f a mgnt-lg final
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INTRODUCTION:
Financial management is a service activity which is concerned with
providing quantitative information which is of financial nature which may
be needed for making Economic decisions regarding the choice among
alternative course of actions
The financial management is a process of identification accumulation,
analysis preparation interpretation and communication of financial
information to plan evaluate and control a business firm.
Financial management is that specialized function of general
management which is related to the procurement of finance and its effective
utilization for the achievement of the goals of an organization.
Finance may be defined as the provision of money at the time where,
it is required. Finance refers to the management flews of money through an
organization. It concerns with the application of skills in the manipulation,
use and control of money. Different authorities have interpreted the term
finance differently. However there are three main approaches to finance.
The first approach views finance as to providing of funds needed by a
business on most suitable terms this approach confines fiancs to the
raising of funds and to the study of financial institutions & instruments
from where funds can be procured.
The second approach relates fianc to cash.
The third approach views fianc is being concerned with raising funds &
their effective utilization.
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Objectives of Financial Management:
In order to meet the day to day operation every firm should maintain
necessary liquid assets.
The immediate objective of any business is to earn profit and
maximize the profit as much as possible.
Profit maximization at the cost of social or moral obligation is a short
signated policy.
Wealth Maximization is better criteria rather than profit
maximization. Any financial action which creates wealth.
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Objectives Of the Study:
The study is made to known the amount of capital expenditure made
by the company during study period.
The study is conducted to evaluate depreciation and method of
depreciation adopted by LG.
Profit maximization is not considered as basic idea for making
investment and financing decision through Fixed Asset Management.
The study is evaluate is giving adequate returns to the company.
Study is conducted to evaluate that if fixed assets are liquidated. What
is the proportion of fixed assets amount will contribute for payment of
owner fund and long term liabilities.
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Sources of Data:
After going through different methods of data collection, it was decided that
both primary and secondary data are suitable for this survey.
Primary Data:
The primary data was collected mainly with interactions and discussionswith the companys executives.
Secondary Data:
The data gathering method is adopted purely form secondary sources.
The theoretical content is gathered form eminent text book referenceand library at LG ELECTRONICS.
The financial data and information is gathered from annual reports ofthe company internal records.
Interpretation, Conclusions and suggestions are purely base on myopinion and suggestions provided by the project guide.
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Need for study:
Fixed Assets play vary important role in realign companys objectives
the firms to which capital investment vested on fixed assets. Theses fixed
assets are not convertible or not liquid able over a period of time the total
owner finds and long term liabilities are invested in fixed assets. Since fixed
assets playing dominant role in total business the firms has realized the
effective utilization of fixed assets. So ration contributes very much in
analyzing and utilized properly it effects long term sustainability of the firms
in analyzing and utilized properly it affect long term sustainability of the
firms which may effect liquidity and solvency and profitability positions of
the company. The idle of fixed assets lead a tremendous in financial cost and
intangible cost associate to it. So there needs lead a tremendous in financial
cost and intangible cost associate to it. So there is need for the companies to
evaluate fixed assets performance analysis time to time by comparing with
pervious performance comparison with similar company and comparison
with industry standards. So chose a study to conduct on the fixed assets
analysis of LG ELECTRONICS. Using ratio in comparison with previous
year performance, the title of the project is analysis on Fixed Assets
management.
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Importance:
Fixed assets are the assets which cannot be liquidates into cash within
one year. The large amount of the company is invested in these assets. Every
year the company investment a additional fund in these assets directly or
indirectly the survival and other objectives of the company purely depends
on operating performance of management in effective utilization of there
assets.
Firm has evaluate the performance of fixed assets with proportion of
capital employee on net assets turnover and other parameters which is
helpful for evaluating the performance of fixed assets.
Scope Of Study:The project is covered of fixed Assets of LG ELECTRONICS. drawn
form annual report of the company. The fixed assets considered in the
project is which cam not be converted into cash with one year. Ratio
analysis is used for evaluating fixed assets performance of LG
ELECTRONICS.
The subject matter is limited to fixed assets it analysis and its performance
but not any other areas of accounting, corporate marketing and financial
matters.
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METHODOLOGY
The present study confines to the evaluation of overall financial
performance ofLG Electronics.
For this purpose of the study the recent five years period(2005-2006
to 2010-2011) is selected.
The data used for analysis and interpretation from annual reports of
the company that is secondary forms of data.
Trend analysis and Ratio analysis are the techniques used for
calculation purpose.
The project is presented by using tables, graphs and with their
interpretations.
No survey is undertaken or observation study is conducted in
evaluating Fixed Assets performance ofLG ELECTRONICS.
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Limitations:
The study period of 45 days as prescribed by Osmania University.
The study is limited up to the date and information provided by LGELCTRONICS INDIA LTD and its reports.
The reports will not provide exact fixed Assets status and position inLG ELECTRONICS. it may varying form time to time and situationto situation.
This report is not helpful in investing in LG ELECTRONICS. Either
through disinvestments or capital market.
The accounting procedure and other accounting principles are limitedby the company changes in them may vary the fixed assetsperformance.
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Objectives of the study:
The study is conducted to evaluate fixed assets performance of the
study is conducted to evaluate the fixed assets turnover on LGELECTRONICS.
The study is made to known the amount of capital expenditure madeby the company during study period.
The study is conducted to evaluate depreciation and method ofdepreciation adopted by LG ELECTRONICS.
The study is conducted to known the amount of finance made by longterm liabilities and owner funds towards fixed assets.
Study is conducted to evaluate that if fixed assets are liquidated. Whatis the proportion of fixed assets amount will contribute for payment ofowner funds and long term liabilities.
The study is to evaluate adequate returns to the company.
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REVIEW LITERATURE
THEORITICAL CONCEPT
INTRODUCTION:
TANGIBLE FIXED ASSETS are those, which have physical existence and
generate goods and services. Included in this category are land, building,
plants, machinery, furniture, and so on. They are shown in the balance sheet,
in accordance with the cost concept, at their cost to the firm at the time they
were purchased. Their cost is allocated to/charged against/spread over their
useful life. The yearly charge is referred to as depreciation. As a result, the
amount of such assets shown in the balance sheet every year declines to the
extent of the amount of depreciation charged in that year and by the end of
the useful life of the asset it equals the salvage value, if any. Salvage value
signifies the amount realized by the sale of the discarded asset at the end of
its useful life.
INTANGIBLE ASSETS do not generate goods and services directly. In a
way, they reflect the rights of the firm. This category of assets comprises
patents, copyrights, trade marks and goodwill. They confer certain exclusive
rights to their owners patents conger exclusive rights to use an invention,
copyrights relate to production and sale of literary, musical and artistic
works, trade marks represent exclusive right to use certain names, symbols,
labels, designs, and so on intangible fixed assets are also written-off over a
period of time.
Intangible assets lack physical substance and arise form a right granted by
the government or another company. Intangibles may be acquired or
developed internally. Examples of rights granted by the government are
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patents, copyrights, and trademarks, while am example of a privilege granted
by another company is a franchise. Other types of intangibles include
organization costs, leasehold improvements, and goodwill. Organization
costs are the expenditures incurred in starting a new company; an example
would be legal fees. Leasehold improvements are expenditures made by a
tenant to his or her leased property, such as the cost of putting up new
paneling. Goodwill represents the amount paid for another business in
excess of the fair market value of its tangible net assets. For example, if
company A paid $ 1000,000 for company Bs net assets having a fair market
value of $84,000, the amount paid for goodwill is $16,000. Goodwill can be
recorded only when a company purchases another business. The amount
paid for the goodwill of a business may be based upon the acquired firms
excess earnings over other companies in the industry. Internally developed
goodwill (e.g., good customer relations) is not recorded in the accounts.
