2. INTRODUCTION
• “Analysis of Financial Statements” involves
the process of reviewing and evaluating a
company's financial statements (such as the
balance sheet or profit and loss statement),
thereby gaining an understanding of the
financial health of the company and enabling
more effective decision making.
• As a part of IT Project, horizontal
comparative analysis of Balance Sheet is
performed in order to identify Company’s
financial health using various functionalities
available in Excel.
• Post which the parameters are analyzed and
reported using dashboards and graphs.
• In order to make the analysis significant and
ready to use, decision making enablers and
discussions are provided.
3. METHODOLOGY
• In order to make the analysis more authentic we have taken up
the actual Financial Statements of HUL from Financial Year
2009 to 2013.
• We have calculated the various possible financial ratios in
order to compute the Solvency, Liquidity, Profitability and
Market ratios using the data available.
• The trend of these ratios over time is studied to check whether
they are improving or deteriorating.
• Ratios are also compared across different years to see how
they stack up, and to get an idea of comparative valuations.
• Apart from analyzing ratios we have also made projections for
coming years in order to determine the financial standing of
the company in the future.
5. RATIOS ANALYZED
SOLVENCY RATIOS
• Current ratio
• Quick ratio
• Debt equity ratio
• Interest coverage ratio
• Total debts to total assets ratio
• Proprietary ratio
PROFITABILITY RATIOS
• Operating profit ratio
• Net profit ratio
• Return on shareholders’ funds
MARKET RATIOS
• Earnings per share
• Book value per share
6. EXCEL FUNCTIONALITIES USED
• In order to perform the aforementioned
analysis we have made use of various
excel functions such as:
1. H-lookup.
2. Macros.
3. Graphing.
4. Data tables.
5. Scenario manager.
6. Trend analysis, maximum – minimum
function ,etc.
7. Data analysis using pictorial displays.
8. ANALYSIS AND INTERPRETATION
SOLVENCY RATIOS
• The Current Ratio for a company is
ratio of current assets to current
liabilities. In this case it is much lower
than the industry standard ratio of
2:1 which means the company may
have problems meeting its short-term
obligations.
• The standard quick ratio for industry is
1:1. Low or decreasing quick ratios
suggests that a company is over-
leveraged, struggling to maintain or
grow sales, paying bills too quickly or
collecting receivables too slowly.
• As far as Debt equity ratio is concerned
the company does not rely much on debt
financing it rather finances its resources
with equity capital. The debt equity
ratio is nil for some years whereas it is
marginal in other years.
• Total debt to total assets ratio is
marginal which signifies that very less
assets are financed through debt capital.
0.78
0.86 0.87 0.85
1.02 1.03
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Mar
'09
Mar
'10
Mar
'11
Mar
'12
Mar
'13
Mar
'14
CURRENT RATIO
CURRENT RATIO
1.991559246
0.0496860250 0
0.114404624
0
0.5
1
1.5
2
2.5
FY' 09 FY' 10 FY' 11 FY' 12 FY' 13
Debt Equity Ratio
Debt Equity Ratio
9. PROFITABILITY RATIOS
• Operating profit ratio and net
profit ratio of the firm has been
considerably consistent over the
years which mean that the
company’s operations have been
fairly good in converting the
profits.
• Since the company finances most
of its operations through equity
and less of capital therefore return
on shareholders fund is
considerably good over the years.
14%
15%
13%
14%
15%
12%
12%
13%
13%
14%
14%
15%
15%
16%
16%
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13
OP Ratio
OP Ratio
12% 12% 12% 12%
14%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13
NP Ratio
NP Ratio
117.42
81.10 84.34
76.07
134.02
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13
Return on Share holder's Capital
Return on Share holder's
Capital
10. MARKET RATIOS
• EPS of the company has been
steadily rising over the years with
a slight decline in 2010 because
of new competitors coming in but
HUL soon realized the needs of
the market and came up with
more for its customers and
shareholders.
• Book value per share compares
the amount of stockholders' equity
to the number of shares
outstanding. Higher the BV the
better it is for the shareholders.
The BV of the company has been
rising over the year which is a
good sign for the company.
• From the graph we can easily
comprehend that the EPS of the
firm has been consistently at par
with Book Value and even more
at times which indicates the
company’s good financial
standing in the market.
11.51
9.92
10.68
12.95
17.75
9.81
12.23 12.66
17.03
13.25
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
Mar '09 Mar '10 Mar '11 Mar '12 Mar '13
Comparison of EPS & BV
Earnings per share
Book value per share
12. USERS OF FINANCIAL STATEMENT
ANALYSIS
• Creditors- Anyone who has lent funds to a
company is interested in this analysis.
• Investors- Both current and prospective
investors examine financial statements.
• Management- The company controller
prepares an ongoing financial results,
particularly in relation to a number of
operational metrics .
• Regulatory authorities-Financial statements
are examined by the SEBI and other
authorities to see if its statements conform
to the various accounting standards and the
rules.
13. ADVANTAGES OF FINANCIAL
STATEMENT ANALYSIS
• It provides an idea to the investors on
investing their funds in a particular
company.
• Regulatory authorities can ensure
company follow the required
accounting standards.
• Helpful to the government agencies in
analyzing the taxation owed to the
firm.
• Company is able to analyze its own
performance over a specific time
period.
14. LIMITATIONS OF FINANCIAL
STATEMENT ANALYSIS
• Comparability of financial data and
the need to look beyond ratios.
• Differences between two companies’
accounting methods make it,
sometimes, difficult to compare the
data of the two.
• The analyst should remember the
lack of data comparability before
reaching any clear-cut conclusion.
• Ignores qualitative aspects of data.
15. DECISION MAKING BASED ON ANALYSIS
• As the sales have been fairly good throughout and is even
expected to rise in the coming years but still the
management can look for more marketing efforts so as to
reap higher profits.
• As far as the solvency position is concerned the company’s
liquidity position is not at par with the industry standard
therefore it should work on maintaining its current and quick
ratios so as to maintain a better working capital and for
avoiding liquidity crunch.
• The EPS of the firm has been consistently at par with Book
Value and even more at times which indicates the
company’s good financial standing in the market.
• The overall financial position of the company is fairly good
and to it take to higher levels the company should increase
its efforts in product diversification and product expansion
in context with increasing competition.
• The company should leverage more on its capital structure
and employ more of debt capital in its capital structure.
16. • After comprehensively analyzing financial statements of HUL
we can easily make out the company’s sales have been rising
over the years with a positive sign.
• The profit ratios of the company are consistent over the years
and show an increasing trend in coming years as well.
• Company’s capital structure includes more of Equity which
increases the investors trust thereby leading to increased EPS
and Book Value.
• Therefore through scenario manager and data tables we have
projected future position of the company’s sales and profits
which definitely indicates a bright future.
