A SUMMER INTERNSHIP REPORT ON

FINANCIAL STATEMENT ANALYSIS

AT
CA M/S JAY JHA AND COMPANY

A REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

BACHELOR’S DEGREE IN BUSINESS ADMINISTRATION
(ST. XAVIER’S COLLEGE, RANCHI)

BY
AASTHA DIVYA

EXAM ROLL NO. -20PBBA046724 SESSION:2020-2023

DEPARTMENT OF BBA
ST. XAVIER’S
COLLEGE RANCHI-
834001
 PREFACE

The project provides an opportunity to demonstrate the application of my knowledge ,

skills and competencies. This project helps me to devote my skills to analyze the problem
to suggest alternative solutions and to evaluate them.

I have worked on the topic FINANCIAL STATEMENT ANALYSIS. I have put my level
best to prepare my project an error-free project. Every effort has been made to offer the
most authenticate position with accuracy.
 ACKNOWLEDGEMENT

I am extremely grateful to CA Jay Jha for giving me the opportunity to do my research

project in his esteemed organization.
I would like to express my deep gratitude and sincere thanks to our faculty Mr.Abhijit Dey
(HOD), and Dr. Sandeep Kumar (Project Guide) for their encouragement, guidance, and
valuable suggestions which helped me throughout the period of this study.
Finally, I thank all other faculty members of the college for their constant support without
which the study would not have been successful.

Date: Aastha Divya

(20PBBA046724)
 CERTIFICATE OF APPROVAL

This is to certify that the under sign have accessed and evaluated the project work on
submitted by AASTHA DIVYA of BBA (semester 5) for the academic year 2020- 2023
on the topic FINANCIAL STATEMENT ANALYSIS. This project is original and to the
best of our knowledge and has been accepted for Internal Assessment.

Internal Examiner External Examiner

 CERTIFICATE
This is to certify that Aastha Divya, Class Roll no. – 2056, Examination Roll no.
20PBBA046724, Semester – V has completed the project report on “ Financial Statement
Analysis” at M/S CA JAY JHA AND COMPANY, Ranchi in the partial fulfilment of the
requirement for a degree of Bachelor of Business Administration(BBA).

Abhijit Dey
Head of Department
Department of BBA
St. Xavier’s College, Ranchi
JAY JHA & COMPANY
Chartered Accountants

TO WHOM IT MAY CONCERN

This is to cetiify that Aastha Divya, Exam Roll no. - 20PBBA046724 of B.B.A
Department, ST.Xavier’s College , Ranchi has successfully completed her internship for
the period of 01.06.2032 to I .07.2023 in my Firm on the topic ”Financial Statements
Analysis".

Her performance was good and satisfactory and 1 wish her success for future endeavours.

For CA JAY JHA AND

COMPANY CHARTERED
FRN 03 l280C

JAY KRISHNA JHA

(Proprietor)
M. NO. 524589

PLACE -RANCH
Date:- 02/07/2022

Shop No. 6, Ground Floor, Amna or Aman Complex, Ward No. 28, Kadru, Ranchi-834002
Mob: 6200145697, 9973643734, E-mail : jayjhaca@gmail.com
 DECLARATION

I , AASTHA DIVYA student of BBA, Exam roll no -20PBBA046724 hereby declare

that the work presented in the project entitled “FINANCIAL STATEMENT
ANALYSIS”
At CA M/S JAY JHA AND COMPANY in partial fulfillment of the requirement for the
award of the degree of Bachelor of Business Administration at St. Xavier’s College,
Ranchi has been the result of my own efforts and this project has not been formed a
basis for the award of any other degree or any other university.

All the information and data in my project report are true and authentic to best of my
knowledge and taken from reliable sources.

AASTHA DIVYA
(20PBBA046724)
 CONTENTS

Serial no. Content

Chapter I Introduction
Chapter II Factors to be studied
Chapter III About the organisation
Chapter IV Research study
A. Objecives and Scope of the study
B. Research problem and design
C. Data collection method
D.Research measuring tools
E. Rechearch Methodology
F. Steps involved
G.SWOT analysis
Chapter V Data interpretation and testing of hypothesis
Findings and Suggestions
Chapter VI Bibliography
Annexures
 CHAPTER - I
INTRODUCTION
 FINANCIAL STATEMENT ANANLYSIS
Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions to earn
income in future. These statements include the income statement, balance sheet, statement
of cash flows, notes to accounts and a statement of changes in equity (if applicable).
Financial statement analysis is a method or process involving specific techniques for
evaluating risks, performance, financial health, and future prospects of an organization.[1]
It is used by a variety of stakeholders, such as credit and equity investors, the government,
the public, and decision-makers within the organization. These stakeholders have different
interests and apply a variety of different techniques to meet their needs. For example,
equity investors are interested in the long-term earnings power of the organization and
perhaps the sustainability and growth of dividend payments. Creditors want to ensure the
interest and principal is paid on the organizations debt securities (e.g., bonds) when due.

