Financial analysis

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Financial analysis

  1. 1. INTRODUCTION OF COMPANY• ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited.• In recognition of the Companys multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri- business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full stops in the Companys name were removed effective September 18, 2001.• The Company now stands rechristened ITC Limited.
  2. 2. India Tobacco Company Limited Subsidiary companies:in was established on 1910 • Packaging and printing business • Itc-welcomed group of hotelPlant location • Papercraft business• The Companys headquarter • Classmate,papercraft building, Virginia House • Itc setup Agree business Kolkatta devision • Itc infotech ltd.Registered office: • Sunfeast• M/S India Tobacco Company • Wills classic Limited • Mint-o Kolkatta • Candymen • Bingo! Etc..
  3. 3. CHAIRMAN NON-EXECUTIVE DIRECTORS• Y C Deveshwar • A BaijalEXECUTIVE DIRECTORS • S Banerjee • AV Girija Kumar• Nakul Anand • D K Mehrotra• P V Dhobale • S B Mathur• K N Grant • S H Khan • H G Powell • Basudeb Sen • P B Ramanujam • K Vaidyanath • Anthony Ruys • B Vijayaraghavan
  4. 4. VERTICAL ANALYSIS
  5. 5. INTRODUCTION• Vertical analysis is the proportional expression of each item on a financial statement to the statement total.• The results of vertical analysis are presented in the form of common-size-statements in which all the elements within each statement are expressed in percentage of some common number and always add up to 100 percent
  6. 6. VERTICAL ANALYSIS OF BALANCE SHEET FROM 2007 TO 2011SOURCE OF FUNDS PARTICULARS CONTRIBUTION (%) WITH RESPECTED YEAR 2007 2008 2009 2010 20111. Shareholders’ Fundsa) Capital 3.39 2.95 2.55 2.55 4.59b) Reserves & Surplus 90.54 91.13 90.38 91.48 90.06TOTAL 93.93 94.08 92.93 94.03 94.652. Loan Fundsa) Secured Loans 0.55 0.05 0.08 ----- 0.01b) Unsecured Loans 1.26 1.62 1.12 0.73 0.58TOTAL 1.81 1.67 1.20 0.73 0.593. Deferred Tax-Net 4.26 4.25 5.87 5.24 4.75SUB TOTAL 100 100 100 100 100
  7. 7. INTERPRETATION• In 2007 If we consider total Source of Fund as 100%, from this 90.54% was by Reserve and Surplus. This contribution of the reserve and surplus remain almost same for the rest of year. And the less contribution by secured loan in all year which contributed less than 0.1%.• We can say that the contribution in source of fund was mainly by Shareholder’s fund. Contribution of deferred tax was b/w 4 to 6% for all years.
  8. 8. APPLICATION OF FUNDS PARTICULARS CONTRIBUTION (%) WITH REAPECTED YEAR 2007 2008 2009 2010 20111. Fixed Assetsa) Net Block 42.70 48.13 49.20 54.44 49.79b) Capital Work-In Progress 07.80 08.79 08.21 6.74 07.95TOTAL 50.50 56.92 57.41 61.18 57.742. Investments 27.62 22.89 19.20 38.29 32.953. Current Assets, Loans and Advancesa) Inventories 30.17 31.61 31.11 30.00 31.22b) Sundry Debtors 05.73 5.75 04.52 05.67 05.38c) Cash and Bank Balances 08.10 4.45 6.98 07.43 13.30d) Other Current Assets 01.64 1.19 1.45 01.90 2.06e) Loans and Advances 10.94 11.83 11.23 08.60 8.40TOTAL 56.58 54.78** 55.21 53.60 60.374. Current Liabilities and Provisions*a) Liabilities 21.46 21.75 20.05 23.08 26.43b) Provisions 13.24 12.84 11.77 30.00 24.33TOTAL 34.70 34.59** 31.82 53.08 50.76Net Current Assets 21.88 20.19 23.39 0.52 09.61FINAL TOTAL 100 100 100 100 100
  9. 9. INTERPRETATION• if we consider application of fund as 100%, contribution of fixed assets, investment and net current assets was 50.50%, 27.62% and 21.88% in 2007. It was 56.92%, 22.89% and 20.19% in 2008. And for rest of the year it was b/w 57 to 62%, 19 to 33% and 09 to 24% respectively except 2010. In 2010 contribution of net current assets was only 0.52% and for that year investment contribution increased up to 39%.• So for 2011 business year company must be increased its net current assets. It was increased up to 10%.
  10. 10. VERTICAL ANALYSIS OF PROFIT AND LOSS ACCOUNT FROM 2007-20111.NET INCOME PERTICULERS CONTRIBUTION (%) WITH REAPECTED YEAR 2007 2008 2009 2010 2011 NET SALES 97.31 95.81 99.67 96.79 96.28 OTHER INCOME 02.69 04.19 0.33 03.21 03.72 TOTAL 100 100 100 100 100
  11. 11. INTERPRETATION• If we consider net Income as 100%, contribution of net sales is more than 95% for all 5 years. And about less than 5% contribution of other income. For any company net sale is much important than other income. If expense remain same for every year and net income will increase your net profit will increase.
  12. 12. 2.EXPENDITUREPERTICULERS CONTRIBUTION (%) WITH REAPECTED YEAR 2007 2008 2009 2010 2011RAW MATERIALS 41.56 41.33 40.48 37.16 36.96ETC.MANUFACTURING, 24.13 24.25 25.75 27.51 27.00SELLING ETC.EXPENSESDEPRECIATION 02.90 03.01 03.46 03.25 02.98TOTAL 69.59 68.59 69.69 67.92 66.94
  13. 13. INTERPRETATION• The contribution of total expenditure was b/w 66 to 70% which was almost remain same the all 5 years, from this we can say that the expenses made by the company was stable for every year and this is good sign for the company .• For analysis we took the data of 2007, in 2007 the contribution of the raw material, manufacturing expenses and depreciation was 41.56%, 24.13% and 2.90%. from this we can say that the depreciation on the machinery is less compare to others.• The good thing for this company is the all expenses remain nearly same for the all 5 year.
