RATIO ANALYSIS OF DLF LIMITED

Real 660 – Accounting and Finance for Built Environment

Submitted To

Prepared and submitted by

Mehul Sarkar A13558922003
Devi Sanjeev A13558922025
Kishlay Pathak A13558922008
Md Aman Murshid A13558922011
Place: RICS SCHOOL OF BUILT ENVIRONMENT Date: 14/12/21

ACKNOWLEDGEMENT

We would like to express our sincere and heartfelt gratitude towards all who have supported us in this
endeavour. Without their guidance, critique, help, encouragement & co-operation, we would not have
made headway in this journey of MBA. We are indebted to RICS SCHOOL OF BUILT ENVIRONMENT,
AMITY UNIVERSITY for giving us this opportunity to undertake a Financial Ratios Analysis project for a
company of personal interest as a part of MBA REUI curriculum. We are extremely thankful and pay
our gratitude to Professor C.A. Vishal Goel Sir, for his patience, valuable guidance and knowledgeable
support at every step of this project right up to the completion. We are thankful to batch 2022-24 of
MBA REUI for being a part in the learning process of Finance & Accounting. We also acknowledge with
a deep sense of reverence, our gratitude towards our grandparents, parents, who have always
supported us morally as well as economically. Any omission in this brief acknowledgement does not
mean lack of gratitude.
Table of Contents
1: About the Company ........................................................................................................................... 5
a. Background of the company ....................................................................................................... 5
b. What kind of business company has or what are its core working areas? ................................. 5
c. Promoters of the company ......................................................................................................... 7
d. Does the company has any subsidiary or holding company? ..................................................... 8
e. Any latest news which is important for company and economy ................................................ 8
2. Understanding and analysing the Financial Statements of the company:....................................... 9
B1. Profitability Ratios: .......................................................................................................................... 9
B3. Liquidity Ratios:.............................................................................................................................. 12
B3. Solvency Ratios: ............................................................................................................................. 15
B4. Efficiency Ratios: ............................................................................................................................ 18
3. Concept of Financial Statement Analysis ........................................................................................ 20
4. Conclusion & Summary .................................................................................................................... 23
List of Figures
Figure 1 Main core businesses and different segments of its business.................................................. 6
Figure 2 Pie Chart showing shareholding pattern of DLF ....................................................................... 7
Figure 3 Earnings per Equity Share of DLF Limited for 2 financial years ................................................ 9
Figure 4 Shows increase of the net profit ratio .................................................................................... 10
Figure 5 shows the ROI ratio ................................................................................................................. 11
Figure 6 Revenue of DLF limited ........................................................................................................... 11
Figure 7 Increase in Current ratio from 1.47 to 1,77 from year FY-2020-21 to FY-2021-22................. 12
Figure 8 Showing a decrease in the Net profit from FY 2020-21 to FY 2020-22................................... 13
Figure 9 showing current assets for years 2020, 2021 & 2022 ............................................................. 14
Figure 10 Shows DLF's Revenue from operations................................................................................. 14
Figure 11 DLF's total current & non-current liabilities ......................................................................... 14
Figure 12 Shows Graph showing Debt Equity Ratio.............................................................................. 15
Figure 13 High Non-current assets and its increase over the years shows an increase in investments
like creating land banks ........................................................................................................................ 16
Figure 14 Decreasing Purchases shows less business expansion ......................................................... 16
Figure 15 Shows Graph showing proprietary ratio ............................................................................... 17
Figure 16Total Equity from the balance sheet of DLF........................................................................... 17
Figure 17 Total Assets of DLF impacting proprietary ratio ................................................................... 17
Figure 18 Shows the increase in performance of DLF by the utilization of its assets........................... 18
Figure 19Highlights the Parameters that affect the ratio analysis ....................................................... 19
Figure 20 Shows an increase in the efficiency pf the way in which the stock has been utilized to
generate its revenue ............................................................................................................................. 20

