This document provides an overview of balance sheet analysis and profit and loss account concepts. It discusses the key components of the balance sheet including sources of funds like capital, reserves, and liabilities, and uses of funds like fixed assets, current assets, and intangible assets. It also covers the key line items in a profit and loss account, such as gross sales, cost of goods sold, operating profit, and net profit. Notes are provided on accounting conventions and qualitative factors to consider in analyzing financial statements.
Balance Sheet
The Balance Sheet shows the financial condition of a business at a specific point of time categorizing financial sheet of the firm under two major heads “Equity & Liabilities” and “Assets”
The balance sheet is based on the fundamental equation:
Assets = Liabilities + Equity
The balance sheet is one of the major fundamental financial statements used to serve various purposes of financial analysis, accounting and financial modelling
Equity & Liabilities represents what the firm owes, the burden or debt
The format prescribed in the Companies Act classifies Equity and Liabilities as follows: Shareholders’ Fund, Non-current Liabilities & Current Liabilities
Equity is a degree of ownership in any asset after deducting all the debts associated with that asset
It represents the shareholders’ stake/ownership in the company
Liabilities are defined as a company's financial debts or obligations that arise during the course of business operations
Shareholders’ fund represents the contribution made by shareholders in the form of financing for the business
Non-current liabilities are liabilities which are expected to be settled in longer period of time usually after one year
These include long-term borrowings , deferred tax liabilities, long-term provisions and other long-term liabilities
Current Liabilities are liabilities which are due to be settled within a year
These include short-term borrowings , trade payables and short-term provisions
An asset is any resource owned by the business either tangible or intangible that produce value and is held by a company to for longer period of time to reap positive economic value for the business.
As per Companies act , under balance sheet asset is categorized under two main headings :- Current assets and Non- current assets.
Current asset is any asset which can reasonably be expected to get sold, consumed, or exhausted through the normal course of a business within the current fiscal year or operating cycle usually within one year
Current assets include current investments, inventories, trade receivables, cash& cash equivalents, short-term loans & advances
Non-current assets are company’s long-term investments usually in the form of investments made in property (land & building), plant and equipment, machinery, intangible assets like patents, copyright, trademark, goodwill etc.
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Balance Sheet
The Balance Sheet shows the financial condition of a business at a specific point of time categorizing financial sheet of the firm under two major heads “Equity & Liabilities” and “Assets”
The balance sheet is based on the fundamental equation:
Assets = Liabilities + Equity
The balance sheet is one of the major fundamental financial statements used to serve various purposes of financial analysis, accounting and financial modelling
Equity & Liabilities represents what the firm owes, the burden or debt
The format prescribed in the Companies Act classifies Equity and Liabilities as follows: Shareholders’ Fund, Non-current Liabilities & Current Liabilities
Equity is a degree of ownership in any asset after deducting all the debts associated with that asset
It represents the shareholders’ stake/ownership in the company
Liabilities are defined as a company's financial debts or obligations that arise during the course of business operations
Shareholders’ fund represents the contribution made by shareholders in the form of financing for the business
Non-current liabilities are liabilities which are expected to be settled in longer period of time usually after one year
These include long-term borrowings , deferred tax liabilities, long-term provisions and other long-term liabilities
Current Liabilities are liabilities which are due to be settled within a year
These include short-term borrowings , trade payables and short-term provisions
An asset is any resource owned by the business either tangible or intangible that produce value and is held by a company to for longer period of time to reap positive economic value for the business.
As per Companies act , under balance sheet asset is categorized under two main headings :- Current assets and Non- current assets.
Current asset is any asset which can reasonably be expected to get sold, consumed, or exhausted through the normal course of a business within the current fiscal year or operating cycle usually within one year
Current assets include current investments, inventories, trade receivables, cash& cash equivalents, short-term loans & advances
Non-current assets are company’s long-term investments usually in the form of investments made in property (land & building), plant and equipment, machinery, intangible assets like patents, copyright, trademark, goodwill etc.
