A PROJECT REPORT ON

“FINANCIAL STATEMENT ANALYSIS OF SREE BALAJI AGRO OILS”

MAHABUBNAGAR

SRI VASAVI DEGREE & PG COLLEGE

PROJECT REPORT SUBMITTED TO

PALAMURU UNIVERSITY

UNDER THE FACULTY OF COMMERCE

SUBMITTED BY
POOJA LAKHOTIA (20033053684033)

UNDER THE SUPERVISION OF

AMJAD ALI KHAN

(2022-2023)

DEPARTMENT OF COMMERCE
SRI VASAVI DEGREE & PG COLLEGE
NEWTOWN, MAHABUBNAGAR, TELANGANA (509001)
 CERTIFICATE OF PRINCIPAL

This is to certify that POOJA LAKHOTIA (20033053684033) has worked and duly completed
her project work for the degree of Bachelor Of Business Administration under the faculty of
commerce and her project is entitled, “FINANCIAL STATEMENT ANALYSIS OF SREE
BALAJI AGRO OILS MAHBUBNAGAR” under my supervision .

Date:

Place: Mahabubnagar

Signature of principal
KONDA SWAMY
 CERTIFICATE

DEPARTMENT OF COMERCE

This is to certify that POOJA LAKHOTIA (20033053684033) has worked and duly completed
her project work for the degree of Bachelor Of Business Administration under the faculty of
commerce and her project is entitled, “FINANCIAL STATEMENT ANALYSIS OF SREE
BALAJI AGRO OILS MAHBUBNAGAR” under my supervision .

I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any degree or diploma of any university.

It is her own work and facts reported by her personal findings and investigation .

AMJAD ALI KHAN

PROJECT GUIDE
 DECLARATION

I POOJA LAKHOTIA (20033053684033), hereby declare that the project work entitled
“ FINANCIAL STATEMENT ALALYSIS OF SREE BALAJI AGRO OILS
MAHABUBNAGAR” is a record of independent and bonafide work carried out by me
under the supervision and guidance of MR. AMJAD ALI KHAN , lecturer in department
of commerce , SRI VASAVI DEGREE & PG COLLEGE MAHABUBNAGAR . The
information and data given in the report is authentic to the best of my knowledge. The
report has not been submitted for the award of any degree, diploma, associateship or
other similar title of any other university or institute. I hereby further declare that all
information of this document has been obtained and presented in accordance with
academic rules and ethical conduct.

Place: Mahabubnagar

Date:
 ACKNOWLEDGEMENT

I would like to take the opportunity to express my sincere gratitude to all the people who have helped
me with sound advice and able guidance. Above all, I express my external gratitude to the Lord
Almighty under whose divine guidance; I have been able to complete this report successfully.

I would like to express my sincere obligation to MR. KONDA SWAMY, principal of SRI VASAVI
DEGREE & PG COLLEGE for providing various facilities.

I am thankful to MR. AMJAD ALI KHAN, whose guidance and support throughout the training period
helped me to complete this work successful.

I would also like to thank all the faculties of the department for their cooperation and interest in this
regard.

I extend my hearty gratitude to the librarian and other library staff of our college for their wholehearted
cooperation

I express my sincere thanks to my friends and family for their support in completing this report
successfully.
 ABSTRACT

The main purpose of this study is to determine, forecast and evaluate the best of economic conditions
and company’s performance in the future. The other purpose of this study is to analyze the financial
statement and then give information for financial managers to make thorough decisions about their
business. The financial statement applies tools, analytical techniques and required methods for business
analysis. It is a diagnostic tool for evaluating financing activities, investment activities and operational
activities as well as an assessment tool for management decisions and other business decisions. The
analysis of financial statements, respectively the analysis of the financial reports are used by managers,
shareholders, investors and all other interested parties regarding the company's state. Managers use
financial reports to see the situation in which the company stands and then provide information to
shareholders, to see how reasonable are the investments made in the company. To potential investors,
the analysis of the financial statements of the company is very important, because, first they want to
know the actual state of the company and then decide whether to invest or not.
 INDEX
CHAPTER PARTICULARS PAGE NO
NO:
1 INTRODUCTION 8-27

STATEMENT OF PROBLEM

OBJECTIVES OF THE STUDY

NEED OF THE STUDY

LIMITATIONS OF THE STUDY

2 LITERATURE REVIEW 28-39

3 METHODOLOGY 40-43

RESEARCH DESIGN

4 COMPANY PROFILE 44-47

5 DATA ANALYSIS AND INTERPRETATION 48-54

6 CONCLUSION & RECOMMENDATIONS 55-57

7 APPENDICES 58-60

8 BIBLIOGRAPHY 61-62
 CHAPTER 1

INTRODUCTION
 1. INTRODUCTION

Introduction

Meaning of Financial Statement

Financial statements refer to such statements which contain financial information about an
enterprise. They report profitability and the financial position of the business at the end of
the accounting period. The term financial statement includes at least two statements which
the accountant prepares at the end of an accounting period. The two statements are: -

· The Balance Sheet

· Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors
the financial position on a particular date in terms of the structure of assets, liabilities and
owner's equity, and so on and the Profit and Loss account shows the results of operations
during a certain period of time in terms of the revenues obtained and the cost incurred
during the year. Thus the financial statement provides a summarized view of financial
position and operations of a firm

Meaning of Financial Analysis

The first task of financial analysis is to select the information relevant to the decision under
consideration to the total information contained in the financial statement. The second step
is to arrange the information in a way to highlight significant relationships. The final step is
interpretation and drawing of inference and conclusions. Financial statement is the process
of selection, relation and evaluation.
Features of Financial Analysis

· To present complex data contained in the financial statement in

simple and understandable form.

· To classify the items contained in the financial statement

inconvenient and rational groups.

· To make comparison between various groups to draw various

conclusions.

Purpose of Analysis of financial statements

· To know the earning capacity or profitability.

· To know the solvency.

· To know the financial strengths.

· To know the capability of payment of interest & dividends.

· To make comparative study with other firms.

· To know the trend of business.

· To know the efficiency of Management.

· To provide useful information to Management

Procedure of Financial Statement Analysis

· The following procedure is adopted for the analysis and interpretation of

financial statements:-

· The analyst should acquaint himself with principles and postulates of

accounting. He should know the plans and policies of the management so that he
may be able to find out whether these plans are properly executed or not.

· The extent of analysis should be determined so that the sphere of work

may be decided. If the aim is to find out. Earning capacity of the enterprise then
analysis of income statement will be undertaken. On the other hand, if financial
position is to be studied then balance sheet analysis will be necessary.

· The financial data given in the statement should be recognized and

rearranged. It will involve the grouping of similar data under the same heads.
Breaking down individual components of a statement according to nature. The
data is reduced to a standard form. A relationship is established among financial
statements with the help of tools & techniques of analysis such as ratios, trends,
common size, fund flow etc.

· The information is interpreted in a simple and understandable way. The

significance and utility of financial data is explained to help indecision making.

