FINANCIAL STATEMENT ANALYSIS 2

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FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT:

Financial Statement, as normally understood, refer to a set of reports and schedules which an account prepares at the end of a period of time for a business enterprise

According to Smith and Ashburne, financial products are the end products of financial accounting, prepared by the accountant, that support to reveal the financial position of the enterprise, the result of its recent activities and an analysis of what has been done with the earnings

There are six basic financial statements of special importance They are: The Income Statement (Profit and Loss A/c)

The Position Statement (Balance Sheet)

The Funds Flow Statement (Sources and Application Statement) The Cash Flow Statement

The Statement of Retained Earnings Schedules NV FY NY PS

1 INCOME STATEMENT: The Income Statement, also called as the Profit &

Loss account, is the accounting report which summarizes the revenues, expenses and the difference between them for an accounting period The construction of an Income Statement is accordance with the concepts of Accrual, Accounting period, Matching, Materiality and Realization there is no statutory format in which the Income Statement is to be presented, except for Banking and Insurance companies However Sec 211 of the Companies Act, 1956 prescribes the contents to be

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2 POSITION STATEMENT: The Position Statement or Balance Sheet shows the financial status of a business at a given point of time All the assets owned by the business and all the liabilities and claims it owes to outsiders and owners are listed The Balance Sheet must always be in balance 1.e the total assets should always be equal to total liabilities The Balance Sheet of a joint stock company must be prepared as per Part I of Schedule VI of Co Act Separate statutory formats exist for the preparation of the Balance Sheet of Banking and Insurance Companies

3 FUNDS FLOW STATEMENT: The term 'fund' normally means working capital The funds flow statement reveals the sources from which funds are received and the uses to which these have been put It is a valuable tool to analyze the changes in the financial condition of the business between two periods and helps the management in policy formulation and performance appraisal

4 CASH FLOW STATEMENT: The Cash flow statement is a statement of changes in the financial position of a firm on 'Cash bases It is very much similar to the 'Funds Flow' statement, except that the cash flow statement lays emphasis on cash changes only

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6 SCHEDULES: Schedules are statements which describe the summarized information presented in the Income Statement and the Balance Sheet in greater detail Schedules are a part of the financial statements, and enable a better understanding of the financial position of a business

FINANCIAL STATEMENT ANALYSIS:

The significance of financial statement lies not in their preparation but in their analysis and interpretation Analysis and interpretation of financial statements involves a study of relationship among various financial factors and to judge their meaning and significance The financial analyst must understand the plans and policies of management, determine the extent of analysis, reorganize data available as per requirements, establish relationship among financial figures and make interpretations in a simple and unbiased way

Types of Analysis:

The process of analysis may be classified based on the nature of information used and on the basis of 'methodology' of operations

1) On the basis of Nature of Information used:

a) External Analysis: The information used 1s that which is freely available to anybody Published Financial Statements are an example of such information There is no access to internal records of an organization With increasing emphasis on disclosures in recent times, the quality of external analysis is likely to improve in the future

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2) On the basis of Methodology of Operations:

a) Horizontal Analysis: It involves analysis and review of financial statements pertaining to a number of years An attempt id made to identify the periodical trend of various items in the financial statements Percentage increase/decrease is calculated for all such items Alternatively, a base year is fixed and figures pertaining to other years are indexed to that of base period It is also known as ‘dynamic’ analysis or 'trend' analysis

b) Vertical Analysis: Vertical Analysis involves analyzing a single set of financial statement, by expressing various items of the statement as a percentage of a particular item Quantitative relationship is established amongst various items at a particular data It is also known as 'Static' analysis or ‘Structural’ analysis

TYPES OF FINANCIAL STATEMENT:

The following methods of analysis are generally used: I Comparative Statements

II Common Size Statements

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NEED AND IMPORTANCE OF FINANCIAL STATEMENTS: To determine the legality of dividends

As a guide to wise dividend action As a basis for the granting of credit

As information for prospective investors in an enterprise As a guide to the value of investment already made As an aid to government supervision

As a basis for price or rate regulation

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OBJECTIVE& METHODOLOGY

The financial analysis provides valuable insight into a firm’s performance financial statement of an organization has given for a particular period and its financial positions at the end of the period There by themselves will not help people to conclude whether financial performance of the organization is good/bad the statement given only the figure further analysis and

interpretations of these figure is better Managers, investors and all employees some from of this analysis at the beginning point for their financial decision making investors use financial analysis in deciding whether or not to end their provides managers with measurement of law the company’s competitions industry The study is undertaken to present financial performance analyst of S.P.M Ltd

