NTCC PROJECT

Financial Trend Analysis

Of
v-guard industries

Submitted by : RG DINESH RAJA

Course : B.com (Hons), batch 2016-19
Faculty guide: renuka bakshi
CONTENTS

ACKNOWLEDGEMENT
1. INTRODUCTION TO THE COMPANY
1.1. ABOUT WIPRO LTD.
1.2. RESEARCH OBJECTIVE
2. FINANCIAL TOOLS AND TECHNIQUES
2.1. PROFITABILITY RATIO
2.2. SOLVENCY RATIO
2.3. ACTIVITY/TURNOVER RATIO
2.4. LIQUIDITY RATIO
3. ANALYSIS AND FINDINGS OF FINANCIAL STATEMENTS
3.1 LIQUIDITY RATIO
3.2 PROFITABILITY RATIO
3.3 SOLVENCY RATIO
3.4 ACTIVITY RATIO
4. CONCLUSION
 Executive summary

This work contains the financial data of the

electrical and electronics equipments
manufacturing company v guard . It briefly
explains the working of the company and its
main objective is to analyse various financial
ratios and predict the necessary data for the
future profitability of the company .

It also explains the findings graphically and

does the derivance of data more effective .
 Acknowledgement
I would like to show my gratitude to all
those who have helped me in making of this
project. I would like to thank my faculty
Renuka bakshi for the inputs in the making
of the project. I would also like to thank my
friends for giving the inputs and necessary
data the completion of this assignment.

I would like to thank v guard industries for

helping me with their data and giving me the
necessary financial information without
which the completion of this project is
impossible .
Chapter 1
Introduction of the company

V-Guard Industries Ltd is a noteworthy electrical appliances

producer in India, and is the biggest private firm of Kerala
with a yearly turnover of $17.50 billion It produces voltage
stabilizers, electrical link, electric pumps, electric engines,
springs, sun based water radiators, electric fans and UPSs. It
was established in 1977 by Kochouseph Chittilappilly as a
little voltage stabilizer fabricating unit.
Kochouseph Chittilappilly likewise established different
foundations held as auxiliaries, for example, V Star
Creations, an Indian maker of innerwear for men, ladies,
and youngsters, and Wonder, a chain of entertainment
meccas in South India.

History
V-Guard is one of India's shopper merchandise
organization with expanded item offerings.
Headquartered in city of Kochi, Kerala, the
organization now has more than 500 wholesalers,
20,000 retailers, and branches crosswise over India.
It's recorded with the NSE and BSE since 2008.
Throughout the years V-Guard has sold into
household, modern and horticultural electronic
products and apparatuses class taking the aggregate
organization income to over Rs. 1700 Crore in 2014-15

The organization begun in 1977, when Kochouseph

Chittilappilly embarked to fabricate a brand in the
Indian electric and electronic products industry The
organization begun with a little assembling unit for
voltage stabilizers, a capital of Rs.100,000 and two
representatives. The Kangaroo logo was made by
craftsman Sreekandan V.A. (Mani).

The organization's present Managing Director,

Mithun Chittilappilly is a Post Graduate in
Management from the University Of Melbourne,
Australia. In the year 2006, he joined V-Guard as the
Executive Director and in 2012 , he was delegated as
the Managing Director of the organization. Mithun
Chittilappilly has beforehand worked with driving
MNCs like Deloitte and Hewlett Packard
The research objective of this project -
Is to analyse the financial data in relation with the
electrical and electronics manufacturing industry in
india.
It goes for spreading mindfulness as of how the hazard
factor in running such tremendous firms can be
lessened by building up a strict control on specific
factors, for example, obligation value proportion,
stock turnover proportion
It also aims at providing the technical and pratical
aspects of finance in such firms
 PROFITABILITY RATIOS

Gross Profit Ratio

Gross profit margin is a financial metric used to assess a company's

financial health and business model by revealing the proportion of
money left over from revenues after accounting for the cost of goods
sold (COGS). Gross profit margin, also known as gross margin, is
calculated by dividing gross profit by revenues. Also known as "gross
margin."

