1.1 Vision, Mission and Quality Management Vision: TO BE AMONGEST THE MOST ADMIRED COMPANIES IN INDIA COMMITED TO EXCELLENCE Mission: To be a customer obsessed company. To be the largest and most profitable tyre company in India. To retain No 1 position in truck and bus segment and to be amongst top 2 in all other 4 wheeler tyre.
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To make truck/bus radial opens profitable and retain leadership in the passenger radial market. To enhance value to shareholders and service to all stake holders. To excel as a value driven organization. To be the most preferred tyre brand in India. Quality Management: The people of JK Tyre have an organization committed to quality in everything they do. They continuously anticipate and understand customer requirement, convert these into performance standards for their product and service and to meet the standards every time. 1.2 J K Industries JK Organization owes its name to Late Lala Juggilal Singhania, a dynamic personality with a broad vision, Inspired by the Swadeshi movement of Mahatma Gandhi, and driven by the zeal to set up an Indian enterprise, Lala Kamlapat Singhania founded JK organization in the 19 th century in India. The process of industrialization and diversification was worthily and successfully carried on by Lala Kamlapats three illustrious sons Sir Padampat, Lala Kailashpat and Lala Laksmipat, aided in no small measure by the late Gopal Krishna son of sir Padampat. JK Organization has been a forerunner in the economic and social advancement of India. It always aimed at creating job opportunities for a multitude of country men and provides high quality of products. It has driven to make India self reliant by pioneering the production of number of industrial and consumer products, by adopting latest as well as developing its own know-how. It has also under taken industrial ventures in several other countries.
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JK Organization is an association of industrial and commercial companies and charitable trust. Its member companies, employing nearly 50000 persons are engaged in the manufacture of variety of products and in diverse fields of commerce. Trust are devoted to promoting industrial, technical and medical researches, education, religious values and providing better living and recreational facility. With the spirit of social consciousness uppermost in mind, JK organization is committed to cause the human advancement.
Background and inception of the company 1933 First in India to manufacture calico prints- {Juggilal Kamlapat cottons spinning and weaving mills company, Kanpur.} 1940 First in India to manufacture steel bailing Hoops for jute and cotton and to make the country self sufficient by meeting the entire demand- J.K Iron and Steel Co. Ltd., Kanpur. 1944 First in India to produce Aluminum Virgin Metal for Indian Bauxite-Aluminum CorpoRATIOn of India Ltd., Jaykayanagar. 1949 First in India to manufacture Engineering files- J.K. Engineers files Bombay. 1959 First in India to set up a continuous process Rayon plant. 1960 First in India to set up a Hydraulically operated Cane Crushing Mill for Kandsari Sugar Plant and completed 100 ton plant.
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1961 First in world to set up a plant for production of Hydrosulphite of soda by Sodium Amalagam process- J.K. Chemicals Ltd., Bombay. 1962 First in India to produce Nylon-6 with its own polymerized raw material- J.K. Synthetics Ltd., Kota. 1965 First to produce sodium Sulphoxylate Formaldehyde [Rangolite C of Formosul] in India- J.K. Chemicals Ltd., Bombay. 1968 First to manufacture TV sets in India- J.K. Electronics, Kanpur. 1976 First in India to produce steel belted Radial tyres for passenger car, trucks and buses- J.K. Tyre plant, Kankroli. 1980 First in the world to make steel belted radial tyres for 3 wheelers. 1984 First in India to produce white cement through dry process. 1985 First in India to produce cathonic Dye able Polyester Fiber. 1989 First in India to produce magnetic tapes with cobalt technology. 1991 Banmore tyre plant {BTP} set up with the capacity of 5.7 lacks tyres per annum. 1992 R&D centre setup at HASTERI. 1994 Indias first T-rated tyre launched Banmore Tyre Plant {BTP} Crossed 100 TPD.
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1995 Mercedes Benz launched on JK STEEL RADIALS first tyre manufacturer in the world to get ISO 9001. 1996 Indias first dual contact high tractions steel radial- aqua sonic launched. {Introduce steel wheels}. 1998 First tyre manufacturer in the world to get QS 9000. Awarded CAPEXILS highest export award for 1997-98. 1999 Synergy with VTL in procurement, marketing and production flexibility. Completion of states of the art modernizations of truck radials J.K. Tyres ranked 16 th largest tyre company in the world ISO- 14001 accreditation for environment and safety. 2000 J.K. introduced national Go- carting championships. 2001 J.K. industries received FOCUS LAC EXPORT award for the year 1999-2000. Commendation certification of CII ND National exam. Go- carting championships held.
