A STUDY ON FINANCIAL ANALYSIS STATEMENT OF

BRITANNIA MARIEGOLD

Introduction

Financial statement analysis is the process of analyzing a company’s financial statements for decision-
making purposes. External stakeholders use it to understand the overall health of an organization and to
evaluate financial performance and business value. Internal constituents use it as a monitoring tool for
managing the finances.

Overall, a central focus of financial analysis is evaluating the company’s ability to earn a return on its
capital that is at least equal to the cost of that capital, to profitably grow its operations, and to generate
enough cash to meet obligations and pursue opportunities.

Fundamental financial analysis starts with the information found in a company’s financial reports. These
financial reports include audited financial statements, additional disclosures required by regulatory
authorities, and any accompanying (unaudited) commentary by management. Basic financial statement
analysis—as presented in this reading—provides a foundation that enables the analyst to better
understand other information gathered from research beyond the financial reports.

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.

Common methods of financial statement analysis include horizontal and vertical analysis and the use of
financial ratios. Properly comparing a balance sheet with the corresponding profit and loss account to
determine the strengths and weaknesses of a business describes financial statement analysis. Financial
analysis determines a company’s health and stability. The data gives you an intuitive understanding of
how the company conducts business. Stockholders can find out how management employs resources
and whether they use them properly. Governments and regulatory authorities use financial statements
to determine the legality of a company’s fiscal decisions and whether the firm is following correct
accounting procedures. Finally, government agencies, such as the Internal Revenue Service, use financial
statement analysis to decide the correct taxation for the company. Financial analysis has a broad range of
use cases, so analysts employ various methods to draw insight from data based on standardized
accounting principles. Two main types of financial analysis used to evaluate a company’s financial
performance are vertical analysis and horizontal analysis.

Vertical Analysis

Vertical analysis takes a snapshot of a company’s financials at a particular point in time. Here, each item
on a financial statement–be it on the income statement, balance sheet, or cash flow statement–is
compared to a base item. For example, in an income statement, each expense item might be expressed
as a percentage of total revenue. This ratio analysis helps identify correlations and compare companies
of different sizes. By turning raw numbers into percentages, comparisons are more meaningful.

Horizontal Analysis.

Horizontal analysis focuses on comparing changes in financial data over a series of reporting periods
rather than at a single point in time. Also called trend analysis, it examines how specific financial data
points grow or shrink over time. For example, if a company’s revenue increased by 15% from Year 1 to
Year 2 and then by 20% from Year 2 to Year 3, horizontal analysis would flag this as a positive trend in
revenue growth. Financial analysts use horizontal analysis to identify trends and make projections about
future performance.

Financial statements consist of ‘Revenue Account’ and ‘Balance Sheet’.

1.Revenue Account / Income Statement: Revenue Account refers to ‘Profit and Loss Account’ or ‘Income
and Expenditure Account’ or simply ‘Income Statement’. Revenue Account may be split up or divided
into ‘Manufacturing Account’, ’Trading Account’, ’Profit and Loss Account’ and ‘Profit and Loss
Appropriation Account’, Revenue Account is prepared for a period, covering one year. This statement
shows the expenses incurred on production and distribution of the product and sales and other business
incomes. The final result of this statement may be profit of loss for a particular period

2. Balance Sheet: Balance sheet shows the financial position of a business as on a particular date. It
represents the assets owned by the business and the claims of the owners and creditors against the
assets in the form of liabilities as on the date of the statement.

Definition.
In investment finance, an analyst external to the company conducts an analysis for investment purposes.
Analysts can either conduct a top-down or bottom-up investment approach. A top-down approach first
looks for macroeconomic opportunities, such as high-performing sectors, and then drills down to find
the best companies within that sector. From this point, they further analyze the stocks of specific
companies to choose potentially successful ones as investments by looking last at a particular company’s
fundamentals.

History of Financial Statement Analysis.

The primary cause of the evolution of financial statement analysis can be traced back to the last stages
of America’s drive to industrial maturity in the last half of the nineteenth century. As the management of
enterprises in the various industrial sectors transferred from the enterprising capitalists to the
professional manager and as the financial sector became a more predominate force in the economy, the
need for financial statements increased accordingly. Both of these changes were primary causes of
financial statement analysis.

But it was not the point from where it all began, if we move further back in the books of the history we
can assess that from clay tablets to the cloud, accounting and finance have seen vast changes in tools,
methods, and focus since their inception. But they continue to evolve in the face of a changing business
environment.

Developments in the type and amount of data available to finance professionals, along with powerful
new tools used to analyze it, have created a role for financial analysis. Evolving from reactionary to
predictive has made finance a guiding hand for strategic business decisions—and senior leaders have
begun to expect timely insights, creating pressure for teams.

In this blog post, we trace key historical developments that created the modern financial analysis
function. As accounting dates back thousands of years and has been used and explored in many parts of
the world. Given the importance of goods and trade to human civilization, it’s not surprising that
bookkeeping and accounting date back to the beginning of recorded human history. Rudimentary
accounting documents have been found in the ruins of Mesopotamia, Babylon, and other ancient
civilizations dating back thousands of years. The earliest accounts of this language go back to
Mesopotamian civilizations. These people kept the earliest records of goods traded and received. It was
also related to the early record-keeping of the ancient Egyptians and Babylonians. They used more
primitive accounting methods, keeping records that detailed transactions involving animals, livestock,
and crops. In India, philosopher and economist Chanakya wrote “Arthashasthra” during the Mauryan
Empire around the second century B.C. The book contained advice and details on how to maintain
record books for accounts.
Bookkeepers most likely emerged while society was still in the barter and trade system (pre-2000 B.C.)
rather than a cash and commerce economy. Ledgers from these times read like narratives with dates and
descriptions of trades made or terms for services rendered. All the transactions were kept in individual
ledgers, and if a dispute arose, they provided proof when matters were brought before magistrates.
Although tiresome, this system of detailing every agreement was ideal because long periods of time
could pass before transactions were completed.

As currencies became available and tradesmen and merchants began to build material wealth,
bookkeeping also evolved. Then, as now, business sense and ability with numbers was not always found
in one person, so math-phobic merchants would employ bookkeepers to maintain a record of what they
owed and who owed them. Up until the late 1400s, this information was still arranged in a narrative style
with all the numbers in a single column, whether an amount was paid, owed, or otherwise. This is called
single-entry bookkeeping and is similar to what many of us do to keep track of our checkbooks. It was
necessary for the bookkeeper to read the description of each entry to decide whether to deduct or add
it when calculating something as simple as monthly profit or loss. This was a very time consuming and
inefficient way to go about tallying things.

