FINANCIAL ANALYSIS OF NEPAL LG COMPANY

A Project Work Report

By

Ankit Maharjan

T.U. Reg.No:7-2-539-18-2016
Symbol no: 5390002
Shikharapur Campus

Submitted to

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Pharping, Kathmandu

Dec, 2020
 DECLARATION

I hereby declare that the project work the entitled FINANCIAL ANALYSIS OF NEPAL LG
COMPANY submitted to the faculty of management, Tribhuvan University, Kathmandu is an
original piece of Work under the supervision of Mrs. ANITA BHANDARI, faculty member,
SHIKHARAPUR CAMPUS, PHARPING, KATHMANDU, and is submitted in partial
fulfillment of the requirements for the award of the degree of Bachelor of Business Studies
(BBS). This project work report has not been submitted to any other university or institution
for the award of any degree of diploma.

.…………………….

Signature

Ankit Maharjan

Date:

ii
 SUPERVISOR’S RECOMMENDATION

This is to certify that Mr. Ankit Maharjan has prepared the project work report entitled
FINANCIAL ANALYSIS OF NEPAL LG COMPANY under my supervision and guidance
as per the procedure and format requirements, as partial fulfillment of the requirements for
the award of the degree of Bachelor of Business Studies (BBS).

I, therefore, recommend the project work report for evaluation.

........................

Mrs. Anita Bhandari

Project Work Supervisor

Shikharapur Campus

Date:

iii
 ENDORSEMENT

We hereby endorse the project work report entitled “FINANCIAL ANALYSIS OF NEPAL
LG COMPANY" submitted by Mr. ANKIT MAHARJAN of SHIKHARAPUR CAMPUS,
PHARPING, KATHMANDU partial fulfillment of the requirement for award of the Degree
of Bachelor of Business Studies (BBS) for external evaluation.

...........................

(Mrs. Anita Bhandari) ........................

Project Supervisor (Niroj Shrestha )

Shikharapur Campus Campus Chief

Date: Shikharapur Campus

Date:

iv
 ACKNOWLEDGEMENT

I would like to express my deep gratitude to Shikharapur Campus, Pharping, for allowing
carrying out this project work in partial fulfillment of the requirements for Bachelor of
Business Studies (BBS).

I am extremely grateful and indebted my respected project work supervisor Mrs. Anita
Bhandari, Shikharapur Campus, Pharping, who in spite of her busy schedule spared her
valuable moments to provide me constructive input, in the way of guidance, inspiration,
support and constant encouragement to complete this project work. I would like to appreciate
her for supervision and inspirations to improve the quality of project work.

I wish to express my sincere gratitude to Campus Chief Mr. Niroj Shrestha. I would also like
to thanks all the administrative staff of Shikharapur Campus, Pharping.

I am thankful to my family members and all my friends who provided regular inspiration and
continuous contribution for the completion of project work.

Lastly, I hearty beg sorry for my any mistake and assure to take responsibility for all
comments.

Ankit Maharjan

v
TABLE OF CONTENTS

vi
Declaration...................................................................................................................ii

Supervisor’s Recommendation.....................................................................................iii

Endorsement.................................................................................................................iv

Acknowledgement.........................................................................................................v

Table of contents..........................................................................................................vi

List of Tables................................................................................................................viii

List of Figures..............................................................................................................ix

Abbreviations...............................................................................................................x

INTRODUCTION........................................................................................................1

1.1 Background of study.........................................................................................................1

1.2 Profile of the Company....................................................................................................1
1.3 Objectives of the study.....................................................................................................7
1.4 Rationale of the study.......................................................................................................8
1.5 Review of the Literature...................................................................................................9
1.5.1 Conceptual review...........................................................................................................9

1.5.2 Review of Previous work..............................................................................................10

1.5.3 Research Gap.................................................................................................................10

1.6 Methods..........................................................................................................................11
1.6.1 Types of Research.........................................................................................................11

1.6.2 Population and Sample..................................................................................................11

1.6.3 Types of Data................................................................................................................11

1.6.4 Data collection procedure..............................................................................................11

1.6.5 Instrument......................................................................................................................12

1.6.6 Techniques of analysis..................................................................................................12

1.7 Limitations of the study..................................................................................................13

1.8 Report Structure..............................................................................................................14

vii
RESULTS AND ANALYSIS......................................................................................15

2.1 Presentation of Data and Analysis..................................................................................15

2.2 Major Findings...............................................................................................................29
SUMMARY AND CONCLUSION.............................................................................30

3.1 Summary.........................................................................................................................30
3.2 Conclusion......................................................................................................................31
BIBLIOGRAPHY........................................................................................................32

APPENDIX..................................................................................................................33

viii
 LIST OF TABLES

Table No. Page No.

Table 1: Current ratio.....................................................................................................................16

Table 2: Quick Ratio......................................................................................................................18

Table 3: Net Working Capital........................................................................................................19

Table 4: Inventory Turnover ratio.................................................................................................20

Table 5: Fixed assets turnover ratio...............................................................................................21

Table 6: Total assets turnover ratio...............................................................................................23

Table 7: Return on Equity..............................................................................................................24

Table 8: Return on Assets..............................................................................................................25

Table 9: Gross profit Margin.........................................................................................................27

Table 10:Net profit Margin............................................................................................................28

ix
 LIST OF FIGURES

Figure No. Page No.

