Contents

1 Chapter I: Introduction....................................................................................................................2
1.1 Concept and meaning of financial statement...........................................................................2
1.2 Objectives of financial statement..............................................................................................2
1.3 Importance of financial statement............................................................................................2
1.4 Advantages of financial statement............................................................................................2
1.5 Limitations of financial statement............................................................................................2
1.6 Introduction of Bottlers Nepal Limited....................................................................................2
2 Chapter II: Financial Statement Analysis.......................................................................................3
2.1 Concept and meaning of financial statement analysis.............................................................3
2.2 Objectives of financial statement analysis................................................................................3
2.3 Importance of financial statement analysis..............................................................................3
2.4 Advantages of financial statement analysis..............................................................................3
2.5 Limitations of financial statement analysis..............................................................................3
2.6 Techniques of financial statement analysis..............................................................................3
2.7 Financial statements of selected organization..........................................................................3
3 Chapter III: Ratio Analysis..............................................................................................................4
3.1 Introduction of Ratio analysis...................................................................................................4
3.2 Importance of Ratio analysis....................................................................................................4
3.3 Types of Ratio analysis..............................................................................................................4
3.4 Calculation and Interpretation of Ratios.................................................................................4
4 Chapter IV: Summary and Conclusion...........................................................................................5
5 Reference............................................................................................................................................6
1 Chapter I: Introduction

1.1 Concept and meaning of financial statement

Financial statements are a collection of summary-level reports about the financial activities and
financial performance of the company. It contains all the information including the profit earned
or loss suffered, the list of the resources utilized, sources of the fund to acquire the resources. So
Financial statement depicts not only the profit or loss but also the assets and liabilities and can be
concluded that it reflects the true picture of financial performance of the business firm.

The statement should be prepared under specified and standardized accounting standards to
ensure that reporting is consistent. Financial statement of most of the company comprise of
balanced sheet, cash flow statement income statement and statement of retained earnings. The
balance sheet provides an overview of assets, liabilities, and shareholders' equity as a snapshot in
time.

The income statement primarily focuses on a company’s revenues and expenses during a
particular period. Once expenses are subtracted from revenues, the statement produces a
company's profit figure called net income. The cash flow statement (CFS) measures how well a
company generates cash to pay its debt obligations, fund its operating expenses, and fund
investments.

The statement of retained earnings shows the cumulative earnings of the business after any
dividends or distributions to shareholders. As well, this statement, sometimes called a statement
of changes in equity, also shows the change in the retained earnings account between the opening
and closing periods on each balance sheet.

Financial statements can be prepared for different timeframes. Annual financial statements cover
the company’s latest fiscal year. Companies may also prepare interim financial statements on a
monthly, quarterly or semi-annual basis. Interim statements sometimes include fewer
components than year-end statements. For example, they may lack a cash flow statement and a
statement of retained earnings.

Financial statements generally give information for both the latest period and the prior period to
make comparisons easier. The statements are used by investors, market analysts, and creditors to
evaluate a company's financial health and earnings potential. It shows the sustainability of the
business and allow you to make educated financial decisions.

1.2 Objectives of financial statement

The main objectives of financial statements is to provide the necessary information required for
informative decision making, assessing the current and past performance of the company,
predicting the success or failure of the business, etc. Further about the objectives of financial
statements are discussed below:
a) To know the financial position of the company

Financial statement helps in knowing the financial position of the company. It enlists the
assets and liabilities. The difference between those represents the net worth. Net worth
includes the capital infused by the owners plus the profits earned till date.
Decreasing in the net worth is bad indicator of growth. This gives the management various
hints to improvise the financial position.

b) To provide financial information to internal and external users

Financial statements contribute on providing the financial information to its users. It provides
information related to company’s economic assets and liabilities, resources available with
company, earning potential etc.
c) To evaluate the financial performance and efficiency of the company

The financial statement helps in knowing the financial performance of the company. It shows
the entity i.e. its revenue and its expenses. The difference between those represents the profit
or loss earned during the period.
These statements depict the effectiveness of a company’s management. How well a company
is performing depends on its profitability, which these statements show.
Decrease in revenue has direct impact in decrease in profits. Increase in expense have reverse
impact of decrease in profits.
d) To form basis for decisions making of the stakeholders

