CHAPTER - I

INTRODUCTION

1.1 GENRAL INTRODUCTION

The consumer electronics industry has witnessed a phenomenal growth over the past

few years. This growth can be attributed to the increasing effect of state of the art electronic

devices on the market. It is the confluence and merging of hitherto separated markets of

digital-based audio, video and information technology, removing entry barriers across the

market and industry boundaries. This convergence of technologies has resulted in a greater

demand for consumer devices, be they portable, in-home or in-car, offering multiple

functions.

The revolution brought about by Digital technology has enabled the consumer

electronics sector to profit from the growing interaction of digital applications such as:

camcorders, DVD player/recorder, still camera, computer monitor, LCD TV etc. It has also

witnessed the emergence of Mobile telecommunications technology, incorporating both

digital visual and digital MP3 capabilities.

The global sale of consumer electronics is estimated to exceed all expectations to

touch an all time high of $135.4 billion in 2006, which indicates 8% increase from 2005. By

the year 2008, sales are forecasted to soar up to $158.4 billion, up by 65% of 2000.

The Asia Pacific region is the market leader wielding the biggest chunk of the market,

closely followed by Europe. The European market share is expected to take a drubbing due to

the growing demand for consumer durables in the Asia Pacific consumer electronic market. 

Japanese companies have captured the consumer electronics market. World famous

brands such as Sony, Panasonic and Matsushita are all owned by these Japanese

manufacturers. Korean companies such as Samsung and LG are all trying to join the Japanese

bandwagon. Samsung can claim to be the world’s fastest growing electronics company.

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The World Consumer Electronics is very dynamic and new products are launched

everyday in the consumer electronics sector. The demands of the consumers are ever

increasing and the companies are using state-of-the-art technologies to stay in the

competition. The ever-changing electronics sector holds a great potential not only for the

new-entrants, but also for the existing industry giants.

The Electronics Industry in India took off around 1965 with an orientation towards

space and defense technologies. This was rigidly controlled and initiated by the government.

This was followed by developments in consumer electronics mainly with transistor

radios, Black & White TV, Calculators and other audio products.. In 1982-a significant year

in the history of television in India - the government allowed thousands of color TV sets to be

imported into the country to coincide with the broadcast of Asian Games in New Delhi. 1985

saw the advent of Computers and Telephone exchanges, which were succeeded by Digital

Exchanges in 1988. The period between 1984 and 1990 was the golden period for electronics

during which the industry witnessed continuous and rapid growth.

After the software boom in mid 1990s India's focus shifted to software. While the

hardware sector was treated with indifference by successive governments. Moreover the

steep fall in custom tariffs made the hardware sector suddenly vulnerable to international

competition.

In 1997 the ITA agreement was signed at the WTO where India committed itself to total

elimination of all customs duties on IT hardware by 2005. In the subsequent years, a number

of companies turned sick and had to be closed down. At the same time companies like Moser

Baer, Samtel Color, Celetronix etc. have made a mark globally.

In recent years the electronic industry is growing at a brisk pace. It is currently worth

$10 Billion but according to estimates, has the potential to reach $ 40 billion by 2010. The

largest segment is the consumer electronics segment. While is largest export segment is of

components.

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1.2 INDUSTRY PROFILE

The consumer electronics market is one of the largest segments in the electronics

industry in India. With a market size of Rs.15,897.13 crore ($3.89 billion) in 2006, catering

to a population of more than 100 crore people, the consumer electronics industry in India is

poised for strong growth in the years to come.

iSuppli Corp. predicts the Indian audio/video consumer electronics industry will grow

to Rs.26,931.13 crore ($6.59 billion) by 2011, rising at a Compound Annual Growth Rate

(CAGR) of 10.0 per cen`t from Rs.18,390 crore ($4.5 billion) in 2007.

The growth will be aided by a multitude of factors, including:

—Growing consumer confidence due to rising disposable incomes;

—Easy financing schemes that are making purchases possible;

—Increased local manufacturing;

—Expanding distribution networks;

—Sporting events, such as the Cricket World Cup.

Video remains the key driver

Television continues to be the mainstay of the consumer electronics industry in India

with the transition slowly occurring to newer technologies such as LCD and PDP. Most

players in the consumer-electronics industry have introduced products in the FPD segment,

and for few companies, especially the Korean chaebols, FPD remains a focus area. But the

Indian market continues to exhibit contradictions that may be unique to this market. On one

hand, campaign promises have prompted the free distribution of 75 lakh 14-inch CRT

television sets worth Rs.3,065 ($75) each to families below the poverty line in one electoral

state over the period of three years. On the other hand, FPD sets are available for Rs.1.23

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lakh ($3,000) in India. Although, black and white TVs are obsolete elsewhere in the world,

they still sell in large numbers in India.

Increased customization to suit domestic demand

Companies are focusing on customizing products to suit Indian tastes, thereby creating

a niche for themselves. Several companies are conducting market research in order to

understand the psyche of an Indian consumer. The inputs from this research are determining

product attributes and pricing and accordingly are achieving better acceptance among

consumers.

By conducting consumer research, companies are trying to identify customer

requirements, thereby incorporating specific design elements into their products. For

example, LG in 2006 launched a range of TVs from 21 inches to 29 inches in size that were

designed based on the company's research on consumer preferences for television sets.

Expanded distribution is critical

In order to tap semi-urban and rural demand, companies are expanding their

distribution networks in these areas. The move has positively impacted sales for companies

opting for rural expansion. However, rural consumers have not been as brand-conscious as

their urban counterparts. Due to the lower prices of unbranded products, rural consumers

have been inclined to buy these products, although they often have poor quality. As the

awareness among rural consumers rises, they are expected to show a preference for branded

products.This is reflected by the fact that established players are reporting higher sales of

products in rural areas.

Domestic manufacturing to expand

iSuppli expects domestic manufacturing to be a key characteristic of this growth in the

years to come. Although electronics production has remained a miniscule portion of overall

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Indian manufacturing for a long time, the trend is gradually changing. The government has

been focusing increasingly on developing the manufacturing sector by developing

infrastructure, rationalising duties and creating export-promotion zones. This is in alignment

with India figuring into the plans of several companies that want to cater to the domestic and

export markets.

