A Project Report

On
“Financial Statement Analysis of ‘Asian paint ltd.”

Submitted to

Dr. Riddhi Agrawal

S.K. College of Business Management

Hemchndracharya North Gujarat University

In Partial fulfillment of the Requirement for the Subject of

Management Accountancy in Bachelor of Commerce

Submitted BY:
1) Ekta Patel (55)
2) Aditi Patel (52)
3) Drashti Raval (89)

B.COM SEM – 5 YEAR : 2019-20

 PREFACE
Management means an art of getting the things done through others. Today we find
management in each and every field. It is a developing field. There are frequent changes in it’s
principles due to increasing complexities that we find around the financial area in management
field. Today finance function has played a significant role in field of management.

True learning happens out of experience and observation. And for more improvement, new
tools and techniques have been developed to meet the needs of modern business which works
in complex environment.

A being a B.COM students got a great opportunity to improve my practical knowledge in the
field of financing, having only theoretical knowledge in immaterial without practical knowledge.

There is vast difference between the paper plan and implementation of the plan. So practical
knowledge proves that experience is the best teacher and as a part of it I have understood and
analyzed the information about the ASIAN PAINTS LTD.
 ACKNOWLEDGEMENT

Through this acknowledgement, I express my sincere gratitude towards all those people who
helped me in preparing this project report, which has been a great learning experience.

We are extremely thankful and pay our gratitude to our faculty DR. RIDDHI AGRAWAL, for her
outstanding teaching, her valuable guidance and her support completing this project. A good
idea needs nurturing to grow to full potential and that nurturing was done by her in the form of
her suggestion, value addition and constructive criticism during the entire project besides her
schedule and workload.

At last I would also like to thank my friends for their help and suggestion.

THANK YOU
 EXECUTIVE SUMMERY
The project assigned to us was to study the financial analysis of any institute. Company or
organization in the country. We decided to choose one of the India’s best companies in a sector
that rapidly growth over the last few years is one an Asian paints ltd.

Ratio is one of the technical financial analysis where ratio are used as a yardstick of evaluating
the financial condition and performance of a company. Later, we are try and evaluate the
various ratio to appreceiate their Impact on company’s performance over the last three years.

For the study Asian paints ltd. is considered. The ratio analysis is done using the income
statements and balance sheet of the company of last three years.
 INDEX
Sr. no: CONTENT Page no.
1. Preface I
2. Acknowledgement II
3. Executive summary III
4. Introduction 1
5. Financial analysis 3
6. Ratio analysis 4
7. Findings & suggestions 20
8. Bibliography 21
9. Annexure 22
 TABLE OF LIST
SR.NO. CONTENT PAGE NO.
1. Gross profit ratio 5
2. Net profit ratio 6
3. Current ratio 7
4. Return on capital employed 8
5. Debt- equity ratio 9
6. Liquid ratio 10
7. Proprietary ratio 11
8. Long term to fixed assets ratio 12
9. Total asset turnover ratio 13
10. Total fixed asset turnover ratio 14
11. Expense ratio 15
12. Return on equity share-holder 16
ratio
13. Return on share-holder fund 17
14. Debtors ratio 18
15. Stock turnover ratio 19
 INTRODUCTION

Asian paint ltd. Was established way back on February 1, 1942 and today stands as India’s
largest paint company and Asia’s third largest paint company with an annual turnover of Rs.
5,463Crore.

Present the company is having its presence in 22 countries with 28 manufacturing locations,
over 2500 SKU’s, integrated SAP-ERP&i2 –SCM solution. Besides Asian paints, the group
operates around the world through its subsidiaries Berger international, Apco Coatings, SCIB
Paints and Taubmans.

The company manufactures paints in the category of decorative, Automative and industrial
segment. Apart from these the company also manufactures various accessories like, wall
primer, wood primer, putty and strainers etc.

Asian paints along with its subsidiaries has operations in 20 countries across the world and 28
paints manufacturing facilities, servicing consumers in 65 countries through Berger
international, SCIB paints – Egypt, Asian paints, APCO coantings and taubmans. Asian paints
operates in 5 regions across the world viz. south asia , south east Asia, south pacific , middle
east and carbbean region through the 5corporate branch viz. Asian paints berger internationals
, SCIB paints APCO coatings and taubmans. In 10 markets, it operates through its subsidiary,
Berger internationals ltd; in Egypt through SCIB paints; in 5 markets in the south pacific it
operates through APCO coatings and in Fiji and Samoa it also operates taubmans.

