F A mgnt-LG Final

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INTRODUCTION:

Financial management is a service activity which is concerned with

providing quantitative information which is of financial nature which may

be needed for making Economic decisions regarding the choice among

alternative course of actions

The financial management is a process of identification accumulation,

analysis preparation interpretation and communication of financial

information to plan evaluate and control a business firm.

Financial management is that specialized function of general

management which is related to the procurement of finance and its effective

utilization for the achievement of the goals of an organization.

Finance may be defined as the provision of money at the time where,

it is required. Finance refers to the management flews of money through an

organization. It concerns with the application of skills in the manipulation,

use and control of money. Different authorities have interpreted the term

finance differently. However there are three main approaches to finance.

The first approach views finance as to providing of funds needed by a

business on most suitable terms this approach confines fiancs to the

raising of funds and to the study of financial institutions & instruments

from where funds can be procured.

The second approach relates fianc to cash.

The third approach views fianc is being concerned with raising funds &

their effective utilization.

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Objectives of Financial Management:

In order to meet the day to day operation every firm should maintain

necessary liquid assets.

The immediate objective of any business is to earn profit and

maximize the profit as much as possible.

Profit maximization at the cost of social or moral obligation is a short

signated policy.

Wealth Maximization is better criteria rather than profit

maximization. Any financial action which creates wealth.

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Objectives Of the Study:

The study is made to known the amount of capital expenditure made

by the company during study period.

The study is conducted to evaluate depreciation and method of

depreciation adopted by LG.

Profit maximization is not considered as basic idea for making

investment and financing decision through Fixed Asset Management.

The study is evaluate is giving adequate returns to the company.

Study is conducted to evaluate that if fixed assets are liquidated. What

is the proportion of fixed assets amount will contribute for payment of

owner fund and long term liabilities.

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Sources of Data:

After going through different methods of data collection, it was decided that

both primary and secondary data are suitable for this survey.

Primary Data:

The primary data was collected mainly with interactions and discussionswith the companys executives.

Secondary Data:

The data gathering method is adopted purely form secondary sources.

The theoretical content is gathered form eminent text book referenceand library at LG ELECTRONICS.

The financial data and information is gathered from annual reports ofthe company internal records.

Interpretation, Conclusions and suggestions are purely base on myopinion and suggestions provided by the project guide.

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Need for study:

Fixed Assets play vary important role in realign companys objectives

the firms to which capital investment vested on fixed assets. Theses fixed

assets are not convertible or not liquid able over a period of time the total

owner finds and long term liabilities are invested in fixed assets. Since fixed

assets playing dominant role in total business the firms has realized the

effective utilization of fixed assets. So ration contributes very much in

analyzing and utilized properly it effects long term sustainability of the firms

in analyzing and utilized properly it affect long term sustainability of the

firms which may effect liquidity and solvency and profitability positions of

the company. The idle of fixed assets lead a tremendous in financial cost and

intangible cost associate to it. So there needs lead a tremendous in financial

cost and intangible cost associate to it. So there is need for the companies to

evaluate fixed assets performance analysis time to time by comparing with

pervious performance comparison with similar company and comparison

with industry standards. So chose a study to conduct on the fixed assets

analysis of LG ELECTRONICS. Using ratio in comparison with previous

year performance, the title of the project is analysis on Fixed Assets

management.

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Importance:

Fixed assets are the assets which cannot be liquidates into cash within

one year. The large amount of the company is invested in these assets. Every

year the company investment a additional fund in these assets directly or

indirectly the survival and other objectives of the company purely depends

on operating performance of management in effective utilization of there

assets.

Firm has evaluate the performance of fixed assets with proportion of

capital employee on net assets turnover and other parameters which is

helpful for evaluating the performance of fixed assets.

Scope Of Study:The project is covered of fixed Assets of LG ELECTRONICS. drawn

form annual report of the company. The fixed assets considered in the

project is which cam not be converted into cash with one year. Ratio

analysis is used for evaluating fixed assets performance of LG

ELECTRONICS.

The subject matter is limited to fixed assets it analysis and its performance

but not any other areas of accounting, corporate marketing and financial

matters.

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METHODOLOGY

The present study confines to the evaluation of overall financial

performance ofLG Electronics.

For this purpose of the study the recent five years period(2005-2006

to 2010-2011) is selected.

The data used for analysis and interpretation from annual reports of

the company that is secondary forms of data.

Trend analysis and Ratio analysis are the techniques used for

calculation purpose.

The project is presented by using tables, graphs and with their

interpretations.

No survey is undertaken or observation study is conducted in

evaluating Fixed Assets performance ofLG ELECTRONICS.

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Limitations:

The study period of 45 days as prescribed by Osmania University.

The study is limited up to the date and information provided by LGELCTRONICS INDIA LTD and its reports.

The reports will not provide exact fixed Assets status and position inLG ELECTRONICS. it may varying form time to time and situationto situation.

This report is not helpful in investing in LG ELECTRONICS. Either

through disinvestments or capital market.

The accounting procedure and other accounting principles are limitedby the company changes in them may vary the fixed assetsperformance.

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Objectives of the study:

The study is conducted to evaluate fixed assets performance of the

study is conducted to evaluate the fixed assets turnover on LGELECTRONICS.

The study is made to known the amount of capital expenditure madeby the company during study period.

The study is conducted to evaluate depreciation and method ofdepreciation adopted by LG ELECTRONICS.

The study is conducted to known the amount of finance made by longterm liabilities and owner funds towards fixed assets.

Study is conducted to evaluate that if fixed assets are liquidated. Whatis the proportion of fixed assets amount will contribute for payment ofowner funds and long term liabilities.

The study is to evaluate adequate returns to the company.

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REVIEW LITERATURE

THEORITICAL CONCEPT

INTRODUCTION:

TANGIBLE FIXED ASSETS are those, which have physical existence and

generate goods and services. Included in this category are land, building,

plants, machinery, furniture, and so on. They are shown in the balance sheet,

in accordance with the cost concept, at their cost to the firm at the time they

were purchased. Their cost is allocated to/charged against/spread over their

useful life. The yearly charge is referred to as depreciation. As a result, the

amount of such assets shown in the balance sheet every year declines to the

extent of the amount of depreciation charged in that year and by the end of

the useful life of the asset it equals the salvage value, if any. Salvage value

signifies the amount realized by the sale of the discarded asset at the end of

its useful life.

INTANGIBLE ASSETS do not generate goods and services directly. In a

way, they reflect the rights of the firm. This category of assets comprises

patents, copyrights, trade marks and goodwill. They confer certain exclusive

rights to their owners patents conger exclusive rights to use an invention,

copyrights relate to production and sale of literary, musical and artistic

works, trade marks represent exclusive right to use certain names, symbols,

labels, designs, and so on intangible fixed assets are also written-off over a

period of time.

Intangible assets lack physical substance and arise form a right granted by

the government or another company. Intangibles may be acquired or

developed internally. Examples of rights granted by the government are

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patents, copyrights, and trademarks, while am example of a privilege granted

by another company is a franchise. Other types of intangibles include

organization costs, leasehold improvements, and goodwill. Organization

costs are the expenditures incurred in starting a new company; an example

would be legal fees. Leasehold improvements are expenditures made by a

tenant to his or her leased property, such as the cost of putting up new

paneling. Goodwill represents the amount paid for another business in

excess of the fair market value of its tangible net assets. For example, if

company A paid $ 1000,000 for company Bs net assets having a fair market

value of $84,000, the amount paid for goodwill is $16,000. Goodwill can be

recorded only when a company purchases another business. The amount

paid for the goodwill of a business may be based upon the acquired firms

excess earnings over other companies in the industry. Internally developed

goodwill (e.g., good customer relations) is not recorded in the accounts.

