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INDUSTRIAL BACKGROUND
For the Indian Retail Industry, these are exciting times. An economic recession or two notwithstanding, the Indian retail industry has been growing at a fast clip. The current size of the overall retail market in India is estimated to be about USD 400 billion ( Rs 18,00,000crores), and the industry has been clocking healthy two digit growth rates over the last many years. Currently, the Indian retail market is the fifth largest in the world, and is one of the fastest growing among the emerging markets category. While the present scenario is exciting, the future seems to be still brighter. It is expected that retail will contribute about 23% of the overall GDP within the next three years, and the market size estimates vary between USD 750 billion (Rs 35,00,000 crores) to a mind boggling USD 1.25 trillion (Rs 55,00,000 crores), depending upon which analyst you want to believe. While these figures are understandably minded boggling, these numbers are hiding a curious story which needs to be told. To put things in proper perspective, I would again present a set of figures about the biggest retailer in the world, Wal Mart. In fact, calling Wal Mart a retailer would be a huge understatement many people believe it is an industry in itself. Why? Here is why Wal Mart 2009 turnover was an estimated USD 400 billion dollars (approx), almost equal in size to the WHOLE of Indian retail Industry. Another fact The number of employees in Wal Mart stores is around 1.3 million (13 lakhs), about the size of the Indian Army!
A Study on Financial Statement Analysis of UniverCell Besides there are a number of reasons which clearly vouch for the fact that India will continue to be dominated by small retailers for a long time to come. Such as
Even the biggest of domestic players in organized retail lack the muscle and resources to cater to significant proportion of Indian population. It takes a lot of time and money for an organized retailer to show decent profits in Indian situations, and the weaker ones will continue to fall by the wayside remember Shubhiksha!
The bulk of future growth in retail will come from rural population, which is a segment that organized retailers will not be able to cover for a number of reasons poor infrastructure, operational difficulties, and remoteness of markets and the sheer size of the Indian market.
Peculiarities of the Indian customers, which make it a very unpredictable lot. Even for a large section of able and affluent buyers, malls are mostly for hanging out and family outings purchasing is still done at the friendly neighborhood kirana store. And however much marketing gurus like to tout the changing mindset and the increased purchasing power of the Indian customer the truth is she still feels that supermarkets/malls are expensive.
The biggest draw for organized retail all over the world has been an innovative format called the discount stores. These stores sell grocery items at hugely discounted prices, for the simple reason that high margins make such a move possible. In India, the margins are already wafer thin, even at the retailers level. Therefore,
A Study on Financial Statement Analysis of UniverCell supermarkets will find it very hard to attract customers on the price front unless they are ready to bear huge losses for a long, long time.
Despite of what the media and business leaders want us to believe, the average Indian customer has very limited purchasing capacity. Even the affluent buyers are not profligate spenders we Indians love to extract maximum value for money. Purchasing at the local kiranawalla gives us valuable opportunity to bargain!
Most important of all, the smaller retailers, shopkeepers and kiranawallas are learning very fast, and are willing to provide exceptional customer service at no extra cost. For example, my residence is about the same distance from the nearest supermarket, and the nearest kirana store. I have to make a phone call to the kirana shop, and the delivery boy will reach my place within 10 minutes, even if I order goods worth Rs 50. On the other hand, the supermarket undertakes to home deliver all purchases above Rs 2000 within 24 hours of purchase, within two kilometers! Ahh, the virtues of competition customer is truly the king!
THEORETICAL BACKGROUND:
Introduction to finance
According to Gutham and Dougali, Business finance can be broadly defined as the activity concerned with planning, raising, controlling and administering of funds used in the business Finance studies and addresses the ways in which individuals, businesses and organizations raise, allocate and use monetary resources over time taking into account the risks entailed in the projects. The term Finance may thus incorporate any of the following: The study of money and other assets The management and control of those assets Profiling and managing project risks The science of managing money As a verb, to finance is to provide funds for business or for an individuals large purchases (car, home, etc)
To pay for purchase of raw materials, wages etc To replace existing assets or acquire new assets To hold stock of materials and finishing goods To expand the existing business
Finance function
Finance function includes: Investment decision Finance decision Dividend or Project allocation decision Liquidity decision
A Study on Financial Statement Analysis of UniverCell So the analysis simply states two main aspects of financial management like procurement of funds and an effective use of funds to achieve business.
