Certificate

This is to certify that Aadil Gupta of class XII – Commerce

B of DAV PUBLIC SCHOOL, Pakhowal Road, ludhiana has
completed his project file under my guidance. He has
taken proper care and shown utmost sincerity In
completing the project.

I certify that this project is upto my expectations and as

per the guidance issued by CBSE

Submitted To

Mrs. Damanjit Kaur

(PGT Commerce)
 Acknowledgement

I express my gratitude to Mrs. Damanjit Kaur, my

Accountancy teacher and Guide, who guided me
throughout the project and also gave me valuable
suggestions and guidance for completing the
project. She jelped me to understand the intricate
issues involved in project making besides effectively
presenting it. These intricacies would have been lost
otherwise. My project has been success only
because of her.

Aadil Gupta
XII-Commerce B
 Asian
Paints

History of Asian Paints

Asian Paints, established in 1942 by Chimanlal Choksi, Suryakant Dani, Arvind Vakil, and Danraj Bhagat,
is a leading name in the paint industry. With a vision to rank among the top five global decorative
coating companies, it focuses on innovation, sustainability, and customer satisfaction. Its diverse range
includes decorative paints, industrial coatings, waterproofing solutions, and home décor products.
Headquartered in Mumbai, the company operates globally with a robust organizational structure,
encompassing a skilled leadership team and an extensive retail network.

Analysis of Financial Statemnts

Meaning and Significance of Analysis of Financial Statements

The analysis of financial statements means examining the financial data of a business to
understand its performance, strengths, and weaknesses. It helps in comparing past and present
results, understanding profitability, and making informed decisions.
Significance:

 Performance Evaluation: Helps assess the company’s profitability, efficiency, and

financial stability.
 Decision-Making: Assists management, investors, and creditors in making better
financial decisions.
 Trend Analysis: Identifies growth trends by comparing financial data over the years.
 Investment Decisions: Provides insights for investors to decide whether to invest in the
business.
 Risk Identification: Highlights potential risks and areas of improvement.

This analysis is crucial for understanding the financial health of a company and ensuring its
long-term growth.

Tools of Analysis of Financial Statements

The tools of financial statement analysis help in evaluating the financial performance and
position of a business. These tools make it easier to interpret complex financial data. The main
tools are:

1. Comparative Statements:
o Used to compare financial data of two or more periods.
o Shows changes in financial position and performance.
o
2. Common-Size Statements:
o Expresses items as percentages of a common base (e.g., total assets or sales).
o Useful for comparing companies of different sizes.
o
3. Ratio Analysis:
o Calculates financial ratios like profitability, liquidity, and solvency ratios.
o Helps in detailed analysis of financial strengths and weaknesses.
o
4. Cash Flow Analysis:
o Examines inflows and outflows of cash during a period.
o Indicates the liquidity and cash management of the business
Ratio Analysis
Meaning and Significance of Ratio Analysis

Meaning:
Ratio analysis is a method of studying the relationship between different items in the financial
statements. Ratios are calculated to evaluate the profitability, liquidity, solvency, and efficiency
of a business. It simplifies complex financial data and makes comparison easier.

Significance:

 Performance Evaluation: Helps assess how well the business is performing in terms of
profit, sales, and expenses.
 Financial Stability: Shows whether the company can meet its short-term and long-term
obligations.
 Decision-Making: Aids management, investors, and creditors in making informed
decisions.
 Trend Analysis: Identifies patterns over time, such as growth or decline in financial
health.
 Comparison: Enables comparison with competitors or industry standards to measure
relative performance.
 Investment Decisions: Assists investors in understanding risks and returns before
investing.

Ratio analysis is an important tool to understand the financial health of a business and improve
its future strategies.
 Types of Accounting Ratios

Liquidity Ratios

 Current Ratio
 Quick Ratio

Solvency Ratios

 Debt Equity Ratio

 Debt Ratio
 Interest Coverage Ratio
 Fixed Charge Coverage Ratio
 Receivables Turnover Ratio

Turnover Ratios

 Inventory Turnover Ratio

 Receivables Turnover Ratio
 Payables Turnover Ratio
 Total Asset Turnover Ratio
 Fixed Asset Turnover Ratio
 Working Capital Turnover Ratio

Profitability Ratios

 Gross Profit Ratio

 Net Profit Ratio
 Return on Assets (ROA)
 Return on Equity (ROE)
 Operating Profit Ratio
 Current Ratio

Formula:
Current Ratio = Current Assets / Current Liabilities

Values:

 Current Assets (March 2024): 14,553.21

 Current Liabilities (March 2024): 6,221.01
 Current Assets (March 2023): 13,875.73
 Current Liabilities (March 2023): 5,831.46

Calculation:

 March 2024: 14,553.21 / 6,221.01 = 2.34

 March 2023: 13,875.73 / 5,831.46 = 2.38

Ideal Ratio:
An ideal current ratio is generally 2:1 or higher, indicating that the company can comfortably
cover its short-term liabilities with its current assets.

