car on ecil
TRANSCRIPT
CERTIFICATE
This is to certify that the project report titled “A STUDY ON
COMPARITIVE STATEMENT ANALYSIS IN ELECTRONICS
CORPORATION OF INDIA LTD., (ECIL)” is a confide work of
Mr.NAVEENKUMAR.S (09RN1E0021) in partial fulfillment for the
award of degree Master of Business Administration by Jawaharlal Nehru
Technological university, Hyd.
H.O.D. Project guideMr.M.Bheemesh M.B.A. Mr.P.Nagakrishna M.B.A., M.Phil.
Assistant Professor,Dept. of M.B.A. Dept. of M.B.A.
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ACOMPANY ANALYSIS
REPORT ON
ELECRONICS CORPORATION OF INDIA LTD
Analysis Report Submitted toJawaharlal Nehru Technological University, Hyderabad
In partial Fulfillment of the RequirementFor the Award of
Master of Business Administration
By
NAVEEN KUMAR.S(REG NO: 09RN1E0021)
(2009-2011)
Department of Management Studies
MEDHACOLLEGE OF ENGINEERING
(Affiliated to Jawaharlal Nehru Technological University)Laxmidevi Gudem (V), Bibinagar (M)
Nalgonda (DIST)-508126.
DECLARATION4
This project work entitled “COMPANY ANALYSIS REPORT WITH SPECIAL
REFERENCE TO ELECTRONICS CORPORATION OF INDIA LTD.
(ECIL)”submitted to the Department of Management Studies, MEDHA
COLLEGE OF ENGINEERING affiliated to J.N.T.U. Hyderabad, is a bonafide
work done by me and not submitted to any other university / institution,
either in whole or in part. I further declare that, I am alone responsible for
omission or commissions if any.
PLACE: Hyderabad S. NAVEEN KUMAR
DATE:
09RN1E0021
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TABLE OF CONTENTS
Chapters Page numbers
1. INTRODUCTION A) INTRODUCTION
B) NEED AND IMPORTANCE OF THE STUDY C) OBJECTIVES OF THE STUDY D) METHODOLOGY E) SCOPE AND PERIOD OF THE STUDY
2. COMPANY PROFILE
3. THEORITICAL PRESPECTIVES
4. DATA ANAYSIS & INTERPRETATION
5. FINDINGS, SUGGESTIONS
BIBLIOGRAPHY
ANNAXUARY
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CHAPTER 1 INTRODUCTION
INTRODUCTION:
Company analysis report is a compressive idea of the performance of the
company. Every company publishes an annual report which contains valuable financial other
information about the company. Annual report is the beginning & ending points in obtaining
information about individual companies. As a start they provide an overview of the company's
business its status & its performances for series of year .At the end of the information gathering
process, annual reports are used to corroborate the vast array of company -specific data
assembled from various sources.
The typical Indian company includes the following documents in its annual
report.
1. director's report
2. financial statements
3. schedules & notes to the financial statements
4. Auditor's report
In this report mainly mid with the secondary data about the company. In addition
some company’s provide financial highlights& summary of financial performance of the past 5
(or) 10 years. This annual report sent to the share holders of the companies are also required to
publish a quarterly statement of financial results with in one month from the end of the quarter.
These statement are typically net audited this like the annual statements & are published in
leading news papers.
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Concept of financial performance:
The Financial performance of any organization greatly influences its
operations results and business efficiency. Such performance analyses deals with the
evaluation of the financial wealth at the particular point of the time during its life period
and also involves the determination of the efficiency of the management in utilizing and
managing the fund provided. The financial performance has to be evaluated from time to
time or detect any fault in the financial policy and take the remedial action at the
appropriate time
The financial performance influences the goals and objectives and
consequently affects its size and profitability. Ratio analysis is having a significant place in
the finance judgment and monitoring of the performance of any company. Basically ratio
analysis is used for the purpose of assessing financial strength and weakness of any concern
the present study is conduct to apply ratio analyses in the practical field towards this end
Electronocs corporation of india ltd purposefully.
NEED AND IMPORTANCE OF THE STUDY:
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The basic need is to complete a project work for the partial fulfillment of my
master’s degree. With this name the search started for the topic that was appealing and that
would make most of my skills and abilities.
The project work is carried out by me in Electronocs corporation of india ltd. and
the aim of project is to analyze Ratio Analysis.
The growing demand of pharmaceutical industries play vital component of the
institutional structure for providing services currently lacks of companies rendering services
through out of the world keeping all this in view the need and importance op the pharmaceutical
industry has even in increasing demand through out the world.
For the purpose of this study “The Electronocs corporation of india ltd.” is
chosen. It necessary to identify the financial strength and weaknesses of Electronics corporation
of india ltd by establishing relationship between different items of reference.
The present study is entitled “Financial performance of Electronocs corporation
of india ltd by using ratio Analysis “this study is made with special emphasis on financial
position by using ratio Analysis.
OBJECTIVES OF THE STUDY:
To measure the financial performance of Electronocs corporation of india ltd.
To analyze the Electronocs corporation of india ltd financial performance by using Ratio Analysis.
To know the profitability of Electronocs corporation of india ltd.
To know the liquidity position of Electronocs corporation of india ltd.
To know the Turnover Ratio of Electronocs corporation of india ltd.
To offer suggestion for the improvement of financial position of Electronocs corporation
of india ltd by using the findings of the study.
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METHODOLOGY:
I have collected information for the research from both primary and secondary data
Primary Data:
I have collected information by discussing with Financial Department.
Practical concepts learned during the project in the company.
Secondary Data:
The past five years balance Sheets and Profit & Loss Account statement of the company.
The past five years Annual Reports of the company.
Theoretical and practical concepts learned during the MBA course.
Data collected from different text books relating to Financial Management and Net
service.
SCOPE AND PERIOD OF THE STUDY:
The present study will reveal the liquidity and profitability position of Electronocs
corporation of india ltd., covering purely. Financial data supplied in the financial
statement of Electronocs corporation of india ltd.
The present study taken time period during only past five years in the 2001-2006
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TECHNIQUES:
The following techniques which I followed during the study.
Ratio Analysis was done using the annual reports of Electronocs corporation of india ltd.
Graphical representation and Analysis was done on the basis of findings of the study.
Detail explanation was given on Basic of the findings
LIMITATIONS OF THE STUDY:
The data collected focusing more on secondary.
The time given for the study is only two months, which is not enough to collect sufficient
data
All the data presented for financial was limited up to past five years i.e., 2001-2006.
FINANCIAL STATEMENTS: 11
Financial statements, as used in corporate business houses, refer to a set of reports
and schedules, which an accountant prepares at the end of the period of time for a business
enterprise. The financial statements are the means with the help of which the accounting system
performs its main function of providing summarized information about the financial affairs of
the business. These statements comprise balance sheet or position statement and profit and loss
account or income statement. In India, every company has to present its financial statements in
the form and contents as prescribed under section 211 of the companies Act, 1956.
ANALYSIS OF FINANCIAL STATEMENTS:
Financial analysis is to determine the significant operating and financial
characteristics of a firm from accounting data. It is a technique typically devoted to evaluate the
past, current and projected performance of a business firm. Financial analysis is an attempt to
determine the significance and meaning of financial statement data so that forecast may be made
of the future prospects for earnings, ability to pay interest and debt maturities and profitability.
