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FINANCIAL STATEMENT ANALYSIS
If you are really and seriously
looking answers of all these
Then ...
Financial Statement Analysis
Financial Statement Analysis comprises all
techniques employed by users of financial
statements to show important relationships in
the financial statements so as to understand
business and make decisions in a better way.
First Step
Select Information relevant to
decision under consideration
Second Step
Process the information to
Highlight significant relationships
Third Step
Interpret and draw
Necessary inferences
Who are the people doing Financial Statement Analysis?
INTERNAL USERS
EXTERNAL USERS
What is the source of information for the EXTERNAL
PEOPLE?
Such information is
contained in a
companys annual
report
Annual Report contains
THREE BASIC FINANCIAL STATEMENTS
1
Annual Report contains
FOOTNOTES/SCHEDULES TO THE 1
FINANCIAL STATEMENTS
2
Annual Report contains
FOOTNOTES/SCHEDULES TO THE 1
FINANCIAL STATEMENTS
2
SUMMARY OF ACCOUNTING METHODS
3
Annual Report contains
FOOTNOTES/SCHEDULES TO THE 1
FINANCIAL STATEMENTS
2
SUMMARY OF ACCOUNTING METHODS
3
MANAGEMENTS DISCUSSION AND 4
ANALYSIS OF FINANCIAL STATEMENTS
Annual Report contains
FOOTNOTES/SCHEDULES TO THE 1
FINANCIAL STATEMENTS
2
SUMMARY OF ACCOUNTING METHODS
3
MANAGEMENTS DISCUSSION AND 4
ANALYSIS OF FINANCIAL STATEMENTS
5
AUDITORS REPORT
Annual Report contains
FOOTNOTES/SCHEDULES TO THE 1
FINANCIAL STATEMENTS
2
SUMMARY OF ACCOUNTING METHODS
3
MANAGEMENTS DISCUSSION AND 4
ANALYSIS OF FINANCIAL STATEMENTS
5
AUDITORS REPORT 6
1
EXAMPLE #1.
THREE BASIC FINANCIAL STATEMENTS
1
EXAMPLE #1.
THREE BASIC FINANCIAL STATEMENTS
1
EXAMPLE #2.
FOOTNOTES/SCHEDULES TO THE
FINANCIAL STATEMENTS
2
EXAMPLE #3.
SUMMARY OF ACCOUNTING METHODS
3
EXAMPLE #4.
MANAGEMENTS DISCUSSION AND 4
ANALYSIS OF FINANCIAL STATEMENTS
EXAMPLE #5.
5
AUDITORS REPORT
EXAMPLE #6. 6
BALANCE SHEET
FINANCIAL STATEMENT ANALYSIS
BALANCE SHEET
A statement that shows assets
and liabilities of a company at a
particular date
Liabilities Assets
FINANCIAL STATEMENT ANALYSIS
BALANCE SHEET
FINANCIAL STATEMENT ANALYSIS
BALANCE SHEET A DIFFERENT
PERSPECTIVE!!!
First
Miscellaneous Expenses (to the extent not written off or adjusted) 155.11 105.07 - -
(Rs. IN CRORES) 31-Mar-04 31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10 31-Mar-11
SHARE CAPITAL 369.18 553.67 553.67 727.73 6,203.30 6,203.45 887.41 1,137.61
RESERVES AND SURPLUS 4,830.67 7,120.85 9,905.36 13,914.83 21,624.12 24,453.47 36,942.06 46,743.82
TOTAL SOURCES OF FUNDS 12,860.49 15,628.47 18,172.61 30,848.63 53,689.19 67,139.09 73,232.39 89,551.72
SOURCES OF FUNDS-2011: TATA STEEL
LOANS
OTHERS
33.28%
52.20%
Where this
money is utilized?
Uses of Funds Tata Steel
FIXED ASSETS (Rs. IN 7,857.85 9,112.24 9,865.05 11,040.56 12,623.56 14,482.22 16,006.03 18,774.48
CRORES)
CURRENT ASSETS 2,808.52 4,083.58 4,237.60 13,701.89 36,962.44 10,285.09 12,246.69 24,212.30
TOTAL ASSETS 12,860.49 15,628.47 18,172.61 30,848.63 53,689.19 67,139.09 73,232.39 89,551.72
USES OF FUNDS - 2011: TATA STEEL
27.04% 20.96%
INVESTMENTS
CURRENT ASSETS
52.00%
REVISED BALANCE SHEET
FORMAT
Revised Schedule - VI
INTRODUCTION
Shareholders Funds
Share Capital
Reserve & Surplus
Money Reserved against share warrants
Current Liabilities
Short Term Borrowings
Trade Payables
Other Current Liabilities
Short Term Provisions
Balance Sheet : Assets
Particulars Note Figures at the Figures at the
No. end of current end of
reporting previous
period reporting
period
Non- Current Assets
(a) Fixed Assets
Tangible Assets
Intangible Assets
Capital Work in progress
Intangible Assets under development
(b) Non- Current Investments
(c) Deferred Tax Assets (net)
(d) Long Term Loans & Advances
(e) Other Non-Current Assets
Current Assets
(a) Current Investments
(b) Inventories
(c) Trade Receivables
(d) Cash and Cash Equivalents
(e) Short Term Loans and Advances
(f) Other Current Assets
REQUIREMENTS UNDER REVISED SCHEDULE VI
Accounting Standards will prevail over the Schedule;
Revised Schedule VI has eliminated the concept of schedule;
Terms in the Revised Schedule VI will carry the meaning as defined
by the applicable Accounting Standards;
All items of assets and liabilities are to be bifurcated between
Current and Non-Current portions and presented separately on
the face of the Balance Sheet
REQUIREMENTS UNDER REVISED SCHEDULE VI
Vertical format for presentation only prescribed;
Prescribes minimum disclosure requirements. AS disclosures are
additional;
Source of Funds now is Equity and Liabilities;
Application of Funds now is Assets;
Shareholding of more than 5% shares in the company now needs to
be disclosed;
Share allotments for non-cash consideration, buy back to be
disclosed;
Statement of Profit and Loss (Dr. Bal.) will be disclosed under the
head Reserves and Surplus as a negative item.