Comparison & Analysis:

The current ratio decreased slightly from 2.38 in March 2023 to 2.34 in March 2024, but both are
above the ideal ratio of 2:1. The slight decrease indicates a minor reduction in the company’s
ability to meet short-term obligations. However, the ratio is still strong.
 Quick Ratio

Formula:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities

Values:

 Inventory (March 2024): 5,074.76

 Inventory (March 2023): 5,321.79

Calculation:

 March 2024: (14,553.21 - 5,074.76) / 6,221.01 = 1.54

 March 2023: (13,875.73 - 5,321.79) / 5,831.46 = 1.47

Ideal Ratio:
An ideal quick ratio is generally 1:1, meaning the company can cover its short-term liabilities
without relying on inventory.

Comparison & Analysis:

The quick ratio improved from 1.47 in March 2023 to 1.54 in March 2024, indicating that the
company is in a stronger position to meet its short-term liabilities without needing to sell
inventory. This is a positive sign for liquidity.
 Debt to Equity Ratio

Formula:
Debt to Equity Ratio = Total Debt / Shareholders' Equity

Values:

 Total Debt (March 2024): 53.44 (Long-term + Short-term Borrowings)

 Shareholders' Equity (March 2024): 18,425.09
 Total Debt (March 2023): 49.36
 Shareholders' Equity (March 2023): 15,585.56

Calculation:

 March 2024: 53.44 / 18,425.09 = 0.29

 March 2023: 49.36 / 15,585.56 = 0.32

Ideal Ratio:
The ideal debt to equity ratio is typically 1:1 or lower, indicating balanced financial leverage.

Comparison & Analysis:

The debt to equity ratio decreased from 0.32 in March 2023 to 0.29 in March 2024, showing that
the company has slightly reduced its reliance on debt relative to its equity. This is a positive
development in terms of financial stability.
 Proprietary Ratio

Formula:
Proprietary Ratio = Shareholders' Equity / Total Assets

Values:

 Shareholders' Equity (March 2024): 18,425.09

 Total Assets (March 2024): 25,981.90
 Shareholders' Equity (March 2023): 15,585.56
 Total Assets (March 2023): 22,529.84

Calculation:

 March 2024: 18,425.09 / 25,981.90 = 0.71

 March 2023: 15,585.56 / 22,529.84 = 0.69

Ideal Ratio:
The ideal proprietary ratio is typically 0.5 or higher, indicating that a larger portion of the
company’s assets is financed by equity.

Comparison & Analysis:

The proprietary ratio increased from 0.69 in March 2023 to 0.71 in March 2024, signaling that a
greater proportion of the company’s assets are now financed by shareholders’ equity. This
indicates a stronger equity base, which is positive for financial health.
 Interest Coverage
Ratio
Formula:
Interest Coverage Ratio = EBIT / Interest Expense

Values:

 EBIT (March 2024): 7,120.46

 Interest Expense (March 2024): 115.42
 EBIT (March 2023): 5,582.66
 Interest Expense (March 2023): 93.06

Calculation:

 March 2024: 7,120.46 / 115.42 = 61.76

 March 2023: 5,582.66 / 93.06 = 60.02

Ideal Ratio:
An ideal interest coverage ratio is 5:1 or higher, indicating that the company can comfortably
meet its interest obligations.

Comparison & Analysis:

The interest coverage ratio remained extremely high in both years, improving slightly from 60.02
in March 2023 to 61.76 in March 2024. This indicates that the company can easily meet its
interest payments, demonstrating robust financial stability.
 Debt to Capital
Employed Ratio

Formula:
Debt to Capital Employed Ratio = Total Debt / Total Capital Employed

Values:

 Total Debt (March 2024): 53.44

 Total Capital Employed (March 2024): Shareholders' Equity + Total Debt = 18,425.09 +
53.44 = 18,478.53
 Total Debt (March 2023): 49.36
 Total Capital Employed (March 2023): 15,585.56 + 49.36 = 15,634.92

Calculation:

 March 2024: 53.44 / 18,478.53 = 0.29

 March 2023: 49.36 / 15,634.92 = 0.32

Ideal Ratio:
An ideal ratio is generally less than 1, indicating lower reliance on debt.