Figure 1: Current Ratio..................................................................................................................17

Figure 2: Quick Ratio....................................................................................................................18

Figure 3: Net Working Capital......................................................................................................19

Figure 4: Inventory Turnover Ratio...............................................................................................21

Figure 5: Fixed Assets Turnover Ratio..........................................................................................22

Figure 6: Total Assets Turnover Ratio..........................................................................................23

Figure 7: Return on Equity............................................................................................................25

Figure 8: Return on Assets............................................................................................................26

Figure 9: Gross Profit Margin........................................................................................................27

Figure 10: Net profit......................................................................................................................28

x
 ABBREVIATIONS

AC : Air Conditioners
AV : Audio Video
BOD : Board of Directors
CG : Chaudhary Group
CRT : Cathode-ray tube
DVD : Digital Versatile Disc
ESS : Energy Storage System
IOT : Interoperability Testing
IT : Information Technology
LCD : Liquid Crystal Display
LG : Lucky-Goldstar
Ltd. : Limited
NAPT : Network Address Port Translation
OLED : Original Light-Emitting Diode
SWOT : Strength, weakness, Opportunity & Threats
TV : Television
TVS : Thermal Vacuum Switch
& : And

xi
 1

CHAPTER I

INTRODUCTION

1.1 Background of study

Financial analysis is the process of evaluating business, projects, budget and other finance
related entities to determine their performance and suitability. When looking at a specific
company, a financial analysis conducts analysis by focusing on the income statement, balance
sheet and cash flow statement-potential investors can form opinion about investment value
and expectation of future performance. Financial analysis refers to an assessment of the
validity, stability and profitability of a business, sub-business or projects.

L.G. Company is a South Korean multinational company, the company established in many
countries around the world. Firstly L.G Company is established in South Korean in 1958 as
Gold star, Lak-Hui became the first Korean company to enter the plastic business. The L.G.
group was a merger of two Korean companies Lucky and Gold star. L.G. Company is the
second largest producer of television and third largest producer of mobile phone. LG
electronics produced South Koreas first radios, home entertainment, Mobile communication,
home appliance and air solution and vehicles components, refrigerators, washing machines.
The total revenue of the company is USD 55.76 billion and total net income is more than
USD 161.01 million. Nepal LG company is a under the LG electronics division of the Lucky
Gold star company for the trading of home appliance product and mobile phones.

1.2 Profile of the Company

LG Company is a multinational company, LG is a most branded and popular company. LG

leads the market with around 35% of the overall market. LG Company is established in South
Korea in 1952, Lak-Hui become the first Korean company to enter the plastic industry. It
established Gold star Co. Ltd in 1958; both companies Lackey and Gold star merged and
formed Lucky – Gold star. LG Electronic established in Korea in 1958 as one of the first
 2

companies to make their way into the electronic. Now LG Company becomes a multinational
company. LG Company produces 1,626 products and 65,062 companies established in
around the worlds. LG company Global network in Malaysia, Singapore, Philippines,
Vietnam, Hong Kong, Thailand, Emirates, Taiwan, Indonesia, India, Pakistan and Nepal. CG
Started assembling color television and home appliances products under the “Gold star”
brand in Nepal. LG has been successful in establishing itself as a common household brand
of Nepal.

Nepal LG Company is a company under the LG electronics division of the Lucky-Gold star
Company for the trading the home appliance products and mobile phones. The home
appliances category includes refrigerators, deep freezers, air conditioners, microwave ovens,
rice cookers, DVDs, washing machines, fans and vacuum cleaners.

Financial analysis is the process of the evaluating business, projects budget and other
financial related entities to determine their performance and suitability when looking at a
specific company, a financial analysis conduct analysis by focusing on the income statement,
balance sheet, and cash flow statement. Financial analysis refers to an assessment of the
viability, stability and profitability of a business, sub–business or project.

Financial study Analysis is largely a study of relationship among the various financials
factors in the business aspect. LG company is leading the marketing sectors and able to retain
the no.1 position in the market. So the financial analysis determined the performance of the
company due to their marketing activity and helps to manage the viability, salability and
profitability under the business budget and performance. It helps to predication of net income
and growth prospects by investors while comparing investment alternative and other
interested in judging the earning potential of business enterprises.

 Historical Background

LG Company is established in South Korea in 1952, Lak-Hui became the first Korean
Company to enter the plastic industry. As the company expand its plastic business. It
established Gold star Co. Ltd in 1958; both companies Lucky and Gold Star merged and
formed Lucky-Gold star. LG Electronic was established in Korea in 1958 as one of the first
companies to make their way in to the electronic.
 3

LG Electronics is a global leader and technology innovator in customer electronic mobile

communications and home appliances. LG Company employing (83,000) people working in
128 locations around the world with global sales of Rs.6657.21 billion. LG company produce
four business units –home appliances, mobile communication, home entertainment, and Air
solution, vehicles components. One of the world’s leading procedures of the panel TVS,
mobile devices, air conditioners, washing machines and refrigerators. LG electronics is a
2014 ENERGY STAR partner of the year.

Now LG Company became a multinational company. The company established many

branches in many countries around the word. The total revenue of the company is US$ 55.76
billion. LG is the flagship brand of the company. It has been able to retain the No.1 position
in the Nepalese market for the last 22 years. It is established in 1988 as GOLDSTAR Nepal
Pvt. Ltd. CG started assembling color television and home entertainment product under
“GOLDSTAR” brand in Nepal. LG Company has been successful in establishing itself as a
common household brand of Nepal. It becomes a No.1 electronic company in Nepal. It
produces TVs refrigerators, washing machines, computers, mobile phones, home theater, split
AC, microwave oven, Laptops, Monitors. It provides customers care center in many places to
give information about the LG products and services for the customers. It is also start online
shopping. LG electronics Co. ltd launched its online E-store at WWW.LG digital.com.np at
Kathmandu, Nepal. The company looks to further increase its retails presence and market
share in the country’s growing customer’s technology market. The LG products like audio
visual, home appliances which offers customers the widest range of LG products like visual,
home appliances, small home appliances, mobile and offers brand like CG, Toshiba, Godrey,
Oneida, Tcl, Kelvinator, Index with its full line of products that can be now easily purchase
on online. The website has been launched to meet the requirements of consumer by providing
them with a unique online shopping platform and experiences. As for as pricing is concerned,
the E-store also offer special online prices in addition to other special features. The company
is offering all the regulars payment methods like credit /debit card, mobiles.