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ACCOUNTING FOR INTANGIBLE ASSETS:

APB Opinion 17 specifies the requirements for accounting for intangible

assts. Intangibles that have been acquired, such as goodwill, should berecorded at cost. In the event that an intangible is acquired for other than

cash, it should be reflected at either the fair market value of the

consideration given or the fair market value of the right received, whichever

is more clearly evident. Intangibles should not be arbitrarily written off if

they still have value.

When identifiable intangibles are internally developed (e.g., patents), they

should be recorded as assets and reflected at cost. If they are not identifiable,

they should be expensed.

Intangible assets must be amortized over the period benefited not to exceed

40 years. Amortization is a term used to describe the systematic write-off to

expense of an intangible assets cost over its economic life. The straight-line

method of amortization is used. The amortization entry is Amortization

expense Intangible asset The credit is made directly to the given intangible

asset account. However, it would not be incorrect to credit an accumulated

amortization account, if desired. Some intangibles have a limited legal life.

An example is patents, which have a legal life of 17 years.

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DEFERRED CHARGES:

Deferred charges are of along-term, nonrecurring nature. They are allocated

to a number of future periods. Examples are start-up costs and plantrearrangement costs.

Deferred charges are customarily listed as the last asset category in the

balance sheet since their dollar value is usually insignificant relative to total

assets.

OTHER ASSETS:

When non-current assets cannot be properly placed into the assetclassifications already

Discussed, they may be included in the Other Assets category. Placement of

an item in this classification depends upon its nature and dollar magnitude.

However, this classification should be used as a last resort.

COLLECTIBLE ASSETS:

Not surprisingly, periodic disenchantment with returns on marketable

securities has led some investors to examine a host of tangible assets that are

normally considered only by collectors. The average returns on

collectibles such as Chinese ceramics, coins, diamonds, paintings, and

stamps have on occasion been quite high, but generally such assets also

experience periods of negative returns. This fluctuation is not surprising

because if one (or more) type of collectible had provided consistently high

returns, many investors would have been attracted to it and would have bid

its price up to a level where high returns would no longer have been

possible. In deed, more recent studies of prints and paintings have concluded

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that their risk and return characteristics make them relatively unattractive

investments for risk-averse investors.

In a sense, a collectible asset often provides income to the owner in the form

of consumption. For example, an investor can admire a Roberto Clementre

rookie baseball card, sit on a Chippendale chair, gaze upon a Georgia O

Keefe painting, play a Stradivarius violin, and drive a Stutz Bearcat

automobile. Value received in this manner is not subject to income taxation

and is thus likely to be especially attractive for those in high tax brackets.

However, the value of such consumption depends strongly on ones

preferences.

If markets are efficient, collectible assets will be priced so that those who

enjoy them most will find it desirable to hold them in greater-than-market-

value proportions, whereas those who enjoy them least will find it desirable

to hold them in less-than-market-value proportions (or, in many cases, not at

all).

Institutional funds and investment pools have been organized to owncollectibles of one type or another. These arrangements are subject to serious

question if they involve locking such objects in vaults where they cannot be

seen by those who derive pleasure from this sort of consumption. On the

other hand, if the items are rented to others, the only loss may be that

associated with the transfer of a portion of the consumption value to the

government in the form of a tax on income.

Investors in collectibles should be aware of two especially notable types of

risk. The first is that the bid-ask spread is often very large. Thus an investor

must see a large price increase just to recoup the spread and break even. The

second is that collectibles are subject to fads (that risk has been referred to as

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stylistic risk). For example, Chinese ceramics may be actively sought by

many investors today, leading to high prices and big returns for earlier

purchasers. However, they may fall out of favor later on and plunge in value.

Unlike financial assets, there is no such thing as fair value for collectibles

that can act as a kind of anchor for the market price.

GOLD:

In the United States, private holdings of gold bullion were illegal before the

1970s. In other countries, investment in gold has long been a tradition.

According tone estimate, at the end of 1984 gold represented over 6% of the

world market wealth portfolio.

History suggests gold has performed like other types of collectibles in that it

has had periods of high returns but also periods of low returns (particularly

since the early 1980s). Furthermore, gold has had a high standard deviation,

suggesting that by itself it has been a risky investment. However, for any

single investment, risk and return are only parts of the story. Correlations of

an assets returns with the returns on other assets are also relevant. Ingeneral, gold price changes have a near-zero correlation with stock returns.

Gold thus appears to be an effective diversifying asset for an equity investor.

Furthermore, gold prices generally have been highly correlated with the rate

of inflation in the United States as measured by changes in the Consumer

Price Index. This is consistent with golds traditional role as a hedge against

inflation, because higher inflation generally brings higher gold prices.

Investors interested in gold need not restrict themselves to bullion. Other

possibilities range from stocks of gold mining companies to gold futures to

gold coins and commemoratives. Furthermore, there are other types of

precious metals, such as silver, that investors may want to consider

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TOPIC INTRODUCTION:

Current Assets The second category of assets included in the balance sheet

are current assets. In contrast to fixed assets, they are short-termin nature. They refer to assets/resources, which are either held

in the form of cash or ate expected to be realized to cash within

the accounting period in the normal operation cycle of the

business. The term operating cycle means the time span

during which cash is converted into inventory, inventory, into

receivable /cash sales and receivables into cash.

Conventionally, such assets are held for a short period of time,

usually not more than a year. These are also known as liquid

assets. Current assets include cash, marketable securities,

accounts receivable (debtors), notes/bills receivables and

inventory.

CASH is the most liquid current asset and includes cash to hand and cash

at bank. It provides instant liquidity and can be used to meet

obligations/acquire without assets without any delay.

MARKETABLE SECURITIES are short-term investments, which are

both readily marketable and are expected to be converted into cash within a

year. They provide an outlet to invest temporary surplus /idle funds/cash.

According to generally accepted accounting principles, marketable securities

are shown in the balance sheet below the cost or the market price. When,

however, show at cost, the current market value is also shown in parenthesis.

ACCOUNTS RECEIVABLE represent the amount that the customers owe

to the firm, arising from the sale of goods o credit they are shown in the

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balance sheet at the amount owed less an allowance (bad debts) for the

portion which may but be collected.

NOTES/BILLS PAYABLE :

Refer the amounts owned by outsiders for which written acknowledgments

of the obligations are available.

INVENTORY means the aggregate of those items which are (i) held for

sale in the ordinary course of business (finished goods), (ii) in the process of

production for such sales (work-in-process) or (iii) to be currently consumed

in the production of goods and services (raw materials) to be available for

sale. It is the least liquid current assets. Included in inventory are raw

materials, working process (semi-finished) and finished goods. Each of these

serves a useful purpose in the process of production and sale. Inventory is

reported in the balance sheet at the cost or market value whichever is lower.

Investments the third category of fixed assets is investments. They represent

investments of funds in the securities of another company. They are long-

term assets outside the business of the firm. The purpose of such

investments is either in earn return or/and to control another company. It is

customarily shown in the balance sheet at costs with the market value shown

in parenthesis.

Other assets included in this category of assets are what are called deferred

charges that are advertisement expenditure preliminary expenses and so on.

They are pre-payment for services /benefits for the periods exceeding the

accounting period.

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LIABILITIES:

The second major content of the balance sheet is liabilities defined as the

claims of outsiders that is, other than owners. The assets have to be financed

by different sources. One of source of funds is borrowing long-term as

well as short-term. The firms can borrow on a long-term basis from financial

institutions/banks or through bonds/mortgages/debentures, and so on. The

short-term borrowing may be in the form of purchase of goods and services

on credit. These outside sources from which a firm can borrow are termed as

liabilities. Since they finance the assets, they are, in a sense, claims against

the assets. The amount shown against the liability items is on the basis of the

amount owned, not the amount payable. Depending upon the periodicity of

the funds, liabilities can be classified into (1) long-term liabilities and (2)

current liabilities.

LONG-TERM LIABILITIES:

They are so called because the sources of funds included in them are

available for periods exceeding one year. In other words, such liabilities

represent obligations of a firm payable after the accounting period.

