PROJECT REPORT

Submitted for the Degree of B.com Honour’s in Accounting and Finance under the
University of Calcutta.

TITLE OF THE PROJECT

Financial Statement Analysis of Blue Star ltd

SUBMITTED BY

NAME: Sreyashi Dutta

REGISTRATION NO: 047-1211-0752-17

ROLL NO: 171047-11-0453

NAME OF THE COLLEGE: Sivanath Sastri College

COLLEGE ROLL NO: 1002

SUBJECT: CC 6.1 Ch Project work

SUPERVISED BY

NAME OF THE SUPERVISOR: Sayantani Bagchi

NAME OF THE COLLEGE: Sivanath Sastri College

MONTH AND YEAR OF SUBMISSION:

September, 2020
 Annexure- I:

Supervisor’s Certificate

This is to certify that SREYASHI DUTTA, a student of B.com 6th Semester

Honours in Accounting and Finance of SIVNATH SASTRI COLLEGE under
the university of Calcutta has worked under my supervision and guidance for
this project for her project work and prepared a project Report the title
FINANCIAL STATEMENT ANALYSIS.

The project report, which she is submitting, is her genuine and original work
to the best of my knowledge.

Place: Kolkata Signature:

Date: 27/09/2020

NAME: Sayantani Bagchi

Designation: Faculty of Commerce

Name of the college: SIVNATH SASTRI COLLEGE

 Annexure- II:

Student’s Declaration

I hereby declare that the project work with the title FINANCIAL
STATEMENT ANALYSIS submitted by me for the partial fulfilment of the
degree of B.com Honour’s in Accountancy and Finance under the university of
Calcutta is my original work and has been submitted earlier to any other
University /Institution for the fulfilment of the requirement for any course of
study.

I also declare that no chapter of this manuscript in whole or in part has been
incorporated in this report from any earlier work done by others or by me.
However, ex tracts of any literature which has been used for this report has
been duty acknowledged providing details of such literature in the references.

Place: Kolkata Signature:

Date: 27/07/2020 Name: Sreyashi Dutta

C.U. Registration No: 047-1211-0752-17

Roll No: 171047-11-0453

Name of the college: SIVNATH SASTRI

COLLEGE
Acknowledgement:

I hereby like to thank all the people without whom I would not be able to
complete my project which is helped me in doing a lot research and I come to
know about so many new things.

I am really thankful to my supervisor prof. Sayantani Bagchi mam for her

guidance and help. I would like to thank our HOD prof. Ratan Sen, our
Principal Mrs. Runa Biswas, my parents, and my friends for their help and
being there, when I needed them.

I am making this project not only for marks also to increase my knowledge.
 Content
Chapter Topics page

1. Introduction 1-6
1.1 Background 1-2
1.2 Need of the study 2
1.3 Literature review 2-4
1.4 Objective of the study 5
1.5 Methodology used 5
1.6 Limitations 5-6
1.7 Chapter planning 6

2. Conceptual Framework 7-13

2.1 Introduction to Finance 7
2.2 Analysis and interpretation 7-11
Of Financial Statement
2.3 National scenario 11-12
2.4 Company Profile 12-13

3. Presentation of Data, Analysis and Findings 14-31

3.1 Ratio analysis of Blue Star ltd. 14-23
1. Liquidity Ratio 14-16
a. Current Ratio 14-15
b. Quick Ratio 15-16
2. Profitability Ratio 16-18
a. Gross Profit Ratio 16-17
b. Net Profit Ratio 17-18
3. Activity Ratio 18-21
a. Working Capital 18-19
Turnover Ratio
b. Capital Turnover Ratio 19-20
c. Total Assets Turnover 20-21
 Ratio
4. Solvency Ratio 21-22
a. Debt Equity Ratio 21-22
5. Earnings Per Share 22-23
3.2 Common size Balance Sheet 23-31
Analysis of Blue Star ltd
1. For the year2014-15 & 2015-16 23-25
2. For the year2015-16 & 2016-17 25-27
3. For the year2016-17 & 2017-18 27-29
4. For the year2017-18 & 2018-19 29-31
3.3 Findings 31
4. Conclusion and Recommendations 32-33
4.1 Conclusion 32
4.2 Recommendation 32-33
Bibliography 33
 CHAPTER-1

INTRODUCTION:
1.1. BACKGROUND:
Financial statement analysis is the process of reviewing and analysing
company’s financial statements to make better economic decision. These
statements include the Income Statement, Balance Sheet, Statement of Cash
Flows, and a Statement. Financial statement analysis is a method or process
involving specific techniques for evaluating risks, performance, financial
health, and future prospects of an organization.
There are many stakeholders in a company who are interested to know how
the company is performing. The stakeholders are:
 Shareholders
 Debenture holders
 Lenders
 Financial Institutions
 Suppliers
 Financial Analysis
 Banks
 General public
 Government etc.

However, their interest differs. They judge the performance of the

company from different perspectives.

Shareholders are interested to judge the profitability of the company and how
efficiently the funds invested by the shareholders are managed. They are
interested to know the profitability of the company, effect of company’s
performance on shareholder’s wealth, market value of shares etc. Accordingly
the performance appraisal is done.

Lenders and Financial Institutions provide valuable funds to the company,

which are repayable a certain period of time. They are interested to know

1
 whether the company is able to meet its regular interest payment obligations as
well as principal amount at the time of maturity. So they judge the company
from this view point.

Suppliers and Short term loan lenders provide fund to the company for a
period not exceeding 12 months. So they are interested to know the short term
solvency and liquidity position of the company. From this point of view, the
appraise the performance of the company.

