ASHOKA HYPER MARKET

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Financial statement analysis can be referred as a process of understanding the risk
and profitability of a company by analyzing reported financial info, especially annual and
quarterly reports. Putting another way, financial statement analysis is a study about
accounting ratios among various items included in the balance sheet. These ratios include
asset utilization ratios, profitability ratios, leverage ratios, liquidity ratios, and valuation
ratios. Moreover, financial statement analysis is a quantifying method for determining the
past, current, and prospective performance of a company.
Understanding financial statements is key to fundamental stock analysis and overall
investment research. Financial statements provide an account of a company’s past
performance, a picture of its current financial strength and a glimpse into the future potential
of a firm.
The goal is to enhance your ability to make a sound judgment about a company’s financial
strength and future prospects by showing you the benefits of using financial statements in
your personal investment research.
Given the varied financial knowledge of our readers, I will address many topics that
some may find very basic. However, to build a strong understanding of advanced topics, you
need a solid foundation. As we progress through this series, I expect to touch on more
advanced topics when explaining how I personally use financial statements to analyze a firm.
In this introductory article, I explain the major components of each financial statement and
why they matter in security analysis.
The role of financial reporting for companies is to provide information about their
fiscal health and financial performance. As investors, we use financial reports to evaluate the
past, current and prospective performance and financial position of a company. These
statements allow us to compare one firm to another and form the basis of valuing the worth of
a stock.

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Several financial statements are reported by companies. The most important three,
and the three used most often by investors, are:
 the income statement,
 the balance sheet and
 the cash flow statement.
MEANING:
Financial statement analysis is an analysis that highlights the important relationship in
the financial statements. Financial statement analysis focuses on the evaluation of past
performance of the business firm in terms of liquidity, profitability , operational efficiency
and growth potentiality. Financial statements analysis includes the method use in assessing
and interpreting the result of past performance and current financial position as they relate to
particular factors of interest in investment decisions. Therefore financial statement analysis is
an important means of assessing past performance and in forecasting and planning future
performance.
Definition:
“Financial statements are the products of financial accounting prepared by the
accountant the result of its activities and an analysis of what has been with earnings”
 SMITH ASHBURNE
“The analysis and interpretation of financial statement reveal each and every aspect
regarding the well bringing financial soundness., operational efficiency of the concerned”.
 JOHN MYER
NEED OF STUDY:
Financial statement analysis is used to identify the trends and relationship between
financial statement items. Both internal management and external users of financial
statements need to evaluate companies’ profitability, liquidity and solvency. The most
common methods used for financial statement analysis and trend analysis are common size
statement, and ration analysis. These methods include calculation and comparison of the
results to historical company data.

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SCOPE OF THE STUDY:
 The main scope of study is to find out financial performance of firm for past five
years.
 Annual renewals and filling contractor licenses have been made to know the
performance of business. The financial authorities can use this for evaluate their
performance in future. Which will help to analyze the financial statements
FUNCTIONS OF THE STUDY
 It helps to know the future earning capacity or profitability of concern
 The short term and long term solvency of concern can be known
A possibility of developments in the future by forecasting and prepare budgets.
BENEFITS OF THE STUDY:
 The owner provides fund from operations of a business
 The creditors can know the financial position of concern before giving loans.
 Prospective investors who want to invest money in a firm would like to make an
analysis of financial statements.
LIMITATIONS TO STUDY
 The study is done in short time only
 The study is limited only for the period of five years
 These only a study of interim reports
 Financial analysis based upon only monitoring information and non monitoring
factors are ignored.

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OBJECTIVES OF THE STUDY:
 To know the borrowing as well as liquidity position of a company
 To study the balance of cash and credit in the organization
 To study the profit of the business and net sales of the business
 To examine the solvency of the firm
 To know the financial position of company by studying the ratios.
 To predict the profitability and growth of the firm
To identify the reasons for changes in profitability
HYPOTHESIS:
 H1 accept. The financial position of company is increasing.
 H0 accept. The financial position of company is detraining.
RESEARCH METHODOLOGY
Methodology refers to the process of collection of required data. The collection of a
data can be classified into two categories
 Primary data
 Secondary data
PRIMARY DATA:
Primary data is the first hand information. The company data is collected directly
primary data permits to facts, knowledge , opinion and intension. The basic means of a
primary data are communication and observation. Communication involves questions of
respondent to get the desired information using data collection called.
SECONDARY DATA
The data collected from published sources not collected for the first time is called
secondary data. The secondary data is already gathered and available data before going for
primary data collection and the researcher has to first consider the secondary data. Because
data is readily available and relativity quick.

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PERIOD OF STUDY:
The period of any research is the period for which the data has been collected and
analyzed the period of this study has been limited to five financial years starting from 01-04-
2010 to 31-03-2015. The project duration was over a period of the 45 days.
THE DATA COLLECTION INCLUDES:
 Data collected from annual reports of “ASHOKA HYPER MARKET”
 Reference from text books relating to financial management.
CONCEPT OF FINANCIAL STATEMENT ANALYSIS:
The concept of financial statement analysis is based on mainly two aspects.
CURRENT ASSETS CURRENT LIABILITIES
 Cash in hand / at bank
 Bills receivable
 Sundry debtors
 Short term loans
 Temporary investment
 Accrued incomes
 Bills payable
 Sundry creditor
 Outstanding expenses
 Bank over draft
 Accrued expenses
METHODS OF FINANIAL STATEMENT ANALYSIS:
The analysis an interpretation of financial statements is used to determine the
financial position and results of operation as well.
The following methods of analysis are generally used:-
1. Comparative statement
2. Common size statement
3. Trend analysis
4. Ratio analysis
5. Funds flow analysis
6. Cash flow analysis

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Structure of Financial Analysis
Figure No. 1
Types of Ratio;
Figure No. 2
Ratio Analysis:
Over the years, investors and analysts have developed numerous analytical tools,
concepts and techniques to compare the relative strengths and weaknesses of companies.
These tools, concepts and techniques form the basis of fundamental analysis.

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Ratio analysis is a tool that was developed to perform quantitative analysis on
numbers found on financial statements. Ratios help link the three financial statements
together and offer figures that are comparable between companies and across industries and
sectors. Ratio analysis is one of the most widely used fundamental analysis techniques.
However, financial ratios vary across different industries and sectors and comparisons
between completely different types of companies are often not valid. In addition, it is
important to analyze trends in company ratios instead of solely emphasizing a single period’s
figures.
What is a ratio? It’s a mathematical expression relating one number to another, often
providing a relative comparison. Financial ratios are no different—they form a basis of
comparison between figures found on financial statements. As with all types of fundamental
analysis, it is often most useful to compare the financial ratios of a firm to those of other
companies.
Financial ratios fall into several categories. For the purpose of this analysis, the
commonly used ratios are grouped into four categories: activity, liquidity, solvency and
profitability. Also, for the sake of consistency, the data in the financial statements created for
the prior installments of the Financial Statement Analysis series will be used to illustrate the
ratios. Table 1 shows the formulas with examples for each of the ratios discussed.
Income Statement:
The income statement reports how much revenue the company generated during a
period of time, the expenses it incurred and the resulting profits or losses. The basic equation
underlying the income statement is:
revenue – expenses = income
All companies use a reporting period of one year, which can start and end at the same
time as a calendar year, or could start and end at different point in the year (the firm’s fiscal
year).

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There are several important pieces of information on the income statement that are
relevant to stock analysis. Investment analysts use the income statement to monitor revenues,
expenses and profits and their trends over time. The direction and rate of change in not only
profits but also “top-line” revenue influence the valuation of the firm. The rate of growth, and
whether it is accelerating or decelerating, for both revenue and net income, is a critical
component in stock valuation. Investors often reward high-growth companies with a higher
valuation.
Near the bottom of the income statement is earnings per share. Earnings per share is
simply the earnings the company generated per share of outstanding company stock. This is
the figure used in the denominator of the price-earnings ratio, a key ratio used frequently in
investment analysis.
Activity Ratios:
Activity ratios are used to measure how efficiently a company utilizes its assets. The
ratios provide investors with an idea of the overall operational performance of a firm. As you
can see from Table 1, the activity ratios are “turnover” ratios that relate an income statement
line item to a balance sheet line item. As explained in my previous articles, the income
statement measures performance over a specified period, whereas the balance sheet presents
data as of one point in time. To make the items comparable for use in activity ratios, an
average figure is calculated for the balance sheet data using the beginning and ending
reported numbers for the period (quarter or year).
The activity ratios measure the rate at which the company is turning over its assets or
liabilities. In other words, they present how many times per year inventory is replenished or
receivables are collected.
Inventory turnover:
Inventory turnover is calculated by dividing cost of goods sold by average inventory.
A higher turnover than the industry average means that inventory is sold at a faster rate,
signaling inventory management effectiveness. Additionally, a high inventory turnover rate
means less company resources are tied up in inventory. However, there are usually two sides
to the story of any ratio. An unusually high inventory turnover rate can be a sign that a
company’s inventory is too lean, and the firm may be unable to keep up with any increased

