Financial Statement Analysis

CHAPTER-I
INTRODUCTION
INTRODUCTION:
Financial statements are prepared primarily for decision making. They play a
dominant role in setting the framework of managerial decisions. But the information
provided in the financial statements is not an end in itself as no meaningful conclusions
can be drawn from these statements alone. However, the information provided in the
financial statements is of immense use in making decisions through analysis and
interpretation of financial statements. Financial analysis the process of identifying the
financial strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account There are various
methods or techniques used in analyzing financial statements financial statements are an
important source of information for evaluating the performance and prospects of firm, if
properly analyzed and interpreted these statements can provide valuable insights into
firms performance. Analysis of financial statements is if interest to lenders, investors,
security analyst, manager and others.
Financial statements analysis may be done for a variety of purposes, which may
range from simple
analysis of short term liquidity position of the form to a
comprehensive assessment of the strengths and weakness of the firm in various areas, it is
helpful in assessing corporate excellence, judging credit worthiness forecasting bond
rating, evaluating intrinsic value of equity shares predicting bankruptcy and assessing
market risk.
Financial statements:
Managers, shareholders, creditors and other interested groups seek answer to the
following question about firm:
What is the financial position of the firm at a given point of time?
How has the firm performed financially over a given period of time?
What have been the sources an d uses of cash over a given period?
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To answer these questions, accountant prepares two principle statements, the

Balance sheet and the profit and loss account, ancillary statement, the Cash Flow
statement.
Analysis of financial statement

Analysis refers to the process of critical examination of the financial information
contained in the financial statement in order to understand and make decisions regarding
the operations of the firm. The analysis is basically study of the relationship among
various financial facts and figure as given in a set of financial statements. Complex figure
as given in this statements are dissected\broken up into simple and variable element and
significant relationship are established between the elements of the same statements are
different financial statements.
This process of dis section, establishing and identifying the financial weaknesses
and strengths of the firm. It is indicative of two aspects of a firm i.e. the profitability and
the financial position and it are what are known as the objectives of the analysis.
Procedure of Financial Statements Analysis

Broadly speaking there are three steps involved in the analysis of financial statements.
There are:
Selection,
Classification,
Interpretation.
The first step involves selection of information (data). The second step involved is the
methodical classification of the data and the third step includes drawing of internees and
conclusions.
The following procedure is adopted for the analysis and Interpretation of financial
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statements:
The analyst should acquaint himself with the principles and postulates of
accounting.
The extent of analysis should be determined so that the sphere of work may be
decided.
The financial data given in the statements should be re-organized and re-arranged.
A relationship is established among financial statements with the help of tools and
techniques of analysis such as ratios, trends, common size, funds flow etc.
The information is interpreted in a simple and understandable way.
The
significance and utility of financial data is explained for helping decision-taking.
The conclusions drawn from interpretation are presented to the management in

the form of reports.
Objectives of the study:
To analysis the financial statements and present its financial positions.
To assess and evaluate the performance of the company.
To determine the efficiency of operations as reflected in the financial statements.
To offer appropriate suggestions for better performance of the company.
Need and importance of the study:
Financial analyst analyses the financial statements with various tools of analysis
before commanding upon the financial health of the firm.
Essential to bring out the history of UNIVERSAL FINANCIALS.
Significance and meaning of the financial statements.
Scope of the study:

Analysis of financial statement can be undertaken by different persons and for different
purposes, therefore, the scope of the AFS may be varying from one situation to another.
However, the following are some the techniques of the AFS:
Comparative financial statements.
Common-size financial statements.
Trend percentage analysis.
Statement of changes in financial position.
Cost-volume-profit relations, and
Ratio analysis and others.
Research methodology:
Research design
This is a systematic way to solve the research problem and it is important component for
the study without which researches may not be able to obtain the format. A research
design is the arrangement of conditions for collection and analysis of data in a manager
that aims to combine for collection and analysis of data relevance to the research purpose
with economy in procedure.
Meaning of research design
The formidable problem that follows the task of defining the research problem is
the preparation of design of the research project, popularly known as the research design,
decision regarding what, where, when, how much, by what means concerning an inquiry
of a research study constitute a research design. A research design is the arrangement of
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conditions for collection and analysis of data in a manager that aims to combine for
collection and analysis of data relevance to the research purpose with economy in
procedure.
Sources of data
The process of research work done the present project work is financial statement
analysis in this project the methodology adopted is the two steps.
Data collection
Data analysis
Data collection:-
Data means the information regarding the topic so researched this can be done
using two sources.
Primary data
Secondary data
Primary data:
The Primary data are those informations, which are collected afresh and for the first
time, and thus happen to be original in character.
Secondary Data:
The Secondary data are those which have already been collected by some other
agency and which have already been processed. The sources of Secondary data are
Annual Reports, browsing Internet, through magazines.
It includes data gathered from the annual reports of UNIVERSAL FINANCIALS
Articles are collected from official website of UNIVERSAL FINANCIALS.

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Data analysis:-
Data analysis is the time series analysis where tables and graphs have been used
to analysis the data the following tools has been applied.
Comparative financial statements.
Common-size financial statements.
Trend percentage analysis.
Statement of changes in financial position.
Cost-volume-profit relations, and
Ratio analysis and others.
Limitation of the study:
It is only a study of interim reports.
Financial analysis is based upon only monetary information and non monetary
factors are ignored.
Different people may interpret the same analysis in different ways.
It does not consider the changes in prices level.
Changes in accounting procedure by firm may often make financial analysis

misleading.
CHAPTER-II
REVIEW OF LITERATURE
Financial Statement Analysis

Introduction:
The term financial analysis also known as analysis and interpretation of financial
statements , refers to the process of determining financial strength and weaknesses of the
firm by establishing strategic relationship between the items of the balance sheet , profit
and loss account and other operative data.
Analyzing financial statements by Metcalf and Titard
Financial analysis is a process of evaluating the relationship between
component parts of a financial statement to obtain a better understanding of a firms
position and performance by Myers
The purpose of financial analysis is to diagnose the information contained in
financial statements so as to Jude the profitability and financial soundness of the firm.
Just like a doctor examines his patient by recording his body temperature, blood pressure,
etc. Before making his conclusion regarding the illness and before giving his treatment, a
financial analyst analysis the financial statements with various tools of analysis before
commenting upon the financial health or weaknesses of an enterprise.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. Financial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so that
forecast may be made of the future earnings, ability to pay interest and debt maturities
(both current and long term) and profitability of a sound divided policy.
OBJECTIVES OF FINANCIAL STATEMENT

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Broadly the objective of the Analysis of Financial statement is to understand

the information contained in the financial statement with a view to the weakness and
strengths of the
firm and to make forecast about the future prospects of the firm and their by enabling the
financial analyst to take different decision regarding the operation of the firm. The
objectives of the analysis can be identified as:
To assess the present profitability and operating efficiency of the firm as a whole
as well as for its different departments.
To find out the relative importance of different components of the financial

position of the firm.
To identify the reasons for change in the profitability\financial position of the

firm.
To assess the short-term as well as the long-term liquidity position of the firm.
To examine the solvency of the firm.
To find out the ability of the firm to meet its current obligations.
Significance of financial analysis

