Description
A STUDY ON “ THE FIANANCIAL ANALYSIS OF
LOTTE INDIA CORPORATIONS LTD”
PROJECT REPORT
A STUDY ON “ THE FIANANCIAL ANALYSIS OF
LOTTE INDIA CORPORATIONS LTD”
PROJECT REPORT
Submitted in partial fulfillment of the
Requirements for the award of the Degree of
MBA
2013
BY
VIJAYALAKSHMI.E
Under the Supervision of
MR. E. PRADEEP KUMAR
Faculty, Department of MBA ,
SRM UNIVERSITY,
KATTANKULATHUR,
CHENNAI – 203.
MAY 2013
ACKNOWLEDGEMENT
ACKNOWLEDGEMENT
First and foremost, I offer my sincerest gratitude to our Chancellor, SRM University, for his academic
support and the facilities provided to carry out the project work at the Institute. His wide vision and
concern for students have been inspirational. I wish to express my profound gratitude to my venerable
Chairman, SRM Group of Institutions-Kattankulathur Campus, who offered me such a huge
opportunity, incredible infrastructure and other support which made the project work quite smooth. I
express my heartfelt thanks to our Dean & Vice Principal, Faculty of Engineering and Technology,
SRM University, Kattankulathur Campus who provided all facilities for carrying out this project. I
immensely thank to our Head of the department, Prof.Dr.C.Sundar M.B.A., M.Phil .,( Ph.D) for his
cordial support, valuable information and guidance, which helped me in completing this task through
various stages. The blessing, help and guidance given by him time to time shall carry me a long way in
the journey of life on which I am about to embark.
I take this opportunity to express my profound gratitude and deep regards to my Project Guide ,
Mrs.E. PRADEEP KUMAR,MBA.,M.Phil.,(Ph.D) for his exemplary guidance, monitoring and
constant encouragement throughout the course of this project.
I also take this opportunity to express a deep sense of gratitude to Mr.RANGANATHAN.P,
DGM-ACCOUNTS, MR.ANAND.NA, MR.SABARIRAJAN, MR.HEMANTH KUMAR,
MRS.SUBASHINI, ASST.MANAGER-FINANCE, MR.GANESH PANDIAN B.COM,
MR.JALEEL, for their cordial support, valuable information and guidance, which helped me in
completing this task through various stages. I owe my wholehearted thanks and appreciation to the
entire staff of the company for their cooperation and assistance during the course of my project. I hope
that I can build upon the experience and knowledge that I have gained and make a valuable
contribution towards this industry in coming future. I thank God Almighty for showering his perennial
blessing on me for giving me the courage to pursue this project work successfully. I owe a lot to my
parents, who encouraged and helped me at every stage of my personal and academic life, and longed
to see this achievement .
E.VIJAYALAKSHMI
REG NO.3511210059
DECLARATION
I, E.VIJAYALAKSHMI, hereby declare that the project Report, entitled “A
STUDY ON THE FINANCIAL ANALYSIS OF LOTTE INDIA CORPORATION LIMITED”
submitted to the SRM University in partial fulfillment of the requirements for the award of the Degree
of Master of Business Administration is a record of original work undergone by me during the period
29.05.2013 to 29.07.2013 under the supervision and guidance of Mr.E.PRADEEP KUMAR,
MBA.,M.Phil.,(Ph.D) School of Management Studies, SRM University, kattankulathur Campus and it
has not formed the basis for the award of any Degree/Fellowship or other similar title to any candidate
of any University.
LIST OF CONTENTS
SL. NO. PARTICULARS PAGE NO.
1 INTRODUCTION
2 INDUSTRY PROFILE
3 COMPANY PROFILE
4 REVIEW OF LITERATURE
5 DATA ANALYSIS & INTERPRETATION
6 FINDINGS, SUGGESTIONS & CONCLUSIONS
LIST OF TABLES
TABLE NO. TITLE PAGE NO.
1 GROSS PROFIT RATIO
2 NET PROFIT RATIO
3 OPERATING PROFIT RATIO
4 RETURN ON TOTAL ASSETS
5 EARNINGS PER SHARE
6 DEBTORS TURNOVER RATIO
7 WORKING CAPITAL TURNOVER RATIO
8 FIXED ASSETS TURNOVER RATIO
9 CAPITAL TURNOVER RATIO
10 OWNED CAPITAL TURNOVER RATIO
11 CURRENT RATIO
12 LIQUID RATIO
LIST OF CHARTS
TABLE NO. TITLE PAGE NO.
1 GROSS PROFIT RATIO
2 NET PROFIT RATIO
3 OPERATING PROFIT RATIO
4 RETURN ON TOTAL ASSETS
5 EARNINGS PER SHARE
6 DEBTORS TURNOVER RATIO
7 WORKING CAPITAL TURNOVER RATIO
8 FIXED ASSETS TURNOVER RATIO
9 CAPITAL TURNOVER RATIO
10 OWNED CAPITAL TURNOVER RATIO
11 CURRENT RATIO
12 LIQUID RATIO
CHAPTERIZATION:
The project report content is divided into 6 main chapters.
Chapter 1 - Introduction
Chapter 2 - Industry Profile
Chapter 3 - Company Profile
Chapter 4 - Review Of Literature
Chapter 5 - Data Analysis & Interpretations
Chapter 6 - Findings, Suggestions & Conclusions
CHAPTER – I: INTRODUCTION
INTRODUCTION
FINANCIAL STATEMENT ANALYSIS
Financial statement analysis (or financial analysis) the process of understanding the risk and profitability of a firm
(business, sub-business or project) through analysis of reported financial information, by using different accounting
tools and techniques.
The focus of financial analysis is on key figures in the financial statements and the significant relationship that
exists between them. The analysis of financial statements is a process of evaluating the relationship between
component parts of financial statements to obtain a better understanding of the firm's position and performance.
Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments
of measurement errors, and 3) financial ratio analysis on the basis of reformulated and adjusted financial
statements. The first two steps are often dropped in practice, meaning that financial ratios are just calculated on
the basis of the reported numbers, perhaps with some adjustments. Financial statement analysis is the foundation
for evaluating and pricing credit risk and for doing fundamental company valuation.
Financial statement analysis typically starts with reformulating the reported financial information. In relation to the
income statement, one common reformulation is to divide reported items into recurring or normal items and non-
recurring or special items. In this way, earnings could be separated into normal or core earnings and transitory
earnings. The idea is that normal earnings are more permanent and hence more relevant for prediction and
valuation. Normal earnings are also separated into net operational profit after taxes (NOPAT) and net financial
costs. The balance sheet is grouped, for example, in net operating assets (NOA), net financial debt and equity.
Analysis and adjustment of measurement errors question the quality of the reported accounting numbers. The
reported numbers can for example be a bad or noisy representation of invested capital, for example in terms of
NOA, which means that the return on net operating assets (RNOA) will be a noisy measure of the underlying
profitability (the internal rate of return , IRR). Expensing of R&D is an example when such investment expenditures
are expected to yield future economic benefits, suggesting that R&D creates assets which should have been
capitalized in the balance sheet. An example of an adjustment for measurement errors is when the analyst removes
the R&D expenses from the income statement and put them in the balance sheet. The R&D expenditures are then
replaced by amortization of the R&D capital in the balance sheet. Another example is to adjust the reported
numbers when the analyst suspects earnings management.
Financial ratio analysis should be based on regrouped and adjusted financial statements. Two types of ratio
analysis are performed: 1) Analysis of risk and 2) analysis of profitability:
1. Analysis of risk typically aims at detecting the underlying credit risk of the firm. Risk analysis consists of
liquidity and solvency analysis. Liquidity analysis aims at analyzing whether the firm has enough liquidity to meet
its obligations when they should be paid. A usual technique to analyze illiquidity risk is to focus on ratios such as
the current ratio and interest coverage. Cash flow analysis is also useful. Solvency analysis aims at analyzing
whether the firm is financed so that it is able to recover from a loss or a period of losses. A usual technique to
analyze insolvency risk is to focus on ratios such as the equity in percentage of total capital and other ratios of
capital structure. Based on the risk analysis the analyzed firm could be rated, i.e. given a grade on the riskiness, a
process called synthetic rating.
Ratios of risk such as the current ratio, the interest coverage and the equity percentage have no theoretical
benchmarks. It is therefore common to compare them with the industry average over time. If a firm has a higher
equity ratio than the industry, this is considered less risky than if it is above the average. Similarly, if the equity
ratio increases over time, it is a good sign in relation to insolvency risk.
2.Analysis of profitability refers to the analysis of return on capital, for example return on equity, ROE, defined as
earnings divided by average equity. Return on equity, ROE, could be decomposed: ROE = RNOA + (RNOA -
NFIR) * NFD/E, where RNOA is return on net operating assets, NFIR is the net financial interest rate, NFD is
net financial debt and E is equity. In this way, the sources of ROE could be clarified.
Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital - also called the required
return on capital. For example, the return on equity, ROE, could be compared with the required return on equity,
kE, as estimated, for example, by the capital asset pricing model.If ROE < kE (or RNOA > WACC, where WACC
is the weighted average cost of capital), then the firm is economically profitable at any given time over the period
of ratio analysis. The firm creates values for its owners.
Insights from financial statement analysis could be used to make forecasts and to evaluate credit risk and value the
firm's equity. For example, if financial statement analysis detects increasing superior performance ROE - kE > 0
over the period of financial statement analysis, then this trend could be extrapolated into the future. But as
economic theory suggests, sooner or later the competitive forces will work - and ROE will be driven toward kE.
Only if the firm has a sustainable competitive advantage, ROE - kE > 0 in "steady state".
DEFINITION OF FINANCIAL STATEMENT ANALYSIS:
The process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and
loss statement), thereby gaining an understanding of the financial health of the company and enabling more
effective decision making. Financial statements record financial data; however, this information must be evaluated
through financial statement analysis to become more useful to investors, shareholders, managers and other
interested parties.
OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS:
1.Assessment Of Past Performance -
Past performance is a good indicator of future performance. Investors or creditors are interested
in the trend of past sales, cost of good sold, operating expenses, net income, cash flows and return on
investment. These trends offer a means for judging management's past performance and are possible
indicators of future performance.
2.Assessment of current position -
Financial statement analysis shows the current position of the firm in terms of the types of assets
owned by a business firm and the different liabilities due against the enterprise.
3.Prediction of profitability and growth prospects -
Financial statement analysis helps in assessing and predicting the earning prospects and growth rates
in earning which are used by investors while comparing investment alternatives and other users in judging
earning potential of business enterprise.
4.Prediction of bankruptcy and failure -
Financial statement analysis is an important tool in assessing and predicting bankruptcy andprobability of
business failure.
5. Assessment of the operational efficiency -
Financial statement analysis helps to assess the operational efficiency of the management of a
company. The actual performance of the firm which are revealed in the financial statements can be compared
with some standards set earlier and the deviation of any between standards and actual performance can be
used as the indicator of efficiency of the management.
FEATURES OF FINANCIAL STATEMENT ANALYSIS:
1.The financial statements should be relevant for the purpose for which they are prepared.
Unnecessary and confusing disclosures should be avoided and all those that are relevant and material should be
reported to the public.
2.They should be easily comparable with previous statements or with those of similar concerns or
industry, comparability increases the utility of financial statements.
3.They should be prepared in a classified form so that a better and meaningful analysis could be made.
4. The financial statements should be prepared and presented at the right time. Undue delay in their
preparation would reduce the significance and utility of these statements.
ADVANTAGES OF FINANCIAL STATEMENT ANALYSIS:
The different advantages of financial statement analysis are listed below:
?The most important benefit if financial statement analysis is that it provides an idea to the investors about
deciding on investing their funds in a particular company.
?Another advantage of financial statement analysis is that regulatory authorities like IASB can ensure the company
following the required accounting standards.
?Financial statement analysis is helpful to the government agencies in analyzing the taxation owed to the firm.
?Above all, the company is able to analyze its own performance over a specific time period.
Limitations of financial statement analysis
In spite of financial statement analysis being a highly useful tool, it also features some limitations, including
comparability of financial data and the need to look beyond ratios. Although comparisons between two companies can
provide valuable clues about a company’s financial health, alas, the differences between companies’ accounting methods
make it, sometimes, difficult to compare the data of the two.
Besides, many a times, sufficient data are on hand in the form of foot notes to the financial statements so as to restate
data to a comparable basis. Or else, the analyst should remember the lack of data comparability before reaching any
clear-cut conclusion. However, even with this limitation, comparisons between the key ratios of two companies along
with industry averages often propose avenues for further investigation.
TECHNIQUES OR TOOLS USED FOR THE ANALYSIS OF FINANCIAL STATEMENTS:
1. Ratio Analysis
2. Cash Flow Statements
3. Fund Flow Statements
4. Comparative Statements
5. Common Size Statements
6. Net Working Capital Analysis
7. Trend Analysis
STATEMENT OF THE PROBLEM:
The main aim of this study is to analyse the financial status and performance of Lotte India Corporation for
the past 5 years.
1. To analyse the liquidity solvency position of the firm.
2. To Compare the annual income of Lotte India Coporation to ascertain whether it satisfies the
investors, dividends and the rate of return expectations which supports the growth of the company.
3. To ascertain whether the company is capable of covering Current liabilities quickly with Current
assets secure creditors and shareholdes against losses.
4. To ascertain the Trend percent of Lotte India with regard to 5 years.
SCOPE OF THE STUDY:
1.The study helps in determining the short-term and Long-term financial decisions.
2.To meet routine cash requirements to finance the transactions.
3.To find the strategies for efficient management of cash.
4. It reveals the liquidity position of the firm by highlighting the various sources of cash and its uses.
NEED AND SIGNIFICANCE OF THE STUDY:
1. To determine the overall financial status of the firm.
2. To judge the earning capacity or profitability of the firm.
3. To identify the basic forces influencing the cash management of the firm.
4. To make comparative studies between various firms.
5. To analyse the credit worthiness of the firm.
6. To understand the relationship maintained with the trade creditors and the debtors of the firm.
OBJECTIVS OF THE STUDY:
1. PRIMARY OBJECTIVES:
The main objective of the study is to analyse and interpret financial statements of Lotte India
with Ratio Analysis.
SECONDARY OBJECTIVE:
(i) To analyse the liquidity solvency position of the firm.
(ii) To study the short -term and Long- term solvency ratios of the firm.
(iii) To study the relationships between various items or groups of items i the financial statements.
(iv) To assess the factors influencing the financial position of the company.
(v) To compute the profitability position of the firm.
(vi) To give valuable suggestions to improve the financial position of the firm.
CHAPTER – II : INDUSTRY PROFILE
INDUSTRY PROFILE
INTRODUCTION:
Confectionery has grown from the ancient delights to a US$21 billion industry in the United states. The U.S
confectionery market leader Hershey Foods Corporation also has grown from a small chocolate company in the
countryside of Pennsylvania to the leader of the North American markets. In recent years confectionery markets have
been growing worldwide. However, Hershey is experiencing difficulty in taking advantage of global growth. As a result of
this concern, Hershey needs to re-evaluate its strategies in order to seize the present global opportunities
HISTORY OF CONFECTIONERY:
Human's desire for something sweet to at goes back to primitive times and has grown into $21
billion confectionery industry in the United States. The industry produces a universal food products using
ingredients from many parts of the world. From the cocoa tree plantations of tropical climates, to the cane
and beet sugar field, to the confides of the middle west, to the fruit and trees in many parts of the world, to
the roots and herbs area, to the dairy lands in most countries,candy strongly affects agricultural producers
and their markets. Modern machines, skilled workers and executive, scientific and distributive techniques
combine to meet the great demand for the confectionery products.
The recorded history of confectionery can be traced back to ancient Egyptians, Romans, Greeks
and chinese. Nevetheless, the confections made at the time would seem strange compared to modern candies.
Ancient Egyptians made candy from flour and crude starch, sweetened with honey, with additions of spices
and sweets. By combining honey with flour paste and fruits, ancient Romans and Greeks also enjoyed their
confections. Records date back to ancient china show that people made a variety of hard candy by boiling
barely and water to a hard consistency,spinning it into sticks and then rolling these in toasted seasame
seeds. At that time, candy was a luxurious treat that only a few could afford.
The increased availability of sugar transformed candy from an ancient delight into a major
modern industry producing a relatively low cost food that millions of people could enjoy. Candy evolved from
ancient forms produced in ancient origins to a modern industry centered in Europe. Venice has acquired
sugar through trade with the east. In the 13
th
century, venetians had a virtual monoploy on the European
trade, they were also the first to first to prove sugar-refining methods. Eventually refineries sprang up in
Italy, Germany, Spain, England and Brazil.
The first confectioners in America were the Dutch backers of New Amsterdam, later called New
York. At the beginning of 20
th
century, there were about 1000 manufacturers in the United States. They
employed 27000 workers and the total annual sales were $60,000,000. Equipment until the 1900s consisted
chiefly of kettles, hand cutters, starch boards,shallow trays and hand printers. The majority of these were
quite primitive; the inroduction of European candy manufacturing inventions modernized the candy industry
in the United states. These inventions enabled mass production of candy at alower cost, improved a sanitary
conditions of candy manufacturing by eliminating the work previously done by hand and increased production
to meet the everincreasing demand for candy.
World war I fostered mass production of candy and revolutionized the industry. Almost every
candy making process, from the preparation of raw materials to the packaging of the final product, was
transformed to continuous oepration. Candy became a nationally recognized food and its evaluation from a
mere delicacy to a world commodity wa complete. World war II also fostered many improvements in the candy
flavours and freshness was developed and is still in general use of advanced stages of development today.
Although it would be impossible to present an exact history, for sake of clarity, this timeline
illustrates the pattern at which the candy industry developed in theUnited states from 1800's onward.
As you will see, many candies and their founding companies have come and gone but it is
interesting to note that sixty five (65) percent of American candy bars have been around for longer than
sixty (60) years.
1800s
?1848 – The first branded American Chewing Gum is produced by John Curtis. It is made from tree resin and
is called State of Maine Spruce Gum.
?1854 – The first packaged box of Whitman's chocolate debuts thus being the advent of boxed chocolates as
we know them today.
?1868 – Richard cadbury inroduces the first Valentine's Day box of chocolates.
?1879 – William H. Thompson finds thompson chocolate with the goal to “make only quality products”.
?1880 – Wunderle Candy company creates candy corn. In 1898, Goelitz confectionery Company began
making candy corn and has made this Halloween favourite longer than any other company. It remains one of
the best selling Halloween candies of all times.
?1890 – The Piedmont Candy Company, manufacturer of Red bird peppermint puffs is founded in Lexington,
north Carolina.
?1891 – Claus Doscher opens Doscher Brothers Confectioners and a few years later, after tasting wrapped
taffy in the South of France, introduces French Chews.
?1893 – Milton Hershey visits the famed World's Columbian Exposition in chicago and watches chocolate
being manufactured. Although the equipment is manufactured in Germany, he purchases it at great expense
and ships it to his factory in pennsylvania.
?1893 – William Wrigley, Jr. introduces juicy Fruit Chewing Gum and Wrigley's Spearmint Chewing Gum.
Company
?1893 – Thomas Richardson, founder of Richardson Brands, introduces Pastel Mints at a department store in
Philadelphia, PA.
?1894 – Milton Hershey creates the first “American” candy bar, although his famous Milk Chocolate Bar
wasn't deducted for another 6 years.
?1896 – Tootsie Rolls debut, introduced by Leo Hirshfield Of New York who named them after his daughter's
nickname, “Tootsie”.
?1899 – The Jenner Manufacturing Company was founded. Forty five years later, the name of the company
was changed to Judson Atkinson.
1900S
(vii) 1900 – A truly seminal year as Milton Hershey introduces a variation of what would
someday become the Hershey's milk chocolate bar.
(viii) 1901 – The King Leo pure peppermint stick candy was developed and trademarked
(ix) 1901 – Multicoloured candy disks called “NECCO wafers” first appear named for the
acronym of the New England confectionery company.
(x) 1902 – New Englamd Confectionery company (NECCO) makes the first conversation hearts
which, to this day, continue to be a Valentine's Day tradition.
(xi) 1904 – Emil Brach starts Brach's Candy. Using $15,000 of his personal savings, he opened
oma candy company a few years prior but it was not a success so he tried again. The first
product was wrapped Caramels which cost a then unheard sum of $.20 per pound.
? 1905 – The Squirrel Brand Company of Massachusetts creates the first peanut bar known as
the Squirrel Nut Zipper. This candy bar was, sadly, discontinued in the late 1980's.
? 1906 – Sprangler Manufacturing Company, now known as Sprangler candy, is founded. The
company originally manufactured baking soda and related products and it wasn't until 1908
that they addedd and candy to their offerings.
? 1906 – Hershey's Milk Chocolate kisses chocolates appear in their familiar silver foil wraps
and a small town in Pennsylvania called Derry Church Changes its name to Hershey to
honour Milton Hershey.
1910S
? 1907 – Flush with the success of the Milk Chocolate Bar, Hershey introduces the beloved
Hershey's Kisses! The original Hershey's kiss was called Silver tops and was sold as
individual units. Sadly, this oversized variation was discontinued in 1931.
? 1908 – Hershey's take the milk chocolate Bar one step further and introduce a version with
Almonds.
? 1911 – Ethel and Frank Mars decide to open a candy company in Tacoma, Washington. This
company soon became Mars Inc which is one of the largest, privately owned candy companies
in the world!
? 1912 – Life savers, the candy named for its ring shaped with the hole in the center is
introduced in peppermint flavour. Twenty two years would pass before the popular five-
flavour roll is introduced.
? 1912 – The Whitman's Sampler box of chocolates is introduced and is the first box of
chocolates to include an index allowing chocolate lovers to specifically choose the candy that
they want to eat.
? 1913 – Goo Goo Clusters, a Southern favourite, was the first bar to combine milk chocolate,
caramel, marshmallow and peanuts.
? 1914 – The Health Bar was introduced by L.S. Health & Sons which is located in Robinson,
Illinois.
? 1917 – Goldenberg Candy Company, located in Philadelphia, PA creates the Goldenberg's
Peanut Chews as a high protein energy ration for troops fighting in World war I although this
candy was not available for retail purchase until 1921. The family remained in control of the
compa ny until the brand was sold to Just Born in 2003.
1920s
? 1920 – Fannie May Candies opens its first retail candy shop in chicago.
? 1920 – Williamson Candy co., introduced O'Henry!
? 1921 – Chuckles – colourful, sugared jelly candies are first made.
? 1921 – Hershey adds automation to the production process and Hershey's kisses are now wrapped by
machine and emblazoned with a small “flag” at the top.
? 1922 – H.B. Reese makes the first peanut butter candy coated with Hershey's Milk Chocolate. This
delicious candy is known as the Reese's Peanut Butter Cup.
? 1922 – Goldenberg's peanut chews, made in Philadelphia, Pennsylvania are introduced and take on a
cult status amongst East Coast candy lovers.
? 1923 – The Baby Ruth candy bar is introduced by curtiss Candy Co. And is named for
President Grover Cleveland's daughter not the famous baseball player.
? 1923 - The Mounds chocolate Bar is offered which includes coconut filling encased in rich
milk chocolate. It was invented by Peter Paul Halijian although it is sold under the trade
name of Peter Paul Mounds as Halijian was too hard tp pronounce.
? 1923 – The Milky Way Candy Bar is introduced by the Frank Mars. The candy bar was
designed to taste like Malted Milk and was one of the first candies to have a nougat center.
? 1923 – Hershey's Kisses become so popular that the Hershey Company registers the name
for federal trademark protection.
? 1925 – Hershey remains on a roll and introduces the first Milk Chocolate Bar with Peanuts.
This candy is called Mr.Goodbar.
? 1925 – Bit-O-Honey the honey-flavoured taffy bar made with bits of almond is first
introduced.
? 1926 – Milk Duds are introduced.
? 1927 – McKeesport Candy Co. Was established. Although not as important as the
introduction of a new candy bar, we couldn't resist including ourselves as we are one of the
oldest wholesale candy companies in the nation!
? 1928 – primrose Candy Company was established with a focus on manufacturing hard
candies.
? 1928 – Health Bars appear, offering chocolate covered toffee. This candy was originally
offered for “home delivery” as was sold by Dairy Salesmen.
? 1928 – An important year for any candy lover as the beloved Reese's Peanut Butter Cups is
introduced. It remains one of the best selling candy bars of all times!
1930s
? 1930 – M&M Mars introduces the Snickers Bar which, to date, remains the best selling
candy bar of all time. It was named after one of the family's beloved horses...
? 1931 – Tootsie Roll Pops are introduced and are considered by some to be the first
“novelty candy” as they combined two candies in one.
? 1931 – A fortunate accident involving Marshmallow at the sifer's Candy Company lead to the
creation of the Valomilk Dips.
? 1932 – M&M Mars introduces the MARS Candy Bar which was renamed Snickers Almond
Crunch in the late 1990's. The formula remains the same with the only differences being the
name!
? 1932 – Charles Howard creates Violet Mints in an industrial loft in New York. The product
was sold on street corners and the company changed its name to C.Howards Company.
? 1932 – Ferrara Pan Candy Company, located in Chicago, introduces Red Hot Cinnamon
candy known as Red Hots.
? 1932 – M&M Mars debuts the 3 Musketeers bar, made as the three-flavour bar featuring
chocolate, vanilla and strawberry nougat. This flavour combination would last for 13 years.
? 1936 – In a break from tradition, William Luden, one of the creators of Cough Drops,
introduces the 5
th
Avenue Candy Bar.
? 1936 – Marpo offers the first non meltable ice cream cone called Marpo “Yum Yum”
Marshmallow Cones.
? 1938 – Hershey offers a candy bar that combines Milk Chocolates with Rice Krispies called
the krackel Bar.
? 1939 – Hershey's Miniatures chocolate bars debut.
? 1939 – Overland Candy Company introduces a chocolate covered malt ball called Giants.
? 1939 – Blommer Chocolate Company opens a huge factory in Chicago, Illinois. This
mammoth operation became the largest chocolate manufacturer in North America.
1940s
? 1940 – Hershey chocolates produces a special chocolate bar called the D Bar which is highly
caloric and has a high melting point. This was designed as a survival ration for soldiers and
was was wrapped in sealed wax paper to ensure that it iwas resistant to poisonuous gas. Its
flavour was bittersweet which was to prevent it from being consumed too quickly.
? 1941 – Bruce Murrie, the President of Hershey Chocolates, joins forces with Forrest Mars
and opens a company called M&M Ltd.
? 1941 - “M&M's” plain Chocolate candies are introduced in response to depressed
chocolate sales in summer. Fifty-nine years later, M&M mars shortened the name to M&M's.
? 1942-1945 – Working hard to maintain high wartime morale, female employees at Whitman's
candy Company secretly slipped notes to soldiers in boxes of Whitman's chocolate samplers
destined for military shipment. The notes resulted in several long-term friendship and even
a few marriages.
? 1945 – M&M Mars decides to change the formula in the 3 Musketeers Bar to all Chocolate.
? 1947 – Peter paul introduces the Mounds Bar.
? 1947 – Frankford Candy & Chocolate Company is founded in Philadelphia, PA.
? 1949 – Junior Mints were introduced.
? 1949 – Smarties candy roll wafers are introduced. They are often referred to as “Candy
pills”.
? 1949 – El Bubble Gum Cigars are the first five-cent bubble gum.
? 1949 – Leaf Confectionery changes the name of a popular chocolate covered malted milk
candy from Giants to Whoppers.
1950s
? 1950 – The Annabelle candy Company is founded by Sam Altshuler. The company is named
for his daughter and their first product was the Rocky Road candy Bar.
? 1950 – Bob candy canes, sold under the cris Cringle brand are introduced.
? 1954 – Marshmallow Peeps are introduced by Just Born, Inc. In the shape of Easter chicks.
? 1958 – Candy necklaces, a retro candy classic are introduced.
