TABLE OF CONTENTS Chapters Pagenumbers 1 .

INTRODUCTION A) INTRODUCTIONB) NEED AND IMPORTANCE OF THE STUDYC) OBJECTIVES OF THE STUDYD) METHODOLOGYE) SCOPE AND PERIOD OF THE STUDY 2. COMPANY PROFILE 3. THEORITICAL PRESPECTIVES 4. DATA ANAYSIS & INTERPRETATION 5. FINDINGS, SUGGESTIONSBIBLIOGRAPHY

INTRODUCTION: C o m p a n y a n a l ys i s r e p o r t i s a c o m p r e s s i v e i d e a o f t h e p e r f o r m a n c e o f t h e company. Every company publishes an annual report which contains valuable financial other information about the company. Annual report is the beginning & ending points in obtaininginformation about individual companies. As a start they provide an overview of the co mpany's business its status & its performances for series of year .At the end of the information gathering p r o c e s s , annual reports are used to corroborate the vast array of company s p e c i f i c d a t a assembled from various sources.The typical Indian company includes the following documents in its annual report. 1 . d i r e c t o r ' s r e p o r t 2 . f i n a n c i a l s t a t e m e n t s 3.schedules & notes to the financial statements 4.Auditor's reportIn this report mainly mid with the secondary data about the company. In additionsome companys provide financial highlights& summary of financial performance of the past 5(or) 10 years. This annual report sent to the share holders of the companies are also required to publish a quarterly statement of financial results with in one month from the end of the quarter.These statement are typically net audited this like the annual statements & are published inleading news papers. 4

Concept of financial performance: The Financial performan ce of any organization greatly influences itsoperations results and business efficiency. Such performance analyses deals with the evaluation of the financial wealth at the particular point of the time during its life periodand also involves the determination of the efficiency of the management in utilizing andmanaging the fund provided. The financial performance has to be evaluated from time tot i m e o r d e t e c t a n y f a u l t i n t h e f i n a n c i a l p o l i c y a n d t a k e t h e r e m e d i a l a c t i o n a t t h e appropriate timeThe financial performance influences the goals and objectives andconsequently affects its size and profitability. Ratio analysis is having a significant place inthe finance judgment and monitoring of the performance of any company. Basically ratioanalysis is used for the purpose of assessing financial strength and weakness of any concernthe present study is conduct to apply ratio analyses in the practical field towards this endElectronocs corporation of india ltd purposefully

Concept of financial performance: The Financial performan ce of any organization greatly influences itsoperations results and business efficiency. Such performance analyses deals with the evaluation of the financial wealth at the particular point of the time during its life periodand also involves the determination of the efficiency of the management in utilizing andmanaging the fund provided. The financial performance has to be evaluated from time tot i m e o r d e t e c t a n y f a u l t i n t h e f i n a n c i a l p o l i c y a n d t a k e t h e r e m e d i a l a c t i o n a t t h e appropriate timeThe financial performance influences the goals and objectives andconsequently affects its size and profitability. Ratio analysis is having a significant place inthe finance judgment and monitoring of the performance of any company. Basically ratioanalysis is used for the purpose of assessing financial strength and weakness of any concernthe present study is conduct to apply ratio analyses in t NEED AND IMPORTANCE OF THE STUDY: The basic need is to complete a project work for the partial fulfillment of mymasters degree. With this name the search starte d for the topic that was appealing and thatwould make most of my skills and abilities.The project work is carried out by me in Electronocs corporation of india ltd. andthe aim of project is to analyze Ratio Analysis. The growing demand of pharmaceutical industries play vital component of theinstitutional structure for providing services currently lacks of companies rendering servicesthrough out of the world keeping all this in view the need and importance op the pharmaceuticalindustry has even in increasing demand through out the world.For the purpose of this study The Electronocs corporation of india ltd. is chosen. It necessary to identify the financial strength and weaknesses of Electronics corporationof india ltd by establishing relationship between different items of reference. The present study is entitled Financial performance of Electronocs corporationo f i n d i a l t d b y u s i n g r a t i o A n a l ys i s t h i s s t u d y i s m a d e w i t h s p e c i a l e m p h a s i s o n f i n a n c i a l position by using ratio Analysis. OBJECTIVES OF THE STUDY: To measure the financial performance of Electronocs corporation of india ltd. To analyze the Electronocs corporation of india ltd financial performance by using RatioAnalysis. To know the profitability of Electronocs corporation of india ltd. he practical field towards this endElectronocs corporation of india ltd purposefully To know the liquidity position of Electronocs corporation of india ltd. To know the Turnover Ratio of Electronocs corporation of india ltd.

 To offer suggestion for the improvement of financial position of Electronocs corporationof india ltd by using the findings of the study.

METHODOLOGY: I have collected information for the research from both primary and secondary data Primary Data: I have collected information by discussing with Financial Department. Practical concepts learned during the project in the company. Secondary Data: The past five years balance Sheets and Profit & Loss Account statement of the company. The past five years Annual Reports of the company. Theoretical and practical concepts learned during the MBA course. Data collected from different text books relating to Financial M a n a g e m e n t a n d N e t service.

SCOPE AND PERIOD OF THE STUDY: The present study will reveal the liquidity and profitability position o f E l e c t r o n o c s c o r p o r a t i o n o f i n d i a l t d . , c o v e r i n g p u r e l y. F i n a n c i a l d a t a s u p p l i e d i n t h e f i n a n c i a l statement of Electronocs corporation of india ltd. The present study taken tim TECHNIQUES: The following techniques which I followed during the study. Ratio Analysis was done using the annual reports of Electronocs corporation of india ltd. Graphical representation and Analysis was done on the basis of findings of the study. Detail explanation was given on Basic of the findings LIMITATIONS OF THE STUDY: The data collected focusing more on secondary. The time given for the study is only two months, which is not enough to collect sufficientdata All the data presented for financial was limited up to past five years i.e., 2001-2006.

