A STUDY ON FINANCIAL PERFORMANCE OF ELGI

ELECTRIC & INDUSTRIES LTD, COIMBATORE.

By

A.ALEX ARUL

Reg.No. 71103631002

Of

KONGU ENGINEERING COLLEGE,

Perundurai, Erode – 638 052.

A PROJECT REPORT

Submitted to the

FACULTY OF MANAGEMENT SCIENCES

In partial fulfillment of the requirements

For the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

JUNE, 2005
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BONAFIDE CERTIFICATE

Certified that this project report titled “A STUDY ON

FINANCIAL PERFORMANCE OF ELGI ELECTRIC & INDUSTRIES LTD

COIMBATORE” is the bona fide work of Mr. A. Alex Arul who carried out

the research under my supervision. Certified further, that to the best of my

knowledge the work reported herein does not form part of any other project

report or dissertation on the basis of which a degree or award was conferred

on an earlier occasion on this or any other candidate.

SUPERVISOR HEAD OF THE DEPARTMENT

Viva – Voce held on ___________________

Internal Examiner External Examiner

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ABSTRACT
The present study of the research entitled “A Study on Financial
Performance" was conducted at Elgi Electric & Industries Ltd., Coimbatore.
The details regarding the history and accounting policies of the company was
collected through discussion with the company officials. The study was based
on secondary data from records, reports and profile of the organization. The
present study has been organized into five chapters. The first chapter deals
with the introduction about the project title “Financial performance” and
profile of the company. The second chapter deals with the need, objectives
and limitations of the study. The main objectives of the study is to make an
analysis on the financial performance of the company for 5 financial Years, to
calculate profitability turnover & financial ratios to assess the financial
position of the firm, to study the efficiency and liquidity position using ratios,
to study the trend of financial performance of the company, to asses
individual financial segments and put forth the strength and weakness of the
financial elements of balance sheet through trend analysis.

The third chapter deals with research design, data collection and
period of study. The data for 5 financial years i.e., from 1999 – 2000 to 2003
– 2004, were collected and used in the present study.

The fourth chapter deals with the Analysis and Interpretation. The
tools used in this study are ratio analysis, trend percentages of income
statements and Balance sheet, common size income statement & balance
sheet and comparative income statement & balance sheet. Charts and tables
are used for better understanding. Through ratio analysis the company could
under stand the Profitability, Liquidity, Leverage, Turnover positions of the
company. Through trend percentage of income statement & balance sheet,
the company can visualize their trend of growth. The comparative income
statement & balance sheet reveals the comparison between the various year
periods.
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The fifth chapter deals with results, suggestions for the improvement
of the company and conclusion. Findings of the study shows that the
profitability position is good as the Net profit ratio, return on equity, operating
profit ratio have an increasing trend during the period of study. The Turnover
position was better as the Debt – equity ratio, Fixed & Total asset turn over
ratios show an increasing trend during the period of study, the collection
period was also within the efficiency level. The liquidity position was good
during the period of study. The Leverage position was not so poor during the
period of study. The suggestion is that, the management may take proper
decisions to maintain their absolute liquid ratio, so that they can maintain
their liquidity position in the long run., The liquidity position could be
strengthened by reducing the current liabilities., The management may try to
increase the EPS by increasing the profitability of the company., The cash
balance level of the company when compared to current liabilities is lower.
The management may improve the cash balance to an optimum level to meet
the contingencies. This study will be useful for owners, creditors, suppliers,
customers, Department managers and others to get insight about financial
soundness.
The study has revealed that the financial performance of Elgi
Electric & Industries Ltd., Coimbatore, is good.
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ACKNOWLEDGEMENT

I am greatly indebted to many personalities for their kind help,

encouragement and guidance for me to prepare and finish this project

successfully. I take this opportunity to thank all of them.

I here by acknowledge my sincere gratitude to the Kongu

Vellalar Institute of Technology Trust and to the principal of Kongu

Engineering College Dr.A.M.NATARAJAN B.E., M.Sc.,(Engg.) Ph.D., and

the management for providing me an opportunity to undergo M.B.A Degree

course and to undertake this project work.

I wish to express my deep sense of gratitude to our Director

Prof. P.SURESH KUMAR M.Sc.,(Agri)M.B.A., I wish to express my hearty

thanks to Prof. M.GNANAJOTHI, B.Sc.,(Agri)M.B.A.,D.L.L., faculty of

management studies for his valuable advice and guidance to carryout the

project work successfully.

I express my sincere thanks to Mr. P.MURUGANATHAN,

Senior officer – Accounts, ELGI ELECTRIC & INDUSTRIES LTD,

COIMBATORE for his kind guidance in the project.

