1.

Life insurance corporation of India

1. Life Insurance Corporation of India

Life Insurance Corporation of India popularly known as LIC is the largest life insurance company
in India owned by the Government of India. LIC, one of the top 10 insurance companies in India,
came into existence in the year 1956. LIC makes insurance accessible for every person in any
corner of the country with 2048 branch offices, 113 divisional offices, 8 zonal offices and 1381
satellite offices. Currently, LIC’s total asset under management is INR 3,111,847 crores (USD 450
billion). LIC being the dominant insurance player has a huge customer base of over 29 crores
policyholders. LIC is a trusted insurance brand that offers great convenience to its customers
through its excellent customer services on the digital platform and also through branch offices
and various other tie-ups. LIC offers numerous life insurance products that can meet the unique
needs of a variety of customer segments. For all the milestones it has achieved, LIC has been
consistently recognised and awards. Following are some of the awards received by LIC:

LIC has been consistently winning the Reader’s Digest Trusted Brand Award

According to the Brand Trust Report, LIC has been consistently voted as ‘India’s Most Trusted
Brand’ in BFSI category

LIC has won ‘Best Life Insurance Company of the Year’ and ‘Most Preferred Life Insurance
Company of the Year’ award

In fact, the flexibility offered with the LIC plans are so diverse that choosing a LIC policy itself
can be quite a dilemma. To make things easier for you, we have compared the top policies
offered by LIC along with their features and benefits
2. Show the Final accounts of that particular company.
3. Analyse and interpret it.(or)Draw inference.
to Analysis and Interpretation of Financial Statements:
Analysis and interpretation of financial statements are an attempt to determine the significance
and meaning of the financial statement data so that a forecast may be made of the prospects
for future earnings, ability to pay interest, debt maturities, both current as well as long term,
and profitability of sound dividend policy.

The main function of financial analysis is the pinpointing of the strength and weaknesses of a
business undertaking by regrouping and analysis of figures contained in financial statements, by
making comparisons of various components and by examining their content. The analysis and
interpretation of financial statements represent the last of the four major steps of accounting.

The first three steps involving the work of the accountant in the accumulation and
summarisation of financial and operating data as well as in the construction of financial
statements are:

(i) Analysis of each transaction to determine the accounts to be debited and credited and the
measurement and variation of each transaction to determine the amounts involved.

(ii) Recording of the information in the journals, summarisation in ledgers and preparation of a
worksheet.

(iii) Preparation of financial statements.

The fourth step of accounting, the analysis and interpretation of financial statements, results in
the presentation of information that aids the business managers, investors and creditors.

Interpretation of financial statements involves many processes like arrangement, analysis,

establishing relationship between available facts and drawing conclusions on that basis.
Types of Financial Analysis:
The process of analysis may partake the varying types. Normally, it is classified into different
categories on the basis of information used and on the basis of modus operandi.

(a) On the basis of Information Used:

(i) External analysis.

(ii) Internal analysis.

External analysis is an analysis based on information easily available to outsiders (externals) for
the business. Outsiders include creditors, suppliers, investors, and government agencies
regulating the business in a normal way.

These parties do not have access to the internal records (information) of the concern and
generally obtain data for analysis from the published financial statements. Thus an analysis
done by outsiders is known as external analysis.

Internal analysis is an analysis done on the basis of information obtained from the internal and
unpublished records and books. While conducting this analysis, the analyst is a part of the
enterprise he is analysing. Analysis for managerial purposes is the internal type of analysis and
is conducted by executives and employees of the enterprise as well as governmental and court
agencies which may have major regulatory and other jurisdiction over the business.

(b) On the basis of Modus Operandi:

(i) Horizontal analysis.

(ii) Vertical analysis.

Horizontal analysis is also known as ‘dynamic analysis’ or ‘trend analysis’. This analysis is done
by analysing the statements over a period of time. Under this analysis, we try to examine as to
what has been the periodical trend of various items shown in the statement. The horizontal
analysis consists of a study of the behaviour of each of the entities in the statement.

Vertical analysis is also known as ‘static analysis’ or ‘structural analysis’. It is made by analysing
a single set of financial statement prepared at a particular date. Under such a type of analysis,
quantitative relationship is established between the different items shown in a particular
statement. Common size statements are the form of vertical analysis. Thus vertical analysis is
the study of quantitative relationship existing among the items of a particular data.

Preliminaries Required for Analysis and Interpretation of Financial Statements:

The following procedures are required to be completed for making an analysis and
interpretation of financial statements:

(i) Data should be presented in some logical way.

