 Perpetual succession. Promoter/owner and company are different.

 Shareholders can sell the shares without any restriction.

 HCL balance sheet has cost model for asset
 Gross profit ratio high implies that the company is operating good inward
logistics and reduced cost of sales or a measure of production efficiency.
However, the gross profit ratio may not be a good indicator in manufacturing or
any industry where operating expenses like marketing sales etc are very high.
because an increase in operating expenses can lead to high sales and hence a gross
profit, but the cost of production may be low
 EBITDA ratio depends on the investment in asset and depreciation
 Improvement in operating ratio may be always good. for example if a company
reduces training then the operating ratio will increase, but that may lead to other
issues because of reduced training
 Current ratio may be not a good parameter for a creditor who cannot force a
company to sell current assets to settle current liabilities. some companies may
work with negative capital and hence the current ratio may be less than 0, so this
does not mean that the company is not good prepaid expense is also a current
asset solvency ratio measures the ability of the company to meet long term
financial commitments
 Low debt equity ratio means the company has capacity to borrow debt
 Minority interest - interest of subsidiary company
 Impairment occurs when the sum of the expected cash flows from the asset is less
than the book value of the asset. Accounting practices require that long-term
assets be evaluated for impairment. If a reduction is made in the carrying value
because of impairment, it is recorded as a loss.
 Company can choose either revaluation model or cost model for a particular
category of asset. however, if the option is chosen for a particular category, then
all assets should be assessed with the same choice
 When you revalue asset, equity and book value goes up, so a company does
revaluation when it goes for IPO or tries to get loan with collateral. revaluation
gain is unrealized profit and hence taken out for analysis
 For bench mark ratio, industrial average is not the correct number. For best
performing companies, the actual will be far away from industrial average and for
worst performing companies, actual will be far low compared with industrial
average Non recurring items, examples - reorganization
 expenditure invested capital = equity + total debt
 equity should also considered the profit accumulated capital employed = equity +
Long term debt we are excluding the short term debt
 Total asset = invested capital + interest free credit
 Hierarchy of profits
o Gross profit = net sales - cost of Sales (earlier cost
o of goods sold)
o Cost of goods sold includes - all cost incurred to
o acquire the merchandize and bring it to the location
o and condition of sale interest free credit is not part of short term debt
o Net sales = sales - excise duty
o EBITDA - Earning before interest tax, depreciation and amortization.
EBITDA is also called cash profit
o Cost of sales does not include operating expenses like advertising,
marketing expenses etc
o NOPLAT is before interest and after tax
o EDBIT and NOPLAT are same except that NOPLAT we are deducting the
tax
 Fixed asset turnover = net sales/Av FA (Net block) Net sales is current no,
whereas AV FA is historical working capital turnover ratio says one rupee of
working capital supports how many rupees of sales. Generally this number should
be high, but not necessarily because some companies may work with very low
working capital though we can arrive at a bench mark, the comparison of nos with
the benchmark ratio depends purely on Strategy the company follows. For exam,
if a company maintains a huge inventory to avoid loss of sales, then the Turn over
ratio may be less, but that does not means that the company is not doing good
compared to the bench mark ratio
 Internal brand is not recognized, but purchased brand is recognized.
 registration fee depends on the authorized capital
 Share split increases the liquidity
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