CONTENTS

Pg.No

1. CHAPTER-I 1-10

INTRODUCTION
NEED FOR THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY
LIMITATIONS OF THE STUDY

2. CHAPTER-II 11-27

INDUSTRY PROFILE
COMPANY PROFILE

3. CHAPTER-III 28-52

THEORETICAL FRAMEWORK OF THE STUDY

4. CHAPTER-IV 53-68

DATA ANALYSIS & INTERPRETATION OF THE STUDY

4. CHAPTER-V 69-108

SUMMARY
FINDINGS
SUGGESTION
CONCLUSION
BIBLIOGRAPHY
ANNEXURE

1
 CHAPTER-1
 INTRODUCTION OF THE STUDY
 NEED FOR STUDY
 OBJECTIVES OF STUDY
 METHODOLOGY
 LIMITATIONS OF THE STUDY

2
 INTRODUCTION
Concept of financial management

Organization is a group of employees working together consciously towards the

maximize the profit of an organization.. But the goal of modern organizations, which
are raising funds by issue of equity shares, is to maximize shareholders wealth .in other
words, the objective is to maximize net present worth by taking right decisions which
help increase share price. Maximization of shareholders wealth is possibly only when
the organization is able to maximize net profits. The employees work in the
organization under different departmentsviz.hr, finance, production, marketing, and r&d
and now a days, it. All the employees who are in the decision making level have to take
decisions that help maximize shareholders wealth.

Money is like blood, without which there is no human being ,similarly without
finance. There is no organization .here ,there is a need to know the difference between
money and finance .money is any country’s currency ,which is in the hands of a person
or an organization, whereas finance is also a country’s currency ,which is owned by
person or organization, that is given to others as loan to buy an asset or to invest in
investment opportunities. Put it simply, a currency as long as you have it becomes
finance. For example, bank, which has raised money from public through various types
of deposits, when it grants the same money to others, it becomes finance. If it s granted
to buy a car, it is known as car finance, if it is granted to buy a house it is a called as
housing finance. Organizations raise funds from public to buy assets or invest in
business. Efficient management of finance helps in maximizing of shareholders wealth.
In other words, financial management plays a key role in maximization of the owner’s
wealth.
as we know finance is the life blood of every business, its management requires special
attention. Financial management is that activity of management which is concerned
with the planning, procuring and controlling of the firm’s financial resources.
The scope and coverage of financial management have undergone fundamental
changes over the last half a century. During 1930s and 1940s, it was concerned of

3
raising adequate funds and maintaining liquidity and sound financial structure. This is
known as the “traditional approach” to procurement and utilization of funds required by
a firm. Thus, it was regarded as an art and science of rising and spending of funds. In
the words of paisco,”in a modern money using economy, finance may be defined as the
provision of money at the time it is wanted”. The traditional approach emphasized the
acquisition of funds and ignored efficient allocation and constructive use of funds. It
does not give sufficient attention to the management of working capital. During
1950s ,the need for most profitable allocation of scarce capital resources was
recognized .during 1960s and 1970s many analytical tools and concepts like funds flow
statement, ratio analysis ,cost of capital, earning per share optimum capital structure
portfolio theory etc. Were emphasized, as a result ,a broader concept of finance began to
be used.thus,the modern approach to finance emphasizes the proper allocation and
utilization of funds in addition to their economical procurement. Thus, business finance,
in the words of authuman and dongall, may broadly be defined as “the activity
concerned with the planning, raising, controlling and administering of funds used in the
business”

Business finance is broader than corporate finance,since it covers sole proprietors,

partnerships and company business .corporate finance is restricted to the company
finance only and not the other forms of business organizations.
According to the encyclopedia of social sciences, corporate finance deals with the
financial problems of corporate enterprises. Problems include financial aspects:

Many authors use business finance and corporate finance as synonym but of the
promotion of new enterprises and their administration during early development ,the
accounting problems connected with distinction between capital and income ,the
administrative questions created by growth and expansion and finally ,the financial
adjustments required for the bolstering upon rehabilitation of a corporation which has
come into financial difficulties .management of all these financial
management .financial management mainly involves raising funds and their effective
utilization with objective of maximizing shareholders wealth.

4
according to van horne and wachowicz, “financial management is concerned with the
acquisition, financing, and management of assets with some overall goal in
mind” .financial manager has to forecast expected events in business and note their
financial implications.
Financial management is concerned with three activities:

 anticipating financial needs, which means estimation of funds required for

investment in fixed and current assets are long term and short term assets.
 Acquiring financial resources – once the required amount of capital is anticipated
the next task acquiring financial resources i.e. .,where and how to obtained the
funds to finance the anticipated financial needs and
 Funds in business- means allocation of available funds among the best plans of
assets ,which are able to maximize shareholder’s wealth .thus ,the decisions of the
financial management can be divided into three viz., investment, financing and
dividend decisions.

Financial Statement Analysis:

the basis for financial planning, analysis and decision making is the financial
information. Financial information is needed to predicate, compare and evaluate the
firm’s earning ability. It is also required to aide in economic decision making-
investment and financing decision making. The financing information of an enterprise is
contained in the financial statement or accounting report

Accounting System:

accounting is the guide –post for management .every enterprise should know the
activities carried by it and the financial implications for its operations. The financial
score of an enterprise is kept by the accounting system. It points out the problems faced
or to be faced by the enterprise.

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 Definition: “the process of identifying, measuring and commanding economic
information to permit informed judgment and decisions by users of information”.

Objectives:

According to this definition, the main objective of accounting is to provide

information to the users to make relevant decisions and from judgments .besides
decisions also emphasizes control and custodianship aspects of accounting.

Functions:
Accounting has to perform three functions

 Measurement
 Communication
 Accumulation

The process of data accumulation involves the recording and of economic events .the
accounting records includes journals and ledgers.

These records are essentially historical in nature .as the events recorded are the recorded
are the once which already occurred.

Accounting also performance measurement functions .it assigns monitory values to

economic events. While performing these functions it acts accordance with the generally
accepted accounting principles.

Techniques of Financial Statement Analysis:

the analysis of financial statements consists of a study of a relationship and trends

to determine .whether or not the financial positions of the concern and its operating
efficient have been satisfactory. In process of this analysis various tools or methods or
devices are used by the financial analysis. The financial analysis tools generally
available to an analyst for this purpose are as follows:

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Comparative Statement:

the preparation of comparative statement is an important device of horizontal

financial analysis .financial data becomes more meaningful when compared with
similar data for a previous period or a number of prior periods .statements prepared in a
dorm that reflect financial data for two or more periods are known as comparative
statements .annual data can be compared with similar data prior years .such statements
are very helpful in measuring the effects of the conduct of a business during a period
under considerations. Comparative statement can be prepared for both types of financial
statements –balance sheet as well as profit and loss account. The comparative profit and
loss account will present a review of operating activities of the business. The
comparative balance sheet shows the effect of operations on the assets and liabilities
(i.e.,) changes on the financial position during the period under considerations.

Common Size Statement:

comparative statements that give only the vertical percentage or ratio for financial
data without given rupee values are known as 100% statements. For example, if the
balance sheet items are expressed as the ratio of each sheet to total assets and ratio of
each liability of total liabilities, it will be called a common size balance sheet. Thus a
common size statement shows the relation of each component to the whole. It is useful
in vertical financial analysis and comparisons of two –business enterprise at a certain
data.

Trend Analysis:

trend analysis is an important technique for the analysis and interpretation of financial
statements .generally ,the trend means tendency .to know the tendency of the data of the
financial statements .the data of four or five years are required .data may be taken from
the balance sheet and profit and loss account .it depends on the objective of analysis. To
compute the tendency one year’s figures are taken as base year. On the basis of these

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relative figures the tendency of a particular item is determined. The trend analysis of the
business activities and financial position may be done in the following ways:

 Trend percentage /ratio

 Graphic or presentation

Trend Percentage / Ratio:

To calculate the trend percentage the following procedure is adopted;

1. One year’s figure are assumed as base year’s figure

2. In order to compute the trend percentage the each and every item of the other
years of divided by the corresponding item of the base year and multiplying by
100.

Graphic Or Diagrammatic Presentations:

the trend percentage ratio discussed in the previous method may be represented by graphs
and diagrams. Two or three variables can be represented on graphs very easily. If
different variables of the financial statements are represented by graphs and diagrams,
those quickly draw human attraction. Now a day there is a trend to show the important
variable on the graphs.

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 NATURE OF THE STUDY

Funds Flow Statement:

fund flow analysis has become very popular technique to analyst the financial
statements .fund flow statement does not reveal the financial position of the business
like the financial statement but it reveals the changes in the working capital in two
period .working capital is the life blood of the business. This statement also gives the
information regarding the sources and application of fund .sources of fund are profit
from operation ,issue of capital loans, sale of fixed assets,etc.,while the application of
fund are the purchase of fixed assets, redemption of capital, payment of dividend
purchase of investment,etc.

1. “Fund flow statement is a statement prepared to indicate the increase in the cash
resources and the utilization of such resources of business during the accounting period”

- Robertanthony

2.”The fund flow statement is a method by which we study the net funds flow between
two points in time”

- james c. Van horne

Cash flow analysis:

cash flow analysis is also similar to fund flow analysis. now it is being prepared by the
companies along with the balance sheet and profit and loss account. It is prepared as per
accounting standard –3 of the institute of chartered accountant of India. The fund flow
statement reveals the changes in the fund /working capital while the cash flow statement
reveals the changes in the cash during two periods. It also gives the information
regarding the sources of cash and uses of cash during a period.

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 NEED FOR THE STUDY:

Financial statements of any firm or organization reveal the two important aspects
i.e. The financial soundness and its solvency position. A financial manager may not be
able to take an appropriate decision by observing the financial statements. Financial
statement analysis is the close observations and critical examination of data contained in
financial statements in order to understand better and to make decisions as and when
required, on the other hand it is study of relationship among various financial facts and
figures given in financial statements.

Analysis reveals the trends and tendencies, relative importance of each item,
relationship and interrelationships between items and the changes that have taken place
among them. Therefore, the purpose of financial analysis is to know these things so as to
identify the financial strengths and weaknesses of the business firm. Financial analysis is
undertaken by the management of the firm or by parties outside to it, namely owners,
creditors, investors, etc., the nature and type of analysis varies according to the specific
interest or purpose of the analyst.

The study is mainly concentrate to assess the present profitability and operating
efficiency of the firm as a whole as well as for its different departments, thus, to judge the
financial health of the fgic. It is also focus on the relative importance of different
components of the financial position of the fgic. The study is to identify the reasons for
change in the profitability financial position of the firm. To judge the ability of the firm
to pay the principal and interest, arrangements for amortization of debt and security
available for the loans and thus, to assess the short term as well as the long-term liquidity
position of the firm.

