LOVELY PROFESSIONAL UNIVERSITY

TERM PAPER
Of
Accounting for Managers
Topic

Submitted to:- Submitted By

Mrs. Nitika Sehgal Parveen Nagar
MBA
11011597
 B62
CONTENTS
 INTRODUCTION

 BORD OF DIRECTORS

 OBJECTIVE

 BALANCE SHEET

 PROFIT AND LOSS STATEMENT

 COMPERATIVE STATEMENTS

 Interpretation

 COMMON SIZE STATEMENTS

 Interpretation

 TREND ANALYSIS

 Interpretation

• RATIO ANALYSIS

• Interpretation

• CASH FLOW STATEMENT

• Interpretation

• FUND FLOW STATEMENT

• Interpretation

• COST ANALYSIS

• Interpretation
INTRODUCTION POWERGRID, the Central Transmission Utility (CTU)
of the country, is engaged in power transmission business with the mandate for
planning, co-ordination, supervision and control over complete inter-State
transmission system. POWERGRID, as on July 2009, owns and operates about
71,600 ckt kms of transmission lines at 800/765 kV, 400 kV, 220 kV & 132 kV
EHVAC & +500 kV HVDC levels and 122 sub-stations with transformation
capacity of about 81,200 MVA. About 45% of total power generated in the country
is wheeled through this transmission network Recognizing the role of
POWERGRID in the overall development of transmission and power sector, Govt.
of India has conferred Navratna upon status to POWERGRID in May` 08, the
highest honour for a Public Sector Enterprise. For overall co-ordination at national
level, POWERGRID has implemented National Load Despatch Centre (NLDC) at
Delhi with back up at Kolkata, which has been commissioned in February, 2009.
NLDC shall be the apex body to ensure integrated operation of the national power
system. POWERGRIDs achievements have been continuously been praised in
terms of awards from GoI and various other agencies. The Company recently
received Three National Awards for meritorious performance in the field of
Transmission sector for system availability and early completion of project for the
year 2007-08, All India Organization of Employers Industrial Relations award
2007-08, and IEEMA Power Awards 2009 for “Excellence in Power
Transmission”. Further, POWERGRID has been conferred the “The First DSIJ
PSU Awards 2009” by Dalal Street Group of Publications for being “one of the
largest transmission utilities in the world”.
 OBJECTIVES OF MY RESEARCH

 To know the earning capacity of the business:- It helps us to ascertain

the financial position of the company. It helps us to know whether the
profits are increasing or decreasing over the year.
 To know the solvency position of the company:- It helps us to know that,
whether the business in a position to pay its long term and short term
liabilities in time.
Debt Equity Ratio is calculated to ascertain the liquidity of the business.
 To make comparative study with other firms:- The purpose of financial
analysis is compare the financial position of the firm with the other firms
engaged in the same business.
 To know the efficiency of the business:- The purpose of a financial
analysis is to judge the financial policies adopted by the management are
proper or not.
E.g, If actual ratios are, as were the standards fixed then managent policies are
said proper and efficient.
 To provide useful information to the management:- The objective of the
financial analysis is to find out the shortcomings of the business, so that the
management can take the remedial measures to remove those shortcomings.
 To know the trend of the business:- It helps the management to compare
the performance of the two or more financial years of a same firm. It helps
in ascertaining the performance of the business over a period of time.
BALANCE SHEET of the year 2009 and 2010
Sources Of Funds 2009 2010