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JK Tyres Plants Mysore plant- 1 {VTP} - Karnataka Mysore plant- 2 {VTP Radial} - Karnataka Kankroli - Rajasthan Banmore - Madhya Pradesh 1.2 Vikrant Tyres Limited Vikrant tyres ltd {VTL} is situated in an area of 53 acres in Mysore. VTL is a major tyre manufacturing company and one of the most successful industrial ventures in the state of Karnataka. In the year 1970 this company was conceived as a joint venture by the participation of south Indian export company Pvt Ltd, Madras {Chennai} with Karnataka state industrial investment and development corporation Ltd {KSIIDC} for establishing and automobile tyres and tubes manufacturing unit at Metagalli industrial area in Mysore. In 1977 the management was taken over by the Government of Karnataka state industrial investment and development corporation Ltd {KSIIDC}. The commercial production started from 19 th
may 1980. During 1985 a plant was set up for manufacturing of radial tyres. The company is certified under ISO 9001, QS 9000, ISO 14001 and ISO/TS 16949:2002 certifications, for design manufacture and sale of automobile tyres, tubes, flaps and tread rubber. JK industries ltd was inducted as strategic Alliance Partner {SAP} during may 1997 with a view to improve the overall performance of the company. Collaboration agreement was entered with the M/S Continental tyres Germany in 1980. Vikrant tyres Limited, a JK tyres associate, manufactures cutting edge innovative products at conformed to the highest international standards. JK industries ltd in 1997 Acquired Vikrant Tyres Limited, Mysore. VTL has the first truck/bus steel radial in India. This has state of the art technology in technical collaboration
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with continental A G Germany. Vikrant tyres have successfully launched high performance steel truck radial tyres in the latest international pattern for the Indian as well as international market. Register Office at:- VIKRANT HOUSE No 54, 1 st Main Road, V.V Mohalla, Mysore - 570002
Milestones of Vikrant Tyres Limited {VTL}
1970 Joint Venture by SIEC Pvt. Ltd., and KSIIDC conceived to manufacture Automotive Tyres and Tubes at Mysore. 1973 Incorporated as a joint venture company by KSSIDC and SIEC Pvt. Ltd., Madras {Chennai}. 1977 Taken over by government of Karnataka through KSIIDC. 1980 Commercial production commenced. 1982 Collaboration with M/S AVON Tyres UK. 1985 T-Pilot plant setup for manufacturing of truck Radial Tyre Plant. 1989 Construction of new Truck Radial Tyre Plant.
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1991 Commercial production of all steel truck Radial Tyre. 1992 First against OTR tyre rolled out. 1994 Certified to IS 9001:1994 quality management systems. 1997 JKIL inducted as strategic Alliance Partner {SAP} by government of Karnataka. 1999 Certified to QS 9001:1998 QMS and also ISO 14001:1996 EMS. Turnaround under JK management within 10 months and declared divided after a gap of 6 years. Massive modernization and up gradation investing Rs. 224.13 crores. 2000 March-Bias plant-Rs 73.16 crores, December-Truck Radial Plan- Rs 150.97 crores. 2011 Merged with JKIL. Certified to ISO/RS 16949:2002 process based QMS. 2004 First Indian tyre company to adopt process based management through Business Process Re- Engineering {BPR}.
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1.3 J K GROUP DIVERSIFICATION
JK ORGANISATION J.K. Organization, founded over 100 years ago, is an eminent industrial group in India. The Group has multi-business, multi-product and multi-location opeRATIOns
JK PAPER LTD. JK Paper Limited is one of the leading manufacturers of reading and writing paper
JK LAKSHMI CEMENT LTD. JK Lakshmi Cement Limited is a well respected name in the cement industry in India
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FENNER (I) LTD. Fenner (I) Limited is a leading manufacturer of Industrial and Automotive Belts, Oil Seals, Power Transmission Accessories and Textile Yarn
UMANG DAIRIES LTD. The Creme de la creme of dairy foods
JK AGRI-GENETICS LTD. At JK Agri-genetics limited, concentrates on Research and Development, production, processing and marketing of hybrid seeds.
JK SUGAR LTD. The company's principle activity is to manufacture Sugar. However, the company currently operates in two segments. Power and Sugar
JK RISK MANAGERS AND INSURANCE BROKERS LTD. Services rendered to various clients for all facets of Insurance both life & non-life.
CLINIRX RESEARCH PRIVATE LTD. Full Service Contract Research Organization (CRO)
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1.4 Product/Services profile: The major products of JK Company are automobile tyre {Nylon tube tyre, radial tube and tubeless tyre } tubes names. 1} Truck Tyre
1. Jet rib 7. Jet truck 2. Vikrant truck king 8. jet truck 3. Star lug 9. Sand cum hiway 4. Super T.K 10. Truck plus 5. JT king 11. JT Classic 6. Hi Life 12. JETRK 2} Light Tucks 1. Jet rib 3. Fleet king 2. Star lug 4. Truck king
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3} O.T.R (Of the Road) 1. VEM 99 E-3 T/L 3. VEM 00 SS E-4 T/L 2. VEM 99 E-4 T/T 4. EGO4 G2 T/T 4} Tubes 1. JK Tubes 2. Vikrant tubes 3. Tube V EX 5} Flaps 1. JK FLAPS 2. JK RDFLAPS 3. JK EXP FLAP 1.5 MANUFACTURING LOCATIONS JK Tyre has five Modern plants in India which are strategically located at Mysore plant-1(VTP) Karnataka Mysore plant-2(VTP Radial) Karnataka Banmore, Madhya Pradesh Kankroli, Rajasthan JK Tyre has also enhanced its global reach by taking over Tornel a renowed Mexican company, which has 3 plants in Mexico. All these plants are equipped with Worlds most advanced manufacturing and testing machines.