1960s
? 1960 – In an effort to create a healthy candy product, M&M Mars Starburst Fruit Chews are
introduced and later fortified with Vitamin C.
? 1960 – Amurol Confections introduce the first sugar free bubble gum called Blammo.
? 1960 – Ferrara Pan Candy Company introduces Lemonheads and later in the year, heads,
Grape and Orange Heads.
? 1962 – Hershey chocolates offers Hershey's Kisses in coloured wrappers .
? 1963 – Sweetarts are introduced.
? 1963 – An important merger occurs when H.B. Reese Company is acquired by Hershey
Chocolate Company for the princely sum of $23 million dollars.
? 1966 – The Belgian choclatier Godiva is acquired by the campbell Soup Company.
? 1968 – Zotz is released and was one of the first “sour fizzy” candies.
1970s
? 1970 – M&M Mars introduces the Snickers Munch Bar.
? 1970 - Reese's Peanut Butter Cups become so popular that Hershey Food Corporation has
to double the size of its production in order to meet worldwide demand.
? 1973 – Chocolate has become so popular that Hershey Foods Corporation opens the first
candy related theme park known as Hershey's chocolate World.
? 1973 – Hershey's Foods becomes the first candy company to offer ingredients and nutritional
information on their wrapper.
? 1976 – Herman Geolitz Company introduces the first individually flavoured Jelly Bean known
as Jelly Bellies.
? 1976 – Hershey Foods decides to tweak the Reese's Peanut Butter Cup and offers a version
with peanuts called Reese's Crunchy.
? 1977 – Hershey Foods introduces a new variation of the “Great American chocolate Bar”
called Golden almond.
? 1978 – Fuelled by the overwhelming success of Reese Peanut Butter Cups, Hershey's
introduces Reese's Pieces.
? 1979 – M&M Mars introduces the Twix Caramel Cookie Candy Bar.
1980s
? 1980 – Herman Geolitz Company introduces the first American-made gummi bears and
gummi worms. Traditionally, these candies were imported from Europe.
? 1981 – Fuelled by their success in Europe, M&M Mars introduces Skittle Bite size Candies.
? 1983 – Albanese candy is founded with the aim of producing the World's Best Gummi
Products.
? 1988 – Hershey Chocolate Company ia renamed Hershey Chocolate USA.
? 1989 – Hershey Chocolate USA introduces the Symphony Bar which is a combination of
almonds, toffee and milk chocolate.
1990s
? 1990 – Hershey sends 144,000 heat resistant candy bars to soldiers serving in the first Gulf
War. The formula is identical to that which was offered to soldiers in World war Two.
? 1991 – Reese's Peanut Butter Cups continue to be a worldwide favourite and, in response,
the receipe is adjusted adding three times the amount of peanuts.
? 1992 – M&M Mars introduces DOVE Dark Chocolate Bar and DOVE Milk Chocolate Bars.
? 1993 – Hershey chocolate introduces miniature hershey's kisses as well as White Chocolate
Kisses called Hugs.
? 1994 – M&M Mars introduces Starburst Jelly beans.
BIRTH OF MODERN CONFECTIONERY:
Their products are consumed by millions and available from supermarket shelves. Ye Olde
Sweet Shoppe, and in vending machines the world over. But despite its popularity, throughout history the confectionery
industry has sometimes been the subject of criticism – from specific business actions, to being blamed for mass obesity.
Interestingly, the massive confectionery industry we know today had surprisingly humble beginnings and it seems that
the pioneering spirit, ethical reasoning, and the inspirational business awareness of those who founded the three biggest
names in chocolate are all to forgotten.
Heinrich Nestle was born in Germany in 1814. After growing up in ahuge family of fourteen children, he bucked the
trend of going into the glazier business of his father and grandfather before him, and instead concentrated his efforts on
pharmaceutics, taking up an apprenticeship at a local pharmacy for four years in his mid-teens. It was at this time that
he moved to Vevey in switzerland and changed his name to Henri Nestle and soon developed his original product. By
combining flour, malt, sugar and cow's milk he invented the first substitute for mother's milk (inspired by the young
deaths of half his siblings) which, by the 1970s, was selling as far a field as North America. In 1875 he retired and sold
his business choosing to then concentrate on offering small loans to locals in Glion. The company did not adopt
chocolate as another product until the 1920s.
Interestingly, john Cadbury in the UK began to find his feet at a similar time. Born in 1801 and coming from a
quaker background, Cadbury couldn't study at university nor join the army and so also strted an apprenticeship. After
spending some time dealing tea in leeds he moved back to his hometown, Brimingham, and opened a small grocery store
and by 1831 he had enough money to switch his focus to establishing his own cocoa/drinking chocolate factory. Like
Nestle's reasoning for the invention of baby formula, Cadbury chose to focus his efforts on chocolate as a viable
alternative to what he considered the major reason for the social ills of the country, alcohol. Today, the district around
Bourneville remains dry in honour of Cadbury's opposition to alcohol.
Franklin Clarence Mar's introduction to the manufacture of chocolate came when he was a child in Minnesota in
the late 1800s. Whilst suffering from Polio, his mother taught him to hand dip chocolate, and by the time he was 19, his
entrepreneurial spirit and love of candy inspired him to sell molasses chips in the local neighbourhood. By 1910, Mars
was selling confectionery wholesale and in 1920 founded the Mar-O-Bar Co. Which released the Milky Way. The milky
Way (incidentally was his son, Forrest's idea) quickly became the best- selling chocolate bar in the US, and they moved
again to Chicago in 1929. Here they developed the Snickers and M&M as his son took the helm. Mars moved into a
ranch estate with a horse racing track and barns, and lived out his house until 1950.
CURRENT SCENARIO OF CONFECTIONERY INDUSTRY
In recent years, confectionery markets have been growing worldwide. Opportunities range from the
mature markets of western European and the US to the emerging markets of Asia pacific, Eastern European and South
America. Per Capita consumption in the US has risen from 17.7 pounds in 1974 to 25.5 pounds in 1997 (US department
of commerce). From 1993 to 1997, the total growth rate of candy sales was about 17.5%. In 1997 confectionery sales
growth doubled that of the overall food market's growth.
Internationally between 1993 and 1997, Vietnam (10.5%), Brazil ( 9.1%), Ireland (5.8%), China (5.7%), and
the czech Republic (5.4%) were the leading per capita confectionery consumption growth markets in volume. Data-
monitor, a strategic market analysis company, forecast that the confectionery trading pattern will expand futher into
regions such as Eastern Europe, Brazil and China.
Ranked first among snack categories and third among food categories in 1998, the US confectionery industry
is a highly concentrated industry which is becoming increasingly global. Eight firms account for 85% of market share.
Among these firms several of the leading confectionery companies are foreign owned, but maintain or own manufacturing
facilities in the United States. In 1997, the Uschocolate manufactures trade deficit increased by 52% to $44 billion
despite domestic chocolate exporters increasing their global presence by 10%.
CONFECTIONERY INDUSTRY – RECENT HISTORY AND PREDICTIONS
The confectionery industry, despite an economy in recession, is ascending in sales and popularity.
Even with a health cautious world, chocolate, non-chocolate and gum sales are all predicted to rise as years pass by.
However, the odds would seem to be against theconfectionery industry, yet profit margins are expected to grow. With
chocolate on top of the confectionery empire, it takes in the majority of all confectionery sales yearly. Non-chocolate
trails behind but still brings in a good share of the confectionery sales. Gum is responsilble for the smallest share in
sales.
Chocolate sales in 2007 were reported as being just 80 billion dollars. Majority of the sales came from
chocolates counter lines, which are accountable for over 25% of chocolate sales. Tablets, on the other hand, are
responsible for a decent share of the chocolate sales. Tablets sold 18.6 while boxed assortments sold a close 15.1,
leaving seasonal and others accounting for the remaining sales. While all types of chocolate have seen an increase from
2008-2013. However, sale of tablet and other types of chocolate are predicted to not have as substantial of an increase
as seen in 2007-2008.
The non-chocolate industry in 2007 had seen sales close to 45 billion dollars, while the 2008 sales came
very close to 49 billion dollars. Having seen a percentage increase in sales from 2007-2008, the projected future for
2008-2013 is to also see an increase in sales in many of various non-chocolate types. Again, just like the chocolate
industry, this increase is much smaller than before. For example in 2007-2008, boiled sweets saw a percentage increase
of 11.9% in sales, but it is predicted that from 2008-2013, the percentage increase will only be as little as 3.2%, which is
shocking as this increase is over a 5 year period compared to 2007-2008's 2 year period. The economic recession may
have played a huge part in this as consumers take their focus away from secondary confectionery items such as non-
chocolate and more towards the more popular chocolate industry.
The gum industry coughs uo a mere 15% of all confectionery sales, but is a major candidate in the
expansion of all confectionery sales. In 2007, chewing and bubble gum made a total of 20.1 billion dollars total. The year
after, gum made 22.5 billion, which is an 11.9% increase. Nevertheless, most of the sales increase is from the chewing
gum half of the gum industry. In 2007, chewing gum made 17.3 while in 2008 it made 19.7 billion. Bubble gum, however,
went from 2.7 to 2.8 billion dollars. These sales figures show where companies should concentrate sales to expand
profit.
Despite the odds, sales are increasing every year. In 2007, total confectionery sales equalled 141.2, and in
year after sales increased to 158.5 billion dollars. This substantial gain is expected to repeat, and by year 2013, total
sales are going to reach above 180 billion dollars. Without a doubt, the confectionery industry can be expected to be
successful for years to come. Wholesale candy and candy store sales should stay strong despite increasing new players
in the market.
INDIAN CONFECTIONERY INDUSTRY
The confectionery market in India has undergone major changes and growth since the opening up of the economy
and liberalization of the investment regime in 1991. India became an attractive place for foreign investment and several
large multinational companies entered the market for confectionery products. This resulted in its steady growth and
gradual transformation from a commodity market to a branded products market dominated by multinational companies.
Despite its vast population, India's confectionery market is still very small. It is valued at close to US $450
million and is estimated to be 138,000 MT. Suagr confectioneries (candies and toffees) has the largest share (50%),
followed by chocolate (16%), and bubble gum (10%).
Over the 1998-2003 periods, confectionery retail sales have grown more than
55% in value terms and 46% in volume terms, at an average annual rate of 9.5% and 8% respectively. There is a clear
trend of faster sales growth in value terms, indicating that consumers are increasingly ready to pay a premium for higher
value products. The chocolate segment is the fastest growing in value terms (9.8% average annual growth rate) closely
followed by the gum segment (9.5%). in volume terms gums grow at the fastest rate (8.5%), followed by chocolate and
sugar confectionery (7.8% each). At the same time, to put these figures in some perspective, while retail sales for 2003
in india are estimated to have been US $562 million (Rs.26,220 million), US $26 billion worth of confectionery products
were sold in the US. In
volume terms these figures were 127,000 MT in india and 3.3 million MT in the US.
While growth rates in general look rather healthy, and all agree that there ia still large potential for further
growth of the confectionery sector in India, many individual players have experienced slower growth in their sales over
the last few years. This trend is partly attributed to the economic slowdown that india experienced in 2000-2002 and
resulting decline in consumer spending. Confectionery products are impulse purchase which would be among the first to
be cut out. Companies are fighting this trnd by broadening theit consumer base from primarily children and teenagers to
adults as well. Most of the large multinationals active in india are also actively marketing to rural india where
penetration is lower than the average for the country.
The organized confectioney segment in indian segment is dominated by the multinational companies; however,
domestic players are increasingly finding a prominent position in the market leader followed by perfectti Van Melle India
Ltd. And Nestle India Ltd. Other important players are Lotte India Ltd, Nutrine Confectionery Co Pvt Ltd, Candico
india ltd, Parle Products Pvt Ltd, wrngley India Pvt Ltd, Gujarat Coop., Milk Marketing Federation, ITC Foods,
Hindustan Lever ltd, CAMPCO Ltd, and Lotus chocolates Co Ltd.
Since import restrictions were eased in 2001, imports of confectionery products have grown
rapidly, although they remain tiny and only a small part of the overall confectionery market. Put into
context, india's total imports for 2002-03 and 2003-04, combined are less than 1% by volume and
value of US confectionery imports in 2003 alone.
Retail chocolates and sugar confectionery account for the greatest share of total
confectionery imported into india. In 2003-04, imports of retail chocolate totalled close to US $5.7
million. Imports of sugar confectionery fell close behind, totalling US $3.3 million, but registered a
growth rate of 100% from the previos year. Imports of bulk chocolate and chewing gum remained
very small at roughly US $5,00,000 and US $400,000, respectively. In addition to the regular import
channels, indian also has significant gray imports. As a result, actual imports are probably larger
than that shown by official statistics. Nevertheless, they remain very small.
In the last two years, Malaysia and Singapore have been the leading supplier of confectionery
to india in terms of both value and volume. In 2003-04, the two countries accounted for more than
20% in value and more than 30% in volume of the total confectionery import maket in india.
However, in the last year, imports from Singapaore have shown decline, particularly in volume term,
while imports from the third largest supplier, the UAE, have grown almost 60% in volume terms and
almost 40% in value terms.
It all began in June 2004, with the erstwhile Parry's Confectionery, part of the Chennai-
based Murugappa group, was bought over by Korea's Lotte India.
This was followed by Godrej Foods & Beverages Limited which acquired Nutrine
Confectionery Company Private Limited in June 2006.
Close to the heels of this deal was a joint venture effort in April 2007, when the Hershey
Company, North America's leading chocolate and confectionery manufacturer, announced the
formation of Godrej Hershey Foods & Beverages Ltd., to manufacture and market confectionery
across the country.
Among the well-known national names are Candico which is engaged in the development of
a range of products.
Naturo Food & Fruit Products Pvt. Ltd in the outskirts of Bangalore is one of the largest
indian confectionery companies known for its innovative fruit based products. Its Fruit bars range
under the brand name 'Naturo' offers a tasty, healthy and appetising fruit snack and is available in
Apple, Mango, Strawbery & orange pure fruit varieties. The fruit bars are manufactured in a captive
and HACCP and BRC ceritified facility is totally natural with no sugar and preservatives added. The
fruit bars are manufactured employing a unique retexturised process to retain the vital nutrients of
the fruits.
Pops Foods Products Private Limited manufactures a range of bubble gums. Central Arecanut
and Cocoa Marketing and Processing Co-operative Ltd.(Campco) based at Mangalore which is
producing chocolate for cadbury- Kraft has noe inked a pact with Karnataka Milk Federation to
manufacture chocolates at its facility. The company Campco produces all types of moulded
chocolates along with semi-finished products like cocoa butter and cocoa powder. “Food research
is open to assess the new product innovation which is a prime factor for the growth of the industry.
At Defence Food Research Laboratory at Mysore, efforts were on to develop a range of
candies and fruit bars for the armed forces stationed in high altitudes.
CHAPTER – III : COMPANY PROFILE
INTRODUCTION :
It's a story born in the age of British Raj, when childern in India found confectionery
hard to come by. It had to be imported from across the seas until the year 1914, When parry's
picked up the gauntlet and pioneered the manufacture of sweets – the first to do so in the country.
Parry's sweets went on to become a household name- a name that people recollect with warmth ans
a smile. Ever since, the Parry's factory was set up in Nellikuppam, in the Cuddalore District of
Tamilnadu in South India. Parry's has become synonymous with Sweets and Confectionery. With the
liking we indians have for sweets are not surprising that this smooth, milky and irresistibly delicious
confectionery is the best gift any child could get. And an obsession with quality ensured that
childern had a choice of nothing but the very best in confectionery.
In the nine decades since, the scenario has undergone a dramatic change. There are a
number of offerings in the market today, each wooing children with a wide array of array of
products. But Parry's still finds a prominent place in the heart of consumers.
Parry's has always stayed at the top, having weathered the variation of change, with our ear
close to the ground – and to the hearts of children, changing, adapting and growing with the times –
But never losing sight of its values traditions and ethics. At the turn of this century, Parry's is
poised on the threshold of greater challenges in a global village, where dynamism and innovation is
the very law of survival.
In the backdrop of india joining the WTO, and the global giants eyeing the Indian Market with
enthusiasm, the company needed to strengthen itself and broaden its base to delight customers
across the country and abroad. With this vision in the mind, Murugappa Group, promoters of
Parry's Confectionery Limited entered in to an agreement with Lotte Confectionery Limited, South
Korea by which the entire shares which Murugappa Group, the founders of Parry's Confectionery
Limited, held was divested to lotte Confectionery Limited – A South Korean Multinational giant.
Lotte Confectionery is the first Company of the Lotte family of Companies founded by Mr.Shin
Kyuk-ho. The three L's in the Lotte emblem stands for Love, Liberty and Life. The Corporate
philosophy and idealism of Lotte is driven by dream of a world full of Love where people care for
each other and respect each other's thoughts. The Lotte Group has presence in Food & Beverages,
Distribution, Tourism and Leisure business; Heavy Chemicals, Construction and Machinery;
Information, Communication and Electronics, Trading and Services apart from Welfare research and
Support services. The Lotte Confectionery Co. Ltd, is the Lotte Group's flagship Company in
Foods and Beverages category. Lotte Confectionery, Korea, was established with 500 employees in
1967 and today it has more than 6000 employees. It has over 500 products produced at 5 large-
scale plants in Korea. Lotte has been actively working towards establishments of overseas branches,
production facilities and has a presence in mor than 70 countries. Lotte Confectionery's annual
Sales are over USD 900 millions apart from Korea, Lotte has overseas investments in production
facilities in China, philippines and Vietnam. Lotte Confectionery's main line products are chewing
gum ( Lotte Xylitol, Lotte Juicy & Fresh, Lotte Spearmint, Lotte Fresh Mint, Flavono, White & E,
Spout Cafe Coffee) Candy, Biscuits, Chocolates, Snacks, Ice cream and health care product.
“The purchase of Lindt would instantly give the Lotte group a global standing within the
confectionery arena, as up until now its acquisitions have been relatively minor players,” said
IldikÓ Szalai, packaged food analyst at Euro monitor International.
Asian group Lotte has publically stated its intention to increase its share of global
confectionery sales by 20 per cent in the next few years. July saw it acquiring the Wedel business in
Poland from Kraft Foods, which it has been forced to sell under European Commission competition
rules following its takeover of Cadbury.
Meanwhile, the acquisition of belgiann firm Guylian in mid-2008 for €105m spring boarded the
Asian conglomerate into the European premium chocolate sector.
“Over 80% of Lotte's sales come from mature markets in Japan and Korea. This group is
looking to grow its confectionery portfolio, and while india or china might may more logistics
expansion target markets, takeover of a significant premium European confectionery asset would
better serve its global growth plans,” added Szalai.
The multinational has its headquarters in Tokyo and has annual sales of approximately $40bn
(€32bn). Founded in 1948 as a chewing gum company, it currently operates in a variety of sectors,
including food and confectionery, retail, travel and tourism, industrial chemicals and construction
and finance.
As the original business, confectionery is at the core of the Lotte Group's operations and its
confectionery portfolio includes leading Asian brands, such as Xylitol, Koala March and Ghana. It is
the largest chewing gum manufacturer in Asia and third largest in the world.
If the decades past are any indication, there's little doubt that even in the coming century,
children grow up with the brands Parry's has established.
MILESTONES
1910-1911 : Parry's acts as agents for M/s Glaze brook steel & Company of UK selling their sweets
in Bombay, Karachi & Kolkata.
Till 1913 : Parry's imports cofectionery from C&E Morton Ltd. UK
1914 : Factory set at Nellikuppam and EID parry starts manufacturing confectionery in a small way.
1920 : Parry sweets develop an “All india reputation for quality sweets”.
1940 : Parrys starts exporting sweets to countries like Africa & Singapore where they were well
accepted.
1941 : Supplies made to Red Cross (about 300 tons) – in aid of war victims.
1954 : Nellikuppam Confectionery plant of EID Parry spun off in to a newly formed company
“Parry's Confectionery Ltd”.
1960 : Period of growth for PCL. Pioneers several new trade practices. First to introduce Indian
made wrapped sweets.
1978 : 100% of all Parry's sweets are machine wrapped.
1981 : Murugappa Group takes over Parrys.
1982 : Unit at Maraimalai Nagar near Chennai opens for packing small consumer packs.
1983 : Coco Products and Beverages Limited taken over by Parrys.
1986 : PCL developed its own IT Division – and undertakes computerisation. PCL takes over the
biscuits division that was a part of Parry & Co then.
1987 : Modernization takes place at Nellikuppam once again.
1987 : Maraimalai Nagar plant starts manufacturing confectionery to meet growing demand.
1988 : Shift from the “king of sweets” to focus on the Brands Commercial became product
oriented.
1992 : PCL Company crosses the Rs.500 million marks. Nellikuppam crosses 800 tonne production.
1993 : R & D center opened at Manapakkam. CPBL stops cocoa processing totally and is into full-
fledged production of confectionery.
1995 : Establishes C & F Agents across the country.
1996 : State-of-art Manufacturing facility established by modernization the entire. Plant.
2003: Nellikuppam Plant gets the certifications from BVQI-Bureau VERTITAS Quality International
for its best Quality Management system, Evironmental Management System and Food Safety
management Sysytem.
? ISO 9001:2001
? ISO 14001:1996
? HACCP:2002 Version
2004: Parry confectionery is now completely transformed into Lotte India Corporation ltd.
BUSINESS:
Lotte Group consists of over 50 business units employing 38,000 people engaged in
such diverse industries as candy manufacturing, beverages, hotels, fast food, retail, financial
services, heavy chemicals, electronics, IT, construction, publishing and entertainment. Lotte has
major operations in Japan where its head office is located in South korea, China, Philippines,
Thailand, Indonesia, Vietnam, India, USA and Russia and continues to expand. Today, lotte is the
largest candy/chewing gum manufacturer in both Japan and South Korea and is South Korea's 5
th
largest conglomerate.
Lotte's corporate headquarters are located in Tokyo, with offices also in Seoul and Beijing.
According to the company's Korean website, Lotte of korea had 30 trillion won in sales in 2005.
Lotte of Japan employs 3,600 persons and operates 5 production facilities, 7 branch offices, and a
research centre in saitama. The company's core business focus in Japan is the production and sale
of chewing gum, chocolate, biscuits, beverages, candy, ice cream and Lotteria while it focuses on
lotte Department Store, Lotte cinema, Lotte Hote, Lotte Chilsung and Lotte Confectionery.
In addition to candy and chewing gum, Lotte also operates the Lotteria chain of fast food
restaurants, Lotte Hotel, the Lotte Cinema chain of Cineplex's and lotte world in Seoul, one of the
world's largest indoor theme parks. Lotte also owns professional baseball teams – the Chiba Lotte
Marines in Japan (1971 – present) and Lotte Giants in Busan, South Korea (1982 – present).
INCORPORATION OF LOTTE CONFECTIONERY:
Lotte India Corporation limited is a subsidiary of Lotte confectionery company ltd., Korea,
which is a US $1.5 billion company. In the backdrop of india joining the WTO, and the global giants
eyeing the Indian Market with enthusiasm, the company needed to strengthen itself and broden its
base to delight customers across the country and abroad.
With this visionin the mind, on Jan 17, 2004 lotte confectionery Limited, South Korea entered
in to an agreement with parry's confectionery limited owned by Murugappa Group, by buying 60.39
per cent stake in, Parry's Confectionery Ltd (PCL) for rs 64.47 crore at a rate of 283.12 per share.
Latter lotte make an open offer to acquire another 20 per cent at Rs.283.25 per share.
Lotte has invited the Murugappa group to appoint one representative on the board of the new
company, which they had accepted. It will continue with the parry's brand for the next five years
and will pay EID parry a royalty of Rs.5 lakh per annum. After that, the Korean company will
introduce its brand in the indian market.
Lotte now has plants (which was previously held by PCL) in Nellikuppam (Tamil Nadu), Kolanchery
(kerala), Sangli and Nasik (Maharastra). It has over 25 types of candies and toffes and makes brands
such as Coffee Bite, Lacto King, Caramilk and Coconut Punch.
Lotte India Corporation Ltd is a significant player in the Indian confectionery market especially in
sugar boiled confectionery business in India and is engaged in the manufacture and marketing of
toffees, hard-boiled confectionery, chewing gum and bubble gum.
Lotte India corporation Ltd products are well established across the indian market. Some of our
leading brands are coffy bite, lacto king, caramilk, 'spout' chewing gum, and chill pilz.
The company launched choco pie and xylitol during the previous year across the country and has
received a very positive response. The company aims to be a dominant player and has received a
very positive response. The company aims to be a dominant player in fun food business in the long
run. The company caters to the market through its own manufcaturing facility located in Tamil Nadu
with an all india distribution network and also through outsourcing units across india.
FINANCE DEPARTMENT CHART OF LOTTE INDIA CORPORATION LIMITED
COMPANY PERFORMANCE:
The company witnessed a drop in its sale in the face of sluggish markets and lower exports.
Due to enhanced competitive activity levels, launch of new brands of gums and stagnant markets
and due to inflationaryconditions, the company has had to incur significantly higher advertisement
amount and sales promotion expenditure compared to previous year. Implementation of VAT in
kerala state also severely affected the operations.
Despite a steep increase in price of critical raw materials like liquid glucose, vanaspathi,
milk etc. The company has managed to sustain its margin through various strategic measures and
very focused cost reduction initiatives. During the year the company launched new products like
coffy bite krunch, king's ransom and variants of eclairs viz, strawberry, mango and mint for which
the market response has been quite encouraging. To enhance the product image, the company has
also improved the packaging for majority of its key products. With support form its parent company,
Lotte India Corporation ltd., Korea and access to their wider product portfolio, the company is
confident of achieving its growth targets, while sustaining its profit margins.
The company has documented procedures and controls in respect of critical operations,
which are reviewed by the internal audit function and audit committee periodically. During the year,
the company successfully concluded an overdue long-term settlement with the Nellikuppam factory
workers union, which has resulted in a one-time lump sum payment of Rs.25 lakh as ex-gratia. The
management has decided not to proceed with the rights issue and is looking at alternative options to
fund the new project.
A number of HR development initiatives in the form of training programmes and focused
skill development programmes have been implemented during the year based on the business and job
requirements. In 2007, the total numb er of employees was 542 whereas on March 31
st
2008, the
HEAD FINANCE
FINANCE MANAGER
EXECUTIVE
total number of employees in the organization was 572.
MANUFACTURING FACILITIES OF LOTTE
A state of the art manufacturing plant is at Nellikuppam. LOTTE
India's manufacturing facility is located at Nellikuppam, South Arcot
District, Tamil Nadu, which is in the southern part of India. The factory
is housed in Buildings constructed in the British era; but refurnished
inside to accomodate the state of the art equipments.
Apart from having the own factory at Nellikuppam, Lotte
India also has dedicated Sub- Contracting in units at Kollenchery,
Kozhikode in Kerala, Sangli in Maharashtra, Nemam and Sholavaram in
Chennai.
All the products are manufactured under the most hygienic conditions.
Great care is exercised in the selection and quality control of Raw Materials and packing materials.
Rigid quality controls are implemented at every stage of production process. Every batch of
production is checked thoroughly using modern equipments.
The factory at Nellikuppam has been awarded with ISO 14001:1996 and HACCP awards by BVQI.
HACCP
Food Safety Management System
Hazard Analysis Critical Control Point(HACCP) is a preventive system of food
control. It involves examining and analyzing every stage of a food-releated operation to identify and
asses hazards; determining the 'critical control points' at which action is required to control the
identified hazards; establishing the critical limits that must be met at, and procedures to monitor,
each critical control point; establishing corrective procedures when a deviation is identified by
monitoring; documentation of the HACCP plan and verification procedures to establish that it is
working correctly.
HACCP Policy
We are committed to provide safe products to our customers at all times, we shall trive to
achieve this through,
? Practicing Systems & Procedures as per HACCP requirements.