Board of director of LG Company is the launch of the holding company, LG group, LG

electronics under an advance corporate governance structure that comprise a professional
administrator and a Board of Director. This structure helps us deploy more transparent, value
creating management activities that help increase corporate and shareholders’ value.
Structure of Board of Director are Audit candidates recommendation, committee, 2 Executive
 4

Directors, 1 Non –Executive Director and Review Determination of management issues

delegated by the board .

“Life is Good ‘slogan and futuristic logo is a great representation of what the LG Company is
stand for the LG way is unique management philosophy that has been passed down through
generations of LG managers and employees of the spirit of LG Vision. Its experiences and
management expertise accumulated over its history. Accordingly the LG way of foundation
for through and action that every LG members should observes and practice. Simply put LG
way is the call to becoming premier company; hence the essences of its strategic vision are
embodied in No.1 LG. At its foundation are the principal of customer –value creation and
people – oriented management, which are in true implemented according to the high ethical
standard of behavior delineated by Jeong-do management. To achieve this we have embraced
the idea of “Great Company, Great People” recognizing that only great people can create a
great company.

 Evaluation and compensation

Compensation for the BOD member is made within regulation pertaining to BOD
compensation that has been approved at general shareholders meeting. The evaluation of
management and executive of LG is held annually. Top, management and executive are
evaluated to determine whether they set and achieved challenging goals, whether their job
objectives composed of quantitative and non-quantitative factors were achieve as well as their
capability through fair and objectives process and appropriate compensation corresponding to
the outcomes of the evaluations is determined.

 Product line of LG
 Consumer Electronic
 Home Appliances
 Computer products and Mobile phones
 5

 Vision

LG Electronics continue to pursue its 21st century vision of becoming a worldwide leader in
digital-ensuring customer satisfaction through innovative products and superior service while
aiming to rank among the world’s top three electronics, information and telecommunication
firms by 2010. On our way we hold tight to a philosophy of “Great Company, Great People,”
underscoring our belief that only great people can create a great company.

LG main vision is empowering economic vitality and quality of life. It strives for greatness in
what we’ve identified as their three core capabilities: product leadership, market leadership
and people leadership strength a key part of realizing our growth strategies for “Fast
Innovation” and “Fast Growth”.

 Core capability

LG goal is to offer technologies that suits people’s need, as it stated on its annual report. The
core goal of LG company development processes is to create technologies that enrich
peoples’ lives it flows directly from LG’s guiding principle of “creating harmony among
people”. Innovation flourishes best when it anticipates or answers a need that enriches
peoples’ lives. LG Company creates product that helps people get more out of life have more
leisure time and experience, more pleasure. LG Company does this by always understanding
their needs and continually surpassing their expectation.”

 Growth Strategies

Fast innovation calls for securing a competitive edge over the competitive by selling and
meeting the highest of goals in all realms of innovation by at least 30%. This applies to new
product development and innovation in design and technology as well as products sales,
market share and corporate value.
 6

 Mission

LG company mission is to be recognized as the leader in development of global

communication products and to sustain their development position in telecommunication
market through the innovation and outstanding passions for excellent and products
performance to delivers on their promise to keep “Accelerating Opportunity” by providing
the best communication product to enrich the human experiences.

 Objectives of LG Company

The Company, Organization and institution have their own objectives goals to reach their
mission. LG Company has also the objectives to get and to reach its mission. They are
following:

 To provide the customer with almost satisfaction.

 To design innovative electric products.
 In line national environmental goals LG electronics executes green energy
consumption and reduces.
 To respect human dignity.
 To become best in its field.
 To become best in its field.
 To provide quality service to customer.

 List of LG Electronics Nepal

 LG lifestyle shopping Centre Gorkha Complex, Minbhawan

 LG Mobile conceit store, Civil Mall
 LG-Bhatbhatini online.com
 LG shop, Jawalakhel-Lalitpur
 L.G Showroom-Biratnagar
 LG electronics inc. Kathmandu, Nepal
 LG Electronics showroom, Siraha
 7

 Company overview

LG Electronic Nepal Manufacturing and sales consumer electronic, home appliances,

computer products and mobile phones in Nepal. The company’s consumer electronics include
LCD TV, Plasma display, Display panel, color television; Home appliances comprise room
air conditioners, Commercial air conditioner, refrigerators, refrigerator compressor, washing
machine, dishwasher, microwaves and vacuum cleaner. The company also offers computer
products such as laptop, notebook, desktop, personal computer, LCD monitor, CRT monitor,
optical storage device, and projectors and mobile phones. LG electronics was spun off from
LG electronics investments ltd. April 1 2002. The company shares are listed on the Korea
exchange and some of its preferred shares, in the form of global depository receipt are listed
on the London stock exchange as of the reporting date. The company is domiciled in Koreaat
Yeoui-daero, yeundeunpoi-gaseous. As of December 31, 2015, LG crop Owns 33.7% of the
parent company’s total shares excluding preferred shares, while financial institution, foreign
investors and other own the rest.

The parent company and its subsidiaries operate six major business segment .Home
entertainment segment manufactures and sell TV’s monitors and digital media products,
mobile communication segment manufacture and sell mobile communication equipment,
home appliances segment manufacture and sells refrigerator, washing machines and vacuum
cleaner, air conditioners & energy solution segment design and manufactures automobiles
parts, LG innotek co. ltd Manufacture and sells LED, Optics Solution, substrate materials and
automotive components business in addition the group separately operates four financial
situation and determine compressor and motors for air conditioners and washing machines,
CEM division which produce and sell display materials, lighting, division and solar division.

1.3 Objectives of the study

 To highlights the importance relationship in the financial statement.

 To know the financial position, performance and change of the company.
 To know the growth rates in the earning and helps in predicting the earning prospect,
 This study checks the profitability, liquidity of the company.
 To know the largely a study of relationship among the various financial factors.
 To provide a strong theoretical framework for analyzing financial statement.
 8

 To offer suggestion for improvement in company.

