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CHAPTER 1
Introduction
➢ Objectives
➢ Source of Data
➢ Research Methodology
➢ Limitations
INTRODUCTION OF THE STUDY
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.
1. The first approach views finance as to providing of funds needed by a business on most suitable terms this approach confines finances to the raising of funds and to the study of financial institutions and instruments from where funds can be procured.
2. The second approach relates finance to cash.
3. The third approach views finance is being concerned with raising of funds and their effective utilization.
Definition of Financial Management;
Financial Management as practice by corporate firms can be called corporation finance or business finance Financial Management refers to that part of the management activity, which is concerned with the planning & controlling of firms financial resources. It deals with finding out various sources for raising funds for the firm. The sources must suitable and economical for the needs of the business. The most appropriate use of such funds also forms a part of Financial Management.
Objective of Financial Management
Financial Management is concerned with procurement and use of funds. its Main aim is to use business funds in such a way that the firm’s value / earning are maximized there are various alternatives available for using business funds. The pros & cons of various decisions have to look into before making a final selection. Financial Management provides a frame work for selecting a proper cause if action and decision available commercial strategy. The main objective of a business is to maximize the owner economics welfare. These objectives can be achieved by
1. Profit maximization and
2. Wealth maximization
(A)MANAGEMENT OF FIXED ASSETS
The selection of various fixed asset required creating the desired Production facilities and the decision regards the extermination of the level of Fixed assets is primarily the task that at the production technical people. The decision relating to fixed assets involves huge funds a long period of time and are generally irreversible nature affecting the long term profitability of a concern, an unsound invest decision may prove to b total to the very existence of the organization. Thus, the management of fixed asset is of vital importance to any organization.
The process of fixed asset management involves:
(i) Selection of most worthy projects or alternative of fixed assets,
(ii) Arranging the requisite funds / capital for the same
The first importance consideration to be acquire only that much amount of fixed assets which will be just sufficient to ensure and efficient running of the business. In some cases it may be economical to by certain asset in a lot size. Another important consideration to be kept in mind is possible increase in demand of the firm’s 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 of fixed assets management is that a firm must ensure buffer stocks of certain essential equipment / services to ensure uninterrupted production in this events of emergencies. Sometime, there may be a breakdown in some equipment or services affecting the entire production. It is always better to have some alternative arrangements to deal with such situations. But at the same time the cost of carrying such buffer stock should also be evaluated. Efforts should also be made to minimize the level of buffer stock of fixed assets be encouraging their maximum utilization during learn period, transferring a part of peak period and living additional capacity.
(B) FIXED ASSETS:
Fixed assets are those, which are required and held permanently for a pretty longtime in the business and are used for the purpose of earning profits. This successful continuance of the business depends upon the maintenance of such assets. They are not meant for release 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 building, 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 their business unit. It is assumed the business unit has a reasonable expectation of continuing business at a profit for indefinite period of time. It will continue to operate I the future. This assumption provides much of the justification for recoding fixed assets at original coat 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 (i.e., cost less depreciation provided) and not at their current realizable values.
The market value of a fixed asset may change with the passage of time, but for accounting purpose it continues to be shown in the books at its book value, i.e., the cost at which it was purchased minus depreciation proved up to date.
The cost concept of accounting, depreciation calculated on the basis of historical costs of old assets is usually lower than that of those calculated at current value or replacement value, This results in more profits on paper, which if distributed in full, will lead to reduction of capital.
1 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.
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.
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 discussions with the company’s executives.
Secondary Data:
➢ The data gathering method is adopted purely form secondary sources.
➢ The theoretical content is gathered form eminent text book reference and library at LG ELECTRONICS.
➢ The financial data and information is gathered from annual reports of the company internal records.
➢ Interpretation, Conclusions and suggestions are purely base on my opinion and suggestions provided by the project guide.
Need for study:
Fixed Assets play vary important role in realign company’s 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.
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.
METHODOLOGY
➢ The present study confines to the evaluation of overall financial performance of LG Electronics.
➢ For this purpose of the study the recent five years period(2007 to 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 of LG ELECTRONICS.
Limitations:
➢ The study period of 45 days as prescribed by Osmania University.
➢ The study is limited up to the date and information provided by LG ELCTRONICS INDIA LTD and its reports.
➢ The reports will not provide exact fixed Assets status and position in LG ELECTRONICS. it may varying form time to time and situation to 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 limited by the company changes in them may vary the fixed assets performance.
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 LG ELECTRONICS.
