CHAPTER-I

INTRODUCTION

1.1 INTRODUCTION TO THE STUDY

A financial statement is the combination of the three major reports on a business. It

contains the cash flow statement, the income statement and the balance sheet of the business.
All three together produce an overall picture of the health of the business.

The financial statement determines if a business has to ability to repay loans, if it has the
cash flow to meet bills and purchase stock. It will also tell from where the business is generating
cash and where the cash goes. The financial statement tells if the business is profitable, if it
will stay profitable and if there are any large problems looming, such as a continuous drop in
sales over time. Reading the financial statement will give an overall view of the condition of
the business and if there are any warnings signs of possible future problems. A bank or other
such institution will look to the financial statement as the first indicator of how the business is
performing and if there is a need for further investigation.

Every business will ready a financial statement to go with their end of year results, to give
interested parties the overview of how the business is functioning. If a business is looking to
increase credit facilities with a bank or trying to raise capital for an expansion, it will produce
a financial statement for the end of a fiscal quarter or the most recent month. When preparing
a financial statement for such purposes the best practice is to use general accountancy language,
understood by all parties. A financial statement that may accompany an end of year report and
read just by employees is often in terms familiar to just those involved.

Financial Statement Analysis is a method of reviewing and analyzing a company’s

accounting reports (financial statements) in order to gauge its past, present or projected future
performance. This process of reviewing the financial statements allows for better economic
decision making. Globally, publicly listed companies are required by law to file their financial
statements with the relevant authorities. For example, publicly listed firms in America are
required to submit their financial statements to the Securities and Exchange Commission
(SEC). Firms are also obligated to provide their financial statements in the annual report that
they share with their stakeholders. As financial statements are prepared in order to meet
requirements, the second step in the process is to analyze them effectively so that future
profitability and cash flows can be forecasted.
1.2 DEFINITION OF FINANCIAL ANALYSIS

1. “Analysing financial statements,” according to Metcalf and Titard, “is a process of

evaluating the relationship between component parts of a financial statement to obtain a better
understanding of a firm’s position and performance."

2. In the words of Myers, “Financial statement analysis is largely a study of relationship

among the various financial factors in a business as disclosed by a single set-of statements and
a study of the trend of these factors as shown in a series of statements.”

1.3 A BRIEF ABOUT INMED PROGNOSTICS

InMed Prognostics is an AI-powered, globally-distributed healthcare and wellness

company, backed by cutting-edge research and human-centered design. The company offers a
suite of products that use AI/ML to process and analyze complex medical imaging data.
InMed's proprietary image processing platform/pipeline can be seamlessly integrated and
deployed in different modes, making it accessible to a wide range of users.

In-Med Prognostics brings affordable, accessible, reliable, and data-driven brain health
prognostics and diagnostics tools to India and other emerging markets. Their proprietary
software, Neuroshield™ integrates MRI images, clinical reports and psychological
assessments to produce automated, quantified reports to support the physician’s clinical
impression for various neurological disorders and provides a seamless, end-to-end cloud based
image analysis platform for clinical and research use. Leveraging state-of-the-art data analytics
and deep learning methodologies, they are developing a biomarker algorithm for various
neurological disorders starting with paediatric epilepsy and dementia. Currently, they offer
segmentation services and comparative volumetric analysis reports to clinical end-users and
research support for clinical imaging based projects for pharma and life sciences customers.
Their aim is to build an Indian databank for neurological disorders consisting of complete
clinical data including radiology. In-Med was founded by Rajesh Purushottam, Dr. Latha
Poonamallee & Dr. Al Curran.
1.4 ANALYSIS OF FINANCIAL STATEMENTS

Financial Statement Analysis is a method of reviewing and analysing a company’s

accounting reports (financial statements) in order to judge its past, present or projected future
performance. This process of reviewing the financial statements allows for better economic
decision making. Financial analysis (also referred to as financial statement analysis or
accounting analysis or Analysis of finance) refers to an assessment of the viability, stability and
profitability of a business, sub-business or project. It is performed by professionals who prepare
reports using ratios that make use of information taken from financial statements and other
reports. These reports are usually presented to top management as one of their bases in making
business decisions. Financial analysis may determine if a business will.

Continue or discontinue its main operation or part of its business; Make or purchase certain
materials in the manufacture of its product; Acquire or rent/lease certain machineries and
equipment in the production of its goods; Issue stocks or negotiate for a bank loan to increase
its working capital; Make decisions regarding investing or lending capital; Make other
decisions that allow management to make an informed selection on various alternatives in the
conduct of its business.

Common methods of financial statement analysis include fundamental analysis, DuPont

analysis, horizontal and vertical analysis and the use of financial ratios. Historical information
combined with a series of assumptions and adjustments to the financial information may be
used to project future performance. The Chartered Financial Analyst designation is available
for professional financial analysts.

1.5 MEANING OF FINANCIAL ANALYSIS

Financial analysis is prepared mainly for decision-making purposes. The

information given in the financial statements is of immense use in making decisions through
analysis and interpretation of financial statements. Financial analysis is the process of
identifying the financial strengths and weakness of a firm by properly establishing relationship
between the items of the balance sheet and profit and loss account.

Financial statements are summaries of all the company’s activities for a specific time
period they include records of the total sales revenue and all expenses of operation. The
statements also include a listing of the company’s assets, liabilities and retained earnings.
Financial performance means ensuring the results of a firm’s policies and operations terms.
These results are reflected in the firm’s return on investment, returns on assets, value added,
etc. A subjective measure of how well a firm can use assets from its primary mode of business
and generate revenues.

