c
c


  
c

cc

 
c

 


Financial Accounting


 !


"
 #
$ %&$

 c'$

 ()*

 
 '&+! 

It is my great pleasure and privilege to present this Project Report to Sydenham Institute of
Management Studies, Research and Entrepreneurship Education. The Report is based on the
project entitled ³
   
   



This report bears the imprint of many people. This acknowledgement is humble attempt to
earnestly thank all those who were directly or indirectly involved in the completion of the project
and were of immense help to me.

I am grateful to our Accounting Faculty, to ,
$ ! - for his valuable guidance
and explanation of concepts and giving us this wonderful opportunity to learn and understand the
practical significance of Ratio analysis and Accounting as a subject in whole. To know in detail
about how exactly these concepts are used in the real life world gave us an opportunity to apply
what we have been taught in the class.

I would also like to mention that the regularly updated books and the reference material available
in our college library have provided excellent help.

 
 "
˜ERGER PAINTS is the culmination of over seven-decade process of evolution and growth that
began in 1923. Its growth has been closely linked with the business and industrial development
of modern India.

˜ERGER'S performance is anchored today in a wide variety of Decorative and Industrial paints
which continue to gain an increasing share of the highly competitive Indian paint market. ˜eing
an ISO 9001 company its quality products have attained instant recognition, worldwide, and
continues to meet quality requirements that are demanded today even in the domestic market.

The Country's second largest decorative paint player, ˜erger is headquartered in Calcutta and
services the market through a distribution network comprising of 82 stock points and 12,000+
paint retailers.

Today the names "˜erger" and "Lewis ˜erger" are synonymous with colour. ˜erger Paints
continues to be inspired by the creation and innovation of Mr. Lewis ˜erger, who through his
marvelous shades, had offered people a chance to transform their homes through the power of
imagination. At ˜erger we believe in taking paints to the level of fine art. Enriched by the
imagination of Lewis ˜erger since 1760.

'
.

/0. http://www.bergerpaints.com/
 "12'$
!
'c$ 3333333333,,3333333333333 333333333333333,,33333333
 456 45(
 )2 $ )2 $

c%'%!
Total Share Capital 63.77 63.77
Equity Share Capital 63.77 63.77
Share Application Money 0 9.9
Preference Share Capital 0 0
Reserves 284 350.37
Revaluation Reserves 1.24 1.09
Net Worth 349.01 425.13
Secured Loans 99.84 78
Unsecured Loans 21.08 0.06

0 )25,(2 76,58
0 *8(,(9 :59,)(

""'%!
Gross ˜lock 275.22 322.68
Less: Accumulated 141.51 160.37
Depreciation
Net ˜lock 133.71 162.31
Capital Work in Progress 24.71 18.82
Investments 21.85 29.52

Inventories 269.1 266.33

Sundry Debtors 158.44 180.38
Cash and ˜ank ˜alance 39.51 23.96
% *87,5: *75,87

Loans and Advances 61.24 61.6

Fixed Deposits 0.39 7.91
; :26,86 :*5,)6
!<'
Deferred Credit 0 0
%0 225,)6 2)(,6(
Provisions 18.82 27.74
 ;< 29( 2*7,89
% 26(,86 2(2,::
Miscellaneous Expenses 0 0
 *8(,(: :59,2

Contingent Liabilities 70.04 34.44

˜ook Value (Rs) 10.91 12.99
 
 "12'  
!  
;''% 3333333333333,,333333333333 33333333333,,333333333333
 456 45(
 )2 $ )2 $

' 
Sales Turnover 1,521.80 1,688.66
Excise Duty 182.4 177.7
Net Sales 1,339.40 1,510.96
Other Income 15.22 25.64
Stock Adjustments 12.81 14.16
'  )987,*9 )::5,78

="!%
Raw Materials 886.65 1,027.64
Power & Fuel Cost 15.05 17.18
Employee Cost 68.19 77.21
Other Manufacturing 19.81 20.5
Expenses
Selling and Admin Expenses 200.02 224.84
Miscellaneous Expenses 27.44 30.33
Preoperative Exp Capitalized 0 0
=" )2)7,)8 )9(7,75