List of Tables
Table 1 Showing Shareholding pattern of DLF for the year 2022 ........................................................... 7
Table 2 List of Subsidiaries of DLF limited for the year 2022 .................................................................. 8
Table 3 shows the summarized financial ratios from FY 2020-21 TO FY 2021-22 ................................ 23
1: About the Company

a. Background of the company

Founded in 1946 by Chaudhary Raghvendra Singh, DLF started with the creation of 22 urban colonies
in Delhi, including Model Town, Rajouri Garden, Punjabi Bagh, South Extension, Greater Kailash,
Kailash Colony and Hauz Khas, providing millions of homes to families displaced by partition who
settled in the capital. In 1985, the company expanded into the then-unknown region of Gurugram,
creating exceptional living and working spaces for the new Indian global professionals. Today, DLF is
the largest publicly listed real estate company in India, with residential, commercial, and retail
properties in 15 states and 24 cities.
DLF Foundation was established in 2008 as the CSR implementing arm of the DLF Group and works to
deliver high impact interventions in the areas of education, healthcare and social sustainability.

Milestone of DLF
1946: Established by Chaudhary Raghvendra Singh
1985: Saw the start of construction of the 3000 acre DLF metropolis in Gurgaon.
1999: Started renting Grade A offices in Gurgaon.
2002: Started a business in shopping centres
2004: Saw the debut of upscale housing developments with golf links.
2006: New business expansion in hotels and large towns
2007: JV with Prudential Financial Inc. of the USA, first initial public offering
2012: 8.1 km of expressway was built in collaboration with HUDA.
2020: Developed Noida data centre and IT park

b. What kind of business company has or what are its core working areas?

DLF as an organisation and its functional areas:

Construction of residential, commercial, and retail properties is DLF's primary activity. DLF primarily
operates in 2 industries:

1. Residential and commercial real estate development

2. Annuity Business: Retail, Offices, IT Parks, SEZ DLF has recently forayed into infrastructure, SEZ,
investments, and hospitality DLF's operations are broken down into SBUs. The Homes SBU caters to
the Super Luxury, Luxury, and Mid-Income segments of the housing market. A wide variety of items,
including condominiums, duplexes, row homes, and apartments of various sizes, are included in the
product offering.
Figure 1 Main core businesses and different segments of its business

The company’s business is spread across different divisions:

• Office–Commercial
• Home–Residential
• Shopping Mall
• Retail
• SEZ's
• Hotels
• Infrastructure
• Leisure
Projects of the company:
Housing:
• DLF Capital Greens, Shivaji Marg, Delhi
• Express Greens, Gurgaon
• Green Estate, DLF Nandigama (Shamshabad Extn.), Hyderabad
• Westend Heights, BTM Bangalore
• Garden City DLF OMR, Chennai
• Garden City DLF New Indore, and many more
Commercial
• DLF Cyber SEZ Gurgaon Building 14
• DLF IT Park Gandhinagar
• DLF IT SEZ Chennai
• DLF IT SEZ Hyderabad
• DLF IT PARK–II Kolkata
• City Centre ,Chandigarh
• The Galleria Jalandhar, Punjab
• The Galleria Kolkata
• DLF Towers Banjara Hills, Hyderabad
Completed projects:
• The Summit, Gurgaon
• The Pinnacle, Gurgaon
• The Regency Park–II ,Gurgaon
• The Richmond Park ,Gurgaon
 • DLF Exclusive Floors, Gurgaon
• The Silver Oaks, Gurgaon
• DLF Centre, Gurgaon
• DLF Gateway Tower, Gurgaon
• City Centre Shalimar Bagh, New Delhi, and many more

c. Promoters of the company

Share holding pattern for the year 2022:

Holder's Name No of Shares % Share Holding

No of shares 2,475,311,706 100%
Promoters 1840733505 74.36%
Foreign Institutions 368819296 14.9%
Banks & Mutual Funds 81720147 3.3%
Central Govt 1114 0%
Others 21159061 0.85%
General Public 111386318 4.5%
Financial Institutions 36996905 1.49%
Foreign Promoter 14495360 0.59%
Table 1 Showing Shareholding pattern of DLF for the year 2022

Figure 2 Pie Chart showing shareholding pattern of DLF

d. Does the company has any subsidiary or holding company?
As per annual report of 2021 - 22, DLF has 169 subsidiaries. We have mentioned few of
them below.

