This action might not be possible to undo. Are you sure you want to continue?
1 GENRAL INTRODUCTION
The consumer electronics industry has witnessed a phenomenal growth over the past few years. This growth can be attributed to the increasing effect of state of the art electronic devices on the market. It is the confluence and merging of hitherto separated markets of digital-based audio, video and information technology, removing entry barriers across the market and industry boundaries. This convergence of technologies has resulted in a greater demand for consumer devices, be they portable, in-home or in-car, offering multiple functions. The revolution brought about by Digital technology has enabled the consumer electronics sector to profit from the growing interaction of digital applications such as: camcorders, DVD player/recorder, still camera, computer monitor, LCD TV etc. It has also witnessed the emergence of Mobile telecommunications technology, incorporating both digital visual and digital MP3 capabilities. The global sale of consumer electronics is estimated to exceed all expectations to touch an all time high of $135.4 billion in 2006, which indicates 8% increase from 2005. By the year 2008, sales are forecasted to soar up to $158.4 billion, up by 65% of 2000. The Asia Pacific region is the market leader wielding the biggest chunk of the market, closely followed by Europe. The European market share is expected to take a drubbing due to the growing demand for consumer durables in the Asia Pacific consumer electronic market. Japanese companies have captured the consumer electronics market. World famous brands such as Sony, Panasonic and Matsushita are all owned by these Japanese manufacturers. Korean companies such as Samsung and LG are all trying to join the Japanese bandwagon. Samsung can claim to be the world’s fastest growing electronics company.
The World Consumer Electronics is very dynamic and new products are launched everyday in the consumer electronics sector. The demands of the consumers are ever increasing and the companies are using state-of-the-art technologies to stay in the competition. The ever-changing electronics sector holds a great potential not only for the new-entrants, but also for the existing industry giants. The Electronics Industry in India took off around 1965 with an orientation towards space and defense technologies. This was rigidly controlled and initiated by the government. This was followed by developments in consumer electronics mainly with transistor radios, Black & White TV, Calculators and other audio products.. In 1982-a significant year in the history of television in India - the government allowed thousands of color TV sets to be imported into the country to coincide with the broadcast of Asian Games in New Delhi. 1985 saw the advent of Computers and Telephone exchanges, which were succeeded by Digital Exchanges in 1988. The period between 1984 and 1990 was the golden period for electronics during which the industry witnessed continuous and rapid growth. After the software boom in mid 1990s India's focus shifted to software. While the hardware sector was treated with indifference by successive governments. Moreover the steep fall in custom tariffs made the hardware sector suddenly vulnerable to international competition. In 1997 the ITA agreement was signed at the WTO where India committed itself to total elimination of all customs duties on IT hardware by 2005. In the subsequent years, a number of companies turned sick and had to be closed down. At the same time companies like Moser Baer, Samtel Color, Celetronix etc. have made a mark globally. In recent years the electronic industry is growing at a brisk pace. It is currently worth $10 Billion but according to estimates, has the potential to reach $ 40 billion by 2010. The largest segment is the consumer electronics segment. While is largest export segment is of components.
1.2 INDUSTRY PROFILE
The consumer electronics market is one of the largest segments in the electronics industry in India. With a market size of Rs.15,897.13 crore ($3.89 billion) in 2006, catering to a population of more than 100 crore people, the consumer electronics industry in India is poised for strong growth in the years to come. iSuppli Corp. predicts the Indian audio/video consumer electronics industry will grow to Rs.26,931.13 crore ($6.59 billion) by 2011, rising at a Compound Annual Growth Rate (CAGR) of 10.0 per cen`t from Rs.18,390 crore ($4.5 billion) in 2007. The growth will be aided by a multitude of factors, including: • —Growing consumer confidence due to rising disposable incomes; • —Easy financing schemes that are making purchases possible; • —Increased local manufacturing; • —Expanding distribution networks; • —Sporting events, such as the Cricket World Cup. Video remains the key driver Television continues to be the mainstay of the consumer electronics industry in India with the transition slowly occurring to newer technologies such as LCD and PDP. Most players in the consumer-electronics industry have introduced products in the FPD segment, and for few companies, especially the Korean chaebols, FPD remains a focus area. But the Indian market continues to exhibit contradictions that may be unique to this market. On one hand, campaign promises have prompted the free distribution of 75 lakh 14-inch CRT television sets worth Rs.3,065 ($75) each to families below the poverty line in one electoral state over the period of three years. On the other hand, FPD sets are available for Rs.1.23 lakh ($3,000) in India. Although, black and white TVs are obsolete elsewhere in the world, they still sell in large numbers in India.
Increased customization to suit domestic demand Companies are focusing on customizing products to suit Indian tastes, thereby creating a niche for themselves. Several companies are conducting market research in order to understand the psyche of an Indian consumer. The inputs from this research are determining product attributes and pricing and accordingly are achieving better acceptance among consumers. By conducting consumer research, companies are trying to identify customer requirements, thereby incorporating specific design elements into their products. For example, LG in 2006 launched a range of TVs from 21 inches to 29 inches in size that were designed based on the company's research on consumer preferences for television sets. Expanded distribution is critical In order to tap semi-urban and rural demand, companies are expanding their distribution networks in these areas. The move has positively impacted sales for companies opting for rural expansion. However, rural consumers have not been as brand-conscious as their urban counterparts. Due to the lower prices of unbranded products, rural consumers have been inclined to buy these products, although they often have poor quality. As the awareness among rural consumers rises, they are expected to show a preference for branded products.This is reflected by the fact that established players are reporting higher sales of products in rural areas. Domestic manufacturing to expand iSuppli expects domestic manufacturing to be a key characteristic of this growth in the years to come. Although electronics production has remained a miniscule portion of overall Indian manufacturing for a long time, the trend is gradually changing. The government has been focusing increasingly on developing the manufacturing sector by developing infrastructure, rationalising duties and creating export-promotion zones. This is in alignment
with India figuring into the plans of several companies that want to cater to the domestic and export markets. Domestic consumption is reaching significant size to trigger manufacturing in the electronics sector. India also is assuming a significant place in the global plans of several major electronics manufacturers, thereby positioning it also as an export base. Furthermore, fabless companies are suitable to cater to such development because they can assist in moving the industry up the value chain by creating design-service opportunities for the Indian market. EMS and ODM companies in India have been associated with several design companies, although such relationships represent an extension of their global relationships. However, some local partnerships also are appearing, such as Flextronics' deal with inSilica for the development of SoC devices. Currently, such instances are few and far between. As the local market gains size, these associations will become more common. Significant challenges remain iSuppli believes that there are still challenges facing the India consumer electronics industry as the sector tries to realise its full potential. These include declining margins for many players; inverted duty structure; expansion of distribution reach; creating awareness about new technologies and products and low affordability level of consumer products among the rural masses. However, these challenges are gradually being addressed. And looking ahead, iSuppli believes that India will continue to grow as an important market for the global consumer electronics industry. The future of India's market is indeed bright.