This term is also used as a general measure of firm’s overall financial health over
a given period of time, and can be used and prepared for decision-making purpose. The
information given in the financial statements is of immense use in making decisions through
analysis and interpretation of financial strengths and weakness of a firm by properly
establishing relationship between the items of the balance sheet and profit and loss account.

1.6 INCOME STATEMENT

The income statement reflects a company’s revenues and expenses. It shows the company’s
bottom lines so you can see how profitable your company is during a certain period of time,
such as quarterly or annually. The statement of financial performance takes into account sales
revenue, cost of goods sold and other operating expenses and income.

1.7 BALANCE SHEET

Balance sheet is a snapshot of company’s assets, liabilities and shareholder’s equity at specific
point in time. The entries come from the general ledger.

Assets = liabilities + shareholder’s equity

Assets are classified as short-term including cash, accounts receivable and inventory and long-
term including real estate, building and investments. Short-term liabilities are bank lines of
credit, debts to suppliers and other payables due to suppliers and payable due in less than 90
days. Long-term liabilities including equipment loans, real estate mortgages and bond.

• Often, the financial statements (e.g. balance sheet, income statement, and statement of
cash flows) of a company are used to measure the financial performance of a firm.
• No single measure should be used to define the financial performance of a firm.
Assets

Within the assets segment, accounts are listed from top to bottom in order of their
liquidity that is, the case with which they can be converted into cash. They are divided into
current assets, which can be converted to cash in one year or less; and non-current or long-
term assets, which cannot.

Here is the general order of accounts within current assets:

• Cash and cash equivalents are the most liquid assets and can include treasury bills and
short-term certificates of deposit, as well as hard currency.
• Marketable securities are equity and debt securities for which there is liquid market.
• Accounts receivable refers to money that customers owe the company, perhaps
including an allowance for doubtful accounts since a certain proportion of customers
can be expected not to pay.
• Inventory is goods available for sale, valued at the lower of the cost or market price.
• Prepaid expenses represent the value that has already been paid for, such as insurance,
advertising contracts or rent.
Long-term assets

• Long-term investments and securities that will not or cannot be liquidated in the next
year.
• Fixed assets include land, machinery, equipment, buildings and other durable,
generally capital-intensive assets.
• Intangible assets include non-physical (but still valuable) assets such as intellectual
property and goodwill. In general, intangible assets are only listed on the balance sheet
if they are acquired, rather than developed in house. Their value may thus be wildly
understated by not including a globally recognized logo, for example- or just as wildly
overstated.
Liabilities

Liabilities are the money that a company owes to outside parties, from bills it has to pay
to suppliers to interests on bonds it has issued to creditors as rent, utilities and salaries. Current
liabilities are those that are due within one year and are listed in order of their due date. Long-
term liabilities are due at any point after one year.

Current liabilities account might include:

 • Current portion of long-term debt

• Bank indebtedness

• Interest payable

• Rent, tax, utilities

• Wages payable

• Customer prepayments

• Dividends payable and others

Long-term liabilities can include:

• Long-term debt: interest and principal on bonds issued

• Pension fund liability: the money a company is required to pay into its employees
retirement’s accounts
• Deferred tax liability: taxes that have been accrued but will not be paid for another
year (Besides timing, this figure reconciles differences between requirements for
financial reporting and the way tax is assessed, such as depreciation calculations)
Some liabilities are considered off the balance sheet, meaning that they will not appear on the
balance sheet.

Shareholder’s Equity

Shareholder’s equity is the money attributable to a business’ owners, meaning its

shareholders. It is also known as “net assets”, since it is equivalent to the total assets of a
company minus its liabilities, that is, the debt it owes to the non-shareholders.

Retained earnings are the net earnings a company either reinvests in the business or use
to pay off debt; the rest is distributed to shareholders in the form of dividends. Treasury stock
is the stock a company has either repurchased or never issued in the first place. It can be sold
at a later date to raise cash or reserved to repel a hostile takeover.

Shareholders equity is a number that stock investors and analysts look at when they're
evaluating a company's overall financial health. It helps them to judge the quality of the
company's financial ratios, providing them with the tools to make better investment
decisions.
1.8 USERS OF FINANCIAL STATEMENT

The list of stakeholders in a company and interested in Financial Statement Analysis is

pretty long. Among them most important parties are

1. Management: The management always looks for the safe survival of business and the
maintenance of its economic visibility and sustainable growth. For carrying out managerial
activities, proper planning, framing useful policies and strategies, taking appropriate decisions
regarding allocation of limited resources and exercising overall control are essentially required.
For this purpose the management needs correct and reliable information drawn out of analysis
of the financial statements.

2. Investors: They look for steady return and the safety of their investment. The existing
shareholders try to know the profitability of the firm and its dividend policy. The potential
stakeholders try to be sure about the risk factor involved as compare to other businesses. They
all apply judiciousness at rationality in taking investment decisions. They have to decide
correctly whether to make further investment or to hold the existing investment or to sell out
this. Information emanating from financial statement analysis helps them to take decisions in
this respect.

3. Bankers/ Lenders: They need information as whether the recovery of their existing and
proposed loans to the firm will be possible in due time and whether they will get proper interest
on such loans. A firm’s profitability and solvency position are analysed to give this information.

4. Suppliers and Trade Creditors: They want to assess the profitability and short-term
solvency of the firm to which they are going to allow credit facilities. They want to ensure
recovery of their dues on due dates.

5. Employees: They want information about the profitability and financial stability of their
employer-firm. They want to be sure regarding the regular payment of their remuneration and
other employment facilities including retirement benefits.

6. Customers: Usually the customers want to build up a long-term relationship and want a
continuous supply of quality products at a reasonable price. They have to judge the financial
and economic prospect of the supplier firm.

