Ricoh Fraud

[pic 1]

FINANCIAL ACCOUNTING PROJECT

[pic 2]

Prepared by:                                

Akash Gurnani (16PGDMBFS01)

Mahima Tyagi (16PGDMBFS34)

Samir Bansal (16PGDMBFS43)

Shirsendu Bikash Das (16PGDMBFS48)

Shubradeep Paul (16PGDMBFS51)

Tanmay Harsh (16PGDMBFS59)

About Ricoh

Ricoh’s origins date to a decision of the Institute of Physical and Chemical Research to commercialize the fruits of its R&D by setting up Rikagaku Kogyo. In 1936, Rikagaku Kogyo established Riken Kankoshi Co., Ltd. (renamed Riken Optical Co., Ltd., in 1938, and Ricoh Company, Ltd., in 1963), to manufacture and sell sensitized paper. The Company started its camera business in 1937. In 1950, it created Japan’s first mass production structure for cameras, driving their popularity among consumers. The company entered the business machine field in 1955 by launching the Ricopy 101. It was incorporated as a joint venture with RPG group (RPG Ricoh Limited) in 1993. It reincorporated in 1998 as Ricoh India Ltd with 76% ownership by Ricoh Company Limited, Japan, and the rest by Indian Public.

Ricoh is a global technology company specializing in office imaging equipment, production print solutions, document management systems and IT services. Headquartered in Tokyo, Ricoh Group operates in about 200 countries and regions. In the financial year ending March 2015, Ricoh Group had worldwide sales of 2,231 billion yen (approx. 18.5 billion USD). From Printing & Document Solutions to IT Services to Communication Systems, having offerings that address the ever-evolving and diverse needs of customers under a holistic umbrella.

In India, Ricoh is a market leader in its key categories and enjoys immense customer confidence in the wide variety of our products and solutions, which includes Office Printers, Digital Duplicators, Production Printers, Projection systems and Video conferencing solutions and related software technologies. Ricoh is a leader in Managed Document Services, and can provide a unique combination of Document and IT-related services, addressing business practices surrounding the management of both print and electronic information and communication. Ricoh also produces award-winning digital cameras and specialized industrial products.

CONTENTS

1. Analysis

1. Liquid ratio

1. Current ratio
2. Quick ratio

1. Solvency ratio

1. Debt Equity ratio
2. Total asset to Debt ratio
3. Propriety ratio
4. Interest coverage ratio

1. Turnover and efficiency ratio

1. Inventory turnover ratio
2. Debtors turnover ratio
3. Creditors turnover ratio
4. Working capital turnover ratio
5. Total assets turnover ratio
6. Fixed assets turnover

Analysis

Liquidity Ratio

1. Current Ratio:

• (2011-12 to 2012-13) The current ratio has decreased from 1.21 to 1.02 because current liabilities have increased in a greater proportion than increase in current assets. The current assets have increased by 110.4% while current liabilities have increased by 149%.
• (2012-13 to 2013-14) The current ratio has remained the same. Current liabilities have increased in a similar proportion as increase in current assets. The current assets have increased by 15.2% while current liabilities have increased by 15.5%.
• (2013-14 to 2014-15) The current ratio has increased from 1.02 to 1.28 because the current assets have increased by 61.68% while current liabilities have increased by only 28.3%.

1. Quick Ratio:

• (2011-12 to 2012-13) The quick ratio has decreased from 0.91 to 0.77 because liquid assets have increased by 110% and current liabilities by 149%.
• (2012-13 to 2013-14) The quick ratio has decreased 0.77 to 0.73. Liquid assets have increased by 9.3% and current liabilities have increased by 15.5%.
• (2013-14 to 2014-15) The quick ratio has increased from 0.73 to 1.07 because the liquid assets have increased by 88.26% and current liabilities by 28.3%.

The liquidity position is poor for the company. They don’t have sufficient current assets to liquidate and pay for their liabilities.

Solvency ratio

1. Debt Equity Ratio: Has remained the same throughout the period in consideration. The long term debts and equity has increased in the same proportion.

1. Total Assets to Debt ratio: This has increased year on year as the total assets have increased in a greater proportion as compared to the long term debts. Although this is a healthy sign but, the long term liabilities is very less as compared to the current liabilities which is not reflected in this ratio. The company has high total liability solely because of high current liability.

1. Proprietary ratio: Proprietary ratio is decreasing year on year. This is due to increase in reliance on external funds to run the business.

1. Interest coverage ratio: From 2011 to 2014 the interest coverage ratio is increasing year on year due to increase in earnings before tax. This is a healthy sign for the company. However, we observe that the ratio has fallen in the year 2014-2015 because of a substantial increase in interest being paid. The company has heavy short term borrowings which indicate the rise in interests and finance cost.  

Note: Annual report 2013-14 To mitigate the effect of increase interest cost, the company has taken has taken short term working capital loans from banks at the most competitive rates, which in fact are well below the prevailing market rates).

Turnover and efficiency ratio

1. Inventory turnover ratio:

• (2011-12 to 2012-13) The inventory turnover ratio has decreased from 5.88 to 4.08 (average holding period has increased from 62 days to 89 days)
• (2012-13 to 2013-14) The inventory turnover ratio has increased from 4.08 to 5.08 (average holding period has decreased from 89 days to 72 days)
• (2013-14 to 2014-15) The inventory turnover ratio has significantly increased from 5.08 to 8.34 (average holding period has decreased from 72 days to 44 days)

1. Debtors turnover ratio:

• (2011-12 to 2012-13) The debtor turnover ratio has decreased from 4.44 to 3.44 (debt collection period has increased from 82 days to 106 days)
• (2012-13 to 2013-14) The debtor turnover ratio has decreased from 3.44 to 3.29 (debt collection period has increased from 106 days to 111 days)
• (2013-14 to 2014-15) The debtor turnover ratio has significantly decreased from 3.29 to 2.46 (debt collection period has increased from 111 days to 148 days)

The debt collection period over the given period has increased from 82 days to 148 days. This could be a strategy to increase market share (2011-12: 11%, 2012-13: 20%, 2013-14: 46%) however, this may lead to liquidity crisis if the credit period is low. Further there are chances of having defaulters indicating increasing risk for the company.