A STUDY ON FINANCIAL PERFORMANCE ANALYSIS OF TRICOLOUR

FINANCIAL SERVICES PRIVATE LIMITED

Submitted by
SANTHOSH SIVAN M

Register No: 715620631027

In partial fulfillment for the award of the degree

of
MASTER OF BUSINESS ADMINISTRATION

ANNA UNIVERSITY
CHENNAI 600 025
September 2022
 TIPS SCHOOL OF MANAGEMENT
COIMBATORE – 641 107

PROJECT WORK

SEPTEMBER 2022

This is to certify that the project entitled

A STUDY ON FINANCIAL PERFORMANCE ANALYSIS

OF TRICOLOUR FINANCIAL SERVICES PRIVATE
LIMITED
is the bonafide record of project work done by

SANTHOSH SIVAN M
Register Number: 715620631027
of MBA during the year 2020 – 2022

Dr. C. Meera Dr. Venugopal E

Associate Professor Principal

Submitted for the Project Viva – Voce examination held on…………………

…………………….. …………………………..
Internal Examiner External Examiner
DECLARATION
 DECLARATION

I Santhosh Sivan M (Reg: 715620631027) affirm that the project work titled “A Study on
Financial Performance Analysis of Tricolour Financial Services Private Limited” being
submitted in partial fulfillment for the award of MBA is the original work carried out by me. It has
not formed the part of any other project work submitted for award of any degree or diploma, either
in this or any other University.

SANTHOSH SIVAN M

Register Number: 715620631027

I certify that the declaration made above by the candidate is true.

………………………
Dr. C. Meera
Associate Professor
CERTIFICATE
EXECUTIVE SUMMARY
 EXECUTIVE SUMMARY

The present study deals with the “A Study on Financial Performance Analysis of Tricolour
Financial Services Private Limited”. In this present era of Liberalization, Privatization and
Globalization the Market has become globally competitive; hence the survival of an enterprise
depends upon the efficiency and accuracy. Hence, it is necessary to evaluate the financial
performance to know whether the companies stand in the market and how they can improve further
in the future by knowing their shortcomings. In the present study, the Researcher has discussed the
Liquidity, Profitability, Efficiency and Leverage to arrive at any conclusion.
The researcher uses 25 reviews of literature on the topics Financial Statement Analysis, Ratio
Analysis, Trend Analysis, Correlations, Altman’s Z-Score Model and Mootal’s Comprehensive test
for the purpose of the study.
This research is undertaken A study on Financial Performance Analysis of Tricolour
Financial Services Private Limited (TFSPL). The study of analysis is on Financial performance of
TFSPL was under taken on the bases of last 5 years annual report data. The scope of the study
consists of secondary data from the TFSPL that is the balance sheet from 2017-2022 for five years.
The research methodology consists of design, data collections and tools for analyzing the
past and future performance of TFSPL, Financial analysis. The various tools used for a ratio analysis,
regression analysis, comparative balance sheet, common size balance sheet, trend analysis, Z-Score
analysis and Comprehensive test of liquidity. Through the analysis of the study, it finds out the
increase and decrease position in particular field of the TFSPL.
ACKNOWLEDGEMENT
 ACKNOWLEDGEMENT

The success and final outcome of this project required a lot of guidance and assistance from
many people and I am extremely fortunate to have got this all along the completion of my project
work. Whatever I have done is only due to such guidance and assistance and I would not forget to
thank them.

I would like to express my sincere gratitude to our respected Chairman Mr. Ashok Kumar
and our beloved Academic Director Dr. S. Narayanan for having provided me with the best
facilities and infrastructure to pursue my post graduate studies at TIPS SOM.

I heartily thank our Principal Dr. E. Venugopal for having provided me moral support and
guidance during my MBA studies.

I owe my profound gratitude to my project guide Dr. C. Meera, Associate Professor, who
took keen interest on my project work and guided me all along till the completion of my project
work by providing all the necessary support, guidance in order for me to complete my project on
time.

I thank the corporate guide Mrs. K. Manju Latha, Senior Manager – Tricolour Financial
Services Private Limited, for giving me an opportunity to do the project work at Tricolour Financial
Services Private Limited, and provided me all the support and guidance when and where necessary
for me to complete my project work.

I am so thankful and fortunate enough to get constant encouragement, support and guidance
from all the faculty members and the support staff of TIPS SOM, who helped me to successfully
complete my project work.
 TABLE OF CONTENTS
CHAPTER NO. PARTICULARS PAGE NO.
Executive Summary
List of Tables
List of Charts
Introduction, Design and Execution of the Study
1.1. Introduction to the Study 1
1.2. Industry Profile 14
1.3. Organization Profile 21
1
1.4. Statement of the Problem 25
1.5. Objectives of the Study 26
1.6. Scope of the Study 27
1.7. Limitations of the Study 27
2 Review of Literature 28
Research Methodology
3.1. Research Design
3 3.2 Sampling Design
3.3 Data Collection Instruments 33-34
3.4 Measurement Scales and Tools
3.5 Period of the Study
Data Presentations, Analysis and Interpretation
4.1 Common Size Balance Sheet Analysis 35
4.2 Comparative Balance Sheet Analysis 37
4.3 Ratio analysis 40
4
4.4 Trend percentage analysis 55
4.5 Altman’s Z score 60
4.6 Correlation 61
4.7 Mootal’s Comprehensive test 65
Findings, Conclusions and Recommendations
5.1. Findings 66
5
5.2. Suggestion 70
5.3. Conclusion 71
References and Bibliography 72
Annexure
 LIST OF TABLE
Table Page
Description
No Number
4.1.1 Common Size Balance Sheet Analysis 35
4.2.1 Comparative Balance Sheet Analysis 37
4.3.1 Current Ratio 40
4.3.2 Quick Ratio 41
4.3.3 Absolute Liquid Ratio 42
4.3.4 Account Receivables Turnover Ratio 43
4.3.5 Working Capital Turnover ratio 44
4.3.6 Asset Turnover Ratio 45
4.3.7 Debt Equity ratio 46
4.3.8 Proprietary ratio 47
4.3.9 Total Assets to debt ratio 48
4.3.10 Interest Coverage Ratio 49
4.3.11 Net Profit ratio 50
4.3.12 Operating Profit ratio 51
4.3.13 Operating Ratio 52
4.3.14 Return on Equity 53
4.3.15 Return on Assets 54
4.4.1 Trend Percentage analysis of Net profit 55
4.4.2 Trend Percentage analysis of Total assets 56
4.4.3 Trend Percentage analysis of Sales 57
4.4.4 Trend Percentage analysis of Total Non-current liability 58
4.4.5 Trend Percentage analysis of Cash and cash equivalents 59
4.5.1 Altman’s Z score Model 60
4.6.1 Correlation between Net profit and sales 61
4.6.2 Correlation between Net profit and Total assets 62
4.6.3 Correlation between Net profit and Total Non-current liability 63
4.6.4 Correlation between Net profit and Cash and cash equivalents 64
4.7.1 Mootal’s Comprehensive test 65
 LIST OF CHARTS
Page
Chart No Description
Number
1.1.1 Types of Ratios 05
4.3.1 Current Ratio 40
4.3.2 Quick Ratio 41
4.3.3 Absolute Liquid Ratio 42
4.3.4 Account Receivables Turnover Ratio 43
4.3.5 Working Capital Turnover ratio 44
4.3.6 Asset Turnover Ratio 45
4.3.7 Debt Equity ratio 46
4.3.8 Proprietary ratio 47
4.3.9 Total Assets to debt ratio 48
4.3.10 Interest Coverage Ratio 49
4.3.11 Net Profit ratio 50
4.3.12 Operating Profit ratio 51
4.3.13 Operating Ratio 52
4.3.14 Return on Equity 53
4.3.15 Return on Assets 54
4.4.1 Trend Percentage analysis of Net profit 55
4.4.2 Trend Percentage analysis of Total assets 56
4.4.3 Trend Percentage analysis of Sales 57
4.4.4 Trend Percentage analysis of Total Non-current liability 58
4.4.5 Trend Percentage analysis of Cash and cash equivalents 59
4.6.1 Correlation between Net profit and sales 61
4.6.2 Correlation between Net profit and Total assets 62
4.6.3 Correlation between Net profit and Total Non-current liability 63
4.6.4 Correlation between Net profit and Cash and cash equivalents 64
4.7.1 Mootal’s Comprehensive test 65
INTRODUCTION
 CHAPTER 1

INTRODUCTION, DESIGN AND EXECUTION OF THE STUDY

1.1 INTRODUCTION TO STUDY

The term “Finance” can be defined as the art and science of managing money. Virtually,
all Individuals and organization earn or raise money among and between individual’s business
and governments. According to Paul Hastings “Finance is the management of monetary affairs
of a company. It includes determining what has to be paid for raising the money on the best
terms available devoting available funds to the best use” Finance is a set of activities commerce
with the management of funds. It is the result of collection and use of funds. More specially, it
is a branch of economics that studies the management of money and other assets. The finance
states that the topic of the certain segments like the time, money and the risk and shows that
how the unrelated topics are related to the finance for the management process. financial
activities are very much needed for any activity should be care full analyse the conditions of
the finance.

DEFINITION

According to John N Myer, “The financial statements provide a summary of the

accounts of a business enterprise, the balance sheet reflecting the assets and liabilities and the
income statement showing the results of operations during a certain period.” The definition
emphasizes the importance of other financial statements like cash statement of retained
earnings.

Analysis is the procedure of assessing the relationship between segment parts of

financial related statement to obtain a better understanding of position and execution. The
purpose behind financial execution performance is to analyse the data in it is to judge the
productivity and financial status of the organizations In the expressions of MYERS, financial
related execution analysis is to a great extent an investigation of relationship among the
different financial statement analysis is largely a study of statement and an study of the patterns
of these elements as appeared in a series of statements. gives valuable data. Financial statement
related assessing is an exhaustive analysis of the three financial statement balance sheet ,
income statements, and cash flow statement . A financial statement explanation gives helpful
data. However one needs to fastidiously search for the right data from the right information.
One can attempt the financial analysis from various stakeholder’s perspectives; creditors,

1
bankers, credit rating agencies, existing shareholders, potential shareholders, internal
management, and employee too.

FINANCE IS CLASSIFIED INTO TWO CLASS

• Public finance
• Private finance

Public finance

Which will be operates under the government institution with all funds process.

Private finance

The private funds which includes all the individual activity, profit business organization
and the non- profit business organization under the finance process. Hence it is divided into
three:

➢ Personal finance
➢ Business finance
➢ Non-profit organization financial

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths and weaknesses of
the firm and establishing relationship between the items of the balance sheet and profit & loss
account. Financial ratio analysis is the calculation and comparison of ratios, which are derived
from the information in a company’s financial statements. The level and historical trends of
these ratios can be used to make inferences about a company’s financial condition, its
operations and attractiveness as an investment. The information in the statements is used by-

• Trade creditors, to identify the firm’s ability to meet their claims i.e. liquidity position
of the company.
• Investors, to know about the present and future profitability of the company and its
financial structure.
• Management, in every aspect of the financial analysis. It is the responsibility of the
management to maintain sound financial condition in the company.

METHODS OF FINANCIAL STATEMENT ANALYSIS:

A number of various methods/tools/techniques are available for financialstatement analysis.

2
The important methods of financial analysis are as follows
• Ratio Analysis
• Common Size Balance Sheet
• Comparative Balance Sheet
• Trend Analysis
• Atman Z-Score
• Comprehensive Test of Liquidity

Ratio Analysis

There are many standard ratios used to evaluate the overall financial condition of a
corporation or other organization. Financial ratios are used by managers within a firm, by
current and potential stockholders of a firm, and by a firm's creditor. Financial analysts use
financial ratios to compare the strengths and weaknesses in various companies.

Meaning of Ratio:

A ratio is simple arithmetical expression of the relationship of one number to another.

It may be defined as the indicated quotient of two mathematical expressions.

According to Accountant’s Handbook by Wixom, Kill and Bedford, “a ratio is an

expression of the quantitative relationship between two numbers”.

Meaning of Ratio Analysis:

Ratio analysis is a very important tool of financial analysis. It is the process of

establishing the significant relationship between the items of financial statement to provide a
meaningful understanding of the performance and financial position of a firm. Ratio when
calculated on the basis of accounting information are called "Accounting Ratio".

Definitions of Ratio Analysis:

Kennedy and Mc Mulla. “The relationship of one to another, expressed in simple term
of mathematical is known as ratio”

According to Accountant’s Handbook by Wixom, Kell and Bedford, a ratio “is an

expression of the quantitative relationship between two numbers”

3
Nature of Ratio Analysis:

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the

process of establishing and interpreting various ratios for helping in making certain decisions.
However, ratio analysis is not an end in itself. It is only a means of better understanding of
financial strengths and weakness of a firm. There are a number of ratios which can be calculated
from the given information given in the financial statements, but the analyst as to select the
appropriate data and calculate only a few appropriate ratios from the same keeping in mind the
objectives of analysis. The following are the four steps involved in the ratio analysis:

• Selection of relevant data from the financial statements depending upon the objective
of the analysis.
• Calculation of appropriate from the above data.
• Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from the projected financial statements.
• Interpretation of the ratios.

Classification of Ratios

Several ratios, calculated from the accounting data can be grouped into various classes
according to financial activity or function to be evaluated. Management is interested in
evaluating every aspect of the firm’s performance. They have to protect the interests of all
parties and see that the firm grows profitably. In view of the requirement of the various users
of ratios; ratios are classified into following four important categories:

4
 Liquidity Turnover Solvency Profitability
Ratio Ratio Ratio Ratio

Receivables Debt To Equity

Current Ratio Net Profit Ratio
Turnover Ratio Ratio

Working Capital Proprietary Operating

Quick Ratio
Turnover Ratio Ratio Profit Ratio

Absolute Liquid Asset Turnover Total Assets to Operating

Ratio Ratio Debt Ratio Profit

Interest Return on
Coverage Ratio Equity

Return on
Assets

Chart 1.1.1: Types of Ratios

• Liquidity Ratio

It is extremely essential for a firm to be able to meet the obligations as they become due.
Liquidity ratios measure the ability of the firm to meet its current obligations (liabilities). The
liquidity ratios reflect the short-term financial strength and solvency of a firm. In fact, analysis
of liquidity needs the preparation of cash budgets and cash and funds flow statements; but
liquidity ratios, by establishing a relationship between cash and other current assets to current
obligations, provide a quick measure of liquidity. A firm should ensure that it does not suffer
from lack of liquidity, and also that it does not have excess liquidity. The failure of a company
to meet its obligations due to lack of sufficient liquidity, will result in a poor credit worthiness,
loss of credit worthiness, loss of creditors‟ confidence, or even in legal tangles resulting in the
closure of the company.