I also extend my thanks to all the other faculty members for

sending their helping hands to complete this project effectively. Finally, I

would like to profoundly thank all the respondents who helped me in

collecting the necessary information in completing this project.

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TABLE OF CONTENTS

PARTICULARS PAGE NO.

ABSTRACT iii
LIST OF TABLES ix
LIST OF FIGURES xi

CHAPTER 1 INTRODUCTION
1.1 INTRODUCTION AND DESIGN OF THE STUDY 1
1.2 INTRODUCTION TO COMPANY 10

CHAPTER 2 NEED, OBJECTIVES AND LIMITATIONS

2.1 NEED FOR THE STUDY 14

2.2 OBJECTIVES OF THE STUDY 15
2.3 LIMITATIONS OF THE STUDY 16

CHAPTER 3 RESEARCH METHODOLOGY

3.1 RESEARCH DESIGN 17

3.2 DATA COLLECTION 17
3.3 PERIOD OF STUDY 18

CHAPTER 4 ANALYSIS AND INTERPRETATIONS 19

CHAPTER 5 FINDINGS, SUGGESTIONS AND CONCLUSION 59

APPENDICES
REFERENCES
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LIST OF TABLES

Table
Particulars Page No.
No.
4.1.1.1. Gross Profit Margin Ratio 19
4.1.2.1. Net Profit Margin Ratio 20
4.1.3.1. Operating Profit Margin Ratio 21
4.1.4.1. Return on Capital Employed 22
4.1.5.1. Return on Equity 23
4.1.6.1. Earning Per Share 24
4.2.1.1. Debtor’s turnover Ratio 25
4.2.2.1. Debt Collection Period 26
4.2.3.1 Fixed Asset Turnover Ratio 27
4.2.4.1. Total Assets Turnover Ratio 28
4.2.5.1. Inventory Turnover Ratio 29
4.2.6.1 Stock Velocity 30
4.3.1.1 Current Ratio 31
4.3.2.1. Quick Ratio 32
4.4.1.1. Debt Equity Ratio 33
4.4.2.1. Debt – Assets Ratio 34
4.5.1.1 Common Size Balance Sheet (1999, 2000) 35
4.5.2.1. Common Size Balance Sheet (2000, 2001) 36
4.5.3.1. Common Size Balance Sheet (2001, 2002) 37
4.5.4.1. Common Size Balance Sheet (2002, 2003) 38
4.5.5.1. Common Size Balance Sheet (2003, 2004) 39
4.6.1.1. Common Size Income Statement (1999, 2000) 40
4.6.2.1. Common Size Income Statement (2000, 2001) 41
4.6.3.1. Common Size Income Statement (2001, 2002) 42
4.6.4.1. Common Size Income Statement (2002, 2003) 43
4.6.5.1. Common Size Income Statement (2003, 2004) 44
4.7.1.1. Comparative Balance Sheet (1999, 2000) 45
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Table
Particulars Page No.
No.
4.7.2.1. Comparative Balance Sheet (2000, 2001) 46
4.7.3.1 Comparative Balance Sheet (2001, 2002) 47
4.7.4.1 Comparative Balance Sheet (2002, 2003) 48
4.7.5.1 Comparative Balance Sheet (2003, 2004) 49
4.8.1.1 Comparative Financial Statement (1999, 2000) 50
4.8.2.1 Comparative Financial Statement (2000, 2001) 51
4.8.3.1 Comparative Financial Statement (2001, 2002) 52
4.8.4.1 Comparative Financial Statement (2002, 2003) 53
4.8.5.1 Comparative Financial Statement (2003, 2004) 54
4.9.1.1 Financial Statement Trend Percentages 55
4.9.2.1 Balance Sheet Trend Percentages 56
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LIST OF FIGURES

Chart Particulars Page No.

No.
4.1.1.2 Gross Profit Margin Ratio 19
4.1.2.2 Net Profit Margin Ratio 20
4.1.3.2 Operating Profit Margin Ratio 21
4.1.4.2 Return on Capital Employed 22
4.1.5.2 Return on Equity 23
4.1.6.2 Earning Per Share 24
4.2.1.2 Debtor’s turnover Ratio 25
4.2.2.2 Debt Collection Period 26
4.2.3.2 Fixed Asset Turnover Ratio 27
4.2.4.2 Total Assets Turnover Ratio 28
4.2.5.2 Inventory Turnover Ratio 29
4.2.6.2 Stock Velocity 30
4.3.1.2 Current Ratio 31
4.3.2.2 Quick Ratio 32
4.4.1.2 Debt Equity Ratio 33
4.4.2.2 Debt – Assets Ratio 34