Accountants were already essential for attracting investors, and they quickly became essential for
maintaining investor confidence. The profession of accounting was recognized in 1896 with a law stating
the title of certified public accountant (CPA) would only be given to people who passed state
examinations and had three years of experience in the field. The creation of professional accountants
came at an opportune time. Less than 20 years later, the demand for CPAs would skyrocket as the U.S.
government, in need of money they started charging income tax.

These few points in history illustrate the foundation for the general practices of accounting, as well as
the impetus for the modern accounting and finance function.

Importance of Financial Statement Analysis.

The importance of financial statement analysis is a critical tool for businesses to evaluate their financial
health. Knowing the importance of financial statement analysis that help get information on a company’s
financial performance, including its profitability, liquidity, solvency, and efficiency. Financial analysis
enables businesses to identify trends, evaluate performance, and make informed decisions. Take a deep
dive into the basics of financial markets to know more.

1.The Shares Investment and Holding

Financial analysis for business is essential for investors who want to invest in shares or hold them. By
analysing a company’s financial statements and performance, investors can make informed investment
decisions. Investors use financial statement analysis to assess a company’s profitability, growth potential,
and financial stability. This analysis enables investors to identify companies that are likely to generate
good returns on investment and avoid companies that are risky.

2.Plans, Decisions, and Management

Financial analysis for business is crucial for businesses when making plans, decisions, and managing their
finances. By analysing financial data, businesses can identify potential risks and opportunities. This
financial analysis enables businesses to make informed decisions, develop strategies, and allocate
resources more efficiently. Financial statement analysis also helps businesses identify areas where they
can reduce costs and increase profitability. Read about financial management functions in detail.

3.Providing Credit

Importance of financial statement analysis for business is seen in providing credit to businesses. By
conducting a company’s financial analysis, lenders can evaluate the company’s creditworthiness and
assess the risk involved in lending. This analysis enables lenders to make informed decisions about
whether to grant credit, how much credit to grant, and what terms and conditions to apply.

4.Financial Analysis Helps in Assessing a Company’s Financial Health.

Businesses can leverage the importance of financial statement analysis to assess their financial health.
By analysing financial data, businesses can identify areas where they need to improve and develop
strategies to achieve their financial goals. Financial analysis for business also helps monitor their financial
performance and identify potential risks and opportunities. Tools of financial statement analysis enables
businesses to make informed decisions about investments, cost-cutting measures, and other strategies
to improve financial performance.

Financial statement analysis can also help a business become more aware of its requirements and help
to manage its tax information, which can help to save money. An analysis of a business’s financial
statements is an essential part of applying for a loan, as most financial institutions require a balance
sheet and analysis to decide whether they can repay the loan.

• For Finance Manager: A finance manager assesses and analyses the financial statements to
understand the managerial effectiveness and operational efficiency of the company. This
statement also helps them analyse the financial strength and weakness of the particular entity. A
finance manager analyses the position of the entity and the types of assets owned by it. They
also easily determine the liabilities and the current cash positions of the company. They calculate
the debts of the company as well. After all these analyses, the finance manager can take a
proper and adequate decision for the company.

• For Top Management: The analysis of the financial statement is crucial for the top management
of the company. The financial analysis helps them understand the best use of available resources
by the firm, the financial condition of the firm, and the determination of the company’s success.
They can also conclude the individual’s performance and evaluate the internal control of the
system.

• For Trade Payables: The analysis of financial statements helps the trade payables to determine
the company’s capability to fulfil the short- and long-term obligations. It also helps in the
determination of the company to meet any short-term debts and other claims of creditors over a
brief period.

• For Lenders: The lenders or the long-term suppliers of the firm analyse these financial
statements concerning the firm’s long-term solvency and survival in the future. They help in the
determination of the company’s ability to generate cash to clear the interest and principal
amount, and also in determining its experience to generate the probability of the future success
rate. These statements help the lenders to also determine the credit risk and loan if sanctioned
to the firm or company.
 • For Labour Unions: Labour Unions analyses the financial statement to conclude whether they
can apply for an increase in their wages according to the company’s profitability. They may also
assess if the firm can elevate the productivity or the price of their services to absorb their
increment in wages.

• For Investors: To ensure the profitability and security of the invested money, the investors
require the annual report of the company to analyses any bankruptcy or failure to fulfil debts. In
case of such mishappening, the investors shall take different measures to prevent loss. They may
help the company in paying off its debts.

Importance of financial statement analysis in process of business valuation.

Valuation is the process of estimating the value of a business, which can be used for a variety of
purposes such as mergers and acquisitions, fundraising, financial reporting, and litigation. One of the key
components of business valuation is financial statement analysis, which involves the examination of a
company’s financial statements to gain a better understanding of its financial health and performance.
Financial statement analysis in the process of business valuation is required for –

• Understanding the Company’s Financial Performance – This involves analyzing the company’s
income statement, balance sheet, and cash flow statement, as well as any other relevant
financial information. Financial statement analysis helps the valuer to identify the company’s key
revenue and expense drivers, as well as any trends or anomalies in the financial data. This
information is essential for assessing the company’s historical financial performance, and for
projecting its future financial performance.

• Profitability Analysis – One of the key metrics used in financial statement analysis is profitability.
Profitability is a measure of the company’s ability to generate profits from its operations. It is
typically measured using metrics such as gross profit margin, operating profit margin, and net
profit margin. By analyzing the company’s profitability over time, the valuer can gain insights into
the company’s revenue and cost structures, as well as its pricing strategy, competitive position,
and operating efficiency.

• Liquidity Analysis – Liquidity is a measure of the company’s ability to meet its short-term
obligations, such as paying suppliers and employees, without resorting to external financing. It is
 typically measured using metrics such as current ratio, quick ratio, and cash ratio. By analyzing
the company’s liquidity, the valuer can gain insights into the company’s cash management
practices, working capital requirements, and financial risk.

• Leverage Analysis – Leverage is a measure of the company’s financial risk, and it reflects the
extent to which the company is financed by debt as opposed to equity. It is typically measured
using metrics such as debt-to-equity ratio, debt-to-assets ratio, and interest coverage ratio. By
analyzing the company’s leverage, the valuer can gain insights into the company’s financial risk,
its ability to service its debt, and its capacity for future growth.

