1. Introduction Financial statement analysisanalysis the process of reviewing and analyzing a company's financial statements to make better economic decisions. These statements include theincome statement,balance sheet,statement of cash flows, and a statement of retained earnings. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization The information, that are needed for the preparation of financial statement analysis are ,the financial statement of the company. Financial statement analysis is defined as the process of identifying financial strength and weakness of the firm by properly establishing relationship between items of the balance sheet and profit and loss account. Financial statement analysis is the process of understanding the risk and profitability of the firm through analysis of reported financial information, by using different accounting tools and techniques A variety of stakeholders, such as credit and equity investors, the government, the public, and decision-makers within the organization use it. These stakeholders have different interests and apply a variety of different techniques to meet their need The process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.

1.1Problem statement Financial statement analysis is an evaluative method of determining the past, current and projected performance of a company. The study is used to analyze and interpret the financial performance of FACT Ltd, in order to understand the strength and weakness of the company by establishing strategic relationship between items of balance sheet ,profit and loss account and other operative data A financial statement, which is the center of annual report, is an organized collection of data prepared according to logical and consistent accounting procedures. Its purpose is to convey an understanding of financial aspect of the business. The financial statements can get further insight about the financial strength and weakness of the firm if they properly analyze information reported in the financial statements. Therefore, the study of financial statement analysis of FACT Ltd becomes relevant Financial statement analysis helps in identifying financial strength and weakness of the firm by establishing relationship between items of the balance sheet and profit and loss account. The study conducted to obtain better understanding of the companys performance. By applying financial analysis tools tries to understand how the performance of FACT Ltd can be evaluated. The study aims to analysis the financial strength and weakness of FACT Ltd

1.2 ObjectivesPrimary objectives To analysis financial performance of FACT Ltd To make comparison of profit of last five years To evaluate the short term and long term solvency of Secondary objectives To know main drawback of FACT Ltd To suggest measures for improving efficiency of profitability To know the return on asset1.3Significance of the study

Financial statement is prepared at a certain point of time according to established convention. These statements are prepared to suit the requirement of the proprietor. For measuring the financial soundness, efficiency, profitability and future prospects of the concern, it is necessary to analyze the financial statement. Following purposes are served by the Financial analysis: - Efficiency Help in Evaluating the operational of the Concern:- It is necessary to analyze the financial statement for matching the total expenses incurred in manufacturing, Advertising, selling and distribution of the finished goods and total financial expanses of the current year comparing with the total expanses of the previous year and evaluate the managerial efficiency of concern Help in Evaluating the short and long term financial position It is necessary to analyze the financial statement for comparing the current assets and current liabilities to evaluate the short term and long term financial soundness. Help in calculating the profitability:It is necessary to analyze the financial statement to know the gross profit and net profit. Help in indicating the trend of achievements Analysis of financial statementhelps in comparing the financial position of previous year andalso compares various expenses, purchases and sales growth, gross and net profit.Cost of goods sold, total value of assets and liabilities can be compare easily with the help of Analysis of financial statement. Forecasting, budgeting and deciding future line of action The potential growth of the business can be predicts by the analysis of financial statement which helps in deciding future line of action. Comparisons of actual performance with target show all the shortcomings.1.4Methodology In this study secondary data was gathered from different sources, such as annual report of FACT Ltd and its website (www.fact.co.in).Apart from that books on financial management written by various authors were also referred .The study comprises a number of evaluation mechanism and tools which link together to form a conclusion . In this study financial tools like ratio analysis, comparative statement , common size statement analysis, trend analysis and statistical tools like tables and graphs are used for data analysis and to drive in a conclusion. The overall intention is to know the financial position of the company in last five years. The period of study arranged between 23rd February 2015 to march 23rd 2015.1.5 Chapter schemeThe project report has been: The first chapter, which is the introduction, problem statement, objectives, significance of the study, methodology and limitation of the study. The second chapter is review of literature The third chapter is industry profile and organization The forth chapter deals with data analysis and interpretation Chapter five includes findings, recommendations and conclusions1.6 Limitation of the study The study is based mainly on data collected through secondary sources provided by the company .Hence there are chance of errors Financial analysis provides misleading result in absence of absolute data Price level changes is ignored in financial analysis The present study will be based on annual report of the FACT Ltd . Hence it may be considered only as a postmortem analysis of financial statement

2. Review of literature 2.1 Introduction Aliterature reviewis a text of a scholarly paper, which includes the current knowledge including substantive findings, as well as theoretical and methodological contributions to a particular topic.Literature reviewsuse secondary sources, and do not report new or original experimental work.2.2 Financial statement Afinancial statement(orfinancialreport) is a formal record of thefinancialactivities of a business, person, or other entity. Relevant financialinformation is presented in a structured manner and in a form easy to understand. The process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and loss statement), thereby gaining an understanding of the financial health of the company and enabling more effective decision making. Financial statements record financial data; however, this information must be evaluated through financial statement analysis to become more useful to investors, shareholders, managers and other interested parties.Financial statement include the following Profit and loss accountAnincome statement orprofit and loss account(also referred to as aprofit and loss statement(P&L),revenue statement,statement of financial performance,earnings statement,operating statement, orstatement of operations is one of thefinancial statementsof a company and shows the companysrevenuesandexpensesduring a particular period. It indicates how the revenues (money received from the sale of products and services before expenses are taken out, also known as the top line) are transformed into thenet income It displays the revenues recognized for a specific period, and thecostandexpenses charged against these revenues, includingwrite-offs(e.g.,depreciationandamortizationof variousassets) andtaxes.The purpose of the income statement is to showmanagersandinvestorswhether the company made or lost money during the period being reported Balance sheet Statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding periodA financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. Statement of retained earningsThe statement explains the changes in a company'sretained earningsover the reporting period. They break down changes in the owners' interest in the organization, and in the application of retained profit or surplus from oneaccounting periodto the next. Line items typically include profits or losses from operations,dividendspaid, issue or redemption of stock, and any other items charged or credited to retained earnings