➢ 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 ELECTRONICS.
➢ The study is conducted to known the amount of finance made by long term liabilities and owner funds towards fixed assets.
➢ 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 funds and long term liabilities.
➢ The study is to evaluate adequate returns to the company.
CHAPTER II
Theoritical concept
➢ Introduction of Topic
➢ Definitions
➢ Process
➢ Methods
THEORITICAL CONCEPT
MANAGEMENT OF FIXED ASSETS:
The selection of various fixed assets required for creating the desired production facilities and the decision regarding the determination of level of fixed assets in the capital structure is an important decision for the company to take for the smooth running of business. The decisions relating to fixed assets involve huge funds for long period of time and are generally of irreversible nature affecting the long profitability of the business. Thus, management of fixed asset is of vital importance to any organization.
The process of Fixed Assets Management involves:
1. Selection of most worthy projects from the different alternatives of fixed assets.
2. Arranging the requisite funds/capital for the same.
The first important consideration is to acquire only that 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 buy certain assets in a lot size. Another important consideration to be kept in mind is possible increase in the demand of the firm’s product needs the expansion of activities. Hence a firm should have that amount of fixed assets, which could adjust to increase demand.
Another aspect of fixed assets management is that a firm must ensure buffer stocks of certain essential equipments to ensure uninterrupted production in the events of emergencies. Sometimes, there may some breakdown in some equipments or services affecting the entire production. It is always better to have some alternative arrangements to deal with such situations but at the same time the cost of carrying such buffer stock should also be evaluated. Efforts should also be made to minimize the level of buffer stock of fixed assets so that there will be maximum utilization during that period.
Fixed assets management is an accounting process that seeks to track Fixed assets for the purposes of financial accounting, preventive Maintenance, and theft deterrence.Many organizations face a significant challenge to track the location, quantity, condition, maintenance and depreciation status of their fixed assets. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile barcode reader and then produce a report.Off-the-shelf software packages for fixed asset management are marketed to businesses small and large. Some Enterprise Resource Planning systems are available with fixed assets modules.
Investment management is the professional management of various securities (shares, bonds etc) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes eg. mutual funds) .The term asset management is often used to refer to the investment management of collective investments, whilst the more generic
fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as
wealth management or portfolio management often within the context of so-called "private banking".The provision of 'investment management services' includes elements of financial analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments.Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars, euros, pounds and yen. Coming under the remit of financial services many of the world's largest companies are at least in part investment managers and employ millions of staff and create billions in revenue.
Fund manager (or investment advisor in the U.S.) refers to both a firm that provides investment management services and an individual(s) who directs 'fund management' decisions
Fixed asset, also known as property, plant, and equipment (PP&E), is a term used in accountancy for assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets. In most cases, only tangible assets are referred to as fixed.
Fixed assets normally include items such as land and buildings,motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term assets because they depreciate over time.
Assets Characteristics:
Assets have three essential characteristics:
• They embody a future benefit that involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services;
• The entity can control access to the benefit; and,
• The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred.
It is not necessary; in the financial accounting sense of the term, for control of access to the benefit to be legally enforceable for a resource to be an asset, provided the entity can control its use by other means.
It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term "equity," (see the related term shareholders' equity). Assets are equal to "equity" plus "liabilities."
The accounting equation relates assets, liabilities, and owner's equity:
The accounting equation relates assets, liabilities, and owner's equity:
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The accounting equation is the mathematical structure of the balance sheet.
Assets are usually listed on the balance sheet. It has a normal balance, or usual balance, of debit (i.e., asset account amounts appear on the left side of a ledger).
Similarly, in economics an asset is any form in which wealth can be held.
Probably the most accepted accounting definition of asset is the one used by the International Accounting Standards Board. The following is a quotation from the IFRS Framework: "An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise."
Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets.
The assets in the balance sheet are listed either in order of liquidity-promptness with which they are expected to be converted into cash-or in reverse order, that is, fixity or listing of the least liquid (fixed) first followed by others. All assets are grouped into categories, that is, assets with similar characteristics are put in one category. The assets included in one category are different from those in other categories. The standard classification of assets divides them into (1) fixed assets, (2) current assets, (3) investments, and (4) other assets.
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 owner’s 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 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 B’s 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 firm’s excess earnings over other companies in the industry. Internally developed goodwill (e.g., good customer relations) is not recorded in the accounts.