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 OBJECTIVES OF THE STUDY

The financial statement analysis has a wide range of scope but as the time is main
constraint, mainly i could be able to focus on the study of financial performance over
period of five year with the following objectives:

 To highlight the profile of future generali insurance company limited, visakhapatnam.

 To know the concept of financial performance of a company.
 To study the significance of financial management and concept of generali insurance
company analysis of financial statements.
 To examine the financial planning and performance of limited during 2010-14
 To access and analyze the liquidity, solvency and profitability position and
performance of general insurance company limited during 2010-14
 To interpret the financial statements, policies and programs in generali insurance
company limited during the period of study
 To identify major findings and give necessary suggestions for better financial
performance.

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 METHODOLOGY

The methodology of the collection of data is based on primary and secondary data
and with more emphasize on secondary data.

Primary data: the primary data is collected by interactions of official, staff and
executives of the organizations for the purpose of collecting information relevant.

Secondary data: this study is mainly based on secondary data which has required
various financial information from the books of fgic over a period of five years. Such as:

annual accounts, financial reports, magazines, journals.

 Administrative reports.
 Internally available files and other documents of generali insurance company
limited
 Paper clippings, etc.

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 LIMITATIONS OF THE STUDY

Every research study has some limitations. The limitations that might come across
during the course of study are listed below:

 Time is the major constraint, especially my study was conducted within a period
of 6 weeks and sincere effort was made to collect the information to the maximum
possible extent.
 The entire study is confined to five years only i.e. From 2009 to 2014as per
available sources of an organization.
 By observing the financial performance of the generali insurance company limited
with limited available data whole organizations performance cannot be judged.
 Being the study involved in the financial matters, it may not be possible to access
the entire information needed for the study.
 Top management may not provide us with adequate information due their busy
schedule.

Presentation

The project work on “financial performance” with reference to fgic, visakhapatnam

is characterized into six chapters.

The first chapter consists of introduction which includes the introduction of

financial performance and a brief of fgic. It also comprises of need, objectives,
methodology, framework and limitations of the study. The second chapter deals with the
review of literature over the research area. The third chapter comprises a brief profile of
the fgic, visakhapatnam.

The theoretical aspects of financial performance and components such as

comparative, common size statements etc., are covered in forth chapter. The fifth chapter
deals with specific financial data analysis and interpretation of the study over a period of
five years and the final chapter give an outline of summary and sug

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CHAPTER-II
INDUSTRY PROFILE
AND
COMPANY PROFILE

14
 INSURANCE INDUSTRY PROFILE

Introduction of insurance industry

Insurance is a contract between the insurance company (insurer) and the
policyholder (insured). In return for a consideration (the premium), the insurance
company promises to pay a specified amount to the insured on the happening of a
specific event.

Insurance is nothing but a risk transfer mechanism wherein the person taking out
insurance transfers their risk to the insurance company in return for a payment (known as
the premium).Insurance companies collect premiums from people – from all those who
are exposed to the same risks – and put the money into a risk pool. Not everyone will
experience the happening of an insured event at the same time, but those who do are
compensated from this risk pool

 the process of transferring the risk from the owner (insured person);
 to another party (insurer) who can bear that risk;
 in return for a consideration (premium).

The business of insurance relates to the protection of the economic value of assets.
An asset is valuable to its owner because they expect some benefits from it. The benefit
can be in the form of income generated from the asset (giving a car on rent) or
convenience (using the car for their own travel).

Human beings are also assets in the sense that they have the capacity to generate income
themselves. Every human being has a finite life span, and death is certain. But the timing
of death is uncertain. If a person dies unexpectedly early in their working life, then their
family will lose the income that person would have generated in future, had they survived
for their entire working life. This is where life insurance acts to fill the financial gap left
behind by the early death of a person.

15
 The timing of death is uncertain for everyone, so potentially every human being
needs life insurance from an early age, to protect future income.Life insurance can
protect the family from financial hardship in the event that the untimely death of an
individual leads to a loss of income.

2.1.1 Formation Of The Irda(1999):

Following the recommendations of the amphora committee report, the

Insurance regulatory and development authority (irda) was constituted as an

autonomous body in 1999 to regulate and develop the insurance industry. The irda was
incorporated as a statutory body in April 2000

Post-Liberalization:

As we have seen, following the recommendations of the malhotra committee, the

insurance sector was opened to private companies. Foreign companies were also allowed
to participate in the Indian insurance market through joint ventures (jvs) with Indian
companies. Under current regulations the foreign partner cannot hold more than a 26%
stake in the joint venture.

The key objectives of the India include the promotion of competition with a view
to increasing customer satisfaction through more consumer choice and lower premiums,
while ensuring the financial security of the insurance market. The irda has the power to
make regulations under section 114a of the insurance act 1938. Since 2000 it has
introduced various regulations ranging from the registration of companies for carrying on
insurance business to the protection of policyholders’ interests.

The insurance act 1938 and gibna were amended which removed the exclusive
privilege of gic and its four subsidiaries to write general insurance in india. As a result,
general insurance business was opened up to the private sector.

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With the general insurance business (nationalizations) amendment act 2002, effective
from 21 march2003, gic ceased to be a holding company of its four subsidiaries. Their
ownership was vested with the government of India. Gic was notified as a reinsurance
company.

2.1.2Recent Developments In The Insurance Industry:

By 2010 India was the fifth largest insurance market in the world and it is still
growing rapidly. There has been a lot of change in the decade since the market was
opened up to the private sector. In this section we will look at some of the important
developments of the last few years.

Growing Importance of It:

All insurance companies now use information technology (it) to benefit their
business and to improve convenience for their customers. Today, customers can pay their
premiums and check the status and other details of their policy using the company’s
website. Updates relating to the receipt of premiums or changes to their policy are sent to
the customer through mobile sms.

Bank Assurance:

Many banks have joined with insurance companies to cross-sell insurance

products to their customers. Insurance companies benefit from the wide network and
loyal customer base of banks, and the contribution that banc assurance makes to
insurance sales has steadily grown over the last few years. The banks benefit through
being able to provide value-added products to their customers and from the fee income
they receive in return from the insurance companies. Many banks have started their own
life insurance subsidiaries.

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 2.1.3 Types of Insurance Organizations:

Insurance organizations are divided into three main categories, as the following
figure shows. We will look briefly at the various products the different types of insurance
organizations offer in section g.

Figure: types of insurance organization:

Figure 1.2: types of insurance

Insurance

Life insurance Non- life insurance Re insurance

Life Insurance Companies:

life insurance companies cover risks that relate to human lives. They offer different
benefits under different types of products and cover the risk of early death, as well as the
risk of living into old age. Under traditional plans, like term insurance plans, insurance
companies provide death cover. If the insured person dies within the term of the policy
then the nominee/beneficiary is paid a specified amount (also known as the sum insured).
We saw an example of this when we looked at the case of ajay at the start of this chapter.
Under pension plans, insurance companies offer periodic monthly payments (annuities)
to support the insured during their retirement.

Non-Life Insurance Companies:

18
non-life insurance companies generally cover risks other than those relating to human
lives. The exceptions to this are personal accident and health insurance, which are
provided by non-life insurance companies. Any asset either gives a monetary return (e.g.
A house given on rent), or offers convenience (e.g. A car which can be used to travel
from one place to another) can be insured. All assets are exposed to various risks: they
can be damaged or destroyed by fire, earthquake, riot, theft, flooding, cyclones etc. If the
asset is damaged by any of these risks, the owner will be at a disadvantage and they will
lose the income or the convenience the asset provided. Non-life insurance companies
offer products that cover these risks and compensate the owner should the asset be
damaged by one of them. It is a product from this type of company that an individual
would buy to protect their assets, for example, their home against fire etc.

Re-insurance Companies:

we saw in earlier that insurance is a risk transfer mechanism. Risk is transferred from
those who are unable to bear it to those who can. However, insurance companies can only
take on so much risk. Once that limit is reached, the insurer itself is exposed to the risk of
loss. When this happens insurers look to transfer some of their risks to someone else to
shield themselves from overexposure. This is where reinsurance companies come into
use. A reinsurance company is an insurer for the insurance company. Reinsurance
companies take on a certain percentage of the risks on the insurance company’s books, in
return for the payment of the consideration.

19
 2.1.4Roles in the Insurance Industry:

Apart from the insurer and the insured the other roles in the insurance industry include
the following.
Agent

Corporate agent

Intermediates

Under writers

Actuaries

Constituents of the
insurance market
TPAS

Surveyors/loss
adjusters

The regulator

Training Institute

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 Insurance Products:

The insurance market is broadly divided into two categories.Life insurance and non-life
insurance. Life insurance covers risks related to human lives. All other risks are covered
under non-life insurance or general insurance.

Non-life insurance market:

The non-life insurance market is further divided into sub-categories.

figure:

Non life insurance

market

Fire insurance Marine insurance Miscellaneous insurance

Property Insurance
Motor insurance Liability insurance

Travel insurance
Health Insurance

It is a continuously developing market with new products being introduced from time to
time as society has a need for them

Motor Insurance:

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 Motor insurance protects you against financial loss if you have an accident. It is a
contract between you and the insurance company. You agree to pay the premium and
the insurance company agrees to pay your losses as defined in your policy. Auto
insurance provides property, liability and medical coverage.

Home Insurance:

Home insurance provides compensation for damage or destruction of a home from

disasters. In some geographical areas, the standard insurances exclude certain types
of disasters, such as flood and earthquakes that require additional coverage.
Maintenance-related problems are the homeowners' responsibility.

Health:

Health insurance policies by the national health service in the united kingdom (nhs)
or other publicly-funded health programs will cover the cost of medical treatments.
Dental insurance, like medical insurance, is coverage for individuals to protect them
against dental costs. In the u.s., dental insurance is often part of an employer's
benefits package, along with health insurance.

Property:

Property insurance provides protection against risks to property, such as fire, theft or
weather damage. This includes specialized forms of insurance such as fire insurance,
flood insurance, earthquake insurance, home insurance, inland marine insurance or
boiler insurance.

Liability:

Liability insurance is a very broad superset that covers legal claims against the
insured. Many types of insurance include an aspect of liability coverage. The
protection offered by a liability insurance policy is twofold: a legal defense in the
event of a lawsuit commenced against the policyholder and indemnification

22
 (payment on behalf of the insured) with respect to a settlement or court verdict.
Liability policies typically cover only the negligence of the insured, and will not
apply to results of willful or intentional acts by the insured.

