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TERM PAPER OF ACCOUNTING FOR
MANAGERS
ON
ANALYSIS OF FINACIAL POISITION OF S.KUMARS
COMPANY
Submitted to lovely professional
university
Submitted to:
submitted by:
Mrs. Gagandeep BhatraGautam Singh
Sec: - RR1011
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Roll no: - A13
INTRODUCTION:
(Textile) the branch of industry involved in the
manufacture of cloth or relating to fabric or weaving the:the textile industry.
The textile industry (known colloquially in the United
Kingdom and Australia as the rage trade) is a term used
for industries primarily concerned with the design or
manufacture of clothing as well as the distribution and
use of textiles.
COMPANY PROFILE:-
SKNL is one of Indias leading textile and Apparel Company withexpertise in multi-fiber manufacturing. The company hasextended its presence in multiple product categories from Fabricsto Apparels and Home Textiles.
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From a turnover of Rs.5 million in 1948, today, the group hascome a long way in achieving a turnover of Rs. 17 billion. SKNLhas set standards of excellence, acquiring many "firsts" to itscredit and crossing a number of "milestones" in its journey.
As a company that caters to the entire spectrum of the socio-economic segment in the Indian market, SKNL takes upon itselfthe unique distinction of being the Clothiers to the Nation
TodayThe World Tomorrow'.
SKNL's mission is to make the vision a reality.
To keep pace with brisk growth in business, teams were
strengthened and infrastructure modernized. Offices, plants,
machinery were updated in line with the growth outlined for thecompany.
COMMON SIZE STATEMENT:-
(1) statement in which all items are expressed as a percentage
of a base figure, useful for purposes of analyzing trends andchanging relationship among financialstatement items. Forexample, all items in each year's incomestatement could bepresented as a percentage ofnetsales.
(2) A financial statement that has variables expressed inpercentage rather than in dollar amounts. For example,items on an income statement are shown as a percentage of
revenue or sales, and balance sheet entries are displayed asa percentage of total assets. Common-size statements areused primarily for comparative purpose so that firms ofvarious sizes can be equated. Also called one hundredpercent statement.
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COMMON SIZE= ENTERY/TOTAL*100
Balance Sheet for the years ending 31st March 2007,08,09common size
Particulars 2007 2008 2009 2007 2008 20
SOURCES OF FUNDS
Shareholders Funds
Equity Capital 192.7 210.05223.3
99.6514
568.84573
766.068
Preference Share Capital169.0
1 169.79 86.948.4649
337.15028
72.361
Amount to be converted into PreferenceShares 0 65.59 0 0
2.762161
Share Application Money (Equity) 20 20 01.0017
080.84225
07
Reserves & Surplus421.9
2 510.021325.
3121.132
0321.4782
3436.00
Total803.6
3 975.451635.
6440.250
1341.0786
744.43
Minority interest 0 0230.3
9 0 06.258
Loan Funds
Secured Loans871.0
61,182.
101621.
7443.627
3849.7812
2544.05
Unsecured Loans 321.9 212.92182.4
916.122
498.96660
054.957
Total1192.
961,395.
021804.
2359.749
8758.7478
2649.01
Deferred tax liabilities 0 4.12 11.03 00.17350
360.299
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TOTAL LIABILITIES1996.
592,374.
593681.
29 100 100 1
APPLICATION OF FUNDS
Fixed Assets
Gross Block638.8
1 561.69851.6
931.995
0523.6541
8923.13
Less: Depreciation355.5
8 180.19217.4
417.809
367.58825
735.906
Net Block283.2
3 381.5634.2
514.185
6916.0659
3117.22
Add: Capital Work-in Progress295.8
6 540.38665.7
614.818
2722.7567
7118.08
Total Fixed Assets579.0
9 921.881300.
0129.003
9538.8227
0235.31
Investments 1.38 1.37 3.750.0691
180.05769
420.101
good will 0 0
101.1
4 0 0
2.747
Current Assets, Loans & Advances
Inventories503.6
5 579.45807.9
525.225
5124.4021
0721.94
Sundry Debtors 608.7 801.41204.
4630.486
9833.7489
8432.71
Cash & Bank Balances 14.52 11.23109.0
30.7272
40.47292
372.961
Loans & Advances256.9
8 289.05634.4
812.870
9412.1726
2817.23
Total Current Assets1383.
851681.1
32755.
9269.310
6770.7966
4374.86
Less: Current Liabilities & Provisions
Current Liabilities143.6
1 152.02230.3
27.1927
646.40194
736.256
Provisions 23.24 77.77249.2
11.1639
853.27509
176.769
Total Current Liabilities166.8
5 229.79479.5
38.3567
489.67703
913.02
Net Current Assets 12171,451.
342276.
3960.953
9361.1196
0461.83
Miscellaneous Expenditure (not written off) 0.94 0 0
0.0470
8 0
Profit & Loss Account198.1
8 0 09.9259
24 0
Defferred Tax Assets 0 0 0 0 0
TOTAL ASSETS1996.
592,374.
593681.
29 100 100 1
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INTERPRETATION OF COMMON SIZE OF BALANCE
SHEET:-
In the 2009 source of funds is increasing as compare
to 2008 & 2007 which shows the relative changes in
source of funds at a specific date which is increasing.
The assets which are remain same in all the year
shows that company is in a balanced position.
profit and loss A/c for the year ending 31st march2007,2008 & 2009commonsize
Particulars 2007 2008 2009 2007 2008 2009
INCOME
Sales and Services charges1229.
541,748.
652260.
3692.733
18100.333
9495.9080
11
Other Income 9.9 10.51 15.850.7466
680.60304
220.67252
21
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Increase/(Decrease) in Stock 86.45 -16.33 80.596.5201
49
-0.93698
183.41946
71
Total1325.
891,742.
832356.
