FINANCIAL STATEMENT

INTRODUCTION:

Accounting is the process of identifying, measuring and communicating economic

information to permit informed judgment and decision by users of the information. It
involves recording, classifying and summarizing various business transaction.

The end product of business transactions are the financial statement comprising primarily
the position statements or the balance sheet and the income statement or the profit and loss
account. These statements are the outcomes of summarizing process of accounting and are
therefore the source of information on the basis of which conclusions are drawn about the
profitability and the financial position of the concern.

MEANING OF FINANCIAL STATEMENT:

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

accounting procedures. Its purpose is to convey an understanding of some financial aspect of
a business firm. It may show a position at a moment in time, as in the case of a balance sheet
or may reveal a series of activity over a given period of time, as in the case of a income
statement. Thus the term financial statement generally refers to the two statements.

1. The position statement or the balance sheet

2. The income statement or the profit and loss account.

These statements are used to convey to management and other interested outsiders the
profitability and financial position of a firm.

Financial statements are also called financial reports. In the words of “Anthony” financial
statement essentially are interim reports, presented annually and reflect a division of the life
of an enterprise into more or less obituary accounting period more frequently a year.

1
DEFINITION:

According to Chorles J Woelfel The purpose of financial statement analysis

is to examine poet and current financial data so that the company performance and future
risks and potential be estimated financial statement analysis can yield valuable information
about trends and relationship the quality of the company earning, strength and weaknesses of
its financial position.

TYPES OF FINANCIAL STATEMENT ANALYSIS:

We can classify various types of financial analysis into different categories depending upon

I. The material used

II. The method of operation followed the analysis or the modus of analysis.
I. ON THE BASIS OF MATERIAL USED:

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

A. External analysis
B. Internal analysis
A. EXTERNAL ANALYSIS:

It is made by those who do not have access to the detailed records of the company. This
group, which has to depend almost entirely on published financial statements, include
investors, credit agencies and government agencies regulating a business in a nominal
way. The position of the external analyst has been improved in recent times owing to the
government regulations requiring business undertaking to make available detailed
information to the public through audited accounts.

2
 B. INTERNAL ANALYSIS:

The internal analysis is accomplished by those who have access to the books of accounts
and all other information related to business. While conducting this analysis, the analyst
is a part of the enterprise he is analyzing. Analysis for managerial purposes is an internal
type of analysis and is conducted by executives and employees of the enterprise as well as
governmental and court agencies which may have regulatory and other jurisdiction over
the business.

II. ON THE BASIS OF MODUS OPERATION:

According to the method of operations followed in the analysis, financial
analysis can also be of two types.
A. HORIZONZTL ANALYSIS
B. VERTICAL ANALYSIS
A. HORIZONTAL ANALYSIS:
When financial statements for a number of years are reviewed and analysis, the
analysis is called ‘horizontal analysis’ as it is based on data from year to year rather
than on one date or period of time as a whole, this is also known as ‘dynamic
analysis’. This is very useful for long term trend analysis and planning.
B. VERTICAL ANALYSIS:
It is frequently used for referring to ratios developed for one date or for one
accounting period. Vertical analysis is also called ‘static analysis’. This is not very
conducive to proper analysis of the firm’s financial position and its interpretation as it
does not enable to study data is perspective. This can only be provided by a study
conducted over a number of years so that comparisons can be effected. Therefore,
vertical analysis is not very useful.

NEED FOR THE STUDY:

1) To known the profit earned and loss sustained during a specific period.
2) To show the true financial position of the organization.
3) To determine the profit and comparing the profit of different years.

3
SCOPE OF THE STUDY:

1) The present study is concerned with “LOHIYA SEAT COVERS AND

ACCESSORIES” situated in Nizamabad, Nizamabad District.
2) Quality of assets and profitability of “LOHIYA SEAT COVERS AND
ACCESSORIES” for a period of five years is covered in the study.
3) The study is limited to the financial aspects of the organization and that to with their
aspects which are required for the calculation and analysis of the financial statement
of “LOHIYA SEAT COVERS AND ACCESSORIES.”

USE AND IMPORTANCE OF FINANCIAL STATEMENT:

The financial statements are mirror which reflects the financial position and operating
strength or weakness of the concern. These statements are useful to management, investors,
creditors, bankers, workers, government and public at large. George O may point out the
following major uses of financial statement.

i. As a report of stewardship.
ii. As a basis for fiscal policy.
iii. To determine the legality of dividends.
iv. As guide to advice dividend action.
v. As a basis for the granting of credit.
vi. As informative for prospective investors in the enterprise.
vii. As an aid to government super vision.

LIMITATION OF FINANCIAL STATEMENT:

Though financial statements are relevant and useful for the concern, still they do not present
the final picture of the concern. The utility of these statements is dependent upon a number of
factors. The analysis and interpretation of these statements should be done very carefully
otherwise misleading conclusion may be drawn. The financial statements suffer from the
following limitations.

1. Only interim reports

2. Do not give exact position
3. Historical cost 4. Impact of non-monetary factors ignored 5. No precision

4
 1. ONLY INTERIM REPORTS:

These statements do not five a final picture of the concern. The data given in this statement is
only approximate. The actual position can only be determined when the business is sold or
liquidated. However the statements have to be prepared for different accounting periods,
generally one tear, during the life time of the concern. The costs and incomes are apportioned
to different periods with a view to determine profits etc.

2. DO NOT GIVE EXACT POSITION:

The financial statements are expressed in monetary values, so they appear to give final and
accurate position. The value of fixed assets in the balance sheet neither represent the value for
which fixed assets can be sold nor the amount which will be required to replace the assets.
The balance sheet is prepared on the presumption of a going concern. The concern is
expected to continue in the future. So, fixed assets are shown at cost less accumulated
depreciation.

3. HISTORICAL COST:

The financial statements are prepared on the basis of historical costs or original costs. The
value of assets decreases with the passage of time current price changes are not taken into
account. The statements are not prepared keeping in the view the present economic
conditions. The balance sheet loses the significance of being an index of current economic
realities. Similarly, the profitability shown by the income statement may not represent the
earning capacity of the concern. The conclusion drawn from financial statement may not give
a fair picture of the concern.

4. IMPACT OF NON-MONETARY FACTORS IGNORED:

These are certain factors which have a bearing on the financial positions and operating results
of the business but they do not become a part of this statement because they cannot be
measured in monetary terms. Such factory may include the reputation of the management,
credit worthiness of the concern, sources and commitments for purchases and sales, co-
operation of the employees etc. the financial statement only show the position of the financial
accounting for business and not the financial position.

5
 5. NO PRECISION:

The precision of financial statement data is not possible because the statement deals with
matters which cannot be precisely stated. The data are recorded by conventional procedure
followed over the year. Various conventions, postulates, personal judgment etc are used for
developing the data.

FINANCIAL STATEMENT ANALYSIS:

Financial statements are prepared primarily for decision making. They play a dominant role
in setting the frame work of managerial decision but the information provided in the financial
statements is not an end in itself as no meaning full conclusion can be drawn from this
statements alone. However the information provided in the financial is of immense use in
making decisions through analysis and interpretation of financial statements. Financial
analysis is the process of the firm by properly establishing relationship between the items of
balance sheet and profit and loss accounts.

MEANING OF FINANCIAL STATEMENT ANALYSIS:

The term “financial analysis” also known as analysis and interpretation of financial
statements, refers to the process of determining financial strengths and weaknesses of the
firm by establishing strategic relationship between the items of the balance sheet, profit and
loss account and other operative data.

In other words of “Myers” financial statement analysis is largely a study of among the
various financial factors in a business as disclosed by a single set of statements and study of
the trend of these factors as shown in the series of statements.

6
OBJECTIVES OF THE STUDY:

The main focus of the study is to evaluate the financial performance of Lohiya Seat Covers
and Accessories with the help of financial statements.

1. To make comparative analysis and identify the financial performance of “LOHIYA

SEAT COVERS AND ACCESSORIES.”
2. To known the profitability of the company.
3. To study the financial statements and overall financial performance of “LOHIYA
SEAT COVERS AND ACCESSORIES.”
4. To identify the every source of income and understand the expenditure pattern of
“LOHIYA SEAT COVERS AND ACCESSORIES.”

