A PROJECT REPORT

ON
MARGINAL COSTING OF LARSEN & TOUBRO

In the subject Cost Accounting

SUBMITTED TO
UNIVERSITY OF MUMBAI
FOR SEMESTER 2 OF M.COM.
BY
Name of the student
(WALKE SHAMEE ARUN)
(Roll No. 79)

UNDER THE GUIDANCE OF

Prof. Ashwina Paul
YEAR 2013 2014
1

ACKNOWLEDGEMENT

At the beginning, I would like to thank GOD for his shower of blessing. The desire of
completing this project was given by my guide
Prof. Ashwina Paul. I am very much thankful to him for the guidance, support and for sparing his
precious time from a busy schedule.
I would fail in my duty if I dont thank my parents who are pillars of my life. Finally I would
express my gratitude to all those who directly and indirectly helped me in completing this
project.

(Signature of the student)

DECLARATION BY THE STUDENT

I, Walke Shamee Arun student of M.Com. Part-1 Accountancy, Roll No. 79 hereby declare that
the project for the Paper Cost Accounting titled, Marginal Costing of Larsen & Toubro
submitted by me to University of Mumbai, Semester 2 examination during the academic year
2013-2014, is based on actual work carried by me under the guidance and supervision of prof.
Ashwini Paul Madam.
I further state that this work is original and not submitted anywhere else for any examination.

Signature of student

CERTIFICATE

This is to certify that the project entitled Marginal Costing of Larsen & Toubro submitted by
Ms.Walke Shamee Arun Roll No. 79 student of M.Com. (Part-1) Management (University of
Mumbai) Semester 2 examination has not been submitted for any other examination and does
not form a part of any other course undergone by the candidate. It is further certified that she has
completed all required phases of the project. This project is original to the best of our knowledge
and has been accepted for Internal Assessment.

Internal Examiner

External Examiner

Co-coordinator

Principal

College seal

INDEX
SR.NO
1

Particulars
I) Cover page with details

Page No

II) Declaration of the student

III) Certificate from the institution
IV) Acknowledgement
2

Introduction

3
4

A) Objective of the study

B) Scope of the study
C) Research Design
D) Limitation of the study
Company Profile: Larsen & Toubro
Findings, suggestions & conclusion

CHAPTER 1
INTRODUCTION
Marginal costing - definition
Marginal costing is formally defined as: The accounting system in which variable costs are
charged to cost units and the fixed costs of the period are written-off in full against the aggregate
contribution. Its special value is in decision making. Marginal costing distinguishes between
5

fixed costs and variable costs as conventionally classified. Variable costing is another name
of marginal costing. Marginal costing may be defined as the technique of presenting cost data
where invariable costs and fixed costs are shown separately for managerial decision-making. It
should be clearly understood that marginal costing is not a method of costing like process
costing or job costing. Rather it is simply a method or technique of the analysis of cost
information for the guidance of management which tries to find out an effect on profit due to
changes in the volume of output.

MARGINALCOST
The marginal cost of a product is its variable cost. This is normally taken to be; direct labor,
direct material, direct expenses and the variable part of overheads. Marginal cost means the cost
of the marginal or last unit produced. It is also defined as the cost of one more or one less unit
produced besides existing level of production The marginal cost varies directly with the volume
of production and marginal cost per unit remains the same. It consists of prime cost, i.e. cost of
direct materials, directlabour and all variable overheads. It does not contain any element of
fixed cost which is kept separate under marginal cost technique. The term contribution
mentioned in the formal definition is the term given to the difference between Sales and
Marginal cost. Thus MARGINAL COST =VARIABLE COST DIRECT LABOUR + DIRECT
MATERIAL+ DIRECT EXPENSE+ VARIABLE OVERHEADS Marginal costing technique has given
birth to a very useful concept of contribution where contribution is given by: Sales revenue less
variable cost (marginal cost)Contribution may be defined as the profit before the recovery of
fixed costs. Thus, contribution goes toward the recovery of fixed cost and profit, and is equal to
fixed cost plus profit (C = F + P). In case a firm neither makes profit nor suffers loss,

contribution will be just equal to fixed cost (C = F). This is known as breakeven point. The
concept of contribution is very useful in marginal costing. It has a fixed relation with sales.
The proportion of contribution to sales is known as P/V ratio which remains the same
under given conditions of production and sales.

