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FINANCIAL STATEMENT
ANALYSIS
Submitted By:
Vivek Kalagaggari (22)
Shreya Kapoor (23)
Sumedha Kapoor (24)
Akrit Kashyap (25...
INTRODUCTION
• “Analysis of Financial Statements” involves
the process of reviewing and evaluating a
company's financial s...
METHODOLOGY
• In order to make the analysis more authentic we have taken up
the actual Financial Statements of HUL from Fi...
TYPES OF RATIOS
RATIOS ANALYZED
SOLVENCY RATIOS
• Current ratio
• Quick ratio
• Debt equity ratio
• Interest coverage ratio
• Total debts ...
EXCEL FUNCTIONALITIES USED
• In order to perform the aforementioned
analysis we have made use of various
excel functions s...
SUMMARY OF RATIO
ANALYSIS AND INTERPRETATION
SOLVENCY RATIOS
• The Current Ratio for a company is
ratio of current assets to current
liabil...
PROFITABILITY RATIOS
• Operating profit ratio and net
profit ratio of the firm has been
considerably consistent over the
y...
MARKET RATIOS
• EPS of the company has been
steadily rising over the years with
a slight decline in 2010 because
of new co...
PROJECTED PROFITS AND SALES
USERS OF FINANCIAL STATEMENT
ANALYSIS
• Creditors- Anyone who has lent funds to a
company is interested in this analysis.
...
ADVANTAGES OF FINANCIAL
STATEMENT ANALYSIS
• It provides an idea to the investors on
investing their funds in a particular...
LIMITATIONS OF FINANCIAL
STATEMENT ANALYSIS
• Comparability of financial data and
the need to look beyond ratios.
• Differ...
DECISION MAKING BASED ON ANALYSIS
• As the sales have been fairly good throughout and is even
expected to rise in the comi...
• After comprehensively analyzing financial statements of HUL
we can easily make out the company’s sales have been rising
...
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  1. 1. FINANCIAL STATEMENT ANALYSIS Submitted By: Vivek Kalagaggari (22) Shreya Kapoor (23) Sumedha Kapoor (24) Akrit Kashyap (25) Shreyansh Kejriwal (26) Ambarish Kulkarni (27)
  2. 2. INTRODUCTION • “Analysis of Financial Statements” involves the process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. • As a part of IT Project, horizontal comparative analysis of Balance Sheet is performed in order to identify Company’s financial health using various functionalities available in Excel. • Post which the parameters are analyzed and reported using dashboards and graphs. • In order to make the analysis significant and ready to use, decision making enablers and discussions are provided.
  3. 3. METHODOLOGY • In order to make the analysis more authentic we have taken up the actual Financial Statements of HUL from Financial Year 2009 to 2013. • We have calculated the various possible financial ratios in order to compute the Solvency, Liquidity, Profitability and Market ratios using the data available. • The trend of these ratios over time is studied to check whether they are improving or deteriorating. • Ratios are also compared across different years to see how they stack up, and to get an idea of comparative valuations. • Apart from analyzing ratios we have also made projections for coming years in order to determine the financial standing of the company in the future.
  4. 4. TYPES OF RATIOS
  5. 5. RATIOS ANALYZED SOLVENCY RATIOS • Current ratio • Quick ratio • Debt equity ratio • Interest coverage ratio • Total debts to total assets ratio • Proprietary ratio PROFITABILITY RATIOS • Operating profit ratio • Net profit ratio • Return on shareholders’ funds MARKET RATIOS • Earnings per share • Book value per share
  6. 6. EXCEL FUNCTIONALITIES USED • In order to perform the aforementioned analysis we have made use of various excel functions such as: 1. H-lookup. 2. Macros. 3. Graphing. 4. Data tables. 5. Scenario manager. 6. Trend analysis, maximum – minimum function ,etc. 7. Data analysis using pictorial displays.
