Financial Accounting Management-2019-2021

ARCHIDPLY.LTD

Submitted by: Submitted to:

Abhinav Choudhary 201931108 Prof. Pawan Jain

Mohd. Azhar Khan 201931026

Section:E
Company Details:
Most important asset for Archidplywood is its innovation and uniqueness. Its is one of the leading Plywood
company in India. With 15 acres of manufacturing unit in Uttrakhand, Assam, and Kerala, Archidplywood is
using its Asset deliberately to ensure quality products for its customers. Archidplywood is working to provide
raw material and premium finished goods both enabling customers to choose from the number of options. The
company’s shares are listed on the Bombay stock exchange and National stock exchange. In their 2018-19
Annual report Archidplywood standalone performance are as follows:
1. The company’s total income increased by 6.52% from Rs.31,166.22 Lakhs to Rs. 33,199.04 lakhs.
2. The profit before tax (PBT) increased by 32.71% from Rs.383.75 lakhs to Rs 508.87 lakhs.
3. Profit After Tax(PAT) increased by 77.89% Rs. 250.89 lakhs to Rs. 446.30 Lakhs.

Research Methodology:
● The objective of the Report – To carry out the Financial Statement Analysis of
Archidply.Ltd., which is assigned to us.
● This report is based on the data of three fiscal years from 2015 to 2018.
● The type of data that is used in making if this report is Secondary Data is taken from the
company’s website only.
● Analysis of data of Archidply.Ltd is done by “Ratios Analysis” as a tool to Analyze
Financial statements of previous years.

pg. 2
 Ques. What are the main Revenue Generating Activities (Main Business) of the company?

Main Revenue Generating Activities of the company.

(All the business Activities contributing more than 10% of the total turnover of the company are
mentioned below)

S.No Name and Description of the main product/services % of the total turnover of the
company.

1 PLYWOOD 52.36%

2 DECORATIVE LAMINATES 34.69%

Ans. As shown in the table above main operating activities of Archidply is Manufacturing and
selling of Plywood and other decorative laminates and the revenues generated these activities
from at the end of the Fiscal year 2019 is Rs.33,042.23 Lakhs.
Ques. What are the areas which are being covered by the Company in its Accounting Policies?
Summarize the Accounting Policies being followed for Depreciation, Inventory Valuation and
Basis for Preparation of Accounts.

Ans. Areas that are being covered by Archidply in its Accounting policies are Corporate
information, Basis of preparation of financial statement(statements have been prepared in
accordance with Indian Accounting Standards), Accounting Estimates and assumptions,
Property plants and equipment, Intangible Assets, Inventory property, Impairment of
Assets, Inventory, Cash flow statements, Financial Assets, Financial Liability, Tax Assets,
Revenue Recognition(Sale of goods,service,interest, insurance claims), Foreign Currency
Transaction, Employee Benefits, Borrowing costs, Accounting for taxes and income,
Contingent Asset and Contingent Liabilities, Current and Non Current classification.

Accounting Policies for Depreciation, Inventory valuation, And Basis of Preparation of

Accounts.

Policies for depreciation: Property, Plant And equipment are mentioned at original costs less
accumulated depreciation and impairment losses except free hold which is on cost.

1. Costs mentioned consisted of cost of acquisition, Trial Run expense, construction and
installation, Taxes, duties, freight other incidental expenses including attributable
 borrowing costs incurred during pre-operating period.
2. Other costs are included in the asset’s carrying or recognized as a separate asset, as
suitable, only when it is probable that future economic benefits with the item will flow to
the firm and the cost of that particular item can be measured reliably.
3. Assets that are not ready for their actual use on reporting date are carried as capital work in
progress at cost, consisting of incidental and direct expenses.
4. The changeover to Ind As, the company carrying the value of its property, plant and
equipment.
5. According to schedule II to the Companies Act Properties, Plant and equipment including
continuous process are depreciated and/or amortized on the continuous use.
6. Depreciation on PPE is charged on pro-rata basis with reference to the period when the
assets are ready for usage. Depreciation for multiple shifts has been made in respect of
eligible assets on the basis of the operation of respective units.
7. Lives for the property, plant, and equipment are as per Schedule II to the companies Act,
2013 are as follows:
● Buildings -30 to 60 years
● Plant Equipments (Paper Divison): 15 years (Triple shift)
● Plant Equipment(Other Divisions): 15 years (Double Shift)
● Furniture and Fixtures: 10 years
● Vehicles-8 to 10 years
● Office Equipment- 5 to 10 years
● Computers- 3 years