Published financial statements are the only source of information about the
activities and affairs of a business entity available to the public, shareholders, investors and
creditors and the government. These various groups are interested in the progress, position and
prospects of such entity in various ways. But these statements howsoever, correctly and
objectively prepared, by themselves do not reveal the significance, meaning and relationship of
the information contained therein. For this propose, financial statements have to be carefully
studied, dispassionately analyzed and intelligently interpreted.
Financial analysis results in the presentation of information by arranging
financial statement data in a systematic manner that aids business managers, investor, and
financial statement can provide valuable insights into a company’s performance.
OBJECT OF FINANCIAL ANALYSIS:
1. To estimate the earning capacity of the firm
2. To gauge the financial position and financial performance to the firm
3. To determine the long term liquidity of the funds as well as solvency.
4. To determine the debt capacity of the firm.
5. To decide about the future prospects of the firms
PROCEDURE OF ANALYSIS:
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The process of analyzing financial statements involves the rearranging, comparing
and measuring the significance of financial and operating data. Interpretation, which follows
analysis, is an attempt to logical conclusion regarding the position and progress of the business
on the basis of analysis.
The procedure may be as under:
1. Deciding upon the extent of analysis: - The depth, object and extent of Analysis have
to be determined so that the scope of the analysis, tool of Analysis and the amount and quality of
financial data required could be determined.
2. Going through the financial statements: - Before analyzing and preparing any
statement or composing financial ratios, it is necessary to go through the various financial
statements of the firm.
3. Collection of necessary information: - Other useful information which cannot be
revealed from financial statement but is useful for analysis has to be collected from management.
4. Rearranging of financial data: - The data available has to be rearranged in a useful
manner before analysis and interpretation.
5. Analysis: - In this step the actual analysis is made for which any Technique such as,
comparative financial statements, trend analysis, Ratio analysis and cash flow statements,
statements of change in Working capital, etc., can be used.
6. Interpretation and presentation: - After analysis, interpretation is done and
conclusions are drawn. These interpretations are of vital Importance to the management,
shareholder, workers, etc., to know the Relative worth of the company. Thus, analysis and
interpretation of financial statements are regarded as complimentary to each other.
TOOLS OF FINANCIAL ANALYSIS:
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The analysis of financial statements consists of relationships and trends, to determine
whether the financial position of the company is satisfactory or not. The analytical methods or
devices, listed below are used to ascertain or measure the relationships among the financial
statement’s items.
Analytical methods and devices used in analyzing financial statements are as follows:
1. Comparative financial statements
2. Ratio Analysis
They may be discussed as under:
1. Comparative financial statements:
Statements prepared in a form that reflect financial data for two or more periods are
known as comparative statements. Financial data become more meaningful when compared with
similar data for a previous period or a number of prior periods. Annual
Data can be compared with similar data for prior years. Comparative statements can be prepared
for both types of financial statements balance sheet as well as profit and loss account. The
comparative balance sheet shows the effect of operations on the assets and liabilities i.e., change
in the financial position duding the period under consideration. The comparative profit and loss
account will present a review of operating activities of the business.
2. Ratio Analysis:
Ratio analysis is the most widely used tool of financial analysis. It is essentially an
attempt to develop meaningful relationship between individual items or group of items in the
balance sheet or profit and loss account. The objects and utility of ratio analysis is confined not
only to the internal parties but to the credit suppliers, bans and lending institutions also. Ratio
analysis tells about the financial position of the enterprise as to whether the capital structure of
the business is in proper order, whether the capital structure of the enterprise is satisfactory,
whether the credit policy in relation to sales and purchases is sound and whether the company is
creditworthy. Thus, ratio analysis highlights the liquidity, solvency, profitability and capital
gearing position
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CHAPTER 2
COMPANY PROFILE
Introduction of ECIL
"Let us work up the embers of national pride latent in all of us and build up our morale so that we can confidently aim high and achieve greater goals"- Dr. AS Rao -Founder C&MD of ECIL
Dr.A.S.Rao, Founder C& MD of ECIL
1914 - 2003
About ECIL
ECIL was setup under the Department of Atomic Energy in the year 1967 with a view to generating a strong indigenous capability in the field of professional grade electronics. The initial accent was on total self-reliance and ECIL was engaged in the Design Development, Manufacture and Marketing of several products emphasis on three technology lines viz. Computers, Control Systems and Communications. Over the years, ECIL pioneered the development of various complex electronics products without any external technological help and scored several 'firsts' in these fields prominent among them being country's
First Digital Computer First Solid State TV First Control & Instrumentation for Nuclear Power Plants First Earth Station Antenna
The company played a very significant role in the training and growth of high caliber technical and managerial manpower especially in the fields of Computers and Information Technology. Though the initial thrust was on meeting the Control & Instrumentation requirements of the Nuclear Power Program, the expanded scope of self-reliance pursued by ECIL enabled the company to develop various products to cater to the needs of Defence, Civil Aviation, Information & Broadcasting, Telecommunications, Insurance, Banking, Police, and Para-Military Forces, Oil & Gas, Power, Space Education, Health, Agriculture, Steel and Coal sectors and various user departments in the Government domain. ECIL thus evolved as a multi-product company serving multiple sectors of Indian economy with emphasis on import of country substitution and development of products & services that are of economic and strategic significance to the country.
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Mission
ECIL's mission is to consolidate its status as a valued national asset in the area of strategic electronics with specific focus on Atomic Energy, Defence, Security and such critical sectors of strategic national importance.
Objectives
To continue services to the country's needs for the peaceful uses Atomic Energy. Special and Strategic requirements of Defence and Space, Electronics Security Systems and Support for Civil Aviation sector.
To establish newer technology products such as Container Scanning Systems and Explosive Detectors.
To explore new avenues of business and work for growth in strategic sectors in addition to working for realizing technological solutions for the benefit of society in areas like Agriculture, Education, Health, Power, Transportation, Food, Disaster Management etc.
To progressively improve shareholder value of the company. To strengthen the technology base, enhance skill base and ensure succession planning in
the company. To re-engineer the company to become nationally and internationally competitive by
paying particular attention to delivery, cost and quality in all its activities. To consciously work for finding export markets for the company's products.
HUMAN RESOURCESStaff Strength
During the year, a total of 62 persons were recruited (including 2 internal candidates) in different Groups (Group ‘A’: 11, Group ‘B’: 38 and Group ‘D’: 13). Out of the 62, 23 belong to SC, 12-ST, 8-OBC, 12 Ex-servicemen (on 3 years contract), 6 general and 1 physically handicapped category. A total of 131 employees were relieved under the Voluntary Retirement Scheme. Reckoning other cessations,
the manpower strength as on 31.3.2005 stood at 5108. The number of SC employees and their percentages to the total number of employees in different Groups are (given in brackets) Group A: 153 (8.94%), Group B: 277 (17.29%), Group C: 162 (15.01%), Group D: 107 (17.92%) and Group D1: 44 (excluding Sweepers) (36.66%). The ST employees and their percentages Group-wise are (given in brackets) Group A: 16 (0.93%), Group B: 75 (4.68%), Group C: 39 (3.61%), & Group D: 12 (2.01%) and Group D1 (excluding Sweepers): 2 (1.66%).During the year, there were no employees whose particulars are required to be given under Sub-section (2A) of Section 217 of the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975 as amended.
