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  1. 1. A study on FINANCIAL STATEMENT ANALYSIS With reference to BUIDING BLOCKS PROJECTS PVT LTD. VISAKHAPATNAM.A Project report submitted to Andhra University, VisakhapatnamIn partial fulfillment of the requirement of award of the degree of BACHELOR OF BUSINESS MANAGMENT Submitted by Mr. K. KRISHNA CHAITANYA (REGD NO: 2010-1109084) Under the guidance of s.seshagiri kumar Asst.proffesor, GVP college for degree and PG courses (Autonomus) (Accredited by NAAC with B++) Gayatri valley, Rushikonda campus Department of Management Studies.vsp-45. 1
  2. 2. DECLARATION I hereby declare that the project report entitled “FINANCIAL STATEMENTANALYSIS” with reference to Building Blocks Group has been prepared by me duringthe year (2010–2013) under the guidance of S.SESHAGIRI KUMAR in partialfulfillment of the requirement for the award of the degree of Bachelors of BusinessAdministration and has not been submitted earlier to any University / Institution for theaward of Degree / Diploma.Date:Place: Visakhapatnam K. KRISHNA CHAITANYA 2
  3. 3. BONAFIDE CERTIFICATECertified that this project report title “FINANCIAL STATEMENT ANALYSISwith reference to BUILDING BLOCKS GROUP LTD, Visakhapatnam is thebonafide work of K.KRISHNA CHAITANYA (Reg.No.2010-1109084) whocarried out the analysis under my Supervision. Certified further, that to the best ofmy knowledge the work reported here in does not form part of any other projectreport or dissertation, on the basis of which a degree or award was conferredearlier occasion on this or any other Candidate. Seshagiri kumar.S Asst.proffesor management studiesDate:Place: Visakhapatnam 3
  4. 4. ACKNOWLEDGEMENT My sincere thanks to the Almighty God for having guided me thought-out my life. It‟s my great pleasure to express my truthful and sincere thanks to smt. Rajini,Director for her guidance for doing this project. It‟s my great pleasure to express my truthful and sincere thanks toG.SHAYAMALA RAO, Head of the Department, BBM, for his guidance for doingthis project. I express my sincere thanks to S.SESHAGIRI KUMAR, for his valuablesuggestions and continuous encouragement throughout this project. I express my thanks to Sri. MALLIKARJUNA RAO General Manager (F&A),for providing me an opportunity to work on this project. I am extremely grateful toSri. V B S RAO who cooperated and coordinated me throughout the project withoutwhom this project would not have been a reality. I wish to express my grateful thanks to the management and employees ofBUILDING BLOCKS PROJRCTS PVT LTD., for helping me in completing theproject successfully. I express my gratitude to all my staff members of department of managementscience for their help and timely advice to make my project much more effective. (K KRISHNA CHAITANYA) 4
  5. 5. INDEX Page no.CHAPTER – I  Introduction & Methodology  Financial Statement Analysis 4-11  Objectives Of The Study  Limitations Of The StudyCHAPTER – II 12-18  Industrial ProfileCHAPTER – III 19-30  Company ProfileCHAPTER – IV 31-34  Theoretical concept of financial statementsCHAPTER- V 35-38  Data Analysis & InterpretationCHAPTER VI  Findings & Suggestions 79-82  ConclusionsBIBILOGROPHY 86 5
  6. 6. CHAPTER – I (Introduction) 6
  7. 7. FINANCIAL STATEMENT ANALYSISAN INTRODUCTION Financial statements, as used in corporate business houses, refer to a set of reportand schedules, which an accountant prepares at the end of the period of time for abusiness enterprise. The financial statements are the means with the help of which theaccounting system performs its main function of providing summarized informationabout the financial affairs of the business. This statement comprises balance sheet orposition statement and profit and loss account or income statement. In India, everycompany has to present its financial statements in the form and contents as prescribedunder section 211 of the Companies Act, 1956.ANALYSIS OF FINANCIAL STATEMENTS Financial analysis is to be determined by the significant operation and financialcharacteristics of a firm from accounting data. It is a technique, typically devoted toevaluate the past, current and projected performance of a business firm. Financialanalysis is an attempt to determine the significance and meaning of financial statementdata so that forecast may be made of the future prospects for earnings, ability to payinterests and debit maturities and profitability. Published financial statements are the only source of information about theactivities and affairs of a business entity available to the public, shareholders, investorsand creditors and the government. This various groups are interested in the progress,position and prospect of such entity in various ways. But these statements howsoever,correctly and objectively prepared, by themselves do not reveal the significance, meaningand relationship of the information contained therein. For this purpose, financialstatements have to be carefully studied, dispassionately analyzed and intelligentlyinterpreted. Financial analysis results in the presentation of information by arranging financialstatement data in a systematic manner that aids business managers, investor, and financialstatement can provide valuable insights into a company‟s performance. 7
  8. 8. OBJECT OF FINANCIAL ANALYSIS  To estimate the earning capacity of the firm  To gauge the financial position and financial performance of the firm  To determine the long term liquidity of the funds as well as solvency  To determine the debt capacity of the firm  To decide about the future prospects of the firmTYPES OF FINANCIAL STATEMENT ANALYSISA distinction may be drawn between various types of financial analysis and it may be asunder: (A) According to the nature of the analysis and the material used by him: 1. External analysis:-It is made by those who do not have access to the detailed records of the company. This group, which has to depend almost entirely on published financial statement, includes investors, credit agencies and government agencies regulating a business in nominal way. 2. Internal analysis:- The internal analysis is accomplished by those who have access to the books of accounts and all other information related to business. While conducting this analysis, the analyst is a part of the enterprise he is analyzing. Executives and employees of the enterprise conduct it. (B) According to the Modus Operandi of Analysis: 1. Horizontal analysis:-When financial statements for a number of years are reviewed and analyzed, the analysis is called „Horizontal analysis‟. As it is based on data from year to year rather than on one date or period of time as a whole, this is also known as „Dynamic analysis‟. 2. Vertical analysis:- It is frequently used for referring to ratios developed for one date or for one accounting period. It is also called as „Static analysis‟. This is not very conductive to proper analysis of the firm‟s financial position and its interpretation, as it does not enable to study data in perspective. 8
  9. 9. (C) According to the objective of analysis: 1. Long term analysis:-This analysis is made in order to study the long term financial stability, solvency and liquidity as well as profitability and earning capacity of a business. The objective of this analysis is to know whether the firm will be able to earn a minimum amount, which will be sufficient to maintain a reasonable rate of return on the investment. 2. Short term analysis:- This analysis is made to determine the short term solvency, stability, liquidity and earning capacity of the business. The requirement or not and sufficient borrowing capacity to meet contingencies in the near future.PARTIES INTERESTED IN FINANCIAL ANALYSIS: 1. Financial Executives: First party interested in the financial analysis in the finance department of the business concern who has a deep insight into the financial condition of the enterprise and a view of the past performance, which helps in future decisions making 2. Management: The management of the concern is also interested in the analysis of the statements because it helps them in reaching conclusions regarding the overall operation of the business. The management is interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most effectively and efficiently and the firm‟s financial position is sound. As such, return on analysis is very important to them. 3. Creditors: Creditors also evaluate the financial statements and on the basis of this financial statement they come about the credit worthiness of the business enterprises and chosen to extend, maintain or restrict credit. Creditors will be interested to give credit for those business enterprises having sound financial position and having capable of being repayment of their credit. Some of the aspects of enterprise operations that are of interest of the creditors are liquidity 9
  10. 10. of funds, soundness of the financial structure, and profitability of the operation, effectiveness of the working capital management etc. The bankers and the trade creditors of a business enterprise are interested in its cash generation and credit worthiness. They want to assess whether the enterprise will as interest payments and due an agreed schedules. They get all this information from the analysis of balance sheet and income statement of the company.4. Investors: Investors, present as well as prospective, are interested in the measurement of earning capital of securities. Every investor has the tendency to get fair return on his or her investment. Investors have been increasingly concerned with the cash generation capability of an enterprise primarily in terms of the flexibility availability to such enterprises to acquire other business and new assets on an advantageous basis. For this purpose each cash flow analysis and fund flow analysis are very useful.5. Government: The financial statements are used to assess the tax liability of business enterprise. The government studies economic situation of the country from these statements enables the government to find out whether business is following various rules and regulations or not.6. Bankers: The banker is interested to see that the loan amount is secure and the customer is also able to take the interest regularly. The bankers will analyze the balance sheet to determine financial strength of the concern and profits and loss account with also is studied to find out the earning position. The information provided by the analysis and interpretation of various financial statements is important and useful to those groups also are interested in working of the business due to one or other motive. 10
