1.

INTRODUCTION TO THE PROJECT

1.1 PROJECT TITLE

A STUDY OF RELATIONSHIP BETWEEN FIXED ASSETS AND

FIRMS
PROFITABILITY

1.2 INTRODUCTION
No organization can be sustained without some investment in fixed asset. Investment in
fixed assets like land, building, plant and machinery, fixtures, fittings and motor vehicle
enhances the productive capacity of firms. Profits can be generated by investing in such
assets to ensure long term profitability.

Profitability plays a vital role within the structure and development of firm as a result
of it measures the performance and success of a firm. It also enhances the reputation of
a firm. Maximizing the profits of firm is one in all the most objectives of managers.
The profitability of a firm is so a key concern, Profitability also maximizes neutral
price and capitalist price.

This paper shows the impact of firm fixed asset on profitability of SKF India Limited.
The main objective of a business is maximization of profit which is able to cause
maximization of shareholders wealth. Examining many relationship among the assets
and sales asset utilization provide picture how much corporation begin manage
resources.(OJ & Adelegan, 2008)

1
1.3 OBJECTIVES

The main objective of this study is to examine the effect of investment in fixed asset on
profitability of SKF India Limited.

The specific objectives of the study are:

It also analyses the significant components of fixed assets investment of SKF India
Limited. We examine the impact of fixed asset on profitability of SKF India Limited

1.4 WHY SKF AND THIS PROJECT

SKF India limited is one of the leading manufacturer of bearings in India. Today, with 3
manufacturing facilities located in Pune, Bangalore and Haridwar, with 11 sales offices
across India and a supplier network of over 300 distributors, SKF continues to serve the
varied markets with reliable solutions.

Over the years the company has evolved from being a pioneer ball bearing
manufacturing company to a knowledge-driven integrated solutions provider, helping
customers achieve sustainable and competitive advantage.

Asset utilization is especially helpful to companies considering growth or capital

investment if production can be increased by improving efficiency of existing
resources. Here are many reasons that why the assets are considered to be most
important. The non-current assets are about half of the total assets of the manufacturing
firm and in distribution firm. Effective organization of profitability and assets has an
important impact on the strategy of Entire Corporation so that to create the value of
shareholder.

1.5 LOCATION

SKF India limited, Chinchwad, Near Chapekar Chowk, Pune, Maharashtra 411033.

1.6 DURATION OF PROJECT

The duration of the project is 2 months.

2
1.7 PROCEDURE OF PROJECT

The reason for conducting this study, as well as the purpose of it will be described in
the first chapter. The background will be discussed in order to give an overview of the
subject in second chapter. The literature study on the topic will be accounted for in this
chapter.

Third chapter gives information of SKF India limited.

Fourth chapter is concerned with the methodological considerations related to the study.
The aim is to describe the course of action and how the problem is dealt with.

Fifth includes the purpose of the research, the complete data collection method, and
research evaluation..

Six chapter will analyze the data and interpretation of data takes place.

Seven on the basis of analysis findings will be draw. In chapter seven,

recommendations are given on how the profitability can be improved in order to its
non-current assets at SKF. The recommendations are based on the analysis of the
findings presented in chapter six. In the final chapter, Chapter eight presents
conclusions of the situation at SKF.

1.8 RESULT OF PROJECT

The scope of research is related to the firms profitability and the relationship with the
noncurrent assets as managing working capital and capital expenditure efficiently
affects the profitability of the firm. Last twenty years data of SKF India limited taken.
Regression analysis has been utilized to find out the effects of non-current assets on
profitability. It is concluded that there is moderate correlation between Non-Current
Asset and Firms Profitability indicating hypothesis is accepted.

3
2. THEREOTICAL BACKGROUND

2.1 PROJECT INFORMATION

The investor and the creditors has much interest in the financial statements of a
particular structure has the main value of firms. The report of financial conditions is
very helpful for the creditors and the investors specially in enhancing the business and
making effective business. The most important part for the financial analysis especially
with context to market value of a particular corporation. Usually, the firms who have
low liquidation value are more considered for the analysis. The era of 2002 was
considered more relevant as the net cash value for many firms drop down even to the
net cash at hand. This kind of condition is mostly dangerous for the firms in long run a
very careful explanation is required for managing the assets and liabilities in short run.
The fixed asset has the major role in the profit ratio determination and the evaluation of
risk involved. Effective organization of fixed assets is the most important
part of the entire corporation and in creating the value of shareholders. The earning per
share is not increased by the minimum weighted average capital cost as the value of the
stock of the firm increases due to it. The liability increases the Earning per share but it
also increased the risk. So we can say that the Earning per share is not maximized by
the increased price of stock.(Smith, 1980)

The structure of the capital does not involve the complete debt as it include 100 percent
debt rate the assets cannot be converted into cash during a year of running a business. It
includes the land, equipment of manufacturing and other assets which last for longer
periods of time if we analyze the non-current assets are more revenue generators than
the current assets but the risk involvement is more than the current assets as it is
difficult to convert them into cash and the value also differ indifferent point of times
than the current assets claimed that the maximum capital structure can be obtained
when the savings of tax on debt is settled by the risk of getting bankruptcy.
When the capital structure of this kind is established then the shareholders value
maybe increased and these outcomes may be more than the return from the capital
invested and made up of the equity of the firm.