The company is having state-of-the-art supply chain system using cutting edge technology to
integrate all its pants, regional distribution, outside processing centers and branches in India.
All the companies paints plants in India, to capital plants, 18 processing centers, 350 raw
materials and intermediate good suppliers, 140 packing material vendors, 6 regional
distribution centers, 72 depots are integrated.

The company is having a big and experienced R&D team which has successfully managed to
develop high-end exterior finished and wood finishes in-house, which was earlier imported into
the country. These products are currently market under Asian paints elastomeric hi-stretch
exterior paint and Asian paints PU wood finish respectively.
The company is having three subsidiary viz, APCO coatings – it is subsidiary of Asian paints in
south pacific island. The company operates in Australia, FIJI , Tonga, Solomon island and
Vanuatu under the brand name of APCO coatings.

On the recommendation of Booz, Allen and Hamilton, Asian paints restructured itself into
growth decorative and international business units and has adopted SCM and ERP technology.
Asian paints aims to become the product range of the company includes:

 Automotive paints
 Decorative paints
 Industrial paints

Ancillaries- range of ancillaries like primers, fillers strainers, and a lot more.

Milestones:
1957 - 66 - the family-owned company makes the transition to a professionally
managed organization. British company Balmer Lawrie rejects the products of a giant
british paint company in favour of Asian paints. Asian paints embarks on an ambitions
grassroots marketing campaign, partnering with thousand of dealers of small towns all
over India.

1945-Asian paints touches a turnover of RS. 3,50,000 , with an innovative marketing

strategy ‘to reach consumer in the remotest corners of the country with small packs.’
1954-asian paints mascot, gattu, the mischievous kid, is born.

1st February, 1942 – armed with little knowledge and great determination, champaklal H.
Choksey, chimanlal N. Choksi, Suryakant c. dani and arvind R. vakil get together to
manufacture paints in garage on four road, Bombay. They name their company ‘The Asian
oil & paint company’, a name that they picked randomly from a telephone directory.

Objectives achieved
Through this financial accounting project we:

 Had a first hand experience of analyzing financial statements.

 Critically examined the performance of Asian paints vis-à-vis its closest
competitors i.e. Berger paints
 FINANCIAL ANALYSIS

Analysis of financial statements reveal the underlying significant of the items composed in
them. Analysis breaks down the complex set of facts or figures into simple elements.

The analysis of financial statements has to be undertaken to suit the purpose for which it is
required. For example, a short term creditor is interested in the liquid position a business
whereas a long term creditor is concerned with safety of property in the long run which is
mortgaged in his favour. The prospective investor is interested in the profitability of business.

 by the provision of companies act

Purposes of financial analysis

 To abide For income tax purposes
 To give necessary information to the shareholders who have invested their savings.
 To give necessary information to the lenders of money or to trade creditors.
 To give a true picture of performance and financial position to the bank for a
obtaining loan.
 To safety the requirements of stock exchanges and controller of capital issues.
 To assist the management in taking important policy decision like pricing etc.

The analysis consist of the study of inter-relationship between various items

comprised in financial statements to determined whether the earnings and the
financial position of the company are satisfactory.
 RATIO ANALYSIS

Ratio analysis is a widely used tool of financial analysis. It can be used to compare the risk and
return relationship of firms of different sizes. It is defined as the systematic use of ratio to
interpret the financial statements so that the strength and weakness of a firm as well as its
historical performance and current financial condition can be determined.

Classification of ratio:

These ratio can be grouped into various classis according to financial activities. ratios are
classified into four broad categories:

1) Liquidity ratios

2) Profitability ratio

3) Leverage ratios

4) Activity ratio
1) GROSS PROFIT RATIO
It measures the percentage of each sales rupee remaining after the firm has
paid for its goods and it is also known as gross profit ratio.
GROSS PROFIT= GROSS PROFIT *100
NET SALES

gross profit ratio

23.00%
22.00%
21.00%
20.00%
19.00% gross profit ratio

18.00%
17.00%
16.00%
2019-20 2018-19 2017-18

particulars 2019-20 2018-19 2017-18

Gross profit 3556.75 3176.94 2952.15
Net sales 16391.78 14559.55 16203.39
Ratio 21.69% 21.82% 18.22%

Interpretation: A high ratio of gross profit to sale is a good sign of a good management.
Here in 2018-19 the ratio is the highest where as it has decreased from 21.82% to 21.69% in
2019-20 which means the company’s cost of production increased which is not good for the
company.
2) NET PROFIT RATIO
It measure the percentage of each sales rupee remaining after all costs and

expense including interest, tax have been deducted .

