A STUDY

ON

CONDUCTED AT
OSRAM INDIA PVT. LTD.
SONEPAT

SUBMITTED IN THE PARTIAL FULFILMENT OF THE REQUIREMENT OF

TWOYEARS DEGREE COURSE 2006-2008

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO :- SUBMITTED BY :-
MISS SHIWANI ARORA SANJEEV
(MBA FACULTY ) ROLL NO : 50

HINDU INSTITUTE OF MANAGEMENT

SONEPAT
(Affiliated to M.D. University, Rohtak )

DECLARATION

I, SANJEEV, Roll No. 50, MBA-2nd Year, of Hindu Institute Of Management,

Sonepat, hereby declare that the Summer Training Report

Entitled “ A Study on RatioAnalysis ” is an original work and the same has not been

submitted to any other institute for the award of any other degree.

A seminar presentation of the Training Report was made on

------------------- and the suggestion as approved by the faculty were duly

incorporated.
Presentation Incharge SANJEEV
MISS SHIWANI ARORA
(Faculty) MBA – 2nd Year

HIM,

Sonepat.

Countersigned

Director of HIM

ACKNOWLEDGEMENTS

“Perseverance, inspiriting and motivation has always

played a key role in the success of any venture.”

The successful completion of the project would have been far from

reality without mentioning the people who made an indelible impression

while making the project.

I wish to convey my sincere thanks to Osram India Pvt. Ltd. Sonepat

and the members for instructing me and giving me an opportunity to work

for them.

I express my sincere and special thanks to Mr. V.D. BANSAL . It is a matter of

great pleasure for me to place on record my gratitude for their competent and perfect
guidance, valuable opinion and healthy criticism, which have gone a long way in

enabling me to complete this project successfully.

This opportunity to express out gratitude and profoundest regard to

the guide of this project, Mr. ANANT SHARMA, is very inadequate to match

her adroitness and magnanimity. Expression fall short to elucidate her

incomparable guidance under which the project reared and blossomed

and without her it would have been in consummate.

I am also thankful to all my teachers and friends who helped me

directly & indirectly in the completion of the project.

TABLE OF CONTENTS

 Preface

 Objective of Study

 Scope of Study

 Focus of the Problem

 Introduction

a) Osram Worldwide

b) Quality Policy

c) Certification

d) Quality Objectives

e) Environment Health Safety & Social Policy

f) Our Vision

g) Our Mission
 h) Our Values

 Company Profile

a) History

b) New Markets

c) Innovations

d) Employees

e) Worldwide Sales by Market

f) Oscar from Osram

g) Description of Products

 SWOT Analysis

 Research Methodology

a) Research Objective

b) Research Design

c) Data Collection Method

 Project Profile

I. Project : An overview

a) Necessity of Project

b) Advantages of Project

c) Meaning of Project

d) Inference

II. Prelusion to Ratio Analysis

III. Significance of Ratio Analysis

 IV. Limitation of Ratio Analysis

V. Parameter considered for measuring Financial performance.

 Financial Analysis

 Analysis & Interpretation

 Suggestions

 Limitations

 Conclusion

 Bibliography
 PREFACE

PERFORM THOU RIGHT ACTION, FOR ACTION IS SUPERIOR

TO INACTION AND INACTIVE, AND WITHOUT IT EVEN THE

MAINTENANCE OF BODY WOULD NOT BE POSSIBLE.

GITA,III,8

In the two year full time MBA course, there is provision for summer training of eight

weeks. The essential purpose for this training is to give an exposure to student of day-to-

day working of business, which will facilitate identification of opportunities or problems

and deciding best course of action when some difficulty is encountered. I have done my

summer training at OSRAM INDIA PVT. LTD. SONEPAT.

The succeeding pages contain report undergone by me on “ A Study on Ratio

Analysis “ Of the above said company.

 OBJECTIVE OF THE STUDY

The project entitled Ratio Analysis, which was undertaken at Osram India Pvt. Ltd.,

Sonepat , is related to study each and every type of ratio of the company. The main

objective of the study are :-

 To analyzing the financial statement.

 To simplifies and summarizes a long array of accounting

data and makes them understandable.

 To forecasting and preparing the plans for the future.

 To will reveal the trend of costs, sales, profits and other important

facts.

 To establish ideal standards of the different items of the business.

 To discloses the liquidity , solvency and profitability of business

enterprise.

 To provide useful information to the management.

SCOPE OF THE STUDY

It become quite difficult rather impossible to make judgment about the position of any

business by way of analyzing the financial statements of one year.

To get a view about the business happiness, the past data of some year relating

to the problem are studied and trend is determined. The present study covers a period of

years from 2004 – 2007. A large period may prove inconvenient while a short period

would not give desired results. A period of four to six years is to be considered to be the

optimum one.

The present study has been undertaken to analyze the Ratio analysis is being

managed in the company and how far it contributes to the overall objective of

maximization of shareholders wealth and the organization wealth.

FOCUS OF THE PROBLEM

Any type of research study suffers from certain limitation relating to either the

research itself or to the topic thought. The degree and nature of the limitation varies with

the topic.

The present study has been undertaken to analyze the Ratio analysis is being

managed in the company and how far it contributes to the overall objective of

maximization of shareholders wealth and the organization wealth.

It become quite difficult rather impossible to make judgment about the position of any

business by way of analyzing the financial statements of one year.

SIGNIFICANCE OF THE STUDY

 It is useful for the management.

 It gives information to the investors about the earning capacity of the

business.

 With the help of Ratio Analysis comparison of profitability and

Financial soundness can be made between one firm and another.

 Current year's ratios are compared with those of previous years and if

some weak spots are thus located remedial measures are taken to

correct them.

