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Financial Performance Analysis Studies

The document reviews various studies on financial performance analysis conducted by researchers in India and abroad, highlighting different perspectives and methodologies. Key studies include analyses of the tea industry, diversified companies, and the pharmaceutical sector, focusing on financial ratios and performance measures. The findings indicate trends in profitability and efficiency across various industries, emphasizing the importance of financial management and performance evaluation.

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14 views2 pages

Financial Performance Analysis Studies

The document reviews various studies on financial performance analysis conducted by researchers in India and abroad, highlighting different perspectives and methodologies. Key studies include analyses of the tea industry, diversified companies, and the pharmaceutical sector, focusing on financial ratios and performance measures. The findings indicate trends in profitability and efficiency across various industries, emphasizing the importance of financial management and performance evaluation.

Uploaded by

carc4680
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Review of literature

AN OVERVIEW OF EARLIER STUDIES

A number of research studies have been carried out on different aspects of financial
performance analysis by the researchers, economists and academicians in India and
abroad. Different authors have analysed performance in different perspectives. A review
of these analyses is important in order to develop an approach that can be employed in
the context of the study. Therefore, the present chapter reviews the studies related to
different aspects of financial performance analysis.

Kallu Rao (1993) has made a study of inter-company financial analysis of tea
industry-retrospect and prospect. An attempt has been made in this study to analyse the
important variables of the tea industry and projected future trends regarding sales and
profit for the next 10 year periods, with a view to help the policy makers to take
appropriate decisions. Various financial ratios have been calculated for analyzing the
financial health of the industry.

Pai, Vadivel and Kamala (1995) studied diversified companies and financial
performance: A study. An effort was made to study the relationship between diversified
firms and their financial performance. Seven large firms having different products-both
related and otherwise-in their portfolio and operating in diverse industries were
analyzed. A set of performance measures / ratios was employed to determine the level of
financial performance. The results reveal that the diversified firms studied have had
healthy financial performance.

In the RBI study (1995) an attempt was made to study the financial performance of the
private corporate business sector during the period 1994-95. Of the 1030 companies
covered in this study, 925 are non-financial companies and 105 are financial companies.
The results of the non-financial and financial companies are also analyzed size-wise
apart from the analysis of the consolidated results for the entire sector. The good
corporate performance during 1994-95 reflected in major profitability ratios registering
distinct improvement in the year under review as compared to the previous year.

Sardeesh Babu (1999)12 in her study "A Study on Financial Performance of Fertilizers
and Chemicals Travancore Limited". The cost of various overheads can be brought down
by carefully scrutinizing each item and applying cost cutting techniques. The
profitability of the company can be improved by reducing the expenses that do not
contribute any productive use. The current assets can be managed efficiently by
1
examining the material holding and stock holding procedure and pattern. If the
company increase its turnover and reduces its cost, the profit will increase leading to an
increases in the growth rate of sales, profit before tax and profit after tax

Joanne Loundes (2001) in the study„The Financial performance of Australian


Government Trading Enterprises Pre-and Post-Reform" revealed that during the 1990's
there were several measures introduced to improve the efficiency and financial
performance of government trading enterprises in Australia. The purpose of this study
was to discover whether there had been any change in the financial performance of
government trading enterprises operating in electricity, gas, water, railways and ports
industries as a result of these changes.

Debasish Sur and Kaushik Chakraborty (2006) in his study financial performance of
Indian Pharmaceutical industry. The comparative analysis of the financial performance
of the Indian Pharmaceutical industry for the period 1993 to 2002 by selecting six
notable companies of the industry. The comparison has been made from almost all
points of view regarding financial performance using relevant statistical [Link]
[Link] & Khalid S.M (2012) The study explored that ratios are calculated from
financial statements which are prepared as desired policies adopted on depreciation and
stock valuation by the management. Ratio is a simple comparison of numerator and a
denominator that cannot produce a complete and authentic picture of business. Results
are manipulated and also may not highlight other factors which affect performance of
firms by promoters.

Ray Sabapriya (2012) Studied the sample of automobile companies to evaluate the
performance of industry through indicators namely sales, production and export trend
etc for period of 2003-04 to 2009-10. The study finds that the automobile industry has
been passing through disruptive phases by over debt burden, under utilization of assets
and liquidity instability. The researcher suggested to improving the labour productivity,
labour flexibility and capital efficiency for success of industry in future

Jothi, K. & Geethalakshmi, A. (2016) This study tries to evaluate the profitability &
financial position of selected companies of the Indian automobile industry using
statistical tools like, ratio analysis, mean, standard deviation, correlation.

Common questions

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The reviewed studies reveal that financial performance is influenced by a multitude of variables, such as diversification, cost management, and efficient asset utilization. Methodologies commonly used include financial ratios, statistical tools, and comparative analyses. These approaches provide nuanced insights into inter-company financial health and guide policymakers and enterprises in strategic decision-making .

Kallu Rao's 1993 study provided a comprehensive financial analysis of the tea industry, focusing on inter-company financial metrics. The study projected future trends regarding sales and profit for a 10-year period, helping policymakers make informed decisions. Rao utilized various financial ratios to examine critical variables and gain insights into the industry's financial health .

Jothi and Geethalakshmi utilized various statistical tools to evaluate the profitability and financial position of selected Indian automobile companies. Their methodologies included ratio analysis, mean, standard deviation, and correlation to provide a comprehensive financial evaluation .

Pai, Vadivel, and Kamala's study analyzed the financial performance of seven large diversified firms to understand the impacts of having diverse product portfolios. They used a set of performance measures/ratios to assess the financial health and concluded that the diversified firms showed healthy financial performance .

Debasish Sur and Kaushik Chakraborty employed comparative financial performance analysis using various statistical tools to assess the Indian Pharmaceutical industry between 1993 and 2002. They selected six significant companies and extensively applied these tools to evaluate financial metrics from different perspectives .

Joanne Loundes found that the financial performance of Australian Government Trading Enterprises in industries like electricity, gas, water, railways, and ports showed improvement as a result of several measures introduced during the 1990s aimed at enhancing efficiency and financial outcomes .

Ray Sabapriya identified several challenges faced by the automobile industry from 2003-2010, including over debt burden, underutilization of assets, and liquidity instability. The study suggested solutions such as improving labor productivity, enhancing labor flexibility, and increasing capital efficiency to ensure future success and stability .

Zafar S.M. Tariq & Khalid S.M. critiqued the reliance on financial ratios for performance evaluation, arguing that ratios derived from financial statements, which reflect policies like depreciation and stock valuation, might not capture the complete business picture. They pointed out that these metrics could be manipulated and may overlook other performance-affecting factors .

Sardeesh Babu suggested that Fertilizers and Chemicals Travancore Limited could enhance profitability by scrutinizing various overheads and applying cost-cutting techniques. Efficient management of current assets, specifically through examining material holding and stockholding procedures, was also recommended to reduce non-productive expenses and increase the profit margin .

The RBI's 1995 study found that the private corporate business sector in India experienced good financial performance during 1994-95, with significant improvements in major profitability ratios. This positive trend was observed across both non-financial and financial companies within the sector, indicating overall enhanced corporate financial health .

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