FINANCIAL STATEMENT ANALYSIS ON PRIMETECH

ACCUMULATORS PRIVATE LTD.

Prof. Ashwini B R
Professor, Department of Management Studies,
PES University, Bangalore- 560085
Email: ashwinibr@pes.edu
Ms. M Keerthana
Student, BBA Program, PES University, Bangalore- 560085
Email: keerthanamagam@yahoo.in

Abstract:
Business is mainly concerned with financial activities and every company has its own
financial statements mostly used for decision making process. But the information as is
provided in the statements is not adequately helpful in drawing a conclusion and financial
decision making. It is necessary to predict, evaluate and compare firms earning ability. Thus,
we need an effective analysis and interpretation of financial statements. It is mainly
concerned in making better economic decisions to gain income in future. It is the process that
involves specific techniques for understanding risks and evaluating them, financial health and
performance of the organisation. Every business is done with a specific goals and objectives
and businesses have to periodically check how far they are able to meet the set goals and
objectives while there are various measures to check the progress towards the achievement of
goals of the firm.

Introduction:

The term “Financial analysis” includes both ‘analysis and interpretation’. The term analysis
means simplification of financial data by methodical classification given in the financial
statements. Interpretation means explaining the meaning and significance of the data. These
two are complimentary with each other. Analysis is useless without interpretation and
interpretation without analysis is difficult or impossible. The Analysis means establishing a
meaningful relationship between various items of the financial statements i.e., P&L
account/income statement and balance sheet. These are the financial records that are prepared
at the end of the year by the company. These are mainly the indicators of profitability and
financial soundness of the business concerns.
The success of an organization is portrayed through its financial position, represented by its
Financial Statements. Analysis of Financial Statements is the analytical tool normally used to
assess the performance of the company. While it is easy to calculate it partially explains the
appeal widely, their interpretation is problematic, especially when two or more ratios provide
conflicting signals. Interpretation of ratios is highly subjective and may differ with the level
of expertise involved. It can be used for analysing past performance, extrapolating future
prospect of a company and to compare with other companies operating in a similar industry
but one of their limitation is they need to be analysed along with non-financial data to present
more meaningful and effective assessment.

Financial ratio analysis is one of the techniques that can be used by business for evaluating
their progress towards achievement of goals and even the success rate of the achievement as
ratios provide relationship between two variables which help to analyse how one variable
have an impact on the other variable. Ratio analysis is a popular method used by various
stakeholders associated with the firm to evaluate the performance of the firm like creditors,
employees, government, investors etc to evaluate the financial health and
how far company is able to perform better compared to other firms in the industry.

Financial statements provide a clear summary of all financial information of the company
presented in a structured manner ratio analysis is one of the techniques of financial
management used by various stakeholders of the firm like creditors, employees, investors etc
for judging the financial health and soundness of the firm for investing in the company.
Ratios help in judging the operational and managerial efficiency and how fine firms are able
to use their assets in earning money and ratio analysis also help in identifying the weakness
of the firm and help the management to take out the weakness that is affecting the firm
performance of the firm.

Literature review:

1. Van Dinh, Doan;Guangming Gong (2019) Management and applied economics review,
Vol. 39, p38-48.Investors FSA to help the managers, investors and someone else understand
about reasonable economic information in financial statements. In this article the authors talk
about how a financial statement analysis can help the people such as managers and investors
to understand the company’s economic status and its financial ability. This is mainly done to
have a proper portfolio management that helps investors to get higher returns.
2. Ioannis, rigas, George, theodossiou, Nikolaos, rigas, christos, karelakis(2019) International
journal of business and economic science applied research, Vol. 12.Analysis and critical
investigation of the financial statements of food sector companies in Thessaly region
(Greece). In this article the authors mainly concentrate on food sectors of particular region
called Thessaly in Greece. Since Greece attracts a lot of tourist people the food sector has a
major impact on the revenue to the government. The authors concentrated on having a detail
analysis on the financial statements which also includes critical investigations in order to
understand the company’s profit so as to understand their contribution towards the
government inform of tax.

3.Fischer, mary (2019) Journal of accounting and finance, Vol. 19. Governmental financial statement
notes disclosures and analysis of Texas public two-year colleges’ reporting. The authors talk about the
local colleges and schools under government. They concentrate on studying about a public two-year
colleges’ in Texas. Here they have made analysis on the financial statements and FS notes disclosures
to understand the financial performance of the public colleges and understand their revenues in
comparison to private ones.