  14. 14. 3.NET PROFITPARTICULERS CONTRIBUTION (%) WITH REAPECTED YEAR 2007 2008 2009 2010 2011PROFIT BEFORE 31.41 31.40 30.31 32.08 33.06TAXATIONPROVISION FOR 09.81 09.97 09.81 10.42 10.37TAXATIONPROFIT AFTER 21.60 21.43 20.50 21.66 22.69TAXATION
  15. 15. INTERPRETATION• Net profit comes from deducting expenses from the net income. From all income net profit is by 21.6% for 2007. Net profit for all the year remains almost same for the company. So we can say that the stability of the company is very good.
  16. 16. HORIZONTAL ANALYSIS
  17. 17. INTRODUCTION• Financial statements present comparative information for the current year and the previous year. A simple approach to financial statement analysis, known as Horizontal analysis, is to calculate amount changes and percentage changes from the previous year to the current year.• While an amount change in itself may mean something, converting amount changes to percentages is more useful in appreciating the order of magnitude of the change.
  18. 18. ANALYSIS OF BALANCE SHEET OF YEAR 2007-20081.SOURCE OF FUNDS PARTICULERS CHANGE IN VALUE (IN CHANGE IN % CR.) 1. Shareholders’ Funds a) Capital 0.64 0.17 b) Reserves & Surplus 1619.94 16.10 TOTAL 1620.59 15.52 2. Loan Funds a) Secured Loans (55.21) (90.83) b) Unsecured Loans 68.76 49,08 TOTAL 13.55 06.74 3. Deferred Tax-Net 72.22 15.27 TOTAL 1706.36 15.35
  19. 19. INTERPRETATION• From the above analysis of balance sheet we came to know that source of fund increased to 15.35% compare to the last year (2007).• Let’s first talk about the shareholder’s fund.• SHAREHOLDER’S FUND Shareholder’s fund increased to 15.52% in 2008 due to increase of Capital(0.17%) and Reserve and Surplus (16.10%). From the data we can easilyunderstand that increase in Shareholder’s Fund is mainly due to increase inReserve and Surplus.• LOAN FUNDS Here, Loan Fund increased to only 06.74% because secured loan decreased to90.83% and unsecured loan increased only to 49.08%. Decreased in to securedloan is mainly responsible for the less increase in to Loan Fund.• DEFERRED TAX-NET As compared to 2007, in 2008 deferred tax net increased to 15.27%
  20. 20. 2.APPLICATION OF FUNDS PERTICULERS CHANGE IN VALUE (IN CHANGE IN % CR.)1. Fixed Assetsa) Gross Block 1825.39 25.58b) Depreciation 401.33 16.8c) Net Block 1424.06 30.0d) Capital Work-In Progress 260.68 30.1TOTAL 1684.74 30.02. Investments (133.22) (04.32)3. Current Assets, Loans and Advancesa) Inventories 696.44 20.76b) Sundry Debtors 100.24 15.74c) Cash and Bank Balances (329.91) (36.65)d) Other Current Assets (36.97) (20.19)e) Loans and Advances 299.7 24.65TOTAL 729.55 11.64. Current Liabilities and Provisionsa) Liabilities 402.22 16.86b) Provisions 172.49 11.71TOTAL 574.71 14.90Net Current Assets 154.84 06.36TOTAL 1706.36 15.35
  21. 21. INTERPRETATION• Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.• Here, application of fund increased to 15.35%. And net current assets increased to 06.36%.• FIXED ASSETS Increased to 30% due to increase in capital and grossblock. Another thing is depreciation it is increased to16.80%. Net block and capital increased in almost sameproportion.
  22. 22. CONTINUOUS• CURRENT ASSETS, LOANS AND ADVANCES Inventory increased to 20.76%, Sundry debtors increasedto 15.74% and Loan advances increased to 24.65% whilecash and other current assets decreased to 36.65% and20.19% respectively. From this data we can say that mostaffected change was in cash. So, at the end total these wereincreased to 11.60%.• CURRENT LIABILITIES Current liabilities increased to 14.9% this is due toincrease in liability and provision increased to 16.86% and11.71% respectively.
  23. 23. ANALYSIS OF BALANCE SHEET OF YEAR 2008-20091.SOURCE OF FUNDS PARTICULERS CHANGE IN VALUE (IN CHANGE IN % CR.) 1. Shareholders’ Funds a) Capital 0.58 0.15 b) Reserves & Surplus 1676.83 14.31 TOTAL 1677.41 13.91 2. Loan Funds a) Secured Loans 6.06 108.79 b) Unsecured Loans (42.94) (20.55) TOTAL (36.88) (17.20) 3. Deferred Tax-Net 322.12 59.10 TOTAL 1962.65 15.31
  24. 24. INTERPRETATION• From the above analysis of balance sheet we came to know that source of fund increased to 15.31% compare to the last year (2008). This was 15.35% increase in 2008 as compare to 2007.• Let’s first talk about the shareholder’s fund.• SHAREHOLDER’S FUND Shareholder’s fund increased to 14.31% in 2009 due to increase of Capital(0.15%) and Reserve and Surplus (13.91%). From the data we can easilyunderstand that increase in Shareholder’s Fund is mainly due to increase inReserve and Surplus.• LOAN FUNDS Here, Loan Fund increased to only 17.20% because unsecured loan decreasedto 20.55% and secured loan increased only to 108.79%. Decreased in tounsecured loan is mainly responsible for the less increase in to Loan Fund becauseamount increase in to secured loan is very small as compare to unsecured loan.• DEFERRED TAX-NET As compared to 2008, in 2009 deferred tax net increased to 59.10%
  25. 25. 2.APPLICATION OF FUNDS PERTICULERS CHANGE IN VALUE (IN CHANGE IN % CR.)1. Fixed Assetsa) Gross Block 1598.95 17.84b) Depreciation 495.87 17.76c) Net Block 1103.08 17.88d) Capital Work-In Progress 87.24 7.74TOTAL 1190.32 16.312. Investments (96.80) (3.30)3. Current Assets, Loans and Advancesa) Inventories 549.2 13.55b) Sundry Debtors (68.26) (09.26)c) Cash and Bank Balances 462.14 81.04d) Other Current Assets 69.28 47.42e) Loans and Advances 129.48 08.54TOTAL 1141.84 16.264. Current Liabilities and Provisionsa) Liabilities 177.55 06.37b) Provisions 95.16 05.78TOTAL 272.71 06.15Net Current Assets 869.13 33.60
  26. 26. INTERPRETATION• Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.• Here, application of fund increased to 15.31%. And net current assets increased to 33.60%.• FIXED ASSETS Increased to 16.31% due to increase in capital and gross block.Another thing is depreciation it is increased to 17.76%. Net blockincreased to 17.88% and capital increased to 07.74%.• INVESTMENT In 2008 investment decreased to 3.30%. Value of investmentdecreased to Rs. 96.8 cr.