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ACCOUNTING FOR INTANGIBLE ASSETS:
APB Opinion 17 specifies the requirements for accounting for intangible
assts. Intangibles that have been acquired, such as goodwill, should berecorded at cost. In the event that an intangible is acquired for other than
cash, it should be reflected at either the fair market value of the
consideration given or the fair market value of the right received, whichever
is more clearly evident. Intangibles should not be arbitrarily written off if
they still have value.
When identifiable intangibles are internally developed (e.g., patents), they
should be recorded as assets and reflected at cost. If they are not identifiable,
they should be expensed.
Intangible assets must be amortized over the period benefited not to exceed
40 years. Amortization is a term used to describe the systematic write-off to
expense of an intangible assets cost over its economic life. The straight-line
method of amortization is used. The amortization entry is Amortization
expense Intangible asset The credit is made directly to the given intangible
asset account. However, it would not be incorrect to credit an accumulated
amortization account, if desired. Some intangibles have a limited legal life.
An example is patents, which have a legal life of 17 years.
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DEFERRED CHARGES:
Deferred charges are of along-term, nonrecurring nature. They are allocated
to a number of future periods. Examples are start-up costs and plantrearrangement costs.
Deferred charges are customarily listed as the last asset category in the
balance sheet since their dollar value is usually insignificant relative to total
assets.
OTHER ASSETS:
When non-current assets cannot be properly placed into the assetclassifications already
Discussed, they may be included in the Other Assets category. Placement of
an item in this classification depends upon its nature and dollar magnitude.
However, this classification should be used as a last resort.
COLLECTIBLE ASSETS:
Not surprisingly, periodic disenchantment with returns on marketable
securities has led some investors to examine a host of tangible assets that are
normally considered only by collectors. The average returns on
collectibles such as Chinese ceramics, coins, diamonds, paintings, and
stamps have on occasion been quite high, but generally such assets also
experience periods of negative returns. This fluctuation is not surprising
because if one (or more) type of collectible had provided consistently high
returns, many investors would have been attracted to it and would have bid
its price up to a level where high returns would no longer have been
possible. In deed, more recent studies of prints and paintings have concluded
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that their risk and return characteristics make them relatively unattractive
investments for risk-averse investors.
In a sense, a collectible asset often provides income to the owner in the form
of consumption. For example, an investor can admire a Roberto Clementre
rookie baseball card, sit on a Chippendale chair, gaze upon a Georgia O
Keefe painting, play a Stradivarius violin, and drive a Stutz Bearcat
automobile. Value received in this manner is not subject to income taxation
and is thus likely to be especially attractive for those in high tax brackets.
However, the value of such consumption depends strongly on ones
preferences.
If markets are efficient, collectible assets will be priced so that those who
enjoy them most will find it desirable to hold them in greater-than-market-
value proportions, whereas those who enjoy them least will find it desirable
to hold them in less-than-market-value proportions (or, in many cases, not at
all).
Institutional funds and investment pools have been organized to owncollectibles of one type or another. These arrangements are subject to serious
question if they involve locking such objects in vaults where they cannot be
seen by those who derive pleasure from this sort of consumption. On the
other hand, if the items are rented to others, the only loss may be that
associated with the transfer of a portion of the consumption value to the
government in the form of a tax on income.
Investors in collectibles should be aware of two especially notable types of
risk. The first is that the bid-ask spread is often very large. Thus an investor
must see a large price increase just to recoup the spread and break even. The
second is that collectibles are subject to fads (that risk has been referred to as
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stylistic risk). For example, Chinese ceramics may be actively sought by
many investors today, leading to high prices and big returns for earlier
purchasers. However, they may fall out of favor later on and plunge in value.
Unlike financial assets, there is no such thing as fair value for collectibles
that can act as a kind of anchor for the market price.
GOLD:
In the United States, private holdings of gold bullion were illegal before the
1970s. In other countries, investment in gold has long been a tradition.
According tone estimate, at the end of 1984 gold represented over 6% of the
world market wealth portfolio.
History suggests gold has performed like other types of collectibles in that it
has had periods of high returns but also periods of low returns (particularly
since the early 1980s). Furthermore, gold has had a high standard deviation,
suggesting that by itself it has been a risky investment. However, for any
single investment, risk and return are only parts of the story. Correlations of
an assets returns with the returns on other assets are also relevant. Ingeneral, gold price changes have a near-zero correlation with stock returns.
Gold thus appears to be an effective diversifying asset for an equity investor.
Furthermore, gold prices generally have been highly correlated with the rate
of inflation in the United States as measured by changes in the Consumer
Price Index. This is consistent with golds traditional role as a hedge against
inflation, because higher inflation generally brings higher gold prices.
Investors interested in gold need not restrict themselves to bullion. Other
possibilities range from stocks of gold mining companies to gold futures to
gold coins and commemoratives. Furthermore, there are other types of
precious metals, such as silver, that investors may want to consider
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TOPIC INTRODUCTION:
Current Assets The second category of assets included in the balance sheet
are current assets. In contrast to fixed assets, they are short-termin nature. They refer to assets/resources, which are either held
in the form of cash or ate expected to be realized to cash within
the accounting period in the normal operation cycle of the
business. The term operating cycle means the time span
during which cash is converted into inventory, inventory, into
receivable /cash sales and receivables into cash.
Conventionally, such assets are held for a short period of time,
usually not more than a year. These are also known as liquid
assets. Current assets include cash, marketable securities,
accounts receivable (debtors), notes/bills receivables and
inventory.
CASH is the most liquid current asset and includes cash to hand and cash
at bank. It provides instant liquidity and can be used to meet
obligations/acquire without assets without any delay.
MARKETABLE SECURITIES are short-term investments, which are
both readily marketable and are expected to be converted into cash within a
year. They provide an outlet to invest temporary surplus /idle funds/cash.
According to generally accepted accounting principles, marketable securities
are shown in the balance sheet below the cost or the market price. When,
however, show at cost, the current market value is also shown in parenthesis.
ACCOUNTS RECEIVABLE represent the amount that the customers owe
to the firm, arising from the sale of goods o credit they are shown in the
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balance sheet at the amount owed less an allowance (bad debts) for the
portion which may but be collected.
NOTES/BILLS PAYABLE :
Refer the amounts owned by outsiders for which written acknowledgments
of the obligations are available.
INVENTORY means the aggregate of those items which are (i) held for
sale in the ordinary course of business (finished goods), (ii) in the process of
production for such sales (work-in-process) or (iii) to be currently consumed
in the production of goods and services (raw materials) to be available for
sale. It is the least liquid current assets. Included in inventory are raw
materials, working process (semi-finished) and finished goods. Each of these
serves a useful purpose in the process of production and sale. Inventory is
reported in the balance sheet at the cost or market value whichever is lower.
Investments the third category of fixed assets is investments. They represent
investments of funds in the securities of another company. They are long-
term assets outside the business of the firm. The purpose of such
investments is either in earn return or/and to control another company. It is
customarily shown in the balance sheet at costs with the market value shown
in parenthesis.
Other assets included in this category of assets are what are called deferred
charges that are advertisement expenditure preliminary expenses and so on.
They are pre-payment for services /benefits for the periods exceeding the
accounting period.
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LIABILITIES:
The second major content of the balance sheet is liabilities defined as the
claims of outsiders that is, other than owners. The assets have to be financed
by different sources. One of source of funds is borrowing long-term as
well as short-term. The firms can borrow on a long-term basis from financial
institutions/banks or through bonds/mortgages/debentures, and so on. The
short-term borrowing may be in the form of purchase of goods and services
on credit. These outside sources from which a firm can borrow are termed as
liabilities. Since they finance the assets, they are, in a sense, claims against
the assets. The amount shown against the liability items is on the basis of the
amount owned, not the amount payable. Depending upon the periodicity of
the funds, liabilities can be classified into (1) long-term liabilities and (2)
current liabilities.
LONG-TERM LIABILITIES:
They are so called because the sources of funds included in them are
available for periods exceeding one year. In other words, such liabilities
represent obligations of a firm payable after the accounting period.
