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FINANCIAL STATEMENT ANALYSIS

Chapter 1
Introduction

1.1 Background of the topic

Definition of financial analysis-


“Financial statement analysis is the process of reviewing and analysing a company's financial
statements to make better economic decisions to earn income in future. These statements
include the income statement, balance sheet, statement of cash flows, notes to accounts and a
statement of changes in equity.”

Objectives of Financial analysis-

• Analyzing Past Performance and Current Position:


By analyzing the past performance, the future performance can also be predicted. The
current financial position of the company is also calculated by analyzing the financial
statements.
• “Prediction of Bankruptcy and Failure:”
Financial statement analysis includes analysis of long term and short term
borrowings, which indicates whether the company has enough funds to repay them,
whether it is eligible to pay back the debts or not. By analyzing debts, future
bankruptcy and failure can be predicted.
• “Loan Decision by Financial Institutions and Banks:”
Financial statement analysis can be used by financial institutions and banks, to
analyse their customer’s financial position. This helps in finding out their eligibility to
repay, banks can also predict the time it might take for the customer to repay the full
amount. This way, bad debts can be avoided.
• “Assessment of the operational efficiency:”
It helps to analyse it’s operational activities, the operational performance can be
compared with the standards of the company. This helps in analyzing whether the
company is on the right track of achieving their goals. Corrective measures can also be
taken if the performance is not according to its standards.

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1.2 “Importance of financial analysis:

• Holding Of Share
Shareholders are the owners of the company. Time and again, they may have to take
decisions whether they have to continue with the holdings of the company's share or
sell them out. The financial statement analysis is important as it provides meaningful
information to the shareholders in taking such decisions.

• Decisions And Plans


The management of the company is responsible for taking decisions and formulating
plans and policies for the future. They, therefore, always need to evaluate its
performance and effectiveness of their action to realise the company's goal in the past.
For that purpose, financial statement analysis is important to the company's
management.

• Extension Of Credit
The creditors are the providers of loan capital to the company. Therefore they may
have to take decisions as to whether they have to extend their loans to the company
and demand for higher interest rates. The financial statement analysis provides
important information to them for their purpose.

• Investment Decision
The prospective investors are those who have surplus capital to invest in some
profitable opportunities. Therefore, they often have to decide whether to invest their
capital in the company's share. The financial statement analysis is important to them
because they can obtain useful information for their investment decision
making purpose.”

1.3 Theoretical implication of the topic

Definition-
Ratio analysis is a part of financial statement analysis, it covers all the important aspects in a
company i.e., current ratio, quick ratio, debt equity ratio, etc.

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Ratio analysis

Solvency Operating Growth


Risk Analysis
Ratios Performance Analysis

Operating
Liquidity Ratio efficiency Business risk Growth Rate
ratio

Turnover
Profitability Financial risk
Ratio

External
Liquidity Risk

● Liquidity ratios

Liquidity ratios measure the ability of a company to repay its short‐term debts and meet
unexpected cash needs.

• Current ratio.

The current ratio is also called the working capital ratio, the working capital is the difference
between current assets and current liabilities. The current ratio is calculated by dividing
current assets by current liabilities.

Acid‐test ratio.

“It is also known as quick ratio. They are cash, marketable (or short‐term) securities, and
accounts receivable and notes receivable, net of the allowances for doubtful accounts. These

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assets are considered to be very liquid that is they are easy to obtain cash from the assets and
they are available for immediate use to pay obligations. The acid‐test ratio is calculated by
dividing quick assets by current liabilities.”

Solvency ratios: Solvency ratios are used to measure long‐term risk and are of interest to
long‐term creditors and stockholders.

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Current Ratio

Liquidity Ratio Quick Ratio

Cash Ratio

Receivables turnover ratio

Solvency Ratio

Days Receivable

Inventory turnover ratio

Turnover Ratio Days inventory

Accounts Payable turnover

Days Payable

Cash Conversion Cycle

• Debt to total assets ratio.

The debt to total assets ratio calculates the percent of assets provided by creditors. It is
calculated by dividing total debt by total assets. Total debt is the same as total liabilities.

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Comparative Statements

Definition of comparative statements:


“A comparative statement is a document that compares a particular financial statement with
prior period statements or with the same financial report generated by another company.
Analysts and business managers use the income statement, balance sheet and cash
flow statement for comparative purposes.”
The comparative statement also show:
• Absolute figures (rupee amounts).

• Changes in absolute figures i.e., increase or decrease in absolute figures.

• Absolute data in terms of percentages.