• Analysis of asset quality – Asset quality is a measure of the company’s ability to generate cash
flows from its assets. It is typically measured using metrics such as asset turnover ratio,
inventory turnover ratio, and accounts receivable turnover ratio. By analyzing the company’s
asset quality, the valuer can gain insights into the company’s operating efficiency, inventory
management practices, and customer creditworthiness.

• Analysis of risks and opportunities- Financial statement analysis can help to identify risks and
opportunities that can have an impact on the value of a business. For example, if a company has
high levels of debt or is dependent on a single customer or supplier, this can increase its risk
profile and lower its valuation. Conversely, if a company has a diversified customer base or has a
competitive advantage in its industry, this can increase its valuation.

• Supports valuation methodologies: Financial statement analysis is essential for supporting the
various valuation methodologies that are used to value a business. For example, the income
approach requires the analysis of a company’s historical financial statements to project future
cash flows. The market approach requires the analysis of comparable companies to identify the
appropriate valuation multiples. The asset approach requires the analysis of a company’s assets
and liabilities to estimate its net asset value.

Features of Financial Statement Analysis.

1. The Financial Statements should be relevant for the purpose for which they are prepared.
Unnecessary and confusing disclosures should be avoided and all those that are relevant and
material should be reported to the public.
 2. They should convey full and accurate information about the performance, position, progress and
prospects of an enterprise. It is also important that those who prepare and present the financial
statements should not allow their personal prejudices to distort the facts.

3. They should be easily comparable with previous statements or with those of similar concerns or
industry. Comparability increases the utility of financial statements.

4. They should be prepared in a classified form so that a better and meaningful analysis could be
made.

5. The financial statements should be prepared and presented at the right time. Undue delay in
their preparation would reduce the significance and utility of these statements

6. The financial statements must have general acceptability and understanding. This can be
achieved only by applying certain “generally accepted accounting principles” in their
preparation.

7. The financial statements should not be affected by inconsistencies arising out of personal
judgment and procedural choices exercised by the accountant.

8. Financial Statements should comply with the legal requirements if any, as regards form,
contents, and disclosures and methods. In India, companies are required to present their
financial statements according to the Companies Act, 1956.

Important Features of Financial Statement Analysis.

1. Depict True Financial Position:

The information contained in the financial statements should be such that a true and correct idea is
taken about the financial position of the concern. No material information should be withheld while
preparing these statements.

2. Effective Presentation:

The financial statements should be presented in a simple and lucid way so as to make them easily
understandable. A person who is not well versed with accounting terminology should also be able to
understand the statements without much difficulty. This characteristic will enhance the utility of these
statements.

3. Relevance:

Financial statements should be relevant to the objectives of the enterprise. This will possible when the
person preparing these statements is able to properly utilize the accounting information. The
information which is not relevant to the statements should be avoided, otherwise it will be difficult to
make a distinction between relevant and irrelevant data.

4. Attractive:

The financial statements should be prepared in such a way that important information is underlined so
that it attracts the eye of the reader.

5. Easiness:

Financial statements should be easily prepared. The balances of different ledger accounts should be
easily taken to these statements. The calculation work should be minimum possible while preparing
these statements. The size of the statements should not be very large. The columns to be used for giving
the information should also be less. This will enable the saving of time in preparing the statements.

6. Comparability:
The results of financial analysis should be in a way that can be compared to the previous years
statements. The statement can also be compered with the figures of other concerns of the same nature.
Sometimes budgeted figures are given along with the present figures. The comparable figures will make
the statements more useful. The Indian Companies Act, 1956 has made it obligatory to give previous
years figures in the balance sheet. The comparison of figures will enable a proper assessment for the
working of the concern.

7. Analytical Representation:

The information should be analyzed in such a way that similar data is presented at the same place. A
relationship can be established in similar type of information. This will be helpful in analysis and
interpretation of data.

8. Brief:

If possible, the financial statements should be presented in brief. The reader will be able to form an idea
about the figures. On the other hand, if figures are given in details then it will become difficult to judge
the working of the business.

9. Promptness:

The financial statements should be prepared and presented at the earliest possible. Immediately at the
close of the financial year, statements should be ready.

Advantages of Financial Statement Analysis.

For most small-business owners, analyzing financial statements might seem overwhelming. While many
business owners might outsource the creation of financial statements to an accountant, learning to
analyze them helps determine the financial health of the company. Financial statements should be
analyzed once a year, if not quarterly, to take full advantage of the information they offer.

• Cash Flow Review

A cash flow statement is one of the financial statements used in financial analysis. As the name implies,
it accounts for money in and money out. It shows the financial solvency of a company to pay its liabilities
at any point in time.

Some companies have cyclical revenues but consistent expenses. Knowing that the Christmas rush needs
to fund a slow first quarter of expenses is important for business owners to manage financial resources.

• Company Liability Review

The financial statements show the existing liabilities. These include business loans, lines of credit, credit
cards and credit extended from vendors. A business owner who is planning to apply for a business
expansion loan can look at the financial statements and determine if he needs to reduce existing
liabilities before applying. Lenders look at the financial statements and consider the revenues, assets and
existing liabilities.

• Review Assets and Inventory

The balance sheet is a component of the financial statement. Assets are included on the balance sheet.
Analyzing whether there is too much inventory or too little helps business owners prepare for upcoming
sales months. Keeping too much inventory on hand is a potential problem that ties up money, while not
having enough inventory can lead to losing customers and market share.

• Identify Trends and Determine Steps Needed

Analyzing the financial statements from quarter to quarter and year to year help business owners see
trends in growth. A young business might have losses in the early years while it is developing products
and a customer base. At the same time, statements show whether the business owner is meeting
projected estimates.

If a business is projecting a 10 percent annual growth but only achieving 7 percent, business leaders
need to look for ways to either cut costs or increase revenues. The financial statement identifies the
information to explore further.

• Seeking Investment Capital

When a business seeks partners or investors, the financial statements are critical. Analyzing the
statements not only helps investors determine if a company is making money, but it also helps to identify
a reasonable cost per share. Shareholders usually invest capital in a company for growth; thus,
shareholder equity is defined based on the capital investment added to assets, with liabilities subtracted,
to define total shareholder equity.

For example, if a company has $1 million in assets with $500,000 in liabilities and gets another $500,000
in investment capital, the total shareholder equity is $1 million ($1,000,000 assets + $500,000
investment - $500,000 liabilities = $1,000,000).