Name % Of equity
share holding
DLF Builders and Developers Private Limited 100
DLF Commercial Developers Limited 100
DLF Aspinwall Hotels Private Limited 100
DLF Commercial Projects Corporation 100
DLF Estate Developers Limited 100
DLF Exclusive Floors Private Limited (formerly 100
Delanco Home and Resorts Private Limited)
DLF Golf Resorts Limited 100
DLF Green Valley 50
DLF Homes Goa Private Limited 100
DLF Homes Services Private Limited 100
DLF Office Developers Private Limited 85
DLF Property Developers Limited (formerly 100
DLF Emporio Restaurants Limited)
DLF Recreational Foundation Limited 85
DLF Residential Developers Limited 100
DLF Universal Limited 100
Table 2 List of Subsidiaries of DLF limited for the year 2022

e. Any latest news which is important for company and economy

Latest news on DLF

• Net profit of DLF Cyber City Developers rose by 50.73% to Rs 177.74 crore in the quarter ended
September 2022 as against Rs 117.92 crore during the previous quarter ended September
2021. Sales rose 22.31% to Rs 576.02 crore in the quarter ended September 2022 as against
Rs 470.96 crore during the previous quarter ended September 2021.

• DLF, plans to invest approximately 3,000 crores to expand 5 million square feet over the next
5 to 6 years.

• In addition to providing retail space in its upcoming residential and commercial complexes,
the majority of which will be unveiled this year, the company has planned malls in Gurugram
and Goa as well as high streets in Gurugram.

• DLF will invest around Rs 2,000 crore to construct two new shopping malls in Gurugram and
Goa, as it sees huge growth potential in organized retail with opening up of the economy after
significant reduction in COVID-19 cases. Khattar said the DLF is expanding its retail real estate
portfolio, and will develop two new shopping malls, including 'Mall of India' Gurgaon and four
neighbourhood shopping centres.

• In its research report dated December 6, 2022, Motilal Oswal advised Neutral rating on DLF
with a target price of Rs 425.
2. Understanding and analysing the Financial Statements of the company:

B1. Profitability Ratios:

Profitability ratios can be judged on the basis of sales or capital employed

In terms of Capital employed, we have 2 ratios that is, EPS & ROI

In terms of Capital Employed:

EPS (Earnings Per Share):

The higher the Earning per share the better is its profitability. It is obtained by dividing Profit after
tax with Total number of ordinary shares of the company.

FY 2020-21: April 2020 - March 2021:

= 4.26

FY 2021-22: April 2021 - March2022:

= 5.39

Earnings Per Share of DLF Limited

6
5.39
5
4.26
4
EPS ratio

FY 2020-21 FY 2020-22

Figure 3 Earnings per Equity Share of DLF Limited for 2 financial years

Analysis:
From the Profit & Loss Statement of DLF’s Annual Report the Earnings per equity share’s basic value
in rupees has directly been analysed:

DLF is having a better and increased EPS ratio which indicates an increased profitability in the
financial year 2021-22 that in the previous financial year. It is indicating a good room of the DLF for
an investor who want to increase his/her dividend and is seeking for a steady source of income
In terms of Sales:
Net Profit Ratio:
It is expressed as (Net Profit/Net Sales) x100. From the Profit and Loss Statement of DLF’s
Standalone Financial Statement (EBIT/RFO) X100 has been used to find out the net profit ratio.

EBIT = PBT + Financial Cost.