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Employee Relations
The employee relations continued to be harmonious during the year 2004-05, with continued active co-operation of the Employees’ Union and the Officers’ Association. However, the Humble Court of Junior Civil Judge, Medical, Range Reddy District vide IA No.236 of 2004 dated 16.09.2004 has given an Order restraining ECIL from negotiating or discussing Management affairs of ECIL with the existing office-bearers of ECIL Employees’ Union. Subsequently, in terms of the Orders dated 25.01.2005 in IA o.4509/04 in IA No.214/04 in OS No.477/02 of the Principal Junior Civil Judge, Hyderabad, East and North, R R District, the Dy. Commissioner of Labor, R Zone has conducted the elections of the office-bearers of ECIL Employees’ Union on 2.4.2005 and the newly elected office-bearers have started functioning. During the year, in terms of the approval accorded by Government, the payment towards arrears on account of pay/ wage revision pertaining to the period from 1.1.1997 to 31.12.1998 was made in the month of June, 2004. In addition to the annual performance incentive payable as per Performance Incentive Scheme for the year 2004-05 amounting to Rs.2352/- for workmen and Rs.2688/- for executives, the Company had also paid an amount of Rs.7500/- as ex-gratia to all employees, considering the profit.
A total number of 2989 man-day’s were lost in pursuance of band observed by a few political parties throughout Andhra Pradesh on 20.11.2004 and 25.01.2005 as APSRTC could not operate the Company hired buses in some routes on the said days.
Training and Development
In-house Training Programmes
During the year, 2004-05, Corporate Learning Centre(CLC) had organized a total of 65 (40 on technical & 25 on management development) in-house programmes on themes addressing management development, workers oriented training programmes and programmes on various technical topics of current interest by eminent faculty drawn from reputed institutions. In all, 2180 employees (1683 Executives and 497 Workmen) have participated in the training programmes, resulting in 4488 man-day’s of training incurring an expenditure of Rs.14,62,980/-.
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Business Divisions
The COMPANY is organized into DIVISIONS serving various Sectors, National and Commercial Importance
Divisions serving Nuclear sector
Control & Automation Division (CAD) Instruments & Systems Division (ISD) Components Division (CD)
Divisions serving Defence sector
communications Division (CND) Antenna Products Division (APD) Servo Systems Division (SSD) Strategic Electronics Division (SED) Special Products Division (SPD)
Divisions handling Commercial Products
Supervisory Control & Data Acquisition Division (SCADA) Business Systems Division (BSD) Telecom Division (TCD) Customer Support Division (CSD) Computer Education Division (CED)
Research and Development18
Objectives
Coordination and review of in-house R&D projects Promotion of new R&D projects Utilization of External Grant In Aid Development of new technologies Development of products and support to in-house R&D projects
Facilities
Full fledged Laboratory for Embedded Systems design Development tools for 8 bit, 16 bit and 32 bit micro controllers Development tools for ultra low power micro controllers Platform for development of products based on Xilinx & Altera FPGA Front end and Back End Tools for ASIC design Tools for Validation and Verification of Software Infrastructure for multi-tier based software development LINUX based software development
Product Being Development
RFID card readers with RS232/485, Ethernet, LCD display and Keypad with contact output for access control devices
RFID solutions for supply chain management Holter Monitors Encryption Systems Biometric systems (Hand geometry and crease pattern) GPS systems Thin client based solutions Smart Radiation monitors with multiple interfaces for communication Continuous Air activity monitors Teletectors Alpha contamination monitors with gas flow proportional
Genesis & Evolution:
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ECIL was setup under the Department of Atomic Energy in the year 1967 with a view to generating a strong indigenous capability in the field of professional grade electronics. The initial accent was on total self-reliance and ECIL was engaged in the Design Development, Manufacture and Marketing of several products emphasis on three technology lines viz. Computers, Control Systems and Communications. Over the years, ECIL pioneered the development of various complex electronics products without any external technological help and scored several 'firsts' in these fields prominent among them being country's
First Digital Computer
First Solid State TV
First Control & Instrumentation for Nuclear Power Plants
First Earth Station Antenna.
The company played a very significant role in the training and growth of high caliber
technical and managerial manpower especially in the fields of Computers and Information
Technology. Though the initial thrust was on meeting the Control & Instrumentation
requirements of the Nuclear Power Program, the expanded scope of self-reliance pursued by
ECIL enabled the company to develop various products to cater to the needs of Defense, Civil
Aviation, Information & Broadcasting, Telecommunications, Insurance, Banking, Police, and
Para-Military Forces, Oil & Gas, Power, Space Education, Health, Agriculture, Steel and Coal
sectors and various user departments in the Government domain. ECIL thus evolved as a multi-
product company serving multiple sectors of Indian economy with emphasis on
import of country substitution and development of products & services that are of economic and
strategic significance to the country.
Research:
ECIL has a well equipped and well staffed research and development wing, concentrating its efforts more in the multiple technologies to launch new products in the market. Staffed by qualified personal concentrating their efforts in the fields of atomic energy, defense etc.Organization (ECIL) has received CSIR national award from the ministry of science & technology for R&D efforts in the area of computer software.The research has helped to meet the specific requirements of government and semi-government organization.
Welfare:
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Welfare activities include canteens supplying subsidized meals, transport facilities, housing facilities to employees
Achievements, Awards and Felicitations:
As a recognition of the incredible turn around achieved and for its pioneering contribution in the field of R&D, the company received a number of awards, most prominent of them are: "PADMA BHUSHAN" award (1972) to Sambhashiva Rao, a recognition given to personalities of great national stature, when he was
then chairman and managing director of ECIL and director of atomic energy commission. Dr.A.S.Rao has been facilitated as "Electronics man of venture" in the year 2001.
ECIL received national award for "excellence in electronics" in 2003..
Certificate of merit for "Excellence in MOU" performance, from the ministry of heavy industries.
Quality:
Standards And Quality Assurance Group (SQAG) at ECIL is a Corporate Quality Assurance Service Facility. While the individual business groups have their own Quality Control / Quality Assurance sections, this corporate facility caters to the common requirements.
Faculty for training personnel in Product divisions on ISO awareness and on Internal Quality Audits, Helping in developing their quality system documentation, planning, conducting and managing internal quality audits and reporting of audit results.
A well equipped and NABL accredited Calibration and Measurements Laboratory equipped with standards traceable to National Standards and catering to the calibration requirements of the Product divisions in the field of electro-technical measurements.
An Environmental Test laboratory meant for both component / unit / system evaluation. It has Dry / Damp heat chambers, Walk in chambers, Dust / Rain chambers, Vibration and bump test facilities.
A Technical Information Centre:
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Equipped with such facilities with service as its motto SQAG has adapted and declared its quality policy as "To render reliable and professional services in the fields of Quality Assurance, Testing and Calibration to the satisfaction of its CUSTOMERS."
Standards and Quality Assurance Group (SQAG) is a Corporate Services Group catering to the needs of all Production divisions in the following areas.
1. Standards
2. Quality Assurance
3. Environmental and Calibration Services
4. Industrial Engineering
Standards:
In this area, SQAG maintains national and international standards for reference of Product divisions. SQAG organizes and coordinates the participation of ECIL experts in various branches of standardization activity organized by Bureau of Indian Standards, Electronics Standardization Subcommittee and Electronic Components Standardization Organization of Ministry of Defence and any other organization that needs our expertise. A link is established to browse or download Defence standards through Dial-up connection to Defence Standardization cell, Hyderabad, situated at DLRL.
Quality Management System:
ECIL's quality consciousness has resulted in the company receiving the ISO 9000 certification in a wide range of operations such as Control Systems, Hybrid Micro Circuits, Tantalum Capacitors, Telecom Products, Software Consultancy Projects and Customer Support Services. SQAG supports all Product divisions in maintaining Quality Management System as per ISO 9001: 2000. All Product divisions are certified to ISO 9001:2000 Quality Management System.
