FINANCIAL PERFORMANCE ANALYSIS OF BHARTI AIRTEL LIMITED

CHAPTER – 1 INTRODUCTION
1.1 BACKGROUNDOFTHESTUDY
Financial Statement Analysis is the structural and logical way to present overall financial
performance of a financial institution. It also helps to evaluate and decision making for business
operation. It is used to analyze whether an entity is stable, solvent, liquid or profitable enough
to be invested in.
Financial Statement Analysis is a method used by interested parties such as investors, creditors,
and management to evaluate the past, current, and projected conditions and performance of
the firm. Ratio analysis is the most common form of financial analysis. It provides relative
measures of the firm's conditions and performance. Horizontal Analysis and Vertical Analysis
are also popular forms. Horizontal analysis is used to evaluate the trend in the accounts over
the years, while vertical analysis, also called a Common Size Financial Statement discloses the
internal structure of the firm. It indicates the existing relationship between sales and each
income statement account. It shows the mix of assets that produce income and the mix of the
sources of capital, whether by current or long term debt or by equity funding. When using the
financial ratios, a financial analyst makes two types of comparisons.
Financial ratio analysis is an important topic and is covered in all mainstream corporate
Finance textbooks. It is also a popular agenda item in investment club meetings. It is widely
used to summarize the information in a company's financial statements in assessing its financial
health. In today's information technology world, real time financial data are readily available via
the Internet. Performing financial ratio analysis using publications, such as Robert Morris

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Associates’ Annual Statement Studies, Dun & Bradstreet’s Key Business Ratios, Moody’s
Manuals, Standard & Poor’s Corporation Records, Value Line Investment Survey, etc., is no
longer efficient. Since students and investors now have easy access to on-line databases, the
assignments on financial ratio analysis can be modified accordingly to enhance learning.
In the current scenario where financial instability is rife and financial intuitions are becoming
popular, when it comes to investing, the sound analysis of financial statements is one of the
most important elements in the fundamental analysis process. At the same time, the massive
amount of numbers in a company's financial statements can be bewildering and intimidating to
many investors. However, through financial ratio analysis, we shall be able to work with these
numbers in an organized fashion and present them in a concise form easily understandable to
both the management and interested investors
1.2 SIGNIFICANCEOFTHESTUDY
Financial statements provide an overview of a business' financial condition in both short and
long term. All the relevant financial information of a business enterprise presented in a
structured manner and in a form easy to understand, is called the financial statements.
Therefore these financial statements are very useful for the stake holder, as they obtain all
insight information. In assessing the significance of various financial data, experts engage in
ratio analyses, the process of determining and evaluating financial ratios.
A financial ratio is a relationship that indicates something about a company's activities, such as
the ratio between the company's current assets, current liabilities or between its accounts

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receivable and its annual sales. The basic source for these ratios is the company's financial
statements that contain figures on assets, liabilities, profits, or losses. Financial ratios are only
meaningful when compared with other information. Since they are most often compared with
industry data, ratios help an individual understand a company's performance relative to that of
competitors; they are often used to trace performance over time.
Ratio analysis can reveal much about a company and its operations. However, there are several
points to keep in mind about ratios. First, financial statement ratios are "flags" indicating areas
of strength or weakness. One or even several ratios might be misleading, but when combined
with other knowledge of a company's management and economic circumstances, ratio analysis
can tell much about a corporation. Second, there is no single correct value for a ratio. The
observation that the value of a particular ratio is too high, too low, or just right depends on the
perspective of the analyst and on the company's competitive strategy. Third, a ratio is
meaningful only when it is compared with some standard, such as an industry trend, ratio
trend, a ratio trend for the specific company being analyzed, or a stated management objective.
Financial statement analysis is the process of examining relationships among financial
statement elements and making comparisons with relevant information. It is a valuable tool
used by investors and creditors, financial analysts, and others in their decision-making
processes related to stocks, bonds, and other financial instruments. The goal in analyzing
financial statements is to assess past performance and current financial position and to make
predictions about the future performance of a company. Investors who buy stock are primarily
interested in a company's profitability and their prospects for earning a return on their
investment by receiving dividends and/or increasing the market value of their stock holdings.
Creditors and investors who buy debt securities, such as bonds, are more interested in liquidity
and solvency: the company's short-and long-run ability to pay its debts. Financial analysts, who
frequently specialize in following certain industries, routinely assess the profitability, liquidity,
and solvency of companies in order to make recommendations about the purchase or sale of
securities, such as stocks and bonds. Analysts can obtain useful information by comparing a
company's most recent financial statements with its results in previous years and with the

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results of other companies in the same industry. My aim is to summarize all that data into a
form which is easily understood by all the relevant parties.
1.3 SCOPEOFTHESTUDY
1. The study covers the financial performance of the Bharti Airtel.
2. The study is made by making comparison of five year of it operation.
3. The study covered aims to reveal where the stands in respect to liquidity and an effective use
of asset.
1.4 OBJECTIVESOFTHESTUDY
Objectives are the ends that states specifically how goal be achieved. Every study must have
objectives for which all the efforts have been done. Without objective no research can be
conducted and no result can be obtained. On the basis of objective all the research process is
followed.
In this present study we have the following objective.
1. To know the financial position of the Bharti Airtel.
2. To know the Liquidity and profitability position of the company.
3. To know the financial strength and weakness of the company.
1.5 LIMITATIONSOFTHESTUDY

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The study has suffered from some barriers;
 Lack of structured and current information as the company’s policy does not permit to
disclose various data related to my study and this is the major problem among all the
problems, I have encountered with.
 The study period is limited to three year only.
 The study is based on secondary data collected from websites
 The information is accessible on company’s websites.
 Very limited researches have been done due to the availability of data is limited
1.6 REVIEWOFLITERATURE
A non-systematic literature review was undertaken to identify the financial ratios included in
articles in peer-reviewed journals, industry publications, and articles in magazines and
newspaper.
To identify ratios in peer-reviewed articles, searches of academic databases using keywords
such as “financial management”, “profitability and liquidity” and “ratio analysis” were
undertaken Singh and Pandey (2008) In their research suggested that, for the successful
working of any business organization, fixed and current assets play a vital role, and that the
management of working capital is essential as it has a direct impact on profitability and
liquidity. They studied the working capital components and found a significant impact of
working capital management on profitability for Hindalco Industries Limited.
Chakraborty and Bandopadhyay (2007) In their research studied strategic working capital
management, and its role in corporate strategy development, ultimately ensuring the survival
of the firm. They also highlight how strategic current asset decisions and strategic current
liabilities decisions had multi-dimensional impact on the performance of a company. Raheman
and Nasr (2007) In their study made an attempt to show the effect of different variables of

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working capital management including average collection period, inventory turnover in days,
average payment period, cash conversion cycle, and current ratio on the net operating
profitability of Pakistani firms. They selected a sample of 94 Pakistani firms listed on Karachi
Stock Exchange for a period of six years from 1999 - 2004 and found a strong negative
relationship between variables of working capital management and profitability of the firm.
They found that as the cash conversion cycle increases, it leads to decreasing profitability of the
firm and managers can create a positive value for the shareholders by reducing the cash
conversion cycle to a possible minimum level.
Lazaridis and Tryfonidis (2006) They conducted a cross sectional study by using a sample of 131
firms listed on the Athens Stock Exchange for the period of 2001 - 2004 and found statistically
significant relationship between profitability, measured through gross operating profit, and the
cash conversion cycle and its components (accounts receivables, accounts payables, and
inventory). Based on the results analysis of annual data by using correlation and regression
tests, they suggest that managers can create profits for their companies by correctly
handling the cash conversion cycle and by keeping each component of the conversion cycle
(accounts receivables, accounts payables, and inventory) at an optimal level
. Eljelly (2004) In his study empirically examined the relationship between profitability and
liquidity, as measured by current ratio and cash gap (cash conversion cycle) on a sample of 929
joint stock companies in Saudi Arabia. Using correlation and regression analysis, Eljelly found
significant negative relationship between the firm's profitability and its liquidity level, as
measured by current ratio. This relationship is more pronounced for firms with high current
ratios and long cash conversion cycles. At the industry level, however, he found that the cash
conversion cycle or the cash gap is of more importance as a measure of liquidity than current
zratio that affects profitability. The firm size variable was also found to have significant effect
on profitability at the industry level.
Rao(1985) , in his study discussed regarding ‘impact of debt-equity ratio on profitability –an
exploratory study of banking industry’. In this study he observed that if the earning ability i.e ,

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profitability ,has any impact on the debt-equity ratio in banks . this study was based on the
impact of profitability on the debt-equity ratio and has revealed a negative association i.e high
debt equity ratio means low profitability due to large interest payments, where as low debt
equity ratio caused high profitability because of low interest payments.
He concluded that the operating efficiency of the firm and reasonable rate of return on
owner’s capital ultimately depend on the profits earned by it and thus , profits are necessary to
run the firm in a healthy atmosphere of present day cut throat competition and also defend it
from business rivalry.
1.7 RESEARCHMETHODOLOGY
Research methodology is a comprehensive approach to solving a research problem very
carefully. For a researcher, it is not only important to know the different methods and
technique of research but also he is supposed to know how and when a particular method is to
be used. A well planned research methodology can help in enriching the research by systematic
collection and compilation of data for meaningful analysis and their proper interpretation to
find out the hidden truth underlying the research problem. Considering all the facts, we have
developed our methodology, which we think, is very appropriate to our research study.
We can use several tools to evaluate a company, but I will use one of the most valuable tools
that is “ratios“. Ratios are an analyst’s microscope; they allow us get a better view of the firm’s
financial health than just looking at the raw financial statements. Ratios are useful both to
internal and external analysts of the firm. For internal purposes: ratios can be useful in planning
for the future, setting goals, and evaluating the performance of managers. External analysts use
ratios to decide whether to grant credit, to monitor financial performance, to forecast financial
performance, and to decide whether to invest in the company. I used Microsoft Word and
Microsoft Excel work sheets to compute the different ratios and analysis.

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1.7.1 Sources ofdata:
Taking into consideration the cost, time and other resources at our disposal we have taken
utmost care in collecting the adequate data, which are considered to be appropriate for proper
investigation and analysis.
The data have been collected mainly from secondary sources. Secondary data have been
collected for five years from the annual reports and accounts of SBI. Moreover, necessary
supporting data and information have been collected from certain publication, reports,
journals, books, websites, newspapers etc.
1.7.2 Toolsapplied:
For proper analysis of the data we have used Accounting tools. Under accounting tools we have
mainly used the ratio analysis comparative and common size analysis, which is traditional and
time, tested and universally accepted technique for judging financial performance and financial
position of the company.