4. Honaker.kim, Thomas, paula.B (2019) CPA journal, Vol. 89. An analysis of the initial
financial statement impact of the tax cuts and jobs act. Here the authors mainly concentrate
on doing analysis of the impacts on initial financial statements due to the tax cuts and job act.
It mainly concentrates on FS impacts on tax cuts such as lower tax rate and tax assets. Having
lower tax rate has a direct impact the profits after tax in the p/l account of the financial
statements.

5. Laitinen, Erkki k (2018) International journal of management and enterprise development.

Vol 17, issue 1. Entry based financial statement analysis for small firms. Here the authors talk
about the basic or entry based financial statements for small firms. Opportunity to control in
the real time on how FSA are formed up from successive bookkeeping. Small firms are the
new source of economic to the country since it is small and basic organisation, they
concentrate on bookkeeping for understanding their finances. So, having the basic analysis of
financial statements can help the small firms to perform better.

6. Krueger, Thomas M (2018). Journal of accounting and finance. Vol 18, issue 5. Gonzalez
energy partners: A hypothetical teaching case study of FSA and firm valuation. Case studies
are the new trends which helps in analysing the firm’s financial capacity. It is possible
through having proper analysis of financial statements through case study. The authors
concentrate on
Gonzalez energy partners hypothetical teaching caste study of FSA and firm valuation. It
helps in understanding the company’s worth or financial status through this hypothetical case
study.

7. Eng, li li, tian, Xi, Robert Yu (2018) Review of pacific basin financial markets and
policies, Vol. 21. Financial statement analysis: evidence from Chinese firms. The authors
mainly talk about the fundamental analysis based on accounting numbers in Financial
statements. To prove this aspect the writers have taken few evidences such as financial
statements, their economic status, the firm’s value of few Chinese firms to support the study.

8. Ahmed, anwer, safdar, Irfan. (2018) Accounting and finance. Vol. 58. Dissecting stock
price momentum using financial statement analysis. Here the authors talk about the price
momentum that is happening in the company by using financial statement analysis. That is, it
mainly concentrates on explaining about how past price performance predicts future price
performance of the company. The authors use the financial statements to analyse the past
performance and the corrective measures to be taken to have a better future performance.

9. Mohanram, partha, saiy, vyas,dushyanthkumar (2018) Review of accounting studies, Vol.

23. Fundamental analysis of banks: the use of financial statement information to screen
winners from losers. It is the study of Efficiency of Financial Analysis approach to screen US
based stocks. The authors study on having the fundamental analysis of banks having the US
stocks with the use of their financial statement’s information. This helps in understanding the
stock price in the market and understanding whether the company has reasonable growth in
its economy so to differentiate between the winner i.e. the high returns company to losers i.e.
the companies which has very less returns and can cause loss to the investors or stock
holders.

Objectives:

 A study on financial statement analysis of the company.

 To assess the efficiency of the company.

 To asses short term as well as long term solvency position.

 To derive findings and suggestions to take better future decisions.

 Research methodology

This study evaluates the financial performance of Primetech accumulators pvt. Ltd. With the
help of most appropriate tool of financial analysis like ratio analysis. Suggestions are then
made to improve the financial performance of the firm.

 Sampling method:

Research design: Analytical

Research type: Empirical research and descriptive research

 Domain: finance

 Sampling size: 3 years (2016-2019)

 Sampling unit: financial statements (balance sheet and P&L accounts.)

Balance sheet: It is the financial position of the company as of the report date. Its
information is aggregated on the basis of assets, liabilities and equity.
P&L accounts: It is a report revelling the financial performance of an organisation for
an accounting period. It begins with sales and subtracts out all the expenses during the
period to arrive at net profit or poss. It is considered as an important financial
statement as it majorly describes the performance of the company.
 Method of Data collection: Secondary data ie, annual reports of Primetech
accumulators private limited.

 Instrument for data collection: Personal interaction with the manager of the
company and analysing balance sheet and income statements of the company.

 Data analysis tools: Ratio analysis.

