Understanding and Analysing Financial Statements Assignment Sample

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Financial statements are considered a document which defines the financial position of organisation. Understanding of financial statements and information centralised around analysing the value of organisation (Yazdanmehr and Akbari, 2015). This report is prepared to analyse background of company with corporate objectives. 'INTELLECT SOFT' a software development organisation is chosen to demonstrate the financial aspects of financial statements. The capital structure and dividend policy of the company and the impact on the company's performance over the past 3 years are concluded in this report. Investment appraisal techniques and the investment decisions to ensure the organisation's corporate objectives are centralised properly. Dividend policy and the investment strategies are discussed in terms of analysing the well structured company to incorporate objectives.

1. Background to the INTELLECT SOFT

Intellect soft started its operations form 2007 by inventing applications and software development. Approx 500 companies and brand organisations like Jaguar, Ernst, young, Nestle and Eurostar are the business partners of intellect soft. Main vision of the company is to assist the global leaders and organisation by providing advanced application software. To overcome the technological challenges of digital modification is the main vision of the organisation. Organisation believe in create positive impact on particular area for lives and make them simpler, effective and opening new permissions and horizons.

Organisation mainly offers type of services as

  • Blockchain development: it remains related to the security and automation of operations with Blockchain solutions.
  • FINTECH: This remain engaging in meeting the demands of current customers in speed and security with scalable financial technology.
  • Augmented reality solutions services for better cost control and maximising profitability.
  • Cloud computing services that remain flexible and connected with the enterprise environment.
  • Artificial intelligence services for custom based solutions as machine and keen learning which helps in automation process of operations
  • interest of things are also some essential elements covered in this context to release the data and process for improving the decision making.

Technology excellence

Block chain: This is one of the part of company deals in distributed ledger technologies (DLT) retains the potential to transform the path accessed in business. This provides consultancy services in six segments as Blockchain technology consulting, public and private blockchain development, distributed applications, AML/KYC/GDPR compliance and Distributed e-commerce solutions. System mainly utilise the full power of DLT to assist the future brighter and make brighter. It creates multiple system of software solution build on top.

XR: This is lab in which experts and scientist focus on emphasising technology. This segment was formed to increase productivity in architecture, engineering and structure with comprehensive AR tools for visual cooperation and quality control. AR tool is an Augmented Reality tool back introduced in 2015. The technology to the next step in the evaluation of architecture was formed to engineering and construction. The essential changes are done subject to develop and structured technology and research to emerge the sections of business. An all-encompassing experience in technology by intellect Soft AR Lab called KADO construction. KADO is a technological framework that make structure process with the assistance of Microsoft Holones. Mixed reality application, industrial AR/VR solutions, 3D modelling and prototyping and installation and trainings.

UI and UX design Services: There is a particular team of this organisation which mainly associated with establishing a clear design and process, meeting the targets and deliverables services subject to determine the small design and studio with in a large software company and organisation. Small design studio with in a large software company. It will assist an engaging products easily and quickly.

Enterprise artificial intelligence software: This is one of the main section which computational capabilities of abased software are analysed to improve and emphasise the line of business. Artificial intelligence software solutions such as machines and models are considered in this context. Most of the inventions and artificial intelligence software are used to improve and emphasise the technology. Physically and mentally all the relevant aspects for assisting the enterprise are considered in this context. It mainly associated with business operations optimise the secure internet tools and solutions. IOT provides the platform with sensors and devise to monitor. Measurement subject to analyse the major sections.

AL models: A cloud based model machine learning, algorithms, data management and analysis and visual information processing are the elements considered in Al model.

Key operative objective and problems

Intellect Soft supplies technological and artificial intelligent which are based upon innovations and development. It is entrain that type of technological changes and alternatives affect the key goals and objectives of organisation. The corporate objectives also affected by these technological changes. It is evaluated that the major changes take placed while introducing new technology and tactics related to automation of functions and operations. These factors are considered while assessing the risk. Risk management is the part of corporate management strategies and goals.

2. Capital structure and dividend policy of the INTELLECT SOFT

Capital structure

The capital structure of organisation include the finance capital which shows the revenue growth of company. As per annual report 2017 of intellect soft present the revenue growth from 609 Corers to in Financial year 2015 to the 914 cores in financial year 2017 registering a CAGR of 22.51%. Software license revenue has grown from 85 Crores in financial year 2015 to 156 Crores in financial tear 2017. After incorporating A CAGR of 35.47% and AMC revenues has been grown from 108 Crores. In financial year 2015 to 170 crores financial year 2017 registering a CAGR of 24.89%. Annual gross margins sited as 49.3%.