HYPOTHYSIS:

H0-The financial position of company is increasing.

H1-The financial position of company is detraining.

METHODOLOGY OF THE STUDY:

A. SOURCES OF DATA

The analysis is worked out by using various sources of data, which is gathered in two
ways. They are:

1) Primary Data
2) Secondary Data
1) PRIMARY DATA:

The primary data are those information’s, which are collected afresh and for the first
time, and thus happens to be original in character.

7
 2) SECONDARY DATA:

The secondary data are those which have already been collected by some other
agency and which have already been processed. The sources of secondary data are
Annual Reports, browsing Internet, through magazines.

B. STATISTICAL TECHNIQUES EMPLOYED:

Various techniques are used in the analysis of financial data emphasis comparative and
relative importance of data presented and to evaluate the position of the firm.

These techniques of financial analysis are intended to shoe relationship and changes. The
more widely used of these techniques are the following

METHODS OF ANALYSING FINANCIAL STATEMENTS

The analysis of financial statements consists of a study of relationship and trends, to

determine whether or not the financial position and results of operations as well as the
financial progress of the company are satisfactory or unsatisfactory. The analytical
methods or devices, listed below, are used to ascertain or measure the relationships
among the financial statements items of a single set of statements and the changes that
have taken place in these items as reflected in successive financial statements. The
fundamental objective of any analytical method is to simplify or reduce the data under
review to more understandable terms.

Analytical methods and devices used in analyzing financial statements are as follows:

I. Comparative statements
II. Common size statements
III. Trend analysis
IV. Fund flow analysis
V. Cash flow analysis
VI. Ratio analysis
VII. Cost volume profit analysis

8
 I. COMPARATIVE STATEMENTS:

These financial statements are so designed as to provide time perspective to the various
elements of financial position contained therein. These statements give the data for all the
periods stated so as to show.

a) Absolute money values of each item separately for each of the periods
stated.
b) Increase and decrease in absolute data in terms of money values.
c) Increase and decrease in terms of percentages.
d) Comparison expressed in ratios.
e) Percentages to totals.

Such comparative statements are necessary for the study of trends and direction of movement
in the financial position and operating results. This call for a consistency in the practice of
preparing these statements, otherwise comparability may be distorted. Comparative
statements enable horizontal analysis of figures.

A. COMPARATIVE INCOME STATEMENT:

Comparative income statements shows the operating results for a number of accounting
periods and change in the data significantly in absolute periods and change in the data
significantly in absolute money terms as well as in relative percentage.

Absolute change

It is calculated as: ------------------------------X100

Base year

9
 GUIDE LINES FOR INTERPRETATION OF INCOME
STATEMENTS:

The analysis and interpretation of income statement will involve the following steps

1) The increase or decrease in sales should be compare with increase or decrease

in cost of goods sold. In increasing sales will not always means an increasing
profit. The profitability will improve if increase in sales is more than the
increase in cost of goods sold. The amount of gross profit should be studied
in the first step.
2) The second step of analysis should be the study of operational profit. The
operating expenses such as office and administrative expenses, selling and
distribution expenses should be deducted from the gross profit to find out the
operating profit. The changes in individual expenses should also be studied.
3) The increase or decrease in net profit will give an idea about the overall
profitability of the concern. Non operating expenses such as interest paid,
loses from sale of assets, written of differed expenses, payment of taxes etc.
4) An opinion should be formed about profitability of the concern and it should
be given at the end

PROCEDURE OF FINANCIAL STATEMENTS ANALYSIS:

Broadly speaking there are three steps involved in the analysis of financial statements.

These are

i. Selection
ii. Classification
iii. Interpretation.

The first step involves selection of information(data) relevant to the purpose of analysis of
financial statements. The second step involved in the methodical classification of the data and
third step include drawing of internees and conclusion.

The following procedure is adopted for the analysis and interpretation of

financial statements.

10
 1. The analysis should be acquiring him with the principles and postulates of accounting.
He should be known the plans and policies of the management so that he may be able
to find whether these plans are properly executed or not.
2. The extent of analysis should be determined so that the sphere of work may be
decided. If the aim is to find out the earning capacity of enterprise then analysis of
income statement will be undertaken. On the other hand if the financial position is to
be studied then balance sheet analysis will be necessary.
3. The financial data given in the statement should be re-organized or re-arranged. It will
the grouping of similar data under same head, breaking down of individual
components of statements according to nature. This data is reduced to a standard
form.
4. A relationship is establishing among financial statements with the help of tools and
techniques of analysis ratio trend, common size, funds flowered.
5. The information is interpreted in simple and understandable way. The significance
and utility of financial data is explained for helping decision taking.
6. The conclusion drawn from interpretation are presented to the management in the
form of reports.
B. COMPARATIVE BALANCE SHEET:

A comparative balance sheet shows the balance of accounts of assets and liabilities on
different dates and also the extent of their increase or decrease between these dates through
light on the trends and direction of changes in the position over the periods. This helps in
perdicting about the position of business in future.

The comparative balance sheet analysis is the study of the trend of the same items, group of
items and computed items into two or more balance sheet of the same business enterprise on
different dates. The changes in periodic balance sheet items reflect the conducted of a
business the changes can be observed by comparison of the balance sheet.

11
 GUIDE LINES FOR INTERPRETATION OF COMPARATIVE
BALANCE SHEET:

While interpreting comparative balance sheet the interpreter is an expected to study the
following aspects.

1) Current financial position and liquidity position

2) Long term financial position
3) Profitability of the concern

Absolute change

It is calculated as: ----------------------------X100

Base year

COMPARATIVE FINANCIAL STATEMENT ADVANTAGES:

The comparative financial statements are useful for analysis of the following..

1) Comparative statement indicates trend in sales cost of production, profits etc… and
help the analyst to evaluate the performance of the company.
2) Comparative statement can also be used to compare the performance of the firm with
the average performance of the industry or inter firm comparison. This helps in
identification of the weaknesses of the firm and remedial measures can be taken
accordingly.

WEAKNESSES:

The comparative financial statement suffers from the following weaknesses.

1) Inter firm comparison can be misleading if the firms are not identical in size and age
and when they follow different accounting procedures with regard to depreciation,
inventory valuation etc….
2) Inter period comparison may also be misleading, if the period has witnesses changes
in accounting policies, inflation, recession etc…

12
 II. COMMON SIZE STATEMENTS:

The common size statements balance sheet and income statements are shown in the analytical
percentages. The figures are shown as percentages of total assets, total liabilities and total
sales. The total assets are taken as hundred and different assets are expressed as percentage of
the total.

Similarly various liabilities are taken as a part of total liabilities. These statements are also
known as component percentage or hundred percentage statements because every individual
item is stated as a percentage of the total hundred. The following statements show the
methods of presentation of data.

A. COMMON SIZE INCOME STATEMENTS:

In common size income statement, the sales figure is taken as hundred and all other figures of
cost and expenses are expressed as percentage to sales when other costs and expenses are
reduced from sales figures of hundred. The balance figure is taken as net profit. This reveals
the efficiency of the firm in generating revenue which leads to profitability and we can make
analysis of different components of cost as proportion to sales.

B. COMMON SIZE BALANCE SHEET:

In common size balance sheet, the total of assets size or liabilities is taken as hundred and all
figures of assets and liabilities, capital and reserved are expressed as a proportion to the total
that is hundred. The common size balance sheet reveals the proportion of fixed assets
proportion of long term funds to current liabilities and provisions, composition of current
liabilities.

III. TREND ANALYSIS:

The financial statements may be analyzed by computing trend of series of information. This
method determines the direction upwards or downwards and involves the computation of the
percentage relationship that each statements item bears to the same item in the base year. The
information for a number of years are taken up and one year generally the first year is taken
as base year.

13
 IV. FUND FLOW ANALYSIS:

This statement is prepared in order to know clearly the various source where from the funds
are procured to finance the activities of business concern during the accounting period and
also brings to highlight the uses to which these funds are put during the staid period.