· The conclusions drawn from interpretation are presented to the

management in the form of reports.

Analyzing financial statements involves evaluating three

characteristics of a company: its liquidity, its profitability, and its insolvency. A
short-term creditor, such as a bank, is primarily interested in the ability of the
borrower to pay obligations when they come due. The liquidity of the borrower is
extremely important in evaluating the safety of aLoan. A long-term creditor, such
as a bond holder, however, looks to profitability and solvency measures that
indicate the company’s ability to survive over a long period of time.Loan. A long-
term creditor, such as a bond holder, however, looks to profitability and solvency
measures that indicate the company’s ability to survive over a long period of time.
.
 Tools of Financial Statement Analysis

Important tools or techniques of financial statement analysis are as follows.

1. Comparative Statement or Comparative Financial and Operating Statements.

2. Common Size Statements.
3. Trend Ratios or Trend Analysis.
4. Fund Flow Analysis.
5. Cash Flow Analysis.
6. Ratio Analysis.

A brief explanation of the tools or techniques of financial statement analysis presented below.

1. Comparative Statements

Comparative statements deal with the comparison of different items of the Profit and Loss
Account and Balance Sheets of two or more periods. Separate comparative statements are
prepared for Profit and Loss Account as Comparative Income Statement and for Balance Sheets.

As a rule, any financial statement can be presented in the form of comparative statement such as
comparative balance sheet, comparative profit and loss account, comparative cost of production
statement, comparative statement of working capital.

 Comparative Income Statement

Three important information are obtained from the Comparative Income Statement. They are Gross
Profit, Operating Profit and Net Profit. The changes or the improvement in the profitability of the
business concern is found out over a period of time. If the changes or improvement is not satisfactory,
the management can find out the reasons for it and some corrective action can be taken.

 Comparative Balance Sheet

The financial condition of the business concern can be found out by preparing comparative balance
sheet. The various items of Balance sheet for two different periods are used. The assets are classified as
current assets and fixed assets for comparison. Likewise, the liabilities are classified as current
liabilities, long term liabilities and shareholders’ net worth. The term shareholders’ net worth includes
Equity Share Capital, Preference Share Capital, Reserves and Surplus.

2. Common Size Statements

A vertical presentation of financial information is followed for preparing common-size statements.

Besides, the rupee values of financial statement contents are not taken into consideration. But, only
percentage is considered for preparing common size statement.
The total assets or total liabilities or sales are taken as 100 and the balance items are compared to the
total assets, total liabilities or sales in terms of percentage. Thus, a common size statement shows the
relation of each component to the whole. Separate common size statement is prepared for profit and
loss account as Common Size Income Statement and for balance sheet as Common Size Balance Sheet.

3. Trend Analysis

The ratios of different items for various periods are found out and then compared under this analysis.
The analysis of the ratios over a period of years gives an idea of whether the business concern is
trending upward or downward. This analysis is otherwise called as Pyramid Method.
4. Fund Flow Analysis
Fund flow analysis deals with detailed sources and application of funds of the business concern for a
specific period. It indicates where funds come from and how they are used during the period under
review. It highlights the changes in the financial structure of the company.

5. Cash Flow Analysis

Cash flow analysis is based on the movement of cash and bank balances. In other words, the movement
of cash instead of movement of working capital would be considered in the cash flow analysis. There
are two types of cash flows. They are actual cash flows and notional cash flows.

6. Ratio Analysis

Ratio analysis is an attempt of developing meaningful relationship between individual items (or group
of items) in the balance sheet or profit and loss account. Ratio analysis is not only useful to internal
parties of business concern but also useful to external parties. Ratio analysis highlights the liquidity,
solvency, profitability and capital gearing.

Importance of Financial Analysis

The financial analysis is important for different reasons:

1. Holding of Share

Shareholders are the owners of the company. Time and again, they may have to make
decisions whether they have to continue with the holdings of the company's shares or sell
them out. The financial statement analysis is important as it provides meaningful information
to the shareholders in taking such decisions.

2. Decisions and Plans

The management of the company is responsible for taking decisions and formulating plans
and policies for the future. They, therefore, always need to evaluate the performance and
effectiveness of their actions to realize the company's goal in the past. For that purpose,
financial statement analysis is important to the company's management.
3. Extension of Credit

The creditors are the providers of loan capital to the company. Therefore they may have to
make decisions as to whether they have to extend their loans to the company and demand for
higher interest rates. The financial statement analysis provides important information to them
for their purpose.

4. Investment Decision

The prospective investors are those who have surplus capital to invest in some profitable
opportunities. Therefore, they often have to decide whether to invest their capital in the
company's shares. The financial statement analysis is important to thembecause they can
obtain useful information for their investment decision making purpose.

5. Review Assets and Inventory

The balance sheet is a component of the financial statement. Assets are included on the
balance sheet. Analyzing whether there is too much inventory or too little helps business
owners prepare for upcoming sales months. Keeping too much inventory on hand is a
potential problem that ties up money, while not having enough inventories can lead to losing
customers and market share.

6. Identify Trends and Determine Steps Needed

Analyzing the financial statements from quarter to quarter and year to year help business
owners see trends in growth. A young business might have losses in the early years while it is
developing products and a customer base. At the same time, statements show whether the
business owner is meeting projected estimates.
If a business is projecting a 10 percent annual growth but only achieving 7 percent, business
leaders need to look for ways to either cut costs or increase revenues. The financial statement
identifies the information to explore further.

Advantages of Financial statements analysis

1. It simplifies the financial statements.

2. It helps in comparing companies of different sizes with each other.
3. It helps in trend analysis which involves comparing a single company over a period.
4. It highlights important information in simple form quickly. A user can judge a company by
just looking at a few numbers instead of reading the whole financial statements.
5. Indicates the current financial position of the business in terms of profitability and operational
efficiency.

Limitations of financial statement analysis

1. Not a Substitute of Judgment

An analysis of a financial statement cannot take the place of sound judgment. It is

only a means to reach conclusions. Ultimately, the judgments are taken by an
interested party or analyst on his/ her intelligence and skill.

2. Based on Past Data

Only past data of accounting information is included in the financial statements,

which are analyzed. The future cannot be just like the past.

Hence, the analysis of financial statements cannot provide a basis for future
estimation, forecasting, budgeting and planning.

3. Problem in Comparability

The size of business concern is varying according to the volume of transactions.

Hence, the figures of different financial statements lose the characteristic of
comparability.

4. Reliability of Figures

Sometimes, the contents of the financial statements are manipulated by window

dressing. If so, the analysis of financial statements results in misleading or
meaningless

5 Various methods of Accounting and Financing

The closing stock of raw material is valued at purchase cost. The closing stock of
finished goods is valued at market price or cost price whichever less is. In general, the
closing stock is valued at cost price or market price whichever less is. It means that the
closing stock of raw material is valued at cost price or market price whichever less is.
So; an analyst should keep in view these points while making analysis and
interpretation otherwise the results would be misleading.
6 Change in Accounting Methods

There must be uniform accounting policies and methods for a number of years. If
there are frequent changes, the figures of different periods will be different and
incomparable. In such a case, the analysis has no value and meaning.

