Abad fisheries ltd

A PROJECT STUDY REPORT ON

FINANCIAL PERFORMANCE ANALYSIS WITH SPECIAL REFERENCE TO ABAD FISHERIES PRIVATE LIMITED, KOCHANGADY, KOCHI

In partial fulfillment of the requirements for the award of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

TIJU V JOHN

Reg.No:32887

Under the guidance of

Mr. NAVIN V KOSHY

Assistant Professor

MUSALIAR COLLEGE OF ENGINEERING AND TECHNOLOGY

PATHANAMTHITTA – 689 653, Kerala

2011- 2013

CERTIFICATE

This is to certify that this report is based on “FINANCIAL PERFORMANCE ANALYSIS” conducted by TIJU V JOHN, is in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION, degree program of MAHATMA GANDHI UNIVERSITY, KOTTAYAM.

…………………………………. …………………………………………

Signature of the Faculty Guide Signature of the Head of Department

………………………………………….

Signature of the Examiner

MUSALIAR COLLEGE OF ENGINEERING AND

TECHNOLOGY, KUMBAZHA,

PATHANAMTHITTA

DECLARATION

I hereby declare that the project Report “FINANCIAL PERFORMANCE ANALYSIS”, is a record of bona-fide work done by me in ABAD Fisheries private limited, Kochi during 15- 6- 2013 to 15-8-2013 under the supervision of Mr. Navin V Koshy, Department of Management Studies, Musaliar College of Engineering and Technology, Pathanamthitta, Kerala, India.

I also hereby declare that this project report has not been submitted to any other University or institute for the award of any degree or diploma recognition before.

Pathanamthitta TIJU V JOHN

Date

ACKNOWLEDGEMENT

The elation and gratification of this project study will be incomplete without mentioning all who helped me to make it possible, whose encouragement and guidance were valuable to me throughout conducting the project study.

First and foremost I thank God Almighty for giving me the ability to do this study and make the venture a success.

I express my sincere thanks to my guide Mr. MOHAMMED SADIK for providing the necessary guidelines to conduct the study at the organization. I am also thankful to all the department heads for their valuable suggestions and constructive criticism throughout the preparation of the report. I am obliged to my Guide for his valuable guidance and help throughout the completion of the study.

I owe my sincere thanks to Navin V Koshy, faculty guide supported me throughout the work with excellent guidance. I extend my thanks to all the lecturers and staff members of the Department of Management studies for their tireless help.

Last but not the least I express my sincere gratitude to my parents and friends for their constant help and encouragement and valuable prayers motivating me mentally for the successful completion of this project study.

CONTENTS

CHAPTER NO. TITLE

1 INTRODUCTION

1.1 Industry profile

1.2 Company profile

1.3 Product profile

2 LITERATURE REVIEW

3 RESEARCH METHODOLOGY

3.1 Objective of study

3.2 Scope of the study

3.3 Limitations of the study

4 ANALYSIS & INTERPRETATION

5 FINDINGS

6 SUGGESTIONS

7 CONCLUSIONS

8 BIBLIOGRAPHY

1.INTRODUCTION Today we live in the world of rapid development of technologies due to the success we earned through innovative programs and dedicated services to nation. All this came possible with onset of industrial flourishment widely overseas. Most of the well known reputed industries frame their image through carrying their product sales at an increased potential for across the horizon. To accomplish the task of achieving greater output growth about the available utilized input, one started to make use of export-import facility that border lined our great economic share to the national revenue.

All of us were aware about the risk associated with any business activity. This is true whether one is engaged in manufacturing and marketing, or only engaged in trading or even providing technical and commercial services to another individual or a business corporation.

The Govt. of India controls the export and import trade by way of Export-Import Policy announced by them. An exporter or importer will have to deal with two ministries under the Govt. of India viz, Ministry of Commerce and Ministry of Finance.

Over the past few years, the role of financial management in the business organization has substantially changed and the jobs of financial manager was largely confined to the acquisition of funds; for the most part ,the use of those funds within the organization was not the managers concern. As business firms continued to expand their markets, however an organization become large and classified, greater control of the financial position become necessary. The financial management has evolved in to an integrated approach, which encompasses all aspects of acquiring and utilizing means of financial support for the firm’s activities. Financial statements also called financial reports are account balances arranged in effective and meaningful order so that the facts, concepts they portray may be readily interpreted and used as bases for decisions by all people who are interested in the affairs of business.

The financial performance analysis of ABAD Fisheries is carried out with the help of various tools such as Ratio analysis, common size statements, comparative balance sheets, trend percentage analysis etc.

I had prestigious honor of completing my project in such a company were, through proper investment in export-import practices they reaped a harvest of success. I was given a chance to perform my project at ABAD Fisheries Pvt. Ltd., Kochi a prompt role model amongst emerging seafood industries or Overseas marketing. The details of my studies are enclosed within.

1.1 INDUSTRY PROFILE

India is a major fish producing country among the world nations, which stands in the seventh position. Marine products have created a sensation in the world market because of their healthy attributes. Seafood has been acclaimed as one of the fast moving commodity in the world market with high value. The share of marine products has steadily grown over the years from a mere of ‘392crores in 1961-62 to ‘1376crores in 1991-92. The growth continued in the subsequent years and attained ‘6881crores in 2002-2003 accounting year for approximately 2.72% of the total exports from India.

When canned and frozen items started figuring increasingly in the company’s exports, the sophisticated markets like Japan, USA, Australia etc. became the major international buyers. In the Indian seafood, industry experiments and innovations have a greater role in the modern industrial sector as requirements and tastes of the society are changing fast.

Whatever happens in the seafood industry it is the matter related to the society rather than the matter of a particular business cycle as the anglers’ society as a whole is totally involved in the processing units, which is on a higher side compared to other industrial units, fisheries sectors has been contributing to a very significant share in the India Economy through employment generation and earning foreign exchange.

1.2 COMPANY PROFILE

History of the Company.

The last decade of 19 th century was a milestone in the history of the Indian seafood industry as a new chapter titled “overseas marketing” could have been opened and thereby could spring an enlightening experience in the international market for marine products as well as being key factor in earning foreign currency with a fair share of its volume of exports.

1894 was absolutely a momentous year that could witness the country’s 1 st export of seafood that is, sun dried shrimps to Myanmar, to erstwhile Burma, by none other than Sri. MOHAMED KASSIM ALLANA, the founder of ABAD. In the year 1931, his son USMAN MOHAMED HASHIM established ABAD fisheries and still stands as the flagship of ABAD Group as well as India’s largest processors of Quick Frozen Quality seafood and could attain its rightful place ‘PRIDE OF INDIA’.

ABAD is the 1st to construct fully penalized and air conditioned facilities for processing seafood in India, keeping with the factory standards over the world. The GROUP is maintaining a combined freezing capacity of 300 MT per day and a cold storage capacity of 8000 MT at a time. All the said factories are located very next to major fishing harbors or have been integrated to main landing centers, which ensure availability of fresh raw materials irrespective of time constraints.

The highest quality standards are always maintained at every phase of production process monitored by well qualified, trained and motivated workforce, considered the best in the country. The brand name such as “Pride Of India” and “Sea Sparkle” are known over the world for seven decades and have the regard in the International Industrial Circle. With a pronounced emphasis on R&D and innovation, ABAD have been furthering their expertise in producing High Quality Value Added Products to satisfy the demand from their valued customers the world over.

ABAD FISHERIES PRIVATE LIMITED.

