finanical comparison project

8/9/2019 Finanical Comparison Project

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A

SUMMER TRAINING REPORT

ON

FINANCIAL COMPERSION BETWEEN MAGNETI MARELLI UMFINANCIAL COMPERSION BETWEEN MAGNETI MARELLI UM

ELECTRONIC SYSTEM PVT. LTDELECTRONIC SYSTEM PVT. LTD WITH PRICOL LTD.

SUBMITTED IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT

OF AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION (MBA)

TO

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

SUBMITTED BY:SUBMITTED BY:

JATIN JUNEJAJATIN JUNEJA

ROLL. NO. : 16 / MBA / 2009ROLL. NO. : 16 / MBA / 2009

VAISH COLLAGE OF ENGINEERING

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TABLE OF CONTENTS

Particulars Page

Significance Of Study

06

Conceptualization

07

Process Of Financial Comparison

08

Focus Of S

10

Objective Of Study

11

Research Methodology

12

Limitation Of St

13

Fiat Group Introduct

15

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Company Profile

20

Theoretical Background

29

Analysis & Data Presentation

32

S.W.O.T analysis

71

Recommendation

74

Limitations

75

Bibliography

76

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Declaration

I, Jatin Juneja, Roll no. 16 / MBA / 2009, MBA 3

rd

semester of the Vaish CollageOf Engineering, Rohtak hereby declare that the project entitled, FINACIAL

COMPERSION BETWEEN MAGNETI MARELLI UM ELECTRONIC

SYSTEM PVT. LTD.WITH PRICOL LTD. is an original work and same has not

been submitted to any other institute for the award of any other degree.

Project Incharge Signature

of the candidate

(Faculty)

Director of the institute

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ACKNOWLEDGEMENT

A project report is never a sole product of one person, whose name appears on the

cover. I consider it a privilege to acknowledge the contribution of all helpinghands for their cooperation and guidance that enabled me to dedicate time and

effort in framing my analysis in conceivable system.

First and foremost, I would like to express my sincere gratitude to, Prof. (Dr.) K.

K Garg, principal, Vaish Collage of Engineering without whose support and

encouragement. I would not have achieved what I have accomplished today. His

consistent support and cooperation showed the way towards the successful

completion of the project. I extend my deepest thanks to my mentor and guide,

MR. TARUN JAIN, Vaish Collage Of Engineering, Rohtak for giving me the

opportunity to understand the project and for providing me the necessary

information whenever required.

I would like to take the opportunity to thanks and acknowledge my deep sense of

gratitude to Mr. Kulvir Singh (Dy. Manager HR& Admin.) Who has given

me chance to enter at Magneti Marelli umelectronic system pvt. Ltd. Lastly, I

express my thanks to the CFO Mr. Arun Aggarwal, Dy. Finance manager

Mr. Umesh Gupta, Mr. Rakesh Bhatt, Miss Yogita Virmani & Mr. Ankush

Verma at Magneti Marelli umelectronic system pvt Ltd. for their guidance and

pain taking supervision during course of my present work. Their valuable advice,

constructive criticism and suggestion during course of my study really helped me a

lot. I also thank them for providing full facilities required in submitting our report

within a limited time span.

PREFACEPage | 5


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Practical training provides a golden opportunity to implement studied rules and

regulation. In the absence of Practical knowledge, theoretical knowledge is

incomplete. This indented for the experience gained by trainee during SummerTraining in Magneti Marelli um electronic system pvt ltd. (IMT Manesar).

While making this project report, trainee became Familiar with the financial terms

that are usually used in a company and the different functions that a Finance

Manager has to perform. Trainee has learnt how to compare company through

various tools and techniques like Ratio analysis, Comparative and Common size

statements etc. and hence how to take form judgment about the operating

performance and financial position of a business.

The other areas on which trainee have gained confidence during his training period

are TDS , working of export department, Fixed assets register and updating of

daily transactions. Trainee has also gained confidence to interact with different

persons working at reputed posts in the organization. During the summer training,

in preparing the project report, Trainee has tried his level best effort to make it

reliable, compact and accurate.

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SIGNIFICANCE OF STUDY

Financial comparison is an important technique for the analyze the performance of

company. With the help of financial comparison we can estimate the progress of a business, short term and long-term financial position and also know about

competitor strong and week points of that company. On the basis of these the

management can take the important decisions. The financial terms given in the

financial statements can be calculated by the financial analysis. With the help of

financial comparison, we can represent the difficult figures in briefs and can

understand easily. It is not important only for management, but also for others like

creditors, investors, financial institutions, by financial analysis they can estimate

the profits and the financial position of a business. We take the comparisons of the

financial analysis with the standards so that the deviations can be minimum.

This study is useful for the company as it helps in them in evaluating their position

with respect to other organizations. With this study, they can be aware about their

solvency position, profitability position as well as their operating efficiency. This

study also helps in determining future plan to be successful in this competitive

environment. Since individual companies are most often compared with industry

data, study helps an individual to understand a companys performance related to

the competitor.

The study is also useful for the readers; it helps them in understanding the position

of the company like as creditors are interested in knowing about the liquidity

position of the company, shareholders are interested in profitability of the

company. This study provides them useful information. This study also helps the

future researcher for their research in any organization.

CONCEPTUALIZATION

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Finance is defined as the provision of money at the time when it is required.

Finance holds the key to all the business activities and a firms success and, in

fact, its survival is dependent upon how efficiently it is able to require and utilizethe funds.

Intercompany comparison it is technique of evaluating the performance,

efficiency, cost & profits of company in industry. It consists of voluntary

exchange of information / data concerning costs, profits, prices, productivity and

overall efficiency among company in similar type of operation for the purpose of

bringing improvement in efficiency & indicating the weakness. Such a comparison

will be possible where uniform costing is in operation.