  27. 27. Continuous• CURRENT ASSETS, LOANS AND ADVANCES Inventory increased to 13.55%, Sundry debtors decreased to 09.26% andLoan advances increased to 08.54% while cash and other current assetsincreased to 81.04% and 47.42% respectively. From this data we can say thatmost affected change was in cash. So, at the endtotal these were increased to 16.26%. here, increased in total is mainly due toincrease in cash.• CURRENT LIABILITIES Current liabilities increased to 06.15% this is due to increase in liability andprovision increased to 06.37% and 05.78% respectively.
  28. 28. ANALYSIS OF BALANCE SHEET OF YEAR 2009-20101.SOURCE OF FUNDS PARTICULERS CHANGE IN VALUE (IN CHANGE IN % CR.) 1. Shareholders’ Funds a) Capital 0.58 0.15 b) Reserves & Surplus 1676.83 14.31 TOTAL 1677.41 13.91 2. Loan Funds a) Secured Loans 6.06 108.79 b) Unsecured Loans (42.94) (20.55) TOTAL (36.88) (17.20) 3. Deferred Tax-Net 322.12 59.10 TOTAL 1962.65 15.31
  29. 29. INTERPRETATION• From the above analysis of balance sheet we came to know that source of fund increased to 15.31% compare to the last year (2008). This was 15.35% increase in 2008 as compare to 2007.• Let’s first talk about the shareholder’s fund.• SHAREHOLDER’S FUND Shareholder’s fund increased to 14.31% in 2009 due to increase of Capital(0.15%) and Reserve and Surplus (13.91%). From the data we can easilyunderstand that increase in Shareholder’s Fund is mainly due to increase inReserve and Surplus.• LOAN FUNDS Here, Loan Fund increased to only 17.20% because unsecured loan decreasedto 20.55% and secured loan increased only to 108.79%. Decreased in tounsecured loan is mainly responsible for the less increase in to Loan Fund becauseamount increase in to secured loan is very small as compare to unsecured loan.• DEFERRED TAX-NET As compared to 2008, in 2009 deferred tax net increased to 59.10%
  30. 30. 2.APPLICATION OF FUNDS PERTICULERS CHANGE IN VALUE (IN CR.) CHANGE IN %1. Fixed Assetsa) Gross Block 1598.95 17.84b) Depreciation 495.87 17.76c) Net Block 1103.08 17.88d) Capital Work-In Progress 87.24 7.74TOTAL 1190.32 16.312. Investments (96.80) (3.30)3. Current Assets, Loans and Advancesa) Inventories 549.2 13.55b) Sundry Debtors (68.26) (09.26)c) Cash and Bank Balances 462.14 81.04d) Other Current Assets 69.28 47.42e) Loans and Advances 129.48 08.54TOTAL 1141.84 16.264. Current Liabilities and Provisionsa) Liabilities 177.55 06.37b) Provisions 95.16 05.78TOTAL 272.71 06.15Net Current Assets 869.13 33.60TOTAL 1962.65 15.31
  31. 31. INTERPRETATION• Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.• Here, application of fund increased to 15.31%. And net current assets increased to 33.60%.• FIXED ASSETS Increased to 16.31% due to increase in capital and gross block.Another thing is depreciation it is increased to 17.76%. Net blockincreased to 17.88% and capital increased to 07.74%.• INVESTMENT In 2008 investment decreased to 3.30%. Value of investmentdecreased to Rs. 96.8 cr.
  32. 32. Continuous• CURRENT ASSETS, LOANS AND ADVANCES Inventory increased to 13.55%, Sundry debtors decreased to09.26% and Loan advances increased to 08.54% while cash andother current assets increased to 81.04% and 47.42%respectively. From this data we can say that most affectedchange was in cash. So, at the end total these were increased to16.26%. here, increased in total is mainly due to increase in cash.• CURRENT LIABILITIES Current liabilities increased to 06.15% this is due to increasein liability and provision increased to 06.37% and 05.78%respectively.