Abad fisheries private ltd is a partnership firm, converted private limited company registered under the Companies Act 1956 performing its business in and around Kochi. Sailing as a flagship of the “ABAD Group”, the parent unit of the group continues to contribute the lion share of its revenue right from commencement of its commercial operations in the year 1931 under the name of Abad Fisheries. This is the most familiar and reputed organization within the group.

AUTHORIZED CAPITAL.

Authorized capital of the company is ‘200lakhs.

ISSUED, SUBSCRIBED AND PAID UP CAPITAL.

Authorized capital of the company has been fully issued, subscribed and paid up.

CONSTRUCTION CAPITAL

Capital of the company has been fully taken as the Authorized capital, which has been fully issued and subscribed. The subscribed capital of the company has fully paid up and it figures at ’20,000,000.00 divided into 20,000 equity shares of 10,000.00 each, but in the year 2010-11 equity shares issued are 20,600 @ 10000 each.

REGISTERED OFFICE

The registered office of the company is situated at ABAD Building, Jews Town Road, Kochangady, Cochin KERALA-682002. The main objective of the company to be pursued is to carry on the business of the procuring, producing, processing, marketing, importing and exporting of all kinds of food items in India and abroad.

FACTORY

The existing factory attached to the registered office also situated at ‘Abad fisheries’, having address at Jew Town Road, Kochangady, Cochin-682002. This plant is having 15 tones capacity per day as approved by Export Inspection Agency and is utilizing the entire capacity. The factory is having all features required for a processing plant such as a Pre-processing plant, Ice plant, Mini laboratory, Effluent treatment plant etc.

The pre-processing plant within the factory premises to be very much satisfactory and hence the entire phases of processing can be done under one roof right from procurement of raw materials up to shipment of finished goods. Around 200 persons are employed to produce 15 MT peeled materials per day. The factory is self contained with its own landing centre, an Ice plant consisting 1 MT Alfa level Tube Ice Machine, one Dg Set and a Spiral Freezer from Frigoscandia, Sweden.

One full-fledged mini laboratory has been placed, equipment like Elisa Kit have been produced and installed. A team of highly qualified and HACCP ensures the “safety and wholesomeness” of the ‘product from water to consumer’ with consistent excellency. A well equipped water treatment plant has also been opened whereby the waste water treatment mechanism is effectively carried out in a very good manner in compliance of all the statutory formalities and standards laid by authorities like Kerala State Pollution Control Board.

BRANCH UNITS OF ABAD FISHERIES.

1. ABAD FISHERIES, MALIPPURAM

Opened in the year 1987, this is well equipped classic factory having 10 tons capacity per day and storage capacities 300 MT. All the statutory requisites such as pre-processing plant, effluent treatment plant etc have been dispensed.

2. ABAD FISHERIES, MUNAMBAM.

This unit was started in the year 2000. This is also a well equipped and most modernized one having all facilities and infrastructure. This is situated near to the Arabian Sea with freezing capacity of 10MT and storage capacity 330MT.

3. ABAD FISHERIES, VIZHINJAM

This factory is a classic one in appearance and in its operation, having 15 tons capacity to process all kind of marine food products per day as approved by EIA and the cold storage capacity 300MT.

4. ABAD FISHERIES, NAMBIAPURAM

This unit is a well equipped and most modernized one having all facilities and infrastructure. This unit is having 10 tons capacity per day as approved by EIA and the cold storage capacity 300MT.

5. ABAD FISHERIES, THE COLD STORAGE

This is the third public cold storage having 3000MT capacity and the second one in Kerala. This is situated in the 63 cent of land bordered on one side of the NH47 Aroor. This is a State-of-art public cold storage having 3000MT capacity. With fully penalized and computer controlled operations. The cold store will accommodate 3000 pellets of 1 MT each.

SISTER CONCERNS .

1. ABAD EXIM PVT. LTD.2. ABAD EXPORT PVT. LTD.3. ABAD OVERSEAS PVT. LTD.4. CAP SEAFOODS PVT. LTD.5. ABAD FOODS PVT. LTD.6. ABAD FOOD CANNING COMPANY PVT. LTD.

SISTER CONCERNS OTHER THAN SEAFOOD INDUSTRY.

ABAD Group has very versatile interests in various areas extended to real estate and hospitality industry. The main business interested areas consists of;

1. ABAD HOTELS (INDIA) PVT. LTD.2. ABAD FLIGHT CATERS AND HOTELS PVT. LTD.3. ABAD MOTELS AND RESORTS PVT. LTD.4. ABAD BUILDERS PVT. LTD.5. ABAD CONSTRUCTIONS PVT. LTD.

OBJECTIVES OF THE COMPANY

a) Improve the goodwill and reputation of the firm.b) Ensure maximum profit through customer satisfaction.c) Provide best quality products.d) Ensure the existence, growth and expansion of enterprises.e) Provide good working conditions to the workers. f) Conservation of environment and natural resources.g) Prompt payment to the suppliers in respect of price of raw materials.

QUALITY POLICY

i. Maximum utilization of resources of the company.ii. To procure, manufacture and export sea foods with good quality.

iii. Meeting the requirements of the customers those of regulatory agencies abroad.iv. To ensure safety and wholesomeness of the product from the workers to

customers.v. Plan and implement quality management system namely Hazards Analysis

Critical Control Point (HACCP).vi. To enable HACCP, conducted and developed in all disciplines of the facilities by

catering to all possible needs of the business.vii. Plan and impart need-based hands of training from low level to the top

management on a regular basis.

ABAD FISHERIES PVT .LTD: - MILESTONES

1894- 1st export of Indian seafood (Sun-dried shrimps). 1931- ABAD Fisheries the flagship of ABAD Group established. 1979- ABAD introduced faster 90 minutes freezer. 1985- India’s 1st IQF freezer (indigenous). 1985- India’s 1st Frigoscandia IQF freezer. 1987- India’s 1st Frigoscandia IQF spiral freezer. 1995- ABAD Commissions India has 1st fully penalized air conditioned factory,

CAP Seafood. 1998- CAP Seafood became the 1st Indian factory to get EOU. 2002- Commissioned 2500 tones cold storage at Chennai. 2003- ABAD Overseas joint venture factory started with partners from Spain,

USA, Australia and New Zealand. ABAD Fisheries got an award for outstanding export performance for the

following years; 2006, 2007, 2008 and 2009.

VISION

To be in the path of success through customer satisfaction. To attain monopoly in the international market. To make possible what others consider to be impossible by earnest and dedicated

service.

MISSION

To provide product of good quality and fair price.

To maintain smooth industrial relationship.

1.3 PRODUCT PROFILE

1. Prawns, Shrimps and Lobsters.a) HOSO, HLSO, PUD, PTO, PDTO, etc..b) Raw, Blanchard or cooked.

2. Speciality products include:a) Blast frozen Whole Squid.b) IQF Block Frozen Octopus.c) Whole Cleaned Cuttle Fish IQFd) Squid.e) Cuttle Fish Sashimi Grade Fillets.

3. Fishes.a) Tuna.b) Red Snapper.c) Seer Fish.d) Reef Cold.e) Mackerel.f) Pomp Fret.g) Ribbon Fish.h) Whole, Gutted, H&G, Fillets & Steaks.