An inter company comparison indicates the efficiency of production & selling,

adequacy of profits, weak spots in the organization etc. and thus demands from the

company management an immediate suitable action. Inter- company comparison

may enable the management to challenge the standards which it has for itself & to

improve upon them in the light of the current information gathered from more

efficient units.

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PROCESS OF FINACIAL COMPARSION

1). Center for inter comparison: For the collection & analyzing data received from

members units, for doing a comparative study and for dissemination of the resultsof study a central body is necessary. The function of such a body may be:-

Collection of data and information from its members.

Dissemination of results to its members.

Undertaking research and development foe common and individual benefits

of its members.

Organizing training programs and publishing magazines.

2). Membership: Another requirement for the success of the success of inter-

company comparison is that the company of different size should become

members of the center entrusted with the task of carrying out inter company

comparison.

3). Nature of information to be collected: Although there is no limit to

information, yet the following information useful to the management is in general

collected by center for inter company comparison.

Information regarding costs and cost structure.

Raw material consumption

Stock of raw material, wastage of materials etc.

Labour efficiency and labour utilization

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Machine utilization and machine efficiency

Capital employed and return on capital.

Liquidity of the organization.

Reserve and appropriate of profits

Creditors and debtors

Methods of production and technical aspects.

4). Methods of collection and presentation of information: The centre collects

information at fixed interval in a prescribed from its members. Sometimes a

questionnaire is sent to each member; the replies of the questionnaires received by

the center constitute the information / data. The information supplied by firms is

generally in the form of ratios and not in absolute figures. The information

collected as above is stored and presented to its members in the form of a report.

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FOCUS OF THE STUDY

The study is entitled FINACIAL COMPERSION BETWEEN MAGNETIMARELLI UM ELECTRONIC SYSTEM PVT. LTD.WITH PRICOL LTD.

focused on evaluating company performance through various financial analysis

tools from different point of view by looking into various aspects so that we can

draw conclusions regarding the financial health of MAGNETI MARELLI UM

ELECTRONIC SYSTEM PVT.LTD.

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OBJECTIVES OF THE STUDY

There is always an objective of every study and there is no exception. The study ofmy project is also based on some objectives. The objectives are given as under:

i. To understand the concept of financial comparison.

ii. To know present position of the company progress made during the past &

future of the company.

iii. To find out cost of production to goods as compare to pricol ltd.

iv. To know the profitability & operating efficiency of company as compare to

pricol.

v. To know the strengths or weakness of the company.

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RESEARCH METHODOLOGY

Nature of Research:-The research is of descriptive in nature, where the researcher

has analyzed problem with help of financial information available with the

company.

Data collection and Data source :-

Due to the nature of study, study is primarily

based on the secondary data. The secondary data is collected through annexure,

schedules, other pertinent details from various sources in the company and

references books. Annual reports and records of the company have been used for

the purpose of study.

Analysis Pattern:-

In order to analyze the problem and to arrive on a fair view

the researcher has used various tools like for liquidity position liquidity ratio is

used, for operating efficiency profitability ratio is used, for inter firm comparison

comparative size statements & common size statement is used and with the help of

trend analysis trend of profit and sales is being calculated.

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LIMITATIONS OF STUDY

Although maximum efforts have been put to make the research project

comprehensive and free from any biases, still the scope of project is limited due tosome unavoidable reasons some of these reasons are given as under:-

Limited Time: There was limited time in which this project has to be completed.

Therefore it was a major limitation of the study.

Sample Size: The sample size was limited only to last years balance sheet and

forecast result of current year because company is new in market. So it was also a

drawback of my report.

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COPMANY PROFILE

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FIAT GROUP: Introduction

Active for over a century, the Group has transformed its vocation for Automobiles into a

strong commitment to all forms of mobility for people and goods from cars to trucks,

agricultural tractors, marine engines, Aeronautical engines and space launchers. In recent

years the Group has undergone a profound cultural change which permeates every aspect

of the organisation. And today, Fiat is not only. The largest industrial business in around

the world and a major international group, it is an enterprise which has taken its future

back into its own hands. This courage and desire to change have been rewarded and, in

2008, The Group achieved remarkable results, some beyond expectations. The numerous

awards and recognition received are acknowledgement of those results. With revenues in

excess of 59 billion in 2008, the Fiat Group was one of the most vibrant and dynamic

industrial groups internationally. Group results were, in fact, in line with stated targets.

The level of success achieved in just a few years was the product of an extremely

ambitious plan of industrial restructuring and cost containment. In 2005, the Group

turned the corner and returned to profit. The improvement continued in 2006 when, after

a hiatus of 5 years, Fiat was once again able to distribute a dividend to shareholders. In

2008, despite weak global trading conditions, the Group recorded its highest ever trading

profit, with an increase of 129 million or 4% over the previous year. In addition, the

Groups trading margin improved to 5.7% and a net profit of 1.7 billion was achieved.

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PROGRESS

With revenues in excess of 59 billion in 2008, the Fiat Group was one of the Most

vibrant and dynamic industrial groups internationally. Group results were, In fact, in line

with stated targets. The level of success achieved in just a few years Was the product of

an extremely ambitious plan of industrial restructuring and Cost containment. In 2005,

the Group turned the corner and returned to profit. The improvement continued in 2006

when, after a hiatus of 5 years, Fiat was once Again able to distribute a dividend to

shareholders. In 2008, despite weak global trading. Conditions, the Group recorded its

highest ever trading profit, with an increase of 129 million or 4% over the previous year.