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demand. Furthermore, inventory turnover is very industry-specific. In an industry where
inventory gets stale quickly, you should seek out companies with high inventory turnover.
Going forward, a decrease in inventory or an increase in cost of goods sold will
increase the ratio, signaling improved inventory efficiency (selling the same amount of goods
while holding less inventory or selling more goods while holding the same amount of
inventory).
Receivables turnover:
The receivables turnover ratio is calculated by dividing net revenue by average
receivables. This ratio is a measure of how quickly and efficiently a company collects on its
outstanding bills. The receivables turnover indicates how many times per period the company
collects and turns into cash its customers’ accounts receivable.
Once again, a high turnover compared to that of peers means that cash is collected
more quickly for use in the company, but be sure to analyze the turnover ratio in relation to
the firm’s competitors. A very high receivables turnover ratio can also mean that a
company’s credit policy is too stringent, causing the firm to miss out on sales opportunities.
Alternatively, a low or declining turnover can signal that customers are struggling to pay their
bills.
Payables turnover:
Payables turnover measures how quickly a company pays off the money owed to
suppliers. The ratio is calculated by dividing purchases (on credit) by average payables.
A high number compared to the industry average indicates that the firm is paying off
creditors quickly, and vice versa. An unusually high ratio may suggest that a firm is not
utilizing the credit extended to them, or it could be the result of the company taking
advantage of early payment discounts. A low payables turnover ratio could indicate that a
company is having trouble paying off its bills or that it is taking advantage of lenient supplier
credit policies.

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Be sure to analyze trends in the payables turnover ratio, as a change in a single period
can be caused by timing issues such as the firm acquiring additional inventory for a large
purchase or to gear up for a high sales season. Also understand that industry norms can vary
dramatically.
Asset turnover:
Asset turnover measures how efficiently a company uses its total assets to generate
revenues. The formula to calculate this ratio is simply net revenues divided by average total
assets. Our asset turnover ratio of 0.72x indicates that the firm generates $0.72 of revenue for
every $1 of assets that the company owns.
A low asset turnover ratio may mean that the firm is inefficient in its use of its assets
or that it is operating in a capital-intensive environment. Additionally, it may point to a
strategic choice by management to use a more capital-intensive (as opposed to a more labor-
intensive) approach.
Liquidity Ratios:
Liquidity ratios are some of the most widely used ratios, perhaps next to profitability
ratios. They are especially important to creditors. These ratios measure a firm’s ability to
meet its short-term obligations.
The level of liquidity needed varies from industry to industry. Certain industries are
more cash-intensive than others. For example, grocery stores will need more cash to buy
inventory constantly than software firms, so the liquidity ratios of companies in these two
industries are not comparable to each other. It is also important to note a company’s trend in
liquidity ratios over time.
Current ratio:
The current ratio measures a company’s current assets against its current liabilities.
The current ratio indicates if the company can pay off its short-term liabilities in an
emergency by liquidating its current assets. Current assets are found at the top of the balance
sheet and include line items such as cash and cash equivalents, accounts receivable and
inventory, among others.

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A low current ratio indicates that a firm may have a hard time paying their current liabilities
in the short run and deserves further investigation. A current ratio under 1.00 xs, for example,
means that even if the company liquidates all of its current assets, it would still be unable to
cover its current liabilities. In our example, the firm is operating with a very low current ratio
of 0.91 xs. It indicates that if the firm liquidated all of its current assets at the recorded value,
it would only be able to cover 91% of its current liabilities.
A high ratio indicates a high level of liquidity and less chance of a cash squeeze. A
current ratio that is too high, however, may indicate that the company is carrying too much
inventory, allowing accounts receivables to balloon with lax payment collection standards or
simply holding too much in cash. Although these issues will not typically lead to insolvency,
they will inevitably hurt the company’s bottom line.
Quick ratio:
The quick ratio is a liquidity ratio that is more stringent than the current ratio. This
ratio compares the cash, short-term marketable securities and accounts receivable to current
liabilities. The thought behind the quick ratio is that certain line items, such as prepaid
expenses, have already been paid out for future use and cannot be quickly and easily
converted back to cash for liquidity purposes. In our example, the quick ratio of 0.45x
indicates that the company can only cover 45% of current liabilities by using all cash-on-
hand, liquidating short-term marketable securities and monetizing accounts receivable.
The major line item excluded in the quick ratio is inventory, which can make up a
large portion of current assets but may not easily be converted to cash. During times of stress,
high inventories across all companies in the industry may make selling inventory difficult. In
addition, if company stockpiles are overly specialized or nearly obsolete, they may be worth
significantly less to a potential buyer. Consider Apple Inc. (AAPL), for example, which is
known to use specialized parts for its products. If the company needed to quickly liquidate
inventory, the stockpiles it is carrying may be worth a great deal less than the inventory
figure it carries on its accounting books.

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Cash ratio:
The most conservative liquidity ratio is the cash ratio, which is calculated as simply
cash and short-term marketable securities divided by current liabilities. Cash and short-term
marketable securities represent the most liquid assets of a firm. Short-term marketable
securities include short-term highly liquid assets such as publicly traded stocks, bonds and
options held for less than one year. During normal market conditions, these securities can
easily be liquidated on an exchange. The cash ratio in Table 1 is 0.27x, which suggests that
the firm can only cover 27% of its current liabilities with its cash and short-term marketable
securities.
Although this ratio is generally considered the most conservative and very reliable, it
is possible that even short-term marketable securities can experience a significant drop in
prices during market crises.
Solvency Ratios:
Solvency ratios measure a company’s ability to meet its longer-term obligations.
Analysis of solvency ratios provides insight on a company’s capital structure as well as the
level of financial leverage a firm is using. Some solvency ratios allow investors to see
whether a firm has adequate cash flows to consistently pay interest payments and other fixed
charges. If a company does not have enough cash flows, the firm is most likely overburdened
with debt and bondholders may force the company into default.
Debt-to-assets ratio:
The debt-to-assets ratio is the most basic solvency ratio, measuring the percentage of
a company’s total assets that is financed by debt. The ratio is calculated by dividing total
liabilities by total assets. A high number means the firm is using a larger amount of financial
leverage, which increases its financial risk in the form of fixed interest payments. In our
example in Table 1, total liabilities accounts for 72% of total assets.
Debt-to-capital ratio:
The debt-to-capital ratio is very similar, measuring the amount of a company’s total
capital (liabilities plus equity) that is provided by debt (interesting bearing notes and short-
and long-term debt). Once again, a high ratio means high financial leverage and risk.
Although financial leverage creates additional financial risk by increased fixed interest
payments, the main benefit to using debt is that it does not dilute ownership. In theory,

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earnings are split among fewer owners, creating higher earnings per share. However, the
increased financial risk of higher leverage may hold the company to stricter debt covenants.
These covenants could restrict the company’s growth opportunities and ability to pay or raise
dividends.
Debt-to-equity ratio:
The debt-to-equity ratio measures the amount of debt capital a firm uses compared to
the amount of equity capital it uses. A ratio of 1.00x indicates that the firm uses the same
amount of debt as equity and means that creditors have claim to all assets, leaving nothing for
shareholders in the event of a theoretical liquidation.
Interest coverage ratio:
The interest coverage ratio, also known as times interest earned, measures a
company’s cash flows generated compared to its interest payments. The ratio is calculated by
dividing EBIT (earnings before interest and taxes) by interest payments.
With interest coverage ratios, it’s important to analyze them during good and lean
years. Most companies will show solid interest coverage during strong economic cycles, but
interest coverage may deteriorate quickly during economic downturns.
Profitability Ratios:
Profitability ratios are arguably the most widely used ratios in investment analysis.
These ratios include the ubiquitous “margin” ratios, such as gross, operating and net profit
margins. These ratios measure the firm’s ability to earn an adequate return. When analyzing a
company’s margins, it is always prudent to compare them against those of the industry and its
close competitors.
Margins will vary among industries. Companies operating in industries where
products are mostly “commodities” (products easily replicated by other firms) will typically
have low margins. Industries that offer unique products with high barriers to entry generally
have high margins. In addition, companies may hold key competitive advantages leading to
increased margins.

