FINANCIAL Stave STATEMENT 4 The following are some NALYSIS The following are the Balance Sheets of M/ Prepare a comparative of the Hmitati: fons of financial st —_— fatements : Historical ture : The intorm, the past and hence mores ation Given by the financial statement is about Nistor to know the companies future trepenr ere Where as, the investor would like Different Accounting Practice: 8 : Ditter ‘on Straight line method, written down method or fixed m ‘on the profit of a company and hence ‘ethod and this may affect rent Companies may charge depreciation the actual financial position of the company isineither known nor two companies financial position can be compared. Non monetary status : The financial statements show the monetary figures but ignores completely the man power, competition (present and future), Research and Development, etc status. The information technology is drastically affected with the man power Wealth of a company. If a company has better man power as compare to other information technology company then it will do better in future. Different Interests : Different people may have ditterent interests like a person interested in taking an employment would like to see different points as compare to equity investor or debt investor and it is not possible to satisty the interests of different persons through financial statements prepared by the companies. Other Factors : The financial statements alone can not help in estimating the future position of the company. There are other factors as well which should be considered: like the quality and caliber of the management, labour yee relations, estimation of future demands of the products, estimation ot ~ ure: competition of the products, estimation of the future cost of production selling price of the products, etc. s GIMCO for the years 2005 Se 2006. Balance Sheet and study the financial position of the firm. (303) |SK HOTEL ACCOUNT, FINANCIAL AND F & 8 MANAGEMENT Balance Sheets of M/s ABC as on 31st December [ Uiabiities 2005 2006 assole R ae i Pe s. Pp | Rs PRs. ‘a 00,000 Land, Building 5,00,000 Equity Shares 10,00,000 - 10. Plant & Mach. — | 2,00,000 Eratonce | | 100,000 | - | cutlery 1,00,000 000 | - | 3,00,000 Furniture 1,00,000 CS, ed ~ | 400,000 |- | Kitchen Equip. | 2,00,000 Debentures v100,000| - | 4,00,000 |- } Cars& Buses | 1,00,000 Sundry Creditors 1,00,000] - | 1,50,000 Cash & Bank 87,000 Bills Payable 50,000 2,00,000 Sundry Debtors so 00 Rent Payable 2,000 | - 10,000 BR 4 Sarees) Closing Stock 40,000 Other fixed assets} 3,00,000 | 17,52,000 | = | 27,60,000 17,52,000 Solution : Comparative Balance Sheet of M/s ABC for the year ending on 31st Dec (2005 - 2008) } Particulars Year ending on 31st Dec. Increase/ Increase/ 2005 2006 Decrease | Decrease Amount Percentage Rs. P| As. P| Rs. P Assets: Current Assets : es & Bank Balance 87,000 10.000 }-| — -77,000 88.51% Se 50,000 ]- | 60,000 }- | +10,000] - } +20% receivable 75,000 |- | 60,000 |- | —-15,000] - | -20% losing Stock 40,000 | = | 30,000 |- | _--10,000] - | -25% otal Current Assets 252,000 1.60 a aS q ferent {1.80.00 92,000) "36.51% Cutlery 1,00,000 ,00,000 | - | 2,00, % ey B00 |_ 2.00 goo +1,00,000] - | +100% : ,00, ,00, +1,00,000] - | +100% Kitchen Equipment 2,00,000 | - | 6.00,000 +4,00,000] - | +200% Cars and Buses 1,00,000 | - | 4.00,000 +3,00,000 +300% Other Fi | Other Fixed Assets 3,00,000 | - | 5,00,000 +2,00,000] - | +67% lant and Machinery 2,00,000 | - | 3,00,000 +1,00,000] - | +50% Land and Building }-sooon0 || aooona |. | “y'on'noal = | ‘ons. Total Fixed Assets {15.00.00 26,00,000 | - | +11.00,000] - 9 [Total Assets ae 52,000 08, +See IE 27,60,000 | - | +10,08,000 +57.53% | (306)oTEL ACCOUNT, FINANGIAL AND F 8 B/ MANAGEMENT ease In cost can not by ein sales or the decr: ot be ag, and cost have to be studied together to compat” ot accompany. The expert's opinion shouta zing them carefully, be finally the net profit. The increas tthe sal greater gross profit in fact ee ross profit of two income statemer rt Her ater ‘studying the income statements and analy Mlustration 3 Theincome statements of Hotel Mayur are given for the on rai aie Decombe, 2005 and 2006. Rearrange the figure ina comparative [or Prati i jayur. position of the Hotel May! aoe 5008 Particulars Rs p | Rs. P Net Sales 15,75,000 | - | 20,00,000 | - Cost of Sales 5,25,000 | - | 6,60,000 | - Operating Expenses : General & Administrative Exp 1,50,000 | - } 1,80,000 | - Selling Expenses 1,90,000 | - | 2,00,000 | - Non Operating Expenses : Tereerese) 50,000 | - | 50,000 Income Tax 60,000 | - 90,000 | - Solution : Comparative Income Statement for the years ending on 31st Dec 2005 & 2006 {Particulars Year ending on 31st Dec. Increase/ Increase/ | 2005 2006 Decrease | Decrease | i Amount Percentage | Rs. P| Rs. P | Rs Pp [Net Sales 15,75,000 | - | 20,00,.000 | - | +4,25,000] - | +26.98% Less Cost of Sale 5,25,000 | - | _6,50,000 | - | +1,25,000| - | +23.81% Gross Profit 10,50,000 | = [ 13,50,000 | - | +3,00,000] - | +28.57% | Operating Expenses : | Gen & Adm Expenses 1,50,000 | - | 180,000 | - |, .+30,000]- | +20% | Selling Expenses 1,90,000 | - | _2,00,000 | - +10,000| - |_+0.53% | Total Operating Expenses {_ 3.40000 | - | 3,80,000 | - | _+40,000| - |_+11.76% Operating Profit 7,10,000 | - | 9,70,000.] - |" +2,60.000] - | +36.62% Non Operating Expenses Less Interest Paid 50,000 | - 50,000 | - ef ei| Sis Net Profit before |. T, 6,60,000 | - | 9,20.000 | - | +2,60,000|- | +39.39% __| Less Income Tax 60,000 | - 90,000 |.- +30,000| - |_+50% | N.P. after Income Tax 6,00,000 | - | 8,30,000 | - | +2,30,000] - | _+38.33% (308)FINANCIAL STATEMENT ANALYSIS Interpretation 4. Oncomparing the two income statements it is revealed that there is substantial > increase in net sales of 26.98%. However, the cost of sales is also increased Aiffost proportionally i.2, 23.81% and the gross profit is increased by 28.57%: The general and administrative expenses are increased by 20% but the selling expenses are increased marginally i.e. only 0.53% and the total operating expenses have increased merely by 11.76% which is much less the increase In ale of 26.98% and gross profit of 28.57%. This has resulted in an increase of 36.62% of operating profits. 3, The interest payment for both the years has been constant but there is an increase ‘of 50% on the payment of income tax. The net profit after income taxis increased by 38.93%. On comparing these two income statements. it is revealed that the hotel's overall profitability is very good. y Mustration 4 Convert the Income Statement given in Illustration 3 into Common Size Income Statement and interpret the changes. Solution : Common Size Income Statement for the year ending on 31st Dec. 2005 & 2006 raga 2005, 2006 | Le Rs. P.| Percentage | Rs P.| Percentage \NetSales ~ 7 | 15.75,000 | - | 100% 20,00,000 | - | 100% ‘Less Cost of Sale 5,25,000 | - | 33.33% 650,000 | - | 32.50% Gross Profit 10,50,000 | - | 66.67% 73.50,000 | - | 67.50% ‘Operating Expenses : | General & Adm Expenses | 1,50.000 | - | 9.52% 1,80,000 | - | 9% | Selling Expenses 1,90,000 | - | 12.06% 2,00,000 | - | 10% | Operating Expenses | 3,40,000 | - | 21.59% 380,000 |- | 19% 710,000 | - | 45.08% 9,70,000 | - | 48.50% 50,000 | - | 3.17% 50,000 | - | 2.5% 6,60,000 | - | 41.90% 9.20,000 | - | 46% 60,000 3.81% 90,000 | - | 4.5% ~6,00,000 38.10% 8,30,000 [- | 41.5%FINANCIAL STATEMENT ANALYSIS - | 14.18% Fixed Asse 2,00,000 | - | 14.37% SO eal on Cutlery & Crockery 1,00,000 | - | 7.18% 450,06 Cee Cen & Fixture 001000: | = | aaraey oo.s00 | +). 