Government is also interested to appraise the company. The company being a

unit of the society cannot avoid its responsibilities. Thus the government is
interested to know how far the company discharges its social responsibilities.
Since many persons such as shareholders, debenture holders, creditors, bank
etc. have invested their hard earned money in the company, so the government
is interested to know how efficiently the company is managing their funds. It
sees whether it follows good governance or not, whether it pays its dues timely
to the government, whether it makes regular and timely payments to its
workers etc.

Apart from ones mentioned above, there are prospective investors who are
interested in the performance appraisal of the company. Thus financial
analysts are also keen to know about the performance of a company and their
interest is multifaceted.

1.2. NEED OF THE STUDY:

Financial statement analysis is used to identify the trends and relationships
between financial statement items. Both internal management and external
users (such as analysts, creditors, and investors) of the financial statements
need to evaluate a company’s profitability, liquidity, and solvency.

1.3. LITERATURE REVIEW:

Literature Review was done by referring previous studies, articles and books
to know the areas of study and analyse the gap or study not done so far. There
are various studies were conducted relating to operational performance of the
2
company from which most relevant literatures were reviewed. Kennedy et al.
(1999), has explained that “The analysis and interpretation of financial
statements are an attempt to determine the significance and meaning of
financial statements data so that the forecast may be made of the prospects for
future earnings, ability to pay interest and debt matureness (both current and
long term) and profitability and sound dividend policy.” Reddy et al. (2009),
have stated that “The statement disclosing status of investments is known as
balance sheet and the statement showing the result is known as profile and loss
account.” Patsula (2006), he define that a sound business analysis tells others
a lot about good sense and understanding of the difficulties that a company
will face. We have to make sure that people know exactly how we arrived to
the final financial positions. We have to show the calculation but we have to
avoid anything that is too mathematical. It gives a physiological advantage to
the employees and also a planning advantage. Pandey (2007), had stated that
the financial statements contain information about the financial consequences
and resources and uses of financial resources, one should be able to day
whether the financial condition of a firm is good or bad; whether it is
improving or deteriorating. One can relate the financial variables given in
financial statements in a meaningful way which will suggest the actions which
one may have to initiate to improve the firm’s financial condition.
Chidambaram et al. (2006), he argue that Ratio Analysis enables the
business owner/manager to spot trends in a business and to compare its
performance and condition with the average performance of similar business
in the same industry. TO do this compare your ratios with the average of
business similar to yours and compare your own ratios for several successive
years, watching especially for any unfavourable trends that may be starting.
Ratio analysis may provide the all-important early warning indications that
allow you to solve your business problems before your business is destroyed
by them. Wild et al. (2007), Financial statement are the major source of
information used by its users to have an understanding about a company.
There are five components of financial statements that are available to the
users, which are balance sheet, income statement, owner’s equity statement,
cash flow statement and notes to financial statements. The preparation of
financial statements is required to provide information to its users regarding

3
 the financial condition, performance and future prospects of a company
(Alfredson, Leo, Picker, Pacter and Radford, 2005). Alfredson et al. (2005),
identify that each financial statement has its own objectives. Balance sheet is
prepared to provide information about a company’s financial condition, while
income statement is used to provide information about a company’s financial
performances. The owner’s equity statement is used to assess the full
performance of a company. It includes revenues, expenses, gains or losses that
are reported in income statement and also transactions related to equity
holders (such as, owner’s investment and withdrawal). Moreover, the
statement of owner’s equity acts as a connection between the balance sheet
and income statement. Cash flow statement is prepared to support users with
the information about the movement of cash (inflow and outflow) in the
company. Nimalathasan, have pointed out capital structure and its impact on
profitability by a study of listed manufacturing companies in Sri Lanka. The
analysis of listed manufacturing companies shows that dept-equity ratio is
positively and strongly associated to all profitability ratios (Gross Profit,
Operating Profit & Net Profit Ratios). The proportion of the debt-equity in the
capital structure is also fairly responsible to design the financial structure of
the firms to a greater extent. Pandey, tested the efficiency level of the three

popular stock Indices of Indian Stock Market using the Runs Test and the
Autocorrelation Function of ACF. It is found from the Autocorrelation and
Runs Test that the time series of stock indices in the Indian Stock Market were
biased random time series. It is the attitude that is well addressed amongst the
financial researchers to set a new horizon on the investment pattern, that
redefine the company financial pattern.

1.4. OBJECTIVES OF THE STUDY:

The major objectives of financial statement analysis are as follows:

 Assessment of past Performance

 Assessment of current position

4
  Prediction of profitability and growth prospect
 Prediction of bankruptcy and failure
 Assessment of the operational efficiency

1.5. METHODOLOGY USED:

Secondary Data

 Company’s Annual Report

 Company’s Website
 Here in this project I have taken last 5 years data of Blue Star limited
i.e. 2014-15,2015-16,2016-17,2017-18,2018-19.

Tools of Data Analysis

The data are analysed using the following tools:

 Common size Balance Sheet

 Cash Flow Statement
 Ratio Analysis

1.6. LIMITATIONS:

Although analysis of financial statement essential to obtain relevant

information for making several decisions and formulating corporate plans and
policies, it should be carefully performed as it suffers from a number of the
following limitations.

Mislead the user:

The accuracy of financial information largely depends on how accurately

financial statements are prepared. If their preparation is wrong, the
information obtained from their analysis will also be wrong which may
mislead the user in making decisions.

Not useful for planning:

Since financial statements are prepared by using historical financial data,

therefore, the information derived from such statements may not be effective
in corporate planning, if the previous situation does not prevail.