Debentures or bonds are issued by a firm to the public to raise debt. A
debenture or a bond is a general obligation of the firm to pay interest and
return the principal sum as per the agreement. Loan raised through Issue of
debentures or bonds may be secured or unsecured.
Secured loans are the long-term borrowings with fixed assets pledged as
security. Term loans from financial institutions and commercial banks are
secured against the assets of the firm.
They have to be repaid/redeemed either in lump sum at the maturity of the
loan/debenture or in installments over the life of the loan. Long-term
liabilities are shown in the balance sheet net of redemption/repayment.
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CURRENT LIABILITIES:
In contrast, the long term-liabilities, such liabilities are obligations to
outsiders repayable in a short period, usually within the accounting period or
the operating cycle of the firm. It can be said to be the counterpart of the
current assets. Conventionally, they are paid; out of the current assets; in
some cases, however existing current liabilities can be liquidated through the
creation of additional current liabilities.
Sundry creditors or accounts payable represent the current liability towards
suppliers from whom the firm has purchased raw materials on credit. This
liability is shown in the balance sheet till the payment has been made to the
creditors.
BILLS PAYABLE:
Bills payable are the promises made in writing by the firm to make payment
of a specified sum to creditors at some specific date. Bills are written by
creditors over the firm and become bill payable once they are accepted by
the firm. Bills payable have a life of less than a year; therefore, they are
shown as current liabilities in the balance sheet.
BANK BORROWINGS:
Bank borrowings form a substantial part of current liabilities of a large
number of companies in India. Commercial banks advance short-term credit
to firms or financing their current assets. Banks may also provide funds
(term loans) for a financing a firms fixed assets. Such loans will be grouped
under long-term liabilities. In India, it is a common practice to include both
short and long-term borrowings under loan funds.
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PROVISIONS:
Provisions are other types of current liabilities. They include provision for
taxes or provision for dividends. Every business has to pay taxes on its
income. Usually, it takes some time to finalize the amount of tax with the tax
authorities. Therefore, the amount of tax is estimated and shown as
provision for taxes or tax liability in the balance sheet. Similarly, provision
for paying dividends to shareholders may be created and shown as current
liability.
EXPENSES PAYABLE OR OUTSTANDING EXPENSES:
Expenses payable or outstanding expenses are also current liabilities. The
firm may owe payments to its employees and others at the end of the
accounting period for the services received in the current year. These
payments are payable within a very short period. Examples of outstanding
expenses are wages payable, rent payable, or commission payable.
INCOME RECEIVED IN ADVANCE:
Income received in advance is yet another example of current liability. A
firm can sometimes receive income for gods or services to be supplied in the
future. As goods or services have to be provided within the accounting
period, such receipts are shown as current liabilities in the balance sheet.
INSTALLMENTS OF LONG-TERM LOANS:
Installments of long-term loans are payable periodically. That portion of the
long-term loan which is payable in the current year will for part of current
liabilities.
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DEPOSITS FROM PUBLIC:
Deposits from public may be raised by a firm for financing its current assets.
These may therefore classify under current liabilities. It may be noted that
public deposits may be raised for duration of one year through three years.
How should the changing value of a fixed asset be reflected in a company'saccounts?
The benefits that a business obtains from a fixed asset extend over several
years. For example, a company may use the same piece of production
machinery for many years, whereas a company- owned motor car used by a
salesman probably has a shorter useful life.
By accepting that the life of a fixed asset is limited, the accounts of a
business need to recognize the benefits of the fixed asset as it is "consumed"
over several years.
This consumption of a fixed asset is referred to as depreciation.
DEFINATIONS:
Financial Reporting Standard 15 (covering the accounting for tangible fixed
assets) defines depreciation as follows:
"the wearing out, using up, or other reduction in the useful economic life of
a tangible fixed asset whether arising from use, effluxion of time or
obsolescence through either changes in technology or demand for goods and
services produced by the asset".
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A portion of the benefits of the fixed asset will be used up or consumed in
each accounting period of its life in order to generate revenue. To calculate
profit for a period, it is necessary to match expenses with the revenues they
help earn.
In determining the expenses for a period, it is therefore important to include
an amount to represent the consumption of fixed assets during that period
(that is, depreciation).
In essence, depreciation involves allocating the cost of the fixed asset (less
any residual value) over its useful life. To calculate the depreciation chargefor an accounting period, the following factors are relevant:
- The cost of the fixed asset;
- The (estimated) useful life of the asset;
- The (estimated) residual value of the asset.
What is the relevant cost of a fixed asset?
The cost of a fixed asset includes all amounts incurred to acquire the asset
and any amounts that can be directly attributable to bringing the asset into
working condition.
Directly attributable costs may include:
- Delivery costs
- Costs associated with acquiring the asset such as stamp duty and importduties
- Costs of preparing the site for installation of the asset
- Professional fees, such as legal fees and architects' feesNote that general
overhead costs or administration costs would not costs of a fixed asset (e.g.
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the costs of the factory building in which the asset is kept, or the cost of the
maintenance team who keep the asset in good working condition)The cost of
subsequent expenditure on a fixed asset will be added to the cost of the asset
provided that this expenditure enhances the benefits of the fixed asset or
restores any benefits consumed. This means that major improvements or a
major overhaul may be capitalized and included as part of the cost of the
asset in the accounts. However, the costs of repairs or overhauls that are
carried out simply to maintain existing performance will be treated as
expenses of the accounting period in which the work is done, and charged in
full as an expense in that period.
PROCESS:
Although the useful life of equipment (a fixed asset) may be long, it is
nonetheless limited. Eventually the equipment will lose all productive worth
and will possess only salvage value (scrap value). Accounting demands a
period-by-period matching of costs against income. Hence, the cost of a
fixed asset (over and above its salvage value) is distributed over the assets
estimated lifetime. This spreading of the cost over the periods which receive
benefits is known as depreciation.
The depreciable amount of a fixed asset that is, cost minus salvage
value may be written off in different ways. For example, the amount may
be spread evenly over the years affected, as in the straight-line method.
The units of production method bases depreciation for each period on
the amount of output. Two accelerated methods, the double declining
balance method and the sum-of-the years-digits method, provide for greater
amounts of depreciation in the earlier years.
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METHODS:
1. STRAIGHT-LINE METHOD
This is the simplest and most widely used depreciation method. Under
this method an equal portion of the cost (above salvage value) of the asset is
allocated to each period of use. The periodic depreciation charge is
expressed as
Cost Salvage Value= Depreciation
Estimated life2. UNITS OF PRODUCTION METHOD
Where the use of equipment varies substantially from year to
year, the units-of-production method is appropriate for determining the
depreciation. For example, in some years logging operations may be carried
on for 200 days, in other years for 230 days, in still other years for only 160
days, depending on weather conditions. Under this method, depreciation is
computed for the appropriate unit of output or production (such as hours,
miles, or pounds) by the following formula:
Cost Salvage= Unit Depreciation
Estimated units of production during lifetime
The total number of units used in a year is then multiplied by the unit
depreciation to arrive at the depreciation amount for that year. We can
express this as
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Unit depreciation x usage = depreciationOr
Cost SalvageX usage = depreciation
Estimated life (in units)
This method has the advantage of relating depreciation cost directly.
3. DOUBLE DECLINING BALANCE METHOD
The double declining balance method produces the highest amount
of depreciation in the earlier years. It does not recognize salvage or scrap
value. Instead, the book value of the asset remaining at the end of the
depreciation period becomes the salvage or scrap value. Under this method,
the straight-line rate is doubled and applied to the declining book balance
each year. Many companies prefer the double declining balance method
because of the greater write-off in the earlier years, a time when the asset
contributes most to the business and when the expenditure was actually
made. The procedure is to apply a fixed rate to the declining book value of
the asset each year. As the book value declines, the depreciation becomes
smaller.