ACCOUNTING FOR INTANGIBLE ASSETS
APB Opinion 17 specifies the requirements for accounting for intangible assts. Intangibles that have been acquired, such as goodwill, should be recorded 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 asset’s 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.
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 plant rearrangement 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 asset classifications 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 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 one’s 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 own collectibles 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
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 asset’s returns with the returns on other assets are also relevant. In general, 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 gold’s 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
1 Current Assets The second category of assets included in the balance sheet are current assets. In contrast to fixed assets, they are short-term in 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 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.
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.
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 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 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 firm’s 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.
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 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 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 are payable periodically. That portion of the long-term loan which is payable in the current year will for part of current liabilities.
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's accounts?
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.
Definition of depreciation
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.'
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 charge for 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 import duties
- Costs of preparing the site for installation of the asset
- Professional fees, such as legal fees and architects' fees
Note that general overhead costs or administration costs would not costs of a fixed asset (e.g. 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.
2 DEPRECIATION AND SALVAGE VALUE
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 asset’s 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
3 DEPRECIATION METHODS
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 life
1. 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
Unit depreciation x usage = depreciation
Or Cost – Salvage
X usage = depreciation
Estimated life (in units)
This method has the advantage of relating depreciation cost directly to income.
2. 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
3. SUM-OF-THE-YEARS-DIGITS METHOD
With this method, the years of asset’s 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 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.
CHAPTER III
Company Profile
➢ Brief History
➢ Board of Directors
➢ Objectives of Company
➢ Industrial Profile
1 COMPANY PROFILE
HISTORY:-
The trajectory of LG Electronics, its growth and diversification, has always been grounded in the company ethos of making our customers' lives ever better and easier-happier, even-through increased functionality and fun.
Since its founding in 1958, LG Electronics has led the way to an ever-more advanced digital era. Along the way, our constantly evolving technological expertise has lent itself to many new products and applied technologies. Moving forward into the 21st century, LG continues to on its path to becoming the finest global electronics company, bar none.
BRAND IDENTITY
LG is the brand that is Delightfully Smart. "Life's Good" slogan, and futuristic logo are a great representation of what we stand for.
Global, Tomorrow, Energy, Humanity and Technology are the pillars that this corporation is founded on; with the capital letters L and G positioned inside a circle to center our ideals above all else, humanity. The symbol mark stands for our resolve to establish a lasting relationship with, and to achieve the highest satisfaction for our customers.
The letters "L" and "G" in a circle symbolize the world, future, youth, humanity, and technology. Our philosophy is based on Humanity. Also, it represents LG's efforts to keep close relationships with our customers around the world. The symbol mark consists of two elements: the LG logo in LG Grey and the stylized image of a human face in the unique LG Red color. Red, the main color, represents our friendliness, and also gives a strong impression of LG's commitment to deliver the best. Therefore, the shape or the color of this symbol mark must never be changed.
Our logo is the fundamental visual expression used to identify LG. It expresses the quality and sophistication that is the hallmark of our products. It is simple, modern and distinctive. Consistent and proper usage of the logo is absolutely essential. The logo is symbolic of our steadfast reputation for excellence; therefore, any variation of the logo diminishes the visual identity of LG Electronics and its products.
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 at home and abroad. We create value help people realize their dreams of a better life.