1.3 INDUSTRY CHALLENGES
• Small FootprintThe consumer electronics industry is rapidly evolving, setting rather than following technological trends. Devices are getting smaller – but more functionality is being packed into them – leading a shift towards NANO designs.
• Converged DevicesThrough strong electronics the industry helps companies develop converged devices and create a superior customer experience. • Shortened shelf lifeThrough its integrated engineering offerings, electronics industry is strongly positioned to help Consumer Electronics Companies in shortening their products' lifecycles and introduce new products in the market more swiftly. • Service integrationMore and more companies are following the "buy a product - buy a service" philosophy –and consumer electronics industry capabilities to provide engaging experiences for end-users through service integration.
1.4 STATEMENT OF THE PROBLEM
A financial statement contains sales, revenue, tax, expense etc on one side and the other side shows liabilities and assets position in the year. There are various reasons, which contribute to profits such as operation costs, marketing efficiencies, reduced interests and many more. The essence of the financial soundness of a company lies in balancing its goals, commercial strategy and resultant financial needs. The company should have financial needs. The company should have financial capability and flexibility to pursue its commercial strategy. Ratio analysis is a very useful analytical technique to raise pertinent questions on a number of managerial issues. It provides bases or clues to investigate such issues in detail. While assessing the financial health of a company, ratio analysis answers to questions relating to the companies profitability, asset utilization liquidity and financial capabilities of the company.
The statement of the problem can be generalized as:
• Analysis of the relationship between assess and liability. • Analysis of the liquidity and profitability of the current assets and current liability. • Detection of the reasons for the variability of profits. • Analysis of various components of working capital such as cash, marketable securities, inventories and receivables. • Find out the business fluctuations, technical developments etc on financial performance. The study takes into consideration the external analyst point of view and with the help of the past and latest financial statements, financial position will tried to be analyzed impartially.
1.5 OBJECTIVES OF THE STUDY
Based on the information furnished in the financial statements, the various objectives of the ratio analysis are: o To determine the financial conditions and financial performance of the firm. o To involve comparison for a useful interpretation of the financial statements. o To find out the solution to the unfavorable financial conditions and financial conditions. o To forecast the future of the company. o To help taking suitable corrective measures when the firm’s financial conditions and Performance is unfavorable to the firm when compared to the firms in same industry. o To analyze the firm’s relative strengths and weakness.
1.6 SCOPE OF THE STUDY
Ratio analysis is perhaps the first financial tools developed to analyze and interpret the financial statement and still used widely used for this purpose. Financial performance analysis is a well researched area and innumerable studies have proved the utility and usefulness of this analytical technique.
1.7 THEORITICAL OVERVIEW
1.7.1 FINANCIAL ANALYSIS Financial analysis is the analysis of financial statement of a company to assess its financial health and soundness of its management. The focus on financial analysis is on key figures in the financial statements and the significant relation ship that exists between them. The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firms position and performance. “Financial statements” analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend if these factors as shown in a series of statements” -by Myer
1.7.2 FINANCIAL STATEMENTS
They refer to two statements, which are prepared by the organization at the end of the year. Income statement or profit and loss account to know profit earned or loss substained during a specific period. Position statement or balance sheet in order to known its financial position as on a particular point of time, usually one year.
1.7.3 RATIO ANALYSIS
Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items /variables. These relationships can be expressed as: 1. Percentages 2. Fraction 3. Proportion of numbers These alternative methods of expressing items which are related to each other are , for purposes of financial analysis, referred to as ratio analysis.
1.7.4 IMPORTANCE OF RATIO ANALYSIS
Ratio analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. It is an important technique of financial analysis. • Useful in financial position analysis:- accounting ratios reveal the financial position of the concern. This helps the balks, insurance companies and other financial institutions in lending and making investment decisions. • Useful in simplifying accounting figures:- accounting ratios simplify summarize and systematize the accounting figures in order to make them more understandable and in lucid form. They highlight the inter-relationship which exists between various segments of the business as expressed by accounting statements. Often the figures standing alone cannot help them convey any meaning and ratios help to relate with other figures.
• Useful in assessing the operational efficiency:- accounting ratio helps to have an idea of the working of a concern. The efficiency of the firm becomes evident when analysis is based on accounting ratios they diagnose the financial health by evaluating liquidity, solvency, profitability etc. this helps the management to assess financial requirements and the capabilities of various business units. • Useful in forecasting purposes:- if accounting ratios are calculated for a number of years, then a trend is established. This trend helps in setting up future plans and forecasting. • Useful in locating the weak spots of the business:- accounting ratios are of great assistance in locating the weak spots in the business even though the overall performance may be efficient. Weakness in financial structure due to incorrect policies in the past or present are revealed through accounting ratios. • Useful in comparison of performance:- through accounting ratios comparisons can be made between one department of a firm with another of the same firm in order to evaluate the performance of various departments in the firm.