100%X 2 = depreciation rate
Estimated life in years
4. SUM-OF-THE-YEARS-DIGITS METHOD
With this method, the years of assets lifetime are labeled 1,2,3
and so on, and the depreciation amounts are based on a series of fractions
that have the sum of the years digit as their common denominator. The
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greatest digit assigned to a year is used as the numerator for the first year,
the next greatest digit for the second year, and so forth.
What is the Useful Life of a fixed asset?
An asset may be seen as having a physical life and an economic life.
Most fixed assets suffer physical deterioration through usage and the
passage of time. Although care and maintenance may succeed in extending
the physical life of an asset, typically it will, eventually, reach a condition
where the benefits have been exhausted.
However, a business may not wish to keep an asset until the end of its
physical life. There may be a point when it becomes uneconomic to continue
to use the asset even though there is still some physical life left.
The economic life of the asset will be determined by such factors as
technological progress and changes in demand. For purposes of calculating
depreciation, it is the estimated economic life rather than the potential
physical life of the fixed asset that is used.
What about the Residual Value of a fixed asset?
At the end of the useful life of a fixed asset the business will dispose of it
and any amounts received from the disposal will represent its residual value.This, again, may be difficult to estimate in practice. However, an estimate
has to be made. If it is unlikely to be a significant amount, a residual value
of zero will be assumed.
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COMPANY PROFILE
INTRODUCTION:
Established in 1997, LG Electronics India Pvt. Ltd., is a wholly
owned subsidiary of LG Electronics, South Korea. In India for a decade
now, LG is the market leader in consumer durables and recognized as a
leading technology innovator in the information technology and mobile
communications business. LG is the acknowledged trendsetter for the
consumer durable industry in India with the fastest ever nationwide reach,
latest global technology and product innovation.
One of the most formidable brands, LGEIL has an impressive portfolio of
Consumer Electronics, Home Appliances, GSM mobile phones and IT
products.
The trend of beating industry norms started with the fastest ever-
nationwide launch by LG in a period of 4 and 1/2 months with the
commencement of operations in May 1997. LG set up a state-of-the art
manufacturing facility at Greater Noida, near Delhi, in 1998, with an
investment of Rs 500 Crores. This facility manufactured Colour Televisions,Washing Machines, Air-Conditioners and Microwave Ovens. During the
year 2001, LG also commenced the home production for its eco-friendly
Refrigerators and established its assembly line for its PC Monitors at its
Greater Noida manufacturing unit. The beginning of 2004 saw the roll out of
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the first locally manufactured Direct Cool Refrigerator from the plant at
Greater Noida.
In 2005, LGEIL also up its second Greenfield manufacturing unit in Pune,
Maharashtra that commences operations in October 2005. Covering over 50
acres, the facility manufactures LCD TV, GSM Phones, Color Televisions,
Air Conditioners, Refrigerators, Microwave Ovens Color Monitors.
Both the Indian manufacturing units has been designed with the latest
technologies at par with international standards at South Korea and are one
of the most Eco-friendly units amongst all LG manufacturing plants in the
world.
LG has been able to craft out in ten years, a premium brand positioning in
the Indian market and is today the most preferred brand in the segment
Sales and Profit:
In the fourth quarter of 2009, sales and operating profit on a global
basis jumped 22.5% year on year to KRW 13.37 trillion (USD 9.82 billion)
and KRW 101 billion (USD 74.16 million), resulting in a profit margin of
0.8%. On a parent basis the company recorded sales of KRW 6.59 trillion
(USD 4.84 billion), an operating loss of KRW 310 billion (USD 228million) and a net loss of KRW 671 billion (USD 493 million).
2009 annual sales on a global basis soared 20.8% to a company record-high
level of KRW 49.33 trillion (USD 36.22 billion) with operating profit
recording KRW 2.13 trillion (USD 1.56 billion). Consolidated sales
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including subsidiaries rose 18.4% YoY to KRW 63.18 trillion (USD 46.39
billion). Consolidated operating profit reached KRW 4.05 trillion (USD 2.97
billion), for a margin of 6.4%, 1.1% point higher than the previous year.
LG Mobile Communication Company reached a company high of KRW
4.49 trillion (USD 3.3 billion) in sales, 34.6% higher than a year
earlier. Handset sales accounted for KRW 4.09 trillion (USD 3.0
billion), up 40.3% YoY and 16.5% QoQ. Shipments of handsets
recorded 8% growth YoY to 25.7 million, which resulted in a record
100.7 million units being sold in 2009 versus 80.5 million units in
2008. Sales stayed strong in Europe and Asia despite the economic
slowdown. Europe saw the introduction of new models including
Renoir, an 8-megapixel camera phone, Cookie, a full touch screen
phone and LG-KS360, a QWERTY keypad messaging phone while a
QoQ increase in India contributed to Asias strong performance.
Digital Appliance Company sales rose 20.1% to KRW 2.971 trillion
(USD 2.18 billion) year-on-years.
Digital Display Company sales jumped to KRW 4.62 trillion (USD 3.39
billion), an increase of 16.4% from a year earlier. Sales of flat panel digital
TVs grew 22% YoY and 26% QoQ, but PDP module sales declined 44%
YoY and 24% QoQ. Globally, operating profit saw a loss of KRW 14
billion (USD 10 million) primarily due to a sharp drop in the prices of TVs
and slowdown in external sales of PDP modules.
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Financial Statement and Non-operating Items on a ParentBasis:
The company recorded a recurring profit loss of KRW 942 billion
(USD 692 million) primarily as a result of foreign exchange loss of KRW
276 billion (USD 203 million) and equity method loss of KRW 294 billion
(USD 216 million) from overseas subsidiaries and affiliates. LG Display, in
which LG Electronics has a 37.9% stake, booked an equity method loss forLGE of KRW 214 billion (USD 157 million).
LG Electronics, Inc. (KSE: 066570.KS) is a global leader and technology
innovator in consumer electronics, home appliances and mobile
communications, employing more than 82,000 people working in 114
operations including 82 subsidiaries around the world. With annual
worldwide revenues exceeding $40 billion, LG is comprised of five business
units - Home Entertainment, Home Appliance, Air Conditioning, Business
Solutions and Mobile Communications. LG is the worlds leading producer
of mobile handsets, flat panel TVs, air conditioners, front-loading washing
machines, optical storage products, DVD players and home theater systems.
For more information, please visit.
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History:
1958 Founded as Gold Star
1960s Produces Korea's first radios, TVs, refrigerators,
washing machines and air conditioners
1995Renamed LG Electronics
Acquires US-based Zenith
1997Worlds first CDMA digital mobile handsets supplied to
Ameritech and GTE in U.S. Achieves UL certifica tion in U.S.
Develops worlds first IC set for DTV
1998Develops worlds first 60-inch plasma TV
1999Establishes LG. Philips LCD, a joint venture with Philips
2000Launches worlds first internet refrigerator Exports
synchronous IMT-2000 to Marconi Wireless of Italy
Significant exports to Verizon Wireless in U.S.
2001GSM mobile handset exports to Russia, Italy and
Indonesia Establishes market leadership in Australian CDMA
market Launches worlds first internet washing machine, air
conditioner, and microwave oven
2003Under LG Holding Company system, spins off to become
LG Electronics and LG Corporation Full-scale export of
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GPRS color mobile phones to Europe Establishes CDMA
handset production line and R&D center in China
2004Enters North-European and Middle East GSM handset
market Achieves monthly export volume above 2.5 million
units (July) Top global CDMA producer.