Funds flowstatement A Funds flowstatementis prepared to show changes in the assets, liabilities and equity between two balance sheet dates, it is also called statementof sources and uses of funds. The advantages of such a financialstatementare many fold.A fund flow statement, better known as a cash flow statement, is an important document in the accounting world. A fund flow statement shows a company's inflows and outflows of funds. It is used to show investors, stakeholders or owners where the company's money came from and where it went.A fund flow statement is an important tool used in evaluating a company's performance. A fund flow statement is a statement that shows all money coming in to a company and all money leaving a company during an accounting period. Investors when considering investing in a company use this statement. The fund flow statement shows problems a company has if the cash flow is negative Cash FlowStatement ACash FlowStatementis a statement showing changes in cash position of the firm from one period to another. It explains the inflows (receipts) and outflows (disbursements) of cash over a period of time. The inflows of cash may occur from sale of goods, sale of assets, receipts from debtors, interest, dividend, rent, issue of new shares and debentures, rising of loans, short-term borrowing, etc. The cash outflows may occur on account of purchase of goods, purchase of assets, payment of loans loss on operations, payment of tax and dividend, etc.A cash flow statement is different from a cash budget. A cash flow statement shows the cash inflows and outflows which have already taken place during a past time period. On the other hand a cash budget shows cash inflows and outflows which are expected to take place during a future time period.

Schedule

Ascheduleor atimetable, as a basictime-managementtool, consists of a list of times at which possibletasks, events, or actions are intended to take place, or of asequence of eventsin the chronological order in which such things are intended to take place. The process of creating a schedule - deciding how to order these tasks and how to commit resources between the varieties of possible tasks - is called scheduling,and a person responsible for making a particular schedule may be called ascheduler. Making and following schedules is an ancient human activity. Some scenarios associate "this kind of planning" with learning "life skills".Schedules are necessary, or at least useful, in situations where individuals need to know what time they must be at a specific location to receive a specific service, and where people need to accomplish a set of goals within a set time.

2.3 Tools used for analysis

Tools used for financial analysis

Ratio analysis Comparative statement Common size statement Trend analysis

Ratio analysis Financial ratios are mathematical comparisons of financial statement accounts or categories. These relationships between the financial statement accounts help investors, creditors, and internal company management understand how well a business is performing and areas of needing improvement.Financial ratios are the most common and widespread tools used to analyze a business' financial standing. Ratios are easy to understand and simple to compute. They can also be used to compare different companies in different industries. Since a ratio is simply a mathematically comparison based on proportions, big and small companies can be use ratios to compare their financial information. In a sense, financial ratios don't take into consideration the size of a company or the industry. Ratios are just a raw computation of financial position and performance.Ratios allow us to compare companies across industries, big and small, to identify their strengths and weaknesses. Financial ratios are often divided up into six main categories. Liquidity Ratios Solvency Ratios Efficiency Ratios Profitability Ratios Market Prospect Ratios Financial Leverage Ratios Coverage Ratios

Comparative financial statement

A statement which compares financial data from different periods of time. The comparative statement lines up a section of the income statement, balance sheet or cash flow statement with its corresponding section from a previous period. It can also be used to compare financial data from different companies over time, thus revealing the trend in the financials.Analysts like comparative statements because they show the effect business decisions have on a company's bottom line. Analysts can identify trends and evaluate the performance of managers, new lines of business and new products on one statement instead of having to flip through individual financial statements from different periods of time. When comparing different companies, a comparative statement can show how businesses react to market conditions affecting an entire industry. Common size financial statement A companys financial statement that display all items as percentages of a common base figure. This type of financial statement allows for easy analysis between companies or between times of a company. The values on the common size statement are expressed as percentages of a statement component such as revenue. While most firms do not report their statements in common size, it is beneficial to compute if you want to analyze two or more companies of differing size against each other. Formatting financial statements in this way reduces the bias that can occur when analyzing companies of differing sizes. It also allows for the analysis of a company over various periods, revealing, for example, what percentage of sales is cost of goods sold and how that value has changed over time. Common size balance sheet expresses each item on the balance sheet as a percentage of total assets A common size income statement expresses each income statement category as a percentage of total sales revenues. Trend analysis Trend analysisis the process of comparing business data over time to identify any consistent results ortrends. You can then develop a strategy to respond to thesetrendsin line with your business goals. An aspect of technical analysis that tries to predict the future movement of a stock based on past data. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future. There are three main types of trends: short-, intermediate- and long-term. Trend analysis tries to predict a trend like a bull market run and ride that trend until data suggests a trend reversal (e.g. bull to bear market). Trend analysis is helpful because moving with trends, and not against them, will lead to profit for an investor. Trend Analysisis the practice of collecting information and attempting to spot a pattern, ortrend, in the information. In some fields of study, the term "trend analysis" has more formally defined meaning.