Summer Internship Project

By Anil Kumar Panda

A PROJECT REPORT ON
Analysis of Comparative financial Statements.
In Om Oil & Flour Mills Ltd., Cuttack. RUCHI SUBMITTED AS AN ANALYSIS ON PART OF ACADEMIC ENDEAVOUR MASTERS OF BUSINESS ADMINISTRATION Under BPUT

Under The Guidance of External Guide: Mr. Nishikanta Jena (Chief Manager F&A) RUCHI Internal Guide: Ms. Leena P. Singh, Faculty Department of Management C.V.Raman College of Engineering

Submitted By:Anil Kumar Panda Regd No.0906227054

Table of contents
Sl.No. Particulars Page No.

1.

Chapter-1 Introduction to the Project Objective of the Study Rational of the Study Significance of the study Scope of the Study Limitations of the Study Research Methodology

2.

Chapter-2 Company Overview

3.

Chapter-3 Literature Review Topic Description

4.

Chapter-4 Data Analysis & Interpretation

5.

Chapter-5 Findings & Suggestions Conclusion

6.

Bibliography & References

Summer Training report for an M.B.A student is an important part of competition of the particular topic. Hence every student undergoes this training at various place having different topics. The main objective of the actual environment that prevails in to todays organization. In this project one can find that how the theories of book are put into the practice and how much they are suitable and useful.

Moreover practical training is an important part of management courses. The theoretical studies are not sufficient to get into the corporate world. Only practical knowledge can help us to understand the complexities of large scale organizations.

Thus, in my case I confronted myself to the largest manufacturer of spices & vermicelli products in India i.e., Ruchi for completing my research study. I found it very interesting and challenging. I did my training at Om Oil & Flour Mills Ltd. Head office, Cuttack and my topic of project is Analysis of Comparative financial Statements.

Behind every strenuous work, there is immense help of bunch of people who are really deserved thanks though thanks is not enough to acknowledge their guidance support. But I must say thank you to all those persons who have helped me for the completion of this work. I profoundly extend my sincere thanks to Mr. Nishikanta Jena (Chief Manager F&A) for having given me this opportunity to undertake the project in this esteemed organization. He guidance throughout has helped me enhance the domain of my knowledge. Now I would like to thank Ms. Leena P.Singh, my internal faculty guide for constantly guiding me in learning new aspects of the corporate world and helping me in applying the knowledge that Ive learned at my workplace and I am also thankful to Prof. Chittaranjan Sathpathy for also helping me throughout this project with valuable information and giving me a better insight of the things. I am also thankful to our Venerable H.O.D. Prof. S.C.Sahoo, Department of Management, C.V.Raman College of engineering whose encouragement, moral support provide the valuable guidance, which has been a source of inspiration to us.

Last but not the least I would like to thank all the students and staff members of Management Department of C.V Raman College who helped me in my endeavor.

This is to certify that the project work entitled Analysis of Comparative financial

Statements is an original piece of work done by Anil Kumar Panda (Regd.No0906227054), student of C.V.Raman College of Engineering, under my guidance and supervision
for the partial fulfillment of the requirement for the degree in M.B.A under BPUT. To the best of my knowledge and belief, the thesis embodies the work of the candidate himself and has been duly completed. Simultaneously, the thesis fulfils the requirements of the rules and regulations related to the summer internship of the institute and I am assured that the project is up to the standard both in respect to the contents and language for being referred to the examiner.

Ms. Leena P.Singh Faculty, Department of Mangement C.V.Raman College of Engineering

I do here declare that this project entitled Analysis of Comparative financial Statements the result of my project work for the partly fulfillment of my MBA degree, I do pledge this project is my original work and no part of it has been submitted or published in any other Formby. The contents of this project are based on the secondary collection and analysis done by me during my tenure at Om Oil & Flour Mills Ltd., Cuttack.

Anil Kumar panda Regd No: 0906227054 MBA

Financial Statements are prepared primarily for decision-making. They play a dominant role in setting the framework of managerial decisions. But the information provided in financial statements is not an end in itself as no meaningful conclusion can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing the relationship between the items of the balance sheet and the profit & loss account. There are various methods and techniques used in analyzing financial statements, such as:

Comparative Statements Trend Analysis Common-size Statements Schedule of changes in working capital Funds flow & Cash flow analysis Cost-profit-volume analysis and Ratio analysis

Objectives of the Study:

The primary objective of the study is to understand and diagnose the information contained in financial statements with a view to judge the profitability and financial soundness of the firm, and to make forecast about future prospects of the firm. Secondary Objectives:

To assess the earning capacity and profitability of the firm. To assess the progress of the firm over a period of time. To help in decision making & control.

Rationale of the Study:

The main reason to undertake the study is

To understand the financial strength and weaknesses of the particular firm. For the partial fulfillment of the Masters Degree in Business Administration
consequential benefits.

with its

Significance of the study:

The study is conducted to get awareness and learn about the performance of the company. However the following purposes of financial statements analysis may be stated to bring out the significance of such analysis:

To assess the operational efficiency and managerial effectiveness of the firm. To assess the short-term as well as long-term solvency position of the firm. To identify the reasons for change in profitability and financial position of the firm. To make inter-firm comparison.

Scope of the study:

The study is conducted by considering one company: Om Oil & Flour Mills Ltd.(Ruchi), from Spices & Vermicelli industry, which is one of the leading manufacturer of spices & Vermicelli. To determine its performance & Competitiveness of the company. Two years of financial data is considered to analyze the various financial statements. The tenure of the project period being two months.

Limitations of the study:

As every study has its own limitations, depending on many factors which are practically unavoidable, this study has also suffers from limitations and errors, which could not be avoided. This study suffers from following limitations:

All the analysis is based on only the interim reports provided by the company. Thus it may
not give a final picture of the concern.

The study is based only on monetary information and non-monetary factors are ignored. Analysis is only a means and not an end in itself. The analyst has to make interpretation and
draw his own conclusions. Different people may interpret the same analysis in different ways.

Research methodology

Type of research Type of data Source of data collection Statistical tools used Methods & instruments used for data analysis

Type of Research
This research is purely of analytical type where, the companys past four years data & financial statements has been collected, analyzed and interpreted to make a critical evaluation out of it.

Type of data
The theoretical data of this report was gathered from the companies own website: And the technical part of this report was collected from the companys annual reports as a secondary source provided by the companys Chief Manager (F&A).

Sources of Data Collection

The data collected for the purpose of this study is of secondary type which have been collected from the companys two years annual reports i.e., from 2005-06 to 2006-07.