A Study on Financial Statement Analysis of UniverCell growth rate it is more important to have sound financial management since finance alone guarantees their survival. Financial management is very important in case of non-profit organizations, which do not pay adequate attentions to financial management. However a sound system of financial management has to be cultivated among bureaucrats, administrators, engineers, educationalists and public at large.
FINANCIAL PERFORMANCE
Financial Performance is about knowing how the firm is doing and what its financial condition is. The stakeholders of a firm viz., shareholders, creditors, suppliers, managers, employees, tax authorities, and others are interested in broadly knowing about the firms financial conditions. Of course, their specific concern may differ. Trade creditors and short - term lenders are interested primarily in the short term liquidity of the firm and its ability to pay its dues in the next 12 months or so. Term lending institutions and debentures holders have a relatively longer time horizon and are concerned about the ability of the firm to service its debt over the next five to ten years. Long term shareholders and managers who want to make a career with the firm are interested in the profitability and growth of the firm over an extended period of time. To understand the financial performance and condition of a firm, its stakeholders look at their financial statements. The Balance Sheet The Profit and Loss Account
A Study on Financial Statement Analysis of UniverCell Financial analysis depends primarily on financial statements to diagnose financial performance. If properly analyzed and interpreted, financial statement can provide valuable insights into a firms performance. Financial Statements, their uses and significance The two financial statements viz. the Balance Sheet and the Profit and Loss Account aid the understanding of a firms financial performance.
Balance Sheet
The Balance Sheet shows the financial condition of a business at a given point of time, in terms of assets and liabilities. Assets are classified into the following categories: fixed assets, investments, current assets, loans and advances and miscellaneous expenditures and losses. Liabilities are classified as follows: share capital, reserves and surplus, secured loans, unsecured loans, current liabilities and provisions. As per the Companies Act, the Balance Sheet of a company shall be in either the horizontal form or the vertical form.
A Study on Financial Statement Analysis of UniverCell the company for the accounting period. The important items in the profit and Loss Account are: net sales, cost of goods sold, gross profit, operating expenses, operating profit, non-operating surplus/ deficit, profit before interest and tax, interest, profit before tax, tax, and profit after tax. Thus the Balance Sheet shows the financial position or condition of a firm at a given point of time. It provides a snapshot and may be regarded as a static picture. The income statement referred to in India or Profit and Loss Account reflects the performance of a firm over a period of time. With this background of Financial Performance, Financial Statement Analysis with special reference to Ratio Analysis is studied in depth as a main objective of the project under consideration. Note that the Companies Act requires that the Annual Report of the company, a public document that is sent to shareholders, contain the Balance Sheet, the Profit and Loss Account, the Directors report, and the Auditors report. Though not presently required by law, most companies present Fund Flow Statement and Cash Flow Statement as well in the Annual Report.
A Study on Financial Statement Analysis of UniverCell by a single set of statements, and a study of the trend of these as shown in a series of statements. In words of Metcalf and Titard, Analyzing financial statements is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance.
A Study on Financial Statement Analysis of UniverCell for future earning, ability to pay interest and debts maturities (both current and long term) and probability of a sound dividend policy.
NATURE OF FINANCIAL STATEMENTS The American Institute of Certified Public Accountants States the nature of financial statement as Financial Statement are prepared for the purpose of presenting a periodical review of report on progress by the management and deal with the states of investment in the business and the results achieved during the period under the view. They reflect a combination of recorded facts, accounting principles and personal judgements. The following features explain the nature of financial statement: Recorded facts Conventions Postulates Personal Judgement
Recorded facts
The term recorded faces refers to the data which are taken out of accounting records. The records are maintained on the basis of actual cost data. The historical cost is the basis of recording various transactions. The figures of various accounts such as cash in hand, cash at bank, bills receivables, sundry debtors, land & building, furniture, are taken as per the figures recorded in the accounting books.
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Conventions
Certain accounting conventions should be followed while preparing financial statements. The materiality convention is followed in dealing with small items like pencils, match box, postal stamps etc. These items are treated as expenditure in the year in which they are purchased even though they are assets in nature. The accounting conventions make financial statements more simple and realistic.