8 100 100 100
EXPENDITURERaw MaterialConsumed/Purchased
886.84
1,112.32
1541.61
66.88639
63.822633
65.411151
Manufacturing Expenses 49.1 51.54 77.513.7031
732.95725
923.28878
14
Payment to & for Employees 30.16 42.05 73.062.2746
992.41274
253.09996
61
Administrative Expenses 30.13 43.95 61.892.2724
362.52176
062.62601
83
Selling & Distribution Expenses 79.85 88.71113.8
86.0223
75.08999
734.83197
56Miscellaneous ExpenditureWritten 10.53 10.21 13.71
0.794184
0.5858288
0.581721
Interest 60.92 89.33138.8
24.5946
55.12557
165.89019
01
Depreciation 43.87 42.61 44.213.3087
212.44487
411.87584
86
Total1191.
41,480.
722064.
6989.856
6284.9606
6787.6056
52
PROFIT/ ( LOSS)134.4
9 262.11292.1
110.143
3815.0393
3312.3943
48expense & income on settlementof cdr dues 0 0 57.2 0 0
2.4270197
PRIOR PERIOD ADJUSTMENT 0.37 -0.46 -0.760.0279
06
-0.0263939
-0.0322471
PROVISION FOR TAXATION net -11.34 -51.94 -88.42
-0.8552
75
-2.98021
03
-3.75169
72
deferred tax assets/(liabilities) 0 -4.12 -3.48 0
-0.23639
71
-0.14765
78
taxation for earlier years 0 0 61.51 0 02.60989
48
EXTRAORDINARY INCOME/(LOSS) -16.05 0 0
-1.2105
08 0 0AMOUNT AVAILABLE
FOR APPROPRIATION107.4
7 205.59176.5
88.1054
9911.7963
317.49236
25
APPROPRIATION
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Capital Redemption Reserve 2 0 40.030.1508
42 01.69848
95
BALANCE AFTER APPROPRIATION105.4
7 205.59115.6
77.9546
5711.7963
314.90792
6
BALANCE BROUGHT FROM Pre.
YEAR
-303.6
5
-
198.18 7.41
-22.901
6
-11.3711
61
0.31440
94
BALANCE CARIED OVER TO BAL.SHEET
-198.1
8 7.41123.0
8
-14.946
940.42517
065.22233
54
INTERPRETATION OF COMMON SIZE OF PROFIT &
LOSS ACCOUNT:
One most important assumption for the common size of
profit & loss account is that sales are considered as the base
value for finding common size of all other values. Hence
sales contribute to be the most important factor for thechanges in common size values.
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The total income remains same in 2008 & 2009 which shows
the no change in the two years. So the company needs to be
improvement in its financial position.
COMPARATIVE STATEMENT:-
A simple method of tracing periodic changes in the financialperformance of a company is to prepare comparative statements.Comparative financial statements will contain items at least fortwo periods. Changes increase and decrease- in incomestatement and balance sheet over period can be shown in twoways:
(1) Aggregate changes and (2) proportional changes.
Drawings special columns for aggregate amount orpercentage, or both, of increases and decreases, can indicate
aggregate changes. Recording percentage calculated in relationto a common base in special columns, on the other hand, showsrelative, or proportional, changes.
(1) COMPARATIVE STATEMENT= CURRENT YEAR- PREVIOUSYEAR (ABSOLUTE CHANGE)
(2) ABSOLUTE CHANGE/PREVIOUS YEAR*100
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Balance Sheet for the years ending 31st March 2007,08,09
Particulars 2007 2008 2009
AbsoluteChange 08
%Change08
AbsoluteChange 09
%Cha09
SOURCES OF FUNDS
Shareholders Funds
Equity Capital 192.7 210.05223.3
9 17.59.00363
26 13.346.3
Preference Share Capital 169.01 169.79 86.94 0.78 0.4615112 -82.85 48.
Amount to be converted intoPreference Shares 0 65.59 0 65.59 0 -65.59
Share Application Money (Equity) 20 20 0 0 0 -20
Reserves & Surplus421.9
2 510.021325.
31 88.120.8807
36 815.29159
Total803.6
3 975.451635.
64 171.8221.3804
86 660.1967.
Minority interest 0 0230.3
9 0 0 230.39
Loan Funds
Secured Loans871.0
61,182.
101621.
74 311.0435.7082
18 439.6437.
Unsecured Loans 321.9 212.92182.4
9-
108.98
-33.8552
35 -30.4314.
Total1192.
961,395.
021804.
23 202.0616.9377
01 409.2129.
Deferred tax liabilities 0 4.12 11.03 4.12 0 6.91167
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TOTAL LIABILITIES1996.
592,374.
593681.
29 37818.9322
8 1306.755.
APPLICATION OF FUNDS
Fixed Assets
Gross Block638.8
1 561.69851.6
9 -77.12
-12.0724
47 29051.
Less: Depreciation355.5
8 180.19217.4
4-
175.39
-49.3250
46 37.2520.
Net Block283.2
3 381.5634.2
5 98.2734.6961
83 252.7566.
Add: Capital Work-in Progress295.8
6 540.38665.7
6 244.5282.6471
98 125.3823.
Total Fixed Assets579.0
9 921.881300.
01 342.7959.1945
98 378.1341.
Investments 1.38 1.37 3.75 -0.01
-
0.7246377 2.38 173
good will 0 0101.1
4 0 0 101.14
Current Assets, Loans & Advances
Inventories503.6
5 579.45807.9
5 75.815.0501
34 228.539.
Sundry Debtors 608.7 801.41204.
46 192.731.6576
31 403.0650.
Cash & Bank Balances 14.52 11.23109.0
3 -3.29
-22.6584
02 97.8870
Loans & Advances256.9
8 289.05634.4
8 32.0712.4795
7 345.43119
Total Current Assets1383.
851681.1
32755.