FY 2020-21: April 2020 - March 2021:

= [ (137,807.17+57,475.39)/392,877.69] x 100
= [195,282.56/392,877.69] x 100
= 0.49 x 100
=49%
FY 2021-22: April 2021 - March2022:
= (167,527.19 + 43,565.20)/ 405,355.30
=211,092.39/405,355.30
=0.52 x 100
=52%

Net Profit Ratio

100
90
80
70
60
Net profit ratio

49 52
50
40
30
20
10
0

FY 2020-21 FY 2020-22

Figure 4 Shows increase of the net profit ratio

Analysis:
Analysing from the balance sheet it is inferred that both the company’s profit as well as the amount
of money which is being brought into the business (Net Sales) has increased from FY 2020-21 to FY
2021-22. There is a increase of 3%. This evidently shows that DLF efficiency of generating profits in
increasing with respect to its revenue that is happening from of its Real estate development and
Real estate Annuity Business.
Return On Investment

ROI Ratio
5
0.04
4.5
4 0.035
3.5
3
ROI ratio

2.5
2
1.5
1
0.5
0

FY 2020-21 FY 2020-22

Figure 5 shows the ROI ratio

Return on Investment Analysis

It is calculated by dividing the Profit for the year of the company & Capital Employed where Capital
Employed = Total Assets - Total Current Liabilities

FY 2020-21: April 2020 - March 2021:

= 105345.65 / (3954551.26- 999344.54)] x 100
= [105345.65 / 2955206.72] x 100
= 0.066x100
= 3.56%
FY 2021-22: April 2021 - March2022:
= 133535.26/ (3,731,567.08 - 711,407.60)
= [133535.26/3020159.48] x 100
= 0.0698x100
= 4.42%

Analysis & Recommendation:

DLF needs to increase profits & reduce expenses or they have to reduce the capital employed in the
company. Since DLF is a real estate company there are expenses associated with maintenance of
inventories so this should be managed to increase the return of investments. The ideal ROI for real
estate companies is 9-12 % minimum so DLF needs to improve its ROI value by 6 – 8 % approximately.
DLF should also focus on increasing its total income from operations since the expenses are mostly
inevitable to reduce(as the company has a good brand image in the market).

Figure 6 Revenue of DLF limited

B3. Liquidity Ratios:
For Short Term:
Current Ratio:

The ability of a company to pay its short-term obligations within one accounting period. It also
shows the liquidity position of the company. It is also necessary to look into this ratio with the debt-
equity ratio

As inferred from the balance sheet:

Current Ratio = Total Current Assets / Total Current Liabilities

FY 2020-21: April 2020 - March 2021:

1,478,321.24 / 999,344.54
=1.47
FY 2021-22: April 2021 - March2022:
= 1,260,085.87 / 711,407.60
=1.77
Current Ratio
2
1.77
1.8
1.6 1.47
1.4
1.2
Current Ratio

1
0.8
0.6
0.4
0.2
0

FY 2020-21 FY 2020-22

Figure 7 Increase in Current ratio from 1.47 to 1,77 from year FY-2020-21 to FY-2021-22

Analysis:

As analysed from the balance sheet of the company the ratio has increased from 1.47:1 to 1.77:1
which is in between the industry benchmark of “1.33:1 to 2:1”. This shows an increase in repayment
capacity of DLF most possibly happening because of the increase in revenue of the business due to
increase of both sales and leasing business after the pandemic.

Recommendations:

DLF uses mostly its Annuity led business to repay loans and other short term and long-term
obligations. For Ex: The Annuity led business model of the company can be strengthened by improving
the facility management in retail segment and increasing the diversity and flexibility of floorplate areas
to its tenant for lease. This will significantly increase cash from leasing return and thus increase the
repayment capacity within a year of time. From 323634.41 to 172,516.59 the borrowing under
Financial Liabilities in the Balance Sheet has decreased which is contributing majorly to the decrease
in its current liabilities and is greater than the decrease in its Total assets in the respective years. DLF
should maintain this decline of its short-term obligations.