FINANCIAL STATEMENTS: Financial statements, as used in corporate business houses, refer to a set of reportsa n d schedules, which an accountant prepares at the end of the period of t i m e f o r a b u s i n e s s enterprise. The financial statements are the means with the help of which the accounting system performs its main function of providing summarized information about the financial affairs of the business. These statements comprise balance sheet or position statement and profit and lossaccount or income statement. In India, every company has to present its financial statements in the form and contents as prescribed under section 211 of the companies Act, 1956. ANALYSIS OF FINANCIAL STATEMENTS: Financial analysis is to determine the significant operating and financialcharacteristics of a firm from accounting data. It is a technique typically devoted to evaluate the past, current and projected performance of a business firm. Fi nancial analysis is an attempt todetermine the significance and meaning of financial statement data so that forecast may be madeof the future prospects for earnings, ability to pay interest and debt maturities and profitability.Published financial statements are the only source of information about theactivities and affairs of a business entity available to the public, shareholders, investors andcreditors and the government. These various groups are interested in the progress, position and p r o s p e c t s o f s u c h e n t i t y i n v a r i o u s w a ys . B u t t h e s e s t a t e m e n t s h o w s o e v e r , c o r r e c t l y a n d objectively prepared, by themselves do not reveal the significance, meaning and relationship of the information contained therein. For this propose, financial statements have to be carefullystudied, dispassionately analyzed and intelligently interpreted.Financial analysis results in the presentation of information by arrangingf i n a n c i a l s t a t e m e n t d a t a i n a s y s t e m a t i c m a n n e r t h a t a i d s b u s i n e s s m a n a g e r s , i n v e s t o r , a n d financial statement can provide valuable insights into a companys performance.

OBJECT OF FINANCIAL ANALYSIS: 1.To estimate the earning capacity of the firm 2.To gauge the financial position and financial performance to the firm3.To determine the long term liquidity of the fu nds as well as solvency.4 . T o determine the debt capacity of the firm.5.To decide about the future prospects of the firms

PROCEDURE OF ANALYSIS: The process of analyzing financial statements involves the rearranging, comparingand measuring the significance of financial and operating data. Interpretation, which followsanalysis, is an attempt to logical conclusion regarding the position and progress of the businesson the basis of analysis.The procedure may be as under: 1. Deciding upon the extent of analysis: The depth, object and extent of Analysis haveto be determined so that the scope of the analysis, tool of Analysis and the amount and quality of financial data required could be determined. 2. Going through the financial statements: B e f o r e a n a l yz i n g a n d p r e p a r i n g a n ys t a t e m e n t o r c o m p o s i n g f i n a n c i a l r a t i o s , i t i s n e c e s s a r y t o g o t h r o u g h t h e v a r i o u s f i n a n c i a l statements of the firm. 3. Collection of necessary information: Other useful information which cannot berevealed from financial statement but is useful for analysis has to be collected from management. 4. Rearranging of financial data: The data available has to be rearranged in a useful manner before analysis and interpretation. 5. Analysis: In this step the actual analysis is m ade for which any Technique such as,c o m p a r a t i v e f i n a n c i a l s t a t e m e n t s , t r e n d a n a l ys i s , R a t i o a n a l ys i s a n d c a s h f l o w s t a t e m e n t s , statements of change in Working capital, etc., can be used. 6. Interpretation and presentation: A f t e r a n a l ys i s , i n t e r p r e t a t i o n i s d o n e a n d c o n c l u s i o n s a r e d r a w n . T h e s e interpretations are of vital Importance to the management,shareholder, w o r k e r s , e t c . , t o k n o w t h e R e l a t i v e w o r t h o f t h e c o m p a n y. T h u s , a n a l ys i s a n d interpretation of financial statements are regarded as complimentary to each other. 3

TOOLS OF FINANCIAL ANALYSIS:

The analysis of financial statements consists of relationships and trends, to determinewhether the financial position of the company is satisfactory or not. The analytical methods or devices, listed below are used to ascertain or measure the relationships among the financial statements items.Analytical methods and devices used in analyzing financial statements are as follows:1 . C o m p a r a t i v e financial statements2 . Ratio Anal ys is They may be discussed as under:1. Comparative financial statements: Statements prepared in a form that reflect financial data for two or more periods areknown as comparative statements. Financial data become more meaningful when compared withs i m i l a r d a t a f o r a p r e v i o u s p e r i o d o r a n u m b e r o f p r i o r p e r i o d s . A n n u a l Data can be compared with similar data for prior years. Comparative statements can be preparedf o r b o t h t y p e s o f f i n a n c i a l s t a t e m e n t s b a l a n c e s h e e t a s w e l l a s p r o f i t a n d l o s s a c c o u n t . T h e comparative balance sheet shows the effect of operations on the assets and liabilities i.e., changein the financial position duding the period under consideration. The comparative profit and lossaccount will present a review of operating activities of the business. 2. Ratio Analysis: Ratio anal ysis is the most widel y used tool of financial anal ysis. It i s e s s e n t i a l l y a n attempt to develop meaningful relationship between individual items or group of items in the balance sheet or profit and loss account. The objects and utility of ratio analysis is confined notonly to the internal parties but to the credit suppliers, bans and lending institutions also. Ratio analysis tells about the financial position of the enterprise as to whether the capital structure of the business is in proper order, whether the capital structure of the enterprise is satisfactory,whether the credit policy in relation to sales and purchases is sound and whether the company is creditworthy. Thus, ratio analysis highlights the liquidity, solvency, profitability and capital gearing position.