In addition, the Groups trading margin Improved to5.7% and a net profit of 1.7 billion

were

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Division of Fiat group

Fiats activities are focused in the automotive sector: it designs, produces and sells cars,

trucks, tractors, combine harvesters, excavators, engines, components and productionsystems. This choice of strategic focus has enabled the Group to target its energy and

investment, constantly developing new solutions and models which are appreciated by

customers the world over.

To ensure the best and most rapid response to changes in demand in international

markets, the Groups operating activities are organised into 7 different Sectors through

which Fiat is present worldwide.

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Social Responsibility

Focus on, respect for and protection of the individual. In addition to providing a work

environment which offers everyone the same opportunities to grow and develop,

improving their professional abilities and know-how. These are key themes of Fiat

Group, which believes the professional contribution of every employee to be fundamental

to achieving results.

The Fiat Group is conscious of the important role it plays in the economic development

and wellbeing of communities where its activities are located. The Group has always

supported local communities both directly and in partnership with local institutions and

non-profit organisations. The Group is involved in numerous initiatives including: social

projects in local communities, collaboration in international programmes, youth training,

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sponsorship of art, culture and education, support for scientific research and events to

raise awareness of environmental and safety issues

Environmental Responsibility

Satisfying the growing demand for mobility while reducing the impact a vehicle can

have on the community and the environment throughout its entire life cycle is a strategic

necessity. Each and every day, the men and women at Fiat Group work toward this

objective with the conviction that it is both necessary and possible to reconcile the

ambition for growth with respect for the environment. The Group has always dedicated

significant resources toward translating this commitment into concrete solutions. In fact,

in the 1980s we had already constructed our first electric and natural gas vehicles.

The following decade, Fiat led a revolution in diesel engine technology, patenting the

Unijet electronic injection system, forerunner of the Common Rail design, cutting

average fuel consumption by a full 15% and rapidly becoming the new standard for many

automakers. Since then, the Group has continued to invest in the search for solutions to

increase product recyclability and reduce polluting and noise emissions and traffic

congestion.

The latest milestone is the Multiair, an innovative valve management system to control

airflow and combustion, enabling a notable reduction in consumption and improvements

in performance. There is no one-size-fits-all solution: making mobility sustainable will

call for a combination of conventional and alternative technologies to accommodate the

differing economic conditions, geographies and kinds of fuel available in any given area.

With this in mind, the Fiat Group is working to improve the ecological performance of

conventional power plants, develop alternative propulsion systems, design systems to cut

emissions, find new recycling methods that will reduce environmental impact at the end

of the product life cycle, and make vehicle architectures safer.

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ABOUT MAGNETI MARELLI

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Introduction

Magneti Marelli is an international company that designs and produces all the

components and systems which form the nerve centre of a vehicle. Its products include:

lighting, electronic systems, engine control units, exhaust systems, suspensions and shock

absorbers, plastic components, motorsports and supply of spare parts to independent

distributors.

During 2008, the company released dozens of new products including components for the

Lancia Delta, Alfa MiTo, Abarth 500 and Maserati Gran-Turismo.The company

committed to the design and production of hi-tech systems and components for the

automotive sector, based in Italy (Corbetta, Milan).With a turnover of 5.4 billion in

2008, about 33.000 employees, 67 production sites (80 production units), 10 R&D

Centres and 28 Application Centres, the Group has a presence in 16 countries (Italy,

France, Germany, Spain, Poland, Czech Republic, Russia, Slovakia, Turkey, the United

States, Mexico, Brazil, Argentina, China, Japan, India, Malaysia and South

Africa).Magneti Marelli supplies all the leading car makers in Europe, North and South

America, and Asia.

The Origin-:

The Fabbrica Italiana Magneti Marelli (Fimm) was founded on 8 October 1919 with a

share capital of seven million of the former Italian Liras, underwritten in equal parts by

Fiat Torino Ercole Marelli & Co. The company was founded to satisfy the demand for

start magnets for engines, requested by the vehicles market and by the aviation sector.

The first factory was located in Sesto San Giovanni. In 1922, the production of electricalequipment was started, followed by sparkplugs and batteries and windshield wipers

(1929). In 1930, the company started the mass production of radios with the trademark

Radio Marelli. During this period, Enrico Fermi covered the position of Managing

Director of the Magneti Marelli science and research laboratories. In 1931, Fimm began

to produce batteries for submarines and for electric-drive vehicles as well as lighting

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systems for trains. In 1935, a joint venture was signed by Fimm and Bosch, thus creating

a new company called Mabo, which specialized in the sale of electrical equipment for

automobiles and motorcycles. In 1941, Fimm became a supplier to the Italian

Aeronautical Industry. Some of the companys factories were bombed during World War

II: the company started to rebuild and recover in 1946, and the following year Fimm was

listed in the stock markets of Milan, Genoa, Turin, Rome and Naples. In 1955, the

company started the mass production of television components. During this twenty-year

period, the company expanded to Spain, Brazil and Argentina. In the early 1960s, the

company experienced a difficult moment as it was hit by the economic crisis, and for the

first time since 1945 proceeds were on the downswing. In 1967, Fiat purchased the

Magneti Marelli share owned by Ercole Marelli. In 1969, Magneti Marellis electronic

systems started to be installed on racing cars.i n 1972, the company abandoned the

Production of radios and televisions, although the sales activity continued. In this decade,

corporate restructuring was especially important, along with the growing relevance taken

on by Research and Development. In 1982 the company declared a state of crisis, and a

rationalization plan was implemented. In 1984 the headquarters moved from Sesto San

Giovanni to Cinisello Balsamo. In 1986 the company became an international holding,

responsible for important European Companies specialized in the production of

components with prestigious brands. In 1989 the Excellence Centre for electronic

systems was created in Italy and in 1990 the corporate structure was reorganized into

divisions, based on product line . In this decade an M&A policy was applied, also

through joint venture agreements: in 1993 in Brazil with American Walbro and in 1999 in