 It gives information to the financial institution for providing the finance

to the company.
 It gives information to the taxation authorities.

 It gives information to the researchers for conducting research in

respect of profitability , efficiency , financial soundness and growth of

that company.

INTRODUCTION
 INTRODUCTION

OSRAM India Pvt. Ltd. Sonepat

The plant of OSRAM India Pvt. Ltd. Sonepat was established by Birla Group of

company as ECE Industries Sonepat in the year 1973 in collaboration with M/s

Tungsram, Hungary. It is situated 45 km from Delhi, in industries-oriented

environment of Sonepat (Haryana).

In Oct. 1998, ECE Industries Ltd. Sonepat was taken over by OSRAM India

Pvt. Limited a wholly owned subsidiary of OSRAM GmbH. OSRAM India Pvt. Ltd.

having its registered at New Delhi, was Primarily formed for sales and marketing
operations in India. The company has got three regional offices at Bombay, Calcutta

and Banglore in addition to 14 other distribution centers. The total turnover of

OSRAM India pvt. Ltd. were worth Rs.42 crore in acquisition, innovation and

expansion

has been regular feature of this plant. Currently a high speed CFL manufacturer

line and slim tube manufacture line have been brought from

(Germany). With this new induction, total investment at this to approximately Rs.100

crore.

OSRAM India Pvt. Ltd. has Government's approval for manufacturing and

trading of the following lamps :-

• Metal Halide and High Intensity discharge lamps.

• Tri phosphor and energy efficient fluorescent tubes.

• automotive Halogen and Discharge lamps.

• Photo-Optic lamps for films, TV, Theatre, etc.

• Other high technology, innovation lamps for Medical, Germicidal,

UV lamps.

• Incandescent Lamps.
 OSRAM WORDWIDE

• 58

Subsidiaries and Sales Offices

for 91 Countries.

• 54 Countries supported by local

agents or OSRAM Grubh Munich.

• 54 Production Plants in

18 Countries.
 QUALITY POLICY

Management is committed to :-

• Customer Orientation :-

To fulfill the requirement of our & external customer.

• PROCESS ORIENTATION :-

To optimize and harmonize interrelated process

rather than individual functions.

• PREVENTIVE BEHAVIOUR :-

To prevent the mistakes to happen.

CERTIFICATION
OSRAM has been certified for Quality Management system by :-

• Iqnet

(Www.iqnet-cetification.com)

• Rina

(Www.Rina.org)

• CISQ

(Www.cisq.com)

QUALITY OBJECTIVE

• To achieve customer satisfaction index of 60% with in 3 years.

• To conform with the budgetary plan for production , shrinkage

and efficiency.

• To confirm with " annual PPM plan ".

• To upgrade three raw & packing material supplies each year

to a quality score 57/60.

• To bring down number of accidents by 20% every year by

following the safety norms.

• To maintain training index of 0.5%

ENVIRONMENT, HEALTH SAFETY

& SOCIAL POLICY

• To ensure health & safety of its employees, prevent pollution and protect the

environment by complying with relevant legal requirement.

• Prevent behavior which is integral to the quality policy shall be the guiding
principle for implementation.

• To conserve natural resources by optimum utilization minimization

 wastage of Raw Material , water energy & other associated factors

affecting the environment.

• This policy shall be deployed at all level of the orgn. and interested

parties through awareness / training about EHS aspect and hazards

and motivate them for active participation.

• The management shall review EHS performance at regular interval for continual

improvement.

Our Vision :

The expectations and targets of company are reflected

in its policy and

continuous efforts for expanding its

share in the market. The OSRAM India

Vision 2007

proves to be the statement of its goals and would shape

its future

in India. The highlights of OSRAM India

Vision 2007 are -----

 OSRAM No.2 in lamps business in India.

OSRAM India sales over INR 3 billion.

OSRAM India leader in CFL, FO and ECG.

OSRAM the most respected brand name in the

country.

OSRAM products available in all parts of

India.

Cost leadership in halogen, T8 Luminux, CFL,

NAV Super and HQI.

Our Mission :

Better Technology

Better Quality

Better Tomorrow
 Our Values :

Customer Satisfaction.

Commitment to Total Quality.

Cost and Time consciousness.

Innovation and Creativity

Trust and Team Spirit.

Respect for Individual Integrity.

COMPANY PROFILE
 COMPANY PROFILE

OSRAM GmbH is one of the three leading lamp manufacturers in the word with its

headquarter at Munich (Germany). It is a company working with strong international

outlook, competent & farsighted management, and team spirit working, among 3000

employees throughout the world.

The world wide sales for the year 1998-99 amounts to approximately 16,000 crore

of Rupees. Of this huge amount, 88% was earned outside Germany, which

emphasizes the company’s strong international existence.

Today OSRAM is 81 years young the history of this world present giant can be

traced back to year 1919 , when three companies - AEG, Siemens & Halske AG, and

Duetsche Gasgluhlicht (Auer Gasellschaft)-pooled their resources for producing filament

lamps.

Today , Siemens AG is the sole stakeholder in OSRAM GmbH. The

OSRAM trademark was registered back in 1906,making it one of the oldest

internationally recognized trade names. The name 'OSRAM' had been derived from

"OSMIUM" and "WOLFRAM" the two German words for metals required for

manufacturing the filaments.

The division with largest turnover is general Lighting. Innovation products as

halogen lamps, compact fluorescent lamps, and metal halide lamps continue to show

healthy growth. OSRAM is today world's largest manufacturer of automotive lamps. It

has also an excellent

position in the field of photo optic lamps. Company has a considerable

market share in electronic control gear sector by offering systems that

integrate lamps with an electronic ballast.

