Accountancy Project on Segment and Ratio Analysis of ITC
INTRODUCTION TO ITC LIMITED:
ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal. Established in 1990 as the Imperial Tobacco Company of India Limited, the company was removed as the Indian Tobacco company now stands renamed to the same. ITC has a diversified presence across industries such as cigarettes, FMCG, hotels, Packaging, Paperboards & papers, and Agribusiness. The company started 100 years ago as of 2010 and 2019-2020 had an annual turnover of US$10.47 Billion and a market capitalization of US$ 35 Billion It employs over 36,500 people at more than 60 locations across India and is a part of the Forbes 2000 lit.
More About The Company:
Tobacco Bussiness & Early Years:
“ITC Limited” was originally named “Imperial Tobacco” and was later renamed “Imperial Tobacco Company of India Limited.” Succeeding W.O. & H.O wills on 24 August 1910 as British-owned company registered in Calcutta. Since the company was largely based on agriculture resources, it ventured into partnerships in 1911 with farmers from South India to source leaf tobacco. Under the company’s Umbrella, the “Indian leaf Tobacco Development Company Limited “ was formed in Gunter district of Andhra Pradesh in 1912. The 1st cigarette factory of the company was set up in 1913 in Bangalore.
Towards Indianization & Business Diversion:
The company was converted into a public limited company on 27 October 1954. The 1st step towards Indianisation was taken in the same year within 6% of the Indian Shareholding of the company. 1st company to foray into consumer research during this time.
During the 1960s, technology was given more focus as the setting up of cigarette machinery and filter rod manufacturing facilities aimed at achieving self-sufficiency in cigarette-making.
Ajit Narain Haskar became the company’s 1st Indian chairman in 1969 and this was crucial in building up the Indian management for the company.
ABOUT SEGMENT ANALYSIS:
In every company, there will be different segments producing different types of products every year. Each segment shows different levels of performance in an accounting year. It is mandated for companies to report the progress of each segment as per AS17. It ensures full disclosure about the revenue for each segment and the amount of capital employed or to each segment. Some reports are prepared after the analysis of each segment from the collected data. It helps to find the strength and weaknesses of each segment. It helps to access the financial position and profitabilities of each segment. To analyze the performance we’ll calculate the %age of revenue, profit, and return of each segment.
Objective Of Study:
- To analyze the performance of each segment of ITC Limited.
- To find out the return on investment on each segment.
- To study whether the contribution of various segments of ITC Limited for revenue & profit is justified.
Interpretation:
It includes the comparison of the performance of each segment for revenue, profit, and capital employed.
- Comparison of revenue of each segment
- Comparison of profit of each segment
- Comparison of capital employed in each segment.
Tools Of Analysis:
The following are the tools of analysis of study :
- Common Size Statement
- Accounting Ratio
Analysis Of Performance:
| Segment | FMCG | Hotels | Agribusiness | Paperboards, Paper & Packaging | Total |
| Revenue | 8,996.25 | 81.96 | 2,985.26 | 1,458.67 | 13,442.14 |
| Profit | 3,497.46 | 184.90 | 256.06 | 330.28 | 3,898.90 |
| Assets | 17,614.31 | 6,537.10 | 3,656.28 | 7,259.93 | 35,067.62 |
| Liabilities | 6,636.79 | 772.35 | 980.07 | 968.49 | 9,357.70 |
| Capital Employed | 10,977.52 | 5,764.75 | 2,676.21 | 6,291.44 | 25,709.92 |
COMPARISION OF REVENUE OF EACH SECTOR:
Percentage of Revenue = Segment Revenue X 100
Total Revenue
- FMCG = 25 X 100 = 66.33%
13,442.14
- Hotels = 96 X 100 = 0.609%
13,442.14
- Agri-business = 26 X 100 = 22.20%
13,442.14
- Paperboards paper & packaging = 67 X 100 = 10.85%
13,442.12
CALCULATION OF DEGREE OF EACH SEGMENT:
Degree of Revenue = segment revenue X 360’
Total revenue
- FMCG = 25 X 360’ = 238.79’
13442.14
- Hotels = 96 X 360’ = 2.99’
13,442.14
- Agri-business = 26 X 360’ = 79.94’
13,442.14
- Paperboards paper & packaging = 67 X 360’ = 39.06’
13,442.14
