During the pandemic, an alumnus of IITM got two job offers (Rs. 15 Lakhs p.a. as a Design-Engineer in Company A and Rs. 11 Lakhs p.a. as an Analytics Engineer in Company B). He was in a dilemma about which one to join. Assume that he is capable and interested in both the jobs but is keen to join a company that has demonstrated better efficiency during crisis and rebounded faster. He has sought your help in answering this question using financial statements. Your answers must be based on analysis of the financial statements, and not any qualitative information about the individual or the company. 1. What is the first question you would ask before comparing the two companies? (1 mark) 2. What is missing in the P&L statement? You may compute that to answer the questions 384 (1 mark) 3. Suggest three best financial ratios or measures that you would use to reveal differences between the two firms in terms 'managing the crisis better and rebounding faster' - provide justification for these measures? (9 marks). What is your conclusion based on the financial analysis? (2 marks). 4. Which financial measures point to job security, timely payment of salary? Which company appears better? (2 marks) Sep'19 Profit & Loss statements of A and B for last four quarters (All Figures in Rs. Crores) Company A Company B Sep'20 Jun 20 Mar 20 Sep 19 Sep 20 Jun 20 Mar 20 Net Sales 11710.46 5602.18 9143.72 12345.29 18744.5 4106.5 18198.7 Turnover Other Income 392.59 127.79 314.71 206.25 602.5 1318.3 880.4 20706.8 784 Total Income 12103.05 729.97 9458.43 2551.54 47 424.8 1490.8 6251.38 3282.03 4398.09 6482.11 8599.9 2008.3 8019.9 9338 Raw Material Consumed 701.16 678.04 617.8 759.38 826.8 730.3 819.4 867 Employee Expenses Total Cost of Goods Sold 6952.54 3960.07 5015.89 7241.49 9426.7 2738.6 8839.3 10205 Gross Profit 5150.51 1769.9 4442.54 5310.05 9920.3 2686.2 10239.8 11285.8 2868.09 1092.95 2993.01 3454.28 7384.2 2231.3 7813 8399.7 R&D and SG&A Expenses Operating Profit EBITDA 2282.42 676.95 1449.53 1855.77 2536.1 454.9 2426.8 2886.1 1055.77 629.18 1171.48 948.66 1164.5 704.3 1135.1 1321.3 Depreciation, Interest & Taxes The balance sheets of A and B as on 30 Sep 2020 (All figures in Rs. Crores) Particulars Company A Company B Owners' Equity / Shareholder 34467.84 Funds Long-term Liabilities / Debt 2932.03 48437 106.3 Total Current Liabilities 13102.19 14008.8 Total Liabilities + Owners Equity 50502.06 62552.1 Fixed Assets 34342.18 53586.2 Current Assets 16159.88 8965.9 Total Assets 50502.06 62552.1 During the pandemic, an alumnus of IITM got two job offers (Rs. 15 Lakhs p.a. as a Design-Engineer in Company A and Rs. 11 Lakhs p.a. as an Analytics Engineer in Company B). He was in a dilemma about which one to join. Assume that he is capable and interested in both the jobs but is keen to join a company that has demonstrated better efficiency during crisis and rebounded faster. He has sought your help in answering this question using financial statements. Your answers must be based on analysis of the financial statements, and not any qualitative information about the individual or the company. 1. What is the first question you would ask before comparing the two companies? (1 mark) 2. What is missing in the P&L statement? You may compute that to answer the questions 384 (1 mark) 3. Suggest three best financial ratios or measures that you would use to reveal differences between the two firms in terms 'managing the crisis better and rebounding faster' - provide justification for these measures? (9 marks). What is your conclusion based on the financial analysis? (2 marks). 4. Which financial measures point to job security, timely payment of salary? Which company appears better? (2 marks) Sep'19 Profit & Loss statements of A and B for last four quarters (All Figures in Rs. Crores) Company A Company B Sep'20 Jun 20 Mar 20 Sep 19 Sep 20 Jun 20 Mar 20 Net Sales 11710.46 5602.18 9143.72 12345.29 18744.5 4106.5 18198.7 Turnover Other Income 392.59 127.79 314.71 206.25 602.5 1318.3 880.4 20706.8 784 Total Income 12103.05 729.97 9458.43 2551.54 47 424.8 1490.8 6251.38 3282.03 4398.09 6482.11 8599.9 2008.3 8019.9 9338 Raw Material Consumed 701.16 678.04 617.8 759.38 826.8 730.3 819.4 867 Employee Expenses Total Cost of Goods Sold 6952.54 3960.07 5015.89 7241.49 9426.7 2738.6 8839.3 10205 Gross Profit 5150.51 1769.9 4442.54 5310.05 9920.3 2686.2 10239.8 11285.8 2868.09 1092.95 2993.01 3454.28 7384.2 2231.3 7813 8399.7 R&D and SG&A Expenses Operating Profit EBITDA 2282.42 676.95 1449.53 1855.77 2536.1 454.9 2426.8 2886.1 1055.77 629.18 1171.48 948.66 1164.5 704.3 1135.1 1321.3 Depreciation, Interest & Taxes The balance sheets of A and B as on 30 Sep 2020 (All figures in Rs. Crores) Particulars Company A Company B Owners' Equity / Shareholder 34467.84 Funds Long-term Liabilities / Debt 2932.03 48437 106.3 Total Current Liabilities 13102.19 14008.8 Total Liabilities + Owners Equity 50502.06 62552.1 Fixed Assets 34342.18 53586.2 Current Assets 16159.88 8965.9 Total Assets 50502.06 62552.1