V. CASH FLOW ANALYSIS:

This statement is prepared to know clearly the various items of inflow and outflow of cash. It
is an essential tool for short term financial analysis and is very helpful in the evaluation of
current liquidity of a business concern. It helps the business in the efficient cash management
and internal financial management.

VI. RATIO ANALYSIS:

It is done to develop meaningful relationship between individual items or group of items

usually shown in the periodic financial statements published by the concern.

An accounting ratio shows the relationship between the two interrelated accounting figures as
gross profit to sales current assets to current liabilities loaned capital to own capital etc…

Ratio should not be calculated between the two unrelated figures as sales and discount on
issue of share operating costs and equity capital etc. as it will not serves any useful purpose.

VII. COST VOLUME PROFIT ANALYSIS:

Accounting to the terminology of cost accounting of the institute of cost and management
accountant, London, marginal cost represents the amount of any given volume of output by
which aggregate costs are changed if the volume of output is increased by one unit.

In practice this is measured by the total variable costs attributable to one unit. In this context,
a unit may be a single article a batch of articles and order a stage of production capacity, a
man hour a process or a department.

14
FINANCIAL STATEMENT

INTRODUCTION:

Accounting is the process of identifying, measuring and communicating economic

information to permit informed judgment and decision by users of the information. It
involves recording, classifying and summarizing various business transactions.

The end product of business transactions are the financial statement comprising primarily the
position statements or the balance sheet and the income statement or the profit and loss
account. These statements are the outcomes of summarizing process of accounting and are
therefore the source of information on the basis of which conclusions are drawn about the
profitability and the financial position of the concern.

MEANING OF FINANCIAL STATEMENT:

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

accounting procedures. Its purpose is to convey an understanding of some financial aspect of
a business firm. It may show a position at a moment in time, as in the case of a balance sheet
or may reveal a series of activity over a given period of time, as in the case of a income
statement. Thus the term financial statement generally refers to the two statements.

1. The position statement or the balance sheet

2. The income statement or the profit and loss account

These statements are used to convey to management and other interested outsiders the
profitability and financial position of a firm.

Financial statements are also called financial reports. In the words of “Anthony” financial
statement essentially are interim reports, presented annually and reflect a division of the life
of an enterprise into more or less obituary accounting period more frequently a year.

FINANCIAL STATEMENT:

Accounting is the process of identifying, measuring and communicating economic

information to permit informed judgment and decision by users of the information. It
involves recording, classifying and summarizing various business transactions.

15
The end product of business transactions are the financial statement comprising primarily the
position statements or the balance sheet and the income statement or the profit and loss
account. These statements are the outcomes of summarizing process of accounting and are
therefore the source of information on the basis of which conclusions are drawn about the
profitability and the financial position of the concern.

MEANING OF FINANCIAL STATEMENT:

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

accounting procedures. Its purpose is to convey an understanding of some financial aspect of
a business firm. It may show a position at a moment in time, as in the case of a balance sheet
or may reveal a series of activity over a given period of time, as in the case of a income
statement. Thus the term financial statement generally refers to the two statements.

1. The position statement or the balance sheet

2. The income statement or the profit and loss account

These statements are used to convey to management and other interested outsiders the
profitability and financial position of a firm.

Financial statements are also called financial reports. In the words of “Anthony” financial
statement essentially are interim reports, presented annually and reflect a division of the life
of an enterprise into more or less obituary accounting period more frequently a year

NATURE OF FINANCIAL STATEMENTS:

Financial statements are prepared for the purpose of presenting a periodical review or report
on the progress by the management and deal with the

a) Status of the investments in the business and

b) Results achieved during the period under review.

The data exhibited in these financial statements are the result of the combined effect of

16
 i. RECORDED FACTS:

The term recorded facts means , facts which have been recorded in the accounting books
such as cash in hand, cash at bank, bills receivables, bills payable, debtors, creditors,
fixed assets, purchase, sales, wages, capital and so forth.

ii. ACCOUNTING CONVENTIONS:

Accounting conventions have reference to certain fundamental accounting principles, the

application of which has been sanctified by long usage. These conventions are applied for
the valuation of inventory, allocation of expenditure between capital and revenue for the
purpose of assets valuation etc

iii. POSTULATES:

Accountant makes various assumptions for the convention adopted. One of these
assumptions or postulates is to effect that the enterprise will continue in business beyond
the period which is covered by the financial statements i.e., business is a going concern.

iv. PERSONAL JUDGEMENT:

It may be noted that the application of conventions, assumptions or postulates depends on

the personal judgments of the accountant. For example, the choice of selecting method of
depreciation, the mode of amortization of fictitious assets, the method of valuation of
stock etc.

v. ACCOUNTING STANDARDS AND GUIDANCE NOTES:

Accountants are guided by various accounting standards and guidance notes in preparing
the financial statements.

17
OBJECTIVES OF FINANCIAL STATEMENTS:

Financial statements are the sources of information on the basis of which conclusions are
drawn about the profitability and financial position of the concern. The primary objectives of
financial statements are to assist in decision making. The accounting principal board of
America states the following objectives of financial statements.

1) To provide reliable financial information about economic resources and obligations of

a business firm.
2) To provide other needed information about changes in such economic resources and
obligations.
3) To provide reliable information about changes in net resources (resources less
obligations) arising out of business activities.
4) To provide financial information that assists in estimating the earning potential of
business.
5) To disclose, to the extent possible other information related to the needs of the uses of
these statements.

18
FINANCIAL STATEMENT ANALYSIS:

INTRODUCTION:

Financial statements are prepared primarily for decision making. They play a dominant role
in setting the frame work of managerial decision but the information provided in the financial
statements is not an end in itself as no meaning full conclusion can be drawn from this
statements alone. However the information provided in the financial is of immense use in
making decisions through analysis and interpretation of financial statements. Financial
analysis is the process of the firm by properly establishing relationship between the items of
balance sheet and profit and loss accounts.

MEANING AND CONCEPT OF FINANCIAL STATEMENT ANALYSIS:

The term “financial analysis” also known as analysis and interpretation of financial
statements, refers to the process of determining financial strengths and weaknesses of the
firm by establishing strategic relationship between the items of the balance sheet, profit and
loss account and other operative data.

In other words of “Myers” financial statement analysis is largely a study of among the
various financial factors in a business as disclosed by a single set of statements and study of
the trend of these factors as shown in the series of statements. A financial analysis is the
financial statements with various tools of analysis before commenting upon the financial
health or weakness of enterprise.

The term financial statements analysis includes both analysis and interpretation. A distinction
should therefore, be made between the terms. While the term analysis is used of mean the
simplification of financial data by methodical classification of data given in the financial
statements, interpretation means, explaining the meaning and significance of the data so
simplified and significance of the data so simplified. However both analysis and
interpretation are interlinked and complimentary to each other. Analysis is useless without
interpretation and interpretation with analysis is difficult or even impossible.

19
 REVIEW OF LITERATURE

Business theory draws heavily from economics and social sciences, profitability and
productivity are the two yardsticks against which the performance of any business
organization is being measured. Before the industrial revolution, business system was simple
and the organization was relatively small. The advent of mechanization, increase in the
volume of business and invention of company form of organization required that the financial
transactions of the business need be more scientific and organized. The science of book
keeping, which was invented in 1494, was the obvious remedy to record, monitor and control
the commercial transactions of various businesses.

Book keeping and accounting are the fore runners of finance. In fact, the science of financial
management is based on accounting and economics. Accounting is defined as the art of
recording and summarizing business transaction and of interpreting their effects on the affairs
and activities of an economic units. This definition given long back in 1955, is referring to
management’s use of accounting data for quantifying and appraising of the business
activities. Another definition by a well known author is: Accounting deals almost exclusively
with data that can be measured and reported in monetory terms. Business is concerned with
money, and the measure and reporting is thro accounting mechanism. Accounting has often
been called the language of business because people in the business world – owners,
managers, bankers, brokers, lawyers, engineers, and investors use accounting terms and
concepts to describe the events that make up the existence of business of every kind.