In the words of Myers, “Financial statement analysis is largely a study of relationship

among the various financial factors in a business as disclosed by a single set-of statements
and a study of the trend of these factors as shown in a series of statements.”
 SIGNIFICANCE OF FINANCIAL ANALYSIS

Financial analysis is useful and significant to different users in the following ways:
(a) Finance manager:
Financial analysis focusses on the facts and relationships related to managerial
performance, corporate efficiency, financial strengths and weaknesses and
creditworthiness of the company. A finance manager must be well-equipped with the
different tools of analysis to make rational decisions for the firm. The tools for analysis
help in studying accounting data so as to determine the continuity of the operating
policies, investment value of the business, credit ratings and testing the efficiency of
operations. The techniques are equally important in the area of financial control, enabling
the finance manager to make constant reviews of the actual financial operations of the
firm to analyse the causes of major deviations, which may help in corrective action
wherever indicated.
(b) Top management: The importance of financial analysis is not limited to the finance
manager alone. It has a broad scope which includes top management in general and other
functional managers. Management of the firm would be interested in every aspect of the
financial analysis. It is their overall responsibility to see that the resources of the firm
areused most efficiently and that the firm’s financial condition is sound. Financial analysis
helps the management in measuring the success of the company’s operations, appraising
the individual’s performance and evaluating the system of internal control.
(c) Trade payables: Trade payables, through an analysis of financial statements,
appraises not only the ability of the company to meet its short-term obligations, but also
judges the probability of its continued ability to meet all its financial obligations in future.
Trade payables are particularly interested in the firm’s ability to meet their claims over a
very short period of time. Their analysis will, therefore, evaluate the firm’s liquidity
position.
(d) Lenders: Suppliers of long-term debt are concerned with the firm’s longterm solvency
and survival. They analyse the firm’s profitability over a period of time, its ability to
generate cash, to be able to pay interest and repay the principal and the relationship
between various sources of funds (capital structure relationships). Long-term lenders
analyse the historical financial statements to assess its future solvency and profitability.
(e) Investors: Investors, who have invested their money in the firm’s shares, are interested
about the firm’s earnings. As such, they concentrate on the analysis of the firm’s present
and future profitability. They are also interested in the firm’s capital structure to ascertain
its influences on firm’s earning and risk. They also evaluate the efficiency of the
management and determine whether a change is needed or not. However, in some large
companies, the shareholders’ interest is limited to decide whether to buy, sell or hold the
shares.
(f) Labour unions: Labour unions analyse the financial statements to assess whether it
can presently afford a wage increase and whether it can absorb a wage increase
through increased productivity or by raising the prices.
(g) Others: The economists, researchers, etc., analyse the financial statements to study the
present business and economic conditions. The government agencies need it for price
regulations, taxation and other similar purposes

OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS

To be more specific, the analysis is undertaken to serve the following purposes

(objectives):
• to assess the current profitability and operational efficiency of the firm as a whole
as well as its different departments so as to judge the financial health of the firm.
• to ascertain the relative importance of different components of the financial position of
the firm.
• to identify the reasons for change in the profitability/financial position of the firm.
• to judge the ability of the firm to repay its debt and assessing the short-term as well as
the long-term liquidity position of the firm. Through the analysis of financial statements
of various firms, an economist can judge the extent of concentration of economic power
and pitfalls in the financial policies pursued. The analysis also provides the basis for many
governmental actions relating to licensing, controls, fixing of prices, ceiling on profits,
dividend freeze, tax subsidy and other concessions to the corporate sector
 CHAPTER-II
FACTORS TO BE STUDIED
 RATIO ANALYSIS

Ratio analysis refers to the analysis of various pieces of financial information in

the financial statements of a business. They are mainly used by external analysts to
determine various aspects of a business, such as its profitability, liquidity, and solvency.

Analysts rely on current and past financial statements to obtain data to evaluate the
financial performance of a company. They use the data to determine if a company’s
financial health is on an upward or downward trend and to draw comparisons to other
competing firms.

Ratio analysis is useful in the following ways:

1. Comparing Financial Performance: One of the most important things about
ratio analysis is that it helps in comparing the financial performance of two
companies.
2. Trend Line: Companies tend to use the activity ratio in order to find any kind of trend
in the performance. Companies use data from financial statements that is collected from
financial statements over many accounting periods. The trend that is obtained can be used
for predicting the future financial performance.
3. Operational Efficiency: Financial ratio analysis can also be used to determine the
efficiency of managing the asset and liabilities. It helps in understanding and
determining whether the resources of the business is over utilised or under utilised.
 COMPARATIVE BALANCE SHEET STATEMENT ANALYSIS

A comparative balance sheet is a side-by-side comparison of the entire balance sheet report
of a current accounting period and a previous accounting period.

A date-to-date comparison within the company helps a business owner or investor identify
financial performance trends over time. Investors can also compare companies who use the
same accounting principles for reasons such as how organizations in the same business
vertical respond to the changes in seasons.

Investors also use comparative balance sheets to do a comparative analysis of financial ratios.
We’ll expand on this in a later section.

