A Project report
On
Financial analysis
Of
TRUSTED HEALTH SERVICES PRIVATE LIMITED
REVIEW OF LITERATURE
The literature review of this study will emphasis and on the related studies on conduct
complete financial due diligence of a company for investment analysis
The basis of financial planning analysis and decision making is the financial information
(statements). Financial statements are needed to predict, compare and evaluate a firm’s
earning ability. It is also required to aid in economic decision making investment and
financing decision making. The financial information of an enterprise is contained in the
financial statements. The use of financial statement analysis in investment decision has been
addressed by a series of authors.
According to Gautam, U. S. (2005) Accountancy (P#215) Financial Statement is generally
explained as financial information which is the information relating to financial position of
any firm in a capsule form.
Financial statement according to J. A Ohison (1999) was defined as a written report that
summarizes the financial status of an organization for a stated period of time. It includes an
income statement and balance sheet or statement of the financial position describing the
flow of resources, profit and loss and the distribution or retention of profit.
According to Pandey, I.M. (2005 Financial management) profitability is the ability of an
entity to earn income. It can be assessed by computing various relevant measures including
the ratio of net sales to assets, the rate earned on total assets etc.
According to Meigns et al. (2001), Financial Statement simply means a declaration of what is
believed to be true and which, communicated in terms of monetary unit. It describes certain
attributes of a company that is considered to fairly represent its financial activities.
Due Diligence Report
Name of the company: - Trusted health private limited
Industry: - Internet
Company size:-51-200 employees
Headquarters: - San Francisco, CA
Nature of the Business:-
Trusted Health is reinventing the employment landscape for healthcare
professionals with a digital employment platform built by nurses for nurses.
Combining personal touch with modern technology, Trusted Health is building the
future of work in healthcare by enabling nurses to seamlessly manage their
careers. The platform simplifies how they create resumes, manage credentials,
and understand and apply for opportunities in real-time.
Investors include Craft Ventures, Felicis Ventures and Founder Collective, as well
as healthcare innovators like Texas Medical Center and Healthbox.
The San Francisco-based company, operated by Trusted Inc., was founded in 2017
by a team of nurses, labor marketplace experts and technology innovators who
previously worked at Hired, Entelo, Google Hire, Job Score, LinkedIn and top
health systems. Trusted Health supports flexible and permanent hiring in all 50
states and Washington, D.C.
Trusted Health’s nurse advocates – all former bedside nurses – provide one-on-
one support and coaching through the entire Trusted Health experience. For
nurses interested in flexible jobs, Trusted Health serves as their W2 employer,
providing an unrivaled end-to-end experience – from on boarding and
credentialing to payroll and 24/7 support.
TREND ANALYSIS OF PROFIT AND LOSS STATEMENT OF TRUSTED HEALTH
PVT LTD
2017-18 2016-17 2015-16 trend % trend % trend %
INCOME Note 2017-18 2016-17 2015-16
Revenue from
Operations 11 6,639,755 2,714,371 56,199 11815% 4830% 100%
Other Income 12 11,500 45,893 22 52273% 208605% 100%
Total Revenue 6,651,255 2,760,264 56,221 11831% 4910% 100%
Expenditure 100%
Cost of material
consumed 531,648 - - %0 0% 100%
Cost of sales 57247 - - 0% 0% 100%
Changes in Inventories of
Finished Goods, 'Work-
in-Progress and Stock-in-
Trade 0 0 0 0% 0% 100%
Employee benefits
expenses 13 6,881,975 3,025,305 675,480 1019% 448% 100%
Other operating
expenses 14 0 74,750 5,000 0% 1495% 100%
Administrative expenses 15 689,955 343,846 33,580 2055% 1024% 100%
Financial costs 16 834,122 48,772 1,816 45932% 2686% 100%
Depreciation and
Amortization expenses 7 54,813 21,891 11,560 474% 189% 100%
Other expenses 17 1,633,619 4,424,945 98,790 1654% 4479% 100%
Total expenses 10,683,379 7,939,509 826,226 1293% 961% 100%
Profit before tax (4,032,124) (5,179,245) (770,005) 524% 673% 100%
Tax expenses 0% 0% 100%
Current tax 0 0 0 0% 0% 100%
Excess written back 0 -3 0 0% 0% 100%
Deferred tax 4,323 9,022 4,550 95% 198% 100%
Profit for the year (4,036,447) (5,188,264) (774,555) 521% 670% 100%
Earnings per equity share
of face value of Rs .10
each Basic and Diluted (44.14) (53.26) (76.34) 58% 70% 100%
INTERPRETATION
The revenue trends of the company have increased at a higher rate compared to the
previous years. The current year i.e., (2017-18) revenue from operations trend is much
higher than the previous year’s i.e., (2016-17) and (2015-16). The comparison of the overall
revenue trend between current and previous year the revenue trend increased more than
thousand times. The current year’s revenue trend is still more than its previous year. Thus
company performed well in the year 2017-18 in terms of revenue generating.
