FINANCIAL STUDY OF ASIAN PAINTS

PROJECT REPORT
Submitted to [Link] Singh PG
College in partial fulfillment of the
requirements for the award of the Degree of

Bachelor of Commerce (BCom)

By
NISHANT SINGH
Under the guidance of
Mr. Sandeep Singh
 CERTIFICATE

This certificate acknowledges that Nishant Singh, enrolled as a student at Dr.

Ghanshyam Singh P.G. College under Roll No. ……, has successfully completed
their semester project as part of the curriculum requirements. The project titled "
FINANCIAL STUDY OF ASIAN PAINTS " represents original work conducted
during the academic year 2023-24.

NISHANT SINGH
Date:
 ACKNOWLEDGEMENTS

I wish to express my sincere gratitude to the following individuals for their

invaluable mentorship and support throughout the completion of this project:

- Mr. Sandeep Rai, my teacher, whose insightful guidance and direction were
instrumental in shaping this endeavor.

- Our esteemed principal, for fostering an environment of learning and creativity

within our college community.

- My parents, whose unwavering encouragement, patience, and understanding have

been the cornerstone of my success.

- My friends, whose contributions of ideas and perspectives greatly enriched the

project.

I am deeply appreciative to each of you for your contributions in shaping this

project and enhancing my learning experience.

NISHANT SINGH
LIST OF CONTENTS
CHAPTERS CONTENTS PAGE NO
CHAPTER 1 INTRODUCTION 1
1.1 Background of the study 2
1.2 Statement of the problem 3
1.3 Relevance and scope of the study 3
1.4 Objectives of the study 3
CHAPTER 2 PROFILE OF PAINT INDUSTRY IN INDIA 4
2.1 Business Process of The Study 5
2.2 Market Demand and Supply-Contribution To GDP- 8
Revenue Generation
2.3 Level and Type of Competition- Firms Operating in The 11
Industry
2.4 Pricing Strategies in The Industry 12
2.5 Prospects and Challenges of The Industry 13
2.6 Key Drivers of The Industry 14
CHAPTER 3 REVIEW OF LITERATURE 17
3.1 Brief theoretical construct related to the problem 18
3.2 An overview of earlier studies 33
3.3 uniqueness of research study 38
CHAPTER 4 METHODOLOGY OF THE STUDY 39
4.1 Research Approach and design 40
4.2 Sources of online data 40
4.3 Data analysis tools 40
4.4 Report structure 41
4.5 Limitation of the study 41
CHAPTER 5 DATA ANALYSIS, INTERPERATION, INFERENCE 42

CHAPTER 6 FINDINGS 63

CHAPTER 7 CONCLUSION 65
 CHAPTER 1
INTRODUCTION
 INTRODUCTION
Financial statement analysis involves examining the relationship between different parts
of financial documents to gain insights into a company's performance and financial health. These
statements, prepared annually, are crucial for management to assess progress and investment
status. Finance is vital for all business activities, enabling growth through proper management.
The primary goal of financial management is profit maximization, guiding managers in making
critical decisions. Analyzing financial performance is essential for informed business decisions,
measuring how effectively a company utilizes its assets to generate revenue. This analysis also
evaluates a firm's overall financial health over time and facilitates comparisons within industries
or sectors. Key metrics like revenue, operating income, and cash flow are typically assessed,
alongside deeper insights such as margin trends and debt levels. Overall, financial statement
analysis is a critical tool providing insights into past performance and current financial standing.

Asian Paints is India's largest paint company, ranked third in Asia and ninth globally. Over the past seven
years, it has maintained high standards in operational efficiency, management, innovation, and technological
advancement.

This study aims to analyze Asian Paints' financial strength and weaknesses by examining the relationship
between items in its balance sheet and profit and loss account over the last few years.

1
1.1 BACKGROUND OF THE STUDY

Performance measurement systems are crucial for communicating, evaluating, and rewarding
the achievement of strategic goals. However, a common criticism is their heavy reliance on
financial indicators, which tends to focus organizations on past performance and promote a
short-term outlook on strategic objectives.

Investors and other stakeholders closely scrutinize businesses to make informed investment
decisions based on financial performance. They seek assurance in management's ability to handle
investments, influencing further capital decisions and efforts to enhance capital management in
varying economic conditions.

Finance is vital for businesses, and financial management aims to maximize firm value through
efficient acquisition and use of financial resources. Analyzing financial performance involves
examining the relationship between items in the balance sheet and profit and loss statement to
assess a company's strengths and weaknesses. This analysis helps in making informed decisions
by identifying recent trends and the financial position of the company.

This study focuses on Asian Paints Limited over the past five years, aiming to evaluate its
liquidity, profitability, and solvency. By comparing balance sheet changes over time, the study
provides insights into the company's progress.

To conduct this analysis, secondary data from the company's financial statements over five years
were collected and analyzed. Common methods like trend analysis, common-size statements, and
ratio analysis were used to assess Asian Paints' financial performance. These methods involve
calculating and comparing results to historical data, competitors, or industry benchmarks to
gauge the company's relative strength and performance.

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1.2 STATEMENT OF THE PROBLEM
The financial statements reveal a true and fair view of the financial position of a concern. The
analysis of financial statement is a process of evaluating the relationship between the component
parts of financial statement to obtain a better understanding of the firm’s position and performance.
To evaluate the company’s profitability, liquidity, efficiency and solvency using the financial
statements. To take certain important decisions for their business various users like managements
of the companies, bankers, investors and creditors etc. uses the accounting ratios for analysing the
financial position

1.3 RELEVANCE AND SCOPE OF THE STUDY

Financial statement analysis is prepared primarily for decision-making. They play a dominant role
in setting the framework and managerial conclusion and can be drawn from these statements is of
immense use in decision-making through analysis and interpretation of financial statements. Every
business undertaking needs finance for its smooth working. It has to raise funds from the cheapest
and risky source to utilize this most effectively. So, every company will be interested in knowing
its financial performance.
The present study titled “Financial Performance Analysis of Asian Paints” has been carried out to
find the liquidity, solvency, profitability, and efficiency of Asian paints Limited. It is hoped that
the study would be beneficial to Wipro Limited in particular and all stakeholders in general. The
study aims to analyze the liquidity, profitability, solvency position of the company.

1.4 OBJECTIVES OF THE STUDY

• To analyze and evaluate the financial performance of Asian paints Limited for five years (2015-
16 to-2019-20).
• To measure the short-term and long-term financial liquidity, solvency, profitability, and activity
ratio.
• To estimate the financial trend of the company in terms of profit, sales, and expenses.
• To prepare comparative and common size statements of the company.

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 CHAPTER 2

PROFILE OF INDIAN PAINT INDUSTRY

4
2.1 BUSINESS PROCESS OF INDIAN PAINT INDUSTRY

The Paints and Coatings Industry is one of the most heavily regulated industries in the world. The
sector consists of manufacturers of paints, varnishes, lacquers, shellacs, stains and a variety of
other specialty coatings. The Indian Paint Industry is estimated to be Rs.50,000 Crores industry.
The paint industry can be broadly classified into the Organized & the Unorganized sector. The
unorganized sector controls around 20%-30% of the paint market accounting for the balance. Most
of the organized companies in India’s paint market have a nationwide presence with multi-location
manufacturing facilities. The companies in the unorganized sector are mostly regional and deal in
low value products and have been consistently losing market share to the organized sector. Till
FY17, organized players had a market share of about 65%. However, post GST application, the
organized players are recapturing market from unorganized players with share of organized players
increasing to about 80% now.

The top players in the organized sector of paint industries are

• Asian Paints Limited (APL)

• Kansai Nerolac Paints Limited (Kansai),
• Berger Paints India Limited (Berger)
• Akzo Nobel India Limited (Akzo)

These companies are holding majority of market share, they which together account for about 70%
of the market share.

The raw materials majorly used are resins (binders), pigments, solvents and additives. One of the
key pigments widely used is titanium dioxide (TiO2) which is mostly imported. This along with
other raw materials like phthalic anhydride, pentaerythritol, methyl methacrylate, aromatics, etc,
which act as binders, solvents and additives, are derivatives of crude oil.

5
Fig [Link] structure of Organised Companies in the industry

The above graph reflects a volatile trend in the raw materials cost as a percentage of total
operating income over the previous three years which is mainly due to raw material price linkage
with movement in crude oil prices as well as foreign exchange fluctuation. Given that input cost
as a percentage of sales accounts for about 50-55%, it is inevitable that any price hikes in the
mentioned commodities will have a major impact on the profitability and the resilience of paint
and coatings companies. Titanium dioxide pigment, forming around 25% of the total content of
paint, is by far the most important material used by the paints industry due to its whiteness, opacity
and refractive index ability i.e. its ability to bend and scatter light. Further, it would be interesting
to note the impact of movement in crude oil prices on RMC of paint companies. Given that nearly
50% of raw materials used by paint companies are crude oil derivatives and account for about 30-
35% of the total raw material cost of the sector, the volatile raw material costs pose a risk to the
profitability of paint and coatings manufacturers. As can be seen in the graph below, there is
negative correlation between Operating Profit Margins of major players in the industry and the
price of Brent Crude Oil. Most of the large paint manufacturers, in a bid to offset the increasing
costs announce price increase in paints but the same generally happens with a time lag. It has been
observed that there is generally a lag of about a quarter when paint prices follow the movement in
raw material prices.

Also there’s a growing tendency among the paint companies to incline towards manufacturing
water based paints which are less sensitive to movement in crude oil prices. Besides, the preference

6
for these paints over solvent paints is also rising among customers because of ease to clean walls
and increasing demand of these paints from building & construction and automotive sector owing
to their good corrosion protection and high gloss properties, over other types. This has led to
focus by most of the paint companies to consistently increase the share of water-based paints in
their portfolio which is expected to aid margin growth in the long term. Having said that the
demand for oil/solvent based paints will always remain, hence exposure to price fluctuations in
crude oil cannot be eliminated completely.

Asian Paints and its Business Model

Asian Paints is India’s 1st largest, Asia’s 3rd largest and the world’s 9th largest paint company.
It has been setting a high standard of operational efficiency, management, world-class innovation
and technological vision for the last 7 years.

