Professional Documents
Culture Documents
Mil Report 07
Mil Report 07
COMPANY PROFILE
2006-2008
Installed Capacity
Resin T/month
varnish
5000
Resin 100%
varnish
&
Ink
2006-2008
Paid-up
AVG PRICE OF SHARE (as per BSE &NSE data) till DEC 06 TOTAL SHARES HELD
2006-2008
24,871,941
ORIGIN
Ink is essence of life. Centuries ago, it communicate. Life without ink is hard to conceive. used to express thoughts and
was
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morning newspaper to bring us the news. No magazines to leaf through. No letters to be exchanged. No fairy tales to read to our children as we put them to sleep. It's no wonder they say; a world without inks is unimaginable. But where did the story of inks begin? Perhaps from our desire to communicate with each other across the barriers of time and space. and tree barks. History saw the invention of paper in 105 AD and the earliest use of inks in the form of coal, gum rosin and tung oil. This was clearly amongst the major influences that led to the rapid progress of human civilization. Despite its ancient origin, little has been said or written about the influence of inks throughout history. Today, inks are our silent companions present in our lives in some form or the other in almost everything that we do. Thanks to modern printing technology in particular. A saga, which began in 1450 AD, when Johan Gutenberg invented the letterpress. Thereafter, ink technology evolved in tandem with the evolution of printing technologies. In the present day, Printing Inks are a blend of various ingredients, formulated to create graphic design or text on a variety of substrates or surfaces ranging from paper to
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Centuries
The world market of Printing Inks is around US $15 to US $ 16 billion. The USA leads with a global market share of 30%. Among the leading Ink manufacturing companies worldwide, Dainippon Ink / Sun Chemicals is the largest. Micro Inks ranks the 4th largest globally and No.1 in India. Printing Inks are a unique blend of various ingredients, which ultimately find expression in creating exciting graphic designs or text, on a variety of substrates or surfaces. Advancing printing technology has also accelerated the creation of high quality inks. The global ink industry has matched progressing technology, stride for stride. The world market for Printing Inks was valued at US $ 14.3 billion in 1999 2000 and is growing at a rate of around 2% to
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consolidations and alliances in the past and all this has led to a few dominant players controlling the ink markets. majors have achieved a high growth rate because of vertical integration, which ensured consistency and high quality at a low cost.
Printing Inks
Letter Press
Offset
Gravure
Flexo
Silk Screen
Sheeted
Web
Coldset
Heatset
USA is the largest market for Printing Inks with a 31% Followed by Europe with a collective 28% share or US Asia Pacific growing at a rate of 6.73%.
$3.8 billion.
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Global market valued at US$ 15 billion in '03. Estimated rate of growth 2% to 3% annually. By process largest segment lithographic Printing Inks (paste/offset), US$ 6.6 billion. Estimated rate of growth 4.5% annually. This is followed by flexographic inks (liquid) with a global share of US$ 2.9 billion. Growing at 6% annually. Gravure inks US $ 2 billion 14.9% global share.
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Rosins, etc.
Oil
&
Petrochemicals,
NaturalProd ucts
4B Acid, Bon Acid, Carbon Black, CPC, IPA, Soya Oil, Linseed Oil, Aniline, Phenol, ONCB,
Additiv es
Oils
Print er
Materials
BOPP, Polyesters, Bonded Paper, Coated Paper
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GLOBAL STRENGTHS
15 Production facilities across the globe. Micro has 6 large manufacturing set-ups in Vapi, Gujarat in India within a range of 30 Km and one Plant in USA. Huber has a plant each in Canada, USA, Switzerland and Italy, 2 plants in Ireland and 3 plants in Germany. Backward Integrated paste inks production facilities, presence in various product segments.
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Dainippon Ink & Chemicals is the largest company worldwide, accounting for a 24% share in the market. Other key players in the market include Flint Inks and BASF.
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11th Largest in USA total revenues USD 216 Mio . International revenues exceeds 59% spread over 70 countries .