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CHAPTER -2
OVERVIEW OF THE COMPANY
2.1INDUSTRYPROFILE
Indian mobile telephony market is increasing day by day and there is more to happen with
technological up gradations occurring nearly every day and the ever-increasing demand for
easier and faster connectivity, the mobile telephony market is expected to race ahead…India
has a fast-growing mobile services market with excellent potential for the future. With almost
five million subscribers amassed in less than two years of operation, India's growth tempo has
far exceeded that of numerous other markets, such as China and Thailand, which have taken
more than five years to reach the figures India currently holds. +According to recent strategic
research by Frost & Sullivan, Indian Cellular Services Market, such growth rates can be greatly
attributed to the drastically falling price of mobile handsets, with price playing a fundamental
role in Indian subscriber requirements. Subscribers in certain regions can acquire the handset at

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almost no cost, thanks to the mass-market stage these technologies have reached
internationally. The Indian consumer can buy a handset for $50 or less. This should lead to
increased subscribership. This market is growing at an extremely fast pace and so is the
competition between the mobile service providers. With the presence of a number of mobile
telephony services providers including market leaders like Airtel, Reliance, Idea Cellular, Tata
Indicom, Spice Communications etc who are providing either of the two network technologies
such as Global System for Mobile Communications (GSM) and Code Division Multiple Access
(CDMA). In cellular service there are two main competing network technologies: Global System
for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). Understanding
the difference between GSM and CDMA will allow the user to choose the preferable network
technology for his needs. Global System for Mobile Communications (GSM) is a new digital
technology developed by the European community to create a common mobile standard
around the world. It helps you achieve higher sall capacity and better speech quality and one
can enjoy crystal clear reception on ones mobile phone. It automatically solves the problem of
eavesdropping on ones calls.
Code Division Multiple Access (CDMA) describes a communication channel access principle that
employs spread spectrum technology and a special coding scheme (where each transmitter is
assigned a code). It is a spread spectrum signaling, since the modulated coded signal has a
much higher bandwidth than the data being communicated. CDMA is the current name for
mobile technology and is characterized by high capacity and small cell radius. It has been used
in many communication and navigation systems, including the Global Positioning System and
the omnitracs satellite system for transportation logistics. The Company’s wireless network
runs on a GSM technology. The mobile telephony services providers Airtel, Vodafone (Formerly
Hutch), have been competing aggressively for their market share with MTNL, Tata Indicom,
Reliance and Idea Cellular entering into the foray, this tussle has only become tougher. With
major market share in the hands of the likes of Reliance, Airtel, Vodafone (Formerly Hutch),
Idea Cellular the others have been finding it difficult to compete in the market.
The Telecom Regulatory Authority Of India (TRAI) has been playing an important role in keeping
a watch on these existing players and bringing new environment as well as policies and reforms
for these Mobile Telephony Service Providers and permitting them to provide mobile telephony

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services including permission to carry its own long distance traffic within their service area
without seeking an additional license.
TRAI’s mission is to create and nurture conditions for the growth of telecommunications
including broadcasting and cable services in the country in a manner and at a pace which will
enable India to play a leading role in the emerging global information society. The service
providers are free to provide, in its service area of operation, all types of mobile services
including voice and non-voice messages, data services and PCO’s. The Operators would be
required to pay a one-time entry fee.
The basis for determining the entry fee and the basis for selection of additional operators
would be recommended by the TRAI. Apart from the one time entry fee, operators would also
be required to pay license fee based on a revenue share. It is proposed that the appropriate
level of entry fee and percentage of revenue share arrangement for different service areas
would be recommended by TRAI in a time-bound manner.
India is currently the world’s second-largest telecommunications market with a subscriber base
of 1.05 billion and has registered strong growth in the past decade and half. The Indian mobile
economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product
(GDP), according to report prepared by GSM Association (GSMA) in collaboration with the
Boston Consulting Group (BCG). The country is the fourth largest app economy in the world.
The liberal and reformist policies of the Government of India have been instrumental along
with strong consumer demand in the rapid growth in the Indian telecom sector. The
government has enabled easy market access to telecom equipment and a fair and proactive
regulatory framework that has ensured availability of telecom services to consumer at
affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the
sector one of the fastest growing and a top five employment opportunity generator in the
country.

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The Indian telecom sector is expected to generate four million direct and indirect jobs over the
next five years according to estimates by Randstad India. The employment opportunities are
expected to be created due to combination of government’s efforts to increase penetration in
rural areas and the rapid increase in smartphone sales and rising internet usage.
International Data Corporation (IDC) predicts India to overtake US as the second-largest
smartphone market globally by 2017 and to maintain high growth rate over the next few years
as people switch to smartphones and gradually upgrade to 4G.
2.1.1 Market Size
Data usage on Indian telecom operators' networks (excluding Reliance Jio), doubled in six
months to 359 petabytes or 3.7 million gigabytes per month as 4G data usage share increased
to 34 per cent by the end of June 2017.$
Smartphones sales across the globe increased 6.7 per cent year-on-year to 366.2 million
between April-June 2017, on the back of increased demand of 4G smartphones in India and
other emerging markets.
The mobile industry is expected to create a total economic value of Rs 14 trillion (US$ 217.37
billion) by the year 2020. It would generate around 3 million direct job opportunities and 2
million indirect jobs during this period. @
The total number of telephone subscribers in the country rose by 11.13 per cent year-on-year
to 1,151.78 million in the September-December quarter of 2016. According to a report by
leading research firm Market Research Store, the Indian telecommunication services market
will likely grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020.

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The revenue of mobile handset industry rose 22 per cent to Rs 1.36 trillion (US$ 21.12 billion) in
2016. * In 2017, around 200 million mobile handsets will be made out of India out of the 270
million mobile handsets to be shipped.
According to the Ericsson Mobility Report India, smartphone subscriptions in India is expected
to increase four-fold to 810 million users by 2021, while the total smartphone traffic is
expected to grow seventeen-fold to 4.2 Exabytes (EB) per month by 2021.
According to a study by GSMA, smartphones are expected to account for two out of every three
mobile connections globally by 2020 making India the fourth largest smartphone market. India
is expected to lead in the growth of smartphone adoption globally with an estimated net
addition of 350 million by year 2020.# Total number of smartphone shipments in India stood at
25.8 million units in the quarter ending December 2016, and smartphone shipments during
2016 stood at 109.1 million units, up by 5.2 per cent year-on-year. Broadband services user-
base in India is expected to grow to 250 million connections by 2017.
2.1.2 Investment
With daily increasing subscriber base, there have been a lot of investments and developments
in the sector. The industry has attracted FDI worth US$ 24.033 billion during the period April
2000 to June 2017, according to the data released by Department of Industrial Policy and
Promotion (DIPP).
Some of the major developments in the recent past are:
 India telecommunication companies will be investing US$ 20 billion over the next two
years for expansion of network and operations, stated Mr Akhil Gupta, Vice Chairman,
Bharti Enterprise.
 Airtel divested 3.65 per cent stake or 67.53 million shares in Bharti Infratel Ltd to raise
over Rs 2,570 crore (US$ 403.21 million) in order to reduce company debt.

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 Topwise Communication, a Chinese Original Device Maker (ODM), plans to launch its
own brand of ‘Comio’ smartphones in India and invest Rs 500 crore (US$ 77.6 million)
for marketing, manufacturing, research and development as well as other activities,
with the aim to capture 5 per cent market share within three years of operations.
 Bharti Airtel Ltd has planned to invest about Rs 2,000 crore (US$ 309.88 million) over
the next three years in Project Next, its digital innovation programme, in an attempt to
strengthen its position in India's highly competitive telecommunications market.
 Reliance Industries Limited plans to invest an additional sum of Rs 18,000 crore (US$
2.79 billion) during April-June 2017 on its telecom arm, Reliance Jio, to expand its fibre
network, thereby raising the total amount invested in the business to more than Rs 1.9
trillion (US$ 29.50 billion).
 Nettle Infrastructure Investment Ltd, a wholly-owned subsidiary of Bharti Airtel, plans to
acquire 21.63 per cent stake in Bharti Infratel Ltd for an estimated sum of Rs 12,400
crore (US$ 1.93 billion).
 Bharti Airtel Ltd, India's largest telecom operator, has decided to buy Tikona Digital
Networks Pvt Ltd’s 4G business for approximately Rs 1,600 crore (US$ 248.43 million),
which includes its broadband wireless access spectrum as well as 350 cellular sites in
five telecom circles.
 Bharti Airtel will buy Telenor's India operations in seven circles to receive 43.5
megahertz (MHz) spectrum in the 1800 MHz band.
 Apple plans to produce iPhone SE at an upcoming facility in Bengaluru, owned by its
partner Wistron.
 Ortel Communications, Odisha’s largest multi-system operator, plans to invest around
Rs 300 crore (US$ 45 million) over the next two years, for upgrading its infrastructure,
along with strengthening its reach, efficiency and competitiveness in the market.
 Reliance Communications Limited (RCom) has signed a binding agreement with
Brookfield Infrastructure Partners to sell a 51 per cent stake in Reliance Infratel, RCom’s
tower unit, for Rs 11,000 crore (US$ 1.65 billion).

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 Private equity giant KKR & Co LP and pension giant Canada Pension Plan Investment
Board (CPPIB) are in talks to acquire a significant stake in Bharti Infratel, which is
expected at around US$ 4 billion.
2.1.3 Government Initiatives
The government has fast-tracked reforms in the telecom sector and continues to be proactive
in providing room for growth for telecom companies. Some of the other major initiatives taken
by the government are as follows:
 The Government of India is devising a plan to provide wifi facility to 550,000 villages by
March 2019 for an estimated cost of Rs 3,700 crore (US$ 577.88 million), as per the
Department of Telecommunications, Government of India.
 The Government of India has set up high level 5G India 2020 Forum with the primary
objective of early deployment of 5G in India and a globally competitive product
development and manufacturing ecosystem targeting 50 per cent of the Indian market
and 10 per cent of the global market over the next 5-7 years.
 The Telecom Regulatory Authority of India (TRAI) focuses on identifying issues that
make it difficult to do telecom business in India like licence acquisition and spectrum
allotment among others, and review them in order to simply these processes to the
maximum possible extent.
 The Government of India plans to auction the 5G spectrum in bands like 3,300 MHz and
3,400 MHz to promote initiatives like Internet of Things (IoT), machine-to-machine
communications, instant high definition video transfer as well as its Smart Cities
initiative.
 The Government of India has launched a phased manufacturing programme (PMP)
aimed at adding more smartphone components under the Make in India initiative
thereby giving a push to the domestic manufacturing of mobile handsets.

