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A PROJECT REPORT ON “PROFIT MAXIMIZATION V/S WEALTH MAXIMIZATION” Submitted to

In requirement of partial fulfillment of Master of Business Administration (MBA) Submitted on

Submitted by

PREFACE
As a part of the curriculum of the MBA Program of the _________________, the students are required to undergo project work in addition to their theoretical study so as to enable them to have the knowledge of theoretical aspects taught in the class room with its practical application. As students of management it is learning experience to analyze an industry. It is the most essentials tools for us to expose our skill as a future responsible managerial post. The preparation of this project report is based on the financial analysis of annual reports consecutive years of five public limited companies, using Ratio analysis and other tools. The scope of the project report is limited to the study of financial position and analysis of the financial objectives of the companies on the basis of published data available. My work in this project is therefore a humble attempt towards this end. I have tried my best to get the necessary information for project which includes secondary. In spite of my best efforts there may be errors of omissions and commissions, which may be please excused.

ACKOWLEDGEMENT
This report has been submitting in partial fulfillment of the requirement of the award of M.B.A. from _____________________________________ It is a universal fact that for study of a project in depth, I need the support of many people right from the stage of conceiving the idea to completion of report. It is difficult for a single person to do the job efficiently without interaction & involvement of others. I take this opportunity to thank ________________________our director ____________ and our inspiration our guides, _______________________ For giving me Valuable Guidance and providing facilities to successfully complete my Grand Project. I am grateful to other faculty members of ___________for their support whenever required. Discussions with friends also have served to provide sought after information. I am thankful to all our batch mates. Finally I am thankful to my parents and Lord Almighty without whose blessings tasks are incomplete.

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TABLE OF CONTENT
SR. No.
1 2 ( A)

PARTICULAR
INTRODUCTION THEORETICAL APPROACH PROFIT MAXIMIZATION Meaning Definition Characteristics Merits Demerits Factors affecting (B) WEALTH MAXIMIZATION Introduction Meaning Definition Characteristics Merits Demerits Critics and defense of Wealth Maximization ( C) IS PROFIT MAXIMIZATION BETTER

PAGENO.
6-8

10 11 12 13 14 15

16 18 18 19 21 23 24 25 27

3

THAN WEALTH MAXIMIZATION ANALYTICAL APPROACH (A) METHODOLOGY Objective of study Methodology Scope of the Study Limitations

5

(C )

DATA ANALYSIS HINDUSTAN UNILEVER LIMITED Profitability Wealth Analysis

30

31-32 33 34

• IDEA CELLULAR Profitability Wealth Analysis • RANBAXY PHARMA LTD. Profitability Wealth Analysis • WIPRO LIMITED Profitability Wealth Analysis • AXIS BANK Profitability Wealth Analysis 4 5 FINDINGS AND CONCLUSION BIBLIOGRAPHY 47-48 49 50 51 52 43-44 45 46 39-40 41 42 35-36 37 38

There are five generally areas of finance: 1. The academic discipline of financial management may be viewed as being made of five specialized field. Distinctions arise because different organizations pursue different objectives and do not face the same basic set of problems. 3. 2. 4. In each field financial manager is dealing with the management of money and claims against money.6 INTRODUCTION The field of finance rests heavily on the work of economists and uses many economic tools. PUBLIC FINANCNE SECURITIES AND INVESTMENT ANALYSIS INTERNATIONAL FINANCE INSTITUTIONAL FINANCE FINANCIAL MANAGEMENT . 5.

There are two widely discussed approaches. In this section the alternative approaches in the financial literature is discussed. they are concern with designing method of operating internal investment and financing of the firm. It implies that what is important is not overall objective of goal of business but an operationally useful criterion by which to judge a specific set of mutually interrelated business decisions. 2. The second point that should ne noted that the term ‘objective’ provides a normative framework. The objectives provide framework for optimum financial decisionmaking. financing and dividend policy. In other words. That is the focus in the financial literature on what a firm should try to achieve and on policies that should be if certain goals are to be achieved. Profit Maximization Wealth Maximization It should be noted at the outset that the ‘term’ objective is to be used in the sense of goal and decision criterion for the three decisions involved in the financial management. namely investment.7  Objectives of Financial Management To make wise decision clear understanding of the objectives sought to be achieved necessarily. 1. .

