project of finance analysis

1

1. OBJECTIVES OF THE STUDY

To analyse the financial position of ProvibTech India Pvt. Ltd.

To assess the operating profitability and efficiency of ProvibTech

India Pvt. Ltd.

To assess the short term liquidity and long term liquidity and solvency

position of ProvibTech India Ltd.

To undertake a comparative intra-firm study of ProvibTech India Pvt.

Ltd.

2

2. INTRODUCTION Finance is defined as the provision of money when it is required. Every

enterprise needs finance to start and carry out its operation. Finance is the

life blood of an organization. So finance should be managed effectively.

Financial Statements are prepared primarily for decision making. Financial

Analysis refers to the process of determining financial strength and

weakness of the firm by properly establishing strategic relationship between

the items of the balance sheet and profit and loss account.

There are various tools and techniques used in analyzing financial

statements are: comparative statement, common size statement, ratio

analysis, fund flow and cash flow analysis is used for decision making by

various parties.

In this project, efforts have been made firstly, to analyse and select the

information which is required for taking decision.

Secondly to arrange the information in a way to highlight significant

relationship.

Finally to interpret and draw conclusions.

3

COMPANY PROFILE

4

3.1. ABOUT PROVIBTECH- INNOVATIVE MACHINE MONITORING

ProvibTech is a growing manufacturer and service provider for vibration

monitoring, measuring and analysis products.

Headquartered in Houston, Texas (United States), with additional offices in

Germany, India and China, ProvibTech has been providing highly reliable

machinery vibration monitoring solutions for leading manufacturers and

public utilities worldwide for more than ten years.

ProvibTech’s broad product line offers solutions for every application, such

as online protection systems for monitoring high-value critical machinery,

portable vibration data collectors for routine predictive maintenance, and

easy-to-use vibration analysis software for balance of plant equipment.

ProvibTech’s robust product designs and ISO 9001 certified manufacturing

capabilities allow us to offer warranty in the industry at two years.

5

ProvibTech’s state-of-the-art R&D facility continues to keep our product

capabilities at the leading edge of the industry, with features such as the

highest channel density of any 19” rack mounted system in the world,

universal interchangeability with sensors from other leading manufacturers,

and an industry-unique proximity sensor caliberation circuit that allows field

linearization for any manufacturers probe and extension cable combination.

ProvibTech’s broad product portfolio includes equipment certified by CSA

and ATEX for use in hazardous areas and products specially designed to

withstand harsh and corrosive environments.

All of this comes with ProvibTech’s strong commitment to providing world

class products and outstanding customer service while offering the best

pricing in the industry.

Having concentrated in machinery protection and vibration monitoring for

more than 10 years.

ProvibTech is strengthening its position in the global market base on the

high technologies reliability and customer service.

ProvibTech provides one of the industry’s complete offerings for the

monitoring and protection of critical machines and balance of plant

machines.

6

ProvibTech will continue to provide the innovative machinery vibration

monitoring products and outstanding customer service which has led to

ProvibTech being the fastest growing vibration company in the world.

Many of ProvibTech's products have explosion area approval. Most of the

products are also certified by CE.

7

3.2. PRODUCTS OF PROVIBTECH

1. Monitors

PT2060 Multi-Channel Critical Machine Monitor

DM200 Dual Channel Vibration Monitor

DTM Series Distributed Transmitter Monitor

DTM10 Proximity Module

DTM20 Seismic Module

2. Transmitters

TM016 Two Wire Velocity Vibration Transmitter

TR Series Transmitters for Vibration and Axial

Position

3. Sensors

Proximity Probes

Accelerometers and Velocity Transducers

Accessories, Cables and Monitors

http://www.provibtech.com/pt2060.htm%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5

http://www.provibtech.com/2-and-3-wire-transmitters.htm%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5

http://www.provibtech.com/proximity-probes.htm%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5

8

4. Vibration Switches

PT500 Mechanical Vibration Switch

VS102 Electronic Vibration Switch

PT580 Digital Electronic Vibration Switch

5. Condition Monitoring

PCM 360 Condition Management System

PCM370 Plant Management System

PT908 Portable Vibration Meter

http://www.provibtech.com/mechanical-vibration-switch.htm%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5

http://www.provibtech.com/plant-condition-20080716.htm%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5

9

3.3. ORGANISATIONAL STRUCTURE OF PROVIBTECH INDIA PVT.

LTD.

President- Mr. Akash Sharma

Managers:

Admin division- Ms.Neha, Mr. Gagan

Finance division- Ms. Sarika, Mr.Kamal, Mr. Neeraj

Marketing division- Mr. Akash Sharma

Service division- Mr. Anand Rajput

President

Manager Manager Manager

Admin

Sales

Admin Division

Finance Division

Finance

Marketing Division

Installation & Commisioning Service

StoreServiceDivision

10

3.4. CLIENTS OF PROVIBTECH INDIA PVT. LTD.

Name of the Company LocationBhagwati Power and Steel RaipurBOC India Ltd KolkataBPCL AllahabadCairn Energy Jodhpur, RajasthanFlaktwoods India ChennaiFlowmore GurgaonGactale Turnkey Projects MumbaiGammon India Ltd MumbaiIndustrial Sales & Services JamshedpurIntelligent Enterprise Solutions Ltd ThailandJaiprakash Power Ventures Ltd. NCRMacawber Beekay Pvt. Ltd KolkataMahendra Sponge & Power Ltd. RaipurMasibus Automation & Instrumentation Pvt. Ltd. GujaratNational Thermal & Power Corporation Ltd. (NTPC) Baren, RajasthanPower Concepts Pvt. Ltd. DelhiPrakash Industries ChattisgarhProtech Monitoring DelhiSai Autotech Vadodara,GujaratSolution Engineering PakistanSolutronix PakistanSparco Cooling Tower Ltd. ThailandSPIG Cooling Towers India Pvt. Ltd. VadodaraVedanta Sterile Energy Ltd. OrissaYokogava India Pvt. Ltd. Bangalore

11

LITRATURE REVIEW

12

4.1. ANALYSIS OF FINANCIAL STATEMENTS

Financial Statement analysis is largely a study of relationship among the

various financial factors in a business as disclosed by a single set of statements

and a study of trend of these factors as shown in a series of statements.