Domestic consumption is reaching significant size to trigger manufacturing in the

electronics sector. India also is assuming a significant place in the global plans of several

major electronics manufacturers, thereby positioning it also as an export base. Furthermore,

fabless companies are suitable to cater to such development because they can assist in

moving the industry up the value chain by creating design-service opportunities for the

Indian market. EMS and ODM companies in India have been associated with several design

companies, although such relationships represent an extension of their global relationships.

However, some local partnerships also are appearing, such as Flextronics' deal with inSilica

for the development of SoC devices. Currently, such instances are few and far between. As

the local market gains size, these associations will become more common.

Significant challenges remain

iSuppli believes that there are still challenges facing the India consumer electronics

industry as the sector tries to realise its full potential. These include declining margins for

many players; inverted duty structure; expansion of distribution reach; creating awareness

about new technologies and products and low affordability level of consumer products

among the rural masses. However, these challenges are gradually being addressed. And

looking ahead, iSuppli believes that India will continue to grow as an important market for

the global consumer electronics industry. The future of India's market is indeed bright.

1.3 INDUSTRY CHALLENGES

Small Footprint-

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The consumer electronics industry is rapidly evolving, setting rather than following

technological trends. Devices are getting smaller – but more functionality is being packed

into them – leading a shift towards NANO designs.

Converged Devices-

Through strong electronics the industry helps companies develop converged devices

and create a superior customer experience.

Shortened shelf life-

Through its integrated engineering offerings, electronics industry is strongly

positioned to help Consumer Electronics Companies in shortening their products' lifecycles

and introduce new products in the market more swiftly.

Service integration-

More and more companies are following the "buy a product - buy a service"

philosophy –and consumer electronics industry capabilities to provide engaging experiences

for end-users through service integration.

1.4 STATEMENT OF THE PROBLEM

A financial statement contains sales, revenue, tax, expense etc on one side and the

other side shows liabilities and assets position in the year.

There are various reasons, which contribute to profits such as operation costs,

marketing efficiencies, reduced interests and many more.

The essence of the financial soundness of a company lies in balancing its goals,

commercial strategy and resultant financial needs. The company should have financial needs.

The company should have financial capability and flexibility to pursue its commercial

strategy.

Ratio analysis is a very useful analytical technique to raise pertinent questions on a

number of managerial issues. It provides bases or clues to investigate such issues in detail.

While assessing the financial health of a company, ratio analysis answers to questions

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relating to the companies profitability, asset utilization liquidity and financial capabilities of

the company.

The statement of the problem can be generalized as:

Analysis of the relationship between assess and liability.

Analysis of the liquidity and profitability of the current assets and current liability.

Detection of the reasons for the variability of profits.

Analysis of various components of working capital such as cash, marketable

securities, inventories and receivables.

Find out the business fluctuations, technical developments etc on financial

performance.

The study takes into consideration the external analyst point of view and with the help

of the past and latest financial statements, financial position will tried to be analyzed

impartially.

1.5 OBJECTIVES OF THE STUDY

Based on the information furnished in the financial statements, the various objectives

of the ratio analysis are:

o To determine the financial conditions and financial performance of the firm.

o To involve comparison for a useful interpretation of the financial statements.

o To find out the solution to the unfavorable financial conditions and financial

conditions.

o To forecast the future of the company.

o To help taking suitable corrective measures when the firm’s financial conditions and

Performance is unfavorable to the firm when compared to the firms in same industry.

o To analyze the firm’s relative strengths and weakness.

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1.6 SCOPE OF THE STUDY

Ratio analysis is perhaps the first financial tools developed to analyze and interpret the

financial statement and still used widely used for this purpose. Financial performance

analysis is a well researched area and innumerable studies have proved the utility and

usefulness of this analytical technique.

1.7 THEORITICAL OVERVIEW

1.7.1 FINANCIAL ANALYSIS

Financial analysis is the analysis of financial statement of a company to assess its

financial health and soundness of its management. The focus on financial analysis is on key

figures in the financial statements and the significant relation ship that exists between them.

The analysis of financial statements is a process of evaluating the relationship between

component parts of financial statements to obtain a better understanding of the firms position

and performance.

“Financial statements” analysis is largely a study of relationship among the various

financial factors in a business as disclosed by a single set of statements and a study of the

trend if these factors as shown in a series of statements” -by Myer

1.7.2 FINANCIAL STATEMENTS

They refer to two statements, which are prepared by the organization at the end of the year.

Income statement or profit and loss account to know profit earned or loss substained during a

specific period. Position statement or balance sheet in order to known its financial position as

on a particular point of time, usually one year.

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1.7.3 RATIO ANALYSIS

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic

use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm

as well as its historical performance and current financial condition can be determined. The

term ratio refers to the numerical or quantitative relationship between two items /variables.

These relationships can be expressed as:

1. Percentages

2. Fraction

3. Proportion of numbers

These alternative methods of expressing items which are related to each other are , for

purposes of financial analysis, referred to as ratio analysis.

1.7.4 IMPORTANCE OF RATIO ANALYSIS

Ratio analysis stands for the process of determining and presenting the relationship of

items and groups of items in the financial statements. It is an important technique of financial

analysis.

Useful in financial position analysis:- accounting ratios reveal the financial position of

the concern. This helps the balks, insurance companies and other financial institutions

in lending and making investment decisions.

Useful in simplifying accounting figures:- accounting ratios simplify summarize and

systematize the accounting figures in order to make them more understandable and in

lucid form. They highlight the inter-relationship which exists between various

segments of the business as expressed by accounting statements. Often the figures

standing alone cannot help them convey any meaning and ratios help to relate with

other figures.

Useful in assessing the operational efficiency:- accounting ratio helps to have an idea

of the working of a concern. The efficiency of the firm becomes evident when analysis

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is based on accounting ratios they diagnose the financial health by evaluating

liquidity, solvency, profitability etc. this helps the management to assess financial

requirements and the capabilities of various business units.