  11. 11. IMPORTANCE OF FINANCIAL ANALYSISFinancial analysis is very important for the management, shareholders, creditors,investors and general public. Following are important points in this regard: 1. It simplifies, summarizes and systemizes a long array of accounting figures, which prove very useful to the interested parties as it helps them in arriving at valuable decisions. 2. Financial analysis is invaluable aid to the management in discharge if its basis functions of forecasting, planning, coordination, communication and control. 3. It identifies the financial health of enterprise by evaluating important aspects of business like liquidity, solvency, profitability, capital gearing etc. such an evaluation enables conclusion to be drawn regarding financial health of business. 4. The process of analyzing financial statements involves the preparation and interpretation of meaning device such as ratio and trend percentages. So with the preparation of meaning devices the data becomes easy to establish its relationship and other data can be easily ranked in terms of its relative significance 5. Without analysis of financial statements it is impossible to interpret the financial statement figures. Therefore, interpretation requires analysis. 6. Owing to increasing demand for analytical information by business executives, bankers and others it is necessary to have analysis and interpretation of financial and operating data. 11
  12. 12. OBJECTIVE OF THE STUDYRATIONAL FOR THE STUDY Financial analysis of an organization provides the clear view of its performanceparameters present as well in comparison to past performance. This analysis is importantfor the management and also for outsiders dealing with organization as this shows theway of functioning and the direction in which an organization is moving. A management student should properly understand the various aspects offinancial analysis as if opted for specialization in financial management. That‟s why Ihave selected “Financial Analysis” as a topic for my study.OBJECTIVE OF THE STUDY The objective of the study is to determine the clear picture of the company‟sperformance. The comparison of past and present performance helps to understand thecompany‟s efficiency level and makes it able to understand what should be done toimprove its performance.The objectives of the study are as under: To study the resources pattern and their utilization with a view to analyze the financial statements of BUILDING BLOCKS GROUP LIMITED. To study performance and growth of income over period of time. To analyze profitability and capital structure of the company . To estimate the earning capacity of the firm To gauge the financial position and financial performance of the firm To determine the long term liquidity of the funds as well as solvency To decide about the future prospects of the firm 12
  13. 13. SCOPE OF THE STUDY The study of financial statement analysis of BUILDING BLOCKS GROUPLIMITED; is a very wide topic and could be a detailed study. But here it is intended tothe author a brief reports keeping in view the time factor. In the study many factors thatneed detailed analysis could not be detailed in detail because of the limitations regardingthe length of the project and available time. The scope of the study has, therefore, been limited to the presentation ofcomparative balance sheets, common size balance sheet, cash flow statements and theiranalysis and calculation of various ratios and their analysis.METHODOLOGY My visit to the premises of the Company‟s Registered Office, observation ofworking, meeting the concerned authorities and the printed financial statement of thecompany are the basis of the study. The sources of data may be classified into (a) primarysources and (b) secondary sources.Primary data:Primary sources are original sources from which the researcher directly collects data thathave not been previously collected, e.g., collection of data directly by the researcher onbrand awareness, brand preference, brand loyalty and other aspects of consumer behaviorfrom a sample of consumers by interviewing them. Primary data are first-handinformation collected through various methods such as observation, interviewing, mailingetc.Secondary SourcesThese are sources containing data that have been collected and compiled for anotherpurpose. The secondary data consist of readily available compendia and already compiledstatistical statements and reports whose data may be used by researches for their studies,e.g., census reports, annual reports and financial statements of companies, Statisticalstatements, Reports of Government Departments, Annual Reports on currency andfinance published by the National Bank for Ethiopia, Statistical Statements relating toCooperatives, Federal Cooperative Commission, Commercial Banks and Micro FinanceCredit Institutions published by the National Bank for Ethiopia, Reports of the NationalSample Survey Organization, Reports of trade associations, publications of international 13
  14. 14. organizations such as UNO, IMF, World Bank, ILO, WHO, etc., Trade and FinancialJournals, newspapers, etc.Secondary data consist of not only published records and reports, but also unpublishedrecords. The latter category includes various records and registers maintained by firmsand organizations, e.g., accounting and financial records, personnel records, register ofmembers, minutes of meetings, inventory records, etc.Features of Secondary Sources: Though secondary sources are diverse and consist of allsorts of materials, they have certain common characteristics.First, they are readymade and readily available, and do not require the trouble ofconstructing tools and administering them.Second, they consist of data over which a researcher has no original control overcollection and classification. Others shape both the form and the content of secondarysources. Clearly, this is a feature, which can limit the research value of secondarysources.Finally, secondary sources are not limited in time and space. That is, the researcher usingthem need not have been present when and where they were gathered.USE OF SECONDARY DATAUsesThe secondary data may be used in three ways by a researcher. First, some specificinformation from secondary sources may be used for refer-ence purposes.Second, secondary data may be used as bench marks against which the findings of aresearch may be tested.Finally, secondary data may be used as the sole source of information for a researchproject. Such studies as Securities Market Behavior, Financial Analysis of Companies,and Trends in credit allocation in commercial banks, Sociological Studies on crimes,historic a Bureau of Public Enterprises, Census Reports etc. serve as major data sourcesfor small studies, and the like depend primarily on secondary data. Year books, Statisticalreports of government departments, reports of public organizations like such researchstudies.Advantages 1. Secondary data, if available, can be secured quickly and cheaply. 2. Wider geographical area and longer reference period may be covered without much cost. Thus the use of secondary data extends the researchers space and time reach. 14
  15. 15. 3. The use of secondary data broadens the database from which scientific generalizations can be made. 4. The use of secondary data enables a researcher to verify the findings based on primary data.Disadvantages/limitations 1. The most important limitation is the available data may not meet, our specific research needs. 2. The available data may not be as accurate as desired. 3. The secondary data are not up-to-date and become obsolete when they appear in print, because of time lag in producing them. 4. Finally information about the where about of sources may not be available to all. I also studied various concerned books for this purpose. This study is basedentirely on the published Financial Statements of BUILDING BLOCKS GROUP.LIMITATIONS OF THE STUDYThe limitations of the present study are 1. In the study many factors that need detailed analysis could not be discussed in detail because of the limitations regarding length of the project and available time. 2. The study is subject to limitations of the nature of financial analysis tools and techniques. 3. Further the study takes into consideration the quantitative aspect of the performance and not the qualitative aspect such as impact of industrial assistance of company in the economic development of company in the economic development of the state, on additional employment opportunities, contribution to net domestic product and development of industrial estate etc., 15
  16. 16. CHAPTER – II(Industry Profile) 16
  17. 17. 17