Life insurance market:

There are many products available in the life insurance market

Figure:

p Main Life insurance

products

Endowment Term insurance plans

insurance plans

Whole life insurance Pension and savings Unit linked insurance

plans plans plans

Insurance Companies Active In IndiaJanuary2015:

Table : life insurance companies in India:

S Name of the life insurance company

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no
1 Hdfc standard life insurance co. Ltd.
2 Max new york life insurance co. Ltd.
3 Icici prudential life insurance co. Ltd.
4 Kotakmahindra old mutual life insurance co. Ltd.
5 Birla sun life insurance co. Ltd.
6 Tata aig life insurance co. Ltd.
7 7 sbi life insurance co. Ltd.
8 Ingvysya life insurance co. Ltd.
9 Bajaj allianz life insurance co. Ltd.
10 Met life india insurance co. Ltd.
11 Reliance life insurance co. Ltd. (earlier amp sanmar life insurance company from
3 january 2002 to 29 september 2005)
12 Aviva life insurance company india limited
13 Sahara india life insurance co. Ltd.
14 Shriram life insurance co. Ltd.
15 Bhartiaxa life insurance co. Ltd.
16 Future generaliindia life insurance company ltd.
17 Idbi federal life insurance company ltd.
18 Canarahsbcobc life insurance company ltd.
19 Aegonreligare life insurance company ltd.
20 Aegonreligare life insurance company ltd.
General insurance companies
S no Name of the general insurance company
1 Bajaj allianz general insurance company limited
2 Iffcotokyo general insurance company limited
3 Hdfc ergo general insurance company limited
4 Icicilombard general insurance company limited
5 The new india assurance company limited

24
 6 The oriental insurance company limited
7 Max bupa health insurance company limited
8 Royal sundaram alliance insurance company limited
9 United india insurance company limited
10 Sbi general insurance company limited
11 Tata aig general insurance company limited
12 Reliance general insurance company limited
13 Cholamandalamms general insurance company limited
14 National insurance company limited
15 Shriram general insurance company limited
16 Bhartiaxa general insurance company limited
17 Future generaliindia insurance company limited
18 Agriculture insurance company of india
19 Star health and allied insurance company limited
20 Apollo munich health insurance company limited
21 Universal sampo general insurance company limited
22 Export credit and guarantee corporation of india limited
23 Rahejasqbe general insurance company limited
24 L&t general insurance company limited

Insurance Companies Active In India (January 2021):

ORGANIZATION PROFILE

2.2 Introduction of future generali

Future generali is a joint venture between the india-based future group and the
italy-based generaligroup. Future generali is present in india in both the life and non-life
businesses as future generaliindia life insurance co. Ltd. And future generaliindia
insurance co. Ltd

25
 Future group, led by its founder and group ceo, mr. Kishore biyani, is one of
india’s leading business houses with multiple businesses spanning across the
consumption space. While retail forms the core business activity of future group, group
subsidiaries are present in consumer finance, capital, insurance, leisure and
entertainment, brand development, retail real estate development, retail media and
logistics.

Led by its flagship enterprise, pantaloon retail, the group operates over 11 million
square feet of retail space in over 63 cities and towns and 65 rural locations across india.
Headquartered in Mumbai (Bombay), pantaloon retail employs around 30,000 people and
is listed on the Indian stock exchanges. The company follows a multi-format retail
strategy that captures almost the entire consumption basket of indian customers. In the
lifestyle segment, the group operates pantaloons, a fashion retail chain and central, a
chain of seamless malls. In the value segment, its marquee brand, big bazaar is a
hypermarket format that combines the look, touch and feel of indian bazaars with the
choice and convenience of modern retail. The group’s specialty retail forms include-
books and music chain - depot; sportswear retailer - planet sports; electronics retailer -
ezone; home improvement chain - hometown; and rural retail chain - aadhar; among
others. It also operates the popular shopping portal, www.futurebazaar.com.

Future capital holdings, the group’s financial arm provides investment advisory to
assets worth over $1 billion that are being invested in consumer brands and companies,
real estate, hotels and logistics. It also operates a consumer finance arm with branches in
150 locations. Other group companies include, future generali, the group’s insurance
venture in partnership with italy’sgenerali group, future brands, a brand development and
ipr company, future logistics, providing logistics and distribution solutions to group
companies and business partners and future media, a retail media initiative. The group’s
presence in leisure & entertainment segment is led through, mumbai-based listed
company galaxy entertainment limited. Galaxy includes leading leisure chains, sports bar
and bowling co. And family entertainment centers, f123. Through its partner company,

26
blue foods the group operates around 100 restaurants and food courts through brands like
bombay blues, spaghetti kitchen, noodle bar, the spoon, copper chimney and gelato.
Future group’s joint venture partners include, us-based stationery products retailers,
staples, french women’s wear retailer, etam, middle east-based axiom communications
and india-based blue foods, liberty shoes, talwalkars’ and asian electronics.

Future group believes in developing strong insights on indian consumers and

building businesses based on indian ideas, as espoused in the group’s core value of
‘indian’s.’ the group’s corporate credo is, ‘rewrite rules, retain values.’

General Group:

Established in Trieste on December 26, 1831, general is an international group present in

more than 40 countries with insurance companies and companies mostly operating in the
financial and real estate sectors. Over the years, the general group has reconstructed a
significant presence in central Eastern Europe and has started to develop business in the
principal markets of the far east, including china and India.

Identity:

Generali group ranks among the top three insurance groups in europe and the 30th largest
company in the fortune 500 international ranking, with a 2007 premium income of over €
66 billions

 It is present in more than 40 countries

 It has over 50 millions clients worldwide
 It has 80,555 employees
 It has over €398 billions of total assets under management

Values:

 Respect: for all our stakeholders- employees, customers, for all rules and
regulations both internal and external.

27
  Indianness : we understand india in all its diversity and different facets and will
use for our local understanding to respond to our specific markets, design our
products and craft our processes.
 Nimbleness: a combination of speed and quality, and ability to overcome all
obstacles which come in the way of the achievement of our vision.
 "can do" : an attitude which demonstrates our passion, entrepreneurship, and
positive thinking.

Vision:

"pledged to provide financial security to all people & enterprises through total
insurance solutions"

Mission:

" to provide superior customer service through our knowledge-based business

partners and employees supported by innovative products and services”.

Corporate Partners:

As the vital channel for future generali products, we have chosen some exemplary
banks and financial institutions, retail outlets, health products. These will serve as the
interface between our customers and us to aid us understand the unique needs and
aspirations of every indian. And update our products with features that form the
cornerstones of financial freedom.

big bazar pantaloon central

28
food bazar fit and healthy

Customers

It is important for a customer to understand that according to the typical stage of

life, which they are currently in and based upon that their financial needs changes.
Therefore, it is vital for a customer to know about their financial commitments and long
term financial need before choosing a product. Future generali company is one of the fast
growing companies in the insurance industry. Customers of future generaliindia private
insurance company is segmented based on the different age groups.

Ages: 16 to 25 (unmarried, young professionals)

Stage overview

 Still be in higher education

 First job
 May or may not have spouse
 May or may not own home
 May or may not have dependants

Their Financial Needs

 May still have some support from parents

 May be saving towards future family needs - say buying home
 May be paying off education loans
 Likes to spend money

Their Insurance Needs

29
Life insurance needs are probably zero, as there are likely to be no dependents.
There is possibly a need for savings. Examples:

Goonholiday.
buyanewcar
buyfurniture,curtains,carpetsetc.,fortheirhome.
setupanewhouse.
Buy jewelry.
1. Ages 25-35 (married, with or without kids)

If they are in this stage, they might be a young professional (married, with or without
kids).

Stage Overview

 May be married with or without kids

 Probably in debts - (for e.g. Home loan)
 Earn a moderate income
 Has a high expenditure
 Not much of accumulated wealth
 Need tax planning

Their Financial Status

 High expenditure through installment repayments for house, car etc.

 Worried about protecting dependents in case of death or prolonged illness or
disability
 Need to save for children for their education, marriage etc.
 Need to support elderly parents
 Need for planning a comfortable retirement phase.

30
Their Insurance Needs

This stage calls for maximum insurance protection because of the following reasons:

 High debt, high expenditure phase

 Family’s dependency on your income
 Low accumulated wealth
 Need for planning retirement

Ages 35-60 (pre-retirement)

Stage Overview

 Older, financially independent children

 Reduced debts or repaid loans
 Decreased expenditure
 Probable period of redundancy
 Their financial needs
 Save for retirement
 Enjoy a life time holiday on retirement
 Protect dependents financially against your death, prolonged illness or
disability
 Save for children

Their Insurance Needs:

 Retirement planning,
 Wealth transfer or other savings vehicles could be used for this stage of life.
 Their emphasis should be on returns on investment - so, with-profit or unit-linked
products would be ideal.
 If they are close to retirement, they could also opt for guaranteed products.

31
Ages over 60 (postretirement)

Stage Overview

 Need to move from employment to retirement

 Debts are either paid off or very minimal
 Reduced income
 More accumulated wealth / savings
 Risk of running out of money, in case of long life spans

 Imminent need for long term care

Their Financial Needs:

 Need for considerable savings if you live long

 Need to save for spouse
 Save for medical expenditures - for both self and spouse
 Need to save for children

Their insurance needs

 Protection in case you live long

 Protection for spouse in case of death
 Wealth accumulation for children

Products Of Future Generali:

 Future care –term plan ( pure protection- only insurance/ risk coverage)
 Future assure- endowment plan (savings +insurance )
 Instant life – endowment plan –oct. (savings +insurance)
 Future sanjeevani – whole life ulip (unlike term / endowment – here premium is
first chosen by proposer- how much to be paid, sub to min 15000/- p.a )

32
  Future freedom- ulip with limited premium payment term (ppt 3 years, minimum
premium 50000/-)
 Future pension plan –traditional plan (single premium, minimum rs.10000/- p.a an
capital is guaranteed /no risk coverage)
 Future pension advantage plan- ulip(minimum premium rs.15000/- p.a )
 Future an and –(future an and is combination of whole life & traditional
endowment plan which provides life cover till 99 years)

Competitors:

major competitors

bajajallianz life insurance :

Icici prudential life insurance :

Life insurance company: :

ingvysya :

max new york life:

Environment:

33
Micro Environment:

There is a sea of change occurring and going to occur in the health insurance
sector, both globally and nationally. Globally, with particular reference to the increasing
costs etc, many large insurance companies are planning to buy up hospitals and run on
their won.

The experiments are going on. At the national level, during the tenure of office of
sri. P. Chidambaram, who with a great vision opened up the health insurance sector to
privatization.

