ASSIGNMENT ON FINANCIAL STATEMENT PRACTICES ANALYSIS

SUBMITTED TO: DR.SHIKHA BHATIA

SUBMITTED BY: BHAWNA SHARMA PGSF1104 PGDM (SERVICES) 2011-13

JAIPURIA INSTITUTE OF MANAGEMENT NOIDA

I interviewed three different finance managers to ak them questions about their financial analysis process ,its need ,uses or applications and their real life

practices. Three of them belongs to finance and accounting department. Names and contact details are mentioned below: (1)Jonas S.Walker (Manager) Contact no-9810116527 H&H LOGISTICS &SHIPPING CO (I)PVT.LTD. (2)Raghunath (SR.Accounts officer) Contact No.26815772 INDIA GLYCOLS LIMITED (3)Sidharth Yadav (Credit Manager) Contact No. RELIGARE PVT.LTD.

Firstly when I interviewd Mr. Jonas S.Walker .He firstly gave a introduction about his company

H & H LINES LTD and HULL & HATCH LOGISTICS LLC are
operated from the United Arab Emirates Managed by a core group of professionals highly experienced in the field of Shipping & Logistics. Strong by professionals with varied experience in Liner and Logistics Operations positioned in our Gulf/ ISC/ SEA offices. It is through sheer determination we have grown to enviable heights in the previous eventf. Then he tell me his analysis procedure that they generally use some of the

important ratios like operating ratio ,long term debt to operating property, operating revenue to operating property. These ratios are computed to have a look on the operations of the company because of high investment in motor vehicles ,carriers ,ships which increases the cost of operations . Operating ratio: This ratio is computed by comparing operating revenues with operating expenses. This ratio is considered important because operating revenues vary from year to year because of differences in rates, classification of traffic, the distance traffic is transported. Therefore common size analysis of revenues and expenses is needed to explain changes in operating ratio Long term debt to operating property : Due to heavy investment in operating assets, such as equipment, the long term ratios increase in importance. long term borrowing capacity is also a key consideration .This ratio gives a measure of the sources of funds with which property is obtained.

Operating revenue to operating property: This ratio measures turnover of operating assets. The objective is to generate as many rupees in revenue as per rupee of property as possible. Therefore this ratio is considered as important ratio while doing analysis of financial statements. He also told me that while doing analysis,he also use the annual data of 4 to 5 years to get a comparative look over the increase or decrease in cost ,price or profits .This is useful in making plans and policies for the next year as if they get the idea that whether their profits are falling or increasing in comparison to other years then they effectively workout the new strategies to follow in the future.

Then I interviewed Mr.Sidharth Yadav who is working in RELIGARE PVT LTD. Firstly he introduced his working about SME Mortgage solution which targets individuals or companies who own residential, commercial or industrial property and have a stable source of income. Their prime product "Loan against property" enables their customers to obtain loans against their property and use these funds towards different purposes including business expansion and purchase of plant and machinery or even consolidation of debts or purchase of another property. There principal revenue source is usually interest income from loans and investment securities. The net interest margin is important to banks profitability. The important ratios which they consider are Earning to total assets , interest margin to average earning assets ,loan loss coverage ratio, equity capital to total assets.

Earning Assets to total assets: This ratio shows how well company management puts bank to work. Earning assets include loans,leases,investment securities and money market assets. Interest margin to average earning assets: This is a key determinant of profitability ,because it provides an managements ability to control the spread between interest income and interest expense. Loan loss to coverage ratio: This ratio helps in determining the asset quality and level of protection of loans. This ratio is very important to judge the financial soundness of the mortgage firm. Equity capital to total assets: This ratio helps in measuring the extent of equity ownership in the company. this ownership provides the cushion against the risk of using debt and leverage. They use income statement also at the time of doing analysis because that helps them in getting the view of interest income as well as non interest income because non interest income also plays important role in mortgage firm.

Then I interviewed Mr. Raghunath who is working with INDIA GLYCOLS LIMITED India Glycols holds the distinction of being the only green petrochemical company of its kind. It is one of the leading manufacturers of glycols, ethoxylates and PEGs, performance chemicals, glycol ethers and acetates, natural gums and potable

alcohol. Our continued emphasis on superior quality, through the latest technologies available worldwide, has made us a pioneer in our field. For analysis purpose they use cash flow statement.because for this type of companies ,financial statements are affected significantly by the method they choose to account for costs associated with exploration and production.the financial statements are different for these type of companies because they are required to disclose ,in a note ,supplementary information of exploration and production.Sometimes they use ratios also but cash flow is considered as important part for analysis.thew potential for a significant difference exits between the reported income and cash flow from operations. One reason is that large amount can be spent for exploration and development,years in advance of revenue from the found reserves.the other reason is that there can be significant difference between when expenses are deducted on the financial statements and when they are deducted on the tax return.therefore observing the operating cash flow is very important. Oher than that they use two costing methods like successful efforts method and the full costing method.these methods have very significant influence on the balance sheet and income statement.