1.4 Rationale of the study

This study is based on the financial analysis of the Nepal LG company. Financial analysis is
the examination of a business from a variety of perspective in order to fully understand the
gather financial situation. The study is important for the creditors and investors as well as
managers to use of financial statement analysis compares and to judge the performance. The
studies is helpful for the fulfill information on needs of intended users. The financial
statement analysis helps in predicting the earning prospects and growth rates in the earning
which are used by investors while comparing investment alternatives and other users
interested in judging the earning potential of business enterprise. The main rational of this
study financial statement and analysis is to provide information about the financial position,
performance and change in financial position of a company that is useful to a wide range of
users in making economics decision. This study helps for the decision making process of the
company and analysis the financial performance of the company also. The company doing
well or not that can be determined by the helps of this study also. This study is also helps for
to know the growth rates in the earning and helps in predicting the earning prospects. It helps
to know about the financial information of company.

This report is based on financial analysis of LG Company. Financial analysis is helps to know
about financial performance of the company and helps to good decision making. It helps to
expand the investment and utilized the resource. Financial analysis highlights the financial
performance of the firms and helps to determine, profitability increase and maintenance the
liquidity. It provides strong theoretical frame for analysis financial statement.

Financial analysis is the process of evaluating business, projects, budget and other financial
related entities to determine their performance and suitability when looking at a specific
company a financial analysis conduct analysis by focusing on the income statement, Balance
sheet and cash flow statement. Financial analysis refers to a profitability of a business, sub
business or projects. Financial analysis involves the use of financial statement is an organized
collection of data according to logical and conceptual framework consistent accounting
procedures. Its purpose is to convince un understanding of some financial aspects of a
business firms. Financial statement analysis is an analysis that highlights the important
relationship in the financial statement.
 9

1.5 Review of the Literature

1.5.1 Conceptual review

In this review of literature I found that many researchers have contributed to this study about
financial analysis of LG Company. Which help to gap of the research?

“Financial analysis is the examination of a business from a variety of perspective in order to

fully understand the greater financial situation and determine how best to strength the
business. A financial analysis looks at many aspect of a business from its profitability and
stability to its solvency and liquidity”.

Financial analysis dictionary definition “Financial analysis also referred as financial

statement analysis or accounting analysis or analysis of finance refers to an assessment of the
viability, stability and profitability of a business, sub business or project.”

http://edu.m.wikipedia.org. “Gangabdhar (1998) has made an attempt on “Financial analysis

of companies in criteria: a profitability and efficiency focus one of the objective of the study
is to analyze the liquidity position of the companies and to point out the factors responsible
for such apposition. It’s concluded that the liquidity position was quite alarming since these
are facing chronic liquidity problem. Their proportion current assets in relation to the current
liabilities are very low. IT is suggested that, they may be improved by reducing excessive
burden of current liabilities or increasing the level of current assets depending upon the
requirement”.

Moses Jshuva Daniel (2013) “In this study “A study on Financial status of “LG Company”
started the main objectives to analyzing the overall financial status of the LG Electronic by
using various financial tools. In order to analyze financial status in term of profitability,
Solvency, activity and financial stability various accounting ratios have been used. It is
cleared from the study that the company’s financial performance is satisfactory. The
company has stable growth and it shows a greater status in all the areas it work. The company
has been suggested increase every year. Decrease in expenses will increase the profitability”.
 10

1.5.2 Review of Previous work

A review of these analyses is important in order to develop an approach that can be employed
in the context of the study of financial analysis. A large number of research studies have been
carried out on different aspect of the working of public and private sectors by the researcher,
economists and academicians in Nepal.

Different authors have analyzed financial performance in different perspective. Therefore the
present chapter reviews the various approaches to the study on financial analysis and
performance.

Bansal and Gupta (1985)”In their study entitle “Financial ratio analysis and statistic,”
enlightened that the coefficient of variation in the study period had a wide gap varying
between 7.1 and 51.3 for current ratio and ratio on fixed assets to sales. The correlation of
component of short term liquidity ratio generally possesses low correlation as against long
term solvency ratio component but the components of both ratios independently possess quite
satisfactory correlation in Nepal LG Company. The profitability ratio element in all company
also have quite “high correlation analysis of Nepal LG Company” enlightened that the
coefficient of variation in the study period. Here 32 years’ time different from the previous
study. In previous study had a wide gap varying between 7.1 and 51.3 for current ratio and
ratio on fixed assets to sales and in this studied period had a wide gap varying between 1.11
and 3.0214 for current ratio and ratio on fixed assets to sales in Cotton Company as a
compared to cotton Textile Company.

1.5.3 Research Gap

Here, review of the previous founded wide gap on the study, of the research. Here Bansal and
Gupta’s study in entitle of “Financial ratio analysis and statistics” and the correlation of
components of short term liquidity ratio possesses low correlation as against long-term
solvency ratio components but the components of both ratios independently possess quite
satisfactory correlation in Nepal LG Company. The profitability ratio elements in the
company also have quite high correlation in cotton Textile Company. Here I used secondary
data for analysis of the data which was are already used and published by the company but
MR. Bansal and Gupta used primary data.
 11

1.6 Methods

1.6.1 Types of Research

Here, generally two types of research. Basic research and applied research, here I used basic
research, basic research is conduct by professor academia and student with the view to gain
more knowledge in particular areas of interest. The aim of conducting such research is to
understand more about certain issuers the takes place in several organization and industries.
Basic research conduct to acquire depth knowledge of theory, undertaken for the purpose of
generating more knowledge and understanding issues and building theories based on research
result.

1.6.2 Population and Sample

Population is other companies and sample as a Nepal LG Company.

 Annual reports
 Financial statement published by the company
 The company websites
 Concerned with the staff of the company

1.6.3 Types of Data

Here two types of data, primary and secondary data. Primary data are those data where the
researchers gone in the field to collect the data from related field which are fresh and full of
truth. The secondary data are those data which are already used by researcher and published
by the company. Secondary data are helpful for researcher, when research have no time for
the collect of data.

