Project report on Financial Statement Analysis and interpretation of A Company

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PROJECT REPORT
SUMMER TRAINING
ON
A FINANCIAL STATEMENT ANALYSIS AND INTERPRETATION
OF C.B ENTERPRISES
S.D. GUPTA & COMPANY
FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF
BACHELOR OF COMMERCE
UMDER THE SUPERVISION OF UNDER THE SUPERVISION OF
Mrs. Unnati Jadaun CA Shobhit Kumar
SUBMITTED BY
…………
B.com (2015)
Enrolment No. 20130544
INSTITUTE OF BUSINESS MANAGEMENT,
MANGALAYATAN UNIVERSITY,
33rd KM STONE, ALIGARH MATHURA HIGHWAY,
BESWAN ALIGARH

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CERTIFICATE OF THE SUPERVISOR
This is to certify that the work entitled A Financial statement analysis & interpretation of C.B.
ENTERPRISES is a piece of SIP research work done by Ms. Pinkey Rana under my guidance
and supervision for the degree of B.COM (Hons.) from Mangalayatan University Aligarh. I
certify that the candidate has put 45 days in industry training at S.D.GUPTA & COMPANY.
To the best knowledge and belief the report:
(i) Embodies the work of the candidate himself.
(ii) Has duly been completed.
(iii) Fulfills the requirement of the ordinance relating to the B.COM (Hons.) degree of the
University and
(iv) Up to the standard both in respect of contents and language for being referred to the
examiner.
Signature of the Supervisor
Date

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ACKNOWLEDGEMENT
"I have taken efforts in this internship. However, it would not have been possible without the
kind support and help of many individuals and organizations. I would like to extend my sincere
thanks to all of them.
I am highly indebted to Mrs. Unnati Jadaun for their guidance and constant supervision as well
as for providing necessary information regarding the internship & also for their support in
completing the internship.
I would like to express my gratitude towards my parents & member of S.D.GUPTA &
COMPANY for their kind co-operation and encouragement which help me in completion of this
internship.
I would like to express my special gratitude and thanks to CA Shobhit Kumar for giving me such
attention and time.

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PREFACE
This Project Report has been prepared in partial fulfillment of the requirement for the subject:
the Summer Internship programme on the topic A Financial statement analysis and interpretation
of C.B ENTERPRISES in B.COM (HONS.) 4th Sem. in the academic year 2014-2015.
For preparing the Project Report, I have completed my Internship from S.D.GUPTA &
COMPANY under the CA Shobhit Kumar during the suggested duration for the period of 45
days to enhance my knowledge. The blend of learning and knowledge acquired during my Summer
Internship atthe company is presented in this Project Report.
The rationale behind doingSummer Internship and preparing the project report is to studyA FinancialStatement
Analysisand Interpretation, what is company, what isFinancialstatement, whyAnalysis ofstatement is necessary
for a company, ratio analysis and how does it help to get liquidity position liquidity position and how does it
helpful of Investors for taking investing decision and Use oftally for maintain company account.

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ABSTRACT
Financial statements are formal record of the financial activities of a business, person or other
entity and provide an overview of a business or person’s financial condition in both short and
long term. They give an accurate picture of a company’s condition and operating results in a
condensed form. Financial statements are used as a management tool primarily by company
executive and investor’s in assessing the overall position and operating results of the company.
Analysis and Interpretation of financial statements help in determining the liquidity position,
long term solvency, financial viability and profitability of a firm. Ratio analysis shows whether
the company is improving or deteriorating in past years. Moreover, comparison of different
aspects of all the firms can be done effectively with this. It helps the clients to decide in which
firm the risk is less or in which one they should invest so that maximum benefit can be earned.
Industries are capital intensive; hence a lot of money is invested in it. So before investing in
companies one has to carefully study its financial condition and worthiness. An attempt has been
carried out in this project to analyze and interpret the financial statements of a company.
OBJACTIVE:
 To understand, analyze and interpret the basic concepts of financial statements of
different mining companies.
 Interpretation of financial ratios and their significance.
 Use of Tally 9.0 package for the analysis and interpretation of financial statements of
mining companies.
This project mainly focuses in detail the basic types of financial statements of different
companies and calculation of financial ratios. Ratio analysis of C.B.ENTERPRISES was done.
Tally 9.0 was used for preparation of balance sheet, profit & loss statements and estimation of
few financial ratios of selected companies. Profit & Loss Statements of companies were not
calculated as Tally 9.0 has limitations in processing the data that was available. However, only

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three ratios viz. current ratio, quick ratio and debt-equity ratio were calculated. An advanced
version can be developed for calculation of profit & loss statements and other financial ratios.
From ratio analysis of Balance Sheet and P & L Statement of C.B.ENTERPRISES of 2013-15 it
was concluded that liquidity position of the company is good. Current ratio, debt-equity ratio,
quick ratio, net profit margin, operating profit margin, gross profit margin, return on assets,
return on investments and return on capital employed were found to be unacceptable.
In this project, comparison of different ratios viz. current ratio, debt-equity ratio, net profit
margin and return on investment of all the above e companies has been done for the period 2013-
15.It was observed that current ratio of C.B.ENTERPRISES was always more than 1 from 2013-
15which indicates that liquidity position of the company was good.
Debt-Equity ratio of C.B.ENTERPRISE increased in 2013-15 which the debts have been cleared.
Return on Investment of C.B.ENTERPRISES increased from 44.20% to 48.72% in Two years.

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CONTENTS
Sl. No. Title Page No.
Chapter -01 INTODUCTION
1.1 S.D.GUPTA & COMPANY 14
1.2 A Financial Statement Analysis and Interpretation 14
1.3 Objectives 15
Chapter-02 FINANCIAL STATEMENTS 16
2.1 Balance Sheet 17
2.1.1 Format of Balance Sheet 18
2.1.2 Contents of Balance Sheet 20
2.2 Profit and loss statements 25
2.2.1 Format of Profit and Loss Statement 26
2.2.2 Contents of Profit and Loss Statement 27
2.3 FINANCIAL RATIOS
2.3.1 Objectives 29
2.3.2 Financial Ratios And Their Interpretation 30
Chapter-03 FINANCIAL RATIO ANALYSIS: CASE STUDY
3.1 Ratio Analysis of C.B ENTERPRISES
3.1.1 Balance sheet of C.B.ENTERPRISES for 2014 39
3.1.2 Balance sheet of C.B.ENTERPRISES for 2015 40
3.1.3 Profit & Loss Statement for 2014 42
3.1.4 Profit & Loss Statement for 2015 44
3.1.5 Ratio Analysis for 2014 46
3.1.6 Ratio Analysis for 2015 50
3.1.7 Summary for Balance sheet and profit & loss statement 53
3.2 RATIO ANALYSIS USING TALLY 9.0 54

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3.2.1 Balance Sheet and Ratio Analysis for 2014 55
3.2.2 Balance Sheet and Ratio Analysis for 2015 56
Chapter-04 VARIATION OF FINACIAL RATIOS
S.B ENTERPRISES 57
Chapter-05 COMPRATIVE STATEMENT
5.1 Income Statement 61
5.2 Balance Sheet 62
FINDINGS 63
CONCLUSION 64
RECOMMENDATIONS 66
LIMITATIONS 68
BIBLIOGRAPHY 69

