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FINANCIAL STATEMENT ANALYSIS

The Balance Sheet enables a banker to assess the financial position of a company / unit and assists him in forming a judgment about the financial strength and weakness of the entity as on particular date.

The Profit & Loss A/c indicates the working results of the company during a specified period of time, which is usually one year.

Assets:- Asset should satisfy three attributes for accounting

1) Capability to generate an economic benefit 2) Ownership and

3) Measurement of cost

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FIXED ASSETS

Fixed assets are productive assets.e.g. land, building, plant & machinery fixtures & fittings, vehicles etc. An analyst should look in to the intrinsic worth of the assets rather than the rupee value

Depreciation is referred amortization of cost of fixed assets as a notional wear and tear basis of the asset. Two methods of depreciation are in use in India

In Straight-line method, a fixed amount is written off every year.

In Written-down value method, depreciation is provided at a fixed percentage of the outstanding net block each year

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CURRENT LIABILITIES

1. Short –term borrowings from banks ( including bills purchased and discounted and the excess

borrowings placed on repayment basis)i. From applicant bankii. From other banksSub- total (A)

2. Short term borrowings from others3. Deposits (maturing within one year)4. Sundry Creditors (trade)5. Unsecured loans6. Advances /progress payments from customers /

deposits from dealers, selling agents etc.

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CURRENT LIABILITIESContd…

7. Interest and other charges accrued but not due for payment

8. Provision for taxation9. Other statutory liabilities( due within one year)10. Installments of term loans / deferred payment /

credits / debentures /redeemable preference shares (due within one year)

11. Other current liabilities and provisions (due within one year (major items to be specified individually)

12. Current Liabilities SUB-TOTAL (B)(Total of items 2 to 11 )

13. TOTAL CURRENT LIABILITIES (TOTAL OF ITEM A+B)

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TERM LIABILITIES14. Debentures ( not maturing within one year)15. Redeemable preference shares ( not maturing within

one year, but of maturity not exceeding 12 years)16. Term loans (exclusive of installments payable within

one year)17. Deferred payment credits ( exclusive of installments

payable within one year)18. Term Deposits( repayable after one year)19. Other term liabilities20. Total Term Liabilities

(Total of items 14 to 19)21. Total Outside Liabilities

(Total of Item 13 + item 20 )

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NET WORTH

22. Ordinary Share Capital23. Preference share capital (maturing after 12

years)24. General reserves25. Development rebate reserve26 Other reserve( excluding provisions)27. Surplus(+) or deficit (-) in profit and loss account28. Net worth (Total of items 22 to 27 )29. Total Liabilities ( Item 21 + item 28 )

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CURRENT ASSETS

30 Cash and bank balances31. Investments (other than long term investments e.g.

Sinking Funds, Gratuity Fund. Etc.)i. Government and other Trust Securitiesii. Fixed deposits with banks.

32. i. Receivables other than deferred and export receivables ( including bills purchased and discounted by banks)ii.Export receivables including bills purchased and discounted for by bankers)

33. Installments of deferred receivables ( due within one year)

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CURRENT ASSETSContd…

34. Inventory:(i) Raw materials ( including store and other

items used in the process of manufacture)(a) Imported(b) Indigenous

(ii) Stock-in-process(iii) Finished goods(iv) Other consumable spares

35. Advances to suppliers of raw material and stores / spares consumable

36. Advance payment of taxes37. Other current assets ( major item to be specified

individually38. Total Current Assets ( Total of items 30 to 37 )

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FIXED ASSETS

39. Gross block ( land and buildings , machinery, construction-in-progress etc.)

40. Depreciation on date41. Net Block ( item 39 minus item 40 )

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OTHER NON-CURRENT ASSETS 42. Investment / book debts/ advances / deposits, which

are not current assets(i) (a) Investments in subsidiary companies

(b) Others(ii) Advances to suppliers of capital goods / spares and contractors for capital expenditure(iii) Deferred receivables ( other than those maturing

within one year)(iv) Others

43. Non – consumable stores and spares44. Other miscellaneous assets including dues from

directors45. Total other Non- Current Assets (Total of items 42 to

44)

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OTHER NON-CURRENT ASSETSContd…

46. Intangible Assets ( patents, good will, preliminary and formation expenses, bad / doubtful debts not

provided for etc.)48. Total Assets ( Total of items 38,41,45 and 46 )49. Tangible Net Worth ( item 28 minus 46 )50. Net Working Capital ( item 38 minus item 13 )