INDUSTRY PROFILE The „Indian dairy industry has made rapid progress since independence .a large number of modern milk and milk products factories have been established. These organized dairies have been successfully engaged in the routine commercial production of pasteurized milk and milk products.India is the world‟s largest milk producer that is certified by the „international dairy industry‟. industry‟. Dairy is a place where handling of milk and milk products is done and technology refers to the application of scientific knowledge for practical purpose. Dairy technology has been defined as that branch of dairy science, which deals with the processing of milk and manufacture of milk products on an industrial scale. In India, dairying has been practiced as a rural cottage industry since the remote past. Semicommercial dairying started with the establishment of military dairy farms and co-operative milk unions throughout the country towards the end of the nineteenth century. During the earlier years, each household household in those countries maintained its „family cow‟ or secured milk from its neighbor who supplied those living closed by. As the urban population increased, fewer households could keep cow for private use. The high cost of milk production, problems of sanitation etc, restricted the practice and gradually the family cow in the city was eliminated and city cattle were all sent back to the rural areas. Gradually farmers within easy driving distance began delivering milk over regular routes in the cities. This was the beginning of fluid milk-sheds which surround the large cities of today. Prior to the 1850s most milk was necessarily produced within a short distance of the place of consumption because of lack of suitable means of transportation and refrigeration. The Indian dairy industry has made rapid progress since Independence. A large number of modern milk plants and products factories have since been established. These organizes dairies have been successfully engaged in the routine commercial production of pasteurized bottle milk and various Western and Indian dairy products. With modern knowledge of the protection of milk during transportation, it became possible to locate dairies where land was less expensive and crops could be grown more economically.
In India, the market milk technology may be considered to have commenced in 1950, with the functioning of the Central Dairy of Aarey Milk Colony and milk product technology in 1956 with the establishment of AMUL Dairy, Anand. The industry is still in its infancy and barely 10% of our total milk production The most valuable resources that a dairy business can have are reliable and productive workers. Today‟s tight labor market means that workers have many employment choices. Dairy producers need to do all they can to keep their best employees and attract other excellent workers to their team.
COMPANY PROFILE Milma is the popular name given to Kerala Co-operative Milk Marketing Federation (KCMMF).Milma started its operation in 1980 with its head office at Thiruvananthapuram. It was started under the Indo-Swiss project. The project was launched in 1963 on the basis of a bilateral agreement executed between the Swiss Confederation and the Government of India. The project has made great strides in the improvement of livestock farming in the state. One of them is the development of Swiss Brown, a cross breed suited for the states conditions. The project is now managed by the Kerala Livestock Development and Milk Marketing Board. It main motive was to implement the Operation Flood programme started by the National Diary Development Board (NDDB) in Kerala. The project impact was so widespread that close to about 83%of the adult cattle to the state got converted to the new breed- Sunandini, the milk production increased by over ten times and the availability of milk increased by over 7 times with over a million families dependant on milk production. The project has succeeded in integrating better technology and management to the traditional small holder production system. It also demonstrated how the high productive, semi stall fed cows led to a spontaneous decline in in the total bovine population of the state from 34.6 lakh in 1977 to 21.86 lakh in 2003 when the total bovine population of India went through an upsurge. This contributed immensely to environmental en vironmental sustainability. By demonstrating a growth model for productivity enhancement, the productivity enhancement, the project not only impacted the million small livestock in Kerala, but also millions outside the state. The project demonstrated revolutionary institutional changes beginning with the Indo Swiss project of Kerala, an autonomous institution under the government of Kerala Livestock
Development Board, with the formidable dairy cooperative System under the Kerala Cooperative Milk Marketing Federation (MILMA), under the able guidance of its first managing director S. Nagarajan IAS, spun off as successful an independent entity. PALAKKAD DAIRY Milma Palakkad dairy was located in Kalepully Palakkad. Palakkad dairy is one of the three dairies under Malabar Regional Cooperative Milk producers union limited. This diary came into existences in 1967 as Palakkad Cooperative milk supply union limited under the Madras Cooperative societies act. But in 1978 KLD and MM Board had taken over this dairy and it was under their control until 1983. In 1983 Kerala cooperative milk marketing federation limited taken over this dairy from KLD and MM Board. Milma milk producers union limited taken over this dairy and it started functioning very smoothly and achieved success is each and every step under this dairy two milk chilling plants are also functioning one at Attapady, and other is in Pattambi. The name Milma represents:
2,702 primary milk co-operative societies
7.78 lakhs farmer members
Three Regional Co-operative Milk Producers' Union
Eleven Dairies capable of handling 9.90 lakhs litres of milk per day
Thirteen Milk Chilling Centers
Two Cattle Feed Plants with cumulative capacity of 600MT per day
One Milk Powder Plant of 10MT per day capacity
A well established Training Centre
5,200 retail outlets
Over 32,000 people working either directly or indirectly for the functioning of Milma.
