UNDERSTANDING ANNUAL REPORTS

An annual report is a document which a company presents in its Annual General Meeting for approval by its shareholders. It is intended to give the shareholders. owners an insight into the performance of the company during the financial year. year. It is a document which can provide key insight into the affairs of the company if read and understood properly since most often than not it provides a rosy picture of the company. company. Hence it is very imperative that annual reports be understood properly so as to enable the user to take right decision on any aspect of the company. company. The details provided in the report are of use to investors in gaining an understanding of the company's financial position and future direction. direction.

Analyzing those figures and checking them will help uncover operations that are beginning to falter, or zero in on struggling enterprises that are turning around. around. The financial statements and their accompanying notes explain a company's financial performance and recent financial history. history. Financial Analysts use these statements in several ways: ways: To evaluate a company's overall performance, identify strengths and weaknesses, anticipate future successes or problems, and ultimately help them decide if the company is a good investment opportunity. opportunity.

Contents of an Annual Report

1. Directors Report 2. Auditors Report 3. Corporate Governance Report 4. Financial Statements  Balance Sheet  Profit and Loss Account  Annexures to above  Notes to Accounts 5. Cash Flow Statement 6. Balance Sheet Abstract and general business profile

Directors Report - Current industrial and economic scenario in which the company is operating - Financial performance of the company for the year - Dividend declared for the year - Expansion plans and future growth prospects - Note on corporate social responsibility - Report on energy conservation/technical absorption - Employee particulars ( Annexure ) The above information throws light on the companys philosophy, future plans, vision.

Corporate Governance Report This is a compliance report on corporate governance adopted by the company This report gives information regarding the composition of Board of Directors , existence of audit committee, grievances committee etc. etc. This report helps the user to gauge the level of transparency in which the company operates. operates.

Auditors Report The statutory auditors report assures the shareholders that the financial statements reflect the true and fair state of affairs of the company and all relevant regulations, accounting principles in so far as it concerns the preparation of financial statements has been adhered to. to. It is important to note any qualifications made by the auditor in the report. report.

CARO Report is an annexure to the auditors report where the auditor has to comment on certain matters related to systems, policies and methods followed by the company while recording the transactions. transactions. This report is also very relevant because it comments on certain issues like: like: - Default in payment of dues to financial institutions /debenture holders - whether term loans were applied for the purpose for which it was procured. procured. These comments can highlight the liquidity position of the company

FINANCIAL STATEMENTS
The most important part of any annual report are the financial statements .The financial statements and the accompanying notes explain a companys financial performance. performance. Analysing the financial statements can help the user evaluate the companys overall performance, identify its strengths and weaknesses and anticipate future problems Also it brings to light operations which may be loss making or identify struggling enterprises that are turning around. around. The objective of financial analysis may differ from user to user. For the management it is not only user. to plan its future strategies but also to find answers to all the queries raised by investors, employees, regulators, general public and maybe even the media. Management studies financial media. statements to know : - Performance of the company in relation to Management goals as well as industrial standards - Operations which are profitable and which are not - Future plan of action

Balance Sheet Sources of fund : It contains data about the amount of Share capital. Reserves & Surplus, Borrowed funds and the quantum of deferred tax liability The capital mix enables the user to gauge the companys leverage and also the quantum fixed cash outflow in the form of interest payments. At this point it is necessary to compare the companys average rate of return with that of the interest rates.

Also note any contingent liability pertaining to the company.

Application of funds Fixed Assets The user can know about of capitalisation in fixed assets. Also assets. see the profile of fixed assets i.e land, buildings, plant and machinery etc., etc. additions during the year, sales during the year Investments Marketable investments, other investments, investments in securities etc. This gives an indication regarding the movement of funds. etc. funds. Current Assets , Loans and Advances : These items are indicators about the operational efficiency of the company. The movement of stock, receivable company. management , recovery of short term loans etc. etc.

INCOME STATEMENT Income statement is an indicator about the bottom line of the company. company. The operational efficiency of the companys business activities is reflected in this statement Indicators Gross Profit Manufacturing and other expenses Non operating incomes and expenses Transfers to reserves Dividend proposed Provisions made for any liability including tax

Notes to Accounts Notes to accounts contains very pertinent information about the accounting principles and policies followed by the management in respect of depreciation , stock valuation, retirement benefits, contingent liabilities This becomes more important when the company changes the method of accounting or policy for a specific transaction. The effect of transaction. such transactions on the net profit of the company has to be looked into. into.

