GL BAJAJ INSTITUTE OF MANAGEMENT AND RESEARCH

GREATER NOIDA
(2019-2021)

ASSIGNMENT
On
Corporate Finance
Sub. Code: PG-20
Post Graduation Diploma In management
Term -3

BATCH – 2019-21

SUBMITTED BY: SUBMITTED TO:

Saloni Sharma Dr. Anu Thakur
PGDM19122
Gm 19162

1
Question No. 1: Go through the annual report of a firm (it should be
your minor project’s company) and find out what does it state with
respect to the four decision areas of financial management. Also write
down the critical points that emerge in this context.

Important Note: Student needs to submit the respective relevant

proof for all the data taken from the Annual Report of the company.
Otherwise the answer will be treated as incomplete and no mark will
be given.
AUDITED BALANCE SHEET IS ATTACHED AT PAGE 11
Answer – 1
Decision making helps to utilise the available resources for achieving the objectives of the
organization, unless minimum financial performance levels are achieved, it is impossible for
a business enterprise to survive over time.
Therefore financial management basically provides a conceptual and analytical framework
for financial decision making.

Types of Financial Decisions:

Investment Decision, Financing Decision, Dividend Decision and Working Capital
Management Decision .

1 ) Financing Decision –
A financial decision which is concerned with the amount of finance to be raised from various
long term sources of funds like, equity shares, preference shares, debentures, bank loans etc.
Is called financing decision. In other words, it is a decision on the ‘capital structure’ of the
company.

2) Investment Decision:
A financial decision which is concerned with how the firm’s funds are invested in different
assets is known as investment decision. Investment decision can be long-term or short-term.

3) Dividend Decision -
A financial decision which is concerned with deciding how much of the profit earned by the
company should be distributed among shareholders (dividend) and how much should be
retained for the future contingencies (retained earnings) is called dividend decision.

2
 COMPANY VIVO

 Vivo Communication Technology Co. Ltd. is a Chinese technology

company owned by BBK Electronics that designs and manufactures smartphones and
smartphone accessories in China, software and online services. BBK Electronics also
owns Oppo, Realme and OnePlus. The company develops software for its phones,
distributed through its vivo App Store, with iManager included in their proprietary,
Android-based operating system, Funtouch OS.
 With research and development centers in Shenzhen and Nanjing, vivo employs 1,600
R&D personnel, as of January 2016 .

1) FINANCING DECISION BY VIVO COMPANY

 Bajaj Finserv has partnered with the smartphone brand to offer up to 100% finance on
all Vivo mobiles. You can shop for the latest Vivo smartphones on EMIs across any
of Bajaj Finserv’s 60,000+ partner stores.
 Available with Bajaj Finance , HDFC , HDB and Capital First.

 Vivo, which is also the country’s third largest smartphone brand by shipment share,
posted India sales of Rs 11,179.3 crore in the fiscal ended March 2018, compared
with Rs 6,292.96 crore in 2016-17.

 Vivo had lost marginal market share by up to 1% in April-June this year over last.
Counterpoint and IDC also said Vivo has about 12% share of the market followed by
Oppo.

 Vivo shipments have increased sequentially last quarter driven by new launches,
celebrity endorsement and aggressive campaign around the IPL cricket tournament,
2018. Vivo recently signed film star Aamir Khan as the brand ambassador and also
announced additional investment of Rs 200 crore to expand its Greater Noida plant.

 The decision to become an all-price segment player pegs Vivo against Korea’s
Samsung, which reclaimed the top spot in the smartphone market in the June quarter
with a 29% share against Chinese rival Xiaomi’s 28% share.

3
 As on 31st march 2018

Equity and Liabilities

Equity
Equity Share capital 11(a) 28,00,00,000 28,00,00,000 28,00,00,000
Reserves and Surplus 11(b 4,38,27,66,550 3,13,91,01,393 2,00,01,77,642
)

Total Equity 4,10,27,66,550 2,65,91,01,393 1,72,01,77,942

Liabilities
Non-current Liabilities

Borrowings 14(a) 6,99,61,50,375 69,99,61,50,375 -

Other Financial 14(b - - -
Liabilities )

Employee Benefit 13 1,45,04,368 43,06,541 9,12,494

Obliqations

Deferred Tax Liabilities 6 32,92,009 13,59,203 -

Other Non-current 15 9,60,64,052 7,09,84,321 3,09,10,098
Liabilities

According to this –

 Liabilities of Rs. 3292009 have to be paid or it must be decreased.

 Employees should be benefited more.
 Borrowings to be decreased.
 Share equity capital is 28,000000
 Company have much funds to be invested to earn more and increase profit which will
be done by the company in the year 2020 but may delay due to corona.

2) INVESTMENT DECISION BY VIVO COMPANY

 Vivo plans Rs 7,500-crore investment, facility expansion in India.