Thus. the term is used rather in narrow sense of what a firm should attempt to achieve with its investments. . financing and dividend policy decisions. They are rather employed to serve as a basis of theoretical analysis and do not reflect contemporary empirical industry practices.8 The implication is that these are not necessarily followed by firms in actual practice.

9 THEORETICAL APPROACH .

implicit cost etc. • For economist: They takes in to account the concept of opportunity cost. It is a simple mathematics of what has come and what has gone. . it implies different connotation as interpreted variedly.10 PROFIT MAXIMIZATION Meaning: • PROFIT: The term profit is a deep rooted in terms in financial management. • For management: It is interested in profit centers to arrive at proper decision whether to discontinue production at particular site or product itself etc… it is interested in fixing responsibility. to arrive profit and thus it is far less than what is profit by their point of and of accountancy’s point of view. • For an accountant: It is sales and other revenue less the expenses incurred exclusively for business for particular financial year. • For a layman: It is revenue less expenditures.

11 Simply. 2. You reduce your expenses Increase the sales But both of them have their own challenges to achieve. are to undertaken and those decreases the profit is to avoid.Expenses Definition Profit Maximization: It means maximizing the rupee income of firms. According to this approach. The actions. which increase the profit. profit can be defined as the amount a business earns after subtracting all expenses necessarily for its sales. there are two ways to do it… 1. . If we want to maximize the profit. Profit = Sales .

No concentration of Shareholder’s wealth The firm is always trying to achieve owner’s profit and wealth but not have shareholders.12 Characteristics of Profit Maximization 1. it will be adversely affected to the market price of shares and so market value will decrease in long term. machinery and etc… 6. nation and industry. 2. Utilization of Resources The firm in this goal tries to utilize all required resources in full strength such as labor. 5. In Interest of Economy As firm’s profit will increase… it increase in industrial growth and then national growth. 3. Short Term Profitability This objective is for short term because if the promoter is trying to increase their wealth. Risky Objective It is mainly focused on the owner’s wealth. 4. Increase in owner’s Wealth Its main aim is to increase owner’s wealth. The firm is not pay dividends to the shareholders or for employees of organization. . which is after all risky for shareholders.

Buying and selling activities of consumers. . competitors price and thereby it affects the allocation of resources.13 Merits: Profit Maximization • Efficient Allocation of Resources Profit Maximization is signal to manufacturing firm. • Achieving Social Upliftments “MILLERE” explain that. it is an invisible hand in attaining his own interest. As the profits are to be maximized. It is the generally accepted measure for efficiency criterion and common rational behind any economy. • o o o o o Various Theories To explain profit making Innovation Theory Risk bearing Theory Monopoly Theory Friction Theory Managerial Efficiency Theory • On the Grounds of Economic Rationality Any economic institutions earn to make profit is the main and natural objective. the management frequently promotes that society and that too more affected and there by business also secures society. every resource is utilized in the most economic manner.

14 Demerits: Profit Maximization: • It is Vague The problem is the meaning of term ‘Profit’. but in the long run. Example: If a firm continue to operate an instrument without proper maintenance. it may loose its real efficiency. Profit is in the short run is different from the profit is in the long run. • It overlook quality aspect of future activity Business does not carry on their activities solely with an aim to achieving the highest possible profits. even in firms professing to maximize profits. It is widely observe that non-profit factors influence the determination of corporate goals. . It may be able to reduce current year’s expenditure. Some business have place a high value on the growth of sales and are willing to accept lower profits in order to gain the stability provided by large volume of sales. which after all increase the depreciation cost. A profit seeking organization must consider the timing of cash flows and profits. • It ignores timing It ignores timing as money receives today has higher value than money received next year.