Cash Flow statement

CFS is a very important statement while analysing a company. It gives the company. movement of cash during the year i.e sources from which cash has come in (inflows) and how it has been spent (outflows ). Is cash flow statement a summary of cash book ? Components of CFS Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities The inflows and outflows of cash highlights : Ability to generate cash flows from its operating activities Ability to generate income from investing activities Dependence on external financing Effective implementation of financial strategies

1. 2. 3. 4.

Guidelines for financial statement analysis

         

Use ratios as a clue to look for further information Employ proper standards / benchmarks for comparison Get knowledge about latest reporting practices and how window dressing is done Evaluate the management vision with its performance. Look for litigation that could impair equity or accounting changes that that increased profit Read auditors report for any qualification Read notes to accounts for relevant details. Check inventory figures Check the breakup of fixed assets. What assets does the company own and what assets are leased? Go for substance not form. form.

Tool kit of a financial analyst

Multi step income statement  Analytical Balance Sheet  Comparative Balance Sheet & P/L A/c  Trend Analysis  Ratio Analysis


Financial analysis of a FMCG company Illustrative example

Comparative ( Horizontal )Profit & Loss A/c) Sales Materials cost Manufacturing cost Provision for contingencies Other operating income PBDT Depreciation Impairment loss on fixed assets Loss on sale of assets PBIT Interest Non operating income PBT Provision for income tax Current tax Deferred tax PAT

2007

2006 % ^/ v 182.05 158.20 82 .12 72.64 68 .16 57.92 1.81 2.94 (0.63) (0.28) 30.59 24.97 4.35 3.79 0.14 0.33 0.33 0.23 25.77 20.61 0.98 1.49 (0.99) (0.79) 25.77 19.91 9.25 (0.79) 17.31 8.05 11.86

14% 13 % 18% 38% 122% 23% 15% (58%) 42% 25% (34%) 27% 29% 15% 46%

Appropriations Dividends Transfer to reserves 14.80 1.73 12.40 1.18

Comparative Balance Sheet Sources of funds Shareholders funds Capital Reserves Loan Funds Secured Unsecured Total Application of funds Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in progress Investments Current Assets, Loans and Advances Inventories Sundry debtors Cash & Bank balances Loans and Advances* Less : Current liabilities and Provisions Liabilities Provisions Net current assets Deferred Tax liabilities (net ) * Mainly ICDs

2007

2006

% ^/v

9.64 16.88 13.99 40.52

9.64 16.15 7.90 0.60 34.30

4.52% 77.09% (100%) 18% 18%

70.81 30.04 40.77 1.88 1.05 21.27 2.92 0.42 11.33 20.10 18.11 2.26 (0.92)

67.71 26.45 41.26 0.49 20.64 3.11 1.01 8.72 19.22 21.72 7.45 -

5% 13.61% (1.20) % 2.16 % 3.07% (6.05) % (59%) ( 30%) 4.56 (16 %) (70%) -

Analysis Profit & Loss Account

      

Net sales growth by 15% Increase in material cost / depreciation less than growth in sales Increase in manufacturing expenses / loss on asset more than growth in sales Impairment loss / interest show a negative growth Other income growth more than growth in sales. Profit at every stage more than the growth in sales Overrall a positive impact on PAT

Balance Sheet
      

Total Assets / Liabilities increase by 18% Net worth increases by 2 % only inspite of growth in loan funds by 65% Gross block increases by 5% only showing efficient utilization when compared to increase in sales High increase in Capital WIP showing heavy investment in income generating assets Current assets growth only 7% showing efficient utilization of current assets since sales have grown by 15% Current liabilities increase by only 5% inspite of increase in material costs and manufacturing expenses by around 15% Overall effective current asset management. Apparently there is a inflow of funds towards fixed assets and loans & advances signifying future income earning prospects.

Common size financial statements supplement comparative analysis, study changes in asset liability ratio and their impact on profits and to find trends in expense pattern to identify critical areas. Also called as vertical analysis. analysis.