  7. 7. SUMMARY OF RATIO
  8. 8. ANALYSIS AND INTERPRETATION SOLVENCY RATIOS • The Current Ratio for a company is ratio of current assets to current liabilities. In this case it is much lower than the industry standard ratio of 2:1 which means the company may have problems meeting its short-term obligations. • The standard quick ratio for industry is 1:1. Low or decreasing quick ratios suggests that a company is over- leveraged, struggling to maintain or grow sales, paying bills too quickly or collecting receivables too slowly. • As far as Debt equity ratio is concerned the company does not rely much on debt financing it rather finances its resources with equity capital. The debt equity ratio is nil for some years whereas it is marginal in other years. • Total debt to total assets ratio is marginal which signifies that very less assets are financed through debt capital. 0.78 0.86 0.87 0.85 1.02 1.03 0.00 0.20 0.40 0.60 0.80 1.00 1.20 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Mar '14 CURRENT RATIO CURRENT RATIO 1.991559246 0.0496860250 0 0.114404624 0 0.5 1 1.5 2 2.5 FY' 09 FY' 10 FY' 11 FY' 12 FY' 13 Debt Equity Ratio Debt Equity Ratio
  9. 9. PROFITABILITY RATIOS • Operating profit ratio and net profit ratio of the firm has been considerably consistent over the years which mean that the company’s operations have been fairly good in converting the profits. • Since the company finances most of its operations through equity and less of capital therefore return on shareholders fund is considerably good over the years. 14% 15% 13% 14% 15% 12% 12% 13% 13% 14% 14% 15% 15% 16% 16% Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 OP Ratio OP Ratio 12% 12% 12% 12% 14% 0% 2% 4% 6% 8% 10% 12% 14% 16% Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 NP Ratio NP Ratio 117.42 81.10 84.34 76.07 134.02 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Return on Share holder's Capital Return on Share holder's Capital
  10. 10. MARKET RATIOS • EPS of the company has been steadily rising over the years with a slight decline in 2010 because of new competitors coming in but HUL soon realized the needs of the market and came up with more for its customers and shareholders. • Book value per share compares the amount of stockholders' equity to the number of shares outstanding. Higher the BV the better it is for the shareholders. The BV of the company has been rising over the year which is a good sign for the company. • From the graph we can easily comprehend that the EPS of the firm has been consistently at par with Book Value and even more at times which indicates the company’s good financial standing in the market. 11.51 9.92 10.68 12.95 17.75 9.81 12.23 12.66 17.03 13.25 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 Mar '09 Mar '10 Mar '11 Mar '12 Mar '13 Comparison of EPS & BV Earnings per share Book value per share
  11. 11. PROJECTED PROFITS AND SALES
  12. 12. USERS OF FINANCIAL STATEMENT ANALYSIS • Creditors- Anyone who has lent funds to a company is interested in this analysis. • Investors- Both current and prospective investors examine financial statements. • Management- The company controller prepares an ongoing financial results, particularly in relation to a number of operational metrics . • Regulatory authorities-Financial statements are examined by the SEBI and other authorities to see if its statements conform to the various accounting standards and the rules.
  13. 13. ADVANTAGES OF FINANCIAL STATEMENT ANALYSIS • It provides an idea to the investors on investing their funds in a particular company. • Regulatory authorities can ensure company follow the required accounting standards. • Helpful to the government agencies in analyzing the taxation owed to the firm. • Company is able to analyze its own performance over a specific time period.
  14. 14. LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS • Comparability of financial data and the need to look beyond ratios. • Differences between two companies’ accounting methods make it, sometimes, difficult to compare the data of the two. • The analyst should remember the lack of data comparability before reaching any clear-cut conclusion. • Ignores qualitative aspects of data.
  15. 15. DECISION MAKING BASED ON ANALYSIS • As the sales have been fairly good throughout and is even expected to rise in the coming years but still the management can look for more marketing efforts so as to reap higher profits. • As far as the solvency position is concerned the company’s liquidity position is not at par with the industry standard therefore it should work on maintaining its current and quick ratios so as to maintain a better working capital and for avoiding liquidity crunch. • The EPS of the firm has been consistently at par with Book Value and even more at times which indicates the company’s good financial standing in the market. • The overall financial position of the company is fairly good and to it take to higher levels the company should increase its efforts in product diversification and product expansion in context with increasing competition. • The company should leverage more on its capital structure and employ more of debt capital in its capital structure.
  16. 16. • After comprehensively analyzing financial statements of HUL we can easily make out the company’s sales have been rising over the years with a positive sign. • The profit ratios of the company are consistent over the years and show an increasing trend in coming years as well. • Company’s capital structure includes more of Equity which increases the investors trust thereby leading to increased EPS and Book Value. • Therefore through scenario manager and data tables we have projected future position of the company’s sales and profits which definitely indicates a bright future.

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