INTRODUCTION

Financial Management is the specific area of finance dealing with the financial decision
corporations make, and the tools and analysis used to make the decisions. The discipline as a whole
may be divided between long-term and short-term decisions and techniques. Both share the same
goal of enhancing firm value by ensuring that return on capital exceeds cost of capital, without
taking excessive financial risks. Capital - investment decisions comprise the long-term choices
about which projects receive investment, whether to finance that investment with equity or debt,
and when or whether to pay dividends to shareholders. Short-term corporate finance decisions are
called working capital management and deal with balance of current assets and current liabilities
by managing cash, inventories, and short-term borrowings and lending (e.g., thecredit terms
extended to customers).

Corporate finance is closely related to managerial finance, which is slightly broader

in scope, describing the financial techniques available to all forms of business enterprise, corporate
or not[1-5].
Role of Financial Managers:
The role of a financial manager can be discussed under the following heads:
1. Nature of work
2. Working conditions
3. Employment
4. Training, Other qualifications and Advancement
5. Job outlook
6. Related occupations
Let us discuss each of these in a detailed manner.
1. Nature of work

Almost every firm, government agency and organization has one or more financial
managers who oversee the preparation of financial reports, direct investment activities, and
implement cash management strategies. As computers are increasingly used to record and organize

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data, many financial managers are spending more time developing strategies and implementing
the long-term goals of their organization[6-9].

The duties of financial managers vary with their specific titles, which include
controller, treasurer or finance officer, credit manager, cash manager, and risk and insurance
manager. Controllers direct the preparation of financial reports that summarize and forecast the
organization’s financial position, such as income statements, balance sheets, and analyses of future
earnings or expenses. Regulatory authorities also in charge of preparing special reports require
controllers. Often, controllers oversee the accounting, audit, and budget departments.
Treasurers and finance officers direct the organization’s financial goals, objectives, and budgets.
They oversee the investment of funds and manage associated risks, supervise cash management
activities, execute capital-raising strategies to support a firm’s expansion, and deal with mergers
and acquisitions. Credit managers oversee the firm’s issuance of credit. They establish creditrating
criteria, determine credit ceilings, and monitor the collections of past-due accounts. Managers
specializing in international finance develop financial and accounting systems for the banking
transactions of multinational organizations[10-14].
Cash managers monitor and control the flow of cash receipts and disbursements to meet the
business and investment needs of the firm. For example, cash flow projections are needed to
determine whether loans must be obtained to meet cash requirements or whether surplus cash
should be invested in interest-bearing instruments. Risk and insurance managers oversee programs
to minimize risks and losses that might arise from financial transactions and business operations
undertaken by the institution. They also manage the organization’s insurance budget. Financial
institutions, such as commercial banks, savings and loan associations, credit unions, and mortgage
and finance companies, employ additional financial managers who oversee various functions, such
as lending, trusts, mortgages, and investments, or programs, including sales, operations, or
electronic financial services. These managers may be required to solicit business, authorize loans,
and direct the investment of funds, always adhering to State laws and regulations[15-19]. 2.
Working conditions

Financial managers work in comfortable offices, often close to top managers and to
departments that develop the financial data these managers need. They typically have direct access
to state-of-the-art computer systems and information services. Financial managers commonly
work long hours, often up to 50 or 60 per week. They generally are required to attend meetings of
financial and economic associations and may travel to visit subsidiary firms or to meet
customers.

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3. Employment

While the vast majority is employed in private industry, nearly 1 in 10 works for
the different branches of government. In addition, although they can be found in every industry,
approximately 1 out of 4 are employed by insurance and finance establishments, such as banks,
savings institutions, finance companies, credit unions, and securities dealers[20-24].

4. Training, Other qualifications and Advancement

A bachelor’s degree in finance, accounting, economics, or business administration

is the minimum academic preparation for financial managers. However, many employers now seek
graduates with a master’s degree, preferably in business administration, economics, finance, or
risk management. These academic programs develop analytical skills and provide knowledge of
the latest financial analysis methods and technology.

