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Financial statements (or financial reports) are formal records of the financial activities and
position of a business, person, or other entity.
Relevant financial information is presented in a structured manner and in a form which is easy to
understand. They typically include four basic financial statements accompanied by a
management discussion and analysis:
(Notably, a balance sheet represents a single point in time, where the income statement, the
statement of changes in equity, and the cash flow statement each represent activities over a stated
period of time.)
For large corporations, these statements may be complex and may include an extensive set of
footnotes to the financial statements and management discussion and analysis. The notes
typically describe each item on the balance sheet, income statement and cash flow statement in
further detail. Notes to financial statements are considered an integral part of the financial
statements.
FINACIAL STATEMENT OF EME (Rs. In thousands)
Results consolidated, results excludes extra ordinary/exceptional items Source: financial statements provided by company
If we see the financial statement the Net profit margin percentage it actually decreasing IN
FY2017-2018 as compared to FY2016-2017 i.e being 26.07% in 2016-2017 to 20.63%
So, if we see operating expenses have increased means company is spending more and might be
taking short term loans.
INCOME STATEMENT OF EME
An income statement is one of the three important financial statements used for reporting a
company's financial performance over a specific accounting period, with the other two key
statements being the balance sheet and the statement of cash flows. Also known as the profit and
loss statement or the statement of revenue and expense, the income statement primarily focuses
on the company’s revenues and expenses during a particular period.
Interest 0 0 33.3
Profit before tax 4358000 3583000 -17.8
tax 819000 896000 9.4
Profit after tax 3539000 2899000 -18.1
Gross profit margin 34.5% 26.8%
Effective tax rate 18.8% 25.0%
Net profit margin 26.1% 20.6%
Results consolidated, results excludes extra ordinary/exceptional items Source: financial statements provided by company
Operating income during the year 2017-2018 rose to 2.6% on a year-on-year (YoY)
basis.
The company's operating profit decreased by 20.3% YoY during the fiscal. Operating
profit margins witnessed a fall and stood at 26.8% in FY18 as against 34.5% in FY17.
Depreciation charges decreased by 6.9% and finance costs increased by 33.3% YoY,
respectively.
Other income grew by 42.7% YoY.
Net profit for the year declined by 18.1% YoY.
Net profit margins during the year declined from 26.1% in FY17 to 20.6% in FY18
BALANCE SHEET
A balance sheet is a fiscal summary that reports an organization's advantages, liabilities and
investors' value at a particular point in time, and gives a premise to figuring rates of return and
assessing its capital structure. It is a fiscal summary that gives a depiction of what an
organization claims and owes, just as the sum contributed by investors.
It is utilized close by other significant fiscal reports, for example, the salary explanation and
articulation of money streams in leading principal examination or computing budgetary
proportion.
As per balance sheet as on 31st March 2018, the net worth of the EME technologies
decreased by Rs. 106000.
Current liabilities increased by Rs.266000 i.e 19.5% change which reduced the current
ratio of the company.
Current assets also increased by 2.5%.
Current liabilities increased more i.e 19.5% in comparison to current assets i.e 2.5%, thus
reducing the current ratio of the company, resulting in the reduction of the liquidity of
EME technologies which is not good for the company.
Company have reduced their long term debts by repaying. So, current assets have
reduced.
We can clearly see this in the balance sheet table which clearly shows long term debts
reduced in March 31, 2018. And purchase of fixed assets can also be observed from the
balance sheet.
Cash flow statements are the statements of changes in the financial position prepared on the basis
of funds defined in cash or cash equivalents. In short cash flow statements summarises the cash
inflow and outflow of the firm during a particular period of time.
EME TECHNOLOGIES cash flow from operating activities (CFO) during FY18 stood at
Rs. 3050000 on a YoY basis.
Cash Flow from investing activities (CFI) during FY18 stood at Rs. 170000 on a YoY
basis which clearly shows an increase which means EME sold some investment/fixed
assets.
Cash Flow from finanancing activities (CFF) during FY18 stood at Rs. -3035000 on YoY
basis which is a decreasing value,thus there might be any long term borrowings.
Overall, net cash flows for the EME during FY18 stood at Rs.278000 from Rs.-1082000
net cash flows seen during FY17.
Thus, with the help of cash flow statements changes in cash between two periods and
their courses can be ascertained.
RATIO ANALYSIS
Ratio analysis is the process of the determining and presenting the relationship of the items and
group of items in the statements. Ratio can assist management in its basic functions of
forecasting, planning, coordination, control and communication.
TYPES OF RATIOS
Liquidity Ratio- They indicate the firms ability to meet its current obligations out of
current resources.
Current ratio = current assets / current liabilities
Quick ratio = liquid assets / currents liabilities
Leverage or Capital Structure Ratio- This ratio discloses the firms ability to meet ability
to meet the interest costs regularly and long term solvency of the firm.
Debt equity ratio = long term loans / shareholders funds or net worth
Debt to total fund ratio = long term loans / shareholders funds + long term loan
Proprietary ratio = shareholders fund / shareholders funds + long term loans
Activity ratio or turnover ratio- They indicate the rapidity with which the resources
available to the concern are being used to produce sales.
Profitability Ratios or Income Ratios- The main object of every business concern is to
gain profits. A business must be able to earn adequate profit in relation to the risk and
capital invested in it.
The table below shows financial data of the EME Technologies company on which basis the
ratio analysis have been done.
Solvency Ratios
Current Ratio : The company’s current ratio decreased and stood at 6.4x during FY18, from
7.4x during FY17. The current ratio measures the company’s ability to pay short term. As a
conventional rule, a current ratio of 2:1 or more is considered satisfactory. The ratio of the
company is more with time .So, we can say that in short run the EME technologies is financially
strong and its liquidity position can also be considered good.
Interest Coverage Ratio : The company’s interest coverage ratio deteriorated and stood at
8,957.5x during FY18, from 14528.7x during FY17. The interest coverage ratio of a company
states how easily a company can pay its interest expense on outstanding debt. A higher ratio is
preferable.
Profitability Ratios
Return on equity (ROE): The ROE of EME Technologies declined and down at 24.1% during
FY18, from 29.1% during FY17. The ROE measures the ability of a firm to generate profits from
its shareholders capital in the company. This also indicates that EME is not using the resources
of the owners properly.
Return on capital employed(ROCE) : The ROCE for the EME Technologies declined and
down at 31.5% during FY18, from 35.8% during FY17. The ROCE measures the ability of a
firm to generate profits from its total capital( shareholder capital plus debt capital) employed in
the company.
Return on Assets( ROA): The ROA of the EME Technologies declined and down at 20.3%
during FY18, from 25.3% during FY17 .The ROA measures how efficiently the company uses
FINDINGS
In 2018 there is increase in current assets by 2.5% than 2017 and there is increase in current
liability by 19.5%, because of greater increase in current assets than in current liabilities, the
position of Working Capital has improved.
Due to better long term and short term financial conditions firm’s working capital is better than
that of previous year.its assets to generate earnings. The data of company shows its efficiency in
this case.