Statistical instruments used

The analysis and interpretation of financial statements is used to determine the financial position and results of operations as well. A no. of methods or devices are used to study the relationship between different statements. The following are some of the instruments used for analysis of data:

Comparative Statements Trend Analysis Common-size Statements

An ISO 9001:2000 & HACCP Certified Company : Originating from Om Oil & Flour Mills Ltd., "RUCHI SPICES" has bloomed into a fragrant flower of international horizon. Its golden glorious past urges it to forge forward against the encircling gloom and numberless odds. Orissa's ancient maritime traditions inspire it further to be the beacon light in a number of productive fields. Ruchi Food-Craft Institute, a sister concern of Om Oil & Flour Mills Ltd., has endeared itself in the households of Orissa, through its spices and vermicelli. It has initiated a revolutionary step in the food processing industry in the state. A Unique Wave of Transformation : Introduction of packed food/processed food by this premier institute has dawned a glittering hope for busy people in all walks of life. An All-Women Self Help Group ( Ruchi Food Craft Institute ) has been the burning example of women employment through a series of bio-products with a competitive spirit. It has completely changed the concept of marketing strategy. Channel for a Dignified Earning : The hygienic, processed food packets of this concern has opened up vast possibilities of earning with dignity. Serving mankind with an open approach, basing on values both practical and moral, has been the guiding spirit of this concern. Winning over the heart and confidence of numberless customers through genuine products and exemplary quality have been its motto.

A Star Trendsetter : Being one among millions has been the dream of Ruchi. Being different, unique and far better than others in production, marketing as well as customer care has been its passion. Supreme quality, untiring labour, transparency and latest technology are the fundamental elements behind the dazzling success of this industrial house. It has already set a landmark trend in its field through whole hearted endeavour, perseverance and honesty. Besides unstinted devotion, ceaseless work, correct selection of the product have transformed "RUCHI" into a house of success, hope and inspiration for others. The Architect Behind This Empire : Yes, it's the story of a single man, determined, dedicated, dashing, dynamic and daring - Sarat Kumar Sahoo, Managing Director, OFML ( RUCHI ), Cuttack. With the initial investment of a paltry capital of Rs.5000/-, he led "RUCHI" to the dizzy heights of giant success. Today it has grown to a Rs.50 crore business house - through ideal work culture and progressive mindset. Acclamation, appreciation and covet recognitions have been showered on it, as a natural result. Beyond the National Frontiers : Ruchi products have a great demand in Singapore, Tanzania, Muscat, Dubai, Kuwait, Nepal, Bangladesh and Australia. Obtaining vermicelli technology from Italy and South Korea, it has added another feather to its cap. Global business has been its significant venture, demolishing several competitive odds in its path. Foreigners particularly conscious and careful of quality have bestowed their much value confidence on Ruchi. Centre of Excellence : Set up in the Industrial Estate of the millennium Silver City-Cuttack in 1976, Om Oil & Flour Mills Ltd. has carved out a glorious place in the domestic and foreign industrial area. With 32 years expertise in manufacturing and exporting quality spices, vermicelli and pasta - it has built up an image of excellence in this field. Guiding Motto - "No Compromise with Quality and Hygiene" : This noble principle has been moving RUCHI for decades. Following the foot prints of Utkal Gaurav Madhusudan Das, it prefers loss to profit - without ever compromising with the desirable quality from all points of view. This has obviously resulted in the phenomenal growth of this concern, basing on the capital "Customer-Confidence".

The Nectar of Nature : "Go Organic"- this is the call of RUCHI. It has innovated a special technique of developing organic spices and pasta, adopting twin Italian and South Korean technology. Modern customers, conscious of their latest regimen, for sound health, demand the use of organic spices throughout the world. Phulbani district has been earmarked for producing organic spices, in Orissa. Ruchi has already joined this useful venture, ahead of others. Its research and production has time and again proved its efficacy by retaining the original aroma of spices. Care of Specific Requirements : Ruchi has brought cheers for diabetic patients through its "Ruchi Rice", made of pure wheat which has been a boon for persons suffering from High BP and Over Weight. On the other hand, its "Raw Hand Pounded Rice" has high calorific value with vitamin-B - a must for good health. Ruchi Millets - rich calcium - is useful for infants, invalids and has a magical effect in the treatment of liver disorders. Ruchi Horse Gram - an effective organic product is particularly useful in treating gallstones, kidney-stones and provides relief from joint and muscular pain and common cold. Mission Statement : Since 1976 our love affair with spices continues. Today we have the spices of the world at our finger tips and we use them to create the dishes of many culture. We are a pioneer in seasonings technology and innovation. Our state of the art culinary center-with a huge staff, including talented food technologists - is dedicated to customization and process optimisation. We custom formulate seasonings to your applications, assuring quality control, care in blending and innovative production process. We understand proprietary nature of the business, and go a long way to protect customer secrets. Our mission is to harness fresh ideas, global control of spices and dynamic product development team to deliver tastes that delight consumers. Product Focus We are focused our fidelity of spices and vermicelli which is evaluated by the following three techniques. Physical or sensory evaluation. Physical-chemical analysis and Nutritional assessment.

Packaging Superiority : We market acceptable & high quality spices and spice products. Before it reaches sales counter or the consumer we look into various factors like proper cultivator, optimum maturity at harvest, best drying and storage practices, efficient methodology of pre cleaning and improved processing techniques .Better Packaging using flexible films, thermoplastic polyester (PET), and multi layered packaging. As a means of increasing the shelf -life of foods in general and of spices and condiments in particular, our packaging guidelines follow the world standard new and improved transparent plastic films, foils, laminations, high-speed film sealing machines, gas flushers for packaging food, spices, condiments and for new spices products. We provide an endless variety of containers of thermoplastic polyester (PET); co extruded, metalized and coated films of all shapes and sizes for packaging.Food grade plastic (HDPE) Multi-layered films of HDPE are a good material to carry spices in most hygienic condition to users.