4
It can also be said that the debt is the reason of disciplining the managers but this can
also be the reason of running the firms. claimed that the debt based on interest and the
deduction of tax must be component of the whole structure of the firm. (Millr, 1963)
As when the debt level increases, the involvement of the creditors increases and they
are the key decision makers regarding to the strategies adopted in future as well. This
may be a cause of conflict between the shareholders as the ideas cannot be
communicated effectively. The holders of debt want to ensure. While the shareholders
are more concerned to the return they must get. As if the firm has the cash flow that
only covers the debt obligation, then there may not be remained enough cash to be paid
to shareholders. So the shareholders want the firm to invest in such businesses which
Generates enough cash value to the firms remained. So the reasons of the conflict
Between shareholders and the firm arise because the shareholders want the firm to
Invest in profitable businesses only So in order to refrain it the shareholders and the
firm want to invest in more profit generating investment Opportunities. So it can be
said that if the debt holders pressurize the firm excessively then the firm can reduce its
performance level and can invest in the businesses which involve low risk to fulfill the
liabilities and avoid the firm to invest in long term investment opportunities having
high risks.(Myrs & Robichk, 1966)

Asset the management of the firm is the most critical issue in the firm where there are
many managers who are managing the financial conditions in order to identify the
reasons of good asset management and the level of optimization of management of
assets By having the balanced level of asset management , the major component is the
skills and the ability of the management of the firm who make key decisions in order to
manage the key areas of receivables, inventory and other issues as well.

The amount of investment in current assets can be managed by decreasing the costs of
finance and by increasing the funds available to the firms explained that the
effectiveness of the managers can be computed by the time they make decisions and the
efforts that are exerted on the identification of the problems. The best level of asset
management is by keeping balance in the efficiency and risk involved. There can be
various ways for optimization of different parts of asset management. The cash
conversion cycle is considered to be the best measurement of the asset management
which can be formulized as average collection period and the .The investment volume

5
is dependent on the larger span of time. The higher sales are resultant of higher cycle of
cash conversion. The cash conversion cycle can lead to minimize the profit ratio of
corporation. If the cost of managing the asset management is increasing and increases
more than the advantages of holding excess stock in the warehouses and the term of
credit are getting favorable The profit rate and the asset management relationship are
explained by different researchers. conducted a survey in which the sample of firms
totaled 5897, is used between the years of 1978-1988 to explore the relation between
the trade cycle to measure the effectiveness of asset management and the profit ratio.
(Lamberson, 1995)

They conducted research by the name of Investment in fixed Asset and Firm
Profitability based on a sample four companies in Nigerian brewery sector over eleven
year period. Through the link is positive, however the result is not statistical not
important. Therefore the result failed to strong positive impact of
investment in fixed assets on the operation profit. This finding is that which is line with
past education research show that investment in noncurrent assets does not have any
strong impact on the firm profitability.(Okwo Vol 4, 2012)
The fixed assets turnover quantitative relation measures the efficiency with that a firm
is utilizing its investment in fixed assets, like land, building, plant and machinery,
furniture etc. It additionally indicates the adequacy of sale in respect to the investment
in fixed assets.(Singh, 1981)

Companys investment in fixed asset plus is dependent, to an outsized degree, on its

line of business. Some businesses square measure a lot of capital intensive than others.
Firms in the natural resources even as companies within the distillery business and
different and business producers need an outsized quantity of fixed-asset investment
and huge capital instrumentality whereas, service firms and laptop computer code
producers want a relatively touch of mounted assets. It is a lot of fascinated by the
common mounted assets. This mounted plus turnover magnitude relation indicator,
checked out plus over time and compares the magnitude relation to it of competitors.
This provides the investor a plan of however effectively a companys management is in
victimization mounted plus. It's a rough live of the productivity of a companys
mounted assets with relevance generating sales. The upper the quantity of times turns

6
over, the better. But investors ought to explore for consistency or increasing mounted
assets turnover rates as positive balance sheet investment qualities (Scott, 2003)

Investigated the impact of analysis and development (R&D) on a firms performance.

This was compared with the impact on investment. They used improved statistic, cross
sectional regression model, to compare the quantitative relation of come from a
greenback investment in R&D to a greenback investment on fastened assets in
pharmaceutical and chemical industries. They found that (1) there's a positive
association of R&D intensity and every one variables of a firms performance (net
margin, operational margin, sales growth, and market value). (2) An investment in
R&D earns an operational margin come a lot of on top of the trade value of capital (3).
The impact of an investment in R&D on the firms market price is concerning double
the maximum amount the impact of an investment in fastened assets. They finished that
these funding have implications for company investment ways, indicating that further
R&D investment is a lot of possible to supply a firm with a novel and sustained
competitive advantage.

Reports that Indian exchange result for the primary quarter of 2009 twelve months
didn't reflect the combined impact that top interest rates and input price had on
corporations sales and profitableness. He however commented on the result of high
charge on profitableness. in keeping with him, if a companys fastened portion of input
costs remains high even once its sales square measure falling the gross margin can get
depleted. In India, issues to operating leverage (the balance between fastened and
variable costs) are higher as a result of, within the previous couple of years; companies
have had a high charge that was contributive towards higher margins.

The fixed asset has the major role in the profit ratio determination and the evaluation of
Risk involved effective organization of fixed assets is the most important part of the
entire corporation and in creating the value of shareholders.

Found out that high fixed cost can deplete a companys profit especially if sales fall.
The revelation that other variables do not have significant impact on profit after tax
may be explained by the fact that companies probably adjust selling prices of their
products to take care of changes in variable cost other than fixed cost..

7
The relationship between the asset quality management proxies and profitability nexus.
Using the return on assets and profitability ratios as proxies for bank profitability for
the period 2006-07 to 2010-11, operating performance of the sample banks is estimated
with the help of financial ratios. Also multiple regression model was employed to
examine if bank asset quality and operating performance are positively correlated. The
results showed that a bad asset ratio is negatively associated with banking operating
performance, after controlling for the effects of operating scale, traditional banking
business concentration and the idle fund ratio.(Kown & Mrtin, 2003)

The financial performance of large and small firms: evidence from Greece. The paper
attempts to specify possible differences in the main factors that determine a firms
profitability, using data from Greek manufacturing sector for 1995-1999 period. The
analysis used regression models and is performed on a longitudinal sample of 3035
firms, classified by size of employment. The econometric results indicate that size,
managerial efficiency, debt structure, investment in fixed assets and sales affect
significantly a firms profitability.(ljlly, 2004)

Sayeed and Hogue studied the impact of assets and liability management on
profitability; a study on public versus private commercial banks in Bangladesh.
According to them, banks profitability is almost concern in modern economy. Banks
are in a business to receive deposits or liabilities and to issue debt securities on the one
hand and create or invest in assets on the other hand. Thus commercial banks incur cost
for their liabilities and earn income from their assets. Thus profitability of banks is
directly affected by management of their assets and liability. Their study examined how
assets and liability management together with external variable such as degree of
market concentration and inflation rate impact the profitability of selected commercial
banks in Bangladesh.