1.6.4 Data collection procedure

Not tools, Process are particularly utilized for the collection of required data. All the used
data for the study is secondary data.
 12

1.6.5 Instrument

Tabulating and arranging in a require form process the collected data.

1.6.6 Techniques of analysis

This section discusses about the financial structure and its analysis which is one of the major
part of organization in Nepal. Financial as well as statistical tools are used to analysis the
collection data to assess the profitability of Nepal LG Company. The analysis are given
below

A. Liquidity Ratio:

Liquidity or short term solvency mean ability of the company to pay its short term liability.
The first ratio well takes a look at in this tutorial are the liquidity ratio following ratios are
highlights the company liquidity.
Current assets
 Current ratio =
Current Liabilities

Quick assets
 Quick ratio =
Current Liabilities

 Net working Capital = Current asset – Current Liabilities

B. Activity ratio:

Activity ratio is also known as assets management ratio of efficiency ratio or turnover ratio or
performance ratio. The following ratio are highlights the company activity ratio.

Sales
 Inventory turnover ratio =
Inventory

Sales
 Fixed assets turnover ratio =
¿ assets
 13

Sales
 Total Assets Turnover ratio =
Total Assets

C. Profitability ratio:

Profitability ratios are measure of performance that indicates the amount of the firm is
earning relative to some base, such as sales, assets or equity. Following ratios are highlights
the company profitability.

Net Income
 Return on equity =
common equity

Net income
 Return on assets=
Total assets

Gross profit
 Gross profit Margin =
Sales

Net income
 Net profit Margin =
Sales

1.7 Limitations of the study

 Financial analysis study only profitability, liquidity and activity ratios.

 The study mainly analysis balance sheet and income statement only.
 The study mainly concentrates on the secondary data.
 It study had been carried out for seven fiscal year.
 Financial data is not adjusted for price change or influence/deflation.
 Financial analysis based or dependent on historical costs.
 14

1.8 Report Structure

The report is divided into three different chapters:

Chapter I

The first chapter will deal with the subject matter consisting Introduction, Profile of the

Organization, objective of the Study, Rationale of the study, Literature Review, Research
Methodology, limitation and Report Structure.

Chapter II

Different data will deal with deal with presentation of data in tables and figures and
Represented in the form of graphs. Major findings from the analysis will be further discussed.

Chapter III

The third chapter concludes the report with the discussion and conclusion accordingly.
 15

CHAPTER II

RESULTS AND ANALYSIS

2.1 Presentation of Data and Analysis

This section discusses about the financial structure and its analysis and SWOT analysis of LG
Company, which is one of the major parts of the industry/company in Nepal. It gives the true
picture of how the LG Company is analysis the financial and SWOTS in the marketing
business.

Out of various methods of financial statement analysis, financial analysis, Liquidity ratio,
profitability ratio, activity ratio analysis is far and most widely used method.

 Financial Analysis

Financial analysis is an important and useful technique and useful to check upon the
efficiency of an organization. The management can arrive at important decision by using
financial analysis; the financial analysis is used for expressing the mutual relation of different
account consisting in the financial statement.

Any given data in the financial statement are not important in it. To make its real important
clear, it is to be expressed in referring to other figure, with the help of financial analysis the
big figure group can be made short and simple from this, the dog figure group can be made
short and simple from this, the business activities are made possible to analyze
systematically.

A. Liquidity ratio :
 16

The ability of firm to asset its short –term obligation is known as liquidity. It reflects the short
of the business the ratio are used to know the capacity of concern to repay its short-term
liability.

 Current ratio
 Quick Ratio
 Net working Capital

 Current Ratio

Current ratio is mainly used to given an idea of a company ability to pay back its liability
with its assets. As such current ratio can be used to make a rough estimate of a company
financial health. It is calculated by dividing current assets by Current liability. Current
liability is debt that will come due with a year.

Current assets
Current ratio =
Current Liability

The Major current assets are cash, marketable securities, sundry debtors, bills receivables and
inventory. The major current liabilities are bank overdraft, sundry creditors, bills payable and
outstanding expenses.

Table 1: Current ratio (In Billions Rupees)

Year Current assets Current Liabilities Current Ratio

2015 7586.28 6660.79 1.14
2016 7363.74 6654.36 1.11
2017 8007.42 7146.36 1.12
2018 8512.61 7390.75 1.15
2019 8751.28 7583.69 1.15

(Source: LG company annual Report of 2015-2019)

Total ratio
Average ratio =
Number of year
 17

Therefore, Average ratio = 1.13

In above table current ratio of LG Company seems to be very satisfactory, the average ratio is
1.13 over the period.

Current Ratio
1.16

1.15

1.14

1.13

1.12 1.15 1.15

1.14
1.11
1.12
1.1 1.11

1.09
2015 2016 2017 2018 2019

Figure 1: Trend line showing Current Ratio

The ratio shows a fluctuation trend. The highest ratio is 1.15 in year 2018 and 2019 and
lowest ratio is 1.11 in year 2016. The average ratio is 1.13.

 Quick ratio

Quick ratio is a measure of how well a company can meet its short term financial inabilities,
also known as the acid - test ratio. The quick ratio mainly indicates how well the current
liabilities are covered by cash and by highly liquid assets that may be converted into cash
relatively quickly. Because this ratio takes into account that not all current assets are equally
a liquid, it is more precise measure of liquidity than is the current ratio. Quick ratio is
calculated by dividing liquid current assets by total current liabilities. Liquid current assets
include cash, Marketable securities and receivables.

The following is the most common formula used to calculate quick ratio:
 18

Quick Assets
Quick ratio =
Current liabilities

Where,

Quick Assets = (Total curret assets−Inventories−Prepaid expenses)

Table 2: Quick Ratio (In Billions Rupees)

Year Quick assets Current Liabilities Quick Ratio

2015 5221.08 6660.79 0.78
2016 5083.30 6654.36 0.76
2017 5477.43 7146.36 0.77
2018 5902.21 7390.75 0.80
2019 6071.64 7583.69 0.80

(Source: Annual report of LG Company 2015-2019)

Total Ratio
Average ratio =
Number of Year

= 0.78

In above table quick ratio of LG company seems to be very much satisfactory. The average
quick ratio is 0.78 over the period.