In the opinion of Kennedy and Macmillion- “by establishing strategic

relationships between the components of balance sheet and profit and loss

account and other operative data, it unveils the meaning and significance if

the various items embodied in the financial statements”.

4.2. TOOLS AND TECHNIQUES OF FINANCIAL ANALYSIS

A variety of tools and techniques are available to the financial analyst.

Financial Analyst chooses the techniques to suit the requirements of different

enterprises under different situations.

These tools and techniques are:

I. COMPARATIVE FINANCIAL STATEMENTS

In Comparative Financial Statements, two or more balance sheet and / or the

income statement are shown simuntaneously, in columnor form to facilitate

comparison.

It is a horizontal analysis of the firm in which figures for more than one year

are shown side by side to study the trend of different items.

It can be prepared for both balance sheet and income statement.

13

It is useful for identifying the direction of changes and to study the trend in

different indicators of performance of an enterprises.

Comparative Income Statement

It is prepared to study the trend of different items of income statement by

studying simultaneously the income statement of two or more periods. It is useful

to analyse the changes of amount and direction of changes in sales, cost of goods

sold, operating expenses, operating profit, different heads of expenses and

incomes from one period to another.

Comparative Balance Sheet

It is prepared on the lines of comparative income statements. It is useful for

analyzing the changes in the financial position over a period of two or more years.

It is useful for identifying the direction of changes in the amount of the working

capital, fixed assets, long term liabilities, capital, retained earnings, reserves and

surpluses.

II. COMMON SIZE FINANCIAL STATEMENTS

In Common Size Financial Statements, the relationship of different items

of financial statement is established with some common base.

The sales figure is assumed to be 100 and all figures are expressed as a

percentage of total sales.

Common Size Income Statement

14

It is useful for identifying the relative importance of different components of the

sales revenue. By computing similar ratios for the previous years, the reasons for

the decline or increase in the profit may be identified.

In order to prepare the Common Size Income Statement, the following procedure

is followed:

a) The total of sales revenue is taken as 100.

b) Each item of the expense is expressed as a percentage of total of sales

revenue.

c) Each item of the revenue is expressed as a percentage of total of sales

revenue and the profit is also expressed as a percentage of total sales

revenue.

Common Size Balance Sheet

The procedure for preparing the Common Size Balance Sheet is as follows:

a) The total of the asset side or the total of the capital and liabilities side is

taken as 100.

b) Each type of asset is expressed as a percentage of total assets.

c) Each item on the ‘capital & liabilities’ side of the balance sheet is

expressed as a percentage of total of the capital and liabilities of the

balance sheet.

In order to have a comparison of one year with that of another year, it is necessary

to ensure that the organization has followed consistently the same accounting

policies and practices from year after year.

15

III. RATIO ANALYSIS

Ratio Analysis is a powerful technique of financial analysis.

Ratio is an expression of the quantitative relationship between two

numbers.

The term ‘accounting ratios is used to describe significant relationship

between figures shown on a balance sheet, in a profit and loss account, in a

budgetary system or in any other part of the accounting organization.

Usefulness of Ratio Analysis:

Provides greater insight into the profit ability and financial position of

the concern.

It simplifies the comprehensive financial data available in financial

statements.

It is helpful to assess the operating efficiency of the firm by determining

whether the assets are being used efficiently or not.

It is very useful for planning and forecasting.

It helps in locating the factors which led to the failure of the business,

thus management can take necessary corrective and remedial measures

to overcome them.

It is useful for comparison the performance of the firm with that of other

firm and of industry in general. It also makes the comparison of

different units in the same firm i.e. the intra-firm comparison.

It is helpful in ascertaining the trends in profits, sales, costs etc. and

enables to judge the performance of the concern over the years.

16

IV. CASH FLOW ANALYSIS

Cash Flow Statement analyse the movement of funds in terms of cash i.e.,

cash transactions where cash moved in and out of the organization.

The movement of cash into the organisation, is called cash inflow.

The movement of cash out of the organization is called cash outflow.

Cash Flow Statement is prepared to know the changes in cash position

from one period to another. It is a statement which shows the sources and

applications of cash and the manner in which cash has been utilized during

the year.

It includes only the cash transactions. The cash may be generated from

sources, like, cash operating profit, sale of fixed assets, issue of share

capital for cash, issue of other securities for cash, etc.

The application of cash may be cash operating loss, purchase of fixed

assets, payment of tax, dividend, redemption of debentures, repayment of

borrowings, etc.

If the sources exceed the applications of cash during a year, it would be an

increase of cash and if reverse is the case, the cash balance would decrease

during the period.

This type of financial analysis is useful for short term planning by the firm.

It is an important tool for the management of cash and finds out the

liquidity position of the firm.

In India, the preparation of cash flow statement is governed by AS-3 issued

by Institute of Chartered Accountants of India.

17

RESEARCH METHODOLOGY

18

The study involved internal financial analysis of ProvibTech India Pvt. Ltd.

which is situated at Ashram, South Delhi over a period of 6 weeks.

The study is extended to the accounts department of ProvibTech India Pvt.

Ltd.

During this study, efforts are made to analyse the financial position and

performance of the company in India.

Financial Analysis Tools Used:

Comparative Statements (Income Statement and Balance Sheet)

Common Size Statements (Income Statement and Balance Sheet)

Ratio Analysis

Cash Flow Statement

5.1. RESEARCH DESIGN : DESCRIPTIVE RESEARCH

Descriptive research seeks to describe the current status of an identified

variable.

The researcher does not usually begin with an hypothesis, but is likely to

develop one after collecting data.

The analysis and synthesis of the data provide the test of the hypothesis.