Calculated as:

Where: COGS = Cost of Goods Sold

Operating Ratio
Operating Ratio is a profitability ratio that is computed by dividing
Operating cost by Net sales. It is expressed in percentage form.
Operating Ratio = (Operating Cost/Net Sales) X 100
Operating Cost = Cost of goods sold + Administrative Expenses +
Selling and Distributive Expenses.
The operational efficiency of the management is measured through this
ratio.
Operating Profit Ratio
The operational efficiency is determined by calculating operating profit
ratio.
Operation profit ratio = (Operating profit/sales)x 100

Net Profit Ratio

Net Profit Ratio shows us the relationship between net profit after tax
and net sales. formula:
Net Profit Ratio = (Net Profit after tax/Net Sales) X 100
Net Profit can be calculated by subtracting operating expenses and
income tax from gross profit.
This ratio is used to assess the overall profitability of the business.

Return on Investment
Return On Investment Ratio = (Profit before Int and Tax / capital
employed) X 100
A performance measure used to evaluate the efficiency of an
investment or to compare the efficiency of a number of different
investments. ROI measures the amount of return on an
investment relative to the investment cost To calculate ROI, the
benefit (or return) of an investment is divided by the cost of the
investment, and the result is expressed as a percentage or a ratio
SOLVENCY RATIOS

Debt to Equity Ratio

The debt to equity ratio is a solvency ratio that compares a companys
total debt to total equity. It is computed by dividing total liabilities by
total equity. This ratio is also considered to be a balance sheet ratio since
all of the elements are listed on the balance sheet.
Debt to Equity Ratio =Total Debt(long term external equities) / Equity
A lower ratio usually implies a more financially stable business.

Proprietary Ratio
Proprietary Ratio, also known as the net worth ratio or equity ratio)
,evaluates the soundness of the capital structure of a firm. It is
calculated by dividing shareholders funds by total assets.
Proprietary Ratio = Shareholders Funds / Total Assets
 ACTIVITY/TURNOVER RATIOS

Inventory Turnover Ratio

Inventory Turnover Ratio is an activity ratio which evaluates the liquidity
of the inventories of a company. It measures the number of times a
particular company has sold or replaced its inventory during a certain
period of time.
Inventory Turnover Ratio = Cost of goods sold / Average Inventory
Cost of goods sold = Cost of goods manufactured + Opening inventory
Closing inventory
Average Inventory = (Opening Stock + Closing Stock) / 2

Receivables or Debtors Turnover Ratio

Debtors Turnover Ratio is calculated from dividing the credit revenue
from operations by average trade receivables.
Debtors Turnover Ratio = Credit revenue from operations / Average
trade receivables
Average Trade Receivables = (Opening trade receivables + Closing trade
receivables) / 2
This ratio simply measures the efficiency in collection of the amount that
is due from trade receivables.
Payables or Creditors Turnover Ratio
Creditors Turnover Ratio is calculated from dividing the net credit
purchases by the average of trade payables.
Creditors Turnover Ratio = Net Credit purchases / Average trade
payables
Average Trade Payables = (Opening & closing balances of trade payables)
/2
This ratio measures the credit worthiness of the company.

Working Capital Turnover Ratio

Working Capital Turnover Ratio is found out by dividing Revenue from
operations by Working Capital.
Working Capital Turnover Ratio = Revenue from operations / Working
Capital
Working Capital = Current assets Current liabilities. This information is
listed on the balance sheet.
This ratio evaluates the number of times working capital has been
employed over a period of time in order to carry on business.
LIQUIDITY RATIOS
Current Ratio
Current Ratio is used to evaluate the short term solvency position of a
business. It is calculated by dividing total current assets by total current
liabilities of the business.
Current Ratio = Current Assets / Current Liabilities
Current assets and current liabilities are present in the balance sheet of
the company.

Ratio/Quick Ratio/Acid Test Ratio

Quick Ratio tests the ability of a business to pay its short term debts. It is
used to measure the relationship between liquid assets and current
liabilities.
Quick Ratio = Liquid Assets or Quick Assets / Current Liabilities
Liquid Assets = Total current assets (Inventories + Prepaid Expenses)
Quick Ratio is a more preferred ratio than Current Ratio to test short
term solvency since it measures the ability of a business to pay short term
debts immediately.