2005EVSB, the next-generation DTV transmission
technology, chosen to be the US/Canada Industry standard by
the US ATSC Commercializes worlds first 55" all-in-one
LCD TV Commercializes worlds first 71" plasma TV
Develops worlds first Satellite- and Terrestrial-DMB
handsets
2006Becomes fourth-largest supplier of mobile handsets
market worldwide Develops worlds first 3G UMTS DMB
handset, 3G-based DVB-H and Media FLO phones, DMB
Phone with time-shift function, and DMB notebook computerEstablishes LG-Nortel, a network solution joint venture with
Nortel
2007LG Chocolate, the first model in LGs Black Label series
of premium handsets, sells 7.5million units world wide
Develops the first single-scan 60" HD PDP module
Establishes the strategic partnership with ULAcquires the worlds first IPv6 Gold Ready logo
2009Launches the industry-first dual-format high-definition
disc player and drive
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2010 design center when bog bae, executive vp
VISION OF LG:
Management Based on Esteem for Human Dignity
Human Value each Individual.
Dignity Capitalize on Individual competencies, Respect for personal
aspiration.
Esteem People are of the origin of all values. By developing people
we improve the organizations clear tasks and fair treatment.
LOOKING AHEAD Our Millennium Commitment
On the way to becoming the Best Global Organization we are
promising:
DIGITAL TECHNOLOGY LEADERSHIP: The new millennium sees
the birth of the Digital Technology at LGEIL-TL2006 (Technology
Leadership), which offers customers easy to use, very affordable, and
technologically ingenious "Champion Products".
GLOBALISATION: 70 % of its total revenues are from overseas. 54
subsidiaries carry out manufacturing, sales and marketing, logistics,
R&D and the customer services in key geographical sites worldwide.
CREATING VALUE FOR THE PEOPLE: LG extends a warm hand
to contribute to the world community; to touch the hearts of the
customers, friends, shareholders, employees, partners and subsidiaries
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at home and abroad. We create value help people realize their dreams
of a better life.
BOARD OF DIRECTORS:
34
S.NO NAME DESIGNATION
1 Yong Nam Vice Chairman and CEO
2 David Jung CFO of LG Electronics
3 Yu-Sig Kang CEO of LG Corp
4 Suk-Jean Kang Chairman of CEO Consulting
5 In Ki Joo Professor of YonseiUniversity Outside Director
6 Suk Chae Lee Consultant of TaepyoungyangLawfirm (Bae, Kim & Lee)
Outside Director
7 Sung-Won HongPresident of Jeollanamdo
8 Suk Chae Lee Consultant of TaepyoungyangLaw firm (Bae, Kim & Lee)
Outside Director
9 Suk-Jean Kang Chairman of CEO ConsultingGroup
Outside Director
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OBJECTIVES OF COMPANY
LG Electronics (LG), a major player in the global flat panel display
market, recently announced business strategies and goals for its
display business at IFA International 2009 in Berlin, Germany.
Competition has intensified since the flat panel TV industry has
fully matured,' said Simon Kang, President and CEO of LG
Electronics Digital Display Company, during a press
conference at IFA.
we are confident that focused, localized marketing activities
emphasizing our products, which embody the perfect
harmony of design and technology, will separate us from our
competitors.'
LG has established itself as a premium brand by systematically
focusing on brand marketing activities, for its products which
balance stylish design and smart technology.
The company plans to invest in marketing and will take a
segmented, regional approach. LG plans to reinforce
partnerships with premium distributors and centralize brand
marketing activities in developed markets such as North
America and Europe.
In contrast to assembly line manufacturing, cell assembly
allows one person to assemble a TV from start to finish
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LG will maximize its return on invested capital through
outsourcing, innovative manufacturing technology, and an
advanced supply chain management system.
INDUSTRY PROFILE
Electronics is the study of the flow of charge through various materials and
devices such as, semiconductors, resistors, inductors, capacitors, nano-
structures, and vacuum tubes. All applications of electronics involve the
transmission of either information or power. Although considered to be a
theoretical branch of physics, the design and construction of electroniccircuits to solve practical problems is an essential technique in the fields of
electronics engineering and computer engineering.
The study of new semiconductor devices and surrounding technology is
sometimes considered a branch of physics. This article focuses on
engineering aspects of electronics. Other important topics include electronic
waste and occupational health impacts of semiconductor manufacturing.
Consumer Durables(Data table headings are shown Year-wise in descending order)
Air Conditioners
Bicycles
Crystal Glass
Domestic Electrical Appliances
Gems and Jewellery
Glass Products
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Kitchen Equipment
Liquefied Petroleum Gas Cylinders
Microwave Ovens
Refrigerators
Sewing Machines
Sunglasses
Toys and Games
Washing Machines and Vacuum Cleaners
Watches and Clock
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DATA ANALYSIS:
The selection of various fixed assets required creating the desired
production facilities and the decision as regards determination of the level of
fixed assets is primarily the task at the production / technical people. The
decision relating to fixed assets involve huge funds for a long period of time
and are generally of irreversible nature affecting the long term profitability
of a concern, an unsound invest decision may prove to be total to the very
existence of the organization. Thus, management of fixed assets is of vital
importance to any organization.The process of fixed asset management involves:
(i) Selection of most worthy projects or alternatives of fixed assets.
(ii) Arranging the requisite funds / capital for the same.
The first important consideration to be acquire only that much amount
of fixed assets which will be just sufficient to ensure smooth and
efficient running of the business. In some cases it may be economical
to be kept in mind is possible increase in demand of the firms product
necessarily expansion of its activities. Hence a firm should have that
much amount of fixed assets which could adjust to increase demand.
The third aspect of fixed assets management is that a firm must ensure
buffer stock of certain essential equipments / services to ensure
uninterrupted production in the events of emergencies. Sometime, there may
be breakdown in some equipment or services affecting the entire production.
It is always better to have some alterative arrangements to deal with Cush
situations. But at the same time the cost of carrying such situations. But at
the same time cost of carrying such arrangements to deal with such
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situations. But at the same time the cost of carrying such buffer stock of
fixed assets be encouraging their maximum utilization during lean period,
transferring a part of peak period and living additional capacity.
Fixed Assets:
Fixed assets are those assets which are required and held permanently
for a pretty longtime in the business and are used for the purpose of earning
profits. The successful continuance of the business depends upon the
maintenance of such assets. They are not meant for resale in the ordinary
course or business and the utility of these remains so long as they are in
working order, so they are also known as capital assets. Land and buildings,
plant and machinery, motor vans, furniture and fixture are some examples of
these assets.
Financial transactions are recorded in the books keeping in view the
going concern aspect of the business unit. It is assumed the business unit has
a reasonable expectation of continuing business at a profit for an indefinite
period of time. It will continue to operate in the future. This assumption
provides much of the justification for recording fixed assets at original cost
and depreciating them in a systematic manner without reference to their
current realizable value. It is useless to show fixed assets in the balance
sheet at their estimated realizable values if there is no immediate expectation
of selling them. Fixed resale, so they are shown at their book values and not
at their current realizable values.
The market values of a fixed asset may change with the passage of
time, but for accounting purpose it continues be shown in the books at its
book value the cost at which it was purchased minus depreciation paved up
to date.
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The cost concept of accounting, deprecation calculated on the basis of
historical costs of old assets is usually lower than that of those calculated at
current values or replacement value. This results in more profits on paper
which if distributed in full, will lead to reduction of capital.
Need for valuation of fixed assets:
Valuation of fixed assets is important in order to have fair measure of
profit or loss and financial position of the concern.
Fixed assets are meant for use for many years. The value of these
assets decreases with their use or with time or for other reasons. A portion of
fixed asset reduced by use is converted into cash though charging
depreciation. For correct measurement of income proper measurement of
depreciation is essential, as depreciation constitutes a part of the total cost of
production.
Trend analysis and Ratio analysis are the techniques used in analysis
of Fixed assets management.