  33. 33. ANALYSIS OF BALANCE SHEET OF YEAR 2010-20111.SOURCE OF FUNDS PARTICULERS CHANGE IN VALUE (IN CHANGE IN % CR.) 1. Shareholders’ Funds a) Capital 391.33 102.66 b) Reserves & Surplus 1496.9 10.94 TOTAL 1888.89 13.43 2. Loan Funds a) Secured Loans 1.94 ----- b) Unsecured Loans (10.45) (9.70) TOTAL (8.51) (7.90) 3. Deferred Tax-Net 10.84 2.14 TOTAL 1897.22 12.48
  34. 34. INTERPRETATION• From the above analysis of balance sheet we came to know that source of fund increased to 12.48% compare to the last year (2011). This was 1.20% increase in 2010 as compare to 2009.• Let’s first talk about the shareholder’s fund.• SHAREHOLDER’S FUND Shareholder’s fund increased to 13.43% in 2011 due to increase of Capital(102.66%) and Reserve and Surplus (10.94%). From the data we can easily understandthat increase in Shareholder’s Fund is mainly due to increase in capital.• LOAN FUNDS Here, Loan Fund decreased to only 7.90% because unsecured loan decreased to9.70% and secured loan was increase by Rs.1.20 Cr.• DEFERRED TAX-NET As compared to 2010, in 2011 deferred tax net decreased to 2.14% this was goodfor company.
  35. 35. 2.APPLICATION OF FUNDS PERTICULERS CHANGE IN VALUE (IN CR.) CHANGE IN %1. Fixed Assetsa) Gross Block 797.96 6.66b) Depreciation 595.29 15.56c) Net Block 202.67 20.49d) Capital Work-In Progress 324.41 32.15TOTAL 527.08 9.202. Investments (172.21) (30.07)3. Current Assets, Loans and Advancesa) Inventories 718.46 15.79b) Sundry Debtors 49.55 5.77c) Cash and Bank Balances 1116.96 99.17d) Other Current Assets 59.05 20.47e) Loans and Advances 112.03 8.57TOTAL 2056.05 25.294. Current Liabilities and Provisionsa) Liabilities 958.8 27.40b) Provisions (445.1) (8.57)TOTAL 513.7 6.38Net Current Assets 1542.35 ----TOTAL 1897.22 12.48
  36. 36. INTERPRETATION• Balance sheet of company is prepared as per the Matching Concept. So, as per this concept the source of the fund and application of the fund must be come same.• Here, application of fund increased to 12.48%. And net current assets decreased by Rs.1542.35 Cr. this was good for company• FIXED ASSETS Increased to 6.66% due to increase in gross block. Another thing isdepreciation it is increased to 15.56%. Net block increased to 20.49% andcapital in progress increased to 32.15%.• INVESTMENT In 2011 investment decreased to 30.07%. Value of investment increased toRs.172.21 cr.• This was not good for the company. So, may be production will be in control..
  37. 37. Continuous• CURRENT ASSETS, LOANS AND ADVANCES Inventory increased to 15.79%, Sundry debtors increased to5.77% and Loan advances increased to 8.57% while cash andother current assets increased to 99.17% and 20.47%respectively. This means company is in way of progress• CURRENT LIABILITIES Current liabilities increased to 6.38% this is due to increase inliability and decreased provision increased to 20.40% and 9.78%respectively. Net Current Assets increased to Rs.1542.35 Cr.mainly due to decrease in provision.
  38. 38. ANALYSIS OF PROFIT AND LOSS ACCOUNT 2007-08• GROSS INCOME PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) GROSS INCOME 2330.31 11.66 Gross profit of the company increased by 11.66% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this.
  39. 39. • NET INCOME PARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.) NET SALES 1783.24 14.66 OTHER INCOME 274.41 81.55 TOTAL 2057.65 16.46 Net income is increased by 16.46% due to increase in net sales and other income. Here, other income is increased by 81.55% but in small amount while Net sales are increased by 14.66% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales.
  40. 40. • EXPENDITUREPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)RAW MATERIALS ETC. 821.92 15.82MANUFACTURING, SELLING 515.12 17.07ETC. EXPENSESDEPRECIATION 75.54 20.81TOTAL 1412.58 16.47Expenditure is increased by 16.47% as compared to previous year. This washappened due to increase in Raw material expense, Manufacturing and sellingexpense and depreciation by 15.82%, 17.07% and 20.81% respectively.
  41. 41. • PROFITPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)PROFIT BEFORE TAXATION 645.07 16.42PROVISION FOR TAXATION 224.94 18.33PROFIT AFTER TAXATION 420.13 15.56Profit after taxation is increased by 15.56%. at present year company isincreased provision for taxation by 18.33% from profit before tax. At presentyear profit before taxation is also increased by 16.42%. we can say easily fromthis data that company is running in path of success.
  42. 42. • APPROPRIATIONSPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)GENERAL RESERVE 250 20PROPOSED DIVIDEND 152.72 13.10INCOME TAX ON PROPOSED 25.96 13.10DIVIDENDAfter adding the profit brought forward in to profit after taxation, theupcoming figure will get available for the appropriation. From data we can saythat company increased the general reserve by 20% and proposed dividend isalso increased by 13.1% so, obviously income tax on dividend is increased by13.1%. These all reserve will help the company infuture.
  43. 43. ANALYSIS OF PROFIT AND LOSS ACCOUNT 2008-09• GROSS INCOMEPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)GROSS INCOME 1711.62 7.8 Gross profit of the company increased by 7.8% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this.
  44. 44. • NET INCOMEPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)NET SALES 1407.68 10.1OTHER INCOME (75.97) (12.43)TOTAL 1364.61 9.37Net income is increased by 9.37% due to increase in net sales and otherincome. Here, other income is decreased by 12.43% but in small amount whileNet sales are increased by 10.1% but in big amount. So, for this we can say thatincrease in to net income is mainly due to the increase in Net sales.
  45. 45. • EXPENDITUREPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)RAW MATERIALS ETC. 430.08 7.14MANUFACTURING, SELLING 569.61 16.13ETC. EXPENSESDEPRECIATION 110.95 25.30TOTAL 1110.64 11.12Expenditure is increased by 11.12% as compared to previous year. This washappened due to increase in Raw material expense, Manufacturing andselling expense and depreciation by 9.37%, 7.14% and 25.30% respectively.