4. Crabs.a) Four species, soft shell crabs packed in moulded trays.

5. Bivales.a) Grit and sand free baigai.b) Calm and mussles

2.LITERATURE REVIEW 1. "The analysis of financial statements is a process of evaluating the relationship between

component parts of financial statements to obtain a better understanding of the firm's position and performance"

Metcalf, R.W. and P.L. Titard

Principles of Accounting

W.B, Saunders,1976, P-157

2. "Financial Performance Analysis is the process of selection, relation and evaluation"

Meigs, W.B and others

Intermediate Accounting, McGraw - Hill,

New York, 1978, P-1049

3. Global Data’s Datum International Limited (DATP.PZ) - Financial Analysis provides a comprehensive insight into the company’s history, business structure and operations. The report contains information on the company’s key employees, key competitors and major products and services, as well as detailed financial ratios for the last 5 years.

Pavlock (2000)

4. “A comparative study on the financial performance of Sakthi Finance ltd., and Annamalai finance ltd., “focused mainly on growth and related problems in finance companies. In her study she has observed that financial companies should maintain proper plan and adequate efforts must be made to overcome the difficulties through better performance.

Kanchanna Devi (1998)

5. “Financial performance appraisal –A case study of associated cement companies Ltd.,“focused on the performance appraisal of associated cement companies ltd. The study has provided reliable financial information about economic resources an obligations of a business and other needed information about changes in such resources and obligations.

Sherly Roselyn (1994)

6. Benchmarking begins with measuring and evaluating internal operating practices followed by comparative analyses with those of external best-performing organizations. This comparison facilitates identification of an organization's strengths and weaknesses. Business practices of the industry's best performing, most profitable, and most productive organizations are then adopted and evaluated using a continuous quality improvement approach to assist organizations to become more efficient.

Gift & mosel (1994)

7. Examined the frame work of financial statement analysis in five years. The first part of his study has focused on “return on asset performance”. It has examined the profitability of solton company. He has examined the components related to return on sales and assets management in depth. According to him, inefficient asset management will result in destroyed market value of the company and will probably cause financial distress problems which may even result in bankruptcy. He has also opined that if the weighted average cost of capital on a before tax basis exceeds the return on assets, the company would need to improve the performance through higher return on sales or increased asset turnover or both.

George Gallingar (2000)

8. Finance is the lifeblood of business. Finance is most important function of organization. Effective management of finance can do much more to the success of the business while its ineffective management will undoubtedly lead to ensure failure of the business. In the past few years the sugar industry has been facing several problems like mounting stocks, controls by the government and underutilization of capacity. The financial analysis of sugar unit was done by using Ratio analysis technique and analyzed previous five years financial statements from 2004-2009. It was observed that the particular unit needs to improve its liquidity position and should utilize its financial resources which is helpful for increasing the profitability of sugar unit.

Sathe (2011)

9. Financial ratios are used to restate the accounting data in relative terms to identify some of the financial strengths and weakness of a company. The objective in using a ratio when analyzing financial information is simply to standardize the information being analyzed, so that the comparison can be made between ratios of different firms or possibly the same firm at different points in time.

Keown, Martin and Petty (2009)

10. Financial analysis are undertaken to interpret the position of an enterprise. Financial analysis includes the study of relationships within a set of financial statements at a point in time. Analysis of financial statement is a process of evaluating the relationship between component part of a financial statement to obtain a better understanding of a firm’s position and performance.

Sreevastava and Misra (2008)

11. Financial statement provide a summary of the accounts of a business enterprise, the balance sheet reflecting the assets and liabilities and the income statement showing the results of operations during a certain period. It emphasis the importance of balance sheet and profit and loss account, but ignores the importance of other financial statement like cash flow statement, fund flow statement ,and statement of retained earnings.

Myer(2006)

12. Financial statement is a process of evaluating the relation between component parts of a financial statement to obtain a better understanding of a firm’s position and performance.

Metcall and Tiford(2000)

13. Ratio analysis identifies potential frauds by computing the variance in asset of transactions of then calculating the ratios for selected numeric fields. Three commonly employed ratios are the ratio of the highest value to the lowest value, the ratio of the highest value to the next highest , and the ratio of one numeric field to another , such as the current year to the previous year or one operational area to another.

Coderre (2000)

14. The statement of profit and loss is the condensed and classified record of gains and losses causing changes in the owners interest in the business for a period of time. Hence profit and loss account in the statement of revenues earned and expenses incurred during a particular period. It is prepared taking into consideration all expenses paid and payable and all incomes received and receivable during a particular period, generally a year. The excess of revenues earned over the expenditure incurred is termed as profit or earnings and excess of expenditure incurred over the revenues earned is termed as loss.

Guttmann, (2002)

15. Financial statement analysis is useful both to help anticipate future conditions and more important as a starting point for planning action that will improve firm’s future performance.

Brighain (1999)

16. Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret financial statements so that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratios are relative figures reflecting the relationship between related variables.

Khan and PK Jain, (2000)

17. financial ratio analysis doesn’t involve just comparing different numbers from the balance sheet, income statement, and cash flow statement. It’s comparing the number against previous years, other companies, the industries or even the economy in general. It’s an excellent method for determining the overall financial condition of a business. Ratios can also help you spot potential threats to company health to help you decide where to dive deeper into the analysis.

Ismael.D. Tabije (2002)

3.RESEARCH METHODOLOGY

A research methodology defines what the activity of research is, how to proceed, how to measure progress, and what constitutes success. Thus the nature and scope of the research greatly affects the choice of the method to be adopted for the collection of research data. Availability of time and finance also affects the choice of methods for collecting primary data. Thus in simple terms research methodology may be considered as science and art of conducting a research throughout.

3.1 OBJECTIVES OF STUDY

The main objective of the study is to carryon brief study on "Analysis of three year balance sheet of ABAD through comparative balance sheet in Comparative Statement" through this I am able to get the differences of various assets and liabilities of ABAD Fisheries.

Other objectives of this project are as follows:

PRIMARY OBJECTIVE

To find out the financial performance of the company.

SECONDARY OBJECTIVE

To estimate the earning capacity of the firm and the long term liquidity.

Comparative study of three year annual reports.

To analyse the trend for the past three years.

3.2 SCOPE OF STUDY

Ratio analysis consists of calculating financial performance using basic types of ratios: profitability, liquidity, activity, debt and market.

Ratio analysis consists of the calculation of ratios from financial statements and is a foundation of financial analysis.

A financial ratio, or accounting ratio, shows the relative magnitude of selected numerical values taken from those financial statements.

Availability of cash over short term: ability to service short-term debt.

3.3 LIMITATIONS OF THE STUDY

The study is purely based on the data available in the form of annual reports.

Analysis is only means and not ends of itself different people interpreting the same analysis in the different ways.

The overall financial performances taken consideration without taking into account the minute values for individual values.

This study provides the information regarding the analysis on p & L A/C and Balance Sheet only.

PERIOD OF THE STUDY: The time allowed to do the project work is from July 15th

to September 15th 2013.

TOOLS USED FOR THE STUDY

1. Ratio analysis

2. Trend analysis

3. Comparative balance sheet

4. Common size balance sheet

4. FINANCIAL ANALYSIS AND INTERPRETATION

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form easy to understand. They typically include, balance sheet and profit & loss account. Financial statements are intended to be understandable by readers who have a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. Financial statements may be used by users for different purposes:

Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.

Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.

Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.

Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.

The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. Financial statements have been created on paper for hundreds of years. The growth of the Web has seen more and more financial statements created in an electronic form which is exchangeable over the Web. Common forms of electronic financial statements are PDF and HTML. These types of electronic financial statements have their drawbacks in that it still takes a human to read the information in order to reuse the information contained in a financial statement.