Systematic collection of information requires careful selection of the units

studied and careful measurement of each variable.

19

5.2. SOURCES OF DATA

Primary Data

Secondary Data

To generate primary data for the analysis, discussion was made with

company’s accounts manager and accountants. The data collected

from such discussions are coordinated, analysed and integrated in

this study.

To generate secondary data, various other sources were used:

- Accounting records of the company viz. Annual Audit Financial

Statemens (Income Statement and Balance Sheet)

- Catalogues / Magazines

- Internet

5.3. SAMPLING INSTRUMENT

The Sampling Instrument used in this project study is Financial Statements

(Profit and Loss Account and Balance Sheet) for the last 5 financial years

(2009-13).

20

5.3. LIMITATIONS OF THE STUDY

The study is restricted to a period of six weeks only, so some additional

financial analysis are not covered in this study.

The accuracy of financial analysis largely depends on how accurately

financial statements are prepared.

The financial analysis of financial statements of the concern provides only

the quantitative information about the company’s financial affairs and it

fails to provide qualitative information such as management-employee

relation, customer’s satisfaction, etc.

Past performance (Good or bad) is not a perfect indicator of future

performance.

The financial analysis reveals only the past performance of firm and it is

not necessary that the same conditions have to be repeated in the future.

21

DATA ANALYSIS

22

6.1. COMPARATIVE INCOME STATEMENT OF PROVIBTECH INDIA

PVT. LTD. (FINANCIAL YEARS 2009-13)

Particulars 31.03.09 31.03.10 31.03.11 31.03.12 31.03.13

Net Sales

Less: Cost of Goods Sold

795211.00

785074.45

2856402.34

2731962.96

6025987.71

5859714.27

8401163.42

8044475.46

8093258.00

8271290.00

GROSS PROFIT

Less: Operating

Expenses

10136.55

349187.25

124439.38

1286619.92

166273.44

1855934.68

356687.96

1395770.34

(178032.00)

1137032.00

OPERATING PROFIT

Add: Other Incomes

(15511.04)

-

(242654.80)

526366.18

(1689661.2)

175307.46

(1039082.4)

1337917.00

(1315064.00)

18223.00

EBIT

Less: Interest

(15511.04)

0

283711.38

0

(1514353.7)

684.37

298834.60

17809.00

(1296841.00)

0

EBT

Less: Tax

(15511.04)

0

283711.38

34862.00

(1515038.1)

59130

281025.60

121975.00

(1296841.00)

62690.00

EAT (15511.04) 248849.38 (1574168.1) 159050.6 (1359531.00)

23

Interpretation 1:

Net Sales of ProvibTech India are increasing from 2009 onwards. However

there are low net sales in 2013 (2012-13) i.e. Rs. 80.93 lakhs as compared to

the previous financial year i.e. Rs.84.01 lakhs.

24

The Company has lowest net sales (in Rs.) in 2009 (2008-09) i.e. Rs.7.95

lakhs.

The Company has highest net sales (in Rs.) in 2012 (2011-12) i.e. Rs.84.01

lakhs.

Interpretation 2:

Total Revenue of ProvibTech India is increasing from 2010 onwards.

Increase in Total Expenditure of ProvibTech India is less than the increase in

its Total Revenue in 2010 onwards.

25

2009: The company has incurred highest operating expenditure of Rs. 34.91

lakhs. The company has generated the lowest revenue of Rs. 7.95 lakhs.

2010: The company has incurred lowest operating expenditure of Rs.13.21

lakhs. The company has incurred low operating expenditure as compared to

its revenue and its Total Revenue has increased and is more than that of

previous year.

2011: The company has incurred low operating expenditure as compared to

its revenue. However the same is high as compared to that of previous year.

And its Total Revenue has also increased and is more than that of previous

year.

2012: The Company has generated highest Revenue of Rs.97.39 lakhs. The

company has incurred low operating expenditure as compared to its revenue

and the same is low as compared to that of previous year. Total Revenue has

also increased and is more than that of previous year.

2013: The company has incurred high operating expenditure as compared to

its revenue and the same is high as compared to that of previous year. Total

Revenue has declined and is low than that of previous year.

26

Interpretation 3:

2009: Total Revenue of ProvibTech India started increasing from 2009

onwards. The Company has lowest Revenue of Rs.33.82 lakhs. However in

this financial year the company has high operating expenditure of Rs.7.95

lakhs as compared to its revenue. The Gross Profit of Rs. 10136.5 is lowest

in this financial year.

2010: Total Revenue has increased and is more than that of previous year.

Company’s Operating Expenditure has increased and is more than that of

previous year. However the same has not increased more than its revenue in

27

this financial year. The Gross Profit has increased to Rs. 1.24 lakhs and is

more than that of previous year.

2011: The company has incurred highest operating expenditure of Rs.18.5

lakhs. Increase in total revenue is more than the increase in that of previous

year. The Gross Profit has increased and is more than that of previous year.

2012: Increase in total revenue of the company is more than the increase in

that of previous year. The operating expenditure incurred in this financial

year is less than that of previous year. The Gross Profit has increased and is

more than that of previous year.

2013: The company has generated low total revenue in this financial year as

compared to that of previous year. The operating expenditure incurred in this

financial year is less than that of previous year. The Gross Profit has become

negative (Gross Loss).

28

Interpretation 4:

2009: ProvibTech India has earned the negative EBT/EAT (loss) of

Rs.15511. There is no income tax incurred in this year.

2010: EBT and EAT increased in this financial year. However the increase

in EAT is less than the increase in EBT. The company has paid income tax

from this year onwards.

29

2011: The company has earned a negative EBT and EAT (losses) of Rs. 15.1

lakhs and 15.7 lakhs respectively. The company has paid an increased

amount of income tax as compared to that paid in the previous year.

2012: EBT and EAT increased in this financial year and this increase is

more than that in the financial year 2010. However the increase in EAT is

still less than the increase in EBT. The company has paid an increased

amount of income tax as compared to that paid in the previous year.