Inventory Evaluation:

a. Inventories related to raw materials, packing materials, stores & spares are
valued at cost on the weighted average basis or net realizable value whichever is
lower.
b. Waste & scraps are valued at estimated realizable value.
c. Materials in transit and Semi-Finished goods are valued at cost or market value
whichever is lower.
d. Finished goods and process stock include all cost of purchases, cost of
conversion and other related costs incurred in bringing the inventories to their
present location and condition.
e. Finished goods are valued at cost or net realizable value whichever is lower. Net
realizable value is the estimated selling price in the ordinary course of business less
the estimated cost of completion and the estimated costs necessary to make the
sale. f. Obsolete, defective and unserviceable stocks are duly provided for.

2. Basis of preparation of Financial Statements: The Financial Statements have

been prepared in accordance with Indian Accounting Standards (Ind AS) notified
under the Companies (Indian Accounting Standards) Rules, 2015. The Financial
Statements for year ended 31st March 2019 were prepared in accordance with
Indian Accounting Standards notified under the Company (Accounting Standards)
Rules 2006 read with Rule 7(1) of the Companies (Accounts) Rules, 2014 and the
provisions of the Companies Act, 2013 (hereinafter referred to as the ‘previous
GAAP’). The financial statements have been prepared under historical cost
convention and on an accrual basis, except for the following items which have been
measured as required by relevant Ind AS: a) Financial Instruments classified as fair
value through other comprehensive income. b) The defined benefit loss/(profit) is
recognized as at the present value of defined benefit obligation less fair value of
plan assets through other comprehensive income. Accounting policies have been
consistently applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a change in the
accounting policy hitherto in use. The Company’s management evaluates all
recently issued or revised accounting standards on an on-going basis. Where
changes are made in the presentation, the comparative figures of the previous years
are
Ques. Comment on the cash flows from Operating Activities, Financing Activities and Investing
Activities. During the period of study, whether these cash flows have improved or otherwise.
Provide the reasons for same.
Cash Flow from Operating Activities.
2015-16: At The End of the year 2015 -Rs. 13,12,79,693.05 And At the of the year 2016
It is at Rs. 20,67,76,087.07
2016-17: At the end of year 2017 it is Rs. 3,00,72,155.
2017-18: At the end of year 2018 it is Rs.179,218,495

As shown in their Report Their Cash flow from operating is maximum in year 2015-16 and lowest in
2016-17 they added some number in 2017-18 as compared to 2016-17 but company is generating higer
revenue every passing year which is a good news for them. But their trade receivables is increasing thats
why their operating goes some down in 2016-17. But they Gained highest revenue in 2017-18
Ques. (a) For all 3 year data, find out the percentage of Profit after Tax with that of Net Operating
Revenue and Total Revenue. Provide the reasons of change, if any, in these numbers. Explain
what information reader is getting from these numbers.

Ans. Percentage of Profit after Tax (PAT) with that of Net Operating Revenue is Profit Margin
Ratio (after tax) and the ratios for three year study 2014 - 2017 are given below:

2015-2016 2016-2017 2017-2018

PAT PAT PAT 24,618,17
6,01,32,754 6,68,76,06 0
2
Net Operating Net Operating Net Operating
2,92,70,37, 3,087,229,
Revenue Revenue Revenue
2,83,05,30, 623 935
192
Profit After Profit After Profit After
Profit Margin Tax/Net Profit Margin Tax/Net Profit Margin Tax/Net
Ratio (after Operating Ratio (after Operating Ratio (after Operatin
tax) Revenue tax) Revenue tax) g
Revenue
0.02140002 0.02449401 0.0256878
= =
7 = 4 91
2.01% 2.44% 2.58%

pg. 6
Percentage of Profit after Tax with that of Total Revenue is called Net profit Ratio and the ratios
for three year study 2014 – 2017 are given below:

2015-2016 2016-2017 2017-2018

PAT PAT 6,68,76,062 PAT 24,618,17
6,01,32,75 0
4
Total Revenue Total Revenue 2,92,70,37, Total Revenue 3,087,229,
2,80,58,99 623 935
,142
PAT/Total PAT/Total PAT/Total
Net profit Ratio Net profit Ratio Net Profit Ratio
Revenue Revenue Revenue
0.02147162 0.02442101 0.02.5878
= = =
4 8 91
2.14% 2.44% 2.58%

Profit Margin Ratio and Net Profit Ratio are useful for Managers, Shareholders/Owners and
Lenders. These ratios indicates the amount of profit available for dividend distribution after
deducting total expenses from revenue. In both ratios above, values are increasing by the year
which means firm is working productivity and producing profits. But in both above solved ratios,
values are almost same for given three years because in year 2017-2018. Archidply didn’t incur
any other income that’s why its Net Operating Revenue and Total Revenue became same and
hence giving same figures for both the ratios. In year 2015-2016 and 2016-2017, Relaxo has
incurred very low other income which has created less impact on the values of both above
calculated ratio and hence giving approx. same values.

Ques. (b) For all 3 year data, find out the percentage of Operating Profit with that of Net
Operating Revenue. Provide the reasons of change, if any, in these numbers. Explain what
information reader is getting from these numbers.
Ans. Percentage of Operating Profit with that of Net Operating Revenue is called Operating
Profit Ratio and the ratios for three year study 2014 - 2017 are given below:

2015-2016 2016-2017 2017-2018

Operating Operating Operating
7,16,00,403 8,27,04,074 38,345,427
Profit Profit Profit
Total Total Total
Operating Operating 2,92,70,37,623 Operating 3,087,229,935
Revenue 2,83,05,30,19 Revenue Revenue
2
Operating Operating Operating
Operating Profit*100/Tot Operating Profit*100/Tot Operating Profit*100/Tot
Profit Ratio al Operating Profit Ratio al Operating Profit Ratio al Operating
Revenue Revenue Revenue
= 2.52% = 2.8% = 1.24%
Operating Profit Ratio is useful for Managers, Shareholders/Owners and Lenders. It indicates that
profit available after deducting manufacturing and operating expenses including depreciation from
operating revenue. Higher the Operating Profit Ratio, higher the profitability. From 2015-2016 to
2016-2017 ratio is increasing that means for every 1 unit of net sales Archidply earns 2.14% as
operating profit but for the next year it is decreased to value 1.24% because Operating Profit has
reduced in year 2016-2017 compared to 2015-2016 with respective increase in Total operating
Revenue.

Ques. (c) For all 3 year data, find out the percentage of Total Non-Current Liabilities with that of
Shareholders funds. Provide the reasons of change, if any, in these numbers. Explain what
information reader is getting from these numbers.
Ans. Percentage of Total Non-Current Liabilities with that of Shareholders funds is called Debt
Equity Ratio and the ratios for three year study 2014-2017 are given below:

name of 2015-16 2016-17 2017-18

ratio
debt equity .027255 .0289407 .0175255
ratio
debt equity 2.75% 2.89% 1.75255%
%

Debt – Equity Ratio is useful for Lenders, Shareholders and Potential Shareholders. It indicates
the organization’ reliance on own funds or debt funds. Higher Debt is cause of concern for
organization. If this ratio is very high compared to industry average/Nearest competitor and its
operating cash flows are very low, this is a cause of concern.

In Archidply case Debt – Equity ratio is decreasing by the years which means Archidplyis able
to generate cash to satisfy its debt obligations and it is aggressive in financing its growth without
debt which is good signal of growth.