More recently a market driven global standard , XBRL (Extensible Business Reporting Language), which can be used for creating financial statements in a structured and computer readable format, has become more popular as a format for creating financial statements. Many regulators around the world such as the U.S. Securities and Exchange Commission have mandated XBRL for the submission of financial information.

The UN/CEFACT (the United Nations Centre for Trade Facilitation and Electronic Business) created, with respect to Generally Accepted Accounting Principles, (GAAP), internal or external financial reporting XML messages to be used between enterprises and their partners,

such as private interested parties (e.g. bank) and public collecting bodies (e.g. taxation authorities). Many regulators use such messages to collect financial and economic information.

FINANCIAL ANALYSIS:

Financial analysis (also referred to as financial statement analysis or accounting analysis or Analysis of finance) refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. It is the process of identifying the financial strength and weakness of a firm from the available accounting data and financial statement. The analysis is done by properly establishing the relationship between the items of balance sheet and profit & loss account.

TYPES OF FINANCIAL ANALYSIS

1. External Analysis:-

External analysis of financial statement is made by those who do not have access to the detailed

accounting records of the company, i.e., banks, creditors and general public. These people depend

almost entirely on published financial statement. The main objective of such analysis varies from

party to party.

2. Internal Analysis:-

According to

materials used

According to modus operandi

According to the objectives of analysis

Internal analysis Short term

analysisVertical analysis

Horizontal analysis

Long term analysis

External analysis

Such analysis is made by the finance and accounting department to help the top management.

These people have direct approach to the relevant financial records. So they can peep behind the

two basic financial statement and narrate the inside story, such analysis emphasis on the

performance appraisal and assessing the profitability of different activities.

3. Horizontal Analysis:-

When the financial statement for a number of years are reviewed and analyzed, the analysis is

called horizontal analysis. The preparation of comparative statement is an example of horizontal

analysis. As it is based on data from year to year, rather than o one data or period or time as a

whole, this is also known as “Dynamic Analysis.”

4. Vertical Analysis:-

Vertical analysis is also known as “Static Analysis.” When ratios are calculated from the Balance

Sheet of one year, it is called vertical analysis. It is not very useful for long-term planning as it

does not include the trend study for future.

5. Long-term Analysis:-

In the long term the company must earn a minimum amount sufficient to maintain a suitable rate

of return on the investment to provide for the necessary growth and development of the company

and to meet the cost of capital. Thus, in the long run analysis the stress is on the stability and

earning potentiality of the concern. In long term analysis the fixed assets, long term debt

structure and the ownership interest is analyzed.

6. Short-term Analysis:-

The short term analysis of financial statement is mainly concerned with the working capital

analysis. In the short run a company must have ample funds readily available to meet its current

needs and sufficient borrowing capacity to meet the contingencies. Hence, in short term analysis,

the current assets and current liabilities are analyzed and cash position of the concern is

determined. For short term analysis the Ratio Analysis is very useful.

OBJECTIVES:

1. To estimate the earning capacity of the firm.2. To gauge the financial position and financial performance of the firm.3. To determine the long-term liquidity of the funds.4. To judge the solvency of the firm.5. To determine the debt capacity of the firm.6. To decide about the future prospectus of the firm.7. To know the progress of the firm.8. To measure the efficiency of operations

METHODS OR DEVICES OF FINANCIAL ANALYSIS:

The analysis and interpretation of financial statement is used to determine the financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. An effort is made use those devices which clearly analyse the position of the enterprise. The following methods of analysis are generally used;

Ratio analysis. Trend analysis. Comparative balance sheet. Common size balance sheet.

RATIO ANALYSIS

Ratio analysis is one of the most important financial tools which has come to be used very frequently for analyzing the financial strength and weakness of the enterprise. Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions.

Ratio may be expressed in either of three ways. It may be a quotient obtained by dividing one value by the other. This unit of expression is called as ‘times’.

If the quotient is multiplied by one hundred, the unit of expression becomes ‘percentage’. It may also be stated in terms of proportion between the two figures. Thus times, percentage and proportion are the three forms of expressing ratio.

ADVANTAGES

It makes it easy to grasp the relationship between various items and helps in understanding the financial statements.

Inter firm comparisons can be made with the help of ratios, which may help management in evolving future ‘market strategies’.

It throws light on the degree of efficiency of the management and utilization of the assets and that is why it is called surveyor of efficiency. They help management in decision making.

A. LIQUIDITY RATIO

1. Current ratioCurrent Ratio is the most common ratio for measuring liquidity. It represents the

ratio of current assets to current liabilities. It is also called Working Capital Ratio, is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm. It is calculated by dividing the total of current assets by current liabilities.

Current Ratio= Current Assets/Current Liabilities

2. Quick ratio. This ratio is also known as acid test ratio, is a more rigorous test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations and when they become due. Quick ratio may be defined as the relationship between liquid assets and current or liquid liabilities. An asset is said to be liquid if it can be converted into cash within a short period without loss of value. The quick ratio can be calculated by dividing the total of the quick assets by current liabilities.

Quick ratio = quick or liquid assets/current liabilities.

3. Absolute liquid ratio. This ratio is obtained by dividing cash and marketable securities by current liabilities. It is also known as cash position ratio. Some authorities are of the opinion that the absolute liquid ratio should also be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.

Absolute liquid ratio= absolute liquid assets/current liabilities.

B. LEVERAGE RATIO

1. Debt- equity ratio.

The relationship between borrowed funds and owner’s capital is a popular measure of the long term financial solvency of a firm. This relationship is shown by the debt-equity ratio. This ratio indicates the relative proportion of debt and equity in financing the assets of a firm. This ratio is computed by dividing the total debt of the firm by its worth.

Debt-equity ratio= debt/equity

2. Proprietary ratio.

A variant to the debt equity ratio is the proprietary ratio, also known as equity ratio or shareholder’s to total equities ratio or net worth or total assets ratio. This ratio establishes the relationship between shareholder’s funds to total assets of the firm. The ratio is important for determining long term solvency of a firm. The components of this ratio are shareholder’s fund or proprietor’s funds and total assets.

Proprietary ratio=shareholder’s funds/total assets

3. Fixed asset to net worth ratio.

This ratio shows the relationship between fixed assets and shareholders fund. The purpose of this ratio is to find out the percentage of the owners fund invested in fixed assets.

Fixed assets to net worth= fixed assets/shareholders fund.

C. ACTIVITY RATIO.

These ratios are also called as “turnover ratios or efficiency ratios”. It shows the operational efficiency of the business concern. Activity ratios measure how efficient the assets are employed by the firm. This ratio indicates the speed with which assets are converted into sales.

1. Total assets turnover ratio.

A firm’s ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. It shows the firm’s operating efficiency. This ratio shows the firm’s ability in generating sales from all financial resources committed to assets.

Total assets turnover ratio= net sales/net total assets.

2. Fixed asset turnover ratio.

It measures the capacity of utilization and the quantity of fixed assets. This ratio expresses the number of times fixed assets are being turned over. This ratio shows the relationship between sales and fixed assets. Thus ratio shows how the fixed asset will be used in the business. Higher the ratio, indicate the better performance.

Fixed asset turnover ratio= net sales/fixed asset.

3. Inventory turnover ratio.

It shows how rapidly the inventory is turning into receivables through sales. Inventory ratio expresses the relationship between sales and inventory. It denotes the efficiency in inventory management. Its purpose is to measure the liquidity of the inventory.

Inventory turnover ratio=sales/average stock.