Germany with Bosch in the lighting systems sector. At the end of the decade Magneti

Marelli strengthened its core business, disinvesting in areas considered non-strategic. To

this purpose, it launched a restructuring plan according to which, in 2001, it acquired

control of Automotive Lighting, it sold the air-conditioning systems to the Japanese

group Denso and sold off other activities. In October of 2002, the FIAT group decided to

group all the units that were initially independent under Magneti Marelli Holding. So,

Magneti Marelli started a new phase, with the medium/long-term goal to strengthen its

own competitive position and economic-financial solidity. Starting in 2005, the current

management rebuilt the original perimeter, reintegrating activities tied to electronics and

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spareparts. Today, Magneti Marelli confirms its mission of excellent automotive

components and focuses its efforts especially on intelligent systems for the active and

passive safety of the vehicle, making the most of its great expertise in electronic systems.

Today Magneti Marelli is structured along the following business lines: Lighting,

Electronic Systems, Powertrain, Suspension Systems, Exhaust Systems, After Market

Parts & Services and Motorsport. Magneti Marelli currently deals with intelligent

systems for active and passive safety of vehicles. As part of its mission to supply parts to

the automotive industry worldwide, Magneti Marelli is providing its know-how and

wide-ranging expertise in electronics, through a process of ongoing innovation, in order

to develop intelligent systems for active and passive vehicle safety, onboard comfort and

powertrain technologies.

Buisness areas

Automotive Lighting (front and back lighting systems) -:

Automotive Lighting focuses on research and development, on the production and sale

of the entire range of technologies for front and rear lighting. Automotive Lighting is

the Magneti Marelli Division with headquarters in Reutlingen that focuses on

development, production and sales of automotive exterior lighting products for all

major OEMs worldwide. The significant numbers for 2007 are as follows: total

turnover of 1.6 ML/, 11.700 employees in 15 countries spanning 3 continents, 20.8

Mio headlamps production volume and 20.07 Mio rearlamps production volume.

Automotive Lighting has 16 production facilities, 2 research centres and 13

application centres. Magneti Marelli Electronic Systems is the Magneti Marelli

division with headquarters in Corbetta (Milan) that deals with automotive electronics.

The significant numbers for 2008 for this business line are as follows: total turnover of

570 ML/, an R&D expenditure equal to 14.8% of the turnover on investments equal

to 8.5%. It has 6 production facilities, 3 research centres and 5 application centres in

Italy, France, Germany, Spain, Brazil, Mexico and China

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Powertrain -:

Magneti Marelli Powertrain is Magneti Marelli business line dedicated to engines and

transmissions components production for cars, motorbikes and light vehicles.933 million of revenues, 2 R&D centres, 4 applicative centres and 11

manufacturing sites, located in 4 continents: these are the significant data about

2008 for this business unit.

Suspensio Systems-:

Magneti Marelli Suspension Systems, that designs and produces suspension modules

and components for motor vehicles, has recently originated three new and different

business line: Suspension Systems, Cofap - Shock Absorbers and Synaptic Damping

Control (electronic-control shock absorbers). Magneti Marelli Suspension Systems is

the Magneti Marelli business unit that designs and manufactures suspension modules

and components for motor vehicles.

The significant numbers for 2008 pertaining to this business line are as follows: total

turnover of 1.210 ML/, an R&D expenditure equal to 1.5% of the turnover and

investments equal to 4.8%.It has 13 production facilities and 2 research centres in

Brazil, India, Italy, Poland, Spain and the U.S.A.In October 2007 it was split into

three business lines: Suspensions, Cofap Shock absorbers and Dynamic Systems.

Exhaust Systems -:

Magneti Marelli Exhaust Systems develops and produces exhausts systems for

automobiles and motor vehicles in general featuring advanced technologies in terms of

performances and quality. Magneti Marelli Exhaust Systems is the Magneti Marelli

business line which develops and produces exhaust systems for cars and engine-

powered vehicles, using advanced technologies in terms of performances and quality.

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The business unit significant numbers for 2008 are as follows: 635 ML/ of actual

turnover, an R&D expense equal to 1.0% of turnover on investments equal to 3.0%. It

consists in 7 production plants and 4 research and development centres in Argentina,

Brazil, China, Italy, Poland, Spain and South Africa.

After Market Parts & Services-:

After Market Parts & Services positions itself on the global aftermarket as a spare parts

distributor in the IAM (Independent After Market) segment of the motor vehicles market

(automobiles and commercial vehicles). Magneti Marelli After Market Parts and Services

is positioned in the global aftermarket as a spare parts distributor in the IAM

(Independent After Market) segment of the motor vehicle market (cars and

commercial vehicles). A turnover of 242 ML/, 478 people employed in 8 countries

spanning 2 continents: these are the meaningful numbers for 2008 for this business

unit. It is present in Argentina, Brazil, France, Germany, Greece, Italy, Poland and

Spain with 8 sales organizations

Motorsport -:

Motorsport Department is engaged in the design, production, sale and technical

support of a complete range of components and hardware and software products

dedicated to racing applications and motor competitions. Magneti Marelli's Motorsport

Department is involved with the design, manufacture and technical sales support for a

complete range of parts, hardware and software products for racing applications andmotor racing championships. The business line is based in Corbetta (MI), with plants

at Venaria (TO) and Bologna, and application centres in France, the UK, USA, Brazil

and Japan. This highly qualified department which comprises a team of over 100

specialized engineers and technicians enables Magneti Marelli to partner the top teams

in Formula 1, WRC, MotoGP, Superbike, GP2, FIA GT and other championships.