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Trend Analysis:
In Financial analysis the direction of changes over a period of years is
of initial importance. Time series or trend analysis of ratios indicators the
direction of change. This kind of analysis is particularly applicable to the
items of profit and loss account. It is advisable that trends of sales and net
income may be studies in the light of two farceurs. The rate of fixed
expansion or secular trend in growth of the business and the general Price
level. It might be found in practice that a number of the business and the
general price level. It might be found in practice that a number of firms
would be shown a persistent growth over period of years. But to get a true ofgrowth, the sales figure should be adjusted by a suitable index of general
prices. In other words, sales figures should be deflated for rising price level.
Another method of securing trend of growth and one which can be used
instead of the adjusted sales figure or as check on them is to tabulate and
plot the output or physical volume of the sales expressed in suitable units of
measure. If the general price level is not considered while analyzing trend of
growth, it can be mislead management they may become unduly optimistic
in period of prosperity and pessimistic in duel periods.
For trend analysis the use of index numbers is generally advocated the
procedure followed is to assign the numbers 100 to times of the base year
and at calculate percentage change in each items of other years in relation to
the base year. The procedure may be called as Fixed percentage method.
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LG Electronics Inc. and SubsidiariesIncome Statement:
Income Statement
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
(Rs. inLakhs)
(Rs. InLakhs)
(Rs. inLakhs)
(Rs. inLakhs)
(Rs. inLakhs)
Sales 134543.28 140116.22 135375.24 129553.62 142195.78
Domestic
Exports
17062.471294.5
19584.372379.8
2205873131.7
25534.873943.5
28777.974943.9
Cost of Sales 60513.1 65982.7 70725 76108.3 80938.1
Gross Profit 22879.3 23476.4 24464.7 23370 22783.7
SG&A 20146.5 19764.3 20803.4 21074 20290.9
Operating Profit 3547.2 3887 3661.3 2296 2492.8
Non-Operating
Income
Non-Operating
Expenses
2598.95017.3
3574.64239.2
4538.75235.7
32394411.6
8224.64153.3
Recurring Profit 5998.7 5646.4 29684 1123.4 6564.1
Extraordinary Gains
Extraordinary Losses
--
--
--
--
--
Income before
Income Taxes4509.07 3991.5 2968.4 6090.47 3765.1
Tax 135.9 145.64 153.73 209.1 413.82
Net Profit 4644.97 4137.14 2814.67 6299.57 3351.28
LG Electronics Inc. and Subsidiaries
Consolidated Balance Sheets:
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Balance Sheet
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
(Rs. InLakhs)
(Rs. InLakhs)
(Rs. InLakhs)
(Rs. InLakhs)
(Rs. InLakhs)
Current Assets 53063.74 45598.02 49713.32 53951.48 63063.52
Quick Assets
Inventories
11568.55762.2
12484.84876.8
10315.65637.5
8831.44739.6
8306.64173.8
Fixed Assets 6,07,94.08 6,25,64.02 5,89,55.39 5,69,93.08 5,71,48.37
Investment Assets
Tangible Assets
Intangible Assets
19568.613543.51293.5
20834.515859.61423.7
21947.316617.3
1681
22972.318273.71984.4
31225.617818.61758.9
Total Assets 179137.63 163641.62 164867.41 167745.96 317929.03
Current Liabilities
Fixed Liabilities2,05,36.47 2,03,50.59 2,40,99.51 2,14,80.89 2,30,72.27
Total Liabilities 2,05,36.47 2,03,50.59 2,40,99.51 2,14,80.89 2,30,72.27
Paid in Capital
Capital Surplus
Retained Earnings
Capital Adjustment
2965.47832.79765.62246.6
3079.58067.39945.82359.9
3202.18437.810057.32976.6
3472.79532.5
10590.32759.3
3571.19799
15547.22906.9
Total Shareholder's
Equity18456.8 20543.5 24673.8 26354.8 31824.2
Total Liabilities and
Shareholder's Equity54387.8 55346.9 56198.7 56801.4 6326.3
LG Electronics Inc. and Subsidiaries
Financial Highlights:
Financial
Highlights
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
(Rs. In (Rs. In (Rs. In (Rs. In (Rs. In
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Lakhs) Lakhs) Lakhs) Lakhs) Lakhs)
Sales 134543.28 140116.22 135375.24 129553.62 142195.7Operating Profit 3547.2 3887 3661.3 2296 2492.8
Net Profit 4644.97 4137.14 2814.67 6299.57 3351.28
Total Assets 179137.63 163641.62 164867.41 167745.96 317929.0Total Liabilities 2,05,36.47 2,03,50.59 2,40,99.51 2,14,80.89 2,30,72.2Total Shareholder's
Equity18456.8 20543.5 24673.8 26354.8 31824.2
ROE 10.5% 8.7% 12.6% 3.5% 19.1%
EBITDA 1,476 1,585 1,685 1,297 1,349Capex 1,075 1,179 1,291 860 1,060
BAR DIAGRAMS & CHARTS:
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46
YEAR INVESTMENTTREND
PERCENTAGE
2007-2008 41,28,06,232 100
2008-2009 44,85,21,386 108.65
2009-2010 39,68,35,265 96.13
2010-2011 24,99,02,930 60.54
2011-2012 28,19,24,444 68.29
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CHART:
INTERPRETATION:
From the analysis of the above table it can be observed that the
growth rate of total investment of LG ELECTRONICS industries is in
downward trend which show table LG ELECTRONICS Industries
investment in total investment is decreasing form time to the during the year
47
Growth rate of Investment Trend
Percentage
100 108.65 96.13
60.5468.29
0
20
40
60
80
100
120
2007-
2008
2008-
2009
2009-
2010
2010-
2011
2011-
2012
years
Investment
Investment
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2007-2008 it was recorded 100%. But it is decreasing in the year 2011-2012
which shows that there is a net decrease by 68.29%. The average investment
in total assets was found to be Rs.35, 79, 98,051.4 during the review period.
During the period of 2006-2007 it is Rs. 41,28,06,232 and it was decrease in
the year 2011-2012 Rs. 28,19,24,444.
GROWTH RATEINFIXED ASSETS:
Table: 2
YEAR FIXED ASSETS PERCENTAGE
2007-2008 6,07,94,08,271 100
2008-2009 6,25,64,02,873 102.91
2009-2010 5,89,55,39,377 96.97
2010-2011 5,69,39,08,565 93.74
2011-2012 5,71,48,06,436 94.00
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Chart:
INTERPRETATION:
Growth rate in fixed assets, the examination of the above table reveals
analysis and interpretation.
1. During the year 2007-2008 the assets investment was recorded at
6,07,94,08,271 and it is decreased to Rs 5,71,48,37,436 in 2010=2012
the fixed assets investment is quite satisfactory.
2. The trend percentage in the year 2007-2008 is taken as the base year
as 100% and it was decreased to 94.00% in the year 2011-2012
3. The average growth rate in Fixed assets Rs.5, 92, 90,306 in 5 years.
49
Growth rate in Fixed Assets
100
102.91
96.97
93.74 94
88
90
92
94
9698
100
102
104
2007-08 2008-09 2009-10 2010-11 2011-12
Years
FixedAssets
Fixed Assets
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RATIO ANALYSIS:
Ratio analysis is a powerful tool of financial analysis. A ratio is
defined as The indicated quotient of two mathematical expression and as
The relationship between for evaluating the financial position and
performance of firm. The absolute accounting figure reported in financial
statement do not private a meaningful understanding of the performance and
financial position of a firm. An accounting figure conveys meaning when it
is related to some other relevant information.
Ratios help to summarize large quantities of financial data and tomake qualitative judgments about the firms financial performance.
1. Fixed Assets to Net Worth Ratio:
This ratio establishes the relationship between Fixed Assets and net worth.
Net Worth = Share Capital + Reserves & Surplus + Retained Earnings.
Fixed Assets
Fixed assets to Net worth Ratio = ------------------ X 100
Net Worth
This ratio of Fixed Assets to Net Worth indicates the extent to
which shareholder funds are sunk into the fixed assets.