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Gross profit margin:
Gross profit margin is simply gross income (revenue less cost of goods sold) divided
by net revenue. The ratio reflects pricing decisions and product costs. The 50% gross margin
for the company in our example shows that 50% of revenues generated by the firm are used
to pay for the cost of goods sold.
For most firms, gross profit margin will suffer as competition increases. If a company
has a higher gross profit margin than is typical of its industry, it likely holds a competitive
advantage in quality, perception or branding, enabling the firm to charge more for its
products. Alternatively, the firm may also hold a competitive advantage in product costs due
to efficient production techniques or economies of scale. Keep in mind that if a company is a
first mover and has high enough margins, competitors will look for ways to enter the
marketplace, which typically forces margins downward.
Operating profit margin:
Operating profit margin is calculated by dividing operating income (gross income less
operating expenses) by net revenue. The operating margin in Table 1 is 18%, which suggests
that for every $1 of revenues generated, $0.18 is left after deducting cost of goods sold and
operational expenses. Operating expenses include costs such as administrative overhead and
other costs that cannot be attributed to single product units.
Operating margin examines the relationship between sales and management-
controlled costs. Increasing operating margin is generally seen as a good sign, but investors
should simply be looking for strong, consistent operating margins.
Net profit margin:
Net profit margin compares a company’s net income to its net revenue. This ratio is
calculated by dividing net income, or a company’s bottom line, by net revenue. It measures a
firm’s ability to translate sales into earnings for shareholders. Once again, investors should
look for companies with strong and consistent net profit margins.
ROA and ROE:
Two other profitability ratios are also widely used—return on assets (ROA) and return
on equity (ROE).

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Return on assets is calculated as net income divided by total assets. It is a measure of
how efficiently a firm utilizes its assets. A high ratio means that the company is able to
efficiently generate earnings using its assets. As a variation, some analysts like to calculate
return on assets from pretax and pre-interest earnings using EBIT divided by total assets.
While return on assets measures net income, which is return to equity holders, against
total assets, which can be financed by debt and equity, return on equity measures net income
less preferred dividends against total stockholder’s equity. This ratio measures the level of
income attributed to shareholders against the investment that shareholders put into the firm. It
takes into account the amount of debt, or financial leverage, a firm uses. Financial leverage
magnifies the impact of earnings on ROE in both good and bad years. If there are large
discrepancies between the return on assets and return on equity, the firm may be
incorporating a large amount of debt. In that case, it is prudent to closely examine the
liquidity and solvency ratios.
FINANCIAL STATEMENTS IN TERMS OF 5 COMPONENTS:
1. Cash & Equivalents: A good cash budgeting and forecasting systems provides
answers to key questions such as it is the cash level adequate to meet current expenses
as they come due? When & how much bank borrowing will be needed to meet any
cash shortfalls? When will be repayment expected?
2. Amortization: Repayment of loan principal and interest a loan can be amortized in
several ways in including (a) in equal installments of amortization, where the interest
component of the payment reduces as the principal is paid down. (b) in regular
payment of varying amounts, often called “commercial Amortization which results
from paying of a constant principal each installment plus interest on the amount of
principal owed”.
3. Assets: An item of current or future economic benefit to an organization. Examples
cash, short terms investments, accounts receivable, grants receivable, inventories,
prepaid expenses, buildings, furniture’s and long term investments.

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4. Audit: A financial statement as of a certain date, usually covering a 12 month period,
prepared by certified public accountant (CPA), that includes an opinion letter ,a
statement of financial position(Balance sheet), a statement of activities (Income
statements). A auditor can have an unqualified opinion, stating that the organization
appears to have followed all accounting rules.
5. Depreciation: A non cash expense associated with reducing a fixed asset book value
due to general wear and tear over its defined accounting or useful life. Depreciation is
only an approximation of the amount needed to replace fixed assets.

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Financial statement analysis (or financial analysis) the process of understanding the
risk and profitability of a firm (business, sub-business or project) through analysis of reported
financial information, particularly annual and quarterly reports.
Financial statement analysis consists of
1) Reformulating reported financial statements,
2) Analysis and adjustments of measurement errors, and
3) Financial ratio analysis on the basis of reformulated and adjusted financial statements. The
two first steps are often dropped in practice, meaning that financial ratios are just calculated
on the basis of the reported numbers, perhaps with some adjustments. Financial statement
analysis is the foundation for evaluating and pricing credit risk and for doing fundamental
company valuation.
1. Financial statement analysis typically starts with reformulating the reported financial
information. In relation to the income statement, one common reformulation is to
divide reported items into recurring or normal items and non-recurring or special
items. In this way, earnings could be separated in to normal or core earnings and
transitory earnings. The idea is that normal earnings are more permanent and hence
more relevant for prediction and valuation. Normal earnings are also separated into
net operational profit after taxes (NOPAT) and net financial costs. The balance sheet
is grouped, for example, in net operating assets (NOA), net financial debt and equity.
2. Analysis and adjustment of measurement errors question the quality of the reported
accounting numbers. The reported numbers can for example be a bad or noisy
representation of invested capital, for example in terms of NOA, which means that the
return on net operating assets (RNOA) will be a noisy measure of the underlying
profitability (the internal rate of return, IRR). Expensing of R&D is an example when
such investment expenditures are expected to yield future economic benefits,
suggesting that R&D creates assets which should have been capitalized in the balance
sheet. An example of an adjustment for measurement errors is when the analyst
removes the R&D expenses from the income statement and put them in the balance
sheet.

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3. Financial ratio analysis should be based on regrouped and adjusted financial
statements. Two types of ratio analysis are performed: 3.1) Analysis of risk and 3.2)
analysis of profitability:
a. Analysis of risk typically aims at detecting the underlying credit risk of the
firm. Risk analysis consists of liquidity and solvency analysis. Liquidity
analysis aims at analyzing whether the firm has enough liquidity to meet its
obligations when they should be paid. A usual technique to analyze illiquidity
risk is to focus on ratios such as the current ratio and interest coverage. Cash
flow analysis is also useful. Solvency analysis aims at analyzing whether the
firm is financed so that it is able to recover from a loss or a period of losses. A
usual technique to analyze insolvency risk is to focus on ratios such as the
equity in percentage of total capital and other ratios of capital structure. Based
on the risk analysis the analyzed firm could be rated, i.e. given a grade on the
riskiness, a process called synthetic rating. Ratios of risk such as the current
ratio, the interest coverage and the equity percentage have no theoretical
benchmarks. It is therefore common to compare them with the industry
average over time. If a firm has a higher equity ratio than the industry, this is
considered less risky than if it is above the average. Similarly, if the equity
ratio increases over time, it is a good sign in relation to insolvency risk.
b. Analysis of profitability refers to the analysis of return on capital, for example
return on equity, ROE, defined as earnings divided by average equity. Return
on equity, ROE, could be decomposed: ROE = RNOA + (RNOA - NFIR) *
NFD/E, where RNOA is return on net operating assets, NFIR is the net
financial interest rate, NFD is net financial debt and E is equity. In this way,
the sources of ROE could be clarified. Unlike other ratios, return on capital
has a theoretical benchmark, the cost of capital - also called the required return
on capital. For example, the return on equity, ROE, could be compared with
the required return on equity, kE, as estimated, for example, by the capital
asset pricing model. If ROE < kE (or RNOA > WACC, where WACC is the
weighted average cost of capital), then the firm is economically profitable at
any given time over the period of ratio analysis. The firm creates values for its
owners. Insights from financial statement analysis could be used to make
forecasts and to evaluate credit risk and value the firm's equity.

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A financial statement (or financial report) is a formal record of the financial
activities of a business, person, or other entity. In British English—including United
Kingdom company law—a financial statement is often referred to as an account, although
the term financial statement is also used, particularly by accountants.
For a business enterprise, all the relevant financial information, presented in a
structured manner and in a form easy to understand, are called the financial statements. They
typically include four basic financial statements, accompanied by a management discussion
and analysis:
1. Statement of Financial Position: also referred to as a balance sheet, reports on a
company's assets, liabilities, and ownership equity at a given point in time.
2. Statement of Comprehensive Income: also referred to as Profit and Loss statement
(or a "P&L"), reports on a company's income, expenses, and profits over a period of
time. A Profit & Loss statement provides information on the operation of the
enterprise. These include sale and the various expenses incurred during the processing
state.
3. Statement of Changes in Equity: explains the changes of the company's equity
throughout the reporting period
4. Statement of cash flows: reports on a company's cash flow activities, particularly its
operating, investing and financing activities.
For large corporations, these statements are often complex and may include an
extensive set of notes to the financial statements and explanation of financial policies and
management discussion and analysis. The notes typically describe each item on the balance
sheet, income statement and cash flow statement in further detail. Notes to financial
statements are considered an integral part of the financial statements.
Purpose of financial statements by business entities:
"The objective of financial statements is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful to a
wide range of users in making economic decisions." Financial statements should be
understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income
and expenses are directly related to an organization's financial position.