Experience may be more important than formal education for some financial
manager positions—notably, branch managers in banks. Banks typically fill branch manager
positions by promoting experienced loan officers and other professionals who excel at their jobs.
Other financial managers may enter the profession through formal management training programs
offered by the company.
Continuing education is vital for financial managers, who must cope with the
growing complexity of global trade, changes in State laws and regulations, and the proliferation of
new and complex financial instruments. Firms often provide opportunities for workers to broaden
their knowledge and skills by encouraging employees to take graduate courses at colleges and
universities or attend conferences related to their specialty. Financial management, banking, and
credit union associations, often in cooperation with colleges and universities, sponsor numerous
national and local training programs. Persons enrolled prepare extensively at home and then attend
sessions on subjects such as accounting management, budget management, corporate cash
management, financial analysis, international banking, and information systems. Many firms pay
all or part of the costs for employees who successfully complete courses. Although experience,
ability, and leadership are emphasized for promotion, this type of special study may accelerate
advancement[25-32].

5. Job outlook

In some cases, financial managers also may broaden their skills and exhibit their
competency by attaining professional certification. There are many different associations that offer
professional certification programs. For example, the Association for Investment Management and

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Research confers the Chartered Financial Analyst designation on investment professionals who
have a bachelor’s degree, pass three sequential examinations, and meet work experience
requirements. The Association for Financial Professionals (AFP) confers the Certified Cash
Manager credential to those who pass a computer-based exam and have a minimum of 2 years of
relevant experience. The Institute of Management Accountants offers a Certified in Financial
Management designation to members with a BA and at least 2 years of work experience who pass
the institute’s four-part examination and fulfill continuing education requirements. Also, financial
managers who specialize in accounting may earn the Certified Public Accountant (CPA) or
Certified Management Accountant (CMA) designations. Candidates for financial management
positions need a broad range of skills. Interpersonal skills are important because these jobs involve
managing people and working as part of a team to solve problems. Financial managers must have
excellent communication skills to explain complex financial data. Because financial managers
work extensively with various departments in their firm, a broad overview of the business is
essential[33-37].
Financial managers who are familiar with computer software that can assist them in this role will
be needed.
6. Related occupations

Financial managers combine formal education with experience in one or more

areas of finance, such as asset management, lending, credit operations, securities investment, or
insurance risk and loss control. Workers in other occupations requiring similar training and skills
include accountants and auditors; budget analysts; financial analysts and personal financial
advisors; insurance underwriters; loan counselors and officers; securities, commodities, and
financial services sales agents; and real estate brokers and sales agents[38-42].

OBJECTIVES

The major objectives of the recent study are to know about financial strengths and weakness of
PHILIPSthroughFINANCIAL RATIO ANALYSIS

1. Primary objective:-

1) To study the software used in Philips

2) Toanalyze the financial statements of the corporation to its true financial position by
the use ofratios.
2. Secondary objective:-
1) To find out the shortcomings in Philips
2) To see whether Philips Companyis going well or not in different areas

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3) To inform the management about the financial condition of Philips
4) To inform the investor, enabling them to take the investment decision.
SCOPE OF THE STUDY
1. The study has great significance and provides benefits to various parties whom directly or
indirectly interact with the company.
2. It is beneficial to management of the company by providing crystal clear picture regarding
important aspects like liquidity, leverage, activity and profitability.
3. The study is also beneficial to employees and offers motivation by showing how actively
they are contributing for company’s growth.
4. The investors who are interested in investing in the company’s shares will also get
benefited by going through the study and can easily take a decision whether to invest or not to
invest in the company’s shares[43-45].
LIMITATIONS
1. The study provides an insight into the financial, personnel, marketing and other aspects of
PHILIPS. Every study will be bound with certain limitations.
2. The below mentioned are the constraints under which the study is carried out.
3. One of the factors of the study was lack of availability of ample information. Most of the
information has been kept confidential and as such as not assed as art of policy of company.
Time is an important limitation. The whole study was conducted in a period of 3 months,
which is not sufficient to carry out proper interpretation and analysis.
Research Methodology –
Data collection method: The report will be prepared mainly using primary and secondary data.
They are follows below
✓ PRIMARY DATA
It is first hand data, which is collected by researcher itself. Primary data is collected by various
approaches so as to get a precise, accurate, realistic andrelevant data. The main tool in gathering
primary data was investigation and observation. It was achieved by a direct approach and
observation from the officials of the company
✓ SECONDARY DATA
It is the data which is already collected by someoneelse. Researcher has to analyze the data and
interprets the results. It has always been important for the completion of any report. It provides
reliable, suitable, adequate and specific knowledge.
It took data comprise annual reports and post records. Bank has provided me annual reports from
2005-06 to 2009-10 by help of which, I prepared my report.