So. to fulfill this requirement of regular funds. . every firm requires the constant flow of funds to keep its activities running. firms are in need of profits. which affect the objective of “Profit Maximizaiton to put it in the practical approach… Factors are as under: • Requirement of Funds As per the nature of business. • Trend of Business What is the value of firm’s business in the mind of consumers and other parties will decide the future of firm’s profitability.15 Factors Affecting Profit Maximization: There are some factors. • Tax Implication Tax implication is largely affects the profitability of firm as it varies from different types of business. as after all management decided that up to what extent firm should maximize its profits. • Management Policy It is the best factor. which affects the firm’s profitability widely.

16 WEALTH MAXIMIZATION Introduction The second frequently encountered objective of a firm is to maximize the value of firm over the long run. with wealth defines as the net present value of the firm. the net present worth can be calculated as shown below: 1. E = Size of future benefits available to the supplier of the input capital K = The capitalization (discount) rate reflecting the quality and timing of benefits attached to E . It is linked to long-term profit of the firm. W=V–C Where. V= E K Where. W = Net present Worth V = Gross present Worth C = Investment required to acquire the assets or to purchase the course of action 2. Using Ezra Soloman’s symbols and methods. This goal may also be stated as the maximization of wealth.

and therefore. T = Expected annual outflow on account of taxes. . A1. I = Expected flow of annual payments on account of interest. an appropriate and operationally feasible decision criterion for the financial management decision. before Maintenance charges. a practice and unambiguous concept. + .17 3. G = Average future flow of gross annual earnings Expected from the course of action. taxes and interest and other prior charges like preference divided M = Average annual re investment required to maintain G at the projected level. A represents the stream of cash flows expected to occur from a course of action over a period of time: K = the appropriate discount rate to measure risk and timing C = initial outlay to acquire that asset or Purchase the course of action. It is.(M+I+T) Where. moreover.. Thus it can be inferred that in the value maximization decision criterion the time value of money and handling of the risk as measured by the uncertainty of the expected benefits is an integral part of the exercise. A2.. W = (1 + k ) + (1 + k ) 2 (1 + k ) n A1 A2 An Where. dividends. preference. E = G .

which characterized the earlier profit criterion.18 Meaning The wealth maximization is almost globally accepted as an appropriate Operational decision criterion for financial management decision as it removes the technical limitations. What the company needs to focus on is the affect that hits decision should have on the share price if every thin else was held constant. In order to employee use this goal. . creates wealth and so. Definition Wealth maximization means maximization of the net present value or net worth of a course of action. The share holder’s wealth maximization goal gives us the best results because effects of all the decision taken by the company and managers are reflected in it. it is negative present value should be rejected. A financial action which has a positive net present value. These conflicts of decisions required by the owners are known as the agency problem. we do not have to consider every price changes of the shares in the market as an interpretation of the worth of the decision that the company has taken.

So. profit is not so much maximized than that of the wealth of shareholders. in the long term. labor welfare. So. Social audit. firm is not trying to maximize the profit but it is trying to increase the wealth of shareholders. • Not for Economic Interest Wealth maximization is not for economic interest because is wealth maximization object. • Worth of the Firm Maintained . the net worth of a firm and of shares is increasing. • In Interest of Shareholders and Employees Wealth maximization objectives leads to increase shareholder’s wealth by giving them dividend and increasing in labor welfare by providing them proper education and safety measures so that the wealth of the share holders and employees is increase in the long run. overall income of the country or industry will not increase or per capita income of the people also not increases.19 Characteristics of Wealth Maximization • Long Term Objective Wealth maximization is the long-term objective as in it.

firm is not concentrating on maximization of profit but trying to utilize the wealth of the people. gardens. . established schools. As its main objective is to survive for the Shareholder and for the employees.20 Wealth Maximization objective leads to maintain the value of shares and of firm in the long run. charitable hospitals etc. For example. • Social Audit Objective The main objective of the wealth maximization is welfare of the general public..