? Implement Control measures to ensure that the products are free from physical, Chemical
and Microbiological hazards.
? Continuous improvements through training activities.
? Adherence to Good Manufacturing practices and Good Hygiene Practices.
Quality Policy
“ We at Lotte India corporation Limited, endeavour to provide our products with
appropriate quality at right time and at an affordable cost.
Towards this we would:
? Continually improve our products and processes.
? Educate, train and develop all our employees for enhancing their skills, knowledge and
quality of work life.
? Provide safe products to our customers.
? Adhere to good manufacturing practices.
ISO 9001:2000 specifies the requirements for a quality management system where an organiation:
? Needs to demonstarte its ability to consistently provide product that meets customer and
applicable regulatory requirements, and
? Aims to enhance customer staisfaction through the effective application of the system,
including processes for continual improvement of the system and the assurance of conformity
to customer and applicable requirements.
? It is now the only standard in the ISO 9000 family against whose requirements the quality
system will be certified by an external agency. The ISO 9001:2000 certification signifies a
global benchmark in customer satisfaction, product quality and leads to significant reduction
in defects levels. The standard recognizes that the word “product” applies to services,
processed material, hardware and software intended for or required bt the customer.
EVIRONMENTAL POLICY
Environmental Management Systems
ISO 14001:1996
Environmental management is a tool designed to assist an organization to remain in touch
with the environmental interactions and consequential impacts of its activities and poducts. It
provides the organization with programs and procedures to achieve due diligence in meeting
regulatory requirements. Its also promotes continual improvement performance.
An environmental management system is essentially a management framework to ensure you
evaluate how your business impacts the environment, know what impacts are significant, and
processes in place to minimize the significant environmental impacts.
The basic element of our environmental management system is enabling our organization to :
Establish an appropriate environmental policy;
? Identify its most significant environmental impacts;
? Identify relevant legislative, regulatory and industry specific requirements;
? set appropriate environmntal objectives and targets;
? Establish programs to implement the environmental policy and achieve objectives and
targets, and;
? Continuously improve the environmental performance through improvement of the EMS.
Organizations can experience a number of benefits from implementing an effective
environmental management system, such as:
? Preventive of pollution.
? Reduction of consumption of materials and energy.
? Limited liability by providing evidence of due diligence.
? Improved access to capital.
? Improved industry/government relations.
? May reduce insurance costs.
? Improved public relations.
Our Environmental Policy
We are committed to the society we live in and it is our endeavour to improve continually the
environment around ua by -
? Ensuring Zero discharge of effluents and developing a green belt to improve our
environment.
? Adhering to the emission norms to protect the quality of ambient air.
? Focusing on conservation of energy and seeking opportunities for using alternative and
renewable energy sources.
? Imparting awareness on the need for environmental protection to the people in the
neighbourhood.
? Adhering to all statutory and regulatory requirements.
DISTRIBUTION NETWORK OF LOTTE INDIA CORPORATION:
Transportation investments often have direct effects on the spatial distribution of a
region or country's population and economic activity. Improved access to employment centres',
decreases in the travel time of trips and changes in the distribution of economic centres affect the
location decisions of people and businesses.
FACTORIES:
Shkb
DISTRIBUTION CENTRE:
Nemam
Nellikuppa
m
Sangli Kollenecher
y
kozhikod
e
Sholavara
m
Centralized Distribution
Centre
CFA'S
CHAPTER – IV : REVIEW OF LITERATURE
North zone
Delhi
Ghaziabad
Lucknow
Ambala
Dehradun
Jammu
Parwanoo
Zirakhpur
Jaipur
East Zone
Kolkata
Siliguri
Guwahathi
Patna
Ranchi
Cuttack
West Zone
Bhiwandi
Nagpur
Pune
Goa
Indore
Ahmadabad
South Zone
Chennai
Trichy
Salem
Hyderabad
Vijayawada
Palaghat
Dharwad
Bangalore
FINANCAL STATEMENT ANALYSIS:
Financial statement analysis can be referred as a process of understanding the risk and
profitability of a company by analyzing reported financial info, especially annual and quarterly reports. Putting
another way, financial statement analysis is a study about accounting ratios among various items included in
the balance sheet. These ratios include asset utilization ratios, profitability ratios, leverage ratios, liquidity
ratios, and valuation ratios. Moreover, financial statement analysis is a quantifying method for determining
the past, current, and prospective performance of a company.
SOME IMPORTANT METHODS USED TO DETERMINE THE FINANCIAL STATEMENTS:
1.Ratio Analysis
2.Comparative Financial Statements
3.Common size financial Statements
4.Trend Analysis
REVIEWS OF PREVIOUS RESEARCHES RELATED TO THE STUDY:
HORRIGAN (1968)- Says the history of financial statement analysis dates far back to the end of the previous century
However, the modern, quantitative analysis has developed into its various segments during the last two decades with
the advent of the electronic data processing techniques. The empiricist emphasis in the research has given rise to
several, often only loosely related research trends in quantitative financial statement analysis. Theoretical approaches
have also been developed, but not always in close interaction with the empirical research.
LIVINGSTONE & SALAMON (1970) - build on Solomon's model and conduct a simulation analysis of the ARR-
IRR relationship by extending the assumptions of the previous models into more general cases. They observed under
their assumptions that ARR shows a dampening cyclical behavior determined by the project life-spans, pattern of cash
flows generated by the projects making up the firm, the reinvestment rate, and the level or IRR. They also include the
effect of growth. McHugh (1976) and Livingstone and Van Breda (1976) have an exchange of views about the
mathematical derivations and the generality of the results of Livingstone and Salamon (1970).
STAUFFER (1971) - presents a generalized analysis of the ARR vs IRR relationship using continuous
mathematics under several cash profile assumptions. He demonstrates that the depreciation schedule
affects the relationship. Also he puts forward that the accounting and the economic measurements
(ARR/IRR) are irreconcilable, and that the situation is aggravated by the introduction of taxation into
the analysis. From the accounting point of view it is interesting that he points to the task of estimating
the real rates of return from historical accounting data.
BHASKAR (1972) - arrives at the conclusion that "in general ARR does not perform satisfactorily as a surrogate for
the IRR". He also points out that the using the annuity method of depreciation makes ARR a more accurate reflection
of the IRR, but points out that the annuity method has undesirable side-effects for accounting measurement. Bhaskar
augments his deductions with a statistical analysis of his simulation results on ARR and IRR levels.
FISHER & McGOWAN (1983) - consider economic rate of return (IRR) the only correct measure of economic
analysis. They conclude that the accounting rate of return is a misleading measure of the economic rate of return and
see little merit in using the former. Long and Ravenscraft (1984) present a critical view on Fisher and McGowan's
claim of the prevalence of the IRR, the assumptions in their examples, and their mathematical derivations. Fisher
(1984) discards the criticism insisting that ARR does not relate profits with the investments that produce it.
PINCHES, MINGO & CARUTHERS (1973) - apply factor analysis to classify 51 log-transformed financial ratios
of 221 Compustat firms for four cross sections six years apart. The selection of the method was prompted by
applications in other behavioral disciplines (e.g. psychology and organizational analysis). They identify seven factors,
Return on investment, capital intensiveness, inventory intensiveness, financial leverage, receivables intensiveness,
short-term liquidity, and cash position. These factors explain 78-92% (depending on the year) of the total variance of
the 51 financial ratios. Moreover, the correlations for the factor loadings, and the differential R-factor analysis indicate
that the ratio patterns are reasonably stable over time.
GORDON (1974-1977) - takes a more optimistic view on the potential reconciliation between ARR
and IRR. He shows that ARR can be a meaningful approximation of the IRR when "the accountant's
income and asset valuations approximate the economic income and asset values". The central condition
is linked to the depreciation method. The accountant's accumulated depreciation must approximate the
accumulated economic depreciation for the ARR and IRR to converge. Gordon concludes by pointing
out that even if no general "cook-book tricks" can be devised for converting the ARR to the IRR, the
managers can be able to make sufficient adjustments. To us this view appears logical because it is
unlikely that profit oriented business firms could, in the long run, indulge in totally unsound
measurement and management practices. Stephen (1976), on the other hand, claims that Gordon fails to
resolve the difference between ARR and IRR.
TAMMINEN (1976) -presents a thorough mathematical analysis (with continuous time) of ARR and
IRR profitability measurement under different contribution distribution, growth conditions, and
depreciation methods. As one result he derives a growth-dependent formula for a conversion between
IRR and ARR assuming realization depreciation. (For the definition of the realization depreciation see
e.g. Bierman. The analysis is conducted under steady-state growth conditions, then extended to
structural changes and for under cyclical fluctuations.
KAY (1976) - refutes Salamon's conclusion and contends that IRR can be approximated by the ARR
irrespective of the cash flow and depreciation patterns. The crucial requirement is that the accountant's
evaluation of the assets (their book value) and the economist's evaluation (the discounted net cash flow)
are equal. He also applies his results to estimate the profitability of the British manufacturing industry
1960-1969 from aggregate accountant's data. Key and Mayer (1986) revisit the subject coming to the
conclusion that "accounting data can be used to compute exactly the single project economic rate of
return".
PINCHES, EUBANK, MINGO & CARUTHERS (1975) - After a principal component factor analysis of 39 ratios
of the Pinches, Eubank, Mingo and Caruthers (1975) they conclude that there is a high instability in always selecting
the financial ratio with the highest absolute factor loading as the representative financial ratio for the observed factors.
JOHNSON (1978) -runs the factor analysis for a single year 1972, but for two industries based on a sample of 306
primary manufacturing and 61 retail firms. Congruency coefficients of financial ratio patterns indicate a good stability
of the nine factors for the two industries. Johnson (1979) repeats the study for a larger sample of firms and for two
years.
WRIGHT (1978) - considers Kay's (1976) view too optimistic and claims that one cannot easily translate ARR into
IRR except under special circumstances. Salmi demonstrated using simulated financial statements that applying Kay's
results require more restrictive assumptions than originally indicated by Kay (1976). Stark (1982) recounts Key's
results by including working capital, loan financing and taxation.
LEV & SUNDER (1979) -The traditionally stated major purpose of using financial data in the ratio form is making
the results comparable across firms and over time by controlling for size. This basic assertion gives rise to one of the
fundamental trends in financial ratio analysis (or FRA for short, in this paper). The usually stated requirement in
controlling for size is that the numerator and the denominator of a financial ratio are proportional.
LEV & SUNDER (1979) - They point out, using theoretical deduction, that in order to control for
the size effect, the financial ratios must fulfill very restrictive proportionality assumptions (about the
error term, existence of the intercept, linearity, and dependence on other variables in the basic
financial variables relationship models Y = bX + e and its ratio format Y/X = b + e/X). It is shown
that the choice of the size deflator (the ratio denominator) is a critical issue. Furthermore, Lev and
Sunder bring up the problems caused in multiple regression models where the explaining variables
are ratios with the same denominator. This is a fact that has been discussed earlier in statistics
oriented literature like in Kuh and Meyer (1955).
AHO (1980) - includes also cash-flow based profitability ratios in a factorization study for 24 financial ratios of 57
Finnish firms in 1967-1976. His financial characteristic factors become financial structure, profitability, liquidity,
working capital turnover and financial opportunities for investments.
WHITTINGTON (1980) - Two interrelated trends are evident. Theoretical discussions about the ratio format in FRA
and empirical testing of the ratio model. While mostly tackling the former Whittington (1980) independently presents
illustrative results finding the ratio specification inappropriate in a sample of U.K. firms. Whittington also discusses the
usage of a quadratic form in FRA. Significant instability in the results was reported.
Barnes (1981) - shows how the non-normality of financial ratios can result from the underlying relationships of the
constituents of the financial ratios. He is thus able to tie in the ratio format aspects with the distributional properties of
financial ratios (to be discussed later in this review). In the discussion on Barnes's paper (Horrigan, 1983, Barnes,
1983), Horrigan puts forward that financial ratio research should be more interested in the role of the financial ratios
themselves than in "the nature of the ratios' components or to the ratios' incidental role as data size deflators".
CHEN & SHIMERDA (1981) - present a summary of the financial ratios used in a number of early studies which use the
financial ratios for analysis and prediction. They note that there is an abundant 41 different financial ratios which are found
useful in the earlier studies. They reconcile by judgement the factors in the earlier studies into financial leverage, capital
turnover, return on investment, inventory turnover, receivables turnover, short-term liquidity, and cash position. They
identify ten financial ratios which are representative of their seven factors.
SALMI & LUOMA (1981) - demonstrate using simulated financial statements that applying Kay's results require more
restrictive assumptions than originally indicated by Kay (1976). Stark (1982) recounts Key's results by including working
capital, loan financing and taxation.
COWEN & HOFFER (1982) - studied the inter-temporal stability of financial ratio classification in a single, homogeneous
industry. Their findings do not support the Pinches, Mingo and Caruthers results about the stability of the ratio patterns.
Cowen and Hoffer's sample consist of 72 oil-crude industry firms for 1967-75. Four or five factors are found for each year
for the 13 financial ratios included. As the authors put it "there was little consistency and stability in the factor loadings
across all years". The results are only slightly improved with log-transformations. Cowen and Hoffer also find applying
cluster analysis that groupings of firms with respect to the financial ratios exist within the industry, but that they are not
stable over time.
LAITINEN (1983) - presents a model of the financial relationships in the firm with attached financial ratios. The model is
based on Laitinen (1980). For the most part empirical evidence based on 43 publicly traded Finnish firms supports the
structure of the model. Bayldon, Woods, and Zafiris (1984) evaluate a pyramid scheme of financial ratios. In a case study
the pyramid scheme does not function as expected. The deductive approach to establish relevant financial ratio categories
has more or less stalled, and this approach has become intermixed with confirmatory approach discussed later.
GOMBOLA & KERTZ (1983) - include cash-flow based (adjusted for all accruals and deferrals) financial
ratios in their factorization of 40 financial ratios for a sample of 119 Compustat firms for 1962-80.
Contrary to the earlier studies, the cash-flow based financial ratios load on a distinct factor. The results
are not sensitive to using historical costs vs general price-level adjusted data. Similar results on the
empirical distinctiveness of cash flow ratios are later obtained in a study that also introduces market-
based ratios to the analysis.
McDONALD & MORRIS (1984-1985) - present the first extensive empirical studies of the statistical validity of the
financial ratio method. The authors use three models with two samples, one with a single industry the other with one
randomly selected firm from each (four-digit SIC) industry branch to investigate the implications of homogeneity on
proportionality. The first model is the traditional model for replacement of financial ratios by bivariate regression,
with intercept
Y(i) = a + bX(i) + e(i).
The above model is central in this area. It is characteristic that the testing for proportionality is considered in terms of
testing the hypothesis H0: a = 0. Barnes (1986) points out for statistical testing that the residual is typically
heteroscedastic. For a discussion also see Garcia-Ayuso (1994). The second model in McDonald and Morris is
Y(i) = b'X(i) + e'(i)
that is without the intercept to tackle heteroscedasticity. Dropping the intercept from the model is not always enough
to treat the heteroscedasticity (see Berry and Nix, 1991). The third model applies a (Box-Cox) transformation on the
first model to tackle non-linearities. While they find support for financial ratio analysis for comparisons within
industry branches, in inter-industry comparisons proportionality of financial ratios is not supported.
BUIJINK & JEGERS (1986) - studies the financial ratio distributions from year to year from 1977 to 1981 for 11
ratios in Belgian firms corroborating the results of the earlier papers in the field. Refined industry classification brings
less extreme deviation from normality. They also point to the need of studying the temporal persistence of cross-
sectional financial ratio distributions and suggest a symmetry index for measuring it.
EZZAMEL, BRODIE & MAR-MOLINERO (1987) -detect instability in the factors of financial ratios for a sample
of UK firms.
SALMI, VIRTANEN & YLI- OLLI (1990)- A financial ratio is of the form X/Y, where X and Y are figures derived
from the financial statements or other sources of financial information. One way of categorizing the ratios is on the
basis where X and Y come from Salmi's research.In traditional financial ratio analysis both the X and the Y are based
on financial statements. If both or one of them comes from the income statement the ratio can be called dynamic while
if both come from the balance sheet it can be called static (see ibid.). The concept of financial ratios can be extended
by using other than financial statement information as X or Y in the X/Y ratio. For example, financial statement items
and market based figures can be combined to constitute the ratio.
In this paper we review the existing trends in financial statement analysis literature by focusing
primarily on the theoretical and empirical basis of financial ratio analysis. This is an important task
to carry out since the ratios are often used intuitively, without sufficient consideration to their
theoretical meaning and statistical properties. In doing this it is our purpose to pinpoint the
different directions taken in quantitative ratio based research. By critically considering financial
ratio literature, we also aim to help the decision makers to use ratios in an efficient way.
We review four of the research areas listed above. In our opinion the primary areas of the literature
concerning the theoretical and empirical basis of financial ratio analysis are the functional form of
the financial ratios, distributional characteristics of financial ratios, and classification of financial
ratios. These three research avenues are reviewed in Section 2. All the major financial ratio
research avenues cannot be tackled within the limited space of this paper. Therefore, we select the
estimation internal rate of return from financial statements as the fourth area. A fundamental task of
financial analysis is evaluating the performance of the business firm. This area, reviewed in Section
3, directly concerns profitability measurement.
WATSON (1990) - examines the multivariate distributional properties of four financial ratios from a
sample of approximately 400 Compustat manufacturing firms for cross-sections of 1982, 1983 and
1984. Multivariate normality is rejected for all the four financial ratios. Multivariate normality is still
rejected after applying Box's and Cox's modified power transformations. However, when multivariate
outliers are removed, normality is confirmed. Multivariate normality has particular bearing on
research using multivariate methods, for example on bankruptcy prediction. It also has implications
on univariate research, since while univariate normality does not imply multivariate normality, the
opposite is true.
MARTIKAINEN & ANKELO (1991) - find that instability of financial ratio groups is more
pronounced for firms about to fail than for healthy firms in a sample of 40 Finnish firms. Martikainen,
Puhalainen and Yli-Olli (1994) observe significant instability of the financial ratio classification patters
across industries in a sample typical of bankruptcy research.
BERRY & NIX (1991) - however, cast doubt on the generality of McDonald and Morris results over
time, over ratios and over industries. Similar results was obtained for Finnish data in Perttunen and
Martikainen (1989) and for Spanish data by Garcia-Ayuso (1994). By comparing value and equal
weighted aggregate financial ratios McLeay and Fieldsend (1987) find evidence based on samples of
French firms that "the departure from proportionality varies from ratio to ratio, from size class to
size class and from sector to sector".
Research on financial ratio proportionality has close connections to distributional questions. Testing
the statistical significance of the parameters of the previous models involves, at least implicitly,
assumptions of normality (see Ezzamel, Mar-Molinero and Beecher, 1987, p. 467). Fieldsend,
Longford and McLeay (1987) draw on the fact that a number of accounting variables are expected to
be lognormally distributed because of technical zero lower bounds. Consequently they test
empirically a lognormal regression model
lnY(ij) = a + blnX(ij) + g(j) + e(ij)
where the industry effect g(j) is explicitly specified in the model. Their empirical results on a single
financial ratio (the current ratio) are in line with the earlier results supporting proportionality only if
industry effects are included.
BOLLEN(1999)- conducted a study on Ratio Variables on which he found three different uses of ratio
variables in aggregate data analysis: (1) as measures of theoretical concepts, (2) as a means to control
an extraneous factor, and (3) as a correction for heteroscedasticity. In the use of ratios as indices of
concepts, a problem can arise if it is regressed on other indices or variables that contain a common
component. For example, the relationship between two per capita measures may be confounded with
the common population component in each variable. reegarding the second use of ratios, only under
exceptional conditions will ratio variables be a suitable means of controlling an extraneous factor.
Finally, the use of ratios to correct for heteroscedasticity is also often misused. Only under special
conditions will the common form forgers soon with ratio variables correct for heteroscedasticity.
Alternatives to ratios for each of these cases are discussed and evaluated.
COOPER(2000)-conducted a study on Financial Intermediation on which he observed that the
quantitative behavior of business-cycle models in which the intermediation process acts either as a
source of fluctuations or as a propagator of real shocks. In neither case do we find convincing evidence
that the intermediation process is an important element of aggregate fluctuations. For an economy
driven by intermediation shocks, consumption is not smoother than output, investment is negatively
correlated with output, variations in the capital stock are quite large, and interest rates are procyclical.
The model economy thus fails to match unconditional moments for the U.S. economy. We also
structurally estimate parameters of a model economy in which intermediation and productivity shocks
are present, allowing for the intermediation process to propagate the real shock. The unconditional
correlations are closer to those observed only when the intermediation shock is relatively unimportant.
GERRARD(2001)-conducted a study on The Financial Performance on which he found that Using
ratio analysis the financial performance of a sample of independent single-plant engineering firms in
Leeds is examined with regard to structural and locational differences in establishments. A number of
determinants of performance are derived and tested against the constructed data base. Inner-city
engineering firms perform relatively less well on all indicators of performance compared with outer-
city firms. The study illustrates the importance of using different measures of performance since this
affects the magnitude and significance of the results. Financial support is necessary to sustain
engineering in the inner city in the long run.
SCHMIDGALL(2003)- conducted a study on Financial Analysis Using the Statement of Cash Flows
on which he observed that Managers use many financial ratios to judge the health of their businesses.
With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards
Board, manager snow have a new set of ratios that will give a realistic picture of the business. The
ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations
to cash flow in investments. These ratios are particularly useful because they show changes in a hotel
or restaurant's cash position over time, rather than at a given moment, as is the case with many other
ratios.
MURINDE (2003)- conducted study on Corporate Financial Structures on which he observed that the
financial structure of a sample of Indian non-financial companies using a new and unique dataset
consisting of a panel containing the published accounts of almost 900 companies that published a full
set of accounts every year during 1989-99.In a new departure in the literature, the dataset includes
quoted and unquoted companies. We compare the sources-uses approach to analyzing company
financial structures with the asset-liability approach. We use both approaches to characterize and to
compare the financial structures of Indian companies over time; between quoted and unquoted
companies; and between companies which belong to a business group and those that do not. Finally, we
compare our results to those obtained previously for India and for the industrial countries.
McMAHON(2005)-conducted a study on Financial Information on which he found that financial
statements mean little to the uninitiated. This paper, explains, in layman's terms, how to understand
financial information. It covers measures of profitability. The second article will cover measures of
company liquidity and the use of financial ratios. This paper continues to explain how to interpret and
understand financial information. It deals with measures of liquidity, solvency and fund flows and
describes how to establish standards against which a company's financial ratios can be compared.
LARS LINDBERGH (2003)- has told in his research that possibility for firms to smooth income over
a number of years. The results capital structure, financial position and financial statement information
from small firms in Sweden. The result of the multivariate canonical correlation analysis provides some
support to the hypothesis that the firms develop patterns, in their use of assets and their financing.
WILLIAM I.MEDGINSON (1996)-has told in research that the study showed that significant
increase newly private firms in profitability, output per employee capital spending, and employment. It
is also found that financial policies of these firms start to resemble those typically associated with
private entrepreneurial companies with lower leverage and higher dividend ratios.
PARKAR (2004)- studied the size of the capital structure analysis is and its components and
management in factoring companies. They also studied the correlation between and profitability of
factoring companies. They concluded that the sundry debtors amount due to creditors are the major
component of current assets current liability respectively in determining the size of the financial
analysis.
CHAPTER- VI: DATA ANALYSIS & INTERPRETATION
NTRODUCTION:
Analysis and interpretation are central steps in the research process. The goal of analysis is to summarize the
collected data in such a way that they provide answer to question and trigger the research through interpretation
the meaning and implication of the study becomes clear . Analysis is not complete without interpretation cannot
proceed without analysis . Both are, thus interdependent . In fact , interpretations can be conceived to of as
apart of analysis . It is the time study in the whole analytical framework . Keeping this mind the researcher has
analyzed all the variables the give a clear picture about the study and make use of statistical applications when
ever, it is necessary to find the relation between the variables.
The researcher interprets the meaning and implication of those relations within the research study
band its data and these compares the results and the inference drawn within the data to theory and
other results.
RESEARCH DESIGN AND METHODOLOGY
This research is a financial research i thr field of financial analysis. It assesses the overall financial position of
the company.Hence, it is essentially a fact-finding study type of data. The study is based on the secondary data which
covers the company records for the process of the project report. The study covers for a period of 5 years from 2008-
2012.
RESEARCH DESIGN:
The study is mainly based on secondary sources of data for which if resorted to the annual report of Lotte India
corporation Limited. Besides information attained from the chief accounts officer and from other officers.
The secondary data also has been collected from the audited financial statements, annexure to the cost audit
reports, periodicals and other maintained by Lotte India Corporation ltd.
AREA OF STUDY :
The study is carried out on the financial statements and Ratio analysis .
PERIOD OF STUDY:
The period of study is for 2months.
DATA COLLECTION:
Datas are mostly collected from the secondary sources.
SECONDARY DATA:
Secondary datas were collected through the annual reports of Lotte India Corporation Ltd.
TYPES OF RESEARCH TOOLS
Tools used for analyzing the data:
1.Ratio Analysis
2.Comparative Balance Sheet
3.Common SizeBalance Sheet
4.Trend Analysis
DATA ANALYSIS & INTERPRETATION
RATIO ANAYSIS
? PROFITABILITY RATIOS:
1. GROSS PROFIT RATIO :
TABLE – 1: GROSS PROFIT RATIO
GROSS PROFIT RATIO = GROSS PROFIT X 100
NET SALES
CHART - 1
YEAR NET SALES GROSS PROFIT GROSS PROFIT RATIO
2007-08 15403.95 5717.19 -5.63
2008-09 17056 6505.48 -2.1
2009-10 18838.87 7431.7 2.4
2010-11 25715.08 9179.9 2.8
2011-12 28214.73 9613.75 6.93
INTERPRE
TATION:
The table
reveals the
Gross
Profit
Ratio from
2007-
2012. This
ratio
indicates
the
difference
between sales and direct cost. Gross Profit ratio explains the relationship between gross profit and sales. A higher
ratio is preferrable, indicating pofitability. Except 2007-08 & 2008-09, the company has shown a great pace of
increase in the following years indicating a higher degree of performance in sales.
2. NET PROFIT RATIO :
TABLE – 2 : NET PROFIT RATIO
NET PROFIT RATIO = PROFIT AFTER TAX X 100
NET SALES
CHART
- 2
YEAR NET PROFIT NET SALES NET PROFIT RATIO
2007-08 -579.33 15403.95 -3.76
2008-09 -214.13 17056 -1.26
2009-10 254.21 18838.87 1.35
2010-11 615.03 25715.08 2.39
2011-12 837.22 28214.73 2.96
INTERPRETATION:
The table reveals the Net Profit Ratio from 2007-2012. This ratio indicates the difference between sales
and direct cost. Net Profit ratio explains the relationship between Net profit and sales. A higher ratio is
preferrable, indicating pofitability. Except 2007-08 & 2008-09, which depicts -3.76 and -1.26, the company has
shown a great pace of increase in the following years indicating a higher degree of performance in sales.
RETURN ON TOTAL ASSETS :
TABLE – 3: RETURN ON TOTAL ASSETS
RETURN ON TOTAL ASSETS = NET PROFIT AFTER TAX X 100
TOTAL ASSETS
CHART - 3
INTER
PRET
ATIO
N :
The
table
reveals
the
Return
On
Total
Assets
Ratio
YEAR TOTAL ASSETS
2007-08 -579.33 10285.44 -5.63
2008-09 -214.13 10179.95 -2.1
2009-10 254.21 10584.9 2.4
2010-11 615.03 9179.9 0.06
2011-12 666.35 9613.75 6.93
NET PROFIT AFTER
TAX
RETURN ON
INVESTMENTS
from 2007-2012. This ratio explains the relationship between the Net Profit after tax and total assets. It shows a
moderate increase and decrease percentage on the return of total assets.