A very high degree of liquidity is also bad; idle assets earn nothing. The firm’s funds
will be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper
balance between high liquidity and lack of liquidity. The most common ratios which indicate
the extent of liquidity are lack of it, are:

5
 a. Current ratio

b. Quick ratio.

c. Cash ratio

Current Ratio:

Current Ratio is calculated by dividing current assets by current Liability. Current assets
include cash and other assets that can be converted into cash within in a year, such as
marketable securities, debtors and inventories. Prepaid expenses are also included in the current
assets as they represent the payments that will not be made by the firm in the future.

All obligations maturing within a year are included in the current liabilities. Current
liabilities include creditors, bills payable, accrued expenses, short-term bank loan, income tax,
liability and long-term debt maturing in the current year. The current ratio is a measure of
firm’s short-term solvency. It indicates the availability of current assets in rupees for every one
rupee of current liability. A ratio of greater than one means that the firm has more current
assets than current claims against them Current liabilities.

Quick Ratio:

Quick ratio also called Acid-test ratio, establishes a relationship between quick, or
liquid, assets and current liabilities. An asset is a liquid if it can be converted into cash
immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Other
assets that are considered to be relatively liquid and included in quick assets are debtors and
bills receivables and marketable securities (temporary quoted investments).

Inventories are considered to be less liquid. Inventories normally require some time for
realizing into cash; their value also has a tendency to fluctuate. The quick ratio is found out by
dividing quick assets by current liabilities. The ideal quick ratio should be one (1) for a
financially stable company.

Absolute Liquid Ratio:

Since cash is the most liquid asset, it may be examined cash ratio and its equivalent to
current liabilities. Trade investment or marketable securities are equivalent of cash; therefore,
they may be included in the computation of cash ratio.

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 A cash ratio equal to or greater than 1 indicates a company has enough cash and cash
equivalents to entirely pay off all short-term debts. A ratio above 1 is generally favored, while
a ratio under 0.5 is considered risky as the entity has twice as much short-term debt compared
to cash.

• Turnover Ratio

These ratios are calculated on the bases of cost of sales or sales, therefore, these ratios
are also called as Turnover Ratio. Turnover indicates the speed or number of times the capital
employed has been rotated in the process of doing business.

Higher turnover ratio indicates the better use of capital or resources and in turn leads to
higher profitability.

It includes the following:

Receivables Turnover Ratio:

This ratio otherwise known as the accounts receivable turnover ratio or debtors turnover
ratio, is an important ratio in accounting. It is used to determine the efficiency by which the
business is managing the credit that is being extended to its customers and evaluate how long
does it take for the business to collect the outstanding debt in the accounting period.

Significance:

A high receivables turnover ratio can indicate that a company's collection of accounts
receivable is efficient and that it has a high proportion of quality customers who pay their debts
quickly. A high receivables turnover ratio might also indicate that a company operates on a
cash basis.

Working Capital Turnover Ratio:

This ratio reveals how efficiently working capital has been utilized in making sales.

Significance:

A high turnover ratio indicates that management is being extremely efficient in using a
firm's short-term assets and liabilities to support sales. Conversely, a low ratio indicates that a
business is investing in too many accounts receivable and inventory assets to support its sales,
which could eventually lead to an excessive number of bad debts and obsolete inventory write-
offs.

7
Asset Turnover Ratio:

The asset turnover ratio, also known as the total asset turnover ratio, measures the
efficiency with which a company uses its assets to produce sales. The asset turnover ratio
formula is equal to net sales divided by the total or average assets of a company.

Significance:

A company with a high asset turnover ratio operates more efficiently as compared to
competitors with a lower ratio.

• Solvency Ratio

The short-term creditors, like bankers and suppliers of raw materials, are more
concerned with the firm‟s current debt-paying ability. On other hand, ling-term creditors like
debenture holders, financial institutions etc. are more concerned with the firm‟s long-term
financial strength. In fact a firm should have a strong short as well as long-term financial
strength. In fact a firm should have a strong short-as well as long-term financial position. To
judge the long-term financial position of the firm, financial leverage, or capital structure ratios
are calculated. These ratios indicate mix of funds provided by owners and lenders. As a general
rule there should be an appropriate mix of debt and owners‟ equity in financing the firm‟s
assets.

Leverage ratios may be calculated from the balance sheet items to determine the
proportion of debt in total financing. Many variations of these ratios exist; but all these ratios
indicate the same thing the extent to which the firms has relied on debt in financing assets.
Leverage ratios are also computed form the profit and loss items by determining the extent to
which operating profits are sufficient to cover the fixed charges.

It includes the following:

Debt to equity

Debt to Equity ratio is one of the most used debt solvency ratios. It is also represented
as D/E ratio. Debt to equity ratio is calculated by dividing a company’s total liabilities with the
shareholder’s equity. These values are obtained from the balance sheet of the company’s
financial statements. It is an important metric which is used to evaluate a company’s financial
leverage. This ratio helps understand if the shareholder’s equity has the ability to cover all the
debts in case business is experiencing a rough time.

8
Significance:

Increase in the levels of debt to equity ratio indicates that the company is running on a
debt fund, which can be risky in the long term. Companies that have a higher debt to equity
ratio find it difficult to obtain additional funding from other sources. High debt to equity ratio
presents a financial risk for companies. It means the company is using more debt as compared
to equity for financing. A low debt to equity ratio shows that a company has sufficient funds
in the form of equity and there is no need for the company to obtain debt for financing the
business.

Proprietary Ratio:

Proprietary ratios is also known as equity ratio. It establishes a relationship between the
proprietor’s funds and the net assets or capital. Proprietary ratio can be used to evaluate the
stability of the capital structure of a business or company and also show how the assets of a
business are formed by issuing a number of equities shares rather than taking loans or debt
from outside.

Significance:

High proprietary ratio indicates that a business is in a strong position and provides
relief to creditors, while a low proprietary ratio shows the dependence of the company on the
debt financing in order to run its business. It also indicates that creditors will lose interest for
providing finance to such a company. Interest rates will become high and there is also a high
risk of bankruptcy.

Financial Leverage:

Leverage ratio is one of the most important of the financial ratios as it determines how
much of the capital that is present in the company is in the form of debts. It also analyses how
the company is able to meet its obligations. Leverage ratio becomes more critical as it analyzes
the capital structure of the company and the way it can manage its capital structure so that it
can pay off the debts.

Interest Coverage:

Interest coverage ratio is one of the most important ratios that need to be learned when
assessing risk management and the possible reduction methods. Interest coverage ratio plays a
very important role for stockholders and investors as it measures the ability of a business to

9
pay interests on its outstanding debt. It acts as a solvency check for the business organisation
using which financial advisors, business analysts and investors can determine the ability of a
business or a company to pay off the accumulated interest on the debt they are holding.

Significance:

A company's interest coverage ratio determines whether it can pay off its debts. The
ratio is calculated by dividing EBIT by the company's interest expense—the higher the ratio,
the more poised it is to pay its debts. Creditors can use the ratio to decide whether they will
lend to the company. A lower ratio may be unattractive to investors because it may mean the
company is not poised for growth

Profitability Ratio

Profitability ratios are a type of accounting ratio that helps in determining the financial
performance of business at the end of an accounting period. Profitability ratios show how well
a company is able to make profits from its operations.

It includes the following:

Net Profit Ratio:

Net profit ratio is an important profitability ratio that shows the relationship between
net sales and net profit after tax. When expressed as percentage, it is known as net profit margin.
It helps investors in determining whether the company’s management is able to generate profit
from the sales and how well the operating costs and costs related to overhead are contained.

Operating Profit Ratio:

Operating profit ratio is a type of profitability ratio that is used for determining the
operating profit and net revenue generated from the operations. It is expressed as a percentage.

Operating Ratio:

Operating ratio is calculated to determine the cost of operation in relation to the revenue
earned from the operations.

Return on Equity:

Return on Equity ratio essentially measures the rate of return that the owners of
common stock of a company receive on their shareholdings. Return on equity signifies how
good the company is in generating returns on the investment it received from its shareholders.
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Return on Assets:

The return on total assets ratio compares a company’s total assets with the amount of
money it returns to its shareholders. The return on total assets ratio indicates how well a
company’s investments generate value, making it an important measure of productivity for a
business. It is calculated by dividing the company’s earnings after taxes (EAT) by its total
assets, and multiplying the result by 100%.

Common Size Balance Sheet

A common size balance sheet is a balance sheet that displays both the numeric value
and relative percentage for total assets, total liabilities, and equity accounts. Common size
balance sheets are used by internal and external analysts and are not a reporting requirement of
generally accepted accounting principles (GAAP).

A common size balance sheet allows for the relative percentage of each asset, liability,
and equity account to be quickly analysed. Any single asset line item is compared to the value
of total assets. Likewise, any single liability is compared to the value of total liabilities, and
any equity account is compared to the value of total equity. For this reason, each major
classification of account will equal 100%, as all smaller components will add up to the major
account classification. The information presented is useful to financial institutions and other
lenders, a common-size balance sheet is typically not required during the application for a loan.

Although common-size balance sheets are most typically utilised by internal

management, they also provide useful information to external parties, including independent
auditors. The most valuable aspect of a common size balance sheet is that it supports ease of
comparability. The common size balance sheet shows the makeup of a company's various
assets and liabilities through the presentation of percentages, in addition to absolute dollar
values. This affords the ability to quickly compare the historical trend of various line items or
categories and provides a baseline for the comparison of two firms of different market
capitalizations. Additionally, the relative percentages may be compared across companies and
industries.

Comparative Balance sheet

A comparative balance sheet is a statement that shows the financial position of an

organisation over different periods for which comparison is made or required. The financial

11
position is compared with 2 or more periods to depict the trend, direction of change, analyse
and take suitable actions.

Given the usefulness of the comparative balance sheet, most of the businesses that have
different business verticals, prepare a comparative balance sheet in comparison with other
business verticals. In preparing a comparative balance sheet, the items are placed in rows, and
years and amounts are shown in the columns.

Trend Analysis

It is a technique of studying the operational results and financial position over a series
of years. Using the previous years’ data of a business enterprise, trend analysis can be done to
observe the percentage changes over time in the selected data. The trend percentage is the
percentage relationship, in which each item of different years bear to the same item in the base
year. Trend analysis is important because, with its long run view, it may point to basic changes
in the nature of the business. By looking at a trend in a particular ratio, one may find whether
the ratio is falling, rising or remaining relatively constant. From this observation, a problem is
detected or the sign of good or poor management is detected.

We found Trend Analysis with the following:

• Net Profit
• Total Assets
• Sales
• Total Non-Current Liability
• Cash and Cash Equivalent

Altman Z-Score Model of 1983

Altman Z-Score is the measure of creditworthiness of a company, irrespective of it

being privately or publicly held. This mathematical model investigates scientifically to predict
the possibility of a company claiming bankruptcy. Initially, there was a single Altman Z-score
model; with time, several different models came into existence.

Stakeholders interested in a company's creditworthiness use the Altman Z-score to

determine its performance. Based on this score, they choose the company they would like to
invest in or lend money. Usually, banks check this score to determine the risk associated with

12
issuing business loans. Private investors use this score because the data required to compute
the score is easy to obtain.

Variables Associated with Altman Z-Score

• Market value: The total of all outstanding shares of a company is called the market
value.
• Book value: Long-term and short-term debts constitute the book value of a company,
and it is found in the balance sheet. The reserves found on the credit side of the balance
sheet is not part of the company's book value.
• Turnover: The total sales seen by the company in a year is called turnover. It should be
recorded in the same book year as the used profit before tax and interest (EBIT).
• Total assets: All the assets found on the balance sheets are together known as total
assets, including the cash and properties that needed longer-term investments.
• Total retained earnings: The sum of all profits earned in the past that was used for
reinvesting in the company is known as total retained earnings. This parameter does not
take into account taxes and dividends.
• Working capital: The money used to fund the company's activities is known as working
capital. The primary characteristic of working capital is that the funds must be available
at short notice. It is calculated by deducting the current short-term debts from cash and
cash equivalents.
• Profit before tax and interest: This refers to the profit earned by a company in a certain
book year before deducting tax and interest payments.

Motaal’s Comprehensive Test of Liquidity

The soundness of a company's liquidity is assessed using a thorough set of criteria provided by
Motaal. The following three ratios are merged into a point score by using a ranking mechanism
in order to acquire a more complete estimate of liquidity.

• Working Capital (WC to Current Asset Ratio= Working Capital/Current Assets x100
• Stock to Current Asset Ratio= Inventory or Stock/Current Assets x100
• Liquid Resources (LR to Current Asset Ratio= Liquid Resources or Quick
Assets/Current Assets x100

Increasing a company's working capital to current assets ratio and its liquid resources to current
assets ratio can help strengthen its liquidity. An organization's liquidity is better reflected by a

13
smaller stock-to-current-assets ratio. As a company's top three ratios change over time, they
are listed in that order. Finally, the final ranking is based on the premise that lower points are
awarded for better liquidity, and vice versa

1.2 INDUSTRY PROFILE

OVERVIEW OF NON-BANKING FINANCIAL COMPANY:

Non-Banking financial companies play an important role in access to financial services

enhancing competition and diversification of the financial sector. There are various types of
institutions to be involved in financial services in India. This includes commercial banks
financial institutions and non-banking finance companies due to the financial sector reforms
non-banking financial companies have been emerged as an integral part of the Indian financial
system.

Nonbanking finance companies frequently act as suppliers of loans and credit facilities
and accepting the deposits, operating various mutual funds, and similar other functions. They
are competitive and complementary to banks and financial institutions. In this paper, the author
will analyse various types of NBFCs, its benefits, the difference between the owned and net
owned funds of NBFCs, and how are NBFCs different from Banks.

