NOIDA INSTITUTE OF ENGINEERING & TECHNOLOGY

Summer Training Project Report (MB 307)

UNDER THE SUPERVISION : SUBMITTED BY :

Ms. NEHA KATIYAR

DEEPAK Roll no.- 1213370031

TOPIC :- A Study of Accounting and financial

system at I.T.I Ltd

INTRODUCTION OF TOPIC
This project is based on topic Accounting & Financial Analysis of ITI LTD.. The projects determine the financial position of the ITI ltd. To ascertain the Analysis of the ITI Ltd. the secondary data was collected through annual report, magazines, personal manuals, charts and tables. SWOT analysis is a systematic anticipation and analysis of future coupled with the methodology for adapting such changes. The SWOT analysis ensures growth and continued profitability to a company. This can be achieved through identification of market opportunities, proper investment plans and utilizing existing resources at the right time and right place. Without proper financial policy a finance manager:

Losses control over the future of the firm, as he is not in position to know the reasons of failure and cannot take any corrective action. Faces with the problems of managing by crisis rather than design. Remains busy in counteracting the well timed, well planned offensive strategies of competitors.

Company Profile
Indias first public sector unit (PSU) - ITI Ltd. was established

in 1948. Ever since, as a pioneering venture in the field of telecommunications, it has contributed to the 50% of present national telecom network. With stateof-the-art manufacturing facilities spread across six locations and countrywide network of Marketing/Service outlets, the company offers complete range of telecom products and total solutions covering the whole spectrum of switching, transmission, and access and subscriber premises equipment. ITI joined league of world class vendors of global system for mobile technology (GSM) with the inauguration of mobile equipment manufacturing facilities at its Mankapur and Rae Bareli plants in 2005-06.

4/8/2014

 This ushered in a new era of indigenous mobile equipment production in the country. These two facilities supply more than nine million lines per annum to both domestic as well as export markets.
Secure communications is the companys forte with a proven record of engineering strategic communication networks for Indias Defense Forces. Extensive in-house R&D work is devoted towards specialized areas of Encryption, NMS, IT and access products to provide complete customized solutions to various customers.

Objectives of Summer Internship

The rationale behind Financial Analysis is of the following: To obtain a true insight into financial position of the company. To make comparative study of financial statements of different years. To draw the correct picture of the financial operations of the company in terms of liquidity, solvency, turnover, profitability etc. To find out the reasons for unsatisfactory results. To estimate the earning capacity of the concern. To judge the financial (both liquidity and solvency) position and financial performance of the concern. To determine the debt capacity of the concern. To decide about the future prospects of the concern.

Research Methodology
The methodology opted for carrying out project was by way of collection of data from the companys annual reports for the past three years i.e. from 2010-11 to 2012-2013, for the calculation of ratios. The theory related to ratios was gathered from various financial management books, which served the purpose of calculation and analysis of ratios.

Further based on the above statements ratios related to liquidity, turnover, solvency, profitability and over profitability groups and miscellaneous groups have been calculated and interpreted in an intra firm comparison method. Similarly the ratios have been presented in graphical format to have clear understanding of it during three financial years and changes in it.

Data Collection
a) Primary Data: -Primary data related to the project was collected from the discussion and interaction with the senior employees and executives in the organization from Accounts and Finance department. b) Secondary Data: -Secondary data was collected from the documents, which were in printed forms like annual reports, pamphlets, reference books based on Financial Management and through websites.

Trend Projection Method

The trend projection method involves (a) determining the trend of consumption by analysis of past consumption statistics and (b) projects future consumption by extrapolating the trend. The trend of consumption may be represented by one of the following relationships: Linear Relationship: Yx = a + bx Exponential Relationship: Yx = a ebx In the above equation Yx represent demand for year x, x is the time variable and a, b and axs are constants.

Correlation Analysis
Correlation analysis is the statistical technique that is used to describe not only the degree to which are variable is related another but also the directions the influence. The coefficient of correlation measures the mutual relationship between two variables. The increase in one variable is accompanied by the proportionate increase in the other variable. The increase in one variable causes the proportionate decrease in the other variable. In the first case the variable are said to be positively correlated, while in the second case, the variable are said to be negatively correlated.