• Using financial statement analysis as a vehicle for asking questions

The numbers and outputs from financial statement analysis alone cannot tell us exactly what is
happening in a business. Instead it provides users of the financial statements with a way to analyse the
data so that they can ask the most appropriate questions. For shareholders, this might be asking a
question of management at an annual general meeting. For lenders, this could be probing deeper when
they are asked to provide another loan or an alteration to a borrowing contract.

• In reality, very few accountants or business people conduct the calculations you are about to
learn by hand. Today, most users of such analysis obtain it from websites or service providers
who use software and technology to remove the mundane actions of calculating these numbers.
The key is to understand HOW the various forms of analysis are constructed so that you can
INTERPRET the outputs and then develop good QUESTIONS to ask.

• Clean and Complete Data Generates Optimal Financial Statements

To fully realize the benefits of your financial reports, you need full control over, and visibility into, your
financial data.

Regardless of your goals and benchmarks, it pays to invest in a complete software solution that
centralizes your data management, integrates all of your applications, and optimizes your processes to
eliminate wasted time and resources. Full data transparency destroys data silos, enhances
communication and collaboration, and reduces risk by preventing common financial headaches such as
rogue spend and invoice fraud.
Key Benefits of Effective Financial Statement Analysis

1. Real-Time Analyses

With current and historical spend and performance data at your fingertips, financial analysis can help
you generate forecasts, reports, and data models to make informed, strategic decisions quickly—not
hastily. With real-time visibility and analysis, you can stay ahead of the competition and take swift
advantage of opportunities for growth and investment that might otherwise pass you by.

2. Better Debt Management

Managing debts effectively is a priority for any business that wants to enjoy a long life. Transparency into
debt-related data immensely improves your ability to manage it, and it’s not just corporations looking to
tap into the power of financial reporting and analysis. The United Nations, for example, has invested
heavily in optimizing its data management and enhancing its analytics toolkit in recent years as a hedge
against a growing global debt crisis. Accurately tracking and analyzing the ratio between your current
assets and current liabilities, as well as the financial processes related to generating revenue and paying
your bills (i.e., accounts receivable and accounts payable), makes it easier to maintain short-term
liquidity, plan long-term debt management, and adjust workflows and processes to ensure you’re getting
the best possible return on every dollar when paying down debts.

4.Cash Flow Management.

An estimated 82% of all small businesses fail due to cash flow problems. But businesses of all sizes are
susceptible to cash flow challenges and unexpected market disruptions. A 2020 study conducted by the
International Labor Organization (ILO) found that, for businesses trying to navigate the COVID-19 novel
coronavirus pandemic, cash flow management was the number one threat to business operations and
solvency.

By carefully reviewing your KPIs, you can dive deeper into your revenue streams and liabilities to identify
your current and future cash flow, create strategies to insulate against unpleasant surprises, and make
sure you’ve got the capital on hand to take advantage of opportunities when they arise.

5. Improved Communication and Collaboration

On-demand, role-appropriate access to complete and clean financial data opens up a lot of new doors
for sharing information, strategic planning, and building strong relationships with creditors, investors,
and potential partners.

Real-time data analysis and sharing improves your company’s agility by putting everyone on the same
page and allowing teams to hit the ground running.

Financial analysis can help you reduce risk in several important ways:

• Identifying and correcting delays, inefficiencies, and errors in your financial processes before
they become crises. Over time, and with the use of artificial intelligence and process
automation, iterative improvements can refine processes to improve performance and accuracy
even further.

• Using predictive analytics to anticipate changes in market conditions, supply chain disruptions,
etc. and develop contingencies accordingly.

• Leverage data-driven insights to make more strategically sound business decisions, investments,
and business process management initiatives organization-wide.

• Mitigating the risk of financial fraud by improving data security and spend management.

Disadvantages of Financial Statement Analysis.

Every Organization has to prepare Financial Statements as per the applicable financial reporting
framework and this contains certain limitations as the organization cannot prepare and present the
financial statement as per the convenience of the organization but as per the applicable financial
reporting framework and as per applicable laws. Every stakeholder should be aware of the limitations so
as to decide the limit of reliance on the financial statements. As financial statements are publicly
published hence company or any business organization cannot disclose all the information as there are
chances that the competitor may steal the information and use it for its benefit. Hence the organization
has to limit itself while publishing public information and follow the protocols disclosed by the law. The
other reason being limitations on the financial statements is that any person can manipulate the
information and plan the fraud. Following are some of the limitations mentioned:

1. Assets are Valued at Historical Cost

In financial Statements long term assets are valued at the price it was purchased long year back and the
organizations are not allowed to revalue the same. Hence the current market price is ignored while the
valuation of assets and because of its proper financial position cannot be shown as proper wealth cannot
be presented in the absolute terms.

2. Some Policies are Judgemental Based

Some of the accounting policies like a method of depreciation, method of amortization, method of
measuring cost, a compilation of accounting standards etc. depends upon the judgement of the person
using the same. For different methods, the results are different. Hence it puts limitations as a true and
fair view cannot be presented properly.

3. Specific Time Period Reporting

Financial statements are reported annually or quarterly. Each period has some upward and downward
phases hence each period cannot be compared with the previous period because of the different
situations for that period. A reader of financial statements usually compares the financial statement with
the previous period whether it is the year or it is the quarter which seems to be limitations.

4. Self-Generated Intangibles are Ignored

In preparation of Financial Statements self-generated intangible assets like credit standing of the
organization in the market, the unique quality of product due to which sales targets can be easily
achieved etc. are not recorded in the financial statement due to the valuation problems. Hence it is said
that the financial statements do not reflect the proper position
 5. Comparability with the Industry Standards

The investor or analyst every time try to compare the financial position and result of the specific
company with the Industry standards but they forget that every organization works on different terms,
adopt different methods of valuation, adopt different accounting policies which makes them
incomparable. Then to the analyst and investors compare the results of a specific company to industry
standards to make the investment decisions.

6. Non-Financial Issues are Ignored

Just like the Financial position, Non-Financial issues also affect the organization at large like
environmental pollution because of manufacturing, employee turnover ratio, sales return ratio, the
building of strong management team, their qualification and perquisites, selection criteria for
employees, managers, directors, non-executives etc. these things also greatly affect the performance of
the organization.