Common size Profit & Loss A/c Sales Materials cost Manufacturing cost Provision for contingencies Other operating income PBDT Depreciation Impairment loss on fixed assets Loss on sale of assets PBIT Interest Non operating income PBT Provision for income tax Current tax Deferred tax PAT

2007

2006 % ^/ v

182.05 100% 158.20 100% 82 .12 45% 72.64 46% 68 .16 37% 57.92 37% 1.81 1% 2.94 2% (0.63) (0.35%) (0.28) (0.18%) 30.59 17% 24.97 16% 4.35 2.38 % 3.79 2.39% 0.14 0.08% 0.33 0.21% 0.33 0.18% 0.23 0.14% 25.77 14.16% 20.61 13.04% 0.98 0.54% 1.49 0.94% (0.99) (0.54%) (0.79) (0.49%) 25.77 14.16% 19.91 12.59% 9.25 (0.79) 17.31 8.05 11.86

9.51%

7.50%

Common size Balance Sheet Balance Sheet Sources of funds Shareholders funds Capital Reserves Loan Funds Secured Unsecured Total Application of funds Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in progress Investments Current Assets, Loans and Advances Inventories Sundry debtors Cash & Bank balances Loans and Advances* Less : Current liabilities and Provisions Liabilities Provisions Net current assets Deferred Tax liabilities (net ) * Mainly ICDs

2007

2006

9.64 16.88 13.99 40.52

24% 42% 34% 100%

9.64 16.15 7.90 0.60 34.30

28% 47% 23% 2% 2% 100%

70.81 30.04 40.77 1.88 1.05 21.27 2.92 0.42 11.33 20.10 18.11 ( 2.26) (0.92)

175% 74% 101% 5% 3% 53% 7% 1% 28%

67.71 26.45 41.26 0.49 20.64 3.11 1.01 8.72

197% 77% 120% 1%

60% 9% 3% 25% 56% 63% (22%) -

50% 19.22 45% 21.72 (6%) ( 7.45) (2%) -

Analysis Profit & Loss Account



  

Cost of materials has fallen to 45.11 on sales from 45.92 last year but manufacturing and other expenses increase to 37.44 % thereby wiping out the savings Other operating income increases leading to an increased PBDIT Depreciation is relatively constant and loss on impairment is down. Hence increase in PBIT Total income tax lower over previous year due to deferred tax . Hence PAT has improved .

Balance Sheet
 

Proportion of loan funds increased to 35% as against 25% Gross Block has come down but capital WIP has gone up . This indicates effective utilization of assets in view of higher sales. Investments of surplus funds is indicated Current Assets , loans & advances, current liabilities have decreased despite higher sales showing effective current asset management In conclusion loan funds have been diverted to capital WIP and Loans and advances ( ICDs) both being income generating assets. However this policy of deployment will be good only if interest earned is more than interest paid. This also validates our findings through horizontal analysis

 

Ratio Analysis Return on investment ratios RONW , EPS, Cash earnings per share (CEPS) Leverage ratios Net asset value, Debt equity , Debt service coverage Profitability ratios GP ratio, Multi step NP ratios Liquidity ratios Current ratio, Quick ratio, Debtors Turnover, Inventory turnover ratio Turnover ( Efficiency ) ratios - Fixed assets Turnover ratio, Net worth turnover ratio Valuation ratios PE ratio, Market price to NAV, Market capitalization, Yeild to investors.

ROI ratios I. Analytical value in decision making II. Comparative Standards / Benchmarking  Industry leader  Industry average  WACC  Cost of borrowings III.Influencing III.Influencing factors  Sales  Cost economies  Optimum capital structure

ROI ratios

2007

2006

RONW = PAT Preference dividend * 100 = 65% 49% Net worth ( ESHs Fund ) High ratio means high dividend , better growth prospects and high valuation in capital market. However adjust the PAT for extra ordinary items fro proper analysis. Rs.17.96 Rs 12.30 EPS = PAT Preference dividend Number of equity shares This ratio is the basis for valuation of companies in the event of mergers etc, strategic investments by owners. Higher ratio shows company in a positive light. Rs.26.76 Rs.20.80 CEPS = PAT preference dividend + non cash charges Number of equity shares This ratio takes into account cash earnings. In case of companies with very low profits this ratio is an indicator that the company position may improve in future.