Analysis of financial statement is carried out to measure the enterprises liquidity,
profitability, solvency and other indicators to assess its operating efficiency, financial
position and performance. Financial Analysis serves the following purpose.
To know the operational efficiency of the business: The financial analysis enables
the management to find out the overall efficiency of the firm. Department-wise
efficiency can also be judged from the available data. This will enable the
management to locate weak spots of the business and take necessary remedial
action.
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Helpful in measuring the solvency of the firm: The firm must know its financial
soundness. It should satisfy itself that its current resources are sufficient to meet
its current liabilities. This is possible through the calculations of liquid ratios. On
the other hand, the long term financial position can be measured by calculated
debt equity, proprietary and fixed assets ratios. Thus, the financial analysis helps
the decision makers in taking appropriate decisions for strengthening the shortterm as well as long-term solvency of the firm.
Comparison of past and present results: Financial statement of the previous years
can be compared and the trend regarding various expenses, purchases, sales gross
profit can be ascertained. The cost of goods sold, values of assets and liabilities
can be compared and the future prospects of the business can be indicated.
Help in measuring the profitability: Financial statements show the gross profit, net
profit, and other expenses. The relationship of these items can be established with
sales by calculating operating ratios. This type of analysis helps the managers in
taking certain decisions for improving the profitability or reducing the losses of
the firm.
Inter-firm comparison: The financial analysis makes easy to inter-firm

comparison. Various financial characteristics like profitability, liquidity, solvency
of different firms can be compared. This comparison can also be made for various
time periods.
Helps in judging the solvency of the undertaking: creditors are always interested
in knowing the solvency i.e, the capacity of the business to repay their loans.
Through
Financial statement it is possible to known:
Whether current assets are sufficient to meet current liabilities.
Proportion of liquid assets to current assets.
Futures prospects of the business.

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Whether debentures and other loans are secured or not.
Managerial efficiency of the company.
Bankruptcy and failure: Financial statement analysis is a significant tool in

predicting the bankruptcy and failure of the business enterprises. Financial
statement analysis accomplishes this through the evaluation of solvency position.
Helps in forecasting: The financial analysis will help in assessing future

development by making forecasts and preparing budgets. Capital budgets are
prepared after taking into account the profitability of various alternative
proposals. The trend shown by financial analysis will pave way for the future.
Types of financial analysis:Financial analysis into different categories depending upon
The material used and
The method of operation followed in the analysis or the modus operandi of

analysis
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Types of financial analysis
On the basis of material used
on the basis of modus operandi
External
Internal
Horizontal
Vertical
Analysis
Analysis
Analysis
Analysis
On the basis of material used:

According to material used, financial analysis can be of two types
External analysis
Internal analysis
External analysis:This analysis is done by outsiders who do not have access to the detailed
internal outsiders include investors, potential investors , Creditors, Potential
Creditors, Government Agencies , Credit agencies and General Public for financial
analysis, these external parties to the firm depend almost entirely on the published
financial statements.
Internal analysis:13
The analysis conducted by persons who have access to the internal

accounting records of a business firm is known as internal analysis.
On the basis of modus operandi:

According to the modus operandi financial analysis can also be of two types
Horizontal analysis
Vertical analysis
Horizontal analysis:Horizontal analysis refers to the comparison of financial data of a

company for several years. The figures for this type of analysis are presented
horizontally over a number of columns. The figures of the various years are compared
with standard or base year a base year is year chosen as beginning point. This type of
analysis is also called dynamic analysis as it is based on the data from year to year
rather than on data of any one year. The horizontal analysis makes it possible to focus
attention on items that have changed significantly during the period under view
Vertical analysis:Vertical analysis refers to the study of relationship of the various items in the
financial statements of one accounting period in this types of analysis the figures from
financial statement of a year are compared with a base selected from the same years
statement.
Parties interested in financial analysis:

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Financial Executives:-
The first party interested in the financial analysis in the financial department of the
business concern who have a deep insight into the financial condition of the enterprise
and view of the past performance, which help in future decisions making.
Management:-
The management of the concern is also interested in the analysis of the statements
because it helps them in reaching conclusion regarding the overall operation of the
business. The management is interested in every aspects of the financial analysis it is
there overall responsibility to see that the resources of the firm are used effectively and
efficiently and the firms financial position is sound. As such, return on analysis is very
important for them.
Creditors:-
Creditors also evaluate the financial statements and on the basis of these financial
statements they come about the credit worthiness of the business enterprise and chosen to
extend, maintain of restrict credit. Creditors will be interested to give credit for those
business enterprises having sound financial position and having capable of being
repayments of their credit. Some of the aspects of enterprise operations that are of
interested of the creditors are liquidity of funds, soundness of the financial structure,
profitability of the operations, effectiveness of working capital management etc. The
bankers and trade creditors of a business enterprise are interested in its cash generation
and credit worthiness. They want to assess whether the enterprise will be as interested
payments due as per agreed schedules. The get all this information from the analysis of
balance sheet and income statement of the company.
Investors:-
Investors present as well as prospective, are interested in the business in the

measurements of earning capital of securities. Every investor has the tendency to get fair
return on his or her investment. Investors have been increased concerned with the cash
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generation capability of an enterprise primarily in terms of the flexibility availability to

such enterprises to acquire other business and new assets on an advantageous basis. For
this purpose each cash flow analysis and funds flow analysis are very useful.
Government:-
The financial statements are used to assess the tax liability of the business enterprise. The
government studies economic situation of the country from these statements enable the
government to find out whether business is following various rules and regulations or not.
Bankers:-
The banker is interested to see that the loan amount is secure and the customer is also
able to take the interest regularly. The bankers will analysis the balance sheet to
determine financial strength of the concern and profit and loss account will also be
studied to find out earning position.
The information provided by the analysis and interpretation of various financial
statements is important and useful to those groups also that are interested in working of
the business due to one or other motive.
Procedures for financial analysis:

The following is the procedure to be followed by the interested parties in analyzing the
financial statements.
Determination of nature and extent of analysis: First of all, the depth, object
and extent of analysis is to be determined by the financial analyst. The nature of
analysis will differ depending on the purpose of the analysis. For example, trade
creditors and bankers are interested in knowing whether the firm can pay back their
debt in short period. Their analyses will, therefore, confidence to the evaluation of the
firms liquidity position. The suppliers of interested in knowing its ability to generate
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cash to be able to pay interest and return their claims. Similarly, investors, who have
invested their money in long-term debt, on the other hand, are interested in the firms
profitability over time. They are the firms shares, are most concerned about the firms
earnings. As such, they concentrate on the analysis of the firms financial position to
the extent it influences the firms earnings ability. Finally, management of the firm
would be interest red in every aspect of the financial analysis.
Vertical of the financial statements: Before analyzing and preparing any

statement or composing financial ratios, it is necessary for the analyst to go through
the various financial statements of the firm.
Collection of necessary statements: The analyst should collect other useful

information from the management useful for analysis. This includes any other
information not being revealed from the published financial statements.
Rearrangement of financial data: Before making actual analysis and

interpretation, the analyst must rearrange the data provided by these statements in
useful manner. The approximation of figures, re-classification of consolidation of
items etc., is done in this step.
Methods of analysis: Now the financial analyst may use one or multiple methods
of financial analysis. The methods of financial analysis are: comparative statements,
common size statements, trend analysis, ratio analysis, funds flow statements, cash
flow statements and cost volume profit analysis (CVP analysis).
Interpretation
and
presentation: After
analyzing
the
statements
the
interpretation is to be made. The interference drawn from the analysis are presented in
the scope of reports to the management.
Limitations of financial analysis :
Historical data: Analysis of the financial statements indicates about the

performance of the business in the processing period or periods. It does not
indicate the present position of the business. Financial statements are prepared on
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historical facts and do not throw light on the current and present position of the
business.
Lack of standard terminology: Accounting is not an exact science. It does not