As a result of which many private organizations, corporate sector leaders drafted

plans to enter in to health insurance field. There is little or no surprise to note that the
medi claim is certainly not the answer to the health care needs of the one billion people of
this country. In a bold and wise move mr. Chidambaram opened up the health care sector
to foreign insurance companies by allowing them to develop joint ventures with indian
companies holding major stakes (51%) and many large corporate, l.i.c and the general
insurance corporation of india are likely to form such joint venture companies. Since after
the nationalization few decades ago, and now opening up of the insurance sector to
private players, particularly with foreign players (partial participation) the people of india
particularly the middle class (about 200-300 million strong) are looking for a bright
future and security through the insurance sector. This futuristic hope and expectations are
more evident in the field of health insurance sector, mainly due to the escalating medical
care. The introduction of new economic policy and consequent financial sector reforms
have brought number of changes in insurance sector. This sector hitherto owned by the
life insurance corporations india and other general insurance companies of the
government of india have been opened to private partners. The formation of irda,
partnerships with insurance business and banking business and the introduction of micro
insurance have given new thrust to this sector. All these trends have increased the
competition both in life and non life insurance business, which resulted in more choice
for consumers. These trends need in depth analysis and documentation for policy
formulation and future direction.

34
Macro Environment:

Massive sources of insurance company earnings come from annuities and other
retirement and investment products, along with profits (or losses) that insurance
underwriters earn on their own assets and reserves. 2008's stock market meltdown
will have a significant effect on profits and assets at life insurance companies in
particular, and property & casualty companies to a lesser degree.

In america, insurance is unique in the financial services field because, unlike

banking and investments, which are regulated by federal agencies such as the securities
and exchange commission, insurance is regulated primarily at the state level. This means
that insurance firms must deal with up to 50 different sets of state regulations and 50
different state regulatory agencies. At the same time, they must develop dozens of
different premium rate structures that appropriately reflect the costs of meeting local risks
and fulfilling state requirements. As a result, few insurance underwriters offer all of their
insurance products in all 50 states; many do business only in a limited number of states.
Recent regulatory changes have heightened competition within the insurance industry-an
area in which competition has always been fierce. Massive mergers and acquisitions have
resulted, creating financial services mega-firms, many of which offer a complete range of
financial services and products to their customers, from checking accounts to investment
products to life insurance. For example, banks are slowly gaining market share in the sale
of insurance products, particularly annuities and life insurance. Investment companies
like merrill lynch (now part of bank of america) have been eager to sell insurance to their
customers as well. Bank holding companies have been aggressively acquiring insurance
agencies. Competition will only become more intense. While there are tens of thousands
of small insurance industry companies in the u.s. Alone, the industry tends to be
concentrated in a few hundred major companies, many of which enjoy brands that are
household names

Technology:

35
 With the advances in technology, the company has also adopted and adapted to
automated operations and maintenance. All systems are interconnected and communicate
via an intranet connected to a central server which provides data to all clients
respectively. Central data storage in this format enables availability of data throughout.
Lotus notes is software for configuring internal mails and to communicate. A central z
folder is created and maintained and the data in this folder is available and can be
accessed from any part of the world.

Terminology

Age Limits:

The any life insurance policy has minimum and maximum ages, below and above
which insurer doesn’t accept applications or renew policies.

Annuity Plans:

These plans provide for a “pension” to be paid to the policyholder or his spouse
starting at a pre-determined date. At the end of the tenure, you start to enjoy a regular
pension amount till the end of either’s lifetime. In the event of death of both of you
during the policy period, the next of kin get a lump sum amount. You can also have the
flexibility of choosing a mix of a lump sum money back amount and pension under these
plans.

Assignee

Assignee is the person to whom the benefits of a life insurance policy are
assigned.

Assignor

36
 Assignor is the person who holds the right/title of the policy and it’s she/he who
can make a valid assignment.

Applicant / Proposed

The person whose life is proposed to be insured in the application for life
insurance and who becomes the legal owner of the policy, after it is issued.

Assured / Insured

It is the person, whose life is insured i.e., upon whose death, the death benefits are
payable under a life insurance policy. When the policy is on one’s own life, the policy
owner and the insured is the same person.

Beneficiary

Beneficiary is the person(s) or entity(ies) (for e.g. Corporation, trust etc.) Who is
named in the policy as the recipient of insurance proceeds upon the death of the insured.

Bonus

Bonus is the amount added to the basic sum assured under a participating life
insurance policy

Claim Amount

It is the amount payable by the insurer to the insured/beneficiary in the event of a

claim arisen

37
 CHAPTER-III
THEORETICAL FRAMEWORK OF THE
STUDY

THEORETICAL FRAME WORK

3.1 introduction of financial performance

Financial performance analysis is the process of determining the operating and

financial characteristics of a firm from accounting and financial statements. The goal of

38
such analysis is to determine the efficiency and performance of firm’s management, as
reflected in the financial records and reports. The analyst attempts to measure the firm’s
liquidity, profitability and other indicators that the business is conducted in a rational and
normal way; ensuring enough returns to the shareholders to maintain at least its market
value.

Financial statement analysis is important to boards, managers, payers, lenders,

and others who make judgments about the financial health of organizations. One widely
accepted method of assessing financial statements is ratio analysis, which uses data from
the balance sheet and income statement to produce values that have easily interpreted
financial meaning.

Most hospitals, health systems and other healthcare organizations routinely

evaluate their financial condition by calculating various ratios and comparing the values
to those for previous periods, looking for differences that could indicate a meaningful
change in financial condition. Many healthcare organizations also compare their own
ratio values to those for similar organizations, looking for differences that could indicate
weaknesses or opportunities for improvement.

Financial Statement Analysis:

Financial statements (also knownas financial reports, financial accounts, financial

accounts published accounts or annual accounts) are organized collections of financial
data, undertaken according to logical and consistent accounting procedure, for the
purpose of presenting a periodical firm, such as the operating results (i.e. Profits) of the
firm for a particular moment of time.

In the other purpose of depicting the financial health of a business in terms of

profits, position and prospects as on a certain data. Remain short, they are statements
prepared on a certain data for giving an accounting picture of a firm's operations and
financial positions. The term 'financial statements'" assured in accounting includes at
least two basic statements viz

39
  the income statement or the profit and loss account and
 the position statement or the balance sheet prepared by a concern at the
end of every financial year.

Income statement or profit and loss statement or profit and loss account is,
generally, considered to be the most useful of all the financial statement. It is a statement
which explains what has happened to a business as a result of operations between two
balances sheet data (i.e. Compares) of the revenues (i.e. Sales and other earnings) of a
concern with the cost incurred in earning those revenues (i.e. The cost of goods sold ad
minis creation selling and distribution and other expenses), and there by, reveals the net
profit i.e. Accounting year. In short, it is a statement which indicates the results of the
operations (i.e. The net fit or net loss) of an enterprise for a year.

A balance sheet on position statement is a statement which indicates the financial

positions of a business as on particular date, i.e. As on the lost of the accounting year. In
other words, it is state it is statement which this closes the assets and liabilities of the
business and also the owner's capital in the business has on the lost date of the accounting
year. In short, it is a statement of assets and liabilities of business as at the end of a
financial year.

As a balance sheet indicates the financial position of a business as at a specified

moment of times (i.e. As on a particular date, usually on the lost date of the accounting
year), it can be regarded as a snapshot of financial position of the business has at a
particular moment of time.

Analysis And Interpretation Of Financial Statements:

Financial statements are indicators of two significant factors.

 Profitability
 Financial soundness

40
 Analysis and interpretation of information continued in the income statement and
balance sheet so as to afford full diagnosis of the profitability and financial soundness
classification of the data, given in the financial statement, will not help one unless they
are put in a simplified form. The term "interpretation" ''means, explaining the meaning
and significance of the simplified data. However, both analysis and interpretation are
complementary to each other. According to myers “financial statement analysis is a
financial factor in business as disclosed by a single set of statement and a study of the
trend of these factors as shown in a series of statement".

3.2Types Of Financial Analysis:

Financial analysis can be classified in to different categories depending upon

 On the basis of material used and

 On the basis of modules s operandi of analysis.

On The Basis Of Material Used:

According to the basis, financial analysis can be of two types.

41
External Analysis:

This is done by those who are outsiders for the business. These persond mainly
depend up on the published financial statements. Their analysis serves only a limited
purpose.

Internal Analysis:

This is a performed by outsiders to firm, such as creditors, stock holders etc. It

makes use of existing financial statement and involves limited access to confidential
information this is a performed by the corporate financial accounting department, which
is more detailed than external analysis. These departments are able to prepare perform a
statements and are able to produce a more accurate and timely analysis of the firm's
strengths and weakness.

On The Basis Of The Modules Operandi:

According to this financial analysis can also be of two types:

Horizontal Analysis:

In this case, financial statements for a number of years is reviewed and analyzed.
The current year figures are compared with standard or base year. The analysis statement
usually contained figures for two or more years and changes are shown regarding each
item from the base year usually in the form of percentages which gives the management
considerable insight into levels and areas and areas of strength and weakness.

Vertical Analysis:

It is also known as “static analysis" as it is frequently used for referring used for
referring to ratios developed on the data for one accounting period. In case of this type of
relationship of the various items in the financial statements on a particular data.

42
 For example; the ratios of different items of costs for a particular period may be
calculated with the sales for that period. Such analysis is useful in comparing the
performance of several companies in the same group or divisions in the same company.

3.3Techniques Of Financial Analysis:

A financial manager can adopt one or more of the following techniques/ tools of financial
analysis

3.3Comparative Financial Statements:

Comparative financial statements are those statements which have been designed
in a way so as to provide time perspective to the consideration of various elements of
financial position embodied in such statements. In these statements figures for two or
more periods are placed side by side to facilitate comparison.

Both the income statement and balance sheet can be prepared in the form of
comparative financial statements.

The comparative financial statement contains the following items:

1. Absolute figure (amount in rs. As given the final accounts)

2. Absolute figures expressed in terms of percentages.
3. Increase or decrease in absolute figures in terms of money value.
4. Comparison expressed in ratios.
5. Percentage of totals.

43
t
d
e
l
n
o
ti
a
r
s
y
i
3.3.1Comparative Income Statement:

The income statement discloses net profit or net loss on account of operations. A
comparative income statement will show the absolute figures for two or more periods, the
absolute change from on period to another and it reveals the profit earned or loss incurred
by the concern. The comparative study of income statement for more than one year may
enable us to know the progress of the concern. First two columns give figures of various
items for two years.

The third and fourth column used to show increase or decrease in figures in absolute
amounts and percentages respectively. The following steps are adopted in preparing
comparative balance sheet.

1) In first step, find out the changes in absolute figures i.e., increase or decrease
should be calculated.
2) In second step, percentage of change should be calculated with the help of
following formula.