The company gives very high returns on equity with substantial improvement. Compare with industry average. CEPS is very high than EPS . It shows a large amount of hidden reserves due to high element of non cash charges and provisions. provisions. NAV = ESHs Funds / No. of equity shares

Leverage ratios ( Long term solvency ratios )

I. Analytical value in decision making II. Comparative Standards / Benchmarking  Industry average  NAV of industry leader / laggard  Institutional norms  Growth / Decline over the previous years III. Influencing factors  ROI & EPS  Dividend policy

Gearing or leverage ratios Debt equity ratio = Long term Debt 0.19 : 1 0.21.1 Total net worth ( ESHs Funds + PC ) This ratio helps in assessing whether the company is relying on own funds or borrowed funds. Higher the debt more fixed liabilities by way of interest. FI s generally look for a D/E of 1.5 :1 while financing projects. Debt Sevice coverage ratio = PAT + Interest on long term debts+ non cash charges Interest on long term debts + Instalments on principal due 36.59 times 3.48 times This ratio indicates the ability of the company to service loan funds. FI s generally look for a DSCR of 1.6 and above. NAV has improved over the previous years. It could have been better since the company has very high provisioning. Long term solvency is strong due to very low D/E ratio. Interest coverage is also high. No default risk. The company will enjoy a very high credit in the market. It has sufficient capacity to raise long term debt. debt.

Liquidity ratios
I. Analytical value in decision making II. Comparative Standards / Benchmarking


Institutional norms

  

Effective asset utilisation Cost economies Proportion of non cash charges in expense structure

III.Influencing III.Influencing factors  Proper asset liability management  Credit period availed and credit period allowed  Inventory management / Supply chain management/ level of obsolescence

Liquidity ratios Current ratio = Current Assets, loans & Advances and short term investments Current liabilities +Provisions+ Short term debts 1.16:1 Quick ratio = Current Assets, loans & Advances Inventories + short term investments Current liabilities +Provisions+ Short term debts Bank overdraft

1.05:1

0.68:1 0.44:1 These 2 ratios helps in analyzing the current assets and current liabilities of the company and its ability to discharge its day to day obligations Quick ratio is more realistic 6 days Debtors turnover ratio = Receivables * 365 5 days Credit sales Creditors turnover ratio = Payables * 365 85 days 87 days Credit purchases These ratio helps us to understand the credit policy of the company towards its customers and the credit allowed to it by the suppliers. Generally a successful company will be able to extend a shorter credit period and enjoy a longer credit period. Inventory holding period = Inventory * 365 55 days 62 days Cost of goods sold This ratio indicates in how many days companys inventory is converted into sales. Hence an appropriate level of inventory is required to ensure minimum blockage of funds in inventory and also be able to service the customers promptly. Efficient management of customers. Very low collection period. High credit standing in the market. The company is enjoying reduction in purchase price as well as increased credit limits. However inventory holding period looks quite high. Improvement in supply chain of finished goods may be needed. Check for old and obsolete stocks in the inventory break up. Current ratio looks fine however quick ratio needs improvement. But in view of the leverage enjoyed due to low credit to customers and high credit from suppliers, it does not require a high liquidity. Reserves may be invested in income generating assets. However inventory levels may be reduced.

Efficiency ratios
I. Analytical value in decision making II. Comparative Standards / Benchmarking
  

Industry average Industry leader Trend over a period of time

III.Influencing III.Influencing factors  Production efficiencies  Investment in relevant technologies  Price and quality of products

Efficiency ratios Fixed assets turnover ratio - Net sales Net block of fixed assets 4.47 times 3.83 times Fixed assets are income generating assets for any company. Higher the ratio better is the utilization of assets for generating sales. Net worth turnover ratio = Net sales Net worth 6.86 times

6.56 times

Fixed assets are financed through equity and borrowings. The results of fixed assets efficiency net of interest belongs to shareholders. An optimum capital structure provides this advantage to the shareholders. shareholders.

Profitability ratios
I. Analytical value in decision making II. Comparative Standards / Benchmarking  Trend over a period of time  Industry average  Industry leader / laggard  WACC III.Influencing III.Influencing factors
   

Qualitative and quantitative growth in sales Age of fixed assets ( depn ) Cost of borrowing Efficient tax planning

Profitability ratios GP ratio = GP*100 GP*100 Sales Operating Profit ratio = PBIT * 100 Sales 14 % Net profit ratio = PAT * 100 Sales 10%

13%

8%

Effective tax rate = Current Income Tax * 100 PBT These ratios helps to assess the business performance starting from Gross Profit. Multi level profitability ratios helps to understand the levels at which there is pressure on margin.