John Myer, a renowned authority on financial statement analysis, has referred in the initial
years of 20th century, the bankers and securities exchange authorities were extensively relying
on the financial statements of the companies of analysis, monitoring and control of the
activities and performance of businesses. The history, principles and financial statements
analysis has been referred by authority also : Kennedy and McMullen.

Literature on economics also has a reference to accounting and financial management. The
aim of financial management has been linked with (1) the field of basic economics, and
especially micro economics (use of scarce resource). (2) by examining the many and diverse
activities and decisions which occupy financial managers.

20
Long back (1957), EF Donaldson referred to the importance of business and financial
reporting. He highlighted that the economic depends on the business organizations for goods
and services. United States believes in corporate world. The financial activities of business
enterprises of productions and sale is of utmost importance. In this well known publication
(corporate finance, 1957) he has referred to all important aspects of business finance like
organization structure, securities, production, capitalization, working capital, administration
of income, expansion and combinations (mergers), reorganization and readjustment.

Business theory draws heavily from Economics and Social sciences. Profitability and
productivity are the two yardsticks against +which the performance of any business
organization is being measured. Before the industrial revolution, business system was simple
and the organizations were relatively small. The advent of mechanization, increase in the
volume of business and invention of Company form of organization required that the
financial transactions of the business need be more scientific and organized. The science of
book keeping, which was invented in 1494, was the obvious remedy to record, monitor and
control the commercial transactions of various businesses. Book keeping and Accounting are
the fore runners of Finance. In fact, the science of financial management is based on
Accounting and Economics. Accounting is defined as the art of recording and summarizing
business transactions and of interpreting their effect on the affairs and activities of an
economic unit. l This definition given long back in 1955, is referring to management's use of
accounting data for quantifying and appraising of the business activities. Another definition
by a well known author is : Accounting deals almost exclusively with data that can be
measured and reported in monetory terms.2 Business is concerned with money, and the
measure and reporting is thro accounting mechanism. Accounting has often been called the
language of business because people in the business world - owners, managers, bankers,
brokers, lawyers, engineers, and investors use accounting terms and concepts to describe the
events that make up the existence of business of every kind

John Myer, a renowned authority on Financial Statements Analysis, has referred that in the
initial years of 20th century, the bankers and securities exchange authorities were extensively
relying on the financial statements of the companies for analysis, monitoring and control of
the activities and performance of businesses. The history, principles and financial statement
analysis has been referred by another authority also : Kennedy and McMullen.

21
Literature on Economics also has a reference to accounting and financial management. The
aim of financial management has been linked with (1) the field of basic economics, and
especially micro economics (use of scarce resource). (2) by examining the many and diverse
activities and decisions which occupy financial managers.

Long back (1957), EF Donaldson referred to the importance of business and financial
reporting. He highlighted that the economy depends on the business organizations for goods
and services. United States believes in corporate world. The financial activities of business
enterprises of production and sale is of utmost importance. In his well known publication
(Corporate Finance, 1957) he has referred to all important aspects of business finance like
organization structure, securities, production, capitalization, working capital, administration
of income, expansion and combinations (mergers), reorganization and readjustments.

Another authority has aptly said that: Accounting is a systematic means of writing the
economic history of an organization. Here there is a reference that the economic activity of
any business enterprise is involving money and accounting is concerned with record keeping
of such monetary transactions of the business. The authority has referred that invention and
growth of corporations (company form of organization) and need for keeping monetary
records of growing and very large businesses were the basic reasons for the phenomenal
development of accounting science and importance of financial statements as well as its
analysis. This data was useful to the owners, government, customers, investors and the
society. The important principles of verifiability, objectivity, consistency and comparability
were developed, so that the statements become more reliable and useful. The authors have
also mentioned that in the initial period of twentieth century, the following principles of
management accounting were evolved and developed. (1) Relevance. (2) Flexibility. And (3)
Timeliness.

Another definition by a well known author can also be referred : Accounting is score keeping,
attention directing and problem solving.6 This authority states that accounting system
provides information for three broad objectives. (1) Internal reporting to managers for use in
planning and control of current operations. (2) Internal reporting to managers for use in
strategic planning, and (3) external reporting to owners, government and other outsiders. As a
score keeping activity, all relevant data are generated by the system which becomes a guide
for attention directing and problem solving in different areas like inventory, production, sales

22
etc. The authors have referred to important aspects accounting principles, importance of
Annual Reports, measurement of income, marginal costing and efficiency.

Robert Anthony, Professor of Accounting and Financial Control at Harvard University has
written many authoritative books of accounting and financial management. He defines
Accounting as a means of collecting, summarizing, analyzing and reporting in monetary
terms, information about the business. This simple definition highlights the importance of
accounting and financial information in the business enterprise. There is a reference to the
following accounting principles and scope of the field of accounting and finance.

Principles :

(1) Objectivity. (2) Going concern. (3) Realisation. (4) Matching and constant rupee
measurement. (5) Consistency. (6) Verifiability. (7) Conservatism.(S) Disclosure. And
Economic feasibility.

Scope :

(1) Accounting Concepts. (2) Records, measurement. (3) Financial Statement Analysis. (4)
Performance appraisal and control. (5) Behaviour of costs in the organization. (6)
Choices of decision making.

Another well-known publication on Financial Management, Financial Decision Making By

John Hampton (1983) covers authoritative and lucid exposition on the subject covering :
Financial accounting, Financial Statements, Financial analysis, Leverage, Working capital,
capital Budgeting, valuation of the Firm, Mergers, acquisitions and reorganization And
Financial decisions.

The fundamental behaviour of finance is based on two basic variables of (a) risk and (b)
uncertainty. Both refer to situations in which future outcomes are imperfectly known. The
term risk commonly denotes only those future events in which the probabilities of alternative
possible outcomes are known. Objective probability is a measure of the relative frequency of
alternative events, and is strictly applicable only to those events which are repetitive in
nature, and so possess a frequency distribution from which observations can be drawn and
statistical inferences can be made. Subjective probability may be interpreted as a measure of
the degree of ignorance or belief held with regard to the outcomes of particular future
[Link] less perfectly the conditions of the law of large numbers are satisfied, the more

23
uncertain are subjective probability estimates concerning future possible states of the world.
The term uncertainty is commonly used to denote the degree of ignorance about the
frequency distribution of a future event. Even with uncertainties of investments and funds
deployment for business, the firms have no choice but to commit themselves to some
decision. This is the reality of basic financial behaviour.

The basic objectives of Financial Management of (a) Liquidity and (b) Profitability are
discussed at length by this authority in the above publication. It covers the discussion about
functions leading to liquidity : (1) forecasting cash flows. (2) rationing funds. (3) managing
flow of internal funds. The functions leading to profitability are : (1) cost control. (2) pricing.
(3) forecasting profits. (4) managing required return. The financial tools have been discussed
with the focus on (1) Use of tools for measuring the effectiveness of actions (like ROI). (2)
Use of tools for measuring validity of decisions (like capital budgeting).

SC Kuchhal, noted Indian authority on Financial Management and Professor of Finance,

IIM, Ahmedabad wrote an authoritative publication on Financial Management way back in
1969 which served as a valid guide to corporates, banks, financial institutions, Professors,
management students and researchers. He defines Finance as a science of money. The finance
functions are

(1) Providing funds required by business. (2) Finance is money, hence every business
transaction involves money (Finance) directly or indirectly. (3) Procurement of funds and
their effective use. Important finance functions referred by this authority are :

1) Establishing asset managing policies.

2) Determining the allocation of net profits.

3) Estimating and controlling cash flows and requirements.

4) Deciding the needs and sources of outside financing.

5) Negotiations for outside financing.

6) Checking upon the financial performance.

24
The scope of finance as discussed by Prof. Kuchhal covers :

1) Basics of Financial Management.

2) Corporate planning and financial Management.

3) Ratio analysis.

4) Cost Volume Profit analysis.

5) Analysis of operating and financial leverages.

6) Financial forecasting.

7) Short term and long term finance.

8) Capital budgeting.

9) Cost of capital.