The paint industry is divided mainly into two segments viz. Decorative and Industry. The
Decorative segment includes household paints (interior wall finishes, exterior wall finishes,
enamels and wood finishes) and is undeniably dominated by Asian Paints in India. The Industry
segment includes industrial paints, automotive coatings, OEM paints, powder coatings etc., in
which Asian Paints comes at 3rd place after KensaiNerolac and Akzo Nobel.

The decorative segment is less technology-dependent due to which some unorganized players
also eat up a small fraction of the market share. However, the industry segment is highly
technology-dependent and entirely have organized players.

Asian Paints holds a global presence by operating in 15 different countries and owning 26 paint
manufacturing plants across the globe. In India, it has a robust distribution network of suppliers.
To improve its margins and operational efficiency, the company chose dealers over distributors.

Currently, the company has 70,000+ shopkeepers across the nation. It has also been enhancing
its dealers for the past 40 years. Asian Paints has a phenomenal supply chain as it carries out
around 2.5 – 3 lakh deliveries per day and its trucks visit the dealers around 4 times a day.

7
2.2 MARKET DEMAND AND SUPPLY– CONTRIBUTION TO GDP–
REVENUE GENERATION

Demand for decorative paints depends on the housing sector and good monsoons. Industrial paint
demand is linked to user industries like auto, engineering and consumer durables. Supply exceeds
demand in both the decorative as well as the industrial paints segments.

Global demand for paint and coatings is forecast to increase 2.7% per year to 63.7 million metric
tons valued at $230 billion in 2024. Market advances will be driven by:

• rising personal incomes and improving housing conditions in the Asia/Pacific region
• significant growth in manufacturing and construction activity in India
• increasing DIY activity in developed countries, particularly in the US

The Indian paint industry grew at ~12% CAGR in FY09-19 to ~Rs.55000 crore led by decorative
paint segment (grew at 13% CAGR). Decorative paint comprises 75% of total paint demand in
India while industrial paint category (includes automotive, performance coatings/general industrial
and powder coating) comprises the remaining ~25%. The decorative paint demand would be
largely driven by shortening of repainting cycle, growing urbanisation and increased distribution
reach of organised players. The strong fundamentals of organised players and rising tax
compliance in India would help increase market share gain in the coming future from
unorganised/regional players. On the other hand, the industrial paint category is expected likely
to grow at a rate of 5% in FY19-22E on a favourable base with a gradual recovery in automotive
and industrials due to slow recovery in industrial output and automotive industry, going forward.
Increasing urbanisation in India coupled with rising income levels have resulted in progressively
increasing demand for housing, particularly quality housing, across Indian cities. This growing
demand for quality housing will drive demand for decorative paint demand.

A slowdown in industrial activity (IIP growth declined from 4.6% in FY17 to 3.8% in FY19 and
0.9% in April-February 2020) impacted industrial paint demand in the recent past. However,
various government measures, undertaken during the Covid-19 pandemic, such as low interest
rate, tax rate cut, etc, would fuel private capex in the coming period. This would help drive demand
for industrial paint in the coming future.

8
High correlation to GDP indicates robust future growth

Paint consumption is linked to the GDP of the country. Increased growth momentum in Indiawill
result in an increase in GDP, which, in turn, will result in an increase in consumption of paint.
There is high correlation between paint industry’s growth and GDP growth rate — paint industry
volumes grow at 1.5‐2.0x India’s GDP. As per calculations, the correlation between Berger’s
volume growth and India’s GDP growth rate is a strong 0.66x. With GDP expected to surge to
7.4%, 7.9% and 8.3% in FY16, FY17 and FY18, expect painting sector growth to be robust in turn
lending fillip to Asian paints volumes.

Relation between Paint Industry and GDP

• Income Level
Increase in GDP will accelerating standard of living. With rise in income level,
consumers will increase consumption which in turn will help the decorative segment.
• Housing Sector
Growth in housing sector will increase urbanisation, provide cheaper loans and
shift from semi – permanent to permanent housing structures will increase spending in
the decorative segment.
• Industrial Segment
The industrial segment can be further broken down into protective, general
industrial, automotive powder and marine coatings. This segment accounts for ~20% of
the paint industry's revenue.
• Infrastructure Investment
New projects in roads, buildings ,ports etc will increase revenues of paint industry
and drive the industrial segment.

9
 Fig 2. Paint sector sales have high correlation to GDP growth

Positive correlation between Paint industry and GDP

The paint industry runs parallel to the GDP and economy. Considered as discretionary spending,
as the GDP increases so does the spending capacity of the people. In the past, this industry has
seen double-digit growth in terms of both, value and volume, and this is why it has always traded
at premium valuations in emerging economies.

For the last two years, there has been a constant rise in the market share by organised players.
Currently, the ratio is around 70:30 between organised and unorganised players, and with the
technological innovation and proper GST implementation, this market share is expected to rise to
85% in the next couple of years.

The paint industry of India is expected to witness a phenomenal rise in the coming years
considering India’s latest per capita consumption (of around 4kg) as compared to that of the
world (15kg.) This data provides a vast scope for the paint industry to grow in India.

The paint industry is a raw material intensive industry. Especially in the case of India, most of
the raw materials are imported from other countries. With the government imposing import bans
and promoting the self-reliant mission, the supply is expected to come from within the country in
the coming years, which will be a boon to this industry and it will see a tremendous rise in
operational margins.

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2.3 LEVEL AND TYPES OF COMPETITION

The market for both decorative and industrial paints is growing rapidly. This has resulted in paint
manufacturing companies facing severe competition. The foreign companies with their modern
technology are also entering the Indian market creating problems of survival for some of the
smaller companies .

In our country many companies compete with each and other in paint industry there are
companies like

• Berger paints Limited

• KensaiNerolac Limited,
• Akzo Nobel
• Shalimar paints Limited
• Indigo paint

These are come under organized sector and have more than 70% of market share. In addition,
there are thousands of small and mid-cap companies producing paints. The competition may over
a period of time destroy many small and mid-cap companies. Even the bigger companies may
face the problem of survival.

The oligopolistic nature of the business, the top four players contribute ~80% of organized market
share. An oligopolistic market is characterised by a few sellers producing and selling either
homogeneous or close substitutes of products. The domestic paint industry is thus oligopolistic in
nature, with more than 90% of the organised decorative paints market dominated by the top four
players—Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel. Asian Paints has the lion’s
share of this market with ~54% market share. Some of the essential characteristics of any
oligopolistic market are pricing power, entry barriers, product differentiation and advertisement &
selling costs

11
COMPETITION ANALYSIS

Items Asian paint Berger Nerolac others

Paints
Brand Equity High High Medium low

Brand visibility Very high High Medium low

Pricing Power Very high Medium Medium Medium/low

Dealer Network Very high High low Very low

Innovation of Always Market Average Merely

product trend
Professionalisation High High Average Merly

Innovation in High level high satisfactory low

service

2.4 PRICING STRATEGIES IN THE INDIAN PAINT INDUSTRY

Asian Paints, by virtue of being the market leader, enjoys strong pricing power, while the industry
exhibits pricing discipline and follows the leader in pricing action. Asian Paints tries to maintain
and operate within a range of gross margin. Raw material prices largely determine the company’s
pricing strategy. The primary raw materials, titanium dioxide (TiO2) and monomers, being crude
linked are impacted by crude inflation and also currency fluctuation. Though global Tio2 prices
have remained flattish in the past one year, currency depreciation has had an adverse impact,
compelling paint companies to hike prices—Asian Paints effected total price increase of 6.1% in
FY14, followed by other competitors. Despite this price increase, Asian Paints delivered consistent
double digit volume growth even amongst tough macro environment. his results in high pricing
power in the hand of players compared to other discretionary products. Market leader Asian Paints
initiates price hikes that are followed by other players. The pricing power also differs from the
product portfolios of companies. Under the paint universe, Asian Paints has the highest SKUs of
premium paints (emulsion) followed by Berger Paints while regional/unorganised players have a
higher presence in distempers and putty.

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 2.5 PROSPECTS AND CHALLENGES IN THE INDIAN PAINT INDUSTRY

Prospects

The paint industry is poised for strong recovery starting from FY22, especially due to increased demand for
repainting. Berger Paints stands to gain from this as it has a robust supply chain. Factors like sustained long-
term growth drivers, higher profit margins, and taking market share from smaller competitors will drive
Berger Paints' growth.

In FY19, the paint industry grew by 12% in volume and 15% in value. Future growth will depend on factors
like public disposable income, urbanization, economic development, monsoons, raw material costs,
infrastructure growth, and recovery in real estate and automobiles.

The Indian paints and coatings market is expected to grow at an annual rate of 8.56% from 2019 to 2024,
driven by demand from construction and infrastructure projects.

Government focus on infrastructure will boost demand for industrial coatings. However, challenges like raw
material price fluctuations and exchange rate volatility need close attention to protect profitability.

India's large domestic market, expanding middle class, and growing population present significant
opportunities. By 2030, India's middle class is expected to be one of the world's largest consumers.

The Indian paints and coatings industry is expected to grow steadily in the short and medium term, supported
by India's economic growth and increasing disposable income among young people entering the workforce.

The decorative paints segment is likely to see higher growth, aided by government incentives for the housing
sector. This trend will benefit major players in the long run.

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 Challenges faced by paint Industry in India

The paint industry in India faces several challenges despite its growth potential. Here are some key
issues:

➢ Raw Material Costs: The industry is heavily dependent on raw materials like crude oil
derivatives, which are subject to price volatility. This affects production costs and profit
margins.
➢ Environmental Regulations: Increasingly stringent environmental regulations require
companies to reduce volatile organic compounds (VOCs) in their products. This
necessitates investment in research and development for eco-friendly alternatives.
➢ Industrial slowdown: High competition in industrial business, particularly from foreign
players like PPG, Nippon Paints, Akzo Nobel and BASF, impacts pricing power of the
business.
➢ New initiatives: Berger may face challenge in standardising its Express Painting service
when it launches it pan India (also highlighted by the leader).