MISSION
“FARMERS PROSPERITY THROUGH CONSUMER SATISFACTION”
VISSION
“To bring about socio economic development of dairy farmers on a sustainable basis and providing quality of milk and milk products to the customers at a reasonable price”
PUNCHLINE “THE GOODNESS KERALA WAKES UP TO”
STRATEGY
The Motto of Co-operation, Co-operation, “of the people, by the people and for the people" is the foundation of the "three tier system" followed by the organization. At the village level Milma have the Village Milk Co-operative Societies which have the local milk producers as its members. These Village Co-operatives unite at the Regional level and form Regional Co-operative Milk Producers' Unions. These Unions are federated at the State level to form State Federation namely Kerala Co-operative Milk Marketing Federation (KCMMF). ASSOCIATES
Milma is in constant touch with other Organizations in this sector. It is only through this active exchange that Milma grew from a small dairy co-operative to the position it holds in Kerala today. Chief associates are:NATIONAL DAIRY DEVELOPMENT BOARD
NDDB, under Dr. V Kurien's guidance set up KCMMF in 1980. Ever since then, there has been a very close co-operation between NDDB and the Federation. NDDB are the originators of the Operation Flood Programme and have been our funding agent for the Operation Flood Projects in Kerala. AMUL
The Dairy Co-operatives of Gujarat have been the inspiration for the development of such a vast network of dairy co-operatives in Kerala. Among the co-operatives in Gujarat, the Kaira District
Co-operative Milk Producers' Unions (Amul) is the first in this sector. Our Co-operatives are called "Anand Pattern Co-operative Societies" following the illustrious lineage of "Amul". GOVERNMENT OF KERALA
The Phenomenal success of the Dairy Co-operatives in Kerala could not have been achieved, without the foundation of animal husbandry husband ry activities, led by the Animal Husbandry Department, Dairy Development Department and Kerala Livestock Development Board, of the Government of Kerala. QUALITY POLICY
MRCMPU Ltd is committed to provide consistently safe hygienic and healthy milk and milk products to achieve and enhance consumer satisfaction. Milma shall strive to excel in the market leadership by achieving quality and economy in all our activities adopting quality management system. Milma shall strive scientific approach to ensure the continual improvement in personal and in own activities that increase value and status of its organization and its associates. OBJECTIVES OF MILMA
• To channelize marketable surplus milk from the rural areas to urban deficit areas to maximize the returns to the producers and provide quality milk and milk products to the consumers. • To carryout activities for promoting production, procurement, processing and marketing of milk and milk products for economic development of farming community. • To build build up a viable dairy industry In the th e state. • To provide constant market and stable price to the dairy farmers for their produce PRODUCT PROFILE OF MILMA
Milma has a range of products. A marketing chain consisting of nearly 4000 retail outlets, across the state ensures availability availability of Milma‟s products to consumers. Milma with its motto “Your health is our concern” has become synonymous with assured quality of milk and milk products. Milma‟s spectrums of products of products adhere to the PFA rules and are released for distribution only after stringent quality checks. Their products are;
• Milk • Ice creams • Curd • Fat products • Beverages • Sweets 1.MILK
A.PASTEURIED MILK Milma pasteurized Vitamin A enriched milk comes in 3 varieties
Fat free milk
Toned milk which contains 3.0% fat and 8.5% SNF
Standardized milk which contains 4.5% fat and 9.0 SNF
Conveniently packed in 500 ml and 1 liter sachets, the fat content range of Milma‟ Milma‟ss milk has made it the popular health drink of young and old alike. B. STERILISED FLAVOURED SKIMMED MILK Prepared from the pasteurized milk and sweetened with sugar cane and flavoured with cardamom. It is very tasty in chilled condition. 2. ICE CREAMS
Milma ice cream is available in a range of lip smacking flavours : Vanilla, Chocolate, Mango, Strawberry, and Fruit & Nut. 3. CURD
It is a subsidiary product of Milma which is produced in dairies. Curd is an important milk product produced from milk by the addition of cacture prepared in the laboratory to the skimmed