10) Planning of capital structure.

11) Valuation.

12) Amalgamations and reorganization.

The remarkable contributions by other well known authorities on Financial Management

include :

1) Brigham E F and Houston JF (Fundamentals of Corporate Finance, 1930 ).

2) HG Guthman (Analysis of Financial Statements, 1925).

3) Solomon E. (Theory of Financial Management, 1969).

4) Van Home JC (Financial Management and Policy, 1989 ).

5) Weston J. Fred et. Al. (Managerial Finance, 1981).

6) R A Foulke (Practical Financial Statements Analysis, 1976 ).

7) John Myer ( Financial statement Analysis, 1961 ).

8) H. Black & J. Champion (Accounting in Business Decisions, 1961).

25
9) HG Guthman & H. Dougall (Corporate Financial Policy, 1955).

10) Carl Moore & Robert Jadicke (Managerial Accounting, 1974).

11) Robert Anthony & Glen Welsch (Fundamentals of Management Accounting, 1981

12) McMennamin Jim (Financial Management, 2000).

13) RM Srivastav ( Financial Decision Making, 1972 ).

14) Bhattacharya & Dearden (Accounting for Management, 1976 ).

15) PV Kulkarni (Financial Management, 1972 ).

16) Prasanna Chandra (Financial Management, 1980 ).

17) MY Khan & PK Jain (Financial Management, 1981 ).

18) IM Pandey ( Financial Management, 1978 ).

In the financial literature a lot of importance has been attached to financial ratios for
assessing the financial health of a firm. Financial health will decide the repayment
capacity of the debt sought by any business enterprise. William Beaver10 studied
important ratios of 79 Companies. These ratios were important ratios which decided the
success and failure of the concerned Companies. The important ratios identified by this
researcher were :

(1) Cash flow to total debt.

(2) Net income to total assets.

(3) Total debt to total assets.

(4) Working capital to total assets.

(5) Current ratio.

The failed firms had more debt and lower return on assets. They had less cash but more
receivables as well as low current ratio. The also had less inventory.

In the Indian context, LC Gupta11 attempted a refinement of Beaver’s method with the
objective of building a forewarning system of corporate sickness. A simple non-

26
parametric test of measuring the relative differentiating power of the various financial
ratios was used. The study covered cross section of companies falling under various
industries. Fifty six (56) ratios were tested for the period of 1962 to 1974, i.e. for twelve
(12) years. As per this study, it was found that the following five (5) ratios have high
degree of predictive power. These are :

(1) Earnings before depreciation, interest and taxes (EBDIT) to Sales.

(2) Operating cash flow (OCF) to Sales.

(3) EBDIT/Total assets including accumulated depreciation.

(4) OCF/Total assets including accumulated depreciation.

(5) EBDIT/(Interest + 0.25 Debt).

Among the balance sheet ratios, only two ratios were found to have some power of
predicting possible sickness. They were :

(1) Net worth/Debt, including both short term and long term debt.

(2) All outside liabilities/Tangible assets.

An important outcome of the research was that weak equity base can lead to sickness.

Another important research was carried out by E.I. Altman 12 which is referred to as
Multiple Discriminant Analysis (MDA). After studying 66 Companies, Altman
concluded that a set of ratios can be developed which has failure predictive power.
Altman developed a discriminant function, covering following ratios.

(1) Net working capital/total assets (percentage).

(2) Retained earnings/total assets (percentage).

(3) EBIT/total assets (percentage).

(4) Market value of total equity/book value of debt (Percentage).

(5) Sales/total assets (times).

27
 The mixed result of these five ratios was Z score, on the basis of which the firms can be
classified either financially sound or otherwise.

Eltman found that a score above 2.675 was believed to be healthy. The score below this,
warranted overall financial weakness. In Eltman’s study, half of the firms became bankrupt.

Eltman’s study was refined later on in 1977 which is more broad and 70 % accurate.

Many studies have taken place on the issue of methods, tools, techniques and practices of
business performance appraisal of companies. This is critical, since this system plays a key
role in developing strategic plans and evaluating the achievements of the firm. Research has
been undertaken by premier business schools, consultant firms and others. Individual
researchers from various fields of accounting, finance and control, economics, strategy,
operations management and others , are exploring the subject and also trying to understand
the drivers of corporate performance, the linkages between them, and how to measure their
impacts on profitability.

David Otely has mentioned that the financial performance measures serve three important
ends : (1) They act as tools of financial management. (2) They form a major objective of
business organization. (3) They act as a mechanism for motivation and control within the
organization.

As referred by Bititci, Carrie and Turner, the business performance measurement has variety
of uses, like : (1) To monitor and control. (2) To drive improvement. (3) To maximize the
effectiveness of the improvement effort. To achieve alignment with organizational goals and
objectives. (5) To reward and to discipline.

Also, as referred by Simmons,15 performance measurement is the tool of balancing five

major tensions within the firm : (1) Balancing profit, growth and control. (2) Balancing short
term results against long term capabilities and growth opportunities. (3) Balancing
performance expectation of different constituencies. (4) Balancing opportunities and
attention. (5) Balancing the motive of human behaviour.

28
 COMPANY PROFILE

Lohiya Seat Covers and Accessories was formed on 1994 December 25 th. The owner of
Lohiya Seat Covers and Accessories is Mr. BALKISHAN LOYA. Company distributes all
types of seats covers and accessories of two wheeler.

The promoter is having two years of experience in the field of REXINE WORK and worked
in similar units at Nizamabad as production supervisor and having exposure in handling
production section activities. During the tenure, he developed the good contacts with the local
people, co-employees, contractors, suppliers, vendors etc., related to rexine works, and
occationally involved in other areas also as and when required in the above said unit.

Presently the promoter is doing Trading in various products like rexine works etc., made with
rexine, others etc., used in rexine works as per the requirement of the clients order and other
related products since last 5 years in nizamabad district and surrounding areas / towns and
involved in marketing of above product and establish relationship with parties, now with the
earlier practical experience gained in industry as production supervisor and with present
experience, the promoter is interested to start REXINE WORKS on his own at
Mubaraknagar(vg), Nizamabad(Mdl), Nizamabad(Dt)., A.P., he surveyed and analysed the
market and other areas like procurement of raw materials, sales, production etc., areas since
last 4 years and is confident in organizing to run the new proposed unit on his own.

Beside the above experience of the promoter, the other co-family members like AAKASH
LOYA and ADITYA LOYA, who are having little experience and knowledge are also ready
to take part in handling activities like procurement of raw material and general supervision
and administration of the proposed unit as and when required to strengthen the beneficiary.
The promoters gets varied experience and exposure in making and marketing for a
considerable period of time and has good exposure in the relevant field of production and
marketing skills are good advantage to the business. The promoter with his good social
contacts and qualitative product, is quite confident of marketing the product on a large scale.
The promoter geographically very familiar with the surroundings of the unit area of
Nizamabad and can mould the situation to the advantageous to run the unit successful.

The company used to produced the rexin work like seat cover and tank cover of two wheeler
and later in 2004 the company also started the work of accessories of two wheeler named as

29
TWO WHEELER ACCESSORIES. The company mainly deals with the showrooms like
HERO, HONDA, TVS, BAJAJ, and YAHMA

The company has both wholesale and retail outlet. The wholesale outlet provides facilities
like transport, self service, auto service. The retail outlet provides facilities like self fitting
with no charges.

30
FIG:3.1

31
ACCESSORIES:
1. Helmet
2. Cylencor
3. Spray bottles
4. Fancy headlight
5. Side box
6. Indicator fancy
7. Horrons
8. Ladies handle
9. Yellow cloth
10. Side stand
11. Eingne plates
12. Remotes
13. Bumper
14. Bullet bags
15. Fancy mirrors

32
HELMETS:

A bike head protector is a sort of cap utilized by bike riders. The essential objective of a
cruiser cap is bike security - to ensure the rider's head amid effect, accordingly forestalling or
diminishing head damage and sparing the rider's life. A few head protectors give extra
comforts, for example, ventilation, confront shields, ear security, radio and so forth.

