Financial Statements and Firm Value 115(Rs crore)
Balance sheet 2000 2001
Current portion of long-term
Debt 11.04 3.33
Secured loans 69.21 43.04
Unsecured loans 42.39 40.69
Deferred tax 0.00 103.13
Current liabilities &
provisions 3,197.19 3,534.82
Total 5,797.03 6,765.37
Exhibit 5.1(b) Income statement of HLL
(Rs crore)
2000 2001Income
Sales 11,458.30 11,861.77
Other income 305.99 283.14
Change in stocks –83.85 –4.63
Non-recurring income 47.84 310.93
Expenditure
Raw materials,
stores, etc. 6,388.85 6,381.54
Indirect taxes 870.12 920.66
Excise duties 788.35 817.75
Repairs & maintenance 64.01 68.44
Selling and distribution
expenses 1,161.85 1,302.27
Misc. expenditure 532.36 538.57
Non-recurring expenses 20.79 146.01
EBDIT 1,826.42 2,195.12
Interest 13.15 7.74
Depreciation 130.94 144.66
Tax 355.00 402.42
PAT 1,327.33 1,640.30
Published financial statements are an important source of financial information for investors, researchers,
and analysts. Suppose you are an analyst—tracking HLL—and you have to find out whether HLL is a good
‘bet’. In other words, your assignment is to find if HLL is worth investing in at the prevailing market price.
To ascertain a company’s financial performance, analysts calculate a number of financial ratios.
Financial Ratios and Financial Analysis
A ratio is a relationship between two numbers. Managers and analysts use a variety of balance sheet and
income statement ratios to assess the financial health of a company. These ratios can be classified as:
- Liquidity ratios
- Coverage ratios
- Leverage ratios
Exhibit 5.1(a) contd.