Quick Ratio:
Quick Assets/Current Liabilities, Where (Quick Assets=Current Assets - Stock - Prepaid Expenses)
After studying the balance sheet of DLF the inventories have been subtracted from the current assets
to obtain the quick assets. Quick assets usually don’t consider inventories because conversion of it
into cash takes time

FY 2020-21: April 2020 - March 2021:

= (1,478,321.24-1,167,327.42) / 999,344.54
=310,993.82/999,344.54
= 0.31
FY 2021-22: April 2021 - March2022:
= (1,260,085.87- 1,067,093.92) / 711,407.60
= 192,991.95/711,407.60
= 0.27
Quick Ratio
1
0.9
0.8
0.7
0.6
Net Profit Ratio

0.5
0.4 0.31
0.3 0.27

0.2
0.1
0

FY 2020-21 FY 2020-22

Figure 8 Showing a decrease in the Net profit from FY 2020-21 to FY 2020-22

Analysis:

As it talks about the extent to which a business can pay its short-term liabilities with the use of its
most liquid assets. Since it has reduced it shows that DLF’s liquid assets has decreased in the financial
years. It’s clearly evident in the respective financial year that quick assets have reduced from
310,993.82 to 192,991.95, showing a good decrease in the number of its highly liquid assets which
could have been else used to fulfil the short-term obligations. Although the number of inventories has
reduced which indicates comfortable cash flows and better financial strength and that the developer
company DLF is in the position of launching new projects however there has also been a decrease in
the number of its current assets from 1,478,321.24 to 1,260,085.87 because of which it is
comparatively more difficult to reply to the short-term current liabilities.
 Figure 9 showing current assets for years 2020, 2021 & 2022

The main current assets because of which the liquidity of the company has been reduced is:

• Cash & Cash Equivalents

• Bank Balances
• Loans

Recommendations:
It should maintain its cash and should also focus on increasing its Cash Equivalents as the growth is
not very significant. DLF as a company being high in debt & other outstanding & payables as evident
from its total liabilities and also from its current and non-current liabilities should increase its revenue
from operation (because the growth is low) so that there is more inflow of cash and increased bank
balances to be able to liquidate and fulfil its short-term obligations (which though decreased but not
proportionately to the Revenue From Operations of DLF joncarico (n.d.).

Figure 10 Shows DLF's Revenue from operations

Figure 11 DLF's total current & non-current liabilities

B3. Solvency Ratios:

Debt – Equity Ratio

Debt to Equity ratio shows the relative proportion of shareholders equity and debt that is used to
finance a company’s assets. Thus, it talks about the extent to which shareholder equity can fulfil the
obligations to the creditors when the business is in decline.

From the balance sheet data analyse for finding out Debt Equity Ratio we can use the formula

: Total Debt/Total Equity in the form of -

: (Total Current Liabilities + Total Non-Current Liabilities)/Total Equity

Since this is a sector specific ratio

FY 2020-21: April 2020 - March 2021:

= (999,344.54 + 316,285.26) / 2638921.46
=1315619.80/2638921.46
=0.50
FY 2021-22: April 2021 - March2022:
(711,407.60+297,195.21) / 2,722,964.27
=1,008,602.81/2,722,964.27
=0.37

Debt-Equity Ratio
0.6
0.5
0.5

0.4 0.37
DE ratio

0.3

0.2

0.1

FY 2020-21 FY 2020-22

Figure 12 Shows Graph showing Debt Equity Ratio

Analysis:
The debt-equity ratio of the company has decreased from 0.50 in FY-2020-21 to 0.37 in FY-2021-22.
Also as analysed the total Equity of the company has increased from 2638921.46 in FY 2020-21 TO
2,722,964.27 in FY 2021-22. Whereas the debt has decreased from 1315619.80 to 1,008,602.81. This
shows that company is trying to de-leverage its liabilities and increasing its equity so that it has a better
chance to fulfil obligations to the creditors when business is in decline.
Recommendation:
The Company is not using its debt for expansion rather it is using it to increase its non-current assets
like Land, Investments and purchasing of property which otherwise could have been used for
expansion (cost of land and property purchase in the “expenses” of the Income statement as shown
in the figure). Other competitors in the industry are using it for their expansion because of which the
industry average is higher “3.5:1” (which means they are taking more risk). This also shows the land
banking nature of the DLF’s real estate property development business