Theory of Marginal Costing

The theory of marginal costing as set out in A report on Marginal Costing published by CIMA,
London is as follows: In relation to a given volume of output, additional output can normally be
obtained artless than proportionate cost because within limits, the aggregate of certain items of
cost will tend to remain fixed and only the aggregate of the remainder will tend to
rise proportionately with an increase in output. Conversely, a decrease in the volume of output
will normally be accompanied by less than proportionate fall in the aggregate cost. The theory of
marginal costing may, therefore, by understood in the following two steps:1. If the volume of
output increases, the cost per unit in normal circumstances reduces. Conversely, if an output
reduces, the cost per unit increases. If a factory produces 1000units at a total cost of $3,000 and
if by increasing the output by one unit the cost goes up to $3,002, the marginal cost of additional
output will be $.2.2. If an increase in output is more than one, the total increase in cost divided
by the total increase in output will give the average marginal cost per unit. If, for example, the
output is increased to 1020 units from 1000 units and the total cost to produce these units is
$1,045, the average marginal cost per unit is $2.25. It can be described as follows:
Additional cost = $ 45 = $2.25
Additional units

20

The principles of marginal costing are as follows: a. For any given period of time, fixed costs
will be the same, for any volume of sales and production (provided that the level of activity is
within the relevant range).Therefore, by selling an extra item of product or service the
following will happen:
Revenue will increase by the sales value of the item sold.
Costs will increase by the variable cost per unit.
Profit will increase by the amount of contribution earned from the extra item. b. Similarly, if the
volume of sales falls by one item, the profit will fall by the amount of contribution earned from
the items. Profit measurement should therefore be based on an analysis of total contribution.
Since fixed costs relate to a period of time, and do not change with increases or decreases in
sales volume, it is misleading to charge units of sale with a share of fixedcosts.d. When a unit
of product is made, the extra costs incurred in its manufacture are the variable production costs.
Fixed costs are unaffected, and no extra fixed costs are incurred when output is increased.

In economics and finance, marginal cost is the change in the total cost that arises when the
quantity produced has an increment by unit. That is, it is the cost of producing one more unit of a
good. In general terms, marginal cost at each level of production includes any additional costs
required to produce the next unit. For example, if producing additional vehicles requires building
a new factory, the marginal cost of the extra vehicles includes the cost of the new factory. In

practice, this analysis is segregated into short and long-run cases, so that over the longest run, all
costs become marginal. At each level of production and time period being considered, marginal
costs include all costs that vary with the level of production, whereas other costs that do not vary
with production are considered fixed.
If the good being produced is infinitely divisible, so the size of a marginal cost will change with
volume, as a non-linear and non-proportional cost function includes the following:
variable terms dependent to volume, constant terms independent to volume and occurring with
the respective lot size, jump fix cost increase or decrease dependent to steps of volume increase.
In practice the above definition of marginal cost as the change in total cost as a result of an
increase in output of one unit is inconsistent with the differential definition of marginal cost for
virtually all non-linear functions. This is as the definition finds the tangent to the total cost curve
at the point q which assumes that costs increase at the same rate as they were at q. A new
definition may be useful for marginal unit cost (MUC) using the current definition of the change
in total cost as a result of an increase of one unit of output defined as: TC(q+1)-TC(q) and redefining marginal cost to be the change in total as a result of an infinitesimally small increase in
q which is consistent with its use in economic literature and can be calculated differentially.
If the cost function is differentiable joining, the marginal cost is the cost of the next unit
produced referring to the basic volume.

If the cost function is not differentiable, the marginal cost can be expressed as follows.

A number of other factors can affect marginal cost and its applicability to real world problems.
Some of these may be considered market failures. These may includeinformation asymmetries,
the presence of negative or positive externalities, transaction costs, price discrimination and
others.

Cost functions and relationship to average cost

In the simplest case, the total cost function and its derivative are expressed as follows, where Q
represents the production quantity, VC represents variable costs, FC represents fixed costs and
TC represents total costs.

Since (by definition) fixed costs do not vary with production quantity, it drops out of the
equation when it is differentiated. The important conclusion is that marginal cost is not related
to fixed costs. This can be compared with average total cost or ATC, which is the total cost
divided by the number of units produced and does include fixed costs.