Postulates
The accountant follows certain basic assumption while making accounting records. One of the assumptions is the business entity concept. This means business and businessman are two separate persons. So if the businessman used any goods or cash from business, it will be treated as drawings. Another important assumption is that the concern is treated as a going concern. The other alternate to this assumption is that the concern is to be litigated. These assumptions are known as postulates.
Personal Judgement
Although during the preparation of financial statements certain accounting concepts, principles are followed, but still personal judgement of accountant plays an important role. The selection of depreciation method, period for writing off intangible assets is some of the examples where judgement of the accountant will play an important role in selecting the most appropriate course of action.
A Study on Financial Statement Analysis of UniverCell To interpret the profitability of various business activities with the help of profit and loss account. To measure marginal efficiency of the firm To measure the short term solvency of the business To ascertain earning capacity in the future period To determine future potential of the concern To measure utilization of various assets during the period To compare operational efficiency of similar concerns engaged in the same industry
A Study on Financial Statement Analysis of UniverCell There are two broad categories or classifications of financial analysis, and these are made on the basis of:
Nature of the analyst or the material used; The modus operandi of the analysis..
External Analysis:
It is the analysis made by those persons who are not connected with the organization. They do not have any access to the detailed records of the Company and have to depend mostly on the published statements. Such type of analysis is made by investors, credit agencies, Government agencies and research scholars. b) Internal Analysis: Internal analysis is made by those who have an access to the books of an account. They are members of the organization. Analysis of financial statement or financial data for managerial purpose is the internal type of analysis. The internal analysis provides more reliable results than the external analysis because all the important information is at his disposal. 2) According to the modus operandi of the analysis: a) Horizontal (dynamic) Analysis: This analysis is made to review and analyze financial statements of a number of years and therefore based on financial data taken from several years. This is very useful for long term trend analysis and planning. Comparative financial statement is an example of this type of analysis
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A Study on Financial Statement Analysis of UniverCell b) Vertical (static) Analysis : This analysis is made to review and analyze the financial statements of one particular year only. Ratio analysis of the financial year relating to a particular accounting year is an example of this type of analysis.
. Methods of devices of financial analysis A number of methods or devices are used to study the relationship between different statements. They are: Comparative Statement Trend analysis Common size statement Fund flow analysis Cash flow analysis
A Study on Financial Statement Analysis of UniverCell Ratio analysis Cost profit volume analysis Each of the above tools can be explained as follows.
1.
In this technique, the statements are prepared to examine and compare the assets and liabilities, incomes and expenses of the current year. These statements exhibit the magnitude and direction of changes in the operating results and financial status of an organization. It provides columns to indicate the changes in absolute terms and also in percentage terms.
2.
In this technique, statements are prepared to examine the changes that have taken place year after year in relation to total assets, total liabilities and net sales i.e. each of assets is expressed as a percentage of total liabilities. Again in the Profit and Loss Account each item is expressed as a percentage of sales.
3. Trend Analysis:
It helps in identifying the direction in which the organization is moving. It involves the ascertainment of arithmetical relationship of each item of several years within the same item of the base year. Normally first year is taken as base year.
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It refers to the analysis of changes in the financial position (between two accounting period) of a firm in terms of cash. Cash Flow statement explains the changes in cash position between two accounting periods. The term cash in Cash Flow Analysis refers to the inflow and outflow of cash.
Depict the Financial PositionThe information contained in the financial statements should be such that a true & correct idea about the financial position of the firm is received. No material information should be withheld while preparing these statements.
Effective PresentationIt should be presented in simple manner to make it easily understandable. This characteristic enhances the utility of the statement.
RelevanceIt should be relevant to the objectives of the enterprise. The information that is irrelevant to the statements should be avoided; otherwise it will be difficult to make a distinction between what is relevant & what is not.
AttractiveIt should be prepared in such a way that important information is underlined so that it catches the eye of the leader.
EasinessIt should be easily prepared. The calculation work should be minimum, the size of the statement should be very large, and the columns used should be less. This enables saving time in preparing the statements & is easy for the person reading it as well.
Comparability It should be made in such a way that they can be compared to previous years statements. The statements can also be compared with the figures given in details will make it difficult to judge the working of the business.
Brief It should be given in brief. The reader will be able to form an idea about the figures more easily whereas figures given in details will make it difficult to judge the working of the business.