Valuation ratios
I. Analytical value in decision making II. Comparative Standards / Benchmarking  Industry average  Leaders & laggards in industry  Trend over a period of time III.Influencing III.Influencing factors  Dividend policy  Size of the company  Market conditions  NAV

Valuation ratios P/E ratio = Market price of equity share EPS

516/ 17.96 542/12.30 29 44 4 This ratio is important for valuation of shares in the event of many strategic decision making. It reflects the investors perception of the company.

Market value to NAV = Market price of the equity share NAV 516/ 27.51 542/ 24.98 18 times 24 times Market price of a share is generally higher than the NAV. At times due to the industry not doing well or other reasons the market price may be lower than NAV. This is a very good investment opportunity. Yield to investors = (Dividend (Dividend received + market appreciation) * 100 Initial investment This ratio helps in understanding the returns being earned by the shareholders or the losses suffered by it. 20 + (516-542 ) * 100 (51612.50 + (542-430)*100 (542542 430 -1.11% 28.95%

Du Pont Analysis RONW = Net profit margin * Net worth turnover Net profit * Net sales Net sales Net worth 2007 9.51% * 6.86 times = 65.28% 2006 7.50% * 6.56 times = 49.23% When RONW is being compared then it helps us to know whether the improvement / deterioration is due to improved / deteriorated net margin or improved / deteriorated net worth turnover so that suitable strategies can be formed. There is an improvement in both the parts. Net profit margin improvement is higher than net worth improvement showing better operating efficiency. efficiency.

Overall summation
    

  

Good financial performance No solvency risk High fixed asset utilization High provisioning and high hidden reserves High inventory holding period . Need to study the break up of inventory into raw materials, WIP , finished goods, spare parts to zero down on the exact cause. High CWIP . Need to understand the projects / products where investment made to estimate future earnings. Deferred tax liabilities are not considered while computing current ratio as per AS 22. Due to high dividend payout and maybe declining market the market valuation has been adversely affected leading to negative yield. In case of MNC due to high stake of foreign shareholders dividend payout may be higher due to non taxability of dividend in the hands of shareholders. Capital market may be sluggish leading to high dividend payout.

Core ratios

ROI - RONW , EPS Leverage NAV, D/E, DSCR Liquidity CR, QR, Collection period, Suppliers credit, Inventory holding period Efficiency Fixed Assets Turnover, Net worth Turnover Profitability PBT , PAT , Effective Tax rate Valuation - P/E, Yield to investors

Creative Financial Practices

     

Increasing the estimates of useful life of intangible assets Write offs of preliminary expenses against profits Non provisioning of expenses , doubtful , disputed debts Non operating income not disclosed seperately Changing accounting policy w.r.t valuation of assets Making inadequate provisions for certain liabilities or treat certain liabilities as contingent after getting suitable legal opinion Making extra provisions in good years and writing them back in lean years

Listing Agreement with SEBI Clause 49 on Corporate Governance Companys philosophy on code of governance Board of Directors Audit Committee Remuneration Committee Shareholders Committee General Body meetings Disclosures Means of communication General Shareholder information

Going beyond the figures

     

Are the companys revenues tied to one key customer Are the companys revenues tied to a single product What part of companys operations are situated overseas Is the company dependant on a single supplier Likely actions of current competitors Legal and regulatory environment

Analysts should take the following precautions Analysis of trends over a long period of time  Interpretation of observation against industry bench mark  Analysis of core ratios only  Inter firm comparison for variations in accounting policies  In case of conglomerates comparative performance of different lines of business


CFS is a very important statement while analysing a company. It gives the company. movement of cash during the year i.e sources from which cash has come in (inflows) and how it has been spent (outflows ). Is cash flow statement a summary of cash book ? Components of CFS Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities The inflows and outflows of cash highlights : Ability to generate cash flows from its operating activities Ability to generate income from investing activities Dependence on external financing Effective implementation of financial strategies

1. 2. 3. 4.

Cash Flow Statement

Ability to generate cash  Indicator of the amount and certainty of future cash flows  Relationship between profitability and net cash flow.


