Final Conclusions - Financial Statement Analysis for asian paints for the year 2021 PDF

Preview

Summary

Financial Statement Analysis for asian paints for the year 2021...

Description

Conclusions Comparative Statement (Balance Sheet) - Clarissa

1. Reserves & Surplus have increased by 6929% in a span of 4 years in order to settle any unknown future contingencies that may arise. Also for strengthening and increasing the company’s financial position in the market.

2. Having too much debt reduces a company's operating flexibility. So reducing longterm debt can help a business in the long run. Hence, with the same motive Asian Paints has been able to reduce its long-term borrowings by Rs.26.54 crores in the span of 4 years.

3. A company that needs money for its business operations can raise capital through either issuing equity or taking on long-term debt. Comparatively, debt financing is generally cheaper. Hence Aian Paints has seen an Absolute increase of Rs. 558.43 crores in their other long-term liabilities since FY 2016-17. Debt financing however creates cash flow liabilities which the company must manage properly.

4. The primary reason why Trade payables increase is because of the purchase of inventory. When inventory is purchased, it can be purchased in one of two ways. The first way is to pay cash out of the remaining cash on hand. The second way is to pay on short-term credit through a trade payables method. Hence, the company’s Trade Payables over the years has increased by Rs. 1455.89 crores because of the increase in purchase of inventory which over the years has increased by Rs. 1171.66 crores and a decrease in cash and cash equivalents by Rs. 190.46 crores are seen for the same.

5. Asian Paints has seen an increase in their tangible assets by 8000% amounting to a figure of Rs. 2365.25 crores. This shows the company position and ability to cover its liabilities and at the same time this figure can be seen as a great investment.

6. An increase in intangibles as reported on the balance sheet can be the result of different business activities. The potential value of a business goodwill or license may increase in favourable market conditions, and a business may decide to mark up the perceived value increase in intangibles. Hence, Asian Paints has registered a growth in their Intangible assets worth Rs. 80.38 crores.

7. The Current Investments of the company has increased by 14177% i.e. Rs.1915.78 crores which indicates the company has witnessed better market opportunities since FY 2016-17 and hence has made itself more capable to pay off its obligations. Comparative Statement (P&L)

1. Increasing revenue can result in higher costs and lower profit margins. Cutting costs can result in diminished sales and also lower profit margins if market share is lost over time. However, this is not case with Asian Paints as they have increased their revenue and kept their expenses under control so as to make a profit and see to that the profit margin increases over the years. The profit thus earned has increased by 6160% i.e., Rs.1211.51 crores since FY 2016-17.

Trend Analysis (Balance Sheet) - Sanchit

1. There has been no change in Total Share capital in the last 5 years.

2. A positive trend can be seen in total shareholders’ funds. Shareholder's equity has increased from selling shares of stock, raising the company's revenues and decreasing its operating expenses.

3. There is a negative trend in long term borrowings as discussed in the comparative statement.

4. There is a positive trend in Other long-term liabilities as discussed in the comparative statement. Hence there has been a positive and gradual increase in the total capital and liabilities over the last 5 years. 5. As discussed earlier there has been an increase in fixed assets of the company, which indicates that the company has effectively used investments in fixed assets to generate sales.

6. Also, most of the fixed assets can be seen with a positive trend till March 2020, with figures dropping in March 2021 because of the economic conditions.

7. Current investment was at Rs. 1351.34 crores in March 2017 but it witnessed an increase up to Rs. 3267.12 crores in March 2021. This indicates the company’s capability in paying off its obligations because it has a larger proportion of short-term asset value relative to the value of its short-term liabilities.

8. Due to a decrease in sales in March 2021 because of the given economic conditions, the company has a huge inventory as compared to its previous years.

Trend Analysis (P&L) 1. As discussed earlier in the comparative statement analysis, Asian Paints have increased their revenue and kept their expenses under control so as to make a profit and see to that their profit margins increases over the years. Thus, we can see a positive and attractive trend in their total revenue and a well outlined and scrutinized trend in their expenses. Hence, in return we see a positive trend in the net profit of the company in the last 5 years.

Common Size (Balance Sheet) – Juhi

1. Total Non-current liabilities have fallen from 7.68% to 5.96% because of a gradual decrease in the long-term borrowings of the company, which as discussed earlier can help the business in the long run.

2. Fixed assets of the company have seen a drop from 37.71% in March 2020 to 28.17% in March 2021 due to the given economic crisis.

3. The Current Investments of the company has increased from Rs.1351 crores to Rs.3267 crores which indicates the company has witnessed better market opportunities since FY 2016-17 and hence has made itself more capable to pay off its obligations.

4. Thus, the total current assets of the company have increased at an attractive pace.

Common Size Statement (P&L)

1. The total revenue of the company is growing at an attractive pace. At the same time, we can witness a minute but steady decrease in the total expenses of the company. Resulting in an attractive growth in the profits of the company in the last five years.

2. We can also see an increase in the total tax expenses of the company resulting majorly from an increase in the current tax by Rs.1114.02 crores since the previous financial year which ultimately has an impact on the profits of the company.

Comparative Statement - Competitor (BS) - Arpit 1. Long term liabilities of Nerolac have increased by 46% whereas it has decreased by 5% for Asian Paints. 2. Thus, the long-term provisions of Nerolac have increased by 543% compared to just a 19% increase by Asian Paints.

3. Which means Nerolac is building its assets and manpower whereas Asian paints is more focused on paying off its liabilities. 4. Nerolac has increased its tangible assets by 1% whereas Asian Paints has seen a fall by 6%. 5. Asian Paints has increased its current investments by 538% whereas Nerolac has increased it by just 119%. This puts Asian Paints in a better position to fund it's dayto-day business operations and to pay for the ongoing operating expenses compared to Nerolac. Comparative Statement - Competitor (P&L) 1. The total revenue of Nerolac has decreased by 4% whereas comparatively Asian Paints has increased its revenue by 7%. 2. Which shows Asian Paints has better increased their sales figures compared to Nerolac. 3. Nerolac has better reduced its expenses as compared to Asian Paints. Which can be seen by their Total expense figures. 4. Asian Paints has seen an increase in Profit after tax by 16% compared to just a 2% increase by Nerolac. The biggest contributing factor to this point is that Asian Paints has better handled their taxes than Nerolac....