 Namaste. In last three sessions, we have discussed a lot about financial statement analysis and its interpretations. We have seen variety of ratios and to which stakeholders which ratios are important. Now let us start actually playing with numbers. So, today we are going to actually work on certain companies data, so that you get the feel to calculate those things. As I have told you earlier, these sheets are shared with you. So, please take a print out. If you are still not taken, take it right now. You can halt the video, take the print out. Now we are going to discuss about shipping corporation of India and we will be calculating, compare it to you as well as common size statement, which is horizontal and vertical analysis as we discussed in the first session. So, let us do it on the actual data. Now this is a profit and loss account of shipping corporation of India. I hope you know about this company. This is a public sector undertaking government company, which is a one of the leading shipping companies in India and we have got data of March 16 and 17. This is not a very good year for the company. You can see here revenue from operations has dropped from 4000 to 3400. We will look at various expenses. So, first we are going to start with what is known as horizontal analysis. So, in horizontal analysis what we do is we compare the two years. We want to study this year March 17. So, we collect the data of last year that is March 16 and each of the figures will compare with earlier year. So, what we prepare is known as a comparative statement. Now it is very easy to make it, it is very much common sense. So, I request you to make it along with you. So, we will give a title, this is a comparative statement. Now what is done in comparative statement is we have got two year data. So, we will calculate the difference, the increase or decrease in the year. So, if you take the first figure normally we expect an increase I have deliberately taken a company where there is a decrease. So, you can see that the revenue from operations gross has fallen from 4078 to 3407. So, minus 671 is a difference or increase in the current year not increase is a decrease. So, it is a minus increase. Now even this absolute figure does not tell you about what is relatively relative change relative increase or decrease. So, what we will do is we will calculate this as a percentage to the base that is to the last year. So, we get minus 0.16 that means, 16 percent fall in the revenue. Are you getting? So, each of the figures now we are going to compare first find the difference and then find the percentage change. Now calculating all these figures is very simple of course, when you calculate on Calc, you will have to calculate every figure. But overall we will be able to do the same thing for all the figures. So, we will see now one by one figure. So, revenue from operations gross and net both are same they have fallen by 16 percent then other non-operating revenue. I do not know why they are showing the same thing. Again it is 16 percent. So, I got a bit confused it is correct, but it is an increase of 16 percent from 34 it became 39. So, here the third figure that is other operating revenue has increased by 16 percent coincidentally both figures came 16. Then the total operating revenue shows a fall of 16 percent, because the anyway other operating revenue was negligible the major component was the revenue from operations. Other income you can see has also fallen by 19 percent by 19 crores sorry 19 crores which comes to 12 percent fall. So, total revenue again has a 16 percent fall this figure is not required it is just a total. Operating and direct expenses there are more or less same from 2339 they have fallen to 2149 that is a fall of 0.08 percent negligible chain. Employee benefits are almost same salaries have almost not changed more or less it is a same figure. Finance cost has again almost remained constant marginal increase of 0.7 percent depreciation is also more or less constant other expenses very slight fall. So, you can see that total expenses more or less are same they are only decreased by minus 0.11 percent. Naturally you can now see the impact of profitability of all this while the revenue has come down by 16 percent revenues expenses are more or less constant. If you think of shipping industry you will realize that they have same number of ships same number of crew. So, depreciation cost is more or less same maintenance cost is same the salary cost is same operating expenses are almost same. So, only the fall is in the revenue which led to significant fall in the profits. So, profits have come down by 244 which comes to 0.50 percent fall. So, you can see from 421 to 177 that means less than half the profit. So, more than 50 percent fall in the profit if you look at the absolute amounts you can understand 660 crore loss of revenue of which 440 was made up by reduction in expenses, but overall reduction in profit by 244 crore that is why nearly 50 percent fall of profit because their other expenses came down by 240 at least they were saved otherwise they would have more or less gone into losses. Net profit before tax is same current tax again is more or less constant. Now, if you think a bit you will be surprised as to why the current tax has not changed because normally profits fall