NBFC is a Financial Institution that is into Lending or Investment or collecting monies

under any scheme or arrangement but does not include any institutions which carry on its
principal business as agriculture activity, industrial activity, trading and purchase or sale of
immovable properties. A company that carries on the business of accepting deposits as its
principal business is also an NBFC. India has a diversified financial sector undergoing rapid
expansion, both in terms of the strong growth of existing financial services firms and new
entities entering the market. The sector comprises commercial banks, insurance companies,
non-banking financial companies, co-operatives, pension funds, mutual funds, and other
smaller financial entities. The banking regulator has allowed new entities such as payments
banks to be created recently thereby adding to the types of entities operating in the sector

NON-BANKING FINANCIAL COMPANY:

A Non-Banking Financial Company (NBFC) is a company registered under the

Companies Act, 2013 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/ debentures/securities issued by Government or local authority or other
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business

14
but does not include any institution whose principal business is that of agriculture activity,
industrial activity, purchase or sale of any goods (other than securities) or providing any
services and sale/purchase/construction of the immovable property.

A non-banking institution which is a company and has principal business of receiving

deposits under any scheme or arrangement in one lump sum or in installments by way of
contributions or in any other manner is also a non-banking financial company (Residuary non-
banking company).

Financial activity as a principal business is when a company s financial assets constitute

more than 50 percent of the total assets and income from financial assets constitute more than
50 percent of the gross income. A company that fulfils both these criteria will be registered as
NBFC by RBI. Interestingly, this test is popularly known as the 50-50 test and is applied to
determine whether or not a company is into financial business. NBFCs lend and make
investments and hence their activities are akin to that of banks; however, there are a few
differences as given below:

➢ NBFC cannot accept demand deposits;

➢ NBFCs do not form part of the payment and settlement system and cannot issue cheques
drawn on themselves;
➢ Deposit the insurance facility of Deposit Insurance and Credit Guarantee Corporation
is not available to depositors of NBFCs, unlike in the case of banks

In terms of Section 45-IA of the RBI Act, 1934, no Non-banking Financial Company can
commence or carry on the business of a non-banking financial institution without a) obtaining
a certificate of registration from the Bank and without having a Net Owned Funds of Rupees
Two crore.

However, in terms of the powers given to the Bank, to obviate dual regulation, certain
categories of NBFCs which are regulated by other regulators are exempted from the
requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking
companies/Stockbroking companies registered with SEBI, Insurance Company holding a valid
Certificate of Registration issued by IRDA, Nidhi companies as notified under or formed under
section 406 of the Companies Act, 2013, Chit companies as defined in clause (b) of Section 2
of the Chit Funds Act, 1982, Housing Finance Companies regulated by National Housing Bank,
Stock Exchange or a Mutual Benefit company

15
VARIOUS TYPES OF NBFCS:

NBFCs are categorized as above:

➢ In terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs,
➢ Non deposit taking NBFCs by their size into systemically important and other non-
deposit holding companies (NBFC-NDSI and NBFC-ND) and
➢ By the kind of activity they conduct.

Within this broad categorization the different types of NBFCs are as follows:

➢ Asset Finance Company (AFC):

An AFC is a company which is a financial institution carrying on as its principal

business the financing of physical assets supporting productive/economic activity, such as
automobiles, tractors, lathe machines, generator sets, earth moving and material handling
equipment, moving on own power and general-purpose industrial machines. Principal
business for this purpose is defined as the aggregate of financing real/physical assets
supporting economic activity and income arising therefrom is not less than 60% of its total
assets and total income respectively

➢ Investment Company (IC):

IC means any company which is a financial institution carrying on as its principal

business the acquisition of securities

➢ Loan Company (LC):

LC means any company which is a financial institution carrying on as its principal

business the providing of finance whether by making loans or advances or otherwise for
any activity other than its own but does not include an Asset Finance Company.

➢ Infrastructure Finance Company (IFC):

IFC is a non-banking finance company:

• Which deploys at least 75 percent of its total assets in infrastructure loans,

• Has a minimum Net Owned Funds of Rs 300 crores,
• Has a minimum credit rating of A or equivalent?
• And a CRAR of 15%. Capital adequacy ratio of banks capital to its risk.
➢ Mortgage Guarantee Companies (MGC)

16
 MGC are financial institutions for which at least 90% of the business turnover is
mortgage guarantee business or at least 90% of the gross income is from mortgage
guarantee business and net owned fund is Rs 100 crore.

➢ NOFHC

Non-Operative Financial Holding Company (NOFHC) is financial institution

through which promoter / promoter groups will be permitted to set up a new bank. It’s a
wholly-owned Non-Operative Financial Holding Company (NOFHC) which will hold the
bank as well as all other financial services companies regulated by RBI or other financial
sector regulators, to the extent permissible under the applicable regulatory prescriptions.

➢ Systemically Important Core Investment Company (CIC-ND-SI):

CIC-ND-SI is an NBFC carrying on the business of acquisition of shares and

securities

➢ Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI):

It means a non-deposit taking NBFC (other than a company formed and registered
under section 25 of the Companies Act, 1956 or Section 8 of the Companies Act, 2013)
that fulfills the following conditions:

• Minimum Net Owned Funds of Rs 5 crores. (For NBFC-MFIs registered in

the North Eastern Region of the country, the minimum NOF requirement
shall stand at Rs 2 crores).
• Not less than 85% of its net assets are in the nature of qualifying assets.

BENEFITS OF NBFC’s

➢ Competitive Interest Rates:

Rate of interest is one of the main aspects of all types of loans. Non-Banking Financial
Sectors have started to concentrate on this area in the recent decades and have brought
down the interest rates to either equal to bank lending rates or at times even lower to bank
rates. With all the other benefits when the rate of interest is also lowered, borrowers found
this easier and more affordable. This has also resulted in lower EMI (Equated Monthly
Instalment) for borrowers. Based on the income, credit scoring, and repayment, the rate of
interest is charged on the borrowers However it is at competitive rates.

17
 ➢ Quick Processing:

At banks, it is very important that the applicant should fulfil the eligibility criteria but
NBFC is lenient in this aspect. This makes loan approval easier, a smoother process, and
quicker. Most of the time, people apply for loans when they are in immediate need of
money. NBFCs have taken this as an opportunity to meet the demand by quickly processing
the loans at a competitive rate of interest. At times, borrowers are even ready to compromise
on the interest rates if the loan amount is huge and if they could get it approved quickly.

➢ Fewer Rules and Regulations:

As NBFC is incorporated under the Companies Act, (though regulated by the Reserve
Bank of India), the rules and regulations for lending are not as stringent as banks. This
helps borrowers to get loans easily. In view of less complicated loan processing
requirements, borrowers are highly satisfied. Of course, the risk of default is high with
NBFC and thus interest rates and other charges will be according priced by the NBFC.
Even the loan amount approved will be quite lesser than the collateral value. This is due to
the high risk of default. NBFCs do not have statutory reserve ratios and can open branches
at will.

➢ Loan available for Individuals with Poor Credit Rating:

Individuals with poor credit ratings generally will not get loans from banks. The reason
for this is banks consider borrowers are high-risk individuals if the credit scoring is low.
Unless the credit score is above 600 -650, it is very difficult to get a loan sanctioned from
banks. On the other hand, loans will be offered to individuals with low credit scores by
NBFCs but most of the time the interest rates for such borrowers will be higher than market
rates. Due to these aforementioned advantages, most of the NBFCs are growing.

➢ With regard to offering loans, banks and NBFCs will offer business, personal and
retail loans. And this is totally on the basis of the repayment capacity of the borrower.
Most of the corporate sector prefers banks; however retail sector chooses NBFCs over
banks. Simple loans such are vehicle financing loans, gold loans, home loans, and
durable loans are offered by NBFCs and the customer satisfaction ratio is high here.
NBFC sector is also set to expand even further in the coming days.

HOW NBFC IS DIFFERENT FROM BANKS:

18
➢ Governing Act:

Banking companies are governed by Banking Companies Act, 1949, whereas, Non-
banking Financial companies are governed by RBI Act

➢ License:

Banking companies must obtain a license from RBI for commencement. However,
there is no license is required in the case of NBFCs.

➢ Ceiling on deposits:

There is no ceiling on deposit mobilization in the case of a banking company, on the

other hand in the case of for NBCs there is a restriction on acceptance of deposits which is
based on the net worth of the company.

➢ Balance Sheet:

The proforma for the Balance sheet of the banking company should be as per the format
provided by RBI. But for Non-banking the company, the balance sheet should be as per the
Companies Act.

➢ Negotiable instruments:

There is the use of negotiable instruments such as cheques, bills of exchange for various
transactions in a bank. But Negotiable instruments cannot be used for the withdrawal of
money from non-Banks.

➢ Credit Rating:

Credit rating is not required for accepting deposits in the case of a banking company.
Whereas NBFCs have a mandatory requirement of Credit rating in order to accept deposits
from the public

➢ Types of Accounts:

Different types of accounts can be opened by a bank for the benefit of customers in a
banking company. A non-banking financial company can only accept deposits of different
duration as prescribed by RBI.

➢ Interest on deposit:

19
 The interest charged by a bank` on deposits is decided by the banks themselves. It is
based on Prime Lending Rate (it is the interest rate charged by the banks while lending on
Government securities that have no risks). But for a non-banking company, the interest rate
on deposits is decided by RBI.

➢ Insurance coverage on deposit:

All bank deposits are insured up to a certain limit compulsorily with Deposit Insurance
Credit Guarantee Corporation. But there is no insurance cover for non-banking company
deposits.

➢ Lending policy:

The lending policy of commercial banks is influenced by the monetary policy of RBI.
But for the other institutions, the lending policy is decided by the security offered by the
borrower

➢ Joint Operation:

All banking companies are necessarily joint-stock companies. But, NBFCs can be in
the form of Nidhi’s, Benefit societies, etc. However, partnership firms are prohibited now.

➢ Forex Transaction:

The commercial banks can undertake transactions in foreign exchange as Authorized

Dealers, whereas, NBFCs cannot undertake transactions in foreign exchange unless they
are licensed by RBI.

➢ Merger of banks:

A banking company can be merged with other commercial banks as per RBI orders.
But the Merger of non-banking will be as per the Companies Act.

➢ Periodical Inspection:

There can be an inspection of banks by RBI periodically. No such approval is required

from RBI. But non-banks should comply with the provisions of the Companies Act.

➢ Appointment of Chairman and Directors:

20
 Appointment of Chairman and managing directors in a banking company requires prior
approval of RBI. But no such approval is required from RBI for an NBC. But, they should
comply with the provisions of the Companies Act.

➢ Type of Advertisements:

Commercial banks can choose any type of advertisement for inviting public deposits.
For non-banks, advertisements for inviting public deposits should be as per RBI
regulations.

➢ Customer grievance:

For a banking company, consumers Grievance Cells of respective banks will look after
the grievance of customers. Whereas in the case of NBFCs a Company Law Board is set
up which acts as the regulatory authority for non-banking companies in case of non-refund
of deposits.

➢ Rate of Interest:

Consumer credit is cheaper with banks as the interest charged is on a declining rate of
interest. But hire purchase finance of NBFCs has a flat rate of interest and hence it s costlier.

➢ Evidence between banker and customer:

Savings account and current account are operated in a bank and entries of the savings
account are recorded in the passbook and the passbook is regarded as the conclusive
evidence between a banker and customer. But there are no such accounts in non-banking
companies.

1.3 COMPANY PROFILE:

Tricolour Financial Services Private Limited (TFSPL) is a NBFC under the licence of
the Reserve Bank of India. Tricolour Financial Services (TFS) Private Limited is a Non-
Banking Financial Institution (NBFI) registered as an NBFC-ND by RBI in October 2018. It
is a non-deposit-taking NBFC providing collateral-free loans and provide customized credit
solutions to SME and MSME clients for their working capital requirements. It is registered as
Investment and Credit Companies (NBFC – ICC) registered with RBI. TFSPL is a new – age
fintech company founded in 2017 by Mr. Suresh Kumar. The company was incorporated in
2017 as private limited. The Company commenced business in October 2019 after recruitment
of senior management and successful installation of a Loan Origination and Loan Management

21
Software (LOS&LMS). TFS has been consistently profitable year on year since 2019 to date
and the audited financials can be reviewed on the website which would be shortly upgraded.

TFS is designed as a key part of an ‘integrated finance proposition’ i.e., providing both
debt (via the NBFC), an equity and hybrid capital via an Alternative Investment Fund
(AIF)/Private Equity. TFS will sponsor the AIF and launch it with SEBI's approval. TFS and
Values Alternative Investments International (VAII) Private Limited (to manage the AIF) have
been ‘promoted’ by Mr. Suresh Kumar, who has over 50 years of Senior Management and
Governance experience in banking and financial Institutions. Mr Kumar is the Chairman and
Mentor of TFS, and the Board of Directors include Mr. CR Rajagopal, former partner at
Deloittes and an experienced senior professional as an Independent Director. The third director
is Mrs. Sethu Kumar who has considerable years of relevant banking and academic experience.

TFS focuses on financing SMEs and extends to them such business loans and other
credit facilities as would provide them with growth capital on a sensible risk-calibrated basis.
TFS would like to pursue companies of good standing, with diverse income streams and more
importantly building upon the entrepreneurial abilities of the promoters of the businesses to
establish sustainable, viable and vibrant enterprises. TFS continues to build a strong and
capable team of managers and senior managers.

➢ CIN/LLPIN/FCRN - U65929TZ2017PTC029206
➢ ROC Code - ROC-Coimbatore
➢ Company No. – 029206
➢ Category: Company Limited By Shares
➢ Products: Unsecured Loans
➢ Authorized Capital: 45 Cr
➢ Paid Up Capital: 25.7 Cr
➢ Date of Incorporation: 13 July 2017
➢ Place: Coimbatore
➢ Employees: 11-20

VISION

To provide a most innovative way of providing loans to SMEs and MSME by using
technology that facilitates faster processing thereby meeting the fund requirement of clients on
time.

22
DEPARTMENT PROCESS

➢ Sales - They are the most significant person in the organisation because they are
engaged in the cases logins that are the client bringers to the company that they will
obtain from DSA - Direct Sourcing Agency on which the case must be worked on.
➢ Operations - Once the sales team has sent the logins to operations, they work with the
LMS and LOS (Loan Origination and Loan Management Software) to obtain the
necessary client documents such as KYC and Financials.
➢ Credit - After the Operations team works with the login document, the Credit team
works with the eligibility on three norms: ABB, GST, and DSCR, where the login must
meet any of the three norms to be eligible, and then the process of personal discussion
occurs by checking their loan track and bank statement, having a general conversation
with the client, and moving on to the reference calls for confirmation. The paperwork
will then be completed with a credit evaluation remark and forwarded to the directors
for approval of the login.
➢ Finance - Once the login case is accepted by the company's directors, the finance staff
produces the loan amount and transfers it to the clients by generating a charge sheet and
penalty charges.
➢ Collection Team - The collection team is responsible for processing finished cheques
and documents, such as the individual who receives a cheque every month depending
on their tenure amount.
➢ Human Resource Team - The HR team is in charge of the selection and recruiting
process, in which the organisation selects the best candidate for the position.