Qualitative aspects:

The financial statement analysis provides only quantitative information about

the company’s financial affairs. However, it fails to provide qualitative

5
 information such as management labour’s relation, customer’s satisfaction,
management’s skills and so on which are also equally important for decision
making.

Comparison not possible:

The financial statements are based on historical data. Therefore, Comparative

analysis of financial statements of different years cannot be done as inflation
distorts the view presented by the statements of different years.

Wrong judgement:

The skills used in the analysis without adequate knowledge of the subject
matter may lead to negative direction. Similarly, biased attitude of the analyst
may also lead to wrong judgement and conclusion.

1.7. CHAPTER PLANNING:

In this Project Work I cover 4 chapters.
In chapter 1, i.e. Introduction chapter I have mention a brief background
about the “Financial Statement Analysis”, need of the study, literature review,
objective of the study, methodology used and limitations of the study. In
chapter 2, a conceptual framework, national scenario, profile of the company
have been mentioned. In chapter 3, data analysis and findings has been done
on the basis of objectives of my study, methodology, and on the basis of
collected data for the purpose of the study. In chapter 4, final conclusion has
been done and recommendations on the project also been done.

CHAPTER-2
CONCEPTUAL FRAMEWORK:

2.1. CONCEPTUAL FRAMEWORK OF FINANCIAL

STATEMENT ANALYSIS:
6
 INTRODUCTION TO FINANCE:

The subject of financial management is to immense

interest both academicians and practicing manager. It is of great
interest to academicians because the subject is still developing.
And there are still certain areas where controversies exist for which
no unanimous solutions have been reached as yet. Practicing
manager are interested in this subject because among the most
crucial decision of the firm are those which relate to finance and an
understanding of the theory of financial management provides
them conceptual and analytical insight to make those decisions
skilfully.

ANALYSIS AND INTERPRETATION OF FINANCIAL

STATEMENT:

The analysis and interpretation of financial statements represents the

lot of the four measure steps of accounting viz.

 Analysis of each transaction to determine the accounts to debited and

credited and the measurements and the valuation of each transactions to
determine the amounts involved.
 Recording of the information in the journals. Summarization in largest and
preparation of worksheet.
 Preparation of financial statements.
 Analysis and interpretation of financial statements results in the
presentation of information that assets business managers, creditors and
investors.

Accounting principles specify that a complete set of financial

statements must include:
1. Common Size Statements
2. Ratio Analysis

7
1. COMMON SIZE STATEMENTS:

The common size statement, balance sheet and income statement are shown in
analytical percentages. The figures are shown as percentages of total assets, total
liabilities and total sales.

1.1. Common size balance sheet: A statement in which balance sheet

items are expressed as the ratio of each asset to total assets and the
ratio of each liability is expressed as a ratio of total liabilities is called
common sized balance sheet.
1.2. Common size income statement: The items in income statement can
be shown as percentage of sales to show the relation of each item to
sales. A significant relationship can be established between item of
income statement and value of the sales.
2. RATIO ANALYSIS:
Ratio analysis is a very important tool of financial analysis. It is the
process of establishing a significant relationship between the items of
financial statements to provide a meaningful understanding of the
performance and financial position of the firm. They help us to draw certain
conclusions. Comparison with related facts is the basis of ratio analysis.
TYPES OF RATIOS
 Liquidity Ratio
 Profitability Ratio
 Activity Ratio
 Solvency Ratio

LIQUIDITY RATIOS:

It measures the short-term solvency of the firm.

The following are the important liquidity ratios:

1) Current Ratio
2) Quick Ratio/Acid-test Ratio

1) CURRENT RATIO:

8
 Current ratio may be defined as the relationship between current assets and
current liabilities.
Therefore, Current ratio=current assets/current liabilities
2) LIQUID RATIO/ACID TEST RATIO/QUICK RATIO:
The term ‘liquidity’ refers to the ability of a firm to pay its short-term
obligation as and when they become due. It is a measure for judging immediate
solvency position of a firm.
Therefore, Liquid ratio= Quick assets/quick liabilities
= [current assets-(inventory + prepaid
expenses)]/current liability-bank overdraft

PROFITABILITY RATIO:
Profitability ratios measure the profitability of a company.

The following are the important profitability ratios:

1) Gross Profit Ratio
2) Net Profit Ratio

1) GROSS PROFIT RATIO:

The ratio expresses the relationship between Gross

Profit and sales.

Therefore, Gross profit ratio= (gross profit/net sales)*100

NET PROFIT RATIO:

Net profit ratio establishes a relationship between net

profit (after taxes) and sales.
Therefore, Net profit ratio= (net profit/net sale)*100

ACTIVITY RATIO:

9
 Activity ratios measures the efficiency or effectiveness with
which a firm manager its resources or assets. The significant activity or
turnover ratios are

1) Working Capital Turnover Ratio

2) Capital Turnover Ratio
3) Total Asset Turnover Ratio

(1) WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio indicates the velocity of
the utilization of net working capital. It is a good measure over-
trading and under-trading.
Therefore, Working capital turnover ratio= net
sales/working capital
(2) CAPITAL TURNOVER RATIO:
It denotes the entity’s ability to generate sales
or cost of goods sold per rupee of long term
investment.
Therefore, Capital Turnover Ratio=sales/Average
Capital employed.

(3) TOTAL ASSETS TURNOVER RATIO:

It indicates the degree of managerial efficiency
in utilisation of resources deployed in the firm.
Therefore, Total Assets Turnover
Ratio=Sales/Total Asset.

SOLVENCY RATIO:

A Solvency Ratio measures the extent to which assets

cover commitments for future payments, the liabilities.