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Global Strengths
15 Production facilities across the globe. Micro has 6 large manufacturing setups in Vapi, Gujarat in India within a range of 30 Kms and one Plant in USA. Huber has a plant each in Canada, USA, Switzerland and Italy, 2 plants in Ireland and 3 plants in Germany.
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Backward Integrated paste inks production facilities, presence in various product segments.
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PRODUCTION DEPARTMENT
Manufacturing
understood
mean
20
Plant location
Plant location may be understood as the function of determining where the plant should be located for maximum operating and effectiveness. The selection of the place for locating a plant is one of the problems, perhaps the most
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Cost of land: - Being located in an industrial area, the cost of land is relatively low and hence, proves economic. Nearness to source of raw material: - As Micro Inks is implementing Backward Integration, all the units are located near to each other. So it becomes easy to access the raw materials, with minimum transportation cost. Income Tax Exemption (for Daman units & EOU Plant.)
Proper infrastructure facilities:- Easy availability of basic infrastructural facilities like high power supply, water supply, etc. due to its location in industrial area.
Power supply: They have their own 2 power plants, which generates electricity at minimal cost and helps them to reduce the cost of production.
The production plant of the company is spread over 90 acres, which enables workers to get proper place of undertaking the production activities in proper manner.
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Plant layout
A plant layout refers to the arrangement of machinery, equipment and other industrial facilities for the purpose of achieving the quickest and smoothest production at the least cost. A layout essentially refers to the arranging and grouping of machines which are meant to produce goods.
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Process order
Confirmation with Back flush for Raw material from Sub stores GR for Prcoess order (auto) to Sub stores Sub stores
Sales
Rejection
Internal consumption
BSR
Scrap
Issue to Reprocessing
This is the normal production every company follows. But micro inks do the production planning and scheduling through SAP system. It uses the production planning (PP) module for this purpose. This module also has many sub modules in it and the module named PI is specifically used for this purpose.
Quality system
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It therefore, identified a well-defined resource plan using systems approach, which led to the following initiatives.
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Whereas HRD is a function more concerned with training and development, career planning and development and organization development. Therefore, HRD is a part of HRM. At Micro Inks, the HRM activities include: HR planning Job analysis and design Recruitment and selection Orientation and placement
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Let us understand each of these functions in the general aspect as well as how does the company does it.
HR PLANNING
Identificatio n manpower Matching requirement Recruiting the personnel at a particular post as per is qualification. Giving them targets and furnishing timely reporting to measure the standards against the actual achievements. the supply of deficiency of Source supply through references with the of
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JOB ANALYSIS
It is the process of collecting job related information. It results in two sets of data, job description and job specification. Job description implies listing of job title, tasks, duties and responsibilities involved in a job. Job specification, on the other hand, involves listing of employees qualifications, skills and abilities.
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After approving the Manpower Requisition Form, the HR Department looks into two sources: Internal and External for the purpose of Recruitment.
Internal Source
Transfers: Transferring employees from one department to other or from one location to other as per the requirement. Promotions: By shifting an eligible and competent
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There are only two external sources through which it fulfills its requirement for manpower: e Recruitment: Micro Inks Ltd has registered itself at websites like naukri.com, timesjob.com, monster.com to get new talent and competencies from all over at the world. Campus: Micro Inks Ltd. also conducts campus interviews to recruits fresher for their new competencies. For the purpose, company goes to various Institutes and Universities.
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For Workers Training regarding safety measures and making them familiar with the operations of the machines. Training regarding ISO is also provided to the workers.
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PERFORMANCE APPRAISAL
It is the policy of Micro Inks Ltd. to undergo an exercise of goal setting before reviewing the performance of its employees. The practice in Micro Inks Ltd. for an effective Performance Management is described as follows: Firstly, every employee fills up a document in consultation with his superiors. This document consists of details such as Employee information, Company Objectives / Goals, Functional Objectives / Goals and Individual Objectives / Goals. Then after a period of 3 months employee has to fill up a Performance Review Form. This form consists of Individual Objectives / Goals, weightage, appraise and appraiser remarks.