The line items that are included in a comparative balance sheet are the same that are included
in an individual balance sheet. The general categories included are: assets, liabilities, and
equity. The categories are further broken down into current assets, current liabilities, long-
term assets, and long-term liabilities.

he comparative figures in comparative balance sheets can help you identify trends and areas
of weaknesses or strengths. It can also help you understand fluctuations caused by seasons so
that you can make better-informed business decisions.

This comparative report, along with other comparative reports such as the comparative
income statement, helps potential investors determine the financial health of your business
and whether it’s growing, getting worse, or stagnant.

It can help you see the variance in how much a line item has changed from one period to
another so that you focus on what is causing the increase or decrease in figures in a particular
area of the balance sheet.
 CHAPTER -III
ABOUT THE ORGANISATION
 CA M/S JAY JHA AND COMPANY is a charted accountant firm
established in 2016 under the proprietorship of CA Jay Jha , FRN
031280C , Membership no. 524589.
Following are the responsibilities of the company :-

 manage financial systems and budgets

 undertake financial audits (an independent check of an organisation's financial
position)
 provide financial advice
 liaise with clients (individuals or businesses) and provide financial information and
advice
 review the company's systems and analyse risk
 perform tests to check financial information and systems
 advise clients on tax planning (within current legislation to enable them to
minimise their tax liability) and tax issues associated with activities such as
business acquisitions and mergers
 maintain accounting records and prepare accounts and management information
for small businesses (accountancy)
 advise clients on business transactions, such as mergers and acquisitions
(corporate finance)
 counsel clients on areas of business improvement, or dealing with insolvency
 detect and prevent fraud (forensic accounting)
 manage junior colleagues
 liaise with internal and external auditors (where applicable) and deal with any
financial irregularities as they arise
 produce reports and recommendations following internal audits or public sector
audits
 prepare financial statements, including monthly and annual accounts
 arrange financial management reports, including financial planning and forecasting
 advise on tax and treasury issues
 negotiate terms with suppliers.
 ORGANISATION

M/S SHYAM STONE MINE was established in 2016 under the proprietorship of
Sri.Umakant Prashad Jaiswal at Chhattarpur, Palamu , Jharkhand.
The mining industry in India is a major economic activity which contributes significantly
to the economy of India. The GDP contribution of the mining industry varies from 2.2% to
2.5% only but going by the GDP of the total industrial sector it contributes around 10% to
11%. Even mining done on small scale contributes 6% to the entire cost of mineral
production. Indian mining industry provides job opportunities to around
700,000 individuals.
We can also see that this company is also highly profitable nearly 8% every financial year.
Fixed assets of the company accounts for around 4 crore. The capital of the company
under Sri.Umakant Prashad Jaiswal is around 1 crore every yearMining in India has been
prominent since ancient times. The field is noted for significantly contributing to the
economy of the nation.
 CHAPTER-IV
RESEARCH STUDY
 OBJECTIVES OF THE STUDY
Financial statements are used by various interested groups for various purposes.Financial
ananlysis serves the following purposes and brings out the significance of financial
ananlysis.
Assessing the Earning Capacity or Profitability
On the basis of financial analysis, earning capacity of the enterprise can be assessed or
computed. Financial analysis means analysing the financial statements of the firm to make
financial decisions. It helps in assessing the earning capacity, present position, past
performance, managerial efficiency and helps in inter-firm comparison.

Assessing the Managerial Efficiency

Financial statement analysis provides a primary foundation for evaluating business
performance and adapts to every business. All owners and managers should be skilled in
analyzing financial statements to understand the impact business decisions will have on
the organization.
Assessing the Short-term and Long-term Solvency of the Enterprise
Long term and Short term solvency of an enterprise can be assessed on the basis of
financial statement analysis. Creditors or suppliers are interested to know the short term
solvency or liquidity of the enterprise ,i.e, its ability to meet short term
liabilities.Debentureholders and lenders are interested to know the long term and short
term solvency of the enterprise to assess the ability of the company to repay the principal
amount and interest thereon.
Inter-firm Comparison
Inter-firm comparision becomes easy with the help of financial analysis.It helps an
enterprise in assessing its own performance as well as that of others,if mergers and
acquisitions are to be considered.
Forecasting and Preparing Budgets
Past financial statement analysis helps in assessing developments in future,especially in
the next year.For example , give a certain investment , it may be possible to forecast the
next year’s profit on the basis of earning capacity shown in the past . An analysis thus
helps in forecasting and preparing the budgets.
Explainable and Understandable
Financial analysis helps the users of the financial statements to understand the complicated matter
in a simplified manner. Financial data can be made more comprehenhive by charts,graphs and
diagrams , which can easily explained and understood.
 SCOPE OF FINANCIAL ANALYSIS
On the basis of financial analysis, we can take a variety of decisions in various areas such
as securities analysis, credit analysis, debt analysis, dividend decision, and general
business analysis. These are discussed below :
Security Analysis
It is a process by which the investor comes to know whether the firm is fulfilling his expectations
with regard to the payment of dividend, capital appreciation, and security of money. Such analysis
is done by a securities analyst who is interested in cash-generating ability, dividend payout policy,
and the behavior of share prices.
Credit Analysis
Such analysis is useful when a firm offers credit to a new customer or a dealer. The manager of the
firm would like to know whether to allow or extend credit to them or not. Such analysis is also
useful for a bank before granting a loan.
Debt Analysis
Such analysis is done by the firm to know its borrowing capacity.
Dividend Decision
Financial analysis helps the firm in deciding about the rate of dividend. The management would
have to decide about how much portion of the earnings to distribute and how much to retain. Such
decisions indicate the profitability of the firm and hence , to some extent affect the behaviour of
the share prices.
General Business Analysis
Financial analysis can be used to identify the key profit drivers and business risk in order to assess
the profit potential of the firm. It helps in future growth scenarios for the firm.