  18. 18. INDUSTRY STRUCTURE AND DEVELOPMENTSThe construction industry of India is an important indicator of the development as itcreates investment opportunities across various related sectors. The construction industryhas contributed an estimated 3, 84,282 crores to the national GDP in 2010-11 (a share ofaround 8%). The industry is fragmented, with a handful of major companies involved inthe construction activities across all segments; medium sized companies specializing inniche activities; and small and medium contractors who work on the subcontractor basisand carry out the work in the field. The sector is labor-intensive and, including indirectjobs, provides employment to more than 35 million people.Construction is a cyclicalindustry it means it reflects fluctuation in national economy sensitively and rapidly.Construction has a very large number of self-employed workers. Opportunities forworkers to form their own firms are better in construction than in many other industries.Construction industry has different groups these were1. The design group: includes people who have a basic interest in conceiving,programming, synthesizing, & planning & physical environment.2. The constructor group: those in the constructor group are people of action.3. The support group: The motivation and interest those in the support group are asvaried as the list of professions would indicate.The construction sector comprises establishments primarily engaged in the constructionof buildings or engineering projects (e.g., highways and utility systems). Establishmentsprimarily engaged in the preparation of sites for new construction and establishmentsprimarily engaged in subdividing land for sale as building sites also are included in thissector. Construction work done may include new work, additions, alterations, ormaintenance and repairs. Activities of these establishments generally are managed at afixed place of business, but they usually perform construction activities at multipleproject sites. 18
  19. 19. HISTORYThe period from 1950 to mid-60‟s witnessed the government playing an active role in thedevelopment of these services and most of construction activities during this period werecarried out by state owned enterprises and supported by government departments. In thefirst five-year plan construction of civil works was allotted nearly 50 per cent of the totalcapital outlay. The first professional consultancy company,National Industrial Development Corporation (NIDC), was set up in the public sector in1954. Subsequently, many architectural, design engineering and construction companieswere set up in the public sector (Indian railways Construction Limited (IRCON),National Buildings Construction Corporation (NBCC), Rail India Transportation andEngineering Services (RITES), Engineers Indian Limited (EIL), etc.) and private sector(M N Dastur and Co., Hindustan Construction Company (HCC), Ansals, etc.).In India Construction has accounted for around 40 per cent of the developmentinvestment during the past 50 years. Around 16 per cent of the nations workingpopulation depends on construction for its livelihood. The Indian constructionIndustry employs over 3 crores people and creates assets worth over 20,000 crores.It contributes more than 5 per cent to the nations GDP and 78 per cent to thegross capital formation. Total capital expenditure of state and central govt. will betouching 8, 02,087 crores in 2011-12 from 1, 43,587 crores (1999-2000).The share of the Indian construction sector in total gross capital formation (GCF) camedown from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 19
  20. 20. 48 per cent in 1993-94 and stood at 44 per cent in 1999-2000. In the 21 st century, therehas been an increase in the share of the construction sector in GDP and capital formation.GDP from Construction at factor c (at current prices) increased to 1, 74,571 crores(12.02% of the total GDP) in 2004-05 from 1, 16,238 crores (10.39% of the total GDP)in 2000-01.The main reason for this is the increasing emphasis on involving the private sectorinfrastructure development through public-private partnership and mechanismslike Build-Operate-Transfer (BOT), private sector investment has not reached theexpected levels.The Indian construction industry comprises 200 firms in the corporate sector. In additionto these firms, there are about 1, 20,000 class a contractors registered with variousgovernment construction bodies. There are thousands of small contractors, whichcompete for small jobs or work as sub-contractors of prime or other contractors. Totalsales of construction industry have reached 42,885.38 crores in 2004 05 from 21,451.9crores in 2000-01, almost 20% of which is a large contract for Benson & HedgesCAREER WITH CONSTRUCTION INDUSTRYConstruction industry sector offers a great variety of career opportunities. People withmany different talents and educational backgrounds-managers, clerical workers,engineers, truck drivers, trades workers, and construction helpers-find job opportunitiesin the construction industry. 20
  21. 21. In this industry most of the trade workers which includes both skilled and craft worker,construction manager and labor their so many vacancies related to mechanical, structural,civil engineer and other vacancies are there. The construction industry employs a numberof other workers apart from the construction trades the construction industry employsnearly all of the workers in some construction craft occupations. In other constructioncraft occupations, large numbers also work in other industries. Other industriesemploying large numbers of construction workers include transportation equipmentmanufacturing; transportation, communication, and utilities; real estate; wholesale andretail trade; educational services; and State and local government.GROWTH OF CONSTRUCTION INDUSTRYDay by day construction sector is growing, the challenges continue raising awareness ofcareer opportunities in construction sector.These innovative approaches address the following workforce needs of business whilealso effectively helping workers find good jobs with good wages and promising careerpathways in the construction industry:« expanding the pipeline of youth;« helping alternative labor pools gain industry-defined skills and competencies;« developing alternative training strategies;« developing tools and curricula for enhancing skill sets;« enhancing the capacity of educational institutions;« developing industry-defined career ladders and lattices;« developing strategies to retain and retrain incumbent workers; and 21
  22. 22. « Assisting transitioning individuals from declining industries to high growth industries.« Employment of production workers in construction has also increased.FUTURE CHALLENGESThe Indian economy has witnessed considerable progress in the past few decades. Mostof the infrastructure development sectors moved forward, but not to the required extent ofincreasing growth rate up to the tune of 8 to 10 per cent. The Union Government hasunderlined the requirements of the construction industry.With the present emphasis on creating physical infrastructure massive investment isplanned in this sector. The Planning Commission has estimated that investmentrequirement in infrastructure to the tune of about 14, 50,000crores or US$320 billionduring the 11th five year plan period.This is a requirement of an immense magnitude. Budgetary sources cannot raise thismuch resources. Public Private Partnerships (PPP) approach is best suited for finding theresources. Better construction management is required for optimizing resources andmaximizing productivity and efficiency. 22
  23. 23. CHAPTER – III (Company Profile) 23
  24. 24. 24
  25. 25. COMPANY PROFILEINTRODUCTIONBuilding Blocks Group has laid its landmark in projects ranging from Infrastructure, ClubHouses, Eco Homes, and Residential Plots to Landing/Plotting for mixed-usedevelopment. It was established in the year of 2009Headquartered in Hyderabad,Building Blocks Group has its presence across the globe i.e. in U.S.A, U.K and Dubai.With each of its projects, customers are assured with the highest standards in architecturaldesign and construction, building materials, facility management, on-time completion andoverall customer satisfaction. We take pride in developing and implementingcomprehensive real estate programs for our customers and cultivating a sense of trust inthe communities we serve. Upholding its corporate values, Building Blocks Groupassumes the utmost responsibility towards the environment and adopts sustainableecologically-neutral technologies in its projects.Our deep commitment to superior value services, sustainable business processes, designinnovations, our visionary culture and our reputation of trust & transparency along withnational & social responsibility makes us the real estate company of choice. With truth,service, respect and contribution as our code of conduct, we proudly say that we areexpending towards perfection edges. 25
  26. 26. VISIONTo offer Value added &Customer-centric property management services bynourishing the idea of acceleration & enhancing the virtues of Real Estate industry byexcellence.MISSION & VALUESTo offer services that ensures profit & steady returns on customers investment thusbuilding customer confidence & a life-time relationship.PHILOSOPHY To establish Collaborative & Sustainable Business Partnerships To offer superior value products and services To help customers preserve and enhance their wealth To live up to Social & Environmental ResponsibilitiesLogo comprises of Red & White Colors.Red is an extreme and emotionally intense color which evokes passion symbolizingstrength and vitality. Its a color of enthusiasm, interest and energy. It brings focus to theessence of life and living with emphasis on survival.White associated with light, goodness & purity. It is considered to be color ofperfection, a good choice for new beginnings, and development in any direction.From its very inception with a passion, Building Blocks has raised with full strength tooperate corporate standards as much larger real estate companies, which grabbed theattention of customers for its transparent and perfect services.Building Blocks Group has made a successful beginning and is edging towardsperfection 26