COMPANY PROFILE Introduction of ECIL

"Let us work up the embers of national pride latent in all of us and build up our morale so that we can confidently aimhigh and achieve greater goals" Dr. AS Rao -Founder C&MD of ECIL Dr.A.S.Rao,FounderC& MD of ECIL 1914 - 2003 About ECIL ECILwas setup under the Department of Atomic Energy in the year 1967 with a view togenerating a strong indigenous capability in the field of professional grade electronics. The initiala c c e n t w a s o n t o t a l s e l f - r e l i a n c e a n d ECIL w a s e n g a g e d i n t h e D e s i g n D e v e l o p m e n t , Manufacture and Marketing of several p r o d u c t s e m p h a s i s o n t h r e e t e c h n o l o g y l i n e s v i z . Computers, Control Systems andC o m m u n i c a t i o n s . O v e r t h e y e a r s , ECIL p i o n e e r e d t h e development of various complexelectronics products without any e x t e r n a l t e c h n o l o g i c a l h e l p a n d s c o r e d s e v e r a l ' f i r s t s ' i n these fields prominent among them being country's First Digital Computer First Solid State TV First Control & Instrumentation for Nuclear Power Plants First Earth Station Antenna The company played a very significant role in the training and growth of high caliber technical and managerial manpower especially in the fields of Computers and InformationTechnology . Though the initial thrust was on meeting the

Control & Instrumentation requirements of the Nuclear Power Program, the expanded scope of self -reliance pursued byECIL enabled the company to develop various products to cater to the needs of Defence, CivilAviation, Information & Broadcasting, Telecommunications, Insurance, Banking, Police, andPara-Military Forces, Oil & Gas, Power, Space Education, Health, Agriculture, Steel and Coal sectors and various user departments in the Government domain. ECIL thus evolved as a multi- p r o d u c t c o m p a n y s e r v i n g m u l t i p l e s e c t o r s o f I n d i a n e c o n o m y w i t h e m p h a s i s o n i m p o r t o f country substitution and development of products & services that are of economic and strategicsignificance to the country. 3 Mission ECIL's mission is to consolidate its status as a valued national asset in the area of strategic electronics with specific focus on Atomic Energy, Defence, Security and such critical sectors of strategic national importance. Objectives To continue services to the country's needs for the peaceful uses Atomic Energy. Specialand Strategic requirements of Defence and Space, Electronics Security S ystems andSupport for Civil Aviation sector. To establish newer technology products such as Container Scan ning S y s t e m s a n d Explosive Detectors. To explore new avenues of business and work for growth in strategic sectors in additionto working for realizing technological solutions for the benefit of society in areas likeAgriculture, Education, Health, Power, Transportation, Food, Disaster Management etc. To progressively improve shareholder value of the company. To strengthen the technology base, enhance skill base and ensure succession planning inthe company. To re-engineer the company to become nationally and internationally competitive by paying particular attention to delivery, cost and quality in all its activities. To consciously work for finding export markets for the company's products.

HUMAN RESOURCESStaff Strength During the year, a total of 62 persons were recruited (including 2 internal candidates) in differentGroups (Group A: 11, Group B: 38 and Group D: 13). Out of the 62, 23 belong to SC, 12-ST, 8-OBC, 12 Ex-servicemen (on 3 years contract), 6 general and 1 physically handicappedcategory. A total of 131 employees were relieved under the Voluntary Retirement Scheme.Reckoning other cessations,the manpower strength as on 31.3.2005 stood at 5108. The number of SC employees and their percentages to the total number of employees in different Groups are (given in brackets) GroupA: 153 (8.94%), Group B: 277

(17.29%), Group C: 162 (15.01%), Group D: 107 (17.92%) andGroup D1: 44 (excluding Sweepers) (36.66%). The ST employees and their percentages Group-wise are (given in brackets) Group A: 16 (0.93%), Group B: 75 (4.68%), Group C: 39 (3.61%),& Group D: 12 (2.01%) and Group D1 (excluding Sweepers): 2 (1.66%).During the year, therewere no employees whose particulars are required to be given under Sub-section (2A) of Section217 of the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975 asamended. EMPLOYEE RELATIONS The employee relations continued to be harmonious during the year 2004-05, withcontinued active co-operation of the Employees Union and the Officers Association. However,the Humble Court of Junior Civil Judge, Medical, Range Reddy District vide IA No.236 of 2004dated 16.09.2004 has given an Order restraining ECIL from negotiating or discussingManagement affairs of ECIL with the existing office-bearers of ECIL Employees Union.Subsequently, in terms of the Orders dated 25.01.2005 in IA o.4509/04 in IA No.214/04 in OS No.477/02 of the Principal Junior Civil Judge, Hyderabad, East and North, R R District, the Dy.Commissioner of Labor, R Zone has conducted the elections of the office-bearers of ECILEmployees Union on 2.4.2005 and the newly elected office-bearers have started functioning.During the year, in terms of the approval accorded by Government, the payment towards arrearson account of pay/ wage revision pertaining to the period from 1.1.1997 to 31.12.1998 was madein the month of June, 2004. In addition to the annual performance incentive payable as per Performance Incentive Scheme for the year 2004-05 amounting to Rs.2352/- for workmen andRs.2688/- for executives, the Company had also paid an amount of Rs.7500/- as ex-gratia to allemployees, considering the profit.A total number of 2989 man-days were lost in pursuance of band observed by a few political parties throughout Andhra Pradesh on 20.11.2004 and 25.01.2005 as APSRTC couldnot operate the Company hired buses in some routes on the said days. Training and DevelopmentIn-house Training Programmes During the year, 2004-05, Corporate Learning Centre(CLC) had organized a total of 65(40 on technical & 25 on management development) in-house programmes on themes addressingmanagement development, workers oriented training programmes and programmes on varioustechnical topics of current interest by eminent faculty drawn from reputed institutions. In all,2180 employees (1683 Executives and 497 Workmen) have participated in the training programmes, resulting in 4488 man-days of training incurring an expenditure of Rs.14,62,980/-. Business Divisions The COMPANY is organized into DIVISIONS serving various Sectors, National andCommercial Importance Divisions servingNuclear sector Control & Automation Division (CAD) Instruments & Systems Division (ISD)