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The valuable cooperation extended by staff members contributed a lot to fulfill the requirements
in the collection of data in order to complete the project. In this study ratio analysis, has been used
for analyzing and interpreting the result. Some of the secondary data which was collected throug

• Company manuals.
• Annual Report of the company.
• www.philips.com
The techniques, which would be used for the study:
1. Discussions with company guide and customers.
2. By studying annual reports.
3. Using Project Technique.

TABLE NO: 1
(Rs. In crores)
Year Current assets Current liabilities Ratio

2005-2006 511.60 294.50 1.73

2006-2007 513.50 511.30 1
2007-2008 599.90 684.10 0.87
2008-2009 643.40 572.40 0.95
2009-2010 774.30 473.30 1.63
INTERPRETATION:
Internationally accepted ratio is 2:1 i.e., current assets shall be 2 times to current liabilities. In this
above table shows year 2008-2009 the ratio slightly decrease comparing to the previous year 2007-
2008 indicate that the company run out of money and it inadequate current assets and current
liabilities.

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Profitability Analysis Ratios:

Profitability ratios are the most significant of the financial ratios. Similar to income ratios,
profitability ratios provide a definitive evaluation of the overall effectiveness of management based
on the returns generated on sales and investment. The adequacy of your company’s earnings can
be measured in terms of (1) the rate earned on average total assets; (2) the rate earned on sales; (3)
the rate earned on average common stockholders’ equity; and (4) the availability of earnings to
common stockholders. The most widely used profitability measurements are profit margin on sales,
return-on-investment ratios, and earnings per share[711].
i) Return on Equity (ROE)

This ratio shows the return on the equity to the company. This ratio compares the Net profit and
shareholders fund of the company. In other words this expresses the relationship between the net
profit and shareholders fund. It indicates the strength of the financial foundation of the concern.
The following formula explains the above statement

Net Profit
Return on Equity (ROE) = ————————————— x100
Shareholders fund

TABLE NO: 2
(Rs. In crores)
Year Net profit Shareholders fund percentage

2005-2006 80.70 570.80 14.13

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2006-2007 213.00 767.70 27.74

2007-2008 190.30 941.20 20.21

2008-2009 135.10 883.10 15.29

2009-2010 117.50 805.10 14.60

INTERPRETATION:
This ratio shows the good results through out the year, it shows slightly decrease their percentage
of equity comparing to the previous year that is 2008-2009 and it will not harm the company they
will survive immediately.

ii) Gross Profit on Net Sales:

Gross profit ratio helps to determine whether average markup on goods will consistently cover
expenses, therefore resulting in the desired profit. If gross profit rate is continually lower than your
average margin, something is wrong! Be on the lookout for downward trends in gross profit rate.
This is a sign of future problems for bottom line. Gross Profit

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Gross Profit Rate = —————————————— x100
Net Sales

TABLE NO: 3
(Rs. In crores)
year Gross profit sales Percentage

2005-2006 95.80 2,780.70 3.44

2006-2007 299.70 2594.04 11.55

2007-2008 290 2837.20 10.22

2008-2009 219.40 3076 7.13

2009-2010 185 3241.20 5.70

INTERPRETATION:
It shows the gross profit of the company. The ratio is decrased in the current year that is 20092010
then the previous year. It shows the inefficiency of the company to meet the future needs.

i) Net Profit ratio

This ratio provides a primary appraisal of net profits related to investment. Once the basic expenses
are covered[8-9], profits will rise disproportionately greater than sales above the breakeven point
of operations.
Earnings after Taxes
Net Profit Rate = ————————— x100
Net Sales

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TABLE NO: 4
Rs. In crores)
Year Net profit Sales Percentage

2005-2006 80.70 2,780.70 3.18

2006-2007 213 2594.04 5.92

2007-2008 190.30 2837.20 6.70

2008-2009 135.10 3076 4.39

2009-2010 117.50 3241.20 3.62

INTERPRETATION:
Generally this ratio shows the net profit of the company and this table shows the financial position
of the company. The percentage of ratio decreased the current year that shows inefficiency of the
company.