Total Share Capital 95.92 95.92

Equity Share Capital 95.92 95.92

Share Application Money 0 0

Preference Share Capital 0 0

Reserves 998.55 1,461.30

Revaluation Reserves 0 0

Net worth 1,094.47 1,557.22

Secured Loans 24.59 25.59

Unsecured Loans 40.7 40.7

Total Debt 65.29 66.29

Total Liabilities 1,159.76 1,623.51

Application Of Funds

Gross Block 1,116.93 1,194.39

Less: Accum. Depreciation 494.02 486.93

Net Block 622.91 707.46

Capital Work in Progress 164.64 380.72

Investments 234.77 703.69

Inventories 546.71 763.14

PROFIT AND LOSS STATEMENT for the year 2009 and 2010

PARTICULARS 2009 2010

Sales Turnover 5,042.40 5,794.09

Excise Duty 532.28 426.37

Net Sales 4,510.12 5,367.72

Other Income 23.86 150.61

Stock Adjustments 0.61 130.83

Total Income 4,534.59 5,649.16

Raw Materials 2,641.09 2,966.23

Power & Fuel Cost 45.78 47.03

Employee Cost 239.77 262.73

Other Manufacturing Expenses 40.45 52.3

Selling and Admin Expenses 939.16 1,119.89

Miscellaneous Expenses 10.55 17.41

Preoperative Exp Capitalised 0 0

Total Expenses 3,916.80 4,465.59

Operating Profit 593.93 1,032.96
PBDIT 617.79 1,183.57
Interest 15.91 19.1

PBDT 601.88 1,164.47

Depreciation 57.15 60.74

Other Written Off 0 0

 Profit Before Tax 544.73 1,103.73

Extra-ordinary items 3.6 7.23

PBT 548.33 1,110.96

Tax 185.97 336.46

Reported Net Profit 362.36 774.5

Total Value Addition 1,275.71 1,499.36

Preference Dividend 0 0

Equity Dividend 167.86 258.98

Corporate Dividend Tax 28.53 43.33

Shares in issue (lakhs) 959.2 959.2

Earnings Per Share (Rs) 37.78 80.74

Equity Dividend (%) 175 270

Book Value (Rs) 114.1 162.35

COMPERATIVE BALANCE SHEET for year 2009 and 2010

Particulars Mar,2009 Mar,2010 Change(+/- %age

) change
• Cr. • C
r
.
Gross Block 1,116.93 1,194.39
77.46 6.93
494.02 486.93
Less:-Depreciation -7.09 -1.43
622.91 707.46
TOTAL FIXED ASSET(A) 84.55 13.57
 234.77 703.69
INVESTMENTS(B) 468.92 199.7
164.64 380.72
CAPITAL WORK IN PROGRES ( C) 216.08 131.24

WORKING CAPITAL :-
Inventories 546.71 763.14
216.43 39.58
Sundry Debtors 311.02 331.43
20.41 0.06
Cash and Bank Balance 128.05 28.58
-99.47 -77.68
Loans and Advances 186.37 241.68
55.31 29.67
Fixed Deposits 0.21 0.02
-0.19 -90.47
Total CA, Loans & Advances (i) 1,172.36 1,364.85
192.49 16.41
Deffered Credit 0.00 0.00
0.00 0.00
Current Liabilities 849.08 1,229.04
379.96 44.74
Provisions 185.84 304.17
118.33 63.67
Total CL & Provisions (ii) 1,034.92 1,533.21
518.29 50.08
WORKING CAPITAL ( D ) 137.44 -168.36
-305.8 -222.49
CAPITAL EMPLOYED(A+B+C+D) 1159.76 1623.51
463.75 39.98
Less:-Long Term Debt

Secured Loans 24.59 25.59

1.00 16.26
Unsecured Loans 40.70 40.70
0.00 0.00
Shareholders' Funds 1094.47 1557.22
462.75 42.28
Represented By:-

Equity Share Capital 95.92 95.92

0.00 0.00
Preference Share Capital 0.00 0.00
0.00 0.00
Reserves 998.55 1,461.30
462.75 42.28
TOTAL:- 1094.47 1557.22
462.75 42.28

ANALYSIS:-

1. Total Fixed Assets have increased by Rs.84.55 Cr. i.e, 13.57 % increase.

2. Purchases of fixed Assets are financed partly by raising secured loans of Rs.
1.0 cr. And partly from the reserves i.e,Rs.83.55 Cr.
3. Current Assets have increased by 16.41% and the current liabilities have
increased by 50.08%.
4. Reservers have been increased by42.28%.
5. Company has raised secured loan of Rs.1.0 Cr.