REQUIREMENTS UNDER REVISED SCHEDULE VI
Share application money pending allotment not refundable is to be
included under Equity and share application money to the extent
refundable is to be separately shown under Other current liabilities.
Sundry Debtors has been replaced with the term Trade
Receivables;
Disclosure of trade receivables outstanding for a period exceeding
six months from the date the bill/invoice is due for payment;
Tangible assets under lease are required to be separately specified
under each class of asset;
Current Liabilities will no longer be shown as deduction from Current
Assets
REQUIREMENTS UNDER REVISED SCHEDULE VI
Defaults in repayment of loans and interest to be
specified in each case;
Exceptional Items
Part II : Statement of Profit & Loss
Particulars Note Figures at the Figures at the
No. end of current end of
reporting previous
period reporting
period
Extraordinary Items
Tax Expense
Current Tax
Deferred Tax
TOP LINE!!!
EXPENSES side
PROFIT AND LOSS ACCOUNT OF TATA STEEL LIMITED FOR THE YEAR ENDING ON 31ST MARCH
(Rs. in Crores)
Particulars 2008 2009 2010 2011
EXPENDITURE
Manufacturing, and Other Expenses 11,645.24 15,525.99 16,396.00 18,162.27
Depreciation 834.61 973.40 1,083.18 1,146.19
12,479.85 16,499.39 17,479.18 19,308.46
Less: Expenditure (Other than Interest)
175.50 343.65 326.11 198.78
Transferred to Capital and Other Accounts
12,304.35 16,155.74 17,153.07 19,109.68
OF TATA STEEL
(Profit)/Loss on sale of Assets/Discarded Assets written off (11.19) (28.26)
(Profit)/Loss on sale of current investments (15.63) (9.98)
(Profit)/Loss on sale of long term investments
Impairment of Assets 6.22 0.06
Amount received on cancellation of forward covers/options (82.69) (124.30)
Provision for diminution in value of investments 0.10
Loss on cancellation of own debentures
Reversal of Impairment Loss
Interest income (77.35) (50.33)
Dividend income/Income from Investments (324.16) (170.67)
Interest charged to Profit and Loss Account 251.25 929.03
Miscellaneous Expenditure - Employee Separation Compensation (amortised)
152.10 226.18
Provision for Wealth Tax 0.97 0.95
Amortisation of long term loan expenses 65.10 57.99
Contribution for sports infrastructure written off 150.00
Exchange (Gain)/Loss on revaluation of foreign currency loans (743.60)
Operating Profit before Working Capital Changes 7045.66 8138.04
Adjustments for
Trade and other Receivables (21.94) (143.44)
Inventories (158.22) (272.00)
Trade and other Payables 512.04 806.34
331.88 390.90
Cash Generated from Operations 7377.54 8528.94
Direct Taxes paid (2034.59) (2060.20)
Cash Flow before Exceptional Item 5342.95 6468.74
Employee Separation Compensation paid (224.85) (214.54)
Net Cash Flow from Operating Activities 5118.10 6254.20
CASH FLOW STATEMENT OF TATA STEEL LTD FOR THE
YEAR ENDING ON MARCH 31,
OF TATA STEEL
Purchases of Fixed Assets (2007.68) (2458.97)
Sales of Fixed Assets 17.85 63.88
Purchases of Investments (18306.13) (31595.17)
Purchase of investments in Subsidiaries (118.17) (29587.40)
Sale of Investments 14623.48 34110.46
Intercorporate deposits (20.00) (85.80)
Shareholder's loan to subsidiary
Interest received 58.89 63.75
Dividend received 324.16 170.67
Exceptional Items :
Sale of long term investments in subsidiary
Sale of other investments
Net Cash used in Investing Activities (5427.60) (29318.58)
CASH FLOW STATEMENT OF TATA STEEL LTD FOR THE
YEAR ENDING ON MARCH 31,
TATA STEEL
Issue of Cumulative Convertible Preference Shares 5472.52
Issue of Share Warrants 147.06
Capital contributions received 5.59
Proceeds from borrowings 8043.69 17632.70
Repayment of borrowings (916.31) (10386.61)
Amount received on cancellation of forward covers/options 93.65 134.41
Long term loan expenses (118.88) (202.38)
Interest paid (227.85) (746.07)
Dividends paid (717.69) (937.95)
Net Cash from Financing Activities 7702.46 15848.07