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 The Government of India has allocated Rs 10,000 crore (US$ 1.5 billion) for rolling out
optical fibre-based broadband network across 150,000 cumulative gram panchayats
(GP) and Rs 3,000 crore (US$ 450 million) for laying optical fibre cable (OFC) and
procuring equipment for the Network For Spectrum (NFS) project in 2017-18.
2.2 AIRTEL
Airtel is a name that connects India with millions of people all over the world with millions of
people in India. Today, this telecom giant is amongst the most trusted telecommunication
brands in the world. The company’s modest journey from a regional operator limited to the city
of Delhi to second largest mobile operator in the Asia Pacific region is nothing short of inspiring.
It operates in 18 countries across South Asia and Africa. Airtel provides GSM, 3G and 4G LTE
mobile services, fixed line broadband and voice services depending upon the country of
operation. Airtel is also testing VoLTE technology across five cities in India and should roll out
the technology towards the end of 2017.
Airtel is credited with pioneering the business strategy of outsourcing all of its business
operations except marketing, sales and finance and building the 'minutes factory' model of low

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cost and high volumes. The strategy has since been adopted by several operators. Airtel's
equipment is provided and maintained by Ericsson, Huawei, and Nokia Solutions and Networks,
whereas IT support is provided by IBM. The transmission towers are maintained by subsidiaries
and joint venture companies of Bharti including Bharti Infratel and Indus Towers in India.
Ericsson agreed for the first time to be paid by the minute for installation and maintenance of
their equipment rather than being paid up front, which allowed Airtel to provide low call rates
of ₹1 (1.6¢ US)/minute
2.2.1History ofAirtel
In 1984 Sunil Mittal started assembling push-button phones in India,which he earlier used to
import from a Taiwan company, Kingtel, replacing the old fashioned, bulky rotary phones that
were in use in the country then. Bharti Telecom Limited (BTL) was incorporated and entered
into a technical tie up with Siemens AG of Germany for manufacture of electronic push button
phones. By the early 1990s, Bharti was making fax machines, cordless phones and other
telecom gear. He named his first push-button phones as 'Mitbrau'.
In 1992, he successfully bid for one of the four mobile phone network licences auctioned in
India. One of the conditions for the Delhi cellular license was that the bidder have some
experience as a telecom operator. So, Mittal clinched a deal with the French telecom group
Vivendi. He was one of the first Indian entrepreneurs to identify the mobile telecom business as
a major growth area. His plans were finally approved by the Government in 1994 and he
launched services in Delhi in 1995, when Bharti Cellular Limited (BCL) was formed to offer
cellular services under the brand name AirTel. Within a few years Bharti became the first
telecom company to cross the 2 million mobile subscriber mark. Bharti also brought down the
STD/ISD cellular rates in India under brand name 'Indiaone'.

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In 1999, Bharti Enterprises acquired control of JT Holdings, and extended cellular operations to
Karnataka and Andhra Pradesh. In 2000, Bharti acquired control of Skycell Communications, in
Chennai. In 2001, the company acquired control of Spice Cell in Calcutta. Bharti Enterprises
went public in 2002, and the company was listed on Bombay Stock Exchange and National Stock
Exchange of India. In 2003, the cellular phone operations were re-branded under the single
Airtel brand. In 2004, Bharti acquired control of Hexacom and entered Rajasthan. In 2005,
Bharti extended its network to Andaman and Nicobar. This expansion allowed it to offer voice
services all across India.
Airtel launched "Hello Tunes", a caller ring back tone service (CRBT), in July 2004 becoming to
the first operator in India to do so. The Airtel theme song, composed by A.R. Rahman, was the
most popular tune in that year.
In May 2008, it emerged that Airtel was exploring the possibility of buying the MTN Group, a
South Africa-based telecommunications company with coverage in 21 countries in Africa and
the Middle East. The Financial Times reported that Bharti was considering offering US$45 billion
for a 100% stake in MTN, which would be the largest overseas acquisition ever by an Indian
firm. However, both sides emphasise the tentative nature of the talks, while The Economist
magazine noted, "If anything, Bharti would be marrying up," as MTN has more subscribers,
higher revenues and broader geographic coverage. However, the talks fell apart as MTN Group
tried to reverse the negotiations by making Bharti almost a subsidiary of the new company. In
May 2009, Bharti Airtel again confirmed that it was in talks with MTN and the companies
agreed to discuss the potential transaction exclusively by 31 July 2009. Talks eventually ended
without agreement, some sources stating that this was due to opposition from the South
African government.
In 2009, Bharti negotiated for its strategic partner Alcatel-Lucent to manage the network
infrastructure for the fixed line business. Later, Bharti Airtel awarded the three-year contract to
Alcatel-Lucent for setting up an Internet Protocol access network across the country. This would

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help consumers access internet at faster speed and high quality internet browsing on mobile
handsets.
In 2009, Airtel launched its first international mobile network in Sri Lanka. In June 2010, Bhartil
acquired the African business of Zain Telecom for $10.7 billion making it the largest ever
acquisition by an Indian telecom firm. In 2012, Bharti tied up with Wal-Mart, the US retail giant,
to start a number of retail stores across India. In 2014, Bharti planned to acquire Loop Mobile
for ₹7 billion (US$110 million), but the deal was called off later.
Bharti Airtel Limited ("Airtel"), the world's third largest mobile operator with operations in 20
countries across Asia and Africa, said that its Treasury division has been adjudged as a highly
commended winner of the Top Treasury Team (Asia) Awards at the Adam Smith Asia Awards
2015
2.3.AIRTELINDIA&CORPORATESTRUCTURE
Airtel India is the largest provider of mobile telephony and second largest provider of fixed
telephony in India, and is also a provider of broadband and subscription television services. It
offers its telecom services under the Airtel brand, and is headed by Sunil Bharti Mittal.
AIRTEL is credited with pioneering the business strategy of outsourcing all of its business
operations except marketing, sales and finance and building the 'minutes factory' model of low
cost and high volumes. The strategy has since been adopted by several operators. AIRTEL's
equipment is provided and maintained by Ericsson and Nokia Solutions and Networks whereas
IT support is provided by IBM.[ The transmission towers are maintained by subsidiaries and
joint venture companies of Bharti including Bharti Infratel and Indus Towers in India.

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2.3.1Tele Media
Under the Tele media segment, Airtel provides broadband internet access through DSL, internet
leased lines and MPLS (multiprotocol label switching) solutions, as well as IPTV and fixed line
telephone services. Until 18 September 2004, Bharti provided fixed line telephony and
broadband services under the Touchtel brand. Bharti now provides all telecom services
including fixed line services under the common brand airtel. As of September 2012, Airtel
provides Telemedia services to 3.3 million customers in 87 cities. As on 30 November 2012,
Airtel had 1.39 million broadband subscribers.
Airtel Broadband provides broadband and IPTV services. Airtel provides both capped as well as
unlimited download plans. However, Airtel's unlimited plans are subject to free usage policy
(FUP), which reduces speed after the customer crosses a certain data usage limit. In most of the
plans, Airtel provides only 512kbit/s beyond FUP, which is lower than the TRAI specified limit of
half the subscriber's original speed. The maximum speed available for home users under the
new V-Fiber program is 100MBit/s and with DSL is 16Mbit/s.
In May 2012, Airtel Broadband and some other Indian ISPs temporarily blocked file sharing
websites such as vimeo.com, megavideo.com, and thepiratebay.se, without giving any legal
information to customers. Airtel will be launching its Voice over LTE calling service in Mumbai
and Kolkata.
In June 2011 the Economic Times reported that Telemedia Business was merged with Mobile,
DTH and Business in three separate parts respectively.
2.3.2 DigitalTelevision

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The Digital television business provides Direct-to-Home (DTH) TV services across India under
the brand name Airtel digital TV. Airtel digital TV is an Indian direct-broadcast satellite service
provider owned and operated by Bharti Airtel. Its satellite service, launched in October 2008,
transmits digital satellite television and audio to households in India. It has a total subscriber
base of 10.07 million as of 30 March 2015.
2.3.3MobileDataService
Services under mobile data include BlackBerry services; a web-enabled mobile email solution
working on 'push technology'; a USB modem that helps in getting instant access to Internet and
corporate applications; Airtel Data Card, which enables accessing the internet anytime; Easy
Mail, a platform that provides access to personal/corporate e-mails independent of handset
operating system; and application services that shorten the queues at the billing section, off-
load the pressure on the billing staff and bring convenience to the user.
2.3.4Business
Airtel Business is comprised largely of six products: cloud and managed services, digital signage,
NLD/ILD connectivity (VSAT/ MPLS/ IPLC and Ethernet products), Wi-Fi dongles, voice solutions
(like toll free numbers, TracMate, and automated media reading) and conferencing solutions
(VoIP, audio, video, and web conferencing) serving Industry verticals like BFSI, IT/ITeS,
manufacturing, hospitality and government.
Airtel Business, the B2B arm of Bharti Airtel, has rolled out a first of its kind dedicated digital
platform to serve the growing connectivity, communication and collaboration requirements of
emerging businesses, including SMEs and startups. The digital platform will offer solutions to
emerging enterprises to enable ease of business and faster time to market.