OBJECTIVES OF STUDY The present study has the following objectives

e Tostudy the present financial position of the concern e To observe the trends in rations

e To examine the operational performance of the organization

e To analyses the significance of fund flow, cash flow and various financial ratios e To offer some suggestions in the right of analysis made to strengthen the

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LIMITATIONS OF THE STUDY

Lack of the awareness a bout the projet

Customers are procrastinating the things many times Most of the customers already have LIC policies Competition from other market players

Some do not trust private insurance

Some customers are not ready to give details due to fear of phone call me ssages Although ICICI PRUDENTIAL has good return linked products, but convincing of customers is difficult because of high premium

Most of the customers already have LIC policies

There ‘re lots of thetas in the mind of customers towards these private

companies

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CHAPTERISATION:

The entire study is dividing into four chapters They are 1 It deals with the introduction

2 It deals with Company Profile

3 It deals with theory of financial statement analysis 4 It deals with conclusions and suggestions

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COMPANY PROFILE

ABOUT THE ORGANISATION:

THE SIRPUR PAPER MILLS LTD., marked the year 1938 for its establishment, in 1942 under the management of "M/s Hyderabad Construction Company limited", it commenced production with a capacity of 14.0 M.T per day

In 1953 M/s BIRLA BROTHERS were entered with management of company with the change in the management the expansion programmed of the mill started in a big way and by 1955 the production increased from 15 tones/day to 50 tones/day A third paper machine of 50 tones/day to 50 tones/day A third paper machine of 50 tones/day increased to production to

100 tones/day by 1959 paper machine No,4 was installed in the year 1966 with a capacity of 10.0 Mega Tonnes per day, Later a Board machine with a production capacity of 60.0 M.T per day was installed in the year 1974 In 1976 paper machine No.5 was started with production capacity of 10 M.T per day

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the Company installed BHEL Recovery Boiler, Two, and FBL Boilers, Full

Hedged W.T, Plant and many of the equipments

THE PRODUCTION HAS INCREASED IN THE SECOND PHASES:

> Paper machine no 2 was commissioned in the year 1953 -30 TPD

> A new paper machine no 3 with the capacity of 60 MT/D was commissioned in the year 1959

> Installed another machine no 4 of 10 MT/D production capacities in 1966,

> A 60 MT/D, production capacity of board machine was started in the year 1974

> Another 10 MT/D production capacity paper machine No 5 was commenced in the year 1976

> 7" machine of 68 MT/D capacities was installed and commenced on

21 March 2002

The installed capacity of the mill today is 83,550 MT, in the financial year 2002-03 the company has achieved its highest annual production of 77,974 MT, The total share capital of SPM Ltd is Rs.8,34,55,980 and its present face value of the share is Rs.10 In the financial year 2000-01 the company has achieved its maximum net profit of Rs.1621.17 lacks

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THE COMPANIES PRESENT PRINCIPAL BANKERS ARE: > Central Bank of India

> State Bank of Hyderabad

> Bank of Borada > Andhra Bank

THERE ARE 10 DIRECTORS FOR THE COMPANY INCLUDING CHAIRMAN, THEY

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> P Vaman Rao > Utsav Pari

GENERAL:

The paper is made of cellulose fibres Cellulose is an organics material of fibrous nature It occurs in all woody materials mixed with gums, resins and lignin Cotton is the present from cellulose In paper making, cotton 1s also used for good quality for paper But it is costly and not available in plenty because it is required for textiles also Therefore major source of paper making cellulose is obtained from woods, grass, cereals straws and bags The percentage of cellulose and hemicelluloses content in different materials are 65%-75% In India bamboo raw material for paper making The main source of fibrous raw materials for SIRPUR PAPER MILLS are bamboo, government reserve forest spread over 1650 sq km and hardwood from private plantation through Andhra Pradesh Forest Development Corporation

RAW MATERIAL:

The source of the main raw material Bamboo is from Andhra Pradesh Government Forest and Hard Wood from social forest Apart from Bamboo the raw matenals consumed by "SIRPUR PAPER MILLS LTD" are

Casuarinas, Bo, Subabul, Eucalyptus and other local hard wood, Bamboo,

imported pulp and waste paper are the major raw materials used The main

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constituents present in the wood in cellulose and micelulloses (fiber composition) which is used for paper manufacturing Bamboo 1s obtained from forests spread out in the Northern and Eastern parts of

Andhra Pradesh in the District of Adilabad, Karimnagar Khammam and Warangal The company continued to lay emphasis on obtaining basic conventional raw materials and has motivated fanners under the various forestry schemes The S.P.M Ltd receives higher qualities of Bamboo as under the lease Agreement with Government of Andhra Pradesh