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A Study on Financial Statement Analysis of UniverCell Promptness It should be prepared & presented at the earliest possible. Immediately at the close of the Financial Year, statements should be ready.
Users of financial statements and the exact utility of the Finance Statements to the users
1. Shareholders or Owners The shareholders of a company are interested in the finance statements of the company with the view to ascertaining the profitability and the financial strength of the company, its prospects for future growth, and also the usefulness of the management to the company. 2. Financial Institutions and Commercial banks Financial institutions and commercial banks are interested in the financial statements of the borrowing concern to ascertain its short-term as well as long-term solvency and also its profitability. 3. Creditors Creditors (i.e., the suppliers of goods on credit) are interested in the financial statements of the purchasing concern to ascertain its short-term solvency or liquidity position (i.e., its ability to meet its current or shortterm liabilities out of its current or short-term assets). 4. Prospective Investors Prospective Investors are interested in the financial statements of a concern to ascertain its financial strength and future prospects.
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A Study on Financial Statement Analysis of UniverCell 5. Employees and Trade Unions The employees of a concern and the trade unions are interested in the financial statements of the concern to ascertain its profitability and ability to pay higher wages, bonus, etc. 6. Government The government is interested in the financial statements of a concern for the purpose of taxation and also for the purpose of regulating the activities of the concern. 7. Security or Investment Analysis Security or Investment is interested in the financial statements of a company to advise their clients whether to buy or sell the securities of that company.
A Study on Financial Statement Analysis of UniverCell The analysis of these statements relating to a single year only will have limited use and value. It will not be advisable to depend fully on such analysis. The analysis should be extended to a number of years. Results may have different interpretations Different users may differently interpret the results or indications derived from the analysis of these statements. Example: a high current asset may suit the banker, a supplier of goods or short-term lender but it may be an index of insufficiency of management due to un-utilization of funds. Price level changes reduce the validity of the analysis The continuous and rapid changes in the value of money, in the present day economy also reduce the validity of analysis. Acquisition of assets at different level of prizes makes comparison useless as no meaningful conclusion can be drawn from a comparative analysis of such items relating to several accounting periods.
There are different tools of analysis available to the analyst (i.e. trend analysis, ratio analysis, comparative statement).Which is to be used in a particular situation depends on the training and skills of the analyst. If wrong tool is used; it may give misleading results and may lead to wrong conclusions or inferences, which may be harmful to the interests of the business.
A Study on Financial Statement Analysis of UniverCell b) To know the Financial Strength. c) To know the capability of payment of interest and dividend. d) To know the efficiency of management. e) To provide useful information's to the Management.
Telecommunications Limited and aimed of discovering strengths and weakness of the Company. This research seeks to investigate and constructively contribute to help the company in finding out the gray areas for the improvement in performance, the company to understand its own position over time, the managers to understand their attribution to the performance of the company.
Source of data:
The study of financial performance of UniverCell Telecommunications Limited includes only secondary data. Journals Magazines Internet
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UniverCells website
Predictability-
Financial statements reflect the past; they do not predict the future. They do not predict changes in sales due to increased research and marketing. They do not forecast the impacts on profitability from the entry and exit of competitors. The statements also provide no direct way of assessing whether recent performance trends -- such as sales and profit growth -will continue and for how long.
2)
Reliability-
It is often difficult to assess the reliability of financial statements. For example, the accompanying notes -- usually included at the end of the statements -- contain details that may not be readily apparent on the financial statements. This could lead to potential risks being overlooked: Enron turned into a disaster because research analysts missed the potential impact of its off-balance sheet holdings. Company may characterize a major customer loss as a delayed order rather than a loss or cancellation in order to buy time to find a replacement customer. Company often release unaudited statements, which are, by definition,
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A Study on Financial Statement Analysis of UniverCell less reliable than audited statements. However, even an audited and publicly disclosed financial statement is no guarantee of a company's health because company can routinely run into trouble.
3)
Comparability-
The financial statements of industry peers are usually compared to evaluate investment trade-offs. However, these comparisons may prove difficult because of differences in accounting methods, such as different fiscal year ends--a fiscal year can start on Jan. 1 or the first of some other month -- and different inventory valuation methods. The method determines the cost of goods (an income statement item) and the inventory (a balance sheet item) amounts, making financial statement comparisons difficult when company use different inventory valuation methods.