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2.3.5 Android-Based tablet
Beetel Teletech Ltd., a unit of Bharti Enterprises Ltd., on 18 August 2011, launched a ₹9,999
(US$160) 7-inch tablet in India based on Google Inc.'s Android operating system. The offering is
intended to capitalise on the expected demand for cheap computing devices in the world's
fastest-growing and second-largest mobile phone market.
2.3.6 Products and Services Offered by theCompany:
I. Mobile
 Prepaid
 Postpaid
II. Broadband & Internet
 Speed on demand
 Airtel PC secure
 Airtel Net PC
 IPTV
III. Digital TV
IV. Data and IP Solutions
V. Wireless Internet
 Data Card
 USB Modem
VI. Email on the go
 Windows Mobile 5.0

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 Airtel Easy Mail
VII. Calling Cards
 International Calling Cards
 Airtel Call Home
 Airtel World Calling Cards
2.4SUSTAINABILITYPLAN2020
At Airtel, we firmly believe that the digital world should be open to everyone and are therefore,
committed to reducing the digital gap and thus creating a platform where no person, service or
information is too remote. Our highly efficient and dense network infrastructure and far
reaching distribution form the backbone of our digital inclusion strategy. Ongoing investments
in innovative technologies and applications backed by products and solutions that create added
value for customers, society and the environment are the key pillars of this area. At Airtel, for
us, serving our customers is at the heart of everything we do and enriching their lives is core to
our business. To build an enduring relationship with the customers, we constantly remain
concerned about our network quality, resilience and augmentation, enhanced customer service
and communication. We ensure our customers continue to experience a world-class seamless
network for voice and data services.
Through a wide variety of cutting-edge and innovative products and services tailored to
emerging market needs, we strive to bring further sustainable benefits and help improve our
customers’ lives. We aim to provide our customers with rich and simplified service channel and
process through innovative self-care initiatives in multiple ways and across many platforms.

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2.4.1Protecting Planet &Empowering People
• Deployment of Energy-Efficient Technologies
• Promotion of Renewable Energy
• Innovative services that reduce environment impact
• Waste Management and Resource Optimization
• Talent Development
• Promotion of Gender Diversity
• Employee Engagement and Retention
• Fostering an ethical work culture
• Developing a safe and healthy workplace Reduction in CO2 emissions from our network
infrastructure by around 70% per terabyte in next three years, by deploying renewable energy
solutions and efficient technologies.
• Create a high performance culture through embedding Talent First
• Grow talent through strong learning, mentoring and succession planning
Environmental and climate protection form an integral part of our sustainability strategy.
It is our continuous endeavor to reduce the environmental impact of our business operations.
The energy-efficient designing in our networks, facilities and data centers, increased use of
renewable energy, and the preservation of raw materials through optimized recycling and reuse
are core of our ecological responsibility. Our business strategy has a critical pillar called "Win
with people" which is anchored on three people-related strategic aspects:
• Building a high performance culture
• Building employee capabilities to deliver and grow
• Enabling effective cross-functional work culture

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Identifying and developing our critical talent through iconic learning programs covering
functional expertise, leadership and business insight, a balanced performance management
system backed by rewards and recognitions and promotion of equality and diversity by being an
equal opportunity employer have been some of our key focus areas to meet this objective.
2.5 ACHIEVEMENTSANDRECOGNITION
Milestones:
2014 Airtel crosses 200 million mobile customer mark in India
2013 Airtel signs definitive agreement to fully acquire Warid Uganda
2012 Bharti Airtel move one notch in the world wide ranking to be the fourth largest mobile operator in the
world in terms of subscribers.
2011 Bharti Airtel and other global telcos launch EIG for Commercial use
2011 Bharti Airtel partners with Savvis for enhancing Managed Service offerings
2010 Bharti Airtel launches high capacity direct terrestriallink between India and China
2010 Bharti Airtel rated as India’s Best Enterprise Connectivity Provider
2010 Bharti Airtel launches Global Data Services in Thailand & Malaysia
Achievements/ Recognition:–
 Bharti Airtel ranked fourth in Transparency 2013
 Airtel wins top honors at the 7th Frost & Sullivan ICT Awards 2008
 Bharti Airtel hs been awarded the 'Best Cellular Service Provider' and 'Best Broadband Service Provider' at
the 2008 V&D 100 Awards.
 Bharti Airtel has been voted as India’s most innovative company , in a survey conducted by The Wall Street
Journal.

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 Airtel has been voted the 2nd Most Trusted Service Brand in the Annual Economic Times–Brand Equity,
Most Trusted Brands survey.
 Airtel has won the Platinum Trusted Brand Award in the Mobile Service provider category in the Reader's
Digest Asia Trusted Brands Survey.
 Airtel bagged 'Wireless Service Provider of the Year' award at the 2008 Frost & Sullivan Asia Pacific ICT
Awards.
 Voted India’s most innovative company – in a survey conducted by The Wall Street Journal in 2008
 Winner of the “Gallup Great Workplace Award”– Gallup Consulting, 2008
 “2nd Most Trusted Service Brand” – Annual Economic Times–Brand Equity, Most Trusted Brands survey
2008
 ‘Best Content Service’ Award for its Farmer Information Dissemination Platform for Bharti Airtel’s joint
venture with IFFCO, IKSL (IFFCO Kisan Samachar) – World Communications Awards 2008
 Best Project Management’ Award for its Gujarat e–GRAM project – World Communications Awards 2008
 “Best Telecom Company” at the NDTV Profit Business Leadership Awards
 Best Carrier India for innovative products & services and efficient cost models and the Ovum Telco–
Transformation award recognizing philosophy and execution of a successful outsourcing strategy at the
Telecom Asia Awards 2008
 Sunil Bharti Mittal was awarded the GSM Association Chairman’s Award 2008. The highest honour in global
telecom sector, recognized his tremendous contribution to the development of India’s telecom sector
 Sunil Bharti Mittal adjudged the “Business Leader Transforming India, 2008 at the NDTV Profit Business
Leadership Awards
 Bharti Airtel has won the ‘Most Preferred Cellular Service Provider Brand’ award at the CNBC Awaaz
Consumer Awards in Mumbai.
 Bharti Airtel has received the prestigious Businessworld–FICCI–SEDF Corporate Social Responsibility Award
2009–2010.

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CHAPTER-3
FINANCIAL STATEMENTS- A CONCEPTUAL DISCUSSION
3.1FINANCIALSTATEMENT
Financial Statements is a collection of data organized according to logical and consistent
accounting procedures. It purposes is to convey an understanding of some financial aspect of a
business firm. It may show a position at a moment in time, as in the case of a balance sheet , or
may reveal a series of activities over a given period of time, as in the case of an income
statement. Thus, the term ‘financial statements’ generally refers to the two statements : i) the
position statement or balance sheet; and ii) the income statement or the profit and loss
account. These statements are used to convey to management and other interested outsiders
the profitability and financial position of a firm.
3.1.1BalanceSheet orthe PositionStatement
Balance Sheet is the financial statement of a company which includes assets, liabilities, equity
capital, total debt, etc. at a point in time. Balance sheet includes assets on one side, and
liabilities on the other. For the balance sheet to reflect the true picture, both heads (liabilities &
assets) should tally (Assets = Liabilities + Equity).
Balance sheet is more like a snapshot of the financial position of a company at a specified time,
usually calculated after every quarter, six months or one year. Balance Sheet has two main

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heads -assets and liabilities.
Let's understand each one of them.
Asset
An asset is something that an entity owns or controls in order to derive economic benefits from
its use. Assets must be classified in the balance sheet as current or non-current depending on
the duration over which the reporting entity expects to derive economic benefit from its use.
An asset which will deliver economic benefits to the entity over the long term is classified as
non-current whereas those assets that are expected to be realized within one year from the
reporting date are classified as current assets.
Types of Assets
There is two major type of assets:
· Tangible assets
· Intangible assets
Tangible Assets
Tangible assets are those have a physical substance, such as equipment and real estate.
Intangible Assets
Intangible assets lack physical substance and usually are very hard to evaluate. Assets which do
not possess any material value.

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They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc.
Types of Tangible Assets
1. Fixed Assets.
2. Current Assets.
1. Fixed Assets
This group includes land, buildings, machinery, vehicles, furniture, tools, and certain wasting
resources e.g., timberland and minerals. It is also referred to as PPE (property, plant, and
equipment), these are purchased for continued and long-term use in earning profit in a
business.
2. Current Assets
Current assets are cash and other assets expected to be converted to cash, sold, or consumed
either in a year or in the operating cycle. These assets are continually turned over in the course
of a business during normal business activity. There are 5 major items included into current
assets:
 Cash and Cash Equivalents
It is the most liquid asset, which includes currency, deposit accounts, and negotiable
instruments (e.g., money orders, cheque, and bank drafts).
 Short-term Investments
It includes securities bought and held for sale in the near future to generate income on
Short term price differences (trading securities).
 Inventory

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The raw materials, work- in-process goods and completely finished goods that are considered to
be the portion of a business's assets that is ready or will be ready for sale.
 Receivables
It is usually reported as net of allowance for uncollectable accounts
 Prepaid Expenses
These are expenses paid in cash and recorded as assets before they are used or consumed
(a common example is insurance). The phrase net current assets (also called working capital) are
often used and refer to the total of current assets less the total of current liabilities
I. Gross Block
Gross block is the sum total of all assets of the company valued at their cost of acquisition. This
is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block
less accumulated depreciation on assets. Net block is actually what the asset are worth to the
company.
II. Capital Work in Progress
Work that has not been completed but has already incurred a capital investment from the
company. This is usually recorded as an asset on the balance sheet. Work in progress indicates
any good that is not considered to be a final product, but must still be accounted for because
funds have been invested toward its production.
III. Investments
 Shares and Securities, such as bonds, common stock, or long-term notes
 Associate Companies
 Fixed deposits with banks/finance companies
 Investments in special funds (e.g., sinking funds or pension funds).
 Investments in fixed assets not used in operations (e.g., land held for sale).