Generally, the purchase of fixed assets should be financed by
shareholders, equity including reserves & surpluses and retained earnings. If
the ratio is less than 100 % it implies that owners funds are more than total
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fixed assets and a part of the working is provided by the shareholders. When
the ratio is more 100% it implies that owners funds are not sufficient to
finance the fixed assets and the finance has to depend upon outsiders to
fianc the fixed assets. There is no rule of thumb to interpret this ratio but
60% to 65 % is considered to be satisfactory ratio in case of industrial
undertaking.
2. Fixed Assets Ratio:
This ratio explains whether the firm has raised adequate long term
funds to meet its fixed assets requirements and is calculated as under.
Fixed assets (after depreciation)
-------------------------------------------
Capital Employed
This ratio gives an idea as to what part of the capital employed has been
used in purchasing the fixed assets for the concern. If the ratio is less than
one it is good for the concern.
3. Fixed assets as a percentage to current Liabilities:
This ratio measures the relationship between fixed assets and the
funded debt and is a very useful so the long term erection. The ratio can be
calculated as below.
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Fixed Assets
Fixed assets as a percentage to current Liabilities = ----------------------------
Current
Liabilities
4. Total investment Turnover Ratio:
This ratio is calculated by dividing the net sales by the value of total
assets that is (Net sales / Total Investment) or (sales / Total Investment.) A
high ratio is an indicator of over trading of total assets while a low ratio
reveals idle capacity. The traditional standard for the ratio is two times.
5. Fixed Assets Turnover Ratio.
This ratio expresses the number of times fixed assets are being turned-
over is a state period. It is calculated as under.
Sales
-------------------------------------------------------
Net fixed Assets (After depreciation)
This ratio shows low well the fixed assets are being uses in the
business. The ratio is important in case of manufacturing concern because
sales are produced not only by use of Current Assets but also by amount
invested in Fixed Assets the higher ratio, the better is the performance. On
the other hand a low ratio indicated that fixed assets are not being efficiently
utilized.
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6. Gross capital Employed:
The term Gross Capital Employed usually comprises the total
assets, fixed as well as current assets used in a business.
Gross Capital Employed = fixed Assets + Current Assets.
7. Return on Fixed Assets:
Profit after Tax
--------------------- X 100
Fixed assets
This ratio is calculated to measure the profit after tax against the
amount invested in total assets to ascertain whether assets are being utilized
properly or not. The higher the ratio the better it is for the concern.
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1. Fixed Assets to Net Worth:
The ratio indicates the extent to where shareholders funds are struck
in the fixed assets. The formula to compute fixed assets to net worth is
calculated as follows. Fixed assets (after depreciation) / Net Worth.
Net Worth = share capital + reserve & Surplus + Retained earnings.
If the ratio is less than 100 % it implies that owner funds are more
than the fixed assets and a part of working capital is provided by the share
holders and vice versa.
Fixed assets
Fixed assets to net worth ratio = ------------------------------------- X 100
Net worth
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Table:
YEAR NETWORTH GROSSFIXED
ASSETSRATIOIN
2007-2008 3,64,91,77,075 6,07,94,08,271 166.592008-2009 3,38,81,85,855 6,25,64,02,879 184.65
2009-2010 3,38,78,40,215 5,89,55,39,377 174.02
2010-2011 3,48,48,27,422 5,69,93,08,565 163.54
2011-2012 3,7714,58,784 5,71,48,37,436 151.52
Chart :
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INTERPRETATION:
A) The Gross fixed to Net worth Ratio is fluctuating from year to year. In
the year 2007-2008 the gross fixed assets to net worth ratio is 166.59,
in the year 2007-2012 the fixed assets to net worth to acquire the ratio
is 151052.
56
Graph of Fixed Assets to Net worth
166.59
184.65174.02
163.54151.52
0
20
40
60
80
100
120
140160
180
200
2007-
2008
2008-
2009
2009-2010
2010-2011
years
Ratio
Fixed assets to net worth ratio
20112012
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B) The average net worth to fixed assets ratio is Rs,3,53,62,97,870 or
fixed assets average ratio is Rs. 5,92,90,99,306 the average percentage
of fixed assets to net worth is 168.06.
C) The highest ratio recorded in 2008-2009 at 184.65 the lowest ratio is
recorded at 151.52 in the year 2011-2012.
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2. Fixed Assets as a percentage to long term Liabilities:
Fixed Assets ratio a various of fixed assets to net worth is a ratio of
fixed assets to long term funds which is calculated as
Fixed assets (after depreciation)
-------------------------------------------------------- X 100
Capital Employed
TABLE:
YEAR FIXEDASSETS LONGTERM
FUNDS
PERCENTAGE
2007-2008 6,07,94,08,271 3,64,91,77,075 166.5
2008-2009 6,25,64,02,879 3,38,81,85,855 184.6
2009-2010 5,89,55,39,377 3,38,78,40,215 174.0
2010-2011 5,69,93,08,565 3,48,48,27,422 163.5
2011-2012 5,71,48,37,436 3,7714,58,784 152.7
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CHART:
INTERPRETATION:
A) The fixed assets as a % of long term liabilities the ratio is fluctuating
form year to year. The fixed asset as a percentage of long term
liabilities is recorded at 166.5% in the year 2011-12
B) The highest ratio is recorded at 184.6% in the 2007-2008 the lowest
ratio is 152.7% in 2011-12
59
166.5
184.6174
163.5 152.7
0
20
40
60
80
100
120
140
160
180
200
2007-08 2008-09 2009-10 2010-11 2011-12
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3. FIXED ASSETS AS A PERCENTAGE TO CURRENT
LIABILITIES:
Fixed Assets
Fixed Assets as a percentage to Current Liabilities = -----------------------------
Current Liabilities
TABLE:
YEAR FIXEDASSETSLONGTERM
FUNDSPERCENTAGE
2007-2008 6,07,94,08,271 2,05,36,47,518 2.96
2008-2009 6,25,64,02,879 2,03,50,59,123 3.07
2009-2010 5,89,55,39,377 2,40,99,51,568 2.44
2010-2011 5,69,93,08,565 2,14,80,89,665 2.65
2011-2012 5,71,48,37,436 2,30,72,27,432 2.47
CHART:
60
2.96 3.07
2.44
2.65
2.47
0
0.5
1
1.5
2
2.5
3
3.5
2007-08 2008-09 2009-10 2010-11 2011-12
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INTERPRETATION:
A) The ratio was fluctuating trend percentage in review period.
B) From the above table it is observed that the ratio was recorded at 2.96 in
the 2007-2008 and is gradually changing to 2.47 in 2011-2012 which
indicates that the current funds are used in the fixed asset which is quite
satitsfactory.
C) The average ratio was recorded at 2.71 during the review period of time.
D) The highest ratio was recorded at 3.07 which is higher than the average
ratio.
E) The lowest ratio was recorded at 2.44 which is less than the average ratio.
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4. TOTAL INVESTMENT TURNOVER RATIO:
The total invest turnover ratio can be calculated by the formula as given
under.
Sales
Total investment turnover ratio = --------------------------- X 100
Total investment
TABLE:
YEAR SALES (INLACKS) TOTAL
INVESTMENT
RATIOS
2007-2008 134543.28 4128.06 32.5
2008-2009 140116.22 4485.21 31.2
2009-2010 135375.24 3968.35 34.1
2010-2011 129553.62 2499.02 51.84
2011-2012 142195.78 2819.24 50.43
CHART :
INTERPRETATION:
62
32.5 31.234.1
51.84 50.43
0
10
20
30
40
50
60
2007-08 2008-09 2009-10 2010-112011-12
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A) The ratio was in increasing trend.
B) During the year 2007-2008 the ratio was recorded at 32.5 and in the2011-2012 the ratio was increasing to 53.43.
C) The highest ratio was recorded at 51.84 in the year 2010-2011 whichis more than the average ratio.