DIRECTORS

➢ Mr SURESH KUMAR - Mr. Suresh Kumar is the founding chairman of this company.
He is having over 45 years of experience in globally active banking and financial
institutions. He is CEO & Ex Co member in the Emirates Bank / Emirates NBD Group
(1985 – 2012) He was Member & Later Chairman of the Board of Directors of Federal
Bank Ltd (2005-2013),IDBI Federal Life Insurance Co. Ltd (2011-2015), and FedBank
Financial Services Ltd (2009 to date). He is currently Independent Director in the
Boards of ICICI Lombard General Insurance Company Ltd, (2015 to date), ICICI
Prudential AMC Ltd (2014 to date), Aster DM Healthcare (UAE & India 2015 to date)
and Emirates REIT @ DIFC (2010 to date). He is Board Member in Non-Profitable

23
 Institutions like Founder-President of IBPC Dubai. Founder – (DUCTAC) Dubai
Community Theatre & Art Centre). Educational & philanthropic institutions in the
UAE and in India; (Tips Tech, S.P. Jain, Build).
➢ MRs. SETHU SURESH KUMAR - Mrs. Sethu Suresh Kumar has extensive
experience in the fields of banking and education. She joined the State Bank of India
as a Probationary Officer in 1975 and spent time in different divisions of the Bank. She
then continued her banking experience with Emirates Commercial Bank in Dubai.
Thereafter she then moved to the field of education, teaching Chemistry to IB students
and was Head of Science Department at an International School in Dubai. Later she
was Director of a Montessori nursery school. She is an avid reader and was a moderator
for several years at the prestigious Emirates Festival of Literature, held annually in
Dubai. Sethu Suresh Kumar has an M.Sc. in Chemistry from the University of Delhi.
➢ Mr C R RAJAGOPAL - C R Rajagopal is a Chartered Accountant by profession
having a vast experience of more than 35 years. Professional career includes head of
Finance and Accounts of a leading listed Textile company and later as a Partner in a
leading Professional services Firm for 22 years retired. As Senior Audit Partner, he has
handled leading companies in Textiles, fashion, Automotive component
manufacturing, Mining, Agriculture, Plantations and Retail Industries. His core areas
of expertise are finance, private equity, mergers, acquisitions and reorganisations. He
specializes and is highly adept in formulation of strategy, governance management, risk
mitigation, financial and corporate restructuring. He is passionate about the
development and growth of family-owned businesses and has advised and mentored
more than 15 enterprises, who are now recognised players with global presence.

LOCATION OF SERVICE:

➢ Bangalore
➢ Chennai
➢ Coimbatore
➢ Madurai

24
1.4 STATEMENT OF THE PROBLEM

• Balance sheets and Profit & Loss accounts are important statements to owners,
management, and investors.
• A balance sheet gives a summary of the firm’s resources (Assets) and obligations at a
point in time. Whereas the Profit & Loss Account results in the business operations by
summarising revenue and expenses during a period.
• Both these statements fail to explain the changes in assets, liabilities, and owners’
equity.
• Therefore, an additional statement is needed to show the changes in assets, liabilities,
and owners’ equity.

25
1.5 OBJECTIVE OF THE STUDY

• To know the history and profile of Tricolour Financial Services Private Limited
• To examine the financial performance of the Tricolour Financial Services Private
Limited
• To critically analyses the financial performance of the Tricolour Financial Services
Private Limited with the help of the ratios.
• To offer appropriate suggestions for the better performance of the organization.
• To know the profitability, liquidity and solvency position of the Tricolour Financial
Services Private Limited

26
1.6 SCOPE OF THE STUDY

The scope of the study is limited to collecting financial data published in the annual
report of the company every year. The analysis is done to suggest the possible solutions. The
study is carried out for 5 years (2017-2022).

1.7 LIMITATION OF THE STUDY

• The study is based on only secondary data provided in the financial statement.
• The study is limited to accuracy of the statistical tools used.
• The period of study was 2017-2022 financial years only.
• One of the factors of the study was lack of availability of ample information.
• Most of the information has been kept confidential and as such as not assed as art of
policy of company

27
REVIEW OF LITERATURE
 CHAPTER 2

REVIEW OF LITERATURE

In this chapter we will be able to understand various Reviews and Literatures from various
authors and scientists. A literature review is a survey of scholarly sources on specific topic. It
provides an overview of current knowledge, allowing us to identify relevant theories, methods,
and gaps in the existing research. It discusses published information in a particular subject area,
and sometimes information in a particular subject area within a certain time period. Generally,
the purpose of review is to analyze critically a segment of a published body of knowledge
through summary, classification and comparison of prior research studies, reviews of literature
and theoretical articles. This chapter contains a review of 25 articles related to Financial
Position, Ratio Analysis, Trendline, Accounting Standards, Accounting Statement.

1. Yerda.vletova. F & Etal (2021) Studied the financial position of a firm in the
pandemic CoronaVirus. It had a great impact around the world. They found out that the
outbreak of the Virus had a significant impact on the preparation and presentation of
financial reports. The final impact was that the financial statement or financial position
varies depending on the specific business risks and circumstances prevailing in the
company.
2. Anil Kumar Goyal (2020) ‘A Study on financial analysis of Indian oil corporation’
Financial analysis is the art and science of examine and drawing interference from the
financial statement. The study is based on secondary date collected from company
annual report for the period of five years from2005-2006 to 2011-2012. The analysis
was been made on gross profit ratio, net profit ratio, EPS, debt-equity ratio to and
concluded the profitability position of the company cannot be said satisfactory because
the gross profit ratio varies from the average.
3. Haitham Nobanee (2020): ‘A Study on financial performance on dell technologies.
The author had made the study to analysis company financial position with data
collected from yahoo finance for the period of 2015-2016 to 2018-2019. The Analysis
consists of four different ratios and made up a suggestion to increase company’s
financial stability and to reduce the impact of stating the occurrence of unfavourable
incidences to minimize the negative impact on investors.
4. Larkin, Richard & Ditommaso, Marie (2020) the financial statement of a non-profit
organization. By using the information provided by FASE ASC 958 - 210 for preparing

28
 the statement and information provided by ASU 2016-14 Then he also includes
information from ASB ASC 210-20-05 to provide a general principle of accounting that
the offsetting of assets and liabilities. He said that financial Statements must include
several disclosure, aggressive assets, and liabilities into homogeneous groups.
5. Alibhai, ETAL (2020) studied International financial reporting standards, assets and
liability are recorded at cost or fair price. Then as a practical matter, banks and some
other financial institutions, primarily invoke liquidity exceptions. Continental Europe
requires a portion of retained earnings and a small portion of where capital and set aside
a legal reserve.
6. Bondu & Sangisetti, Manoy (2020) This rematch is done by applying accounting tools
and techniques like common size analysis, trend analysis, ratio analysis, and
Comparative Analysis. This financial analysis has been a very fundamental tool for the
creditors, management, investors, and other users to measure the financial position of a
company to make several decisions.
7. Istomina & Etal (2020) studied modern trends related to providing territories with
inter-budget transfer both in domestic scientific literature and foreign scientific
literature. It is proved that there is a need for legislation and financial regulation in the
format of establishing mandatory parameters for the consistent entities of the Russian
federation. Besides the level of financial dependence of highly significant changes in
(an indicator of an оwn revenues and debtors of highly subsidized the Russian
Federation.
8. Tekić, Dragana & Etal (2020) studied the financial position of mill Companies in
Vojvodina. It absorbed companies from 2015 to 2019. The author used two models,
mainly Altman's Z Score model and Kralicek's quick test model. These models use
standard financial ratio indicators to assess the bankruptcy of Companies. The result
showed successful Company a was MLINTEST and in the worst financial position
KIKINDSKI MLIN.
9. Jončová & Etal (2019) evaluated the financial position of a non-financed business
entity divided by SK NACE 689 other human health activities. They used financial data
of 21 Spa Companies from 2013-to 2017. It has 16 joint-stock companies, 13 LLP and
2 state-owned companies. They used four methods of multi-criteria Evaluation. Within
that methodology, they used productivity and intensity indicators, namely basic earning
power of decision-making units, return on sales, personal cost to net turnover ratio, and
value-added to sales ratio.
29
10. AICPA (2019) states that financial statements should focus on the NEP as a whole and
report all the amount and literature on accounting does not specify whether certainly
required information should be presented on the face of the statement of financial
stational position. There the pancake format is in which numerous funds are presented
separately so it makes it easier to include comparative information by fund or class is a
more compact argument than does the Columnar formal.
11. Sharavova, O.I & Etal (2016) researched the financial resources of the
Communication Companies. It is proved that cost structure impacted the value of
financial stability, solvency, and liquidity of the mobile Communications Companies.
It has been present in the developed econometric model of the evolution of prospective
financial stability of the mobile communication Companies.
12. Collings & Steve (2016) studied the financial position of a reporting entity at the end
of a reporting period. It is not necessary that the end of 'reporting period should be your
end, it can be any point in time. They exposed companies under the Companies Act
2006. This Act prescribes the structure for balance sheets and complies with the
requirement of Financial Reporting Standard [FRS] 102,105 & European Union. The
reporting entities preparing financial statements to the example of the EU adopted
IFRS.
13. Tatiana Nikolaevna Fliginskih & Etal (2016), studied the dynamics and identification
of trends in related indicators of the financial position of credit and non-credit
institutions in the Russian Federation. The main difference in the approaches to
calculating the basic Coefficient characterizing the financial stability of organizations
was received liquidity solvency and Capital adequacy.
14. Mackenzie & Etal (2014) studied the format and concept of a financial position
statement by incorporating guidance from framework IAS 1 and other standards. It
describes 9 that assets and liabilities are recorded at cost or fair value as per IFRS in
the financial statement. Then IAS 1 does not prescribe a Sequence or format for the
items presented in the statement.
15. Khan, (2013) found that the bank with higher total capital, deposits, credits, or total
assets does not always mean that has better profitability performance. The operational
efficiency and asset management, in addition to the bank size, strongly and positively
influenced financial performance of the banks.
16. Jani, Dr (2012) Concluded that this research paper strongly supports that the financial
position of BHEL is strong from 2003 to 2011. The first part is described by the cost of
30
 equity capital of the company and their estimation through arithmetic mean. The author
attempted to improve EVA and T-test used to measure the correlation between the
financial indicators of the Company. The result shows the cost of equity capital of the
company and the correlation between EVA&EPS and other indicators.
17. Mahesh R & Dadlekar Prasad (2012) focused on the performance of Indian Airline
Companies after the Consolidation of the airline Sector in the year 2007-08 · The main
objective was the financial position of this company’s efficiency during the port merger
& acquisition period. They found that there was no improvement in surviving after post-
merger and acquisition.
18. Md .Tofael Hossain Majumder& Mohammed Mizanur Rahman ( 2011) researched
the financial performance of the pharmaceutical industry to test its strengths and
weaknesses. It was found that they are not in a sound position and also they were at a
lower level position of bankruptcy.
19. K.S.Savitha and Dr.P. Palanivelu (2011) studied and Concluded that management
should utilize maximum production Capacity to increase profit. To find it they studied
the total number of 7 Companies and concluded to analyze the present financial position
of the companies listed in NSE (Steel industry) and to Compare based on the
profitability of companies.
20. Surupaceanu and Ecaterina (2011) concluded that performance information is useful
to produce the entity's ability to generate cash flow and useful for formulating
judgments about the effectiveness of the entity. They considered most cases to contain
distinct both accounting regulation and tax rules prescribed under accounting doctrine.
21. Siddiqui & Shoaib, (2011) found in their study “Measuring performance through
capital structure in Pakistan” that size of the bank played a significant role in
determining the profitability of the bank measured by ROE. They used also the Tobin’s
Q model as a proxy of determining banks performance while they found that Tobin’s
Q is affected by the size of the bank, the leverage ratio and Investments carried out by
the bank.
22. Ahmad, (2011) studied the financial performance of seven Jordanian commercial
banks. He used the ROA as a measure of banks’ performance and the bank size, asset
management and operational efficiency as three independent variables affecting ROA.
The results of his analysis revealed a strong negative correlation between ROA and
banks’ size, a strong positive correlation between ROA and asset management ratio,
and a negative weak correlation between ROA and operational efficiency.
31
23. Ali et al. (2011) conducted a comprehensive study about banks’ profitability in
Pakistan, where they found significant relation between asset management ratio, capital
and economic growth and with ROA. While they found that operating efficiency, asset
management and economic growth are significant with the ROE.
24. Bilston &Etal (2010) studied the financial position of unlisted firms and Compared it
with that of the border business sector. There was some downward pressure on profits
in 2009, and the ongoing profitability of firms in the unlisted sector has provided a flow
of internal funds that has helped the sector to reduce gearing.
25. David J. Collison & Etal (2007), studied the financial performance of the FTSE 4 good
indices. This was Good performed from 1996 to 2005. It has resulted that a portfolio of
Companies that satisfies FTSE4Good corporate social responsibility criteria is no worse
than the count experts who don't follow a socially responsible strategy when purchasing
equity.

32
RESEARCH METHDOLOGY
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 RESEARCH DESIGN

The study uses Analytical Research Design. Analytical research is a specific type of
research that involves critical thinking skills and the evaluation of facts and information relative
to the research being conducted. It is a generic process combining the power of the Scientific
Method with the use of formal process to solve any type of problem.

3.2 SAMPLING DESIGN

The Sampling technique used in Convenient Sampling

3.3 DATA COLLECTION INSTRUMENT

In order to develop trend and ratio analysis the researchers used both secondary data of
Tricolour Financial Services Private Limited. The audited annual financial reports for the
selected company during the year 2017 to 2022 were the area of focuses as a source of
secondary data. The other sources like literatures from various books, journals and websites
were also used as a source of secondary data.