 As an ISO – 9002 certified company, OSRAM has got 51production facilities

in 18 countries, catering the needs of customers in 146 countries. The company was

awarded the technical Oscar in march 1988 by the academy of motion picture arts and

science for the invention and continuous improvement in HMI lamps for the

professional motion pictures. Currently, company is spending 4%of its turnover R&D

activities. It is at top in Europe and second largest lamp producer in North America (as

OSRAM SYLVANIA). In addition to

Europe and North America, Asia is one of the most important growth

center for OSRAM's innovation products. Specially, in 1994 Indian subcontinent

become a potential market for energy efficient lighting products. So, due to strong

urge to explore the market here, OSRAM GmbH set up OSRAM India Pvt. Ltd. in 1994

for sales & marketing operations. The company has 100% foreign equity.
 HISTORY

The history of OSRAM is bound up closely with the rapid development of

lighting engineering. It was this company that in 1919 under one roof the

scientific expertise and decades-long experience of the top three lamp

producers in Germany. Only 1, 1919 a limited partnership, OSRAM GmbH,

was called into existence in Berlin by the manager of Allgemeine

Elektricitats - Gesellschaft , Deutsche Gasgluhlicht - Aktiengesellschaft

( Auergesellschaft ), and the electric lamp production facilities of Sieman

& Halske.

The Auergesellschafthad already in 1906 Registered the name OSRAM with

the Imperial Patent Office as the official trademark forits incandescent and arc lamps.

1906 was thus the birth date of a trade name that was destined to win world renown :

OSRAM. The origin of the OSRAM name came about thus : OS - (OS)MIUM which

is a lamp making metal.

The history of electric light and the history of OSRAM are inextricably
intertwined. Again and again , new developments from OSRAM have

changed the way we live.

As early as 1925, for example, OSRAM made night time driving much

safer with the development of the first twin filament headlight lamp worth

high and low beams. These BILUX lamps became famous throughout the

world. From filaments to fluorescents - In 1936, OSRAM launched the

first fluorescent lamp. Its economical light revolutionized artificial lighting

in offices, shops, factories and public buildings. Halogen light, a brilliant

idea - By including halogens in the filler gas, lighting specialists as

OSRAM set the incandescent lamp on a completely new course in 1960.

OSRAM has made constant improvements to the range. We have been

able; for example to reduce the tube diameter of fluorescent lamps from

38 mm to 26 mm and less, which saves glass and fluorescent material

and at the same time increases luminous efficacy.

 NEW MARKETS

In addition to Europe & North America , two bases where OSRAM is

particularly strong , Asia is one of the most important growth markets for

OSRAM's innovative products. In 1994 the Indian sub-continent became

a potential growth center for the energy efficient lightning products.

OSRAM India Pvt. Ltd. became quite strong & with the acquisition of E.C.E.

Lamps , division the projected sale was projected to be in excess of Rs.100 crore. In

1997 and achieved the same the far east joint ventures were established in Taiwan &

Indonesia & a new factory was started in Foshan ( China ). OSRAM continually

improves it's market presence in Eastern Europe.

 INNOVATIONS

About 4% of turnover is being spent every year on research &

development. OSRAM is an innovative company. Around 30% of the

lamp sale achieved with products, which are less than 5 years old.
 EMPLOYEES

As of Sept. 30, 1997, the OSRAM company world wide employed about

26,800 people. In Germany 8000 people were employed & outside

Germany 18,800, which is 70% of the employees worldwide

WORLD WIDE SALES BY MARKET

In fiscal year 2006/2007 the world wide sales were DM 6.3 billion , up

12% on the previous year . OSRAM is one of the three leading

manufacturer in the world.

The company's strong international focus is reflected by the fact that 88%

of sales were generated outside of Germany. Nearly half of OSRAM's

global sales are made in North America, where OSRAM SYLVANIA is

the region's second largest lamp producer . In Europe OSRAM is also

the market's second largest supplier. In Germany OSRAM is the market

leader.

Emphasis is also being placed on Latin America as well as on East & South East Asia.

OSRAM has 51 manufacturing units in 18 countries with most of the production is being

realized in the North America & Germany. Similar good growth in the sales has been

marked by the OSRAM INDIA Pvt. Ltd. The graph depicting the growth of the

company has been displayed below.

OSCAR FROM OSRAM

OSRAM was awarded the technical OSCAR in March 1998 by the

ACADEMY OF MOTION PICTURE ARTS & SCIENCE for the invention

& continuous improvement of H.M.I. lamps for professional motion

pictures.

DESCRIPTION OF PRODUCT
 Product offerings from OSRAM India

The range of products which osram has to offer can be broadly classified

in to four groups:-

GROUPS DESCRIPTION

AB General automotive lamps

AM Automotive lamps

FQ Photo optic lamps

PL Ballats* and luminanes

*In India BL will most probably be electonics ballasts.

The main area of concentration so far has been on AB ( general lighting )

and on FO (photo optics). The entire range of product brochures specifying

design feature are available at osram offices in India.

3.) Osram India Pvt. Ltd. has taken over lamp division of ECE industries limited satiated

at Sonepat ( Haryana ) on Oct 1998. Osram India Pvt. Limited is now owner of the

factory. Here different luminary products are manufactured in the following plants :-

1. GLASS PLANT.

2. LAMP PLANT.

3. COIL PLANT.

4. GLS PLANT.

PRODUCT OF GLASS PLANT :-

1. glass shells 60 mm round 60 mm mushroom

60 mm elliptical 60 mm egg type

45 mm round 75 mm elliptical

80 mm round 90 mm mushroom

110 mm round

2. tubular shells 36.2 mm to 38 mm diameter.