33108 RIL Shares 75,000 | - | 5.39% 1,50, : Aare Plant and Machinery 4,00,000 | - | 28.74% 6,00,000 | - | __28. ve Land and Building 11,75,000 | - | 84.41% 79,00,000 | - 89.83 . ‘TotalFixed Assets 13,92,000 | - | 100% 21,15,000 | - | 100% Total Assets Uiilties ioe Current Lia 2 | chee oo silt ee Outstanding Rent 2,000 fe cia tiog | _ IAs See 10,000 | - | 0.72% 30,000 | - | 0.47% Bills Payable b x re iby Grediors 30,000 | - | 2.16% 60,000 ar Tolal Current Liabilities 42,000 |- | 3.02% 75,000 | - | 3.55% Term Liabilities a Te femsans 50,000 | - | 3.59% 90,000 | - | 4.26% Total Long Term Liabilities 50,000 | - [73.59% 90,000 | - | 4.26% ae Total Liabilities 92,000 |- | 6.61% 7,65,000 | - | 7.80% Capital & Reserve : 5 Equity Share 10,00,000 | - | 71.84% 15,00,000 | - | 70.92% Preference Share 2,00,000 | - | 14.37% 3,00,000 | - | > 14.18% Reserve & Surplus 1,00,000 | - | 7.18% 1,50,000 | - | 7.10% Total Capital & Reserve —[73,00,000 | - | 93-30% 19,50,000 | - | 92.20% Total Liabilities + Capital | 73,92,000 | - | 100% 21,15,000 | - | 100% Interpretation : The hotels have 15.59% and 10.17% of current assets and the fixed assets are 84.41% and 89.83% respectively. Both the hotels have very low current liabilities of 3.02% and 3.55% and can easily pay off from their current assets and their Capital & reserve is 93.39% and 92.20%. On com paring these hotels, it is found that both the hotel have ‘strong capital base with Very little current and long term liabilities, -‘Mustration 6 _ From the following balance sheets as on _ Santur Hotel, compare the financial positi 31st December 2006 of Mayur Hotel and alance sheets, lon of Hotel with the help of common size (311)HOTEL ACCOUNT, FINANCIAL AND F & 8 MANAGEMENT ‘Uabilities ‘Mayur Hotel | Santur Hole! Assets Mayur Hotel | Santur Hotet Rs. P| Rs Rs, PRs. P i] Equity Shares | 3,00,000 ]- | Land & Buiding | 8,00.000] - | 4,80,000]- | | Pref. Shares 5,00,000 Plant, Machinery | 1,00,000 | - | 6,00,000 | - | Reserve Surplus swe | | Cutlery 2,00,000 | - | 1,00,000 Long Term Loan 4,00,000 Kitchen Equip | 2,00,000 - | §,00,000 |. Debentures 5,00,000 Cash in Hand 75,000 | - 5,000 | Bills Payable 1,00,000 Cash at Bank 4,00,000 10,000 | - | S. Creditors 1,00,000 | - | S. Debtors 0,000 40,000 | Out. Salaries = |... 5,000 | - | Bills Receivable | 1,00,000| - | 2,00,000 cE 10,000 Closing Stock 10,000} -| 10,000 } - Short Term Loan 30,000 | - | Rit Shares 3,55,000 | - 19,45,000 [22,80,000 | = | Solution Common Size Balance Sheet as on 31st December, 2006 Particulars Mayur Hotel Santur Hotel _[Rs. PT Percentage | As PT] Percentage Current Assets : Cash in Hand 75,000 | - | 3.28% 5,000 0.26% Cash at Bank 4,00,000 17.47% 10,000 0.51% Closing Stock 10,000 0.44% 10,000 0.51% Sundry Debtors 50,000 | - | 2.18% 40,000 2.06% Bills Receivable 1,00,000 4.37% 2,00,000 10.28% Total Current Assets [6.35000 27.73% 2,65,000 13.62% Fixed Assets Kitchen Equipment 2,00,000 8.73% 5,00,000 25.71% Cutlery 2,00,000 8.73% 1,00,000 5.14% RIL Shares 3,55,000 | - | 15.50% =| 0.00% Plant and Machinery 1,00,000 4.37% - | 30.85% Land and Building 8,00,000 | - | 34.93% 24.68% Total Fixed Assed 16.55,000 72.27% 86.38% Total Assets 22,90,000 | - | 100% 100% Liabilities - T Current Liabilities Bills Payable 50,000 2.18% 100,000 | - | 5.14% (312)MENT HOTEL ACCOUNT, FINANCIAL AND F & B MANAGE! /s ABC Hotel as on 31st December for the @4. From the following balance sheet of i balance sheet and study the financial years 2005 and 2006 prepare a compa position of the concern. 