Financial statement provides the required financial information which helps the stakeholders
at the time of decision making. It also provides information about the economic assets and
liabilities.
They help in predicting the extent of a company’s capacity to earn profits. Shareholders and
investors can use this data to make their financial decisions.
These statements also provide information relating to the company’s cash flows. Investors
and creditors can use this data to predict the company’s liquidity and cash requirements.
1.3 Importance of financial statement
Financial statements are the important sources of information to all the users of the company.
The following are the points which highlight the significance or importance of financial
statements:
a. Provide Accurate Financial Data

Financial statements are the summary of information relating to profitability, and resources
owned by the firm. These statements provide accurate and up to date financial data and
information to the management and shareholders.
b. Easy Comparison

Financial statements provide the information which can be compared with those of other
firms. It helps to understand the strength and weakness of the firm.
c. Important For Obtaining Loan

Bankers and other financial institutional make the lending decision on the basis of financial
condition of the firm. Therefore, financial statements are useful to obtain loan. The financial
information from the statement is also used to extend, or restrict the amount of credit to a
business.
d. Tax Purpose

Government bases on financial statements of the companies for the calculation of tax revenue
from the firms. So, these statements are important for tax purpose also.
e. Assist Decision Making

Another importance of financial statements is that they can be used as the basis for
management decision-making purpose. It provides the required financial information which
helps to know the weakness and strength of the company. It also helps in knowing its
financial position. The financial position helps to understand the company’s performance in
comparison to the other businesses and the sector.
All this information assists to form proper policies for the companies and make correct
decisions.
f. Assists in investment decision making

Financial statements help in providing information related to liquidity, debt, and profitability.
Investors are most concerned about the company’s debt position. If the debt level is higher
than the other companies in the same industry, it means that the company is over-leveraged.
So, Investors use the information to decide whether to invest, and the price per share at which
they want to invest.
g. Useful For Employees
 Financial statements show financial position, profitability and liquidity of the firm.
Employees can use these statements to demand for increment in salary and other benefits.

1.4 Advantages of financial statement

The preparation of financial statements places a high emphasis on the accuracy, reliability,
and relevance of financial data. Below are the advantages of financial statements:
1. Review of cash flow:
Financial statement shows the financial solvency and the ability of the company to pay
liabilities to pay its liabilities. The statement of cash flow statement breaks the statement into
operating, investing, and financial parts. A cash flow review helps us understand whether the
business is operating under a cyclical revenue stream structure or a consistent revenue model.
This also helps the business maintain and keep the expenditure the business in line with the
revenue model it operates.
2. Review of liability:
Financial statements present the short- and long-term obligations of the business. If the
owner wants to expand his business, he must look at the statements of financial position and
deduce the logic as to whether he should reduce existing liabilities to apply for further capital
expansion. Lenders look at the financial statements and determine business prospects based
on revenues, assets, and liabilities.
3. Review of inventory and its movement:
The levels of opening and closing stock as a percentage of purchase and sales, along with the
changes and movements in the levels of stock throughout the year, show the business’s
ability and nature. It shows whether the goods are in demand, fast-moving or slow-moving,
or change in the trend of sales, and so on. When the goods are slow-moving compared to
industry, it is considered a negative for the business prospect and growth.
4. Identification of trends:
The business owner should prepare and compare financial statements over various periods to
identify business trends. This helps the business know what products are selling well, what
segments are growing well, and which segment of business needs further review and re-
investment or complete exit at once. Trends are the gospel in the performance of the
business. Identifying trends is, therefore, a necessity for the business to sustain growth and
achieve higher profits.
5. Preparation of budget:
Every business must have a vision. To prepare a vision, the business must have defined goals
and objectives. The objective of financial statements is to prepare a blueprint for the future
by analyzing the past financial statements already prepared and audited. Budgets help to keep
 the expenses in line with income and sales. The budgets are forecasted using prepared
financial statements.