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IV. Loans and Advances include
 House building advance
 Car, scooter, computer etc. advance
 Multipurpose advance
 Transfer travelling allowance advance
 Tour travelling allowance advance
 DRS payment.
V. Reserves
 Subsidy Received From The Govt.
 Development Rebate reserve
 Issue of Shares at Premium
 General Reserves
Liabilities
A liability is an obligation that a business owes to someone and its settlement involves the
transfer of cash or other resources. Liabilities must be classified in the statement of financial
position as current or non-current depending on the duration over which the entity intends to
settle the liability. A liability which will be settled over the long term is classified as non-current
whereas those liabilities that are expected to be settled within one year from the reporting
date are classified as current liabilities.
Types of Liabilities
Current Liabilities
Current liabilities are short-term financial obligations that are paid off within one year or on
current operating cycle. These liabilities are reasonably expected to be liquidated within a year. It
includes:

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 Accrued expenses as wages, taxes, and interest payments not yet paid
 Accounts payable
 Short-term notes
 Cash dividends and
 Revenues collected in advance of actual delivery of goods or services.
Long-Term Liabilities
Liabilities that are not paid off within a year, or within a business's operating cycle, are known as
long-term or non-current liabilities. Such liabilities often involve large sums of money necessary
to undertake opening of a business, major expansion of a business, replace assets, or make a
purchase of significant assets. These liabilities are reasonably expected not to be liquidated
within a year. It includes:
 Notes payable- debt issued to a single investor.
 Bonds payable – debt issued to general public or group of investors.
 Mortgages payable.
 Capital lease obligations – contract to pay rent for the use of plant, property or
equipments.
 deferred income taxes payable, and
 Pensions and other post-retirement benefits.
Contingent Liabilities
A third kind of liability accrued by companies is known as a contingent liability. The term refers
to instances in which a company reports that there is a possible liability for an event,
transaction, or incident that has already taken place; the company, however, does not yet know
whether a financial drain on its resources will result. It also is often uncertain of the size of the
financial obligation or the exact time that the obligation might have to be paid.
Secured Loans

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A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan, which then becomes a secured debt owed to the creditor who gives the
loan.
Unsecured Loans
An unsecured loan is a loan that is not backed by collateral. It is also known as signature loan
and personal loan. Unsecured loans are based solely upon the borrower's credit rating. An
unsecured loan is considered much cheaper and carries less risk to the borrower. However,
when an unsecured loan is granted, it does not necessarily have to be based on a credit score.
Equity
Equity is what the business owes to its owners. Equity is derived by deducting total liabilities
from the total assets. It therefore represents the residual interest in the business that belongs
to the owners.
Equity is usually presented in the statement of financial position under the following categories:
 Share capital represents the amount invested by the owners in the entity
 Retained Earnings comprises the total net profit or loss retained in the business after
distribution to the owners in the form of dividends.
 Revaluation Reserve contains the net surplus of any upward revaluation of property,
plant and equipment recognized directly in equity.
Purpose&Importance
Statement of financial position helps users of financial statements to assess the financial health
of an entity. When analyzed over several accounting periods, balance sheets may assist in
identifying underlying trends in the financial position of the entity. It is particularly helpful in

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determining the state of the entity's liquidity risk, financial risk, credit risk and business risk.
When used in conjunction with other financial statements of the entity and the financial
statements of its competitors, balance sheet may help to identify relationships and trends
which are indicative of potential problems or areas for further improvement. Analysis of the
statement of financial position could therefore assist the users of financial statements to
predict the amount, timing and volatility of entity's future earnings.
3.1.2 Income Statement or Profitand LossStatement
The income statement is one of the three primary financial statements used to assess a
company’s performance and financial position (the two others being the balance sheet and
the cash flow statement). The income statement summarizes the revenues and expenses
generated by the company over the entire reporting period.
The basic equation on which an income statement is based is:
Revenues – Expenses = Net Income
All companies need to generate revenue to stay in business. Revenues are used to pay
expenses, interest payments on debt and taxes owed to the government. After the costs of
doing business are paid, the amount left over is called net income. Net income is theoretically
available to shareholders, though instead of paying out dividends, the firm's management often
chooses to retain earnings for future investment in the business.
BasisofPreparation
Income statement is prepared on the accruals basis of accounting.

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This means that income (including revenue) is recognized when it is earned rather than when
receipts are realized (although in many instances income may be earned and received in the
same accounting period).
Conversely, expenses are recognized in the income statement when they are incurred even if
they are paid for in the previous or subsequent accounting periods.
Income statement does not report transactions with the owners of an entity.
Hence, dividends paid to ordinary shareholders are not presented as an expense in the income
statement and proceeds from the issuance of shares is not recognized as an income.
Transactions between the entity and its owners are accounted for separately in the statement
of changes in equity.
Components
Income statement comprises of the following main elements:
Revenue
Revenue includes income earned from the principal activities of an entity. So for example, in
case of a manufacturer of electronic appliances, revenue will comprise of the sales from
electronic appliance business. Conversely, if the same manufacturer earns interest on its bank
account, it shall not be classified as revenue but as other income.
CostofSales
Cost of sales represents the cost of goods sold or services rendered during an accounting
period.

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Hence, for a retailer, cost of sales will be the sum of inventory at the start of the period and
purchases during the period minus any closing inventory.
In case of a manufacturer however, cost of sales will also include production costs incurred in
the manufacture of goods during a period such as the cost of direct labor, direct material
consumption, depreciation of plant and machinery and factory overheads, etc.
You may refer to the article on cost of sales for an explanation of its calculation.
OtherIncome
Other income consists of income earned from activities that are not related to the entity's main
business. For example, other income of an entity that manufactures electronic appliances may
include:
 Gain on disposal of fixed assets
 Interest income on bank deposits
 Exchange gain on translation of a foreign currency bank account
DistributionCost
Distribution cost includes expenses incurred in delivering goods from the business premises to
customers.
AdministrativeExpenses

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Administrative expenses generally comprise of costs relating to the management and support
functions within an organization that are not directly involved in the production and supply of
goods and services offered by the entity.
Examples of administrative expenses include:
 Salary cost of executive management
 Legal and professional charges
 Depreciation of head office building
 Rent expense of offices used for administration and management purposes
 Cost of functions / departments not directly involved in production such as finance
department, HR department and administration department
OtherExpenses
This is essentially a residual category in which any expenses that are not suitably classifiable
elsewhere are included.
FinanceCharges
Finance charges usually comprise of interest expense on loans and debentures.
The effect of present value adjustments of discounted provisions are also included in finance
charges (e.g. unwinding of discount on provision for decommissioning cost).
Incometax
Income tax expense recognized during a period is generally comprised of the following three
elements:

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 Current period's estimated tax charge
 Prior period tax adjustments
 Deferred tax expense
Purpose&Use
Income Statement provides the basis for measuring performance of an entity over the course of
an accounting period.
Performance can be assessed fromthe income statement in terms of the following:
 Change in sales revenue over the period and in comparison to industry growth
 Change in gross profit margin, operating profit margin and net profit margin over the
period
 Increase or decrease in net profit, operating profit and gross profit over the period
 Comparison of the entity's profitability with other organizations operating in similar
industries or sectors
Income statement also forms the basis of important financial evaluation of an entity when it is
analyzed in conjunction with information contained in other financial statements such as:
 Change in earnings per share over the period
 Analysis of working capital in comparison to similar income statement elements (e.g. the
ratio of receivables reported in the balance sheet to the credit sales reported in the
income statement, i.e. debtor turnover ratio)
 Analysis of interest cover and dividend cover ratios

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3.2FINANCIALSTATEMENTANALYSIS
We know business is mainly concerned with the financial activities. In order to ascertain the
financial status of the business every enterprise prepares financial statements. Financial
statements are mainly prepared for decision making purposes. But the information as is
provided in the financial statements is not adequately helpful in drawing a meaningful
conclusion. Thus, an effective analysis and interpretation of financial statements is required.
Analysis means establishing a meaningful relationship between various items of the two
financial statements with each other in such a way that a conclusion is drawn.
The term financial analysis is also known as analysis and interpretation of financial statements.
It refers to the establishing meaningful relationship between various items of the two financial
statements i.e. Income statement and position statement. It determines financial strength and
weaknesses of the firm. Analysis of financial statements is an attempt to assess the efficiency
and performance of an enterprise. Thus, the analysis and interpretation of financial statements
is very essential to measure the efficiency, profitability, financial soundness and future
prospects of the business units. Financial analysis serves the following purposes :
MeasuringtheProfitability
The main objective of a business is to earn a satisfactory return on the funds invested in it.
Financial analysis helps in ascertaining whether adequate profits are being earned on the
capital invested in the business or not. It also helps in knowing the capacity to pay the interest
and dividend.
IndicatingtheTrendofAchievements

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Financial statements of the previous years can be compared and the trend regarding various
expenses, purchases, sales, gross profits and net profit etc. can be ascertained. Value of assets
and liabilities can be compared and the future prospects of the business can be envisaged.
AssessingtheGrowthPotentialoftheBusiness
The trend and other analysis of the business provide sufficient information indicating the
growth potential of the business.
ComparativePositioninrelationtoOtherFirms
The purpose of financial statements analysis is to help the management to make a comparative
study of the profitability of various firms engaged in similar businesses. Such comparison also
helps the management to study the position of their firm in respect of sales, expenses,
profitability and utilizing capital, etc.
AssessOverallFinancialStrength
The purpose of financial analysis is to assess the financial strength of the business. Analysis also
helps in taking decisions, whether funds required for the purchase of new machines and
equipments are provided from internal sources of the business or not if yes, how much? And
also to assess how much funds have been received from external sources.
Chapter- 4
FINANCIAL STATEMENT ANALYSIS AND
INTERPRETATION

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4.1BALANCESHEET
Balance Sheet of Bharti Airtel ----------------------In Rupees Crores----------------------------
Table No 1 Balance Sheet
Particulars March2017 March2016 March2015
Equities And Liabilities:
Shareholder’s funds:
Equity share capital
Total share capital
Revaluation and reserves
Reserves and surplus
Total reserves and surplus
Total shareholder’s funds
Noncurrent liability:
Long term borrowings
Deferred tax liability
Other long term liability
Long term provisions
1998.70
1998.70
0.00
99208.5
99208.50
101207.30
50342.10
0.00
4038.80
233
1998.70
1998.70
2.10
82446.00
82448.00
84446.80
41700.20
3278.40
4395.40
226.20
1998.70
1998.70
2.10
76272.10
78272.80
78272.90
19626.70
1072.10
4203.6
196.90

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Total long term liability
Current liability:
Short term borrowings
Trade payable
Other current liability
Short term provisions
Total current liability
Total capital and liability
Asset
Noncurrent asset:
Tangible assets
Intangible assets
Capital work in progress
asset under development
Fixed assets
Noncurrent investment
Deferred tax asset
Long term loans and advances
Other noncurrent asset
54613.90
6547.80
20536.90
7706.60
129.10
34920.40
190741.60
38117.60
73405.20
1181.80
8418.40
121123.00
45959.00
887.50
1115.80
3985.40
49600.20
699.9
7058.80
19360.40
772.70
27891.80
161938.80
31156.30
60658.20
2825.10
971.50
95611.10
43026.10
0.00
9347.00
2548.90
25099.30
625.90
7123.20
14067.50
1234.90
23051.59
126423.70
25655.20
27789.20
2656.10
6410.80
62511.30
38395.80
0.00
8838.10
1922.10