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ii) Earnings per Share (EPS)

The earnings per share ratio are mainly useful for companies with publicly traded shares. Most
companies will quote the earnings per share in their financial statements, saving you from having
to calculate it yourself. By itself, EPS doesn’t really tell you a whole lot. But if you compare it to
the EPS from a previous quarter or year, it indicates the rate of growth that a company is earning.
Net Profit
Earnings per Share (EPS) = —————————————————— x100 No. of Equity
Shares
TABLE NO: 5
(Rs. In crores)
Year Net profit Number of shares Percentage

2005-2006 80.70 702.61 11.48

2006-2007 213 702.61 13.31

2007-2008 190.30 702.61 27.08

2008-2009 135.10 702.61 19.37

2009-2010 117.50 634.01 18.54

INTERPRETATION:
The net profit ratio is the overall measure of the firm’s ability toturn each rupee of income from
services in net profit. If the net margin isinadequate the firm will fail to achieve return on
shareholder’s funds. Highnet profit ratio will help the firm service in the fall of income from
services,rise in cost of production or declining demand.The net profit is increased because the
income from services isincreased.This ratio slightly decreased in year 2009-20010 and it shows
the inefficient of the company towards the shareholders view.

OBSERVATIONS AND FINDINGS OF THE STUDY

1) The current of the company increased rapidly from the year 2006-2010, but it will decrease
in the current year. It shows the inefficient to carry out the business and it will hope that it
did not affect the business anymore and it will survive instantly.

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2) The Gross profit ratio shows the good result towards the growth of the company, the sales
of the company increased constantly since 2006-2010 and gross profit of the company is
also be increased same and also increased in the current year also, so it explain that the
company is in the good position.
3) The Net profit ratio shows the good improvement towards the company’s development.
The net profit ratio is decreased between the year 2009 and 2010, but it will survive quickly.
4) The Earning per share ratio reflects the capital structure of the company. It indicates the
rate of growth of the company. The ratio shows continuous increase in the earning per share
as stated above, that shows the good result since past five years i.e., 2006-2010 it increased
rapidly. This shows share market of the company is very good and the shareholders are able
to invest its share more.
5) The operating profit ratio that shows return of the cost of the goods sold and other operating
expenses. The operating expenses of the company shows the good result that will increase
for past five years that is 2006-2010, it shows the good efficiency of the company and the
amount invested in the business to be satisfied[37-41].
6) The Return on the equity or shareholders fund ratio it helpful to understand the
shareholder’s that the shareholder’s fund of the company used effectively or not. This keeps
the company very good in the effective use in the shareholder’s fund. The ratio has been
increased effectively in the year 2010 that means the company uses his shareholder’s fund
effectively.
7) The Return on assets ratio shows how the company uses his assets towards the growth of
the company and they get return from the asset used for the company. The ratio has
increased frequently during the year2006-2010 it shows the utilization of the assets for the
company it has been very good.
8) The debt equity ratio shows the debt raises over the equity shareholders, but it will not
affect to the company because they raise their equity year by year so they will survive from
the problem. In the current year they will slightly increase in the year 2010, this will not
affect the company.
9) The interest coverage ratio is generating the cash to pay its interest obligations. In this point
interest paying from the company is very good, the interest ratio paying for the last five
years i.e., 2006-2010 seems to be satisfied.
10) The Payout ratio is shows the dividend and earnings per share. This gives hope to the
shareholders that they came to know that how much they earn from the share. The payout
ratio of the company show the good return to the shareholder of the company, the ratio has
been increased slightly then the previous year it will not affect the company, it runs its same
way.

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SUGESSTIONS

1) After the analysis of Financial Statements, the company status is better, because the
Net working capital of the company is doubled from the last year’s position.
2) The company profits are huge in the current year; it is better to declare the dividend to
shareholders.
3) The company is utilising the fixed assets, which major help to the growth of the
organisation. The company should maintain that perfectly.
4) The company fixed deposits are raised from the inception, it gives the interest to the
investors and other income i.e., Interest on fixed deposits.
5) The investment of the company is very good and increasing year by year and it helps
the growth of the organization and it maintains the same that shows the efficient of the
company.
CONCLUSION

The company’s overall position is at a good position. Particularly the current year’s
position is well due to raise in the profit level from the last year position. It is better for the
organization to diversify the funds to different sectors in the present market scenario.

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