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Financial statements are intended to be understandable by readers who have "a
reasonable knowledge of business and economic activities and accounting and who are
willing to study the information diligently." Financial statements may be used by users for
different purposes:
 Owners and managers require financial statements to make important business
decisions that affect its continued operations. Financial analysis is then performed on
these statements to provide management with a more detailed understanding of the
figures. These statements are also used as part of management's annual report to the
stockholders.
 Employees also need these reports in making collective bargaining agreements (CBA)
with the management, in the case of labor unions or for individuals in discussing their
compensation, promotion and rankings.
 Prospective investors make use of financial statements to assess the viability of
investing in a business. Financial analyses are often used by investors and are
prepared by professionals (financial analysts), thus providing them with the basis for
making investment decisions.
 Financial institutions (banks and other lending companies) use them to decide
whether to grant a company with fresh working capital or extend debt securities (such
as a long-term bank loan or debentures) to finance expansion and other significant
expenditures.
 Government entities (tax authorities) need financial statements to ascertain the
propriety and accuracy of taxes and other duties declared and paid by a company.
 Vendors who extend credit to a business require financial statements to assess the
creditworthiness of the business.
 Media and the general public are also interested in financial statements for a variety of
reasons.
Government financial statements:
The rules for the recording, measurement and presentation of government financial
statements may be different from those required for business and even for non-profit
organizations. They may use either of two accounting methods: accrual accounting, or cash
accounting, or a combination of the two (OCBOA). A complete set of chart of accounts is
also used that is substantially different from the chart of a profit-oriented business

21. 21
Financial statements of not-for-profit organizations:
The financial statements that not-for-profit organizations such as charitable
organizations and large voluntary associations publish, tend to be simpler than those of for-
profit corporations. Often they consist of just a balance sheet and a "statement of activities"
(listing income and expenses) similar to the "Profit and Loss statement" of a for-profit.
Charitable organizations in the United States are required to show their income and net assets
(equity) in three categories: Unrestricted (available for general use), Temporarily Restricted
(to be released after the donor's time or purpose restrictions have been met), and Permanently
Restricted (to be held perpetually, e.g., in an Endowment).
Personal financial statements:
Personal financial statements may be required from persons applying for a personal
loan or financial aid. Typically, a personal financial statement consists of a single form for
reporting personally held assets and liabilities (debts), or personal sources of income and
expenses, or both. The form to be filled out is determined by the organization supplying the
loan or aid.
Audit and legal implications:
Although laws differ from country to country, an audit of the financial statements of a
public company is usually required for investment, financing, and tax purposes. These are
usually performed by independent accountants or auditing firms. Results of the audit are
summarized in an audit report that either provide an unqualified opinion on the financial
statements or qualifications as to its fairness and accuracy. The audit opinion on the financial
statements is usually included in the annual report.
There has been much legal debate over who an auditor is liable to. Since audit reports
tend to be addressed to the current shareholders, it is commonly thought that they owe a legal
duty of care to them. But this may not be the case as determined by common law precedent.
In Canada, auditors are liable only to investors using a prospectus to buy shares in the
primary market. In the United Kingdom, they have been held liable to potential investors
when the auditor was aware of the potential investor and how they would use the information
in the financial statements. Nowadays auditors tend to include in their report liability
restricting language, discouraging anyone other than the addressees of their report from

22. 22
relying on it. Liability is an important issue: in the UK, for example, auditors have unlimited
liability.
In the United States, especially in the post-Enron era there has been substantial
concern about the accuracy of financial statements. Corporate officers (the chief executive
officer (CEO) and chief financial officer (CFO)) are personally liable for attesting that
financial statements "do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by th[e]
report." Making or certifying misleading financial statements exposes the people involved to
substantial civil and criminal liability. For example Bernie Ebbers (former CEO of
WorldCom) was sentenced to 25 years in federal prison for allowing WorldCom's revenues to
be overstated by billion over five years.
Standards and regulations:
Different countries have developed their own accounting principles over time, making
international comparisons of companies difficult. To ensure uniformity and comparability
between financial statements prepared by different companies, a set of guidelines and rules
are used. Commonly referred to as Generally Accepted Accounting Principles (GAAP), these
set of guidelines provide the basis in the preparation of financial statements, although many
companies voluntarily disclose information beyond the scope of such requirements.
Recently there has been a push towards standardizing accounting rules made by the
International Accounting Standards Board ("IASB"). IASB develops International Financial
Reporting Standards that have been adopted by Australia, Canada and the European Union
(for publicly quoted companies only), are under consideration in South Africa and other
countries. The United States Financial Accounting Standards Board has made a commitment
to converge the U.S. GAAP and IFRS over time.
Inclusion in annual reports:
To entice new investors, most public companies assemble their financial statements
on fine paper with pleasing graphics and photos in an annual report to shareholders,
attempting to capture the excitement and culture of the organization in a "marketing

23. 23
brochure" of sorts. Usually the company's chief executive will write a letter to shareholders,
describing management's performance and the company's financial highlights.
In the United States, prior to the advent of the internet, the annual report was
considered the most effective way for corporations to communicate with individual
shareholders. Blue chip companies went to great expense to produce and mail out attractive
annual reports to every shareholder. The annual report was often prepared in the style of a
coffee table book.
Moving to electronic financial statements:
Financial statements have been created on paper for hundreds of years. The growth of
the Web has seen more and more financial statements created in an electronic form which is
exchangeable over the Web. Common forms of electronic financial statements are PDF and
HTML. These types of electronic financial statements have their drawbacks in that it still
takes a human to read the information in order to reuse the information contained in a
financial statement.
More recently a market driven global standard, XBRL (Extensible Business Reporting
Language), which can be used for creating financial statements in a structured and computer
readable format, has become more popular as a format for creating financial statements.
Many regulators around the world such as the U.S. Securities and Exchange Commission
have mandated XBRL for the submission of financial information.
The UN/CEFACT created, with respect to Generally Accepted Accounting Principles,
(GAAP), internal or external financial reporting XML messages to be used between
enterprises and their partners, such as private interested parties (e.g. bank) and public
collecting bodies (e.g. taxation authorities). Many regulators use such messages to collect
financial and economic information.
In financial accounting, a balance sheet or statement of financial position is a
summary of the financial balances of a sole proprietorship, a business partnership, a
corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and
ownership equity are listed as of a specific date, such as the end of its financial year. A
balance sheet is often described as a "snapshot of a company's financial condition". Of the

24. 24
four basic financial statements, the balance sheet is the only statement which applies to a
single point in time of a business' calendar year.
A standard company balance sheet has three parts: assets, liabilities and ownership
equity. The main categories of assets are usually listed first and typically in order of liquidity.
Assets are followed by the liabilities. The difference between the assets and the liabilities is
known as equity or the net assets or the net worth or capital of the company and according to
the accounting equation, net worth must equal assets minus liabilities.
Another way to look at the same equation is that assets equal liabilities plus owner's
equity. Looking at the equation in this way shows how assets were financed: either by
borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets
are usually presented with assets in one section and liabilities and net worth in the other
section with the two sections "balancing."
A business operating entirely in cash can measure its profits by withdrawing the entire
bank balance at the end of the period, plus any cash in hand. However, many businesses are
not paid immediately; they build up inventories of goods and they acquire buildings and
equipment. In other words: businesses have assets and so they cannot, even if they want to,
immediately turn these into cash at the end of each period. Often, these businesses owe
money to suppliers and to tax authorities, and the proprietors do not withdraw all their
original capital and profits at the end of each period. In other words businesses also have
liabilities.
Types:
A balance sheet summarizes an organization or individual's assets, equity and
liabilities at a specific point in time. We have two forms of balance sheet. They are the report
form and the account form. Individuals and small businesses tend to have simple balance
sheets. Larger businesses tend to have more complex balance sheets, and these are presented
in the organization's annual report.

