Financial Statement Ojm1

05/05/09 Newly Promoted officers
Principal Of lending
• Safety
• Liquidity
• Profitability
• The Purpose of Loan
• Security
• Concentration Risk
• Govt. and RBI policy

CASH
+ COST
RECEIVABLES RAW
MATERIAL
+ COLLECTION + COSTS
COSTS
FINISHED GOODS STOCKS – IN –

PROCESS
+ SELLING /
ADMINISTRATIVE + COST
EXPENSES

ASSESSING FINANCIAL HEALTH
OF A FIRM
•Profitability of operations
•Liquidity
•Ability to service & redeem debt
•Quality of management
•Capital Market perceptions

Indian GAAP
What is financial Statement?
 All relevant Financial information of a
business enterprise, presented in
structured manner and in a form easy to
understand , are called financial
statements.
 It is public communication of its financial
performance.
 Mainly quantitative details

It is designed to give “A FAIR VIEW”not

“ABSOLUTE VIEW”

Indian GAAP
 A set of financial Statement includes
the following:
 Profit and Loss A/C for a period,
generally for a year.
 Balance Sheet at the end of such
period
 Cash Flow Statements
 Explanatory schedule or notes
 EPS
Trading & Manufacturing
It is an account which shows the result

of buying, manufacturing and selling of
goods. It summaries all the
transactions occurred during
trading/manufacturing period which
have direct relationship to the goods
dealt it by the business.

Profit and Loss account
A P/L account gives information about
operation of the Enterprise
It contains Manufacturing or trading A/C
depending upon activity of the Company
No prescribed Format
Major items of P/L accounts
Sale is the most important item of revenue
in P/L account
Depreciation is one of the most important
items of cost of production. It is the
notional expense arising on account of
wear and tear of e Fixed Assets employed
in Production Newly Promoted officers
05/05/09
Treatment of Important Items
Interest cost
Expenses relating to previous year
Events happening after balance sheet
date viz. fire , earthquake, natural disaster
are loss to organization and proper
provision should be made with
retrospective date.
Contingent liability and their probable
crystallization

Important Items
Inter-corporate Deposit and Loans
Leasehold Assets
Revaluation Reserve
Borrowal more than the Capital + free
reserve in the company

Balance Sheet
 B/S is a summary of the Asset and Liabilities of
an enterprise at the close of an accounting
period.
Asset: Assets are considered to be what a
business organisation owns. There are the tools
with the help of which income in business is
earned and these are required by incurring cost.
Liability: The liability are what the business
organisation owes. These are the resources
which the business mobilises to acquire assets
for earning income. Like Assets liability are also
long term and Short Term in nature.
Balance Sheet
Liability are the source of fund

Assets are uses of fund
Liability are total funds of the business
which includes owners fund and borrowed
fund and are invested in assets

Balance Sheet
Liabilities Assets
Net worth 100 Fixed assets 1100
Long term liabilities 200 Current assets 400

Current liabilities 1200
Balance sheet Total 1500 1500

LIABILITIES ASSETS
CURRENT CURRENT
TERM FIXED
CAPITAL
THIS IS
OWNED BY
THIS IS OWED BY THE
THE COMPANY COMPANY
Liability Asset
Entrepreneurs Fund Fixed Asset
Fixed Liabilities Current Asset
Current Liabilities
TOTAL TOTAL
ABC Ltd.
As on 31-3-2005
(Amount in Rs.)
Liabilities Assets
Entrepreneur's 6,120 Land buld. Etc 17,500
capital
Long -Term 14,000

Loan Raw Materials 6,920
Bank O/D 4,300
TOTAL 24,420 TOTAL 24,420

Liability
Capital Issued
Entrepreneurs Fund
Authorised capital
Subscribed capital
Revenue Reserve
Reserves Paid up capital

Liability
Entrepreneurs Fund
Long Term loan

Fixed Liabilities
Debentures

Liability
Entrepreneurs Fund
Fixed Liabilities
Cash Credit
Current Liabilities
Overdraft
Trade Credit
Asset
Land Fixed Asset