The 75 tones/hour capacity Fluidized Bed combustion (FBC) Boiler enabled the company to use cheaper, Low Grade Coal with higher ash content thus reducing the dependency on erratic APSEP Power supply and also reducing energy cost There are total 8 coal fired boilers in the mills 1.e Six New Boilers and two FBC Boilers cinder and fly ash are the waste material that 1s generated from FBC Boilers To improve process economy- efficiency, product quality and new process developments, the company's research and development activities are carried out The company had the financial

assistance from financial institutions like IDBI, ICICI, IFCI and UIT around

10Crores from above mentioned Institutions, The SIRPUR PAPER MILLS LTD 1s constantly vigilant to its duty of maintaining clear environment of mills, site and neighborhood Full fledged effluent treatment plant in operation to give clear effluent discharge as per Government specification, The Sirpur Paper Mills Ltd is also engaged in community development activities like Construction of Drinking Water Wells, Community Halls, and School Buildings etc It is also engaged 1n welfare activities by giving monthly aid to some of the school's, In addition to the monthly aid to the school the management 1s conducting free eye camp, Health camp, Organizing Social and Religious Functions Maintenance of Hospitals and water supply to some residential wards of SirpurKaghaznagar

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In the year 1986 "The HRD Training Center" was started training programmed on worker Development and productivity orientation is being conducted for the Development of workmen The company also allows undergoing in plan training of various students of different disciplines like

Personnel, Finance, Marketing, Engineering, Computer's etc, of various

colleges The Company has a well established IT facilities and information support is made having HP 9000 computer system which 1s operational in 20 applications areas for better integration of increased service capabilities the company has further planned to introduce "Real Time '' Technology Enterprise Resource Planning (ERP), SAP and it is under implementation

GENERAL PRODUCTION PROCESS OF SPM LTD: The S.P.M.L 1s divided into five process departments They are as follows: > Pulp Mill > Stock Preparation > Paper Machine > Finishing House > Power Block PULP MILL:

Pulping is essentially the separation of the cellulose fibers in the raw materials from lignin, a phenol substance that is the bond with the fiber The pulping stage being linked to the nature of raw materials utilized as well as

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characteristics of the end product is the most critical and employees a variety of mechanical process varies from 85-95% as a _ percentage of wood utilized and such process are mainly used for the manufacture of News Print Chemical process generally yield 50-65% of pulp as percentage of wood utilized and are employed for the manufacture of high strength Kraft or writing and printing papers

The raw materials like bamboo and hardwood are simultaneously assed to chipper house in the ratio of 85% and 15% through conveyor It is cut in to pieces of size between 3mm to 45mm than it is allowed to pass through vibrating screens and piece of size above 45mm 1s rejected to Re-chippers from the chipper house the chips are passed to digester house and the cooking material passes to blow tank and then to knitters In Knitters cooked chips are stored and redirected to digester house and then come to the washing screens

STOCK PREPARATION:

After Screening and cleaning to remove unwanted matter, followed by bleaching (if it undesired to produce bleached varieties) the pulp 1s subjected to treatment in heaters and refiners for disintegration into individual fibers The 'Stock' a term used to describe the dilute suspension of fibers in water utilized to produce a sheet of paper, in prepared by blending different grades of pulp and mixture of additives to secure the desired properties of the end product

THE PAPER MACHINE:

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At the "Wet end' of the paper machine, the head box controls the flow of stock, which is passed over a fine wire mesh (referred to as the 'wire') to form the sheet of web of paper, while the water is simultaneously drained The paper web is then compressed against a felt to squeeze out the remaining water and passed through a series of steam heated drying cylinders (the 'dry end’) to complete the extraction of water, followed by calendaring to achieve surface finish

FINISHING:

This 1s the term which refers to preparation of the paper reel for marketing and covers a series of operations such as slitting and rewinding of large reels into smaller ones, sheet cutting and packing Power Block the Primary function of the power block is supplying - water -to various departments supplying power and steam produced to various departments and treatment of waste water There are 13 Boilers and 4 Turbines, the other subsidiary departs

Chemical = 3 ~—_ - Electrical Central Laboratory - Mechanical Civil Department — - Soda Recovery

POWER BLOCK:

The function of power block are supplying of water, power and steam produced to various departments and treatment of wastewater The company

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has got 1ts own power generation plant generating 32MW of power, and gets 3500K VA power from A.P

TRANSCO; there are 13 boilers and 4 turbines The four turbo generators installed in the mills are: TA2,TA3 (Metro Politah Vackers, England)

TA4, TAS (M/s Jyoliti Tnveniturbines 1 id, Ranjilnrc) TẠI (BHEL makes double extraction turbines)

