Professional Documents
Culture Documents
ON
FINANCIAL ANALYSIS
OF
MASTER
OF
BUSINESS ECONOMICS
CHANDIGARH
SUBMITTED TO:
SUBMITTED BY:
Mrs. Sumeet Kaur
Bhawana Devi
Roll No: 5774
1
Year: 20112013
CERTIFICATE
Chartered Accountants
Vikas Gupta, F.C.A.
(M.No. 096996)
2
Partner
ACKNOWLEDGEMENT
(BHAWANA DEVI)
DECLARATION
Sumeet Kaur
Devi
Bhawana
4
(Faculty Guide)
PREFACE
Table of Contents
CHAPTER- 1................................................................................................................ 7
Company Profile...................................................................................................... 7
CHAPTER- 2.............................................................................................................. 16
Introduction of Financial Analysis..........................................................................16
CHAPTER- 3.............................................................................................................. 37
Research Methodology.......................................................................................... 37
CHAPTER 4............................................................................................................... 40
SWOT Analysis of the Company............................................................................ 40
CHAPTER-5............................................................................................................... 43
Data Analysis and Interpretation...........................................................................43
CHAPTER-6............................................................................................................... 60
Findings................................................................................................................. 60
CHAPTER-7............................................................................................................... 62
Suggestions and Recommendations......................................................................62
Conclusion................................................................................................................ 64
Bibliography............................................................................................................. 65
CHAPTER- 1
Company Profile
COMPANY PROFILE
Sood & Sood Associates is a partnership firm established in 1984 with
three partners. All the three partners are in the profession of Chartered
Accountant. The firm has conducted various types of audits for various
Public Sector Banks, Multi National Companies, Financial Institution,
Government offices and Corporate offices.
The firm specializes in conducting the below mentioned activities:
Concurrent Audits
Statutory Audits
Foreign Exchange Management Act
Internal Audits ( Ranbaxy, Nestle, Cadbury)
10
CASE STUDY
FOR
NESTLE INDIA LIMITED
11
COMPANY PROFILE
Nestle India Limited (Nestle India) is a subsidiary to Nestl S.A. a global
food products company based in Switzerland. Nestle India principally is
engaged in the manufacturing, marketing, exporting and sales of food
& beverage products which include milk products, nutrition products,
beverages, chocolates and confectionery. It markets its products under
international brand names which include Nescafe, Milo, Nestea Maggi,
and Milky bar, Kit Kat, Milkmaid, Nestl Milk, Nestl Slim Milk and
Nestl Fresh.
The report provides a comprehensive insight into the company,
including business structure and operations, executive biographies and
key competitors. The hallmark of the report is the detailed financial
ratios of the company.
SCOPE
Provides key company information for business intelligence
needs.
The report contains critical company information ' business
structure and operations, major products and services
The report provides detailed financial ratios for the past five
years as well as interim ratios for the last four quarters.
Financial ratios include profitability, margins and returns, liquidity
and leverage, financial position and efficiency ratios.
INDUSTRY SNAPSHOT
India is one of the fastest growing economies in the world. While
we are moving towards a services-led economy but still agriculture
contributes 17 per cent of the total GDP and employs 60 per cent of
the population. India is one of the key food producers in the world.
12
COMPANY OVERVIEW
Nestle India Limited, a subsidiary of Nestle S.A. of Switzerland, was
incorporated in 1959. Nestle S.A. of Switzerland holds around 62 per
cent stake in the company. It is a leading branded processed food
companies with a large market share.
The company first unit at Moga stated in 1961 for
manufacturing milk products
13
BUSINESS SEGMENTS
The company broad product portfolio includes Milk Products &
Nutrition, Beverages, Prepared Dishes & Cooking Aids and
Chocolates & Confectionary.
Milk Products & nutrition
The company milk products & nutrition portfolio encompasses a wide
range of products that includes milk, skimmed milk, value added
products like condensed milk, curd, ghee, yogurt, cheese. These
products are sold under various popular brands - Nestle Every day,
Nestle Milkmaid, Nestle Milk, Nestle Fresh n Natural, etc. The company
enjoys the leadership position in infant milk foods business under the
famous brand Cereal with a market share of more than 68 percent.
The Milk products and Nutrition division contributes more than 46 per
cent to the companys revenues.