Building
Plant & Machinery
Motor Vehicles
Fixture
Goodwill
How F/A are Valued? - Cost Less Depreciation

Cash in hand Asset
Marketable Quick Fixed Asset

securities Asset
Receivables
Current Asset
Deposits Advances
Prepaid
To staff To suppliers
expenses
05/05/09 Inventories
Newly Promoted officers
Asset
Quick Fixed Asset

Asset
Current Asset
Finished
Work in
product
progress
Raw
05/05/09material Inventories
TABLE OF ASSETS
Third group “ INVESTMENT”
Eg. Investment in Govt. or trust

securities , shares, debentures, bonds
(quoted and unquoted), immovable
properties and in the capital of a
partnership firm.

Analysis of Balance sheet
To understand financial structure of an

ongoing enterprise.
By knowing the way the assets (current &

Fixed) are financed by own fund and outside
05/05/09 liability. Newly Promoted officers
• Is the enterprise solvent?
• Is the enterprise liquid?

Analysis of Balance Sheet
Interest cost
date viz. fire , earthquake,, natural disaster
retrospective date.
crystallization

Balance Sheet
It depicts the most important financial

statement prepared annually. It depicts the
assets and liabilities at a stated point of time
e.g. 31st march to find exact financial position
of a business concern on a given date

Balance Sheet
It is divided into two major Assets and Liability
It is Snap shot of the running Train
Assets Liability
Fixed asset, Fixed Current liability
asset, current asset Term Liability
Other Non-current The Net Worth

Assets, Intangibles Contingent
liability
Balance sheet-Traditional layout
Assets Liabilities
Things owned Amounts owned
By the business By the business

Balance sheet-source and Uses
concept
Assets Liabilities
Uses Sources
where money spent Where money obtained

Balance Sheet
A most useful way of looking at the financial
affairs of the business is to consider its liabilities
as sources and assets as uses of funds.
The two sides are merely two different aspects

of the same sum of money i.e. where the money
came from and where it went to.

The Terms of Balance Sheet
Four terms in the balance sheet
2. Total assets
3. Capital employed
4. Net worth
5. Working capital

Total assets
(TA)
TA =FA +CA
1000= 600+400 (SAY)
However, very often we use the term ‘
total asset’ when we are really more
interested in right hand side where the
definition more properly is
TA =OF + LTL +CL (As in the next slide)
1000=450+250+300
We must able to see that exists between
this a and other balance sheet
05/05/09
definitions Newly Promoted officers
Total Asset (TA)
FA OF(Owners fund)
600 450
LTL
CA
250
CL
400 300
1000 1000
Current Liability
Borrowing from Banks
Trade Creditors
Early installments of of long-term liabilities
Other current liabilities
Charges and interest due but not paid
Deposits from Sales agents, dealers,
All long term deposits to be paid in one
year

Term liability
Debentures not payable within 1 year
Redeemable preference shares
Term loans
Deferred payment Credits
Terms Loans repayable after 12 months

The Net worth
The owned fund or the capital fund of the
borrowing concern. These fund comprise;
1. The paid up capital
2. The retained profit kept in the form of
general reserve, development rebate
3. Preference share repayable after 12
years
4. Credit Balance in P/L account
5. However, Specific purpose reserve are
treated as Current Liabilities e.g. provision
for bad and doubtful
05/05/09
debt, deprecation are
treated as Current asset
Contingent liability
It is those liabilities which do not exist at
the time of balance sheet but may arise in
future. For example , Arrears of
cumulative dividend, Gratuity Scheme of
of the staff , liability scheme as a Surety ,
etc. They are shown as a footnote to the
balance sheet.
Banker to take adequate note of these.