Changes in amount
Percentage of changes = -----------------------------------*100
base year value

Guidelines For Interpretation:

1) The increase or decrease in sales should be compared with increase or decrease in

cost of goods sold. If increase in sales in more than the cost of goods sold it
means that the profitability of the concern is increase.
2) The amount of gross profit should be studies.
3) Operating profits should be studied. The expenses should be deducted from gross
profit to find out operating and then operating incomes should be added.
4) In the next step, some of the non-operating expenses are to be deducted from the
operating profits and non-operating incomes should be added to get net profits.

44
 5) The opinion should be formed the profitability of the business concern and it
should be given at the end.

3.3.2Comparative balance sheet:

Comparative balance sheet is prepared on a particular on a particular date reveals

the financial position of the concern on the date to study the trends of business over a
period of time comparative balance sheet is prepared. The comparative study of balance
sheet reveals the cause for changes in the financial position on amount of various
transactions. The comparative study light on financial policies adopted by management.

The comparative balance sheet consists of two columns for the original data. A third
column used to show increase or decrease in various items. A fourth column containing
the percentage of increase of decrease may be added.

Guidelines For Interpretation Of Balance Sheet:

1) The short-term financial position can be studied by comparing the working capital
of both the years.
2) To study the liquidity position changes in liquid assets must be ascertain if there is
any increase in liquid assets. We must understand that there is an improvement in
the liquidity position of the concern and vice versa.
3) A high increase in sundry debtors and bills receivables mean an increase in risk in
collecting the amount of dues.
4) A high increase in closing stock may mean that decrease in the demand.
5) Long-term financial position of the busyness’ concern can be analyzed by
studying the changes in fixed assets, long-term liabilities and capital.
6) Fixed assets must be compared with long-term loans and capital. If the increase in
fixed assets is more than the increase in long-term financiers than a part of fixed
assets has been financed from the working capital, which is not good.

45
 7) If the increase in the long term financial is more than the increase in the fixed
assets. It means that a part of long-term finance is made available for the working
capital.

Both the income statement and balance sheet can be prepared in the form of
comparative financial statements.

The comparative financial statement contains the following items:

6. Absolute figure (amount in rs. As given the final accounts)

7. Absolute figures expressed in terms of percentages.
8. Increase or decrease in absolute figures in terms of money value.
9. Comparison expressed in ratios.
10. Percentage of totals.

3.4 Common Size Statement:

The common size statement, balance sheet and income statement are shown in
analytical percentage. The figures are shown as percentage of total assets, total liabilities
and sales. The total assets are taken as 100 and different assets are expressed as
percentage of the total. Similarly, various liabilities are taken as a part of total liabilities.
These statements are also known as component percentage 100% statements because
every individual item is stated as percentage of the total 100. The shortcomings in
comparative statements and trend percentages where changes in items could not be
compared with the totals have been covered up. The common size statements may be
prepared in the following way.

 The totals of assets or liabilities are taken as 100.

 The individual’s assets are expressed as a percentage of total assets.

I.e., 100 and different liabilities are calculated in relation to total liabilities.

3.4.1Common Size Income Statement:

46
 The items in income statements can be shown as percentage of sales to show the
relation of each item of income statement and volume of sales. The increase in sales will
certainly increase selling expenses and not administration or finance expense. In case the
volume of sales increase to a considerable extent, administrative and financial expenses
should be reduces at once. So, a relationship is helpful in evaluating operational activities
of the enterprise

3.4.2 Common Size Balance Sheet:

A statement in which balance sheet items are expressed as the ratio of each
liability is expressed as a ratio of total liability is called common size balance sheet. The
common size balance sheet is a horizontal analysis. The comparison of figures in
different periods is not useful because total figures may be affected a number of factors.
It is not possible to establish standard norms for various assets. The trends of year to year
not be studied and even they may not given proper results.

Trend Analysis:

trend analysis is an important and useful technique of financial analysis. It

involves computation of index numbers of the moments of the various financial items in
the financial statements for a number of the moments of the various financial items in the
financial statements for a number of periods. It enables to know the changes in the
financial position and the operational efficiency between the period chosen.

Through trend analysis the analyst can give his opinion as to whether favorable or
unfavorable tendencies are reflected by the accounting data. The comparative and
common size balance sheets suffer from a major limitation i.e., absence of basic standard
to indicate whether the proportion of an item is normal or analysis values are calculated
for each item in isolation but conclusion are to be drawn by studying the related items
also.

It involves the ascertainment of arithmetical relationship which each item of

several year to the same item of base year. Any year may be the base year; it is usually
the earliest year. The following procedure may be adopted for calculating the trend ratio

47
select any year as the base year. The selected year should be normal year for the trend
value is taken as 100. Trend percentage of each item should be calculated with the help of
following formula.

Trend analysis = (current year value/base year value)*100

Cost –Volume-Profit Analysis:

cost –volume-profit (cvp) analysis expands the use of information provided by

breakeven analysis. A critical part of cvp analysis is the point where total revenues equal
total costs (both fixed and variable costs). At this breakeven point (bep), a company will
experience no income or loss. This bep can be an initial examination that precedes more
detailed cvp analysis.

Cost-volume- profit analysis is an important tool of profit planning. It studies the

relationship between cost, volume of production, sales and profit. It is not strictly a
techniques used for analysis of financial statements. However, it is an important tool for
the management for decision making. Since the data is provided both cost and financial
records. It tells the volume of account of variation in output, selling price and cost, and
finally, the quantity to be produced and sold to reach the target profit level.

Ratio Analysis:

Financial analysis depends to very large extents of the use of ratios through there
are other equally important tools of such analysis. Thus, a direct examination of the
magnitude of two released items is somewhat enlightening but the comparison is greatly
facilitated by expressing the relationship as a ratio.

48
 Ratio analysis of business enterprises enters on efforts to derive quantitative
measures or guides concerning the expected capacity of the firm to meet its future
financial obligations or expectations present and past data are used for the purpose and
whatever extrapolations appear necessary. They are made to provide no indication of
feature performance.

Ratio analysis is powerful tool of financial analysis. It is “an expression of the

quantitative relationship between two numbers”. An accounting ration signifies numerical
or mathematical relationship between two relevant items contained in the income
statement and balance sheet. Hence, ratio analysis is one to the widely used techniques of
financial analysis. It is the process of establishing and interpreting various ratios for
helping in making certain decisions. Ratio analysis is not an end in itself. It is only a
means of better understanding of financial strengths and weakness of firm.

3.5 Cash Flow Analysis:

cash flow (also “cash flow”) refers to the movement of cash into or out of a business, a
project, or a financial product. It is usually measures during a specified, finite period of
time. Measurement of cash flow can be used:

 To determine a project’s rate of return or value. The time of cash flows into and
out of projects are used as inputs in financial models such as internal rate of
return, and net present value.
 To determine problems with a business’s liquidity. Being profitable does not
necessarily mean being liquid. A company can fail because of shortage of cash,
even while profitable.
 As am alternate measure of a business’s profits when it is believed that accrual
accounting concepts do not represent economic realities. For example, a
company may be notionally profitable but generating little operational cash (as
may be the case for a company that barters its products rather than selling for
cash).

49
  In such a case, the company may be deriving additional operating cash by issuing
shares, or raising additional debt finance.
 Cash flow can be used to evaluate the ‘quality ‘ of income generated by accrual
accounting. When net income is composed of large non-cash items it is
considered low quality.
 To evaluate the risks within a financial product. E.g. Matching cash requirements,
evaluating default risk, re-investment requirements. Etc.
 Cash flow is a generic term used differently depending on the context. It may
defined by users for their own purposes. It can refer to actual past flows, or to
projected future flows. It can refer to the total of all the flows involved or to only
a subset of those flows. Subset terms include ‘net cash flow’, operating cash flow
and free cash flow.

3.6Funds Flow Analysis:

the funds flow analysis is a statement which shows the movement of funds and is
a report of the financial operations of the business undertakings. It indicates various
means by which funs were obtained during a particular period and the way to which these
funds were employed. In simple words it is a statement of sources and application of
funds.

The funds-flow-statement is a report on financial operations changes, flow or

movements during the period. It is a statement which shows the sources an application of
funds or it shows how the activity of a business is financed in a particulate period. In
other words, such a statement shows how the financial resources have been used during a
particular period of time. It is, thus, a historical statement showing sources and
application of funds between the two dates designed especially to analysis the changes in
the financial conditions of an enterprise.

Funds flow statement is not an income statement. Income statement shows the
items of income and expenditure of a particular period, but the funds slow statement is an

50
operating statement as it summaries the financial activities for a period of time. It covers
all movements that involve an actual exchange of assets.

The utility of this statement can be measured on the basis of its contributions to
the financial management. It generally serves the following purposes:-

Limitations Of Funds Flow Statement:

The funds flow statement has a number of uses. However, it has certain
limitations also, which are listed below:

It should be remembered that a funds flow statement is not a substitute of an income

statement or a balance sheet.

it provides only some additional information as regards changes in working capital.

 It cannot reveal continuous changes.

 It is not original statement but simply a re- arrangement of data given in the
financial statement.
 It is essentially historic in nature and projected funds flow statement cannot be
prepared with much accuracy.
 Changes in cash are more important and relevant for financial management than
the working capita

51
CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION

52
 DATA ANALYSIS AND INTERPRETATION

4.1 Interpretation and analysis

analysis is the process of critically examining in detail accounting information given

in the financial statements for the purpose of analysis individual item are studied, their
interpretation ship with other related figures established, the data is sometimes re-
arranged to have better understanding of information with the help of different techniques
or tools for the purpose.

interpretation and analysis are closely related. The interpretation is not possible without
analysis and no analysis without interpretation and analysis would have no value without
interpretation. Various account balances appear in the financial statements these account
balances do not represent homogeneous data so it is difficult to interpret and draw
conclusions. This requires an analysis of information in the financial statements to bring
homogeneity to the figures.