Average stock= opening + closing/2

4. Debtor’s turnover ratio.

It indicates the number of times debtor’s turnover each year. It measures the ratio of account receivables and tells about the efficiency of the credit policy of the company. Higher the ratio indicates more efficiency in the credit management.

Debtor’s turnover ratio=net sales/sundry debtors.

5. Average collection period.

It indicates how fast the debtors of the firm are get collected. Shorter the average collection period, better will be the quality of the debtors.

Average collection period=sundry debtors/sales * 360.

6. Inventory holding period.

The number of day’s inventory is also known as average inventory period and inventory holding period. A high number of days inventory indicates that there is a lack of demand for the product being sold. A low day inventory ratio may indicate that the company is not keeping enough stock on hand to meet demands.

Inventory holding period=inventory/sales * 360

COMPARATIVE BALANCE SHEET

Comparative Balance Sheet is the study of the trend of the same item, group of item and computed item in two or more Balance Sheet of the same business enterprises on different date. The changes in periodic balance sheet items reflect the conduct on the business. The changes can be observed by comparison of the balance sheet at the beginning and end of the period and these changes help in forming an opinion about the progress of an enterprise. The comparative Balance Sheet has two Colum for the data for original balance sheet. A third column is used to show increase in figures, the forth column may be added for giving percentage or increase and decrease. As per the name suggesting, it is the method of comparing the assets and liabilities of two or more different dates. Hence we can find the increase or decrease in those items. It is very useful in studying the trends in an enterprise. It is helpful to know;

i. Current financial position and liquidity position.ii. Long term financial position.

iii. Profitability of the concern.

TREND ANALYSIS

Trend ratios are also an important tool of horizontal financial analysis. Under this technique

of financial analysis, the ratios of different items for various periods are calculated and then a

comparison is made. The method of trend percentage is a useful analytical device for the

management since by substituting percentages for large amounts; the brevity and readability are

achieved. An aspect of technical analysis that tries to predict the future movement of a stock

based on past data. Trend analysis is based on the idea that what has happened in the past gives

traders an idea of what will happen in the future. Trend analysis provide important information

regarding historical performance and growth and given a sufficiently long history of accurate

seasonal information, can be of great assistance as a planning and forecasting tool for

management and analysis. Trend analysis is also an important and useful technique of financial

statement analysis. Trend means any general tendency. Analysis discloses the direction of

change upward or downward in financial and operating data during the period under review by

linking each statement item into same base year. Generally the first year is taken as base year.

The analysis of trend is highlighted; such analysis is very significant for forecasting the business

events. It might also be useful to compare such trends with similar trends in the firm generally

and in the industry concerned particularly. Being a horizontal analysis of financial statement, it is

often called the pyramid method of ratio analysis. There are three main types of trends: short-,

intermediate- and long-term.

COMMON SIZE BALANCE SHEET.

A company balance sheet that displays all items as percentages of a common base figure . This type of financial statement can be used to allow for easy analysis between companies or between time periods of a company. Comparative statements that give only the vertical percentage ratio for financial data without giving rupee values are known as common size statements. They are also known as 100% statements. A statement in which balance sheet items are expressed as percentage of each asset to total asset and percentage of each liability to liabilities is called common size balance sheet.

RATIO ANALYSIS:

Ratio analysis helps to analysis and understands the financial health and trend of a business. Past performance and future projection could be reviewed through the ratio analysis easily.

1. CURRENT RATIO:

Current ratio is the most common ratio for measuring liquidity. It represents the ratio of current assets to current liabilities. It is calculated by dividing the total of current assets by current liabilities.

Current Ratio=Current Assets/Current liabilities.

Year Current assets Current liabilities Current ratio

2008-09 2369.48 326.18 7.26

2009-10 2539.52 605.43 4.19

2010-11 3182.75 653.34 4.90

2008-09 2009-10 2010-110

1

2

3

4

5

6

7

8

current ratio

current ratio

INTERPRETATION:

Current ratio of the ABAD FISHERIES shows a dual trend. The standard norm of current ratio of the firm is 2:1. In the year 2008-2009 the ratio was 7.26 and then it decreased to 4.19 in the year 2009-2010., but after that in the year 2010-11 it shows a slight increase in the ratio,ie;4.90 From the chart it is clear that the current ratio is increased in the year 2010-2011. Hence the current ratio of ABAD is almost satisfactory.

2. QUICK RATIO

This ratio is also known as Acid Test or Liquid Ratio, is a more rigorous test of liquidity than the current ratio. The term ‘liquidity’ refers to the ability of a firm to pay its short-term obligations and when they become due. Quick ratio may be defined as the relationship between quick/liquid assets and current or liquid liabilities. The quick ratio can be calculated by dividing the total of the quick assets by current liabilities.

Quick Ratio= Quick or Liquid Assets/ Current Liabilities

Year Quick asset Current liabilities Quick ratio

2008-09 1871.26 326.18 5.73

2009-10 2012.57 605.43 3.32

2010-11 2291.90 653.34 3.50

INTERPRETATION:

Quick Ratio of 1:1 is considered to represent a satisfactory current financial condition. The quick ratio of ABAD shows a dual character. In the year 2008-09 it is 5.73 and next year it has ben declined to 3.32 and started increasing from the very next year 2010-11.From this, it can be understood that the company has liquid asset sufficient to provide a cover to current liability and ABAD can meet all its current liabilities.

3 . DEBT EQUITY RATIO.

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

Total liability/share holders equity

year Total liability Share holders equity Debt equity ratio

2008-09 3200.84 882.84 3.62

2009-10 3403.46 354.30 9.6

2010-11 4148.86 600.62 2.6

2008-09 2009-10 2010-110

1

2

3

4

5

6

7

quick ratio

quick rario

2008-09 2009-10 2010-110

2

4

6

8

10

12

DEBT EQUITY

DEBT EQUITY

Interpretation:

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing.

4. INVENTORY TURNOVER RATIO.

A ratio showing how many times a company's inventory is sold and replaced over a period. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days."

ITR = Cost of goods sold / average inventory

YEAR COST OF GOODS SOLD

AVERAGE INVENTORY

RATIO

2009-10 7966.03 512.58 15.5

2010-11 9796.81 708.91 13.8

2009-10 2010-1112.5

13

13.5

14

14.5

15

15.5

16

INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

INTERPRETATION:

A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall.

A low turnover is usually a bad sign because products tend to deteriorate as they sit in a warehouse.

Companies selling perishable items have very high turnover.

5. NET PROFIT MARGIN.

This ratio is also called as the net profit to sales or net profit ratio. It is determined by dividing the net income after tax to the net sales for the period and measures the profit per rupee of sales.

Net profit ratio= Net profit/ Net sales*100

YEAR NET PROFIT NET SALES RATIO

2008-09 667.84 8005.05 8.34

2009-10 1139.30 7966.03 14.30

2010-11 1379.62 9796.81 14.08

INTERPRETATION:

This ratio is used to measure overall profitability and hence it is very useful to proprietors. It is an index of efficiency and profitability of the business. In 2008-09 the ratio is 8.34, in 2009-10 it increases to 14.30 and in 2010-11 it shows a slight change ie, 14.08.

6. DEBTORS TURNOVER RATIO.

Debtors turnover ratio indicates the number of items debtors turn over each year. It tells about the efficiency of the credit policy of the company. Higher the ratio indicates, more efficient in the management of credit. Debtor’s turnover ratio expresses the relationship between sales and debtors. It reflects the efficiency with which the debtors are turned over into cash. It refers to how fast the collection from customers is made.