" )9:,5: )27,*2

P˜DIT 150.27 153.06
Interest 12.78 15.33
P˜DT 137.49 137.73
Depreciation 18.65 20.4
Other Written Off 0.08 0
 = ))6,78 ))7,99
Extra-ordinary items 0 5.42
P˜T (Post Extra-order Items) 118.76 122.75
Tax 26.7 34
"! (2,56 66,78

Total Value Addition 330.51 370.06

Preference Dividend 0 0
Equity Dividend 15.94 19.13
Corporate Dividend Tax 2.71 3.25

$!>%?!@
Shares in issue (lakhs) 3,188.72 3,188.72
Earnings Per Share (Rs) 2.89 2.78
Equity Dividend (%) 25 30
˜ook Value (Rs) 10.91 12.99
Face Value (Rs.) 2 2


















c,
  % 5( 56  

Current ratio helps you
to ascertain the short
=(266.33+180. =(269.1+158.4
Current Assets/ term solvency of the
38+23.96) 4+39.51)/220.
1. Current ratio Current firm. ˜erger Paints¶
/219.89 18
Liabilities Current ratios are 2.14 &
= 2,)* = 2,)2
2.12. Solvency of this
firm has improved.
It gives better picture of
=(540.18- firms¶ ability to meet it
Quick =(528.68-
266.33)/ short-term debts from its
2. Quick Ratio Assets/Quick 269.1)/239
247.63 short-tem assets.
Liabilities = ),56
=),57 Immediate solvency has
come down.
˜erger Paints¶ debt
equity ratio is very low.
It indicates that it is a
conservative company
which doesn¶t believe in
=78.06/425.13 =120.92/349.0 taking debts
Debt-Equity
3. Debt/ Equity 1 (conservative attitude).
ratio
= 5,5)6 =5,9: Hence it will not have to
pay out a lot on interest.
Long term solvency of
this firm is good as it has
redeemed some of its
debt.
It indicates the general
profitability of the
business. For the
Gross Profit /
company ratio are less
Net sales
than 10%; which
=(1510.96- =(1339.40-
indicates less than
Gross Profit (Gross 1397.10)/1510 1217.16)/1339.
4. adequate coverage of
Ratio Profit=Net .96 *100 40 *100
operating expense, and
sales-Cost of =7,:A = (,)A
build up of reserves. The
Goods Sold)
decrease in this ratio
shows that cost of sales
have increased over the
period.
=88.76/ =92.08/1339.4 It is useful to proprietors
Net Profit Net Profit /
5. 1510.96 0 as in it gives the idea of
Ratio Net sales
=:,67A =8,67A efficiency as well as
 profitability of the
business. In this
company net Profits
have decreased which
means operational
efficiency has gone
down.
This ratio indicates the
Proprietors =425.13/503.1 =349.01/469.9
Proprietors extent to which Tangible
6. Fund / Total 9 3
Ratio Assets are financed by
Assets =5,6**68 =5,7*286
Owner¶s Fund.
This ratio is of practical
importance to
prospective investors
and share holders. If
Return on Net Profit After =88.76/425.13 =92.08/349.01 ratio is higher they feel
7. Proprietors Tax/ Proprietors =5,25676 =5,28969 confident and
Fund Fund >25,676A@ >28,969A@ encouraged to invest in
the company. Decrease
in this ratio indicates that
firm is generating less
returns for its owners.
EPS indicates the
quantum of net profit of
(Net Profit After
=(88.76*10^7- =(92.08*10^7- the year that would be
Earnings Per Tax±Preference
8. 0)/ 318872000 0)/ 318872000 ranking for dividend for
Share(EPS) Dividend)/No of
= 2,769:: = 2,66786 each share of the
Equity Share
company being held by
the equity share holders,
PE Ratio indicates the
number of times the
Earning Per Share is
covered by its market
Price/ =40.55/2.7835 =38.15/2.8876
Market Price price. Market price has
9. Earnings 5 8
Per Share / EPS increased in spite of
Ratio = )*,:8779 =)9,2))9
earnings going down
which means firms
market price is
overvalued.
This ratio is often used
as a measure in
Fixed Asset =1510.96/(162 =1339.40/(133 manufacturing
Net sales/total
10. Turnover .31+18.82) .71+24.71) industries, where major
fixed assets
ratio =6,9*)6:* =6,8797*7 purchases are made for
PP&E to help increase
output. A higher fixed-
 asset turnover ratio
shows that the company
has been more effective
in using the investment
in fixed assets to
generate revenues. Firm
is generating less sales
from given fixed assets.
Dividends are a form of
profit distribution to the
=15.94*10^7/ shareholder. Having a
Sum of
=19.13*10^7/ 318872000 growing dividend per
Dividend Per dividends over a
11. 318872000 share can be a sign that
Share period /No. of
=5,:(((272* =5,*((667 the company's
Equity shares
 management believes
that the growth can be
sustained. 
=0.59992724/
Average 40.55 =0.499887/38.
This ratio throws light
Dividend Dividend Per = 15
12. on effective rate of
Yield Share/Price per D D
 =5,57:8(27(
return on investment.
share  