4)
Other Limitations-
Financial statements do not provide all the answers: For example, they cannot quantify the financial impact of senior management changes. The competitive environment is difficult to assess from financial statements: For example, there is usually no information on how many competitors were bidding on specific contracts.
Chapter Scheme:
1. General Introduction This chapter explains the different financial Strategies adopted by UniverCell in Bangalore. It also gives a theoretical background of the various aspects of the selected problems.
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A Study on Financial Statement Analysis of UniverCell 2. Introduction to the problem This chapter deals about analyzing the problem area of the UniverCell to get a clear cut idea about the financial position and the ways of how the financial pattern of UniverCell is.
3. Research Design This chapter deals with the methodology in the approach of the study. It includes all the framing of objectives to fieldwork and analysis, and gives a detailed description of the research design. 4. Company Profile This chapter reveals the detailed information about the company along with the important people, employees, products and services. 5. Data Analysis and Interpretation This chapter deals with the ratio analysis as the secondary source of data as there is no primary data for this.
6.
Findings
This chapter is all about what is being analysis from the previous chapter along with the derivations from the ratios. 7. Recommendations & Conclusions This chapter deals with the suggestions for the financial position of the company using the ratios.
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The Entrepreneur
Mr. D. Sathish Babu founded UniverCell in November, 1997, selling post paid mobile connections as a Skycell Teleshop (now AirTel Connect). Studying the buying behavior of his customers, Sathish understood that what consumers really wanted was to make intelligent and informed
A Study on Financial Statement Analysis of UniverCell shopping decisions in an ambience that combined both comfort and a high degree of service. In February 2000, using savings and some capital from family, Sathish opened Chennai's first large-format mobile retail store in an upscale location in Chennai, India. Since then, Sathish and UniverCell have been cresting the wave of the Indian mobile revolution from the retailing front, growing and evolving to become India's largest mobile retailer and one of India's best known brands. A strong believer in mind share, Sathish Babu has consistently promoted the UniverCell brand through the various mass media available to him. Using a clever mix of targeted advertising campaigns and promotions aimed at localities as well as generations, UniverCell is well entrenched in the hearts and minds of the Indian consumer. One can see and feel its presence through its large format retail outlets as well as in print, television, cinema, special event promotions, billboards and FM radio. Determined to take UniverCell and mobile phone retailing to the heights of excellence, Sathish constantly looks to incorporate innovative modern retailing concepts into his own organization. The series of core improvements initiated five years ago has now resulted in a world-class retailing organization that is powered as much by technology as by its people. The foundation for growth well in place, UniverCell has its sights on replicating its success Pan India. These same investments in technology and processes have earned UniverCell the ISO 9000-2001 certification (March 2004) for quality management systems. Strong relationships with all the manufacturers, the e-portal @ www.univercell.in and wap.univercell.in, its pan Indian presence,
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A Study on Financial Statement Analysis of UniverCell UniverCell has been able to leverage efficiencies of scale, providing the highest levels of service and options to consumers. UniverCell presenting a single face to its customers assures the same level of support (warranties, service, etc) from every single outlet across the country.
A Study on Financial Statement Analysis of UniverCell through the mobile industry. The first mobile retailer to provide Bill & warranty on every purchase The first mobile retailer to implement 'Touch Feel' concept Exchange offers Easy Installments-0% interest, quick loan approvals Knowledgeable staff-groomed in customer service and soft skills Best After Sales Service Quality Management process ISO 9000-2001 certified One stop shop for mobile needs
Mobile version of website wap.univercell.in Short code service SMS 55050 Door step delivery
Ratio
It is the mathematical relationship between two quantities in the form of a fraction or percentage.
Ratio analysis
It is essentially concerned with the calculation of relationships which after proper identification and interpretation may provide information about the operations and state of affairs of a business enterprise. The analysis is used to provide indicators of past performance in terms of critical success factors of a business. This assistance in decision-making reduces reliance on guesswork and intuition and establishes a basis for sound judgment.
1) Current Ratio
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:
Significance / Uses:
The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands.
If current liabilities exceed current assets, then the company may have problems meeting its short-term obligations.