Regulatory Authorities

If a company is publicly held, its financial statements are examined by the Securities and
Exchange Commission (if the company files in the United States) to see if its statements
conform to the various accounting standards and the rules of the SEC.
 RESEARCH PROBLEM
A Research Problem is a specific issue or concern that a researcher would like to
investigate. It is the beginning phase of any project. It is important to define the
research problem clearly, as it will provide guidance and focus for the rest of the research
project.
I as a researcher may like to analyze, the profitability, growth, financial position, and
future prospects of a business or industry. It is interesting in analysing the data of different
aspects of business like purchases, sales, operating costs, a particular type of expenditure,
various ratios, solvency, managerial efficiency, earning capacity or profitability, and also
the inter-firm comparison.
I have focused on the Inter-firm comparison: It compares the financial variables of two or
more enterprises or firms to determine their competitive position.

RESEARCH DESIGN

A research design is a strategy for answering your research question using empirical data.
Creating a research design means making decisions about:

● my overall research objectives and approach

● The type of research design I’ll use
● My sampling methods or criteria for selecting subjects
● My data collection methods
● The procedures I’ll follow to collect data
● My data analysis methods

A well-planned research design helps ensure that my methods match my research aims
and that I’ve used the right kind of analysis for my data.

The type of research design is one of the biggest contributors to the quality, relevance, and
accuracy of a result. Therefore, before setting out to outline a proposal, it is always a good idea to
distinguish the type of research by including it in the research design.
There are many types of research designs such as experimental ,correlational, explanatory etc. I
have followed descriptive type of research which is-
Descriptive Research

In studies where the researcher is interested in describing a case, situation, or

phenomenon, they are acting under a descriptive research design. As a theory-based
design, it is interested in answering the how, what, when, and where questions, instead of
the why. Descriptive research directs the researcher to understand the research problem
before investigating why it even happens in the first place.

Any researcher would need an understanding of the research design types to see which is
more appropriate for the study or which one brings to fruition the most accurate results.
To do this, there are three broad ways to approach the design, as we will discuss below.

Qualitative

A qualitative approach, on the other hand, to research sets out to determine a relationship
between collected data and observations. As it is about recording, analyzing, and
discovering the web of interconnectedness that underpins related subjects, it generates a
plethora of raw data, whether obtained through statistical means or otherwise. This nature
of a qualitative approach thus lends itself well to exploratory research (Blaikie, 2009).

Unlike quantitative approaches, a qualitative approach is its opposite. It uses an inductive

way of approaching the conclusion of the study. Also called a “bottom-up” approach, it
infers meaning or looks for patterns on the basis of the data that they have collected.

Designing and Implementing an Actionable Research

Design

I used descriptive type of research design an quantitative type of data which includes
balance sheets and profit and loss statement acoount. It was the biggest contributors to the
quality , relevance,and accuracy of the result.
 DATA COLLECTION

BALANCE SHEET
• The balance sheet is a report of a company's financial worth in terms of book value. It is
broken into three parts to include a company’s assets, liabilities, and shareholders' equity.
• Short-term assets such as cash and accounts receivable can tell a lot about a company’s
operational efficiency.
• Liabilities include its expense arrangements and the debt capital it is paying off.
• Shareholder’s equity includes details on equity capital investments and retained
earnings from periodic net income.
• The balance sheet must balance with assets minus liabilities equaling
shareholder’s equity.

TRADING AND PROFIT & LOSS ACCOUNT

• The income statement breaks down the revenue a company earns against the
expenses involved in its business to provide a bottom line, net income profit or loss.
• The income statement is broken into three parts which help to analyze business
efficiency at three different points. It begins with revenue and the direct costs associated
with revenue to identify gross profit. It then moves to operating profit which subtracts
indirect expenses such as marketing costs, general costs, and depreciation. Finally it ends
with net profit which deducts interest and taxes.
 RESEARCH MEASURING TOOLS

RATIO
ANALYSIS

COMPARATIVE BALANCE SHEET

RATIO ANALYSIS
Once the financial statements of an organization are prepared they then need to be
analyzed. One such tool to analyze and asses the financial situation of a firm is Ratio
Analysis.
Ratio analysis is a quantitative procedure of obtaining a look into a firm’s functional
efficiency, liquidity, revenues, and profitability by analysing its financial records and
statements. Ratio analysis is a very important factor that will help in doing an analysis of
the fundamentals of equity.
 TYPES OF ACCOUNTING RATIOS