The Man Behind Ruchi:

Leading manufacturers & Exporters of renowned quality Spices, Vermicelli & Pasta products of Orissa (INDIA) with 30 years of experience & expertise having large network all over India and abroad in the Brand name "RUCHI". 1. Company : M/s. Om Oil & Flour Mills Ltd - RUCHI Asia's foremost food processing company, aims to revolutionize the food processing industry in India. 2. Motto : "Quality & Customer Service is our priority." 3. The Man Behind : Shri Sarat Kumar Sahoo, the eminent entrepreneur of Spices and Vermicelli was born on 22.7.1950 to his lucky parents Late Banamali Sahoo and Late Maina Devi at Cuttack, Orissa. 4. Vision :Mr. Sahoo had started a humble Spices grinding unit with a mere amount investment in 1976, which gradually blossomed to "Ruchi Spices" industry, thus he could realize his dreams. It was nothing but his sheer, sincerity, selfless endeavor and perseverance that made him today a Giant among entrepreneurs. The seed of Om Oil & Flour Mills Ltd., which was sown on the barren land of industrially backward Orissa in the year 1976, has culminated into full-grown tree spreading the aroma of the Ruchi Spices to different parts of the globe. 5. Certifications : Equipped with state-of-the-art equipment and managed according to international food standards, the Ruchi Spices and Vermicelli company's factory is regarded as one of the best of its kind in the spice world. It has been certified by several food safety companies and audited regularly by the concern authority. Ruchi is an ISO 9001 and HACCP Certified Company which is a model for quality assurance in production, installation and servicing and applicable for all its quality clauses. Through ISO and HACCP, Ruchi intends to satisfy the customer's needs and expectations by having standardized systems, procedures and work ethics compared with the best in industry. Ruchi's achievement include prestigious AGMARK from Govt. of India and Exports Registration Certificate from Spices Board, also Govt. of India. 6. Strength: The installed capacity of SPICES DIVISION is 4950 MT per annum.

Infrastructure: The Company has imported and installed an Italian Pasta Plant having 5400 MT production capacity per annum. The technology adopted for production of Pasta and Vermicelli is purely Italian.

7. Nationawide Customer Support Network : After sales service being a key aspect to serve customers in this segment, a constant thrust is given at Ruchi to make the dealers infrastructure best class and make them competent to cope with growing customer expectations and demand. Ruchi has an excellent dealer network coverage throughout the country, which helps them serve their customers better. Regular training program are conducted for both internal and external Ruchi employees, dealer and others to improve their skill level, which helps in providing better customer support. 8. Expanding Manufacturing Base : Ruchi's vision extends to improving the product design and utility, expand product range, and to invest latest technology and manufacturing process in order to improve quality and capacity. Ruchi has set up a plant at Cuttack to manufacture Noodles and Pasta food products. The new plant will blow Ruchi to expand manufacturing capacity and meet the growing demand of the Indian market. 9. Social Activities : The Company's extra activities, social, cultural and welfare are noteworthy Meritorious/poor students, social workers, eminent scientists, artists and athletes are annually honored with suitable awards and scholarships.

Spices

Pasta

Frozen Foods

Laurels & Awards bagged by Ruchi:

1986 & 1988 Award for the Best Successful Enterprises & Industrial Peace and Promotion Unit by OASME (Orissa Assembly of Small and Medium Enterprises) 1988 Rotary International Award (R.R. Sikka Memorial Award) for the Best Maintained Factory by Sri Narendra Kumar Mishra, I.A.S Quality Award by State Bank of India & Orissa Small Industries Corporation (OSIC) Chalachitra Jagat Prativa Award by Sri Hemananda Biswal, Deputy Chief Minister of Orissa Best Export Award from OASME by His Excellency Sri Gopal Ramanujam, Honble Governor of Orissa Best Export Award from EPM, Govt. of Orissa by Sri Niranjan Pattnaik, Industry Minister, Govt. of Orissa. Spices House certificate from Spices Board, Govt. of India by Sri Sudhansu Bhusan Mishra, IAS, Chief Secretary of Orissa. First SWAVIMAN Samman from Govt. of Orissa by Dr. Giridhara Gomango, Chief Minister of Orissa. Chinta-O-Chetana Award by Sri Sarat Kumar Kar, Honble Speaker and Sri Biswa Bhusan Harichandan, Honbe Revenue Minister, Orissa. Rotary International Award (Gopal Pattnaik Memorial Award) by Rotary Club of Cuttack. Biju Pattnaik Memorial Award from OASME by His Excellency Sri M. M. Rajendran, Honble Governor of Orissa. Chala Chitra Jagat Millennium Award by Sri Sarat Kumar Kar, Honble Speaker, Orissa. AGMARK Certification by Ministry of Agriculture, Govt. of India. Best Enterpreneur Award-2001 from New Thinking Forum, Khurdha by Sri Janaki Ballava. Pattnaik, Former Chief Minister of Orissa. ISO-9002 Certification, presented by Sri Debi Prasad Bagchi, I.A.S. Chief Secretary of Orissa.

2 3 4 5 6 7 8

1989 1996 1997 1998 24.4.98 1999 19.04.00 22.04.00 12.08.00 24.12.00

01.01.01

10 06.05.01 11 19.08.01

12 Nov 2001 13 Mar 2002

Best Export Award 2001 by Sri Biswa Bhusan Harichandan, Revenue Minister, Govt. of Orissa. Best Successful & Proven Enterpreneur Award from Orissa State Financial Corporation (OSFC) by Sri Kanak Bardhan SinghDeo, Honble Minister, Industry, Govt. of Orissa. Rajiv Gandhi Award-2002 in the Field of Commercial Business Organisation by Rajiv Gandhi Forum, Orissa. Best Enterpreneur Award by Orissa Union of Working Journalists by Honble Justice Sri Laxmikanta Mohapatra, Judge, Orissa High Court. Utkal Sammilani Satabddi Samman-2004 by Utkal Sammilani Centenary Committee, Orissa from Sri Sarat Kumar Kar, Honble Speaker, Orissa Legislative Assembly Vaish Shree Samman by All India Vaish Federation by Sri Beda Prakash Agarwal, Honble Minister, Rural Development, Govt. of Orissa. Best Enterpreneur Award in Golden Jubilee Celebration of SISI, Govt. of India. State Safety Award by Govt. of Orissa by Sri Danda Nirodha Mishra, I.A.S., Labour Commissioner. HACCP Certification, presented by General Manager, The Samaja Expo-Orissa-2007 award for Excellence in Entrepreneurship from M.S.M.E., Govt. of India.by Sri Naveen Pattnaik, Honble Chief Minister, Orissa. Best Enterpreneur Award from Matrubhasa Prachar Samiti by Sri Prafulla Chandra Ghadei, Honble Finance Minister, Orissa Think Odisha Leadership Award-2008 by Shri Naveen Patnaik, Honble Chief Minister, Orissa Best Social Activist Award from Khurdha District Deaf Association by Shri Murlidhar Chandrakant Bhandare, Honble Governor, Orissa on 51st International Deaf Day.