Beverages
Under the beverages segment, the company mainly sells instant
coffee. It is the largest coffee company in India, commanding market
share of more than 11 per cent. Besides, it sells a melted chocolate
drink, Nestle Milo. The beverages division contributes around 17
percent to the company's revenues. Beverages contribute a major
portion in the total export market. The company exports instant coffee
to various countries such as Russia and Japan. Besides, it also exports
some of its other products.
Prepared Dishes & Cooking Aids
Nestle' Maggi 2 -Minute Noodles has become an almost synonymous
name for instant noodles in India. The company later extended
culinary products such as sauces, pizza sauce, healthy soups and
magic spice cubes. The company also introduced new variants of
14
noodles such as Vegetable Atta Noodles, Dal Atta Noodles and Rice
Noodles Mania under its Maggi Noodles umbrella in the last few years.
This division contributes 23 per cent to the company's revenues.
Chocolates & Confectionary
The company also has a strong presence in the chocolates &
confectionary business. With a more than 18 per cent market share,
it is the second largest confectionary company in India. The company
sells its world famous Kit Kat brand in India along with some other
brands such as Nestle Munch (wafer chocolate), Nestle Milk bar, Polo
(mint confectionary) etc. The Chocolates & Confectionary division
contributes 14 per cent to the company's revenues.
Export
15
16
Nestle provided inputs to the Nestle Group R&D for the development of
an innovative product MAGGI Bhuna Masala.
2009 was a
challenging year for the coffee business in India
primarily due to adverse climatic and whether conditions that were
experienced, the Coffee and Beverages business further straightened
its position as a leader in instant coffees. While NESCAFE Cappuccino
had a successful start, popularly priced products supported growth in
the south and limited edition NESCAFE SUNRISE Rich Mountain blend
received very good feedback and despite the challenging environment
NESCAFE performed satisfactorily, achieving volume and market share
growth in India.
17
During the year, your company also became the leader in the clairs
category with NESTLE ECLAIRS,
18
19
CHAPTER- 2
20
FEATURES
OF
FINANCIAL ANALYSIS
21
PURPOSE
To
To
To
To
To
To
To
To
OF
ANALYSIS
OF FINANCIAL STATEMENTS
PROCEDURE
OF FINANCIAL
STATEMENT ANALYSIS
TOOLS
OF
FINANCIAL ANALYSIS
RATIO ANALYSIS
Ratio analysis isnt just comparing different numbers from the balance
sheet, income statement, and cash flow statement. It means
comparing the number against previous year of other companies, the
industry, or even the economy in general. Ratios look at the
relationship between individual values and relate them to how a
company has performed in the past, and its performance in the future .
23
RATIO
A ratio is a simple arithmetical expression of the relationship of one
number to another. It may be defined as the indicated quotient of two
mathematical expressions. In simple language ratio is one number
expressed in terms of another and can be worked out by dividing one
number into another.
For example, Current assets of the firm are 5, 00,000 and Current
liabilities are 2, 50,000 then the ratio of current assets to current
liabilities will work out to be 2 such type of ratio are called simple or
pure ratios.
OBJECTIVE
OF
RATIOS
FORM
OF
RATIO
For example the equity share capital of a company is Rs. 20, 00,000 & the preference
share capital is Rs. 5,00,000 the ratio of equity share capital to preference share capital
20,00,000:5,00,000=4:1
Sales
B) As a rate of times
In the above case the equity share capital may also be described
as 4 times that of preference share capital. Similarly, the cash
sales of a firm are Rs. 12, 00,000 & credit sales are Rs. 30,
00,000. So the ratio of credit sales to cash sales can be described
as
2.5[30, 00,000/12, 00,000] = 2.5 times are the credit
sales.
25
Sales
CASH SALES
CREDIT SALES
C) As a percentage
In such case, one item may be expressed as a percentage of some other items. For
example, net sale of the firm are Rs.50, 00,000 & the amount of the gross profit is Rs.
10,00,000 then the gross profit may be described as 20% of sales [10, 00,000/50,
00,000]
STEPS
IN
RATIO
ANALYSIS
TYPES
OF COMPARISONS
NATURE
OF
RATIO ANALYSIS
27
OF
THE RATIO
OF
RATIO ANALYSIS
29
30
C. Utility to creditors
The creditors or the suppliers extend short term credit to the
concern. They are interested to know whether financial position
of the concern warrants their payments at the specified time or
not. The concern pays short term creditors out of its current
assets. If current assets are quite sufficient to meet current
liabilities then the creditors will not hesitate in extending credit
facility.