universally accepted terminology. Different meanings are given to a particular
term. There are different methods of providing depreciation. Interest may be
charged on different rates. In this way, there is sufficient possibility of
manipulation and the financial statements have to suffer. As a consequence
financial analysis also proves to be defective. However, in the recent past the
international accounting board is taking interest and taking measures for
standardizing the accounting terminology as well as bringing standards for being
uniformity in accounting system.
Affects of prices level changes: The results shown by financial statements may
be misleading, if price level changes have not been accounted for. The ratio may
improve with the increase in price, where as actual efficiency may not improve.
Ratios of the two years will not be meaningful for comparison, if the prices of
commodities are different. Change in price affects cost of production, sales and
value of assets and as a consequent comparability of ratios also suffers.
Non-consideration qualitative aspect: financial analysis does not measure the

qualitative aspects of the business it does not show the skill, technical know how
and the efficiency of its employees and managers. It is the quantitative
measurement of the performance. It means that analysis of financial statements
measures only one sided performance of the business. It completely ignores
human resources.
Misleading results: Results shown by financial analysis may be misleading in the

absence of absolute date. For example, the analysis of one firm reveals that the
increase in profits from Rs.20,000 to Rs.80,000 shows that the profit has
increased by four times. In case of another firm the analysis reveals that the profit
of this firm als increased from Rs.100 crores toRs.400 crores, showing four fold
increases. But this analysis ignored the size of the firms. As such, the results may
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mislead.
Methods of financial analysis:The following methods of analysis are generally used:
Comparative Statements.
Trend Analysis.
Common-Size Statements.
Funds flow Analysis.
Cash Analysis
Ratio Analysis
Cost-volume-Profit Analysis
COMPARATIVE STATEMENTS:The comparative financial statements are statements of the financial position at
different periods of time .the elements of financial position are show in a comparative
Statement provides an idea of financial position at two or more periods. Generally two
financial statements (balance sheet and income statement) are prepared in comparative
form for financial analysis.
THE COMPARATIVE STATEMENT MAY SHOW: Absolute figures (rupee amounts)

Changes in absolute figures i.e. increase or decrease in absolute figures.
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Absolute data in terms of percentages.

Increase or decrease in terms of percentages.
THE TWO COMPARATIVE STATEMENTS ARE:
Comparative balance sheet, and
Income statement.
COMPARATIVE BALANCE SHEET:Comparative balance sheet as on two or more different dates can be used for comparing
assets and liabilities and finding out any increase or decrease on those items. Thus, while
in a single balance sheet the emphasis is on present position, it is on change in the
comparative balance sheet. Such a balance sheet is very useful in studying the trends in
an enterprise.
Comparative financial statements can be prepared for more than 2 periods or on more
than two dates. However, it becomes very cumbersome to study the trend with more than
2 periods data. Trend percentages are more useful in such cases.
Acc to American institute of certified public accountant the presentation of comparative
financial statements in annual and other reports enhances the usefulness of such reports
and brings out more clearly the nature and trend of current changes affecting the
enterprise. Such presentation emphasis the fact that statements for series of periods are
far more significant than those of a single period and that the accounts of 1 period are but
an installment of what is essentially a continuous history. In any one year, it is ordinary
desired that the balance sheet, the income statement and surplus statement be give for 1
or more proceeding year as well as for the current year.
The comparative balance sheet analysis is the study of the trend of the same items,
group of items and computed items in two or more balance sheets of the same business
enterprise on different dates. The change in periodic balance sheet items reflect the
conduct of a business the change can be observed by comparison of the balance sheet at
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the beginning and at the end of a period and these changes can help in forming an opinion
about the progress of an enterprise.
Guide lines for interpretation of comparative balance sheet:While interpreting comparative balance sheet the interpreter is expected to study the
following aspects:
Current financial position and liquidity position
Long-term financial position
Profitability of the concern.
COMMON SIZE STATEMENT:The common-size statements, balance sheet and income statement are show in analytical
percentages. The figures are shown as percentages of total assets, total liabilities and total
sales. The total assets are taken as 100 and different assets are expressed as a percentage
of the total similarly, various liabilities are taken as a part of total liabilities.
COMMON SIZE BALANCE SHEET:A statement in which balance sheet items are expressed as the ratio of each asset
to total assets and the ratio of each liability is expressed as a ratio of total liabilities is
called common size balance. The common size balance sheet can be used to compare
companies of differing size. The comparison of figures in different periods is not useful
because total figures may be affected by a number of factors. It is not possible to establish
standard norms for various assets. The trends of figures from year to year may not be
studied and even they may not give proper results.
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Common size balance sheet is prepared by stating the total assets as 100 and
reducing individual assets into % of the total. Likewise, individual liability items are
expressed as percentage of the total liabilities. Thus, the common size balance sheet
percentage shows the relation the of each asset item to total assets and of each liability
and owners equity. A closer scrutiny of the common size balance sheet discloses that this
statement focuses on two important aspects.
Distribution pattern of liabilities as between current liabilities, long-term

liabilities and equity capital.
Distribution pattern of assets as between current assets, fixed assets and others.
The common size balance sheet analysis can, of course, be carried further and extended
to the study of what portion of a sub-group, rather than the total, an item is. Thus, in
assessing the liquidity of current assets, it may be of interest to know not only what
proportion of total assets are inventories, but also what proportion of current assets is
represented by this asset. A study of common size statement of the company with that of
a competitive company or the industry would show whether or not the company is the
managing assets efficiently. An analysis of the pattern of distribution of liability reveals
the debt--equity position of the company too large a % of liabilities. And a relatively low
margin of safety for creditors.
While common size statements do not focus light on the relative sizes of individual
companies which are compared, the problem of actual comparability between them is a
matter to be resolved by the analyst judgment. Comparison of common size statement of
single enterprise over the years valuable in that reveals the changing proportions of
components within groups of assets and liabilities. However, care must exercise in
interpreting such changes and the trend which discloses.
Trend analysis :
Trend analysis depicts behavior of the ratios over a period of time and the trends in the
operation of the enterprise. The trend figure are index figures giving a birds eye view of
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the comparative data by presenting its over a period of time. Thus is horizontal analysis
of financial statement, often called as pyramid method of ratio analysis- a guide to yearly
changes. Under this form of analysis, generally financial ratios are studied for a specified
number if years. It is a dynamic analysis depicting the changes over a stated period. Their
method of analysis is one of direction.
TREND ANALYSIS OF BALANCE SHEET:Trend analysis is Very important tool of horizontal financial analysis.
This analysis enables to known the change in the financial function and operating
efficiency in between the time period chosen.
By studding the trend analysis of each item we can known the direction of changes and
based upon the direction of changes, the options can be changed.
Trend = Absolute Value of item in the statement understudy *100

Absolute Value of same item in the base statement
Fund flow statements

Cash flow analysis is a valuable aid to the financial executive and creditors for evaluating
the uses of funds by the firm and in determining how these uses were financed. A cash
flow statement indicates where funds came from and where it was used during the period
under review. They are important tools for communication and very helpful for financial
executives in planning the intermediate and long-term financing of the firm.
RATIO ANALYSIS
INTRODUCTION:
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Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives skilled and experienced analysis, a better
understanding of the financial condition and performance of the firm than what he could
have obtained only through a perusal of financial statements.
MEANING OF RATIOS:
Ratios are relationships expressed in mathematical terms between figures which are
connected with each other in some manner. Obviously, no purpose will be served by
comparing two sets of figures which are not at all connected with each other. Moreover,
absolute figures are also unfit for comparison.
There are various techniques or models for analyzing information contained in the
financial statements viz. Comparative statements, common size statements, trend
percentages, funds flow analysis, cash flow analysis and ratio analysis.
Financial
analysis is undertaken by the management of the firm or by parties outside to it viz.