INTERPRETATION:-
 1. Company has purchased Fixed Assets of Rs 84.55Cr., and these have been
financed partly by reserves and by secured loans also.
2. No matter the current assets have increased by 16.41% but there is more
increase in current liabilities by 50.08%. This decreases the working capital
as well.
3. As the current assets of the company are less than that of current liabilities,
it shows that the short term financial position of the company is weak.

COMPERATIVE INCOME STATEMENT for year 2009

and 2010
Particulars Mar,2009 Mar,2010 Change %age
(+/-) change
• Cr. • C
r •
.
Net Sales 4,510.12 5,367.72
857.6 19.01

Less:- Cost of Goods Sold

Raw Materials 2,641.09 2,966.23
325.14 12.31
Power & Fuel Cost 45.78 47.03
1.25 2.73
Employee Cost 239.77 262.73
22.96 9.57
Other Manufacturing Expenses 40.45 52.30
11.85 29.29
Gross Profit 1543.03 2039.43
496.4 32.17
Less:- Selling and Admns Expenses 939.16 1,119.89
180.73 19.24
Miscellaneous Expenses 10.55 17.41
6.85 65.02
OPERATING PROFIT 513.32 902.13
388.81 75.74
Other Income 23.86 150.61
126.75 531.22
Stock Adjustments 0.61 130.83
130.22 21347.4
NET PROFIT 617.79 1183.57
565.78 91.58

ANALYSIS:-

1. In 2010, the sales of the company have increased by 19.1%, but the cost
of the sales has also increased by 12%.
2. The Gross profit of company has increased by 32.17%
3. Operating Profits have increased by 75.74%.
4. Increases in other income and stock adjustments has increased the Net
Profit by 91.58%
ITERPRETATION:-

1. Cost of goods sold has increased by 12% due to increase in the cost of the
Raw Material by 12%. And with an increasing sale by 19.1% which
increases the Operating profit of the company by 75.74%.
This indicates that the operating efficiency of the company is not satisfactory as
the profit has increased only because increase in SALES not by decrease in cost

COMMON SIZE BALANCE SHEET for the year 2010

Mar,2009 Mar,2010
%of %of
Particulars Amount 2009 Amount 2010

ASSETS

TOTAL FIXED ASSET 622.91 34.69 707.46 34.13

CURRENT ASSETS 1172.36 65.3 1364.85 65.86

TOTAL ASSETS 1795.27 100 2072.31 100

LIABILITIES
 Equity Share Capital 95.92 4.37 95.92 3.03

Preference Share Capital 0 0 0

Reserves 998.55 45.49 1,461.30 46.29

Secured Loans 24.59 1.12 25.59 0.08

Unsecured Loans 40.7 1.85 40.7 1.28

Total CL & Provisions (ii) 1,034.92 47.15 1,533.21 48.56

TOTAL LIABILITIES 2194.68 100 3156.72 100

ANALYSIS:-
1. In 2009, Current Assets were 65.3% of total assets. In 2010, these have
increased to 65.86%.
2. Current liabilities have increased from 47.15% to 48.56%.
3. Reserves have been created