(1) DEBT EQUITY RATIO:

10
 This ratio expresses the relationship between debt
capital and shareholders fund of the company.
Therefore, Debt Equity Ratio= Long term debt/shareholders
Fund.

2.2. NATIONAL SCENARIOS:

Blue Star is India's leading air conditioning and commercial refrigeration

company, with an annual revenue of over ₹5200 crores (over US$ 750
million), a network of 32 offices, 5 modern manufacturing facilities, 2800
employees, and 2900 channel partners. The Company has manufacturing
facilities at Dadra, Himachal, Wada and Ahmedabad. The Company has 5000
stores for room ACs, packaged air conditioners, chillers, cold rooms as well as
refrigeration products and systems, along with 765 service associates reaching
out to customers in over 800 towns. Blue Star's integrated business model of a
manufacturer, contractor and after-sales service provider enables it to offer an
end-to-end solution to its customers. In fact, every third commercial building
in India has a Blue Star product installed.

The Company fulfils the cooling requirements of a large number of

corporate, commercial as well as residential customers. Blue Star has also
forayed into the residential water purifiers business with a stylish and
differentiated range including India’s first RO+UV Hot & Cold Water
purifier; as well as the air purifiers and air coolers businesses. The Company
also offers expertise in allied contracting activities such as electrical,
plumbing, fire-fighting and industrial projects, in order to offer turnkey
solutions, apart from execution of specialised industrial projects.

Blue Star's other businesses include marketing and maintenance of imported

professional electronics and industrial products and systems, which is handled
by a wholly owned subsidiary of the Company called Blue Star Engineering
& Electronics Ltd.

11
 2.3. COMPANY PROFILE:

Blue Star Limited is a company specialising in designing, developing,

manufacturing and marketing a wide variety of products in the air
conditioning and commercial refrigeration industry and is headquartered
in Mumbai, India. It is the country's second largest home-grown player in the
air conditioning space. Blue Star was founded in 1943 by Mohan T Advani as
a reconditioning company. The company later expanded into new product
lines and began exporting to Dubai. It went public in 1969 with an Initial
Public Offering, listing on the Exchange. In the late 2000s, Blue Star ventured
into the electrical, plumbing and fire-fighting contracting businesses, offering
customers an integrated mechanical, electrical, and plumbing (MEP) solution.
It then forayed into the residential air conditioning segment a few years later,
along with entering the water and air purification segments as well as
the engineering facility management (EFM) space recently.

Blue Star Limited

Type Public

Traded as BSE: 500067
NSE: BLUESTARCO[1]

12
Industry Air Conditioning and Refrigeration

Headquarters Mumbai, Maharashtra

, 

India

Area served Worldwide

Key people Shailesh Haribhakti

(Chairman); Vir Advani

(Vice Chairman & Managing Director); B

Thiagarajan
(Managing Director)[1]

Air Conditioners
Products
Water purifiers
Air purifiers
Air coolers
Water Coolers
Central Air Conditioning Units
Cold Storage
Mortuary Chambers
Deep freezers
Bottled Water Dispensers
VRF Systems
Chillers
Specialty Refrigeration Products

Revenue ₹52.35 billion (US$730 million) (2019)[2]

Net income ₹1.91 billion (US$27 million) (2019)

Number of 2800 [3]
employees

Website www.bluestarindia.com

CHAPTER-3

Presentation of Data, Analysis and

Findings:

13
3.1. Ratio Analysis of Blue Star ltd.

1. Liquidity Ratio:

a) Current Ratio: Current ratio is calculated by dividing current assets

and current liabilities. Current assets are those, the amount of which can
be realized with in a period of one year. Current liabilities are those
amounts which are payable with in a period of one year.

Current ratio=current assets/current liabilities

Table 3.1 Current Ratio:

YEAR Current Asset (in Current Liability Current Ratio

crores) (in crores)
2014-2015 1502.80 1562.99 0.96:1
2015-2016 1774.55 1716.90 1.03:1
2016-2017 1828.44 1687.29 1.08:1
2017-2018 2339.43 2139.58 1.09:1
2018-2019 2415.22 2260.66 1.06:1
(Source: www.bluestarindia.com)

Diagram 3.1: CURRENT RATIO

14
Interpretation: The above table and diagram shows that current ratio in all the
years is below standard ratio 2:1. In 2014-2015 the current ratio is 0.96:1, then
it decrease to 1.03:1 in 2015-2016. In 2016-2017 and 2017-2018 the ratio
increased to 1.08:1 and 1.09:1 respectively. But in 2018-2019 it again decreased
to 1.06:1.

b) Quick Ratio: The term quick assets or liquid assets refers current
assets which can be converted into cash immediately it comprises all
current assets except stock and prepaid expenses, and quick liability are
calculated by deducting the amount of Bank O.D and cash credit
facilities from total amount of current liabilities.

Liquid ratio or Quick Ratio= Liquid assets/Liquid liabilities

Table 3.2 Liquid Ratio:

15
 YEAR Current Asset (in Current Liability Liquid Ratio
crores) (in crores)
2014-2015 1039.98 1562.99 0.66:1
2015-2016 1259.08 1716.90 0.73:1
2016-2017 1248 1687.29 0.74:1
2017-2018 1517.03 2139.58 0.71:1
2018-2019 1557.47 2260.66 0.69:1
(Source: www.bluestarindia.com)

Diagram 3.2: LIQUID RATIO

Interpretation: The standard liquid ratio is 1:1. It is seen that the company quick
assets is less than the quick liabilities. In the year 2014-2015 it was 0.66:1. In
2015-2016 and 2016-2017 the ratio increased to 0.73:1 and 0.74:1 respectively.
In 2017-2018 and 2018-2019 the ratio again decreased to 0.71 and 0.69
respectively.