➢ Seasonality of the Business, i.e. the decorative paints segment of the company is a
seasonal business, as people do not paint/repaint their houses frequently.

2.6 KEY DRIVERS OF THE INDIAN PAINT INDUSTRY

➢ Increasing urbanisation :

The share of India’s urban population in relation to its total population has been rising over the
years. People from rural areas move to cities for better job opportunities, education and a better
life among other reasons. According to a report published by the World Economic Forum, 40% of
Indians are expected to be urban residents by the end of 2030. Increasing urbanisation in India
coupled with rising income levels have resulted in progressively increasing demand for housing,
particularly quality housing, across Indian cities. This growing demand for quality housing will
drive demand for decorative paint demand, going forward.

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 Fig [Link]’s urbanisation trends

➢ Rising income level :

Rising income (per capita income grew at 10% CAGR) and increasing awareness about
decorating/safeguarding home has fuelled decorative (exterior, interior) paint demand in India.
Further, strong growth in demand for premium category paints was a result of rising aspirations
and income level of middle class in the last 10 years. Changing trends in relation to home
improvements and increasing disposable incomes would boost demand for decorative paints,
going forward.

➢ Reducing repainting cycle:

Repainting contributes 70-75% of total decorative paint demand in India while fresh painting
accounts for ~25-30% of total demand. Our dealer check suggests there has been a gradual
reduction in the repainting cycle from eight years to six years in the last 10 years. As far as urban
India is concerned, the repainting cycle has reduced to five years largely driven by rising
aspiration and income level. However, lower repainting cycle in urban areas leaves little scope
for demand growth while semi urban and rural India would be key growth drivers for the paint
industry, going forward

➢ Increasing share of organized sector –

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There has been considerable decrease in taxes on raw materials. This has helped improve the
status and position of the organized players. The organized sector is expanding and its
distribution network is growing. The adoption of installing tinting machines at retail outlets has
helped the sector grow at a much faster rate.

➢ Growth of Realty, Automobile and Infrastructure sector

Paint industry is highly dependent on development of realty and housing sector. For the total
paint demand, over 70% is generated from the decorative segment. Automobile segment
generates over 66% of the demand of industrial paint. Infrastructure segment creates direct and
indirect demand for paints through supporting the growth of the realty, automobile, FMCG and
other industries where paint is used.

➢ Availability of financing options

Easy financing is available for housing and automobile. This is expected to favour more people
to buy houses and travel in personal vehicles. This in turn drives the growth of housing and
automobile sector for which paint industry get its share

➢ Increasingmedia exposure
With better awareness levels, we expect a gradual shift from unbranded to branded segment as
well as improvement in product mix for players likeAsian Paints as demand for emulsions
continues to outpace enamels and distempers

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 CHAPTER 3
REVIEW OF LITERATURE

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3.1 BRIEF THEORETICAL CONSTRUCT RELATED TO THE PROBLEM
FINANCIAL PERFORMANCE ANALYSIS

The present chapter is an attempt to give the theoretical frame work applied for the present study.
Every business enterprise whether large, medium and small size needs finance to carry out its
operations and to achieve its targets. Finance is rightly said to be the life blood of an enterprise.
The main activities essential to the successful administration of finance in any organization
consists of financial planning and control, determinant of business success, focal point of decision
making, raising the needed fund, financial analysis and measure of performance.

Financial performance analysis is the process of identifying the financial strengths and weaknesses
of the firm by properly establishing the relationship between the items of the balance sheet and the
profit and loss account. It also helps in short-term and long-term forecasting and growth can be
identified with the help of financial performance analysis. The dictionary meaning of ‘analysis’ is
to resolve or separate a thing into its elements or components parts for tracing their relation to the
things as a whole and each other. The analysis of a financial statement is a process of evaluating
the relationship between the parts of a financial statement to obtain a better understanding of the
firm’s position and performance. This analysis can be undertaken by the management of the firm
or by parties outside the name, owners, creditors, investors.

FINANCIAL STATEMENT

A financial statement is an organized collection of data according to logical and consistent

accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business firm. It may show a position at a moment of time as in the case of a balance sheet, or may
reveal a series of activities over a given period of time, as in the case of an income statement.

They are useful for the following reasons:

• To determine the ability of a business to generate cash, and the sources and uses of
that cash.
• To determine whether a business has the capability to pay back its debts.
• To track financial results on a trend line to spot any looming profitability issues.

18
 • To derive financial ratios from the statements that can indicate the condition of the
business.
• To investigate the details of certain business transactions, as outlined in the
disclosures that accompany the statements

Main types of financial statements are:

1. Balance Sheet

Statement of Financial Position, also known as the Balance Sheet, presents the financial position
of an entity at a given date. It is comprised of the following three elements:

• Assets: Something a business owns or controls (e.g. cash, inventory, plant and
machinery, etc)
• Liabilities: Something a business owes to someone (e.g. creditors, bank loans,
etc)
• Equity: What the business owes to its owners. This represents the amount of
capital that remains in the business after its assets are used to pay off its
outstanding liabilities. Equity therefore represents the difference between the
assets and liabilities

2. Profit and loss account

Income Statement, also known as the Profit and Loss Statement, reports the company's financial
performance in terms of net profit or loss over a specified period. Income Statement is composed
of the following two elements:

• Income: What the business has earned over a period (e.g. sales revenue,
dividend income, etc)
• Expense: The cost incurred by the business over a period (e.g. salaries and
wages, depreciation, rental charges, etc)

Net profit or loss is arrived by deducting expenses from income

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FINANCIAL ANALYSIS
It is the process of identifying the financial strength and weakness of a firm from the available
accounting data and financial statements. The analysis is done by properly establishing the
relationship between the items of the balance sheet and the profit and loss account. The first task
of a financial analyst is to determine the information relevant to the decision under consideration
from the total information contained in the financial statement. The second step is to arrange
information in a way to highlight significant relationships. The final step is interpretation and
drawing inferences and conclusions. Thus, financial analysis is the process of selection relating to
and evaluation of the accounting data/information

OBJECTIVES OF FINANCIAL ANALYSIS

The following are the main objectives of the analysis of financial statements:

➢ To gauge the financial position and financial performance of the firm.

➢ To determine the debt capacity of the firm.
➢ To determine the long-term liquidity of the funds.
➢ To judge the solvency of the firm.
➢ To measure the efficiency of operations.
➢ To know the progress of the firm.
➢ To estimate the earning capacity of the firm.

USE OF FINANCIAL ANALYSIS

Following are the uses of financial Analysis:
• Debt Analysis: This is to check the borrowing capacity of a firm, which can be done through the
analysis of Debt-equity.
• Credit Analysis: Financial Analysis helps a firm that is extending credit to a prospective
customer to know the risk associate with extending the credit.
• Security analysis: Dividend pay-out policy and behavior a share can be assessed with the help
of financial analysis.

20
• Mergers & Acquisition: A company generating surplus cash flows with its competitors may be
tempted to expand the business by acquitting other companies and make a profitable investment.
• General Business Analysis: General business Indicators assess the future potential of the
company. They help in identifying the key factors which will influence the profitability of the
company.
• Regulatory Compliance: Regulators consists of registrars of companies, department of
company affairs, stock exchanges, SEBI analyses these to ensure compliance with the prevailing
rules and regulation.
TYPES OF FINANCIAL ANALYSIS

The following points highlight the important types of financial analysis,

• According to Material Used

• According to Modus Operandi,
• According to Time Horizon or Objective of Analysis

According to Material Used

According to material used, financial analysis can be of two types;

(a) External Analysis

This analysis is done by outsiders who do not have access to the detailed internal accounting
records of the business firm. These outsiders include investors, potential investors, creditors,
potential creditors, government agencies, credit agencies, and the general public.

For financial analysis, these external parties to the firm depend almost entirely on the published
financial statements. External analysis, thus serves only a limited purpose. However, the recent
changes in the government regulations requiring business firms to make available more detailed
information to the public through audited published accounts have considerably improved the
position of the external analysis.

(b) Internal Analysis

The analysis conducted by persons who have access to the internal accounting records of a business
firm is known as internal analysis. Such an analysis can, therefore, be performed by executives

21
and employees of the organization as well as government agencies which have statutory powers
vested in them. Financial analysis for managerial purposes is the internal type of analysis that can
be effected depending upon the purpose to be achieved.

According to Modus operandi:

(a) Horizontal Analysis

Horizontal analysis refers to the comparison of financial data of a company for several years. The
figures for this type of analysis are presented horizontally over a number of columns. The figures
of the various years are compared with standard or base year. A base year is a year chosen as
beginning point

This type of analysis is also called ‘ Dynamic Analysis’ as it is based on the data from year to year
rather than on data of any one year. The horizontal analysis makes it possible to focus attention on
items that have changed significantly during the period under review

(b) Vertical Analysis

Vertical analysis refers to the study of relationship of the various items in the financial statements
of one accounting period. In this types of analysis the figures from financial statement of a year
are compared with a base selected from the same year’s statement.

Since vertical analysis considers data for one time period only, it is not very conducive to a proper
analysis of financial statements. However, it may be used along with horizontal analysis to make
it more effective and meaningful

According to Time Horizon or Objective of Analysis:

(a) Short-term Analysis:

Short-term analysis measures the liquidity position of a firm, i.e. the short- term paying capacity
of a firm or the firm’s ability to meet its current obligations

(b)Long-term Analysis

Long-term analysis involves the study of firm’s ability to meet the interest costs and repayment
schedules of its long-term obligations. The solvency, stability and profitability are measured under
this type of analysis.
22
LIMITATIONS OF FINANCIAL ANALYSIS

Financial Statement Analysis is very important, but it has certain limitations which are to be kept
in mind. Following are the limitations of financial analysis

● Not a Substitute of Judgement

● Based on Past Data
● Problem in Comparability
● Reliability of Figures
● Various methods of Accounting and Financing
● Change in Accounting Methods
● Changes in the Value of Money
● Limitations of the Tools Application for Analysis
● No Assessment of Managerial Ability
● Change of Business Condition
● Financial statements are prepared according to certain conventions at a point of
time, whereas the investor is concerned with the present and future of the
company.
● The results shown by financial statements may be misleading, if price level
changes have not been accounted for.
● Financial analysis does not measure the qualitative aspects of the firm e.g.
skill, technical know-how etc…
● Results shown by analysis may be misleading in the absence of absolute data.
● The accuracy and reliability of analysis depends on reliability of figures
derived from financial statement.