Debentures or bonds are issued by a firm to the public to raise debt. A

debenture or a bond is a general obligation of the firm to pay interest and

return the principal sum as per the agreement. Loan raised through Issue of

debentures or bonds may be secured or unsecured.

Secured loans are the long-term borrowings with fixed assets pledged as

security. Term loans from financial institutions and commercial banks are

secured against the assets of the firm.

They have to be repaid/redeemed either in lump sum at the maturity of the

loan/debenture or in installments over the life of the loan. Long-term

liabilities are shown in the balance sheet net of redemption/repayment.

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CURRENT LIABILITIES:

In contrast, the long term-liabilities, such liabilities are obligations to

outsiders repayable in a short period, usually within the accounting period or

the operating cycle of the firm. It can be said to be the counterpart of the

current assets. Conventionally, they are paid; out of the current assets; in

some cases, however existing current liabilities can be liquidated through the

creation of additional current liabilities.

Sundry creditors or accounts payable represent the current liability towards

suppliers from whom the firm has purchased raw materials on credit. This

liability is shown in the balance sheet till the payment has been made to the

creditors.

BILLS PAYABLE:

Bills payable are the promises made in writing by the firm to make payment

of a specified sum to creditors at some specific date. Bills are written by

creditors over the firm and become bill payable once they are accepted by

the firm. Bills payable have a life of less than a year; therefore, they are

shown as current liabilities in the balance sheet.

BANK BORROWINGS:

Bank borrowings form a substantial part of current liabilities of a large

number of companies in India. Commercial banks advance short-term credit

to firms or financing their current assets. Banks may also provide funds

(term loans) for a financing a firms fixed assets. Such loans will be grouped

under long-term liabilities. In India, it is a common practice to include both

short and long-term borrowings under loan funds.

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PROVISIONS:

Provisions are other types of current liabilities. They include provision for

taxes or provision for dividends. Every business has to pay taxes on its

income. Usually, it takes some time to finalize the amount of tax with the tax

authorities. Therefore, the amount of tax is estimated and shown as

provision for taxes or tax liability in the balance sheet. Similarly, provision

for paying dividends to shareholders may be created and shown as current

liability.

EXPENSES PAYABLE OR OUTSTANDING EXPENSES:

Expenses payable or outstanding expenses are also current liabilities. The

firm may owe payments to its employees and others at the end of the

accounting period for the services received in the current year. These

payments are payable within a very short period. Examples of outstanding

expenses are wages payable, rent payable, or commission payable.

INCOME RECEIVED IN ADVANCE:

Income received in advance is yet another example of current liability. A

firm can sometimes receive income for gods or services to be supplied in the

future. As goods or services have to be provided within the accounting

period, such receipts are shown as current liabilities in the balance sheet.

INSTALLMENTS OF LONG-TERM LOANS:

Installments of long-term loans are payable periodically. That portion of the

long-term loan which is payable in the current year will for part of current

liabilities.

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DEPOSITS FROM PUBLIC:

Deposits from public may be raised by a firm for financing its current assets.

These may therefore classify under current liabilities. It may be noted that

public deposits may be raised for duration of one year through three years.

How should the changing value of a fixed asset be reflected in a company'saccounts?

The benefits that a business obtains from a fixed asset extend over several

years. For example, a company may use the same piece of production

machinery for many years, whereas a company- owned motor car used by a

salesman probably has a shorter useful life.

By accepting that the life of a fixed asset is limited, the accounts of a

business need to recognize the benefits of the fixed asset as it is "consumed"

over several years.

This consumption of a fixed asset is referred to as depreciation.

DEFINATIONS:

Financial Reporting Standard 15 (covering the accounting for tangible fixed

assets) defines depreciation as follows:

"the wearing out, using up, or other reduction in the useful economic life of

a tangible fixed asset whether arising from use, effluxion of time or

obsolescence through either changes in technology or demand for goods and

services produced by the asset".

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A portion of the benefits of the fixed asset will be used up or consumed in

each accounting period of its life in order to generate revenue. To calculate

profit for a period, it is necessary to match expenses with the revenues they

help earn.

In determining the expenses for a period, it is therefore important to include

an amount to represent the consumption of fixed assets during that period

(that is, depreciation).

In essence, depreciation involves allocating the cost of the fixed asset (less

any residual value) over its useful life. To calculate the depreciation chargefor an accounting period, the following factors are relevant:

- The cost of the fixed asset;

- The (estimated) useful life of the asset;

- The (estimated) residual value of the asset.

What is the relevant cost of a fixed asset?

The cost of a fixed asset includes all amounts incurred to acquire the asset

and any amounts that can be directly attributable to bringing the asset into

working condition.

Directly attributable costs may include:

- Delivery costs

- Costs associated with acquiring the asset such as stamp duty and importduties

- Costs of preparing the site for installation of the asset

- Professional fees, such as legal fees and architects' feesNote that general

overhead costs or administration costs would not costs of a fixed asset (e.g.

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the costs of the factory building in which the asset is kept, or the cost of the

maintenance team who keep the asset in good working condition)The cost of

subsequent expenditure on a fixed asset will be added to the cost of the asset

provided that this expenditure enhances the benefits of the fixed asset or

restores any benefits consumed. This means that major improvements or a

major overhaul may be capitalized and included as part of the cost of the

asset in the accounts. However, the costs of repairs or overhauls that are

carried out simply to maintain existing performance will be treated as

expenses of the accounting period in which the work is done, and charged in

full as an expense in that period.

PROCESS:

Although the useful life of equipment (a fixed asset) may be long, it is

nonetheless limited. Eventually the equipment will lose all productive worth

and will possess only salvage value (scrap value). Accounting demands a

period-by-period matching of costs against income. Hence, the cost of a

fixed asset (over and above its salvage value) is distributed over the assets

estimated lifetime. This spreading of the cost over the periods which receive

benefits is known as depreciation.

The depreciable amount of a fixed asset that is, cost minus salvage

value may be written off in different ways. For example, the amount may

be spread evenly over the years affected, as in the straight-line method.

The units of production method bases depreciation for each period on

the amount of output. Two accelerated methods, the double declining

balance method and the sum-of-the years-digits method, provide for greater

amounts of depreciation in the earlier years.

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METHODS:

1. STRAIGHT-LINE METHOD

This is the simplest and most widely used depreciation method. Under

this method an equal portion of the cost (above salvage value) of the asset is

allocated to each period of use. The periodic depreciation charge is

expressed as

Cost Salvage Value= Depreciation

Estimated life2. UNITS OF PRODUCTION METHOD

Where the use of equipment varies substantially from year to

year, the units-of-production method is appropriate for determining the

depreciation. For example, in some years logging operations may be carried

on for 200 days, in other years for 230 days, in still other years for only 160

days, depending on weather conditions. Under this method, depreciation is

computed for the appropriate unit of output or production (such as hours,

miles, or pounds) by the following formula:

Cost Salvage= Unit Depreciation

Estimated units of production during lifetime

The total number of units used in a year is then multiplied by the unit

depreciation to arrive at the depreciation amount for that year. We can

express this as

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Unit depreciation x usage = depreciationOr

Cost SalvageX usage = depreciation

Estimated life (in units)

This method has the advantage of relating depreciation cost directly.

3. DOUBLE DECLINING BALANCE METHOD

The double declining balance method produces the highest amount

of depreciation in the earlier years. It does not recognize salvage or scrap

value. Instead, the book value of the asset remaining at the end of the

depreciation period becomes the salvage or scrap value. Under this method,

the straight-line rate is doubled and applied to the declining book balance

each year. Many companies prefer the double declining balance method

because of the greater write-off in the earlier years, a time when the asset

contributes most to the business and when the expenditure was actually

made. The procedure is to apply a fixed rate to the declining book value of

the asset each year. As the book value declines, the depreciation becomes

smaller.