3.4 MEASUREMENT SCALES AND TOOLS

The data collected were meaningless unless and otherwise they were not interpreted
and analysed correctly. The data were analysed through table, graph and percentage. The
researchers used descriptive analysis technique using the below analysis: -

• Common Size Balance Sheet Analysis: A common size balance sheet is a balance
sheet that displays both the numeric value and relative percentage for total assets, total
liabilities, and equity accounts.
• Comparative Balance Sheet Analysis: A comparative balance sheet is a statement
that shows the financial position of an organisation over different periods for which
comparison is made or required.
• Ratio Analysis: It is the analysis of the line items present in the financial statements of
the company. It can be used to check various factors of a business such as profitability,
liquidity, solvency and efficiency of the company or the business. It is a quantitative
method of gaining insight into a company's liquidity, operational efficiency, and

33
 profitability by studying its financial statements such as the balance sheet and income
statement.
• Trend Analysis: Trend analysis is an analysis of the trend of the company by
comparing its financial statements to analyze the trend of the market or analysis of the
future based on past performance results, and it’s an attempt to make the best decisions
based on the results of the analysis done. It is a statistical technique that involves the
collection of information from multiple time periods and plotting the information on a
horizontal line for further review.
• Altman’s Z-score Model: Altman’s Z-Score model is a numerical measurement that
is used to predict the chances of a publicly traded manufacturing company going
bankrupt in the next two years. The formula is based on the information found in the
income statement and balance sheet of an organization and takes into takes into account
profitability, leverage, liquidity, solvency, and activity ratios.
• Correlation: It is a statistical method used to measure the strength of the linear
relationship between two variables and compute their association. It calculates the level
of change in one variable due to the change in the other.
• Mootal’s Comprehensive Test: Mootal prescribes a comprehensive test for
determining the soundness of a firm as regards liquidity position. According to him, a
process of ranking is used to arrive at a more comprehensive measure of liquidity in
which the following three ratios are combined in a point score.

3.5 PERIOD OF STUDY

This study uses the financial statements of the Tricolour Financial Services Private Limited
collected from the year 1st April 2017 to 31st March 2022.

34
 ANALYSIS
&
INTERPRETATION
 CHAPTER IV

ANALYSIS AND INTERPRETATION

This chapter brings out the analysis of past 5 years (1st April, 2017 to 31st March, 2022)
data (Financial Statements) of Tricolour Financial Services Private Limited. For the data
collection, the and this data was used for the analysis purpose.

4.1 COMMON SIZE BALANCE SHEET ANALYSIS

Table 4.1.1: Common Size Balance Sheet Analysis

31st
31st Mar
In Mar In
Particulars 2022 in
Percentage 2021 in Percentage
Lakhs
Lakhs
Current Assets 180.55 100% 199.64 100%
Cash & Bank 138.84 77% 172.11 86%
Inventory / Work-in-Progress 0 0
Accounts Receivable Less than six months 0.43 0% 0.97 0%
Advance to suppliers 16.51 9% 10.63 5%
Other Current Assets 24.77 14% 15.94 8%
Other Assets (Non-Current) 2597.60 100% 2483.59 100%
Long Term Advances to Directors /
Shareholders / Relatives / Friends / Group 0 0
Entities / Related Entities
Accounts receivable more than six months 1876.48 72% 1369.13 55%
Security Deposits 688.43 27% 1083.77 44%
Other Non-Current Assets 7.73 0% 9.51 0%
Fixed Assets 24.96 1% 21.18 1%
Fixed Assets 38.31 34.11
Less: Accumulated Depreciation 13.35 12.93
Total Assets 2778.15 100% 2683.24 100%

35
 Current Liabilities 137.48 100% 179.86 100%
Working Capital Limits 0 0
Short term Secured/Unsecured Loans from
0 0
Banks / Financial Institutions
Short term loans from Directors / Shareholders
/ Relatives / Friends / Group Entities / Related 0 0
Entities
Short term Unsecured Loans from Others 0 0
Account Payable 9.05 7% 78.86 44%
Other Current Liabilities 128.43 93% 101.00 56%
Non-Current Liabilities 256.85 100% 202.01 100%
Secured/unsecured Loans from Banks /
0 0
Financial Institutions
Loans from Directors / Shareholders /
Relatives / Friends / Group Entities / Related 0 0
Entities
Unsecured Loans from Others 0 0
Other Non-Current Liabilities 256.85 100% 202.01 100%
Equity 2383.82 86% 2301.37 86%
Capital 2570.30 93% 2570.30 96%
General Reserves -186 -7% -269 -10%
Total Liabilities 394.33 100% 381.87 100%
Total Equity and Liabilities 2778.15 100% 2683.24 100%

Interpretation:

The researcher found a total asset of 2,778 lakhs in FY 2022 in TFSPL, where 7% are Current
Assets and 93% are Non-Current Assets.

The researcher found a total asset of 2,683 lakhs in FY 2021 in TFSPL, where 8% are Current
Assets and 92% are Non-Current Assets.

The researcher found in current assets that cash and cash equivalent are about 77 percent and
86 percent in 2022 and 2021, respectively.

The researcher found in non-Current assets that long term Receivables are about 72 percent
and 55 percent in 2022 and 2021, respectively.

The researcher found a total liability of 394 Lakhs in FY 2022 in TFSPL, where 35% are current
liability and 65% are non-current liability.

The researcher found a total liability of 382 Lakhs in FY 2021 in TFSPL, where 47% are current
liability and 53% are non-current liability.

36
The researcher found in current liability of 138 Lakhs in FY 2022 where 7% are Account
payables and 93% are other current liability whereas, in FY 2021 The researcher found in
current liability of 180 Lakhs where 44% are Account payables and 56% are other current
liability

According to table 4.1.1, non-current liabilities total 257 lakhs in 2022 and 202 lakhs in 2021,
with other non-current liabilities equal to 100 percent in both years.

Equity of 2,570 Lakhs in both the FY, holds 86% of Total equity and liability.

4.2 COMPARATIVE BALANCE SHEET ANALYSIS

Table 4.2.1: Comparative Balance Sheet Analysis

31st 31st 31st 31st 31st

Mar In Mar In Mar In Mar In Mar In
Particulars
2022 in Percentage 2021 in Percentage 2020 in Percentage 2019 in Percentage 2018 in Percentage
Lakhs Lakhs Lakhs Lakhs Lakhs
Current
180.55 100% 199.64 100% 353.35 100% 68.95 100% 90.32 100%
Assets
Cash & Bank 138.84 77% 172.11 86% 314.72 89% 12.56 18% 0.60 1%
Inventory /
Work-in-
Progress
Accounts
Receivable
0.43 0% 0.97 0% 25.13 7% 52.30 76% 89.70 99%
Less than six
months
Advance to
16.51 9% 10.63 5% 5.40 2% 1.64 2% 0%
suppliers
Other Current
24.77 14% 15.94 8% 8.10 2% 2.45 4% 0.02 0%
Assets
Other Assets
(Non- 2597.60 100% 2483.59 100% 1923.05 100% 1150.94 100% 642.82 100%
Current)
Long Term
Advances to
Directors /
Shareholders /
Relatives /
Friends /
Group Entities
/ Related
Entities
Accounts
receivable
1876.48 72% 1369.13 55% 267.76 14% 146.45 13% 0.05 0%
more than six
months
Security
688.43 27% 1083.77 44% 1629.65 85% 1000.86 87% 639.67 100%
Deposits
Other Non-
7.73 0% 9.51 0% 10.66 1% 2.00 0% 1.90 0%
Current Assets
Fixed Assets 24.96 1% 21.18 1% 14.98 1% 1.63 0% 1.20 0%

Fixed Assets 38.31 34.11 27.13 1.81 1.33

Less:
Accumulated 13.35 12.93 12.15 0.18 0.13
Depreciation
Total Assets 2778.15 100% 2683.24 100% 2276.40 100% 1219.89 100% 733.14 100%

37
 31st
31st 31st 31st 31st
Mar
Mar In Mar In Mar In Mar In In
Particulars 2018
2022 in Percentage 2021 in Percentage 2020 in Percentage 2019 in Percentage Percentage
in
Lakhs Lakhs Lakhs Lakhs
Lakhs
Current Liabilities 137.48 100% 179.86 100% 101.87 100% 78.71 100% 32.71 100%
Working Capital
Limits
Short term
Secured/Unsecured
Loans from Banks /
Financial Institutions
Short term loans
from Directors /
Shareholders /
Relatives / Friends /
Group Entities /
Related Entities
Short term Unsecured
Loans from Others
Account Payable 9.05 7% 78.86 44% 18.75 18% 9.84 13% 1.54 5%
Other Current
128.43 93% 101.00 56% 83.12 82% 68.87 87% 31.17 95%
Liabilities
Non-Current
256.85 100% 202.01 100% 166.24 100% 137.73 100% 62.33 100%
Liabilities
Secured/unsecured
Loans from Banks /
Financial Institutions
Loans from Directors
/ Shareholders /
Relatives / Friends /
Group Entities /
Related Entities
Unsecured Loans
from Others
Other Non-Current
256.85 100% 202.01 100% 166.24 100% 137.73 100% 62.33 100%
Liabilities
Equity 2383.82 86% 2301.37 86% 2008.29 88% 1003.45 82% 638.10 87%

Capital 2570.30 93% 2570.30 96% 2266.29 100% 1191.29 98% 715.00 98%

General Reserves -186 -7% -269 -10% -258 -11% -188 -15% -77 -10%

Total Liabilities 394.33 100% 381.87 100% 268.11 100% 216.44 100% 95.04 100%
Total Equity and
2778.15 100% 2683.24 100% 2276.40 100% 1219.89 100% 733.14 100%
Liabilities

Interpretation:

The researcher found that compare the balance sheet for the financial year 2022-2021 the
balance sheet shows that there is a 19% decrease in Cash and Cash Equivalents of TFSPL. The
researcher found that compare balance sheet for the financial year 2020-2019 the balance sheet
shows that there was an increase of 2,405% increase in Cash and Cash Equivalents.

The researcher found that compare the balance sheet for the financial year 2018-2022 the
balance sheet shows that there is a huge impact in Account receivables which are short term
receivables.

The researcher found that compare the balance sheet for the financial year 2022– 2021 the
balance sheet shows there is a 1% increase in fixed assets. The researcher found that compare
the balance sheet for the financial year 2021 - 2018 the balance sheet shows there is an average
of 10% increase of fixed assets every year.

38
The researcher found that compare the balance sheet for the financial year 2022– 2021 the
balance sheet shows there is a 36% decrease in Security Deposits. The researcher found that
compare the balance sheet for the financial year 2021 - 2018 the balance sheet shows there is
an average increase of 60% of security Deposits.

Though there is an increase of in the total assets for about 95 Lakhs from 2021 to 2022, there
was an increase of 2,045 Lakhs during 2017 to 2022.

The researcher found that compare the balance sheet for the financial year 2022 - 2021 the
balance sheet shows there is a 89% decrease in trade payables. The researcher found that
compare the balance sheet for the financial year 2021-2018 the balance sheet shows there is an
average increase of 317% of trade payables.

there is an average increase of 48% of other current liabilities for the financial year 2018-2022,
where as there is also the same increase of 48% of other non-current liabilities for the financial
year 2018-2022.

The researcher found that compare the balance sheet for the financial year 2022 - 2021 the
balance sheet shows there is a 3% increase in total liabilities. The researcher found that compare
the balance sheet for the financial year 2021-2018 the balance sheet shows there is an average
increase of 65% of total liabilities.

Though there is an increase of in the total equity and liabilities for about 95 Lakhs from 2021
to 2022, there was an increase of 2,045 Lakhs during 2017 to 2022 which is 279% increase.

39
4.3 RATIO ANALYSIS

4.3.1 Current Ratio

Current Ratio = Current Assets / Current Liabilities

Table 4.3.1: Current Ratio

Current
Year Current Asset Current Ratio
Liability
2018 180.55 137.48 1.313
2019 199.64 179.86 1.110
2020 353.35 101.87 3.469
2021 68.95 78.71 0.876
2022 90.33 32.7 2.762

Interpretation:

The above table and diagram showed the current ratio of five years (2018-22). The
Current Ratio of Tricolour Financial Services Private Limited varied from 2.8 to 1.3. The
Current ratio in the year 2020 is 3.5 which came down to 1.1 in the year 2012. This shows
utilization of idle funds in the company.

Chart 4.3.1: Current Ratio

Current Ratio
4.0
3.5
3.5
3.0 2.8
2.5
2.0
1.5 1.3
1.1
0.9
1.0
0.5
0.0
2022 2021 2020 2019 2018

Current Ratio

40
4.3.2 Quick Ratio

Quick Ratio = Quick Assets / Current Liabilities

(Quick Assets = Current Assets – Inventories)

Table 4.3.2: Quick Ratio

Year Quick Assets Current Liability Quick Ratio

2018 180.55 137.48 1.3
2019 199.64 179.86 1.1
2020 353.35 101.87 3.5
2021 68.95 78.71 0.9
2022 90.33 32.7 2.8

Interpretation:

The above table and diagram showed the Quick ratio of five years (2018-22). The Quick
Ratio of Tricolour Financial Services Private Limited varied from 2.8 to 1.3. The high Quick
Ratio indicates that the firm has the ability to meet its current liabilities. In terms of Quick ratio
was above the standard norm volume of 1:1 for the entire period.

Chart 4.3.2: Quick Ratio

Quick Ratio
4.0
3.5
3.5
3.0 2.8
2.5
2.0
1.5 1.3
1.1
0.9
1.0
0.5
0.0
2022 2021 2020 2019 2018

Quick Ratio

41
4.3.3 Absolute Liquid Ratio:

Absolute Liquid Ratio = Cash and Cash Equivalents / Current Liabilities

Table 4.3.3: Absolute Liquid Ratio

Cash and Cash Current

Year
Equivalents Liability Absolute Liquid Ratio
2018 138.84 137.48 1.0
2019 172.11 179.86 1.0
2020 314.73 101.87 3.1
2021 12.56 78.71 0.2
2022 0.6 32.7 0.02

Interpretation:

The above table and diagram showed the Absolute Liquid Ratio of five years (2018-
22). The Absolute Liquid Ratio of Tricolour Financial Services Private Limited varied from 0
to 1. In terms of Absolute Liquid Ratio was above the standard norm volume of 1:2 for the
entire period expect for the period 2020 as the Liquid Assets was considered high during the
period.