The study also dealt with the impact of Assets and Liability Management on the
profitability of the sixteen Bangladesh commercial banks classified into private and
public. A modified Statistical Cost Accounting model was applied to test whether the
ALM of the private sector banks are better than public sector banks. The regression
results show that the use of total income the dependent variable for private and public

8
banks show evidence that all of the assets have significant contribution to total income
of the private banks. The coefficients of all liabilities are insignificant. Six out of eleven
independent variables have significant impact on total income to assets ratio of public
sector banks. The co-efficient of assets are positive and significant whereas the
coefficient of three out of the four liabilities is not significant implying that, like private
banks, public banks are earning very nominal or zero return from these liabilities. The
effect of the investment in fixed assets cannot be completely studied without
mentioning the effect of depreciation on fixed assets. (A & Hogue, 2009)

Various authors have x-rayed the relationship between investment in fixed assets and
profitability of firms. Eriotis Frangouli and Neokosmides (2000) investigated the
relationship between debt to equity ratio and firms profitability taking into
consideration the level of a firms investment and the degree of market power. The
study used panel data for various industries, covering a period 1995-96. The main
conclusions of the study were: - (a) firms which prefer to finance their investment
activities through self-finance are more profitable than firms which finance investment
through borrowed capital.
(b) Firms prefer competing with each other than cooperating.
(c) Firms use their investment in fixed assets as a strategic variable to affect
profitability.

Mishra and Cobeli (2003) investigated the impact of research and development (R&D)
on a firms performance. This was compared with the impact on investment. They used
an improved time series, cross sectional regression model, to compare the ratio of
return from a dollar investment in R&D to a dollar investment on fixed assets in
pharmaceutical and chemical industries. They found that (1) there is a positive
association of R&D intensity and all variables of a firms performance (net margin,
operating margin, sales growth, and market value). (2) An investment in R&D earns an
operating margin return much higher than the industry cost of capital (3). The effect of
an investment in R&D on the firms market value is about twice as much the effect of
an investment in fixed assets. They concluded that these funding have implications for
corporate investment strategies, indicating that additional R&D investment is more
likely to provide a firm with a unique and sustained competitive advantage.

9
Paradogonas (2007) wrote on the financial performance of large and small firms:
evidence from Greece. The paper attempts to specify possible differences in the main
factors that determine a firms profitability, using data from Greek manufacturing sector
for 1995- 1999 period. The analysis used regression models and is performed on a
longitudinal sample of 3035 firms, classified by size of employment. The econometric
results indicate that size, managerial efficiency, debt structure, investment in fixed
assets and sales affect significantly a firms profitability.
According to Adelegan (2008) investment is of paramount importance for business
cycle fluctuations and economic growth. It is not surprising that in Nigeria,
depreciation, capital allowance and corporate income tax have changed repeatedly and
investment tax credit (ITC) has been introduced in an effort to stimulate investment.
Adelegan (2008) carried out a study to examine the link between tax and real
investment and address the effect of the incentive and disincentive structures of
different taxes on investment at the firm and industry level in Nigeria. The study adopts
the neoclassical model that incorporated adjustment costs and tax parameters using a
firms level of industry level data from 1984-2000. The study showed that adjusted tax
cash flow, debt shield, and cost of capital have significant positive effects on
investment, while marginal tax rates and interest expenses have significant negative
effects on a firms fixed investment.

Gautam (2008) reports that Indian stock market result for the first quarter of 2009
financial year did not reflect the combined impact that high interest rates and input cost
had on companies sales and profitability. He however commented on the effect of high
fixed cost on profitability. According to him, if a companys fixed portion of input
costs remains high even when its sales are falling the profit margin will get depleted. In
India, problems due to operating leverage (the balance between fixed and variable
costs) will be higher because, in the last few years, companies have had a high fixed
cost that was contributing towards higher margins. Belgian Magazine (2009) analysis
of SAB Miller 2009 performance shows that Revenue in the six months to September
2009 fell to USD8.85 billion from USD 11.17 billion while the net profit dropped to
USD 973 million from USD 1.42 billion. Profit was hit by higher input costs and
unfavourable foreign-exchange rates. Svetlana and Aaro (2012) studied the impact of
company's investment intensity on its return on assets. Svetlana and Aaro (2012) used

10
regression analysis as the methodology on a sample of 8,074 companies in six
European Union (EU) member states over a nine year period from 2001 to 2009.
Contrary to some previous studies, they could not identify any strong negative (or
positive) impact of investment intensity on future rate of return on assets. (Mary, 2012)

11
2.2 APPLICATION OF FINANCE CONCEPT

1. Fixed assets turnover ratio: The fixed-asset turnover ratio measures a company's
ability to generate net sales from fixed asset investments, specifically property,
plant and equipment (PP&E) - net of depreciation. A high fixed-asset turnover
ratio shows that the company has been more effective in utilization the investment
in fixed assets to generate sale or revenues.
The fixed-asset turnover ratio is calculated as:
NET
= SALES
ASSETS

2. Return on equity: Return on equity or return on capital is the ratio of net income
of a business during a yearto its stockholders' equity during that year. It is a
measure of gain of stockholders'investments. It shows net income as percentage of
shareholder equity. The formula tocalculate return on equity is:

ANNUAL NET INCOME

ROE = '
AVERAGE STOCKHOLDE R S EQUITY

3. Profitability: The portion of a company's profit allocated to each outstanding

share of common stock. Earnings per share serve as an indicator of a company's
profitability.