100%X 2 = depreciation rate

Estimated life in years

4. SUM-OF-THE-YEARS-DIGITS METHOD

With this method, the years of assets lifetime are labeled 1,2,3

and so on, and the depreciation amounts are based on a series of fractions

that have the sum of the years digit as their common denominator. The

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greatest digit assigned to a year is used as the numerator for the first year,

the next greatest digit for the second year, and so forth.

What is the Useful Life of a fixed asset?

An asset may be seen as having a physical life and an economic life.

Most fixed assets suffer physical deterioration through usage and the

passage of time. Although care and maintenance may succeed in extending

the physical life of an asset, typically it will, eventually, reach a condition

where the benefits have been exhausted.

However, a business may not wish to keep an asset until the end of its

physical life. There may be a point when it becomes uneconomic to continue

to use the asset even though there is still some physical life left.

The economic life of the asset will be determined by such factors as

technological progress and changes in demand. For purposes of calculating

depreciation, it is the estimated economic life rather than the potential

physical life of the fixed asset that is used.

What about the Residual Value of a fixed asset?

At the end of the useful life of a fixed asset the business will dispose of it

and any amounts received from the disposal will represent its residual value.This, again, may be difficult to estimate in practice. However, an estimate

has to be made. If it is unlikely to be a significant amount, a residual value

of zero will be assumed.

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COMPANY PROFILE

INTRODUCTION:

Established in 1997, LG Electronics India Pvt. Ltd., is a wholly

owned subsidiary of LG Electronics, South Korea. In India for a decade

now, LG is the market leader in consumer durables and recognized as a

leading technology innovator in the information technology and mobile

communications business. LG is the acknowledged trendsetter for the

consumer durable industry in India with the fastest ever nationwide reach,

latest global technology and product innovation.

One of the most formidable brands, LGEIL has an impressive portfolio of

Consumer Electronics, Home Appliances, GSM mobile phones and IT

products.

The trend of beating industry norms started with the fastest ever-

nationwide launch by LG in a period of 4 and 1/2 months with the

commencement of operations in May 1997. LG set up a state-of-the art

manufacturing facility at Greater Noida, near Delhi, in 1998, with an

investment of Rs 500 Crores. This facility manufactured Colour Televisions,Washing Machines, Air-Conditioners and Microwave Ovens. During the

year 2001, LG also commenced the home production for its eco-friendly

Refrigerators and established its assembly line for its PC Monitors at its

Greater Noida manufacturing unit. The beginning of 2004 saw the roll out of

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the first locally manufactured Direct Cool Refrigerator from the plant at

Greater Noida.

In 2005, LGEIL also up its second Greenfield manufacturing unit in Pune,

Maharashtra that commences operations in October 2005. Covering over 50

acres, the facility manufactures LCD TV, GSM Phones, Color Televisions,

Air Conditioners, Refrigerators, Microwave Ovens Color Monitors.

Both the Indian manufacturing units has been designed with the latest

technologies at par with international standards at South Korea and are one

of the most Eco-friendly units amongst all LG manufacturing plants in the

world.

LG has been able to craft out in ten years, a premium brand positioning in

the Indian market and is today the most preferred brand in the segment

Sales and Profit:

In the fourth quarter of 2009, sales and operating profit on a global

basis jumped 22.5% year on year to KRW 13.37 trillion (USD 9.82 billion)

and KRW 101 billion (USD 74.16 million), resulting in a profit margin of

0.8%. On a parent basis the company recorded sales of KRW 6.59 trillion

(USD 4.84 billion), an operating loss of KRW 310 billion (USD 228million) and a net loss of KRW 671 billion (USD 493 million).

2009 annual sales on a global basis soared 20.8% to a company record-high

level of KRW 49.33 trillion (USD 36.22 billion) with operating profit

recording KRW 2.13 trillion (USD 1.56 billion). Consolidated sales

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including subsidiaries rose 18.4% YoY to KRW 63.18 trillion (USD 46.39

billion). Consolidated operating profit reached KRW 4.05 trillion (USD 2.97

billion), for a margin of 6.4%, 1.1% point higher than the previous year.

LG Mobile Communication Company reached a company high of KRW

4.49 trillion (USD 3.3 billion) in sales, 34.6% higher than a year

earlier. Handset sales accounted for KRW 4.09 trillion (USD 3.0

billion), up 40.3% YoY and 16.5% QoQ. Shipments of handsets

recorded 8% growth YoY to 25.7 million, which resulted in a record

100.7 million units being sold in 2009 versus 80.5 million units in

2008. Sales stayed strong in Europe and Asia despite the economic

slowdown. Europe saw the introduction of new models including

Renoir, an 8-megapixel camera phone, Cookie, a full touch screen

phone and LG-KS360, a QWERTY keypad messaging phone while a

QoQ increase in India contributed to Asias strong performance.

Digital Appliance Company sales rose 20.1% to KRW 2.971 trillion

(USD 2.18 billion) year-on-years.

Digital Display Company sales jumped to KRW 4.62 trillion (USD 3.39

billion), an increase of 16.4% from a year earlier. Sales of flat panel digital

TVs grew 22% YoY and 26% QoQ, but PDP module sales declined 44%

YoY and 24% QoQ. Globally, operating profit saw a loss of KRW 14

billion (USD 10 million) primarily due to a sharp drop in the prices of TVs

and slowdown in external sales of PDP modules.

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Financial Statement and Non-operating Items on a ParentBasis:

The company recorded a recurring profit loss of KRW 942 billion

(USD 692 million) primarily as a result of foreign exchange loss of KRW

276 billion (USD 203 million) and equity method loss of KRW 294 billion

(USD 216 million) from overseas subsidiaries and affiliates. LG Display, in

which LG Electronics has a 37.9% stake, booked an equity method loss forLGE of KRW 214 billion (USD 157 million).

LG Electronics, Inc. (KSE: 066570.KS) is a global leader and technology

innovator in consumer electronics, home appliances and mobile

communications, employing more than 82,000 people working in 114

operations including 82 subsidiaries around the world. With annual

worldwide revenues exceeding $40 billion, LG is comprised of five business

units - Home Entertainment, Home Appliance, Air Conditioning, Business

Solutions and Mobile Communications. LG is the worlds leading producer

of mobile handsets, flat panel TVs, air conditioners, front-loading washing

machines, optical storage products, DVD players and home theater systems.

For more information, please visit.

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History:

1958 Founded as Gold Star

1960s Produces Korea's first radios, TVs, refrigerators,

washing machines and air conditioners

1995Renamed LG Electronics

Acquires US-based Zenith

1997Worlds first CDMA digital mobile handsets supplied to

Ameritech and GTE in U.S. Achieves UL certifica tion in U.S.

Develops worlds first IC set for DTV

1998Develops worlds first 60-inch plasma TV

1999Establishes LG. Philips LCD, a joint venture with Philips

2000Launches worlds first internet refrigerator Exports

synchronous IMT-2000 to Marconi Wireless of Italy

Significant exports to Verizon Wireless in U.S.

2001GSM mobile handset exports to Russia, Italy and

Indonesia Establishes market leadership in Australian CDMA

market Launches worlds first internet washing machine, air

conditioner, and microwave oven

2003Under LG Holding Company system, spins off to become

LG Electronics and LG Corporation Full-scale export of

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GPRS color mobile phones to Europe Establishes CDMA

handset production line and R&D center in China

2004Enters North-European and Middle East GSM handset

market Achieves monthly export volume above 2.5 million

units (July) Top global CDMA producer.

