Anandam Manufacturing Company: Analysis of Financial Statements

By: Vinay Goyal, Subrata Kumar Mitra

In July 2015, the owner of the Anandam Company approached a bank for additional funding to meet the growing requirements of his garment manufacturing firm. The owner was confident about the financial prospects of his firm, with its fourfold increase in revenue and phenomenal increase in profit after taxes over the last three years. In a lengthy discussion with the bank manager, the owner shared the development of his company and the dynamics and growth opportunities of the garment and textile market in India. He believed his firm was performing strongly in a highly competitive industry environment. The bank manager instructed the loan officer to process the loan application as soon as possible and make a decision. Determining the health of the company would involve preparing a trend analysis and a common size statement, interpreting selected ratios, and preparing a basic statement of cash flows. Was the Anandam Company a good candidate for receiving a loan?

Review the case and respond to the following questions:

1. Compute the Exhibit 3 ratios for the Anandam Manufacturing Company.

EXHIBIT 1: INCOME STATEMENT, APRIL 1 TO MARCH 31 (IN THOUSANDS) Source: Company's audited financial statement. EXHIBIT 2: BALANCE SHEET (IN THOUSANDS) Source: Company's audited financial statement. EXHIBIT 3: INDUSTRY AVERAGE OF KEY RATIOS