ZeePedia Add to Favourites   |   Contact us


Financial Statement Analysis

<<< Previous ANALYSIS OF BALANCE SHEET & INCOME STATEMENT Next >>>
 
img
Financial Statement Analysis-FIN621
VU
Lesson-44
ANALYSIS OF BALANCE SHEET & INCOME STATEMENT
5
1
Fixed Assets
a) Decreasing.
b) No depreciation reserve (unable to replace old
assets out of its own resources).
·
Bibo had made counter claims
6
1
Current Assets:
·
These are doubtful debts.
·
No provision for bad debts.
m Bibo:Rs.17 m
·
Liquidity overstated.
·
Interest
treated
as
miscellaneous
-Book  debt
=
Income.
Rs.6.71 m
·
Treating interest as misc. income  understated
on 30.06.72
operating losses by Rs.10.29 million.
·
Accumulated loss rises from 114 million to 124
-Interest over the=
million.
Rs.10.29 m
period 1972-80
____
17
m
7
1
Other Receivables
·
Loans given to cane growers.
·
Aging detail.
·
Loans of Rs.0.5 million outstanding for 6-10
years.
·
Doubtful/bad loans.
·
No provision.
·
Liquidity overstated.
8
3
Liquidity
·
Current and quick ratios.
·
Poor liquidity.
·
Actual ratios much lower in view of doubtful
debts.
·
Cannot repay its current obligations.
Table-2
ACCUMULATED LOSS
Rs. in million
At the end of year
1976-77
1977-78
1978-79
1979-80
Loss for the year
9.5
16.0
12.03
19.8
Accumulated loss
66.0
82.0
94.3
114.1
% increase in accumulated loss
24%
43%
73%
over base year (1976-77)
157
img
Financial Statement Analysis-FIN621
VU
Table-3
CURRENT AND QUICK RATIOS
Rs. in million
Year end June 30
1977
1978
1979
1980
Current assets
33
40
35
24
Current assets less inventory & pre- 19
19
21
22
paid
Current liabilities
40
55
53
51
Current ratio
0.8:1
0.7:1
0.6:1
0.5:1
Quick ratio
0.5:1
0.3:1
0.3:1
0.4:1
Table-4
XYZ SUGAR MILLS
PROFIT AND LOSS ACCOUNT
Rs. in thousands
Year
1976-77
1977-78
1978-79
1979-80
Sales
58,000
%
52,000
%
42,000
%
20,000
%
Cost of Sales
Cane, carriage & 35,000
60
38,000
73
24,000
57
16,000
80
incidentals
Salaries & Wages 6,000
10
7,000
13
6,000
14
6,000
30
Excise duty
15,000
26
11,000
21
11,000
26
2,000
10
Depreciation
1,000
2
1,000
2
800
2
800
4
Others
3,000
5
3,400
7
3,000
7
2,000
10
Total:
60,000
103
60,400
116
44,800
106
26,800
134
Gross Profit (loss) (2,000)
3
(8,400)
16
(2,800)
6
(6,800)
34
Operating & non-operating expenses
Admin & selling
3,000
5
3,000
5
4,000
10
5,000
25
Financial
4,500
8
4,600
9
5,500
13
8,000
40
Total:
7,500
13
7,600
14
9,500
23
13,000
65
Operating (loss)
(9,500)
16
(16,000)
30
(12,300)
29
(19,800)
99
158
img
Financial Statement Analysis-FIN621
VU
`Others' consist of:
-
Cloth & packing material
-
Stores & Spares
-
Insurance
ANALYSIS OF PROFIT & LOSS ACCOUNT
No.
DATA/FACTS/DOCUMENTS
FINDING
1.
Table-4 Profit & Loss Accounts
·
Bottom line figures: operating losses.
·
Never made profit.
2.
Table-4
-do-
·
Various costs as % of sales.
·
Constantly reducing sales.
3.
Table-5 Production and capacity
·
Reduced sugar production.
Utilization.
·
Below capacity utilization.
4.
Non availability of cane; feasibility report
·
Erroneous assumption in PC 1
5.
Table-6 Sugarcane procured locally
·
Only 5 to 44% of plant's requirement (of
185,000 tons) met locally.
6.
Table-7 Total procurement of cane.
·
Cane crushing capacity = 1500 tons/day
normal crushing season = 120 days.
·
Full requirement of cane never met.
·
During 1979-80, growers switched to
turmeric, they also preferred gurmaking
due to its high price.
7
Table-8  Area-wise
procurement of
·
Between 42% to 60% cane brought from
sugar-cane
far-off places.
·
Result
was
excessive
cost
of
transportation, drying up of cane (less
recovery percentage).
8
Table-9 Cost of transportation
9% to 14% of cost of cane.
9
Table-10 Per ton cost of
·
Between Rs.15 to 21.
transportation.
·
Double the cost of other factories.
10
Table-4 P&L Account
·
High percentage of sale revenues.
Cane, Chemical and
·
Include increased cost of transportation.
incidentals.
11
Table-4 Salaries, Wages and
·
Constantly increasing as % of sales.
benefits.
·
Heavy fixed cost due to:
- normal increases.
- increase in employee strength.
159
img
Financial Statement Analysis-FIN621
VU
12
Table-11 Employees strength
·
53-73% over PC1 strength/seasonal staff
as routine.
13
Table-12 Cost of establishment
·
Very high due to:-
per ton of sugar produced
- excess employees.
- reduced production.
14
Table-13 Productivity per employee
·
Decreasing.
15
Table-4 Administrative expenses
·
Increasing as % of sales.
·
Excess employee strength.
16
Table-4 Financial expenses
·
Increasing as % of sales
Table-14
(range: 8% to 40%)
·
Why? Because of increased debt burden,
and Unit's inability to pay owing to
persisting losses: vicious circle.
Table-5
PRODUCTION AND CAPACITY UTILISATION
TONS
1976-77
1977-78
1978-79
1979-80
Cane crushing capacity
185,000
185,000
185,000
185,000
Cane crushed
140,292
166,271
93,931
14,375
Capacity utilization
76%
90%
51%
8%
Sugar produced
11.344
14,015
8,007
1,206
% recovery
8.08%
8.43%
8.55%
8.38%
Table-6
PROCUREMENT OF SUGAR CANE LOCALLY
1976-77
1977-78
1978-79
1979-80
160
img
Financial Statement Analysis-FIN621
VU
Quality procured (Tons)
81,444
81,367
37,857
8,392
Procurement  as
%
of
total 44%
44%
20%
5%
requirements.
Table-7
TOTAL PROCUREMENT OF SUGAR-CANE
1976-77
1977-78
1978-79
1979-80
·
Cane procured (tons)
140,292
166,271
93,731
14,375
·
% of requirement
76%
90%
51%
8%
Table-8
AREA-WISE PROCUREMENT OF SUGAR-CANE
TONS
1976-77
1977-78
1978-79
1979-80
Qty
%
Qty
% Qty
%
Qty
%
Sugar-cane
produced from
· Local area
40%
49% 37857
81367
58%
81444
58%
8392
17%
27% 15976
44415
20%
Distt. 28316
6%
801
·A
(200km
North)
20%
11% 19164
18361
9%
12395
17%
2439
·B
Distt.
(150km
14%
11% 12870
18268
12%
16707
18%
2627
South)
·C
Area
9%
7864
2%
3860
1%
(150km East) 1430
1%
116
·D
Area
(300km
100%
100% 93,731
166,271
140,292 100%
100%
14,375
West)
Total:
161