For discrete calculation without calculus, marginal cost equals the change in total (or variable)
cost that comes with each additional unit produced. In contrast, incremental cost is the

10

composition of total cost from the surrogate of contributions, where any increment is determined
by the contribution of the cost factors, not necessarily by single units.
For instance, suppose the total cost of making 1 shoe is $30 and the total cost of making 2 shoes
is $40. The marginal cost of producing the second shoe is $40 $30 = $10.
Marginal cost is not the cost of producing the "next" or "last" unit. [2] As Silberberg and Seen
note, the cost of the last unit is the same as the cost of the first unit and every other unit. In the
short run, increasing production requires using more of the variable input conventionally
assumed to be labor. Adding more labor to a fixed capital stock reduces the marginal product of
labor because of the diminishing marginal returns. This reduction in productivity is not limited to
the additional labor needed to produce the marginal unit - the productivity of every unit of labor
is reduced. Thus the costs of producing the marginal unit of output has two components: the cost
associated with producing the marginal unit and the increase in average costs for all units
produced due to the damage to the entire productive process (AC/q)q. The first component
is the per unit or average cost. The second unit is the small increase in costs due to the law of
diminishing marginal returns which increases the costs of all units of sold. Therefore, the precise
formula is: MC = AC + (AC/q)q.
Marginal costs can also be expressed as the cost per unit of labor divided by the marginal product
of labor.

11

Because

is the change in quantity of labor that affects a one unit change in output, this

implies that this equals

. Therefore

[4]

Since the wage rate is assumed

constant, marginal cost and marginal product of labor have an inverse relationshipif marginal
cost is increasing (decreasing) the marginal product of labor is decreasing (increasing).
Economies of scale
Economies of scale is a concept that applies to the long run, a span of time in which all inputs
can be varied by the firm so that there are no fixed inputs or fixed costs. Production may be
subject to economies of scale (or diseconomies of scale). Economies of scale are said to exist if
an additional unit of output can be produced for less than the average of all previous units that
is, if long-run marginal cost is below long-run average cost, so the latter is falling. Conversely,
there may be levels of production where marginal cost is higher than average cost, and average
cost is an increasing function of output. For this generic case, minimum average cost occurs at
the point where average cost and marginal cost are equal (when plotted, the marginal cost curve
intersects the average cost curve from below); this point will not be at the minimum for marginal
cost if fixed costs are greater than 0.
Perfectly competitive supply curve
The portion of the marginal cost curve above its intersection with the average variable cost curve
is the supply curve for a firm operating in a perfectly competitive market. (the portion of the MC
12

curve below its intersection with the AVC curve is not part of the supply curve because a firm
would not operate at price below the shut down point) This is not true for firms operating in
other market structures. For example, while a monopoly "has" an MC curve it does not have a
supply curve. In a perfectly competitive market, a supply curve shows the quantity a seller's
willing and able to supply at each price - for each price there is a unique quantity that would be
supplied. The one-to-one relationship simply is absent in the case of a monopoly. With a
monopoly there could be an infinite number of prices associated with a given quantity. It all
depends on the shape and position of the demand curve and its accompanying marginal revenue
curve.
Decisions taken based on marginal costs
In perfectly competitive markets, firms decide the quantity to be produced based on marginal
costs and sale price. If the sale price is higher than the marginal cost, then they supply the unit
and sell it. If the marginal cost is higher than the price, it would not be profitable to produce it.
So the production will be carried out until the marginal cost is equal to the sale price. In other
words, firms refuse to sell if the marginal cost is higher than the market price.
Relationship to fixed costs
Marginal costs are not affected by changes in fixed cost. Marginal costs can be expressed as
C(q)Q. Since fixed costs do not vary with (depend on) changes in quantity, MC is VCQ.
Thus if fixed cost were to double MC would not be affected and consequently the profit
maximizing quantity and price would not change. This can be illustrated by graphing the short
run total cost curve and the short run variable cost curve. The shape of the curves are identical.
Each curve initially decreases at a decreasing rate, reaches an inflection point, then increases at
13

an increasing rate. The only difference between the curves is that the SRVC curve begins from
the origin while the SRTC curve originates on the y-axis. The distance of the origin of the SRTC
above the origin represents the fixed cost - the vertical distance between the curves. This distance
remains constant as the quantity produced, Q, increases. MC is the slope of the SRVC curve. A
change in fixed cost would be reflected by a change in the vertical distance between the SRTC
and SRVC curve. Any such change would have no effect on the shape of the SRVC curve and
therefore its slope at any point - MC.
Externalities
Externalities are costs (or benefits) that are not borne by the parties to the economic transaction.
A producer may, for example, pollute the environment, and others may bear those costs. A
consumer may consume a good which produces benefits for society, such as education; because
the individual does not receive all of the benefits, he may consume less than efficiency would
suggest. Alternatively, an individual may be a smoker or alcoholic and impose costs on others. In
these cases, production or consumption of the good in question may differ from the optimum
level.