2005EVSB, the next-generation DTV transmission

technology, chosen to be the US/Canada Industry standard by

the US ATSC Commercializes worlds first 55" all-in-one

LCD TV Commercializes worlds first 71" plasma TV

Develops worlds first Satellite- and Terrestrial-DMB

handsets

2006Becomes fourth-largest supplier of mobile handsets

market worldwide Develops worlds first 3G UMTS DMB

handset, 3G-based DVB-H and Media FLO phones, DMB

Phone with time-shift function, and DMB notebook computerEstablishes LG-Nortel, a network solution joint venture with

Nortel

2007LG Chocolate, the first model in LGs Black Label series

of premium handsets, sells 7.5million units world wide

Develops the first single-scan 60" HD PDP module

Establishes the strategic partnership with ULAcquires the worlds first IPv6 Gold Ready logo

2009Launches the industry-first dual-format high-definition

disc player and drive

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2010 design center when bog bae, executive vp

VISION OF LG:

Management Based on Esteem for Human Dignity

Human Value each Individual.

Dignity Capitalize on Individual competencies, Respect for personal

aspiration.

Esteem People are of the origin of all values. By developing people

we improve the organizations clear tasks and fair treatment.

LOOKING AHEAD Our Millennium Commitment

On the way to becoming the Best Global Organization we are

promising:

DIGITAL TECHNOLOGY LEADERSHIP: The new millennium sees

the birth of the Digital Technology at LGEIL-TL2006 (Technology

Leadership), which offers customers easy to use, very affordable, and

technologically ingenious "Champion Products".

GLOBALISATION: 70 % of its total revenues are from overseas. 54

subsidiaries carry out manufacturing, sales and marketing, logistics,

R&D and the customer services in key geographical sites worldwide.

CREATING VALUE FOR THE PEOPLE: LG extends a warm hand

to contribute to the world community; to touch the hearts of the

customers, friends, shareholders, employees, partners and subsidiaries

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at home and abroad. We create value help people realize their dreams

of a better life.

BOARD OF DIRECTORS:

34

S.NO NAME DESIGNATION

1 Yong Nam Vice Chairman and CEO

2 David Jung CFO of LG Electronics

3 Yu-Sig Kang CEO of LG Corp

4 Suk-Jean Kang Chairman of CEO Consulting

5 In Ki Joo Professor of YonseiUniversity Outside Director

6 Suk Chae Lee Consultant of TaepyoungyangLawfirm (Bae, Kim & Lee)

Outside Director

7 Sung-Won HongPresident of Jeollanamdo

8 Suk Chae Lee Consultant of TaepyoungyangLaw firm (Bae, Kim & Lee)

Outside Director

9 Suk-Jean Kang Chairman of CEO ConsultingGroup

Outside Director


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OBJECTIVES OF COMPANY

LG Electronics (LG), a major player in the global flat panel display

market, recently announced business strategies and goals for its

display business at IFA International 2009 in Berlin, Germany.

Competition has intensified since the flat panel TV industry has

fully matured,' said Simon Kang, President and CEO of LG

Electronics Digital Display Company, during a press

conference at IFA.

we are confident that focused, localized marketing activities

emphasizing our products, which embody the perfect

harmony of design and technology, will separate us from our

competitors.'

LG has established itself as a premium brand by systematically

focusing on brand marketing activities, for its products which

balance stylish design and smart technology.

The company plans to invest in marketing and will take a

segmented, regional approach. LG plans to reinforce

partnerships with premium distributors and centralize brand

marketing activities in developed markets such as North

America and Europe.

In contrast to assembly line manufacturing, cell assembly

allows one person to assemble a TV from start to finish

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LG will maximize its return on invested capital through

outsourcing, innovative manufacturing technology, and an

advanced supply chain management system.

INDUSTRY PROFILE

Electronics is the study of the flow of charge through various materials and

devices such as, semiconductors, resistors, inductors, capacitors, nano-

structures, and vacuum tubes. All applications of electronics involve the

transmission of either information or power. Although considered to be a

theoretical branch of physics, the design and construction of electroniccircuits to solve practical problems is an essential technique in the fields of

electronics engineering and computer engineering.

The study of new semiconductor devices and surrounding technology is

sometimes considered a branch of physics. This article focuses on

engineering aspects of electronics. Other important topics include electronic

waste and occupational health impacts of semiconductor manufacturing.

Consumer Durables(Data table headings are shown Year-wise in descending order)

Air Conditioners

Bicycles

Crystal Glass

Domestic Electrical Appliances

Gems and Jewellery

Glass Products

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Kitchen Equipment

Liquefied Petroleum Gas Cylinders

Microwave Ovens

Refrigerators

Sewing Machines

Sunglasses

Toys and Games

Washing Machines and Vacuum Cleaners

Watches and Clock

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DATA ANALYSIS:

The selection of various fixed assets required creating the desired

production facilities and the decision as regards determination of the level of

fixed assets is primarily the task at the production / technical people. The

decision relating to fixed assets involve huge funds for a long period of time

and are generally of irreversible nature affecting the long term profitability

of a concern, an unsound invest decision may prove to be total to the very

existence of the organization. Thus, management of fixed assets is of vital

importance to any organization.The process of fixed asset management involves:

(i) Selection of most worthy projects or alternatives of fixed assets.

(ii) Arranging the requisite funds / capital for the same.

The first important consideration to be acquire only that much amount

of fixed assets which will be just sufficient to ensure smooth and

efficient running of the business. In some cases it may be economical

to be kept in mind is possible increase in demand of the firms product

necessarily expansion of its activities. Hence a firm should have that

much amount of fixed assets which could adjust to increase demand.

The third aspect of fixed assets management is that a firm must ensure

buffer stock of certain essential equipments / services to ensure

uninterrupted production in the events of emergencies. Sometime, there may

be breakdown in some equipment or services affecting the entire production.

It is always better to have some alterative arrangements to deal with Cush

situations. But at the same time the cost of carrying such situations. But at

the same time cost of carrying such arrangements to deal with such

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situations. But at the same time the cost of carrying such buffer stock of

fixed assets be encouraging their maximum utilization during lean period,

transferring a part of peak period and living additional capacity.

Fixed Assets:

Fixed assets are those assets which are required and held permanently

for a pretty longtime in the business and are used for the purpose of earning

profits. The successful continuance of the business depends upon the

maintenance of such assets. They are not meant for resale in the ordinary

course or business and the utility of these remains so long as they are in

working order, so they are also known as capital assets. Land and buildings,

plant and machinery, motor vans, furniture and fixture are some examples of

these assets.

Financial transactions are recorded in the books keeping in view the

going concern aspect of the business unit. It is assumed the business unit has

a reasonable expectation of continuing business at a profit for an indefinite

period of time. It will continue to operate in the future. This assumption

provides much of the justification for recording fixed assets at original cost

and depreciating them in a systematic manner without reference to their

current realizable value. It is useless to show fixed assets in the balance

sheet at their estimated realizable values if there is no immediate expectation

of selling them. Fixed resale, so they are shown at their book values and not

at their current realizable values.

The market values of a fixed asset may change with the passage of

time, but for accounting purpose it continues be shown in the books at its

book value the cost at which it was purchased minus depreciation paved up

to date.

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The cost concept of accounting, deprecation calculated on the basis of

historical costs of old assets is usually lower than that of those calculated at

current values or replacement value. This results in more profits on paper

which if distributed in full, will lead to reduction of capital.

Need for valuation of fixed assets:

Valuation of fixed assets is important in order to have fair measure of

profit or loss and financial position of the concern.

Fixed assets are meant for use for many years. The value of these

assets decreases with their use or with time or for other reasons. A portion of

fixed asset reduced by use is converted into cash though charging

depreciation. For correct measurement of income proper measurement of

depreciation is essential, as depreciation constitutes a part of the total cost of

production.

Trend analysis and Ratio analysis are the techniques used in analysis

of Fixed assets management.