The wealth of the owner of the company. • Consistent with Ultimate Object of Financial Management The main objective of the wealth maximization is in consistent with aim of maximizing if the owner economic welfare.21 Merits : Wealth Maximization: • Operationally Feasible The wealth maximization is based on the concept of cash flow statement is generated by the decision and which is a definite connotation. so. the shareholders. • Increase in Value of Shares and Firm . • Encouragement to Shareholder’s wealth Its main objective is to increase the shareholders wealth by giving them higher rates of dividends rather than retains earns with firms so this is for advantage of share holder in increasing their wealth. as is reflected by the market value of the economies shares so wealth maximization objective with ultimate objective of financial management. shareholders wealth is encouraged.

Then.22 As the increase in wealth of the shareholders is the main objective of wealth maximization. authenticity of the firm is increased and so it is easy to get income from the public. it leads to increase the investment of shareholders in our firm. • Easy to Get Public Capital As wealth maximization is always concentrating on the wealth of society and shareholders. By this approach firm’s worth is also increases. . it is automatically. which automatically increase the value of shares.

firm is not retaining earnings for the future expansion. • Economic Interests not achieved . which may misuse by employees. firm will pay more dividend to them and not retain earnings for future expansion. And this will be greater loss of the firm. • High Payment of Dividend Shareholder’s wealth maximization is the main goal of the firm so. • Resources are not fully Utilized This objective is also believed in the welfare of the labor. By this way dividend will become forcible liability. And gives the right to work free in the organization.23 Demerits: Wealth Maximization: • Seek Growth The firm having objective of wealth maximization needs to grow rapidly. And so. as the firm is paying higher dividends to share holders. spend money for social audit.

However. employees. The strategic visionaries argue that the firm should pursue a product market share. community. For example. When managers confront problems involving numerous tradeoffs. customers. Defense Based on extensive empirical evidence financial economists argue that in developed capital market. investors would Amply rewarded. Each manager would be left to his own judgments. There is no way to figure out what the right balance is. and fails to reflect long-term values. when this happens. Let shareholders decide in their personal capacity what they want to contribute to various social programs. suppliers. and others. beyond a certain point customer satisfaction comes at the cost of shareholders value.24 As firm is more concentrating on its shareholders and laborers. viz. or enhancing customer satisfaction. the conflict should be resolved in favor of share holders to enhance long term viability and competitiveness of the firm. This role should not be arrogated by corporate The balancers argue a firm should seek to balance the interest of various Shareholders. creditors. In a large organization this can lead to confusion and even chaos. it may decrease in the overall increment of industry. . at least share prices are the least biased Estimates. or minimizing costs in relation to competitors or achieving a zero defect level. Balancing the interest of various stakeholder is not a practical governing objectives. Critics and Defense of Shareholder Wealth Maximization Goal: Critics The capital market skeptics argue that the stock market displays myopic tendencies. Satisfied and loyal customers are Essential for value creation. they will have no clear guidelines on how to resolve the differences. It is true that shareholders wealth is created only through successful product market strategies. often wrongly prices securities. If as business firm engages itself in social programmers it may become vulnerable to competitive encroachment. If the firm get success in implementing its product market strategy. shareholders. which requires lots of efforts of achieve economic interest. Advocates of social responsibilities Argue that a business firm must view itself as a social responsive entity and assume wider responsibilities.

nature of business. It depends on the industry of business. future and market. • • Profit maximization Wealth Maximization And after taking into consideration the “THEORETICAL APPROACH”. These are some points which distinguished both and prove Wealth maximization is more optimal and better than Profit Maximization. . whose mandate is IS PROFIT MAXIMIZATION IS BETTER THAN WEALTH MAXIMIZATION? Every firm has their own decision criterion regarding their growth.25 managements economic. nature of owners and capital requirement that which objective is between than that of another. According to the above details and interpretation of both firm’s objective. Wealth Maximization is better than Profit Maximization.

But practically. So. Most of the companies are concentrating on Profit Maximization. Let us have practical approach.26 • In the Profit Maximization. . • Wealth Maximization never brings problems for any parties but under Profit Maximization. While wealth maximization covers the wealth of shareholders. employees. to prove this belief. the shareholders and employees are suffering a lot. while in the Wealth Maximization not only shareholders but employee’s wealth would also give importance. these are the reasons why Wealth Maximization is better than Profit maximization. social responsibilities and for all public. • Profit Maximization covers only Owner’s benefits and firm’s profit. only Owner’s wealth is given concentration.