PRODUCT OF LAMP PLANT:-

fluorescent tubes 02feet

04 feet

PRODUCT OF COIL PLANT :-

filament and lead in wire

Now total production of fluorescent of fluorescent tubes is about 900000

tubes per month and different kinds of GLS production is about 3100000

bulbs per month. we have renovation plans for improvement in production

and quality of these two products.

PRODUCTS OF GLS PLANT :-

BC, CC, GLS 25W, 100W (230 volts)

BC,SC,GLS,MW 150W, 200W (250 volts)

ES,SC,GLS,HW 300W, 500W (250 volts)

 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research

problem. In it, step-by-step methods are followed to solve a particular problem. It refers

to a search for knowledge. It can also be defined as a scientific and systematic search for

pertinent information on a specific topic. In fact, research is an art of scientific

investigation.

Redman & Mory defines research as “systematized effort to gain new knowledge.”

RESEACH DESIGNS:

Research Design is the way in which the research is carried out. It works as a

blue print. Research Design is the arrangement of conditions for the collection and

analysis of data in a manner that aims to combine relevance to the research purpose with

economy in procedure.
TYPES OF RESEARCH DESIGN:

Basically, there are three types of Research Designs. These are:

Exploratory Descriptive & Diagnostic Experimental

Research Design Research Design Research Design
 Exploratory Research Design:

In it , a problem is formulate for precise investigation and working

hypothesis are developed.

 Descriptive & Diagnostic Research Design:

In Descriptive Research Design, those studies are taken which are

concerned with describing the characteristics of a particular individual

or a group.

In Diagnostic Research Design, those frequency are determined with

which something occurs or its association with something else.

 Experimental Research Design:

In it, casual relationships between the variables are tested. It is also

known as Hypothesis Testing Research Design.

The present project is descriptive in nature. The major purpose of

descriptive research is the description of state of affairs, as it exists at

present. The main characteristic of this method is that the researcher has no control

over the variables; he can only report what has happened or what is happening.
DATA COLLECTION:

The data can be of two types:

 Primary Data

 Secondary Data

The study is based on both primary and secondary data.

Primary Data: Primary data are those data , which is originally

collected afresh.

In this project, Questionnaire Method has been used for gathering required

information. However, some assistance was provided to respondents in filling it.

Secondary Data: Secondary Data are those data which are already

collected and stored and which has been passed through statistical research.

In this project, secondary data has been collected from following

sources :-

Annual Report

Articles in Journal, Magazines.

Books

Other material and report published by company

PROJECT PROFILE
 PROJECT : AN OVERVIEW

Managerial persons have vital role in this new management era. Industry's

growth is depend upon these managerial personnel’s because the

production field is depend upon these personnel’s. This industrial training

project gives the pre idea about planning of the industries and deals with

various field of industry. By this project persons get the opportunity to face

the problems that will come ahead in his path. Before making the project

planning of requirement is necessary , by this we can improve our quality

of estimation. After planning, execution, completion and evaluation are the

futer process of the project. In general words " Project is scheme of work

to be completed with in stimulated time by an adequate men & machine. "

complete or proper information can be grasp by trainee on the pre -

assigned project's subject.

Necessity of PROJECT :- It is well known that practice makes a men

Perfect , probably for industrious profession what so ever the knowledge

of book without practical knowledge they are like as a room without light.

So for this problem industrial training is a optimum way. Credit of the

profession may achieved by a manager when he process the good

knowledge of theory along with better wisdom of practical hand. By this

way we get an approximity for planning, designing and estimating a given

project. It is very essential before starting in any industry to make a good

project.

Advantages of PROJECT:-This training project is a process of stimulating

the skill of personal, increasing the aptitude and abilities to perform specific

job. The following important advantage are responsible for making a

project report and to proposed job.

1. Project gives the sufficient idea of proposed job.

2. It gives the sufficient knowledge for the type of material which is

required for the job.

3. If the project for a job designed then no wastage of money and material

takes place.

4. Project helps to work systematically.

5. Project develops the mind and our area of knowledge.

6. If we have the project of any proposed job then there is great easiness

in the installation.

7. Modern and scientific arrangement and management can be employed.

Meaning of PROJECT :- The work project has generate significance role

in the field of management. It is essentially required for management work

as delailed scene in order to give the practical form of work as indicated.

Before starting the project , we should fully aware about

the meaning of project. It's each word or letter has it own meaning.
P : Planning :- In planning stage all the aspect has regards to types of

work to be carried out is taken into consideration estimate with full details

of requirement cost and probable activity of the project is prepared.

R : Resources :- These are guided to promote the function of a plan

from which the way problem will be solved and the matter will be select.

O : Organization :- It is way of performing different type of works in

a systematic way of procedure.

J : Joint efforts :- The work which has been planned, is done by the

help of co - operation of labour. It means that the effort of jointing to all

these procedures which come in the work is known as joint effort.

E : Execution / Engineering junction :- As per estimate man and

material are arranged and work is organized according to the time

schedule.

A well educated engineer which is related , to do this working better way

to find out the better result. Hence the project is an engineering junction.

C : Construction :- Each of the activity in accordance with the plan is

completed. When all the activity are completed , the project as whole is

considered to be completed.

OR

: Co-operation :- This tells about the phenomenon of construction

which is the most essential for doing the work.

T : Technique :- The technique of working with due to co-operation of

working project and then controlled the body.

The general form of conclusion , the project is an systematic

consideration discussed and proposed on a particular subject.

As the mater of fact project is the work which used for construction

purpose before work planned and performed.

In general form of conclusion , the project is systematic and

consideration subject.