LG ELECTRONICS 50-YEAR HISTORY
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[pic]1958 Founded as GoldStar[pic]1959 Produce Korea's first consumer radios[pic]1998 Introduce the 60-inch plasma TV[pic]1999 Forge joint venture with Philips[pic]2003 Enter UK GSM handset market[pic]2005 Develop 3G UMTS DMB handset[pic]2007 Launch HD disc-player and drive
1958
GoldStar (today’s LG Electronics) established
1959
Korea’s first radio produced
1965
Korea’s first refrigerator produced
1966
Korea’s first black & white TV produced
1968
Korea’s first air conditioner produced
1969
Korea’s first washing machine produced
1974
GoldStar Communications went public
1977
Color TV produced
1978
Exports surpassed US$100 million, a first for Korea’s electronics industry
1980
First EU sales subsidiary in Germany (LGEWG) established
1982
Color TV plant established in the US in Huntsville, Alabama
1984
Sales surpassed 1 trillion Won
1986
European-standard VCR plant established in Germany
1989
Sales subsidiary and a joint production subsidiary established in Thailand
1990
Ireland-based design technology center established
1993
With the establishment of Huizhou subsidiary in China(LGEHZ), marketing in China took full swing
1995
Company name changed to LG Electronics and US-based Zenith acquired
1997
40-inch Plasma TV and the world’s first IC set for DTVs developed India production subsidiary (LGEIL) established
1998
World’s first 60-inch Plasma TV developed
1999
LG.Philips LCD established
2000
LG Information & Communications merged The world’s first Internet-enabled refrigerator launched Global sales of refrigerators reached the number one position
2001
Asynchronous IMT-2000 equipment commercialized The world’s first Internetenabled washing machine, air conditioner, and microwave oven launched LG.Philips Displays, a joint venture with Philips established
2002
Under the LG Holding Company system, the Company spun off to LG Electronics (LGE)& LG Electronics Investment (LGEI) The first home network system commercialized in the global market
2003
World’s first synchronous-asynchronous IMT-2000 mobile phone developed The world’s first 76-inch Plasma TV developed CDMA mobile handsets took the largest share in the US and world CDMA market Launched the world’s first Super Multi DVD Rewriter
2004
EVSB, the next-generation DTV transmission technology, chosen to be the US/Canada DTV transmission standard by the US ATSC All-in-one LG 55-inch LCD TV, the world’s first and largest among LCD TVs, commercialized The world’s largest and first 71-inch Plasma TV commercialized The world’s first terrestrial DMB phone developed Developed Wireless Speaker Home Cinema System
2005
The world’s first DMB notebook commercialized The world’s slimmest TV commercialized The world’s largest 102-inch Plasma TV developed LG and Nortel Networks agreed to establish a joint venture for telecommunication network equipment Satellite-based DMB phone commercialized The largest share seized in the global CDMA market
2006
Launched the LG Shine, the second handset in the Black Label Series Globally launched the steam washing machine and interactive TV refrigerator Developed the world's first 100-inch LCD TV Launched the world's largest Full HD 102-inch Plasma TV (1080p) Developed the world's first dual-format high-definition Disc Player& Drive
2007
Launches the industry's first dual-format, high-definition disc player and drive Launches 120Hz Full HD LCD TV Demonstrated the world-first MIMO 4G-Enabled technologies with 3G LTE Won contract for GSMA's 3G campaign
• 2008
Introduces new global brand identity: "Stylish design and smart technology, in products that fit our consumer's lives." Posted No.1 spot in US frontloading washers in 5 consecutive quarters Unveiled the world's first Bluetooth headset combined mobile phone Unveiled the world's first Blu-ray network storage Developed the world's first LTE mobile modem chip Recorded over 100 million units of LG air conditioners in accumulated sales
• 2009
Became second-largest LCD TV provider worldwide Became third-largest supplier of mobile handsets market worldwide Became Global Partner and Technology Partner of Formula One™
• 2010
Unveiled the world’s first and fastest dual-core smartphone, LG OPTIMUS 2X Unveiled the world’s first full LED 3D TV
LG Electronics continues to pursue its 21st century vision of becoming a worldwide leader in digital—ensuring customer satisfaction through innovative products and superior service while aiming to rank among the world’s top three electronics, information, and telecommunications firms by 2010.
On our way, we hold tight to a philosophy of "Great Company, Great People," underscoring our belief that only great people can create a great company.
LG strives for greatness in what we've identified as our three core capabilities: Product Leadership, Market Leadership, and People Leadership—each strength a key part of realizing our growth strategies for "fast innovation" and "fast growth".
LG Electronics is pursuing the vision of becoming a true global digital leader, attracting customers worldwide through its innovative products and design. The company’s goal is to rank among the top 3 consumer electronics and telecommunications companies in the world by 2010. To achieve this, we have embraced the idea of “Great Company, Great People,” recognizing that only great people can create a great company.
CORE CAPABILITIES
Product leadership refers to the ability to develop creative, top-quality products, using specialized new technologies.
Market leadership refers to the ability to achieve top ranking, worldwide, thanks to a formidable market presence in countries across the globe.
People leadership refers to the market dominance achieved by selecting and nurturing talented team players able to internalize and execute innovation across the board.
1 Growth Strategies
Fast innovation calls for securing a competitive edge over the competition by setting—and meeting—the highest of goals in all realms of innovation, by at least 30%. This applies to new-product development and unveiling, innovation in design and technology—as well as product sales, market share, and corporate value.
Fast growth is the result of implementing strategies designed to swiftly expand market size and earnings, with and eye toward monetary growth.
2 Corporate Culture
Though a company can boast stellar management strategies and an outstanding and talented pool of employees, it is still necessary to adopt a corporate culture that can fully unleash the power of these capabilities.