owners, creditors, investors, etc.
Ratio analysis is most widely used and powerful tool or technique of financial
analysis. The term ratio refers to the numerical quantitative relationship between two
variables.
It shows arithmetical relationship between two figures, which can be
expressed in three ways.
Percentage
Fraction
Proportion
A study of the trend of strategic ratios helps the management in planning, forecasting and
decision making. It helps in identifying specific work areas. In short, though the
technique of ratio analysis, the firms solvency, efficiency and profitability can be
assessed.
IMPORTANCE OF RATIO ANALYSIS
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Ratio analysis helps in simplifying the financial statement for easy understanding.
It helps in drawing out meaningful conclusion from the information provided in

the financial statements which is useful for decision making and framing sound
policies for business in future.
It helps in assessing the financial strength and weakness of the firm and this
enhances the value of the financial statements.
Comparative study of the ratios between the competing firms helps to know the
efficiency of the firm.
It helps the investor to assess the financial position of the concern in which he is
going to invest.
Ratio analysis helps the employees interested in wage increase and fringe benefits
that are related the volume of profits earned by the concern.
Ratio analysis provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firms. They also reveal strong
firms and weak firms, over valued and under valued firms.
Ratio analysis helps in planning and forecasting. Over a period of time a firm or
industry develops certain norms that may include future success or failure. If
relationship changes in firms data over different time periods, the ratios may
provide clues on trends and future problems.
Ratio analysis also makes possible comparison of the performance of the different
divisions of the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.
Thus, ratios can assist management in its basic function of forecasting, planning,
coordination, control and communication.
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LIMITATIONS OF RATIO ANALYSIS
Ratios are of limited use and thus single ratio may not be useful.
Better
interpretation is possible with the calculation of number of ratios, which may lead
to confusion to the analyst in making any meaningful conclusion.
Ratios are calculated on the basis of past results, which may not necessarily true
indicators of the future, if the business policies are constantly changing.
Change in accounting procedure may be misleading for ratio analysis.
For
example, change in inventory valuation methods from LIFO to FIFO may also
influence in the analysis.
Ratio analysis considers only quantitative aspects, but not qualitative factors.
Ratio analysis may give misleading results If the effects of price level changes are
not considered.
Ratio analysis when interpreted by different people in different way may

encounter with the personal bias or prejudice of the analyst.
Ratios are classified as:
liquidity ratios
leverage ratios
coverage ratios
activity ratios (or) turnover ratios
profitability ratios
LIQUIDITY RATIOS:
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A liquidity ratio is also known as short-term solvency. These ratios are used to measure
the firms ability to meet short term obligations. They compare short-term obligation to
short term (or current) resources available to meet these obligations. From these ratios,
much insight can be obtained into the present cash solvency of the firm and firms ability
to remain solvent in the event of adversity. The creditors of the firm are primarily
interested in the short term solvency of the firm. A firms liquidity should be neither too
high nor too low but adequate.
Low liquidity implies the firms inability to meet its maturing obligations. This
will result in bad credit rating, loss of creditors confidence or even technical insolvency,
ultimately leading to the closure of the firm.
A very high liquidity position is also bad. It means that the firms current assets
are too high in proportion to maturing obligations. Idle assets earn nothing to the firm.
The firms funds will be unnecessarily locked up in current assets, which if, released can
be used to generate profits to the firm.
The ratios, which measure, and indicate the extent of a firms liquidity, are
known as liquidity ratios or short-term solvency ratios. Commonly used liquidity ratios
include.
current ratio (or) working capital ratio
quick ratio (or) acid test ratio
cash position ratio (or) super stock quick ratio
LEVERAGE RATIO:
These ratios are also known as capital structure ratios or solvency ratios or capital gearing
ratios. The long-term creditors are more concerned with the firms long-term financial
position. They judge the financial soundness of the firm in the firm in term of the ability
to pay interest promptly as well as making repayment of the principal. The long-term
solvency of the firm can be examined with the help of leverage ratios. They measure the
funds supplied by owners as compared with the financial provided only a small
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proportion of total financing, the risks of the business are borne mainly by the creditors.
Firm with low leverage have less risk of loss, but they also have lower
expected returns. Conversely, firm with high leverage ratios have the risk of large losses
but also have a chance of earning huge profits. Therefore, before deciding whether a firm
should have debt, it must balance higher expected returns against increased risks. The
most commonly examined leverage: ratios are
debt equity ratio
proprietor ratio
debt to capital ratio
gross fixed assets to shareholders funds
fixed assets ratio
COVERAGE RATIOS:
These ratios indicate the extent to which the interest of the persons entitled to get a fixed
return (i.e. interest or dividend) or a scheduled repayment as per agreed terms is safe. The
higher the cover the better it is. Under this category the following ratios are calculated.
fixed interest coverage ratio
fixed dividend coverage ratio
debt service coverage ratio
ACTIVITY RATIO (OR) TURNOVER RATIO:

The finances obtained by the firm from its owners and creditors will be inverted in assets,
28
which the firm uses to generate sales and profits. The amount of sales generated and the
profit earned depend on the effective and efficient management of these assets by the
firm. Activity ratios measure the efficiency with which the firm manages and uses its
assets. That is why activity ratios are known as efficiency ratios, because these ratios are
converted or turned over in to sales.
Thus the turnover or activity ratios measure the relationship between sales on one
side and various assets on the other side. Higher the turnover ratio, the better the
profitability and use of capital.
Many activity ratios can be calculated to measure the efficiency of assets utilization.
Following are some of the important activity ratios.
total assets turnover ratio
capital employed turnover ratio
fixed assets turnover ratio
current assets turnover ratio
working capital turnover ratio
stock turnover ratio
debtors turnover ratio
creditors turnover ratio
PROFITABILITY RATIOS:
Profitability is the ability to make profits. Every firm should earn adequate profits in
order to survive in the immediate present and grow in future. In fact, profit is what makes
the business run. Profitability is the net results of large number of policies and decisions.
Profitability ratios give final answers about how efficiency the firm is managed. The
29
profitability ratio relates profits earned by a firm by its parameters like sales, capital
employed and net worth. But while making ratio analysis relating to profits, it should be
remembered that there are different concepts of profit such as concepts of profit such as
contribution, gross profits, net profits, EBIT, operating profits, profits before depreciation
and before tax etc. Profitability ratios are important for a concern. These ratios are
calculated to enlighten the end results of business activities, which is the sole criterion of
the overall efficiency of a business concern. The following are the important profitability
ratio, which are based on.
Sales
Investment
gross profit ratio
operating ratio
operating profit ratio
net profit ratio
return on capital employed
return on shareholders equity
return on total assets
earnings per share
dividend payout ratio
30
CHAPTER-III
INDUSTRY PROFILE
31
The term "financial services" became more prevalent in the United States partly
as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled
different types of companies operating in the U.S. financial services industry at
that time to merge.[2]
Companies usually have two distinct approaches to this new type of business.
One approach would be a bank which simply buys an insurance company or
aninvestment bank, keeps the original brands of the acquired firm, and adds
the acquisition to its holding company simply to diversify its earnings. Outside the
U.S. (e.g., in Japan), non-financial services companies are permitted within
the holding company. In this scenario, each company still looks independent, and
has its own customers, etc. In the other style, a bank would simply create its own
brokerage division or insurance division and attempt to sell those products to its
own existing customers, with incentives for combining all things with one
company.
India has a diversified financial sector undergoing rapid expansion, both in terms
of strong growth of existing financial services firms and new entities entering the
market. The sector comprises commercial banks, insurance companies, nonbanking financial companies, co-operatives, pension funds, mutual funds and
other smaller financial entities. The banking regulator has allowed new entities
such as payments banks to be created recently thereby adding to the types of
entities operating in the sector. However, the financial sector in India is
predominantly a banking sector with commercial banks accounting for more than
64 per cent of the total assets held by the financial system.
The Government of India has introduced several reforms to liberalise, regulate
and enhance this industry. The Government and Reserve Bank of India (RBI)
32
have taken various measures to facilitate easy access to finance for Micro, Small
and Medium Enterprises (MSMEs). These measures include launching Credit
Guarantee Fund Scheme for Micro and Small Enterprises, issuing guideline to
banks regarding collateral requirements and setting up a Micro Units
Development and Refinance Agency (MUDRA). With a combined push by both
government and private sector, India is undoubtedly one of the world's most
vibrant capital markets.
Market Size
Total outstanding credit by scheduled commercial banks of India stood at US$
1.06 trillion!. The Association of Mutual Funds in India (AMFI) data show that
assets of the mutual fund industry have reached a size of Rs 12.62 trillion (US$
185 billion)@. During April 2015 to February 2016 period, the life insurance
industry recorded a new premium income of Rs 1.072 trillion (US$ 15.75 billion),
indicating a growth rate of 18.3 per cent. The general insurance industry
recorded a 14.1 per cent growth in Gross Direct Premium underwritten in FY2016
up to the month of February 2016 at Rs 864.2 billion (US$ 12.7 billion).
Indias life insurance sector is the biggest in the world with about 360 million
policies, which are expected to increase at a Compounded Annual Growth Rate
(CAGR) of 12-15 per cent over the next five years. The insurance industry is
planning to hike penetration levels to five per cent by 2020, and could top the
US$ 1 trillion mark in the next seven years. The total market size of India's
insurance sector is projected to touch US$ 350-400 billion by 2020.
India is the fifteenth largest insurance market in the world in terms of premium
volume, and has the potential to grow exponentially in the coming years. Life
insurance penetration in India is just 3.9 per cent of GDP, more than doubled
from 2000. A fast growing economy, rising income levels and improving life
expectancy rates are some of the many favorable factors that are likely to boost
growth in the sector in the coming years.
Investment corpus in Indias pension sector is expected to cross US$ 1 trillion by
2025, following the passage of the Pension Fund Regulatory and Development
Authority (PFRDA) Act 2013.
Investments/Developments
Thomas Cook India, an integrated travel and travel related financial
services company, has entered into a partnership with Western Union
Business Solutions, with a view to assist Small and Medium-sized
Enterprises (SMEs) in India with their trade payments across borders.
Kotak Mahindra Bank Limited has bought 19.9 per cent stake in Airtel M
Commerce Services Limited (AMSL) for Rs 98.38 crore (US$ 14.43
million) to set up a payments bank. AMSL provides semi-closed prepaid
instrument and offers services under the Airtel Money brand name.
BankBazaar.com, an online financial services marketplace operated by

A&A Dukaan Financial Services Private Limited, has initiated its
international business expansion plan by starting a wholly owned
33
subsidiary in Singapore, to tap into mortgages and credit cards market in

Singapore and other Asian markets, thus expanding the business potential
for the company.
Tata Capital, the financial services arm of Tata Group, plans to raise Rs
2,000 crore (US$ 293.4 million) for its real estate fund, from State General
Reserve Fund (SGRF), the sovereign wealth fund of OmaN
Ujjivan Financial Services Ltd, a microfinance services company, has

raised Rs 312.4 crore (US$ 45.84 million) in a private placement from 33
domestic investors including mutual funds, insurance firms, family offices
and High Net Worth Individuals (HNIs), ahead of its planned Initial Public
Offering (IPO).
Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA
Life Insurance Co Ltd, a joint venture owned by Tata Sons Ltd and AIA
Group from 26 per cent to 49 per cent.
Canada-based Sun Life Financial Inc plans to increase its stake from 26
per cent to 49 per cent in Birla Sun Life Insurance Co Ltd, a joint venture
with Aditya Birla Nuvo Ltd, through buying of shares worth Rs 1,664 crore
(US$ 244.14 million).
Nippon Life Insurance, Japans second largest life insurance company,

has signed definitive agreements to invest Rs 2,265 crore (US$ 332.32
million) in order to increase its stake in Reliance Life Insurance from 26
per cent to 49 per cent.
The Securities and Exchange Board of India (SEBI) plans to gradually
introduce more commodity products and allow more participants in the
commodity derivatives market in India.
The Reserve Bank of India (RBI) has granted in-principle licenses to 10

applicants to open small finance banks, which will help expanding access
to financial services in rural and semi-urban areas, thereby giving fillip to
Prime
Minister's
financial
inclusion
initiative.
The Reserve Bank of India (RBI) has also given in-principle approval to 11
entities to open payment banks which are expected to result in widening
the reach of banking services and thereby improve the extent of financial
inclusion as envisaged by the government. The setting up of 11 new
payments banks can potentially free up Rs 1,400,000 crore (US$ 205.4
billion) per annum to fund the infrastructure sector, as per a study by the
State Bank of India.
34
A Reserve Bank of India (RBI) committee headed by Deputy Governor Mr

Gandhi has recommended granting commercial banking license to multistate Urban Cooperative Banks (UCB) having business of more than Rs
20,000 crore (US$ 2.93 billion).
Indias largest microfinance company Bandhan has set up Bandhan Bank