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Trend Analysis:

In Financial analysis the direction of changes over a period of years is

of initial importance. Time series or trend analysis of ratios indicators the

direction of change. This kind of analysis is particularly applicable to the

items of profit and loss account. It is advisable that trends of sales and net

income may be studies in the light of two farceurs. The rate of fixed

expansion or secular trend in growth of the business and the general Price

level. It might be found in practice that a number of the business and the

general price level. It might be found in practice that a number of firms

would be shown a persistent growth over period of years. But to get a true ofgrowth, the sales figure should be adjusted by a suitable index of general

prices. In other words, sales figures should be deflated for rising price level.

Another method of securing trend of growth and one which can be used

instead of the adjusted sales figure or as check on them is to tabulate and

plot the output or physical volume of the sales expressed in suitable units of

measure. If the general price level is not considered while analyzing trend of

growth, it can be mislead management they may become unduly optimistic

in period of prosperity and pessimistic in duel periods.

For trend analysis the use of index numbers is generally advocated the

procedure followed is to assign the numbers 100 to times of the base year

and at calculate percentage change in each items of other years in relation to

the base year. The procedure may be called as Fixed percentage method.

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LG Electronics Inc. and SubsidiariesIncome Statement:

Income Statement

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

(Rs. inLakhs)

(Rs. InLakhs)

(Rs. inLakhs)

(Rs. inLakhs)

(Rs. inLakhs)

Sales 134543.28 140116.22 135375.24 129553.62 142195.78

Domestic

Exports

17062.471294.5

19584.372379.8

2205873131.7

25534.873943.5

28777.974943.9

Cost of Sales 60513.1 65982.7 70725 76108.3 80938.1

Gross Profit 22879.3 23476.4 24464.7 23370 22783.7

SG&A 20146.5 19764.3 20803.4 21074 20290.9

Operating Profit 3547.2 3887 3661.3 2296 2492.8

Non-Operating

Income

Non-Operating

Expenses

2598.95017.3

3574.64239.2

4538.75235.7

32394411.6

8224.64153.3

Recurring Profit 5998.7 5646.4 29684 1123.4 6564.1

Extraordinary Gains

Extraordinary Losses

--

--

--

--

--

Income before

Income Taxes4509.07 3991.5 2968.4 6090.47 3765.1

Tax 135.9 145.64 153.73 209.1 413.82

Net Profit 4644.97 4137.14 2814.67 6299.57 3351.28

LG Electronics Inc. and Subsidiaries

Consolidated Balance Sheets:

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Balance Sheet

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

(Rs. InLakhs)

(Rs. InLakhs)

(Rs. InLakhs)

(Rs. InLakhs)

(Rs. InLakhs)

Current Assets 53063.74 45598.02 49713.32 53951.48 63063.52

Quick Assets

Inventories

11568.55762.2

12484.84876.8

10315.65637.5

8831.44739.6

8306.64173.8

Fixed Assets 6,07,94.08 6,25,64.02 5,89,55.39 5,69,93.08 5,71,48.37

Investment Assets

Tangible Assets

Intangible Assets

19568.613543.51293.5

20834.515859.61423.7

21947.316617.3

1681

22972.318273.71984.4

31225.617818.61758.9

Total Assets 179137.63 163641.62 164867.41 167745.96 317929.03

Current Liabilities

Fixed Liabilities2,05,36.47 2,03,50.59 2,40,99.51 2,14,80.89 2,30,72.27

Total Liabilities 2,05,36.47 2,03,50.59 2,40,99.51 2,14,80.89 2,30,72.27

Paid in Capital

Capital Surplus

Retained Earnings

Capital Adjustment

2965.47832.79765.62246.6

3079.58067.39945.82359.9

3202.18437.810057.32976.6

3472.79532.5

10590.32759.3

3571.19799

15547.22906.9

Total Shareholder's

Equity18456.8 20543.5 24673.8 26354.8 31824.2

Total Liabilities and

Shareholder's Equity54387.8 55346.9 56198.7 56801.4 6326.3

LG Electronics Inc. and Subsidiaries

Financial Highlights:

Financial

Highlights

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

(Rs. In (Rs. In (Rs. In (Rs. In (Rs. In

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Lakhs) Lakhs) Lakhs) Lakhs) Lakhs)

Sales 134543.28 140116.22 135375.24 129553.62 142195.7Operating Profit 3547.2 3887 3661.3 2296 2492.8

Net Profit 4644.97 4137.14 2814.67 6299.57 3351.28

Total Assets 179137.63 163641.62 164867.41 167745.96 317929.0Total Liabilities 2,05,36.47 2,03,50.59 2,40,99.51 2,14,80.89 2,30,72.2Total Shareholder's

Equity18456.8 20543.5 24673.8 26354.8 31824.2

ROE 10.5% 8.7% 12.6% 3.5% 19.1%

EBITDA 1,476 1,585 1,685 1,297 1,349Capex 1,075 1,179 1,291 860 1,060

BAR DIAGRAMS & CHARTS:

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46

YEAR INVESTMENTTREND

PERCENTAGE

2007-2008 41,28,06,232 100

2008-2009 44,85,21,386 108.65

2009-2010 39,68,35,265 96.13

2010-2011 24,99,02,930 60.54

2011-2012 28,19,24,444 68.29


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CHART:

INTERPRETATION:

From the analysis of the above table it can be observed that the

growth rate of total investment of LG ELECTRONICS industries is in

downward trend which show table LG ELECTRONICS Industries

investment in total investment is decreasing form time to the during the year

47

Growth rate of Investment Trend

Percentage

100 108.65 96.13

60.5468.29

0

20

40

60

80

100

120

2007-

2008

2008-

2009

2009-

2010

2010-

2011

2011-

2012

years

Investment

Investment


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2007-2008 it was recorded 100%. But it is decreasing in the year 2011-2012

which shows that there is a net decrease by 68.29%. The average investment

in total assets was found to be Rs.35, 79, 98,051.4 during the review period.

During the period of 2006-2007 it is Rs. 41,28,06,232 and it was decrease in

the year 2011-2012 Rs. 28,19,24,444.

GROWTH RATEINFIXED ASSETS:

Table: 2

YEAR FIXED ASSETS PERCENTAGE

2007-2008 6,07,94,08,271 100

2008-2009 6,25,64,02,873 102.91

2009-2010 5,89,55,39,377 96.97

2010-2011 5,69,39,08,565 93.74

2011-2012 5,71,48,06,436 94.00

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Chart:

INTERPRETATION:

Growth rate in fixed assets, the examination of the above table reveals

analysis and interpretation.

1. During the year 2007-2008 the assets investment was recorded at

6,07,94,08,271 and it is decreased to Rs 5,71,48,37,436 in 2010=2012

the fixed assets investment is quite satisfactory.

2. The trend percentage in the year 2007-2008 is taken as the base year

as 100% and it was decreased to 94.00% in the year 2011-2012

3. The average growth rate in Fixed assets Rs.5, 92, 90,306 in 5 years.

49

Growth rate in Fixed Assets

100

102.91

96.97

93.74 94

88

90

92

94

9698

100

102

104

2007-08 2008-09 2009-10 2010-11 2011-12

Years

FixedAssets

Fixed Assets


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RATIO ANALYSIS:

Ratio analysis is a powerful tool of financial analysis. A ratio is

defined as The indicated quotient of two mathematical expression and as

The relationship between for evaluating the financial position and

performance of firm. The absolute accounting figure reported in financial

statement do not private a meaningful understanding of the performance and

financial position of a firm. An accounting figure conveys meaning when it

is related to some other relevant information.

Ratios help to summarize large quantities of financial data and tomake qualitative judgments about the firms financial performance.

1. Fixed Assets to Net Worth Ratio:

This ratio establishes the relationship between Fixed Assets and net worth.

Net Worth = Share Capital + Reserves & Surplus + Retained Earnings.

Fixed Assets

Fixed assets to Net worth Ratio = ------------------ X 100

Net Worth

This ratio of Fixed Assets to Net Worth indicates the extent to

which shareholder funds are sunk into the fixed assets.