Figure 13 High Non-current assets and its increase over the years shows an increase in investments like creating land banks

Figure 14 Decreasing Purchases shows less business expansion

Proprietary ratio:
A Proprietary ratio tells how much is the holding or contribution of the shareholder or owner in the
total asset of the business. As inferred from the DLF’s balance sheet the Proprietary ratio can be found
out by using Total Equity of the company divided by its Total Assets (formula is Proprietary’s
Fund/Total Assets)

FY 2020-21: April 2020 - March 2021:

=2,638,921.46/ 3,954,551.26
=0.67

FY 2021-22: April 2021 - March2022:

=2,722,964.27/3,731,567.08
=0.73
 Propreitary Ratio
0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
Category 1

FY 2020-21 FY 2021-22

Figure 15 Shows Graph showing proprietary ratio

Analysis:
The equity share capital remains the same for both the financial year but there is an increase in the
other equity in the next financial year which leads to an increase in the total equity of the company
by 84,042.81 however there has also been a decrease in the total assets of the company. Also, the
ratio is greater than 0.5:1 (Ideal Proprietary ratio) for both the years. This shows that the contribution
of the owners has increased towards their assets and that the business is in a strong position (that is,
less dependence on debt financing to run its business).

0
Figure 16Total Equity from the balance sheet of DLF

Figure 17 Total Assets of DLF impacting proprietary ratio

Recommendations:
The nominal value of shares being held by its shareholders is known as issued share capital. As
observed and analysed from the Standalone balance sheet, it needs to increase its issue of Equity
Share Capital & other equity sources. Since it is greater than 0.5 the Proprietary ratio of the company
seems healthy.
B4. Efficiency Ratios:

Asset Turn-over Ratio

From the data analysed it is, Asset turnover ratio = Sales/Total Assets. Here Revenue from operations
of DLF from its Balance sheet has been taken for finding out the ratio value. The value has increased
from 0.0971 to 0.1086 which shows company has made more revenue by the use of its assets in the
financial year 2020-21 than in 2021-22 and has produced more revenue by the utilization of its total
assets of the respective accounting period.

April 2020 - March 2021:

= 389,347.69/4,007,378.69 =0.0971
April 2021 - March2022:
405,355.30/3,731,567.08 =0.1086

Asset Turn-over Ratios

0.12
0.1086
0.0971
0.1
Asset turnover ratio

0.08

0.06

0.04

0.02

FY 2020-21 FY 2020-22

Figure 18 Shows the increase in performance of DLF by the utilization of its assets

Analysis:
There has been a decrease in the amount of its total asset yet DLF has made increasing revenue from
operations which shows a good efficiency of the company to use its assets. There has been a decrease
in deferred tax from 222,765.93 to 192,125.15 from 2020-21 to 2021-22 and also a good decrease in
its investment properties which have not affected the revenue from operations of DLF much. 42.
 Figure 19Highlights the Parameters that affect the ratio analysis

Recommendations:
DLF should focus on increasing its revenue from operations and should further decrease
upon its current assets like loan to increase its asset turnover ratio and have a good
efficiency of generating Revenue from its assets

Stock Turn-over Ratio:

As we know, Asset turnover ratio = COGS/Average Inventory or stock where COGS=Cost of Goods
Sold. In this case the value of Revenue from operations of the company in the Profit & Loss
statement of the company has been taken as its cost of goods sold and the average stock has been
taken as the inventory from its current assets of previous year which is (Opening stock+Closing
Stock)/2.This year’s opening stock was last year’s closing stock

