ABSTRACT

This project report is entitled to “A study on financial statement analysis of

Haldiram’s. The aim of the study is to analyze the financial position of the company. When
we analyze the financial statement of it, we came to know the exact condition of the company
in the market and their strengths and weakness. Haldiram’s is one of the oldest and famous
company of the India. It is the world's largest food beverage company. Haldiram’s is one of
the major Indian sweets and snacks manufacturing company based in Nagpur, Maharashtra.
Its products are exported to countries all over the world including the UK, USA, Canada,
United Arab Emirates, Sri Lanka, and many more. The company has an annual turnover of US
$ 590 million having over 100 products like frozen meals, ice creams, sweets, cookies, chips,
and other snacks. Along with packaged food, Haldiram’s is a chain of restaurants spread all
over the nation which is quite popular among the people. After analyzing the financial
statement of this company, the process of interpretation helps us to know to the solvency
position, liquidity position, profitability and the results of operation. We must analyze the
income statement and position statement of the firm by taking the help of comparative
statement. Comparative statement calculates the absolute change of each item of a statement
with respect to the same item of previous year. It helped in comparing the previous year figure
into current year figure which make the comparison simpler and ultimately help in taking
decisions.

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 INDEX

Sl. No. Contents Page no.

1 Introduction 3

2 Objectives of financial statement analysis 4

3 Types of financial analysis 5

4 Comparative statement 6

5 Advantages comparative statement 6

6 Limitation of comparative statement 7

7 Problem 8

8 Solution 9

9 Interpretation 11

10 Conclusion 12

11 Bibliography 13

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 INTRODUCTION

Financial statement analysis method of analyzing a company financial statement in

order to take better economic decisions. When financial statement is prepared by preparing
income statement position statement and cash flow statement. It provides financial data which
are not useful for the users in decision making process.

Thus, an effective analysis and interpretation of financial statement is required.

Financial statement analysis means regrouping of data contained in the financial

statement, interpreting those and drawing conclusion about the profitability, liquidity and
solvency of an enterprise.

It’s an analysis which highlights important relationships between items in the financial
statements. Financial Statement analysis embraces the methods used in assessing and
interpreting the results of past performance and current financial position as they relate to
factors of interest in investment decisions. It is an important means of assessing past
performance and in forecasting and planning future performance.

Definition: -

According to Bernstein: - "Financial statement analysis is a judgmental process which aims

to estimate current and past financial position and the result of the operation of an enterprise,
with the primary objective of determining the best possible estimates and predictions about
the future conditions."

According to Lev: - “Financial Statement Analysis is an information processing system

designed to provide data for decision making models, such as the portfolio selection model,
bank lending decision models, and corporate financial management models.”

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Objectives of financial statement analysis: -

1. To assess profitability: -

The prospective investors would like to know whether the business is profitable and
progressing on sound line. So, for that they calculate the present and future profit potential of
a business by doing cross sectional analysis and comparing the performance of business with
similar firm.

2. To know the liquidity position: -

The short-term creditor, lender is interested to know whether a firm can repay their
dues in time so they calculate various liquidity ratio from the figures of financial statement,
also compare cash and cash equivalent with the commitment of paying dues in short period of
time.

3. To know the solvency position: -

The long-term creditor of long-term funds try to examine the long-term solvency of
firm at regular interval. They want to know whether the firm can pay interest and repay the
installment of borrowed money on due date.

4. To judge the operational efficiency: -

The management is interested to know the operational efficiency of business. It

examines trend of sales, purchase COGS and other expenses, movement of stock, average
collection period, average payment period etc.

5. To disclose hidden information: -

Critical analysis of financial statement helps to unearth some hidden information which are
very useful to management for decision making. The management analyses the financial
statement from different angle and bring certain things to limelight.

6. To plan and forecast: -

Sound planning and forecasting is necessary for successful running of an enterprise. It

would be correct when they are based on facts and figures given in the financial statement.

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 Planning for increase in sales etc. can be done by proper analysis and interpretation of
financial statement.

7. To establish relationship: -

There exist cause and effect relationship among different figure given in the financial
statement. Its aim of analyzing the financial statement is to explore such relationship. It also
helps to find out strength and weakness of business.