Calculated as:
DIVIDENDS ON PREFERRED STOCK
Net income = AVERAGE OUTSTAND ING SHARES

Earnings per share are generally considered to be the single most important
variable in determining a share's price. It is also a major component used to
calculate the price-to earnings (Rustogi & R.P, 2016)

12
3. COMPANY PROFILE

3.1 SKF INDIA LIMITED

3.2 MISSION STATEMENT

To be the preferred company.

For our customers, distributors and suppliers: Delivering industry-leading, high

value products, services and knowledge-engineered solutions.

For our employees: Creating a satisfying work environment where efforts are
recognised, ideas valued, and individual rights respected.

For our shareholders: Delivering shareholder value through sustainable earnings

growth.

3.3 VISION

To equip the world with SKF knowledge

3.4 SLOGAN

The power of knowledge engineering.

3.5 LOCATION

SKF India limited, Chinchwad, Near Chapekar Chowk, Pune, Maharashtra 411033.

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3.6 PRODUCT RANGE AND VARIETY

Bearings and Units - Ball bearings, roller bearings, bearing accessories, engineered
products, track runner bearings, plain bearings, bearing units, bearing housings.

Linear motion - Ball and roller screws, linear guides.

Actuation systems - Linear actuators products, telescopic pillars, control units,

operating switches.

Magnetic systems - Magnetic bearings.

Lubrication Solutions - Lubricants, manual lubrication, lubrication system and

components, lubrication management tools.

Maintenance products - Hydraulic tools, mechanical tools, bearing heaters, alignment

tools.

Power transmission products - Belts, pulleys, chains, sprockets, bushings and hubs,
couplings.

Seals - Automotive seals, industrial seals, materials, machines, engineering services.

Test and measurement equipment - Waviness, roundness and form analyzer, grease
test rings, dimension measuring machines.

14
3.7 ORGANISATION CHART

3.8 LIST OF COMPETITORS

FAG Bearings India Timken India

NRB Bearings Menon Bearings

ABC Bearings Bimetal Bearings

SNL Bearings Vishal Bearings

Austin Engineering Co. Galaxy Agrico

Galaxy Bearings Deccan Bearings

3.9 BRANCHES AND OFFICES

15
Headquarter Gothenburg, Sweden

Offices Pune, Gurgaon, Ahmedabad, Bengaluru, New Delhi, Chennai, Coimbatore,

Bahadrabad, Secunderabad, Bistupur,Mumbai.

3.10 HISTORICAL DEVELOPMENT OF COMPANY

1964
Rolling bearing factory inaugurated in Poona, India, in which SKF had the majority
shareholding. Inge Stenberg died and was succeeded by Folke Lindskog as Managing
Director.

1965
RIV-SKF formed by SKF, obtaining two-thirds of the shares in the Italian rolling
bearing company RIV, with factories in Argentina and Spain.

1966
Tools company, Malcus AB, in Halmstad, Sweden, acquired. Rolling bearing factory
inaugurated in Uitenhage, South Africa.

1970
SKF had 68 factories with 67 700 employees, 78% of whom were employed outside
Sweden.

1971
Factory in Sarajevo, Yugoslavia inaugurated as the result of a joint venture agreement
with a Yugoslavian company. Jacob Wallenberg retired and was succeeded by Folke
Lindskog as Chairman of the Board. Lennart Johansson was appointed new Managing
Director.

1972
New research centre inaugurated at Nieuwegein, The Netherlands.

1974
SKF gained complete control over the Australian rolling bearing company of which it
had been joint owner since 1959.

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1975
Majority shareholding in The Sheffield Twist Drill and Steel Company acquired.
Factory for textile machinery components opened in Singapore.

1976
Parent company name changed from Aktiebolaget Svenska Kullagerfabriken to
Aktiebolaget SKF. SKF Industries Inc., PA, acquired McQuay-Norris Company, St.
Louis, MO, a manufacturer and distributor of automotive components and spare parts.

1978
SKF-CAM closed the factory in Bois-Colombes. The Echuca plant in Australia closed
after the government changed import regulations

1979
The Fiat Group sold its minority interest in RIV-SKF to the SKF Group. Joint venture
with IKL, the Yugoslavian company in Belgrade, concluded.

1980
SKF business supervision for Eastern European markets transferred from Vienna to a
newly founded subsidiary, SKF Eurotrade AB in Gothenburg. SKF resumed activities
in Zimbabwe after 12 years with no access to this market. Minority shareholding in the
Iranian bearing company in Tabriz was divested. Folke Lindskog retired and was
succeeded by Peter Wallenberg as Chairman of the Board.

1981
Plant in Scarborough, Canada, closed.

1983
Factory in Ivry, France closed. Bearing production in France concentrated in two
factories: Saint-Cyr-sur-Loire and Fontenay-le-Comte. Anderton International, UK,
acquired.

1984
Fagersten & Co., Sweden acquired

17
1985
SKF share introduced on the Basel and Zurich stock exchanges and in New York
through the NASDAQ system. Stellana Plast AB acquired. SKF Espaola became
wholly owned subsidiary. Waldes Truarc Inc., acquired. Joint venture with Koyo
bearing company in Japan started. Peter Wallenberg retired as Chairman of the Board
and was succeeded by Lennart Johansson. Mauritz Sahlin was appointed Managing
Director, replacing Lennart Johansson.

1986
MRC Bearings, USA acquired. Mexican bearing company IBISA became a wholly
owned Group subsidiary. SKF Steel merged with Ovako Oy Ab to form Ovako Steel
AB, of which SKF owned 50%.