14

Mar 2002

15 16.10.2003 16 30.12.2003

17 04.01.2004 18 30.9.2004 19 04.01.2004 20 26.09.2005 21 02.11.2007 22 10.03.2008 23 14.08.2008 24 28.09.2008

Activities:
Social Responsibility Strive for the greater good of humanity and the world not only through our business but also through our social contributions. At Ruchi Spices, contributing to the realization of sustainable development through our operations is an important goal. We have a clean commitment to meeting the demands of the society today as well as those future generations. Since its inception, Ruchi has demonstrated the value it places on people by helping the poor student and awarding them, as well as recognized the talent. RUCHI PRATIVA FOUNDATION Off : Type-II/8, Industrial Estate Post : Madhupatna City : Cuttack Fax : 0671-2344538

Aim:
The Prativa foundation is a resource for innovative people and institutions countrywide. Its goals are to promote education, sports, literature and to other social causes. Ruchi Prativa Foundation has always recognized the importance of its corporate social responsibility, due to that our corporate social responsibility has become one of the highlights of the company's history and culture. Voluntary services and contributions of its employees to the local society have become part of its corporate culture and are sustained with the voluntary participation of all its executives and employees based on their continuing interest and affection. Such activities are even enhancing the solidarity of our organization.

Ruchi Prativa Samman to Eminent Pesonalities

Ruchi Prativa Samman to H.S.C Toppers

ORGANIZATION STRUCTURE OFM are managed by Managing Directors & Executive Officer from the following categories: 1. 2. 3 (Three) whole time Directors 1 (ONE) EXECUTIVE OFFICER

Managing Director Mr. Sarat Kumar Sahoo

Whole time Directors

Executive Directors

Mrs. Sangita Sahoo

Mr. Arbind Sahoo

Mrs. Rashmi Sahoo

Mr.S.N.JENA

KEY PERSONAL

ASSISTANT GENERAL MANAGERS

AUDITORS

MR. RANJAN KUMAR ROUT

STATUTORY

INTERNAL

CHIEF MANAGER (F&A)

MR.MANNORANJA N MALLA MR.NISHIKANTA JENA

M/S. BAJORIA & CO.

M/S.H.K.MORE & CO.

Products:

Spices: Basic Spices Blended Spices Whole Spices Other than Spices

BASIC SPICES
CORIANDER POWDER KASHMIRI CHILLI POWDER

CHILLI POWDER

CUMIN POWDER

TURMERIC POWDER

BLENDED SPICES

BIRYANI MASALA BLACK PAPPER POWDER CHANA MASALA

CHAT MASALA CHICHKEN MASALA

DUM ALOO DUM DUM MASALA

MEAT MASALA

DALMA POWDER

EGG CURRY MASALA

CURRY POWDER

. FISH MASALA GARAM MASALA SUNDAY MASALA SAMBAR MASALA

WHOLE SPICES

BLACK PAPPER

GOTA DHANIA

CUMMIN SEEDS

KALA JEERA

JUANI

CHILLI WHOLE METHI Pack Size:100gm Pack Size:100gm

PANCH PHUTAN

MADHURI

KASOORI METHI

Pack Size:100gm

Pack Size:100gm

Pack Size:100gm

POSTAK Pack Size: Small Sachet50gm, 100gm

GARLIC GRANULES Pack Size: 50gm, 100gm

MUSTARD Pack Size: smallsachet50gm, 100gm, 200gm, 250gm, 500gm, 1kg

TEJ PATTA Pack Size: 50gm

SAFFRON Pack Size: 3gm

GINGER GRANULES Pack Size: 75gm Pack Size: 75gm

CHILLI FLAKES Pack Size: 75gm

SPICE COLLECTION Pack

ONION FLAKES Size: 250gm

QUEENS COLLECTION

OTHER THAN SPICES

AMCHUR POWDER Pack Size: 50gm

BAKING POWDER Pack Size: 25gm

BLACK SALT Pack Size: 100gm, 250gm

EDIBLE SODA Pack Size: 10gm, 100gm, 500gm

ISABGOL HUSK CORNFLOUR CUSTARD POWDER JAL JEERA

Pack Size: 100gm Pack Size: 100gm NOODLE

Pack Size: 10gm, 20gm, and 100gm

Pack Size: 50gm, 100gm

HING PAPAD ASSORTED MASALA PAPAD PALM CANDY NOODLES (FLOUR) Pack Size: 10gm, 50gm Pack Size: 250gm Pack Size: Pack Size: 300gm, 700gm PALAK NOODLES 200gm, 400gm

100gm, 1200gm

Pack Size: 50gm,

. SATTU PackSize: 200gm, 500gm

PASTA & VERMICELLI:

CLUB VERMICELLI A TO Z VERMICELLI Pack Size: 200gm, 500gm, 1kg Pack Size: 500gm,

DIET RICE EXPORT VERMICELLI Pack Size: 350gm, 500gm Pack Size: 200, 50gm

KHEER MIX LONG VERMICELLI MACARONI Pack Size: 50-400gm Pack Size: 200gm, 400gm

NASTA KA PASTA Pack Size: 175-500gm Pack Size: 250gm, 400gm

ROASTED VERMICELLI SHORT VERMICELLI Pack Size: 175gm--5kg Pack Size: 100gm, 250gm, 500gm, 1kg

STAR VERMICELLI Pack Size: 100gm,200gm,1kg

SUNMADE VERMICELLI Pack Size: 175gm, 400gm RICE (RISO) from CHAKI ATTA Pack Size: 500gm

JUMBO VERMICELLI Pack Size: 200gm LITTLE CLAMS Pack Size: 200gm

Frozen Food:

Literature Review

The history of financial statement analysis dates far back to the end of the previous century (see Horrigan, 1968). However, the modern, quantitative analysis has developed into its various segments during the last two decades with the advent of the electronic data processing techniques. The empiricist emphasis in the research has given rise to several, often only loosely related research trends in quantitative financial statement analysis. Theoretical approaches have also been developed, but not always in close interaction with the empirical research. According to Metcalf and Titard, is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance. In the words of Myers, Financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements, and a study of the trend of these factors as shown in a series of statements. Shillinglaw Gordon et al (1979), asserts that the basic building block in financial statement analysis is the ratio, a percentage or decimal relationship of one number to another. Swanson Ross et al (1988), is of the idea that, Financial analysis is crucial to managers in order to make decisions about operating a business.

Definition and Explanation of Financial Statement Analysis:

Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis. Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.

Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement analysis:

Comparative Statements Trend Analysis Common-size Statements Schedule of changes in working capital Funds flow & Cash flow analysis Cost-profit-volume analysis and Ratio analysis.