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accordance to his standard Objectives / Goals. If any deviations are found they are eliminated and again the Objectives / Goals are revised for next 3 months. The process continues every quarter for the whole year. After one year one more form is filled up which shows an account of the individuals significant contributions in the appraisal year, its impact and Appraisers comments.
REMUNERATION
The remuneration system which Micro Inks uses is that, it sees the experience and qualification of a particular designated person, compares it with the same of that of the other companies and pays them 10% higher and manage their remuneration system. Remuneration to the workers is as per the minimum wages as specified from time to time by the government authorities. remuneration than that prevailing in other companies. This is how they retain
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Need for safety and health. An accident free plant enjoys certain benefits like: o o o o Cost saving. Increased productivity. Moral Legal
Safety programme o For the safety of workers Plant Incharge, Safety Incharge, as well as Engineering Incharge are responsible. The safety department consists of 1 manager, 4 officers and 12 firemen. All the workers are given a compulsory safety training for 1 hour for 4 days in a week. they are scheduled in batches. The
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Safety systems used in the plant are: o Fire handling system. o Work permit system. o Certification system. o Fire extinguishers.
Welfare activities
Micro Inks Ltd. offers the benefits of Bilakhia Group Employees Welfare Trust Schemes to its employees. The various schemes under this trust include:
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FINANCE DEPARTMENT
Financial planning is the process of analyzing the firms investment option and estimating the fund requirement and deciding the sources of funds.
Thus, the financing planning process involves the following facets: Evaluating the current financial condition of the firm Analyzing the future growth prospects and options. Analyzing the investment options to achieve the stated growth objective. Projecting the future growth and profitability Estimating funds requirement and considering alternative financing option Comparing and choosing from alternative growth plans and financing options. Measuring performance. actual performance with planned
The company follows a practice of monthly and quarterly review of budgeted and actual cash flows. They plan the requirement of working capital for an annual period, and according to the review of the cash flow statement, they come to a conclusion of requirement of finance for the company.
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From the review of each category in the cash flow, what are the capital requirements, the company will need in a special segment, according to it will acquire loan from the bank from the total permissible amount under that particular segment.
A. Ratio analysis
(i)
Liquidity ratios :
The liquidity ratios measure the ability of a firm to meet its short term obligations and reflect the short term financial strength or solvency of a firm. These ratios indicate the ease of turning assets into cash.
Current ratio =
Current ratio of the year of 2007 = 618098125 14382801 = 42.97:1 489317741 73071869 = 6.69
Interpretation :
Current ratio is standard measure of a business financial condition. Mitsu Ltd has Current ratio of 43:1 it is interpreted to be more than sufficient liquidity. It is important that very high current ratio may be indicate of slack management practices, as it might signal excessive inventory for the current requirements and poor credit management in terms of overextended account receivable and also may not be making full use of its current assets. so, firm should have a proportional to cycle. our operating
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73071869
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6.12:1
Interpretation :
The quick ratio of 0.975 : 1 of the year of 2006 is represent satisfactory current financial condition. Here, we can interpret that the current ratio is 1.41:1 and quick ratio 0.98:1 is that large part of current assets of BSL is tied up in fast moving and saleable inventories and fast paying debts.