Quick Ratio
0.81

0.8

0.79

0.78

0.77 0.8 0.8

0.76 0.78
0.77
0.75 0.76

0.74
2015 2016 2017 2018 2019

Quick Ratio
 19

Figure 2: Trend line showing Quick Ratio

The trend line shows a fluctuation trend. However the highest ratio is 0.80 in year 2018 and
2019 and the lowest ratio is 0.76 in year 2016 and the average ratio is 0.78.

 Net Working Capital

Net working capital is the difference between current assets and current liabilities. It is
absolute measure which indicates the rupee amount of equity in the working capital position
of the firm.

Net Working Capital = Current Assets – Current Liabilities

Table 3: Net Working Capital (In Billions Rupees)

Year Current assets Current Liabilities Net working Capital

2015 7586.28 6660.79 925.49

2016 7363.74 6654.36 732.38
2017 8007.42 7146.36 861.06
2018 8512.61 7390.75 1121.86
2019 8751.28 7583.69 1167.59
(Source: Annual report of LG Company 2015-2019)

In above table total net working capital of LG Company is Rs.4808.38 billion. Its shows the
Rs.4808.38 billion amount of equity is the working capital position of the firm.
 20

Net Working Capital

1400.00

1200.00

1000.00

800.00

600.00 1121.86 1167.59

925.49 861.06
400.00 732.38

200.00

0.00
2015 2016 2017 2018 2019
Net Working Capital

Figure 3: Trend line showing Net Working Capital

In above figure the trend line shows net working capital of the company. The trend line
seems to go up and down related factors affecting investment but trend line is increasing in
2016.

B. Activity Ratio

Activity turnover ratio is also known as assets management ratio or efficiency ratio or
turnover ratios of performance ratio. It calculates how effectively the company manages its
assets and level of operation as measure by sales.

 Inventory turnover ratio:

The inventory turnover ratio is defined as cost of goods sold dividend by inventories. It
measures the efficiency of inventory utilization.

Sales
Inventory turnover ratio =
Inventory

Table 4: Inventory Turnover ratio (In Billions Rupees)

Year Sales Inventories Inventory turnover ratio

 21

2015 6037.80 2365.20 2.55

2016 5915.78 2280.44 2.59
2017 7201.07 2487.24 2.90
2018 6554.16 2610.39 2.51
2019 6657.21 2679.64 2.48
(Source: Annual report of LG Company 2015-2019)

Total ratio
Average ratio =
Number of year

= 2.61

In above table inventories ratio of LG Company has manage to utilize its inventories funds in
term of sales in ratio is 2.61%.

Inventory Turnover ratio

Inventory Turnover ratio
3
2.9
2.8
2.7
2.6
2.5
2.4
2.3
2.2
2015 2016 2017 2018 2019

Figure 4: Trend line showing Inventory Turnover Ratio

In above ratio shows a flotation trend. However, the highest ratio is 2.90 in year 2017 and
lowest ratio is 2.48 in year 2019. The average ratio is 2.61.

 Fixed Assets turnover ratio

 22

It measures how effectively the firm use it fixed assets like plant and equipment building
machinery, Land and other long term assets to generates sales. It is generated sales. It is
calculated by dividend sales by the net fixed assets.

Sales
Fixed assets turnover ratio =
¿ assets

Table 5: Fixed assets turnover ratio (In Billions Rupees)

Year sales Fixed assets Fixed assets turnover ratio

2015 6037.80 4485.73 1.35
2016 5915.78 4562.71 1.30
2017 7201.07 4855.56 1.48
2018 6554.16 5431.48 1.21
2019 6657.21 6093.79 1.09
(Source: Annual report of LG Company 2015-2019)

Total ratio
Average ratio =
Number of year

= 1.29

In above table fixed assets turnover ratio of LG Company shows that the form is very
efficient on fixed assets management. Its average ratio is 1.29.

Fixed Assets Turnover Ratio

1.6

1.4

1.2

1
Fixed Assets Turnover Ratio
0.8

0.6

0.4

0.2

0
2015 2016 2017 2018 2019
 23

Figure 5: Trend line showing Fixed Assets Turnover Ratio

The ratio shows a fluctuation trend, however the increasing ratio is in 2017 is 1.48 and
decreasing ratio is in 2019 is 1.09. The average ratio is 1.29.

 Total assets turnover ratio

It means the overall utilization of firm’s total assets. Total assets turnover ratio is calculated
by dividing sales by total assets.

Sales
Total assets turnover ratio =
Total assets

Table 6: Total assets turnover ratio (In Billions Rupees)

Year Sales Total Assets Ratio

2015 6037.80 16079.85 0.38
2016 5915.78 15980.30 0.37
2017 7201.07 17075.72 0.42
2018 6554.16 18542.56 0.35
2019 6657.21 19645.75 0.34
(Source: Annual report of LG Company 2015-2019)

Total ratio
Average ratio =
Number of Year

= 0.37

In above table total assets turnover ratio of LG Company it shows that the company's Total
Assets Turnover Ratio of 2015 is 0.38, 2016 is 0.37, 2017 is 0.42, 2018 is 0.35, 2019 is 0.34
and average ratio is 0.37.
 24

Total Assets Turnover Ratio

Total Assets Turnover Ratio
0.42
0.38 0.37
0.35 0.34

2015 2016 2017 2018 2019

Figure 6 : Trend line showing Total Assets Turnover Ratio of LG Company.

The ratio shows a fluctuation trend, however highest ratio is 0.42 in year 2017 and lowest
ratio is 0.34 in year 2019. The average ratio is 0.37.