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Total noncurrent asset
Current asset:
Current investments
Inventories
Trade receivables
Cash and cash equivalents
Short term loans & advances
Other current assets
Total current assets
Total assets
173070.70
0.00
3.90
3211.80
108.70
9678.40
4668.10
17670.9
190741.60
150553.10
0.80
5.30
3793.00
52.10
6842.90
711.60
11405.7
161938.80
111667.30
4721.10
9.40
3311.00
388.70
5394.20
932.00
14756.4
126423.70
Additional information:
March2017 March2016 March 2015
Contingent liabilities
C/F Value of Imports
Capital goods
Expenditure in foreign currency
Dividend remittance in F.C
15058.00
0.00
11627.80
99564.10
7370.20
3590.30
191.20
118113.10
3772.10
3017.20
295.80

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Earnings in Foreign exchange
FOB value of goods
Other earnings
Bonus details
Noncurrent investments (NCI)
NCI Quoted Market Value
NCI Unquoted Book Value
Current investments(CI)
CI quoted market value
CI unquoted book value
4906.00
30296.10
11876.40
4186.80
51945.20
36503.50
0.80
3727.40
52360
30945
4755
1.70
4.2INCOMESTATEMENT
Table no. 2 Profit and Loss Account

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Profit & Loss account ------------------- in Rs. Cr. -------------------
Mar '17 Mar '16 Mar '15
Income
Sales Turnover 62,276.30 60,300.20 55,496.40
Net Sales 62,276.30 60,300.20 55,496.40
Other Income -17,086.50 805.70 5,193.00
Total Income 45,189.80 61,105.90 60,689.40
Expenditure
Raw Materials 0.00 51.60 71.40
Power & Fuel Cost 6,509.30 4,038.70 4,115.10
Employee Cost 1,738.50 1,869.30 1,691.50
Other Manufacturing
Expenses
23,018.80 15,074.70 14,602.50
Selling and Admin
Expenses
720.00 748.50 0.00

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Miscellaneous Expenses 6,596.80 16,181.20 15,584.80
Total Expenses 38,583.40 37,964.00 36,065.30
Operating Profit 23,692.90 22,336.20 19,431.10
PBDIT 6,606.40 23,141.90 24,624.10
Interest 2,912.50 3,559.00 1,409.10
PBDT 3,693.90 19,582.90 23,215.00
Depreciation 12,203.40 9,543.10 7,559.70
Profit Before Tax -8,509.50 10,039.80 15,655.30
PBT (Post Extra-ord Items) -8,509.50 10,039.80 15,655.30
Tax 1,416.10 2,493.30 2,454.80
Reported Net Profit -9,925.60 7,546.50 13,200.50
Total Value Addition 38,583.40 37,912.40 35,993.90
Equity Dividend 399.70 543.60 1,539.00

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Corporate Dividend Tax 145.90 -70.00 58.60
Per share data (annualized)
Shares in issue (lakhs) 39,974.00 39,974.00 39,974.00
Earnings Per Share (Rs) -24.83 18.88 33.02
Equity Dividend (%) 20.00 27.20 77.00
Book Value (Rs) 253.18 211.25 195.80
4.3RATIOANALYSIS
Financial ratios are useful indicators of a firm's performance and financial situation.
Financial ratios can be used to analyze trends and to compare the firm's financials to those of
other firms. Ratio analysis is the calculation and comparison of ratios which are derived from
the information in a company's financial statements. Financial ratios are usually expressed as a
percent or as times per period.
Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of
ratio to interpret the financial statements so that the strength and weaknesses of a firm as well
as its historical performance and current financial condition can be determined. The term ratio
refers to the numerical or quantitative relationship between two variables. With the help of
ratio analysis conclusion can be drawn regarding several aspects such as financial health,
profitability and operational efficiency of the undertaking. Ratio points out the operating
efficiency of the firm i.e. whether the management has utilized the firm’s assets correctly, to
increase the investor’s wealth. It ensures a fair return to its owners and secures optimum

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utilization of firm’s assets. Ratio analysis helps in inter-firm comparison by providing necessary
data.
An inter firm comparison indicates relative position. It provides the relevant data for the
comparison of the performance of different departments. If comparison shows a variance, the
possible reasons of variations may be identified and if results are negative, the action may be
initiated immediately to bring them in line. Yet another dimension of usefulness or ratio
analysis, relevant from the View point of management is that it throws light on the degree
efficiency in the various activity ratios measures this kind of operational efficiency.
 Liquidity Ratios
 Leverage Ratios
 Profitability Ratio
 Activity Ratio
 Market Ratios
4.3.1LiquidityRatios
Liquidity ratios measure a firm’s ability to meet its current obligations. These include:
Current Ratio:
Current Ratio = Current Assets / Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets expected
to be converted to cash in the near future. Current assets normally include cash, marketable
securities, accounts receivables, and inventories. Current liabilities consist of accounts payable,
short-term notes payable, current maturities of long-term debt, accrued taxes, and other
accrued expenses. Current assets are important to businesses because they are the assets that
are used to fund day-to-day operations and pay ongoing expenses.

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A relatively high current ratio is an indication that firm is liquid and has ability to pay its current
obligations in time as and when they become due. On the other hand, a relatively low current
ratio represents that the liquidity position of the firm is not good and the firm shall not be able
to pay its debt without facing difficulties. As a convention the minimum of two or, one ratio is
referred to as a bankers rule of thumb.
Table No.3 Current Ratio
Year 2017 2016 2105
Current Asset 17670.9 11405.7 14756.4
Current Liabilities 34920.4 27891.8 23051.5
Current Ratio 0.51 0.41 0.64
Interpretation:
The current ratio of Bharti Airtel was 0.64 in 2015 and it decreased to 0.41 in 2016 and in 2017
it shows a slight increase to 0.51. All those three years current ratio of the company is not
satisfactory because it is below the rule of thumb that is 2:1.
Quick Ratio
The quick ratio, also known as the acid-test ratio, is a liquidity ratio that further refines the
current ratio by measuring the level of the most liquid current assets available to cover current
liabilities. The quick ratio is more conservative than the current ratio because it excludes
inventory and other current assets, which generally are more difficult to turn into cash. A higher
quick ratio means a more liquid current position.
The formula for calculating a company’s quick ratio is:
Quick asset /Current Liability
(Quick Asset=Current Asset-Inventory)

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Table No.4 Quick Ratio
Year 2017 2016 2015
Quick Asset 17667 11400.4 14747
Current Liability 34920.4 27891.8 23051.5
Quick Ratio 0.64 0.41 0.64
Working Capital:
Working Capital = Current Assets – Current Liabilities
A Measure of both a company's efficiency and its short-term financial health. Positive working
capital means that the company is able to pay off its short-term liabilities. Negative working
capital means that a company currently is unable to meet its short-term liabilities with its
current assets (cash, accounts receivable and inventory). Also known as "net working capital".
Table No.5 Working Capital
Year 2017 2016 2015
Current Asset 17670.90 11405.70 14756.40
Current Liabilities 34920.40 27891.80 23051.50
Working Capital -17249.5 -16486.1 -8295.1
Interpretation
It is very clear from the above calculations that the working capital of the company is gradually
decreasing over the years, which shows the company’s liquidity position is not good. Airtel
current liability is more than its current asset. This results in negative working capital over the
years.

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4.3.2Leverage Ratios
By using a combination of assets, debt, equity, and interest payments, leverage ratios are used
to understand a company's ability to meet it long term financial obligations.
Leverage ratios measure the degree of protection of suppliers of long term funds. The level of
leverage depends on a lot of factors such as availability of collateral, strength of operating cash
flow and tax treatments. Thus, investors should be careful about comparing financial leverage
between companies from different industries. For example companies in the banking industry
naturally operates with a high leverage as collateral their assets are easily collateralized. These
include:
Time Interest Earned:
TIE Ratio = EBIT / Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have. The ratio is designed to understand the amount of
interest due as a function of company’s earnings before interest and taxes (EBIT). This ratio
measures the extent to which operating income can decline before the firm is unable to meet
its annual interest cost.
Table No. 6 TIE Ratio
Year 2017 2016 2015
EBIT 23877.20 23821.80 24624.10

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Interest Charges 2912.8 3559 1409.1
TIE Ratio 8.2 6.7 17.47
Interpretation
We can see from this ratio analysis that, this company has covered their interest expenses
17.47 times in 2015 , 6.7 times in 2016 and 8.2 times in 2017. It means they have performed
pretty much same in 2016 and 2017, but has taken a different look in 2015. As in 2015they
issued a little high number of long-term loans and their EBIT became high thus making TIE a
little high as well.
Debt Ratio:
Debt Ratio = Total Debt / Total Assets
The ratio of total debt to total assets, generally called the debt ratio, measures the percentage
of funds provided by the creditors. The proportion of a firm's total assets that are being
financed with borrowed funds. The debt ratio is calculated by dividing total long term and
short-term liabilities by total assets. The higher the ratio, the more leverage the company is
using and the more risk it is assuming. Assets and liabilities are found on a company's balance
sheet.
Table No. 7 Debt Ratio
Year 2017 2016 2015
Total Debt 89172.2 76493.1 46719
Total Asset 158097.20 126844.80 98523.40
Debt Ratio 0.56 0.60 0.47

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Interpretation
Calculating the debt ratio, we came to see that this company is highly leveraged one.
Debt to Equity Ratio:
Debt to Equity Ratio = Total debt / Total Equity
The debt to equity ratio is the most popular leverage ratio and it provides detail around the
amount of leverage (liabilities assumed) that a company has in relation to the monies provided
by shareholders. As you can see through the formula below, the lower the number, the less
leverage that a company is using. The debt to equity ratio gives the proportion of a company (or
person's) assets that are financed by debt versus equity.
It is a common measure of the long-term viability of a company's business and, along with
current ratio, a measure of its liquidity, or its ability to cover its expenses. As a result, debt to
equity calculations often only includes long-term debt rather than a company's total liabilities.
A high debt to equity ratio implies that the company has been aggressively financing its
activities through debt and therefore must pay interest on this financing.
Table No. 8 Debt to Equity Ratio
Year 2017 2016 2015
Total debt 89172.2 76493.1 46719
Total Equity 101207.30 84444.70 78270.84
Debt to Equity Ratio 0.88 0.90 0.59
Interpretation:
The debt equity ratio of Airtel in 2015 was 0.59 which increased to 0.90 in 2016 and shows a
slight decrease in 2017 to 0.88. it shows the company is using advantages of having debt.
Current WorthtoNet worthRatio=Current Worth/ Net worthRatio
We can calculate current worth and net worth by using following formulas:

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Current Worth = Total Current Assets – Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
Table No. 9 Current Worth to Net Worth Ratio
Year 2017 2016 2015
Current Worth -17249.5 -16486.1 -8295.1
Net worth 101207.30 84444.70 78270.84
CW/NW Ratio -0.17 -0.19 -0.11
Interpretation:
The current worth of the company shows a negative pattern over the years which results in
negative current worth to net worth ratio. In 2015 it was -0.11 and -0.17 in 2017.
Total CapitalizationRatio:
The capitalization ratio measures the debt component of a company’s capital structure, or
capitalization (i.e., the sum of long-term debt liabilities and shareholders’ equity) to support a
company’s operations and growth. Long-term debt is divided by the sum of long term debt and
shareholders’ equity. This ratio is considered to be one of the more meaningful of the “debt”
ratios – it delivers the key insight into a company’s use of leverage.
Total Capitalization Ratio = Long-term debt / long-term debt + shareholders’ equity
Table No. 10 Total Capitalization Ratio
Year 2017 2016 2015

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Long Term debt 56889.90 42400.10 20252.6
LTD +Net Worth 56889.9+101207.3
=158097.2
42400.1+84444.7
=126844.8
20252.6+78270.84
=98523.44
Total Capitalization
Ratio
0.35 0.33 0.21
Interpretation
Total capitalization ratio was 0.21 in 2015 which increases to 0.33 in 2016 and then shows slight
increase In 2017, 0.35. Here low debt and high equity indicates good quality of investment.
4.3.3ProfitabilityRatios
Profitability is the ability to earn profit from all the activities of an enterprise. It indicates how
well management of an enterprise generates earnings by using the resources at its disposal.
Good Profitability is essential element for a healthy enterprise.
Profitability is the net result of a number of policies and decisions. For making policy an policy
decision under different situations, measurement of profitability is essential. According to
Murthy V.S. “The most important measurement of profitability of a company is ratio, e.g.
profitability of assets, variously referred to as earning power of the company, return on total
investment or total resource Committed to operations. These profitability ratios were
calculated to measure the operating efficiency of the firm. Measurement of profitability is as
essential as the earning of itself for the business concern. Some managerial decision like rising
of additional finance, further expansion, problems of bonus and dividend payments rest upon
this measurement. It can be measured for short term as well as long term purpose. The relation

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to sales is the good short term indication of successful growth while profitability in relation to
investment is the healthier for long term growth of the business. It provides overall
performance of a company and useful tool for forecast measurement of a company’s
performance.
This section discusses the different measures of corporate profitability and financial
performance. These ratios, much like the operational performance ratios, give users a good
understanding of how well the company utilized its resources in generating profit and
shareholder value. The long-term profitability of a company is vital for both the survivability of
the company as well as the benefit received by shareholders. It is these ratios that can give
insight into the all important "profit". Profitability ratios show the combined effects of liquidity,
asset management and debt on operating results. These ratios examine the profit made by the
firm and compare these figures with the size of the firm, the assets employed by the firm or its
level of sales. There are four important profitability ratios that I am going to analyze:
Net Profit margin = Net Profit / Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales.
This margin indicates the profit after all the costs have been incurred it shows that what
% of turnover is represented by the net profit. An increase in the ratios indicates that a firm is
producing higher net profit of sales than before.
Table No. 11 Net Profit Margin
Year 2017 2016 2015
Net Profit -9925.60 7546.50 13200.50
Sales 62276.30 60300.20 55496.40
Net Profit Margin -15.93% 21.21% 21.39%

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Interpretation
From the above table, it can be seen that net profit ratio of the year 2016-17 was negative
because the company incurred losses, it because of the effect of demonetization and merger
Reliance Jio. The profit of the company in the year 2016 and 2015 was 21.39% and 21.39%
respectively. The decrease in the amount in these years was due to increase in expenses, high
finance cost, and high amount of loan.
Operating Profit Margin:
The operating profit margin ratio indicates how much profit a company makes after paying for
variable costs of production such as wages, raw materials, etc. It is also expressed as a
percentage of sales and then shows the efficiency of a company controlling the costs and
expenses associated with business operations.
Table No. 12 Operating Profit Margin
Operating Profit Margin = Operating Profit x 100/Net Sales
Interpretation
Operating profit margin shows actual performance of the company and evaluation of the
business is done by it. The table shows the operating profit ratio of Airtel from the period 2015
to 2017. This table indicates the trend of operating profit Ratiois increasing from35.01% in 2015
to 38.04% in 2017. The reason of increasing operating profit margin can be decrease in
operating expenses of the company.
Year 2017 2016 2015
Operating Profit 23692.9 22336.20 19431.10
Sales 62276.30 60300.20 55496.40
Operating Profit
Margin
38.04% 37.04% 35.01%

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Returnon Assets:
It measures a company's profitability, equal to a fiscal year's earnings divided by its total assets,
expressed as a percentage. This is an important ratio for companies deciding whether or not to
initiate a new project.
The basis of this ratio is that if a company is going
to start a project they expect to earn a return on it, ROA is the return they would receive.
Simply put, if ROA is above the rate that the company borrows at then the project should be
accepted, if not then it is rejected.
Return on Assets (ROA) = Profit after Taxation / Total assets x 100
Table No. 13 Return on Assets
Year 2017 2016 2015
Net Profit -9925.60 7546.50 13200.50
Total Asset 158097.20 126844.80 98523.40
Return On Asset -6.28% 5.95% 13.40%
Interpretation
The table above depicting the data regarding net profit to total asset of Airtel, which were
working in India during the period of 2015-2017. In the year 2015, the net profit was the
highest as compared to other years. But after 2015 it started decreasing. In 2016 , it decreased
by 174.9%. In 2017 return on asset was -6.28%, which was negative due to loss incurred by the
company.
Returnon Net worth:

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Return on Net worth measures the amount of Net Income earned by Shareholders. It is the
most important of the “Bottom line” ratio. By this, we can find out how much the shareholders
are going to get for their shares. This ratio indicates how profitable a company is by comparing
its net income to its average shareholders' equity. It measures how much the shareholders
earned for their investment in the company. The higher the ratio percentage, the more efficient
management is in utilizing its equity base and the better return is to investors.
Return on Net Worth= Profit aftertaxation /Net Worth x 100
Table No. 14 Return on Net Worth
Year 2017 2016 2015
Net Profit -9925.60 7546.50 13200.50
Net Worth 101207.30 84444.70 78270.84
Return On Net Worth -9.81% 8.94% 16.87%
Interpretation
The table above showing returns on net worth of Airtel for the last 3 year. It is evident that in
the year 2015 it was 16.87% which means the company earning 16.87% on its shareholders but
it decreases suddenly to 8.94% in 2016. This is because of the increase in shareholders fund was
more than increase in net profit. Again in 2015 it started increasing to 10.53% due to increase in
net profit and shareholders fund. In 2017 it was- 9.81% which is negative due to negative profit
of the company.
4.3.4ActivityRatios

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Activity ratio are sometimes are called efficiency ratios. Activity ratios are concerned with how
efficiency the assets of the firm are managed. These ratios express relationship between level
of sales and the investment in various assets inventories, receivables, fixed assets etc.
Asset Turnover:
The amount of sales generated for every dollar's worth of assets. It is calculated by dividing
sales in dollars by assets in dollars. Asset turnover measures a firm's efficiency at using its
assets in generating sales or revenue - the higher the number the better. It also indicates
pricing strategy: companies with low profit margins tend to have high asset turnover, while
those with high profit margins have low asset turnover.
Total Asset Turnover = Total Sales / Total Assets
Table No. 15 Asset Turnover Ratio
Year 2017 2016 2015
Sales 62276.30 60300.20 55496.40
Assets 158097.20 126844.80 98523.40
Total Asset Turnover 39.39% 47.54% 56.33%
Interpretation
Asset turnover ratio has been decreased all the years. It was 56.33% in 2015 and it reduced to
39.39% in 2017.
4.3.5 Market Ratios

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Market Value Ratios relate an observable market value, the stock price, to book values
obtained from the firm’s financial statements.
Earnings per Share- EPS:
The portion of a company’s profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company’s profitability. Earnings per share are
generally considered to be the single most important variable in determining a share’s price. It
is also a major component used to calculate the price-to-earnings valuation ratio.
Earnings per Share = Profit after Taxation/Number of Shares
Table No. 16 EPS
Year 2017 2016 2015
Net Profit -9925.60 7546.50 13200.50
No. of Shares 39.97 39.97 39.97
EPS -248.33 188.8 330.26
Interpretation
From the above table it can be seen that earning per share of the company showing decreasing
trend. In the year 2015 the ratio was highest that is 330.26, but in 2016 it decreased to 188.8
because of decrease in net profit. Then again decrease to -248.3 in 2017 because of the
negative profit.
Price / Earnings Ratio:
The Price-Earnings Ratio is calculated by dividing the current market price per share of the stock
by earnings per share (EPS). (Earnings per share are calculated by dividing net income by the
number of shares outstanding.)
The P/E Ratio indicates how much investors are willing to pay per dollar of current earnings. As
such, high P/E Ratios are associated with growth stocks. (Investors who are willing to pay a high

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price for a dollar of current earnings obviously expect high earnings in the future.) In this
manner, the P/E Ratio also indicates how expensive a particular stock is. This ratio is not
meaningful, however, if the firm has very little or negative earnings. The
Price-Earnings Ratio is calculated by dividing the current market price per share of the stock by
earnings per share (EPS). (Earnings per share are calculated by dividing net income by the
number of shares outstanding.) The P/E Ratio indicates how much investor willing to pay per
dollar of current earnings. As such, high P/E Ratios are associated with growth stocks. (Investors
who are willing to pay a high price for a dollar of current earnings obviously expect high
earnings in the future.) In this manner, the P/E Ratio also indicates how expensive a particular
stock is. This ratio is not meaningful, however, if the firm has very little or negative earnings.
Price / Earnings Ratio = Stock Price Per Share/Earning Per Shares
Table No. 17 Price Earnings Ratio
Year 2017 2016 2015
Market Price Per
Share
498 498 498
EPS -248.33 188.8 330.26
P/E Ratio -2.005 2.64 1.51
Interpretation
The P/E ratio has decreased drastically from 1.51 in 2015 to -2.005 in 2017. As the firm has
negative earnings hence, this ratio is not meaningful.
Dividendpayout ratio:
The dividend payout ratio is the amount of dividends paid to stockholders relative to the
amount of total net income of a company. The amount that is not paid out in dividends to