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LIST OF TABLES
Sl. No. Title Page No.
Table2.1 Balance Sheet Statement 18
Table2.2 Profit & Loss Statement 26
Table2.3 Different Financial Ratio 30
Table3.1 Balance Sheet of C.B ENTERPRISES,2014 39
Table3.2 Balance Sheet of C.B ENTERPRISES,2015 40
Table3.2 Profit & Loss Statement of C.B ENTERPRISES ,2014 42
Table3.3 Profit & Loss Statement of C.B ENTERPRISES. 2015 44
Table3.4 Analysis of Financial Ratio for 14 46
Table3.5 Analysis of Financial Ratio for 15 50
Table3.7 Summary of Balance Sheet 53
Table3.8 Summary of Profit & Loss Statement 54
Table5.1 Comparative Income Statement 61
Table5.2 Comparative Balance Sheet 62

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LIST OF FIGURES
Fig.3.1 Balance Sheet,2014 55
Fig.3.2 Ratio Analysis of C.B.ENTERPRISES for 2014 55
Fig.3.3 Balance Sheet,2015 56
Fig.3.4 Ratio Analysis of C.B ENTERPRISES for 2015 56
Fig.4.1 Current Ratio 57
Fig.4.2 Working Capital Ratio 57
Fig.4.3 Quick Ratio 58
Fig.4.4 Debt- equity Ratio 58
Fig.4.5 Inventory Turnover Ratio 58
Fig.4.6 Return On Assets 59
Fig.4.7 Return on Investment 59
Fig.4.8 Gross Profit Ratio 59
Fig.4.9 Net Profit Ratio 60
Fig.4.10 Return On Working Capital 60
Fig.4.11 Operating CostRatio 60

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EXECUTIVE SUMMARY
Subject Matter: This Project report provides an analysis and interpretation of the year 2013-14
and 2014-15 profitability, liquidity and financial stability of C.B.ENTERPRISES.
Methods of Analysis: Methods of analysis include horizontal and vertical analyses as well as
ratios such as Debt, Current and Quick ratios. Other calculations include rates of return on
Shareholders’ Equity and Total Assets and earnings before interest & Tax to name a few. Many
other calculation of can be found in this project.
Findings: Results of data analyzed show that all ratios are below industry averages. In particular,
comparative performance is poor in the areas of profit margins, liquidity, credit control, and
inventory management.
 Assets have decreasing due to investment is decreasing.
 Liquidity Position is good.
 Purchase has decreased by 37.58%
 COGS has decreased by 46.17%
 Sales have decreased by 29.47%
 Gross Profit has decreased by 45.79%
 Net profit has decreased by 33.22%
Conclusion: The report finds the prospects of the company in its current position are not
positive. The major areas of weakness require further investigation and remedial action by
management.
Recommendations: Recommendations discussed include:
 Improving the average collection period for accounts receivable·
 Improving/increasing inventory turnover·

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 Reducing prepayments and perhaps increasing inventory levels.
 Increase in purchase and Production activity.
Limitations of the report: three problems involved in such report are:
a) That firms use different accounting principles and methods.
b) That it is often difficult to define what industry and firm is really a part of and
c) That accounting principles varies among countries

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CHAPTER- 01
INTRODUCTION
1.1S.D.GUPTA & COMPANY: S.D. GUPTA & COMPANY was formed on May 2,
2015 in Greater Noida by 2 directors CA Shobhit Kumar and CA Deepali Gupta. It is
registered under the Act, CA Regulation Act. 1949 The Head Office is in GR. Noida and has
its branch in Mumbai also. They become a CA in Jan 19, 2013. CA Shobhit Kumar and CA
Deepali Gupta open their offices respective names- SHOBHIT KUMAR & ASSOCIATE in
Jun 7, 2013 and DEEPALI GUPTA & COMPANIES in Jun 25, 2013 under the Act, CA
Regulation Act 1949. After that, an agreement was signed between both of them and they
Opened S.D GUPTA & COMPANY on May2, 2015 under the regulation act,
1.2 A FINANCIAL STAMENT ANALYSIS & INTERPRETATION:
Financial statements are records that provide an indication of the organization’s financial status.
It quantitatively describes the financial health of the company. It helps in the evaluation of
company’s prospects and risks for the purpose of making business decisions. The objective of
financial statements is to provide information about the financial position, performance and
changes in financial position of an enterprise that is useful to a wide range of users in making
economic decisions. Financial statements should be understandable, relevant, reliable and
comparable. They give an accurate picture of a company’s condition and operating results in a
condensed form. Reported assets, liabilities and equity are directly related to an organization's
financial position whereas reported income and expenses are directly related to an organization's
financial performance. Analysis and interpretation of financial statements helps in determining
the liquidity position, long term solvency, financial viability, profitability and soundness of a
firm. There are four basic types of financial statements: balance sheet, income statements, cash
flow statements, and statements of retained earnings.

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The analysis of financial statement is a process of evaluating the relationship between
component parts of financial statement to obtain a better understanding of firm financial position.
Analysis is a process of critically examining the accounting information given in financial
statements. For the purpose of analysis, individual items are studied; their interrelationship with
other related figures is established.
Thus analysis of financial statement refer to treatment of information contain in financial
statement in a way so as to afford a full diagnosis of the profitably and financial position of the
firm concern. An attempt has been carried out in this project to analyze and interpret the
financial statements of C.B ENTERPRISES.
1.3 OBJECTIVE
 To understand, analyze and interpret the basic concepts of financial statements of a
company.
 Interpretation of financial ratios and their significance.
 Use of Tally 9.0 package for the analysis and interpretation of financial statements of C.B
ENTERPRISES.
 To know about Liquidity Position
 To Know about Long- Term Solvency
 To Know about Operating Efficiency
 To know about Over-All Profitability
 To Know About Inter- firm Comparison
This project mainly focuses in detail the basic types of financial statements of C.B
ENTERPRISES and calculation of financial ratios. Ratio analysis of C.B ENTRPRISES was
done.

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CHAPTER -02
FINANCIAL STATEMENTS
Financial statements (or financial reports) are formal records of the financial activities of a
business, person, or other entity. Financial statements provide an overview of a business or
person's financial condition in both short and long term. All the relevant financial information of
a business enterprise, presented in a structured manner and in a form easy to understand is called
the financial statements.
The analysis of financial statement is a process of evaluating the relationship between
component parts of financial statement to obtain a better understanding of firm financial
position.
A complete set of financial statement comprises:
1) A statement of financial position as at the end of the period:
2) A statement of comprehensive income for the period;
3) A statement of changes in equity for the period:
4) A statement of cash flow for the period.
5) Notes of Account comprising a summary of significant accounting policies and other
explanatory information.
There are four basic financial statements:
1. Balance sheet: It is also referred to as statement of financial position or condition,
reports on a company's assets, liabilities, and ownership equity as of a given

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point in time. The Balance Sheet shows the health of a business from day one to the date
on the balance sheet.
2. Income statement: It is also referred to as Profit and Loss statement (or "P&L"), reports
on a company's income, expenses, and profits over a period of time. Profit & Loss
account provide information on the operation of the enterprise. These include sale and the
various expenses incurred during the processing state.
The income statement shows a presentation of the sales, the main expenses and the
resulting net income over the period. Net income is based on accounting principles which
gives guidance/rules on when to recognize revenues and expenses, whereas cash from
operating activities, obviously is cash based.
3. Statement of Retained Earnings: It explains the changes in a company's retained
earnings over the reporting period. The statement of retained earnings shows the
breakdown of retained earnings. Net income for the year is added to the beginning of year
balance, and dividends are subtracted. This results in the end of year balance for retained
earnings.
4. Cash Flow Statement: It reports on a company's cash flow activities, particularly its
operating, investing and financing activities. The statement of cash flows the ins and outs
of cash during the reporting period. The statement of cash flows takes aspects of the
income statement and balance sheet and kind of crams them together to show cash
sources and uses for the period.
2.1 BALANCE SHEET
In financial accounting, a balance sheet or statement of financial position is a summary of a
person's or organization's balances. A balance sheet is often described as a snapshot of a
company's financial condition. It summarizes a company's assets, liabilities and shareholders'
equity at a specific point in time. These three balance sheet segments give investors an idea as to
what the company owns and owes, as well as the amount invested by the shareholders. Of the
four basic financial statements, the balance sheet is the only statement which applies to a single
point in time.