2. Profitability Ratio:

a. Gross Profit Ratio: It indicated the efficiency of production or

trading operation. A high gross profit ratio is a good management as it implies
that cost of production is relatively low.

Gross profit ratio= (gross profit/net sales)*100

16
Table 3.3 Gross Profit Ratio:

YEAR Gross Profit (in Net Sales (in Gross Profit

crores) crores) Ratio
2014-2015 183.72 3080.79 5.96%
2015-2016 208.49 3531.50 5.90%
2016-2017 148.28 4149.08 3.57%
2017-2018 195.75 4425.15 4.42%
2018-2019 179.85 4783.70 3.76%
(Source: www.bluestarindia.com)

Diagram 3.3: GROSS PROFIT RATIO

Interpretation: It is seen that the Gross Profit Ratio in 2014-2015 and 2015-2016
is higher than 2016-2017, 2017-2018 and 2018-2019.

b. Net Profit Ratio: It is determined by dividing the net

income after tax to the net sales for the period.
Net profit ratio= (net profit/net sale)*100

Table 3.4 Net Profit Ratio:

YEAR Net Profit (in Net Sales (in Net Profit Ratio
crores) crores)
2014-2015 152.52 3080.79 4.95%
17
 2015-2016 122.77 3531.50 3.48%
2016-2017 111.96 4149.08 2.70%
2017-2018 141.93 4425.15 3.21%
2018-2019 121.79 4783.70 2.55%
(Source: www.bluestarindia.com)

Diagram 3.4: NET PROFIT RATIO

Interpretation: It is seen that in 2014-2015 Net Profit Ratio is higher than the
other years. In 2018-2019 its Net Profit Ratio is lowest i.e. 2.55%.

3. Activity Ratio:
a. Working Capital Turnover Ratio: This ratio indicates the
no. of times the working capital is turned over in the course of
a year.

Working capital turnover ratio=Net Sales/Net

working capital

Table 3.5 Working Capital Turnover Ratio:

YEAR Net Sales (in Net Working Ratio

crores) Capital (in crores)

18
 2014-2015 3080.79 60.19 -
2015-2016 3531.50 57.65 61.26 times
2016-2017 4149.08 141.15 29.39 times
2017-2018 4425.15 199.85 22.14 times
2018-2019 4783.70 154.56 30.9 times
(Source: www.bluestarindia.com)

Diagram 3.5: WORKING CAPITAL TURNOVER RATIO

Interpretation: From above we can see that in 2014-2015 the company negative
working capital which means company’s current liabilities exceeds its current
assets. In next year i.e. 2015-2016 the ratio had and incredible increase to 61.26.
But in 2016-2017 it decrease to 29.39 and 2017-2018 it again decrease to 22.14.
In 2018-2019 it is rise to 30.9.

b. Capital Turnover Ratio: Capital turnover ratio indicates

how efficiently the firm is utilising its net assets in generating
sales. Higher this ratio, more in the efficiency of the firm in
utilisation of its net assets.
Table 3.6 Capital Turnover Ratio:

19
 YEAR Capital Turnover
Ratio
2014-2015 4.0
2015-2016 4.6
2016-2017 5.0
2017-2018 5.3
2018-2019 5.3
Source: www.bluestarindia.com

Diagram 3.6: CAPITAL TURNOVER RATIO

Interpretation: From above we can see that the capital turnover ratio is
gradually rising over years. It indicates that management is being
extremely efficient in using a firm short term assets and liabilities to
support sales.

c. Total Assets Turnover Ratio: The asset turnover ratio is an

efficiency ratio that measures a company’s ability to generate
sales from its assets.
Total Assets Turnover Ratio=Sales/Total Assets
Table 3.7 Total Assets Turnover Ratio:

20
 YEAR Sales (in crores) Total Assets (in Ratio
crores)
2014-2015 3080.79 2192.56 1.41
2015-2016 3531.50 2571.57 1.37
2016-2017 4149.08 2619.86 1.58
2017-2018 4425.15 3144.23 1.41
2018-2019 4783.70 3239.66 1.48
(Source: www.bluestarindia.com)

Diagram 3.7: TOTAL ASSETS TURNOVER RATIO

Interpretation: A high assets turnover ratio reveals firm’s ability to generate

larger volume of sales with respect to a given amount of total assets. In the
above table 2016-2017 ratio is highest among those year i.e. 1.58.

4. Solvency Ratio :
a. Debt-Equity Ratio: It indicates the respective claim of outsiders
and owners i.e. shareholders in the assets of the firm. So it
reflects the financial soundness of the firm.
Table 3.8 Debt-Equity Ratio:

YEAR Debt Equity Ratio

2014-2015 0.78
21
 2015-2016 0.51
2016-2017 0.17
2017-2018 0.37
2018-2019 0.28
(Source: www.bluestarindia.com)

Diagram 3.8: DEBT EQUITY RATIO

Interpretation: A high D/E ratio indicates that dependence of firm on outside

fund is high. In this case the firm is exposed to greater financial risk. In above
table 2014-2015 has the highest D/E ratio any 5 years. A firm with low D/E
ratio will provide a high margin of safety to outside suppliers of capital. They
become sure about return of their capital in time. In 2016-2017 the D/E ratio is
0.17 which lowest among these years.

5. Earnings Per Share(EPS): Earnings Per Share is the portion of a

company’s profit that is allocated to each outstanding share of its
common back.