2013: The company has earned a very negative EBT and EAT (losses) of Rs.

12.9 lakhs and 13.5 lakhs respectively as compared to that in the financial

year 2011. The company has paid an increased amount of income tax as

compared to that paid in the previous year.

30

6.2. COMPARATIVE BALANCE SHEETS OF PROVIBTECH INDIA

PVT. LTD.

(FINANCIAL YEARS 2009-10)

Particulars 31.03.09 31.03.10 Increase or

Decrease

Percentage

Increase or

Decrease

SOURCES OF FUNDS

Authorised Share Capital

Paid Up Capital

Reserves

Net Profit

1000000.00 1000000.00 - -

100000.00

-

83473.50

100000.00

-

79440.00

-

-

(4033.5)

-

-

(4.83)

100000.00 179440.00 79440.00 79.44

APPLICATION OF FUNDS

Fixed Assets

Less: Depreciation

909864.50

268669.10

1044401.51

420441.11

134537.00

151772.00

149

56.4

Net Block

Investments/Fixed Deposits

641195.40

134000.00

623960.40

903766.00

(17235)

769766.00

(0.26)

57.4

31

Current Assets: 1066886.96 1271096.34 294209.40 27.5

Sundry Debtors

Closing Stock

Cash In Hand

Cash at Bank

Accrued Interest

Security Deposits

Bills Recievables

Advance to Staff

Other Advances

97549.60

-

386733.98

335303.38

-

122300.00

-

125000.00

-

561897.52

-

213444.90

290800.17

25372.38

162260.00

17321.37

-

-

464347.00

-

(173289)

(44503.13)

25372.38

17321.37

(125000.00)

-

47.6

-

(44.8)

(13.2)

100

14.16

100

(100)

-

Current Liabilities 1782218.91 2641881.91 859663.00 482.3

Sundry Creditors

Advances from Customers

Bills Payable

Provision for Income Tax

Other Provisions

Other Liabilities

Preliminary Expenses

Long Term Borrowings

380903.00

-

112281.66

-

-

1289034.25

30000.00

-

564117.67

240561.00

47252.50

34862.00

-

1755088.74

22500.00

-

183214.6

240561.00

(65029.00)

34862.00

-

466054.00

(7500)

-

48.10

100

(57.9)

100

-

36.15

25

-

32



Decrease

Percentage

Increase or

Decrease

SOURCES OF FUNDS


Paid Up Capital

Reserves

Net Profit

1000000.00 1000000.00 - -

100000.00

-

79440.00

100000.00

-

186584.27

-

-

-

-

179440.00 286584.27 107144.00 59.7


Fixed Assets

Less: Depreciation

1044401.51

420441.11

680181.11

211389.59

(364220.40)

(20905.16)

(34.8)

49.7

Net Block


623960.40

903766.00

512744.40

853766.00

(111216.00)

(50000.00)

(17.8)

(5.5)

33

Current Assets: 1271096.34 2236310.35 965214.00 76

Sundry Debtors

Closing Stock

Cash In Hand

Cash at Bank

Accrued Interest

Security Deposits

Bills Recievables

Advance to Staff

Other Advances

561897.52

-

213444.90

290800.17

25372.38

162260.00

17321.37

-

-

680181.11

852663.00

211389.59

4148.00

65381.65

-

17497.00

-

405050.00

118283.6

852663.00

(2055.4)

(286652.17)

40009.30

(162260.00)

175.70

-

405050.00

21.05

100

(0.96)

(98.5)

157.6

(100)

10.01

-

100


Sundry Creditors


Bills Payable


Other Provisions

Other Liabilities



564117.67

240561.00

47252.50

34862.00

-

1755088.74

22500.00

-

696374.17

-

49136.24

59130.00

-

2344695.92

15000.00

-

132256.57

(240561.00)

1883.7

24268

-

589607.2

7500.00

-

23.44

(100)

3.9

69.6

-

33.4

33.33

-

34


Decrease

Percentage

Increase or

Decrease

SOURCES OF FUNDS


Paid Up Capital

Reserves

Net Profit

1000000.00 1000000.00 - -

100000.00

-

186584.27

100000.00

186584.27

234712.96

-

186584.27

48128.70

-

100

25.7

286584.27 521297.23 234713.00 81.9


Fixed Assets

Less: Depreciation

680181.11

211389.59

1129090.50

688351.50

448909.40

476962.00

66

225.6

Net Block


512744.40

853766.00

440739.00

-

(72995.40)

(853766.00)

(14.04)

(100)


35

Current Assets: 2236310.35 1238846.10 (997464.25) (44.6)

Sundry Debtors

Closing Stock

Cash In Hand

Cash at Bank

Accrued Interest

Security Deposits

Bills Recievables

Advance to Staff

Other Advances

680181.11

852663.00

211389.59

4148.00

65381.65

-

17497.00

-

405050.00

-

150477.00

15426.00

773757.83

28880.65

199266.00

36880.00

-

34158.76

(680181.11)

(702186.00)

(195963)

769609.8

(36501)

199266.00

19383

-

(370891.3)

(100)

(82.3)

(92.7)

(185.3)

(55.8)

100

110.7

-

(91.5)


Sundry Creditors


Bills Payable


Other Provisions

Other Liabilities



696374.17

-

49136.24

59130.00

-

2344695.92

15000.00

-

-

-

3757704.84

130335.00

1214707.10

-

7500.00

-

(696374.17)

-

3708568.60

71205.00

1214707.10

(2344695.92)

(7500)

-

(100)

-

75.4

120.4

100

(100)

(50)

-

36



Decrease

Percentage

Increase or

Decrease

SOURCES OF FUNDS


Paid Up Capital

Reserves

Net Profit

1000000.00 1000000.00 - -

100000.00

186584.27

234712.96

100000.00

421297.00

115116.00

-

234712.8

(119596.9)

-

125.7

(50.9)