• Increase or decrease in terms of percentages.

Types of comparative statements

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Types of
comparative
statements

Comparative Comparative
Balance Sheet Income
statement
(i) Comparative Balance Sheet:
“The comparative balance sheet analysis is the study of the trend of the same items, group of
items and computed items in two or more balance sheets of the same business enterprise on
different dates.’ The changes in periodic balance sheet items reflect the conduct of a
business.”

Comparative Income Statement:

“The Income statement gives the results of the operations of a business. The comparative
income statement gives an idea of the progress of a business over a period of time. The
changes in absolute data in money values and percentages can be determined to analyse the
profitability of the business. Like comparative balance sheet, income statement also has four
columns. First two columns give figures of various items for two years. Third and fourth
columns are used to show increase or decrease in figures in absolute amounts and
percentages respectively.”

Common size statement

Definition

“A common size income statement is an income statement in which each account is


expressed as a percentage of the value of sales. It is used for vertical analysis, in which each

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line item in a financial statement is listed as a percentage of a base figure within
the statement, to make comparisons easier.”

Types of common size statement

Types of
common size
statements

Common-size Common-size
Balance Sheet Income
statement
(i) Common-Size Balance Sheet:
“It is a statement where balance sheet items are expressed as the ratio of each asset to total
assets and the ratio of each liability is expressed as a ratio of total liabilities is called
common-size balance sheet.”

The common-size balance sheet are used to compare companies of differing size. The
comparison of figures in different periods is not useful because total figures may be affected
by a number of factors. It is not possible to establish standard norms for various assets. The
trends of figures from year to year may not be studied and even they may not give proper
results.

(ii) Common Size Income Statement:


“The items in income statement can be shown as percentages of sales to show the relation of
each item to sales. A significant relationship can be established between items of income
statement and volume of sales. The increase in sales will certainly increase selling expenses
and not administrative or financial expenses.”

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“In case the volume of sales increases to a considerable extent, administrative and financial
expenses may go up. In case the sales are declining, the selling expenses should be reduced at
once. So, a relationship is established between sales and other items in income statement and
this relationship is helpful in evaluating operational activities of the enterprise.”

CHAPTER 2

LITERATURE REVIEW

“INTRODUCTION TO DYNAMIC FINANCIAL ANALYSIS”, Roger Kaufmann,


Andreas Gadmer and Ralf Kett 2001 To give an introduction of Dynamic Financial Analysis
(DFA) This article wanted to provide a framework leaving it up to the reader to complete the
DFA house by making adjustments or amendments at his/her discretion. Although we did not
necessarily target the DFA experts our exposition might have also served to give an
impression of the complex- ity of a fully fledged DFA model.

“A STUDY ON FINANCIAL STATEMENT ANALYSIS OF TATA STEEL”,- DR.


Ashok Kumar Rath 2006- To assess the financial strength and weaknesses of Tata Steel
Orissa project with the help of various financial statement analysis tools and techniques over
the period of study.This project report is an effort to suggests the best financing option for the
project expenditure of Rs.21200 Cr and to identify its financial strength and weaknesses with
the help of various financial statement analysis tools and techniques.
“ANALYZING FINANCIAL STATEMENTS”,-Javkhlant Ganbaatar 2010 - was to assess
the financial situation of the company BD Sensors LLC by using various tools of financial
statement analysis. It contains basic information about the company and numerous financial
analyzing tools

“FINANCIAL ANALYSIS – A STUDY”,Dr. Donthi Ravinder, Muskula Anitha 2013 To


find out the financial stability and soundness of the business enterprise. To assess and
evaluate the earning capacity of the business.

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“FINANCIAL STATEMENT ANALYSIS”, Measurement of Performance and
Profitability: Applied Study of Baghdad Soft-Drink Industry Dr. Ayad Shaker Sultan 2014 to
study and show the unproblematic financial statements analysis, to evaluate the profitability
position.

“A CASE STUDY ON THE JORDANIAN INDUSTRIAL COMPANIES”-Dr. Nabil M.


Al-Nasser 2014-This study aims to point out the impact of financial analysis in maximizing
the firm's value It studies that financial analysis has a significant positive effect on helping
managers in taking effective decisions that can increase the profitability and the value of the
firm.

“FINANCIAL ANALYSIS OF A SELECTED COMPANY”, - Dušan BARAN, Andrej


PASTÝR, Daniela BARANOVÁ 2016“- It contains all the concepts involved in financial
analysis, the definition and meaning. It has a blueprint of how financial analysis should be
done.