7. Inflation Effect is Ignored

The assets are recorded at the historical cost. Purchase cost is recorded at the price at which it was
initially purchased, the stock is valued at FIFO or LIFO basis. Investments are valued at face value, while
debtors and creditors are recorded at actual values. This creates the problem as the inventory is not
measured at the current market price, investments are not recorded at the market value and assets are
also not recorded as per current values. Which are shown as the assets are either undervalued or
overvalued and because of its proper financial position is not reflected.

8. Subject to Judgements and Frauds

As the auditor’s report also stated that the responsibility of the auditor is to verify the figures on the test
check basis and the whole responsibility is of the management. And management is the whole and sole
of the organization. As it manages the day to day affairs and prepares financial statements as well. Hence
the management knows all the flaws, mistakes and loopholes in the accounting system and it can easily
manipulate with the figures. Hence there are more chances that the financial statements presented are
might not be shown the true and correct position and trying to attract the investors.

9. Subject to Internal Controls and Checks

As the auditor, while auditing the financial statement heavily depends upon the internal controls within
the organization and internal checks. The auditor does not thoroughly verify the internal controls and
internal checks. He majorly depends upon the internal auditors for that and as internal auditors are the
team of management as appointed by the management hence the chances of misappropriations are
more.

10. All Financial Statements may not be Audited

Sometimes the branch limit is not applicable for audit and the organization do not get audited the
accounts of some non-applicable branches and joint ventures, but we also merge the data in
consolidated financial statements. Hence for unaudited statements, there are chances of the frauds and
manipulation of the data.

Types of Financial Statements

1.Balance Sheet: The balance sheet provides an overview of a company’s assets, liabilities, and
shareholders’ equity at a specific time and date. The date at the top of the balance sheet tells you when
this snapshot was taken; this is generally the end of its annual reporting period. Below is a breakdown of
the items in a balance sheet. Assets

• Cash and cash equivalents are liquid assets, which may include Treasury bills and certificates of
deposit.

• Accounts receivable are the amount of money owed to the company by its customers for the
sale of its products and services.

• Inventory is the goods a company has on hand, intended to be sold as a course of business.
Inventory may include finished goods, work in progress that is not yet finished, or raw materials
on hand that have yet to be worked.

• Prepaid expenses are costs paid in advance of when they are due. These expenses are recorded
as an asset because their value has not yet been recognized; should the benefit not be
recognized, the company would theoretically be due a refund.
 • Property, plant, and equipment are capital assets owned by a company for its long-term benefit.
This includes buildings used for manufacturing or heavy machinery used for processing raw
materials.

• Investments are assets held for speculative future growth. These aren’t used in operations; they
are simply held for capital appreciation.

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• Trademarks, patents, goodwill, and other intangible assets can’t physically be touched but have
future economic (and often long-term benefits) for the company.

Liabilities

• Accounts payable are the bills due as part of a business’s operations. This includes utility bills,
rent invoices, and obligations to buy raw materials.

• Wages payable are payments due to staff for time worked.

• Notes payable are recorded debt instruments that record official debt agreements, including the
payment schedule and amount.

• Dividends payable are dividends that have been declared to be awarded to shareholders but
have not yet been paid.
 • Long-term debt can include a variety of obligations, including sinking bond funds, mortgages, or
other loans that are due in their entirety in more than one year. Note that the short-term
portion of this debt is recorded as a current liability.

Shareholders’ Equity

• Shareholders’ equity is a company’s total assets minus its total liabilities. Shareholders’ equity
(also known as stockholders’ equity) represents the amount of money that would be returned to
shareholders if all of the assets were liquidated and all debts paid off.

• Retained earnings are part of shareholders’ equity and are the amount of net earnings that were
not paid to shareholders as dividends.

Non-operating revenue is the income earned from non-core business activities. These revenues fall
outside the primary function of the business. Some non-operating revenue examples include:

• Interest earned on cash in the bank

• Rental income from a property

• Income from strategic partnerships like royalty payment receipts

• Income from an advertisement display located on the company’s property

Other income is the revenue earned from other activities. Other income could include gains from the
sale of long-term assets such as land, vehicles, or a subsidiary.

Expenses
Primary expenses are incurred during the process of earning revenue from the primary activity of the
business. Expenses include the cost of goods sold (COGS), selling, general and

Income Statement

Unlike the balance sheet, the income statement covers a range of time, which is a year for annual
financial statements and a quarter for quarterly financial statements. The income statement provides an
overview of revenues, expenses, net income, and earnings per share.

Operating revenue is the revenue earned by selling a company’s products or services. The operating
revenue for an auto manufacturer would be realized through the production and sale of autos.
Operating revenue is generated from the core business activities of a company.

Non-operating revenue is the income earned from non-core business activities. These revenues fall
outside the primary function of the business. Some non-operating revenue examples include:

• Interest earned on cash in the bank

• Rental income from a property

• Income from strategic partnerships like royalty payment receipts

• Income from an advertisement display located on the company’s property

Expenses

Primary expenses are incurred during the process of earning revenue from the primary activity of the
business. Expenses include the cost of goods sold (COGS), selling, general and administrative expenses
(SG&A), depreciation or amortization, and research and development (R&D).
Typical expenses include employee wages, sales commissions, and utilities such as electricity and
transportation.

Expenses that are linked to secondary activities include interest paid on loans or debt. Losses from the
sale of an asset are also recorded as expenses.

The main purpose of the income statement is to convey details of profitability and the financial results of
business activities; however, it can be very effective in showing whether sales or revenue is increasing
when compared over multiple periods.

Cash Flow Statement

The cash flow statement (CFS) shows how cash flows throughout a company. The cash flow statement
complements the balance sheet and income statement.

The CFS allows investors to understand how a company’s operations are running, where its money is
coming from, and how money is being spent. The CFS also provides insight as to whether a company is
on a solid financial footing.

The cash flow statement contains three sections that report on the various activities for which a
company uses its cash. Those three components of the CFS are listed below.

Statement of Changes in Shareholder Equity

The statement of changes in equity tracks total equity over time. This information ties back to a balance
sheet for the same period; the ending balance on the change of equity statement equals the total equity
reported on the balance sheet.

The formula for changes to shareholder equity will vary from company to company; in general, there are
a couple of components:

• Beginning equity: This is the equity at the end of the last period that simply rolls to the start of
the next period.
 • (+) Net income: This is the amount of income the company earned in a given period. The
proceeds from operations are automatically recognized as equity in the company, and this
income is rolled into retained earnings at year-end.

• (-) Dividends: This is the amount of money that is paid out to shareholders from profits. Instead
of keeping all of a company’s profits, the company may choose to give some profits away to
investors.

