A Presentation by,

Amruth G
Karthick Shan
• Balance Sheet is a Financial Statement which presents
to the analyzer the Asset and Liabilities of the given
Organization or person

• It is made for analysis of the financial position of the

organization, it is being followed by many companies
around the world

• Investors analyze Balance sheet along with P/L Account

before investing

4/25/2014 Balance SheetAnaysis 2 of 9

 Balance Sheet as on / /
Liabilities Rs. Assets Rs.
Current liabilities: Current Assets:
Bank overdraft Cash in hand
Bills Payable Cash at Bank
Sundry creditors Bills Receivable
Outstanding Expenses Short Term Investments
Unearned Income Sundry Debtors
Fixed Liabilities: Closing Stock
Long Term loans Prepaid expenses
Reserves Accrued Income
Capital Long Term Investments
Add: Net profit Fixed Assets:
Less: Drawings Furniture
Less: Income Tax Loose Tools
Less: Life Insurance Premium Motor vehicle
Plant & Machinery
Land & Buildings
Patents
4/25/2014 B alance eGtAonoaydswisil 3 of 9
She
• There are three different methods,
• Vertical Analysis: Analyzing a single period financial statement
works well with vertical analysis.

• Horizontal Analysis: Horizontal analysis is the comparison of

data sets for two periods.

• Ratio Analysis: Ratios express a relationship between two more

financial statement totals, and compare to budgets and industry
benchmarks. Five common categories of ratios exist: liquidity,
asset turnover, leverage, profitability and solvency.

4/25/2014 Balance SheetAnaysis 4 of 9

• During the analysis, it is assumed that total assets, total
liabilities, total equity & revenue in the financial
statements constitute 100%.

• The other values in the financial statements are

compared with these basic captions

• It is then expressed in percentage of the basic caption

4/25/2014 Balance SheetAnaysis 5 of 9

• Involves comparison of a financial ratio, a bench mark, or
a line i tem over a number of accounting periods.
• Horiz ontal analysis allows the assessment of rel ative
changes in different items over time.
• It also indicates the behavior of revenues, expenses,
and ot her line items of financial statements over the
courseof time.
• Accounting periods can be two or more than two periods.
Accounting period can be a month, a quarter or a year.
• Horizontal analysis can be performed in one of t he
following two different methods i.e. Absolute com parison
or Per centage comparison.
4/25/2014 Balance SheetAnaysis 6 of 9
• Liquidity Ratios
• Current Ratio: Current Assets/Current Liabilities
• Quick Ratio: Quick Assets/Current Liabilities

• Capital Structure Ratios

• Debt-Equity Ratio: Total Debt/Shareholder’s Equity
• Debt to Total Capital Ratio: Total Debt/TotalAssets

4/25/2014 Balance SheetAnaysis 7 of 9

• Profitability Ratios
• Gross Profit Margin:
(Gross profit/Sales)*100= ((Sales – cost of goods
sold)/Sales) *100
• Return on Assets: Net profit after taxes/ total assets

• Activity Ratios
• Inventory Turnover Ratio: Cost of goods sold/average inventory
• Debtors Turnover Ratio: Credit Sales/Average debtors

4/25/2014 Balance SheetAnaysis 8 of 9

4/25/2014 Balance SheetAnaysis 9 of 9