Pandl Account Presentation - Final

Profit & Loss Account Prepared by: Khagesh Chitlangiya (06) Jagdeep Dahiya (07) Deep Shikha (08) Suyash Gupta (09) Siddharth Iyer (10)

Objective of the presentation  Meaning

of P&L a/c  Basic format of a P&L a/c  Explanation of contents & different items  To compare income statements of two companies in the two wheeler industry, namely HERO HONDA & BAJAJ AUTO

Introduction  Also

known as income statement  Integral part of financial statement  Report of the financial transactions of entity for a particular period  

Calculation of income Appropriation of income

Meaning  For

a layman - tool to calculate profit or loss of an entity  For an analyst – detailed statement of the various types of income and expense    

Operating incomes & expenses Non-operating incomes & expenses Extraordinary items Appropriation

The Income Statement 





Revenues  Assets (cash or AR) created through business operations Expenses  Assets (cash or AP) consumed through business operations Net Income or (Net Loss)  Revenues - Expenses

AR:A/c’s receivable; AP:A/c’s payable

Shows the results of a company’s operations over a period of time. • What goods were sold or services performed that provided revenue for the company? • What costs were incurred in normal operations to generate these revenues? • What are the earnings or company profit?

Purpose  Investors:  

Existing: to know whether to continue with investment in the same stock New: to analyze whether the past performance will be repeated

 Creditors:  

Short term: if entity would be able to pay the interest Long term: if the entity would be able to repay the principle

Purpose  Financial

institutions: they will look for the  

Earnings per share (EPS) Growth in operating margins

 Government:  

To discern if the company is evading taxes To ensure compliance with government norms

Limitations  Qualitative

aspects are not accounted for

 Some

numbers depend on accounting methods used

 Some

numbers depend on judgments and estimates

Basic Accounting Concepts  Matching

Concept: only current year’s income and expenses are matched

 Accrual

Concepts: incomes or expenses identifiable with the current year but still not paid or received

 Going

Concern Concept: the company’s future existence is assumed

Outline of P&L A/c (+) Income: Sales turnover Other income Stock adjustments (-) Expenditure (operating) Raw-material cost Direct expenses/ manufacturing expense Office and administration expenses Selling and distribution expenses

(=) Operating profit

Outline of P&L A/c contd.. (=) Operating Profit (EBIDT) (-) Interest (=) Gross Profit (EBDT) (-) Depreciation (=) Profit before tax (PBT) (-) tax (-) deferred tax (=) Profit after tax (PAT) (+/-) Extra-ordinary items (=) Adjusted net profit

Outline of P&L A/c contd.. Adjusted net profit (+) P & L Balance brought forward Profits available for Appropriations Dividends (Preference) Dividends (equity) Transfer to reserves

 Balance carried to balance sheet.

Hero Honda - Profit and Loss Ac c ount Year

Mar 07(12)

Mar 06(12)

Mar 05(12)

Mar 04(12)

Mar 03(12)

INCOME :

Sales Turnover +

11,542.04

10,086.16

8,596.81

6,747.35

1,647.52

1,374.90

1,178.22

916.33

4.15

9,894.52

8,711.26

7,418.59

5,831.02

5,097.56

234.07

167.6

149.42

180.86

108.15

3.2

14.97

14.95

-21.59

21.08

10,131.79

8,893.83

7,582.96

5,990.29

5,226.79

7,176.47

6,067.27

5,214.57

4,009.02

3,491.85

Power & Fuel Cost+ 52.45 Employee Cost + 299.03 Other Manufacturing Expenses + 97.16 Selling and Administration Expenses + 857.17 Miscellaneous Expenses + 262.02 Less: Pre-operative Expenses Capitalised+ 0

46.65

32.88

29.75

25.82

259.47

215.29

185.95

163.97

93.56

75.84

59.24

50.18

716.72

562.81

419.75

391.02

180.38

173.01

139.07

154.27

0

0

0

0

8,744.30

7,364.05

6,274.40

4,842.78

4,277.11

1,387.49

1,529.78

1,308.56

1,147.51

949.68

Interest +

1.61

2.92

1.93

1.72

1.73

Gross Prof it

1,385.88

1,526.86

1,306.63

1,145.79

947.95

Depreciation+

139.78

114.62

89.38

73.33

63.39

Profit Bef ore Tax

1,246.10

1,412.24

1,217.25

1,072.46

884.56

Tax+ Deferred Tax+

378.79

423.02

395.22

331.07

298.19

9.42

17.88

11.56

13.07

5.61

Reported Net Profit

857.89

971.34

810.47

728.32

580.76

Excise Duty Net Sales

Other Income + Stock Adjustments + Total Incom e

5,101.71

EXPENDITURE :

Raw Materials +

Total Expenditure Operating Prof it

Extraordinary Items + Adjusted Net Prof it

Adjst. below Net Profit +

80.78

74.79

64.71

77.31

45.38

777.11

896.55

745.76

651.01

535.38

0

0

0

0

0

P & L Balance brought f orw ard

1,224.05

808.1

538.53

335.75

220.48

Statutory Appropriations + Appropriations +

0

0

0

0

0

487.16

555.39

540.9

525.54

465.49

1,594.78

1,224.05

808.1

538.53

335.75

339.47

399.38

399.38

399.38

359.44

0

0

0

0

0

850

1,000.00

1,000.00

1,000.00

900

40.07

45.84

37.75

33.91

26.78

123.69

100.62

74.78

57.03

43.12

P & L Balance carried dow n Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Book Value-Unit Curr

Comparative Analysis  What  Analysis     

to analyze ??? in terms of operational efficiency

Sales performance Other incomes Gross margin EBIDT Profitability

Hero Honda Comparative Income Statement Particulars 2006-07 2005-06 % change Sales turnover 9,894.52 8,711.26 13.58% Other income 234.07 167.60 39.66% Gross income 10,131.79 8,893.83 13.92% Operating costs 8,744.30 7,364.05 18.74% Operating profit 1,387.49 1,529.78 -9.30% PAT 857.89 971.34 -11.68% Appropriations 487.16 555.39 -12.29%

Hero Honda:5 year Comparison 12,000.00

8,000.00 6,000.00 4,000.00 2,000.00

ar 03 (1 2) M ar 04 (1 2) M ar 05 (1 2) M ar 06 (1 2) M ar 07 (1 2)

0.00

M

Crore Rs.

10,000.00

Total Income Total Expenditure Operating Profit

Bajaj Auto Comparative Income Statement Particulars 2006-07 2005-06 % change Sales turnover 9,317.47 7,488.11 24.43% Other income 751.71 617.24 21.79% Gross income 10,068.28 8,154.36 23.47% Operating costs 8,145.13 8,382.83 -2.84% Operating profit 1,923.15 1,771.53 8.56% PAT 1,727.55 1,580.19 9.33% Appropriations 1,237.10 1,123.27 10.13%

Comparison: 2006-07 Comparative Income Statement Particulars Sales turnover

Bajaj Auto

Hero Honda

9,317.47

9,894.52

Other income

751.71

234.07

Gross income

10,068.28

10,131.79

Operating costs

8,145.13

8,744.30

Operating profit

1,923.15

1,387.49

PAT

1,727.55

857.89

Appropriations

1,237.10

487.16

Ratio Analysis Hero

Honda

Year 05-06 Operating Expense Ratio = 84.5% Year 06-07 Operating Expense Ratio = 88.3%

Questions

Thank you