Analysis of Financial

Statements

By: Dr. Divya,

Asst. Professor, USMS
And, in this direction…

Our first step is towards…

Understanding financial
statements
of Tata
Steel …
First, we take Balance
sheet …

…Sources of Funds Side

What is Balance Sheet?
BALANCE SHEET is…

 … A statement that consists of assets and liabilities of

a company on a particular date.

 … A statement having balances of various accounts to

be carried to the next year.

 … A statement that represents sources of funds and

application of funds.
We start understanding
balance sheet by taking
…

…Sources of Funds Side

BALANCE
MARCH…
BALANCE
MARCH…
Share Warrants…
 The preferential issue of equity shares/ Fully Convertible
Debentures (FCDs)/ Partly Convertible Debentures (PCDs) or
any other financial instruments which would be converted into
or exchanged with equity shares at a later date, by listed
companies whose equity share capital is listed on any stock
exchange, to any select group of persons under Section 81(1A)
of the Companies Act 1956 on private placement basis shall be
governed by these guidelines.

 An amount equivalent to at least ten percent of the price fixed

as per Chapter-XIII of DISCLOSURE AND INVESTOR PROTECTION
GUIDELINES, SEBI shall become payable for the warrants on
the date of their allotment.
BALANCE
MARCH…
 Security Premium

Account …
The Securities Premium Account may be applied by the
company-
(a) in paying up unissued shares of the company to be issued
to members of the company as fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or commission paid or
discount allowed on, any issue of shares or debentures of
the company; or
(d) in providing for the premium payable on the redemption of
any redeemable preference shares or of any debentures of
the company.
BALANCE
MARCH…
Deferred Tax Assets/Deferred
Tax Liabilities
ACCOUNTING STANDARD 22:
• The differences between taxable income and accounting income can be
classified into PERMANENT DIFFERENCES and TIMING
DIFFERENCES.
 Permanent differences are those differences between taxable income
and accounting income which originate in one period and do not reverse
subsequently.
 Timing differences are those differences between taxable income and
accounting income for a period that originate in one period and are
capable of reversal in one or more subsequent periods.
• The tax effects of timing differences are included in the tax
expense in the statement of profit and loss; and as deferred tax
assets or as deferred tax liabilities, in the balance sheet.
BALANCE
MARCH…
BALANCE
MARCH…
BALANCE
MARCH…
Now, let’s move to …

…Application of Funds Side

BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
(Rs. in Crores)

Particulars 2007 2008

APPLICATION OF FUNDS    
FIXED ASSETS    
Gross Block 18,526.93 20,847.04
Less: Amortization 100.41 100.47
Less: Depreciation 7,385.96 8,123.01
Net Block 11,040.56 12,623.56
Capital Work in Progress    

  11,040.56 12,623.56
INVESTMENTS 6,106.18 4,103.19
CURRENT ASSETS, LOANS & ADVANCES    
Inventories: Stores and Spare Parts 505.44 557.67
Inventories: Stock-in-Trade 1,827.54 2,047.31
Sundry Debtors 631.63 543.48
Cash in Hand and at Bank 7,681.35 465.04
Loans and Advances 3,055.73 33,348.74
Interest Accrued on Investments 0.20 0.20
  13,701.89 36,962.44
Less: CURRENT LIABILITIES & PROVISIONS    
Current Liabilities 3,523.20 3,855.26
Provisions 1,930.46 2,913.52
  5,453.66 6,768.78
Net Current Assets 8,248.23 30,193.66
Miscellaneous Expenses (to the extent not written off or adjusted) 202.53 155.11
TOTAL 25,597.50 47,075.52
Does Balance Sheet talk
about RISK?

Think!!!
BALANCE SHEE

Particulars
SOURCES OF FUN
SHAREHOLDER'S
BALANCE SHEET AND
BUSINESS RISK …
Balance Sheet
LIABILITIES ASSETS

FINANCIAL OPERATING
RISK RISK

TOTAL RISK OF
BUSINESS
 ever
thought that
……
Sources of funds are not
the same thing as
LIABILITIES!!!!!!
&
Application of funds is
not the same thing as
Remember …
 First, Sources of Funds side of a Balance Sheet
does not represent the TOTAL LIABILITIES of a
company.

 Second, Application of Funds side of a Balance

Sheet does not represent ‘everything of this
side’ as TOTAL ASSETS.
ASSETS

 Third, the focus of representing a Balance Sheet

as SOURCES OF FUND and APPLICATION OF
FUNDS is ‘a long-term focus’.
Now, let’s move towards
understanding of ……

PROFIT AND LOSS ACCOUNT…

PROFIT A N
YEA R END
TOP – LINE OF TATA STEEL
PROFIT AND LO

BOTTOM – LINE
OF TATA STEEL
YEAR ENDING O

Particulars
PROFIT AND L
YEAR ENDING

Particulars
APPROPRIATION OF PROFIT
OF TATA STEEL
 Accounting for Investments…
(AS 13)
 Investments are assets held by an enterprise for earning income by way of dividends,
interest, and rentals, for capital appreciation, or for other benefits to the investing
enterprise. Assets held as stock-in-trade are not 'investments'.

 A Current Investment is an investment that is by its nature readily realizable and is

intended to be held for not more than one year from the date on which such investment is
made.

 A Long Term Investment is an investment other than a current investment.

 An Investment Property is an investment in land or buildings that are not intended to be

occupied substantially for use by, or in the operations of, the investing enterprise.
Types of Investments…
(AS 13)

Current Long Term

Investments Investments
Current Investments …
 A current investment is an investment that is by its nature
readily realizable and is intended to be held for not more
than one year from the date on which such investment is
made.

 The carrying amount for current investments is the lower of

cost and fair value. In respect of investments for which an
active market exists, market value generally provides the
best evidence of fair value.

 For current investments, any reduction to fair value and any

reversals of such reductions are included in the profit and
loss account.
Long-Term Investment …
 A long term investment is an investment other than a
current investment.

 Long-term investments are usually carried at cost.

However, when there is a decline, other than temporary, in
the value of a long term investment, the carrying amount is
reduced to recognize the decline.

 Where there is a decline, other than temporary, in the

carrying amounts of long term investments, the resultant
reduction in the carrying amount is charged to the profit
and loss statement.
Disclosure – AS
13
Investments should be disclosed in
financial statements as the
aggregate amount of quoted and
unquoted investments,
investments giving the
aggregate market value of quoted
investments.
Now, we move to …

CASH FLOW STATEMENT …

 CASH FROM OPERATIONS
CASH FLOWSTA

OF TATA STEEL
YEAR ENDING O

A) CASH FLOWFR
C A S H FL
Y EA R EN
CASH USED IN INVESTING
OF TATA STEEL
Y EA R EN D
C A SH FL O

CASH FROM FINANCING

TATA STEEL
WHAT NEXT IN OUR
AGENDA?