7 Changes in the Value of Money

The purchasing power of money is reduced from one year to the subsequent year due
to inflation. It creates problems in comparative study of financial statements of
different years.

8 Limitations of the Tools Application for Analysis

There are different tools applied by an analyst for an analysis Even though the
application of a particular tool or technique is based on the skill and experience of the
analyst. If an unsuitable tool or technique is applied, certainly, the results are
misleading.

9 No Assessment of Managerial Ability

The results of the analysis of financial statements should not be taken as an indication
of good or bad management. Hence, the managerial ability cannot be assessed by
analysis.

1O.Change of Business Condition

The conditions and circumstances of one firm can never be similar to another
firm. Likewise, the business condition and circumstances of one year to
subsequent can never be similar. Hence, it is very difficult to analyze and
compare one firm with another.
 Statement of the Problem

Financial statement analysis can be a very useful tool for understanding a firm’s
performance and conditions. However, there are certain problems and issues
encountered in such analysis which call for care, circumspection, and
Judgment. Problems in Financial Statement Analysis:

You have to cope with the following while analyzing financial statements:

Lack of an Underlying Theory: The basic problem in financial statement analysis is

that there is no theory that tells us which numbers to look at and how to interpret
them. In the absence of an underlying theory financial statement analysis appears to
be ad hoc, informal and subjective. From a negative viewpoint, the most striking
aspect of ratio analysis is the absence of an explicit theoretical structure. As a result
the subject of ratio analysis is replete with untested assertions about which ratios
should be used and what their proper levels should be.

Conglomerate Firms: Many firms, particularly the large ones, have operations
spanning a wide range of industries. Given the diversity of their product lines, it is
difficult to find suitable benchmarks for evaluating their financial performance and
condition. Hence, it appears that meaningful benchmarks may be available only for
firms which have a well defined industry classification.

Window Dressing: Firms may resort to window dressing to project a favorable

financial picture. For example, a firm may prepare its balance sheet at a point when its
inventory level is very low. As a result, it may appear that the firm has a very
comfortable liquidity position and a high turnover of inventories. When window
dressing of this kind is suspected, the financial analyst should look at the average
Level of inventory over a period of time and not the level of inventory at just one
point of time
Variations in Accounting Policies: Business firms have some latitude in the
accounting treatment of items like depreciation, valuation of stocks, research and
development expenses, foreign exchange transactions, installment sales, preliminary
and pre-operative expenses, provision of reserves, and revaluation of assets. Due to
the diversity of accounting policies found in practice, comparative financial statement
analysis may be vitiated.

Interpretation of Results: Though industry average and other yardsticks are

commonly used in financial ratios, it is somewhat difficult to judge whether a certain
ratio is good or bad. A high current ratio, for example, may indicate a strong liquidity
position (something good) or excessive inventories (something bad). Likewise a high
turnover of fixed assets may mean efficient utilization of plant and machinery or
continued flogging of more or less fully depreciated worn out and inefficient plant and
machinery.

Another problem in interpretation arises when a firm has some favorable ratios and
some unfavorable ratios and this is rather common. In such a situation, it may be
somewhat difficult to form an overall judgment about its financial strength or
weakness. Multiple discriminate analysis, a statistical tool, may be employed to
sortout the net effect of several ratios pointing in different directions.

Correlation among ratios: Notwithstanding the previous observation, financial ratios

of a firm often show a high degree of correlation. This is because several ratios have
some common element (sales for example, are used in various turnover ratios) and
several items tend to move in harmony because of some common underlying factor.
In view of ratio correlations, it is redundant and often confusing to employ a large
number of ratios in financial statement analysis. Hence it is necessary to choose a
small group of ratios from a large set of ratios. Such a selection requires a good
Understanding of the meaning and limitations of various ratios and an insight into the
economies of the business.
This project is based on two techniques of financial statement analysis. They are:

 Comparative analysis
 Common size analysis

Comparative analysis
Comparative statements or comparative financial statements are statements of financial position of a
business at different periods. These statements help in determining the profitability of the business by
comparing financial data from two or more accounting periods.
The data from two or more periods are updated side by side, which is why it is also known as Horizontal
Analysis. The advantage of such an analysis is that it helps investors to identify the trends of business,
check a company’s progress and also compare it with that of its competitors.
The financial data will be considered to be comparative only when the same set of accounting principles are
being used for preparing the statements.
Types of Comparative Statements
There are two types of comparative statements which are as follows
1. Comparative income statement
2. Comparative balance sheet

1. Comparative Income Statement

Income statements provide the details about the results of the operations of the business, and comparative
income statements provide the progress made by the business over a period of a few years. This statement
also helps in ascertaining the changes that occur in each line item of the income statement over different
periods.
The comparative income statement not only shows the operational efficiency of the business but also helps
in comparing the results with the competitors, over different time periods. This is possible by comparing the
operational data spanning multiple periods of accounting.
The following points should be studied when analyzing a comparative income statement
1. Compare the increase or decrease in sales with a relative increase in the cost of goods sold
2. Studying the operational profits of the business
3. Overall profitability of the business can be analyzed by an increase or decrease in the net profit

Steps in preparing a comparative income statement are as follows:

1. Specify absolute figures of all the items related to the accounting period under consideration.
2. Determine the absolute change that has occurred in the items of the income statement. It can be achieved
by finding the difference between previous year values with the current year values.
3. Calculate the percentage change in the items present in the current statement with respect to previous
year statements.
The format of a comparative income statement is as follows:
2. Comparative Balance Sheet
Comparative balance sheet analyses the assets and liabilities of business for the current year and also
compares the increase or decrease in them in relative as well as absolute parameters.
A comparative balance sheet not only provides the state of assets and liabilities in different time periods,
but it also provides the changes that have taken place in individual assets and liabilities over different
accounting periods.
The following points should be studied when analyzing a comparative balance sheet
1. The present financial and liquidity position (study working capital)
2. The financial position of the business in the long term
3. The profitability of the business
Steps in preparing a comparative balance sheet
The below steps can be followed
1. Determine the absolute value of assets and liabilities related to the accounting periods.
2. Determine absolute changes in the items of the balance sheet relative to the accounting periods in
question.
3. Calculate the percentage change in assets and liabilities by comparing current year values with values of
previous accounting periods.
The format of a comparative balance sheet is as follows:
Common size analysis
Common size statement is a form of analysis and interpretation of the financial statement. It is also known
as vertical analysis. This method analyses financial statements by taking into consideration each of the line
items as a percentage of the base amount for that particular accounting period.
Common size statements are not any kind of financial ratios but are a rather easy way to express financial
statements, which makes it easier to analyze those statements.
Common size statements are always expressed in the form of percentages. Therefore, such statements are
also called 100 per cent statements or component percentage statements as all the individual items are taken
as a percentage of 100.
Types of Common Size Statements
There are two types of common size statements:

1. Common size income statement

2. Common size balance sheet

1. Common Size Income Statement

This is one type of common size statement where the sales are taken as the base for all calculations.
Therefore, the calculation of each line item will take into account the sales as a base, and each item will be
expressed as a percentage of the sales.
Use of Common Size Income Statement
It helps the business owner in understanding the following points

1. Whether profits are showing an increase or decrease in relation to the sales obtained.
2. Percentage change in cost of goods that were sold during the accounting period.
3. Variation that might have occurred in expense.
4. If the increase in retained earnings is in proportion to the increase in profit of the business.
5. Helps to compare income statements of two or more periods.
6. Recognizes the changes happening in the financial statements of the organisation, which will help
investors in making decisions about investing in the business.
Common Size Income Statement Format

2. Common Size Balance Sheet:

A common size balance sheet is a statement in which balance sheet items are being calculated as the ratio of
each asset in relation to the total assets. For the liabilities, each liability is being calculated as a ratio of the
total liabilities.
Common size balance sheets can be used for comparing companies that differ in size. The comparison of
such figures for the different periods is not found to be that useful because the total figures seem to be
affected by a number of factors.
Standard values for various assets cannot be established by this method as the trends of the figures cannot
be studied and may not give proper results.
Preparing Common Size Balance Sheet:

(1) Take the total of assets or liabilities as 100.

(2) Each individual asset is expressed as a percentage of the total assets, i.e., 100 and different liabilities are
also calculated as per total liabilities. For example, suppose total assets are around Rs. 4 lakhs, and
inventory value is Rs. 1 lakh. In that case, it will be counted as 25% of the total assets.

Common Size Balance Sheet Format

Limitations of Common Size Statement:

Following are the limitations discussed

1. It is not helpful in the decision-making process as it does not have any approved benchmark.
2. For a business that is impacted by fluctuations due to seasonality, it can be misleading.
 OBJECTIVES OF THE STUDY

 To allow comparisons to be made which assist in predicting the future.

 To investigate the reasons for the changes.

 To construct a simple explanation of a complicated financial statement by its

expression in one figure.

 To permit the charting of a firm’s history and the evaluation of its present
position.

 To provide indicators of a firm’s past performance in terms of its

operational activity and profitability;

 To see what information users can get from the accounting system output.

 To estimate the earning capacity of the enterprise.

 To gauge the financial position and financial performance of the firm.

 To determine the long term liquidity of the funds as well as solvency.

 To determine the debt capacity of the business.

 The basic objective of a Common-size Income Statement is to analyze the

change in individual terms of the Income Statement.
 It also compares data of more than one year, showing the overall trend of profit.

 Analyze and determine the reasons behind the change in the financial performance of the
company.

 To study the trend in different items of Incomes and expenses

 NEED OF STUDY

The term financial analysis is applied to almost any kind of detailed inquiry into
financial data. It is a technical tool in the hands of financial executives to measure
the financial progress. Analysis of financial statement is an attempt to determine
the significance and meaning of the financial statement data so that a forecast can
be made of the prospects of the future earnings, ability to play interest debt
maturities both current as well as long term and probability of a sound dividend
policy.

In the words of Myer’s “Financial statement analysis is largely a study of

relationships among the various financial factors in a business as disclosed by a single
set of statements and a study of the trends of these factors as shown in a series of
statements”.

LIMITATIONS OF THE STUDY

 The financial analysis does not contemplate cost price level changes
 The financial analysis might be ambiguous without the prior knowledge of the changes
in accounting procedure followed by an enterprise
 Financial analysis is a study of reports of the enterprise
 Monetary data alone is contemplated in financial analysis while non-monetary factors
are overlooked
 The financial statements are outlined on the ground of accounting concept, as such, it
does not mirror the current position
 CHAPTER 2

REVIEW OF LITERATURE
 2. REVIEW OF LITERATURE

Literature review

The Literature review of this study will emphasize the related studies on
comparing and analyzing financial statements to make an investment.

The basis of financial planning analysis and decision making is the financial
information (Statements). Financial statements are needed to predict, compare and
evaluate a firm’s earning ability. It is also required to aid in economic decision
making investment and financing decision making. The financial information of an
enterprise is contained in the financial statements. The use of financial statement
analysis in investment decisions has been addressed by a series of authors.

According to Gautam, U. S. (2005) Accountancy Financial Statement is

generally explained as financial information which is the information relating
to the financial position of any firm in a capsule form. Financial statement
according to J. AOhison (1999) was defined as a written report that
summarizes the financial status of an organization for a stated period of time.
It includes an income statement and balance sheet or statement of the financial
position describing the flow of resources, profit and loss and the distribution or
retention of profit.

According to Pandey, I.M. (2005 Financial management) profitability is the

ability of an entity to earn income. It can be assessed by computing various
relevant measures including the ratio of net sales to assets, the rate earned on
total assets etc.
According to Meigns et al. (2001), Financial Statement simply means a
declaration of what is believed to be true and which, communicated in terms of
monetary units. It describes certain attributes of a company that is considered to
fairly represent its financial activities.
 Meigs and Meigs (2003) stated that the rate of return on investment
(ROI) is a test of management’s efficiency in using available resources.
This review is organized under the following sub-heads for ease of
comprehension.

I. What is a financial statement?

II. Objective of financial statement analysis

III. Uses and users of financial statement analysis

IV. Classification of financial statement

V. Relationship among the Statement of Financial Position,

Income Statement, Statement of Cash Flows and Statement of
Retained Earnings.

VI. Techniques of financial statement analysis

VII. Limitations of financial statement analysis

VIII. Impact of inflation on financial statement analysis

I. What is a Financial Statement?

According to Meigs and Meigs (2003), financial statements are a structured
representation of the financial position and financial performance of an entity. The
objective of financial statements is to provide information about the financial position,
financial performance and cash flows of an entity that is useful to a wide range of
users in making economic decisions.
Financial statements also show the results of the management’s stewardship
of the resources entrusted to it. To meet these objectives, financial statements
provide information about an entity’s:

a) Assets

b) Liabilities

c) Equity
d) Income and expenses, including gains and losses

e) Contribution by and distribution to owners in their capacity as

owners, and

f) cash flows A complete set of financial statement

comprises:

1) A statement of financial position as at the end of the period:

2) A statement of comprehensive income for the period;

3) A statement of changes in equity for the period:

4) A statement of cash flow for the period.

5) Notes of Account comprising a summary of significant

accounting policies and other explanatory information; and

6) A statement of financial position as at the beginning of the earliest

comparative period when an entity applies an accounting policy
retrospectively or makes a retrospective restatement of items in its financial
statements or when it reclassifies items in its financial statements.
II. Objective of a Financial Statement Analysis

Business decisions are made on the basis of the best available estimates of the
outcome of such decisions. According to Meigs and Meigs (2003), the purpose of
financial statement analysis is to provide information about a business unit for
decision making purposes and such information need not to be limited to accounting
data. White ratios and other relationships based on past performance may be helpful
in predicting the future earnings performance and financial health of a company, we
must be aware of the inherent limitations of such data.

