1638085.90

Long Term Debt = Secured Loans + Other Long Term liabilities

= 992702.95

Shareholder Funds = Equity Share+ Pre. Share+ Profit+ General Reserve

= 875860.05+ 502558.24
= 1318418.29

45 | P a g e

Earnings before Interest & Tax (EBIT) OR Operating Profit =

Net Profit + Tax + Interest
= 502558.24+ 644.32
= 503202.56

Operating Expenses = Financial Exp. + Administration Exp.+ Financial Exp.+ Sales

Operating & Distribution Exp.
= 981800.40

Operating Cost= COGS OPERATING EXP.

=4358261.6 981800.40
= 3376461.2
Cost of Goods Sold = Opening Stock+ Purchase+ Direct Exp. Closing Stock =
343079+ 4068867.2+ 981800.4- 1035485 = 4358261.6

3.1.6 Ratio analysis for 2015

46 | P a g e

Table 3.6: Analysis of Financial Ratios for 2015s

Sl.

RATIOS

No.
1.

PARTICULARS
Current

Assets

= 1245025.5

Working Capital =

3738894.1

Current assets-Current liabilities

Current Liabilities =
2493868.57
Current
Assets

2.

Current Ratio =

3738894.1

Current Assets

Current Liabilities =

Current Liabilities

2493868.57

3.

liquid

Assets

2503803.1

Liquid Assets

Current Liabilities =

Liquid Liabilities

2493868.57

Debt-Equity Ratio =
Long term debt
Capital A/C+ Net Profit

REMARKS
Liquidity position
is good

1.50:1

= 1.00:1

Acid test or Quick ratio =

Long term debt

4.

VALUE

2.77:1

It is safe

It is good

It is safe

= 1908532.90
Capital A/C =
353181.05
Net Profit=
335599.45

5.

Return On Investment =

Net Profit=

net Profit*100

335599.45

Capital a/c + Net Profit

Capital a/c=
353181.05

47 | P a g e

48.72%

It is good

6.

Gross Profit=
Gross Profit Ratio =

1253731.45

Gross Profit * 100

Sales=

Sales
7.
Net Profit Ratio =

= 335599.42

Net Profit * 100

Sales=

8.

It is not satisfactory

9.32%

It is not satisfactory

3599918
Net Profit

Sales

34.83%

3599918
Net Income=

Return on Assets =

335599.45

Net Income*100

Fix. Assets=

It is not good
12.92%

Fix. Assets Net + Working 1352287.87

Capital

Working Capital=
1245025.53
Net profit=

9.
Return on working capital =

335599.45

Net Profit 100

Net Working capital=

Working Capital

1245025.53

10.

Cost of goods sold=

26.96%

It is not good

65.17

It is not satisfactory

90.67%

It is so high

Cost of Goods Sold Ratio = 2346186.55

Cost of Goods Sold*100

Sales=

Sales

3599918
COGS=

11.

Operating Cost Ratio =

2346186.55

COGS + Operating Exp.*100 Operating Exp.=

Net Sales

918132.03
Sales=
3599918

48 | P a g e

12.

Fixed Assets turnover =

Sales a/c=

Sales a/c

3599918

Fixed Assets

It is not safe
2.66

Fixed Assets=
1352287.87
Sales=

13.
Working Capital Turnover=
Sales a/c

2.89

Working Capital=

working Capital

1245025.53
Sales=

14.
Inventory Turnover=

3599918

Sales a/c

It is not good
2.91

Closing Stock=

Closing stock

3599918

It is safe

1235091

Liquid Assets = Total Current Assets Inventory Prepaid Exp.