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A company balance sheet has three parts: assets, liabilities and ownership equity. The main
categories of assets are usually listed first and are followed by the liabilities. The difference
between the assets and the liabilities is known as equity or the net assets or the net worth or
capital of the company. It's called a balance sheet because the two sides balance out. A typical
format of the balance sheet has been given in Table 2.1. It works on the following formula:
Assets = Liabilities + Shareholders' Equity
2.1.1 FORMAT OF BALANCE SHEET
Table 2.1: Balance Sheet of C.B.ENTERPRISES
LIABILITIES
1.Share Capital
Equity Share Capital
2. Reserves & surpluses
Capital Reserve
General Reserve
Security Premium Account
Capital Redemption Reserve
3. Secured Loans
Debentures
Loan from Bank
Long Term Loan
Other Secured Loans
4.Unsecured Loans
Fixed Deposit
Short Term Loans

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Other Loans
5.Current Liabilities & Provisions
A) Current Liabilities
Bills Payable
Sundry Creditors
Bank Overdraft
Other Liabilities (if any)
B) Provisions
Provision for Tax
Proposed Dividend
Other Provision
TOTAL
ASSETS
1.Fixed Assets
Goodwill
Land
Building
Leaseholds
Plant & Machinery
Furniture
Trade marks
Patents
Vehicle
2.Investment
3.Current Assets, Loan and Advances
A) Current Assets
Sundry Debtors

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Bills Receivables
Closing Stock
Interest on Investment
Cash at Bank
Cash on Hand
Securities Deposit
Fixed Deposit with Banks
B) Loans and Advances
Prepaid Expenses
Tax Paid in Advance
Advances Paid
4.Miscellaneous Expenditure
Preliminary Expenses
Revenue Expenditures
Discount Allowed
5. Profit & Loss account
TOTAL
2.1.2 CONTENTS OF BALANCE SHEET
(A) Assets
In business and accounting, assets are economic resources owned by business or company. Any
property or object of value that one possesses, usually considered as applicable to the payment of
one's debts is considered an asset. Simplistically stated, assets are things of value that can be
readily converted into cash.

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The balance sheet of a firm records the monetary value of the assets owned by the firm. It is
money and other valuables belonging to an individual or business.
Types of Assets
There is two major type of assets:
· Tangible assets
· Intangible assets
Tangible Assets
Tangible assets are those have a physical substance, such as equipment and real estate.
Intangible Assets
Intangible assets lack physical substance and usually are very hard to evaluate. Assets which do
not possess any material value.
They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc.
Types of Tangible Assets
1. Fixed Assets.
2. Current Assets.
1. Fixed Assets
This group includes land, buildings, machinery, vehicles, furniture, tools, and certain
wasting resources e.g., timberland and minerals.
It is also referred to as PPE (property, plant, and equipment), these are purchased for
continued and long-term use in earning profit in a business.
2. Current Assets
Current assets are cash and other assets expected to be converted to cash, sold, or
consumed either in a year or in the operating cycle. These assets are continually turned

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over in the course of a business during normal business activity. There are 5 major
items included into current assets:
 Cash and Cash Equivalents
It is the most liquid asset, which includes currency, deposit accounts, and negotiable
instruments (e.g., money orders, cheque, bank drafts).
 Short-term Investments
It includes securities bought and held for sale in the near future to generate income on
short term price differences (trading securities).
 Receivables
It is usually reported as net of allowance for uncollectable accounts.
 Inventory
The raw materials, work-in-process goods and completely finished goods that are
considered to be the portion of a business's assets that is ready or will be ready for sale.
 Prepaid Expenses
These are expenses paid in cash and recorded as assets before they are used or consumed
(a common example is insurance). The phrase net current assets (also called working
capital) are often used and refer to the total of current assets less the total of current
liabilities.
I. Gross Block
Gross block is the sum total of all assets of the company valued at their cost of acquisition. This
is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block
less accumulated depreciation on assets. Net block is actually what the asset are worth to the
company.
II. Capital Work in Progress
Work that has not been completed but has already incurred a capital investment from the
company. This is usually recorded as an asset on the balance sheet. Work in progress indicates

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any good that is not considered to be a final product, but must still be accounted for because
funds have been invested toward its production.
III. Investments
 Shares and Securities, such as bonds, common stock, or long-term notes
 Associate Companies
 Fixed deposits with banks/finance companies
 Investments in special funds (e.g., sinking funds or pension funds).
 Investments in fixed assets not used in operations (e.g., land held for sale).
Remark: While fixed deposits with banks are considered as fixed assets, the investments in
associate concerns are treated as non-current assets.
IV. Loans and Advances include
 House building advance
 Car, scooter, computer etc. advance
 Multipurpose advance
 Transfer travelling allowance advance
 Tour travelling allowance advance
 DRS payment.
V. Reserves
 Subsidy Received From The Govt.
 Development Rebate reserve
 Issue of Shares at Premium
 General Reserves
(B) Liability

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A liability is a debt assumed by a business entity as a result of its borrowing activities or other
fiscal obligations (such as funding pension plans for its employees). Liabilities are debts and
obligations of the business they represent creditors claim on business assets.
Types of Liabilities
Current Liabilities
Current liabilities are short-term financial obligations that are paid off within one year or one
current operating cycle. These liabilities are reasonably expected to be liquidated within a year. It
includes:
 Accrued expenses as wages, taxes, and interest payments not yet paid
 Accounts payable
 Short-term notes
 Cash dividends and
 Revenues collected in advance of actual delivery of goods or services.
Long-Term Liabilities
Liabilities that are not paid off within a year, or within a business's operating cycle, are known as
long-term or non-current liabilities. Such liabilities often involve large sums of money necessary
to undertake opening of a business, major expansion of a business, replace assets, ormake a
purchase of significant assets. These liabilities are reasonably expected not to be liquidated
within a year. It includes:
 Notes payable- debt issued to a single investor.
 Bonds payable – debt issued to general public or group of investors.
 Mortgages payable.
 Capital lease obligations – contract to pay rent for the use of plant, property or
equipments.
 deferred income taxes payable, and
 Pensions and other post-retirement benefits.

