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Financial Accounting ! "
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'&+ ! It is my great pleasure and privilege to present this Project Report to Sydenham Institute of Management Studies, Research and Entrepreneurship Education. The Report is based on the project entitled ³ This report bears the imprint of many people. This acknowledgement is humble attempt to earnestly thank all those who were directly or indirectly involved in the completion of the project and were of immense help to me. I am grateful to our Accounting Faculty, to , $ ! - for his valuable guidance and explanation of concepts and giving us this wonderful opportunity to learn and understand the practical significance of Ratio analysis and Accounting as a subject in whole. To know in detail about how exactly these concepts are used in the real life world gave us an opportunity to apply what we have been taught in the class. I would also like to mention that the regularly updated books and the reference material available in our college library have provided excellent help.
" ERGER PAINTS is the culmination of over seven-decade process of evolution and growth that began in 1923. Its growth has been closely linked with the business and industrial development of modern India. ERGER'S performance is anchored today in a wide variety of Decorative and Industrial paints which continue to gain an increasing share of the highly competitive Indian paint market. eing an ISO 9001 company its quality products have attained instant recognition, worldwide, and continues to meet quality requirements that are demanded today even in the domestic market.
The Country's second largest decorative paint player, erger is headquartered in Calcutta and services the market through a distribution network comprising of 82 stock points and 12,000+ paint retailers. Today the names "erger" and "Lewis erger" are synonymous with colour. erger Paints continues to be inspired by the creation and innovation of Mr. Lewis erger, who through his marvelous shades, had offered people a chance to transform their homes through the power of imagination. At erger we believe in taking paints to the level of fine art. Enriched by the imagination of Lewis erger since 1760.
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/ 0 . http://www.bergerpaints.com/
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3333333333, ,3333333333333 456 )2 $
333333333333333, ,33333333 45( )2 $
c% ' %! Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Secured Loans Unsecured Loans 0 0
63.77 63.77 0 0 284 1.24 349.01 99.84 21.08 )25,(2 *8(,(9
63.77 63.77 9.9 0 350.37 1.09 425.13 78 0.06 76,58 :59,)(
275.22 141.51
322.68 160.37
133.71 24.71 21.85
162.31 18.82 29.52
Inventories Sundry Debtors Cash and ank alance %
269.1 158.44 39.51 *87,5:
266.33 180.38 23.96 *75,87
Loans and Advances Fixed Deposits ; !<' Deferred Credit % 0 Provisions
61.24 0.39 :26,86
61.6 7.91 :*5,)6
0 225,)6 18.82
0 2)(,6( 27.74
""' %! Gross lock Less: Accumulated Depreciation Net lock Capital Work in Progress Investments
; < % Miscellaneous Expenses
29( 26(,86 0 *8(,(:
2*7,89 2(2,:: 0 :59,2
Contingent Liabilities ook Value (Rs)
70.04 10.91
34.44 12.99
"12 ' ! ; ''%
3333333333333, ,333333333333 33333333333, ,333333333333 456 45(
)2 $
)2 $
' Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments '
1,521.80 182.4 1,339.40 15.22 12.81 )987,*9
1,688.66 177.7 1,510.96 25.64 14.16 )::5,78
886.65 15.05 68.19 19.81
1,027.64 17.18 77.21 20.5
200.02 27.44 0 )2)7,)8
224.84 30.33 0 )9(7,75
" PDIT Interest PDT Depreciation Other Written Off = Extra-ordinary items PT (Post Extra-order Items) Tax " !
)9:,5: 150.27 12.78 137.49 18.65 0.08 ))6,78 0 118.76 26.7 (2,56
)27,*2 153.06 15.33 137.73 20.4 0 ))7,99 5.42 122.75 34 66,78
Total Value Addition Preference Dividend
330.51 0
370.06 0
=" !% Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized ="
Equity Dividend Corporate Dividend Tax
15.94 2.71
19.13 3.25
$ !>%? !@ Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) ook Value (Rs) Face Value (Rs.)
3,188.72 2.89 25 10.91 2
3,188.72 2.78 30 12.99 2
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Current ratio
=(266.33+180. Current Assets/ 38+23.96) Current /219.89 Liabilities = 2,)*
2.
Quick Ratio
Quick Assets/Quick Liabilities
3.
Debt-Equity ratio
Debt/ Equity
1.
=(540.18266.33)/ 247.63 =),57
=78.06/425.13 = 5,5)6
56 =(269.1+158.4 4+39.51)/220. 18 = 2,)2
=(528.68269.1)/239 = ),56
=120.92/349.0 1 =5,9:
Gross Profit / Net sales 4.
5.
=(1510.96Gross Profit (Gross 1397.10)/1510 Ratio Profit=Net .96 *100 sales-Cost of =7,:A Goods Sold)
Net Ratio
Profit Net Profit / Net sales
=88.76/ 1510.96 =:,67A
=(1339.401217.16)/1339. 40 *100 = (,)A
=92.08/1339.4 0 =8,67A
Current ratio helps you to ascertain the short term solvency of the firm. erger Paints¶ Current ratios are 2.14 & 2.12. Solvency of this firm has improved. It gives better picture of firms¶ ability to meet it short-term debts from its short-tem assets. Immediate solvency has come down. erger Paints¶ debt equity ratio is very low. It indicates that it is a conservative company which doesn¶t believe in taking debts (conservative attitude). Hence it will not have to pay out a lot on interest. Long term solvency of this firm is good as it has redeemed some of its debt. It indicates the general profitability of the business. For the company ratio are less than 10%; which indicates less than adequate coverage of operating expense, and build up of reserves. The decrease in this ratio shows that cost of sales have increased over the period. It is useful to proprietors as in it gives the idea of efficiency as well as
6.