92 297.2821.4820
971074.7
963.
Less: Current Liabilities &Provisions
Current Liabilities143.6
1 152.02230.3
2 8.415.85613
82 78.351.
Provisions 23.24 77.77249.2
1 54.53234.638
55 171.44220
Total Current Liabilities166.8
5 229.79479.5
3 62.9437.7225
05 249.74108
Net Current Assets 12171,451.
342276.
39 234.3419.2555
46 825.0556.
Miscellaneous Expenditure (notwritten off) 0.94 0 0 -0.94 -100 0
Profit & Loss Account198.1
8 0 0-
198.18 -100 0
Deferred Tax Assets 0 0 0 0 0 0
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TOTAL ASSETS1996.
592,374.
593681.
29 37818.9322
8 1306.755.
INTERPRETATION OF COMPARATIVE STATEMENT OF
BALANCE SHEET:-
Balance sheet shows the fluctuation in the comparative
statement since 2007 to 2009.
The value for beginning is found to be decreasing in 2007 &2008 and it is increasing in 2009. That show more
investments in the company for business.
The highest value for liabilities is increasing in 2009 by 31%
as compare to other years which shows company needs to
be increasing its profit.
The assets are increasing in 2009 which shows more liquidity
and company in sound position.
profit and loss A/c for the year ending 31st march 2007,2008,2009
Particulars 2007 2008 2009absolutechange
2008%
absolutechange 2009%
INCOME
Sales and Services charges1229.
541,748.
652260.
36 519.1142.19
9 511.71 29.26
Other Income 9.9 10.51 15.85 0.616.161
62 5.34 50.81
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Increase/(Decrease) in Stock 86.45 -16.33 80.59 -102.78
-118.8
9 96.92 -593.51
Total1325.
891,742.
832356.
8 416.9431.44
6 613.97 35.23
EXPENDITURE
Raw Material Consumed/Purchased886.8
41,112.
321541.
61 225.4825.42
51 429.29 38.59
Manufacturing Expenses 49.1 51.54 77.51 2.444.969
45 25.97 50.39
Payment to & for Employees 30.16 42.05 73.06 11.8939.42
31 31.01 73.75
Administrative Expenses 30.13 43.95 61.89 13.8245.86
79 17.94 40.82
Selling & Distribution Expenses 79.85 88.71113.8
8 8.8611.09
58 25.17 28.37
Miscellaneous Expenditure Written 10.53 10.21 13.71 -0.32
-3.038
94 3.50 34.28
Interest 60.92 89.33
138.8
2 28.41
46.63
49 49.49 55.40
Depreciation 43.87 42.61 44.21 -1.26
-2.872
12 1.60 3.75
Total1191.
41,480.
722064.
69 289.3224.28
4 583.97 39.44
PROFIT/ ( LOSS)134.4
9 262.11292.1
1 127.6294.89
18 30.00 11.45expense & income on settlements ofcdr dues 0 0 57.2 0.00 0 57.20 0.00
PRIOR PERIOD ADJUSTMENT 0.37 -0.46 -0.76 -0.83
-224.3
24 -0.30 65.22
PROVISION FOR TAXATION net -11.34 -51.94 -88.42 -40.60358.0
25 -36.48 70.23
deferred tax assets/(liabilities) 0 -4.12 -3.48 -4.12 0 0.64 -15.53
taxation for earlier years 0 0 61.51 0.00 0 61.51 0.00
EXTRAORDINARY INCOME/(LOSS) -16.05 0 0 16.05 -100 0.00 0.00
AMOUNT AVAILABLE
FOR APPROPRIATION107.4
7 205.59176.5
8 98.1291.29
99 -29.01 -14.11
APPROPRIATION
Capital Redemption Reserve 2 0 40.03 -2.00 -100 40.03
BALANCE AFTER APPROPRIATION105.4
7 205.59115.6
7 100.1294.92
75 -89.92 -43.74
BALANCE BROUGHT FROM Pre. YEAR
-303.6
5-
198.18 7.41 105.47
-34.73
41 205.59 -103.74
BALANCE CARIED OVER TO BAL. SHEET
-198.1
8 7.41123.0
8 205.59
-103.7
39 115.67 1,561.00
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INTERPRETATION OF COMPARATIVE STATEMENT OF
PROFIT & LOSS ACCOUNT:-
The income in 2008 is 31% which is increasing by 4% in
2009 which shows the company is in profit & in sound
position also.
The sales in 2008 is 6.1% & in 2009 is 50.8% which shows
company is earning profit in the earlier years.
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TREND ANALYSIS:-
Trend analysis of ratios indicates the direction of change.This kind of analysis is particularly applicable to the items
of profit & loss account. It is advisable that trends of salesand net income may be studied in the light of two factors:the rate of fixed expansion or secular trend in the growthof the business and the general price level. It might befound in practice that a number of firms would show apersistent growth over a period of years. But to get a truetrend of growth, the sales figures should be adjusted by asuitable index of general prices.
For trend analysis, the use of index numbers isgenerally advocated. The procedure followed is to assignthe number 100 to items of the base year and tocalculate percentage changes in each item of other yearsin relation to the base year. This procedure may be calledas trend-percentage method.
TREND ANALYSIS = CURRENT YEAR/BASE YEAR*100
Balance Sheet for the years ending 31st March 2007,2008,2009
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Particulars 2007 2008 2009 2007 2008 2009
SOURCES OF FUNDS
Shareholders Funds
Equity Capital 192.7 210.05223.3
9 100109.003
63115.926
31
Preference Share Capital169.0
1 169.79 86.94 100100.461
5151.4407
43Amount to be continuo PreferenceShares 0 65.59 0 100 0 0
Share Application Money (Equity) 20 20 0 100 100 0
Reserves & Surplus421.9
2 510.021325.
31 100120.880
74314.114
05
Total803.6
3 975.451635.