VIKRANT BIAS TYRE PLANT VIKRANT RADIAL TYRE PLANT
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VIKRANT OTR PLANT
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KANKROLI TYRE PLANT BANMORE TYRE PLANT Three plants in Mysore are VTP -Vikrant Tyre Plant OTR Off the road Tyre plant RTP - Truck Radial Plant
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JK TYRE PLANTS OPERISKNAL CAPACITY PLANT CURRENT CAPACITY(MT/DAY) Kankroli Tyre Plant 210.00 Banmore Tyre Plant 165.00 Vikrant Tyre Plant 321.95 TOTAL 696.95 Nature of the business carried. JK Industries is engaged in manufacturing and marketing of automotive tyres, tubes, flaps. Products Involved: Cross ply and radial tyres for light commercial vehicles. Cross ply tyres for passenger cars. Cross ply tyres for agricultural vehicles. Cross ply tyres for of the road {OTR} vehicles. Automotive inner tubes for trucks, buses, light commercial vehicles. Achievements /awards 1. JK Tyres ranked 16 th largest company in the world. 2. ISO 14001 accreditation for environment and safety. 3. Indias first T rated tyre launched. 4. Mercedes Benz launched on JK Tyres radials first tyre manufacture in the world to get ISO 9001.
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5. Only tyre manufacture to get E mark certification. 6. First tyre manufacture in the world to get QS 9000. 7. Awarded CEPEXILS highest export for 1997-98. 8. JK introduced national Go-carting championships. 9. JK industries received FOCUS LAC EXPORT award for the year 1999 and 2000. 10. Certified to ISO 9000 (1994 quality management systems). 11. First Indian Tyre Company to adopt process based management process based management through business process re-engineering (BPRO).
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1.6 Work Flow Model
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The company opted for BPR (Business Process re-Engineering) with the concept of Factory with in Factory called as Business Units. The primary objective of this concept is to focus on Operational Efficiency such as production, quality, Cost, Deliverables and other parameters. This breeds healthy competition amongst the BUs. BU 1: Mixing, Dipping, Calendaring, Extruders BU 2: Stock PrepaRATIOn and Tyre Assembly BU 3: Tyre molding, Inspection BU 5: Tyre Dispatch BU 4: Radial Tyres The Business Units are supported by SSUs calls as Service Support Units. general functioning of Bus. E.g. . SSU 1: Engineering Services SSU 2: Engineering Services for Radial Plant SSU 3: Finance SSU 4: QA, Technical, IT SSU 5: HR , IR , GAD SSU 6: IED , Shift in charges , Mgf. services
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Work Flow Model BU 1 1) Compound At Banbury: Compound is the process of mixing the necessary raw materials with selected elastomer in the banbury. Banbury is an internal mixer, which consists of a completely enclosed mixing chamber with two spiral shaped rotors. There is a hoper to feed the ingredients and a door to discharge the mix. The rubber ingredients like chemicals are weighted as mentioned in specification file and feed into hoper. Then the mixing process takes place. Required mixing time is fixed to get better quality mixing. 2) Extruder: The main function of an extruder is to produce tread and side wall, bead, apex. Extrusion is a process of forcing the mixed compound by means of screw, which rotates inside the barrel. There are two types of extruder: a) Screw extruder, b) Ram extruder. 3) Zell Plant: : Dipping The dipping process takes places in a zeal plant. Here rayon, nylon. Polyesters are dipped in a solution containing normally a latex based resorcinol formaldehyde to improve adhesive properties. Then the fabric is dried at a temperature of about 280-300 F for 150- 180 sec, the fabric is stretches to about 0-15% 4) Calendaring: Calendaring is a machine, which consists of three or four rolls held in a frame work used to produce the rubber sheets of required strength and length. To get a better quality calendared fabric with uniform gauges, viscosity is important in the same way, hot temperature of about 110-137mm.
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BU 2 5) Bias Cutter: It is a machine used to make plys or to the rubber coated fabrics at required width and angle, which are used in the production of tyres. Bias angle is the angle of cords in tyres with respect to the central line. Based on the ideal cured angle, required for particular type size and pattern, bias angle is calculated for the particular drum. 6) Pocket Making: It is a process of making the pocket from the angle cutter fabrics. In pocket making section, three types of pockets are constructed. The plys used for the first and second pocket are known ad inner ply and those used for third pocket are known as outer ply. 7) Bead Assembly : Bead wire High tensile copper coated Steelwire coated with compound wound on a former , fillered and flipped 8) Tyre Assembly : All individual components of tyre Viz Beads , Pockets, Tread and Sidewall are assembled on a Building drum and the finished product is called as Green Tyre. BU 3 9) Bladder: Butyl rubber compound is used for making the bladder. As first, butyl rubber is mixed with specified chemicals properly and then it enters the extruder section by the use of the extruder, a specific length and width of slug is extruded. Then the ends of the slugs are cut into the specified angle for proper joining. 8) Tyre Moulding: Before moulding opeRATIOns, the green tyre has to be made ready for painting with inner lubricants inside tyre for easy release from the bladder and the side walls are to be coated with blemish paints.