Useful in forecasting purposes:- if accounting ratios are calculated for a number of

years, then a trend is established. This trend helps in setting up future plans and

forecasting.

Useful in locating the weak spots of the business:- accounting ratios are of great

assistance in locating the weak spots in the business even though the overall

performance may be efficient. Weakness in financial structure due to incorrect policies

in the past or present are revealed through accounting ratios.

Useful in comparison of performance:- through accounting ratios comparisons can be

made between one department of a firm with another of the same firm in order to

evaluate the performance of various departments in the firm.

1.7.5 LIMITATIONS OF ACCOUNTING RATIOS

Ratio analysis is very important in revealing the financial position and soundness of

the business. But, in spite of its advantages, it has some limitations which restrict its use.

These limitations should be kept in mind while making use of ratio analysis for interpreting

the financial statements.

False results based on incorrect accounting data:- accounting ratios can be correct only

if the data are correct. Sometimes, the information given in the financial statements is

effected by window dressing, i.e., showing positions better than what actually is. So

the analyst must always be on the Look out for signs of window dressing, if any.

No idea of probable happenings in future:- ratios are an attempt to make an analysis of

the past financial statements. so they are historical documents. Nowadays keeping in

view the complexities of the business, it is important to have an idea of the probable

happenings in future.

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Variation in accounting methods:-the two firm’s results are comparable with the help

of accounting ratios only if they follow the same accounting methods. Comparison

will become difficult if the two concerns follow the different methods of providing

depreciation or valuing stock. Comparison of financial statements of such firms by

means of ratios is bound to be misleading.

Price level changes:- changes in price levels make comparison for various years

difficult. For example, the ratio of sales to assets in current year would be much higher

than the previous years due to raising prices.

Only one method of analysis:- ratio analysis is only a beginning and gives just a

fraction of information needed for decision making. Therefore, to have a

comprehensive analysis of financial statements, ratios should be used along with other

methods of analysis.

No use if ratios are worked out for insignificant and unrelated figures:- accounting

ratios may be worked for any two insignificant and unrelated figures as ratio of sales

and investment in government securities. Such ratios may be misleading. Ratios

should be calculated on the basis of cause and effect relationship. One should be clear

as to what is cause and what is effect before calculating a ratio between two figures.

1.7.6 CLASSIFICATION OF RATIOS

Ratios may be classified in numbers of ways in keeping in view the purpose. Ratios

indicating profitability are calculated on the basis of the profit and loss account; those

indicating financial position are computed on the basis on balance sheet and those which

show operating efficiency or effective use of resources are calculated ion the basis of figures

in profit and loss account and balance sheet. Thus classification is rather and crude and

unsuitable ton determine the profitability and financial position of the company. To achieve

this purpose effectively, ratios may be classified as;

Profitability ratios

Profitability ratio is the overall measure of companies with regard to efficient and

effective utilization of resources at their command.

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Profitability ratios are of utmost importance for a concern. These ratios are calculated to

enlighten the end results of business activities which is sole criterion of the overall efficiency

of a business concern.

Coverage ratios

These ratios indicate the extent to which the interest of person entitled to get a fixed

return or scheduled repayments as per agreed terms are safe.

Turnover ratios

These ratios are very important for a concern o judge how well facilities at the

disposal of the concern are being used or to measure the effectiveness’ with which a concern

uses its resources at its disposal. In short, this will indicate position of assets usage. These

ratios are usually calculated on the basis of sales or cost of sales and are expressed in number

of times rather than as a percentage. The greater the ratio more will be the efficiency of asset

usage. The lower ratio will reflect the under utilization of the recourses available at the

command of the concern. The concern must always plan for efficient use of the assets to

increase the overall efficiency.

1.7.7 FINANCIAL RATIOS

These ratios are calculated to judge the financial position of the concern from long term

as well as short term solvency point of view.

Liquidity ratios

If it is decided to study the liquidity position of the concern, in order to highlight the

relative strength of the concerns in meeting their current obligations to maintain sound

liquidity and to pinpoint the difficulties if any in it, then liquidity ratios are calculated. These

ratios are used to measure the firm’s ability to meet short term obligations.

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Stability ratios

These ratios helps in ascertaining the long term solvency of a firm which depends on

firms adequate resources to meet its long term funds requirements, appropriate debt equity

mix to raise long term funds and earnings to pay interest and installments of long term loans

in time.

Leverage ratios

The leverage ratios explain the extent to which the debt is employed in the capital

structure of the concerns. Always concerns use debt funds along with equity funds, in order

to maximize the after tax profit, thereby optimizing the earnings available to equity share

holders. The basic facility of debt is that after tax cost of them will be significantly lower and

which can be paid back depending upon their terms of issue. In order to analyze the leverage

position of the concerns. total debt to total assets ratio, debt equity ratio and time interest

earned can be calculated.

1.7.8 TYPES OF RATIOS

1. Short term solvency ratio

2. Long term solvency ratio

3. Profitability ratio

SHORT TERM SOLVENCY RATIO

1. Current ratio

2. Absolute liquid ratio

3. Cash position ratio

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CURRENT RATIO

This ratio will explain the relationship between the current assets and current

liabilities. The current ratio of a firm measures short term solvency of the firm. The higher

the current ratio , the larger is the amount of rupees available per rupee of current liability,

the more is the firm’s ability to meet current obligations and the greater is the safety of funds

of short term creditors. Thus current ratio in a way is a measure of margin of safety to the

creditors. A ratio of 2:1 is considered satisfactory as a rule of thumb.

Current assets

Current ratio =

Current liabilities

ABSOLUTE LIQUID RATIO

This ratio will define the relationship between absolute liquid assets and current

liabilities. Absolute liquid assets include cash in hand and at bank and marketable securities

or temporary investments.

A ratio of 1:1 is considered to be good. Such ratio will imply that the firm has enough

liquid assets to meet all current liabilities of the firm.

Cash +Marketable securities

Absolute liquid ratio=

Current liabilities

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CASH POSITION RATIO

This ratio will explain the relationship between the available cash both at bank and in

hand and current liabilities.