1987
Acquisition of three companies within linear motion: Jacob AG, Switzerland, and
Transmatic in Sweden and Norway, as well as Ateco in The Netherlands. Italian spindle
and ball screws manufacturer Gamfior acquired.

1988
Acquisition of Austrian bearing company, Steyr Walzlager Ges.m.b.H. The British
company AMPEP P.L.C., manufacturer of plain bearings for aircraft, acquired. SKF
College of Engineering started. New sales companies in Thailand, Hong Kong, and an
office in the Philippines, opened. SKF's national distributor in Indonesia formed a new
company, P.T. Skefindo Pramatama. A consignment centre in Shanghai opened in
cooperation with the Shanghai export trade organization.

1989
Majority shareholding in Palomar Technology International Inc., USA, acquired.
Palomar manufactures equipment for condition monitoring of rolling bearing. Bearing
factories in Bangalore, India and Guarulhos, Brazil inaugurated.

1990
Italian tools company Cofler & C.S.p.A. acquired. Seals manufacturer CR Industries
acquired. Oil seals activities of Italian Gallino Gomma S.p.A. acquired. SKF Tools

18
merged with German Gunther & Co. to form CTT Tools. Dymac, San Diego, specialists
in vibration monitoring, acquired. SKF Tools acquired substantial assets in Union
Butterfield Corp, US manufacturer of high-speed steel cutting tools. Acquisition of
Fixtur-Laser, Sweden, manufacturer of laser measurement instruments.

1991
Acquisition of Swiss company SMM, manufacturer of high-speed spindles for spinning
machines. German subsidiary Seeger-Orbis GmbH acquired two factories in East
Germany. Channel concept introduced in the manufacturing operations. Sales
companies opened in Poland and Bulgaria.

1992
Operations started at the new plant in Malaysia. CTT Tools division was sold. Lennart
Johansson retired and was replaced by Anders Scharp as Chairman of the Board.

1993
Ball bearing production plant in Madrid was sold. Stellana AB, Fixtur-Laser AB, and
French subsidiary ADR.S.A. sold as a result of SKF's increased focus on its core
business, rolling bearings and seals.

1994
Goetze Elastomere GmbH, seals manufacturer, acquired. SKF European Distribution
Centre in Tongeren, Belgium, inaugurated.

1995
CARB toroidal roller bearing launched. Joint venture company for manufacture of
wheel hub bearing units established in Korea. 80% of Polish bearing company FLT
Poznan acquired. Mauritz Sahlin retired and was replaced by Peter Augustsson as
Managing Director.

1996
Joint venture with subsidiary of China Railways. New plant for manufacture of wheel
hub bearing units built in Aiken, USA, in collaboration with SKF Technical Center in
Detroit.

19
1997
New joint ventures in China, one for the manufacture and sales of spherical roller
bearings together with the Wafangdian Group, and the other a new company for the
manufacture of oil seals as a joint venture between Chicago Rawhide and ANZAG.
Series production began at SKF Hanwha Automotive Components Corporation in
Korea. Majority shareholding acquired in Indonesian bearing company PT Logam Sari
Bearindo in Jakarta. FlexLink Systems AB sold. SKF and Revolve Technologies Inc. in
Canada established a new company, Revolve Magnetic Bearings. Majority
shareholding acquired in Lutsk Bearing Plant, Ukraine.

1998
A further joint venture in China was formed with Wafangdian Bearing Co. Ltd. US
manufacturer of machine tool spindles, Russell T. Gilman, acquired. Sune Carlsson
appointed President and CEO. SKF Group certified to ISO 14001.

1999
SKF Textile machinery Components with operations in Cannstatt, Germany and
Singapore was sold. Forging unit at Arvika, Sweden sold. Partnership established with
Gamfior, Italian manufacturer of ground ball screws. SKF Explorer bearings
introduced. The e-business network, Endorsia.com, launched.

2000
The following acquisitions were made: Development Engineering International, a
maintenance engineering consultancy company, Scotland; Machine Support BV, The
Netherlands, specialist in precision geometric alignment; Sealpool AB, Sweden,
supplier of sealing systems; Diagnostic Instruments Ltd, Scotland; Electrac S.A.,
French manufacturer of electromechanical actuators. Lidkoping Machine Tools was
sold. SKF, FAG and NN Ball and Roller started joint venture for ball manufacturing.
Outstanding shares in Revolve Magnetic Bearings acquired.
2001
Gamfior S.p.A., leading Italian manufacturer of high-precision motorized spindles and
ball screws, acquired. The FILO drive-by-wire concept car developed jointly by SKF
and the design company Bertone. SKF and Timken formed joint venture in Brazil to

20
produce bearing rings. SKF Logistics Services opened its new Asian distribution centre
in Singapore. SKF signed an agreement with Sandvik, Rockwell Automation, INA and
Timken to share ownership of Endorsia.com. SKF Manufacturing Development Centre
established in Gothenburg, Sweden.

2002
SKF Reliability Systems expanded with the acquisition of Delta Consult in The
Netherlands and Erin Engineering and Research in the USA. Further acquisitions were
Magnetic Group, Switzerland, a leading manufacturer of electromechanical actuators;
Aerospace Bearings UK, manufacturer of bearings for main shafts and gearboxes for jet
engines; SBB in Bulgaria with four bearing factories; and The Twentieth Century
Machine Co., a USA manufacturer of ground ball screws. SKF Bearings Co. Ltd. in
Shanghai, a new joint-venture factory, started production of small size deep groove ball
bearings.

2003
Tom Johnstone succeeded Sune Carlsson as Managing Director and CEO. Acquisitions
were Scandrive Control AB, Swedish manufacturer of servo gears for the printing
industry, and Rolling Stock Supply & Service Pty Ltd, Australia, specializing in service
of railway bearings. Component manufacturing operations in The Netherlands sold.
SKF decided to leave the Paris, Zurich and NASDAQ stock exchanges.
2004
Willy Vogel AG, a world leader in lubrication systems, acquired. An Industrial Services
Centre was opened in Moscow, Russia. Remaining 40% of Anhui CR Seals Co., Ltd. in
China acquired.