Ques. (d) For all 3 year data, find out the percentage of Total Current Assets with that of Total
Current Liabilities. Provide the reasons of change, if any, in these numbers. Explain what
information reader is getting from these numbers
Ans. Percentage of Total Current Assets with that of Total Current Liabilities is called Current
Ratio and the ratios for three year study 2014 – 2017 are given below:

2014-2015 2015-2016 2016-2017

Total Current Total Current Total Current
1,30,65,24, 1,74,63,51, 1,884,775,9
Assets 738 Assets 654 Assets 47
Total Current Total Current Total Current
87,74,75,37 1,23,10,03, 1,379,455,6
Liabilities Liabilities Liabilities
3 601 02
Total Total Total
Current Current Current
Current Ratio Current Ratio Current Ratio
Assets/Tot Assets/Tot Assets/Tot
al Current al Current al Current
Liabilities Liabilities Liabilities
= 1.48895 = 1.41864 = 1.36078874
5

Current Ratio measures the company’ liquidity and, also, the margin of safety. It is one of the
Liquidity Ratios. Higher the current ratio means more liquidity of cash in company. Here,
current ratio is increasing by the years which is a good signal of growth and in 2016-2017, it is
1.41 which means for every 1 unit of debt Archidply has 1.41 rupee to pay. Along with increase
in Total current assets, there is subsequent increase in Total current liabilities comparatively
more than the assets which lead to declinment in Current Ratio in 2017-2018. Archidply is going
less liquid as year going on.
Ques. (e) For all 3 year data, find out the percentage of Total Non-Current Fixed Tangible Assets
with that of Non-Current Liabilities. Provide the reasons of change, if any, in these numbers.
Explain what information reader is getting from these numbers.

Ans. Percentages of Total Non-Current Fixed Tangible Assets with that of Non-Current
Liabilities for three year study 2014-2017 are given below:

2014-2015 2015-2016 2016-2017

Total Non- Total Non- Total Non-
Current 53,69,14,0 Current Fixed 56,21,65,1 Current Fixed 620.629
Fixed 30 Tangible 48. Tangible
Tangible Assets Assets Assets
Total Non- Total Non-
Current 3,76,45,69 53.11
Current Current
Liabilities 83,82,20, 1
Liabilities Liabilities
029
Total Non- Total Non- Total Non-
Current Current Current
Fixed Fixed Fixed
= Tangible = Tangible = Tangible
Assets/T Assets/T Assets/To
otal Non- otal Non- tal Non-
Current Current Current
Liabilities Liabilities Liabilities
= 15.98 = 13.87 = 11.68

pg. 9
Throughout the years, values of ratios is decreasing indicating Archidply has more liability than
asset i.e. company is not as much highly profitable and increasing liability by the year is
contributing towards this decreasing value of ratio.

Ques. (f) For all 3 year data, find out the percentage of Total Assets with that of Non-Current
Liabilities. Provide the reasons of change, if any, in these numbers. Explain what information
reader is getting from these numbers.

Ans. Percentage of Total Assets with that of Non-Current Liabilities for three year study 2014-
2017 are given below:

2015-2016 2016-2017 2017-2018

Total Assets Total ASSETS 2,56,94,36 Total Assets 2,751,770,0
2,14,47,44 ,441 17
,76
Non-Current Non-Current Non-Current
Liabilities Liabilities Liabilities 53,119,586
3,36,24,15 3,76,45,6
5 91
Total Total Total
Assets/N Assets/N Assets/N
= = =
on- on- on-
Current Current Current
Liabilities Liabilities Liabilities
= 63.78 = 68.253 = 51.80

Higher the ratio, higher the assets company has and highly profitable the firm is. For this ratio,
Archidply faced excellent in value due to massive declinment in total assets in 2017-2018.

Ques. (g) For all 3 year data, find out Trade Receivables Turnover Ratio, Average Collection
Period and Inventory Turnover Ratio. Provide the reasons of change, if any, in these numbers.
Explain what information reader is getting from these numbers. For these calculations, you can
use the formula given in the handout on Ratio Analysis provided by the course instructor.
Ans. Trade Receivables Turnover Ratio – Ratio of Credit Sales or Net Sales to the Total
Receivables of the company for three years study 2014 – 2017 are given below:

Trade Receivables Turnover Ratio is used to measure how effective a company is at extending
credits and collecting debts. It shows how quickly you turn your inventory to sale. Higher the
Trade Receivables Turnover Ratio, higher the rate of conversion of inventory into cash.
Archidply has downturn in this trend which indicates that it is slow in converting its inventory
into cash.