A ratio of 1:1 is considered to be a good ratio but a rate of 0.75:1 is also good. Such a

ratio would imply that the firm has enough cash on hand to meet all the current liabilities.

Cash

Cash position ratio =

Current liabilities

LONG TERM SOLVENCY RATIO

Long term solvency ratio conveys a firm’s ability to meet the interest cost and

repayment schedule of its long term obligations.

These ratios are helpful to management in proper administration of capital. It also

helps the creditors to know the capacity of a business concern to pay debt in future.

The various ratios are:

1. Proprietary ratio

2. Solvency ratio

3. Fixed assets to net worth ratio

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PROPRIETORY RATIO

This ratio establishes the relationship between the shareholders funds and the total

assets of the firm. It establishes the claims of the shareholders on the firm’s assets. It is

usually expressed as a pure ratio.

Shareholder’s funds

Proprietary ratio =

Total assets

FIXED ASSETS TO NETWORTH RATIO

This ratio establishes the relationship between fixed assets and shareholders’ fund. This

ratio indicates the extent to which shareholder’s funds are sunk in the fixed asset. Generally,

the purchase of fixed assets should be financed by the shareholders equity, which includes

reserve, surpluses and retained earnings.

Fixed asset (after depreciation)

Fixed asset ratio

Net worth

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PROFITABILITY RATIO

Profits are measures of overall efficiency of a business. In other words they are the

ratios, which reveal the total effect of business transaction has been successful in its

operation.

These ratios are:

1. Return on equity

2. Return on total resource

3. Net profit ratio

4. Operating expenses ratio

RETURN ON EQUITY

It indicates how the firm has used the resources of owners. This ratio is one of the most

important ratios in financial analysis. The earnings of a satisfactory return are one of the most

desirable objectives of a business. The ratio of net profit to owner’s equity reflects the extent

to which the objective has been accomplished.

Profit after tax

Return on equity=

Equity share capital

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RETURN ON TOTAL RESOURSE

It is the ratio of net profit to total resources or total assets. Return here means net profit

after taxes and total resources means all realizable assets including intangible assets, if they

are realizable. This ratio measures the productivity of the total resources of a concern.

Net profit

Return on total resource=

Total assets

EARNING PER SHARE

This ratio establishes the relationship between profit after tax to number of equity

shares.

Profit after tax

Earning per share =

Number of equity shares

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INTEREST ON LOAN

This ratio establishes the relationship between interest received and total loan.

Interest received

Interest = *100

Total loan

INTEREST PAYOUT RATIO

This will establishes the relationship between interest paid to earnings before interest

and tax.

Interest paid

Interest payout ratio = *100

EBIT

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1.8 LIMITATION OF THE STUDY :

60 days being a very short time, I have done a study that I feel to be comprehensive and

possible in this time. However, some other details of methods of analysis could definitely

be found which I have missed out there.

Inter firm and intra firm comparison is not possible.

The study covers a period of 3 years with the available sources i.e. from 2005-06 to 2007-08

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CHAPTER - II

COMPANY AND PRODUCT PROFILE

2.1 COMPANY HISTORY

2.1.1 How it all began

Onida was started by Mr.G.L.Mirchandani and Mr.Vijay Mansukhani in 1981 in

Mumbai. In 1982, Onida started assembling television sets at their factory in Andheri,

Mumbai. Superior products and the combination of a distinctive voice, a cutting-edge

advertising strategy, and purposeful marketing ensured that Onida became a household name.

Over the years, Onida has strengthened its reputation for the intelligent and pioneering

application of technologies.

2.1.2Onida Today

Onida today enjoys a strong equity among consumers making it one of the leading

brands in India. Our constant endeavor to introduce products of substance that offer the very

best in technology and the finest design have made Onida a leading player in the electronics

and entertainment business today.

Onida has recently made a foray in other household appliances including air-

conditioners, washing machines, DVDs, Plasma & LCD televisions and home theatre

systems. For offices, Onida has also introduced state-of-the-art multi-media presentation

products.

2.1.3The Network

Onida has a network of 33 branch offices, 208 Customer Relation Centers and 41

depots spread across India. MIRC Electronics shares are listed on the National and Mumbai

Stock Exchanges. The company enjoyed a market capitalization of Rs.301.46 Cr. as on 31st

March 2005.

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The transition of Onida from a family-owned business to a professionally managed

company has largely been made possible by the vision of the Chairman & Managing

Director, Mr.G.L.Mirchandani.

2.1.4 RESEARCH AND DEVELOPMENT

Onida recognizes that a vigorously intelligent research initiative works at two ends:

cost reduction through effective process improvement and value-addition through a sustained

ability to put innovative and customised products in line with customer needs. A team of 75

Engineers are at work at the Onida R&D centers in Mumbai and Delhi developing products

at the forefront of technology meeting customer expectations.

The team conducts research in the areas of :

Embedded Software

Industrial Design

Mechanical Engineering

Electrical Engineering

Model Shop

2.2 VISION AND MISSION

Vision

To build a brand around substance. To communicate simple truths that customers

understand. To become a leader in our chosen field and become a globally recognized,

prestigious company through synergistic business investment, differentiation through

innovation, passion through empowerment, cost through economies of scale and world class

systems and procedures that bring in delight of stakeholders.

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Mission

To benefit society at large through Innovation, Quality, Productivity, Human

Development and Growth, and to generate sustained surpluses, always striving for

excellence, within the framework of law, and in nothing but the truth in which we base every

action.

2.2.1 CORPORATE PHILOSOPHY

Commitment to society/nation

We respect the society and the environment to which we belong and will contribute to its

progress and welfare.

Passion for quality

Strive to create products with substance, that are the best in class. Never compromise on

quality. Give our customer better value-for-money, always.

Fairness

We stand for truth, fairness and justice in all our business and individual dealing - without

this spirit, no man can win respect no matter how capable he may be.

People - our greatest assets

We value good people. It is our responsibility to create actively and constantly an

environment that supports them to grow and flourish.

Harmony and co-operation

Alone we are weak. Together we are strong. Work together as a family in mutual trust

and responsibility.