64 100121.380
49203.531
48
Minority interest 0 0230.3
9 0 0
Loan Funds
Secured Loans871.0
61,182.
101621.
74 100135.708
22186.180
06
Unsecured Loans 321.9 212.92182.4
9 10066.1447
6556.6915
19
Total1192.
961,395.
021804.
23 100116.937
7151.239
77
Deferred tax liabilities 0 4.12 11.03 100 0 0
TOTAL LIABILITIES1996.
592,374.
593681.
29 100118.932
28184.378
87
APPLICATION OF FUNDS
Fixed Assets
Gross Block638.8
1 561.69851.6
9 10087.9275
53133.324
46
Less: Depreciation355.5
8 180.19217.4
4 10050.6749
5461.1507
96
Net Block283.2
3 381.5634.2
5 100134.696
18223.934
61
Add: Capital Work-in Progress295.8
6 540.38665.7
6 100182.647
2225.025
35
Total Fixed Assets579.0
9 921.881300.
01 100159.194
6224.491
88
Investments 1.38 1.37 3.75 10099.2753
62271.739
13
good will 0 0101.1
4 100 0 0
Current Assets, Loans & Advances
Inventories503.6
5 579.45807.9
5 100115.050
13160.418
94
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Sundry Debtors 608.7 801.41204.
46 100131.657
63197.874
16
Cash & Bank Balances 14.52 11.23109.0
3 10077.3415
98750.895
32
Loans & Advances256.9
8 289.05634.4
8 100112.479
57246.898
59
Total Current Assets 1383.85 1681.13 2755.92 100 121.4821 199.14875
Less: Current Liabilities & Provisions
Current Liabilities143.6
1 152.02230.3
2 100105.856
14160.378
8
Provisions 23.24 77.77249.2
1 100334.638
551072.33
22
Total Current Liabilities166.8
5 229.79479.5
3 100137.722
51287.401
86
Net Current Assets 12171,451.
342276.
39 100119.255
55187.049
3Miscellaneous Expenditure (notwritten off) 0.94 0 0 100 0 0
Profit & Loss Account198.1
8 0 0 100 0 0
Deferred Tax Assets 0 0 0 100 0 0
TOTAL ASSETS1996.
592,374.
593681.
29 100118.932
28184.378
87
INTERPRETATION OF TREND ANALYSIS OF BALANCESHEET:-
Source of funds is increasing in 2009 is 203% and
121% in 2008 & 100 in 2007 which shows more trend
of sale.
Total assets are increasing by 66% in 2009 as
compare to other years and show persistent growth
over a period of years.
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profit & los a/c for year 2007,08,09
trendanalysis
Particulars 2007 2008 2009 2007 2008 2009
INCOME
Sales and Services charges 1229.541,748.6
5 2260.36 100142.219
85183.837
86
Other Income 9.9 10.51 15.85 100106.161
62160.101
01
Increase/(Decrease) in Stock 86.45 -16.33 80.59 100
-18.889532
93.221515
Total 1325.891,742.8
3 2356.8 100131.446
05177.752
3
EXPENDITURE
Raw Material Consumed/Purchased 886.841,112.3
2 1541.61 100125.425
1173.831
81
Manufacturing Expenses 49.1 51.54 77.51 100104.969
45157.861
51
Payment to & for Employees 30.16 42.05 73.06 100139.423
08242.241
38
Administrative Expenses 30.13 43.95 61.89 100145.867
91205.409
89
Selling & Distribution Expenses 79.85 88.71 113.88 100111.095
8142.617
41
Miscellaneous Expenditure Written 10.53 10.21 13.71 10096.9610
64130.199
43
Interest 60.92 89.33 138.82 100146.634
93227.872
62
Depreciation 43.87 42.61 44.21 10097.1278
78100.775
02
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Total 1191.41,480.7
2 2064.69 100124.284
04173.299
48
PROFIT/ ( LOSS) 134.49 262.11 292.11 100194.891
81217.198
3expense & income on settlement ofcdr dues 0 0 57.2 100 0 0
PRIOR PERIOD ADJUSTMENT 0.37 -0.46 -0.76 100
-124.324
32
-205.405
41
PROVISION FOR TAXATION net -11.34 -51.94 -88.42 100458.024
69779.717
81
deferred tax assets/(liabilities) 0 -4.12 -3.48 100 0 0
taxation for earlier years 0 0 61.51 100 0 0
EXTRAORDINARY INCOME/(LOSS) -16.05 0 0 100 0 0
AMOUNT AVAILABLE
FOR APPROPRIATION 107.47 205.59 176.58 100191.299
9164.306
32
APPROPRIATION
Capital Redemption Reserve 2 0 40.03 100 0 2001.5
BALANCE AFTER APPROPRIATION 105.47 205.59 115.67 100194.927
47 109.671
BALANCE BROUGHT FROM Pre. YEAR -303.65 -198.18 7.41 10065.2659
31
-2.44030
96
BALANCE CARIED OVER TO BAL.SHEET -198.18 7.41 123.08 100
-3.73902
51
-62.1051
57
INTERPRETATION OF TREND ANALYSIS OF PROFIT
& LOSS ACCOUNT:-
For trend analysis, the use of index numbers is
generally advocated. The procedure followed is to
assign the number 100 to items of the base year and
to calculate percentage changes in each item of
other years in relation to the base year.
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Profit in 2008 is 194% and 217% in 2009 which
shows company earning profit and sales figures is
going high.