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World Presences

Magneti Marelli is currently present in 5 Continents and 18 Countries

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PRODUCT OF COMPANY

YAMANA CLUSTER

NAVIGATION SYSTEM

BODY CONTROL

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FIAT CLUSTER

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AUDIA4

THEORTICAL BACKGROUND

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INTRODUCATION TO FINANCE

FINANCE: -Finance is considered to be the life blood of any business. Finance isrelated to each activity of the business production, marketing, advertising etc. No activity

can take place without in coordination with finance. When we talk of finance generally it

is considered that we are talking of money, but it is not so.

Finance is study of nature and uses of the means of payment.

I. Money

II. Business Finance

III. Investment

i) Money:- Three aspects of the study of money are especially important. They are:

a) The connection between the total supply of money and price levels and Business

activity.

b) The structure and behavior of the financial system, which is based on

money.

c) The role of the financial system, as a barometer of business conditions.

ii) Business Finance: - The head of a firm or its financial manager must know three things-

a) Anticipate a firms need for money.

b) Assure the availability of needed funds.

c) Allocate funds for most profitable use.

iii) Investment:- Investment means the commitment of money to any kind of earning assets.

The three main problems in investment are:-

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a) Selection (What to buy?)

b) Timing (When to buy it?)

c) What combination to buy?

The solution of three problems, which are stated above, lies in knowledge of valuation i.e. what

future income an investment will produce. Basic Principles in finance.

I. Financial Managers Dilemma: - It means in any financial decision,

profitability is generally opposed to liquidity.

II. Suitability:- It means the preservation of time balance assets and liabilities. The

principle means that the assets in which money is invested should not have a longer

maturity than the liabilities through which the money is raised.

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Analysis & Data Presentation

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TECHNIQUES OR TOOLS FOR FINANICL COMPARSION

A number of methods can be used for the purpose of analysis of financial statements. An

enterprise can choose those techniques which are suitable to its requirements. The

principal techniques of financial comparison are:

RATIO ANALYSIS.

COMMAN SIZE STATEMENTS.

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RATIO ANALYSIS

Ratio analysis is a widely-used tool of financial analysis. It can be used to compare the

risk and return relationships of firms of different sizes. It is defined as systematic use of

ratio to interpret the financial statements so that the strengths and weakness of a

company as well as its historical performance and current financial condition can be

determined. Ratio analysis reveals the relationship in a meaningful manner so as to

enable us to draw conclusion from them. It makes related information comparable. The

term ratio refers to the numerical or quantitative relationship between two

items/variables. Ratio is simply one number expressed in terms of another. The

relationship can be expressed as:-

(1) Percentage:- for example net profits are 25% of sales.

(2) Fraction:- for example, net profits are 1/4th of the sales.

(3) Proportion of numbers:- for example, relationship between profits and sales

are 1 : 4.

TYPES OF RATIO:-

1. LIQUIDITY RATIO.

2. PROFITABILITY RATIO.

3. TURNOVER RATIO.

4. LEAVERAGE RATIO.

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OBJECTIVES AND IMPORTANCE

Ratio analysis has certain objective behind their use and some of important objectives

are mentioned below:-

(1) Helpful in analyzing financial statements.

(2) Simplification of accounting data.

(3) Helpful in comparative study.

(4) Helpful in location the weak spots of the business.

(5) Helpful in forecasting.

(6) Fixation of ideal standards.

(7) Helpful in effective control.

(8) Helpful in estimation of trends of business.

(9) Helpful in inter-firm comparison.

(10) Benefits to another parties interested in the business

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LIMITATIONS

Ratio analysis has certain limitations which usually occur with the use of ratios and

some of general limitations are as under:-

(1) Difficulty in comparison.

(2) Impact of inflation.

(3) Conceptual diversity.

(4) False accounting data gives false results.

(5) Limited use of single ratio.

(6) Window dressing.

(7) Lack of proper standards.

(8) Effect of personal ability and bias of the analyst.

(9) Different meaning.

(10) Lack of qualitative analysis

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LIQUIDITY RATIO

Liquidity ratio measures the ability of the firm to meet its current obligations. Lack of

liquidity or excess liquidity, both conditions is harmful for the health of company. If

the company is having excess liquidity then in that case some funds remain idle, on

the other hand if the company is suffering from lack of liquidity then in case it might

be possible that it will not be able to meet its obligations at time. It is necessary for a

company to strike a proper balance of liquidity.

To find out the liquidity position of the company we generally use current ratio or

Quick ratio, these are the most common ratios that indicate the extent of liquidity or

lack of it. There are some other rations too i.e.

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CURRENT RATIO

The current ratio represents the margin of safety for creditors. The higher the current

ratio, the greater the margin of safety.

CURRENT ASSETS*

CURRENT RATIO =

CURRENT LIABILITIES

Current Assets includes:

Cash

Marketable securities

Inventories

Loans & Advances

Sundry Debtors

Current Liabilities Includes:

Creditors

Bills payable

Accrued expenses

Income Tax liability As a conventional rule, a current ratio of 2:1 ormore is considered satisfactory. However is should be blindly followed

because the current ratio is a test of quantity, not quality.

CURRENT RATIO

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MAGNETI MARELLI UM ELECTRONIC SYSTEMS PVT LTD.

