- Material for presentation by Group A:
Firm Specific Analysis
(source : Book on PortFolio Management by Professors. S.K.Barua, and V.Raghunathan
and J.R.Verma)
3.1. If we want to know how prosperous a person is, we generally look at his
income and wealth. A person who is very wealthy can live off his capital for
several years even if his current income is low. So also a person who has a
high level of income may be able to live well even if he has little wealth or is
encumbered with substantial liabilities. Similarly, when we look at the
financial health of a company, we must look at its assets and at its income.3.2. The financial statements published by a company periodically (typically once
a year) allow us to do precisely that. The two basic financial statements
provided by a company are the Balance Sheet and the Profit and Loss
Account (P & L Account for short). The first gives us a picture of the assets
and liabilities of the company while the second gives us the details of its
earnings. We shall now look at each of these statements in greater detail.3.3. The Balance Sheet is a snapshot of what the company ‘owns’, the assets, and
what the company ‘owes’, the liabilities, on a specific date. We have below
the condensed Balance Sheets as on 31.03.1990 and 31.03.1991 of Shatabdi
Industries, in the format used by the Bombay Stock Exchange (BSE)
Directory. (The published Balance Sheet, from which these condensed
statements have been prepared, contains hundreds of items.)