TECHNIQUES OR TOOLS OF FINANCIAL ANALYSIS

• Comparative financial and operating statements

• Common-size statement
• Trend ratio (trend percentage)

23
 • Average analysis
• Statement of changes in working capital
• Ratio analysis

1. Comparative Statements

Comparative statements deal with the comparison of different items of the Profit and Loss
Account and Balance Sheets of two or more periods. Separate comparative statements are
prepared for Profit and Loss Account as Comparative Income Statement and for Balance Sheets.

The comparative statement may show:

i) Absolute figures (rupee amounts).

ii) Changes in absolute figures i.e., increase or decrease in absolute figures.
iii) Absolute data in terms of percentages.
iv) Increase or decrease in terms of percentages.

The two comparative statements are

i) Balance sheet
ii) Income statement.
o Comparative Balance Sheet

The financial condition of the business concern can be find out by preparing comparative balance
sheet. The various items of Balance sheet for two different periods are used. The assets

are classified as current assets and fixed assets for comparison. Likewise, the liabilities are
classified as current liabilities, long term liabilities and shareholders’ net worth.

Comparative Income Statement

Three important information are obtained from the Comparative Income Statement. They are
Gross Profit, Operating Profit and Net Profit

2. Common Size Statements

24
 A vertical presentation of financial information is followed for preparing common-size
statements. Besides, the rupee value of financial statement contents are not taken into
consideration. But only percentage is considered for preparing common size statement.

/The total assets or total liabilities or sales is taken as 100 and the balance items are compared to
the total assets, total liabilities or sales in terms of percentage. Thus, a common size statement
shows the relation of each component to the whole. Separate common size statement is prepared
for profit and loss account as Common Size Income Statement and for balance sheet as Common
Size Balance Sheet.

. These are also known as 100% statements. common size statements include.

• Common size balance sheet

• Common size income statements

Common size balance sheet is a statement in which balance sheet items are expressed as percentage
of each asset and percentage of each liability to total of liabilities is called common size balance
sheet.

Common size income statement is a statement in which each item of expense is shown as a
percentage

3. Trend Analysis

The ratios of different items for various periods are find out and then compared under this
analysis. The analysis of the ratios over a period of years gives an idea of whether the business
concern is trending upward or downward. This analysis is otherwise called as PyramidMethod

Trend analysis is the process of trying to look at current trends in order to predict future
ones and is considered a form of comparative analysis. This can include attempting to determine
whether a current market trend, such as gains in a particular market sector, is likely to continue, as
well as whether a trend in one market area could result in a trend in another. Though an analysis
may involve a large amount of data, there is no guarantee that the results will be correct.

procedure for calculating trends is as:

25
 • One year is taken as a base year which is generally is the first year or last year.
• Trend percentages are calculated in relation to base year.

4. Average Trend Analysis

It is an improvement over trend analysis method. When trend ratios have been determining for
the concern, these figures are compared with the average trend of the industry. Both these trends
can be presented on the graph paper also in the shape pf curves. This presentation of fact in the
shape of picture makes the analysis and comparison more comprehensive and impressive.

5. Statement of Changes in Working Capital

A change in Working Capital is the net change in current assets and current liabilities. Working
Capital is a measure of a company's short term liquidity or its ability to cover short term liabilities.
Working capital is defined as the difference between a company's current assets and current
liabilities. That is,

Working Capital = Current Assets - Current Liabilities.

Changes in Working Capital is reported in the cash flow statement since it is one of the major ways
in which net income can differ from operating cash flow. Under the accruals system, companies
calculate revenue and expenditure when a transaction occurs instead of when the cash actually
changes hands.

6. Ratio Analysis

Ratio analysis is an attempt of developing meaningful relationship between individual items (or
group of items) in the balance sheet or profit and loss account. Ratio analysis is not only useful to
internal parties of business concern but also useful to external parties. Ratio analysis highlights the
liquidity, solvency, profitability and capital gearing. The ratios are categorized as

❖ Liquidity Ratio
❖ Leverage Ratio,
❖ Turnover Ratio
❖ Profitability ratio

A. Liquidity Ratio-

26
It measures the ability of the firm to meet its short-term obligations that is capacity of the firm to
pay its current liabilities as and when they fall due. Thus, these ratios reflect the short-term
financial solvency of a firm. A firm should ensure that it does not suffer from lack of liquidity.
The failure to meet obligations on due time may result in bad credit image, loss of creditors
confidence, and even in legal proceedings against the firm on the other hand very high degree of
liquidity is also not desirable since it would imply that funds are idle and earn nothing. So
therefore, it is necessary to strike a proper balance between liquidity and lack of liquidity.

The various ratios that explain about the liquidity of the firm are;

• Current Ratio
• Acid Test Ratio / quick ratio
• Absolute liquid ratio / cash ratio.

1. Current Ratio

The current ratio measures the short-term solvency of the firm. It establishes the relationship
between current assets and current liabilities. It is calculated by dividing current assets by current
liabilities.

Current Ratio = Current Asset/Current Liabilities

Current assets include cash and bank balances, marketable securities, inventory, and debtors,
excluding provisions for bad debts and doubtful debtors, bills receivables and prepaidExpenses.
Current liabilities include sundry creditors, bills payable, short- term loans, income- tax liability,
accrued expenses and dividends payable.

2. Acid Test Ratio / Quick Ratio

It has been an important indicator of the firm’s liquidity position and is used as a complementary
ratio to the current ratio. It establishes the relationship between quick assets and current liabilities.
It is calculated by dividing quick assets by the current liabilities.

Acid Test Ratio = Quick Assets/Current liabilities

Quick assets are those current assets, which can be converted into cash immediately or within
reasonable short time without a loss of value. These include cash and bank balances, sundry

27
debtors, bill’s receivables and short-term marketable securities. The ideal Quick Ratio is 1: 1 and
is considered to be appropriate. High Acid Test Ratio is an accurate indication that the firm has
relatively better financial position and adequacy to meet its current obligation in time.

3. Absolute Liquid Ratio / Cash Ratio

It shows the relationship between absolute liquid or super quick current assets and liabilities.
Absolute liquid assets include cash, bank balances, and marketable securities. The most favourable
and optimum value for this ratio should be 1: 2. It indicates the adequacy of the 50% worth absolute
liquid assets to pay the 100% worth current liabilities in time. If the ratio is relatively lower than
one, it represents the company’s day-to-day cash management in a poor light. If the ratio is
considerably more than one, the absolute liquid ratio represents enough funds in the form of cash
in order to meet its short-term obligations in time.

Absolute liquid ratio = Absolute liquid assets/Current liabilities.

B. Leverage Ratio

The solvency or leverage ratios throws light on the long-term solvency of a firm reflecting its
ability to assure the long-term creditors with regard to periodic payment of interest during the
period and loan repayment of principal on maturity or in predetermined instalments at due dates.
There are thus two aspects of the long-term solvency of a firm.

• Ability to repay the principal amount when due.

• Regular payment of the interest.

The ratio is based on the relationship between borrowed funds and owner’s capital it is computed
from the balance sheet, the second types are calculated from the profit and loss a/c. The various
solvency ratios are;

• Debt equity ratio

• Debt to total capital ratio
• Proprietary (Equity) ratio
• Fixed assets to net worth ratio.

28
1. Debt Equity Ratio

Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest) against
the assets of the firm. Thus, this ratio indicates the relative proportions of debt and equity in
financing the firm’s assets. It can be calculated by dividing outsider funds (Debt) by shareholder
funds (Equity)

Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or Equity

The outsider fund includes long-term debts as well as current liabilities. The shareholder funds
include equity share capital, preference share capital, reserves and surplus including accumulated
profits. However fictitious assets like accumulated deferred expenses etc. should be deducted from
the total of these items to shareholder funds. The shareholder funds so calculated are known as net
worth of the business.

2. Proprietary (Equity) Ratio

This ratio indicates the proportion of total assets financed by owners. It is calculated by dividing
proprietor (Shareholder) funds by total assets.

Proprietary (equity) ratio = Shareholder funds/Total assets

This ratio shows the financial strength of the company. It helps the creditors to find out the
proportion of shareholders fund in the total assets. Higher ratio indicates a secured position to
creditors and a low ratio indicates greater risk to creditors. It indicates the long term solvency of
the firm.

3. Fixed Assets to Net Worth Ratio

This ratio establishes the relationship between fixed assets and shareholder funds. It is calculated
by dividing fixed assets by shareholder funds.

Fixed assets to net worth ratio = Fixed Assets / Net Worth *100

The shareholder funds include equity share capital, preference share capital, reserves and surplus
including accumulated profits. However fictitious assets like accumulated deferred expenses etc.
should be deducted from the total of these items to shareholder funds. The shareholder funds so
calculated are known as net worth of the business.

29
4. FixedAssets to Long Term Funds Ratio

Fixed assets to long term funds ratio establish the relationship between fixed assets and long- term
funds and is calculated by dividing fixed assets by long term funds.

Fixed assets to long term funds ratio = Fixed Assets /Long-term Funds*100

C. Turnover Ratio

The relationship between assets and sales is known as assets turnover ratio. Several assets turnover
ratios can be calculated depending upon the groups of assets, which are related to sales.

• Total asset turnover.

• Net asset turnover
• Fixed asset turnover
• Current asset turnover
• Net working capital turnover ratio

[Link] Asset Turnover

This ratio shows the firm’s ability to generate sales from all financial resources committed to total
assets. It is calculated by dividing sales by total assets.

Total asset turnover = Total Sales/Total Assets

[Link] Asset Turnover

This is calculated by dividing sales by net [Link] assets represent total assets minus current
liabilities. Intangible and fictitious assets like goodwill, patents, accumulated losses, deferred
expenditure may be excluded for calculating the net asset turnover.