521297.23 536413.00 15118.8 2.90


Fixed Assets

Less: Depreciation

1129090.50

688351.50

587129.00

110124.00

(541961.5)

(578227.5)

(4.80)

(84.01)

37

Current Assets: 1238846.10 4427384.00 3188538.00 257.3

Sundry Debtors

Closing Stock

Cash In Hand

Cash at Bank

Accrued Interest

Security Deposits

Bills Recievables

Advance to Staff

Other Advances

-

150477.00

15426.00

773757.83

28880.65

199266.00

36880.00

-

34158.76

-

554261.00

6229.00

163062.00

43944.00

286926.00

2223626.00

-

12626.00

-

403784

(9197)

(610695.8)

15063.4

87660.00

2186746.00

-

(21532.7)

-

286.33

(59.6)

(78.9)

52.15

44

592.9

-

(63.03)

Current Liabilities 5098292.00 3751470.00 (1346822) (26.4)

Sundry Creditors


Bills Payable


Other Provisions

Other Liabilities



-

-

3757704.84

130335.00

1214707.10

-

7500.00

-

2705794.00

-

102305.00

62690.00

880681.00

102305.00

7500.00

855500.00

2705794.00

-

(3655400)

(67645)

(334026)

102305.00

-

855500.00

100

-

(97.2)

(51.9)

(27.4)

100

-

100

38

Interpretation 5:

2009: The company has high level of Current Assets of Rs.10.66 lakhs

against its Net Fixed Assets of Rs.6.41 lakhs. Also in this financial year

there are no Reserves and any Long Term Liability.

2010: There is an increase in the level of current assets and fixed assets

from 2009 onwards. Like in previous year, in this year too, the company has

high level of Current Assets of Rs.12.71 lakhs against its Net Fixed Assets

39

of Rs.6.23 lakhs (less as compared to the previous year). Also, there are no

Reserves and any Long Term Liability.

2011: Likewise, in this year, the company has increased level of Current

Assets of Rs.22.36 lakhs against its Net Fixed Assets of Rs.5.12 lakhs (less

as compared to the previous year). Also, there are no Reserves and any Long

Term Liability.

2012: There are reserves of Rs.1.86 lakhs. However the level of current

assets and fixed assets has declined to Rs. 12.38 lakhs and Rs. 4.4 lakhs

respectively.

2013: The company in this financial year observed a tremendous increase in

the level of current assets worth Rs. 44.27 lakhs. Reserves increased to Rs.

4.2 lakhs. While fixed assets’s net block stood at Rs.4.7 lakhs i.e. more than

the previous year. Also, The company undertaken a Long term liability of

Rs. 8.55 lakhs.

40

6.3. COMMON SIZE INCOME STATEMENT OF PROVIBTECH INDIA PVT. LTD.

Particulars 31.03.09 31.03.10 31.03.11 31.03.12 31.03.13

Net Sales

Less: Cost of Goods Sold

100.0

98.7

100.0

95.6

100.0

97.2

100.0

95.7

100.0

102.1

GROSS PROFIT 1.3 4.8 2.8 4.3 (2.1)

Less: Operating Expenses 43.9 45.04 30.7 16.6 14.04

OPERATING PROFIT (42.6) (40.64) (27.9) (12.3) (16.14)

(For Financial Years 2009-13)

41

Interpretation 6:

2009: The Cost of Goods Sold (COGS) of 98.7% is within the percentage of

sales (100%). The Gross Profit is 1.3% of the net sales.


sales (100%). The company has earned maximum gross profit of 4.8% as a

percentage of sales (100%).


sales (100%). The Gross Profit percent fell down to 2.8% .


sales (100%). The Gross Profit percent increased to 4.3% which is low as

compared to that in the financial year 2010.

2013: The COGS has exceeded to 102.1% as the percentage of sales (100%).

This has resulted into a negative gross profit (2.1%).

6.3. COMMON SIZE BALANCE SHEET OF PROVIBTECH INDIA PVT. LTD.

42

(For Financial Years 2009-13)

Particulars 2009 2010 2011 2012 2013

Assets

Current Assets:

Sundry Debtors

Closing Stock

Cash In Hand

Cash at Bank

Accrued Interest

Security Deposits

Bills Recievables

Advance to Staff

Other Advances

100

4.93

-

19.5

16.9

-

6.18

-

6.32

-

100

24.2

-

10.01

12.5

1.09

7.07

0.74

-

-

100

23.3

29.2

7.24

0.14

2.24

-

0.59

-

13.8

100

-

6.35

0.65

32.6

1.21

8.41

1.55

-

1.44

100

-

53.8

0.60

3.53

4.2

27.8

21.5

-

1.22

TOTAL 100 100 100 100 100

Fixed Assets:

Computers

Furniture and Fixtures

Office Equipment

Telephones

5.51

19.5

-

1.08

7.85

13.6

-

0.79

5.52

11.21

-

1.02

2.76

8.98

6.86

-

3.35

-

7.93

-

EPABX

Air Conditioner

Other Fixed Assets

0.44

4.37

1.43

0.32

3.21

11.33

0.22

2.95

0.72

-

-

-

-

3.45

4.21

TOTAL 32.33 37.10 21.64 18.6 18.94

43

TOTAL ASSETS 100 100 100 100 100

Liabilities and Capital 100 100 100 100 100

Current Liabilities:

Sundry Creditors


Bills Payable


Other Provisions

Other Liabilities

21.3

-

6.3

-

-

72.3

21.3

9.10

1.78

1.31

-

66.4

20.9

-

1.47

1.77

-

70.3

-

-

73.7

2.55

-

-

58.7

-

2.22

1.36

19.1

2.22

TOTAL 99.9 99.89 94.44 76.25 255.5

Long Term Liabilities

Unsecured Loan

Capital and Reserves:

Equity Share Capital

Reserves

-

5.6

-

-

3.7

-

-

3.01

-

-

1.96

3.6

18.5

2.17

9.14

Total Shareholder’s Fund 5.6 3.7 3.01 5.56 29.81

TOTAL LIABILITIES AND

CAPITAL

100 100 100 100 100

Particulars 2009 2010 2011 2012 2013

44

Interpretation 7:

2009: The company has 4.93% content of sundry debtors in the total asset

portfolio, 19.5% content of cash in hand in the total asset portfolio, 16.9%

45

content of cash at bank in the total asset portfolio, 6.18% content of security

deposits in the total asset portfolio and 6.32% content of staff advance in the

total asset portfolio.



content of cash at bank in the total asset portfolio, 1.09% content of accrued

interest in the total asset portfolio and 7.07% content of security deposits in

the total asset portfolio and 0.74% content of bills recievables in the total

asset portfolio.


portfolio, 29.2% content of closing stock in the total asset portfolio, 7.24%

content of cash in hand in the total asset portfolio, 0.14% content of cash at

bank in the total asset portfolio 2.24% content of accrued interest in the total

asset portfolio and 0.59% content of bills recievables in the total asset

portfolio and 13.8% content of other advances in the total asset portfolio.

2012: The company has 6.35% content of closing stock in the total asset



interest in the total asset portfolio 8.41% content of security deposits in the

total asset portfolio and 1.55% content of bills recievables in the total asset


2013: The company has 53.8% content of closing stock in the total asset


46


interest in the total asset portfolio 27.8% content of security deposits in the

total asset portfolio and 21.5% content of bills recievables in the total asset


47

Interpretation 8:

2009: The company has 5.51% content of computer in the total asset

portfolio, 19.5% content of furniture & fixtures in the total asset portfolio,

1.08% content of telephones in the total asset portfolio, 0.44% content of

48

EPABX in the total asset portfolio, 4.37% content of air conditioners in the

total asset portfolio and 1.43% content of other fixed assets in the total asset

portfolio.





total asset portfolio and 11.33% content of other fixed assets in the total

asset portfolio.





total asset portfolio and 0.72% content of other fixed assets in the total asset

portfolio.



6.86 % content of office equipment in the total asset portfolio.


portfolio, 7.93% content of office equipment in the total asset portfolio,

3.45% content of air conditioner in the total asset portfolio and 4.21%

content of other fixed assets.

50

6.4. CASH FLOW STATEMENT OF PROVIBTECH INDIA PVT.LTD.

(2009-13)

Particulars 2009 2010 2011 2012 2013Cash Flows from Operating

Activities

Cash receipts from customers

Cash paid to suppliers and

employees

795211.00

430512.70

2856402.34

1812437.22

6025987.70

4872236.00

8401163.42

6174743.72

8093258.00

7087929.00

Total

Less: Income Tax Paid

1225723.70

-

4668839.50

34862.00

10898223.70

59130.00

14575906.40

130335.00

15181187.00

62690.00

Net Cash from Operating

Activities

1225723.70 4633977.50 10839093.70 14445571.40 15118497.00

Cash Flows from Investment

Activities

Interest Received

Less: Purchase of Fixed

Assets

-

909864.50

25372.38 65381.65 28880.65

-

43944.00

-

Net Cash from Investment

Activities

909864.50 25372.38 65381.65 28880.65 43944.00

Cash Flows from Financing

Activities:

Long term loan - - - - 855500.00

Net Cash from Investment

Activities

- - - - 855500.00

Net increase in cash and cash

equivalents 1234367.20 (217792.20) (288707.50) 573646.50 847687.00

51

Cash and Cash equivalents at

the beginning of a period

Cash and Cash equivalents at

the end of a period

512330.00

722037.20

722037.20

504245.00

504245.00

215537.50

215537.50

789184.00

789184.00

1636871.00

Interpretation 9:

52

In 2009, cash flows of ProvibTech India are from- operating activities and

investment activities. Where the former is more than the latter. And Net

Increase in cash is maximum in this year.


investment activities. Where the former is more than the latter. And Net

Increase in cash is minimum in this year.


investment activities. Where the former is more than the latter. And there is

a pinch increase in the cash and cash quivalents.


investment activities. Where the former is maximum and the latter is still

very less than the former. And there is a pinch more increase in the cash and

cash equivalents as compared to that of previous year.


investment activities. This year the former has also declined. However the

company has undertaken financing activity in the form of long term loan.

Also net increase in cash and cash equivalents is much more than that of

previous year.

53

6.5. RATIO ANALYSIS

1) Liquidity Ratios: It refers to the ability of the firm to meet its current

obligations as and when they become due.

Current Ratio: It establishes the relationship between the current assets and

the current liabilities.

Current Ratio= Current Assets

Current Liabilities

54

Interpretation 10:

Year Current Assets Current

Liabilities

Current

Ratio

2009 1066886.96 1782218.91 0.6:1

2010 1271096.34 2641881.91 0.48:1

2011 2236310.35 3331236.48 0.67:1

2012 1238846.10 5098292.00 0.96:1

2013 4427384.00 3751470.00 1.18:0

55

The above table shows the current ratio which has declined from 2009

onwards keeping in view the ideal current ratio. However in 2013, the

same has raised to 1.18:1 which is more than the ideal current ratio.

Inference:

The ideal current ratio is 1:1. This means that the content of current

assets should be same as the content of current liabilities of the

company.

Although from 2009-2012, the actual current ratio is not meeting the

ideal current ratio and it shows that the content of company’s asset is

less than the content of its current liabilities.

But In 2013, the current ratio is 1.18:1. This is a favorable situation

for the company as it shows that its current assets are more as

compared to the current liabilities.

Quick Ratio/Acid Test Ratio/Liquid Ratio : It establishes the relationship

between liquid assets and current liabilities.