COMMON SIZE INCOME STATEMENT for the year 2009 and 2010
Particulars Mar,2009 Mar,2010
%of %of
Amount Amount
total total
100
Net Sales 4,510.12 100 5,367.72
Less:- Cost of Goods Sold 62.01
2967.09 65.78 3328.29
37.99
Gross Profit 1543.03 34.12 2039.43
20.86
Less:- Selling and Admns Expenses 939.16 20.82 1,119.89
0.20
Miscellaneous Expenses 10.55 0.26 17.41
16.8
OPERATING PROFIT 513.32 12.78 902.13
 2.8
Other Income 23.86 0.59 150.61
2.43
Stock Adjustments 0.61 0.015 130.83
22.04
NET PROFIT 617.79 15.38 1183.57
ANALYSIS:-
1. Gross Profit has increased with a reduction in cost of goods sold’
2. Operating Profit has increased from 12.78% to 16.80% in 2010.
3. Net Profit Increased 15.38%to 22.04%.
INTERPRETATION:-
1. The gross profit has increased in 2010 because of the company has been
able to reduce
the cost of goods sold fom 65.8% to 62.01% in 2010.
2. The concern has been able to reduce to operating expenses too, which has
increased the operating profit of the concern.
3. The Net profit of the concern has increased due to an increase in the stock
adjustments and other incomes.
Here, the increase in gross profit with a reduction in the operating expences
indicates the operating efficiency of the concern.

TREND ANALYSIS
(Base Year 2006=100)
Cost of Goods current
Sales Stock Sold profit before tax liabilities current
Rs. In Rs. In Rs. In Rs. In Rs. In Rs. In
Year Cr. %age Cr. %age Cr. %age Cr. %age Cr. %age Cr.
200 2,447.7 348.7 2,080.2 1,229.0
6 8 100 9 100 7 100 303.85 100 4 100 562.07
200 2,953.3 120.6 434.0 124. 2,588.5 124. 69.0
7 7 5 7 5 9 4 412.02 136 849.08 8 712.5
200 3,595.5 146.8 538.9 154. 3,059.9 147. 69.2
8 3 8 7 5 4 1 561.86 184.9 850.79 2 832.2
200 4,510.1 184.2 546.7 156. 3,916.8 188.
9 2 5 1 7 0 3 548.33 180.5 649 52.8 985.78
201 5,367.7 219.9 763.1 218. 4,465.5 214. 1,110.9 365.6 1123.1
0 2 8 4 8 9 7 6 2 489.11 39.8 5

ANALYSIS:-
1. In 2006, Sales were 100% and increases continuously to 219.98% in 2010.
It has been doubled only in 5years.
2. In 2006, Inventory has been increased continuously to 218.79% in 2010. It
has been doubled only in 5years.
3. Profit Before Tax has increased to 365.62%, it has been tripled in 5years
only.
4. Current Assets has increased has doubled in 5years only
5. Current Liabilities has decreased from 100% to 39.8%.

INTERPRETATION:-
1. Sales have been increased with an annual increase in cost of goods sold. It
means that the company has weak operating efficiency and could not
decrease its cost to increase its operating efficiency.
2. Profit before tax has tripled just in 5years only, as sales has been increased
by two times.
3. Current Assets have doubled in 5years and the current liabilities has
decreased tremendously, which shows that the short term financial position
of the company is very sound. And the company can pay off its liabilities in
short period.

RATIO ANALYSIS
Definition:- A Ratio is simply one number expressed in terms of another. It is
found by dividing one number into another.
Expressions:-
1. Proportion or Pure Ratio or Simple ratio:- It is expressed by the simple
division of one number by another.
2. Rate or So Many Times:- It is calculated how many times the figure is in
comparison with another figure.
3. Percentage:- The relation between two figures is expressed in hundredth.
4. Fraction:- Say Net Profit is one fifth of capital.

TYPES:-
1. LIQUIDITY RATIOS.
A. Current Ratio.
B. Quick Ratio.
C. Cash Ratio.
2. SOLVENCY RATIOS.
A. Debt Equity Ratio.
B. Total Asset to Debt Ratio.
C. Proprietary Ratio.
3. ACTIVITY RATIOS.