Debtors Turnover Ratio= Sales/ Sundry debtors.

YEARS SALES SUNDRY DEBTORS RATIO

2008-09 8005.05 913.580 8.76

2009-10 7966.03 976.06 8.16

2010-11 9796.81 1249.75 7.83

2008-09 2009-10 2010-110

2

4

6

8

10

12

14

16

NET PROFIT RATIO

NET PROFIT RATIO

2008-09 2009-10 2010-117.2

7.4

7.6

7.8

8

8.2

8.4

8.6

8.8

9

DEBTORS TURNOVER RATIO

DEBTORS TURNOVER RATIO

INTERPRETATION:

It also measures the liquidity of company. Higher the ratio lowers the average debtors to the credit sales. The debtor’s turnover ratio is varying over the study period. It is found from debtor’s ratio that the turnover from debtors shows fluctuations in each year. In 2008-2009 it is higher, ie 8.76 but in 2010-2011 it decreases to 7.83.

7. EXPENSE RATIO.

YEAR TOTAL EXPENSE TOTAL SALES RATIO

2008-09 8443.27 8005.05 1.055

2009-10 8401.15 7966.03 1.054

2010-11 10440.84 9796.81 1.065

2008-09 2009-10 2010-111.048

1.05

1.052

1.054

1.056

1.058

1.06

1.062

1.064

1.066

EXPENSE RATIO

EXPENSE RATIO

INTERPRETATION: From the data it is clear that the expense is little bit higher than the amount of sales.

8. PROPRIETORY RATIO.

A variant to the debt-equity ratio is the proprietary ratio which is also known as Equity ratio or Shareholders to Total Equities Ratio or Net Worth or Total Assets Ratio. This ratio establishes the relationship between shareholders funds to total assets of the firm. This ratio shows the financial strength of the company. It helps the creditors to find out the proportion of shareholders fund in the total assets. Higher ratio indicates a secured position to creditors and low ratio indicates greater risk to creditors.

YEAR SHAREHOLDERS EQUITY

TOTAL ASSETS RATIO

2008-09 883 3200 0.275

2009-10 1354 3403 0.397

2010-11 1601 4149 0.385

INTERPRETATION:

The proprietary ratio of ABAD is 0.275 in the year 2008-09, in 2009-10 it increases to 0.397 and then it decreases to 0.385 in the year 2010-11 but in 2010-2011

9. FIXED ASSET TO NETWORTH RATIO.

This ratio shows the relationship between fixed assets and shareholders fund. The purpose of this ratio is to find out the percentage of the owners fund invested in fixed assets. If the ratio is greater than one, it means that creditors fund have been used to acquire a part of the fixed assets. If the ratio is less than 100%, it implies that owner’s funds are more than total fixed assets and a part of working capital is provided by the shareholders. When the ratio is more than 100%, it implies that owner’s fund are not sufficient to finance the fixed assets and the firm has to depend upon outsiders to finance the fixed assets.

Fixed assets to net worth ratio=Fixed assets/ Shareholders fund

YEAR FIXED ASSETS SHAREHOLDERS FUND

RATIO

2008-09 831 883 0.94

2009-10 864 1354 0.63

2010-11 966 1601 0.60

2008-09 2009-10 2010-110

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

PROPRIETORY RATIO

PROPRIETORY RATIO

INTERPRETATION:

The fixed asset ratio helps in ascertaining the long-term solvency of a firm which depends basically on whether the firm has adequate resources to meet its long-term funds requirement. The ratio should not be more than 1. If it is less than 1, it shows that a part of the working capital has been financed through long-term funds. During the period of study the ratio shows a decreasing trend, it is favorable to the organization.

10. FIXED ASSET TURNOVER RATIO

This ratio expresses the number of items fixed assets are being turned over. This ratio shows the relationship between sales and fixed assets. Thus ratio shows how will the fixed assets are being used in the business. It measures the capacity of utilization and the quantity of fixed assets higher the ratio indicates the better performance.

Fixed Asset Turnover Ratio= Sales/Fixed Asset

YEAR SALES FIXED ASSETS RATIO

2008-09 8005.05 831 9.63

2009-10 7966.03 864 9.21

2010-11 9796.81 966 10.14

2008-09 2009-10 2010-110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

FIXED ASSET TO NET WORTH

FIXED ASSET TO NET WORTH

2008-09 2009-10 2010-118.6

8.8

9

9.2

9.4

9.6

9.8

10

10.2

10.4

FIXED ASSET TO TURNOVER RATIO

FIXED ASSET TO TURNOVER RATIO

INTERPRETATION:

The effective utilization of fixed assets shows a higher ratio in the year 2010-2011. The ratio is 10.14 which is highest in the study period of time and the least is in the year 2009-2010 which is 9.21. Higher the ratio indicates the better performance of the company.

11. WORKING CAPITAL TURNOVER RATIO

This ratio reflects the turnover of the firm’s net working capital in the course of year.A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information to how effectively a company is using its working capital to generate sales. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations.

Working Capital Turnover Ratio= Sales/ Net Working Capital

YEAR SALES NET WORKING CAPITAL

RATIO

2008-09 8005.05 2043.03 3.91

2009-10 7966.03 1934.09 4.11

2010-11 9796.81 2529.41 3.87

INTERPRETATION:

The highest net working capital is favorable for the company’s liquidity position. During the year 2008-09 ratio is 3.91; in the next year 2009-2010 it increases to 4.11. Then it was decreased to 3.87 in the year 2010-2011.

12. TOTAL ASSET TURNOVER RATIO

A firm’s ability to produce a large volume of sales for a given amount of net assets is the most important of its operating performance. It shows the firm’s operating efficiency. This ratio shows the firm’s ability in generating sales from all financial resources committed to total assets. Asset turnover ratios indicate how efficiently the firm utilizes its assets.

Total Asset Turnover Ratio= Net Sales/ Net Total Assets

YEAR NET SALES NET TOTAL ASSETS

RATIO

2008-09 8005.05 2874.66 2.78

2009-10 7966.03 2798.03 2.84

2010-11 9796.81 3495.51 2.80

2008-09 2009-10 2010-113.75

3.8

3.85

3.9

3.95

4

4.05

4.1

4.15

WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

INTERPRETATION: This ratio implies the firm’s ability in generating sales from all financial resources committed to total assets. The highest turnover ratio is shown in the year 2009-2010 and lowest in the year 2008-2009.

13. CURRENT ASSET TO WORKING CAPITAL RATIO

This ratio shows the relationship between total current assets in the firm and net working capital in the firm. Current asset and working capital are closely related to each other because if a firm is said to be in a good working capital position high current assets are needed than the current liabilities.

Current Asset to Working Capital Ratio=Current Asset/ Net Working Capital.

YEAR CURRENT ASSET NET WORKING CAPITAL

RATIO

2008-09 2369.48 2043.03 1.15

2009-10 2539.52 1934.09 1.31

2010-11 3182.75 2529.41 1.25

2008-09 2009-10 2010-110

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

TOTAL ASSET TURNOVER RATIO

TOTAL ASSET TURNOVER RATIO

2008-09 2009-10 2010-111.05

1.1

1.15

1.2

1.25

1.3

1.35

CURRENT ASSET TO WORKING CAPITAL RATIO

CURRENT ASSET TO WORKING CAPITAL RATIO

INTERPRETATION: This ratio shows a dual character both increasing and decreasing trend. It shows the firm’s working capital position is fluctuating. The lowest ratio is shown in the year 2008-2009 and the highest ratio is shown in the year 2009-2010. It shows an increasing trend in every year.