7. Competitors: For comparison of relative performance result they need information out of
financial statement analysis.
8. Government: It depends upon the financial statement analysis of a firm for different reasons
like assessment of the general/ economic condition of the firm, its position in the industry,
considering and applying national economic statistics, deciding tax matters etc.

1.9 TYPES OF FINANCIAL ANALYSIS

The analysis and interpretations of financial statement can be classified into different
categories as discussed under:

1. On the basis of information used: On the basis of information used, the analysis and
interpretation of financial statements may be classified into-

a. External Analysis: This analysis meant for the outsiders of the business firm. Outsiders
may be investors, creditors, suppliers, governmental agents, shareholders etc. These external
people have to rely only on this published financial statement for important decision making.
This analysis serves only a limited purpose due to non-availability of detailed information.

b. Internal Analysis: Internal analysis performed by the persons who are internal to the
organization. These internal people who have access to the books of accounts and other
information are related to the business. Such analysis can be done for the purpose of assisting
managerial personnel to take corrective actions and appropriate decisions.

II. On the basis of Modus Operandi: On the basis of Modus Operandi, the analysis and
interpretation of financial statements may be classified into-

a. Horizontal Analysis: Horizontal Analysis is also termed as Dynamic analysis. Under this
type of analysis, comparison of the trend of each item in the financial statements over the
number of year are reviewed or analyzed. This type of comparison helps to identify the trend
in various indicators of performance. In the type of analysis, current year figures are compared
with base year for figures are presented horizontally over a number of columns.

b. Vertical Analysis: Vertical analysis is also termed as Static analysis. This type of analysis
is useful in comparing the performance, efficiency and profitability of several companies in
the same group or divisions in the same company.
1.10 OBJECTIVES

• To identify the financial soundness of the company.

• To identify the profitability position of the company.

1.11 SCOPE OF THE STUDY

• Creating budgets and financial forecasts to plan and anticipate future financial
outcomes.

• Comparing the company's financial performance with competitors and industry

benchmarks.

• Aligning financial goals with the company's overall business objectives.

1.12 ADVANTAGES OF FINANCIAL STATEMENT ANALYSIS

The main advantage of financial statement analysis is to understand and diagnose the
information contained in financial statement with a view to judge the profitability and financial
soundness of the firm, and to make forecast about future prospects of the firm.

a. The financial statement analysis uses the information about the past performance of the
company in order to predict how it will fare in the future.

b. The analysis of financial statements is done to identify potential problem areas and
troubleshoot those problems.

c. It examines past and current financial data so that a company's performance and financial
position can be evaluated and future risks and potential can be estimated.

d. Financial statement analysis can yield valuable information about trends and relationships,
the quality of a company's earnings, and the strengths and weaknesses of its financial position.

e. Financial statement analysis can yield valuable information about trends and relationships,
the quality of a company's earnings, and the strengths and weaknesses of its financial position.

f. Financial statement analysis is that regulatory authorities like IASB can ensure the company
following the required accounting standards. Financial statement analysis is helpful to the
government agencies in analysing the taxation owed to the firm. Above all, the company is able
to analyse its own performance over a specific time period.

1.13 LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

1. Not a Substitute for Judgment.

An analysis of financial statement cannot take place of sound judgment. It is only a means to
reach conclusions. Ultimately, the judgments are taken by an interested party or analyst on his/
her intelligence and skill.

2. Based on Past Data.

Only past data of accounting information is included in the financial statements, which are
analysed. The future cannot be just like past. Hence, the analysis of financial statements cannot
provide a basis for future estimation, forecasting, budgeting and planning.

3. Problem in Comparability.

The size of business concern is varying according to the volume of transactions. Hence, the
figures of different financial statements lose the characteristic of comparability.

4. Reliability of Figures Sometimes,

the contents of the financial statements are manipulated by window dressing. If so, the analysis
of financial statements results in misleading or meaningless.

5. Various methods of Accounting and Financing

The closing stock of raw material is valued at purchase cost. The closing stock of finished
goods is value at market price or cost price whichever is less. In general, the closing stock is
valued at cost price or market price whichever less is. It means that the closing stock of raw
material is valued at cost price or market price whichever less is. So; an analyst should keep in
view these points while making analysis and interpretation otherwise the results would be
misleading.
6. Change in Accounting Methods

There must be uniform accounting policies and methods for number of years. If there are
frequent changes, the figures of different periods will be different and incomparable. In such a
case, the analysis has no value and meaning.

7. Changes in the Value of Money

The purchasing power of money is reduced from one year to subsequent year due to inflation.
It creates problems in comparative study of financial statements of different years.

8. Limitations of the Tools Application for Analysis

There are different tools applied by an analyst for an analysis. Even though, the application of
a particular tool or technique is based on the skill and experience of the analyst. If an unsuitable
tool or technique is applied, certainly, the results are misleading.

9. Change of Business Condition

The conditions and circumstances of one firm can never be similar to another firm. Likewise,
the business condition and circumstances of one year to subsequent can never be similar.
Hence, it is very difficult for analysis and comparison of one firm with another.

1.14 NEED FOR THIS STUDY ARE AS FOLLOWS

The study on the financial performance of Eaton Power quality privates Limited with its
competitors is essential for a wide range of stakeholders. It provides valuable insights into the
company's financial health, competitive positioning, and potential areas for improvement,
ultimately aiding in better decision-making, strategic planning, and risk management within
the Power Management industry

1.14.1 Competitive Analysis: Comparing financial performance metrics with competitors

helps Eaton Power Quality gauge its relative standing in the market. This analysis provides
insights into whether the company is outperforming or lagging behind its rivals in key financial
areas.