Products Information:In line with the corporate mission and objectives, the company chose a product range
suiting the strategic requirements of our country. The current product range of ECIL may be categorized broadly under three sectors;
Nuclear sector:Control & Instrumentation products for Nuclear Power Plants Integrated Security
Systems to Nuclear installations Radiation Monitoring instruments to support the radiation safety program of the DAE Secured Networking of all DAE units via satellite.
Defense Sector:22
Various types of fuses V/UHF Radio Communication Equipment Electronics Warfare Systems and derivatives Thermal Batteries and Special components for missile projects Precision Servo components like gyros Missile Support control & Command Systems Training Simulators, Stabilized Antenna & Tracking for Light Combat Aircraft Detection and Pre-detonation of Explosive devices Jammers with Direction Finding abilities Projects connected with Defense Intelligence.
Commercial Sector:Electronics Voting Machines to Election Commission Wireless in Local Loop (WLL) for
Telecom sectors Antenna products for I & B and Telecom sectors Integrates Security Systems and Security equipment including X-Ray Baggage inspection system for airports, Customs and VVIP Installations Computer Hardware, Software and Services to various agencies in the Government domain Computer Education Services.
Production Objectives: To reduce cost by 50% and increase profits. To accelerate the development and growth of new products and markets. To develop indigenous technology by using research and development yearly growth rate of
20%. Quality assurance and adequate after sales services. Any entry in international markets.
Financial objectives: To achieve 20% earning before tax. To meet working capital and plant replacement for internal sources.
Strategies: Technical up gradation and R&D efforts. Effective new markets and exports. Gather delegation of authority and tuning up management information system. Diversification. Shareholders pattern.
Management Practice and Control Systems:ECIL employs professional management which is distinct from the owners. Thus there is
a distinct separation between ownership, control and management is that in agency. The
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professional managers, exercise their power in order to achieve the objective of the owners of the company. The chief executive officer is the managing director appointed by the government of India for specific term, similarly the government of India, also appoints few directors of the company from the senior executives. The company had undertaken annual exercise of the budget, which details the minute information. The company adopts a combination of top down to bottom up and bottom up to top down approach in its budgeting. There are two ways of budgeting exercise, one is operational budget another one is relates to capital expenditure normally this plan for a period of 5 years and the review of expenditure is done every year. Each group has committed to formulate the review proposal from each groups are consolidated and decision is taken keeping in view the following consideration:
There capital expenditure is essential for moderation to remain in business up to the mark. They for see a good and profitable business prospect. They satisfy the criteria such as pay back period and internal rate of return. The department and the group are responsible center and each of respective head is
responsible for achieving the targets. Most of them are profit center and some are designated as cost centers. The budget becomes base and production unit under take elaborate schedule for production. The achievements are recorded and the performances of all evaluated production techniques adopted are based on the principle and policies elaborately laid down.
Joint Venture Company:
The Joint Venture, ECIL-Rapiscan Limited registered a total income of Rs.25.50 crore during this year by way of income from maintenance of conventional X-Ray Machines, Services rendered in respect of Cargo Scanning Systems and supply of Multi-energy X-Ray machines to Reserve Bank of India, Blue Dart, Museums, SBI, Dena Bank, Indian Army, Indian Airlines, Indian Air Force, Police Departments of various States, CISF, etc. The total income during the year has come down by 1.55 crore as compared to the previous year. The Profit before tax (provisional) is Rs.5.05 crore and this too dropped marginally by 15% over the previous year. The income target set for the year 2005-06 is Rs.44 crore and the JV Company is confident of achieving it considering the increased demand for security related products and systems in the current security scenario. The decision of the Government to introduce Container Scanning Systems in a big way in Indian Seaports provides ample business opportunity in this new line.
HIGHLIGHTS OF OPERATIONS
During the year under review, the Company made rapid strides on the technology front with emphasis on high
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technology low volume areas in the strategic sectors. The overall performance of the Company was quite satisfactory though there was marginal decline in turnover and profit. However, the Company is quite confident of achieving an improved performance in the years to come, as a result of a number of actions initiated that would in turn not only enlarge the technology base but also significantly open up new windows of opportunities.
The Company registered a turnover of Rs.771 Crore against an MoU target of Rs. 781 Crore. The financial results reflect a pre-tax profit of Rs.51 Crore for the year. Non-receipt of order from Ministry of Home Affairs and issues relating to evaluation in case of Electronic Warfare Projects were prime contributing factors to the shortfall. Sectorally, the major contributions to the turnover during the year were from the Defence Sector, accounting for 42% and the Nuclear Sector, for 22%. The rest was contributed by the Space and Security Products & Systems, IT services, etc. In the Nuclear Sector, the Company received accolades for supplying Control & Instrumentation Packages to Tarapur-4 Nuclear Power Plant that went critical recently, 7 months ahead of schedule. The Company continues to enjoy the patronage of Nuclear Power Plants in respect of supply of C&I packages. On the Defence front, the Company played a significant role in commencement of supply of Electronic Warfare Systems to Air Force and in the successful field trials of BrahMos Missile Project. The Company also installed and commissioned for the first time in the country, a mobile Gamma Ray and a high energy X-ray Container Inspection Systems at JNPT, Mumbai. A notable achievement of the Company during this year was its role in facilitating smooth conduct of the General Elections-2004 by means of deployment of a large number of EVMs across the Nation.
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BOARD OF DIRECTORS
ECIL Annual reports
2004-200526
DIRECTOR’S REPORT
To
The Shareholders ofElectronics Corporation of India Limited
Gentlemen,
Your Directors have pleasure in presenting herewith the 38th Annual Report of your Company, together with the audited statement of accounts for the year ended 31st March, 2005.
OPERATING RESULTS AT A GLANCE
(Rs. Crore)
Particulars 2004-05Turnover 771
Production at realisable value
711
Profit before tax 51Profit after tax 37
Net worth 322
Capital employed322
Value added 291
SHARE CAPITAL & UNSECURED LOANS
The authorized share capital of the Company remained unchanged at Rs.150 crore. During the year, the company received an amount of Rs.9 crore equity capital from the Government of India as budgetary support towards capital expenditure. The called up and paid up share capital as on 31.3.2005 stood at Rs.145.88 crore. No loans were taken from Government during the year.
DIVIDENDYour Directors are pleased to recommend a dividend @ Rs.50.90 per share of Rs.1000/- each for the year 2004-05.
NEW PRODUCTS INTRODUCED
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In-core Neutron Flux Mapping System for Nuclear Power Plants, Distributed Control System for Steam Generator Test Facility (SGTF) for IGCAR, SCADA software on UNIX platform, BF3 and He counters for neutron monitoring, SRM detectors for in-core neutron flux measurement, Tritium in water monitor, Portal monitors, SNM monitors, Pocket Dosimeters, Mobile VSAT antenna for Telemedicine applications & Transportable Earth station and Electrometer Amplifier.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Particulars of conservation of energy, technology absorption and foreign exchange earnings and outgo as required under the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 are given in to this report.
Employee Relations The employee relations continued to be harmonious during the year 2004-05, with
continued active co-operation of the Employees’ Union and the Officers’ Association. However,
the Hon’ble Court of Junior Civil Judge, Medchal, Ranga Reddy District vide IA No.236 of 2004
dated 16.09.2004 has given an Order restraining ECIL from negotiating or discussing
Management affairs of ECIL with the existing office-bearers of ECIL Employees’ Union.