D. Utility to employees
The employees are also interested in the financial position of the
firm especially profitability. Their wage increases and the amount
of fringe benefits are related to the volume of profits earned by
the concern. The employees make use of information available in
financial statement.
E. Utility to governmentGovernment is interested to know the overall strength of the
industry. Various financial statements published by industrial
units are used to calculate ratios for determining short term, long
term and overall financial position of the concerns. Profitability
index can also be prepared with the help of ratios.
LIMITATION
OF
FORM
OF
BALANCE SHEET
SECEDULE VI PART I
FORM OF BALLACE SHEET
Figure
s for
the
Figures
for the
current
32
previo
us
year
Rs.
curre
nt
year
Rs.
previo
us
year
Rs.
year
Rs.
SHARE CAPITAL
FIXED ASSETS :
Authorizedshares
of Rs. Each
Distinguishing as far as
possible Between
expenditure upon.
Issued:
(Distinguishing
between the various
classes of capital
and
stating particulars
satisfied below,
in respect of each
class)
.shares of Rs
each.
Subscribed :
(distinguishing
between the various
classes of capital
and stating the
particulars
specified below, in
respect of each
Class)..shares of
Rs..each.. Rs.
Called up.
( of the above
shares.. shares
are allotted as fully
paid up pursuant to
a contract without
payments being
received in cash)
a. Goodwill
b. Land
c. Buildings
d. leaseholds
e. railway sidings
f. plant and
machinery
g. Furniture and
fittings.
h. Development of
property
33
i. Patents, trademarks
and
designs
Specify the source
from which bonus
shares are issued
e.g. ,
Capitalization of
profits and reserves
or from share
premium Account.
Less : Calls unpaid
:
(1.)
By
Directors
(2.)
By others
Add : Forfeited
shares :
(Amount originally
paid up any capital
profit or reissue of
forfeited shares
should be
Transferred to
capital reserves.)
Notes :
1. Terms
of
redemption
and conversion
j. Livestock, and
k. Vehicles, etc
(Under each head the
original cost and the
additions thereto and
deductions therefore
during the year, and the
total depreciation
written off or provided
Up to the End of the
year is to be stated.
Depreciation written off
or
Provided shall be
allotted under the
different asset heads
and deducted in arriving
at the value Of the fixed
assets.)
In every case where the
original cost cannot be
ascertained, without
unreasonable expenses
or delay, the valuation
Shown by the books is
34
to be given.
For the purpose of
paragraph,
such valuation will be
the net
amount at which an
asset stood in the
companys books at the
commencement of this
Act after deduction of
the amount previously
provided or written off
for depreciation or
diminution in value, and
where any such asset is
sold, the amount of sale
proceeds
Shall be shown as
deduction.
Where the sum have
been written off on a
reduction of capital or a
revaluation of assets,
every balance sheet,
subsequent to the
reduction or revaluation
shall show a reduced
figures with the date of
reduction in place of the
Original cost.
Each balance sheet for
the first five years
subsequent to the date
of reduction shall show
also the Amount of the
reduction made.
Similarly, where sums
have been added by
writing up the assets,
35
required to certify
the correctness of
such share- holdings
as certified by the
Management.
RESERVES
SURPLUS :
(1.) Capital
Reserves
AND
(2.) Capital
Redemption
Reserves.
(3.) Share
premium
Account
(Showing details
of its utilization
in the manner
provided
in
Section 78 in
the
Year
of
utilization).
(4.) Other reserves
specifying
the
nature of each
reserves and the
amount
in
respect Thereof.
Less : Debit balance
in profit and loss
account (if any)
(the debit balance in
profit
and
loss
account shall be
(2.)
Investment in shares,
Debentures or
bonds.
(showing separately
shares
fully paid up and partly
paid up and also
distinguishing the
different classes of
shares and
36
shown
as
a
deduction from the
uncommitted
reserves, if any)
(5.) Surplus,
i.e.,
balance in profit
and loss account
after providing
for
propose
allocations,
namely:
Dividend, Bonus and
Reserves
(6.) Proposed
addition
reserves
to
(4.)
Investment in capital
of Partnership
firms.
(Aggregate amount of
companys quoted
investments and also
the market value thereof
shall be shown)
(Aggregate amount of
companys unquoted
investments shall also
be shown)
CURRENT ASSETS,
LOANS
AND ADVANCES:
CURRENT ASSETS :
(1)
Interest accrued on
SECURED LOANS :
Investments.