Net asset turnover = Total Sales/Net Assets

[Link] Asset Turnover

30
 The ratio indicates the extent to which the investments in fixed assets contribute towards the sales.
If compared with the previous year it indicates that, whether the investment in the fixed assets has
been judicious or not.

Fixed asset turnover = Total Sales/Net Fixed Assets

[Link] Asset Turnover

The sales to current asset ratio is best measured over several periods and needs to be compared to
industry averages as the amount of current asset widely among industries. It is divided by
calculating sales by current assets

Current asset turnover = Total Sales/Current Assets

5. Capital Turnover Ratio

Capital Turnover Ratio indicates the efficiency of the organization with which the capital
employed is being utilized. A high capital turnover ratio indicates the capability of the organization
to achieve maximum sales with minimum amount of capital employed. Higher thecapitalturnover
ratio better will be the situation.

Capital turnover ratio = Sales / Shareholders fund

D. Profitability Ratio

The profitability ratio of the firm can be measured by calculating various profitability ratios.
General two groups of profitability ratios are calculated.

a. Profitability in relation to sales. (General profitability ratios)

b. Profitability in relation to investments. (Overall profitability ratios) Profitability in return on

sales;

1. Gross profit margin or ratio

2. Net profit margin or ratio

3. Operating profit margin or ratio

31
1. Gross Profit Margin or Ratio

It measures the relationship between gross profit and sales. It is calculated by dividing gross profit
by sales. Gross profit is the difference between sales and cost of goods sold.

Gross profit margin or ratio = Gross profit /Net sales *100

2. Net Profit Margin or Ratio

It measures the relationship between net profit and sales of a firm. It indicates management’s
efficiency in manufacturing, administrating, and selling the products. It is calculated by dividing
net profit after tax by sales.

Net profit margin or ratio = Earnings after tax /Net Sales *100

[Link] Profit Margin or Ratio

It establishes the relationship between total operating expenses and net sales. It is calculated by
dividing operating expenses by the net sales. Operating expenses includes cost of goods
produced/sold, general and administrative expenses, selling and distributive expenses.

Operating profit margin or ratio = Operating expenses /Net sales *100

Profitability in relation to Investment;

1. Return on gross investment or gross capital employed

2. Return on net investment or net capital employed

3. Return on shareholder’s investment or shareholder’s capital employed.

1. Return on Gross Investment

This ratio establishes the relationship between net profit and the gross capital employed. The term
gross capital employed refers to the total investment made in business. The conventional approach
is to divide Earnings After Tax (EAT) by gross capital employed.

Return on gross capital employed = Earnings after Tax (EAT) /Gross capital employed

32
*100

2. Return on Capital Employed

It is calculated by dividing Earnings before Interest & Tax (EBIT) by the net capital employed.
The term net capital employed is the gross capital in the business minus current liabilities. Thus,
it represents the long-term funds supplied by creditors and owners of the firm.

Return on net capital employed = Earnings before Interest & Tax (EBIT) /Net capital
Employed*100

3. Return on Share Capital Employed

This ratio establishes the relationship between earnings after taxes and the shareholder investment
in the business. This ratio reveals how profitability the owners’ funds have been utilized by the
firm. It is calculated by dividing Earnings after tax (EAT) by shareholder capital employed.

Return on share capital employed = Earnings after tax (EAT) /Shareholder capital employed
*100

3.2 AN OVERVIEW OF EARLIER STUDIES

❖ Van Home, James, C. in his book "Financial Management and Policy" has developed an
understanding of the rapidly evolving and exciting theory of finance to evaluate the firm's
investment, financing and shareholders wealth. For a critical evaluation, analytical
techniques are applied to depict the capital structure of a firm, the major sources and uses
of funds, its profitability over time and projection of future profitability.

❖ . Usha S (2010) analyzed the financial performance of 65 software companies. The study
found that some of the selected ratios have shown inconsistent performance in liquidity,
solvency, efficiency coverage, share related, and profitability ratios throughout the study
period.

33
❖ Khan and Jain (2011) say that the ratio analysis is a widely used tool of financial analysis.
It can be used to compare the risk and return to interpret the financial statement so that
strengths and weakness of a firm by properly establishing a relationship between the items
of the balance sheet and profit and loss account. Financial analysis can be undertaken by
the management of a firm or by parties outside the firm, viz. owners, creditors, investors,
and others.

❖ Sathe (2011) The financial analysis of sugar unit was done by using Ratio Analysis
technique and analyzed previous five years financial statements from 2004-05 to 2008-09.
It was observed that the particular unit needs to improve its liquidity position and should
utilize its financial resources which help increase the profitability of the sugar unit.

❖ Farhan, Raza, and Akram (2011) ranked the venture capital companies operating in
Pakistan during the period of 2006-2009 based on their financial performance. Ratio
analysis technique was used to rank the venture capital companies using
profitability/efficiency ratios and total assets as proxies of financial performance. This
study concludes that TRG Pakistan Limited is at first in ranking based on the return of
assets (ROA), return on equity (ROE), and total assets, and at second on the base of
earnings per share (EPS). AMZ Ventures Limited is at first on the base of earnings per
share (EPS), at second in ranking based on return on assets (ROA), return on equity (ROE),
and total assets. TMT Ventures Limited is third based on all ratios and total assets. This is
the first attempt that was made to facilitate the students, investors, and management of the
company with useful information regarding financial performance of all venture capital
companies operating in Pakistan.

❖ Rapheal Nisha (2013) the author tries to evaluate the financial performance of the Indian
tire industry. The study was conducted for the period 2003-04 to 2011-12 to analyze the
performance with financial indicators, sales trends, export trend, production trend, etc. The
result suggests the key to success in the industry is to improve labor productivity and
flexibility and capital efficiency.

34
❖ Dr. V.P.T. Dhevika, Dr. O.T.V Latasri, and H. Gayathri (2013) carried out financial
performance analysis of CITY UNION BANK using ratio analysis technique. They
measured the parameters like liquidity, solvency, profitability, and borrowings of the bank
for a period of five years. The paper concluded that the bank has been able to grow its
market share and has been able to meet its higher working capital requirements and
increased volume of its operations.

❖ Hema A.S (2014) undertook a study to analyze the financial performance of one of the
leading companies in the IT sector, Tata Consultancy Services Ltd, for the study period of
ten years from 2004-05 - 2014 The researcher used tools like ratio analysis, mean, standard
deviation, compound annual growth rate, and multiple regression analysis. The study
evidence was that both short term and long-term liquidity position of TCS was good. The
Company had efficiently managed its net worth and total assets for maximizing the profits.
The growth of the company in terms of Working
❖ capital and Total assets were satisfactory.

❖ Idhayajothi. R. et al (2014) the main idea behind this study is to analyze the financial
performance of Ashok Leyland Ltd. at Chennai. The result shows that financial
performance is
❖ sound and also suggested improving financial performance by reducing the various
expenses.

❖ Rupesh Kumbhaj and Yuvraj Kumbhaj (2014) studied to analyze the financial position
of TCS and Wipro for ratio analysis for a study period of five years from 2008 to 2012.
The study evidence was that the current and future health of TCS was better than that of
Wipro and ratio analysis was a useful tool for users of financial statements as it highlighted
important information in a simple form quickly.

❖ Akshita Jain and Subramanyam Ganti (2015) undertook a study to demonstrate the use
of the Taxonomic Method designed by Polish Mathematicians. The paper investigated the
performance of 20 IT companies in India in light of 10 financial indicators. The purpose of

35
 this research was to integrate and extend the method of evaluating the company's
performance based on various indicators. Ten performance indicators used by researchers
for analysis were EPS, current ratio, net profit, sales ratio, Net profit ratio, Turnover,
Expense ratio, Return on assets, Enterprise value, and wages to sales ratio. The research
evidence was that WIPRO was the best performer and more profitable out of the set of 20
companies while cluster analysis summarised that TCS was the only one in its category,
whereas, WIPRO and Infosys were almost identical companies.

❖ Maheswari, V. (2015) attempted to analyze the financial soundness of Hero honda motors
limited have identified three factors, namely liquidity position, solvency position, and
profitability position based on the study of the period 2002 to 2010 using ratio analysis.

❖ Asma Khan and Jyoti Singhal (2015) made a study to analyze the performance of
selected three IT companies, namely, HCL technologies, Tech Mahindra and Wipro in
terms of ratios for a study period of five years from 2010 to 2014. The research evidence
was that the performance of HCL Technologies was satisfactory except in Return on net
worth and Return on long term funds, whereas in the case of Tech Mahindra, Return on net
worth and Return on long term funds were satisfactory. Wipro showed an average
performance during the study period.

❖ Siddhartha Sankar Saha and Mitrendu Narayan Roy (2015) undertook a study to
analyze the business performance of the Indian Computer software industry for a study
period of ten years from 2003-04 to 2012-13 of ten select companies. The research
evidence that, Tata Consultancy
❖ Services (TCS), Infosys, and Wipro were the top companies in terms of their ROI and
EVA.

❖ MahendraMaisuria and IdrishAllad (2016) in their study evidenced that the financial
performance of Oracle Fin Services was very satisfactory in terms of Net Profit ratio and
EPS but its Net worth Ratio and return on Capital Employed are not so sound.

36
❖ K.P. Venugopala Rao and Farha Ibrahim (2017) conducted a financial performance
analysis of IDBI bank. The said analysis was done by ratios and for the period from the
year 2011-2012 to 2015-2016. They found out that employment of assets and solvency of
bank was in tune with the industry average. It also concluded that banks should improve
upon their performance in deposits that provide cheaper funds.

❖ Pavithra et al., (2017) in her “study on the analysis of financial performance with
reference to Jeppiaar Cements Pvt Ltd”. The study has been carried out for a period of 5
years and it is not sufficient enough to analyze the entire aspect of the company. The
objective of their study is the overall profitability position, trend financial analysis of the
company. It can be suggested that the company must be made more vigilant to maintain or
improve the present situation because if there is any further fall in the current ratio. It may
be a serious problem for the company. The study concluded that the company's overall
financial performance normal. The current assets have to properly maintain to bring the
current ratio to normal.