Current Assets
These are the assets which changes their form
in a short period and are exchanged for Cash
Circulating Assets
EXAMPLES
Cash and Bank balance
Investment in Govt. securities

Receivables and Book Debt
Fixed deposit in the Bank
RM, SIP,Finished Goods
Money receivable from contracted
sale of fixed asset during next 12
Months
Principal Of lending
• Safety
• Liquidity
• Profitability
• The Purpose of Loan
• Security
• Concentration Risk
• Govt. and RBI policy

ASSESSING FINANCIAL HEALTH
OF A FIRM
•Profitability of operations
•Liquidity
•Ability to service & redeem debt
•Quality of management
•Capital Market perceptions

Indian GAAP

 All relevant Financial information of a
business enterprise, presented in
structured manner and in a form easy to
understand , are called financial
statements.
 It is public communication of its financial
performance.
 Mainly quantitative details

It is designed to give “A FAIR VIEW”not

“ABSOLUTE VIEW”

Indian GAAP
 A set of financial Statement includes
the following:
 Profit and Loss A/C for a period,
generally for a year
 Balance Sheet at the end of such
period
 Cash Flow Statements
 Explanatory schedule or notes
 EPS
Trading & Manufacturing
It is an account which shows the result

of buying , manufacturing and selling
of goods. It summaries all the
transactions occurred during
trading/manufacturing period which
have direct relationship to the goods
dealt it by the business.

Profit and Loss account
A P/L account gives information about
operation of the Enterprise
It contains Manufacturing or trading A/C
depending upon activity of the Company
No prescribed Format
Major items of P/L accounts
Sale is the most important item of revenue in
P/L account
Depreciation is one of the most important
items of cost of production. It is the notional
expense arising on account of wear and tear
of e Fixed Assets employed in Production
Treatment of Important Items
Interest cost
date viz. fire , earthquake, natural disaster
retrospective date.
crystallization

Important Items
Inter-corporate Deposit and Loans
Leasehold Assets
Revaluation Reserve
Borrowal more than the Capital + free
reserve in the company

Balance Sheet
 B/S is a summary of the Asset and Liabilities of
an enterprise at the close of an accounting
period.
Asset: Assets are considered to be what a
business organisation owns. There are the tools
with the help of which income in business is
earned and these are required by incurring cost.
Liability: The liability are what the business
organisation owes. These are the resources
which the business mobilises to acquire assets
for earning income. Like Assets liability are also
long term and Short Term in nature.
Balance Sheet
Liability are the source of fund

Assets are uses of fund
Liability are total funds of the business
which includes owners fund and borrowed
fund and are invested in assets

Balance Sheet
Liabilities Assets
Net worth 100 Fixed assets 1100
Long term liabilities 200 Current assets 400

Current liabilities 1200
Balance sheet Total 1500 1500

LIABILITIES ASSETS
CURRENT CURRENT
TERM FIXED
CAPITAL
THIS IS
OWNED BY
THIS IS OWED BY THE
THE COMPANY COMPANY
Liability Asset
Entrepreneurs Fund Fixed Asset
Fixed Liabilities Current Asset
Current Liabilities
TOTAL TOTAL
ABC Ltd.
As on 31-3-2005
(Amount in Rs.)
Liabilities Assets
Entrepreneur's 6,120 Land buld. Etc 17,500
capital
Long -Term 14,000

Loan Raw Materials 6,920
Bank O/D 4,300
TOTAL 24,420 TOTAL 24,420

Liability
Capital Issued
Entrepreneurs Fund
Authorised capital
Subscribed capital
Revenue Reserve
Reserves Paid up capital

Liability
Entrepreneurs Fund
Long Term loan

Fixed Liabilities
Debentures

Liability
Entrepreneurs Fund
Fixed Liabilities
Cash Credit
Current Liabilities
Overdraft
Trade Credit
Asset
Land Fixed Asset

Building
Plant & Machinery
Motor Vehicles
Fixture
Goodwill
How F/A are Valued? - Cost Less Depreciation

Cash in hand Asset
Marketable Quick Fixed Asset

securities Asset
Receivables
Current Asset
Deposits Advances
Prepaid
To staff To suppliers
expenses
05/05/09 Inventories
Asset
Quick Fixed Asset

Asset
Current Asset
Finished
Work in
product
progress
Raw
05/05/09material Inventories
TABLE OF ASSETS
Third group “ INVESTMENT”
Eg. Investment in Govt. or trust

securities , shares, debentures, bonds
(quoted and unquoted), immovable
properties and in the capital of a
partnership firm.