the income tax on that also should have come down. But what happens is shipping is a unique industry where income tax is charged on the threat carried by them that is why there is no major fall in income tax. They have got some matte credit entitlement. Do you remember what is this? We had discussed in one of the cases earlier this is known as minimum alternate tax. So, in the earlier year they have paid more tax as a matte they are now getting credit for it that last year they have got credit of 24 this year they have got credit of 11 no major change different taxes anyway is a very small amount. So, there is no significant change in it there is no tax of earlier years. So, total tax expenses are more or less constant slight fall in the tax expenses. So, overall profit after tax you can see is a major fall from 275 to 135. So, 65 percent more or less fall in the profit. Then there is a small prior period item. What is meant by prior period item? These are items of earlier year, but now you got some extra information. So, you are doing a kind of rectification then no extraordinary item. So, final profit from continuing operations has come down by 241. So, a fall of 64 percent and that is reported as a profit for the period. Are you getting everything? This is a very simple starting point of analysis known as comparative statement where we take last year's figure and compare it with this year's figures and do comparison both in absolute value and also in percentage. This is a very useful simple statement for the performance analysis. Now we will go for the balance sheet. Same way like earlier we will try to calculate comparative balance sheet and analyze it. So, either you can call it difference or you can call it change and we will also calculate percentage change. So, please calculate it along with me. So, current year figure minus last year figure and take it as a percentage to the base, percentage to last year's figure. Equity capital of course has not changed. So, have a look at it. There is no change in equity capital. So, zero change, reserves and surplus has slightly gone down. Why it would have gone down? There are some prior period item and a few changes companies profits have gone down, but company had paid dividend. That is why their reserves available with them have slightly gone down. You can see company has substantial reserves on a capital of 461. They have reserves of 6444. In current year it is now 6400. So, it is a negligible fall only 1 percent fall in the reserves. Total shareholders funds are also more or less same. It is again a 1 percent fall. Now, look at the long term borrowings. From 4598 there is a substantial reduction in long term borrowing almost one third of their debt they have paid. So, minus 1520 it is a reduction of 33 percent of their debt. Why they would have done that? Maybe their loans there was a due date of loan and they have repaired the loan. There is another possibility that these loans were costly in nature paying high interest. So, they decided to repay, but they have done a major repayment. If you look at the deferred tax liability it has increased from 0 to 343. So, you cannot calculate percentage, but it is a sizable increase. Other long term liabilities are anyway negligible. Long term provisions have gone down. So, if you take the total non-current liability there is a major fall 26 percent fall mainly this fall is because of repayment of long term borrowings. Now, let us go to their current liabilities. They had no short term borrowing they have increased the short term borrowing from 0 to 974. Now, if you read this together you will understand that part of their long term borrowings which were this are now converted into short term borrowing. Why this would have happened? Maybe because this is their last year of repayment. Suppose they have issued a 10-year debenture 9 years are over this is the last year. This is the year in which repayment would be due. That is why you can see here total reduction is 1520 of that 974 is now a short term borrowing. In the always keep in mind that long term means one which is repayable for more than one year. So, if you take a loan say for 8 years for 7 years it will be shown as a long term. In the 8th year it will be shown as a short term or if you are repaying in installment which is more common whatever are the installments due in the current year that would be called as a short term borrowing. So, not that all the long term borrowings were completely paid partly they were paid remaining are due in the current year. So, now they are reflected as short term borrowing. So, trade payables there is a significant increase from 989 to 2900. So, you can see it is more than 100 percent 190 almost 200 percent increase you can say they are more or less doubled or they are rather they are tripled from 1000 to all nearly 3000. We do not know the reasons there is one possibility that company has having some cash crunch. So, they are delaying their trade payables. So, one needs to investigate more now we will look at cash flow settlement that time we will get to know little more about it, but you can see here clearly that the trade payables have increased 3 times and the quantum is also very big. It is 3000 crore it is almost now more or less equal to their long term borrowings. Now the current