OPERATING PROFIT RATIO:
TABLE – 4: OPERATING PROFIT RATIO
OPERATING PROFIT RATIO = OPERATING PROFIT
NET SALES
CHART – 4
INTERPRETATION:
Operating Profit ratio shows the operational efficiency of the business. Lower Operating ratio showa higher
operating profit and vice versa. The table above shows the relationship between operating profit and Net sales.
YEAR OPERATING PROFIT NET SALES NET PROFIT RATIO
2007-08 25.48 15403.95 0.17
2008-09 596.53 17056 3.49
2009-10 955.49 18838.87 5.07
2010-11 2064.76 25715.08 8.02
2011-12 2139.44 28214.73 7.58
The chart depicts that the highest operating profit ratio is shown in 2011-12. Likewise it also shows a sequence
of increasing percents in the forecoming years.
EARNINGS PER SHARE:
TABLE – 5: EARNINGS PER SHARE
EARNINGS PER SHARE = NET PROFIT AFTER TAX & PREFERENCE DIVIDEND
NO. OF EQUITY SHARES
CHART - 5
INTERPRETATION:
YEAR E.P.S RATIO
2007-08 -15.36
2008-09 -5.68
2009-10 6.74
2010-11 5.07
2011-12 6.97
2007-08 2008-09 2009-10 2010-11 2011-12
-20
-15
-10
-5
0
5
10
EARNINGS PER SHARE RATIO
E.P.S RATIO
YEARS
R
A
T
I
O
S
The Earnings per share highlights the overall success of the concern from owner's point of view and it
is helpful in determining market price of equity shares. It reflects upon the capacity of the concern to pat dividend
to its equity shareholder's. In the year 2007-08 & 2008-09 the EPS value is in a biggest negative stage. The
company has to concentate on all factors such that they should retain their shareholder's. They should ultimately
increase their profits and sales volume.
II.TURNOVER RATIOS
1. DEBTORS TURNOVER RATIO
DEBTORS TURNOVER RATIO = CREDIT SALES
AVERAGE DEBTORS
TABLE – 6
CHART - 6
YEAR CREDIT SALES
2007-08 15403.95 297.21 19.22
2008-09 17056 344.02 -6.48
2009-10 18838.87 365.18 -10.18
2010-11 25715.08 308.19 0.66
2011-12 28214.73 307.52 0.75
AVERAGE
DEBTORS
DEBTORS TURNOVER
RATIO
INTERPRETATION:
Debtors Turnover Ratio measures whether the amount of resources tied up in debtors is reasonable and
whether the company has been efficient in converting debtors into cash. The analysis shows that the ratio
increased from 2007-08 & 2008-09 and has decreased from 2007-08 and 2008-09. Thus it shows that the
company's Debtors turnover ratio is moderate.
WORKING CAPITAL TURNOVER
TABLE – 7: WORKING CAPITAL TURNOVER RATIO
WORKING CAPITAL TURNOVER RATIO = NET SALES
NET WORKING CAPITAL
YEAR NET SALES
2007-08 15403.95 801.32 19.22
2008-09 17056 -2634.02 -6.48
2009-10 18838.87 -1850.58 -10.18
2010-11 25715.08 9179.9 2.8
2011-12 28214.73 9613.75 2.93
NET WORKING
CAPITAL
NET CAPITAL
TURNOVER RATIO
INTERPRETATION :
The Working Capital Turnover ratio measures the efficiency with which the working capital is being
used by the firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise.
But a very high working capital turnover ratio may also mean lack of sufficient working capoital which is not good.
From the data interpreted it is well known that in the year 2007-08 , i.e 19.22 is the highest percentage of ratios
among all other ratios.
FIXED ASSETS TURNOVER RATIO:
TABLE – 8: FIXED ASSETS TURNOVER RATIO
FIXED ASSETS TURNOVER RATIO = NET SALES
FIXED ASSET
INTERPRETATION:
YEAR FIXED ASSET NET SALES
2007-08 6142.7 15403.95 19.22
2008-09 5777.95 17056 -6.48
2009-10 5452.15 18838.87 -10.18
2010-11 38873.57 25715.08 0.66
2011-12 37522.3 28214.73 0.75
NET CAPITAL
TURNOVER RATIO
The working capital turnover ratio measures the efficiency with which the working
capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low
ratio indicates otherwise.But a very high working capital turnover ratio may also mean lack of sufficient
working capoital which is not good. In 2007-08, the WCTOR is in a very good position but after that it doesn't do
well. Company has to seriously look after this issue.
CAPITAL TURNOVER RATIO:
TABLE – 9: CAPITAL TURNOVER RATIO
CAPITAL TURNOVER RATIO = SALES X 100
CAPITAL EMPLOYED
CHART - 9
YEAR NET SALES
2007-08 15403.95 7767.32 1.98
2008-09 17056 4044.54 4.22
2009-10 18838.87 4264.65 4.22
2010-11 25715.08 44238.34 57.75
2011-12 28214.73 43527.99 62.42
CAPITAL
EMPLOYED
NET CAPITAL
TURNOVER RATIO
INTERPRETATION:
This analysis shows a constant usage of capital in the turnover of the company. This is an
indicator of how many times the assets have been put into operation have been effectively used up
in the increasing sales. A high ratio indicates efficiency of operations and a low ratio means idling of
scarce assets. The company's capital turnover ratio is growing tremendouslyin an increasing state.
The 2011-2012 year shows 62.42% , which is the highest percentage among all the years.
OWNED CAPITAL TURNOVER RATIO:
TABLE – 10: OWNED CAPITAL TURNOVER RATIO
OWNED CAPITAL TURNOVER RATIO = SALES
SHAREHOLDER'S FUNDS
CHART – 10
YEAR NET SALES
2007-08 15403.95 4224.57 3.65
2008-09 17056 4010.44 4.25
2009-10 18838.87 4264.65 4.42
2010-11 25715.08 44527.99 57.75
2011-12 28214.73 45194.34 62.42
SHAREHOLDER
FUNDS
OWNED CAPITAL
TURNOVER RATIO
INTERPRETATION:
This analysis shows a constant usage of Owned Capital turnover of the company. This is an
indicator of how many times the assets have been put into operation have been effectively used up
in the increasing sales. A high ratio indicates efficiency of operations and a low ratio means idling of
scarce assets. The company's capital turnover ratio is growing tremendouslyin an increasing state.
The 2011-2012 year shows 57.75 & the year 2011-12 shows 62.42, which is the highest percentage
among all the years.
III. SOLVENCY RATIOS
TABLE – 11: CURRENT RATIO
CURRENT RATIO = CURRENT ASSETS/ CURRENT LIABILITIES
CHART – 11
YEAR CURRENT ASSETS
2007-08 3319.12 2517.8 3.65
2008-09 3501.39 6135.41 4.25
2009-10 4469.67 6320.25 4.42
2010-11 9179.9 5651.31 57.75
2011-12 9613.75 6615.37 62.42
CURRENT
LIABILITIES
CURRENT
RATIO
INTERPRETATION:
The table reveals the Current Ratio from 2007-2012. Current ratio explains the relationship between Current
Assets and Current Liabilities. A higher ratio is preferrable, indicating pofitability. From 2010-2012, the company
has shown a great pace of increase in the following years indicating a higher degree of performance. It shows 4.67%
in the year 2011-12 when compared to the year 2010-11.
LIQUID RATIO :
TABLE – 12 : LIQUID RATIO
LIQUID RATIO = LIQUID ASSETS
LIQUID LIABILITIES
CHART – 12
YEAR LIQUID ASSETS LIQUID RATIO
2007-08 1388.49 2517.8 0.55
2008-09 1491.5 6135.41 0.24
2009-10 2385.43 6320.25 0.38
2010-11 9179.9 5310.92 1.72
2011-12 9613.75 6283.37 1.53
LIQUID
LIABILITIES
INTERPRETATION:
The table reveals the Liquid Ratio from 2007-2012. Current ratio explains the relationship
between Liquid Assets and Liquid Liabilities. A higher ratio is preferrable, indicating pofitability. From 2010-2012,
the company has shown a great pace of increase in the following years indicating a higher degree of performance
when compared to other years. It shows 1.72% in the year 2010-11, which is the highest of all.
COMPARATIVE STATEMENTS
Comparative study of financial statement is the comparision of the financial
statement of the business with the previous year's financial statements and with the performance of
other competitive enterprises, so that weaknesses may be identified and remedial measures applied.
Comparative statements can be prepared for both types of financial statements i.e., Balance
Sheet as well as profit & loss account. The Comparative profits and loss account will present a
review of operating activities of the business. The comparative balance shows the effect of
operations on the assets and the liabilities that change in the financial poisition during the period
under consideration.
Comparative analysis is the study of trend of the same items and computed items into or more
financial statements of the same business enterprise on different dates.
The presentation of Comparative financial statements, in annual and other reports, enhances the
usefulness of such reports and brings out more clearly the nature and trends of current changes
affecting the enterprise.
While the single balance sheet represents balances of accounts drawn at the end of an accounting
period, the comparative balance sheet represent not nearly the balance of accounts drawn on two
different dates but also the extent of their increase or decrease between these two dates. The
single balance sheet focuses on the financial status of the concern as on a particular date, the
comparative balance sheet focuses on the changes that have taken place in one accounting period.
The changes are the direct outcome of operational activities, conservation of assets, liability and
capital form into others as well as various interactions among assets, liability and capital.
COMPARATIVE BALANCE SHEET ANALYSIS
COMPARATIVE BALANCE SHEET (2007-08 & 2008-09)
SL.NO PARTICULARS 2007-2008 2008-2009
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 377.13 - -
2Reserves & Surplus 3847.44 3633.31 -214.13 -5.56
3Loans 3543.07 34.1 -3508.97 -99.04
4Current Liabilities
(i)Liabilities 2434.51 6045.47 3610.96 148.32
(ii)Provisions 83.29 89.94 6.65 7.98
2517.8 6135.41
TOTAL CURRENT LIABILITIES 10285.44 10179.95 -105.49 -1.02
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 6142.7 5777.95 -364.75 -5.94
2Capital Work in progress 85.1 77.03 -8.07 9.48
3Investments - - - -
4Deferred Tax Asset(Net) 738.52 823.58 85.06 11.5
5Current Asset 3319.12 3501.39 182.27 5.49
TOTAL CURRENT ASSET 10285.44 10179.95 -105.49 -1.02
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
INTERPRETATION:
The above comparative statement analysis shows the following valuable information;
? The Capital investment for both the years i.e.,2007-08 & 2008-09 are the same.
? Reserves and surplus are reduced from 3847.44 lakhs to 3633.31 lakhs with -
5.56% decrease.
? The current Liabilities has increased from 2517.8 lakhs to 6135.41 lakhs with
7.98% increase.
? Fixed Assets have been reduced from 6142.7 lakhs to 5777.95 lakhs thereby
indicating -5.94 % decrease.
? The Capital work- in progress has decreased from 85.1 lakhs to 77.03 lakhs with
-9.48% decrease.
? The deferred tax asset has been reduced to 11.5% in the year 2007.
? The Current Assets have been increased from 3319.12 lakhs to 3501.39 lakhs
with 5.49% increase.
COMPARATIVE BALANCE SHEET (2008-09 & 2009-10)
INTERPRETATION:
The above comparative statement analysis shows the following valuable information;
1.The Share Capital for both the years i.e.,2008-09& 2009-10 are the same.
2.Reserves and surplus are increased from 3633.31lakhs to 3887.52 lakhs with 6.99%
decrease.
3.The current Liabilities has increased from 6135.41 lakhs to 6320.25 lakhs with 2.94%
increase.
4.Fixed Assets have been reduced from 5777.95 lakhs to 5452.15 lakhs thereby indicating -
5.64 % decrease.
5.The Capital work- in progress has decreased tremendously from 77.03 lakhs to 0.50 lakhs
with 99.35% decrease.
6.The deferred tax asset has been reduced to 19.55% in the year 2010.
7.The Current Assets have been increased from 3501.39 lakhs to 4469.67 lakhs with 27.65%
increase.
SL.NO PARTICULARS 2008-2009 2009-2010
LIABILITIES:
I. SOURCES OF FUNDS
1 Capital 377.13 377.13 - -
2 Reserves & Surplus 3633.31 3887.52 254.21 6.99
3 Loans 34.1 - 34.1 100
4 Current Liabilities
(i)Liabilities 6045.47 6232.64 187.17 3.09
(ii)Provisions 89.94 87.61 -2.33 -259
TOTAL CURRENT LIABILITIES 10179.95 10584.9 404.95 3.98
ASSETS:
II. APPLICATION OF FUNDS
1 Fixed Assets 5777.95 5452.15 -325.8 -5.64
2 Capital Work in progress 77.03 0.5 -76.53 99.35
3 Investments - - - -
4 Deferred Tax Asset(Net) 823.58 662.58 -161 19.55
5 Current Asset 3501.39 4469.67 968.28 27.65
TOTAL CURRENT ASSET 10179.95 10584.9 404.95 3.98
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
COMPARATIVE BALANCE SHEET 2009-10 & 2010-11
INTERPRETATION:
SL.NO PARTICULARS 2009-2010 2010-2011
LIABILITIES:
I. SOURCES OF FUNDS
1 Capital 377.13 956 578.87 153.49
2 Reserves & Surplus 3887.52 43087.46 39199.94 1008.35
3 Loans - - - -
4 Current Liabilities
(i)Liabilities 6232.64 3862.39 -2370.25 -38.02
(ii)Provisions 87.61 72.61 -15 -17.12
TOTAL CURRENT LIABILITIES 10584.9 47978.46 37393.56 353.27
ASSETS:
II. APPLICATION OF FUNDS
1 Fixed Assets 5452.15 40124.83 34672.68 -5.64
2 Capital Work in progress 0.5 26.67 26.17 99.35
3 Investments - - - -
4 Deferred Tax Asset(Net) 662.58 - 662.58 19.55
5 Current Asset 4469.67 7826.96 3357.29 27.65
TOTAL CURRENT ASSET 10584.9 47978.46 37393.56 353.27
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
The above comparative statement analysis shows the following valuable information;
1.The Share Capital is increased from 377.13 lakhs to 956 lakhs in the year 2011 with 153%
increase.
2.Reserves and surplus are increased from 3887.52 lakhs to 43087.46 lakhs with 156%
decrease.
3.The current Liabilities has decreased from 6232.64 lakhs to 3862.39 lakhs with -
38.02% decrease.
4.Fixed Assets have been increased from 5452.15 lakhs to 40124.83 lakhs thereby indicating
5.64 % increase.
5.The Capital work- in progress has increased tremendously from 0.50 lakhs to 26.67 lakhs
with 99.35% increase.
7.The Current Assets have been increased from 4469.67 lakhs to 7826.96 lakhs with 27.65%
increase.
COMPARATIVE BALANCE SHEET 2010-11 & 2011-12
SL.NO PARTICULARS 2010-2011 2011-2012
LIABILITIES:
I. SOURCES OF FUNDS
1 Capital 956 956 - -
2 Reserves & Surplus 43087.46 43571.99 484.53 6.99
3 Loans - - 34.1 100
4 Current Liabilities
(i)Liabilities 3862.39 4749.82 887.43 3.09
(ii)Provisions 72.61 51.87 -20.74 -259
TOTAL CURRENT LIABILITIES 47978.46 49329.68 1351.22 3.98
ASSETS:
II. APPLICATION OF FUNDS
1 Fixed Assets 40124.83 38873.57 -1251.26 -5.64
2 Capital Work in progress 26.67 842.01 815.34 99.35
3 Investments - - - -
4 Deferred Tax Asset(Net) - - - 19.55
5 Current Asset 7826.96 9614.1 1787.14 27.65
TOTAL CURRENT ASSET 47978.46 49329.68 1351.22 3.98
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
INTERPRETATION:
The above comparative statement analysis shows the following valuable information;
1.The Share Capital of both years are the same with Rs,956 lakhs.
2.Reserves and surplus are increased from 43087.46 lakhs to 43571.99 lakhs with 6.99%
increase.
3.The current Liabilities has increased from 3862.39 lakhs to 4749.82 lakhs with 3.09%
increase.
4.Fixed Assets have been reduced from 40124.83 lakhs to 38873.57 lakhs thereby indicating
-5.64 % decrease.
5.The Capital work- in progress has increased tremendously from 26.67 lakhs to 842.01 lakhs
with 99.35% increase.
7.The Current Assets have been increased from 4469.67 lakhs to 7826.96 lakhs with 27.65%
increase.
COMMON SIZE BALANCE SHEET
Common Size Balance Sheet provides a common basis for the absolute figures and facilitates
comparison between two or more years or two or more companies, or a single company and the
aggregate statements for the the entire industry. However, this technique helps in ascertaining the
trend in various item of the balance sheet and also helps to compare the financial position of
different companies having different size.
COMMON SIZE BALANCE SHEET 2007-08 & 2008-09
SL.NO PARTICULARS 2007-2008 PERCENTAGE 2008-2009 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 3.67 377.13 3.7
2Reserves & Surplus 3847.44 37.41 3633.31 35.7
3Loans 3543.07 34.44 34.1 0.33
4Current Liabilities
(i)Liabilities 2434.51 23.67 6045.47 59.39
(ii)Provisions 83.29 0.81 89.94 0.88
2517.8 6135.41
TOTAL CURRENT LIABILITIES 10285.44 100 10179.95 100
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 6142.7 59.72 5777.95 56.76
2Capital Work in progress 85.1 0.83 77.03 0.76
3Investments - - -
4Deferred Tax Asset(Net) 738.52 7.18 823.58 8.09
5Current Asset 3319.12 32.27 3501.39 34.39
TOTAL CURRENT ASSET 10285.44 100 10179.95 100
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
? The Capital investment for both the years i.e.,2007-08 & 2008-09 are the same.
? Reserves and surplus are reduced from 3847.44 lakhs to 3633.31 lakhs with 35.7%
in 2009 and 37.41% in 2008
? The current Liabilities has increased from 2517.8 lakhs to 6135.41 lakhs
with23.67% in 2008 and 59.39% in 2009 .
? Fixed Assets have been reduced from 6142.7 lakhs to 5777.95 lakhs with 59.72%
in 2008 and 56.76% in 2009.
? The Capital work- in progress has decreased from 85.1 lakhs to 77.03 lakhs with
0.83% in 2008 and 0.76% in 2009.
? The deferred tax asset has been increased from 738.52 lakhs to 823.58 lakhs with
7.18% and 8.09% .
? The Current Assets have been increased from 3319.12 lakhs to 3501.39 lakhs
with 32.27% in 2008 and 34.395 in 2009.
COMMON SIZE BALANCE SHEET 2008-09 & 2009-10
SL.NO PARTICULARS 2008-2009 PERCENTAGE 2009-2010 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 3.7 377.13 3.7
2Reserves & Surplus 3633.31 35.7 3887.52 36.62
3Loans 34.1 0.33 - 0
4Current Liabilities
(i)Liabilities 6045.47 59.39 6232.64 58.86
(ii)Provisions 89.94 0.88 87.61 0.82
TOTAL CURRENT LIABILITIES 10179.95 100 10584.9 100
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 5777.95 56.76 5452.15 51.5
2Capital Work in progress 77.03 0.76 0.5 0.04
3Investments - - - -
4Deferred Tax Asset(Net) 823.58 8.09 662.58 6.24
5Current Asset 3501.39 34.39 4469.67 42.22
TOTAL CURRENT ASSET 10179.95 100 10584.9 100
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
? The Capital investment for both the years i.e.,2008-09 & 2009-10 are the same.
? Reserves and surplus are increased from 36331.31 lakhs to 3887.52 lakhs with
35.7% in 2008 and 36.62% in 2010
? The current Liabilities has increased from 6045.47 lakhs to 6232.64 lakhs with
58.86% in 2010 and 59.39% in 2009 .
? Fixed Assets have been reduced from 5777.95 lakhs to 5452.15 lakhs with 56.76%
in 2009 and 51.5% in 2010
? The Capital work- in progress has decreased from 77.03 lakhs to 0.50 with 076%
in 2009 and 0.5% in 2010.
? The Current Assets have been increased from 3501.39 lakhs to 4469.67 lakhs
with 34.39% in 2009 and 42.22% in 2010.
COMMON SIZE BALANCE SHEET 2009-10 & 2010-11
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
SL.NO PARTICULARS 2009-2010 PERCENTAGE 2010-2011 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 3.7 956 1.99
2Reserves & Surplus 3887.52 36.62 43087.46 89.8
3Loans - 0 -
4Current Liabilities
(i)Liabilities 6232.64 58.86 3862.39 8.05
(ii)Provisions 87.61 0.82 72.61 0.15
TOTAL CURRENT LIABILITIES 10584.9 100 47978.46 99.99
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 5452.15 51.5 40124.83 83.63
2Capital Work in progress 0.5 0.04 26.67 0.05
3Investments - - - -
4Deferred Tax Asset(Net) 662.58 6.24 -
5Current Asset 4469.67 42.22 7826.96 16.31
TOTAL CURRENT ASSET 10584.9 100 47978.46 99.99
? The Share Capital investment for both the years i.e.,2009-10 & 2010-11 shows a
greater investment.
? Reserves and surplus are increased from 3887.52 lakhs to 43087.46 lakhs with
36.62% in 2010 and 89.8% in 2011
? The current Liabilities has been decreased from 6232.64 lakhs to 3862.39 lakhs
with 58.86% in 2010 and 8.05% in 2011 .
? Fixed Assets have been reduced from 5452.15 lakhs to 40124.83 lakhs with
51.5%% in 2010 and26.67% in 2011.
? The Capital work- in progress has increased from 0.50 lakhs to 26.6s7 lakhs with
0.04%in 2010 and 0.05% in 2011.
? The Current Assets have been increased from 4469.67 akhs to 7826.96 lakhs
with 42.22% in 2010 and 16.31% in 2011.
COMMON SIZE STATEMENT 2010-11 & 2011-12
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
? The Share Capital investment for both the years i.e.,2010-11 & 2011-12 shows a
greater investment.
? Reserves and surplus are increased from 43087.46 lakhs to 43571 lakhs with
89.8% in 2011and 88.32% in 2012.
? The current Liabilities has been decreased from 3862.39 lakhs to 4749.82 lakhs
with 8.05% in 2011 and 9.62% in 2012 .
? Fixed Assets have been reduceD from40124.83 lakhs to 38873.57 lakhs with
83.63% in 2011 and78.8% in 2012.
? The Capital work- in progress has increased from 26.67 lakhs to 842.01 lakhs
with 0.05% in 2011 and1.7% in 2012.
? The Current Assets have been increased from 7826.96 lakhs to 9614.1 lakhs with
16.31% in 2011 and 19.48% in 2012.
SL.NO PARTICULARS 2010-2011 PERCENTAGE 2011-2012 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 956 1.99 956 1.94
2Reserves & Surplus 43087.46 89.8 43571.99 88.32
3Loans - - -
4Current Liabilities
(i)Liabilities 3862.39 8.05 4749.82 9.62
(ii)Provisions 72.61 0.15 51.87 0.1
TOTAL CURRENT LIABILITIES 47978.46 99.99 49329.68 99.98
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 40124.83 83.63 38873.57 78.8
2Capital Work in progress 26.67 0.05 842.01 1.7
3Investments - - - -
4Deferred Tax Asset(Net) - - -
5Current Asset 7826.96 16.31 9614.1 19.48
TOTAL CURRENT ASSET 47978.46 99.99 49329.68 99.98
TREND ANALYSIS
YEAR SALES STOCK SALES (IN %)STOCK (IN %)
2008 16815.48 1930.63 272.19 100 100 100
2009 18341.68 2009.89 501.21 109 104 184
2010 19703.19 2084.24 56.29 117 108 216
2011 28873.79 3868.98 615.03 172 200 342
PROFIT BEFORE
TAX
PROFIT BEFORE TAX (IN
%)
SUMMARY
The research study is focused mainly on the financial performance of Lotte India Corporation
Ltd., chennai. The study explains that how the company is managing its funds and liquidity. The
study also focuses on analyzing financial performance of the company and projecting future sales and
working capital.
The data's are collected through company's last five year's annual reports. And financial analysis
tools and statistical tools are also used to study the financial analysis of this company.
CHAPTER – VI : FINDINGS, SUGGESTIONS & CONCLUSIONS
FINDINGS :
? The company's profit shows a moderate trend for the last 5 years.
? The equity share capital didn't change as they maintain a constant invested capital.
? There is a sudden growth in borrowings in the year 2008 due the purchase of land by the
company.
? The company's Net working Capital has been at increasing trend till 2007-08 but in 2008-09
& 2009-10 it is decreased.
? The current assets of the company show an increasing trend.
? The sales of the company show an increasing trend when compared to the base year 2008-
09. it has gradually increased in 2009-10.
? The Reserves and surplus of the company shows an increasing trend for the years expected
in the year 2008-09.
? The Current Liabilities also shows an increasing growth rate.
? Gross profit ratio is at increasing phase.
? Debtor's turnover is not up to the mark.
? Investments are only made at the base year of the company.
? Fixed Assets have been increased in 2010-11 & 2011-12.
? capital turnover ratio has been decreased from 2008-09 & 2009-10.
SUGGESTIONS:
From the above study i would like to suggests some measures in order to develop the company in
a profitable manner.
? The company's profit over the years has been decreasing when compared to previous years
and even it incurred loss in 2008. The company must increase the profit in future. The
company must take steps to increase the profit level.
? It should deduct the unwanted costs in order to reach higher profitability. In 2009-10, it has
incurred huge loss in all aspects.
? Capital turnover ratio has been decreased in from 2008-09. so company can use some
techniques to improve that.
? The sales of the company can be futher increased by improving the quality through optimum
utilization of company's resources (i.e. Assets, raw materials, credit system etc) and that in
turn will increase the overall profits of the firm.
? The company should improve sales in order to achieve the growth, and the company should
make some innovative ideas to improve sales through various distribution channels and with
effective and innovative marketing techniques.
? The company should work out and improve EPS.
? The company should reduce their debt (loan) because shareholders get attracted towards
debt-free firm and it also increases profits to the firm.
? The company's operating profit is not up to the mark and hence it should take some
measures to overcome it.
? The managemnt must also study the market position and it should also find demands
prevailing in the market for the products and thus this will guide them enhance their sales
volume.
CONCLUSIONS:
The study titled “ Financial Analysis of Lotte India” is totally done based on the
secondary sources provided by the company. At the end of this study we come to know taht the
company is efficiently managing and utilizing their funds. Despite the losses occured, the company
has performed well. With the help of various financial analysis i analysed the company's
performance. And with some innovative financial tools i could analyze the firm's future predictions.
The company can manage their funds more effectively and thusthey can improve their
operational efficiency. The financial performance experienced a healthier path in terms of liquidity
and profitability of the business during the study period except 2009-10. The other important factor
which is worth mentioning here is that the company has been processing steadily on its capacity
utilization in line with its growing financial performance.
To end with, we can conclude taht if the company takes over the above actions as suggested,
the comapny would reamain as the number one leader in the Indian Confectionery business in future,
with its excellent past records and the latent potential for achieving greater heights in future.
BIBLIOGRAPHY
BOOKS :
1. M.Y Khan and P.K Jain
Financial Management, 4
th
Edition-2006,
Tata Mc graw-Hills Publications, New Delhi.
WEBSITES:
1http://www.readyratios.com/reference/analysis/financial_statement_analysis.html
2.www.google.com
3.www.mbaguys.net
4.www.lotteindia.com
doc_243152911.docx
A STUDY ON “ THE FIANANCIAL ANALYSIS OF
LOTTE INDIA CORPORATIONS LTD”
PROJECT REPORT
A STUDY ON “ THE FIANANCIAL ANALYSIS OF
LOTTE INDIA CORPORATIONS LTD”
PROJECT REPORT
Submitted in partial fulfillment of the
Requirements for the award of the Degree of
MBA
2013
BY
VIJAYALAKSHMI.E
Under the Supervision of
MR. E. PRADEEP KUMAR
Faculty, Department of MBA ,
SRM UNIVERSITY,
KATTANKULATHUR,
CHENNAI – 203.