Courtesy and Humility

Respect the right of others. Be cordial, modest and humble. Praise and encourage

freely.

Strive for continuous improvement ( KAIZEN )

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Seek and find in every action a way to do things better, always better.

Growth

Growth is vital. Increasingly seek out ways and means to constantly move forward.

Innovation

Progress by adjusting to ever-changing environment around us. As the world moves

forward, we must keep-in-step.

Gratitude

Always repay the kindness of our customers, associates, community, nation and

friends worldwide with gratitude.

2.2.2 QUALITY ASSURANCE

Superior quality is the cornerstone of every Onida product. Our rigorous practices and

procedures aim at maintaining the highest quality standards at all times. We believe that a

satisfied Onida consumer is one who takes pride in ownership of our products and always

recommends Onida.

2.2.3 QUALITY POLICY

The company is committed to quality and strives for a continuous improvement

through innovation and human development to give the customer better value for

money always.

All quality norms followed are continuously upgraded taking into account changing

customer needs.

The TQM movement being practiced has enabled process innovation. Due emphasis is

given to prevention driven activities through feedback obtained from all over.

Product reliability tests are performed with total compliance to international quality

assurance standards.

The above processes have lowered quality problems and helped improve customer

satisfaction.

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2.3 SOME MILESTONES …

2.3.1OPERATIONS

1981 : Mirc Electronics Pvt. Ltd was established

1982 : CTV production started at 13/14A Nand Bhuvan

1983 : Collaboration with JVC-Japan

1985 : Production expanded and moved to a new factory at Kalina

1986 : Production expanded and moved to a new factory at Kalina

1987 : Moved to our own factory building “Onida House”

1987 : Iwai, Speaker plant started its operation

1991 : Moved to a new CTV plant at Vasai

1992 : Akasaka, PCB plant started (the only one of its kind in India)

1994 : Moved to a large fully automatic factory with state-of-the-art technology at Wada. (one of the best CTV factories in Asia)

1995 : ISO 9001 certification obtained from BVQI (Onida, the first Indiacompany in CTV industry which measured quality from the customer’s internal and external perspective).

2002 : Call Center (Imercius Technology (I) Ltd) commenced operation at Mind Space, Malad, Mumbai

2003 : Wada factory futher expanded and increased production capacity from 600K CTVs to 1 million CTV sets p.a.

2003 : Two production lines with a total production of 8 CTV sets per minute

2005 : Six Sigma and VIM launched.

2007 : Started steam moulding at Wada factory

2007 : Started the production of Ultraslim 21” CTV

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2007 : Started the production of Slim 29”CTV

2007 : Wada factory has been certified for ISO 14001:2004 Environmental Management System

2.3.2 : MARKETING & PRODUCTS

1983 : ONIDA launched India’s first monitor TV

1984 : “Devil” Advertisement (better known as ONIDA DEVIL) ad campaign started.

1992 : Crossed 1 million CTV sales

1993 : Launched KY, the largest selling 21” CTV

1995 : Launched “Unique Collection series”

1998 : Marketing operations at Delhi merged with Mumbai operations

1999 : Launched “Candy” series and internet enabled CTV

2000 : - Launched “KY Thunder” series with 550 W PMPO-- Launched “Profile” Designer series-- Launched Multiview – 9 PIP series

2000 : Launched Large Screen Plasma Monitors / TV

2001 : Launched Onida Black, flat CTV range.

2001 : Multimedia Projectors launched in India

2001 : International Marketing Office opened at Dubai

2002 : Launched second brand “IGO”

2002 : Launched 29” Home Theatre with circle surround sound & DVD

2003 : - Launched Air Conditioners- Launched fully automatic front loading Washing Machine

2003 : Crossed the sale 160,000 CTVs in October (in a single month)

2003 : Launched DVD players and Rear Projection TVs.

2003 : Operation started in Russia.

2003 : A Mirc product was getting sold in every 27 seconds !

2004 : Relaunch of Onida devil in a modern Avtaar

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2004 : Launch of “Oxygen” CTV

2004 : Crossed the sale of 250,000 CTVs in October (in a single month)

2004 : Launch of Microwave Oven

2005 : 100000 TVs has been shipped to Russia in super quick time

2005 : Launched LCD TVs

2.3.3 : ACCOUNTS & FINANCE

1992 : Mirc went for Public issue during Nov 92 and got listed in major Stock Exchange including BSE

1997-2003 : Mrc grew over the last five years from Rs.522.58 crore in 1997-98 to Rs.981.67 crore in 2002-03 at CAGR of 13.46 percent.

1997-2003 : Debt-equity ratio declined from 1.56 in 97-98 to 0.56 in 2002-03. Interest outflow declined from Rs.18.33 crore to Rs.10.16 crore.

1997-2003 : PBT has gone up from 18.35 crores in 1996-97 to 70.98 crores in 2002-2003.

1997-2003 : Book value per share has gone up from Rs.124.63 to Rs.305.48 in 2002-03.

1997-2003 : Net worth increased from Rs.96 crore in 97-98 to Rs.215 crore in 2002-03

2003 : Micr issued bonus shares and 100% dividend on the expanded capital base.

2003 : Dividend – Consistent dividend payout – 60% to 100%

2004 : Crossed 1000 crore turnover mark

2.3.4 ISD

2000 : Implemented SAP R/3 at Factory and HO

2001 : Launched Onida Infotech Services

2002 : Implemented SAP at Branches

2003 : Implemented APO

2004 : Upgraded SAP from 4.0B to 4.6C

2004 : Sold Onida Infotech Services to Mphasis.

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2006 : Linked Wada factory with a high capacity connectivity (2mbps) using Radio Frequency Solution

2006 : Extend SAP to Noida factory

2006 : Implemented my SAP Business Suite

2007 : SAP Application upgrade from my SAP ERP 2004 to my SAP ERP 2005.