Chart 4.3.3: Absolute Liquid Ratio

Absolute Liquid Ratio

3.5 3.1
3.0
2.5
2.0
1.5
1.0 1.0
1.0
0.5 0.2 0.02
0.0
2022 2021 2020 2019 2018

Absolute Liquid Ratio

42
4.3.4 Account Receivables Turnover Ratio

Account Receivables Turnover Ratio = Revenue from Operations / Average Receivables

Table 4.3.4: Account Receivables Turnover Ratio

Average Receivable Turnover

Year Sales
Receivable Ratio
2022 324.33 0.7 463.329
2021 246.17 13.05 18.864
2020 132.58 38.72 3.424
2019 99.88 71 1.407

2018 13.04 44.85 0.291

Interpretation:

The above table and diagram showed the Account Receivables Turnover Ratio for thew
five years (2018-2022). The Receivables Turnover Ratio varies from 0.29 to 463.33 which is
drastic change in an organization that receivables are turned over and converted into cash
during the accounting period. During 2020 company starts to grow its ratio times from 3.42
times to 463.33 times where receivables are converted into cash.

Chart 4.3.4: Account Receivables Turnover Ratio

Receivables Turnover ratio (in Times)

500.00 463.33
450.00
400.00
350.00
300.00
250.00
200.00
150.00
100.00
50.00 18.86
3.42 1.41 0.29
0.00
2022 2021 2020 2019 2018
Years

43
4.3.5 Working Capital Turnover Ratio

Working Capital Turnover Ratio = Revenue from Operations / Net working capital

Table 4.3.5: Working Capital Turnover Ratio

Net working Working capital

Year Sales
Capital Turnover Ratio
2022 324.33 43.07 7.530
2021 246.17 19.78 12.445
2020 132.58 251.48 0.527
2019 99.88 -9.76 -10.234

2018 13.04 57.62 0.226

Interpretation:

The above table shows the Working Capital turnover ratio of five years (2018-2022).
Generally, a ratio of 1.5 to two is interpreted as indicating a company on solid financial ground
in terms of liquidity. An increasingly higher ratio above two is not necessarily considered to
be better. A substantially higher ratio can indicate that a company is not doing a good job of
employing its assets to generate maximum possible revenue. It shows that the company has not
utilized its W.C to produce sales during 2019. But they found different strategy to build. In
2021, the WC turnover Ratio stood at 12.44 resulting in higher liquidity and profitability in the
business.

Chart 4.3.5: Working Capital Turnover Ratio

Working capital Turnover ratio

15.00 12.44

10.00 7.53

5.00
0.53 0.23
0.00
2022 2021 2020 2019 2018
-5.00
Years
-10.00
-10.23
-15.00

Working capital Turnover ratio

44
4.3.6 Asset Turnover Ratio

Asset Turnover Ratio = Revenue from Operations / Average Total Assets

Table 4.3.6: Asset Turnover Ratio

Average Total
Year Sales
Assets Asset Turnover Ratio
2018 324.33 2730.69 0.119
2019 246.17 2479.82 0.099
2020 132.58 1748.15 0.076
2021 99.88 976.52 0.102
2022 13.04 366.57 0.036

Chart 4.3.6: Asset Turnover Ratio

Asset turnover ratio

0.14
0.12
0.12
0.10 0.10
0.10
0.08
0.08

0.06
0.04
0.04

0.02

0.00
2022 2021 2020 2019 2018
Years

Interpretation:

The above table and diagram showed the Working Capital turnover ratio of five years
(2018-2022). This shows the company is in risk as there are inefficiency in utilisation of
resources. The Chart gives ratio which stands below 1 time stating lower turnover for all the
five financial years.

45
4.3.7 Debt-to-Equity Ratio

Debt to Equity Ratio = Long term Debts / Equity

Table 4.3.7: Debt-to-Equity Ratio

Year Debt Equity Debt Equity Ratio

2022 256.85 2383.82 0.108
2021 202.01 2301.37 0.088
2020 166.24 2008.29 0.083
2019 137.73 1003.45 0.137
2018 62.33 638.11 0.098

Interpretation:

The above table and diagram showed the Debt-to-Equity ratio of five years (2018-
2022). This Ratio is calculated to assess the ability of the firm to meet its long-term liabilities.
Generally, debt equity ratio of is considered safe. The standard norm for the ratio is 2:1. The
debt to equity ratio is too low for all the years as the Equity of the company’s shareholder is
bigger and it does not require any money to finance its business and operations for growth. The
preferable of Debt Equity Ratio for Capital-intensive industries like the financial and
manufacturing industries is around 2.

Chart 4.3.7: Debt-to-Equity Ratio

Debt equity ratio

0.16
0.14
0.14
0.12 0.11
0.10
0.10 0.09 0.08
0.08
0.06
0.04
0.02
0.00
2022 2021 2020 2019 2018
Years

46
4.3.8 Proprietary Ratio

Proprietary Ratio = Equity / Total Assets

Table 4.3.8: Proprietary Ratio

Year Equity Total Asset Proprietary Ratio

2022 2383.82 2778.15 0.86
2021 2301.37 2683.24 0.86
2020 2008.29 2276.4 0.88
2019 1003.45 1219.9 0.82
2018 638.11 733.15 0.87

Interpretation:

The above table and diagram showed the Proprietary ratio of five years (2018-2022).
Higher proportion of shareholders’ funds in financing the assets is a positive feature as it
provides security to creditors. This ratio can also be computed in relation to total assets. The
researcher found that the ratio stands between 80% - 90% which states that the capital
employed is funded by owners’ fund. However, a low proprietary ratio signifies more use of
debt funds for purchasing total assets. It also shows a huge portion of debts in the total assets
may minimize the creditor's interest and increase the finance costs. Thus, the company has a
chance to become bankrupt. Investors and analysts always like a higher ratio compared to a
lower ratio.

Chart 4.3.8: Proprietary Ratio

Proprietary ratio
0.89 0.88
0.88 0.87
0.87
0.86 0.86
0.86
0.85
0.84
0.83 0.82
0.82
0.81
0.80
0.79
2022 2021 2020 2019 2018
Years

47
4.3.9 Total Assets to Debt Ratio

Total Assets to Debt Ratio = Total Assets / Debts

Table 4.3.9: Total Assets to Debt Ratio

Total Assets to Debt

Year Total Asset Debt
Ratio
2022 2778.15 256.85 10.816
2021 2683.24 202.01 13.283
2020 2276.4 166.24 13.693
2019 1219.9 137.73 8.857
2018 733.15 62.33 11.762

Interpretation:

The above table and diagram showed the Total Assets to Debt ratio of five years (2018-
2022). In the Chart, there is a higher ratio that indicates that assets have been mainly financed
by owners’ funds and the long-term loans is adequately covered by assets. This ratio primarily
indicates the rate of external funds in financing the assets and the extent of coverage of their
debts are covered by assets.

Chart 4.3.9: Total Assets to Debt Ratio

Total Assets to Debt Ratio

16.00
13.28 13.69
14.00
11.76
12.00 10.82
10.00 8.86
8.00
6.00
4.00
2.00
0.00
2022 2021 2020 2019 2018
Years

48
4.3.10 Interest Coverage Ratio

Interest Coverage Ratio = EBIT / Interest Paid

Table 4.3.10: Interest Coverage Ratio

Interest
Year EBIT
Payment Interest Coverage Ratio
2022 149.21 33.76 4.42
2021 199.05 7.47 26.65
2020 113.09 4.01 28.20
2019 86.48 2.01 43.02
2018 8.41 0.76 11.07

Interpretation:

The above table and diagram showed the Interest Coverage ratio of five years (2018-
2022). From the table, the researcher observed that could find Interest coverage ratio varies
from 11.13 times to 4.42 times in recent year which states that the safety of the interest on debt
are paid on time and there is no risk.

Chart 4.3.10: Interest Coverage Ratio

Interest Coverage
50.00
45.00 43.11

40.00
35.00
26.63 28.21
30.00
25.00
20.00
15.00 11.13
10.00
4.42
5.00
0.00
2022 2021 2020 2019 2018
Years

49
4.3.11 Net Profit Ratio

Net Profit Ratio = (Net Profit / Revenue from Operations) *100

Table 4.3.11: Net Profit Ratio

Year Net Profit Sales Net Profit Ratio

2022 82.45 324.33 25%
2021 33.24 246.17 14%
2020 12.46 132.58 9%
2019 9.8 99.88 10%
2018 2.98 13.04 23%

Interpretation:

The above table and diagram showed the Net profit ratio of five years (2018-2022). In
this table, the researcher finds the net profit ratio 23% in 2018, 10% in 2019, 9% in 2020, 14%
in 2021 and 25% in 2022 and during 2022 the company achieves maximum net profit ratio.
There was a decline of net profit ratio from 2018-2020 and then there was a huge growth during
2020-2022. In general, a 10% net profit margin is considered average, a 20% margin is
considered high (or “good”), and a 5% margin is low. So in the year of 2019 to 2021, the
company’s Net Profit margins are considered to be average. But in the years of 2018 and 2022
the Net Profit margins are considered high

Chart 4.3.11: Net Profit Ratio

Net profit ratio

30%
25%
25% 23%

20%

15% 14%
9% 10%
10%

5%

0%
2022 2021 2020 2019 2018
Years

50
4.3.12 Operating Profit Ratio

Operating Profit Ratio = Operating Profit / Revenue from Operations

Table 4.3.12: Operating Profit Ratio

Year Operating Profit Sales Operating Profit ratio

2022 161.98 324.33 50%
2021 41.57 246.17 17%
2020 17.7 132.58 13%
2019 12.44 99.88 12%
2018 4.06 13.04 31%

Interpretation:

The above table and diagram showed the Operating profit ratio of five years (2018-
2022). The researcher finds the net profit ratio 31% in 2018, 12% in 2019, 13% in 2020, 17%
in 2021 and 50% in 2022 and during 2022 the operating profit ratio is achieved the maximum
level. There was a decline of profit ratio from 2018-2020 and then there was a huge growth
during 2020-2022. In general, a 10% operating profit margin is considered average, a 20%
margin is considered high (or “good”), and a 5% margin is low. So in the year of 2019 to 2021,
the company’s Operating Profit margins are considered to be average. But in the years of 2018
and 2022 the Operating Profit margins are considered high

Chart 4.3.12: Operating Profit Ratio

Operating profit ratio

60%
50%
50%

40%
31%
30%

20% 17%
13% 12%
10%

0%
2022 2021 2020 2019 2018
Years

51
4.3.13 Operating Ratio

Operating Ratio = Operating Expenses / Revenue from Operations

Table 4.3.13: Operating Ratio

Year Operating Expenses Sales Operating ratio

2022 90.8 324.33 28%
2021 93.78 246.17 38%
2020 61.47 132.58 46%
2019 40.37 99.88 40%
2018 6.7 13.04 51%

Interpretation:

The above table and diagram showed the Operating ratio of five years (2018-2022). In
this chart the researcher could find the net profit ratio 51% in 2018, 40% in 2019, 46% in 2020,
38% in 2021 and 28% in 2022. The Operating ratio varies from 51% to 28% from (2018-2022).
It states that nearly half of the expenses are carried over by sales in 2018. The normal operating
expense ratio range is typically between 60% to 80%, and the lower it is, the better. Researcher
sees that the company’s Operating Ratio is below lower than 60% for all the 5 years. An
operating ratio that is decreasing is viewed as a positive sign, as it indicates that operating
expenses are becoming an increasingly smaller percentage of net sales.

Chart 4.3.13: Operating Ratio

Operating ratio
60%
51%
50% 46%
40%
38%
40%
28%
30%

20%

10%

0%
2022 2021 2020 2019 2018
Years

52
4.3.14 Return on Equity

Return on Equity = (Net Profit – Dividend) / Average Equity

Table 4.3.14: Return on Equity

Equity share
Year Net Income
capital Return on Equity ratio
2022 82.45 2342.59 4%
2021 33.24 2154.83 2%
2020 12.46 1505.87 1%
2019 9.8 820.78 1%
2018 2.98 319.06 1%

Interpretation:

The above table indicates the Return on Equity for the period from 2018 - 2022. It is
observed that ROE of the company for all the years fall below the range of 5%. This ratio is
very important from shareholders’ point of view in assessing whether their investment in the
firm generates a reasonable return or not. It is considered as average as the company have
started to utilize shareholders’ investment for generating a good return. For the recent year the
ROE was the highest which states that there is a good ROE.

Chart 4.3.14: Return on Equity

Return on equity
4%
4%
4%

3%

3%

2%
2%
2% 1%
1% 1%
1%

1%

0%
2022 2021 2020 2019 2018
Years

53
4.3.15 Return on Assets

Return on Assets = Net Profit / Average Total Assets

Table 4.3.15: Return on Assets

Year Net Profit Total Asset Return on Asset ratio

2022 82.45 2730.69 3%
2021 33.24 2479.82 1%
2020 12.46 1748.15 1%
2019 9.8 976.52 1%
2018 2.98 366.57 1%

Interpretation:

The above table indicates the Return on Equity for the period from 2018 - 2022. An
ROA of 5% or better is typically considered good, while 20% or better is considered great A
low ROA for all the year indicates that the company is not able to make maximum use of its
assets for getting more profits. But if you see for the last year ROA comparing 2021 ROA it is
increased by 3 percentage where the profit margin for 2022 has increased turning to good ROA.

Chart 4.3.15: Return on Assets

Return on assets
4%
3%
3%

3%

2%

2% 1%
1%
1% 1%
1%

1%

0%
2022 2021 2020 2019 2018
Years

54
4.4.1 TREND PERCENTAGE ANALYSIS OF NET PROFIT

Table 4.4.1: Trend Percentage Analysis of Net Profit

Year Net Profit Trend (Percentage)

2018 2.98 100%
2019 9.80 329%
2020 12.46 418%
2021 33.24 1117%
2022 82.45 2769%

Interpretation:

The above table indicates the Trend Percentage Analysis of the Net Profit of Tricolour
Financial Services for the period from 2018 - 2022. Here the Net Profit of 2.98 has been taken
as the Base value of the year 2018 which is the Base Period. From the table the researcher
found that the net profit is increasing YOY which is a good sign for a company growth. From
the table it is observed that the Net Profit has increased by 2669% (2769% - 100%) over the 5
years period.