 The company used the HELMETS for both wholesale and retail outlet.
 The helmets are supplied for both the showroom and to the customer.
 They are bought directly from the industry of Delhi and Mumbai.

The varieties of helmets are-

a) Stag
b) Rakshak
c) Ergo
d) Studs
e) Vega
f) Volga
g) Steel bird
h) Glinder
i) Aerostar

FIG:3.2 FIG:3.3

33
SILENCER:

Bicycles need to toss out the fumes gasses out of the ignition chamber amid the fumes stroke
and it needs to go through the Silencer. There is a thing called "Back Pressure" which is
brought about by the fumes framework because of the measure of fumes gasses in it.

 The silencer only deals with the retail outlet.

 They are bought from the Delhi.

Silencer are of:

1. Top Bird
2. Fancy Silencer

FIG: 3.4

FIG: 3.5

34
FANCY HEADLIGHTS:
Bike lighting is enlightenment joined to bikes whose reason most importantly is, alongside
reflectors, to enhance the perceivability of the bike and its rider to other street clients under
conditions of poor surrounding brightening. An optional reason for existing is to light up
intelligent materials, for example, feline's eyes and movement signs. A third reason might be
to light up the roadway so that the rider can see the path ahead. Filling the last needs require a
great deal more glowing flux and along these lines more power.

Numerous wards require at least one bike lights to be fitted to bikes ridden around evening
time — for the most part a white light in the front and a red light at the back.

FIG: 3.6

SPRAY BOTTLES:

35
Spray bottles are of so many colors. Like black, dull black,yellow,auto yellaw,green,
parrot,white,sliver,gray,orange,chrome steel, golden, red.

SIDE BOX:
The varities of side box are-

1. Thoss
2. Avon
3. Steelo

FIG: 3.7

36
 FIG: 3.8

INDICATORS FANCY:
The electronic bike flagging unit portrayed here utilizations minimal effort segments and is a
decent substitute to numerous financially accessible adaptations. It works in a to a great
degree diverse way and is advantageous to work.

The goal of this circuit is to demonstrate left or right turn for bicycle/vehicle. Two
indistinguishable circuits are required, one is for left and the other is for right. The
fundamental heart of this circuit is 555 clock. Here, this 555 clock goes about as an astable
multi vibrator. It produces the beat motion with variable width. Utilizing this variable width
of the beat, we can set diverse time delays for the LEDs

FIG: 3.9

37
 FIG: 3.10

HORRONS:
A horn is a sound-production gadget that can be prepared to engine vehicles, transports,
bikes, trains, cable cars (a.k.a. streetcars in North America), and different sorts of vehicles.
The sound made for the most part takes after a "blare". The vehicle administrator utilizes the
horn to caution others of the vehicle's approach or nearness, or to point out some peril.
Engine vehicles, ships and prepares are required by law in a few nations to have horns. Bikes
like cable cars, trolley autos and streetcars in numerous zones are likewise legitimately
required to have a perceptible cautioning gadget, however not generally, and not generally a
horn.

The varities of horron are-

1. AR
2. Z-star
3. Orient
4. CYT
5. Mocc

FIG: 3.11

38
LADIES HANDLE:

FIG: 3.12

FIG: 3.13

39
SIDE STAND:
The side-stand is the one planned to be utilized for stopping. It is significantly more steady
horizontally than an inside stand. It requires a great deal more push to high side a bicycle
(push over to one side) from the left side, side-remain than it is to tip it sideways off of the
generally limit balance of an inside stand. Also, it is totally steady to one side against the
stand's wide leg, inasmuch as the bicycle doesn't move forward. This is the reason when you
take a ship over unpleasant water they generally have you put the bicycle as an afterthought
stand - NEVER on the inside stand. They likewise in some cases play it safe to shield the
bicycle from moving forward (chocks) and high siding (strap bicycle against the side-remain
to one side). With the bicycle in apparatus, a side-stand is likewise more steady in the
forward course of the wheels.

FIG: 3.14

40
 FIG: 3.15

EINGNE PLATES:

FIG: 3.16

FIG: 3.17

41
REMOTES:
The varities of remote are-

1. YQS
2. Police man
3. Moto gad
4. Thief gad
5. Black dog
6. Minda

FIG: 3.18

FIG: 3.19

42
BUMPER:

FIG: 3.20

FIG: 3.21

43
BULLET BAGS:

FIG: 3.22

44
FANCY MIRRORS:

FIG: 3.23

FIG: 3.24

45
 Table: 4.1 Comparative Income Statement of Lohiya Seat Covers and
Accessories for the Year Ended 2018-2019
Current
Previous Year Absolute Percentage
Particulars Year 2018 2019 Change Change
A)income
Net Sales 3696000 4620000 924000 23.28%
(-)Cost of Goods Sold 3088921 3955290 866369 28.05%
Gross Profit 607079 664710 57631 9.49%

(+)Other Income 390000 390000 - -

Total Income A 997079 1054710 57631 5.78%
B)Expenditure
1)Operating Expenses
a)Administration Expenses 302100 324100 22000 7.28%
b)Marketing & Selling
Expenses 97100 117600 20500 21.1%
2)Non Operating Expenses
a)Interest on Term Loan 112400 96049 16351 14.54%
b)Interest on Cash Credit 132750 132750 - -
Total Expenditure B 644350 670499 26149 4.06%
Profit Before Tax 352729 384211 31482 8.93%
(-)Tax 50648 55289 4641 9.16%
Profit After Tax 302081 328922 26841 8.89%

46
INTERPRETATION:

1) Sales were significantly increased by 23.28 Percentage which is profitable to the

company.
2) Total Income is increased by 5.78 Percentage.
3) Increased in Sales are highlighting increase in cost of goods sold, administrative
expenses, marketing & selling expenses.
4) Administrative Expenses is increased by 7.28 Percentage.
5) Interest on Term Loan is decreased by 14.54 Percentage.

14.54%
23.28%
Net Sales
(-)Cost of Goods Sold
Gross Profit
21.10% a)Administration Expenses
b)Marketing & Selling
Expenses
a)Interest on Term Loan
28.05%
7.28%

9.49%

FIG: 4.1

47
 Table: 4.2 Comparative Income Statement of Lohiya Seat Covers and
Accessories for the Year Ended 2019-2020

Current
Previous Year Absolute Percentage
Particulars Year 2019 2020 Change Change
A)income
Net Sales 4620000 5544000 924000 20%
(-)Cost of Goods Sold 3955290 4840800 88551 22.39%
Gross Profit 664710 703200 38490 5.79%
(+)Other Income 390000 380000 10000 2.56%
Total Income A 1054710 1083200 28490 2.70%
B)Expenditure
1)Operating Expenses
a)Administration Expenses 324100 342000 17900 5.52%
b)Marketing & Selling
Expenses 117600 138600 21000 17.86%
2)Non Operating Expenses
a)Interest on Term Loan 96049 80739 15310 15.94%
b)Interest on Cash Credit 132750 132750 - -
Total Expenditure B 670499 694089 23590 15.82%
Profit Before Tax 384211 389111 4900 1.27%
(-)Tax 55289 58367 3078 5.57%
Profit After Tax 328922 330744 1822 0.55%

48
INTERPRETATION:

1) Sales were marginally decreased by 20 Percentage.

2) Total Income is also decreased by 2.70 Percentage.
3) Total Expenses were increased by 15.82 Percentage.
4) Administrative expenses were decreased by 5.52 Percentage.
5) Interest in Term Loan increased by 15.94 Percentage.