MAY 2013
ACKNOWLEDGEMENT
ACKNOWLEDGEMENT
First and foremost, I offer my sincerest gratitude to our Chancellor, SRM University, for his academic
support and the facilities provided to carry out the project work at the Institute. His wide vision and
concern for students have been inspirational. I wish to express my profound gratitude to my venerable
Chairman, SRM Group of Institutions-Kattankulathur Campus, who offered me such a huge
opportunity, incredible infrastructure and other support which made the project work quite smooth. I
express my heartfelt thanks to our Dean & Vice Principal, Faculty of Engineering and Technology,
SRM University, Kattankulathur Campus who provided all facilities for carrying out this project. I
immensely thank to our Head of the department, Prof.Dr.C.Sundar M.B.A., M.Phil .,( Ph.D) for his
cordial support, valuable information and guidance, which helped me in completing this task through
various stages. The blessing, help and guidance given by him time to time shall carry me a long way in
the journey of life on which I am about to embark.
I take this opportunity to express my profound gratitude and deep regards to my Project Guide ,
Mrs.E. PRADEEP KUMAR,MBA.,M.Phil.,(Ph.D) for his exemplary guidance, monitoring and
constant encouragement throughout the course of this project.
I also take this opportunity to express a deep sense of gratitude to Mr.RANGANATHAN.P,
DGM-ACCOUNTS, MR.ANAND.NA, MR.SABARIRAJAN, MR.HEMANTH KUMAR,
MRS.SUBASHINI, ASST.MANAGER-FINANCE, MR.GANESH PANDIAN B.COM,
MR.JALEEL, for their cordial support, valuable information and guidance, which helped me in
completing this task through various stages. I owe my wholehearted thanks and appreciation to the
entire staff of the company for their cooperation and assistance during the course of my project. I hope
that I can build upon the experience and knowledge that I have gained and make a valuable
contribution towards this industry in coming future. I thank God Almighty for showering his perennial
blessing on me for giving me the courage to pursue this project work successfully. I owe a lot to my
parents, who encouraged and helped me at every stage of my personal and academic life, and longed
to see this achievement .
E.VIJAYALAKSHMI
REG NO.3511210059
DECLARATION
I, E.VIJAYALAKSHMI, hereby declare that the project Report, entitled “A
STUDY ON THE FINANCIAL ANALYSIS OF LOTTE INDIA CORPORATION LIMITED”
submitted to the SRM University in partial fulfillment of the requirements for the award of the Degree
of Master of Business Administration is a record of original work undergone by me during the period
29.05.2013 to 29.07.2013 under the supervision and guidance of Mr.E.PRADEEP KUMAR,
MBA.,M.Phil.,(Ph.D) School of Management Studies, SRM University, kattankulathur Campus and it
has not formed the basis for the award of any Degree/Fellowship or other similar title to any candidate
of any University.
LIST OF CONTENTS
SL. NO. PARTICULARS PAGE NO.
1 INTRODUCTION
2 INDUSTRY PROFILE
3 COMPANY PROFILE
4 REVIEW OF LITERATURE
5 DATA ANALYSIS & INTERPRETATION
6 FINDINGS, SUGGESTIONS & CONCLUSIONS
LIST OF TABLES
TABLE NO. TITLE PAGE NO.
1 GROSS PROFIT RATIO
2 NET PROFIT RATIO
3 OPERATING PROFIT RATIO
4 RETURN ON TOTAL ASSETS
5 EARNINGS PER SHARE
6 DEBTORS TURNOVER RATIO
7 WORKING CAPITAL TURNOVER RATIO
8 FIXED ASSETS TURNOVER RATIO
9 CAPITAL TURNOVER RATIO
10 OWNED CAPITAL TURNOVER RATIO
11 CURRENT RATIO
12 LIQUID RATIO
LIST OF CHARTS
TABLE NO. TITLE PAGE NO.
1 GROSS PROFIT RATIO
2 NET PROFIT RATIO
3 OPERATING PROFIT RATIO
4 RETURN ON TOTAL ASSETS
5 EARNINGS PER SHARE
6 DEBTORS TURNOVER RATIO
7 WORKING CAPITAL TURNOVER RATIO
8 FIXED ASSETS TURNOVER RATIO
9 CAPITAL TURNOVER RATIO
10 OWNED CAPITAL TURNOVER RATIO
11 CURRENT RATIO
12 LIQUID RATIO
CHAPTERIZATION:
The project report content is divided into 6 main chapters.
Chapter 1 - Introduction
Chapter 2 - Industry Profile
Chapter 3 - Company Profile
Chapter 4 - Review Of Literature
Chapter 5 - Data Analysis & Interpretations
Chapter 6 - Findings, Suggestions & Conclusions
CHAPTER – I: INTRODUCTION
INTRODUCTION
FINANCIAL STATEMENT ANALYSIS
Financial statement analysis (or financial analysis) the process of understanding the risk and profitability of a firm
(business, sub-business or project) through analysis of reported financial information, by using different accounting
tools and techniques.
The focus of financial analysis is on key figures in the financial statements and the significant relationship that
exists between them. The analysis of financial statements is a process of evaluating the relationship between
component parts of financial statements to obtain a better understanding of the firm's position and performance.
Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and adjustments
of measurement errors, and 3) financial ratio analysis on the basis of reformulated and adjusted financial
statements. The first two steps are often dropped in practice, meaning that financial ratios are just calculated on
the basis of the reported numbers, perhaps with some adjustments. Financial statement analysis is the foundation
for evaluating and pricing credit risk and for doing fundamental company valuation.
Financial statement analysis typically starts with reformulating the reported financial information. In relation to the
income statement, one common reformulation is to divide reported items into recurring or normal items and non-
recurring or special items. In this way, earnings could be separated into normal or core earnings and transitory
earnings. The idea is that normal earnings are more permanent and hence more relevant for prediction and
valuation. Normal earnings are also separated into net operational profit after taxes (NOPAT) and net financial
costs. The balance sheet is grouped, for example, in net operating assets (NOA), net financial debt and equity.
Analysis and adjustment of measurement errors question the quality of the reported accounting numbers. The
reported numbers can for example be a bad or noisy representation of invested capital, for example in terms of
NOA, which means that the return on net operating assets (RNOA) will be a noisy measure of the underlying
profitability (the internal rate of return , IRR). Expensing of R&D is an example when such investment expenditures
are expected to yield future economic benefits, suggesting that R&D creates assets which should have been
capitalized in the balance sheet. An example of an adjustment for measurement errors is when the analyst removes
the R&D expenses from the income statement and put them in the balance sheet. The R&D expenditures are then
replaced by amortization of the R&D capital in the balance sheet. Another example is to adjust the reported
numbers when the analyst suspects earnings management.
Financial ratio analysis should be based on regrouped and adjusted financial statements. Two types of ratio
analysis are performed: 1) Analysis of risk and 2) analysis of profitability:
1. Analysis of risk typically aims at detecting the underlying credit risk of the firm. Risk analysis consists of
liquidity and solvency analysis. Liquidity analysis aims at analyzing whether the firm has enough liquidity to meet
its obligations when they should be paid. A usual technique to analyze illiquidity risk is to focus on ratios such as
the current ratio and interest coverage. Cash flow analysis is also useful. Solvency analysis aims at analyzing
whether the firm is financed so that it is able to recover from a loss or a period of losses. A usual technique to
analyze insolvency risk is to focus on ratios such as the equity in percentage of total capital and other ratios of
capital structure. Based on the risk analysis the analyzed firm could be rated, i.e. given a grade on the riskiness, a
process called synthetic rating.
Ratios of risk such as the current ratio, the interest coverage and the equity percentage have no theoretical
benchmarks. It is therefore common to compare them with the industry average over time. If a firm has a higher
equity ratio than the industry, this is considered less risky than if it is above the average. Similarly, if the equity
ratio increases over time, it is a good sign in relation to insolvency risk.
2.Analysis of profitability refers to the analysis of return on capital, for example return on equity, ROE, defined as
earnings divided by average equity. Return on equity, ROE, could be decomposed: ROE = RNOA + (RNOA -
NFIR) * NFD/E, where RNOA is return on net operating assets, NFIR is the net financial interest rate, NFD is
net financial debt and E is equity. In this way, the sources of ROE could be clarified.
Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital - also called the required
return on capital. For example, the return on equity, ROE, could be compared with the required return on equity,
kE, as estimated, for example, by the capital asset pricing model.If ROE < kE (or RNOA > WACC, where WACC
is the weighted average cost of capital), then the firm is economically profitable at any given time over the period
of ratio analysis. The firm creates values for its owners.
Insights from financial statement analysis could be used to make forecasts and to evaluate credit risk and value the
firm's equity. For example, if financial statement analysis detects increasing superior performance ROE - kE > 0
over the period of financial statement analysis, then this trend could be extrapolated into the future. But as
economic theory suggests, sooner or later the competitive forces will work - and ROE will be driven toward kE.
Only if the firm has a sustainable competitive advantage, ROE - kE > 0 in "steady state".
DEFINITION OF FINANCIAL STATEMENT ANALYSIS:
The process of reviewing and evaluating a company's financial statements (such as the balance sheet or profit and
loss statement), thereby gaining an understanding of the financial health of the company and enabling more
effective decision making. Financial statements record financial data; however, this information must be evaluated
through financial statement analysis to become more useful to investors, shareholders, managers and other
interested parties.
OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS:
1.Assessment Of Past Performance -
Past performance is a good indicator of future performance. Investors or creditors are interested
in the trend of past sales, cost of good sold, operating expenses, net income, cash flows and return on
investment. These trends offer a means for judging management's past performance and are possible
indicators of future performance.
2.Assessment of current position -
Financial statement analysis shows the current position of the firm in terms of the types of assets
owned by a business firm and the different liabilities due against the enterprise.
3.Prediction of profitability and growth prospects -
Financial statement analysis helps in assessing and predicting the earning prospects and growth rates
in earning which are used by investors while comparing investment alternatives and other users in judging
earning potential of business enterprise.
4.Prediction of bankruptcy and failure -
Financial statement analysis is an important tool in assessing and predicting bankruptcy andprobability of
business failure.
5. Assessment of the operational efficiency -
Financial statement analysis helps to assess the operational efficiency of the management of a
company. The actual performance of the firm which are revealed in the financial statements can be compared
with some standards set earlier and the deviation of any between standards and actual performance can be
used as the indicator of efficiency of the management.
FEATURES OF FINANCIAL STATEMENT ANALYSIS:
1.The financial statements should be relevant for the purpose for which they are prepared.
Unnecessary and confusing disclosures should be avoided and all those that are relevant and material should be
reported to the public.
2.They should be easily comparable with previous statements or with those of similar concerns or
industry, comparability increases the utility of financial statements.
3.They should be prepared in a classified form so that a better and meaningful analysis could be made.
4. The financial statements should be prepared and presented at the right time. Undue delay in their
preparation would reduce the significance and utility of these statements.
ADVANTAGES OF FINANCIAL STATEMENT ANALYSIS:
The different advantages of financial statement analysis are listed below:
?The most important benefit if financial statement analysis is that it provides an idea to the investors about
deciding on investing their funds in a particular company.
?Another advantage of financial statement analysis is that regulatory authorities like IASB can ensure the company
following the required accounting standards.
?Financial statement analysis is helpful to the government agencies in analyzing the taxation owed to the firm.
?Above all, the company is able to analyze its own performance over a specific time period.
Limitations of financial statement analysis
In spite of financial statement analysis being a highly useful tool, it also features some limitations, including
comparability of financial data and the need to look beyond ratios. Although comparisons between two companies can
provide valuable clues about a company’s financial health, alas, the differences between companies’ accounting methods
make it, sometimes, difficult to compare the data of the two.
Besides, many a times, sufficient data are on hand in the form of foot notes to the financial statements so as to restate
data to a comparable basis. Or else, the analyst should remember the lack of data comparability before reaching any
clear-cut conclusion. However, even with this limitation, comparisons between the key ratios of two companies along
with industry averages often propose avenues for further investigation.
TECHNIQUES OR TOOLS USED FOR THE ANALYSIS OF FINANCIAL STATEMENTS:
1. Ratio Analysis
2. Cash Flow Statements
3. Fund Flow Statements
4. Comparative Statements
5. Common Size Statements
6. Net Working Capital Analysis
7. Trend Analysis
STATEMENT OF THE PROBLEM:
The main aim of this study is to analyse the financial status and performance of Lotte India Corporation for
the past 5 years.
1. To analyse the liquidity solvency position of the firm.
2. To Compare the annual income of Lotte India Coporation to ascertain whether it satisfies the
investors, dividends and the rate of return expectations which supports the growth of the company.
3. To ascertain whether the company is capable of covering Current liabilities quickly with Current
assets secure creditors and shareholdes against losses.
4. To ascertain the Trend percent of Lotte India with regard to 5 years.
SCOPE OF THE STUDY:
1.The study helps in determining the short-term and Long-term financial decisions.
2.To meet routine cash requirements to finance the transactions.
3.To find the strategies for efficient management of cash.
4. It reveals the liquidity position of the firm by highlighting the various sources of cash and its uses.
NEED AND SIGNIFICANCE OF THE STUDY:
1. To determine the overall financial status of the firm.
2. To judge the earning capacity or profitability of the firm.
3. To identify the basic forces influencing the cash management of the firm.
4. To make comparative studies between various firms.
5. To analyse the credit worthiness of the firm.
6. To understand the relationship maintained with the trade creditors and the debtors of the firm.
OBJECTIVS OF THE STUDY:
1. PRIMARY OBJECTIVES:
The main objective of the study is to analyse and interpret financial statements of Lotte India
with Ratio Analysis.
SECONDARY OBJECTIVE:
(i) To analyse the liquidity solvency position of the firm.
(ii) To study the short -term and Long- term solvency ratios of the firm.
(iii) To study the relationships between various items or groups of items i the financial statements.
(iv) To assess the factors influencing the financial position of the company.
(v) To compute the profitability position of the firm.
(vi) To give valuable suggestions to improve the financial position of the firm.
CHAPTER – II : INDUSTRY PROFILE
INDUSTRY PROFILE
INTRODUCTION:
Confectionery has grown from the ancient delights to a US$21 billion industry in the United states. The U.S
confectionery market leader Hershey Foods Corporation also has grown from a small chocolate company in the
countryside of Pennsylvania to the leader of the North American markets. In recent years confectionery markets have
been growing worldwide. However, Hershey is experiencing difficulty in taking advantage of global growth. As a result of
this concern, Hershey needs to re-evaluate its strategies in order to seize the present global opportunities
HISTORY OF CONFECTIONERY:
Human's desire for something sweet to at goes back to primitive times and has grown into $21
billion confectionery industry in the United States. The industry produces a universal food products using
ingredients from many parts of the world. From the cocoa tree plantations of tropical climates, to the cane
and beet sugar field, to the confides of the middle west, to the fruit and trees in many parts of the world, to
the roots and herbs area, to the dairy lands in most countries,candy strongly affects agricultural producers
and their markets. Modern machines, skilled workers and executive, scientific and distributive techniques
combine to meet the great demand for the confectionery products.
The recorded history of confectionery can be traced back to ancient Egyptians, Romans, Greeks
and chinese. Nevetheless, the confections made at the time would seem strange compared to modern candies.
Ancient Egyptians made candy from flour and crude starch, sweetened with honey, with additions of spices
and sweets. By combining honey with flour paste and fruits, ancient Romans and Greeks also enjoyed their
confections. Records date back to ancient china show that people made a variety of hard candy by boiling
barely and water to a hard consistency,spinning it into sticks and then rolling these in toasted seasame
seeds. At that time, candy was a luxurious treat that only a few could afford.
The increased availability of sugar transformed candy from an ancient delight into a major
modern industry producing a relatively low cost food that millions of people could enjoy. Candy evolved from
ancient forms produced in ancient origins to a modern industry centered in Europe. Venice has acquired
sugar through trade with the east. In the 13
th
century, venetians had a virtual monoploy on the European
trade, they were also the first to first to prove sugar-refining methods. Eventually refineries sprang up in
Italy, Germany, Spain, England and Brazil.
The first confectioners in America were the Dutch backers of New Amsterdam, later called New
York. At the beginning of 20
th
century, there were about 1000 manufacturers in the United States. They
employed 27000 workers and the total annual sales were $60,000,000. Equipment until the 1900s consisted
chiefly of kettles, hand cutters, starch boards,shallow trays and hand printers. The majority of these were
quite primitive; the inroduction of European candy manufacturing inventions modernized the candy industry
in the United states. These inventions enabled mass production of candy at alower cost, improved a sanitary
conditions of candy manufacturing by eliminating the work previously done by hand and increased production
to meet the everincreasing demand for candy.
World war I fostered mass production of candy and revolutionized the industry. Almost every
candy making process, from the preparation of raw materials to the packaging of the final product, was
transformed to continuous oepration. Candy became a nationally recognized food and its evaluation from a
mere delicacy to a world commodity wa complete. World war II also fostered many improvements in the candy
flavours and freshness was developed and is still in general use of advanced stages of development today.
Although it would be impossible to present an exact history, for sake of clarity, this timeline
illustrates the pattern at which the candy industry developed in theUnited states from 1800's onward.
As you will see, many candies and their founding companies have come and gone but it is
interesting to note that sixty five (65) percent of American candy bars have been around for longer than
sixty (60) years.
1800s
?1848 – The first branded American Chewing Gum is produced by John Curtis. It is made from tree resin and
is called State of Maine Spruce Gum.
?1854 – The first packaged box of Whitman's chocolate debuts thus being the advent of boxed chocolates as
we know them today.
?1868 – Richard cadbury inroduces the first Valentine's Day box of chocolates.
?1879 – William H. Thompson finds thompson chocolate with the goal to “make only quality products”.
?1880 – Wunderle Candy company creates candy corn. In 1898, Goelitz confectionery Company began
making candy corn and has made this Halloween favourite longer than any other company. It remains one of
the best selling Halloween candies of all times.
?1890 – The Piedmont Candy Company, manufacturer of Red bird peppermint puffs is founded in Lexington,
north Carolina.
?1891 – Claus Doscher opens Doscher Brothers Confectioners and a few years later, after tasting wrapped
taffy in the South of France, introduces French Chews.
?1893 – Milton Hershey visits the famed World's Columbian Exposition in chicago and watches chocolate
being manufactured. Although the equipment is manufactured in Germany, he purchases it at great expense
and ships it to his factory in pennsylvania.
?1893 – William Wrigley, Jr. introduces juicy Fruit Chewing Gum and Wrigley's Spearmint Chewing Gum.
Company
?1893 – Thomas Richardson, founder of Richardson Brands, introduces Pastel Mints at a department store in
Philadelphia, PA.
?1894 – Milton Hershey creates the first “American” candy bar, although his famous Milk Chocolate Bar
wasn't deducted for another 6 years.
?1896 – Tootsie Rolls debut, introduced by Leo Hirshfield Of New York who named them after his daughter's
nickname, “Tootsie”.
?1899 – The Jenner Manufacturing Company was founded. Forty five years later, the name of the company
was changed to Judson Atkinson.
1900S
(vii) 1900 – A truly seminal year as Milton Hershey introduces a variation of what would
someday become the Hershey's milk chocolate bar.
(viii) 1901 – The King Leo pure peppermint stick candy was developed and trademarked
(ix) 1901 – Multicoloured candy disks called “NECCO wafers” first appear named for the
acronym of the New England confectionery company.
(x) 1902 – New Englamd Confectionery company (NECCO) makes the first conversation hearts
which, to this day, continue to be a Valentine's Day tradition.
(xi) 1904 – Emil Brach starts Brach's Candy. Using $15,000 of his personal savings, he opened
oma candy company a few years prior but it was not a success so he tried again. The first
product was wrapped Caramels which cost a then unheard sum of $.20 per pound.
? 1905 – The Squirrel Brand Company of Massachusetts creates the first peanut bar known as
the Squirrel Nut Zipper. This candy bar was, sadly, discontinued in the late 1980's.
? 1906 – Sprangler Manufacturing Company, now known as Sprangler candy, is founded. The
company originally manufactured baking soda and related products and it wasn't until 1908
that they addedd and candy to their offerings.
? 1906 – Hershey's Milk Chocolate kisses chocolates appear in their familiar silver foil wraps
and a small town in Pennsylvania called Derry Church Changes its name to Hershey to
honour Milton Hershey.
1910S
? 1907 – Flush with the success of the Milk Chocolate Bar, Hershey introduces the beloved
Hershey's Kisses! The original Hershey's kiss was called Silver tops and was sold as
individual units. Sadly, this oversized variation was discontinued in 1931.
? 1908 – Hershey's take the milk chocolate Bar one step further and introduce a version with
Almonds.
? 1911 – Ethel and Frank Mars decide to open a candy company in Tacoma, Washington. This
company soon became Mars Inc which is one of the largest, privately owned candy companies
in the world!
? 1912 – Life savers, the candy named for its ring shaped with the hole in the center is
introduced in peppermint flavour. Twenty two years would pass before the popular five-
flavour roll is introduced.
? 1912 – The Whitman's Sampler box of chocolates is introduced and is the first box of
chocolates to include an index allowing chocolate lovers to specifically choose the candy that
they want to eat.
? 1913 – Goo Goo Clusters, a Southern favourite, was the first bar to combine milk chocolate,
caramel, marshmallow and peanuts.
? 1914 – The Health Bar was introduced by L.S. Health & Sons which is located in Robinson,
Illinois.
? 1917 – Goldenberg Candy Company, located in Philadelphia, PA creates the Goldenberg's
Peanut Chews as a high protein energy ration for troops fighting in World war I although this
candy was not available for retail purchase until 1921. The family remained in control of the
compa ny until the brand was sold to Just Born in 2003.
1920s
? 1920 – Fannie May Candies opens its first retail candy shop in chicago.
? 1920 – Williamson Candy co., introduced O'Henry!
? 1921 – Chuckles – colourful, sugared jelly candies are first made.
? 1921 – Hershey adds automation to the production process and Hershey's kisses are now wrapped by
machine and emblazoned with a small “flag” at the top.
? 1922 – H.B. Reese makes the first peanut butter candy coated with Hershey's Milk Chocolate. This
delicious candy is known as the Reese's Peanut Butter Cup.
? 1922 – Goldenberg's peanut chews, made in Philadelphia, Pennsylvania are introduced and take on a
cult status amongst East Coast candy lovers.
? 1923 – The Baby Ruth candy bar is introduced by curtiss Candy Co. And is named for
President Grover Cleveland's daughter not the famous baseball player.
? 1923 - The Mounds chocolate Bar is offered which includes coconut filling encased in rich
milk chocolate. It was invented by Peter Paul Halijian although it is sold under the trade
name of Peter Paul Mounds as Halijian was too hard tp pronounce.
? 1923 – The Milky Way Candy Bar is introduced by the Frank Mars. The candy bar was
designed to taste like Malted Milk and was one of the first candies to have a nougat center.
? 1923 – Hershey's Kisses become so popular that the Hershey Company registers the name
for federal trademark protection.
? 1925 – Hershey remains on a roll and introduces the first Milk Chocolate Bar with Peanuts.
This candy is called Mr.Goodbar.
? 1925 – Bit-O-Honey the honey-flavoured taffy bar made with bits of almond is first
introduced.
? 1926 – Milk Duds are introduced.
? 1927 – McKeesport Candy Co. Was established. Although not as important as the
introduction of a new candy bar, we couldn't resist including ourselves as we are one of the
oldest wholesale candy companies in the nation!
? 1928 – primrose Candy Company was established with a focus on manufacturing hard
candies.
? 1928 – Health Bars appear, offering chocolate covered toffee. This candy was originally
offered for “home delivery” as was sold by Dairy Salesmen.
? 1928 – An important year for any candy lover as the beloved Reese's Peanut Butter Cups is
introduced. It remains one of the best selling candy bars of all times!
1930s
? 1930 – M&M Mars introduces the Snickers Bar which, to date, remains the best selling
candy bar of all time. It was named after one of the family's beloved horses...
? 1931 – Tootsie Roll Pops are introduced and are considered by some to be the first
“novelty candy” as they combined two candies in one.
? 1931 – A fortunate accident involving Marshmallow at the sifer's Candy Company lead to the
creation of the Valomilk Dips.
? 1932 – M&M Mars introduces the MARS Candy Bar which was renamed Snickers Almond
Crunch in the late 1990's. The formula remains the same with the only differences being the
name!
? 1932 – Charles Howard creates Violet Mints in an industrial loft in New York. The product
was sold on street corners and the company changed its name to C.Howards Company.
? 1932 – Ferrara Pan Candy Company, located in Chicago, introduces Red Hot Cinnamon
candy known as Red Hots.
? 1932 – M&M Mars debuts the 3 Musketeers bar, made as the three-flavour bar featuring
chocolate, vanilla and strawberry nougat. This flavour combination would last for 13 years.
? 1936 – In a break from tradition, William Luden, one of the creators of Cough Drops,
introduces the 5
th
Avenue Candy Bar.
? 1936 – Marpo offers the first non meltable ice cream cone called Marpo “Yum Yum”
Marshmallow Cones.
? 1938 – Hershey offers a candy bar that combines Milk Chocolates with Rice Krispies called
the krackel Bar.
? 1939 – Hershey's Miniatures chocolate bars debut.
? 1939 – Overland Candy Company introduces a chocolate covered malt ball called Giants.
? 1939 – Blommer Chocolate Company opens a huge factory in Chicago, Illinois. This
mammoth operation became the largest chocolate manufacturer in North America.
1940s
? 1940 – Hershey chocolates produces a special chocolate bar called the D Bar which is highly
caloric and has a high melting point. This was designed as a survival ration for soldiers and
was was wrapped in sealed wax paper to ensure that it iwas resistant to poisonuous gas. Its
flavour was bittersweet which was to prevent it from being consumed too quickly.
? 1941 – Bruce Murrie, the President of Hershey Chocolates, joins forces with Forrest Mars
and opens a company called M&M Ltd.
? 1941 - “M&M's” plain Chocolate candies are introduced in response to depressed
chocolate sales in summer. Fifty-nine years later, M&M mars shortened the name to M&M's.
? 1942-1945 – Working hard to maintain high wartime morale, female employees at Whitman's
candy Company secretly slipped notes to soldiers in boxes of Whitman's chocolate samplers
destined for military shipment. The notes resulted in several long-term friendship and even
a few marriages.
? 1945 – M&M Mars decides to change the formula in the 3 Musketeers Bar to all Chocolate.
? 1947 – Peter paul introduces the Mounds Bar.
? 1947 – Frankford Candy & Chocolate Company is founded in Philadelphia, PA.
? 1949 – Junior Mints were introduced.
? 1949 – Smarties candy roll wafers are introduced. They are often referred to as “Candy
pills”.
? 1949 – El Bubble Gum Cigars are the first five-cent bubble gum.
? 1949 – Leaf Confectionery changes the name of a popular chocolate covered malted milk
candy from Giants to Whoppers.
1950s
? 1950 – The Annabelle candy Company is founded by Sam Altshuler. The company is named
for his daughter and their first product was the Rocky Road candy Bar.
? 1950 – Bob candy canes, sold under the cris Cringle brand are introduced.
? 1954 – Marshmallow Peeps are introduced by Just Born, Inc. In the shape of Easter chicks.
? 1958 – Candy necklaces, a retro candy classic are introduced.
1960s
? 1960 – In an effort to create a healthy candy product, M&M Mars Starburst Fruit Chews are
introduced and later fortified with Vitamin C.