Advantages of Financial Statement Analysis:

There are various advantages of financial statements analysis. The major benefit is that the investors get enough idea to decide about the investments of their funds in the specific company. Secondly, regulatory authorities like International Accounting Standards Board can ensure whether the company is following accounting standards or not. Thirdly, financial statements analysis can help the government agencies to analyze the taxation due to the company. Moreover, company can analyze its own performance over the period of time through financial statements analysis.

Financial Statement Analysis Limitations

Many things can impact the calculation of ratios and make comparisons difficult. The limitations include:

The use of estimates in allocating costs to each period. The ratios will be as accurate as the estimates. The cost principle is used to prepare financial statements. Financial data is not adjusted for price changes or inflation/deflation. Companies have a choice of accounting methods (for example, inventory LIFO vs FIFO and depreciation methods). These differences impact ratios and make it difficult to compare companies using different methods. Companies may have different fiscal year ends making comparison difficult if the industry is cyclical. Diversified companies are difficult to classify for comparison purposes. Financial statement analysis does not provide answers to all the users' questions. In fact, it usually generates more questions!

1. Comparative Statements: The Comparaive financial statements are statements of the financial position at different periods; of time. The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods. From practical point of view, generally, two financial statements ( Balance sheet and Income statements) are prepared in comparative form for financial analysis purposes. The comparative statements may show:

Absolute figures (rupee amounts) Changes in absolute figures Absolute data in terms of percentages. Increase or decrease in terms of percentage.

Comparative balance sheet:

A comparative balance sheet is designed to show financial differences between several accounting periods. A balance sheet is a detailed account of everything lost and gained financially during a certain time, containing both physical and abstract data. A comparative balance sheet is useful because a business can instantly compare profits and losses between different time periods. Most businesses use comparative balance sheets to help increase profits and functionality of a company. Features 1. A comparative balance sheet will include several different types of accounting data. First there will be the income received and money spent. There will also be a list of credits and debits to the company. A list of assets and liabilities is also included. All of these factors are necessary to see what the total worth of the company is through the balance sheet. The comparative balance sheet allows the company or business to see at a glance how its profits differ from one year to another. These comparative balance sheets are aligned so that business people can see at a glance the financial differences from year to year. Function 2. A balance sheet is designed to help keep a business or company aware of every expense and profit that it is receiving. It also allows the company to see which times of the year are most profitable, and which years they did the best. This knowledge is important so that the company can adapt to the information to build the best business possible. If the business did better three years ago, they can look at that data and try to decide what it was that made them do so well that year. Then they can change what they are doing in the present to help boost current profits.

Benefits 3. The main benefit of a comparative balance sheet is that profits and losses can be seen at a glance. It is also possible to see the increase or decrease of assets that the business has. The company will be able to tell what the biggest money suckers in the business are, and try to think of ways to cut down losses in that area. Significance 4. Without a comparative balance sheet, businesses would not know how to change their strategy from year to year. All they would have to go on would their current balance statements. This would be detrimental to most businesses. It is very important to be able to look at past profit information to judge how to act for the future. The comparative balance sheet analysis can be of two types:

Horizontal Balance Sheet Analysis

Horizontal Balance Sheet Analysis is the side-by-side comparison of two time periods for the same company, usually comparing one year to another. Analysis asks the following questions: Has inventory increased or decreased? If it has increased, is it due to higher anticipated sales or a unanticipated reduced sales, resulting in a stockpile? Has accounts receivable increased? If so, is the increase due to increase sales last year, or are current customers taking longer to pay? Has the company increased its long-term debt? If so, is it due to anticipated growth or to fund current obligations it is unable to pay? Answers to these questions assist the analyst in determining whether the company is growing or struggling.

Vertical Balance Sheet Analysis

Vertical Balance Sheet Analysis shows the balance sheet in terms of percentage. Each balance sheet item is shown as a percentage of total assets. This is also called a common-size balance sheet. The purpose of a vertical balance sheet is most often used to compare two companies of different size. The following questions may be answered in a vertical analysis: What proportion of total assets are in liquid form (i.e. in short-term assets)? The answer indicates which company has more flexibility in paying its obligations.

Comparative Income statement:

The income statement gives the results of the operations of a business. The comparative income statement gives an idea of the progress of the business over a period of time. The changes in absolute data in money values and percentages can be determined to analyze the profitability of the business. Like comparative balance sheet income statement also has four columns. First two columns give figures of various items for two years. Third and fourth columns are used to show increase or decrease in figures in absolute amounts and percentages respectively.

TREND ANALYSIS
In financial analysis the direction of changes over a period of years is of crucial importance. Time series or tend analysis of ratios indicates the direction of change. This kind of analysis is particularly applicable to the items of profit and loss account. It is advisable that trends of sales and net income may be studied in the light of two factors: the rate of fixed expansion or secular trend in the growth of the business and the general price level. In other words, sales figures should be defaulted for rising price level.

The financial statements may be analyzed by computing trends of series of information. This method determines the direction upwards or downwards and involves the computation of the percentage relationship that each statement items bears to the same item in base year. The information for a no. of years is taken up and one year, generally the first year, is taken as a base year. The figures of the base year are taken as 100 and trend ratios for other years are calculated on the basis of the base year. For example, if sales figures for the year 2003 to 2008 are to be studied, then sales of 2003 will be taken as 100 and the percentage of sales for all other years will be calculated in relation to the base year, i.e., 2003. Suppose the following trends are determined: 2003 2004 2005 2006 2007 2008 100 120 110 125 135 140

The trend of sales shows that sales have been more in all the years since 2003. The sales have shown an upward trend except in 2005 when sales were less than the previous year. Though the sales are more as compared to the base year but still the rate of increase has not been constant and requires a study by comparing these trends to other items like cost of production, etc.

Common size Statements:

The common-size statements, balance sheet and income statement are shown in analytical percentages. The figures are shown as percentages of total assets, total liabilities and total sales. The total assets are taken as 100 and different assets are expressed as percentage of the total. Similarly, various liabilities are taken as a part of total liabilities. These statements are also known as component percentage or 100 percent statements because every individual item is stated as a percentage of the total 100. The common-size statements may be prepared in the following way: 1. The total assets or liabilities are taken as 100. 2. The individual assets are expressed as a percentage of total assets, i.e., 100 and different liabilities are calculated in relation to total liabilities.