Negative externalities of production

14

Negative Externalities of Production

Much of the time, private and social costs do not diverge from one another, but at times social
costs may be either greater or less than private costs. When marginal social costs of production
are greater than that of the private cost function, we see the occurrence of a negative
externality of production. Productive processes that result in pollution are a textbook example of
production that creates negative externalities.
Such externalities are a result of firms externalizing their costs onto a third party in order to
reduce their own total cost. As a result of externalizing such costs we see that members of society
will be negatively affected by such behavior of the firm. In this case, we see that an increased
cost of production on society creates a social cost curve that depicts a greater cost than the
private cost curve.
In an equilibrium state we see that markets creating negative externalities of production will
overproduce that good. As a result, the socially optimal production level would be lower than
that observed.
Positive externalities of production

15

Positive Externalities of Production

When marginal social costs of production are less than that of the private cost function, we see
the occurrence of a positive externality of production. Production of public goods are a textbook
example of production that create positive externalities. An example of such a public good,
which creates a divergence in social and private costs, includes the production of education. It is
often seen that education is a positive for any whole society, as well as a positive for those
directly involved in the market.
Examining the relevant diagram we see that such production creates a social cost curve that is
less than that of the private curve. In an equilibrium state we see that markets creating positive
externalities of production will under produce that good. As a result, the socially optimal
production level would be greater than that observed.
Social costs
Of great importance in the theory of marginal cost is the distinction between the
marginal private and social costs. The marginal private cost shows the cost associated to the firm
in question. It is the marginal private cost that is used by business decision makers in their profit
maximization goals. Marginal social cost is similar to private cost in that it includes the cost of
private enterprise but also any other cost (or offsetting benefit) to society to parties having no
direct association with purchase or sale of the product. It incorporates all negative and
positive externalities, of both production and consumption. Examples might include a social cost
from air pollution affecting third parties or a social benefit from flu shots protecting others from
infection.
16

The main features of marginal costing are as follows:

1. Cost Classification
The marginal costing technique makes a sharp distinction between variable costs and fixed costs.
It is the variable cost on the basis of which production and sales policies are designed by a firm
following the marginal costing technique.2. Stock/Inventory Valuation Under marginal costing,
inventory/stock for profit measurement is valued at marginal cost. It is in sharp contrast to the
total unit cost under absorption costing method.3. Marginal Contribution Marginal costing
technique makes use of marginal contribution for marking various decisions. Marginal
contribution is the difference between sales and marginal cost. It forms the basis for judging the
profitability of different products or departments.

Advantages and Disadvantages of Marginal Costing Technique

Advantages:
1. Marginal costing is simple to understand.
2. By not charging fixed overhead to cost of production, the effect of varying charges per unit is
avoided.
3. It prevents the illogical carry forward in stock valuation of some proportion of current years
fixed overhead.4. The effects of alternative sales or production policies can be more readily
available and assessed, and decisions taken would yield the maximum return to business.5.
It eliminates large balances left in overhead control accounts which indicate the difficulty of
ascertaining an accurate overhead recovery rate.6. Practical cost control is greatly facilitated. By
avoiding arbitrary allocation of fixed overhead, efforts can be concentrated on maintaining a
17

uniform and consistent marginal cost. It is useful to various levels of management.7. It helps
in short-term profit planning by breakeven and profitability analysis, both inters of quantity and
graphs. Comparative profitability and performance between two or more products and divisions
can easily be assessed and brought to the notice of management for decision making.
Disadvantages:
1. The separation of costs into fixed and variable is difficult and sometimes gives misleading
2.

results
Normal costing systems also apply overhead under normal operating volume and this

shows that no advantage is gained by marginal costing.

