Finance for non Finance- Analysis of Income Statement- Listed Companies

now we would look at financial
statements of few listed companies and see if we can calculate these ratios let's start with Mcdonalds since mcdonalds I have 10K is the annual report in US and since
it is listed in US the financial statements are prepared as
per the US gaap What would be US GAAP? gap would be generally accepted
accounting practices every country will have its own set
of rules to prepare financial statements These financial statements that we see here are prepared as per the rules in US in US here this is data for 2013 this is a
data 2012 this is a data for 2011 is this visible to everyone? sales by company operator restaurants revenue from franchisee restaurants we will look at the total revenue year 2011 it was 27006 27567 28106 can we say there's an increase in revenue ? but fractional, not very significant the data is given in dollars in millions 27,000 million here now these are there operating costs and
expenses company operated restaurant, franchisee, SGA to be just saw that and total operating cost so can we say that sales minus operating cost will give us EBIT
that means EBIT of MCdonalds is how much? 8764 , so using this can you calculate
operating profit margin? so please find out what is the
operating profit margin of McDonald's? for 2013 8764 divided by 28106, these two numbers 8764, 28106 how much would that be it 31-point so roughly about let's say 31 percent so whatever is the sales operating cost are about 69 percent of
the sales and therefore operating profit margin is
31 percent let's look at the same values for 2018 so same 8605 divided by 27567 30 it's almost the same number and for year before that 8530 divided by 27006 31.5 so again I will sale maybe 31 or 32% which means the operating performance of McDonald's
over the period of 3 years 2011-12 and 13 has been more or less similar so we do not have the
bifurcation of what is COGS and what are the other expenses We don't have that but on a totality basis it looks to be on the similar lines then we have interest expese here we have non operating expenses profit
before Taxes then Taxes and this is where we have
the net income do see this net income numbers 55 86 5465 5503 can you calculate net profit margin for McDonald's this would be calculated as 5586 divided by 28106 19.87 5465 divided by 27567 82 and 5503 divided by 272006 20.37 so there is a really small fractionally degrees in
your net profit margin and maybe that's happening because we can see some small amount of increase in interest cost is it visible 493 then 517 and then 522 but it is not significant which means
this appears to be more of a mature and stable company operating profit margin net
profit margin and more predictable over the period of time let's look at a few more companies know
so one question is that 19.87 a good number or bad number yes is that 19.87 good or bad so the answer is depends it depends on what are the profit margin of similar
businesses in US if you take Burger King and if their KFC and if their
profit margins at 35-40 percent then we will say maybe McDonald's doesn't
have the operating structure right because similar industries who should
generally produce similar type a profit margins so now we
will build comparative analysis on few similar companies let's take a Dabur India Limited let me find out the
financial statements so this annual report for 2012-13 financial statements fish 102 what would
be difference between financial statements standalone and consolidated
consolidated means inclusive of all the subsidiaries to consolidated financial statement is
available on page 102 this is income statement all
amount in Rupees lacs except the share data this is year 2012 this is year 2013 we started with revenues group is in
lacks so 2013 the revenue 627 062 these are cost of material consumed Employee Benefit so now this is an
Indian accounting standard balance sheet so therefore format is slightly
different but roughly these four items up to 2916 are component of your cogs which is a
manufacturing cost so what I want to do is take a total of
these items take negative item as negative and find
out what is total cogs which means 242 211 is it visible at the back 242 211 plus 59922% W plus 59922 W minus 3028 minus 87 plus 2916 301934 your total cogs is 301934 now using this we can calculate the
gross profit for Dabur company here so Ideally we should be taking only this number but just senses are first analysis let's take 627062 627062 minus 301934 325128 now using this gross profit can you find out gross profit margin so
find out 325128 divided by 627062 51 percent so next time you buy a Dabur product and if you buying it for
100 rupees you know that it has been manufactured
roughly at about 49 rupees and because 51 percent is the gross
profit margin now after this if you would observe these expenses this
is a part of your SGA which is given as: Employee Benefit
expense and even these other expenses are
part of SGA so when we will reduce 47123 and 165575 then we will get a beta from that you will reduce depreciation then you would get a bit from that you
will reduce interest and you'd see interest is really really less and for such a large size of company its
very small amount of interest that means it even this company appears
to be more on the conservative side so when you reduce interest you will get
earning before Taxes and then you will make
adjustments for taxes and some other items which is here and finally we get net
profits so directly calculate net profit now 76342 76342 as ratios to 627062 12.17 percent this is someone
you knows just write down this number since we'll be building comparative
analysis gross profit margin Dabur gross profit margin Dabur 51 percent and net profit margin 12.17 percent are we fine here let us go on to Godrej now or maybe Hindustan
Unilever is a better comparison so let's pick up Hindustan Unilever let's search for consolidated financial
statements page number 115 so these are your financial statements your
total revenue is 27536 and your cogs would be made of these three components this is data is given in rupees and crore
which was actually is substantially larger in size company so let's take an addition of these
numbers 10987 plus 3125 -26 total of these 3 will gives us cogs 14086 this is 14086 is the cogs now sales minus cogs will give us a
gross profit 27536 -14086 13450 and let us calculate gross profit
margin which is 13450 divided by 27536 forty-eight percent 48.8 so about forty-nine percent so which means from a manufacturing perspective Dabur was fractionally better that than the Hindustan
Unilever but the 2% isn't really here significant difference all we fine with
this so it appears now it's very nave
conclusion but based on two companies that we analyse on an average in the FMCG sector manufacturing cost is about fifty
percent sales in India so next time you buy some FMCG
product let it be a detergent or bathing bar or shampoo you'd know that if you're buying it
at fifty rupees it must have been manufactured at price of 25 now moving further let us take the net profit margin so you're total revenue is 27536 and your net profit is 3828 how much is that 13.9% is the net profit margin and how much was a net profit margin of
Dabur so compared to Dabur HUL had slightly
lesser gross profit margin but it is got slightly higher net
profit margin and may be one reason that you can see
is your finance cost just 25 that's almost negligible twenty-fifth
crores on such a big balance sheet should which means actually appears to be more

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