Financial Statement Analysis Assignment 1

1. Compute the financial ratios for Acme Ltd.

Balance Sheet of Acme Lt d. as at March 31, 20X2
(₹ in million)
20X2 20X1
EQUITY AND LIABILITIES
Shareholder’s fund 440 400
Share capital* 100 100
Reserves and Surplus 340 300
Non-Current Liabilities 180 140
Long-term borrowings 130 100
Deferred tax liabilities (net) 25 20
Long-term provisions 25 20
Current Liabilities 286 208
Short-term borrowings 100 80
Trade payables 152 100
Other current liabilities 24 20
Short-term provisions 10 8
Total 906 748
ASSETS
Non-current Assets 430 410
Fixed assets 355 300
Non-current investments 50 80
Long term loan and advances 25 30
Current Assets 476 338
Current investments 8 10
Inventories 267 166
Trade receivables 190 150
Cash and cash equivalents 6 5
Short-term loans and advances 5 7
Total 906 748
*Par value of share ₹10
Statement of Profit and Loss for the Acme Ltd. For the year ended march 31, 20X2
(₹ in million)
Revenue from operations 800
Other income* 10
Total revenue 810
Expenses
Material expenses 350
Employee benefits expenses 180
Finance costs 60
Depreciation and amortization expenses 50
Other expenses 12
Total expenses 652
Profit before exceptional and extraordinary items and tax 158
Exceptional items -
Profit before tax 158
Tax expenses 48
Profit (loss for the period) 110
Dividends 70
*Consists entirely of interest income.
Calculate the following ratios for the year 20X2.
Current ratio, acid test ratio, debt equity ratio, interest coverage ratio, fixed charges coverage
ratio (assume a tax rate of 31 percent), inventory turnover ratio (assume the cost of goods
sold to be ₹ 450 million), debtor turnover ratio, average collection period, total assets
turnover, gross profit margin, net profit margin, return on assets, earning power, return on
equity.

2. The comparative balance sheets and comparative income statements for MM Ltd, a
machine tool manufacturer, are given below:

Comparative Balance Sheets, MM Ltd.

(₹ in million)
 20X1 20X2 20X3 20X4 20X5
EQUITY AND LIABILITIES
Share capital 2.4 2.4 3.0 3.0 3.2
Reserves and Surplus 0.6 1.0 1.1 1.4 1.8
Long-term debt 1.2 1.3 2.0 2.3 2.8
Short-term Bank borrowings 1.2 1.4 2.1 2.5 2.6
Other current liabilities 1.3 1.8 2.5 3.0 3.1
ASSETS
Net Fixed assets 2.5 3.2 4.4 4.7 4.8
Current Assets
Cash and cash equivalents 0.5 0.6 0.7 0.8 0.7
Trade receivables 1.5 1.6 2.3 2.6 3.2
Inventories 2.0 2.2 3.0 3.7 4.2
Other current assets 6.7 7.9 10.7 12.2 13.5

Comparative Income statements, MM Ltd.

(₹ in million)
20X1 20X2 20X3 20X4 20X5
Revenue from operations 4.0 6.1 7.8 9.1 11.2
Material expenses 2.1 3.0 3.8 4.8 5.3
Employee benefits expenses 0.9 1.3 1.7 1.9 2.0
Finance costs 0.2 0.3 0.4 0.5 0.6
Depreciation and amortization 0.3 0.4 0.7 0.9 1.4
expenses
Other expenses 0.2 0.3 0.6 0.2 0.5
Total expenses 3.7 5.3 7.2 8.3 9.8
Profit before tax 0.3 0.8 0.6 0.8 1.4
Tax 0.1 0.4 0.3 0.3 0.7
Profit after tax 0.2 0.4 0.3 0.5 0.7

Required: (a) compute the important ratios for MM Ltd for the years 20X1-X5.
(b) Graph the trends in these ratios.
(c) Comment critically on the financial strengths and weakness of the firm.
3. An excerpt of the financial statement of Dabur Ltd is given below:

Balance sheet of Dabur Ltd

(₹ in crores)
31, March 2016 31, March 2015
EQUITY AND LIABILITIES
Shareholder’s fund 4160 3354
Share capital (par value 10) 176 176
Reserves and Surplus 3984 3178
Non-Current Liabilities 490 333
Long-term borrowings 341 211
Deferred tax liabilities (net) 76 59
Long-term provisions + minority 73 63
interest
Current Liabilities 2470 2419
Short-term borrowings 450 523
Trade payables 1330 1096
Other current liabilities 357 544
Short-term provisions 333 256
Total 7,120 6,106
ASSETS
Non-current Assets 3829 3375
Fixed assets 1995 1927
Non-current investments and other 1805 1427
assets
Long term loan and advances 29 21
Current Assets 3291 2731
Current investments 736 406
Inventories 1096 973
Trade receivables 810 711
Cash and cash equivalents 220 276
Short-term loans and advances and 429 365
other assets
Total 7,120 6,106
 Statement of profit and loss of Dabur Ltd. For year ending 31 March 2016
(₹ in crores)
Current Period Previous Period
Revenue from operations 8454 7827
Other income 219 158
Total revenue 8673 7985
Expenses
Material expenses 3798 3720
Employee benefits expenses 795 690
Finance costs 48 40
Depreciation and amortization expenses 134 115
Other expenses 2342 2101
Total expenses 7117 6666
Profit before tax 1556 1319
Tax expenses 302 251
Profit (loss for the period) 1254 1068
Price per Share (in rupee) 250
Number of Equity Shares (in crores) 176

a. Compute the following ratios for Dabur Ltd for the year 2016: Current ratio, acid-test
ratio, debt-equity ratio, times interest earned ratio, inventory turnover ratio, total assets
turnover ratio, net profit margin, return on assets, earning power, return on equity,
price-earnings ratio, market value to book value ratio.
b. Prepare the Dupont Chart for the year 2016.
c. Prepare the common size and common base financial statements for Dabur.
d. Identify the financial strengths and weaknesses of Dabur Limited.