Common-size Balance sheet:

A statement in which balance sheet items are expressed as the ratio of each asset to total assets and the ratio of each liability is expressed as a ratio of total liabilities is called common-size balance sheet. For example, following assets are shown in a common-size balance sheet:

Rs. Percentage __________________________________________________________________ Cash in hand and at bank Sundry debtors Stock Land & building Plant & machinery 5000 20000 25000 50000` 100000 2.50 10.00 12.50 25.00 50.00

______________________________ Total Assets: 200000 100.00

The common-size balance sheet can be used to compare companies of different size. The comparison of figures in different periods is not useful because total figures may be affected by a no. of factors. It is not possible to establish standard norms for various assets. The trends of figures from year to year may not be studied and even they may not give proper results.

Common-size Income Statement:

The items in income statement can be shown as percentages of sales to show the relation of each item to sales. A significant relationship can be established between items of income statement and volume of sales. The increase in sales will certainly increase selling expenses and not administrative or financial expenses. In case the volume of sales increases to a considerable extent, administrative & financial expenses may go up. In case the sales are declining, the selling expenses should be reduced at once. So, a relationship is established between sales and other items in income statement and this relationship is helpful in evaluating operational activities of the enterprise.

COMPARATIVE BALANCE SHEET (for the year ending 2006 & 2007)
Year Endings 2007(Rs.) 2006(Rs.) increase/Decrease (Rs.) % of Change

Assets Fixed Assets:

Land & Site development Land (Staff Quarter) Building (Factory & Office) Building ( Staff Quarter) Plant & machinery (Imp.) Plant & machinery ( Ind.) Electrical Installation Panel Board Transformer Boiler Air Compresser Water supply installation Furniture & Fixture Office equipment Computer System Labrotary Equipment Tools & Impliments Telephone Installation Vehicles Capital Work in Progress

12945378.46 300000 33231883.14 393248.62 42613449.39 37566415.07 2996311.71 315074.13 453113.1 414171.61 72222.66 449598.11 2525038.37 970576.1 864949.85 103087.19 12545.66 114925.83 10184256.22

2343878.46 300000 22793656.2 409819.62 58433647.39 29136136.07 2716946.96 268748.13 247113.1 336555.41 77440.66 480775.11 1848355.37 960368.1 609731.85 109888.19 13678.66 123257.83 8426100.22 5437824

10601500 0 10438226.94 -16571 -15820198 8430279 279364.75 46326 206000 77616.2 -5218 -31177 676683 10208 255218 -6801 -1133 -8332 1758156

45.2305876 0 45.79443881 -4.043486254 -27.07378147 28.93410087 10.28230415 17.23770134 83.3626384 23.061938 -6.738062408 -6.484736699 36.61000536 1.062925768 41.8574165 -6.189018128 -8.282975087 -6.759813961 20.86559564

Total Fixed Assets Current Assets:

Inventories Sundry Debtors Cash & bank balance Loans & Advances Total Current Assets Investments Preliminary Expenses

146526245.2

135073921.3

16890147.89

12.5043737

84710332 17073904.67 21663277.02 7430881.54 130878395.2 100000

47485057.67 19147420.22 21776215.31 8152558.76 96561251.96 100000 2520

37225274.33 -2073515.55 -112938.29

78.3936593 -10.82921629 -0.518631398

35038820.49 0

36.28662613 0

Total Assets

277504640.5

231737693.3

45766947.16

19.74946178

Current liabilities & Capital:

Sundry Creditors Share Capital Reserve & Surplus Loans Funds: Secured loans Unsecured loans 77212974.85 41049330 59873911.65 91572146.05 37366000 29173719.04 -14359171.2 3683330 30700192.61 -15.68071932 9.857437242 105.2323585

70257595.95 29110828

64713791.2 8912037

5543804.75 20198791

8.566651168 226.6461753

Total Liabilities

277504640.5 231737693.3

45766947.16

19.74946178

Interpretation: The above Comparative Balance sheet can be interpreted with respect to the
following 3 aspects: A. Current Financial position & Liquidity position. B. Long-term Financial Position. C. Profitability of the concern. a) The Comparative Balance sheet of the Company reveals that, the working capital of the company has increased in 2007 as compared to the previous year. In current assets only the Inventories shows an increment of 78% in 2007, whereas the Sundry Debtors decreased to a low of 10% as compared to the previous year. However the total current assets shows an increment of 36%.Like-wise in Current Liabilities the Sundry Creditors decreased by 15%. From the above analysis it is clear that the liquidity position of the company is not good both the liquid assets shows a decrement. An increase in inventories may increase working capital of the company but it will not be good for the company. b) In this aspect it reveals that the companys fixed assets has been increased up to 12%, whereas its long-term loans and share capital has increased to a percent of 8 & 10 respectively, which shows that the part of fixed assets has been financed from the working capital. It is a wise policy of the Company to finance the fixed assets.

c) The reserves & surplus of the Company shows a drastic increment of 105% which will mean an increase in the profitability of the concern. d) Overall, The Financial Position of the Company is Satisfactory.

Comparative Income Statement: Comparative Income Statement of Om Oil & Flour mills Ltd.(For the year ending 2006 & 2007) 2007 2006 Absolute Change (Rs.) Percentage (%)

Sales

386497788.1

323978877 62518911.06

19.29721827

Less:

Cost of Goods sold Gross Profit Operating expenses: Administrative & Operative Exp Selling & Distribution exp Depreciation

283309375.4*

235522246* 47787129.49

20.2898581 16.65424218

103188412.7 88456631.09 14731781.57

34655021.89 27899196.53 31937763.23 24900858.86 7896794 7353199

6755825.36 7036904.37 543595

24.21512517 28.25968538 7.392632785 23.83299935 1.397207281 54.1546436

Less:

Total Operating exp Operating Profit

74489579.12 60153254.39 14336324.73 28698833.54 1387080.4 28303376.7 899798 395456.84 487282.4

Add:

Non Operating Income(Other income)

Less:

Other Expenses: Preliminary Exp. Profit before interest & Tax

2520 30083393.94 8538934.33

2520 29200654.7 9135046.83

0 882739.24 -596112.5 1478851.74 2021552 77278 -619978.26

0 3.023011809 -6.525554943 7.370081931 119.7232371 62.5347964 -3.396487746

Less:

interest Profit Before Tax

21544459.61 20065607.87 3710073 200854 1688521 123576

Less:

Provision for taxation Provision For Fringe benefit tax Profit After tax

17633532.61 18253510.87 244353.7 1257678

16751479.17

Less:

Prior period adjustment Provision for Deferred Tax

Net Profit after interest & Tax

843409
16790123.61

-414269
38644.44

-32.93919429
0.230692702

* See the working note below

Working Note
Raw material consumed Packing Material Prime Cost Manufacturing Exp Prime Cost op WIP Cl. WIP work Cost Op Finished goods