Subsequently, in terms of the Orders dated 25.01.2005 in IA o.4509/04 in IA No.214/04 in OS
No.477/02 of the Principal Junior Civil Judge, Hyderabad, East and North, R R District, the Dy.
Commissioner of Labour, R R Zone has conducted the elections of the office-bearers of ECIL
Employees’ Union on 2.4.2005 and the newly elected office-bearers have started functioning.
During the year, in terms of the approval accorded by Government, the payment towards arrears
on account of pay/ wage revision pertaining to the period from 1.1.1997 to 31.12.1998 was made
in the month of June, 2004. In addition to the annual performance incentive payable as per
Performance Incentive Scheme for the year 2004-05 amounting to Rs.2352/- for workmen and
Rs.2688/- for executives, the Company had also paid an amount of Rs.7500/- as ex-gratia to all
employees, considering the profit. A total number of 2989 mandays were lost in pursuance of
bandh observed by a few political parties throughout Andhra Pradesh on 20.11.2004 and
28
25.01.2005 as APSRTC could not operate the Company hired buses in some routes on the said
days.
QUALITYMANAGEMENT
All product divisions achieved Quality Management System Certification against ISO
9001:2000 in the Corporation. During 2004-05, Control & Automation Group, Computer
Education Division and Strategic Electronics Division were re-certified and the validity of
registration was extended for three more years i.e. up to 2007. Calibration & Measurements
Laboratory of Standards & Quality Assurance Group (SQAG) was also re-accredited by NABL
for another 3 years. i.e. up to September, 2007. Implementation of Environmental Management
System against ISO 14001:2004 was initiated in the Corporation and necessary documentation
was prepared and put in place. The certification is expected to be achieved during 2005-06
ECIL BRANCHES
29
Role of Compensation and Reward in Organization:
Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e Men, Material, Machine and Money, Men has been most important factor, it
30
is impossible to imagine a business process without Men.
Land, Labor, Capital and Organization are four major factors of production.Every factor contributes to the process of production/business. It expects return from the business process such as Rent is the return expected by the Landlord. similarly Capitalist expects Interest and Organizers i.e Entrepreneur expects profits. The labour expects wages from the process. It is evident that other factors are in-human factors and as such labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production process.
Advantages of Fair Compensation System:
Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following:
1. If an ideal compensation system is designed, it will have positive impact on the efficiency and results produced by workmen.
2. Such system will encourage the normal worker to perform better and achieve the standards fixed.
3. This system will encourage the process of job evaluation. It will also help in setting up an ideal job evaluation, which will have transparency, and the standards fixing would be more realistic and achievable.
4. Such a system would be well defined and uniform. It will be apply to all the levels of the organization as a general system.
5. The system would be simple and flexible so that every worker/recipient would be able to compute his own compensation receivable.
6. Such system would be easy to implement, so that it would not penalize the workers for the reasons beyond their control and would not result in exploitation of workers.
7. It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers.
8. Such system would help management in complying with the various labor acts.
CHAPTER 3
THEORITICAL PRESPECTIVES31
A) INTRODUCTION:
A basic limitation of the traditional financial statements comprising the balance sheet and
profit and loss account is that they do not give all the information regarding the financial
operation of a firm much can be learnt about a firm from a careful study of financial statements.
The analysis of financial statements is, thus, an important aid to financial analysis.
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 weakness of a firm as
well as its historical performance and current financial condition can be determined.
Basis of comparison:
Ratios enable to draw conclusions regarding financial operations. The use of ratios, as a
tool of financial analysis, involves their comparison for a single ratio, like obsolete figures. Four
types of comparison involved.
Trend Ratio:
They involved a comparison of ratios of a firm over time, i.e. present ratios are compared
with post ratios for the same firm. This indicates the direction of change in the performance
improvement.
Inter- firm comparison:
It involves comparison of the ratios of a firm with those of others in the same line of
business.
32
Comparison with standards (or) plans:
Relate to comparison of items within a single years financial statement of a firm.
(B) CLASSIFICATION OF RATIOS:
Ratios can be classified into four broad groups depending upon the particular purpose.
1) Liquidity ratios.
2) Leverage ratios/ capital structure
3) Profitability ratios.
4) Activity ratios.
Liquidity ratio: The ability of a firm to meet current/ short term obligations and reflect the
short-term financial strength/ solvency of a firm. These also measure the financial position of the
concern from long term as well as short-term solvency.
Net working capital: Net working capital represents the excess of current assets over current
liabilities. An enterprise should have the sufficient NWC in order to be able to meet the claims of
the creditors and meeting the day-to-day needs of business. The greater the amount of NWC, the
greater the liquidity of the firm.
1. Current ratio:
A current ratio may have different meanings depending on the point of view of an
analyst. It has a liquidating meaning - the ability to make all necessary payments today - which
33
gives a measure of protection or cushion for lenders. But, lenders are not interested in receiving
inventory in lieu of their claims, and they may look at the ratio as an indication that the firm is
able to generate funds to make all needed payments in the future; thus, the ratio indicates
whether the firm is likely to be a going concern. But, to infer such a meaning, the ratio cannot be
looked upon as a single statistic, and it is necessary to analyze the degree of liquidity of the
components of working capital, as it is done later in this chapter
Current Assets
Current Ratio = -------------------------------
Current Liabilities
CURRENT ASSETS CURRENT LIABILITIES
CashSundry DebtorsCash in Bank
Bills receivablePre-paid Expenses
Marketable securityStock
Bank OverdraftSundry creditors
Bills payableDividend payable
Tax payableOutstanding expenses
Interest payable
2.Cash ratio:
Since cash is the most liquid asset, a financial analyst may examine cash ratio and
its equivalent to current liabilities. Trade investment or marketable securities are equivalent of
cash. Therefore, they may be included in the computation of cash ratio.34
(Cash and Bank Balances + Current Investments)
Cash Ratio = ---------------------------------------------------------
Current Liabilities
3. QUICK RATIO:
The quick ratio is a very stringent measure of solvency. When compared to the
current ratio, it may reveal the extent to which the firm is dependent on selling its inventory to
meet current obligations. Whether or not this is a problem obviously depends on how liquid (i.e.
sealable) inventory is, and thus, an additional analysis is always necessary. In fact, this measure
is too stringent and narrow to allow meaningful implications about the firm's future. But, a
comparison over time may bring to light a deterioration of liquidity foretelling oncoming
insolvency, and therefore, it must never be overlooked.
Quick assets
Quick Ratio = ------------------------------------
Current liabilities
4. FIXED ASSET TURNOVER RATIO (FAT):
Measure of the productivity of a firm, it indicates the untamo of sales generated by
each dollar spent on fixed assets, and the amount of fixed assets required to generate a specific
level of revenue. Changes in this ratio over time reflect whether or not the firm is becoming more
efficient in the use of its fixed assets. Formula: Sales revenue average fixed assets.
Net sales
FAT = ------------------------------------------
Average net fixed asset
5. TOTAL ASSET TURNOVER RATIO:
The total assets turnover ratio measures the use of all assets in terms of sales, by
comparing sales with net total assets. This interactive tutorial walks you through the calculations
as well as where on the financial statements to find the numbers.
35
Net sales
TAT = --------------------------------
Average total assets
6. PROPRIETOR FUND RATIO:
A fixed asset to proprietor’s fund ratio establishes the relationship between fixed
assets and shareholders funds. The purpose of this ratio is to indicate the percentage of the
owner's funds invested in fixed assets.