7.
8.
9.
10.
profitability of the business. In this company net Profits have decreased which means operational efficiency has gone down. This ratio indicates the Proprietors =425.13/503.1 =349.01/469.9 Proprietors extent to which Tangible Fund / Total 9 3 Ratio Assets are financed by Assets =5,6**68 =5,7*286 Owner¶s Fund. This ratio is of practical importance to prospective investors and share holders. If Return on Net Profit After =88.76/425.13 =92.08/349.01 ratio is higher they feel Proprietors Tax/ Proprietors =5,25676 =5,28969 confident and Fund Fund >25,676A@ >28,969A@ encouraged to invest in the company. Decrease in this ratio indicates that firm is generating less returns for its owners. EPS indicates the quantum of net profit of (Net Profit After =(88.76*10^7- =(92.08*10^7- the year that would be Earnings Per Tax±Preference 0)/ 318872000 0)/ 318872000 ranking for dividend for Dividend)/No of Share(EPS) each share of the = 2,769:: = 2,66786 Equity Share company being held by the equity share holders, PE Ratio indicates the number of times the Earning Per Share is covered by its market Price/ =40.55/2.7835 =38.15/2.8876 Market Price price. Market price has Earnings 5 8 Per Share / EPS increased in spite of Ratio = )*,:8779 =)9,2))9 earnings going down which means firms market price is overvalued. This ratio is often used as a measure in Fixed Asset =1510.96/(162 =1339.40/(133 manufacturing Net sales/total Turnover .31+18.82) .71+24.71) industries, where major fixed assets ratio =6,9*)6:* =6,8797*7 purchases are made for PP&E to help increase output. A higher fixed-
11.
12.
Sum of =19.13*10^7/ Dividend Per dividends over a 318872000 Share period /No. of =5,:(((272* Equity shares
Dividend Yield
=0.59992724/ Average 40.55 Dividend Per = Share/Price per D D share
Net Credit Sales/Average Account Receivables (Debtors)
=15.94*10^7/ 318872000 =5,*((667
asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. Firm is generating less sales from given fixed assets. Dividends are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign that the company's management believes that the growth can be sustained.
=0.499887/38. 15 =5,57:8(27(
This ratio throws light on effective rate of return on investment.
=1,510.96/ =1,339.40/((143 ((158.44+180.3 .52 +158.44)/2) 8)/2) = 6,67)9798( =6,()6(:*5)7
Debtors¶ turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.
13.
Debtors Turnover Ratio
14.
( Net Profit after Return on Tax/ Shareholders Shareholders Fund fund )* 100
15.
Net profit before =(153.06/503.1 and 9)*100 Return on interest =95,*)7(9A Tax/Total capital capital employed employed *100
=(88.76/425.13 )*100 = 25,6769A
=(92.08/349.01) *100 =28,9692A
=(150.27/469.9 3)*100 =9),(77)A
It is used to compare performance of company¶s equity capital with those of other companies. It is indicator of earning power of the capital employed in the business. It acts as a pointer to management showing the progress / deterioration in the
16.
ROA(Return on Assets)
(Net Profit /Total Assets)*100
(Expenses Considered/Net Sales)*100 17.
Expenses Ratio
18.
Market Price to Price/ook ook Ratio Value
19.
Working Capital Turnover
20.
Stock Working Capital
(Expenditure may be Cost of Production or cost of sales, Admin or selling, etc.)
Net Sales/Working Capital(CA-CL)
to
(Stock/Working Capital)
=(88.76/503.20
=(92.08/469.95
)*100 =)7,89()A
)*100 =)(,:(98A
earning capacity of the business. It tells about the profitability of the company in terms of its assets utilization.
Comparison of expense ratio with the corresponding ratios of previous years provides =((17.18+77.21 =((15.05+68.19 valuable information as +20.50+224.84 +19.81+200.02+ to the direction in which + 27.44)/ 30.33)/1510.96) economies are ought to 1339.40)*100 *100 be affected. =2*,87:(7A =ÿ A Expense ratio enables the management in controlling costs and improving the managerial efficiency. A lower P/ ratio could mean that the stock is undervalued. However, it could also mean that =40.55/12.99 =38.15/10.91 something is = 9,)2)982 =9,*(87(2 fundamentally wrong with the company. As with most ratios, this ratio varies by industry. A measurement comparing the depletion of working capital to the generation of sales over =1510.96/(540 =1339.40/(528 a given period. .68-239) .18-247.63) This provides some =*,8297 =:,)*87 useful information as to how effectively a company is using its working capital to generate sales. Therefore stock should not exceed the Working =266.33/(540. =269.1(528.68 Capital. If Stock is 18-47.63) -239) greater than WC then it B5,()597 B5,(26(:8 indicates there will be a fall in the value of stock
in the near future. Therefore Working Capital should always be greater.