pg. 10
 2014-2015 2015-2016 2016-2017
Credit Credit Credit
Sales/Total Sales/Total 2,68,96,05, Sales/Total 3,066,689,3
Sales 2,78,41,50 Sales 489 Sales 84
,338
Total
Receivables 57,14,65,44 Total 75,35,15,60 Total 868,297,39
5 Receivables 4 Receivables 4

Credit Credit Credit

Trade Trade Trade
Sales or Sales or Sales or
Receivables Receivables Receivables
Net Net Net
Turnover Turnover Ratio Turnover Ratio
Sales/Tot Sales/Tot Sales/Tota
Ratio
al al l
Receivable Receivable Receivable
s s s
= 4.87 = 3.56 = 3.533

Average Collection Period – Ratio of Trade Receivables multiplied by 365 to the Credit Sales or
Net Sales of the company for three years study 2015 – 2018 are given below:

2014-2015 2015-2016 2016-2017

Total Total Total
Receiv 571465445 Receiv 753515604 Receiv
abl abl abl 868,297,394
es es es
Credit Credit Credit
Sales/ Sales/ 2,68,96,05,489 Sales/
Tot 2,78,41,50,338 Tot Tot 3,066,689,384
al Sales al Sales al Sales
Total Total Total
Avera Avera Avera
Receivables*365 Receivables*365 Receivables*365
ge ge ge
/Cr edit Sales or /Cr edit Sales or /Cr edit Sales or
Colle Colle Colle
Net Net Net
ctio n ctio n ctio n
Sales Sales Sales
Perio Perio Perio
d d d
= 75 days = 102 = 103

This ratio is useful for Managers and Working Capital Fund Providers. This ratio indicates the
period, company takes to collect money from its Trade Receivables. A lower Average Collection
Period is more favorable than high Average Collection Period. A low Average Collection period
indicates that organization collects payments faster.

Archidply has high values of Average Collection Period with every passing year which shows
that Archidply is not able to collect its payment timely and fastly.

Inventory Turnover Ratio – Ratio of Cost of Goods sold to the Inventory for the company for
three years study 2014 – 2017 are given below:
Inventory turnover Ratio is useful for Managers and Working Capital fund providers. It indicates
the velocity with which Inventory moves or how quickly a company is able to convert its
inventory into cash or cash equivalents. Higher the Inventory Turnover Ratio, the more efficient
& profitable

pg. 11
the firm is. A high ratio means that the firm is holding a low level of average inventory in
relation to sales. Holding inventory means money tied up in stock.

2015-2016 2016-2017 2017-2018

Cost of Goods Cost of Goods Cost of Goods
sold 2,41,34,15,4 sold 2,42,75,38,7 sold 2978,276,58
19 38 2
Inventory 59,32,70,940 Inventory 74,81,50,152 Inventory 812,436,462

Inventory Cost of Inventory Cost of Inventory Cost of

Turnover Goods Turnover Goods Turnover Goods
Ratio sold/Invento Ratio sold/Invento Ratio sold/Invento
ry ry ry
= 4.032 = 3.24 = 3.56

Archidply has downturn in Inventory turnover Ratio which means that it is holding more
inventory in stock compared to the sales which is clearly visible in table that with every passing
year Cost of Goods sold is less compared to subsequent increase on Inventory it has.

Ques. (h) For all 3 year data, find out the percentage of Cash Flow from Operating Activities
with that of Profit after Tax. Provide the reasons of change, if any, in these numbers. Explain
what information reader is getting from these numbers.
Ans. Percentage of Cash Flow from Operating Activities with that of Profit after Tax (PAT) for
the company for three years study 2014 – 2017 are given below:

2014-2015 2015-2016 2016-2017

Net Cash Flow Net Cash Flow Net Cash Flow
from Operating from from 179,218,495
Activities Operating 3,00,72,155 Operating
20,67,76,0 Activities Activities
87
Profit After Tax Profit After Tax Profit After Tax
(PAT) 6,01,32,754 (PAT) 6,68,76,062 (PAT) 25,089,541
Net Cash Net Cash Net Cash
Flow from Flow from Flow from
= = =
Operating Operating Operating
Activities/PA Activities/PA Activities/PA
T T T
= 3.43 = 3.87 = 5.45
Higher the value of ratio, the more profitable the firm is. Archidply has increased value of the
ratio with every passing year making it profitable firm having more amount of cash coming from
its operational activities.