• (+/-) Other comprehensive income: This is the period-over-period change in other

comprehensive income. Depending on transactions, this figure may be an addition or
subtraction from equity.

Statement of Comprehensive Income

An often less utilized financial statement, the statement of comprehensive income summarizes standard
net income while also incorporating changes in other comprehensive income (OCI). Other
comprehensive income includes all unrealized gains and losses that are not reported on the income
statement. This financial statement shows a company’s total change in income, even gains and losses
that have yet to be recorded in accordance with accounting rules.

Examples of transactions that are reported on the statement of comprehensive income include:

• Net income (from the statement of income)

• Unrealized gains or losses from debt securities

• Unrealized gains or losses from derivative instruments

• Unrealized translation adjustments due to foreign currency

 • Unrealized gains or losses from retirement programs

Nonprofit Financial Statements

Nonprofit organizations record financial transactions across a similar set of financial statements.
However, due to the differences between a for-profit entity and a purely philanthropic entity, there are
differences in the financial statements used. The standard set of financial statements used for a
nonprofit entity includes:

• Statement of Financial Position: This is the equivalent of a for-profit entity’s balance sheet. The
largest difference is nonprofit entities do not have equity positions; any residual balances after
all assets have been liquidated and liabilities have been satisfied are called “net assets.”

• Statement of Activities: This is the equivalent of a for-profit entity’s statement of income. This
report tracks the changes in operation over time, including the reporting of donations, grants,
event revenue, and expenses to make everything happen.

• Statement of Functional Expenses: This is specific to nonprofit entities. The statement of

functional expenses reports expenses by entity function (often broken into administrative,
program, or fundraising expenses). This information is distributed to the public to explain what
proportion of company-wide expenditures are related directly to the mission.

• Statement of Cash Flow: This is the equivalent of a for-profit entity’s statement of cash flow.
Though the accounts listed may vary due to the different nature of a nonprofit organization, the
statement is still divided into operating, investing, and financing activities.

• The purpose of an external auditor is to assess whether an entity’s financial statements have
been prepared following prevailing accounting rules and whether any material

• Functions of Financial Statement Analysis

 1. The Shares Investment and Holding

Financial analysis for business is essential for investors who want to invest in shares or hold them. By
analysing a company’s financial statements and performance, investors can make informed investment
decisions. Investors use financial statement analysis to assess a company’s profitability, growth potential,
and financial stability. This analysis enables investors to identify companies that are likely to generate
good returns on investment and avoid companies that are risky.

2.Providing Credit

Importance of financial statement analysis for business is seen in providing credit to businesses. By
conducting a company’s financial analysis, lenders can evaluate the company’s creditworthiness and
assess the risk involved in lending. This analysis enables lenders to make informed decisions about
whether to grant credit, how much credit to grant, and what terms and conditions to apply.

3.Financial Analysis Helps in Assessing a Company’s Financial Health

• Businesses can leverage the importance of financial statement analysis to assess their financial
health. By analysing financial data, businesses can identify areas where they need to improve
and develop strategies to achieve their financial goals. Financial analysis for business also helps
monitor their financial performance and identify potential risks and opportunities.

• Financial statements provide a snapshot of a corporation’s financial health, giving insight into its
performance, operations, and cash flow.

• Financial statements are essential since they provide information about a company’s revenue,
expenses, profitability, and debt.

• 4. Importance of Financial Statements to Management: Management needs the financial

statements for proper execution of managerial functions. If there is a correct and reliable
 information, the management can plan properly and perform the functions of operation and
control very easily. The financial statements guide the management for effective use of capital
employed and determine the level of credit obtained from the banks and financial-institutions.

• The well drawn and properly constructed financial statements helps for effective policy
formulation. Moreover, the management may examine and analyze the net results of different
activities and the efficiency of employees concerned with those activities. The expansion
activities of the business concern are determined on the basis of financial position and strength
of the company.

5. Importance of Financial Statements to trade Association: It provides service to its members i.e.
business concern. The extent of service and types of services are determined on the basis of information
contained in financial statements. They may develop standard ratios and design uniform system of
accounts.

6. Importance of Financial Statements to trade Suppliers: The sales volume of the trade suppliers are
increased if the financial statements are properly analyzed and assess the financial position of the
customers i.e. business concern. A customer is faithful and regular in payment of trade credit if his
financial position is sound. The use of financial statements is very imperative since these statements can
convey the delay in payment or regularity in payment and can suggest about customer’s ability to make
the payment in future.

7. Importance of Financial Statements to Stock Exchange: The shares and debentures of a company are
traded in the stock exchanges. The value of shares and debentures are determined on the basis of
financial position and credit worthiness of the company. The financial statements are giving correct
information to fix the price for shares and debentures.

9. Importance of Financial Statements to Investors: Both present and prospective investors are
reading the contents of financial statements. They assess the financial position of the company
from a different angle. Long term solvency, earning capacity, prospects for growth, utilization of
funds, sources of funds and managerial ability are identified from the financial statements.

If the investor happens to be debenture holder, he/she studies the financial statements in such a manner
whether the company is able to redeem the debentures at the date of redemption.
 BRITANNIA COMPANY PROFILE

The company was established in 1892 by a group of British businessmen with an investment

Of ₹295. Initially, biscuits were manufactured in a small house in central Kolkata. Later, the enterprise

Was acquired by the Gupta brothers, mainly Nalin Chandra Gupta, an attorney, and operated under the

Name “V.S. Brothers.” In 1918, C.H. Holmes, an English businessman based in Kolkata, was taken on

As a partner and The Britannia Biscuit Company Limited (BBCo) was launched. The Mumbai factory

Was set up in 1924 and Peek Freans UK, acquired a controlling interest in BBCo. Biscuits were in

High demand during World War II, which gave a boost to the company’s sales. The company name

Was changed to the current “Britannia Industries Limited” in 1979. In 1982, the American

Company Nabisco Brands, Inc. acquired the parent of Peek Freans and became a major foreign

Shareholder. The company’s principal activity is the manufacture and sale of biscuits, bread, rusk,

Cakes and dairy products.

Britannia Industries is one of India’s leading food companies with a 100 year legacy and annual

Revenues in excess of Rs. 9000 Cr. Britannia is among the most trusted food brands, and manufactures
India’s favorite brands like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold which are

Household names in India. Britannia’s product portfolio includes Biscuits, Bread, Cakes, Rusk, and

Dairy products including Cheese, Beverages, Milk and Yoghurt.