Brand Capital: This is one of the essential aspect in terms of managing the organisation's value. As per brand capital it is ranked as 2 in digital banking and channels as #1 in retail banking system. IBS intelligence in their annual sales league table 2017. The leadership in brand is given subject to model the end customers and the analysis of Oxford school of transaction banking and 8012. leadership brand has been droved by the intellectual operations and management with in transaction and banking and Fintech design centre.

End customer: It is considered that the second element of was recorded as BELIEF model for example the end customers of advanced emerging markets and customer base containing the orders which was recorded in Quarter 4 Financial year 2017. a well organised structure of customer base and order form mainly associated with analysing the process of diversified customers and base of the key products.

Leadership capital: This capital structure ios considered as third element of belief model determining the leadership comprehensive leadership encompassing, strategic thinking, innovative products and services manufacturing procedure and institution buildings subject to services delivers and assumed the engagement (Garrett, 2015). The leadership team mainly assist the key structure of business to make and implement new tactics for better and fundamental growth. These leaders refers the organisation like JPMC and the competitors like Misysm, Fundtech and tenements.

IP Capital: According to annual report of 2017 it is summarised that the financial technology are considered essential in terms of big opportunities with the predefined format and structure. Main Criteria of this capital is mainly associated with financial technology products space globally due to vast opportunities and growth of organisation rather then diverting the interrelated sections and criteria. As per financial reports the capital work in progress, plants and equipments considered as 19605.06 for the year 2017, 1780540 for the year 2016, 1346013 for the year 2015.

Income statement of intellect soft digital company

 

Year ended

PARTICULARS

March 31, 2017

March 31, 2016

March 31, 2015

INCOME

     

Income from software product license and related services

91357.5

81065.55

47514.17

EXPENDITURE

     

Provision for Debts and Write Off

1233.16

979.62

53187.03

Research & Engineering expenses

7192.08

10629.77

1705.68

Selling and marketing & General and administrative expenses

39102.94

33050.24

-

Software development expenses

46326

39500.01

-

Total Expenditure

93854.18

84159.64

 

EBITDA

-2496.68

-3094.09

-5672.86

Depreciation / Amortisation

2413.99

2077.11

1705.68

Finance Charges

1130.24

1192.22

-

Provision for tax including deferred tax

-

-

-260.99

Profit / (Loss) before other income / minority interest

-6040.91

-5290.42

-7117.55

Other Income including exceptional items

3235.56

1869.71

-

Minority Interest / Share of profit / (loss ) of Associate Companies

656.24

93.93

-

Profit / (Loss) before tax

-2149.11

-3326.78

-7117.55

As it is seen that there is no any dividend was declared during the financial year due to losses. Loss for the financial years subsequently 2017, 2016 and 2015 was recorded -2149.11, -3326.78 and -7117.55. Even after having loss organisation is growing and improving its capital structure and strong customer base. 

Particulars

2017 in Rupees lakhs

2016 in lakhs

2015 in lakhs

EBIT

-2496.67

-3094.09

-7259.93

Net Profit

-2238.58

-3251.31

-8412.4

       

Equity

59834.38

61131.77

61451.45

Debt

-

323.78

118.6

Interest Paid

1130.24

119.22

976.63

Dividends Paid

-

-

-

Dividend policy

It is seen that there was no dividend declared due to having losses in last three financial years. In general meeting, stakeholders' relation was the primary point to undertake and form the dividend policies accordingly. A separate stakeholders' relationship committee was formed that contains executives and non-executives directors. It is observed the main reason of not declared any dividend during the year 2017, 2016 and 2015 was having losses. A board meeting held subject to creating more values and interest of investors and engaging the stakeholders with the vision and mission statement. After forming the committee, lots of complaints and issues was received by executive directors regarding transferring of shares, non- receipts of balance sheer, and declared dividends and many more issues. Main objective of constituting this committee was to develop such a structure of stakeholder and investor base so that they would be able to track their investment details and get proper information about their earnings.