A. Inventory Turnover Ratio.

B. Debtors or Receivables Ratio.
C. Creditors or Payables Turnover Ratio.
D. Working Capital Turnover Ratio.
E.
4. PROFITIBILITY RATIOS or INCOME RATIOS.
A. Gross Profit Ratio.
B. Operating Profit Ratio
 RATIO ANALYSIS of Asian Paints
 Documents Supported My Analysis….
 • Balance Sheet for the year 2010
• Income Statement for the year 2010

1. Liquidity Ratios.

 A. Current Ratio = Current Assets/Current Liabilities.

Here, Current Assets
Inventories 763.14
Sundry Debtors 331.43
Cash and Bank Balance 28.58
Current Assets 1123.15
Current Liabilities=1,229.04

Current Ratio = 1123.15/1229.04 = 0.91:1

 B. Quick Ratio = Quick Assets/Current Liabilities.

Here, Quick Assets are

Sundry Debtors 331.43

Cash and Bank Balance 28.58
Quick Assets 360.01
Current Liabilities=1,229.04
Quick Assets = 360.01/1229.04 = 0.29:1

 C. Cash Asset Ratio = Cash+ Bank+ Equivalent /Current Liabilities

Here, Cash and Equivalents are

Cash and Bank Balance 28.58

Current Liabilities=1,229.04
Cash Ratio = 28.58/1229.04 = 0.02:1
 1. SOLVENCY RATIOS.

 A. Debt Equity Ratio = Debt/Equity

 Debt
Equity Share Capital 95.92
Preference Share Capital 0
Reserves 998.55

Here, Equity is
Equity Share Capital 95.92
Preference Share Capital 0
Reserves 1,461.30
Equity 1557.22

Debt Equity Ratio=998.55/1557.22=0.64:1

 B. Total Asset to Debt Ratio.

Here, Total Assets are
TOTAL FIXED ASSET 622.91
INVESTMENTS 234.77
Total CA, Loans & Advances 1,172.36
TOTAL ASSET 2030.04

Debt
Equity Share Capital 95.92
Preference Share Capital 0
Reserves 998.55
DEBT 1094.47
 Total Asset to Debt Ratio = 2030.04/1094.47 = 1.85:1
 C. Proprietary Ratio = Equity/Total Assets
Here, Equity is
Equity Share Capital 95.92
Preference Share Capital 0
Reserves 1,461.30
Equity 1557.22

Total Assets
TOTAL FIXED ASSET 622.91
INVESTMENTS 234.77
Total CA, Loans & Advances 1,172.36
TOTAL ASSET 2030.04

Proprietary Ratio = 1557.22/2030.04 = 0.76:1

1. ACTIVITY RATIOS.

 A. Inventory Turnover Ratio = Cost Of Goods Sold/Inventory

Here, COGS= Net Sales – Gross Profit
= 5367.72 - 2039.43
 = 3328.29

Inventory Turnover Ratio = 3328.29/ 763.14=4.36:1

1. PROFITIBILITY RATIOS or INCOME RATIOS.

A. Gross Profit Ratio=Gross Profit/Net Sales*100

= 2039.43/5367.72=38%

Interpretation:- The gross Profit ratio indicates that to which extent the selling per
unit may decline without resulting in loses on operations of business.

This ratio indicates the excess of sales over COGS..Here in this it shows that sales
are 38% over the cost and the cost is 62% of the total sales…

It is satisfactory.

B. Operating Profit/Net Sales*100

Operating Profit Ratio= 388.81/5367.72=70%

Interpretation:- This ratio shows that 70% of the sales have been consumed by
the operating cost, i.e., COGS and Operating expenses and only 30% is left to
cover interest charge, income tax payment, dividend and the retention of profits as
reserves.

C. Return on Investment= Net profit (after interest & taxes)/Shareholder’s

Funds.

