break evev analysis

8/7/2019 Break evev analysis

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Presented By:

Manu Dadu

Priyanka Goyal


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Meaning of Financial Statementsy Financial statements are summaries of the operating, financing,

and investment activities of a firm.

y According to the Financial Accounting Standards Board

(FASB), the financial statements of a firm should providesufficient information that is useful to

y investors and

y creditors

y in making their investment and credit decisions in an

informed way.y Analysis of financial statements means such a treatment of the

information contained in financial statements as to afford fulldiagnosis of the profitability and financial position of the firmconcerned.


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TYPES OF ANALYSIS(A) ON THE BASIS OF MATERIAL USED

i) External Analysis

ii) Internal Analysis

(B) ON THE BASIS OF MODUS OPERANDI

i) Horizontal Analysis

ii) Vertical Analysis

(C) ACCORDING TO OBJECTIVES

i) Long Term Analysis

ii) Short Term Analysis


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USERS OF FINANCIAL ANALYSISAN INVESTOR

BANKERS and LENDERS

SUPLLIERSEMPLOYEES

MANAGEMENT

REGULATORYAUTHORITIES

DIFFERENTAGENCIES


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PURPOSE OF FINANCIAL

STATEMENTANALYSISy To use financial statements to evaluate an organisations

y Financial performance

y

Financial position.y To have a means of comparative analysis across time in terms

of:

y Intra company basis (within the company itself)

y Intercompany basis (between companies)

y Industry Averages (against that particular industrysaverages)

y To apply analytical tools and techniques to financial statementsto obtain useful information to aid decision making.


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TOOLS OF FINANCIAL ANALYSISo Comparative Financial and Operating Statements

o Common size Statements

o Trend Analysiso AverageAnalysis

o Statement ofChanges in Working Capital

o Fund-flow and Cash-flowAnalysis

o RatioAnalysis


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COMPARATIVE FINANCIAL

STATEMENTSy Comparative financial statements are the statements

which summarize and present relevant accounting

data for two or more periods, incorporating th

ere inthe changes in individual items.

y Comparative statements usually prepared are:-

Comparative Balance Sheet

Comparative Income Statements


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FORMAT OF COMPARATIVE

BALANCE SHEETParticulars 2007 2008 Absolute Proportionate

(Rs) (Rs) Change( Rs) Change (Rs)

Source of funds

Share Capital 1,50,000 1,75,000 25,000 16.6

Reserve and Surplus 30,000 25,000 5,000 25.0

Shareholders Funds 1,70,000 2,00,000 30,000 17.7

Loan Funds:-

Long term loans - - - -

Total 1,70,000 2,00,000 30,000 17.7

Application of funds

(A) Fixed Assets 1,00,000 1,50,000 50,000 50

Current Assets: 70,000 50,000 (-) 20,000 (-) 28.5

Less: Current Liabilities - - - -

(B) Net Current Assets 70,000 50,000 (-) 20,000 (-) 28.5

T

otal (A+B) 1,70,000 2,00,000 30,000 17.7


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FORMAT OF A COMPARATIVE

INCOME STATEMENT

Particulars 2007 2008 Absolute ProportionateChange Change %

Rs Rs

Net Sales (i.e. after returns) 4,00,000 5,00,000 1,00,000 25

Less: Cost of Goods Sold 2,00,000 3,00,000 1,00,000 50

Gross Profit 2,00,000 2,00,000 - -

Less: Operating Expenses:

Administration, Selling & 60,000 1,00,000 40,000 66.66

Distribution Expenses

Net Operating Income 1,40,000 1,00,000 (40,000) (-) 28.57

Add: Other Incomes 25,000 35,000 10,000 40.00

Net (Profit) before tax 1,65,000 1,35,000 (30,000) (-) 18.88

Less: Tax 50,000 60,000 10,000 20.00

Net (Profit) after tax 1,15,000 75,000 (40,000) (-)34.78


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COMMON SIZE STATEMENTSy Common size financial statements are those in which

figures reported are converted into percentage to some

common base. For an interpretation of underlying causesof changes over a period of time a vertical analysis is

required.

y Common size statements usually prepared are:-

Common size income statementsCommon size position statement ( Balance Sheet)


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FORMAT OF COMMON SIZE

BALANCE SHEET

Particulars Absolute Amount % of Balance Sheet

Amount % ofTotal Amount % of total

Rs. RsAssets:

Fixed Assets 4,00,000 66.67 4,00,000 53.33

Current Assets 2,00,000 33.33 3,50,000 46.67

Total Assets 6,00,000 100.00 7,50,000 100

Liabilities:

Share Capital 3,00,000 50.00 4,00,000 53.33

Reserves & Surplus 2,00,000 33.33 3,00,000 40.00

Current Liabilities 1,00,000 16.66 50,000 6.67

6,00,000 100.00 7,50,000 100


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FORMAT OF COMMON SIZE INCOME

STATEMENTParticulars 2007 2008

Amount % Amount %

Sales 8,00,000 100.00 10,00,000 100.00

Less Cost of Goods Sold 5,00,000 62.50 6,00,000 60.00

Gross Profit 3,00,000 37.50 4,00,000 40.00

Less Operating Expenses

Office & Administration Expenses 50,000 6.25 75,000 7.5

Selling & distribution Expenses. 25,000 3.12 35,000 3.5

Net Income before Tax 2,25,000 28.13 2,90,000 29.0

Less Tax 20,000 2.50 25,000 2.5

Net Income afterTax 2,05,000 25.63 2,65,000 26.5


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break evev analysis

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