Financial Statement Analysis:

Financial statement viz., profit and loss account and balance sheet are the indicators of
two significant factors, i.e. Profitability and financial soundness. Financial statements are
the outcome of summarizing process of accounting. A complete set of financial
statements consists of income statement or profit and loss account, balance sheet or
position statement, statement of changes in owner’s accounts i.e. Profit and loss
appropriation account and statement of changes in financial position. The importance of
financial statements lies not in their preparation but in their analysis. The financial
analysis emphasize on evaluating the financial position and the results of the operations
of a business. It involves presentation of information useful to the business managers,
investors, creditors and all others interested in the information contained in the financial
statements. The data provided in the financial statements should be methodically
classified and compared with figures with previous periods (intra-firm comparison)or
other similar firms (inter firm comparison) in order to have a clear understanding of the

53
profitability and financial position. Financial statements prepared in an absolute manner,
do not convey anything to a layman. Therefore, there should be a proper regrouping and
analysis o the statements to make them more meaningful for the user. Analysis of
financial statements means presentation of the information in such a manner so as to
afford a full diagnosis of the profitability and financial position of the firm concerned. An
external analyst usually relies on the published information. It is the internal analyst who
would really know the full story behind each and every figure of the financial statement
and he would also get supplementary information to properly assess the significance of
the figures. Such analysis is more reliable than done by an outsider. The process of
critical examination of the financial information contained in the financial statement in
order to understand and make decisions regarding the operations of the firm is called
’financial statements analysis’. It is basically a study of the relationship among various
financial facts and figures as given in a set of financial statements. Financial statement
analysis of a firm can be undertaken in different ways. There is no ‘the best type’ of
financial statement analysis which can be applied to all the firms under all the situations.
For e.g., financial statement analysis can be done on the basis of member of firms, party
who is analyzing and interpreting, number of year’s figures used, etc. The term ‘financial
analyses’ include both ‘analysis’ and ‘interpretation’. The term analysis means
simplification of financial data, by methodical classification, given in the financial
statements. Interpretation means explaining the meaning and significance of the data so
simplified. These two are complimentary to each other. Analysis is useless without
interpretation and interpretation without analysis is difficult or even impossible

Tools (Or) Devices Of Financial Statement Analysis:

The analysis and interpretation of financial statements is used to determine the financial
position and results of operations as well. A number of methods or devices are used to
study the relationship between different statements. An effort is made to use those
devices which clearly analyze the position of the enterprise.

The following methods of analysis are generally used:

54
  Comparative statements
 Common – size statements
 Working capital statement
 Cash flow analysis

Comparative Statement:

Comparative financial statements are statements of the financial position at

different periods of time. The elements of financial position are shown in a comparative
from so as to give an idea of financial position at two or more periods. Any statement
prepared in a comparative from will be covered in comparative statement. Generally
two financial statements (balance sheet income statement) are prepared in a
comparative form for financial analysis purpose.It includes:

o Comparative balance sheet

o Comparative income statement .

55
 Table- .4.1

Comparative Balance Sheet Statement2020-2021

March March Increase/ Change
particulars
31,2021 31,2020 Decrease In %

Source of funds:

Shareholders’ funds:
1,20,30,000 1,05,20,000 1,510,000 12.55

Share capital
12,41,000 5,00,000 741,000 59.70

Share application money and

pending allotment

Reserves and surplus

- - - -
Fair value change account
(4,674) (5,180) 506 (10.82)
Sub –total 1,32,66,326 1,10,14,820 2,251,506 16.97
Borrowings - - - -
Policy holders funds:

Fair value change account - 26 (26) -

Policy liabilities 61,30,444 39,01657 2,228,787 36.35

Insurance reserves - - - -

Provisions for linked liabilities 84,31,227 64,60,976 1,970,251 23.36

Sub-total 1,45,61,671 1,03,62,659 4,199,012 28.83

Funds for future appropriations

Funds for discontinued policies:

56
 A)discontinued on account of
77,429 9,338 68091 87.93
nonpayment of premium

b)others

- - - -

Total 2,79,05,426 2,13,86,817 6,518,609 23.35

Application of funds

Investments:

Shareholders
20,06,302 12,08,383 797,919 39.77
Policy holders
59,40,333 37,95,975 2,144,358 36.09
Assets held to cover linked
liabilities 85,08,656 6470,314 2,038,342 23.95

Loans

Fixed assets 31 - 31 100

Current assets 43,780 39,349 4431 10.12

Cash and bank balances 5,35,874 3,76,296 159,578 29.77

Advances and other assets 10,44,146 7,93,951 250,195 23.96

sub total (a) 15,80,020 11,70,247 409,773 25.93

Current liabilities 11,01,607 9,21,688 179,919 16.33

Provisions 34,048 41,184 (7136) (20.95)

Sub total(b) 11,35,655 9,62,872 172,783 15.21

57
Net current assets (c) = (a-b) 4,44,365 2,07,375 236,990 53.33

Miscellaneous expenditure - - - -

Debit balance in p&l account 1,09,61,959 96,65,421 1,296,538 11.82

Debit balance in revenue account

Total 2,79,05,426 2,13,86,817 6,518,609 23.35

Analysis & Interpretation:

a company in order to expand their operations it needs cash reserves. If the

available cash reserves are not sufficient it has to raise additional capital or borrow loans
from various sources fgi has improved their long term sources during the year 2020-2021
it was increased by 16.97 % when compared to 2020

the total fixed assets of fgi were increased by 10.12% during the year at the same
time the investments on shareholders and policy holders increased by 39.77% & 36.09%.
The firm maintained adequate current assets here we observed that the current assets has
been increased by 25.93%, at the same time current liabilities also increased by 15.21%.
The overall financial position of the company is satisfactory

Table- 4.2

58
 Comparative Balance Sheet Statement

2020-2019
particulars March March Increase/ change

31,2020 31,2019 Decrease in %

Source of funds:

Shareholders’ funds:

Share capital 10.520,000 7,020,000 3,500,000 33.26

500,000 625,750 (125,750) (25.15)

Share application money and
pending allotment

Reserves and surplus

Fair value change account

(5,180) (583) (4597) 88.74

Sub-total 11,014,820 7,645,167 3,369,653 30.59

Borrowings - - - -
Policy holders funds:

Fair value change account 26 26

Policy liabilities 3,901,657 1,888,353 2,013,304 51.60

Insurance reserves -

Provisions for linked liabilities 5,534,943 2,783,760 2,751,183 49.70

59
Sub-total 9,436,626 4,672,113 4,764,513 50.48

Funds for future appropriations 926,033 219,015 707,018 76.34

Funds for discontinued policies:

A)discontinued on account of 9,338 - 9,338 100

nonpayment of premium

b)others

Total 21,386,817 12,536,295 8,850,522 41.38

Application of funds

Investments:

Shareholders 1,110,394 1,020,193 90,201 81.70

Policy holders 3,804,702 1,901,944 1,902,758 50.01

Assets held to cover linked liabilities 6,460,976 3,002,775 3,458,201 53.52

Loans

Fixed assets 39,349 75,328 (35,979) (91.43)

Current assets

Cash and bank balances 376,907 525,410 (148,503) (39.40)

Advances and other assets 891,940 643,681 248,259 27.83

Sub-total (a) 1,268,847 1,169,091 99,756 7.86

60
current liabilities 921,688 1,069,427 (147,739) (16.02)

Provisions 41,184 27,781 13403 32.54

Sub-total(b) 962,872 1,097,208 (134336) (13.95)

Net current assets(c) =( a-b) 305,975 71,883 234,092 76.50

Miscellaneous expenditure - - - -

Debit balance in p&l account 9,665,421 6,464,172 3,201,249 33.12

Debit balance in revenue account

Total 21,386,817 12,536,295 8,850,522 41.38

Analysis & Interpretation:

From the above analysis we understand that the total fixed assets of fgi were
decreased by 91.43% during the year at the same time the investments on shareholders
and policy holders also increased by 81.70% and 50.01%. The firm maintained adequate
current assets here we observed that the current assets has been increased by 7.86%, at
the same time current liabilities were decreased by 13.95 %.

the total of current assets increased by 99,756 i.e. 7.86%. It encountered

fluctuations for the past years. Liabilities and provisions decreased by 13.95 % compared
to previous year. The overall financial position of the company is not satisfactory
compare to previous year.

Table- 4.3

Comparative Balance Sheet Statement

61
 2018-2019
particulars March March Increase/ Change

31,2019 31,2018 Decrease in %

Source of funds:

Shareholders’ funds:

Share capital 7,020,000 4,685,000 2,335,000 33.26

625,750 340,425 285,325 45.59

Share application money and
pending allotment

Reserves and surplus

Fair value change account - - - -

(583) 305 (278) 47.68

Sub –total 7,645,167 5,025,730 2,619,437 34.26

Borrowings - - - -

Policy holders funds:

Fair value change account - 120 (120) -

Policy liabilities 1,888,353 321,729 1,566,624 82.96

Insurance reserves - - - -

Provisions for linked liabilities 2,783,760 847,105 1,936,655 69.56

62
Sub-total 4,672,113 1,168,954 3,503,159 74.98

Funds for future appropriations 219,015 37 218,978 99.98

Reserves for lapsed unit-linked

policies
Total 12,536,295 6,194,721 6,341,574 50.58

Application of funds

Investments:

Shareholders 1,020,193 1,527,879 (507,686) (49.76)

Policy holders 1,901,944 307,858 1,594,086 83.81

Assets held to cover linked liabilities 3,002,775 847,142 2,155,633 71.78

Loans - -

Fixed assets 75,328 791,383 (716,055) (950.58)

Current assets

Cash and bank balances 525,410 222,432 302,978 57.66

Advances and other assets 643,681 408.791 234,890 36.49

Sub-total (a) 1,169,091 631,223 537,868 46.00

current liabilities 1,069,427 788,535 280,892 26.26

Provisions 27,781 17,754 10,027 36.09

Sub-total(b) 1,097,208 806,289 290,919 26.51

Net current assets (c) = (a-b) 71,883 175,066 246,949 343.54

63
Miscellaneous expenditure - - - -

Debit balance in p&l account 6,464,172 2,895,525 3,568,647 55.20

Total 12,536,295 6,194,721 6,341,574 50.58

Analysis & Interpretation:

the total of current assets increased by 537,868i.e. 46%. It encountered

fluctuations for the past years. Liabilities and provisions increased by 26.51% compared
to previous year.

the comparison of assets and liabilities for the year 2018-19 shows that current
assets have been increased to 46% due to increase in cash & bank balances and advances
and other assets. The current liabilities have also been increased to 26.51% due to
increase in liabilities and provisions. The percentage in current assets is more than current
liabilities; this shows the good performance of the company.