No to “No’s”
At LG, we try to meet every road block with an alternate route—brainstorming and working harder before saying “no.”
3 ‘We’ not ‘I’
LG’s embraces a code of strong teamwork—encouraging pride in achievement as goals are met by many working together as one.
4 Fun Workplace
LG’s workplace is one where the individual’s creativity and freedom are respected, and work is made fun.
• Established In : Jan 1997
• Managing Director : Mr. Soon Kwon
• Corporate Office : Plot No. 51, Udyog Vihar, Surajpur Kasna Road, Greater Noida (UP)
5 BUSINESS AREAS & MAIN PRODUCTS
6 Home Entertainment
Plasma Display Panels, LCD TVs, LED LCD TVs, Colour TVs, Audios, Home Theatre System, DVD Recorder/Player, BluRay Players
7 Home Appliances
Refrigerators, Washing Machines, Microwave Ovens, Vacuum Cleaners, Air Purifiers
8 AC
Split AC, Window AC, Commercial AC’s
9 Business Solutions
LCD monitors, CRT monitors, Network Monitors, Graphic Monitor, Optical Storage Devices, LED Projectors, NAS (Network attached Storage) and Digital signage
10 GSM
Smart Phones, Color Screen GSM Handsets, Camera Phones, Touch Screen Phones, 3G Phones, Multimedia Phones, Dual SIM Phones, CDMA Phones
AWARDS
|Award Name |Awarded By |Year |
|Most Admired Company in India |A&M Magazine |1998 |
|Most Admired MNC |A&M Magazine |1999 |
|No.1 Consumer Durable Company |A&M Magazine |1999 |
|Best Marketing Company |A&M Magazine |1999 |
|Most Ethieal MNC |Business World |1999 |
|Techies Award Best Flat Screen Monitor |Computer World |2000 |
|3rd Largest Exporter |ESC2001 |2001 |
|Best Employer |Business Today/ Hewitt Assts |2001 |
|Best Employer |Business Today/ Hewitt Assts |2002 |
|Enterpreneur of the year |Ernst & Young |2002 |
|Gold Rating for Environmental Performance |CII |2003 |
|No. 1Awareness Award. |Business Today |2003 |
|Super Achivers Award : MD LGEIL |CETMA |2003 |
|Green Technology Gold Award |Green Tech Foundation |2003 |
|Best Designer Award -Art Cool Air Conditioner |Business World & NIT |2003 |
|VAR India User Choice Award : Monitors |VAR India |2003 |
|Most Admired Product - Microwave |EFY |2004 |
|Award for IT Innovation |Business Today |2004 |
|Most Trusted Brand -CD Writers |DIGIT/Jasubhai Digital Media |2004 |
|EFY's Electronics Organisation of the Year Award for Television |Electronics for You |2005 |
|Consumer Durable Retailer of the Year |ICICI Bank |2005 |
|Excellence in Corporate Leadership & Entreprerenural Spirit |CNBC TV 18 |2005 |
|Most preferred Brand- CTV & WM |CNBC Consumer Vote Awards |2005 |
|Maximum Imports & Third Highest Exports |CONCOR |2005 |
|EFY Reader's Choice Award For Microwaves |EFY |2005 |
|Outstanding Contribution in the field of HR |CETMA |2005 |
|Outstanding Contribution in the field of HR |MID DAY |2005 |
|Top Company :CDMA Handsets |V & D |2005 |
|Top Company : Fixed Phones |V & D |2005 |
|Best in Recruiting & Staffing |RASBIC |2006 |
|Most Preferred Brand - CTV, WM, Computer & AC |CNBC Awaaz Consumer Awards |2006 |
|4 P Award : Refrigerator and Air Conditioner |4Ps Power Brand Award |2006 |
|4P Power Brand |CNBC Consumer Vote Awards |2006 |
|Most Trusted Brand - LCD TV, Plasma TV, AC, WM, Ref, PC |Reader's Digest |2006 |
|Maximum Exports-Consumer Electronics |ESC |2006 |
|Maximum Exports |CONCOR |2006 |
|First Consumer Awards - CTV, Ref, WM, AC, MWO, PC |Times Group |2006 |
|Business World Customer Loyalty Survey : Air-conditioner & Refrigerator |Business World & IMRB |2007 |
|Top Newsmaker – Consumer Durables |Business Today & Cirrus |2007 |
|Most Trusted Brand - TV, AC & HA |Super Brands |2007 |
|Reader's Digest Trusted Brands: Platinum Awards- Airconditioner. Gold Awards- LCD |Reader's Digest |2007 |
|TV/Plasma TV, Ref, Washing Machine,PC | | |
|EFY Reader's Choice Award For IT & MWO |EFY |2007 |
|India's Most Trusted Brands 2007 |Brand Equity |2007 |
|4 Ps Business & Marketing : India's 100 Most Valuable Awards |Planman Consulting & ICMR Ranking |2007 |
|Business Leadership Award in Consumer Durable Sector |NDTV |2007 |
|Most Preferred Brand -CTVs, ACs, Ref.and Washing Machines |CNBC |2007 |
|Loyalty Awards - Customer and Brand Loyalty in the Consumer Durables Sector |India Times- Mindscape with Savile-Row |2008 |
|Avaya Global Connect Customer Responsiveness Awards |ET Avaya Awards |2008 |