“A STUDY OF RATIO ANALYSIS AS A TECHNIQUE OF FINANCIAL


PERFORANCE EVALUATION”- Parvesh kumar Goyal 2016- To identify the role of ratio
analysis indicators in investors decisions also to study the significance of financial
performance.

“EMERGING IMPORTANCE OF FINANCIAL STATEMENT ANALYSIS”, Vishal


Saxena 2016- To understand how financial statement analysis will help business owners and
the other interested people to represent the past and predict the future.

“A STUDY ON COMPARATIVE FINANCIAL STATEMENT ANALYSIS WITH


REFERENCE TO DAS LIMITED”, Dr.S.Poongavanam, 2017 - To study the financial
statement for five years. To examine the financial statement with the help of comparative
study.

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CHAPTER 3
COMPANY PROFILE

BACKGROUND AND INCEPTION OF THE COMPANY


SAM Tours and travels has been formulated at the dawn of new millennium, the organization
was keen to set up a team of experienced incumbents to muster an organization. SAM tours
and travels have specially focused on promotion and operation of cultural and adventurous
tourism in India. Apart from this our aim is to spearhead in promoting adventurous feats like
Trekking, Visiting Temples, Honeymoon packages, Vacations tours etc , are the fields of our
operation. Localization of numerous areas of interest is everybody's passion and merits
recognition. Our experts have keenly developed all our tours keeping in view the original
flavour of the Country. Seeing the rudimentary India, in its original form, with the help of
experts is what we are striving at.

NATURE OF THE BUSINESS CARRIED


SAM Tours & Travels effectively caters to the requirements of Indian tourism sector. We at
SAM Tours & Travels believe in offering India tour packages that take you to unbelievably
exotic locales in India.
We organize a wide range of adventure and theme tours and warmly invite you to select from
our wide range of tour packages and have unlimited fun while you avail of the special Golden
Triangle Tours.
We believe in offering you details of hotels located in different parts of India so that all you
need to do is enjoy, frolic, relax and rejuvenate while you are on your India tours with SAM
Tours & Travels.
You are welcome to write to us and send for our detailed tour brochure program that consists
of all information regarding India tour options, tour costs, hotel information and online hotel
booking.
The key attractions of our India tours with the website SAM Tours include vacations and
tours to the wildlife sanctuaries in India, Goa vacations, South India vacations, and North
India and Golden Triangle tours among a host of other special India tours

PRODUCT AND SERVICE PROFILE

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No operation however well planned can be successful without the efficient human touch.
SAM Tours and travels is fortunate to have some of the most talented and committed
professionals in the field with an average experience of 22 years at senior and middle level.
The personnel skills are constantly upgraded through carefully selected top training
programs. No wonder we are proud recipients of complimentary comments about our team’s
efficiency and personalised service.
We are providing transportation to major MNC'S and institutions in and around Bangalore
• Coaches Booking • Domestic/ International Air Reservations • Domestic / International
Hotel Reservations • Car Rental • Hotel Bookings • Package Tours - Munnar, Thekkady,
Kodai, Ooty, Thirupati, Cochin, Rameshwaram, Madurai, Kanaya Kumari, Hyderabad, etc., •
Daily Sight Seeing to Important Towns
Vehicles available for all Kinds of tours
Vehicles available for all Kinds of tours
• Tempo travelers (12 & 14 seaters) A/C & Non A/C • Continental & Hi-Tech Coaches of (35
Seaters) A/C & Non A/C • Continental & Hi-Tech Coaches of (47 & 50 Seaters) A/C & Non
A/C • Mini Buses (18 / 23 / 25 / 31 seaters)
Premium cars: Innova, Toyota Qualis, Tavera, Scorpio, Tata Sumo, Like Indica,
Ambassador, Corrola, Lancer Ikon, Esteem, Opel Astra & Ceilo, Benz, etc.,

Vehicles:
Our vehicles will be as per your Requirement and will be provided with necessary First Aid
Box, Fire extinguisher, Torch, Tool kit, umbrella and stepney, pollution and insurance
certificate, Documents and Driver License in accordance with the rules.
Maintenance of Vehicles:
We have tied up with well-equipped garages for maintenance of our vehicles, which will
provide round the clock service by well -experienced and skilled mechanics.
Office Set-up / Helpline Service
Our office is well equipped and located quite adjacent to Gandi Bazaar area, works on 24/7
basis. It is equipped with all modern facilities like Telephones, Fax, E-mail, Computers, and
Mobile phones. Trained and dedicated staff and supervisors.