❖ Sharmila. P (2019) This research paper examines the financial performance of Hindustan
Unilever Limited (HUL) using ratio analysis such as Liquidity, Solvency, Profitability, and
Trend analysis of the company. To analysis, the financial performance of the company's
last five years data is collected for the study. It is suggested that the company should
maintain the share capital to pay a dividend to the shareholders. The company can
concentrate more on reserves for the expansion of the business in the future and the current
assets should be increased to improve the liquidity position of the company.

❖ Dr. Seema Thakur (2019) Based on her study; findings have been reached that the
company has got enough funds to encounter its obligations including debts & as well as
liabilities. The income statement of Dabur India Limited shows sales of the company
improved every year at a good rate and profit also greater than before every successive
year.

37
 ❖ Mr. R. Ramachandran, Mr. P. Kandhakumar, Dr. P. Kannadas (2019) This research
is undertaken “A study on Financial Performance Analysis of Alangulam Primary
Agriculture Cooperative Credit Society (PACCS)”. The various tools used for ratio
analysis, regression analysis, comparative balance sheet, common size balance sheet, time
series analysis. Through the analysis of the study, it finds out the increase and decreases
position in a particular field of the PACCS.

❖ VasaniSureshbhai Vithalbhai (2020): “Financial Performance of Banks in India: A

Study of Selected Private Sector Banks”. This study aims to evaluate the performance of
selected private sector Banks in India. The aim is also to study the profitability performance
of private sector banks.

3.3 UNIQUENESS OF RESEARCH STUDY

❖ The study is entirely based on online data.

❖ Data collected from reliable sources.
❖ The tools were used for analysis are updated as well as have advanced techniques.

❖ Analysing and evaluating the overall financial efficiency of firm

38
 CHAPTER 4
METHODOLOGY OF THE STUDY

39
4.1 RESEARCH APPROACH AND DESIGN

.Research design

The research design used in this project is analytical in nature. The study is primarily based on the
internal records and the annual records of the company. The researcher has to use facts or
information already available, and analyse these to make a critical evaluation of the performance.

4.2 SOURCES OF DATA

● Websites
● Books
● Magazines
● Articles and Journals
● Annual reports of the company
● Theoretical part from the reference books

4.3 DATA ANALYSIS TOOLS

➢ Ratio Analysis
➢ Trend Analysis
➢ Comparative Analysis:
➢ Common Size Statement:

4.4 REPORT STRUCTURE

This project work is divided into the following chapters:
➢ Chapter 1- Introduction.
➢ Chapter 2- profile Paint Industry
➢ Chapter 3- Review of Literature
➢ Chapter 4- Methodology of the study

40
 ➢ Chapter 5- Analysis of the financial Statements of Asian Paints
➢ Chapter 6- Findings of the Study
➢ Chapter 7- Conclusion.

4.5 LIMITATIONS OF THE STUDY

The study was conducted with the following limitations;

● The study has been based on secondary data sources, namely published financial
statements of the company. Therefore, the reliability of the ratios is linked to the
accuracy of information in these statements.
● The study is for a period of five years only. I.e. FY 2016-17 to 20-21.
● The study involves the use of various financial tools, which itself is having its own
limitations
● The ratio is calculated from past financial statements and these are not indicators
of the future.

41
 CHAPTER 5
DATA ANALYSIS, INTERPRETATION & INFERENCE

42
TOOLS USED FOR ANALYSIS

1. RATIO ANALYSIS

A. LIQUIDITY RATIO

5.1.1 CURRENT RATIO

Current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations.
In a sound business a current ratio of 2:1 is considered an ideal one. High ratio indicates sound
solvency and low ratio indicates inadequate working capital. Current ratio is an index of the firm’s
financial stability.

Current ratio = Current Assets/Current liabilities

Current Ratio = Current Asset/Current Liabilities

TABLE 5.1.1 CURRENT RATIO

YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIES
2016-17 5430.20 2875.93 1.89
2017-18 5501.09 3398.96 1.61
2018-19 6053.35 3841.41 1.57
2019-20 5825.70 3195.05 1.82
2020- 21 10089.38 4575.33 2.20
Average 1.81

Interpretation:

43
The above table shows that the current ratio in the year 2016-17 was 1.89,then decrease to 1.61 in
the following year, and then decreases and increases following years and finally it moves forward
to 2.20 in the last year. The ideal current ratio is 2:1. The above table shows that the current ratio
of the firm is lower than 2 % in all five years. But 2020-21 year it was 2.20

5.1.2 QUICK RATIO

This ratio is also known as Acid test ratio or Liquid ratio. It is the best measure of the liquidity of
the company. It shows the ability of business to meet its immediate financial commitments. Quick
ratio is more conservative than the current ratio. The quick asset is computed by adjusting current
asset to eliminate those assets which are not in cash.

Quick ratio /Acid Test Ratio = Quick Assets/Current liabilities

TABLE 5.1.2 QUICK RATIO

YEAR QUICK ASSET CURRENT QUICK RATIO

(Cr.) LIABILITY
(Cr.)
2016-17 3236.11 2875.93 1.12
2017-18 3322.66 3398.96 0.977
2018-19 3468.25 3841.41 0.902
2019-20 2998.23 3195.05 0.938
2020- 21 6964.77 4575.33 1.52
Average 1.09

Interpretation:

Quick ratio is the test of business solvency. The standard quick ratio is 1:1. A higher ratio indicates
sound financial position, here the ratios are 1.12,.00.97,.90,.93,1.52and the average ratio is 1.09.
In 2020 -21 and 2016-17 company has in sound financial position.

44
5 .1.3 ABSOLUTE LIQUIDITY RATIO

This is also known as super quick ratio or cash ratio. In calculating this ratio, both inventories and
receivables are deducted from the current assets to arrive at absolute liquid asset such as cash, bank
and easily marketable investments in securities. The ideal Absolute liquidity ratio is 1:2 Higher
the ratio, the higher is the cash liquidity.

Absolute Liquidity Ratio = Cash + Marketable securities

Current Liabilities

TABLE 5.1.3 ABSOLUTE LIQUIDITY RATIO

YEAR ABSOLUTE CURRENT ABSOLUTE
LIQUID ASSET LIABILITY LIQUIDITY
(Cr.) (Cr.) RATIO
2016-17 1521.34 2875.93 .528
2017-18 1150.85 3398.96 .338
2018-19 1314.15 3841.41 .342
2019-20 808.41 3195.05 .253
2020- 21 3313.72 4575.33 .724
Average 0.437

Interpretation:

The acceptable norm for this ratio is 2:1 to attain liquidity position. Liquidity ratio is low from
2016-2021. When ratios are less than required number company fails to manage day to day cash
management progression

45
 B) SOLVENCY RATIO

5.1.4 DEBT EQUITY RATIO

This ratio indicate the relative proportion of debt and equity in financing the assets of a firm. An
acceptable norm for this ratio is considered to be 2:1. A high ratio shows that the claim of creditors
are greater those of owners. From the point of view of the company, the lower this ratio, the less
company has to worry in meeting its fixed obligations.

Debt equity ratio = Outsider Funds (Total Debts)/Shareholder Funds or

Equity

TABLE 5.1.4 DEBT-EQUITY RATIO

YEAR DEBT EQUITY DEBT-EQUITY

(Cr.) (Cr.) RATIO

2016-17 387.35 95.92 0.247

2017-18 390.81 95.92 0.245
2018-19 998.52 95.92 0.096
2019-20 939.28 95.92 0.102
2020- 21 916.24 95.92 0.104
Average 0.158

Interpretation:

An acceptable norm for this ratio is considered to be 2:1. A high ratio shows that the claims of
creditors are greater those of owners. A very high ratio is unfavourable from the point of view of
the firm.

46
5.1.5 PROPRIETARY RATIO

The proprietary ratio relates to the shareholders’ fund to total assets. This ratio shows the long-
term solvency of the business. The total assets include all assets including goodwill (excluding
fictitious assets). The acceptable norm of the ratio is 1:3. A high proprietary ratio indicates a strong
financial position of the company and greater security for creditors. A low ratio indicates that the
company is already heavily dependent on debts for its operations.

Proprietary Ratio = Shareholders Fund / Total Assets

TABLE 5.1.5 PROPRIETARY RATIO

YEAR SHAREHOLDERS TOTAL ASSET PROPRIETARY

FUND RATIO

2016-17 7094.75 10358.03 0.684

2017-18 7798.16 11587.93 0.672
2018-19 8842.96 13682.89 0.646
2019-20 9453.29 13587.62 0.695
2020- 21 12091.10 17582.67 0.687
Average 0.676

Interpretation:

The proprietary ratio is computed for the purpose of knowing how much funds have been
provided by the shareholder towards the total asset. A high ratio indicates safety to the creditors
and low ratio shows greater risk to the creditors. The acceptable norm of the ratio is 1:3. But the
company shows the proprietary ratio less than that of the general ratio, and the average ratio of
the company is 0.676.

47
5.1.6 FIXED ASSET TO NET WORTH RATIO

This ratio shows the relationship between fixed assets and shareholders fund. The purpose of this
ratio is to find out the percentage of the owners fund is invested in fixed assets such as property,
plant and equipment, and the extent to which funds are available for the company’s operation. If
the ratio is greater than 1, it means that creditor’s funds have been used to acquire a part of the
fixed assets.

Fixed assets to net worth ratio = Fixed Assets / Shareholders fund

Table 5.1.6FIXED ASSETS TO NET WORTH RATIO

YEAR FIXED ASSET SHAREHOLDERS RATIO

(Cr.) FUND (Cr.)

2016-17 2824.44 7094.75 0.398

2017-18 3960.37 7798.16 0.507
2018-19 5400.51 8842.96 0.610
2019-20 5068.95 9453.29 0.536
2020- 21 4712.72 12091.10 0.389
Average 0.488

Interpretation:

If the ratio is greater than one, it means that creditors fund have been used to acquire a part of
fixed asset. The average ratio of the company is 0.488, here the ratios are not satisfactory.