Ltd, banking and financial services company, post the receipt of license
from RBI.
Government Initiatives
Several measures have been outlined in the Union Budget 2016-17 that aim at
reviving and accelerating investment which, inter alia, include fiscal consolidation
with emphasis on expenditure reforms and continuation of fiscal reforms with
rationalization of tax structure.
The Union Budget 2016-17 has allowed foreign investment in the insurance and
pension sectors in the automatic route up to 49 per cent subject to the extant
guidelines on Indian management and control to be verified by the regulators.
Service tax on service of life insurance business provided by way of annuity
under the National Pension System regulated by Pension Fund Regulatory and
Development Authority (PFRDA) being exempted, with effect from April 01, 2016.
Capital gains tax exemptions have been extended to merger of different plans
within a mutual fund scheme, which is expected to benefit investors in case of
merger of mutual fund schemes.
The Government of India plans to revise and improve few of its flagship schemes
such as the Atal Pension Yojana (APY), aimed at providing pension coverage,
and Pradhan Mantri Mudra Yojana, which funds small entrepreneurs, in Union
Budget 2016-17 in order to increase the number of beneficiaries covered by
these schemes and overcome shortcomings in implementation.
The Government has also announced several schemes to improve the extent of
financial inclusion. The Prime Minister of India has launched the Micro Unit
Development and Refinance Agency (MUDRA) to fund and promote Microfinance
Institutions (MFIs), which would in turn provide loans to small and vulnerable
sections of the business community. Financial Services Secretary Mr Hasmukh
Adhia has announced that the ministry will launch a campaign for loans under
Pradhan Mantri Mudra Yojana (PMMY) in order to double loan disbursement to
the small business sector to over Rs 100,000 crore (US$ 14.67 billion).
Government of Indias Jan Dhan initiative for financial inclusion is gaining
momentum. Under Pradhan Mantri Jan DhanYojna (PMJDY), 210 million
accounts# have been opened and 174.6 million RuPay debit cards have been
issued. Government of India aims to extend insurance, pension and credit
facilities to those excluded from these benefits under the Pradhan Mantri Jan
Dhan Yojana (PMJDY). The Union Cabinet Minister has also approved
35
the Pradhan Mantri Suraksha Bima Yojana which will provide affordable personal
accident and life cover to a vast population.
The Union Cabinet has approved 100 per cent Foreign Direct Investment (FDI)
under the automatic route for non-bank entities that operate White Label
Automated Teller Machine (WLA), subject to certain conditions.
Minister of Finance Mr Arun Jaitley has formally declared the merger of Forward
Markets Commission (FMC) with Securities and Exchange Board of India (SEBI),
which help convergence of regulations in the commodities and equity derivatives
markets.
The Insurance Regulatory and Development Authority of India (IRDA), as part of
its endeavour to increase insurance sector growth, has allowed a new distribution
avenue called the point of sale person, who will be allowed to sell simple
standardized insurance products in the non-life and health insurance segments,
which are largely pre-underwritten.
Road Ahead
India is today one of the most vibrant global economies, on the back of robust
banking and insurance sectors. The country is projected to become the fifth
largest banking sector globally by 2020, as per a joint report by KPMGConfederation of Indian Industry (CII). The report also expects bank credit to
grow at a Compound Annual Growth Rate (CAGR) of 17 per cent in the medium
term leading to better credit penetration. Life Insurance Council, the industry
body of life insurers in the country also projects a CAGR of 1215 per cent over
the next few years for the financial services segment.
Also, the relaxation of foreign investment rules has received a positive response
from the insurance sector, with many companies announcing plans to increase
their stakes in joint ventures with Indian companies. Over the coming quarters
there could be a series of joint venture deals between global insurance giants
and local players. The relaxation in the foreign direct investment (FDI) limit to 49
per cent can result in additional investments up to Rs 60,000 crore (US$8.81 billi
36
CHAPTER-IV
COMPANY PROFILE
37
38
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41
CHAPTER-V
DATA ANALYSIS
& INTERPRETATION
Statements of profit & loss for the year ended Dec 31, 2011-12
(All amounts in Cr of rupees)
42
PARTICULARS
Schedule
2010-11
2011-12
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
Add: service Incomes
other incomes
TOTAL(A)
3,015,714
366,923
2,648,791
173,847
2,822,638
13
114,172
2,936,810
3,423,153
379,705
3,043,448
102,182
3,145,630
258,985
3,404,615
EXPENDITURES
Material costs
decrease/increase in stock
excise duty on stocks, scrap sales etc.,
employee costs
manufacturing and other expenses
Depreciation
Interest
miscellaneous expenditure written off
TOTAL(B)
Profit before tax(A-B)
TAXATION
current(Net of excess provisions of
earlier year written back rs.5086(2006
nil)
Deferred
14 1,737,661 2,219,601
15
(28,949)
(59,818)
32,655
1,933
16
482,580
588,770
17
382,604
378,026
143,832
174,202
18
25,793
44,428
2,759
---2,778,935 3,347,142
157,875
57,473
----(46,315)
(86)
(40,971)
Net profit for the year

Profit & loss a/c beginning of the year
111,560
(470,185)
16,588
(358,625)
Profit & loss a/c end of the year

Earning per share basic & diluted
(358,625)
5.60
(342,037)
0.80
43

PARTICULARS
Schedule
2011-12
2012-13
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
other incomes
TOTAL(A)
3,423,153
379,705
3,043,448
102,182
3,145,630
13
258,985
3,404,615
4,255,506
330,181
3,925,325
66,668
3,991,993
426,626
4,418,619
EXPENDITURES
Material costs
employee costs
Depreciation
Interest
TOTAL(B)
TAXATION
current(Net of excess provisions of
earlier year written back rs.5086(2006
nil)
Deferred
14 2,219,601 3,387,645
15
-59,818 -315,934
1,933
17,657
16
588,770
668,065
17
378,026
446,527
174,202
208,101
18
44,428
36,532
---------3,347,142 4,448,593
57,473
(29,974)
(86)
(40,971)
-----(3,779)

16,588
(358,625)
(33,753)
(342,037)

Earnings per share basic & diluted
(342,037)
0.80
(375,790)
1.55
44
PARTICULARS
Schedule
2012-13
2013-14
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
other incomes
TOTAL(A)
4,255,506
330,181
3,925,325
66,668
3,991,993
13
426,626
4,418,619
3,903,005
288,534
3,614,471
67,362
3,681,833
493,559
4,175,392
EXPENDITURES
Material costs
employee costs
Depreciation
Interest
TOTAL(B)
Provision for taxation
Current Tax
Fringe benefit Tax
Deferred
14 3,387,645 2,828,104
15 -315,934
186,135
17,657
10,414
16
668,065
612,4
67
17
446,527
508,751
208,101
240,224
18
36,532
69,032
4,448,593 4,455,127
(29,974)
(279,735)
------(3,779)
(4000)
(8056)
----

(33,753)
(342,037)
(291,791)
(375,790)

Earning per share basic & diluted
(375,790)
1.55
(667,581)
13.25
45
PARTICULARS
Schedule
2013-14
2014-15
INCOMES
sales and services
sales (gross)
less: excise duty
Net sales
3,903,005
288,534
3,614,471
67,362
3,681,833
13
493,559
4,175,392
4,748,354
330,678
4,417,676
37,428
4,455,104
386,261
4,841,365
14 2,828,104
15
186,135
10,414
16 612,467
17
508,751
240,224
18
69,032
3,722,053
88,800
25,085
685,159
466,859
292,689
133,955
4,455,127
5,414,600

Provision for taxation
current taxation
fringe benefit tax
(279,735)
(573,235)
(4000)
(8056)
---(7,355)

(291,791)
(375,790)
(580,590)
(667,581)

Earnings per share basic & diluted
(667,581) (1,248,171)
13.25
26.37
other incomes
TOTAL(A)
EXPENDITURES
Material costs
employee costs
Depreciation
Interest
TOTAL(B)
Balance sheet
46
Balance sheet is a statement of financial position of a business at a specified moment

of time. It represents all assets own by the business at a particular moment of time and the
claim of the owners and outsiders against those assets at that time. It in a way of the
financial condition of the business at that time.
The important distinct an income statement and balance sheet is that the income
statement is for a period while balance which is for a particular date. Income statement is
therefore a flow report, as contrasted with the balance sheet which is a static report
Comparative Balance Sheets

The comparative balance sheet analysis is the study of the same items, group of items and
computed items in two or more balance sheets of the same enterprise on different dates.
The changes in periodic balance sheet items reflect the conduct of a business. The
changes can be observed by comparison of the balance sheet at the beginning and at the
end of a period and these changes can help in informing an opinion about the progress of
and enterprise.
47
Balance Sheet of UNIVERSAL FINANCIALS .During the year 2010-11