INFERENCE :- Project method is used by many Indian Management

Institution for their student trainees : A student is assigned a certain

problem of an organization , collect the data , conduct analysis and

prepare a proposal giving his conclusion and investigation and prepare

a proposal giving his conclusion and recommendation. They prepare the

project with the help of this coach guide. Oral examination is given to test

of dept of understanding of the student and provide him an opportunity to

explain the conclusion and solution given in his report.

 PRELUSION TO RATIO ANALYSIS

PRELUSION TO RATIO ANALYSIS

Absolute figures expressed in monetary terms in financial statement by themselves are

meaningless. these figure often do not convey much meaning unless expressed in relation

to other figures.

A Ratio is simply one number expressed in term of another. It is found by dividing one

number into the other.

Ratio may be expressed in the following three ways :

 Pure Ratio or Simple Ratio :- It is expressed by the simple division

 of one number by another.

 Rate or So Many Times :- It is calculated how many times a figure

is, in comparison to another figure.

SIGNIFICANCE OF RATIO ANALYSIS

 Ratio Analysis is an extremely useful device for analyzing the

financial statement.

 Ratio Analysis simplifies and summarizes a long array of accounting data and

makes them understandable.

 With the help of Ratio Analysis comparison of profitability and

Financial soundness can be made between one firm and another.

 Current year's ratios are compared with those of previous years and if
 some weak spots are thus located remedial measures are taken to

correct them.

 Ratio analysis is very helpful in forecasting and preparing the plan

for the future.

 If Ratio analysis is prepared for a number of years, they will reveal the trend of

costs, sales, profits and other important facts.

 Ratios help us in establishing ideal standards of the different items of

the business.

 Ratio analysis discloses the liquidity , solvency and profitability of the business

enterprise. Such information enables management to assess the changes in

comparison to another figure.

 Percentage: - It is the relation between two figures expressed

in hundredth.
 LIMITATION OF RATIO ANALYSIS

 False accounting data gives false ratios.

 Comparison not possible if different firms adopt different accounting

policies regarding depriciation, creation of provision for doubtful debts

method of valuation of closing stock etc.

 Ratio Analysis become less effective due to price level changes.

 Ratio may be misleading in the absence of absolute data.

 Limited use of a single ratio.

 Some companies in order to cover up their bad financial position to

Window dressing i.e., showing a better position than the one which

really exists.
 Circumstances differ from firm to firm hence no single ratio can be

fixed for all firms against which the actual ratio may compared.

 Ratio derived from analysis of statement alone are not sure indicator

of good or bad financial position and profitability of a firm. Effect of

personal ability and bias of analyst.

PARAMETER CONSIDERED FOR MEASURING

RATIO ANALYSIS

 Profitability

 Liquidity

 Solvency

 Operating Efficiency

PROFITABILITY

Every enterprise operate with an objective to earning profit , and profit is

must for the survival and growth of every business enterprise. profit serves

the following three purposes :-

• Measures net effectiveness and soundness of business efforts.

• Covers the costs of staying in business, replacement, market and

technical risks.

• Ensure a supply of future capital for innovation and expansion.

Profits can be related to various parameters like sales, owner equity

( net worth ) , capital employed to as certain the profitability of sales or the

capital employed. Owner are interested in profitability ratio , as profits

reflects the return on fund invested.

Basically , the main profitability ratio are as follows :-

1. NET PROFIT MARGIN = NET PROFIT AFTER

-------------------------------
NET SALES

2. RETUREN ON INVESTMENT (ROI) = PBIT

----------- * 100
CE

3. RETUREN ON EQUITY = PROFIT AFTER TAX

----------------------------
NET WORTH

4. RETUREN ON ASSETS = NET PROFIT

------------------- * 100
TCE
 LIQUIDITY

The liquidity of an enterprise refers to its ability to honor its commitment

or obligations arising over a short period of time of say, one year. Liquidity

is reflected by current assets and current liabilities and liquidity ratio are

expressed by comparing the current assets with current liabilities.

Liquidity ratios are very useful to various parties having interest

in the enterprise over a short period .

Some of the liquidity ratios are as follows: -

1. CURRENT RATIO :- It is a quantitative relationship between current

assets and current liabilities and indicate an enterprise ability to meet the current

obligation as expressed in terms of current liabilities.

Current assets refers to liquidity resources and must be sufficient enough

to pay current liabilities as and when they mature. This ratio is calculated

as follows :-

CURRENT RATIO = CURRENT ASSETS

-------------------------------
CURRENT LIABILITIES

The current ratio of 2 : 1 is the standard ratio. It means the current assets

are twice as comparison to the current liabilities and they are sufficient to

meet the short term obligation.

2. ACID TEST RATIO OR QUICK RATIO :- A distinction is made between

quick current assets and current assets.

Quick current assets are those current assets which are convertible into cash rather

early. As inventory is not likely to be realized early, the some is not treated as quick

assets.

QUICK RATIO = QUICK ASSETS

--------------------------------
CURRENT LIABILITIES

QUICK ASSETS = CURRENT ASSETS -(INVENTORIES+PREPAID EXP)

The quick ratio is 1 : 1 is considered as good for the business organization.

The current assets includes cash, debtors , bills receivable, stock, bank

balance etc. and the current liability includes creditors, bills payable,

outstanding expenses etc.

SOLVENCY

The solvency ratio reveal that ability of the firm to meet its long run obligation. Solvency

ratio indicate long term liquidity. Lenders like Bank , Financial institution, debenture

holders who gives long term loans to the enterprise. are interested in ascertaining the

solvency of the enterprise.

The important solvency ratio are :-

1. INTEREST COVERAGE RATIO :- This ratio relates the interest obligation

with the profits available for the period and indicates the number of times the interest

obligation is covered by the profit for the period.