2006

2007

149790704.1 62868817.06 212659521.2 19727012.55 232386533.7 2957629 2311447.3 646181.7 233032715.4 18318281 251350996.4 15828750.48

207047257.1 65065574.61 272112831.7 26225501 298338332.7 2311447.3 3002917 -691469.7 297646863 15828750.48 313475613.5 30166238

Cl Finished goods

Cost of goods sold

235522246

283309375.5

Interpretation:
a) The Comparative Income Statement of the Company reveals that there has been increase in net sales of 19% while the cost of goods sold has increased proportionately by 20% resulting in increment of Gross profit of 16%. b) Though the Operating Expenses of the company increased by 23.89%, the companys operating profit increased just only 1.39% from the previous year, which shows that the company should try to control its operating expenses for its further increase in operating profit. c) The net profit of the concern is increased just about 0.39% from the previous year i.e. from 2006. But it will be a good indicator for the increase in net profit of the concern that the nonoperating income has been increased by 54%. The non-operating expenses like interest and tax also decreased over the period which will result the increase in profitability of the concern. d) Thus the overall profitability of the Company is in a good position, but it needs improvement.

Trend Analysis:
Trend Percentages for the four years considering Sales, Stock & Profit before tax.:

Trend Percentages of Om Oil & Flour mills Ltd.(RUCHI) for four years
Base year 2006=100 Year Sales Amount(Rs.) 2006 2007 323978877 386497788.1 Trend percentage 100 119.2972183 Stock Amount(Rs.) 47485057.67 84710332 Trend percentage 100 178.3936593 Profit before Tax Amount(Rs.) 20065607.87 21544459.61 Trend percentage 100 107.3700819

2008

463840905.5

143.1701072

83106371.76

175.0158383

16088921.82

80.18158196

2009

631826365.6

195.0208518

107942570.6

227.3190261

22344838.65

111.3588923

Trend Analysis
250

200

150

100

50

0 Sales Trend Stock trend Profit Trend

2006 100 100 100

2007 119.2972183 178.3936593 107.3700819

2008 143.1701072 175.0158383 80.18158196

2009 195.0208518 227.3190261 111.3588923

Interpretation: a) The Sales has been increased continuously in all the year up to 2009. The percentage in 2009 is 195% as compared to 100% in 2006. Thus, the increase in sales is quite satisfactory. b) The trend of the Stock also shows an increment in all the years. The increase in stock is more in 2007 i.e. 178% as compared to 2008 i.e. 175%. Overall, the stock has been increased up to a high of 227% currently as compared to the base year i.e. 2006.

c) The profit before tax has substantially increased in 2007 and in the next year it decreased to 80% & again it increased to a percent of 111 in the year 2009. The comparative increase in profits is much higher in 2009 as compared to 2006. d) Thus, the expansion of the company is good and it has doubled its sales & stock in just four years time. While the profit is increasing in a very slow trend over the all years.

e) The overall performance of the company is good.

Common-size Statements: 1. Common size balance sheet of Om oil & flour mills Ltd. For two years.

Common-size Balance sheet of OFM Ltd. For the years 2006-07

2006 Amount(Rs.) Percentage (%) 2007 Amount(Rs.) Percentage (%)

Assets
Fixed Assets: Land & Site development Land (Staff Quarter) Building (Factory & Office) Building ( Staff Quarter) Plant & machinery (Imp.) Plant & machinery ( Ind.) Electrical Installation Panel Board Transformer Boiler Air Compresser Water supply installation Furniture & Fixture Office equipment Computer System Labrotary Equipment Tools & Impliments Telephone Installation Vehicles Capital Work in Progress Total Fixed Assets Current Assets: Inventories Sundry Debtors Cash & bank balance Loans & Advances Total Current Assets Investments Preliminary Expenses 2343878.46 300000 22793656.2 409819.62 58433647.39 29136136.07 2716946.96 268748.13 247113.1 336555.41 77440.66 480775.11 1848355.37 960368.1 609731.85 109888.19 13678.66 123257.83 8426100.22 5437824 135073921.3 1.011436002 0.129456713 9.835972679 0.176846336 25.21542636 12.57289466 1.172423407 0.115970832 0.106634832 0.14523119 0.033417378 0.207465218 0.797606701 0.414420324 0.263112937 0.047419213 0.005902648 0.053188512 3.636050787 2.346542732 58.28741946 146526245.2 52.80136757 12945378.46 300000 33231883.14 393248.62 42613449.39 37566415.07 2996311.71 315074.13 453113.1 414171.61 72222.66 449598.11 2525038.37 970576.1 864949.85 103087.19 12545.66 114925.83 10184256.22 4.664923238 0.1081063 11.97525313 0.141708845 15.35594119 13.5372205 1.079733912 0.113538328 0.16328127 0.149248535 0.026025749 0.162014628 0.909908521 0.349751304 0.311688427 0.037147916 0.004520883 0.041414021 3.669940871

47485057.67 19147420.22 21776215.31 8152558.76 96561251.96 100000 2520

20.49086491 8.262540266 9.396924169 3.518011526 41.66834087 0.043152238 0.001087436 100

84710332 17073904.67 21663277.02 7430881.54 130878395.2 100000

30.5257353 6.152655553 7.806455771 2.677750371 47.162597 0.036035433

Total Assets

231737693.3

277504640.5

100

Current liabilities & Capital: Sundry Creditors Share Capital Reserve & Surplus Loans Funds: Secured loans Unsecured loans 91572146.05 37366000 29173719.04 39.51543003 16.1242651 12.58911255 77212974.85 41049330 59873911.65 27.82403016 14.79230399 21.57582358

64713791.2 8912037

27.92544893 3.845743381

70257595.95 29110828

25.31762922 10.49021305

Total Liabilities

231737693.3

100

277504640.5

100

Total Asstes & Liabilities(Proportion) 2006

Land & Site development Building ( Staff Quarter) Electrical Installation Boiler Furniture & Fixture Labrotary Equipment Vehicles Land (Staff Quarter) Plant & machinery (Imp.) Panel Board Air Compresser Office equipment Tools & Impliments Inventories Building (Factory & Office) Plant & machinery ( Ind.) Transformer Water supply installation Computer System Telephone Installation Preliminary Expenses