C. Profitability ratio

Profitability ratio is measure of performance that indicates the amount of the firm is earning
relative to some base, such as sales, assets or equity. The ratio indicating the profitability of
firms is:

 Return on equity
 Return on assets
 Gross profit margin
 Net profit Margin

 Return on Equity

Return on equity is a measure of profitability of a business in relation to the book value of

shareholders equity, also known as net assets. It is most commit used ratio for measure. The
return on owner’s investment. It reflects the extent to which the company have been
successful in mobilizing there equity capital dividing by shareholder equity.
 25

Net income
ROE =
Common Equity

Table 7: Return on Equity (In Billions Rupees)

Year Net income Common equity Ratio

2015 26.62 5593.02 0.0048
2016 19.49 5561.67 0.0035
2017 199.75 6164.88 0.0324
2018 157.36 6834.80 0.0230
2019 19.22 7256.04 0.0026
(Source: Annual report of LG Company 2015-2019)

Total Ratio
Average ratio =
Number of Year

= 0.0133

The above calculation reveals that NAPT is about 1.3260% of total shareholders’ funds. It
also shows that company's return on equity was 0.0048 in 2015, 0.0035 in 2016, 0.0324 in
2017, 0.0230 in 2018 and 0.0026 in 2019.

Return On Equity
Return On Equity
0.0324

0.023

0.0048
0.0035 0.0026

2015 2016 2017 2018 2019

Figure 7: The Trend line showing Return on Equity of the LG Company

The ratio shows a fluctuation trend, however highest ratio is 0.0324 in year 2017 and lowest
ratio is 0.0026 in year 2019. The average ratio is 0.0133.
 26

 Return on Assets

Return on Assets is a form of return on investment, measure the profitability of business in

relation to its assets. It shows overall efficiency of a firm.

Net income
ROA =
Total assets

Table 8: Return on Assets (In Billions Rupees)

Year Net income Total Assets Ratio

2015 26.62 16079.85 0.0017
2016 19.49 15980.30 0.0012
2017 199.75 17075.72 0.0117
2018 157.36 18542.56 0.0085
2019 19.22 19645.75 0.0010
(Source: Annual report of LG Company 2015-2019)

Total ratio
Average ratio =
No . of years

= 0.0048

The ratio 0.0048 reveals that proportion of Net profit after tax is on 0.4816% over the
analysis period which is very low.
 27

Return on Assets
Return on Assets

0.0117

0.0085

0.0017
0.0012 0.001

2015 2016 2017 2018

Figure 8: The Trend line showing the Return on Assets

The ratio shows a fluctuation trend, however highest ratio is 0.0117 in year 2017 and lowest
ratio is 0.0010 in year 2019. The average ratio is 0.0048.

 Gross profit Margin

The gross profit reflects the effectiveness of pricing policy and of production efficiency. The
gross profit margin is calculated by gross profit divided by sales.

Gross profit
Gross profit Margin =
sales

Table 9: Gross profit Margin (In Billions Rupees)

Year Gross profit Sales Ratio

2015 1375.53 6037.80 0.2278
2016 1467.68 5915.78 0.2481
2017 1566.23 7201.07 0.2175
2018 1611.36 6554.16 0.2459
 28

2019 1638.56 6657.21 0.2461

(Source: Annual Report of LG Company 2015-2019)

Total ratio
Average ratio =
sales Number of Year

= 0.2370

The ratio 0.2370 reveal that firm is earning Rs.0.02370 on every rupees of sale before
considering administration expenses, deprecation and financial costs.

Gross Profit Margin

0.26

0.25

0.24

0.23

0.22

0.21

0.2
2015 2016 2017 2018 2019

Gross Profit Margin

Figure 9: The Bar Graph Showing the Gross Profit Margin

In above figure the bar diagram shows the gross profit from 2017 to 2019 of the company.
The Company maintains its profit very well in those years. The gross Profit reflects the
effectiveness of the pricing and of production efficiency.

 Net profit Margin

It is ratio of Net income available to common stockholders to sales, this ratio is also known as
Net margin it measure per rupee of sales.

Net income
Net Profit Margin =
sales
 29

Table 10: Net profit Margin (In Billions Rupees)

Year Net income Sales Ratio

2015 26.62 6037.80 0.0044
2016 19.49 5915.78 0.0033
2017 199.75 7201.07 0.0277
2018 157.36 6554.16 0.0240
2019 19.22 6657.21 0.0029
(Source: Annual Report of LG Company 2015-2019)

Total ratio
Average ratio =
Number of Year

= 0.0125

The ratio revels the 0.0125 indicates that the firm earns Rs 0.0125 on every sales.

Net Profit Margin

0.03

0.025

0.02

0.015

0.01

0.005

0
2015 2016 2017 2018 2019

Net Profit Margin

Figure 10: The Bar Graph Showing Net profit

In above diagram shows the net profit earning by the company through the sales of the
common Stockholders is lowest in 2019 and is highest in 2017.
 30

2.2 Major Findings

From the presentation of the data in table and figure and the analysis of the data here I found
Liquidity ratio, activity ratio & profitability ratio. Those ratios show the financial
performance of the company. The liquidity ratio shoes the short of the business ratio are used
to know the capacity of concern to repay its short term liabilities. The current ratio revels
generates cash in a relatively short time period and average current ratio is 1.13 over the time
period. Quick ratio indicated how well the current liabilities are covered by cash and highly
liquid assets that may be converts into cash relatively quick the average quick ratio 0.78 over
the period of time Net working capital indicates the rupee amount of equity in working
capital position of the firm and total working capital is Rs.4808.38 billion over the time
period. The activity ratio calculates how effectively the company manage it assets and level
of operation as major by sales. Here average inventory turnover ratio is 2.61 and its shows
that the company has managed to utilized its inventory funds in term of sales. Fixed assets
turnover ratio shows the how effectively the firm use it fixed assets like plant and machinery,
buildings, equipment land and other long term assets to generates sales and average ratio on
fixed assets turnover ratio is 1.29 and the company on a firm total assets average ratio is 0.37.
It shows that the company uses its assets and level of operation and manage its well also. The
profitability ratio measures of performance that indicate among of the firm is earning
relatives to some base such as sales, assets or equity. Here average return on equity is 0.0133
and it shows extend the company has been successful mobilization their equity, NAPT of
total shareholders’ funds. The return on assets measures in term of relationship between net
profit and assets, its shows overall efficiency of a firm, financial resource invested in
companies’ assets. Average ratio is 0.0048 it revels the proportion of NAPT over’s the
period. The gross profit reflects the effectiveness of pricing policy and production efficiency,
the average ratio is 0.2370 which shows the firm earning Rs.0.02370 on every rupee of sales
before considering administrative expenses, depreciation and financial cost. The net profit is
available to common stockholders to sales; it measures per rupee on sales. The Average ratio
is 0.0125 which indicates the firm earned.
 31