According to Meigs and Meigs (2003), the key objectives of financial

analysis are to determine the company’s earnings Performance and
the soundness and liquidity of its financial position. We are
essentially interested in financial analysis as a predictive tool.
Accordingly, we want to examine both quantitative and qualitative data in order
to ascertain the quality of earnings and the quality and protection of assets. In
periods of recession when business failures are common, the balance sheet takes
on increased importance because the question of liquidity is uppermost in the
minds of many in the business community.
However, when business conditions are good, the income statement receives
more attention.

Nevertheless, a financial analyst has to grapple on the above complexities of

using financial statement analysis to achieve a specific purpose.

III. Uses and Users of Financial Statement

According to Akpan (2002), financial statement may be used by users for
different purposes:

A. OWNERS AND MANAGERS: Require financial statements to make

important business decisions that affect its operations. Financial analysis is then
performed on these statements to provide management with a more detailed
understanding of the figures. These statements are also used as part of
management’s annual report to the stockholders.

B. EMPLOYERS: Also need these reports in making collective bargaining

agreements (CBA) with the management, in the case of labor unions or for
individuals in discussing their compensation promotion and rankings.

C. PROSPECTIVE INVESTORS: They make use of financial statements to

assess the viability of investing in a business. Financial analysis is often used by
investors and is prepared by professionals (financial analyst), thus providing them
with the basis for making investment decisions

D. FINANCIAL INSTITUTIONS: Financial institutions (banks and other

lending companies) use them to decide whether to grant a company with fresh
working capital or extend debt securities (such as a long term bank loan or
debentures) to finance expansion and other significant expenditures.
E. GOVERNMENT ENTITIES: Government entities (Tax authorities) need
financial statements to ascertain the property and accuracy of taxes and other
duties declared and paid by a company.

F. VENDORS: They require financial statement to access the credit

worthiness of the business

G. MEDIA AND GENERAL PUBLIC: They are also interested in

financial statements for a variety of reasons.
IV. Classification of Financial Statement
According to Diamond (2006), all watchful business owners have an innate sense of
how well their business is doing. Almost without thinking about it, these business
owners can tell you any time during the month how close they are to butting
budgeted figures. Certainly, cash in the bank plays a part, but it's more than that.
Helpful is the review of financial statements. They are three types of financial
statements. Each will give important information about how efficient andeffective
the business is operating.

Income statement, balance sheet and statement of cash flow are the basic and the
most important financial statements which interpret the quantitative data of a
company’s performance. Whereas footnotes have the qualitative explanation for
the major transactions and the accounting policy adopted while formulating the
financial statements. The publicly traded companies publish their financial
statements quarterly.

a) Income Statement

Income statement measures the company profitability over a period of time. In the
income statement, the net income is calculated by subtracting all the expenses from
income. According to Patrick, Ralph, Barry & Susan (2002;63-92), income
statements provide the information of the transactions occurring in a certain period

Of time called accounting period. Expenses include purchase, administrative

expenses, selling expenses, depreciation, amortization expenses and income tax
paid. Initially gross profit is calculated by subtracting the cost of goods sold from net
sales. Cost of goods sold is the expense incurred from the sales of the goods,

Labor cost, raw materials and overhead expenses occurred during the sales period
falls under the cost of goods sold category.
Operating income is calculated by subtracting the depreciation and the other selling
and administrative expenses. From the operating income, interest and/or amortization
is paid which will result in earning before tax income of the entity.

Finally, income tax is paid from earning before tax resulting in net profit.
Management decides if they want to pay dividends or not. If they do pay dividends
then preferred dividends are paid first and afterwards common stockholders'
dividends are paid. The residue income also known as the retained earnings are
reinvested in the firm.

b) Balance Sheet

A firm’s assets, liabilities and equity at a given time period are presented in the
balance sheet. It shows the financial position at a point in time there are two sub
accounts in the balance sheet. Assets account is the first one, which includes all the
current and fixed assets of the company. Current assets include cash, market
securities, and account receivable, inventories, prepaid Expenses etc. Current
assets also named as working capital provide short- term benefit for the entity. The
other items which fall under assets are property, plant, equipment, goodwill,
intangibles, long term investments, note receivable and other long term assets.
Additionally, the other sub account includes all the liabilities and equity. Accounts
payable, accrued expenses, notes payable, short term debt are the major
components of current liabilities. While total long term debt, deferred income tax
and minority interest added to the current liabilities sums up the total liabilities.
Total liabilities summed up with total equity make total liabilities &shareholders’
equity, which is always equal to the total assets.

c) Statement of Cash Flow

Statement of cash flow shows how cash flows in and out of the company. Cash generated by the
operating, investing and financing activities are shown in the statement of cash flow. Furthermore, the
statement of cash flow shows the overall net increase or decrease in cash of the firm. According to
Patrick et al, cash flow helps theinvestors and creditors to access the ability of the firm to generate
positive future cashflow, ability to meet the debt obligations and to shed light on the cash and non-
cash aspect of the investing and financial transactions. Operating activities includes net income,
depreciation, the increase or decrease in marketable securities, accounts receivable, inventory, prepaid
expenses, account payable, and accrued expenses.
The cash involved in purchase or sales of fixed assets falls under investing activities.
Finally sales and retirement of notes, preferred and common stock, other corporate
securities and bonds fall under financial activities in the statement of cash flow report.

d) Footnotes

The footnote gives a detailed description of reporting policies and the practices
companies have adopted. It is impossible to present understandable financial
statements without some explanations as all the information cannot be shown on the
face of the statement. Although the quantitative information is shown in the major
financial statements, the foot note provides the vital qualitative understanding of the
financial report.

Footnotes have two kinds of information; initially the accounting method company
chooses to formulate its financial statements. The second one explains the major
financial results mentioned in the financial statements like income statement, balance
sheet and statement of cash flow. (Charles and Patricia, 1983:79)

e) The statement of retained earnings

The statement of retained earnings shows the breakdown of retained earnings. Net
income for the year is added to the beginning of year balance, and dividends are
subtracted. This results in the end of year balance for retained earnings.

Remember that expenses, revenues and dividends impact retained earnings. Since net
income equals revenue minus expenses, we need to include dividends when
computing the end of period retaining earnings, plus net income and minus dividends.

V. Relationship among the Statement of Financial Position, Income

Statement, Statement of Cash Flows and Statement of Retained Earnings.

As mentioned above, the balance sheet shows the financial position at a point in
time. It therefore cannot contain information that is related to some period, such as
sales or wages expense.
It is a common practice to include the beginning of a period balance sheet as well as
an end period balance sheet in a financial report. This way the reader can form an
opinion about how the firm's financial position has changed.

The cash flow statement and the income statement-statement both give information
about the firm's performance over the period, albeit from different angles. The cash
flow statement explains the change in cash. In other words, it explains how the
beginning of period cash has turned into the end of period cash by differentiating
between operating, investing and financial activities. The income statement shows a
presentation of the sales, the main expenses and the resulting net income over the
period. Net income is based on accounting principles which gives guidance/rules on
when to recognize revenues and expenses, whereas cash from operating activities,
obviously is cash based.