Quick Ratio= Quick Assets

Current Liabilities Quick Assets= Current Assets-Prepaid Expenses-Closing Stock

Year Current

Assets

Prepaid

Expenses

Closing

Stock

Quick

Assets

Current

Liabilities

Quick

Ratio

2009 1066886.96 125000.00 - 1782218.91 1782218.91 0.5:1

56

2010 1271096.34 - - 2641881.91 2641881.91 0.48:1

2011 2236310.35 405050.00 852663.00 3331236.48 3331236.48 0.2:1

2012 1238846.10 34158.76 150477.00 5098292.00 5098292.00 0.2:1

2013 4427384.00 12626.00 554261.00 3751470.00 3751470.00 1.02:1

Interpretation 11:

The above table shows the quick ratio which has declined from 2009

onwards. However in 2013, the same has raised to 1.02:1 which is

more than the ideal quick ratio.

Inference:

57

The ideal current ratio is 1:1. This means that the content of quick

assets should be same as the content of current liabilities of the

company.

Although from 2009-2012, the actual quick ratio is not meeting the

ideal current ratio and it shows that the content of company’s asset is

less than the content of its current liabilities.

But In 2013, the current ratio is 1.02:1. This is a favorable situation

for the company as it shows that its quick assets are more as compared

to the current liabilities

2) Activity Ratios/Turnover Ratios/Asset Utilisation Ratios/Efficiency

Ratios:

It is concerned with measuring the efficiency with which the asset is

managed.

It is a measure of movement and reflects how frequently an asset has moved

or turned over during the period.

Stock Turnover Ratio (STR) : It establishes the relationship between the

cost of goods sold during a given period and the average inventory held

during the year by the firm.

58

STR= Cost of Goods Sold (COGS)

Average Inventory

COGS= Net Sales-Gross Profit

Average Inventory= Opening Stock + Closing Stock2

Year Net Sales Gross

Profit

COGS Opening

Stock

Closing

Stock

Average

Inventory

STR

(times)2009 795211.00 10136.55 785074.45 - - - -

2010 2856402.34 124439.38 2731962.96 - - - -

2011 6025987.71 166273.44 5859714.27 - 852663.00 426331.50 13.7

2012 8401163.42 356687.96 8044475.46 852663.00 150477.00 501570.00 16.03

2013 8093258.00 (178032.00) 8271290.00 150477.00 554261.00 352369.00 23.47

59

Interpretation 12:

The above table shows the Stock Turnover Ratio (STR).

In 2009 and 2010 respectively, there are no opening stock and closing

stock of the company. Hence there is no STR.

The STR of the company has increased from 2011 onwards.

Inference:

As such there is no ideal STR. The higher is this ratio, the better it is.

60

Although there is no STR in 2009 and 2010 respectively, but from

2011 onwards the firm has observed an increased STR which is a

positive sign for the company indicating quick sales of its products.

Debtor Turnover Ratio (DTR) : It establishes the relationship between net

credit sales and the average debtors

DTR= Total Sales

Accounts Recievables (Closing)

Average Collection Period (ACP) (in months) = 12

61

DTR

Year Total

Sales

Accounts

Recievables

DTR

(times)

ACP

(approx)2009 892760.00 97549.00 9.15 1.3

2010 3418299.00 561897.00 6.08 1.9

2011 6706168.00 680181.00 9.8 1.2

2012 8401163.42 - - -

2013 8093258.00 - - -

62

Interpretation 13:

The above table shows the Debtor’s Turnover Ratio (DTR).

In 2009, DTR is 9.15 times but in 2010, it fell to 6.08 times.

In 2011, DTR is 9.8 times which is more than that of 2010 (6.08

times) but less than that of 2009.

In 2012 and 2013 respectively, there are no debtors. Hence there is no

DTR.

The approx average collection period in 2009 is approx. 1.3 months.

63



Inference:

As such there is no ideal DTR. The higher is this ratio, the better it is.

Although there is no DTR in 2009 and 2010 respectively, but from

2011 onwards the firm has observed an increased DTR which is a

positive sign for the company indicating highly liquid accounts

recievables.

The Average Collection Period (ACP) should be as low as possible.

ProvibTech India’s ideal ACP is less than 2 months in the financial

years.

And the chart, clearly indicates that the company’s actual ACPs is less

than 2 months i.e. these are meeting with the ideal ACP. Hence, a

positive situation for the company.

64

Creditor’s Turnover Ratio (CTR): It establishes the relationship between

net credit purchases and the average trade creditors.

CTR= Net Credit Sales

Average Accounts Payable

Average Accounts Payable= Trade Creditors + Bills Payable.

Average Payment Period (APP) (in days) = 12

CTR

65

Year Net

Credit

Sales

Trade

Creditors

Bills

Payable

CTR

(times)

APP

(approx)

2009 97549.00 380903.00 112281.00 0.19 63.1

2010 561897.00 564117.00 47252.00 0.91 13.1

2011 680181.00 696374.00 49136.00 0.91 13.1

2012 - 2705794.00 3757704.00 - -

2013 - - 62690.00 - -

66

Interpretation 14:

The above table shows the Creditor’s Turnover Ratio (CTR).

In 2009, CTR is lowest but in 2010 and 2011, it is maximum and

constant.

In 2012 and 2013 respectively, there are no credit sales. However in

both the years bills payable exists. Whereas trade creditors are there

in the former and not in the latter.

67

The approx average payment period in 2009 is approx. 1.19 days.



Inference:

The ideal CTR is neither too low nor too high.

Although there is no CTR in 2012 and 2013 respectively, but from

2009 onwards the firm has observed an increased CTR which is a

positive sign for the company indicating the credit worthiness of the

company.

The Average Collection Period (ACP) should be as shorter as

possible. ProvibTech India’s ideal ACP is 3 days and in the chart it

clearly indicates that ACP is less than 3 days.

It shows that the company is meeting its ideal CTP/ACP.

Fixed Assets Ratio (FAR): It indicates the efficiency of the fixed assets

towards contribution to sales.