THE CAPACITIES OF EACH TURBO GENERATORS ARE: TAI - 9.5 MW TA2 - 7.5 MW TA3 - 7.5 MW TA4 - 2.5 MW TAS - 5.0MW

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The following are the names of the school to which S.P.M Management 1s giving monthly aid

Bala Bharathi High School Balvidya Mandir High School Anwar Urdu Upper Primary School Iqbal Urdu School

Tamil Manran Primary School Vv VV VY VY WV

The company has contributed Rs.18 Lacks to unable the Kaghaznagar Municipal authorities to take up road repairs, roads, formations and drainages etc

ORGANISATION STRUCTURE

The “SIRPUR PAPER MILLS LTD" Commenced in the year 1938 It is located in the remote corner of Andhra Pradesh The Mill is located at "Sirpur-Kaghaznagar" District Adilabad; The SPM Ltd is a joint stock company Registered under companies Act The registered office is located at 5-9-2/1/1 first floor opposite: New MLA Quarters Gate, Adarshanagar, and Hyderabad-500463 The Sales Office and corporate office of SPM Ltd is in New Delhi The Control of SIRPUR PAPER MILLS LIMITED rests with the Board of Directors representing Slate Government and other Share Holders The Board of directors does formulate the policies enumerating to translate The board of directors docs the approval of the annual budget and future Financial outlay

For convenience the organization structure is divided into two sections as

follows:

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> Technical Section

> Administrative Section

A brief outline of the Organization structure of S.P.M Ltd is presented in the figure

INTRODUCTION TO PAPER INDUSTRY

A country civilization mostly depends upon its paper consumption First we have to know as briefly about the introduction and establishment of paper in the world, its entrance in INDIA, Again 1t 1s essential to know about the development and progress of paper industry in our country as well as in our

State

The world paper is adopted from the water plant called "PAPYRUS" which is used to grow around "NILE RIVFR" F.GYPT the Egypt citizens used papyrus plant as paper after cutting and drying It since 3000BC it was sad that "T JAMEUM CHAINE" had prepared paper at a tank of mulberry tree in 105 A.D

In751 ADthe "ARABS" imported the knowledge of paper making" is spread to "EUROPE" and central countries of the world It has highly

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popularized by the "BOWDDACK" especially by the "DOKSOMONK" through out the world

The first paper mill the world was started in 1336 AD in GERMANY Later paper mills were started in 1586 AD in SWITZERLAND and HOLLAND and later it spread all over the world

Firstly in 1789 AD chlorine was used for bleaching of pulp In 1799 AD "ROBERT INCHOLES" the French scientist designed the first paper machine in the world Later "LAGER DIBBT" and "BRIMAN DONKIM" designed present paper machine with their continuous efforts

PAPER INDUSTRY IN INDIA (CAPITAL) HISTORY:

Unlike iron & steel, textile & sugar industry the paper making industry did not exist in ancient India For writing purpose “BOJPARTRO” (Bank of Trees) and ‘TALLAPATRA” (Leaves of Palm) were used

In newsprint segment there are at present 39 mills (4 in the central public sector, 2 in the state public sector and 33 in private sector) with an installed capacity of about 0.836 million TPM at present

The per capita consumption of paper in India is currently 6 Kgs, against a world average 45 Kgs with an expected growth rate of 6.7% PA over the next five years (fig 1)

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PER CAPITA CONSUMPTION OF PAPER 50 40 30 20 10 = #india m World Series-1 INDUSTRY DEMAND:

The demand of paper influenced by various macro-economic factors like national economic growth, industrial production, promotional expenditure, population growth and the government allocation for the educational sector Paper consumption in India is expected to reach 9.0 MT by the years 2010 and 13 MT by 2015 (fig.2)

Paper Consumption in India

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Chart Title 14 12 10 " + DD HW Year COMPARATIVE STATEMENTS

Comparative financial statement refer to comparison of financial statements Pertaining to two different periods by putting them side by side and finding out the changes with respect to each item of the statements and overall changes in absolute and relative changes

Points to be noted:

2 The financial data which is to be compared should be properly defined A particular account head must have the same connotation for all the periods comparison

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3 The accounting policies followed during the years of comparison should be uniform If there is any change in any Policy, the figures should be adjusted to ensure uniformity

4 It is preferable to present financial information in "Vertical or Statement" form

5 The Comparative financial statement must reveal changes in both 'absolute'

and 'relative' measures

Interpretation:

1 A change in sales is meaningful only if it is compared with a change in cost of goods sold

2 A change in operating expenses might be due to change in scale of operations or on account of change in degree of managerial efficiency 3 A change in net profit is good indicator of overall profitability of the