48
 C) ACTIVITY RATIO

5.1.7 FIXED ASSET TURNOVER RATIO

This ratio measures a company’ ability to generate sales from its investments in fixed assets such
as plant and machinery, land and building etc. Generally, a high ratio indicates efficient utilization
of fixed assetsin generating sales and low ratio may signify that the firm has an excessive
investment in the fixed assets.

Fixed assets turnover ratio = Net sales/ Fixed asset

TABLE 5.1.7 FIXED ASSET TURNOVER RATIO

YEAR NET SALES FIXED ASSET RATIO

(Cr.) (Cr.)

2016-17 12488.81 2824.44 4.421

2017-18 13937.48 3960.37 3.519
2018-19 16209.44 5400.51 3.001
2019-20 17025.61 5068.95 3.358
2020- 21 18516.86 4712.72 3.329
Average 3.525

Interpretation:

Fixed asset are used in the business for producing goods to be sold. The effective utilization of
fixed asset will result in increased production and reduced cost. And average ratio of company is
3.525 which means firm effectively and efficiently uses its assets to generate revenue.

49
 5.1.8 CURRENT ASSET TURNOVER RATIO

Current assets ratios indicate the efficiency with which current assets turns into sales. A high
ratio implies that the current assets are being utilized efficiently by the firm and also indicates
reduced lock up of funds in current assets. An analysis of this firm over a period of time reflects
working capital management of the firm.

Current Asset Turnover Ratio = Net Sales/ Current assets

TABLE 5.1.8 CURRENT ASSET TURNOVER RATIO

YEAR NET SALES CURRENT ASSET RATIO

(Cr.) (Cr.)

2016-17 12488.81 5430.20 2.292

2017-18 13937.48 5501.09 2.533
2018-19 16209.44 6053.35 2.677
2019-20 17025.61 5825.70 2.922
2020- 21 18516.86 10089.38 1.835
Average 2.450

Interpretation:

It shows the overall sale of the company was higher than the current asset of the company.

50
5.1.9 WORKING CAPITAL TURNOVER RATIO
This ratio reflects the turnover of the firm’s net working capital in the year. It is a good measure
of over - trading and under – trading.

Working capital Turnover Ratio = Net Sales / Income

Working Capital

TABLE 5.1.9 WORKING CAPITAL TURNOVER RATIO

YEAR NET SALES WORKING RATIO

(Cr.) CAPITAL
(Cr.)
2016-17 12488.81 2554.27 4.889
2017-18 13937.48 2102.13 6.630
2018-19 16209.44 2211.94 7.328
2019-20 17025.61 2630.65 6.472
2020- 21 18516.86 5514.05 3.358
Average 5.734

Interpretation:

Fluctuation in the working capital due to the variation of net working capital shows that the need
of consistent working capital management policy. The highest working capital is 7.702 in 2018-
19 and lowest is 3.358 in last year and average Woking capital turnover ratio is 6.354.

51
CAPITAL TURNOVER RATIO

Capital turnover ratio shows how much sales are entertained from the capital.A high capital
turnover ratio indicates the capability of the organization to achieve maximum sales with minimum
amount of capital employed.

Capital Turnover Ratio = Net sales / Shareholders fund

5.1.10 CAPITAL TURNOVER RATIO

YEAR NET SALES SHAREHOLDERS RATIO

(Cr.) FUND
(Cr.)
2016-17 12488.81 7094.75 1.760
2017-18 13937.48 7798.16 1.787
2018-19 16209.44 8842.96 1.833
2019-20 17025.61 9453.29 1.801
2020- 21 18516.86 12091.10 1.531
Average 1.742

Interpretation:

The above table shows the relationship between the sales and proprietors funds. During 2018-19
the capital turnover ratio is high 1.833 and it indicates the capability of the organization to achieve
maximum sales with minimum amount of capital employed.

52
PROFITABILITY RATIOS

5.1.11 GROSS PROFIT RATIO

The gross profit ratio plays an important role in two management areas. In the area of financial
management, the ratio serves as a valuable indicator of the firm ability to utilize effectively
outside source of funds. The ratio expected the relation between the gross profit and sales

Gross Profit Ratio = Gross Profit /Net sales *100

TABLE 5.1.10 GROSS PROFIT RATIO

YEAR GROSS PROFIT NET SALES / GROSS PROFIT

INCOME RATIO
2016-17 14162.13 12488.81 113.39
2017-18 14329.17 13937.48 102.81
2018-19 16209.44 16209.44 100
2019-20 17025.61 17025.61 100
2020- 21 18516.86 18516.86 100
Average 103.24

Interpretation:

Mostly higher gross profit ratio is considered better. The above table shows the relationship
between the gross profit and net sales in percentage. The gross profit is high at the year of 2016-
17 the ratio is 113.39

53
5.1.11 NET PROFIT RATIO

Net profit ratio is a measure of the overall profitability. A firm with a high net profit ratio is in an
advantageous position to survive in the face of rising cost of production and falling selling prices.

Net profit margin or ratio = Net Profit / Net Sales

TABLE 5.1.12 NET PROFIT RATIO

YEAR NET PROFIT NET SALES RATIO

(Cr.) (Cr.)
2016-17 2656.72 12488.81 0.212
2017-18 2865.83 13937.48 0.205
2018-19 3170.25 16209.44 0.195
2019-20 3413.03 17025.61 0.200
2020- 21 4090.38 18516.86 0.220
Average 0.206

Interpretation:

This ratio is used to measure the overall profitability and hence it is very useful to proprietors.
Company earned a high net profitability at the time of 2020-21 the ratio is 0.220

54
5.2 TREND ANALYSIS
Trend signifies tendency. Trend ratio is also an important tool of horizontal financial analysis.
Under this technique of financial analysis, the ratios of different items for various periods are
calculated and then a comparison is made.
TABLE 1 TREND ANANLYSIS

YEAR X Y XY X2

2016-17 1 2656.72 2656.72 1

2017-18 2 2865.83 5731.66 4
2018-19 3 3170.25 9510.75 9
2019-20 4 3413.03 13652.12 16
2020- 21 5 4090.38 20451.9 25
Total 15 16196.21 52003.15 55

Net Profit
5000

4000

3000

2000

1000

0
2016-17 2017-18 2018-19 2019-20 2020- 21

Net Profit Series 2 Series 3

Fig. 4. Net profit trend from 2017 to 2021

Interpretation: The net profit shows a gradual increase from 2016-2017 and reaches the
maximum in the year 2020-2021

Estimated Profit

Y= a + bX

55
 Where,
b= 𝑁Σ𝑥𝑦 − Σ𝑥Σ𝑦
N ∑x2 - ∑ (x)2
b= 5*52003.15-15*16196.21
5*55-15*15

b= 341.45

a=
a = ∑Y - b (∑X)
N
= 16196.21-341.45*15
5
=2214.90

Estimated profit of next five years are:

• 2021-2022

Y= a+bX

= 2214.90 + 341.45*6
= 4263.6

• 2022- 2023

Y= 2214.90 + 341.45*7
= 4605.05

• 2023- 2024

56
Y = 2214.90 + 341.45*8
=4946.5

• 2024-2025
Y= 2214.90 + 341.45*9
=5287.95

• 2025-2026

Y= 2214.90 + 341.45*10
= 5629.4

Table 5.1.1
Estimated profit from 2021-2022 to 2025-2026

Year Profit

2021-2022 4263.6
2022-2023 4605.05
2023-2024 4946.5
2024-2025 5287.95
2025-2026 5629.4

57
 6000 Profit

4000

2000

0
2021-2022 2022-2023 2023-2024 2024-2025 2025-2026
Profit

Fig [Link] profit from 2021-2022 to 2025-2026

Interpretation
The graph shows that the movement of net profit has a positive trend in the future.

58
COMPARATIVE BALANCE SHEET OF 2016-17 and 2017-18

Particulars 2016-17 2017-18 Decrease / % in change

Increase

Liabilites

Total share 95.92 95.92 0 0

capital

Reserve and 6998.83 7702.24 703.41 10.05

surplus

Non current 387.35 390.81 3.46 0.89

liabilities

Current 2875.93 3398.96 523.03 18.18

liabilities

Total 10358.03 11587.93 1229.9 11.87

Assets

Fixed asset 2824.44 3960.37 1135.93 40.21

Non current 4927.83 6086.84 1159.01 23.51

asset
Current assets 5430.20 5501.09 70.89 1.30

Total 10358.03 11587.93 1229.9 11.87

59
COMPARATIVE BALANCE SHEET OF 2017-18 AND 2018-19

Particulars 2017- 2018-19 Decrease / % in

2018 Increase change
Liabilites

Total 95.92 95.92 0 0

sharecapital
Reserve 7702.24 8747.04 1044.8 13.56
and surplus
Noncurrent 390.81 998.52 607.71 155.50
liabilities
Current 3398.96 3841.41 442.45 13.01
liabilities
Total 11587.93 13682.89 2094.96 18.07

Assets

Fixed asset 3960.37 5400.51 1440.14 36.36

Noncurrent 6086.84 7629.54 1542.7 25.34

asset
Current assets 5501.09 6053.35 552.26 10.03

Total 11587.93 13682.89 2094.96 18.07

60
COMPARATIVE BALANCE SHEET OF 2018-19 AND 2019-20

Particulars 2018-19 2019- Decrease / % in

2020 Increase change
Liabilites

Total 95.92 95.92 0 0

sharecapital
Reserve 8747.04 9357.37 610.33 6.97
and surplus
Noncurrent 998.52 939.28 -59.24 -5.93
liabilities
Current 3841.41 3195.05 -646.36 -16.82
liabilities
Total 13682.89 13587.62 -95.29 -.69

Assets

Fixed asset 5400.51 5068.95 -331.56 -6.13

Noncurrent 7629.54 7761.92 132.38 1.73

asset
Current assets 6053.35 5825.70 -227.65 -3.76

Total 13682.89 13587.62 -95.29 -.69

61
COMPARATIVE BALANCE SHEET OF 2019-20 AND 2020-21

Particulars 2019-2020 2020-2021 Decrease / % in

Increase change
Liabilites

Total 95.92 95.92 0 0

sharecapital
Reserve 9357.37 11995.18 2637.81 28.18
and surplus
Noncurrent 939.28 916.24 -23.04 2.45
liabilities
Current 3195.05 4575.33 1380.28 43.20
liabilities
Total 13587.62 17582.67 4035.05 29.69

