This is a CBSE Project --- shared by Dr Vinod Kumar --- free of cost --- for accountancy teachers

No commercial use

PROJECT ON SEGMENT ANALYSIS-I

1. Name of Project:
Analysis of Performance of each segment of Prakash Industries Limited with reference to

1. Revenue,

2. Profit and

3. Capital employed

2. Objectives:
 To study whether the contribution of various segments of Prakash Industries Limited
with respect to (i) Revenue, and (ii) Profit, is justified ?

 To know as to which operation segment is performing best in terms of Net Profit and
Return on Investment.

3. Period Under Study:

Financial Year ending 31st March, 2007

4. Tools of Analysis:
1. Common Size Statement and

2. Ratios

5. Source Material:
Newspaper cutting of Audited Financial Results of Prakash Industries Limited from the
Economic Times dated 2nd August, 2007 or the Website of the company.

6. Processing of Data :
I. Common Size Statement of Segment Wise Revenue
 Compare the Revenue from Operations of each segment of Prakash Industries with
TOTAL REVENUE for the year ended 31 March 2007.

Revenue of the segment

 Use the formula =  100
Total Revenue
Revenue of the segment
Degree =  360
Total Revenue

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 Commonsize Statement Showing Inter-Segment Comparison of Revenue
For the year ended 31 March, 2007

Segment Power Steel PVC Pipes Others Total

Revenue (`) 12755 94901 6497.00 3079 117232

Percentage of Total Revenue (%) 10.88 80.95 5.54 2.63 100

Degrees for Pie Diagram 39.17° 291.43° 19.95° 9.45° 360°

Source: The Economic Times 2nd August, 2007

Pie Chart Representing Segment Revenue

9.45°
19.95°
39.17°

291.43°

Power Steel PVC Pipes Others

II. Common Size Statement of Segment Wise Profit

 Compare the PROFIT of each segment of Prakash Industries Limited with TOTAL
PROFIT for the year ended 31 March, 2007.
 Use the formula to calculate percentage and degrees for making pie diagram.

Profit of the segment

Percentage =  100
Total Profit
Profit of the segment
Degrees =  360
Total Profit

Commonsize Statement Showing Inter Segment Comparison of Profit

For the year ended 31 March, 2007

Segment Power Steel PVC Pipes Others Total

Profit (`) (in lakhs) 6506 7985 901 272 15664

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 Percentage of Total Profit (%) 41.53 50.98 5.75 1.74 100

Degrees for Pie Diagram 149.52° 183.52° 20.71° 6.25° 360°

Source: The Economic Times 2nd August, 2007

Pie Chart Representing Segmentwise Profit

6.25°
20.71°

149.52°

183.52°

Power Steel PVC Pipes Others

III. Common size statement of segment wise capital employed

 Compare the CAPITAL EMPLOYED of each segment of Prakash Industries Limited with
TOTAL CAPITAL EMPLOYED for the year ended 31 March, 2007.
 Use the formula to calculate percentage and degrees for making pie diagram.

Capital Employed of the Segment

Percentage =  100
Total Capital Employed

Capital Employed of the Segment

Degrees =  360
Total Capital Employed

Commonsize Statement Showing Inter Segment Comparison of Capital Employed

For the year ended 31 March, 2007

Segment Power Steel PVC Pipes Others Total

Capital Employed ` (in lakhs) 13870 66660 1630 6921 89081

% of Total Capital Employed (%) 15.57 74.83 1.83 7.77 100

Degrees for Pie Diagram 56.05° 269.39° 6.59° 27.97° 360°

Source: The Economic Times 2nd August, 2007

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IV. Calculation of Return on Investment
 Calculate the Return on Investment of each segment of Prakash Industries Limited for
the year ended 31 March, 2007

 Use the following formula to calculate Return on Investment

Profit Before Interest, Tax and Dividend

Return on Investment =  100
Capital Employed

Statement Showing Inter Segment Comparison of ROI

For the year ended 31 March, 2007

Segment Power Steel PVC Pipes Others Total

PBIT ` (in lakhs) 6506 7985 901 272 15664

Capital Employed (` in lakhs) 13870 66660 1630 6921 89081

 PBIT  46.91 11.98 55.28 3.93 17.58

ROI (%)   100 
 Capital Employed 

Graphical Representation of ROI

60 55.28%

50 46.91%

40

30
ROI (%)

20 17.58%

11.98%
10
3.93%
0
Power Steel PVC Pipes Others Total

Segments

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 Combined Comparative Statement

Segment Power Steel PVC Pipes Others Total

Revenue (%) of Total 10.88 80.95 5.54 2.63 100

PBIT (%) of Total 41.53 50.98 5.75 1.74 100

Capital Employed (%) of Total 15.57 74.83 1.83 7.77 100

ROI (%) same 46.91 11.98 55.28 3.93 17.38

Conclusions:

 PVC Pipes Segment has the highest ROI 55.28% with capital share of only 1.83%.

 With the Revenue share of 10.88% of the Total Revenue, Power Segment is able to generate a
PBIT of 41.53% of the Total Profit.

 Power Segment also has a good ROI of 46.91%.

 Therefore, PVC Pipes Segment and Power Segment are the best performing segments.

Future Projections:

 With 55.28% share of ROI, PVC Pipes segment seems to have a bright future. More funds
should be diverted towards this segment from Steel segment which is losing its shine.

 Power also has a future growth potential because of shortage of power in the country. It will
be a good idea to divert some funds towards this segment from Steel Segment.

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