To understand financial structure of an

ongoing enterprise.
By knowing the way the assets (current &

Fixed) are financed by own fund and outside
05/05/09 liability. Newly Promoted officers
• Is the enterprise solvent?
• Is the enterprise liquid?

Analysis of Balance Sheet
Interest cost
date viz. fire , earthquake,, natural disaster
retrospective date.
crystallization
Balance Sheet
It depicts the most important financial

statement prepared annually. It depicts the
assets and liabilities at a stated point of time
e.g. 31st march to find exact financial position
of a business concern on a given date

Balance Sheet
It is divided into two major Assets and Liability
It is Snap shot of the running Train
Assets Liability
Fixed asset, Fixed Current liability
asset, current asset Term Liability
Other Non-current The Net Worth

Assets, Intangibles Contingent
liability
Balance sheet-Traditional layout
Assets Liabilities
Things owned Amounts owned
By the business By the business

Balance sheet-source and Uses
concept
Assets Liabilities
Uses Sources
where money spent Where money obtained

Balance Sheet
A most useful way of looking at the financial
affairs of the business is to consider its liabilities
as sources and assets as uses of funds.
The two sides are merely two different aspects

of the same sum of money i.e. where the money
came from and where it went to.

The Terms of Balance Sheet
Four terms in the balance sheet
2. Total assets
3. Capital employed
4. Net worth
5. Working capital

Total assets
(TA)
TA =FA +CA
1000= 600+400 (SAY)
However, very often we use the term ‘
total asset’ when we are really more
interested in right hand side where the
definition more properly is
TA =OF + LTL +CL (As in the next slide)
1000=450+250+300
We must able to see that exists between
this a and other balance sheet
05/05/09
definitions Newly Promoted officers
Total Asset (TA)
FA OF(Owners fund)
600 450
LTL
CA
250
CL
400 300
1000 1000
Current Liability
Borrowing from Banks
Trade Creditors
Early installments of of long-
term liabilities
Other current liabilities

Term liability
Debentures
Redeemable preference shares
Term loans
Deferred payment Credits

The Net worth
The owned fund or the capital fund of the
borrowing concern. These fund comprise;
1. The paid up capital
2. The retained profit kept in the form of
general reserve, development rebate
3. Preference share repayable after 12
years
4. Credit Balance in P/L account
5. However, Specific purpose reserve are
treated as Current Liabilities e.g. provision
for bad and doubtful
05/05/09
debt, deprecation are
treated as Current asset
Contingent liability
It is those liabilities which do not exist at
the time of balance sheet but may arise in
future. For example , Arrears of
cumulative dividend, Gratuity Scheme of
of the staff , liability scheme as a Surety ,
etc. They are shown as a footnote to the
balance sheet.
Banker to take adequate note of these.

Current Assets
These are the assets which changes their form
in a short period and are exchanged for Cash
Circulating Assets
EXAMPLES
Cash and Bank balance
Investment in Govt. securities

Receivables and Book Debt
Fixed deposit in the Bank
RM, SIP,Finished Goods
Money receivable from contracted
sale of fixed asset during next 12
Current Assets-2
Cash and bank balance
Marketable investments and fixed
deposits
Book debts and bills receivable
inventory

Fixed Assets
Land and buildings

Plant and Machinery
Fixtures
Furniture
Automobiles
What is Gross Block:-Represents original
cost of fixed Asset i.e land , building, Plant
and Machinery and other fixed asset
Intangible Assets
Fictitious Assets
Goodwill
Patents
Trade Marks
Designs
Preliminary and formation expenses
Loss incurred by the organisation
Formulae