 Components Division (CD)

Divisions servingDefence sector communications Division (CND) Antenna Products Division (APD) Servo Systems Division (SSD) Strategic Electronics Division (SED) Special Products Division (SPD) Divisions handlingCommercial Products Supervisory Control & Data Acquisition Division (SCADA) Business Systems Division (BSD) Telecom Division (TCD) Customer Support Division (CSD) Computer Education Division (CED) Research and Development Objectives Coordination and review of in-house R&D projects Promotion of new R&D projects Utilization of External Grant In Aid Development of new technologies Development of products and support to in-house R&D projects 3 Facilities Full fledged Laboratory for Embedded Systems design Development tools for 8 bit, 16 bit and 32 bit micro controllers

Development tools for ultra low power micro controllers Platform for development of products based on Xilinx & Altera FPGA Front end and Back End Tools for ASIC design Tools for Validation and Verification of Software Infrastructure for multi-tier based software development LINUX based software development Product Being Development RFID card readers with RS232/485, Ethernet, LCD display andKeypad with contact output for access control devices RFID solutions for supply chain management Holter Monitors Encryption Systems Biometric systems (Hand geometry and crease pattern) GPS systems Thin client based solutions Smart Radiation monitors with multiple interfaces for communication Continuous Air activity monitors Teletectors Alpha contamination monitors with gas flow proportional Genesis & Evolution: ECIL was setup under the Department of Atomic Energy in the year 1967 with a view togenerating a strong indigenous capability in the field of professional grade electronics. The initiala c c e n t w a s o n t o t a l s e l f - r e l i a n c e a n d E C I L w a s e n g a g e d i n t h e D e s i g n D e v e l o p m e n t , Manufacture and Marketing of several products emphasis on three technology lines viz. Computers, Control Systems and Communications . O v e r t h e y e a r s , E C I L p i o n e e r e d t h e development of various complex electronics products without any external technological help and scored several 'firsts' in these fields prominent among them being country's First Digital Computer First Solid State TV

First Control & Instrumentation for Nuclear Power Plants First Earth Station Antenna. The company played a very significant role in the training and growth of high caliber t e c h n i c a l a n d m a n a g e r i a l m a n p o w e r e s p e c i a l l y i n t h e f i e l d s of Computers and Information T e c h n o l o g y . T h o u g h t h e i n i t i a l thrust was on meeting the Control & I n s t r u m e n t a t i o n requirements of the Nuclear Power Program, the expanded scope of self -reliance pursued byECIL enabled the company to develop various products to cater to the needs of Defense, CivilAviation, Information & Broadcasting, Telecommunications, Insurance, Banking, Police, andPara-Military Forces, Oil & Gas, Power, Space Education, Health, Agriculture, Steel and Coal sectors and various user departments in the Government domain. ECIL thus evolved as a multi- product company serving multiple sectors of Indian economy with emphasis onimport of country substitution and development of products & services that are of economic andstrategic significance to the country. Research: ECIL has a well equipped and well staffed research and development wing, concentratingits efforts more in the multiple technologies to launch new products in the market. Staffed byqualified personal concentrating their efforts in the fields of atomic energy, defense etc.O r g a n i z a t i o n ( E C I L ) h a s r e c e i v e d C S I R n a t i o n a l a w a r d f r o m t h e m i n i s t r y o f s c i e n c e & technology for R&D efforts in the area of computer software.The research has helped to meet the specific requirements of government and semi-governmentorganization. Welfare: Welfare activities include cantee ns supplying subsidized meals, transport facilities,housing facilities to employees Achievements, Awards and Felicitations: As a recognition of the incredible turn around achieved and f o r i t s p i o n e e r i n g contribution in the field of R&D, the company received a number of awards, most prominent of 3. Environmental and Calibration Services 4. Industrial Engineering Standards: In this area, SQAG maintains national and international standards f o r r e f e r e n c e o f Product divisions. SQAG organizes and coordinates the participation of ECIL experts in various b r a n c h e s o f s t a n d a r d i z a t i o n a c t i v i t y o r g a n i z e d b y B u r e a u o f I n d i a n S t a n d a r d s , E l e c t r o n i c s Standardization Subcommittee and Electronic Components Standardization Organization of Ministry of Defence and any other organization that needs our expertise. A link is established to browse or download Defence standards through Dial-up connection to Defence Standardizationcell, Hyderabad, situated at DLRL. Quality Management System:

ECIL's quality consciousness has resulted in the company receiving the I S O 9 0 0 0 certification in a wide range of operations such as Control Systems, Hybrid Micro Circuits, Tantalum Capacitors, Telecom Products, Software Consultancy Projects and Customer SupportServices. SQAG supports all Product div isions in maintaining Quality Management System as per ISO 9001: 2000. All Product divisions are certified to ISO 9001:2000 Quality ManagementSystem. Products Information : In line with the corporate mission and objectives, the company chose a product rangesuiting the strategic requirements of our country. The current product range of ECIL may be categorized broadly under three sectors; Nuclear sector: Control & Instrumentation products for Nuclear Power Plants I n t e g r a t e d S e c u r i t y S ystems to Nuclear installat ions Radiation Monitoring instruments to support the radiation safety program of the DAE Secured Networking of all DAE units via satellite. Defense Sector: Various types of fuses V/UHF Radio Communication Equipment Electronics WarfareS y s t e m s a n d d e r i v a t i v e s T h e r m a l B a t t e r i e s a n d S p e c i a l c o m p o n e n t s f o r m i s s i l e p r o j e c t s Precision Servo components like gyros Missile Support control & Command Systems TrainingS i m u l a t o r s , S t a b i l i z e d A n t e n n a & T r a c k i n g f o r L i g h t C o m b a t A i r c r a f t D e t e c t i o n a n d P r e - detonation of Explosive devices Jammers with Direction Finding abilities Projects connectedwith Defense Intelligence. Commercial Sector Electronics Voting Machines to Election Commission Wireless in Local Loop (WLL) for Telecom sectors Antenna products for I & B and Telecom sectors Integrates Security Systemsand Security equipment including X-Ray Baggage inspection system for airports, Customs andV V I P I n s t a l l a t i o n s C o m p u t e r H a r d w a r e , S o f t w a r e a n d S e r v i c e s t o v a r i o u s a g e n c i e s i n t h e Government domain Computer Education Services. Production Objectives: To reduce cost by 50% and increase profits. To accelerate the development and growth of new products and markets. To develop indigenous technology by using research and development yearly growth rate of 20%. Quality assurance and adequate after sales services. Any entry in international markets. Financial objectives: To achieve 20% earning before tax. To meet working capital and plant replacement for internal sources.

Strategies: Technical up gradation and R&D efforts. Effective new markets and exports. Gather delegation of authority and tuning up management information system. Diversification. Shareholders pattern. Management Practice and Control Systems: ECIL employs professional management which is distinct from the owners. Thus there isa distinct separation between ownership, control and management is t h a t i n a g e n c y . T h e professional managers, exercise their power in order to achieve the objective of the owners of thecompany. The chief executive offi cer is the managing director appointed by the government of India for specific term, similarly the government of India, also appoints few directors of the c o m p a n y f r o m t h e senior executives. The company had undertaken annual exercise of t h e budget, which details the minute information. The company adopts a combination of top down to b o t t o m u p a n d b o t t o m u p t o t o p d o w n a p p r o a c h i n i t s b u d g e t i n g . T h e r e a r e t w o w a y s o f budgeting exercise, one is operational budget another one is relates to capital e x p e n d i t u r e normally this plan for a period of 5 years and the review of expenditure is done every year. Eachgroup has committed to formulate the review proposal from each groups are consolidated and decision is taken keeping in view the following consideration: There capital expenditure is essential for moderation to remain in business up to the mark. They for see a good and profitable business prospect. They satisfy the criteria such as pay back period and internal rate of return. The department and the group are responsible center and e a c h o f r e s p e c t i v e h e a d i s responsible for achieving the targets. Most of them are profit center and some are designatedas cost centers. The budget becomes base and production unit under take elaborate schedulef o r p r o d u c t i o n . T h e a c h i e v e m e n t s a r e r e c o r d e d a n d t h e p e r f o r m a n c e s o f a l l e v a l u a t e d production techniques adopted are based on the principle and policies elaborately laid down. Joint Venture Company : The Joint Venture, ECIL-Rapiscan Limited registered a total income of Rs.25.50 croreduring this year by way of income from maintenance of conventional X-Ray Machines, Servicesrendered in respect of Cargo Scanning Systems and supply of Multi-energy X-Ray machines toReserve Bank of India, Blue Dart, Museums, SBI, Dena Bank, Indian Army, Indian Airlines,Indian Air Force, Police Departments of various States, CISF, etc. The total income during theyear has come down by 1.55 crore as compared to the previous year. The Profit before tax(provisional) is Rs.5.05 crore and this too dropped marginally by 15% over

the previous year.The income target set for the year 2005-06 is Rs.44 crore and the JV Company is confident of achieving it considering the increased demand for security related products and systems in thecurrent security scenario. The decision of the Government to introduce Container ScanningSystems in a big way in Indian Seaports provides ample business opportunity in this new line.

HIGHLIGHTS OF OPERATIONS During the year under review, the Company made rapid strides on the technology frontwith emphasis on hightechnology low volume areas in the strategic sectors. The overall performance of the Companywas quite satisfactory though there was marginal decline in turnover and profit. However, theCompany is quite confident of achieving an improved performance in the years to come, as aresult of a number of actions initiated that would in turn not only enlarge the technology base but also significantly open up new windows of opportunities.The Company registered a turnover of Rs.771 Crore against an MoU target of Rs. 781Crore. The financial results reflect a pre-tax profit of Rs.51 Crore for the year. Nonreceipt of order from Ministry of Home Affairs and issues relating to evaluation in case of ElectronicWarfare Projects were prime contributing factors to the shortfall. Sectorally, the major contributions to the turnover during the year were from the Defence Sector, accounting for 42%and the Nuclear Sector, for 22%. The rest was contributed by the Space and Security Products &Systems, IT services, etc. In the Nuclear Sector, the Company received accolades for supplying Control & Instrumentation Packages to Tarapur-4 Nuclear Power Plant that went criticalrecently, 7 months ahead of schedule. The Company continues to enjoy the patronage of Nuclear Power Plants in respect of supply of C&I packages. On the Defence front, the Company played asignificant role in commencement of supply of Electronic Warfare Systems to Air Force and inthe successful field trials of BrahMos Missile Project. The Company also installed andcommissioned for the first time in the country, a mobile Gamma Ray and a high energy X-rayContainer Inspection Systems at JNPT, Mumbai. A notable achievement of the Company duringthis year was its role in facilitating smooth conduct of the General Elections-2004 by means of deployment of a large number of EVMs across the Nation ECIL Annual reports2004-2005 DIRECTORS REPORT ToThe Shareholders of Electronics Corporation of India LimitedGentlemen,Your Directors have pleasure in presenting herewith the 38 th Annual Report of your Company,together with the audited statement of accounts for the year ended 31st March, 2005. OPERATING RESULTS AT A GLANCE (Rs. Crore) P a r t i c u l a r s 2 0 0 4 0 5 3