April 2020 - March 2021:

=236,994.95 / (1,068,781.45+1,167,327.42)/2

=236,994.95 / 1118054.43

=0.21

April 2021 - March 2022:

= 405,355.30 / (1,167,327.42+ 1,067,093.92)/2

=405,355.30 / 1117210.67

=0.36
 Stock Turn-over Ratio
0.4
0.36
0.35

0.3

0.25
0.21
Asset turnover ratio

0.2

0.15

0.1

0.05

FY 2020-21 FY 2020-22

Figure 20 Shows an increase in the efficiency pf the way in which the stock has been utilized to generate its revenue

3. Concept of Financial Statement Analysis

A company’s financial statements are analysed by its internal stakeholders for the decision-making
process and is known as Financial Statement analysis. This is being employed by the external
stakeholders of the company as well to understand the overall financial health of the company over
time. The main purpose of the process is to evaluate the business and its value. All businesses are
required by financial accounting to produce balance sheets, income statements, and cash flow
statements, which serve as the foundation for financial statement analysis.

The three techniques used by financial analysts to analyse financial statements are Horizontal, Vertical
and Ratio Analysis.

Analysing Financial Statements

Every important activity that has happened in the business can be analysed through the financial data
recorded over time. This is evaluated using the performance in the past, present, and the future. Every
public listed company is expected to maintain its balance sheet, income statement and cash flow
statement in all the financial years as aligned with the generally accepted accounting principles or
GAAP.

Types of Financial statements

1. Balance sheet

It has the complete details of a company's financial worth in terms of book value which includes details
on assets, liabilities and shareholder’s equity. A company's operational efficiency can be greatly
influenced by its short-term assets, such as cash and accounts receivable; liabilities, such as the
company's expense plans and the debt it is repaying; and shareholder equity, which includes
information on equity capital investments and retained earnings from periodic net income. Assets and
liabilities must be equal on the balance sheet to reflect shareholder equity.

2. Income statement

The income statement compares the revenue that a business generates with the costs associated with
its operations to produce a bottom line, or the net profit or loss. The income statement is divided into
three sections to aid in the analysis of business efficiency at various points. To calculate gross profit,
start with revenue and the direct costs that go along with it. The next step is operational profit, which
is calculated after deducting indirect expenditures like marketing, general, and depreciation. Finally,
the net income is determined after interest and taxes have been subtracted.

3. Cash Flow Statement

The cash flows from operating, investment, and financing activities of the business are summarized in
the cash flow statement. The top line item for operating operations is net income, which is carried
over to the cash flow statement. Investment operations encompass the cash flows related to firm-
wide investments, as suggested by their name. Cash flow from debt financing and equity financing are
both included in the financing activities section. The bottom line displays how much cash is on hand
for a business.

Tools Used in Financial Analysis

1.Comparative Or Horizontal Statements

This type of financial statement shows profitability and financial condition over time. These
statements provide information about the company's financial position over a period of two or more.
Only when the same accounting standards are followed in the preparation of the financial statements
can they be compared. This is carried out through comparison of balance sheets and income
statements

2. Comparative Balance Sheet

By examining the firm's various assets and liabilities on various dates and comparing the balances from
one date to another, it is possible to track the evolution of the business. The comparative balance
sheet needs two columns for the information from the original balance sheets in order to be
understood. The figures' gains and decreases are displayed in a third column. The percentages of
increases or declines are shown in the fourth column. Through this process the following aspects can
be compared:

Profitability of the business

Current and Long-term financial position

Liquidity Position of the company

Comparative Income Statement

An income statement includes crucial elements like net sales, cost of goods sold, selling charges, office
expenses, and so forth. Individual profit and loss details are compared with the similar data from prior
years in order to compare profitability. The variations in money value and percentage are identified
in order to analyse the profitability of the company. Through this process the following aspects can be
compared:
Change in gross profit over time

Operational profit over time

Net Profit

Overall profit of the business over a particular period of time

3.Common Size Statements or Vertical Analysis

Financial statements might be deceptive if they are read with absolute numbers. As a result, the
percentage form is taken into consideration while doing a vertical analysis of financial data. We
compare the balance sheet items:

by applying a percentage to the entire assets while assuming that they are all valued at 100.

