‘This waching materail 8 an exclusive property of Dr. Partosh Beau snd only meant for teaching purpose Tools and Techniques for Financial Analyses A. Instruments of Analysis 1 Percentage 2 Ratios expressed in proportion and times 3 Data Envelope Analysis 4 Multivariate Analysis B. Types of Financial and Ratio Analyses 1 Vertical Analysis and Horizontal (Trend) Analysis 2 Financial Ratios and Non Financial Ratios 3 Balance Sheet Ratios 4 Profit & Loss Ratios § Cash Flow Ratios 6 Hybrid Ratios (When two of the variables are not from the same source) 7 Variance Analysis C. Tools and Techniques of Analysis 4 Intra-firm Comparison 2 inter-divisional Comparison 3 Inter-regional comparison 4 Comparison with Industry Best or Average (with or without outliers) 5 Inter-period Analysis (Base Year and Year on Year), Trend Analysis, Time Series Analysis and Horizontal Analysis 6 Distress Analysis D. Common Size Analysis 1 Intra-firm Comparison 2 Inter-divisional Comparison E. Groups of Ratios for Relational Analysis of Financial Variables 4 Long Term Strength and Stability A. Capita! Structure and Long Term Financing 8. Leverage and Coverage 2 Short Term Strength and Stability A. Short Term Liquidity and Working Capital Management 8. Working Capital Management Efficiency 3 Value Generation Ability A, Profitability in relation to Turnover B, Earning Ability in relation to Investments 4 Cash Flow - Function-wise Cash Generation and Deployment 5 Market Evaluation Analysis‘Tseng materallisna exclu property of Dr, Paritosh ase and only avant for feching purpose Trinity Electro Products Ltd. Balance Sheet Rs.icr, As at 31.3.2014 Asat313.2016 § As at34.9.2018 Net Worth : Equity Shares. 50.00 ‘ 45,00 i 40.00 Reserves & Surplus 227.20 277.20 | 141.85 186.85 | 70.00 110.00 Non Current & Current Liabilities : Debentures 189.00 5) 160.00 Term Loans from Fis 128.00 | 96.00 4 CIC & Export PIC (Current) 203.90 517.90 {465.00 421.00 = 403.00 Long Term Unsecured Loan 30.00, 547.90 jf 45.00 466.00: 20.00 433.00 85.10) Teens 545.00 — Non Current Assets : : Fixed Assets if A Gross Block 407.15 380,00 Cumulative Depreciation 207.00 200.16 j, 186.00 195.00 Capital Work-in- Progress 5.00 © : Investments 36.00 |, 6.00 Current Assets a Inventory } Raw Material 210.00 2 166.00 Finished Goods - Mnfgd. 22.00 232.00 = 31.85 196.85 185.00 ‘Sundry Debtors : Due for more than six months 12,00 | 17.00 il Due for less than six months _ 280.00 262,00 (273.00 290.00 4 240.00 Loans & Advances 130.30 f 36,00 5 30.00 Cash & Bank Balances 1.20 5 1.50 * 500 625.50 EB $23.35 * 460.00 Less Current Liabilities , p Sundry Creditors 8 A Trade Payables 138.00 {104.65 5 Others 48.20 183.20 472.304 7.00 114.68 414.70, 448.00 342.00 t i 525-10} 62.05 345.00 Class Notes of Dr. Paritosh Basu Strictly for Students of NMIMS.Ths engl can etry nf Pas Sse of tei pane ‘Trinity Electro Products Lt Profit & Loss Statement FIYE 31 Turnover, Sales Manufactured Goods 4,015.00 90.00 810.00 Expenses Cost of Materials Consumed 625,00 542.00 515.00 ‘Manufacturing Expenses. 