  27. 27. ASSOCIATES TEAMBuilding Blocks Group has a unique blend of multidisciplinary associates to offer thebest services to the customers and propel to heights with hi-end standards in qualityand services. The associates team of Building Blocks Group includes: GIRIDHARI CONSTRUCTIONS – Builders RAO & ASSOCIATES – Legal Solicitors& Corporate Advisors DESIGNSPACE – Master Planner, Architects, Interior Designers S.S.REDDY & ASSOCIATES – Practicing Company Secretaries VSPN & CO - Chartered Accountant SMILE FACILITIES – Property Maintenance & Facility Management MA FOI RANDSTAD – HR Recruitment Solutions ALL E-TECHNOLOGIES, MICROSOFT – IT Services LIQUID – Advertising & BrandingSince inception in 2009, Building Blocks Group has been a leader in providing"Affordable Homes", making everyones dream of owning a house true thus playing akey role in the real estate industry.The companys history is a story of experts with a combined experience of more than 60years; the company follows the outsourcing methodology of business for Law,Architecture and Engineering, ensuring high-end work and transparency in its dealingsacross the business. A team of qualified and experienced experts as its corecompetency, at Building Blocks Group, we feel we are well poised to deliver structuredand well-planned projects that not only exceed our clients expectations, but are alsoprofessionally managed and flawlessly executed. 27
  28. 28. MILESTONESDATE January, 2009 50 Acres Gated Community February, 2010 4 Projects- 500 Acres - Grandeur City December, 2010 Grandeur City- Vizag November, 2010 Grandeur City- Vijayawada 12 projects- 2000 Acres- Multiple March, 2011 Grandeur Cities. PROJECTS Completed Projects In Hyderabad: Located in the near to Shamshabad airport, Shadnagar 1 fetches a huge benefit of best returns for investment. Surrounded by mega townships and huge housing projects like DLF, My Home, AP Housing Board etc., Shadnagar 1 project makes an ideal living space, with best-of-the-best amenities too. GRANDEUR 2 is initiative of building those grandeur homes that every family loves to be part of. The grand towers of residencies amidst lush green landscape and lifes joy amenities and facilities are what we devised for our 21st century modern dwellers. These highly optimum living spaces are on the path of soon to be a reality. GRANDEUR 3 is the project going to have all the modern facilities like gated community, black top roads, lush green spaces, gym, club house, swimming pools, 28
  29. 29. sports & games facilities, shopping complex, round-the-clock security and muchmore.GRANDEUR 4 is the project going to have 100% vaasthu compliance, flexiblehousing options, bank loan facility, incredible features and benefits are the other add-ons for Shadnagar 6, which make living a happy and joyful affair.Completed Projects in VisakhapatnamLocated in the near to Anakapalle fetches a huge benefit of best returns forinvestment. Surrounded by mega townships and huge housing projects like DLF, MyHome, AP Housing Board etc., project makes an ideal living space, with best-of-the-best amenities too.GRANDEUR 2 is initiative of building those grandeur homes that every family lovesto be part of. The grand towers of residencies amidst lush green landscape and lifesjoy amenities and facilities are what we devised for our 21st century modern dwellers.These highly optimum living spaces are on the path of soon to be a reality 29
  30. 30. Owning a prime piece of land in the prized Kothavalasa area in itself is quite an idea.In a very short span of time, the land value in the Kothavalasa area is due to go up,and the value of your investments is going to quadruple, at the very least. For moredetails on the planned developments in the Kothavalasa area, please look up ourLocation section.Grandeur 5 @ Vizag is a prestigious Gated Community facing NH5 in near vicinityto IT Park. Visakhapatnam is second focused destination for information technologyafter Hyderabad. The city will get an IT tower and a special economic zone park soonCompleted Projects in VijayawadaGRANDEUR 1 is the project going to have 100% vaasthu compliance, flexiblehousing options, bank loan facility, incredible features and benefits are the other add-on, which make living a happy and joyful affairOwning a prime piece of land in the prized area in itself is quite an idea. In a veryshort span of time, the land value in the area is due to go up, and the value of yourinvestments is going to quadruple, at the very least. For more details on the planneddevelopments in the area, please look up our Location section 30
  31. 31. GRANDEUR 3 is initiative of building those grandeur homes that every family loves to be part of. The grand towers of residencies amidst lush green landscape and lifes joy amenities and facilities are what we devised for our 21st century modern dwellers. These highly optimum living spaces are on the path of soon to be a reality FUTURE PROJECTS:GRANDONE GRAND ONE is our initiative of building those grandeur homes that every family loves to be part of. The grand towers of residencies amidst lush green landscape and lifes joy amenities and facilities are what we devised for our 21st century modern dwellers. These highly optimum living spaces are on the path ofsoon to be realityThe projects are going to have all the modern facilities like gated community, black toproads, lush green spaces, gym, club house, swimming pools, sports & games facilities,shopping complex, round-the-clock security and much more. Topping this, the exclusiveplanning & research we have put in shall bring you the most anticipated LOCATION,QUALITY, PRICE three things stringed together. So gear up to lead life in the lovelyliving spaces we are engineering for Us! FARM ANANDA Farm Amanda is a prestigious eco-friendly sustainable project of Building Blocks Group venturing Eco Plots. "Living next togreen" is an old concept; "Living amidst green" is the new concept of living.Unveiling this whole new concept of living, we present you to a greener way of living.With its first venture on Warangal Highway, every care has been taken to build high-performance, energy saving and green-riches homes. Experience a better living atFarm Ananda, with 02 enriched air, green landscapes, serene views and of course ahappy home with green utilities.With a vision Of providing green luxury zones in 15 strategic locations (in the firstphase) and a conscience of giving its turn to the environment, Building Blocks Grouphas ventured Farm Ananda. 31
  32. 32. Farm Amanda has finest features such lands with clear title deeds, infrastructurefacilities, landscape gardens and parks, water harvesting, waste management, energyand soil conservation procedures and eco-friendly sustainable constructionscontributing for a healthier and greener lifestyle. Come, experience the real meaning ofgreen life and explore happy living in the green paradise.CLUB ANANDA Club Ananda is a hi-end leisure hospitality service provider, making holidays an experience in today‟s busy schedules of families. Life today is enriched with swiftness, technology, rapidity, and many more except that quality time we spend with our families. Many of us today lack that touch of celebration, happy moments with kids, regurgitation of old memories withparents, a tinge of smoothening privacy with spouse etc. We are living high professionallives filled with stress too. Wouldnt it be a wonderful life when all these come back toour lives?Yes, Club Ananda makes them possible with its wide range of services and offeringquality family holidays via vacation memberships. Club Ananda is a flagship companyof Building Blocks Group, with various holiday resorts such as"Arogyananda" (HealthResort), "Kridananda" (Sports) "Divyananda" (Healing Resort)and"Satchidananda" (Spiritual Resort)."Arogyananda" is health resort where you can avail various health-related i.e. medicaland Para-medical services like Ayurveda, physiotherapy, ancient Indian therapies torevive your health. "Kridananda" is sports resort where your holiday will be a neverbefore experience with all the best sports and games including golf, trekking and moreexciting sports. "Divyananda" is healing resort where you can rejuvenate your mind,body and soul, experiencing holistic wellness through authentic spa therapies, bothIndian & international. "Satchidananda" is spiritual resort where you get food for yoursoul; your craving for peace of mind, solitude and tranquility gets quenched here.Give holiday experience an interesting twist, enrich it with fun, happiness and joy atClub Ananda with vacation memberships. Come, relive those moments for which youare longing for!! 32
  33. 33. INFRA BBG INFRA is the infrastructure wing of soon to be giant Building Blocks Group. It plays a key role in each project of the Building Blocks. Backed with the best and expertise team, the mostmodern engineering techniques employed by BBG will surely make every project aspectacular one. As we know in construction industry, its always delivering promisedquality on promised time matters. To fulfill such promises and make such an attribute ahallmark of ours, BBG INFRA has taken shape. This separate entity alone stands as atestimonial for our emphasis on satisfying customers and keeping up our word.BBG INFRA has already made its valuable contribution in our project sites with manyneeded social infra, but with mega projects in the pipeline, BBG INFRA is poised to bea name to reckon with. Building Blocks Group has also laid its mark in service sector, as it believes "Helping hands are better than praying lips". By establishing "Building Blocks Foundation", the group has been taking part in various service events, working its best to give its return to the society. At Building Blocks, Corporate Social Responsibility has been a keystone as creating value for society is always an integral part of Building Blocks. We presume 33