37
(1)
Debentures.
(2) Loans
advances
Banks.
and
from
(3) Loans
and
advances
from
Subsidiaries.
(4) Other
loans
and advances
(loans
from
directors
and/or
managers should be
shown separately)
(2)
Stores and spare
parts.
(3)
Loose tools
(4)
Stock in trade
(5)
Work-in-progress
(6)
Sundry Debtors.
a. Debts
outstanding for
38
In
case
of
debentures,
terms
of redemption or
conversion (if any)
are to be stated
together
with
earliest
date
of
redemption
or
conversion.
UNSECURED LOANS
:
(1)
Fixed deposits.
(2) Loans
and
advances
from
subsidiaries
(3) Short
term
loans
and
advances :
(a)
From
bank.
(b)
From
others.
(Short term loans
include those which
are
due
for
repayment not later
than one year as at
the date Of the
balance sheet.
(4) Other
loans
and advances :
(a)
From
b. a period
exceeding six
Months.
c. Other debts.
Less Provision.
( The amounts to be
shown under sundry
debtors shall include the
amounts due in respect
of the goods sold or
services rendered or in
respect of other
contractual
obligations but shall not
include the amount
which are in the nature
of loans or advances)
In regard to sundry
debtors
particulars to be given
separately of-
(a)
Debts considered
good and in
respect of which
the Company is
fully secured.
39
banks.
(b)
From
Others.
(Loans
from
directors
and/or
managers should be
shown separately
Interest accrued and
due on unsecured
loans
should
be
included under an
appropriate
subheads under the
head
Unsecured Loans
Where loans have
been guaranteed by
manager,
and/or
directors, a mention
thereof shall also be
made together with
the
aggregate
amount
of
such
loans under each
head. This does not
apply
to
fixed
deposits.)
CURRENT
LIABILITIES
PROVISIONS:
AND
A. CURRENT
LIABILITIES:
1. Acceptance
2. Sundry
Creditors
(b)
Debts considered
good for which the
company holds no
security other than
the Debtors
personal security.
(c)Debts considered
doubtful or bad.
Debts due by directors
or other officers of the
company or nay of them
either severally or jointly
with Other person or
debts due by firms or
private companies
respectively in which
any director is a partner
or a director or a
Member to be
separately stated.
Debts due from other
companies under the
same management
within the meaning of
subsections
of Section 370 to be
disclosed
With the names of the
companies.
The maximum amount
due by directors or other
officers of the company
at any time during the
40
3. Subsidiary
Companies
4. Advance
Payments and
unexpired
discounts for
the portion for
which
value
has still to be
given, e.g., in
the case of the
following
companies :Newspapers, fire
insurance,
theatres,
clubs,
banking,
Steamship
companies, etc.
The provision to be
shown
under this head should
not exceed the amount
of debts stated to be
considered doubtful or
bad and any surplus of
such provision, if
already created, should
be shown at every
closing under Reserves
and Surplus under a
separate sub-head
Reserve for Doubtful or
Bad Debts.
(7)
(7A) Cash balance on
hand.
(7B) Bank balance-
5. Unclaimed
dividends.
6. Other liabilities
(if any)
7. Interest
accrued
not due
loans
but
on
B. PROVISIONS
8. Provision
taxation
9. Proposed
for
(a)
With scheduled banks.
(b)
With others
( in regard to bank
balances
particulars to be given
separately of(a)
The balance lying with
41
dividends.
10.
For
contingencies.
11.
For
provident fund
Scheme.
12.
For
insurance.
13.
Other
provisions.
A foot-note to the
balance sheet
may be added to
show separately
:(1)
Claims
against the
(2)
not
company
Acknowledged
as debts.
(3)
Uncalled
liabilities
on
Shares partly
paid.
(4)
Arrears
of fixed
(5)
Cumulati
ve dividends.
(The
period
for
which the dividend
is in arrear or if
scheduled banks on
current accounts,
call accounts and
Deposit accounts.
(b)
The names of the
bankers other than
the Scheduled
banks and the
balances lying with
each such banker on
current account, call
account and deposit
account and the
maximum amount
outstanding at any
time during the year
with each such
banker.
partnership firms
in which the
company and any
of its Subsidiaries
are a partner.