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This slides will explain how accounting magic, especially Balance Sheet, woks. Once you understand that the basics of accounting magic, you will find how actions of the company are happening all over the world, and understand it.
This material was used in "The Energy Perspective of Post 3.11 Japan" which was a session of Global Entrepreneurship Week Japan . We discuss about Japanese Energy Perspectives and Innovation.
Event Details:
http://impactjapan.org/event/energy-tohoku/
This slides will explain how accounting magic, especially Balance Sheet, woks. Once you understand that the basics of accounting magic, you will find how actions of the company are happening all over the world, and understand it.
This material was used in "The Energy Perspective of Post 3.11 Japan" which was a session of Global Entrepreneurship Week Japan . We discuss about Japanese Energy Perspectives and Innovation.
Event Details:
http://impactjapan.org/event/energy-tohoku/
Hello, this slide will take you through the essentials of financial report, Fundamental concepts of Balance Sheet, Profit & Loss, Cash Flow, Ratio Analysis etc. For a detailed course please visit https://excelfinanceacademy.zenler.com/
Overview of Corporate Finance in India a presentationfootydigarse
Slide 1: Introduction
Welcome to the presentation on Corporate Finance in India.
Overview of the financial landscape and key aspects of corporate finance.
Slide 2: Importance of Corporate Finance
Explanation of why corporate finance is vital for businesses.
Role in maximizing shareholder value, strategic decision-making, and capital allocation.
Slide 3: Financial Markets in India
Overview of India's financial markets: stock exchanges, bond markets, money markets.
Regulatory bodies such as SEBI (Securities and Exchange Board of India).
Slide 4: Sources of Corporate Finance
Equity financing: IPOs, rights issues, private placements.
Debt financing: bank loans, corporate bonds, debentures.
Hybrid instruments: convertible bonds, preference shares.
Slide 5: Capital Structure Decisions
Explanation of capital structure and its importance.
Factors influencing capital structure decisions.
Trade-off between debt and equity financing.
Slide 6: Valuation Methods
Common valuation methods in India: Discounted Cash Flow (DCF), Comparable Company Analysis (CCA), Precedent Transactions Analysis.
Importance of accurate valuation for investment decisions.
Slide 7: Corporate Governance
Overview of corporate governance principles in India.
Role of the board of directors, transparency, and accountability.
Slide 8: Risk Management
Types of financial risks faced by Indian corporations: market risk, credit risk, operational risk.
Risk management strategies: hedging, diversification, insurance.
Slide 9: Mergers and Acquisitions (M&A)
Trends in M&A activity in India.
Motivations behind M&A transactions.
Regulatory framework and approval process.
Slide 10: Case Studies
Analysis of notable corporate finance transactions in India.
Learnings from successful and unsuccessful deals.
Slide 11: Future Outlook
Emerging trends and opportunities in Indian corporate finance.
Potential challenges and how to address them.
Slide 12: Conclusion
Recap of key points covered in the presentation.
Importance of effective corporate finance management for sustainable growth.
Slide 13: Questions and Discussion
Open the floor for questions and discussion.
Basics of Accounting and Financial Statements.pptxshardulbuva2
A basic understanding of business cycle, accounting, and financial statements. Beginners, especially those with a science background, will find this useful. In an easy-to-understand manner, they will learn accounting concepts and interpretation of financial statements. The purpose of this presentation is to make the financial statements understandable to non-commerce students.