 “This is the company’s third investment and will take its total commitment in
manufacturing to about ₹7,900 crore (nearly $1 billion), to happen in multiple
phases,” said Nipun Marya, Director - Brand Strategy, Vivo India.

4
  “Vivo has so far invested ₹400 crore in its plant in Greater Noida to manufacture 25
million phones annually,

   “When the capacity was reaching 100 per cent, the company invested another ₹400
crore in the second phase to expand the annual capacity by 8.4 million phones to take
the total capacity to 33.4 million.” 

 Purchase of Property, Plant and Equipment and Other Intangible Assets

(including Adjustments on Account of Capital Work-in-progress, Capital
Creditors and Capital Advances
 Purchase of Investments in Subsidiaries
 Purchase of non-current Investments
 Purchase of Current Investments
 The Company has also invested in IT/Automation in a big way to reduce the
stress and strain in repetitive jobs and processes
NOTE –
VIVO this year ready to invest and manufacture in its fullest capacity it have
also purchase land in the area of greater Noida , it have also invested a lot in promoting
its premium product through actor Amir khan , this huge investment will turn positive in
terms of increase in sale , market share , building brand .

3) WORKING CAPITAL MANAGEMENT DECISIONS

As on 31st march 2018

Total Non-Current assets 2,79,16,14,134 1,69,18,70,767 61,14,63,903

Current assests
Inventories 7 3,77,37,20,755 9,71,34,14,664 1,25,46,37,556
Trade Receivables 5(a) 13,70,58,03,243 5,08,47,47,624 1,53,59,96,536
Cash and Cash equivalents 5(b) 3,74,83,91,178 61,76,58,068 31,41,80,471
Bank Balance other than 5(C) 6,17,46,41,980 4,93,04,77,374 3,00,09,99,999
(111)
Loans and Security Deposits 5(d) 49,42,940
Other Financial assets 5(e) 18,60,44,536 16,16,64,740
Current Tax assets 8 - - -
Other current assets 10 13,95,58,62,335 2,65,30,58,561 69,82,82,752

Total current assets 38,17,52,54,967 23,16,10,21,031 4,10,31,97,314

5
 According to Balance sheet,
 Decision was taken to clear inventories in the year 2017 and it is great that in year
2018 inventories of vivo mobile is only 3,77,37,20,755 and it is decided that in the
year 2019 all inventories and stock would be cleared.
 Trade Receivables have been increased , and it should be increased more.

4) DIVIDEND DECISION BY VIVO

 "With consumer satisfaction at our core, we aim to keep our business partners,
employees, and shareholders content with all our decisions," Chen said.

 An additional 2,500 people are to be hired as the capacity is raised by 8.4 million
phones, taking the total employment to nearly 10,000, he added.

 The company has paid this amount of Dividend in the year of 2018 (140.12) and
in the year of 2017 (161.68)

 Dividend Distribution Tax Paid in the year of 2018 is (28.80) and in the
Year of 2017 (33.83)

Critical points are-

1) Vivo Mobile continues to operate at a loss but it has narrowed by 30% from INR 166
crore in FY 15-16 to INR 112 crore in FY 16-17.

2)

Incorporated in Revenue FY 16-17 Loss FY 16-17 Funds Raised

2014 INR 6,146 CR INR 112 CR   INR 718 CR

6
 ANSWER 2
VIVO INDIA MOBILE PRIVATE INDIA
BALANCE SHEET AS ON 31ST MARCH 2018
Particulars Notes As at 31th Mar As at 31th Mar As at 31th Mar
2019 2018 2017

Assets
Non – Current assets
Property -Plant and 3 2,55,63,48,928 1,50,59,74,111 46,17,95,791
equipment
Capital work in Progress 3 6,64,74,178 46,74,465 5,38,92,297
Intra assests 4 3,65,51,062 3,96,68,486 3,59,19,475
Loan and Security Deposit 5(d) 7,65,01,611 8,45,51,360 1,42,03,722
Other Financial assets 5(e) 1,38,12,274 20,20,854 20,75,798
Other non-currrent assets 9 1,04,01,360 2,60,02,342 3,24,18,645
Deferred Tax assets 6 4,19,55,823 2,88,79,149 1,11,58,184

Total Non-Current assets 2,79,16,14,134 1,69,18,70,767 61,14,63,903

Current assests
Inventories 7 3,77,37,20,755 9,71,34,14,664 1,25,46,37,556
Trade Receivables 5(a) 13,70,58,03,243 5,08,47,47,624 1,53,59,96,536
Cash and Cash equivalents 5(b) 3,74,83,91,178 61,76,58,068 31,41,80,471
Bank Balance other than 5(C) 6,17,46,41,980 4,93,04,77,374 3,00,09,99,999
(111)
Loans and Security Deposits 5(d) 49,42,940
Other Financial assets 5(e) 18,60,44,536 16,16,64,740
Current Tax assets 8 - - -
Other current assets 10 13,95,58,62,335 2,65,30,58,561 69,82,82,752