25.00 740.00 _ 78.00 620.00 60.00 © $75.00 ‘Administration Expenses 26.00 22.00 18.00 Markoting Expenses 38.00 22.00 Distribution Expenses 3.00 2.00 7.90 Operating Profit hofore Interost & Depreciation 207.00 193.00 Interest Fixed Loans 27.00 - Cash Credit & Export Packing Credit 27.00 31.00 Profit before Depreciation 762.00 Depreciation 20.00 Net Operating Profit Other Income Income from Investment 6.00 2.00 41.50 Profit before Tax 156.00 133.00 142.50 Incomo Tax 36.00, 32.00 40.00, Profit after Tax 120.00 704.00 102.50 ‘Appropriation Dividend (including Tax) Equity Share 29.45 28.32 ‘Transfer to General Reserve 74.85, 74.18 10.00" 702.50 Other Information 4, Tem Loan installment payable as on the three year ends are are payable on June 30 every year. 2. Manufacturing Expenses include Lease Rental of Rs. 5.00 Crs. for each year. 3. Dividend figures are inclusive of 10% tax payable on Dividend. 44. Market value of equity shares as on the three dates of year end are Rs. 50, 45 and 40 respectively 5. Face value of Equity shares is Rs. 10. 6. Expected average retum on equity shares is 20%. 7. Term Loan Installments payable in next year Rs. 20.00, 15.00 and 10.00 Crs. Respectively. 8. The same Jeage rental of Rs. 5.00 Crs have been paid in all the years and included in Ming. Expenses. 9, Value of purchased materials, utilities and services consumed for 3 years are Rs. 699.3, 614.7 and 532. 10, Total variable costs are Rs. 683.76, 601.04 and 520.96 Crs. for the three years 11. Estimated market value of all the fixed assets as on the year ends are Rs. 1150 , 860 and 800 Crs. 12, 30% Is to bo considered as the applicable Rate of Income Tax. 13. Both outputs of the company are subject to 16% Excise Duty 114, Average Salas Tax can be considered @ 4% for bath inputs and outputs. 415, Fixed Labour costs included in manufacturing expenses are Rs. 61.00, 47,00 and 44.00 Crs. 46. Ail figures are imaginary and have not been taken from any published annual report.FINANCIAL RATIO ANALYSIS ‘ong Term Strength & Stability Liabilities = All Loans + Sundry Creditors Name of Ratio Format 2016-16 | 2014-15 Debt-Equity Long Term Debts, 4241] 1.6121 [Capital Greaing Ratio [Net Worth Net Worth = Equity Shares + Reserves & Surplus (Also known as Proprietors’ Equity) Total Debt Equity Raito {Total Debt / Total Equity 197/260 [Total Debt to |Long Term Debt + Short Term Debt 066s} 074-1 Total Assets [Total Assets ote : [Total Assets = WDV of Fixed Assets + Total Assets may Capital Work in Progress + Advance for include Brand Fixed Assets + NCA + Investments Value & Goodwill INCA = Net Current Assets = Gross Current Assets - Current Liabilities [Capital Assets to Capital Assets 0.95:1} 0.68: Long Term Debts Long Term Debts (Fixed Asset Coverage) [Capital Assets = Written Down Value of Fixed Assets + Capital WIP + Advance Account Capital Expenditure ICapital Assets to [Capital Assets. 14834] 4.40:1 Net Worth Net Worth investments to Investments in Securities, 008: 4] 0.49:1 Net Worth Net Worth Q Ratio Market Value of Eg, Shares + Liabilities Osi} 9.55] Estimated Replacement Cost of Assets times} times| Note : For internal MIS purposes all MIS should be calculated after determining “norghied average of montvend balances of assets and fables. FS Analysis for llems lke Captal Employed. calsulaions should be done considering average of epening and closing balances 068 995 008 os: 2a ho onsFINANCIAL RATIO ANALYSIS; lLong Term Strenath & Stability Leverage & Coverage Ratios Name of Ratio Formula Weis i6 | 2015 JOperating Leverage Percent Change in EBIT Over Last Year [Percent Charge in