Though the company performed well in terms of generating revenue it is still in losses
because of its expenses. The employee benefits expenses alone in each year is more than its
revenue so the overall expenses of the company are much higher than the revenue in all the
three consecutive which made the company to remain losses for all the three years. The
trend of each and every expense is higher by thousand times compared to the base year.
The trend value of the loss in the year (2017-18) is less than previous year i.e., (2016-17)
which shows that the company has taken some measures to avoid losses.
The tax expenses in the current year are reduced when compared to previous year. This was
a benefit to the company
The overall performance of the company is not satisfactory in the current year because the
trend of the loss is much higher than the base year.
The company must and should control its employee benefit expenses and other expenses
including financial costs and administrative expenses in order to gain profits.
The EPS is also in negative which is not a good indicator.
The overall financial position of the company is not satisfactory
ANALYSIS OF BALANCE SHEET OF TRUSTED HEALTH PVT LIMITED
Note As on 31st level of As on 31st level of As on 31st level of
march 2017 assets and march assets and march assets and
liabilities 2016 liabilities 2015 liabilities
EQUITY AND LIABILITIES
Shareholder's Funds
Share Capital 2 1,021,400 36.36% 971,400 92.33% 148,030 8.59%
Reserves and Surplus
(6,793,653) (241.82%) (2,757,206) (262.06%) (486,3750 (28.22%)
Money Received against
Share Warrants
0 0 0.00% 0 0.00%
(5,772,253) (205.46%) (1,785,806) (169.73%) (338,345) (19.63%)
Share Application Money
Pending Allotment -
0 0.00% 0 0.00% 1,703,790 98.86%
Non-Current Liabilities
Long Term Borrowings
4 5,314,625 189.17% 304,000 28.89% 175,000 10.15%
Defferred Tax Liability
(Net) 17,895 0.64% 13,572 1.29% 4,550 0.26%
Other Long Term
Liabilities 0 0.00% 0 0.00% 0 0.00%
Long Term Provisions
0 0.00% 0 0.00% 0 0.00%
5,332,520 189.81% 317,572 30.18% 179,550 10.42%
Current Liabilities
Short Term Borrowings
0 0.00% 0 0.00% 0 0.00%
Trade Payables 0 0.00% 0 0.00% 0 0.00%
Other Current Liabilities
3249142 115.65% 2520357 239.55% 178,500 10.36%
Short Term Provisions
0 0 0.00% 0 0.00%
3,249,142 115.65% 2,520,357 239.55% 178,500 10.36%
Total 2,809,409 100.00% 1,052,123 100.00% 1,723,495 100.00%
ASSETS
Non-Current Assets
Fixed Assets 0 0 0.00% 0
Tangible Assets 187,546 6.68% 253,433 24.09% 76,054 4.41%
Intangible Assets 311219 11.08% 0 0.00% 0 0.00%
Capital Work-in-Progress
0 0.00% 0 0.00% 0 0.00%
Intangible Assets under
Development 0 0.00% 0 0.00% 0 0.00%
Non-Current Investments
0 0.00% 0 0.00% 0 0.00%
Defferred Tax Asset (Net)
0 0.00% 0 0.00% 0 0.00%
Long Term Loans and
Advances 10,500 0.37% 59,000 5.61% 0 0.00%
Other Non-Current Assets
-- 0 0 0 0.00%
509,265 18.13% 312,433 29.70% 76,054 4.41%
Current Assets
Current Investments 0 0.00% 0 0.00% 0 0.00%
Inventories 0 0.00% 0 0.00% 0 0.00%
Trade Receivables 0 0.00% 0 0.00% 0 0.00%
Cash and Bank Balances
753079 26.81% 398,996 37.92% 1,616,738 93.81%
Short Term Loans and
Advances - - 0 0.00% 0 0.00% 0 0.00%
Other Current Assets
1547065 55.07% 340,693 32.38% 30,702 1.78%
2300144 81.87% 739,689 70.30% 1,647,440 95.59%
Total 2,809,409 100.00% 1,052,123 100% 1,723,495 100.00%
ANALYSIS
The tangible assets level in the balance sheet of the company was very low at the
year ending 31st march, 2016 but in the next year company has increased its
tangible assets which means company has purchased more of tangible assets but
in the next year ending i.e., 31st march 2018 the tangible assets level decreased
to 6.68% which means company has sold its assets in the year 2018. But
intangible assets came into existence in the year ending 31st march, 2018
company may had some patents or copy rights which led to the existence of
intangible assets in its balance sheet. The fixed assets percentage is zero for all
the three years which is not good for the financial health of the company as fixed
assets are useful to raise loans from banks and creditors.