Table- 4.4

Comparative Balance Sheet Statement

64
 During The Period 2017-2018
particulars March March Increase/ change

31,2018 31,2017 Decrease in %

Source of funds:

Shareholders’ funds:

Share capital 4,685,000 1,850,000 2,835,000 60.51

340,425 - 340.425 100

Share application money pending
allotment

Reserves and surplus

Fair value change account - - - -

305 - 305 100

Sub- total 5,025,730 1,850,000 3,175,730 63.18

Borrowings - - - -
Policy holders funds:

Fair value change account 120 - 120 100

Policy liabilities 321,729 8,022 313,707 97.50

Insurance reserves - - - -

Provisions for linked liabilities 847,142 - 847,142 100

Sub-total 1,168,991 8,022 1,160,969 99.31

Funds for future appropriations - - - -

65
Total 6,194,721 1,858,022 4,336,699 70.00
Application of funds

Investments:

Shareholders 1,527,879 1,295,864 232,015 15.18

Policy holders 307,858 20,056 287,802 93.48

Assets held to cover linked liabilities 847,142 - 847,142 100

Loans - - - -

Fixed assets 791,383 131,536 659,847 83.37

Current assets

Cash and bank balances 222,432 113,872 108,560 48.80

Advances and other assets 408,791 100,331 308,460 75.45

Sub-total (a) 631,223 214,203 417,020 66.06

Current liabilities 788,535 136,122 652,413 82.73

Provisions 17,754 3,669 14,085 79.33

Sub-total(b) 806,289 139,791 666,498 82.66
net current assets (c) = (a-b) (175,066) 74,412 (100,654) 57.49

Miscellaneous expenditure - - - -

Debit balance in p&l account 2,895,525 336154 2,559,371 88.39

Total 6,194,721 1,858,022 4,336,699 70.00

66
Analysis & Interpretation:

a company in order to expand their operations it needs cash reserves. If the

available cash reserves are not sufficient it has to raise additional capital or borrow loans
from various sources fgi has improved their long term sources during the year 2015-11it
was increased by 3,175,730 i.e. 63.18%.

the total of current assets increased by 417,020 i.e. 66.06%. It encountered

fluctuations for the past years.

the comparison of assets and liabilities for the year 2017-18 shows that current
assets have been increased to 66.06% due to increase in cash and bank balances and
advances & other assets. The current liabilities have also been increased to 82.66% due to
increase in liabilities and provisions. The percentage increase in current liabilities is more
than current assets this shows cash inflows are less than outflows during this period. So
company performance is not good that much the previous year

March March Increase/ change

Particulars 31,2017 31,2016 Decrease in %
Source of funds:

Shareholders’ funds:

Share capital 1,850,000 500 1,849,500 99.97

Share application money pending - 60,000 (60,000) -

allotment

Reserves and surplus

Fair value change account

- - - -

- - - -
Sub –total 1,850,000 60,500 1,789,500 96.72

Borrowings - - - -

Policy holders funds:

67
Fair value change account - - - -

Policy liabilities 8,022 - 8,022 100

Insurance reserves - - - -

Provisions for linked liabilities - - - -

Sub- total 8,022 - 8,022 100

Funds for future appropriations - - - -

Total 1,858022 60,500 1,797,522 96.74

Application of funds

Investments:

Shareholders 1,295,864 - 1,295,864 100

Policy holders 20,056 - 20,056 100

Assets held to cover linked liabilities - - - -

Loans 131,536 - - -

Fixed assets 65,175 66,361 50.45

Current assets 113,872

Cash and bank balances 100,331 5,470 108,402 95.19

Advances and other assets 24,271 76,060 75.80

Sub-total (a) 214,203 29,741 184,462 86.11

Current liabilities 136,122 70,066 66,056 48.52

Provisions 3,669 30 3,639 99.18

Sub-total(b) 139,791 70,096 69,695 49.85

net current assets(c ) = (a-b) 74,412 (40,355) 114,767 154.23

Miscellaneous expenditure - - - -

68
 Debit balance in p&l account 336,154 35,680 300,474 89.38

Total 1,858,022 60,500 1,797,522 96.74

Analysis & Interpretation:

the total of current assets increased by 184,462i.e. 86.11%. It encountered

fluctuations for the past years. Liabilities and provisions increased by 49.85% compared
to previous year.

the comparison of assets and liabilities for the year 2016-17 shows that current
assets have been increased to 86.11% due to increase in cash & bank balances and
advances and other assets. The current liabilities have also been increased to 49.85% due
to increase in liabilities and provisions. The percentage in current assets is more than
current liabilities; this shows the good performance of the company.

Table 4.5

Common Size Balance Sheet Statement

2020-2021
Particulars March % change March % change

31,2021 In 2021 31,2020 In 2020

69
Source of funds:

Shareholders’ funds:

Share capital 1,20,30,000 43.10 1,05,20,000 49.18

Share application money 12,41,000 4.44 5,00,000 2.33

and pending allotment

Reserves and surplus

- - - -

Fair value change account

(4,674) (0.01) (5,180) (0.02)

Sub total 1,32,66,326 47.54 1,10,14,820 51.50

Borrowings - - - -
Policy holders funds:

Fair value change account - - 26 1.21

Policy liabilities 61,30,444 21.96 39,01657 18.24

Insurance reserves - - - -

Prbovisions for linked 84,31,227 30.21 64,60,976 30.21

liabilities
Sub total 1,45,61,671 52.18 1,03,62,659 48.45

Funds for future

appropriations

Funds for discontinued

77,429 0.27 9,338 0.04
policies:

70
A)discontinued on account
of nonpayment of premium
- - - -
B)others

Total 2,79,05,426 100 2,13,86,817 100

Application of funds

Investments:

Shareholders 20,06,302 7.18 12,08,383 5.65

Policy holders 59,40,333 21.28 37,95,975 17.74

Assets held to cover linked 85,08,656 30.49 6470,314 30.25

liabilities

Loans
31 1.11 - -

Fixed assets
43,780 0.15 39,349 0.18

Current assets

Cash and bank balances

5,35,874 1.92 3,76,296 1.75

Advances and other assets

10,44,146 3.74 7,93,951 3.71

Sub total (a) 15,80,020 5.66 11,70,247 5.47

Current liabilities 11,01,607 3.94 9,21,688 4.30

71
Provisions 34,048 0.12 41,184 0.19
Sub total(b) 11,35,655 4.06 9,62,872 4.50

Net current assets c = (a- 4,44,365 1.59 2,07,375 0.96

b)
Miscellaneous expenditure - - - -

Debit balance in p&l 1,09,61,959 39.28 96,65,421 45.19

account

Debit balance in revenue

account
Total 2,79,05,426 100 2,13,86,817 100

Analysis & Interpretation:

From the above statement we could be understand that the company has been
increased the portion of shareholders funds i.e. From 7.18%to 5.65% at the same time the
loan funds of fgic are 1.1% in the previous year here we noticed that the company has
changed their capital stricture during the year 2020-2021 since the fgic redeemed around
10% of unsecured loans by utilizing reserves and surplus money from the shareholders
fund.

Fixed assets block maintained by fgic is around 33.55%. Hence the total block of
fixed assets also decreased from 0.15% to 0.18%. At the same time we observed that the
current assets block also increased 5.66%. It indicated the capacity of solvency of the
firm has been increased when compared to the previous year.

Table 4.6.

Common Size Balance Sheet Statement

2019-2020
Particulars March % change March % change

72
 31,2020 In 2020 31,2019 In 2019
Source of funds:

Shareholders’ funds:

Share capital 10.520,000 49.18 7,020,000 55.99

Share application money and 500,000 2.33 625,750 4.99

pending allotment

Reserves and surplus

Fair value change account

(5,180) (0.02) (583) (4.65)

Sub-total 11,014,820 51.50 7,645,167 60.98

Borrowings - - - -
Policy holders funds:

Fair value change account 26 1.21

Policy liabilities 3,901,657 18.24 1,888,353 15.06

Insurance reserves - -

Provisions for linked liabilities 5,534,943 25.88 2,783,760 22.20

Sub-total 9,436,626 44.12 4,672,113 37.26

Funds for future appropriations 926,033 4.32 219,015 1.74

73
Funds for discontinued
policies:
9,338 0.04 - -
A)discontinued on account of
nonpayment of premium

B)others

Total 21,386,817 100 12,536,29 100

5
Application of funds

Investments:

Shareholders 1,110,394 5.19 1,020,193 8.13

Policy holders 3,804,702 17.78 1,901,944 15.17

Assets held to cover linked 6,460,976 30.21 3,002,775 23.95

liabilities

Loans

Fixed assets
39,349 0.18 75,328 0.60

Current assets

Cash and bank balances 376,907 1.76 525,410 4.19

Advances and other assets 891,940 4.17 643,681 5.13

Sub-total (a) 1,268,847 5.93 1,169,091 9.32

Current liabilities 921,688 4.30 1,069,427 8.53

74
 27,781
Provisions 41,184 0.19 0.22
Sub-total(b) 962,872 4.50 1,097,208 8.70
Net current assets(c) =( a-b) 305,975 1.43 71,883 57.33
Miscellaneous expenditure - - - -

Debit balance in p&l account 9,665,421 45.19 6,464,172 51.56

Debit balance in revenue

account
Total 21,386,817 100 12,536,29 100

Analysis & Interpretation:

From the above statement we could be understand that the company has been
decreased the portion of shareholders funds i.e. From 8.13% to 5.19% at the same time
the loan funds of fgic slightly decreased from 0.18% to 0% here we noticed that the
company has changed their capital stricture during the year 2019-2020 since the fgic
redeemed around 0% of unsecured loans by utilizing reserves and surplus money from
the shareholders fund.

Fixed assets block maintained by fgic is around 0.78%. Hence the total block of
fixed assets also decreased from 0.6% to 0.18%. At the same time we observed that the
current assets block also decreased 3.40%. It indicated the capacity of solvency of the
firm has not been increased when compared to the previous year.

Table 4.7

Common Size Balance Sheet Statement

During The Period 2018-2019

Particulars March % change March % change

31,2019 In 2019 31,2018 In 2018

75
Source of funds:

Shareholders’ funds:

Share capital 7,020,000 55.99 4,685,000 75.62

Share application money and 625,750 4.99 340,425 5.49

pending allotment

Reserves and surplus

- - - -

Fair value change account

(583) (4.65) 305 4.92

Sub total 7,645,167 60.98 5,025,730 81.12

Borrowings - - - -

Policy holders funds:

Fair value change account - - 120 1.93

Policy liabilities 1,888,353 15.06 321,729 5.19

Insurance reserves - - - -

Provisions for linked liabilities 2,783,760 22.20 847,105 13.67

Sub total 4,672,113 37.26 1,168,954 18.87

Funds for future appropriations 219,015 1.74 37 5.97

76
Reserves for lapsed unit-linked
policies
Total 12,536,29 100 6,194,721 100
5
Application of funds

Investments:

Shareholders 1,020,193 8.13 1,527,879 24.66

Policy holders 1,901,944 15.17 307,858 4.96

Assets held to cover linked 3,002,775 23.95 847,142 13.67

liabilities
- -

Loans
75,328 0.60 791,383 12.77

Fixed assets

Current assets
525,410 4.19 222,432 3.59

Cash and bank balances

643,681 5.13 408.791 6.59

Advances and other assets

Sub-total (a) 1,169,091 9.32 631,223 10.18

Current liabilities 1,069,427 8.53 788,535 12.72

Provisions 27,781 0.22 17,754 0.28

Sub-total(b) 1,097,208 8.75 806,289 13.01

Net current assets (c) = (a-b) 71,883 0.57 175,066 (2.82)

Miscellaneous expenditure - - - -

77
Debit balance in p&l account 6,464,172 51.56 2,895,525 46.74
Total 12,536,29 100 6,194,721 100
5

Analysis & Interpretation:

The above analysis we could be understand that the company has been decreased
the portion of shareholders funds i.e. From 55.99% to 75.62% at the same time the loan
funds of fgic slightly decreased to zero stage. Both secured and unsecured loans slightly
decrease comparative previous year

Fixed assets block maintained by fgic is around 13.39%. Hence the total block of
fixed assets also increased form 0.62% to 12.77%. At the same time we observed that the
current assets block also decreased 1%. It indicated the capacity of solvency of the firm
has been increased when compared to the previous year

Table 4.8.