(a)
This
inventory is replaced and the efficiency of the firm in selling its product. during the year Inventory turnover ratio = goods sold Average inventory Inventory turnover ratio of the year of 2007 = 239952076 9979539 = 24.44 times =0.49month(12month/7.39times) = (360days/7.39times) Inventory 421784439 21105860 = 20 times turnover ratio of the year of 2006 = 15 days cost of
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Interpretation :
Company is turning its inventory of finished goods into sales 24.44 times in a year of 2007. In other words, it holds average inventory of: 0.49 months or 15 days (days of inventory holdings). A careful high analysis. ratio it implies may good be inventory indicative management. yet, a very high ratio calls for a underinvestment in inventory. and a very low level of inventory will adversely affect the ability to meet
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technology that provides accurate colors and stores the data to produce an identical color time after time. Every time. Any time. In double quick time. (At most times, the Micro Inks ATM delivers a printers ink requirements in less than an hour). Just like a bank ATM uses technology to help you instantly meet your needs for relatively small amounts of cash, a Micro Inks ATM helps you instantly meet your needs for small quantities of ink.
Introduction
Micro Inks ATM was a concept developed by one of the senior most person in Micro Inks.
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It gradually ended the method of manual ink matching and brought up the new latest and effective process.
1st Micro Inks ATM centre was launched on February 2005 at DAMAN.
18th
The success of ATM is revealed by the fact that today there are 40 ATMS operating successfully in INDIA and abroad.
ATMS commercial head is guiding the success of ATM onto the path of excellence.
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specific than they were in the past. Manual matching of color requires a lot of
time, money, and labor. Also to the worst its also not very accurate. So the need of the time was a faster and
shades.
This was quickly recognized by Micro Inks. They thought an idea of setting up a depot
where peoples according to their requirements can get colored inks by a faster and accurate means. This gave them the idea of ATM (Any Time
Micro).
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easy as it looked to be. Three years of hard work by the R&D team
and many trials finally gave the way of launching up the 1st ATM at DAMAN.
Basic Process:
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4) The correct specs are instantly sent into production at the mini plant in the ATM itself.
5) Customers wait in the lounge, sip tea or coffee and go through some of the worlds leading magazines (printed using Micro Inks).
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6) quantity customers
The
color
and
the
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This is the first time when Micro Inks has got so nearer to the small printing presses and other customers. It was possible only with the help of ATM.
Onto to these micro inks provide all the help and support to the distributors on setting up the whole ATM. This help is on the basis of quality guideline, is it profitable to join ATM, etc.
This help is also related with the technical aspects, the process and the technology.
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BRANDS OF MICRO INKS : 1. LIQUID INKS : - Esteralm + - Esteralm - Microlame - Microglass 2.PASTE INK : - Persection. - sunrise - Rapida - Reflecta. - Turbo chrome. - Mitsu.
3. Wet offset Black & Colors. Cold set Black & Colors. Heatset Black & Colors.
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Target Market : 15% growth for current year 9% growth was for last year Zero Level Distributors get over - riding commission (ORC) at the rate of 6% for introducing new customers.
One- Level
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Marketing Communication Mix E- mails, letters and telephone to industrial customers. Seminars for regular customers and distributors. Advertisements in the magazines of Printing Industry. Stall in Trade Fairs relating to Packaging & Printing Industries. Any Time Micro [ATM] to distributors to facilitate smaller requirements of customers.
Brochures and leaflets to communicate to the external organizations. Statues and Circles in Vapi as well as Sign Symbols at the street lights on the roads of Vapi is also the part of promotion.