3. Under marginal costing, stocks and work in progress are understated. The exclusion of
fixed costs from inventories affect profit, and true and fair view of financial affairs of an
organization may not be clearly transparent.
4. Volume variance in standard costing also discloses the effect of fluctuating output unfixed
overhead. Marginal cost data becomes unrealistic in case of highly fluctuating levels of
production, e.g., in case of seasonal factories.
5. Application of fixed overhead depends on estimates and not on the actual and as such there
may be under or over absorption of the same.
6. Control affected by means of budgetary control is also accepted by many. In order to know
the net profit, we should not be satisfied with contribution and hence, fixed overhead is also
a valuable item. A system which ignores fixed costs is less effective since a major portion
of fixed cost is not taken care of under marginal costing.
7. In practice, sales price, fixed cost and variable cost per unit may vary. Thus, the
assumptions underlying the theory of marginal costing sometimes becomes unrealistic. For
long term profit planning, absorption costing is the only answer.

18

OBJECTIVE OF THE STUDY

1. To study about Marginal Costing
2. To study and analyze Financial statements of Larsen & Toubro

SCOPE OF THE STUDY

It covers the information about Marginal Costing

It covers the information about Financial Statements of Larsen & Toubro

RESEARCH DESIGN
For the purpose of the present study only secondary data were used. Secondary data are
collected from books and websites

LIMITATIONS OF THE STUDY

19

During the study there was lack of information available for the study.

No proper source on the topic

CHAPTER SCHEME
Chapter 1- Introduction

Gives an introduction to the study

Chapter 2- Conceptual framework & Observation

Gives the information about profile, financial statement, marginal cost statement of the
company.

Chapter 3- Conclusion

Deals with findings, suggestions and conclusion to the topic

20

CHAPTER2
COMPANY PROFILE:
Date of Establishment- 1946
Revenue- 9933.88 (USD in Millions )
Market Cap- 785064.76857305 (Rs. in Millions)
Corporate

Address-

&

House,

Ballard

Estate,Mumbai-400001,Maharashtra

www.larsentoubro.com
Management Details:
Chairperson A.M.Naik
MD A.M.Naik
Directors A.K.Jain, A.M.Naik, A.K.Jain, AM Naik,Bhagyam Ramani, J P Nayak, J S Bindra, K
VRangaswami, K Vekataramanan, K Venkataramanan, MM Chitale, M V Kotwal, MM Chitale,

21

N Hariharan, NMohan Raj, R N Mukhija, R Shankar Raman, Ravi Uppal,S N Subrahmanyan, S

N Talwar, S Rajgopal, SubodhBhargava, Thomas Mathew T, V K Magapu, Y MDeosthalee
Business Operation- Engineering Construction
Background- Larsen & Toubro (L&T) is a technology, engineering, construction and
manufacturing company. It is one of the largest and most respected companies in India's private
sector. Larsen & Toubro Limited is the biggest legacy of two Danish Engineers, who built a
world-class organization that is professionally managed and a leader in India's engineering and
construction industry. It was the business.
Financials
Total Income- Rs. 454455.4 Million (year ending Mar 2011)
Net Profit- Rs. 38870.5 Million (year ending Mar 2011)
Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing
company. It is one of the largest and most respected companies in India's private sector.
More than seven decades of a strong, customer-focused approach and the continuous quest for
world-class quality have enabled it to attain and sustain leadership in all its major lines of
business.
L&T has an international presence, with a global spread of offices. A thrust on international
business has seen overseas earnings grow significantly. It continues to grow its global
footprint, with offices and manufacturing facilities in multiple countries.
The company's businesses are supported by a wide marketing and distribution network, and
have established a reputation for strong customer support.
L&T believes that progress must be achieved in harmony with the environment. A
commitment to community welfare and environmental protection are an integral part of the
corporate vision.
In response to changing market dynamics, L&T has gone through a phased process of
redefining its organisation model to facilitate growth through greater levels of empowerment.
22

The new structure is built around multiple businesses that serve the needs of different
industries.

The evolution of L&T into the country's largest engineering and construction organization is
among the most remarkable success stories in Indian industry.
L&T was founded in Bombay (Mumbai) in 1938 by two Danish engineers, Henning HolckLarsen and Soren Kristian Toubro. Both of them were strongly committed to developing
India's engineering capabilities to meet the demands of industry.