There are multiple key points considered while preparing the policies regarding the rights to transfer the shares, flow of publishing the financial statements on timely basis (Adams and Olsen, 2017). A residual report was published to stakeholders and shareholders by considering all the relevant material information and reason to not to declare dividend for subsequent financial years. To control and engage the stakeholders with the organisation various rights given to them like participating in general and stakeholders' meeting, right to vote and electing members of the board and sharing the results and distribution of residual profit and reserves of company. It helped the organisation to engage stakeholders with them and maintain strong and effective stakeholder relationships.

3. Role of investment appraisal techniques subject to evaluate the management decisions and corporate objective

Capital investment appraisal techniques mainly helps to determine the financial objective and plans in terms of attaining the management decisions (Hemmi and Ryve, 2015). There are type investment appraisal techniques are used in terms of dividing the plans and objectives. Appropriate decision making properties helps in managing the finance decisions and investment decisions. Management committee and senior authorities are the main parties who analyse the proposed plans for investing capital and financial Resources. 

There is a proper analysis of financial statements of organisation for making investment plans and taking precious decisions. As per financial statements of organisation it is observed that equity share capital of organisation was recorded as 5086.69 million, 5038.98 million and 5009.92 million subsequently for 2017, 2016 and 2015. the investment values was 563.92 million, 1550.68 million and 1496.78 million subsequently for 2017, 2016 and 2015.

Cash flow statement of Intellect Design Arena Limited

Cash flow statement

2017

2016

2015

Cash flow form operating activity (A)

-6495.25

-10061.23

-4494.77

Cash flow form investing activity (B)

-10887.15

3109.25

-16374.76

Cash flow from financing activity (c)

14597.05

1642.69

167.78

Exchange differences on translation of foreign currency cash and cash equivalents

   

3.02

Net increase / (decrease) in cash and cash equivalents during the year

-2785.35

5309.29

-20698.72

Cash and cash equivalents acquired on Demerger pursuant to Scheme of arrangement

605.04

-47.05

24191.83

Cash and cash equivalents at the beginning of the year

4483.09

9839.05

5

Cash and cash equivalents at the end of the year

2302.78

4483.09

3498.1

Above cash flow statement presents the following information related to flow of cash invested in major three categories as operating, investing and financing. Cash flow form investing activity. It is observed that large number of investment were made in fixed assets, investment and securities. In 2016 the cash flow formation was positive due to positive returns and the sale of non performing fixed assets. 

Type of investment appraisal techniques may be used to evaluate the decisions some of are discussed below;

Payback period method: This is considered one of the simplest aspect among the four investment appraisal techniques (Gold and Holodynski, 2015). Payback period technique mainly helps in determining the amount to be generated for future to accelerate the cash inflows. The break even and recoup of cash outlay required to initiate the project. As per above analysis of cash flow position is calculated as follows;

Year

Profit/loss

2015

3498.1

2016

4483.09

2017

2302.78

The above example figures presents the cash flows for three financial years. If organisation wants to invest the amount in future investments then it should be consider the current cash flow position. Current cash flow position and profitability determines indicates that organisation should invest 5000 million so that it would be able to generate the recover the cash upcoming year.

Accounting rate of return: A rate of return is evaluated on investments or return on capital employed (Fleury, Thompson and Wong C., 2015). This method based upon past profits and capital expenditure incurred in near future. Main purpose of this appraisal technique is to provide an optimum rate of return a which organisation be able to get average rate of return (Dajani, 2016). These structure and This capital investment technique mainly helps to communicate the organisational goals and the architecture for calculated as follows;

Year

Net cash inflows (in rupees million)

2015

-7117.55

2016

-3326.78

2017

-2149.11

As per current situation of organisation it is seen that there was loss occurred in last three financial years which is the main reason to opt this capital investing appraisal technique. Loss become come during gradually year by year which indicates that organisation would be able to achieve the target profits form the market. Current financial position will show the negative returns which will impact the current structure of business.

ARR = ( Average annual profits / average capital investment ) * 100

4. Effective corporate governance system

Corporate governance structure is the system made of multiple rules, practices and process formed to direct and control the directed and controlled (Rispoli and et. al., 2015.). It is mainly associated with determining the shareholders and management customers and supplies. It build the ethical standard to make viable the structure of business in terms of determining the Inellectsoft is formed as follows;

Company's philosophy: Corporate governance structure of organisation mainly focus on corporate governance with a growth and effective medium. Main goal of this philosophy is to maximise the profitability and gaining stakeholders interest. A legal and authentic corporate governance structure build a strength to tackle the challenges related to compliance and financial management. Moreover these information remain related to build up and efficient strategies and plans to fulfil the commitment towards the customers and employee. 