= 3738894.1- 1235091
= 2503803.1

Liquid Liabilities = Current Liabilities Bank Overdraft

= 2493868.57

Long Term Debt = Secured Loans + Other Long Term liabilities

= 837922.95

Shareholder Funds = Equity Share+ Pre. Share+ Profit+ General Reserve

= 595406.05+ 3355599.45

49 | P a g e

= 629005.5

Earnings before Interest & Tax (EBIT) OR Operating Profit =

Net Profit + Tax + Interest
= 3355599.45

Operating Expenses = Financial Exp. + Administration Exp.+ Financial Exp.+ Sales

Operating & Distribution Exp.
= 918132.03
Cost of Goods Sold = Opening Stock+ Purchase+ Direct Exp. Closing Stock =
= 1035485+ 2539552.55+ 6240- 1235091
= 2346186.55

3.1.7 Summary for Balance Sheet and Profit & Loss Statement
Table 3.7: Summary of Balance Sheet
PARTICULARS

2014

2015

Remarks

Current Assets

2545241.15

3738894.10

Short term liquidity available is very

less.

Fixed Assets

1579196.65

1352287.87

Fixed Assets have decreased due to

decrease in investment.

Current Liabilities

1638085.85

2493868.57

Substantial increase in liabilities.

Liquidity position is not good.

Long Term Liabilities

992702.95

837922.95

Debts have decreased because of less

investment

50 | P a g e

Table 3.8: Summary of Profit & Loss Statement

PARTICULARS

2014

2015

Remarks

Purchase

4068867.20

2539552.55

Purchase has decreased by 37.58%

Cost of Goods Sold

4358261.60

2346186.55

COGS has decreased by 46.17%

Sale

5104025.9

3599918

Sales have decreased by 29.47%

Gross Profit

2312544.35

1253731.45

Gross Profit has decreased by 45.79%

Net Profit

502558.24

335599.45

Net profit has decreased by 33.22%

3.2 RATIO ANALYSIS USING TALLY 9.0

Tally 9.0 manufactured by Tally Solutions FZ LLC, Dubai, and Tally India Private Limited. It
facilitates smooth and error free Excise Accounting for manufacturers and dealers engaged in
manufacturing or trading of excisable goods. It is mainly used for the calculation of excise
duties, taxes and other transactions. In this project Tally 9.0 is used to compute the balance sheet
and the financial ratios of companies that can be obtained from it. However Tally 9.0 has certain
limitations. It has been used to calculate only current ratio, quick ratio and debt equity ratio. In
future the version can be modified to calculate other ratios.
Preparation of balance sheet and ratio analysis of C.B ENTERPRISES from 2013-15 using
Tally 9.0 has been carried out below:

51 | P a g e

3.2.1 C.B. ENTERPRISES

3.2.1 Balance Sheet and Ratio Analysis For 2014

Fig. 3.1: Preparation of Balance Sheet of C.B.ENTERPRISES

Fig. 3.2: Ratio Analysis of C.B.ENTERPRISES

52 | P a g e

3.2.2 Balance Sheet and Ratio Analysis For 2015

Fig.3.3: Preparation of Balance Sheet of C.B.ENTERPRISES OF 2015

Fig. 3.4: Ratio Analysis of C.B.ENTERPRISES OF 2015

53 | P a g e

CHAPTER -04
VARIATION OF FINANCIAL RATIOS
The variation of different financial ratios from 2013-15 of C.B.ENTERPRISES has been shown
below:

4.1 C.B.ENTERPRISES

Current Ratio
1.56
1.55
1.54
1.53
1.52
1.51
1.5
1.49
1.48
1.47

Fig.4.1: Current Ratio

Working Capital
1400000
1200000
1000000
800000
600000
400000
200000
0

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Fig.4.2: Working Capital

Quick Ratio
1.02
1
0.98
0.96
0.94
0.92
0.9
0.88

Fig.4.3: Quick Ratio

Debt - Equity Ratio

3
2.5
2
1.5
1
0.5
0

Fig.4.4: Debt-Equity Ratio

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Inventory Turnover Ratio

6
5
4
3
2
1
0

Fig.4.5: Inventory Turnover Ratio

Return on Assets
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

Fig.4.6: Return on Assets

Return on Investment
50.00%
48.00%
46.00%
44.00%
42.00%
40.00%

Fig.4.7: Return on Investment

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Gross Profit Ratio

50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

Fig.4.8: Gross Profit Ratio

Net Profit Ratio

10.00%
9.80%
9.60%
9.40%
9.20%
9.00%

Fig.4.9: Net Profit Ratio

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Return on Working Capital

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

Fig.4.10: Return on Working Capital

Operating Cost Ratio

140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%

Fig.4.11: Operating Cost Ratio

CHAPTER-05
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COMPRATIVE STATEMENTS
Table: 5.1 COMPARATIVE INCOME STATEMENT
Particulars