TYPES OF FINANCIAL ANALYSIS

Based on number of firms Based on modus Based on users

involved operandi

INTER FIRM INTRA FIRM HORIZONTAL VERTICAL EXTERNAL INTERNAL

Explanation of types of FSA

Inter firm analysis: - When the financial variables after 2 or more similar firm are compared
to determine their comparative strength and weakness, it is termed as inter-firm analysis.

Intra firm analysis: - When analysis and comparison is made between the financial variables
of a single enterprise for 1 year or over several years it is termed by intra- firm analysis.

Horizontal analysis: -When financial data of two or more periods or Enterprises are
compared in horizontal form, it is termed as horizontal analysis.

Vertical analysis, -When data analyzed vertically in percentage form with respect to the total
within a single statement, it is termed as vertical analysis.

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External analysis: -Analysis of financial statement by the parties external to the firm is
termed as external analysis.

Internal analysis: -When the company analyzes its financial statement to know its progress
it is termed as internal analysis.

COMPARATIVE STATEMENT

Meaning: -
A comparative statement is a document used to compare a financial statement with prior
period statements. Previous financials are presented alongside the latest figures in side- by-
side columns, enabling investors to identify trends, track a company's progress and compare it
with industry rivals.

Comparative income statement: -

In this statement all individual items are expressed in 2 different years where we shall find
absolute change and a percentage of change i.e., increase or decrees in revenues.

Comparative balance sheet: -

statement all individual items are expressed in 2 different years where we shall find absolute
change and a percentage of change i.e., increase or decrees in assets and liabilities

Advantage of comparative statement: -

(a) Comparison:
The comparative statements show the figures of various firms or number of years side by side
i.e., both for inter-firm comparison and intra-firm comparison.

(b) Horizontal Analysis:

The variables are arranged horizontally for the purpose of analysis and interpretations of data
taken from financial statements for assessing profitability, overall efficiency and financial
position of a firm.

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(c) Trend Analysis:
The comparative financial statement helps to ascertain the ‘trend’ relating to sales, cost of
goods sold, operating expenses etc. so that a proper comparison can easily be made which
helps the analyst to understand the overall performance of a firm.

(d) Trend and Directions:

The comparative financial statement provides necessary information for comparison of trends
in related items e.g., the analyst can compare the trend of sales with the trend of accounts
receivable which gives very useful information. A 20% increase in accounts receivable and
an increase of sales by only 10% warrants investigation into the reasons for this difference in
the rate of increase.

(e) Evaluation of:

The comparative financial statement helps the analyst to compare Performance the
performance of one firm with that of other similar firm in the industry and compare the
performance of the competitors in the line. This comparison helps to find out the weakness or
strength of a firm and to take adequate steps.

(f) Measuring Financial:

Comparative financial statements help to measure important Distress financial ratios which
are used for predicting financial distress and predicting corporate failure with the help of
Multivariate Model.

Limitation of Comparative statement: -

(a) Inter-firm Comparison:

Inter firm comparison will only be effective if both the firms follow the same accounting
principles, method of valuations of stocks, assets etc. i.e., all the accounting concepts and
conventions, which in real world situation, are not identically followed by both the firms e.g.,
Firm A follows the FIFO method of valuing stock whereas Firm B follows LIFO method for
the same.

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(b) Inflationary Effect:
Comparative financial statements do not recognize the change in prices level and, as such, it
will be of no use.

(c) Ascertaining Correct Trend:

It is very difficult to ascertain the correct trend if there is a structural change in a firm which
are frequently happened.

(d) Supply Misleading Information:

Sometimes a comparative financial statement provides meaningless information, e.g., if a
negative amount comes in base year, and a positive amount in the next year, it is not possible
to find out the change in percentage.

(e) Uniformity in Principle:

There must be a consistency while following accounting principles, concepts and convention.
But in practice, this is not done and as such, multi-year analysis becomes useless.

PROBLEM: -

Q) From the following information prepare comparative statement that is comparative

income statement and comparative balance sheet for the year 2020 and 2021 of Haldiram’s.

PARTICULARS 2020 2021

Sales 88785 89469

Cost of Goods Sold 44730 44199

Operating Expenses 28643 29544

Non-Operating Expenses 4231 4091

Non-Operating Incomes 1591 1661

Tax 3305 4413

Share Holders Fund 319 311

Reserves 1345 1198

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Non-Current Liabilities 89007 92875

Trade Payables 17038 18268

Provisions 564 620

Other Current Liabilities 15719 18268

Intangible Assets 19236 20397

Plant & Equipment’s 26576 27554

Goodwill 32772 33007

Other Non-Current Assets 15974 18901

Cash & Cash Equivalents 4884 7990

Short Term Investments 921 1306

Inventories 5183 8401

Trade Receivables 12252 12411

Other Current Assets 3224 1934

SOLUTION: -
comparative income statement of Haldiram’s for the year 2020 & 2021.