Cash flow from assets = Cash flow to lenders + Cash flow to shareholders

Other important sources of financial information Magazines  Newspapers  Databases CMIE , Capitaline plus  Research reports prepared by leading securities firms, credit rating agencies  RBI reports on economy and industry  Research reports prepared by  Websites SEBI , Capital market, BSE, NSE  Websites of leading companies in the industry


Points to be kept in mind by a analyst  Connect business model with Balance Sheet  Differentiate between Cash Flows & Profitability  Evaluate performance properly '  Evaluate segment-wise results segment Bifurcate Fixed Costs & Variable costs  Working capital management  Focus on Return on Net Worth (RONW) and Return on Capital Employed (ROCE)  Evaluate justification for Capex  Secret Reserves - When value of the assets in the Balance Sheet is LOWER . . than the. estimated realisable / market value of those assets . _. . .  Impaired Assets - When value of the assets in the Balance Sheet is higher than the estimated realisable / market value of those .assets

           

ISSUES.ON FLXED ASSETS . Capitalisation of pre_operative expenses during construction period' . Interest capitalisation during construction period . Delayed capitalisation of project . . Depreciation rates under Schedule XIV of Companies Act - much lower than economic life of asset Depreciation not provided as per the economic life of the asset . Difficult to estimate impaired value of Fixed Assets . . Capitalising repair expenditure. .Revaluation of Fixed Assets - inflated valuation . Non-moving Capital Work-in-Progress NonWork-in. Exchange fluctuation on Forex borrowing used for acqiuiring fixed assets to be taken to cost of asset - Schedule VI (t. .

ISSUES ON INVESTMENT'S . Depreciation in value of quoted Investments not recognised  Depreciation in-value of unquoted .Investment innot evaluated  Funding to promoters Partnership firms may not have underlying assets  Investment into Subsidiary / JV's / Associate JV's companies - impaired valuation


ISSUES ON DEBTORS Running accounts of customers does not indicate nonnon-realisable amounts .  Material rejected by customer not accounted  Associate company balances may not be fully recoverable  Long overdue Debtors may not be realisable .  Balance outstanding against Performance Guarantee


Number of items under Schedule VI schedule not truly items Current Assets  Money advanced to a loss making subsidiary / associate company may not be realisable . .  Money advanced to supposed unconnected parties are actually controlled by  promoters. and may not be realizable


CASH & BANK BALANCES  Rotating associate company balance's without movement of funds DEFERRED REVENUE EXPENDITURE .  VRS expenditure amortised  Advertisement expenditure amortised  Goodwill on acquisition

ISSUES IN LOANS & ADVANCES / CURRENT LIABILITIES  Provisions not made for all known liabilities  Gratuity liability not provided  Contingent liability may actually be tangible liability  Transfer of Creditors to Deposit received accounts  Quasi Equity from Promoters withdrawn after loan disbursement from bank

Disconnect between business model and financial statements

100% Diamond exporter gets into local sales, but Debtors ratio deteriorates instead of improving. Also huge inventory build-up : Just not possible buildChemical company manufacturing an almost monopoly product for local I exportt market - Debtors at over 120 days instead of having minimal Debtors since most customers were paying in advance. Just not possible. Car Dealer margins provided by manufacturer much lower than operating profit disclosed in the audited accounts Projected Gross Margins not in sync with past performance - dramatic changes Projected operating margins not in sync with Industry "norms . Insurance for lower value of Fixed / Current Assets

Particulars Sources Share capital R&S Net worth Secured loans Unsec. Loans Debt

Amt 29 319 348 208 49 257

Particulars Amt Application Net fixed Assets 90 Investments 495 CA, Loans & Adv. Inventories 43 Debtors 26 Cash & Bank 3 Loans & Adv 59 131 Current liabilities Current liab 97 Provisions 14 Net current Assets

Total

605

111 20 605

Additional information Investments include Rs.475 lacs investment in subsidiary Loans & Advances includes Rs.33 lacs advances to subsidiary Secured loans include Rs.58 lacs bank finance

Recasting Balance Sheet & Profit & loss A/c Recast P/L A/c segment wise /Product wise Analyse fixed & variable cost Slow moving drs to be classified as non current Slow moving / non moving stock as non current Advances / Deposits as non current Loans due within 1 year as current liabilities Short term/ unsecured loans as current liabilities

TELLTELL- TALE SIGNS!!  Deteriorating Debtors to Sales ratio  Deteriorating Inventory Turnover ratio  Increasing reliance on Short Term Loans  Increasing Creditors I Current Liabilities  Deteriorating Current ratio  Increased Off-Balance Sheet financing Off-