1.5 Limitations of financial statement

Financial statements are useful sources of accounting information. Although they provide
accounting information to the users, these statements also suffer from some limitations. The
major limitations of financial statements can be pointed out as follows:
a) Lack Of Qualitative Information

Financial statements include the quantitative information which is expressed in monetary

units. But, the qualitative information such as efficiency of management executives, goodwill
of the company, employee and employer relationship, efficiency of workers, customer
satisfaction, loyalty of customers, competitive strength and the like are not expressed in
monetary terms.
Hence, these are not included in the financial statements. However, this qualitative
information is necessary for understanding the real financial position and the operating
results of the business. So, lack of quantitative information is one of the main drawbacks of
financial statements.
b) Based on historical data

Financial reports depend on historical costs. All the transactions are recorded at historical
costs. The value of the assets purchased by the company and the liabilities it owes change
with time and depend on market factors. The financial statements do not provide the current
value of such assets and liabilities. Thus, if any items are available in the financial statements
based on historical costs and the company has not revalued them, the statements can be
misleading.
As it is historical data in nature. They do not include any future possible results. So, they may
not provide correct information to formulate future plans and policies.
c) Summary Only

Financial statements are just the summary reports of the company's financial transactions. All
the detailed information regarding to such transactions cannot be disclosed in the financial
statements.
d) Not adjusted for Inflation

The assets and liabilities of the company are not inflation-adjusted. Therefore, if the inflation
is very high, the items in the reports will be recorded at lower costs and hence, not give much
information to the readers.
e) Intangible assets are ignored
 In preparation of Financial Statements self-generated intangible assets like credit standing of
the organization in the market, the unique quality of product due to which sales targets can be
easily achieved etc. are not recorded in the financial statement due to the valuation problems.
Hence it is said that the financial statements do not reflect the proper position.
f) Specific time period recording

Financial statements are reported annually or quarterly. Each period has some upward and
downward phases hence each period cannot be compared with the previous period because of
the different situations for that period. A reader of financial statements usually compares the
financial statement with the previous period whether it is the year or it is the quarter which
seems to be limitations.
g) Financial Statements Have No Predictive Value

The information in a set of financial statements provides information about either historical
results or the financial status of a business as of a specific date. The statements do not
necessarily provide any value in predicting what will happen in the future.
For example, a business could report excellent results in one month, and no sales at all in the
next month, because a contract on which it was relying has ended.

1.6 Introduction of Bottlers Nepal Limited

Bottlers Nepal Limited (hereinafter referred to as the “Company” or “BNL”) is a Public Limited
Company, with operations spanning over 43 years. The shares of the Company are listed with the
Nepal Stock Exchange Limited (NEPSE), and the majority of its shares are held by M/s Coca-
Cola Southwest Asia Holdings Limited, [Formerly known as Coca-Cola SABCO (Asia)
Limited].
Bottlers Nepal Limited, and its subsidiaries, Bottlers Nepal (Terai) Limited (BNTL) and Troika
Traders Private Limited (TTPL) (hereinafter referred to as the “Group”) is engaged in the
production, manufacture, sale, distribution and supply of soft drinks being carbonated non-
alcoholic beverages and packaged drinking water under the brand names - Coca-Cola, Sprite,
Fanta, Coke-Zero and Kinley. The Company along with its subsidiaries, Bottlers Nepal (Terai)
Limited and Troika Traders Private Limited, are the only authorized bottlers and suppliers of
“The Coca-Cola Company” (“TCCC”), in Nepal.
For over 43 years, Bottlers Nepal Limited and its subsidiaries has built success on a profound
understanding of demand of the consumers. That success is based on a continuous, compelling
strategy that leads to sustainable value creation. It is also based on ability to change and adapt.
2077/78 was no exception. High standards of Corporate Governance, strong technical
credentials, prudent risk management approach, a culture of dedication and a strong distribution
network have been the key driving forces of the Group. The Group is considered as one of the
most prestigious multinational companies in Nepal.
The Company believes the success of the Group depends on their ability to connect with
consumers by providing them with a wide variety of beverage options to meet their desires,
needs and lifestyles.
The main success further depends on the ability of working people to execute effectively, every
day. The objective is to use Company’s assets, brands, financial strength, unrivaled distribution
system, global reach, and the talent and strong commitment of management and associates to
become more competitive and to accelerate growth in a manner that creates value for their
shareowners.

2 Chapter II: Financial Statement Analysis

2.1 Concept and meaning of financial statement analysis

2.2 Objectives of financial statement analysis

2.3 Importance of financial statement analysis

2.4 Advantages of financial statement analysis

2.5 Limitations of financial statement analysis

2.6 Techniques of financial statement analysis

2.7 Financial statements of selected organization

3 Chapter III: Ratio Analysis

3.1 Introduction of Ratio analysis

3.2 Importance of Ratio analysis

3.3 Types of Ratio analysis

3.4 Calculation and Interpretation of Ratios

4 Chapter IV: Summary and Conclusion

5 Reference