CHAPTER III

SUMMARY AND CONCLUSION

3.1 Summary

LG Nepal is a famous band company which produces electronics product. It is a company the
Lucky-Goldstar company. LG is the flagship brand of the Company. It has been able to retain
the No. 1c position in the Nepalese market for the last 22 years. It established in 1988 as Gold
star Nepal Pvt.ltd. The LG brand vision in Nepal is to maintain no.1 Brand position in
consumer durables & electronics products. Financial study analysis is largely a study of
relationship among the various financial factors in the business aspects. Financial analysis
determines the performance of the company due to their marketing activity and helps to
manage the validity, stability and profitability under the business and performance when
looking at a specific company, in financial analysis of LG Company here rational hypothesis
is made. Here relationship between dependent and independent variables are shown. This
helps to determines in financial activities of the company.

The company has total assets Rs.19645.75 billion, gross profit is Rs.1643.82 billion and sales
is Rs.6657.21 billion. LG Company can lead all electronics company of Nepal, if retains the
same pace and progress. However the management of the company should be keen towards
its activities and takes challenges to any kind of financial hurdles. This will encounter in the
operation. The total sales revenue of the company is more than Rs.6500 billion, which is an
impressive figure for any company. The financial, figure of the LG Company is major aspects
of LG’s success.
 32

3.2 Conclusion

Financial analysis is an assessment of feasibility, steadily and profitability of the business. It

is performed by the financial analysis in which they prepare the financial report by using the
financial ratio. And other financial technique to valid the information and evaluate it with
past performance and industrial average to identify the trend and make business decision
based on it. In my project I calculated financial ratios of LG Company and company average
of seven years. Based on the discussion, interpretation and analysis of the LG company
financial analysis. The Company is famous and profit making company. Now the company is
in no.1 position LG Company Nepal.

LG company Nepal is a company unreformed the LG electronics division of the Lucky-

Goldstar company for the trading the homes appliances products. The growth trade of the
production is increasing. Financial analysis is influences by the profitability, liquidity of the
company. They tend of current ratio is decelerating with its liquidity balance. The ability of
the firm is 1.11% and satisfactory section of the company. The company has used its assets
effectively. The firm earned profit very well.

The company should follow certain factors like objectives expected sales of return, expected
risks, taxes and investment horizon and strategies. If those factors are considered the
company surely does the better investment. There are also certain things that should be taken
into consideration before making investment such as, investment environment, investment
process. The investment environment consists of various parts like securities market and
financial intermediaries however the investment process consists.
 33

BIBLIOGRAPHY

Claessens citizen, and Daniel Kilngebiel, (2001).Competition and scope of activities in

financial services.

Hilber, Paul, and others(2000).New Tools for assessing financial system soundness.
Finance and development

Joshi, Shyam(2057) B.S. Financial Markets and Institution.

Brealy, Richard and Steward Myers.(2002). Principal of corporate Finance. New Delhi:
Tata McGrew Hill.

Kiran Thapa. (2073). Fundamental of corporate finance. Kathmandu, Nepal

Rajan, Kesher, Padam R., Rishi R., and Surya B. Rana (2017).Foundation of Financial
Markets and Institutions.

Pradhan Surendra. (2000). Basic of Financial Management. Kathmandu

Government of Nepal, Ministry of Finance(2015-2016). Economic Survey. Ministry of

Finance. Kathmandu

Paudel, R.B; Baral, K.J.; Joshi, P.R.; and Rana, S.B. (2016).Fundamental of Investment.
Kathmandu

Thapa, K. & Pokheral, J. (2010).Financial derivatives & Risk Management. Kathmandu

www.NepalLGYP .com

http://www.NepalLGCompany.com

https://www.ukessays.com

https://www.premium writingservice.com

www.lgchem.com>stock –valuation

www.lgcorp.com
 34

APPENDIX

Appendix 1:

Income Statement (In Korean Won)

Particulars 2016 2017 2018 2019

Sales 55,367,033 61,396,284 61,341,664 62,306,175

Change of sales in % -2.02 10.89 -0.09 1.57

Gross profit on sales 13,266,891 14,219,423 14,655,693 15,928,249

Gross profit on sales change in % -2.16 7.18 3.07 8.68

Operating income 1,315,081 2,454,786 2,683,602 2,436,139

Operating income change in % 13.32 86.66 2,008,575 -9.22

Income before tax 721,717 2,558,112 9.32 1,580,734

Income before tax change in % 21.68 254.45 -21.48 -21.30

Income after tax 76,879 1,725,774 1,240,139 31,285

Income after tax change in % -38.20 2,144.79 -28.14 -97.48

 35

Appendix 2:

Balance Sheet (in Korean Won)

Particulars 2016 2017 2018 2019

Total liabilities 24,498,527 26,547,275 28,021,536 28,434,737

Total liabilities change in % 48,616.43 50,041.69 60,458.45 59,849.30

Equity 13,356,742 14,673,684 16,306,907 16,425,138

Equity change in % 3.10 10.32 7.78 0.54

Balance sheet total 37,855,269 41,220,959 44,328,443 44,859,875

Balance sheet total change in % 4.24 8.89 7.54 1.20