Multiple Discriminate Analysis

Y SCORE MODEL:
Y = 14.5166v2 + 0.0015v25 + 0.8715v31 + 0.7914v35; Where Y = Overall Discriminate Score v2 = Cash Flow / Total Tangible Assets v25 = Current Assets / Current Liabilities v31 = Net Sale / Total Tangible Assets v35 = Defensive Assets / Total Operating Expenditure

Z SCORE MODEL:
Z = 0.012X1 + 0.01X2 + 0.033X3 + 0.006X4 + 0.999 X5; Where Z = Discriminant function of a firm X1 = Net Working Capital / Total Assets (%) X2 = Retained Earning / Total Assets (%) X3 = EBIT / Total Assets (%) X4 = Market value of total equity / Book value of debt (%) X5 = Sales / Total Assets (Times)

Ratio Analysis
Ratio analysis is a powerful tool of financial performance analysis. A ratio is defined as the indicated quotient of two mathematical expressions and as the relation between two or more things. In financial performance analysis, a ratio is used as a benchmark for eval position of a firm. The relationship between two accounting figures, expressed mathematically, is known as financial ratio (or simply as ratio). Ratios help to summarise a large quantities of financial data and to make qualitative judgment about the firms financial performance. TYPES OF RATIOS: The ratios are of following types: Liquidity Ratios. Leverage Ratios. Activity Ratios. Profitability Ratios.

Liquidity Ratios
Liquidity ratios measure the ability of the firm to meet its current obligations. They indicate whether the firm has sufficient liquid resources to meet its short term liabilities. To predict the short term solvency of the firm, following liquidity ratios are used. Current Ratio: . Current Assets Current ratio = ---------------------------Current Liabilities Quick Ratio or Liquid Ratio: Liquid Assets Quick / Liquid / Acid test ratio = --------------------------------Liquid Liabilities

Net Working Capital Ratio: Net Working Capital NWC ratio = ------------------------------------------------Net Assets

Leverage Ratios
Total Debt Ratio: Total Debts Total Debt ratio = -------------------------------------------Total Debt + Net Worth Debt Equity Ratio: Debt Debt - Equity Ratio = -----------------------------------------Equity Coverage Ratio: EBIT Coverage Ratio = --------------------------------------Interest

Activity Ratios
Inventory Turnover Ratio: Cost of goods sold (or) Cost of Sales Inventory / Stock Turnover Ratio = ------------------------------------------------Average Stock Debtors Turnover Ratio (Accounts Receivables Ratio): Credit Sales Debtors Turnover Ratio = ----------------------------------Sundry Debtors Working Capital Turnover Ratio: Sales Working Capital Ratio = -----------------------------------------------Net Working Capital

Profitability Ratios
Gross Profit Margin: Gross Profit Gross Profit Ratio = ------------------------------- X 100 Net Sales Net Profit Margin: Net Profit Net Profit Ratio = ------------------------------ X 100 Net Sales Return on Investment (ROI): Profit before Interest Return on Investment = ------------------------------------- X 100 Capital Employed

Return on Equity: Profit after tax Return on Equity = --------------------------------Net Worth Earnings per Share: Earnings available to equity shareholders Earnings per Share (E.P.S) = ---------------------------------------------------------No. of Equity shares Dividend Payout Ratio: Dividend per share Payout Ratio = ---------------------------------------EPS

Findings
As per the analysis of the data through various tools the researcher has prepared the following findings and recommendations to the company: As per the comparative balance sheet the companys financial position has become poor year by year. Therefore the company has to appropriate steps to improve the financial position in the future years. According to the financial statement of the company has incurred loss for the past three years. Hence the researcher cannot estimate the future profitability position of the company and also to increase the volume of sales in the future years. The companys financial statement for the past three years shows that the liquidity position of the company was unsatisfactory. So the company has to improve the liquidity position.

As per the analysis, quick ratio was unsatisfactory .During the period funds are scared in the inventories. Due to that the company cannot maintain adequate liquidity position. Hence the company has to take necessary measures to control the funds locked in the inventory. The companys average collection period has been decreased from 2012-13 than the previous years. It found that the product is being undemandable in the market at present. So the company should take initiative to promote the sales of the product. The companys inventory turnover ratio was not satisfactory. So the company has to take necessary steps for controlling the inventory holding period. The companys asset and liabilities has been decreased year by year as per the comparative balance sheet. So the company has to improve the capital structure, profitability, working capital, liquidity position in the future years.

The trend projection for analysis for sales in negatively increasing year by year but the actual sales may have fluctuation, whereas the trend projection for loss is increasing year by year. So the company should take preventive measures to increase profit.

THANK YOU