25. 25
Personal balance sheet:
A personal balance sheet lists current assets such as cash in checking accounts and
savings accounts, long-term assets such as common stock and real estate, current liabilities
such as loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage
and other loan debt. Securities and real estate values are listed at market value rather than at
historical cost or cost basis. Personal net worth is the difference between an individual's total
assets and total liabilities.
A small business bump that balance sheet lists current assets such as cash, accounts
receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible
assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-
term debt. Contingent liabilities such as warranties are noted in the footnotes to the balance
sheet. The small business's equity is the difference between total assets and total liabilities.
Public Business Entities balance sheet structure:
Guidelines for balance sheets of public business entities are given by the International
Accounting Standards Board and numerous country-specific organizations/companys.
Balance sheet account names and usage depend on the organization's country and the type of
organization. Government organizations do not generally follow standards established for
individuals or businesses.
If applicable to the business, summary values for the following items should be included in
the balance sheet: Assets are all the things the business owns, this will include property, tools,
cars, etc.
Assets:
Current assets;
1. Cash and cash equivalents
2. Accounts receivable
3. Inventories
4. Prepaid expenses for future services that will be used within a year
Non-current assets (Fixed assets);
1. Property, plant and equipment
2. Investment property, such as real estate held for investment purposes
3. Intangible assets

26. 26
4. Financial assets (excluding investments accounted for using the equity method,
accounts receivables, and cash and cash equivalents)
5. Investments accounted for using the equity method
6. Biological assets, which are living plants or animals. Bearer biological assets are
plants or animals which bear agricultural produce for harvest, such as apple trees
grown to produce apples and sheep raised to produce wool.
Liabilities:
See Liability (accounting)
1. Accounts payable
2. Provisions for warranties or court decisions
3. Financial liabilities (excluding provisions and accounts payable), such as promissory
notes and corporate bonds
4. Liabilities and assets for current tax
5. Deferred tax liabilities and deferred tax assets
6. Unearned revenue for services paid for by customers but not yet provided
Equity:
The net assets shown by the balance sheet equals the third part of the balance sheet, which is
known as the shareholders' equity. It comprises:
1. Issued capital and reserves attributable to equity holders of the parent company
(controlling interest)
2. Non-controlling interest in equity
Formally, shareholders' equity is part of the company's liabilities: they are funds
"owing" to shareholders (after payment of all other liabilities); usually, however, "liabilities"
is used in the more restrictive sense of liabilities excluding shareholders' equity. The balance
of assets and liabilities (including shareholders' equity) is not a coincidence. Records of the
values of each account in the balance sheet are maintained using a system of accounting
known as double-entry bookkeeping. In this sense, shareholders' equity by construction must
equal assets minus liabilities, and are a residual.

27. 27
Regarding the items in equity section, the following disclosures are required:
1. Numbers of shares authorized, issued and fully paid, and issued but not fully paid
2. Par value of shares
3. Reconciliation of shares outstanding at the beginning and the end of the period
4. Description of rights, preferences, and restrictions of shares
5. Treasury shares, including shares held by subsidiaries and associates
6. Shares reserved for issuance under options and contracts
7. A description of the nature and purpose of each reserve within owners' equity
Income statement (also referred to as profit and loss statement (P&L), revenue
statement, statement of financial performance, earnings statement, operating statement or
statement of operations) is a company's financial statement that indicates how the revenue
(money received from the sale of products and services before expenses are taken out, also
known as the "top line") is transformed into the net income (the result after all revenues and
expenses have been accounted for, also known as Net Profit or the "bottom line"). It displays
the revenues recognized for a specific period, and the cost and expenses charged against these
revenues, including write-offs (e.g., depreciation and amortization of various assets) and
taxes. The purpose of the income statement is to show managers and investors whether the
company made or lost money during the period being reported.
The important thing to remember about an income statement is that it represents a
period of time. This contrasts with the balance sheet, which represents a single moment in
time.
Charitable organizations that are required to publish financial statements do not produce an
income statement. Instead, they produce a similar statement that reflects funding sources
compared against program expenses, administrative costs, and other operating commitments.
This statement is commonly referred to as the statement of activities. Revenues and expenses
are further categorized in the statement of activities by the donor restrictions on the funds
received and expended.
The income statement can be prepared in one of two methods. The Single Step
income statement takes a simpler approach, totaling revenues and subtracting expenses to
find the bottom line. The more complex Multi-Step income statement (as the name implies)
takes several steps to find the bottom line, starting with the gross profit. It then calculates

28. 28
operating expenses and, when deducted from the gross profit, yields income from operations.
Adding to income from operations is the difference of other revenues and other expenses.
When combined with income from operations, this yields income before taxes. The final step
is to deduct taxes, which finally produces the net income for the period measured.
Usefulness and limitations of income statement:
Income statements should help investors and creditors determine the past financial
performance of the enterprise, predict future performance, and assess the capability of
generating future cash flows through report of the income and expenses.
However, information of an income statement has several limitations:
 Items that might be relevant but cannot be reliably measured are not reported (e.g.
brand recognition and loyalty).
 Some numbers depend on accounting methods used (e.g. using FIFO or LIFO
accounting to measure inventory level).
 Some numbers depend on judgments and estimates (e.g. depreciation expense
depends on estimated useful life and salvage value).
Guidelines for statements of comprehensive income and income statements of business
entities are formulated by the International Accounting Standards Board and numerous
country-specific organizations, for example the FASB in the U.S..
Names and usage of different accounts in the income statement depend on the type of
organization, industry practices and the requirements of different jurisdictions.
If applicable to the business, summary values for the following items should be included in
the income statement:
Non-operating section:
 Other revenues or gains - revenues and gains from other than primary business
activities (e.g. rent, income from patents). It also includes unusual gains that are either
unusual or infrequent, but not both (e.g. gain from sale of securities or gain from
disposal of fixed assets)
 Other expenses or losses - expenses or losses not related to primary business
operations, (e.g. foreign exchange loss).
 Finance costs - costs of borrowing from various creditors (e.g. interest expenses,
bank charges).

29. 29
 Income tax expense - sum of the amount of tax payable to tax authorities in the
current reporting period (current tax liabilities/ tax payable) and the amount of
deferred tax liabilities (or assets).
Irregular items:
They are reported separately because this way users can better predict future cash flows -
irregular items most likely will not recur. These are reported net of taxes.
 Discontinued operations is the most common type of irregular items. Shifting
business location(s), stopping production temporarily, or changes due to technological
improvement do not qualify as discontinued operations. Discontinued operations must
be shown separately.
Disclosures:
Certain items must be disclosed separately in the notes (or the statement of comprehensive
income), if material, including:
 Write-downs of inventories to net realizable value or of property, plant and equipment
to recoverable amount, as well as reversals of such write-downs
 Restructurings of the activities of an entity and reversals of any provisions for the
costs of restructuring
 Disposals of items of property, plant and equipment
 Disposals of investments
 Discontinued operations
 Litigation settlements
 Other reversals of provisions
Earnings per share:
Because of its importance, earnings per share (EPS) are required to be disclosed on the face
of the income statement. A company which reports any of the irregular items must also report
EPS for these items either in the statement or in the notes.

30. 30
There are two forms of EPS reported:
 Basic: in this case "weighted average of shares outstanding" includes only actual
stocks outstanding.
 Diluted: in this case "weighted average of shares outstanding" is calculated as if all
stock options, warrants, convertible bonds, and other securities that could be
transformed into shares are transformed. This increases the number of shares and so
EPS decreases. Diluted EPS is considered to be a more reliable way to measure
EPS.
Sample income statement:
The following income statement is a very brief example prepared in accordance with IFRS. It
does not show all possible kinds of items appeared a firm, but it shows the most usual ones.
Please note the difference between IFRS and US GAAP when interpreting the following
sample income statements.
Bottom line:
"Bottom line" is the net income that is calculated after subtracting the expenses from revenue.
Since this forms the last line of the income statement, it is informally called "bottom line." It
is important to investors as it represents the profit for the year attributable to the shareholders.
After revision to IAS 1 in 2003, the Standard is now using profit or loss for the year rather
than net profit or loss or net income as the descriptive term for the bottom line of the income
statement.
Requirements of IFRS:
, the International Accounting Standards Board issued a revised IAS 1: Presentation of
Financial Statements, which is effective for annual periods beginning.
A business entity adopting IFRS must include:
 a Statement of Comprehensive Income or two separate statements comprising:
1. an Income Statement displaying components of profit or loss and
2. a Statement of Comprehensive Income that begins with profit or loss (bottom
line of the income statement) and displays the items of other comprehensive
income for the reporting period.

31. 31
All non-owner changes in equity (i.e. comprehensive income ) shall be presented in either in
the statement of comprehensive income (or in a separate income statement and a statement of
comprehensive income). Components of comprehensive income may not be presented in the
statement of changes in equity.
Comprehensive income for a period includes profit or loss (net income) for that period
and other comprehensive income recognized in that period.
All items of income and expense recognized in a period must be included in profit or
loss unless a Standard or an Interpretation requires otherwise. Some IFRSs require or permit
that some components to be excluded from profit or loss and instead to be included in other
comprehensive income.
Items and disclosures:
The statement of comprehensive income should include:
1. Revenue
2. Finance costs (including interest expenses)
3. Share of the profit or loss of associates and joint ventures accounted for using the
equity method
4. Tax expense
5. A single amount comprising the total of (1) the post-tax profit or loss of discontinued
operations and (2) the post-tax gain or loss recognised on the disposal of the assets or
disposal group(s) constituting the discontinued operation
6. Profit or loss
7. Each component of other comprehensive income classified by nature
8. Share of the other comprehensive income of associates and joint ventures accounted
for using the equity method
9. Total comprehensive income
The following items must also be disclosed in the statement of comprehensive income as
allocations for the period:
 Profit or loss for the period attributable to non-controlling interests and owners of the
parent