2005
The SKF share was delisted from the London Stock Exchange. Jaeger Industrial Ltd in
Taiwan, a leading manufacturer of electromechanical actuators, acquired. Acquisition
of Sommers AB, distributor of Vogel lubrication systems in Sweden. SKF, Rautaruukki
and Wartsila combined their long steel businesses into a jointly owned company, Oy
Ovako AB.

21
2006
SKF was certified to the health and safety management standard OHSAS 18001.
Acquisition of 51% of the shares of the North American seals company Macrotech
Polyseal Inc. SKF Life Theory adopted as the new ISO standard for bearing life
calculations. SNFA SAS, a leading French manufacturer of bearings for aerospace and
machine tool applications, acquired. A leading Finnish lubrication systems business
was acquired. SKF, Rautaruukki Corporation and Wartsila Corporation sold Oy Ovako
Ab. Precision Balancing & Analyzing in the US, specialist in repair and upgrading of
machine tool spindle mechanisms, acquired. Monitek, leading Australian predictive
maintenance services company,

2007
SKF celebrated its 100th anniversary. Production started at three new factories in Asia,
one in China and two in Korea. Important acquisitions were ABBA, a manufacturer of
linear guides with headquarters in Taiwan; S2M, a leading French magnetic bearing
company; Baker Instruments, a leading manufacturer of testing and diagnostic
instruments in the US; Automatic Lubrication Systems, a service company for
Canadian mobile transportation equipment; Preventive Maintenance Company Inc, a
US-based market leader in predictive maintenance services. The forging business at the
Luchow plant in Germany was sold. New product and service launches include a new
range of energy-efficient bearings which provide at least 30% less friction in the
bearing.

2008
Acquisitions in 2008 included American QPM Aerospaces metallic rod business; two
factories in China and one in Thailand from the US-based PEER Bearing Company;
Cirval S.A., an Argentine company specialized in design, manufacture and sales of
centralized lubrication systems. Anders Scharp retired as Chairman of the Board and
Leif ostling was elected new Chairman. The energy efficient bearing family was
extended with the addition of spherical and cylindrical roller bearings. In light of
weakening demand SKF announced at the end of the year that it would be reducing
capacity and costs.

22
2009
Remaining 49% of Macrotech Polyseal Inc, USA, were acquired. The company is now
renamed SKF Polyseal. The network of SKF Solution Factories was extended. This is a
concept that brings together SKFs entire service offering. Together with Cambridge
University, the SKF University Technology Centre on Steels was set up at Cambridge
campus. SKF Global Testing Centre opened in Bengaluru.

2010
The SKF University Technology Centre on Tribology was set up in conjunction with
Imperial College London. Two new factories opened in India (Hardiwar and
Ahmedabad) and one in Russia (Tver). New SKF Industry Service Centres opened: for
wind industry in Shanghai and Houston; for oil and gas industry in Aberdeen and
Stavanger; for marine industry in Rotterdam. The SKF Global Technical Centre China
opened. The network of SKF Solution Factories was extended, comprising 17 units at
the end of the year. US-based lubrication systems company Lincoln Holdings
Enterprises was acquired.

2011
The cage factory in Gothenburg was sold. The SKF University Technology Centre on
Sustainability and Environment was set up together with the Chalmers University of
Technology in Gothenburg. SKF Distributor College, started in 2001, awarded its 100
000th certificate. The college offers training to SKF distributors. A Latin American
Distribution Centre was opened in Montevideo, Uruguay. A second factory for
production of medium size bearings was opened in Dalian, northeast China. Factory in
Brazil extended to produce advanced wheel bearings. SKF Global Technical Centre
India was opened in Bengaluru, and an SKF University Technology Centre on
condition monitoring and asset management was established together with the Lule
Technical University, Sweden.

2012
SKF Group acquired US-based General Bearing Corporations. SKF developed a range
of Knowledge Engineering apps for the mobile market. A Guinness World record was

23
set at Liseberg and SKF supported the Kim Kallstrom Trophy during Gothia Cup. The
integration and re-branding of SNFA was completed. SKF increased focus on
sustainability and launched a aggressive climate strategy and a partnership with WWF
to reduce greenhouse gas emissions. The BeyondZero concept was revealed with a
portfolio of solutions with significant environmental benefits. SKF celebrated 100 years
in China with new investments and inauguration of a new factory in Jinan, China.

2013
SKF acquired Blohm + Voss Industries GmbH and Kaydon Corporation and divested
metallic rods operation to Precision Castparts Corp. For the 14th year in a row, SKF
was listed as one of the worlds most sustainable companies by both the Dow Jones
Sustainability World Index (DJSI) and the Dow Jones Sustainability Index for Europe.
At Hannover Fair 2013, SKF presented a selection of products and integrated solutions
under the theme Release the Power of Knowledge Engineering.

2014
SKF invested in two new Global Technical Centres in Europe and one in United States.
The SKF Documented Solutions Programme celebrated 10 years of confirmed
customer savings. The cooperation with Gothia Cup was extended and SKF sponsored
the finals arena. Two acqusitions were made: GLOi and Hofmann Engineering North
America. SKF invested in a Kaydon production facility in Brazil. SKF took the nest
step in Smartifying the industry by utilizing smart phones and tablets in the industrial
arena. Alrik Danielson was appointed as new President and CEO as of 1 January 2015,
succeeding Tom Johnstone, and a reorganization of SKF was done in connection to this.

3.11 ACHIEVEMENTS OF THE COMPANY

2007

24
SKF India wins CNBC Asia's Talent Management Award 2007. SKF India receives the
Dun and Bradstreet American Express Corporate Award for the Top Indian Company in
the Bearings Sector. SKF India receives Auto Monitor Award for the 'Green
Manufacturer of the Year.' SKF India wins "Autofit Rolling Trophy" at the 4th National
Convention on Six Sigma organized by Confederation of Indian Industries (CII).