INTEREST COVERAGE RATIO = PBIT
---------------
INTEREST

PBIT means profit before interest and taxes. This ratio must be greater than 1 , otherwise

the profit available being less than the interest payable , the enterprise would not be able

to discharge its interest obligation.

2. LEVERAGE RATIO :- This ratio relates debt to equity or owners fund. Equity

here is used in broader sense as net worth (i.e. capital plus retained earnings ) ,while debt

normally used as a long term interest bear in loans. This ratio is calculated as under :-

LEVERAGE OR DEBT EQUITY RATIO = DEBT

------------
EQUITY

The debt equity ratio thus , the ratio of total outside liabilities

to owner's total funds. It is ratio of the amount invested by outsiders to the

amount invested by the owners of business.

 RATIO
ANALYSIS
 PROFITABILITY

I. GROSS PROFIT RATIO= GROSS PROFIT * 100

NET SALES

YEAR Gross Profit NET %

SALES
2003-2004 1329 4522 29.83
2004-2005 1232 4363 28.23
2005-2006 1277 4172 30.69
2006-2007 1350 4240 31.83

GROSSPROFIT RATIO

5000
4500
4000 Gross Profit
3500
3000
NET SALES
2500
2000
1500 GROSS PROFIT
1000 RATIO
500
0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
 Profit is the difference between revenues and expenses over a period of time.

Profit is the ultimate output of a company and it will have no future if it fails to make

sufficient profit.

Gross profit is the difference between sales and the manufacturing cost of sold

goods. A number of companies in India define gross profit differently. They define it as

earnings before depreciation interest and taxes etc.On the above table ratio is 31.83% in

financial year it means company paid the direct expenses easily? This ratio is varying its

means company is good position.

 II. NET PROFIT RATIO = NET PROFIT * 100
NET SALES

YEAR NPAT NET %

SALES
2003-2004 462 4522 10.22
2004-2005 365 4363 8.36
2005-2006 410 4172 9.83
2006-2007 445 4240 10.49

NET PROFIT RATIO

5000

4000 NPAT

3000
NET SALES
2000
NET PROFIT
1000 RATIO
0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
YEAR

Profit is very important factor of every company without profit any

company can not survive. So profit play the very important role to survive the every

company like Osram India Pvt. Ltd. Gain the profit 10.22% in 2003-2004 Financial
year. It is good net profit ratio of company and ext year 2006-2007 gain the more

profit 10.49%. It means company lays good position.

III. RETURN ON TOTAL ASSET = PROFIT AFTER TAX

TOTAL ASSETS

YEAR PAT TOTAL %

ASSETS
2003-2004 462 3400 13.5
2004-2005 365 3652 10
2005-2006 410 3993 10.26
2006-2007 445 4030 11.04

RETURN ON TOTAL ASSETS

4500
4000
3500 PAT
3000
2500
2000
TOTAL ASSETS
1500
1000
500
0 RETURN
ONTOTAL
2003- 2004- 2005- 2006-
ASSETS
2004 2005 2006 2007
YEAR

The profitability ratio is measured in term of relationship between net profit and assets

employed to earn that profit. This ratio measures the profitability of the firm in term of

assets employed in the firm.

On the above table in financial year 2005-2006 this ratio was 10.26 %. If this ratio is

high that means company is good position.

IV. RETURN ON EQUITY SHAREHOLDER FUND = PAT & D
EQUITY SH. FUND

YEAR PAT & D EQUITY %

FUND
 2003- 462 1662 27.8
2004
2004- 365 1415 25.8
2005
2005- 410 1545 26.53
2006
2006- 445 1617 27.52
2007

RETURN ON EQUITY

1800
1600
1400
1200 PAT & D
1000
EQUITY FUND
800
600 ROI
400
200
0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
YEAR

Return on equity measure he profitability of equity funds invests in the firm. This ratio

reveals how the firm has utilized profitability of the owner funds. On the above basis of

table in financial year 2005-2006 his ratio is 26.53% it means shareholders funds is

proper utilized.And after that in next financial year in 2006-2007 this ratio is 27.52%. It

is good ratio.

V. EARNING PER SHARE = NET PROFIT AFTER TAX

NO. OF SHARE

YEAR NPAT NO. OF %

SHARES
2003-2004 462 43 10.74
2004-2005 365 43 8.48
2005-2006 410 43 9.53
2006-2006 445 43 10.34
 EARNING PER SHARE

500

400

300 NPAT
NO. OF SHARES
200
EPS
100

0
2003- 2004- 2005- 2006-
2004 2005 2006 2006
YEAR

The profit of a firm from the point of view of ordinary shareholders can be measured in

term of number of equity share. This is known as E.P.S.

(Earning Per Share) ratio.On the basis of above table it is very much clear that the

company earning was Rs. 10.74 per share in 2003-2004 financial year. Which is less

than the face value of the share and next financial year 2006-2007. Increase the share

value 10.34 per share. Through this ratio company decide the market value of the share.

LIQUIDITY RATIOS

I. CURRNENT RATIO = CURRENT ASSETS

CURRENT LIABLITIES

YEAR CURRENT CURRENT RATIO

ASSETS LIABILITIES
2003- 2374 1583 1.50
2004
2004- 3159 1708 1.85
2005
2005- 3664 1832 2
 2006
2006- 5899 2622 2.25
2007

CURRENT RATIO

7000
6000
5000
CURRENT
4000
CURRENT
3000
RATIO
2000
1000
0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
YEAR

This is the most important ratio for the every company’s point of view. Because every

body who have any relation with company are interested in company’s current ratio. It

is a part of liquidity ratio. It includes cash and those assets, which can be converted into

cash with in one year such as marketable securities, debtors and investment. Prepaid

expenses are also including in current assets.