  34. 34. contributing to the development of society is an extension of our core practices. We contemplate it as an internal process that reflects companys soul. BBG FOUNDATION is a close to heart initiative of Building Blocks Group. The social uplifting of underprivileged is the motive behind it. It also covers the companys environmental responsibility, social responsibility and corporate accountability activities. With this BBG would like to be a catalyst of change in society. EDUCATION and EMPOWERMENT are the main stay of foundation; it offers voluntary and financial support to these causes. Every employee on critical issues to sensitize staff and provide opportunities forsignificant participation in of the BBG shall be part of these activities. The aim is tocreate awareness response to community needs. 34
  35. 35. BBG HAVE HOLISTICALLY INTEGRATED SOCIAL INITIATIVESCOVERING THE FOLLOWING: Community Development programs like free Eye care camps, Aids Awareness- Programs for the physically & mentally challenged. Improving the quality of life for children Undertake rural and community development projects Create, maintain and support need-based and area-specific services to the poor and needy in the areas of: Healthcare, Education, Training and Safety Subsidized housing Free education Building temples AWARDS: CRISIL VERIFIED BUILDING BLOCKS PROJ ECTS INDIA PRIVATE LIMITED, Crisil Verification ID: 960283758994 Report DATE: JAN 16, 2012 Valid Till: Jan 15, 2013 BUSINESS DESCRIPTION: The company takes a great pride in its reputation as Ap`s fastest growing real estate company with projects ranging from residential plots, construction infrastructure, farming, clubs, and Resorts. FACT SHEET: Year of incorporation: 2009 Legal status: private limited company Industry :services Nature of services: constructions Products/services: plotted development, construction, infrastructure, farming and leisure. 35
  36. 36. NO.Of Employers : 500Bankers: Axis bank, Hyderabad, Andhra Pradesh.Auditors: v s p n company, charted accountants.Key Customers : PLOT OWNERS 36
  37. 37. CHAPTER – IV(Theoretical Study) 37
  38. 38. 38
  39. 39. PROCEDURE ANALYSISThe process of analyzing financial statements involves the rearranging, comparing andmeasuring the significance of financial and operating data. Interpretation, which followsanalysis, is an attempt to logical conclusion regarding the position and progress of thebusiness on the basis of analysis.The procedure may be as under: 1. Deciding upon the extent of analysis: The depth, object and extent of analysis have to be determined so that the scope of the analysis, tool of analysis and the amount and quality of financial data required could be determined. 2. Going through the financial statement: Before analyzing and preparing any statement or composing financial ratios, it is necessary to go through the various financial statements of the firm. 3. Collection of necessary information: Other useful information that cannot be revealed from financial statement but is useful for analysis hast to be collected from management. 4. Rearranging of financial data: The data available has to be rearranged in a useful manner before analysis and interpretation. 5. Analysis: In this step the actual analysis is made for which any technique such as, comparative financial statements, trend analysis, ratio analysis and cash flow statements, statements of change in working capital etc., can be used. 6. Interpretation: After analysis, interpretation is done and conclusions are drawn. These interpretations are of vital importance to the management, shareholder, and workers etc., to know the relative worth of the company. 39
  40. 40. TOOLS OF FINANCIAL ANALYSIS The analysis of financial statements consists of relationships and trends, todetermine whether the financial position of the company is satisfactory or not. Theanalytical methods or devices, listed below are used to ascertain or measure therelationships among the financial statement‟s items.Analytical methods and devices used in analyzing financial statements are as follows: 1. Comparative financial statements 2. Common size financial statements 3. Trend ratio 4. Ratio analysis 5. Cash flow statementsThey may be discussed as under: 1. Comparative financial statements: Statements prepared in a form that reflect financial data for two or more periods are known as comparative statements. Financial data become meaningful when compared with similar data for a previous period of a number of prior periods. Annual data can be compared with similar data for prior years. Comparative statements can be prepared for both types of financial statements balance sheet as well as profit and loss account. The comparative balance sheet shows the effect of operations on the assets and liabilities i.e., change in the financial position during the period under 40
  41. 41. consideration. The comparative profit and loss account will present a review of operating activities of the business.2. Common size financial statements: Comparative statements that give only the vertical percentage of ratios for financial data without giving rupee values are known as common size financial statements. They are also known as 100% statements. A common size statement shows the relation of each component to the whole. It is useful in vertical financial analysis and comparison of two business enterprises at a certain date.3. Trend analysis: Under the technique of trend analysis the ratio of different items for various periods are calculated and then a comparison is made. An analysis of the ratios over the past few years may well suggest the trend or direction in which the concern is going- upward or downward.4. Ratio analysis Ratio analysis is the most widely used tool for financial analysis. It is essentially an attempt to develop meaningful relationship between individual items or group of items in the balance sheet or profit and loss account. The objects and utility of ratio analysis is confined not only to the internal parties but to the credit suppliers, banks and lending institutions also. Ratio analysis tells about the financial position of the enterprise as to whether the capital structure of the business is in proper order, whether the capital structure of the enterprise is satisfactory, whether the credit policy in relation to sales and 41
  42. 42. purchases is sound and whether the company is creditworthy. Thus, ratio analysis highlights the liquidity, solvency, profitability and capital gearing position. 5. Cash flow statements: Cash flow analysis is a valuable aid to the financial executive and creditors for evaluation the uses of funds by the firm and in determining how these uses were financed. A cash flow statement indicates where funds came from and where it was used during the period under review. They are important tools for communication and very helpful for financial executives in planning the intermediate and long term financing of the firm.The financial statements are a mirror, which reflect the financial position andoperating strength or weakness of the business enterprise. 42
  43. 43. CHAPTER – V (Data Analysis) 43
  44. 44. 44
  45. 45. ANALYSIS AND INTERPRETATIONCOMPARATIVE FINANCIAL STATEMENTS These financial statements are so designed as to provide time perspective to thevarious elements of financial positions contained therein. These statements give the datafor all periods stated so as to show: 1. Absolute money values of each time separately for each item separately for each of the period stated. 2. Increase and decrease in absolute date in terms of money values. 3. Increase and decrease in terms of percentages. 4. Comparison expressed in ratios. 5. Percentage of totalsSuch comparative statements are necessary for the study of trends and direction ofmovement in the financial positions and operating results. This call for a consistency inthe practice of preparing these statements, otherwise comparability may be distorted.Comparative statements enable horizontal analysis of figures.COMPARATIVE BALANCE SHEET A comparative balance sheet shows the balance of accounts of assets andliabilities on different dates and also the extent of their increase or decrease betweenthese dates throwing light on the trends and direction of changes in the position over theperiods. This helps in prediction about the position of the business in future. 45
  46. 46. Comparative balance sheet as on 31st March 2010 In Rs.Cr. Increase(+) Percentage Mar Mar Decrease(-) „09 „10 (%) In crores 12 mths 12 mthsSources Of FundsTotal Share Capital 7.77 7.77 0.00 0.00Equity Share Capital 7.77 7.77 0.00 0.00Share Application Money 0.15 0.15 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00Reserves 58.14 63.10 4.96 8.53Revaluation Reserves 0.00 0.00 0.00 0.00Net worth 66.06 71.02 4.96 7.51Secured Loans 124.17 105.84 -18.33 -14.76Unsecured Loans 25.47 21.12 -4.35 -17.08Total Debt 149.64 126.96 -22.68 -15.16Total Liabilities 215.70 197.98 -17.72 -8.22Application Of FundsGross Block 174.41 171.90 -2.51 -1.44Less: Accum. Depreciation 50.29 56.13 5.84 11.61Net Block 124.12 115.77 -8.35 -6.73Capital Work in Progress 0.11 0.17 0.06 54.54Investments 0.36 0.36 0.00 0.00 46
  47. 47. Inventories 91.05 67.93 -23.12 -25.39Sundry Debtors 9.54 7.17 -2.37 -24.84Cash and Bank Balance 1.99 1.97 -0.02 -1.01Total Current Assets 102.58 77.07 -25.51 -24.87Loans and Advances 11.92 17.30 5.38 45.13Fixed Deposits 3.57 3.92 0.35 9.80Total CA, Loans & 118.07 98.29 -19.78 -16.75AdvancesDiffered Credit 0.00 0.00 0.00 0.00Current Liabilities 22.70 11.55 -11.15 -49.12Provisions 4.27 5.07 0.80 18.74Total CL & Provisions 26.97 16.62 -10.35 -38.38Net Current Assets 91.10 81.67 -9.43 -10.35Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 215.70 197.98 -17.72 -8.22 47
  48. 48. INTERPRETATION: In the above comparative balance sheet the Cash and Bank balance in 2009 is 1.99and in 2010 it is 1.97, we observe that there is a decrease in cash and bank balance in2010 when compared to 2009. The Capital work in progress position in 2009 is 0.11 and2010 is 0.17 here we also observe that the there is a increase in capital in 2010 whencompared to 2009. We can see a big change in total assets which pose a fluctuationduring the years which mean that company is acquiring and selling of assets. Share capital has been constant throughout the years but reserves are changing over theyears which add to the liabilities. The company has more secured loans compared tounsecured loans. Similarly liabilities are also pretty hand and the company is able torepay its debts as the sales have been fetching profits to the company since the years. 48