Generally, the purchase of fixed assets should be financed by

shareholders, equity including reserves & surpluses and retained earnings. If

the ratio is less than 100 % it implies that owners funds are more than total

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fixed assets and a part of the working is provided by the shareholders. When

the ratio is more 100% it implies that owners funds are not sufficient to

finance the fixed assets and the finance has to depend upon outsiders to

fianc the fixed assets. There is no rule of thumb to interpret this ratio but

60% to 65 % is considered to be satisfactory ratio in case of industrial

undertaking.

2. Fixed Assets Ratio:

This ratio explains whether the firm has raised adequate long term

funds to meet its fixed assets requirements and is calculated as under.

Fixed assets (after depreciation)

-------------------------------------------

Capital Employed

This ratio gives an idea as to what part of the capital employed has been

used in purchasing the fixed assets for the concern. If the ratio is less than

one it is good for the concern.

3. Fixed assets as a percentage to current Liabilities:

This ratio measures the relationship between fixed assets and the

funded debt and is a very useful so the long term erection. The ratio can be

calculated as below.

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Fixed Assets

Fixed assets as a percentage to current Liabilities = ----------------------------

Current

Liabilities

4. Total investment Turnover Ratio:

This ratio is calculated by dividing the net sales by the value of total

assets that is (Net sales / Total Investment) or (sales / Total Investment.) A

high ratio is an indicator of over trading of total assets while a low ratio

reveals idle capacity. The traditional standard for the ratio is two times.

5. Fixed Assets Turnover Ratio.

This ratio expresses the number of times fixed assets are being turned-

over is a state period. It is calculated as under.

Sales

-------------------------------------------------------

Net fixed Assets (After depreciation)

This ratio shows low well the fixed assets are being uses in the

business. The ratio is important in case of manufacturing concern because

sales are produced not only by use of Current Assets but also by amount

invested in Fixed Assets the higher ratio, the better is the performance. On

the other hand a low ratio indicated that fixed assets are not being efficiently

utilized.

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6. Gross capital Employed:

The term Gross Capital Employed usually comprises the total

assets, fixed as well as current assets used in a business.

Gross Capital Employed = fixed Assets + Current Assets.

7. Return on Fixed Assets:

Profit after Tax

--------------------- X 100

Fixed assets

This ratio is calculated to measure the profit after tax against the

amount invested in total assets to ascertain whether assets are being utilized

properly or not. The higher the ratio the better it is for the concern.

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1. Fixed Assets to Net Worth:

The ratio indicates the extent to where shareholders funds are struck

in the fixed assets. The formula to compute fixed assets to net worth is

calculated as follows. Fixed assets (after depreciation) / Net Worth.

Net Worth = share capital + reserve & Surplus + Retained earnings.

If the ratio is less than 100 % it implies that owner funds are more

than the fixed assets and a part of working capital is provided by the share

holders and vice versa.

Fixed assets

Fixed assets to net worth ratio = ------------------------------------- X 100

Net worth

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Table:

YEAR NETWORTH GROSSFIXED

ASSETSRATIOIN

2007-2008 3,64,91,77,075 6,07,94,08,271 166.592008-2009 3,38,81,85,855 6,25,64,02,879 184.65

2009-2010 3,38,78,40,215 5,89,55,39,377 174.02

2010-2011 3,48,48,27,422 5,69,93,08,565 163.54

2011-2012 3,7714,58,784 5,71,48,37,436 151.52

Chart :

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INTERPRETATION:

A) The Gross fixed to Net worth Ratio is fluctuating from year to year. In

the year 2007-2008 the gross fixed assets to net worth ratio is 166.59,

in the year 2007-2012 the fixed assets to net worth to acquire the ratio

is 151052.

56

Graph of Fixed Assets to Net worth

166.59

184.65174.02

163.54151.52

0

20

40

60

80

100

120

140160

180

200

2007-

2008

2008-

2009

2009-2010

2010-2011

years

Ratio

Fixed assets to net worth ratio

20112012


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B) The average net worth to fixed assets ratio is Rs,3,53,62,97,870 or

fixed assets average ratio is Rs. 5,92,90,99,306 the average percentage

of fixed assets to net worth is 168.06.

C) The highest ratio recorded in 2008-2009 at 184.65 the lowest ratio is

recorded at 151.52 in the year 2011-2012.

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2. Fixed Assets as a percentage to long term Liabilities:

Fixed Assets ratio a various of fixed assets to net worth is a ratio of

fixed assets to long term funds which is calculated as

Fixed assets (after depreciation)

-------------------------------------------------------- X 100

Capital Employed

TABLE:

YEAR FIXEDASSETS LONGTERM

FUNDS

PERCENTAGE

2007-2008 6,07,94,08,271 3,64,91,77,075 166.5

2008-2009 6,25,64,02,879 3,38,81,85,855 184.6

2009-2010 5,89,55,39,377 3,38,78,40,215 174.0

2010-2011 5,69,93,08,565 3,48,48,27,422 163.5

2011-2012 5,71,48,37,436 3,7714,58,784 152.7

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CHART:

INTERPRETATION:

A) The fixed assets as a % of long term liabilities the ratio is fluctuating

form year to year. The fixed asset as a percentage of long term

liabilities is recorded at 166.5% in the year 2011-12

B) The highest ratio is recorded at 184.6% in the 2007-2008 the lowest

ratio is 152.7% in 2011-12

59

166.5

184.6174

163.5 152.7

0

20

40

60

80

100

120

140

160

180

200

2007-08 2008-09 2009-10 2010-11 2011-12


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3. FIXED ASSETS AS A PERCENTAGE TO CURRENT

LIABILITIES:

Fixed Assets

Fixed Assets as a percentage to Current Liabilities = -----------------------------

Current Liabilities

TABLE:

YEAR FIXEDASSETSLONGTERM

FUNDSPERCENTAGE

2007-2008 6,07,94,08,271 2,05,36,47,518 2.96

2008-2009 6,25,64,02,879 2,03,50,59,123 3.07

2009-2010 5,89,55,39,377 2,40,99,51,568 2.44

2010-2011 5,69,93,08,565 2,14,80,89,665 2.65

2011-2012 5,71,48,37,436 2,30,72,27,432 2.47

CHART:

60

2.96 3.07

2.44

2.65

2.47

0

0.5

1

1.5

2

2.5

3

3.5

2007-08 2008-09 2009-10 2010-11 2011-12


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INTERPRETATION:

A) The ratio was fluctuating trend percentage in review period.

B) From the above table it is observed that the ratio was recorded at 2.96 in

the 2007-2008 and is gradually changing to 2.47 in 2011-2012 which

indicates that the current funds are used in the fixed asset which is quite

satitsfactory.

C) The average ratio was recorded at 2.71 during the review period of time.

D) The highest ratio was recorded at 3.07 which is higher than the average

ratio.

E) The lowest ratio was recorded at 2.44 which is less than the average ratio.

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4. TOTAL INVESTMENT TURNOVER RATIO:

The total invest turnover ratio can be calculated by the formula as given

under.

Sales

Total investment turnover ratio = --------------------------- X 100

Total investment

TABLE:

YEAR SALES (INLACKS) TOTAL

INVESTMENT

RATIOS

2007-2008 134543.28 4128.06 32.5

2008-2009 140116.22 4485.21 31.2

2009-2010 135375.24 3968.35 34.1

2010-2011 129553.62 2499.02 51.84

2011-2012 142195.78 2819.24 50.43

CHART :

INTERPRETATION:

62

32.5 31.234.1

51.84 50.43

0

10

20

30

40

50

60

2007-08 2008-09 2009-10 2010-112011-12


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A) The ratio was in increasing trend.

B) During the year 2007-2008 the ratio was recorded at 32.5 and in the2011-2012 the ratio was increasing to 53.43.

C) The highest ratio was recorded at 51.84 in the year 2010-2011 whichis more than the average ratio.

D) The lowest ratio was 32.5 which is lesser than the average ratio.