1. • CAIIB - Financial Management
• Module B – Study of Financial
Statements
• - Balance Sheet Analysis
• M. Syed Kunmir
2. BALANCE SHEET ANALYSIS
• Sources of Funds
1) Capital
2) Reserves & Surplus
3) Term Liabilities
4) Current Liabilities
3. BALANCE SHEET ANALYSIS
• Uses of Funds
• 1) Fixed Assets
• 2) Intangible Asets
• 3) Non Current Assets
• 4) Current Assets
4. BALANCE SHEET ANALYSIS
• Capital
• 1) Authorised Capital
• 2) Issued Capital
• 3) Subscribed Capital
• 4) Paid-up Capital
5. BALANCE SHEET ANALYSIS
• Reserves
• 1) Subsidy Received From The Govt
• 2) Development Rebate reserve
• 3) Revaluation of fixed assets
• 4) Issue of Shares at Premium
• 5) General Reserves
• Surplus
• The credit balance in profit and loss account
6. BALANCE SHEET ANALYSIS
• Tangible Net Worth
• This refers to the total funds arrived by paid-
up capital , Reserves and P&L Surplus
• Less
• Intagible Assets
7. BALANCE SHEET ANALYSIS
• Term Liabilities
• Redeemable preference shares
• Debentures
• Deferred payment gaurantees
• Public Deposits(Repayable after 12 months)
• Term loans and unsecured loans from friens,
relatives,directors repayable over a period of time
• Remark : The company can raise public deposits
to the extent of 25% of paid up capital plus free
reserves and 10% from share holders for the
maturity period ranging from 6 months to 3 yrs
8. BALANCE SHEET ANALYSIS
• Current Liabilities
• Working capital bank borrowings
• T.loans deferred credit inst falling due in 12 mths
• public deposits maturing within 12 months
• unsecured loans, unless the repayment is on
deferred terms
• sundry creditors
• advances from dealers and customers
• interest accrued but not paid
• tax provisions
• Dividend declared and payable
9. BALANCE SHEET ANALYSIS
• Contingent Liabilities
• Tax disputes
• Legal litigations
• Bills and cheques discounted with banks
• Claims against the company not acknowledged
10. BALANCE SHEET ANALYSIS
• Fixed Assets
• Infrastructure like land & building
• plant & machinery
• Vehicles
• Furniture & fixtures
• Depreciation
• Straight line method
• Written down Value Method
• Remark : Dep added to profit to arrive repayment
obligation especially in term loans
11. BALANCE SHEET ANALYSIS
• Investments
• 1) Shares And Securities
• 2) Associate Companies
• 3) Fixed deposits with banks/finance companies
• Remark : While analysing bal sheet we can
analyse necessity of such investments
• Remark : While fixed deposits with banks are
considered as fixed assets, the investmetns in
associate concerns are treated as non current
assets.
12. BALANCE SHEET ANALYSIS
• Non Current Assets
• Deferred recievables/Overdue recievables(like
disputed amounts and Over Due > 6 mths)
• Non moving stocks/inventory/un usable spares
• Investment/Lending to associate concern
• Borrowing of the directors from the company
• Telephone deposits/ ST deposits etc
13. BALANCE SHEET ANALYSIS
• Intangible Assets
• Preliminary & Preoperative expenses
• Deferred Revenue Expenditure
• Goodwill
• Trade mark
• Patents
• Rem : The o/s balance to be written off every
year by charging P&L account
14. BALANCE SHEET ANALYSIS
• Current Assets
• Raw materials, work-in-progress,finished
goods,spares and consumables
• Sundry debtors and recievables < 6 mths
• Advances paid to suppliers of raw materials
• Cash and bank balances
• Interest recievables
• Other current assets such as Government
securities, Bank deposits ..etc
15. BALANCE SHEET ANALYSIS
• Notes
• All expenses or provisions or advances or loans
etc which are accrued and payable within 12
months are current liablities
• When a company makes investments in
unconnected avenues such as shares, securites,
associate concerns are to be treated as non cur ast
• The slow moving and absolete inventory - NCA
16. BALANCE SHEET ANALYSIS
• Notes
• Bal Sh Analy not only to be quantitative but to be
qualitative
• It is the fin pos on a part date. Min three years bal
sh ana would be more meaningful
• It is a mixture of facts, opinions and conventions
• While opinions are of the company’s management,
the conventions are practiced by the finance
managers of the company.