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9) Tyre Curing: It is a process of cross linking the rubber compounds through heat and pressure. For the pressure of curing tyres presses are used. These pressed are pre warmed before loading of green tyre is done in the top ring raise condition with vacuum. 10) Tyre Finishing and Inspection: After curing, the tyres obtained by trimming of the extensions on the tyres surfaces are checked for defects. Thus the process of removing excess materials from the tyre after curing is called finishing. The finishing process is done either by buffing or trimming method. All the tyres then are inspected and separated. BU 5 : Finished Goods Storage and dispatch : Storing of Okay tyres and arranging logistics to various depots / STUs / OEMs as per the marketing requirements. Future growth and prospectus: To be the No.1 tyre company in India. To be the largest tyre export company in India. To be a customer obsessed company. High quality of products. Profit Maximization.
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VARIOUS ASPECT OF THE STUDY This is the measure of inter relationship between different sections of the financial statements which then is compared with the budgeted or forecasted results. Prior year results and or the industrial results. To be most important risk must include a study of underlying data. risk should be taken as guides that are useful in evaluating a companys financial position and open risk and making comparisons with results in previous years or with other companies. The primary purpose of risk is to point out areas needing further investigations, risk will not carry meaningful business reasoning if there is no supporting quantitative and financial information. A part from the risk other information which should be looked at includes: 1. The contents of any accompanying commentary on the accounts.
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2. The age and nature of companys assets. 3. Current and future development in the companys markets, at home and overseas, recent acquisition and disposals of a subsidiary by the company. 4. Extraordinary items in the income statement. 5. The auditor opinion on the financial statements. 6. Other information in the local papers about the company. As you know there are vast numbers of users of parties interested in analyzing the financial statement, including shareholders, lenders, customers, government, employees and competitor. Yet in many respect, they will be interested in different things. There in not, therefore, any definitive, all-encompassing list of points for management that would be useful to all these stakeholder groups. Nevertheless, it is possible to construct a series of risk that together will provide all to them with something that they will find relevant and from which they can investigate further if necessary. Risk management is the first step in assessing an entity. It removes some of the mystique surrounding the financial statement and makes it easier to pin point items which it would be interesting to investigate further. These risk can ably be classified according the target group of the stakeholders. Profitability for shareholders, creditors, investors, management.
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Risk management of J.K. Tyre & industries ltd. RISK MANAGEMENT Category of risk (1) PROFITABILITY RISK :- NET PROFIT MARGIN Risk = Profit after tax / sales 100
NET PROFIT MARGIN RISK OF J.K. INDUSTRIES LTD.
PERTICULARS 2011 2012 PROFIT AFTER TAX 1081 2603 SALES 9371 12282 NET PROFIT MARGIN RATIO 11.5% 21.2%
The objectives of profitability relates to a companys ability to earn a satisfactory profit so that the investors and shareholders will continue to provide capital to it. Company profitability is linked to its liquidity because earning ultimately produces cash flow. For these reasons risk are important to both investors and shareholders. (a) Return on capital employed (ROCE) or return on investment. (b) Return on equity (ROE )
RETURN ON INVESTMENT = NET PROFIT BEFORE TAX 100 CAPI TAL EMPLOYES
CAPITAL EMPLOYES = WORKING CAPITAL + FIXED ASSESTES
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RETURN ON INVESTMENT OF J.K. INDUSTRIES LTD.
PERTICULARS 2012 2012 NET PROFIT BEFORE TAX 1081 2603 CAPITAL EMPLOYED 5958 7725 RETURN ON INVESTMENT 18.14% 33.69%
Operating RISK = Cost of goods sold + operating expenses 100 Net sales OPERATING RISK OF J.K. INDUSTRIES LTD.
PERTICULARS 2011 2012 COST OF GOODS SOLD 359 560 OPERATING EXP. 109 92 NET SALES 1070 2081 OPERATING RATIO 43.73% 31.33%
NET PROFIT RISK = NET OPERATING PROFIT 100 SALES
NET PROFIT RISK OF J.K. INDUSTIRES LTD. PERTICULARS 2011 2012 NET OPERATING PROFIT 43.73 31.33 NET SALES 9371 12282 NET PROFIT RATIO 0.47% 0.26%
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LIQUIDITY RISK :-
The business should not only provide information on its profitability, but also to provide information that indicates whether or not the business will be able to pay its creditors, expenses, loans falling due at correct times. A company may be profitable but if it fails to generate enough cash to settle its said to be insolvent.
CURRENT ASSETS CURRENT RISK = ______________________________ CURRENT LIABILITIES
CURRENT RISKN OF J.K. INDUSTRIES LTD. PERTICULARS 2011 2012 CURRENT ASSETS 5865 6133 CURRENT LIABILTIES 3107 2388 CURRENT RATIO 1.89 2.56
LIQUID ASSETS QUICK RISK = _________________________ CURRENT LIABILITIES
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QUICK RISK OF J.K. INDUSTRIES LTD. PERTICULARS 2011 2012 LIQUID ASSETS 3003 2697 CURRENT LIABILITIES 3107 2388 QUICK RATIO 0.97 1.13
SALES CURRENT ASSETS TURNOVER RISK = _______________________ CURRENT ASSETS
CURRENT ASSETS TURNOVER OF J.K. INDUSTRIES LTD. PERTICULARS 2011 2012 SALES 692.31 967.55 CURRENT ASSETS 5865 6133 TURNOVER RATIO 0.12 0.16
ACTIVITY RISKS :- Activity risk is calculated to measure the efficiency with which the resources of a firm have been employed. These risk are called turnover risk because they indicate the speed with which assets are being turned over into sales.