  46. 46. • PROFITPARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.)PROFIT BEFORE TAXATION 253.97 5.55PROVISION FOR TAXATION 110.48 7.61PROFIT AFTER TAXATION 143.49 4.56Profit after taxation is increased by 4.56%. at present year company isincreased provision for taxation by 7.61% from profit before tax. Atpresent year profit before taxation is also increased by 5.55%. we can sayeasily from this data that company is running in path of success.
  47. 47. • APPROPRIATIONS PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) GENERAL RESERVE ----- ----- PROPOSED DIVIDEND 77.52 5.87 INCOME TAX ON 13.17 5.87 PROPOSED DIVIDEND After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say company was not interested in change general reserve and proposed dividend is also increased by 5.87% so, obviously income tax on dividend is increased by 5.87%. these all reserve will help the company in future.
  48. 48. ANALYSIS OF PROFIT AND LOSS ACCOUNT 2009-10• GROSS INCOME PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) GROSS INCOME 3184.52 13.44 Gross profit of the company increased by 13.44% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this.
  49. 49. • NET INCOME PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) NET SALES 2541.27 16.27 OTHER INCOME 68.45 12.8 TOTAL 2609.72 16.16 Net income is increased by 16.16% due to increase in net sales and other income. Here, other income is increased by 12.80% but in small amount while Net sales are increased by 16.27% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales.
  50. 50. • EXPENDITURE PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) RAW MATERIALS ETC. 1013.53 17.01 MANUFACTURING, SELLING 347.32 7.21 ETC. EXPENSES DEPRECIATION 59.3 10.79 TOTAL 1420.15 12.54 Expenditure is increased by 12.54% as compared to previous year. This was happened due to increase in Raw material expense, Manufacturing and selling expense and depreciation by 17.01%, 7.21% and 10.79% respectively.
  51. 51. • PROFIT PARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.) PROFIT BEFORE TAXATION 1189.57 24.65 PROVISION FOR TAXATION 392.16 25.10 PROFIT AFTER TAXATION 797.41 24.43 Profit after taxation is increased by 24.43%. at present year company is increased provision for taxation by 18.33% from profit before tax. At present year profit before taxation is also increased by 16.42%. we can say easily from this data that company is running in path of success. And as compare to the last year company was earn more.
  52. 52. • APPROPRIATIONS PARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.) GENERAL RESERVE (1093.9) (72.92) PROPOSED DIVIDEND 321.65 23.03 After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say that company decreased the general reserve by 72.92% and proposed dividend is also increased by 23.03% so, income tax on dividend is increased by 16.71%. these all reserve will help the company in future.
  53. 53. ANALYSIS OF PROFIT AND LOSS ACCOUNT 2010-11• GROSS INCOME PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) GROSS INCOME 4548.89 16.92 Gross profit of the company increased by 16.92% as compared to previous year. Only from gross profit we cannot say anything about the progress of company. For this we have to analyze other following particulars for the company. Let’s go for this.
  54. 54. • NET PROFIT PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) NET SALES 3014.89 16.60 OTHER INCOME 204.1 33.20 TOTAL 3218.44 17.14 Net income is increased by 17.14% due to increase in net sales and other income. Here, other income is increased by 33.20% but in small amount while Net sales are increased by 16.60% but in big amount. So, for this we can say that increase in to net income is mainly due to the increase in Net sales.
  55. 55. • EXPENDITURE PARTICULERS CHANGE IN CHANGE IN % VALUE (IN CR.) RAW MATERIALS ETC. 1119.24 15.47 MANUFACTURING, 799.12 15.55 SELLING ETC. EXPENSES DEPRECIATION 47.28 7.76 TOTAL 1965.64 15.41 Expenditure is increased by 15.91% as compared to previous year. This was happened due to increase in Raw material expense, Manufacturing and selling expense and depreciation by 15.47%, 15.55% and 7.76% respectively.
  56. 56. • PROFIT PARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.) PROFIT BEFORE TAXATION 1252.85 20.82 PROVISION FOR TAXATION 326.24 16.09 PROFIT AFTER TAXATION 926.61 22.81 Profit after taxation is increased by 22.81%. at present year company is increased provision for taxation by 16.09% from profit before tax. At present year profit before taxation is also increased by 20.82%. we can say easily from this data that company is running in path of success.
  57. 57. • APPROPRIATION PARTICULERS CHANGE IN VALUE CHANGE IN % (IN CR.) GENERAL RESERVE 92.66 22.81 PROPOSED DIVIDEND 448.5 26.10 After adding the profit brought forward in to profit after taxation, the upcoming figure will get available for the appropriation. From data we can say that company increased the general reserve by 22.81% and proposed dividend is also increased by 126.10%.
  58. 58. RATIO ANALYSIS
  59. 59. • A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprises financial statementS.• Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firms creditors.• Financial ratios allow for comparisons between companies between industries between different time periods for one company between a single company and its industry average
  60. 60. TYPES OF RATIOS• Return on investment ratios Return on net worth (RONW) Earning per share (EPS) Cash earning per share (CEPS).• Solvency ratios Net asset value-NAV Debt equity ratio-D/E Interest cover Debt service covering ratio• Liquidity ratios Current ratio Quick ratio Collection period allowed to customers Suppliers credit Inventory holding period
  61. 61. • Resource efficiency or turn over ratios Fix asset turn over ratio Net worth turn over ratio• Profitability ratios Multi step Profit margin to sales ratio• Valuation or capital market ratios P/E ratio Market price to NAV ratio Market capitalisation
  62. 62. RETURN ON INVESTMENT RATIO• Return on net worth (RONW) It measures the net profit earned on the equity share holders funds. Return on net worth = (PAT – Preference dividend)*100/net worth March 2011 March 2010 March 2009 March 2008 March 2007 4987.61 4061 3263.59 3120.10 2774.34 PAT 0.0 0.0 0.00 0.0 0.0 Pref.dividend 15204.82 13901.92 13273.77 11247.695 10310.24 Net worth RONW(%) 32.80 29.21 24.58 27.73 26.90
  63. 63. RONW(%) 35 30 25 20 15 RONW(%) 10 5 0 2007 2008 2009 2010 2011Interpretation : There has been a gradual improvement in the RONW ratio from2007,though it went down a bit in 2009 but it has managed to shoot up in 2011 asseen in the graph above.These are good signs for the company as a high ratio meanshigh dividend,better growth prospects,high valuation in capital market etc.Variety offactors like growth in sales or efficient tax planning may have played a vital role.
