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Equit-I Club Primer 2017
Equit-I Club Primer 2017
STATEMENT
ANALYSIS
AND
FINANCIAL
Finance Primer RATIOS
PGP Participants 2017-19
Prepared by finance club in association with placement preparation committee
FINANCIA
Brief Overview
L
of Equit-i, the
STATEMENT
Finance Club of
ANALYSIS
IIM Indore
AND
FINANCIAL
Prepared by finance club in association with placement preparation committee
RATIOS
About Equit-i Finance Club, IIM Indore
Equit-I: The Finance Club, IIM Indore, is a PGP participants' initiative to create a finance oriented
learning environment within the campus that eventually helps the students' community brace up
for the industry rigor.
The club provides opportunities for hands on learning through workshops and mentorship
programs. Also, it facilitates a fun learning experience in the form of events and competitions
organized all year round.
Equit-I assists participants in exploring financial career opportunities by organizing interactive sessions
on various finance related topics and setting up career panels specifically for finance roles.
The club assists participants in preparing for their summer and final placements by publishing special
articles and newsletters. Also, Equit-I members conduct lectures on fundamentals of finance for the
PGP1 participants once they are inducted to the course.
Additionally, the club helps companies increase their brand equity and visibility on campus through
various initiatives like talks, newsletters and different on-campus competitions.
Prepared by finance club in association with placement preparation committee
INTRODUCTION
TO BASICS OF
FINANCIAL
STATEMENTS
Prepared by finance club in association with placement preparation committee Assets = Liabilities + OwnersEquity
FINANCIAL
STATEMENT
ANALYSIS
AND
FINANCIAL
RATIOS
Prepared by finance club in association with placement preparation committee
Income Statement Balance Sheet Ratios
COGS
FINANCIA
L
Linkages to
Balance
Sheet Main
STATEMENT
Operating
Revenue
Components
of the Income
Statement ANALYSIS
AND
EBITDA FINANCIAL
Operating
Profit
Operating Revenue
Income from companys everyday business
operations
In Financials , comprises of :
(a) Revenue from Operations (-) Excise Duty (if any)
Operating Revenue for HUL
= 29,557.90 - 1638.77 = 28,019.13
Operating Profit
(b)
(c) Profit earned from Normal Business Operations
Operating Profit = Profit Before Exceptional Items
and Taxes
(-) Other income,
(+) Depreciation and Finance Cost
(Interest Expense)
Operating Profit of HUL
= 4,799.71 + (b) + (c) - (a) = 4,475.25
EBITDA
EBITDA is Earnings Before Interest, Tax,
Depreciation and Amortisation
In Financials,
EBITDA = Profit before exceptional items
and tax
(a)
(b) (+) Depreciation/Amortisation
(+) Finance Cost
Equity
Common stock of company, preferred stock.
In Financials :- Share Capital
Equity of HUL :- 216.27
Liabilities
Three conditions for defining liability:-
A. Obligation of the Firm
B. Obligation arises from past events
C. Results in transfer of economic
benefits
Type of Liabilities :-
A. Short-Term/Current Liabilities :- Liability
which is payable in Less than 1 year
B. Long-Term/Non-Current Liabilities :- Any
liability which is not short term
Long Term Liabilities of HUL:-
278.82 + 838.69 = 1,117.51
Short Term Liabilities of HUL :-
6,793.89 + 862.94 + 1,957.01 = 9,613.84
Prepared by finance club in association with placement preparation committee
Income Statement Balance Sheet Ratios
Contingent Liability
Three conditions for defining contingent
liability:-
A. May or may not be obligation of the firm.
B. Existence can be only confirmed by occurrence
or non-occurrence of future event
C. Reasonable estimate of liability is not known.
(b) In Financials :- Below the Balance Sheet
Contingent Liability of HUL :- 991.20 (As per
Note 24,25)
Working Capital :-
It is Current Assets (-) Current Liabilities
Working Capital of HUL = (a) - (b) =
Sum of Current Assets = 8,852.47
(a) (-) Sum of Current Liabilities = (8,603.84)
Working Capital = 248.63
(a)
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Income Statement Balance Sheet Ratios
Fixed Asset
Three Types of Fixed assets :
(a) Tangible :- Asset which has a physical form.
(b) Intangible :- Assets that are not physical in
nature eg :- goodwill, patents etc.
(c) Capital WIP/Intangible Assets under Development-
Assets which are under construction.