VISION MISSION AND QUALITY POLICY

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VISION
Tourism is a dynamic and service-driven industry, and to be successful tourism enterprises
need to deliver great products and high-quality customer service. Whether it’s an immediate
response to an email inquiry or offering an ice-cold drink in the middle of the desert –
tourism operations can make or break a business.
Many tourism projects tend to focus on the initial stages of a business development such as
assessment, planning and investment. Although critical first steps, such projects often lack
the tools or expertise to build the capacity of local partners to actually manage and grow
tourism enterprises. Without empowering local partners effectively to run a business, they
often fail.
Sam tours and travels Operations and Management training program attempts to fill that void
by teaching tourism entrepreneurs the day-to-day tasks of managing money, staff and clients.
Whether establishing operations and management procedures for a new tourism enterprise or
helping an existing one that is struggling, this program focuses on the “nuts & bolts” of
running a small business.
The Tourism Operations and Management program is centered around a comprehensive
curriculum that can be delivered in person or via online webinars that introduces core tourism
operations principles and practices to the local staff responsible for managing the business.
With a focus on practical, relevant, and user-friendly tools – the program helps each
participant build a customized “Operations Manual” through the course of the training. Once
back at their site, the course (and the Operations Manual) helps local managers coordinate
everything from reservation and payment systems to tour logistics and financial procedures.

MISSION
Planning, developing, and promoting the tourism industry
• Developing the tourism product locally
• Offering prompt and efficient service in every capacity to visitors at all times
• Marketing of Sam tours and travels as a tourism product both locally and internationally
The duties of the Board include the following:
• Developing all aspects of the tourism industry of Sam groups and promoting the efficiency
of the industry
• Promoting and securing increased airline and shipping facilities in order to increase tourist
traffic

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• Encouraging and promoting training for staff
• Classifying hotels according to the amenities provided
• Developing the tourism product locally
• Surveys and planning related to natural and cultural tourism resources
• Maintenance of historical sites and beauty spots in tourist areas
• Conducting tourist market surveys and research
• Offering prompt and efficient service in every capacity
No venture can be successful without a vision and determination to excel. Behind SAM
Tours and travels steady growth is focussed and well-planned business strategy of its
dynamic leader. A travel expert by experience, Mr Naveen with his exceptional vision,
foresight & strategic planning has ensured the commendations of all in travel related field.

QUALITY

Pursuit of excellence-the key to success


The secret of SAM Tours and travels success is a sincere and committed approach to tourist’s
requirements, anticipating their needs and working towards providing fuller satisfaction to
this effect.

Integrity
Indian Horizons is committed in maintaining the highest ethical standards in the travel
industry.
A Fleet of Deluxe Buses / coaches and Cars
An in-house department managing a fleet of deluxe cars and coaches of various sizes at
various locations in Bangalore takes care of group as well as individual tourist’s requirements
in India affording a comfortable and reliable backup support.

COMPETITORS INFORMATION
Competitor analysis in marketing and strategic management is an assessment of the strengths
and weaknesses of current and potential competitors. This analysis provides both an offensive
and defensive strategic context to identify opportunities and threats.

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Opportunities can be created by leveraging technology to service customer quickly efficiently
and conveniently.
Threats are there is heavy competition by other players in the market such as SRS travel, Sri
Sathya Sai, Jnani Travels, Infant Travels, Royal Travels, Bhaheerathi Tours and Travels and
VRL travel they have many branches all over Karnataka so this adds up as an advantage to
the competitors in Karnataka.
There is a vast body of literature about competition, competitive advantage and competitive
identity in tourism industry. Competitiveness is grounded in the strategic and operational
advantages businesses have been able to achieve and through the application of these
concerns to tourism, the competitive advantage of destinations. Globalization is creating
trends and expectations but there is also evidence to suggest that the strong sense of the local
community is a vital part of the destination competitive advantage. Tourism competitiveness
is rarely examined at the single business level as the complexity of the tourism system is
based on interaction and interdependency. Therefore the concerns with strategy, structure and
rivalry seems a little different within tourism – hence the growing concerns with network
partnerships, clusters and co-operations within the tourism literature. Management of tourist
services should satisfy the needs of the customer (tourist) and contributes to tourist well
Being as well as it should contribute to wellbeing of local community. This is the part of
sustainable competitiveness concept.