NET PROFIT RATIO= NET PROFIT *100

NET SALE

net profit ratio

13.50%

13.00%

12.50%

12.00%

11.50% net profit ratio

11.00%

10.50%

10.00%
2019-20 2018-19 2017-18

particular 2019-20 2018-19 2017-18

Net profit 2134.76 1894.80 1801.72
Net sale 16391.78 14559.55 16203.39
Ratio 13.02% 13.01% 11.12%

Interpretation: the net profit ratio is indicative of management’s ability to operate the
business with sufficient success. Here it has increased in 2020 which is the good for the
company.
3) CURRENT RATIO
This ratio establishes a relationship between current assets and current liabilities. The objective
of calculating this ratio is to measure the ability of the firm to meet its short term obligation

CURRENT RATIO= CURRENT ASSET

CURRENT LIABILITIES

particular 2019-20 2018-19 2017-18

Current asset 6053.35 5500.17 5429.63
Current 3716.19 3398.96 2875.93
liabilities
Ratio 1.63:1 1.62:1 1.89:1

current ratio
4
3.5
3
2.5
2
current ratio
1.5
1
0.5
0
2019-20 2018-19 2017-18

INTERPERTATION: The higher the turnover ratio, the more efficient is the management and
utilization of the assets. Here in 2018 it was higher while in 2019 it has decreased.
4) RETURN ON CAPITAL EMPLOYED
It is an index of profitability of business and obtained by comparing net profit with capital
employed. The ratio is normally expressed in the percentage. The term capital employed

includes share capital, reserve and long term loan such as debentures .
RETURN ON CAPITAL EMPLOYED RATIO=

NET PROFIT BEFORE INTEREST & TAX *100

CAPITAL EMPLOYED

Particular 2019-20 2018-19 2017-18

NBIT 3174.57 2865.83 2656.72
Capital employed 9436.18 8188.97 7482.1
Ratio 33.64% 35% 35.51%

return on capital employed

36.00%
35.50%
35.00%
34.50%
34.00% return on capital employed
33.50%
33.00%
32.50%
2019-20 2018-19 2017-18

Interpretation : Here the profits are related to the total capital employed. Here the ratio
is increasing so we can say that the funds of owner and lenders have been used efficiently.
5) DEBT – EQUITY RATIO
It measures the ratio of long term or total debt to shareholders equity. It is the ratio of the
amount invested by outsiders to the amount invested by the owners of business.

DEBT EQUITY RATIO= LONG TERM LIABILITIES *100

SHARE-HOLDER FUND

Particular 2019-20 2018-19 2017-18

Long term 10.89 9.87 10.38
liabilities
Share-holder 8887.56 7798.16 7094.75
fund
Ratio 0.12% 0.13% 0.15%
Debt equity ratio
0.16%
0.14%
0.12%
0.10%
0.08%
Debt equity ratio
0.06%
0.04%
0.02%
0.00%
2019-20 2018-19 2017-18

INTERPRETETION: It is an important tool of financial analysis to appraise the financial

structure of a firm. A low ratio has opposite implications.Here the ratio is decreasing which is
not good for company
6) LIQUID RATIO
It is the ratio between liquid current asset and liquid current liabilities and is calculated by

dividing the liquid asset by the current liabilities .

LIQUID ASSET = LIQUID ASSET

LIQUID LIABILITIES

Particular 2019-20 2018-19 2017-18

Liquid asset 3468.25 3321.74 3235.54
Liquid 3716.19 3398.96 2875.93
liabilities
Ratio 0.93:1 0.98:1 1.13:1

Liquid ratio
1.2

0.8

0.6
Liquid ratio
0.4

0.2

0
2019-20 2018-19 2017-18

INTERPRETATION: A liquid ratio is 1:1 is considered satisfactory as a firm can easily meet
all current claims. It provides in a sense a check on liquidity position of a firm.
7) PROPRIETARY RATIO
The ratio shows the proportion of proprietors funds to the total assets employed in the
business. The higher the ratio, the higher proprietors and the financial position of business.