milk. Milma curd does not contain much fat in it but it contains 10.2 % SNF in it. The product is generally marketed in 500 gram packets through a chain of wholesale and retail dealers. Each packet of curd is sold to the wholesale and retail dealers. The maximum retail price is Rs.14.50 per packet. SAMBHARAM: Sambharam (Buttermilk) contains 4.5 percent total solids and natural flavour extracts. Ideal as thirst quencher during hot season. Prepared under hygienic conditions using fully natural processes. It is available in 200 ml sachets. LASSI It is a sweetened and flavoured product p roduct prepared from curd. It is available in 20 0ml pack. 4. FAT PRODUCTS
A. GHEE Milma produces good quality, pure ghee from butter or cream at all dairies. B.BUTTER Milma butter prepared from the cream of milk contains 81 %fat and less than 15% water 5. BEVERAGES
A.TETRA PACK FLAVOURED MILK Milma offers a range of flavoured health drinks in hygienic tetra packs. Cardamom milk has already captured the market and are available at all Milma outlets. B. REFRESH In addition to health drinks Milma also has a Mango drink in the market. 6. SWEETS
A. PEDA
An indigenous milk product manufactured by evaporating water content from a whole sale cow‟s milk. B. CREAM ROLL Mixtures of tasty ice cream and fruity encircled with oven fresh sponge cakes.
FUNCTIONAL DEPARTMENTS 1. Quality control/ assurance department:
Quality control department is headed by Quality Control Officer assisted by Technical Superintendent. They check incoming and outgoing milk. Responsibilities:
Checking the quality of raw milk.
Determine the Fat and SNF level in the raw milk.
Checking the quality of milk at different sit permits during the production processes.
Ensuring quality of packed milk.
To ensure that the supplied milk satisfies the conditions stated in process of food
adulteration act, Package commodities act and Weight and measurement. 2. Production Department:
This department deals with the production activities. The production department is headed by Technical officer (dairy). 3. Technical Department:
There is an engineering department to maintain the machines and other equipment installed for the production process. This department is headed by Dairy Engineer. They are deals with machinery maintenance, machinery operation, Vehicle scheduling, electricity, water and other statutory requirements of the company. Responsibilities:
Inspection of machineries for damage.
Repairs and maintenance of installed machines
Ordering for the new machines and replacement replac ement of parts.
Refrigerator and boiler maintenance
4. Marketing Department:
MRCMPU has a centralized marketing department for the whole region headed by marketing manager at head office and dairy level marketing department in each unit is headed by marketing manager at dairy. Responsibilities
New product Development.
Forecasting of sales
Development and Execution of market development activities.
Developing of marketing strategies.
Brand management
Packaging and product development
Coordinate promotional activities
5. Finance and Accounts Department:
It is centralized department situated in the diary and headed by Assistant Finance Manager. This department deals with financial and accounting a ctivities of the diary. Responsibilities:
Calculation and charging of depreciation to fixed asset
Preparation of P&L A/c and Balance sheet
Making payment to workers
Capital Management Schemes for primary co-operative societies
Liaison with government for availing government financial assistance
6. Human Resources Department:
The unit level Human Resource Department is headed by HR Manager. Activities like recruitment of permanent staff training and development planning etc centralized in the P& A at the head office. This department deals with accounting matters related to ranging from recruitment to retention. Responsibilities:
Recruitment and Selection of employees
Providing training and development programs.
Fixing compensation and other benefits.
Finalize long term wage settlement,bonus
Taking care of employee welfare activities
7. MIS and Systems Department:
Computers are widely used for information processing and other office automation functions. Computer system are installed in in diary for various purpose such as Milk billing, Financial Accounting, Raw Milk Reception and Dispatch, Stores, Payroll, Plant Operation, Marketing etc. All Diaries are interconnected with Management Information System (MIS).
NEED FOR THE THE STUDY
OBJECTIVES OF THE STUDY Primary objectives
To analyze the financial position of Milma Palakkad
Secondary objective
To know the ability of the firm to meet its current obligations
To highlight the short comings in the area of finance with the aid of comparative analysis and common size analysis to give recommendations with a view to increase efficiency of the company.
RESEARCH METHODOLOGY Research methodology is a method to solve the research problem systematically. It involves gathering data, use of statistical techniques, interpretation and drawing conclusion about the research data.