THEORITICAL PRESPECTIVES

A) INTRODUCTION: A basic limitation of the traditional financial statements comprising the balance sheet and p r o f i t a n d l o s s a c c o u n t i s t h a t t h e y d o n o t g i v e a l l t h e i n f o r m a t i o n r e g a r d i n g t h e f i n a n c i a l operation of a firm much can be learnt about a firm from a careful study of financial statements.The analysis of financial statements is, thus, an important aid to financial analysis. Ratio analysis: Ratio anal ysis is a widel y used tool of financial anal ysis. It is defined as the s ystematicuse of ratio to interpret the financial statements so that the strengths and weakness of a firm as well as its historical performance and current financial condition can be determined. Basic comparision Ratios enable to draw conclusions regarding financial operations. The use of ratios, as atool of financial analysis, involves their comparison for a single ratio, like obsolete figures. Four types of comparison involved. Trend Ratio: They involved a comparison of ratios of a firm over time, i.e. present ratios are comparedwith post ratios for th e same firm. This indicates the direction of change in the performance improvement. Inter- firm comparison It involves comparison of the ratios of a firm with those of others in the same line of business. Comparison with standards (or) plans: Relate to comparison of items within a single years fina ncial statement of a firm. (B) CLASSIFICATION OF RATIOS: Ratios can be classified into four broad groups depending upon the particular purpose.1 ) L i q u i d i t y r a t i o s . 2 ) L e v e r a g e r a t i o s / c a p i t a l structure3 ) P r o f i t a b i l i t y r a t i o s . 4 ) A c t i v i t y r a t i o s . Liquidity ratio: The ability of a firm to meet current/ short term obligations and reflect theshort-term financial strength/ solvency of a firm. These also measure the financial position of theconcern from long term as well as short-term solvency. Net working capital: Net working capital represents the excess of current assets over currentliabilities. An enterprise should have the sufficient NWC in order to be able to meet the claims of the creditors and meeting the day-to-day needs of business. The greater the amount of NWC, thegreater the liquidity of the firm.

1. Current ratio A current ratio may have different meanings depending on the p o i n t o f v i e w o f a n analyst. It has a liquidating meaning - the ability to make all necessary payments today - whichgives a measure of protection or cushion for lenders. But, lenders are not interested in receivinginventory in lieu of their claims, and they may look at the ratio as an indication that the firm is a b l e t o g e n e r a t e funds to make all needed pa yments in the future; thus, the ratio i n d i c a t e s whether the firm is likely to be a going concern. But, to infer such a meaning, the ratio cannot belooked upon as a single statistic, and it is necessary to anal yze the degree of liq uidit y of thecomponents of working capital, as it is done later in this chapter Current AssetsCurrent Ratio = -------------------------------Current Liabilities C U R R E N T A S S E T S C U R R E N T LIABILITIES CashSundry DebtorsCash in Bank Bills receivablePre-paid ExpensesMarketable securityStock Bank OverdraftSundry creditorsBills payableDividend payableTax payableOutstanding expensesInterest payable 2.Cash ratio Since cash is the most liquid asset, a financial analyst may examine cash ratio andits equivalent to current liabilities. Trade investment or marketable securities are equivalent of cash. Therefore, they may be included in the computation of cash ratio. (Cash and Bank Balances + Current Investments)Cash Ratio = ---------------------------------------------------------Current Liabilities 3. QUICK RATIO: The quick ratio is a very stringent measure of solvency. When compared to thecurrent ratio, it may reveal the extent to which the firm is dependent on selling its inventory to meet current obligations. Whether or not this is a problem obviously depends on how liquid (i.e.sealable) inventory is, and thus, an additional analysis is always necessary. In fact, this measureis too stringent and narrow to allow meaningful implications about the firm's future. But, ac o m p a r i s o n o v e r time may bring to light a deterioration of liquidity foretelling o n c o m i n g insolvency, and therefore, it must never be overlooked. Quick assetsQuick Ratio = -----------------------------------Current liabilities 4. FIXED ASSET TURNOVER RATIO (FAT): Measure of the productivity of a firm, it indicates the untamo of sales generated byeach dollar spent on fixed assets, and the amount of fixed assets required to generate a specific level of revenue. Changes in this ratio over time reflect whether or not the firm is becoming moreefficient in the use of its fixed assets. Formula: Sales revenue average fixed assets. Net salesF A T = - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Average net fixed asset 5.TOTALASSETTURNOVERRATIO: 3