PROPRIETARY RATIO = PROPRIETARY FUND * 100

TOTAL ASSET

Particular 2019-20 2018-19 2017-18

Proprietary fund 8887.56 7798.16 7094.75
Total asset 13152.37 11587.93 10358.03
Ratio 67.57% 67.30% 68.50%

Proprietary fund
68.60%
68.40%
68.20%
68.00%
67.80%
67.60%
Proprietary fund
67.40%
67.20%
67.00%
66.80%
66.60%
2019-20 2018-19 2017-18

INTERPRETATION: The ratio indicates the extent to which assets are financed by owners
funds. Here in 2018 the ratio is highest which is not good for company.
8) LONG TERM FUND TO FIXED ASSETS RATIO
The fixed assets should always be acquired out of long term funds meaning there by that this

ratio should not be less than 100 .

LONG TERM FUND TO FIXED ASSET = LONG TERM FUND * 100

FIXED ASSET

particular 2019-20 2018-19 2017-18

Long term fund 9019.83 7918.64 7223.93
Fixed asset 4849.85 3960.37 2824.44
Ratio 185.98% 200% 255.76%

Long term fund to fixed asset ratio

300.00%

250.00%

200.00%

150.00% Long term fund to fixed

asset ratio
100.00%

50.00%

0.00%
2019-20 2018-19 2017-18

INTERPRETATION: Higher the ratio, better for the company. In the year 2019 it has
decreased to 185.98% from 255.76% which is not good for the firm.
9) TOTAL ASSET TURNOVER RATIO
The amount invested in business are invested in all assets jointly and sales are effected through
them to earn profit. so in order to find out relation between total asset to sales.

TOTAL ASSET TURNOVER RATIO = SALES

TOTAL ASSETS
particular 2019-20 2018-20 2017-18
Sales 16391.78 14559.55 16203.39
Total asset 13152.37 11587.93 10358.03
Ratio(time) 1.25 1.26 2

TOTAL ASSET TURNOVER RATIO

2.5

1.5
TOTAL ASSET
1 TURNOVER RATIO

0.5

0
2019-20 2018-19 2017-18

INTERPRETATION: The higher this ratio, its shows that with less amount of investment in
total assets. Here the ratio has decreased 2.0 to 1.25.
10) FIXED ASSETS TURNOVER RATIO
It indicate the efficiency with which firm uses all its assets to generate sales. It is based on the
relationship between the cost of goods sold and asset of a firm.

FIXED ASSET TURNOVER RATIO = SALES

TOTAL FIXED ASSET

particular 2019-20 2018-19 2017-18
sales 16391.78 14559.55 16203.39
Fixed asset 4849.85 3960.37 2824.44
Ratio (time) 3.38 3.68 5.74

fixed asset turnover ratio

7
6
5
4
fixed asset turnover
3 ratio
2
1
0
2019-20 2018-19 2017-18

INTERPRETATION: A high ratio implies good inventory management. Here in 2017-18 it was
highest. But it decreased from 5.74 to 3.38. a low ratio is dangerous. It signifies excessive
inventory or overinvestment in inventory.
11) EXPENSE RATIO
For the purpose of ascertaining relationship between operating expense and net sales, expense

ratio are computed .

EXPENSE RATIO = EXPENSE * 100

SALES

particular 2019-20 2018-19 2017-18

Expense 2770.42 2459.43 2365.04
Sales 16391.78 14559.55 16203.39
Ratio 16.90% 16.89% 14.60%

expense ratio
17.50%
17.00%
16.50%
16.00%
15.50%
15.00% expense ratio
14.50%
14.00%
13.50%
13.00%
2019-20 2018-19 2017-18

INTERPRETATION: Here the profits are related to the expense ratio. The higher the ratio,
the more efficient is the use of expense ratio. Here the ratio is increasing so we can say that the
fund of owner and lenders have been used efficiently.
12) RETURN ON EQUITY SHARE HOLDER RATIO
Its shows what percentage of profit is earned on the capital invested by ordinary share-holder.
The ratio is obtained by dividing net profit after deduction of preference dividend by the
amount of ordinary share capital plus free reserves.