LIQUIDITY SOLVENCY
RATIO RATIO

ACTIVITY PROFITABILITY
RATIO RATIO

1.LIQUIDITY RATIO (2019 -20)

Current ratio = Current assets / Current liabilities
= 46607243.52 / 65524378.61
= 0.71:1
1. LIQUIDITY RATIO (2020-21)

Current ratio = Current assets / Current liabilities

= 23504894.55 / 68357342.35
= 0.34 : 1

2. SOLVENCY RATIO (2019-20)

Total Assets to Debt Ratio = Total Assets / Debt

= 97619276.60 / 20125986.55
= 4.8 : 1
2. SOLVENCY RATIO (2020-21)

Total Assets to Debt Ratio = Total Assets / Debt

= 90490195.51/ 10167149.69
= 8.9 : 1

3. ACTIVITY RATIO/TURNOVER RATIO

Working Capital Turnover Ratio = Net Sales / Working capital (2019-20)
= 95214724.79 / (18917135.09)
= - 5.03 times
Working Capital Turnover Ratio = Net Sales / Working Capital (2020-21)
= 142972668.87 / (44852447.8)
Total Asset Turnover ratio = Net sales / Total asset (2019-20)
= 95214724.79 / 97619276.60
= 0.97 times
Total Asset Turnover Ratio = Net Sales / Total Assets (2020-21)
= 142972668.87 / 90490195.51
= 1.57 times
Fixed Asset Turnover Ratio = Net Sales / Fixed Asset (2019-20)
= 95214724.79 / 45618585.67
= 2.08 times
Fixed Assets Turnover Ratio = Net Sales / Fixed Assets (2020-21)
= 142972668.87 / 40423912.62
= 3.53 times

Current Assets Turnover Ratio = Net Sales / Current Asset (2019-20)

= 95214724.79 / 46607243.52
= 2.04 times
Current Assets Turnover Ratio = Net Sales / Current Assets (2020-21)
= 142972668.87 / 23504894.55
= 6.08 times
4. PROFITABILITY RATIO

Gross Profit Ratio = Gross Profit / Revenue from operation *100 (2019-20)
= 20358998.70 / 95214724.79 ×100
= 21.38 %

Gross Profit Ratio = Gross Profit / Revenue from operation *100 (2020-21)
= 24349440.62 / 142972668.87
= 17.03 %

Net Profit Ratio = Net Profit after Tax / Revenue From Operations *100(2019-20)
= 7817420.06 / 95214724.79 ×100
= 8.21 %
Net Profit Ratio = Net Profit / Revenue From Operations *100 (2020-21)
= 11918318.94 / 142972668.87 *100
= 9.53 %
 COMPARATIVE BALANCE SHEET STATEMENT ANALYSIS
The comparative balance sheet is a balance sheet that provides financial figures of assets,
liabilities, and equities for “two or more periods of the same company,” or “two or more
subsidiaries of the same company” or “two or more companies of the same industry” in
the same format so that it can be easily understood and analyzed.
The comparative balance sheet has two amount columns against each balance sheet item.
One column shows the current year’s financial position, whereas the other column shows
the previous year’s financial situation. This helps investors or other stakeholders easily
understand and analyze the company’s financial performance against last year.

Advantages of Comparative Balance Sheet

1. Comparison – It is effortless to compare the figures for the current year with
the previous years as it gives both the years’ figures in one place. It also assists
in analyzing the data of two or more companies or subsidiaries of one company.
2. Trend Indicator – It shows the company’s trend by putting several years’
financial figures in one place like an Increase or Decrease in profit, current
assets, current liabilities, loans, reserves & surplus, or any other items that help
investors make the decision.
3. Ratio Analysis – Financial ratio is derived from the balance sheet items. The
comparative balance sheet’s financial ratio of two years of two companies can be
derived to analyze the company’s financial status. For example, the current ratio is
derived with the help of current assets and current liabilities. If the current ratio of
the current year is more than the last year, it shows the company’s liabilities have
been reduced from last year against the existing assets.
4. Compare performance with the Industry Performance – Helps to compare one
company’s performance with another company or the industry’s average
performance.
5. Helps in Forecasting – It also helps in forecasting because it provides the past
trend of the company based on which the management can forecast the company’s
financial position.