Turnover Over Last Year BIT = Profit before Interest & Tax but after Depreciation Financial Leverage [Per Over Last Year Percent Charge in EBIT Over Last Year [Combined Leverage ent Change in Profit Over Last Year [Percent Charge in Turnover Over Last Year IDebt Service IPAT# Interest + Depreciation + NCE ICoverage [Term Loan instaliment + Interest on Loans (Times) JPAT = Profit before Tax - Tax INCE = Non-cash Expenses Provisions for write-off, etc, + Deferred Revenue Expenses interest Coverage IPAT+ Interest + Depreciation + NCE (Times) Interest Costs on alf Loans {Total Service PAT + interest + Dopn, + NCE'+ Lease Rent Coverage IT. L. installment + Interest + Lease Rent (Times) DuPont Analysis 1.07] 1.45} 1.23] 2.63| 3.53) 2.84] 0.79] 0.86 0.88} 2.87| 3.28| Noto : For internal MIS purposes all MIS should be calculated after determining Employed, caiculaions should be done considering average of opening and closing balances ‘weighed average of month-end balances of assels and labilies, FS Analysis for items Bka Capital 263 263 359 326 2aking Capital Formula Taste rae] | curtént Ratio cA 4.68] 58 | tee val” co ent Liabilities (GCL) (with S. T. Loan} “[biquid Assets = GCA ~Inventory - _{ Debtors more than six months - from Debtros = CF t [CF from Debtors Coans to Employees (Assuming 0) 200 ng Credit + Oth rent Assets oaris = Commercial Paper > 4 523.35 t 141.65 |} 472.30| 411.70} r 86.38) 130.84) [ 315.93] 280.86} 203.50) “165,00 houid be calculated after determining Enployed, cafe t month-end balances of assets and Wablitias. FSs Anal jons should be dane consi yas for tame Te Capa — ering average of opening and Gosing balances TtFINANCIAL RATIO. ANALYSIS. Short Tert king Capital Mana Name of Ratio (Times) IGross Working Capital Turnover {Gross Turnover ross Current Assets ~~ Terese Turnover = Sales Reatisations ~ |e Excise Duty, ifnot included _}* Sales Tax Net Working Capital |Gross Turnover ‘Tumover (Times) __ |Net Working Cap, (Net Current Assets) ___|Stosk of FG X Total Days in. Period ~ ~ {Gost of Prodn. of Goods Sold cons-of RM, During the Perlod 3s) ___ [Stock of RM at Period End |Sundry Debtors x Total Days iquid Current Assets ments perday | and charges included in Creditors tors winPetiod falue + Levies included in Debts (Gioss Purchase Cost= Purchase value af nef landed cost of materials ¥ Levies ‘os yse a | ws os t 166] bo 165.40 “fi wehbe Bal os20 | saee alee He Not : For internal iS purposes all ifi8 should be calculated after determin ‘ieighted average of mornhvend belances of assets and labilies. FSs Analy replayed, dalculsions snould be done considering average of opening aad closing balancss Far items like CaitFINANCIAL RATIO ANALYSIS os esha moun an cnc pepe Be Pia How andy vt cain pe Value Generation Abili “cofitabilty in Relation to Turnover [Name of Ratio _ Formuta 2076-16 | 2014-18 Gross Operating JGross Operating Margin 23.45%) 23.26%] zeasn 25.26 Margin [Operating Turnover (Sales) Gross Operating Margin = Operating Turnover - Direct Operating Expenses [Contribution Operating Turnover - Variable Costs 32.63%| 32.47%] azean seers or PV Ratio Operating Turnover [Value Addition Value Addition 31.10%] 30.93%] atia% so0se Assuming lOperating Turnover Value Addition = Rs.315.7 & 275.3 Crs, [Value Addition = Operating Turnover ~ Purchased Materials - Components - - Utilities - Services |Net Operating Profit |Gross Op. Marain - General Expenses 14.78%) 14.72% saree 142% [Operating Turnover Break-even Point —_| Fixed Costs X Sales 54.72%) 54.67%! —osu72. ose (% of Turnover) [Contribution Margin of Safety {% of Sales beyond Break-even Point 45.28%] 45.33% (h of Turnover) Profit before Tax [Profit before Tax 18.13%] 14.72%] ta794 oa r06 Total Turnover [Total Turnover = Sales + Other Income Operating Ratio |Operating Expenses (Total or Each) JOperating Turnover Administration Expenses 2.46%] 2.47%] 2am Bare Marketing Expenses 3.45%| 4.27% 345% 20 [Note : For imernat tis purposos all iS should be calculatod after determining \woighted average of month-end balances of assets and Fabliios, FSs Anaiya for items ke Capita Employed, calulaions should be dona considering average af opening ard cising balances,FINANCIAL RATIO ANALYSIS *'*=hrmaenn! wa aclameprnanrafDe Pani Bastard le mei forte pon Value Generation Abitity Return in Relation to Investments (Excluding Extra Ordinary Income) Name of Ratio Formula 2018-16] 2014-16) Return on [Profit After Tax (PAT) 51.72%] 68.05% s17% enon Net Worth (%) [Net Worth. Return on PAT+ Interest on Long Term Loansx(t-t) | 26,44%| 34.99%} 25x ssom Investment (%) __|Net Worth + Long Torm Loans (Post Tax) Return on PAT+ (intt. on L.T. and S.T. Loans)x(i-t) | 21.83%) 28.89%|21 05, 232% Cap. Employed (%) [Net Worth + L. T. & 8. T. Loans (Post- Tax) Return on /PBT+ Intt. on L. T. and S. T. Loans 29.09%] 31.27%] 201% 319% Cap. Employed (%) |Net Worth + L. T. & S. T. Loans (Pre- Tax) Return on PAT- Earnings from Investment (Tax Adi.) | 48.85%] 54.13%| 4025. stay Net F. Assets (%) |Net Fixed Assets Return on |PAT+ Interest on Short Term Loansx(1-t) | 30.48%] 31.82% 205% 10% Working Capital (%)|Net Working Capital |(Post-Tax) Earning per Profit After Tax 24.00) 22.44) asm oscar Equity Share (Rs.) |No. of Equity Shares Price-Earning —_|Market Price of Equity Share 2.08) 2.01 (Times) Earning per Equity Share Economic Value —_|{Pre-tax ROCE (%) - WAC (%)} 10,43%| 12.27% [Addition (%) JOr NOPAT - Post Tax Cost of Capital Economic Value __|{Pre-tax ROGE (%) - ACC (%)} X 86.08] 80.13] |Addition (Rs. Cr.} | Total Capital Employed Market Yield Dividend per Equity Share + Change 26.51%] 28,69%| 22% 287% jin Market Price of Equity Share ial Market Price |Sustainable Grwoth|Retention Ratio X Return on Equity Rate dacsmng covstninoeor (1 - Div. Payout Ratio) x ROE % [Dupont Analysis [Note : For internat Mis purposes all MIS should be calculated after determining weighed average of montt-end balances of assets and iabliles FSs Analysis for tems like Capital Employed, calculaions should be done considering average of opening and lesing balances,‘ais teaching muta an eselasve proper af Dr. Palos Bas and oa fortune FINANCIAL RATIO ANALYSIS. Function-wise Cash Generation Ability and Deployment ns Flow Ratios Name of Ratio Formula 2015-16 | 2014-15} Cash Flow from Ops to Net |Gash Flow from Operatons 13.90% Net Sales (%) Net Operating Sales Cash Flow from Ops to Tota! |Cash Flow from Operatons 17.10% Assets (%) Total Assets Cash Flow from Ops to Cash Flow from Operatons 92.10%| |Current Liabilities(%) Current Liabilities Free Cash Flow to Cash Flow/CFO - Capital Expenditure 29.02% from Operations Cash flow from Operations