Shareholder FundProprietor fund ratio = ---------------------------------
Total Tangible Assets
7. FIXED ASSET RATIO:
The sales to fixed assets ratio is often called the asset turnover ratio. A low sale to
fixed assets ratio means inefficient utilization or obsolescence of fixed assets, which may be
caused by excess capacity or interruptions in the supply of raw materials. The sales to fixed
assets ratio is included in the financial statement ratio analysis spreadsheets highlighted in the
left column, which provide formulas, definitions, calculation, charts and explanations of each
ratio. The sales to fixed assets ratio is listed in our sales ratios.
Fixed assets
Fixed assets ratio = ------------------------------------
Capital employed
8. EQUITY RATIO:
The equity ratio is a financial ratio indicating the relative proportion of equity to
all used to finance a company's assets. The two components are often taken from the firm's
36
balance sheet or statement of financial position (so-called book value), but the ratio may also be
calculated using market values for both, if the company's equities are publicly traded. The equity
ratio is especially in Central Europe a very common financial ratio while in the US the debt to
equity ratio is more often used in financial (research) reports.
Equity
Equity ratio = ------------------------------
Total assets
9. GROSS PROFIT RATIO:
Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a
percentage. It expresses the relationship between gross profit and sales. The basic components of
the calculation of gross profit ratio are gross profit and net sales. A net sale means that sale
minus sales returns. Gross profit would be the difference between net sales and cost of goods
sold. Cost of goods sold in the case of a trading concern would be equal to opening stock plus
purchases, minus closing stock plus all direct expenses relating to purchases. In the case of
manufacturing concern, it would be equal to the sum of the cost of raw materials, wages, direct
expenses and all manufacturing expenses. In other words, generally the expenses charged to
profit and loss account or operating expenses are excluded from the calculation of cost of goods
sold.
Gross profitGross Profit Ratio = --------------------- x 100
Net sales
10. NET PROFIT MARGIN:
The profit margin is mostly used for internal comparison. It is difficult to accurately
compare the net profit ratio for different entities. Individual businesses' operating and financing
arrangements vary so much that different entities are bound to have different levels of
37
expenditure, so that comparison of one with another can have little meaning. A low profit margin
indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in
a net loss.
Net profitNet Profit Ratio = --------------------- x 100
Net sales
11. RETURN ON ASSET (ROA):
An indicator of how profitable a company is relative to its total assets. ROA gives an
idea as to how efficient management is at using its assets to generate earnings. Calculated by
dividing a company's annual earnings by its total assets, ROA is displayed as a percentage.
Sometimes this is referred to as "return on investment". ROA tells you what earnings were
generated from invested capital (assets). ROA for public companies can vary substantially and
will be highly dependent on the industry. This is why when using ROA as a comparative
measure, it is best to compare it against a company's previous ROA numbers or the ROA of a
similar company.
The assets of the company are comprised of both debt and equity. Both of these
types of financing are used to fund the operations of the company. The ROA figure gives
investors an idea of how effectively the company is converting the money it has to invest into net
income. The higher the ROA number, the better, because the company is earning more money on
less investment
PAT + Interest
ROA = ------------------------------------------- x 100 Average Total Assets
12. RETURN ON SHARE HOLDERS FUND:
It is the ratio of net profit to share holder's investment. It is the relationship between
net profit (after interest and tax) and share holder's/proprietor's fund. This ratio establishes the
profitability from the share holders' point of view. The ratio is generally calculated in percentage.
38
The two basic components of this ratio are net profits and shareholder's funds. Shareholder's
funds include equity share capital, (preference share capital) and all reserves and surplus
belonging to shareholders. Net profit means net income after payment of interest and income tax
because those will be the only profits available for share holders.
Net profit after taxReturn on shareholders = ----------------------------- x 100
Shareholders13. RETURN ON CAPITAL EMPLOYED:
The return on capital employed (ROCE) ratio, expressed as a percentage, complements
the return on equity (ROE) ratio by adding a company's debt liabilities, or funded debt, to equity to
reflect a company's total "capital employed". This measure narrows the focus to gain a better
understanding of a company's ability to generate returns from its available capital base. By comparing net
income to the sum of a company's debt and equity capital, investors can get a clear picture of how the use
of leverage impacts a company's profitability. Financial analysts consider the ROCE measurement to be a
more comprehensive profitability indicator because it gauges management's ability to generate earnings
from a company's total pool of capital.
PBIT
Return on Capital Employed = ------------------------------- x 100 Capital Employed
14. EARNINGPERSHARE (EPS):
The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company’s profitability. When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end oftheperiod.
Net Profits Available to Equity Holders
EPS = --------------------------------------------------------------
Number of Ordinary Shares Outstanding
15. DIVIDENDPERSHARE (DPS): The amount of dividend that a stockholder will receive for each share of stock held. It
can be calculated by taking the total amount of dividends paid and dividing it by the total shares
39
outstanding. If a company issues a $1 million dividend and has 10 million shares, the dividend
per share is 10 cents ($1 million divided by 10 million shares).
Dividend Paid to Ordinary Shareholders
DPS = -----------------------------------------------------------
Number of Ordinary Shares Outstanding
16. DIVIDEND PAY- OUT RATIO:
The part of the earnings not paid to investors is left for investment to provide for
future earnings growth. Investors seeking high current income and limited capital growth
prefer companies with high Dividend payout ratio. However investors seeking capital growth
may prefer lower payout ratio because capital gains are taxed at a lower rate. High growth
firms in early life generally have low or zero payout ratios. As they mature, they tend to
return more of the earnings back to investors. Note that dividend payout ratio is a reciprocate
ratio to dividend cover, which is calculated as EPS/DPS.
Dividend per Share (DPS)
D/P ratio = ------------------------------------------ x 100
Earnings per Share
17. OPERATING PROFIT RATIO:
The Operating Profit Margin measures the Operating Profit in relation to the Net Sales. This
reveals the operating efficiency of the company - how well the company can convert its sales into profits from
its day-to-day activities by its core operations. The higher the Operating Profit Margin, the more efficient the
company's core business. This ratio is interesting to compute between two or more competing companies in the
same industry - to view which has the most efficient operations.
Operating profit ratio= operating profit/net sales*100
(C) IMPORTANCE:
Liquidity position:
40
It reveals the financial position of the firm. The liquidity ratios are particularly useful in
credit analysis by banks and other suppliers of short-term loans.
Long-term solvency:
Ratio analysis is equally useful for assessing the long-term financial viability of a firm.
The long-term solvency is measured by the leverage and profitability ratios. Ratio analysis
reveals the strength and weakness of a firm in this respect.
Operating Efficiency:
Ratio analysis throws light on the degree of efficiency in the management and
utilization of the assets
Inter-firm comparison:
Due to this it can be served as a stepping-stone to remedial measures.
Forecasting purposes:
These ratios are calculated for a number of years, this helps in future plans and
forecasting
Locating the weak spots:
Weakness in financial structure due to incorrect policies in post (or) present that are
revealed through accounting ratios.
Trend analysis:
The significance of trend analysis of ratios lies in the fact that the analyst can know the
direction of movement.