Previous

Current

Absolute

Percentage

Year

Year

Change

change

Sales

5104025.95

3599918

-1504107.95

-29.47%

Less- Cost of Goods Sold

4358261.6

2346186.55

-2012075.05

-46.17%

Operating Profit

745764.35

1253731.45

507967.1

68.11%

Add- Other Income

1566780

-1566780

-100%

Gross Profit

2312544.35

1253731.45

-1058812.9

-45.79%

Less-Operating Exp.

1810630.43

918132.03

-63667.97

-3.52%

Earnings Before Interest & Tax

501913.92

335599.45

-167603.11

-33.39%

Add- Interest

644.32

-644.32

-100%

Profit

502558.24

335599.45

-166958.79

-33.22%

Percentage Change =

Absolute Change
Figures of the previous year

Table: 5.2 Comparative Balance Sheet of C.B. ENTERPRISES

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Pervious

Current

Absolute

Percentage

Particulars

Year

Year

Change

Change

Car

593850

504772.5

(89077.5)

15%

53842.29

(5931.45)

9.92%

26504.40

(4677.25)

15%

584111.4

(103078.35)

14.99%

6936

176121.28

(148919.77)

71.87%

1235091

199606

19.28%

35642

(17431)

34.81%

917360.62

(508351.98)

35.66%

1544699

1519830

61.11%

966744.12

23.43%

Mobile

59773.74

Motor Bike

31181.65

Plant & Machinery

687189.75

LCD Monitor

Tata Ace

207201.51

Closing Stock

1035485

Loans & Advances (Assets)

53073

Sundry Debtors

1425712.6

Cash in Hand

24869.00

Bank Accounts
Total

6101.48
6101.48
412443 5091181.97

Capital Account

7.85
634506.05

353,181.05

281325

44.33%

Loans (Liability)

1851845.9

1908532.9

(56687)

3.06

Current Liabilities

1,638,085.9

2,493,868.5

855782.67

52.24%

966744.12

23.43%

Total

4124437.85

5091181.97

FINDINGS
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This report work has identified how companies use financial statement analysis and
interpretation in making effective management decisions. Overall organizational profitability and
achievement of organizational objectives were discussed. Again the difference between the
returns of a financial statement analysis and interpretation based on management decisions were
also discussed.

Gross profit and net profits are decreased during the period of 2013-15, which indicates

that firms inefficient management in manufacturing and trading operations

Liquidity ratio of the firm is better liquidity position in over the two years. It shows that

the firm had sufficient liquid assets.

The fixed asset turnover ratio of the firm has in 2013-15 the ratio is 3.23 or 2.26

respectively and it decrease.

cost ratio of the company has decreased during the period of 2013-15
Current liabilities are Increasing by 52.4%
Current assets Ratio are decreased in two years.
Net profit also decreased by 33.22%
Return on Investment has increased.
Gross Profit has decreased by 45.79%