20.00%
Net Sales
(-)Cost of Goods Sold
Gross Profit
other income
17.86% a)Administration Expenses
b)Marketing & Selling
Expenses
22.39% a)Interest on Term Loan

5. 5.79%
52 2.56%
%

FIG: 4.2

49
 Table: 4.3 Comparative Income Statement of Lohiya Seat Covers and
Accessories for the year ended 2020-2021

Current
Previous Year Absolute Percentage
Particulars Year 2020 2021 Change Change

A)Income
Net Sales 5544000 6468000 924000 16.66%
(-)Cost of Goods Sold 4840800 5412950 572150 11.82%
Gross Profit 703200 1055050 351850 50.03%
(+)Other Income 380000 64000 316000 83.16%
Total Income A 1083200 1119050 35850 3.31%
B)Expenditure
1)Operating Expenses
a)Administration Expenses 342000 359100 17100 5%
b)Marketing & Selling
Expenses 138600 161700 23100 16.66%
2)Non Operating Expenses
a)Interest on Term Loan 80739 56737 24002 2.73%
b)Interest on Cash Credit 132750 132750 - -
Total Expenditure B 694089 710287 16198 2.33%
Profit Before Tax 389111 408763 19652 5.05%
(-)Tax 58367 61314 2947 5.05 %
Profit After Tax 330744 347449 16705 5.05 %

50
INTERPRETATION:

1) Sales were significantly decreased by 16.66 Percentage.

2) Total income is increased by 3.31 Percentage.
3) Total Expenses were decreased by 2.33 Percentage.
4) Administrative Expenses were decreased by 5 Percentage.
5) Profit After Tax decreased by 5.05 Percentage.

11.
5.0 82
0% 16.66% 16.66% %

Net Sales
(-)Cost of Goods Sold
Gross Profit
other income
a)Administration Expenses
b)Marketing & Selling
50.09% Expenses
a)Interest on Term Loan
83.16%

FIG: 4.3

51
 Table: 4.4 Comparative Income Statement of Lohiya Seat Covers and
Accessories for the year ended 2021-2022
Current
Previous Year Absolute Percentage
Particulars Year 2021 2022 Change Change
A)Income
Net Sales 6468000 7392000 924000 14.28%
(-)Cost of Goods Sold 5412950 6121815 708865 13.09%
Gross Profit 1055050 1270185 215135 20.40%
(+)Other Income 64000 63000 1000 1.56%
Total Income A 1119050 1333185 214135 19.14%
B)Expenditure
1)Operating Expenses
a)Administration Expenses 359100 377055 17955 5%
b)Marketing & Selling
Expenses 161700 184800 23100 14.29%
2)Non Operating Expenses
a)Interest on Term Loan 56737 31691 25046 44.14%
b)Interest on Cash Credit 132750 132750 - -
Total Expenditure B 710287 726296 16009 2.25%
Profit Before Tax 408763 606889 198126 48.47%
(-)Tax 61314 91033 29719 48.47%
Profit After Tax 347449 515856 168407 48.47%

52
INTERPRETATION:

1) Sales were decreased by 14.28 Percentage.

2) Total Income increased by 19.14 Percentage.
3) Total Expenses were increased by 22.23 Percentage.
4) Interest on Term Loan is increased by 44.14 Percentage.
5) Profit After Tax increased by 48.47 Percentage.

14.28%

Net Sales
(-)Cost of Goods Sold
13.09% Gross Profit
other income
a)Administration Expenses
b)Marketing & Selling
Expenses
20.04% a)Interest on Term Loan

14.29%
1.5
5.00% 6%

FIG: 4.4

53
 Table: 4.5 Comparative Income Statement of Lohiya Seat Covers and
Accessories for the year ended 2022-2023

Current
Previous Year Absolute Percentage
Particulars Year 2022 2023 Change Change
A)Income
Net Sales 7392000 8316000 924000 12.5%
(-)Cost of Goods Sold 6121815 6839801 717986 11.73%
Gross Profit 1270185 1476199 206014 16.22%
(+)Other Income 63000 63000 - -
Total Income A 1333185 1539199 206014 15.45%
B)Expenditure
1)Operating Expenses
a)Administration Expenses 377055 395908 18853 5%
b)Marketing & Selling
Expenses 184800 207900 23100 12.5%
2)Non Operating Expenses
a)Interest on Term Loan 31691 13915 17776 56.09%
b)Interest on Cash Credit 132750 132750 - -
Total Expenditure B 726296 750473 24177 3.33%
Profit Before Tax 606889 788727 181838 29.96%
(-)Tax 91033 118309 27276 29.96%
Profit After Tax 515856 670418 154562 29.96 %

54
INTERPRETATION:
1) Sales decreased by 12.5 Percentage.
2) Total Income is decreased by 15.45 Percentage.
3) Total Expenses decreased by 3.33 Percentage.
4) Interest on Term Loan is increased by 56.09 Percentage.
5) Administrative Expenses remaining constant by 5 Percentage.

12.50%

11.73% Net Sales

(-)Cost of Goods Sold
Gross Profit
56.09% a)Administration Expenses
16.22% b)Marketing & Selling
Expenses
a)Interest on Term Loan

12.50% 5.0
0%

FIG: 4.5

55
 PROFITS

1822
26841 16705

2011-2012
154562 2012-2013
2013-2014
2014-2015
2015-2016

168407

FIG: 4.6

56
 Table: 4.6 Comparative Balance Sheet of Lohiya Seat Covers and
Accessories for the Year Ended 2018-2019
Previous Current Absolute Percentage
Particulars Year 2018 Year 2019 Change Change

Sources of Fund
1)Capital Account 125000 125000 - -
2)Reserves & Surplus 221964 258465 36501 16.44%
3)Non-Current Liability
a)LOng Term Borrowings
i)Term Loan New 884656 852145 -32511 -3.67%
4)Current Liability
a)Short Term Borrowings
i)Working Capital Loan 1425000 1425000 - -
b)Trade Payables
i)Credited for Raw
Material 71000 75000 4000 5.63%
Total 2727620 2735610 7990 0.29%
Application of Fund
1)Fixed Assets
a)Gross Block 1340000 1180000 -160000 -11.94%
b)less: Depreciation 160000 180000 -20000 -12.5%
c)Net Block 1180000 1000000 -180000 -15.25%
2)Current Assets
a)Inventories
i)Raw Material Consumed 260000 289000 29000 11.15%
ii)Work In Process 126000 133000 7000 5.55%
iii)Finished Goods 287000 330000 43000 14.98%
b)Cash & Cash Equivalents
i)Cash & Bank 255620 291610 35990 14.08%
c)Sundry Debtors 619000 692000 73000 11.79%
Total 2727620 2735610 7990 0.29%

INTERPRETATION:
57
1) The overall current assets has been increased by 0.29 percentage
2) The cash and bank balance increased by 14.08 percentage
3) Reserves and surplus shows an increase by 16.44 percentages which indicates the
profitability position of the concern is satisfactory.
4) Sundry debtors increased by 11.79 percentage
5) Current liability increased by 5.63 percentage

58
 Table: 4.7 Comparative Balance Sheet of Lohiya Seat Covers and
Accessories for the Year Ended 2019-2020
Previous Current Absolute Percentage
Particulars Year 2019 Year 2020 Change Change
Sources of Fund
1)Capital Account 125000 125000 - -
2)Reserves & Surplus 258465 318245 59780 23.13%
3)Non-Current Liability
a)Long Term Borrowings
i)Term Loan New 852145 820454 -31691 -3.72%
4)Current Liability
a)Short Term Borrowings
i)Working Capital Loan 1425000 1425000 - -
b)Trade Payables
i)Credited for Raw
Material 75000 77000 2000 2.67%
Total 2735610 2765699 30089 1.09%
Application of Fund
1)Fixed Assets
a)Gross Block 1180000 1000000 -180000 -15.25%
b)less: Depreciation 180000 150000 -30000 -16.66%
c)Net Block 1000000 850000 -150000 -15%
2)Current Assets
a)Inventories
i)Raw Material Consumed 289000 302000 13000 4.49%
ii)Work In Process 133000 156000 23000 17.29%
iii)Finished Goods 330000 380000 50000 15.15%
b)Cash & Cash Equivalents
i)Cash & Bank 291610 338699 47089 16.15%
c)Sundry Debtors 692000 739000 47000 6.79%
Total 2735610 2765699 30089 1.09%

59
INTERPRETATION:

1) Current assets shows an increase by 23.13 percentage

2) Current liability increased by 2.67 percentage
3) Current assets has been increased by 1.09 percentage
4) Sundry debtors increased by 6.79 percentage
5) Cash and bank increased by 16.15 percentage