The study is purely academic in nature and the main objectives of study are as under: 1) To investigate profitability status of the selected companies.27 ANALYTICAL APPROACH Methodology  Objectives of the Study: Here. The main objective to choose such different corporate from different industries is to compare their objectives and way of business. 4) To investigate wealth position of selected companies. 5) To undertake comparison within the companies on wealth maximization objective. 3) To undertake comparison of profitability amongst selected companies. 2) To undertake comparison within the companies for profitability. I have taken leading corporate groups (companies) for the purpose of study. 6) To undertake the comparison of wealth maximization goal amongst the selected companies . rather to take one industry.

• • • • • Hindustan Unilever Limited (FMCG Industry) IDEA Cellular Limited (Tele-Communication Industry) Ranbaxy Pharma Limited (Pharmaceutical Industry) Wipro Limited (I. The formulae for ratio which used.T. are as under: 1.  Profitability Ratios: Gross profitability ratio (GPR) = Gross profit × 100 Sales . Industry) AXIS Bank (Banking Industry)  Duration The study is conducted on the basis of last five years from the current year.  Data analysis We used different profitability and wealth ratios for studies.28  Sample Selection Only Five Companies of different industries are selected for the study.  Collection of data Only secondary data has been used for the purpose of analysis and mainly collected from annual reports of the companies.

FMCG. 2.T. Pharmaceutical. i.  Limitations of the Study: 1. Only secondary data is used for the study.e. .29 Net profit × 100 Sales Pr ofit after tax  Net Profitability ratio (NPR) =  Return on Shareholder’s fund (ROSF) = Shareholder ' s fund × 100 2. Wealth Ratios:  Debt equity Ratio = Shareholder ' s fund Long − term debt  Intrinsic value of shares = No. i. The data for the five years from the current year (available) of each of them has been considered for the study.e. banking industry. Tele-communications. of equity shares of company Net Assets  Scope of the Study: The scope of the study is limited to the analysis of five companies above stated). Only Five years data from current year (which are available) is taken in to consideration. The scope of the study is of different industries.. 3. From the annual reports of the companies and companies url. I.

5. Thus. Only debt-equity and intrinsic value of shares is taken into consideration for investigation of Wealth Maximization goal. Financing and Dividend policy decisions of a firm should be oriented to the maximization of profits. Gross Profitability ratio (GPR) Net Profitability ratio (NPR) Return on Shareholder’s Fund ratio (ROSF) . in order to study the practical applicability of this goal the financing and investment decisions of the stated companies have been analyzed. Due to lack of availability and accessibility of only some basic Financing decisions are taken into consideration. For the profit Maximization goal.30 4. To understand the financing decision following formulae are taken on to consideration. 3. The Profit maximization goal posits that investment. 1. DATA ANALYSIS In order to investigate the Profit Maximization goal of Financial Management and the wealth Maximization goal of Financial management and the comparison between them. 2.

69 16.4 2340.67 2.51 15.78 1658.88 Ratio (%) 19. Following formulae are to be considered: 1. It can also evaluate by taking into consideration the load of debts of the company on company’s equity.14 10996. 2.94 11203.74 13. • Profitability Ratio: (Rs.1 Gross Profit Sales 2212. Net Profitability ration (NPR) = Net profit × 100 Sales .31 The Wealth Maximization goal is known as Value Maximization or Net Present worth Maximization goal. Gross profitability ratio (GPR) = Gross profit × 100 Sales Year 2005 2006 2007 2008 2009 Table 1.08 2177.29 13.42 1461.72 12108.86 13189. Intrinsic Value of shares Debt-equity ratio HINDUSTAN UNILEVER LTD. It can be studied by investigating market value of shares and intrinsic value of shares. in crores) 1.70 14937.