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Contingent Liabilities
A third kind of liability accrued by companies is known as a contingent liability. The term refers
to instances in which a company reports that there is a possible liability for an event, transaction,
or incident that has already taken place; the company, however, does not yet know whether a
financial drain on its resources will result. It also is often uncertain of the size of the financial
obligation or the exact time that the obligation might have to be paid.
Fixed Liability
The liability which is to be paid of at the time of dissolution of firm is called fixed liability.
Examples are Capital, Reserve and Surplus.
Secured Loans
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan, which then becomes a secured debt owed to the creditor who gives the
loan.
Unsecured Loans
An unsecured loan is a loan that is not backed by collateral. It is also known as signature loan
and personal loan. Unsecured loans are based solely upon the borrower's credit rating. An
unsecured loan is considered much cheaper and carries less risk to the borrower. However, when
an unsecured loan is granted, it does not necessarily have to be based on a credit score.
2.2 PROFIT & LOSS STATEMENT
Income statement, also called profit and loss statement (P&L) and Statement of Operations is
financial statement that summarizes the revenues, costs and expenses incurred during a specific
period of time - usually a fiscal quarter or year. These records provide information that shows the
ability of a company to generate profit by increasing revenue and reducing costs. The purpose of
the income statement is to show managers and investors whether the company made or lost
money during the period being reported. The important thing to remember about an income
statement is that it represents a period of time. This contrasts with the balance sheet, which

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represents a single moment in time. A typical format of the Profit & Loss Statement has been
given in Table 2.2.
2.2.1 FORMAT OF PROFIT & LOSS STATEMENT
Table 2.2: Profit & Loss Statement of C.B.ENTERPRISES
PARTICULARS Amount PARTICULARS Amount
Gross Profit(Transferred) Gross Profit(Transferred)
Office and Administration Exp: Interest received
Salaries Rent received
Rent Discount received
Postage & telegrams Dividend received
Office electric charges Bad debts recovered
Telephone charges Provision for discount on creditors
Printing and stationary Provision for discount on creditors
Selling and Distribution
Expenses:
Carriage outward
Advertisement
Salesmen's salaries
Commission
Insurance
Traveling expense
Bad debts
Packing expense

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Financial and Other Expenses:
Depreciation
Repair
Audit fee
Interest paid
Commission paid
Bank charges
Legal charges
Profit before Interest Net loss
Less- Net Interest
Profit before Tax
Less- Tax Payable
Profit after Tax
Less- Dividend
Retained Profit
2.2.2 CONTENTS OF PROFIT & LOSS STATEMENT
a. Revenue - Cash Inflows or other enhancements of assets of an entity during a period
from delivering or producing goods, rendering services, or other activities that constitute
the entity's ongoing major operations.
b. Expenses - Cash outflows or other using-up of assets or incurrence of liabilities during a
period from delivering or producing goods, rendering services, or carrying out other
activities that constitute the entity's ongoing major operations.
c. Turnover
The main source of income for a company is its turnover, primarily comprised of sales of
its products and services to third-party customers.
d. Sales

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Sales are normally accounted for when goods or services are delivered and invoiced, and
accepted by the customer, even if payment is not received until some time later, even in a
subsequent trading period.
e. Cost of Sales (COS)
The sum of direct costs of goods sold plus any manufacturing expenses relating to the sales (or
turnover) is termed cost of sales, or production cost of sales, or cost of goods sold. These costs
include:
 Costs of raw materials stocks
 Costs of inward-bound freight paid by the company
 Packaging costs
 Direct production salaries and wages
 Production expenses, including depreciation of trading-related fixed assets.
(f) Other Operating Expenses
These are not directly related to the production process, but contributing to the activity of the
company, there are further costs that are termed ‘other operating expenses’. These comprises of
costs like:
 Distribution costs and selling costs,
 Administration costs, and
 Research and development costs (unless they relate to specific projects and the costs may
be deferred to future periods).
(g) Other Operating Income
Other operating income includes all other revenues that have not been included in other parts of
the profit and loss account. It does not include sales of goods or services, reported turnover, or
any sort of interest receivable, reported within the net interest category.

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(h) Gross Margin (or Gross Profit)
The difference between turnover, or sales, and COS is gross profit or gross margin. It needs to be
positive and large enough to at least cover all other expenses.
(i) Operating Profit (OP)
The operating profit is the net of all operating revenues and costs, regardless of the financial
structure of the company and whatever exceptional events occurred during the period that
resulted in exceptional costs. The profit earned from a firm's normal core business operations. It
is also known as Earnings before Interest and Tax (EBIT).
Operating Profit = Turnover - COS - other Operating Expenses + Other Operating Income
(j) Profit before Tax (PBT)
A profitability measure that looks at a company's profits before the company has to pay
corporate income tax. This measure deducts all expenses from revenue including interest
expenses and operating expenses, but it leaves out the payment of tax.
(k) Profit after Tax (PAT)
PAT, or net profit, is the profit on ordinary activities after tax. The final charge that a company
has to suffer, provided it has made sufficient profits, is therefore corporate taxation.
PAT = PBT - Corporation Tax
(l) Retained Profit
The retained profit for the year is what is left on the profit and loss account after deducting
dividends for the year. The balance on the profit and loss account forms part of the capital (or
equity, or shareholders’ funds) of the company.

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2.3 FINANCIAL RATIOS
2.3.1 OBJECTIVES OF CALCULATION OF RATIO ANALYSIS
The importance of ratio analysis lies in the fact that it presents data on a comparative basis and
enables the drawing of inferences regarding the performance of the firm. Ratio analysis helps in
concluding the following aspects:
To know about Liquidity Position:
Ratio analysis helps in determining the liquidity position of the firm. A firm can be said to have
the ability to meet its current obligations when they become due. It is measured with the help of
liquidity ratios.
To Know about Long- Term Solvency:
Ratio analysis helps in assessing the long term financial viability of a firm. Long- term solvency
measured by leverage/capital structure and profitability ratios.
To Know about Operating Efficiency:
Ratio analysis determines the degree of efficiency of management and utilization of assets. It is
measured by the activity ratios.
To know about Over-All Profitability:
The management of the firm is concerned about the overall profitability of the firm which
ensures a reasonable return to its owners and optimum utilization of its assets. This is possible if
an integrated view is taken and all the ratios are considered together.
To Know About Inter- firm Comparison:
Ratio analysis helps in comparing the various aspects of one firm with the other.
2.3.2 FINANCIAL RATIOS AND THEIR INTERPRETATION

31 | P a g e
Table 2.3: Different FinancialRatios
Sl. No. CATEGORY TYPE OF RATIO ITNERPRETATION
1. Liquidity Ratio
Net Working Capital =
Current assets-current liabilities
 It measures the
liquidity of a firm.
Current ratio =
Current Assets
Current Liabilities
 It measures the short
term liquidity of a firm.
A firm with a higher
ratio has better
liquidity.
 A ratio of 2:1 is
considered safe.
Acid test or Quick ratio =
Quick assets
Current Liabilities
 It measures the
liquidity position of a
firm.
considered safe.
2. Turnover Ratio
Inventory Turnover ratio =
Costs of goods sold
Average inventory
 This ratio indicates how
fast inventory is sold.
 A firm with a higher
ratio has better
liquidity.
Debtor Turnover ratio =
Net credit sales
Average debtors
 This ratio measures
how fast debts are
collected.
 A high ratio indicates
shorter time lag

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between credit sales
and cash collection.
Creditor’s Turnover ratio =
Net credit purchases
Average Creditors
 A high ratio shows
that accounts are to
be settled rapidly
3. Capital
Structure Ratios
Debt-Equity ratio =
Long term debt
Shareholder’s Equity
 This ratio indicates the
relative proportions of
debt and equity in
financing the assets of
a firm.
considered safe.
Debt to Total capital ratio =
Long term debt
Permanent Capital
Or
Total debt
Permanent capital + Current
liabilities
Or
Total Shareholder’s Equity
Total Assets
 It indicates what
proportion of the
permanent capital of a
firm consists of long-
term debt.
 A ratio 1:2 is
considered safe.
 It measures the share of
the total assets financed
by outside funds.
 A low ratio is desirable
for creditors.
 It shows what portion
of the total assets is

33 | P a g e
financed by the owners’
capital.
 A firm should neither
have a high ratio nor a
low ratio.
4. Coverage ratios
Interest Coverage =
Earnings before interest and tax
Interest