Particulars 2020 2021 Absolute Percentage

change change
Sales 88785 89469 684 0.77

(-) COGS/Cost of Goods sold 44730 44199 (531) (1.18)

Gross Profit 44055 45270 1215 2.75

(-) Operating expenses 28643 29544 901 3.14

operating profit 15412 15726 314 2.03

(+) Non-Operating Income 1591 1661 70 4.39

17003 17387 384 2.25

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(-) Non-Operating Expenses 4231 4091 (140) (3.30)

Net profit before tax 12772 13296 524 4.10

(-) Tax Paid 3305 4413 1108 33.52

Net Profit after Tax 9467 8883 (584) (6.16)

Comparative Balance Sheet for the year 2020 & 2021

Particulars 2020 2021 Percentage

A: Liabilities

1. Equity & Liabilities:

(a) Share Holder's Fund 319 311 (8) (2.50)

(+) (b) Reserves 1345 1198 (147) (10.92)

2. Non-Current Liabilities 89007 92875 3868 4.34

3.Current Liabilities:

(a) Trade payable 17038 18629 1591 9.33

(b) Provisions 564 620 56 9.03

(c) Other Current Liabilities 15719 18268 2549 16.21

Total fund provided 123992 131901 7909 6.37

B: Assets

1. Fixed Assets: -

(a)Plant & Equipment 26576 27554 978 3.68

(b) Good will 32772 33007 235 0.71

(c) Intangible Assets 19236 20397 1161 6.03

(d) Other Non-Tangible Assets 15974 18901 2927 18.38

2. Current Assets

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(a)Cash & cash equivalent 4884 7990 3106 63.59

(b) Short Term Investments 921 1306 385 41.88

(c) Inventories 8153 8401 248 26.92

(d) Trade receivables 12252 12411 159 1.29

(e) Other Current Assets 3224 1934 (1290) (40.01)

Total Fund Employed 123992 131901 7909 6.37

Interpretation

1. Income statement

1. In 2021 sales figure is increased and the percentage of gross profit is decreases. This
happens due to the reduction of COGS.

2. The operating profit has increased.

3. The non-operating expenses has decrease in both absolute and percentage figure.

4. The net profit after tax has been decreased due to increase in operating expenses.

5. Operating expenses has been increased in both absolute and percentage figure.

2. Balance sheet: -

I. The percentage of fixed assets has been increased.

II. The Goodwill has been reduced.

III. Current assets have been increased.

IV. The long-term liabilities and equities have been decreased.

V. But the current liabilities have been increased.

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 CONCLUSION

From the project on “Financial statement analysis” I have got an overall idea about
how to do this project. By doing this it helps me to understand the definition of financial
statement analysis, its nature, objectives, meaning of comparative statement and its
limitations and advantages. This project shows how the firm prepare a comparative statement
which help the firm to compare the performance of two different years of same firm. By
doing this project I acquired a lot of knowledge about this topic I also got to know how to
calculate it in different method.

So, I would like to conclude that this project has helped me to know completely about
this topic which can helpful further in my exam and also, I want to express my gratitude and
thanks to my teacher who helped and guided me in every step for successful completion of
this project.

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 BIBLIOGRAPHY
BOOKS
• Amitabha Basu, Financial Accounts, Volume – 3, Edition - August- 2017, accounting ratios for
financial statement analysis, page – 829 – 835.
• Sarat Kumar Sahu, Pradeep Kumar Prusty, Edition – 2017, Fundamental of Management
Accounting, page 4.1 – 4.90
• Pradeep Kumar Prusty, Suresh Chand, Prasad Kumar Sahu: 2018: Nano Publication Home: Pg.
568-579

WEBSITE:
o www.yourarticlelibrary.com
o https://www.crazymasalafood.com/top-20-food-companies-india/
o http://www.yourarticlelibrary.com/accounting/financial-statements-
analysis/comparative-financial-statement-advantages-and-disadvantages/73285

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