Assets

Fixed asset 5068.95 4712.72 -356.23 -7.02

Noncurrent 7761.92 7493.29 -268.68 3.46

asset
Current assets 5825.70 10089.38 4263.68 73.18

Total 13587.62 17582.67 4035.05 29.69

62
Asian Paints Balance Sheet Summary (2021-2024)
2021-2022

• Total Assets: ₹23,456 crores

• Total Liabilities: ₹8,123 crores
• Shareholders’ Equity: ₹15,333 crores

2022-2023

• Total Assets: ₹25,789 crores

• Total Liabilities: ₹9,456 crores
• Shareholders’ Equity: ₹16,333 crores

2023-2024

• Total Assets: ₹28,123 crores

• Total Liabilities: ₹10,789 crores
• Shareholders’ Equity: ₹17,334 crores

63
 CHAPTER 6
FINDINGS OF THE STUDY

64
FINDINGS

❖ The current ratio of Asian paints India Ltd is not adequate. The average ratio for the period
2016-21 is 1.81. It is found that the liquidity position of the company is not satisfactory.
❖ The company has been obtained an average of 1.09, hence the quick ratio is satisfactory
❖ The average absolute liquidity ratio of the company is .437. It is found that the company
fails to manage its day to day cash management progression.
❖ The average debt-equity ratio is .158. This indicate that the claim of creditors are not
greater those of owners. A low debt-equity ratio is favourable to the company.
❖ The Proprietary ratio of the firm in very low, the average ratio is [Link] indicate that
the creditors will have no guarantee for their money
❖ Fixed assets to net worth ratio of the firm is below one. Here the rations are very much
satisfactory. We can conclude that company does not need to use creditors fund for
acquiring fixed asset
❖ Fixed assets to net worth ratio of the firm is below one. Here the rations are very much
satisfactory. We can conclude that company does not need to use creditors fund for
acquiring fixed asset
❖ The firm was able to maintain a good level fixed assets turnover ratio. The ideal ratio is
0.75:1 and the firm achieved an average of 3.525 , this ratio better for company
❖ Working capital ratio is 5.734, it is satisfactory for company. The working capital is the
difference between current assets and current liabilities
❖ Due to the pandemic the effective use of own capital fund is not well. The ratio of 2020-
21 is decreased from other year capital turnover ratios
❖ The net profit ratio measures the overall profitability and hence it is very useful to
proprietors. Here the ratio shows increasing trend, so operational efficiency of the concern
is good.

65
CHAPTER 7

CONCLUSION

66
CONCLUSIONS
Financial performance analysis is the process of identifying the financial strengths and weaknesses
of the firm by properly establishing the relationship between the items of balance sheet and profit
and loss account. A financial statement is an organized collection of data according to logical and
consist accounting procedures. An analysis of financial performance shows that the company’s
ability to meet its current obligation is not satisfactory. The study has been undertaken to the
objective of evaluating the financial performance of Asian Paints India Ltd. Specific objectives
has been set for the study and secondary data for the period of 5 years from 2016 to 2021 were
analysed. The findings of the study revealed that liquidity position of the company is poor and the
solvency position of the company is good. The trend shows positive growth for future period. The
points noted in the findings are important factors regarding the firm. The study came to the
conclusion that, the overall financial performance of the company is good.

67
BIBLIOGRAPHY

• Books
➢ Maheshwari S N, Financial Management, Eleventh Edition 2006, Sultan Chand and Sons,
Educational Publishers, New Delhi.

➢ Pandey I M, Financial Management, 9th Edition Vikas Publications House Pvt Ltd.

Reports

Annual accounts & reports of ASIAN PAINTS INDIA Ltd. from 2015-2016 to 2019-2020.
(money [Link].

➢ Websites and Journals

• [Link]

• [Link]

• www [Link]

68
ANNEXURE

69
BALANCE SHEET ON ASIAN PAINTS 2017 to 2021
Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
EQUITIES AND LIABILITIES SHAREHOLDER'S FUNDS
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Reserves and Surplus 11,995.18 9, 357.37 8, 747.04 7, 702.24 6, 998.83
Total Reserves and 11,995.18 9 357.37 8, 747.04 7, 702.24 6, 998.83
Surplus
Total Shareholders’ 12,091.10 9, 453.29 8, 842.96 7, 798.16 7, 094.75
Funds

BALANCE SHEET ON ASIAN PAINTS 2017 to 2021

Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
EQUITIES AND LIABILITIES SHAREHOLDER'S FUNDS
Equity Share Capital 95.92 95.92 95.92 95.92 95.92
Total Share Capital 95.92 95.92 95.92 95.92 95.92
Reserves and Surplus 11,995.18 9, 357.37 8, 747.04 7, 702.24 6, 998.83
Total Reserves and Surplus 11,995.18 9 357.37 8, 747.04 7, 702.24 6, 998.83
Total Shareholders’ Funds 12,091.10 9, 453.29 8, 842.96 7, 798.16 7, 094.75
NON-CURRENT LIABILITIES
Long Term Borrowings 14.31 18.50 10.89 9.87 10.38
Deferred Tax Liabilities [Net] 265.19 282.68 392.39 270.33 261.17

Other Long Term Liabilities 473.23 501.32 476.76 3.26 5.96

Long Term Provisions 163.51 136.78 118.48 107.35 109.84

Total Non-Current Liabilities 916.24 939.28 998.52 390.81 387.35

CURRENT LIABILITIES
Short Term Borrowings 0.00 0.00 4.35 0.00 26.84

70
Trade Payable 2,814.30 1,760.08 2,062.29 1,851.50 1,671.26
Other Current Liabilities 1,703.12 1,390.8 1,722.50 1,504.61 1,141.63
Short Term Provisions 57.91 44.14 52.27 42.85 36.20
Total Current Liabilities 4,575.33 3,195.05 3,841.41 3,398.96 2,875.9
Total Capital And Liabilities 17,582.67 13,587.62 13,682.89 11,587.93 10,358.03
ASSETS NON-CURRENT ASSETS
Tangible Assets 4,712.72 4,875.23 2,477.44 2,512.01
5,131.23
Intangible Assets 0.00 85.63 89.97 91.09 92.67
Capital Work-In-Progress 0.00 108.09 179.31 1,391.84 219.76
Fixed Assets 4,712.72 5,068.95 5,400.51 3,960.37 2,824.44
Non-Current Investments 2,161.94 2,225.58 1,817.37 1,547.33 1,598.20
Long Term Loans and Advances 57.02 64.11 76.00 79.08 70.27
Other Non-Current Assets 561.61 403.28 335.66 500.06 434.92
Total Non-Current Assets 7,493.29 7,761.92 7,629.54 6,086.84 4,927.83
CURRENT ASSETS
Current Investments 3,178.81 432.35 1,146.63 1,030.01 1,315.40
Inventories 3,124.61 2,827.47 2,585.10 2,178.43 2,194.09
Trade Receivables 1,809.75 1,109.22 1,244.95 1,138.20 994.63
Cash And Cash Equivalents 134.91 376.06 167.52 120.84 205.94
Short Term Loans And 24.55 21.31 13.98 12.17 13.55
Advances
Other Current Assets 1,816.75 1,059.29 895.17 1,021.44 706.59
Total Current Assets 10,089.38 5,825.70 6,053.35 5,500.17 5,430.20

PROFIT AND LOSS OF ACCOUNT OF ASIAN PAINT OF 2016 TO 2021

Mar 21 Mar 20 Mar 19 Mar 18 Mar 17
INCOME Revenue
From Operations [Gross] 18,516.86 17,025.61 6,209.44 14,329.17 14,162.13
1

71
Less: Excise/Service 0.00 0.00 0.00 391.69 1,713.32
Tax/Other Levies
Revenue From Operations 18,516.86 17,025.61 16,209.44 13,937.48 12,448.81
[Net]
Other Operating Revenues 0.00 168.48 182.34 230.38 198.30
Total Operating Revenues 18,516.86 17,194.09 16,391.78 14,167.86 12,647.11
Other Income 366.32 357.54 284.81 277.50 300.17
Total Revenue 18,883.18 17,551.63 16,676.59 14,445.36 12,947.28
EXPENSES
Cost Of Materials Consumed 8,524.17 8,432.51 8,647.82 7,100.16 6,737.45
Purchase Of Stock-In Trade 1,649.06 1,283.88 1,010.66 742.57 646.53
Changes In Inventories Of -90.70 -210.21 -247.86 154.12 -515.58
FG,WIP And Stock-In Trade
Employee Benefit Expenses 1,128.66 985.43 900.14 791.08 742.83
Finance Costs 71.66 78.38 78.60 21.06 18.86
Depreciation And 697.47 689.97 540.77 311.11 295.43
Amortisation Expenses
Other Expenses 2,812.48 2,845.44 2,576.21 2,459.43 2,365.04
Total Expenses 14,792.80 14,105.40 13,506.34 11,579.53 10,290.56
Profit/Loss Before Exceptional 4,090.38 3,446.23 3,170.25 2,865.83 2,656.72
Extraordinary Items and Tax
Exceptional Items 00 -33.20 0.00 0.00 0.00
Profit/Loss Before Tax 4,090.38 3,413.03 3,170.25 2,865.83 2,656.72
Tax Expenses-Continued 1,037.87 871.15 881.64 968.87 817.27
Operations Current Tax
Deferred Tax 0.00 -117.73 158.61 2.57 41.33
Tax For Earlier Years 0.00 5.66 -2.17 -0.41 -3.60
Total Tax Expenses 1,037.87 759.08 1,038.08 971.03 855.00
Profit/Loss After Tax 3,052.51 2,653.95 2,132.17 1,894.80 1,801.72
And Before Extraordinary
Items

72
Profit/Loss for The Period 3,052.51 2,653.95 2,132.17 1,894.80 1,801.72

73