D) The lowest ratio was 32.5 which is lesser than the average ratio.
5. FIXED ASSETS TUROVER RATIO:
The fixed assets turnover ratio is the relationship between the sales or
cost o f goods / capital assets employed in a business.
Sales
Fixed assets turnover ratio = --------------------------------- X 100
Total fixed Assets
TABLE:
YEAR SALES (INLACKS)TOTALFIXED
ASSETSPERCENTAGE
2007-2008 134543.28 6.794.08 2.21
2008-2009 140116.22 62564.02 2.23
2009-2010 135375.24 58955.39 2.29
2010-2011 129553.62 56993.08 2.27
2011-2012 142195.78 57148.37 2.40
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CHART:
INTERPRETATION:
A) The fixed assets turnover ratio is fluctuating trend during the review
period of time. During the year 2007-2008 the ratio was recorded as
2.21 % and in the 2010-2011 the ratio was increased to 2.40 %.
B) Average ratio was observed 2.28 % during the review period of time.
C) The highest ratio was recorded at 2.40 % in 2011-2012 which is more
than the average.
D) The lowest ratio was 2.21 % in the 2007-2008 which is less than the
average
64
2.212.23
2.292.27
2.4
2.1
2.15
2.2
2.25
2.3
2.35
2.4
2.45
2007-08 2008-09 2009-10 2010-11 2011-12
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6. FIXED ASSETS AS A PERCENTAGE TO TOTAL ASSETS:
Fixed assets
Fixed assets a % Total Assets = -------------------------------- X 100.
Total Asset
TABLE:
YEAR SALES (INLACKS)TOTALFIXED
ASSETSPERCENTAGE
2007-2008 60794.08 117985.89 51.5
2008-2009 62564.03 112647.26 55.5
2009-2010 58955.39 112637.07 52.32010-2011 56993.08 113443.60 50.0
2011-2012 57148.37 123031.14 46.0
CHART:
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INTERPRETATION:
A) Fixed assets to total assets is fluctuating trend during the review
period of time.
B) During the year 2007-2008 the ratio was recorded at 51.5 % and the
year 2010-2011 the ratio decreased to 46 %.
C) Average ratio was observed at 51.06 % during the review period oftime.
D) The highest ratio was observed at 55.5 % in the year 2007-2008 which
is more than the average. The lowest ratio was recorded at 46% in
2011-2012 which is less than average ratio.
67
51.555.5
52.350
46
0
10
20
30
40
50
60
2007-08 2008-09 2009-10 2010-11 2011-12
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7. GROSS CAPITAL EMPLOYED:
Gross capital employed = fixed assets + Current Assets.
TABLE:
YEARFIXEDSALES
(INLACKS)
CURRENT
ASSETS
GROSSCAPITAL
EMPLOYED (INLACKS)
2007-2008 60794.08 53063.74 113857.82
2008-2009 62564.03 45598.02 108162.05
2009-2010 58955.39 49713.32 108668.71
2010-2011 56993.08 53951.48 110944.56
2011-2012 57148.37 63063.52 120211.89
PROFITAFTERTAX:
TABLE:
YEAR PROFITAFTERTAX (INLACKS)
2007-2008 4644.97
2008-2009 4137.14
2009-2010 2814.67
2010-2011 6299.57
2011-2012 3351.28
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INTERPRETATION:
From the above profits of LG ELECTRONICS Industries is in
increasing which is good for the company. In the year 2011-12 the PAT is
3351.28 lacks and then it is decreasing.
In the year 2009-10 the pat is the lowest and in 2010-11 it observed
the highest PAT is 62999.57 over the years.
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8. RETURN ON GROSS CAPITAL EMPLOYED:
The profit for the purpose of calculation on capital employed should
be computed according to the concept of capital employed & used. The
profits taken must be the profit earned on the capital employed in the
business.
Profit After Tax
Return on Gross Employed = ------------------------------------ X 100
Gross Capital Employed
TABLE:
YEAR PROFITAFTER
TAX (LACKS)
GROSSCAPITAL
EMPLOYED
PERCENTAGE
2007-2008 4644.97 113857.82 4.0
2008-2009 4137.14 108668.71 3.8
2009-2010 2814.67 108668.05 2.5
2010-2011 6299.57 110944.56 5.7
2011-2012 3351.28 120211.89 2.8
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CHART:
INTERPRETATION:
Return on Gross Capital Employ6ed ratio is fluctuating trend during the
review period of time
During the year 2007-08 the ratio was recorded at 4.0 % and in the year
2011-12 the ratio was increased to 2.8 % and average ratio is 3.76 %.
The highest ratio was recorded at 5.7 % in the year 2010-11 which is
more than average ratio.
The lowest ratio was recorded at 2.5 % in the year 2010-11 which is the
less than the average ratio
72
4 3.8
2.5
5.7
2.8
0
1
2
3
4
5
6
2007-08 2008-09 2009-10 2010-12
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9. RETURN ON FIXED ASSETS:
The return on fixed assets can be calculated as under.
PAT
Return on Fixed Assets = ------------------------- X 100
Fixed Assets
TABLE:
YEAR PROFITAFTER
TAX (LACKS)
FIXEDASSETS PERCENTAGE
2007-2008 4644.97 60794.08 7.6
2008-2009 4137.14 62564.03 6.6
2009-2010 2814.67 58955.39 4.7
2010-2011 6299.57 56993.08 11.05
2011-2012 3351.28 57148.37 5.86
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CHART:
INTERPRETATION:
Return on fixed assets ratio is decreasing.
74
7.6
6.6
4.7
11.05
5.86
0
2
4
6
8
10
12
2007-08 2007-08 2008-09 2009-10 2010-11
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During the year 2007-08 the ratio recorded as 7.6 % & in the year
2011-12 the ratio decreased 5.86 %.
The average ratio is 7.14 %
The highest ratio is recorded at 11.05 % in the year 2008-09, the lowest
ratio is 4.7 % in the year 2009-10
FINDINGS:
Company should concentrate on long term assets are utilized for
working capital problem will not arise in future.
Company should concentrate on inventory it can improves theinventory turn over ratio
Growth rate of investment trend percentage, growth rate in fixedassets
Growth rate in fixed assets during the years 2008-09 increased to6,25,64,02,873.
Fixed asset to net worth is good position in LG Electronics.
Fixed assets to long term liability highest ratio is regarded 184.6% inthe 2006-07 lowest ratio is 152.7% in 2010-11.
Total investment turn over ratio was highest regarded 51.84% in theyear 2010-11.Which is more than average ratio
Fixed assets turn over ratio was increased the every year. Highest ratiowas regarded at 2.40% in 2011-12
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Return on grass capital employee highest ratio was regarded 5.7% inthe year 2010-11
SUGGESTIONS:
Regarding the fixed assets to total assets it been observed that there
was decreased form 31.5% to 46 % as a results it is said to be that the
ratio is quite satisfactory.
Regarding the profit and gross capital employed ratio it can be
observed that it as been increasing over the year form 113857.82 to
120211.89. As a result of the above it can be said that the ratio is
steadily increasing.
From the above study it can be said that the LG ELECTRONICS
industries financial position on fixed assets is quite satisfactory.
Company should maintain adequate ratios
It should try to utilize the fixed assets to maintain maximum profit.
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APPENDIX Bibiliography
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BIBLIOGRAPHY
Authors name : Title of the Book, Publisher & Edition
L.M Panday : Financial management vikas publisher,
Prasanna Chandra : Financial Management, Tata McGrawhile
R.K Sharma : Management Accounting Kalyani Polishers.
S.P Jain & K.L Narang : Financial Accounting & Analysis Kalyani
Publisher
Websites: WWW.LGELECTRONICS.COM
WWW.GOOGLE.COMNews paper : Business line,
India Today.
78
http://www.lgelectronics.com/http://www.google.com/http://www.lgelectronics.com/http://www.google.com/ -
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