14. AVERAGE COLLECTION PERIOD

Average collection period indicates how fast the debtors of the firm are got collected. Shorter the average collection period, better will be the quality of the debtors.

Average Collection Period= Sundry Debtors/ Sales*360

YEARS SUNDRY DEBTORS SALES DAYS

2008-09 913.580 8005.05 41.08

2009-10 976.06 7966.03 44.11

2010-11 1249.75 9796.81 45.92

2008-09 2009-10 2010-1138

39

40

41

42

43

44

45

46

47

DAYS

DAYS

INTERPRETATION: The debtor’s turnover ratio and average collection period is having inverse relationship. Higher the turnover ratio lower will be the average collection period. Shorter collection period indicates prompt payment by the debtors. The highest collection period is shown in the year 2010-2011 and the lowest is shown in the year 2008-2009.

2. COMPARATIVE BALANCE SHEET

COMPARATIVE BALANCE SHEET AS ON 2009-10 (IN LAKHS)

PARTICULARS 2009 2010INCREASE/ DECREASE PERCENTAGE

Fixed Assets 821.21 850.61 29.4 3.5

Current Assets 2369.48 2539.52 170.0 7.2

Other Assets

(a) Investment 1.187 1.177 -0.1 -8.4

(b) Deferred tax assets 8.126 11.729 3.6 44.3

(c )Miscellaneous expenses 0.838 0.419 -0.4 -47.73

TOTAL ASSETS 3200.84 3403.46 202.62 6.33

Current Liability 326.18 605.43 279.3 85.6

Other Liability

Share Capital 200.00 200.00 0 0

Reserves And Surplus 682.84 1154.29 471.45 69.04

Secured Loans 1097.88 594.46 -503.42 -45.85

Unsecured Loans 893.92 849.26 -44.66 -4.99

TOTAL LIABILITIES 3200.84 3403.46 202.62 6.33

COMPARATIVE BALANCE SHEET AS ON 2010-11 (IN LAKHS)

PARTICULARS 2010 2011INCREASE/ DECREASE PERCENTAGE

Fixed Assets 850.61 948.56 97.9 11.5

Current Assets 2539.52 3182.75 643.2 25.3

Other Assets

(a) Investment 1.177 1.177 0.0 0.0

(b) Defferred tax assets 11.729 16.379 4.7 39.6

(c ) Miscellaneous expenses 0.419 0 -0.4 -100.0

TOTAL ASSETS 3403.46 4148.86 745.4 21.9

Current Liability 605.43 653.35 47.9 7.9

Other Liability

Share Capital 200.00 206.00 6 2.91

Reserves And Surplus 1154.29 1394.62 240.33 17.23

Secured Loans 594.46 957.85 363.39 37.93

Unsecured Loans 849.26 937.03 87.77 9.36

TOTAL LIABILITIES 3403.46 4148.86 745.4 21.9

3 .COMMON SIZE BALANCE SHEET

THREE YEAR COMMON SIZE BALANCE SHEETLIABILITIES 2008-09 % 2009-10 % 2010-11 %

Shareholders fund

Share Capital 20000000.00 6.25 20000000.00 5.88 20600000.00 4.97

Reserves and Surplus

68284806.04 21.33 115429927.80 33.92 139462994.60 33.61

Loans funds;

Secured Loans 109788647.30 34.30 59446874.89 17.47 95785731.76 23.09

Unsecured loans 89392669.95 27.93 84926211.88 24.95 93703130.24 22.59

Current Liabilities 28836424.69 9.01 54603889.47 16.04 61545200.21 14.83

Provision 3782059.46 1.18 5939162.43 1.75 3789719.00 0.91

TOTAL 320084607.44 100.00 340346066.47 100.00 414886775.81 100.00

ASSETS

Fixed Assets

Gross Block 114964951.70 128821421.90 150049157.00

less: Depreciation 32843609.00 43760095.88 55193042.60

Net Block 82121342.67 25.66 85061326.00 24.99 94856114.39 22.86

Investments 118700.00 0.04 117700.00 0.03 117700.00 0.03

Deferred Tax Payments

812600.00 0.25 1172930.00 0.34 1637900.00 0.39

Current assets, Loans & Advances;

Inventories 49821819.60 15.57 52695168.00 15.48 89084935.50 21.47

Sundry Debtors 91358042.56 28.54 97606164.76 28.68 124975291.50 30.12

Cash and Bank Balances

36160488.54 11.30 47937497.27 14.08 3987251.92 0.96

Loans and Advances 59607814.06 18.62 55713380.47 16.37 100227582.50 24.16

TOTAL CURRENT ASSETS 236948164.76 253952210.50 318275061.42

MISCEL/EXPENDITURE 83800.00 0.03 41900.00 0.01 0.00 0.00

TOTAL 320084607.43 100.00 340346066.50 100.00 414886775.81 100.00

6.25

21.33

34.30

27.93

9.01

1.18

2008-09 Liabilities

Share Capital

Reserves and Surplus

Secured Loans

Unsecured loans

Current Liabilities

Provision

0.03

18.62

11.30

28.54

15.57

0.250.04

25.66

2008-09 Assets

MISCELLANEOUS EXPENDITURE

Loans and Advances


Sundry Debtors

Inventories


Investments

Net Block

5.88

33.92

17.47

24.95

16.04

1.75

2009-10 Liabilities

Share Capital Reserves and Surplus

Secured Loans Unsecured loans

Current Liabilities Provision

24.99

0.030.34

15.48

28.68

14.08

16.37

0.01

2009-10 Assets

Net Block

Investments


Inventories

Sundry Debtors


Loans and Advances


4.97

33.61

23.09

22.59

14.83

0.91

2010-11 Liabilities

Share Capital Reserves and Surplus

Secured Loans Unsecured loans

Current Liabilities Provision

22.86

0.030.39

21.47

30.12

0.96

24.16

2010-11 Assets

Net Block

Investments


Inventories

Sundry Debtors


Loans and Advances


4. TREND ANALYSIS.

2008-09 2009-10 2010-110

2000

4000

6000

8000

10000

12000

NET SALESNET PROFITEXPENDITURE

YEARS EXPENDITURE NETPROFIT SALES

2008-09 8443.27 667.84 8005.05

2009-10 8401.15 1139.29 7966.03

2010-11 10440.84 1379.62 9796.81

5.FINDINGS

Profits for the year 2011 has decreased dramatically compared to 2010 as follows

2010 2011 Inc./Dec. %Op. Profit 83512327 51684418 -31827909 -38PBT 71548915 37568097 -33980818 -47PAT 47145122 24033067 -23112055 -49

Elevated manufacturing, selling and administration costs are major charge against revenue.

Though, in 2011 there is substantial increase (of 19%) in the revenue generated by the company compared to 2010.