Cash Flow from Financing —_|Cash Flow from Financing Activities 0.53%] [Activities to Cash Flow from |Cash flow from Operations lOperatons Cash Flow Adequacy Ratio |Cash Flow from Operations 7.055 6.82 Maturity value of Loans in one year Cash Flow Reinvestment ICEQ - (Dividend + Interest) 0.34) -0.31 Ratio (Times) Cash Flow from Investment Activity Physical Assets Reinvement |COF for Fi 5.21 1.46 Ratio Depreciation for the yearisang mrt renee Pais Rane met fr kan pp [Market Evaluation Analysis Analysis in relation to movement of Share Price in Capital Market Name of Ratio Formula 2075-16] 2014-16 Price to Book Value (Times) PE Ratio (Times) Market Rate of Return (%) lPvice Approciation + Dlv.)/ Purehee Price Dividend Yietd (%) Market Price Earnings Yield (%) PO -P1} +04 Market Price Book Value per Share Market Price per share Fair Value per share Earning per share IMC of current period end - MC of previ od end IMC of previous period end PO Dividend earned per sh: Purchase Price per share 0.99) 24.00] W404 25.44 14.00 Note: Market price is generally based on PE multiple of estimated EPS of next year, 1.08] 5546 «1.52022 osors7e 22.44| 12.60) 1.210 14.72 125NCIAL_ RATIO. ANALYSIS. Z Score emt nieve pa af a Pin ean er ins pr Tool to gauge and monitor relative financial health and likely cases of bankruptey Wame of Ratio Formula (2075-16| 2074-15] Z Score of a Company Liquidity distress Leverage Ability to extract surplus from capital Dectine of Market value in insolvency Ability to stretch and swat assets. Notes iz Score = 1.28 + 1,48 + 3.9C 40.6D + 1.08 Working Capital / Total Assets 1B = Retained Earnings / Total Assets Ic = Earnings before Intt. and Tax/ Total Assets| ID = Market Value of Equity / Total Liabilities E= Sales / Total Assets 1. Z Score below 1.8 indicates that the company is heading for bankruptcy 2. Z Score above 3.0 are unlikely cases af bankruptcy. 3. Companies with score betwoon 3.0 to 1.8 aro to be strictly monitored. 4. Not 2 very good too! to apply for new-born companies which are in process for stabilising operations. 53, Shortcoming of 2 score Is that it does not take Into consideration cashtiow, 6. Ono-off exceptional transactions are to be adjusted in incomes and expenses to get the right score. 0.48| 0.23] 0.23| 0.36 1.04Trinity Electro Products (ile muteraits ay exclusve pmpens of Dr. Parts Bas and only meant fr tenecing purpose Weighted Average Cost of Capital Employed 2015-16 2014-15 Total Capital Employed Net Worth Equity Share Capital 50.00 45.00 Reserve & Surplus 227.20 141.85 186.85 277.20 Long Term Loans Secured 314.00 256.00 Unsecured 30.00 45.00 301.00 344.00 Short Term Loans 165.00 203.30 Total 825.10 Cost of Capital Net Worth (Dividend & imputed Cost) Equity Shares (Pre-Tax Dividend) 41.64 Reserves & Surplus (/mputed Pre-tax Cost 20%) 49.50 28.37 Total cost of Owners Capital 45.44 70.64 Loan Funds (interest) Long Term Loans Short Term Loans 38.00 Total cost of Loan 21.00 59.00 Total Cost of Captiat 124.04 153.94 Weighted Avg. Cost of Capital before Tax 19.00% 18.66% [Note : For internat tis purposes all M/S should be calculated after determining weighted average of month-end balances of assets and llabilties. FSs Analysis for items lke Capital Employed, calculaions should be done considering average of opening and closing balances.