1.7.5 LIMITATIONS OF ACCOUNTING RATIOS
Ratio analysis is very important in revealing the financial position and soundness of the business. But, in spite of its advantages, it has some limitations which restrict its use. These limitations should be kept in mind while making use of ratio analysis for interpreting the financial statements. • False results based on incorrect accounting data:- accounting ratios can be correct only if the data are correct. Sometimes, the information given in the financial statements is effected by window dressing, i.e., showing positions better than what actually is. So the analyst must always be on the Look out for signs of window dressing, if any. • No idea of probable happenings in future:- ratios are an attempt to make an analysis of the past financial statements. so they are historical documents. Nowadays keeping in
view the complexities of the business, it is important to have an idea of the probable happenings in future. • Variation in accounting methods:-the two firm’s results are comparable with the help of accounting ratios only if they follow the same accounting methods. Comparison will become difficult if the two concerns follow the different methods of providing depreciation or valuing stock. Comparison of financial statements of such firms by means of ratios is bound to be misleading. • Price level changes:- changes in price levels make comparison for various years difficult. For example, the ratio of sales to assets in current year would be much higher than the previous years due to raising prices. • Only one method of analysis:- ratio analysis is only a beginning and gives just a fraction of information needed for decision making. Therefore, to have a comprehensive analysis of financial statements, ratios should be used along with other methods of analysis. • No use if ratios are worked out for insignificant and unrelated figures:- accounting ratios may be worked for any two insignificant and unrelated figures as ratio of sales and investment in government securities. Such ratios may be misleading. Ratios should be calculated on the basis of cause and effect relationship. One should be clear as to what is cause and what is effect before calculating a ratio between two figures. 1.7.6 CLASSIFICATION OF RATIOS Ratios may be classified in numbers of ways in keeping in view the purpose. Ratios indicating profitability are calculated on the basis of the profit and loss account; those indicating financial position are computed on the basis on balance sheet and those which show operating efficiency or effective use of resources are calculated ion the basis of figures in profit and loss account and balance sheet. Thus classification is rather and crude and unsuitable ton determine the profitability and financial position of the company. To achieve this purpose effectively, ratios may be classified as; Profitability ratios
Profitability ratio is the overall measure of companies with regard to efficient and effective utilization of resources at their command. Profitability ratios are of utmost importance for a concern. These ratios are calculated to enlighten the end results of business activities which is sole criterion of the overall efficiency of a business concern. Coverage ratios These ratios indicate the extent to which the interest of person entitled to get a fixed return or scheduled repayments as per agreed terms are safe. Turnover ratios These ratios are very important for a concern o judge how well facilities at the disposal of the concern are being used or to measure the effectiveness’ with which a concern uses its resources at its disposal. In short, this will indicate position of assets usage. These ratios are usually calculated on the basis of sales or cost of sales and are expressed in number of times rather than as a percentage. The greater the ratio more will be the efficiency of asset usage. The lower ratio will reflect the under utilization of the recourses available at the command of the concern. The concern must always plan for efficient use of the assets to increase the overall efficiency.
1.7.7 FINANCIAL RATIOS
These ratios are calculated to judge the financial position of the concern from long term as well as short term solvency point of view. Liquidity ratios If it is decided to study the liquidity position of the concern, in order to highlight the relative strength of the concerns in meeting their current obligations to maintain sound liquidity and to pinpoint the difficulties if any in it, then liquidity ratios are calculated. These ratios are used to measure the firm’s ability to meet short term obligations.
Stability ratios These ratios helps in ascertaining the long term solvency of a firm which depends on firms adequate resources to meet its long term funds requirements, appropriate debt equity mix to raise long term funds and earnings to pay interest and installments of long term loans in time. Leverage ratios The leverage ratios explain the extent to which the debt is employed in the capital structure of the concerns. Always concerns use debt funds along with equity funds, in order to maximize the after tax profit, thereby optimizing the earnings available to equity share holders. The basic facility of debt is that after tax cost of them will be significantly lower and which can be paid back depending upon their terms of issue. In order to analyze the leverage position of the concerns. total debt to total assets ratio, debt equity ratio and time interest earned can be calculated. 1.7.8 TYPES OF RATIOS 1. Short term solvency ratio 2. Long term solvency ratio 3. Profitability ratio
SHORT TERM SOLVENCY RATIO 1. Current ratio 2. Absolute liquid ratio 3. Cash position ratio
CURRENT RATIO This ratio will explain the relationship between the current assets and current liabilities. The current ratio of a firm measures short term solvency of the firm. The higher the current ratio , the larger is the amount of rupees available per rupee of current liability, the more is the firm’s ability to meet current obligations and the greater is the safety of funds of short term creditors. Thus current ratio in a way is a measure of margin of safety to the creditors. A ratio of 2:1 is considered satisfactory as a rule of thumb. Current assets Current ratio = Current liabilities
ABSOLUTE LIQUID RATIO This ratio will define the relationship between absolute liquid assets and current liabilities. Absolute liquid assets include cash in hand and at bank and marketable securities or temporary investments. A ratio of 1:1 is considered to be good. Such ratio will imply that the firm has enough liquid assets to meet all current liabilities of the firm. Cash +Marketable securities Absolute liquid ratio=
CASH POSITION RATIO This ratio will explain the relationship between the available cash both at bank and in hand and current liabilities. A ratio of 1:1 is considered to be a good ratio but a rate of 0.75:1 is also good. Such a ratio would imply that the firm has enough cash on hand to meet all the current liabilities. Cash Cash position ratio = Current liabilities