 A ratio used to
determine how easily a
company can pay on
outstanding debt.
 A ratio of more than 1.5
I satisfactory
Dividend Coverage =
Earnings after tax
Preference Dividend
 It measures the ability
of firm to pay dividend
on preference shares.
 A high ratio is better
for creditors.
Total Coverage ratio =
Earning before interests and tax
Total Fixed charges
 It shows the overall
ability of the firm to
fulfill the liabilities.
 A high ratio indicates
better ability.
5.
Profitability
ratios
Gross Profit margin =
Gross profit * 100
Sales
 It measures the profit in
relation to sales.
low ratio.
 It measures the net

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Net Profit margin =
Net Profit after tax before interest
Sales
Or
Net Profit after Tax and Interest
Sales
Or
Net profit after Tax and Interest
Sales
profit of a firm with
respect to sale.
low ratio.
6. Expenses ratios
Operating ratio =
Cost of Goods sold + other
expenses
 Operating ratio shows
the operational
efficiency of the
business.
 Lower operating ratio
shows higher operating
profit and vice versa .
sales
Cost of Goods sold ratio =
Cost of Goods sold
Sales
 It measures the cost of
goods sold per sale
Specific Expenses ratio =
Specific Expenses
Sales
 It measures the specific
expenses per sale.
7.
Return on
Investments
Return on Assets (ROA) =
Net Profit after Taxes * 100
Total Assets
Or
(Net Profit after Taxes +interest)
 It measures the
profitability of the total
funds per investment of
a firm.

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*100
Total Assets
Or
(Net profit after Taxes + Interest)
* 100
Tangible Assets
Or
(Net Profit after Taxes + Interest)
* 100
Total Assets
Or
* 100
Fixed Asset
Return on Capital Employed
(ROCE) =
(Net Profit after Taxes) * 100
total capital employed
Or
*100
 It measures profitability
of the firm with respect
to the total capital
employed.
 The higher the ratio, the
more efficient use of
capital employed.
Total Capital Employed

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Or
* 100
Total Capital Employed -
intangible assets
Return on Total Shareholders’
Equity =
Net Profit after Taxes * 100
Total shareholders’ equity
 It reveals how
profitably the owner’s
fund has been utilized
by the firm.
Return on Ordinary
shareholders equity =
Net profit after taxes and Pref.
dividend *100
 It determines whether
the firm has earned
satisfactory return for
its equity holders or
not.
Ordinary Shareholders’ Equity
8.
Shareholder’s
ratios
Earnings per Share (EPS) =
Net Profit of Equity holders
 It measures the profit
available to the equity
holders on a per share
basis.
Number of Ordinary Shares
Dividend per Share (DPS) =
Net profits after interest and
preference dividend paid to
ordinary shareholders
Number of ordinary shares
outstanding
 It is the net distributed
profit belonging to the
shareholders divided by
the number of ordinary
shares
 It shows what

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Dividend Payout ratio (D/P) =
Total Dividend To Equity holders
Total net profit of equity holders
Or
Dividend per Ordinary
Share Earnings per Share
percentage share of the
net profit after taxes
and preference dividend
is paid to the equity
holders.
 A high D/P ratio is
preferred from
investor’s point of
view.
Earnings per Yield =
Earnings per Share
Market Value per Share
 It shows the percentage
of each rupee invested
in the stock that was
earned by the company.
Dividend Yield =
Dividend per share
Market Value per share
 It shows how much a
company pays out in
dividends each year
relative to its share
price.
Price- Earnings ratio (P/E) =
Market value per Share
Earnings per Share
 It reflects the price
currently paid by the
market for each rupee
of EPS.
 Higher the ratio better it
is for owners
Earning Power =
Net Profit after taxes
Total Assets
 It measures the overall
profitability and
operational efficiency
of a firm
 It measures how

38 | P a g e
9. Activity Ratios Inventory turnover =
Sales
Closing Inventory
quickly inventory is
sold.
low ratio.
Raw Material turnover =
Cost of Raw Material used
Average Raw Material Inventory
Work in Progress turnover =
Cost of Goods manufactured
Average Work in process
inventory
Debtors turnover =
Cost of Goods manufactured
Average Work in Process
Inventory
 It shows how quickly
current assets that are
receivables or debtors
are converted to cash.
low ratio.
10.
Assets
Turnover
Ratios
Total Assets turnover =
Cost of Goods Sold
Total Assets
 It measures the
efficiency of a firm in
managing and utilizing
its assets.
 Higher the ratio, more
efficient is the firm in
utilizing its assets.
Fixed Assets turnover =
Cost of Goods Sold
Fixed Assets

39 | P a g e
Capital turnover =
Cost of Goods Sold
Capital Employed
Current Assets turnover =
Cost of Goods Sold
Current Assets
CHAPTER- 03
FINANCIAL RATIO ANALYSIS
The ratio analysis of C.B ENTERPRISES from 2012-14 has been carried out below.
3.1 RATIO ANALYSIS
3.1.1 Balance Sheet of C.B ENTERPRISES for 2014
Table 3.1: Balance Sheet of C.B.ENTERPRISES as at 31st Mar -2014
PARTICULARS Amount
Total
Amount
Source of Funds:
Capital Account 634,506.05
Sunil's Capital 875860.05
Less- Credit card HDFC 50,489.00
Donation 2,502.00
Drawings 109053
LIC 54,860.00

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3.1.2 Balance Sheet of C.B. ENTERPRISES for 2015
Table 3.2: Balance Sheet of C.B.ENTERPRISE as at 31st Mar -2015
School fees 24,450.00
Loans (Liability) 1851845.9
Bank od A/C 859142.95
Secured Loans 992702.95
Unsecured Loans
Current Liabilities 1,638,085.9
Provision 44,553.00
Sundry Creditors 1570805
Unregistered Tax Payable 65,940.00
less- Duties & Taxes 43,212.15
Profit & Loss A/C 0
Opening balance Current Period 502558.24
less- Transferred 502558.24
Total 4,124,437.8
Application of Funds:
Fixed Assets 1579196.65
Car 593850
Mobile 59,773.74
Motor Bike 31,181.65
Plant & Machinery 687189.75
Tata Ace 207201.51
Current Assets 2545241.15
Closing Stock 1035485
Loans & Advances (Assets) 53,073.00
Sundry Debtors 1425712.6
Cash in Hand 24869.00
Bank Accounts 6101.48
Total 4124437.8

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PARTICULARS Amount
Total
Amount
Source of Funds:
Capital Account 353,181.05
Sunil's Capital 595406.05
Less- Credit card HDFC 12,500.00
Star Health Insurance 9,343.00
Drawings 181362
School fees 39,020.00
Loans (Liability) 1908532.9
Bank od A/C 920609.95
Secured Loans 837922.95
Unsecured Loans 150000
Current Liabilities 2,493,868.57
Provision 76,703.00
Sundry Creditors 2385328.5
Unregistered Tax Payable 65,940.00
less- Duties & Taxes 34,102.93
Profit & Loss A/C 3355599.45
Opening balance Current Period 3355599.45
Total 50,91,181.97
Application of Funds:
Fixed Assets 1,352,287.87
Car 504772.5
Mobile 53,842.29
26,504.40Motor Bike
LCD Monitor 6936
Tata Ace 176121.28
Current Assets 3738894.1

