Page 77 - MA - May 2017

T (b) Top Management: Financial analysis helps the

Top Management in measuring the success of the
company’s operations, appraising the individual’s
performance and evaluating the system of internal
control.
(c) Trade Payables: The traders are particularly

claims over a very short period of time, which
he basis for financial analysis, planning
and decision making reflects in scientific analytical interested in sugar factory’s ability to meet their
evaluate factory’s liquidity position.
financial statement which mainly consists of Balance (d) Lenders: Banks and Financial Institutions are
Sheet and Profit & Loss account of a sugar factory. This concerned about the sugar factory’s long term
summarized financial report provides the operating solvency and survival. They analyze the historical
result and financial position of a sugar factory and financial statements to assess its future solvency
detailed analytical information contained therein and profitability.
is useful for assessing the operational efficiency and (e) Investors: Investors, who have invested their
financial soundness of a sugar factory. money in the sugar factory’s shares, are interested
in the sugar factory’s earnings and present and
What is Financial Statement? future profitability to ascertain its effects on sugar
Financial statements are structured representation of factory’s earning.
the financial position and financial performance of an (f) Others: Economists, Researchers, Government
entity. Financial statements provide information about etc., analyze the financial statements to study the
an entity’s economic conditions for price regulations, taxation
i) Assets and other similar purposes.
ii) Equity & Liabilities
iii) Income and expenses, including gains and losses Tools of Analysis of Financial Statements
and The most commonly used techniques of financial
iv) Cash flows. analysis are as follows:
A) Comparative Statements: The comparative
Significance of Analysis of Financial Statements Profit & Loss account gives an idea of the progress
Financial analysis is useful and significant to different of business over a period of time. The changes
users in the following ways: in absolute money values and percentages can
(a) Finance Manager: Financial analysis techniques be determined to analyze the profitability of the
enable the finance manager to make constant business. This analysis is also known as ‘horizontal
reviews of the actual financial operations of the analysis or Intra sugar factory analysis. Horizontal
sugar factory for analyzing the causes of major analysis compares each item with an item for a
deviations, which may help in taking corrective selected base year.
action.

“One cannot be the finest without comparing with rest”
SUMMERISED COMPARATIVE PROFIT AND LOSS ACCOUNT FOR THE YEAR 2014-15 & 2015-16
YEAR CANE CRUSHING PRODUCTION
2014-15 674765.310 MT 894855 QTLS
2015-16 731132.950 MT 967000 QTLS Rs.Lakhs
1) INCOME 2014-15 2015-16 Diff. (+/-) Change%
1.1) Sugar Realization 26109.58 27801.88 1692.30 6.48
1.2) Bagasse 279.15 542.60 263.45 94.37
1.3) Molasses 948.16 1312.77 364.61 38.46
1.4) Other Income 163.29 485.05 321.76 197.06
TOTAL (1) 27500.18 30142.30 2642.12 9.61

www.icmai.in May 2017 l The Management Accountant 77