Organization

4 A change in retained earnings can be on account of change in profitability, or in account of change in dividend policy, capitalization of free reserves or change in current financial position, or short term solvency of the business 5 A change in working capital is good indicator of the change in current

financial position, or short term solvency of the business

6 A change in liquid assets is a better indicator of the short term solvency of the business

7 A change in fixed assets must be balanced by a change in long-term funds 8 The nature of assets which have increased or decreased must be studied to

understand its implications in the future

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9 Relative measures provide a sharper picture than absolute measures

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COMPARATIVE INCOME STATEMENT OF 2004-2005

Particulars 2004 2005 Absolute Relative

(Amounts in Lakhs) | Change (Rs.) | Change (“%)

(A) NET SALES 17753.30| 23240.15 5486.85 30.91

(B)COST OF GOODS SOLD

Material Consumed 3652.69} 4800.52 1147.83 31.42

Direct Labor 3222.29] 3646.46 424.17 13.16

Manufacturing Expenses 5511.95} 7542.23 2030.28 36.83

(Accretion to)/ Depletion of stocks 101.35 57.98 -43.37 -42.79 TOTAL COST OF GOODS SOLD (B) 12488.28| 16047.19 3558.91 28.50 (C)GROSS PROFIT (A-B) 5265.02} 7192.96 1927.94 36.62

(D) OPERATING EXPENSES

Administration, selling & Distribution Exp 3385.33] 4447.02 1061.69 31.36

TOTAL OPERATING EXP (D) 3385.33} 4447.02 1061.69 31.36

OPERATING PROFIT (C-D) 1879.69} 2745.94 866.25 46.08

(+) Non-Operating income 574.20 224.96 -349.24 -60.82 (-) Non Operating Expenses (including interest) 618.82} 1100.47 481.65 77.83 NET PROFIT BEFORE TAX (NPBT) 1835.07} 1870.43 35.36 1.93

(-) TAX 662.31 625.81 -36.50 -5.51

NET PROFIT AFTER TAX (NPAT) 1172.760 1244.62 71.86 6.13

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INTERPRETATION

>

There is a modest increase in Sales (30.91%) It points towards increased acceptability of the company's products and customer satisfaction

The rate of growth sales (30.91%) is considerably higher than the rate of growth of Cost of Goods Sold (28.50%) This has resulted in a handsome rise in Gross Profit of the company

There is increase of (36.62%) of Gross Profit It is good sign to the company

There is a moderate increase in Operating Expenses (31.36%) compared to the increase in sales (30.91%) and increase in cost of goods sold (28.50%), which do not affect that much to overall financial position of the company But the management should control it

There is increase of Operating Profit (46.08%) It is good sign to the company

There is a high decrease in Non-Operating Income (-60.82%) and increase in Non-operating Expenses (77.83%) It affects the financial position of the company

There is increase in Profit before and after tax (PBT) 1.93% and (PAT) 6.13% respectively It is a good sin to the company, but compared to sales it should increase more

The overall profitability of the company is satisfactory

Conclusion: the main rational for not increasing profit as a % of sales in high increasing in Non-operating expenses and decreasing in Non-operating income

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(Amounts in lakhs)| Change | Change (“%)

(Rs.)

(A) NET SALES 23240.15|21657.22 -1582.93 -6.81

Direct Labor 3646.46] 3728.03 81.57 2.24

Manufacturing Expenses 7542.23) 7920.72 378.49 5.02

(Accretion to)/ Depletion of stocks 57.98 19.42 m38.56 -66.51 TOTAL COST OF GOODS SOLD (B) 16047.19)17230.33 1183.14 7.37

(C)GROSS PROFIT (A-B) 7192.96] 4426.89 -2766.07 -38.46

Administration, selling & Distribution Exp 4447.02] 1953.95 -2493.07 -56.06

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INTERPRETATION

>

There is a modest decrease in Sales (-6.81%) It points towards decreased acceptability of the company's products and customer satisfaction

The rate of growth of Cost of Goods Sold (7.37%) Is considerably higher than the rate of reduction of Sales (-6.81%) This has resulted in Gross Profit of the company

There is decrease of (-38.46%) of Gross Profit It is bad sign to the company

There is a moderate decrease in Operating Expenses (-56.06%) compared to the decrease in sales (-6.81%) and increase in cost of goods sold (7.37%), which increase the Operating Profit

There is decrease of Operating Profit (-9.94%) It is bad sign to the company

There is a high increase in Non-Operating Income (134.19%) and decrease in Non-operating Expenses (-7.10%) It increase the net profit of the company

There is increase in Profit before and after tax (PBT) 5.72% and (PAT) 43.98% respectively It is a good sign to the company,

Conclusion: the main rational for increasing profit, even though with a decreasing of sales in increasing in Non-Operating income and decreasing in Non-operating expenses