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Loans & Advances (Assets) 35,642.00
Total 5091181.97
3.1.3 Profit &loss
Table 3.3: Profit & Loss Statement as per the year
Ending of 31st Mar, 2014
Particulars Amount Amount
Trading Account:
Sales Account 5104025.95
Sales Ag. E Form 450887
Sales Ag. H Form 420469.5
Sales central Tax 5% 1701502
Sales Tax Invoice 5% 2531167.45
Direct Incomes 1566780
Work Contract Received 1566780
6670805.95
Cost of Sales 4358261.6
Opening Stock 343079
Add: Purchase Accounts 4068867.2
Less: Closing Stock 1035485
3376461.2
Direct Expenses 981800.4
Cartage Inward 342534
Job Work Paid
Power& Fuel Exp.
302586.4
336680
Gross Profit 2312544.35

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Income Statement:
Indirect Incomes 644.32
Cartage Outward
Interest 644.32
2313188.67
Indirect Exp. 1810630.43
Accounting Charges 15000
Advertising Exp. 16120
Audit Fees 10000
Bank Charges 12556.54
Business Promotion Exp. 15840
Commission Exp. 9680
Convince Exp. 71842
Depreciation 239417.59
Factory Rent 275000
Festival Exp. 77425
Interest on Tata Ace Loan 42290.94
Interest On C.C limit 85655.96
Interest On Term Loan 44465.7
Insurance 14832
Legal & Professional Charges 23000
Postage& Currier Exp. 1872
Printing & Stationary Exp. 12134
Repair & Maintenance Of Building 54670
Repair & Maintenance Exp. 43700.29
Salaries 412633
Short & Excess 0.66
Staff Welfare 56450
Telephone Exp. 41488.75
Traveling Exp. 65670

44 | P a g e
Vehicle Running & Maintenance 168886
Nett Profit: 502558.24
3.1.4 Profit & Loss Statement for 2015
Table 3.4: Profit & Loss Statement as per the year
Ending of 31st Mar, 2015
Particulars Amount Amount
Trading Account:
Sales Account 3599918
Sales Ag. D Form 139550
Sales Ag. E Form 667113
Sales Tax Invoice 5% 2793255
Direct Incomes
3599918
Cost of Sales 2346186.55
Opening Stock 1035485
Add: Purchase Accounts 2539552.55
Less: Closing Stock 1235091
2339946.55
Direct Expenses 6240
Cartage Inward 2210
Job Work Paid 4030
Gross Profit 1253731.45
Income Statement:
Indirect Incomes
1253731.45
Indirect Exp. 918132.03
Accounting Charges 13750

45 | P a g e
Advertising Exp. 9752
Audit Fees 12500
Bank Charges 10752
Business Promotion Exp. 7524
Cartage Outward (-)2187.75
Commission Exp. 6582
Company Insurance 14621
Convince Exp. 9850
Depreciation 238638.78
Donation (Charity) 1401
Factory Rent 120000
Festival Exp. 12580
Interest on Tata Ace Loan
Interest Aon VAT
20992
154
Interest On C.C limit 115379
Legal & Professional Charges 9852
Office Exp. 1880
Printing & Stationary Exp. 9782
Salaries 245864
Short & Excess (-)5
Staff Welfare 2356
Telephone Exp. 15710
Toll Tax (Octory) 180
Vehicle Running & Maintenance 40145
Weighting & Measurement 80
Nett Profit: 335599.42

46 | P a g e
3.1.5 Ratio analysis for 2014
Table 3.5: Analysis of Financial Ratios for 2014
Sl.
No.
RATIOS PARTICULARS VALUE REMARKS
1.
Working Capital =
Current assets-Current liabilities
Current Assets =
2545241.15
Current Liabilities =
1638085.90
907155.25 Liquidity position
is good.
2.
Current Ratio =
Current Assets
Current Liabilities
Current Assets =
2545241.15
1638085.90
1.55:1 It is safe.
3.
Liquid Assets
Liquid Liabilities
liquid Assets =
1509756.15
1638085.90
0.92:1 It is not good.
4.
Debt-Equity Ratio =
Long term debt
Capital A/C+ Net Profit
Long term debt
=1851845.90
Capital A/C =
634506.05
Net Profit= 502558.24
1.63:1 It is safe
5.
Return On Investment Ratio =
Net Profit*100
Capital a/c+ Net Profit
Net Profit
502558.24
Capital A/C
634506.05
44.20%
It is good

47 | P a g e
6.
Gross Profit Ratio =
Gross Profit * 100
Sales
Gross Profit=
2312544.35
Sales=
5104025.95
45.31% It is not satisfactory
7.
Net Profit Ratio =
Net Profit * 100
Sales
Net Profit
= 502558.24
Sales=
5104025.95
8.
Return on Assets Ratio =
Net Income*100
Fix. Assets+Net WorkingCapital
Net Income
502528.24
Fix. Assets=
1579196.65
Net Working Capital=
907155.25
20.21% It is not good
9.
Return on working capital =
Net Profit ∗ 100
Working Capital
Net profit=
502558.24
Net Working capital=
907155.25
55.40% It is good
10.
Cost of Goods Sold Ratio =
Cost of Goods Sold*100
Sales
Cost of goods sold=
4358261.6
Sales=
5104025.95
85.38 It is not satisfactory
11.
Operating Cost Ratio =
COGS+ Operating Exp.*100
Net Sales
COGS=
4358261.6
Operating Exp.=
1810630.43
Sales=
5104025.95
120.86 It is so high

48 | P a g e
 Liquid Assets = Total Current Assets – Inventory – Prepaid Exp.
= 2545241.15- 1035485
=1509756.15
 Liquid Liabilities = Current Liabilities – Bank Overdraft
= 1638085.90
 Long Term Debt = Secured Loans + Other Long Term liabilities
= 992702.95
 Shareholder Funds = Equity Share+ Pre. Share+ Profit+ General Reserve
= 875860.05+ 502558.24
= 1318418.29
12.
Fixed Assets turnover =
Sales a/c
Fixed Assets
Sales a/c=
5104025.95
Fixed Assets=
1579196.65
3.23
It is not safe
13.
Working Capital Turnover=
Sales a/c
working Capital
Sales=
5104025.95
Working Capital=
907155.25
5.63
It is safe
14.
Inventory Turnover=
Sales a/c
Closing stock
Sales=
5104025.95
Closing Stock=
1035485
4.93
It is not good

49 | P a g e
 Earnings before Interest & Tax (EBIT) OR Operating Profit =
Net Profit + Tax + Interest
= 502558.24+ 644.32
= 503202.56
 Operating Expenses = Financial Exp. + Administration Exp.+ Financial Exp.+ Sales
Operating & Distribution Exp.
= 981800.40
 Operating Cost= COGS – OPERATING EXP.
=4358261.6 – 981800.40
= 3376461.2
 Cost of Goods Sold = Opening Stock+ Purchase+ Direct Exp. – Closing Stock =
343079+ 4068867.2+ 981800.4- 1035485 = 4358261.6

50 | P a g e
3.1.6 Ratio analysis for 2015
Table 3.6: Analysis of Financial Ratios for 2015s
Sl.
No.
RATIOS PARTICULARS VALUE REMARKS
1.
Working Capital =
Current assets-Current liabilities
Current Assets =
3738894.1
2493868.57
1245025.53 Liquidity position
is good
2.
Current Ratio =
Current Assets
Current Liabilities
Current Assets =
3738894.1
2493868.57
1.50:1 It is safe
3.
Liquid Assets
Liquid Liabilities
liquid Assets =
2503803.1
2493868.57
1.00:1 It is good
4.
Debt-Equity Ratio =
Long term debt
Capital A/C+ Net Profit
Long term debt
= 1908532.90
Capital A/C =
353181.05
Net Profit=
335599.45
2.77:1 It is safe
5.
Return On Investment =
net Profit*100
Capital a/c + Net Profit
Net Profit=
335599.45
Capital a/c=
353181.05
48.72%
It is good