CONCLUSION
Analysis and interpretation of financial statements is an important tool in assessing companys
performance. It reveals the strengths and weaknesses of a firm. It helps the clients to decide in
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which firm the risk is less or in which one they should invest so that maximum benefit can be
earned. It is known that investing in any company involves a lot of risk. So before putting up
money in any company one must have thorough knowledge about its past records and
performances. Based on the data available the trend of the company can be predicted in near
future.
This project of financial analysis & interpretation in the production concern is not merely a work
of the project but a brief knowledge and experience of that how to analyze the financial
performance of the firm. The study undertaken has brought in to the light of the following
conclusions. According to this project I came to know that from the analysis of financial
statements it is clear that C.B.ENTERPRISES have been incurring profit during the period of
study. So the firm should focus on getting of more profits in the coming years by taking care
internal as well as external factors. And with regard to resources, the firm is take utilization of
the assets properly. And also the firm has a maintained low inventory.
This project mainly focuses on the basics of different types of financial statements. Balance
Sheet and Profit & Loss statements of C.B.ENTERPRISES have been studied.
From ratio analysis of Balance Sheet and P & L Statement of C.B.ENTERPRISES of 2013-15 it
was concluded that liquidity position of the company is good. Current ratio, debt-equity ratio,
quick ratio, net profit margin, operating profit margin, gross profit margin, return on assets,
return on investments and return on capital employed were found to be unacceptable. The ratios
that are found to be desirable are Current Ratio, Return On investment and Return on working
capital and Debt Equity Ratio.
Tally 9.0 is used for analyzing the balance sheet and profit & loss statements of a company and
calculating the financial ratios. In this project Tally 9.0 is used to prepare the balance sheet and
calculate the financial ratios of different companies. Profit & Loss Statements of companies were
not calculated as Tally 9.0 has limitations in processing the data that was available. However,
only three ratios viz. current ratio, quick ratio and debt-equity ratio were calculated. An advanced
version can be developed for calculation of profit & loss statements and other financial ratios.

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RECOMMENDATION
8.1 Recommendation for Company:

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The profit Of the Company is not in a good Position. Profit decrease in 2014-15 comparison to
2013-14 so for earn more profit company has to Take Alternative Actions for more profit such
As:

Increasing in Procurement in sugarcane,

Production, and Control in Expenses Like, Administrative, selling Etc.
The firms have low current ratio in 2014-15 comparison to 2013-14 so it should increase

its current ratio where it can meet its short term obligation smoothly.
Liquidity ratio of the firm is less in 2014-15 comparison to 2013-14 liquidity position in
over the years. So I suggested that the firm maintain proper liquid funds like cash and

bank balance
It should enhance its employees efficiency, more training needed to its employees in
order to increase its production capacity and minimize mistakes while performing the
tasks, also more safety precaution need to implement to the employees who directly

working on sugar production process.

The company high inventory so I suggested that the firm must reduce the stock by

increase sales.
The firms should have proper check all process of the plant.

Recommendation for the Students:

Based on the findings of this study as presented, analyzed and interpreted, the following
recommendations were deemed necessary by the Student who prepares project report:

Adequate time should always be allowed for collection of financial statement data and
preparation for their analysis.

Financial statement should be properly interpreted and should be made to reflect current
cost accounting to reduce the negative effects of historical cost principle on financial
statement decisions.

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The effects of inflation on financial statement result should be considered to reduce the
inflation risk.

The adequacy of financial information need to be emphasized on, as it will provide

enough and necessary details for investment and management decisions.

A combination of different ratios should be used to analyze a companys financial and/or

operating performance.

Finally, the management of the selected company should make proper use of financial
statement analysis in other decision areas of management.

LIMITATION
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LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS AND INTERPRETATION

1.
2.
3.
4.
5.
6.

It is suffering from the limitations of financial statements.

There is Absence of standard universally accepted terminology in financial analysis
Price level changes is ignored in financial analysis
Quantity aspect is ignored in financial analysis
Financial analysis provides misleading result in absence of absolute data
The qualitative elements like quality management, quality of labor, public relations are

ignored while carrying out the analysis of financial statement only.

7. In many situations, the account has to make choice out of various alternatives available, e.g.
choice in the method of depreciation, choice in the method of inventory valuation etc. since
the subjectivity is inherent in personal judgment, the financial statement are therefore not free
from bias.
8. Financial Statements are essential interim reports.
9. Lack of Exactness in financial Statement analysis and interpret.
10. Lack of comparability in financial statement analysis and interpret.

BIBLIOGRAPHY

BOOKS:
1. M.Y. KHAN, P.K.JAIN (1981), Financial Management, and Cost Accounting

(third

edition) New Delhi: McGraw Hill publishing company limited.

2. I.M.PANDEY.Financial Management New Delhi Vikas publishing house private Ltd
ninth addition 2004
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3. Financial Statement
4. Financial Management
COMPANY DATA:
Vouchers of Sale & Purchase
Bank Statement
Other Data of C.B.ENTERPRISES

WEBSITES
www.google.com

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