? 1960 – Amurol Confections introduce the first sugar free bubble gum called Blammo.
? 1960 – Ferrara Pan Candy Company introduces Lemonheads and later in the year, heads,
Grape and Orange Heads.
? 1962 – Hershey chocolates offers Hershey's Kisses in coloured wrappers .
? 1963 – Sweetarts are introduced.
? 1963 – An important merger occurs when H.B. Reese Company is acquired by Hershey
Chocolate Company for the princely sum of $23 million dollars.
? 1966 – The Belgian choclatier Godiva is acquired by the campbell Soup Company.
? 1968 – Zotz is released and was one of the first “sour fizzy” candies.
1970s
? 1970 – M&M Mars introduces the Snickers Munch Bar.
? 1970 - Reese's Peanut Butter Cups become so popular that Hershey Food Corporation has
to double the size of its production in order to meet worldwide demand.
? 1973 – Chocolate has become so popular that Hershey Foods Corporation opens the first
candy related theme park known as Hershey's chocolate World.
? 1973 – Hershey's Foods becomes the first candy company to offer ingredients and nutritional
information on their wrapper.
? 1976 – Herman Geolitz Company introduces the first individually flavoured Jelly Bean known
as Jelly Bellies.
? 1976 – Hershey Foods decides to tweak the Reese's Peanut Butter Cup and offers a version
with peanuts called Reese's Crunchy.
? 1977 – Hershey Foods introduces a new variation of the “Great American chocolate Bar”
called Golden almond.
? 1978 – Fuelled by the overwhelming success of Reese Peanut Butter Cups, Hershey's
introduces Reese's Pieces.
? 1979 – M&M Mars introduces the Twix Caramel Cookie Candy Bar.
1980s
? 1980 – Herman Geolitz Company introduces the first American-made gummi bears and
gummi worms. Traditionally, these candies were imported from Europe.
? 1981 – Fuelled by their success in Europe, M&M Mars introduces Skittle Bite size Candies.
? 1983 – Albanese candy is founded with the aim of producing the World's Best Gummi
Products.
? 1988 – Hershey Chocolate Company ia renamed Hershey Chocolate USA.
? 1989 – Hershey Chocolate USA introduces the Symphony Bar which is a combination of
almonds, toffee and milk chocolate.
1990s
? 1990 – Hershey sends 144,000 heat resistant candy bars to soldiers serving in the first Gulf
War. The formula is identical to that which was offered to soldiers in World war Two.
? 1991 – Reese's Peanut Butter Cups continue to be a worldwide favourite and, in response,
the receipe is adjusted adding three times the amount of peanuts.
? 1992 – M&M Mars introduces DOVE Dark Chocolate Bar and DOVE Milk Chocolate Bars.
? 1993 – Hershey chocolate introduces miniature hershey's kisses as well as White Chocolate
Kisses called Hugs.
? 1994 – M&M Mars introduces Starburst Jelly beans.
BIRTH OF MODERN CONFECTIONERY:
Their products are consumed by millions and available from supermarket shelves. Ye Olde
Sweet Shoppe, and in vending machines the world over. But despite its popularity, throughout history the confectionery
industry has sometimes been the subject of criticism – from specific business actions, to being blamed for mass obesity.
Interestingly, the massive confectionery industry we know today had surprisingly humble beginnings and it seems that
the pioneering spirit, ethical reasoning, and the inspirational business awareness of those who founded the three biggest
names in chocolate are all to forgotten.
Heinrich Nestle was born in Germany in 1814. After growing up in ahuge family of fourteen children, he bucked the
trend of going into the glazier business of his father and grandfather before him, and instead concentrated his efforts on
pharmaceutics, taking up an apprenticeship at a local pharmacy for four years in his mid-teens. It was at this time that
he moved to Vevey in switzerland and changed his name to Henri Nestle and soon developed his original product. By
combining flour, malt, sugar and cow's milk he invented the first substitute for mother's milk (inspired by the young
deaths of half his siblings) which, by the 1970s, was selling as far a field as North America. In 1875 he retired and sold
his business choosing to then concentrate on offering small loans to locals in Glion. The company did not adopt
chocolate as another product until the 1920s.
Interestingly, john Cadbury in the UK began to find his feet at a similar time. Born in 1801 and coming from a
quaker background, Cadbury couldn't study at university nor join the army and so also strted an apprenticeship. After
spending some time dealing tea in leeds he moved back to his hometown, Brimingham, and opened a small grocery store
and by 1831 he had enough money to switch his focus to establishing his own cocoa/drinking chocolate factory. Like
Nestle's reasoning for the invention of baby formula, Cadbury chose to focus his efforts on chocolate as a viable
alternative to what he considered the major reason for the social ills of the country, alcohol. Today, the district around
Bourneville remains dry in honour of Cadbury's opposition to alcohol.
Franklin Clarence Mar's introduction to the manufacture of chocolate came when he was a child in Minnesota in
the late 1800s. Whilst suffering from Polio, his mother taught him to hand dip chocolate, and by the time he was 19, his
entrepreneurial spirit and love of candy inspired him to sell molasses chips in the local neighbourhood. By 1910, Mars
was selling confectionery wholesale and in 1920 founded the Mar-O-Bar Co. Which released the Milky Way. The milky
Way (incidentally was his son, Forrest's idea) quickly became the best- selling chocolate bar in the US, and they moved
again to Chicago in 1929. Here they developed the Snickers and M&M as his son took the helm. Mars moved into a
ranch estate with a horse racing track and barns, and lived out his house until 1950.
CURRENT SCENARIO OF CONFECTIONERY INDUSTRY
In recent years, confectionery markets have been growing worldwide. Opportunities range from the
mature markets of western European and the US to the emerging markets of Asia pacific, Eastern European and South
America. Per Capita consumption in the US has risen from 17.7 pounds in 1974 to 25.5 pounds in 1997 (US department
of commerce). From 1993 to 1997, the total growth rate of candy sales was about 17.5%. In 1997 confectionery sales
growth doubled that of the overall food market's growth.
Internationally between 1993 and 1997, Vietnam (10.5%), Brazil ( 9.1%), Ireland (5.8%), China (5.7%), and
the czech Republic (5.4%) were the leading per capita confectionery consumption growth markets in volume. Data-
monitor, a strategic market analysis company, forecast that the confectionery trading pattern will expand futher into
regions such as Eastern Europe, Brazil and China.
Ranked first among snack categories and third among food categories in 1998, the US confectionery industry
is a highly concentrated industry which is becoming increasingly global. Eight firms account for 85% of market share.
Among these firms several of the leading confectionery companies are foreign owned, but maintain or own manufacturing
facilities in the United States. In 1997, the Uschocolate manufactures trade deficit increased by 52% to $44 billion
despite domestic chocolate exporters increasing their global presence by 10%.
CONFECTIONERY INDUSTRY – RECENT HISTORY AND PREDICTIONS
The confectionery industry, despite an economy in recession, is ascending in sales and popularity.
Even with a health cautious world, chocolate, non-chocolate and gum sales are all predicted to rise as years pass by.
However, the odds would seem to be against theconfectionery industry, yet profit margins are expected to grow. With
chocolate on top of the confectionery empire, it takes in the majority of all confectionery sales yearly. Non-chocolate
trails behind but still brings in a good share of the confectionery sales. Gum is responsilble for the smallest share in
sales.
Chocolate sales in 2007 were reported as being just 80 billion dollars. Majority of the sales came from
chocolates counter lines, which are accountable for over 25% of chocolate sales. Tablets, on the other hand, are
responsible for a decent share of the chocolate sales. Tablets sold 18.6 while boxed assortments sold a close 15.1,
leaving seasonal and others accounting for the remaining sales. While all types of chocolate have seen an increase from
2008-2013. However, sale of tablet and other types of chocolate are predicted to not have as substantial of an increase
as seen in 2007-2008.
The non-chocolate industry in 2007 had seen sales close to 45 billion dollars, while the 2008 sales came
very close to 49 billion dollars. Having seen a percentage increase in sales from 2007-2008, the projected future for
2008-2013 is to also see an increase in sales in many of various non-chocolate types. Again, just like the chocolate
industry, this increase is much smaller than before. For example in 2007-2008, boiled sweets saw a percentage increase
of 11.9% in sales, but it is predicted that from 2008-2013, the percentage increase will only be as little as 3.2%, which is
shocking as this increase is over a 5 year period compared to 2007-2008's 2 year period. The economic recession may
have played a huge part in this as consumers take their focus away from secondary confectionery items such as non-
chocolate and more towards the more popular chocolate industry.
The gum industry coughs uo a mere 15% of all confectionery sales, but is a major candidate in the
expansion of all confectionery sales. In 2007, chewing and bubble gum made a total of 20.1 billion dollars total. The year
after, gum made 22.5 billion, which is an 11.9% increase. Nevertheless, most of the sales increase is from the chewing
gum half of the gum industry. In 2007, chewing gum made 17.3 while in 2008 it made 19.7 billion. Bubble gum, however,
went from 2.7 to 2.8 billion dollars. These sales figures show where companies should concentrate sales to expand
profit.
Despite the odds, sales are increasing every year. In 2007, total confectionery sales equalled 141.2, and in
year after sales increased to 158.5 billion dollars. This substantial gain is expected to repeat, and by year 2013, total
sales are going to reach above 180 billion dollars. Without a doubt, the confectionery industry can be expected to be
successful for years to come. Wholesale candy and candy store sales should stay strong despite increasing new players
in the market.
INDIAN CONFECTIONERY INDUSTRY
The confectionery market in India has undergone major changes and growth since the opening up of the economy
and liberalization of the investment regime in 1991. India became an attractive place for foreign investment and several
large multinational companies entered the market for confectionery products. This resulted in its steady growth and
gradual transformation from a commodity market to a branded products market dominated by multinational companies.
Despite its vast population, India's confectionery market is still very small. It is valued at close to US $450
million and is estimated to be 138,000 MT. Suagr confectioneries (candies and toffees) has the largest share (50%),
followed by chocolate (16%), and bubble gum (10%).
Over the 1998-2003 periods, confectionery retail sales have grown more than
55% in value terms and 46% in volume terms, at an average annual rate of 9.5% and 8% respectively. There is a clear
trend of faster sales growth in value terms, indicating that consumers are increasingly ready to pay a premium for higher
value products. The chocolate segment is the fastest growing in value terms (9.8% average annual growth rate) closely
followed by the gum segment (9.5%). in volume terms gums grow at the fastest rate (8.5%), followed by chocolate and
sugar confectionery (7.8% each). At the same time, to put these figures in some perspective, while retail sales for 2003
in india are estimated to have been US $562 million (Rs.26,220 million), US $26 billion worth of confectionery products
were sold in the US. In
volume terms these figures were 127,000 MT in india and 3.3 million MT in the US.
While growth rates in general look rather healthy, and all agree that there ia still large potential for further
growth of the confectionery sector in India, many individual players have experienced slower growth in their sales over
the last few years. This trend is partly attributed to the economic slowdown that india experienced in 2000-2002 and
resulting decline in consumer spending. Confectionery products are impulse purchase which would be among the first to
be cut out. Companies are fighting this trnd by broadening theit consumer base from primarily children and teenagers to
adults as well. Most of the large multinationals active in india are also actively marketing to rural india where
penetration is lower than the average for the country.
The organized confectioney segment in indian segment is dominated by the multinational companies; however,
domestic players are increasingly finding a prominent position in the market leader followed by perfectti Van Melle India
Ltd. And Nestle India Ltd. Other important players are Lotte India Ltd, Nutrine Confectionery Co Pvt Ltd, Candico
india ltd, Parle Products Pvt Ltd, wrngley India Pvt Ltd, Gujarat Coop., Milk Marketing Federation, ITC Foods,
Hindustan Lever ltd, CAMPCO Ltd, and Lotus chocolates Co Ltd.
Since import restrictions were eased in 2001, imports of confectionery products have grown
rapidly, although they remain tiny and only a small part of the overall confectionery market. Put into
context, india's total imports for 2002-03 and 2003-04, combined are less than 1% by volume and
value of US confectionery imports in 2003 alone.
Retail chocolates and sugar confectionery account for the greatest share of total
confectionery imported into india. In 2003-04, imports of retail chocolate totalled close to US $5.7
million. Imports of sugar confectionery fell close behind, totalling US $3.3 million, but registered a
growth rate of 100% from the previos year. Imports of bulk chocolate and chewing gum remained
very small at roughly US $5,00,000 and US $400,000, respectively. In addition to the regular import
channels, indian also has significant gray imports. As a result, actual imports are probably larger
than that shown by official statistics. Nevertheless, they remain very small.
In the last two years, Malaysia and Singapore have been the leading supplier of confectionery
to india in terms of both value and volume. In 2003-04, the two countries accounted for more than
20% in value and more than 30% in volume of the total confectionery import maket in india.
However, in the last year, imports from Singapaore have shown decline, particularly in volume term,
while imports from the third largest supplier, the UAE, have grown almost 60% in volume terms and
almost 40% in value terms.
It all began in June 2004, with the erstwhile Parry's Confectionery, part of the Chennai-
based Murugappa group, was bought over by Korea's Lotte India.
This was followed by Godrej Foods & Beverages Limited which acquired Nutrine
Confectionery Company Private Limited in June 2006.
Close to the heels of this deal was a joint venture effort in April 2007, when the Hershey
Company, North America's leading chocolate and confectionery manufacturer, announced the
formation of Godrej Hershey Foods & Beverages Ltd., to manufacture and market confectionery
across the country.
Among the well-known national names are Candico which is engaged in the development of
a range of products.
Naturo Food & Fruit Products Pvt. Ltd in the outskirts of Bangalore is one of the largest
indian confectionery companies known for its innovative fruit based products. Its Fruit bars range
under the brand name 'Naturo' offers a tasty, healthy and appetising fruit snack and is available in
Apple, Mango, Strawbery & orange pure fruit varieties. The fruit bars are manufactured in a captive
and HACCP and BRC ceritified facility is totally natural with no sugar and preservatives added. The
fruit bars are manufactured employing a unique retexturised process to retain the vital nutrients of
the fruits.
Pops Foods Products Private Limited manufactures a range of bubble gums. Central Arecanut
and Cocoa Marketing and Processing Co-operative Ltd.(Campco) based at Mangalore which is
producing chocolate for cadbury- Kraft has noe inked a pact with Karnataka Milk Federation to
manufacture chocolates at its facility. The company Campco produces all types of moulded
chocolates along with semi-finished products like cocoa butter and cocoa powder. “Food research
is open to assess the new product innovation which is a prime factor for the growth of the industry.
At Defence Food Research Laboratory at Mysore, efforts were on to develop a range of
candies and fruit bars for the armed forces stationed in high altitudes.
CHAPTER – III : COMPANY PROFILE
INTRODUCTION :
It's a story born in the age of British Raj, when childern in India found confectionery
hard to come by. It had to be imported from across the seas until the year 1914, When parry's
picked up the gauntlet and pioneered the manufacture of sweets – the first to do so in the country.
Parry's sweets went on to become a household name- a name that people recollect with warmth ans
a smile. Ever since, the Parry's factory was set up in Nellikuppam, in the Cuddalore District of
Tamilnadu in South India. Parry's has become synonymous with Sweets and Confectionery. With the
liking we indians have for sweets are not surprising that this smooth, milky and irresistibly delicious
confectionery is the best gift any child could get. And an obsession with quality ensured that
childern had a choice of nothing but the very best in confectionery.
In the nine decades since, the scenario has undergone a dramatic change. There are a
number of offerings in the market today, each wooing children with a wide array of array of
products. But Parry's still finds a prominent place in the heart of consumers.
Parry's has always stayed at the top, having weathered the variation of change, with our ear
close to the ground – and to the hearts of children, changing, adapting and growing with the times –
But never losing sight of its values traditions and ethics. At the turn of this century, Parry's is
poised on the threshold of greater challenges in a global village, where dynamism and innovation is
the very law of survival.
In the backdrop of india joining the WTO, and the global giants eyeing the Indian Market with
enthusiasm, the company needed to strengthen itself and broaden its base to delight customers
across the country and abroad. With this vision in the mind, Murugappa Group, promoters of
Parry's Confectionery Limited entered in to an agreement with Lotte Confectionery Limited, South
Korea by which the entire shares which Murugappa Group, the founders of Parry's Confectionery
Limited, held was divested to lotte Confectionery Limited – A South Korean Multinational giant.
Lotte Confectionery is the first Company of the Lotte family of Companies founded by Mr.Shin
Kyuk-ho. The three L's in the Lotte emblem stands for Love, Liberty and Life. The Corporate
philosophy and idealism of Lotte is driven by dream of a world full of Love where people care for
each other and respect each other's thoughts. The Lotte Group has presence in Food & Beverages,
Distribution, Tourism and Leisure business; Heavy Chemicals, Construction and Machinery;
Information, Communication and Electronics, Trading and Services apart from Welfare research and
Support services. The Lotte Confectionery Co. Ltd, is the Lotte Group's flagship Company in
Foods and Beverages category. Lotte Confectionery, Korea, was established with 500 employees in
1967 and today it has more than 6000 employees. It has over 500 products produced at 5 large-
scale plants in Korea. Lotte has been actively working towards establishments of overseas branches,
production facilities and has a presence in mor than 70 countries. Lotte Confectionery's annual
Sales are over USD 900 millions apart from Korea, Lotte has overseas investments in production
facilities in China, philippines and Vietnam. Lotte Confectionery's main line products are chewing
gum ( Lotte Xylitol, Lotte Juicy & Fresh, Lotte Spearmint, Lotte Fresh Mint, Flavono, White & E,
Spout Cafe Coffee) Candy, Biscuits, Chocolates, Snacks, Ice cream and health care product.
“The purchase of Lindt would instantly give the Lotte group a global standing within the
confectionery arena, as up until now its acquisitions have been relatively minor players,” said
IldikÓ Szalai, packaged food analyst at Euro monitor International.
Asian group Lotte has publically stated its intention to increase its share of global
confectionery sales by 20 per cent in the next few years. July saw it acquiring the Wedel business in
Poland from Kraft Foods, which it has been forced to sell under European Commission competition
rules following its takeover of Cadbury.
Meanwhile, the acquisition of belgiann firm Guylian in mid-2008 for €105m spring boarded the
Asian conglomerate into the European premium chocolate sector.
“Over 80% of Lotte's sales come from mature markets in Japan and Korea. This group is
looking to grow its confectionery portfolio, and while india or china might may more logistics
expansion target markets, takeover of a significant premium European confectionery asset would
better serve its global growth plans,” added Szalai.
The multinational has its headquarters in Tokyo and has annual sales of approximately $40bn
(€32bn). Founded in 1948 as a chewing gum company, it currently operates in a variety of sectors,
including food and confectionery, retail, travel and tourism, industrial chemicals and construction
and finance.
As the original business, confectionery is at the core of the Lotte Group's operations and its
confectionery portfolio includes leading Asian brands, such as Xylitol, Koala March and Ghana. It is
the largest chewing gum manufacturer in Asia and third largest in the world.
If the decades past are any indication, there's little doubt that even in the coming century,
children grow up with the brands Parry's has established.
MILESTONES
1910-1911 : Parry's acts as agents for M/s Glaze brook steel & Company of UK selling their sweets
in Bombay, Karachi & Kolkata.
Till 1913 : Parry's imports cofectionery from C&E Morton Ltd. UK
1914 : Factory set at Nellikuppam and EID parry starts manufacturing confectionery in a small way.
1920 : Parry sweets develop an “All india reputation for quality sweets”.
1940 : Parrys starts exporting sweets to countries like Africa & Singapore where they were well
accepted.
1941 : Supplies made to Red Cross (about 300 tons) – in aid of war victims.
1954 : Nellikuppam Confectionery plant of EID Parry spun off in to a newly formed company
“Parry's Confectionery Ltd”.
1960 : Period of growth for PCL. Pioneers several new trade practices. First to introduce Indian
made wrapped sweets.
1978 : 100% of all Parry's sweets are machine wrapped.
1981 : Murugappa Group takes over Parrys.
1982 : Unit at Maraimalai Nagar near Chennai opens for packing small consumer packs.
1983 : Coco Products and Beverages Limited taken over by Parrys.
1986 : PCL developed its own IT Division – and undertakes computerisation. PCL takes over the
biscuits division that was a part of Parry & Co then.
1987 : Modernization takes place at Nellikuppam once again.
1987 : Maraimalai Nagar plant starts manufacturing confectionery to meet growing demand.
1988 : Shift from the “king of sweets” to focus on the Brands Commercial became product
oriented.
1992 : PCL Company crosses the Rs.500 million marks. Nellikuppam crosses 800 tonne production.
1993 : R & D center opened at Manapakkam. CPBL stops cocoa processing totally and is into full-
fledged production of confectionery.
1995 : Establishes C & F Agents across the country.
1996 : State-of-art Manufacturing facility established by modernization the entire. Plant.
2003: Nellikuppam Plant gets the certifications from BVQI-Bureau VERTITAS Quality International
for its best Quality Management system, Evironmental Management System and Food Safety
management Sysytem.
? ISO 9001:2001
? ISO 14001:1996
? HACCP:2002 Version
2004: Parry confectionery is now completely transformed into Lotte India Corporation ltd.
BUSINESS:
Lotte Group consists of over 50 business units employing 38,000 people engaged in
such diverse industries as candy manufacturing, beverages, hotels, fast food, retail, financial
services, heavy chemicals, electronics, IT, construction, publishing and entertainment. Lotte has
major operations in Japan where its head office is located in South korea, China, Philippines,
Thailand, Indonesia, Vietnam, India, USA and Russia and continues to expand. Today, lotte is the
largest candy/chewing gum manufacturer in both Japan and South Korea and is South Korea's 5
th
largest conglomerate.
Lotte's corporate headquarters are located in Tokyo, with offices also in Seoul and Beijing.
According to the company's Korean website, Lotte of korea had 30 trillion won in sales in 2005.
Lotte of Japan employs 3,600 persons and operates 5 production facilities, 7 branch offices, and a
research centre in saitama. The company's core business focus in Japan is the production and sale
of chewing gum, chocolate, biscuits, beverages, candy, ice cream and Lotteria while it focuses on
lotte Department Store, Lotte cinema, Lotte Hote, Lotte Chilsung and Lotte Confectionery.
In addition to candy and chewing gum, Lotte also operates the Lotteria chain of fast food
restaurants, Lotte Hotel, the Lotte Cinema chain of Cineplex's and lotte world in Seoul, one of the
world's largest indoor theme parks. Lotte also owns professional baseball teams – the Chiba Lotte
Marines in Japan (1971 – present) and Lotte Giants in Busan, South Korea (1982 – present).
INCORPORATION OF LOTTE CONFECTIONERY:
Lotte India Corporation limited is a subsidiary of Lotte confectionery company ltd., Korea,
which is a US $1.5 billion company. In the backdrop of india joining the WTO, and the global giants
eyeing the Indian Market with enthusiasm, the company needed to strengthen itself and broden its
base to delight customers across the country and abroad.
With this visionin the mind, on Jan 17, 2004 lotte confectionery Limited, South Korea entered
in to an agreement with parry's confectionery limited owned by Murugappa Group, by buying 60.39
per cent stake in, Parry's Confectionery Ltd (PCL) for rs 64.47 crore at a rate of 283.12 per share.
Latter lotte make an open offer to acquire another 20 per cent at Rs.283.25 per share.
Lotte has invited the Murugappa group to appoint one representative on the board of the new
company, which they had accepted. It will continue with the parry's brand for the next five years
and will pay EID parry a royalty of Rs.5 lakh per annum. After that, the Korean company will
introduce its brand in the indian market.
Lotte now has plants (which was previously held by PCL) in Nellikuppam (Tamil Nadu), Kolanchery
(kerala), Sangli and Nasik (Maharastra). It has over 25 types of candies and toffes and makes brands
such as Coffee Bite, Lacto King, Caramilk and Coconut Punch.
Lotte India Corporation Ltd is a significant player in the Indian confectionery market especially in
sugar boiled confectionery business in India and is engaged in the manufacture and marketing of
toffees, hard-boiled confectionery, chewing gum and bubble gum.
Lotte India corporation Ltd products are well established across the indian market. Some of our
leading brands are coffy bite, lacto king, caramilk, 'spout' chewing gum, and chill pilz.
The company launched choco pie and xylitol during the previous year across the country and has
received a very positive response. The company aims to be a dominant player and has received a
very positive response. The company aims to be a dominant player in fun food business in the long
run. The company caters to the market through its own manufcaturing facility located in Tamil Nadu
with an all india distribution network and also through outsourcing units across india.
FINANCE DEPARTMENT CHART OF LOTTE INDIA CORPORATION LIMITED
COMPANY PERFORMANCE:
The company witnessed a drop in its sale in the face of sluggish markets and lower exports.
Due to enhanced competitive activity levels, launch of new brands of gums and stagnant markets
and due to inflationaryconditions, the company has had to incur significantly higher advertisement
amount and sales promotion expenditure compared to previous year. Implementation of VAT in
kerala state also severely affected the operations.
Despite a steep increase in price of critical raw materials like liquid glucose, vanaspathi,
milk etc. The company has managed to sustain its margin through various strategic measures and
very focused cost reduction initiatives. During the year the company launched new products like
coffy bite krunch, king's ransom and variants of eclairs viz, strawberry, mango and mint for which
the market response has been quite encouraging. To enhance the product image, the company has
also improved the packaging for majority of its key products. With support form its parent company,
Lotte India Corporation ltd., Korea and access to their wider product portfolio, the company is
confident of achieving its growth targets, while sustaining its profit margins.
The company has documented procedures and controls in respect of critical operations,
which are reviewed by the internal audit function and audit committee periodically. During the year,
the company successfully concluded an overdue long-term settlement with the Nellikuppam factory
workers union, which has resulted in a one-time lump sum payment of Rs.25 lakh as ex-gratia. The
management has decided not to proceed with the rights issue and is looking at alternative options to
fund the new project.
A number of HR development initiatives in the form of training programmes and focused
skill development programmes have been implemented during the year based on the business and job
requirements. In 2007, the total numb er of employees was 542 whereas on March 31
st
2008, the
HEAD FINANCE
FINANCE MANAGER
EXECUTIVE
total number of employees in the organization was 572.
MANUFACTURING FACILITIES OF LOTTE
A state of the art manufacturing plant is at Nellikuppam. LOTTE
India's manufacturing facility is located at Nellikuppam, South Arcot
District, Tamil Nadu, which is in the southern part of India. The factory
is housed in Buildings constructed in the British era; but refurnished
inside to accomodate the state of the art equipments.
Apart from having the own factory at Nellikuppam, Lotte
India also has dedicated Sub- Contracting in units at Kollenchery,
Kozhikode in Kerala, Sangli in Maharashtra, Nemam and Sholavaram in
Chennai.
All the products are manufactured under the most hygienic conditions.
Great care is exercised in the selection and quality control of Raw Materials and packing materials.
Rigid quality controls are implemented at every stage of production process. Every batch of
production is checked thoroughly using modern equipments.
The factory at Nellikuppam has been awarded with ISO 14001:1996 and HACCP awards by BVQI.
HACCP
Food Safety Management System
Hazard Analysis Critical Control Point(HACCP) is a preventive system of food
control. It involves examining and analyzing every stage of a food-releated operation to identify and
asses hazards; determining the 'critical control points' at which action is required to control the
identified hazards; establishing the critical limits that must be met at, and procedures to monitor,
each critical control point; establishing corrective procedures when a deviation is identified by
monitoring; documentation of the HACCP plan and verification procedures to establish that it is
working correctly.
HACCP Policy
We are committed to provide safe products to our customers at all times, we shall trive to
achieve this through,
? Practicing Systems & Procedures as per HACCP requirements.
? Implement Control measures to ensure that the products are free from physical, Chemical
and Microbiological hazards.
? Continuous improvements through training activities.
? Adherence to Good Manufacturing practices and Good Hygiene Practices.