FAR= Net Sales

Net Fixed Assets

Net Fixed Assets= Gross Fixed Assets – Depreciation

68

Interpretation 15:

Year Net Sales Fixed

Assets

Depreciation Net

Fixed

Assets

FAR

(times)

2009 795211.00 909864.50 26866.10 641195.40 1.24

2010 2856402.34 1044401.51 420441.11 623960.40 4.55

2011 6025987.71 680181.11 211389.50 5127440.40 8.85

2012 8401163.42 1129090.50 688351.50 440739.00 19.06

2013 8093258.00 578129.00 110124.00 477005.00 16.9

69

The above table shows the Fixed Asset Turnover Ratio (FATR).

In 2009, FATR is lowest but in 2010 onwards, it started increase with

every efficient contribution to sales of the company.

In 2012, the company has witnessed the maximum FATR of 19.06

times.

In this year (2013), this has fallen down to 16.9 times.

Inference:

As such there is no ideal FATR. The higher is this ratio, the better it

is.

ProvibTech India’s FATR has increased in every financial year.

However in 2013, the same has fallen down as compared to that of the

previous year. But still it is satisfactory.

The company is meeting its ideal FATR and this indicates the higher

efficiency in the utilization of the fixed assets.

70

3) Solvency Ratios: These ratios are used to assess the long term solvency of

the business.

Proprietory Ratio: It establishes the relationship between shareholder’s fund

and total assets of business.

Proprietory Ratio= Shareholders’ Fund (share capital + reserves)

Total AssetsYear Share

Capital

Reserves Shareholders’

Fund

Total

Assets

Proprietory

Ratio

(times)2009 100000.00 - 100000.00 1708082 0.050

2010 100000.00 - 100000.00 1805056 0.055

2011 100000.00 - 100000.00 2749054 0.036

2012 100000.00 186584.27 286584.27 1679585 0.17

2013 100000.00 421297.00 521297.00 4904389 0.10

71

Interpretation 16:

The above table shows the Proprietory Ratio of ProvibTech India.

72

In 2011, Proprietory Ratio is lowest but in 2013, it started increasing

with increase in the fixed assets of the company.

In 2012, the company has witnessed the maximum Proprietory Ratio

of 0.17 times.

In this year (2013), this has fallen down to 0.10 times.

Inference:

As such there is no ideal Proprietory Ratio. The higher is this ratio,

the better it is.

ProvibTech India’s Proprietory Ratio has not increased in a stable

manner. This shows that the creditors can be suspicious about the

repayment of their debt which indicates greater risk to the creditors.

As seen in the chart, all the Proprietory Ratios of the company are

below 50%. This is quite alarming to the creditors.

73

7. FINDINGS AND CONCLUSIONS OF THE STUDY

FINDINGS :

ProvibTech India’s cash flow from operating activities i.e. revenue from

sales has increased in 2013.

There are certain heads of the company which are negatively influenced viz.

EAT, Gross Profit and Net Profit due to increased operating expenditure and

it is more than the total revenue of the company.

74

The company has sufficient and infact a good composition of current assets

in its assets portfolio. This shows that the liquidity position of the company

is strong.

In This year (2013), the company has incurred a long term liability in the

form of an unsecured loan.

The liquidity ratios of the company are showing its favourable liquidity

position.

The activity/turnover ratios of the company are showing positive signs.

In this year (2013), the company has no debtors because of which its DTR

could not be ascertained.

In this year (2013), the company has no creditors because of which its CTR

could not be ascertained.

Proprietory Ratios of ProvibTech India over the years may indicate a quite

alarming for its future creditors.

75

CONCLUSIONS:

Financial analysis is the process of selection, relation and evaluation. The

focus of financial analysis is on key figure in the financial statements and the

significant relationship that exist between them.

The analysis of financial statements is a process of evaluating the

relationship between component part of financial statement to obtain a

better understanding of the firm’s position and performance.

76

This financial analysis is done using the tools like ratio analysis and

common size balance sheet. These tools show us the company position in

terms of liquidity, profitability, solvency, bankruptcy and stability.

By using these tools we came to a conclusion that the firm should improve

its sales by improving its marketing technique like advertisement in

newspaper, television, radio etc. so that it can gain goodwill and publicity.

The company should produce products that competes the competitors and

make available to public at a reasonable rate and time. Even it should use the

present new technology and improve the consumption of resource

efficiently.

Since it’s a Private Ltd. firm and cannot generate additional funds from

public issue of shares, it may go for long term debt/loan from banks to fulfill

its funding requirements.

In the changing economy scenario the financial performance has to be better.

Even though the firm’s profitability, liquidity and other positions are

satisfactory it can even reach higher position or increase its profit if the

above said suggestion are considered.

77

8. RECOMMENDATIONS

The company may undertake measures to control its operating expenditure

since from the last few financial years it has incurred more operating

expenditure than its total revenue which has resulted into negative profits.

Since ProvibTech is a Pvt. Ltd. Company so it may raise additional funds

from the bank to undertake marketing initiatives for its brand promotion. It

may help it increasing its sales.

The creditors may find become suspicious about the unsecured loan taken up

by the company in 2013 only because the company’s proprietory ratio is not

78

satisfactory. So, it may keep some amount as reserves to meet unforeseen

circumstances in the future.

In 2011, the company’s DTR has fallen down as compared to its previous

financial years. Consequently, In 2012 and 2013, there are no debtors of the

company because of which its DTR is nil. Ideally, DTR should be as high as

possible. But low or no debtors indicates that the company has no accounts

recievables in its current asset portfolio. So the company may decide to

change this situation and may opt for liberal credit policy but it should

neither be too liberal nor too restrictive.

In the past financial year as well as in this current year (2013), there are no

trade creditors of the company because of which its CTR is nil. It indicates

that the company has no short term creditors.

Low or no trade creditors seems as a good indicator that the company is

operating with good liquidity, provided that its liquid assets are sufficient

enough to do so.

In 2011, the CTR of the company is high as compared to that in the previous

year. However the average credit period allowed by its suppliers is same as

it was in the previous year. So the company may change this situation and its

CTR should neither be too low or too high.

project of finance analysis

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