32. 32
In commerce, a Hypermarket is a super store combining super market and a
department store. The result is an expensive retail facility carrying a wide range of products
under one roof, including full grocery lines and general merchandise. In theory hyper markets
allow customers to satisfy all their routine shopping in one trip.
A hyper market, large form of traditional grocery store, is a self service shop offering
a wide verity of food and household products. Hyper market typically comprises fresh
products along with shelf space reserved for packaged goods as well as for various food and
non food items. Such as Kitchen ware, house hold cleaners, chocolates, soaps, kids items, like
games, balls etc.. To maintain a profit hypermarket make up for lower margins by higher
overall volume for sales and with the sale of higher margin items. By the intended the higher
volume of shoppers.
Overview:
Hypermarkets like other Big Box stores typically have business models focusing on
high volume, low margin sale , a typical wall mart super centre covers any where from
1,50,000 Sq.fts to 2,35,000 sq.fts and a typical there fore covers 20,000sq.fts they generally
have more than 2,00,000 different branch of merchandise available at any one time because
of there large food prints, ,many hyper markets choose suburban or out of town locations that
are easily accessible by automobiles.
History:
The Pacific Northwest chain Fred Meyer , now a division of the Kroger supermarket
company, opened the first suburban one-stop shopping center in 1931 in the Hollywood
District of Portland, Oregon . The store's innovations included a grocery store alongside a
drugstore plus off-street parking and an automobile lubrication and oil service. In 1933, men's
and women's wear was added, and automotive department, house wares, and other nonfood
products followed in succeeding years. In the mid 1930s, Fred Meyer opened a central
bakery, a candy kitchen, an ice cream plant, and a photo-finishing plant, which supplied the
company's stores in Portland and neighboring cities with house brands such as Vita Bee
bread, Hocus Pocus desserts, and Fifth Avenue candies. By the 1950s, Fred Meyer began

33. 33
opening stores that were 45,000 sq ft (4,200 m 2 ) to 70,000 sq ft (6,500 m 2 ), and the 1960s
saw the first modern-sized Fred Meyer hypermarkets.
The Midwest chain Meijer , which today operates some 190 stores in five US states
and calls the hypermarket format "supercenter", opened its first such "supercenter" in Grand
Rapids, Michigan , in June 1962, under the brand name "Thrifty Acres".
In the late 1980s and early 1990s, the three major US discount store chains – Walmart
Kmart and Target – started developing hypermarkets. Wal-Mart (as it was known before its
late-2000s rebranding as Wal-Mart) introduced Hyper mart USA in 1987, followed by Wal-
Mart Supercenter in 1988; [5] Kmart opened its first Super Kmart (originally called Kmart
Super Center) in 1991; [6] and Target came with the first Target Great land stores in 1990,
followed by the larger Super Target stores in 1995. Most Great land stores have since been
converted to Super Target stores, while some have been converted into regular Target stores
with the exception of 2 entrances (like the Antioch, California location).
Hypermarkets in India:
Indian hypermarkets constitute 1.99% of the total organized retail and the segment
was estimated at INR7.28 billion during 2005-06, growing by 37.21% over 2004-05. Retail is
India’s largest industry, accounting for over 10% of the country’s GDP and around 8% of the
employment. Indian retail industry size was estimated at INR10,754.21 billion in 2005-06,
out of which the organized retail contributed about 3.41% or INR366.21 billion.
Indian hypermarket industry is more vibrant than ever, with major industry players
vying for their share in the retail segment. The size and share of Indian hypermarket is
expected to increase in the coming years, given the strong macro-economic performance,
favorable consumption pattern due to growing personal disposable income, rapid
development of Tier II and III cities, availability of quality retail space and recent entry of big
industrial houses into retailing with focus on large store formats.

34. 34
Future:
Despite its success, the hypermarket business model may be under threat from on-line
shopping and the shift towards customization according to analysts like Sanjeev Sanyal ,
Deutsche Bank's Global Strategist. Sanyal has also argued that some developing countries
such as India may even skip the hypermarket stage and directly go online.
Mass merchandise/ hypermarket:
Mass merchandise and hypermarket stores are typically characterized by a large
number of checkout stations across the ‘front-end' of the store. These stores generally
experience large volumes of customers each day with transactions that contain a high number
of lower value items. Customers shop by placing their selected merchandise into shopping
carts (trolleys) or baskets and unload the items onto a belt that brings the items to the cashier.
Mass merchandise and hypermarket checkout stations are designed for fast scanning.
Cashiers receive the items at the end of the belt and slide the items across an in-counter bar
code scanner in a seated or standing position. To meet their transaction demands, these stores
generally use a bi-optic scanning solution with or without a scale platter, depending on
whether the store sells weighed produce or not. A single plan scanner can also be used for
stores with low average transaction volumes. Almost all items are moved across the scanner,
there are some exceptions for bulky or heavy items that may be scanned with an auxiliary
handheld scanner, connected to the primary high performance (bi-optic) scanner.
Success of Hypermarkets:
Produce section of a typical Wal-Mart Supercenter (Wal-Mart’s hypermarket brand)
in Mexico After the successes of super- and hyper-markets and amid fears that smaller stores
would be forced out of business, France enacted laws that made it more difficult to build
hypermarkets and also restricted the amount of economic leverage that hypermarket chains
can impose upon their suppliers (the Loi Galland ).

35. 35
In France, hypermarkets are generally situated in shopping centers (French: centre
commercial or centre dachas) outside of cities, though some are present in the city center.
They are surrounded by extensive car parking facilities, and generally by other specialized
superstores that sell clothing, sports gear, automotive items, etc.
In Japan, hypermarkets may be found in urban areas as well as less populated areas.
The Japanese government encourages hypermarket installations, as mutual investment by
financial stocks are a common way to run hypermarkets. Japanese hypermarkets may contain
restaurants, Manga (Japanese comic) stands,
Internet cafes, typical department store merchandise, a full range of groceries, beauty
salons and other services all inside the same store. A recent [when? ] trend has been to
combine the dollar store concept with the hypermarket blueprint, giving rise to the "hyakkin
plaza"— hyakkin (百均) or hyaku en (百円) means 100 yen (roughly 1 US doll.
Products of Hypermarket:
 Confections and candies
 Dairy products and eggs
 Electrical products
 Canned goods and dried cereals
 Feminine hygiene products
 House cleaning products
 Pet foods and products
 Seasonal items & decorations
 Toys and novelties
 Breads and bakery products
 Baby foods and Baby care products

36. 36
Chocolates most commonly comes in dark milk and white various with cocoa solids
contributing to brown color. These are sweet, usually brown, food preparation of the brome
cacao seeds, roasted and ground, often flavored as with vanilla.
Much of the chocolate consumed today is in form of sweet chocolate, a combination
of cocoa solids cocoa butter or other fat and sugar.
Biscuits are a terminal for a variety of baked, commonly it is a flour based food products.
There’s a bunch of biscuits for bakers to love. The variety of taste and texture are found to
delight perfect for a wide range of occasions.
 Rolled biscuits
 Drop biscuits
 Cream biscuits
 Chocolate flavored biscuits
 Butter milk biscuits
 Salt biscuits

37. 37
There are many types of rice each kind has different taste texture and usage. Some
dishes require specific types of rice to be prepared properly. Rice is a cereal that many people
tend to. Take for granted until there is a shortage of this staple food.
There are 40,000 varieties of rice worldwide.
Indian Varieties:
 Annapurna
 Basmati rice
 HMT rice
 Sona Masuri
These are some of the rice which is used in our places.
Tooth paste is an oral hygiene product line of tooth pastes, tooth brushes, mouth ashes
and dental floss
 Colgate
 Pepsodent
 Close-up

38. 38
Green tea is the healthiest beverage on the planet. It is antioxidants and nutrients that
have powerful effects on body. These nutrients that have powerful effects on body. This
improve brain function, fat loss, a lower risk of cancer and many other incredible benefits
Phoenix dactylifera(Dates) is a flowering plant species in the palm family Arecaceae,
cultivated for its edible sweet fruit. Although its place of origin is unknown because of long
cultivation, it probably originated from lands around Iraq. Dates have been a staple food of
the Middle East and the Indus Valley for thousands of years. There is archaeological
evidence of date cultivation in eastern Arabia in 6000 BCE.

39. 39
Corn flake are a popular breakfast cereal made by toasting flakes of corn. The breakfast
cereal proved popular among patients and the Kellogg Company was setup to produce
cornflakes for a wider public.
Corn flakes are packaged cereal product forms from small toasted flakes of corn and a
usually saved cold with milk and sugar. Products with additional ingredients have been
manufactured as “Sugar frosted flakes, “Honey nut corn flakes”.
About Organization:
Company Name : ASHOKA HYPER MARKET
Established Year : 2002
Class : Private Company
Activity Type : Grocery Items, Consumer Goods
Registrar : Nizamabad
Nature ; Company Limited
Sub Category ; Indian Non Govt Company
ASHOKA HYPER MARKETS started in the year of 2002, in NGO’s Colony,
Nizamabad. The owner of the store is Sri. Ashok Garu & Managing Director is Sri Praneeth
Garu.
Our Mission:
Our mission is to create healthy individuals with strong and just leaves for themselves
for together to build the country.

