Company Profile
Company Profile
Company Profile
Company Profile
Name of the Company
(1) Videocon has the largest panel production facility in the world under one
roof providing very high economies of scale.
(2) It is one of the world’s largest and most respected CRT glass
manufacturers.
(3) Videocon has a name in firing the largest furnace of its kind in the world
with a tank size of 3300 sq ft.
(4) Videocon is among one of the very few companies in the world who
have been able to convert sand to Television.
(6) Videocon has been successful in manufacturing India’s first rust free
Washing Machine.
Financial Highlights
A statement showing Inflow and Outflow of cash during the last year
and as a result of which the balance of cash at the end of the year is
derived, is called the ‘Cash flow Statement’.
Following are the findings from cash flow statement of the year 30 th
September, 2009
4. So, net profit from operating activities for the year 2009 is Rs. 7142.17
millions.
The ratios are grouped into three categories on the basis of financial
statement from which the figures are taken for computing the ratios. This is
known as the traditional classification and has been grouped in this form
since the advent of ratio analysis. Classification of the ratios based on the
traditional method is done as follows
These ratios are computed on the basis of items taken from revenue
statement.
When two items or group of items appearing in the balance sheet are
compared, the ratios so obtained are the balance sheet ratios.
A ratio showing the relationship between one item taken from the
balance sheet and another taken from the profit and loss account is called
a composite or combined ratio.
4. Liquidity Ratios
5. Leverage Ratios
(1) Proprietary ratio
6. Coverage Ratios
Meaning
Implication
High ratio implies the cost of production to be relatively low. Low ratio
suggests that the firm’s cost of production is not under control.
Formula
Interpretation
Meaning
This ratio measures the relation between the net profits and sales of
the firm. The reasonable ratio ensures adequate return to the owners.
Implication
High ratio implies that the business will withstand adverse economic
conditions of decline in selling price, rising cost of production and falling
demand of the product. Decline in the ratio implies that the proportions of
administrative as well as selling and distribution expenses have risen
considerably.
Formula
Interpretation
The Net Profit has decreased drastically in the three years. Net profit in
the year 2008 is 8.45% which has decreased as compared to the year
2007 i.e. 9.82%. And then it has further decreased in year 2009 by another
4.18%.
(3) Expense ratio
Meaning
Implication
High ratio indicates that only a small part of sales revenue is available
for meeting financial liabilities.
Formula
Interpretation
Meaning
Implication
Lower the ratio, greater is the operating profit to cover the non –
operating expenses, to pay the dividend and to create reserves and vice
versa.
Formula
Interpretation
Meaning
Implication
Formula
Interpretation
Return on capital employed says that higher the ratio is better for the
firm. So the company will try to increase their ratio. Here, the ratio is
gradually decreasing which is not good for the company in terms of
profitability. But it still needs to achieve higher target.
(6) Return on share holder’s fund
Meaning
Profit is earned for the owners of the business due to which they are
interested in the returns they get on their money invested in the company
business. This return is measured with the help of the return on
shareholder’s fund.
Implication
This ratio indicates how profitably the funds provided by the owners
have been used in the business. Higher the ratio, more efficient is the
management and utilization of the shareholder’s fund.
Formula
Interpretation
Meaning
Implication
This ratio indicates profitability of the firm from the viewpoint of the
real owners of the company who are ordinary shareholders, who bear all
the risks of the business. Higher the ratio, more efficient is the
management and utilization of equity share capital.
Formula
Interpretation
Meaning
Implication
Formula
Interpretation
The return on equity share holder fund has increased in the year
2008. The rate of diminishing is seen greatly in the year 2009.
(9) Earning per share
Meaning
Implication
Formula
Interpretation
Meaning
Implication
This ratio indicates that, higher the return on equity and higher the
retention rate, higher will be the rate of growth in earnings the company can
sustain.
Formula
Interpretation
The dividend declared has decreased in the second year but then in
the third year it has again decreased. So, company needs to increase the
dividend per share.
(11) Price earning ratio
Meaning
It shows the relation between the market price of the share and the
earnings per share. It signifies the price that is currently ruling in the market
for each rupee of earnings being made by the company per share.
Implication
The higher the price earning ratio, the better it is for the owners.
Formula
Price Earning Ratio = Market Value Per Share / Earning Per Share
Interpretation
(12) Dividend yield ratio
Meaning
Implication
Formula
Dividend Yield Ratio = (Dividend Per share / Market Value Per share)
* 100
Interpretation
Activity / Turnover Ratios
Meaning
Implication
Formula
Interpretation
The overall turnover ratio shows a declining trend in the three years
which is beneficial for the company.
(2) Fixed assets turnover ratio
Meaning
Implication
Formula
Interpretation
Meaning
This ratio shows the number of days taken to collect the dues of
credit sales. It shows the efficiency or otherwise of collection policy of an
enterprise.
Implication
Formula
Interpretation
This ratio suggests the number of times the amount of credit sale is
collected during the year.
Implication
Formula
OR
Interpretation
Implication
Formula
Interpretation
Implication
Formula
OR
Interpretation
The ratio in the year 2007 is 8.49 times which increases to 11.06
times in the year 2008 which further decreases to 9.36 times in the year
2009.
The ratio signifying the efficiency of sales is called the stock turnover
ratio. It shows the number of times the average stock is turned over during
the year.
Implication
Higher the turnover, the business would be more profitable. But very
high ratio is also not preferable as it would mean under – investment in
inventory which would mean that the firm is not able to meet the customer’s
demand fully. Low turnover indicates over investment in stocks.
Formula
Interpretation
From the above table we can see that the company has done well in
recent years. It shows that the company is making its stock turnover
frequently.