Chart 4.4.1: Trend Percentage Analysis of Net Profit

Trend (Net Profit)

3000% 2769%

2500%
2000%
1500% 1117%
1000% 418%
329%
500% 100%
0%
2018 2019 2020 2021 2022

Trend (Percentage)

55
4.4.2 TREND PERCENTAGE ANALYSIS OF TOTAL ASSETS

Table 4.4.2: Trend Percentage Analysis of Total Assets

Year Total asset Trend (Percentage)

2018 733.15 100%
2019 1219.90 166%
2020 2276.40 310%
2021 2683.24 366%
2022 2778.15 379%

Interpretation:

The above table indicates the Trend Percentage Analysis of the Total Assets of
Tricolour Financial Services for the period from 2018 - 2022. Here the Total Assets of 733.15
has been taken as the Base value of the year 2018 which is the Base Period. From the table the
researcher found that the Total Assets is increasing YOY which is a good sign for a company
growth. From the table it is observed that the Total Assets has increased by 279% (379% -
100%) over the 5 years period.

Chart 4.4.2: Trend Percentage Analysis of Total Assets

Trend (Total Assets)

366% 379%
400%
350% 310%
300%
250%
200% 166%
150% 100%
100%
50%
0%
2018 2019 2020 2021 2022

Trend (Percentage)

56
4.4.3 TREND PERCENTAGE ANALYSIS OF SALES

Table 4.4.3: Trend Percentage Analysis of Sales

Year Sales Trend (Percentage)

2018 13.04 100%
2019 99.88 766%
2020 132.58 1017%
2021 246.17 1888%
2022 324.33 2488%

Interpretation:

The above table indicates the Trend Percentage Analysis of the Sales of Tricolour
Financial Services for the period from 2018 - 2022. Here the Sales of 13.04 has been taken as
the Base value of the year 2018 which is the Base Period. From the table the researcher found
that the Sales is increasing YOY which is a good sign for a company growth. From the table it
is observed that the Sales has increased by 2388% (2488% - 100%) over the 5 years period.

Chart 4.4.3: Trend Percentage Analysis of Sales

Trend (Sales)
3000%
2488%
2500%
1888%
2000%
1500%
1017%
1000% 766%

500% 100%
0%
2018 2019 2020 2021 2022

Trend (Percentage)

57
4.4.4 TREND PERCENTAGE ANALYSIS OF NON-CURRENT LIABILITIES

Table 4.4.4: Trend Percentage Analysis of Non-Current Liabilities

Year Total Non-current liability Trend (Percentage)

2018 62.33 100%

2019 137.73 221%

2020 166.24 267%

2021 202.01 324%

2022 256.85 412%

Interpretation:

The above table indicates the Trend Percentage Analysis of the Non-Current Liabilities
of Tricolour Financial Services for the period from 2018 - 2022. Here the Non-Current
Liabilities of 62.33 has been taken as the Base value of the year 2018 which is the Base Period.
From the table the researcher found that the Non-Current Liabilities is increasing YOY which
is a good sign for a company growth. From the table it is observed that the Sales has increased
by 312% (412% - 100%) over the 5 years period.

Chart 4.4.4: Trend Percentage Analysis of Non-Current Liabilities

Trend (Non-Current Liabilities)

500%
412%
400% 324%
267%
300%
221%
200%
100%
100%

0%
2018 2019 2020 2021 2022

Trend (Percentage)

58
4.4.5 TREND PERCENTAGE ANALYSIS OF CASH AND CASH EQUIVALENTS

Table 4.4.5: Trend Percentage Analysis of Cash and Cash Equivalents

Year Cash and Cash Equivalents Trend (Percentage)

2018 0.60 100%

2019 12.56 2093%

2020 314.73 52446%

2021 172.11 28680%

2022 138.84 23136%

Interpretation:

The above table indicates the Trend Percentage Analysis of the Cash and Cash
Equivalent of Tricolour Financial Services for the period from 2018 - 2022. Here the Cash and
Cash Equivalent of 0.6 has been taken as the Base value of the year 2018 which is the Base
Period. From the table the researcher see that the Cash and Cash Equivalents of all the years
has followed an increasing trend range. So, it is observed that the Cash and Cash Equivalents
has increased by 23036% (23136% - 100%) over the 5 years period

Chart 4.4.5: Trend Percentage Analysis of Cash and Cash Equivalents

Trend (Cash and Cash Equivalent)

60000% 52446%
50000%
40000%
28680%
30000% 23136%
20000%
10000% 2093%
100%
0%
2018 2019 2020 2021 2022

Trend (Percentage)

59
4.5 ALTMAN’S Z SCORE MODEL

Z = 6.56*X1 + 3.26*X2 + 6.72*X3 + 1.05*X4

Table 4.5.1: Altman’s Z score Model (1983)

Value
Particulars (in Lakhs)
2022
X1= working capital / Total assets (43.07/2778.2) 0.02
X2= Retained earnings / Total assets (0/2778.2) 0.00
X3= Earnings before interest and tax / Total assets (161.98/2778.2) 0.06
X4= Market capitalization / Total liabilities (2570.3/394.33) 6.52
Altman Z score 7.34

Interpretation:

The above table indicates the Altman’s Z score of Tricolour Financial Services Private
Limited for the year 2022.Lower the Z-score, the higher the odds that a company is heading
for bankruptcy. A Z-score that is lower than 1.23 means that the company is in financial distress
and with a high probability of going bankrupt. On the other hand, a score of 2.9 and above
means that the company is in a safe zone and is unlikely to file for bankruptcy. A score of
between 1.23 and 2.9 means that the company is in a grey area and with a moderate chance of
filing for bankruptcy. From the table it is observed that the Z score is 7.34 which means that
the company is in a safe zone and is unlikely to file for bankruptcy.

60
4.6.1 CORRELATION BETWEEN NET PROFIT AND SALES

Table 4.6.1: Correlation between Net Profit and Sales

Year Net Profit Sales

2018 2.98 13.04
2019 9.80 99.88
2020 12.46 132.58
2021 33.24 246.17
2022 82.45 324.33
Correlation Value 0.918

Interpretation:

The above table indicates the Correlation between Net Profit and Sales of Tricolour
Financial Services Private Limited for the period from 2018 - 2022. Positive correlation is
measured on a 0.1 to 1.0 scale. Weak positive correlation would be in the range of 0.1 to 0.3,
moderate positive correlation from 0.3 to 0.5, and strong positive correlation from 0.5 to 1.0.
The stronger the positive correlation, the more likely the variables are to move in the same
direction. So, from the table the researcher observed that the Correlation between Net Profit
and Sales is 0.918 which lies in the range of 0.5 to 1.0 meaning that they have a strong positive
relationship.

Chart 4.6.1: Correlation Between Net Profit and Sales

Sales
400
350
300
250
Sales

200
150
100
50
0
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00
Net Profit

61
4.6.2 CORRELATION BETWEEN NET PROFIT AND TOTAL ASSETS

Table 4.6.2: Correlation between Net Profit and Total Assets

Year Net Profit Total Asset

2018 2.98 733.15
2019 9.80 1219.90
2020 12.46 2276.40
2021 33.24 2683.24
2022 82.45 2778.15
Correlation Value 0.74015795

Interpretation:

The above table indicates the Correlation between Net Profit and Total Assets of
Tricolour Financial Services Private Limited for the period from 2018 - 2022. Positive
correlation is measured on a 0.1 to 1.0 scale. Weak positive correlation would be in the range
of 0.1 to 0.3, moderate positive correlation from 0.3 to 0.5, and strong positive correlation from
0.5 to 1.0. The stronger the positive correlation, the more likely the variables are to move in
the same direction. So, from the table the researcher observed that the Correlation between Net
Profit and Total Assets is 0.74 which lies in the range of 0.5 to 1.0 meaning that they have a
strong positive relationship.

Chart 4.6.2: Correlation between Net Profit and Total Assets

Total asset
3500.00

3000.00

2500.00
Total Assets

2000.00

1500.00

1000.00

500.00

0.00
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00
Net Profit

62
4.6.3 CORRELATION BETWEEN NET PROFIT AND NON-CURRENT LIABILITY

Table 4.6.3: Correlation between Net Profit and Non-Current Liability

Year Net Profit Non-Current liability

2018 2.98 62.33
2019 9.80 137.73
2020 12.46 166.24
2021 33.24 202.01
2022 82.45 256.85
Correlation Value 0.877

Interpretation:

The above table indicates the Correlation between Net Profit and Non-Current
Liabilities of Tricolour Financial Services Private Limited for the period from 2018 - 2022.
Positive correlation is measured on a 0.1 to 1.0 scale. Weak positive correlation would be in
the range of 0.1 to 0.3, moderate positive correlation from 0.3 to 0.5, and strong positive
correlation from 0.5 to 1.0. The stronger the positive correlation, the more likely the variables
are to move in the same direction. So, from the table the researcher observed that the
Correlation between Net Profit and Non-Current Liabilities is 0.877 which lies in the range of
0.5 to 1.0 meaning that they have a strong positive relationship.

Chart 4.6.3: Correlation between Net Profit and Non-Current Liability

Non current liability

300.00

250.00
Non-Current Liability

200.00

150.00

100.00

50.00

0.00
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00
Net Profit

63
4.6.4 CORRELATION BETWEEN NET PROFIT AND CASH EQUIVALENTS
Table 4.6.4: Correlation between Net Profit and Cash and Cash Equivalents

Year Net Profit Cash and Cash Equivalents

2018 2.98 0.60
2019 9.80 12.56
2020 12.46 314.73
2021 33.24 172.11
2022 82.45 138.84
Correlation Value 0.192

Interpretation:

The above table indicates the Correlation between Net Profit and Cash and Cash
Equivalents of Tricolour Financial Services Private Limited for the period from 2018 - 2022.
Positive correlation is measured on a 0.1 to 1.0 scale. Weak positive correlation would be in
the range of 0.1 to 0.3, moderate positive correlation from 0.3 to 0.5, and strong positive
correlation from 0.5 to 1.0. The stronger the positive correlation, the more likely the variables
are to move in the same direction. So, from the table the researcher observed that the
Correlation between Net Profit and Cash and Cash Equivalents is 0.192 which lies in the range
of 0.1 to 0.3 meaning that they have a weak positive relationship.

Chart 4.6.4: Correlation between Net Profit and Cash and Cash Equivalents

Cash and Cash Equivalents

350.00
Cash and Cash Equivalents

300.00

250.00

200.00

150.00

100.00

50.00

0.00
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00
Net Profit

64
4.7 MOOTAL’S COMPREHENSIVE TEST

Table 4.7.1: Mootal’s Comprehensive Test

Working capital to Liquid asset to
Total Ultimate
Year current asset ratio Rank current asset ratio Rank
Rank Rank
(%) (%)
2018 23.86 3 90.85 5 8 3
2019 9.91 4 94.68 4 8 3
2020 71.17 1 98.47 2 3 1
2021 -14.16 5 97.63 3 8 3
2022 63.80 2 100.00 1 3 1

Interpretation:

The above table indicates the Mootal’s Comprehensive Test of Tricolour Financial
Services for the period from 2018 - 2022. On the basis of Ultimate ranking, it may be
interpreted that liquidity position of Tricolour Financial Services in the year 2022 (rank 1) and
2020 (rank 1) were the best followed by 2018 (rank 3), 2019 (rank 3), 2021 (rank 3)
respectively in that order. Rank 3 is shared between the years of 2018, 2019 and 2021. It
indicates that the liquidity position of the enterprise is more or less fluctuating over the period
of study.

Chart 4.7.1: Mootal’s Comprehensive Test

Ultimate rank
3.5
3 3 3
3
2.5
2
1.5
1 1
1
0.5
0
2018 2019 2020 2021 2022

Ultimate rank

65
FINDINGS, SUGGESTIONS &
CONCLUSION
 CHAPTER 5

FINDING, SUGGESTION AND CONCLUSION

From the analysis and interpretation done through the statistical tools, the findings of
the study are classified into balance sheet analysis, ratio analysis, trend analysis, Z score,
correlation and Mootal’s comprehensive test sections.

5.1 FINDINGS:

5.1.1 Common Size Balance Sheet Analysis

➢ It is found that the total assets for the FY 2021 and 2022 holds 93% of Non-Current
Assets which are the long-term receivables with an average of 63% for the two
financial years which are to be received 12 months which are considered non-Current
Assets.
➢ It is also found that the current assets which are 7% of the total assets hold an average
of 82% of cash and cash equivalent which includes cash at bank, cash in hand ...etc
for the FY 2021 and 2022.
➢ In the financial year 2022, The researcher found a total liability of 394 Lakhs in FY
2022 in TFSPL, where 35% are current liability and 65% are non-current liability. The
researcher found a total liability of 382 Lakhs in FY 2021 in TFSPL, where 47% are
current liability and 53% are non-current liability.
➢ The researcher found in current liability of 138 Lakhs in FY 2022 where 7% are
Account payables and 93% are other current liability whereas, in FY 2021 The
researcher found in current liability of 180 Lakhs where 44% are Account payables and
56% are other current liability.

5.1.2 Comparative Balance Sheet Analysis

➢ The researcher found that compare the balance sheet for the financial year 2022-2021
the balance sheet shows that there is a 19% decrease in Cash and Cash Equivalents of
TFSPL. The researcher found that compare balance sheet for the financial year 2020-
2019 the balance sheet shows that there was an increase of 2,405% increase in Cash
and Cash Equivalents. The researcher also found that compare the balance sheet for the
financial year 2018-2022 the balance sheet shows that there is a huge impact in Account
receivables which are short term receivables.

66
 ➢ The researcher found that compare the balance sheet for the financial year 2022– 2021
the balance sheet shows there is a 1% increase in fixed assets. The researcher found that
compare the balance sheet for the financial year 2021 - 2018 the balance sheet shows
there is an average of 10% increase of fixed assets every year. The researcher also found
that compare the balance sheet for the financial year 2022– 2021 the balance sheet
shows there is a 36% decrease in Security Deposits. The researcher found that compare
the balance sheet for the financial year 2021 - 2018 the balance sheet shows there is an
average increase of 60% of security Deposits. Though there is an increase of in the total
assets for about 95 Lakhs from 2021 to 2022, there was an increase of 2,045 Lakhs
during 2017 to 2022.
➢ The researcher found that compare the balance sheet for the financial year 2022 - 2021
the balance sheet shows there is a 89% decrease in trade payables. The researcher found
that compare the balance sheet for the financial year 2021-2018 the balance sheet shows
there is an average increase of 317% of trade payables. It is found that there is an
average increase of 48% of other current liabilities for the financial year 2018-2022,
whereas there is also the same increase of 48% of other non-current liabilities for the
financial year 2018-2022.
➢ The researcher found that compare the balance sheet for the financial year 2022 - 2021
the balance sheet shows there is a 3% increase in total liabilities. The researcher found
that compare the balance sheet for the financial year 2021-2018 the balance sheet shows
there is an average increase of 65% of total liabilities. And also there is an increase of
in the total equity and liabilities for about 95 Lakhs from 2021 to 2022, there was an
increase of 2,045 Lakhs during 2017 to 2022 which is 279% increase.