Obervations
Diversion of funds:
If fixed asst is financed by short term
funds.
Guidelines of Management of funds:
4. Fixed assets are to be financed by
NW+LTL.
5. CA to be financed by CL.
6. Intangible and fictitious asset to be
deducted from NW.
Some situations and guidelines
Increase in sales.
Decrease in sales
Increase in profits
Decrease in profits
Increase in debtors
Decrease in debtors
Increase in creditors

Increase in capital
Decrease in fixed assets
Increase in inventory
Decrease in provisions
Ensure depreciation has been charged.
Intangible asset to be reduced.
Reduction of term loan should not be out
of working capital fund.

Jargons
CAPITALISATION
Over Capilalisation: What it indicates?
Capital does not produce the desired result.
Earning capacity is low.
UNDER CAPITALISATION: What it indicates?
Rate of earning is exceptionally high.
 Capital Gearing: A system adopted by every
organisation in the process of capitalisation.
E.g. Share or debebture

Over Capitalization-indications
Payment of poor dividend
Interest. On borrowing not paid.
The provision for depreciation not done.
Profit could not be ploughed back.

Under Capitalisation-indications

Limitation of Financial
Statements
Date of balance sheet
Principle of accounting
Valuation of Asset
Quality of assets
Contingent liabilities
Window Dressing

Ratio Analysis
Ratios show in arithmetic terms the

relationship between figures drawn from
the financial statements. Ratio analysis is
useful only when figures selected for
comparison or for establishing the ratio
are relevant to each other and have
meaningful relation.
More meaningful when compared for
number of consecutive years.

Ratio Analysis
“Ratio are not end in themselves ,

rather , on a selective basis , they
may help answer significant
questions”
Erich A. Helfert

Liquidity Ratio
A banker is related to liquidity

position of the borrowing concern
which is assessed by the following
ratio. Sound Principle of financing is
to meet the long term requirements
from long term sources and short
term requirement from short term
sources. In other word CA should
always greater than the CL.

Liquidity Ratio
The current Ratio= CA/ CL.
Acid Test Ratio Or Quick Ratio=

CA-INVENTARY/ CL- Overdraft or CC

Leverage Ratio
/ Capitalization Ratio
Solvency Ratio=Total outside Liabilities/
TNW
Debt-Equity Ratio= Debt / Equity
Capital Gearing Ratio=
equity share capital Reserve/ Pref. Share
capital + debentures

Debt Equity Ratio
If it goes wrong , Company has a real long term
problem; All debt in the balance sheet gives third
parties legal claim on the company.
Debt increases both profit and risk. It is the job
of the management to maintain a proper balance
between the two.
Well managed ratio helps us from Major default
by the customer of our unit or general
worsening of business conditions. It is prudent
for the banker to ask customer to some liquidity.

Profitability Ratios
Gross profit Ratio=
Gross profit/Sales*100
Operating Ratio
(cost of sales+other operating
expenses)*100 /Sales
Expenses Ratio
Sell. And other expenses*100/Sales
Return on Capital Employed
= Profit before tax/Capital employed *100
Debt Service Coverage Ratio
DSCR=
Nominator=Profit after
Tax+Depreciation+Interest on term borrowing
and deferred credit
Denominator= Repayment (Ins. Term
borrowing+interest borrowing and deferred
credit)
It indicates capability of the unit to generate
suff. Cash accruals to pay of term loan and
interest thereon.
It is extensively used in the appraisal of long-
term credit facilities provided by DFIs and
banks
If Interest of term loan is not added back, it is
Year 1 2 3 4 5 6 7 Tota
l
Annual cash 150 200 225 250 250 250 300 1600
accrual
Annual 25 50 125 125 125 125 25 600
Repayment
obligation
DSCR 6 4 1.8 1.8 2 2 12 2.67
If year wise average is taken out it will be 4.23 not 2.67 as in