Ques. (i) For all 3 year data, find out Earning per Share. Provide the reasons of change, if any, in
these numbers. Explain what information reader is getting from these numbers.
pg. 12
Ans. Earnings per Share (EPS) – Ratio of Profit after Tax (PAT) to the No. of Equity shares
outstanding or issued and EPS of the company for three years study 2014 – 2017 are given
below:

2014-2015 2015-2016 2016-2017

Profit After Tax Profit After Tax Profit After Tax
(PAT) 10304.99 (PAT) 12027.65 (PAT) 122.97
No. of Equity No. of Equity No. of Equity
shares shares shares
outstanding/issue 600.17 outstanding/issue 1200.36 outstanding/issue 12.42
d d d
PAT/No. of PAT/No. of PAT/No. of
Equity Equity Equity
Earnings Per shares Earnings Per shares Earnings Per shares
Share outstandin Share outstandin Share outstandin
g g g
or issued or issued or issued
= 17.1701184 = 10.0200356 = 9.98133116
7 6 9

Earnings per Share is useful for Shareholders. It indicates the amount of profit available for
equity shareholders after paying off all expenses and if the entire amount of profit is distributed
to all shares, how much each share will be getting. Higher the EPS, higher the vale because
investors will pay more for a company with higher profits.

Archidply has decreased value of EPS with passing years which indicates that it is having more
PAT but along with that Archidply has increment in no. of shares outstanding as well .i.e. more
no. of shares are held by all its shareholders.

Ques. (j) For all 3 years data, analyze whether company is able to service its debt, Interest
expense? Which ratio you will use to find out this data? Why this analysis is significant and for
whom?
Ans. To analyze the company’ current state that whether it is capable of servicing its debt and
interest expenses, we will use the Debt – Equity Ratio which shows the relationship between
borrower’ fund (Debt) and owner’ capital (Equity). In general, a high Debt – Equity ratios
indicates that a company may not be able to generate enough cash to satisfy its debt obligations
& expenses. However, low Debt – Equity ratios may also indicate that a company is not taking
advantage of the increased profits that financial leverage may bring and Current Ratio which
measures the company’ liquidity and, also, the margin of safety, the company has in order to
meet any emergency arising out of uneven flows of funds. Higher the Current ratio, better for the
firm. We could also have used the Acid Test Ratio which also checks the liquidity of the
company, higher the ratio, better the performance of the company.
Ques. (l) Show the share price movement chart of the company from July 01, 2019 – September
10, 2019. Also show dividend/bonus given by the company during last three years.
Ans. Dividend Declared by Archidply. in last seven years:
The board regret its inability to recommend any dividend as it is considered prudent conserve the
resources for investment in business.
2014-2015 2015-2016 2016-2017
Non- Non- Non- 53,119,586
Curr 3,36,24,155 Curr 3,76,45,691 curr
ent ent ent
Liability Liability Liability
Sharehold Sharehol Sharehold
1,23,36,45,239 1,30,07,87,146 1,319,194,829
ers’ d ers’
Funds ers’ Funds
Funds
Debt Non-Current Debt Non-Current Debt Non-Current
Equi Liabilities/Share Equi Liabilities/Share Equi Liabilities/Share
ty ho lder’ Funds ty ho lder’ Funds ty ho lder’ Funds
Rat Rat Rat
io io io
0.02 0.02 0.04
= = =
2% 2% 4%

Stock price charts of ARCHIDPLY INDUSTRIES. are attached below:

 Bibliography

https://www.archidply.com/images/pdf/Annual_report_Final_2018.pdf
https://www.archidply.com/images/pdf/Final%20Annual%20Report%202017.pdf
https://www.archidply.com/images/pdf/ArchidplyAR.pdf
https://www.moneycontrol.com/india/stockpricequote/miscellaneous/archidplyindustries/AI
pg. 16