The company has raised its equity for the year 2016 to 2018but it is running out of
its reserves so it has to take some of the measures and the capital structure has to
be reconstructed again. The long term borrowings of the is high in the year ending
31st march, 2018 as it is 189.81% this shows that company is not entirely
dependent on the equity it is also utilizing its debt capital but as the company is
running into losses it was unable to pay the long term debts so the debt got
accumulated from the previous years to the year ending 31st march, 2018 so
company must necessarily make profits in the next financial and try to reduce its
debt percentage to at least less than 70% in order to get a good financial leverage
The company’s cash levels i.e., it’s networking capital. In the year ending 31st
march 2016 the company has go the ability to repay all its current liabilities as
current liabilities accounted just 10.36% whereas current assets accounted for
95.59% which means there is too much liquidity in the company which not good
for its financial health but in the year ending 31st march 2017 current assets
accounted for 70.3% whereas current liabilities accounted for 239.5% which are
much higher than the current assets which shows that company was unable to
pay its debts during the year 2017. In the year ending 31st march, 2018 the
current assets of the company accounted for 81.87% whereas current liabilities
accounted for 115.65% so even in this year company was unable to pay its debts.
This is not good for the financial health of the company
The overall position of the company is not up to the mark it has to take certain
measures to increase reserves and it is also necessary to reconstruct the capital
structure.
Analysis of various ratios
RATIOS 2018 2017 2016
Current Ratio 0.707 0.293 9.229
Quick Ratio 0.23 0.15 9.05
Gross Profit Margin 0.93 0.65 0.73
Net Profit Margin -0.607 -1.876 -13.78
Return on Investment 9.17 3.52 -4.877
Return on Equity -3.95 -5.34 -5.232
Price to sales ratio 0.153 0.357 2.63
Price to earning ratio (0.226) (0.187) (0.13)
Current Ratio indicates ability of the firm to pay off its current liabilities in the
year 2016 the company is able to pay off its current liabilities but the current
assets are too high which shows the high liquidity over the firm as it is 9.229:1
whereas ideal ratio for current ratio is 2:1. The ideal ratio was not achieved by
the firm in any of year which shows that firm is unable to pay its current liabilities
Quick ratio indicates the firm’s ability to meet its daily cash requirements 1:1 is
the ideal quick ratio in the year 2016 quick ratio is 9.05:1 which represents high
liquidity so therefore it is not good for the financial health of the company and in
the two years quick ratio also didn’t met its ideal ratio thus the firms position is
not satisfactory.
Net profit margin is negative in all the three years which indicate that the firm is
running in losses since three years due to its wide expenses. So company needs to
take some reforms to increase net profits at least in the next financial year.
Return on investment indicates the level of the investment which the business is
earning as a return the return on investment is negative in the year 2016 but it
has improved in the years 2017 and 2018 thus company got some good returns
on its investment
Return on equity indicates the ability of the firm to raise its own capital without
depending on outsiders the firms return on equity is negative which means that
the firm is unable to raise its own capital thus it has to depend more on external
or outsiders to raise funds. Since return in equity is negative form all the three
years thus firm is dependent on outsiders for funds which are not a good
indicator. As it is not making profits and it has to bear much interest as interest
burden increases it may ruin the financial health.
The price-to-sales (P/S) ratio is a valuation ratio that compares a company’s stock
price to its revenues. It is an indicator of the value placed on each dollar of a
company’s sales or revenues. As price to sales ratio is positive for all the three
years but it is not satisfactory as the price to sales ratio is too less.
Price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures
its current share price relative to its per-share earnings (EPS). The price-to-
earnings ratio is also sometimes known as the price multiple or the
earnings multiple. A negative price earnings ratio indicates negative returns or
simply losing money as company’s P/E ratio is negative in all the three years it
means company is having negative returns all the three years.
Review on the company in deciding whether the
company is good for investment or not
The company is in losses for three continuous financial years and it is more dependent on
the external liabilities which mean that company has to pay higher rate of interest as it is in
losses it may be unable to pay the debts which increases its fixed cost and reduces its
returns of the company. This was clearly reflected in the return on equity it was negative in
all the three years. The employee benefits expenses alone are more than its revenue and its
other expenses are also more than its revenue the company the company didn’t took any
measures in all the three years to reduce its expenses. The capital structure is also not good
when the company is in losses it is more dependent on outsider’s liability which has higher
rate of interest and higher cost of capital than the equity as the company is in losses it has
to depend on equity rather than outsiders debt as it increases the fixed cost and it reduces
its returns and there is less probability to the shares holders to get the best returns out of
this company. The EPS is also in negative which is not a good indicator. The fixed assets
percentage is zero for all the three years which is not good for the financial health of the
company as fixed assets are useful to raise loans from banks and creditors.
Trusted health private is not a good option for investment.
Annexure
Bibliography
Website
[Link]
[Link]