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stockholders is held by the company for growth. The amount that is kept by the company is
called retained earnings.Net income shown in the formula can be found on the company's
income statement.
This formula is used by some when considering whether to invest in a profitable company that
pays out dividends versus a profitable company that has high growth potential. In other words,
this formula takes into consideration steady income versus reinvestment for possible future
earnings, assuming the company has a net income.
Table No. 18 Dividend Payout Ratio
Year 2017 2016 2015
Dividend Per equity share 20 27.20 77
EPS -24.83 18.88 33.02
Dividend Pay Out Ratio -0.81 1.44 0.56
4.4COMPARATIVESTATEMENTANALYSIS
Comparative study of financial statements is the comparison of the financial statements of the
business with the previous year’s financial statements. It enables identification of weak points
and applying corrective measures. Practically, two financial statements (balance sheet and
income statement) are prepared in comparative form for analysis purposes.
4.4.1ComparativeBalanceSheet

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The comparative balance sheet shows the different assets and liabilities of the firm on different
dates to make comparison of balances from one date to another. The comparative balance
sheet has two columns for the data of original balance sheets. A third column is used to show
change (increase/decrease) in figures. The fourth column may be added for giving percentages
of increase or decrease. While interpreting comparative Balance sheet the interpreter is
expected to study the following aspects : (i) Current financial position and Liquidity position (ii)
Long-term financial position (iii) Profitability of the concern (i) For studying current financial
position or liquidity position of a concern one should examine the working capital in both the
years. Working capital is the excess of current assets over current liabilities. (ii) For studying the
long-term financial position of the concern, one should examine the changes in fixed assets,
long-term liabilities and capital. (iii) The next aspect to be studied in a comparative balance
sheet is the profitability of the concern. The study of increase or decrease in profit will help the
interpreter to observe whether the profitability has improved or not.
Table No. 19 Comparative Balance Sheet
Particulars 2017 2016 Absolute
Change
Percentage
Change
Fixed assets
Current Asset
Current Liabilities
Capital Employed
Long Term Debt
Share Capital
Reserve and Surplus
173070.70
17670.9
34920.40
155821.2
54613.90
1998.7
99208.5
150553.10
11405.7
27891.00
134067
49600.20
1998.70
82446.00
22517.6
6265.2
7029.4
21754.2
5013.7
0.00
16762.5
13.01%
35.45%
20.13%
13.96%
9.18%
0.00
16.56%

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Share Holder’s funds 101207.2 84444.7 16762.5 16.56%
Interpretation:
The comparative balance sheet of the company reveals that during 2017 there has been an
increase in fixed assets of 22517.6 i.e. 13.01%. Long term liabilities to outsiders have relatively
increased by Rs 5013.7 and share holder’s funds has increased by Rs 16760.6. This fact indicates
that the policy of the company is to purchase fixed assets from the long-term sources of
finance.
The current assets have increased by Rs6265.2 i.e. 35.45. The current liabilities have increased
only by Rs 7029.4 i.e. 20.13%. This further confirms that the company working capital position
is not good as its working capital comes in negative figures.
Reserve and surplus has been increased by 16.56% to which can say that increase in retained
earnings could be a sign of increased dividends in the future; which may help the company to
increase its share prices.
4.4.2ComparativeIncomeStatement
The income statement provides the results of the operations of a business. This statement
traditionally is known as trading and profit and loss A/c. Important components of income
statement are net sales, cost of goods sold, selling expenses, office expenses etc. The figures of
the above components are matched with their corresponding figures of previous years

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individually and changes are noted. The comparative income statement gives an idea of the
progress of a business over a period of time. The changes in money value and percentage can
be determined to analyse the profitability of the business. Like comparative balance sheet,
income statement also has four columns. The first two columns are shown figures of various
items for two years. Third and fourth columns are used to show increase or decrease in figures
in absolute amount and percentages respectively. The analysis and interpretation of income
statement will involve the following:
– The increase or decrease in sales should be compared with the increase or decrease in cost of
goods sold.
– To study the operating profits
– The increase or decrease in net profit is calculated that will give an idea about the overall
profitability of the concern.
Table No. 20 Comparative Income Statement
Particulars 2107 2016 Absolute
Change
Percentage
Change
A) Income
Sales
Other Income
Total income
B)Expenses
Raw materials Expenses
Power &fuel Cost
62276.30
-17086.5
45189.8
0.00
6509.30
60300.20
805.70
61105.9
51.60
4038.70
1976.1
-17892.2
-15916.1
-51.6
2470.6
3.17%
-104.7%
35.22%
0%
37.95

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Employee Cost
Other Manufacturing Expenses
Selling & Administrative Cost
Miscellaneous Expenses
Total Expenses
C)PBDI
Interest
PBDT
Depreciation
PBT
Tax
D)Net profit
1738.50
23018.8
720
6956.8
38583.4
6606.4
2912.5
3693.9
12203.4
-8509.5
1416.10
-9925.6
1869.30
15074.7
748.5
16181.20
37964.00
23141.90
3559.00
19582.9
9543.10
10039.8
2493.3
7546.5
-130.8
7944.1
-28.5
9224.4
619.4
-16535.5
-646.5
-15943
2660.3
-18549.3
-1077.2
-17472.1
7.5%
34.51%
3.96%
132.6%
1.61%
-250%
-22%
-431%
21.8%
218%
76.06%
-176.03%
Interpretation:
The comparative income statement reveals that there has been decreased in total income of
the company by Rs. 15916.1 i.e. 35.22%, although operating expenses have increased merely by
619.4 which is quite good. While the net profit decreased by Rs. 17472.1, the company needs to
analyze the reasons for negative profit and should take corrective actions.
4.5COMMONSIZESTATEMENTANALYSIS

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The common size statements (Balance Sheet and Income Statement) are shown in analytical
percentages. The figures of these statements are shown as percentages of total assets, total
liabilities and total sales respectively. Take the example of Balance Sheet. The total assets are
taken as 100 and different assets are expressed as a percentage of the total. Similarly, various
liabilities are taken as a part of total liabilities.
4.5.1 CommonSize BalanceSheet
A statement where balance sheet items are expressed in the ratio of each asset to total assets
and the ratio of each liability is expressed in the ratio of total liabilities is called common size
balance sheet.
Thus the common size statement may be prepared in the following way. – The total assets or
liabilities are taken as 100 – The individual assets are expressed as a percentage of total assets
i.e. 100 and different liabilities are calculated in relation to total liabilities. For example, if total
assets are Rs10 lakhs and value of inventory is Rs 100,000, then inventory will be 10% of total
assets (10000*100/1000000)
Common size Balance sheet
As on 31-03-2017
Table No. 21 Common Size Balance Sheet
Particulars Amount of
Bharti Airtel
percentage Amount Of Percentage

69 | P a g e
Equities And Liabilities:
Equity share capital
Reserves and surplus
Total shareholder’s funds
Noncurrent liability:
Long term borrowings
Other long term liability
Deferred tax liability
Long term provisions
Total long term liability
Current liability:
Short term borrowings
Trade payable
Other current liability
Short term provisions
Total current liability
Total capital and liability
1998.70
99208.50.
101207.30
50342.10
4038.80
00
233
54613.90
6547.80
20536.90
7706.60
129.10
34920.40
190741.60
1.05%
52.01%
53.06%
26.39%
2.12%
0.12%
28.63%
3.43%
10.77%
4.04%
0.07
18.31%
100%
1998.70
2.10
82446.00
84446.80
41700.20
3278.40
4395.40
226.20
49600.20
699.9
7058.80
19360.40
772.70
27891.80
161938.80
1.23%
0.001%
50.91%
52.15
25.75%
2.02
2.71%
0.14%
30.63%
0.43%
4.36%
11.96
0.45%
17.22%
100%

70 | P a g e
Asset
Noncurrent asset:
Tangible assets
Intangible assets
Capital work in progress
asset under development
Fixed assets
Noncurrent investment
Deferred tax asset
Long term loans and advances
Other noncurrent asset
Total noncurrent asset
Current asset:
Inventories
Trade receivables
Cash and cash equivalents
Short term loans & advances
Other current assets
Total current assets
38117.60
73405.20
1181.80
8418.40
121123.00
45959.00
887.50
1115.80
3985.40
173070.70
3.90
3211.80
108.70
9678.40
4668.10
17670.90
19.98%
38.48%
0.62%
4.4%
63.50%
24.09%
0.47%
0.58%
2.09%
90.74%
0.002%
1.683%
0.055%
5.07%
2.45%
9.26%
31156.30
60658.20
2825.10
971.50
95611.10
43026.10
0.00
9347.00
2548.90
150553.10
0.80
5.30
3793.00
52.10
6842.90
711.60
19.24%
37.46%
1.74%
0.60%
59.04%
26.57%
5.77%
1.57%
92.96
0.0005%
0.0033%
2.3422%
0.0322%
4.2218%
0.44

71 | P a g e
Total assets 190741.60 100% 161938.80 100%
Interpretation
Common size balance sheet shows that share holder’s fund has been increased from 52.15% to
53.06% and total noncurrent liability has been decreased from 30.63% to 28.63% which shows
the company has paid some of its noncurrent liability.
Total current liability has been increased from 17.22% to 18.31% and its current asset has been
increased from merely 0.44% to 9.26% which shows the company has tried to improve its
liquidity position.
4.5.2CommonSizeIncome Statement
The items in income statement can be shown as percentages of sales to show the relations of
each item to sales.
Table No. 22 Common Size Income Statement
Particulars Amount
2017
Percentage
2017
Amount
2016
Percentage
2016
Sales
B)Expenses
Raw materials Expenses
62276.30
0.00
100% 60300.20
51.60
100%
0.08%

FINANCIAL PERFORMANCE ANALYSIS OF BHARTI AIRTEL LIMITED

FINANCIAL PERFORMANCE ANALYSIS OF BHARTI AIRTEL LIMITED

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