Research Design Descriptive form of research method is adopted for this study. The major purpose of descriptive research is description of state of affairs of the institution as it exists at present. The nature and characteristics of the financial statement of Milma dairy in Palakkad has been described in this study.
Data Collection Method The data required for the study has been collected from secondary sources. It is collected from the audited financial statements, annual reports of the company.
Financial Tools Used Financial statement gives complete information about asset, liability, reserves, equity, expenses, profit and loss of an enterprise. They are not readily understood to interested parties like creditors, shareholders, investors. Thus, various techniques are employed for analysis and interpretation of financial statement. Tools which are commonly used for analyzing and interpreting financial statements are
Ratio analysis
Common size statement
Comparative financial statement
Period of Study
FINANCIAL STATEMENTS Financial statements are the statements containing financial information of a business enterprise. The basic purpose preparing financial statements is to convey information about financial position of the enterprise to owners, creditors and investors. Financial statements are the essential documents of business. These are the statements showing financial position and results of business operation at the accounting period. These are the final products of accounting process. A financial statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show sh ow a position at a moment of time as in case of a balance sheet, or may reveal a series of activities over a given period of time, as in the case of an income statement. On the basis of information provided in the financial statement management makes a view of the progress of the company & decides the future course of action. TRADITIONAL financial statement includes
Balance sheet
Profit and loss
The companies act 1956 stipulates the balance sheet of a joint stock company. However, the statement form has been emphasized upon by accountants for the purpose of analysis and interpretation. The balance sheet shows the financial position at the particular point of time. That is why it is called as statement of financial position. The profit and loss account shows the result of operation for a period of time. Profit and loss account also known as “income statement”. There is no legal format for the profit and loss account. Therefore it can be represented in the traditional „T‟ form or vertically
Objective of financial statement statement 1.Providing information for economic decisions: The economic decisions that are taken by users of financial statements require an evaluation of the ability of an enterprise to generate cash and cash equivalents and of the timing and certainty of their generation. generation. 2. Providing information about financial position: The financial position of an enterprise is effected by the economic resources it controls. it includes:
Information about financial structure is useful in predicting future borrowing needs
Information is useful in predicting how successful the enterprise is likely to be raising in further finance.
Information about liquidity and solvency is useful in predicting the ability of the enterprises to meet their financial commitments as fall due.
3.Providing information about changes in financial position:The financial statement provide information concerning changes in the financial position of an enterprise, which is useful in order to assess its investing financing and operating activities during the reporting period. 4.Providing information information about performance performance of an enterprise:enterprise:It provides information about the performance and in particular its profitability, which is required in order to assess potential changes in the economic resources that are likely to control in future. future. It is also useful in forming judgments about the effectiveness with which the enterprise might employ additional resources.
TYPES OF FINANCIAL STATEMENT
INCOME STATEMENT:-
The income statement or profit and loss account is considered as very useful statement of all financial statements. It depicts the expenses incurred on production, sales and distribution and sales revenue and the net profit or loss for a particular particular period. It shows whether the operations of the firm results in profit or loss at the end of accounting period.
BALANCE SHEET:-
It is a statement which shows the financial position of a business as on a particular date. It represents the assets owned by the business and the claims of the owners and creditors against the assets in the form of liabilities as on the date of the statement.
Statement of retained earnings:-
It is also called the profit and loss appropriation account. It is a link between the income statement and balance sheet. Retained earnings are the accumulated excess of earnings over losses and dividends. The balance shown by the income statement is transferred to the balance sheet through this statement after making the necessary appropriations.
Fund flow statement:-
It described the source s from which additional funds were derived and the use to which these funds were put. It helps the financial analyst in having more detailed analysis and understanding the changes in the distribution of resources between two balance sheet periods. The statement reveals the sources of funds and their application application of different purposes. purposes.
Cash flow statement:-
A cash flow statement depicts the changes in cash position from one period to another. It shows the inflow and outflow of cash and helps the management management in making plans for immediate future. This statement is useful for short-term planning by management.
Schedules:-
These are the statement which explains the items given in the income statement and balance sheet. Schedules are the part of financial statements which give detailed information about the financial position of the business business organization. organization.