2008
SKF India receives the Dun and Bradstreet - Rolta Corporate Award for the Top Indian
Company in the Bearings Sector. SKF India wins 'Tecumseh India Rolling Trophy',
Bosch Group at the National Convention on Six Sigma. SKF India receives Elgi Award
for Best Supplier of the Year.

2009
SKF India receives the Dun and Bradstreet - Rolta Corporate Award for the Top Indian
Company in the Bearings Sector.

2010

SKF India receives the Dun and Bradstreet - Rolta Corporate Award for the Top Indian
Company in the Bearings Sector. Confederation of Indian Industry gives SKF India the
"Winner" Trophy at the National level in the Lean Manufacturing Organizations
category. SKF India receives the Best Kaizen Award at the 10th TPM National
Conference organised by Confederation of Indian Industry. SKF India received the
"Best Performance in Warranty improvement" from Maruti Suzuki India Ltd.
SKF wins 'Overall Excellence Supplier' of the year from Maruti Suzuki India Ltd.

2011
SKF India receives the Dun and Bradstreet - Rolta Corporate Award for the fifth
consecutive year for being the Top Indian Company in the Bearings Sector. SKF bags
the 'Best Supplier Award' by Lucas TVS Limited.

2012
SKF India is ranked number one in the Engineering and Capital Goods company in the
country by Hay Group, the research partner for Fortune's Most Admired Companies

25
study. SKF India Awarded Star performer award by Engineering Export Promotion
Council India. Bajaj Auto limited Pune conferred SKF India with the Quality Gold
Award.SKF India receives the Dun and Bradstreet - Rolta Corporate Award for the
sixth consecutive year for being the Top Indian Company in the Bearings Sector.
Maruti Suzuki India Ltd. (MSIL) selected SKF as the 'Preferred supplier towards local
R&D capability' at their annual vendor meet at Bangkok on May 11, 2012. SKF
conferred as the best supplier in the 'Best Quality & Services' category and
'Improvement Orientation' category by Tata Steel. (http://www.skf.com/in/our-
company/organization/skf-india/index.html) (https://en.wikipedia.org/wiki/SKF)

3.12 BUILDING AND PRODUCT PHOTOGRAPHS

26
3.13 SWOT ANALYSIS

strong R&D Activities OPPORTUNITIES

global presence outlook for wind market
Diversified business operation organic growth drivers
STRENGTH strategic agreements

SWOT
ANALY
SIS counterfeit products
WEAKNESS competitive pressure
debt obligation
rapid technological changes
decreasing operationalefficiency
THREATS
declining liqidity

27
 4. RESEARCH METHODOLOGY

4.1 RESEARCH

Research is investigative process employed to increase or revise current knowledge by

discovering new facts. Research is a careful and detailed study into a specific problem,
concern, or issue using the scientific method. It's the adult form of the science fair
projects back in elementary school, where you try and learn something by performing
an experiment. This is best accomplished by turning the issue into a question, with the
intent of the research to answer the question.

This study identifies key variables that influence profit- ability of SKF INDIA. They
include dependent and independent variables. We take operating profit dependent
variable net income ratio which is a measure of profitability of the firm as dependant
variable. It is defined as the ratio of net income after taxes and depreciation divided by
total sales.

Fixed asset is an independent variable on the hand firm Profitability is dependent and it
is measured with the help of following financial ratios.

Earning price per share ratio.

Return to equity ratio.

Fixed asset turnover ratio.

RESEARCH QUESTION:

What is the impact of fixed asset on firm profitability?

What is the nature of impact whether positive or negative ?

28
4.2 SCOPE OF THE PROJECT

The project is covered on fixed assets of and profitability of SKF India by drawn from
annual reports of the company. The subject matter is limited to fixed assets, its analysis
and its performance but not to any other areas of accounting corporate, marketing and
financial matters and how company can make profit in future

4.3 SECONDARY DATA

The project is covered on fixed assets of and profitability of SKF India by drawn from
annual reports of the company. The subject matter is limited to fixed assets, its analysis
and its performance but not to any other areas of accounting corporate, marketing and
financial matters and how company can make profit in future

Published data and the data collected in the past or other parties is called secondary
data. Data collected by someone else for some other purpose (but being utilized by the
investigator for another purpose) is known as secondary data.

SOURCES OF DATA

The data needed for this project is collected from the following sources:

1.The data is adopted purely from secondary sources

2.The theoretical contents are gathered purely from eminent text books and references.

3.The financial data and information is gathered from annual reports of the company.

4.4 SAMPLE SIZE CALCULATION

The study uses data of SKF India as the sample.The financial statements were analyzed
and the statistical analysis concluded the results of the study. For this purpose, past 20

29
yrs. Financial Sttmnts wr nlysd s wll s blnc shts of SKF India
Limited.

4.5 Sampling techniques used for project

The research is based upon the convenient sampling among the SKF Group.

4.6 RESEARCH QUESTION:

What is the impact of fixed asset on firm profitability?

What is the nature of impact whether positive or negative?

4.7 Hypothesis development:

Following hypothesis are generated on the basis of growing through the research work

ofprevious researchers and which are going to be tested later on:

H0: Fixed asset have no impact on Return on Asset, Gross profit and Return on
Equity. .

H1: Fixed asset have a significant impact on Return on Asset, Gross profit and Return
on Equity

30
 31
RETURN ON EQUITY
FIXED ASSETS TURNOVER RATIO
RETURN ON ASSETS
GROSS PROFIT
DEPENDENT VARIABLE
INDEPENDENT VARIABLE
4.8 RESEARCH MODEL
4.9 DATA ANALYSIS METHOD

In this research multiple regression analysis has been used for the analysis of the
results because research has to find out the association and the relationship Non
Current Assets and Firms Profitability. The dependent variable is taken as
profitability and independent variable is non-current assets.