Comparison & Analysis:

The debt to capital employed ratio decreased from 0.32 in March 2023 to 0.29 in March 2024,
showing a slight improvement in the company’s use of debt. The company is relying less on debt
to finance its capital, which is favorable for financial health and reducing risk.
 Inventory Turnover
Ratio

Formula:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Values:

 Cost of Goods Sold (March 2024): 16,862.41

 Average Inventory (March 2024): (5,321.79 + 5,074.76) / 2 = 5,198.28
 Cost of Goods Sold (March 2023): 18,627.28
 Average Inventory (March 2023): 5,321.79

Calculation:

 March 2024: 16,862.41 / 5,198.28 = 3.24

 March 2023: 18,627.28 / 5,321.79 = 3.50

Ideal Ratio:
An ideal ratio depends on the industry but typically, a ratio above 4 is considered good.

Comparison & Analysis:

The inventory turnover ratio decreased slightly from 3.50 in March 2023 to 3.24 in March 2024.
Although both values are acceptable, a lower ratio suggests that inventory is moving more
slowly in 2024. This could imply an increase in inventory levels or slower sales, which may
require attention.
 Trade Receivables
Turnover Ratio

Formula:
Trade Receivables Turnover Ratio = Revenue / Average Trade Receivables

Values:

 Revenue (March 2024): 30,727.71

 Trade Receivables (March 2024): 3,633.45
 Revenue (March 2023): 29,953.12
 Trade Receivables (March 2023): 3,462.61

Calculation:

 March 2024: 30,727.71 / (3,633.45 + 3,462.61) / 2 = 8.52

 March 2023: 29,953.12 / (3,462.61 + 3,462.61) / 2 = 8.64

Ideal Ratio:
An ideal ratio typically falls between 10-15 times per year, depending on the industry.

Comparison & Analysis:

The trade receivables turnover ratio slightly decreased from 8.64 in March 2023 to 8.52 in March
2024. This suggests that the company is collecting receivables at a similar rate, but the decrease
could indicate a small slowdown in the efficiency of receivable collections.
 Trade Payables
Turnover Ratio

Formula:
Trade Payables Turnover Ratio = Cost of Goods Sold / Average Trade Payables

Values:

 Cost of Goods Sold (March 2024): 16,862.41

 Trade Payables (March 2024): 3,238.83
 Cost of Goods Sold (March 2023): 18,627.28
 Trade Payables (March 2023): 3,045.86

Calculation:

 March 2024: 16,862.41 / (3,238.83 + 3,045.86) / 2 = 5.35

 March 2023: 18,627.28 / (3,045.86 + 3,238.83) / 2 = 5.74

Ideal Ratio:
A higher ratio is generally better, with an ideal ratio above 6 depending on the industry.

Comparison & Analysis:

The trade payables turnover ratio decreased slightly from 5.74 in March 2023 to 5.35 in March
2024. This suggests that the company is taking a slightly longer time to pay its suppliers, which
could indicate improved cash flow management but could also affect relationships with suppliers
if it persists.
 Working Capital
Turnover Ratio

Formula:
Working Capital Turnover Ratio = Revenue / Working Capital

Values:

 Revenue (March 2024): 30,727.71

 Working Capital (March 2024): Current Assets - Current Liabilities = 14,553.21 -
6,221.01 = 8,332.20
 Revenue (March 2023): 29,953.12
 Working Capital (March 2023): 13,875.73 - 5,831.46 = 8,044.27

Calculation:

 March 2024: 30,727.71 / 8,332.20 = 3.69

 March 2023: 29,953.12 / 8,044.27 = 3.73

Ideal Ratio:
The ideal ratio varies by industry, but a higher ratio (above 4) is generally better, indicating
efficient use of working capital.

