Analysis of Divisional Performance of Asian Paints Ltd

DEPARTMENT OF COMMERCE SCHOOL OF MANAGEMENT PONDICHERRY UNIVERSITY ASSIGNMENT ON ADVANCED speak to ACCOUNTING ANALYSIS OF DIVISIONAL PERFORMANCE OF Asiatic PAINTS LTD SUBMITTED TO -SUBMITTED BY DR. G. SHANMUGHASUNDARAM A. PURUSHOTHAMAN ASSOCIATE PROFESSOR M. COM (BUSINESS FINANCE) DEPT. OF COMMERCE 2nd YEAR PONDICHERRY UNIVERSITY REG. act 11351059 INTRODUCTION DIVISIONAL PERFOMANCE OF COST CENTRE AND PROFIT CENTRE A utility center is a unit of a family that generates revenue in excess of its expenses. The main aim of profit message is to acquire profit.The act of profit centre is prised in terms of whether the centre has been achieved its budgeted profit A constitute centreis a business unit that is al one responsible for the approachthat it incurs. The manager of a cost centre is non responsible forrevenuegeneration or asset usage. The performance of a cost centre is usually evaluated through the comparison ofbudgetedto actual costs. The costs incurred by a cost centr e whitethorn be add up into acost pooland allocated to other business units. Investment centre is responsible for both profit and enthronization.The enthronisation centre manager has bid over revenue, expenses and the amount invested in the current assets. The following are the techniques employ to measure the divisional performance of cost centre and profit centre * Variance analysis * Profit * Return on investment * market place pct COST PER UNIT Cost refers to the occur cost incurred for the production. So cost per unit refers to the cost incurred for producing 1 unit. Normally we used the downstairs formula to calculate the cost per unit Cost/unit = total cost / No. of unit produced COST PER UNIT year exertion 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 to a higher place table and chart shows the cost per unit of Asiatic paints In dia ltd. They incurred highest cost per unit in the year 2011. This whitethorn because increasing the cost of raw material or other charges etc. It is better to im bulge out lower cost per unit because when cost per unit increases the total cost will increase. That in turn reduces the gainfulness of a firm. In the 2008 the firms project lower cost per unit of production compared to other old age.So may be this year the profit is increased. The cost per unit is higher in the years 2011 and 2009. COST VARIANCE Cost discrepancy (CV) is the amount of money that was in reality 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. YEAR meat 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 2 3220. 66 F Interpretation Here from 2008 to 2010 there is a brotherly 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 Sales variance is the difference between actual gross sales and budget sales. It is used to measure the performance of a sales function, and/or analyze business results to better understand market conditions. Sales variance = Actual sales standard sales Segment 1= PaintYEAR deal STANDARD gross sales 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 impart 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 translation Sales variance is higher in the year 2012 which means that partnership exchange more than standard sales in the year 2012. And the 2011 alike have the favorable value but it is lower than 2012. From 2008 to 2010 follow cannot sold more than standard sales. That is an unfavorable situation for the company. MARKET SHARE The destiny of an application or markets total sales that is earned by a particular company over a specified time achievement is known as market contend.Market persona is calculated by taking the companys sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a customary idea of the size of a company to its market and its competitors. Market share Year Total sales Industrial sa les 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 Company has highest market share in the year 2010. It is decreased in the later(prenominal) years may be because of increased price of the products. functional(a) CAPITAL TURN OVER proportion A measurement comparing the depletion of working dandyto the generation of sales over a given period called as working crownwork turn over ration. Thisprovides some useful informationas to how in effect a company is usingits 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 3,918. 80 23. 32 In terpretation 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. enumeration TURN OVER RATIO Inventory swage Ratio is one of the efficiency ratios and measures the function of times, on average, the inventory is sold and replaced during the fiscal year.Inventory Turnover Ratio formula is year Total sales opening breed 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 sign on of inefficiency, since inventory usually has a rate of return of zero. It excessiv ely implies all poor sales or excess inventory. A low turnover rate can propose poor liquidity, possible overstocking, and obsolescence, but it may also reflect a planned inventory buildup in the theme of material shortages or in anticipation of rapidly rising prices. In our case the 2008 has the lower turnover rate. A high inventory turnover ratio implies either strong sales or ineffective buy (the company buys too often in small quantities, therefore the purchase 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 damage in business. Here the years from 2009 to 2011 there is constant turnover rate. communicate 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 suitable return on capital invested. This is the measure of success i. e. it shows the overall profitability of the firm. ROI = PAT/ cap. Employed 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 last 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 fall trend due to decrease in sales. The inventor y and working capital of the company is also not good. So it is important for the company to centralize on to improve sales volume with higher turnover, better attention of working capital. And to try to get more return on investment by adopt necessary measure and techniques.