Ideal Ratio:
The ideal ratio of 2:1 is considered to be satisfactory.
Analysis:
Table 1
Current Ratio Particulars Current Assets Current Liabilities Current Ratio 2010 1,095.48 284.11 3.85583049 2009 868.02 280.66 3.092781 (Rs in Lakhs) 2008 891.74 72 12.38528
InterpretationThis table shows that the current ratio of the company is above the ideal ratio. It was highest in the year 2008 and then due to recession in 2009 it decreased from 12.39 to 3.09 which show that the growth rate of current assets is less than the growth rate of current liabilities.
Graph 1
InferenceThe company does not shows a ideal ratio of 2:1 which is an indication that the company is not-liquid and does not have the ability to pay its current obligation in time as and when they become due. The companys Current Ratio was above the ideal ratio 2:1 in all the 3 years.
2) Quick Ratio
It is also known as acid test or liquid ratio. It is calculated by dividing quick assets by liquid liabilities. Quick assets include all current assets minus stock and prepaid expenses. Liquid liabilities include all current liabilities minus bank overdraft.
Significance / Uses:
The quick ratio is very useful in measuring the liquidity position of a firm. That is the ability of a concern to meet its short-term obligations out of its quickly realizable assets. It is used as a complimentary ratio to the current ratio
Ideal ratio:
The ratio of 1:1 is considered ideal.
Analysis:
Table 2
Quick Ratio Particulars Quick Assets Current Liabilities Quick Ratio 2010 1025.6371 284.11 3.61 2009 777.4282 280.66 2.77 (Rs in Lakhs) 2008 821.52 72 11.41
InterpretationThis table shows that the quick ratio is higher than the ideal ratio for all the three years as it was 11.41 in the year 2008 which is the highest of all three years.
Graph 2
InferenceFrom the above ratio it is clear that current assets are more than current liability in all the three years. This shows that the company is not well concerned about their current asset management.
Ideal ratio:
Analysis:
Table 3
Absolute Liquid Ratio Particulars 2010 2009 345.79 280.66 1.23206 (Rs in Lakhs) 2008 593.23 72 8.239306
Absolute Liquid Assets 345.56 Current Liabilities Absolute Liquid Ratio 284.11 1.21628947
InterpretationThis table shows the absolute liquid ratio for the last three years its constantly decreasing from 8.23 to 1.21 in the year 2010.
Graph 3
InferenceThere is an increase in the ratio in 2008 which show that the absolute liquid assets are adequate to pay its current liabilities in time. This is a good sign for the firm as the company is capable of meeting its short-term obligations. Ratio has fallen down in the year 2009 and 10.
Significance/Uses
A high working capital turnover ratio shows the efficient utilization of working capital in generating sales. A low ratio, on the other hand, may indicate excess of net working capital. This ratio thus shows whether working capital is efficiently utilized or not. This ratio is considered better than stock turnover ratio as it shows the utilization of the entire working capital whereas stock turnover ratio indicates only the turnover of stock which is only a part of the working capital.
Analysis:
Table 4
Working capital turnover ratio Particulars Working Capital Net sales 2010 811.37 1,965.11 2009 587.36 1,608.28 2.73815 2008 819.74 1,216.44 1.483934 (Rs. in Lakhs)
InterpretationThis table shows the working capital turnover ratio and from the table we can see that it is 2.42 times for the year 2010 and it increased from 1.48 in 2008. So we can derive from the table that the working capital is efficiently being managed.
Graph 4
InferenceA higher working capital turnover shows that there is low investment in working capital and there is more profit. Here the company working capital is favourable as there is less amount of capital outlay in terms of working capital and the ratio has increased from 1.48 in the year 2008 to 2.42 in 2010.
Significance / Uses
It establishes a relationship among the total sales made by the business concern and the total assets hold by the company. It helps in keeping a track on the application of the owners fund. It reflects the potential liquidity of the company.
Analysis:
Table 5
Total assets turnover ratio Particulars Total Assets Fixed Assets 2010 2,116.16 1020.68 2009 1,802.84 934.81 0.518521 2008 1,338.95 447.21 0.334001 (Rs in lakhs)
InterpretationThis table shows the total assets turnover ratio and from the table we can see that it is 0.48 for the year 2010 and it increased from 0.33 in 2008.