Data analysis and interpretation:

CURRENT RATIO

YEAR CURRENT ASSETS CURRENT LIABILITIES CURRENT RATIO

2016-2017 2,43,16,922 2,98,97,667 0.81
2017-2018 3,42,49,338 3,64,93,506 0.94
2018-2019 5,80,17,923 5,40,10,922 1.07
 DATA FOR CURRENT RATIO

CURRENT RATIO
1.2
1
Ratios

0.8
0.6
0.4
0.2
0

2016-2017 2017-2018 2018-2019Scale:

X-axis: 1cm = 1year Y-axis: 1cm = 0.2
Years

current ratio Column2 Column1

GRAPHICAL REPRESENTATION OF CURRENT RATIO

INTERPRETATION:

The current ratio is been increased over the years. It is the desirable situation to be in. The
working capital of the year 2017 and 2018 was negative and it effects the current ratio. If the
ratio is above 1.0 then the company can pay off short term obligations easily. From the above
analysis in the year 2019 the current ratio was 1.10 with which the short-term obligations can
be met peacefully.

QUICK RATIO

YEAR LIQUID ASSETS QUICK LIABILITIES CURRENT RATIO

2016-2017 2,13,04,048 2,98,97,667 0.71
2017-2018 3,23,94,838 3,64,93,506 0.89
2018-2019 5,37,96,532 5,40,10,922 0.99
 5.2: DATA OF QUICK RATIO

quick ratio
1.2

0.8
Ratios

0.6

0.4
0.2
0
2016-2017 2017-2018 2018-2019 Scale:
X-axis: 1cm = 1year
Years quick ratio Y-axis: 1cm = 0.2

GRAPHICAL REPRESENTATION OF QUICK RATIO

INTERPRETATION:

If the quick ratio is above 1 that means the company has enough quick assets to pay for its
current liabilities. But according to the above analysis of three years the quick ratio is less
than 1 for all the three years i.e, 2017- 0.71, 2018- 0.89 and 2019 – 0.99. The quick ratio is
increased gradually through the years, in 2019 the company had enough cash and cash
equivalents to pay of the liabilities.

EQUITY MULTIPLIER RATIO

YEAR TOTAL ASSETS TOTAL EQUITY

SHAREHOLDERS MULTILPIER RATIO
EQUITY
2016-2017 5,30,04,137 1,63,59,365 3.24
2017-2018 6,37,35,511 2,14,69,816 2.97
2018-2019 9,14,86,142 3,04,62,462 3.00
DATA OF EQUITY MULTIPLIER RATIO
 EQUITY MULTILPIER RATIO
3.4
Ratios

3.2
3
2.8

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year Y-axis: 1cm = 0.05
EQUITY MULTILPIER RATIO

GRAPHICAL REPRESENTATION OF EQUITY MULTIPLIER RATIO

INTERPRETATON:

Investors look for the company with low equity multiplier because it indicates the company
is using more equity and less debt to finance the company. In the above analysis, in the year
2018 the ratio was less compared to the other two years. This means the financial risk of
increasing debt was least in 2018.

PROPRIETARY RATIO

YEAR SHAREHOLDERS CAPITAL EMPLOYED PROPRIETARY

FUND RATIO
2016-2017 1,63,59,365 1,67,11,514 0.978
2017-2018 2,14,69,816 2,19,09,155 0.979
2018-2019 3,04,62,462 3,09,65,881 0.983
DATA OF PROPRIETORY RATIO
 Ratios Proprietary ratio
0.985
0.98
0.975

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year
Proprietary ratioY-axis: 1cm = 0.001

GRAPHICAL REPRESENTATION OF PROPRIETARY RATIO

INTERPRETATION:

A high proprietary ratio indicates a strong financial position of the company and greater
security for creditors. In the year 2017 the company was highly depending on the debt for its
operations. Later it started increasing in 2018 and 2019. in 2019 it has the highest proprietary
ratio of 0.983 indicating a strong position in that year.

GROSS PROFIT RATIO

YEAR GROSS PROFIT NET SALES GROSS PROFIT

RATIO
2016-2017 7,64,57,324 9,95,60,645 76.79
2017-2018 14,75,56,115 18,08,17,477 81.60
2018-2019 18,41,99,105 22,75,65,039 80.94
DATA OF GROSS PROFIT RATIO
 Gross Profit ratio
82
80
Ratios

78
76
74

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year Y-axis: 1cm = 2
Series 1

GRAPHICAL REPRESENTATION OF GROSS PROFIT RATIO

INTERPRETATION:

The higher the gross margin the better. The company has reasonable gross profit to cover all
the expenses and provide for profit. In the year 2018 it has highest gross profit ratio of
81.60%.