  64. 64. EARNING PER SHARE (EPS)• This ratio measures the overall profitability in terms of per equity share capital contributed by the owners. EPS = PAT/Weighted average number of equity shares. March 2011 March 2010 March 2009 March 2008 March 2007 PAT 4987.61 4061 3263.59 3120.10 2774.34 Equity shares 773.81 381.82 377.74 376.86 376.22 EPS 6.44 10.63 8.64 8.27 7.37
  65. 65. EPS1210 8 6 EPS 4 2 0 2007 2008 2009 2010 2011 Interpretation Fall in EPS as compared to 2010.Owing to the good reputation of the company,the equity was good.But somehow the EPS is not high as expected.
  66. 66. CASH EARNING PER SHARE (CEPS)• This ratio measures the overall cash profitability in terms of per equity shares of capital contributed by the owners CEPS = PAT + Non-cash charges(Depreciation)/Weighted no of equity shares March 2011 March 2010 March 2009 March 2008 March 2007PAT 4987.61 4061 3263.59 3120.10 2774.34Equity shares 773.81 381.82 377.74 376.86 376.22Depreciation 655.99 608.71 549.41 438.46 362.92CEPS 7.29 12.23 10.10 9.44 8.42.
  67. 67. CEPS 14 12 10 8 CEPS 6 4 2 0 2007 2008 2009 2010 2011InterpretationFall in CEPS ratio as compared to 2010.
  68. 68. NET ASSET VALUE• Net asset value –NAV value:This ratio measures the net worth or net asset value per equity share.It thus seeks to assess as to what extent the value of equity share of a company contributed at par or at a premium has grown or the value/wealth has been created for the share holders. NAV = NW (Equity shareholders fund) / No .of equity shares o/s March 2011 March 2010 March 2009 March 2008 March 2007 Net worth 15953.27 14064.38 13735.08 12057.67 10646.58 Equity shares 773.81 381.82 377.74 376.86 376.22 NAV 20.61 36.83 36.39 31.99 28.29
  69. 69. NAV (Rs.crores)4035302520 NAV (Rs.crores)1510 5 0 2007 2008 2009 2010 2011 Interpretation : The company witnessed a rise in NAV ratio from 2007 to 2010.Due to which the company was successful in raising more capital from the share holders in the current year.But 2011 saw a decrease in the Net asset value.The reasons for the same may be in efficientness of the company to create a back up of reserves and surplus,may be some flaws in its dividend policy.Speculations at peak.
  70. 70. DEBT EQUITY RATIO This ratio measures the proportion of debt and capital-both equity and in preference in the capital structure of the company.It measures the extents of assets financed Debt equity ratio = Long term debt / Total NW March 2011 March 2010 March 2009 March 2008 March 2007NW 15953.27 14064.38 13735.08 12057.67 10646.58Long term debt 420.5 110.8 186.7 224.9 200.9D/E 0.01 0.01 0.013 0.0186 0.018
  71. 71. D/E (Rs.crores) 0.020.0180.0160.0140.012 0.010.008 D/E (Rs.crores)0.0060.0040.002 0 2007 2008 2009 2010 2011 Interpretation: The D/E ratio has been very low as compared to the standard ratio of 1.5:1.These are very good signs for the company as company has to pay very less debt from its profit margins and it can further raise its resources because of it.Leveraging capacity also increases due to this.
  72. 72. INTEREST COVER RATIO• This ratio measures the capacity of a company to pat yhe interest liability it has incurredon its long term borrowings out of its cash profits.It is also known as Times –Interest covered. Interest cover = EBIT/Interest EBIT = Earnings before interest and taxation March 2011 March 2010 March 2009 March 2008 March 2007 Interest 98.11 90.28 47.65 24.62 16.04 EBIT 7316 6080 4844 4576 3930 Interest cover 93.6 67.34 101.65 125.9 245.01
  73. 73. Interest cover300250200150 Interest cover10050 0 2011 2010 2009 2008 2007Interpretation: Interest cover ratio is extremely high.Though it did decrese in2010 but it has managed to pull up in 2011.This high ratio indicates thatcompany is well placed to meet its interst obligations from the revenue it isgenerating.
  74. 74. CURRENT RATIO• This ratio measures the abitlity of company to discharge its day to day bills,or current liabilities as and when they fall sue,out of the cash or near cash or current assets that it posses.Current ratio = Current assets,loans and advances + Short term Investment/ Current liabilities and provisions + short term debts March 2011 March 2010 March 2009 March 2008 March 2007 Current 10183.97 8127.08 8161.11 7019.27 6934.55 assets,loans and advances S.term investment 0.0 0.0 0.0 0.0 0.0 Current liabilities 8562.7 8048.24 4705.01 4432.30 3990.64 and provisions S.term debts 0.0 0.0 0.0 0.0 0.0 Current ratio 1.18 1.00 1.73 1.58 1.73
  75. 75. CURRENT RATIO 21.81.61.41.2 1 CURRENT RATIO0.80.60.40.2 0 2011 2010 2009 2008 2007 Interpretation: The ratio is comfortably placed at 1.18,though 1.33 is desirable.This ratio calculated is without the numbers of short term investment.The figures of the same may have an impact on the over all ratio and it may further rise.But this ratio can be considered good.