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(Amount in Lakhs) | Change (Rs.) | Change

(%)

(A) NET SALES 21657.22| 22025.76 368.54 1.70

Direct Labor 3728.03} 3774.53 46.50 1.25

Manufacturing Expenses 7920.72] 8132.15 211.43 2.67

(Accretion to)/ Depletion of stocks 19.42) -185.38 -204.80] , -1054.58 TOTAL COST OF GOODS SOLD (B) 17230.33| 17915.16 684.83 3.97

(C)GROSS PROFIT (A-B) 4426.89} 4110.60 -316.29 -7.14

Administration, selling & Distribution Exp 1953.95) 1860.33 -93.62 -4.79

TOTAL OPERATING EXP (D) 1953.95} 1860.33 -93.62 ^-4.79

OPERATING PROFIT (C-D) 2472.94) 2250.27 -222.67 -9.00

(+) Non-Operating income 526.83 418.08 -108.75 -20.64

(-) Non Operating Expenses (including interest) 1022.38] 1140.41 118.03 11.54

NET PROFIT BEFORE TAX (NPBT) 1977.39| 1527.94 -449.45 -22.73

(-)TAX 185.39 118.00 -67.39 -36.35

NET PROFIT AFTER TAX (NPAT) 1792.00} 1409.94 -382.06 -21.32

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INTERPRETATION

>

There is a modest increase in Sales (1.70%) It points towards decreased acceptability of the company's products and customer satisfaction

The rate of growth of Cost of Goods Sold (3.97%) Is considerably higher than the rate of growth of Sales (1.70%) This has resulted in Gross Profit of the company

There is a moderate decrease in Operating Expenses (-4.79%) compared to the increase in sales (1.70%) and increase in cost of goods sold (3.97%), which increase the Operating Profit to some extent

There is a high decrease in Non-Operating Income (-20.64%) and increase in Non-operating Expenses (11.54%) It decreases the net profit of the company

There is decrease in Profit before and after tax (PBT) -22.73% and (PAT) - 21.32% respectively It is a bad sign to the company,

The overall profitability of the company is not satisfactory

Conclusion: The main rational for decreasing profit, even through with a moderate increase of cost of goods sold, decreasing of Non-operating income an increasing of Non-operating expenses

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(Amounts in lack's)| Change (Rs.)| Change (“)

(A) NET SALES 22025.76| 23331.99 1306.23 5.93

Direct Labor 3774.53|} 4485.22 710.69 18.83

(Accretion to)/ Depletion of stocks -185.38 48.46 233.84 -126.14 TOTAL COST OF GOODS SOLD (B) 17915.16} 19503.75 1588.59 8.87

(C)GROSS PROFIT (A-B) 4110.60} 3828.24 -282.36 -6.87

Administration, selling & Distribution Exp 1860.33} 1812.14 -48.19 -2.59

TOTAL OPERATING EXP (D) 1860.33) 1812.14 -48.19 -2.59

OPERATING PROFIT (C-D) 2250.27} 2016.10 -234.17 -10.41

(+) Non-Operating income 418.08} 961.29 543.21 129.93

(-) Non Operating Expenses (including mnterest)| I140.41[ 1359.06 218.65 19.17

NET PROFLT BEFORE TAX (NPBT) 1527.94| 1618.33 90.39 5.92

(-) TAX 118.00} 159.00 41.00 34.75

NET PROFIT AFTER TAX (NPAT) 1409.94) 1459.33 49.39 3.50

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INTERPRETATION

>

There is a modest increase in Sales (5.93%) It points towards increased acceptability of the company's products and customer satisfaction

The rate of growth of Cost of Goods Sold (8.87%) Is considerably higher than the rate of growth of Sales (5.93%) This has decreasing in Gross Profit of the company

There is a moderate decrease in Operating Expenses (-2.59%) compared to the increase in sales (5.93%) and increase in cost of goods sold (8.87%), which increase the Operating Profit to some extent

There is a high increase in Non-Operating Income (129.93%) and increase in Non-operating Expenses (19.17%) It increases the net profit of the company

There is increase in Profit before and after tax (PBT) 5.92% and (PAT) 3.50% respectively It is a good sign to the company,

Conclusion: The main rational for not increasing profit as a percentage of sales is increasing, cost of goods sold by 8.87% and increasing of tax by 34.75%

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(Amounts in lack's) Change (Rs.) | Change (%)

(A) NET SALES 23331.99| 24186.10 854.11 3.66

Material Consumed 6517.32 6690.62 173.30 2.66

Direct Labor 4485.22 4520.16 34.94 0.78

Manufacturing Expenses 8452.75 8660.00 207.25 2.45

(Accretion to)/ Depletion of stocks 48.46 44.67 -3.79 -7.82 TOTAL COST OF GOODS SOLD 19503.75) 19915.45 411.70 2.11 (B)