Using 100 as the entire amount of liabilities, convert the total liabilities to a percentage.

As a result, the entire Balance Sheet is converted to a percentage. The term "Common-Size Balance
Sheet" refers to such a transformed balance sheet. Comparing similar profit and loss items:

simply converting the total revenues to a percentage and using 100 as the starting point.

Using 100 as the starting point, convert the total expenses into a percentage.

The percentage can be simply compared with the outcomes of equivalent percentages from the
previous year or from some other firms as the statistics are brought to a benchmark.

4. Trend Analysis or Pyramid Method

Trend analysis is the process of examining the operational outcomes and financial status over a
number of years. Under this technique, ratios of various items for various years are calculated and
then compared. The analysis of the ratios over a number of years is performed regardless of
whether the enterprise is heading forward or backward. This study can be used to identify signs of
effective or ineffective management.

5. Ratio Analysis

Ratio analysis is a quantitative analysis of data from a company's financial statements. It explains the
important connection between numerous things on a balance sheet and a firm's statement of profit
and loss. Management can use the ratio analysis technique to evaluate a company's profitability,
solvency, and efficiency. A meaningful relationship between specific items (or groups of items) on
the balance sheet or profit and loss statement is being attempted.
4. Conclusion & Summary
After finding out the different ratio a list of them has been summarised below

Ratios Parameters Used from Formula FY-2021-22 FY-2020-21

the Financial April 2021 - April 2020 -
Statements March2022 March 2021
Efficiency Ratios
Asset Revenue from Sales/Total Assets 0.11 0.10
Turnover Operations/
Ratio Total Assets

Stock Revenue from Cost of goods sold or Sale/ 0.36 0.21

Turnover Operation/Average Average Stock
Ratio Stock

Solvency Ratios
Debt Equity (Total Current 0.37 0.50
Ratio Liabilities + Total Non-
Current Long Term Outside Liabilities/
Liabilities)/Total Equity Tangible Net Worth

Proprietary Total Equity / Total Proprietors Fund/Total Assets 0.73 0.67

ratio Assets
Liquidity Ratio
Current Total Current Assets / Total Current Assets / 1.77 1.48
Ratio Total Current Liabilities Total Current Liabilities

Quick Ratio Quick Assets /Current Quick Assets/Current Liabilities 0.27 0.31
Liabilities Where (Quick Assets=C.A.-
Where (Quick Stock-Prepaid Exp)
Assets=C.A-
Inventories)
Profitability Ratio
Net Profit (Profit before tax/RFO) (Net profit/Net sales) x 100 52% 49%
ratio X100

ROI Profit for the year / (Net profit after taxes/Gross 4.42% 3.56%
(Total Assets – Current Capital Employed) x 100
Liabilities)
EPS Profit for the year/Not (Net profit after taxes. /No. of 5.39 4.26
Available ordinary share) x 100

Table 3 shows the summarized financial ratios from FY 2020-21 TO FY 2021-22

They key findings were that:

Efficiency Ratio:
Both Asset turn over ratio and Stock turn over ratio have shown a good improvement showing that
the company is efficiently using its assets and stock to generate a good revenue from its operations
even though the Total assets of the company has reduced from the previous to the next financial
year

Solvency Ratio:
Debt to Equity reduced indicating a good sign and proprietary ratio increased
Profitability Ratio:
Profitability of the company seems good and growing
Liquidity Ratio:
Its Current ratio has increased showing better chances of fulfilling the obligations than the
Quick ratio which got decreased in the respective financial years chosen
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