COST OF GOODS SOLD STOCK TURNOVER RISK = _______________________________ AVERAGE STOCK STOCK TURNOVER RISK OF J.K. INDUSTRIES LTD.
PERTICULARS 2011 2012 COST OF GOOD SOLD 4052 5789 AVERAGE STOCK 289 358 STOCK TURNOVER RATIO 14.03 16.18
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ASSETS MANAGEMENT RISK :- Management is required to maintain an optimum level of working capital. Remember if an entity is having high inventory levels it will insure high storage costs, theft, insurance costs and stock losses. Likewise having low stock levels will disturb the production run of the company as it will regularly run out of inventories thereby loosing important business opportunities. The same can be said of receivables, having more receivable the company may run the risk bad debts but also being too strict with debt repayment period may result in loss of customers.
MARKET VALUE RISKS :- The market price of a companys shares is of interest to the Management because it represents what investor as a whole think of the company at a point in times. Market price is the at which people are willing to buy or sell the shares. It provides information about how investors view the potential return and risk connected with owning the company shares. Market price by itself however is not very information for this purpose. Companies differ in number of outstanding shares and amount of underlying earnings and ratios. Thus, market price must be related to earsidering the price earnings risk and the ratio yield.
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Research is not conned to science and technology only. There are vast areas of research in other disciplines such as languages, literature, history and sociology. Whatever might be the subject, research has to be an active, diligent and systematic process of inquiry in order to discover, interpret or revise facts, events, behaviours and theories. Applying the outcome of research for the renement of knowledge in other subjects, or in enhancing the quality of human life also becomes a kind of research and development. 2. Type of Research: The research work being undertaken by the researcher is purely analytical work Because the research is an attempt to analyze the financial position of the organization on the basis of the annual reports. 3. Objective of the study: There are various objective of the study which is as follows: I. Primary objectives II. Secondary objectives i. The primary objectives of the study are to prepare the project report successfully it was necessary to create some objective so that it helps task to get complete easily and correctly. To highlight the policies and procedure of analysis of risk management & by analyzing various ratios.
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To make a detailed analysis of the strategies adopted by the company for planning monitoring and risk management. To identify the vertical areas where greater attention is needed for better management. To give the feedback to the company for improvement in their strategies.
ii. The secondary objectives of this study are as follows: To get some experience of working in an organization. To know the deficiencies in the area of the finances.
4. Research Design: Before starting the research every researcher should know the objective of the study. The objective is already given to attain it various data is analyzed. Research design is analytical. 5. Sample size: A sample size cannot be given here because this study is purely based on secondary data and no field study are necessary for this analysis. 6. Analysis: Analysis of data is most essential and difficult task in the present report an attempt has been made to analyze each & every financial statement of the company effectively so that proper analysis can be made of financial condition of the company.
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Management and interpretation:- A much higher RATIO indicates poor investment policies of the company & poor inventory control while a low risk indicates lack of liquidity & shortage of working capit In case of J.K.Tyres,this risk is increased in 2011 & decreased till 2012.Better sign for the company investment policies & investment decision of management. In case of JK tyres,the risk decreased in 2011-12and later increased. Not a good sign. In case of MRF Tyres,this risk is more or less constant,a better sign.
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higher risk indicates poor investment and inventory control. Indicates lack of liquidity and shortage. Working capital risk = CURRENT ASSETS/CURRENT LIABILITY JK tyres is better. If we analyse graph working capital risk is low as compared with others.
RISK-1 DEBT EQUITY RISK: The debt-equity RISK is worked out to ascertain soundness of the long-tern financial policies of the firm. This RISK experess a relationship between debt(external equities) and the equity(internal equities). Debt means long term loans and equity means shareholders fund. This RISK is calculated as under:- Debt equity RISK= debt (long term loans)/equity(share holders fund). A higher RISK indicates a risky financial position while a lower RISK indicates safer financial position. OBJECTIVES: The objectives of this RISK are as under:- 1) It derives the idea of the amount of capital supplied to the concern by the proprietors.
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2) To assess the soundness of long term financial position. 3) Indicates the extent to which the firm depends upon outsiders. Table-2 years company 2008 2009 2010 2011 2012 J.k tyres industries 1.04 1.26 1.84 1.96 2.28 JK tyres 0.76 0.72 0.84 1.07 0.86 MRF tyres 0.83 0.70 0.72 0.86 0.91
Management And Interpretation In case of j.k tyre, debt-equity risk implies that the debt position is more than equity.The lower the debt equity risk The higher the degree of protection felt by the creditors. In this debt equity risk of company is increasing which is not a good sign. In case of MRF tyre, debt-equity risk is more or less constant which a good sign is. Graph-1 Debt equity risk
Relationship between debt(external equities) and equity(internal equities). Ascertain soundness of long term financial policies. Higher risk indicates a risky financial position. Debt-equity risk =debt/equity. MRF is better as its debt-equity risk is low.