(9) Bills of exchange
(10) Advances
recoverable in cash
or in kind or for value
to be received, e.g.,
Rates, taxes,
Insurance, etc
(11) Balances with
customs, port
trust, etc. (where
payable on
demand)
[The instructions
regarding sundry
debtors apply to Loans
and Advances also. The
amounts due from other
companies under the
same management
within the meaning of
sub-section (1B) of
section 370 should also
be given with the names
of the companies;
the maximum amount
due from every one of
these at any time during
the year must be
shown]
43
MISCELLANEOUS
EXPENDITURE
(to the extent not
written off or adjusted)
(1)
Preliminary expenses.
(2)
Expenses including
commission or
brokerage
or underwritten or
Subscription of shares or
Debentures.
(3)
Discount allowed on
the Issue of shares
or debentures.
(4)
Interest paid out of
capital during
construction( also
stating the rate of
interest)
(5)
Development
expenditure not
44
adjusted.
(6)
Other sums
(specifying
natured)
PROFIT AND LOSS
ACCOUNT
(show here the debit
balance of profit and
loss account carried
forward after deduction
of the
uncommitted reserves,
if any)
45
CHAPTER- 3
Research Methodology
46
Collection of data
Oraganisation of data
Presentation of data
Analysis of data
Interpretation of data
47
48
CHAPTER 4
SWOT Analysis of the Company
49
Strengths:
High quality and safe food products at affordable prices,
endorsed by the NESTLE Seal of Guarantee.
Recognized Nutrition, health and Wellness Company.
Strong
and
well
differentiated
brands
with
market
share
leadership.
Product innovation and renovation based on consumers insights.
Well diversified product portfolio across categories and income
strata.
Efficient supply chain.
Responsive organizations structure and strong management
team.
Distribution structure that allows wide reach and coverage in the
target markets.
Capable and committed human resources.
Participation in Global Business Excellence (GLOBE).
Strong financial position.
Weakness:
Complex supply chain configuration.
Cascading indirect taxes.
Price point portfolio.
There is not much margins for retailers to prefer its sales.
50
Threat:
Price of raw material and fuels.
Availability of agro based commodities.
Food inflation.
White collar talent.
Opportunities:
Potential for expansion in smaller towns and other geographies.
Recovery of out of home segment.
Leverage Nestle Technology to develop more products that
provide Nutrition, health and wellness at affordable price.
Company can open separate stores to eliminate retailers.
They have an opportunity to expand or capture the market by
adding its product line.
51
CHAPTER-5
Data Analysis and Interpretation
52
FINANCIAL RESULTS
Millions)
AND
OPERATIONS
(Rs in
2011
2010
Gross Revenue
Profit Before interest and taxation
Interest
Impairment loss and fixed
assets(Net)
Provision for contingences(Net)
Provision For tax
51,672
9,610
43,581
8,052
14
103
16
3
323
2620
305
2387
Net Profit
Profit Brought Forward
Amount Transferred from share
Premium account
Amount Transferred from general
Reserves
Balance available for appropriation
Interim Dividends
Special dividend
Final Dividend Proposed
Corporate Dividend Tax
Transfer to general reserves
6550
1001
-
5341
125
432
431
7551
3471
1205
795
655
6329
2281
732
1157
696
534
1425
1001
Key Ratio
Earnings per Share (Rs.)
55.39
Dividend per Share (Rs.)
42.50
67.94
48.50
53
TOTAL INCOME
EBIT %
19
18.5
18
EBIT %
17.5
17
16.5
16
2007
2008
2009
2010
2011
Net Income
60000
50000
40000
Net Income
30000
20000
10000
0
2007
2008
2009
2010
2011
54
55
Dividends
Final dividend of Rs 12.50 per equity share of the face value of
Rs.10/- year 2011, amounting to Rs. 1,205 Million.
This is in addition to the two Interim Dividends for 2011, aggregating
to Rs. 36.00 per equity share, paid in May 2011 and 2011
(amounting to Rs. 3,471 Million).
The total payout for 2011 would be Rs. 5,470 Million (including the
corporate dividend tax). Further dividends will continue to be based
on the need of the company to deploy internal accruals for business
expansion and an appropriate debt equity ratio.
40
30
20
10
0
2008
2009
2010
2011
56
CURRENT RATIO
Current ratio may be defined as the relationship between current
assets and current liabilities. This ratio also known as working capital
ratio is a measure of general liquidity and is most widely used to make
the analysis of a short-term financial position or liquidity of a firm. It is
calculated by dividing the total of current assets by total of the current
liabilities.
