1. A STUDY ON MEASURING FINANCIAL HEALTH OF
LOTTE INDIA CORPORATION LTD ( NEMAM )

2. “Z” Score model
 It’s the model for Predicting Bankruptcy
 Developed by Edward I Altman in 1968
 “Z” Score is a linear combination of five common
business Ratios
 The “Z” Score formula was as follows
 Z = 0.012 A + 0.014 B + 0.033 C + 0.006 D +0.999 E,
 A = Working Capital / Total Assets
Measures Liquid Assets in relation to the size of the
company
B = Reserve & Surplus / Total Assets
Measures Profitability that reflects the company’s age
and earning power

3. Cont….
 C = EBIT / Total Assets
Measures operating efficiency apart from tax
and leveraging factors. it recognizes operating
earnings as being important to long term
viability
 D = Equity / Total Debt
Adds market dimension that can show up
security price fluctuation as a possible red flag.
 E = Sales or Income / Total Assets
Standard measure for total asset Turnover

4. Altman Guidelines
Situations “Z” Score Zones Remarks
I Below 1.8 Bankruptcy Its failure is certain
and extremely
likely and would
occur probably
within two years
II Between 1.8 and Healthy Financial viability
2.99 is considered to be
Healthy
III 3.0 and above Too Healthy Its financial health
is viable and not to
fall

5. SPRINGATE MODEL ( 1978 )
 Step wise multiple Discriminate analysis
 Z = 1.03 A + 3.07 B + 0.66 C + 0.4 D
 A = Working Capital / Total Assets
 B = Net Profit Before Interest and taxes / Total
assets
 C = Net Profit Before Taxes / Current Liabilities
 D = Sales / Total Assets
 “Z” Less than 0.862; then the firm is classified
as “ Failed”

6. Industry profile
 The organized sector of the Confectionery
market is estimated to be about Rs 1400 crore
 Largest among the food processing Industry
 Four categories of Confectionery in the
organized sector – chocolate Confectionery,
sugar Confectionery, gum and cereal bars
 Candico is the only Indian Confectionery
company with production facilities overseas
 LOTTE, Cadbury, Wrigley’s and Perfetti etc..
 Growing at a pace of 9 % per annum.

7. Company profile
 Lotte India Corporation, Incorporated in 1954.
 Lotte Confectionery is the first company in the
Lotte family of companies founded by Shin
Kyuk-ho a part of South Korea based group
 They engaged in manufacturing and marketing
toffees, chewing gum, bubble gum, and sugar
boiled Confectionery
 On July 2010 Inaugurated a new facility at
Nemam village near poonamallee invested
around $70 million (around Rs 322 crore) in the
facility.

8. Objectives of the study
 Primary objective
To predict the financial health and viability of the
company using “Z” Score model
 Secondary objective
To analyze the financial condition of Lotte India
Corporation Ltd
To know the efficiency in financial operations of
the company.
To offer suitable suggestions.

9. Need and Scope for the study
 The primary need of the study is to analyze the
financial health of the company and to identify
the signs of financial distress and thereby avoid
the Bankruptcy
 The scope of the study is limited to 5 years
financial performance only
 this study help company improve the financial
health and performance of the business

10. Research methodology and design
Desk research Design is used to analysis the
financial health of the company
Meaning of Desk research
Research using published sources, and/or
the client's own internal sources, carried out
prior to a research project.
which can include company financial
details, analysts reports, market statistics or
comments and information about the issues in a
marketplace.

11. Research methodology and design
Data collection
 (A) NATURE OF DATA
 The data collection is based on secondary data.
 (B) SOURCES OF DATA
 The secondary data for analysis are taken from
the company
 ANNUAL REPORT

12. Findings
 The company’s financial health is sound during
the study period, the significant findings of the
study are given below
 1. Working capital to total assets ratios of the
company shows a highly fluctuating during the
study period this clearly shows the company
liquidity position is very fluctuating during the
study period
 2. Reserves and surplus to total assets ratios of
the company shows an Increasing trend in the
study period which indicates that the company
has financed capital expenditures through
Reserves and surplus during the period of study

13. Findings
 3. EBIT to total assets ratios of the company
shows a highly fluctuating during the study period
this clearly shows the company operating earning
is not favorable during the study period
 4. The Equity to total Debt ratios of the company
shows a highly fluctuating during the study
period this clearly shows the company depended
on equity capital rather than debt capital during
the study period
 5. The Income to total assets ratios of the
company shows a highly fluctuating during the
study period this clearly shows the company
Income is not satisfactory over the study period

14. Conclusions
 The final conclusion of the study is the financial
health of Lotte India corporation Ltd is sound
during the period of study 2007-2011 and the
company does not face the Bankruptcy in the
future