40. 40
Our Vision:
To be with the top 5 Hypermarket in the state of Telangana and achieve leadership in
major states reputed through excellence and service to our customers.
Our Values:
 Quality: We can be relied on by our client to provide the quality of product and
service they demand constantly focus on customer satisfaction.
 Pro Active: We encourage people to see things and do things differently we call it as
“Out of the Box thinking”
 Energy: A positive attitude is at centre of our “Any thing can be done” culture
growth is way of life.
 Success: We value and reward every success.
 Integrity, loyalty & Commitment: We value and reward the success earned by our
people. Ethical and responsible conduct. We believe in earning keeping the trust of
our client and employees

41. 41
1) Current Ratio:
Current ratio may be defined as the relationships between current assets and
current liabilities. It is the most common ratio for measuring liquidity. It is calculated
by dividing current assets by current liabilities. Current assets are those, the amount of
which can be realized within a period of one year. Current liabilities are those
amounts which are payable within a period of one year. A current ratio of 2:1 is
considerable ideal.
Current Assets
Current Ratio =
Current liabilities
Current Ratio :
Year Current Assets Current liabilities Current Ratio
2006-2007 13343 8446 2.57
2007-2008 16331 10321 2.58
2008-2009 21063 14420 2.45
2009-2010 27705 19821 2.34
2010-2011 36901 28333 2.15

42. 42
Interpretation:
Current ratio during the year 06-07 is the 2.57. In the next year 2007-08 it was
maximum 2.58 and in the year 2008- 09 it was 2.45. In the year 2009-10 the current
ratio is 2.34 and in the last year 2010--11 the current ratio decreased to 2.15
The ideal value of current ratio 2:1, but during the period of study, the current
ratio is lesser than the standard. This shows the current ratio to shows a do down ward
which indicates the inefficiency of the company to meet its current obligations.
0
0.5
1
1.5
2
2.5
3
2006-07 2007-08 2008-09 2009-10 2010-2011
Current Ratio
Current Ratio

43. 43
2) Liquid Ratio:-
The term ‘Liquidity’ refers to the ability of a firm to pay its short – term
obligations as and when they become due. The term quick assets or liquid assets refer
current assets, which can be converted into cash immediately. It comprises all current
assets except stock and prepaid expenses. It is determined by dividing quick assets by
quick liabilities.
Liquid Assets
Liquid Ratio =
Liquid Liabilities
Year Liquid Assets Liquid liabilities Liquid Ratio
2006-2007 10427 8446 2.23
2007-2008 12587 10321 2.21
2008-2009 21021 14420 2.45
2009-2010 27648 19821 2.39
2010-2011 36823 28333 2.29

44. 44
Interpretation:
Liquid ratio during the year 2008-2009 it attains the maximum value of 5.20.
in the above year it was slightly reduced to 2006 – 07 to 2.23. In the next year, 2007-
08 it further decreased to 2.21 and in the next year 2009-10 2.39. In the last year
decreased 2010—2011 to 2.29.
During the period of study, the value of liquid ratio is higher than the ideal
value which indicates the efficiency of the company to meet is immediate
requirements. The overall trend of liquid ratio shows up and down ward trend.
2.05
2.1
2.15
2.2
2.25
2.3
2.35
2.4
2.45
2.5
2006-2007 2007-2008 2008-2009 2009-2010
LIQUID RATIO

45. 45
3) Proprietary Ratio:
Proprietary ratio relates to the proprietors funds to total assets. It revels the
owners’ contribution to the total value of assets. This ratio shows the long – time
solvency of the business. It is calculated by dividing proprietor’s funds by the total
tangible assets.
Proprietor’s Funds
Proprietary Ratio = -------------------------------
Total Tangible Assets
Year Proprietary Fund Total
Assets
Proprietary
Ratio
2006-2007 6027 14483 1.41
2007-2008 7301 17498 1.41
2008-2009 8788 22354 1.39
2009-2010 10774 29344 1.36
2010-2011 12939 39528 1.32

46. 46
Interpretation:
Proprietary ratio during the year 2006-07 and 2007-08 it attains the maximum
value of 1.41. In the year2006-07 the proprietary ratio was slightly reduced to 1.39. In
the next year, 2009-10 It further reduced to 1.36. During the year 2010-11 it further
decreased to 1.32.
1.26
1.28
1.3
1.32
1.34
1.36
1.38
1.4
1.42
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
ProprietaryRatio
Proprietary Ratio

47. 47
4) Net Profit Ratio:
Net Profit Ratio establishes a relationship between net profit (after taxes) and
sales. It is determined by dividing the net income after tax to the net sales for the
period and measures the profit per rupees of sales.
Net Profit
Net Profit Ratio = ------------------------------- x 100
Sales
Year Net Profit Sales Net Profit
Ratio
2006-2007 953 10336 9.2%
2007-2008 1679 14,525 11.6%
2008-2009 2415 18739 12.9%
2009-2010 2859 21401 13.4%
2010-2011 3138 28033 11.20%

48. 48
Interpretation:
From the table, it is found that the net profit has been fluctuating during the
study period. In the year 2006-07 the net profit ratio was 9.2%. In the year 2007-08 it
was increased to 11.6%. In the next year 2008-09 it was further increased 12.9%.
During the year 2009-10 there was a slight increase to 13.4%. During the year 2010-
11 the net profit ratio was 11.20%.
0
2
4
6
8
10
12
14
16
2006-2007 2007-2008 2008-2009 2009-2010

49. 49
5) Stock Turnover Ratio:
This ratio Indicates whether investment in inventory is efficiently used or not.
It explains whether investment in inventories in within proper limits or not. It also
measures the effectiveness of the firm’s sales efforts. The ratio is calculated as
follows.
Cost of goods sold
Stock Turnover = -------------------------------
Average Stock
Cost of goods sold = Sales- Gross Profit
Average stock = Opening stock + Closing stock
-------------------------------------
2
Year Cost of goods
sold
Average
Stock
Stock
Turnover Ratio
2006-2007 8673 2919 3.97
2007-2008 11902 3653 4.25
2008-2009 14960 4971 4.00
2009-2010 16936 7097 3.38
2010-2011 23153 9350 3.47

50. 50
Interpretation:
From the table, it is found that the stock Turnover ratio has been fluctuating
during the study period. In the year 2006-07 it was 3.97, It increases during the year
2007-08 was slightly to 4.25. In the year 2008-09 it was 4.00 and decreases to 4.38 in
the year 2009-10 and during the year 2010-2011 it was increased to 3.47.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Stock turnover Ratio
Turnover Ratio

51. 51
6) Debtors turnover ratio:
The purpose of this ratio is to discuss the credit collector power and policy of
the firm. This ratio is established between account receivable and net credit sales of
the period. The debtor’s turnover ratio is calculated as follows.
Credit Sales
Debtors Turnover Ratio = -------------------------------
Average Account receivables
Average account receivables = Total Debtors and B/R
Year Sales
Rs
Avg accounts receivable
Rs
Debtors turnover ratio
2006-2007 10336 5972 2.73
2007-2008 14525 7168 3.02
2008-2009 18739 9695 2.93
2009-2010 21401 11975 2.78
2010-2011 28033 15976 2.75

52. 52
Interpretation:
From the table, it is found that the Debtor Turnover ratio has been fluctuating
during the study period. In the year 2006-07 it was 2.73, It increases during the year
2007-08 was slightly to 3.02. In the year 2008-09 it was decreased to 2.93 and
decreases to 2.78 in the year 2009-10 and during the year 2010-2011 it was further
decreased to 2.75
2.55
2.6
2.65
2.7
2.75
2.8
2.85
2.9
2.95
3
3.05
2006-2007 2007-2008 2008-2009 2009-2010
Turn Over Ratio

53. 53
7) Average debt collection period:
The average number of days that lapsed between the receipt of the invoice by
customers and the actual payment of the invoice. When measured against the credit
terms obtained from suppliers, average the account period shows the length of time
during which the firm is financing the account receivable either with its own funds or
borrowed funds. The radio may be calculated as follows:
Debtors B/R
Average debt collection period = -------------------------------
Net Credit sales
Year Debtors Credit Sales Debt Collection
Period
2006-2007 5972 10336 210 days
2007-2008 7169 14525 180 days
2008-2009 9695 18739 188 days
2009-2010 11975 21401 204 days
2010-2011 15976 28033 208 days

54. 54
Interpretation:
Debt Collection period ratio in the year 06-07 was 210 days. In next year 07-08
it further reduced to 180 days. In the next year 08-09 it was 188 days. In the next year
2009-10 it was 204 days. During the years 2010-11 it was 208 days.
From the above it is inferred that the debt collection period shows a fluting
trend, which indicates quick recovery of money from debtors and also indirectly
shows that the management in highly efficient in collecting debts promptly.
165
170
175
180
185
190
195
200
205
210
215
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
DEBT COLLECTION PERIOD
debt collection period