32
5. DATA ANALYSIS AND INTERPRITATION

Correlation

Correlation is a statistical technique that can show whether and how strongly pairs of
variables are related.The Direction of a Relationship The correlation measure tells us
about the direction of the relationship between the two variables. The direction can be
positive or negative.

1. Positive: In a positive relationship both variables tend to move in the same

direction: If one variable increases, the other tends to also increase. If one
decreases, the other tends to also.

2. Negative: In a negative relationship the variables tend to move in the opposite

directions: If one variable increases, the other tends to decrease, and vice-versa.

The direction of the relationship between two variables is identified by the sign of the
correlation coefficient for the variables. Postive relationships have a "plus" sign,
whereas negative relationships have a "minus" sign.

Fixed asstes turnover ratio is Dependent Variable and Return on Asset, Gross profit and
Return on Equity are Indepent variables.To know the association between variables
correlation performed with the help of statistical package for social science (SPSS).
The following is the result of correlation.

33
The data is normally distributed.

34
Correlations

Fixed Asset Gross Return on Return on

Turnover Ratio profit Equity Asset
Pearson Correlation Fixed Asset 1.000 .541 .439 .579
Turnover Ratio
Gross profit .541 1.000 .757 .839
Return on Equity .439 .757 1.000 .949
Return on Asset .579 .839 .949 1.000
Return on Asset, Gross profit and Return on Equity are moderately correlated with each
other. Gross profit is 0.541, Return on Equity is 0.439 and Return on Asset is 0.579
correated with Fixed Asset Turnover Ratio.

Model Summaryb
Adjusted R
Model R R Square Square Std. Error of the Estimate
1 .675a .456 .354 1.18067
a. Predictors: (Constant), Return on Asset, Gross profit, Return on Equity
b. Dependent Variable: Fixed Asset Turnover Ratio
Predictors are taken for study i.e Return on Asset, Gross profit, Return on Equity
explains 35.4 % of Fixed Asset Turnover Ratio.

35
ANOVAb
Sum of
Model Squares df Mean Square F Sig.
1 Regression 18.703 3 6.234 4.472 .018a
Residual 22.304 16 1.394
Total 41.007 19

a. Predictors: (Constant), Return on Asset, Gross profit, Return on Equity

b. Dependent Variable: Fixed Asset Turnover Ratio

Return on Asset, Gross profit and Return on Equity has significant impact on
Dependent Variable Fixed Asset Turnover Ratio. P = 0.018 which is less than 0.05 at F
= 4.472

5.11 LIMITATIONS

Duration of study was limited and hence elaborate and comprehensive project
survey was not undertaken.

5. FINDINGS

36
After analyzing the financial position of SKF and evaluating its fixed assets
management or capital budgeting techniques in respect of trend analysis and ratio
analysis. The following conclusions are drawn from the project preparation. The
progress of SKF shows that there is an increase in due to strong investment on fixed
assets.
Regarding to the fixed assets to net worth ratio shows a continuous increase in
net worth and fixed assets. This shows the satisfactory position of the company.
Regarding the long-term funds to fixed assets they show an increase.

Regarding the total investment turnover ratio it is observed sales had an

increase from last couple of years

Regarding the Fixed Asset turnover ratio, sales had an increased.

Regarding the Return on total assets ratio it has been observed that there is
profit. This shows the favorable position of the company. From the above study
it can be said that the SKF overall financial position on fixed assets is
satisfactory.

6. SUGGESTIONS

37
 It is suggested to improve the position of the company by effectives utilization
of fixed assets.

Growth rate in fixed assets can be increase by employing more investment.

Total investment to sales can be improved.

Instead of disclosing the combined flows of debtors and loans advances as

decrease or increase in trade and other receivables, their separate disclosure will
be more meaningful.

Globalization of economies and the requirement of shares from investors in

capital market, diverse and demanding audience to the company, need a clear
and in-depth in information about the companys financial position in Annual
report

Companies should also focus on their credit policy for customers according to
their company policy.

It is also suggested to all the companies that use the latest supply chain
technology which helps to focus on reducing inventory level as well.

38
7. CONCLUSION

The result of tested hypothesis showed that the level of investment in noncurrent asset
have significant result on firms profitability. An asset is an economic resource
controlled by the specified entity and assets structure is to allocate the resource
diversely.

The production pattern which is a function of demand for the product will dictate #hat
type of assets that are needed to produce the product needed by the customers. Asset
utilization is particularly useful to companies considering expansion or capital
investment. If production can be increased by improving the efficiency of existing
resources, There is also positive correlation between EPS and fixed asset quality of
Textile, cement, and sugar sector when it was analyzed independently while it gave a
positive relationship when analyzed together with other performance indicators.

Profitability also maximizes neutral price and capitalist price. This paper shows the
impact of firm fixed asset on gain of textile, sugar, and cement sector. The main
objective of a business is maximization of profit which is able to cause maximization of
shareholders wealth. Examining many relationship among the assets and sales asset
utilization provide picture how much corporation being manage resources. Effective
use of resources plays important role increasing firm profitability.

The relationship between return on asset (ROA) and return on equity is tested based on
the 2 sided p value of 0.000 which is lower than 0.05 , the null hypothesis is therefore
rejected which states that Fixed asset have no impact on Return on Asset, Gross profit
and Return on Equity. This means that the hypothesis is rejected because P values are
greater than 0.05.

Fixed asset have a significant impact on Return on Asset, Gross profit and Return on
Equity because p values are lower then 0.05 the hypothesis is significant and accepted.

39
8. BIBLIOGRAPHY

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https://en.wikipedia.org/wiki/SKF

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http://www.skf.com/in/our-company/organization/skf-india/index.html. (n.d.).
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