Table 3.9 Earnings Per Share:

22
 YEAR Earnings Per
Share (Rs)
(Source:
2014-2015 6.0
2015-2016 8.7
2016-2017 12.9
2017-2018 15.0
2018-2019 19.8
www.bluestarindia.com)

Diagram 3.9: EARINGS PER SHARE

Interpretation: It is seen that company’s market price share depends on

its performance and earnings per share. So the company should try to
improve its earnings per share.

3.2 Common size, Balance sheet Analysis of Blue Star ltd.

1. common size Balance sheet of Blue Star ltd for the year 2014-
2015 and 2015-2016:

23
 2014-2015 2015-2016
Particulars Amount (in % in Amount % in
crores) total (in total
crores)
I. EQUITY AND
LIABILITIES
1. Share holder’s fund
i.Share capital 17.98 0.82 17.99 0.70
ii.Share capital suspense 172.57 6.71
Account
iii. Reserves and surplus 607.09 27.69 655.71 25.50

TOTAL 625.07 28.57 846.27 32.91

SHAREHOLDER’S
FUNDS

2.Non-current liabilities

i. Long Term Provisions 4.48 0.20 8.39 0.33

Total Noncurrent 4.48 0.20 8.39 0.33
Liabilities
3.Current Liabilities
i.Short Term Borrowings 331.91 15.14 285.66 11.11
ii.Trade payables 840.83 38.35 1034.72 40.24
iii.Other current liabilities 311.24 14.20 365.89 14.23
iv.Short Term Povision 79.00 3.60 30.62 1.20
Total Current Liabilities 1562.98 71.29 1716.89 66.76
TOTAL 2192.53 100 2571.55 100
II. Assets
1.Noncurrent Assets
(i).Fixed Assets
a.Tangible Assets 195.81 8.93 189.37 7.36
b.Intangible Assets 21.68 0.99 38.53 1.50
c.Captital Work in 2.47 0.11 6.26 0.24
Progress
d.Intangible Assets 19.93 0.91 10.07 0.39
Under Development
(ii).Non Current 231.85 10.57 296.01 11.51
Investment
(iii).Deferred Tax Assets 16.46 0.75 22.23 0.86
(net)
(iv).Long Term Loans and 133.10 6.07 182.81 7.11
Advances
(v).Trade Receivables 67.34 3.07 48.35 1.88
(vi).Other –Non-Current- 1.08 0.05 3.34 0.13
Assets
Total Non Current 689.72 31.45 797.01 30.99
Assets
2.Current Assets
(i).Current Investments - - 158.06 6.15
(ii).Inventories 462.82 21.11 515.47 20.05

24
 (iii).Trade Receivables 640.76 29.22 712.66 27.71
(iv).Cash and Bank 36.33 1.66 42.95 1.65
Balance
(v). Short Term Loans and 105.43 4.81 100.44 3.91
Advances
(vi).Other Current Assets 257.44 11.74 245.45 9.54
Total Current Assets 1502.78 68.55 1774.54 69.01
Total 2192.53 100 2571.55 100

Interpretation:

1. Analysis of liquidity: Current Asset increased from Rs.1502.78

crores in the year 2014-2015 to Rs.1774.54 crores in the year
2015-2016. Current liability also increased from 1562.98 2014-
2015 to Rs.1716.89 in 2015-2016.
Working Capital is negative in 2014-2015 which is
increased to Rs.57.65 crores, (1774.54-1716.89). In 2015-2016
the liquidity positive of the company is favourable.
[Working Capital=C.A-C.L].
2. Analysis of long term solvency: Shareholder increased from
28.51% to 32.91% in 2015-2016. Therefore there was a growth by
64.4% long term debts was increased from 0.201 to 0.33.
The overall liability of the company increased
from 2192.53 crores in 2014-2015 to Rs.2571.55 crores in 2015-
2016.
Hence long term solvency position of the company is not very
poor.

25
 2.common size Balance sheet of Blue Star ltd for the year 2015-
2016 and 2016-2017:

2015-2016 2016-2017
Particulars Amount (in % in Amount % in
crores) total (in total
crores)
I. EQUITY AND
LIABILITIES
1. Share holder’s fund
i.Equity Share capital 17.99 0.70 19.11 0.73
ii.Share capital suspense 172.57 6.71
Account
iii. Other Equity - - - -
iv. Reserves and surplus 655.71 25.50 898.64 34.30
TOTAL
SHAREHOLDER’S
FUNDS 846.27 32.91 917.75 35.03

2.Non-current liabilities
(i).Financial Liabilities - - 0.56 0.02
(ii).Long Term Provisions 8.39 0.33 10.76 0.41
(iii).Government Grants - - 3.48 0.13
Total Noncurrent Liabilities 8.39 0.33 14.80 0.56
3.Current Liabilities
i.Short Term Borrowings 285.66 11.11 149.23 5.70
ii.Trade payables 1034.72 40.24 1106.91 42.25
iii.Other payables - - 1.67 0.06
iv.Other Financial Liabilities - - 13.27 0.51
v.Government Grants - - 0.64 0.02
vi.Short term povisions 30.62 1.20 34.78 1.33
vii.Other Current Liabilities 365.89 14.23 380.76 14.53
Total Current Liabilities 1716.89 66.76 1687.26 64.41
TOTAL 2571.55 100 2619.86 100

II. Assets
1.Noncurrent Assets
(i).Fixed Assets
a.Tangible Assets 189.37 7.36 216.10 8.25
b.Intangible Assets 38.53 1.50 43.70 1.67
c.Captital Work in 6.26 0.24 21.51 0.82
Progress
d.Intangible Assets 10.07 0.39 12.08 0.46
Under Development
e.Investment Property - - 59.48 2.27
(ii).Non Current 296.01 11.51 215.07 8.21
Investment
(iii).Deferred Tax Assets 22.23 0.86 104.53 3.99