The total assets turnover ratio measures the use of all assets in terms of sales, bycomparing sales with net total assets. This interactive tutorial walks you through the calculationsas well as where on the financial statements to find the numbers. Net salesTAT = --------------------------------Average total assets 6. PROPRIETOR FUND RATIO: A fixed asset to proprietors fund ratio establishes the relationship between fixeda s s e t s and shareholders funds. The purpose of this ratio is to indicate t h e p e r c e n t a g e o f t h e owner's funds invested in fixed assets. Shareholder FundProprietor fund ratio = ---------------------------------Total Tangible Assets 7. FIXED ASSET RATIO: The sales to fixed assets ratio is often called the asset turnover ratio. A low sale to fixed assets ratio means inefficient utilization or obsolescence of fixed assets, which may becaused by excess capacit y or interruptions in the supply of raw materials. The sales to fixed assets ratio is included in the financial statement ratio anal ysis spreadsh eets highlighted in theleft column, which provide formulas, definitions, calculation, charts and explanations of each ratio. The sales to fixed assets ratio is listed in our sales ratios. Fixed assetsFixed assets ratio = ------------------------------------Capital employed 8. EQUITY RATIO: The equity ratio is a financial ratio indicating the relative proportion of equity toa l l u s e d t o f i n a n c e a company's assets. The two components are often taken from the f i r m ' s balance sheet or statement of financial position (so-called book value), but the ratio may also becalculated using market values for both, if the company's equities are publicly traded. The equityratio is especially in Central Europe a very common financial ratio while in the US the debt to equity ratio is more often used in financial (research) reports. EquityEquity ratio = ------------------------------Total assets 9. GROSS PROFIT RATIO: Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. The basic components of the calculation of gross profit ratio are gross profit and net sales. A net sale means that saleminus sales returns. Gross profit would be the difference between net sales and cost of goodssold. Cost of good s sold in the case of a trading concern would be equal to opening stock plus purchases, minus closing stock plus all direct expenses relating to purchases. In the case of manufacturing concern, it would be equal to the sum of the cost of raw materials, wag es, directexpenses and all manufacturing expenses. In other words, generall y the

expenses charged to profit and loss account or operating expenses are excluded from the calculation of cost of goodssold. Gross profitGross Profit Ratio = --------------------- x 100Net sales 10. NET PROFIT MARGIN: The profit margin is mostly used for internal comparison. It is difficult to accuratelycompare the net profit ratio for different entities. Individual businesses' operating and financinga r r a n g e m e n t s v a r y s o m u c h t h a t d i f f e r e n t e n t i t i e s are bound to have different levels of expenditure, so that comparison of one with another can have little meaning. A low profit marginindicates a low margin of safety: higher risk that a decline in sales will erase profits and result ina net loss. Net profitNet Profit Ratio = --------------------- x 100Net sales 11. RETURN ON ASSET (ROA): An indicator of how profitable a compa ny is relative to its total assets. ROA gives anidea as to how efficient management is at using its assets to generate earnings. Calculated bydividing a company's annual earnings by its total assets, ROA is displayed as a percentage.S o m e t i m e s t h i s i s r e f e r r e d t o a s " r e t u r n o n i n v e s t m e n t " . R O A t e l l s y o u w h a t e a r n i n g s w e r e generated from invested capital (as sets). ROA for public companies can vary substantially andw i l l b e h i g h l y d e p e n d e n t o n t h e i n d u s t r y . T h i s i s w h y w h e n u s i n g R O A a s a c o m p a r a t i v e measure, it is best to compare it against a company's previous ROA numbers or the ROA of a similar company.The assets of the company are comprised of both debt and equit y. Both of these t y p e s of financing are used to fund the operations of the company. The R O A f i g u r e g i v e s investors an idea of how effectively the company is converting the money it has to invest into netincome. The higher the ROA number, the better, because the company is earning more money onless investment PAT + InterestROA = ------------------------------------------- x 100Average Total Assets

12. RETURN ON SHARE HOLDERS FUND: It is the ratio of net profit to share holder's investment. It is the relationship betweennet profit (after interest and tax) and share holder's/proprietor's fund. This ratio establishes the profitability from the share holders' point of view. The ratio is generally calculated in percentage.The two basic components of this ratio are net profits and shareholder's funds. Shareholder's expenditure, so that comparison of one with another can have little meaning. A low profit marginindicates a low margin of safety: higher risk that a decline in sales will erase profits and result ina net loss. Net profitNet Profit Ratio = --------------------- x 100Net sales

11. RETURN ON ASSET (ROA): An indicator of how profitable a compa ny is relative to its total assets. ROA gives anidea as to how efficient management is at using its assets to generate earnings. Calculated bydividing a company's annual earnings by its total assets, ROA is displayed as a percentage.S o m e t i m e s t h i s i s r e f e r r e d t o a s " r e t u r n o n i n v e s t m e n t " . R O A t e l l s y o u w h a t e a r n i n g s w e r e generated from invested capital (assets). ROA for public companies can vary substantially andw i l l b e h i g h l y d e p e n d e n t o n t h e i n d u s t r y . T h i s i s w h y w h e n u s i n g R O A a s a c o m p a r a t i v e measure, it is best to compare it against a company's previous R OA numbers or the ROA of a similar company.The assets of the company are comprised of both debt and equit y. Both of these t y p e s of financing are used to fund the operations of the company. The R O A f i g u r e g i v e s investors an idea of how effectively the company is converting the money it has to invest into netincome. The higher the ROA number, the better, because the company is earning more money onless investment PAT + InterestROA = ------------------------------------------- x 100Average Total Assets 12. RETURN ON SHARE HOLDERS FUND: It is the ratio of net profit to share holder's investment. It is the relationship betweennet profit (after interest and tax) and share holder's/proprietor's fund. This ratio establishes the profitability from the share holders' point of view. The ratio is generally calculated in percentage.The two basic components of this ratio are net profits and shareholder's funds. Shareholder's funds include equity share capital, (preference share capital) a n d a l l r e s e r v e s a n d s u r p l u s belonging to shareholders. Net profit means net income after payment of interest and income tax because those will be the only profits available for share holders. Net profit after taxReturn on shareholders = ----------------------------x 100Shareholders13. RETURN ON CAPITAL EMPLOYED: The return on capital employed (ROCE) ratio, expressed as a percentage, complementsthe return on equit y (ROE) ratio by adding a company's debt liabilities, or funded debt, to equit y tor e f l e c t a c o m p a n y ' s t o t a l " c a p i t a l e m p l o y e d " . T h i s m e a s u r e n a r r o w s t h e f o c u s t o g a i n a b e t t e r understanding of a company's ability to generate returns from its available capital base. By comparing netincome to the sum of a company's debt and equity capital, investors can get a clear picture of how the useof leverage impacts a company's profitability. Financial analysts consider the ROCE measurement to be amore comprehensive profitability indicator because it gauges management's ability to generate earningsfrom a company's total pool of capital . PBITReturn on Capital Employed = ------------------------------- x 100Capital Employed

