Financial Statement Analysis 2

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In the previousclass, we started with Financial Statement Analysis …

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FINANCIAL STATEMENT ANALYSIS

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Financial Statement Analysis… No#1… Understanding No#2… Analysis CHALLENGES...

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First, we proceedfor understanding financial statements of Tata Steel …

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First, we takeBalance sheet … … Sources of Funds Side

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Now, let’s moveto … … Application of Funds Side

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47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66 2,913.52 1,930.46 Provisions 3,855.26 3,523.20 Current Liabilities Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89 0.20 0.20 Interest Accrued on Investments 33,348.74 3,055.73 Loans and Advances 465.04 7,681.35 Cash in Hand and at Bank 543.48 631.63 Sundry Debtors 2,047.31 1,827.54 Inventories: Stock-in-Trade 557.67 505.44 Inventories: Stores and Spare Parts CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56 Capital Work in Progress 12,623.56 11,040.56 Net Block 8,123.01 7,385.96 Less: Depreciation 100.47 100.41 Less: Amortization 20,847.04 18,526.93 Gross Block FIXED ASSETS APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…

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Now, let’s movetowards understanding of …… PROFIT AND LOSS ACCOUNT…

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TOP – LINEOF TATA STEEL

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BOTTOM – LINE OF TATA STEEL

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APPROPRIATION OF PROFITOF TATA STEEL

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Now, we moveto … CASH FLOW STATEMENT …

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CASH FROM OPERATIONS OF TATA STEEL

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CASH USED ININVESTING OF TATA STEEL

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CASH FROM FINANCING TATA STEEL

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All this is………… our story about understanding financial statements

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WHAT NEXT INOUR AGENDA?

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Share Warrants… Thepreferential issue of equity shares/ Fully Convertible Debentures (FCDs)/ Partly Convertible Debentures (PCDs) or any other financial instruments which would be converted into or exchanged with equity shares at a later date, by listed companies whose equity share capital is listed on any stock exchange, to any select group of persons under Section 81(1A) of the Companies Act 1956 on private placement basis shall be governed by these guidelines. An amount equivalent to at least ten percent of the price fixed as per Chapter-XIII of DISCLOSURE AND INVESTOR PROTECTION GUIDELINES, SEBI shall become payable for the warrants on the date of their allotment.

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Security Premium Account… The Securities Premium Account may be applied by the company- (a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; (b) in writing off the preliminary expenses of the company; (c) in writing off the expenses of, or commission paid or discount allowed on, any issue of shares or debentures of the company; or (d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.

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Deferred Tax Assets/DeferredTax Liabilities ACCOUNTING STANDARD 22 or IAS-12: The differences between taxable income and accounting income can be classified into PERMANENT DIFFERENCES and TIMING DIFFERENCES . Permanent differences are those differences between taxable income and accounting income which originate in one period and do not reverse subsequently. Timing differences are those differences between taxable income and accounting income for a period that originate in one period and are capable of reversal in one or more subsequent periods. The tax effects of timing differences are included in the tax expense in the statement of profit and loss; and as deferred tax assets or as deferred tax liabilities, in the balance sheet.

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Look at thefollowing information and suggest what should be the cost of plant and machinery purchased!!!!! Suggest at what cost the asset will be shown in the Balance Sheet.

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What is thedifference between … Depreciation Amortization Depletion Impairment

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All assets aresubject to depreciation except freehold land.

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Impairment Loss (AS-28)An enterprise should assess at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the enterprise should estimate the recoverable amount of the asset. An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. This Standard defines recoverable amount as the higher of an asset’s net selling price and value in use.

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Accounting for Investments…(AS13) Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not 'investments'. A Current Investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. A Long Term Investment is an investment other than a current investment. An Investment Property is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise.

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Types of Investments…(AS13) Current Investments Long Term Investments

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Current Investments …A current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made . The carrying amount for current investments is the lower of cost and fair value . In respect of investments for which an active market exists, market value generally provides the best evidence of fair value. For current investments, any reduction to fair value and any reversals of such reductions are included in the profit and loss account.

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Long-Term Investment …A long term investment is an investment other than a current investment. Long-term investments are usually carried at cost . However, when there is a decline, other than temporary, in the value of a long term investment, the carrying amount is reduced to recognize the decline . Where there is a decline, other than temporary, in the carrying amounts of long term investments, the resultant reduction in the carrying amount is charged to the profit and loss statement.

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Disclosure – AS13 Investments should be disclosed in financial statements as the aggregate amount of quoted and unquoted investments , giving the aggregate market value of quoted investments.

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What’s the differencebetween Reserve and Provision? Provision is charged to Profit and Loss Account where as Reserve is an appropriation of profit. Provision is charged to Profit and Loss Account before calculating the net profit or loss , but Reserve can be made only when there is profit. Provision is created for specific purpose, while Reserve may be created for general purpose as well. Provision are not invested in outside securities. Reserves reduces divisible profit can be invested in outside securities.

Financial Statement Analysis 2

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Financial Statement Analysis 2