26
 (net)
(iv).Trade Receivables 48.35 1.88 29.85 1.14
(v).Long Term Loans and 182.81 7.11 19.43 0.74
Advances
(vi).Other Financial - - 3.61 0.14
Assets
(vii).Income Tax - - 37.64 1.44
Assets(net)
(viii).Other Non Current 3.34 0.13 28.35 1.08
Assets
Total Non Current 797.01 30.99 791.42 30.21
Assets
2.Current Assets
(i).Current Investments 158.06 6.15 - -
(ii).Inventories 515.47 20.05 580.44 22.16
(iii).Loans and Advances 100.44 3.91 5.41 0.21
(iv).Trade Receivables 712.66 27.71 812.76 31.02
(v).Cash and Bank 42.45 1.65 77.99 2.98
Balance
(vi). Other Financial - - 223.66 8.54
Assets
(vii).Other Current Assets 245.45 9.54 126.39 4.82
(viii).Assets Held for Sale - - 1.76 0.07
Total Current Assets 1774.54 69.01 1828.44 69.74
Total 2571.55 100 2619.86 100

Interpretation:

1. Analysis of liquidity: Current Asset increased from Rs.1774.54

crores in the year 2015-2016 to Rs.1828.44 crores in the year
2016-2017. Current liability also decreased to1687.26 in 2016-
2017 from Rs.1716.89 in 2015-2016.
Therefore, Working Capital of the company
increased from 57.65 in 2015-2016 to Rs.141.16 crores, in 2016-
2017. Hence liquidity position of the company is favourable.
2. Analysis of long term solvency: Shareholder increased from
32.91% in 2015-2016 to 35.03% in 2016-2017. There was a
growth by 2.21%. The overall liability of the company increased
from 2571.55 crores to Rs.2619.86 crores in 2016-2017.
Hence long term solvency position of the company is not very
poor.
27
 3.common size Balance sheet of Blue Star ltd for the year 2016-
2017 and 2017-2018:

2016-2017 2017-2018
Particulars Amount (in % in Amount % in
crores) total (in total
crores)
I. EQUITY AND
LIABILITIES
1. Share holder’s fund
i.Equity Share capital 19.11 0.73 19.20 0.61
ii. Reserves and surplus 898.64 34.30 966.10 30.73
TOTAL
SHAREHOLDER’S
FUNDS 917.75 35.03 985.30 31.34

2.Non-current liabilities
(i).Financial Liabilities 0.56 0.02 4.20 0.13
(ii).Long Term Provisions 10.76 0.41 12.20 0.39
(iii).Government Grants 3.48 0.13 2.95 0.09
Total Noncurrent Liabilities 14.80 0.56 19.35 0.61
3.Current Liabilities
i.Short Term Borrowings 149.23 5.70 320.02 10.18
ii.Trade payables 1106.91 42.25 1446.88 46.02
iii.Other payables 1.67 0.06 1.27 0.04
iv.Other Financial Liabilities 13.27 0.51 7.26 0.23
v.Government Grants 0.64 0.02 0.54 0.02
vi.Short term povisions 34.78 1.33 33.35 1.06
vii.Other Current Liabilities 380.76 14.53 330.26 10.05
Total Current Liabilities 1687.26 64.41 2139.58 68.05
TOTAL 2619.86 100 3144.23 100

II. Assets
1.Noncurrent Assets
(i).Fixed Assets
a.Tangible Assets 216.10 8.25 234.80 7.47
b.Intangible Assets 43.70 1.67 56.12 1.78
c.Captital Work in 21.51 0.82 18.38 0.58
Progress
d.Intangible Assets 12.08 0.46 6.93 0.22
Under Development
e.Investment Property 59.48 2.27 56.07 1.78
(ii).Non Current 215.07 8.21 220.26 7.01
Investment
(iii).Deferred Tax Assets 104.53 3.99 87.81 2.79
(net)
(iv).Trade Receivables 29.85 1.14 23.10 0.73
(v).Long Term Loans and 19.43 0.74 19.98 0.63

28
 Advances
(vi).Other Financial 3.61 0.14 3.96 0.13
Assets
(vii).Income Tax 37.64 1.44 45.59 1.45
Assets(net)
(viii).Other Non Current 28.35 1.08 31.80 1.01
Assets
Total Non Current 791.42 30.21 804.80 25.59
Assets
2.Current Assets
(i).Inventories 580.44 22.16 822.40 26.16
(iii).Short term Loans and 5.41 0.21 8.52 0.27
Advances
(iv).Trade Receivables 812.76 31.02 954.81 30.37
(v).Cash and Bank 77.99 2.98 65.07 2.07
Balance
(vi). Other Financial 223.66 8.54 277.40 8.82
Assets
(vii).Other Current Assets 126.39 4.82 206.01 6.55
(viii).Assets Held for Sale 1.76 0.07 5.22 0.17
Total Current Assets 1828.44 69.79 2339.43 74.41
Total 2619.86 100 3144.23 100

Interpretation:

1. Analysis of liquidity: Current Asset increased from Rs.1828.44

crores to Rs.2339.43 crores. Current liability also increased from
1687.26 crores to Rs.2139.58 crores. Therefore, Working Capital
of the company increased from 141.15 crores to Rs.199.85 crores.
Hence liquidity position of the company is favourable.
2. Analysis of long term solvency: Shareholder decreased from
35.03% to 31.34% in 2017-2018. There was a decreased by
3.69%.
The overall liability of the company increased by
(3144.23-26.19.86=524.37) crores in 2017-2018.
Hence long term solvency position of the company is not very
poor.