Limitation/Disadvantages

1. Uniformity in Policy and Principles – Comparative balance sheets will not give
the correct comparison if two companies have adopted different policies and
accounting principles while preparing the balance sheet or if the same company
has adopted other accounting methods in two additional years.
2. Inflationary Effect is not Considered – While preparing the comparative
balance sheet, the inflation effect is not considered. Therefore, only a comparison
with other balance sheets will not give the correct picture of the company’s trend.
3. Market Situation and Political Conditions not Considered – While preparing
the comparative balance sheet, marketing conditions, political environment, or any
4. factor affecting the company’s business are not considered. Therefore, it does not
give the correct picture every time. For example, suppose the overall economy is
going down in the current year, or the political condition is unstable compared to
last year. In that case, it will decrease the demand, and general company sales will
experience de-growth, not because of its performance but external factors.
5. Misleading Information – Sometimes, it gives misleading information, thus,
misguiding the person who reads the comparative balance sheet. For example, if
a product was unavailable for last year and is available for the current year, it will
show a 100% change over the previous year. It implies that one needs to read the
complete financial statement, not just a comparative balance sheet.
 M/s SHAYAM STONE MINE
(Prop. Sri Umakant Prashad Jaiswal)
CHATTARPUR,PALAMU

COMPARATIVE BALANCE SHEET as at 31st March , 2020 and 2021

Particulars Note no 31st March,2019 (Rs.) 31st March,2020(Rs) Absolute Change(Rs.) Percentage Change(%
(A) (B) (C = B - A ) ( D = C/A*100)

I.EQUITY AND LIABILITIES

1.Shareholder's Funds
Capital 11968911.44 11965703.47 -3207.97 -0.02

2.Non-Current Liabilities
Long - term Borrowings
Motor Vehicle Loan 695710
Truck Loan 1904725
Mahindra & Mahindra Finance Service 150000
Ltd
Kotak Mahindra Bank Ltd 17375551.55 10167149.69 -9958836.86 -49.4

3. Current Liability
Short - term borrowings 65500778.61 68333742.35 2832963.74 4.3
Trade Payables 23600 23600 - -

Total 97619276.6 90490195.51 -7129081.09 -7.3

II.ASSETS
1.Non-Current Assets
(a)Fixed Assets 45618585.62 40423912.62 -5194673 -11.4
(b)Non-Current Investment
Security Deposit 2200000 2200000 - -
FDR with kotak mahindra 3193448 3366708.34
FDR with State Bank of 20994740
India
5393448 26561448.34 21168000.34 392.5
2.Current Assets
(a)Short-term Advances 2398865 - -2398865 -100
(b)Trade Receiveables 19354997.85 6369425.3 -12985572.55 -67.1
(c)Cash and Cash Equivalents 24853380.13 13666009.25 -11187370.88 -45.0
(d)Inventories - 3469400 3469400 -

Total 97619276.6 90490195.51 -7129081.09 -7.3

 INTERPRETATION OF COMPARATIVE BALANCE SHEET

EQUITY AND LIABILITIES

1. Shareholder’s Funds

Capital A/C – There is a decrease in capital account which is 0.02%. So it shows that more
money is debited from the account to meet the losses made by the company
2. Non-current Liabilities

Long-Term borrowings – There is a huge decrease in the long term borrowings of the
company which is 49.4 % which is approx 50 %.It means that company has paid it’s
maximum debt which was for the purchase of motor vehicle, Truck and hence it could
result in better future growth prospects.
Current Liability –
Short-term borrowings is increased by 4.3 percent that means that company has generated
the cash to meet its short term liabilities or to finance a shortage of cash.

ASSETS
1. Non-current Assets

Fixed Assets – we can see that there is a decrease of 11.4%

Non-current Investments – Non – current investments resulted in a huge increase of

392.5%.
Here security deposits which is made every year would be refunded on the departure from
the concerned property.
FDR made with kotak Mahindra and SBI bank has various advantages like :

 Flexible tenure
 Guaranteed returns
 Insurance of Rs. 5 lakh by RBI subsidiary, if the bank defaults
 Multiple interest payout options (monthly, quarterly, bi-annually, and annually)
 Premature withdrawal and nomination facilities
 Extra (0.25%- 0.75% approx.) FD interest rates for senior citizens, aged 60 years
or above
2. Current Assets –

Short – term advances have utilized fully

Trade receivables shows 67.1 % decrease . Cash has to be received from the parties and
represents profit yet to be received, earned from selling goods and services on credit.

Cash and cash equivalents shows 45% decrease

 Companies must used the cash and cash equivalents to pay invoices and current
portions of long-term debts as they come due.
 Cash and cash equivalents is often a safe place for companies to park funds they'll
need in the future.So we can also see that company’s non-current investments
have increased with a huge change.
 INTERPRETATION OF RATIO ANALYSIS

CURRENT RATIO
1.2

0.8

0.6

0.4

0.2

2019-20 2020-21

current assetscurrent liabilitiesColumn1

Interpretation -This ratio provides a way of looking at your working capital and
measuring your short-term solvency.A decrease in this ratio can be attributable to an
increase in short-term debt, a decrease in current assets, or a combination of both.
Regardless of the reasons,a decrease in this ratio means a decreased ability to generate
cash’

Total Assets to Debt Rati0

10

0
2019-20 2020-21

total assetsdebtSeries 3
Interpretation – the asset to debt ratio has doubled due to increase in debt . It means that
the company has to reduce its debt to reach its ideal ratio.

Working Capital Turnover Ratio

0
2019-20 2020-21
-1

-2

-3

-4

-5

-6

Series 1Column1Column2

Interpretation - Inventory turnover measures how often a company replaces inventory

relative to its cost of sales. Generally, the higher the ratio, the better. A high inventory
turnover ratio, on the other hand, suggests strong sales. company has sufficient inventory
to support strong sales is a better one to have than needing to scale down inventory
because business is lagging.

