A

Summer Training Project Report

On
“Study of Financial Leverage of Mindarika Pvt. Ltd on the basis of Debt-
Equity Structure & their Impact on Shareholder Wealth(EPS & DPS) &
Profitability for last 4 Years(2007-2010)”

Under the guidance of: Submitted By:

Mrs. Sapna Sanserwal Nitin Manchanda
Faculty Timt Class Roll no. 1160/09
 CONTENTS
1. INTRODUCTION

a)Company profile

b)Topic

2.THEORITICAL FRAMEWORK

a)Construct

b)Independent variable & Dependent variable

3.RESEACH OBJECTIVES

4.RESEARCH METHODLOGY

a)Research design

b)Type of research design

c)Study setting

5. HYPOTHESIS DEVELOPMENT & TESTING

6. ANALYTICAL TOOLS

7. STATISTICAL TOOLS

8. LIMITATIONS OF THE STUDY

9. RESULT & FINDING

Mindarika Pvt. Ltd. (An Indo-Japanese Joint
Venture)
 ABOUT MINDARIKA
• Parent company is MINDA

• JV with TOKAIRIKA ,JAPAN

• Two plants in INDIA-

Manesar, Gurgaon
Pune
 PRODUCTS OF MINDARIKA

Lever Combination Switches

Power Window Switches
Astray & Cigar lighters
Oil Pressure Switches
Panel Switches
HVAC Panel Assemblies
CUSTOMERS OF MINDARIKA
Group Sales Structure
 INTRODUCTION TO TOPIC

• Meaning of Financial leverage

• Impact of Financial leverage

DFL=% Change in EPS/% change in EBIT

Debt equity ratio=Debt/Equity
 Significance of Financial Leverage
1) Planning of Capital Structure
2) Profit Planning
 Limitation of Financial Leverage
• Doubled edged weapon
• Beneficial only to companies having stability
of earning
• Increases risk and rate of interest.
• Restriction from Financial Institution
 THEORETICAL FRAMEWORK
• Construct of the study
“Study of Financial Leverage of On the basis of Debt-Equity Structure and their
Impact on Shareholder Wealth (EPS & DPS) and Profitability”.

• Independent variable
Amount of Debt (Financial Leverage)
Debt-equity mix

• Dependent variables
Profitability(Profit after Tax)
EPS
DPS
 OBJECTIVES OF STUDY
Main Objective: -

• The project is designed to show the impact of Financial Leverage on profitability & shareholder

wealth position of the company.

Sub Objective

•The basic objective of studying the ratios of the company is to know the financial position of the

company.

•Another reason is to study that the company’s profit trends.

•To know the borrowings of the company as well as the liquidity position of the company.

•To know the solvency of the business and the capacity to give interest to the long-term loan

•Lenders (debenture holders) and dividend to the shareholders.

•To study the balance of cash and credit in the organization .

RESEARCH DESIGN:
 RESEARCH DESIGN

Study type • Descriptive

Time Horizon • Cross Sectional

Study Setting • Not contrived

Hypothesis Testing • ( T-Test )

 HYPOTHESIS TESTING
• Ho: There is a no significant impact of debt on Profitability.

• H1-There is significant impact of debt on Profitability .

 
H0-There is a no significant impact of Equity on DPS
H1-There is significant impact of Equity on DPS
H0-There is a no significant impact of Equity on DPS
H1-There is significant impact of Equity on DPS
 ANALYTICAL TOOLS
Ratio analysis
DEBT EQUITY RATIO:

Debt Equity Ratio

2

1.8

1.6

1.4

1.2
Debt Equity Ratio
1

0.8

0.6

0.4

0.2

0
2006-07 2007-08 2008-09 2009-10
 DEBTS TO TOTAL FUND RATIO

Debt to Total Fund Ratio

0.64

0.63

0.62

0.61

0.6 Debt to Total Fund Ratio

0.59

0.58

0.57

0.56

0.55
2006-07 2007-08 2008-09 2009-10
 DIVIDEND PER SHARE

Series 1
2.5

1.5
Series 1

0.5

0
2006-07 2007-08 2008-09 2009-10
 EARNING PER SHARE

Series 1
25

20

15
Series 1

10

0
2006-07 2007-08 2008-09 2009-10
 FINANCIAL LEVERAGE

Ratio (%)
2

1.8

1.6

1.4

1.2
Ratio (%)
1

0.8

0.6

0.4

0.2

0
2006-07 2007-08 2008-09 2009-10
STATISTICAL TOOLS
Regression between Debt and
Profitability
Regression between Equity and EPS
Regression between Equity and DPS
 LIMITATIONS OF THE STUDY

• STUDY OF INTERIM REPORTS: it is only the study of interim reports and

secondary data present on different websites so not much reliable as primary data.
• CHANGES IN ACCOUNTING PROCEDURE by a firm may often make financial
statements misleading.
• MINOR PLAYER: I have studied only a single firm of the industry. So, I got
knowledge about just a minor player in the team.
• Analysis is based only on monetary information and not on non monetary factors.
• SECRECY OF INTERNAL DATA: Manager some time denied disclosing some
important financial matters, which can be helpful in this study.
 RESULTS AND FINDING:
• There is significant impact of Debt on Profitability proved by acceptance of alternate hypothesis by the

application of T-test.

• The statistical tools applied that is regression states that variation in profitability is majorly because of

variation in Debt.

• The Debt equity ratio of Mindarika Pvt. Ltd. is more than the standard of 1:1, and it can be interpreted

that the firm is using more debt than equity.

• The Company’s earnings per share in the year 2006-07 was observe to be 17.84 which than reduce to 9.16

in 2007-08 and again rose to 20.88 in 2009-10.Hence it can be stated that the dividend are available to

equity shareholders.

• Net profit ratio signifies the firm ability to earn the profit on sales higher the ratio the better it is for the

firm. As it can be seen that situation has been improved time by time and in 2010 there are high profits.

• The financial leverage of the company shows the fluctuating trend as observed by the application of

analytical tool.
Recommendations