5.1.3 Ratio Analysis:

➢ During 2020 and 2018, the current ratio of the company is higher than the ideal norms
indicating sufficient Current Assets to pay short term liabilities, where as in 2019,
2021, 2022, the current ratio of the company is lower than the ideal norms of 2:1.
➢ The Quick Ratio of the company meets the ideal norms of 1:1 except the quick ratio
in 2019 indicating that there were insufficient liquid assets to pay the short-term
liabilities.
➢ The Absolute Liquid Ratio was above the standard norm volume of 1:2 for the entire
period expect for the period 2020 as the Liquid Assets was considered high during the
period.

67
➢ The Receivables Turnover Ratio varies from 0.29 to 463.33 which is drastic change in
an organization that receivables are turned over and converted into cash during the
accounting period. During 2020 company starts to grow its ratio times from 3.42 times
to 463.33 times where receivables are converted into cash.
➢ It shows that the Working Capital has not utilized during 2019 as it went negative where
as there was a change for that during the recent times as it stands at 7.5 which is
considered as good.
➢ Asset Turnover Ratio for Tricolour Financial Services Private Limited is at risk as the
Assets turnover ratio is below the norms. It only holds below 0.1 which indicate the
risk of assets.
➢ The debt to equity ratio is too low for all the years as the Equity of the company’s
shareholder is bigger and it does not require any money to finance its business and
operations for growth. The preferable of Debt Equity Ratio for Capital-intensive
industries like the financial and manufacturing industries is around 2.
➢ The researcher found that the ratio stands between 80% - 90% which states that the
capital employed is funded by owners’ fund. However, a low proprietary ratio signifies
more use of debt funds for purchasing total assets. It also shows a huge portion of debts
in the total assets may minimize the creditor's interest and increase the finance costs.
Thus, the company has a chance to become bankrupt.
➢ There is a higher ratio that indicates that assets have been mainly financed by owners’
funds and the long-term loans is adequately covered by assets. This ratio primarily
indicates the rate of external funds in financing the assets and the extent of coverage of
their debts are covered by assets.
➢ The researcher observed that could find Interest coverage ratio varies from 11.13 times
to 4.42 times in recent year which states that the safety of the interest on debt are paid
on time and there is no risk.
➢ the researcher finds the net profit ratio 23% in 2018, 10% in 2019, 9% in 2020, 14% in
2021 and 25% in 2022 and during 2022 the company achieves maximum net profit
ratio. There was a decline of net profit ratio from 2018-2020 and then there was a huge
growth during 2020-2022. In general, a 10% net profit margin is considered average, a
20% margin is considered high (or “good”), and a 5% margin is low.
➢ The researcher finds the Operating profit ratio 31% in 2018, 12% in 2019, 13% in 2020,
17% in 2021 and 50% in 2022 and during 2022 the operating profit ratio is achieved

68
 the maximum level. There was a decline of profit ratio from 2018-2020 and then there
was a huge growth during 2020-2022.
➢ The researcher could find the net profit ratio 51% in 2018, 40% in 2019, 46% in 2020,
38% in 2021 and 28% in 2022. The Operating ratio varies from 51% to 28% from
(2018-2022). It states that nearly half of the expenses are carried over by sales in 2018.
The normal operating expense ratio range is typically between 60% to 80%, and the
lower it is, the better. Researcher sees that the company’s Operating Ratio is below
lower than 60% for all the 5 years.
➢ It is observed that ROE of the company for all the years fall below the range of 5%.
This ratio is very important from shareholders’ point of view in assessing whether their
investment in the firm generates a reasonable return or not. It is considered as average
as the company have started to utilize shareholders’ investment for generating a good
return. For the recent year the ROE was the highest which states that there is a good
ROE.
➢ The researcher observed in Tricolour Financial Services that ROA of 5% or better is
typically considered good, while 20% or better is considered great A low ROA for all
the year indicates that the company is not able to make maximum use of its assets for
getting more profits. But if you see for the last year ROA comparing 2021 ROA it is
increased by 3 percentage where the profit margin for 2022 has increased turning to
good ROA.

5.1.4 Trend Analysis

➢ According to Trend Percentage Analysis of Net profit the Sales has increased by 2669%
(2769% - 100%) over the 5 years period.
➢ According to Trend Percentage Analysis the Total Assets has increased by 279% (379%
- 100%) over the 5 years period.
➢ According to Trend Percentage Analysis the Sales has increased by 2388% (2488% -
100%) over the 5 years period.
➢ According to Trend Percentage Analysis the Total Non-Current Liabilities has
increased by 312% (412% - 100%) over the 5 years period.
➢ According to Trend Percentage Analysis the Cash and Cash Equivalents has increased
by 23036% (23136% - 100%) over the 5 years period.

69
5.1.5 Altman Z-Score Model

The Altman's Z score of Tricolour Financial Services which is a non-manufacturing

company where the Altman Z-Score which was modified in 1983 stands at 7.34 which means
that the that the company is in Safe Zone and with a low possibility of company going bankrupt.

5.1.6 Correlation

➢ The correlation between Net Profit and Sales is 0.918 which is positive and lies in the
range of 0.5 to 1. This means that there is almost strong positive relationship between
the two variables.
➢ The Correlation between Net Profit and Total Assets is 0.74 which lies in the range of
0.5 to 1.0 meaning that they have a strong positive relationship.
➢ The Correlation between Net Profit and Total Non-Current Liabilities is 0.877 which is
positive and lies in the range of 0.5 to 1. This means that there is almost strong positive
relationship between the two variables.
➢ The Correlation between Net Profit and Cash and Cash Equivalents is 0.192 which lies
in the range of 0.1 to 0.3 meaning that they have a weak positive relationship between
the two variables.

5.1.7 Mootal’s Comprehensive Test

According to Mootal’s Comprehensive Test Liquidity position of Tricolour Financial

Services in the year 2022 (rank 1) and 2020 (rank 1) were the best followed by 2018 (rank 3),
2019 (rank 3), 2021 (rank 3) respectively in that order. Rank 3 is shared between the years of
2018, 2019 and 2021. It indicates that the liquidity position of the enterprise is more or less
fluctuating over the period of study.

5.2 SUGGESTION:

Based on various test and analysis done the following suggestions can be taken into
consideration for the improvement of the company

➢ It should improve advertising, particularly in rural regions, because more people in

Tamil Nadu and Karnataka are unaware of the company's existence in metropolitan
areas.
➢ The company should focus more on advancing loans and money to customers.
➢ It should reduce the cost of management.

70
 ➢ It should recover its money from defaulters in a limited time.
➢ It should control the non-operation expenses and other expenditure.
➢ It should be ready for the coming competitive as all financier’s Companies are going
to be privatized.
➢ To increase the net profit at higher rate, carefully designed risk management systems
and increasingly higher aspiration levels of customer services should be taken.

5.3 CONCLUSION:

The project of Ratio analysis in the Financial Service industry is not merely a work of
the project. But a brief knowledge and experience that how to analyse the financial performance
of the firm. The study undertaken has brought into the light of the following conclusions.

According to this project I came to know that from the analysis of financial statements
of Tricolour Financial Services Private Limited, the company have been incurring profit during
the period of study. So, the firm should focus on getting of huge profits in the coming year by
taking care internal as well as external factors.

Gross profit and net profit of the Tricolour Financial Services Private Limited is
fluctuating over the past five years. If the company utilizes its working capital, then the
company can go heights which it wanted to achieve. TFSPL has mainly focused on profit from
investment rather than from loan and advances so that it has maintained more profitability
despite of lowest interest income. TFSPL has higher ratio of interest earned and interest paid
which indicates that it has collected more deposits and disbursed more loan and advances in
comparison to other banks. The comparative income statement shows increase in the current
year of net profit, and it depict the company’s current profit position.

To improve the efficiency the company will strive for better performance and increase
the market share the company. The suggestions provided through the study will help the
company to improve the operational performance efficiently. On an average the Tricolour
Financial Services Private Limited overall performance is quite satisfactory.

71
BIBLIOGRAPHY
 CHAPTER 6

BIBLIOGRAPHY

REFERENCE:

1. Yerda.vletova, F & Ge, Danyi & Akhanov, S.. (2021). The impact of the Covid–19
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WEBSITES:

• https://www.researchgate.net
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• www.indianjournaloffinance.co.in
• www.tricolourfinancialservices.com

BOOKS:

• Ratio Analysis: Accountancy for Class 12 by NCERT – National Council of

Educational Research and Training (1st Edition)
• Financial Performance (Butterworth – Heinemann Finance) by Rory Knight (Author)
and Marc Bertoneche (Contributor) (15 April 2015)
• Financial Analysis Tools and Techniques: A Guide for Managers (PROFESSIONAL
FINANCE & INVESTM) by Erich A. Helfert (16 October 2001)
• Forecasting Of Financial Position Of Mobile Communications Organizations.

74
ANNEXURE
BALANCE SHEET – TRICOLOUR FINANCIAL SERVICES PRIVATE LIMITED
31st Mar 31st Mar 31st Mar 31st Mar 31st Mar
Fields
2022 2021 2020 2019 2018
Current Assets 18055178.69 19964205.77 35334769.00 6895021.00 9032681.00
Cash & Bank 13883629.52 17210874.00 31472568.00 1256221.00 60009.00
Inventory / Work-in- 0.0 0.0 0.0 0.0
0.0
Progress
Accounts Receivable
43000.00 97000.00 2513000.00 5230000.00 8970000.00
Less than six months
Accounts receivable
more than six 187647670.23 136913210.00 26775528.00 14645238.00 5146.00
months
Advance to suppliers 1651419.84 1062532.00 539680.00 163520.00
Other Current Assets 2477129.33 1593799.77 809521.00 245280.00 2672.00
Fixed Assets 2496013.00 2118373.23 1498079.00 163370.70 120438.90
Fixed Assets 3830792.00 3411192.23 2713421.00 181523.00 133821.00
Less: Accumulated
1334779.00 1292819.00 1215342.00 18152.30 13382.10
Depreciation
Other Assets (Non-
257264147.31 246241022.00 190807308.00 114931586.30 64161499.10
Current)
Long Term Advances 0.0 0.0 0.0 0.0 0.0
to Directors /
Shareholders /
Relatives / Friends /
Group Entities /
Related Entities
Security Deposits 68843275.00 108377125.00 162965798.00 100086319.30 63966778.10
Other Non-Current
773202.08 950687.00 1065982.00 200029.00 189575.00
Assets
Total Assets 277815339.00 268323601.00 227640156.00 121989978.00 73314619.00
Current Liabilities 13748062.00 17985933.00 10187019.00 7871377.00 3270228.00
Working Capital 0.0 0.0 0.0 0.0 0.0
Limits
Short term 0.0 0.0 0.0 0.0 0.0
Secured/Unsecured
Loans from Banks /
Financial Institutions
Short term loans 0.0 0.0 0.0 0.0 0.0
from Directors /
Shareholders /
Relatives / Friends /
Group Entities /
Related Entities
Short term 0.0 0.0 0.0 0.0 0.0
Unsecured Loans
from Others
Account Payable 905392.00 7885530.00 1874888.00 984752.00 153678.00
Other Current
12842670.00 10100403.00 8312131.00 6886625.00 3116550.00
Liabilities
Non-Current
25685340.00 20200806.00 16624261.00 13773251.00 6233102.00
Liabilities
Secured/unsecured 0.0 0.0 0.0 0.0 0.0
Loans from Banks /
Financial Institutions
Loans from Directors 0.0 0.0 0.0 0.0 0.0
/ Shareholders /
Relatives / Friends /
Group Entities /
Related Entities
Unsecured Loans 0.0 0.0 0.0 0.0 0.0
from Others
Other Non-Current
25685340.00 20200806.00 16624261.00 13773251.00 6233102.00
Liabilities
Equity 238381937.00 230136862.00 200828876.00 100345350.00 63811289.00
Capital 257029500.00 257029500.00 226629500.00 119129500.00 71500500.00
General Reserves -18647563 -26892638 -25800624 -18784150 -7689211
Total Liabilities 277815339.00 268323601.00 227640156.00 121989978.00 73314619.00
Asset Liability
0.00 0.00 0.00 0.00 0.00
Confirmation
 PROFIT AND LOSS ACCOUNT – TRICOLOUR FINANCIAL SERVICES
31st Mar 31st Mar 31st Mar 31st Mar 31st Mar
Fields
2022 2021 2020 2019 2018
Income 32432863.58 24617096.93 13258008.94 9987532.00 1303721.86
0.0 0.0 0.0 0.0 0.0
Domestic Sales

Other revenue related to

32432863.58 24617096.93 13258008.94 9987532.00 1303721.86
business
Other revenue not related 0.0 0.0 0.0 0.0 0.0
to business

Cost of Sales 14921472.87 19904567.83 11309467.17 8647718.79 841255.22

Employee Cost 7437540 8577687.00 5567795.08 3759112.06 598761.98

Rent / Repairs and

313994 239245.80 393580.32 178461.00 14563.00
Maintenance

Electricity Charges 15457 6359.00 6818.00 3258.00 117.00

Other Expenses 7154482 11081276.03 5341273.77 4706887.73 227813.24

Raw Material Consumption 0.0 0.0 0.0 0.0 0.0

Cost

EBITDA 17511390.71 4712529.10 1948541.77 1339813.21 462466.64

Depreciation/Amortization 1313136 555107.62 178956.00 96251.00 56478.00

Directors / Partners 0.0 0.0 0.0 0.0 0.0

Remuneration

Finance Expenses 3375959.00 747363.90 400856.93 200590.78 75590.78

Interest to bank and 0.0 0.0 0.0 0.0 0.0

financial Institution
0.0 0.0 0.0 0.0 0.0
Interest on Partners Capital

Commission & Charges 3375959 747363.90 400856.93 200590.78 75590.78

Net Profit Before Taxation 12822295.71 3410057.58 1368728.84 1042971.43 330397.86

Income Tax 4577220.00 85675.00 122965.00 62705.00 32655.00

0.0 0.0 0.0 0.0
Current Tax 4577220.00

Deferred Tax (Liability) /

0.0 85675.00 122965.00 62705.00 32655.00
Reversal

Net Profit(Loss) After Tax 8245075.71 3324382.58 1245763.84 980266.43 297742.86