Current assets for the year of 2009

Current Assets: 89,771,267

Current Liabilities: 107,868,168

Ratio: Current Assets / Current Liabilities

Ratio: 89,771,267 / 107,868,168 = 0.83:1


Current Assets: 1,665,590,881

Current Liabilities: 1,008,169,385


Ratio: 1,665,590,881 / 1,008,169,385 = -1.65: 1

CURRENT RATIO

PRICOL LTD


Current Assets: 4095.737 Million

Current Liabilities: 1744.608 Million


Ratio: 4095.737/ 1744.608 = 2.3:1


Current Assets: 3664.089 Million

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Ratio: 3664.089/ 1729.142 = 2.11: 1

Graphical Representation:-

Particular 2009 2010

MMUM 0.83 -1.65

PRICOL 2.3 2.11

Table: 1

Current Ratio

Figure: - 1

Interpretation:- So by conclusion we can In 2009 MMUM Current ratio is .083

but in 2010 ratio is -1.65 but PRICOL ratio is better then MMUM

QUICK RATIO

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The ratio establishes a relationship between quick or liquid asset and current liabilities.

Quick ratio is regarded as a good indicator of liquidity then current ratio.

Inventories normally require some time for realizing into case. So inventories consider

being less liquid. So it is subtracted from current assets.

CURRENT ASSETS - INVENTORY

QUICK RATIO =

CURRENT LIABILITIES

Generally, quick ratio of 1:1 is considered satisfactory but again it is not necessary that

1:1 or more always imply sound liquidity position

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QUICK RATIO


Quick Assets for the year of 2009

Quick Assets: 38,625,027

Current Liabilities: 107,868,168

Ratio: Quick Assets / Current Liabilities

Ratio: 38,625,027 / 107,868,168 = 0.36:1


Quick Assets: 957,839,676

Current Liabilities: 1,008,169,385


Ratio: 957,839,676 / 1,008,169,385 = -.095

QUICK RATIO

PRICOL LTD.


Quick Assets: 2358.52 Million



Ratio: 2358.528/ 1744.608 = 1.35:1


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Quick Assets: 2288.437

Current Liabilities: 1729.142


Ratio: 2288.437/ 1729.142 = 1.32: 1

Graphical Representation


MMUM 036 (0.95)

PRICOL 1.35 1.32

Table: 2

QUICK RATIO

Figure:-2Interpretation: - In 2009 MMUM quick ratio is 036 but in 2010 ratio is -0.95 because

company yet starts production as compare to PRICOL.

PROFITABILITY RATIO

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Profitability is the measure of efficiency and control of a company. It suggest the how

business is managed, profitability is the base of liquidity and solvency position of a

company. Creditors, banks and financial institutions can know the capability of paying

interest with the help of profitability ratio. Profitability ratio can be calculated as

bellow:

Profitability ratio related to sales.

1. Gross profit ratio.

2. Net profit ratio

GROSS PROFIT

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Gross profit reflects the efficiency of the management with which it produces each unit

of product.

GROSS PROFIT

GROSS PROFIT = *100

NET SALES

GROSS PROFIT RATIO


Gross Profit Ratio for the Year of 2009

GROSS LOSS FOR THE YEAR OF 2009 = (9,129,730)

SALE FOR THE YEAR OF 2009 = 266,461

Ratio: GROSS PROFIT OR LOSS / NET SALES *100

Ratio: (1,129,730) / 266,461 = (26%)


GROSS PROFIT / LOSS FOR THE YEAR OF 2010 = 88, 72,547

SALE FOR THE YEAR OF 2010 = 2, 71, 87,830


Ratio: 88, 72,547 / 2, 71, 87,830 = 33%

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GROSS PROFIT RATIO

PRICOL LTD.


GROSS LOSS FOR THE YEAR OF 2009 = 335.34 Million

SALE FOR THE YEAR OF 2009 = 6,140.76 Million


Ratio: 335.34 / 6,140.76 *100 = 5%


GROSS PROFIT / LOSS FOR THE YEAR OF 2010 = 909.50 Million

SALE FOR THE YEAR OF 2010 = 7,423.92 Million


Ratio: 909.50 / 7,423.92 * 100 = 12%

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MMUM - 31% 33%

PRICOL 5% 12%

Table:3

Gross Profit Ratio

Figure: 3

Interpretation: - In 2008 MMUM in 2009 is 036 but in 2010 ratio is -0.95 because

company yet starts production as compare to PRICOL.

NET PROFIT MARGIN

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Net profit is obtained when operating expenses, interest and taxes are subtracted from

the gross profit. Net profit margin indicates the companys efficiency in manufacturing,

administrating and selling the product.

This ratio is the overall measures of the firm ability to turn each rupee sales into netprofit. It also indicates the firms capacity to withstand adverse economic conditions.

This can be calculates as:

Profit After Tax

NET PROFIT MARGIN = *100

NET SALES

Net Profit Ratio


Net Profit or Loss for the year of 2009

Net loss for the year of 2009 = (10,770,223)

Net Sales = 2, 48,038

Ratio: - Net profit or Loss / Net Sales *100

Ratio: - (10,770,223) / 2, 48,038 *100 = - 30%


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Net loss for the year of 2009 = (45,051,937)

Net Sales = 310,479,172


Ratio: - (45,051,937) / 310,479,172 *100 = - 15%

Net Profit Ratio

PRICOL LTD.


Net loss for the year of 2009 = -300.24 Million

Net Sales = 6140.73 Million


Ratio: - -300.24/ 6140.73 *100 = - 5%


Net loss for the year of 2010 = 254.80 Million

Net Sales = 7423.92 Million

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Ratio: - -254.80/ 7432.92 *100 = - 3%



MMUM - 31% -15%

PRICOL -5% 3%

Table: 4

NET PROFIT RATIO

Figure :4

Interpretation: - In 2009 MMUM loss is 30% but in 2010 loss will reduce up to 50%

because company yet sales will increase.

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TURNOVER RATIO

A business efficiency depends on, how effective and efficiently their assets managed.

Turnover ratio is the measure of effective management of various assets, effective

management of Assets depends on how quickly they converted into sales. This is also

known as Activity ratio or Performance ratio. Activity ratios are measured to evaluate

the efficiency of the management, in utilizing its assets. These ratios can be calculated

by establishing relationship between sales and assets.