Current Ratio =
Current Assets
Current liabilities
CURRENT ASSETS
CURRENT LIABILITIES
1 Cash in hand
2 Cash at bank
2 Bills Payable
3 Marketable securities
3 Sundry Creditors
4 Short-term investments
4 Short-term advances
5 Bills Receivables
5 Income-tax payable
6 Sundry Debtors
6 Dividends Payable
7 Inventories (stock)
7 Bank Overdraft
8 Work- in-progress
9 Prepaid Expenses
INTERPRETATION
OF
CURRENT
RATIO
57
A relatively high current ratio is an indication that the firm is liquid and
has the ability to pay its current obligations in time as and when they
become due. On the other hand, a relatively low current ratio
represents that the liquidity position of the firm is not good and the
firm shall not be able to pay its current liabilities in time without facing
difficulties. An increase in the current ratio represents the
improvement in the liquidity position of a firm while a decrease in the
current ratio indicates that there has been deterioration in the liquidity
position of the firm.
LAST
TWO YEARS
Year
2011
2010
Current Assets
8,565,592
7,979,532
Current Liabilities
14,223,846
11,847,828
Current Ratio
0.60
0.67
The current ratio for the company in the year 2010 was 0.67 and for
the year 2011 was 0.60. So the current ratio for the firm has decreased
by 0.07 which indicates that the companys liquidity position is
decreasing. The main reason for this is the rise in the current liabilities
of the company from 11,847,828 in 2010 to 14,223,846 in 2011.There
may not be sufficient funds to pay liabilities.
QUICK RATIO
Quick Ratio, also known as Acid Test or liquidity ratio, is the most
precise test of liquidity than the current ratio. The term liquidity refers
to the ability of the firm to pay its short term obligations as and when
they become due. The two determinant of current ratio, as a measure
of liquidity, are current assets and current liabilities.
Quick ratio =
Quick assets
58
Current liabilities
Quick/ liquid Assets
Current liabilities
Cash in hand
or Accrued expenses
Outstanding
Cash at Bank
Bills
Payable
Bills Receivable
Creditors
Sundry
Sundry Debtors
advances
Short term
Marketable Securities
Income tax
payable
Temporary investment
Dividends
Payable
INTERPRETATION
OF
QUICK
RATIO
LAST
TWO YEARS
YEAR
2011
2010
QUICK ASSETS
3,578,213
3,630,415
CURRENT
LIABILITIES
14,223,846
11,847,828
59
QUICK RATIO
.251
.306
Hence the quick ratio of the company in 2011 was .251 and 2010 was .
306 shows that the quick ratio of the company has decreased by .55
because the company has purchased assets by the bank balance as
the company has not taken any loan during the year so the quick ratio
of the company decreased.
Manufacturing And Other Expenses
2011(rs in
2010(rs is
thousands)
thousands)
Employee cost
Salaries, wages,
3,982,657
2,853,949
bonus, pension,
gratuity etc.
Contribution to
126,811
102,088
provident and other
fund
Staff welfare
214,360
189,771
expenses
4,323,828
3,145,808
Advertising and sales
promotion
Freight, transport,
and distribution
General license
fees(net of taxes)
Power and fuel
Contract
manufacturing
charges
Travelling
I.T and management
information system
2,675,119
1,943,555
2,403,721
2,035,530
1,759,874
1,459,570
1,588,703
461,752
1,597,565
456,500
460,582
436,538
418,069
400,391
60
Maintenance and
repairs
Plant and machinery
Buildings
Others
Taxes and general
license fees
Consumption of
stores and spare
parts
Rent
Rates and Taxes
Training Expenses
Laboratory(quality
testing )
INCREASE/ DECREASES
327,536
36,333
71,109
434,978
272,998
278,069
33,716
59,948
371,733
226,233
219,104
151,846
209,875
205,946
165,154
151,169
176,972
201,483
175,239
137,557
IN
AND WORK
IN
61
2011 (Rs in
thousands)
2010 (Rs in
thousands)
385,378
2,327,186
2,712,564
424,279
1,977,141
2,401,420
94,996
129,300
Net Opening
stock(A)
2,617,568
2,272,120
462,666
2,312,885
2,775,551
71,438
385,378
2,327,186
2,712,564
94,996
2,704,113
2,617,568
-86,545
-345,448
Opening Stock
Work- in - progress
Finished Goods
INVENTORY
TURNOVER
62
YEAR
2011
2010
63
16465167
13563778
2444844
2660840.5
Inventory turnover
ratio
6.18 times
5.54 times
365
Inventory conversion
Period =
Inventory
conversion period
59 days
66 days
The Inventory conversion period has shifted from 66 days in 2010 and
59 days in 2011 which shows that the company is efficiently managing
their stock and its inventory turnover has also increased which shows
that there is rise in sale.