Debtors¶ turnover ratio

or accounts receivable
turnover ratio indicates
Net Credit =1,510.96/ the velocity of debt
=1,339.40/((143
Debtors Sales/Average ((158.44+180.3 collection of a firm. In
.52 +158.44)/2)
13. Turnover Account 8)/2) simple words it indicates
= 6,67)9798(
Ratio Receivables =6,()6(:*5)7 the number of times
(Debtors) average debtors
(receivable) are turned
over during a year.

It is used to compare
( Net Profit after =(88.76/425.13 =(92.08/349.01)
Return on performance of
Tax/ )*100 *100
14. Shareholders company¶s equity capital
Shareholders = 25,6769A =28,9692A
Fund with those of other
fund )* 100 
companies.
It is indicator of earning
Net profit before =(153.06/503.1 power of the capital
=(150.27/469.9
Return on interest and 9)*100 employed in the
3)*100
15. capital Tax/Total =95,*)7(9A business. It acts as a
=9),(77)A
employed capital pointer to management
employed *100 showing the progress /
deterioration in the
 earning capacity of the
business.
It tells about the
=(88.76/503.20 =(92.08/469.95 profitability of the
ROA(Return (Net Profit /Total )*100 )*100
16. company in terms of its
on Assets) Assets)*100 =)7,89()A =)(,:(98A
assets utilization.

Comparison of expense
ratio with the
(Expenses
corresponding ratios of
Considered/Net
=((17.18+77.21 previous years provides
Sales)*100 =((15.05+68.19 valuable information as
+20.50+224.84
+19.81+200.02+
+ to the direction in which
Expenses (Expenditure 30.33)/1510.96)
27.44)/
17. 1339.40)*100 economies are ought to
Ratio may be Cost of *100
=2*,87:(7A be affected.
Production or =ÿ
A Expense ratio enables
cost of sales,
the management in
Admin or
controlling costs and
selling, etc.)
improving the
managerial efficiency.
A lower P/˜ ratio could
mean that the stock is
undervalued. However,
Market it could also mean that
Price to =40.55/12.99 =38.15/10.91
18. Price/˜ook something is
˜ook Ratio = 9,)2)982 =9,*(87(2
Value fundamentally wrong
with the company. As
with most ratios, this
ratio varies by industry.
A measurement
comparing the depletion
of working capital to the
generation of sales over
Working Net =1510.96/(540 =1339.40/(528 a given period.
19. Capital Sales/Working .18-247.63) .68-239) This provides some
Turnover Capital(CA-CL) =:,)*87 =*,8297 useful information as to
how effectively a
company is using its
working capital to
generate sales.
Therefore stock should
not exceed the Working
Stock to =266.33/(540. =269.1(528.68
(Stock/Working Capital. If Stock is
20. Working 18-47.63) -239)
Capital) greater than WC then it
Capital B5,()597 B5,(26(:8
indicates there will be a
fall in the value of stock
 in the near future.
Therefore Working
Capital should always be
greater.