The current ratio is a measure of the firm’s short-term solvency. It indicate the

availability of current liabilities. A ratio of greater than one means the firm has more

current assets than claims against them. Standards ratio of current ratio is 2:1. On the

basis of above figures it is clear that in the financial year of 2006-2007 the current ratio

of Osram India Pvt. Ltd. was 2.25 : 1 . It is more than the standards ratios this

company is good position for the financial YEAR 2006-2007.

II. LIQUIDITY RATIO = LIQUID ASSETS
CURRENT LIABLITIES

YEAR LIQUID CURRENT RATIO

ASSETS LIABILITIES
2003- 1477 1583 0.933
2004
2004- 1619 1708 0.947
2005
2005- 1832 1832 1
2006
2006- 2098 2622 1.25
2007
 LIQUIDITY RATIO

3000
2500
2000 LIQUID ASSETS
1500 CURRENT
1000 LIQUIDITY RATIO
500
0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
YEAR

It is extremely essential for firm to be able to meet its current obligations. In fact,

analysis of cash budgets and cash and fund flow statements; but liquidity ratio, by

establishing a relationship between cash and other current assets to current obligations ,

provide a quick measure of liquidity.

A firm should ensure that it does not suffer from lack of liquidity, and that it does not

have excess liquidity. Its standard ratio is 1 : 1. On the basis of above figures it is clear

that in the financials year of 2003-2004 the quick ratio was 0.93 : 1 and 2006 - 2007

ratio of Osram India Pvt. Ltd. was 1.25 : 1. It is good for the company that the

quick ratio of the company Increase from 0.93 to 1. According to the above information

we can say that company is in Good Position.

 SOLVENCY RATIOS

I. DEBT EQUITY RATIO = DEBT FUNDS

EQUITY FUNDS

YEAR DEBT EQUITY RATIO

2003-2004 265 1254 21.5 %
2004-2005 271 1339 20.3 %
2005-2006 287 1545 19 %
2006-2007 298 1617 18 %
 DEBT EQUITY RATIO

1800
1600
1400 DEBT
1200
1000 EQUITY
800
600 DEBT EQUITY
400 RATIO
200
0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
YEAR

Several debt ratios may be used to analyze the long-term solvency of the firm.

The firm may be interested in knowing the proportion of the interested bearing debt in the

capital structure. It may, therefore compute debt ratio by dividing debt funds by equity

funds. Debt fund will include

short and long term borrowing from financial intuitions, debenture, bonds, defers

payments, arrangements from buying capital equipment and bank borrowing, public

deposits and any other interest-bearing loan.

Debt-equity ratio can be calculated by many different ways but the above

method is the most appropriate than the other method. Whatever way the debt ratio is

calculated, it shows the extent to which debt financing has been used in the business.

High ratio shows that claim of creditors are greater than those of owners are.
II. INTEREST COVERAGE RATIO = PROFIT BEFORE TEX
NET INTEREST

YEAR PBIT INTEREST RATIO

2003-2004 996 221 4.5 %
2004-2005 1043 200 5.24 %
2005-2006 1071 188 5.69 %
2006-2007 1139 163 7%
 INTEREST COVERAGE RATIO

1200

1000 PBIT

800
INTEREST
600

400 INTEREST
COVERAGE
200 RATIO

0
2003- 2004- 2005- 2006-
2004 2005 2006 2007
YEAR

This ratio also known as time interest earned ratio. It indicates the firms ability to meet

interest obligation, Earning before tax an interest are used in the numerator of this ratio

because the ability to pay interest is not affected by tax burden as interest on debt funds is

deductible expenses. A high coverage ratio means that enterprises can easily meets its

interest obligation. This ratio is five or seven time high of interest then the firm growing

good position. On the basis of above table in 2003-2004 ratio is 4.5 time good position.

Last year 2006-2007 ratio is 7 times. Its mean company pay the interest easily to the

investors.
 ANALYSIS
&
INTERPRETATION

ANALYSIS : INETERPRETING RATIOS

 Steady increase in current ratio and acid test ratio indicates that the company is

able to meet its short term financial obligation out of its current assets. Company

is having 2.25:1 and 1.55:1 value of current ratio and acid test ratio respectively

for the year 2006-2007. However in the earlier years, the ratio less than one

indicates that current liabilities of the company was very high on account of

higher advances from customer dealers.

 The current ratio of the company is less than standard current ratio 2:1. So that

the company will be able to pay its current liabilities more easily. A much higher

ratio may be considered to be adverse from the view point of management but it is

not so much high. It is sufficient.

 Its working capital is increased by 49 (In million of EUR) It shows that the

capital is sufficient for day to day transaction.

 The quick ratio of the company is 1.25:1. Which is more than the standard ratio

1:1. So the company does not face any difficulty to fulfill its short term

obligation.

 The trend of decreasing interest coverage ratio is mainly due to heavy investment

and take loans. The interest obligation of the company is increased and the

interest coverage ration is decreasing.

 Average holding period of the inventory has come down from 39 to 15.5 days

indicating that reduction in inventory due to bringing final operation of distant

vendor to close vicinity of Osram India Pvt. limited and hence implementing the

new system for raw material and component supplies which leads to considerable

decrease in inventory. Raw material and component alone contribute to

approximately 80% of total inventory.

 The localization of sources are also contributed to lesser inventory. Also the cost

component is gradually coming down which adds advantage in reducing

inventory cost.

 Delivery instruction systems: A system by which the firm production plan is sent

to all the vendor end 15 days well in advance itself for their production schedule.