(ii) Data should be analysed for preparing comparative statements.

(iii) All data shown in financial statements should be studied just to understand their
significance.

(iv) The objective and extent of analysis and interpretation should be determined.
(v) Facts disclosed by the analysis should be interpreted taking into account economic facts.

(vi) Interpreted data and information should be in a report form.

Objectives of Analysis and Interpretation of Financial

Statements:

The following are the some of the common objects of

interpretation:

(i) To investigate the future potential of the concern.

(ii) To determine the profitability and future prospects of the concern.

(iii) To make comparative study of operational efficiency of similar concerns.

(iv) To examine the earning capacity and efficiency of various business activities with the help of
income statements.

(v) To estimate about the performance efficiency and managerial ability.

(vi) To determine short term and long term solvency of the business concerns.

(vii) To enquire about the financial position and ability to pay of the concerns.

Importance of Analysis and Interpretation of Financial Statements:

The following factors have increased the importance of the analysis and interpretation of
financial statements:

(i) Decision taken on the basis of intuition may be wrong and defective on the other hand.
Analysis and interpretation are based on some logical and scientific methods and hence
decisions taken on that basis seldom prove to be misleading and wrong.

(ii) The user as individual has a very limited personal experience. He can only understand the
complexities of business and mutual relationship by observation and external experience. Thus
it becomes necessary that financial statements in an implicit form should be analysed in an
intelligible way.

(iii) Decision or conclusions based on scientific analysis and interpretation are relative and easily
to be read and understood by other people.

(iv) Even to verify and examine the correctness and accuracy of the decisions already taken on
the basis of intuition, analysis and interpretation are essential.

Techniques of Analysis and Interpretation:

The most important techniques of analysis and interpretation are:

1. Ratio Analysis

2. Fund Flow Analysis

3. Cash Flow Analysis.

1. Ratio Analysis:

Two individual items on the statements can be compared with one another and the relationship
is expressed as a ratio. Ratios are computed for items on the same financial statement or on
different statements. These ratios are compared with those of prior years and with those of
other companies to make them more meaningful.

A ratio is a simple mathematical expression. Ratio may be expressed by a number of ways. It is

a number expressed in terms of another number. It i s a statistical yard stick that provides a
measure of relationship between two figures.

2. Fund Flow Analysis:

Funds Flow Analysis has been the salient feature of the evolution of accounting theory and
practice. The financial statement of a business provides only some information about financial
activities of a business in a limited manner. The income statement deals solely with operations
and the balance sheet shows the changes in the assets and liabilities.

In fact, these statements are substantially an analysis of static aspects of financial statements.
Under this context, it is imperative to study and to analyse the fund movements in the business
concern. Such a study or analysis may be undertaken by using another tool of financial analysis,
which is called ‘Statement of Sources, and Uses of Funds’ or simply ‘Fund Statement’ or Fund
Flow Analysis.

This statement is also called by other several names and they are:

(a) Application of Funds Statement.

(b) Statement of Sources and Applications of Funds.

(c) Statement of Funds Supplied and Applied.

(d) Where Got and Where Gone Statement.

(e) Statement of Resources Provided and Applied.

(f) Fund Movement Statement.

(g) Inflow-Outflow of Fund Statement.

Fund statement is a new contribution of science of accounting but has become the doyen of
tools of Financial Analysis.

3. Cash Flow Analysis:

Fund Flow Statement fails to convey the quantum of inflow of cash and outflow of cash. When
we say cash, we refer to the cash as well as the bank balances of the company at the end of the
accounting period as reflected in the Balance Sheet of the company. Cash is a current asset like
inventory and Accounts Receivables. Cash reflects its liquidity position.

The term cash can be viewed in two senses. In a narrow sense, it includes actual cash in the
form of notes and coins and bank drafts held by a firm and the deposits withdrawable on
demand the company has held in commercial banks. But in a broader sense, it also includes
what are called ‘marketable securities’ which are those securities which can be immediately
sold or converted into cash if required.

Cash flow statement is a statement of cash flow and cash flow signifies the movements of cash
in and out of a business concern. Inflow of cash is known as sources of cash and outflow of cash
is called uses of cash. This statement also depicts factors for such inflow and outflow of cash.

Thus cash flow statement is a statement designed to highlight upon the causes which bring
changes in cash position between two Balance Sheets dates. It virtually takes the nature and
character of cash receipts and cash payments though the basic information used in the
preparation of this statement differs from that which is used in recording cash receipts and cash
payments.