LONG TERM SOLVENCY RATIO Long term solvency ratio conveys a firm’s ability to meet the interest cost and repayment schedule of its long term obligations. These ratios are helpful to management in proper administration of capital. It also helps the creditors to know the capacity of a business concern to pay debt in future. The various ratios are: 1. Proprietary ratio 2. Solvency ratio 3. Fixed assets to net worth ratio
PROPRIETORY RATIO This ratio establishes the relationship between the shareholders funds and the total assets of the firm. It establishes the claims of the shareholders on the firm’s assets. It is usually expressed as a pure ratio. Shareholder’s funds Proprietary ratio = Total assets
FIXED ASSETS TO NETWORTH RATIO This ratio establishes the relationship between fixed assets and shareholders’ fund. This ratio indicates the extent to which shareholder’s funds are sunk in the fixed asset. Generally, the purchase of fixed assets should be financed by the shareholders equity, which includes reserve, surpluses and retained earnings. Fixed asset (after depreciation) Fixed asset ratio Net worth
PROFITABILITY RATIO Profits are measures of overall efficiency of a business. In other words they are the ratios, which reveal the total effect of business transaction has been successful in its operation. These ratios are: 1. Return on equity 2. Return on total resource 3. Net profit ratio 4. Operating expenses ratio
RETURN ON EQUITY It indicates how the firm has used the resources of owners. This ratio is one of the most important ratios in financial analysis. The earnings of a satisfactory return are one of the most desirable objectives of a business. The ratio of net profit to owner’s equity reflects the extent to which the objective has been accomplished. Profit after tax Return on equity= Equity share capital
RETURN ON TOTAL RESOURSE It is the ratio of net profit to total resources or total assets. Return here means net profit after taxes and total resources means all realizable assets including intangible assets, if they are realizable. This ratio measures the productivity of the total resources of a concern. Net profit Return on total resource= Total assets
EARNING PER SHARE This ratio establishes the relationship between profit after tax to number of equity shares. Profit after tax Earning per share = Number of equity shares
INTEREST ON LOAN This ratio establishes the relationship between interest received and total loan. Interest received Interest = Total loan *100
INTEREST PAYOUT RATIO This will establishes the relationship between interest paid to earnings before interest and tax. Interest paid Interest payout ratio = EBIT *100
1.8 LIMITATION OF THE STUDY : • 60 days being a very short time, I have done a study that I feel to be comprehensive and possible in this time. However, some other details of methods of analysis could definitely be found which I have missed out there. • Inter firm and intra firm comparison is not possible. The study covers a period of 3 years with the available sources i.e. from 2005-06 to 2007-08
CHAPTER - II COMPANY AND PRODUCT PROFILE
2.1 COMPANY HISTORY
2.1.1 How it all began Onida was started by Mr.G.L.Mirchandani and Mr.Vijay Mansukhani in 1981 in Mumbai. In 1982, Onida started assembling television sets at their factory in Andheri, Mumbai. Superior products and the combination of a distinctive voice, a cutting-edge advertising strategy, and purposeful marketing ensured that Onida became a household name. Over the years, Onida has strengthened its reputation for the intelligent and pioneering application of technologies. 2.1.2Onida Today Onida today enjoys a strong equity among consumers making it one of the leading brands in India. Our constant endeavor to introduce products of substance that offer the very best in technology and the finest design have made Onida a leading player in the electronics and entertainment business today. Onida has recently made a foray in other household appliances including airconditioners, washing machines, DVDs, Plasma & LCD televisions and home theatre systems. For offices, Onida has also introduced state-of-the-art multi-media presentation products. 2.1.3The Network Onida has a network of 33 branch offices, 208 Customer Relation Centers and 41 depots spread across India. MIRC Electronics shares are listed on the National and Mumbai Stock Exchanges. The company enjoyed a market capitalization of Rs.301.46 Cr. as on 31st March 2005.
The transition of Onida from a family-owned business to a professionally managed company has largely been made possible by the vision of the Chairman & Managing Director, Mr.G.L.Mirchandani. 2.1.4 RESEARCH AND DEVELOPMENT Onida recognizes that a vigorously intelligent research initiative works at two ends: cost reduction through effective process improvement and value-addition through a sustained ability to put innovative and customised products in line with customer needs. A team of 75 Engineers are at work at the Onida R&D centers in Mumbai and Delhi developing products at the forefront of technology meeting customer expectations. The team conducts research in the areas of : • Embedded Software • Industrial Design • Mechanical Engineering • Electrical Engineering • Model Shop
2.2 VISION AND MISSION
Vision To build a brand around substance. To communicate simple truths that customers understand. To become a leader in our chosen field and become a globally recognized, prestigious company through synergistic business investment, differentiation through innovation, passion through empowerment, cost through economies of scale and world class systems and procedures that bring in delight of stakeholders.
Mission To benefit society at large through Innovation, Quality, Productivity, Human Development and Growth, and to generate sustained surpluses, always striving for excellence, within the framework of law, and in nothing but the truth in which we base every action. 2.2.1 CORPORATE PHILOSOPHY Commitment to society/nation We respect the society and the environment to which we belong and will contribute to its progress and welfare. Passion for quality Strive to create products with substance, that are the best in class. Never compromise on quality. Give our customer better value-for-money, always. Fairness We stand for truth, fairness and justice in all our business and individual dealing - without this spirit, no man can win respect no matter how capable he may be. People - our greatest assets We value good people. It is our responsibility to create actively and constantly an environment that supports them to grow and flourish. Harmony and co-operation Alone we are weak. Together we are strong. Work together as a family in mutual trust and responsibility. Courtesy and Humility Respect the right of others. Be cordial, modest and humble. Praise and encourage freely.