14 10996.63 14. Return on Shareholder’s fund (ROSF) = Shareholder ' s fund × 100 Pr ofit after tax Year 2005 2006 2007 P.86 13189.70 14937.57 0.34 1408.2 P.37 1769. Tax 1771.A.04 2304.82 10.10 1855.96 Ratio (%) 0.61 .89 11.34 1408.06 11203.10 Table 1.82 0.3 Share Fund 2138.88 Year 2005 2006 2007 2008 2009 Ratio (%) 15.79 1197.07 11.32 Table 1.72 12108. Tax Sales 1771.06 2092.79 1197.A.84 3.

45 16.03 . of equity shares of company Net Assets Year 2005 2006 2007 2008 2009 Net Assets 3843.73 12.06 2722.82 Ratio (%) 0.03 3563.76 Table 1.82 2362.44 22012.56 2796.09 1527.31 1471.12 56.94 72.76 21774.82 1438.8 0.06 2092. Debt equity Ratio = Shareholder ' s fund Long − term debt Year 2005 2006 2007 2008 LTD 1704.44 22067.19 10.96 2722. Intrinsic value of shares = No.67 7.5 Share Fund 2138.04 2304.68 1.44 22012.57 0.23 • Wealth Ratios: 1.02 0.02 2.60 Table 1.33 2008 2009 1855.4 No.7 0.63 Ratio (%) 17.37 1769. of Shares 22012.

While the debt-equity ratio shows positive strength. . The intrinsic value of a company is decreased consecutively.06 • Evaluation As per the ratio of profitability.57 0. In the Wealth Maximization criterion.e.53 1438. 16.57% and 15. But then after it is stabilized in the year 2008 and 2009 i.67%. I find that. 2007.34 2009 88. the gross profit percentage is comparatively decreased in 2006. Return on shareholder’s fund is stabilized and consistent. The same is happen in the net profit percentage of the company.

Gross profitability ratio (GPR) = Gross profit × 100 Sales Year 2005 2006 2007 2008 2009 Table 2.14 1165.89 11.40 6719.64 5.1 Gross Profit Sales (206. in crores) 1.4 484.99 Ratio (%) --1.24 1007.09 14.91) 26.42 2007.99 2.52 1625. Net Profitability ration (NPR) = Net profit × 100 Sales . • Profitability Ratio: (Rs.35 IDEA CELLULAR LTD.69 118.07 4366.

098 0.15 Ratio (%) ----0. Return on Shareholder’s fund (ROSF) = Shareholder ' s fund × 100 Pr ofit after tax Year 2005 2006 2007 2008 P.99 Ratio (%) ----5.07 4366.63 1046.A.93 13.3 Share Fund 1022.25 Table 2.91 3.65 1165. Tax Sales ----115.2 P.75 10.A.42 2007. Tax ----115.25 934.36 Year 2005 2006 2007 2008 2009 Table 2.219 .40 6719.50 477.79 1168.53 2179.50 477.52 1625.

51 Table 1.17 2.14 6429. Intrinsic value of shares = No.79 1168.83 4084.16 27425.63 1046.37 2009 934.60 4250.15 Ratio (%) 2.03 0.65 18.08 24.21 2.5 Share Fund 1022. Debt equity Ratio = Shareholder ' s fund Long − term debt Year 2005 2006 2007 2008 LTD 2263.27 25928.58 2.95 . of equity shares of company Net Assets Year 2005 2006 2007 2008 2009 Table 2.53 2179.79 27425.80 38.65 3546.27 3744. of Shares (in lacs) 3286.4 Net Assets No.263 • Wealth Ratios: 1.61 Ratio (%) 11.27 22595.54 2698.98 13.03 2915.66 10060.61 26353.49 1.

While the debt-equity ratio shows positive strength as it decreased. . The same is happen in the net profit percentage of the company. In the Wealth Maximization criterion.38 2009 6514. The intrinsic value of a company is increased consecutively.76 3546. the gross profit percentage of a company shows negative effects.84 • Evaluation: As per the ratio of profitability. I find that. too. Return on shareholder’s fund is decreasing and consistent. and again it has very worst effect in the net profitability.03 1.