In Financials :- Tangible Assets + Intangible Assets +
Capital WIP + Intangibles under development.
Fixed Assets of HUL :-
(2,397.94 + 24.12 + 312.04 + 7.7 = 2,741.80)
Deferred Tax Asset/Liability
Difference between taxes on profit as per books of
accounts (Accounting Profit) and as per tax books.
In Financials :- Deferred Tax Asset/Liability Deferred Tax
Asset of HUL :- 161.73
Current Assets
Assets which are due to be received within a
period of 1 year.
Eg :- Short Term loans and advances, cash and
bank balance, trade receivables, debtors,
inventories etc.
In Financials :- Current Assets
Current Assets of HUL :- 8,852.47
Non Current Assets
Assets which do not fall under current
assets
Eg :- Long Term loans and advances.
In financials :- Non Current Assets + Long
Term
Non Current Assets :- 606.19
LIQUIDITY RATIO:-
Current Ratio:
Best measure of liquidity
Current Ratio :- Current Assets / Current Liabilities
Current Assets of HUL :- 8,852.47
Current Liabilities of HUL :- 8,603.84
Current Ratio of HUL :- 8852.47/8603.83 = 1.03
Quick Ratio/Acid Test Ratio:
Assets which do not fall under current assets
It is a more stricter version of the ratio as it takes
only the assets which are readily convertible in
cash i.e. inventory and prepaid expenses are
excluded.
Quick Assets of HUL :- 8,852.47 - 2,747.53
= 6,104.94
Quick liabilities of HUL :- 8,603.84
Quick Ratio :- 0.71
Prepared by finance club in association with placement preparation committee
Income Statement Balance Sheet Ratios
PROFITABILITY RATIOS:-
Operating Profit Ratio:
Formula = Operating Profit/Sales
Operating Profit of HUL = 4,799.71+ (b) +
(c) - (a) = 4,475.25
Sales = Revenue from Operations Net =
28,019.13
Operating Profit Margin =
4,475.25/28,019.13 * 100 = 15.97%
Net Profit Ratio:
Formula = Net Profit / Sales
In Financials, Net Profit = Profit for the
year.
Net Profit of HUL = 3,867.49
Sales of HUL = 28,019.13
Net Profit Margin = 3,867.49 / 28,019.13 *
100 = 13.80 %
TURNOVER/PERFORMANCE RATIOS:-
Stock Turnover Ratio:
Explains how many times a
companys inventory is sold and
replaced over a period.
Formula = COGS / Average Inventory
Average Inventory =( Opening Stock
+ Closing stock) / 2
COGS as per HUL = 14,343.62
Average Inventory (Finished Goods) =
(1,344.83 + 1,280.66)/2 = 1,312.74
Stock Turnover ratio of HUL =
14,343.62 / 1,312.74 = 10.92 times
TURNOVER/PERFORMANCE RATIOS:-
Debtor Turnover Ratio:
Shows effectiveness in extending credit as well as
collecting debts
Formula = Net Credit Sales/ Average Debtors
(Also called Trade Receivable)
Average Debtors =( Opening Debtors + Closing Debtors)
/2
Net Credit Sales of HUL (Since credit sales is not
available, we take complete sales) = 28,019.13
Average Debtors =(816.43 + 833.48)/2 = 824.95
Debtors turnover ratio = 28,019.13/ 824.95 = 33.96
Creditors Turnover Ratio:
Similar to Debtors turnover ratio
Used to measure the rate at which
company pays off its creditors
Formula = Purchases / Average Creditor
(Also called Trade Payables)
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Income Statement Balance Sheet Ratios
You are required to download the consolidated Financial Statements of ITC Limited for the
year ended 31 March 2016 and calculate all the ratios which have been mentioned in the
primer for the year 2016 and 2015.
Few pointers:-
1. Make the calculation in an excel sheet. Word document or pdf containing the
calculation will not be considered for evaluation.
2. In case you differ from the ratio formula used in the primer, kindly write down the
formula that you have used as a note below the calculations in the excel sheet
3. Do attach the copy of the financial statements used by you for calculation of ratios
4. Naming Convention for the excel sheet: - Full Name_PGP2017-19.xls
Send your answers to equiti@iimidr.ac.in with your name and contact no
Deadline :- June 26th,2017 (EOD)
Winners will be announced on the Equit-I Facebook page
Prepared by finance club in association with placement preparation committee
Prepared by finance club in association with placement preparation committee