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This ratio indicates the efficiency of the firm in selling its product. It is calculated by

dividing the cost of goods sold by the average inventory.

COST OF GOODS SOLD

INV. TURNOVRE =

AVERAGE INVENTORY

The average inventory is the average of opening and closing ba8lance of inventory. In a

manufacturing company inventory of finished goods is used to calculate the inventory

turnover.

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INVENTORY TURNOVER RATIO


For the year of 2009:

Cost of goods sold = 8,163,729

Average Inventory = 25,573,120

Ratio: Cost of goods sold / average inventory

Ratio: 8,163,729 / 25,573,120 = .32 times


Cost of goods sold = 262,665,005.66

Average Inventory = 378,728,926


Ratio: 262,665,005 / 378,728,926 = .70 times

PRICOL LTD,

For the year of 2009

Cost of goods sold = 4074.384 Million

Average Inventory = 1556.431 Million


Ratio: 4074.384 / 1556.431 =2.6 times


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Average Inventory = 1312.937Million


Ratio: 4836.017 / 1312.937 = 3.6 times



MMUM 0.32 times 0.70 times

PRICOL 2.6 times 3.6 times

Table: 5

Inventory Turnover Ratio

Figure: 5

Interpretation: - In 2009 MMUM inventory ratio is lower then pricol ltd but and in 2010 mmun

inventory ratio is increase but its still lower then pricol.

ASSETS TURNOVER

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Assets are used to generate sales and these ratios show the efficiency of the management to turn

the assets efficiency to sales.

SEVERAL ASSETS TURNOVER RATIO ARE:

TOTAL ASSETS TURNOVER

CURRENT ASSET TURNOVER

FIXED ASSET TURNOVER

WORKING CAPITAL TURNOVER

TOTAL ASSET (T. A) TURNOVER:

Sometimes instead of Net Assets, Total Assets are used for calculating the companys ability

generating sales from all financial resources committed to total Assets.

This can be calculated as:

C.O.G.S.

TOTAL ASSETS TURNOVER =

TOTAL ASSETS*

*Total Assets = (Net Fixed Assets + Net Current Assets)

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TOTAL ASSETS TURNOVER RATIO




Total Assets = 204,097,945

Ratio: Cost of goods sold / Total assets

Ratio: 8,163,729 / 204,097,945 = 0.4 times



Total Assets =3,499,576,277


Ratio: 262,665,005/ 3,499,576,277 = 0.8 times

PRICOL LTD,



Total Assets = 6174.767 Million


Ratio: 4074.384 / 6174.767 =.66 times

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Total Assets = 6229.77 Million


Ratio: 4836.017/ 6229.77=.78 times




PRICOL .66 times .78 times

Table:6

Figure: 6

Interpretation: - In 2009 MMUM total assets turnover ratio is lower than pricol ltd but and

in 2010 mmun total assets ratio is increase as compare to pricol.

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CURRENT ASSET (C. A) TURNOVER:

This can be calculated as

Cost of goods sold

CURRENT ASSETS TURNOVER=

Current Assets

CURRENT ASSETS TURNOVER RATIO




Current Assets = 89,771,267

Ratio: Cost of goods sold /Current assets

Ratio: 8,163,729 / 89,771,267 = 0.09 times

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Current Assets =1,665,590,880


Ratio: 262,665,005 /1,665,590,880 = 0.15 times

PRICOL LTD,



Current Assets = 3664.089 Million


Ratio: 4074.384 / 3664.089 = 1.1 times



Current Assets = 3906.717 Million


Ratio: 4836.017/ 3906.717 = 1.23 times

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PRICOL 1.1 times 1.23times

Table:7

Figure:7

Interpretation: - In 2009 MMUM Current assets turnover ratio is lower than pricol ltd but and

in 2010 mmun Current assets ratio is increase But still low than pricol.

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FIXED ASSET (F. A) TURNOVER:


C.O.G.S.

FIXED ASSETS TURNOVER =

FIXED ASSETS

FIXED ASSETS TURNOVER RATIO




Fixed Assets = 114,326,678

Ratio: Cost of goods sold / Fixed assets

Ratio: 8,163,729 / 114,326,678 = 0.7 times



Fixed Assets =1,665,590,880

Ratio: Cost of goods sold / Fixed Assets

Ratio: 262,665,005 /1,665,590,880 = 0.15 times

PRICOL LTD,



Fixed Assets = 2510.678 Million

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Ratio: 4074.384 / 2510.678 = 1.6 times



Fixed Assets = 2323.054 Million


Ratio: 4836.017/ 2323.054 = 2.08 times





Table:8

Figure:8

Interpretation: - In 2009 MMUM Total assets turnover ratio is lower than pricol ltd but and

in 2010 mmun Total assets ratio is still lower But pricol is better than MMUN .

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WORKING CAPITAL TURNOVER:


C.O.G.S.

WORKING CAPITAL TURNOVER =

NET WORKING CAPITAL

WORKING CAPITAL TURNOVER RATIO




Working Capital = - 18,096,901.00

Ratio: Cost of goods sold / Working Capital

Ratio: 8,163,729 /- 18,096,901.00 = -.45 times



Working Capital = 657,421,496.00


Ratio: 262,665,005 / 657,421,496.00 = 0.40 times

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WORKING CAPITAL TURNOVER RATIO

PRICOL LTD,



Working Capital = 1708.826 Million


Ratio: 4074.384 /1708.826 = 2.3 times



Working Capital = 1934.947 Million


Ratio: 4836.017/ 1934.947 = 2.44 times

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MMUM - 0.45 times 0.40 times


Table:9

Figure: 9

Interpretation: - In 2009 MMUM Total Working Capital turnover ratio is -.45 but and in 2010

mmun Working Capital assets ratio is improving But pricol is better than MMUN

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COMMON SIZE STATEMENT

Ratio analysis apart, another useful way of analyzing financial statements is to convert

them into common size statements by expressing absolute rupee amounts into percentage.