ACHIEVEMENT, AWARDS AND RECOGNITIONS


Sam tours and travels has continuously maintained its position in top 3 in Karnataka tourism
sector
It has been awarded as best performance by Tata consultancy services in the year 2015-2016
It has received certificate of appreciation from Indian Red Cross Society in the year 2014

FUTURE GROWTH PROSPECTS


Sam tours and travels is planning to enter courier services which includes domestic and
international packaging and mainly ensure fastest courier and delivery in Bangalore by
providing convenient drop off location that will save time and money of the costumers

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Sam tours and travels are introducing customised tour for the customers depending on the
requirements of the customers. Where the holiday package includes the accommodations
travel as per the needs of the costumers.

A Fleet of Deluxe Buses / coaches and Cars


An in-house department managing a fleet of deluxe cars and coaches of various sizes at
various locations in Bangalore takes care of group as well as individual tourist’s requirements
in India affording a comfortable and reliable backup support.

COMPETITORS INFORMATION
Competitor analysis in marketing and strategic management is an assessment of the strengths
and weaknesses of current and potential competitors. This analysis provides both an offensive
and defensive strategic context to identify opportunities and threats.
Opportunities can be created by leveraging technology to service customer quickly efficiently
and conveniently.
Threats are there is heavy competition by other players in the market such as SRS travel, Sri
Sathya Sai, Jnani Travels, Infant Travels, Royal Travels, Bhaheerathi Tours and Travels and
VRL travel they have many branches all over Karnataka so this adds up as an advantage to
the competitors in Karnataka.
There is a vast body of literature about competition, competitive advantage and competitive
identity in tourism industry. Competitiveness is grounded in the strategic and operational
advantages businesses have been able to achieve and through the application of these
concerns to tourism, the competitive advantage of destinations. Globalization is creating
trends and expectations but there is also evidence to suggest that the strong sense of the local
community is a vital part of the destination competitive advantage. Tourism competitiveness
is rarely examined at the single business level as the complexity of the tourism system is
based on interaction and interdependency. Therefore the concerns with strategy, structure and
rivalry seems a little different within tourism – hence the growing concerns with network
partnerships, clusters and co-operations within the tourism literature. Management of tourist
services should satisfy the needs of the customer (tourist) and contributes to tourist well
Being as well as it should contribute to wellbeing of local community. This is the part of
sustainable competitiveness concept.

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FINANCIAL STATEMENT ANALYSIS

ACHIEVEMENT, AWARDS AND RECOGNITIONS


Sam tours and travels has continuously maintained its position in top 3 in Karnataka tourism
sector
It has been awarded as best performance by Tata consultancy services in the year 2015-2016
It has received certificate of appreciation from Indian Red Cross Society in the year 2014

FUTURE GROWTH PROSPECTS


Sam tours and travels is planning to enter courier services which includes domestic and
international packaging and mainly ensure fastest courier and delivery in Bangalore by
providing convenient drop off location that will save time and money of the costumers
Sam tours and travels are introducing customised tour for the customers depending on the
requirements of the customers. Where the holiday package includes the accommodations
travel as per the needs of the costumers.

Chapter 4

Research Design

Statement of the problem

A research on financial analysis in Sam Tours and Travels has not been conducted before,
this study analyses the financial position of the company and helps to improve i.e., where it
lacks funds and where it can spend more to increase the performance of the company.

Need of the Study

• Analyzing the financial statements determines the current financial position of the
company, then they can focus on weaknesses and improve the overall performance.

• This type of study is not done in the company before, by doing this study, we can
improve the performance.

Scope of the Study

• The study is an effort to know that it a study on the interpretation of financial statements
in terms of contemporary financial analysis of information and factors influencing

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decision. It is a demographic study about the financial analysis by comparing the balance
sheets of the company. To study the profit and loss of the company

• To study the types of expenses incurred by the company

• To study the current financial position of the company

• Recommendation on where the company is not performing well and where it should
focus on

Objectives of the study

● To study the financial performance of sam tours and travels.

● To find out the strengths and weaknesses of the firm.

● To study the overall financial position of the company.

Limitations of the study

● This study is based on secondary data, hence the data provided may not be accurate.

● There might be a minute difference in calculations.

● This study is restricted to past 5 years financial information only.

Research Methodology

● This study evaluates the financial performance of Sam Tours and Travels with the
help of the most appropriate tool of financial analysis like ratio analysis and
comparative balance sheet. Suggestions are then made to improve the financial
performance of the firm.

● Design is descriptive, the purpose of this study is to compare, interpret and analyze
previous years’ financial data. By analyzing the data, appropriate suggestions will be
made to improve the company’s financial performance.