Total Assets Turnover Ratio

3

2.5

1.5

0.5

0
2019-20 2020-21

Series 1Series 2Series 3

Interpretation- The ratio measures the efficiency of how well a company uses assets to
produce sales. A higher ratio is favorable, as it indicates a more efficient use of assets.
 Fixed Assets Turnover Ratio
3

2.5

1.5

0.5

2019-20 2020-21

Series 1Series 2Series 3

Interpretation- The fixed asset turnover ratio reveals how efficient a company is at
generating sales from its existing fixed assets.A higher ratio implies that management is
using its fixed assets more effectively.

Current Assets Turnover Ratio

7

1
2019-20 2020-21
0
Series 1Series 2Series 3

Interpretaion- Current Assets Turnover Ratio indicates that the current assets are
turned over in the form of sales more number of times. A high current assets
turnover ratio indicates the capability of the organization to achieve maximum
sales with the minimum investment in current assets. Higher the current ratio
better will be the situation.
 Gross Profit Ratio
25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2019-20 2020-21

Series 1Series 2Series 3

Interpretation - The decrease in the gross profit ratio may be due to the following
reasons: Decrease in the selling price of goods, without any decrease in the cost of goods sold.
Increase in the cost of goods sold without any increase in selling price.

Net Profit Ratio

10.00%

9.50%

9.00%

8.50%

8.00%

7.50%
2019-20 2020-21

Series 1Series 2Series 3

Interpretation - Higher net profit margin indicates that entity was able to cover all of its
expenses and still left with portion of revenue which is in excess of total expenses.
 RESEARCH METHODOLOGY

My research methodology on the topic “financial statement analysis” are as follows:-

As a researcher I have defined my research problem which is to analyse , the profitability ,
growth , financial position , and future aspects of the business.
My overall research objective and approach was descriptive research type. This type of
research was the biggest contributor to the quality , relevance and accuracy of the result of
my research.
My approach to design the research using a quantitative perspective. This approach best
suits a research goal where actionable insights is tied to a statistical conclusion.
For the data collection I have collected balance sheet statement and profit and loss
statement of the firm.
I have chosed research measuring tools which is Ratio analysis and Comparative Balance
sheet statements.
Ratio analysis is a quantitative procedure of obtaining a look into a firm’s functional
efficiency, liquidity, revenues, and profitability by analysing its financial records and
statements. Ratio analysis is a very important factor that will help in doing an analysis of
the fundamentals of equity.
The comparative balance sheet is a balance sheet that provides financial figures of assets,
liabilities, and equities for “two or more periods of the same company,” or “two or more
subsidiaries of the same company” or “two or more companies of the same industry” in
the same format so that it can be easily understood and analyzed.
I have interpreted the research results in the form of comparative data and graphical
representations.
After interpretation of my data I have successfully done the testing of hypothesis on my
data regarding the change in net profit ratio and gross profit ration from one year to
another.
 SWOT ANALYSIS

WEAKNESS
STRENGTH
The time period for carrying
To analyze the financial out the research was very
statements using the limited.
ratio analysis and
comparative balance • The information collected
sheet statements. for the project is limite

OPPORTUNITY
To know and understand
the financial position and THREAT
financial health of the
The data collected may be
firm.
inaccurate.
• To carry out an efficient
project report on financial
statement analysis.
 STEPS INVOLVED

The steps involved in carrying out this project are as follows:

1) The topic of my project is 'Financial statement analysis'.

2) First , I collected the Financial Statements of the Organization for carrying out the
research work and to analyze them during the initial phase of my internship at CA firm.

3) I defined my research problem and the objectives of the study and purpose for the same.

4) My approach to design the research was quantitative and the research design was
descriptive research type.

5) The source of data collection for my project is secondary data. The data collected is in
the form of Balance Sheet and Profit and loss a/c.

6) The research measuring tools of my project are Ratio Analysis and Comparative
statements analysis which are used to analyse and interpret the financial statements.

7) Next I have interpreted the data (Balance Sheet and Profit and Loss A/C) using the ratio
analysis and comaparative balance sheet statements.

8) Then I have done the SWOT Analysis of the research study to know the strengths
weaknesses, opportunities and threats of my research/project.

9) I have done the hypothesis testing of my topic.

