Anandam Manufacturing Company Analysis of Financial Statements Case Solution

1. Prepare and analyse the cash flow statement of the company.

This report on operational activities' cash flow component concentrates on the company's main business: the amount of cash generated by those operations. The main source of revenue should come from this segment. The net cash supplied by operational operations is fairly low in the first two years, but this is also rather understandable, given that the firm is only getting started. The net cash supplied by operational operations is fairly low in the first two years, but this is also rather understandable, given that the firm is only getting started. Some businesses may even have a negative cash flow from operations at the beginning of their operations. Additionally, Anandam's cash flow from operations has skyrocketed, reaching 1202 in 2014–2015. This shows that the business is currently profitable.

Listing the cash inflow/outflow utilized for investments like the acquisition of equipment essential for the company's activity is what is meant by the phrase "cash flow produced by investing activities." Anandam invests, which makes sense at the beginning of the activity, and the outcome is negative. The largest investment has occurred in the most recent year; it can be seen (2860). Anandam wishes to grow, which calls for investments. Anandam is unafraid to reinvest.

All the actions the business takes to fund itself are included in the cash flow from financing. This might involve financial inflows, such as issuing debt or a boost in capital, or cash outflows, such as the payment of dividends or a debt's interest rate. In this case, Anandam chose to grow share capital and extra paid-in capital, particularly at the start of the activity in 2012–2013, to 1200, before stabilising at 400 in 2013–2014 and then at the end of the activity in 2014–2015. In 2014-2015, Anandam decided to boost the number of long-term loans even further to 1264. Overall, the cash balance in 2013–2014 and 2014–2015 is positive and constant at approximately 100. The balance sheet is favourable since Anandam is profitable and can independently fund its operations.

2. Prepare and analyse the common size statement of the company.

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The firm reported a profit of 364 000 rupees with a gross profit of 760 000R in its first year of operation. The profit after taxes virtually increased by two the next year. And because there was a 25% rise from the previous year, we saw growth slow in 2014–15. However, it is still much more than the sector's growth during the previous three years, which averaged about a 14% increase annually. Consequently, Anandam's profit is increasing faster than the market.

Furthermore, while the profit after sales only had a 20% gain in 2014–15, the gross profit climbed from 38,5%. Therefore, we must exercise caution as fixed expenses rise. This discrepancy demonstrates that fixed costs are increasing more quickly than sales.