Henning Holck-Larsen and Soren Kristian Toubro, school-mates in Denmark,

would not have dreamt, as they were learning about India in history classes that
they would, one day, create history in that land.
In 1938, the two friends decided to forgo the comforts of working in Europe, and started
their own operation in India. All they had was a dream. And the courage to dare.
Their first office in Mumbai (Bombay) was so small that only one of the partners could
use the office at a time!
In the early years, they represented Danish manufacturers of dairy equipment for a
modest retainer. But with the start of the Second World War in 1939, imports were
restricted, compelling them to start a small work-shop to undertake jobs and provide
service facilities.
Germany's invasion of Denmark in 1940 stopped supplies of Danish products. This crisis
forced the partners to stand on their own feet and innovate. They started manufacturing
23

dairy equipment indigenously. These products proved to be a success, and L&T came to
be recognised as a reliable fabricator with high standards.
The war-time need to repair and refit ships offered L&T an opportunity, and led to the
formation of a new company, Hilda Ltd., to handle these operations. L&T also started
two repair and fabrication shops - the Company had begun to expand.
Again, the sudden internment of German engineers (because of the War) who were to put
up a soda ash plant for the Tatas, gave L&T a chance to enter the field of installation - an
area where their capability became well respected.
THE JOURNEY
In 1944, ECC was incorporated. Around then, L&T decided to build a portfolio of
foreign collaborations. By 1945, the Company represented British manufacturers of
equipment used to manufacture products such as hydrogenated oils, biscuits, soaps
and glass.
In 1945, L&T signed an agreement with Caterpillar Tractor Company, USA, for
marketing earthmoving equipment. At the end of the war, large numbers of war-surplus
Caterpillar equipment were available at attractive prices, but the finances required were
beyond the capacity of the partners. This prompted them to raise additional equity capital,
and on 7th February 1946, Larsen & Toubro Private Limited was born.
Independence and the subsequent demand for technology and expertise offered L&T the
opportunity to consolidate and expand. Offices were set up in Kolkata (Calcutta), Chennai
(Madras) and New Delhi. In 1948, fifty-five acres of undeveloped marsh and jungle was
acquired in Powai. Today, Powai stands as a tribute to the vision of the men who
transformed this uninhabitable swamp into a manufacturing landmark.

24

PUBLIC LIMITED COMPANY

In December 1950, L&T became a Public Company with a paid-up capital of Rs.2
million. The sales turnover in that year was Rs.10.9 million.
Prestigious orders executed by the Company during this period included the Amul Dairy
at Anand and Blast Furnaces at Rourkela Steel Plant. With the successful completion of
these jobs, L&T emerged as the largest erection contractor in the country.
In 1956, a major part of the company's Bombay office moved to ICI House in Ballard
Estate. A decade later this imposing grey-stone building was purchased by L&T, and
renamed as L&T House - its Corporate Office.
The sixties saw a significant change at L&T - S. K. Toubro retired from active
management in 1962.
The sixties were also a decade of rapid growth for the company, and witnessed the
formation of many new ventures: UTMAL (set up in 1960), Audco India Limited (1961),
Eutectic Welding Alloys (1962) and TENGL (1963).

EXPANDING HORIZONS
By 1964, L&T had widened its capabilities to include some of the best technologies in the
world. In the decade that followed, the company grew rapidly, and by 1973 had become
one of the Top-25 Indian companies.
In 1976, Holck-Larsen was awarded the Magsaysay Award for International
Understanding in recognition of his contribution to India's industrial development. He
25

retired as Chairman in 1978.

In the decades that followed, the company grew into an engineering major under the
guidance of leaders like N. M. Desai, S.R. Subramaniam, U. V. Rao, S. D. Kulkarni and
A. M. Naik.
Today, L&T is one of India's biggest and best known industrial organisations with a
reputation for technological excellence, high quality of products and services, and strong
customer orientation. It is also taking steps to grow its international presence.
For an institution that has grown to legendary proportions, there cannot and must not be
an 'end'. Unlike other stories, the L&T saga continues....

AWARDS & RECOGNITION

2014
Major Awards & Recognition won by L&T in 2014

L&T Bags Best Sustainability Report Award 2014

L&Ts Sustainability Report Future Now was declared the best corporate report by the
World CSR Congress for its width and depth of coverage, its high degree of transparency
and the engaging manner in which it has projected non-financial data.
The award was part of the Global Sustainability Leadership Awards 2014 instituted by the
26

World CSR Congress. The selection process involved rigorous screening of applications
from a number of corporates. Shortlisted contestants then made presentation to jury
members comprising international CSR consultants, CEOs, sustainability experts and
members of the media.
The community initiatives of L&T Vizag unit also received an award in Outstanding
Social Impact category.
L&T Electrical & Automation's AU-Series Wins Best Product Award at ELECRAMA 2014
The design and development capabilities of L&T's Electrical & Automation (E&A) earned
rich recognition at ELECRAMA 2014 when its AU-Series of Final Distribution Products
was declared winner of 'The Best Product developed by an Indian Exhibitor' Award. The
award ceremony was held at The Exhibitors Nite - JOSH 2014 on January 11, 2014.