Comparison & Analysis:

The working capital turnover ratio decreased from 3.73 in March 2023 to 3.69 in March 2024,
indicating a slight decrease in efficiency in using working capital to generate revenue. However,
both values are still acceptable.
Fixed Assets Turnover
Ratio

Formula:
Fixed Assets Turnover Ratio = Revenue / Fixed Assets

Values:

 Revenue (March 2024): 30,727.71

 Fixed Assets (March 2024): 7,921.19
 Revenue (March 2023): 29,953.12
 Fixed Assets (March 2023): 5,620.73

Calculation:

 March 2024: 30,727.71 / 7,921.19 = 3.88

 March 2023: 29,953.12 / 5,620.73 = 5.33

Ideal Ratio:
A higher ratio is generally better, indicating more efficient use of fixed assets in generating
revenue. A good ratio is typically above 4.

Comparison & Analysis:

The fixed assets turnover ratio decreased from 5.33 in March 2023 to 3.88 in March 2024,
suggesting that the company may be under-utilizing its fixed assets or that it has made significant
investments in fixed assets which have yet to fully generate revenue.
 Net Assets Turnover
Ratio

Formula:
Net Assets Turnover Ratio = Revenue / (Total Assets - Current Liabilities)

Values:

 Revenue (March 2024): 30,727.71

 Total Assets (March 2024): 25,981.90
 Current Liabilities (March 2024): 6,221.01
 Revenue (March 2023): 29,953.12
 Total Assets (March 2023): 22,529.84
 Current Liabilities (March 2023): 5,831.46

Calculation:

 March 2024: 30,727.71 / (25,981.90 - 6,221.01) = 1.50

 March 2023: 29,953.12 / (22,529.84 - 5,831.46) = 1.54

Ideal Ratio:
An ideal ratio depends on the industry but generally, a higher ratio is better, indicating more
efficient use of net assets.

Comparison & Analysis:

The net assets turnover ratio decreased from 1.54 in March 2023 to 1.50 in March 2024, showing
a slight decline in efficiency in utilizing net assets to generate revenue. This could indicate that
the company’s assets are increasing at a rate slower than its revenue growth.
 Gross Profit Ratio

Formula:
Gross Profit Ratio = (Gross Profit / Revenue) * 100

Values:

 Gross Profit (March 2024): 13,865.30

 Revenue (March 2024): 30,727.71
 Gross Profit (March 2023): 11,325.84
 Revenue (March 2023): 29,953.12

Calculation:

 March 2024: (13,865.30 / 30,727.71) * 100 = 45.16%

 March 2023: (11,325.84 / 29,953.12) * 100 = 37.81%

Ideal Ratio:
A higher gross profit ratio is generally better, with an ideal ratio above 40% indicating strong
profitability at the gross level.

Comparison & Analysis:

The gross profit ratio increased from 37.81% in March 2023 to 45.16% in March 2024,
suggesting that the company has improved its ability to generate profit from sales after
accounting for the cost of goods sold.
 Operating Ratio

Formula:
Operating Ratio = (Operating Expenses / Revenue) * 100

Values:

 Operating Expenses (March 2024): Cost of Goods Sold + Employee Benefit Expenses +
Other Expenses = 16,862.41 + 1,747.89 + 4,852.45 = 23,462.75
 Revenue (March 2024): 30,727.71
 Operating Expenses (March 2023): 18,627.28 + 1,513.89 + 4,416.49 = 24,557.66
 Revenue (March 2023): 29,953.12

Calculation:

 March 2024: (23,462.75 / 30,727.71) * 100 = 76.4%

 March 2023: (24,557.66 / 29,953.12) * 100 = 82.0%

Ideal Ratio:
An ideal operating ratio is below 80%, indicating the company is efficiently controlling its
operating costs.

Comparison & Analysis:

The operating ratio improved from 82.0% in March 2023 to 76.4% in March 2024, suggesting
that the company has become more efficient in managing its operating expenses relative to
revenue, which is a positive trend.
Operating Profit Ratio

Formula:
Operating Profit Ratio = (Operating Profit / Revenue) * 100

Values:

 Operating Profit (March 2024): EBIT - Depreciation = 7,120.46 - 734.49 = 6,385.97

 Revenue (March 2024): 30,727.71
 Operating Profit (March 2023): 5,582.66 - 755.83 = 4,826.83
 Revenue (March 2023): 29,953.12

Calculation:

 March 2024: (6,385.97 / 30,727.71) * 100 = 20.8%

 March 2023: (4,826.83 / 29,953.12) * 100 = 16.1%

Ideal Ratio:
An ideal operating profit ratio is typically above 20%.

