International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 4, April (20...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 4, April (20...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 4, April (20...
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online),
Volume 5, Issue 4, April (20...
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10120140504005

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10120140504005

  1. 1. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 4, April (2014), pp. 38-41 © IAEME 38 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT OF COMPANY 1 NAZAHAN SARHAN QAHTAN, 2 Dr. M. H.DASHTI 1 (Research Scholar, Department of Commerce , POONA COLLEGE OF ARTS, SCIENCE & COMMERCE, University of Pune, India) 2 (Asst. Dr. , Department of Commerce , POONA COLLEGE OF ARTS, SCIENCE & COMMERCE, University of Pune, India) ABSTRACT The financial statements of a business, person, or other entity are formal records and financial activities both in the short and long term business or provide an overview of the financial condition of the individual. They have a brief as a condition of the company and the operating results of sat Pictures. Company officials and investors to assess the overall situation and operating results of the company mainly by financial statements are used as a management tool. Analysis and interpretation of financial statements help liquidity situation, long term refinement Efficiency, financial viability and profitability of a firm in determining ratio analysis shows that the company is improving or deteriorating over the past few years. In addition, all firms compared to effectively the various aspects of this can be done with it customers who reduce the risk or a firm should invest in order to decide the maximum profit can be help Does. Mining industries are capital-intensive; that’s why a lot of money invested in it before investing in such companies so a carefully studied its financial condition and eligibility. unfortunately very limited work analysis and interpretation of financial statements for Indian mining companies have been on a quest to analyze and five coal and non-coal mining companies to explain financial statements has been carried out in this project. Keywords: Financial Statements, Financial Analysis, Performance of the Companies, Financial Activities, Advance Accounting. 1. INTRODUCTION Financial statements are eagerly awaited by investors, bankers and some other concerns. For them, it is the only source of information on a company they are interested in. By studying these INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 5, Issue 4, April (2014), pp. 38-41 © IAEME: www.iaeme.com/ijm.asp Journal Impact Factor (2014): 7.2230 (Calculated by GISI) www.jifactor.com IJM © I A E M E
  2. 2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 4, April (2014), pp. 38-41 © IAEME 39 statements, they can find out how well or bad the company has performance in the past year. Besides, these statements help them uncover the problems faced by the company and identify actions to be taken to safeguard their own interest. The reality it is very difficult to understand the picture painted by the Accounts just by looking at them. Some companies publish annual reports running into 100 or more pages. The accounts are, therefore, summarized and analyzed. Trends are spotted and the future prospects forecasted. In simple words, analysis means "breakup.", just like dismantling. An analyst would deconstruct the statements, or carry out reverse-engineering process, in order to make deeper sense of business performance. For Instance, in one year the sales were Rs.150 million. In order to analyse, we can break the sales to month-wise sales or territory-wise sales or variety-wise or a combination thereof. It would now be easy to spot the highest and lowest level in each segmentation adding one or more years with the same breakdown; one can get a clue of the peak month, most lucrative territory or a top-selling variety. 2. THE FOUR FINANCIAL STATEMENTS BALANCE SHEET 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. 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 point in time. 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. 3- Statement of Retained Earnings: It explains the changes in a company's retained earnings over the reporting period. 4- Cash Flow Statement: It reports on a company's cash flow activities; particularly it’s operating, investing and financing activities. CONTENTS OF PROFIT & LOSS STATEMENT A) Revenue Cash inflows or other enhancements are of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entities ongoing major operations.
  3. 3. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 4, April (2014), pp. 38-41 © IAEME 40 B) Expenses Cash outflows or other using-up of assets or incurrence is 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 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 sometime 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 , • 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. H) Gross Margin (or Gross Profit) The difference between turnover, and sales, and COS is gross profit or gross margin. It needs to be positive and large enough to at least cover all other expenses.
  4. 4. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 4, April (2014), pp. 38-41 © IAEME 41 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. Also known as Earnings before Interest and Tax (EBIT) OP = 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. 3. CONCLUSION The study reveals that the company perform financial statement analysis the benefit d the investors for future investment in the company. It is also observed that a current position of all company was good the profitability and growth for the company were positive. REFERENCES 1- Khan, M.Y. (1988). “Financial Management”, Tata Mc-Graw Hill , New Delhi, 1st edition, Chapter -03 , Financial Statement Analysis: Ratio Analysis, pp.114-158. 2- Bhattacharya, Asish.K. (2007). “Introduction to Financial Statement Analysis”, Elsevier NewDelhi, 1st edition, Chapter -03, Ratio Analysis, pp.32-45. 3- Wanless, R.M. (1983). “Finance For Mine Management”, Chapman & Hall Ltd , New York , 1st edition, Chapter -06 , Financial Accounting , pp. 109-112. 4- Khanna, O.P. (1999). “Industrial Engineering and management”, DhanpatRai, 1stedition, New Delhi, Chapter -26, Financial Management, pp. 26.11-26.21. 5- Dr .maheshkulkarni / dr .suhasmahajan management accounting 2008 punecapter 2 financial a statement. 6- M.G. patkarmanagement accounting2008. 7- Essential of Financial Analysis...by George F. Friedlob, Lydia L. F. Schleifer. 8- Management accounting Dr. Maheshkulkarni /dr .suhasmahajan /university of Pune. 9- S. Angappan and Dr. J. Clement Sudhahar, “An Empirical Examination of Corporate Social Responsibility on Financial Performance - A Survey of Literature”, International Journal of Management (IJM), Volume 5, Issue 1, 2014, pp. 63 - 70, ISSN Print: 0976-6502, ISSN Online: 0976-6510.

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