1.14.2 Identifying Strengths and Weaknesses: Studying financial performance alongside

competitors allows Eaton Power Quality to identify its financial strengths and weaknesses. It
helps pinpoint areas where the company excels and areas that may need improvement.
1.14.3 Benchmarking: Financial analysis provides a benchmark for evaluating performance
against industry standards and peer companies. This benchmarking helps Eaton Power Quality
set realistic financial goals and measure its progress over time.

1.14.4 Investor Relations: Investors often use comparative financial analysis to assess the
investment potential of companies. Eaton Power Quality can use this analysis to communicate
its financial strengths and prospects to current and potential investors, thereby attracting
investment.

1.14.5 Strategic Decision-Making: Financial performance analysis informs strategic decision-

making. Eaton Power Quality can gain insights into how competitors allocate resources,
manage costs, and fund growth initiatives. This knowledge guides the company's own strategic
choices and adaptations to remain competitive.

1.14.6 Risk Assessment: Understanding how competitors manage financial risks and navigate
economic challenges can help Eaton Power Quality proactively manage its own financial risks.
It allows the company to anticipate potential threats and develop risk mitigation strategies.

1.14.7 Market Positioning: Comparative financial analysis aids in evaluating Eaton Power
Quality's market positioning. By understanding how competitors price their products, allocate
marketing budgets, and generate revenue, the company can adjust its own market positioning
for better competitiveness.

1.14.8 Product and Service Differentiation: Financial analysis provides insights into
competitors' investments in product development and service quality. Eaton Power Quality can
identify opportunities to differentiate its offerings, potentially gaining a competitive edge.

1.14.9 Mergers and Acquisitions: If considering mergers, acquisitions, or partnerships,

financial performance analysis helps Eaton Power Quality assess the financial viability and
attractiveness of potential targets or collaborators compared to competitors.

1.14.10 Operational Efficiency: By analyzing competitors' financial statements, Eaton Power

Quality can gain insights into their operational efficiency, cost structures, and profit margins.
This information can inform cost reduction and process improvement strategies.

1.14.11 Regulatory Compliance: Studying competitors' financial performance can reveal their
approaches to regulatory compliance and industry standards. Eaton Power Quality can use this
knowledge to ensure it remains compliant and competitive.
1.14.12 Resource Allocation: Comparative financial analysis aids in resource allocation
decisions. Eaton Power Quality can assess how competitors allocate capital for research and
development, expansion, and other strategic initiatives, helping the company make informed
resource allocation choices.

In summary, studying the financial performance of Eaton Power Quality in comparison to its
competitors is vital for competitive positioning, strategic decision-making, risk management,
and attracting investment. It provides valuable insights into the company's financial health and
competitiveness within its industry, guiding its efforts to achieve long-term success.

1.15 CHAPTERISATION

This report shall comprise of six chapters. The first chapter entitled, “Introduction” shall throw
light on concepts of financial analysis and objectives of the study while the second chapter
entitled, “Literature Review” shall give details about few studies which have been done on the
subject of financial analysis. The third chapter, “Research Methodology” shall give details
about nature of the study, data collection details and methods to be adopted for analysing the
data while the fourth chapter entitled, “Industry Profile” shall give details about the Power
management industry and Eaton Power quality privates Limited, which is the company in
which the student completed her internship. The fifth chapter shall provide detailed
representation of the data analysis attempted while the sixth and final chapter shall conclude
the entire report by summarizing the major findings and throwing light on probable
improvements in the functioning of the company.
 CHAPTER-II

REVIEW OF LITERATURE

2.1 Introduction

This chapter shall try to highlight some studies which have been done in the past related to
financial analysis. The review of literature guides the researchers for getting better
understanding of methodology used, limitation of various available estimation procedures and
database, and logical interpretation and reconciliation of the conflicting results. This part
represents the review of those studies that have been carried out in the financial performance.

• DeVancy (1993) conducted a study to measure the changes of status in the families of
United States of America by using financial ratios selected from different categories for
a period of four years ranging from 1983 to 1986. This study used the financial ratios
as indicators of progress to answer the question whether the households were able to
improve their financial status during the study period.

• Rao (1993): Has made a study about inter-company financial analysis of tea industry-retrospect
and prospect. He wished to analyses the important variables of tea industry and projected future
trends regarding sales and profit for the 30 next 10 year periods, with a view to help the policy
makers to take appropriate decisions. He have been calculated various financial ratios for
analyzing the financial health of the industry. After the comparison of ratios, he has concluded
that the forecast of sales and profits of tea manufacturing companies showed that the Indian tea
industry has bright prospects. He has also revealed that the recent changes in the Indian
economic policies may boost up the foreign exchange earnings, which may benefit those
companies, which are exporting to hard currency areas.

• Vijayakumar A. (1996) has studied about ‘Assessment of Corporate Liquidity - a discriminate

analysis approach’ in this research he has revealed that the growth rate of sales, leverage, current
ratio, operating expenses to sales and vertical integration was the important variables which
determine the profitability of companies in the sugar industry. Also he has studied the shortterm
liquidity position in twenty-eight selected sugar factories in co-operative and private sectors. In
research a discriminate analysis has been used by the researcher, to undertaken to distinguish
the good risk companies from poor risk companies based on current and liquidity ratios.
• Dhankar (1998) has studied about the criteria of performance measurement for business
enterprises in India study of public sector undertakings. The author gives a new model for
measuring the performance of a business enterprise in India, wherein, the basis is to compare
its actual rate of return with its expected risk adjusted rate of return. Realizing the importance
and controversy of public sector in India, an attempt was made to measure the performance of
all public sector undertakings, which were started up to 1964 and were in operation until 1983.
It is shocking to know that half of them on an average want to talk of making excess returns,
have not been able to earn equal to their cost of capital.