As dividends do not reduce net income, the income statement does not always explain the change in
retained earnings over the year (Net income always equals thechange in retained earnings when no
dividend is paid out). The statement of retainedearnings is included to show how equity has changed
because of net income and possible dividend payments. It shows the beginning value of retained to
which net income is added and dividends subtracted, resulting in end of year retained earnings.

I. Techniques of Financial Statement Analysis

Financial statement users and analysts have developed a number of techniques to

help them analyze and interpret financial statements. According to Diamond (2006)
the most common of these includes horizontal, vertical and ratio analysis. All of

These techniques focus on relationships among items in the financial statement

themselves.

In trying to understand the current financial position of a firm and its future outlook,
it is important to consider changes from year to year as well as trends over several
years. One way to accomplish this is to use comparative financial statements and the
five-or-ten year summary of data found in the firm’s annual report to spot important
or emerging trends.

II. Limitations of Financial Statement Analysis

In this survey, it will be pertinent to discuss the limitations of financial statement
analysis and recommend ways of minimizing or overcoming them. Categorically,
according to Diamond (2006), three problems involved in such analysis are:

i) That firms use different accounting principles and methods.

ii) That it is often difficult to define what industry and firm is really a part of and

iii) That accounting principles varies among countries

III. The Impact of Inflation of Financial Statement Analysis

During a period of inflation, financial statements which are prepared in terms

of historical costs do not reflect fully the economic resources or the real
income (in terms of purchasing power) of a business enterprise (Meigs and
Meigs 2003).

Therefore, inflation affects financial statement analysis to a greater extent.

However, there is an SEC requirement that large corporations disclose in footnotes
the replacement cost of inventories, cost of goods sold, plant and equipment, and
depreciation, ibid. Financial analysts should therefore attempt to evaluate the
impact of inflation on the financial position and results on operations of the
company being studied.
Moreover, according to Diamond (2006), analysts would raise such questions as:
how much of the net income can be attributed to the increase in the general price
level? Is depreciation expense understated in terms of current price levels? Are
profits exaggerated because the replacement cost of inventories is higher than the
cost of units charged to the cost of goods sold? Will the company be able to keep its
“physical capital” intact by paying the higher prices necessary to replace plant
assets as they wear out? Therefore, accounting information should be modified to
cope with the impact of inflation.
Since inflation affects the financial statements, there is a need for a remedy to be
done; this will be in the form of modifying the accounting. To Meigs and Meigs
(1979:579), two approaches are generally in use. They are:

a) The adjustment of historical cost financial statements for changes in general

purchasing power; and
b) Current value accounting, this approach envisions a series of traditional
steps away from historical cost accounting, the first of which would be limited to
requiring footnotes disclosures of the current values for inventories, cost of goods
sold, plant and equipment, and depreciation. Its second step would involve
preparing supplementary financial statements

Expressed in current values for most items, and a final step would call for a set of
current value financial statements to become the primary financial statement of a
company

CONCLUSION

This project has been very useful to me because I have learnt how to prepare
comparative and common size statements. This has improved my knowledge on
financial statements which is very useful in business and commerce every day.

The work which I have done in this project has helped me to understand the
techniques, applications and usefulness of financial statements to understand the
performance of a particular company or enterprise without much difficulty and
also understand how to prepare them in future.

I came to know the following conclusions while preparing this project.

JUDGING THE EARNING CAPACITY

On the financial analysis, the earning capacity of the business concern

may be computed. In addition to this, the future earning capacity of the concern
may also be forecasted. All the external users of accounts, specially the investors
and potential investors are interested in this.

JUDGING THE MANAGERIAL EFFICIENCY

The financial statement analysis helps to pinpoint the areas where the managers
have shown better efficiency and the areas of inefficiency. For example, using
financial ratios, it is possible to analyze the relative proportion ofproduction,
administrative and marketing expenses.

Any favorable or unfavorable variations can be identified and reasons thereof can be
ascertained to pinpoint managerial efficiency and deficiency judging The Short-term
& Long-term Efficiency of the Enterprise On the basis of Financial analysis, long-
term as well as short-term solvency of the concern may be judged.

Creditors or suppliers are interested to know the short-term solvency/liquidity of the

concern i.e. ability to meet short-term liabilities. Debenture holders and lenders judge
the ability of the company to pay the principal amount and interest on the basis of
Financial analysis
 CHAPTER 3

RESEARCH

METHODOLOGY
 RESEARCH METHODOLOGY

Research methodology is a way of explaining how a researcher intends to carry out

their research. It's a logical, systematic plan to resolve a research problem. A
methodology details a researcher's approach to the research to ensure reliable, valid
results that address their aims and objectives. It encompasses what data they're going

to collect and where from, as well as how it's being collected and analyzed.
In this chapter we will discuss about the research methodology which has been

followed to carry out this project i.e. research problem, locale of the study, data
collection method, data analysis and field experience.
In the firm SREE BALAJI AGRO OILS, a thorough study of its financial statements
has been done broadly by covering topics such as inventory management, cash
management, receivables management etc.

In the firm SREE BALAJI AGRO OILS, a thorough study of its financial
statements has been done broadly by covering topics such as inventory management,
cash management, receivables management etc.

Research problem: The problem identified for the study is to find out the financial
Analysis of the edible oil company by using two techniques i.e. comparative analysis
and common size analysis.

Locale of the study: locale of the study is SREE BALAJI AGRO OILS which mainly
deals in edible oils
Data collection: The primary data collection method is used in this project for the
collection of data .This data has directly been collected by visiting the firm SREE BALAJI
AGRO OILS, MAHABUBNAGAR.

Period of the study: The present study covers the period of two years i.e. 2020-2021 and
2021-2022.

Analysis of data: The study is qualitative and quantitative in nature and primary data is
used. The data is collected for understanding and solving the research problem of the firm.
The income statements of the firm were collected directly from the firm and were analyzed.
Tools used: Comparative balance sheet and income statement
Common size balance sheet and income statements.
Field experience: The research was a positive and enriching experience as it provided
useful insights about the current practices in debt and assets management and the process
through which it is handled in the real world. Besides there was immense learning about other
facts of the organization.

RESEARCH DESIGN

A research design is a broad plan that states objectives of a research project

and provides the guidelines on what is to be done to realize those objectives. It is, in
other words, a master plan for executing a research project.

The word “design‟ has various meanings. But, in relation to the subject concern, it is
a pattern or an outline of a research project’s workings. It is the statement of essential
elements of a study that provides basic guidelines of conducting the project. It is the
same as the blueprint of an architect's work.
The research design is a broad framework that describes how the entire research
project is carried out. Basically, there can be three types of research designs –
exploratory research design, descriptive research design, and experimental (or
causal) research design. Use of particular research design depends upon the type of
problem under study.