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In case of JK tyre, debt-equity risk is more or less constant which a good sign is also. MRF is better than others. Risk-2 Interest coverage Risk:- When a business borrow money, the lender is interested in finding out whether the business would earn sufficient profits to pay periodically the interest charges. This risk is determined by dividing profit before interest and taxes. Thus two variables involved in this risk are fixed interest charges and net profit. Interest coverage risk = net profit before interest and tax/interest on fixed loans or debentures. OBJECTIVES: The objectives of this Risk are as under:- 1) It measures the margin of safety for the lenders. 2) Determines the over all efficiency of the business. TABLE-2
Points whether business would earn sufficient profits or not. Interest coverage RISK= N.P before interest and tax/int. on fixed loans. JK is better as its interest coverage RISK is more.
MANAGEMENT and interpretation:- The greater the interest coverage risk , the higher the ability of the firm to pay its Interest expense. Thus in case of J.k tyres, it is more or less constant, declined in year2011-12 but increased in 2012. Better sign for the company. In case of M.R.F tyres, it is more or less constant but increased in 2012. A better sign for the company. In case of JK tyre, it is decresed till 2005 but increased in 2012.A better sign for the company to pay its interest expenses. JK tyres is better company.
RISK-3 FIXED ASSETS TURNOVER RISK:- This risk indicates the extent to which the investment in fixed assets contribute towards sales. If compared with previous years, it indicates whether the investment in fixed assets is judicious or not. This can be calculated as under. Fixed assets turnover risk = net sales/net fixed assets Net fixed assets= fixed assets-depreciation
OBJECTIVES:-
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The objectives are as follows:- 1)indicates how efficiently fixed assets are used. If there is increase indicates improvement in the utilization of fixed assets.
Management and interpretation: Fixed assets turnover risk indicates the efficient utilization fo fixed assets. It indicates to what extent fixed assets are contributing in gene risk of sales in case of J.K. tyres, fixed assets but not increasing in increased pattern. Fixed constant rate -This indicates efficient management of fixed asets. In case of appolo tyre, fixed assets are decreased in year 2002 to 2005. but company has made better performance in utilization of fixed assets in year 2012 and can be due to-
Graph-3 Fixed assets turnover RISK:-
indicates the extend to which investment in fixed assets contributes towards sales. Fixed assets turnover risk =Net sales/Net assets MRF is better as its fixed assets turnover is constantly increasing.
This through the abover figures MRF tyre is better utilizing its fixed assets in a better way.
RISK-4 INVENTORY TURNOVER RISK OR STOCK TURNOVER RISK This risk established relationship between the cost of goods sold during a given period and the Average amount of inventory carried during that period. This is calculated as under:- Stock turnover risk= cost of goods/ Average stock or inventory. Cost of goods sold is calculated as : Cost of goods sold= opening stock +purchases+ direct expenses- closing stock. OR Cost of goods sold= sales- Gross profit Higher the risk, better it is. The risk shows better performance if it increases, since it means that the investment in stocks is leading to higher sales. OBJECTIVES:- The significance and objectives of this risk are as under:- 1) Indicates whether stock is efficiently used or not. 2) Enables the business to earn a reasonable margin of profits.
Management and interpretation Inventory turnover risk indicates how quickly inventory is converted into sales. The higher the inventory turnover risk, the better it is for the organization. In case of J.k tyre inventory turn over risk is increased in year 2002 to 2005 but this risk is decreased in 2012. This risk is more or less constant and is good enough. years company 2008 2009 2010 2011 2012 J.k tyres industries 8.51 10.13 11.57 11.29 9.64 JK tyres 11.30 9.66 8.96 8.01 8.66 MRF tyres 6.21 6.68 6.67 6.64 7.57
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In case of MRF tyre, inventory turnover risk is more or less constant but is increasing. This indicates that the company is performing well. In case of appolo tyre, inventory turn over risk is in the pattern of decreasing and then in increased pattern. Till 2005 it show decreasing pattern but 2012 it is increasing. This is mainly due to- 1). Efficient utilization of stock. 2). J.k tyres is better as compared with others. Graph-4 Inventory turnover RISK:-
Establishes relationship between costs of goods sold and average amount of inventory carried during that perid. Higher the risk better leads that investment in stock to higher sales. Stock turnover risk = cost of goods sold/ average inventory. J.k tyres is better as it has high inventory turn over risk.
RISK-5
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Debtors turnover risk:- This risk establishes the relationship between net credit sales and average debtors of the year. Average debtor is calculated by dividing the sum of debtors in the beginning and at the end by 2. This risk is calculated as:- Debtors turnover risk = Net credit sales/Average accounts If the risk is high, it indicates economy and efficiency in collection of amounts due. While calculation of debtors turnover, doubtful debts are not deducted from total debtors. When opening and closing receivables and credit sales are not given, the risk is calculated as:- Debtors turnover risk = total sales/ accounts receivables. OBJECTIVES: the objectives of this risk are as under 1) It indicates the efficiency of the staff entrusted with collection of amounts which are due from debtors.