• Sur (2001) studied in his paper about the Liquidity Management: An overview of four
companies in Indian Power Sector using the data for the period of 1987-1988 to 1996-1997. He
had applied accounting techniques of comparative analysis regarding the liquidity management
in Electricity generation and distribution industry. He revealed that the overall liquidity should
be managed in such a way that not only it should not hamper profitability but also its
contribution towards increase in profitability should be positive.

• Loundes (2001) analyzed ‘The Financial performance of Australian Government Trading

Enterprises Pre &Post-Reform’ revealed that during the 1990's. Main objectives of the study
was to discover whether there had been any change in the financial performance of government
trading enterprises operating in electricity, gas, water, railways and ports industries as a result
of these changes. He had concluded that that it did not appear to have been a noticeable
enhancement in the financial performance of most of this business, although railways have
improved slightly, from a low base. He has suggested several measures introduced to improve
the efficiency and financial performance of government trading enterprises in Australia.

• Tehrani et al (2002) developed a model that evaluates a companies’ performance using

the technique of data envelopment analysis. Performance assessment indexes were
generated from financial statements as well as ratios from articles and books. Due to
the huge number of variables, data envelopment analysis was used to analyze the
collected data in the study. Parameters used to measure performance included Liquidity,
Activity, Leverage, Economic Added Value, and Profitability ratios. The result of the
analysis disclosed that nine out of the thirty-six companies were efficient; implying that
the remainder twenty-seven companies were inefficient. Some gaps identified in the
study are that it focused on evaluating the selected companies for internal efficiency
without some form of ranking.
• Sumninder and Samiya(2003) analyzed how size, solvency, liquidity, equity capital,
and leverage impacted on the profitability of some life insurance companies. The
research employed multiple linear regression analysis to quantity the extent to which
the specified indicators influenced the profitability of the firms over a 5 year period.
The results of the study revealed that size and liquidity of life insurers positively
influenced the firms’ profitability whilst the reverse holds for equity capital. Insurance
leverage and solvency showed no interrelatedness with profitability. A significant gap
in the work is to do with the restricted number of variables deployed as indicators of
the profitability of insurance companies.

• Bhunia et al(2004) researched into the financial performance of some public sector
pharmaceutical and drug enterprises in India. The research was aimed at assessing both
short and long term solvency, profitability and liquidity trends, efficiency of financial
processes and to examine determinants of liquidity and profitability behaviors. To
evaluate how the chosen ratios jointly influence the financial position The performance
indicators deployed included solvency, profitability, efficiency, financial stability,
operating efficiency and liquidity ratios. It found that both companies had strong
liquidity positions. Financial stability of the two companies also demonstrated an
increasingly declining trend. Thus, it’s prone to all the weaknesses inherent in the
summarized published financial statements.

• Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot about
good sense and understanding of the difficulties that a company will face. We have to
make sure that people know exactly how we arrived to the final financial positions. We
have to show the calculation but we have to avoid anything that is too mathematical. A
business performance analysis indicates the further growth and the expansion. It gives
a physiological advantage to the employees and also a planning advantage.

• Susan Ward (2008), emphasis that financial analysis using ratios between key values
help investors cope with the massive amount of numbers in company financial
statements. For example, they can compute the percentage of net profit a company is
generating on the funds it has deployed.
• Ramaratnam and Jayaraman (2010) used financial ratios in terms of liquidity,
profitability, variability and sustainability to measure the financial performance of
Indian steel industry for a period of five years from 2005 to 2010. Their study reveals
that the critical situation faced by the Indian steel industry is due to over capacity and
demand slowdown resulting in price cuts.

• A study has been conducted by Pal (2011) on the Indian steel companies for a period
of ten years range between 2000-01 and 2009-10 to measure the profitability of the
selected companies which is of major importance to the internal and external
stakeholders to determine the earning capacity together with the credibility of the
companies to sustain in the competition for a long run.

• Pandya (2011) has done his Ph.D on “A comparative analysis of liquidity and
profitability of Indian car industry”. In this research he has selected four units of auto
sector and for analysing the performance of selected units, he has been made Inter-firm
comparison by using ratios, trend analysis, ANOVA test and for the better
understanding of some important matter was to be presented by graph. On the basis
findings, he has given some suggestion for improvement of performance like company
should try to increase the profitability by control operating expenses.

• Acharya (2013) compared the liquidity position of TATA Steel Ltd. and SAIL and
studied the relationship that exists between liquidity and profitability of both the
companies. The purpose of the study was to investigate the liquidity management
efficiency and profitability position of selected steel companies. Therefore, an attempt
was made to investigate the liquidity position and its impact on the profitability of Tata
Steel Ltd. and Steel Authority of India Ltd for a period of ten years ranging from 2004
to 2013.. Through the analysis of the data, it was found that liquidity position had
positive impact on the profitability of the selected firms.

• Prakash and Natarajan (2014) conducted a study on financial performance of Salem

Steel Authority of India Ltd. The analysis revealed that there is a fluxion in the gross
profit and net profit during the study period. The study helps to identify the financial
 position of the company. Optimum utilization of working capital can be planned so as
to result in sound financial position of the company.

• Rooh Ollah Arab, Seyed Saadat Masoumi and Azadeh Barati (2015) examined the
financial performance of identified units in the steel industry in India in terms of
financial ratios such as Liquidity, Solvency, Activity and Profitability position. For this
study , Tata Steel Ltd., Jindal Steel & Power Ltd., J S W Steel Ltd., Bhushan Steel Ltd.
and Steel Authority of India Ltd. are selected for this study. The study evaluated the
impact of selected variables on the financial performance of identified units in the steel
industry, ANOVA-Test analysis is used.