2007 : SAP SCM 5.0 Demand Planning Module Go live

2007 : Fail Safe over connectivity between 2 Mbps line and 2 Mbps RF line (Wada)

2007 : Fail safe over connectivity between 1 Mbps MTNL and 1Mbps TTML line (OH)

2.3.5 R&D

2006 : Inaugurated Innovation Center “Shristi” – where newinitiatives, ideas and opportunities will take shape.

2.3.6 CORPORATE

1998 : Award for the excellence in electronics by the Ministry of I.T.

1999 : Award from the Chief Commissioner of Central Excise, Mumbai, for “Ideal Assessee” for the year 1998-99

2000 : Award by AV Max for best aesthetics for “Profile” Designer series.

2003 : Award from InFocus Corpn., USA for highest sales growth for Projectors for the year 2002

2004 : Mr.G.L.Mirchandani, Chairman & Managing Director was awarded ‘Man of Electronics for the Year’ by CETMA

2006 : Mirc Electronics Ltd has been ranked 2nd as per total income in the Consumer Durables / Domestic Appliances sector in Dun and Bradstreet’s India’s Top 500 Companies 2006

2007 : Certificate of Merit award to Mirc for “Excellence in Quality” by Elcina Dun & Bradstreet.

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CHAPTER - III

RESEARCH DESIGN

3.1 RESEARCH DESIGN

Research design means a search of facts, answers to question and solution to the

problems. It is a prospective investigation. Research is a systematic logical study of an issue

or problem through specific method. It is a systematic and objective analysis and recording of

control observation that may lead to the development of generalization, principles, resulting

in prediction and possibly ultimate control of events.

Research design is the arrangement of conditions for the collection and analysis of

data in manner that aims to combine relevance to the research purpose with relevance to

economy. There are carious designs which are descriptive and helpful for analytical research.

Research design specified the methods and procedures for conducting a particular

study.

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In brief research design contains

A clear statement of the research problem.

A specification of the data required.

Procedure and techniques to be adopted for data collection.

A method of processing and analysis of data.

3.2 Research design used in the specific study includes the following

Identifying the statement of the problem.

Collection o f the company’s specific literature i.e. annual reports for the study

period and the profile of the company.

Scanning through standard books to understand the theory behind the financial

performance evaluation.

Collection of information from various journals to understand the industrial

background of the study.

Decision regarding study period in this case it was decided to be 3 years i.e. from

2005-2006.

Identification of financial ratios likely to reflect the capital adequacy, resources

declared, assets quality, management quality, earning quality and liquidity of the

organization. In this case it was decided to be:

Long term solvency ratio

Short term solvency ratio

Profitability ratio

Calculation of the above ratios over the study period and analyzing it.

Forwarding certain recommendation and conclusion to the company.

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3.3 STATEMENT OF THE PROBLEM

A financial statement contains sales, revenue, tax, expense etc on one side and the

other side shows liabilities and assets position in the year.

There are various reasons, which contribute to profits such as operation costs,

marketing efficiencies, reduced interests and many more.

The essence of the financial soundness of a company lies in balancing its goals,

commercial strategy and resultant financial needs. The company should have financial needs.

The company should have financial capability and flexibility to pursue its commercial

strategy.

Ratio analysis is a very useful analytical technique to raise pertinent questions on a

number of managerial issues. It provides bases or clues to investigate such issues in detail.

While assessing the financial health of a company, ratio analysis answers to questions

relating to the companies profitability, asset utilization liquidity and financial capabilities of

the company.

The statement of the problem can be generalized as:

Analysis of the relationship between assess and liability.

Analysis of the liquidity and profitability of the current assets and current liability.

Detection of the reasons for the variability of profits.

Analysis of various components of working capital such as cash, marketable

securities, inventories and receivables.

Find out the business fluctuations, technical developments etc on financial

performance.

The study takes into consideration the external analyst point of view and with the help

of the past and latest financial statements, financial position will tried to be analyzed

impartially.

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3.4OBJECTIVES OF THE STUDY

Based on the information furnished in the financial statements, the various objectives

of the ratio analysis are:

o To determine the financial conditions and financial performance of the firm.

o To involve comparison for a useful interpretation of the financial statements.

o To find out the solution to the unfavorable financial conditions and financial

conditions.

o To forecast the future of the company.

o To help taking suitable corrective measures when the firm’s financial conditions and

Performance is unfavorable to the firm when compared to the firms in same industry.

o To analyze the firm’s relative strengths and weakness.

3.5 NEEDS FOR THE STUDY

Any company would like to know its position against its competitors. The ultimate

performance indicator of any company is the financial parameter s because invariably all

costs efficiencies; activities and solvency position of the company will be reflected in the

financial mirror.

The following are the stated as the needs of the study:

o To understand the volume of the profit and its reasonableness.

o To understand the movement of the profit over the period of time.

o To know the reason for the variance in the profit.

o To know the present standing of the company.

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3.6 SCOPE OF THE STUDY

Ratio analysis is perhaps the first financial tools developed to analyze and interpret the

financial statement and still used widely used for this purpose. Financial performance

analysis is a well researched area and innumerable studies have proved the utility and

usefulness of this analytical technique.

3.7 RESEARCH METHODOLOGY

Methodologies assumption;

Definition used as universal.

Selected study period is sufficient.

Selected financial ratios reflect the financial performance of the company.

Ultimate performance evaluation of the company y is shown in its financial

assets.

3.8 SOURCES OF DATA

Data is defined as the group of non-random symbols in the form of text,image,or voice

representing qualities, actions as objects. Data is processed into a form that is meaningful to

the recipient and is of real and perceived value in the current or prospective actions or

decisions of the recipient.

Data are mainly classified into two groups:

Primary data

Secondary data

Primary data

The primary data collection is one of the key tools used by the researcher for data

collection. It is the first hand information collected by the researcher from the respondents

directly. Primary data is collected through observation and communication.

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Secondary data

The secondary data is another form of data collection, where the data is collected from

the existing records, company manual and form previously carried out research work and also

through internet.

Sources of data collection:- All the details are collected from secondary sources only.

Secondary data includes, the annual reports, financial reports of the company etc., discussion

with the concerned officials has also helped to verify and evaluate the variations and results

either to confirm it.