Establishes relationship between net credit sales and average debtors. It risk is high indicates economy and efficiency. Debtors turnover risk = net credit sales/average accounts. Both the three companies have increasing debtors turnover risk. But MRF is better. In case of MRF tyres, debtors turnover risk is increasing it is a better sign for the company. RISK:-6 years company 2008 2009 2010 2011 2012 J.k tyres industries 5.72 5.35 5.19 5.54 6.64 JK tyres 16.66 23.76 19.19 18.10 19.96 MRF tyres 6.37 6.74 7.53 7.99 8.45
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Total assets turnover risk:- It high lights the amount of assets that the firm used to generate its total sales. The ability to generate a large volume of sales on a small assets base is an important part of the firms profit picture, idle or improperly used assets increase a firms need for costly financing and the expenses for maintenance and upkeep. By achieving a high assets turnover, a firm reduces cost and increases the eventual profit of its owner. Total assets turnover RISK = Total sales/ Average assets. TABLE-6 MANAGEMENT and interpretation In case of J.k tyres, total assets turn over risk is increasing theta is a better sign . this increases results in profit of company. In case of MRF tyres, this risk is in increasing. In case of Apollo tyres this risk is more or less constant decreased till 2005. but increased in 2012. Graph -6 Total assets turnover RISK
High assets turnover reduces cost and increases profit. Total assets turnover risk =total sales/ average assets. J.K is better as its total assets turnover is increasing continuously.
RISK-7 years company 2008 2009 2010 2011 2012 J.k tyres industries 1.00 1.16 1.35 1.49 1.89 JK tyres 3.19 2.74 2.52 2.40 2.54 MRF tyres 2.00 2.30 2.43 2.50 2.81
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GROSS PROFIT RISK:- This risk establishes relationship of gross profit on sales to net sales of a firm. Its formula is:- Gross profit risk = gross profit/net sales 100 Net sales means gross sales (both cash and credit ) minus sales returns. And fluctuations in this gross profit is the results of a change either in SALES or the cost of goods sold or both. Thus this risk shows the average margin on goods sold. Objectives: The objectives of gross profit are as under: 1) It helps to determine the selling price. 2) To determine, how much selling price per unit may decline without resulting in losses of ope risk of the firms. 3) Gross profit risk when compared to earlier years, it significantly different is a reason for the management to investigate the change.
MANAGEMENT and interpretation G.p risk is a reliable guide to the adequacy of selling prices and efficiency of trading activities higher the G.p risk declined in the year 2004 and 2005 but gradually increased in 2012 decrease may be mainly due to 1) Price of material has gone up and wages increased but selling price remained constant. 2) Decrease in selling price. 3) Closing stock undervalued. 4) Miss appropriation of goods and wastages. years company 2008 2009 2010 2011 2012 J.k tyres industries 3.80 4.86 3.48 2.48 2.96 JK tyres 9.87 6.44 5.33 5.97 6.88 MRF tyres 9.39 7.33 5.94 4.26 4.91
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A higher gross profit is mainly due to revese reasons in case of MRF tyres, G.P. risk decreased during till 2005 but increased in 2012. this is mainly due to frame of new policies and better management efficiency. In case of appolo tyres, this risk decreased till 2005 but J.K. increased later. J.K tyres is better. Graph-7 Gross profit RISK:
Net profit risk = net profit /net sales *100 JK and J.k tyres gross profit risk is good as it is increasing in 2005 and 2012 continuously.
RISK-8 NET PROFIT RISK:- A risk of net profit to sales is called net profit risk. net profit is derived by deducting administrative & marketing expenses, finance charges and making adjustments of non operating expenses and income from the gross profit. This risk reveals the rate of net profit to each sale. Net profit risk = net profit/ net sales *100 Some time N.P risk is calculated in two ways. N.P is taken either as profit before tax and profit after tax. Net profit risk = profit before tax /net sales *100
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Net profit risk = profit after tax/ net sales *100 Objectives: The objectives of this risk are as : a. determine over all efficiency of the business. b. Higher the net profit, better the business is . c. Determines ope risk nal efficiency of the business.
Table-8
Management and interpretation Net profit margin in case of J.K tyre is increased in 2011 but decreased in 2011-12but is increase in 2012. this is more Or less constant. Decrease is mainly due to more other charges such as administrative, marketing and other operating and operating expenses. Increase is mainly due to reduction in tax liability and other expenses. Graph-8 Net profit RISK:-
Net profit risk = net profit /net sales *100 JK is good as its net profit is increasing in 2011-12and in 2012 also. years company 2008 2009 2010 2011 2012 J.k tyres industries 0.87 1.09 0.54 0.37 0.41 JK tyres 5.93 3.04 2.55 2.60 3.01 MRF tyres 3.57 2.68 1.84 0.75 1.16
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In case of JK tyre is net profit is decreased in 2004 but increased later. It is better sign for the company. In case of MRF tyre is net profit is decreased in 2005 but increased in 2012. this indicates that company made efforts to reduce its other expenses. JK tyre is better then others. RISK-9 Operating profit risk:- Operating profit risk establishes relationship between operating profit and net sales. Operating profit is the net profit arising from the normal ope risk and activities of an enterprise. Operating profit is given by net profit before adjustments of non-operating income and expenditure and finance charge. This risk can be calculated by the following formula:- Operating profit risk:- operating profit /net sales 100
Operating profit risk : net profit + non operating expenses non operating income.
Objectives: the objectives of this risk are as under:- 1) Indicator of open risk efficiencies of management as against the net profit which reveals only overall efficiency 2) To measure the profitability and soundness of the business. 3) Higher the risk, the better is the profitability of business.
