Dimo

Horizontal Analysis for Income Statement

	2016	2015	2014	2013	2012		2016	2015	2014	2013	2012
	Rs. \000	Rs. \000	Rs. \000	Rs. \000	Rs. \000
Revenue	35,403,232	26,179,115	19,185,246	26,496,949	38,877,422		-8.94%	-32.66%	-50.65%	-31.84%	100%
Sales taxes	208,378	218,412	180,872	216,789	305,139		-31.71%	-28.42%	-40.72%	-28.95%	100%
Net revenue	35,194,854	25,960,703	19,004,374	26,280,160	38,572,283		-8.76%	-32.70%	-50.73%	-31.87%	100%
Cost of sales	29,408,729	21,417,468	15,226,149	22,519,305	31,758,534		-7.40%	-32.56%	-52.06%	-29.09%	100%
Gross profit	5,786,125	4,543,235	3,778,225	3,760,855	6,813,749		-15.08%	-33.32%	-44.55%	-44.80%	100%
Other operating income	103,147	63,480	69,722	35,427	23,915		331.31%	165.44%	191.54%	48.14%	100%
Distribution expenses	994,715	561,206	506,403	475,939	641,599		55.04%	-12.53%	-21.07%	-25.82%	100%
Administrative expenses	3,529,057	2,986,459	2,658,182	2,599,142	2,335,213		51.12%	27.89%	13.83%	11.30%	100%
Operating profit	1,365,500	1,059,050	683,362	721,201	3,813,022		-64.19%	-72.23%	-82.08%	-81.09%	100%
Finance income	194,578	106,730	70,617	241,178	179,653		8.31%	-40.59%	-60.69%	34.25%	100%
Finance costs	468,036	415,462	423,990	630,798	447,553		4.58%	-7.17%	-5.26%	40.94%	100%
Net finance costs	273,458	308,732	353,373	389,620	267,900		2.07%	15.24%	31.90%	45.43%	100%
Profit before tax	1,092,042	750,318	329,989	331,581	3,545,122		-69.20%	-78.84%	-90.69%	-90.65%	100%
Income tax expense	352,319	203,757	50,070	20,243	971,221		-63.72%	-79.02%	-94.84%	-97.92%	100%
Profit for the year	739,723	546,561	279,919	351,824	2,573,901		-71.26%	-78.77%	-89.12%	-86.33%	100%

Figure 32: Horizontally Analyzed Income Statement - (2012 -2016)

According to above analysis, it indicates that the most of the figures are negative values. Therefore, the profit of the company has not increased with the increment of the asset of the company. It point out that even the company assets were increased the company has not productively managed the assets to increase the profit of the company.

Z Score Formula

The Z score is use to predict the likelihood that a business will go bankrupt within the next two years. The formula based on information found in the income statement and balance sheet of an organization; as such, it can be readily derivefrom commonly available information. Given the ease with which the required information can be find, the Z score is useful metric for an outsider who has access to a company's financial statements.

The Z score formula is as follows:

Z = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 0.99T5

T1 = Working capital / Total assets

T2 = Retained earnings / Total assets

T3 = Earnings before interest and taxes / Total assets

T4 = Market value of equity / Book value of total liabilities

T5 = Total sales / Total assets

	Working capital	Total assets	Retained earnings	Earnings before interest and taxes	Market value of equity	Book value of total liabilities	Sales
2012	3421640	14,740,119	2,707,993	3,516,177	0.841027994	0.87304	38,877,422
2013	2444707	12,285,246	1,369,850	331,581	0.859710602	0.57951	26,496,949
2014	2393231	15,402,774	1,356,431	329,989	0.891967464	0.91111	19,185,246
2015	2315231	17,083,766	1,631,457	750,318	1.040725913	0.95711	26,179,115
2016	2830031	19,253,328	2,107,736	1,092,042	1.125415412	1.13997	35,403,232
	T1	T2	T3	T4	T5	Z Score
2012	0.232131097	0.183715817	0.238544682	0.96333465	2.637524297	4.512106755
2013	0.198995364	0.111503669	0.02699018	1.483515857	2.156810617	3.509319191
2014	0.155376622	0.088064072	0.021423998	0.978989936	1.24557083	2.200949925
2015	0.135522285	0.095497503	0.043919941	1.087359531	1.532397189	2.610747989
2016	0.146989185	0.109473853	0.056719649	0.987229544	1.838811036	2.929585909

Z > 2.99                      -           “Safe” zone

1.8 < Z < 2.99             -           “Grey” zone

Z<1.80                        -           “Distress” zone

Considering above calculations we can specify that the company in safe zone. However, there were cases in 2014 and 2015, the company has entered in to the grey zone, but eventually it has come in to the safe zone. Therefore, the company is safe to continue its business.