FINANCIAL STATEMENT ANALYSIS :
Financial statement analysis is defined as the process of identifying financial strengths and weakness of the firm by properly establishing relationship between the items of balance sheet and profit and loss account. 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 and loss account the first task of financial analyst is to determine the information relevant to the decision under consideration from the total information contained in the financial statement. The second step is to arrange information in a way to highlight significant relationship. The final step is interpretation and drawing of inferences and conclusion. Thus financial analysis is the process of selection relating and evaluation of the accounting data/information. This studying contain following analysis:
Ratio Analysis Comparative Analysis Statement Common-Size Analysis Statement Trend Analysis.
1) Ratio Analysis:
Ratio analysis is a widely used tool of financial an alysis. The term ratio in it refers to the relationship expressed in mathematical terms between two individual figures or group of figures connected with each other in some logical manner and are selected from financial statements of the concern. The ratio analysis is based on the fact that a single accounting figure by it self may not communicate any meaningful information but when expressed as a relative to some other figure, it may definitely provide some significant information the relationship between two or more accounting figure/groups is called a financial ratio helps to express the relationship
between two accounting figures in such a way that users can draw conclusions about the performance, strengths and weakness of a firm. Purpose of ratio analysis
To study the short term solvency of the firm
To study the leverage position of the firm
To interpret the profitability of the firm
To identify the operating efficiency of the firm firm
Ratio analysis is a very powerful analytical tool useful for measuring performance o f an organization. The ratio analysis concentrates on the interrelation ship among the figures appearing the financial statements. It also helps the man agement to analyze the past performance of the firm and to make further fu rther projections.
The ratio provide an easy way wa y to compare present performance with past.
Ratios depict the areas in which a particular business is competitively advantage.
The ratio analysis is made under 6 broad categories:
Liquidity ratios
Leverage ratios
Asset management ratios
Profitability ratios
Operating ratios
Market based ratios
A. Short term solvency / Liquidity ratio:-
Liquidity ratio means the ability of the firm to pay off its short term liabilities. It includes the following ratios
Current ratio:
It is the ratio of current asset to current liability. It is a measure of firm‟s short term solvency. It is also called as “Working Capital Ratio”. Standard current ratio is 2:1.
Current Ratio =
Current Assets Current Liabilities
Quick/ liquid ratio :
This ratio is also known as “acid test ratio”. Liquid ratio establishes the relationship between quick asset and quick/current liability. Standard quick ratio is 1:1
Liquid Ratio=
Liquid Assets Liquid/Current Liabilities
Liquid Assets = Current Assets – Assets – (Stock (Stock + Prepaid Expenses) Liquid Liabilities = Current Liability – Liability – Bank Bank Overdraft
Absolute liquid ratio :
This ratio is also called „cash position ratio‟, or „cash ratio‟ or „super quick ratio‟. This ratio establishes the relationship between absolute liquid assets and current liabilities. Absolute liquid assets include cash, bank and immediate releasable assets eg: marketable securities. Standard cash ratio is 0.5:1. Absolute liquid ratio =
Cash in hand and Cash at bank + Easily Marketable Securities Current Liabilities
A. Activity ratio Activity ratio shows how efficiently a firm uses its available resources or assets. These ratios indicate efficiency in asset management. These ratios indicate the speed with which the resources are turned over or converted into sales. That is why these ratios are called turnover ratios are:
Inventory turnover ratio:
This ratio shows relationship between cost of goods and average stock calculated by dividing the cost of goods sold by b y average inventory. It indicates the number of times the
stock is turned over converted into sales. Generally a ratio of 8 times is considered satisfactory.
Stock Turnover Ratio =
Cost of goods sold Average Stock
Cost of goods sold =
Average Stock =
Sales- Gross Profit
Opening Stock + Closing Stock 2
Debtors Turnover Ratio:
Debtor‟s turnover ratio explains explains the relationship between net credit sales and average debtors including bills receivables. This ratio shows how quickly debtors are realized or converted into cash. It indicates how efficiently the firm collects cash from debtors. Generally a turnover ratio of 7 may be taken as satisfactory.