Implication
Formula
Interpretation
Implication
Formula
Interpretation
Liquidity Ratios
(1) Current Ratio
Meaning
The current ratio shows the proportion between current assets and
current liabilities.
Implication
Formula
Interpretation
Implication
Formula
Interpretation
Implication
Formula
Interpretation
From the above calculations we can say that in the three years the
acid test ratio is not quite satisfactory.
Leverage Ratio
(1) Proprietary ratio
Meaning
Implication
Formula
Interpretation
Implication
Higher debt equity ratio indicates that outside creditors have a larger
claim of the business. Lower ratio is not beneficial from the view point of
the company because it is not profitable from the view point of equity share
holders as benefit of trading on equity is not availed of and the rate of
equity dividend will be comparatively lower.
Formula
Interpretation
The Debt – Equity ratio shows upward trends which shows the long
term liability are more used and the advantages of equity is taken.
Implication
The higher this ratio, the capital structure of this company is said to
be completely geared. Higher the ratio, more unstable will be the ordinary
shares because major shares of the profit will be absorbed by debenture
interest and preference dividend and there will be greater fluctuations in the
rate of equity dividend.
Formula
Interpretation
Meaning
This ratio shows the relationship between fixed capital and fixed
assets. This ratio should always be 1:1 or more i.e. the fixed capital must
be more than fixed assets or must at least be equal to fixed assets.
Implication
If fixed capital is less than fixed assets it implies that short term funds
have been used in purchasing fixed assets.
Formula
Long Term Fund To Fixed Assets = (Long Term Fund / Fixed Assets)
* 100
Interpretation
Coverage Ratios
Meaning
The interest coverage ratio indicates as to how many times the profit
covers the payment of interest on debentures and other long term loans.
Implication
Higher the ratio, more sound is the financial strength of the company.
Very high ratio shows the firm is not making proper use of outside debt.
Lower ratio indicates that the firm is using excessive debt.
Formula
where, PBDIT stands for profit before depreciation, interest and tax.
Interpretation
(2) Debt service coverage ratio
(a) Fixed assets are stated at actual cost, except for those fixed
assets that have been stated at revalued amounts, less accumulated
depreciation / amortisation and impairment loss, if any. The actual costs
are inclusive of all additional expenses related to the acquisition and
installation of the respective assets.
(b) The advances given for acquiring fixed assets are shown under
Capital Work in Progress which is carried at cost, comprising of direct cost,
attributable interest and related incidental expenditure.
The company follows the “Full Cost” method of accounting for its oil
and natural gas exploration and production activities, which in all are
treated as capital work-in-progress and are accumulated in a cost centre.
(5) Abandonment Costs
(Rs. in Millions)
Particulars Year
ended
30th
Sept.,
2009
Net sales 91630.41
Other Income 340.15
Total Income 91970.56
Profit before Interest, Depreciation, Exceptional 17918.57
Items and Tax
Interest and Finance charges 6363.61
Depreciation 5771.52
Exceptional Items -
Profit before Tax 5783.44
Provision for Taxation 1776.82
Profit after Tax 4006.62
Operations
(3) Telecom
(4) Power
Appropriations
(1) Dividend
Fixed Deposits
The Company has never accepted any fixed deposit within the
meaning of Section 58A of the Companies Act, 1956 and as such, no
amount of principle or interest was outstanding as of the Balance Sheet
date.
Personnel
and persistence.
Listing
The equity shares of the Company are listed on the Bombay Stock
(1) The sales of the firm in the year 2007 was Rs. 87102.58 millions which
increased to Rs. 101051.28 millions in the year 2008 and again decreased
to Rs. 93812.69 millions in the year 2009.
(2) Due to increase in sales, there is increase in gross profit in the year
2008. In the year 2007 gross profit was Rs. 38121.24 millions, which
increased to Rs. 48140.81 millions in 2008 and in year 2009 it was Rs.
35486.45 miilions.
(4) The interest expenses in the year 2007 was Rs.3106.51 millions, in
2008 it was Rs.4011.03 millions and in 2009 it was Rs.6363.61 millions.
This shows that there is increase in the interest payment of the firm.
(5) In the year 2007 the net profit was Rs. 8552.19 millions, in 2008 it was
Rs. 8542.95 millions and in 2009 it was Rs. 4006.62 millions.
(6) In this common size statement of the balance sheet for three years,
shareholders fund for the year 2007 was Rs. 321068.27 millions, for 2008 it
was Rs. 68137.97 millions and for 2009 it was Rs.72050.41 millions. So
here we can say that there is an increasing trend in the shareholders fund.
(7) Loan funds amount for three consecutive years 2007, 2008 and 2009
are Rs. 52596.36 millions, Rs. 80055.94 millions and Rs. 90845.47 millions
respectively.
(8) Fixed assets of the firm have been depreciated year after year. In 2007
it was Rs. 53194.71 millions, for 2008 it was Rs. 59266.71 and for 2009 it
was Rs. 60202.73 millions.
(9) Net current assets of the firm for the year 2007 were Rs. 37839.49
millions, for 2008 it was Rs. 66215.62 millions and for 2009 it was Rs.
78117.55 millions.
(10) Total of assets and liabilities for the year 2007 amounted to Rs.
111959.17 millions, for 2008 it was Rs. 152438.21 millions and for the year
2009 it was Rs. 168969.27 millions.
Chapter : 8
Conclusion &
Findings
I have prepared this report on the basis of the information
available in the annual report of Videocon Industries Limited.
From the above report, I conclude that of Videocon Industries
Limited has a good future. The company has good technology for the
production of its products.
Total sales of the company are fluctuating from the last three years.
The amount of dividend declared by the company is also increasing
year by year. So, according to me, Videocon Industries Limited is
doing an excellent business and it is a very profitable and popular
company.