Gross profitability ratio (GPR) = Gross profit × 100 Sales Year 2005 2006 2007 2008 2009 Table 3.49 4165.56 3816. Net Profitability ration (NPR) = Net profit × 100 Sales .12 4293.55 2.28 3640.99 15.53 17. in crores) 1.94 10.60 179.39 RANBAXY PHARMACEUTICAL LTD.43 753. • Profitability Ratio: (Rs.95 438.95 4.94 3791.1 Gross Profit Sales 954.19 604.02 Ratio (%) 24.

04 380.2 P. Tax 794.51 2377.52 212.04 380.02 Year 2005 2006 2007 2008 2009 Ratio (%) 20.91 5.54 617.16 .A.12 4293.09 0.52 212.34 0.82 13.77 2509.39 3.82 9.A.54 Table 3.3 Share Fund 2321.72 3816.28 3640.78 527. Return on Shareholder’s fund (ROSF) = Shareholder ' s fund × 100 Pr ofit after tax Year 2005 2006 2007 2008 P.01 Ratio (%) 0.94 3791.21 0.40 Table 3. Tax Sales 794.49 4165.13 14.30 2350.78 527.

4 No.30 Ratio (%) 0.25 135. of Shares (in lacs) 1855.38 3407.42 Table 3. of equity shares of company Net Assets Year 2005 2006 2007 2008 2009 Net Assets 2356.77 2509.24 • Wealth Ratios: 1.48 148.61 6041.94 2.42 3726.86 1029.40 0.87 3730. Debt equity Ratio = Shareholder ' s fund Long − term debt Year 2005 2006 2007 LTD 34.41 2009 617.44 1858.31 91. Intrinsic value of shares = No.72 2538.03 2645.05 0.91 3724.51 2377.43 .5 Share Fund 2321.80 Table 3.71 Ratio (%) 126.014 0.98 142.34 161.10 5528.

40 1. While the debt-equity ratio shows negative strength as it increased. it has very worst effect in the net profitability.42 2008 2009 3178. The intrinsic value of a company is increased consecutively. In the Wealth Maximization criterion. I find that.86 3503. . The same is happen in the net profit percentage of the company. too.35 1.03 2350.01 2535. And again.38 • Evaluation As per the ratio of profitability. the gross profit percentage of a company shows negative effects. Return on shareholder’s fund is decreasing and balancing.

20 3469.89 7233.90 17492.10 3176. in crores) 1.51 23.83 2.1 Gross Profit Sales 1075.15 2302.12 13683.60 Ratio (%) 20.39 1739.43 WIPRO LIMITED • Profitability Ratio: (Rs.94 24.21 19.70 5134. Gross profitability ratio (GPR) = Gross profit × 100 Sales Year 2005 2006 2007 2009 2008 Table 4.04 22.16 10227. Net Profitability ration (NPR) = Net profit × 100 Sales .

10 Table 4.30 0.88 1494.76 20.89 7233.30 .10 3063.90 17492.12 13683.30 5134.2 P.60 Year 2005 2006 2007 2008 2009 Ratio (%) 17.48 2842. Tax 914.82 20.31 0. Tax Sales 914.67 19.3 Share Fund 3507. Return on Shareholder’s fund (ROSF) = Shareholder ' s fund × 100 Pr ofit after tax Year 2005 2006 2007 2008 P.40 Ratio (%) 0.82 2020.77 17.51 3.A.44 Table 4.16 10227.59 4893.88 1494.26 0.82 2020.65 6427.94 9320.48 2842.A.

