The following are the Balance Sheets of Mohan Ltd., at the end of 2004 and 2005.
Prepare a Comparative Balance Sheet and study the financial position of the company.
The following are the balance sheets of Devi Co. Ltd at the end of 2002 and 2003. Prepare a Comparative Balance Sheet and study the financial position of the concern.
Comparative Balance Sheet of Devi Co Ltd.
1) The comparative balance sheet of a company reveals that during the year 2003, there has been an increase in fixed asset by 55,000 i.e. 39.29% while equity Capital increase by 65,000 i.e. 54.17 and preference capital increase by 25,000 i.e. 35.71. It shows that company purchase fixed assets from long term source of finance, which does not affect the working capital.
2) The current assets have increased by 82,000 i.e. 42.30% and current liabilities have increased by 39,500 i.e. 47.31. It shows ratio between current assets and current liabilities more or less should be same compare to previous year.
3) The overall financial position of a company is satisfactory.
Convert the following Income Statement into Common Size Statement and interpret the changes in 2005 in the light of the conditions in 2004.
Common Size Income Statement
1) The Net Profit of the company increased from 9% to 15.46 % as the income from operations has increased from 9.15% to 15.71%.
2) Simultaneously the company has tried to reduce its costs to improve its profit margin.
3) Profitability of the company has improved over the year.
Following are the balance sheets of Reddy Ltd. as on 31 March 2003 and 2004.
Analyse the financial position of the company with the help of the Common Size Balance Sheet.
Common Size Balance Sheet of Reddy Ltd. as on March 31, 2003 and 2004
1) The Current Assets has decreased from 44.21% to 25.74% i.e. by 18.47% and the Current Liabilities has reduced from 22.31% to 8.84% i.e. by 13.47%. Despite the decrease in the Current Assets and the decrease in the Current Liabilities, the Current Ratio has improved.
2) Fixed Assets, Long term External Debts and the Share Capital have increased from 51.88% to 70.14%, 17.03% to 24.72%, 34.07% to 41.78% respectively. Thus from this, it can be inferred that the company had purchased fixed assets from long-term source of finance. As the fixed assets were financed through the long-term debts, so the company's working capital remained unaffected.
3) Analysing the reducing figures of the Cash and Bank Balances, it can be inferred that the company has a poor cash management policy. Thus we can predict that the company may face an acute liquidity problem.
The accompanying balance sheet and profit and loss account related to SUMO Logistics Pvt. Ltd. Convert these into Common Size Statements.
Previous Year = 2005, Current Year = 2006
Income Statement for the year ended
Common Size Balance Sheet of SUMO Logistics Pvt. Ltd. As on 2005 and 2006
Common Size Income Statement of SUMO Logistics Pvt. Ltd.
For the year ended 2005 and 2006