Strive for continuous improvement ( KAIZEN )
Seek and find in every action a way to do things better, always better. Growth Growth is vital. Increasingly seek out ways and means to constantly move forward. Innovation Progress by adjusting to ever-changing environment around us. As the world moves forward, we must keep-in-step. Gratitude Always repay the kindness of our customers, associates, community, nation and friends worldwide with gratitude. 2.2.2 QUALITY ASSURANCE Superior quality is the cornerstone of every Onida product. Our rigorous practices and procedures aim at maintaining the highest quality standards at all times. We believe that a satisfied Onida consumer is one who takes pride in ownership of our products and always recommends Onida. 2.2.3 QUALITY POLICY • The company is committed to quality and strives for a continuous improvement through innovation and human development to give the customer better value for money always. • All quality norms followed are continuously upgraded taking into account changing customer needs. • The TQM movement being practiced has enabled process innovation. Due emphasis is given to prevention driven activities through feedback obtained from all over. • Product reliability tests are performed with total compliance to international quality assurance standards. • The above processes have lowered quality problems and helped improve customer satisfaction.
2.3 SOME MILESTONES …
OPERATIONS 2.3.1 1981 1982 1983 1985 1986 1987 1987 1991 1992 1994 1995 : Mirc Electronics Pvt. Ltd was established : CTV production started at 13/14A Nand Bhuvan : Collaboration with JVC-Japan : Production expanded and moved to a new factory at Kalina : Production expanded and moved to a new factory at Kalina : Moved to our own factory building “Onida House” : Iwai, Speaker plant started its operation : Moved to a new CTV plant at Vasai : Akasaka, PCB plant started (the only one of its kind in India) : Moved to a large fully automatic factory with state-of-the-art technology at Wada. (one of the best CTV factories in Asia) : ISO 9001 certification obtained from BVQI (Onida, the first India company in CTV industry which measured quality from the customer’s internal and external perspective). : Call Center (Imercius Technology (I) Ltd) commenced operation at Mind Space, Malad, Mumbai : Wada factory futher expanded and increased production capacity from 600K CTVs to 1 million CTV sets p.a. : Two production lines with a total production of 8 CTV sets per minute : Six Sigma and VIM launched. : Started steam moulding at Wada factory : Started the production of Ultraslim 21” CTV
2002 2003 2003 2005 2007 2007
2007 2007 2.3.2 1983 1984 1992 1993 1995 1998 1999 2000
: Started the production of Slim 29”CTV : Wada factory has been certified for ISO 14001:2004 Environmental Management System : MARKETING & PRODUCTS : ONIDA launched India’s first monitor TV : “Devil” Advertisement (better known as ONIDA DEVIL) ad campaign started. : Crossed 1 million CTV sales : Launched KY, the largest selling 21” CTV : Launched “Unique Collection series” : Marketing operations at Delhi merged with Mumbai operations : Launched “Candy” series and internet enabled CTV : - Launched “KY Thunder” series with 550 W PMPO -- Launched “Profile” Designer series -- Launched Multiview – 9 PIP series : Launched Large Screen Plasma Monitors / TV : Launched Onida Black, flat CTV range. : Multimedia Projectors launched in India : International Marketing Office opened at Dubai : Launched second brand “IGO” : Launched 29” Home Theatre with circle surround sound & DVD : - Launched Air Conditioners - Launched fully automatic front loading Washing Machine : Crossed the sale 160,000 CTVs in October (in a single month) : Launched DVD players and Rear Projection TVs. : Operation started in Russia. : A Mirc product was getting sold in every 27 seconds ! : Relaunch of Onida devil in a modern Avtaar
2000 2001 2001 2001 2002 2002 2003 2003 2003 2003 2003 2004
2004 2004 2004 2005 2005 2.3.3 1992 1997-2003 1997-2003 1997-2003
: Launch of “Oxygen” CTV : Crossed the sale of 250,000 CTVs in October (in a single month) : Launch of Microwave Oven : 100000 TVs has been shipped to Russia in super quick time : Launched LCD TVs : ACCOUNTS & FINANCE : Mirc went for Public issue during Nov 92 and got listed in major Stock Exchange including BSE : : : Mrc grew over the last five years from Rs.522.58 crore in 1997-98 to Rs.981.67 crore in 2002-03 at CAGR of 13.46 percent. Debt-equity ratio declined from 1.56 in 97-98 to 0.56 in 2002-03. Interest outflow declined from Rs.18.33 crore to Rs.10.16 crore. PBT has gone up from 18.35 crores in 1996-97 to 70.98 crores in 20022003. Book value per share has gone up from Rs.124.63 to Rs.305.48 in 200203. Net worth increased from Rs.96 crore in 97-98 to Rs.215 crore in 200203 Micr issued bonus shares and 100% dividend on the expanded capital base. Dividend – Consistent dividend payout – 60% to 100% Crossed 1000 crore turnover mark ISD : : : : : : Implemented SAP R/3 at Factory and HO Launched Onida Infotech Services Implemented SAP at Branches Implemented APO Upgraded SAP from 4.0B to 4.6C Sold Onida Infotech Services to Mphasis.