Ratio Analysis:-A tool used by individuals to conduct a quantitative
analysis of information in a company's financial
statements. Ratios are calculated from current year
numbers and are then compared to previous years, other
companies, the industry, or even the economy to judgethe performance of the company. Ratio analysis is
predominately used by proponents of fundamental
analysis. There are many ratios that can be calculated
from the financial statements pertaining to a company's
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performance, activity, financing and liquidity. Some
common ratios include the price-earnings ratio, debt-
equity ratio, earnings per share, asset turnover and
working capital.Current Ratio:-A Liquidity ratio that measures a company's ability to
pay short-term Obligations. The ratio is mainly used to
give an idea of the company's ability to pay back its
short-term liabilities (debt and payables) with its short-
term assets (cash, inventory, receivables). The higher the
current ratio, the more capable the company is of payingits obligations. A ratio under 1 suggests that the
company would be unable to pay off its obligations if they
came due at that point. While this shows the company is
not in good financial health, it does not necessarily mean
that it will go bankrupt - as there are many ways to
access financing - but it is definitely not a good sign.
The current ratio can give a sense of the efficiency of a
company's operating cycle or its ability to turn its product
into cash. Companies that have trouble getting paid on
their receivables or have long inventory turnover can run
into liquidity problems because they are unable to
alleviate their obligations. Because business operationsdiffer in each industry, it is always more
useful to compare companies within the same industry.
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Quick Ratio:-This is a ratio between quick current assets and current
liabilities. Quick ratio of 1:1 is considered satisfactory.The Higher the quick
Ratio,the better the position of the Company.
The quick ratio is calculated as:
Cash Ratio:-
Since cash is the most liquid asset, a financial analysismay examine cash ratio and its equivalent to currentliabilities. Trade investment or marketable securities areequivalent to cash; therefore, they may be included inthe computation of cash ratio:
Cash ratio = cash + marketable securitiesCurrent liabilities
Liquidity Ratio 2007 2008 2
Current Ratio 1.13 1.15 1
Quick Ratio 0.72 0.75 0
Cash Ratio 0.01 0.19 0
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Interpretation:-Current ratio:This ratio shows Insufficient Utilization ofcurrent Assets in the business. In year 07 ratio is 1.13 &in year 08 ratio is 1.15 & in year 09 ratio is 1.21 Whichis insufficient Ratio Which seems that company need to
be improvement.
Quick ratio: Quick ratio of 1:1 is considered as Ideal.Higher ratio shows efficient utilization of assets inbusiness. In the Year 2009 ratio is 0.85 is Efficientbecause lower ratio is more profitability in the business.
Cash ratio: -The Company carries a small amount of
cash. The company case Ratio Is 0.01 & 0.19 & 0.04 inthe Year 07, 08 & 09 which is insufficient in all years. Socompany need to be improvement in cash because inbusiness 2:1:1 cash ratio is good &ideal.
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Activity ratio:- funds of creditors and owner are
invested in varies assets to generate sale and profit. The
better the management of assets,the larger the amount
of sale. Activity ratios are employed to evaluate the
efficiency with which the firm manager and utilized its
assets. These ratios are also called turnover ratio
because they indicate the speed with which assets are
being covered or turned over into sales. Activity ratio,
thus, involve a relationship between sales and assets. A
proper balance between sales and assets generally
reflects that assets are managed well.
ACTIVITY RATIO
2007 2008 2009
Debtors turnover 2.01 2.18 1.87
Assets turnover 1.01 1.2 0.99
Working capital turnover 0.68 0.73 6.32
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Debtors turnover:- A firm sells goods cash and credit.
Credit is used as a marketing tool by a number of
companies. When the firm extends credit to its customer,debtors are created in the firms accounts. Debtors are
convertible into cash over a short period and, therefore,
are include in current assets. The liquidities position of
the firm depends on quality of the debtors to a great
extant.
Debtors turnover is found out by dividing credit sale by
average debtors:
Debtors turnover =
ITERPRETATION: Lower ratio shows sufficient
utilization of debt in business. It is also shows morebusiness. In the year 2009 lower ratio is best because It
is sufficient for business.
Working capital turnover:- Afirm may also like to
relate net current assets(or net working capital gap) to
sale. It may thus compute net working capital turnover bydividing sale by net working capital.
INTERPRETATION:
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Ratio shows no. of times the working capital has been
employed in the process of carrying on of business. The
Ratio in year 2009 is 6.32 which is higher as compare to
the other year. Higher the ratio, better the efficiency inthe utilization of working capital. So company used his
working capital in year 2009 efficiently.
Assets turnover :- Asset turnover ratio are that
ratio which shows the relationship between sales &assets. Assets are used to generate sales.
ASSESTS TURN OVER =
SALES / NET ASSESTS
INTERPRETATION: IN This ratio higher Ratio shows
Better utilization of assets in business and goodOperational Efficiency. In this ratio 2008 is sufficient ratio
because It Is higher ratio. But it is not sufficient because
It is less as compare to year 2007 IF we have less assets
then we cant earn more profit. So company needed to
improve in his assets turnover.
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Profitability Ratio:-
PROFITABLITY RATIO
2007 2008 2009
Net profit ratio 0.23 0.21 0.28
Return on equity 0.35 0.39 0.38
Net profit ratio:-IT is ratio which establishes relationship between netprofit and sales. Net profit is how much percentage ofnet sales is known by this ratio.
Objective of net profit ratio is todetermine the overall efficiency of business.
NET PROFIT RATIO = PROFITAFTER TAX/ SALES
INTERPRETATION: Higher the net profit ratio, better itis for the business. Higher ratio shows more profit.
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2009 is high ratio year shows more earnings for theyear is more earn profit to the business. Company didnot earn more profit during three years so companyneeds to improve net profit.
Return on equity:-(ROE) and return on capital (ROC)
measure very similar concepts, but with a slight
difference in the underlying formulas. Both measures are
used to decipher the profitability of a company based on
the money it had to work with.
Return on equity =
Interpretation:- The year 2008 more efficiency
because the year is higher rate it is better for business.
The company with higher return on equity is favored by
investors. If the investors are more company will be in
great profit.