Management and interpretation years company 2008 2009 2010 2011 2012 J.k tyres industries 10.61 9.89 7.30 5.31 5.63 JK tyres 11.68 7.82 7.15 7.89 8.86 MRF tyres 11.44 8.92 6.88 5.44 6.08
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This risk is indicator of operating risk efficiency of management. In case of J.K tyres, operating profit risk is decreasing till 2005, but increased during 2012. this increase may be better. Formulation of policies and reduction on non operating expenses. In case of MRF tyres it is more or less constant and decreased till 2005 but increased in 2012.In case of appolo tyres operating profit risk decreased till 2012 & but increased later. J.k tyres is better.
GRAPH-9 OPERATING PROFIT RISK-
Establishes relationship between operating profit and net sales. N.P arising from normal open RISK of business. Operating profit RISK = operating profit /net sales 100 JK is good.
RISK-10
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Return on capital employed (R.O.I) The net result of open risk of business is profit or loss. The sources used in business to attain it are consisting of both proprietors fund & loans. The overall performances can be judged by working out a risk between profit earned & capital employed. This risk can be calculated as:- Return on capital employed = profit before interest, tax and ratio / capital employed 100 Capital employed can be calculated by any of the methods:- Total of:- 1) Share capital (both preference and equity ) 2) Reserves and 3) Long term loans.
Less:- 1) fictitious assets (like preliminary expenses) and 1) Non operating assets like investments. OR Total of :- 1) fixed assets less depreciation and 2) Working capital that is C.A-C.L
objectives: The objectives of this risk are as under :- 1) Determines overall efficiency and performance of the business. 2) Determines open risk efficiency of the business and performance of each department.
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Table-10
Management and interpretation In case of J.k tyres, this risk is decreasing till 2012. but later increased. This is mainly due to better utilization of available resources and managerial efficiency of the company. It is a better sign. In case of MRF tyres ther is a constant increase and decrease. Till 2012 it is decreased but increased in 2007. in case of appolo tyres it is same. Appolo tyre is better as its R.O.I is higher as compared to other companies. Graph-10 Returns on capital employed:-
Net result of every business is profit or less. Returns on capital employed = profit before int, tax and ratio /capital employed 100 MRF is better. years company 2008 2009 2010 2011 2012 J.k tyres industries 7.69 9.31 8.42 5.34 7.54 JK tyres 15.28 12.17 8.95 5.57 7.40 MRF tyres 32.18 16.30 12.65 13.14 17.56
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5 . FINDINGS
After taking the feedback of more than 100 customers the study reveals that customers are fond of different brands in different areas. Like, in Guipure area almost 70% of customers prefer BIRLA tyres (especially SAMSON), in Paginate areas customers prefer JK tyres, where in Dunlop people prefer JK & APOLLO. Not only different choices but also having different experience on different brands. It is found that many customers prefer JKs guaranteed tyres such as JET TRAK 39 and economy class rib tyre VIKRANT TRACK KING for its milage & reliability but it is also true that many other brands such as JET MILES, JET PACE, JET SUPER LUG do not have a strong place in customers mind. The study shows that JKs strong contender is APOLLO whos quality was appreciated by many. APOLLOs XT-7 & LOAD STAR SUPER are very much preferred. In guaranteed tyres BIRLAs SAMSON is the main contender of JK. Incase of normal loaded trucks customers mostly rely on CEAT but in over load APOLLO & JK are reliable. Certainly MRF has not a good reputation at all.
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6. SUGGESTION
J.K. ORGANIZATION is a big and well known organization. The company has built a committed pool of talented people with technological capability and market prowess backed up by world class manufacturing facilities. In spite of organization. There are as follows:-
The production cycle is just little bit longer, it has to be decreased. Current RATIO of the company in 2007is comparison of year 2006 but it is not the satisfactory. The production of J.K. Tyre has been altering so many records but they have to increase their sales in comparison of production, which is loss at present. Gross profit is decreased in year 2007 it is not good indication for the company. Current asset and current liabilities both are increased gradually since year 2006 which increase Cash Flow, Turnover so it has to be restricted.
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Company should maintain adequate level of working capital which fulfilling the daily requirement of company. Company should maintain proper balance between the current assets & current liabilities.
CONCLUSION:
On the basis of the study about risk management in this company, we have concluded that J.K. tyre is one of the most balanced and safely growing company. Keeping in mind various risks for management during the whole study we reached on some milestone points such as - Return on capital employed risk is decreasing till 2012. but later increased. This is mainly due to better utilization of available resources and managerial efficiency of the company. It is a better sign while operating profit risk is decreasing till 2005, but increased during 2012. This increase may be better. Formulation of policies and reduction on non operating expenses. Net profit margin in case of J.K tyre is increased in 2011 but decreased in 2011-12but is increase in 2012. this is more Or less constant. Decrease is mainly due to more other charges such as administrative, marketing and other operating and operating expenses. Increase is mainly due to reduction in tax liability and other expenses. total assets turn over risk is increasing theta is a better sign . this increases results in profit of company. After going through each and every data I came to an come to an conclusion that J.K tyre industries pvt. ltd. Is the best company in India when compared with other companies.