payables have substantially reduced perhaps may be some of their other current payables are now converted into trade payables. We will have to study their finances more to understand it, but as of now you can see that other current payables have substantially gone down it is a 90 percent fall in that figure. Then short term provisions they have also gone down almost by 86 percent. Current liabilities total you can see has increased now because of the major increase in the trade payables although other current liabilities and trade payables are more or less upsetting each other, but still overall you can see rise in 1, 2, 4, 2 as a current liability which is mainly contributed by rise in the short term borrowings. Now in the last session we have discussed the current ratio. If you now calculate current ratio you will realize that the ratio would have fallen. We will do later on, but as of now we will see that we can see that nearly 50 percent rise in the total current liabilities. Now let us go to assets. Assets you can see are more or less same so no major ship they have acquired it is almost same base of asset only 2 percent change that to fall mainly because of depreciation. Intangible assets are anyway almost nil negligible. Work in progress there is a small work in progress other assets assets set for sale or sold are not for sale are not there. Total fixed assets have marginally fallen by 1 percent. Non-current investments have slightly increased it is not a very it is not a major amount though in terms of percentage it is a 173 percent increase. Long-term loans and advances you can see there is a fall maybe they have recovered some of their long-term advances. So total non-current assets are not much change in it it is a 3 percent change. Now let us go to current ones they had a very small amount in current investments which we have disposed of now 37 crores. Inventory it is a shipping company not very large inventory they need there is a slight increase in inventory there is a slight decrease in trade payables which is understandable because their revenue has fallen. Cash and cash equivalents are more or less constant from 1200 to 1300 crore. Short-term loans and advances have slightly increased as a percentage it is a major increase 114 percent but amount wise it is not a big increase and other current assets is anyway a small amount. So if you look at total current assets there is a increase of 323 so around 13 percent increase in current assets. So are you getting this is known as comparative balance sheet. I hope it is very simple so you would have understood the calculation. I am just tempted to calculate current ratio though in detail we will solve the cases later on but just for one calculation let us do it now I hope you remember the formula it is current asset divided by current liabilities. So in the last in the current year it is 2727 total current assets divided by total current liability of 4000. So current ratio is 0.67 in the last year it was 0.84. So you can see here because of the rise in current liabilities rise of about 44 percent there is a fall in the ratio are you getting it. Now traditionally speaking this is not a comfortable position because they have much more current liabilities than their current assets but because it is a shipping company and it is a government company it may not come in trouble but otherwise these are troublesome figures are you getting me. Now let us go to cash flow this is the summary of their cash flow settlement in 2 years March 16 and 17. Let us do the calculation of comparative figures. Now you know current year minus last year so major fall in net profit which we had already calculated and as a percentage it is a 60 percent fall in net profit before tax. Now what do you see from cash from operating activities it is a major fall nearly 50 percent fall from 1327 to 682. So significant fall in cash generated from operating activities cash generated from investing where negative 202 they are now negative 85. So it is 116 and cash from financing activity is also substantially negative from minus 1000 to minus 500. So it is a increase of 582 about 50 percent decrease but since the figure was negative now here in the change it appears like an increase. Overall there are no much changes in the cash and cash equivalent though yes if you look from the compare the opening and closing in the last year it was relatively higher now it has come down. So particularly if you look at these three figures you will realize that there has been a major fall in operating cash flows which are somehow made good by reducing to some extent reducing investment and to some extent reducing their repayment of loan. Are you getting me? So what we did now for all the three statements was calculation of comparative statement this is known as horizontal analysis. Now for the same company let us go for vertical analysis. Now this is the P and L account now in vertical analysis what we did in the horizontal analysis was comparing the two years but it was comparison of absolute values and then we converted as a percentage. Now in common size statement we will compare everything with a base and convert them into percentages. I think it is a simple job so you try to do it yourself we will be actually calculating it in the next session. Till that time namaste.