NET PROFIT
RATIO
Net profit ratio establishes a relationship between net profit (after tax)
and sales, and indicates the efficiency of the management in the
manufacturing, selling, administrative and other activities of the firm.
This ratio is the overall measure of firms profitability and is calculated
as:
Net profit
X 100
Sales
64
The two basic elements of the ratio are net profit and sales. The net
profits are obtained after deducting income-tax and, generally, nonoperating income and expenses are excluded from the net profit for
calculating this ratio. Thus, incomes such as interest on investment
outside the business, profit on sale of fixed assets, etc. are excluded
NET PROFIT RATIO OF NESTLE INDIA LIMITED FOR LAST TWO YEARS
Years
2011
Net profit
Sales
Net profit
ratio
2010
6550
51293767
5341
43242450
.0127
.
0123
There is no much difference in the net profit ratio of year 2010 and
year 2011 as the net profit and the sale has increased in the same
proportion so there is not much difference in the net profit ratio of the
company.
Debt-Equity Ratio
Outsiders funds
Shareholders funds
The two basic components of the ratio are outsiders funds i.e.,
external equities and shareholders funds, i.e. internal equities.
INTERPRETATION OF DEBT EQUITY RATIO
The debt equity ratio is calculated to measure the extent to which debt
financing has been used in the business. The ratio indicates the
proportionate claims of owners and the outsiders against the firms
assets.
Generally speaking, a low ratio is considered as favorable from the
long- term creditors point of view because a high proportion of owners
fund provides a larger margin of safety for them. A high debt equity
ratio which indicates that the claims of outsider are greater than those
of owners, may not be considered by the creditors because it gives a
lesser margin of safety for them at the time of liquidation of the firm.
DEBT EQUITY RATIO FOR NESTLE INDIA LIMITED FOR LAST TWO YEARS
Years
2011
2010
Outsiders funds
5,875,90
5,074,671
Shareholders Funds
5,812,650
4,733,497
1.01
1.07
66
CHAPTER-6
Findings
67
Findings:
Final dividend of Rs 12.50 per equity share of the face value of
Rs.10/- year 2011, amounting to Rs. 1,205 Million.
The current ratio for the company in the year 2010 was 0.67 and
for the year 2011 was 0.60. So the current ratio for the firm has
decreased by 0.07 which indicates that the companys liquidity
position is decreasing.
The quick ratio of the company in 2011 was .251 and 2010 was .
306 shows that the quick ratio of the company has decreased
by .55 because the company has purchased assets by the bank
balance as the company has not taken any loan during the year
so the quick ratio of the company decreased.
The Inventory conversion period has shifted from 66 days in 2010
and 59 days in 2011 which shows that the company is efficiently
managing their stock and its inventory turnover has also
increased which shows that there is rise in sale.
There is no much difference in the net profit ratio of year 2010
and year 2011 as the net profit and the sale has increased in the
same proportion so there is not much difference in the net profit
ratio of the company.
The Indian food industry is estimated to be worth over INR 8,
80,000 crores.
Dividend payout ratio by nestle is over 70 % in last 20 year
68
CHAPTER-7
Suggestions and Recommendations
69
70
Conclusion
NESTLE good food, good life captures the very essence of Nestle and
the promises they commit to themselves every day, everywhere as the
leading nutrition, health and wellness company.
The companys overall is at a very good position. The company
achieves sufficient profit in past two years. The company maintains
low liquidity to achieve the high profitability. The company distributes
dividend every year to its shareholders.
The company grew significantly during these years. There were many
new products and services that were launched during this time. The
company enjoys monopoly in various products, i.e. significant is the
name of Maggi noodles in this section. Increased demand of products
helps the company remain strong. The changing lifestyle and concepts
of Indians have contributing much to the growth of the company.
71
Bibliography
72