SOLVENCY RATIO: THESE Ratios indicate maximum
funds provided by owners, as a general rule, there should
be an appropriate mix of debt and owners equity in
financing the firms assets. It is also called capitalstructure ratio.
SOLVENCY RATIO
2007 2008 2009
Total debt ratio 0.6 0.53 0.44
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Debt equity ratio 1.86 2.48 2.11
Capital equity ratio 3.07 4.63 4.76
Proprietary ratio 0.4 0.41 0.44
TOTAL DEBT RATIO: Debt ratio shows comparison
between total debt and capital employed or net assets.Total debt will include short and long term borrowing
from financial institutions.
TOTAL DEBT RATIO = TOTAL
DEBT/ CAPITAL EMPLOYEED
INTERPRETATION: Higher ratio shows sufficientutilization of debt in the business. 2008 ratio is sufficient
to the business. it is more profitability to business. But
company less profit as compare to the 2007 so the
company needs to be improvement.
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DEBT EQUITY RATIO: DEBT equity ratio is that ratio
which relationship between the debt and equity. The
relationship describing the lenders contribution for eachrupee of the owners contribution is called debt equity
ratio.
DEBT EQUITY RATIO= TOTAL DEBT/ NET
WORTH
INTERPRETATION: LOWER debt equity is always goodfor business. In the year 2007 debt equity is 1.86 which is
lower as compare to year 2008 & 2009. Which is good
because lower debt equity ratio higher degree of
protection enjoyed by lenders.
CAPITAL EQUITY RATIO: Thee ratio shows relationshipbetween debt and equity. One way wants to know how
much funds are being contributed together by lenders
and owners for each rupee of the owners contribution.
C. EQUITY RATIO = NET ASSESTS/
NET WORTH
INTERPRETATION: HIGHER ratio shows more profit.
Capital equity ratio is higher for the year 2009 is 4.76 as
compare to the ratio of year 2008 which is 4.63. Higher
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ratio is the profitability for the business. Company has
more profit in the year 2009.
PROPRIETARY RATIO: The ratio shows the extent to
which the total assets have been financed by theproprietary. Higher the Ratio,Greater the Satisfaction for
Lenders and Creditors.
PROPRIETARY RATIO = SHREHOLDERS
FUND / TOTAL ASSETS
INTERPRETATION: If the proprietary ratio is high then it
is good for lenders and creditors. Because if it is high
then shareholders funds will be high if the funds high
company will be in great profit and using his assets in
very effectively. The company has higher ratio in the year
in 2009 so company has great profit in this year but it isless as compare to year 2007 & 2008. So company need
to be work hard to earn more profit.
CASH FLOW STATEMENT:-
A statement of changes in financial position on cash basis,
commonly known as the cash flow statement, summarizes the
causes of changes in cash position between dates of the two
balance sheets. It indicates the sources and uses of cash. The
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cash flow statement is similar to the funds flow statement except
that it focuses attention on cash (immediate or near term
liquidity) instead of working capital or funds (potential or medium
term liquidity). Thus, this statement analyses changes in non
current accounts as well as current accounts (other than cash) todetermine the flow of cash.
The easiest and the direct method of preparing a
statement of changes in cash position is to only record inflows
and outflows of cash, and find out the net change during a given
period. The rupees received minus the rupees paid during a
period are the cash balance at the end of period. If the net
change in the cash position has to be found out from the income
statement and comparative balance sheets, these adjustments
for the no cash items are made. These adjustments are made in
the same way as in preparing funds flow statement.
cash flow statement for year ended31 march ,2007
CurrentYear
PreviousYear
endedon31.03.2007
endedon31.03.2006
A) Cash Flow Statement fromOperating Activities
Net Profits Before Tax andExtraordinary Items
13,449.43
5,519.65
Adjustments for:
a)depreciation
4,387.51
4,091.85
b)Deferred Revenue Expenditure
1,052.63
1,135.50
c)Profit/Loss on sale of fixed assets(net) 5.94 2.53
d)Sundry balances written back -176.17 -135.5
e)Sundry balances written off 11.89 10.72
f) Long term publicity 0 -26.52
g)Bad debts 3.98 41.49
h)Interest Expenses
6,092.39
4,506.61
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i)Interest Income -82.22 -66.26
j)Profit on Sale of Investment -394.7 0
Operating Profit before Working CapitalChanges
24,350.68
15,080.07
Adjustments for
a)Trade & Other Receivables
-15,177.
07
-11,616.
07
b)Inventories
-12,374.
03
-3,921.9
2
c)Trade payables
3,401.11 664.1
Cash Generated from /in OperatingActivities 200.69 206.18
a)Direct Taxes -68.53 -19.63
Cash Inflow/(outflow) before ExtraordinaryItems 132.16 186.55
a)Prior Period Adjustments (gross) 37.22 5.83
b)Restructuring Gains on Borrowings 0 5,503.04
c)Transfer of Assets on Demerger(1,605.12)
-1,605.1
2 0
Net cash Flow from /in OperatingActivities
Total(A)
-1,435.7
45,695.4
2
B) Cash Flow arising from Investing
Activities
a)Acquisition of F. assets (Including Capital work-in-progress)
-24,425.
89
-1,548.7
1
b)Sale of Fixed Assets 107.54 10.56
c)Investments
1,044.65 -100
d)Interest Income 82.22 66.26
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Net cash Flow from /in InvestingActivities
Total(B)
-23,191.
48
-1,571.8
9
C) Cash Flow arising from financingactivity
a)Proceeds from Secured Loans (Net ofrepayment)
-10,765.
2811,212.
64
b)Proceeds from Unsecured Loans (Net ofrepayment)
12,306.71
-21,676.