Graph 5
InferenceIt has been observed that the total asset turnover ratio for the year 2008 is 0.33 times, 0.51 times for the year 2009 and 0.48 times for the year 2010. The ratios indicate that the assets of the companys were properly utilized in past 3 years.
Significance / Uses
Net Profit Margin Ratio measures the overall efficiency of production, administration, selling, financing and pricing and tax management. Net Profit Margin Ratio provide a valuable understanding of the cost and profit structure of the firm and enable us to identify the sources of business efficiency or inefficiency.
The ratio indicates the quantum of profit earned by a concern, and indicates the firms capacity to face adverse economic conditions such as price competition, low demand, etc.
Analysis:
Table 6
Net Profit Ratio Particulars Net Profit(PAT) net sales Net Profit Ratio 2010 274.34 1,965.11 13.9605416 2009 248.82 1,608.28 15.47119 (Rs in Lakhs) 2008 187.12 1,216.44 15.38259
InterpretationThis table shows the net profit ratio and from the table we can see that it is 13.96 for the year 2010, 15.47 in 2009 and 15.38 in 2008.
Graph 6
InferenceHigher is the profit better is the profitability. The ratio is favourable in all the three years. But the company net profit has fallen down in the year 2010 as compared to 2008 and 2009.
A Study on Financial Statement Analysis of UniverCell This ratio establishes the relationship between operating profit on one hand and the sales on the other. In other words, it measures the profit in per unit of sales done.
Significance/Uses
It is the yardstick to measure the efficiency with which a business is operated. It shows the percentage of profit being made. A high operating profit ratio is considered favorable as it leaves a high margin of profit to meet non-operating expenses. A lower operating profit ratio is considered a bad sign.
Analysis:
Table 7
Operating profit ratio Particulars Operating profit net sales Operating profit ratio 2010 525.54 1,965.11 26.7435411 2009 335.51 1,608.28 (Rs in Lakhs) 2008 245.64 1,216.44
20.86142 20.19335
InterpretationThis table is shows the operating profit ratio and in the year 2008 it was 20.19 and in 2009 it was 20.86 and in 2010 it was 26.74
Graph 7
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InferenceHigher is the ratio better is the profitability. The ratio is favourable in all the three years. But the company operating profit has fallen down in the year 2008 and 2009 as compared to 2010.
A Study on Financial Statement Analysis of UniverCell A balance sheet account that represents the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business. Current assets include cash, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash. Current Assets Turnover ratio shows the productivity of the company's current assets.
Significance/Uses
A higher Current Assets Turnover Ratios indicates the frequent use of current assets in sales and marketing efforts. Its shows the productivity of the companys current asset.
Analysis:
Table 8
Current Assets turnover Ratio Particulars Current Assets Net sales Current Assets turnover Ratio 2010 1,095.48 1,965.11 1.7938346 2009 868.02 1,608.28 1.852814
InterpretationThis table shows current assets turnover ratio in which in the year 2008 it was 1.36 and in the year 2009 it was 1.85 and in the year 2010 it was 1.79.
Graph 8
InferenceHigher is the ratio better is the profitability. The ratio is favourable in all the three years. And the company has maintained a constant ratio in all the three years.
A Study on Financial Statement Analysis of UniverCell A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation.
Significance/Uses
A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.
Analysis:
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Table 9
Fixed assets Turnover Ratio Particulars Net sales Fixed assets 2010 1,965.11 1020.68 2009 1,608.28 934.81 1.720435
(Rs in Lakhs)
InterpretationThis table shows fixed assets turnover ratio and it shows that in the year 2008 it was 2.72 in the year 2009 it was 1.72 and in the year 2010 it was 1.92.
Graph 9
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InferenceHigher is the ratio better is the profitability. The ratio is favourable in all the three years. But the companys ratio has shown a gradual change in all the three years.
A Study on Financial Statement Analysis of UniverCell Inventory Turnover ratio, is simply the turnover of the company divided by its stocks. It should always be compared against the average price of the ratio for the sector.
Significance/Uses
A low Inventory Turnover suggest poor sales and/or high investment in inventory - which is non-profitable and risky.