Board of Director: The board of the company retain the high personal and professional ethics, guidance related to integrity, responsibilities and the committed to represent the long term and short term interest of the stakeholders. Board has introduced the principles of corporate governance and it helps to determine the practicality and provides opportunities for policies and the guidelines to set up adequate review and procedures.

Composition of the Board of directors: This contain the ethical and effective structure with optimum combination of the executive and non executive directors. The board mainly helps to determine the adjacent policies and relevant structure of diversified fields and the professionally (Rispoli, and et.al., 2015). A particular management committee helps to determine the knowledge and exercise the issues related to management. Day to day capital transactions and affairs are considered at top of the list to undertake and supervise the board. Dependency and interdependency remain at high altitude while creating ethical compliance structure of business.

Audit committee: Reliable appearance and relevancy contains is key aspect to considered in corporate governance structure of organisation and in ethical structure (Scott and Alter, 2017). The board of committee was incorporated in 2014 and then reconstituted in 2017. there was lots of alterations were made in order to maintain transparency and relevancy with in corporate structure of organisation. Highly qualified and professional executive and non executives and independent directors are considered in this structure. 

Effectiveness of corporate governance structure

After constituting the corporate governance structure organisation be able to determine the practicability and relevancy between the main aspect considered in designing the development of organisation (Cook and Burdelski, 2017). A relevant information and details are coordinated after creating the ethical standards with in Intellectsoft. Corporate governance

CONCLUSION

From the above report, it is clear to conclude that financial statements and the concepts of corporate finance are useful in management decision. These concepts are used to solve problem of the organisation and make decision about a relevant backgrounds. The table report shows the capital structure and its various calculation based upon company's performance over the past three years. Various dividend policy like regular dividend policy, stable dividend policy which were used by company are discussed in the report. Management of company uses various investment appraisal tools like payback period, accounting rate of return(ARR), Net present value method and internal rate of return(IRR) to make investment decision more effective which help in achieving its goals. The effectiveness of corporate/financial governance system have been analyse and discussed in the above report.

REFERENCES

Books and Journals:

Yazdanmehr, E. and Akbari, R., 2015. An Expert EFL Teacher's Class Management. Iranian Journal of Language Teaching Research. 3(2). pp.1-13.

Garrett, T. F., 2015. Misconceptions and goals of classroom management. The Education Digest. 80(5). p.45.

Hemmi, K. and Ryve, A., 2015. The culture of the mathematics classroom during the first school years in Finland and Sweden. In Mathematics and Transition to School (pp. 185-198). Springer, Singapore.

Gold, B. and Holodynski, M., 2015. Development and construct validation of a situational judgment test of strategic knowledge of classroom management in elementary schools. Educational Assessment. 20(3). pp.226-248.

Dajani, M., 2016. Using Thinking Routines as a Pedagogy for Teaching English as a Second Language in Palestine. Journal of Educational Research and Practice. 6(1). pp.1-18.

Rispoli, M. and et. al., 2015. Evaluating the accuracy of results for teacher implemented trial-based functional analyses. Behavior modification. 39(5). pp.627-653.

Rispoli, M. and et.al., 2015. Training head start teachers to conduct trial-based functional analysis of challenging behavior. Journal of Positive Behavior Interventions. 17(4). pp.235-244.

Scott, T. M. and Alter, P. J., 2017. Examining the case for functional behavior assessment as an evidence-based practice for students with emotional and behavioral disorders in general education classrooms. Preventing School Failure: Alternative Education for Children and Youth. 61(1). pp.80-93.

Cook, H. M. and Burdelski, M., 2017. Language socialization in Japanese. Language Socializatio. pp.1-13.

Fleury, V. P., Thompson, J. L. and Wong, C., 2015. Learning how to be a student: an overview of instructional practices targeting school readiness skills for preschoolers with autism spectrum disorder. Behavior modification. 39(1). pp.69-97.

Adams, C. and Olsen, J., 2017. Principal support for student psychological needs: A social-psychological pathway to a healthy learning environment. Journal of Educational Administration. 55(5). pp.510-525.

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