71
c)Proceeds from Equity Shares/ Shares to bealloted
27,062.56
10,284.00
d)Proceeds from Preference Shares (Net of
Redemption)
1,795.8
5 0.00
e)Interest
-6,092.3
9
-2,971.8
6
Net cash Flow from FinancingActivities
Total(C)
24,307.45
-3,151.9
3
Net Increase in Cash and CashEquivalents (A+B+C) -319.77 971.6
cash & cash equivalent (OpeningBalance)
1,771.33 799.73
cash & cash equivalent (Closing Balance)
1,451.56
1,771.33
Net Change in Cash & CashEquivalent -319.77 971.6
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cash flow statement for the year ended 2008
CurrentYear
PreviousYear
endedon31.03.2008
endedon31.03.2007
A) Cash Flow Statement from OperatingActivities
Net Profits Before Tax & Extraordinary Items
21,866.58
13,449.43
Adjustments for:
a) Depreciation
3,566.54
4,387.51
b) Deferred Revenue Expenditure
1,001.26
1,052.63
c) Profi t/Loss on sale of fixed assets(net) -32.91 5.94
d) Sundry balances written back -44.9 -176.17
e) Sundry balances written off 119.35 11.89
f) ESOP Compensation debited to P&L a/c 171.8 0
g) Bad debts 0 3.98
h) Interest Expenses8,310.9
66,092.3
9
i) Interest Income -222.53 -82.22
j) Profit on sale of Investment 0 -394.7
Operating Profit before Working CapitalChanges
34,736.15
24,350.68
Adjustments for:
a) Trade & Other Receivables2,717.0
3
-
15,177.07
b) Inventories
2,113.75
-12,374.
03
c) Trade payables
-3,108.8
93,401.1
1
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Cash Generated from /(Used)in OperatingActivities
36,458.04 200.69
a) Direct Taxes
-
2,971.39 -68.53
Cash Inflow/(outflow) before ExtraordinaryItems
33,486.65 132.16
a) Prior Period Adjustments (gross) -45.62 37.22
b) Transfer of Assets on Demerger 0
-1,605.1
2
Net cash Flow from /(Used)in OperatingActivities
Total(A)
33,441.03
-1,435.74
B) Cash Flow arising from InvestingActivities
a) Acquisition of F. assets Including Capital w.-in-progress
-38,701.
32
-24,425.
89
b) Sale of Fixed Assets
9,349.37 107.54
c) Investments
-4,003.5
21,044.6
5
d) Interest Income 222.53 82.22
Net cash Flow from /(Used)in InvestingActivities
Total(B)
-33,132.
94
-23,191.
48
C) Cash Flow arising from financingactivities
a) Proceeds from Secured Loans (Net ofrepayment)
-2,229.8
2
-10,765.
29
b) Proceeds from Unsecured Loans (Net ofrepayment)
-6,896.9
612,306.
71
c) Proceeds from Equity Shares/ Shares to beallotted
16,445.56
27,062.56
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d) Proceeds from Preference Shares (Net ofRedemption) 77.26
1,795.85
e) Interest Expenses
-8,310.9
6
-6,092.3
9
Net cash Flow from Financing ActivitiesTotal(C) -914.91
24,307.44
Net Increase in Cash and Cash Equivalents(A+B+C) -606.83 -319.77
Cash & Cash Equivalent (Opening Balance)
1,451.56
1,771.33
Cash & Cash Equivalent (Closing Balance) 844.731,451.5
6
Net Change in Cash & Cash Equivalent -606.83 -319.77
cash flow statement for the year ended 2009
ParticularsCurrent
YearPreviou
s Yearendedon31.03.2009
endedon31.03.2008
A) Cash Flow Statement fromOperating Activities
Net Profits Before Tax and Exceptional 14,253. 21,866.
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Items 70 58
Adjustments for:
a) Depreciation
2,654.49
3,566.54
b) Deferred revenue expenditure
1,261.4
9
1,001.2
6c) Profit/Loss on sale of fixed assets (net) -65.51 -32.91
d) Sundry balances written back -12.46 -44.9
e) Sundry balances written off 5.75 119.35f) ESOP Compensation debited to P&Laccount 308.75 171.8
g) Bad debts 10.02 0
h) Interest expenses
13,461.26
8,310.96
i) Interest income -97.72 -222.53
j) Income on CDR exit
-5,779.7
5 0
Operating Profit before Working CapitalChanges
26,000.01
34,736.15
Adjustments for:
a) Trade & other receivables
-28,145.
812,717.0
3
b) Inventories
-9,521.0
82,113.7
5
c) Trade payables
1,311.49
-3,108.8
9
Cash Generated from /in OperatingActivities
-10,355.
3836,458.
04
a) Direct taxes
-8,877.1
5
-2,971.3
9
Cash Inflow/(outflow) before Prior PeriodItems
-19,232.
5333,486.
65
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a) Prior period adjustments (gross) -54.52 -45.62
Net cash Flow from/(Used)inOperating Activities
Total(A)
-19,287.
0533,441.
03
B) Cash Flow arising from InvestingActivities
a)Acquisition of f. assets (Including capital w.-in-progress)
-28,707.
63
-38,701.
32
b) Sale of fixed assets 211.159,349.3
7
c) Investments
-16,490.
29
-4,003.5
2
d) Interest income 97.72 222.53
Net cash Flow from/in InvestingActivities
Total(B)
-44,889.
05
-33,132.
94
C) Cash Flow arising from financingactivity
a) Proceeds from secured loans (Net ofrepayment) 86,638.68
-
2,229.82
b) Proceeds from unsecured loans (Net ofrepayment)
-3,043.3
7
-6,896.9
6
c) Proceeds from equity shares/ shares to beallotted 0
16,445.56
d) Proceeds from preference shares Net ofRedemption
-8,284.5
7 77.26
e) Interest expenses
-
13,461.26
-
8,310.96
f) Income on CDR exit
5,779.75 0.00
Net cash Flow from FinancingActivities
Total(C)
67,629.24 -914.92
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Net Increase in Cash and CashEquivalents
(A+B+C)
3,453.14 -606.83
Cash & Cash Equivalent (OpeningBalance) 844.73
1,451.56
Cash & Cash Equivalent (Closing Balance)4,297.8
7 844.73
Net Change in Cash & Cash Equivalent
3,453.14 -606.83
INTERPRETATION:-
CASH FROM OPERTING ACTIVITIES:-
In the 2007 the cash from operating activities is morethan in 06 & it reduced in 07. And in 2008 cash is more
than in 2007 then it shows the profit. It shows the profit.