  49. 49. Comparative balance sheet as on 31st March 20011 In Rs. Cr. Increase(+) Percentage Mar Decrease(-) Mar 10 (%) 11 In crores 12 mths 12 mthsSources Of FundsTotal Share Capital 7.77 7.77 0.00 0.00Equity Share Capital 7.77 7.77 0.00 0.00Share Application Money 0.15 0.15 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00Reserves 63.10 66.93 3.83 6.06Revaluation Reserves 0.00 0.00 0.00 0.00Net worth 71.02 74.85 3.83 5.39Secured Loans 105.84 53.65 52.19 49.31Unsecured Loans 21.12 8.46 -12.66 -59.94Total Debt 129.96 62.11 -64.85 -51.07Total Liabilities 197.98 136.96 -61.02 -30.82Application Of FundsGross Block 171.90 171.72 -0.18 -0.10Less: Accum. Depreciation 56.13 71.42 15.29 27.24Net Block 115.77 100.30 -15.47 -13.36Capital Work in Progress 0.17 0.55 0.38 223.52 49
  50. 50. Investments 0.36 0.05 -0.31 -86.11Inventories 67.93 28.58 -39.25 -57.92Sundry Debtors 7.17 13.19 6.02 83.96Cash and Bank Balance 1.97 1.91 -0.06 -3.04Total Current Assets 77.07 43.68 -33.39 -43.32Loans and Advances 17.30 15.99 -1.31 7.57Fixed Deposits 3.92 5.70 1.78 45.40Total CA, Loans & Advances 98.29 65.37 -32.92 -33.49Deferred Credit 0.00 0.00 0.00 0.00Current Liabilities 11.55 23.27 11.72 101.47Provisions 5.07 6.04 0.97 19.13Total CL & Provisions 16.62 29.31 11.69 76.35Net Current Assets 81.67 36.06 -45.61 -55.84Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 197.98 136.96 -61.02 -30.82 50
  51. 51. INTERPRETATION:The above present comparative balance sheets of the company for the period of March2010-11. It can be observed that total liabilities and total assets pose a fluctuation duringthe years which means that company is acquiring and selling of assets. We see a bigchange in inventories level in 2010 and 2011 which shows that current assets are utilizedand work is in progress. Similarly liabilities are also pretty handy and the company isable to repay its debts as the sales turnover has been fetching profits to the company sincethe recent years.Total share capital has been constant throughout the years but the reserves are changingover the years which add to the liabilities. The company has more Secured loans whencompared to Unsecured loans . 51
  52. 52. Comparative balance sheet as on 31st March 2012 In Rs. Cr Increase(+) Percentage Decrease(-) Mar 11 Mar 12 (%) In crores 12 mths 12 mthsSources Of FundsTotal Share Capital 7.77 7.77 0.00 0.00Equity Share Capital 7.77 7.77 0.00 0.00Share Application Money 0.15 0.15 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00Reserves 66.93 82.68 15.75 23.53Revaluation Reserves 0.00 0.00 0.00 0.00Net worth 74.85 90.60 15.75 21.04Secured Loans 53.65 50.60 -3.05 -5.68Unsecured Loans 8.46 6.81 -1.65 -19.50Total Debt 62.11 57.41 -4.70 -7.56Total Liabilities 136.96 148.01 11.05 8.07Application Of FundsGross Block 171.72 171.82 0.10 0.05 52
  53. 53. Less Accum. Depreciation 71.42 78.59 7.17 10.04Net Block 100.30 93.23 -7.07 -7.05Capital Work in Progress 0.55 1.65 1.10 200Investments 0.05 0.05 0.00 0.00Inventories 28.58 53.29 24.71 86.46Sundry Debtors 13.19 11.28 -1.91 -14.50Cash and Bank Balance 1.91 2.84 0.93 48.70Total Current Assets 43.68 67.41 23.73 54.33Loans and Advances 15.99 15.65 -0.34 -2.13Fixed Deposits 5.70 5.32 -0.38 -6.67Total CA,Loans & 65.37 88.38 23.01 35.20AdvancesDeferred Credit 0.00 0.00 0.00 0.00Current Liabilities 23.27 26.77 3.50 15.04Provisions 6.04 8.53 2.49 41.22Total CL & Provisions 29.31 35.30 5.99 20.44Net Current Assets 36.06 53.08 17.02 47.20Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 136.96 148.01 11.05 8.07 53
  54. 54. InterpretationThe above tables present the comparative balance sheets of the company for the periodmarch 2009 to march 2012. It can be observed that total liabilities and total assets pose afluctuation during the years which mean that company is acquiring and selling of assets.We can see a big change in inventory level in 2009 and 2010 which shows that currentassets are utilized and work is in progress. Similarly liabilities are also pretty handy andthe company is able to repay its debts as the sales turnover has been fetching profits tothe company since the recent past.Share capital has been constant throughout the years but the reserves are changing overthe years which add to the liabilities. This company has more secured loans compared tounsecured loans. On an average the current assets stood at Rs.50 crores but the bankbalance has been always low. 54
  55. 55. COMMON SIZE STATEMENT ANALYSISIn the comparative financial statements it is difficult to comprehend the changes over theyears in relation to total assets, total liabilities and capital or total net sale. Theselimitations of comparative statements made comparison between two or more firms of anindustry impossible because there is no common base for absolute figures. Again for aninterpretation of underlying causes of changes over time period, a vertical analysis isrequired and this with comparative statements.Common size financial statements are those in which figures reported are converted intopercentages to some common base. For this, items in the financial statements arepresented as percentages or ratio to total of items and a common base for comparison isprovided. Each percentage shows the relation of the individual item to its respective total.COMMON SIZE BALANCE SHEETIn a common size balance sheet, total of assets or liabilities is taken as 100 and all thefigures are expressed as percentage of the total. Comparative common size balance sheetsfor different periods help to highlight the trends in different items. If it is prepared fordifferent firms in an industry, it facilitates to judge the relative soundness and helps inunderstanding their financial strategy. 55
  56. 56. COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2010 Mar „09 % of Mar „10 % of total total In Rs.Cr In Rs.Cr 12 mths 12 mthsSources Of FundsTotal Share Capital 7.77 3.60 7.77 3.92Equity Share Capital 7.77 3.60 7.77 3.92Share Application Money 0.15 0.07 0.15 0.07Preference Share Capital 0.00 0.00 0.00 0.00Reserves 58.14 26.95 63.10 31.87Revaluation Reserves 0.00 0.00 0.00 0.00Net worth 66.06 30.62 71.02 35.87Secured Loans 124.17 57.57 105.84 53.46Unsecured Loans 25.47 11.81 21.12 10.67Total Debt 149.64 69.38 126.96 64.13Total Liabilities 215.70 100.00 197.98 100.00Application Of FundsGross Block 174.41 80.86 171.90 86.83Less: Accum. Depreciation 50.29 23.31 56.13 28.35Net Block 124.12 57.54 115.77 58.47 56
  57. 57. Capital Work in Progress 0.11 0.05 0.17 0.08Investments 0.36 0.17 0.36 0.18Inventories 91.05 42.21 67.93 34.31Sundry Debtors 9.54 4.42 7.17 3.62Cash and Bank Balance 1.99 0.92 1.97 0.99Total Current Assets 102.58 47.56 77.07 38.93Loans and Advances 11.92 5.53 17.30 8.74Fixed Deposits 3.57 1.65 3.92 1.98Total CA, Loans & 118.07 54.74 98.29 49.64AdvancesDeferred Credit 0.00 0.00 0.00 0.00Current Liabilities 22.70 10.52 11.55 5.83Provisions 4.27 1.98 5.07 2.56Total CL & Provisions 26.97 12.50 16.62 8.39Net Current Assets 91.10 42.23 81.67 41.25Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 215.70 100.00 197.98 100.00 57
  58. 58. INTERPRETATION:The present Common size Balance sheets of accompany for the period March 2009 toMarch 201. It can be observed that total liabilities and total assets are constant .It can beWe can see a big change in Inventory level in 2009 and 2010 which shows that currentThat current assets are utilized and work is in progress. Similarly liabilities are also prettyhandy and the company is able to repay its debts as the sales has been fetching profits theCompany since the recent years.Share capital has been constant throughout the years but the reserves are changing overthe years which add to the liabilities. This company has more secured loans thancompared to Unsecured loans . 58
  59. 59. COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2011 Mar „10 % of Mar „11 % of total total In Rs.Cr In Rs.Cr 12 mths 12 mthsSources Of FundsTotal Share Capital 7.77 3.92 7.77 4.84Equity Share Capital 7.77 3.92 7.77 4.84Share Application Money 0.15 0.07 0.15 0.09Preference Share Capital 0.00 0.00 0.00 0.00Reserves 63.10 31.87 71.43 44.49Revaluation Reserves 0.00 0.00 0.00 0.00Net worth 71.02 35.87 79.35 49.42Secured Loans 105.84 53.46 70.33 43.80Unsecured Loans 21.12 10.67 10.87 6.77Total Debt 126.96 64.13 81.20 50.58Total Liabilities 197.98 100.00 160.55 100.00Application Of FundsGross Block 171.90 86.83 171.20 106.63Less: Accum. Depreciation 56.13 28.35 63.75 39.71 59
  60. 60. Net Block 115.77 58.47 107.45 66.93Capital Work in Progress 0.17 0.08 0.25 0.15Investments 0.36 0.18 0.05 0.03Inventories 67.93 34.31 35.83 22.32Sundry Debtors 7.17 3.62 8.22 5.12Cash and Bank Balance 1.97 0.99 2.20 1.37Total Current Assets 77.07 38.93 46.25 28.81Loans and Advances 17.30 8.74 15.56 9.70Fixed Deposits 3.92 1.98 4.26 2.65Total CA, Loans & 98.29 49.64 40.53 65.07AdvancesDeferred Credit 0.00 0.00 0.00 0.00Current Liabilities 11.55 5.83 7.75 4.83Provisions 5.07 2.56 5.52 3.44Total CL & Provisions 16.62 8.39 13.27 8.27Net Current Assets 81.67 41.25 52.80 32.88Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 197.98 100.00 160.55 100.00 60
  61. 61. INTERPRETATION:The present Common size Balance sheets of accompany for the period March 2010 toMarch 2011. It can be observed that total liabilities and total assets are constant .It can beWe can see a big change in Inventory level in 2010 and 2011 which shows that currentThat current assets are utilized and work is in progress. Similarly liabilities are also prettyHandy and the company is able to repay its debts as the sales has been fetching profits theCompany since the recent years.Share capital has been constant throughout the years but the reserves are changing overthe years which add to the liabilities. This company has more secured loans thanCompared to Unsecured loans. 61