= 774.5/1557.22*100 = 50%

D. Return on Equity = Net Profit After Tax-Preference dividend/Equity Share

Capital(paid up) *100
 = 774.55-0/95.92*100= 80.74%

CASH FLOW STATEMENT

Particulars 2009 2010

Net Profit Before Tax 304.89 409.92

Net Cash From Operating Activities 218.69 312.25

Net Cash (used in)/from

Investing Activities -105.97 -110.92

Net Cash (used in)/from Financing
Activities -110.06 -187.23
Net (decrease)/increase In Cash
and Cash Equivalents 2.66 14.11

Opening Cash & Cash Equivalents 25.73 28.39

Closing Cash & Cash Equivalents 28.39 42.49

INTERPRETATION:-
1. Net cash inflow from operating activities has increased from 218.69Cr. to
312.25Cr. due to increase of current assets, reserves and decrease in current
liabilities.
2. Company purchases Fixed assets more in 2010 than 2009 i.e, Net cash outflow
from Investing activities increases from ( 105.97) to (187.23).
3. Net Cash outflow from financing activities increases from (110.06Cr.) to
(187.23Cr.) because of increase in dividend paid.
WORKING CAPITAL CHANGES
Working Capital
Increas
Particulars 2009 2010 e Decrease
Current assets
Inventories 546.71 763.14 216.43
Sundry Debtors 311.02 331.43 20.41

Cash and Bank Balance 128.05 28.58 99.47

55.31
Loans and Advances 186.37 241.68
(A) 1172.15 1364.83
Current Liabilities
Current Liabilities 849.08 1,229.04 379.96

(B) 849.08 1,229.04

Working Capital (A-B) 323.07 135.79
Net decrease in Working capital
Changes 187.28 187.28
323.07 323.07 479.43 479.43

STATEMENT OF SOURCES AND APPLICATION OF FUNDS

FOR THE YEAR 2010
SOURCES Rs. APPLICATION Rs.
Funds from operations 462.75 purchase of fixed assets 84.55
Capital work in
Net Working capital 242.59 progress 216.08
Raising of secured loan 1 Investment 468.92
Provisions 118.71 Fixed deposit 0.19
Loans and Advances 55.31
 825.05 825.05
FUND FLOW STATEMENT

SOURCE AMOUNT APPLICATION AMOUNT

issue of equity 1696.84 Interest paid 11409.79

share capital
Purchase of net 52916.83
block

Net increase in
fund from operation 16525.42 working capital 13187.44

Dividend paid
60.00
tax received 1187.63

TOTAL 19409.89 77574.06

INTERPRETATION:-
1. Fund flow statement shows how the profits of the company have been
used. It reveals the facts and reasons about the changes in currents assets
with current liabilities between two consecutive years.
2. Here, sources of funds are Retained earnings, provisions, raising of
secured loan. And these funds have been utilized for purchase of fixed
assets, investment etc.
3. This statement reveals that the financial position of the company is
satisfactory.

COST SHEET OF POWER GRID CORPORATION of India ltd. for

2009 and 2010
Particulars • 2009 • 2010
Raw Materials 2,641.09 2,966.23
PRIME COST 2,641.09 2,966.23
Add:- Factory Overheads
Power & Fuel Cost 45.78 47.03
Depreciation 494.02 486.93
FACTORY COST 3,180.89 3,500.19
Add:-Office and Adm. Overheads
Employee Cost 239.77 262.73
Other Manufacturing Expenses 40.45 52.3
COST OF PRODUCTION 3,461.11 3,815.22
Selling and Admns Expenses 939.16 1,119.89
Miscellaneous Expenses 10.55 17.41
COST OF GOODS SOLD 4,410.82 4,952.52
OPERATING PROFIT 513.32 902.13
SALES 4,924.14 5,854.65
ANALYSIS:-

1. The Prime cost of the concern has increased as compared to previous year.
It is due to increase in the consumption of the raw material in 2010.

2. Cost of goods sold increases from 4410.82cr. to 4952.52cr. in 2010.

3. Operating Profit has increases from 513.32Cr. to 902.13Cr.

INTERPRETATION:-

1. The Cost of goods sold has increased because of increase in both of the
variable as well as fixed assets, which adds to the cost of the goods.

2. Despite of increase in the COGS, operating profit is nearly 50% of increase

in sales, which reveals the Operating performance of the company.