16 Financial Management Solution Comparative Balance Sheet Analysis Increased/ Increased/ Particulars Year ending 31st March Decreased Decreased (Amount) (Percentage) Assets Current Assets 2003 2004 Rs. Rs. Rs. Rs. Cash and Balance with RBI 27,06,808 22,37,601 (+) 4,69,207 (+) 17.33 Balance with Banks and money at call and short notice 11,36,781 16,07,975 (–) 4,71,194 (–) 41.45 Total Current Assets 38,43,589 38,45,576 1987 0.052 Fixed Assets Investments 2,14,21,060 2,35,37,098 (-) 21,16,038 (-) 9.88 Advances 1,95,99,764 2,11,39,869 (-) 15,40,105 (-) 7.86 Fixed Assets 4,93,996 5,36,442 (-) 42,446 (-) 8.59 Other Assets 18,58,064 18,35,883 (+) 22,181 (+) 1.19 Total Fixed Assets 4,33,72,884 4,70,49,292 (+) 36,76,408 8.48 Total Assets 4,72,16,473 5,08,94,868 36,78,395 7.79 Current Liabilities Borrowings 7,27,671 2,84,690 (+) 4,42,981 60.88 Other Liability and Provisions 16,74,165 17,99,197 (–) 1,25,032 7.47 Total Current Liability 24,01,836 20,83,887 3,17,949 13.24 Fixed Liability Capital 2,845 2,845 — — Reserves surplus 39,66,009 47,65,406 (+) 7,99,397 20.16 Deposit 4,08,45,783 4,40,42,730 (+) 31,96,947 7.83 Total Fixed Liability 4,48,14,637 4,88,10,981 (+) 39,96,344 8.92 Total Liability 4,72,16,473 5,08,94,868 36,78,395 7.79 Comparative Profit and Loss Account Analysis Another <strong>com</strong>parative <strong>financial</strong> statement analysis is <strong>com</strong>parative profit and loss account analysis. Under this analysis, only profit and loss account is taken to <strong>com</strong>pare with previous year’s figure or <strong>com</strong>pare within the statement. This analysis helps to understand the operational performance of the business concern in a given period. It may be analyzed on horizontal basis or vertical basis.
Financial Statement Analysis 17 Trend Analysis The <strong>financial</strong> statements may be analysed by <strong>com</strong>puting trends of series of information. It may be upward or downward directions which involve the percentage relationship of each and every item of the statement with the <strong>com</strong>mon value of 100%. Trend analysis helps to understand the trend relationship with various items, which appear in the <strong>financial</strong> statements. These percentages may also be taken as index number showing relative changes in the <strong>financial</strong> information resulting with the various period of time. In this analysis, only major items are considered for calculating the trend percentage. Exercise 2 Calculate the Trend Analysis from the following information of Tamilnadu Mercantile Bank Ltd., taking 1999 as a base year and interpret them (in thousands). Year Deposits Advances Profit 1999 2,05,59,498 97,14,728 3,50,311 2000 2,66,45,251 1,25,50,440 4,06,287 2001 3,19,80,696 1,58,83,495 5,04,020 2002 3,72,99,877 1,77,26,607 5,53,525 2003 4,08,45,783 1,95,99,764 6,37,634 2004 4,40,42,730 2,11,39,869 8,06,755 Solution Trend Analysis (Base year 1999=100) (Rs. in thousands) Deposits Advances Profits Year Amount Trend Amount Trend Amount Trend Rs. Percentage Rs. Percentage Rs. Percentage 1999 2,05,59,498 100.0 97,14,728 100.0 3,50,311 100.0 2000 2,66,45,251 129.6 1,25,50,440 129.2 4,06,287 115.9 2001 3,19,80,696 155.5 1,58,83,495 163.5 5,04,020 143.9 2002 3,72,99,877 181.4 1,77,26,607 182.5 5,53,525 150.0 2003 4,08,45,783 198.7 1,95,99,764 201.8 6,37,634 182.0 2004 4,40,42,730 214.2 2,11,39,869 217.6 8,06,755 230.3 Common Size Analysis Another important <strong>financial</strong> statement analysis techniques are <strong>com</strong>mon size analysis in which figures reported are converted into percentage to some <strong>com</strong>mon base. In the balance sheet the total assets figures is assumed to be 100 and all figures are expressed as a percentage of this total. It is one of the simplest methods of <strong>financial</strong> statement analysis, which reflects the relationship of each and every item with the base value of 100%.
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