55. 55
8) Creditors turnover ratio:
It indicates the number of times on the average that the creditors turnover each
year. Creditor turnover ratio indicates the number of items the accounts payable rotate
in a year. It signifies credit period enjoyed by the firm in paying its creditors. Account
payable includes traded creditors and bills payable.
. Credit Purchases
Creditors Turnover Ratio = -------------------------------
Average account payable
Year Credit Purchase Average Account
payable
Creditor
Turnover ratio
2006-2007 4892 2100 3.32
2007-2008 6866 284 26.17
2008-2009 10182 3538 3.87
2009-2010 11821 4424 3.67
2010-2011 17620 5852 4.0

56. 56
Interpretation:
The creditor Turnover ratio during the year 06-07 was 3.32. In the year 07-08 it
was increased to 26.17. In the year 08-09 creditors turnover ratio slightly reduced to
3.87. In the year 07-08 it was reduced to 3.67. During the year 2010-2011 it was
increased to 4.0
From the above it in inferred that the creditors turnover ratio shows an upward
trend which indicates that the company is highly efficient in making. Speedy
settlements of debt to its creditors.
0
5
10
15
20
25
30
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
CreditorsTurnover Ratio
Creditors turnover ratio

57. 57
9) Average Payment period:
The radio gives the average credit period enjoyed by the firm from its creditors.
It can be computed as follows.
Creditors + B/P
Average Payment period = ------------------------------- X 365 (in days)
Credit Purchase
A Lower Ratio shows that the creditors being paid promptly. The amount
payable depends upon the purchase policy, the quantum of purchase and suppliers
credit policy.
year
Credit
Purchase
Average
Creditors
Average Payment
period
2006-2007 4892 2100 156 days
2007-2008 6866 284 15 days
2008-2009 10182 3538 126 days
2009-2010 11821 4424 136 days
2010-2011 17620 5852 121 days

58. 58
Interpretation:
The average payment period during the year 2006-07 was 156 days. From the year
2007-08 it was heavily decreased 15 days. In the year 2008-09 average payment
period was 126 days. In the year 2009-10 it was 136 days. This last year 2010-2011 it
was 121 days.
0
20
40
60
80
100
120
140
160
180
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Payment Period
Payment Period

59. 59
10) Capital Turnover Ratio:
Managerial efficiency is also calculated by establishing the relationship
between cost of sales or sales with the amount of capital invested in the business.
Capital turnover Ratio is calculated with the help of the following formula.
Sales
Capital turnover ratio = --------------------------------------
Net worth (Or) Proprietor’s fund
Year Net worth (or)
Proprietor’s fund
Sales Capital Turnover
ratio
2006-2007 6027 10336 2.71
2007-2008 7302 14525 2.98
2008-2009 8789 18739 3.13
2009-2010 10775 21401 2.98
2010-2011 12939 28033 3.16

60. 60
Interpretation:
It is inferred from the above table the capital turnover ratio for the year 06-07
was 2.71. In the year 07-08 it was 2.98. Where as in the year was 2008-09 it was
increased to 3.13. In the year 2009-10 it was slightly decreased to 2.98. But during the
year 08-09 it was increased further to 3.16.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Capital Turnover Ratio
Capital Turnover Ratio

61. 61
11) Operating Ratio:
Operating ratio is an indicative of the proportion that the cost of sales bears to
sales. ‘Cost of sales’ includes direct cost of goods sold as well as other operating
expenses. It is an important ratio that is used to discuss the general profitability of the
concern. It is calculated by dividing the total operating cost by net sales.
Cost of goods sold + Net operating expenses
Operating ratio = ----------------------------------------------------- X100
Sales
Cost of goods sold = sales = gross profit.
Year Cost of goods
sold + operating
expenses
Sales Operating ratio
2006-2007 8673 10336 70.9
2007-2008 11902 14525 71.9
2008-2009 14960 18739 69.8
2009-2010 16936 21401 69.1
2010-2011 23153 28033 72.5

62. 62
Interpretation:
The above table clearly reveals that the Operating ratio for the year 06-07 was
73.9. But in the year 07-08 it was slightly reduced to 71.9 and in the year 08-09 it was
further reduced to 69.8. In the year 09-10 It was 69.1. During the year last year 2010-
2011 it was increased to 72.5.
66
67
68
69
70
71
72
73
74
75
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Operating Ratio
Operating Ratio

63. 63
12) Gross Profit Ratio:
Gross Profit ratio measures the relationship of gross profit to net sales and is
usually represented as a percentage. This ratio plays an important role in two
management areas. In the area of financial management, the ratio serves as a valuable
indicator of the firm’s ability to utilize effectively outside sources of fund. Secondly,
this ratio also serves as important tool in shipping the pricing policy of the firm. This
ratio is calculated by dividing gross profit by net sales.
Gross Profit
Gross Profit Ratio = -------------------------- X 100
Net Sales
Year Gross profit Sales Gross Profit
Ratio
2006-2007 1663 10336 6.0%
2007-2008 2623 14525 8.0%
2008-2009 3779 18739 10.1 %
2009-2010 4465 21401 10.8 %
2010-2011 4880 28033 7.4 %

64. 64
Interpretation:
The above table shows that the Gross profit Ratio during the year 2006-07 was
6.0%. In the year 2007-08 it was increased to 8.0%. In the following year 2008-09
increased to 10.1 %. In the year 2009-10 there was slight increases to 10.8 %. In this
last year was 2010-11 the gross profit ratio was 7.4 %
0
2
4
6
8
10
12
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Gross profit Ratio
Gross profit Ratio

65. 65
FINDINGS:
Present project work has been under taken on the study of financial statement analysis
of ASHOKA HYPER MARKET. During the analysis the following we are found out.
The firm’s debt collection period have more than 180days it increased the debt
collection period year by year. It shows firms liberal debt collection policy.
1. Fixed assets turnover was 12.67% in the year 2010-11.
2. Capital turnover ratio was 3.16 in the year 2010-11.
3. Return on total assets that decreased from 17.09 in the year 2009-2010 to 14.26 in the
2010-2011.
4. Operating ratio has increased from 71.9 in the year 07-08 to 72.5 in the year 2010-11
5. Asset turnover ratio was 2.4 in the year 2010-11.
6. Gross profit ratio has come down from 10.8% in year 2009-2010 to 7.4% in 2010-11.
7. Sales show the increasing trend at the rate in every year.

66. 66
SUGGESTIONS:
 The standard of current ratio is 2:1. The firm is having the current ratio above the
standard but it is not consistent. Firm should try to manage the current ratio.
 The company is showing fluctuations in liquid ratio it needs to increase assets in order
to increase its liquidity.
 The firm should increase its ratio, because higher the ratio greater the utilization of
fixed assets where as lower ratio means under utilization of fixed assets.
 Instead of disclosing the combined flow of debtors and loans as decrease / increase in
trade and other receivables, their separate discloser will be more meaning full.

67. 67
CONCLUSION:
The financial position of ASHOKA HYPER MARKET is quite comfortable with a
judicious mix of debt and equity. The overall assessment of financial statement signifies
effective utilization of investment, loans and advances. The profitability of the company
appears to be impressive, as judged by increase in reserves and surplus.
The management discussions and analysis by director’s reports and opinions
expressed auditor’s report through financial statements or accountant is true and fare view in
accordance with the provisions of the company’s acts and accounting standards.
The overall financial position of the ASHOKA HYPER MARKET appears to be more
than satisfactory.

68. 68
BIBLIOGRAPHY
REFERED BOOKS:
FOSTER, G. “Financial Statement Analysis”. Prentice Hall, Inc., Englewood Cliffs, NJ.
Latest edition.
GIBSON, C. H. “Financial Statement Analysis”, 1986.
O'MALIA, T.J. “A Banker's Guide to Financial Statements”, 1989.
WOELFEL, C.J. “Financial Statement Analysis”, Probes Publishing Co. Chicago, IL,
1988.
NEWS-PAPERS & JOURNALS:
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69. 69
QUESTIONNAIRE
1. Profession [a]
a. Business man
b. private employed
c. Government employed
d. others
2. Income level of the respondents [c]
a. < 10,000Rs
b. 10000-25,000
c. 25,000-50,000
d. above 50,000
3. What type of scheme you prefer much [a]
a. Open – Ended
b. Closed – Ended
4. What is your period of investment [a]
a. Long term
b. Short term
5. Why do u prefer in investing in mutual funds [b]
a. Tax savings
b. Risk cover
c. Others
6. What type of mutual funds you prefer ? [b]
a. Debt funds
b. Equity funds
c. Hybrid funds