It shows the loss in 2009 as compare to 2008.
CASH FROM INVESTING ACTIVITIES:-
IN 07, no more investment as compare to 2006 and noinvestments and loss in 08 as compare to 07.
CASH FROM FINACING ACTIVITIES:-
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It shows profit in 2007, which is 24307.45 as compare to
06. It shows the financial strong. And shows looks in 2008
and 2009 shows a profit a 67629.24.
CONCLUSION:-
The equity shares held by promoters, as mentioned above, have
been predged to the lenders of company for borrowings made by
the company. The security thus created is an additional security
in addition to the primary charge created on fixed assets &
current assets of the company which are sufficient to cover the
borrowing of the company.
During the year under review, a total of 14 complaints werereceived by the Company from the Shareholders / Investors. Allthe complaints were resolved by the Company to the satisfactionof the investors and as on 31st March 2009, there were nopending letters or complaints All the Subsidiary and Step down
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Subsidiary Companies are managed with their Boards in the bestinterest of their stakeholders.
ANNEXATURE:- BALANCE SHEET
Balance Sheet for the years ending 31st March2007,08,09
Particulars 2007 2008 2009
SOURCES OF FUNDS
Shareholders Funds
Equity Capital 192.7 210.05223.3
9
Preference Share Capital169.0
1 169.79 86.94Amount to be converted intoPreference Shares 0 65.59 0Share Application Money(Equity) 20 20 0
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Reserves & Surplus421.9
2 510.021325.
31
Total803.6
3 975.451635.
64
Minority interest 0 0230.3
9
Loan Funds
Secured Loans871.0
61,182.
101621.
74
Unsecured Loans 321.9 212.92182.4
9
Total1192.
961,395.
021804.
23
Deferred tax liabilities 0 4.12 11.03
TOTAL LIABILITIES1996.
592,374.
593681.
29
APPLICATION OF FUNDS
Fixed Assets
Gross Block638.8
1 561.69851.6
9
Less: Depreciation355.5
8 180.19217.4
4
Net Block283.2
3 381.5634.2
5
Add: Capital Work-in Progress295.8
6 540.38665.7
6
Total Fixed Assets 579.09 921.88 1300.01
Investments 1.38 1.37 3.75
good will 0 0101.1
4
Current Assets, Loans &Advances
Inventories503.6
5 579.45807.9
5
Sundry Debtors 608.7 801.41204.
46
Cash & Bank Balances 14.52 11.23109.0
3
Loans & Advances256.9
8 289.05634.4
8
Total Current Assets1383.
851681.1
32755.
92
Less: Current Liabilities &
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Provisions
Current Liabilities143.6
1 152.02230.3
2
Provisions 23.24 77.77249.2
1
Total Current Liabilities166.8
5 229.79479.5
3
Net Current Assets 12171,451.
342276.
39Miscellaneous Expenditure (notwritten off) 0.94 0 0
Profit & Loss Account198.1
8 0 0
Defferred Tax Assets 0 0 0
TOTAL ASSETS1996.
592,374.
593681.
29
PROFIT & LOSS ACCOUNT:
profit & loss a/c for year2007,2008,2009
Particulars 2007 2008 2009
INCOME
Sales and Services charges1229.
54 1,748.652260.3
6
Other Income 9.9 10.51 15.85
Increase/(Decrease) in Stock 86.45 -16.33 80.59
Total1325.
89 1,742.83 2356.8
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EXPENDITURERaw MaterialConsumed/Purchased
886.84 1,112.32
1541.61
Manufacturing Expenses 49.1 51.54 77.51Payment to & for Employees 30.16 42.05 73.06
Administrative Expenses 30.13 43.95 61.89
Selling & Distribution Expenses 79.85 88.71 113.88Miscellaneous ExpenditureWritten 10.53 10.21 13.71
Interest 60.92 89.33 138.82
Depreciation 43.87 42.61 44.21
Total1191.
4 1,480.722064.6
9
PROFIT/ ( LOSS)134.4
9 262.11 292.11expense & income on stelmentof cdr dues 0 0 57.2
PRIOR PERIOD ADJUSTMENT 0.37 -0.46 -0.76
PROVISION FOR TAXATION net -11.34 -51.94 -88.42
deferred tax assest/(liablities) 0 -4.12 -3.48
taxation for earlier years 0 0 61.51EXTRAORDINARY INCOME/(LOSS) -16.05 0 0
AMOUNT AVAILABLE
FOR APPROPRIATION
107.4
7 205.59 176.58
APPROPRIATION
Capital Redemption Reserve 2 0 40.03BALANCE AFTERAPPROPRIATION
105.47 205.59 115.67
BALANCE BROUGHT FROM Pre.YEAR
-303.6
5 -198.18 7.41
BALANCE CARIED OVER TOBAL. SHEET
-
198.18 7.41 123.08
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BIBLOGRAPHY & REFERENCES:-
www.finacialdictionary.com
www.sknl.co.in
www.investopedia.com
I.m panday reference book (356,357)
http://www.finacialdictionary.com/http://www.sknl.co.in/http://www.investopedia.com/http://www.finacialdictionary.com/http://www.sknl.co.in/http://www.investopedia.com/8/8/2019 Term Paper of Accounting for Managers
47/48
8/8/2019 Term Paper of Accounting for Managers
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