14. EARNINGPERSHARE (EPS): The portion of a company's profit allocated to each outstanding shareof common stock. Earnings per share serve as an indicator of a comp anys profitability. Whencalculating, it is more accurate to use a weighted average number of shares outstanding over thereporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the endoftheperiod. Net Profits Available to Equity HoldersEPS = --------------------------------------------------------------Number of Ordinary Shares Outstanding 15. DIVIDENDPERSHARE (DPS): The amount of dividend that a stockholder will receive for each share of stock held. Itcan be calculated by taking the total amount of dividends paid and dividing it by the total sharesoutstanding. If a company issues a $1 million dividend and has 10 million shares, the dividend per share is 10 cents ($1 million divided by 10 million shares). Dividend Paid to Ordinary Shareholders DPS = -----------------------------------------------------------Number of Ordinary Shares Outstanding 16. DIVIDEND PAY- OUT RATIO: The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. However investors seeking capital growthmay prefer lower payout ratio because capital gains are taxed at a lower rate. High growthfirms in early life generall y have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors. Note that dividend payout ratio is a reciprocateratio to dividend cover, which is calculated as EPS/DPS. Dividend per Share (DPS)D/P ratio =dividednd per share/Earnings per Share x 100 17. OPERATING PROFIT RATIO: The Operating Profit Margin measures the Operating Profit in relation to the Net Sales. Thisreveals the operating efficiency of the company - how well the company can convert its sales into profits fromits day-to-day activities by its core operations. The higher the Operating Profit Margin, the more efficient thecompany's core business. This ratio is interesting to compute between two or more competing companies in thesame industry - to view which has the most efficient operations. Operating profit ratio= operating profit/net sales*100(C) IMPORTANCE:Liquidity position: It reveals the financial position of the firm. The liquidity ratios are particularly useful incredit analysis by banks and other suppliers of short-term loans. Long-term solvency: Ratio analysis is equally useful for assessing the long-term financial viability of a firm.The long-term solvency i s measured by the leverage and profitabilit y ratios. Ratio anal ysis reveals the strength and weakness of a firm in this respect. Operating Efficiency:

Ratio anal ysis throws light on the degree of efficiency in the management and utilization of the assets Inter-firm comparison: Due to this it can be served as a stepping-stone to remedial measures. Forecasting purposes: These ratios are calculated for a number of years, this h e l p s i n f u t u r e p l a n s a n d forecasting Locating the weak spots: Weakness in financial structure due to incorrect policies in post (or) present that arerevealed through accounting ratios. Trend analysis: The significance of trend anal ysis of ratios lies in the fact that the anal yst can know thedirection of movement. (D) USE AND SIGNIFICANCE OF RATIO ANALYSIS: The ratio analysis is one of the powerful tools of financial analysis. IT is used as a deviceto anal yze and interpret the financial health of enterprise with the help of ratios onl y that thefinancial statements can be analyzed more clearly. a. Managerial use: 1.Helps in decision making 2.Helps in financial forecasting and planning3 . H e l p s i n communicating4.Helps in co-ordination5 . H e l p s i n control b.Utilit y to shareholders / investors: c . U t i l i t y t o c r e d i t o r s Utility to employees tax audit requirements LIMITATIONS OF RATIO ANALYSIS: Ratio analysis is very important in revealing the financial position and soundness of the business. But in spite of its advantages it is have the disadvantages like1.False results if based on incorrect accounting data. 2 . N o i d e a o f p r o b a b l e h a p p e n i n g in future.3.Variation in accounting methods.4 . P r i c e l e v e l c h a n g e s 5.Ignores qualitative measures. INTERPRETATION OF RATIOS: The interpretation of ratios is an important factor. Though calculation of ratios is alsoi m p o r t a n t b u t i t i s o n l y a c l e r i c a l t a s k w h e r e a s i n t e r p r e t a t i o n n e e d s s k i l l , i n t e l l i g e n c e a n d foresightedness.A single ratio in itself does not convey much of the sense. To make ratios useful, theyhave to be further interpreted. The interpretation of the ratios can be made in the following ways: 1) SINGLE ABSOLUTE RATIO: One cannot draw any conclusion when a single ratio is considered in isolation. But singleratios may be studied in relation to certain rules of thumb, whi ch are based upon well -provenconventions. 2) GROUP OF RATIOS atios may be interpreted by calculating a group of related ratios. 3) HISTORICAL COMPARISON: One of the easiest and most popular ways of evaluating the performance of the firm is tocompare its present ratios with the past ratios called comparison

in overtime. 4) PROJECTED RATIOS: Ratios can also be calculated for future standards based upon the projected financialstatements. These future ratios may be taken as standard for comparison and the ratios calculatedon actual financial statements can be compared with the standard ratios to find out variances. 5) INTER FIRM COMPARISION: Ratios of the firm can also be compared with the ratios of some other selected firms inthe same industry at the same point of time.