This makes sure that there is a large-scale reduction in Inventory not only in

Osram India Pvt. Ltd. end but also at vendor ends.

 E-Kanban/Nagare (Japanese word) resulted in to reduction on average raw

material holding period. E-Kanban is electronic Kanban. Kanban is an

 identification card, which indicates the Part Number, Total no of components in

the pallet. The idea of these Kanban/Nagare cards is to give an indication that

whether these components have been used on the line or not. Upon receipt back of

these cards, vendor will start make these components and to send it back to Osram

India Pvt. Ltd..

Now, E-Kanban reduces this effort. Through Intranet services the message would be

flashed at the vendor ends that at the end of the day about the production status/

Vendor shall accordingly plan for it.

 The investment turn over of the company is considerable decreasing on account of

increase in assets/investments (capacity enhancement, up gradation of existing

models, introduction of new models etc) in greater proportion than increase in

sales.

 Cash and cash equivalent is available in the company are sufficient for daily

transaction. In term of cash position of company is good.

 Debt equity ratio is 0.21. It is not good because it is less than standard debt equity

ratio is 1:1. It is calculated as external fund/shareholder fund.

 Debtor turn over ratio is high debtor turn over ratio is seems to be good for any

concerns.
 SWOT ANALYSIS

STRENGTHS :

1. Osram India Pvt. Ltd. is Strong Brand Equity in the market of the products.

2. It is having a complete product range of its products.

3. Its products are ISO marked which means that the products are standardized

products.
4. The company provides after sale services to its customers, which make them, satisfy

in all respects.

5. The company uses better and advance technology for manufacturing goods.

6. The company makes available better quality products, which has increased its

goodwill in the market very much.

7. Osram India Pvt. Ltd. is having very strong Distribution Network, which make

available its product in every part of the world.

WEAKNESS :

1) There is lack of complete automation.

2) Product range is not speedily increasing as compared to that of competitors.

3) East and North market is not fully developed.

4) Lack of professionalism is also its weakness.

OPPORTUNITIES :

1) Power has been accorded a “Priority Status” by the Govt. of India.

2) Good demand from developing countries resulting in high capacity

utilization.

3) Increasing bulbs and tubes market due to huge investment planned

in power generation by the Government.

4) Increased emphasis on energy saving and environment friendly

lighting products by all segments all over the world.

5) Huge unexplored export market.

THREATS :

1. Delay in Government’s implementation of power sector reforms and

investments.

1. Freeing up imports and reduction of import tariff barriers resulting

increase in imports and consequent lowering of capacity utilization

and dumping of low quality and cheap products into India.

2. Unchecked import Shrinking of sales and profits due to increase in

the number of MNCs coming to India.

3. Market expansion rate is 10% and entering of competitors is at the

rate of 30% which results in Supply > Demand

SUGGESTIONS
 SUGGESTIONS

 The current ratio of the company is less than standards, which is 2.25:1 and standard

current ratio is 2:1. A much higher ratio may be considered to be adverse from the

view point of management So company should decrease its current assets.

 The Liquidity ratio is not in favors of the company the quick ratio of the company is

1.25:1 and the standard quick ratio is 1:1. So the company should decrease its liquid

assets.

 There is excess of working capital in the company which effects the profitability of

the firms. The company should keep up working capital up to sufficient level.

 There is decreasing trend in interest coverage ratio, which is due to heavy investment

and the heavy investment effect the return o investment ratio. So the company should

keep up its investment up to sufficient level

 There should be efforts by company to reduce average holding period of the

inventory, which will be beneficial to reduce inventory holding cost . It should be

reduced by effective usage of techniques as new and E-Kanban.

 Excess cash should not be kept with the company.

 Debt equity ratio is not good because it is less than standard ratio

Company debt equity ratio Standard debt equity ratio

0.21 : 1 1:1

Debt should be maintain up to the standard level.

LIMITATIONS
 LIMITATIONS

The main limitations of the project undertaken are as under :-

 Time : The time of around two months was too short to study as wide subject like

Financial Analysis.

 Confidential information : The executives were hesitant to reveal complete

information since it was confidential.

 Busy Schedule of Concerned Executives : The concerned executives were not

having very busy schedule because of which they were reluctant to give

appointment.

 Unawareness : Executives were unaware of many terms related to Financial

Analysis while asking to them.

 CONCLUSION

CONCLUSION

It can be concluded that the financial health of Osram India Pvt. Ltd. has been very

good and this is classical example of how a company can take over from the level of
monopoly to competitive environment and how best can be coped up with. Through the

losses were there in the year 2003-2004, they were able to come out of it successfully and

regain into profitable scenario.

Also, it can be seen that by not seeing a superficial picture of a company (seeming

to be bad), if analyses are done in respective of financial ratios, the strong fundamentals

can be seen.

Though the returns on investments are less compared with pre liberalization era, at

the long run Company as well as the customer would be benefited.

Since the company has gone public only this year (2006-2007), the crucial

dividend policy and all related ratios can be studied after the release of the annual report

of 2007-08 only.
 BIBLIOGRAPHY

BIBLIOGRAPHY

S.No. Title Author Publication

1 Financial Management Khan & Jain Tata McGraw Hill

2 Mgt. Accounting & R. K. Mittal V.K. Publication

Financial Mgt.

3 Management Accounting R.K. Sharma Kalyani Publication

(Principles & Practices) S.K. Gupta

4 Research Methodology C. R. Kothari Wishwa Prakashan

6 Personal Discussion with the executives & other staff member of

F&A Dept. of the Company.

7 Magazines & other Records of Company

8 www.osram.com

9 www.osramindia.com