• Dr.C.Balakrishnan (2016) observed that financial performance of any organization is

influenced by several factors like capital structure, cost, revenue and the consequential
profit margin. The study can be analyzed with many aspects like financial facts,
financial ratios, financial health, financial strength and utilization of assets, etc. The
study revealed that financial performance can be influenced by the operational and
financial efficiency of the steel industry, which are related to cost and the revenue
aspects. The study analyzed the performance of steel industry in India on the parameters
such as profitability, utilization of assets, growth of performance, financial strength and
capital structure. The study also attempted to identify the nature of relationship between
the various aspects of financial performance.

• Dalvadi & Tagariaya (2019), studied shareholders returns of selected Infrastructure

companies in India during the period from 2013-14 to 2017- 18 through ratio analysis.
The statistical tools used for analysis are mean, standard deviation, one way Anova test
etc. They found that there is no significant difference in the performance of the selected
Infrastructure companies in India in terms of shareholders return and financial
performance during the study period. They also stated that the performance of DLF
limited, Reliance Infrastructure limited and L & T limited have better compared to IRB
Infrastructure Developers Limited and Nagarjuna Construction Company limited.
 CHAPTER-III

RESEARCH METHODOLOGY

3.1 Introduction

This chapter shall give details about the nature of study, data collection methodology and the
methods proposed to be used to analyze the collected data.

3.2 Nature of Research

The proposed research is descriptive in nature.

3.2 Nature of Data

The research is based purely on secondary data.

3.4 Sources of Data

Electronic sources and data base of the electrical and power management company whose
financial performance is proposed to be analyzed have been used to collect data. Annual reports
of the ten electrical and power management companies were downloaded from different
electronic sources.

3.5 Sampling Plan

Sampling is the process of obtaining information about an entire population by examining only
a part of it. It incorporates population and sampling unit, determining the sampling techniques,
and sampling size.

3.5.1 Study Population

A population is the aggregate of all the elements that share some common set of characteristics
and that comprise the universe for the purpose of the research problem. The universe of the
proposed study comprise of the Pharma industry of India.

3.5.2 Sample unit

10 electrical and power management companies i.e., Eaton power quality Private limited, Asea
Brown Bover limited, Schneider Electric, Siemens, Larsen & Toubro Limited, Cummins Inc.
3.5.3 Sample size

This research proposes to study the financial standing and performance of ten Pharma
companies and hence, sample size of the study is 10.

3.5.4 Period of Study

The period of study comprise of the ten financial years of April 2013 to March 2022.

3.5.5 Sampling Technique

Convenience Sampling Method has been employed to choose the ten electrical and power
management companies for the study. One company, Eaton Power quality Private Limited, is
included in the study as it is the company in which the student completed my internship and
nine other companies which have major stake in the electrical and power management industry
were included in this study.

3.6 Data analysis Software

MS Excel and SPSS shall be used to analyze the data.

3.7 Data Analysis Tools

Statistical analysis tools of Data Envelopment Analysis, ANOVA, Ratio Analysis,

Comparative Financial Statements, Common Size Statements, DuPont Analysis, Cluster
Analysis, Correspondence Analysis, Regression Analysis and Trend Analysis shall be used to
analyse the data and arrive at meaningful conclusion.

3.7.1 Ratio Analysis

It describes the significant relationship which exists between various items of a balance sheet
and a statement of profit and loss of a firm. As a technique of financial analysis, accounting
ratios measure the comparative significance of the individual items of the income and position
statements. It is possible to assess the profitability, solvency and efficiency of an enterprise
through the technique of ratio analysis.
The ratio analysing used in this study are:

➢ Profitability ratios
• Earnings per share
• Net profit margin
• Return on net worth
• Return on capital employed

➢ Liquidity ratios
• Current ratio
• Quick ratio

➢ Solvency ratio
• Debt- equity ratio

➢ Turnover ratio
• Inventory turnover ratio
• Asset turnover ratio

3.6.1 EARNINGS PER SHARE

Earnings per share value is calculated as net income (also known as profits or earnings)
divided by available shares. To calculate a company's EPS, the balance sheet and income
statement are used to find the period-end number of common shares, dividends paid on
preferred stock (if any), and the net income or earnings.

(Net Income of the Company / Average outstanding share of the company)

3.6.2 NET PROFIT MARGIN

Net profit margin measures the relationship between net profits and sales. Net profit is
that proportion of net sales which is remained to the owners or the shareholders after all costs;
charges and expenses including income tax have been deducted.

(Net Profit / Total Revenue * 100)

3.6.3 RETURN ON NETWORTH

By showing the picture of the amount of return the company earns on its capital, return on
net worth illustrates the profitability of the business. It reveals whether the business is effective
enough to expand its net worth each year in order to maximize possible future growth.

(Profit before tax / Net worth * 100)

3.6.4 RETURN ON CAPITAL EMPLOYED

Return on capital employed (ROCE) is a financial measure that may be used to evaluate
the profitability and capital efficiency of an organization. In other words, this ratio can be used
to determine how effectively a business is turning a profit from the capital it uses. When
evaluating a company for investment, financial managers, stakeholders, and potential investors
may utilize a number of profitability ratios, including ROCE.

(Profit before Tax / Capital employed * 100)

3.6.5 CURRENT RATIO

Current ratio is a most widely used ratio to judge short term financial position or solvency
of a firm. it can be defined as relationship between current assets and current liabilities. current
ratio of 2 : 1 is considered as satisfactory.

(Current assets / Current liabilities)

3.6.6 QUICK RATIO

It is also called as Acid test ratio, measures the ability of business to pay its short term
liabilities by having assets that are readily converted into cash. These assets are namely cash,
marketable securities and account receivables.