**All amounts are in Cr
200910
Amou
nt
201011
Amou
nt
Inc/De
c
Amou
nt
19905
34
21864
7
19905
34
36239
4
0
14374
7
22091
81
23529
28
1437
47
16653
9
20130
9
18000
0
38090
9
27338
37
34370
18000
0
2143
70
3581
17
3693
19786
28
58883
6
13897
92
24863
9
83985
14252
3
58538
21224
6
856
14855
79
0
16384
31
-856
1568
52
10
1040
1040
97432
0
9743
2
0
10
0
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Reserves and Surplus
Advance share Application Amount
(A)
Loan Funds
Secured Loans
Unsecured Loans
0
16653
9
23757
20
(B)
(A +B) = ( C )
APPLICATION OF FUNDS
Fixed Assets
18946
4
44631
3
14483
30
Gross block
LESS: Accumulated Depreciation
Net Block
ADD: Capital Work in progress
(including Capital Advances), Net
Fixed Assets held for disposal
(D)
Investments
(E)
Deferred Tax Asset-Net
(F)
48
0
6
6
7
25
0
12
9
15
4
32
4
58
3
10
10
0
Current Assets, Loans and

Advances
Inventories
Sundry Debtors
Cash and bank balances
Loan and Advances
other current Assets
(G)
Less: Current Liabilities and
Provisions
Current Liabilities
Provisions
(H)
Net Current Assets
(G - H) = (I)
Miscellaneous Expenditure (written
off)
Profit and Loss Account
(J)
Total
(D+E+F+I+J)
56163
0
38777
1
63051
8
70810
7
24837
10314
0
56675
10567
7
31838
83
12
8
2537
10773
78
15009
77
4235
99
39
61449
8
46723
66122
1
41705
3
80914
5
53523
86266
8
63830
9
19464
7
6800
2014
47
2212
56
2759
47018
5
23757
20
35862
5
27338
37
-2759
1115
60
3581
17
68888
32033
6
12
32
15
30
53
10
0
24
15
Interpretation (2010-11):
1. The comparative balance sheet of the company during the year 2010-11 records
that the current assets have increased by 423599 Cr i.e.,39%
49
2. Because of increase in current assets we can say that the short term solvency of
the company is good.
3. The current liabilities have increased by 201447 Cr i.e.,30.4%
4. Fixed assets have decreased by 153708 Cr i.e.,10%
5. The shareholders funds of the company have increased when compared to
previous year. So we can say that long-term solvency of the company is
satisfactory.
6. There is increase in working capital of 222152 Cr when compared to the previous
year. So we can say that the financial position of the company is good.
Balance Sheet of UNIVERSAL FINANCIALS. During the year 2011-12

201011
Amou
nt
201112
Amou
nt
Inc/De
c
Amou
nt
19905
34
36239
4
21019
95
36239
4
11146
1
2352 24643
928
89
1114
61
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Advance share Application
Amount
(A)
Loan Funds
Secured Loans
20130
50
13617
Unsecured Loans
(B)
(A +B) =
(C)
9
9
18000 29310
0
1
38090 42928
9
0
27338 28936
37
69
64730
11310
1
4837
1
1598
32
19786
28
58883
6
13897
92
24863
9
16384
31
42325
6
17481
6
24844
0
51265
19715
5
0
1971
75
32
63
13
6
Fixed Assets
Gross block
Net Block
(D)
Investments
(E)
24018
84
76365
2
16382
32
19737
4
18356
06
0
16384 18356
31
06
1040

(F)
Advances
40
97432 56461
63051
8
70810
7
Inventories
Sundry Debtors
Loan and Advances
(G)
Provisions
Current Liabilities
51
76538
0
65647
2
-1000
4097
1
21
30
18
21
12
0
12
96
42
50675 35502
10567 23137
7
9
0
0
15009 16887
77
33
13486
2
51635
15173
12570
2
0
1877
56
-7
31
11
8
0
13
80914
5
94880
12
90402
5
21
Provisions
71660
1665
40
2121
6
19
35862 34203
5
7
27338 28936
37
69
1658
8
1598
32
-5
53523
86266
8
63830
9
(H)
Net Current Assets
(G - H) = (I)
Miscellaneous Expenditure
(written off)
(J)
Total
12518
3
10292
08
65952
5
(D+E+F+I+J)
13
4
Interpretation (2011-12)
1. The comparative balance sheet of the company during the years 2011-12 records
3. The current liabilities have increased by 166540 Cr i.e.,19%
satisfactory.
6. There is an increase in working capital of 212216 Cr when compared to the
previous year. So we can say that the financial position of the company is good.
52
53
Balance Sheet of UNIVERSAL FINANCIALS. During the year 2012-13

201112
Amou
nt
201213
Amou
nt
21019
95
36239
4
22018
61
36239
4
Inc/De
c
Amou
nt
99866
SOURCES OF FUNDS
Share Holders Funds
Share Capital
Amount
(A)
Loan Funds
Secured Loans
Unsecured Loans
(B)
(A +B) =
(C)
24643 25642
89
55
9986
6
13617 32440
9
7
29310 54987
1
4
42928 87428
0
1
28936 34385
69
36
18822
8
25677
3
4450
01
5448
67
24018
84
76365
2
16382
32
33182
7
20116
7
13066
0
10977
3
4
13
8
88
10
4
19
Fixed Assets
Gross block
LESS: Accumulated
Depreciation
Net Block
27337
11
96481
9
17688
92
19737
4 87601
18356 18564
06
93
0
1081
18356 18575
06
74
40
40

(including Capital Advances),
Net
(D)
Investments
54
20887
1081
2196
8
0
14
26
8
56
1
1
0
(E)
(F)
Advances
Inventories
Sundry Debtors
Loan and Advances
(G)
Provisions
Current Liabilities
Provisions
(H)
Net Current Assets
(G
- H) = (I)
(written off)
(J)
Total
(D+E+F+I+J)
56461 52682
-3779
76538
0
65647
2
12507
52
56870
7
35502
20234
7
25034
36973
1
48537
2
87765
10468
16738
4
29032 93380
16887 23076
33
04
64348
6188
71
37
97058
11
28888
1259
46
4929
25
23
90402 10010
5
83
12518 15407
3
1
10292 11551
08
54
65952 11524
5
50
34203 37579
7
0
28936 34385
69
36
3375
3
5448
67
63
13
29
83
22
2
12
75
10
19
4. Fixed assets have increased by 21968 Cr.
55

satisfactory.
6. There is increase in working capital of 492925 Cr when compared to the previous
year. So we can say that the financial position of the company is good.
56
Balance Sheet of UNIVERSAL FINANCIALS .During the year 2013-14

20122013- Inc/De
13
14
c
Amou Amou Amou
nt
nt
nt
SOURCES OF FUNDS
Share Holders Funds
22018 22018
Share Capital
61
61
0
36239 36239
4
4
0
Amount
25642 25642
(A)
55
55
0
Loan Funds
32440 38450
Secured Loans
7
9 60102
54987 10035 45372
Unsecured Loans
4
94
0
87428 13881 5138
(B)
1
03
22
34385 39523 5138
(A +B) = ( C )
36
58
22
Fixed Assets
27337 34410 70731
Gross block
11
23
2
LESS: Accumulated
96481 11874 22260
Depreciation
9
25
6
17688 22535 48470
Net Block
92
98
6
18751
87601
2 99911
(including Capital Advances),
18564
Net
93
1081
0 -1081
18575 24411 5835
(D)
74
10
36
Investments
(E)
40
40
40
52682 52682 5268
57
0
0
0
19
83
15
15
26
23
27
11
4
0
31
0
0
(F)
Advances
Inventories
12507
52
11442
47
Sundry Debtors
56870
7
31628
8
25034
Loan and Advances
93380
36973
1
58827
19246
7
43828
1
23076 21501
04
10
(G)
Provisions
10010 11920
83
12
15407 16715
1
3
11551 13591
54
65
Current Liabilities
Provisions
(H)
Net Current Assets
(G - H) = (I)
(written off)
(J)
Total
(D+E+F+I+J)
10650
5
25241
9
33793
99087
68550
1574
94
19092
9
11524 79094
50
5
13082
2040
11
3615
05
37579 66758
0
1
34385 39523
36
58
2917
91
5138
22
-9
44
13
5
10
6
19
-7
19
8
18
31
78
15
Interpretation (2013-14):
that the current assets have decreased by 157494 Cr i.e.,7%
58
2. Because of decrease in current assets we can say that the short term solvency of
the company is not good.
3. The current liabilities have increased by 204011 Cr i.e., 18%
4. Fixed assets have increased by 583536 Cr i.e.,10%
previous year. So we can say that long-term solvency of the company did not
yield any increase when compared to previous year.
6. There is an decrease in working capital of 361505 Cr compared to the previous
year.
7. Hence the financial position of the company is not satisfactory.
Balance Sheet of UNIVERSAL FINANCIALS, during the year