When this method is pursued, the income statement exhibits each expenses item or group

of expenses item or group of expense items as a percentage of net sales, and net sales are

taken at 100 per cent. Similarly, each individual asset and liability classification is shown

as percentage of total assets and liabilities respectively. Statements prepared in this way

are referred to as common-size statements. Common-size comparative statements

prepared for one firm over the years would highlight the relative changes in each group

of expenses, assets and liabilities. These statements can be equally useful for inter-firm

comparison, given the fact that absolute figure of two firms of the same industry are not

comparable.

COMPARSION OF TOTAL ASSETS WITH OTHER ASSETS

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It is very important part of comparison in this we take total assets as 100% and then

compare other current assets or non- current assets


Assets Compare for the year of 2009

Particular

Magneti

Marelli 2009

Pricol

ltd

2009

Total Assets 100% 100%

Inventories 39% 30%

Sundry Debtors 0.212% 33%

Cash & bank 18% 1%

Other Assets 0.08% NIL

Loan & advances 12% 15%

Fixed Assets 88% 54%

Table: 10

Figure:10

Interpretation:- In this we take Total Assets 100% and then compare with other assets of bothcompany for the year of 2009.As result shows that MMUM shows good results.

Assets Compare for the year of 2010

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ParticularMagneti Marelli

2010Pricol

ltd 2010

Total Assets 100% 100%

Inventories 20% 29%

Sundry Debtors 19% 43%

Cash & bank 18% 3%

Loan & advances 9% 16%

Fixed Assets 52% 54%

Table:11


Total Assets Comparison

FIGURE:11

Interpretation:- In this we take Total Assets 100% and then compare with other assets of both

company for the year of 2010.As result shows that MMUM cash & bank Balance higher then

PRICOL. Other Assets is lower then Pricol

COMPARSION OF TOTAL LIABILITIES

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WITH OTHER LIABILITIES

PARTICULAR MMUN IN 2009 PRICOL

IN 2009

Total Liabilities 100 % 100%

Share Capital 55% 34%

Current Liabilities 45% 30%

Provision 0.25% 7%

Table: 12


Figure:12

Interpretation: - In this we take total liabilities 100% and then compare with other Liabilities ofboth companies in the year of 2009.As result shows PRICOLs liabilities lesser then MMUM.

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COMPARSION OF Share Capital with Other Liabilities

PARTICULAR MMUN IN 2010 PRICOL IN 2010

Total Liabilities 100 % 100%

Share Capital 58% 37%

Current Liabilities 45% 30%

Provision 5% 7%

Table:13

Figure:13

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SWOT Analysis Of the company

Ability to deliver in time.

Excellent Setup In Pune & Gurgaon (Manesar)

Latest technology.

Good quality standards.

Better services.

Good Brand Image

WEAKNESS

High prices as compared to the market.

Physical distance between plant & Supplying devision

Lack Of experience about Indian market

OPPORTUNITIES AND THREATS

The growing domestic demand for Vehicles & commercial vehicles promises a very good

future for companys core business. Recently the company has entred into the contract

with Unitech machines limited for the production of Electronic components. Company is

successfully running its manufacturing divisions in Pune( Maharashtra)&

Manesar( Haryana) soon the company is expected to enter some new contracts with big

players in the Indian automotive sector. The company is currently supplying to all the

major manufacturers in India. So there are huge unexplored opportunities for the

company in the India market. The major threats for the company in India are the

companies which are well established in the Indian market. So the main challenge in

front of the company is to do the effective cost cutting in their products so that they will

be able to perform well in the Indian market.

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Loans & Advances

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Special efforts should be made to analyze loans & advances, which are between 25% to

65% of current assets. This can be classified between production / operation relation

related and non-production / operation related. No production related cases might befinanced from other sources like debenture etc. and treated separately.

Inventory

Inventory should be reviewed constantly to identify show / dead / obsolete item

Optimum level should be revised periodically, keeping in view, distance of

suppliers, production lead time of supplier, transport problem if any and reliability

of suppliers. This will help to avoid obsolesce and dead inventory.

Ratios

The company should try to improve its current situation. The ratios, which are

taken in this research to evaluate the companys position, are Current ratio, Quick

ratio and Activity ratio. These ratios show the actual position of the company.

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Busy Schedule of Concerned Executives: The concerned executives were having

very busy schedule because of which they were reluctant to give appointment.

Time: The time duration could not provide ample opportunity to study every

detail of working capital management of the company.

Confidential Information:As the company on account of confidential report has

not disclosed some figures. Moreover, in some cases separate accounts of

division are not separately maintained thereby, leading to restrictions in study.

BIBLOGRAPHY

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Books

Financial Management- S.K Gupta

Management Accountancy-D k Gole

Cost and Management Accountancy, S.N.Maheshwari

Financial Management And Policy, James C.Van Horne

Management Accounting- Shashi k Gupta

World Wide Web

www.economictimes.com

www.planware.com

www.icraindia.com

www.fiatgroup.com

www.magnetimarelli.com

www.wikepedia.org

Other than Web

M.I.S of the company
http://www.icraindia.com/http://www.fiatgroup.com/http://www.magnetimarelli.com/http://www.wikepedia.org/http://www.icraindia.com/http://www.fiatgroup.com/http://www.magnetimarelli.com/http://www.wikepedia.org/

finanical comparison project

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