Quality Policy
“ We at Lotte India corporation Limited, endeavour to provide our products with
appropriate quality at right time and at an affordable cost.
Towards this we would:
? Continually improve our products and processes.
? Educate, train and develop all our employees for enhancing their skills, knowledge and
quality of work life.
? Provide safe products to our customers.
? Adhere to good manufacturing practices.
ISO 9001:2000 specifies the requirements for a quality management system where an organiation:
? Needs to demonstarte its ability to consistently provide product that meets customer and
applicable regulatory requirements, and
? Aims to enhance customer staisfaction through the effective application of the system,
including processes for continual improvement of the system and the assurance of conformity
to customer and applicable requirements.
? It is now the only standard in the ISO 9000 family against whose requirements the quality
system will be certified by an external agency. The ISO 9001:2000 certification signifies a
global benchmark in customer satisfaction, product quality and leads to significant reduction
in defects levels. The standard recognizes that the word “product” applies to services,
processed material, hardware and software intended for or required bt the customer.
EVIRONMENTAL POLICY
Environmental Management Systems
ISO 14001:1996
Environmental management is a tool designed to assist an organization to remain in touch
with the environmental interactions and consequential impacts of its activities and poducts. It
provides the organization with programs and procedures to achieve due diligence in meeting
regulatory requirements. Its also promotes continual improvement performance.
An environmental management system is essentially a management framework to ensure you
evaluate how your business impacts the environment, know what impacts are significant, and
processes in place to minimize the significant environmental impacts.
The basic element of our environmental management system is enabling our organization to :
Establish an appropriate environmental policy;
? Identify its most significant environmental impacts;
? Identify relevant legislative, regulatory and industry specific requirements;
? set appropriate environmntal objectives and targets;
? Establish programs to implement the environmental policy and achieve objectives and
targets, and;
? Continuously improve the environmental performance through improvement of the EMS.
Organizations can experience a number of benefits from implementing an effective
environmental management system, such as:
? Preventive of pollution.
? Reduction of consumption of materials and energy.
? Limited liability by providing evidence of due diligence.
? Improved access to capital.
? Improved industry/government relations.
? May reduce insurance costs.
? Improved public relations.
Our Environmental Policy
We are committed to the society we live in and it is our endeavour to improve continually the
environment around ua by -
? Ensuring Zero discharge of effluents and developing a green belt to improve our
environment.
? Adhering to the emission norms to protect the quality of ambient air.
? Focusing on conservation of energy and seeking opportunities for using alternative and
renewable energy sources.
? Imparting awareness on the need for environmental protection to the people in the
neighbourhood.
? Adhering to all statutory and regulatory requirements.
DISTRIBUTION NETWORK OF LOTTE INDIA CORPORATION:
Transportation investments often have direct effects on the spatial distribution of a
region or country's population and economic activity. Improved access to employment centres',
decreases in the travel time of trips and changes in the distribution of economic centres affect the
location decisions of people and businesses.
FACTORIES:
Shkb
DISTRIBUTION CENTRE:
Nemam
Nellikuppa
m
Sangli Kollenecher
y
kozhikod
e
Sholavara
m
Centralized Distribution
Centre
CFA'S
CHAPTER – IV : REVIEW OF LITERATURE
North zone
Delhi
Ghaziabad
Lucknow
Ambala
Dehradun
Jammu
Parwanoo
Zirakhpur
Jaipur
East Zone
Kolkata
Siliguri
Guwahathi
Patna
Ranchi
Cuttack
West Zone
Bhiwandi
Nagpur
Pune
Goa
Indore
Ahmadabad
South Zone
Chennai
Trichy
Salem
Hyderabad
Vijayawada
Palaghat
Dharwad
Bangalore
FINANCAL STATEMENT ANALYSIS:
Financial statement analysis can be referred as a process of understanding the risk and
profitability of a company by analyzing reported financial info, especially annual and quarterly reports. Putting
another way, financial statement analysis is a study about accounting ratios among various items included in
the balance sheet. These ratios include asset utilization ratios, profitability ratios, leverage ratios, liquidity
ratios, and valuation ratios. Moreover, financial statement analysis is a quantifying method for determining
the past, current, and prospective performance of a company.
SOME IMPORTANT METHODS USED TO DETERMINE THE FINANCIAL STATEMENTS:
1.Ratio Analysis
2.Comparative Financial Statements
3.Common size financial Statements
4.Trend Analysis
REVIEWS OF PREVIOUS RESEARCHES RELATED TO THE STUDY:
HORRIGAN (1968)- Says the history of financial statement analysis dates far back to the end of the previous century
However, the modern, quantitative analysis has developed into its various segments during the last two decades with
the advent of the electronic data processing techniques. The empiricist emphasis in the research has given rise to
several, often only loosely related research trends in quantitative financial statement analysis. Theoretical approaches
have also been developed, but not always in close interaction with the empirical research.
LIVINGSTONE & SALAMON (1970) - build on Solomon's model and conduct a simulation analysis of the ARR-
IRR relationship by extending the assumptions of the previous models into more general cases. They observed under
their assumptions that ARR shows a dampening cyclical behavior determined by the project life-spans, pattern of cash
flows generated by the projects making up the firm, the reinvestment rate, and the level or IRR. They also include the
effect of growth. McHugh (1976) and Livingstone and Van Breda (1976) have an exchange of views about the
mathematical derivations and the generality of the results of Livingstone and Salamon (1970).
STAUFFER (1971) - presents a generalized analysis of the ARR vs IRR relationship using continuous
mathematics under several cash profile assumptions. He demonstrates that the depreciation schedule
affects the relationship. Also he puts forward that the accounting and the economic measurements
(ARR/IRR) are irreconcilable, and that the situation is aggravated by the introduction of taxation into
the analysis. From the accounting point of view it is interesting that he points to the task of estimating
the real rates of return from historical accounting data.
BHASKAR (1972) - arrives at the conclusion that "in general ARR does not perform satisfactorily as a surrogate for
the IRR". He also points out that the using the annuity method of depreciation makes ARR a more accurate reflection
of the IRR, but points out that the annuity method has undesirable side-effects for accounting measurement. Bhaskar
augments his deductions with a statistical analysis of his simulation results on ARR and IRR levels.
FISHER & McGOWAN (1983) - consider economic rate of return (IRR) the only correct measure of economic
analysis. They conclude that the accounting rate of return is a misleading measure of the economic rate of return and
see little merit in using the former. Long and Ravenscraft (1984) present a critical view on Fisher and McGowan's
claim of the prevalence of the IRR, the assumptions in their examples, and their mathematical derivations. Fisher
(1984) discards the criticism insisting that ARR does not relate profits with the investments that produce it.
PINCHES, MINGO & CARUTHERS (1973) - apply factor analysis to classify 51 log-transformed financial ratios
of 221 Compustat firms for four cross sections six years apart. The selection of the method was prompted by
applications in other behavioral disciplines (e.g. psychology and organizational analysis). They identify seven factors,
Return on investment, capital intensiveness, inventory intensiveness, financial leverage, receivables intensiveness,
short-term liquidity, and cash position. These factors explain 78-92% (depending on the year) of the total variance of
the 51 financial ratios. Moreover, the correlations for the factor loadings, and the differential R-factor analysis indicate
that the ratio patterns are reasonably stable over time.
GORDON (1974-1977) - takes a more optimistic view on the potential reconciliation between ARR
and IRR. He shows that ARR can be a meaningful approximation of the IRR when "the accountant's
income and asset valuations approximate the economic income and asset values". The central condition
is linked to the depreciation method. The accountant's accumulated depreciation must approximate the
accumulated economic depreciation for the ARR and IRR to converge. Gordon concludes by pointing
out that even if no general "cook-book tricks" can be devised for converting the ARR to the IRR, the
managers can be able to make sufficient adjustments. To us this view appears logical because it is
unlikely that profit oriented business firms could, in the long run, indulge in totally unsound
measurement and management practices. Stephen (1976), on the other hand, claims that Gordon fails to
resolve the difference between ARR and IRR.
TAMMINEN (1976) -presents a thorough mathematical analysis (with continuous time) of ARR and
IRR profitability measurement under different contribution distribution, growth conditions, and
depreciation methods. As one result he derives a growth-dependent formula for a conversion between
IRR and ARR assuming realization depreciation. (For the definition of the realization depreciation see
e.g. Bierman. The analysis is conducted under steady-state growth conditions, then extended to
structural changes and for under cyclical fluctuations.
KAY (1976) - refutes Salamon's conclusion and contends that IRR can be approximated by the ARR
irrespective of the cash flow and depreciation patterns. The crucial requirement is that the accountant's
evaluation of the assets (their book value) and the economist's evaluation (the discounted net cash flow)
are equal. He also applies his results to estimate the profitability of the British manufacturing industry
1960-1969 from aggregate accountant's data. Key and Mayer (1986) revisit the subject coming to the
conclusion that "accounting data can be used to compute exactly the single project economic rate of
return".
PINCHES, EUBANK, MINGO & CARUTHERS (1975) - After a principal component factor analysis of 39 ratios
of the Pinches, Eubank, Mingo and Caruthers (1975) they conclude that there is a high instability in always selecting
the financial ratio with the highest absolute factor loading as the representative financial ratio for the observed factors.
JOHNSON (1978) -runs the factor analysis for a single year 1972, but for two industries based on a sample of 306
primary manufacturing and 61 retail firms. Congruency coefficients of financial ratio patterns indicate a good stability
of the nine factors for the two industries. Johnson (1979) repeats the study for a larger sample of firms and for two
years.
WRIGHT (1978) - considers Kay's (1976) view too optimistic and claims that one cannot easily translate ARR into
IRR except under special circumstances. Salmi demonstrated using simulated financial statements that applying Kay's
results require more restrictive assumptions than originally indicated by Kay (1976). Stark (1982) recounts Key's
results by including working capital, loan financing and taxation.
LEV & SUNDER (1979) -The traditionally stated major purpose of using financial data in the ratio form is making
the results comparable across firms and over time by controlling for size. This basic assertion gives rise to one of the
fundamental trends in financial ratio analysis (or FRA for short, in this paper). The usually stated requirement in
controlling for size is that the numerator and the denominator of a financial ratio are proportional.
LEV & SUNDER (1979) - They point out, using theoretical deduction, that in order to control for
the size effect, the financial ratios must fulfill very restrictive proportionality assumptions (about the
error term, existence of the intercept, linearity, and dependence on other variables in the basic
financial variables relationship models Y = bX + e and its ratio format Y/X = b + e/X). It is shown
that the choice of the size deflator (the ratio denominator) is a critical issue. Furthermore, Lev and
Sunder bring up the problems caused in multiple regression models where the explaining variables
are ratios with the same denominator. This is a fact that has been discussed earlier in statistics
oriented literature like in Kuh and Meyer (1955).
AHO (1980) - includes also cash-flow based profitability ratios in a factorization study for 24 financial ratios of 57
Finnish firms in 1967-1976. His financial characteristic factors become financial structure, profitability, liquidity,
working capital turnover and financial opportunities for investments.
WHITTINGTON (1980) - Two interrelated trends are evident. Theoretical discussions about the ratio format in FRA
and empirical testing of the ratio model. While mostly tackling the former Whittington (1980) independently presents
illustrative results finding the ratio specification inappropriate in a sample of U.K. firms. Whittington also discusses the
usage of a quadratic form in FRA. Significant instability in the results was reported.
Barnes (1981) - shows how the non-normality of financial ratios can result from the underlying relationships of the
constituents of the financial ratios. He is thus able to tie in the ratio format aspects with the distributional properties of
financial ratios (to be discussed later in this review). In the discussion on Barnes's paper (Horrigan, 1983, Barnes,
1983), Horrigan puts forward that financial ratio research should be more interested in the role of the financial ratios
themselves than in "the nature of the ratios' components or to the ratios' incidental role as data size deflators".
CHEN & SHIMERDA (1981) - present a summary of the financial ratios used in a number of early studies which use the
financial ratios for analysis and prediction. They note that there is an abundant 41 different financial ratios which are found
useful in the earlier studies. They reconcile by judgement the factors in the earlier studies into financial leverage, capital
turnover, return on investment, inventory turnover, receivables turnover, short-term liquidity, and cash position. They
identify ten financial ratios which are representative of their seven factors.
SALMI & LUOMA (1981) - demonstrate using simulated financial statements that applying Kay's results require more
restrictive assumptions than originally indicated by Kay (1976). Stark (1982) recounts Key's results by including working
capital, loan financing and taxation.
COWEN & HOFFER (1982) - studied the inter-temporal stability of financial ratio classification in a single, homogeneous
industry. Their findings do not support the Pinches, Mingo and Caruthers results about the stability of the ratio patterns.
Cowen and Hoffer's sample consist of 72 oil-crude industry firms for 1967-75. Four or five factors are found for each year
for the 13 financial ratios included. As the authors put it "there was little consistency and stability in the factor loadings
across all years". The results are only slightly improved with log-transformations. Cowen and Hoffer also find applying
cluster analysis that groupings of firms with respect to the financial ratios exist within the industry, but that they are not
stable over time.
LAITINEN (1983) - presents a model of the financial relationships in the firm with attached financial ratios. The model is
based on Laitinen (1980). For the most part empirical evidence based on 43 publicly traded Finnish firms supports the
structure of the model. Bayldon, Woods, and Zafiris (1984) evaluate a pyramid scheme of financial ratios. In a case study
the pyramid scheme does not function as expected. The deductive approach to establish relevant financial ratio categories
has more or less stalled, and this approach has become intermixed with confirmatory approach discussed later.
GOMBOLA & KERTZ (1983) - include cash-flow based (adjusted for all accruals and deferrals) financial
ratios in their factorization of 40 financial ratios for a sample of 119 Compustat firms for 1962-80.
Contrary to the earlier studies, the cash-flow based financial ratios load on a distinct factor. The results
are not sensitive to using historical costs vs general price-level adjusted data. Similar results on the
empirical distinctiveness of cash flow ratios are later obtained in a study that also introduces market-
based ratios to the analysis.
McDONALD & MORRIS (1984-1985) - present the first extensive empirical studies of the statistical validity of the
financial ratio method. The authors use three models with two samples, one with a single industry the other with one
randomly selected firm from each (four-digit SIC) industry branch to investigate the implications of homogeneity on
proportionality. The first model is the traditional model for replacement of financial ratios by bivariate regression,
with intercept
Y(i) = a + bX(i) + e(i).
The above model is central in this area. It is characteristic that the testing for proportionality is considered in terms of
testing the hypothesis H0: a = 0. Barnes (1986) points out for statistical testing that the residual is typically
heteroscedastic. For a discussion also see Garcia-Ayuso (1994). The second model in McDonald and Morris is
Y(i) = b'X(i) + e'(i)
that is without the intercept to tackle heteroscedasticity. Dropping the intercept from the model is not always enough
to treat the heteroscedasticity (see Berry and Nix, 1991). The third model applies a (Box-Cox) transformation on the
first model to tackle non-linearities. While they find support for financial ratio analysis for comparisons within
industry branches, in inter-industry comparisons proportionality of financial ratios is not supported.
BUIJINK & JEGERS (1986) - studies the financial ratio distributions from year to year from 1977 to 1981 for 11
ratios in Belgian firms corroborating the results of the earlier papers in the field. Refined industry classification brings
less extreme deviation from normality. They also point to the need of studying the temporal persistence of cross-
sectional financial ratio distributions and suggest a symmetry index for measuring it.
EZZAMEL, BRODIE & MAR-MOLINERO (1987) -detect instability in the factors of financial ratios for a sample
of UK firms.
SALMI, VIRTANEN & YLI- OLLI (1990)- A financial ratio is of the form X/Y, where X and Y are figures derived
from the financial statements or other sources of financial information. One way of categorizing the ratios is on the
basis where X and Y come from Salmi's research.In traditional financial ratio analysis both the X and the Y are based
on financial statements. If both or one of them comes from the income statement the ratio can be called dynamic while
if both come from the balance sheet it can be called static (see ibid.). The concept of financial ratios can be extended
by using other than financial statement information as X or Y in the X/Y ratio. For example, financial statement items
and market based figures can be combined to constitute the ratio.
In this paper we review the existing trends in financial statement analysis literature by focusing
primarily on the theoretical and empirical basis of financial ratio analysis. This is an important task
to carry out since the ratios are often used intuitively, without sufficient consideration to their
theoretical meaning and statistical properties. In doing this it is our purpose to pinpoint the
different directions taken in quantitative ratio based research. By critically considering financial
ratio literature, we also aim to help the decision makers to use ratios in an efficient way.
We review four of the research areas listed above. In our opinion the primary areas of the literature
concerning the theoretical and empirical basis of financial ratio analysis are the functional form of
the financial ratios, distributional characteristics of financial ratios, and classification of financial
ratios. These three research avenues are reviewed in Section 2. All the major financial ratio
research avenues cannot be tackled within the limited space of this paper. Therefore, we select the
estimation internal rate of return from financial statements as the fourth area. A fundamental task of
financial analysis is evaluating the performance of the business firm. This area, reviewed in Section
3, directly concerns profitability measurement.
WATSON (1990) - examines the multivariate distributional properties of four financial ratios from a
sample of approximately 400 Compustat manufacturing firms for cross-sections of 1982, 1983 and
1984. Multivariate normality is rejected for all the four financial ratios. Multivariate normality is still
rejected after applying Box's and Cox's modified power transformations. However, when multivariate
outliers are removed, normality is confirmed. Multivariate normality has particular bearing on
research using multivariate methods, for example on bankruptcy prediction. It also has implications
on univariate research, since while univariate normality does not imply multivariate normality, the
opposite is true.
MARTIKAINEN & ANKELO (1991) - find that instability of financial ratio groups is more
pronounced for firms about to fail than for healthy firms in a sample of 40 Finnish firms. Martikainen,
Puhalainen and Yli-Olli (1994) observe significant instability of the financial ratio classification patters
across industries in a sample typical of bankruptcy research.
BERRY & NIX (1991) - however, cast doubt on the generality of McDonald and Morris results over
time, over ratios and over industries. Similar results was obtained for Finnish data in Perttunen and
Martikainen (1989) and for Spanish data by Garcia-Ayuso (1994). By comparing value and equal
weighted aggregate financial ratios McLeay and Fieldsend (1987) find evidence based on samples of
French firms that "the departure from proportionality varies from ratio to ratio, from size class to
size class and from sector to sector".
Research on financial ratio proportionality has close connections to distributional questions. Testing
the statistical significance of the parameters of the previous models involves, at least implicitly,
assumptions of normality (see Ezzamel, Mar-Molinero and Beecher, 1987, p. 467). Fieldsend,
Longford and McLeay (1987) draw on the fact that a number of accounting variables are expected to
be lognormally distributed because of technical zero lower bounds. Consequently they test
empirically a lognormal regression model
lnY(ij) = a + blnX(ij) + g(j) + e(ij)
where the industry effect g(j) is explicitly specified in the model. Their empirical results on a single
financial ratio (the current ratio) are in line with the earlier results supporting proportionality only if
industry effects are included.
BOLLEN(1999)- conducted a study on Ratio Variables on which he found three different uses of ratio
variables in aggregate data analysis: (1) as measures of theoretical concepts, (2) as a means to control
an extraneous factor, and (3) as a correction for heteroscedasticity. In the use of ratios as indices of
concepts, a problem can arise if it is regressed on other indices or variables that contain a common
component. For example, the relationship between two per capita measures may be confounded with
the common population component in each variable. reegarding the second use of ratios, only under
exceptional conditions will ratio variables be a suitable means of controlling an extraneous factor.
Finally, the use of ratios to correct for heteroscedasticity is also often misused. Only under special
conditions will the common form forgers soon with ratio variables correct for heteroscedasticity.
Alternatives to ratios for each of these cases are discussed and evaluated.
COOPER(2000)-conducted a study on Financial Intermediation on which he observed that the
quantitative behavior of business-cycle models in which the intermediation process acts either as a
source of fluctuations or as a propagator of real shocks. In neither case do we find convincing evidence
that the intermediation process is an important element of aggregate fluctuations. For an economy
driven by intermediation shocks, consumption is not smoother than output, investment is negatively
correlated with output, variations in the capital stock are quite large, and interest rates are procyclical.
The model economy thus fails to match unconditional moments for the U.S. economy. We also
structurally estimate parameters of a model economy in which intermediation and productivity shocks
are present, allowing for the intermediation process to propagate the real shock. The unconditional
correlations are closer to those observed only when the intermediation shock is relatively unimportant.
GERRARD(2001)-conducted a study on The Financial Performance on which he found that Using
ratio analysis the financial performance of a sample of independent single-plant engineering firms in
Leeds is examined with regard to structural and locational differences in establishments. A number of
determinants of performance are derived and tested against the constructed data base. Inner-city
engineering firms perform relatively less well on all indicators of performance compared with outer-
city firms. The study illustrates the importance of using different measures of performance since this
affects the magnitude and significance of the results. Financial support is necessary to sustain
engineering in the inner city in the long run.
SCHMIDGALL(2003)- conducted a study on Financial Analysis Using the Statement of Cash Flows
on which he observed that Managers use many financial ratios to judge the health of their businesses.
With the recent requirement of a statement of cash flow (SCF) by the Financial Accounting Standards
Board, manager snow have a new set of ratios that will give a realistic picture of the business. The
ratios include cash flow-interest coverage, cash flow-dividend coverage, and cash flow from operations
to cash flow in investments. These ratios are particularly useful because they show changes in a hotel
or restaurant's cash position over time, rather than at a given moment, as is the case with many other
ratios.
MURINDE (2003)- conducted study on Corporate Financial Structures on which he observed that the
financial structure of a sample of Indian non-financial companies using a new and unique dataset
consisting of a panel containing the published accounts of almost 900 companies that published a full
set of accounts every year during 1989-99.In a new departure in the literature, the dataset includes
quoted and unquoted companies. We compare the sources-uses approach to analyzing company
financial structures with the asset-liability approach. We use both approaches to characterize and to
compare the financial structures of Indian companies over time; between quoted and unquoted
companies; and between companies which belong to a business group and those that do not. Finally, we
compare our results to those obtained previously for India and for the industrial countries.
McMAHON(2005)-conducted a study on Financial Information on which he found that financial
statements mean little to the uninitiated. This paper, explains, in layman's terms, how to understand
financial information. It covers measures of profitability. The second article will cover measures of
company liquidity and the use of financial ratios. This paper continues to explain how to interpret and
understand financial information. It deals with measures of liquidity, solvency and fund flows and
describes how to establish standards against which a company's financial ratios can be compared.
LARS LINDBERGH (2003)- has told in his research that possibility for firms to smooth income over
a number of years. The results capital structure, financial position and financial statement information
from small firms in Sweden. The result of the multivariate canonical correlation analysis provides some
support to the hypothesis that the firms develop patterns, in their use of assets and their financing.
WILLIAM I.MEDGINSON (1996)-has told in research that the study showed that significant
increase newly private firms in profitability, output per employee capital spending, and employment. It
is also found that financial policies of these firms start to resemble those typically associated with
private entrepreneurial companies with lower leverage and higher dividend ratios.
PARKAR (2004)- studied the size of the capital structure analysis is and its components and
management in factoring companies. They also studied the correlation between and profitability of
factoring companies. They concluded that the sundry debtors amount due to creditors are the major
component of current assets current liability respectively in determining the size of the financial
analysis.
CHAPTER- VI: DATA ANALYSIS & INTERPRETATION
NTRODUCTION:
Analysis and interpretation are central steps in the research process. The goal of analysis is to summarize the
collected data in such a way that they provide answer to question and trigger the research through interpretation
the meaning and implication of the study becomes clear . Analysis is not complete without interpretation cannot
proceed without analysis . Both are, thus interdependent . In fact , interpretations can be conceived to of as
apart of analysis . It is the time study in the whole analytical framework . Keeping this mind the researcher has
analyzed all the variables the give a clear picture about the study and make use of statistical applications when
ever, it is necessary to find the relation between the variables.
The researcher interprets the meaning and implication of those relations within the research study
band its data and these compares the results and the inference drawn within the data to theory and
other results.
RESEARCH DESIGN AND METHODOLOGY
This research is a financial research i thr field of financial analysis. It assesses the overall financial position of
the company.Hence, it is essentially a fact-finding study type of data. The study is based on the secondary data which
covers the company records for the process of the project report. The study covers for a period of 5 years from 2008-
2012.
RESEARCH DESIGN:
The study is mainly based on secondary sources of data for which if resorted to the annual report of Lotte India
corporation Limited. Besides information attained from the chief accounts officer and from other officers.
The secondary data also has been collected from the audited financial statements, annexure to the cost audit
reports, periodicals and other maintained by Lotte India Corporation ltd.
AREA OF STUDY :
The study is carried out on the financial statements and Ratio analysis .
PERIOD OF STUDY:
The period of study is for 2months.
DATA COLLECTION:
Datas are mostly collected from the secondary sources.
SECONDARY DATA:
Secondary datas were collected through the annual reports of Lotte India Corporation Ltd.
TYPES OF RESEARCH TOOLS
Tools used for analyzing the data:
1.Ratio Analysis
2.Comparative Balance Sheet
3.Common SizeBalance Sheet
4.Trend Analysis
DATA ANALYSIS & INTERPRETATION
RATIO ANAYSIS
? PROFITABILITY RATIOS:
1. GROSS PROFIT RATIO :
TABLE – 1: GROSS PROFIT RATIO
GROSS PROFIT RATIO = GROSS PROFIT X 100
NET SALES
CHART - 1
YEAR NET SALES GROSS PROFIT GROSS PROFIT RATIO
2007-08 15403.95 5717.19 -5.63
2008-09 17056 6505.48 -2.1
2009-10 18838.87 7431.7 2.4
2010-11 25715.08 9179.9 2.8
2011-12 28214.73 9613.75 6.93
INTERPRE
TATION:
The table
reveals the
Gross
Profit
Ratio from
2007-
2012. This
ratio
indicates
the
difference
between sales and direct cost. Gross Profit ratio explains the relationship between gross profit and sales. A higher
ratio is preferrable, indicating pofitability. Except 2007-08 & 2008-09, the company has shown a great pace of
increase in the following years indicating a higher degree of performance in sales.
2. NET PROFIT RATIO :
TABLE – 2 : NET PROFIT RATIO
NET PROFIT RATIO = PROFIT AFTER TAX X 100
NET SALES
CHART
- 2
YEAR NET PROFIT NET SALES NET PROFIT RATIO
2007-08 -579.33 15403.95 -3.76
2008-09 -214.13 17056 -1.26
2009-10 254.21 18838.87 1.35
2010-11 615.03 25715.08 2.39
2011-12 837.22 28214.73 2.96
INTERPRETATION:
The table reveals the Net Profit Ratio from 2007-2012. This ratio indicates the difference between sales
and direct cost. Net Profit ratio explains the relationship between Net profit and sales. A higher ratio is
preferrable, indicating pofitability. Except 2007-08 & 2008-09, which depicts -3.76 and -1.26, the company has
shown a great pace of increase in the following years indicating a higher degree of performance in sales.
RETURN ON TOTAL ASSETS :
TABLE – 3: RETURN ON TOTAL ASSETS
RETURN ON TOTAL ASSETS = NET PROFIT AFTER TAX X 100
TOTAL ASSETS
CHART - 3
INTER
PRET
ATIO
N :
The
table
reveals
the
Return
On
Total
Assets
Ratio
YEAR TOTAL ASSETS
2007-08 -579.33 10285.44 -5.63
2008-09 -214.13 10179.95 -2.1
2009-10 254.21 10584.9 2.4
2010-11 615.03 9179.9 0.06
2011-12 666.35 9613.75 6.93
NET PROFIT AFTER
TAX
RETURN ON
INVESTMENTS
from 2007-2012. This ratio explains the relationship between the Net Profit after tax and total assets. It shows a
moderate increase and decrease percentage on the return of total assets.