Britannia products are available across the country in close to 5 million retail outlets and reach over

50% of Indian homes. The company’s Dairy business contributes close to 5 per cent of revenue and

Britannia dairy products directly reach 100,000 outlets.

Britannia Bread is the largest brand in the organized bread market with an annual turnover of over 1

Lac tons in volume and Rs.450 crores in value. The business operates with 13 factories and 4

Franchisees selling close to 1 mn loaves daily across more than 100 cities and towns of India.

They have a presence in more than 60 countries across the globe. Our international footprint includes

Presence in Middle East through local manufacturing in UAE and Oman, are the No 2 biscuit player

In UAE with a strong contention to leadership and have a similarly strong market position in the other

GCC countries. We are also the market leaders in Nepal and are in the process of investing a

Manufacturing facility in the country.

Our foot print spreads across North America, Europe, Africa and South East Asia through exports and
We are investing in a state- of- the- art facility in Mundra SEZ, Gujarat, to service the exports markets.

Britannia strategic expansion plan is based on the principle of ‘One new market a year’. We plan to

Expand through local operations in Africa and South East Asia in the coming years.

Britannia takes pride in having stayed true to its credo, ‘Eat Healthy, Think Better’. Having removed

Over 8500 tonnes of Trans Fats from products, Britannia became India’s first Zero Trans Fat

Company. Over 50% of the Company’s portfolio is enriched with essential micro- nutrients which

Nourish the body.

The company set up the Britannia Nutrition Foundation in 2009, and began working on public private

Partnership to address malnutrition amongst under-privileged children and women

Brand Britannia is listed amongst the most trusted, valuable and popular brands in various surveys

Conducted by prestigious organizations like Millward Brown, IMRB, WPP Group and Havas Media

Group to name a few.

Our relentless focus on quality and freshness have won us prestigious accolades including the Golden

Peacock National Quality Award and the Ramakrishna Bajaj National Quality Award.

However, the award that we cherish the most is the one given by our consumers. Britannia is
Recognized as one of the most trusted, valuable and popular brands among Indian consumers in

Various reputed surveys.

Britannia believes that ‘Taste & Trust’ are its sobriquet and will constantly endeavor to make a

Billion Indians reach out for a delightful and healthy Britannia product several times a day!

PRODUCT LINE OF BRITANNIA INDUSTRIES LIMITED

JUSTIFICATION OF THE TOPIC

This research project is about the study of Financial Performance Analysis of Britannia Industries

Limited. Britannia industries ltd is one of the oldest and largest FMCG players in the country.

Britannia industries ltd has an established market position in the Indian biscuits industry with market-

Leading presence across categories like cookies, marie and milk biscuits supported by strong brands

Such as Good Day, Marie Gold, Tiger, Milk Bikis and Nutrichoice which has helped the company
Improve its market share steadily over the last few years. In addition to biscuits, the company also has

A healthy market position in the rusk, bread and cream wafers segments further supporting its business

Prospects. The track record of Britannia Industries ltd. Over the last 10 years ending FY20 has been

Heartening that it has grown up in double digit in both revenue and net profit which was ahead of

Other FMCG players. For the study I have taken the five year (2016-2020) financial data of Britannia

Industries ltd. I have use different type of ratios to evaluate and analyze the financial performance of

Britannia industries ltd. The required data for the study are basically secondary in nature and the data

Are collected from the audited reports of the company. The sources of data are from the annual reports

Of the company from the year 2015-2016 to 2019-2020.

CHAPTER – 2

REVIEW OF LITRATURE

2.1 INTERNATIONAL REVIEWS

2.2
2.3 NATIONAL REVIEWS

CHAPTER – 2

REVIEW OF LITRATURE
The literature review is a written overview of major writings and other sources on selected topic.

Sources covered in the review may include scholarly journals, articles, books, government
reports,

Web sites etc.

2.1 INTERNATIONAL REVIEWS

D’Souza & Megginson (1999) have studied concerning the financial and operating performance
of

Privatized firms during the 1990s. They made comparison about the pre and post privatization

Financial and operating performance of 85 companies from 28 industrialized countries that were

Privatized through public share offerings for the period from 1990 to 1996. They have noticed
that

The significant increases in profitability, output, operating efficiency, dividend payments and

Significant decreases in leverage ratios for the full sample of firms after privatization. They have
also

Concluded that the capital expenditures increase significantly in absolute terms, but not relative
to

Sales and Employment declines, but insignificantly. As per findings, they strongly recommended
that

Privatization yields significant performance improvements.

Loundes (2001) analyzed ‘The Financial performance of Australian Government Trading

Enterprises

Pre &Post-Reform’ revealed that during the 1990’s. Main objectives of the study was to discover

Whether there had been any change in the financial performance of government trading
enterprises

Operating in electricity, gas, water, railways and ports industries as a result of these changes. He
had

Concluded that that it did not appear to have been a noticeable enhancement in the financial
Performance of most of this business, although railways have improved slightly, from a low base.
He

Has suggested several measures introduced to improve the efficiency and financial performance
of

Government trading enterprises in Australia.

Zafar S.M.Tariq & Khalid S.M (2012) The study explored that ratios are calculated from financial

Statements which are prepared as desired policies adopted on depreciation and stock valuation
by the

Management. Ratio is simple comparison of numerator and a denominator that cannot produce

Complete and authentic picture of business. Results are manipulated and also may not highlight
other

Factors which affect performance of firm by promoters.

Daniel A. Moses Joshunar (2013) The study has been conducted to identify the financial strength

And weakness of the Tata motors Ltd. Using past 5 year financial statements. Trend analysis &
ratio

Analysis used to comment of financial status of company. Financial performance of company is

Satisfactory and also suggested to increase the loan levels of company for the better
performance.

Gallizo and Salvador (2003) also carried out a study on financial ratios of U.S manufacturing firms

For a period of eight years since 1993 to 2000 to understand the behavior and adjustment
process of

The same. A proper balance between sales and assets generally specify that the assets are
managed and

Utilized well towards the sales generation. The main aim of the company is to maximize its profit
and

Profitability ratios helps to measure overall performance and efficiency of the firm.
Ahmed and Ahmed (2014) conducted a study to analyze the effect of mergers upon financial

Performance of manufacturing industries in Pakistan. Twelve manufacturing companies were

selected

For the study which had involved in the process of merger during 2000-2009. Three years data
before

Merger and three years data after merger were used to test the significance of study. Paired
sample t-

Test was applied on accounting ratios. The study revealed that overall financial performance of

Acquiring manufacturing corporations were insignificantly improved after the merger. The
liquidity,

Profitability and capital position of the selected companies were insignificantly improved and the

Efficiency deteriorated after the merger. Finally, it was concluded that merger impacted on
different

Industries of manufacturing sector differently.