2005 2006 Liabilities 2005 2006 Assels os, p Irs. A Rs. P| Rs. P = Equity Share Capital] 1,00,000] - | 2,00,000 | - | Cashin hand ae Hecrnce Reserve & Surplus | 80,000 60,000 |- | Sundry Debtors | 1,50, qa Debentures 4,50,000]- | 1,25,000 J. | Bils Receivable | 90,000) - | 25.00) |: LongTermLoan | 2,00,000| - | 2,50,000 | - | Cutlery & Crockery | $0,000 | - 200 Bills Payable '50,000]- | 60,000 | - | Kitchen Equipment | 75,000 - | 80,000 }- Sundry Creditors 30,000]- | 25,000 |- | Laundry Machines | 50,000] - | 60,000 }- ‘Other Liabilities 40,000 | - §0,000_| - | Land & Building 2,00,000 2,25,000 | - [0,000 - [770,000 |- 6,50,000 | - | 7.70,000 Q5. From the following balance sheets of XYZ Hotel Ltd. for the years ending on 31st December 2005 and 2006 prepare a comparative balance sheet and study the financial position of the hotel. Also prepare the common size balance sheet (figures in ‘000) Liabilities 2005 2006 Assels 2005 2006 | Rs P| Rs P As pl As. P Equity Share Capital] 3,000] - | 3,500] - | Cashin hand 450|-| 800 Pref, Share Capital | 1,500] - | 1,800 | - | Sundry Debtors soo | -| 600 Reserve 300 | - 400 | = | Bills Receivable 200] -| 100] - Long Term Loan 1,500]- | 1,300 - | Stock 300 | -| 400] - Debentures 2,000 |- | 2,300 | - | investments 1,500} -] 1,800 | - Profit & Loss A/c 500 | - 800| - | Cutlery & Crockery! 600 | -| 700 300 | - 500 | - | Computers 2,000 | -| 2,500 200 | - 150 | - | Laundry Machines| 800 |"-,| 700 300 | - 400 | - | Kitchen Equipment] 900 | -| 1,000 150 | - 250 | - |Land& Building | 2,500 | -| 2.800 9,750 |- | 11,400] - 9,750 | - T1400 TH] L i |. From the following balance sheets of Yuvraj Hotel Ltd., Ranchi for the years ending 6 prepare a com| its financial position. parative balance sheet of the (figures in 000) (314)_———— ss. ,S””~S:”:~—~—™"= FINANCIAL STATEMENT ANALYSIS r= 2008 2006 Assets 2005 2006 Uapities Rs P| Rs, P Ps. P| RP Sec iee. 200 200 | - | Land & Building 200 250 Equity Sere haes 50 150 | - | Kitchen Equipment) 100 130 Preferen 300 400 | - | Computers 200 240 ReseNe an 150 90 | - | Laundry Machines 50 40 ‘Long Term 300 300 Cutlery & Crockery 30 35 Debentures 50 30 | - | Furnishing & Lines. 20 15 Bank Overs raga0e 40 45 | - | Furniture & Fixture 30 25 Short Term Mo’ 30 | - 35 | - | Bills Receivable 75 90 Bills ae 20 | - 15 | - | Sundry Debtors 125 150 Sundry Ore idend 10 12 | - | Stock 50 40 epee ales 43 | - 15 | - | Prepaid Salary 10 8 Tey 0: Sis 7 | - | Bank 293 309 4,193 | - | 1,344 | - 1,193 | -|_1:344 on 3ist December 2 study the profitability. Particulars 2005 2006 Rs. P | Rs. Food & Room Sales 12,50,000 | - | 15,60,000 | - Cost of Sale 3,00,000 | - 4,00,000 Operating Expenses : 1,50,000 | - | 2,00,000 ‘Selling & Marketing Expenses 50,000 | - 75,000 | - | Non Operating Expenses : | interest Paid 1,00,000 | - | 1,15,000 | - Income Tax 1,75,000 | - 1,90,000 | - Q7. From the following income statement of Yuvraj Hotel, Ranchi for the year ending 005 and 2006, prepare the comparative income statement & Q8. From the following income statement of Himland Hotel for the year ending on 31S December 2005 and 2006. Prepare the comparative income statem: the profitability of Hotel. Particulars 2005 2006 | Rs. P| Rs. P Sales 15,00,000 } - | 20,00,000 | - Cost of Sale | 3,00,000 | - | 3,50,000 | - (315) ent & stud)