(Current assets – Inventory - Prepaid Expenses / Current liabilities)

3.6.7 DEBT - EQUITY RATIO

This ratio reflects the long term financial position of a firm and is calculated in the form
of relationship between external equities or outsider’s funds and internal equities or
shareholders fund. Debt equity ratio may also be called as ‘ratio long term debt to shareholders
funs’.

(Total debt / Shareholder’s equity)

3.6.8 INVENTORY TURNOVER RATIO

Inventory turnover is a financial ratio that demonstrates how frequently a company turns
over its stock in relation to its cost of goods sold (COGS) over the course of a specific time
period. The number of days in the period-typically a fiscal year-can then be divided by the
inventory turnover ratio to determine the average number of days it takes for a company to sell
its inventory.

(Cost of goods sold / Average inventory)

3.6.9 ASSET TURNOVER RATIO

The asset turnover ratio measures the value of a company's sales or revenues relative to
the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with
which a company is using its assets to generate revenue.

The higher the asset turnover ratio, the more efficient a company is at generating revenue
from its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is not
efficiently using its assets to generate sales.

(Sales or Revenue / Total assets)

3.7.2 DEA (Data Envelopment Analysis):

DEA or Data Envelopment Analysis, is a method used in operations research and economics
to assess the relative efficiency or productivity of a set of decision-making units (DMUs) by
comparing their input and output variables. It constructs an efficiency frontier, indicating the
best possible performance achievable by DMUs. DMUs are classified into three categories:
efficient, inefficient, and on the frontier. Efficient DMUs have an efficiency score of 1, while
inefficient ones have scores below 1. DEA provides insights into best practices for improving
inefficient DMU performance and has applications in healthcare, finance, education,
manufacturing, and public policy.

3.7.3 Regression
Regression is a statistical method used to analyze the relationship between a dependent variable
(the outcome or response variable) and one or more independent variables (predictor variables
or factors). The primary goal of regression analysis is to understand how changes in the
independent variables are associated with changes in the dependent variable. The R² metric
gives an indication of how well a model fits your data, but is unable to explain if your model is
good or not. In regression with a single independent variable, the coefficient tells you how much
the dependent variable is expected to increase (if the coefficient is positive) or decrease (if the
coefficient is negative) when that independent variable increases by one.
Formulae: Y = a + b X, in which Y is dependent, X is independent, b is slope and a is intercept.

3.7.4 ANOVA (Analysis Of Variance)

ANOVA stands for Analysis of Variance. It is a statistical method used to analyze the
differences between the means of two or more groups or treatments. It is often used to
determine whether there are any statistically significant differences between the means of
different groups. If the p-value is less than 0.05, we reject the null hypothesis that there's no
difference between the means and conclude that a significant difference does exist. If the p-
value is larger than 0.05, we can conclude that a significant difference exists.

3.7.5 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.

3.7.6 Cluster Analysis

Cluster analysis refers to a popular statistical method used to classify a set of objects into
clusters based on their similarities in terms of one or more characteristics. Cluster analysis is
often used in data mining, machine learning, and pattern recognition. The output of cluster
analysis typically includes a visual representation of the clusters as well as metrics that describe
the quality of the clustering and the similarity between data points within and between clusters.

3.7.7 DuPont Analysis

DuPont analysis is a financial ratio used to analyze a company’s overall performance. The
DuPont equation breaks down return on equity (ROE) into three separate components. These
are profit margin, asset turnover, and leverage. This analysis can be helpful in identifying a
company’s strengths and weaknesses. It also highlights potential areas of improvement. The
DuPont equation can be written as follows:

ROE = (Profit Margin) * (Asset Turnover) * (Equity Multiplier)

Where:

Profit Margin = Net Income / Sales

Asset Turnover = Sales / Average Assets

Equity Multiplier = Average Assets / Average Equity

3.7.8 Comparative Financial Statements and Common Size Statements

These tools play a significant role in making inter-firm and intra-firm comparison of financial
performance and financial position of the Pharma companies.
3.7.9 Correspondence Analysis

Correspondence Analysis shall be used to find out the association between two categories
variables arrived at for this study using Cluster Analysis.

3.8 GRAPHICAL REPRESENTATION OF DATA

Graphical Representation is a way of analysing numerical data. It exhibits the relation
between data, ideas, information and concepts in a diagram. It is easy to understand and it is
one of the most important learning strategies. It always depends on the type of information in
a particular domain. There are different types of graphical representation. Some of them are as
follows:

• Bar chart
• Column chart

3.8.1 BAR CHART

A bar chart or bar graph is a chart with rectangular tars with lengths proportional to the
values that they represent the bars can be plotted vertically or horizontally. A vertical bar chart
is sometimes called a column bar chart. Other words, a bar graph display data visually and is
sometimes called a bar chart or a bar graph. Data is displayed either horizontally or vertically
and allows viewers to compare items displayed. Data displayed will relate to things like
amounts, characteristics, times and frequency etc. A bar graph displays information in a way
that helps us to make generalizations and conclusions quickly and easily.

A typical bar graph will have a label, axis, scales and bars. Bar graphs are used to display
all kinds of information such as, numbers of females versus males in a school sale of items
during particular times of a year. Bar graphs are ideal for comparing two be more values. Like
line diagrams these figures are also used where only single dimension length can present the
data. Procedure is almost the same, only one thickness of lines measured.

These can also be drawn either vertically or horizontally, Breadth of these lines or bars
should be equal. Similarly, distance between these bars should be equal. Bar charts have many
advantages like:

• Display a frequency distribution for each data type.

