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Chapter - 01

• Brief introduction of the subject. • Relevance of the study and the Organization. • Objectives of the study. • Materials and Methodology of the study.

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shree
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173 views

Chapter - 01

• Brief introduction of the subject. • Relevance of the study and the Organization. • Objectives of the study. • Materials and Methodology of the study.

Uploaded by

shree
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER – 01

CONTENTS

 Brief introduction of the subject.


 Relevance of the study and the Organization.
 Objectives of the study.
 Materials and Methodology of the study.
INTRODUCTION

Company Name: Aasha Builcon Private Limited.

Topic: Analysis of Financial Statement

What is financial statement analysis ?

Financial statement analysis is the process of analyzing a company’s


financial statement for decision making purposes to understand the
overall health of the organization. Financial Statement records financial
data which must be evaluated through financial statement.

Financial Statement analysis is an evaluative method of the past,


current and future performance of the company. Different techniques
are commonly used as part of financial statement analysis including
horizontal analysis which composes two or more year of financial data
in both rupees and percentage form vertical analysis in which each
category of accounts on balance sheet is shown as a percentage of a
total the total accounts and ratio analysis , which calculates statistical
relationships between data financial statement analysis allows analysis
to identify trends by composing ratios across multiple periods and
statement types. These statement allows analysis to measure different
thing like liquidity, profitability , efficiency and cash flow.

There are three types of financial statement :


1. Balance Sheet.
2. Income Statement.
3. Cash Flow Statement.
Analysis of financial Statement includes:

1. Income Statement Analysis


2. Balance Sheet and Leverage ratios

1) Income Statement Analysis


Most Analysis statements are the analysis of financial statement with
the Income statement. This is usually the first thing we think about the
business, We often ask questions like “ how much revenue does it have,
Is it profitable, what are the margins like.

2) Balance Sheet and Leverage Ratios


In this Section of financial Statement analysis, we evaluates the
operational efficiency of the business. We have to take several items on
the income statements and compare them with the company’s capital
assets on the balance sheet. The Balance sheet is divided into various
categories like liquidity, leverage and operational efficiency.

The main liquidity ratios for a business are :

a) Quick Ratio
b) Current Ratio
c) Net Working Capital

The main Leverage ratios are:

a) Debt to equity
b) Debt to capital
c) Debt to EBIT
d) Interest Coverage
Relevance of the financial Statement

Relevance is the concept that the information generated by an


accounting system should impact the decision making of someone
pursuing the information.
Here are several examples of how relevance is used in Accounting
System:

 A company controller decides to accelerate the month end close,


So that he/she can issue financial statement in three days , rather
than the statements of three weeks.
This improves the speed with which various internal and external
parties receives the financial statement which improves the
relevance if the information.

 A Company has experienced strong quarter, issuing these


improved results to creditors is relevant to their decision to
extend or enlarge the amount of credit granted to the company.
In other to have Relevance Financial Statements issued three
weeks after the account periods ends will have more relevance
than financial statements issued several months after the periods
ends.
OBJECTIVES OF THE FINANCIAL STATEMENT

1. To access the earning capacity or profitability of the firm.

2. To access the Operational efficiency and the managerial


effectiveness.

3. To access the short term as well as long term Solvency position of


the firm.

4. To identify the reason for change in profitability and financial


position of the firm.

5. To make forecast about the future prospectus of the firm.

6. To access the progress of the firm over a period of time.

7. To help in decision making and control.

8. To guide and determine the dividend action.

9. To provide important information for granting credit.

10. To make Inter-firm Comparison.


MATERIALS AND METHODOLOGY OF FINANCIAL
STATEMENT

 RESEARCH DESIGN

The study is based on descriptive and applied research.

 DATA SOURCES

Both primary and secondary data are used in collection of the project
requirements.

 PRIMARY DATA

Primary data are mainly based on informal discussion with officers and
employees of the organization during visit and mainly through
observation basis.

 SECONDARY DATA

Secondary data are mainly taken from websites articles and annual
report of the company.

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