Sample Design

Sample method:

Design is descriptive, the purpose of this study is to compare, interpret and analyze previous
years’ financial data. By analyzing the data, appropriate suggestions will be made to improve
the company’s financial performance. It is a design used to describe a situation and its data
characteristics. Therefore, descriptive study is used to study whether there is a relationship

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FINANCIAL STATEMENT ANALYSIS
between working capital management and profitability. Research has got a very specific
objective and clear cur data requirements.

Sample size: 5 years (2013-2018).

Sample unit: Balance sheet and P&L Account.

METHOD OF DATA COLLECTION:

• Secondary data: The major source of data for this project will be collected through Annual
reports of Sam tours and travels

INSTRUMENT FOR DATA COLLECTION:

• Secondary data is the instrument used for collection of data. It consists of Balance sheets
and P&L account from past 5 years of data.

DATA ANALYSIS TECHNIQUE:

Data analysis is a part of research study, the analysis of secondary data takes place to find out
whether the objectives are achieved. Data analysis uses Annual reports (Balance sheet and
Impact of Working Capital Management on Profitability P& L account) of the past 5 years of
data. In this study, descriptive study is used to analyse and interpret the results.

CHAPTER SCHEME

1. Introduction

2. Literature Review

3. Company profile

4. Research Design

• Statement of the problem

• Nature of the study

• Need of the study

• Scope of the study

• Objectives of the study

• Limitations of the study

• Research Methodology

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5. Data processing and analysis

6. Findings

7. Recommendations

8. Conclusion

• Bibliography

• Annexure

• Balance sheet and P&L Account

CHAPTER-5

DATA ANALYSIS AND INTERPRETATION

1. Current ratio:

CURRENT
CURRENT CURRENT
YEARS LIABLITI
ASSETS RATIO
ES

2013-2014 16666103 15095489 1.1

2014-2015 17106823 18636875 0.91

2015-2016 16810776 15784610 1.06

2016-2017 18648021 18905606 0.98

2017-2018 20040749 20406010 0.98

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the current
ratio is 1.1, in the year 2014-2015 the ratio decreased to 0.9, in the year 2015-2016 the ratio
increased to 1.06 but in the next two years it decreased.

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FINANCIAL STATEMENT ANALYSIS

Current Ratio
1.38

1.1

0.83

0.55

0.28

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION:

Standard current ratio is 2:1, in this case the current ratio is 1:1 or lesser, it is less than
half of the standard current ratio.

2. Quick ratio

QUICK Current
QUICK
YEARS LIABLITI
ASSETS RATIO
ES

2013-2014 14347172 15095489 0.95

2014-2015 13012759 18636875 0.69

2015-2016 14143961 15784610 0.89

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FINANCIAL STATEMENT ANALYSIS

2016-2017 16670635 18905606 0.88

2017-2018 14418450 20406010 0.7

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the
current ratio is 0.95, in the year 2014-2015 the ratio decreased to 0.69, in the year
2015-2016 the ratio increased to 0.89, in 2016-2017 the ratio decreased to 0.88 and in
the year 2017-2018 it significantly reduced to 0.7.

Cash Ratio
1.

0.75

0.5

0.25

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: A quick ratio greater than 1.0 means that a company is


sufficiently able to meet its short-term obligations. Since the company’s quick ratios
are lesser than 1.0 the company may not be able to meet it’s short term expenses.

3. Cash ratio

Cash and
Current
YEARS cash CASH RATIO
liabilities
equivalent

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FINANCIAL STATEMENT ANALYSIS

2013-2014 0 15095489 0

2014-2015 71694 18636875 0.00384689

2015-2016 971763 15784610 0.061563954

2016-2017 1583220 18905606 0.083743415

2017-2018 2409581 20406010 0.118081928

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the ratio is 0,
in the year 2014-2015 the ratio increased to 0.0038, in the year 2015-2016 the ratio increased
to 0.061 but in the next year it increased to 0.083 and in the final year 2017-2018, it increased
to 0.118.

Chart Title
0.15

0.12

0.09

0.06

0.03

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: A cash ratio above 1 indicates that the company can easily pay off its
debt. Since the cash ratio of Sam tours and travels is less than 1, the company may have
issues with their cash transactions.