  62. 62. COMMON SIZE BALANCE SHEET AS ON 31ST MARCH 2012 Mar „11 % of total Mar „12 % of total In Rs.Cr In Rs.Cr 12 mths 12 mthsSources Of FundsTotal Share Capital 7.77 4.84 7.77 5.67Equity Share Capital 7.77 4.84 7.77 5.67Share Application Money 0.15 0.09 0.15 0.11Preference Share Capital 0.00 0.00 0.00 0.00Reserves 71.43 44.49 66.93 48.87Revaluation Reserves 0.00 0.00 0.00 0.00Net worth 79.35 49.42 74.85 54.65Secured Loans 70.33 43.80 53.65 39.17Unsecured Loans 10.87 6.77 8.46 6.17Total Debt 81.20 50.58 62.11 45.35Total Liabilities 160.55 100.00 136.96 100.00Application Of FundsGross Block 171.20 106.63 171.72 125.38Less: Accum. Depreciation 63.75 39.71 71.42 52.14Net Block 107.45 66.93 100.30 73.23Capital Work in Progress 0.25 0.15 0.55 0.40 62
  63. 63. Investments 0.05 0.03 0.05 0.03Inventories 35.83 22.32 28.58 20.86Sundry Debtors 8.22 5.12 13.19 9.63Cash and Bank Balance 2.20 1.37 1.91 1.39Total Current Assets 46.25 28.81 43.68 31.89Loans and Advances 15.56 9.70 15.99 11.67Fixed Deposits 4.26 2.65 5.70 4.16Total CA, Loans & 40.53 47.73 65.07 65.37AdvancesDeferred Credit 0.00 0.00 0.00 0.00Current Liabilities 7.75 4.83 23.27 16.99Provisions 5.52 3.44 6.04 4.41Total CL & Provisions 13.27 8.27 29.31 21.40Net Current Assets 52.80 32.88 36.06 26.33Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 160.55 100.00 136.96 100.00 63
  64. 64. INTERPRETATION:The present Common size Balance sheets of accompany for the period March 2011 toMarch 2012. It can be observed that total liabilities and total assets are constant .It can beWe can see a big change in Inventory level in 2011 and 2012 which shows that currentThat current assets are utilized and work is in progress. Similarly liabilities are also prettyHandy and the company is able to repay its debts as the sales has been fetching profits theCompany since the recent years.Share capital has been constant throughout the years but the reserves are changing overthe years which add to the liabilities. This company has more secured loans thanCompared to Unsecured loans . 64
  65. 65. RATIO ANALYSIS Accounting ratios are relationships expressed in arithmetical terms betweenfigures which have a cause and effect relationship or which are connected with each otherin some other manner. Accounting ratios are very useful tools for grasping the true message of thefinancial statements and understanding them. Ratio analysis is defined as the “systematicuse of ratios to interpret the financial statements so that the strengths and weakness of anorganization as well as its historical performance and current financial condition can befound out and analyzed”. Interpretation of ratios forms a core part of ratio analysis. The usefulness of ratiosdepends on the judicious interpretations.USES OF RATIO ANALYSIS Ratio is an important tool in financial analysis. Ratios are comparative study ofthe relations between items of financial statements, which will reveal the profitability,solvency as well as the overall financial position of a business enterprise.The uses of ratio analysis may be summarized as follows Ratio analysis helps to analyze and understand the financial health and trend of a business. Past performance and future projections could be easily reviewed with ratio analysis. “Inter-firm” and “intra-firm” comparison becomes possible with ratio analysis. 65
  66. 66. It is useful to the management in exercising control in various areas likebudgetary control, inventory control and financial control.It helps in fixing accountability and responsibility of the different heads of thedepartments so as to ensure an effective and planned performance.It is beneficial to all the constitutes of the company as follows: A. Management: The management is interested in ratios since it helps in the formulation of policies, decision making and evaluating performance and trends of the business. B. Shareholders: Shareholder can use ratio analysis to understand and review the operational efficiency of their company. C. Investors: Investors can take decisions regarding the type of security and the industry in which they should invest. D. Government: Government is interested in the financial health of the business. Ratio analysis will reflect the policy adopted by the management of the company. E. Creditors: Creditors need to assure themselves about the solvency and liquidity position of the business. F. Analysis: Ratio analysis is the most important tool used by financial people. This will help them to compare and study the progress and position of various firms with each other and also with the industry standards. 66
  67. 67. PRECAUTIONS IN RATIO ANALYSIS Ratios are valuable working tools for analysis and may prove only helpful inmaking decisions. The following aspects should be kept in view while drawingconclusions from the ratio analysis: The reliability of the ratios will depend upon the reliability of the financial statements themselves. Hence, analysis should insist on the submission of audited and certified copies of financial statements. The financial performance is affected by general economic conditions, local factors and the competence of the management. While interpreting ratios, these factors should be kept in mind. One single ratio for a year may not provide a complete picture, but when a group of ratios of one year are compared to another group of ratios of other years, certain trends would be visible. Their utility is further increased when comparisons are made with the rival firms, which are doing well in the same business.CLASSIFICATION OF RATIOSThe ratios may be classified as under According to the statements from which they are calculated such as balance sheet ratios, operating ratios and combined ratios. According to the functional classification they are profitability ratios, turnover ratios, solvency ratios and market test ratios. According to their importance they are primary ratios and secondary ratios. 67
  68. 68. OPERATING PROFIT MARGIN RATIO DEFINITION The operating profit margin ratio indicates how much profit a company makesafter paying for variable cost of production such as wages, raw materials, etc. It isexpressed as a percentage of sales and shows the efficiency of a company controlling thecosts and expenses associated with business operations. Phrased more simply, it is thereturn achieved from standard operations and does not include unique or one timetransactions. Terms used to describe operating profit margin ratios include operatingmargin, operating income margin, operating profit margin or return on sales (ROS).Operating profit margin formulaThe operating profit margin ratio formula is calculated simply using:Operating profit margin = Operating income ÷ Total revenue(Or)Operating profit margin = EBIT÷ Total revenueOperating Profit Margin Meaning The meaning of operating profit margin varies slightly, although the basics staythe same across all industries. This makes it a common and important metric. Operatingprofit margin ratio analysis measures a company‟s operating efficiency and pricingefficiency with its successful cost controlling. The higher the ratio, the better acompany is. A higher operating profit margin means that a company has lower fixed costand a better gross margin or increasing sales faster than costs, which gives managementmore flexibility in determining prices. It also provides useful information for investors to 68
  69. 69. determine the quality of a company when looking at the trend in operating margin overtime and to compare with industry peers. There are many ways for a company toartificially enhance this ratio by excluding certain expenses or improperly recordinginventory. Revenues may also be falsified by recording unshipped products, recordingsales into a different period than they actually occurred, or more. Usually, it serves moreas a general measurement than a concrete value.Gross Profit Margin Ratio DefinitionThe gross profit margin ratio, also known as gross margin, is the ratio of gross marginexpressed as a percentage of sales. Gross margin, alone, indicates how much profit acompany makes after paying off its Cost of Goods sold. It is a measure of the efficiencyof a company using its raw materials and labor during the production process. The valueof gross profit margin varies from company and industry. The higher the profit margin,the more efficient a company is. Gross profit margin can be assigned to single products oran entire company.Gross Profit Margin Ratio FormulaGross profit margin = Gross profit ÷ Total revenue(Or) Gross profit margin = (Revenue – cost of goods sold) ÷ Total revenueGross Profit Margin Ratio CalculationThe gross profit margin ratio would be calculated usingGross profit = revenue – cost of goods sold 69
  70. 70. Example: a company has Rs.15, 000 in sales and Rs.10, 000 in cost of goods sold. Itwould be expressed as a percentage of sales by:Gross profit margin ratio = (15,000 -10,000) / 15,000 = 33%This means for every rupee generated in sales, the company has 33 cents left over tocover basic operating costs and profit.Applications of Gross Profit MarginThe gross profit margin ratio is an indicator of a company‟s financial health. It tellsinvestors how much gross profit every rupee of revenue a company is earning. Comparedwith industry average, a lower margin could indicate a company is under pricing. Ahigher gross profit margin indicates that a company can make a reasonable profit onsales, as long as it keeps overhead costs in control. Investors tend to pay more for acompany with higher gross profit.Gross Profit Margin DisadvantagesMany see gross profit margin disadvantages despite the common use of gross profitmargin ratios. The issue is that certain production costs are not entirely variable. Somebelieve that only direct materials should be included as they are the only variable tochange in proportion to revenue. When applied, this new gross profit margin causes allother related costs to be transferred to operational and administrative cost categories. Thistends to cause a higher gross margin percentage than originally. It is applied by certainindustries and businesses instead of the more common application. This formula isGross Profit Margin = (Revenue - Direct Materials) / Revenue 70