51 | P a g e
6.
Gross Profit Ratio =
Gross Profit * 100
Sales
Gross Profit=
1253731.45
Sales=
3599918
7.
Net Profit Ratio =
Net Profit * 100
Sales
Net Profit
= 335599.42
Sales=
3599918
8.
Return on Assets =
Net Income*100
Fix. Assets Net + Working
Capital
Net Income=
335599.45
Fix. Assets=
1352287.87
Working Capital=
1245025.53
12.92%
It is not good
9.
Return on working capital =
Net Profit ∗ 100
Working Capital
Net profit=
335599.45
Net Working capital=
1245025.53
26.96% It is not good
10.
Cost of Goods Sold Ratio =
Cost of Goods Sold*100
Sales
Cost of goods sold=
2346186.55
Sales=
3599918
65.17 It is not satisfactory
11.
Operating Cost Ratio =
COGS + Operating Exp.*100
Net Sales
COGS=
2346186.55
Operating Exp.=
918132.03
Sales=
3599918
90.67% It is so high
12. Fixed Assets turnover =
Sales a/c
Fixed Assets
Sales a/c=
3599918
Fixed Assets=
2.66
It is not safe

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1352287.87
13.
Working Capital Turnover=
Sales a/c
working Capital
Sales=
3599918
Working Capital=
1245025.53
2.89
It is safe
14.
Inventory Turnover=
Sales a/c
Closing stock
Sales=
3599918
Closing Stock=
1235091
2.91
It is not good
 Liquid Assets = Total Current Assets – Inventory – Prepaid Exp.
= 3738894.1- 1235091
= 2503803.1
 Liquid Liabilities = Current Liabilities – Bank Overdraft
= 2493868.57
 Long Term Debt = Secured Loans + Other Long Term liabilities
= 837922.95
 Shareholder Funds = Equity Share+ Pre. Share+ Profit+ General Reserve
= 595406.05+ 3355599.45
= 629005.5

53 | P a g e
 Earnings before Interest & Tax (EBIT) OR Operating Profit =
Net Profit + Tax + Interest
= 3355599.45
 Operating Expenses = Financial Exp. + Administration Exp.+ Financial Exp.+ Sales
Operating & Distribution Exp.
= 918132.03
 Cost of Goods Sold = Opening Stock+ Purchase+ Direct Exp. – Closing Stock =
= 1035485+ 2539552.55+ 6240- 1235091
= 2346186.55
3.1.7 Summary for Balance Sheetand Profit & Loss Statement
Table 3.7: Summary of Balance Sheet
PARTICULARS 2014 2015 Remarks
Current Assets 2545241.15 3738894.10 Short term liquidity available is very
less.
Fixed Assets 1579196.65 1352287.87 Fixed Assets have decreased due to
decrease in investment.
Current Liabilities 1638085.85 2493868.57 Substantial increase in liabilities.
Liquidity position is not good.
Long Term Liabilities 992702.95 837922.95 Debts have decreased because of less
investment

54 | P a g e
Table 3.8: Summary of Profit & Loss Statement
PARTICULARS 2014 2015 Remarks
Purchase 4068867.20 2539552.55 Purchase has decreased by 37.58%
Costof Goods Sold 4358261.60 2346186.55 COGS has decreased by 46.17%
Sale 5104025.9 3599918 Sales have decreased by 29.47%
Gross Profit 2312544.35 1253731.45 Gross Profit has decreased by 45.79%
Net Profit 502558.24 335599.45 Net profit has decreased by 33.22%
3.2 RATIO ANALYSIS USING TALLY 9.0
Tally 9.0 manufactured by Tally Solutions FZ LLC, Dubai, and Tally India Private Limited. It
facilitates smooth and error free Excise Accounting for manufacturers and dealers engaged in
manufacturing or trading of excisable goods. It is mainly used for the calculation of excise
duties, taxes and other transactions. In this project Tally 9.0 is used to compute the balance sheet
and the financial ratios of companies that can be obtained from it. However Tally 9.0 has certain
limitations. It has been used to calculate only current ratio, quick ratio and debt – equity ratio. In
future the version can be modified to calculate other ratios.
Preparation of balance sheet and ratio analysis of C.B ENTERPRISES from 2013-15 using
Tally 9.0 has been carried out below:

55 | P a g e
3.2.1 C.B. ENTERPRISES
3.2.1 Balance Sheet and Ratio Analysis For 2014
Fig. 3.1: Preparation of Balance Sheet of C.B.ENTERPRISES
Fig. 3.2: Ratio Analysis of C.B.ENTERPRISES

56 | P a g e
3.2.2 Balance Sheet and Ratio Analysis For 2015
Fig.3.3: Preparation of Balance Sheet of C.B.ENTERPRISES OF 2015
Fig. 3.4: Ratio Analysis of C.B.ENTERPRISES OF 2015

57 | P a g e
CHAPTER -04
VARIATION OF FINANCIAL RATIOS
The variation of different financial ratios from 2013-15 of C.B.ENTERPRISES has been shown
below:
4.1 C.B.ENTERPRISES
Fig.4.1: Current Ratio
Fig.4.2: Working Capital
1 2
Series1 907155.25 1245025.53
0
200000
400000
600000
800000
1000000
1200000
1400000
Working Capital
1 2
Series1 1.55 1.5
1.47
1.48
1.49
1.5
1.51
1.52
1.53
1.54
1.55
1.56
Current Ratio

58 | P a g e
Fig.4.3: Quick Ratio
Fig.4.4: Debt-Equity Ratio
Fig.4.5: Inventory Turnover Ratio
1 2
Series1 1.63 2.77
0
0.5
1
1.5
2
2.5
3
Debt - Equity Ratio
1 2
Series1 0.92 1
0.88
0.9
0.92
0.94
0.96
0.98
1
1.02
Quick Ratio
1 2
Series1 4.93 2.91
0
1
2
3
4
5
6
Inventory Turnover Ratio

59 | P a g e
Fig.4.6: Return on Assets
Fig.4.7: Return on Investment
Fig.4.8: Gross Profit Ratio
1 2
Series1 20.21% 12.92%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Return on Assets
1 2
Series1 44.20% 48.72%
41.00%
42.00%
43.00%
44.00%
45.00%
46.00%
47.00%
48.00%
49.00%
50.00%
Return on Investment
1 2
Series1 45.31% 34.83%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
Gross Profit Ratio

60 | P a g e
Fig.4.9: Net Profit Ratio
Fig.4.10: Return on Working Capital
Fig.4.11: Operating Cost Ratio
1 2
Series1 55.40% 26.96%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Return on Working Capital
1 2
Series1 120.86% 90.67%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
Operating Cost Ratio
1 2
Series1 9.84% 9.32%
9.00%
9.20%
9.40%
9.60%
9.80%
10.00%
Net Profit Ratio