Comparison & Analysis:

The operating profit ratio increased from 16.1% in March 2023 to 20.8% in March 2024,
reflecting an improvement in the company’s operating efficiency and its ability to generate
operating profits relative to revenue.
 Net Profit Ratio

Formula:
Net Profit Ratio = (Net Profit / Revenue) * 100

Values:

 Net Profit (March 2024): 5,321.55

 Revenue (March 2024): 30,727.71
 Net Profit (March 2023): 4,100.18
 Revenue (March 2023): 29,953.12

Calculation:

 March 2024: (5,321.55 / 30,727.71) * 100 = 17.3%

 March 2023: (4,100.18 / 29,953.12) * 100 = 13.7%

Ideal Ratio:
A higher net profit ratio is ideal, with above 10% being considered strong.

Comparison & Analysis:

The net profit ratio increased from 13.7% in March 2023 to 17.3% in March 2024, indicating
that the company is more profitable and generating more profit per unit of revenue.
 Return on Investment
Ratio
Formula:
Return on Investment Ratio = (Net Profit / Total Assets) * 100

Values:

 Net Profit (March 2024): 5,321.55

 Total Assets (March 2024): 25,981.90
 Net Profit (March 2023): 4,100.18
 Total Assets (March 2023): 22,529.84

Calculation:

 March 2024: (5,321.55 / 25,981.90) * 100 = 20.5%

 March 2023: (4,100.18 / 22,529.84) * 100 = 18.2%

Ideal Ratio:
An ideal return on investment ratio is typically above 15%.

Comparison & Analysis:

The return on investment ratio increased from 18.2% in March 2023 to 20.5% in March 2024,
indicating that the company has become more efficient at generating returns on its total assets,
which is a positive sign for investors.
Analysis of
Cash Flow
Statement
 Cash Flow from
Operating Activity
Cash flow from operating activity shows the cash generated or used by
a business's core operations, reflecting its ability to maintain and grow
day-to-day activities.

Examples of operating activities include cash receipts from customers

and payments to suppliers. Key heads are net profit, depreciation,
working capital changes (inventories, receivables, payables), and taxes
paid. These reflect how effectively a business manages its primary
operations to generate cash flow.

The cash flow from operating activities was ₹5,832.14 Cr in March

2024, compared to ₹4,410.14 Cr in March 2023. This improvement
reflects better operational efficiency and stronger working capital
management during the year.
 Cash Flow from
Investing Activity
Cash flow from investing activity represents cash inflows and outflows
from the purchase or sale of long-term assets, investments, or other
non-operational financial activities.

Examples of investing activities include cash spent on acquiring fixed

assets, proceeds from the sale of assets, and investments made or
redeemed. Key heads are capital expenditure, purchase or sale of
investments, and loans or advances given or received.

The cash flow from investing activities was ₹(3,266.57) Cr in March

2024, reflecting significant outflows on fixed assets and capital work-in-
progress, compared to ₹(1,855.62) Cr in March 2023. The increase in
outflows indicates a higher focus on expanding the asset base in 2024,
suggesting long-term growth potential but requiring careful balance
with cash flow sustainability.
 Cash Flow from
Financing Activity
Cash flow from financing activity reflects cash inflows and outflows
related to funding the business, including borrowings, repayments,
equity transactions, and dividend payments.

Examples include proceeds from issuing shares, borrowings, repayment

of loans, and payment of dividends. Key heads are long-term and short-
term borrowings, equity transactions, and dividend payouts.

The cash flow from financing activities was ₹(2,541.80) Cr in March

2024, primarily due to higher dividend payments, compared to
₹(1,908.86) Cr in March 2023. This indicates an increase in returns to
shareholders in 2024 while reflecting a stable financing strategy.
 Conclusions

Cash flow from operating activities surged in 2024, showcasing

remarkable improvements in operational efficiency and working capital
management.
Investing activities experienced substantial outflows, highlighting the
company’s aggressive asset expansion and long-term growth strategies.
Financing activities saw increased outflows, driven by generous
dividend payouts, emphasizing the company’s commitment to rewarding
its shareholders.
 Bibliography

1. Analysis of financial statements for class XII by TS Grewal.

2. https://www.asianpaints.com/content/annualreport/annual-
report-23-24.html
3. Financial statements of Asian Paints
4. Damanjit Kaur (PGT Commerce)