Lucia Jenkins (2009), Understanding the use of various financial ratios and techniques can

Help in gaining a more complete picture of a company’s financial outlook. He thinks the

Most important thing is fixed cost and variable cost. Fixed costs are those costs that are

Always present, regardless of how much or how little is sold. Some examples of fixed costs

Include rent, insurance and salaries. Variable costs are the costs that increase or decrease in

Ratios proportion to sales.

James Clausen (2009), in this article he barfly express about the liquidity ratio. He

Pronounce that it is analysis of the financial statements is used to measure company

Performance. It also analyses of the income statement and balance sheet. Investors and

Lending institutions will often use ratio analyses of the financial statements to determine a

Company profitability and liquidity. If the ratios indicate poor performance, investors may
Be reluctant to invest. Therefore, the current ratio or working capital ratio, measures current

Assets against current liabilities. The current ratio measures the company ability to pay back

Its short-term debt obligations with its current assets. He thinks a higher ratio indicates the

Company is better equipped to pay off short-term debt with current assets. Wherefore, the

Acid test ratio or quick ratio, measures quick assets against current liabilities. Quick assets

Are considered assets that can be quickly converted into cash.

Susan Ward (2008), emphasis that financial analysis using ratios between key values help
investors

Cope with the massive amount of numbers in company financial statements. For example, they
can

Compute the percentage of net profit a company is generating on the funds it has deployed. All
other

Things remaining the same, a company that earns a higher percentage of profit compared to
other

Companies is a better investment option.

James Hutchinson (2010), He realizes that about the long term debt to equity ratio of a

Business. The ratio of these numbers tells a lot about the business. It is calculated by taking

The debt owed by the company and divided by the owner equity, also known as capital. The

Debt number may include all liabilities, or just long term debt.

2.2 NATIONAL REVIEWS

Sur (2001) studied in his paper about the Liquidity Management: An overview of four companies
in Indian

Power Sector using the data for the period of 1987-1988 to 1996-1997. He had applied
accounting techniques
Of comparative analysis regarding the liquidity management in Electricity generation and
distribution

Industry. He revealed that the overall liquidity should be managed in such a way that not only it
should not

Hamper profitability but also its contribution towards increase in profitability should be positive.

Vijayakumar A. (1996) has studied about ‘Assessment of Corporate Liquidity – a discriminate

analysis

Approach’ in this research he has revealed that the growth rate of sales, leverage, current ratio,
operating

Expenses to sales and vertical integration was the important variables which determine the
profitability of

Companies in the sugar industry. Also he has studied the short- term liquidity position in twenty-
eight

Selected sugar factories in co-operative and private sectors. In research a discriminate analysis
has been used

By the researcher, to undertaken to distinguish the good risk companies from poor risk
companies based on

Current and liquidity ratios.

Pai, Vadivel & Kamala (1995) have studied about the diversified companies and financial
performance.

Main purpose of research was found out the relationship between diversified firms and their
financial

Performance. For the purpose of research, they have selected seven large firms and analysed
those firm which

Having different products-both related and otherwise-in their portfolio and operating in diverse
industries. In

This study, a set of performance measures ratios was employed to determine the level of
financial
Performance and variation in performance from one firm to another has been observed and
statistically

Established. They revealed that the diversified firms studied have been healthy financial
performance.

Mistry Dharmendra S. (2012) Understood a study to analyze the effect of various determinants
on the

Profitability of the selected companies. It concluded that debt equity ratio, inventory ratio, total
assets were

Important determinants which effect positive or negative effect on the profitability. It suggerted
to improve

Solvency as to reduce fixed financial burden on the company profit & give the benefit of trading
on equity to

The shareholders

Hotwani Rakhi (2013) The author examines the profitability position and growth of company in
light of sales

And profitability of Tata Motors for past ten years. Data is analyzed through rations, standard
deviations and

Coefficient of variance. The study reveals that there not exists a strong relationship between
sales &

Profitability of company.

Sharma Nishi (2011) Studied the financial performance of passenger and commercial vehicle
segment of the

Automobile industry in the terms of four financial parameters namely liquidity, profitability,
leverage and

Managerial efficiency analysis for the period of decade from 2001-02 to 2010-11. The study
concludes that

Profitability and managerial efficiency of Tata motors as well as Mahindra & Mahindra ltd are
satisfactory
But their liquidity position is not satisfactory. The liquidity position of commercial vehicle is
much better

Than passenger vehicle segment.

Kaur Harpreet (2016) The author tries to examine the qualities & quantities performer of maruti
Suzuki co. &

How had both impact on its market share in India, For this study secondary data has been
collected from

Annual reports, journals, report automobile sites. Result shows that MSL has been successfully
leading

Automobile sector in India for last few years.

Manoj Kumara N V (2015) The author had made attempt to determine the financial performance
of selected

Automobile companies in India by using financial performance parameters, It can be concluded

that the

Anticipated inputs to this study to the firm is to assist strategic thinkers pay attention to the
appropriate

Actions that apply latent and strong affect on their automobile performance. This research
facilitates a

Comprehensive model for examining the financial performance of automobile performance and
the major

Findings of this research will give a important parameters and helps to fill a similar gaps in the
literature.

Further research, need to focus on important parameters like Economic Value added and Refined
Economic

Value Added to Reveal & evaluate the overall organizational development performance.

Vidya (2015) The Author had discussed that the standard current ratio of automobile industry is
matched with

Tractor and the four sectors like gears, engine parts, lamps and ancillaries others are matched
with standard
Norms. It is inferred that other sectors have to improve the repaying capacity to strengthen the
financial

Aspects. The standard liquidity ratio is matched with tractor in the automobile sector and all the
sectors are

Standard in the auto ancillary. In order to meet the financial obligation, the lcv/hcv, motor cycle,
scooters

Have to make arrangement to meet the standards

Prakash and Natarajan (2014) conducted a study on financial performance of Salem Steel
Authority of India

Ltd. The analysis revealed that there is a fluxion in the gross profit and net profit during the
study period. The

Study helps to identify the financial position of the company. Optimum utilization of working
capital can be

Planned so as to result in sound financial position of the company.