NET PROFIT RATIO

YEAR NET PROFIT NET SALES NET RATIO*100

PROFIT RATIO

2016-2017 15,77,420 9,95,60,645 0.015 1.58%

2017-2018 51,10,450 18,08,17,477 0.028 2.82%
2018-2019 89,92,647 22,75,65,039 0.039 3.95%
DATA OF NET PROFIT RATIO
 NET PROFIT RATIO
0.05
0.04
Ratios

0.03
0.02
0.01
0

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year Y-axis: 1cm = 0.01
NET PROFIT RATIO

GRAPHICAL REPRESENTATION OF NET PROFIT RATIO

INTERPRETATION:

The above analysis shows that the company is having increase in net sales while compared to
2017 and 2018.It shows the efficiency of the company’s net profit. It has the highest
profitability in the year 2019.

RETURN ON INVESTMENT RATIO

YEAR PROFIT BEFORE CAPITAL RETUEN ON RATIO*100

INTEREST AND EMPLOYED INVESTMENT
TAX RATIO

2016-2017 24,18,123 1,67,11,514 0.14 14.46%

2017-2018 68,53,507 2,19,09,155 0.31 31.28%
2018-2019 1,27,42,796 3,09,65,881 0.41 41.15%
DATA OF RETURN ON INVESTMENT RATIO
 ROI RATIO
50.00%
40.00%
30.00%
ROI

20.00%
10.00%
0.00%

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year
ROI RATIOY-axis: 1cm = 10%

GRAPHICAL REPRESENTATION OF RETURN ON INVESTMENT RATIO

INTERPRETATION:

The return on investment is increasing through the years. It shows that the profitability
measure that evaluates the performance or potential return on investment. It has the highest
return in the year 2019 with the ratio of 41.15

RETURN ON SHAREHOLDER FUNDS RATIO

YEAR PROFIT SHAREHOLDER RETURN ON RATIO*100

AFTER TAX FUNDS SHARE HOLDER
FUNDS RATIO

2016-2017 15,77,420 1,63,59,365 0.096 9.64%

2017-2018 51,10,450 2,14,69,816 0.238 23.80%
2018-2019 89,92,647 3,04,62,462 0.295 29.52%
DATA ON RETURN ON SHAREHOLDERS FUND
 RETURN ON SHAREHOLDER FUNDS
40.00%

30.00%
ROS

20.00%

10.00%

0.00% 2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year
RETURN ON SHAREHOLDER FUNDSY-axis: 1cm = 5%

GRAPHICAL REPRESENTATION OF RETURN ON SHAREHOLDERS FUND RATIO

INTERPRETATION:

The higher the percentage, the more money is being returned to the investors. In the year
2019, the maximum returns happened. It increased gradually. It had a good financial health in
the year 2019.

PRICE/EARNING RATIO

YEAR MARKET PRICE OF EARNING PER SHARE PRICE/EARNING

A SHARE RATIO

2016-2017 70 45.07 1.55

2017-2018 78 146.01 0.53
2018-2019 85 256.93 0.33
DATA OF PRICE/EARNINGS RATIO
 Price/earnings ratio
2

1.5
Ratios

0.5

0
2016-2017 2017-2018 2018-2019 Scale:
Years X-axis: 1cm = 1year
Series 1 Y-axis: 1cm = 0.5

GRAPHICAL REPRESENATATION OF PRICE/EARNINGS RATIO

INTERPRETATION:

P/E ratio is a part of research process for selecting stocks because it analyses whether we are
paying a fair price. High ratio indicates positive future performance.