26 • Wealth Ratios: 1.65 6427. Intrinsic value of shares = No.54 14590 14615 Ratio (%) 155.40 Long − term debt Year 2005 2006 2007 2008 LTD 100.71 14257.28 2327.025 .09 50.30 11610. Debt equity Ratio = Shareholder ' s fund Table 4.01 0.40 15433.10 7035.45 2009 3063.4 Net Assets No.44 65.59 2.69 62.007 0.03 0.02 70.59 4893.00 Ratio (%) 0.74 6478.5 Share Fund 3507.59 4955.70 0.44 45.16 238.94 9320.51 105. of equity shares of company Net Assets Year 2005 2006 2007 2008 2009 Table 4.10 9558. of Shares (in lacs) 3608.

the gross profit percentage of a company shows balancing and neutral effects.40 11610. Return on shareholder’s fund is balancing and consistent. While the debt-equity ratio shows negative strength as it increased. .46 2009 3822. In the Wealth Maximization criterion. then correction comes and then it is stabilized consecutively.33 • Evaluation: As per the ratio of profitability. And again it has very good effect in the net profitability too. The intrinsic value of a company is increased first. The same is happen in the net profit percentage of the company. I find that.70 0.

52 2299.60 2.1 Gross Profit Sales 432. in crores) 1.46 1890.2 .73 24.60 8750.45 24.06 20.05 1102.47 AXIS BANK LTD.75 568.54 2115. Gross profitability ratio (GPR) = Gross profit × 100 Sales Year 2005 2006 2007 2008 2009 Table 5. Net Profitability ration (NPR) = Net profit × 100 Sales Table 5.18 21.68 Ratio (%) 20. • Profitability Ratio: (Rs.66 865.46 5461.23 3594.

Return on Shareholder’s fund (ROSF) = Shareholder ' s fund × 100 Pr ofit after tax Year 2005 2006 2007 2008 2009 P.61 2885.18 0.23 Table 5.68 Ratio (%) 13.23 Sales 2115.12 .05 2421.21 8770.58 485.08 627.60 8750. Tax 278.23 1071.46 5461.24 0.69 Ratio (%) 0.08 627.14 0.58 485.23 3594.15 14.63 3402.31 334.52 2299.24 3.3 Share Fund 1138.48 12.31 334.23 1071.17 0.49 11.A.55 13.48 Year 2005 2006 2007 2008 2009 P. Tax 278.A.

28 9.57 2737.90 31712 40113.09 13.22 Table 5.60 87626.53 58785.17 707.5 Share Fund 1138.02 23588.81 15036.99 . of equity shares of company Net Assets Year 2005 2006 2007 2008 2009 Table 5. Intrinsic value of shares = No.63 3402.69 Ratio (%) 18.57 834.62 29855.21 8770. Debt equity Ratio = Shareholder ' s fund Long − term debt Year 2005 2006 2007 2008 2009 LTD 20953.08 19724.49 • Wealth Ratios: 1.90 549.4 Net Assets No.10 Ratio (%) 327.96 2786.73 837.41 13.91 2816.90 17. of Shares (in lacs) 7593.05 2421.31 3577.61 2885.55 2315.63 2.

. While the debt-equity ratio shows positive strength as it decreased. The intrinsic value of a company is increased consecutively. In the Wealth Maximization criterion. And again it has very good effect in the net profitability too. the gross profit percentage of a company shows balancing and neutral effects.50 • Evaluation: As per the ratio of profitability. Return on shareholder’s fund is balancing and consistent. I find that. The same is happen in the net profit percentage of the company. which is a good growth shine.

51 FINDINGS AND CONCLUSION From the all of above Tables and Graphs. although it is clear that some of them have to face an huge loss in the initial stage due to one or another reason. shows us the real picture of the market where. companies also have to maintained their Wealth due to one or another reasons. it is clear that the companies have been moving towards achieving their goals of financial management. by making comparison of its years and with the other companies and industry. Most of the company has more concentration on Profit Maximization goal. According to me……… . The objective of the study is to investigate the profitability status of the company. Even these random sample of five different companies of five different industries.

as it covers wealth increment of all the persons related to companies such as equity shareholders. employees. competitors. • • 3. BIBLIOGRAPHY Books referred to: 1.52 Wealth maximization is better objective than that of Profit Maximization. • • Financial Management Prasana Chandra Seventh Edition Financial Management I M Pandey Ninth Edition Financial Decision-Making John J Hampton Fourth Edition Other Sources: • • Annual Reports of respective companies Internet as source of information. • • 2. society and nation as whole. .

53 .