2014-15
201314
Amou
nt
201415
Amoun
t
Inc/De
c
Amou
nt
22018
61
220186
1
SOURCES OF FUNDS
Share Holders Funds
Share Capital
59

Advance share Application Amount
(A)
Loan Funds
Secured Loans
Unsecured Loans
(B)
(A +B) = ( C )
Fixed Assets
Gross block
Net Block
(D)
Investments
(E)
Deferred Tax Asset-Net (F)
Current Assets, Loans and Advances
36239
4
362394
25642
55
25642
55
38450
9
10035
94
13881
03
39523
58
318621
120268
1
15013
02
41455
56
65888 17
25908
7 26
1931
1
99
4
1931
98
5
34410
23
11874
25
22535
98
366802
1
147729
0
219073
2
18751
2
70620
24411
10
40
52682
22613
52
40
52682
Sundry Debtors
11442
47
31628
8
58827
Inventories
43828
1
19246
7
Loan and Advances

60
22699
8
7
28986
5 24
62866 -3
11689
2 62
0
1797
58
0
0
231325
21760
2
31310
8
41190
20695
6
204544
12077
926645
629396
17637
0
-7
0
0
19
99
70
47
6
(G)
Less: Current Liabilities and Provisions
Current Liabilities
Provisions
(H)
Net Current Assets
(G - H) = (I)
Miscellaneous Expenditure (written off)
Total
(J)
(D+E+F+I+J)
21501
10
20135
47
1405
63
11920
12
16715
3
13591
65
122551
5
33503
79094
5
58172
0
66758
1
39523
58
12497
02
41455
56
202313
14127
828
5821
81
1931
98
that the current assets have decreased by -157497 Cr i.e.,7%
2. Because of decrease in current assets we can say that the short term solvency of
the company is not good.
5. The shareholders fund of the company is decreased when compared to previous
year.
6. There is a decrease in working capital of 2029225 Cr compared to the previous
61
35160 21
6866
3
5
2092
2
25
6
year.
7. Hence the financial position of the company is not satisfactory.
-7
8
7
5
CHAPTER-V
FINDINGS, SUGGESTIONS
& CONCLUSION
62
FINDINGS
1. The comparative balance sheet of the company during the year 2010-11 records
3. Ne profit has decreased in 2010-11 by 24%, due t decrease in sales
6. The current liabilities have increased by 166540 Cr i.e.,19%. Fixed assets have
decreased by 197175 Cr i.e.,12%
7. Net profit has increased in 2011-12 by 6%, due to increase in sales
that the current assets have increased by 618871 Cr i.e.,37% and There is increase
in working capital of 492925 (2012-13) Cr when compared to the previous year.
9. In 2012-13 net profit increased by 10%, due t increase in sales
that the current assets have decreased by 157494 Cr i.e.,7% and there is an
decrease in working capital of 361505 Cr compared to the previous year.
11. Net profit increased by 15%
63
that the current assets have decreased by -157497 Cr i.e.,7%
13.Net profit increased by 87% due to increase in sales, but simultaneously there is
an increase in the expenditure
64
CONCLUSION
1 The Purchase of investment by the company is up to mark.
2 The company not raising additional capital shares is same.
3 The company allows has funds from operations
4 Company experienced both increased & decreased in capital work in progress.
5 The company had taken secured loans in the assessment year 2010-2014.
6 The company has repayment total unsecured loans in the assessment year 2012-2014.
7 Equipment required for profits under constructions but not installed by end of year is
shown under capital work in progress.
8 Depreciation is calculated from year to year. That is already given in the balance
sheet.
9 The department verity fixed assets annually.
10 Investment is carried at cost less provisions where ever necessary.
65
BIBLIOGRAPY
BOOKS
Financial Management Written By M.Y. Khan & P.K. Jain
Financial Management Written By Prasanna Chandra
Financial Management Written By I. M. Pandey
Financial Management Written By S. N. Maheswari
WEBSITES
www.UNIVERSAL FINANCIALS.com
www.investopedia.com
www.valuebasedmanagement.net
66
67

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Financial Statement Analysis - Universal Financial

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CHAPTER-I

analysis of short term liquidity position of the form to a

What is the financial position of the firm at a given point of time?

To answer these questions, accountant prepares two principle statements, the

Analysis of financial statement

Procedure of Financial Statements Analysis

The information is interpreted in a simple and understandable way.

significance and utility of financial data is explained for helping decision-taking.

The conclusions drawn from interpretation are presented to the management in

Objectives of the study:

To analysis the financial statements and present its financial positions.

To assess and evaluate the performance of the company.

To determine the efficiency of operations as reflected in the financial statements.

To offer appropriate suggestions for better performance of the company.

Need and importance of the study:

Essential to bring out the history of UNIVERSAL FINANCIALS.

Significance and meaning of the financial statements.

Scope of the study:

Comparative financial statements.

Common-size financial statements.

Trend percentage analysis.

Statement of changes in financial position.

Cost-volume-profit relations, and

Ratio analysis and others.

It includes data gathered from the annual reports of UNIVERSAL FINANCIALS

Articles are collected from official website of UNIVERSAL FINANCIALS.

Comparative financial statements.

Common-size financial statements.

Trend percentage analysis.

Statement of changes in financial position.

Cost-volume-profit relations, and

Ratio analysis and others.

Limitation of the study:

It is only a study of interim reports.

Different people may interpret the same analysis in different ways.

It does not consider the changes in prices level.

Changes in accounting procedure by firm may often make financial analysis

OBJECTIVES OF FINANCIAL STATEMENT

Broadly the objective of the Analysis of Financial statement is to understand

To find out the relative importance of different components of the financial

To identify the reasons for change in the profitability\financial position of the

To examine the solvency of the firm.

Significance of financial analysis

Inter-firm comparison: The financial analysis makes easy to inter-firm

Financial statement it is possible to known:

Whether current assets are sufficient to meet current liabilities.

Proportion of liquid assets to current assets.

Futures prospects of the business.

Whether debentures and other loans are secured or not.

Managerial efficiency of the company.

Bankruptcy and failure: Financial statement analysis is a significant tool in

Helps in forecasting: The financial analysis will help in assessing future

Types of financial analysis:Financial analysis into different categories depending upon

The material used and

The method of operation followed in the analysis or the modus operandi of

Types of financial analysis

On the basis of material used

on the basis of modus operandi

On the basis of material used:

The analysis conducted by persons who have access to the internal

On the basis of modus operandi:

Horizontal analysis:Horizontal analysis refers to the comparison of financial data of a