Absolute Liquid Ratio

Absolute Liquid Ratio = Absolute Liquid Assets/ Current Liabilities
 ACTIVITY/TURNOVER RATIOS

inventory Turnover Ratio

Inventory Turnover Ratio is an activity ratio which evaluates the liquidity
of the inventories of a company. It measures the number of times a
particular company has sold or replaced its inventory during a certain
period of time.
Inventory Turnover Ratio = Cost of goods sold / Average Inventory
Cost of goods sold = Cost of goods manufactured + Opening inventory
Closing inventory
Average Inventory = (Opening Stock + Closing Stock) / 2

Receivables or Debtors Turnover Ratio

Debtors Turnover Ratio is calculated from dividing the credit revenue
from operations by average trade receivables.
Debtors Turnover Ratio = Credit revenue from operations / Average
trade receivables
Average Trade Receivables = (Opening trade receivables + Closing trade
receivables) / 2
This ratio simply measures the efficiency in collection of the amount that
is due from trade receivables.
Payables or Creditors Turnover Ratio
Creditors Turnover Ratio is calculated from dividing the net credit
purchases by the average of trade payables.
Creditors Turnover Ratio = Net Credit purchases / Average trade
payables
Average Trade Payables = (Opening & closing balances of trade payables)
/2
This ratio measures the credit worthiness of the company.

. Working Capital Turnover Ratio

Working Capital Turnover Ratio is found out by dividing Revenue from
operations by Working Capital.
Working Capital Turnover Ratio = Revenue from operations / Working
Capital
Working Capital = Current assets Current liabilities. This information is
listed on the balance sheet.
This ratio evaluates the number of times working capital has been
employed over a period of time in order to carry on business.
 CHAPTER 3
3.1.Liquidity Ratios:

3.1.1.Current Ratio = current assets / current liabilities

2014 = 1.96

2015=1.94

2016 = 2.25

ANALYSIS : The increase in the current ratio shows thats there is an

increase in the financial stability of the company. This also means that the
company will be able to meet its working capital obligations.

3.1.2. Quick Ratio = Quick assets / current liabilities

2014 = 0.98

2015 = 1.04

2016 = 1.39

ANALYSIS: The increase in quick ratio tells us that the company is in a

good financial positions and the company has more liquid assets than the
previous year.
 Profitability Ratios :

3.2.1. Gross Profit Ratio = (gross profit / net sales ) x 100

2014 = 7.28%

2015 = 6.73%

2016 = 8.73%

ANALYSIS: The gross profit ratio is seen to be increasing over the years.
Which signifies a rise in the gross profit in relation to the net sales of the
company. It is a positive growth.

3.2.2. Operating Ratio = ( operating cost/ net sales)x100

2014 = 9.55%

2015 = 7.61%

2016 = 8.67%

ANALYSIS: It can be seen that the operating ratio is decreasing over the
years. Since operating ratio shows the efficiency of a companys
management by comparing operating expenses to net sales, the lesser the
ratio,the better it is for the company. Hence, the companys operating cost
is going down, making it a positive growth.

Operating profit Ratio = (Operating profit / Net sales) 100

2014= 41.06

2015= 44.38

2016= 59.17

ANALYSIS:it is seen that the profit ratio with relation to the operating profit
is good and the rate of profit increases with compred to the net sales

3.2.3. Net Profit Ratio = (net profit / net sales)x100

 2012 = 17.58%

2013 = 16.43%

2014 = 18.30%

ANALYSIS: We can see that the net profit ratio is decreasing to 16.43 in
the year 2013. It means that the net profit of the company has been
reduced in relation to its net sales. However in the year 2014, the net profit
ratio has gone up to 18.30% signifying the increase in the net sales of the
company. This shows the companys efficient working conditions and its
ability to produce at a higher profit.

3.2.4. Return On Investment Ratio = (Profit before Int and Tax /

capital employed) X 100

2012 = 23.51%

2013 = 29.14%

2014 = 29.81%

ANALYSIS: Increase in the Return on Investment ratio implies that the

company has been using its resources efficiently as entrusted upon them.

3.2.5. Operating Profit Ratio = (Operating Profit/ sales) x 100

2012 = 23.12%

2013 = 21.31%

2014 = 22.97%

ANALYSIS: As we can see that the operating profit ratio is increasing over
the years, this means that there has been an increase in the operational
efficiency of the management which will ultimately help the company to
grow and expand.