Target Markets
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manufacturing inks since 1765 with 29 manufacturing facilities in Europe and North America. Huber has 29 manufacturing facilities in Europe / North America and over 200 sales and service points worldwide. Micro Inks is a relatively newer entrant to the global printing ink market and its activities have up to now been focused on India and North America. Micro Inks has five locations in Daman and Vapi in India and a plant in near Chicago in the USA. Huber becomes the market leader in India through this integration with the largest Indian printing ink manufacturer and improves its position in Europe, North America and Asia. One of the main objectives of this move from the Hubers point of view is the backward integration into pigments and resins. From the Bilakhia groups point of view the forward integration into the sales and service network of the Huber is the main attraction. Micro Inks is a relatively newer entrant to the global printing ink market and its activities have up to now been focused on India and North America although it has been exporting inks, flushes and pigments to 63 countries. Micro Inks has developed a significant cost effective manufacturing base by a unique backward integration into pigments and resins for printing inks especially for paste inks in a relatively short period of time. However, with limited global
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manufacturing as well as raw material costs has prompted the group to look for opportunities to secure its business further. The need to be present in the fast growing Asian region compared to the slower growth rates in Europe and North America resulted in the current transaction. Huber group acquired majority stake in Micro inks.(2006 sales Rs 3550 mn) Huber group is the 3rd largest in Europe , Micro Huber combine revenues more than $150 mn ,making it in Top 5 US companies. Huber group has acquired 50.5% from Bilakhia family @ Rs 675 per share. Further public offer to purchase the 20% of share capital @ Rs675 per share has been successfully completed. Fourth Largest post merger globally. The name of Micro Inks Corporation, USA has been changed to Hostmann-Steinberg Inc. USA
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TRANSFER PRICING
Overview:
Over the last few years the cross border business between entities belonging to same business group have increased considerably and due to integration of domestic economy with global economy & growth of MNEs. The MNEs together with their associated enterprises have been playing a critical role in international trade and business. Many studies so far indicated that 2/3rd of the world trade is controlled by multinational groups and trade among them accounts for the bulk of it.The business activities may span from trading of goods and services to undertaking production internationally.
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Historical Background
The transfer pricing legislation was first introduced in UK in 1915.This was followed by United States in 1917.The provisions were introduced to discourage companies from shifting profit to overseas associates through under or overpricing of cross-border transactions. Prior to 1961 , transfer pricing was not considered important as there was no significant international trade during this period.But the period after sixties witnessed a substantial growth in business of multinational corporations.
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The Indian economy witnessed major restructuring after its opening up in the early nineties( Liberalisation).The MNCs realized that our country offered a big market for their goods and also a cheap place for carrying on manufacturing activities and development of software. This all led to spurt of foreign direct investment into the country. There was a feeling that multinational companies pay less tax than comparable domestic companies due to absence of transfer pricing provisions. It was also felt that Indian companies could abuse transfer pricing by entering into transactions of exports of raw material and ancillary goods to their associated enterprises that in turn may sell finished goods back to these companies at prices than prevailing market prices.
International Transaction
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Penalties Resident
Adjustment of Difference
Methods of ALP
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Transfer pricing refers to prices at which an enterprise transfers physical goods and intangible property or provides services to associated enterprises GENERAL DEFINITION It relates to the system of pricing the transfer of goods, services and intangibles between associated enterprises of a multinational enterprise. RATIONALE OF REGULATIONS
The Regulations provide a statutory framework which can lead to computation of reasonable,fair and equitable profits and tax.
It protects the right of the country to collect due share of tax in respect of transactions between enterprises. associated
Absence of regulations allows multinationals to shift profits to low tax jurisdictions by manipulating prices of intra group transactions.
ASSOCIATED ENTERPRISE
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transfer prices among associated enterprises. The principle follows the approach of treating associated enterprises of a group as independent entities and puts associated enterprises and independent entities on equal footing for tax purposes.
applied in a transaction between persons other than associated enterprises in uncontrolled conditions. It is therefore a price, which is ordinarily determined by market forces and would be charged in transactions between independent enterprises that deal with each other.
Comparable uncontrolled price method Resale Price method Cost Price method
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Company Price Lists Website Trade Directories Govt. Publications. Data Base.
Identify the price charged or paid in a comparable uncontrolled transaction. Adjust such price to account for material differences which would affect the price in open market. Price so adjusted is taken as the arms length price in relation to international transaction.