|EFY Reader's Choice Awards 2008 -Microwaves |EFY |2008 |
|Smart Living Awards -TV, AC, Microwave & Washing Machine |360 degrees, Times of India |2008 |
|Brand for Excellence 2008 |VAR India |2008 |
|Reader's Digest Trusted Brand : Platinum Awards -AC. Gold Awards - LCD TV /Plasma |Reader's Digest |2008 |
|TV,Ref, PC | | |
|Most Preferred Brand- Consumer Electronics and Home Appliances |CNBC Awaaz Consumer Awards |2008 |
|Most Admired MNC in India |4P’s Award |2008 |
OBJECTIVES OF COMPANY
1 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
➢ LG will maximize its return on invested capital through outsourcing, innovative manufacturing technology, and an advanced supply chain management system.
1 MANAGEMENT SYSTEM
When LG Electronics removed the Circulating Investment Structure of its affiliated companies (through the launch of a holding company system), this enabled the holding company to take full charge of investments. Consequently, LG Electronics has been able to focus on its own businesses while increasing the overall value of the Company. This corporate governance structure has laid the groundwork for increasing managerial transparency. Through a responsible management system comprising of the CEO of LG Electronics and a Board of Directors, we are taking huge steps in strengthening our competitiveness at both the domestic and international level, in order to maximize corporate and shareholder value.
2 Board of Directors
LG Electronics' Board of Directors maintains independence from its management and major shareholders. Currently, the Board has a total of seven directors, four of whom are outside directors. To ensure that external directors are appointed fairly and independently, the "External Director Recommendation Committee," comprised of one in-house director and one external director, nominates external directors following close examination of their qualifications. These outside directors are then voted on at the next shareholders' meeting.
3 Committees
The BOD is supported by three Board Committees. They are the Audit Committee, the Outside Director Candidate Recommendation Committee and the Management Committee. The Audit Committee consists of three Outside Directors, and is responsible for examining corporate financial records and accounting to ensure compliance with the accounting laws and transparency. The Management Committee reviews and determines the agendas delegated by the BOD and ordinary management activities. In 2010, the Management Committee reviewed a total of 52 agendas.
4 Evaluation and Compensation
Compensation for the BOD members is made within regulations pertaining to BOD compensation that has been approved at the General Shareholder's Meeting. The evaluation of management and executives of LGE is held annually. Top management and executives are evaluated to determine whether they have set and achieved challenging goals, whether their job objectives composed of quantitative and non-quantitative factors were achieved, as well as their capability through fair and objective process, and appropriate compensation corresponding to the outcome of the evaluation is determined.
2 Key Executives for LG Electronics India Pvt. Ltd.
Mr. Soon H. Kwon
Managing Director and Director
Mr. Y. V. Verma
Chief Operating Officer
Mr. Chandramani M. Singh
Product Chief and Head of Consumer Electronics
Mr. R. Manikandan
Business Group Head of Digital Display & Storage
Mr. V. Ramachandran
Head of Strategy
Compensation as of Fiscal Year 2012.
ORGANIZATION
Take a look at LG Electronics’ organization information, including our global operations.
[pic]
INDUSTRY PROFILE
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 electronic circuits 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
➢ Kitchen Equipment
➢ Liquefied Petroleum Gas Cylinders
➢ Microwave Ovens
➢ Refrigerators
➢ Sewing Machines
➢ Sunglasses
➢ Toys and Games
➢ Washing Machines and Vacuum Cleaners
➢ Watches and Clock
CHAPTER IV
➢ Data Analysis
➢ Balance Sheets
➢ Bar Diagrams
➢ Charts
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 firm’s 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 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.