(D) USE AND SIGNIFICANCE OF RATIO ANALYSIS:
41
The ratio analysis is one of the powerful tools of financial analysis. IT is used as a device
to analyze and interpret the financial health of enterprise with the help of ratios only that the
financial statements can be analyzed more clearly.
a. Managerial use:
1. Helps in decision making
2. Helps in financial forecasting and planning
3. Helps in communicating
4. Helps in co-ordination
5. Helps in control
b. Utility to shareholders / investors:
c. Utility to creditors
Utility to employees tax audit requirements
LIMITATIONS OF RATIO ANALYSIS:
Ratio analysis is very important in revealing the financial position and soundness of the
business. But in spite of its advantages it is have the disadvantages like
1. False results if based on incorrect accounting data.
2. No idea of probable happening in future.
3. Variation in accounting methods.
4. Price level changes
5. Ignores qualitative measures.
INTERPRETATION OF RATIOS:
The interpretation of ratios is an important factor. Though calculation of ratios is also
important but it is only a clerical task where as interpretation needs skill, intelligence and
foresightedness.
A single ratio in itself does not convey much of the sense. To make ratios useful, they
have to be further interpreted. The interpretation of the ratios can be made in the following ways:
1) SINGLE ABSOLUTE RATIO:
42
One cannot draw any conclusion when a single ratio is considered in isolation. But single
ratios may be studied in relation to certain rules of thumb, which are based upon well-proven
conventions.
2) GROUP OF RATIOS:
Ratios may be interpreted by calculating a group of related ratios.
3) HISTORICAL COMPARISON:
One of the easiest and most popular ways of evaluating the performance of the firm is to
compare its present ratios with the past ratios called comparison in overtime.
4) PROJECTED RATIOS:
Ratios can also be calculated for future standards based upon the projected financial
statements. These future ratios may be taken as standard for comparison and the ratios calculated
on actual financial statements can be compared with the standard ratios to find out variances.
5) INTER FIRM COMPARISION:
Ratios of the firm can also be compared with the ratios of some other selected firms in
the same industry at the same point of time.
CHAPTER 4
43
DATA ANAYSIS & INTERPRETATION
LIQUIDITY RATIOS:
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year)
obligations. The ratios which indicate the liquidity of a company are Current ratio, Quick/Acid-
Test ratio, and Cash ratio. These ratios are discussed below.
1. CURRENT RATIO:
Current Assets
Current Ratio = -------------------------------
Current Liabilities
(In lakhs)
Year 2006 2007 2008 2009
Current assets 106092 130229 160682 179600
Current Liabilities 80274 88292 96110 119442
Current Ratio 1.322 1.475 1.672 1.504
2006 2007 2008 2009
00.20.40.60.8
11.21.41.61.8
current ratio
Interpretation:
As a conventional rule, a Current ratio of 2:1 or more is considered satisfactory. The
Electronocs corporation of india ltd as a Current Ratio in the financial year 2005-2006 is gone up
to 1.322 times than after it is gradually increasing in the year 2008-2009 it has 1.504 times.
Hence the Electronocs corporation of india ltd is maintain slight standard Current Ratio which is
not a good sing of prosperity.
2. CASH RATIO:
44
(Cash and Bank Balances + Current Investments)
Cash Ratio = -----------------------------------------------------------
Current Liabilities
Year 2006 2007 2008 2009
Cash and bank
balances + Current
investments
18941+165 24502+165 26794+165 23318+165
Current Liabilities 80274 88292 96110 119442
Cash Ratio 0.238 0.279 0.280 0.197
2006 2007 2008 2009
0
0.05
0.1
0.15
0.2
0.25
0.3
cash ratio
INTERPRETATION:
The Electronic corporation of india ltd cash Ratio was 0.238 times in the year of 2005-
2006. Than after it was increased to 0.279 times in the 2006-2007 year. Than after it was
increased to 0.280 times in the year 2007-2008. Than after it was decreased to 0.197 times in the
year 2008-2009. The Electronic corporation of india ltd cash Ratio have the up and downs. So
the Electronic corporation of india ltd reflecting the cash ratio but could not more effectively.
3. QUICK RATIO:
Quick assets
45
Quick Ratio = -------------------------------------------
Current liabilities
(In lakhs)
Year 2006 2007 2008 2009
Cash and bank
balance 3,279 5,507 6,429 9,039
Current Liabilities 3,832 7,137 8,496 12,228
Quick ratio 0.236 0.277 0.279 0.195
2006 2007 2008 2009
0
0.05
0.1
0.15
0.2
0.25
0.3
Quick ratio
Interpretation
The Electronic corporation of india ltd quick Ratio was 0.236 times in the year of 2005-
2006. Than after it was increased to 0.277 times in the 2006-2007 year. Than after it was
increased to 0.279 times in the year 2007-2008. Than after it was decreased to 0.195 times in the
year 2008-2009.
The Electronic corporation of India ltd cash Ratio have the up and downs. So the
Electronic corporation of India ltd reflecting the cash ratio but could not more effectively.
4. SELLING COST COMPONENT RATIO (SCC):
46
Selling Expenses
Selling Cost Component Ratio = --------------------------------- X 100
Income (Sales Net)
(In lakhs)
Year 2006 2007 2008 2009
Selling Expenses 2752 3619 3247 2188
Income 56875 86342s 80558 88789
Inventory Turnover
Ratio 4.84 4.19 4.03 4.60
2006 2007 2008 2009
00.5
11.5
22.5
33.5
44.5
5
Inventory Turnover Ratio
Interpretation
The Electronic corporation of India ltd inventory turnover Ratio was 4.84 times in the
year of 2005-2006. Than after it was decreased to 4.19 times in the 2006-2007 year. Than after it
was decreased to 4.03 times in the year 2007-2008. Than after it was decreased to 4.60 times in
the year 2008-2009.
The Electronic corporation of India ltd inventory turnover Ratio have the up and downs.
So the Electronic corporation of india ltd reflecting the inventory turnover Ratio but could not
more effectively.
5. FIXED ASSETS TURNOVER (FAT):
47
Net sales
FAT = ------------------------------------------
Average net fixed assets
(In lakhs)
Year 2006 2007 2008 2009
Net Sales 56875 86342 80558 88789
Average net fixed
assets 6943 7482 7232 9093
FAT 8.19 11.54 11.14 9.76
2006 2007 2008 2009
0
2
4
6
8
10
12
FAT
Interpretation
Reveals the particulars of FAT Ratios where for the year 2005-2006 was 8.19 later it
increased & decreased for the years 2006-2007 & 2007-2008 respectively. But later it decreased
to 9.76 for the year 2008-2009 respectively.
6. TOTAL ASSETS TURNOVER (TAT):
Net sales
48
TAT = ---------------------------------------
Average total assets
Year 2006 2007 2008 2009
Net sales 56875 86342 80558 88789
Total assets 27970 37207 63322 68498
TAT RATIO 2.03 2.32 1.27 1.30
2006 2007 2008 2009
0
0.5
1
1.5
2
2.5
TAT RATIO
Interpretation
Reveals the particulars of TAT Ratios where for the year 2005-2006 was 2.03 later it
increased for the year 2006-2007 2.32respectively. But later it decreased & increased to 1.21 &
1.30 for the years 2007-2008&2008-2009 respectively.
7. PROPRIETOR FUND RATIO:
Shareholder Fund
Proprietor fund ratio = ---------------------------------
49
Total Tangible Assets
(In lakhs)
Year 2006 2007 2008 2009
Shareholder fund 15488 15488 16337 16337
Total tangible assets 36346 46408 73694 82088
Proprietor fund
Ratio 0.43 0.33 0.22 0.20
2006 2007 2008 2009
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.40.45
Proprietor fund Ratio
Interpretation
Reveals the particulars of PFR Ratios where for the year 2005-2006 PF ratio was
0.43 later it decreased & decreased for the years 2006-2007 & 2007-2008 respectively. But later
it decreased to 0.20 for the year 2008-2009 respectively.