3.9LIMITATIONS OF THE STUDY

The study covers a period of 3 years with the available sources i.e. from 2005-06 to

2007-08.

60 Days being a very short time, I have done a study that I feel to be

comprehensive and possible in this time. However, some other details of methods

of analysis could definitely be found which I have missed out there.

The study has been restricted to the Branch office in Coimbatore.

The study is general.

Inter firm and intra firm comparison is not possible.

Interactions with the company professionals were limited due to their busy

schedule.

Limitations of historical accounts.

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Conclusions will be drawn based on theory and supplemented by figure wherever

feasible.

CHAPTER IV:

ANALYSIS AND INTERPRETATION OF DATA

4.1 CURRENT RATIO

TABLE 1: TABLE SHOWING CURRENT RATIO

YEARCURRENT

ASSETS(Rs in Cr.)

CURRENT LIABILITIES

(Rs in Cr.)RATIO

2005-06 371.21 182.89 2.03

2006-07 427.74 239.37 1.78

2007-08 525.70 253.34 2.08

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GRAPH 1: GRAPH SHOWING STATUS OF CURRENT ASSETS AND CURRENT

LIABILITIES

GRAPH 2: GRAPH SHOWING CURRENT RATIO

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INTERPRETATION

Current ratio indicates the firm’s commitment to meet its short term obligations. It is

an index of the short term financial stability of an enterprise because it shows the margin

available after paying off current liabilities.

A ratio of 2:1 is considered satisfactory as a rule of thumb. If the current assets are two

times of the current liabilities, there will be no adverse effect on the business operations when

the payment of liabilities is made. The current ratio is maintained at an optimal level except

for the year 2006-07 where there is a drop in the ratio

4.2 CASH POSITION RATIO

TABLE 2: TABLE SHOWING CASH POSITION RATIO

YEARCASH

(Rs in Cr.)

CURRENT LIABILITIES

(Rs in Cr.)RATIO

2005-06 36.72 182.89 0.20

2006-07 16.76 239.37 0.07

2007-08 19.46 253.34 0.07

GRAPH 3: GRAPH SHOWING STATUS OF CASH AND CURRENT LIABILITIES

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GRAPH 4: GRAPH SHOWING CASH POSITION RATIO

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INTERPRETATION

This ratio indicates the ability to discharge its short term liabilities with the available

cash on hand.

A ratio of 1:1 is considered to be a good ratio but a rate of 0.75:1 is also good. The

above ratios stated above imply that the company does not have enough cash on hand to meet

all the current liabilities.

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4.3 PROPRIETARY RATIO

TABLE 3: TABLE SHOWING PROPRIETORY RATIO

YEARSHAREHOLDERS

FUND(Rs in Cr.)TOTAL ASSETS

(Rs in Cr.)RATIO

2005-06 215.47 401.08 0.537

2006-07 236.27 417.71 0.566

2007-08 254.25 470.70 0.540

GRAPH 5: GRAPH SHOWING STATUS OF SHAREHOLDER’S FUND AND

TOTAL ASSETS

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GRAPH 6: GRAPH SHOWING PROPRIETORY RATIO

INTERPRETATION

This ratio establishes the relationship between the shareholders funds and the total

assets of the firm. It establishes the claims of the shareholders on the firm’s assets. It

indicates the extent to which the shareholders funds have been invested in the assets of the

company. On examination of this ratio, it denotes that the share holders’ funds have been

moderately invested in the total assets. The ratio is maintained at a regular level indicating

that the consistency in the approach.

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4.4 FIXED ASSETS TO NETWORTH RATIO

TABLE 4: TABLE SHOWING FIXED ASSETS TO NETWORTH RATIO

YEARFIXED ASSETS

(Rs in Cr.)NET WORTH

(Rs in Cr.)RATIO

2005-06 206.75 215.47 0.96

2006-07 206.05 236.27 0.87

2007-08 189.74 254.25 0.75

GRAPH 7: GRAPH SHOWING STATUS OF FIXED ASSETS AND NETWORTH

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GRAPH 8: GRAPH SHOWING FIXED ASSETS TO NETWORTH RATIO

INTERPRETATION

This ratio indicates the proportion of investments in fixed assets out of the networth of

the company. This ratio should not be more than 1. However the above figures indicate that

the entire fixed assets are financed by the shareholders fund. A certain portion of the working

capital should also be financed by these long term funds. Hence it seems that working capital

is completely financed out of borrowed funds which is not healthy.

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4.5 RETURN ON EQUITY

TABLE 5: TABLE SHOWING RETURN ON EQUITY

YEARPROFIT

(Rs in Cr.)EQUITY SHARE CAPATAL

(Rs in Cr.)RATIO

2005-06 32.79 14.19 2.31

2006-07 34.12 14.19 2.40

2007-08 34.58 14.19 2.43

GRAPH 9: GRAPH SHOWING STATUS OF PROFIT EARNED BY THE

COMPANY AND EQUITY SHARE CAPITAL

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GRAPH 10: GRAPH SHOWING RETURN ON EQUITY RATIO

INTERPRETATION

The ratio indicates that the profitability for the equity shareholders. The above figures

indicate that the equity shareholders are getting better returns on their investments. The

company has been able to provide good returns to its equity investors over the last three

years.

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4.6 RETURN ON TOTAL RESOURCE

TABLE 6: TABLE SHOWING RETURN ON TOTAL RESOURSE

YEARNET PROFIT

(Rs in Cr.)TOTAL ASSETS

(Rs in Cr.)RATIO

2005-06 32.79 401.08 0.082

2006-07 34.12 417.71 0.082

2007-08 34.58 470.70 0.074

GRAPH 11: GRAPH SHOWING STATUS OF NET PROFIT ACURRED AND

TOTAL ASSETS

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GRAPH 12: GRAPH SHOWING RATURN IN TOTAL RESOURCES

INTERPRETATION

It is the ratio of net profit to total resources or total assets. Return here means net

profit after taxes and total resources means all realizable assets including intangible assets, if

they are realizable. This ratio measures the productivity of the total resources of a concern.

