Financial statement analysis of Jagatjit industries

Analysis of balance sheet of financial year 2013-14

Shareholders funds:
The shareholders funds of the company in 2013-14 are decreasing by -13.13%
because company has not issued any further shares in the market as the total share
capital remains the same in the financial year. Total reserves and surplus of the
company are decreasing by -15.02% which means that company is making payment
of dividend to its shareholders. And even the revaluation reserves account is also
decreasing by -2.39% Resulting into decrease in shareholders fund as the market
values of the asset is decreasing as compared to it is recorded in books of accounts.
Non- current liabilities:
The long term borrowings of the company is increasing by 109.90% which means
that company is more dependent on outsiders fund as compared to owners fund
because they have not issued any share in 2013-14 . As the borrowings of the
company increases the financial risk and also burden increases as the interest is
also to be paid on this borrowings or in future company might not be able to pay its
loan which results into increase in financial risk of the company. Deferred tax
liability of the company as compares to 2013 it increase by 13.23% in 2014 which
means that company has to pay more tax as compared to previous year.

Current liabilities:
Total current liabilities of the company are decreasing by -1.92% because company
is able to pay its creditors which might be because of improved liquidity position of
the company but at the same time the short term borrowings of the company is
increasing by 8.75% which is because of more dependency of company on outsiders
fund that company might be taking short term borrowings to pay the interest to the
outsiders, or we can say company needs quick financing in order to fund working
capital needs as company is not having even enough reserves and surplus.
Non-current assets:
Total non-current assets are decreasing by -3.42%. as fixed assets are decreasing by
-4.44% and at the same time the Capital Work-In-Progress is increasing by 143.93%
which shows that company is selling its fixed asset because they are interested in
purchasing of new technology assets as they wanted to have technological
upgradation as their whole business depends on technology but at the same time as
it is seen that they are taking more and more loans and even their fixed asset are
decreasing which shows that the solvency position of the company is not good. As
in future when the outsiders will demand the company will might not be able to pay

its outsiders as their fixed assets are also less which may affect the solvency
position of the company.

Current assets:
Total current assets are decreasing by -8.24%. but other long term loans and
advances are increasing by 2.88% because company is giving loan so that they can
earn good interest so that they can pay to their outsiders or can get good amount
because the cash balance of the company as compares to previous year 2013 it is
decreasing by -50.82% even after there is decrease in inventories by -16.85% which
means that company is not able to generate good revenue from its operations to
meets its working capital requirement so they are taking money from outsiders
which will adversely affect their liquidity position as company is not having
sufficient amount of the current assets to pay out their current liability.

Analysis of balance sheet of 2014-2015

Shareholders funds:
Shareholders funds are decreasing by -15.82% which is because of decrease in
reserves and surplus of the company by -18.50% as compared to previous year
which means that company is paying dividend to its shareholders . But companys
share capital has no change which means that company is not issuing its shares.
Non-current liabilities:
Total non-current liabilities of the company is increasing by 3.48% which is because
of increase in long term liabilities i.e. 129.48% but there is decrease in deferred tax
liability of the company by -64.35% as compared to previous financial year which
means company might have paid tax in excess which is now refunded by the tax
authorities. As the long term borrowings of the company increases as compared to
shareholders fund which shows that company is more dependent on outsiders fund
which may adversely affect the solvency position of the company as in future
company might not be able to pay its outsiders even after selling their fixed assets.
Current liabilities:
Total current liabilities of the company increases by 21.30% as compared to
previous year 2014 as the short term borrowings of the company is also increasing
as compared to previous year as the more credit period might be given by the
suppliers. This increase in short term borrowings of the company may affect the
liquidity position of the company.
Non-current assets:

Total current assets of the company are decreasing by -6.68% which might be
because that the company might be thinking to close down its operations as they
are not generating enough revenue or might be to pay their long term borrowings
as their long term long term borrowings are increasing. Or it can be because that
they want to upgrade their technology which results into increase their long term
liabilities.

Current assets:
Current assets are increasing by 12.54% even after -14.71% decrease in cash and
cash equivalents because of increase in 43.48% in current investments which
means that company is investing in some another projects which might be
profitable for the company that they will earn better amount so that they can pay
out their liabilities.

Conclusion
From last three years balance sheet of the company it is observed that the company
is more dependent on outsiders funds as compared to owners fund because in last
three years company has not issued any shares and the long term borrowings are
increasing which may affect the solvency position of the company or we can say will
increase the financial risk of the company. And similarly fixed assets of the company
is also decreasing which means that the solvency position of the company is not
good because company is not having that much amount of the fixed assets to pay
out their long term borrowings which may result to bankruptcy of the company
because solvency is essential to staying in business as it asserts a companys ability
to continue operations into the foreseeable future.
In 2013-14 the current assets of the company were decreasing
but in 2015 the currents assets of the company increased by 12.54%, whereas
current liabilities of the company was also decreasing in 2013-14 but in 2015 the
current liabilities of the company increased by 21.30% which means that the
liquidity position of the company is not good as both the current assets and current
liabilities are increasing but the increase in current liability is more by 8.76% in
comparison to current assets which means company is not having that much
amount of current assets to pay off their current liabilities as they come due. So, we
can say the overall liquidity and solvency position of the company is not good.