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CHAPTER-05
COMPRATIVE STATEMENTS
Table: 5.1 COMPARATIVE INCOME STATEMENT
Particulars Previous
Year
Current
Year
Absolute
Change
Percentage
change
Sales
Less- Cost of Goods Sold
5104025.95
4358261.6
3599918
2346186.55
-1504107.95
-2012075.05
-29.47%
-46.17%
Operating Profit
Add- Other Income
745764.35
1566780
1253731.45
-
507967.1
-1566780
68.11%
-100%
Gross Profit
Less-Operating Exp.
2312544.35
1810630.43
1253731.45
918132.03
-1058812.9
-63667.97
-45.79%
-3.52%
Earnings Before Interest & Tax
Add- Interest
501913.92
644.32
335599.45
0
-167603.11
-644.32
-33.39%
-100%
Profit 502558.24 335599.45 -166958.79 -33.22%
 Percentage Change = Absolute Change
Figures of the previous year

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Table: 5.2 Comparative Balance SheetofC.B. ENTERPRISES
Particulars
Pervious
Year
Current
Year
Absolute
Change
Percentage
Change
Car 593850 504772.5 (89077.5) 15%
Mobile 59773.74
53842.29 (5931.45) 9.92%
Motor Bike 31181.65
26504.40 (4677.25) 15%
584111.4 (103078.35) 14.99%
LCD Monitor -
6936 - -
Tata Ace 207201.51
176121.28 (148919.77) 71.87%
1235091 199606 19.28%
Loans & Advances (Assets) 53073
35642 (17431) 34.81%
917360.62 (508351.98) 35.66%
1544699 1519830 61.11%
6101.48 - -
Total
4124437.85
5091181.97 966744.12 23.43%
Capital Account 634506.05 353,181.05 281325 44.33%
Loans (Liability) 1851845.9 1908532.9 (56687) 3.06
Current Liabilities 1,638,085.9 2,493,868.57 855782.67 52.24%
Total 4124437.85 5091181.97 966744.12 23.43%

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FINDINGS
This report work has identified how companies use financial statement analysis and
interpretation in making effective management decisions. Overall organizational profitability and
achievement of organizational objectives were discussed. Again the difference between the
returns of a financial statement analysis and interpretation based on management decisions were
also discussed.
 Gross profit and net profits are decreased during the period of 2013-15, which indicates
that firm’s inefficient management in manufacturing and trading operations
 Liquidity ratio of the firm is better liquidity position in over the two years. It shows that
the firm had sufficient liquid assets.
 The fixed asset turnover ratio of the firm has in 2013-15 the ratio is 3.23 or 2.26
respectively and it decrease.
 cost ratio of the company has decreased during the period of 2013-15
 Current liabilities are Increasing by 52.4%
 Current assets Ratio are decreased in two years.
 Net profit also decreased by 33.22%
 Return on Investment has increased.
 Gross Profit has decreased by 45.79%

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CONCLUSION
Analysis and interpretation of financial statements is an important tool in assessing company’s
performance. It reveals the strengths and weaknesses of a firm. It helps the clients to decide in
which firm the risk is less or in which one they should invest so that maximum benefit can be
earned. It is known that investing in any company involves a lot of risk. So before putting up
money in any company one must have thorough knowledge about its past records and
performances. Based on the data available the trend of the company can be predicted in near
future.
This project of financial analysis & interpretation in the production concern is not merely a work
of the project but a brief knowledge and experience of that how to analyze the financial
performance of the firm. The study undertaken has brought in to the light of the following
conclusions. According to this project I came to know that from the analysis of financial
statements it is clear that C.B.ENTERPRISES have been incurring profit during the period of
study. So the firm should focus on getting of more profits in the coming years by taking care
internal as well as external factors. And with regard to resources, the firm is take utilization of
the assets properly. And also the firm has a maintained low inventory.
This project mainly focuses on the basics of different types of financial statements. Balance
Sheet and Profit & Loss statements of C.B.ENTERPRISES have been studied.
From ratio analysis of Balance Sheet and P & L Statement of C.B.ENTERPRISES of 2013-15 it
was concluded that liquidity position of the company is good. Current ratio, debt-equity ratio,
quick ratio, net profit margin, operating profit margin, gross profit margin, return on assets,
return on investments and return on capital employed were found to be unacceptable. The ratios
that are found to be desirable are Current Ratio, Return On investment and Return on working
capital and Debt – Equity Ratio.
Tally 9.0 is used for analyzing the balance sheet and profit & loss statements of a company and
calculating the financial ratios. In this project Tally 9.0 is used to prepare the balance sheet and
calculate the financial ratios of different companies. Profit & Loss Statements of companies were
not calculated as Tally 9.0 has limitations in processing the data that was available. However,

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only three ratios viz. current ratio, quick ratio and debt-equity ratio were calculated. An
advanced version can be developed for calculation of profit & loss statements and other financial
ratios.

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RECOMMENDATION
8.1 Recommendation for Company:
The profit Of the Company is not in a good Position. Profit decrease in 2014-15 comparison to
2013-14 so for earn more profit company has to Take Alternative Actions for more profit such
As:
 Increasing in Procurement in sugarcane,
 Production, and Control in Expenses Like, Administrative, selling Etc.
 The firms have low current ratio in 2014-15 comparison to 2013-14 so it should increase
its current ratio where it can meet its short term obligation smoothly.
 Liquidity ratio of the firm is less in 2014-15 comparison to 2013-14 liquidity position in
over the years. So I suggested that the firm maintain proper liquid funds like cash and
bank balance
 It should enhance its employee’s efficiency, more training needed to its employees in
order to increase its production capacity and minimize mistakes while performing the
tasks, also more safety precaution need to implement to the employees who directly
working on sugar production process.
 The company high inventory so I suggested that the firm must reduce the stock by
increase sales.
 The firms should have proper check all process of the plant.
Recommendation for the Students:
 Based on the findings of this study as presented, analyzed and interpreted, the following
recommendations were deemed necessary by the Student who prepares project report:
 Adequate time should always be allowed for collection of financial statement data and
preparation for their analysis.

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 Financial statement should be properly interpreted and should be made to reflect current
cost accounting to reduce the negative effects of historical cost principle on financial
statement decisions.
 The effects of inflation on financial statement result should be considered to reduce the
inflation risk.
 The adequacy of financial information need to be emphasized on, as it will provide
enough and necessary details for investment and management decisions.
 A combination of different ratios should be used to analyze a company’s financial and/or
operating performance.
 Finally, the management of the selected company should make proper use of financial
statement analysis in other decision areas of management.

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LIMITATION
LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS AND INTERPRETATION
1. It is suffering from the limitations of financial statements.
2. There is Absence of standard universally accepted terminology in financial analysis
3. Price level changes is ignored in financial analysis
4. Quantity aspect is ignored in financial analysis
5. Financial analysis provides misleading result in absence of absolute data
6. The qualitative elements like quality management, quality of labor, public relations are
ignored while carrying out the analysis of financial statement only.
7. In many situations, the account has to make choice out of various alternatives available, e.g.
choice in the method of depreciation, choice in the method of inventory valuation etc. since
the subjectivity is inherent in personal judgment, the financial statement are therefore not free
from bias.
8. Financial Statements are essential interim reports.
9. Lack of Exactness in financial Statement analysis and interpret.
10. Lack of comparability in financial statement analysis and interpret.

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BIBLIOGRAPHY
BOOKS:
1. M.Y. KHAN, P.K.JAIN (1981), Financial Management, and Cost Accounting (third
edition) New Delhi: McGraw – Hill publishing company limited.
2. I.M.PANDEY.Financial Management New Delhi Vikas publishing house private Ltd –
ninth addition 2004
3. Financial Statement
4. Financial Management
COMPANY DATA:
Vouchers of Sale & Purchase
Bank Statement
Other Data of C.B.ENTERPRISES
WEBSITES
www.google.com

Project report on Financial Statement Analysis and interpretation of A Company

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