On analysis of the ratio it denotes that the company is able to maintain its productivity over

the three year period.

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4.7 EARNING PER SHARE

TABLE 7: TABLE SHOWING EARNINGS PER SHARE

EARNING PER SHARE :-

YEAR EPS

2005-06 23.10

2006-07 24.04

2007-08 24.37

GRAPH 13: GRAGH SHOWING EARNING PER SHARE

INTEPRETATION

EPS denotes the earning potential per share. Higher the return indicates that the

shareholders are getting better returns on their investments. In this case the EPS shows an

increasing trend indicating better return on investments.

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4.8 MATERIAL COST RATIO

TABLE8: TABLE SHOWING MATERIAL COST RATIO

YEARMaterial

Cost Ratio

2005-06 42

2006-07 40

2007-08 40

GRAPH 14: GRAPH SHOWING MATERIAL COST RATIO

INTEPRETATION

This ratio indicates the material consumption cost to the sales value. On an analysis of

the above ratio it indicates that the material cost is around 40% of the sales value and the

company is able to maintain the cost at a fairly consistent level.

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4.9 LABOUR COST RATIO

TABLE 9: TABLE SHOWING LABOUR COST RATIO

YEAR Labour Cost Ratio

2005-06 4.9

2006-07 4.5

2007-08 4.3

GRAPH 15: GRAPH SHOWING LABOUR COST RATIO

INTEPRETATION

This ratio indicates the labor cost to the sales value. On an analysis of the above ratio

it indicates that the labour cost is around 4.5% of the sales value and the company is able to

reduce the labor cost on a year on year basis.

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4.10 FACTORY OVERHEADS COST RATIO

TABLE 10: TABLE SHOWING INTEREST PAYOUT RATIO

YEAROverhead Cost

Ratio

2005-06 47

2006-07 45

2007-08 45

GRAPH 16: FACTORY OVERHEADS COST RATIO

INTEPRETATION

This ratio indicates the total factory overheads cost to the sales value. On an analysis

of the above ratio it indicates that the factory overheads cost is around 45% of the sales value

and the company is able to reduce & maintain the cost at a fairly consistent level largely due

to reduction in labour cost.

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4.11 SELLING AND DISTRIBUTION EXPENSES RATIO

TABLE 11: TABLE SHOWING SELLING AND DISTRIBUTION EXPENSES

RATIO

YEARSelling & Distribution

Cost Ratio

2005-06 9

2006-07 8

2007-08 8

GRAPH 17: SELLING AND DISTRIBUTION EXPENSES RATIO

INTEPRETATION

This ratio indicates the selling & distribution cost to the sales value. On an analysis of

the above ratio it indicates that the selling & distribution cost is around 8% of the sales value

and the company is able to reduce & maintain the cost at a fairly consistent level largely due

to reduction in advertisement cost.

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CHAPTER - V

FINDINGS AND SUGGESTIONS

5.1 FINDINGS

The current liabilities of the company are increasing continuously from year after year.

But when compared to these, current assets are also increasing year after year.

Current ratio was not constant during these three years. 2005-06 and in 2007-08 it was

more but in 2006-07 it was less.

Current ratio of the company is comfortable for the company although it showed a small

drop during the year 2006-07, but recovered during 2007-08

The company seems to be piling up its inventory position which has resulted in higher

sales during the three year period.

The debtors position shows an upward trend. Although as stated above, the sales are

improving, it is better to reduce the debtors position.

The cash balance position of the company shows a huge drop indicating that its inability

to maintain liquid assets.

Loans and advances position shows an upward trend

Indicating amounts locked up in small advances.

The share capital of the company is constant for the three year period indicating that the

company seems not to have any major expansion plans.

Since the profits for the three year period is almost the same it indicates flat market

conditions. The company seems to be discharging its secured loans out of its liquid assets.

At the same time the company seems to be borrowing more unsecured loans in place of

secured loans. The company has not added fixed assets over the three year period

indicating lack of any major expansion plans.

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5.2SUGGESTIONS

The company has to maintain its current assets to be more so that it will be double the

current liabilities and it should meet the standard ratio 2:1. This will help the company

to meet its current obligations easily. Or the company can decrease its liabilities to

meet the standard ratio.

Cash maintained by the company should be increased so that the cash position ratio is

kept to the standard i.e. 1:1. The standard can be reached either by increasing cash

maintained or by decreasing current liabilities.

Interest payout ratio of the company has to be kept low because higher the interest

payout ratio will decrease the profit of the company.

The company has to maintain its fixed assets less so that to avoid large funds tie up in

the fixed assets.

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CHAPTER - VI

CONCLUSION

6.0 CONCLUSION

The study entitled “A STUDY ON PERFORMANCE EVALUATION OF MIRC

ELECTRONICS LIMITED USING FINANCIAL RATIO ANALYSIS” has been

undertaken with the objective to analyze and interpret the company’s financial performance.

The analysis of the company was undertaken with the help of ratios, which are important

tools of financial analysis.

The company’s liquidity position is satisfactory as the current ratio is as per the

norms. But the company does not seem to have enough cash(liquid resources) to meet its

short term obligations. The company has to improve its cash position by more efficient

measures to turn around its inventory and debtors position.

The proprietary ratio reveals that the share holders funds are not properly invested in

the assets of the company. It indicates that company is not comfortable in raising its long

term financial requirements. Cash in hand maintained by the company is not adequate. There

is no consistency in maintaining the cash. And also the company is maintaining very few

amounts of cash in hand.

After having the solved ratios and analyzing the financial data , we can conclude that ,

the company’s position is stable in maintaining its present position. It seems that the

company is maintaining a status quo position in its business strategies.

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However considering the overall consumer electronics market with regard to

consumers expectation and the competitors aggressive growth plans, the company has to

chalk out plans to increase its product plans and put in place a more bold plan to make its

presence felt in the market, otherwise the company will become stagnant.

Thus ratio analysis is an very useful tool in analyzing, which has high lighten the

financial performance of MIRC ELECTRONICS LIMITED in key areas and also has helped

in the avocations of certain strategies to be followed by the company which is indispensable

to its future growth.

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