The AU-series of final distribution products comprises a complete range of protection,

control and monitoring devices that include Miniature Circuit Breakers, Residual Current
Devices, Isolators, Changeover switches, Energy meters, Time switches, Surge Protection
Devices, Modular Contactors, Communication devices, and Distribution boards. It ensures
the highest level of safety and convenience to the end users.

27

CHAPTER 3
FINANCIAL STATEMENTS
Standalone Profit & Loss
------------------- in Rs. Cr. ------------------account

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials

Mar '13

Mar '12

Mar '11

Mar '10

Mar '09

12 mths

12 mths

12 mths

12 mths

12 mths

60,873.26 53,170.52 43,905.87 37,187.50 34,249.85

0.00
0.00
0.00
317.31
393.31
60,873.26 53,170.52 43,905.87 36,870.19 33,856.54
2,104.96 1,393.28 1,480.37 2,321.67 1,612.58
1,132.03
539.77
532.64
-422.99
105.11
64,110.25 55,103.57 45,918.88 38,768.87 35,574.23
15,243.62 14,133.98 11,208.01

9,593.53

9,316.38
28

Power & Fuel Cost

Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses

758.99
638.79
420.27
334.08
456.39
4,436.32 3,663.45 2,830.08 2,379.14 1,998.02
33,081.82 26,787.18 22,372.53 16,913.31 15,659.17
0.00
0.00
0.00 1,854.23 1,844.83
2,077.48 2,204.28 1,968.05
325.58
569.32
0.00
0.00
0.00
-36.25
-24.48
55,598.23 47,427.68 38,798.94 31,363.62 29,819.63
Mar '13
Mar '12
Mar '11
Mar '10
Mar '09
12 mths

Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

12 mths

12 mths

12 mths

12 mths

6,407.06 6,282.61 5,639.57 5,083.58 4,142.02

8,512.02 7,675.89 7,119.94 7,405.25 5,754.60
982.40
666.10
619.25
995.37
770.00
7,529.62 7,009.79 6,500.69 6,409.88 4,984.60
818.47
699.46
599.22
383.65
284.83
0.00
0.00
0.00
30.95
21.16
6,711.15 6,310.33 5,901.47 5,995.28 4,678.61
0.00
0.00
0.00
-45.13
-21.09
6,711.15 6,310.33 5,901.47 5,950.15 4,657.52
1,800.50 1,853.83 1,943.58 1,577.02 1,176.19
4,910.65 4,456.50 3,957.89 4,375.52 3,481.66
40,354.61 33,293.70 27,590.93 21,770.09 20,503.25
0.00
0.00
0.00
0.00
0.00
1,138.47 1,010.46
882.84
752.75
614.97
85.86
101.44
112.82
110.25
101.83
6,153.86
79.80
925.00
473.57

6,123.99
72.77
825.00
411.87

6,088.52
65.01
725.00
358.81

6,021.95
72.66
625.00
303.28

5,856.88
59.45
525.00
212.32

29

Balance Sheet of Larsen and Toubro

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth

------------------- in Rs. Cr. ------------------Mar '13 Mar '12

Mar '11
Mar '10

Mar '09

12 mths

12 mths

123.08
123.08
0.00
0.00
29,019.64
0.00
29,142.72

12 mths

12 mths

122.48
122.48
0.00
0.00
25,100.54
0.00
25,223.02

121.77
121.77
0.00
0.00
21,724.49
0.00
21,846.26

12 mths

120.44
120.44
25.09
0.00
18,142.82
23.29
18,311.64

117.14
117.14
0.00
0.00
12,317.96
24.59
12,459.69
30

Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

1,234.01
6,771.55
8,005.56
37,148.28
Mar '13
12 mths

Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets

1,453.34
6,813.44
8,266.78
33,489.80
Mar '12
12 mths

11,864.73
3,559.59
8,305.14
596.84
16,103.39
2,064.18
22,613.01
1,455.66
26,132.85
21,035.99
0.00
47,168.84
0.00
32,656.20
2,369.73
35,025.93
12,142.91
0.00
37,148.28