  76. 76. QUICK RATIO• This ratio measures as to how quick is the ability of a company to discharge its current liabilities net of working capital limits as and when they fall due out of cash or current assets net of inventories they posses.It is also called as Acid test ratio• Quick ratio = Currents assets,Loans and advances – Inventories + Short term investment/Current liabilities+Provisions March 2011 March 2010 March 2009 March 2008 March 2007 Current assets,loans 10183.97 8127.08 8161.11 7019.27 6934.55 and advances Inventories 5267.53 4549.07 4599.73 4050.53 3934.67 Current liabilities 8562.7 8048.24 4705.01 4432.30 3990.64 and provisions Quick ratio 0.574 0.44 0.756 0.668 0.75
  77. 77. QUICK RATIO0.80.70.60.50.40.3 QUICK RATIO0.20.1 0 2011 2010 2009 2008 2007 Interpretation : Generally desired and standard ratio is 1:1.But as the graph suggests they have been slightly below 1.This may be due to absence of information regarding short term investments.Needless to say but the ratio have declined from 2009 irrespective of the information of short term investment
  78. 78. COLLECTION PERIOD ALLOWED TO CUSTOMERS• The ratio measures credit period allowed to the customers on credit sales or how fast a company realizes its outstanding dues.It is also known as days sales in receivables ratioCollection period allowed to customers(Days) = Receivables * 365/Creditsales March 2011 March 2010 March 2009 March 2008 March 2007 Recievables 907.62 858.07 668.67 736.93 733.04 Credit sales 30604.39 26259.6 23143.53 21355.93 20208.77 Collection 11 12 11 13 13 period(days)
  79. 79. Collection period allowed to customers (Days) 13.5 13 12.5 12 11.5 Collection period allowed to customers (Days) 11 10.5 10 2007 2008 2009 2010 2011Interpretation: The scenario is very conducive to the company as it has a very shortcollection or credit giving period to its customers in comparision to a staggering 176days period it enjoys from its suppliers.
  80. 80. SUPPLIERS CREDIT RATIO• This ratio measures the average credit period availed by a company from its suppliers on credit purchases or how much leverage it posses to settle its outstanding payables.Also known as Days purchases in payables ratio.• Suppliers credit ratio (Days) = Payables * 365/Credit purchases March March March March March 2011 2010 2009 2008 2007 Payables 4457.94 3499.14 2786.97 2384.75 2548.65 Credit 8126.5 7007.26 6446.78 6016.7 5276.53 purchase Suppliers 200 182 157 144 176 credit (days)
  81. 81. SUPPLIERS CREDIT (DAYS)250200150 SUPPLIERS CREDIT (DAYS)100 50 0 2011 2010 2009 2008 2007 Interpretation : A marked increase from 2010.Just shows the reputation of the company in attracting new suppliers from the market and the existing suppliers extending the credit period they are allocating to the company.If compared to customer collect period,it scores very high in that too.Very favourable.
  82. 82. INVENTORY HOLDING PERIOD• This ratio measures the period of inventory build up or the number of days that is cash is blocked in inventory or how fast a company is able t convert its inventory into cash or near cash• Inventory holding period (days) = Inventory * 365 / Cost of goods sold (COGS) March 2011 March 2010 March 2009 March 2008 March 2007Inventory 5267.53 4549.07 4599.73 4050.53 3934.67Raw materials 8126.5 7007.26 6446.78 6016.7 5276.53Mfg.expense 5935.77 5136.65 4101.11 3531.5 3515.12Inventory holding 138 137 159 155 135period (days)
  83. 83. Inventory holding period(days)165160155150145140 Inventory holding period(days)135130125120 2011 2010 2009 2008 2007• Interpretation : High ratio.It gives a measure is to how fast a company is able to convert its inventory into cash..Though went up in 2008-09 it managed to come down which indicates good sign for the company
  84. 84. FIXED ASSET TURN OVER RATIO• This ratio measures the extent of turnover or volume of gross income generated by the fixed assets of the company in other words the efficiency in utilization. FATR = Netsales/Net block or fixed assets March 2011 March 2010 March 2009 March 2008 March 2007 Net sales 21167.58 18153.19 15611.92 13947.53 12169.29 N.B of F.A 8345.07 8142.40 7271.91 6168.83 4744.77 FATR 2.5365 2.2294 2.1469 2.2609 2.564
  85. 85. FATR 2.6 2.5 2.4 2.3 2.2 FATR 2.1 2 1.9 2011 2010 2009 2008 2007Interpretation: It is a capital intensive industry.Growth in the efficiency offixed asset utilization.
  86. 86. NET WORTH TURNOVER• This ratio measures the extent of turn over or volume of gross income generated by the net worth of a company.It is the efficiency in the resource utilization from the angle of residual interest i.e equity share holders• NWTO = Net sales/Net worth March 2011 March 2010 March 2009 March 2008 March 2007 Net sales 21167.58 18153.19 15611.92 13947.53 12169.29 Net worth 15953.27 14064.38 13735.08 12057.67 10646.58 NWTO 1.32 1.29 1.13 1.15 1.14
  87. 87. NWTO1.35 1.31.25 1.21.15 NWTO 1.11.05 1 2011 2010 2009 2008 2007 Interpretation : There is an increase in the net worth turn over the years and due to this it will play a very important role in improving the over all profitability and financial position of the company.