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 23


FINANCIAL STATEMENT ANALYSIS
4. Debt-to-asset ratio

Total
YEARS Total Debt Debt Ratio
Assets

2013-2014 29310891 30422126 0.963472803

2014-2015 44610516 40624431 1.09812039

2015-2016 43051852 62657019 0.687103419

2016-2017 56549916 44678354 1.265711714

2017-2018 47355860 35373430 1.33874097

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the
ratio is 0.96, in the year 2014-2015 the ratio increased to 1.01, in the year 2015-2016
the ratio decreased to 0.68, in the year 2016-2017 it increased to 1.26 and in the final
year it again increased to 1.33

Chart Title
1.75

1.4

1.05

0.7

0.35

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 24


FINANCIAL STATEMENT ANALYSIS
INTERPRETATION: The ratio decreased significantly in the year 2015 to 0.68,
which shows that it’s not consistent in maintain a good ratio, but in the last 2 years it
is above the standard ratio (1:1)

5. Average collection period

Average
Receivables
YEARS Days collection
turnover
Period

2013-2014 365 14347172 2.544

2014-2015 365 12941065 2.82

2015-2016 365 13172198 2.77

2016-2017 365 15087415 2.419

2017-2018 365 12008869 3.039

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the
current ratio is 2.544, in the year 2014-2015 the ratio increased to 2.82, in the year
2015-2016 the ratio decreased to 2.77, in the year 2016-2017 it decreased to 2.419
and then increased in 2017-2018 to 3.039

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 25


FINANCIAL STATEMENT ANALYSIS
Chart Title
3.875

3.1

2.325

1.55

0.775

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: Collection period is very high as we can see from the above data, this
can affect the finance of the company if they took a long time to collect their debts, if this
continues they might run out of funds or debtors can easily manipulate the company by
extending their time to pay back the debts

6. Shareholder equity ratio

Total
Total shareholder
YEARS shareholder
assets equity ratio
equity

2013-2014 1720200 35373430 0.04862972

2014-2015 1720200 40624431 0.042343978

2015-2016 1720200 62657019 0.027454227

2016-2017 1720200 44678354 0.038501866

2017-2018 1720200 35373430 0.04862972

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 26


FINANCIAL STATEMENT ANALYSIS
ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the
current ratio is 0.048, in the year 2014-2015 the ratio increased to 0.042, in the year
2015-2016 the ratio decreased in the next two years and then increased in 2017-2018

Chart Title
0.0625

0.05

0.0375

0.025

0.0125

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: From the above graph we can see that, the shareholder equity ratio
was at it’s lowest in the year 2015 with 0.027. It has a lot of assets with very less equity.

7. Debt ratio

Debt to assets
YEARS Total debt Total assets
ratio

2013-2014 29310891 35373430 0.828613199

2014-2015 44610516 40624431 1.09812039

2015-2016 43051852 62657019 0.687103419

2016-2017 56549916 44678354 1.265711714

2017-2018 47355860 35373430 1.33874097

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 27


FINANCIAL STATEMENT ANALYSIS
ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the
current ratio is 0.828, in the year 2014-2015 the ratio increased to 1.098, in the year
2015-2016 the ratio decreased to 0.68, in the year 2016-2017 it increased to 1.26 and
then increased in 2017-2018 to 1.33.

Chart Title
1.75

1.4

1.05

0.7

0.35

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: A good debt-to-asset ratio is considered to be more than 1, from the


above graph we can see that the ratio is very inconsistent, the company should maintain the
ratio more than 1 every year.

8. Debt to equity ratio

Total Debt to assets


YEARS Total debt
equity ratio

2013-2014 29310891 1720200 17.03923439

2014-2015 44610516 1720200 25.93333101

2015-2016 43051852 1720200 25.02723637

2016-2017 56549916 1720200 32.87403558

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 28


FINANCIAL STATEMENT ANALYSIS

2017-2018 47355860 1720200 27.52927567

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the debt-to-
equity ratio is 17.03, in the year 2014-2015 the ratio increased to 25.93, in the year 2015-
2016 the ratio decreased to 25.02, in the next year it increased to 32.87 and decreased in the
final year to 27.52.

Chart Title
42.5

34.

25.5

17.

8.5

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: The ratio was highest in the year 2016, with 32.87, the maximum
debt-to-equity can be more than 2, but in this company is very high, Sam tours and travels
should decrease the number of debts and increase it’s equity.

9. Debt to capital ratio

Total debt
Debt to capital
YEARS Total debt + Total
ratio
equity

2013-2014 29310891 31031091 0.944565275

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 29


FINANCIAL STATEMENT ANALYSIS

2014-2015 44610516 46330716 0.962871284

2015-2016 43051852 44772052 0.96157871

2016-2017 56549916 58270116 0.970478864

2017-2018 47355860 49076060 0.964948286

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the current
ratio is 0.944, in the year 2014-2015 the ratio increased to 0.962, in the year 2015-2016 the
ratio decreased in the next two years and then increased in 2017-2018

Chart Title
0.975

0.9625

0.95

0.9375

0.925
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

INTERPRETATION: A good debt-to-equity ratio is 1.5, the company’s ratio is below 1,


this means company is not taking advantage of increased profit through leverage.