8% 2% 20%

9%

Unsecure d loans 0% 4% 1% 0% Secured loans 28% 10% 0%

4% 0%

Total Liabilities 2006

Sundry Creditors Share Capital Reserve & Surplus Secured loans

Sundry Creditors 39%

25% 4% 0% 0% 0% 0% 0% 1% 0% 0% 1% 0% 0% 0% 13% Reserve & Surplus 13% Share Capital 16%

Unsecured loans

Total assets-2007
Land & Site development Building ( Staff Quarter) Electrical Installation Boiler Furniture & Fixture Labrotary Equipment Vehicles Sundry Debtors Investments Land (Staff Quarter) Plant & machinery (Imp.) Panel Board Air Compresser Office equipment Tools & Impliments Capital Work in Progress Cash & bank balance Building (Factory & Office) Plant & machinery ( Ind.) Transformer Water supply installation Computer System Telephone Installation Inventories Loans & Advances

3% 0% 0% 5% 6% 8% 12% 0% 15% 31% 14%

4% 0% 0% 1% 0% 0% 0% 0% 0% 0% 1% 0% 0%

Unsecured loans 10%

Total Liabilities-2007
Sundry Creditors 28%

Secured loans 25% Share Capital 15%

Sundry Creditors Share Capital Reserve & Surplus Secured loans Unsecured loans

Reserve & Surplus 22%

Interpretation: a) The Common-size balance sheet of the Company reveals that the total fixed assets during the year 2006 constitutes 58% of the total assets, while in 2007 it constitutes only 52%, thus it shows a decrease in fixed assets. b) The total current asset constitutes 41% of the total assets during 2006, whereas in 2007 it constitutes 47%, thus it indicates an increment in current assets over the period. c) A close look at the Balance sheet shows that the current liabilities has constituted 39% of the total liabilities in 2006, while in 2007 it decreased to 27% of the total liabilities, which is a good indicator for the growth of the concern. d) The increase in reserves & surplus from 12% to 21% shows that the profitability of the firm is increasing over the period.

2. Common-size Income Statement Common-size Income Statement of OFM Ltd. For the years 2006-07 2006 Percentage Amount of Total (rs.) Sales 100 2007 Amount Percentage (rs.) of Total 100

323978877 386497788.1

Less: Cost of Goods sold Gross Profit Operating expenses: Administrative & Operative Exp Selling & Distribution exp Depreciation Less: Total Operating exp Operating Profit Add: Non Operating Income(Other income)

72.69679064

235522246 283309375.4 73.30168093

27.30320936 88456631.09 103188412.7 26.69831907

8.611424543 27899196.53 34655021.89 8.96642179 7.685951346 24900858.86 31937763.23 8.263375422 2.269653833 7353199 7896794 2.043166673 18.56702972 60153254.39 74489579.12 19.27296389 8.736179642 0.277733539 28303376.7 28698833.54 7.425355183 899798 1387080.4 0.358884434

Less: Other Expenses: Preliminary Exp. Profit before interest & Tax Less: interest Profit Before Tax Less: Provision for taxation Provision For Fringe benefit tax Profit After tax Less: Prior period adjustment Provision for Deferred Tax Net Profit after interest & Tax

0.000777828 9.013135352 2.819642723

2520

2520 0.000652009

29200654.7 30083393.94 7.783587608 9135046.83 8538934.33 2.209310012

6.193492629 20065607.87 21544459.61 5.574277596 0.521182435 0.038143227 1688521 123576 3710073 0.959920888 200854 0.051967697 4.56238901

5.634166967 18253510.87 17633532.61 0.075422726 0.38819753 244353.7 1257678

843409 0.218218325

5.170546711 16751479.17 16790123.61 4.344170685

Interpretation:
a) The sales and gross profit has increased in absolute figures in 2007 as compared to 2006 but the percentage of gross profit to sales has gone down in 2007. b) The increase in cost of goods sold as a percentage of sales has brought the profitability from 27.3 to 26.69%. c) The operating expenses have slightly increased in 2007 from 18.56 to 19.27%. While the nonoperating expenses i.e. interest have slightly decreased from 2.81 to 2.21%. However, the nonoperating income increased over the period which a god news for the company to increase its profitability. d) Net profits have increased in absolute figures but decreased as a percentage in 2007 as compared to 2006. e) The overall profitability has decreased slightly in percentage in 2007 and the reason is a rise in cost of goods sold. The company should take immediate steps to control its cost of goods sold, otherwise the company will be in trouble.

The Companys overall financial statements reveals the following findings from the complete analysis and interpretation and suggestions are also provided for the company to increase its profitability and its performance. a) The Comparative Balance sheet of the Company reveals that, the working capital of the company has increased in 2007 as compared to the previous year. From the above analysis it is clear that the liquidity position of the company is not good both the liquid assets shows a decrement. An increase in inventories may increase working capital of the company but it will not be good for the company. b) The Comparative Income Statement of the Company reveals that there has been increase in net sales of 19% while the cost of goods sold has increased proportionately by 20% resulting in increment of Gross profit of 16%. Thus the overall profitability of the Company is in a good position, but it needs improvement. c) The trend analysis shows that the expansion of the company is good and it has doubled its sales & stock in just four years time. While the profit is increasing in a very slow trend over the all years. d) Net profits have increased in absolute figures but decreased as a percentage in 2007 as compared to 2006. e) The overall profitability has decreased slightly in percentage in 2007 and the reason is a rise in cost of goods sold. The company should take immediate steps to control its cost of goods sold, otherwise the company will be in trouble.

Financial statements are useful, because they show the financial condition of a company at a given period. There are many types of financial statements uses and purposes, measuring different financial aspects of the company. They can be used for both internal-, and external uses. The new Accounting Standards for Enterprises allows enterprises to accounting policies and accounting methods to choose to make similar statements of different enterprises lack of data comparability. Even if the actual operating two businesses are identical, the financial analysis of the two companies may also be differences in the conclusions.

Financial statements of some of the data is not very accurate, some of the projects accounting personnel data is based on Experience and actual conditions is estimated to be measured. The trend analysis method's limitations. First, trend analysis method is based on the information, mainly data on the financial statements, with certain limitations; 2 is due to inflation or the impact of various causal factors and accounting conversion methods change, so that the financial statements of different periods may not be comparable.

Books:
1. Gupta Shashi k., Financial management, New Delhi, Kalyani Publishers, 2010(Revised Edition). 2. Pandey I.M., Financial management, Vikash Publication Housing Pvt.ltd., 2009. 3. Jones H. Martin, Financial statements Analysis, PHI Publications Pvt.Ltd.,2009.

Web References:
1. 2. 3. 4. www.accountingform management.com www.investopedia.com en.wikipedia.org www.oppapers.com