 • Show the relative numbers or percentage of several categories.
• Visually summarize a large data set.
• Tables don’t really clarify trends as well as graphs.
• Key value estimation at a glance.
• Allow for visual verification of calculation accuracy and reasonableness.
• Due to its widespread use in industry and the media.

3.8.2 COLUMN CHART

A column chart is type of data visualization in which categories are represented by

rectangle – also known as vertical bar charts. They make it simple to compare a variety of
goods and analyze trends. In general, statistics and figures are difficult to understand when
presented in tables or written format. Column chart make things easy, fast and understandable.

A column chart differs from a bar chart. The variable in a bar chart is plotted horizontally,
while the fixed dimension is plotted vertically in a column chart. Most individuals, however,
do not recognize the distinction and use column and bar charts interchangeably. They are
especially beneficial when:

• The data is divided into a small number of discrete categories, each with a single value.
Small multiples, cluster column charts, and stacked column charts are best when there
are multiple values per category.
• The purpose is to compare each category’s values.
• The goal is to make it as simple as possible for the spectator. Column charts are perhaps
the best of all visualization because they draw into our natural understanding of heights,
whereas most other data representations take some level of training for the reader to
understand.

3.9 Conclusion

This chapter has given a detailed outlook on the methodology to be adopted to complete the
research.
 CHAPTER-IV

COMPANY PROFILE

InMed Prognostics is an AI-powered, globally-distributed healthcare and wellness

company, backed by cutting-edge research and human-centered design. The company offers a
suite of products that use AI/ML to process and analyze complex medical imaging data.
InMed's proprietary image processing platform/pipeline can be seamlessly integrated and
deployed in different modes, making it accessible to a wide range of users.

In-Med Prognostics brings affordable, accessible, reliable, and data-driven brain health
prognostics and diagnostics tools to India and other emerging markets. Their proprietary
software, Neuroshield™ integrates MRI images, clinical reports and psychological
assessments to produce automated, quantified reports to support the physician’s clinical
impression for various neurological disorders and provides a seamless, end-to-end cloud based
image analysis platform for clinical and research use. Leveraging state-of-the-art data analytics
and deep learning methodologies, they are developing a biomarker algorithm for various
neurological disorders starting with paediatric epilepsy and dementia. Currently, they offer
segmentation services and comparative volumetric analysis reports to clinical end-users and
research support for clinical imaging based projects for pharma and life sciences customers.
Their aim is to build an Indian databank for neurological disorders consisting of complete
clinical data including radiology. In-Med was founded by Rajesh Purushottam, Dr. Latha
Poonamallee & Dr. Al Curran.

AI/ML algorithms to segment and analyze brain MRI images, providing clinicians with
insights into the patient's brain health and the progression of their disease.

InMed Prognostics is also developing a suite of other AI-powered healthcare tools,

including:

• A tool for the early detection of Alzheimer's disease

• A tool for the diagnosis and monitoring of Parkinson's disease
• A tool for the assessment of stroke damage
• A tool for the prediction of the response to cancer treatment
 InMed Prognostics is committed to making AI-powered healthcare accessible and
affordable for everyone. The company is working with partners in India and other emerging
markets to deploy its products and services in these regions.

InMed Prognostics is a healthcare technology company that uses artificial intelligence

(AI) and machine learning (ML) to develop innovative solutions for the diagnosis and
monitoring of neurological disorders. The company's flagship product, NeuroShield, is an AI-
powered MRI analysis tool that helps clinicians to identify subtle changes in the brain that may
be indicative of early-stage disease.

NeuroShield uses a variety of AI and ML techniques, including deep learning, to

automatically segment MRI images and generate volumetric analysis reports. These reports
provide clinicians with detailed information about the size and volume of different brain
structures, as well as how these structures have changed over time. This information can be
used to diagnose neurological disorders such as Alzheimer's disease, Parkinson's disease, and
multiple sclerosis, as well as to monitor disease progression and treatment response.

In addition to NeuroShield, InMed Prognostics also offers a variety of other products and
services, including:

➢ Research assistance for clinical imaging-based projects for pharma and life sciences
companies
➢ Ethnicity-specific AI/ML models for neurological disorders
➢ A cloud-based platform for deploying AI/ML models in clinical settings

InMed Prognostics' products and services are used by a variety of organizations around the
world, including hospitals, clinics, research institutions, and pharmaceutical companies.

Here are some of the ways that InMed Prognostics is transforming healthcare:

• Earlier detection of neurological disorders: NeuroShield can help clinicians to detect

neurological disorders at an earlier stage, when they are more treatable. This can lead
to improved patient outcomes and reduced healthcare costs.
• More personalized medicine: InMed Prognostics' ethnicity-specific AI/ML models can
help clinicians to provide more personalized treatment to their patients. This is because
the models take into account the genetic and environmental factors that can influence
the progression of neurological disorders.
 • Improved access to healthcare: InMed Prognostics' cloud-based platform makes it
possible for clinicians to deploy AI/ML models in clinical settings, regardless of their
location or resources. This means that patients in all parts of the world can have access
to the latest AI-powered healthcare technologies.

InMed Prognostics is a rapidly growing company that is at the forefront of the AI revolution in
healthcare. The company's products and services have the potential to make a significant
impact on the lives of millions of people around the world.

Company Overview

Legal Name Prognostics In-Med Private Limited

Founded 2018

Headquarters Pune, Maharashtra, India

Products and Services AI-powered brain health diagnostics tool, AI-

powered healthcare tools for Alzheimer's
disease, Parkinson's disease, stroke, and
cancer treatment

Industry Healthcare, AI, Machine Learning

Mission: To make AI-powered healthcare accessible and affordable for everyone.

Vision: To become the leading provider of AI-powered healthcare tools for the diagnosis,
prognosis, and treatment of neurological and other disorders