| Segment | FMCG | Hotels | Agribusiness | Paperboards, Paper & Packaging | Total |
| Revenue | 8,916.25 | 81.96 | 2,985.26 | 1,458.67 | 13,442.14 |
| Percentage | 66.33% | 0.61% | 22.21% | 10.86% | 100% |
| Degrees | 238.77’ | 2.19’ | 79.99’ | 39.06’ | 360’ |
COMPARISION OF PROFIT OF EACH SECTOR:
Percentage of Profit = Segment Profit X 100 %
Total Profit
- FMCG = 46 X 100 = 89.70%
3898.90
- Hotels = 90 X 100 = 4.74%
3898.90
- Agri-business = 06 X 100 = 6.56%
3898.90
- Paperboards paper & packaging = 28 X 100 = 8.47%
3898.90
| Segment | FMCG | Hotels | Agribusiness | Paperboards, Paper & Packaging | Total |
| Profit | 3497.46 | 184.9 | 256.06 | 330.28 | 3898.9 |
| Percentage | 89.70% | 4.74% | 6.56% | 8.47% | 100% |
COMPARISION OF CAPITAL EMPLOYED:
Percentage of Capital employed = Segment capital employed X 100 %
Total capital employed
- FMCG = 10,977.52 X 100 = 69%
25,709.92
- Hotels = 75 X 100 = 22.42%
25,709.92
- Agri-business = 21 X 100 = 10.40%
25,709.92
- Paperboards paper & packaging = 6,291.44 X 100 = 47%
25,709.92
| Segment | FMCG | Hotels | Agribusiness | Paperboards, Paper & Packaging | Total |
| Capital Employed | 10,977.52 | 5,764.75 | 2,676.21 | 6,291.44 | 25,709.92 |
| Percentage | 42.69% | 22.42% | 10.40% | 24.47% | 100% |
RETURN ON INVESTMENT:
Return on Investment =Profit before Internet, tax & dividend X 100
Capital employed
Calculating Return an investment for each segment of ITC Ltd.
- FMCG = 46 X 100 = 31.86%
10,977.52
- Hotels = 90 X 100 = 3.20%
5,764.75
- Agri-business = 06 X 100 = 9.56%
2676.21
- Paperboards paper & packaging = 28 X 100 = 10.03%
6,291.44
| Segment | FMCG | Hotels | Agribusiness | Paperboards, Paper & Packaging | Total |
| Revenue | 8,996.25 | 81.96 | 2,985.26 | 1,458.67 | 13,442.14 |
| Capital Investment | 10,977.52 | 5,764.75 | 2,676.21 | 6,291.44 | 25,709.92 |
| Return Investment | 31.86% | 0.03 | 0.10 | 0.10 | 0.55 |
INTERPRETATION OF THE STUDY:
- The FMCG sector has the revenue which is greatest of the segments. This segment has also earned the largest share of the profit in the company. Capital employed of FMCG also holds the largest part.
- The segment hotels have been negatively affected in the year 2020. The profit derived under the sector shows a negative amount. It has earned a competitively lowest share of revenue and the share of capital employed is quite less than the 4th segment of ITC. It has the lowest revenue amongst all the sectors. It earns the lowest returns on investment.
- The Agribusiness has earned the 2nd largest share in the total revenue. However since the profit percentage is low, it seems that revenue has decreased. The sector has the lowest capital employed.
- Paperboards, paper, and packaging sector has received a regular, unaffected amount of revenue and profit. It has the 2nd largest percentage of capital employed as well as return on investment.
CONCLUSION:
There have been various segments of ITC producing different types of products every year. Each segment shows different levels of performance in an accounting year. According to the segments, some show increasing and decreasing tendency and some have a habit of remaining constant.
BIBLIOGRAPHY:
- https;//www.itcportal.com/
- https;//link-springer.com/chapter/10.1007//978-981-10-8816-6-2
- https;//en.m.wikipedia.org/wiki/ITC_Limited
- https;//www.google.co.in/search? q=itc&client=safari & h1=in=in&prnd
- https;//cbseacademic.nic.in/web_material/circular/2015/20%accounting.pdf
- https;//www.cbseacademic.nic.in/web_material/Accountarey_sr_sec_2021.pdf
CERTIFICATE:
This is to certify that of class school, has completed this project under my supervision. He has taken proper care and shown it most sincerity in the completion of this project. I clarify that this project is up to my expectations and as per the CBSE guidelines.
ACKNOWLEDGEMENT:
I would like to express my special thanks of gratitude to my teacher as well as our principal who gave me the golden opportunity to do this wonderful project on the topic, which also helped me in doing a lot of research and learning new things. I am really thankful to them. Secondly, I would also like to thank my parents and friends who helped me a lot in finalizing the project within the limited time frame.
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