RETURN ON EQUITY SHAREHOLDER RATIO =

NET PROFIT – PREFERENCE DIVIDEND *100

EQUITY SHARE-HOLDER FUND

particular 2019-20 2018-19 2017-18

Net profit 2134.76 1894.80 1801.72
Equity share 95.92 95.92 95.92
holder fund
Ratio 22.26:1 19.75:1 18.78:1

return on equity share holder fund ratio

23

22

21

20 return on equity share

holder fund ratio
19

18

17
2019-20 2018-19 2017-18

INTERPRETATION : Here the ratio has increased from 18.78 to 22.26 which means
company has enough capital to pay the dividend.
13) RETURN ON SHARE HOLDERS FUND
In order to judge the efficiency with which the proprietors’ funds are employed in business,
this ratio is ascertained. This ratio is usually expressed in percentage.

RETURN ON SHARE HOLDER FUND RATIO=

NET PROFIT AFTER INT & TAX * 100

SHARE HOLDERS FUNDS

particular 2019-20 2018-19 2017-18

Net profit 8887.56 7798.16 7094.75
Shareholder fund 2134.76 1894.80 1801.72
Ratio 24.02% 24.30% 25.40

return on share dolders fund ratio

26.00%
25.50%
25.00%
24.50% return on share dolders
fund ratio
24.00%
23.50%
23.00%
2019-20 2018-19 2017-18

INTERPRETATION : It is an important tool of financial analysis to appraise the financial

structure of a firm. The low ratio has opposite implication. The ratio is decreasing which is not
good.
14) DEBTORS RATIO
The ratio shows the number of days taken to collect the dues of credit sales. Its
shows the efficiency or otherwise of the collection policy of the enterprise.

DEBTORS RATIO = DEBTORS + B/R *NO OF DAYS IN YEAR

CREDIT SALES

Particular 2019-20 2018-19 2017-18

Debtors & B/R 1244.95 1138.20 994.63
Credit sale 16391.78 14559.55 16203.39
Ratio (days) 28 29 22

Debtors ratio
35
30
25
20
15 Debtors ratio
10
5
0
2019-20 2018-19 2017-18

INTERPRETATION : This ratio measures how rapidly receivable are collected. In 2018-19 the
ratio was high which shows effective collection policy. But in 2017-18 the ratio has gone down
to 22 days.
15) STOCK TURNOVER RATIO
The number of times the average stock is turnover during the year is known as stock turnover.
The objective of computing this ratio is to determine the efficiency with which the inventory is
utilized.

STOCK TURNOVER RATIO = COST OF GOODS SOLD

AVERAGE STOCK

particular 2019-20 2018-19 2017-18

COGS 12835.03 11382.61 13251.24
Average stock 2381.77 2186.26 1902.11
Ratio(Time) 5.39 5.21 6.97

Stock turnover ratio

8
7
6
5
4
Stock turnover ratio
3
2
1
0
2019-20 2018-19 2017-18

INTERPRETATION: A high ratio implies good inventory management. Here in 2017-18 it was
highest. But decreased from 6.97 to 5.21. a low ratio is dangerous. It signifies excessive
inventory or overinvestment in inventory.
 FINDING & SUGGESTIONS
Asian paint ltd. is a growing company and allover performance of the company is satisfactory.
The main performance of the company can be judged by the net profit ratio and it has
increased year by year. The expense has decreased, so company can get the more profit and
can also give more dividend to the share-holders.

 They should promote vendors in supplying the raw materials rather than importing.
 They should develop suppliers in supplying basic ingredients for paints (pthalic
anhydride, Resins )
 During monsoon seasons they should increase exports to more countries ( Already
captured exporting to 22 markets- Asia pacific, Middle East, Africa). In addition, should
offer seasonal products e.g. Diwali in North, Pongal in south & Christmas.
 They should increase promotional activities with regard to regional festivals.
 They should offer other variety of products (wood polishes) at a discounted rate
during sale of decorative paints- predator pricing industrial paints and should tie up
with business units for longer periods or can takeover of small companies to increase
their market share.
 They should refinish their old capital equipment/ metals with paints for industries at
low rates to prevent corrosion.
 And the dealers of the company are not satisfied with the price so they should also get
price relaxation.
 BIBLIOGRAPHY

 https://buc.kim/d/3r9rk61ZOmlZ?pub=link
 https://buc.kim/d/3foOcHJFp3IN?pub=link
 Ratio analysis: Management accounting (5th semester)