above case. So Average Gross DSCR is better which indicates
Better picture.
Activity Ratios
Inventory Turnover
= Cost of Goods sold/ Average inventory
Receivable Turnover
=Net sales / average receivable
Payable Turnover
Net Purchases/ Payables or Reverse
Current Asset turnover
Cost of sales/ Current assets
Fixed Asset Turnover Ratio
=Sales / Fixed Asset
Limitation of Ratio Analysis
Must have practical knowledge and

experience
Not end in themselves but they are means
to achieve a particular end
All ratio should be considered and
decision taken together
Based on reliability of DATA
Comparative study should be among
uniform units
Limitation of Ratio Analysis-2
 Utility is dependent upon method of
presentation
 Inter firm analysis should never be
undertaken in the concern which is not
associated or comparable
 Ratio may make the comparative study
complicated and misleading on the
account of changes in Price-level
 Reality behind the relationship should be
understood
Current Assets-2
Cash and bank balance
Marketable investments and fixed
deposits
Book debts and bills receivable
inventory

Fixed Assets
Land and buildings

Plant and Machinery
Fixtures
Furniture
Automobiles
What is Gross Block:-Represents original
cost of fixed Asset i.e land , building, Plant
and Machinery and other fixed asset

Intangible Assets
Fictitious Assets
Goodwill
Patents
Trade Marks
Designs
Preliminary and formation expenses
Loss incurred by the organisation
Formulae

Observations
Diversion of funds:
If fixed asst is financed by short term
funds.
Guidelines of Management of funds:
4. Fixed assets are to be financed by
NW+LTL.
5. CA to be financed by CL.
6. Intangible and fictitious asset to be
deducted from NW.

Increase in sales.
Decrease in sales
Increase in profits
Decrease in profits
Increase in debtors
Decrease in debtors
Increase in creditors

Increase in capital
Decrease in fixed assets
Increase in inventory
Decrease in provisions
Ensure depreciation has been charged.
Intangible asset to be reduced.
Reduction of term loan should not be out
of working capital fund.

Jargons
CAPITALISATION
Over Capilalisation: What it indicates?
Capital does not produce the desired result.
Earning capacity is low.
UNDER CAPITALISATION: What it indicates?
Rate of earning is exceptionally high.
 Capital Gearing: A system adopted by every
organisation in the process of capitalisation.
E.g. Share or debebture

Over Capitalization-indications

Under Capitalisation-indications

Limitation of Financial
Statements
Date of balance sheet
Principle of accounting
Valuation of Asset
Quality of assets
Contingent liabilities
Window Dressing

Ratio Analysis
Ratios show in arithmetic terms the

relationship between figures drawn from
the financial statements. Ratio analysis is
useful only when figures selected for
comparison or for establishing the ratio
are relevant to each other and have
meaningful relation.
More meaningful when compared for
number of consecutive years.

Ratio Analysis
“Ratio are not end in themselves ,

rather , on a selective basis , they
may help answer significant
questions”
Erich A. Helfert

Liquidity Ratio
A banker is related to liquidity position of

the borrowing concern which is assessed
by the following ratio. Sound Principle of
financing is to meet the long term
requirements from long term sources and
short term requirement from short term
sources. In other word CA should always
greater than the CL.

Liquidity Ratio
The current Ratio= CA/ CL.
Acid Test Ratio Or Quick Ratio=

CA-INVENTARY/ CL- Overdraft or CC

Leverage Ratio
/ Capitalization Ratio
Solvency Ratio=Total outside Liabilities/
TNW
Debt-Equity Ratio= Debt / Equity
Capital Gearing Ratio=
equity share capital Reserve/ Pref. Share
capital + debentures

Debt Equity Ratio
If it goes wrong , Company has a real long term
problem; All debt in the balance sheet gives third
parties legal claim on the company.
Debt increases both profit and risk. It is the job
of the management to maintain a proper balance
between the two.
Well managed ratio helps us from Major default
by the customer of our unit or general
worsening of business conditions. It is prudent
for the banker to ask customer to some liquidity.