(C)GROSS PROFIT (A-B) 3828.24 4270.65 442.41 11.56

Administration, selling & Distribution Exp 1812.14 1943.19 131.05 31.36

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INTERPRETATION

> There is a modest increase in Sales (3.36%) It points towards increased acceptability of the company's products and customer satisfaction

The rate of growth of growth of Sales (3.66%) Is considerably higher than the rate of Cost of Goods Sold (2.11%) This has increasing in Gross Profit of the company

There is increase of (11.56%) of Gross Profit It is good sign to the company

There is a moderate increase in Operating Expenses (7.23%) compared to the increase in sales (3.66%) and increase in cost of goods sold (2.11%), which decrease the Operating Profit to some extent but not more

There is increase of Operating Profit (15.44%) It is very good sign to the company

There is a decreasing in Non-Operating Income (-51.67%) and decrease in Non-operating Expenses (-7.31%) It effects the net profit of the company There is decrease in Profit before and after tax (PBT) -5.31% and (PAT) - 8.70% respectively It is a bad sign to the company, § The overall profitability of the company is not satisfactory

Conclusion: The main rational for decreasing profit, even though with a increasing of sales is decreasing Non-operating income

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(Amounts in lack's)| Change (Rs.)| Change (“)

(A) NET SALES 24186.10) 24307.52 121.42 0.50

Direct Labor 4520.16} 4207.10 -313.06 -6.93

(Accretion to)/ Depletion of stocks 44.67 -2.25 -46.92 -105.04 TOTAL COST OF GOODS SOLD (B) 19915.45 21244.41 1328.96 6.67

(C)GROSS PROFIT (A-B) 4270.65) 3063.11 -1207.54 -28.28

Administration, selling & Distribution Exp 1943.19} 1869.98 -73.21 31.36

TOTAL OPERATING EXP (D) 1943.19} 1869.98 -73.21 31.36

OPERATING PROFIT (C-D) 2327.46) 1193.13 -1134.33 -48.74

(+) Non-Operating income 464.63) 1720.78 1256.15 270.35 (-) Non Operating Expenses (including interest)}_ 1259.70} 1235.31 -24.39 -1.94 NET PROFIT BEFORE TAX (NPBT) 1532.39} 1678.60 146.21 9.54

(-) TAX 200.00} -1583.04 -1783.04 -891.52

NET PROFIT AFTER TAX (NPAT) 1332.39} 3261.64 1929.25 144.80

Trang 36

INTERPRETATION

>

There is very low increase in Sales by (0.50%) it points towards increased acceptability of the company products and customer satisfaction

The rate of growth of growth of cost of goods sold by (7.67%) Is considerably higher than the rate of Sales (0.50%) This has decreasing in Gross Profit of the company

There is decrease of (-28.28%) of Gross Profit It is very bad sign to the company

There is a moderate decrease in Operating Expenses (-3.77%) compared to the increase in sales (0.50%) and, which decrease the Operating Profit to

some extent

There is high decrease of Operating Profit (-48.74%) It is very bad sign to the company

There is a increasing in Non-Operating Income (270.35%) and decrease in Non-operating Expenses (-1.94%) It increases the net profit of the company

There is increase in Profit before and after tax (PBT) 9.54% and (PAT) - 144.80% respectively It is a very good sign to the company,

The overall profitability of the company is very satisfactory

Conclusion: The main rational for abnormally increasing profit only with increase of sales by (0.50%) is previous adjustment of tax which has' not deducted the money but replace previous one and another reason incensing in Non-operating

income

Trang 37

COMPARATIVE BALANCE SHEET OF 2004-2005

(Amounts in lack's)| Change (Rs.)| Change (“) LASSETS A.CURRENT ASSETS Cash & Bank Balance 267.91 451.88 183.97 68.67 Sundray Debtors 2206.59] 3083.18 876.59 39.73 Inventories 1792.68] 1816.50 23.82 1.33 Loans & Advances 3542.67) 3309.60 -233.07 -6.58

TOTAL CURRENT ASSETS (A) 7809.85| §661.16 851.31 10.90 B FIXED ASSETS 20428.33| 20024.22 -404.11 -1.98 C INVESTMENTS 410.00} 258.76 -151.24 -36.89 D MISC-EXPENSES 120.83 66.71 -54.12 -44.79 TOTAL ASSETS (A+B+C+D) 28769.01| 29010.85 241.84 0.84 I LIABILITIES E CURRENT LIABILITIES Current Liabilities 4241.83] 4288.86 47.03 1.11 Provisions 292.70} 388.07 95.37 32.58