1. Exploratory Research Design:

This design is followed to discover ideas and insights to generate possible

explanations. It helps in exploring the problem or situation. It is, particularly,
emphasized to break a broad vague problem statement into smaller pieces or sub-
problem statements that help form specific hypotheses. The exploratory research
design is used to increase familiarity of the analyst with problems under
investigation. This is particularly true when a researcher is new in an area, or
when a problem is of different type.

2. Descriptive Research Design:

Descriptive research design is typically concerned with describing a problem and

its solution. It is a more specific and purposive study. Before rigorous attempts are
made for descriptive study, the well-defined problem must be on hand. Descriptive
study rests on one or more hypotheses.

3. Causal or Experimental Research Design:

Causal research design deals with determining cause and effect relationships. It is
typically in the form of an experiment. In causal research design, an attempt is
made to measure impact of manipulation on independent variables (like price,
products, advertising and marketing strategies in general) on dependent variables
(like sales volume, profits, and brand loyalty). It has more practical value in
resolving marketing problems. We can set and test hypotheses by conducting
experiments.
 CHAPTER 4

COMPANY PROFILE
 3. COMPANY PROFILE

COMPANY PROFILE

LOCATION: NEW GUNJ NAWABPET ROAD

ESTABLISHED IN: 01/04/1992

WEEKLY HOLIDAY: Sunday

WORKING SHIFT: 9:00 AM to 8:00PM

CHAIRMAN: SHIV PRAKASH LAKHOTIA

M.D: KARTIK LAKHOTIA

FINANCIAL INSTITUTION: DEVEPOMENT BANK OF SINGAPORE

AREA OF OPERATION: MAHABUBNAGAR

(NATIONALLY): INDIA

(LOCALLY): TELANGANA
PRODUCTS: SREE BALAJI AGRO OILS is integrated manufacturer of refined sunflower
oil, refined cotton seed oil, refined groundnut oil, refined palm oil. In the name of First
choice. Dawatgold, Rich Health gold.

HISTORY

“SREE BALAJI AGRO OILS” is one of the edible oil trading companies serving many customers with
its health friendly products” and is located at Mahabubnagar. The company is engaged in the repacking
of refined edible oils which includes - refined Sunflower oil, refined cottonseed oil, refined palmolein
oil, and refined groundnut oil. These oils are available in the brands namely FIRST CHOICE and
RICH HEALTH.

This firm was established in 1992 with the aim of providing refined edible oils to the consumers. The
firm imports refined oils from various ports like krishnapatnam and Kakinada. Heavy tankers are used
to transport the oil from the port to the firm.
The oil is then unloaded and is shifted to large storage tanks. Later as per the requirements the
oil will be packed in different quantities with the brands FIRST CHOICE and RICH HEALTH.
Packing machines are used to carry out the process of packaging. The entire process of packing,
storing, supplying and transporting is done in a very systematic manner. The firm has its own
transportation vehicles which are used to supply the products at various locations.

The various packing modes available are:

Pouches
1 LTR

Cans
2 LTR
3 LTR
5 LTR

Tin containers
15 KGS
15 LTR

The Company’s manufacturing capacity per day is approx 10000 kgs. These packed oil will be stored
in the warehouse of the firm and will be supplied throughout the MBNR district and also some other
states as per the orders. The brand FIRST CHOICE is more popular with its tagline ‘FIRST CHOICE
IS RIGHT CHOICE FOR YOUR HEALTHY FAMILY’
 CHAPTER 5

DATA ANALYSIS

AND

INTERPRETATION
COMPARATIVE BALANCE SHEET OF SREE BALAJI AGRO OILS AS ON 31/03/2021&2022

ABSOLUTE PERCENTAGE
PARTICULARS 2021 2022 CHANGE CHANGE

Capital Account:
Shri Shiv Prakash Lakhotia 6149102.2 6718239.1 569136.9 9.25%

Liabilities
Current Liabilities:
Sundry Creditors 6552403.8 2684214.81 -3868189 -59.03%
Chit funds 434266 64656 -369610 -85.115
payable 281692 383387.25 101695.25 36.10%

Non Current Liabilities:

Secured Loans 3005414.42 443827 -2561587.4 -85.23%

Unsecured Loan 7290572 7504216.75 213644.75 2.93%

TOTAL 23713450.47 17798540.91 -5914909.6 -0.2494

ASSETS:
1) Noncurrent Assets
a)Fixed asset 958403.7 1168268.21 209864.51 21.89%
b)Long term loans and
advances 1553300 1609300 56000 3.60%

2) Current Assets:

a)cash & Bank balance 1336062 82592.21 -1253469.8 -993%

b)Sundry debtors 10928291.56 8030099.15 -2898192.4 -26.52%
c)Other current assets 8937393.21 6908281.34 -2029111.9 -22.70%

TOTAL 23713450.47 17798540.91 -5914909.6 -24.94%

COMPARATIVE INCOME STATEMENT OF SREE BALAJI AGRO OILS
SREE BALAJI AGRO OILS
D NO.1-7-152/A/3 NEW GUNJ NAWABPET ROAD
MAHABUB NAGAR
State Name : Telangana, Code : 36
ABSOLUTE
PARTICULARS 2021 2022 CHANGE PERCENTAGE

Net Sales 170841014.00 163292689.39 -7548324.61 -4.41%

less: cost of goods sold 160247659.06 153406913.93 -6840745.73 -4.26%

Gross profit 10593354.94 9885775.46 -707578.88 -6.67%

less: selling expenses 9044048.93 8548832.81 -495216.12 -5.47%

Net operating Profit 1549306.01 1336942.65 -212363.36 -13.70%

Add: other income 26520.00 80615.24 54095.24 20.30%

Net profit before tax 1575826.01 1417557.89 -158268.12 -10.04%

less: tax 276617.00 229918.00 -46669.00 -16.88%

Net profit after tax 1299209.01 1187641 -111568.01 -8.58%

COMMON SIZE BALANCE SHEET OF SREE BALAJI AGRO OILS AS ON
31/03/2021&2022

ABSOLUTE AMOUNT PERCENTAGE OF

PARTICULARS BALANCESHEET TOTAL
2021(RS) 2022(RS) 2021(%) 2022(%)
Capital Account:
Shri Shiv Prakash Lakhotia 6149102.2 6718239.1 25.93% 37.74%

Liabilities
Current Liabilities:
Sundry Creditors 6552403.8 2684214.81 27.63% 15.08%
Chit funds 434266 64656 1.83% 0.36%
payable 281692 383387.25 1.18% 2.15%

Non Current Liabilities:

Secured Loans 3005414.42 443827 12.67% 2.49%
Unsecured Loan 7290572 7504216.75 30.74% 42.16%

TOTAL 23713450.47 17798540.91 100% 100.00%

ASSETS:
1) Non current Assets
a)Fixed asset 958403.7 1168268.21 4.04% 6.56%
b)Long term loans and advances 1553300 1609300 6.55% 9.04%