Debtors Turnover Ratio =
Net Credit Sales Average Debtors
Net Credit Sales = Gross Credit Sales – Sales – Sales Sales Returns
Gross credit sales = Total Sales – Sales – Cash Cash Sales
Average Debtors = Opening Debtors + Closing Debtors 2
Creditors Turnover Ratio:
This ratio shows the relationship between net credit purchases and average creditors including bills payable. This ratio indicates the number of times the creditors are paid
Creditors Turnover Ratio =
Net Credit Purchases Average Creditors
Net Credit Purchase = Total Credit Purchase – Purchase – Purchase Purchase Returns
Total Credit Purchase = Total Purchase – Purchase – Cash Cash Purchase
Average Creditors Creditors = Opening Creditors + Closing Creditors 2
Working Capital Turnover Ratio :
Current assets will change with changes in sales. his me ans working capital is related with sales. The relation between sales and working cap ital is called working capital turnover ratio. This ratio shows how many times working capital is turned over to produce sales. The objective of computing this ratio is to determine how efficiently the working capital is utilized in business. The ideal working capital turnover ratio is 7 or 8 times.
Working Capital Turnover Ratio =
Net Sales Working Capital
Net Sales = Total Sale - Sales Returns
Working Capital = Current Assets – Assets – Current Current Liabilities.
Fixed asset turnover ratio
Fixed asset turnover ratio establishes the relationship between net sales and fixed assets. It measures the efficiency with which a firm is utilizing its fixed assets in producing sales. The sales and profits of a firm is depends on how ho w fixed assets are utilized in business. For knowing whether fixed assets re efficiently, utilized or not, fixed assets turnover ratio is used.
Fixed Assets Turnover Ratio =
Net Sales Net Fixed Assets
A. Profitability ratio
The ability to earn profits from the efficient use of the available resources by the business concern is known as profitability. It depends on the volume of sales, nature of cost and proper use of financial resources. Profitability Profitability ratio means measure the ability of the firm to earn an adequate return on o n sales, total assets and investment capital.
Gross profit ratio :
This is the ratio of gross profit to sales expressed as a percentage. It is also known as gross margin. The ideal ratio is 20% to 25%. 25 %.
Gross profit ratio =
gross profit
x 100
Net sales
Gross profit = Net sales – sales – cost cost of Goods sold
Operating ratio :
Operating ratio expresses the relationship between operating cost and sales. It indicates the overall efficiency in operating the business. The ideal operating ratio is 75% to 85%.
Operating ratio = Cost of Goods sold + Operating Expenses x 100 Net sales
Operating profit ratio:
It explains the relationship between operating profit and net sales
Operating profit ratio =
Operating Profit
x 100
Net Sales
Operating profit = Net sales – sales – Cost Cost of Goods Sold – Sold – Operating Operating Expenses
Return on investment( ROI)
ROI is also known as „rate of return‟ or „return on capital emplo yed‟. It measures the overall profitability of the firm. It establishes the relationship between profit or return on investment. The ideal ROI is 15%.
ROI =
Profit before Interest and Tax
x 100
Capital Employed
Here capital employed means gross or net capital employed. Generally net capital employed is taken.
Net capital employed = share capital + Reserves + Debentures + other long term loans OR Total assets – assets – current current liabilities
Return on shareholder’s fund:
This ratio establishes the profitability from shareholder‟s point of view. It is calculated by dividing net profit after interest and tax by the shareholder‟s fund.
1) Current financial position and liquidity position 2) Long – Long – term term financial position 3) Profitability of the concern
Comparative Financial Statement:
Comparative financial statement is those statements which have been designed in a way so as to provide time perspective to the consideration of various elements of financial position embodied in such statements. In these statements, figures for two or more periods are placed side by side to facilitate comparison. But the income statement and balance sheet can be prepared in the form of comparative financial statement. i) Comparative Income Statement: The income statement discloses net profit or net loss on account of operations. A comparative income statement will show the absolute figures for two or more periods. The absolute change from one period to another and if desired. The change in terms of percentages. Since, the figures for two or more periods are shown side by side; the reader can quickly
ascertain whether sales have increased or decreased, whether cost of sales has increased or decreased etc. ii) Comparative Balance Sheet:
Comparative balance sheet as on two or more different dates can be used for comparing assets and liabilities and finding out any increase or decrease in those items. Thus, while in a single balance sheet the emphasis is on present position, it is on change in the comparative balance sheet. Such a balance sheet is very useful in studying the trends in an enterprise. 3) Common-Size Financial Statement:
Common-size financial statement are those in which figures reported are converted into percentages to some common base in the income statement the sales figure is assumed to be 100 and all figures are expressed as a percentage of sales. Similarly, in the balance sheet, the total of assets or liabilities is taken as 100 and all the figures are expressed as a percentage of this total.
Financial statement analysis is the process of understanding the risk and profitability of a firm,
through analysis of reported financial information, by using different accounting tools and techniques.