TOTAL CURRENT LIABILITIES (E) 4534.53| 4676.93 142.40 3.14

F LONG TERM LIABILITIES

Secured Loans 5990.04| 5548.86 -441.18 -7.37 Un-Secured Loans 263.46 187.77 -75.69 -28.73 Deferred Tax Liabilities 2213.86) 2469.67 255.81 11.55

TOTAL LONG TERM LIABILITIES (F)| 8467.36} 8206.30 -261.06 -3.08

G SHARE HOLDERS FUND

Share Capital 834.56] 834.56 0.00 0.00

Reserve & Surplus 14932.56] 15293.06 360.50 2.41

TOTAL SHARE HOLDERS FUND (G) | 15767.12} 16127.62 360.50 2.29

TOTAL LIABILITIES (E+F+G) 28769.01| 29010.85 241.84 0.84

NET WORKING CAPITAL (A- 3275.32| 3984.23 708.91 21.64

E)

TOTAL LONG TERM FUNDS (F+G) 24234.48] 24333.92 99.44 0.41

Trang 38

INTERPRETATION > VV VV WV X

There is has been a rise of 10.90% in the Current Assets of the Company; the rise is mainly on account of increasing in cash, bank balance and sundry debtors

There have been decrees of -1.98% in the Fixed Assets There has been rise of 3.14% in the Current Liabilities of the Company; the rise is mainly on account of increasing in provisions There has been decrease of -3.08% in the Long term Liability of the

Company, the decreasing mainly on account of decreasing in unsecured squired Loans it good sign for the company

There has been increasing of 2.29% in the share holder's fund of the company, the increasing mainly on account of increasing in reserves & surplus

There has been increase 21.64% in working capital of the company, the increasing mainly on account of increasing in assets

There is an increasing of 42.86% of liquid assets its good for the company The overall financial position of the company appears to be satisfactory

Trang 39

COMPARATIVE BALANCE SHEET OF 2005-2006

(Amounts in lack's) Change (Rs.) | Change (“%) I ASSETS

A.CURRENT ASSETS

Cash & Bank Balance 451.88 679.81 227.93 50.44

Sundry Debtors 3083.18 3302.44 219.26 7A1

Inventories 1816.50 2287.29 470.79 25.92

Loans & Advances 3309.60 3524.24 214.64 6.49

TOTAL CURRENT ASSETS (A) 8661.16 9793.78 1132.62 13.08 B FIXED ASSETS 20024.22 20637.76 613.54 3.06 C INVESTMENTS 258.76 576.19 317.43 122.67 D MISC-EXPENSES 66.71 14.27 -52.44 -78.61 TOTAL ASSETS (A+B+C+D) 29010.85 31022.00 2011.15 6.93 II LIABILITIES E CURRENT LIABILITIES Current Liabilities 4288.86 3683.08 -605.78 -14.12 Provisions 388.07 616.2 228.13 58.79

TOTAL CURRENT LIABILITIES (E) 4676.93 4299.28 -377.65 -8.07 F LONG TERM LIABILITIES

Secured Loans 5548.86 6367.67 818.81 14.76

Un-Secured Loans 187.77 678.87 491.10 261.54

Deferred Tax Liabilities 2469.67 2512.33 42.66 1.73

TOTAL LONG TERM LIABILITIES (F) 8206.30 9558.87 1352.57 16.48 G SHARE HOLDERS FUND

Share Capital 834.56 834.56 0.00 0.00

Reserve & Surplus 15293.06 16329.29 1036.23 6.78

TOTAL SHARE HOLDERS FUND (G) 16127.62 17163.85 1036.23 6.43

TOTAL LIABILITIES (E+F+G) 29010.85 31022.00 2011.15 6.93

NET WORKING CAPITAL (A-E) 3984.23 5494.50 1510.27 37.91

TOTAL LONG TERM FUNDS (F+G) 24333.92 26722.72 2388.80 9.82

Trang 40

INTERPRETATION

> There is has been a rise of 13.08% in the Current Assets of the Company; the rise is mainly on account of increasing in cash and bank balance

>» There has been increase of 3.06% in the Fixed Assets

>» There has been decrease of -8.07% in the Current Liabilities of the Company

> There has been increase of 16.48% in the Long term Liability of the company, the increasing mainly on account of increasing in unsecured Loans

>» There has been increasing of 6.43% in the share holder's fund of the company, the increasing mainly on account of increasing in reserves & surplus

> There has been increase 37.91% in working capital of the company, the increasing mainly on account of increasing in current assets and decreasing in current liabilities

> There is an increasing of 12.65% of liquid assets its good for the company > The overall financial position of the company appears to be satisfactory

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