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.
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 of growth, 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”.
LG Electronics Inc. and Subsidiaries
Income Statement:
|Income Statement |2007-2008 |2008-2009 |2009-2010 |2010-2011 |2011-2012 |
| |(Rs. in Lakhs) |(Rs. In Lakhs) |(Rs. in Lakhs) |(Rs. in Lakhs) |(Rs. in Lakhs) |
|Sales |134543.28 |140116.22 |135375.24 |129553.62 |142195.78 |
|Domestic |17062.4 |19584.3 |22058 |25534.8 |28777.9 |
|Exports |71294.5 |72379.8 |73131.7 |73943.5 |74943.9 |
|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 |2598.9 |3574.6 |4538.7 |3239 |8224.6 |
|Non-Operating Expenses |5017.3 |4239.2 |5235.7 |4411.6 |4153.3 |
|Recurring Profit |5998.7 |5646.4 |29684 |1123.4 |6564.1 |
|Extraordinary Gains |- |- |- |- |- |
|Extraordinary Losses |- |- |- |- |- |
|Income before Income Taxes |4509.07 |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:
|Balance Sheet |2007-2008 |2008-2009 |2009-2010 |2010-2011 |2011-2012 |
| |(Rs. In Lakhs) |(Rs. In Lakhs) |(Rs. In Lakhs) |(Rs. In Lakhs) |(Rs. In Lakhs) |
|Current Assets |53063.74 |45598.02 |49713.32 |53951.48 |63063.52 |
|Quick Assets |11568.5 |12484.8 |10315.6 |8831.4 |8306.6 |
|Inventories |5762.2 |4876.8 |5637.5 |4739.6 |4173.8 |
|Fixed Assets |6,07,94.08 |6,25,64.02 |5,89,55.39 |5,69,93.08 |5,71,48.37 |
|Investment Assets |19568.6 |20834.5 |21947.3 |22972.3 |31225.6 |
|Tangible Assets |13543.5 |15859.6 |16617.3 |18273.7 |17818.6 |
|Intangible Assets |1293.5 |1423.7 |1681 |1984.4 |1758.9 |
|Total Assets |179137.63 |163641.62 |164867.41 |167745.96 |317929.03 |
|Current Liabilities |2,05,36.47 |2,03,50.59 |2,40,99.51 |2,14,80.89 |2,30,72.27 |
|Fixed Liabilities | | | | | |
|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 |2965.4 |3079.5 |3202.1 |3472.7 |3571.1 |
|Capital Surplus |7832.7 |8067.3 |8437.8 |9532.5 |9799 |
|Retained Earnings |9765.6 |9945.8 |10057.3 |10590.3 |15547.2 |
|Capital Adjustment |2246.6 |2359.9 |2976.6 |2759.3 |2906.9 |
|Total Shareholder's Equity |18456.8 |20543.5 |24673.8 |26354.8 |31824.2 |
|Total Liabilities and Shareholder's |54387.8 |55346.9 |56198.7 |56801.4 |6326.3 |
|Equity | | | | | |
LG Electronics Inc. and Subsidiaries
Financial Highlights:
|Financial Highlights |2007-2008 |2008-2009 |2009-2010 |2010-2011 |2011-2012 |
| |(Rs. In Lakhs) |(Rs. In Lakhs) |(Rs. In Lakhs) |(Rs. In Lakhs) |(Rs. In Lakhs) |
|Sales |134543.28 |140116.22 |135375.24 |129553.62 |142195.78 |
|Operating 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 |317929.03 |
|Total Liabilities |2,05,36.47 |2,03,50.59 |2,40,99.51 |2,14,80.89 |2,30,72.27 |
|Total Shareholder's Equity |18456.8 |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 |1,349 |
|Capex |1,075 |1,179 |1,291 |860 |1,060 |
BAR DIAGRAMS & CHARTS:
|year |investment |Trend |
| | |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 |
CHART:
[pic]
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 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 2007-2008 it is Rs. 41, 28, 06,232 and it was decrease in the year 2011-2012 Rs. 28, 19, 24,444.
Growth Rate in fixed 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 |
Chart:
[pic]
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 2011-2012 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.
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 to make qualitative judgments about the firm’s 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 fixed assets and a part of the working is provided by the shareholders. When the ratio is more 100% it implies that owner’s funds are not sufficient to finance the fixed assets and the finance has to depend upon outsiders to fiancé 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.
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.
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.