  88. 88. GROSS PROFIT MARGIN• Gross profit margin (GP %) = Gross profit * 100/ Net sales March 2011 March 2010 March 2009 March 2008 March 2007Gross profit 7105.31 6009.43 4840.22 4599.33 3953.13Net sales 21167.58 18153.19 15611.92 13947.53 12169.29GP margin 33.56 33.10 31.00 32.97 32.48
  89. 89. GP MARGIN 34 33.5 33 32.5 32 31.5 GP MARGIN 31 30.5 30 29.5 2011 2010 2009 2008 2007Interpretation : The gross profit margin of the company has rised from 2007 but it isless if in comparison with the rise in net sales.These may be due to various reasons.
  90. 90. RATIO OF INDIVIDUAL COST AND EXPENSES TO SALES• Raw materials consumed (%) = raw materials consumed * 100/ Net sales March March March March March 2011 2010 2009 2008 2007 Net sales 21167.58 18153.19 15611.92 13947.53 12169.29 Raw 8126.50 7007.26 6446.78 6016.70 5276.53 material Raw 38.39 38.6 41.29 43.13 43.35 material consumed
  91. 91. Raw material consumed444342414039 Raw material consumed38373635 2011 2010 2009 2008 2007 Interpretation : There is a decline in the ratio as compared to 2007 which suggest that the consumption of raw material has decreased over a period of time.
  92. 92. OTHER INCOME TO PBT• Other income to PBT (%) = Other income*100/PBT March 2011 March 2010 March 2009 March 2008 March 2007 Other income 818.84 614.74 534.93 610.90 360.76 PBT 7268.16 6015.31 4825.74 4571.77 4049.06 Ratio 11.26 10.21 11.1 13.36 8.90
  93. 93. other income to pbt 16 14 12 10 8 other income to pbt 6 4 2 0 2011 2010 2009 2008 2007Interpretation : The ratio of other income to PBT has rised in the current year.Theanalysis helps in knowing that what is the quality of income.
  94. 94. P/E RATIO• It measures as to how many times an equity share is priced in the stock market in relation to its EPS. P/E = market price of equity share/EPS March 2011 March 2010 March 2009 March 2008 March 2007 Mkt price of 181.45 131.58 92.4 103.18 75.20 equity shares EPS 6.44 10.63 8.64 8.27 7.37 P/E 28.17 13.15 10.69 12.4 10.9
  95. 95. P/E 30 25 20 15 P/E 10 5 0 2011 2010 2009 2008 2007Interpretation : Drastic rise in the P/E ratio as compared to previous years.This ismainly due to rise in the closing price of 3/2011 in the BSE
  96. 96. MARKET PRICE TO NAV• Market price to NAV = market price of equity share/NAV March 2011 March 2010 March 2009 March 2008 March 2007Closing mkt 181.45 131.58 92.4 103.18 75.20priceNAV 20.61 36.83 36.39 31.99 28.29Ratio 8.8 3.57 2.53 3.22 2.65
  97. 97. Mkt price to NAV 10 9 8 7 6 5 Mkt price to NAV 4 3 2 1 0 2011 2010 2009 2008 2007Interpretation : This ratio gives company the opportunity to the company to buy back itsown shares.There is a huge rise as compared to previous years in 2011.This are good signs forthe company.
  98. 98. MARKET CAPITALIZATION• It measures the total market value of the number of equity shares of a company outstanding.• Market capitalization = No of equity shares O/S * Market price March 2011 March 2010 March 2009 March 2008 March 2007Closing mkt 181.45 131.58 92.4 103.18 75.20priceEquity shares 773.81 381.82 377.74 376.86 376.22Market cap 140407.82 50239.87 34903.1 38884.4 28291.7
  99. 99. market cap160000140000120000100000 80000 market cap 60000 40000 20000 0 2011 2010 2009 2008 2007
  100. 100. CASH FLOW STATEMENT ANALYSIS
  101. 101. Cash Flow From Operating Activity• Cash outflow of ITC Ltd during 2007-2008 had been contributed by operating activities.• As comparison of 2007-08 cash is inflow in 2009-10.• Here in 2008 depreciation is less as compared to 2009 means company production is less than 2009 because depreciation is more means more machine used. Here in 2009 depreciation is more as compared to 2008 means company produce more goods in 2009 as compared to 2008.• In 2009 highest depreciation means machine is used for the production and highest production is done.
  102. 102. CONT…• Here interest and finance charges is more as compared to 2008 in 2009 means more cash outflow in 2008 as compared 2009. In 2008 financing charges and interest is more than the 2009 means more cash inflow in 2008.• Profit on sale of current investment is lower in 2008 than 2009. Inventories are raw material and finished good for the company. In 2008 it is more as compared to 2009.• Sundry debtors increase in 2008 compared to all years, its good sign of company in 2008, means company has more credit.• Overall operating activities in 2009 is bad and in 2008, it is favorable cash position so company has to improve its condition for future growth after 2009.
  103. 103. Cash Flow From Investing Activity• This indicates ITC is purchasing more fixed asset in 2008 It is an indication of not expanding business. Fixed assets are income producing assets, which are expected to produce higher future revenues. It try to be stable• In 2009 company sold fixed asset it shows company is in decline position.• Purchase of long term investment is higer in 2009 as compared to 2009 and current investment also hiher than 2008.
  104. 104. Cash Flow From Financial Activity• Here in 2008 and 2009 issued share capital means higher valuation in capital market and purchase its own share so if market increase they get profit from that.• Repayment long term borrowing loans is less in 2008 as compared to 2009 means less payment done in 2009 as compared to 2008.• Here interest paid on loans is less in 2008 as compared to 2009 means company paid less money in 2009 as compared 2008.• In these years company financial position is not good but compare to 2008 it increase. In 2009 cash inflow is good and it is in favorable position.
  105. 105. CONCLUSION• From analysis of profit and loss and balance sheet of the company it is evident that the company has gained profit and its growth is increasing and net profit remains stable for 5 year.• We can observe that company is in stable position as its liabilities decreases, and against it sales turnover and profit increases. So if company continues with the same position in near future it may not go for insolvency.
  106. 106.

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