10. Asset to equity ratio

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 30


FINANCIAL STATEMENT ANALYSIS

Total Asset to equity


YEARS Total assets
equity ratio

2013-2014 35373430 1720200 20.56355656

2014-2015 40624431 1720200 23.61610917

2015-2016 62657019 1720200 36.42426404

2016-2017 44678354 1720200 25.97276712

2017-2018 35373430 1720200 20.56355656

ANALYSIS: From the above table it is interpreted that in the year 2013-2014 the ratio is
20.563, in the year 2014-2015 the ratio increased to 23.61, in the year 2015-2016 the ratio
increased in the next year and then decreased in 2017-2018.

Chart Title
47.5

38.

28.5

19.

9.5

0.
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 31


FINANCIAL STATEMENT ANALYSIS
INTERPRETATION: The ratio was highest in the year 2015 with a ratio of 36.42, this
shows the company has a lot of assets but has less equity.

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 32


FINANCIAL STATEMENT ANALYSIS
CHAPTER – VI

FINDINGS
• Standard current ratio is 2:1, in this case the current ratio is 1:1 or lesser, it is less than
half of the standard current ratio.

• A quick ratio greater than 1.0 means that a company is sufficiently able to meet its
short-term obligations. Since the company’s quick ratios are lesser than 1.0 the
company may not be able to meet it’s short term expenses.

• A cash ratio above 1 indicates that the company can easily pay off its debt. Since the
cash ratio of Sam tours and travels is less than 1, the company may have issues with
their cash transactions.

• The debt-to-asset ratio decreased significantly in the year 2015 to 0.68, which shows
that it’s not consistent in maintain a good ratio, but in the last 2 years it is above the
standard ratio (1:1)

• A cash ratio above 1 indicates that the company can easily pay off its debt. Since the
cash ratio of Sam tours and travels is less than 1, the company may have issues with
their cash transactions.

• The shareholder equity ratio was at it’s lowest in the year 2015 with 0.027. It has a lot
of assets with very less equity.

• A good debt-to-asset ratio is considered to be more than 1, from the above graph we
can see that the ratio is very inconsistent, the company should maintain the ratio more
than 1 every year.

• The ratio was highest in the year 2016, with 32.87, the maximum debt-to-equity can
be more than 2, but in this company is very high, Sam tours and travels should
decrease the number of debts and increase it’s equity.

• A good debt-to-equity ratio is 1.5, the company’s ratio is below 1, this means
company is not taking advantage of increased profit through leverage.

• The ratio was highest in the year 2015 with a ratio of 36.42, this shows the company
has a lot of assets but has less equity.

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 33


FINANCIAL STATEMENT ANALYSIS
CHAPTER – VII
RECOMMENDATIONS
• After analyzing the above data, the current ratio of the company is less than the
standard ratio which is 2:1, it’s important to maintain the standard ratio, if they don’t,
they might face difficulty in paying back their current liabilities.
• The cash ratio is less than 1, it would be difficult for the company to maintain it’s
day-to-day activities.
• The debt-to-equity ratio is very high of 32.87, the company should decrease it’s debts
and find more investors to increase it’s equity, by having a lot of debts they might
find it difficult to find debtors in the future.

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 34


FINANCIAL STATEMENT ANALYSIS

CHAPTER – VII
CONCLUSION
SAM Tours and travels has been formulated at the dawn of new millennium; the organization
was keen to set up a team of experienced incumbents to muster an organization. SAM tours
and travels have specially focused on promotion and operation of cultural and adventurous
tourism in India.

After analyzing the ratios, it is found that the current ratio of the company is less than the
standard ratio, it’s the same with quick ratio and cash ratio as well. The debt-to-equity ratio is
low and inconsistent, the shareholders’ equity ratio is also less, it has very less equity for high
value of assets.

Sam tours and travels should increase its current asset, quick asset and cash, since it has a lot
of assets it can liquidate some of it to meet its short-term expenses and also have funds in
case of emergencies. It is found that the company’s equity is very less, by having a lot of
debts and not paying them might decrease its credit rating and end up having difficulty in
borrowing funds. It is highly recommended that they find more investors and increase their
equity.

DEPARTMENT OF BBA JUNE-APRIL 2019 pg. 35