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
Table:
|year |Net worth |Gross fixed | |
| | |ASSETS |Ratio in |
|2007-2008 |3,64,91,77,075 |6,07,94,08,271 |166.59 |
|2008-2009 |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 :
[pic]
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.
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.
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 (Long Term Funds)
TABLE:
|year |fixed assets |long term |PERCENTAGE |
| | |funds | |
|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 |
CHART:
[pic]
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 2011-2012.
B) The highest ratio is recorded at 184.6% in the 2008-2009 the lowest ratio is 152.7% in 2011-2012.
3. FIXED ASSETS AS A PERCENTAGE TO CURRENT LIABILITIES:
Fixed Assets
Fixed Assets as a percentage to Current Liabilities = -----------------------------
Current Liabilities
TABLE:
|year |fixed assets |CURRENT LIABILITIES |PERCENTAGE |
|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:
[pic]
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.
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 (in lacks) |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 :
[pic]
INTERPRETATION:
A) The ratio was in increasing trend.
B) During the year 2007-2008 the ratio was recorded at 32.5 and in the 2011-2012 the ratio was increasing to 53.43.
C) The highest ratio was recorded at 51.84 in the year 2010-2011 which is 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 (in lacks) |Total fixed assets |PERCENTAGE |
|2007-2008 |134543.28 |60794.08 |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 |
CHART:
[pic]
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 2011-2012 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
6. FIXED ASSETS AS A PERCENTAGE TO TOTAL ASSETS:
Fixed assets
Fixed assets a % Total Assets = -------------------------------- X 100.
Total Asset
TABLE:
|year |fixed ASSETS |Total assets |PERCENTAGE |
|2007-2008 |60794.08 |117985.89 |51.5 |
|2008-2009 |62564.03 |112647.26 |55.5 |
|2009-2010 |58955.39 |112637.07 |52.3 |
|2010-2011 |56993.08 |113443.60 |50.0 |
|2011-2012 |57148.37 |123031.14 |46.0 |
CHART:
[pic]
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 2011-2012 the ratio decreased to 46 %.
C) Average ratio was observed at 51.06 % during the review period of time.
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.
7. GROSS CAPITAL EMPLOYED:
Gross capital employed = fixed assets + Current Assets.
TABLE:
|year |fixed sales (in lacks) |current assets |Gross capital employed (in lacks) |
|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 |
Profit after tax:
TABLE:
|year |profit after tax (in lacks) |
|2007-2008 |4644.97 |
|2008-2009 |4137.14 |
|2009-2010 |2814.67 |
|2010-2011 |6299.57 |
|2011-2012 |3351.28 |
[pic]
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.
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 |profit after tax (lacks) |gross capital 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 |
CHART:
[pic]
INTERPRETATION:
➢ Return on Gross Capital Employ6ed ratio is fluctuating trend during the review period of time
➢ During the year 2007-08the 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 2009-10 which is the less than the average ratio
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 |profit after tax (lacks) |Fixed assets |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 |
CHART:
[pic]
INTERPRETATION:
➢ Return on fixed assets ratio is decreasing.
➢ During the year 2007-08the 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 2009-10, the lowest ratio is 4.7 % in the year 2009-10
[pic]
➢ Conclusions
➢ Suggestions
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 the inventory turn over ratio
➢ Growth rate of investment trend percentage, growth rate in fixed assets
➢ Growth rate in fixed assets during the years 2008-09 increased to 6,25,64,02,873.
➢ Fixed asset to net worth is good position in LG Electronics.
➢ Fixed assets to long term liability highest ratio is regarded 184.6% in the 2007-08lowest ratio is 152.7% in 2010-11.
➢ Total investment turn over ratio was highest regarded 51.84% in the year 2010-11.Which is more than average ratio
➢ Fixed assets turn over ratio was increased the every year. Highest ratio was regarded at 2.40% in 2011-12.
➢ Return on grass capital employee highest ratio was regarded 5.7% in the 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.
CONCLUSIONS:
Regarding the profit and gross capital employed ratio it can be observed that it has been increasing over the year i.e., from 113857.82 to 020211.89. 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 Financial position on Fixed Assets in quite satisfactory.
The company should focus on the current where the fixed assets to the total assets have decreased from 31.50% to 46% in order to meet current obligations of the business.
The Company should focus on the current where the fixed assets to the total assets have decreased from 31.50% to 46% in order to meet current obligations of the business.
[pic]
APPENDIX
➢ Bibiliography
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.
WWW.
News paper : Business line,
India Today.
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