• ( ex Over due recievable > 6 mths as NCA is a
acccounting convention
17. BALANCE SHEET ANALYSIS
• Notes
• The valuation of the stock is done as per the
opinion of the management
• Depreciation method may be changed to boost
profit
• It may be silent on key personnel and staff
turnover
• Marginal changes in the classification of certain
items would lead to different results.
18. BALANCE SHEET ANALYSIS
• Notes
• Management competence
• Investment decision
• Resorting to window dressing
• experience of the promoters
• Board comprises of only family members
• The key personnel of the company
• The structure of the organisation
• The authority and decision making are
decentralised
19. BALANCE SHEET ANALYSIS
• Notes
• The state of industrial relations
• Financial systems and procedures
• management control
• planning, budgeting, forecasting
• capacity utilisation
• status of the technology
• awareness of the market, competitions ..etc
• for listed co: share prices, EPS, book value,
dividend record, public response ..etc
20. Profit & Loss Account
• It is a summary of revenue earned and
expenses incurred which ultimately results in
profit or loss of to the company
• No defined format in law
• Operating revenue = Sales revenue
• Non_operating revenue = Other income ( out of
sale of investments, interest, commission and
discount etc)
• Hence operating profit is a yard stick for
operating profit of the company
• Operating profit = Sales Revenue- Operating
21. Profit & Loss Account
• Gross Sales
• Gross sales includes excise duty to be charged to
the customer, central sales tax applicable, state
sales tax applicable, the discount o be allowed to
distributors/dealers/customers. The gross sales
appears in the P&L account comprises of all the
above part from the basic unit price.
• Net Sales
• The sales figure excluding all the factors
explained above are the net sales.
22. Profit & Loss Account
• Cost of production
• This is the cost incurred right from the procurement
of raw material to the finished good.
• For ex in a garment firm following cost is incurred
while production
• 1) cost of raw material cloth, buttons, canvas, hooks,
zips etc
• 2) Maintenace of sewing machines
• 3) payment of wages to workers
• 4) power
• 5) washing, ironing,packing etc.
• Cost of Prod exclu selling & admn exp & int cost
23. Profit & Loss Account
• Selling And General Administarative Expenses
• Maintaining office staff for admn & acctg
• marketing effort
• payment of salaries/Tr All to marktg personnel
• All the expenses which are not directly connected to
manufacturing are classifed as selling and/or general
expenses
24. Profit & Loss Account
• Cost of goods sold
• Cost of goods sold includes all manufacturing
expenses and the adjustments for opening and
closing stock
• Cost of Goods sold = Opening stock + Purchases +
Manufacturing expenses - Closing stock
• Gross Profit is arrived deducting figure of cost of
goods sold from the sales figure
• ie Gross profit = Sales - Cost of goods sold.
25. Profit & Loss Account
• Operating Profit is arrived deducting selling,
administrative and general expenses , provision for
bad debts, interest and miscellaneous expenses from
the gross profit.
• ie Op Profit = Gr Prof - (Sel & adm exp + Prov bad
debt + mis exp )
• Profit Before Tax When other income is added and
other expenses are deducted from the operating profit
we get profit before Tax
• ie PBT = Op Profit + oth Inc - oth exp
• Net Profit When provision for taxes is deducted
from the Profit Before Tax we get Net profit
• ie Net Profit = PBT - taxes
26. Profit & Loss Account
• Non Operating Income/Expenses
• The income earned by the unit from other than
manufacturing and seling operations is classified under
this head . i.e
• a) Interest earned on fixed deposits
• b) Dividends and profit earned by sale of assets
and share.
• All those expenses which are not directly connected
with operations of the unit are classified under this
head. i.e
• a) Preliminary expenses written off
• b) Loss suffered due to sale of assets & share