1997-2003 1997-2003 2003 2003 2004 2.3.4 2000 2001 2002 2003 2004 2004
: : : : :
2006 2006 2006 2007 2007 2007 2007 2.3.5 2006 2.3.6 1998 1999 2000 2003 2004 2006
: : : : : : :
Linked Wada factory with a high capacity connectivity (2mbps) using Radio Frequency Solution Extend SAP to Noida factory Implemented my SAP Business Suite SAP Application upgrade from my SAP ERP 2004 to my SAP ERP 2005. SAP SCM 5.0 Demand Planning Module Go live Fail Safe over connectivity between 2 Mbps line and 2 Mbps RF line (Wada) Fail safe over connectivity between 1 Mbps MTNL and 1Mbps TTML line (OH) R&D
Inaugurated Innovation Center “Shristi” – where new initiatives, ideas and opportunities will take shape. CORPORATE
: : : : : :
Award for the excellence in electronics by the Ministry of I.T. Award from the Chief Commissioner of Central Excise, Mumbai, for “Ideal Assessee” for the year 1998-99 Award by AV Max for best aesthetics for “Profile” Designer series. Award from InFocus Corpn., USA for highest sales growth for Projectors for the year 2002 Mr.G.L.Mirchandani, Chairman & Managing Director was awarded ‘Man of Electronics for the Year’ by CETMA Mirc Electronics Ltd has been ranked 2nd as per total income in the Consumer Durables / Domestic Appliances sector in Dun and Bradstreet’s India’s Top 500 Companies 2006 Certificate of Merit award to Mirc for “Excellence in Quality” by Elcina Dun & Bradstreet.
CHAPTER - III
RESEARCH DESIGN 3.1 RESEARCH DESIGN
Research design means a search of facts, answers to question and solution to the problems. It is a prospective investigation. Research is a systematic logical study of an issue or problem through specific method. It is a systematic and objective analysis and recording of control observation that may lead to the development of generalization, principles, resulting in prediction and possibly ultimate control of events. Research design is the arrangement of conditions for the collection and analysis of data in manner that aims to combine relevance to the research purpose with relevance to economy. There are carious designs which are descriptive and helpful for analytical research. Research design specified the methods and procedures for conducting a particular study.
In brief research design contains • A clear statement of the research problem. • A specification of the data required. • Procedure and techniques to be adopted for data collection. • A method of processing and analysis of data.
3.2 Research design used in the specific study includes the following • Identifying the statement of the problem. • Collection o f the company’s specific literature i.e. annual reports for the study period and the profile of the company. • Scanning through standard books to understand the theory behind the financial performance evaluation. • Collection of information from various journals to understand the industrial background of the study. • Decision regarding study period in this case it was decided to be 3 years i.e. from 2005-2006. • Identification of financial ratios likely to reflect the capital adequacy, resources declared, assets quality, management quality, earning quality and liquidity of the organization. In this case it was decided to be: • Long term solvency ratio • Short term solvency ratio • Profitability ratio • Calculation of the above ratios over the study period and analyzing it.
• Forwarding certain recommendation and conclusion to the company.
3.3 STATEMENT OF THE PROBLEM A financial statement contains sales, revenue, tax, expense etc on one side and the other side shows liabilities and assets position in the year. There are various reasons, which contribute to profits such as operation costs, marketing efficiencies, reduced interests and many more. The essence of the financial soundness of a company lies in balancing its goals, commercial strategy and resultant financial needs. The company should have financial needs. The company should have financial capability and flexibility to pursue its commercial strategy. Ratio analysis is a very useful analytical technique to raise pertinent questions on a number of managerial issues. It provides bases or clues to investigate such issues in detail. While assessing the financial health of a company, ratio analysis answers to questions relating to the companies profitability, asset utilization liquidity and financial capabilities of the company. The statement of the problem can be generalized as: • Analysis of the relationship between assess and liability. • Analysis of the liquidity and profitability of the current assets and current liability. • Detection of the reasons for the variability of profits. • Analysis of various components of working capital such as cash, marketable securities, inventories and receivables.
• Find out the business fluctuations, technical developments etc on financial performance.
The study takes into consideration the external analyst point of view and with the help of the past and latest financial statements, financial position will tried to be analyzed impartially.
3.4OBJECTIVES OF THE STUDY Based on the information furnished in the financial statements, the various objectives of the ratio analysis are: o To determine the financial conditions and financial performance of the firm. o To involve comparison for a useful interpretation of the financial statements. o To find out the solution to the unfavorable financial conditions and financial conditions. o To forecast the future of the company. o To help taking suitable corrective measures when the firm’s financial conditions and Performance is unfavorable to the firm when compared to the firms in same industry. o To analyze the firm’s relative strengths and weakness.
3.5 NEEDS FOR THE STUDY Any company would like to know its position against its competitors. The ultimate performance indicator of any company is the financial parameter s because invariably all
costs efficiencies; activities and solvency position of the company will be reflected in the financial mirror. The following are the stated as the needs of the study: o To understand the volume of the profit and its reasonableness. o To understand the movement of the profit over the period of time. o To know the reason for the variance in the profit. o To know the present standing of the company.
3.6 SCOPE OF THE STUDY Ratio analysis is perhaps the first financial tools developed to analyze and interpret the financial statement and still used widely used for this purpose. Financial performance analysis is a well researched area and innumerable studies have proved the utility and usefulness of this analytical technique. 3.7 RESEARCH METHODOLOGY Methodologies assumption; • Definition used as universal. • Selected study period is sufficient. • Selected financial ratios reflect the financial performance of the company.
• Ultimate performance evaluation of the company y is shown in its financial assets. 3.8 SOURCES OF DATA Data is defined as the group of non-random symbols in the form of text,image,or voice representing qualities, actions as objects. Data is processed into a form that is meaningful to the recipient and is of real and perceived value in the current or prospective actions or decisions of the recipient. Data are mainly classified into two groups: Primary data Secondary data Primary data The primary data collection is one of the key tools used by the researcher for data collection. It is the first hand information collected by the researcher from the respondents directly. Primary data is collected through observation and communication. Secondary data The secondary data is another form of data collection, where the data is collected from the existing records, company manual and form previously carried out research work and also through internet. Sources of data collection:- All the details are collected from secondary sources only. Secondary data includes, the annual reports, financial reports of the company etc., discussion with the concerned officials has also helped to verify and evaluate the variations and results either to confirm it.