WORKING CAPITAL TURNOVER RATIO

YEAR NET REVENUE WORKING CAPITAL WORKING CAPITAL

FROM OPERATIONS TURNOVER RATIO

2016-2017 9,95,60,645 -55,80,745 -17.84

2017-2018 18,08,17,477 -22,44,168 -80.57
2018-2019 22,75,65,039 40,07,001 56.79
DATA OF WORKING CAPITAL TURNOVER RATIO
 WORKING CAPITAL TURNOVER RATIO
100

50
Ratios

0
2016-2017 2017-2018 2018-2019
-50

-100
Years Scale:
WORKING CAPITAL TURNOVER RATIO X-axis: 1cm = 1year Y-axis: 1cm = 20

GRAPHICAL REPRESENTATION OF WORKING CAPITAL TURNOVER RATIO

INTERPRETATION:

It shows how well the company is using its working capital to support a given number of
sales. In the year 2019 it has a ratio of 56.79 indicating efficient utilisation of short-term
assets and liabilities.

DEBT EQUITY RATIO

YEAR LONG TERM DEBT EQUITY DEBT EQUITY

RATIO

2016-2017 3,52,149 1,63,59,365 0.020

2017-2018 4,39,339 2,14,69,816 0.021
2018-2019 5,03,419 3,04,62,462 0.016
DATA OF DEBT EQUITY RATIO
 DEBT EQUITY RATIO
0.025
0.02
Ratios

0.015
0.01
0.005
0

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year Y-axis: 1cm = 0.005
DEBT EQUITY RATIO

GRAPHICAL REPRESENTATION DEBT EQUITY RATIO

INTERPRETATION:

Higher ratio indicates that more creditor financing is used than investor financing. More debt
usage was in the year 2017 according to the above analysis. In the year 2019 the debt risk is
reduced by suing shareholder investments.

DEBT RATIO

YEAR LONG TERM DEBT CAPITAL EMPLOYED DEBT RATIO

2016-2017 3,52,149 1,67,11,514 0.021

2017-2018 4,39,339 2,19,09,155 0.020
2018-2019 5,03,419 3,09,65,881 0.016
DATA OF DEBT RATIO
 DEBT
RATIO
0.025
0.02
Ratios

0.015
0.01
0.005
0

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year
DEBT EQUITY RATIOY-axis: 1cm = 0.005

GRAPHICAL REPRESENTATION DEBT RATIO

INTERPRETATION:

Ratio below 1 translates to the fact that a greater proportion of company’s assets is funded by
equity. From the above analysis it is clear that the ratio of debts was higher than total assts
and the company’s assets are financed by debts.

FIXED ASSET TURNOVER RATIO

YEAR NET REVENUE NET FIXED ASSETS FIXED ASSET

FROM OPERATION TURNOVER RATIO

2016-2017 9,95,60,645 2,83,35,036 3.51

2017-2018 18,08,17,477 2,90,46,836 3.47
2018-2019 22,75,65,039 3,29,64,800 6.90
DATA OF FIXED ASSEST TURNOVER RATIO
 fixed asset turnover ratio
8
6
Ratios

4
2
0

2016-2017 2017-2018 2018-2019

Years
Scale:
X-axis: 1cm = 1year Y-axis: 1cm = 1
fixed asset turnover ratio

GRAPHICAL REPRESENTATION OF FIXED ASSEST TURNOVER

INTERPRETATION:

A high ratio indicates that a company spent less money in fixed assets for each of sales
revenue. From the above analysis we can interpret that the company has invested less amount
on fixed assets.

Conclusion:

The company is getting stable with current assets along with years. At present it has enough
assets to pay off short term obligations. There is shortage of liquid assets and it doesn’t have
stable financial leverage as it doesn’t have very less ratio which means it is using less equity
and more debts. It can be inferred that the company is highly depending on debts for its
operation. The company has considerable increase in the return on investments which is a
positive sign to the company. It has positive returns of shareholders’ funds thus benefiting the
shareholder. The company is using the shareholder funds for operations than debts reducing
the debt financing risk.

The analysis of financial statements in Primetech accumulators pvt. Ltd. was to analyse
company’s health and stability providing an understanding of how the company conduct its
business. The financial statements is analysed by using the tool of annual report from 2016-
2017 to 2018-2019. This study helped me understanding efficient utilisation of investments,
loans and advances. The profitability of the company appears impressive and there is
increase in reserves and surplus.
Overall, financial position of the company appears to be more than satisfactory.

References:

 accountingformanagement.org
 Google
 Investopedia.com
 wallstreetmojo.com
 www.corporatefinanceinstitue.com