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BALANCE SHEET ANALYSIS

Sources of Funds

1) Capital 2) Reserves & Surplus 3) Term Liabilities 4) Current Liabilities

BALANCE SHEET ANALYSIS


Uses of Funds 1) Fixed Assets 2) Intangible Asets 3) Non Current Assets 4) Current Assets

BALANCE SHEET ANALYSIS


Capital 1) Authorised Capital 2) Issued Capital 3) Subscribed Capital 4) Paid-up Capital

BALANCE SHEET ANALYSIS


Reserves 1) Subsidy Received From The Govt 2) Development Rebate reserve 3) Revaluation of fixed assets 4) Issue of Shares at Premium 5) General Reserves Surplus The credit balance in profit and loss account

BALANCE SHEET ANALYSIS


Tangible Net Worth This refers to the total funds arrived by paid-up capital , Reserves and P&L Surplus Less Intagible Assets

BALANCE SHEET ANALYSIS


Term Liabilities Redeemable preference shares Debentures Deferred payment gaurantees Public Deposits(Repayable after 12 months) Term loans and unsecured loans from friens, relatives,directors repayable over a period of time Remark : The company can raise public

BALANCE SHEET ANALYSIS


Current Liabilities Working capital bank borrowings T.loans deferred credit inst falling due in 12 mths public deposits maturing within 12 months unsecured loans, unless the repayment is on deferred terms sundry creditors advances from dealers and customers

BALANCE SHEET ANALYSIS


Contingent Liabilities Tax disputes Legal litigations Bills and cheques discounted with banks Claims against the company not acknowledged

BALANCE SHEET ANALYSIS


Fixed Assets Infrastructure like land & building plant & machinery Vehicles Furniture & fixtures Depreciation Straight line method Written down Value Method Remark : Dep added to profit to arrive

BALANCE SHEET ANALYSIS


Investments 1) Shares And Securities 2) Associate Companies 3) Fixed deposits with banks/finance companies Remark : While analysing bal sheet we can analyse necessity of such investments Remark : While fixed deposits with banks are considered as fixed assets, the investmetns in

BALANCE SHEET ANALYSIS


Non Current Assets Deferred recievables/Overdue recievables(like disputed amounts and Over Due > 6 mths) Non moving stocks/inventory/un usable spares Investment/Lending to associate concern Borrowing of the directors from the company Telephone deposits/ ST deposits etc

BALANCE SHEET ANALYSIS


Intangible Assets Preliminary & Preoperative expenses Deferred Revenue Expenditure Goodwill Trade mark Patents Rem : The o/s balance to be written off every year by charging P&L account

BALANCE SHEET ANALYSIS


Current Assets Raw materials, work-in-progress,finished goods,spares and consumables Sundry debtors and recievables < 6 mths Advances paid to suppliers of raw materials Cash and bank balances Interest recievables Other current assets such as Government securities, Bank deposits ..etc

BALANCE SHEET ANALYSIS


Notes All expenses or provisions or advances or loans etc which are accrued and payable within 12 months are current liablities When a company makes investments in unconnected avenues such as shares, securites, associate concerns are to be treated as non cur ast The slow moving and absolete inventory NCA

BALANCE SHEET ANALYSIS


Notes Bal Sh Analy not only to be quantitative but to be qualitative It is the fin pos on a part date. Min three years bal sh ana would be more meaningful It is a mixture of facts, opinions and conventions While opinions are of the companys management, the conventions are practiced by the finance managers of the company.

BALANCE SHEET ANALYSIS


Notes The valuation of the stock is done as per the opinion of the management Depreciation method may be changed to boost profit It may be silent on key personnel and staff turnover Marginal changes in the classification of certain items would lead to different results.

BALANCE SHEET ANALYSIS


Notes Management competence Investment decision Resorting to window dressing experience of the promoters Board comprises of only family members The key personnel of the company The structure of the organisation The authority and decision making are

BALANCE SHEET ANALYSIS


Notes The state of industrial relations Financial systems and procedures management control planning, budgeting, forecasting capacity utilisation status of the technology awareness of the market, competitions ..etc for listed co: share prices, EPS, book value,

Profit & Loss Account


It is a summary of revenue earned and expenses incurred which ultimately results in profit or loss of to the company No defined format in law Operating revenue = Sales revenue Non_operating revenue = Other income ( out of sale of investments, interest, commission and discount etc) Hence operating profit is a yard stick for operating profit of the company

Profit & Loss Account


Gross Sales Gross sales includes excise duty to be charged to the customer, central sales tax applicable, state sales tax applicable, the discount o be allowed to distributors/dealers/customers. The gross sales appears in the P&L account comprises of all the above part from the basic unit price. Net Sales The sales figure excluding all the factors

Profit & Loss Account


Cost of production
This is the cost incurred right from the procurement of raw material to the finished good. For ex in a garment firm following cost is incurred while production 1) cost of raw material cloth, buttons, canvas, hooks, zips etc 2) Maintenace of sewing machines 3) payment of wages to workers 4) power

Profit & Loss Account


Selling And General Administarative Expenses Maintaining office staff for admn & acctg marketing effort payment of salaries/Tr All to marktg personnel All the expenses which are not directly connected to manufacturing are classifed as selling and/or general expenses

Profit & Loss Account


Cost of goods sold Cost of goods sold includes all manufacturing expenses and the adjustments for opening and closing stock Cost of Goods sold = Opening stock + Purchases + Manufacturing expenses - Closing stock Gross Profit is arrived deducting figure of cost of goods sold from the sales figure ie Gross profit = Sales - Cost of goods sold.

Profit & Loss Account


Operating Profit is arrived deducting selling, administrative and general expenses , provision for bad debts, interest and miscellaneous expenses from the gross profit. ie Op Profit = Gr Prof - (Sel & adm exp + Prov bad debt + mis exp ) Profit Before Tax When other income is added and other expenses are deducted from the operating profit we get profit before Tax ie PBT = Op Profit + oth Inc - oth exp

Profit & Loss Account


Non Operating Income/Expenses The income earned by the unit from other than manufacturing and seling operations is classified under this head . i.e a) Interest earned on fixed deposits b) Dividends and profit earned by sale of assets and share. All those expenses which are not directly connected with operations of the unit are classified under this head. i.e

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