60
 Table: 4.8 Comparative Balance Sheet of Lohiya Seat Covers and
Accessories for the Year Ended 2020-2021
Current
Previous Year Absolute Percentage
Particulars Year 2020 2021 Change Change
Sources of Fund
1)Capital Account 125000 125000 - -
2)Reserves & Surplus 318245 651943 333698 104.86%
3)Non-Current Liability
a)Long Term Borrowings
i)Term Loan New 820454 647726 -172728 -21.05%
4)Current Liability
a)Short Term Borrowings
i)Working Capital Loan 1425000 1425000 - -
b)Trade Payables
i)Credited for Raw
Material 77000 83000 6000 7.79%
Total 2765699 2932669 166970 6.04%
Application of Fund
1)Fixed Assets
a)Gross Block 1000000 850000 -150000 -15%
b)less: Depreciation 150000 127500 -22500 -15%
c)Net Block 850000 722500 -127500 -15%
2)Current Assets
a)Inventories
i)Raw Material Consumed 302000 352000 50000 16.56%
ii)Work In Process 156000 170000 14000 8.97%
iii)Finished Goods 380000 444000 64000 16.84%
b)Cash & Cash Equivalents
i)Cash & Bank 338699 382170 43471 12.83%
c)Sundry Debtors 739000 862000 123000 16.64%
Total 2765699 2932669 166970 6.04%

61
INTERPRETATION:
1) Reserves and surplus increased by 104.86 percentage
2) Current liability increased by 7.79 percentage
3) Current assets increased by 6.04 percentage
4) Sundry debtors increased by 16.64 percentage
5) Cash and bank increased by 12.83 percentage

1)

62
 Table: 4.9 Comparative Balance Sheet of Lohiya Seat Covers and
Accessories for the Year Ended 2021-2022

Previous Current Absolute Percentage

Particulars Year 2021 Year 2022 Change Change
Sources of Fund
1)Capital Account 125000 125000 - -
2)Reserves & Surplus 651943 1152799 500856 76.82%
3)Non-Current Liability
a)Long Term Borrowings
i)Term Loan New 647726 474998 -172728 -26.66%
4)Current Liability
a)Short Term Borrowings
i)Working Capital Loan 1425000 1425000 - -
b)Trade Payables
i)Credited for Raw
Material 83000 95000 12000 14.46%
Total 2932669 3272797 340128 11.59%
Application of Fund
1)Fixed Assets
a)Gross Block 850000 722500 -127500 -15%
b)less: Depreciation 127500 108375 -19125 -15%
c)Net Block 722500 614125 -108375 -15%
2)Current Assets
a)Inventories
i)Raw Material Consumed 352000 402000 50000 14.20%
ii)Work In Process 170000 192000 22000 12.94%
iii)Finished Goods 444000 507000 63000 14.19%
b)Cash & Cash Equivalents
i)Cash & Bank 382170 571673 189503 49.59%
c)Sundry Debtors 862000 986000 124000 14.38%
Total 2932669 3272797 340128 11.59%

63
INTERPRETATION:

1) Reserve and surplus decreased by 76.82 percentage

2) Current liability increased by 14.46 percentage
3) Current assets increased by 11.59 percentage
4) Sundry debtors decreased by 14.38 percentage
5) Cash and bank increased by 49.59 percentage

64
 Table: 4.10 Comparative Balance Sheet of Lohiya Seat Covers and
Accessories for the Year Ended 2022-2023
Current
Previous Year Absolute Percentage
Particulars Year 2022 2023 Change Change
Sources of Fund
1)Capital Account 125000 125000 - -
2)Reserves & Surplus 1152799 2681967 1529168 132.65%
3)Non-Current Liability
a)Long Term Borrowings
i)Term Loan New 474998 72584 -402414 -84.72%
4)Current Liability
a)Short Term Borrowings
i)Working Capital Loan 1425000 900000 -525000 -36.84%
b)Trade Payables
i)Credited for Raw
Material 95000 107000 12000 12.63%
Total 3272797 3886551 613754 18.75%
Application of Fund
1)Fixed Assets
a)Gross Block 722500 614125 -108375 -15%
b)less: Depreciation 108375 92219 -16256 -14.9%
c)Net Block 614125 522006 -92119 -15%
2)Current Assets
a)Inventories
i)Raw Material Consumed 402000 452000 50000 87.06%
ii)Work In Process 192000 214000 22000 11.46%
iii)Finished Goods 507000 570000 63000 12.43%
b)Cash & Cash Equivalents
i)Cash & Bank 571673 1019545 447872 78.34%
c)Sundry Debtors 986000 1109000 123000 12.47%
Total 3272797 3886551 613754 18.75%

65
INTERPRETATION:
1) Reserves and surplus increased by 132.65 percentage
2) Current liability decreased by 12.63 percentage
3) Current assets increased by 18.75 percentage
4) Sundry debtors decreased by 12.47 percentage
5) Cash and bank increased by 78.34 percentage

66
FINDINGS:

1) Reserves and surplus of the company is increasing except 2018-2019

2) Current liability for raw material of the company is increasing except 2019-2020
3) Current assets of the company has increased over the period of study
4) Sundry debtors of a company is increasing except 2020-2021 and 2021-2022
5) The cash and bank balances of the company has increased over the period of study
6) Sales of the company has decreasing over the period of study
7) Gross profit of the company has increased during 2022-2023
8) Administrative expenses of the company decreases and remains constant in the last
three years
9) Interest on loan of the company are also increasing except 2023

67
SUGGESTIONS:

 Management should search where the highly qualified and talented employees are
available at minimum salaries.
 It is better to create good relationship among the parties.
 The company may take one of the measures for improving more profits, sales should
enhanced from into end through innovative marketing techniques. In a competitive
business world, unless and other wise aggressive it is very difficult to achieve its
required sales.
 The concern must take measures to avoid dead stock- which has an adverse
 Suitable training may be imparted to all the executives including labour as and when
they are recruited.

68
CONCLUSION:

LOHIYA SEATS COVERS and ACCESSORIES is been successful in meeting the

demanding requirement. HR department plays a very crucial role in providing man power
with right person right time in right place

LOHIYA SEATS COVERS and ACCESSORIES is developing corporate social

responsibility such as self employment generation, environment protection, education health
management and medical aids and so on. It gives more protection and safety to the staff
working in it besides more concentration to the welfare of the workers.

Finally, I Pray GOD requesting to develop the unit more and in day by day. LOHIYA SEAT
COVERS and ACCESSORIES should run in successful manner in future also.

69
BIBILOGRAPHY:

Reference from books:

1) The Institute of Company Secretaries of India (ICSI) “Cost and Management

Accounting”, Delhi.
2) R.P. Trivedi and Manoj Trivedi “Management Accounting and Control”
3) GIBSON, C.H. Financial Statement Analysis, 1986
4) Accounting trends and techniques American institute of certified public accountant,
New Year, NY Latest.
5) FOSTER, G. Financial Statement Analysis, Prentice Hall Inc. Englewood, Clliffs, NJ.
Lastest Edition.
6) OMALIA, P.J.A. Bankers Guide to Financial Statements, 1989.

Reference through Internet:

[Link]

[Link]

[Link]

[Link]

70
QUESTIONNAIRE:

1) Do you experience in examine the financial statements of a for-profit entity

that reflect the initial accounting for intangible assets acquired in business?
(a)
a) Yes
b) No
2) Based on your experience, do you think sufficient information of financial
statement is sufficient?
(b)
a) Yes
b) On
3) Does the organization prepare financial statements at least annually provide a
copy of latest balance sheet and income statement?
(a)
a) Yes
b) On
4) Has the organization established lines of credit? If so identify source and
amount.
(b)
a) Yes
b) No
5) Have you ever encountered such a qualitative description of the assets in the
financial reports you have examined.
(a)
a) Yes
b) No
6) How much of the risk for this form is due to business factors how much of it is
due to financial leverage.
(a)
a) Yes
b) No

71
7) Does the firm have a particularly good or bad reputation as a corporate citizen.
(a)
a) Yes
b) No

72