  71. 71. Net Profit Margin DefinitionThe net profit margin, also known as net margin, indicates how much net income acompany makes with total sales achieved. A higher net profit margin means that acompany is more efficient at converting sales into actual profit. Net profit marginanalysis is not the same as gross profit margin. Under gross profit, fixed costs areexcluded from calculation. With net profit margin ratio all costs are included to find thefinal benefit of the income of a business. Similar terms used to describe net profitmargins include net margin, net profit, net profit ratio, net profit margin percentage, andmore. To calculate net profit margin and provide net profit margin ratio analysis requiresskills ranging from those of a small business owner to an experienced CFO. This dependson the size and complexity of the company..Net Profit Margin FormulaUsing the net profit margin ratio formula, though essential, is a fairly simple process. Thedifficulty is taking steps every day to keep the proper financial information to calculatethis and other financial ratios. Use this formula as a net profit margin calculatorNet profit margin = Net income ÷ Total revenueFinancial calculators exist which can simplify the process of net profit margincalculation. 71
  72. 72. Net Profit Margin CalculationExample: a company has Rs.200, 000 in sales and Rs.50, 000 in monthly net income.Net profit margin = Rs.50, 000 / Rs.200, 000 = 25%this means that a company has Rs.0.25 of net income for every rupee of sales.ApplicationsNet margin measures how successful a company has been at the business of marking aprofit on each rupee sales. It is one of the most essential financial ratios. Net marginincludes all the factors that influence profitability whether under management control ornot. The higher the ratio, the more effective a company is at cost control. Compared withindustry average, it tells investors how well the management and operations of acompany are performing against its competitors. Compared with different industries, ittells investors which industries are relatively more profitable than others. Net profitmargin analysis is also used among many common methods for business valuation.Return on Capital Employed (ROCE) Definition:The return on capital employed ratio is used as a measurement between earnings and theamount invested into a project or company.Return on Capital Employed (ROCE) Meaning:The return on capital employed is very similar to the return on assets (ROA), but isslightly different in that it incorporates financing. Because of this the ROCE calculationis more meaningful than the ROA. The ROCE is generally used to find out how efficient 72
  73. 73. and profitable a company is from year to year. As it is a percentage a company can locateproblems or areas of improvement with the fluctuation of this ratio from year to year.Return on Capital Employed (ROCE) EquationThe return on capital employed equation is as follows:ROCE = EBIT or NI / (Total Assets - Current Liabilities)Note: The earnings before interest and taxes, known as the operating income, is normallyused, but people can also use the Net Income if they would like to incorporate the netinterest and taxes into the ROCE formula.Current Ratio DefinitionCurrent ratio, defined also as the working capital ratio, reveals companys ability to meetits short-term maturing obligations. Values for the current ratio vary by company andindustry. In theory, the larger the ratio is, the more liquid the business is. However,comparing to the industry average is a better way to judge the performance. Current ratio,quick ratio, and other terms are common measurements of cash in a company.Current Ratio ExplanationCurrent ratios are commonly explained as a measure of a companys ability to pay thecurrent debt liabilities. For the lenders, current ratio is very helpful for them to determinewhether a company has a sufficient level of liquidity to pay liabilities. They would prefera high current ratio since it reduces their risk. For the shareholders, current ratio is alsoimportant to them to discover the weakness in the financial position of a business. Theywould prefer a lower current ratio so that more of the company‟s assets can be used for 73
  74. 74. growing business. Although current ratio is an indicator of liquidity, investors should beaware that it cannot give us the comprehensive information about company‟s liquidity.Every industry has its own norms of current ratio. The better way to evaluate it is tocheck a company‟s current ratio against its industry average. More importantly, investorsshould look at the trend of the current ratio of the company, types of current assets thecompany has and how quickly these can be converted into cash to meet company‟scurrent liabilities.Current Ratio FormulaThe current ratio formula is: Current ratio = Current assets / Current liabilitiesCurrent assets, when calculated diligently, represent cash and other assets that will beconverted into cash within one year. It normally included cash, marketable securities,accounts receivable and inventories.Current liabilities represent financial obligations that come due within one year. Itnormally included accounts payable, notes payable, short-term loans, current portion ofterm debt, accrued expenses and taxes.Example: a business has Rs.5, 000 in current assets and Rs2, 500 in current liabilities.Current ratio = 5,000 / 2,500 = 2 this means that for every rupee in current liabilities,there are Rs.2 in current assets.Quick Ratio DefinitionThe quick ratio, defined also as the acid test ratio, reveals a companys ability to meetshort-term operating needs by using its liquid assets. It is similar to the current ratio, but 74
  75. 75. is considered a more reliable indicator of a company‟s short-term financial strength. Thedifference between these two is that the quick ratio subtracts inventory from currentassets and compares the quick asset to the current liabilities. Similar to the current ratio,value for the quick ratio analysis varies widely by company and industry. In theory, thehigher the ratio is, the better the position of the company is. However, a better benchmarkis to compare the ratio with the industry average.Quick Ratio ExplanationQuick ratios are often explained as measures of a company‟s ability to pay their currentdebt liabilities without relying on the sale of inventory. Compared with the current ratio,the quick ratio is more conservative because it does not include inventories which cansometimes be difficult to liquidate. For lenders, the quick ratio is very helpful because itreveals a company‟s ability to pay off under the worst possible condition.Although the quick ratio gives investors a better picture of a company‟s ability to meetcurrent obligations the current ratio, investors should be aware that the quick ratio doesnot apply to the handful of companies where inventory is almost immediately convertibleinto cash (such as retail stores and fast food restaurants).Quick Ratio FormulaThe Quick ratio formula is:Current ratio = (Current assets – Inventories) / Current liabilitiesOr = Quick assets / Current liabilitiesOr = (Cash + Accounts Receivable + Cash equivalents) / Current liabilities 75
  76. 76. Quick Ratio CalculationQuick ratio calculation is a useful skill for any business that may face cash flow issues.Quick assets include those current assets that presumably can be quickly converted tocash at close to their book values. It normally includes cash, marketable securities, andsome accounts receivables.Current liabilities represent financial obligations that come due within one year. Itnormally included accounts payable, notes payable, short-term loans, current portion ofterm debt, accrued expenses and taxes.Debt to Equity RatioDefinition:Debt to equity ratio defined as an indication of management‟s reliance to finance its asseton debt rather than on equity. It measures a company‟s capacity to repay its creditors.The debt to equity ratio varies with different industry and company. Comparing the ratiowith industry peers is a better benchmark.Debt to Equity Ratio Meaning:The debt ratio means an indication of the gearing level of a company. A high ratio meansthat a company may be over-leveraged with debt. This can result in high insolvent risksince excessive debt can lead to a heavy debt repayment burden. However, when acompany chooses to rely largely on equity, they may lose the tax reduction benefit of 76
  77. 77. interest payments. In a word, a company must consider both risk and tax issues to get anoptimal debt to equity ratio explanation that suits their needs.Debt to Equity Ratio FormulaThe debt to equity ratio formula is listed below:Debt to equity ratio equation = total debt / total equityDebt to Equity Ratio CalculationDebt to equity ratio calculations are a matter of simple arithmetic once the properinformation is complied. Debts will include both current liabilities and long termliabilities. Equity will include goods and property your business owns, plus any claims ithas against other entities.Example: a company has Rs.10, 000 in total debt, and Rs.40, 000 in total shareholders‟equity.Debt to equity ratio = 10,000 / 40,000 = 0.25This means that a company has Rs.0.25 in debt for every rupee of shareholders‟ equity.Long-Term Debt-to-Equity RatioIn risk analysis, it is a way to determine a companys leverage. The ratio is calculated bytaking the companys long-term debt and dividing it by the total value of its preferred andcommon stock. Put graphically:Ratio = Long-term debt / (Preferred stock + Common stock) 77