Common Size Balance Sheet Statement

2017-2018
Particulars March % change March % change

78
 31,2018 In 2018 31,2017 In 2017
Source of funds:

Shareholders’ funds:

Share capital 4,685,000 75.62 1,850,00 99.56

0
Share application money 340,425 5.49 -

pending allotment -

Reserves and surplus

Fair value change account

- - -
-
305 4.92 -
-

Sub- total 5,025,730 81.12 1,850,00 99.56

0
Borrowings - - - -
Policy holders funds:

Fair value change account 120 1.93 - -

Policy liabilities 321,729 5.19 8,022 0.43

Insurance reserves - - - -

Provisions for linked liabilities 847,142 13.67 - -

Sub-total 1,168,991 18.87 8,022 0.43

79
Funds for future appropriations - - - -

Total 6,194,721 100 1,858,02 100

2
Application of funds

Investments:

Shareholders 1,527,879 24.66 1,295,86 69.74

4
Policy holders 307,858 4.96 1.07
20,056
Assets held to cover linked 847,142 13.67 -

liabilities -

Loans
- - -

Fixed assets -
791,383 12.77 7.07

Current assets 131,536

Cash and bank balances

222,432 3.59 6.12
113,872
Advances and other assets
408,791 6.59 5.39
100,331

Sub-total (a) 631,223 10.18 214,203 11.52

Current liabilities 788,535 12.72 136,122 7.36

Provisions 17,754 0.28 3,669 0.19

Sub-total(b) 806,289 13.01 139,791 7.52
Net current assets (c) = (a-b) (175,066) (2.82) 74,412 0.04

Miscellaneous expenditure - - - -

80
Debit balance in p&l account 2,895,525 46.74 336.154 18.09
Total 6,194,721 100 1,858,02 100
2

Analysis & Interpretation:

From the above tablewe analyze that the, during the financial year 2017-2018 the
percentage of individual heads to total assets and liabilities varied. From the above
statement we observed the value of sundry debtors has been increased and the share of
cash and bank balance in relation to total assets increased compared to previous years i.e.
10.18% in 2017 and 11.52% in 2018. The total assets comprise of 19.78% of fixed assets
in the year 2017 and 18.11% in the year 2018 which witnessed a slight decrease. The
current assets occupied major portion of total assets and it is decreased from 2017 to
2018 i.e 11.52% to 10.18%.

Table 4.10

Common Size Balance Sheet Statement

2016-2017
Particulars March % change March % change

31,2017 In 2017 31,2016 In 2016

81
Source of funds:

Shareholders’ funds:

Share capital 1,850,000 99.56 500 0.82

Share application money pending - 60,000 99.17

allotment

Reserves and surplus

- -

Fair value change account

- -

Sub –total 1,850,000 99.56 60,500 100

Borrowings - -
Policy holders funds:

Fair value change account - -

Policy liabilities 8,022 0.43 -

Insurance reserves - -

Provisions for linked liabilities - -

Sub- total 8,022 0.43 -

Funds for future appropriations - -

Total 1,858022 100 60,500 100

Application of funds

Investments:

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Shareholders 1,295,864 69.74 -

Policy holders 20,056 1.07 -

Assets held to cover linked - -

liabilities
- -
Loans
7.07 107.72
131,536 65,175
Fixed assets

Current assets 9.04

113,872 6.12 5,470
Cash and bank balances 40.11
100,331 5.39 24,271
Advances and other assets

Sub-total (a) 214,203 11.52 29,741 49.15

Current liabilities 136,122 7.32 70,066 115.81

Provisions 3,669 0.19 30 0.04

Sub-total(b) 139,791 7.52 70,096 115.86
Net current assets(c ) = (a-b) 74,412 4.00 (40,355) (66.70)
Miscellaneous expenditure - -

Debit balance in p&l account 336,154 18.09 35,680 58.97

-
Total 1,858,022 100 60,500 100

Analysis & Interpretation:

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 The common size statement reveals that the firms individual analysis relating to
total value. From the above statement it is observed the value of total assets of firm has
been increased. Sundry debtors has been decreased and share the of cash and bank
balances in relation to total assets decreased compared to previous year . The total assets
comprise of 7.07% of fixed assets in the year 2016 and 10.7 % in the year 2017 which
witnessed a slight increase

No additional capital is employed in the year 2016 due to which the amount of
capital decreased to 500 capital suspense account was not created in this year.

There are huge variations in terms of cash and bank balances than compared to
previous years which are not good for the firm. Apart firm that the performance of the
firm in this year is good

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 CHAPTER-V
SUMMARY
FINDINGS
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY

SUMMARY

Financial management is important because it has an impact on all activities of

the firm. Its primary responsibility is to discharge the finance function successfully. It
touches on all the other business functions. Financial performance is a managerial
activity. Which is concerned with the planning and controlling the firm financial sources?
Financial sources are the life blood of the business organization. We cannot imagine a
business without finance because it is the key for all business activities. All decisions are

85
based on financial implications. It is essential for any type of business big or small,
government, semi government organizations. The finance function of management is
equally important for profit and nonprofit organization.

On the basis of analysis done in this project, one would say that the status of fgic
is quite comfortable the performance of fgic is appreciable, because in all aspects it is
showing favorable quantities, which are related to the standards prescribed for the
comparisons among the various aspects. The financial statements analysis is an attempt to
determine the significance and meaning of the financial statements data. So the forecast
may be made of future prospects for earnings, ability to pay interest and debt maturities
and profitability.

The purpose of financial analysis is to diagnose the information contained in

financial statements so as to judge the profitability and financial soundness of the firm.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements.

The following are the findings in financial analysis of fgic, through study and
suggestions thereon:

Comparative Statements:

During the period of study comparative statements of fgic is prepared. The net
profit increase was observed year by year during the period of study the comparative
study of fgic’s balance sheet is done in order to observe the changes in assets and
liabilities of the firm. The firm maintained adequate assets and liabilities compared to
previous years during period of study.

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Common Size Statements:

Common size income statements reveal the percentage of various heads in

relation to total income. Expenditure, payment of taxes and profit percentage is good in
relation to total income during the period of the study. Common size balance sheets of
fgic are good during the period of study.

Working Capital Statement:

Working capital is regarded as the life blood of any organization. No organization

can survive without working capital. Working capital is of major importance to internal
and external analysis because of its close relationship with the current day-to-day
operations of a business. In accounting, working capital is the difference between the
inflow and outflow of funds. In other words, it is the net cash inflow. It is defined as the
excess of current assets over current liabilities and provisions. It is also known as
circulating capital or current capital, for current asset are rotating in their nature. Where
current liabilities and provisions exceed assets the difference is referred to as negative
working capital. This situation does not generally occur in any business because this is
generally a situation off crisis.

According to shubin, working capital is the amount of funds necessary to cover

the cost of operating the enterprise.

FINDINGS

 The net current assets of the company have been increasing gradually. From the
study it is clear that current liquidity is good.
 The share holders of the fgic gradually increased compared to the previous years.
 Loan funds of the fgic is slowly decreased it is good sign to the company.
 Fixed assets of the company increased some extent gradually it decreased.

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 The study reveals that the working capital position of fgic is good. This is
increasing year by year. Fgic maintains more liquid assets, which can easily
convert them into cash. It is clear that the organization is perfectly maintaining its
cash balances which reflect high liquid position.
 As the fgic increased its equity shares capital because it is having more funds as
debt funds. In 2019 additional capital was introduced which supported the
liquidity requirements of the firm.
 During the period of 2016 to 2017 the percentage of increasing in current
liabilities is more than the current assets so it shows the outflows of firm.
 During the period of 2019-20 the fixed assets are decreased even though the
current assets are increase it indicates the performance of firm is good.

As the study completed with a feeling of satisfaction leaving behind. It can be

ambically concluded that the company’s performance in the year 2018 -2019 is good
and overall working capital position is good. Therefore, with due consideration to
analysis summary and suggestions of the company can achieve greater success in
terms of increase in sales, profitability and continuity of growth and build more
stronger equity than ever. As with the minute changes that has been occurred in the
ratio there can be all over increase in the company sales, current assets, fixed assets
and contributions. During the year 2020-21 company performance is good. But the
overall cash and bank balances are fluctuating drastically which is not good for the
firm, apart from that the overall financial performance of the company is appreciable

SUGGESTIONS

 Cash and bank balances are fluctuating and adequate and stable balances are to be
maintained to avail opportunities
 Adequate shareholder funds are increase the investments in a firm
 Have to maintain the huge current assets compare to current liabilities to increase
the net current assets

88
  Current assets are necessary to maintain the good liquidity position of firm.
 Have to maintain more cash inflows compare to cash out flows to handle the
solvency situation.
 Adequate reserves and surplus are helpful for payments of current liabilities of a
firm.

CONCLUSION

As the study was completed with a feeling of satisfaction leaving behind. It can be
amicably concluded that the company’s performance is extremely good, but there is
always some scope of improvement and growth. Therefore, with due consideration to
analysis, findings and suggestions the company can achieve greater success in terms of
increase in sales on profitability and continuity of growth and build more stronger equity

89
then even. It is a well saying that “a man of words and not of deeds is like a gardenfull of
weeds”. There is no point in studying loads of theories unless and until practical
knowledge is gained. This institutional framing has helped me to see the actual scenario
in insurance industry. The employees in future general life insurance are very co-
operative that they used to ask more questions

Bibliography

1. Financial management : dr. Prasannachandra, tata-mc graw

Hill publishing co., ltd. New dwlhi-2017

2. Financial management : i.m. Pandey, vikas

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Publishing house pvt. Ltd. 2015

3. Financial management : s.c.kuchhalchaitanya

Publishing house. 2017

4. Financial accounting and analysis : Dr. Prashanta. Athma.

himalaya publishing house

5. Management accounting in practices : de paule (pitman, london)-2001

6. Financial accounting and analysis :k.k.Verma, anuragjain, for excel books

new delhi.

Web sites:

www.sciencedirect.com

Www.futuregenerali.in

Other sources:

Annual reports

Records of future generaliindia life insurance company ltd .

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