Analysis:
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Table 10
Inventory Turnover Ratio Particulars Cost of Goods Sold Average Stock Inventory Turnover Ratio 2010 1,439.58 2009 1,272.75 (Rs in Lakhs) 2008 970.81 56.01904 17.33
Interpretation
This table shows inventory turnover ratio and here it is seen that in the year 2008 it was 17.33 in the year 2009 it was 17.55 and in the year 2010 it was 28.57.
Graph 10
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Inference
Higher ratio indicates that more sales are being produced by a unit of investment in stocks. There is an increase in all the three years since it means that the investment in stock is leading to higher sales.
A Study on Financial Statement Analysis of UniverCell number of times average debtors (receivable) are turned over during a year.
Significance/Uses
Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year.
The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are.
Similarly,
low
debtors
turnover
ratio
implies
inefficient
Analysis:
Table 11
Debtors Turnover ratio Particulars Net sales Sundry Debtors Debtors Turnover ratio 2010 1,965.11 530.24 3.70607649 2009 1,608.28 321.77 4.998229 (Rs in Lakhs) 2008 1,216.44 199.15 6.10816
Interpretation
This table shows debtors turnover ratio and it is seen that in the year 2008 it was 6.10 in the year2009 it was 4.99and in the year 2010 it was 3.07.
Graph 11
Inference
Higher is the ratio better is the profitability as it indicates that debts are being collected more from promptly. The ratio is falling down from the year 2008 to 2010. It indicates inefficiency in collection of debts.
A Study on Financial Statement Analysis of UniverCell Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.
Significance/Uses
Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations.
It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is
Analysis
Table 12
Gross Profit Ratio Particulars Gross profit Net sales Gross Profit Ratio 2010 500.77 1,965.11 25.4830518 2009 323.75 1,608.28 20.1302
Interpretation
This table shows gross profit ratio and it is seen that in the year 2008 it was 19.96, in 2009 it was 20.13 and in the year 2010 it was 25.48.
Graph 12
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Inference
Higher is the ratio better is the profitability. The ratio is favourable in all the three years. It shows a good sign of the company.
FINDINGS
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From the study it is revealed that the current ratio of the firm in each of the three years is more than the ideal ratio of 2:1.This shows that the company is managing its current assets properly.
2)
The ideal ratio for quick ratio is 1:1.The Company is satisfying the ideal value in each of the three years.
3)
The ideal ratio for absolute liquid ratio is .75:1. The company has maintained a favourable ratio in all the 3 years.
4)
The working capital turnover ratio increased from the year 2008 which shows that working capital has been effectively managed.
5) The asset turnover ratio was not favourable in all the three years.
6)
There is a satisfactory result in net profit in all the 3 years which had a positive effect on the company. Net profit was constant in the year 2008 and 2009 and there was a slight fall in 2010.
7)
Operating profit was constant in the year 2008 and 2009, but there is an increase in the year 2010 which is a good sign for the company.
8)
The current asset turnover ratio is favourable in all the three years. And the company has maintained a constant ratio in all the three years.
9)
The fixed asset turnover ratio is favourable in all the three years. But the companys ratio has shown a gradual change in all the three years.
A Study on Financial Statement Analysis of UniverCell 10) Inventory turnover ratio shows a better performance over the
3 years. There is a huge increase in the year 2010 which is good for the company.
11)
as it indicates that debts are being collected more from promptly. The ratio is falling down from the year 2008 to 2010. It indicates inefficiency in collection of debts.
12)
The gross profit ratio is favourable in all the three years with
RECOMMENDATIONS
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UniverCell needs to do efficient cash and inventory management which contributes a lot towards any companys profitability.
UniverCell is having a great positive sign of stable performer; the company should maintain this in future also by managing its resources very thoughtfully so that it exists in a long term.
The company should much not depend upon the loans as payment in future can be a problem.
The company should go for an IPO if it wants to run in the market for a long time and to inject fresh capital.
Company debtor is increasing year by year according to the debtors turnover ratio which shows inefficiency in debt collection; therefore which it be managed by the company and should be concerned about collection of debts.
CONCLUSIONS
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From the above study it is revealed that the company overall performance is good in all the three years.
Company net profit has also shown a good result over all the three years which reflects the sound financial position of the company. Company working capital is effectively managed all the 3 years. Finally, the company is doing a great financial management and it is beneficial for the company in future.