Analysis of Divisional Performance of Asian Paints Ltd

DEPARTMENT OF COMMERCE SCHOOL OF MANAGEMENT PONDICHERRY UNIVERSITY ASSIGNMENT ON ADVANCED exist account ANALYSIS OF DIVISIONAL PERFORMANCE OF ASIAN PAINTS LTD SUBMITTED TO -SUBMITTED BY DR. G. SHANMUGHASUNDARAM A. PURUSHOTHAMAN ASSOCIATE PROFESSOR M. COM (BUSINESS FINANCE) DEPT. OF COMMERCE 2nd grade PONDICHERRY UNIVERSITY REG. NUMBER 11351059 INTRODUCTION DIVISIONAL PERFOMANCE OF COST CENTRE AND PROFIT CENTRE A clams mall is a building block of a company that gene vagabonds revenue in excess of its expenses. The main aim of profit nerve centre is to earn profit.The performance of profit centre is evaluated in terms of whether the centre has been achieved its budgeted profit A embody centreis a business building block that is only responsible for thecoststhat it incurs. The manager of a cost centre is not responsible forrevenuegeneration or asset usage. The performance of a cost centre is usually evaluated through the comparison ofbudgetedto true(a) costs. The costs incurred by a cost centre may be aggregated into acost pooland allocated to other business building blocks. investing centre is responsible for both profit and investment.The investment centre manager has control over revenue, expenses and the get along invested in the current assets. The following are the techniques used to ginmill the divisional performance of cost centre and profit centre * Variance analysis * Profit * Return on investment * marketplace assign COST PER building block Cost refers to the totality cost incurred for the production. So cost per unit refers to the cost incurred for producing 1 unit. Normally we used the below formula to calculate the cost per unit Cost/unit = total cost / No. of unit produced COST PER UNIT year Production Total expenses COST PER UNIT 008 40946. 7 559586 0. 073173203 2009 50418. 7 602922 0. 083623918 2010 57937. 2 732142 0. 079133829 2011 72582. 9 849056 0. 085486587 Interpretation The above table and chart shows the cost per unit of A sian paints India ltd. They incurred highest cost per unit in the year 2011. This may because increasing the cost of raw stuff and nonsense or other charges etc. It is go to have frown cost per unit because when cost per unit increases the total cost will increase. That in turn reduces the profitability of a firm. In the 2008 the firms have dishonor cost per unit of production compared to other years.So may be this year the profit is increased. The cost per unit is higher in the years 2011 and 2009. COST VARIANCE Cost magnetic declination (CV) is the beat of money that was actually spent on a project or a part of a project compared to the amount of work that was actually accomplished. Cost variance = Budgeted cost of work performed The actual cost of work performed. social class make out COST STANDARD COST VARIANCE DECISION 2008 40946. 7 61276. 54 -20329. 84 A 2009 50418. 7 61276. 54 -10857. 84 A 2010 57937. 2 61276. 54 -3339. 34 A 2011 72582. 9 61276. 54 11306. 6 F 2012 84,497. 20 61276. 54 23220. 66 F Interpretation Here from 2008 to 2010 there is a favorable situation because in these years actual cost is less than standard cost. In 2011 and 2012 actual cost exceeds standard cost. That may be because of increase in the cost/unit in these years. gross revenue VARIANCE gross sales variance is the difference between actual sales and budget sales. It is used to measurement the performance of a sales function, and/or analyze business results to better understand market conditions. Sales variance = Actual sales standard sales Segment 1= Paint course SALE STANDARD gross revenue VARIANCE DECISION 2008 39062. 2 51731. 3 -12669. 1 A 2009 48641. 9 51731. 3 -3089. 4 A 2010 56135 51731. 3 4403. 7 F 2011 63086. 1 51731. 3 11354. 8 F Segment 2= Others YEAR SALE STANDARD SALES VARIANCE DECISION 2008 1731. 7 1717. 375 14. 325 F 2009 1634. 5 1717. 375 -82. 875 A 2010 1774 1717. 375 56. 625 A 2011 1729. 3 1717. 375 11. 925 A TOTAL SALES VARIANCE YEAR TOTAL SALES STANDARD COST VARIANCE DECISION 2008 40,946. 70 62,655. 72 -21,709. 02 A 2009 50,418. 70 62655. 72 -12,237. 02 A 2010 57,937. 0 62655. 72 -4,718. 52 A 2011 72,582. 90 62655. 72 9,927. 18 F 2012 91,393. 10 62655. 72 28,737. 