Profitability Ratios
Gross profit Ratio=

Gross profit/Sales*100
Operating Ratio
(cost of sales+other operating expenses)*100
/Sales
Expenses Ratio
Sell. And other expenses*100/Sales
Return on Capital Employed
= Profit before tax/Capital employed *100

Debt Service Coverage Ratio
DSCR=
Nominator=Profit after
Tax+Depreciation+Interest on term borrowing
and deferred credit
Denominator= Repayment (Ins. Term
borrowing+interest borrowing and deferred
credit)
It indicates capability of the unit to generate
suff. Cash accruals to pay of term loan and
interest thereon.
It is extensively used in the appraisal of long-
term credit facilities provided by DFIs and
banks
If Interest of term loan is not added back, it is
Year 1 2 3 4T 5 6 7
otal
Annual cash 150 200 225 250 250 250 300 1
accrual 600
Annual 25 50 125 125 125 125 25 600
Repayment
obligation
DSCR 6 4 1.8 1.8 2 2 12 2
.67
If year wise average is taken out it will be 4.23 not 2.67 as in
above case. So Average Gross DSCR is better which indicates
Better picture.
Activity Ratios
Inventory Turnover
= Cost of Goods sold/ Average inventory
Receivable Turnover
=Net sales / average receivable
Payable Turnover
Net Purchases/ Payables or Reverse
Current Asset turnover
Cost of sales/ Current assets
Fixed Asset Turnover Ratio
=Sales / Fixed Asset
Limitation of Ratio Analysis
Must have practical knowledge and
experience
Not end in themselves but they are means
to achieve a particular end
All ratio should be considered and
decision taken together
Based on reliability of DATA
Comparative study should be among
uniform units

Limitation of Ratio Analysis-2
 Utility is dependent upon method of presentation

 Inter firm analysis should never be undertaken in
the concern which is not associated or
comparable
 Ratio may make the comparative study
complicated and misleading on the account of
changes in Price-level
 Reality behind the relationship should be
understood


Financial Statement Ojm1

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05/05/09 Newly Promoted officers

05/05/09 Newly Promoted officers

FINISHED GOODS STOCKS – IN –

05/05/09 Newly Promoted officers

•Ability to service & redeem debt

•Capital Market perceptions

05/05/09 Newly Promoted officers

It is designed to give “A FAIR VIEW”not

05/05/09 Newly Promoted officers

It is an account which shows the result

05/05/09 Newly Promoted officers

05/05/09 Newly Promoted officers

05/05/09 Newly Promoted officers

Liability are the source of fund

05/05/09 Newly Promoted officers

Long term liabilities 200 Current assets 400

Balance sheet Total 1500 1500

05/05/09 Newly Promoted officers

Entrepreneurs Fund Fixed Asset

Fixed Liabilities Current Asset

Long -Term 14,000

Bank O/D 4,300

TOTAL 24,420 TOTAL 24,420

05/05/09 Newly Promoted officers

Long Term loan

05/05/09 Newly Promoted officers

Land Fixed Asset

How F/A are Valued? - Cost Less Depreciation

Marketable Quick Fixed Asset

Quick Fixed Asset

Third group “ INVESTMENT”

Eg. Investment in Govt. or trust

05/05/09 Newly Promoted officers

To understand financial structure of an

By knowing the way the assets (current &

• Is the enterprise solvent?

• Is the enterprise liquid?

05/05/09 Newly Promoted officers

05/05/09 Newly Promoted officers

It depicts the most important financial

05/05/09 Newly Promoted officers

Other Non-current The Net Worth

Things owned Amounts owned

By the business By the business

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where money spent Where money obtained

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The two sides are merely two different aspects

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Investment in Govt. securities

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•Ability to service & redeem debt

•Capital Market perceptions

What is financial Statement?

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It is designed to give “A FAIR VIEW”not

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It is an account which shows the result

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