Total current assets 38,17,52,54,967 23,16,10,21,031 4,10,31,97,314

Total assets 40,96,63,69,101 24,35,29,91,798 4,71,46,91,217

Equity and Liabilities

Equity
Equity Share capital 11(a) 28,00,00,000 28,00,00,000 28,00,00,000
Reserves and Surplus 11(b) 4,38,27,66,550 3,13,91,01,393 2,00,01,77,642

Total Equity 4,10,27,66,550 2,65,91,01,393 1,72,01,77,942

Liabilities
Non-current Liabilities
Borrowings 14(a) 6,99,61,50,375 69,99,61,50,375 -
Other Financial Liabilities 14(b) - - -
Employee Benefit 13 1,45,04,368 43,06,541 9,12,494
Obliqations

7
 Deferred Tax Liabilities 6 32,92,009 13,59,203 -
Other Non-current 15 9,60,64,052 7,09,84,321 3,09,10,098
Liabilities

Total Non-current
Liabilities 7,11,00,10,804 7,07,28,00,440 3,16,22,592

Current Liabilities
borrowings 14(a) - - -
Trade payables 14(c) 26,49,96,92,657 1926,60,39,611 5,25,40,19,714
Other Financial Liabilities 14(b) 9,42,73,291 7,62,40,157 65,24,900
Provisions 12 93,58,59,422 24,24,92,631 5,65,06,517
Employee Benefit 13 5,46,441 98,663 20,557
Obliqations
Other current Liabilities 16 10,42,82,53,036 1,06,44,21,599 6,50,44,779

Total Current Liabilities 37,95,96,24,347 20,53,92,92,761 6,40,30,16,457

Total Liabilities 4,506,96,35,651 27,71,29,93,191 6,43,48,38,069

Total Equity and

Liabilities 40,96,68,59,101 24,85,29,91,798 4,71,46,51,217

ANSWER -2

Take the Balance sheet of a company (it should be your minor project’s company) and
calculate the cost from various sources of finance. Also, being a finance manager of the
respective company, comment on the position of cost of capital of the company.
Important Note: Student needs to submit the respective relevant proof for all the data taken
from the Annual Report of the company. Otherwise the answer will be treated as incomplete
and no mark will be given.

COST OF CAPITAL
 Cost of loan / debt
 Cost of preference
 Cost of Equity
 Cost of retained earnings.
8
 1) COST OF LOAN / DEBT

CALCULATION OF COST OF LOAN / DEBT

After tax cost of debt

Kd = Interest ( 1- tax rate ) / Amount Received

TOTAL DEBT = 6,99,61,50,375

TAX RATE = 32,92,009 ( 18 % )
TOTAL INTEREST COST INCURRED = 6%

COST OF DEBT INCLUDING TAX =

6 X ( 1 - 18 )
100 100
6996150375

= 0.06
2) COST OF PREFERENCE

As per the balance sheet and its note to account there is no preference share issued by the
company . So there is nothing to calculate for cost of Capital of preference share.

3) COST OF EQUITY
( With growth ) –
= D1 / P0 + GROWTH
Growth = 12 rs – 10 rs = 2
Ke = Expected dividend / current market price + Growth Rate

CALCULATION OF COST OF EQUITY

Ke = 28,00,000 / 12 + 2
= 233335.333

4) COST OF RETAINED EARNING

( Including taxes and brokerage fees )

9
 Kr = Ke (1 – t ) ( 1 – b )
T = tax rate to share holders
B = brokerage or commission to acquire new shares

As there is no brokerage or commission charged by the company , the formula will be

Kr = Ke ( 1- t )

CALCULATION OF RETAINED EARNING

Kr = 233335.333 ( 1 – 22 % )
= 182,001.557

CONCLUSION AND ON THE BASIS OF ABOVE

INFORMATION.

1) Vivo company is one of the branded company in India.

2) Targeting all consumers premium , cheap , moderate Vivo can increase its profit.

3) Vivo is going to invest in manufacturing to its fullest capacity which will definitely
result gain in net profit of vivo.

4) Vivo is also going to promote for its premium segment by promoting its premium
mobile by actor Amir khan.

5) Vivo Mobiles plans to double its manufacturing capacity to three lakh devices a
month as the relatively new Chinese entrant looks to meet its entire demand locally,
helping reduce prices of its devices in an intensely competitive and price-sensitive
market.

10
11
References
1) https://www.bajajfinserv.in/emi-network-vivo-mobile-phones
2) https://www.vivo.com/in/product/activity/56
3) https://economictimes.indiatimes.com/tech/hardware/vivo-india-revenue-surges-78-
crosses-rs10k-crore-mark-in-fy18/articleshow/65713969.cms?
utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

12