3.9LIMITATIONS OF THE STUDY The study covers a period of 3 years with the available sources i.e. from 2005-06 to 2007-08. • 60 Days being a very short time, I have done a study that I feel to be comprehensive and possible in this time. However, some other details of methods of analysis could definitely be found which I have missed out there. • The study has been restricted to the Branch office in Coimbatore. • The study is general. • Inter firm and intra firm comparison is not possible. • Interactions with the company professionals were limited due to their busy schedule. • Limitations of historical accounts. • Conclusions will be drawn based on theory and supplemented by figure wherever feasible.
CHAPTER IV: ANALYSIS AND INTERPRETATION OF DATA
4.1 CURRENT RATIO TABLE 1: TABLE SHOWING CURRENT RATIO YEAR 2005-06 2006-07 2007-08 CURRENT ASSETS (Rs in Cr.) 371.21 427.74 525.70 CURRENT LIABILITIES (Rs in Cr.) 182.89 239.37 253.34 RATIO 2.03 1.78 2.08
GRAPH 1: GRAPH SHOWING STATUS OF CURRENT ASSETS AND CURRENT LIABILITIES
GRAPH 2: GRAPH SHOWING CURRENT RATIO
INTERPRETATION Current ratio indicates the firm’s commitment to meet its short term obligations. It is an index of the short term financial stability of an enterprise because it shows the margin available after paying off current liabilities. A ratio of 2:1 is considered satisfactory as a rule of thumb. If the current assets are two times of the current liabilities, there will be no adverse effect on the business operations when the payment of liabilities is made. The current ratio is maintained at an optimal level except for the year 2006-07 where there is a drop in the ratio
4.2 CASH POSITION RATIO TABLE 2: TABLE SHOWING CASH POSITION RATIO YEAR 2005-06 2006-07 2007-08 CASH (Rs in Cr.) 36.72 16.76 19.46 CURRENT LIABILITIES (Rs in Cr.) 182.89 239.37 253.34 RATIO 0.20 0.07 0.07
GRAPH 3: GRAPH SHOWING STATUS OF CASH AND CURRENT LIABILITIES
GRAPH 4: GRAPH SHOWING CASH POSITION RATIO
INTERPRETATION This ratio indicates the ability to discharge its short term liabilities with the available cash on hand. A ratio of 1:1 is considered to be a good ratio but a rate of 0.75:1 is also good. The above ratios stated above imply that the company does not have enough cash on hand to meet all the current liabilities.
4.3 PROPRIETARY RATIO TABLE 3: TABLE SHOWING PROPRIETORY RATIO YEAR 2005-06 2006-07 2007-08 SHAREHOLDERS FUND(Rs in Cr.) 215.47 236.27 254.25 TOTAL ASSETS (Rs in Cr.) 401.08 417.71 470.70 RATIO 0.537 0.566 0.540
GRAPH 5: GRAPH SHOWING STATUS OF SHAREHOLDER’S FUND AND TOTAL ASSETS
GRAPH 6: GRAPH SHOWING PROPRIETORY RATIO
INTERPRETATION This ratio establishes the relationship between the shareholders funds and the total assets of the firm. It establishes the claims of the shareholders on the firm’s assets. It indicates the extent to which the shareholders funds have been invested in the assets of the company. On examination of this ratio, it denotes that the share holders’ funds have been moderately invested in the total assets. that the consistency in the approach. The ratio is maintained at a regular level indicating
4.4 FIXED ASSETS TO NETWORTH RATIO TABLE 4: TABLE SHOWING FIXED ASSETS TO NETWORTH RATIO YEAR 2005-06 2006-07 2007-08 FIXED ASSETS (Rs in Cr.) 206.75 206.05 189.74 NET WORTH (Rs in Cr.) 215.47 236.27 254.25 RATIO 0.96 0.87 0.75
GRAPH 7: GRAPH SHOWING STATUS OF FIXED ASSETS AND NETWORTH
GRAPH 8: GRAPH SHOWING FIXED ASSETS TO NETWORTH RATIO
INTERPRETATION This ratio indicates the proportion of investments in fixed assets out of the networth of the company. This ratio should not be more than 1. However the above figures indicate that the entire fixed assets are financed by the shareholders fund. A certain portion of the working capital should also be financed by these long term funds. Hence it seems that working capital is completely financed out of borrowed funds which is not healthy.
4.5 RETURN ON EQUITY
TABLE 5: TABLE SHOWING RETURN ON EQUITY YEAR 2005-06 2006-07 2007-08 PROFIT (Rs in Cr.) 32.79 34.12 34.58 EQUITY SHARE CAPATAL (Rs in Cr.) 14.19 14.19 14.19 RATIO 2.31 2.40 2.43
GRAPH 9: GRAPH SHOWING STATUS OF PROFIT EARNED BY THE COMPANY AND EQUITY SHARE CAPITAL
GRAPH 10: GRAPH SHOWING RETURN ON EQUITY RATIO
INTERPRETATION The ratio indicates that the profitability for the equity shareholders. The above figures indicate that the equity shareholders are getting better returns on their investments. The company has been able to provide good returns to its equity investors over the last three years.
4.6 RETURN ON TOTAL RESOURCE
TABLE 6: TABLE SHOWING RETURN ON TOTAL RESOURSE YEAR 2005-06 2006-07 2007-08 NET PROFIT (Rs in Cr.) 32.79 34.12 34.58 TOTAL ASSETS (Rs in Cr.) 401.08 417.71 470.70 RATIO 0.082 0.082 0.074
GRAPH 11: GRAPH SHOWING STATUS OF NET PROFIT ACURRED AND TOTAL ASSETS
GRAPH 12: GRAPH SHOWING RATURN IN TOTAL RESOURCES
INTERPRETATION It is the ratio of net profit to total resources or total assets. Return here means net profit after taxes and total resources means all realizable assets including intangible assets, if they are realizable. This ratio measures the productivity of the total resources of a concern. On analysis of the ratio it denotes that the company is able to maintain its productivity over the three year period.