OPERATING PROFIT RATIO:
TABLE – 4: OPERATING PROFIT RATIO
OPERATING PROFIT RATIO = OPERATING PROFIT
NET SALES
CHART – 4
INTERPRETATION:
Operating Profit ratio shows the operational efficiency of the business. Lower Operating ratio showa higher
operating profit and vice versa. The table above shows the relationship between operating profit and Net sales.
YEAR OPERATING PROFIT NET SALES NET PROFIT RATIO
2007-08 25.48 15403.95 0.17
2008-09 596.53 17056 3.49
2009-10 955.49 18838.87 5.07
2010-11 2064.76 25715.08 8.02
2011-12 2139.44 28214.73 7.58
The chart depicts that the highest operating profit ratio is shown in 2011-12. Likewise it also shows a sequence
of increasing percents in the forecoming years.
EARNINGS PER SHARE:
TABLE – 5: EARNINGS PER SHARE
EARNINGS PER SHARE = NET PROFIT AFTER TAX & PREFERENCE DIVIDEND
NO. OF EQUITY SHARES
CHART - 5
INTERPRETATION:
YEAR E.P.S RATIO
2007-08 -15.36
2008-09 -5.68
2009-10 6.74
2010-11 5.07
2011-12 6.97
2007-08 2008-09 2009-10 2010-11 2011-12
-20
-15
-10
-5
0
5
10
EARNINGS PER SHARE RATIO
E.P.S RATIO
YEARS
R
A
T
I
O
S
The Earnings per share highlights the overall success of the concern from owner's point of view and it
is helpful in determining market price of equity shares. It reflects upon the capacity of the concern to pat dividend
to its equity shareholder's. In the year 2007-08 & 2008-09 the EPS value is in a biggest negative stage. The
company has to concentate on all factors such that they should retain their shareholder's. They should ultimately
increase their profits and sales volume.
II.TURNOVER RATIOS
1. DEBTORS TURNOVER RATIO
DEBTORS TURNOVER RATIO = CREDIT SALES
AVERAGE DEBTORS
TABLE – 6
CHART - 6
YEAR CREDIT SALES
2007-08 15403.95 297.21 19.22
2008-09 17056 344.02 -6.48
2009-10 18838.87 365.18 -10.18
2010-11 25715.08 308.19 0.66
2011-12 28214.73 307.52 0.75
AVERAGE
DEBTORS
DEBTORS TURNOVER
RATIO
INTERPRETATION:
Debtors Turnover Ratio measures whether the amount of resources tied up in debtors is reasonable and
whether the company has been efficient in converting debtors into cash. The analysis shows that the ratio
increased from 2007-08 & 2008-09 and has decreased from 2007-08 and 2008-09. Thus it shows that the
company's Debtors turnover ratio is moderate.
WORKING CAPITAL TURNOVER
TABLE – 7: WORKING CAPITAL TURNOVER RATIO
WORKING CAPITAL TURNOVER RATIO = NET SALES
NET WORKING CAPITAL
YEAR NET SALES
2007-08 15403.95 801.32 19.22
2008-09 17056 -2634.02 -6.48
2009-10 18838.87 -1850.58 -10.18
2010-11 25715.08 9179.9 2.8
2011-12 28214.73 9613.75 2.93
NET WORKING
CAPITAL
NET CAPITAL
TURNOVER RATIO
INTERPRETATION :
The Working Capital Turnover ratio measures the efficiency with which the working capital is being
used by the firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise.
But a very high working capital turnover ratio may also mean lack of sufficient working capoital which is not good.
From the data interpreted it is well known that in the year 2007-08 , i.e 19.22 is the highest percentage of ratios
among all other ratios.
FIXED ASSETS TURNOVER RATIO:
TABLE – 8: FIXED ASSETS TURNOVER RATIO
FIXED ASSETS TURNOVER RATIO = NET SALES
FIXED ASSET
INTERPRETATION:
YEAR FIXED ASSET NET SALES
2007-08 6142.7 15403.95 19.22
2008-09 5777.95 17056 -6.48
2009-10 5452.15 18838.87 -10.18
2010-11 38873.57 25715.08 0.66
2011-12 37522.3 28214.73 0.75
NET CAPITAL
TURNOVER RATIO
The working capital turnover ratio measures the efficiency with which the working
capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low
ratio indicates otherwise.But a very high working capital turnover ratio may also mean lack of sufficient
working capoital which is not good. In 2007-08, the WCTOR is in a very good position but after that it doesn't do
well. Company has to seriously look after this issue.
CAPITAL TURNOVER RATIO:
TABLE – 9: CAPITAL TURNOVER RATIO
CAPITAL TURNOVER RATIO = SALES X 100
CAPITAL EMPLOYED
CHART - 9
YEAR NET SALES
2007-08 15403.95 7767.32 1.98
2008-09 17056 4044.54 4.22
2009-10 18838.87 4264.65 4.22
2010-11 25715.08 44238.34 57.75
2011-12 28214.73 43527.99 62.42
CAPITAL
EMPLOYED
NET CAPITAL
TURNOVER RATIO
INTERPRETATION:
This analysis shows a constant usage of capital in the turnover of the company. This is an
indicator of how many times the assets have been put into operation have been effectively used up
in the increasing sales. A high ratio indicates efficiency of operations and a low ratio means idling of
scarce assets. The company's capital turnover ratio is growing tremendouslyin an increasing state.
The 2011-2012 year shows 62.42% , which is the highest percentage among all the years.
OWNED CAPITAL TURNOVER RATIO:
TABLE – 10: OWNED CAPITAL TURNOVER RATIO
OWNED CAPITAL TURNOVER RATIO = SALES
SHAREHOLDER'S FUNDS
CHART – 10
YEAR NET SALES
2007-08 15403.95 4224.57 3.65
2008-09 17056 4010.44 4.25
2009-10 18838.87 4264.65 4.42
2010-11 25715.08 44527.99 57.75
2011-12 28214.73 45194.34 62.42
SHAREHOLDER
FUNDS
OWNED CAPITAL
TURNOVER RATIO
INTERPRETATION:
This analysis shows a constant usage of Owned Capital turnover of the company. This is an
indicator of how many times the assets have been put into operation have been effectively used up
in the increasing sales. A high ratio indicates efficiency of operations and a low ratio means idling of
scarce assets. The company's capital turnover ratio is growing tremendouslyin an increasing state.
The 2011-2012 year shows 57.75 & the year 2011-12 shows 62.42, which is the highest percentage
among all the years.
III. SOLVENCY RATIOS
TABLE – 11: CURRENT RATIO
CURRENT RATIO = CURRENT ASSETS/ CURRENT LIABILITIES
CHART – 11
YEAR CURRENT ASSETS
2007-08 3319.12 2517.8 3.65
2008-09 3501.39 6135.41 4.25
2009-10 4469.67 6320.25 4.42
2010-11 9179.9 5651.31 57.75
2011-12 9613.75 6615.37 62.42
CURRENT
LIABILITIES
CURRENT
RATIO
INTERPRETATION:
The table reveals the Current Ratio from 2007-2012. Current ratio explains the relationship between Current
Assets and Current Liabilities. A higher ratio is preferrable, indicating pofitability. From 2010-2012, the company
has shown a great pace of increase in the following years indicating a higher degree of performance. It shows 4.67%
in the year 2011-12 when compared to the year 2010-11.
LIQUID RATIO :
TABLE – 12 : LIQUID RATIO
LIQUID RATIO = LIQUID ASSETS
LIQUID LIABILITIES
CHART – 12
YEAR LIQUID ASSETS LIQUID RATIO
2007-08 1388.49 2517.8 0.55
2008-09 1491.5 6135.41 0.24
2009-10 2385.43 6320.25 0.38
2010-11 9179.9 5310.92 1.72
2011-12 9613.75 6283.37 1.53
LIQUID
LIABILITIES
INTERPRETATION:
The table reveals the Liquid Ratio from 2007-2012. Current ratio explains the relationship
between Liquid Assets and Liquid Liabilities. A higher ratio is preferrable, indicating pofitability. From 2010-2012,
the company has shown a great pace of increase in the following years indicating a higher degree of performance
when compared to other years. It shows 1.72% in the year 2010-11, which is the highest of all.
COMPARATIVE STATEMENTS
Comparative study of financial statement is the comparision of the financial
statement of the business with the previous year's financial statements and with the performance of
other competitive enterprises, so that weaknesses may be identified and remedial measures applied.
Comparative statements can be prepared for both types of financial statements i.e., Balance
Sheet as well as profit & loss account. The Comparative profits and loss account will present a
review of operating activities of the business. The comparative balance shows the effect of
operations on the assets and the liabilities that change in the financial poisition during the period
under consideration.
Comparative analysis is the study of trend of the same items and computed items into or more
financial statements of the same business enterprise on different dates.
The presentation of Comparative financial statements, in annual and other reports, enhances the
usefulness of such reports and brings out more clearly the nature and trends of current changes
affecting the enterprise.
While the single balance sheet represents balances of accounts drawn at the end of an accounting
period, the comparative balance sheet represent not nearly the balance of accounts drawn on two
different dates but also the extent of their increase or decrease between these two dates. The
single balance sheet focuses on the financial status of the concern as on a particular date, the
comparative balance sheet focuses on the changes that have taken place in one accounting period.
The changes are the direct outcome of operational activities, conservation of assets, liability and
capital form into others as well as various interactions among assets, liability and capital.
COMPARATIVE BALANCE SHEET ANALYSIS
COMPARATIVE BALANCE SHEET (2007-08 & 2008-09)
SL.NO PARTICULARS 2007-2008 2008-2009
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 377.13 - -
2Reserves & Surplus 3847.44 3633.31 -214.13 -5.56
3Loans 3543.07 34.1 -3508.97 -99.04
4Current Liabilities
(i)Liabilities 2434.51 6045.47 3610.96 148.32
(ii)Provisions 83.29 89.94 6.65 7.98
2517.8 6135.41
TOTAL CURRENT LIABILITIES 10285.44 10179.95 -105.49 -1.02
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 6142.7 5777.95 -364.75 -5.94
2Capital Work in progress 85.1 77.03 -8.07 9.48
3Investments - - - -
4Deferred Tax Asset(Net) 738.52 823.58 85.06 11.5
5Current Asset 3319.12 3501.39 182.27 5.49
TOTAL CURRENT ASSET 10285.44 10179.95 -105.49 -1.02
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
INTERPRETATION:
The above comparative statement analysis shows the following valuable information;
? The Capital investment for both the years i.e.,2007-08 & 2008-09 are the same.
? Reserves and surplus are reduced from 3847.44 lakhs to 3633.31 lakhs with -
5.56% decrease.
? The current Liabilities has increased from 2517.8 lakhs to 6135.41 lakhs with
7.98% increase.
? Fixed Assets have been reduced from 6142.7 lakhs to 5777.95 lakhs thereby
indicating -5.94 % decrease.
? The Capital work- in progress has decreased from 85.1 lakhs to 77.03 lakhs with
-9.48% decrease.
? The deferred tax asset has been reduced to 11.5% in the year 2007.
? The Current Assets have been increased from 3319.12 lakhs to 3501.39 lakhs
with 5.49% increase.
COMPARATIVE BALANCE SHEET (2008-09 & 2009-10)
INTERPRETATION:
The above comparative statement analysis shows the following valuable information;
1.The Share Capital for both the years i.e.,2008-09& 2009-10 are the same.
2.Reserves and surplus are increased from 3633.31lakhs to 3887.52 lakhs with 6.99%
decrease.
3.The current Liabilities has increased from 6135.41 lakhs to 6320.25 lakhs with 2.94%
increase.
4.Fixed Assets have been reduced from 5777.95 lakhs to 5452.15 lakhs thereby indicating -
5.64 % decrease.
5.The Capital work- in progress has decreased tremendously from 77.03 lakhs to 0.50 lakhs
with 99.35% decrease.
6.The deferred tax asset has been reduced to 19.55% in the year 2010.
7.The Current Assets have been increased from 3501.39 lakhs to 4469.67 lakhs with 27.65%
increase.
SL.NO PARTICULARS 2008-2009 2009-2010
LIABILITIES:
I. SOURCES OF FUNDS
1 Capital 377.13 377.13 - -
2 Reserves & Surplus 3633.31 3887.52 254.21 6.99
3 Loans 34.1 - 34.1 100
4 Current Liabilities
(i)Liabilities 6045.47 6232.64 187.17 3.09
(ii)Provisions 89.94 87.61 -2.33 -259
TOTAL CURRENT LIABILITIES 10179.95 10584.9 404.95 3.98
ASSETS:
II. APPLICATION OF FUNDS
1 Fixed Assets 5777.95 5452.15 -325.8 -5.64
2 Capital Work in progress 77.03 0.5 -76.53 99.35
3 Investments - - - -
4 Deferred Tax Asset(Net) 823.58 662.58 -161 19.55
5 Current Asset 3501.39 4469.67 968.28 27.65
TOTAL CURRENT ASSET 10179.95 10584.9 404.95 3.98
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
COMPARATIVE BALANCE SHEET 2009-10 & 2010-11
INTERPRETATION:
SL.NO PARTICULARS 2009-2010 2010-2011
LIABILITIES:
I. SOURCES OF FUNDS
1 Capital 377.13 956 578.87 153.49
2 Reserves & Surplus 3887.52 43087.46 39199.94 1008.35
3 Loans - - - -
4 Current Liabilities
(i)Liabilities 6232.64 3862.39 -2370.25 -38.02
(ii)Provisions 87.61 72.61 -15 -17.12
TOTAL CURRENT LIABILITIES 10584.9 47978.46 37393.56 353.27
ASSETS:
II. APPLICATION OF FUNDS
1 Fixed Assets 5452.15 40124.83 34672.68 -5.64
2 Capital Work in progress 0.5 26.67 26.17 99.35
3 Investments - - - -
4 Deferred Tax Asset(Net) 662.58 - 662.58 19.55
5 Current Asset 4469.67 7826.96 3357.29 27.65
TOTAL CURRENT ASSET 10584.9 47978.46 37393.56 353.27
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
The above comparative statement analysis shows the following valuable information;
1.The Share Capital is increased from 377.13 lakhs to 956 lakhs in the year 2011 with 153%
increase.
2.Reserves and surplus are increased from 3887.52 lakhs to 43087.46 lakhs with 156%
decrease.
3.The current Liabilities has decreased from 6232.64 lakhs to 3862.39 lakhs with -
38.02% decrease.
4.Fixed Assets have been increased from 5452.15 lakhs to 40124.83 lakhs thereby indicating
5.64 % increase.
5.The Capital work- in progress has increased tremendously from 0.50 lakhs to 26.67 lakhs
with 99.35% increase.
7.The Current Assets have been increased from 4469.67 lakhs to 7826.96 lakhs with 27.65%
increase.
COMPARATIVE BALANCE SHEET 2010-11 & 2011-12
SL.NO PARTICULARS 2010-2011 2011-2012
LIABILITIES:
I. SOURCES OF FUNDS
1 Capital 956 956 - -
2 Reserves & Surplus 43087.46 43571.99 484.53 6.99
3 Loans - - 34.1 100
4 Current Liabilities
(i)Liabilities 3862.39 4749.82 887.43 3.09
(ii)Provisions 72.61 51.87 -20.74 -259
TOTAL CURRENT LIABILITIES 47978.46 49329.68 1351.22 3.98
ASSETS:
II. APPLICATION OF FUNDS
1 Fixed Assets 40124.83 38873.57 -1251.26 -5.64
2 Capital Work in progress 26.67 842.01 815.34 99.35
3 Investments - - - -
4 Deferred Tax Asset(Net) - - - 19.55
5 Current Asset 7826.96 9614.1 1787.14 27.65
TOTAL CURRENT ASSET 47978.46 49329.68 1351.22 3.98
INCREASE/
DECREASE AMOUNT
INCREASE /
DECREASE %
INTERPRETATION:
The above comparative statement analysis shows the following valuable information;
1.The Share Capital of both years are the same with Rs,956 lakhs.
2.Reserves and surplus are increased from 43087.46 lakhs to 43571.99 lakhs with 6.99%
increase.
3.The current Liabilities has increased from 3862.39 lakhs to 4749.82 lakhs with 3.09%
increase.
4.Fixed Assets have been reduced from 40124.83 lakhs to 38873.57 lakhs thereby indicating
-5.64 % decrease.
5.The Capital work- in progress has increased tremendously from 26.67 lakhs to 842.01 lakhs
with 99.35% increase.
7.The Current Assets have been increased from 4469.67 lakhs to 7826.96 lakhs with 27.65%
increase.
COMMON SIZE BALANCE SHEET
Common Size Balance Sheet provides a common basis for the absolute figures and facilitates
comparison between two or more years or two or more companies, or a single company and the
aggregate statements for the the entire industry. However, this technique helps in ascertaining the
trend in various item of the balance sheet and also helps to compare the financial position of
different companies having different size.
COMMON SIZE BALANCE SHEET 2007-08 & 2008-09
SL.NO PARTICULARS 2007-2008 PERCENTAGE 2008-2009 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 3.67 377.13 3.7
2Reserves & Surplus 3847.44 37.41 3633.31 35.7
3Loans 3543.07 34.44 34.1 0.33
4Current Liabilities
(i)Liabilities 2434.51 23.67 6045.47 59.39
(ii)Provisions 83.29 0.81 89.94 0.88
2517.8 6135.41
TOTAL CURRENT LIABILITIES 10285.44 100 10179.95 100
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 6142.7 59.72 5777.95 56.76
2Capital Work in progress 85.1 0.83 77.03 0.76
3Investments - - -
4Deferred Tax Asset(Net) 738.52 7.18 823.58 8.09
5Current Asset 3319.12 32.27 3501.39 34.39
TOTAL CURRENT ASSET 10285.44 100 10179.95 100
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
? The Capital investment for both the years i.e.,2007-08 & 2008-09 are the same.
? Reserves and surplus are reduced from 3847.44 lakhs to 3633.31 lakhs with 35.7%
in 2009 and 37.41% in 2008
? The current Liabilities has increased from 2517.8 lakhs to 6135.41 lakhs
with23.67% in 2008 and 59.39% in 2009 .
? Fixed Assets have been reduced from 6142.7 lakhs to 5777.95 lakhs with 59.72%
in 2008 and 56.76% in 2009.
? The Capital work- in progress has decreased from 85.1 lakhs to 77.03 lakhs with
0.83% in 2008 and 0.76% in 2009.
? The deferred tax asset has been increased from 738.52 lakhs to 823.58 lakhs with
7.18% and 8.09% .
? The Current Assets have been increased from 3319.12 lakhs to 3501.39 lakhs
with 32.27% in 2008 and 34.395 in 2009.
COMMON SIZE BALANCE SHEET 2008-09 & 2009-10
SL.NO PARTICULARS 2008-2009 PERCENTAGE 2009-2010 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 3.7 377.13 3.7
2Reserves & Surplus 3633.31 35.7 3887.52 36.62
3Loans 34.1 0.33 - 0
4Current Liabilities
(i)Liabilities 6045.47 59.39 6232.64 58.86
(ii)Provisions 89.94 0.88 87.61 0.82
TOTAL CURRENT LIABILITIES 10179.95 100 10584.9 100
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 5777.95 56.76 5452.15 51.5
2Capital Work in progress 77.03 0.76 0.5 0.04
3Investments - - - -
4Deferred Tax Asset(Net) 823.58 8.09 662.58 6.24
5Current Asset 3501.39 34.39 4469.67 42.22
TOTAL CURRENT ASSET 10179.95 100 10584.9 100
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
? The Capital investment for both the years i.e.,2008-09 & 2009-10 are the same.
? Reserves and surplus are increased from 36331.31 lakhs to 3887.52 lakhs with
35.7% in 2008 and 36.62% in 2010
? The current Liabilities has increased from 6045.47 lakhs to 6232.64 lakhs with
58.86% in 2010 and 59.39% in 2009 .
? Fixed Assets have been reduced from 5777.95 lakhs to 5452.15 lakhs with 56.76%
in 2009 and 51.5% in 2010
? The Capital work- in progress has decreased from 77.03 lakhs to 0.50 with 076%
in 2009 and 0.5% in 2010.
? The Current Assets have been increased from 3501.39 lakhs to 4469.67 lakhs
with 34.39% in 2009 and 42.22% in 2010.
COMMON SIZE BALANCE SHEET 2009-10 & 2010-11
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
SL.NO PARTICULARS 2009-2010 PERCENTAGE 2010-2011 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 377.13 3.7 956 1.99
2Reserves & Surplus 3887.52 36.62 43087.46 89.8
3Loans - 0 -
4Current Liabilities
(i)Liabilities 6232.64 58.86 3862.39 8.05
(ii)Provisions 87.61 0.82 72.61 0.15
TOTAL CURRENT LIABILITIES 10584.9 100 47978.46 99.99
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 5452.15 51.5 40124.83 83.63
2Capital Work in progress 0.5 0.04 26.67 0.05
3Investments - - - -
4Deferred Tax Asset(Net) 662.58 6.24 -
5Current Asset 4469.67 42.22 7826.96 16.31
TOTAL CURRENT ASSET 10584.9 100 47978.46 99.99
? The Share Capital investment for both the years i.e.,2009-10 & 2010-11 shows a
greater investment.
? Reserves and surplus are increased from 3887.52 lakhs to 43087.46 lakhs with
36.62% in 2010 and 89.8% in 2011
? The current Liabilities has been decreased from 6232.64 lakhs to 3862.39 lakhs
with 58.86% in 2010 and 8.05% in 2011 .
? Fixed Assets have been reduced from 5452.15 lakhs to 40124.83 lakhs with
51.5%% in 2010 and26.67% in 2011.
? The Capital work- in progress has increased from 0.50 lakhs to 26.6s7 lakhs with
0.04%in 2010 and 0.05% in 2011.
? The Current Assets have been increased from 4469.67 akhs to 7826.96 lakhs
with 42.22% in 2010 and 16.31% in 2011.
COMMON SIZE STATEMENT 2010-11 & 2011-12
INTERPRETATION:
The above comon size statement analysis shows the following valuable information;
? The Share Capital investment for both the years i.e.,2010-11 & 2011-12 shows a
greater investment.
? Reserves and surplus are increased from 43087.46 lakhs to 43571 lakhs with
89.8% in 2011and 88.32% in 2012.
? The current Liabilities has been decreased from 3862.39 lakhs to 4749.82 lakhs
with 8.05% in 2011 and 9.62% in 2012 .
? Fixed Assets have been reduceD from40124.83 lakhs to 38873.57 lakhs with
83.63% in 2011 and78.8% in 2012.
? The Capital work- in progress has increased from 26.67 lakhs to 842.01 lakhs
with 0.05% in 2011 and1.7% in 2012.
? The Current Assets have been increased from 7826.96 lakhs to 9614.1 lakhs with
16.31% in 2011 and 19.48% in 2012.
SL.NO PARTICULARS 2010-2011 PERCENTAGE 2011-2012 PERCENTAGE
LIABILITIES:
I. SOURCES OF FUNDS
1Capital 956 1.99 956 1.94
2Reserves & Surplus 43087.46 89.8 43571.99 88.32
3Loans - - -
4Current Liabilities
(i)Liabilities 3862.39 8.05 4749.82 9.62
(ii)Provisions 72.61 0.15 51.87 0.1
TOTAL CURRENT LIABILITIES 47978.46 99.99 49329.68 99.98
ASSETS:
II. APPLICATION OF FUNDS
1Fixed Assets 40124.83 83.63 38873.57 78.8
2Capital Work in progress 26.67 0.05 842.01 1.7
3Investments - - - -
4Deferred Tax Asset(Net) - - -
5Current Asset 7826.96 16.31 9614.1 19.48
TOTAL CURRENT ASSET 47978.46 99.99 49329.68 99.98
TREND ANALYSIS
YEAR SALES STOCK SALES (IN %)STOCK (IN %)
2008 16815.48 1930.63 272.19 100 100 100
2009 18341.68 2009.89 501.21 109 104 184
2010 19703.19 2084.24 56.29 117 108 216
2011 28873.79 3868.98 615.03 172 200 342
PROFIT BEFORE
TAX
PROFIT BEFORE TAX (IN
%)
SUMMARY
The research study is focused mainly on the financial performance of Lotte India Corporation
Ltd., chennai. The study explains that how the company is managing its funds and liquidity. The
study also focuses on analyzing financial performance of the company and projecting future sales and
working capital.
The data's are collected through company's last five year's annual reports. And financial analysis
tools and statistical tools are also used to study the financial analysis of this company.
CHAPTER – VI : FINDINGS, SUGGESTIONS & CONCLUSIONS
FINDINGS :
? The company's profit shows a moderate trend for the last 5 years.
? The equity share capital didn't change as they maintain a constant invested capital.
? There is a sudden growth in borrowings in the year 2008 due the purchase of land by the
company.
? The company's Net working Capital has been at increasing trend till 2007-08 but in 2008-09
& 2009-10 it is decreased.
? The current assets of the company show an increasing trend.
? The sales of the company show an increasing trend when compared to the base year 2008-
09. it has gradually increased in 2009-10.
? The Reserves and surplus of the company shows an increasing trend for the years expected
in the year 2008-09.
? The Current Liabilities also shows an increasing growth rate.
? Gross profit ratio is at increasing phase.
? Debtor's turnover is not up to the mark.
? Investments are only made at the base year of the company.
? Fixed Assets have been increased in 2010-11 & 2011-12.
? capital turnover ratio has been decreased from 2008-09 & 2009-10.
SUGGESTIONS:
From the above study i would like to suggests some measures in order to develop the company in
a profitable manner.
? The company's profit over the years has been decreasing when compared to previous years
and even it incurred loss in 2008. The company must increase the profit in future. The
company must take steps to increase the profit level.
? It should deduct the unwanted costs in order to reach higher profitability. In 2009-10, it has
incurred huge loss in all aspects.
? Capital turnover ratio has been decreased in from 2008-09. so company can use some
techniques to improve that.
? The sales of the company can be futher increased by improving the quality through optimum
utilization of company's resources (i.e. Assets, raw materials, credit system etc) and that in
turn will increase the overall profits of the firm.
? The company should improve sales in order to achieve the growth, and the company should
make some innovative ideas to improve sales through various distribution channels and with
effective and innovative marketing techniques.
? The company should work out and improve EPS.
? The company should reduce their debt (loan) because shareholders get attracted towards
debt-free firm and it also increases profits to the firm.
? The company's operating profit is not up to the mark and hence it should take some
measures to overcome it.
? The managemnt must also study the market position and it should also find demands
prevailing in the market for the products and thus this will guide them enhance their sales
volume.
CONCLUSIONS:
The study titled “ Financial Analysis of Lotte India” is totally done based on the
secondary sources provided by the company. At the end of this study we come to know taht the
company is efficiently managing and utilizing their funds. Despite the losses occured, the company
has performed well. With the help of various financial analysis i analysed the company's
performance. And with some innovative financial tools i could analyze the firm's future predictions.
The company can manage their funds more effectively and thusthey can improve their
operational efficiency. The financial performance experienced a healthier path in terms of liquidity
and profitability of the business during the study period except 2009-10. The other important factor
which is worth mentioning here is that the company has been processing steadily on its capacity
utilization in line with its growing financial performance.
To end with, we can conclude taht if the company takes over the above actions as suggested,
the comapny would reamain as the number one leader in the Indian Confectionery business in future,
with its excellent past records and the latent potential for achieving greater heights in future.
BIBLIOGRAPHY
BOOKS :
1. M.Y Khan and P.K Jain
Financial Management, 4
th
Edition-2006,
Tata Mc graw-Hills Publications, New Delhi.
WEBSITES:
1http://www.readyratios.com/reference/analysis/financial_statement_analysis.html
2.www.google.com
3.www.mbaguys.net
4.www.lotteindia.com
doc_243152911.docx