10,455.23
2,850.25
7,604.98
758.68
15,871.90
1,776.62
18,729.84
1,778.12
22,284.58
21,172.82
0.00
43,457.40
0.00
31,816.07
2,387.09
34,203.16
9,254.24
0.00
33,489.80

Contingent Liabilities

12,987.97 10,309.19

Book Value (Rs)

473.57

Cash Flow of Larsen and Toubro

411.87

1,063.04
5,268.54
6,331.58
28,177.84
Mar '11
12 mths

955.73
5,845.10
6,800.83
25,112.47
Mar '10

1,102.38
5,453.65
6,556.03
19,015.72
Mar '09

12 mths

12 mths

8,872.71
2,228.52
6,644.19
771.34
14,684.82
1,577.15
12,427.61
1,729.55
15,734.31
19,275.34
0.00
35,009.65
0.00
26,687.98
2,244.18
28,932.16
6,077.49
0.00
28,177.84

7,235.78
1,727.68
5,508.10
857.66
13,705.35
1,415.37
11,163.70
1,104.89
13,683.96
12,662.55
326.98
26,673.49
0.00
19,443.77
2,188.36
21,632.13
5,041.36
0.00
25,112.47

5,575.00
1,421.39
4,153.61
1,040.99
8,263.72
5,805.05
10,055.52
693.13
16,553.70
7,198.85
82.16
23,834.71
0.00
15,211.04
3,066.53
18,277.57
5,557.14
0.26
19,015.72

7,761.66
358.81

1,719.39

1,371.86

303.28

212.32

------------------- in Rs. Cr. ------------------Mar '13

Mar '12
Mar '11
Mar '10

31

Mar '09

Net Profit Before Tax

Net Cash From Operating Activities
Net Cash (used in)/from
Investing Activities
Net Cash (used in)/from Financing Activities
Net (decrease)/increase In Cash and Cash
Equivalents
Opening Cash & Cash Equivalents
Closing Cash & Cash Equivalents

12 mths

12 mths

12 mths

12 mths

6457.09
2114.75

6255.33
1081.58

5568.56
3833.30

5880.67 3940.41
5482.75 1478.57

464.93

-1922.28

-2409.98

-6071.73 -3308.53

-2990.26

1015.61

-1124.84

1245.56 1640.79

-410.58

174.91

298.48

656.58

1905.26
1494.68

1730.35
1905.26

1431.87
1730.35

775.29 964.46
1431.87 775.29

Marginal cost sheet of Larsen & Toubro

Particulars
Sales Revenue

Rs (In Cr.)
60,873.26

Less Marginal Cost of Sales

Contribution
Less Fixed Cost

32

12 mths

-189.17

Marginal Costing Profit/Loss

Chapter 4
Findings, Suggestions and Conclusion
Findings
Marginal cost is the cost of the next unit or one additional unit of volume or output.
The marginal cost varies directly with the volume of production and marginal cost per
unit remains the same. It consists of prime cost, i.e. cost of direct materials, direct labor
and all variable overheads.
L & T is diversified company, which operates in national as well as international level.
33

 Company is going for new ventures in the market so , we can assume that it has greater
scope in future.
Earnings per share of the company Rs 56, which shoes the positive trend.
Operating income of the company is showing positive trend in the 2011,which shows the
positive trend.
Net profit of the company is showing the negative slope, which is risky for the company.
Long term debt and equity of the company is showing the negative slop, which is good
for the company.
Fixed assets of the company are showing the decline slop which is alarming situation for
the company.
Current ratio of the company is showing the giz-gaz trend which is not suitable for the
company.
Total exports of the company are declining at high rate which is alarming for the
company.

CONCLUSION
From the above information, we can conclude that company is having sound financial position,
with reference to debt equity ratio, earning per share, and operating income .But net profit, net
export, fixed assets and current ratio is showing negative trend .L&T need to pay attention
towards the cost reduction so that profitability of the company can be maintained, and control the
liabilities

34

BIBLIOGRAPHY
The information is obtained from the listed sources

www.moneycontrol.com
www.wikipedia.com
www.timesofindia.com
Financial Management- Khan and Jain

35