In our previous blog we understood the first main heading of the asset schedule i.e. Gross block here in this post we would be focusing on the second subheading of the asset schedule i.e. Depreciation and Amortization. Before going deep into this let us first understand what is the difference betw

Case Study: VIP Industries - Hard Luggage V/S Soft Luggage margins Now that we have a thorough understanding of computing Manufacturing and Trading profit margins, lets try and see if we can apply this concept to compute product level margins? We will be taking a look at VIP Industries which manufa

Most people use Revenue CAGR/ YoY growth figures to check the growth of the business and why wouldn't they, one is obviously on the lookout for businesses which are constantly growing! In most of the business this method is correct but what if we have a company whose revenue is coming from locking

In this post we discuss two more critical angles to analyse revenue sources of the company. Let's start with the importance of analysing trend of Operating Revenue Vs other income of a business. Operating Vs Non-Operating Revenue/ other income It's great to have growing revenues for any business.

Typically, we can expect Consolidated revenues to be more or equal to than the standalone revenues, however the reverse can also be true. ITs a rare event but can be observed in a few companies listed in India. Case Study: Prabhat Dairy An interesting case study to take a look at would be Prabhat

Now that we understand Presentation, Calculation and How a company defines revenue, it's time for us to look into how a company sources revenue and few analytical aspects that an analyst can keep in mind to get a deeper understanding of business from these different data cuts and analysis. There ar

Now, you understand what activities a company usually considers as revenue and where you can find these details. Let's dig a bit deeper into this issue from an analytical mindset. How is it that studying this will help us? If you recall in our previous blog on Presentation and Calculation of revenue

Revenue is income/ sales/ turnover of a company, generated from its business operations during the year. It’s the topline of the company (also known as Total Income) which drives profit after deducting all the expenses. Companies earn revenue in return for the supply of goods/ services. It's the onl

Fixed asset schedule is the detailed document/supporting document that discloses the total fixed assets of the company. In IGAAP the fixed assets were shown as fixed assets in non-current assets shown in below snapshot. In IND-As now it is reflected as “Plant, property and equipment” shown in be

Case Study: Vidhi Speciality Vidhi Specialty Food Ingredients Limited is a leading manufacturer of Superior Synthetic and Natural Food Grade Colours. The company manufactures as well as trades these goods. As an analyst it would matter to us to see how these manufacturing, trading and overall profi

Some businesses generate the majority of their revenues in particular quarters/ months/ seasons of the year. The don't have streamlined sales throughout the year hence financial performance exhibits seasonality in the data. Almost every research analyst out there, tracks peak quarter/ seasons perfor

While analyzing revenue figures one should also look at customer wise revenue. This is to check if there is any single customer/ buyer who is buying your product heavily (as a % of your total sales). If yes, then it reflects that your company might be dependent on that buyer (Not a red flag but an a

Standalone Vs Consolidated Revenues: To diversify its existing operations/ venture into different industries/territories/ expansion purposes a company may open up new companies which are completely (100%) or majority owned/controlled (subsidiaries), share operations/Joint control with others (JV) o

What happens when a mistake in revenue recognition is made? If a company reports its revenue aggressively then the company might have overstated revenue numbers in their current financial statements and may have to re-adjust it in future. Case study 1: Below is the snapshot of an Indian Listed c

In our previous two pieces, we discussed how companies Present and Calculate Revenue figures. In this piece, we would like to discuss how companies define what should be included in revenue and what shouldn't. We know that revenue is a consideration a company has received or expects in rendering se

Some businesses may reap the benefits/ profits of holding inventory due to steep price increases (only if they are able to transfer these price hikes to their customers). Often businesses may choose to hedge themselves against fluctuating inventory prices/ commodity prices which directly drive their

In our previous blogs, we spent a significant amount of time in understanding Revenue recognition policies. Since Accounting standards have been very explicit in what should be recognised as revenue and what shouldn't, they have taken similar efforts on the expenses side to ensure the financial stat

Along with segmental information under the new accounting system, there is a mandate for a company to provide geographic revenue bifurcation from where the revenue is generated. Analysing revenue, geography wise, provides a lot of insights regarding the new areas of growth a business may be trying t

Not all related party transactions, even when promoter’s private entities are involved, are bad in nature. It requires deep analysis before commenting whether the transactions seem logical or not. Case Study: Mirza International Let’s take an example where sales are being made to a promoter-owned

Revenue of a company can further be analysed on Product/ Service Level through two angles. Please read our blog 107 - Analysing Revenue sources part 1 to understand remaining angles of analysing revenues of a company on product/service levels. a) Commodity Vs Specialised product Revenue Often bus

Please read our blog 104 - to understand the effect of small revenue recognition policy changes. This blog has been dedicated to analysing a big accounting standard change IND AS 115 introduced by ICAI and it’s impact on financial statements. In FY19, we saw a change in revenue recognition policies

Now that we understand how companies present and calculate revenue figures in the first blog of 101 - Understanding Presentation & Calculation of Revenue Figures in Financial Statements Part 1, the question is, should we take their reported Operating revenue as Revenue for our analysis? Answer is No