In 2011 Gross Profit margin has decreased to 23% from 25% of 2010. Additional share capital of 6lakhs was introduced in 2011 Company holds a huge surplus fund of around 14crores which is double than of 2009. Liquidity position is satisfactory but when it comes to Quick Ratio, company’s liquid

cash position in 2011 (.6) is not satisfactory. They have a highly leveraged capital structure; it is more risky as the debt equity ratio is

greater than 1:1. In 2011 DER is brought downed to 2.6 from 9.6 of 2010. Their return on investment is 33%. An Expense ratio 1.1 shows that they are able to cover

their expenses from revenues. In 2011there is 11.5% increase in assets holdings compared to 2010. 69% increase in closing inventory (in 2011) compared to 2010 shows that company needs

to review their inventory management. Closing stock alone constitutes 21% of total assets. Working capital management is very essential for the firm as current assets constitutes

lion part of the total assets. Cash balance dropped 92% than 2010 levels which may cause cash management

problems. Debtors turnover ratio decreased to 7.8 as compared to 2010, elevated closing stock and

decreased DTR are like a two edged sword. Operating expense of the company is slightly high.

6.SUGGESTIONS

To improve GP margin firm have to undertake intelligent material sourcing. Marketing efforts should be result oriented to reduce selling costs. Take necessary care to improve production capacity in order to meet its current demand

and also to reduce the operating expenses. Inventory management need to be improved to determine optimum inventory levels. Credit policy need to be reviewed to improve debtors turnover ratio. Cost control and cost reduction techniques have to be implemented to increase profit

margins. They have to improve cash management. This can be made more meaningful by utilizing

the investment avenues. Over the years no efforts are taken to make improve investments. Company should maintain proper plan and adequate efforts must be made to overcome

the difficulties through better performance.

7.CONCLUSIONS

The focus of financial analysis is on key figures contained in the financial statements and the significant relationship that exits. The reliability and significance attach to the ratios will largely on hinge upon the quality of data on which they are best. They are as good for as bad as the data itself .Financial ratios are a useful by product of financial statement and provide standardized measures of firms financial position, profitability and riskiness. It is an important and powerful tool in the hands of financial analyst. By calculating one or other ratio or group of ratios he can analyze the performance of a firm from the different point of view.

The ratio analysis can help in understanding the liquidity and short-term solvency of the firm, particularly for the trade creditors and banks. Long-term solvency position as measured by different debt ratios can help a debt investor or financial institutions to evaluate the degree of financial risk. The operational efficiency of the firm in utilizing its assets to generate profits can be accessed on the basis of different turnover ratios.

The profitability of the firm can be analyzed with the help of profitability ratios. However the ratio analysis suffers from different limitations also. The ratios need not be taken for granted and accepted at face values. These ratios are numerous and there are wide spread variations in the same measure. Ratios generally do the work of diagnosing a problem only and failed to provide the solution to the problem.

8.BIBLIOGRAPHY

1. I M Pandey, “Financial Management”, Himalaya Publishing House, 9TH

Edition, page no.517 – 536.

2. John J. Wild, K R Subramanyan, Robert F. Halsey, “Financial Statement Analysis” TATA McGRAW-HILL 9TH EDITION.

3. S N Maheshwary, “Accounting for Management” Vikas Publishing House.

THREE YEARS ANNUAL REPORT OF ABAD FISHERIES.

WEBSITES:

www.investopedia.com

www.abadgroup.com.

www.abadfisheries.org

APPENDIX:

BALANCE SHEET OF ABAD FISHERIES (PVT) LTD

http://WWW.ABAD/

http://WWW.ABADGROUP.COM/

http://WWW.INVESTOPEDIA.COM/

FOR THE YEAR ENDING 31-3-09

PARTICULARS SCHEDULE AS AT 2008-09SOURCES OF FUNDShareholders fund;

Share capital 1 20000000Reserves and surplus 2 68284806.04

Loans funds;Secured loans 3 109788647.3

Unsecured loans 4 89392669.95TOTAL 287466123.3APPLICATION OF FUNDSFixed assets; 5

Gross block 114964951.7Less: depreciation 32843609

Net Block 82121342.67Investments 6 118700Deferred Tax Payments 7 812600Current assets, Loans & Advances; 8

Inventories 49821819.6Sundry debtors 91358042.56

Cash and bank balances 36160488.54Loans and advances 59607814.06

236948164.8Less: current liabilities 9 28836424.69

& provision 3782059.4632618484.15

NET CURRENT ASSETS 204329680.6MISCELLANEOUS EXPENDITURE 83800TOTAL 287466123.3



PARTICULARS SCHEDULE AS AT 2009-10SOURCES OF FUND

Shareholders fund;Share capital 1 20000000

Reserves and surplus 2 115429927.8Loans funds;

Secured loans 3 59446874.89Unsecured loans 4 84926211.88

TOTAL 279803014.6APPLICATION OF FUNDS

Fixed assets; 5Gross block 128821421.9

Less: depreciation 43760095.88Net Block 85061326

Investments 6 117700Deferred Tax Payments 7 1172930Current assets, Loans & Advances; 8

Inventories 52695168Sundry debtors 97606164.76



& provision 5939162.4360543051.9

NET CURRENT ASSETS 193409158.6MISCELLANEOUS EXPENDITURE 41900

TOTAL 279803014.6



PARTICULARS SCHEDULE AS AT 2010-11SOURCES OF FUNDShareholders fund;

Share capital 1 20600000Reserves and surplus 2 139462994.6

Loans funds;Secured loans 3 95785711.76

Unsecured loans 4 93703130.24

TOTAL 349551837APPLICATION OF FUNDSFixed assets; 5

Gross block 150049157Less: depreciation 55193042.6

Net Block 94856114.39Investments 6 117700Deferred Tax Payments 7 1637900Current assets, Loans & Advances; 8

Inventories 89084935.5Sundry debtors 124975291.5



& provision 378971965334919.21

NET CURRENT ASSETS 252940122.2MISCELLANEOUS EXPENDITURE NIL

TOTAL 349551837

PROFIT AND LOSS ACCOUNT OF ABAD FISHERIES

PARTICULARS SCHEDULE 31-3-10 31-3-09

INCOME

Sales 10 796603759 800505334.6

Income 11 115060707.8 103754155.6

Total 911664466.8 904259490.2

EXPENDITURE

Raw materials consumed 12 659198875.3 664936324.1

Stock differential 13 -2793985.2 25053608.4

Manufacturing, selling & administration 14 171826613.2 142943655.8

Depreciation written off 11436992.88 10127147.3

Preliminary expense written off 41900 41900

Provision for gratuity 405156 1175089

Total 840115552.1 844327724.6

PROFIT BEFORE TAX 71548914.76 59931765.6

less: provision for taxation

current tax 25800000 22500000

deferred tax -360330 -195800

fringe benefit tax nil 305000

excess provision for income tax written back -1035877.03 nil

Profit For The Year 47145121.79 37322565.6

Profit Brought Forward From Previous Year 66784806.04 29462240.44

NET PROFIT 113929927.8 66784806.04

Basic and Diluted earnings per share(2000 equity shares @10000 each) 23570 18660

PROFIT AND LOSS ACCOUNT OF ABAD FISHERIES

PARTICULARS SCHEDULE FOR THE YEAR ENDED 31-3-11

INCOME

Sales 10 979681816.6

Income 11 101970433.4

Total 1081652250

EXPENDITURE

Raw materials consumed 12 853803417.4

finished goods purchased 13981808

stock differential 13 -36157163.7

manufacturing, selling & administration 14 198572374.1

depreciation written off 12290345.39

Preliminary expense written off 41900

Total 1044084153

PROFIT BEFORE TAX 37568096.77

less: provision for taxation

current tax 14000000

deferred tax -464970

Profit For The Year 24033066.77

Profit Brought Forward From Previous Year 113929927.8

NET PROFIT 137962927.6

12020Basic & diluted earnings per share 2060 @ 10000

Date post:	06-May-2015
Category:	Business
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