5. FIXED ASSETS TUROVER RATIO:

The fixed assets turnover ratio is the relationship between the sales or

cost o f goods / capital assets employed in a business.

Sales

Fixed assets turnover ratio = --------------------------------- X 100

Total fixed Assets

TABLE:

YEAR SALES (INLACKS)TOTALFIXED

ASSETSPERCENTAGE

2007-2008 134543.28 6.794.08 2.21

2008-2009 140116.22 62564.02 2.23

2009-2010 135375.24 58955.39 2.29

2010-2011 129553.62 56993.08 2.27

2011-2012 142195.78 57148.37 2.40

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CHART:

INTERPRETATION:

A) The fixed assets turnover ratio is fluctuating trend during the review

period of time. During the year 2007-2008 the ratio was recorded as

2.21 % and in the 2010-2011 the ratio was increased to 2.40 %.

B) Average ratio was observed 2.28 % during the review period of time.

C) The highest ratio was recorded at 2.40 % in 2011-2012 which is more

than the average.

D) The lowest ratio was 2.21 % in the 2007-2008 which is less than the

average

64

2.212.23

2.292.27

2.4

2.1

2.15

2.2

2.25

2.3

2.35

2.4

2.45

2007-08 2008-09 2009-10 2010-11 2011-12


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6. FIXED ASSETS AS A PERCENTAGE TO TOTAL ASSETS:

Fixed assets

Fixed assets a % Total Assets = -------------------------------- X 100.

Total Asset

TABLE:

YEAR SALES (INLACKS)TOTALFIXED

ASSETSPERCENTAGE

2007-2008 60794.08 117985.89 51.5

2008-2009 62564.03 112647.26 55.5

2009-2010 58955.39 112637.07 52.32010-2011 56993.08 113443.60 50.0

2011-2012 57148.37 123031.14 46.0

CHART:

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INTERPRETATION:

A) Fixed assets to total assets is fluctuating trend during the review

period of time.

B) During the year 2007-2008 the ratio was recorded at 51.5 % and the

year 2010-2011 the ratio decreased to 46 %.

C) Average ratio was observed at 51.06 % during the review period oftime.

D) The highest ratio was observed at 55.5 % in the year 2007-2008 which

is more than the average. The lowest ratio was recorded at 46% in

2011-2012 which is less than average ratio.

67

51.555.5

52.350

46

0

10

20

30

40

50

60

2007-08 2008-09 2009-10 2010-11 2011-12


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7. GROSS CAPITAL EMPLOYED:

Gross capital employed = fixed assets + Current Assets.

TABLE:

YEARFIXEDSALES

(INLACKS)

CURRENT

ASSETS

GROSSCAPITAL

EMPLOYED (INLACKS)

2007-2008 60794.08 53063.74 113857.82

2008-2009 62564.03 45598.02 108162.05

2009-2010 58955.39 49713.32 108668.71

2010-2011 56993.08 53951.48 110944.56

2011-2012 57148.37 63063.52 120211.89

PROFITAFTERTAX:

TABLE:

YEAR PROFITAFTERTAX (INLACKS)

2007-2008 4644.97

2008-2009 4137.14

2009-2010 2814.67

2010-2011 6299.57

2011-2012 3351.28

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INTERPRETATION:

From the above profits of LG ELECTRONICS Industries is in

increasing which is good for the company. In the year 2011-12 the PAT is

3351.28 lacks and then it is decreasing.

In the year 2009-10 the pat is the lowest and in 2010-11 it observed

the highest PAT is 62999.57 over the years.

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8. RETURN ON GROSS CAPITAL EMPLOYED:

The profit for the purpose of calculation on capital employed should

be computed according to the concept of capital employed & used. The

profits taken must be the profit earned on the capital employed in the

business.

Profit After Tax

Return on Gross Employed = ------------------------------------ X 100

Gross Capital Employed

TABLE:

YEAR PROFITAFTER

TAX (LACKS)

GROSSCAPITAL

EMPLOYED

PERCENTAGE

2007-2008 4644.97 113857.82 4.0

2008-2009 4137.14 108668.71 3.8

2009-2010 2814.67 108668.05 2.5

2010-2011 6299.57 110944.56 5.7

2011-2012 3351.28 120211.89 2.8

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CHART:

INTERPRETATION:

Return on Gross Capital Employ6ed ratio is fluctuating trend during the

review period of time

During the year 2007-08 the ratio was recorded at 4.0 % and in the year

2011-12 the ratio was increased to 2.8 % and average ratio is 3.76 %.

The highest ratio was recorded at 5.7 % in the year 2010-11 which is

more than average ratio.

The lowest ratio was recorded at 2.5 % in the year 2010-11 which is the

less than the average ratio

72

4 3.8

2.5

5.7

2.8

0

1

2

3

4

5

6

2007-08 2008-09 2009-10 2010-12


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9. RETURN ON FIXED ASSETS:

The return on fixed assets can be calculated as under.

PAT

Return on Fixed Assets = ------------------------- X 100

Fixed Assets

TABLE:

YEAR PROFITAFTER

TAX (LACKS)

FIXEDASSETS PERCENTAGE

2007-2008 4644.97 60794.08 7.6

2008-2009 4137.14 62564.03 6.6

2009-2010 2814.67 58955.39 4.7

2010-2011 6299.57 56993.08 11.05

2011-2012 3351.28 57148.37 5.86

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CHART:

INTERPRETATION:

Return on fixed assets ratio is decreasing.

74

7.6

6.6

4.7

11.05

5.86

0

2

4

6

8

10

12

2007-08 2007-08 2008-09 2009-10 2010-11


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During the year 2007-08 the ratio recorded as 7.6 % & in the year

2011-12 the ratio decreased 5.86 %.

The average ratio is 7.14 %

The highest ratio is recorded at 11.05 % in the year 2008-09, the lowest

ratio is 4.7 % in the year 2009-10

FINDINGS:

Company should concentrate on long term assets are utilized for

working capital problem will not arise in future.

Company should concentrate on inventory it can improves theinventory turn over ratio

Growth rate of investment trend percentage, growth rate in fixedassets

Growth rate in fixed assets during the years 2008-09 increased to6,25,64,02,873.

Fixed asset to net worth is good position in LG Electronics.

Fixed assets to long term liability highest ratio is regarded 184.6% inthe 2006-07 lowest ratio is 152.7% in 2010-11.

Total investment turn over ratio was highest regarded 51.84% in theyear 2010-11.Which is more than average ratio

Fixed assets turn over ratio was increased the every year. Highest ratiowas regarded at 2.40% in 2011-12

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Return on grass capital employee highest ratio was regarded 5.7% inthe year 2010-11

SUGGESTIONS:

Regarding the fixed assets to total assets it been observed that there

was decreased form 31.5% to 46 % as a results it is said to be that the

ratio is quite satisfactory.

Regarding the profit and gross capital employed ratio it can be

observed that it as been increasing over the year form 113857.82 to

120211.89. As a result of the above it can be said that the ratio is

steadily increasing.

From the above study it can be said that the LG ELECTRONICS

industries financial position on fixed assets is quite satisfactory.

Company should maintain adequate ratios

It should try to utilize the fixed assets to maintain maximum profit.

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APPENDIX Bibiliography

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BIBLIOGRAPHY

Authors name : Title of the Book, Publisher & Edition

L.M Panday : Financial management vikas publisher,

Prasanna Chandra : Financial Management, Tata McGrawhile

R.K Sharma : Management Accounting Kalyani Polishers.

S.P Jain & K.L Narang : Financial Accounting & Analysis Kalyani

Publisher

Websites: WWW.LGELECTRONICS.COM

WWW.GOOGLE.COMNews paper : Business line,

India Today.

78
http://www.lgelectronics.com/http://www.google.com/http://www.lgelectronics.com/http://www.google.com/


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F A mgnt-LG Final

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