29
 4.common size Balance sheet of Blue Star ltd for the year 2017-
2018 and 2018-2019:

2017-2018 2018-2019
Particulars Amount (in % in Amount % in
crores) total (in total
crores)
I. EQUITY AND
LIABILITIES
1. Share holder’s fund
i.Equity Share capital 19.20 0.61 19.26 0.59
ii. Reserves and surplus 966.10 30.73 941.74 29.07
TOTAL
SHAREHOLDER’S
FUNDS 985.30 31.34 961.00 29.66

2.Non-current liabilities
(i).Financial Liabilities 4.20 0.13 0.05 0.01
(ii).Long Term Provisions 12.20 0.39 11.50 0.35
(iii).Government Grants 2.95 0.09 6.45 0.20
Total Noncurrent Liabilities 19.35 0.61 18.00 0.56
3.Current Liabilities
i.Short Term Borrowings 320.02 10.18 364.42 11.25
ii.Trade payables 1446.88 46.02 1424.91 43.98
iii.Other payables 1.72 0.04 - -
iv.Other Financial Liabilities 7.26 0.23 16.72 0.52
v.Government Grants 0.54 0.02 4.08 0.13
vi.Short term povisions 33.35 1.06 76.09 2.35
vii.Other Current Liabilities 330.26 10.50 374.44 11.56
Total Current Liabilities 2139.58 68.05 2260.66 69.78
TOTAL 3144.23 100 3239.66 100

II. Assets
1.Noncurrent Assets
(i).Fixed Assets
a.Tangible Assets 234.80 7.47 256.18 7.91
b.Intangible Assets 56.12 1.78 50.30 1.55
c.Captital Work in 18.38 0.58 30.77 0.95
Progress
d.Intangible Assets 6.93 0.22 10.28 0.32
Under Development
e.Investment Property 56.07 1.78 52.85 1.63
(ii).Non Current 220.26 7.01 220.88 6.82
Investment
(iii).Deferred Tax Assets 87.81 2.79 77.94 2.41
(net)
(iv).Trade Receivables 23.10 0.73 - -
(v).Long Term Loans and 19.98 0.63 21.77 0.67
Advances
(vi).Other Financial 3.96 0.13 3.92 0.12

30
 Assets
(vii).Income Tax 45.59 1.45 46.50 1.44
Assets(net)
(viii).Other Non Current 31.80 1.01 53.05 1.64
Assets
Total Non Current 804.80 25.59 824.44 25.45
Assets
2.Current Assets
(i).Inventories 822.40 26.16 857.75 26.48
(iii).Short term Loans and 8.52 0.27 9.91 0.31
Advances
(iv).Trade Receivables 954.81 30.37 1015.95 31.36
(v).Cash and Bank 65.07 2.07 27.41 0.85
Balance
(vi). Other Financial 277.40 8.82 0.67 0.02
Assets
(vii).Other Current Assets 206.01 6.55 503.39 15.54
(viii).Assets Held for Sale 5.22 0.17 0.14 0.01
Total Current Assets 2339.43 74.91 2415.22 74.35
Total 3144.23 100 3239.66 100

Interpretation:

1. Analysis of liquidity: Current Asset increased from Rs.2339.43

crores to Rs.2415.22 crores in 2018-2019. Current liability also
increased from 2139.58 crores to Rs.2260.66 crores in 2018-2019.
But Working Capital of the company decreased from 199.85
crores to Rs.154.56 crores in 2018-2019.
2. Analysis of long term solvency: Shareholder’s fund again
decreased from 31.34% to 29.66%.
The overall liability of the company is increased by
3144.23crores to 3239.66 crores.
Hence long term solvency position of the company is not very
poor.

3.3. Findings:

 The current ratio of the company is gradually increasing. But it is

still below the standard 2:1.

31
  The Quick ratio of the company is fluctuating and it is also below
standard 1:1.
 In comparison to gross profit ratio, the net profit ratio is low due
to excessive amount of other expenses.
 The sales figure increasing year after year.
 The company’s market price per share depends on its performing
and earnings per share.
 Capital turnover ratio is increasing over years.
 The debt equity ratio, it can be observed that it is increasing
which means high margin of safety to outside suppliers of capital.
 The working capital is negative in 2014-2015 and maximum in
2015-2016. Total assets turnover ratio is fluctuated over years.

 CHAPTER-4

CONCLUSION AND RECOMMENDATIONS:

4.1. Conclusion:

Finance is the life blood of every business.

Without effective financial management a company cannot
in this competitor.

Conclusion on the basis of the study is broadly

into the following areas:

 “Past performance and current position”

32
 Short term solvency position is not favourable
as it is below the standard ratio of 2:1.
 “Prediction of profitability and growth prospect”
Comparison to gross profit ratio the net profit
ratio of the company is low because there may defect in
pricing the product or due to excessive amount of the
expenses.
 “Assessment of the operational efficiency”
Reserves and surplus have improved over the
years and so it can be concluded that the company is on
the path of growth.
 The company should try to improve its earnings per
share.

4.2. Recommendations:
From the above study of Financial statement analysis of
Blue Star ltd from 2014-2015 to 2018-2019 we study the
company’s efficiency with the help of various financial tools like
Ratio analysis and Balance sheet.
 From the above analysis it can be seen that the
company is in a good position in the market.
 The company should decrease its operating costs.
 The company should take up appropriate advertising
policies so as to increase its market value of shares.

Bibliography:

33
Book.

 Ghosh, J. Financial Reporting and Finance Statement Analysis

Sem VI. India.

Website.

 Financial Reporting and Finance Statement Analysis. Retrieved

march 26,2020, from www.bluestarindia.com.

34
35