50
8. FIXED ASSET RATIO:
Fixed assets
Fixed asset ratio = ------------------------------------
Capital employed
(In lakhs)
Year 2006 2007 2008 2009
Fixed assets 6943 7482 7232 9093
Capital employed 36346 46408 73694 82088
Fixed Assets Ratio 0.19 0.16 0.10 0.11
2006 2007 2008 2009
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
Fixed Assets Ratio
INTERPRETATION:
Reveals the particulars of FIXED ASSET Ratios where for the year 2005-2006
FAR ratio was 0.19 later it decreased for the year 2006-2007 0.16 respectively. Later it
decreased to 0.10 but increased later to 0.11 for the year 2008-2009 respectively.
51
9. GROSS PROFIT RATIO:
Gross profit
Gross Profit Ratio = --------------------- x 100
Net sales
(In lakhs)
Year 2006 2007 2008 2009
Gross profit 6223 20702 23405 5037
Net sales 56875 86342 80558 88789
Gross profit margin 10.94 23.98 29.05 5.67
2006 2007 2008 2009
0
5
10
15
20
25
30
Gross profit margin
INTERPRETATION:
Reveals the particulars of GROSS PROFIT Ratios where for the year 2005-
2006 GP ratio was 10.94 later it increased & increased for the years 2006-2007 & 2007-
2008 respectively. But later it decreased to 5.67 for the year 2008-2009 respectively.
10. NET PROFIT MARGIN :
52
Net Profit Ratio = Net profit x 100
Net sales
(In lakhs)
Year 2006 2007 2008 20089
Net profit 20858 28771 37013 37809
Net sales 56875 86342 80558 88789
Net profit margin 36.67 33.32 45.95 42.58
2006 2007 2008 2009
0
5
10
15
20
25
30
35
40
45
50
Net profit margin
INTERPRETATION:
Reveals the particulars of NET PROFIT Ratios where for the year 2005-2006
NP ratio was 36.67 later it decreased & increased for the years 2006-2007 & 2007-2008
respectively. But later it decreased to 42.58 for the year 2008-2009 respectively.
11. OPERATING PROFIT RATIOS:
53
Operating profit
Operating profit Ratio = ---------------------------- x 100
Net sales
(In lakhs)
Year 2006 2007 2008 2009
Operating profit 49373 77104 71748 79952
Net sales 56875 86342 80558 88789
Operating profit
margin 86.81 89.30 89.06 90.05
2006 2007 2008 2009
85
86
87
88
89
90
91
Operating profit margin
INTERPRETATION:
Reveals the particulars of OPERATING PROFIT Ratios where for the year
2005-2006 OP ratio was 86.81 later it increased & decreased for the years 2006-2007 &
2007-2008 respectively. But later it increased to 90.05 for the year 2008-2009
respectively.
12. RETURN ON ASSETS (ROA):
54
PAT + Interest
ROA = ------------------------------------------- x 100
Average Total Assets
(In lakhs)
Year 2006 2007 2008 2009
PAT + Interest 4407 13121 36820 3505
Total assets 36346 46408 73694 82088
ROA 0.12 0.28 0.50 0.04
2006 2007 2008 2009
00.05
0.10.15
0.20.25
0.30.35
0.40.45
0.5
ROA
INTERPRETATION:
Reveals the particulars of ROA Ratios where for the year 2005-2006 ROA ratio
was 0.12 later it increased & increased for the years 2006-2007 & 2007-2008
respectively. But later it decreased to 0.04 for the year 2008-2009 respectively.
13. RETURN ON SHAREHOLDERS FUND:
55
Net profit after tax
Return on shareholders = ----------------------------- x 100
Shareholders funds
(In lakhs)
Year 2006 2007 2008 2009
PAT 4227 12837 13415 1348
Shareholders fund 15488 15488 16337 16337
ROS 27.29 82.88 82.11 8.25
2006 2007 2008 2009
0102030405060708090
ROS
INTERPRETATION:
Reveals the particulars of ROS Ratios where for the year 2005-2006 ROS ratio
was 27.29 later it increased & decreased for the years 2006-2007 & 2007-2008
respectively. But later it decreased to 33.13 for the year 2008-2009 respectively.
14. RETURN ON CAPITAL EMPLOYED:
56
PBIT
Return on Capital Employed = --------------------------------- x 100
Capital Employed
(In lakhs)
Year 2006 2007 2008 2009
PAT 6223 20702 23405 5037
Capital Employed 36346 46408 73694 82088
ROE 17.12 44.61 31.76 6.14
2006 2007 2008 2009
05
1015202530354045
ROE
INTERPRETATION:
Reveals the particulars of ROCE Ratios where for the year 2005-2006 ROCE
ratio was 17.12 later it increased & decreased for the years 2006-2007 & 2007-2008
respectively. But later it decreased to 6.14 for the year 2008-2009 respectively.
15. EARNINGS PER SHARE (EPS):
57
Net Profits Available to Equity Holders
EPS = ------------------------------------------------------
Number of Ordinary Shares Outstanding
(In lakhs)
Year 2006 2007 2008 2009
EPS Ratio 284 829 821 83
2006 2007 2008 2009
0100200300400500600700800900
EPS Ratio
INTERPRETATION:
Reveals the particulars of EPS where for the year 2005-2006 EPS was 284 later
it increased & decreased for the years 2006-2007 & 2007-2008 respectively. But later it
decreased to 83 for the year 2008-2009 respectively.
FINDINGS
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Here an attempt is made to draw findings based on the study of Electronics
corporation of india ltd.
The study related the following:
Hence the Electronics corporation of india ltd is maintain slight standard Current Ratio
which is not a good sing of prosperity
The Electronics corporation of india ltd have maintain slight standard Liquidity Ratio
The Electronics corporation of india ltd Returns On Capital Employed Ratio was
not satisfactory.
The Electronics corporation of india ltd Gross Profit Ratio was satisfactory.
The Electronics corporation of india ltd Net Profit Ratios was satisfactory.
The Electronics corporation of india ltd EPS was satisfactory and it was more efficient.
The Electronics corporation of india ltd Return on Shareholder funds was not
satisfactory.
Over all Electronics corporation of india ltd Financial performance was positive.
SUGGESTIONS
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In the light of above conclusion it is proposed to suggest the following for improving
the performance of the Electronics corporation of india ltd.
Current Assets Management needs to be more efficient on receivables
management and inventory management more attention.
In the light of Current Assets made, it is suggested that the company should raise
its investment in Current Assets. So that it achieves 2:1 current ratio.
Regarding the Receivable management the company suggested maintaining
collection policies as a percentage of receivable is in increasing trend.
It is desirable that the companies’ percentage of inventory holding to decreasing
trend providing the company is able to meet the market demand keeping in view
of the fluctuations in demand and availability of raw materials the companies
suggested to improve their efficiency in holding the investors.
The firm must be increase the shareholders funds.
Presently the firm used only Equity Share Capital they must be through the
Preference share capital and Debentures also.
h) The firm go to public issue.
BIBLIOGRAPHY
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Books:
1. Financial Management - I.M. Pandey
2. Theory & Problem’s of Financial
Management - Khan. M.Y. & Jain. P.K.
3. Financial Management - Prasanna Chandra
4. Management Accounting - R.K. Sharma &
Shashi K. Gupta
FROM WEB:
1. www.ecil.co.in/
ANNEXURE:
In annexure the four years financial statement (profit & loss a/c and
balance sheet) are shown. These financial statements are taken from annual
reports of ECIL.
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