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Hypothetical Example: Problem: Lets say X ltd , company incorporated in US ,sells laser printer cartridge to its 100% Indian Subsidiary @ $50 per cartridge. X Ltd also sells its laser printer cartridge to another company Y Ltd in India @ $80 per cartridge. Total Income of A ltd for the assessment year 06-07 is Rs 12,00,000 after making the payment for 100 cartridges $50 ( 1$= Rs.40 ). A ltd has deducted the tax at sourcewhile making payments to X Ltd. In this case sold to unrelated party Y Ltd is @ $80.Compute the arms Length price and taxable income of X Ltd and A Ltd by CUP method
Solution: Arms Length Price (ALP) of laser printer which is sold to A Ltd will be $80 per cartridge
Income of A ltd Income 12,00,000 ADD: Amount charged by X Ltd [$50 *100 * 40 ] 2,00,000 LESS: Arms Length Price 3,20,000
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as
per
books
of
account = =
RESALE METHOD
The method begins with the price at which a product purchased from an associated enterprise is resold to an independent enterprise. The price is then reduced by appropriate gross resale price margin. This represents the amount out of which a reseller would cover its other costs and selling expenses. The residuary figure is the arms length price for the transfer of property. The resale margin may be determined by reference to margin that may be earned by a reseller in a comparable uncontrolled transactions or margin earned by an independent enterprise in comparable transactions. DETERMINATION OF ALP UNDER RESALE METHOD
Identify price at which goods, articles or things are ultimately resold to an unrelated enterprise.
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Deduct
reasonable
expenses
and
normal
profit
margin. Adjust resultant price for material differences, if any, in the transactions being compared.
Hypothetical Example: Finished Goods from MIL are transferred to USA at $2.5 but the it is sold by subsidiary at $3 and Gross profit margin is at 10%. Calculate the ALP.
$3 $0.3 _______
ALP
$2.7
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The cost plus method begins with the costs incurred by the supplier of property or services in a controlled transaction to which an appropriate mark-up is added to account for an appropriate profit considering the functions performed, assets involved and risk assumed.
The price arrived at after adding the cost plus mark up to these costs is regarded as arms length price of the controlled transaction.
Under this method the sellerss cost plus mark up is bench marked against that of comparable enterprises. The cost plus mark-up is normally the gross profit of the
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Determine
direct
and
indirect
costs
of
production.
Determine normal gross profit mark up to such costs. Adjust normal gross profit mark-up to take into account the functional and other differences, if any between international transaction and comparable uncontrolled transactions.
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The price so arrived is taken to be an arms length price in relation to supply of property or provision of services.
Transactional net margin method compares the net profit margin from a controlled transaction with net margin earned in comparable uncontrolled transactions. The net margin of the transactions so compared forms the basis of determining arms length price.
The net margin is calculated with reference to appropriate base say costs, sales or assets.
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It is used where the data available is inadequate or unreliable to apply traditional transaction methods
Compute net profit margin of associated enterprise transactions. Compute net profit margin of comparable uncontrolled transactions. Adjust net profit margin of uncontrolled transactions for material differences.
The net profit so established is taken into account to arrive at the arms length price.
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Lets take the price of Resins & Varnish(Product A) Plant the where Raw Material (Z)
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Packaging cost
product
is (RM) Cost
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So the total or Net RM Cost is X+Y+Z = Rs. 66 + Variable Cost ( Manufacturing cost) = Rs 6 + Fixed Overheads + Depreciation + Freight Total Cost (TC ) + Interest ( 5%) ______ TC + TI Profit Margin of(8%) Total Transfer price = @ Exchange rate 98.80/ 40 TP @ USA = $ 2.47 /Kg 91.50 7.30 _______ Rs 98.80 40 = Rs 3 = Rs 2 = Rs 10 ________ Rs 87 4.50
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GRIMS MICRO INKS It is not necessary to determine the functions performed and responsibilities assumed by more than one of the associated enterprise. The method is also advantageous when one of the parties to the transaction is complex and has many interrelated activities
This method is useful when it is difficult to obtain reliable information about one of the parties.
be
influenced
by
many
factors
wholly
90
Net profit margin method is also used when third party data are not sufficiently similar in the transactional elements (eg. The product being transferred, the functions being performed..) Moving to net profit margin can factor out some of this differences.
BIBLIOGRAPHY
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