38 F INTERPRETATION Sales variance is higher in the year 2012 which means that company sold more than standard sales in the year 2012. And the 2011 also have the favorable value but it is lower than 2012. From 2008 to 2010 company cannot sold more than standard sales. That is an unfavorable situation for the company. MARKET SHARE The percentage of an pains or markets total sales that is earned by a particular company over a specified time period is known as market share.Market share is calculated by victorious the companys sales over the period and dividing it by the total sales of the industry over the same period. This careful is used to give a general idea of the size of a company to its market and its competitors. Market share Year Total sales Industrial sales Market share 2008 40,946. 70 348047 11. 76 2009 50,418. 70 393266 12. 82 2010 57,937. 20 260717 22. 22 2011 72,582. 90 834703 8. 70 2012 91,393. 10 868,234. 00 10. 53 Interpretation federation has highest market share in the year 2010. It is decreased in the resultant years may be because of increased price of the products.WORKING CAPITAL TURN OVER proportionality A measurement comparing the depletion of works(a)(a) jacket crownto the generation of sales over a given period called as working hood turn over ration. Thisprovides some useful informationas to how effectively a company is exploitationits working capital to generate sales. WORKING CAPITAL TURN OVER RATIO YEAR TOTAL SALES CURRENT ASSETS CURRENT LIABILITIES WC WCTOR 2008 40,946. 70 8,686. 30 8018. 6 667. 70 61. 32 2009 50,418. 70 10,403. 70 7811. 4 2,592. 30 19. 45 2010 57,937. 20 11,981. 00 10588. 7 1,392. 30 41. 61 2011 72,582. 90 15,475. 70 11952. 3,522. 90 20. 60 2012 91,393. 10 19,927. 70 16008. 9 3,91 8. 80 23. 32 Interpretation Here working capital ratio is higher in the year 2008. This means that company may have adequate working capital for their operation in 2008. Working capital to ratio is very lower in the subsequent years (i. e. 2009 to 2012), it shows that company is struggled with inadequacy of working capital in that years. INVENTORY TURN OVER RATIO Inventory Turnover Ratio is one of the efficiency ratios and measures the number of times, on average, the inventory is sold and replaced during the fiscal year.Inventory Turnover Ratio formula is year Total sales opening depot closing stock Avg stock ITOR 2008 40,946. 70 40,946. 70 42,954. 70 41,950. 70 97. 61 2009 50,418. 70 50,418. 70 52,427. 70 51,423. 20 98. 05 2010 57,937. 20 57,937. 20 59,947. 20 58,942. 20 98. 29 2011 72,582. 90 72,582. 90 74,593. 90 73,588. 40 98. 63 INTERPRETATIONA low inventory dollar volume ratio is a signal of inefficiency, since inventory usually has a rate of return of zero. It also implies both poor sales or excess inventory. A low turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a planned inventory buildup in the case of material shortages or in anticipation of rapidly move up prices. In our case the 2008 has the lower turnover rate. A high inventory turnover ratio implies either strong sales or ineffective buying (the company buys too often in mild quantities, therefore the buying price is higher).A high inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels, which may lead to a loss in business. Here the years from 2009 to 2011 there is constant turnover rate. return ON INVESTMENT A performance measure used to evaluate the efficiency of aninvestment or to compare the efficiency of a number of different investments. The objective of every firm is to earn a satisfactory return on capital invested. This is the measure of succe ss i. e. it shows the overall profitability of the firm. ROI = PAT/ cap. use YEAR PBIT CAPILAT EMPLOYED ROI 2008 5925. 9,285. 00 63. 81583199 2009 6075. 9 10,944. 70 55. 51454128 2010 10526. 9 15,572. 20 67. 60059593 2011 11636. 7 19,753. 20 58. 91045501 2012 14,086. 30 24,877. 80 56. 62196818 INTERPRETATION The above table and chart implies us, The ROI is higher in the year 2008. The Company gets 63. 82% as return on investment. This may because in this year company sold more than the standard sales. So return on investment is increased. Company received lowest ROI in the year 2009 CONCLUSION The Asian paints ltd is having an indifferent performance levels, they have both positive and negative performance indicators.The sales variance is for the destruction two years is favorable for the company, and also all other indicators such as cost variance favorable for the firm. Another thing is that market share of the company shows a decreasing trend ascribable to decrease in sales. The inventory and working capital of the company is also not good. So it is in-chief(postnominal) for the company to focus on to improve sales volume with higher turnover, better maintenance of working capital. And to try to get more return on investment by adopt necessary measure and techniques.