4.7 EARNING PER SHARE TABLE 7: TABLE SHOWING EARNINGS PER SHARE
EARNING PER SHARE :YEAR 2005-06 2006-07 2007-08 EPS 23.10 24.04 24.37
GRAPH 13: GRAGH SHOWING EARNING PER SHARE
INTEPRETATION EPS denotes the earning potential per share. Higher the return indicates that the shareholders are getting better returns on their investments. In this case the EPS shows an increasing trend indicating better return on investments.
4.8 MATERIAL COST RATIO TABLE8: TABLE SHOWING MATERIAL COST RATIO YEAR Material Cost Ratio
2005-06 2006-07 2007-08
42 40 40
GRAPH 14: GRAPH SHOWING MATERIAL COST RATIO
INTEPRETATION This ratio indicates the material consumption cost to the sales value. On an analysis of the above ratio it indicates that the material cost is around 40% of the sales value and the company is able to maintain the cost at a fairly consistent level. 4.9 LABOUR COST RATIO TABLE 9: TABLE SHOWING LABOUR COST RATIO YEAR 2005-06 Labour Cost Ratio 4.9
GRAPH 15: GRAPH SHOWING LABOUR COST RATIO
INTEPRETATION This ratio indicates the labor cost to the sales value. On an analysis of the above ratio it indicates that the labour cost is around 4.5% of the sales value and the company is able to reduce the labor cost on a year on year basis. 4.10 FACTORY OVERHEADS COST RATIO TABLE 10: TABLE SHOWING INTEREST PAYOUT RATIO YEAR 2005-06 Overhead Cost Ratio 47
GRAPH 16: FACTORY OVERHEADS COST RATIO
INTEPRETATION This ratio indicates the total factory overheads cost to the sales value. On an analysis of the above ratio it indicates that the factory overheads cost is around 45% of the sales value and the company is able to reduce & maintain the cost at a fairly consistent level largely due to reduction in labour cost. 4.11 SELLING AND DISTRIBUTION EXPENSES RATIO TABLE 11: TABLE SHOWING SELLING AND DISTRIBUTION EXPENSES RATIO YEAR 2005-06 Selling & Distribution Cost Ratio 9
GRAPH 17: SELLING AND DISTRIBUTION EXPENSES RATIO
INTEPRETATION This ratio indicates the selling & distribution cost to the sales value. On an analysis of the above ratio it indicates that the selling & distribution cost is around 8% of the sales value and the company is able to reduce & maintain the cost at a fairly consistent level largely due to reduction in advertisement cost.
CHAPTER - V FINDINGS AND SUGGESTIONS
5.1 FINDINGS • The current liabilities of the company are increasing continuously from year after year. But when compared to these, current assets are also increasing year after year. • Current ratio was not constant during these three years. 2005-06 and in 2007-08 it was more but in 2006-07 it was less.
• Current ratio of the company is comfortable for the company although it showed a small drop during the year 2006-07, but recovered during 2007-08 • The company seems to be piling up its inventory position which has resulted in higher sales during the three year period. • The debtors position shows an upward trend. Although as stated above, the sales are improving, it is better to reduce the debtors position. • The cash balance position of the company shows a huge drop indicating that its inability to maintain liquid assets. • Loans and advances position shows an upward trend
Indicating amounts locked up in small advances.
• The share capital of the company is constant for the three year period indicating that the company seems not to have any major expansion plans. • Since the profits for the three year period is almost the same it indicates flat market conditions. The company seems to be discharging its secured loans out of its liquid assets. At the same time the company seems to be borrowing more unsecured loans in place of secured loans. The company has not added fixed assets over the three year period indicating lack of any major expansion plans.
5.2SUGGESTIONS • The company has to maintain its current assets to be more so that it will be double the current liabilities and it should meet the standard ratio 2:1. This will help the company
to meet its current obligations easily. Or the company can decrease its liabilities to meet the standard ratio. • Cash maintained by the company should be increased so that the cash position ratio is kept to the standard i.e. 1:1. The standard can be reached either by increasing cash maintained or by decreasing current liabilities.
• Interest payout ratio of the company has to be kept low because higher the interest payout ratio will decrease the profit of the company.
• The company has to maintain its fixed assets less so that to avoid large funds tie up in the fixed assets.
CHAPTER - VI
CONCLUSION 6.0 CONCLUSION The study entitled “A STUDY ON PERFORMANCE EVALUATION OF MIRC ELECTRONICS LIMITED USING FINANCIAL RATIO ANALYSIS” has been undertaken with the objective to analyze and interpret the company’s financial performance. The analysis of the company was undertaken with the help of ratios, which are important tools of financial analysis. The company’s liquidity position is satisfactory as the current ratio is as per the norms. But the company does not seem to have enough cash(liquid resources) to meet its short term obligations. The company has to improve its cash position by more efficient measures to turn around its inventory and debtors position. The proprietary ratio reveals that the share holders funds are not properly invested in the assets of the company. It indicates that company is not comfortable in raising its long term financial requirements. Cash in hand maintained by the company is not adequate. There is no consistency in maintaining the cash. And also the company is maintaining very few amounts of cash in hand. After having the solved ratios and analyzing the financial data , we can conclude that , the company’s position is stable in maintaining its present position. It seems that the company is maintaining a status quo position in its business strategies.
However considering the overall consumer electronics market with regard to consumers expectation and the competitors aggressive growth plans, the company has to chalk out plans to increase its product plans and put in place a more bold plan to make its presence felt in the market, otherwise the company will become stagnant. Thus ratio analysis is an very useful tool in analyzing, which has high lighten the financial performance of MIRC ELECTRONICS LIMITED in key areas and also has helped in the avocations of certain strategies to be followed by the company which is indispensable to its future growth.