2) Current Assets:
a)cash & Bank balance 1336062 82592.21 5.63% 0%
b)Sundry debtors 10928291.56 8030099.15 46.08% 45.11%
c)Other current assets 8937393.21 6908281.34 37.68% 38.81%

TOTAL 23713450.47 17798540.91 100% 100.00%

COMMON SIZE INCOME STATEMENT
OF SREE BALAJI AGRO OILS
SREE BALAJI AGRO OILS
D NO.1-7-152/A/3 NEW GUNJ
NAWABPET ROAD
MAHABUB NAGAR
State Name : Telangana, Code : 36
PERCENTAGE OF
REVENUR FROM
PARTICULARS ABSOLUTE AMOUNT OPERATION
2021(RS) 2022(RS) 2021% 2022%

Net sales 170841014.00 163292689.39 100% 100%

Add: Other income 26520.00 80615.24 0.01% 0.04%

Total Revenue 170867534.00 163373304.63 100.01% 100.04%

Expenses
A) Employee charges 237000.00 237000.00 1.38% 1.45%

B) Other expenses 6674048.00 6178832.00 3.90% 3.78%

Total expenses 6911048.00 6415832.00 5.28% 5.23%

Profit before tax 161823486.00 154824472.60 94.72% 94.81%

less: Tax 276617.00 229918.00 0.16% 0.14%

Profit after tax 161546869 154594554.6 94.56% 94.67%

 INTERPRETATION OF BALANCE SHEET:
After analyzing the above balance sheet, the following observations are made

 The company’s capital has increased by 9.25% from 2021 to 2022.

 The total liabilities that includes sundry creditors and chit funds has reduced by
59.03% and 85.11% respectively whereas the payables are increased by 36.10% .

 There is a considerable increase seen in the fixed assets of the company. Accordingly
the fixed assets increased by 209864.51 i.e. 21.89% .

 Whereas the current assets has been reduced from 2021 to 2022 which indicates a
negative cash position of the company . The total of liabilities and assets has reduced
by 24.94% .

 There is an increase in payables and unsecured loans from 1.18% to 2.15% and
30.74% to 42.16% respectively .

 It can be seen that the company’s non current assets has increased in 2022 when
compared to 2021 .
 INTERPRETATION OF INCOME STATEMENT
After analyzing the income statement it can be seen that

 The total revenue in 2021 was 100.01%, Whereas in 2022 it is 100.04% as the other
income increased in 2022.

 The total expenses are also reduced in 2022 when compared to 2021.

 The PAT (Profit After Tax) has a slight increment in 2022 .

 It can be seen that net sales has declined by 4.41% from 2021-2022 . So the gross
profit also tends to decrease by 6.67%.

 The net
 Operating profit decreased by 13.07% whereas the other incomes increased by
20.30%.

 The net profit before tax seems to reduce by 10.04% from 2021-2022.

 The overall PAT has also decreased to 111568.01 i.e. 8.58%.

 CHAPTER 6

CONCLUSION

AND

RECOMMENDATIONS
 CONCLUSION
Finance is the blood of every business organization, but if not properly managed then it can cause
adverse effects in the business. Therefore the analysis of financial statement of any business is very
important.
The financial statement of a business communicates to its user the financial position of the firm. The
significance of this statement lies not only in its preparation but in its analysis and interpretation.
Thus a study was made on the topic “FINANCIAL STATEMENT ANALYSIS OF SREE BALAJI
AGRO OILS MBNR” to know the solvency and financial position of the firm.
This project topic mainly focuses on the basics of different types of financial statements i.e. balance
sheet and Profit and loss statements of the firm.
This study helped to analyze the liquidity and efficiency of the business and the management of the
firm. The comparative and common size analysis of balance sheet and P & L statement of the firm of
2021-2022 concludes that the liquidity position of the company is good. However the overall
profitability has decreased moderately in 2022.
The position of the company in 2022 is found to be slightly negative when compared to 2021 due to
following reasons as mentioned by the owner of the firm-
 Due to decline in sales
 Heavy competition
 Increase in transportation cost
 Increased expenditure i.e. salaries and wages
As the competition in the market is getting tougher and tougher, the firm should make changes to
maintain the stability position in the market.
 RECOMMENDATIONS

 All operational and finance related activities should be performed efficiently and effectively.

 The business need to improve its sales through improved marketing and advertising.

 The firm needs to expand its customer base.

 It also needs to revise its offer and pricing.

 The manager must try to reduce the expenses and maximize the profits.

 The firm has to maintain good customer relationship.

 It has to become more efficient and control overheads.

CHAPTER 7

APPENDICES
BALANCE SHEET OF SREE BALAJI AGRO OILS AS ON
31/03/2021&2022
PARTICULARS 2021 2022

Capital Account:
Shri Shiv Prakash Lakhotia 6149102.2 6718239.1

Liabilities
Current Liabilities:
Sundry Creditors 6552403.8 2684214.81
Chit funds 434266 64656
payable 281692 383387.25

Non Current Liabilities:

Secured Loans 3005414.42 443827

Unsecured Loan 7290572 7504216.75

TOTAL 23713450.47 17798540.91

ASSETS:
1) Non current Assets

a)Fixed asset 958403.7 1168268.21

b)Long term loans and advances 1553300 1609300

2) Current Assets:

a)cash & Bank balance 1336062 82592.21

b)Sundry debtors 10928291.56 8030099.15
c)Oher current assets 8937393.21 6908281.34

TOTAL 23713450.47 17798540.91

 CHAPTER 8

BIBLIOGRAPHY
BIBLIOGRAPHY

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➢ Rees, Bill (1995) financial analysis. 2nd ed. Hemel Hempstead:

Prentice Hall

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ACCOUNTANCY, VOLUME II, 13thEdition, Kalyani
publishers, Ludhiana.

➢ Nissim D and Penman SH (2001) „Ration analysis and equity

valuation: from research to practice.‟

➢ Prasanna Chandra 2012, FINANCIAL MANAGEMENT, 5th

Edition, TATA- McGraw HILL, New Delhi

WEBSITES:

www.slideshare.com

www.googlebooks.com

www.wikipedia.org
SREE BALAJI AGRO OILS

D.NO.1-7-152/A/3 NEW GUNJ

NAWABPET ROAD

MAHABUBNAGAR

DATE:05/05/2023

CERTIFICATE

This is to certify that POOJA LAKHOTIA(20033053684033) the student of SRI

VASAVI DEGREE & PG COLLEGE, MAHABUBNAGAR has successfully

completed this project work of “FINANCIAL STATEMENT ANALYSIS of SREE

BALAJI AGRO OILS MAHABUBNAGAR” from 02-04-2023 to 04-05-2023 .

During the above period she was placed in the firm SREE BALAJI AGRO OILS,

MAHABUBNAGAR where she carried out her project .

The candidate was found to be enthusiastic and observant during her stint in

SREE BALAJI AGRO OILS, MAHABUBNAGAR , and her performance has

been assessed as excellent.

HR

For

SREE BALAJI AGRO OILS