10) Lastly I have listed all the findings and suggestions of the research.
 CHAPTER – V
DATA INTERPRETATION AND TESTING OF HYPOTHESIS
 HYPOTHESIS TESTING
HO : There is no significant difference between Net Profit Ratio and Gross Profit Ratio of year
2019-20 and 2020-21

H1 : There is significant difference between the Net Profit Ratio and Gross Profit Ratio of year
2019-20 and 2020-21

NET PROFIT RATIO

YEAR NET PROFIT REVENUE FROM OPERATION NET PROFIT (A) Y=(A-MEAN A Y*Y
2019-20 7817420.06 95214724.79 8.21 -0.66 0.4356
2020-21 11918318.94 142972668.9 9.53 0.66 0.4356
TOTAL = 17.74
MEAN= 8.87

GROSS PROFIT RATIO

YEAR GROSS PROFIT REVENUE FROM OPERATION GROSS PROFIT Y= (A-MEAN A) Y*Y
2019-20 20358998.7 95214724.79 21.38 2.18 4.7
2020-21 24349440.62 142972668.9 17.03 -2.18 4.7
TOTAL= 38.41
MEAN= 19.205
CALCULATION OF VARIANCE AND STANDARD DEVIATION

S2 = {(Xi – M2)2} / (n1+n2-2)

Variance = {(17.74 - 8.87)2 + ( 38.41 – 19.205)2} / (2+2-2)
= 223.7
Therefore variance = 223.7
Now Standard Deviation (S) = √223.7
= 14.9

Now finding value of T :

Statistical Value = - 0.691
Critical value = 2.920

Critical value is at 5% significance value and 2 degrees of freedom (dof = n1=n2-2)

Here, we can conclude that ;

T TEST VALUE (STATISTICAL VALUE ) < T TEST VALUE (CRITICAL VALUE )
THEREFORE NULL HYPOTHESIS IS ACCEPTED
And hence , There is a significant change in the Net Profit Ratio and Gross profit
Ratio of the organization from 2019-20 to 2020-21.
 FINDINGS AND SUGGESTIONS
Following are my suggestions to the company :-

 .A decrease in this current ratio can be attributable to an increase in short-term

debt, a decrease in current assets, or a combination of both. Regardless of the
reasons,a decrease in this ratio means a decreased ability to generate cash. The
company should make effort to reach its ideal current ratio.

 A high inventory turnover ratio, suggests strong sales. company has sufficient
inventory to support strong sales is a better one to have than needing to scale
down inventory because business is lagging.so the company should focus on better
and high inventory turnover ratio.

 The asset to debt ratio has doubled due to increase in debt . It means that the
company has to reduce its debt to reach its ideal ratio.

 Short-term borrowings is increased by 4.3 percent that means that company has
generated the cash to meet its short term liabilities or to finance a shortage of
cash.The company should focus on meeting its fiances more efficiently.
 BIBLIOGRAPHY

https://www.google.com
https://wap.business-standard.com/company/tcs-5400/financials-ratios
https://
ANNEXURES
 Mia SHYA ST0flE MINE
CHHAT4RPUR, P LANAU

Proét & Loac Account for the year ended Maxh 31, 2021

PARTICULARS AMOUNT PARTICULARS

Stock, opening Sales Plc 1429,72,668.87

Purchases
Mining Expenses 315,36,013.78 Stock, oosing 34,69,T@ 00
Royalty, DMFT 6 Othen 398,22,597.00
\/¥ages 6 Salaries 61,70,7\3 00
Repairs & Consumables 1,16,608 00
Transportation 6 Fuel Exp 342,01,431,@

GROSS PROFIT c/d 24Z,Dg4062

1464,42,068.87 1464,4?,068 87

Audit Fas 23.6@ @ GROSS PROFIT b/d t43,#9,V0.62

Bank Interest 6 CMrges 7,2/8 /6
Dapraoation 76,H,673.@ Interest on FDR 17.62,70S.J4
General Up 9,18,S87.@ Misc Receipt 2,444,08
i••••^•»p 2,58,5|)OOO
T‹ayeIling I Conveyance 5,23,241.00
Miac 6 Legal Exp 24,04,5t8 35
Rouno off 5 01
Tale@one 15,294.00

Nat Profit transferred to Capital 119,18,318.H

A/c
2#,21#NO0
 M/s SHYA¥I STONE MINE
CHHATARPUR, PAL AMAU

Pfofit6 Lora Account for the year ended March 31, 202a

PAftTlCULAR5
AMOUNT PARTCULARS /\MOUNT
SkxR, opening Prchgm¿ Mining Expenses
110,35,084 04 952,14,724 79
Royalty, DMFT 8 Others Wagee & Saia let Repain s G•r svnat les Tran$|X}I19lon 6 Fuel Exp
1g2.s9,s79 00
GROSS PROFIT c/d !//.32,55100 10fSt0ck, tl O00
,28,731 $|pg
3,33.875.00
217,66,004.05

203,58.998 70

952,14,724,79 952 14,724.79

Audit Fea 23, 60D00 TT.O.1O?2Z #3.3R22300 5,56,850.00
GROSSPROFlTbd
Bank Interest g Ctaqes 20t,58,998.70
3, 3,364 00 8akl«|e+es M srReeig 2,28,a& 00
3.33,274 00 25,Of0,00
Genfifgl Exp Insurance Exp 8.00,788 71
TraveII ng 8 Conveyance MisC1.66
6 Legal Exp
Round og Telephone 11.688.00

Not Ofit tfBn5fgjT0d to g$pi| | @$

78,17,420 @

206,12,476 70 206,12,476 70
 tPfop! Sri Umafari Prasad
Jaisaa ) CHATTARPOR,
PALAMAU

Less: Wilfdraaal

683,3f,742.38